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Exhibit 10.28
SPLIT DOLLAR INSURANCE AGREEMENT AND ASSIGNMENT OF LIFE
INSURANCE POLICY AS COLLATERAL
This Agreement is entered into as of the 24th day of Oct., 1996
at Cleveland, Ohio, by and between ALBERT B. RATNER and JAMES RATNER, Trustees
under the Trust dated December 17, 1990, f/b/o Adam Ratner held under Max Ratner
1988 Grandchildren's Trust Agreement dated December 21, 1988 (hereinafter
referred to as the "Owner"), and FOREST CITY ENTERPRISES, INC., an Ohio
corporation (hereinafter referred to as "Assignee").
W I T N E S S E T H:
WHEREAS, the Owner has agreed to purchase a life insurance
policy (hereinafter referred to and defined as "the Policy") on the life of
Charles Ratner (hereinafter referred to as the "Insured") in the principal
amount of $625,000;
WHEREAS, the Owner is willing to pay a portion of the premium
payments on the Policy;
WHEREAS, the Owner, in order to induce Assignee to pay the
remaining premium payments, is willing to assign certain rights in the Policy to
Assignee and to pledge the Policy to Assignee as collateral;
WHEREAS, Assignee desires to invest and is willing to pay that
portion of the premium payments which are not paid by the Owner if certain
rights in the Policy are assigned to it; and
WHEREAS, Owner and Assignee desire to enter into this Agreement
in order to secure Assignee's repayment, out of the proceeds of the Policy, of
the portion of the premium payments paid by the Assignee and to grant certain
other rights to the Assignee;
NOW, THEREFORE, for value received, the receipt and sufficiency
of which are hereby acknowledged, the Owner and the Assignee mutually agree as
follows:
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1. DEFINITIONS. In this Agreement:
a. INSURER. The "Insurer" is Northwestern Mutual Life Insurance
Company.
b. THE POLICY.
The following policy of life insurance on the life of
the Insured issued by the Insurer, together with any
supplementary contracts issued by the Insurer in
conjunction therewith: Policy No. 13908061; Face Amount:
$625,000.
c. POLICY INTEREST.
The Assignee's "Policy Interest" shall be an amount
equal to the LESSER of the "Cash Surrender Value" of the
Policy OR the Assignee's "Premium Interest"; provided,
if the Insured dies while this Agreement is in effect,
the Assignee's Policy Interest shall be an amount equal
to 1.10 times the Assignee's Premium Interest in the
Policy; provided further, if the Insured dies within two
years after the Owner terminates this Agreement (by
paying to Assignee the LESSER of Cash Surrender Value of
the Policy or the Premium Interest of the Assignee),
then the Owner also shall pay to the Assignee the amount
(if any) by which (i) 1.10 times the Assignee's Premium
Interest, exceeds (ii) the amount paid by the Owner to
the Assignee to terminate this Agreement. The existence
of the Assignee's Policy Interest shall be evidenced by
filing with the Insurer a copy of this Agreement, along
with a collateral assignment in the form prescribed by
the Insurer.
d. CASH SURRENDER VALUE AND PREMIUM INTEREST.
"Cash Surrender Value" shall mean the cash value of the
Policy; plus the cash value of any paid up additions;
plus any dividend accumulations and unpaid dividends;
and less any Policy loans outstanding to Assignee
(including any accrued interest on such loans). The
"Premium Interest" shall be equal to the cumulative
amount of unreimbursed premiums paid on the Policy by
the Assignee, less any Policy loans outstanding to
Assignee (including any accrued interest on such loans).
2. PREMIUM PAYMENTS.
a. Each annual premium on the Policy shall be paid when due as
follows:
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(i) The Owner shall pay a portion of each premium equal
to the Insurer's current term rate for the Insured's age,
multiplied by the excess of the current death benefit over the
Assignee's current Premium Interest. The Insurer's "current term
rate" shall mean the lesser of (a) the Insurer's current
published premium rates charged by the Insurer for individual
one-year term life insurance (available generally to all
comparable policyholders of the Insurer), or (b) the cost of
comparable one-year term insurance as published or approved from
time to time by the Internal Revenue Service or (if no such
IRS-approved tables are in effect) as generally used in the
insurance industry (e.g., for single-life policies, the
so-called "PS 58 rates"). The Owner's premium contribution check
(or checks) shall be delivered to the Insurer on or before each
premium due date.
(ii) The Assignee shall pay the remaining balance of
each premium due until the death of the Insured or, if earlier,
until the termination of this Agreement. The Assignee's premium
contribution check shall be delivered to the Insurer on or
before each premium due date.
(iii) For convenience, either the Assignee or the Owner
may pay the entire premium to the Insurer (by agreement between
the Owner and the Assignee), with reimbursement to be made
promptly by the nonpaying party to the other party, in the
amount of the premium contribution due from the nonpaying party
(as determined under clauses (i) and (ii) above).
b. Dividends on the Policy shall be applied to purchase paid up
additions, except as permitted otherwise pursuant to Section 3
below.
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3. POLICY OWNERSHIP.
a. Except as provided in, or limited by, Section 4 and subparagraph b of
this Section, the Owner shall have all the rights of the "Owner" under the terms
of the Policy, including but not limited to the right to designate
beneficiaries, select settlement options and to surrender the Policy; provided,
the Owner may surrender paid up additions, borrow against the Policy or change
dividend options on the Policy only if and to the extent that, immediately after
the Owner takes such actions, the Cash Surrender Value of the Policy exceeds
110% of the Assignee's Premium Interest.
b. In exchange for the Assignee's payment of its premium
contribution under Section 2, the Owner hereby assigns to the Assignee
the following limited ownership rights in the Policy:
(i) The right to obtain one or more loans or advances on the
Policy to the extent of the Assignee's Policy Interest and to pledge or
assign the Policy for such loans or advances.
(ii) The right to realize against the Cash Surrender Value of
the Policy to the extent of the Assignee's Policy Interest, in the event
of termination of this Agreement as provided in Section 5.
(iii) The right to realize against the proceeds of the Policy to
the extent of Assignee's Policy Interest, in the event of the Insured's
death.
c. It is agreed that benefits may be paid under the Policy by
the Insurer either by separate checks to the parties entitled thereto,
or by a joint check. In the latter instance, the Owner and the Assignee
agree that the benefits shall be divided as provided herein.
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4. ASSIGNMENT BY THE OWNER. The Owner may assign any part or all of such
Owner's retained interest in the Policy or in this Agreement to any person,
entity or trust; provided that such assignment shall be effective only if (i)
the new Owner-assignee agrees in writing to be bound by the terms of this
Agreement, and (ii) the assigning Owner provides written notice to the Assignee
of such assignment (identifying the name, address and telephone number of such
new Owner-Assignee).
5. TERMINATION OF AGREEMENT.
a. This Agreement shall terminate (i) upon surrender of the
Policy (or surrender of any supplemental contracts issued in connection
therewith) by the Owner, or (ii) at such time as the Owner otherwise
arranges to pay to the Assignee the full amount of Assignee's Policy
Interest. The Owner may surrender the Policy at any time; provided, the
Owner shall surrender the Policy or otherwise terminate this Agreement
only with the written consent of the Assignee at any time that the Cash
Surrender Value is less than the Premium Interest.
b. On any termination of this Agreement, at the option of the
Owner, either:
(i) An amount equal to the Policy Interest shall be paid
to the Assignee by the Insurer; or
(ii) The Owner shall direct the Assignee to assign its
Policy Interest to the Owner or as the Owner directs, in which
event the Owner shall pay the Assignee an amount equal to
Assignee's Policy Interest.
6. DEATH OF THE INSURED. In the event of the death of the Insured while
this Agreement is in effect, a portion of the proceeds of the Policy equal to
the Policy Interest shall be paid to the Assignee and the balance of the
proceeds of the Policy shall be paid to
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the beneficiary or beneficiaries under the Policy (as their interests may
appear); provided, in computing the value of Assignee's Policy Interest upon
termination, Assignee shall be deemed to have repaid to Insurer the amount of
any outstanding Policy loans or advances to Assignee (including accrued
interest) immediately prior to such termination, and such deemed repaid amount
in turn shall be deemed to have been distributed to Assignee.
7. THE INSURER. The Insurer shall be bound only by the provisions of and
endorsements on the Policy. The copy of this Agreement filed with the Insurer
shall constitute directives of the Owner to the Insurer and any payments made or
actions taken by it in accordance therewith shall fully discharge Insurer from
all claims, suits and demands of all persons whatsoever. Insurer shall in no way
be bound by the provisions of this Agreement.
IN WITNESS WHEREOF, the parties have signed this Agreement as of
the date stated above.
ASSIGNEE:
FOREST CITY ENTERPRISES, INC.
By /s/ Thomas G. Smith
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Title Sr. Vice President --
Chief Financial Officer
OWNER:
/s/ Albert B. Ratner
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Albert B. Ratner, Trustee u/t dtd 12/17/90
f/b/o Adam Ratner
/s/ James Ratner
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James Ratner, Trustee u/t dtd 12/17/90
f/b/o Adam Ratner
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