SPLIT-DOLLAR AGREEMENT
THIS AGREEMENT made this ______ day of _________________, 1996 , by and between
JUDGE INC., Two Bala Plaza, Bala Cynwyd, Pennsylvania, ("Corporation") and D.
Xxxxxxx Xxxxxxx, Trustee of the Irrevocable Agreement of Trust of Xxxxxxx Xxxx,
Settlor, dated June 19, 1996, ("Owner").
WITNESSETH THAT:
WHEREAS, Xxxxxxx Xxxx ("Employee") is employed by Corporation; and
WHEREAS, Employee wishes to provide life insurance protection for his
family in the event of the death of him and his wife, under a policy of life
insurance listed on Exhibit "A" attached hereto and made a part hereof
(hereinafter referred to as the "Policy"), which is on the lives of Xxxxxxx Xxxx
and Xxxxxxxx Xxxx (Metropolitan Life Insurance Company is hereinafter referred
to as the "Insurer", and Xxxxxxx Xxxx and Xxxxxxxx Xxxx are hereinafter referred
to as the"Insureds"); and
WHEREAS, Corporation has paid and is willing to continue to pay a
portion of the premiums due on the Policy as an additional employment benefit
for the Employee, on the terms and conditions hereinafter set forth; and
WHEREAS, the Owner is the owner of the Policy and, as such, possesses
all incidents of ownership in and to the Policy; and
WHEREAS, Corporation may wish to have the Policy collaterally assigned
to it by Owner, in order to secure the payment of its Policy Interest, as
hereinafter defined; and
WHEREAS, the parties intend that by this Agreement and such collateral
assignment the Corporation shall receive only the right to such repayment with
the Owner retaining all other ownership rights in the Policy; and
WHEREAS, the parties intend that this arrangement shall constitute a
split-dollar agreement as described in Revenue Ruling 64-32~, 1964-2 C.B. 11;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises contained herein, the parties hereto agree as follows:
1. Definition of Policy Interest. At any time prior to the death of the
survivor of the Insureds, the Corporation's "Policy Interest" with respect to a
Policy is an amount equal to the lesser of (I) the aggregate amount paid by
Corporation prior to the execution of this Agreement and under Article S of this
Agreement towards the premium payments due with respect to each Policy listed on
Exhibit "A" to this Agreement, less any amounts reimbursed by the Owner to the
Corporation prior to or following the execution of this Agreement under such
Article 5, and (ii) an amount equal to the cash surrender value of the Policy as
of the end of the Policy year with respect to which the current premiums are
paid, plus any dividend accumulations and the cash value of any paid up
additions as of the due date of the current premiums.
At any time following the death of the survivor of the Insureds, the
Corporation's "Policy Interest" with respect to a policy is that amount which is
equal to the lesser of (I) the aggregate amount paid by Corporation prior to the
execution of this Agreement and under Article 5 of this Agreement towards the
premium payments due with respect to each Policy listed on Exhibit "A" to this
Agreement, less any amounts reimbursed by the Owner to the Corporation prior to
or following the execution of this Agreement under such Article 5, and (ii) an
amount equal to the cash surrender value of such Policy immediately prior to the
death of the survivor of the Insureds, plus any dividend accumulations and the
cash value of any paid up additions immediately prior to the death of the
survivor of the Insureds.
2. Policy of Insurance. The parties hereto shall take any action which
may be necessary to cause the Policy to conform to the provisions of this
Agreement. The parties hereto agree that the Policy shall be subject to the
terms and conditions of this Agreement and of any collateral assignment filed
with the Insurer relating to the Policy. The terms of this Agreement shall be
applicable to any policy of insurance received in exchange for an interest in
the Policy listed on Exhibit "A" attached hereto, provided all sums available to
the Owner under an old policy are applied to the new policy received in such
exchange. Owner shall notify the Corporation of any such exchange and the terms
Policy hereunder shall thereafter include such new policy.
3. Ownership of Insurance.
a. Owner is the sole and absolute owner of the Policy, and may
exercise all ownership rights granted to the owner thereof by the terms of the
Policy, except as hereinafter provided.
b. It is the intention of the parties to this Agreement and
any collateral assignments executed by Owner to Corporation in connection
herewith that Owner shall retain all rights that the Policy grants to the owner
thereof, except Corporation's
right to its Policy Interest with respect to the Policy as hereinbefore defined.
Specifically, but without limitation, Corporation shall neither have nor
exercise any right as collateral assignee of the Policy which could in any way
defeat or impair any of the following rights of the Owner:
(1) the right to surrender the Policy;
(2) the right to receive the cash surrender value or
the death proceeds of the Policy in excess of the amount due Corporation
hereunder, if any;
(3) the right to collect from the Insurer any
disability benefit payable in cash that does not reduce the amount of insurance;
(4) the right to designate and change the beneficiary
with respect to the Policy, and the right to elect any optional mode of
settlement permitted by the Policy or allowed by the Insurer;
(5) the right to exercise all non-forfeiture rights
permitted by the terms of the Policy or allowed by the Insurer and to receive
all benefits and advantages derived therefrom;
(6) the right to borrow upon the cash value of the
Policy; and
(7) the right to obtain one or more loans or advances
on the Policy, either from the Insurer or, at any time, from other persons, or
to pledge or assign the Policy as security for such loans or advances.
It is the expressed intention of the parties that this Agreement shall
be construed so that the Corporation has absolutely no incidents of ownership in
the Policy. All provisions of this Agreement and of any collateral assignment
executed in conjunction with this Agreement shall be construed so as to carry
out such intention.
4. Application of Dividends.
a. Dividends declared by Insurers on the Policy shall be
accumulated at interest by Insurer until Owner elects a dividend option and
directs how the accumulated dividends and interest earned thereon shall be
applied.
b. Owner shall elect a dividend option as provided in
Paragraph (a) of this Article, subject to any subsequent assignment of the
Policy.
5. Premium Payment.
a. Except as otherwise provided herein, on or before the due
date of each Policy premium, or within the grace period provided therein,
Corporation shall pay the full amount of the premium due to each Insurer, and
shall, upon request, promptly furnish Owner evidence of timely payment of such
premium.
b. Thirty (30) days prior to the due date of each premium for
the Policy, Corporation shall notify Owner of the exact amount equal to the
annual cost of current life insurance protection under the Policy on the lives
of the Insureds, measured by the lower of the PS-58 rate, set forth in Revenue
Ruling 55-747 (or the corresponding applicable provision of any future Revenue
Ruling), or the Insurer's current lowest published premium rate for annually
renewable term insurance for standard risks at the ages of the Insureds. Owner
shall pay such amount to Corporation prior to the premium due date. If Owner
shall not make such payment, Corporation shall make Owner's portion of the
premium payment, which payment shall be recovered by Corporation as provided
herein. The Corporation shall annually furnish to the Employee and to the Owner
a statement of the amount of income reportable by the Corporation for federal
and state income tax purposes as a result of such premium payments, indicating
the amount net of any payments by Owner under this Section 5(b), and including
any additional economic benefit to the Employee from this Agreement or the
Policy that is reportable as income for federal and state income tax purposes.
6. Collateral Assignment. To secure the payment to Corporation of its
Policy Interest with respect to the Policy, as hereinbefore defined, Owner will,
upon the request of Corporation, assign the Policy to Corporation as collateral,
under the forms used by Insurer for such assignment, and such collateral
assignment shall specifically limit the right of Corporation thereunder to
payment of its Policy Interest with respect to the Policy. If this Agreement is
terminated, or upon the surrender of the Policy, such payment shall be made from
the cash surrender value of the Policy (as defined therein). Upon the death of
the survivor of the Insureds such payment shall be made from the death proceeds
of the Policy.
In no event shall Corporation have any right to borrow against the
Policy. Any collateral assignment of the Policy to Corporation hereunder shall
not be terminated, altered or amended by Owner, without the express written
consent of Corporation. The parties hereto agree to take all action necessary to
cause any collateral assignment to conform to the provisions of this Agreement.
7. Owner's Rights in Policy.
a. Owner shall take no action with respect to the Policy,
which would in any way compromise or jeopardize Corporation's right to be paid
its Policy Interest with respect to each Policy, as hereinbefore defined,
without the express written consent of Corporation.
b. Owner shall have the sole right to surrender or cancel the
Policy, and to receive the full cash surrender value of the Policy directly from
Insurer. Upon the surrender or cancellation of the Policy, Corporation shall
have the unqualified right to receive an amount equal to the Policy Interest
with respect to the Policy. Immediately upon receipt of the cash value, Owner
shall pay to Corporation the portion of such cash value to which it is entitled
hereunder, and shall retain the balance, if any.
8. Death of Survivor of Insureds.
a. Upon the death of the survivor of the Insureds, Corporation
and Owner shall promptly take all action necessary to obtain the death benefit
provided under the Policy; when such benefit has been collected and paid as
provided therein, this Agreement shall thereupon terminate.
b. Corporation shall have the unqualified right to receive a
portion of such death benefit received with respect to the Policy equal to its
Policy Interest. The balance of the death benefit provided under the Policy, if
any, shall be paid directly to the beneficiary or beneficiaries designated by
Owner, in the manner and in the amount or amounts provided in the beneficiary
designation provision of the policy. In no event shall the amount payable to
Corporation hereunder exceed the proceeds of the Policy payable at the death of
the survivor of the Insureds. No amount shall be paid from such death benefit to
the beneficiary or beneficiaries designated by Owner until the full amount due
Corporation hereunder has been paid. The parties hereto agree that the
beneficiary designation provisions of the Policy shall not be inconsistent with
the provisions hereof as modified by the collateral assignment.
c. Notwithstanding any provision hereof to the contrary, in
the event that, for any reason whatsoever, no death benefit is payable under the
Policy upon the death of the Employee and in lieu thereof the Insurer refunds
all or any part of the premiums paid for the Policy, the Corporation and the
Owner shall have the unqualified right to share such premiums based on their
respective cumulative contributions thereto.
9. Termination of Agreement.
a. This Agreement shall terminate, without notice, upon
the occurrence of any one of the following events:
(1) Total cessation of the business of
Corporation; or
(2) Bankruptcy, receivership or dissolution of
Corporation.
b. In addition, either the Owner or the Corporation shall have
the right to terminate this Agreement by written notice to the other party
hereto. Such termination shall be effective as of the date of such notice.
10. Release of Collateral Assignment.
a. For sixty (60) days after the date of the termination of
this Agreement, Owner shall have the option of obtaining the release by
Corporation of any collateral assignment of the Policy. To obtain such release,
Owner shall pay to Corporation the amount of Corporation's Policy Interest in
the policy. Upon receipt of such amount with respect to the Policy, Corporation
shall release the collateral assignment of the Policy, by the execution and
delivery of an appropriate instrument of release.
b. If Owner fails to exercise such option within such sixty
(60) day period, then, at the request of Corporation, Owner shall execute any
document or documents required by the Insurer to transfer the interest of Owner
in the Policy to Corporation.
11. Release of Insurer. Insurer shall be fully discharged form its
obligations with respect to the Policy by payment of the death benefit to the
beneficiary or beneficiaries named in the Policy, subject to the terms and
conditions of the Policy. In no event shall Insurer be considered a party to
this Agreement, or any modification or amendment hereof. No provision of this
Agreement, nor of any subsequent modification or amendment hereof, shall in any
way be construed as enlarging, changing, varying, or in any other way affecting
the obligations of Insurer as expressly provided in the Policy, except insofar
as the provisions hereof are made a part of the Policy by any collateral
assignment executed by Owner and filed with the Insurer in connection herewith.
12. Fiduciary
a. Corporation is hereby designated as the named fiduciary
under this Agreement. The named fiduciary shall have authority to control and
manage the operation and administration
of this Agreement, and it shall be responsible for establishing and carrying out
a funding policy and method consistent with the objectives hereof.
b. Corporation shall make all determinations concerning rights
to benefits hereunder. Any decision by Corporation denying a claim by Owner or a
designated beneficiary for benefits hereunder shall be stated in writing and
delivered or mailed to Owner or such beneficiary. Such decision shall set forth
the specific reasons for the denial, written to the best of Corporation's
ability in a manner that may be understood without legal or actuarial counsel.
In addition, Corporation shall afford a reasonable opportunity to Owner or such
beneficiary for a full and fair review of the decision denying such claim.
13. Amendment. This Agreement may not be amended, altered or modified,
except by a written instrument signed by the parties hereto, or their respective
sucessors or assigns, and may not be otherwise terminated except as provided
herein.
14. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of Corporation, Employee, Insureds and Owner, and their respective
successors, assigns, heirs, executors, administrators and beneficiaries.
15. Notice. Any notice, consent or demand required or permitted to be
given under provisions of this Agreement shall be in writing, and shall be
signed by the party giving or making the same. If such notice, consent or demand
is mailed to a party hereto, it shall be sent by United States certified mail,
postage prepaid, addressed to such party's last known address as shown on the
records of Corporation. The date of such mailing shall be deemed the date of
notice, consent or demand.
16. Governing Law. This Agreement and the rights of the parties
hereunder, shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania.
17. Captions. The captions appearing in this Agreement are for
convenience only, and do not in any way define, limit or describe the scope of
this Agreement, or the intent of any provision thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
duplicate, as of the day and year first above written.
ATTEST: JUDGE INC.
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Secretary Title:
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Witness D.Xxxxxxx Xxxxxxx, Trustee Under
Agreement of Trust dated
June 19, 1996 of
Xxxxxxx Xxxx, Settlor
