EXHIBIT 10.5
EXECUTIVE LIFE INSURANCE AGREEMENT
Agreement, dated as of this ____ day of __________, 1994, by
and between [NAME] (the "Employee") and UNIVERSAL LEAF TOBACCO
COMPANY, INCORPORATED, a Virginia corporation (the "Corporation").
Recitals
The Employee is a valued employee of the Corporation and the
Corporation desires to retain the Employee in its employment.
Therefore, to induce his continued employment, the Corporation
desires to assist the Employee with his personal life insurance
through this executive life insurance plan.
The Corporation is presently providing group term life
insurance for the Employee equal to twice compensation and a
certain amount of post retirement life insurance which
eventually reduces to 20% of the pre retirement benefit. The
Corporation wishes to pay on behalf of the Employee in the
future an amount equal to the amount currently being paid for
group life insurance coverage plus an amount equal to the
present value of post retirement coverage amortized over a time
period to age 65 (or age 70 in the event the Employee is age 55
or older on the date of this Agreement). However to do so, the
Employee shall apply for these dollars, it is believed that by
using reasonable projections the Employee will have
substantially more post retirement insurance than under the
present arrangement. However, this executive life insurance
plan entails certain risks including but not limited to the
ability of the Insurer to pay, the amount of interest credited
to the policy by the Insurer, taxes and changes in the tax law.
By entering into this Agreement, the benefits under the risks of
owning the policy are transferred to the Employee.
As is the case with the present group life insurance plan, the
Corporation may change the amount of premium payments, and also
may change its corporate policy towards providing or assisting
in providing pre or post retirement life insurance. However,
the present intention of the Company to make payments are stated
in this Agreement. An Insurance Advisor (Clark/Bardes, Inc.)
has provided the Employee a booklet and has discussed the terms
of the policy with the Employee. The Employee has considered
the advantages and disadvantages of signing this Agreement as
opposed to continuing under Corporation's present group term
life insurance plan.
NOW THEREFORE, in consideration of the following, the Employee
and the Corporation agree as follows:
1. Effect of Agreement
By entering into this Agreement, the Employee authorizes the
Corporation to cease the Employee's coverage under the present
group life insurance plan as of July 1, 1994 and to participate
in this arrangement as described herein. The election is
irrevocable and will cause the Employee to be ineligible for the
present group term plan or any term plan that replaces the
present group term plan.
2. The Policy
The life insurance policy (the "Policy") covered by this
Agreement is:
Initial Amount
Insurer Policy Number of Insurance
Manufacturers Life
$<COV_G_AMOUNT>
issued on the life of the Employee. The Employee shall be the
sole owner of the Policy. The Corporation shall have no
interest in the Policy nor any claim to the cash value or Policy
proceeds.
3. Payment of Premiums by the Corporation
A. During Employment
The present plan of the Corporation is to pay on behalf of
the Employee during the period of employment an amount based on
cost tables and calculation methods held by the Human Resources
Department. This amount consists of two parts as follows: (i)
the current cost per $1,000 of term insurance by age using group
New York group term rates discounted by 58.6% which are the
Corporation's present group term policy rates and (ii) the
amortization to age 65 (or 70 in the event the Employee is age
55 or older on the date of this Agreement) of the present value
of the post retirement coverage the Employee would have had
under the present Group Term Life Insurance Plan at normal
retirement, using 1980 CSO Mortality tables to determine life
expectancy of the insured and a discount rate of 5.27%.
The above amount will be paid on a net after-tax basis, i.e.
the gross amount will be computed as above and 32% shall be
withheld for the Employee's federal and state income tax
liability on the above amount yielding the net amount to be paid
to the Insurer. If in the future the federal (39.6%) and/or
state (5.75%) income taxes on earned income changes, the gross
amount to be paid by the Corporation will be adjusted to yield
the same net amount to be forwarded to the Insurer.
B. Disability
If the Employee becomes disabled during the term of
employment the Corporation plans to continue to pay the above
payment specified under paragraph 4 "Employee Contribution" and
the amount of the supplemental insurance premium (if elected by
the Employee during disability) until the earlier of death or
age 65 (or age 70 in the event the Employee is age 55 or older
on the date of this Agreement).
C. Early Retirement
If the Employee elects early retirement between the ages of
55 and 65, the Corporation plans to pay the sum of (i) an amount
equal to the current group-term premium taking into
consideration the coverage reduction schedule currently being
used for early retirees and (ii) the amount of amortization for
post retirement coverage paid by the Corporation during the last
year of employment. No further Corporation payments will be
made after age 65 (or 70 in the event the Employee is 55 or
older on the date of this Agreement).
D. Employment after Age 65
If the Employee works past age 65, the Corporation intends to
continue the portion of the payment for current term coverage as
specified in paragraph 3 A(i) on an after-tax basis. No further
post retirement amortization payment as specified in
subparagraph 3 A(ii) will be made after age 65 unless the
employee was age 55 or older on the date of this Agreement.
E. Right of Corporation to Determine and Change
The Corporation reserves the right to change or terminate the
amounts of its payment in accordance with future circumstances.
Any determination of the obligation to make payment under this
Agreement or to make any interpretation or construction of this
Agreement shall be the sole prerogative of the Corporation.
4. Employee Contributions
The Employee Contribution shall equal the income tax on group
life insurance coverage in excess of $50,000 at various ages for
which the Employee would have paid assuming Table I rates as of
December 1989, the current federal and state combined income tax
rate and the amount of insurance coverage in effect.
The Employee authorizes the Corporation to withhold from his
compensation (salary, bonus or other compensation) amounts equal
to the Employee Contributions. These amounts will be paid by
the Corporation on behalf of the Employee to the Insurer under
the insurance contract.
A. Supplemental Insurance
The employee may pay an additional amount for Supplemental
Insurance (equal to annual compensation) at rates specified by
the Company's Insurance Advisor and acceptable to the Insurer,
assuming that the Employee qualifies for Supplemental Insurance
under the Policy. By electing Supplemental Insurance, the
Employee authorizes the corporation to withhold the amounts and
pay the Insurer.
B. Additional Payments
At any time before or after termination of employment, the
Employee may take any such additional payments to the Policy as
may be allowed by the terms of the Policy. Upon retirement, the
employee should consult with the Insurance Advisor with respect
to any options available under the Policy.
5. Transfer of Policy
The Employee may transfer all of his interest in the Policy
and the transfer shall not effect the Corporation's payment of
premiums. The transfer is subject to the terms of the Policy
and the Corporation makes no representation as to the legal or
tax effects of such transfer.
6. Payment of Policy Proceeds
In the event the Policy becomes a claim by reason of the
Employee's death, the Corporation shall have no interest in the
proceeds of the Policy. The total proceeds of the Policy shall
be paid directly by the Insurer to the beneficiary designated in
the Policy by the owner thereof.
7. Surrender of Policy or Withdrawing Sums
The Employee shall have the exclusive right to surrender or
cancel the Policy and receive the cash surrender value thereof.
However, if the Employee during his employ should cease to make
payments or fail to authorize the Corporation to make payments
on his behalf or if the Employee should withdraw funds or borrow
funds from the Policy, then the Corporation shall have the right
not to make any further contributions to the Policy. The
Corporation wants to encourage the Employee to keep the Policy
in effect and funded during employment.
8. Termination of Agreement by the Corporation
In the event the Employee shall fail to pay that portion of
each premium payment required in Paragraph 4 hereof, or in the
event of the termination of the Employee's employment with the
Corporation for any reason whatsoever other than the Employee's
death, retirement, early retirement, or disability, the
Corporation may terminate the agreement. Termination from
employment shall not terminate the right of the Corporation to
withhold or collect any Employee contributions due or paid to
the Insurer by the Corporation on behalf of the Employee.
9. Obligations of Insurer under Agreement
The insurer shall be bound only by the provisions of and
endorsements on the Policy, and any payments made or action
taken by it in accordance therewith shall fully discharge it
from all claims, suits and demands of all persons whatsoever.
It shall in no way be bound by or deemed to have notice of the
provisions of this Agreement.
10. Changes in Amount of Insurance
The Corporation intends to maintain the amount of life
insurance coverage in force pursuant to this Agreement to equal
twice the Employee's compensation effective July 1 each year but
such increases however shall be subject to the terms and
limitations of the Policy.
11. Accident Insurance
During the term of employment the Corporation intends to
provide a separate policy accidental death coverage in an amount
equal to twice compensation subject to certain maximum coverage
limits (currently $750,000).
12. Miscellaneous
A. Where appropriate in this Agreement (i) words used in the
singular shall include the plural and words used in the
masculine shall include the feminine and vice versa and (ii) the
word "Employee" shall include his transferee, subowner,
subowner's assigns or Policy beneficiary as the case may be.
The word "Corporation" shall include its successors and assigns.
Headings and subheadings are for convenience only and have no
effect on the construction of this Agreement.
B. This Agreement may be altered, amended or modified by
written notice signed by the Corporation. The laws of the
Commonwealth of Virginia shall govern this Agreement.
C. This Agreement is not an employment contract nor does it
create any right of continued employment with the Corporation.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement in more than one counterpart, each of which is an
original.
UNIVERSAL LEAF TOBACCO COMPANY INCORPORATED
By:________________________________
_____________________________
[NAME]