Exhibit 10.26
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
This Agreement is entered into as of ____________ by
and between Ryan's Family Steak Houses, Inc. and (First_Name)
(MI) (Last_Name) ("Employee") in reference to the following
facts:
1. Employee is a valued employee of Ryan's Family
Steak Houses, Inc..
2. Ryan's Family Steak Houses, Inc. has
simultaneously with the execution of this Agreement caused Sun
Life Assurance Company of Canada (U.S.), a wholly-owned
subsidiary of Sun Life Assurance Company of Canada [the
"Insurance Company"], to issue policy number __________________
(the "Policy") on the life of (First_Name) (MI) (Last_Name)
(Employee). The necessary premium to bind the policy has been
paid by Ryan's Family Steak Houses, Inc. as of the date of this
Agreement.
3. For purposes of this Agreement, Ryan's Family
Steak Houses, Inc. and its subsidiaries shall constitute the
"Employer." For this purpose, a subsidiary is a corporation
which is a member of a controlled group of corporations (within
the meaning of Section 1563(a) of the Internal Revenue Code of
1986, as amended (the "Code"), determined without regard to
Section 1563(a)(4) and (e)(3)(C) thereof and by substituting the
phrase "at least 50 percent" for the phrase "at least 80 percent"
each time it appears in Section 1563(a)(1)) of which Ryan's
Family Steak Houses, Inc. is a member. If Employee is employed
by a corporation which, as a result of a sale or other corporate
reorganization, ceases to be a member of such controlled group,
such sale or other corporate reorganization shall be treated as a
termination of Employee by Employer without Cause (as defined in
Section 8) unless immediately following the event and without any
break in employment the Employee remains employed by Ryan's
Family Steak Houses, Inc. or another corporation which is a
member of the controlled group of corporations.
NOW THEREFORE, in consideration of the facts set forth
above and the various promises and covenants set forth below, the
parties to this Agreement agree as follows:
1. Ownership of Policy.
Ryan's Family Steak Houses, Inc. acknowledges that Employee
is the owner of the Policy and that Employee is entitled to
exercise all of his or her ownership rights granted by the terms
of the Policy, except to the extent that the power of the
Employee to exercise those rights is specifically limited by this
Agreement. Except as so limited, it is the expressed intention
of the parties to reserve to Employee all rights in and to the
Policy granted to its owner by the terms thereof, including, but
not limited to, the right to change the beneficiary and the right
to exercise settlement options.
2. Ryan's Family Steak Houses, Inc.'s Security Interest.
Ryan's Family Steak Houses, Inc.'s security interest in the
Policy is conditioned upon its satisfactorily performing all of
the covenants under this Agreement. Each period covered by any
individual premium payment described in Section 3 shall be
considered a discrete extension of Ryan's Family Steak Houses,
Inc.'s security interest in the Policy. Ryan's Family Steak
Houses, Inc. shall not have nor exercise any right in and to the
Policy which could, in any way, endanger, defeat, or impair any
of the rights of Employee in the Policy, including by way of
illustration any right to collect the proceeds of the Policy in
excess of the amount due Ryan's Family Steak Houses, Inc. as
provided in this Agreement and in the Policy. The only rights in
and to the Policy granted to Ryan's Family Steak Houses, Inc. in
this Agreement shall be limited to Ryan's Family Steak Houses,
Inc.'s security interest in and to the cash value of the Policy,
as defined herein, (the "Security Interest"). Ryan's Family
Steak Houses, Inc. shall not assign any of its Security Interest
in the Policy to anyone other than Employee.
3. Premium payments.
For so long as the Ryan's Family Steak Houses, Inc.'s
Security Interest has not been released, Ryan's Family Steak
Houses, Inc. agrees to pay the scheduled premium on the Policy on
or before the last day of each "policy year" (as such term is
used in the Policy) in an amount equal to the sum of (a) the
compensation deferred by Employee under the Ryan's Family Steak
Houses, Inc. Deferred Compensation Plan (the "Plan") during the
pay periods ending during such policy year plus (b) the
Employer's discretionary matching contributions credited to
Employee's account under the Plan for the calendar year ending
during such policy year plus (c) the excess, if any, of (i) the
"cost of insurance" (as defined in the Policy) for the excess, if
any, of the minimum death benefit required under Section 4 hereof
(determined in compliance with the 7-pay test set forth in
Section 7702A of the Code) over (ii) the minimum death benefit
(determined in compliance with such 7-pay test) which could be
provided by that portion of the accumulated premiums actually
paid under the Policy which were paid pursuant to clauses (a) and
(b) of this sentence. The premium payment shall be transmitted
directly by Ryan's Family Steak Houses, Inc. to the Insurance
Company. During the period of time that this Agreement is in
effect, Employee irrevocably agrees that all dividends paid on
the Policy shall be applied to purchase from the Insurance
Company additional paid-up life insurance on the life of
Employee.
4. Death of Employee while employed by Employer.
(a) If Employee dies prior to termination of employment
with Employer and prior to his or her Security Release Date (as
defined in Section 10 below), Employee's designated beneficiary
shall be entitled to receive the entire death benefit under the
Policy, which shall be two times the sum of Employee's annual
base salary at the time of death, plus the last paid annual
bonus.
(b) Employee agrees that, during the period of this
Agreement, Employee will obtain and provide to Ryan's Family
Steak Houses, Inc. and/or the Insurance Company the written
consent of the spouse of the Employee, in the form attached
hereto as Exhibit A, to any designation by Employee of anyone
other than the Employee's spouse as the beneficiary to receive
the benefits under this Section 4.
5.Employee's attaining his or her Security Release Date or
termination of Employee's employment on account of a
Qualifying Termination.
(a) By making timely payment of the premiums described in
Section 3, Ryan's Family Steak Houses, Inc. may renew its
Security Interest in the Policy for the period commencing with
the due date of such payment until the later of (1) the due date
of the next scheduled premium described in Section 3, or (2) the
date that Employee attains his or her Security Release Date or
terminates employment with the Employer on account of a
Qualifying Termination (either of which events described in this
clause 2 is referred to herein as a "Qualifying Event"). Ryan's
Family Steak Houses, Inc. may not extend its Security Interest in
the Policy under the Collateral Security Assignment Agreement
attached as Exhibit B after the occurrence of a Qualifying Event.
After such Qualifying Event, Employee shall be entitled to
exercise all of his or her ownership rights in the Policy without
any limitation, and this Agreement and its accompanying
Collateral Security Assignment Agreement shall no longer
constitute a restriction on Employee's rights.
(b) Notwithstanding paragraph (a), Ryan's Family Steak
Houses, Inc. shall continue to have its Security Interest in the
Policy to the extent required to satisfy its withholding
obligations as described in Section 12 and to recover any amounts
owed by Employee as described in paragraph (c) below.
(c) Employee agrees that if, at the time of the occurrence
of a Qualifying Event, Employee has any outstanding balances on
any loans made by Ryan's Family Steak Houses, Inc. to Employee,
then, unless Employee otherwise repays such outstanding balances,
Employee shall cause, either by withdrawing from or borrowing on
a nonrecourse basis against the Policy, to be transferred to
Ryan's Family Steak Houses, Inc. that portion of the cash value
of the Policy which is equal to the sum of the outstanding
balances on all such loans.
6.Termination of an Employee for a reason other than a Qualifying
Termination.
If the employment of Employee with Employer is terminated
prior to his or her Security Release Date for a reason other than
a Qualifying Termination (as described below), Employee shall
cause, either by withdrawing from or borrowing against the
Policy, on a nonrecourse basis, to be transferred to Ryan's
Family Steak Houses, Inc. an amount equal to the maximum amount
that may then be obtained under the Policy; provided that, the
amount to be transferred to Ryan's Family Steak Houses, Inc.
shall be reduced to the extent the Employee has previously
transferred to Ryan's Family Steak Houses, Inc. an amount equal
to any difference that then exists between the cash value of the
Policy and the amount that may be borrowed against the Policy.
In no event shall Employee's voluntary resignation prior to
attaining his or her Security Release Date (as such concept is
further defined below) ever constitute a Qualifying Termination,
except in certain situations following a Change in Control (see
Section 9).
7.Definition of a Qualifying Termination.
A Qualifying Termination is either of the following events:
the termination of Employee by Employer for any reason other than
"Cause," as described in Section 8; or the termination of
Employee after a Change in Control under the circumstances
described in Section 9(a). Both of these concepts are further
defined below.
8.Qualifying Termination because Employee is terminated for a
reason other than "Cause".
For purposes of this Section, "Cause" shall mean an act or
acts of dishonesty or moral turpitude (including but not limited
to conviction of a felony) taken by Employee which materially
injures or damages the Employer.
9.Qualifying Termination on account of termination after a Change
in Control.
(a) A Qualifying Termination shall be treated as occurring
after a "Change in Control" (as defined below) if there is first
a "Change in Control" and then, within three years following such
Change in Control, either (1) Employee's employment with the
Employer is terminated without "Cause" (as defined in Section 8)
or (2) Employee terminates his or her employment with the
Employer for "Good Reason" (as defined in subsection (c) below).
(b) For purposes of this Section, a "Change in Control"
shall mean (1) the dissolution or liquidation of Ryan's Family
Steak Houses, Inc., (2) a reorganization, merger, or
consolidation of Ryan's Family Steak Houses, Inc. with one or
more corporations as a result of which Ryan's Family Steak
Houses, Inc. is not the surviving corporation, (3) the
acquisition of beneficial ownership, directly or indirectly, of
more than 25% of the voting power of the outstanding stock of
Ryan's Family Steak Houses, Inc. by one person, group,
association, corporation, or other entity, coupled with the
election to the Board of Directors of new members who were not
originally nominated by the Board at the last annual meeting and
who constitute a new majority of the Board or (4) upon the sale
of all or substantially all the property of Ryan's Family Steak
Houses, Inc.. The term "Change in Control" shall not apply to
any reorganization or merger initiated voluntarily by Ryan's
Family Steak Houses, Inc. in which Ryan's Family Steak Houses,
Inc. is the surviving entity.
(c) For purposes of this Section, "Good Reason" shall mean
the occurrence of one of the following events without Employee's
consent:
(1)An adverse and significant change in the Employee's
position, duties, responsibilities, or status with
the Employer, or a change in business location to
a point which is more than 50 miles from his or
her location prior to the Change in Control,
except for required travel on Employer business to
an extent substantially consistent with his or her
business travel obligations prior to the Change in
Control.
(2)A reduction by the Employer in Employee's base
salary or opportunity for Bonus; and
(3)The taking of any action by the Employer to
eliminate benefit plans without providing
substitutes therefor, to reduce benefits
thereunder or to substantially diminish the
aggregate value of incentive awards or other
fringe benefits including insurance and vacation
days.
(d) A termination of employment by Employee within the 36-
month period following a Change in Control shall be for Good
Reason if one of the occurrences specified in paragraph (c) shall
have occurred, notwithstanding that Employee may have other
reasons for terminating employment, including employment by
another employer which Employee desires to accept.
10. Employee's attaining his or her Security Release Date.
(a) Employee's "Security Release Date" shall mean the date
which is two years following the date on which Ryan's Family
Steak Houses, Inc. receives from Employee a completed notice in
the form attached hereto as Exhibit B, provided that Employee
continues to be employed by Employer until such date. Employee's
election of a Security Release Date shall be irrevocable.
(b) Ryan's Family Steak Houses, Inc.'s Security Interest in
the Policy is contingent upon the timely payment of premiums
under Section 3 of this Agreement. Each period covered by any
individual premium payment shall be considered an independent
extension of Ryan's Family Steak Houses, Inc.'s Security Interest
in the Policy. In the event that Ryan's Family Steak Houses,
Inc. waives its rights by reason of failure to make payments
under Section 3 of this Agreement, Employee shall immediately
attain his or her Security Release Date. Ryan's Family Steak
Houses, Inc.'s failure to extend its rights in no way affects
Ryan's Family Steak Houses, Inc.'s duties and obligations under
this Agreement.
11. Limitation on Employee's rights prior to a Qualifying Event.
In order to protect Ryan's Family Steak Houses, Inc.'s
Security Interest and notwithstanding any other provisions in
this Agreement, prior to a Qualifying Event, Employee agrees that
he or she will not modify the death benefit under the Policy,
direct the investment of the cash surrender value of the Policy,
borrow against the Policy, assign the Policy, or obtain any
portion of the cash value of the Policy. Notwithstanding the
preceding sentence, if Section 6 applies to a termination,
Employee may borrow or withdraw from the Policy, so long as the
borrowing or withdrawal request is submitted to the Insurance
Company along with a directive that the borrowed or withdrawn
amount be transferred directly to Ryan's Family Steak Houses,
Inc. Prior to the release of Ryan's Family Steak Houses, Inc.'s
Security Interest in the Policy, Employee and Ryan's Family Steak
Houses, Inc. agree that Ryan's Family Steak Houses, Inc. shall
from time to time appoint one or more individuals (the
"Designee"), who may be officers of Ryan's Family Steak Houses,
Inc., who shall be entitled to administer the investments under
the Policy; provided, however, that, the Designee may only direct
the investments under the Policy in funds offered by the
Insurance Company under the Policy.
12. Tax Withholding.
It is recognized by the parties that the rights of Employee
in the Policy (as modified by the Agreement) may cause Employee
to be treated under certain circumstances as in receipt of gross
income. These circumstances may also impose upon Ryan's Family
Steak Houses, Inc., an obligation to deduct and withhold federal,
state or local taxes. Unless Employee otherwise provides Ryan's
Family Steak Houses, Inc. the amounts it is required to withhold,
Employee shall cause, either by withdrawing from or borrowing on
a nonrecourse basis against the Policy, to be transferred to
Ryan's Family Steak Houses, Inc. that portion of the cash value
of the Policy which is equal to the amount of any federal, state
or local taxes required to be withheld.
13.Disputes.
(a) The Ryan's Family Steak Houses, Inc.'s Compensation and
Stock Option Committee of the Board of Directors (the
"Administrator") shall administer this Agreement. The
Administrator (either directly or through its designees) will
have power and authority to interpret, construe, and administer
this Agreement (for the purpose of this section, the Agreement
shall include the Collateral Security Assignment Agreement);
provided that, the Administrator's authority to interpret this
Agreement shall not cause the Administrator's decisions in this
regard to be entitled to a deferential standard of review in the
event that Employee or his or her beneficiary seeks review of the
Administrator's decision as described below.
(b) Neither the Administrator, its designee nor its
advisors, shall be liable to any person for any action taken or
omitted in connection with the interpretation and administration
of this Agreement.
(c) Any claims or disputes pertaining to this Agreement or
to any matter arising therefrom not resolved by the claims
procedures set forth in Section 29 of the Employee's Executive
Life Insurance Plan's Summary Plan Description ("SPD"), shall be
resolved by arbitration in the State of South Carolina. The
Participant, any Beneficiary, and the Company will be bound to
this mandatory arbitration rule as the exclusive remedy for all
disputes under this Plan. There must be full compliance with the
rules of the American Arbitration Association in order to resolve
any legal disputes regarding this Plan. The exclusive choice of
forum set forth in this Section 29 of the SPD shall not be deemed
to preclude the enforcement of any judgment obtained in such
forum or the taking of any action under this Plan to enforce such
judgment in any appropriate jurisdiction.
(d) All costs and expenses (exclusive of attorney's fees)
incurred in connection with any arbitration relating to a claim
or dispute pertaining to this Plan shall be paid by the Company.
The Company shall bear the cost of all attorneys' fees incurred
by the Company. The attorneys' fees incurred by the Participant
or Beneficiary shall be paid by the party to whom the arbitrator
determines should bear the attorneys' fees incurred by the
Participant or Beneficiary in pursuing the claim. In allocating
the attorneys' fees under this Section 29 of the SPD, the
arbitrator should consider the relative merits of each party's
position and the manner and means the party undertook to assert
the party's case.
14. Collateral Security Assignment of Policy to Ryan's Family
Steak Houses, Inc.
In consideration of the promises contained herein, the
Employee has contemporaneously herewith granted the Security
Interest in the Policy to Ryan's Family Steak Houses, Inc. as
collateral, under the form of Collateral Security Assignment
attached hereto, which Collateral Security Assignment gives
Ryan's Family Steak Houses, Inc. the limited power to enforce its
rights to recover the cash value of the Policy under the
circumstances defined herein. Ryan's Family Steak Houses, Inc.'s
Security Interest in the Policy shall be specifically limited to
the rights set forth above in this Agreement, notwithstanding the
provisions of any other documents including the Policy. Employee
agrees to execute any notice prepared by Ryan's Family Steak
Houses, Inc. requesting a withdrawal or non-recourse loan in an
amount equal to the amount to which Ryan's Family Steak Houses,
Inc. is entitled under Sections 5, 6 or 12 of this Agreement.
15. Employee's beneficiary rights and security interest.
(a) Ryan's Family Steak Houses, Inc. and Employee intend
that in no event shall Ryan's Family Steak Houses, Inc. have any
power or interest related to the Policy or its proceeds, except
as provided herein and in the Collateral Security Assignment. In
the event that Ryan's Family Steak Houses, Inc. ever receives or
may be deemed to have received any right or interest in the
Policy or its proceeds beyond the limited rights described herein
and in the Collateral Security Assignment, such right or interest
shall be held in trust for the benefit of Employee and be held
separate from the property of Ryan's Family Steak Houses, Inc.
(b) In order to further protect the rights of the Employee,
Ryan's Family Steak Houses, Inc. agrees that its rights to the
Policy and proceeds thereof shall serve as security for Ryan's
Family Steak Houses, Inc.'s obligations as provided in this
Agreement to Employee. Ryan's Family Steak Houses, Inc. grants
to Employee a security interest in and collaterally assigns to
Employee any and all rights Ryan's Family Steak Houses, Inc. has
in the Policy, and products and proceeds thereof whether now
existing or hereafter arising pursuant to the provisions of the
Policy, this Agreement, the Collateral Security Assignment or
otherwise, to secure any and all obligations owed by Ryan's
Family Steak Houses, Inc. to Employee under this Agreement. In
no event shall this provision be interpreted to reduce Employee's
rights to the Policy or expand in any way the rights or benefits
of Ryan's Family Steak Houses, Inc. under this Agreement, the
Policy or the Collateral Security Assignment. This security
interest granted to Employee from Ryan's Family Steak Houses,
Inc. shall automatically expire and be deemed waived if Employee
terminates employment with Employer prior to a Qualifying Event.
Nothing in this provision shall prevent Ryan's Family Steak
Houses, Inc. from receiving its share of the death benefits under
the Policy as provided in Section 4 of this Agreement.
16. Amendment of Agreement.
Except as provided in a written instrument signed by Ryan's
Family Steak Houses, Inc. and Employee, this Agreement may not be
cancelled, amended, altered, or modified.
17. Notice under Agreement.
Any notice, consent, or demand required or permitted to be
given under the provisions of this Agreement by one party to
another shall be in writing, signed by the party giving or making
it, and may be given either by delivering it to such other party
personally or by mailing it, by United States Certified mail,
postage prepaid, to such party, addressed to its last known
address as shown on the records of Ryan's Family Steak Houses,
Inc. The date of such mailing shall be deemed the date of such
mailed notice, consent, or demand.
18. Binding Agreement.
This Agreement shall bind the parties hereto and their
respective successors, heirs, executor, administrators, and
transferees, and any Policy beneficiary.
19. Controlling law and characterization of Agreement.
(a) To the extent not governed by federal law, this
Agreement and the right to the parties hereunder shall be
controlled by the laws of the State of South Carolina.
(b) If this Agreement is considered a "plan" under the
Employee Retirement Income Security Act of 1974 (ERISA), both
Ryan's Family Steak Houses, Inc. and Employee acknowledge and
agree that for all purposes the Agreement shall be treated as a
"welfare plan" within the meaning of section 3(1) of ERISA.
Consistent with the preceding sentence, Employee further
acknowledges that his or her rights to the Policy and the release
of Ryan's Family Steak Houses, Inc.'s Security Interest are
strictly limited to those rights set forth in this Agreement. In
furtherance of this acknowledgement and in consideration of
Ryan's Family Steak Houses, Inc.'s payment of the initial
premiums for this Policy, Employee voluntarily and irrevocably
relinquishes and waives any additional rights in the Policy or
any different restrictions on the release of Ryan's Family Steak
Houses, Inc.'s Security Interest that he or she might otherwise
argue to exist under either state, federal, or other law.
Employee further agrees that he or she will not argue that any
such additional rights or different restrictions exist in any
judicial or arbitration proceeding. Similarly, Ryan's Family
Steak Houses, Inc. acknowledges that its Security Interest is
strictly limited as set forth in this Agreement and voluntarily
and irrevocably relinquishes and waives any additional interests
or different interests or advantages that Ryan's Family Steak
Houses, Inc. would have or enjoy if the Agreement were not
treated as a "welfare plan" within the meaning of section 3(1) of
ERISA.
20.Execution of Documents.
Ryan's Family Steak Houses, Inc. and Employee agree to
execute any and all documents necessary to effectuate the terms
of this Agreement.
Ryan's Family Steak Houses, Inc.
By: _____________________________
Executive Officer
Title: _____________________________
EMPLOYEE
_______________________________
Employee's Signature