EXHIBIT 10.21
TOOTSIE ROLL INDUSTRIES, INC.
EXECUTIVE SPLIT DOLLAR INSURANCE AGREEMENT
AGREEMENT, between Tootsie Roll Industries, Inc., a Virginia
corporation (the "Corporation"), and G. Howard Ember, Jr.
WHEREAS, G. Howard Ember, Jr. (the "Employee") is presently employed
by the Corporation, his services have contributed to the successful operation of
the Corporation, and the Corporation's board of directors believes it is in the
best interest of the Corporation to retain the services of the Employee; and
WHEREAS, the Corporation is desirous of transferring to G. Howard
Ember, Jr. (the "Owner") Policy No. 1A2252333-0 issued by Pacific Mutual Life
Insurance Company on the Employee's life (the "policy") now owned by the
Corporation pursuant to this "split dollar" arrangement, subject to the Owner's
agreement to assign the policy to the Corporation as collateral for the "current
value" (defined below) of the policy and the premium payments to be made by the
Corporation under this agreement by an instrument of collateral assignment
attached as Exhibit A (the "assignment") and to record the assignment with the
"Insurer" (defined below).
NOW, THEREFORE, in consideration of the premises, and the services to
be rendered to the Corporation by the Employee, and for other good and valuable
consideration, receipt of which is hereby acknowledged, the Corporation and the
Owner hereby mutually covenant and agree as follows:
ARTICLE I -- PAYMENT OF PREMIUMS AND ECONOMIC BENEFIT
1.1 As long as this agreement is in force, the Owner and the
Corporation agree to pay the amounts and in the manner set forth below.
1.2 The Owner shall pay each year to the Corporation an amount equal to
the economic benefit that would be taxable as gross income for federal income
tax purposes to the Employee but for the payment by the Owner of such amount.
The Owner shall have the option, exercisable upon 30 days' written notice
delivered to the Corporation, to pay a greater amount to the Corporation.
1.3 For purposes of Section 1.2 above, the economic benefit that would
be taxable to the Employee shall be computed in accordance with Revenue Rulings
64-328, 1964-2 C.B. 11, and 66-110, 1966-1 C.B. 12, and the Corporation shall be
responsible for computing such amount. The Corporation will advise the Owner of
the amount payable by the Owner pursuant to Section 1.2, and the Owner shall pay
that amount directly to the Corporation.
1.4 In order to facilitate the payment of premiums on the policy, the
Owner and the Corporation agree that the Corporation will forward to the Insurer
the entire premiums due on the policy, if any.
ARTICLE II -- POLICY OWNERSHIP AND RESTRICTIONS
2.1 The Owner shall be the sole owner of the policy. The Corporation's
payment of premiums hereunder shall constitute a liability of the Owner subject
to repayment as provided herein.
2.2 The Owner agrees to assign the policy to the Corporation as
collateral for such liabilities and the Corporation shall have those rights
granted to it under the assignment and this agreement. The Owner agrees that
while this agreement is in force, the Owner may not borrow or withdraw from or
surrender any part of the policy prior to the 15th anniversary of this
agreement. As between the Owner and the Corporation, this agreement shall take
precedence over any provision of the assignment in case of a conflict between
the terms of this agreement and the assignment.
ARTICLE III -- DEATH OF EMPLOYEE
3.1 On the Employee's death while this agreement is in force, the Owner
will pay to the Corporation an amount equal to the sum of (i) the terminal
reserve value of the policy plus unearned premiums on the date the policy is
transferred to the Owner (the "current value") and (ii) the total premiums paid
by the Corporation from the date of this agreement to the date of the Employee's
death, reduced by the total payments made to the Corporation by the Owner
pursuant to Section 1.2 above.
ARTICLE IV -- TERMINATION OF AGREEMENT
4.1 This agreement shall automatically terminate upon the happening of
any of the following events:
(a) At the option of the Corporation, if the Employee
terminates employment for any reason other than death or a "change of
control" (defined below). The Employee shall be deemed to be employed
by the Corporation during any period in which he is "permanently
disabled" (defined below).
(b) At the surrender, lapse or termination of the policy.
(c) Upon delivery by the Owner of written notice of such
termination to the Corporation.
(d) Upon failure of the Owner to make a payment required by
Section 1.2 above.
(e) Upon agreement of the parties.
4.2 In the event of a termination under Section 4.1(a) above, the Owner
will pay to the Corporation not later than the 15th anniversary of this
agreement an amount equal
to the lesser of (i) the cash surrender value of the policy on the date of such
termination, not reduced by any loan or withdrawal and not less than the current
value or (ii) the amount the Corporation would have been entitled to receive at
the Employee's death under Section 3.1 determined as if such death occurred on
the date of such termination (the "repayment amount"). The Owner acknowledges
that, until the repayment amount has been paid in full to the Corporation, the
Owner must continue to pay the amounts required under Section 1.2 above
notwithstanding the termination of the Employee's employment and the termination
of the Corporation's obligation to pay further premiums.
4.3 In the event of any other termination under Section 4.1 above, the
Owner will pay the repayment amount to the Corporation within 60 days after such
termination.
ARTICLE V -- OTHER PROVISIONS
5.1 The Corporation agrees that it will not merge or consolidate with
another corporation or organization, or permit its business activities to be
taken over by any other organization unless and until the succeeding or
continuing corporation or other organization shall expressly assume the rights
and obligations of the Corporation herein set forth.
5.2 This agreement will be governed by and construed in accordance with
the laws of Illinois, where it is made and to be performed. It sets forth the
entire agreement between the parties concerning the subject matter thereof, and
any amendment or discharge will be made only in writing. This agreement will
bind and benefit the parties and their legal representatives and successors.
5.3 This agreement shall not be deemed to constitute a contract of
employment between the Corporation and the Employee, nor shall any provision
restrict the right of the Corporation to discharge the Employee, or restrict the
Employee's right to terminate employment.
5.4 The provisions required by the Employee Retirement Income Security
Act of 1974 (ERISA).
5.5 The Owner may assign his interest in this agreement at any time by
filing with the Corporation the statement attached as Exhibit C signed by his
assignee. This agreement may be amended or modified in whole or in part by the
Owner and the Corporation in writing at any time.
5.6 A "change of control" of the Corporation shall occur when: (1) any
person, including a "group," as described in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended, acquires after the effective date of this
agreement the beneficial ownership of, and the right to vote, shares having the
right to cast at least 20% of the votes permitted to be cast in any election of
members to the Corporation's board of directors; or (2) as the result of any
tender or exchange offer, substantial purchase of the Corporation's equity
securities, merger, consolidation, sale of assets or contested election, or any
combination of the foregoing transactions, the persons who were directors of the
Corporation immediately prior to such transaction or transactions do not
constitute a
majority of the Corporation's board of directors (or of the board of directors
of any successor to or assignee of the Corporation) immediately after the next
meeting of stockholders of the Corporation (or any successor or assignee)
following such transaction; except that no event described in clause (1) or (2)
above shall constitute a "change of control" if immediately after such event
Melvin J. Gordon, Ellen R. Gordon, their descendants (and spouses of such
descendants) and any trusts or estates in which such persons have an interest
own, directly or indirectly, shares having the right to cast at least 50% of the
votes permitted to be cast in any election of members of the Corporation's board
of directors. The Employee shall be deemed to be "permanently disabled" if he
is unable to perform his stated duties with the Corporation by reason of
illness, accident or other incapacity and is not engaged in any occupation or
employment for wage or profit for which he is reasonably qualified by education,
training, or experience; provided however, that in the event the Corporation
maintains a long-term disability plan in which the Employee is entitled to
receive benefits, the Employee shall be deemed to be permanently disabled when
he suffers a physical illness, injury or other impairment in respect to which he
is entitled to receive benefits under such long-term disability plan.
5.7 Notwithstanding the provisions of this agreement, the life
insurance company (the "Insurer") which has issued the policy is hereby
authorized to act in accordance with the terms of the policy as if this
agreement did not exist, and the payment or other performance of the contractual
obligations by the Insurer, in accordance with the terms of the policy, shall
completely discharge the Insurer from all claims, suits and demands of all
persons whatsoever.
IN WITNESS WHEREOF, the parties hereto have signed this agreement on
July 30, 1994.
G. Howard Ember, Jr.
TOOTSIE ROLL INDUSTRIES, INC.
EXHIBIT A (G. HOWARD EMBER)
COLLATERAL ASSIGNMENT
1. G. Howard Ember (the "Assignor"), hereby assigns, transfers and
sets over to Tootsie Roll Industries, Inc., a Virginia corporation (the
"Assignee"), to the extent of the amounts defined in and owing from time to time
from Assignor to Assignee under the Executive Split Dollar Insurance Agreement
dated July 30, 1994, between the Assignor and the Assignee (the "Assignee's
Interest"), Policy No. 1A2252333-0 issued by Pacific Mutual Life Insurance
Company on the life of G. Howard Ember, Jr., subject to all the terms and
conditions of the policy and to all superior liens, if any, which the insurer
may have against the policy. The Assignor by this instrument agrees and the
Assignee by the acceptance of this assignment agrees to the conditions and
provisions herein set forth.
2. It is expressly agreed that only the following specific rights are
included in this assignment and may be exercised solely by the Assignee:
(a) The right to prohibit the Assignor's borrowing or withdrawal
from or surrender of any part of the policy prior to the 15th anniversary
of the Executive Split Dollar Insurance Agreement.
(b) The right to obtain, upon surrender of the policy by the
Assignor, an amount of the cash surrender proceeds up to the amount of the
Assignee's Interest in the policy.
(c) The right to collect, upon the insured's death, the net
proceeds of the policy up to the amount of the Assignee's Interest in the
policy.
3. The insurer hereby is authorized to recognize the Assignee's claim
to rights hereunder without investigating the reason for any action taken by the
Assignee, or the giving of any notice, or the application to be made by the
Assignee of any amounts to be paid to the Assignee. The sole signature of the
Assignee shall be sufficient for the exercise of its rights under the policy and
the sole receipt of the Assignee for any sums received shall be a full discharge
and release therefor to the insurer.
Dated: July 30, 1994.
G. Howard Ember Jr.
Assignor
TOOTSIE ROLL INDUSTRIES, INC.
Assignee
Accepted an executed counterpart of this Collateral Assignment as of the
date last above written.
PACIFIC MUTUAL LIFE INSURANCE COMPANY