ESTATE ENHANCEMENT PROGRAM AGREEMENTS Exhibit 10-JJ
GPU, Inc.
Split Dollar Insurance for Non-Employee Directors
Summary
Background
Deferral plans provide a means for you to accumulate retirement assets and
income. However, if you accumulate assets which exceed your income needs, income
and estate taxes may significantly diminish the estate value of your
accumulations; combined income and estate taxes can consume 75% of the ultimate
benefits.
The Board of Directors of the Company has authorized the Personnel, Compensation
and Nominating Committee to consider a request from a non-employee Director to
forego the right to his or her existing deferred compensation, and to receive
instead an insurance benefit under a split dollar insurance arrangement with the
Company. The insurance arrangement would be structured so that there may be
favorable financial and P&L results to the Company. In addition, the financial
results to your family (or other heirs) are potentially substantially better
than the results of the current arrangement. Summary of Concept
- Participation is voluntary, and is subject to the review and approval of
the Personnel, Compensation and Nominating Committee. To participate, you
would submit a request for participation to the Committee. The decision of
whether an individual Director will be approved for participation is in the
sole discretion of the Committee. Among other factors, the Committee will
consider the financial and P&L consequences to the Company.
- If your participation is approved by the Committee, you would irrevocably
relinquish your rights to specified amounts of compensation under the
Deferred Remuneration Plan for Outside Directors of GPU, Inc.
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- In lieu of the deferred compensation benefit, the Company would provide an
insurance benefit with coverage on the joint lives of you and your spouse.
The death benefit would be payable at the death of the last survivor of
you and your spouse. (You could participate with a single life policy on
your life alone, but the benefits would not be nearly as substantial.)
- The insurance benefit would be provided in the form of a "split dollar"
life insurance program. GPU will pay premiums equal to the amount of
deferred compensation you forego. A premium attributable to a relinquished
balance in the Deferred Remuneration Plan would be paid when the policy is
issued.
- The policy would be a "face plus cash" policy, which means that the policy
death benefit will equal the initial policy face amount plus the policy
cash value at the time the death benefit is paid. In general, when the
death benefit is paid, GPU will receive the cash value portion of the death
benefit and your beneficiary will receive the policy face amount. However,
if the cash value is less than the amount of premium paid by GPU, then GPU
will receive a portion of the death benefit equal to premium paid.
- During the term of the insurance arrangement, you will recognize imputed
income each year. The income amount will be based on your insurance
coverage amount, your age and the age of your spouse. Under survivorship
coverage, the imputed income will be lower during the years in which you
and your spouse are living, and higher in the years when only the survivor
of you and your spouse is living.
- You can structure the insurance benefit so that it will not be subject to
federal estate taxes when the death benefit is paid. This is generally
accomplished by having the ownership of your rights to the policy owned by
a trust you would create for the benefit of your family. You should consult
with your estate planning attorney or financial advisor as it may be
necessary to take certain steps at the time the insurance is applied for in
order to achieve the most favorable estate planning results.
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- If your participation is approved, depending on the consequences to the
Company, the Committee may determine that, in addition to the insurance
benefit, if GPU's share of the policy death benefit exceeds the premium it
has paid, it will pay any such excess to your designated beneficiary (which
may be the same or a different beneficiary as your beneficiary for the
insurance benefit). Unlike the insurance benefit, this payment would be
subject to income taxes and, possibly, estate taxes when paid. Many
participants in these types of plans designate a charitable beneficiary to
receive this payment so that the income and estate taxes can be avoided.
- If you (or your spouse) have serious health problems, this insurance
arrangement may not be as attractive as if you were healthy. Following the
insurance underwriting process, if the available benefits are reduced due
to health issues you will not be obligated to proceed with the insurance
arrangement.
- This insurance arrangement is a sophisticated estate planning technique
that involves a number of tax and financial issues. You are encouraged to
review the program with your estate planning attorney or other advisors
before you make a final decision to request to participate.
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GPU, Inc.
Split Dollar Life Insurance for Non-Employee Directors
Information Request Form
Please provide me with information and personalized financial illustrations for
a split dollar life insurance arrangement with GPU, Inc.
Amount Relinquished
For illustration purposes, assume that I elect to relinquish $-------------- of
my account balance under the Deferred Remuneration Plan for Outside Directors of
GPU, Inc.
Type of Insurance Coverage
--- I would like the insurance to be illustrated on my life only. My date of
birth is -------------.
--- I would like the insurance to be illustrated on my life and the life of my
spouse (Survivorship Policy). My date of birth is -------------. My
spouse's date of birth is -------------.
I understand that this is a request for information only, and that this does not
constitute a request to participate in the life insurance program. Also, I
understand that if I subsequently decide to request participation in the
insurance program, my participation is in the sole discretion of the Personnel,
Compensation and Nominating Committee of the Board of Directors. I hereby
authorize GPU to release to Ayco any information as may be needed to provide the
requested information.
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Signature Date
------------------------------- Address:
Print Name -----------------------------
-----------------------------
-----------------------------
Telephone:-------------------
Mail or fax this Form to:
The Ayco Company, L.P.
PO Box 8009
MBS
Xxxxxxx Park, NY 12065-8009
Fax: (000) 000-0000
If you have any questions about this form, call Xxxxxx X. Xxxxxx at GPU at (973)
000-0000, or you can call Xx. Xxx Xxxxx at Ayco at (000) 000-0000.
Life Insurance Agreement
An Agreement is hereby entered into between GPU, Inc. ("the Company") and
----------------- (the "Director"), and [Irrevocable Trust] dated -----------,
2000, -------------------, Trustee (the "Owner"), to be effective -----------,
2000.
WHEREAS, the Director is and has been a valued member of the Board of Directors
of the Company (the "Board");
WHEREAS, the Director has requested that the Company enter into this Agreement
providing life insurance benefits and has agreed to relinquish his rights to
certain other compensation otherwise payable to the Director in the future as a
condition of entering into this Agreement;
WHEREAS, the Company expects to realize certain financial and accounting
benefits and advantages as a result of entering into this Agreement;
WHEREAS, in order to provide the life insurance benefits, the Company intends to
pay a single premium on a policy owned by the Owner insuring the lives of the
Director and the Director's spouse (the "Policy"); and
WHEREAS, in exchange for the payment of a Policy premium by the Company, the
Owner shall grant the Company certain interests in the Policy cash values and
death benefits. NOW, THEREFORE, in consideration of the aforementioned promises,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Director, the Company and the Owner hereby
agree as follows, intending to be legally bound.
1. Deferred Compensation Relinquished. As a condition of entering into this
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Agreement, the Director hereby relinquishes his rights to total
compensation of $------------- of the Director's account balance under the
Deferred Remuneration Plan for Outside Directors of GPU, Inc. (the "DRP").
2. Insurance Policy. Owner has purchased or will subsequently purchase the
----------------
Policy, as described in Exhibit A to this Agreement, to be issued by the
---------------- Life Insurance Company (the "Insurer"). The parties
hereto have taken or will take all necessary action to cause the
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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 the Collateral Assignment
filed with the Insurer relating to the Policy as provided in Section 3 of
this Agreement.
3. Collateral Assignment. As security to the Company for the payment to it of
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amounts due it under this Agreement, Owner shall execute a collateral
assignment (the "Collateral Assignment") of the Policy to the Company,
which Collateral Assignment will specifically limit the rights of the
Company in the Policy to payment of the amounts due it under this
Agreement. The Collateral Assignment shall not be terminated, altered, or
amended by Owner without the express written consent of the Company.
4. Ownership of Policy.
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(a) The Owner shall be the sole and exclusive owner of the Policy.
However, except as otherwise provided in this Agreement, the Owner
shall not borrow from, hypothecate, withdraw cash value from,
surrender in whole or in part, cancel, or in any other manner
encumber the Policy without the prior written consent of the
Company. Unless the Company becomes the owner of the Policy pursuant
to Section 8, the Owner shall maintain possession of the Policy. The
Owner may elect to reduce the Policy face amount, except that the
Policy face amount shall not be reduced to an amount less than the
total of the Policy premiums paid or to be paid by the Company
pursuant to this Agreement. If the Company has become the owner of
the Policy pursuant to Section 8, then, subject to the limitations
imposed by the preceding sentence, within sixty (60) days of receipt
of a written request from the Owner, the Company shall complete and
submit the necessary forms to the Insurer to reduce the Policy face
amount in accordance with the Owner's request.
(b) Except as provided in Section 8, the Company shall not have any
ownership rights in the Policy. The Company's rights with respect to
the Policy shall be limited to: (1) the right to receive a portion
of the Policy death benefit in the event the Policy death benefit
becomes payable while the Collateral
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Assignment is in effect with respect to the Policy; and (2) the
right to receive all of the proceeds of any Policy cancellation,
surrender, loan or withdrawal processed while the Collateral
Assignment is in effect.
5. Payment of Insurance Premium by the Company. Within thirty (30) days after
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the issue of the Policy, the Company shall pay a Policy premium equal to
the deferred compensation amount relinquished by the Director pursuant to
Section 1 of this Agreement.
6. Payment of Insurance Premiums by the Director or Owner. Neither the
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Director nor the Owner shall be obligated to pay any Policy premiums.
However, either may decide to pay Policy premiums in addition to the
premium to be paid by the Company.
7. Death Benefit. The Owner agrees to maintain the Policy in a form such that
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the Policy death benefit payable will be equal to the Policy face amount
plus the cash accumulation account value when the death benefit becomes
payable. Upon the death of the last survivor of the Director or the
Director's spouse (the "Insureds"), the Company and Owner shall promptly
take all action necessary to obtain in a lump sum the death benefit
provided under the Policy. The Company shall have the unqualified right to
receive a portion of such death benefit equal to the greater of: (1) the
Policy cash account value calculated immediately prior to the death of the
last survivor of the Insureds, calculated without regard to any surrender
charges; or (2) the Policy premium paid by the Company. The balance of the
death benefit provided under the Policy, if any, shall be paid to Owner.
In no event shall the amount payable to the Company hereunder exceed the
proceeds of the Policy payable at such death. No amount shall be paid to
the Owner until the amounts payable to the Company have been paid to the
Company. The parties hereto agree that the beneficiary designation
provision of the Policy shall conform to the provisions hereof.
8. Alternative Death Benefit Election. The person or entity designated as
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Elector in this Section may elect a death benefit payment from the Company
in lieu of the insurance benefit provided under this Agreement. The
Elector can make such an election (the "Election") in writing in a form
acceptable to the Company. At the time the Election is
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made, the Owner shall transfer the ownership of the Policy to the Company.
Thereafter, notwithstanding any provisions of Section 7 to the contrary,
the entire Policy death benefit shall be payable to the Company, and no
portion of such Policy death benefit shall be payable to the Owner's
beneficiary(ies).
Within thirty (30) days after it receives the Policy death benefit while
the Election is in effect, the Company shall pay an amount (the "Payment
Amount") to the Owner such that (1) and (2) below are equal amounts:
(1) The additional Policy death benefit amount received by the Company
(the amount in excess of the amount that would have been received by
the Company if the Election was not in effect for the Policy),
reduced by any taxes payable by the Company as a result of receiving
the additional Policy death benefit amount.
(2) The Payment Amount, reduced by any tax savings recognized by the
Company (as determined by the Company) as a result of paying the
Payment Amount.
The Owner shall designate the beneficiary(ies) to receive the payment
provided under this Section using a form provided by the Company. Any
payment made by the Company to the Owner's beneficiary(ies) pursuant to
this Section shall be paid from the general funds of the Company, and
shall not be considered to be a payment of a life insurance benefit. The
Company's obligation to pay the Payment Amount is in the nature of an
unsecured and unfunded promise to pay.
The Election under this Section shall be effective when any necessary
documentation is submitted to and accepted by the Insurer. The Owner and
the Company will promptly submit any required forms or documents to the
Insurer when the Election is made.
If the Company becomes the owner of the Policy pursuant to this Section,
the Company shall not thereafter surrender in whole or in part, reduce the
face amount of, withdraw cash value from, borrow from, or otherwise
encumber the Policy without the written consent of the Owner.
The Elector may revoke an Election, and may thereafter again make (or
revoke) an Election. The Elector shall be
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--------------------; if --------------- is unable or unwilling to serve,
the Owner shall be the Elector.
If the Company becomes the owner of the Policy pursuant to this Section,
the Company shall thereafter invest the Policy cash values in the Policy
funds selected by and in the proportions specified by the Owner. The
Company agrees to submit an investment election to the Insurer within
thirty (30) days after a written investment request is submitted to the
Company by the Owner.
9. Company Default. A Company Default shall be deemed to have occurred with
---------------
respect to the Policy if the Company fails to pay a premium on the Policy
as required under the terms of this Agreement within sixty (60) days after
the due date for such premium, or if the Company processes or attempts to
process a policy loan, or a complete or partial surrender, a face amount
reduction, or a cash value withdrawal without prior written approval from
the Owner.
In the event of a Company Default, the Owner shall have the right to
require the Company to cure the Company Default by notifying the Company
in writing within sixty (60) days after the Company Default occurs, or if
later, within thirty (30) days after the Owner becomes aware of the
Company Default. If the Company fails to cure the Company Default within
sixty (60) days after being notified by the Owner of the Company Default,
the Owner shall have the right to require the Company to transfer its
interest in the Policy to the Owner. The Owner may exercise this right by
notifying the Company, in writing, within sixty (60) days after the end of
the period given to the Company to cure the Company Default pursuant to
the preceding sentence. Upon receipt of such notice, the Company shall
immediately transfer its rights in the Policy to the Owner, either by a
release of the Collateral Assignment, or by a transfer of ownership if the
Company is the owner of the Policy, and the Company shall thereafter have
no rights with respect to such Policy. The Owner's failure to exercise its
rights under this Section shall not be deemed to release the Company from
any of its obligations under the Plan, and shall not preclude the Owner
from seeking other remedies with respect to the Company Default. Also, the
Owner's failure to exercise its rights under this Section will not
preclude the Owner from exercising such rights upon a later Company
Default.
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10. Death Benefit Claims Review and Procedure. At the death of the last
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surviving Insured, the Company and Owner shall execute such forms and
furnish such other documents as are required to receive payment under the
Policy. The Company shall also furnish to Owner an affidavit specifying
the amount of the death benefit due the Company. All death benefits under
this Agreement shall be paid in accordance with the Policy and pursuant to
the claims and review procedure of the Insurer.
11. Determinations Concerning Benefits. The Company shall make all
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determinations concerning its rights to benefits under this Agreement. Any
decision by the Company denying a claim by the Owner or the beneficiary
for benefits under the Policy shall be stated in writing and delivered or
mailed to the Owner and such beneficiaries under the Policy. Such
decisions shall set forth the specific reasons for the denial, written to
the best of the Company's ability in a manner that may be understood
without legal or actuarial counsel. In addition, the Company shall afford
a reasonable opportunity to the Owner or such beneficiary for a full and
fair review of the decision denying such claim.
12. Obligations of the Company. The Company shall have no other obligations
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than those specifically enumerated in this Agreement. The payment of any
Policy death benefit shall be the sole responsibility of the Insurer and
nothing contained herein shall be construed as imposing upon the Company
any responsibility for such payment, the economic viability of the
Insurer, or to acquire or maintain additional coverage if the Insurer
becomes insolvent, bankrupt, or engages in rehabilitation.
13. Amendment; Assignment. This Agreement may not be amended, altered, or
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modified, except by a written instrument signed by the Company and Owner.
Any party may assign its rights under this Agreement, provided that any
such assignee shall be subject to the terms of this Agreement.
14. Binding Effect. This Agreement shall be binding upon and inure to the
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benefit of the Company and its successors and assigns, the Owner and its
successors and assigns, and the Director and his or her successors and
assigns.
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15. Notice. Any notice, consent, or demand required or permitted to be given
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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. The date of such mailing shall be deemed the date of notice,
consent, or demand.
16. Governing Law. This Agreement, and the rights of the parties hereunder,
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shall be governed by and construed in accordance with the laws of the
state of New Jersey.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of the
day and year first above written.
-----------------------------,Trustee GPU, Inc.
By: By:
-------------------------- --------------------------
----------------------------- ------------------------------
Name and Title Name and Title
-----------------------------
Signature of Director
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EXHIBIT A
DESCRIPTION OF INSURANCE POLICY
The following life insurance policy is subject or will become subject to the
attached Agreement:
Insured(s):
Insurer Policy Number Face Amount
----------------------------- ------------- -----------
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Collateral Assignment
THIS ASSIGNMENT is made and entered into this ------ day of ---------, 2000, by
and between [Irrevocable Trust] the undersigned owner (the "Policy Owner") of a
Life Insurance Policy No. ---------- (the "Policy") issued by ----------------
(the "Insurer"), on the lives of ------------ and ------------ (the "Insureds"),
and GPU, Inc. (the "Assignee").
WHEREAS, the Policy Owner has entered into a Life Insurance Agreement with the
Assignee (the "Agreement"), and
WHEREAS, in consideration of the Assignee agreeing to make premium payments, the
Policy Owner agrees to grant the Assignee a security interest in the Policy as
collateral security for the payment of amounts due Assignee under the Agreement,
NOW, THEREFORE, the undersigned Policy Owner hereby assigns, transfers and sets
over to the Assignee the following specific rights in the Policy subject to the
following terms and conditions:
1. This Assignment is made as collateral security for all liabilities of the
Policy Owner to the Assignee, either now existing or that may hereafter
arise, pursuant to the Agreement between Policy Owner and Assignee.
2. The Assignee's interest in the Policy shall be strictly limited to:
a. In the event the Policy is canceled or surrendered, the right to
receive directly from the Insurer an amount equal to all of the cash
proceeds of such surrender or cancellation.
b. In the event a Policy loan or cash value withdrawal is taken, the
right to receive directly from the Insurer an amount equal to the
loan or withdrawal proceeds.
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c. Upon the death of the last survivor of the Insureds, the right to
receive directly from the Insurer and before any death proceeds are
paid to the beneficiary of the Policy Owner, that portion of the
death proceeds equal to the greater of: (i) the Policy cash account
value calculated immediately prior to the death of the last survivor
of the Insureds calculated without regard to any surrender charges;
or (ii) the cumulative policy premiums paid by Assignee under the
Policy.
3. The Insurer is hereby authorized to recognize [the Assignee's claims to
rights for any action taken by the Assignee,] the validity or the amount
of any of the liabilities of the Policy Owner to the Assignee under the
Agreement, the existence of any default therein, the giving of any notice
required herein, or the application to be made by the Assignee of any
amounts to be paid to the Assignee. The receipt of the Assignee for any
sums received by it shall be a full discharge and release therefore to the
Insurer.
4. The Insurer shall be fully protected in recognizing a request made by the
Policy Owner for surrender or cancellation of the Policy, in whole or in
part, or in recognizing a request made by the Policy Owner for any loans
against the Policy permitted by the terms of the Policy. In the event of
any such request, the Insurer must pay the proceeds of any surrender,
cancellation or loan to the Assignee, or as the Assignee shall direct.
5. Upon the full payment of the liabilities of the Policy Owner to the
Assignee pursuant to the Agreement, the Assignee shall execute an
appropriate release of this Assignment.
6. This Assignment shall not be terminated, altered, or amended by the Policy
Owner without receipt by the Insurer of the express written consent of the
Assignee.
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IN WITNESS WHEREOF, the Policy Owner has executed this Assignment effective the
day and year first above written.
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Policy Owner Signature
Consent of Assignee
By:
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This assignment was acknowledged and recorded by
------------------------ on ------------, 2000.
By:
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Death Benefit Agreement
WHEREAS, GPU, Inc. (the "Company") is designated as beneficiary to receive a
portion of an insurance policy death benefit from a policy insuring the [life]
[lives] of --------------- (the "Director") [and the Director's spouse]; and
WHEREAS, the Director has been and continues to be a valued Director of the
Company; and
WHEREAS, the Company desires to provide a death benefit to the beneficiaries
designated by the Director; and
WHEREAS, the Director [and the Director's spouse] has [have] agreed to provide
any medical history information to the insurance company or to submit to any
medical exams or tests as required by the insurance company for the coverage to
be issued.
NOW THEREFORE, in consideration of the promises and representations of the
parties as herein recited, and in recognition of other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, the parties
hereby agree as follows, effective -----------------.
The Company is designated as a beneficiary to receive a portion of the death
benefit in accordance with a collateral assignment executed in connection with
policy number ---------- issued by [Carrier] insuring the [life] [lives] of the
Director [and the Director's spouse] (the "Policy"). If the amount received by
the Company (the "Company Death Benefit") exceeds the premium paid by the
Company for such Policy, then the Company shall pay to the Director's
beneficiary an amount equal to the excess of the Company Death Benefit, if any,
over the premium paid by the Company for such Policy. However, the amount paid
shall not exceed the excess of the portion of the Policy death benefit equal to
the Policy cash account value when the policy death benefit is paid, reduced by
the amount of Policy premium paid by the Company. Any amount payable shall be
paid in a single sum as soon as is practicable following the Company's receipt
of its portion of the Policy death benefit.
Any amount payable under this Agreement shall be paid from the general funds of
the Company, and neither the Director nor the Director's beneficiary shall have,
as a result of this Agreement, any rights or interest in the Policy referred to
in this Agreement or any other assets of the Company.
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The Director's beneficiary shall be -------------------------------------------
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This designation of beneficiary shall be irrevocable. This designation of
beneficiary may be changed by the Director completing and submitting to the
Company a Change of Beneficiary on a form provided by the Company. [After the
Director's death, this designation of beneficiary [shall be irrevocable] [may be
changed by the Director's spouse completing and submitting to the Company a
Change of Beneficiary on a form provided by the Company, except that any
beneficiary so designated by the Director's spouse after the Director's death
must be a charitable organization or educational institution eligible to receive
tax deductible donations under the Internal Revenue Code if the designated
beneficiary at the time of the Director's death is an organization eligible to
receive tax deductible donations.]
GPU, Inc.
By:
----------------------- -----------------------------------
Director's Signature Signature of Company Representative
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