ENDORSEMENT SPLIT-DOLLAR INSURANCE AGREEMENT
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THIS AGREEMENT is made as of this 25th day of November, 1997, by and
between MICROAGE, INC., a Delaware corporation (hereinafter referred to as
"Corporation") and XXXXXXX X. XxXXXXXX (hereinafter referred to as "Insured").
WHEREAS, Corporation plans to acquire insurance on the Insured's life
under a policy issued by Northwestern Mutual Life Insurance Company (hereinafter
referred to as "Insurer"); and
WHEREAS, Corporation wants to assist Insured by paying all premiums due
on the policy; and
WHEREAS, Corporation will be the owner of the insurance policy and as
such, will possess all incidents of ownership in and to the policy;
The parties, therefore, in consideration of the mutual promises
contained herein, hereby agree as follows:
ARTICLE I
A. The Corporation plans to acquire from the Insurer a policy on the
life of the Insured in the face amount of $2,444,336.00 (hereinafter referred to
as the "Policy"). The policy number, face amount and plan of insurance will be
recorded on Schedule A attached to this Agreement and the Policy will then be
subject to the terms of this Agreement. The Corporation shall be the sole and
absolute owner of the Policy, and may exercise all ownership rights granted to
the owner thereof by the terms of the Policy, except as provided herein.
B. The Insured may select the settlement option for payment of the
death benefit provided under the Policy and the beneficiary or beneficiaries to
receive the portion of policy proceeds to which the Insured is entitled
hereunder, by specifying the same in a written notice to the Corporation. Upon
receipt of such notice, the Corporation shall execute and deliver to the Insurer
the forms necessary to elect the requested settlement option and to designate
the requested person, persons or entity as the beneficiary or beneficiaries to
receive the death proceeds of the Policy in excess of the amount to which the
Corporation is entitled hereunder. The parties hereto agree to take all action
necessary to cause the beneficiary designation and settlement election
provisions of the Policy to confirm to the provisions hereof. The Corporation
shall not terminate, alter or amend such designation or election without the
express written consent of the Insured.
ARTICLE II
All premiums due on the Policy which shall be FORTY-FOUR THOUSAND
DOLLARS ($44,000.00) per year, shall be paid by Corporation until the first to
occur of (i) the death of the Insured, or (ii) Insured's termination of
employment with Corporation. The Corporation shall annually furnish the Insured
a Statement of the amount of income reportable by the Insured for federal and
state income tax purposes.
ARTICLE III
A. Any dividend declared on the Policy shall be applied, under the
fifth dividend option, to purchase one (1) year term insurance on the life of
the Insured, in an amount equal to the cash value of the Policy (as defined
therein), as of the next anniversary date thereof. If the premium for such term
insurance is less than the amount of such dividend, then the balance of such
dividend shall be used to reduce the premiums payable on the Policy. If such
dividend is not adequate to purchase
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the required amount of one (1) year term insurance on the life of the Insured,
then the entire dividend shall be applied to purchase such term insurance on the
life of the Insured. The parties hereto agree that the dividend election
provisions of the Policy shall conform to the provisions hereof.
B. Contemporaneously with the execution of this Agreement, the
Corporation has executed a beneficiary designation for and/or an endorsement to
the Policy, under the form used by the Insurer for such designations, in order
to secure the Corporation's recovery of the amount of the premiums on the Policy
paid by the Corporation hereunder. Such beneficiary designation or endorsement
shall not be terminated, altered or amended by the Corporation, without the
express written consent of the Insured. The parties hereto agree to take all
action necessary to cause such beneficiary designation or endorsement to conform
to the provisions of this Agreement.
C. Except as otherwise provided herein, the Corporation shall not sell,
assign, transfer, surrender or cancel the Policy, change the beneficiary
designation provision thereof, nor terminate the dividend election thereof
without, in any such case, the express written consent of the Insured.
D. The Corporation may pledge or assign the Policy, subject to the
terms and conditions of this Agreement, for the sole purpose of securing a loan
from the Insurer or from a third party. The amount of such loan, including
accumulated interest thereon, shall not exceed the lesser of (i) the amount of
the premiums on the Policy paid by the Corporation hereunder, or (ii) the cash
surrender value of the Policy (as defined therein) as of the date to which
premiums have been paid. Interest charges on such loan shall be paid by the
Corporation. If the Corporation so encumbers the Policy, other than by a policy
loan from the Insurer, then, upon the death of the Insured or upon the election
of the Insured hereunder to purchase the Policy from the Corporation, the
Corporation shall promptly take all action necessary to secure the release or
discharge of such encumbrance.
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ARTICLE IV
In the event of the death of Insured, the proceeds of the Policy shall
be divided into two parts and paid by Insurer as follows:
Part A - Upon the death of the Insured, the Corporation shall have the
unqualified right to receive a portion of such death benefit
equal to the total amount of premiums paid, the then cash
surrender value of the Policy, or the amount by which the
death benefit exceeds $2,000,000, whichever is greater,
reduced by any indebtedness against the Policy existing at the
death of the Insured (including any interest due on such
indebtedness). In no event shall the amount payable to the
Corporation hereunder exceed the Policy proceeds payable at
the death of the Insured. No amount shall be paid from such
death benefit to the beneficiary or beneficiaries designated
by the Corporation at the direction of the Insured, until the
full amount due the Corporation hereunder has been paid. The
parties hereto agree that the beneficiary designation
provision of the Policy shall conform to the provisions
hereof.
Part B - The balance of the death benefit shall be paid to the
beneficiary designated by the Insured.
ARTICLE V
A. This Agreement shall terminate, during the Insured's lifetime,
without notice, upon the occurrence of any of the following events: (a) total
cessation of the Corporation's business; (b)
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bankruptcy, receivership or dissolution of the Corporation or (c) termination of
Insured's employment by the Corporation (other than by reason of his death).
ARTICLE VI
A. For sixty (60) days after the date of the termination of this
Agreement during the Insured's lifetime, the Insured shall have the assignable
option to purchase the Policy from the Corporation. The purchase price for the
Policy shall be the greater of the total amount of the premium payments made by
the Corporation hereunder or the then cash surrender value of the Policy, less
any indebtedness secured by the Policy which remains outstanding as of the date
of such termination, including interest on such indebtedness. Upon receipt of
such amount, the Corporation shall transfer all of its right, title and interest
in and to the Policy to the Insured or his assignee, by the execution and
delivery of an appropriate instrument of transfer.
B. If the Insured or his assignee fails to exercise such option within
such sixty (60) day period, then the Corporation may enforce its right to be
repaid for the premiums which it paid hereunder by surrendering or canceling the
Policy for its cash surrender value, or it may change the beneficiary
designation provisions of the Policy, naming itself or any other person or
entity as revocable beneficiary thereof, or exercise any other ownership rights
in and to the Policy, without regard to the provisions hereof. Thereafter,
neither the Insured, his assignee nor their heirs, assigns or beneficiaries
shall have any further interest in and to the Policy, either under the terms
thereof or under this Agreement.
ARTICLE VII
Insurer is not a party to this Agreement and the obligations of Insurer
are those set forth in the Policy.
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ARTICLE VIII
This Agreement shall be binding upon the parties hereto, their heirs,
legal representatives, successors and assigns.
ARTICLE IX
This Agreement may be altered, amended or modified only by written
instrument signed by Corporation and the Insured.
ARTICLE X
This Agreement shall be construed according to the laws of the State of
Arizona.
ARTICLE XI
Insured may add a rider to the Policy for the benefit of his
beneficiaries. Upon written request by Corporation, Insured will add a rider to
the Policy for the benefit of Corporation. The additional premium for any rider
which is added to the Policy will be paid by the party entitled to received the
proceeds of the rider.
ARTICLE XXI
A. The party designated as the "named fiduciary" for the Split-Dollar
Plan established by this Agreement shall have the authority to control and
manage the operation and administration of such plan; provided however, the
Insurer shall be the fiduciary of the plan solely with regard to the review and
final decision on a claim or benefits under its Policy as provided in Article
XIII Claims Procedure, set forth below.
B. The Fiduciary may allocate his responsibilities or the operation and
administration of the Split-Dollar Plan, including the designation of persons to
carry out fiduciary responsibilities under any such plan. He shall erect such
allocation of his responsibilities by delivering to the
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Corporation a written instrument signed by him that specifies the nature and
extent of the responsibilities allocated, including, the persons who are
designated to carry out these fiduciary responsibilities under the Split-Dollar
Plan, together with a signed acknowledgment of their acceptance.
ARTICLE XIII
The following claims procedure shall apply to the Split-Dollar Plan:
A. The beneficiary of such Policy shall make a claim for the benefits
provided under the Policy in the manner provided in the Policy.
B. With respect to a claim for benefits under said Policy, the Insurer
shall be the entity which reviews and makes decisions on claim denials.
C. If a claim is wholly or partially denied, notice of the decision,
meeting the requirements of paragraph D below, shall be furnished to the
claimant within a reasonable period of time after the claim has been filed.
D. The Insurer shall provide to any claimant who is denied a claim for
benefits, written notice setting forth in a manner calculated to be understood
by the claimant, the following:
1. The specific reasons for the denial;
2. Specific reference to the pertinent Policy or plan
provisions on which the denial is based;
3. A description of any additional material or
information necessary for the claimant to perfect the
claim and an explanation of why such material or
information is necessary;
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4. An explanation of the plan's claim review procedure,
as set forth in paragraph E and F below.
E. The purpose of the review procedure set forth in this paragraph and
in paragraph F below, is to provide a procedure by which a claimant under the
Split-Dollar Plan may have a reasonable opportunity to appeal a denial of a
claim for a full and fair review. To accomplish that purpose, the claimant or
his duly authorized representative:
1. May request a review upon written application to the
Insurer;
2. May review pertinent plan documents or agreements;
and
3. May submit issues and comments in writing.
A claimant (or his duly authorized representative)
shall request a review by filing a written
application for review at any time within sixty (60)
days after receipt by the claimant of written notice
of the denial of his claim.
F. A decision on review of a denial of a claim shall be made in the
following manner:
1. The decision on review shall be made by the Insurer,
which may in its discretion hold a hearing on the
denied claim. The Insurer shall make its decision
promptly, unless special circumstances (such as the
need to hold a hearing) require an extension of time
for processing, in which case a decision shall be
rendered as soon as possible, but not later than one
hundred twenty (120) days after receipt of the
request for review.
2. The decision on review shall be in writing and shall
include specific reasons for the decisions, written
in a manner calculated to be understood by the
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claimant, and specific references to the pertinent
Policy or plan provision on which the decision is
based.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
MICROAGE, INC., a Delaware Corporation
By /s/ Xxxxxxx X. XxXxxxxx
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Its
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By /s/ Xxxxxxx X. XxXxxxxx
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XXXXXXX X. XxXXXXXX
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SCHEDULE A
Face Amount $2,444,336
Policy Number 14431834
Plan of Insurance The Northwestern Mutual Life
Insurance Company
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ENDORSEMENT FORM
Appin. No., Contract No. Date this form is signed:
or Policy No.: 14431834 November 25, 1997
Insured: XXXXXXX X. XxXXXXXX
Insurance Company: The Northwestern Mutual Life Insurance Company
The undersigned request and direct the Insurance Company to make the provisions
of this form a part of the policy.
All previous designations of payees are hereby revoked. It is hereby requested
and directed that:
BENEFICIARIES
(1) In the event of the death of the Insured, MicroAge, Inc., a Delaware
corporation, or its successors ("Corporation"), will be the direct beneficiary
of an amount equal to the greater of (i) the premiums paid to the Insurance
Company by Corporation for the Policy, (ii) the cash surrender value of the
Policies, or (iii) the amount by which the death benefit exceeds $2,000,000,
reduced by any indebtedness against the Policy existing at the death of the
Insured (including any interest due on such indebtedness).
In the event of Corporation's cessation of business, bankruptcy,
receivership or dissolution, Corporation will be the direct beneficiary of an
amount equal to the greater of (i) the premiums paid to the Insurance Company by
Corporation for the Policy or (ii) the then cash surrender value of the Policy,
less any indebtedness secured by the Policy which remains outstanding as of such
date (including interest due on such indebtedness).
It is understood and agreed that the Insurance Company will have the right to
rely on any statement signed by said Corporation setting forth said
Corporation's share of the premium payments referred to above, and any decision
made by Insurance Company in reliance upon such statement will be conclusive and
will fully protect the Insurance Company.
(2) Xxxxxxx X. XxXxxxxx Revocable Trust (Name of spouse or primary beneficiary)
if living and married to the Insured on (his/her) date of death will be the
direct beneficiary of any remaining proceeds, and if (he/she) is either not
married to Insured or living on Insured's date of death, ______________________
_____________________ (Name of children or secondary beneficiaries) will share
equally or by right of representation of any remaining proceeds.
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The Insurance Company will be fully discharged of liability for any action taken
by the Insured and for all amounts paid to, or at the direction of, the Insured
and will have no obligation as to the use of the amounts. In all dealings with
the Insured, the Insurance Company will be fully protected against the claims of
every other person. The Insurance Company will not be charged with notice of a
change of beneficiary unless written evidence of the change is received at the
Insurance Company's Home Office.
OWNERSHIP
(3) The owner of the Policy shall be the Corporation. The Corporation alone may
exercise all the rights and privileges specified in the Policy.
MODIFICATION OF ASSIGNMENT PROVISIONS
Upon death of the Insured, the interest of any collateral assignee of
Corporation will be limited to the portion of the proceeds described in (1)
above.
MICROAGE, INC., a Delaware corporation
By /s/ Xxxxxxx X. XxXxxxxx
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Officer
/s/ Xxxxxxx X. XxXxxxxx
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XXXXXXX X. XxXXXXXX
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