EXHIBIT 10.20
ALZA Corporation
Executive Estate Protection Plan Agreement
FORM OF EXECUTIVE ESTATE PROTECTION PLAN AGREEMENT
This Executive Estate Protection Plan Agreement ("Agreement")
is made, as of ____________, 1999, among ALZA Corporation, a
Delaware corporation, (the "Corporation") and
_________________________ (the "Participant") and
___________________________ ( the "Owner").
RECITALS
A. The Participant desires to insure his or her life for the
benefit and protection of the Participant's family or other
beneficiary under the Policy (as defined below);
B. The Corporation desires to help the Participant provide life
insurance for the benefit and protection of his or her family
or beneficiary by providing funds from time to time to pay
the premiums due on the Policy in accordance with this
Agreement;
C. The Owner desires to assign certain rights and interests in
the Policy to the Corporation, to the extent provided herein, as
security for repayment of certain funds provided by the
Corporation for the acquisition and/or maintenance of the Policy;
and
D. The Corporation has established a trust ("Trust") dated
________________, 1998, by and between the Corporation and
______________________________ ("Trustee") to provide a source of
funds to cover its obligations under the Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and the mutual
agreements and covenants set forth below, the parties to this
Agreement agree as follows:
1. Definitions. For purposes of this Agreement, unless
otherwise clearly apparent from the context, the following phrases
or terms shall have the following indicated meanings:
(a) "Aggregate Premiums Paid" shall mean, at any time, an amount
equal to (i) the cumulative premiums paid by the Corporation on
the Single Life Policy, plus (ii) the cumulative premiums paid by
the Corporation on the Joint LifePolicy, plus (iii) in the case of
the Joint Life Policy only, interest at the rate of 3.6%per annum
compounded annually on the premiums on such Joint Life Policy.
(b) "Benefit Measurement Date" shall mean the date on which the
first of any of the following events occurs:
(i) termination of this Agreement in accordance with
Section 9 below;
(1) for the Joint Life Policy, the ___________
(____) anniversary of the issuance of the
Joint Life Policy; and
(2) for the Single Life Policy, the _________
(___) anniversary of the issuance of the
Single Life Policy; or
(ii) the death of the Decedent.
(c) "Cash Surrender Value" shall mean an amount that equals,
at any specified time, the cash surrender value as
determined under the terms of the Policy.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(e) "Collateral Assignment" shall mean an assignment made by the
Owner in favor of the Corporation in a form mutually agreed to by
the Corporation and the Owner and accepted by the Insurer.
(f) "Collateral Interest" shall mean the Corporation's interest
in the Policy, which shall equal, at any time, the lesser of
Aggregate Premiums Paid or Cash Surrender Value, and which shall
be repaid to the Corporation in accordance with Section 6 below.
(g) "Corporation's Death Benefit" shall mean the portion of the
Policy's death benefit, if any, that exceeds the sum of the
Collateral Interest and the Owner's Death Benefit.
(h) "Decedent" shall mean, as to a Single Life Policy, the
Participant, and, as to a Joint Life Policy, the second to die of
the Participant and his or her spouse.
(i) "Designated Beneficiary" shall mean the beneficiary
designated under the Policy.
(j) "Economic Income" shall mean taxable compensation income for
that portion of the premiums paid by the Corporation that is equal
in amount to the value of the "economic benefit" derived by the
Participant from the Policy's life insurance protection, as
determined for Federal income tax purposes under Revenue Rulings
64-328 and 66-110, plus any economic benefit derived from any
reimbursement for tax liability under Section 3(c). Economic
Income shall include any increase in economic benefit attributable
to the death of the first to die under a Joint Life Policy.
(k) "Insurer(s)" shall mean
.
(l) "Joint Life Policy" means a policy which pays upon the death
of the second to die of the Participant and his or her spouse.
(m) "Owner" shall mean
________________________________________________.
(n) "Owner's Death Benefit" shall mean $__________________.
(o) "Participant" shall mean
_____________________________________________.
(p) "Plan" shall mean the plan described in Section 8(a) below.
(q) "Policy" shall mean the following Joint Life Policy or
Policies or Single Life Policy or Policies on the life of the
Participant that are issued by the Insurer(s):
Insurer Policy Number Type of
Policy
(r) "Single Life Policy" means a policy that pays upon the death
of the Participant.
2. Acquisition of Policy; Ownership of Insurance. The parties
to this Agreement shall cooperate in applying for and
obtaining the Policy. The Policy shall be issued to the
Owner as the sole and exclusive owner of the Policy, subject
to the rights and interests granted to the Corporation as
provided in this Agreement and the Collateral Assignment.
Concurrent with the signing of this Agreement, the Owner will
collaterally assign the Policy to the Corporation, in the
form of the Collateral Assignment, as security for the
payment of the Collateral Interest, which assignment shall
not be altered or changed without the mutual consent of the
Corporation and the Owner.
3. Premium Payments on Policy.
(a) Payments and Reimbursements. Prior to the occurrence of the
Benefit Measurement Date, the Corporation shall pay to the
Insurer, on or before each applicable premium due date, all
applicable premiums for the Policy. In the event that the
Corporation fails to make any such payment, the Owner or the
Participant may make (but is not required to make) any such
payment, and the Corporation shall immediately reimburse the Owner
or the Participant, as the case may be, for any amount so paid.
(b) Additional Compensation. Each calendar year, the Corporation
shall withhold from the compensation paid to the Participant,
including any compensation paid pursuant to Section 6(c) below, in
a manner determined by the Corporation in its reasonable
discretion, the Participant's share of FICA and other employment
and income taxes relating to that compensation.
(c) Tax Reimbursement. On or before March 15 following each
calendar year until the Benefit Measurement Date, the Corporation
shall reimburse the Participant for some or all of the
Participant's state and federal tax liability attributable to the
Participant's Economic Income for such calendar year. The tax
rates used by the Corporation in calculating the reimbursement
under this Section 3(c) shall be selected by the Corporation in
its sole discretion, and the Participant acknowledges that such
reimbursement may or may not offset his or her entire tax
liability with regard to his or her Economic Income. The
Participant also acknowledges that any reimbursement under this
Section 3(c) itself will be Economic Income.
4. Corporation's Rights. The Corporation's rights and interests
in and to the Policy shall be specifically limited to (i) the
right to be paid its Collateral Interest and the
Corporation's Death Benefit, if any, in accordance with
Section 6 below, (ii) the rights specified in the Collateral
Assignment, and (iii) the right to obtain one (1) or more
loans or advances on the Policy, provided, however, that any
such loans shall not, in the aggregate, exceed the Aggregate
Premiums Paid by the Corporation at any specified date
without the written consent of the Participant.
5. Owner's Rights. Subject to the terms of this Agreement and
the Collateral Assignment, the Owner of the Policy shall be
entitled to exercise all rights in the Policy while the
Collateral Assignment is in effect, except for the following,
which may be exercised only in accordance with Section 6:
(a) To borrow against or pledge the Policy;
(b) To surrender, cancel or assign the Policy; or
(c) To take a distribution or withdrawal from the Policy.
In particular, subject to the terms and conditions of the
Policy, and the provisions of Section 6 below, the Owner may
assign its rights under this Agreement and the Collateral
Agreement, including but not limited to an assignment to an
insurance trust of which the Participant is a settlor. In
the event of an assignment of its rights, the Owner shall
promptly notify the Corporation of the name and address of
the new Owner or assignee, including the name and address of
any trustee.
6. Collateral Interest. On the Benefit Measurement Date, the
Collateral Interest (and, if applicable under Section 6(a)
below, the Corporation's Death Benefit) shall be paid or
repaid to the Corporation in the following manner:
(a) Notwithstanding any provision of this Agreement or the
Policy that may be construed to the contrary, if the
Benefit Measurement Date occurs due to the death of the
Decedent, (i) the Corporation shall be entitled to that
portion of the Policy's death proceeds that equals the
sum of the Collateral Interest and the Corporation's
Death Benefit, if any, and (ii) the Owner or the
Designated Beneficiary, as the case may be, shall be
entitled to the Owner's Death Benefit; provided,
however, if the Benefit Measurement Date occurs due to
the suicide of the Decedent, and the proceeds from the
Policy are limited by either a suicide or contestability
provision under the Policy, the Corporation shall be
entitled to that portion of the higher of the Policy's
Cash Surrender Value or death proceeds that does not
exceed the Aggregate Premiums Paid. In either event,
promptly following the Decedent's death, the Corporation
and the Owner or the Designated Beneficiary shall take
all steps necessary to collect the death proceeds of the
Policy by submitting the proper claims forms to the
Insurer. The Corporation shall notify the Insurer of
the amount of the Owner's Death Benefit (except when the
Policy's proceeds are limited because of the Decedent's
death by suicide) and the Corporation's Collateral
Interest in the Policy at the time of such death. Such
amounts shall be paid, respectively, by the Insurer to
the Owner or to the Designated Beneficiary, as the case
may be, and the Corporation.
(b) If the Benefit Measurement Date is other than the date
of the Decedent's death, the Corporation's Death
Benefit, if any, shall be paid to the Owner or the
Designated Beneficiary, as the case may be, thebe. The
Corporation's Collateral Interest in the Policy shall be
repaid in one of the following ways, as elected by the
Corporation (or the Trustee, upon and after a Change in
Control, as such term is defined in the Trust) in
writing and in accordance with Section 6(c) below,
within thirty (30) days after the date the Corporation
first notifies the Participant in writing of the
occurrence of the Benefit Measurement Date:
(i) The Insurer shallmake a loan against the Policy in
an amount equal to the Corporation's Collateral
Interest and shall pay the proceeds to the
Corporation; the Owner shall be considered the
borrower for all purposes under the loan;
(ii) The Insurer shall withdraw funds from the Policy in
an amount equal to the Corporation's Collateral
Interest and shall pay the proceeds to the
Corporation;
(ii) The Insurer shall make a loan against the Policy in
an amount equal to the Corporation's Collateral
Interest and shall pay the proceeds to the
Corporation; the Owner shall be considered the
borrower for all purposes under the loan; or
(iiii) The Owner shall pay to the Corporation, from
the Owner's separate funds, an amount equal to the
Corporation's Collateral Interest.
(c) The Corporation, in its reasonable discretion, may
select any of the three methods described in Section
6(b) to be repaid its Collateral Interest in the Policy;
provided, however, upon and after a Change in Control
(as that term is defined in the Trust), the Corporation
must select the method described in Section 6(b)(i)
above.
(d) The Corporation agrees to keep records of its premium
payments and to furnish the Owner and the Insurer with a
statement of its Collateral Interest whenever either
party requires such statement.
(e) Upon and after the Corporation's Collateral Interest in
the Policy has been repaid pursuant to Section 6(b)
above, the Corporation shall (i) assign its Collateral
Interest in the Policy to the Owner, (ii) execute and
file with the Insurer an appropriate release of the
Corporation's Collateral Interest in the Policy and
(iii) have no further interest in the Policy; provided
that, in all instances, the Corporation has received
payment in full for its Collateral Interest in the
Policy. Further, the Participant and/or Owner hereby
acknowledge, understand and agree that, upon the release
of the Corporation's Collateral Interest, the
Corporation shall not have any responsibility for the
future performance of the Policy and shall have no
obligation to make any additional premium payments.
(f) Upon payment to the Corporation of its Collateral
Interest in accordance with this Section 6, this
Agreement, and the Participant's participation in the
Plan, shall terminate and no party shall have any
further rights or obligations under the Agreement or the
Plan with respect to any other party.
(g) Notwithstanding anything to the contrary in this
Agreement, the Corporation shall not have any obligation
to seek or inquire after the whereabouts of an Owner or
a Participant upon a Benefit Measurement Date.
7. Insurer.
(a) The Insurer is not a party to this Agreement, shall in
no way be bound by or charged with notice of its terms,
and is expressly authorized to act only in accordance
with the terms of the Policy. The Insurer shall be fully
discharged from any and all liability under the Policy
upon payment or other performance of its obligations in
accordance with the terms of the Policy.
(b) The signature(s) required for the Insurer to recognize
the exercise of a right under the Policy shall be
specified in the Collateral Assignment.
8. Plan; Named Fiduciary; Claims Procedure.
(a) This Agreement is part of the ALZA Executive Estate
Protection Plan, which consists of all ALZA Corporation
Executive Estate Protection Plan Agreements that so
reference their association with the Plan.
(b) The Corporation is the named fiduciary of the Plan for
purposes of this Agreement.
(c) The following claims procedure shall be followed in
handling any benefit claim under this Agreement and the
Plan:
(i) The Owner, Participant, or the Designated
Beneficiary, as the case may be, (the "Claimant"),
shall file a claim for benefits by notifying the
Corporation in writing. If the claim is wholly or
partially denied, the Corporation shall provide a
written notice within ninety (90) days specifying
the reasons for the denial, the provisions of this
Agreement on which the denial is based, and
additional material or information, if any, that is
necessary for the Claimant to receive benefits.
Such written notice shall also indicate the steps
to be taken by the Claimant if a review of the
denial is desired.
(ii) If a claim is denied, and a review is desired, the
Claimant shall notify the Corporation in writing
within sixty (60) days after receipt of written
notice of a denial of a claim. In requesting a
review, the Claimant may review Plan documents and
submit any written issues and comments the Claimant
feels are appropriate. The Corporation shall then
review the claim and provide a written decision
within sixty (60) days of receipt of a request for
a review. This decision shall state the specific
reasons for the decision and shall include
references to specific provisions of this
Agreement, if any, upon which the decision is
based.
(iii) If no event shall the Corporation's liability
under this Agreement exceed the amount of proceeds
from the Policy.
9. Amendment of Agreement. This Agreement shall not be modified
or amended except by a writing signed by all the parties
hereto.
10. Binding Agreement. This Agreement shall be binding upon the
heirs, administrators, executors, successors and assigns of
each party to this Agreement.
11. State Law. This Agreement shall be subject to and be
construed under the internal laws of the State of California,
without regard to its conflicts of laws principles.
12. Validity. In case any provision of this Agreement shall be
illegal or invalid for any reason, said illegality or
invalidity shall not affect the remaining parts of this
Agreement, but this Agreement shall be construed and enforced
as if such illegal or invalid provision had never been
inserted in this Agreement.
13. Not a Contract of Employment. The terms and conditions of
this Agreement shall not be deemed to constitute a contract
of employment between the Corporation and the Participant.
Such employment is hereby acknowledged to be an "at will"
employment relationship that can be terminated at any time
for any reason, with or without cause, unless expressly
provided in a separate written employment agreement. Nothing
in this Agreement shall be deemed to give the Participant the
right to be retained in the service of the Corporation or to
interfere with the right of the Corporation to discipline or
discharge the Participant at any time.
14. Examination. Pursuant to his or her duty under Section 2,
the Participant shall submit to a medical examination if
required by the Insurer. In addition, if the Policy is a
Joint Life Policy, the Participant's spouse shall submit to a
medical examination if required by the Insurer.
15. Notice. Any notice or filing required or permitted to be
given under this Agreement to the Owner, Participant or the
Corporation shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, to
the address below:
To the Owner: ________________________
________________________
________________________
To the Participant: ________________________
________________________
________________________
To the Corporation: ALZA Corporation
950 Page Mill Road
P.O. Box 10950
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attn: Treasurer
or to such other address as may be furnished to the Owner,
Participant or the Corporation in writing in accordance with
this notice provision. Such notice shall be deemed given as
of the date of delivery or, if delivery is made by mail, as
of the date shown on the postmark on the receipt for
registration or certification. Any notice or filing required
or permitted to be given to the Owner and/or the Participant
or the Designated Beneficiary under this Agreement shall be
sufficient if in writing and hand-delivered, or sent by mail,
to the last known address of the Owner and/or the
Participant, as the case may be.
16. Tax Consequences. The Corporation does not guarantee that
the tax consequences of the Participant's and/or Owner's
participation in the Plan will be as the parties hereto may
have expected, and by signing this Agreement the Participant
and Owner assume the risk that different interpretations of
currently applicable tax law or subsequent changes in
applicable tax law may result in unexpected tax consequences.
17. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with regard to the
subject matter of this Agreement and supersedes all previous
negotiations, agreements and commitments in respect thereto.
No oral explanation or oral information by the parties to
this Agreement shall alter the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have signed this
Agreement as of the date first written above.
"Corporation"
ALZA Corporation, a Delaware
corporation
By:
Its:
"Participant"
Signature
Print Name
"Owner"
Signature
Print Name
