Exhibit 10.3
SPLIT-DOLLAR AGREEMENT
THIS AGREEMENT, made and entered into effective the date set forth below,
by and among EQUITY CORPORATION INTERNATIONAL, a Delaware corporation,
(hereinafter referred to as the "Corporation"), and XXXXX X. XXXXXX, III,
an individual residing in the State of Texas (hereinafter referred to as
the "Employee"), and J. XXXXXXX XXXXXXX, an individual residing in the
State of Texas, Trustee of the Xxxxx X. Xxxxxx, III Family Trust, pursuant
to a certain Irrevocable Trust Agreement dated August 27, 1992 (hereinafter
referred to as the "Owner"),
WITNESSETH:
WHEREAS, the Employee is employed by the Corporation; and
WHEREAS, Owner is the owner of a certain policy of life insurance insuring
the life of Employee (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 American General Life 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 employment benefit for the Employee, on the terms and
conditions hereinafter set forth; and
WHEREAS, the Corporation wishes to have the Policy collaterally assigned to
it by Owner in order to secure the repayment of the amounts which it will
pay toward the premiums on the Policy; and
WHEREAS, the parties intend that, by virtue of such collateral assignment
the Corporation shall receive only the right to be repaid its premium
payments hereunder, with the Owner retaining all other ownership rights in
the Policy as specified herein;
NOW, THEREFORE, in consideration of the premises and of the mutual promises
contained herein, the parties hereto agree as follows:
1. The Owner has acquired the Policy from the Insurer in the total face
amount of $500,000.00. The parties hereto 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.
2. a. The Owner 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.
b. It is the intention of the parties to this Agreement and the
collateral assignment executed by the Owner to the Corporation in
connection herewith that the Owner shall retain all rights which the Policy
grants to the owner thereof, except the right of the Corporation to be
repaid the amounts which it pays toward the premiums on the Policy.
Specifically, but without limitation, the Corporation shall neither have
nor exercise any right as collateral assignee of the Policy which could in
any way defeat or impair the Owner's right to receive the cash surrender
value or the death proceeds of the Policy, in excess of the amount due the
Corporation hereunder. All provisions of this Agreement and of such
collateral assignment shall be construed so as to carry out such intention.
3. 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 amount of annual
premiums paid by the Corporation during the six (6) years after the
effective date of this Agreement shall be no less than $37,511.00 per year.
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 its payment of such premium.
4. To secure the repayment to the Corporation of the amount of the
premiums under the Policy, the Owner has assigned the Policy to the
Corporation as collateral, under the form used by the Insurer for such
assignments, which collateral assignment specifically limits the right of
the Corporation thereunder to the repayment of its payments toward premiums
on the Policy hereunder. Such repayment shall be made from the cash
surrender value of the Policy (as defined therein) if this Agreement is
terminated or if the Owner surrenders or cancels the Policy or from the
death proceeds of the Policy if the Employee should die while the Policy
and Agreement remain in force. In no event shall the Corporation have any
right to borrow against the Policy except for the purpose of paying
premiums on the Policy following six (6) years after the effective date of
this Agreement. Such collateral assignment shall not be terminated,
altered or amended by the Owner, 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.
5. a. The Owner shall take no action with respect to the Policy which
would in any way compromise or jeopardize the Corporation's right to be
repaid the amounts it paid toward premiums on the Policy, without the
express written consent of the Corporation.
b. The Owner may pledge or assign the Policy, subject to the terms and
conditions of this Agreement, in order to secure a loan from the Insurer or
from a third party, in an amount which shall not exceed the cash surrender
value of the Policy (as defined therein) as of the date to which premiums
have been paid, less the amount of the premiums on the Policy paid by the
Corporation hereunder. Interest charges on such loan shall be the
responsibility of and be paid by the Owner.
c. The Owner shall have the sole right to surrender or cancel the
Policy. If the Policy is surrendered or cancelled, the Corporation shall
have the unqualified right to receive a portion of the cash surrender value
equal to the total amount of the premiums paid by it hereunder. Upon
receipt of the cash surrender value, the Owner shall pay to the Corporation
the portion of such cash surrender value to which it is entitled hereunder,
and shall retain the balance, if any.
6. a. Upon the death of the Employee, the Corporation and the Owner shall
promptly take all action necessary to obtain the death benefit provided
under the Policy.
b. 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. The balance of the death benefit provided under the
Policy, if any, shall be paid directly to the beneficiary or beneficiaries
designated by the 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 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 Owner, 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.
7. a. The obligations of the Corporation to pay premiums on the Policy
under this Agreement shall terminate, without notice, upon the occurrence
of any of the following events: (a) the total cessation of the business of
the Corporation and its subsidiaries; (b) the bankruptcy, receivership or
dissolution of the Corporation or (c) the date the Employee is neither (i)
an employee of the Corporation or a subsidiary corporation (as defined in
Section 425 of the Internal Revenue Code of 1986, as amended), (ii) a
director of the Corporation or its successor or (iii) a consultant to the
Corporation or a subsidiary corporation in accordance with any consulting
agreement in effect from time to time between Employee and the Corporation
or any subsidiary corporation; provided however in the event of a "Change-
in-Control" of the Corporation, the provisions of paragraph b. of this
Section 7 shall apply.
b. For purposes of this Agreement, the term "Change-in-Control" shall
have the meaning provided in the "Executive Severance Agreement" dated
August 14, 1997, between the Corporation and the Employee. Immediately
prior to a "Change-in-Control", the Corporation will create a "rabbi trust"
for the benefit of Owner pursuant to a trust agreement in such form as is
approved by counsel for the Corporation and the Owner and the Corporation
will transfer to such rabbi trust the excess of $225,066.00 over the
amounts of premiums theretofore paid on the Policy by the Corporation.
Following such Change-in-Control, this Agreement will continue and the
trustee of the rabbi trust shall pay the premiums on the Policy as they
become due thereafter.
8. At any time during the term of this Agreement, the Owner shall have the
option of repaying to the Corporation all or any portion of the total
amount of the premium payments made by the Corporation hereunder and Owner
shall be authorized to borrow against the cash value of the Policy in order
to fund such repayment. Upon receipt of the total amount of the premium
payments made by the Corporation hereunder, the Corporation shall release
the collateral assignment of the Policy, by the execution and delivery of
an appropriate instrument of release.
9. 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 Corporation and filed with the
Insurer in connection herewith.
10. 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 of this Agreement.
b. The Corporation shall make all determinations concerning rights to
benefits under this Agreement. Any decision by the Corporation denying a
claim by the Owner or its beneficiary for benefits under this Agreement
shall be stated in writing and delivered or mailed to the Owner or such
beneficiary. Such decision shall set forth the specific reasons for the
denial, written to the best of the Corporation's ability in a manner that
may be understood without legal or actuarial counsel. In addition, the
Corporation shall afford a reasonable opportunity to the Owner or such
beneficiary for a full and fair review of the decision denying such claim.
11. 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.
12. This Agreement shall be binding upon and inure to the benefit of the
Corporation and its successors and assigns, and the Employee, the Owner,
and their respective successors, assigns, heirs, executors, administrators
and beneficiaries.
13. 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.
14. This Agreement, and the rights of the parties hereunder, shall be
governed by and construed in accordance with the laws of the State of
Texas.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
duplicate, effective as of the 1st day of January, 1998.
"CORPORATION"
EQUITY CORPORATION INTERNATIONAL
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X. Xxxxxx Xxxxxx, Senior Vice President
"EMPLOYEE"
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Xxxxx X. Xxxxxx, III
"Owner"
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J. Xxxxxxx Xxxxxxx, Trustee
EXHIBIT "A"
The following life insurance policy is subject to the attached Split-Dollar
Agreement:
Insurer: American General Life Insurance Company
Insured: Xxxxx X. Xxxxxx, III
Policy Number: U10003825L
Face Amount: $500,000
