EXHIBIT 10.27
DOMINION HOMES, INC.
ENDORSEMENT SPLIT DOLLAR AGREEMENT
THIS AGREEMENT, effective January 1, 2003, is made this 20/th/ day of December,
2002, by and between Dominion Homes, Inc. ("Company") and Douglas G. Borror who
is an employee of Company ("Insured").
WHEREAS, the Company and the Insured previously entered into a split-dollar
agreement dated January 15, 2001 ("Prior Arrangement"); and
WHEREAS, due to changes in the laws governing split-dollar arrangements, the
Company and the Insured want to revise the Prior Arrangement; and
WHEREAS, the Company wants to provide death benefit protection if the Insured
dies while actively employed and if other conditions described in this Agreement
are met; and
WHEREAS, the Company and the Insured have agreed to substitute this agreement
for the Prior Agreement and the Insured has transferred to the Company his or
her ownership rights in the policy subject to the Prior Agreement;
NOW, THEREFORE, in consideration of the premises and mutual promises described
below, the parties agree to cancel the Prior Arrangement, subject to the
following terms:
1. Policy Title and Ownership. By entering into this Agreement, the Insured
surrenders all rights under the Prior Arrangement and under the policy (or
policies) through which the Prior Arrangement was funded and agrees to execute
all documents required to transfer that interest to the Company. Title and
ownership of the policies described in Attachment A to the Agreement
("Policies") will reside in the Company for its use and for the use of the
Insured, all in accordance with this Agreement. The Company will not borrow
against or withdraw from the policy cash values.
2. Beneficiary Designation Rights. The Insured (or his or her assignee) will
have the right and power to designate a beneficiary or beneficiaries to receive
his or her share of the proceeds payable on his or her death and to elect and
change a payment option for such beneficiaries but subject to any right or
interest the Company may have in such proceeds as provided in this Agreement.
3. Policy Dividends. Any dividend declared on the Policy will be applied to
purchase additional paid-up insurance on the Insured's life.
4. Premium Payments. For periods during which the Policy is outstanding,
premiums will be paid as follows:
(a) The Company will pay all premiums due.
(b) On or before the date it is due (or within any grace period provided
under the Policy), the Company will pay to the Insurer the full amount of
each Policy premium due and, if asked to do so, will give the Insured
evidence that these premiums have been paid.
(c) If any Policy contains any disability waiver of premium or mortality
charge provision, neither the Insured nor the Company will be required to
pay any Policy premium for any period that waiver is in effect.
(d) As of the end of each calendar year, the Company will give the Insured
a statement of any taxable income arising under this program. The Insured
is solely responsible for calculating and paying his or her income tax
liability on this income.
5. Division of Death Proceeds of Policy
(a) Subject to the terms of paragraph 5(b), the Company will be entitled
to an amount equal to the cumulative premiums paid as of the date of death
or, if greater, the policy's cash value determined as of the date of death.
Such cash value will include any outstanding dividend accumulations and the
cash value of any paid-up additions and any postmortem dividends determined
as of the date of death.
(b) (1) Despite paragraph 5(a), the Company will irrevocably waive its
right to receive the amounts described in paragraph 5(a) if the Insured
dies while actively employed but:
(i) After both (A) completing at least 10 years of
participation (calculated from January 1, 1999) and (B) the
Company's net worth (calculated by applying standard accounting
principles) first exceeds $100,000,000; or
(ii) After a "change of control" [as defined in paragraph 5(c)]
occurs; and
(2) The Insured dies while actively employed but after reaching age
55; or
(3) For any other reason, the Company decides to waive its interest
in the Policy.
(c) For purposes of this Agreement, "Change of Control" means the
occurrence of the first of any of the following events:
(1) Douglas Borror and David Borror both cease to be members of
Company's Board of Directors; or
(2) Any direct or indirect acquisition by a "person," including a
"group" [as such terms are used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended ("Act")] after which the
"person" or "group" is the "beneficial owner" (as defined in Rule
13d-3 under the Act), directly or indirectly, of securities of the
Company representing more than 40 percent of the combined voting power
of the Company's then outstanding securities; provided, however, that
"person" or "group" will not include (i) the Company, (ii) any entity
under common control with the Company [within the meaning of Section
414 of the Internal Revenue Code of 1986 ("Code")], (iii) BRC
Properties Inc. or any
of its shareholders or members of the family [as defined in Code
(S)318] of Donald Borror or [iv] any employee benefit plan of any
entity described in Section 5(c)(2)(i), (ii) and/or (iii) of this
definition; or
(3) The adoption or authorization by the shareholders of the Company
of a definitive agreement or a series of related agreements (i) for
the merger or other business combination of the Company with or into
another entity in which the shareholders of the Company immediately
before the effective date of that merger or other business combination
own less than 50 percent of the voting power in the entity immediately
after the effective date of that merger or other business combination;
or (ii) for the sale or other disposition of all or substantially all
of the assets of the Company; or
(4) The adoption by the shareholders of the Company of a plan
relating to the liquidation or dissolution of the Company.
6. Limits on Insured's Rights in the Policy.
(a) Except as specifically provided in this Agreement, the Insured may not
sell, assign, transfer, borrow against, surrender or cancel his or her
rights under the Policy or change the dividend election described in
paragraph 3 without the Company's written consent.
(b) Regardless of any other provision of this Agreement, the Employee may
absolutely and irrevocably transfer his or her rights under the Policy to a
donee, subject to the terms of paragraph 5.
7. Collection of Death Benefits.
(a) If the Insured dies while the Policy is in effect and while he or she
is actively employed, the Insured's beneficiary will receive a death
benefit equal to the amount specified in Attachment B. Subject to paragraph
5, the balance of any death benefit payable under any Policy will be paid
to the Company. The Company will cooperate with the named beneficiary to
take any action necessary to collect the death benefit under the Policy.
This Agreement will terminate when that benefit has been collected and paid
as provided in this paragraph.
(b) If the Insured terminates employment for any reason other than death,
no death benefit will be paid under the Policy and the Company will
surrender the Policy and be solely entitled to all value associated with
that Policy.
8. Cash Surrender Value. The Company will be entitled to an amount equal to
the policy's cash value, determined as of the date of surrender less any
indebtedness and interest on such indebtedness determined as of the date of
surrender. Such cash value will include any outstanding dividend accumulations
or cash value of any paid-up additions determined as of the date of surrender.
9. Termination of Agreement During the Insured's Lifetime. This Agreement will
automatically terminate if the Insured terminates employment for any reason
other than death before the Policy is distributed to him or her.
10. Insurer Not a Party. The Insurer is not a party to this Agreement and has
no obligation or duty under this Agreement and will have fully discharged its
obligations by paying benefits under the terms of the Policy. No provision of
this Agreement or any modification or amendment of this Agreement will, in any
way, be construed as enlarging, changing or in any way affecting the Insurer's
obligations.
11. Named Fiduciary, Determination of Benefits, Claims Procedure and
Administration.
(a) The Company is the named fiduciary under this Agreement and has
authority to control and manage the operation and administration of this
Agreement and must establish a funding policy and method consistent with
the objectives stated in this Agreement.
(b) The Company will apply the following claims procedure to resolve any
disputes under this Agreement.
(i) Filing Claims. The Insured or his or her beneficiary may file a
claim for Plan benefits with the Company.
(ii) Notification to Claimant. If a claim is wholly or partially
denied, the Company will send a written notice of denial to the
claimant. This notice must be sent within 90 days after receipt of the
claim, must be written in a manner calculated to be understood by the
claimant and must include (A) the specific reason or reasons for which
the claim was denied, (B) specific reference to pertinent Plan
provisions, rules, procedures or protocols upon which the Company
relied to deny the claim, (C) a description of any additional material
or information that the claimant may file to perfect the claim and an
explanation of why this material or information is necessary and (D) a
description of the steps the claimant may take to appeal an adverse
determination including a statement of the claimant's right to bring
an action under ERISA after all appeals have been exhausted.
(iii) Review Procedure. If a claim has been wholly or partially
denied, the affected claimant, or his or her authorized representative
may (A) request that the Company reconsider its initial denial by
filing a written appeal no more than 60 days after receiving written
notice that all or part of the initial claim was denied, (B) review
pertinent documents and other material upon which the Company relied
when denying the initial claim, and (C) submit a written description
of the reasons for which the claimant disagrees with the Company's
initial adverse decision. An appeal of an initial denial of benefits
and all supporting material must be made in writing and directed to
the Company. The Company is solely responsible for reviewing all
benefit claims and appeals and taking all appropriate steps to
implement its decision.
(iv) Decision on Review. The Company will render its decision within
60 days of receiving a benefit appeal. However, if special
circumstances (such as the need to hold a hearing on any matter
pertaining to the denied claim) require additional time, this decision
will be rendered as soon as possible, but, not later than 120 days
after receipt of the claimant's written
appeal and only if the Company notifies the claimant, in writing, that
it needs more time to review an appeal and why that additional time is
needed. The Company's decision on review will be sent to the claimant
in writing and will include specific reasons for the decision, written
in a manner calculated to be understood by the claimant, specific
references to the pertinent Plan provisions, rules, procedures or
protocols upon which the Company relied to deny the appeal and a
statement that the claimant is entitled to receive, upon request and
free of charge, reasonable access to, and copies of, all documents
relevant to the claim and a statement regarding the claimant's right
to bring an action under ERISA.
12. Amendment. This Agreement may not be amended, altered or modified except by
the written agreement of each party or their respective successors or assigns
and may not be terminated except under the terms specifically provided in this
Agreement.
13. Binding Effect. This Agreement is binding upon and will inure to the
benefit of the Company and its successors and assigns and to the Insured and his
or her successors, assigns, heirs, executors, administrators and beneficiaries.
14. Notices. Any notice, consent or demand made under this Agreement must be
written and signed by the party issuing it. If a notice, consent or demand is
mailed, it must be sent by United States certified mail, postage prepaid,
addressed to the recipient's last known address. The date any notice, consent or
demand is mailed will be treated as the date it is given.
15. Mutual Cooperation. Each party agrees to perform all acts contemplated
under this Agreement and the Policy.
16. Governing Law. This Agreement, and all rights arising under it, will be
governed by the laws of the United States and, where applicable, by the laws of
Ohio.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year written above.
Dominion Homes, Inc
By: /s/ Robert A. Meyer, Jr.
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Date Signed: 12/20/2002
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/s/ Douglas G. Borror
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Douglas G. Borror
Date Signed: 12/20/2002
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ATTACHMENT A
TO
DOMINION HOMES, INC.
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
FOR
Douglas G. Borror
IDENTIFICATION OF POLICY
The Policy that is the subject of this Agreement is Policy Number 1Y000800 and
will be purchased from the New England Financial Life Insurance Company
("Insurer") in the amount of $8,500,000.
ATTACHMENT B
TO
DOMINION HOMES, INC.
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
FOR
Douglas G. Borror
DEATH BENEFIT PAYABLE UNDER THIS AGREEMENT
The death benefit provided under this Agreement will be the aggregate of the
amount specified below plus any additional death benefit purchased by
application of Policy premiums as provided in paragraph 3 of this Agreement,
less the vale of any amount payable to the Company as provided in paragraph 5.
Split Dollar Benefit = $8,000,000
DOMINION HOMES, INC.
SUPPLEMENTAL SCHEDULE
TO
ENDORSEMENT SPLIT DOLLAR AGREEMENT
The following table shows the amount of the death benefit each executive
officer is entitled to under each executive officers' Endorsement Split Dollar
Agreement.
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Named Executive Officer Death Benefit
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Douglas G. Borror $8,000,000
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Jon M. Donnell $6,000,000
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David S. Borror $1,200,000
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Robert A. Meyer, Jr. $ 775,000
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Peter J. O'Hanlon $ 420,000
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The following table shows the cash compensation paid by the Company to each
executive officer upon the execution of the Endorsement Split Dollar Agreement.
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Named Executive Officer Cash Compensation
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Douglas G. Borror $ 19,344
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Jon M. Donnell $ 11,318
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David S. Borror $ 3,537
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Robert A. Meyer, Jr. $ 2,971
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Peter J. O'Hanlon $ 1,232
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