SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
This Agreement is entered into as of February 1, 1996 by and between
Southwestern Energy Company (the "Company") and Xxxxxxx X. Xxxxx ("Employee")
inreference to the following facts:
1. Employee is a valued employee of the Company.
2. The Company has simultaneously with the execution of this
Agreement caused Pacific Mutual Life Insurance Company (the "Insurance Company")
to issue and deliver to Employee policy number 1A23067760 (the "Policy") on the
life of Employee. The first annual premium has been paid by the Company as of
the date of this Agreement.
3. For purposes of this Agreement, the Company and any
subsidiary of the Company shall constitute the "Employer." For this purpose, a
subsidiary is a corporation which is a member of a controlled group of
corporations (within the meaning of Section 414(b) of the Internal Revenue Code
of 1986, as amended (the "Code")) of which the Company is a member. If Employee
is employed by a corporation which, as a result of a sale or other corporate
reorganization, ceases to be a member of such controlled group, such sale or
other corporate reorganization shall be treated as a termination of Employee by
Employer without Cause (as defined in Section 8) unless immediately following
the event and without any break in employment the Employee remains employed by
the Company or another corporation which is a member of the controlled group of
corporations.
NOW THEREFORE, in consideration of the facts set forth above and the
various promises and covenants set forth below, the parties to this Agreement
agree as follows:
1. Ownership of Policy.
The Company acknowledges that Employee is the owner of the Policy and
that Employee is entitled to exercise all of his or her ownership rights granted
by the terms of the Policy, except to the extent that the power of the Employee
to exercise those rights is specifically limited by this Agreement. Except as so
limited, it is the expressed intention of the parties to reserve to Employee all
rights in and to the Policy granted to its owner by the terms thereof,
including, but not limited to, the right to change the beneficiary of that
portion of the proceeds to which Employee is entitled under Section 4 of this
Agreement and the right to exercise settlement options.
2. The Company's Security Interest.
The Company's security interest in the Policy is conditioned upon its
satisfactorily performing all of the covenants under this Agreement. Each period
covered by any individual premium payment described in Section 3 shall be
considered a discrete extension
of the Company's security interest in the Policy. The Company shall not have nor
exercise any right in and to the Policy which could, in any way, endanger,
defeat, or impair any of the rights of Employee in the Policy, including by way
of illustration any right to collect the proceeds of the Policy in excess of the
amount due the Company as provided in this Agreement and in the Policy. The only
rights in and to the Policy granted to the Company in this Agreement shall be
limited to the Company's security interest in and to the cash value of the
Policy, as defined herein, and a portion of the death benefit of the Policy as
hereinafter provided (the "Security Interest"). The Company shall not assign any
of its Security Interest in the Policy to anyone other than Employee.
3. Premium payments.
Until (a) Employee files a notice with the Company pursuant to Section
10 electing a Security Release Date (as defined in Section 10 below), (b)
Employee otherwise attains his or her Security Release Date, or (c) Employee's
employment with the Company is terminated for any reason, whichever occurs
earliest, the Company agrees to pay premiums under the Policy in amounts such
that premiums (not including the initial premium) received by each anniversary
date are at least equal to the "cumulative cost of term insurance" (as defined
in the Policy) from the first anniversary date through the period ending twelve
months after the anniversary date in question. The premium payment shall be
transmitted directly by the Company to the Insurance Company. Consistent with
the preceding sentences, prior to the release of the Company's Security Interest
in the Policy, Employee and the Company agree that the Company shall from time
to time designate one or more individuals (the "Designee"), who may be officers
of the Company, who shall be entitled to adjust the death benefit under the
Policy; provided, however, that the Designee may only increase, but not
decrease, the death benefit in effect on the date that the Policy is issued.
During the period of time that this Agreement is in effect, Employee irrevocably
agrees that all dividends paid on the Policy shall be applied to purchase from
the Insurance Company additional paid-up life insurance on the life of Employee.
4. Death of Employee while employed by Employer.
(a) If Employee dies prior to termination of employment with Employer
and prior to his or her Security Release Date (as defined in Section 10 below),
Employee's designated beneficiary shall be entitled to receive as a death
benefit an amount equal to four times Employee's annual base salary at the time
of death. The amount described in the preceding sentence shall be paid from the
proceeds of the Policy. To the extent that the death benefit under the Policy
exceeds such amount, the balance of the death benefit shall be payable to the
Company. The designation of the beneficiaries under the Policy shall be in
accordance with this Section.
(b) Employee agrees that, during the period of this Agreement, Employee
will obtain and provide to the Company and/or the Insurance Company the written
consent of the spouse of the Employee, in the form attached hereto as Exhibit B,
to any designation
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by Employee of anyone other than the Employee's spouse as the beneficiary to
receive the benefits under this Section 4.
5. Employee's attaining his or her Security Release Date or termination of
Employee's employment on account of a Qualifying Termination.
(a) By making timely payment of the premiums described in Section 3,
the Company may renew its Security Interest in the Policy for the period
commencing with the due date of such payment until the later of (1) the due date
of the next payment described in Section 3, or (2) the date that Employee
attains his or her Security Release Date or terminates employment with the
Employer on account of a Qualifying Termination (either of which events
described in this clause 2 is referred to herein as a "Qualifying Event"). The
Company may not extend its Security Interest in the Policy under the Collateral
Security Assignment Agreement attached as Exhibit A after the occurrence of a
Qualifying Event. After such Qualifying Event, Employee shall be entitled to
exercise all of his or her ownership rights in the Policy without any
limitation, and this Agreement and its accompanying Collateral Security
Assignment Agreement shall no longer constitute a restriction on Employee's
rights.
(b) Notwithstanding paragraph (a), the Company shall continue to have
its Security Interest in the Policy to the extent required to satisfy its
withholding obligations as described in Section 12.
6. Termination of an Employee for a reason other than a Qualifying
Termination.
If the employment of Employee with Employer is terminated prior to his
or her Security Release Date for a reason other than a Qualifying Termination
(as described below), Employee shall cause, either by withdrawing from or
borrowing against the Policy, on a nonrecourse basis, to be transferred to the
Company an amount equal to the maximum amount that may then be obtained under
the Policy. In the event that the amount that can be withdrawn from or borrowed
against the Policy is less than the cash surrender value of the Policy, the
Company shall withhold from other compensation payable to Employee the amount of
such difference unless Employee has previously transferred to the Company an
amount equal to such difference. In no event shall Employee's voluntary
resignation prior to attaining his or her Security Release Date (as such concept
is further defined below) ever constitute a Qualifying Termination, except in
certain situations following a Change in Control (see Section 9).
7. Definition of a Qualifying Termination.
A Qualifying Termination is either of the following events: the
termination of Employee by Employer for any reason other than "Cause," as
described in Section 8; or the termination of Employee after a Change in Control
under the circumstances described in Section 9(a). Both of these concepts are
further defined below.
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8. Qualifying Termination because Employee is terminated for a reason
other than "Cause".
For purposes of this Section, "Cause" shall mean (1) Employee's failure
to render services to the Employer where such failure amounts to gross neglect
or misconduct of Employee's responsibilities and duties; (2) Employee's
commission of an act of fraud or dishonesty against the Employer; or (3)
Employee's conviction of a felony or other crime involving moral turpitude.
9. Qualifying Termination on account of termination after a Change in
Control.
(a) A Qualifying Termination shall be treated as occurring after a
"Change in Control" (as defined below) if there is first a "Change in Control"
and then, within one year following such Change in Control, either (1)
Employee's employment with the Employer is terminated without "Cause" (as
defined in Section 8) or (2) Employee terminates his or her employment with the
Employer for "Good Reason" (as defined in subsection (c) below).
(b) For purposes of this Section, a "Change in Control" shall mean the
occurrence of any of the following:
(1) any "Person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act")) (an "Acquiring Person") becomes the
"beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more of
the combined power of the Company's then outstanding
securities, excluding any employee benefit plan
sponsored or maintained by the Company (or any
trustee of such plan acting as trustee);
(2) the stockholders of the Company approve an agreement
to merge or consolidate the Company with another
corporation (other than a corporation 50% or more of
which is controlled by, or is under common control
with, the Company);
(3) any individual who is nominated by the Board of
Directors of the Company for election to the Board of
Directors of the Company on any date fails to be so
elected as a direct or indirect result of any proxy
fight or contested election for positions on the
Board of Directors;
(4) a change in control of the Company of a nature that
would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated
under the Exchange Act occurs; or
(5) a majority of the Board of Directors of the Company
determines in its sole and absolute discretion that
there has been a Change in Control
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of the Company or that there will be a Change in
Control of the Company upon the occurrence of certain
specified events and such events occur.
Notwithstanding Paragraphs (1) through (4) of this Section 9(b), a
Change in Control shall not occur by reason of any event which would otherwise
constitute a Change in Control if, immediately after the occurrence of such
event, individuals who are Acquiring Persons and who were employees of the
Company immediately prior to the occurrence of such event own, on a fully
diluted basis, securities of the Company representing (a) 5% or more of the
combined voting power of the Company's then outstanding equity securities or (b)
5% or more of the value of the Company's then outstanding equity securities.
(c) For purposes of this Section, "Good Reason" shall mean the
occurrence of one of the following events:
(1) the assignment to the Employee of any duties
inconsistent with, or the reduction of powers or
functions associated with, his positions, duties,
responsibilities and status with the Employer
immediately prior to a Change in Control, or any
removal of the Employee from, or any failure to
reelect the Employee to, any positions or offices the
Employee held immediately prior to a Change in
Control, except in connection with the termination of
the Employee's employment by the Employer for "Cause"
(as defined in Section 8);
(2) a reduction by the Employer of the Employee's base
salary as in effect immediately prior to a Change in
Control, except in connection with the termination of
the Employee's employment by the Employer for "Cause"
(as defined in Section 8);
(3) a change in the Employee's principal work location to
a location more than forty (40) miles from
Fayetteville, Arkansas, except for required travel on
the Employer's business to an extent substantially
consistent with the Employee's business travel
obligations immediately prior to a Change in Control;
(4) (A) the failure by the Employer to continue in effect
any employee benefit plan, program or arrangement
(including, without limitation, "employee benefit
plans" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974) in
which the Employee was participating immediately
prior to a Change in Control (or substitute plans,
programs or arrangements providing the Employee with
substantially similar benefits), (B) the taking of
any action, or the failure to take any action, by the
Employer which could (i) adversely affect the
Employee's participation in, or materially reduce the
Employee's benefits under, any of such plans,
programs or
5
arrangements, (ii) materially adversely affect the
basis for computing benefits under any of such plans,
programs or arrangements or (iii) deprive the
Employee of any material fringe benefit enjoyed by
the Employee immediately prior to a Change in Control
or (C) the failure by the Employer to provide the
Employee with the number of paid vacation days to
which the Employee was entitled immediately prior to
a Change in Control in accordance with the Employer's
vacation policy applicable to the Employee then in
effect, except in connection with the termination of
the Employee's employment by the Company for "Cause"
(as defined in Section 8);
(5) the failure by the Employer to pay the Employee any
portion of the Employee's current compensation, or
any portion of the Employee's compensation deferred
under any plan, agreement or arrangement of or with
the Employer within seven (7) days of the date such
compensation is due;
(6) a material increase in the required working hours of
the Employee from that required prior to a Change in
Control; or
(7) the failure by the Employer to obtain an assumption
of the obligations of the Employer under this
Agreement by any successor to the Employer.
(d) A termination of employment by Employee within the 12-month period
following a Change in Control shall be for Good Reason if one of the occurrences
specified in paragraph (c) shall have occurred, notwithstanding that Employee
may have other reasons for terminating employment, including employment by
another employer which Employee desires to accept.
10. Employee's attaining his or her Security Release Date.
(a) Employee's "Security Release Date" shall mean the date which is at
least two years following the date on which the Company receives from Employee a
completed notice in the form attached hereto as Exhibit C, provided that
Employee continues to be employed by Employer until such date. Employee's
election of a Security Release Date shall be irrevocable.
(b) Employee's "Security Release Date" shall also mean the one-year
anniversary of a Change in Control, provided that Employee continues to be
employed by Employer until such date.
(c) Employee shall attain his or her Security Release Date upon
becoming disabled while employed by the Employer. Employee shall be considered
"disabled" at the time that the Administrator (as defined in Section 13(a)
below) determines, based upon
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competent medical advice, that an Employee is incapable of rendering substantial
services to the Employer by reason of mental or physical disability.
(d) The Company's Security Interest in the Policy is contingent upon
the timely payment of the premiums required under Section 3 of this Agreement.
Each period covered by any individual premium payment shall be considered an
independent extension of the Company's Security Interest in the Policy. In the
event that the Company waives its rights by reason of failure to make payments
under Section 3 of this Agreement, Employee shall immediately attain his or her
Security Release Date (provided, however, that the cessation of the Company's
obligations to pay premiums upon Employee's filing of an election of a Security
Release Date shall not result in Employee immediately attaining his or her
Security Release Date.) The Company's failure to extend its rights in no way
affects the Company's duties and obligations under this Agreement.
11. Limitation on Employee's rights prior to a Qualifying Event.
In order to protect the Company's Security Interest and notwithstanding
any other provisions in this Agreement, prior to a Qualifying Event, Employee
agrees that he or she will not modify the death benefit under the Policy, direct
the investment of the cash surrender value of the Policy, borrow against the
Policy, assign the Policy, or obtain any portion of the cash value of the
Policy. Notwithstanding the preceding sentence, if Section 6 applies to a
termination, Employee may borrow or withdraw from the Policy, so long as the
borrowing or withdrawal request is submitted to the Insurance Company along with
a directive that the borrowed or withdrawn amount be transferred directly to the
Company. Prior to the release of the Company's Security Interest in the Policy,
Employee and the Company agree that the Company shall from time to time appoint
one or more individuals (the "Designee"), who may be officers of the Company,
who shall be entitled to direct the investments under the Policy; provided,
however, that, the Designee may only direct the investments under the Policy in
funds offered by the Insurance Company under the Policy.
12. Tax Withholding.
It is recognized by the parties that the rights of Employee in the
Policy (as modified by the Agreement) may cause Employee to be treated under
certain circumstances as in receipt of gross income. These circumstances may
also impose upon the Company an obligation to deduct and withhold federal, state
or local taxes. Unless Employee otherwise provides the Company the amounts it is
required to withhold, Employee shall cause, either by withdrawing from or
borrowing on a nonrecourse basis against the Policy, to be transferred to the
Company that portion of the cash value of the Policy which is equal to the
amount of any federal, state or local taxes required to be withheld.
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13. Disputes.
(a) The Compensation Committee of the Board of Directors of the Company
(the "Administrator") shall administer this Agreement. The Administrator (either
directly or through its designees) will have power and authority to interpret,
construe, and administer this Agreement (for the purpose of this section, the
Agreement shall include the Collateral Security Assignment Agreement); provided
that, the Administrator's authority to interpret this Agreement shall not cause
the Administrator's decisions in this regard to be entitled to a deferential
standard of review in the event that Employee or his or her beneficiary seeks
review of the Administrator's decision as described below.
(b) Neither the Administrator, its designee nor its advisors, shall be
liable to any person for any action taken or omitted in connection with the
interpretation and administration of this Agreement.
(c) Because it is agreed that time will be of the essence in
determining whether any payments are due to Employee or his or her beneficiary
under this Agreement, Employee or his or her beneficiary may, if he or she
desires, submit any claim for payment under this Agreement or dispute regarding
the interpretation of this Agreement to arbitration. This right to select
arbitration shall be solely that of Employee or his or her beneficiary and
Employee or his or her beneficiary may decide whether or not to arbitrate in his
or her discretion. The "right to select arbitration" is not mandatory on
Employee or his or her beneficiary and Employee or his or her beneficiary may
choose in lieu thereof to bring an action in an appropriate civil court. Once an
arbitration is commenced, however, it may not be discontinued without the mutual
consent of both parties to the arbitration. During the lifetime of the Employee
only he or she can use the arbitration procedure set forth in this section.
(d) Any claim for arbitration may be submitted as follows: if Employee
or his or her beneficiary disagrees with the Administrator regarding the
interpretation of this Agreement and the claim is finally denied by the
Administrator in whole or in part, such claim may be filed in writing with an
arbitrator of Employee's or beneficiary's choice who is selected by the method
described in the next four sentences. The first step of the selection shall
consist of Employee or his or her beneficiary submitting a list of five
potential arbitrators to the Administrator. Each of the five arbitrators must be
either (1) a member of the National Academy of Arbitrators located in the State
of Arkansas or (2) a retired Arkansas Circuit Court, Court of Appeals or Supreme
Court judge. Within one week after receipt of the list, the Administrator shall
select one of the five arbitrators as the arbitrator for the dispute in
question. If the Administrator fails to select an arbitrator in a timely manner,
Employee or his or her beneficiary shall then designate one of the five
arbitrators as the arbitrator for the dispute in question.
(e) The arbitration hearing shall be held within seven days (or as soon
thereafter as possible) after the picking of the arbitrator. No continuance of
said hearing shall be allowed without the mutual consent of Employee or his or
her beneficiary and the
8
Administrator. Absence from or nonparticipation at the hearing by either party
shall not prevent the issuance of an award. Hearing procedures which will
expedite the hearing may be ordered at the arbitrator's discretion, and the
arbitrator may close the hearing in his or her sole discretion when he or she
decides he or she has heard sufficient evidence to satisfy issuance of an award.
(f) The arbitrator's award shall be rendered as expeditiously as
possible and in no event later than one week after the close of the hearing. In
the event the arbitrator finds that the Company has breached this Agreement, he
or she shall order the Company to immediately take the necessary steps to remedy
the breach. The award of the arbitrator shall be final and binding upon the
parties. The award may be enforced in any appropriate court as soon as possible
after its rendition. If an action is brought to confirm the award, both the
Company and Employee agree that no appeal shall be taken by either party from
any decision rendered in such action.
(g) Solely for purposes of determining the allocation of the costs
described in this subsection, the Administrator will be considered the
prevailing party in a dispute if the arbitrator determines (1) that the Company
has not breached this Agreement and (2) the claim by Employee or his or her
beneficiary was not made in good faith. Otherwise, Employee or his or her
beneficiary will be considered the prevailing party. In the event that the
Company is the prevailing party, the fee of the arbitrator and all necessary
expenses of the hearing (excluding any attorneys' fees incurred by the Company)
including stenographic reporter, if employed, shall be paid by the other party.
In the event that Employee or his or her beneficiary is the prevailing party,
the fee of the arbitrator and all necessary expenses of the hearing (including
all attorneys' fees incurred by Employee or his or her beneficiary in pursuing
his or her claim), including the fees of a stenographic reporter if employed,
shall be paid by the Company.
14. Collateral Security Assignment of Policy to the Company.
In consideration of the promises contained herein, the Employee has
contemporaneously herewith granted the Security Interest in the Policy to the
Company as collateral, under the form of Collateral Security Assignment attached
hereto as Exhibit A, which Collateral Security Assignment gives the Company the
limited power to enforce its rights to recover the cash value of the Policy, or
a portion of the death benefit thereof, under the circumstances defined herein.
The Company's Security Interest in the Policy shall be specifically limited to
the rights set forth above in this Agreement, notwithstanding the provisions of
any other documents including the Policy. Employee agrees to execute any notice
prepared by the Company requesting a withdrawal or non-recourse loan in an
amount equal to the amount to which the Company is entitled under Sections 5, 6
or 12 of this Agreement.
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15. Employee's beneficiary rights and security interest.
(a) The Company and Employee intend that in no event shall the Company
have any power or interest related to the Policy or its proceeds, except as
provided herein and in the Collateral Security Assignment. In the event that the
Company ever receives or may be deemed to have received any right or interest in
the Policy or its proceeds beyond the limited rights described herein and in the
Collateral Security Assignment, such right or interest shall be held in trust
for the benefit of Employee and be held separate from the property of the
Company. The Company hereby agrees to act as trustee for the benefit of Employee
concerning any right to the Policy or its proceeds, except to the extent
expressly provided otherwise in this Agreement.
(b) In order to further protect the rights of the Employee, the Company
agrees that its rights to the Policy and proceeds thereof shall serve as
security for the Company's obligations as provided in this Agreement to
Employee. The Company grants to Employee a security interest in and collaterally
assigns to Employee any and all rights the Company has in the Policy, and
products and proceeds thereof whether now existing or hereafter arising pursuant
to the provisions of the Policy, this Agreement, the Collateral Security
Assignment or otherwise, to secure any and all obligations owed by the Company
to Employee under this Agreement. In no event shall this provision be
interpreted to reduce Employee's rights to the Policy or expand in any way the
rights or benefits of the Company under this Agreement, the Policy or the
Collateral Security Assignment. This security interest granted to Employee from
the Company shall automatically expire and be deemed waived if Employee
terminates employment with Employer prior to a Qualifying Event. Nothing in this
provision shall prevent the Company from receiving its share of the death
benefits under the Policy as provided in Section 4 of this Agreement.
16. Amendment of Agreement.
Except as provided in a written instrument signed by the Company and
Employee, this Agreement may not be cancelled, amended, altered, or modified.
17. Notice under Agreement.
Any notice, consent, or demand required or permitted to be given under
the provisions of this Agreement by one party to another shall be in writing,
signed by the party giving or making it, and may be given either by delivering
it to such other party personally or by mailing it, by United States Certified
mail, postage prepaid, to such party, addressed to its last known address as
shown on the records of the Company. The date of such mailing shall be deemed
the date of such mailed notice, consent, or demand.
18. Binding Agreement.
This Agreement shall bind the parties hereto and their respective
successors, heirs, executor, administrators, and transferees, and any Policy
beneficiary.
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19. Controlling law and characterization of Agreement.
(a) To the extent not governed by federal law, this Agreement and the
right to the parties hereunder shall be controlled by the laws of the State of
Arkansas.
(b) If this Agreement is considered a "plan" under the Employee
Retirement Income Security Act of 1974 (ERISA), both the Company and Employee
acknowledge and agree that for all purposes the Agreement shall be treated as a
"welfare plan" within the meaning of Section 3(1) of ERISA, so that only those
provisions of ERISA applicable to welfare plans shall apply to the Agreement,
and that any rights that might arise under ERISA if this Agreement were treated
as a "pension plan" within the meaning of Section 3(2) of ERISA are hereby
expressly waived. Consistent with the preceding sentence, Employee further
acknowledges that his or her rights to the Policy and the release of the
Company's Security Interest are strictly limited to those rights set forth in
this Agreement. In furtherance of this acknowledgement and in consideration of
the Company's payment of the initial premiums for this Policy, Employee
voluntarily and irrevocably relinquishes and waives any additional rights in the
Policy or any different restrictions on the release of the Company's Security
Interest that he or she might otherwise argue to exist under either state,
federal, or other law. Employee further agrees that he or she will not argue
that any such additional rights or different restrictions exist in any judicial
or arbitration proceeding. Similarly, the Company acknowledges that its Security
Interest is strictly limited as set forth in this Agreement and voluntarily and
irrevocably relinquishes and waives any additional interests or different
interests or advantages that the Company would have or enjoy if the Agreement
were not treated as a "welfare plan" within the meaning of section 3(1) of
ERISA.
20. Execution of Documents.
The Company and Employee agree to execute any and all documents
necessary to effectuate the terms of this Agreement.
SOUTHWESTERN ENERGY COMPANY
By: /s/ XXXXXXX X. XXXXXXXX
-----------------------------
Its: Chairman and CEO
-----------------------------
EMPLOYEE
/s/ XXXXXXX X. XXXXX
---------------------------------
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EXHIBIT A
COLLATERAL SECURITY ASSIGNMENT AGREEMENT
This Collateral Security Assignment is made and entered into effective
as of February 1, 1996, by the undersigned as the owner (the "Owner") of Life
Insurance Policy Number 1A23067760 (the "Policy") issued by Pacific Mutual Life
Insurance Company (the "Insurer") upon the life of Owner and by Southwestern
Energy Company, an Arkansas corporation (the "Assignee").
WHEREAS, the Owner is a valued employee of Assignee or a subsidiary of
Assignee, and the Assignee wishes to retain him or her in its or its
subsidiary's employ; and
WHEREAS, as an inducement to the Owner's continued employment, the
Assignee wishes to pay premiums on the Policy, as more specifically provided for
in that certain Split- Dollar Life Insurance Agreement dated as of February 1,
1996, and entered into between the Owner and the Assignee as such agreement may
be hereafter amended or modified (the "Agreement") (unless otherwise indicated
the terms herein shall have the definitions ascribed thereto in the Agreement);
WHEREAS, in consideration of the Assignee agreeing to make the premium
payments, the Owner agrees to grant the Assignee a security interest in the
Policy as collateral security; and
WHEREAS, the Owner and Assignee intend that the Assignee have no
greater interest in the Policy than that prescribed herein and in the Agreement
and that if the Assignee ever obtains any right or interest in the Policy or the
proceeds thereof, except as provided herein and in the Agreement, such right or
interest shall be held in trust for the Owner to satisfy the obligations of
Assignee to Owner under the Agreement and the Assignee additionally agrees that
its rights to the Policy shall serve as security for its obligations to the
Owner under the Agreement;
NOW, THEREFORE, the Owner hereby assigns, transfers and sets over to
the Assignee for security the following specific rights in the Policy, subject
to the following terms, agreements and conditions:
1. This Collateral Security Assignment is made, and the Policy is to be
held, as collateral security for all liabilities of the Owner to the Assignee
pursuant to the terms of the Agreement, whether now existing or hereafter
arising (the "Secured Obligations"). The Secured Obligations include: (i) the
obligation of the Owner to transfer an amount equal to the entire cash value in
the event that the Owner terminates employment with Employer for a reason other
than a Qualifying Termination and before attaining his or her Security Release
Date; (ii) the obligation of the Owner to pay an amount of cash to the Assignee
or transfer to the Assignee that portion of the cash value which is equal to any
federal, state
1
or local taxes that Assignee may be required to withhold and collect (as set
forth in Section 12 of the Agreement); and (iii) the obligation of the Owner to
name the Assignee as beneficiary for a portion of the death benefit under the
Policy in the event of the death of Owner prior to Owner's termination of
employment with Employer in accordance with Section 4 of the Agreement.
2. The Owner hereby grants to Assignee a security interest in and
collaterally assigns to Assignee the Policy and the cash value to secure the
Secured Obligations. However, the Assignee's interest in the Policy shall be
strictly limited to:
(a) The right to be paid the Assignee's portion of the death benefit in
the event of the death of Owner prior to Owner's termination of employment with
Employer in accordance with Section 4 of the Agreement;
(b) The right to receive an amount equal to the entire cash value of
the Policy (which right may be realized by Assignee's receiving a portion of the
death benefit under the Policy or by Owner's causing such amount to be
transferred to Assignee (through withdrawing from or borrowing against the
Policy) in accordance with the terms of the Agreement) if the Owner terminates
employment with Employer for a reason other than a Qualifying Termination
(unless he or she has previously attained his or her Security Release Date); and
(c) The right to receive an amount equal to any federal, state or local
taxes that Assignee may be required to withhold and collect (as set forth in
Section 12 of the Agreement).
3.(a) Owner shall retain all incidents of ownership in the Policy, and
may exercise such incidents of ownership except as otherwise limited by the
Agreement and hereunder. The Insurer is only authorized to recognize (and is
fully protected in recognizing) the exercise of any ownership rights by Owner if
the Insurer determines that the Assignee has been given notice of Owner's
purported exercise of ownership rights in compliance with the provisions of
Section 3(b) hereof and as of the date thirty days after such notice is given,
the Insurer has not received written notification from the Assignee of
Assignee's objection to such exercise; provided that, the designation of the
beneficiary to receive the death benefits not otherwise payable to Assignee
pursuant to Section 4 of the Agreement may be changed by the Owner without prior
notification of Assignee. The Insurer shall not be responsible to ensure that
the actions of the Owner conform to the Agreement.
(b) Assignee hereby acknowledges that for purposes of this Collateral
Security Assignment, Assignee shall be conclusively deemed to have been properly
notified of Owner's purported exercise of his or her ownership rights as of the
third business day following either of the following events: (1) Owner mails
written notice of such exercise to Assignee by United States certified mail,
postage paid, at the address below and provides the Insurer with a copy of such
notice and a copy of the certified mail receipt or (2) the
2
Insurer mails written notice of such exercise to Assignee by regular United
States mail, postage paid, at the address set forth below:
Southwestern Energy Company
X.X. Xxx 0000
Xxxxxxxxxxxx, Xxxxxxxx 00000
ATTN: Corporate Secretary
The foregoing address shall be the appropriate address for such notices to be
sent unless and until the receipt by both Owner and the Insurer of a written
notice from Assignee of a change in such address.
(c) Notwithstanding the foregoing, Owner and Assignee hereby agree
that, until Assignee's security interest in the Policy is released, Assignee
shall from time to time designate one or more individuals (the "Designee"), who
may be officers of Assignee, who shall be entitled to adjust the death benefit
under the Policy and to direct the investments under the Policy; provided,
however, that the Designee may only increase, but not decrease, the death
benefit in effect on the date that the Policy is issued; provided, further, that
the Designee may only direct the investments under the Policy in funds offered
by the Insurer under the Policy. Assignee shall notify the Insurer in writing of
the identity of the Designee and any changes in the identity of the Designee.
Until Assignee's security interest in the Policy is released, no other party may
adjust the death benefit or direct the investments under the Policy without the
consent of the Assignee and Owner.
4. If the Policy is in the possession of the Assignee, the Assignee
shall, upon request, forward the Policy to the Insurer without unreasonable
delay for endorsement of any designation or change of beneficiary or the
exercise of any other right reserved by the Owner.
5.(a) Assignee shall be entitled to exercise its rights under the
Agreement by delivering a written notice to Insurer, executed by the Assignee
and the Owner or the Owner's beneficiary, requesting either (1) a withdrawal or
nonrecourse policy loan equal to the amount to which Assignee is entitled under
Sections 5, 6 or 12 of the Agreement and transfer of such withdrawn or borrowed
amount to Assignee or (2) the payment to the Assignee of that portion of the
death benefit under the Policy to which the Assignee is entitled under Section 4
of the Agreement. So long as the notice is also signed by Owner or his or her
beneficiary, Insurer shall pay or loan the specified amounts to Assignee without
the need for any additional documentation.
(b) Upon receipt of a properly executed notice complying with the
requirements of subsection (a) above, the Insurer is hereby authorized to
recognize the Assignee's claims to rights hereunder without the need for any
additional documentation and without investigating (1) the reason for such
action taken by the Assignee; (2) the validity or the amount of any of the
liabilities of the Owner to the Assignee under the Agreement; (3) the
3
existence of any default therein; (4) the giving of any notice required herein;
or (5) the application to be made by the Assignee of any amounts to be paid to
the Assignee. The receipt of the Assignee for any sums received by it shall be a
full discharge and release therefor to the Insurer.
6. Upon the full payment of the liabilities of the Owner to the
Assignee pursuant to the Agreement, the Assignee shall execute an appropriate
release of this Collateral Security Assignment.
7. The Assignee shall have the right to request of the Insurer and/or
the Owner notice of any action taken with respect to the Policy by the Owner.
8.(a) The Assignee and the Owner intend that in no event shall the
Assignee have any power or interest related to the Policy or its proceeds,
except as provided herein and in the Agreement, notwithstanding the provisions
of any other documents including the Policy. In the event that the Assignee ever
receives or may be deemed to have received any right or interest beyond the
limited rights described herein and in the Agreement, such right or interest
shall be held in trust for the benefit of the Owner and be held separate from
the property of the Assignee. The Assignee hereby agrees to act as trustee for
the benefit of the Owner concerning any right to the Policy or its proceeds,
except to the extent expressly provided otherwise in the Agreement and this
Collateral Security Assignment Agreement.
(b) In order to further protect the rights of the Owner, the Assignee
agrees that its rights to the Policy and proceeds thereof shall serve as
security for the Assignee's obligations to the Owner as provided in the
Agreement. Assignee hereby grants to Owner a security interest in and
collaterally assigns to Owner any and all rights it has in the Policy, and
products and proceeds thereof, whether now existing or hereafter arising
pursuant to the provisions of the Policy, the Agreement, this Collateral
Security Assignment or otherwise, to secure Assignee's obligations ("Assignee
Obligations") to Owner under the Agreement, whether now existing or hereafter
arising. The Assignee Obligations include all obligations owed by the Assignee
to Owner under the Agreement, including without limitation: (i) the obligation
to transfer ownership of the Policy to Owner and to make the premium payments
required under Section 3 of the Agreement and (ii) the obligation to do nothing
which may, in any way, endanger, defeat or impair any of the rights of Owner in
the Policy as provided in the Agreement. In no event shall this provision be
interpreted to reduce Owner's rights in the Policy or expand in any way the
rights or benefits of the Assignee under the Agreement. In the event that Owner
terminates employment with Employer for any reason prior to a Qualifying Event,
this security interest and collateral assignment granted by Assignee to Owner
shall automatically expire and be deemed waived. Nothing in this provision shall
prevent the Assignee from receiving its share of the death benefits under the
Policy as provided in Section 4 of the Agreement.
9. Assignee and Owner agree to execute any documents necessary to
effectuate this Collateral Security Assignment pursuant to the provisions of the
Agreement. All
4
disputes shall be settled as provided in Section 13 of the Agreement. The rights
under this Collateral Security Assignment may be enforced pursuant to the terms
of the Agreement.
IN WITNESS WHEREOF, the Owner and Assignee have executed this
Collateral Security Assignment effective the day and year first above written.
-----------------------------------
Xxxxxxx X. Xxxxx, Owner
SOUTHWESTERN ENERGY COMPANY
By:________________________________
Title:_____________________________
5
EXHIBIT B
SPOUSAL CONSENT TO DESIGNATION OF NONSPOUSAL BENEFICIARY
My spouse is Xxxxxxx X. Xxxxx. I hereby consent to the
designation made by my spouse of ________________ as the beneficiary (subject to
any rights collaterally assigned to Southwestern Energy Company) under Life
Insurance Policy No. 1A23067760, which Southwestern Energy Company has purchased
from Pacific Mutual Life Insurance Company and transferred to him/her. I
understand that this consent is valid only with respect to the naming of the
beneficiary indicated above and that the designation of any other beneficiary
will not be valid unless I consent in writing to such designation.
This consent is being voluntarily given, and no undue
influence or coercion has been exercised in connection with my consent to the
designation made by my spouse of the beneficiary named above rather than myself
as the beneficiary under the Split-Dollar Life Insurance Policy.
------------------------------
Spouse's Signature
------------------------------
Print Spouse's Name
------------------------------
Date
EXHIBIT C
SPLIT-DOLLAR LIFE INSURANCE
TWO YEAR SECURITY RELEASE NOTICE
Pursuant to the Split-Dollar Life Insurance Agreement entered into
between Southwestern Energy Company (the "Company") and me dated as of February
1, 1996 (the "Agreement"), I hereby notify the Company that I request to be
released on _____, _____ ("Security Release Date") from the Company's collateral
security in Policy Number 1A23067760 issued by Pacific Mutual Life Insurance
Company. I understand that my Security Release Date must be at least two years
from the date on which the Company receives this Notice. I further understand
that in order for the Company's collateral security interest to be released on
my Security Release Date, I must continue to be employed by the Company or one
of its subsidiaries (as defined in the Agreement) until such date.
-----------------------------
Xxxxxxx X. Xxxxx
-----------------------------
Date
Received by Southwestern Energy Company
on ________________________________________
By ________________________________________
