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EXHIBIT 10-D
LIFE INSURANCE SPLIT-DOLLAR AGREEMENT
(Second Restatement)
AGREEMENT by and between AMERICAN PRECISION INDUSTRIES INC., a Delaware
corporation with its principal office at 0000 Xxxxxx Xxxxxx, Xxxxxxx, Xxx Xxxx
00000 (the "Company"), and XXXX XXXXXXXXXXX ("Executive"), residing at 000
Xxxxxxxxxx Xxxx, Xxxx Xxxxxx, Xxx Xxxx 00000, first dated as of August 26, 1992,
as amended and restated as of February 19, 1999.
W I T N E S S E T H
WHEREAS, the Executive is currently serving as President and Chief
Executive Officer of the Company; and
WHEREAS, the Company desires to continue to assist the Executive in
providing protection for the Executive's family (or other beneficiaries) in the
event of the Executive's death while employed by the Company and in augmenting
his assets at the time of his retirement or other termination of employment; and
WHEREAS, the Company has determined that this assistance can best be
provided under a "split-dollar" arrangement under this Agreement, which was
first dated July 1, 1992, was amended and restated effective July 1, 1996, and
is now restated to incorporate amendments adopted as of February 19, 1999; and
WHEREAS, the Executive has applied for and has taken delivery of
Insurance Policy No. 3705278 issued by Guardian Life Insurance Company (the
"Insurer") in the original face amount of $1,583,240.00 on the life of the
Executive (the "Policy");
NOW, THEREFORE, the parties agree as follows:
1. OWNERSHIP OF POLICY. The Executive will continue to be the owner of
the Policy in accordance with the terms and provisions of this Agreement.
2. ASSIGNMENT. The Executive has executed a collateral assignment (the
"Assignment") of a partial interest in the Policy to the Company. The
"Assignee's Interest" to which the Assignment refers means the Company's
interests in the Policy's death benefit and cash surrender value as described in
Paragraph 5 of this Agreement, which shall supersede any contrary or
inconsistent provisions of the Assignment. The Assignment shall terminate upon
the termination of this Agreement in accordance with the terms of Paragraph 11
of this Agreement.
3. PAYMENT OF PREMIUMS. On or before the due date of each annual premium
on the Policy, or within the grace period allowed by the Policy or the Insurer
for the
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payment of such annual premium, and for so long as the Executive is
employed by the Company before attaining the age of 65, the Company shall pay a
portion of the annual premium on the Policy. The portion of each such annual
premium to be paid by the Company shall be determined by the Company in its
discretion from year to year. The Executive shall pay the balance of each such
annual premium, on or before its due date or within the grace period allowed by
the Policy or the Insurer for the payment of such annual premium.
4. ADDITIONAL COMPENSATION. The Company shall pay to the Executive as
additional compensation an amount equal to (i) the portion of each annual
premium to be paid by the Executive pursuant to Paragraph 3 of this Agreement
plus (ii) an amount such that, after payment of taxes at the marginal rate (as
defined in Schedule A to this Agreement) on the entire additional compensation
payment, the Executive would have left an amount equal to the portion of the
annual premium payment to be paid by the Executive. The Company shall pay such
additional compensation to the Executive, subject to any applicable payroll tax
withholding, by the end of the grace period allowed by the Policy or the Insurer
for the payment of the annual premium.
5. ALLOCATION OF POLICY VALUES. During the term of this Agreement, the
Executive shall retain a death benefit from the Policy equal to the amount
specified in Schedule A to this Agreement. The remaining proceeds payable from
the Policy upon the death of the Executive shall be payable to the Company under
the Assignment. During the term of this Agreement, the Company's interest in the
cash surrender value of the Policy pursuant to the Assignment shall be equal to
the amount described in Paragraph 5(a), except as provided in Paragraph 5(b).
(a) The lesser of the sum of the premiums paid by the Company on
the Policy or the cash surrender value of the Policy.
(b) If, during a Protection Period in connection with a Change in
Control, the Executive's employment is terminated by the Company other than for
Cause, or the Executive terminates his employment for Good Reason, then the
Company's interest in the cash surrender value shall be equal to the amount of
the excess, if any of the cash surrender value over the Executive's interest in
the cash surrender value as defined in Schedule A to this Agreement. (As used in
this Paragraph 5(b), the terms "Protection Period," "Change in Control,"
"Company," "Cause," and "Good Reason" shall have the meanings given to them in
the Change in Control Agreement entered into by and between the Company and the
Executive as of July 1, 1996.)
The Company's interest in the cash surrender value shall be
payable to the Company upon the termination of the Executive's employment with
the Company other than by reason of death. The Company shall furnish to the
Executive a schedule after each
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anniversary of the Policy showing the relative allocations of the cash surrender
value of the Policy.
6. DESIGNATION OF BENEFICIARY. The Executive shall have the right to name
the beneficiary or beneficiaries of the Policy, who, upon the death of the
Executive shall receive the proceeds of the Executive's interest in the death
benefit of the Policy in accordance with Paragraph 7 below. If the Executive
elects to name someone other than his spouse as beneficiary, a written consent
from the spouse will be required.
7. DEATH CLAIMS. In the event of the Executive's death, the Executive's
personal representative and the Company will promptly take all steps necessary
to cause the death benefits provided under the Policy to be paid by the Insurer.
The Policy shall provide by endorsement or otherwise that in the event of the
death of the Executive while the Policy is in full force and effect during the
term of this Agreement, there shall be paid to the beneficiary or beneficiaries
designated by the Executive as provided in Paragraph 6 of this Agreement, that
portion of the death benefit retained by the Executive as provided in Paragraph
5 of this Agreement, and the remaining proceeds from the Policy shall be paid
directly to the Company.
8. POLICY LOANS. While this Agreement is in effect and except as provided
in Paragraph 10 of this Agreement, there shall be no loans made to the Company
or the Executive secured by the Policy.
9. TERMINATION OF POLICY. The Executive agrees that while this Agreement
is in full force and effect, he will not, without the consent of the Company,
sell, transfer, surrender, assign, or otherwise terminate the Policy.
10. TERMINATION OF EMPLOYMENT. Upon the termination of the Executive's
employment with the Company, the Executive shall pay to the Company (through a
loan secured by the Policy or from other funds) an amount equal to the Company's
interest in the cash surrender value of the Policy (as specified in Paragraph 5
of this Agreement). Upon such payment no other amount will be due to the Company
under this Agreement and the Company shall release the Assignment. The Executive
will thereafter own the Policy free from the terms of this Agreement.
11. TERMINATION OF AGREEMENT. This Agreement shall terminate upon the
termination of the Executive's employment with the Company and the satisfaction
of the Company's interest in the Policy under the Assignment as provided in
Paragraph 10 of this Agreement.
12. EXECUTIVE WAIVER. The Executive acknowledges and agrees that if the
Agreement and the benefits described in the Agreement constitute an employee
benefit plan or part of an employee benefit plan for purposes of Title I of the
Employee Retirement Income
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Security Act, as amended ("ERISA"), (i) the plan is a welfare plan and not a
pension plan and, therefore, is exempt from the participation, vesting, benefit
accrual, joint and survivor and preretirement survivor annuity, and other
requirements of Title I of ERISA, and (ii) the Executive irrevocably waives, on
behalf of himself and any spouse to whom he may now or in the future be married,
any rights and claims the Executive or his spouse or both of them may have now
or in the future under Title I of ERISA with respect to such plan, even if it
should be construed as a pension plan. The Executive has had sufficient
opportunity to review this waiver with counsel. The Company shall administer
this Agreement, construe its terms, and make all determinations necessary under
this Agreement and shall have complete discretion in doing so.
13. AMENDMENT OF AGREEMENT. This Agreement shall not be modified or
amended except by a written amendment signed by the Company and the Executive.
This Agreement shall be binding on the beneficiaries, heirs, and personal
representatives of the Executive and the successors and assigns of the Company.
14. STATE LAW. This Agreement shall be subject to and shall be construed
under the laws of the State of New York.
15. PARAGRAPH READINGS. Paragraph headings as to contents of particular
paragraphs of this Agreement are inserted only for convenience and are in no way
to be construed as part of the provisions of this Agreement or as a limitation
on the scope of particular paragraphs to which they refer.
16. EFFECTIVE DATE OF RESTATEMENT. The amendment of the Agreement as set
forth in this document is effective as of February 19, 1999.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
AMERICAN PRECISION INDUSTRIES INC.
By s/ Xxxxx McH. Xxxxxxxx
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Xxxxx McH. Xxxxxxxx,
Vice President and Chief Financial Officer
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By s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx, Secretary
s/ Xxxx Xxxxxxxxxxx
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Xxxx Xxxxxxxxxxx, individually
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LIFE INSURANCE SPLIT-DOLLAR AGREEMENT
SCHEDULE A
As Amended Effective as of February 19, 1999
I. Marginal Tax Rate
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The marginal tax rate is the marginal tax rate applicable to the Employee
on the date as of which a premium payment is made, as determined by the
Company. The Company shall determine the marginal tax rate applicable to
the Employee as of the premium payment date, taking into account federal,
state, and local income tax rates; the hospital insurance tax rate under
the Federal Insurance Contribution Act; the deduction (for income tax
purposes) for state and local income taxes; and no income other than
income attributable to the Company.
II. Death Benefit
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The death benefit is $3,000,000, or, if less, the difference between the
full death benefit under the Policy and the sum of the premiums paid by
the Company on the Policy.
III. Executive's Interest in Cash Surrender Value Upon a Change in Control.
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The Executive's interest in the cash surrender value of the Policy under
the circumstances described in Paragraph 5(b) of the Life Insurance
Split-Dollar Agreement shall be calculated as follows as of the date of
the termination of the Executive's employment with the Company:
(a) Divide the amount of the Executive's investment in the Policy by
180.
(b) Divide the amount of the quotient from (a) by the after-tax rate
(as defined in Part IV of this Schedule A).
(c) Subtract the amount of the quotient from (b) from $16,666,67. If
the remainder is a negative number substitute zero in its place
for the purposes of this calculation.
(d) Add the amount of the quotient from (a) plus the amount of the
remainder from (c).
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(e) Find the present value of 180 monthly payments each equal in
amount to the sum from (d), assuming interest at the applicable
annual rate (as defined in Part V of this Schedule A).
The present value calculated under (e) is the Executive's interest
in the cash surrender value.
IV After-Tax Rate.
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The After-Tax Rate is the percentage that is the remainder after the
subtraction from (i) 100 percent of (ii) the marginal tax rate defined in
Part I of this Schedule A, but determined as of the date as of which the
calculation is being made.
V. Applicable Annual Rate.
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The Applicable Annual Rate is the annual rate of interest determined for
a given calendar year as follows: For each calendar year, the Company
shall obtain quotes from the Guardian Life Insurance Company and two
other A+ rated life insurance companies on the single premium that would
be required in January of that year to purchase an immediate annuity
policy paying a fixed monthly benefit for a term certain of 180 months.
The premiums quoted shall be translated into discount rates. The highest
of the three discount rates shall be the Applicable Annual Rate in effect
for calculations made as of any date during the given calendar year.
AMERICAN PRECISION INDUSTRIES INC.
by s/ Xxxxx McH. Xxxxxxxx
----------------------------------------------------
Xxxxx McH. Xxxxxxxx,
Vice President and Chief Financial Officer
s/ Xxxx Xxxxxxxxxxx
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Xxxx Xxxxxxxxxxx
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