Exhibit 10-14.5
AMENDED AND RESTATED
SPLIT-DOLLAR INSURANCE AGREEMENT
THIS AMENDED AND RESTATED SPLIT DOLLAR INSURANCE AGREEMENT is made and
entered into this 31st day of July, 1998, by and between XXX SHOPS, INC. (the
"Assignee"), and XXXX X. XXXXXXX and XXXXXX XXXXXX, Trustees under the Rounick
Family Irrevocable Insurance Trust dated October 27, 1986 (the "Owner").
WITNESSETH:
WHEREAS, the parties entered into a certain Split Dollar Insurance
Agreement dated July 31, 1987 (the "Old Agreement") with respect to a policy of
life insurance in the face amount of Twenty Million Dollars ($20,000,000.00),
policy number 3,779,930-1 (the "Policy") issued by Manufacturer's Life Insurance
Company (the "Insurer"); and
WHEREAS, a dispute has arisen between the Insurer, the Owner, and the
Assignee regarding the payment of additional premiums to the Insurer under the
Policy; and
WHEREAS, the dispute has been settled by the Insurer reducing the face
value of the Policy from Twenty Million Dollars ($20,000,000.00) to Fifteen
Million Dollars ($15,000,000.00) and adjusting the illustrated policy values and
eliminating any remaining indebtedness on the Policy, effective February 1,
1996; and
WHEREAS, the Assignee in consideration for the Insurer eliminating any
indebtedness on the Policy and reducing the premium obligation to maintain the
Policy in force, will agree to pay any additional premiums on the Policy if they
become due; and
WHEREAS, the Owner has agreed to the reduction in the face value of the
Policy from Twenty Million Dollars ($20,000,000.00) to Fifteen Million Dollars
($15,000,000.00); and
WHEREAS, this Amended and Restated Split Dollar Insurance Agreement
("Agreement") is intended to replace and supersede the Old Agreement.
NOW, THEREFORE, the Assignee, Owner, and Xxxxxx Xxxxxxx and Xxxx
Xxxxxxx (the "Insured") agree to completely amend and restate the Agreement as
hereinafter set forth:
1. The life insurance policy with which this Agreement deals is the
Policy issued by Manufacturer's Life Insurance Company on the life of the last
to die of the Insured.
2. The Owner, or its transferee, shall be the owner of the Policy, and
may exercise all ownership rights inuring to the owner under the terms of the
Policy, except as specifically provided in this Agreement.
(a) Notwithstanding any other provision of this Agreement and
notwithstanding any assignment executed by the Owner or its transferee in
connection with this Agreement, it is the express intention of the Owner and the
Assignee to reserve to the Owner (i) the right to transfer its interest in the
Policy, (ii) the right to change the beneficiary of that portion of the proceeds
to which it is entitled under paragraph 7, and (iii) the right to exercise
settlement options.
(b) The rights in the Policy granted to the Assignee are limited
solely to its security interest in a portion of the cash surrender value and a
portion of the death benefit as defined and limited by this Agreement.
(c) Policy loans may only be made to pay Policy premiums.
3. Effective on the execution of this Agreement, the Assignee hereby
agrees to pay a one-time, lump sum premium to the Insurer in the amount of Three
Hundred Ninety-Seven
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Thousand Two Hundred Eighty-Six Dollars ($397,286.00). In addition, the Assignee
hereby agrees to pay future premiums, if any, net of any dividends on the Policy
and/or from the surrender of paid-up additions to the Policy. The Insured,
Xxxxxx Xxxxxxx, an employee of Assignee, shall include in income each year for
federal income tax purposes, an amount equal to the value of the "economic
benefit" of the life insurance protection enjoyed by the Insured as provided
under applicable Internal Revenue Service Regulations and Revenue Rulings.
4. In consideration of the payment of the Policy premiums by Assignee,
the Owner has assigned the Policy to the Assignee, which Assignment solely gives
the Assignee the limited power to enforce its rights to be paid the amount
provided in paragraph 4(b) from the cash surrender value or a portion of the
death benefit, as defined and limited by the following terms. Such interest of
the Assignee in the Policy shall be specifically limited to:
(a) the right to pledge or assign its interest in the Policy,
subject to the terms of this Agreement and to any assignment executed in
connection with this Agreement;
(b) the right to be paid its net premium outlay (i.e.
cumulative gross premiums paid less payments made by Owner and less any Policy
loan of the Assignee encumbering the Policy); payable upon (i) the surrender or
cancellation of the Policy, as provided in paragraph 6; (ii) the death of the
Insured, as provided in paragraph 7, or (iii) the termination of this Agreement,
as provided in paragraph 8. In the event the cash surrender value is less than
the net premiums paid, the Assignee's interest shall be limited to the cash
surrender value.
5. Policy dividends shall be applied to the payment of the premiums, as
premiums fall due.
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6. In the event of the surrender or cancellation of the Policy, the
Assignee shall be entitled to receive a portion of the cash surrender value
equal to the amount provided in paragraph 4 (b). The balance of the cash
surrender value, if any, shall be paid to the Owner.
7. Upon the death of the Insured, the Assignee shall be entitled to
receive a portion of the death benefit equal to the amount provided in paragraph
4(b). The balance of the death benefit, if any, shall be paid directly to the
Owner, in the manner and in the amount provided by the beneficiary designation
provision endorsed on the Policy.
8. This Agreement may be terminated by the Owner as follows:
(a) If the Owner intends to terminate this Agreement, it
should notify the Assignee in writing, not less than sixty (60) days prior to
the effective date of such termination.
(b) The Owner shall reimburse the Assignee no later than the
effective date of such termination in an amount equal to the net premium outlay
as defined in Paragraph 4(b). Upon receipt of such payment, the Assignee shall
execute an appropriate instrument to release the Collateral Assignment of the
Policy.
(c) If the Owner fails to reimburse the Assignee within the
time specified, the Owner shall execute any and all instruments that may be
required to vest ownership of the Policy in the Assignee; provided the Assignee
reimburses the Owner for the premium payments made by the Owner, if any.
9. This Agreement may be terminated by the Assignee as follows:
(a) If the Assignee intends to terminate this Agreement, it
should notify the Owner in writing, not less than sixty (60) days prior to the
effective date of such termination.
(b) Following receipt of notice from the Assignee, the Owner
shall reimburse the Assignee no later than the effective date of such
termination in an amount equal to
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the net premium outlay as defined in Paragraph 4(b). Upon receipt of such
payment, the Assignee shall execute an appropriate instrument to release the
Collateral Assignment of the Policy.
(c) In the event the Assignee shall fail to pay any Policy
premium as required under Paragraph 3, the Owner shall have the option to pay
the premium and keep the Policy in force and shall have the right to recoup the
premium from the Assignee. In the alternative, the Owner shall have the right
to deem the Assignee's failure to pay the premium as a notice of termination.
The Owner shall advise the Assignee in writing of its determination and the
sixty (60) days notice of termination shall be effective on the date such notice
is sent to Assignee.
(d) If the Owner fails to reimburse the Assignee within sixty
(60) days of the date of termination, the Owner shall execute any and all
instruments required to vest ownership of the Policy in the Assignee; provided
that the Assignee shall reimburse the Owner for the premium payments made by the
Assignee, if any.
(e) On receipt of the notice of termination from the Assignee,
the Owner shall reimburse the Assignee in the amount equal to the net premium
outlay as defined in Paragraph 4(b). Upon receipt of such payment, the Assignee
shall execute an appropriate instrument of release of the Collateral Assignment
of the Policy.
10. Notwithstanding anything to the contrary in Paragraph 9 above,
(a) The Owner shall have the right to repay the Assignee its
net premium outlay (i.e. cumulative gross premiums paid less payments made by
Owner, less any Policy loan of the Assignee encumbering the Policy) in six (6)
equal annual installments, due on the first and each succeeding anniversary of
the termination of the Policy. The Owner shall also pay interest
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on the unpaid portion of the net premium outlay at the applicable federal rate
of interest in effect at the time of termination. The Owner shall have a right
to prepay all or any portion of the net premium outlay at any time in its sole
discretion. In the event Owner defaults for more than ten (10) days after notice
in the payment of any installment, the entire net premium outlay shall become
immediately due and payable. The Policy of insurance shall remain as collateral
until the Owner has paid the Assignee in full.
(b) The provisions of Paragraph 10(a) notwithstanding, in the
event the Policy is terminated by the Assignee (i) as a result of a sale of more
than fifty (50%) percent of the stock of the Corporation or substantially all of
the assets of the Corporation and at least fifty (50%) percent of the
consideration for such sale is in cash, or (ii) in the event that the
Assignee's available cash and cash equivalents are less than Fifteen Million
Dollars ($15,000,000), then the net premium outlay shall be paid by the Owner to
the Assignee on the termination of this Agreement and the Assignee shall release
the Collateral Assignment of the Policy.
00.Xx the event the Owner transfers all of its interest in the Policy,
then all of Owner's interest in the Policy and in this Agreement shall be vested
in such transferee, and such transferee shall be substituted as a party
hereunder, and the Owner shall have no further interest in the Policy.
12. Except as may otherwise be provided by paragraph 8, this Agreement
may not be canceled, amended, altered or modified, except by a written
instrument signed by all of the parties hereto.
13. All notices or other instruments or communications shall be in
writing and shall be deemed delivered (and signed receipt obtained therefor) or
sent by postage prepaid, actually delivered by Federal Express or a comparable
private courier service, actually delivered
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by telecopier or similar "FAX" equipment. Any notice shall be effective on the
date on which it was delivered or on the date actually delivered by other means.
Each party may, by notice to the other parties specify any other address for the
receipt of such instruments or communications.
14. This Agreement shall bind Owner, Assignee and their successors and
assignees, and any Policy beneficiaries. Owner and Assignee intend to be legally
bound hereby.
15. This Amended and Restated Split Dollar Agreement, and the rights of
the parties hereunder, shall be governed by and construed pursuant to the laws
of the Commonwealth of Pennsylvania.
16. This Agreement and the Collateral Assignment contain the entire
understanding among the parties hereto and supersedes any prior agreements.
Assignee:
ATTEST XXX SHOPS, INC.
/s/ Xxxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxx
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Xxxxxx Xxxxxx, Secretary Xxxxxx Xxxxxxx, President
Owner:
INSURED: ROUNICK FAMILY IRREVOCABLE
INSURANCE TRUST
/s/ Xxxxxx Xxxxxxx /s/ Xxxx X. Xxxxxxx
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Xxxxxx Xxxxxxx Xxxx X. Xxxxxxx, Trustee
/s/ Xxxx Xxxxxxx /s/ Xxxxxx Xxxxxx
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Xxxx Xxxxxxx Xxxxxx Xxxxxx, Trustee
(7)