SPLIT-DOLLAR AGREEMENT
SPLIT-DOLLAR AGREEMENT (this "Agreement") made and entered into
as of this 20th day of December, 1996 by and between American Biltrite
Inc., a Delaware corporation with principal offices and a principal place
of business in the Commonwealth of Massachusetts (the "Corporation"), and
the Xxxxx X. Xxxxxx Irrevocable Insurance Trust Dated Nov. 29, 1996 (the
"Trust").
Xxxxx X. Xxxxxx, an individual residing in the Commonwealth of
Pennsylvania (the "Employee"), is employed by the Corporation as its Chief
Executive Officer.
The Employee desires that his family be provided life insurance
protection under a policy of life insurance insuring the Employee's life,
described in Exhibit A attached hereto and by this reference made a part
hereof (the "Policy"), which has been issued by Xxxx Xxxxxxx Variable Life
Insurance Company (the "Insurer").
The Trust is the owner of the Policy and, as such, possesses all
incidents of ownership in and to the Policy, including without limitation
the right to designate the Policy beneficiary.
The Corporation is willing to pay a portion of the premiums due
on the Policy as an additional employment benefit for the Employee, on the
terms and conditions hereinafter set forth.
The Corporation desires to have the Policy collaterally assigned
to it by the Trust in order to secure the repayment of the amounts which it
will pay toward the premiums on the Policy.
In consideration of the premises and of the mutual promises
contained herein, the parties hereto agree as follows:
1. PURCHASE OF POLICY. The Trust has purchased the Policy
from the Insurer with a Total Sum Insured at Issue (as such
term is defined in the Policy) of $2,495,000. The parties
hereto agree that they will take all necessary action to
cause the Insurer to issue the Policy and will 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 related collat-
eral assignment filed with the Insurer relating to the
Policy.
2. OWNERSHIP OF POLICY. The Trust shall be the sole and
absolute owner of the Policy and shall have and may exercise
all ownership rights granted to the owner thereof by the
terms of the Policy, including without limitation the right
to designate the Policy beneficiary and the right to elect
and change both the Total Sum Insured at Issue and the
investment options of the Policy, except as may otherwise be
provided herein.
3. PAYMENT OF PREMIUMS.
a. On or prior to the date which is 30 days prior to
the due date of each Policy premium, the Corporation shall
notify the Employee and the Trust of the exact amount due
from the Trust to the Corporation hereunder toward payment
of the Planned Premium (as such term is defined in the
Policy), which shall be an amount equal to the annual cost
of current life insurance protection on the life of the
Employee, measured by the lower of the P.S. 58 rate, set
forth in Revenue Ruling 55-747 (or the corresponding
applicable provision of any future Revenue Ruling), or the
Insurer's current published premium rate for annually
renewable term insurance for standard risks. The Trust shall
pay such required contribution to the Corporation prior to
the premium due date. If the Trust fails to make such timely
payment, the Corporation, in its sole discretion, may elect
to make such portion of the premium payment, which payment
shall be recovered by the Corporation as provided herein.
b. 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 Planned Premium to the
Insurer, and shall, upon request, promptly furnish the
Employee evidence of timely payment of such premium. Except
with the consent of the Trust, the Corporation shall not pay
less than the Planned Premium, but it may, in its
discretion, at any time and from time to time, subject to
acceptance of such amount by the Insurer, pay more than the
Planned Premium or make other premium payments on the
Policy. 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 to the Policy
beneficiary.
4. COLLATERAL ASSIGNMENT. To secure repayment to the
Corporation of the amount of the premiums on the Policy paid
by it hereunder, the Trust has contemporaneously herewith
assigned the Policy to the Corporation as collateral, under
a form acceptable to the Insurer for such assignments. The
collateral assignment of the Policy to the Corporation
hereunder shall not be terminated, altered or amended by the
Trust 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. LIMITATIONS ON TRUST'S RIGHTS IN POLICY.
a. Except as otherwise provided herein, the Trust shall
not sell, assign, transfer, borrow against or withdraw from
the cash surrender value of the Policy, surrender or cancel
the Policy, change the beneficiary designation provision
thereof or increase or decrease the Total Sum Insured at
Issue without, in any such case, the express written consent
of the Corporation.
b. Notwithstanding any provision hereof to the
contrary, the Trust shall have the sole authority to direct
the manner in which the amounts in and among the Subaccounts
(as such term is defined in the Policy) established pursuant
to the terms of the Policy shall be allocated among the
various investment options from time to time available under
the Policy and to change such allocation from time to time,
as provided for in the Policy; provided, however, that at
least 50% of the annual premium paid must at all times be
allocated to one or more of the following: a Fixed Account
(as such term is defined in the Policy); a short-term
government bond fund; or a money market account.
c. The Corporation shall have the right to borrow that
portion of the loan value of the Policy equal in amount to
the total amount of the premiums advanced by the Corporation
on behalf of the Trust hereunder, reduced by any then
outstanding indebtedness secured by the Policy which was
incurred by the Corporation, including any interest due on
such indebtedness (the "net premiums"). Interest on such
Policy loan shall be the responsibility of the Corporation
as such interest becomes due. The Trust shall have the right
to borrow that portion of the loan value of the Policy equal
in amount to the net premiums for the sole purpose of paying
such amount to the Corporation under Section 8(a) of this
Agreement if it is terminated during the lifetime of the
Employee. In the event of any such borrowing, the loan
proceeds shall be paid by the Insurer directly to the
Corporation, and such payment shall discharge completely all
obligations owing from the Trust to the Corporation under
this Agreement with respect to the Policy. Interest on any
such Policy loan shall be the responsibility of the Trust as
such interest becomes due.
6. COLLECTION OF DEATH PROCEEDS.
a. Upon the death of the Employee, the Corporation and
the Trust shall cooperate 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 net premiums paid by it. The
balance of the death benefit provided under the Policy, if
any, shall be paid directly to the Policy beneficiary 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 as a result of the maturity of
the Policy as a death claim. No amount shall be paid from
such death benefit to the Policy beneficiary until the full
amount due the Corporation hereunder has been paid.
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 Corpora-
tion shall have the unqualified right to such premiums in an
amount not to exceed the net premiums paid by it.
7. TERMINATION OF THIS AGREEMENT DURING THE
LIFETIME OF THE EMPLOYEE.
a. This Agreement shall terminate, while the Employee
is alive, without notice, upon the occurrence of any of the
following events: (a) total cessation of the Corporation's
business; (b) liquidation or dissolution of the Corporation;
or (c) termination of the Employee's employment by the
Corporation for Cause (as defined below). For the purposes
of this Section 7(a), "Cause" shall mean (i) conviction of
the Employee for any felony or for fraud or embezzlement;
(ii) the Employee's willful and continued refusal to
substantially perform reasonably assigned duties with the
Corporation (other than any such refusal resulting from
incapacity due to physical or mental illness or disability)
after a written demand for substantial performance is
delivered to the Employee identifying the manner in which
the Corporation believes that the Employee has willfully and
continuously refused to substantially perform his duties; or
(iii) other willful misconduct by the Employee which is
materially injurious to the Corporation. For the purposes of
this Section 7(a), no act or failure to act shall be
considered "willful" unless done or omitted to be done not
in good faith and without reasonable belief that such action
or omission was in the best interests of the Corporation.
b. The Corporation may terminate this Agreement at any
time after the date which is 15 years after the Date of
Issue (as such term is defined in the Policy) by written
notice to the Trust. Such termination shall be effective as
of the date of such notice.
c. In addition, the Trust may terminate this Agreement,
during the Employee's lifetime and 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.
8. DISPOSITION OF THE POLICY ON TERMINATION OF THIS
AGREEMENT DURING THE LIFETIME OF THE EMPLOYEE.
a. For 60 days after the date of the termination of
this Agreement during the Employee's lifetime under Section
7 of this Agreement, the Trust shall have the option of
obtaining the release of the collateral assignment of the
Policy to the Corporation. To obtain such release, the Trust
shall repay to the Corporation an amount equal to the total
amount of the net premiums paid by the Corporation. 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 Trust fails to exercise such option within
such 60-day period, then, at the request of the Corporation,
the Trust shall execute any document or documents required
by the Insurer to transfer all interests of the Trust in the
Policy, including without limitation the Trust's right to
designate the Policy beneficiary, to the Corporation.
Alternatively, the Corporation may enforce its right to be
repaid the amount due it hereunder from the cash surrender
value of the Policy under the collateral assignment of the
Policy; provided, however, that in the event the cash
surrender value of the Policy exceeds the amount due the
Corporation hereunder, such excess shall be paid to the
Trust. Thereafter, neither the Trust nor the Trust's
successors, assigns or beneficiaries shall have any further
interest in and to the Policy under the terms thereof or
under this Agreement.
9. 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 Trust and filed with the Insurer
in connection herewith.
10. 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 of this
Agreement. The Corporation may allocate to others certain
aspects of the management and operational responsibilities
of this Agreement, including by the employment of advisors
and the delegation of any ministerial duties to qualified
individuals.
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 90 days and
shall, in fact, deliver such reply within such 90-day
period. Upon written notice prior to the expiration of the
90-day reply period, the Corporation may, however, extend
the reply period for an additional 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) of this section 10(b). If a
notice of denial is not received within the reply period,
the claim shall be deemed denied and the Claimant shall be
permitted to request review, as set forth below.
(3) Request for Review.
With 60 days after the receipt by the Claimant of the
written opinion described above (or, in the case of a deemed
denial, within 60 days after the end of the reply period),
the Claimant may request in writing that the Secretary of
the Corporation (the "Secretary") review the determination
of the Corporation. Such request must be addressed to the
Secretary, at the Corporation's 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 Secretary. If the Claimant does not
request a review by the Secretary of the Corporation's
determination within such 60-day period, he shall be barred
and estopped from challenging the Corporation's
determination, except as may be otherwise provided herein.
(4) Review of Decision.
Within 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,
using language 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 60-day time period be
extended, the Secretary will so notify the Claimant and will
render the written opinion as soon as possible, but no later
than 120 days after receipt of the request for review. If
the written opinion on review is not rendered within the
60-day period (or the 120-day period, if an extension is
granted), the claim shall be deemed denied on review.
(5) Payment of Claim.
If and when a claim is determined to be payable, the
Corporation will promptly issue a check to the Claimant.
(6) Other Remedies.
After exhaustion of the claims procedures set forth in this
Section 10(b), nothing shall prevent any person from
pursuing any other legal or equitable remedy otherwise
available, including without limitation legal action in
federal court.
11. 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.
12. BINDING EFFECT; NO THIRD-PARTY BENEFICIARY.
This Agreement shall be binding upon and inure to the
benefit of the Corporation and its successors and assigns
and the Trust and its respective successors, assigns and
beneficiaries. This Agreement shall not confer any rights or
remedies upon any person other than the parties hereto and
their respective successors and assigns, except that the
Employee is a third-party beneficiary of this Agreement to
the extent necessary to effectuate the intents and purposes
of this Agreement.
13. NOTICE. 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. Any such notice, consent or demand mailed
to a party hereto shall be sent by United States certified
mail, postage prepaid, or sent by a nationally recognized
overnight delivery service, charges prepaid, in each case
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. GOVERNING LAW. This Agreement, and the rights of the parties
hereunder, shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, in duplicate, as of the day and year first above written.
XXXXX X. XXXXXX IRREVOCABLE
INSURANCE TRUST DATED
NOV. 29, 1996
By /s/ Xxxxxxx X. Xxxxxx
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Trustee
ATTEST: AMERICAN BILTRITE INC.
/s/ Xxxxx X. Xxxxxxxxx By /s/ Xxxxxxx X. Xxxxxx
---------------------- ----------------------------
Secretary Name: Xxxxxxx X. Xxxxxx
Title: Executive
Vice President
EXHIBIT A
---------
The following life insurance policy is subject to the attached
Split-Dollar Agreement:
Insurer: Xxxx Xxxxxxx Variable Life Insurance Company
Insured: Xxxxx X. Xxxxxx
Policy Number: 50061001
Face Amount of Insurance: $2,495,000
Date of Issue: October 10, 1996
