Exhibit 10.19
SPLIT DOLLAR INSURANCE AGREEMENT
THIS AGREEMENT made as of the 1st day of January, 1993, by and between
XXXXXXX X. XXXXXX (the "Owner") and ELECTROMAGNETIC SCIENCES, INC. (the
"Corporation"), a Georgia corporation.
WHEREAS, the Corporation recognizes the unique and essential services of
the Owner as an employee of the Corporation and his contributions to the
Corporation; and
WHEREAS, the Corporation has determined that its best interests would be
served by entering into a split dollar life insurance arrangement with the Owner
whereby the Corporation will assist the Owner in maintaining certain life
insurance by contributing from time to time toward the payment of premiums due
on the policy on the Owner's life; and
WHEREAS, the Corporation enters into the following Agreement subject to
the condition that such policy be assigned to the Corporation as security for
repayment of any amounts which the Corporation may contribute toward the payment
of any premiums due on such policy.
Now, therefore, for and in consideration of the mutual and reciprocal
covenants hereinafter captained and for other good and valuable consideration,
the receipt, adequacy, and sufficiency of which are hereby acknowledged, it is
hereby agreed between the parties as follows:
ARTICLE I
APPLICATION FOR INSURANCE
1.1 Owner has applied to The Northwestern Mutual Life Insurance Company
(the "Insurer") for an insurance policy (the "Policy") on the life of the Owner,
which Policy has been issued to and is owned by the Owner. The Policy number is
12379824 and the Policy is subject to the terms of this Agreement. The term
"Policy" includes any supplemental contracts of insurance issued by the Insurer
in conjunction with the Policy.
ARTICLE II
OWNERSHIP OF POLICY
2.1 The Owner shall retain and may exercise all rights and privileges of
ownership with respect to the Policy, except as otherwise hereinafter provided
and as provided in the Collateral Assignment (as hereinafter defined) of the
Policy by the Owner. The Owner's rights shall include 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, borrow on the security of
the Policy and to surrender the Policy.
2.2 Other than as set forth herein and in the Collateral Assignment, the
Corporation shall have no rights of ownership with respect to the Policy. In
exchange for the Corporation's promise to pay the insurance premium on the
Policy as provided in Article IV of this Agreement, the Owner hereby assigns to
the Corporation the following limited ownership rights in the Policy:
(a) The right to obtain one or more loans or advances on the Policy
to the extent of the Net Amount (as hereinafter defined) which has been
contributed by the Corporation toward the payment of the premiums due on the
Policy under paragraph 4.1 of Article IV of this Agreement, and to pledge or
assign the Policy for such loans or advances. If such loans are for the purpose
of paying premiums or otherwise to purchase or carry the Policy, the Corporation
agrees to adhere to the requirements of Section 264 of the Internal Revenue Code
of 1986, as amended, so that interest on such loans remains deductible for
federal income tax purposes.
(b) The right to realize against the cash value of the Policy to the
extent of the Net Amount in the event of the termination of this Agreement or
the death of the Owner as provided in Articles VIII, IX, and X of this
Agreement.
2.3 It is agreed by the parties hereto that the benefits to be paid under
the Policy may be paid 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
Corporation agree that the benefits paid under the Policy shall be divided as
provided herein.
2.4 The Owner shall have the right to assign any part or all of the
Owner's interest in the Policy and this Agreement to any person, entity, or
trust by execution of a written assignment delivered to the Corporation and the
Insurer.
ARTICLE III
ELECTION OF DIVIDEND OPTION
3.1 All dividends declared by the Insurer on the Policy shall be applied
to purchase additional paid up insurance on the life of the Owner.
3.2 The Owner has elected the dividend option described in the foregoing
paragraph 3.1 of this ARTICLE III and agrees to give the Corporation sixty (60)
days advance written notice prior to any change or termination of the dividend
option an selected by the Owner hereunder. In the event the Corporation
determines that such change or termination of the dividend option adversely
affects the security interest of the Corporation hereunder or under the
Collateral Assignment, this Agreement may be terminated by the Corporation upon
thirty (30) days advance written notice to the Owner, in which event the
provisions of ARTICLE IX and ARTICLE X hereinafter set forth shall become
effective and operative. In the event the Corporation determines that such
change or termination does not affect its security interest hereunder or under
the Collateral Assignment, a conforming amendment shall be made to this
Agreement to reflect such change or termination.
ARTICLE IV
PAYMENT OF PREMIUMS ON POLICY
4.1 On or before the due date of each annual premium on the Policy, the
Corporation will pay to the Insurer the entire premium on the Policy and will so
advise the Owner. Within a reasonable period of time thereafter, the Owner will
pay to the Corporation an amount (the "P.S. 58 Cost") equal to that portion of
such annual premium which equals the cost (calculated by application of the
lower of the Internal Revenue Service Table P.S. 58 rates or the insurer's
annual term insurance rates) of the portion of the insurance which the
beneficiary or beneficiaries named by the Owner would be entitled to receive if
the Owner died during the policy year for which the annual premium is paid.
ARTICLE V
OWNER'S OBLIGATION TO CORPORATION
5.1 The Owner shall be obligated and hereby agrees to repay to the
Corporation the net amount (the "Net Amount") which the Corporation has paid
pursuant to paragraph 4.1 of ARTICLE IV of this Agreement; for purposes of this
Agreement, the "Net Amount" shall equal the amount of the premiums paid by the
Corporation reduced by the P.S. 58 Cost paid to the Corporation by the Owner as
provided under paragraph 4.1. This obligation of the Owner to the Corporation
shall be payable as provided in ARTICLE VIII and ARTICLE X of this Agreement.
ARTICLE VI
ASSIGNMENT OR TERMINATION OF POLICY
6.1 The Owner will collaterally assign the Policy to the corporation as
security for the repayment of the Net Amount. The collateral assignment will be
in the form attached as Schedule "A" the "Collateral Assignment") and will not
be altered or changed without the consent of the Corporation.
6.2 While this Agreement is in force and effect, the Owner
will neither sell, surrender nor otherwise terminate the Policy without first
giving sixty (60) days advance written notice to the Corporation. In the event
the Corporation determines that such sale, surrender or termination of the
Policy adversely affects the security interest of the Corporation hereunder or
under the Collateral Assignment, this Agreement may be terminated by the
Corporation upon thirty (30) days advance written notice to the Owner, in which
event the provisions of ARTICLE IX and ARTICLE X hereinafter set forth shall
become effective and operative. In the event the Corporation determines that
such sale, surrender or termination does not affect its security interest
hereunder or under the Collateral Assignment, a conforming amendment shall be
made to this Agreement to reflect such sale, surrender or termination.
ARTICLE VII
ADDITIONAL POLICY BENEFITS AND RIDERS
7.1 The Owner may apply for and secure such additions and riders to the
Policy as are provided by the Insurer for the benefit of the Owner.
7.2 Upon written request by the Corporation, the owner will apply for and
secure such additions and riders to the Policy as are provided by the Insurer
for the benefit of the Corporation.
7.3 The cost or additional premium attributable to any such addition or
rider shall be paid by the party which will benefit from or be entitled to
receive the proceeds of such addition or rider.
ARTICLE VIII
DEATH CLAIMS
8.1 When the Owner dies, the Corporation shall be entitled to receive a
portion of the death benefits payable under the Policy. The amount which the
Corporation will be entitled to receive shall equal the Net Amount. The receipt
of the Net Amount by the Corporation shall constitute satisfaction of the
owner's obligation under ARTICLE V of this Agreement.
8.2 When the Owner dies, the beneficiary or beneficiaries named by the
Owner and designated in the Policy shall be entitled to receive the amount of
the death benefits provided under the Policy in excess of the Net Amount. The
Net Amount shall be paid under the settlement option in the Policy elected by
the Owner.
ARTICLE IX
TERMINATION OF AGREEMENT
9.1 This Agreement shall terminate on the occurrence of any of the
following events:
(a) Cessation of the Corporation's business.
(b) Thirty (30) days after written notice is given by either party
to the other.
(c) Termination of employment of the Owner with the Corporation for
any reason other than death.
(d) Bankruptcy, receivership or dissolution of the Corporation.
(e) Upon the election of the aggrieved party if either the
Corporation fails to pay the premium or if the Owner fails to pay the P.S. 58
Cost to the Corporation as required by ARTICLE IV of this Agreement, provided
that any election to terminate this Agreement under this clause must be made
within so days after the failure to make such payment occurs.
(f) Repayment to the Corporation in full by the Owner of the Net
Amount. The Corporation agrees that, upon receipt of the Net Amount, the
Corporation will release the Collateral Assignment of the Policy made by the
Owner pursuant to ARTICLE VI of this Agreement.
(g) Upon the surrender of the Policy by the Owner.
(h) The fifteenth (15th) anniversary of this Agreement.
ARTICLE X
DISPOSITION OF POLICY ON TERMINATION OF AGREEMENT
10.1 In the event this Agreement is terminated pursuant to paragraph 9.1
of ARTICLE IX of this Agreement, the Owner shall have 90 days in which to repay
to the Corporation the Net Amount. upon receipt of the Net Amount, the
Corporation shall release the Collateral Assignment. In the event the Owner does
not repay the Net Amount within this 90-day period, the Corporation may enforce
any rights which it has under the Collateral Assignment and may take whatever
other action it deems appropriate, at law or in equity, to collect, or to cause
the Owner to repay to the Corporation, the Net Amount. The Owner agrees,
promptly upon any such termination, to surrender the Policy to the Insurer for
cancellation and to direct the Insurer to apply the proceeds of such
cancellation to the repayment of the Net Amount.
ARTICLE XI
INSURER NOT A PARTY
11.1 The Insurer (a) shall not be deemed to be a party to this Agreement
for any purpose nor in any way responsible to the parties to this Agreement for
any purpose nor in any way responsible for its validity; (b) shall not be
obligated to inquire as to the distribution of any monies payable or paid by it
under the Policy pursuant to the terms of this Agreement; and (c) shall be fully
discharged from any and all liability under the terms of any policy issued by
it, which is subject to the terms of this Agreement, upon payment or other
performance of its obligations in accordance with the terms of such policy. The
Insurer shall be bound only by the provisions of and endorsements on the Policy,
and the Insurer shall in no way be bound by or be deemed to have notice of 'he
provisions of this Agreement.
ARTICLE XII
AMENDMENT OF AGREEMENT
12.1 This Agreement shall not be modified or amended except by a writing
signed by the Corporation and the Owner. This Agreement shall inure to the
benefit of and shall be binding upon the heirs, personal representatives,
successors and assigns of each party to this Agreement.
ARTICLE XIII
AGREEMENT OF FURTHER PERFORMANCE
13.1 Each of the parties, for itself and its heirs, personal
representatives, successors and assigns, agrees to take such further action, do
such other things, and execute such other writings as shall be necessary and
proper to carry out the terms and provisions of this Agreement.
ARTICLE XIV
STATE LAW
14.1 This Agreement shall be subject to and shall be construed under the
laws of the State of Georgia.
ARTICLE XV
NO WAIVER
15.1 No waiver of a breach or any provision of this Agreement shall be
construed to be a waiver of any breach of any other provisions of this Agreement
or of any succeeding breach of the same provision. No delay in acting with
regard to any breach of any provision of this Agreement shall be construed to be
a waiver of such breach.
ARTICLE XVI
COUNTERPARTS
16.1 This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original and together shall constitute one and the same
agreement.
ARTICLE XVII
SPECIAL PROVISIONS
17.1 The parties to this Agreement acknowledge that this Agreement is an
individually negotiated arrangement with a highly compensated management
employee. For purposes of any provision of the Employee Retirement Income
Security Act of 1974, as amended, that may be applicable, the following
provisions apply:
(a) The Corporation is the named fiduciary:
(b) The funding policy of this Agreement is that the Corporation
will, as provided in this Agreement, remit all premiums on the Policy when due.
(c) A claim shall be deemed filed when a written request is
presented by the Owner or his beneficiary to the Claims Manager designated by
the Corporation;
(d) If a claim is wholly or partially denied, the Claims Manager
shall furnish the owner or his beneficiary with written notice of the denial
within ninety (90) days of the date that the original claim was filed. This
notice of denial shall provide: (1) the reason is) for denial: (2) specific
reference to pertinent provisions of this Agreement on which the denial is
based: (3) a description of any additional information needed to perfect the
claim and an explanation of why such information is necessary; and (4) an
explanation of the applicable claims review procedure;
(e) The Owner or his beneficiary shall have sixty (60) days from
receipt of the denial notice in which to make written application for review by
the Claims Manager. With respect to such review, the owner or his beneficiary
may review pertinent documents and submit written issues and comments; and
(f) Within sixty (60) days of the Claims Manager's receipt of a
written application for review, together with any related written comments, the
Claims Manager shall issue a written decision on such review, a copy of which
shall be furnished to the owner or his beneficiary. Such decision on review
shall include specific reasons for the decision and specific references to the
pertinent provisions of this Agreement on which the decision is based. If a copy
of the decision on
review is not furnished to the Owner or his beneficiary within sixty (60) days,
the claim shall be deemed denied on review.
IN TESTIMONY WHEREOF, the Corporation, pursuant to the proper corporate
authority, has caused this Agreement to be signed on its behalf and its seal to
be affixed and attested by its proper officers and the Owner has hereunto
subscribed his name and seal, all as of the day and year first above set forth.
OWNER
/s/ Xxxxxxx X. Xxxxxx
ELECTROMAGNETIC SCIENCES, INC.
By: /s/ Xxx X. Xxxxxx
Duly Authorized Officer
