[FORM OF SPLIT-DOLLAR INSURANCE AGREEMENT]
THIS AGREEMENT is made and entered into as of this ____ day of ________,
_____, by and between WESTERN RESOURCES, INC., a Kansas corporation (hereinafter
referred to as the "Corporation"), and (hereinafter referred to as the
"Executive").
WHEREAS, the Executive is employed by the Corporation; and
WHEREAS, the Executive wishes to provide life insurance protection for his
family in the event of his death under a policy of life insurance insuring his
life (hereinafter referred to as the "Policy"), which is described in Exhibit A
attached hereto and by this reference made a part hereof, and which is being
issued by Transamerica Occidental Life Insurance Company (hereinafter referred
to as the "Insurer"); and
WHEREAS, the Corporation is willing to provide an additional employment
benefit for the Executive, on the terms and conditions hereinafter set forth,
and
WHEREAS, the Corporation desires to grant to the Executive the right to
designate the beneficiary of a certain portion of the death proceeds of the
Policy and certain other rights based on a portion of the Policy death proceeds;
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 Corporation shall purchase the Policy from the
Insurer as shown on Exhibit A. The parties hereto agree that they shall take 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.
2. Ownership of Policy. The Corporation shall be the sole and absolute
owner of the Policy, may designate the beneficiary of an amount of the death
benefits to which it is entitled under Section 9.a of this Agreement, and may
exercise all other ownership rights granted to the owner thereof by the terms of
the Policy, except as may otherwise be provided herein.
3. Executive's Designation of Beneficiary. The Corporation hereby grants to
the Executive the right to designate the beneficiary or beneficiaries to receive
a portion of the Policy death benefit provided in the second sentence of Section
9.a of this Agreement and the Executive may designate such beneficiary or
beneficiaries by specifying the same in a written notice to the Corporation.
Upon receipt of any such notice, the Corporation shall execute and deliver to
the Insurer the forms necessary to designate the requested person, persons or
entity as the beneficiary or beneficiaries to receive such portion of the death
benefit. The parties hereto agree to take all action necessary to cause the
beneficiary designation provisions of the Policy to conform to the provisions
hereof. The Corporation shall not terminate, alter or amend such designation
without the express written consent of the Executive.
4. Corporation's Designation of Policy Beneficiary/Endorsement.
Contemporaneously with the purchase of the policy or the execution of this
Agreement, the Corporation has executed a beneficiary designation as Exhibit B
for and/or an endorsement to the Policy, under the form used by the Insurer for
such designations or endorsements, in order to secure the Corporation's recovery
of the amount to which it is entitled under Section 9.a of this Agreement, and,
if appropriate, to provide for the payment of any remaining death proceeds to
the beneficiaries directed by the Executive. Such beneficiary designation or
endorsement with respect for any death benefit with respect to which the
Executive may designate the beneficiaries shall not be terminated, altered or
amended by the Corporation without the express written consent of the Executive.
The parties hereto agree to take all action necessary to cause such beneficiary
designation or endorsement to conform to the provisions of this Agreement.
5. Payment of Premiums. On or before the due date of each Policy premium,
or within the grace period provided therein, the Corporation shall pay the full
amount of the premium to the Insurer, and shall, upon request, promptly furnish
the Executive evidence of timely payment of such premium. The Corporation shall
annually furnish the Executive a statement of the amount of income reportable by
the Executive for federal and state income tax purposes as a result of the
insurance protection provided pursuant to the Policy, which amount shall include
any amount required to "gross-up" such tax liabilities.
6. Limitations on Corporation's Rights in Policy. Except as otherwise
provided herein, the Corporation shall not surrender or cancel the Policy,
change the beneficiary designation provision thereof with respect to any death
benefit with respect to which the Executive may designate the beneficiaries, nor
terminate any dividend election, if applicable, thereof without, in any such
case, the express written consent of the Executive.
7. Policy Loans. 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 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 Executive, the Corporation shall promptly
take all action necessary to secure the release or discharge of such
encumbrance.
[The following section is applicable to certain Participants:
8. Executive's Right To Sell Policy Interest to Corporation. The
Corporation hereby grants to the Executive beginning on the earlier of (i) three
(3) years from the date of the policy, or (ii) the first day of the calendar
year next following the date of Executive's retirement as defined in the Western
Resources Inc. Executive Salary Continuation Plan dated July 17, 1996, the
right, from time-to-time and in whole or in part, to offer to the Corporation
and the Corporation shall purchase his interest in the death benefit under the
policy at a discount equal to one dollar ($1) for each one and a half dollars
($1.50) of the then applicable death benefit of the policy with respect to which
the Executive then has the right to designate or direct the beneficiaries (the
Base Amount) and which Executive offers to the Corporation under this Section 8,
as adjusted below; provided, however, the Executive's right to sell his interest
in the policy shall be exercisable only upon the condition that Executive is a
shareholder of the Corporation on the date of such sale. The parties hereto
agree to take all action necessary to cause the beneficiary designation and any
endorsement to reflect any such sale and purchase. The payment provided above in
this Section 8 shall be adjusted based on changes in total shareowner return
(i.e. the difference between the average of the daily closing prices of
Corporation common stock on the New York Stock Exchange for the twenty days
ending June 3, 1998 and the average of such daily closing prices for the twenty
days ending on the date of the offer by Executive, plus shareholder
distributions, other than return of capital, from June 3, 1998. For each
percentage change in total shareowner return, the dollar amount of the payment
shall change in the same direction by one percent; provided, that such
adjustment shall not result in a payment to the Executive that exceeds one
dollar ($1) for each one dollar ($1) of the Base Amount, or less than one dollar
($1) for each two dollars ($2) of the Base Amount and provided further, that in
no event shall the aggregate of all payments exceed the Executive's Base Amount
on the date hereof. The Executive's rights under this Section 8 shall terminate
at the time of the death of the Executive to the extent it has not been
exercised before that time. In the event that any dividend in Corporation common
stock, recapitalization, stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or stock exchange, or other
similar corporate transaction or event, affects the Corporation common stock
such that an adjustment is appropriate in order to prevent dilution or
enlargement of the rights of Executive under this Section 8, then the
Corporation shall make such changes or adjustments to the calculation of
shareowner return as may be necessary or appropriate and, in such manner as it
may deem equitable.]
9. Collection of Death Proceeds.
a. Respective Portions of Death Benefit. Upon the death of the
Executive, the Corporation shall have the unqualified right to receive a portion
of such death benefit equal to the sum of (1) greater of (i) the total amount of
the premiums paid by it hereunder or (ii) the then cash surrender value of the
Policy, reduced in either case by any indebtedness against the Policy existing
at the death of the Executive (including any interest due on such indebtedness).
plus (2) the amount of death benefit transferred to the Corporation by the
Executive under Section 8 of this Agreement. The balance of the death benefit
provided under the Policy, if any, shall be paid directly to the beneficiary or
beneficiaries designated by the Corporation at the direction of the Executive,
in the manner and in the amount or amounts provided in any beneficiary
endorsement or the beneficiary designation provision of the Policy. In no event
shall the amount payable to the Corporation hereunder exceed the Policy proceeds
payable at the death of the Executive. No amount shall be paid from such death
benefit to the beneficiary or beneficiaries designated by the Corporation at the
direction of the Executive, 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.
b. Collecting Death Benefit. Upon the death of the Executive, the
Corporation shall cooperate with the beneficiary or beneficiaries designated by
the Executive to take whatever action is necessary to collect the death benefit
provided under the Policy. When such benefit has been collected and paid as
provided herein, this Agreement shall thereupon terminate.
c. Premium Refunds. Notwithstanding any provision hereof to the
contrary, in the event that, for any reason whatsoever, no death benefit is
payable under the Policy upon the death of the Executive and in lieu thereof the
Insurer refunds all or any part of the premiums paid for the Policy, the
Corporation and the Executive's beneficiary or beneficiaries shall have the
unqualified right to share such premiums based on their respective cumulative
contributions thereto.
10. Insurer Not a Party. 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 party to
this Agreement, or any modification or amendment hereof. 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 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 beneficiary
designation executed by the Corporation and filed with the Insurer in connection
herewith.
11. Assignment by Executive. Notwithstanding any provision hereof to the
contrary, the Executive shall have the right to absolutely and irrevocably
assign by gift all or any part of his right, title and interest in and to this
Agreement and in and to the Policy to an assignee. This right shall be
exercisable by the execution and delivery to the Corporation of a written
assignment. Upon receipt of such written assignment executed by the Executive
and duly accepted by the assignee thereof, the Corporation shall consent thereto
in writing, and shall thereafter treat the Executive's assignee as the sole
owner of all of the Executive's right, title and interest in and to this
Agreement and in and to the Policy. Thereafter, the Executive shall have no
right, title or interest in and to this Agreement or the Policy, all such rights
being vested in and exercisable only by such assignee.
12. Named Fiduciary/Claims Procedure.
a. Named Fiduciary. The Corporation is hereby designated as the named
fiduciary under this Agreement. The named fiduciary shall have authority to
control and manage the operation and administration of this Agreement, and it
shall be responsible for establishing and carrying out a funding policy and
method consistent with the objectives of this Agreement.
b. ERISA Claims Procedure.
(1) Claim. A person who believes that he or she is being denied a
benefit to which he or she is entitled under this Agreement (hereinafter
referred to as a "Claimant") may file a written request for such benefit with
the Corporation, setting forth his or her claim. The request must be addressed
to the General Counsel of the Corporation at its then principal place of
business.
(2) Claim Decision. Upon receipt of a claim, the Corporation
shall advise the Claimant that a reply will be forthcoming within ninety (90)
days and shall, in fact, deliver such reply within such period. The Corporation
may, however, extend the reply period for an additional ninety (90) days for
reasonable cause.
If the claim is denied in whole or in part, the Corporation
shall adopt a written opinion, using language calculated to be understood by the
Claimant, setting forth: (a) the specific reason or reasons for such denial; (b)
the specific reference to pertinent provisions of this Agreement on which such
denial is based; (c) a description of any additional material or information
necessary for the Claimant to perfect his or her claim and an explanation why
such material or such information is necessary; (d) appropriate information as
to the steps to be taken if the Claimant wishes to submit the claim for review;
and (e) the time limits for requesting a review under subsection (3) and for
review under subsection (4) hereof.
(3) Request for Review. Within sixty (60) days after the receipt
by the Claimant of the written opinion described above, the Claimant may request
in writing that the General Counsel of the Corporation review the determination
of the Corporation. Such request must be addressed to the General Counsel of the
Corporation, at its then principal place of business. The Claimant or his or her
duly authorized representative may, but need not, review the pertinent documents
and submit issues and comments in writing for consideration by the Corporation.
If the Claimant does not request a review of the Corporation's determination by
the General Counsel of the Corporation within such sixty (60) day period, he or
she shall be barred and estopped from challenging the Corporation's
determination.
(4) Review of Decision. Within sixty (60) days after the General
Counsel's receipt of a request for review, he or she will review the
Corporation's determination. After considering all materials presented by the
Claimant, the General Counsel will render a written opinion, written in a manner
calculated to be understood by the Claimant, setting forth the specific reasons
for the decision and containing specific references to the pertinent provisions
of this Agreement on which the decision is based. If special circumstances
require that the sixty (60) day time period be extended, the General Counsel
will so notify the Claimant and will render the decision as soon as possible,
but no later than one hundred twenty (120) days after receipt of the request for
review.
(5) Enforcement of Rights. Western shall pay on a current basis,
as billed, all fees, costs and expenses (including, without limitation,
attorneys and expert fees and expenses) reasonably incurred by the Executive,
his heirs and assigns, for the purpose of investigating, asserting or enforcing
any right hereunder, whether by the above claim procedures, through litigation
or otherwise.
13. Amendment. This Agreement may not be terminated, amended, altered or
modified, except by a written instrument signed by the parties hereto, or their
respective successors or assigns, except as otherwise stated in this Agreement.
14. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Corporation and its successors and assigns, and the Executive,
and his successors, assigns, heirs, executors, administrators and beneficiaries.
15. Notices. 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.
16. Governing Law. This Agreement, and the rights of the parties hereunder,
shall be governed by and construed in accordance with the laws of the State of
Kansas.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
duplicate, as of the day and year first above written.
WESTERN RESOURCES, INC.
__________________________ By
Witness ________________________________
"Corporation"
-------------------------- ------------------------------------
Witness
"Executive"
