Exhibit 10.5
EXHIBIT 1
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INDIVIDUAL EXECUTIVE BENEFIT AGREEMENT
THIS Individual Executive Benefit Agreement (BENEFIT AGREEMENT),
effective as of January 1, 1987, is hereby established as a replacement to the
SUPPLEMENTAL BENEFITS AGREEMENT (AGREEMENT) executed on December 24, 1981, by
XXXXXXX MARITIME CORPORATION (CMC), a corporation organized under the laws of
Delaware having its principal office at San Francisco, California, and XXXXX X.
XXXXXX (EMPLOYEE).
RECITALS
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EMPLOYEE has rendered valuable services to CMC, and CMC desires to
continue to receive his services. As an inducement for EMPLOYEE to remain
employed with CMC, CMC and EMPLOYEE previously have executed the AGREEMENT to
supplement the benefits accruing to EMPLOYEE under the CMC Retirement Plan for
Salaried Employees (CMC Plan). The CMC Plan was terminated effective December
31, 1986. Benefits under the AGREEMENT ceased to accrue, under the terms of the
AGREEMENT, as of December 31, 1986, with the cessation of accruals under the CMC
Plan. EMPLOYEE and CMC have agreed, effective as of January 1, 1987, to cancel
the AGREEMENT and all rights and obligations of either party thereunder, and
have established this BENEFIT AGREEMENT in its place. CMC has applied as the
owner for a permanent insurance policy
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("Policy") on EMPLOYEE'S life, which is described in Exhibit A attached hereto
and by this reference made a part hereof, and which will be issued to CMC by
Mutual Benefit Life Insurance Company (hereinafter referred to as the
"Insurer").
1. CMC will, beginning in the 1987 policy year, as the term "policy year"
is defined in the Policy, pay the premiums due on the Policy in an amount
sufficient to fund a policy which will provide the benefits described in
paragraphs 3 and 7 below during each policy year while EMPLOYEE is alive. CMC
shall be the owner of the Policy, and may exercise all ownership rights granted
to the owner thereof by the terms of the Policy, except as otherwise provided
herein.
2. EMPLOYEE will own each policy year while the Policy remains in force the
portion of the cash value of the Policy equal to the annual benefit for such
policy year described in paragraph 7 below, and in addition the total cash
values owned by EMPLOYEE in prior policy years in which EMPLOYEE has exercised
his right to borrow under paragraph 4 below. CMC will own the remaining cash
value of the Policy.
3. At the death of EMPLOYEE, the portion of the proceeds equal to the sum
of (1) EMPLOYEE's actual indebtedness against the Policy, and (2) for any policy
year in which EMPLOYEE is entitled to borrow against the Policy under paragraph
4 below and does not borrow any amount from
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the Policy, the indebtedness that EMPLOYEE would have had against the Policy had
EMPLOYEE borrowed the full amount allowable under paragraph 4 below in such
year, on the first day permissible and at the interest rate then applicable
under the Policy, and assuming that interest accrues but is not paid on any such
loan (hereinafter collectively "TOTAL INDEBTEDNESS"), subject to offset for
EMPLOYEE's actual indebtedness, shall be paid to EMPLOYEE's estate, or if
EMPLOYEE elects to designate a beneficiary of the proceeds of the Policy, to
such policy beneficiary. The balance of the proceeds shall be paid to CMC.
4. Beginning in the policy year in which EMPLOYEE terminates employment
with CMC, EMPLOYEE will have the right to borrow against the cash value of the
Policy each policy year an amount equal to the annual benefit for such year
described in paragraph 7 below. If no such loan is made for any policy year,
EMPLOYEE will forfeit his right to borrow the annual benefit for such year.
EMPLOYEE may exercise his right to borrow each policy year on or after the 1st
day of November.
5. Upon EMPLOYEE'S death, CMC agrees to pay EMPLOYEE'S beneficiary, as
designated on the form attached hereto as Exhibit B (BENEFICIARY), annual
benefit amounts as described in paragraph 7 below for life should BENEFICIARY
survive EMPLOYEE. The annual survivor benefit will be payable to BENEFICIARY in
the policy year of EMPLOYEE's
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death only if EMPLOYEE has not received an annual benefit under this BENEFIT
AGREEMENT for such year.
6. CMC shall have no right to borrow against the cash value of the
Policy.
7. The annual benefit to EMPLOYEE or to BENEFICIARY for each policy
year shall be the benefit which would have been payable to EMPLOYEE, or to
EMPLOYEE'S surviving beneficiary after EMPLOYEE'S death, under the terminated
AGREEMENT, calculated according to the following terms:
(a) Benefits under the AGREEMENT ceased to accrue as of December 31,
1986;
(b) EMPLOYEE has chosen to receive benefits payable under the AGREEMENT
in the form of a 100% joint and survivor annuity with EMPLOYEE's
BENEFICIARY under the beneficiary designation in force on the date this
BENEFIT AGREEMENT is executed as joint annuitant;
(c) Annual benefits have been calculated as if EMPLOYEE had retired
under the CMC Plan at age 65, and annual benefits under the BENEFIT
AGREEMENT begin in the policy year in which EMPLOYEE terminates
employment with CMC;
(d) Benefit amounts have been reduced to reflect net after-tax value of
payments to EMPLOYEE,
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assuming a combined federal and state tax rate of 30%;
(e) Annual benefit amounts will not be recalculated if EMPLOYEE changes
his beneficiary designation. Notwithstanding paragraph 5, if EMPLOYEE
changes his beneficiary designation, survivor benefits will be paid to
the new beneficiary for the lesser of the new beneficiary's lifetime or
fifteen (15) years; and
(f) The annual benefit amount payable to EMPLOYEE in the policy year in
which EMPLOYEE terminates employment shall be prorated to reflect the
actual number of days of termination status in such policy year
according to the following formula:
(365 minus the number of days elapsed in current policy year as of
termination date)
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365
times (annual benefit amount) equals EMPLOYEE's benefit amount for the
policy year of EMPLOYEE's termination.
(g) If EMPLOYEE dies prior to receiving his first annual benefit
payment under this BENEFIT AGREEMENT, then the annual benefit amount
payable to BENEFICIARY in the policy year in which EMPLOYEE dies shall
be prorated to reflect the number of days remaining in the policy year
as of the date of death according to the following formula:
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(365 minus the number of days elapsed in current
policy year as of date of death)
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365
times (annual benefit amount) equals BENEFICIARY's benefit
amount for the policy year of EMPLOYEE's death.
Annual benefit amounts calculated under the terms set forth above are listed on
the Schedule of Benefits attached hereto as Exhibit C, and EMPLOYEE hereby
agrees on behalf of himself and BENEFICIARY that such schedule is complete and
accurate.
8. To secure the payment to EMPLOYEE of his ownership interest in the
Policy, CMC will assign the Policy to EMPLOYEE as collateral, under the form
used by the Insurer for such assignments, which collateral assignment will
specifically limit the rights of EMPLOYEE thereunder to the ownership rights of
EMPLOYEE as set forth in this BENEFIT AGREEMENT, and which will be attached
hereto as Exhibit D. In no event shall CMC have any right, prior to termination
of this BENEFIT AGREEMENT or mutual agreement by CMC and EMPLOYEE to surrender
or cancel the Policy, to borrow against the Policy or to withdraw funds from the
cash value of the Policy. The collateral assignment of the Policy to EMPLOYEE
hereunder shall not be terminated, altered or amended by CMC while this BENEFIT
AGREEMENT remains in force, without the express written consent of
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EMPLOYEE. The parties hereto agree to take all action necessary to cause such
collateral assignment to conform to the provisions of this BENEFIT AGREEMENT.
9. CMC and EMPLOYEE shall take any action which may be necessary to
cause the Policy to conform to the provisions of this BENEFIT 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.
10. CMC shall neither have nor exercise any right as owner of the
Policy which could in any way defeat or impair EMPLOYEE's right to borrow
against the cash surrender values of the Policy to the extent provided in this
BENEFIT AGREEMENT. All provisions of this BENEFIT AGREEMENT and of the
collateral assignment referred to in paragraphs 8 and 9 above shall be construed
so as to carry out such intention.
11. (a) EMPLOYEE shall take no action with respect to the Policy which
would in any way compromise or jeopardize CMC's ownership rights in the Policy,
without the express written consent of CMC.
(b) EMPLOYEE may pledge or assign the Policy, subject to the terms
and conditions of this BENEFIT AGREEMENT, in order to secure a loan from the
Insurer, in an amount which shall not exceed the benefit described in paragraph
7 of this BENEFIT AGREEMENT for the policy year in which such loan is made.
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(c) So long as this BENEFIT AGREEMENT remains in force, neither
EMPLOYEE nor CMC shall have the right to surrender or cancel the Policy without
the consent of the other party to this BENEFIT AGREEMENT. Upon the surrender or
cancellation of the Policy, either by such mutual agreement or pursuant to the
termination provisions set forth below in paragraphs 12 and 13 hereof, EMPLOYEE
shall have the unqualified right to receive a portion of the net cash surrender
value equal to the annual benefit described in paragraph 7 of this BENEFIT
AGREEMENT for the policy year of cancellation or surrender if EMPLOYEE has not
already made a policy loan for such benefit in such policy year. The balance of
the cash surrender value of the Policy, if any, shall be paid by the Insurer to
CMC. In no event shall the amount payable to EMPLOYEE exceed the cash surrender
value of the Policy.
12. (a) CMC and EMPLOYEE may terminate this BENEFIT AGREEMENT at any
time by mutual written agreement.
(b) In the event this BENEFIT AGREEMENT is terminated for any
reason, neither EMPLOYEE nor BENEFICIARY shall have any further rights under the
Policy or under this BENEFIT AGREEMENT, except the right to receive the
applicable annual benefit for the policy year of termination as described in
paragraph 11(c) above.
13. (a) For sixty (60) days after the date of the termination of this
BENEFIT AGREEMENT, EMPLOYEE shall have
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the option to purchase CMC's interest in the Policy. To purchase such interest,
EMPLOYEE shall pay to CMC an amount equal to the portion of the cash value of
the Policy owned by CMC as specified in paragraph 2 above. Upon receipt of such
amount, CMC shall execute any document or documents required by the Insurer to
transfer the interest of CMC in the Policy to EMPLOYEE, after which CMC shall
have no further interest in and rights under the Policy, either under the terms
thereof or under this BENEFIT AGREEMENT.
(b) If EMPLOYEE fails to exercise such option within such sixty
(60) day period, then at the request of CMC, EMPLOYEE shall release the
collateral assignment of the Policy, by the execution and delivery of an
appropriate instrument of release, and in exchange for such release, CMC shall
assume EMPLOYEE's actual indebtedness against the Policy and shall own the
entire Policy. Alternately, CMC in its sole discretion may surrender the Policy
to the Insurer, in which case EMPLOYEE shall receive a portion of the net cash
surrender value as provided in paragraph 11(c) above, and in addition shall
receive the portion of the cash surrender value equal to EMPLOYEE's actual
indebtedness against the Policy. CMC shall receive the balance of the net cash
surrender value of the Policy.
14. In no event shall the Insurer be considered a party to this BENEFIT
AGREEMENT, or any modification or amendment hereof. No provisions of this
BENEFIT AGREEMENT,
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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 CMC and filed with the Insurer in connection herewith.
15. In the event of the bankruptcy, receivership, or dissolution of the
Insurer, CMC shall fulfill its obligations under this BENEFIT AGREEMENT either
by making the payments that would have been required from that time forward
under the AGREEMENT or by purchasing a policy providing the benefits set forth
in this BENEFIT AGREEMENT from another insurer.
16. The interpretation, performance, and enforcement of this BENEFIT
AGREEMENT shall be governed by the laws of the State of California.
17. This BENEFIT AGREEMENT shall not be construed to require the
establishment of a trust during the EMPLOYEE'S life or after his death. CMC, in
its sole discretion, may make such arrangements as it desires to provide for the
payment of survivor benefits hereunder, and neither EMPLOYEE nor his BENEFICIARY
shall have any claim against a particular fund or asset owned by CMC or in which
it has an interest to secure the payment of CMC's obligation hereunder,
including the Policy, other than the interest of
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EMPLOYEE in the cash value of the Policy as defined in paragraph 7 hereof which
arises each year pursuant to paragraph 4 hereof and the interest of EMPLOYEE's
estate or beneficiary in the proceeds of the Policy pursuant to paragraph 3
hereof. Except as otherwise provided herein, the benefits provided by this
BENEFIT AGREEMENT shall be nonassignable.
18. Premium payments shall be applied first to the cost of the death
benefit net of the TOTAL INDEBTEDNESS, as measured by the PS 58 table of
insurance costs. Additional premiums, if any, shall be treated as paid by
EMPLOYEE.
19. The intention of the parties is that the after-tax benefits
provided by this BENEFIT AGREEMENT to EMPLOYEE and BENEFICIARY be the same as
the after-tax benefits which would have been provided by the AGREEMENT, and CMC
shall make a cash payment to EMPLOYEE or BENEFICIARY in any year in which this
BENEFIT AGREEMENT remains in force in whatever amount is necessary to provide
such equivalent after-tax benefits. In no event shall the preceding sentence be
interpreted to require a reduction in the amount of EMPLOYEE or BENEFICIARY's
annual benefit as set forth in EXHIBIT C or a payment by the EMPLOYEE or
BENEFICIARY to CMC. In addition to the cash payment described above, CMC shall
reimburse EMPLOYEE or BENEFICIARY for reasonable costs (including attorneys and
accountants' fees) incurred in
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determining amounts due under this paragraph 19 and in implementing this BENEFIT
AGREEMENT.
20. This BENEFIT AGREEMENT and any provision hereof may not be changed,
waived, discharged or terminated except by an instrument in writing signed by
the party against whom enforcement of the change, waiver, discharge or
termination is sought.
21. This BENEFIT AGREEMENT contains the entire understanding between
the parties hereto and supersedes any prior written or oral agreements between
them with respect to the subject matter contained herein. There are no
representations, agreements, arrangements, or understandings, oral or written,
between the parties relating to the subject matter of this BENEFIT AGREEMENT
which are not fully expressed herein.
IN WITNESS WHEREOF, the parties hereto have executed this BENEFIT
AGREEMENT this 17th day of February, 1988, at San Francisco, California.
XXXXXXX MARITIME CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
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/s/ Xxxxx X. Xxxxxx
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XXXXX X. XXXXXX
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EXHIBIT A
The following life insurance policy is subject to the foregoing
Individual Executive Benefit Agreement:
Insurer MUTUAL BENEFIT LIFE INSURANCE COMPANY
Insured XXXXX X. XXXXXX
Owner XXXXXXX MARITIME CORPORATION
Policy Number AL 401,254
Face Amount $2,500,000
Date of Issue 12/8/1987
EXHIBIT B
BENEFICIARY DESIGNATION FORM
Pursuant to paragraph 5 of the Individual Executive Benefit Agreement,
I hereby designate /s/ Xxxxxxxxx X. Xxxxxx
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as my beneficiary under the BENEFIT AGREEMENT. I understand that the amount of
my annual benefit, which is $143,617.91, and my beneficiary's annual survivor
benefit, which is $205,168.44, have been calculated based upon the age and sex
of my beneficiary designated pursuant to this form on the date the BENEFIT
AGREEMENT is executed, and that if I change my beneficiary designation in the
future, my annual benefit amount and my new beneficiary's annual survivor
benefit amount will not be recalculated.
February 17, 1988 /s/ Xxxxx X. Xxxxxx
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Date XXXXX X. XXXXXX
EXHIBIT C
SCHEDULE OF BENEFITS
EMPLOYEE: XXXXX X. XXXXXX
BENEFICIARY: XXXXXXXXX X. XXXXXX
Policy Year benefits begin: Year of termination of employment with CMC
Annual lifetime benefit to EMPLOYEE: $143,617.91
Annual benefit to surviving beneficiary after EMPLOYEE'S death: $205,168.44
EXHIBIT D
ASSIGNMENT OF LIFE INSURANCE POLICY AS COLLATERAL
A. For Value Received the undersigned hereby assigns, transfers
and sets over to XXXXX X. XXXXXX, his heirs and assigns, (herein called the
"Assignee") Policy No. AL 401,254 issued by the Mutual Benefit Life Insurance
Company (herein called the "Insurer") and any supplementary contracts issued in
connection therewith (said policy and contracts being herein called the
"Policy"), upon the life of XXXXX X. XXXXXX of Alamo, California, and all
claims, options, privileges, rights, title and interest therein and thereunder
(except as provided in Paragraph B hereof), subject to all the terms and
conditions of the Policy and to all superior liens, if any, which the Insurer
may have against the Policy. The undersigned by this instrument agrees and the
Assignee by the acceptance of this assignment agrees to the conditions and
provisions herein set forth.
B. This Assignment shall be subject to the provisions of the
Individual Executive Benefit Agreement governing the Policy as executed on
February 17, 1988.
C. It is expressly agreed that the right to designate and change
the beneficiary is reserved and does not pass by virtue hereof.
D. This Assignment is made and the Policy is to be held as
collateral security for any and all liabilities of the undersigned, or any of
them, to Assignee, either now existing or that may hereafter arise out of the
Individual Executive Benefit Agreement between the undersigned and the Assignee.
Signed and sealed this 17th day of February, 1988.
XXXXXXX MARITIME CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
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[ACKNOWLEDGEMENT]
STATE OF CALIFORNIA )
) SS.
COUNTY OF San Francisco )
On the 17th day of February, 1988, before me personally came Xxxxxx
X. Xxxxxxx, to me known to be the individual described in and who executed the
assignment on the reverse side hereof and acknowledged to me that he executed
the same.
/s/ Xxxxx X. Xxxxxx
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Notary Public
My commission expires November 22, 1990
[NOTARY SEAL FOR XXXXX X. XXXXXX]
* * * * * *
Accepted this 17th day of February, 1988.
By: /s/ Xxxxx X. Xxxxxx
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XXXXX X. XXXXXX
[ACKNOWLEDGEMENT]
STATE OF CALIFORNIA )
) ss.
COUNTY OF San Francisco )
On the 17th day of February, 1988, before me personally came XXXXX X.
XXXXXX, to me known to be the individual described in and who executed the
acceptance above and acknowledged to me that he executed the same.
/s/ Xxxxx X. Xxxxxx
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Notary Public
My commission expires November 22, 1990
[NOTARY SEAL FOR XXXXX X. XXXXXX]
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AGREEMENT TO TERMINATE
SUPPLEMENTAL BENEFITS AGREEMENT
XXXXX X. XXXXXX (EMPLOYEE) and XXXXXXX MARITIME CORPORATION (CMC), a
corporation organized under the laws of Delaware and having its principal office
at San Francisco, California, having previously entered into a SUPPLEMENTAL
BENEFITS AGREEMENT (AGREEMENT) executed on December 24, 1981, hereby agree to
cancel that AGREEMENT and all rights and obligations of either party thereunder
effective as of January 1, 1987. EMPLOYEE hereby agrees to release CMC, on
behalf of himself and his beneficiaries under the AGREEMENT ("Beneficiaries"),
from all obligations to pay benefits to EMPLOYEE and/or his Beneficiaries under
the AGREEMENT, as consideration for CMC's execution of the Individual Executive
Benefit Agreement attached hereto as Exhibit 1.
Executed this 17th day of February, 1988, at San Francisco, California.
XXXXXXX MARITIME CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
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/s/ Xxxxx X. Xxxxxx
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XXXXX X. XXXXXX
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