SPLIT DOLLAR AGREEMENT
This Split Dollar Agreement (the "Agreement") is made this
15th day of May, 1998 by and between Cavalier Homes, Inc. (hereinafter
referred to as the "Corporation'), and Xxxxx X. Xxxxxx, Xx., as Trustee of the
Xxxxx Xxxxx Xxxxxxxx Family Trust dated May 15, 1998 (hereinafter referred to
as the "Owner"),
RECITALS:
WHEREAS, Xxxxx Xxxxx Xxxxxxxx ("Xx. Xxxxxxxx") has and
continues to perform valuable services as the Chief Executive Officer of the
Corporation; and
WHEREAS, in recognition of the past and continued valuable
services of Xx. Xxxxxxxx to the Corporation, the Corporation wishes to enter
into a Split Dollar plan to provide life insurance protection for the benefit
of Xx. Xxxxxxxx (hereinafter referred to as the "Insured").
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE OF INSURANCE AND PAYMENT OF PREMIUMS
A. The Owner shall purchase a life insurance policy insuring
the life of the Insured (the "Policy"), which is described in Schedule A
attached hereto and by this reference is made a part hereof. The Policy shall
be issued by General American Life Insurance Company (the "Insurer") in the
amount of $2,000,000.
B. Until the termination of this Agreement pursuant to
Article IV, the Corporation shall be responsible for the remittance of the
entire premium due on the Policy on or before the date the premium is due or
within the grace period allowed by the Policy for the payment of said premium
and, if requested, shall give proof of the timely payment of each premium to
the Owner.
C. Unless and until this Agreement is modified, the
Corporation shall pay the PS-58 portion of the gross premium, with the result
that the Insured shall report as income the amount of the economic benefit
received by him as a result of the Corporation's payment of such premiums, and
the Insured shall be deemed to have made a gift to the Owner of such PS-58
cost, which shall not be entitled to the $10,000 annual exclusion under
Section 2503(b) of the Internal Revenue Code of 1986, as amended. The PS-58
portion shall be the amount equal to the cost of term insurance coverage based
on the age of the Insured, as determined by the insurance company issuing the
Policy.
ARTICLE II
POLICY OWNERSHIP PROVISIONS AND RIGHTS OF PARTIES
A. The Policy shall be the exclusive property of the Owner,
who shall possess and may exercise all the rights, titles and incidents of
ownership with respect thereto, subject only to the security interest of the
Corporation as expressed in this Agreement, notwithstanding anything to the
contrary in the Policy, or endorsement and riders thereto.
B. The Owner agrees to grant the Corporation a security
interest in said Policy, and the Owner shall collaterally assign the Policy to
the Corporation whereby the Corporation shall have the following rights:
1. To receive out of any amount payable on
account of the death of the Insured an amount equal to its total premium
payments.
2. To obtain, upon surrender of the Policy by
the assignor, an amount of the cash surrender proceeds up to an amount equal to
its total premium payments.
C. The Corporation shall not exercise any rights in the Policy
in any way that might impair or defeat the rights and interest of the Owner, as
Owner or beneficiaries of the Policy, or their designees.
D. The Corporation shall have its interest first satisfied
from the cash values of the paid up additions to the Policy.
E. The Corporation shall not be entitled to any payments under
this Agreement until the earlier of (i) the death of the Insured, or (ii) the
cancellation of the Policy by the Owner.
F. The Corporation shall provide the Owner an annual
accounting detailing the liability owed to the Corporation by the Owner.
ARTICLE III
FIDUCIARY AND CLAIMS PROCEDURE
A. Xxxxxxx X. Xxxxxx, as Secretary of the Corporation, is
hereby designated as the "named fiduciary" under this plan and shall control
and manage the operation of the plan. Such responsibilities may be allocated to
other persons, named in a written instrument executed by the parties hereto
spelling out to whom and which responsibilities have been delegated.
B. The Owner and Corporation shall make claim and execute such
forms as required under the Policy for collection of the proceeds due and
payable upon the death of the Insured. The Corporation will be entitled to
receive the amount of its premiums in accordance with Section B of Article 11
hereof. The Owner shall be entitled to receive the balance of such proceeds
after payment to the Corporation.
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ARTICLE IV
TERMINATION AND AMENDMENT OF AGREEMENT
A. The Agreement may be altered, amended or modified only by
a written agreement signed by the parties hereto, This Agreement shall be
terminated upon the occurrence of any of the following events:
1. Surrender of the Policy by the Owner.
2. Termination of Xx. Xxxxxxxx'x employment with the
Corporation for any reason whatsoever other than Xx. Xxxxxxxx'x death,
disability, retirement, or termination after a change in control of the
Corporation.
3. Mutual agreement of the Owner and the Corporation.
4. The payment of death benefits under the Policy.
5. The total cessation of the business of the Corporation,
or the bankruptcy or dissolution of the Corporation.
B. Upon termination of this Agreement, the Corporation shall
not be required to make further premium payments on the Policy, and the
obligations of the Owner to pay the amounts due the Corporation under this
Agreement shall survive the termination of this Agreement.
ARTICLE V
LIABILITY OF LIFE INSURANCE CORPORATION
General American Life Insurance Company shall not (A) be deemed to be
a party of this Agreement for any purposes nor in any way be responsible for its
validity; (B) be obligated to inquire as to the distribution of any monies
payable or paid by it under the Policy; and (C) shall be fully discharged from
any and all liability under the terms of any policy or policies 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.
ARTICLE VI
BINDING AGREEMENT
This Agreement shall be binding upon the parties hereto, and
their heirs, assigns, successors, executors and administrators.
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ARTICLE VII
GOVERNING LAW
This Agreement shall be subject to and shall be construed
under the laws of the State of Alabama.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands and seals, or cause these presents to be duly executed by their proper
corporate officers, as of the day and year first written above,
ATTEST: CAVALIER HOMES, INC.
/s/ Xxxxxxxx X. Xxx By: /s/ Xxxxxxx X. Xxxxxx
______________________________ ______________________________
Its: Vice President
_____________________________
WITNESS:
/s/ Xxxxxx X. Xxxxx /s/ Xxxxx X. Xxxxxx, Xx.
______________________________ _________________________________
Xxxxx X. Xxxxxx, Xx., as Trustee
of the Xxxxx Xxxxx Xxxxxxxx Family Trust
