Exhibit 10.31
Split Dollar Agreement
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SPLIT-DOLLAR AGREEMENT
(Collateral Assignment: Employee Owner)
THIS AGREEMENT made and entered into as of the ____ day of _______, ____, by and
between __________________________, a ________ corporation, with principal
offices and place of business in the State of ________ (hereinafter referred to
as the "Corporation"), and ________ , an individual residing in the State of
________ (hereinafter referred to as the "Employee"),
WITNESSETH THAT:
WHEREAS, the Employee is employed by the Corporation; and
WHEREAS, the Employee wishes to provide life insurance protection for his family
in the event of his death, under a policy of life insurance insuring his life
(hereinafter referred to as the "Policy"), which is described in Exhibit A
attached hereto and by this reference made a part hereof, and which was issued
by ____________ Insurance Company (hereinafter referred to as the "Insurer");
and
WHEREAS, the Corporation is willing to pay the premiums due on the Policy as an
additional employee benefit for the Employee, on the terms and conditions
hereinafter set forth; and
WHEREAS, the Employee is the owner of the Policy and, as such, possesses all
incidents of ownership in and to the Policy; and
WHEREAS, the Corporation wishes to have the Policy collaterally assigned to it
by the Employee, in order to secure the repayment of the amounts which it will
pay toward the premiums on the Policy;
NOW, THEREFORE, in consideration of the premises and of the mutual promises
contained herein, the parties hereto agree as follows:
1. Purchase of Policy. The Employee has purchased the Policy from the
Insurer in the total face amount of $_________. The parties hereto have taken
all necessary action to cause the Insurer to issue the Policy, and shall take
any further 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 the collateral
assignment filed with the Insurer relating to the Policy.
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2. Ownership of Policy. The Employee shall be 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 may otherwise be provided herein.
3. Death Benefit Option. Death benefit option 3 has been selected. Such
benefit provides an increasing death benefit equal to the initial specified
amount plus premiums paid. Such election may be changed at any time upon written
agreement of the parties and shall not alter any rights provided herein.
4. Payment of Premiums. On or before the due date of each Policy premium
or within the grace period provided therein, the Corporation shall pay the full
amount of the premium to the Insurer, and shall, upon request, promptly furnish
the Employee evidence of timely payment of such premium. The Corporation shall
annually furnish the Employee a statement of the amount of income reportable by
the Employee for federal and state income tax purposes, as a result of the
insurance protection provided the Employee's beneficiary.
5. Collateral Assignment. To secure the repayment to the Corporation of
the amount of the premiums on the Policy paid by it hereunder, the Employee has,
contemporaneously herewith, assigned the Policy to the Corporation as
collateral, under the form used by the Insurer for such assignments. The
collateral assignment of the Policy to the Corporation hereunder shall not be
terminated, altered or amended by the Employee, without the express written
consent of the Corporation. The parties hereto agree to take all action
necessary to cause such collateral assignment to conform to the provisions of
this Agreement.
6. Limitations on Employee's Rights in Policy.
a. Except as otherwise provided herein, the Employee shall not
sell, assign, transfer, borrow against, surrender or cancel
the Policy, change the beneficiary designation provision
thereof, nor terminate the dividend election thereof without,
in any such case, the express written consent of the
Corporation.
b. Notwithstanding any provision hereof to the contrary, the
Employee shall have the right to absolutely and irrevocably
give to a donee all of his right, title and interest in and to
the Policy, subject to the collateral assignment of the Policy
to the Corporation pursuant hereto. The Employee may exercise
this right by executing a written transfer of ownership in the
form used by the Insurer for irrevocable gifts of insurance
policies, and delivering this form to the Corporation. Upon
receipt of such form, executed by the Employee and duly
accepted by the donee thereof, the Corporation shall consent
thereto in writing, and shall thereafter treat the Employee's
donee as the sole owner of all the Employee's right, title and
interest in and to the Policy to the Corporation pursuant
hereto. Thereafter, the Employee shall have no right, title or
interest in and to the Policy, all such rights being vested in
and exercisable only by such donee.
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7. Collection of Death Proceeds.
a. Upon the death of the Employee, the Corporation shall
cooperate with the beneficiary or beneficiaries designated by
the Employee to take whatever action is necessary to collect
the death benefit provided under the Policy; when such benefit
has been collected and paid as provided herein, this Agreement
shall thereupon terminate.
b. Upon the death of the Employee the Corporation shall have the
unqualified right to receive a portion of such death benefit
equal to the total amount of the premiums paid by it hereunder
reduced by any outstanding indebtedness which was incurred by
the Corporation and secured by the Policy, including any
interest due on such indebtedness. The balance of the death
benefit provided under the Policy, if any, shall be paid
directly to the beneficiary or beneficiaries designated by the
Employee, 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 the Corporation hereunder
exceed the Policy proceeds payable at the death of the
Employee. No amount shall be paid from such death benefit to
the beneficiary or beneficiaries designated by the Employee
until the full amount due the Corporation hereunder has been
paid. The parties hereto agree that the beneficiary
designation provision of the Policy shall conform to the
provisions hereof.
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
Employee's beneficiary of beneficiaries shall have the
unqualified right to share such premiums based on their
respective cumulative contributions thereto.
8. Termination of the Agreement During the Employee's Lifetime.
a. This Agreement shall terminate, during the Employee's
lifetime, without notice, upon the occurrence of any of the
following events: (a) total cessation of the Corporation's
business; (b) bankruptcy, receivership or dissolution of the
Corporation; or (c ) termination of Employee's employment by
the Corporation (other than by reason of his death).
b. In addition, the Employee may terminate this Agreement, while
no premium under the Policy is overdue, by written notice to
the Corporation. Such termination shall be effective as of the
date of such notice.
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9. Disposition of the Policy on Termination of the Agreement During the
Employee's Lifetime.
a. For sixty (60) days after the date of termination of this
Agreement during the Employee's lifetime, the Employee shall
have the option of obtaining the release of the collateral
assignment of the Policy to the Corporation. To obtain such
release, the Employee shall repay to the Corporation the total
amount of the premium payments made by the Corporation
hereunder, less any indebtedness secured by the Policy which
was incurred by the Corporation and remains outstanding as of
the date of such termination, including any interest due on
such indebtedness. Upon receipt of such amount, the
Corporation shall release the collateral assignment of the
Policy, by the execution and delivery of an appropriate
instrument of release.
b. If the Employee falls to exercise such option within such
sixty (60) day period, then, at the request of the
Corporation, the Employee shall execute any document or
documents required by the Insurer to transfer the interest of
the Employee in the Policy to the Corporation. Alternatively,
the Corporation may enforce its right to be repaid the amount
of the premiums on the Policy paid by it from the cash
surrender value of the Policy under the collateral assignment
of the Policy, provided that in the event the cash surrender
value of the Policy exceeds the amount due the Corporation,
such excess shall be paid to the Employee. Thereafter, neither
the Employee nor his respective heirs, assigns or
beneficiaries shall have any further interest in and to the
Policy, either under the terms thereof or under this
Agreement.
10. Insurer Not a Party. 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 party to this
Agreement, or any modification or amendment hereof. 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 other 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 Employee and filed with the Insurer in connection
herewith.
11. Named Fiduciary, Determination of Benefits, Claims Procedure and
Administration.
a. The 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 if this Agreement.
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b. (1) Claim.
A person who believes that he or she is being denied a benefit
to which he or she is entitled under this Agreement
(hereinafter referred to as a "Claimant") may file a written
request for such benefit with the Corporation, setting forth
his or her claim. The request must be addressed to the
President of the Corporation at its then principal place of
business.
(2) Claim Decision.
Upon receipt of a claim, the Corporation shall advise the
Claimant that a reply will be forthcoming within ninety (90)
days and shall, in fact, deliver such reply within such
period. The Corporation may, however, extend the reply period
for an additional ninety (90) days for reasonable cause.
If the claim is denied in whole or in part, the Corporation
shall adopt a written opinion, using language calculated to be
understood by the Claimant, setting forth: (a) the specific
reason or reasons for such denial; (b) the specific reference
to pertinent provisions of this Agreement on which such denial
is based; (c) a description of any additional material or
information necessary for the Claimant to perfect his or her
claim and an explanation why such material or such information
is necessary; (d) appropriate information as to the steps to
be taken if the Claimant wishes to submit the claim for
review; and (e) the time limits for requesting a review under
subsection (3) and for review under subsection (4) hereof.
(3) Request for Review.
Within sixty (60) days after the receipt by the Claimant of
the written opinion described above, the Claimant may request
in writing that the Secretary of the Corporation review the
determination of the Corporation. Such request must be
addressed to the Secretary of the Corporation, at its then
principal place of business. The Claimant or his or her duly
authorized representative may, but need not, review the
pertinent documents and submit issues and comments in writing
for consideration by the Corporation. If the claimant does not
request a review of the Corporation's determination by the
Secretary of the Corporation within such sixty (60) day
period, he or she shall be barred and estopped from
challenging the Corporation's determination.
(4) Review of Decision.
Within sixty (60) days after the Secretary's receipt of a
request for review, he or she will review the Corporation's
determination. After considering all materials presented by
the claimant, the Secretary will render a written opinion,
written in a manner calculated to be understood by the
Claimant, setting forth the specific reasons for the decision
and containing specific references to the pertinent provisions
of this Agreement on which the decision is based. If special
circumstances require that the sixty (60) day time period be
extended, the Secretary will so notify the Claimant and will
render the decision as soon as
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possible, but no later than one hundred twenty (120) days
after receipt of the request for review.
12. 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.
13. Binding Effect. This Agreement shall be binding upon and insure to the
benefit of the Corporation and its successors and assigns, and the
Employee, his successors, assigns, heirs, executors, administrators and
beneficiaries.
14. Notices. Any notice, consent or demand required or permitted to be
given under the 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 the Corporation.
The date of such mailing, shall be deemed the date of notice, consent
or demand.
15. Governing Law. This Agreement, and the rights if the parties hereunder,
shall be governed by and construed in accordance with the laws of the
State of Virginia.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
duplicate, as of the day and year first above written.
By
-------------------------------------
President
ATTEST:
--------------------------------
Secretary
-------------------------------------
Corporation
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Employee
Split Dollar Agreement
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EXHIBIT A
The following life insurance policy is subject to the attached Split-Dollar
Agreement:
Insurer ____________________________________________
Insured ____________________________________________
Policy Number ____________________________________________
Face Amount ____________________________________________
Death Benefit Option ____________________________________________
Date of Issue ____________________________________________
