1
EXHIBIT 10-D(ii)
LIFE INSURANCE SPLIT-DOLLAR AGREEMENT
AGREEMENT by and between AMERICAN PRECISION INDUSTRIES INC., a
Delaware corporation with its principal office at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Company"), and _________________________ ("Employee"),
residing at _______________________________________, dated as of ______________.
W I T N E S S E T H
WHEREAS, the Employee is a capable, efficient, and valued
employee of the Company; and
WHEREAS, the Company desires to continue to assist the
Employee in providing protection for the Employee's family (or other
beneficiaries) in the event of the Employee's death while employed by the
Company and in augmenting his assets at the time of his retirement or other
termination of employment; and
WHEREAS, the Company has determined that this assistance can
best be provided under a "split-dollar" arrangement; and
WHEREAS, the Employee is the owner of insurance policy no.
______________ issued by Guardian Life Insurance Company (the "Insurer") in the
original face amount of $_______ on the life of the Employee (the "Policy"),
NOW, THEREFORE, the parties agree as follows:
1. OWNERSHIP OF POLICY. The Employee will continue to be the
owner of the Policy in accordance with the terms and provisions of this
Agreement.
2. ASSIGNMENT. The Employee has executed a collateral
assignment (the "Assignment") of a partial interest in the Policy to the Company
in accordance with the terms of Paragraph 5 of this Agreement. The "Assignee's
Interest" to which the Assignment refers means the Company's interests in the
Policy's death benefit and cash surrender value as described in Paragraph 5 of
this Agreement. The Assignment shall terminate upon the termination of this
Agreement in accordance with the terms of Paragraph 11 of this Agreement.
-1-
2
3. PAYMENT OF PREMIUMS. On or before the due date of each
annual premium on the Policy, or within the grace period allowed by the Policy
or the Insurer for the payment of such annual premium, and for so long as the
Employee is employed by the Company before attaining the age of 65, the Company
shall pay a portion of the annual premium on the Policy. The portion of each
annual premium to be paid by the Company shall be determined by the Company in
its discretion from year to year. The Employee shall pay the balance of each
such annual premium, on or before its due date or within the grace period
allowed by the Policy or the Insurer for the payment of such annual premium.
4. ADDITIONAL COMPENSATION. The Company shall pay to the
Employee as additional compensation an amount equal to (a) the portion of each
annual premium to be paid by the Employee pursuant to Paragraph 3 of this
Agreement plus (b) an amount such that, after payment of taxes at the marginal
rate (as defined in Schedule A to this Agreement) on the entire additional
compensation payment, the Employee would have left an amount equal to the
portion of the annual premium payment to be paid by the Employee. The Company
shall pay such additional compensation to the Employee, subject to any
applicable payroll tax withholding, by the end of the grace period allowed by
the Policy or the Insurer for the payment of the annual premium.
5. ALLOCATION OF POLICY VALUES. During the term of this
Agreement, the Employee shall retain a death benefit from the Policy equal to
the amount specified in Schedule A to this Agreement. The remaining proceeds
payable from the Policy upon the death of the Employee shall be payable to the
Company under the Assignment. During the term of this Agreement, the Company's
interest in the cash surrender value of the Policy pursuant to the Assignment
shall be equal to the greater of (a) the sum of premiums paid by the Company on
the Policy or (b) the excess of the cash surrender value of the Policy over two
times the Employee's current annual base salary at the time of determination or
termination of employment if earlier. The Company's interest in the cash
surrender value shall be payable to the Company in accordance with Paragraph 10.
The Company shall furnish to the Employee a schedule after each anniversary of
the Policy showing the relative allocations of the cash surrender value of the
Policy.
6. DESIGNATION OF BENEFICIARY. The Employee shall have the
right to designate the beneficiary or beneficiaries of the Policy, who, upon the
death of the Employee, shall receive the proceeds of the Employee's interest in
the death benefit of the Policy in accordance with Paragraph 7 below. If the
Employee elects to designate someone other than his spouse as beneficiary, a
written consent from the spouse shall be required.
-2-
3
7. DEATH CLAIMS. In the event of the Employee's death, the
Employee's personal representative and the Company shall promptly take all steps
necessary to cause the death benefits provided under the Policy to be paid by
the Insurer. The Policy shall provide by endorsement or otherwise that in the
event of the death of the Employee while the Policy is in full force and effect
during the term of this Agreement, there shall be paid to the beneficiary or
beneficiaries designated by the Employee as provided in Paragraph 6 of this
Agreement, that portion of the death benefit retained by the Employee as
provided in Paragraph 5 of this Agreement, and the remaining proceeds from the
Policy shall be paid directly to the Company.
8. POLICY LOANS. While this Agreement is in effect and except
as provided in Paragraph 10 of this Agreement, there shall be no loans made to
the Company or the Employee secured by the Policy.
9. NO TERMINATION OF POLICY. The Employee agrees that while
this Agreement is in full force and effect, he shall not, without the consent of
the Company, sell, transfer, surrender, assign, or otherwise terminate the
Policy.
10. TERMINATION OF EMPLOYMENT; Attainment of Age 65; Related
Events.
(a) Upon the occurrence of an event listed in subparagraph
(b), the Employee shall pay to the Company (through a full or partial surrender
of the policy or a loan secured by the Policy or from other funds) an amount
equal to the Company's interest in the cash surrender value of the Policy (as
specified in Paragraph 5 of this Agreement). Upon such payment no other amount
shall be due to the Company under this Agreement and the Company shall release
the Assignment. The Employee shall thereafter own the Policy free from the terms
of this Agreement.
(b) The events to which subparagraph (a) refers are:
(1) the involuntary termination of the Employee's
employment with the Company before the Employee's 65th birthday; or
(2) the Company's election to terminate its interest
in the Policy coincident with or following the Employee's voluntary termination
of employment with the Company before his 65th birthday; or
(3) the Employee's 65th birthday.
-3-
4
11. TERMINATION OF AGREEMENT. This Agreement shall terminate
upon the occurrence of an event listed in Paragraph 10(b) of this Agreement and
the satisfaction of the Company's interest in the Policy under the Assignment as
provided in Paragraph 10(a) of this Agreement or, if earlier, upon the
Employee's death and the satisfaction of the Company's interest in the Policy as
provided in Paragraph 7 of this Agreement.
12. EMPLOYEE WAIVER. The Employee acknowledges and agrees that
if the Agreement and the benefits described in the Agreement constitute an
employee benefit plan or part of an employee benefit plan for purposes of Title
I of the Employee Retirement Income Security Act, as amended ("ERISA"), (a) the
plan is a welfare plan and not a pension plan and, therefore, is exempt from the
participation, vesting, benefit accrual, joint and survivor and preretirement
survivor annuity, and other requirements of Title I of ERISA, and (b) the
Employee irrevocably waives, on behalf of himself and any spouse to whom he may
now or in the future be married, any rights and claims the Employee or his
spouse or both of them may have now or in the future under Title I of ERISA with
respect to such plan, even if it should be construed as a pension plan. The
Employee has had sufficient opportunity to review this waiver with counsel. The
Company shall administer this Agreement, construe its terms, and make all
determinations necessary under this Agreement and shall have complete discretion
in doing so.
13. AMENDMENT OF AGREEMENT. This Agreement shall not be
modified or amended except by a written amendment signed by the Company and the
Employee. This Agreement shall be binding on the beneficiaries, heirs, and
personal representatives of the Employee and the successors and assigns of the
Company.
14. STATE LAW. This Agreement shall be subject to and shall be
construed under the laws of the State of New York.
15. PARAGRAPH READINGS. Paragraph headings as to contents of
particular paragraphs of this Agreement are inserted only for convenience and
are in no way to be construed as part of the provisions of this Agreement or as
a limitation on the scope of particular paragraphs to which they refer.
-4-
5
IN WITNESS WHEREOF, the Employee has executed this Agreement,
and the Company, pursuant to the authorization of the Board of Directors, has
caused this Agreement to be executed, as of the day and year first above
written.
AMERICAN PRECISION INDUSTRIES INC.
By
-------------------------------------------
-------------------------------------------
-5-
6
SCHEDULE A
Effective as of ___________
I. Marginal Tax Rate
-----------------
The marginal tax rate is the marginal tax rate applicable to the
Employee on the date as of which a premium payment is made, as
determined by the Company. The Company shall determine the marginal tax
rate applicable to the Employee as of the premium payment date, taking
into account federal, state, and local income tax rates; the hospital
insurance tax rate under the Federal Insurance Contribution Act; the
deduction (for income tax purposes) for state and local income taxes;
and no income other than income attributable to the Company.
II. Death Benefit
-------------
The death benefit allocable to the Employee during the term of this
Agreement shall be an amount equal to three times his current annual
base salary at the date of death or upon the termination of his
employment, if earlier, but not more than the Policy proceeds.
