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Exhibit 10.20
SPLIT DOLLAR INSURANCE AGREEMENT AND ASSIGNMENT OF LIFE
INSURANCE POLICY AS COLLATERAL
This Agreement is entered into as of the 26th day of June, 1996
at Cleveland, Ohio, by and between XXXXX X. XXXXXX (hereinafter referred to as
the "Owner"), and FOREST CITY ENTERPRISES, INC., an Ohio corporation
(hereinafter referred to as "Assignee").
W I T N E S S E T H:
WHEREAS, the Owner has agreed to purchase a life insurance
policy (hereinafter referred to and defined as "the Policy") on the lives of
Xxxxxx Xxxxxx and Xxxxxx Xxxxxx (hereinafter individually referred to as an
"Insured" and collectively referred to as the "Insureds") in the principal
amount of $2,500,000;
WHEREAS, the Owner is willing to pay a portion of the premium
payments on
the Policy;
WHEREAS, the Owner, in order to induce Assignee to pay the
remaining premium payments, is willing to assign certain rights in the Policy to
Assignee and to pledge the Policy to Assignee as collateral;
WHEREAS, Assignee desires to invest and is willing to pay that
portion of the premium payments which are not paid by the Owner if certain
rights in the Policy are assigned to it; and
WHEREAS, Owner and Assignee desire to enter into this Agreement
in order to secure Assignee's repayment, out of the proceeds of the Policy, of
the portion of the premium payments paid by the Assignee and to grant certain
other rights to the Assignee;
NOW, THEREFORE, for value received, the receipt and sufficiency
of which are hereby acknowledged, the Owner and the Assignee mutually agree as
follows:
1. DEFINITIONS. In this Agreement:
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a. INSURER. The "Insurer" is Northwestern Mutual Life Insurance
Company.
b. THE POLICY.
The following policy of second-to-die insurance on the
lives of the Insured issued by the Insurer, together
with any supplementary contracts issued by the Insurer
in conjunction therewith: Policy No. 13886121; Face
Amount: $2.5 million.
c. POLICY INTEREST.
The Assignee's "Policy Interest" shall be an amount
equal to the LESSER of the "Cash Surrender Value" of the
Policy OR the Assignee's "Premium Interest"; provided,
if the survivor of the Insureds dies while this
Agreement is in effect, the Assignee's Policy Interest
shall be an amount equal to 1.10 times the Assignee's
Premium Interest in the Policy; provided further, if the
survivor of the Insureds dies within two years after the
Owner terminates this Agreement (by paying to Assignee
the LESSER of Cash Surrender Value of the Policy or the
Premium Interest of the Assignee), then the Owner also
shall pay to the Assignee the amount (if any) by which
(i) 1.10 times the Assignee's Premium Interest, exceeds
(ii) the amount paid by the Owner to the Assignee to
terminate this Agreement. The existence of the
Assignee's Policy Interest shall be evidenced by filing
with the Insurer a copy of this Agreement, along with a
collateral assignment in the form prescribed by the
Insurer.
d. CASH SURRENDER VALUE AND PREMIUM INTEREST.
"Cash Surrender Value" shall mean the cash value of the
Policy; plus the cash value of any paid up additions;
plus any dividend accumulations and unpaid dividends;
and less any Policy loans outstanding to Assignee
(including any accrued interest on such loans). The
"Premium Interest" shall be equal to the cumulative
amount of unreimbursed premiums paid on the Policy by
the Assignee, less any Policy loans outstanding to
Assignee (including any accrued interest on such loans).
2. PREMIUM PAYMENTS.
a. Each annual premium on the Policy shall be paid when due as follows:
(i) The Owner shall pay a portion of each premium equal to the
Insurer's current term rate for the then-living Insureds ages (on a
last-to-die
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basis, while both are alive) multiplied by the excess of the current
death benefit over the Assignee's current Premium Interest. The
Insurer's "current term rate" shall mean the lesser of (a) the Insurer's
current published premium rates charged by the Insurer for individual
one-year last-to-die (or single-life, as applicable) term life insurance
(available generally to all comparable policyholders of the Insurer), or
(b) the cost of comparable one-year term insurance as published or
approved from time to time by the Internal Revenue Service or (if no
such IRS-approved tables are in effect) as generally used in the
insurance industry (e.g., for last-to-die policies, with both Insureds
living, the so-called "US 38 rates"). The Owner's premium contribution
check (or checks) shall be delivered to the Insurer on or before each
premium due date.
(ii) The Assignee shall pay the remaining balance of each
premium due until the death of the survivor of the Insureds or, if
earlier, until the termination of this Agreement. The Assignee's premium
contribution check shall be delivered to the Insurer on or before each
premium due date.
(iii) For convenience, either the Assignee or the Owner may pay
the entire premium to the Insurer (by agreement between the Owner and
the Assignee), with reimbursement to be made promptly by the nonpaying
party to the other party, in the amount of the premium contribution due
from the nonpaying party (as determined under clauses (i) and (ii)
above).
b. Dividends on the Policy shall be applied to purchase paid up
additions, except as permitted otherwise pursuant to Section 3 below.
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3. POLICY OWNERSHIP.
a. Except as provided in, or limited by, Section 4 and
subparagraph b of this Section, the Owner shall have all the rights of
the "Owner" under the terms of the Policy, including but not limited to
the right to designate beneficiaries, select settlement options and to
surrender the Policy; provided, the Owner may surrender paid up
additions, borrow against the Policy or change dividend options on the
Policy only if and to the extent that, immediately after the Owner takes
such actions, the Cash Surrender Value of the Policy exceeds 110% of the
Assignee's Premium Interest.
b. In exchange for the Assignee's payment of its premium
contribution under Section 2, the Owner hereby assigns to the
Assignee the following limited ownership rights in the Policy:
(i) The right to obtain one or more loans or
advances on the Policy to the extent of the Assignee's
Policy Interest and to pledge or assign the Policy for
such loans or advances.
(ii) The right to realize against the Cash
Surrender Value of the Policy to the extent of the
Assignee's Policy Interest, in the event of termination
of this Agreement as provided in Section 5.
(iii) The right to realize against the proceeds
of the Policy to the extent of Assignee's Policy
Interest, at the death of the survivor of the Insureds.
c. It is agreed that benefits may be paid under the
Policy by the Insurer either by separate checks to the parties
entitled thereto, or by a joint check. In the latter instance,
the Owner and the Assignee agree that the benefits shall be
divided as provided herein.
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4. ASSIGNMENT BY THE OWNER. The Owner may assign any part or all of such
Owner's retained interest in the Policy or in this Agreement to any person,
entity or trust; provided that such assignment shall be effective only if (i)
the new Owner-assignee agrees in writing to be bound by the terms of this
Agreement, and (ii) the assigning Owner provides written notice to the Assignee
of such assignment (identifying the name, address and telephone number of such
new Owner-Assignee).
5. TERMINATION OF AGREEMENT.
a. This Agreement shall terminate (i) upon surrender of the
Policy (or surrender of any supplemental contracts issued in connection
therewith) by the Owner, or (ii) at such time as the Owner otherwise
arranges to pay to the Assignee the full amount of Assignee's Policy
Interest. The Owner may surrender the Policy at any time; provided, the
Owner shall surrender the Policy or otherwise terminate this Agreement
only with the written consent of the Assignee at any time that the Cash
Surrender Value is less than the Premium Interest.
b. On any termination of this Agreement, at the option of the
Owner, either:
(i) An amount equal to the Policy Interest shall be paid
to the Assignee by the Insurer; or
(ii) The Owner shall direct the Assignee to assign its
Policy Interest to the Owner or as the Owner directs, in which
event the Owner shall pay the Assignee an amount equal to
Assignee's Policy Interest.
6. DEATHS OF THE INSUREDS. In the event of the death of the survivor of
the Insureds while this Agreement is in effect, a portion of the proceeds of the
Policy equal to the Policy Interest shall be paid to the Assignee and the
balance of the proceeds of the Policy
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shall be paid to the beneficiary or beneficiaries under the Policy (as their
interests may appear); provided, in computing the value of Assignee's Policy
Interest upon termination, Assignee shall be deemed to have repaid to Insurer
the amount of any outstanding Policy loans or advances to Assignee (including
accrued interest) immediately prior to such termination, and such deemed repaid
amount in turn shall be deemed to have been distributed to Assignee.
7. THE INSURER. The Insurer shall be bound only by the provisions of and
endorsements on the Policy. The copy of this Agreement filed with the Insurer
shall constitute directives of the Owner to the Insurer and any payments made or
actions taken by it in accordance therewith shall fully discharge Insurer from
all claims, suits and demands of all persons whatsoever. Insurer shall in no way
be bound by the provisions of this Agreement.
IN WITNESS WHEREOF, the parties have signed this Agreement as of
the date stated above.
ASSIGNEE:
FOREST CITY ENTERPRISES, INC.
By /s/ Xxxxxx X. Xxxxx
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Title Sr. Vice President --
Chief Financial Officer
OWNER:
/s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
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