1
EXHIBIT 10.1
------------
DOMINION HOMES, INC.
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
THIS AGREEMENT, effective January 1, 1999, is made this 11th day of July, 1999,
by and between Dominion Homes, Inc., an Ohio corporation ("Company") and Xxxxxxx
X. Xxxxxx, who is an employee of Company ("Employee").
WHEREAS, the Employee wants to acquire life insurance protection under the terms
of the policy ("Policy") described in Attachment A to this Agreement;
WHEREAS, the Company and the Employee are willing to pay Policy premiums,
subject to the terms and conditions described in this Agreement;
WHEREAS, the Employee, as owner of the Policy, will hold all incidents of
ownership in and to the Policy; and
WHEREAS, the Company wants the Employee to collaterally assign the Policy to it
to secure the Company's rights under the Policy;
NOW, THEREFORE, in consideration of the premises and mutual promises described
below, the parties agree to the following terms:
1. PURCHASE OF POLICY. The Employee will contract for the Policy described in
Attachment A to this Agreement. Both the Company and the Employee agree to take
all action needed to acquire the Policy and to take any future action needed to
ensure that the terms of the Policy are consistent with this Agreement and with
the collateral assignment filed with the insurance company issuing the Policy
("Insurer").
2. OWNERSHIP OF POLICY. The Employee will be the sole and absolute owner of each
Policy issued to insure his or her life and, except as provided in this
Agreement, may exercise any and all rights and privileges granted under the
terms of the Policy to its owner.
3. POLICY DIVIDENDS. Any dividend declared on the Policy will be applied to
purchase additional paid-up insurance on the Employee's life.
4. PREMIUM PAYMENTS. For periods during which the Policy is outstanding,
premiums will be paid as follows:
(a) The Employee's portion of the premium payment will be the amount
calculated in Attachment B. These amounts may be changed periodically
to reflect updated tables issued by the Internal Revenue Service and
revised rates developed by the Insurer. However, these changes will not
constitute an amendment to this Agreement and will be applied without
the Employee's consent, although the Company will apprise the
2
Employee of any change in the amounts described in Attachment B as soon
as possible after it becomes aware of the change. The Company will
withhold the appropriate amount (derived from Attachment B) from the
compensation (or bonus) it pays to the Employee. These amounts,
combined with the amount calculated under paragraph 4(b), will be paid
to the Insurer on or before the date the Policy premium is due (or
within any grace period provided under the Policy).
(b) The balance of any premium due will be paid by the Company.
(c) On or before the date it is due (or within any grace period
provided under the Policy), the Company will pay to the Insurer the
full amount of each Policy premium due and, if asked to do so, will
give the Employee evidence that these premiums have been paid.
(d) If any Policy contains any disability waiver of premium or
mortality charge provision, neither the Employee nor the Company will
be required to pay any Policy premium for any period that waiver is in
effect.
(e) As of the end of each calendar year, the Company will give the
Employee a statement of any taxable income arising under this program.
The Employee is solely responsible for calculating and paying his or
her income tax liability on this income.
5. COLLATERAL ASSIGNMENT. At the same time that this Agreement is adopted, the
Employee will assign the Policy to the Company as collateral to secure the
Company's rights described in this Agreement. This assignment must be made on a
form approved by the Insurer and may not be terminated, revoked, amended or
altered in any way without the Company's express agreement.
6. LIMITS ON EMPLOYEES' RIGHTS IN THE POLICY.
(a) Except as specifically provided in this Agreement, the Employee may
not sell, assign, transfer, borrow against, surrender or cancel his or
her rights under the Policy or change the dividend election described
in paragraph 3 without the Company's written consent.
(b) Regardless of any other provision of this Agreement, the Employee
may absolutely and irrevocably transfer his or her rights under the
Policy to a donee, subject to the terms of the collateral assignment
described in paragraph 5. However, this transfer may be made only if
the Employee gives the Company a signed transfer of ownership form
issued by the Insurer for use when making irrevocable gifts of
insurance policies. The Employee must complete this form by naming the
donee and describing the terms of the transfer. Assuming that it is
completed properly, the Company will accept the terms of the transfer
and will treat the donee as the owner of the Policy, subject to this
Agreement and the terms of the collateral assignment described in
paragraph 5. After the
2
3
Company accepts the transfer, the Employee will have no right, title or
interest in the Policy that has been transferred to his or her donee.
7. COLLECTION OF DEATH BENEFITS.
(a) If the Employee dies while the Policy is in effect and while he or
she is actively employed or during the "Noncompetition Period" defined
in paragraph 9(c)(iv) but without engaging in any conduct prohibited by
paragraph 9(c)(iv), the Employee's beneficiary will receive a death
benefit equal to the amount specified in Attachment C. The balance of
any death benefit payable under any Policy will be paid to the Company.
The Company will cooperate with the named beneficiary to take any
action necessary to collect the death benefit under the Policy. This
Agreement will terminate when that benefit has been collected and paid
as provided in this paragraph.
(b) If, for any reason, no death benefit is payable under the Policy,
the Company will be entitled to all premiums it paid to the Insurer,
reduced by any unpaid debt (plus any unpaid but accrued interest) the
Company secured by the Policy and the balance of any amount refunded by
the Insurer will be paid to the deceased Employee's beneficiary.
8. TERMINATION OF AGREEMENT DURING THE EMPLOYEE'S LIFETIME. This Agreement
will automatically terminate if the Employee terminates employment
(other than because of death) for any reason before the Policy is
distributed to him or her, if the Company terminates the Employee for
"Cause" as defined in paragraph 9(c)(ii) or if the Employee engages in
any activity prohibited under the terms of paragraph 9(c)(iv) during
the "Noncompetition Period" also described in paragraph 9(c)(iv). In
any other cases, benefits will be paid as provided in paragraph 9(d).
9. DISPOSITION OF POLICY ON TERMINATION OF AGREEMENT DURING THE EMPLOYEE'S
LIFETIME. As soon as administratively possible after expiration of the
Noncompetition Period defined in paragraph 9(c)(iv), the Company will
release the collateral assignment made under paragraph 5 and distribute
the entire policy to the Employee but only if:
(a) The Employee terminates employment after:
(i) Completing at least 10 years of participation, calculated
from January 1, 1999;
(ii) The Company's adjusted shareholders' equity (defined in
Section 9(c)(vi)) first exceeds $100,000,000; or
(iii) A "change of control" (as defined in paragraph 9(c)(i))
occurs; and
(b) The Employee terminated for one of the following reasons:
(i) Retirement after the Employee reaches age 55;
3
4
(ii) Regardless of the Employee's age, the Company terminates
his or her employment without "Cause" (as defined in paragraph
9(c)(ii);
(iii) Regardless of the Employee's age (A) the Employee
terminates for "Good Reason" (as defined in paragraph
9(c)(iii))but only if (B) within 10 days after the occurrence
of the event complained of, the Employee notifies the Company,
in writing, of the date of termination and, with reasonable
specificity, describes the reasons the Employee believes that
the resignation is occasioned by "Good Reason" and (C) within
that same 10-day period, the Company does not cure the "Good
Reason" cited in that notice; or
(iv) For any other reason, if, in its sole discretion, the
Company agrees to release its interest in the Policy.
(c) For purposes of this Plan:
(i) "Change of Control" means the occurrence of any event
which results in either (A) Xxxxxx Realty Company's failing to
own at least 30 percent of the combined voting power of the
then outstanding voting securities of the Company entitled to
vote generally in the election of directors or (B) both Xxx
Xxxxxx and Xxxx Xxxxxx ceasing to be directors and officers of
the Company.
(ii) "Cause" means a termination of the Employee's employment
for any of the following reasons (A) any unauthorized
disclosure by the Employee of the Company's business practices
or accounts to a competitor which results in serious damage to
the Company, (B) willful and wrongful misappropriation by the
Employee of funds, property or rights of the Company which
results in serious damage to the Company, (C) willful and
wrongful destruction of business records or other property by
the Employee, which results in serious damage to the Company,
(D) conviction of the Employee of a felony involving moral
turpitude or, as the result of a plea bargain, conviction of
the Employee of a misdemeanor, provided the Employee was
originally charged (prior to the plea bargain) with a felony
involving moral turpitude, (E) gross and willful misconduct by
the Employee which results in serious damage to the Company or
(F) the Employee's material breach of, or inability to perform
his or her regularly assigned duties other than by reason of
Disability.
(iii) "Good Reason" means a termination of employment because
the Company (A) reduced the Employee's base salary for any
reason other than in connection with the termination of his or
her employment, (B) for any reason other than in connection
with the termination of the Employee's employment, the Company
materially reduces any fringe benefit provided to the Employee
below the level of such fringe benefit provided generally to
other actively employed similarly situated executives of the
Company, unless the Company agrees to fully
4
5
compensate the Employee for any such material reduction, (C)
the Company assigns the Employee to duties inconsistent in any
respect with his or her position (including, without
limitation, his status, office and title), authority, duties
or responsibilities normally allotted to the Employee or takes
any other action that results in a material diminution in such
position, authority, duties or responsibilities or (D) the
Company otherwise materially breaches or is unable to perform
its normal obligations to the Employee.
(iv) "Noncompetition Period" means the twelve calendar months
beginning after the Employee terminates employment under
circumstances described in paragraph 9(a) and (b). During this
period, the Employee agrees that he or she will not:
(A) Anywhere in the State of Ohio or in any other
state in which the Company is then conducting
business, without the written consent of the Company,
provide advice with respect to, engage in or directly
or indirectly supervise or assist the provision of
any service or sale of any product which competes
with any service or product of the Company; or
(B) Anywhere in any state, accept employment with,
provide advice to, or engage in or directly or
indirectly supervise or assist the provision of any
service or sale of any product by any person,
company, partnership, corporation or other entity
which builds homes, develops land or otherwise
competes with the Company in any market, city or area
in which the Company then conducts business.
(v) "Disability" means the inability of the Employee due to
illness, accident or otherwise, to perform his or her duties
for the period of time during which benefits are payable to
the Employee under the Company's Short-Term Disability Plan,
as determined by an independent physician selected by the
Company and reasonably acceptable to the Employee (or his or
her legal representative), provided that the Employee does not
return to work on a substantially full-time basis within 30
days after the Company notifies the Employee that he will be
terminated on account of Disability.
(vi) "Adjusted Shareholders' Equity" means the consolidated
shareholders' equity of the Company and its consolidated
subsidiaries as of the last day of any fiscal quarter, as
reported in the consolidated balance sheet of the Company and
its consolidated subsidiaries, as adjusted by subtracting
therefrom the net proceeds of the sale by the Company of any
of its equity securities and by adding thereto the fair value
of any dividends or distributions made by the Company to its
shareholders, after the effective date of this Agreement.
(d) If the Employee (i) terminates for any reason not described in
paragraph 9(a) and (b) (other than death), (ii) engages in any conduct
prohibited under paragraph 9(c)(iv)
5
6
during the Noncompetition Period also defined in paragraph 9(c)(iv), or
(iii) this Agreement terminates under circumstances described in
paragraph 8, the Employee (and the Employee's named beneficiary) will
forfeit any and all rights to any benefit under this Agreement or the
Policy. In this case, the Company itself will be entitled to any and
all rights under the Policy.
10. INSURER NOT A PARTY. The Insurer is not a party to this Agreement and
has no obligation or duty under this Agreement and will have fully
discharged its obligations by paying benefits under the terms of the
Policy. No provision of this Agreement or any modification or amendment
of this Agreement will, in any way, be construed as enlarging, changing
or in any way affecting the Insurer's obligations unless those changes
are made part of the Policy under the terms of the collateral
assignment signed by the Employee and filed with the Insurer as
provided in paragraph 5.
11. NAMED FIDUCIARY, DETERMINATION OF BENEFITS, CLAIMS PROCEDURE AND
ADMINISTRATION.
(a) The Company is the named fiduciary under this Agreement and has
authority to control and manage the operation and administration of
this Agreement and must establish a funding policy and method
consistent with the objectives stated in this Agreement.
(b) The Company will apply the following claims procedure to resolve
any disputes under this Agreement.
(i) FILING CLAIMS. The Employee or his or her beneficiary may
file a claim for Plan benefits with the Company.
(ii) NOTIFICATION TO CLAIMANT. If a claim is wholly or
partially denied, the Company will send a written notice of
denial to the claimant. This notice must be sent within 90
days after receipt of the claim, must be written in a manner
calculated to be understood by the claimant and must include
(A) the specific reason or reasons for which the claim was
denied, (B) specific reference to pertinent Plan provisions,
rules, procedures or protocols upon which the Company relied
to deny the claim, (C) a description of any additional
material or information that the claimant may file to perfect
the claim and an explanation of why this material or
information is necessary and (D) a description of the steps
the claimant may take to appeal an adverse determination.
(iii) REVIEW PROCEDURE. If a claim has been wholly or
partially denied, the affected claimant, or his authorized
representative may (A) request that the Company reconsider its
initial denial by filing a written appeal no more than 60 days
after receiving written notice that all or part of the initial
claim was denied, (B) review pertinent documents and other
material upon which the Company relied when denying the
initial claim, and (C) submit a written description of the
6
7
reasons for which the claimant disagrees with the Company's
initial adverse decision. An appeal of an initial denial of
benefits and all supporting material must be made in writing
and directed to the Company. The Company is solely responsible
for reviewing all benefit claims and appeals and taking all
appropriate steps to implement its decision.
(iv) DECISION ON REVIEW. The Company will render its decision
within 60 days of receiving a benefit appeal. However, if
special circumstances (such as the need to hold a hearing on
any matter pertaining to the denied claim) require additional
time, this decision will be rendered as soon as possible, but,
not later than 120 days after receipt of the claimant's
written appeal and only if the Company notifies the claimant,
in writing, that it needs more time to review an appeal and
why that additional time is needed. If the Company does not
issue its decision within this period, the claim will be
deemed to have been denied. The Company's decision on review
will be sent to the claimant in writing and will include
specific reasons for the decision, written in a manner
calculated to be understood by the claimant, as well as
specific references to the pertinent Plan provisions, rules,
procedures or protocols upon which the Company relied to deny
the appeal.
12. AMENDMENT. This Agreement may not be amended, altered or modified
except by the written agreement of each party or their respective
successors or assigns and may not be terminated except under the terms
specifically provided in this Agreement. However, changes to the rates
stated in Attachment B will not be considered amendments for purposes
of this paragraph (or this Agreement) and will be applied without the
written agreement of the parties to this Agreement or their respective
successors or assigns.
13. BINDING EFFECT. This Agreement is binding upon and will inure to the
benefit of the Company and its successors and assigns and to the
Employee and his or her successors, assigns, heirs, executors,
administrators and beneficiaries.
14. NOTICES. Any notice, consent or demand made under this Agreement must
be written and signed by the party issuing it. If a notice, consent or
demand is mailed, it must be sent by United States certified mail,
postage prepaid, addressed to the recipient's last known address. The
date any notice, consent or demand is mailed will be treated as the
date it is given.
15. MUTUAL COOPERATION. Each party agrees to perform all acts contemplated
under this Agreement, the collateral assignment described in paragraph
5 and the Policy.
16. GOVERNING LAW. This Agreement, and all rights arising under it, will be
governed by the laws of the United States and, where applicable, by the
laws of Ohio.
7
8
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year written above.
DOMINION HOMES, INC.
By: /s/ Xxxxxx X. Xxxxx
--------------------
Xxxxxx X. Xxxxx
Date Signed: _______________
By: /s/ Xxxxxxx X. Xxxxxx
----------------------
Xxxxxxx X. Xxxxxx
Date Signed: July 11, 1999
___________________________
9
ATTACHMENT A
TO
DOMINION HOMES, INC.
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
FOR
XXXXXXX X. XXXXXX
IDENTIFICATION OF POLICY
The Policy that is the subject of this Agreement is Policy Number 1Y000005 and
will be purchased from the New England Life Insurance Company ("Insurer") in the
amount of $8,500,000.00.
10
ATTACHMENT B
TO
DOMINION HOMES, INC.
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
FOR
XXXXXXX X. XXXXXX
CALCULATION OF EMPLOYEE'S SHARE OF PREMIUM
The Employee's share of the Policy premium cost is the smaller of the amount
calculated under Part I or Part II below.
PART I - PS 58 CHARGES
The amount derived from tables produced in Rev. Rul. 55-747, 1955-2, CB 228 or
any superseding tables prepared by the Internal Revenue Service for similar
purposes.
PART II - TERM INSURANCE COSTS
The initial rates applicable are set forth below as the "Economic Benefit from
Split Dollar Agreement." Year 1 is 1999, and subsequent years are numbered
sequentially.
These rates are subject to change in the future by the Insurer. Any changes to
these rates issued by the Insurer will automatically be incorporated herein and
applied as of the effective date specified by the Insurer.
11
DOMINION HOMES, INC.
Supplemental Schedule
Executive Officers? Split Dollar Life Insurance Values
Name Policy Amount Death Benefit
---- ------------- -------------
Xxxxxxx X. Xxxxxx $8,500,000 $8,000,000
Xxx X. Xxxxxxx $6,500,000 $6,000,000
Xxxxx X. Xxxxxx $1,500,000 $1,200,000
Xxxxxx X. Xxxxx $ 900,000 $ 775,000
Xxxxx X. X'Xxxxxx $ 500,000 $ 420,000
