July 28, 1999
Xxxxxx X. Xxxxxxxx
Wind River Systems, Inc.
000 Xxxx Xxxxx Xxx
Xxxxxxx, Xxxxxxxxxx 00000
RE: RETIREMENT AND CONSULTING AGREEMENT
This letter sets forth the substance of the retirement and consulting agreement
(the "Agreement") that WIND RIVER SYSTEMS, INC. (the "Company") is offering to
you to aid in your employment transition.
1. RESIGNATION. As of July 29, 1999 (the "Resignation Date"), you are
resigning as an employee and officer of the Company, and from all positions
you may hold with the Company and any affiliated entities, except as a
director of the Company.
2. BOARD OF DIRECTORS. At your discretion and subject to applicable
law, you may remain as a director on the Company's Board of Directors (the
"Board") through the Company's Annual Meeting in 2000. After the Company's
Annual Meeting in 2000, your nomination for membership on the Board and your
service as a director on the Board will be subject to the Board's discretion.
You agree that you will receive no compensation, bonus, benefits, stock
options, accelerated vesting, stock, or other equity rights in exchange for
service on the Board after the Resignation Date; and you further agree that
you will not be considered a non-employee director for purposes of any stock
option grants or other compensation which may be provided to directors of the
3. ACCRUED SALARY AND PAID TIME OFF.
A. ACCRUED SALARY. On the Resignation Date, the Company will pay
you all accrued salary, subject to standard payroll deductions and
withholdings. You are entitled to this payment regardless of whether or not
you sign this Agreement.
B. BONUS, VACATION AND SABBATICALS. You agree to waive and
relinquish any right you otherwise would have had to payments to you on the
Resignation Date for accrued bonus, vacation and sabbaticals earned through
the Resignation Date.
4. CONSULTING. The Company agrees to retain you, and you agree to make
yourself available and perform, as a consultant, under the terms specified
A. CONSULTING PERIOD. The consulting relationship commences as of
August 1, 1999 and continues through March 31, 2002 (the "Consulting Period").
B. CONSULTING DUTIES. For purposes of this Agreement,
"Consulting" refers to providing services to the Company in any area of your
expertise, but Consulting will not
include any services which are otherwise required in the discharge of your
duties as a member of the Board. During the first three months of the
Consulting Period, you agree to provide Consulting for up to ten (10) hours
per month. For the remainder of the Consulting Period, you agree to provide
Consulting for up to five (5) hours per month. You further agree to exercise
the highest degree of professionalism and utilize your expertise and creative
talents in performing Consulting. You agree not to represent or purport to
represent the Company in any manner whatsoever to any third party during the
Consulting Period unless authorized by the Company in writing to do so.
C. CONSULTING FEES. During the Consulting Period, the Company
will pay you fees totaling nine hundred sixty-eight thousand seven hundred
fifty dollars ($968,750.00), on a monthly basis in the amount twenty-nine
thousand three hundred fifty-six dollars and six cents ($29,356.06) per month
("Consulting Fees"), commencing on August 1, 1999. The Company will not
deduct or withhold any amount from your Consulting Fees for taxes, social
security, or other payroll deductions, but will instead issue you an IRS Form
1099 with respect to your Consulting Fees. You acknowledge that in performing
Consulting services, you will be serving as an independent contractor, not a
Company employee, and you will be entirely responsible for the payment of all
employment taxes and any other taxes due and owing as a result of your
Consulting Fees. You hereby indemnify the Company and hold it harmless from
any liability for any taxes, penalties, and interest that may be assessed by
any taxing authority with respect to the Consulting Fees, with the exception
of the employer's share of social security, if any.
D. NONCOMPETITION AND OTHER WORK ACTIVITIES. During the
Consulting Period and for three (3) months thereafter, in order to protect
the trade secrets and confidential and proprietary information of the
Company, except on behalf of the Company, you will not directly or
indirectly, whether as an officer, director, stockholder, partner,
proprietor, associate, representative, consultant, or in any capacity
whatsoever engage in, become financially interested in, be employed by or
have any business connection with any other person, corporation, firm,
partnership or other entity whatsoever which competes with the Company,
anywhere in the world, in the business of embedded software (including, but
not limited to, Microsoft Corporation and ISS); provided, however, that you
may own, as a passive investor, securities of any competitor corporation, so
long as your direct holdings in any one such corporation shall not in the
aggregate constitute more than 1% of the voting stock of such corporation.
Except as provided in the preceding sentence, during the Consulting Period
you may engage in employment, consulting or other work relationships or
professional or non-professional activities in addition to providing
Consulting to the Company. The Company agrees to make reasonable arrangements
to enable you to perform Consulting at such times and in such manner so that
it does not unreasonably interfere with other such activities in which you
5. STOCK OPTIONS.
A. ACCELERATED VESTING. Subject to the approval of the Board, the
vesting of all of your outstanding unvested stock options shall be
accelerated such that they will be fully vested as of July 29, 1999, except
for the unvested stock options under your September 8, 1997 Option Grant and
your April 13, 1999 Option Grant.
B. SEPTEMBER 8, 1997 OPTION GRANT. Subject to the approval of the
Board, the vesting of your option under the September 8, 1997 Option Grant
shall be accelerated such that ninety-seven thousand (97,000) shares shall be
fully vested as of July 29, 1999, and the remainder of the September 8, 1997
Option Grant will be terminated.
C. APRIL 13, 1999 OPTION GRANT. Subject to the approval of the
Board, the vesting of your option under the April 13, 1999 Option Grant shall
be accelerated such that seventy thousand (70,000) shares shall be fully vested
as of July 29, 1999, and the remainder of the April 13, 1999 Option Grant
will be terminated.
D. EXERCISE DATE. You will have the right to exercise all vested
options through the end of the three month period following the earlier of
the termination of the Consulting Period or your material breach of this
Agreement. All unexercised options will terminate after such three month
E. TAX TREATMENT. You acknowledge that the Company is not making
any representation regarding the tax treatment of any of your stock options
and that you have been advised by the Company to seek independent tax advice
on that matter.
6. HEALTH INSURANCE. To the extent provided by the federal COBRA law
or, if applicable, state insurance laws, and by the Company's current group
health insurance policies, you will be eligible to continue your group health
insurance benefits at your own expense. Later, you may be able to convert to
an individual policy through the provider of the Company's health insurance,
if you wish. If you elect continued coverage under COBRA, the Company, as
part of this Agreement, will pay your COBRA premiums for seventeen (17)
months following the Resignation Date. The Company's obligation to make these
payments will cease immediately if you become eligible for any other health
insurance benefits at the expense of a new employer. You agree to immediately
provide the Company written notice of the availability of health insurance if
you accept new employment prior to December 31, 2000.
7. LIFE INSURANCE POLICY. The Company will continue to make the
remaining three (3) years of payments under your split dollar life insurance
arrangement (the "Arrangement") (attached hereto as Exhibit A) until the five
million dollar ($5,000,000) life insurance policy subject to such Arrangement
(the "Policy") (attached hereto as Exhibit B) is fully paid. You agree that
the Company will receive reimbursement of the aggregate of the premiums paid
by the Company under the Policy pursuant to the Arrangement in the form of
all dividends thereon or, to the extent necessary, proceeds of the Policy.
8. OTHER COMPENSATION OR BENEFITS. You acknowledge that, except as
expressly provided in this Agreement, you will not receive any additional
compensation, bonuses, stock, stock options, accelerated vesting, other
equity rights, severance or benefits after the Resignation Date, except
insofar as you have vested rights in the Company's 401(k) retirement plan as
of the Resignation Date.
9. EXPENSE REIMBURSEMENTS. You agree that, within thirty (30) days of
the Resignation Date, you will submit your final documented expense
reflecting all business expenses incurred through the Resignation Date, if
any, for which you seek reimbursement. The Company will reimburse you for
these expenses pursuant to its regular business practice. The Company will
reimburse you for any documented expenses incurred with the Company's prior
written authorization in performing Consulting.
10. RETURN OF COMPANY PROPERTY. By the Resignation Date, you agree to
return to the Company all Company documents (and all copies thereof) and
other Company property that you have had in your possession at any time,
including, but not limited to, Company files, notes, notebooks, memoranda,
correspondence drawings, books and records, plans and forecasts, financial
information, personnel information, sales and marketing information, research
and development information, specifications, computer-recorded information,
tangible property (including, but not limited to, computers, credit cards,
entry cards, identification badges and keys); and any materials of any kind
that contain or embody any proprietary or confidential information of the
Company (and all reproductions thereof). It is notwithstanding the foregoing,
we have agreed that you will keep your notebooks and copies of the WRS Annual
Operating Plans for your own historical purposes and which will be kept as
strictly confidential to you.
11. PROPRIETARY INFORMATION OBLIGATIONS. Agree to maintain in
confidence and not to use or disclose any confidential or proprietary
information of the Company which you may obtain or develop during the
Consulting Period, except as expressly authorized by the Company.
12. NONSOLICITATION. You agree that for three (3) years following the
Resignation Date, you will not directly or indirectly solicit, entice,
induce, or encourage any employee, consultant or independent contractor of
the Company to terminate his or her relationship with the Company in order to
become an employee, consultant or independent contractor to or for any other
person or entity.
13. CONFIDENTIALITY. The provisions of this Agreement will be held in
strictest confidence by you and the Company and will not be publicized or
disclosed in any manner whatsoever; PROVIDED, HOWEVER, that: (a) you may
disclose this Agreement to your immediate family; (b) the parties may
disclose this Agreement in confidence to their respective attorneys,
accountants, auditors, tax preparers, and financial advisors; (c) the Company
may disclose this Agreement as necessary to fulfill standard or legally
required corporate reporting or disclosure requirements; and (d) the parties
may disclose this Agreement insofar as such disclosure may be necessary to
enforce its terms or as otherwise required by law. In particular, and without
limitation, you agree not to disclose the terms of this Agreement to any
current or former Company employee.
14. NONDISPARAGEMENT. Both you and the Company agree not to disparage
the other party, and the other party's officers, directors, employees,
shareholders and agents, in any manner likely to be harmful to them or their
business, business reputation or personal reputation; provided that both you
and the Company will respond accurately and fully to any question, inquiry or
request for information when required by legal process.
15. RELEASE. In exchange for the payments and other consideration
under this Agreement to which you would not otherwise be entitled and except
as otherwise set forth in this Agreement, you hereby release, acquit and
forever discharge the Company, its parents and subsidiaries, and their
officers, directors, agents, servants, employees, attorneys, shareholders,
successors, assigns and affiliates, of and from any and all claims,
liabilities, demands, causes of action, costs, expenses, attorneys fees,
damages, indemnities and obligations of every kind and nature, in law,
equity, or otherwise, known and unknown, suspected and unsuspected, disclosed
and undisclosed, arising out of or in any way related to agreements, events,
acts or conduct at any time prior to and including the execution date of this
Agreement, including but not limited to: all such claims and demands directly
or indirectly arising out of or in any way connected with your employment
with the Company or the termination of that employment; claims or demands
related to salary, bonuses, commissions, stock, stock options, or any other
ownership interests in the Company, vacation pay, fringe benefits, expense
reimbursements, severance pay, or any other form of compensation; claims
pursuant to any federal, state or local law, statute, or cause of action
including, but not limited to, the federal Civil Rights Act of 1964, as
amended; the federal Americans with Disabilities Act of 1990; the federal Age
Discrimination in Employment Act of 1967, as amended ("ADEA"); the California
Fair Employment and Housing Act, as amended; tort law; contract law; wrongful
discharge; discrimination; harassment; fraud; defamation; emotional distress;
and breach of the implied covenant of good faith and fair dealing.
Notwithstanding the release in this Section 15, you are not hereby releasing
the Company from any obligation it may have to defend and indemnify you for
any claims or liabilities arising from activities within the course and scope
of your service as an officer or director of the Company.
16. ADEA WAIVER. You acknowledge that you are knowingly and
voluntarily waiving and releasing any rights you may have under the ADEA. You
also acknowledge that the consideration given for the waiver and release in
the preceding paragraph hereof is in addition to anything of value to which
you were already entitled. You further acknowledge that you have been advised
by this writing, as required by the ADEA, that: (a) your waiver and release
do not apply to any rights or claims that may arise after the execution date
of this Agreement; (b) you should consult with an attorney prior to executing
this Agreement; (c) you have twenty-one (21) days to consider this Agreement
(although you may choose to voluntarily execute this Agreement earlier); (d)
you have seven (7) days following the execution of this Agreement by the
parties to revoke the Agreement; and (e) this Agreement will not be effective
until the date upon which the revocation period has expired, which will be
the eighth day after this Agreement is executed by you, provided that the
Company has also executed this Agreement by that date ("Effective Date").
17. RELEASE BY THE COMPANY. Except as otherwise set forth in this
Agreement, the Company hereby releases, acquits and forever discharges you
and your agents, attorneys, successors, assigns and affiliates from any and
all claims, liabilities, demands, causes of actions, costs, expenses,
attorneys fees, damages, indemnities, and obligations of every kind and
nature, in law, equity, or otherwise, known and unknown, suspected and
unsuspected, disclosed and undisclosed arising out of or in any way related
to agreements, events, acts or conduct at any time prior to and including the
date the Company executes this Agreement, relating to any act or omission by
you within the course and scope of your employment with the Company.
18. SECTION 1542 WAIVER. In granting the releases herein, you and the
Company acknowledge that each has read and understands California Civil Code
section 1542: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT
WITH THE DEBTOR." You and the Company expressly waive and relinquish all
rights and benefits under that section and any law of any jurisdiction of
similar effect with respect to the release of any unknown or unsuspected
claims contained in this Agreement.
19. ARBITRATION. To ensure rapid and economical resolution of any and
all disputes that may arise in connection with this Agreement, you and the
Company agree that any and all disputes, claims, causes of action, in law or
equity, arising from or relating to this Agreement or its enforcement,
performance, breach, or interpretation, with the sole exception of those
disputes that may arise from your Proprietary Information and Inventions
Agreement, will be resolved by final and binding confidential arbitration
held in San Francisco, California and conducted by Judicial Arbitration &
Mediation Services/Endispute ("JAMS"), under its then-existing Rules and
Procedures. Nothing in this paragraph is intended to prevent either you or
the Company from obtaining injunctive relief in court to prevent irreparable
harm pending the conclusion of any such arbitration.
20. MISCELLANEOUS. This Agreement, including all exhibits, constitutes
the complete, final and exclusive embodiment of the entire agreement between
you and the Company with regard to this subject matter. It is entered into
without reliance on any promise or representation, written or oral, other
than those expressly contained herein, and it supersedes any other such
promises, warranties or representations. This Agreement may not be modified
or amended except in a written agreement signed by both you and a duly
authorized officer of the Company. This Agreement will bind the heirs,
personal representatives, successors and assigns of both you and the Company,
and inure to the benefit of both you and the Company, their heirs, successors
and assigns. If any provision of this Agreement is determined to be invalid
or unenforceable, in whole or in part, this determination will not affect any
other provision of this Agreement and the provision in question will be
modified by the court so as to be rendered enforceable in a manner consistent
with the intent of the parties insofar as possible. This Agreement will be
deemed to have been entered into and will be construed and enforced in
accordance with the laws of the State of California as applied to contracts
made and to be performed entirely within California.
If this Agreement is acceptable to you, please sign below and return the
original to me.
I wish you the best in your future endeavors.
WIND RIVER SYSTEMS, INC.
By: \s\ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Vice President of Finance and Chief Financial Officer
\s\ Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx
Exhibit A - Split Dollar Life Insurance Arrangement
Exhibit B - Life Insurance Policy
SPLIT DOLLAR LIFE INSURANCE ARRANGEMENT
EXECUTIVE LIFE INSURANCE PLAN FOR XXX XXXXXXXX - JOINT LIFE EQUIVALENT
XXXX XXXXXXX LIFE
ROLLOUT FROM POLICY VALUES AT YEAR 16
INSURANCE VALUES BASED ON A GROSS EARNINGS RATE OF 10 %
-1- -0- -0- -0- -0- -0- -0-
Policy Total Net Cumulative Cost of Corporate Corporate Corporate
Year Age Annual Corporate Corporate US38 Net Cash Net Death Charge to
Premium Premium Premium Bonus Value Benefit Earnings
Col. 1 - US38 Cumulative Col. 8 *40% Lesser of Col. 3 Col. 5[t] - Col. 5
less rollouts of Col. 2 Col. 3 or Col. 12 [t-1] - Col. 2
1998 60 $187,553 $185,687 $185,687 $1,119 $150,081 $185,688 (35,606)
1999 61 187,553 185,350 371,037 1,322 338,878 371,038 3,446
2000 62 187,553 184,950 555,987 1,562 526,168 555,988 2,340
2001 63 187,553 184,478 740,466 1,845 737,814 740,466 27,168
2002 64 187,553 183,914 924,380 2,183 924,380 924,380 2,652
2003 65 0 (4,300) 920,079 2,580 920,079 920,080 0
2004 66 0 (5,091) 914,988 3,055 914,988 914,988 0
2005 67 0 (6,025) 908,963 3,615 908,963 908,963 0
2006 68 0 (7,131) 901,832 4,279 901,832 901,832 0
2007 69 0 (8,446) 893,386 5,068 893,386 893,386 0
Subtotals $937,765 $893,386 $893,386 $26,627 $893,386 $893,386 $0
2008 70 $0 ($9,998) $883,388 $5,999 $883,388 $883,388 $0
2009 71 0 (11,837) 871,551 7,102 871,551 871,551 0
2010 72 0 (14,012) 857,539 8,407 857,539 857,539 0
2011 73 0 (16,586) 840,953 9,951 840,953 840,953 0
2012 74 0 (19,631) 821,322 11,778 821,322 821,323 0
2013 75 0 (821,322) 0 0 0 0 0
2014 76 0 0 0 0 0 0 0
2015 77 0 0 0 0 0 0 0
2016 78 0 0 0 0 0 0 0
2017 79 0 0 0 0 0 0 0
Subtotals $937,765 $0 $0 $69,866 $0 $0 $0
2018 80 $0 $0 $0 $0 $0 $0 $0
2019 81 0 0 0 0 0 0 0
2020 82 0 0 0 0 0 0 0
2021 83 0 0 0 0 0 0 0
2022 84 0 0 0 0 0 0 0
2023 85 0 0 0 0 0 0 0
2024 86 0 0 0 0 0 0 0
2025 87 0 0 0 0 0 0 0
2026 88 0 0 0 0 0 0 0
2027 89 0 0 0 0 0 0 0
Totals $937,765 $0 $0 $69,866 $0 $0 $0
-8- -9- -10- -11- -12- -13- -14-
Bonus from IRR on Exec.
Year Age Company Tax on Contribution Total Total
US38 "US 38" Net Cash Net Death to Trust's Cash Death
Cost Bonus Value Benefit Death Benefit Value Benefit
based on a 40 % Col. 12- Col. 5 Col. 13 - Col.5 IRR Col. 7 to Col. 5 + Col.10 Col. 6 + Col. 11
tax bracket Col. 9
1998 60 $1,866 $746 $0 $5,000,000 669927.97% $150,081 $5,185,688
1999 61 2,203 881 0 5,000,000 8026.69% 338,878 5,371,038
2000 62 2,603 1,041 0 5,000,000 1744.26% 526,168 5,555,988
2001 63 3,075 1,230 0 5,000,000 772.51% 737,814 5,740,466
2002 64 3,639 1,456 41,283 5,000,000 455.24% 965,663 5,924,380
2003 65 4,300 1,720 119,079 5,000,000 310.35% 1,039,158 5,920,080
2004 66 5,091 2,037 201,061 5,000,000 230.52% 1,116,049 5,914,988
2005 67 6,025 2,410 291,827 5,000,000 181.00% 1,200,790 5,908,963
2006 68 7,131 2,852 392,141 5,000,000 147.69% 1,293,972 5,901,832
2007 69 8,446 3,378 502,829 5,000,000 123.93% 1,396,215 5,893,386
Subtotals $44,379 $17,752 $502,829 $5,000,000 123.93% $1,396,215 $5,893,386
2008 70 $9,998 $3,999 $624,999 $5,000,000 106.22% $1,508,387 $5,883,388
2009 71 11,837 4,735 758,728 5,000,000 92.54% 1,630,279 5,871,551
2010 72 14,012 5,605 905,023 5,000,000 81.69% 1,762,562 5,857,539
2011 73 16,586 6,634 1,064,855 5,000,000 72.88% 1,905,808 5,840,953
2012 74 19,631 7,852 1,239,339 5,000,000 65.59% 2,060,661 5,821,323
2013 75 0 0 1,335,187 5,000,000 59.50% 1,335,187 5,000,000
2014 76 0 0 1,437,369 5,000,000 54.33% 1,437,369 5,000,000
2015 77 0 0 1,545,686 5,000,000 49.88% 1,545,686 5,000,000
2016 78 0 0 1,659,765 5,000,000 46.03% 1,659,765 5,000,000
2017 79 0 0 1,778,993 5,000,000 42.67% 1,778,993 5,000,000
Subtotals $116,443 $46,577 $1,778,993 $5,000,000 42.67% $1,778,993 $5,000,000
2018 80 $0 $0 $1,903,394 $5,000,000 39.71% 1,903,394 $5,000,000
2019 81 0 0 2,032,508 5,000,000 37.10% 2,032,508 5,000,000
2020 82 0 0 2,165,668 5,000,000 34.77% 2,165,668 5,000,000
2021 83 0 0 2,302,127 5,000,000 32.69% 2,302,127 5,000,000
2022 84 0 0 2,439,946 5,000,000 30.82% 2,439,946 5,000,000
2023 85 0 0 2,578,379 5,000,000 29.13% 2,578,379 5,000,000
2024 86 0 0 2,716,716 5,000,000 27.60% 2,716,716 5,000,000
2025 87 0 0 2,854,633 5,000,000 26.22% 2,854,633 5,000,000
2026 88 0 0 2,989,322 5,000,000 24.95% 2,989,322 5,000,000
2027 89 0 0 3,119,372 5,000,000 23.79% 3,119,372 5,000,000
Totals $116,443 $46,577 $3,119,372 $5,000,000 23.79% $3,119,372 $5,000,000
Insurance values are not valid without complete ledger illustration and prospectuses.
Insurance values are based on an annual average gross earnings rate of 10 %. This is a
hypothetical projection, not a guarantee of future performance.
Insurance values are based on current insurance company mortality charges, expenses, and taxes. ---------------------------------
Investment returns and insurance values are based on projections and are not guaranteed. Registered Representatives
Insurance values are based on a male age 60, and a female Mutual Service Corporation
age 57; both non-smokers in good health. Member NASD & SIPC
The annual economic benefit is calculated using the lesser of the insurance company's ----------------------------------
published one-year term rates or the IRS' US 38 rates. 08-Apr-98
Xxxxxxxx, Xxxxxx and Xxxxx does not provide legal or accounting advice. Please consult your legal
and accounting advisors in these areas.
SITZMANN, MORRIS, & LAVIS
LIFE INSURANCE POLICY
XXXX XXXXXXX Variable Life Insurance Company Xxxx Xxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
INSUREDS XXXXXX X XXXXXXXX SUM INSURED $5,185,688
XXXXX X XXXXXXXX AT ISSUE
POLICY NUMBER 20 023 859 DATE OF ISSUE MARCH 3, 1998
DEATH BENEFIT OPTION A (see Section 4)
PLAN FLEXIBLE PREMIUM VARIABLE SURVIVORSHIP LIFE INSURANCE
JOINT VARIABLE LIFE INSURANCE
The Xxxx Xxxxxxx Variable Life Insurance Company agrees, subject to the
conditions and provisions of this policy, to pay the Death Benefit to the
Beneficiary upon the death of the Surviving Insured if such death occurs
while the policy is in full force, and to provide the other benefits, rights,
and privileges of the policy. The Death Benefit (see Section 4) will be
payable, subject to the 'Deferral of Determinations and Payments' provision,
on receipt at the Home Office of the Company of due proof of the Surviving
Insured's death. Also, due proof of the death of the first Insured to die
must be given to us when such death occurs.
The Death Benefit of this policy will increase or decrease based on the
experience of the Separate Accounts. The Death Benefit may be guaranteed, if
the Guaranteed Minimum Death Benefit feature is elected and if premiums are
paid as described in Section 6.
The policy, which includes any Riders which are a part of the policy on
delivery, is issued in consideration of the application and the payment of
the Minimum Initial Premium shown on Page 4.
The Policy Specifications on pages 3 and 4 and the conditions and provisions
on this and the following pages are part of the policy.
Signed for the Company at Boston, Massachusetts.
\s\ Xxxxx X. Xxxx \s\ Xxxxx Xxxxxx
Variable Survivorship Policy
Death Benefit payable at death of Surviving Insured
Not eligible for dividends
Schedule of benefits and premiums and the premium class are shown on page 3
To the extent any benefit, payment, or value under this policy (including the
Account Value) is based on the investment experience of a Separate Account,
such benefit, payment, or value may increase or decrease in accordance with
the investment experience of the Separate Account and is not guaranteed as to
fixed dollar amount. However, this policy may provide a Guaranteed Minimum
Death Benefit, if such option is elected at issue and if premiums are paid as
described in Section 6.
Right to Cancel - The Owner may surrender this policy by delivering or
mailing it to the Company at Boston, Massachusetts (or to the agent or agency
office through which it was delivered) within 45 days after the date of Part
A of the application, or within 10 days after receipt by the Owner of the
policy, or within 10 days after mailing by the Company of the Notice of
Withdrawal Right, whichever is latest. Immediately on such delivery or
mailing, the policy shall be deemed void from the beginning. Any premium paid
on it will be refunded.
1. POLICY SPECIFICATIONS
Names of Insureds XXXXXX X XXXXXXXX XXXXX X XXXXXXXX
Age at Issue 60 58
Sex M F
Premium Class Standard Nonsmoker Standard Nonsmoker
Owner, Beneficiary As designated in the application subject to Section 18 of
Policy Number 20 023 859 Plan Flexible Premium
Date of Issue March 3, 1998 Total Sum Insured $5,000,000 Basic Sum
at Issue Insured plus
Death Benefit Option A State of Issue CA
Option (See Section 4)
Other Benefits and None Selected
Policy Loan Minimum Loan Amount: $1,000; (See Section 10)
Partial Withdrawals Minimum Withdrawal Amount: $1,000
of Account Value Withdrawal charge: $20. (See Section 11)
Subaccount Allocation Until changed in accordance with Section 14. Net
Premiums and all other credits will be allocated
among the Variable Account and the Fixed Account
as shown in the application for this policy.
2. TABLE OF RATES
A. Table of Guaranteed Maximum Policy Charges
Deductions from Premium Payments
Policy Year 1 30% of Target Premium, 3.5% of Excess Premium
Policy Years 2-5 15% of Target Premium, 3.5% of Excess Premium
Policy Years 6-10 10% of Target Premium, 3.5% of Excess Premium
Policy Year 11-20 4% of Target Premium, 3% of Excess Premium
Policy Years 21 and 3% of Target and Excess Premium
Federal DAC Tax Charge 1.25% of Target and Excess Premium
Rate Premium Tax Charge 2.35% of Target and Excess Premium
Premium Processing 1.2441973% of Target and Excess Premium
Deductions from Account Value
Administrative Charge $10.00 per month for all Policy Years plus
$.03 per $1,000 of Total Sum Insured at Issue per
month for all Policy Years.
Guaranteed Minimum $.03 per $1,000 of Basic Sum Insured at Issue per
Death Benefit Charge month, beginning in the 11th Policy Year.
Policy Split Option Charge $.03 per $1,000 of Total Sum Insured at Issue per
month until the policy anniversary nearest the
older insured's 80th birthday.
Issue Charge $55.55 per month for first 5 Policy Years plus
$.02 per month per $1,000 of Total Sum Insured
at Issue for first 3 Policy Years.
Deductions from Separate Account
Mortality and Expense Risk .60% of Account Value, deducted daily for all
Charge Policy Years
2. Table of Rates, continued
B. Table of Current and Guaranteed Cost of Insurance Rates
Guaranteed Rates Current Rates Guaranteed Rates Current Rates
Year per $1,000 per $1,000 Year per $1,000 per $1,000
---- ---------- ---------- ---- ---------- ----------
1 $ 0.008 $ 0.008 22 $ 4.152 $ 0.938
2 0.026 0.026 23 4.818 1.176
3 0.048 0.048 24 5.580 1.471
4 0.075 0.075 25 6.447 1.864
5 0.110 0.110 26 7.424 2.330
6 0.153 0.153 27 8.492 2.876
7 0.206 0.204 28 9.645 3.501
8 0.271 0.188 29 10.862 4.311
9 0.349 0.173 30 12.146 5.270
10 0.441 0.159 31 13.486 6.348
11 0.548 0.156 32 14.897 7.583
12 0.679 0.160 33 16.383 8.853
13 0.824 0:169 34 17.975 10.072
14 1.006 0.185 35 19.756 11.288
15 1.227 0.209 36 21.856 12.539
16 1.492 0.245 37 24.543 13.753
17 1.806 0.295 38 28.327 14.983
18 2.170 0.366 39 34.031 16.226
19 2.584 0.463 40 42.583 17.481
20 3.048 0.594 41 54.565 33.425
21 3.567 0.747 42 83.197 18.857
The term "age" means age on the nearest birthday.
The term "Annual Processing Date" means every 12th Processing Date starting
with the Processing Date next after the Date of Issue.
The term "Excess Premium" means that portion of the total Premiums received
during any Policy Year that exceeds the Target Premium.
The term "Fixed Account" means an account established by us which accumulates
at rates which we will determine and declare from time to time, but which
will not be less than 4%. The assets of a Fixed Account are invested in a
segment of our General Account.
The term "Fund" means a series type mutual fund registered under the
Investment Company Act of 1940 as an open-end diversified management
The term "in full force" means that the policy has not lapsed in accordance
with Section 7.
The term "indebtedness" means the unpaid balance of a policy loan. As
provided in Section 10, the policy loan amount includes accrued interest.
The term "Minimum Initial Premium" means the amount shown on Page 4.
The term "Net Premium" is defined in Section 5.
The term "payment" means, unless otherwise stated, payment at our Home Office
in Boston, Massachusetts.
The term "Planned Premium" means the amount that the Owner intends to pay, as
indicated on the application.
The term "Policy Year" means (a) or (b) below whichever is applicable:
(a) The first Policy Year is the period beginning on the Date of Issue and
ending on the Valuation Date immediately preceding the first Annual
(b) Each subsequent Policy Year is the period beginning on an Annual
Processing Date and ending on the Valuation Date immediately preceding the
next Annual Processing Date.
The term "Portfolio" means each division of a Fund which has a specific
The term "Premium", unmodified, is defined in Section 5.
The term "Processing Date" means the first day of a policy month which
immediately follows a Valuation Date. The Date of Issue is not a Processing
The term "Separate Account", unmodified, means a separate investment account,
established by us pursuant to applicable law, in which you are eligible to
invest under this policy.
The term "Subaccount" means a Variable Account or a Fixed Account.
The term "Surviving Insured" means the Insured who is living upon the death
of the other Insured. If both Insureds die simultaneously, then the term
"Surviving Insured" shall mean the younger of the two Insureds.
The term "Target Premium" means the amount shown on Page 4.
The term "Valuation Date" means any date on which we are open for business,
the New York Stock Exchange is open for trading, and on which the Fund values
The term "Valuation Period" means the period of time from the beginning of
the day following a Valuation Date to the end of the next following Valuation
The term "Variable Account" means each division of a Separate Account which
has a specific investment objective. The assets of each Variable Account are
invested solely in shares of the corresponding Portfolio of a Fund.
The terms "we", "us" and "our" refer only to the Xxxx Xxxxxxx Variable Life
The term "written notice" means, unless otherwise stated, a written notice
filed at our Home Office in Boston, Massachusetts.
The terms "you" and "your" refer only to the Owner(s) of this policy.
4. DEATH BENEFIT
The Death Benefit is payable when the Surviving Insured dies while the policy
is in full force. This Death Benefit will equal the death benefit of the
policy minus any indebtedness on the date of death. If the Surviving Insured
dies during a grace period we will also deduct any unpaid monthly charges
under Section 9.
6. GUARANTEED MINIMUM DEATH BENEFIT PREMIUM TARGET
If the Guaranteed Minimum Death Benefit feature has been elected, it will so
indicate on the Policy Specification Page. The Guaranteed Minimum Death
Benefit Premium Target equals the sum of all Guaranteed Minimum Death Benefit
Premiums shown on page 4 from the Date of Issue up to the date the Guaranteed
Minimum Death Benefit Premium Target is being measured, with each such
premium accumulated from its due date at an annual effective interest rate of
4%. In order to maintain the Guaranteed Minimum Death Benefit, the Cumulative
Premium Balance defined below must exceed the Guaranteed Minimum Death
Premium Target on each Annual Processing Date.
The Cumulative Premium Balance is the amount equal to the sum of all Premiums
paid less the sum of all withdrawals as described in Section 11, each
accumulated at an annual effective interest rate of 4%. Such interest will be
calculated from the date the Premium was credited or the date the withdrawal
was made up to the date the Cumulative Premium Balance is being measured.
7. GRACE PERIOD
A. If the Guaranteed Minimum Death Benefit feature has been elected:
On each Processing Date, we will compare the Cumulative Premium Balance at
the end of the immediately preceding Valuation Date to the Guaranteed Minimum
Death Benefit Premium Target on that Valuation Date. If, on any such
Processing Date, the Cumulative Premium Balance is less than the Guaranteed
Minimum Death Benefit Premium Target, the Guaranteed Minimum Death Benefit
will be deemed to be in default as of such Processing Date.
The amount by which the Guaranteed Minimum Death Benefit Premium Target
exceeds the Cumulative Premium Balance is the "GMDB shortfall." Any GMDB
shortfall may be paid within a grace period of 61 days after the date of
default. We will send notice to your last known address at least 31 days
before the end of the grace period specifying the minimum payment that you
must make to continue the Guaranteed Minimum Death Benefit in force beyond
the end of the grace period.
If a payment at least equal to the GMDB shortfall is received before the end
of the grace period, the Guaranteed Minimum Death Benefit will remain in the
policy. Any payment will be processed as of the date of receipt.
If a payment at least equal to the GMDB shortfall is not received by the end
of the grace period, the Guaranteed Minimum Death Benefit feature will be
removed from the policy. On the next Processing Date following the removal of
the Guaranteed Minimum Death Benefit, and on each Processing Date thereafter,
the policy will be tested as described in Subsection B.
If the policy contains Additional Sum Insured, in addition to the test
described in Subsection A it will be tested under Subsection B, to ensure
that the policy is funded at a sufficient level to support the Additional Sum
If the Surviving Insured dies during the grace period, we will deduct from
the proceeds the GMDB shortfall.
B. If the Guaranteed Minimum Death Benefit feature has not been elected or
has been removed or if the policy contains Additional Sum Insured:
If, on any Processing Date, the Account Value at the end of the immediately
preceding Valuation Date is less than the total of all Section 9 charges for
that Processing Date the policy will be deemed to be in default as of the
Processing Date on which such determination is made. We will send a notice to
your last known address specifying the minimum amount you must pay to cure
the default (the "Default Payment"). The Default Payment will be equal to a
payment which, after deduction of all Section 5 charges, yields a Net Premium
equal to the total of all Section 9 charges for the date of default and the
next two Processing Dates.
If a payment at least equal to the Default Payment is received before the end
of a grace period of 61 days after the date the notice is mailed, the policy
will then no longer be in default. Any payment received will be processed as
a premium payment as of the date of receipt. When payment is received, any
Section 9 charges which are past due and unpaid will be deducted from the
If a payment at least equal to the Default Payment is not received by the end
of the grace period, then either (a) if the Guaranteed Minimum Death Benefit
is in effect, any Additional Sum Insured will be removed from the policy, or
(b) if there is no Guaranteed Minimum Death Benefit in effect, the policy
will lapse without value and will not be in full force.
No Rider provisions will be in effect after the policy ceases to be in full
You may borrow money from us on receipt at our Home Office of a completed
form satisfactory to us assigning the policy as the only security for the
Loans may be made if a Loan Value is available. Each loan must be for at
least $1000. We may defer loans as provided by the law or as provided in
Section 21. Loans may not be made if the policy is in a grace period.
The Loan Value while the policy is in full force will be 90% of the Account
Value. The amount of loan available will be the Loan Value less any existing
Loan interest at a rate described in 'Variable Loan Interest Rate' provision
below will accrue daily and will be payable on each Annual Processing Date
and on the date the loan is settled. Accrued interest will be added to the
loan daily and will bear interest from that date at the same rate.
A loan may be repaid in full or in part at any time before the Surviving
Insured's death, and while the policy is in full force.
When excess indebtedness occurs, the policy will terminate at the end of the
Valuation Period in which the 31st day after the Notice Date occurs if such
excess has not been repaid by that date. "Excess indebtedness" is the amount,
if any, by which indebtedness exceeds an amount equal to the Loan Value.
"Notice Date" is the date on which notice of excess indebtedness is mailed to
you and any assignee of record with us at the address last known to us.
When a loan is made, the amount of the loan will be added to Loan Assets. The
amount of the loan will be removed from the Subaccounts in proportion to your
policy investment in each Subaccount on the date such loan is made. Upon any
loan repayment, the amount of the repayment will be allocated among the
Subaccounts in accordance with the Subaccount Investment Rule in effect on
the date of repayment.
VARIABLE LOAN INTEREST RATE
We will annually determine the Loan Interest Rate for this policy.
Determination will be made in the calendar month immediately preceding the
calendar month in which the policy anniversary occurs. This Rate will apply
to all indebtedness outstanding during the policy year next following the
date of determination. The rate will not exceed the higher of (a) the
"Published Monthly Average" for the calendar month which is two months before
the month in which the date of determination occurs; and (b) 5%.
The "Published Monthly Average" means Moody's Corporate Bond Yield Average -
Monthly Average Corporates as published by Xxxxx'x Investors Service, Inc. or
any successor thereto. If the "Published Monthly Average" is no longer
published, we reserve the right to select a substitute that we deem
appropriate, subject to applicable law, regulation, or other state
When a new rate is determined: (a) we may increase the previous rate if the
increase would be at least 1/2%; and (b) we must reduce the previous rate if
the decrease would be at least 1/2%. We will: (a) notify you of the initial
Loan Interest Rate at the time a loan is made; and (b) notify you in advance
of any increase in the Loan Interest Rate if there is outstanding
indebtedness on the policy.
11. SURRENDERS AND WITHDRAWALS
We will determine and pay the Surrender Value of the policy if the Surviving
Insured is then alive, subject to Section 21, and the policy will terminate,
as of the end of the Valuation Period in which we receive at our Home Office
(i) written notice requesting surrender of the policy, and (ii) the
While the policy is in full force, the Surrender Value will be an amount
equal to the Account Value less any indebtedness. If the policy is
surrendered before the end of the second Policy Year, then any excess Sales
Load as defined in Rule 6e-3(t) of the Investment Company Act of 1940 will be
returned to the Owner.
You may request a withdrawal of part or all of the Surrender Value in
accordance with our rules then in effect. The amount of the withdrawal will
be removed from the Subaccounts in proportion to your policy investment in
each Subaccount on the date such loan is made. For each withdrawal we will
make a charge to the Account Value of $20. Each withdrawal must be at least
$1000. All amounts withdrawn will be subtracted from the Cumulative Premium
Balance as described in Section 6, and will be reflected in Option A death
benefit as described in Section 4.
14. ALLOCATION TO SUBACCOUNTS
On the Date of Issue and during the first 19 days after the Date of Issue,
Net Premiums will be invested in the Money Market Subaccount. On the 20th day
after the Date of Issue, we will reallocate the amount in the Money Market
Subaccount in accordance with the Subaccount Investment Rule, as chosen by
you and shown in the application for this policy. We will then allocate
future Net Premiums and other credits among the Subaccounts in accordance
with this Subaccount Investment Rule. You may elect to change the Subaccount
Investment Rule at any time. A change will be effective at the end of the
Valuation Period in which we receive notice satisfactory to us, however, fund
transfers will not be made if the policy is in a grace period. We reserve the
right to impose limits on the number and frequency of such changes. The
minimum percentage that may be allocated to any Subaccount and the maximum
number of Subaccounts in which assets may be held will be subject to our
administrative rules in effect at the time of election. We will allocate any
charges under Section 9 among the applicable Subaccounts in proportion to the
value of your policy investment in each Subaccount on the date of the charge.
Variable Account Transfer Provision
You may elect to transfer assets held in the Variable Accounts without charge.
We reserve the right to impose limits on the number and frequency of such
transfers. A transfer will be effective at the end of the Valuation Period in
which we receive notice satisfactory to us.
Fixed Account Transfer Provision
You may elect by notice satisfactory to us to transfer without charge part or
all of the assets in a Fixed Account, in the manner described below. Except
as provided in Section 15, such a transfer will be permitted only once during
the period beginning 60 days before each policy anniversary and ending 30
days after such anniversary. If notice is served on or before the
anniversary, the transfer will be effective at the end of the Valuation
Period during which the anniversary falls. If notice is received after the
anniversary, the transfer will be effective at the end of the Valuation
Period in which we receive the notice. The maximum transfer amount is 20% of
the Fixed Account Assets, or $500, if greater. We may defer the transfer for
up to 6 months after your election would be effective.
15. INVESTMENT POLICY CHANGE
The investment policy of the Portfolios shall not be materially changed
unless a statement of the change is filed with, and not disapproved by the
Insurance Commissioner of Massachusetts. In the event of such a change in
investment policy, and while this policy is in full force, you may elect a
transfer in accordance with Section 14 within 60 days after (i) the effective
date of the material change or (ii) the receipt of a notice of the available
options, whichever is later. No charge will be made for any such transfer
(regardless of the number of transfers previously made), which will be
effective as of the end of the Valuation Period in which we receive the
notice. If required, any statement of material change filed with the
Insurance Commissioner of Massachusetts will be filed with the insurance
supervisory officials of the jurisdiction in which this policy is delivered
or issued for delivery.
16. ANNUAL REPORT TO OWNER
While the policy is in full force, we will furnish annually to the Owner a
statement which shows:
(a) The Death Benefit, Guaranteed Minimum Death Benefit if elected, and
Account Value as of the date of the report;
(b) Payments received and charges made since the last report;
(c) Withdrawals since the last report; and
(d) Loan information.
We will furnish other reports if required by law or regulation.
When at least one Insured is alive, you may change the Owner and Beneficiary
by written notice. You may also revoke any change of Owner prior to its
effective date by written notice. No change or revocation will take effect
unless we acknowledge receipt of the notice. If such acknowledgment occurs,
then (i) a change of Beneficiary will take effect on the date the notice is
signed, and (ii) a change or a revocation of Owner will take effect as of the
date specified in the notice, or if no such date is specified, on the date
the notice is signed. A change or revocation will take effect whether or not
you or either Insured is alive on the date we acknowledge receipt. A change
or revocation will be subject to the rights of any assignee of record with us
and subject to any payment made or other action taken by us before we
19. INTEREST ON PROCEEDS
We will pay interest on proceeds paid in one sum in the event of the
Surviving Insured's death from the date of death to the date of payment. The
rate will be the same as declared for Option 1, Settlement Provisions.
20. TRANSFER OF ASSETS DURING FIRST 24 MONTHS
At any time during the first 24 months from the Date of Issue of this policy
while this policy is in full force, you may elect to transfer all assets held
in the Variable Account to the Fixed Account. No charge will be made for such
transfer. Such transfer will be allowed regardless of any limits we have
imposed on the number and/or frequency of fund transfers.
21. DEFERRAL OF DETERMINATIONS AND PAYMENTS
During any period when the New York Stock Exchange is closed for trading
(except for normal holiday closings) or when the Securities and Exchange
Commission has determined that a state of emergency exists which may make
payment impractical, or the Commission by order permits postponement for the
protection of our policyholders, we reserve the right to do the following:
(1) To defer determination of the Account Value, and if such
determination has been deferred, to defer:
(a) determination of the values for a loan as of the end of the
Valuation Period in which we receive the loan application
at our Home Office, and payment of the loan; and
(b) payment or application of any Death Benefit in excess of the
Guaranteed Minimum Death Benefit, if elected.
(2) To defer determination, application, processing, or payment of a
Surrender Value or any other policy transaction dependent upon
A deferral, as described above, will be applicable only if any portion of the
Account Value is invested in a Variable Account.
Except as provided in this provision we will make payment of the Death
Benefit, any Surrender Value, any withdrawal, or any loan amount within 7
days of the date it becomes payable.
22. CLAIMS OF CREDITORS
The proceeds and any income payments under the policy will be exempt from the
claims of creditors to the extent permitted by law. These proceeds and
payments may not be assigned or withdrawn before becoming payable without our
Your interest in this policy may be assigned without the consent of any
revocable Beneficiary. Your interest, any interest of the Insureds and of any
revocable Beneficiary shall be subject to the terms of the assignment.
We will not be on notice of any assignment unless it is in writing, nor will
we be on notice until a duplicate of the original assignment has been
received at our Home Office. We assume no responsibility for the validity or
sufficiency of any assignment.
28. SETTLEMENT PROVISIONS
OPTIONAL METHODS OF SETTLEMENT
In place of a single payment, an amount of $1,000 or more payable under the
policy as a benefit or as the Surrender Value, if any, may be left with us,
under the terms of a supplementary agreement. The agreement will be issued
when the proceeds are applied through the choice of any one of the options
below. We shall at least annually declare the rate of interest or amount of
payment for each option. Such declaration shall be effective until the date
specified in the next declaration.
Option 1 - Interest Income at the declared rate but not less than 3.5% a year
on proceeds held on deposit. The proceeds may be paid or withdrawn in whole
or in part at any time as elected.
Option 2A - Income of a Specified Amount, with payments each year of at least
1/12th of the proceeds, until they are paid in full. We will credit interest on
unpaid balances at the declared rate but not less than 3.5% a year.
Option 2B - Income for a Fixed Period with each payment as declared but not
less than that shown in the Table for Option 2B.
Option 3 - Life Income with Payments for a Guaranteed Period, with each
payment as declared but not less than that shown in the Table for Option 3.
If the Payee dies within that period, we will pay the present value of those
remaining payments. In determining present value, we will use the same
interest rate used to determine the payments for this option.
Option 4 - Life Income without Refund at the death of the Payee of any part
of the proceeds applied. The amount of each payment shall be as declared but
not less than that shown in the Table for Option 4.
Option 5- Life Income with Cash Refund at the death of the Payee of the
amount, if any, equal to the proceeds applied less the sum of all income
payments made. The amount of each payment shall be as declared but not less
than that shown in the Table for Option 5.
You may choose an option by sending written notice to us: (a) while either
Insured is alive; and (b) before the proceeds become payable. If you have
made no effective choice, the Payee may make one by written notice within:
(a) 6 months after the date of death of the Surviving Insured; or (b) 2
months after the date on which the proceeds, if any, are payable in any case
No choice of an option may provide for income payments of less than $50.00.
The first payment will be payable as of the date the proceeds are applied,
except that under Option 1 it will be payable at the end of the first payment
The Payee under an option shall be the Beneficiary or either of the Insureds.
No option may be chosen without our consent if the proceeds are payable: (1)
in any case, except death, before the policy has been in force on the same
plan for at least 5 years; or (2) in any case to an executor, administrator,
trustee, corporation, partnership, association or assignee.
A Payee may, by written notice, name and change a Contingent Payee to receive
any final amount that would otherwise be payable to the Payee's estate.
Options 3,4 and 5 are available only if the Payee's age is 40 or older.
To cancel or surrender your life insurance policy you must provide written
notice to us. The notice must contain at least all of the following:
1) An unequivocal request to cancel or surrender.
2) The policy number to be canceled or surrendered.
3) The insured's name on the policy to be canceled or surrendered.
4) The policyowner's signature and, if required by the policy or by a
legally binding document of which we have actual notice, the signature
of a collateral assignee, irrevocable beneficiary, or other person
having an interest in the policy through the legally binding document.
5) Either the policy itself, or, in lieu of the policy, a statement that
the policy itself has been lost or destroyed.