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EXHIBIT 10(q)
SPLIT DOLLAR INSURANCE AGREEMENT
THIS SPLIT DOLLAR INSURANCE AGREEMENT (the "Agreement") is entered
into effective the ___ day of January, 1997, by Xxxxx Supermarkets, Inc., an
Indiana corporation (the "Company") and American National Trust and Investment
Management Company, Trustee of the Xxx X. Xxxxx 1983 Irrevocable Trust for
Xxxxxxx Xxxx Xxxxx dated March 9, 1983 ("Owner").
Recitals
A. The Owner has acquired a policy of life insurance in the face
amount of Two Million Five Hundred Thousand Dollars ($2,500,000) (the
"Policy"), issued by Massachusetts Mutual Life Insurance Company (the
"Insurer"), insuring the life of Xxx X. Xxxxx, an employee of the Company (the
"Insured"), which Policy is described in Exhibit A attached hereto and make a
part hereof.
B. The Owner is the Trustee of an irrevocable trust for the benefit
of certain family members of the Insured. The Owner desires to maintain life
insurance on the life of the Insured for the beneficiaries of such trust and
desires that such life insurance have an equity or cash value feature. The
Owner is willing to pay life insurance premiums equal to the annual cost of
current life insurance protection on the life of the Insured as measured by the
lower of the PS-58 rate, set forth in the then applicable Internal Revenue
Service Revenue Ruling, or the Insurer's current published premium rate of
annually renewable term insurance for standard risks. The Company, in the
interests of the Insured as a valuable employee of the Company and his family,
and as an investment of Company assets, desires to pay the balance of the
annual premium due. The only interest of the Company with respect to the
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Policy is the payment due to the Company by reason of its advances of the
premiums due with respect to the Policy as hereinafter described.
C. The Owner is the owner of the Policy and possesses all incidents
of ownership in and to the Policy.
D. In order to secure the recovery of the advances by the Company
with respect to the Policy ("Company Advances") in the event of the termination
of this Agreement, the Company wishes to have a limited collateral assignment
of death benefits payable to the Owner under the policy and cash values
accumulated in favor of the Owner under the policy.
E. The parties intend that by such collateral assignment the Company
shall have only the right to receive recovery of the Company Advances under
this Agreement, with the Owner retaining all other ownership rights in the
Policy, as specified in this Agreement.
Agreement
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Ownership. The Owner shall be the sole and absolute owner of the
Policy and shall have the exclusive right to exercise all ownership rights
granted by the terms of the Policy, including, but not .limited to, the rights
to designate beneficiaries, select settlement and dividend options, borrow on
the security of the Policy and to surrender or cancel the Policy. All such
rights may be exercised by the Owner without the Company's consent. With
respect to the exercise of the right to borrow on the security of the Policy,
the Owner agrees that the
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Owner will not borrow on the security of the Policy in any manner so as to
impair the security of the Company under any collateral assignment executed in
favor of the Company pursuant to the terms of this Agreement to secure the
recovery of the Company Advances under the applicable provisions of this
Agreement. If requested by the Company, the Owner will produce information
verified by the Insurer showing the amount of indebtedness on the Policy at the
time of such request.
2. Owner's Premium Payment Obligation. Under the terms of this
Agreement the Owner shall pay that amount of the premiums due on the Policy
equal to the annual cost of current life insurance protection on the life of
the Insured as measured by the lower of the PS-58 Rate, as set forth in the
then applicable Internal Revenue Service Revenue Ruling, or the Insurer's
current published premium rate of annually renewable term insurance for
standard risks. In addition to the foregoing payments, the Owner may elect to
pay additional Policy premium amounts by policy loan or other borrowing. Upon
making such election, the Owner shall deliver notice of such election to the
Company on or before the Policy premium due date.
3. Company's Payment Premiums as Investments. The Company for its
own account and as an investment of general Company assets shall pay all Policy
premium amounts not paid by the Owner pursuant to paragraph 2 of this
Agreement. Such payments shall be referred to as the "Company Advances". The
Company shall pay all such amounts of the Policy premiums not paid by the Owner
until the death of the Insured, by reason of the valuable services of the
Insured as an employee of the Company.
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4. Manner of Payment. On or before the due date of each Policy
premium, or within the grace period provided therein, the Company shall notify
the Owner of the exact amount due from the Owner. The Owner shall pay its
required amount to the Insurer prior to the premium due date, or within the
grace period provided therein. The Company shall then be responsible to pay
the balance of the premium to the Insurer and shall promptly furnish the Owner
with evidence of timely payment. If the Owner fails to make its required
payment, the Company, in its sole discretion, may elect to pay the Owner's
portion of the premium payment and shall be entitled to recover such payment in
accordance with the provisions of this Agreement.
5. Dividends. Dividends on the Policy shall be applied as elected by
the Owner.
6. Payment of Company Death Benefit or Termination Amount.
(a) Death of lnsured. Upon the death of the Insured, the Company
shall be entitled to payment by the Insurer from the death benefit payable
under the Policy an amount which shall be equal to the lesser of the cash
surrender value of the Policy immediately prior to the Insured's death or
the Company Advances ("Company Death Benefit"). The Company and the Owner
shall take all action necessary under the terms of the Policy to obtain the
Company Death Benefit payable to the Company.
(b) Other Termination. Upon the termination of this Agreement prior
to the death of the Insured, the Company shall have the right to receive an
amount equal to the lesser of the cash surrender value of the Policy or the
Company Advances ("Termination Amount"), and after the payment of such
amount, the Company shall have no further interest in the Policy or under
this Agreement.
(c) Payment to Owner Third Party. Upon the death of the Insured, the
person, trust or other beneficiary designated in writing by the Owner, who
may be referred to for purposes of administration by the Insurer as the
"Third Party", shall receive all amounts not paid to the Company under the
provisions of paragraph 6(a) of this Agreement.
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7. Collateral Assignment. To secure the recovery by the Company of
the Company Death Benefit or the Termination Amount, the Owner shall execute a
limited assignment of amounts payable under the Policy by the Insurer in the
event of the surrender of the Policy or the death of the Insured in favor of
the Company in the form attached hereto as Exhibit B (the "Collateral
Assignment"). The Collateral Assignment shall specifically limit the rights of
the Company thereunder to the recovery of the Company Death Benefit or the
Termination Amount in the event of death of the Insured or other termination of
this Agreement.
8. Absolute Limitation on Company Rights. In no event shall the
Company have any right to borrow against the Policy, to surrender or cancel the
Policy, or to assign its interest in the Policy, unless specifically provided
otherwise in this Agreement. The Company shall neither have nor exercise any
right as collateral assignee of the Policy which could in any way defeat or
impair the Owner' s right to receive the cash surrender value or the death
benefit payable under the Policy in excess of the amount due the Company
hereunder. All provisions of this Agreement and of the Collateral Assignment
shall be construed so as to carry out such intention.
9. Payments by Insurer and Claims Procedure. The Insurer may pay
benefits under the Policy either by separate checks to the parties or agent
assignees entitled thereto, or by a joint check. If the Insurer pays by joint
check, the Owner and the Company shall divide the benefit as provided herein.
Benefits shall be payable in accordance with the provisions of this
Agreement. Should the Owner or its beneficiary as designated in writing fail to
receive benefits to which
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such Owner or beneficiary believes he is entitled, a claim may be filed. Any
claim for a benefit under this Agreement shall be filed by the Owner or
beneficiary (claimant) under this Agreement by written communication which is
made by the claimant or the claimant' s authorized representative which is
reasonable calculated to bring the claim to the attention of the Fiduciary
under this Agreement.
If a claim for a benefit is wholly or partially denied, a written
notice of the decision shall be furnished to the claimant by the Fiduciary or
his designee within a reasonable period of time after receipt of the claim,
which notice shall notice shall include the following information:
(a) The specific reason or reasons for the denial;
(b) Specific reference to the pertinent provisions of this Agreement
upon which the denial is based;
(c) 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; and
(d) An explanation of the claim review procedures under this
Agreement.
In order that a claimant may appeal a denial of a claim, a claimant or
his duly authorized representative:
(a) May request a review by written application to the Fiduciary or
his designee not later that 60 days after receipt by the claimant of
written notification of denial of a claim;
(b) May review pertinent documents; and
(c) May submit issues and comments in writing.
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A decision on review of a denied claim shall be made not later than 60
days after the Fiduciary's receipt of a request for review, unless special
circumstances require an extension of time for processing, in which case a
decision shall be rendered within a reasonable period of time, but not later
than 120 days after receipt of a request for review. The decision on review
shall be in writing and shall include the specific reason(s) for the decision
and the specific reference(s) to the pertinent provisions of this Agreement on
which the decision is based.
Notwithstanding anything contained in this Agreement to the contrary,
any claim for a death benefit under an insurance policy held subject to this
Agreement shall be filed with the Insurer by the claimant or his authorized
representative on the form or forms prescribed for such purpose by the Insurer.
The Insurer shall have sole authority for determining whether a death claim
shall or shall not be paid, either in whole or in part, in accordance with the
terms of such insurance contract which may have been purchased on the life of
the Insured.
10. Termination During Lifetime of Insured. This Agreement shall
terminate on the surrender or cancellation of the Policy by the Owner, who has
the sole and exclusive right to surrender or cancel. Upon any termination of
this Agreement, the Owner shall have the following rights:
(a) The Owner may surrender the Policy, in which event, if the net
cash surrender proceeds are less than the Company Advances, the Owner shall
have no obligation to pay the difference to the Company.
(b) The Owner may direct the Company to assign its interest under the
Policy and this Agreement to any one or more persons, firms or entities as
shall come within the provisions of Sections 101 (a)(2)(A) or 101
(a)(2)(B) of the Internal Revenue Code of 1986, as amended, providing for
the exclusion from
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the gross income of such assignee the proceeds payable to such assignee as
owner of such assigned Policy upon the death of the Insured, in which event
such assignee shall pay to the Company an amount equal to the lesser of the
cash surrender value of the Policy or the Company Advances.
(c) For sixty (60) days after the date of termination of this
Agreement, the Owner shall have the option of obtaining the release of the
Collateral Assignment to the Company. To obtain such release, the Owner
shall pay to the Company an amount equal to the lesser of the cash
surrender value of the Policy or the Company Advances. Upon receipt of
such amount, the Company shall release the Collateral Assignment by
executing and delivering to the Owner an appropriate instrument of release.
11. Obligations of lnsurer. The Insurer shall be fully discharged
from its obligations under the Policy by payment of the Policy 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 part of
this Agreement, or any modification or amendment to this Agreement. No
provision of this Agreement, nor of any modification or amendment hereof, shall
in any way be construed as enlarging, changing, varying, or in any 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 Owner and filed with the Insurer.
12. Appointment of Fiduciary. The Company is hereby designated as
the named Fiduciary under this Agreement. The Fiduciary shall have authority
to control and manage the operation and administration of this Agreement.
13. 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.
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14. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Company and the Owner and their respective
successors, assigns, heirs, executors, administrators and beneficiaries.
15. Specific Enforcement. The Owner shall be entitled to specific
enforcement of all obligations of the Company under this Agreement.
16. Notices. All notices consents or demands required or permitted
to be given under the provisions of this Agreement shall be sent by certified
mail to:
Owner: American National Trust and Investment
Management Company, Trustee
000 Xxxxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000
Company: Xxxxx Supermarkets, Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Notice shall be effective when received by the recipient.
17. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana.
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IN WITNESS WHEREOF the parties have signed this Agreement effective
this ___ day of January, 1997.
XXXXX SUPERMARKETS, INC.
By: /s/
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AMERICAN NATIONAL TRUST AND INVESTMENT
MANAGEMENT COMPANY
By: /s/
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Trust Administrator, Trustee,
Xxx X. Xxxxx 1983 Irrevocable Trust
for Xxxxxxx Xxxx Xxxxx, dated
March 9, 1983
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The following life insurance policy is subject to the attached
Split-Dollar Insurance Agreement:
OWNER: American National Trust and Investment Management
Company, Trustee u/a Xxx X. Xxxxx 1 983 Irrevocable
Trust for Xxxxxxx Xxxx Xxxxx dated March 9, 1983
INSURER: Massachusetts Mutual Life Insurance Company
INSURED: Xxx X. Xxxxx
POLICY NUMBER: __________________
FACE AMOUNT: $2,500,000
DATE OF ISSUE: _____________, 199_
EXHIBIT A
