Exhibit 10b
1
[Key Management Life Insurance Plan]
[Owner is the Executive]
KMLIP SD-1.DOC
SPLIT-DOLLAR AGREEMENT
THIS AGREEMENT is made and entered into as of the __ day of
_____ ,1999, by and between AMERITECH, a Delaware corporation,
with principal offices and place of business in the State of
Illinois (hereinafter referred to as the "Corporation", and
___________, an individual (hereinafter referred to as the
"Executive"),
WITNESSETH THAT:
WHEREAS, the Executive is employed by the Corporation (or
one of its subsidiaries or affiliates, and employment by any such
subsidiary or affiliate shall be considered the same as
employment by the Corporation for purposes of this Agreement) and
is eligible under the Corporation's "Key Management Life
Insurance Plan" (hereinafter referred to as the "Plan") to
purchase life insurance coverage pursuant to a collateral
assignment, split-dollar arrangement (hereinafter referred to as
the "Split-Dollar Arrangement") with the Corporation; and
WHEREAS, the Executive is acquiring life insurance coverage
by purchasing a policy of life insurance (hereinafter referred to
as the "Policy"), insuring the Executive's own life (the
Executive is also sometimes hereinafter referred to as the
"Insured"), which policy is described in Exhibit A attached
hereto and by this reference made a part hereof, and which policy
is issued by Metropolitan Life Insurance Company (hereinafter
referred to as the "Insurer"); and
WHEREAS, pursuant to the Plan, the Corporation is obligated
to pay a portion of the premiums on the Policy as an employment
benefit for the Executive, on the terms and conditions
hereinafter set forth; and
2
WHEREAS, pursuant to the Plan, the Executive is obligated to
pay a portion of the premiums on the Policy, on the terms and
conditions hereinafter set forth; and
WHEREAS, the Executive will be the sole and absolute owner
of the Policy and, as such, will possess all ownership rights and
incidents of ownership in and to the Policy (except as otherwise
specifically provided herein); and
WHEREAS, pursuant to the Plan, the Corporation is entitled
to have the Policy collaterally assigned in its favor by the
Executive, in order to secure the payment of the amount due it
hereunder as a result of its payments toward the premiums on the
Policy; and
WHEREAS, the parties intend that by such collateral
assignment the Corporation shall receive only the right to such
payment, with the Executive retaining all other ownership rights
and incidents of ownership in and to the Policy, as specified
herein;
NOW, THEREFORE, in consideration of the premises and of the
mutual promises contained herein, the parties hereto agree as
follows:
1. Purchase of Policy. The Executive shall purchase the
Policy described in Exhibit A from the Insurer. The parties
hereto have taken all necessary action to cause the Insurer to
issue the Policy, and shall 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 collateral assignment filed with the Insurer relating to the
Policy.
2. Ownership of Policy
a. The Executive shall be the sole and absolute owner of
the Policy, and may exercise all ownership rights and incidents
of ownership granted to the owner thereof by the terms of the
Policy, except as otherwise specifically provided herein.
b. It is the intention of the parties to this Agreement
and the collateral assignment executed by the Executive in favor
of the Corporation in connection herewith that the Executive
shall retain all rights which the Policy grants to the owner
thereof and that the sole right of the Corporation shall be to be
paid the amount due it hereunder as a result of its
3
payments toward the premiums on the Policy. Specifically, but
without limitation, except as otherwise specifically provided
herein, the Corporation shall neither have nor exercise any right
as collateral assignee of the Policy which could in any way
defeat or impair the right of the Executive to utilize the cash
surrender value of the Policy or of the Executive's beneficiary
to receive that portion of the death benefit provided under the
Policy to which the Executive's beneficiary is entitled pursuant
to the terms of this Agreement. All provisions of this Agreement
and of such collateral assignment shall be construed so as to
carry out such intention.
3. Policy Dividends. Subject to the provisions of
paragraph 6, while the Split-Dollar Arrangement remains in
effect, the Executive may make any elections and exercise any and
all other rights relating to Policy Dividends, as hereinafter
defined, granted to the owner of the Policy. For purposes of
this Agreement, the term "Policy Dividends" shall include
"dividends" earned by a participating policy and "excess
interest" earned by a non-participating policy and any similar
type of policy distribution.
4. Payment of Premiums. While the Split-Dollar
Arrangement remains in effect:
a. Except as otherwise provided herein, the premium to be
paid to the Insurer for the Policy in each "Policy Year," as
hereinafter defined in paragraph 10, shall be as set forth in
Column 3 ("Total Policy Year Premium") of Exhibit B attached
hereto and by this reference made a part hereof.
b. Except as otherwise provided herein, on or before the
date of this Agreement as to the first Policy Year and on or
before the first day of each next succeeding Policy Year, or
within the grace period provided in the Policy, the Corporation
shall pay to the Insurer the amount set forth in Column 3 of
Exhibit B for that Policy Year. However, for purposes of
determining the amount due the Corporation hereunder as a result
of its payments toward the premiums on the Policy, in each Policy
Year the Corporation shall be deemed to have paid only that
portion of the premium for which it has not received payment from
the Executive as the Executive's contribution to the premium as
provided for in paragraph 4(c) of this
4
Agreement (hereinafter referred to as the "Corporation's Policy
Year Net Premium Payment").
c. Except as otherwise provided herein, as to each Policy
Year, a certain amount of contribution to the premium shall be
due from the Executive hereunder (hereinafter referred to as the
"Executive's Policy Year Contribution to Premium") for such
Policy Year. This amount shall be based upon the annual cost of
the current life insurance coverage provided to the Executive
hereunder for such Policy Year and shall be equal to the
"economic benefit" of such current life insurance coverage for
federal income tax purposes, as provided in Revenue Ruling 64-328
(or the corresponding applicable provisions of any future Revenue
Ruling) or as otherwise provided for federal income tax purposes.
Under current tax law, this amount would be measured under
Revenue Ruling 66-110 by the lower of the P.S. 58 rate, as set
forth in Revenue Ruling 55-747, or the Insurer's current
published premium rates per $1,000 of life insurance coverage for
individual one-year term life insurance available for all
standard risks. The Executive shall be required to pay the
Executive's Policy Year Contribution to Premium to the
Corporation for each such Policy Year. So long as the
Executive's employment with the Corporation continues and unless
the parties agree otherwise, the Corporation shall deduct the
Executive's Policy Year Contribution to Premium from the
Executive's normal salary payments on a level basis during the
Policy Year, except as to the first Policy Year, during which the
Executive's Policy Year Contribution to Premium shall be deducted
on a level basis beginning as of the date on which the Enrollment
Agreement is signed, and except as to the last Policy Year,
during which the Executive's Policy Year Contribution to Premium
shall be deducted on a level basis ending as of the date of the
termination of the Split-Dollar Arrangement. Upon the
termination of the Executive's employment with the Corporation in
any Policy Year and continuing until the termination of the Split-
Dollar Arrangement, the Executive shall be required to pay the
balance of the Executive's Policy Year Contribution to Premium
for such Policy Year (which has not theretofore been deducted
from the Executive's salary) generally within ninety (90) days of
5
such termination of the Executive's employment with the
Corporation, and the Executive shall be required to pay the
Executive's Policy Year Contribution to Premium for each
succeeding Policy Year generally within ninety (90) days of the
premium payment date for the Policy for each such Policy Year.
In all events, the Executive shall pay the Executive's Policy
Year Contribution to Premium prior to the end of each such Policy
Year. For the Policy Year in which the Executive dies, the
Executive's employment with the Corporation is terminated, or the
Split-Dollar Arrangement is otherwise terminated, an appropriate
adjustment will be required to the Executive's Policy Year
Contribution to Premium for such Policy Year to reflect such
event.
d. Based on the foregoing provisions of this paragraph 4,
under current tax law, it is not anticipated that any amount of
income will be reportable by the Executive for federal, state or
local income tax purposes as a result of the current life
insurance coverage provided to the Executive hereunder for any
Policy Year. However, if any amount of income becomes reportable
by the Executive for federal, state or local income tax purposes
as a result of the current life insurance coverage provided to
the Executive hereunder for any Policy Year, then the Corporation
shall furnish to the Executive a statement of such reportable
income for such Policy Year.
e. Based on the foregoing provisions of this paragraph 4,
if the Executive's employment with the Corporation continues
until the Executive attains age sixty-five (65), under current
tax law, the Corporation's Policy Year Net Premium Payment under
paragraph 4(b) and the Executive's Policy Year Contribution to
Premium under paragraph 4(c) during each Policy Year while the
Split-Dollar Arrangement remains in effect would be illustrated
by Columns 6 and 5, respectively, of Exhibit B.
f. Anything contained in this paragraph 4 or in Exhibit B
to the contrary notwithstanding, if the Executive's employment
with the Corporation terminates before the Executive attains age
sixty-five (65) but the Split-Dollar Arrangement remains in
effect (hereinafter referred to as "Early Retirement"), then in
the Policy Year in which
6
the Executive's employment with the Corporation shall have
terminated and in each Policy Year thereafter until the
termination of the Split-Dollar Arrangement (in lieu of the
amount set forth in Column 3 of Exhibit B), the Corporation shall
pay to the Insurer only such amount, if any, as shall be
necessary to ensure "Adequate Policy Funding" (as hereinafter
defined), or shall receive from the Insurer, out of partial
surrenders of Policy additions (or otherwise), any Policy cash
values in excess of that level of Policy cash value necessary to
ensure Adequate Policy Funding, but in no event shall the
Corporation receive more than the then cumulative total amount of
the "Corporation's Policy Year Net Premium Payment" (as
hereinabove defined). "Adequate Policy Funding" shall mean that
level of Policy cash value on termination of the Split-Dollar
Arrangement, assuming such termination occurred under paragraph
8(a)(5) hereof, which would be sufficient to fund the reduced
level of death benefit provided hereunder in the event of such
Executive's Early Retirement (the "Executive's Death Benefit Upon
Termination," as hereinafter defined), after recovery of the
"Corporation's Cumulative Net Premium Payment at Termination" (as
hereinafter defined), based on the original policy configuration
assumptions and the fact of such Executive's Early Retirement.
For purposes of this paragraph 4(f), the Corporation may rely
conclusively upon, and shall be held harmless in relying upon,
the determination of the Insurer as to any such further premium
obligation or any recovery of such excess Policy cash values.
5. Collateral Assignment. To secure the payment to the
Corporation of the amount due it hereunder as a result of its
payments toward the premiums on the Policy, the Executive has,
contemporaneously herewith, assigned the Policy in favor of the
Corporation as collateral, which collateral assignment
specifically provides that the sole right of the Corporation
thereunder is to be paid the amount due it hereunder as a result
of its payments toward the premiums on the Policy. Such payment
shall be made from the cash surrender value of the Policy (as
defined therein) if the Split-Dollar Arrangement is terminated or
if the Executive surrenders or cancels the Policy while the Split
-Dollar Arrangement remains in effect, or from the death benefit
provided under the Policy if the Executive dies while the
7
Policy and the Split-Dollar Arrangement remain in effect. In no
event shall the Corporation have any right to borrow against or
withdraw amounts from the Policy (except as provided in paragraph
4(f)), to surrender or cancel the Policy, or to take any other
action which would impair or defeat the rights of the Executive
as the owner of the Policy. The collateral assignment of the
Policy to the Corporation hereunder shall not be terminated,
altered or amended by the Executive while the Split-Dollar
Arrangement is in effect. The parties hereto agree to take all
action necessary to cause such collateral assignment to conform
to the provisions of this Agreement.
6. Limitations on Executive's Rights under Policy. As the
sole and absolute owner of the Policy, the Executive may exercise
all of the rights, options, privileges and other incidents of
ownership granted to the owner thereof by the terms of the Policy
(including, without limitation, the unlimited ability to borrow
against or withdraw amounts from the cash surrender value of the
Policy and to surrender or cancel the Policy). Notwithstanding
the foregoing so long as the Split-Dollar Arrangement remains in
effect: (1) the Executive shall not take any action with respect
to the Policy which would have a direct or indirect adverse
effect on the Corporation's interests under this Agreement in the
Policy without the Corporation's prior written consent; and (2)
except with respect to the Executive's right to change the
beneficiaries of the "Executive's Death Benefit," as hereinafter
defined in paragraph 7, and to assign the Executive's interests
in the Policy and under this Agreement, as contemplated in
paragraph 13, the Executive shall not take any other action with
respect to the Policy (regardless of whether it would directly or
indirectly adversely affect the Corporation's interests under
this Agreement in the Policy) without the Corporation's prior
written consent, which consent will not be unreasonably withheld
by the Corporation. For purposes of this paragraph 6, the
Executive may borrow against or withdraw from the cash surrender
value of the Policy any amounts which may be required to be paid
to the Corporation and which are due the Corporation under
paragraph 4(c), so long as the amount of any such loan or
withdrawal is chargeable solely against the "Executive's Death
Benefit," as
8
hereinafter defined in paragraph 7, and that portion of the cash
surrender value of the Policy which is in excess of the cash
surrender value of the Policy due the Corporation hereunder as a
result of its payments toward the premiums on the Policy pursuant
to the collateral assignment hereunder.
7. Collection and Payment of Death Benefit.
a. Upon the death of the Executive while the Split-Dollar
Arrangement remains in effect, the Corporation and the
Executive's beneficiary shall promptly take all action necessary
to obtain the death benefit provided under the Policy and payable
as a result of the maturity of the Policy (hereinafter referred
to as the "Death Benefit").
b. The Death Benefit shall be paid as follows:
(1) The Corporation shall first be paid from the Death
Benefit any unpaid amount of the Executive's Policy Year
Contribution to Premium owed to it by the Executive under
paragraph 4(c).
(2) The Corporation shall next be paid from the Death
Benefit the total net amount of the payments made by it toward
the premiums on the Policy hereunder. Such amount shall be the
sum of the Corporation's Policy Year Net Premium Payment amounts
under paragraph 4(b) (hereinafter referred to as the
"Corporation's Cumulative Net Premium Payment") less any amounts
received by the Corporation under paragraph 4(f). Based on the
foregoing provisions of this Agreement, if, for example, the
Executive died on the last day of any Policy Year (other than the
Policy Year in which the Executive's employment with the
Corporation shall have terminated or any subsequent Policy Year),
under current tax law, the amount of the Corporation's Cumulative
Net Premium Payment would be equal to the amount set forth in
Column 7 of Exhibit B for the Policy Year in which the Executive
died.
(3) The Executive's beneficiary shall next be paid, in
the manner and in the amount or amounts provided in the
beneficiary designation provision of the Policy, from the Death
Benefit an amount equal to the "Executive's Death Benefit," as
hereinafter defined. For purposes of this Agreement, the
"Executive's Death Benefit" shall be an amount equal to
9
the least of (A) the amount provided in Column 4 of Exhibit B
(hereinafter referred to as the "Executive's Maximum Death
Benefit") for the Policy Year in which the Executive shall have
died, (B) the "Executive's Death Benefit Upon Termination," as
hereinafter defined, or (C) that portion of the Death Benefit
remaining after the payments provided for in subparagraphs (1)
and (2) of this paragraph 7(b), and then reduced by any loan
chargeable against the Executive's Death Benefit. For purposes
of this Agreement, the "Executive's Death Benefit Upon
Termination" shall be the amount of the Executive's Maximum Death
Benefit provided in said Column 4 for the Policy Year in which
the Executive's employment with the Corporation shall have
terminated. Based on the foregoing provisions of this Agreement,
if the Executive's employment with the Corporation continues
until the Executive's death, under current tax law, the amount of
the Executive's Death Benefit, before any reduction for any loan
chargeable against the Executive's Death Benefit, would be equal
to the Executive's Maximum Death Benefit as set forth in said
Column 4 for the Policy Year in which the Executive dies.
(4) The Corporation shall receive the balance, if any,
of the Death Benefit remaining after the payments provided for in
subparagraphs (1), (2) and (3) of this paragraph 7(b).
c. The parties hereto agree that the beneficiary
designation provision of the Policy shall conform to the
provisions hereof.
8. Termination of Split-Dollar Arrangement.
a. The Split-Dollar Arrangement shall terminate, without
notice, on the first day of the month following the month during
which the first of the following events occurs:
(1) the Executive fails to make any premium payment
required under paragraph 4(c) of this Agreement for any Policy
Year by the end of such Policy Year or the Executive notifies the
Corporation that the Executive intends to surrender or cancel the
Policy;
10
(2) the Executive's employment with the Corporation
terminates before the date upon which the Executive becomes
"retirement eligible," as hereinafter defined in paragraph 8(c);
(3) the Executive is demoted by the Corporation to a
position that is not eligible under the Plan, even if the
demotion occurs on or after the date upon which the Executive
becomes "retirement eligible;"
(4) the Executive establishes a relationship with a
competitor of the Corporation or engages in any activity which is
in conflict with or adverse to the interests of the Corporation
whether before or after the Executive's employment with the
Corporation has terminated and whether before, on or after the
date upon which the Executive becomes "retirement eligible;" or:
(5) the later of:
(A) the date the Executive's employment with the
Corporation terminates on or after the date upon which the
Executive becomes "retirement eligible," or:
(B) the date immediately before the date fifteen
(15) years after the "Policy Date" of the Policy (as defined
therein), namely, June 30, 2014.
b. In addition, the Executive may terminate the Split
-Dollar Arrangement at any time by written notice to the
Corporation. Such termination shall be effective as of the date
of such notice.
c. For purposes of this Agreement, the Executive shall be
deemed to be "retirement eligible" as of the date upon which (1)
the Executive's age and service equal 75 years or (2) the
Executive is eligible to receive a Minimum Disability Pension
Allowance under the Corporation's "Senior Management Retirement
and Survivor Protection Plan" or (3) the Executive has been
"disabled" for more than fifty-two (52) weeks and had at least
six (6) months credited service, as long as the Executive
continues to be "disabled," in each case as defined under
subsection 3.2 of the Corporation's "Senior Management Long Term
Disability Plan" or the Corporation's "Long Term Disability Plan
for Salaried Employees."
11
Anything contained in this Agreement to the contrary
notwithstanding, the Executive's employment with the Corporation
shall be deemed to continue for as long as the Executive is
eligible to receive Sickness and Accident Disability Benefits
under the Corporation's "Sickness and Accident Disability Benefit
Plan." For purposes of this paragraph 8(c), each of the
Corporation's plans identified above shall also include any
successor plan.
9. Options on Termination of Split-Dollar Arrangement.
a. Upon termination of the Split-Dollar Arrangement, the
Corporation shall be entitled to receive from the cash surrender
value of the Policy an amount equal to the sum of (1) the
Corporation's Cumulative Net Premium Payment less any amounts
received by the Corporation under paragraph 4(f) plus (2) the
amount owed to it by the Executive under paragraph 4(c), if any.
Such amount is hereinafter referred to as the "Corporation's
Cumulative Net Premium Payment at Termination."
b. For thirty (30) days after the date of the termination
of the Split-Dollar Arrangement, the Executive shall have the
option of obtaining the release of the collateral assignment of
the Policy to the Corporation. To obtain such release, the
Executive shall pay to the Corporation an amount equal to the
Corporation's Cumulative Net Premium Payment at Termination, and,
notwithstanding any other provision hereof, the Executive shall
specifically be allowed to borrow against or withdraw from the
cash surrender value of the Policy for this purpose. 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.
c. If the Executive fails to exercise such option within
such thirty (30) day period, then, at the request of the
Corporation, the Executive shall execute any document or
documents required by the Insurer to transfer the interest of the
Executive in the Policy to the Corporation. Alternatively, the
Corporation may enforce its right to be paid an amount equal to
the Corporation's Cumulative Net Premium Payment at Termination
under the collateral assignment of the Policy. Thereafter,
neither the Executive, nor the Executive's heirs, assigns
12
or beneficiaries shall have any further interest in and to the
Policy, either under the terms thereof or under this Agreement.
However, in no event shall the Executive be liable to the
Corporation in the event the cash surrender value of the Policy
at the time of the termination of the Split-Dollar Arrangement is
insufficient to pay the Corporation an amount equal to the
Corporation's Cumulative Net Premium Payment at Termination.
d. Anything contained in this Agreement to the contrary
notwithstanding, if the Split-Dollar Arrangement terminates
(other than as a result of the death of the Executive) for any
reason other than pursuant to paragraph 8(a)(5) of this
Agreement, the Corporation shall also be entitled to recover, in
addition to the Corporation's Cumulative Net Premium Payment at
Termination, an amount sufficient to pay all federal, state and
local income taxes, if any, imposed upon the Corporation as a
result of such early termination and attributable to the Policy
so that the Corporation will receive the Corporation's Cumulative
Net Premium Payment at Termination on an after-tax basis. The
amount, if any, payable to the Corporation pursuant to this
paragraph 9(d) shall be determined by the Corporation's
independent certified public accountant which is responsible for
preparing the income tax returns for the Corporation for such
Policy Year.
10. Policy Year. For purposes of this Agreement, the term
"Policy Year" shall mean, as the context requires, the twelve
month period beginning July 1st and ending
June 30th in which this Agreement is signed or any succeeding
twelve month period in which this Agreement is in force. Each
Policy Year shall begin on July 1st and end on June 30th of each
calendar year. The first such twelve month period in which this
Agreement is signed shall be the first Policy Year (or,
alternatively, Policy Year 1) and each such succeeding twelve
month period will be the succeeding Policy Year.
11. Insurer Not a Party. The Insurer shall be fully
discharged from its obligations under the Policy by payment of
the 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
13
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 Executive and filed with
the Insurer in connection herewith.
12. 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.
13. Binding Effect. This Agreement (and all rights,
options, privileges and obligations hereby created and/or
imposed) shall be binding upon and inure to the benefit of the
Corporation and its successors and assigns, and the Executive and
the Executive's successors, assigns, heirs, executors,
administrators and beneficiaries. More specifically, if the
Executive shall assign any or all of the Executive's interests in
the Policy and under this Agreement to another person ("Third
Party Owner"), then all of such rights, options, privileges and
obligations in the Policy and under this Agreement which would
otherwise inure to the benefit of or be imposed upon the
Executive shall instead inure to the benefit of or be imposed
upon the Third Party Owner.
14. 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. If such notice, consent or demand is mailed to
a party hereto, it shall be sent by United States certified mail,
postage prepaid, 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.
15. Governing Law. This Agreement, and the rights of the
parties hereunder, shall be governed by and construed in
accordance with the law of the State of Illinois.
14
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, in duplicate, as of the day and year first above
written.
AMERITECH
By:____________________________
Its authorized officer
"Corporation"
ATTEST:
_______________________________
Secretary
Signature:_____________________
Name:_______________________
"Executive"
