CITIZENS UTILITIES COMPANY
SPLIT DOLLAR LIFE INSURANCE AGREEMENT
THIS AGREEMENT, made as of the 28th day of April, 1994, by and between Citizens
Utilities Company, (hereinafter called the Employer), and Lyman Russell Mitten
(hereinafter called the Employee).
WHEREAS, Employee is a valued and trusted employee and has been employed by
Employer for a number of years and has discharged all duties in a most capable
manner, and
WHEREAS, Employer wishes to encourage Employee to continue employment by
establishing this Split Dollar Life Insurance Agreement, and
WHEREAS, Employer has applied for and acquired Policy #1529754 issued on
November 19, 1993 by Security Life of Denver Insurance Company (hereinafter
called the Carrier) insuring the life of the Employee (hereinafter with any
additions or modifications called the Policy), and
WHEREAS, Employer wishes to help Employee maintain a portion of said life
insurance Policy for the benefit and protection of the Employee's family by the
establishment of this Split Dollar Life Insurance Agreement, to provide an
amount of life insurance payable to the Employee's beneficiary equal to four
times the Employee's Base Salary, subject to adjustment, and
WHEREAS, it is the intent of the parties that the Policy be designed in a manner
to provide that life insurance benefits under this Agreement may continue after
the Employee's termination of employment, and
WHEREAS, it is the intent of the parties to continue this Slit Dollar
Agreement in force until the earlier of the Employee's Normal Retirement Date or
death, and
WHEREAS, the parties intend that the split dollar arrangement provided in
this Agreement will be taxed in accordance with the principles of split dollar
set forth in Rev. Rul. 64-328, 1964-2 CB 11,
NOW THEREFORE, for acknowledged mutual consideration between the parties
hereto it is agreed that:
1. POLICY OWNERSHIP
The Employee shall continue to own the Policy.
2. NORMAL RETIREMENT DATE DEFINED
For the purposes of this Agreement NORMAL RETIREMENT DATE shall mean
the January 1st following the Employee's 65th birthday.
3. DEATH BENEFIT AMOUNT FOR EMPLOYEE'S BENEFICIARY
The Employee's designated beneficiary shall be entitled to a life
insurance death benefit equal to four times the Employee's annualized
Base Salary (a) on the date of death, if death occurs before NORMAL
RETIREMENT DATE, and (b) for the year immediately before the
Employee's NORMAL RETIREMENT DATE, if death occurs on or after the
Employee's NORMAL RETIREMENT DATE. Base Salary shall have the same
meaning as "earnings" as defined in Citizens Utilities Company's group
term life insurance plan as of January 1, 1994 and set-out in Exhibit
A to this Agreement provided, however, that for purpose of determining
the amount of the death benefit under this Agreement there shall be
the following adjustments.
(a) For purposes of this Agreement, during 1994, the Base Salary
for the period from January 1, 1994 to the effective date of the
annual performance review shall be the actual Base Salary. For purpose
of determining Base Salary for the period from the effective date of
the annual performance review until December 31, 1994 the Bass Salary
as of the date immediately proceeding the effective date of the review
shall be increased by the greater of the actual percentage increase
times that Base Salary or 5.5% times that Base Salary.
(b) For each year after 1994, Base Salary as of January 1 of such
year shall be the Base Salary as of December 31, of the preceding year
(computed in the manner as set-out in clause (a) above). For the
period from the annual performance review date until December 31 of
such year, the Base Salary as of the date immediately preceding the
review date shall be increased by the greater of the actual percentage
increase times that Base Salary or 5.5% times that Base Salary.
(c) If any increase in actual Base Salary shall be effective on
any date other than an annual performance review date (by reason of a
promotion or otherwise) the then Base Salary shall be the greater of
actual Base Salary or Base Salary computed in accordance with clauses
(a) and (b) above.
Provided further that the amount of life insurance death benefit
to which the beneficiary of a terminated Employee is entitled is
subject to the provisions of Section 6 hereof.
4. PAYMENT OF PREMIUMS
The Employee shall pay to the Employer that part of each annual
SCHEDULED premium equal to the value of the "reportable economic
benefit" of the life insurance amount to which the Employee's
beneficiary is entitled under this Agreement, calculated in accordance
with U.S. Treasury Department rules. It is the intent of the parties
that this amount be calculated in accordance with U.S. Treasury
Department rules in a manner which will result in the lowest possible
amount being paid by the Employee. Such amount may hereinafter also
may be referred to as "the cost of the pure term insurance." October
15th of each calendar year, the Employer shall give written notice to
the Employee (whether terminated or not) of the annual cost of the
pure term insurance for the current year. Within 30 days after
receiving such notice, the Employee shall pay to the Employer an
amount equal to the cost of the pure term insurance as set forth in
such notice. In the event of the Employee's death at any time, not
having paid all or any portion of the cost of the pure term insurance
for the year of such death, such unpaid amount shall be a charge
against the Employee's benefit under the policy, thereby reducing the
death benefit on a dollar for dollar basis. The Employer shall pay the
annual SCHEDULED PREMIUM in the amount set for the in the Policy on a
timely basis. The cumulative total paid by the Employer, less the
cumulative amounts paid by the Employee as the cost of the pure term
insurance, shall be known as "PREMIUM ADVANCES". The Employer shall
remit each premium due (including the Employee's amount) on an annual
basis on or before the due date and agrees not to change the premium
payment mode from the annual basis. Provided further, however, that if
an Employee has voluntarily terminated employment with Employer, the
Employer's premium payment obligation is hereby modified to allow a
reduction in the amount of the premium payments so that, based on the
Carrier's current assumptions, such modified premium payment schedule
will provide the projected, vested death benefit both pre- and
post-retirement.
5. COLLATERAL ASSIGNMENT
The total amount of all PREMIUM ADVANCES applied to the policy by
the Employer shall constitute and be known as the "EMPLOYER'S INTEREST
IN THE POLICY" during the Employee's lifetime. Additionally, if
Employee voluntarily terminates employment with the employer, the
EMPLOYER'S INTEREST IN THE POLICY shall also include the excess of the
amount of policy cash value over that needed at any time to provide
the death benefit to which Employee will be entitled under this
Agreement. As security for the repayment of the EMPLOYER'S INTEREST IN
THE POLICY, as it may exist from time to time during the Employee's
lifetime, and also as security for the payment of death benefits to
the Employer pursuant to Section 10, the Employee shall executive and
deliver to the Employer, as of the time of the first Premium Advance
hereunder, a Collateral Assignment of said policy. At or about the
time of Employee's NORMAL RETIREMENT DATE, the Employer shall withdraw
the EMPLOYER'S INTERST IN THE POLICY (decreased by the amounts
previously borrowed or withdrawn by the Employer under Section 8
below) from the then policy values and shall release its Collateral
Assignment to the Employee.
6. TERMINATION OF EMPLOYEMENT
A. Voluntary Termination
If employee voluntarily terminates employment with Employer,
Employee will e deemed to have become entitled to a continuing
death benefit under this Agreement in an amount equal to the
product of multiplying Employee's then Vested Percentage times
the death benefit to which the Employee's beneficiary had been
entitled under this Agreement at the time of the Employee's
termination, based on the then Base Salary. The Employee shall
continue to be obliged to continue paying the cost of the pure
term insurance pursuant to Section 4 hereof until Normal
Retirement Date. Employee's Vested Percentage is determined under
the following schedule:
Years of Service Vested
After 1993 Percentage
---------- ----------
1 20
2 40
3 60
4 80
5 100
A Year of Service is any calendar year in which the Employee
is employed for six full months.
Employee's voluntary termination will result in the increase
of the EMPLOYER'S INTEREST IN THE POLICY set forth in Section 5.
Provided, however that if the terminated Employee fails to
contribute such cost of the pure term insurance on the
continuing, level death benefit, then such failure will result in
a charge against the Employee's interest in the policy equal to
the sum of the unpaid annual amounts calculated pursuant to
Section 4 hereof and further increased by an additional charge
for the use of money resulting from such charge at the annually
compounding rate of 5.5%. The parties intend and agree that such
charges shall be treated as "PREMIUM ADVANCES" made by the
Employer, and that such charges will be included as part of the
EMPLOYER'S INTEREST IN THE POLICY. It is further intended and
agreed that such charges will be secured by the Collateral
Assignment pursuant to Section 5 hereof. The effect of such
charges will be to reduce the Employee's pre- and post-retirement
death benefit and cash surrender value benefit level on a dollar
for dollar basis. Any reference to benefit levels or death
benefit(s) in this Agreement shall be deemed to mean "as the same
may be reduced for failure to contribute the cost of the pure
term insurance.
The failure of the Employee to be elected or retained in the
Employee's present position or in another position of equal or
greater responsibility, or a material reduction in the Employee's
authority, functions, duties or responsibilities (whether or not
followed by termination of employment), shall be deemed to be an
"involuntary termination (other than for `good cause')."
Upon the occurrence of any event or condition specified in
the immediately preceding sentence, the Employee's Vested
Percentage shall be fixed at 100%, regardless of the years of
service, and, until termination of the Employee's employment, the
Employee's Base Salary (and consequently the Employee's death
benefit) shall be determined as provided in Section 3. If an
event or condition specified in the second preceding sentence
occurs and is followed by termination of Employee's employment at
any time prior to the Employee's Normal Retirement Date, such
termination of employment shall be an "involuntary termination
(other than for `good cause')", as stated aforesaid and,
following such termination, the Employee's Base Salary (and
consequently the Employee's death benefit) shall be determined as
provided in the first paragraph of section 6B.
B. Involuntary Termination
If an Employee is involuntarily terminated (other than for
"good cause"), the Employee will thereupon become 100% vested in
the right to receive the benefit to which the Employee would be
entitled under this Agreement. If the Employee is involuntarily
terminated the benefit shall be based on the Employee's Base
Salary in the year of termination, adjusted, if necessary, to
reflect a minimum annual 5 1/2% increase in Base Salary
determined in accordance with paragraph 3 of this Agreement for
years after the year of termination up through the year
immediately before the Employee's NORMAL RETIREMENT DATE,
provided that the Employee shall remain obligated to continue to
pay the cost of the pure term insurance until Normal Retirement
Date.
Provided, however, that if the involuntarily terminated
Employee fails to contribute such cost of the pure term
insurance, then such failure will result in a charge against the
Employee's interest in the policy equal to the sum of the unpaid
annual amounts calculated pursuant to Section 4 hereof, and
further increased by an additional charge for the use of money
resulting from such charge at the annually-compounding rate of
5.5%. The parties intend and agree that such charges shall be
treated as "PREMIUM ADVANCES" made by the Employer, and that such
charges will be included as part of the EMPLOYER'S INTERST IN THE
POLICY. It is further intended and agreed that such charges will
be secured by the Collateral Assignment pursuant to Section 5
hereof. The effect of such charges will be to reduce the
Employee's post-retirement death benefit level and the cash
surrender benefit level on a dollar for dollar basis. Any
reference to benefit levels or death benefit(s) in the Agreement
shall be deemed to mean "as the same may be reduced for failure
to contribute the cost of the pure term insurance."
Termination by Employer of Employee's employment for "good
cause" as used in this Agreement shall be limited to willful
malfeasance by Employee in the performance of employment duties
which is demonstrated to have a materially injurious effect on
the Employer's business, or by reason of Employee's conviction of
a felony related directly to the conduce of Employee's office
(which through lapse of time or otherwise, is not subject to
appeal) or, while in the employ of the Employer, knowingly
engaging in and not thereafter refraining from competition;
provided, however, that such termination shall be effected only
by written notice thereof delivered by the Employer to the
Employee specifying in detail the basis for termination, and
shall be effective as of the date which is 30 business days after
receipt of such notice by the Employee; provided further,
however, that if (i) such termination is by reason of Employee's
willful malfeasance without proper cause to perform the
Employee's particular obligations which has a materially
injurious effect on the Employer's business, or by reason of the
Employee knowingly engaging in competition, and (ii) within 30
days following the date of receipt of such notice Employee shall
cease such refusal and shall make best efforts to perform such
obligations, the termination shall not be effective. Without
limitation, Employee shall have the right to contest in
appropriate forums any termination for "good cause."
If employment is terminated for "good cause" (and, if the
Employee has brought a proceeding to contest such termination for
"good cause", the Company has prevailed in such proceeding and
any time to appeal or seek review has expired), the Employee's
and Employee's beneficiary's interest in the Policy and in any
death benefits shall cease, and the Company may cancel the Policy
and receive the full cash surrender value from the Carrier. If
the Employee should die after the date of such termination for
cause but before the cancellation of the Policy and the Employee
or the Employee's representative shall not have successfully
contested such termination for cause, then the Employer shall
receive all death benefits and other value and the Employee's
beneficiary shall be entitle to nothing.
7. DISABILITY
If the Employee or Employer terminates employment as a result of
"total disability", which has had a duration of at least 12 months,
the Employee will have the same rights and responsibilities under this
Agreement as if there had been an involuntary termination, not for
"good cause", under Section 6B above. For purposes of this Agreement,
the term "total disability" shall have the same meaning as the term
"total disability" as defined in the Employer's group long term
disability policy in force at the time and in which the Employee is a
participant. If the Employer sponsors a non-cancelable individual
disability policy for the Employee as a supplement or replacement for
the group disability policy, then the term "total disability" shall
have the same meaning as in the individual policy.
8. POLICY LOANS
After 4 years of employment with Employer beginning January 1,
1994, the Employee will have a right to borrow from the policy for any
educational cost requirements of the Employee and/or the Employee's
immediate family, provided that the Employee may borrow only from the
bash value of the policy which exceeds the EMPLOYER'S INTEREST IN THE
POLICY. And further provided that a voluntarily terminated Employee
will not have the right to borrow from the policy. Any loans from the
policy will reduce the Employee's pre- and post-retirement benefit
level on a dollar for dollar basis.
Except as provided in this paragraph, the Employer shall have no
rights to borrow or withdraw any amounts from the policy prior to the
Employee's Normal Retirement Date. At Normal Retirement Date, the
Employer's right to borrow or withdraw from the policy shall be
limited to its INTEREST IN THE POLICY. Provided that if the Employee
has voluntarily terminated, the Employer shall have the right at any
time to borrow or withdraw from the Policy any excess cash value not
required under the Carrier's then current projections to provide the
death benefit to which Employee would be entitle under this Agreement.
9. SATISFACTION OF EMPLOYER'S INTEREST DURING EMPLOYEE'S LIFE
Except in the base of termination for "good cause," the Employer
shall withdraw the EMPLOYER'S INTERESET IN THE POLICY (as increased
under Section 5 if Employee has voluntarily terminated but decreased
by any amounts previously borrowed or withdrawn by the Employer under
Section 8 above) from the then policy values on the Employee's Normal
Retirement Date but in no event before, the Employee's Normal
Retirement Date and, upon receipt thereof, shall release and cancel
the Collateral Assignment. Such release and cancellation shall
terminate this Agreement and all obligations, right and interest of
the Employer hereunder. Upon the release and cancellation of the
Collateral Assignment by the Employer, the Employee will have no
further rights or claim against the Employer in connection with this
Agreement and will rely only on the then values in the Policy post
retirement even though the then policy values might be insufficient to
pay the death benefits specified in this Agreement.
10. PAYOUT OF INSURANCE PROCEEDS
In the event of the death of the Employee, while this Agreement
is in force, the Carrier shall pay out policy proceeds in the
following order of sequence:
1. To the Employer: The EMPLOYER'S INTEREST IN THE POLICY.
2. To the Employee: The amount to which the Employee's
designated beneficiary is entitled under
this Agreement.
3. To the Employer: Any remaining balance. No beneficiary or
representative of the Employee shall have
any interest in such balance.
11. BENEFICIARY DESIGNATION
The Employee shall have the right to name and change the
beneficiary under the policy to the extent of the amount of the death
benefit to which the Employee's beneficiary may be entitled under this
Agreement. The Employee's beneficiary for the amount set forth in this
agreement shall be the beneficiary named in the most recently executed
beneficiary designation form filed with the carrier as of the date of
employee's death. The Employer will cooperate fully in order to
effectuate any change in the beneficiary designation which the
Employee may desire to make, subject to the rights of the Employer as
defined in this Agreement. The Employer will be the beneficiary of any
death benefits in excess of the amounts to which the Employee's
beneficiary may be entitled under this Agreement and no beneficiary or
representative of the Employee shall have any interest in such excess.
12. AGREEMENT BINDING
This agreement shall be binding upon the parties hereto, their
heirs, legal representatives or successors.
13. AMENDMENT
This Agreement shall not be modified or amended except by a
written Agreement signed by the Emp0loyer and the Employee.
14. STATE LAW
This Agreement shall be subject to and governed by the laws of
the State of Connecticut.
15. NAMED FIDUCIARY AND PLAN ADMINISTRATOR
Citizens Utilities Company is hereby designated the "Named
Fiduciary", and it shall be responsible for the management, control
and administration of the Split Dollar Plan as established herein. It
may allocate to others certain aspects of the management and
operational responsibilities of the plan, including the employment of
advisors and the delegation of any ministerial duties to qualified
individuals.
16. CLAIMS PROCEDURE
A. Filing of Benefit Claims
1. When an Employee, beneficiary or his or her duly authorized
representative (hereinafter referred to as the "Claimant")
have a claim which may be covered under the provisions of
the Policy, he or she should contact the Named Fiduciary.
2. Claim forms and claim information can be obtained from the
above Named Fiduciary.
3. The claim must be in writing and delivered, along with a
certified copy of the death certificate, to the above Named
Fiduciary either in person or by mail, postage paid. The
above Named Fiduciary will forward the claim form, within 14
days of its receipt, to the authorized representative of the
Carrier.
B. Initial Disposition of Benefit Claims
1. Within thirty (30) days after receipt of a claim, said
Carrier shall send to the Claimant, by mail, postage
prepaid, a notice granting or denying, in whole or in part,
a claim for benefits.
2. If a claim for benefits is denied, the Carrier shall provide
to the Claimant written notice setting forth in a manner
calculated to be understood by the Claimant.
(a) The specific reasons for denial;
(b) Specific reference to pertinent policy provisions on
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) Appropriate information as to the steps to be taken if
the Claimant wishes to submit his or her claim for
review.
3. If the claim is payable, a benefit check will be issued to
the Claimant.
4. If a notice of denial is not received within 30 days of the
claim being filed, the claim shall be deemed denied and the
Claimant shall be permitted to proceed to the review stage.
C. Review Procedure
1. Within thirty (30) days of:
(a) The receipt by the Claimant of written notification
denying, in whole or in part, his or her claim, or
(b) A deemed denial resulting from the Carrier's failure to
provide the Claimant with written notice of denial
within 30 days of the claim being filed, the Claimant
upon written application to the Carrier, delivered in
person or by certified mail, postage prepaid, may
request an opportunity to appeal a denied claim to the
Carrier or a person designated by the Carrier.
2. The Claimant may:
(a) Request a review upon written application to Carrier,
(b) Review pertinent documents; and
(c) Submit issues and comments in writing.
3. The decision on review shall be made within thirty (30) days
of the Carrier receipt of a request for review.
4. The decision on review shall be in writing and shall include
specific reasons for the decision, written in a manner
calculated to be understood by the Claimant, as well as
specific references to the policy provision on which the
decision is based.
5. If the decision on review is not rendered within 30 days,
then the claim shall be deemed denied on review.
D. Other Remedies
1. After exhaustion of the claims procedures, nothing shall
prevent any person from pursuing any other legal or
equitable remedy otherwise available.
17. NOTICES
All notices or communications provided for herein shall be in
writing and shall be delivered to Employer, Employee or the Carrier in
person or by United States mail, via certified mail return receipt
requested, postage prepaid, addressed to Employee as follows:
Lyman Russell Mitten
10 Banks Drive
Wilton, CT 06897 - 3202
or addressed to Employer as follows:
Citizens Utilities Company
Three High Ridge Park
Stamford, CT 06905
Attn: Vice President, Tax
or addressed to the Carrier as follows:
Security Life of Denver
1290 Broadway
Denver, CO 80203
ATTN: Claims Department
Until and unless other addresses are specified by written notice.
18. ENTIRE AGREEMENT
This Agreement sets forth the entire agreement of the parties
with respect to the subject matter hereof. Any and all prior
agreements or understandings will respect to such matters are hereby
superseded.
CORPORATE SEAL
Citizens Utilities Company
Attest: Employer
/s/ Charles J. Weiss By: /s/ Daryl A. Ferguson
- ------------------------------- --------------------------
Charles J. Weiss Daryl A. Ferguson
Attest:
By: /s/ L. Russell Mitten
- ------------------------------- --------------------------
L. Russell Mitten
Dated: April 28, 1994
-------------------------
Filed at the Home Office of the Insurer this 5th Day of July 1994. The Insurer
assumes no responsibility for the Validity of this document.
Security of Denver
/s/ Jean C. Gallagher
-----------------------------------------
Jean C. Gallagher, Sr. Vice President
CITIZENS UTILITIES COMPANY
SPLIT DOLLAR LIFE INSURANCE AGREEMENT
EXHIBIT A
DEFINITION OF EARNINGS
"Earnings" means only that annual, monthly, bi-weekly, or weekly pay, as
the case may be, received by the employee from the employer excluding
commissions, bonuses, overtime pay or other additional compensation.