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EXHIBIT
10.2 TWIN DISC, INCORPORATED ENDORSEMENT SPLIT-DOLLAR LIFE
INSURANCE PROGRAM (ENDORSEMENT OF THREE TIMES BASE SALARY)
This document specifies the terms under which Twin
Disc, Incorporated, a Wisconsin corporation, (the
“Employer”), sponsors various endorsement split-dollar
policies with certain of its executives designated by the Employer
as eligible to participate in this Plan (each an
“Employee”). BACKGROUND INFORMATION
A. The
Employees are valued employees of Employer and Employer wants to
retain them in its employ.
B. The
Employer, as an inducement to such continued employment, wants to
assist Employees with personal life insurance protection.
C.
The Employer is the owner of various life insurance policies (the
“Policies”) issued by The Northwestern Mutual Life
Insurance Company (the “Insurer”) naming the Employees
as insured parties. It is intended that the Policies will
allow the insured party to designate the beneficiary for life
insurance proceeds equal to three times the insured party’s
Base Salary should the insured party die prior to a Rollout Event.
D. The
Employer wishes to specify the rights of the Employees with respect
to the Policies. The terms of the split-dollar Plan
with respect to the Policies are as follows:
1.
Definitions.
(a)
“Base Salary” means either: (i) the annual base salary
of the Employee as specified by the Compensation Committee of the
Employer in effect at the time of the Employee’s death if the
Employee dies before Retirement; or (ii) the annual base salary as
specified by the Compensation Committee of the Employer in effect
at the time of the Employee’s Retirement if the Employee dies
after Retirement.
(b)
“Employer Premiums” means the cumulative sum of all
premiums paid by the Employer on a Policy covering an Employee.
(c)
“Forfeiture Event” means a Termination of Employment
for any reason other than death or Retirement, regardless of
whether such Termination of Employment is voluntary or involuntary.
1
(d)
“Plan” means the Twin Disc, Incorporated Endorsement
Split-Dollar Life Insurance Program, as set forth herein.
(e)
“Retirement” means an Employee’s Termination of
Employment on or after the date that the Employee:
(1) Has attained age 65
with at least 5 Years of Service;
(2) Has attained age 60
with at least 10 Years of Service;
(3) Has accumulated a
combination of age and Years of Service equaling or exceeding 85;
or
(4) Has accumulated at
least 30 Years of Service.
(f)
“Rollout Event” means, with respect to each Policy
separately, the latest to occur of the following: (i) the fifteenth
anniversary of the Employee’s commencement of coverage under
the Policy; or (ii) the Employee’s Retirement.
(g)
“Termination for Cause” means an Employee’s
Termination of Employment for any of the following reasons: (i) the
willful and continued failure of by the Employee to substantially
perform his or her duties with the Employer; (ii) the willful
engaging by the Employee in conduct which is demonstrably and
materially injurious to the Employer; (iii) the Employee’s
conviction of a felony or conviction of a misdemeanor which
materially impairs the ability of the Employee to substantially
performs his or her duties with the Employer; or (iv) the
commission by the Employee of an act of fraud or material
dishonesty involving the Employer.
(h)
“Termination of Employment” means a “separation
from service” with the Employer and all affiliates, within
the meaning of Code section 409A(a)(2)(A) and the default rules set
forth in Treasury Regulation section 1.409A-1(h).
(i)
“Year of Service” means a calendar year in which an
Employee is credited with at least 1,000 hours of service.
For this purpose, hours of service shall be determined in
accordance with Department of Labor Regulations 2530.200b-2(b) and
(c).
2.
Ownership of Policies. Employer shall be the sole Owner of
each of the Policies. Unless otherwise provided by this Plan,
Employees or their beneficiaries shall have no legal, equitable or
beneficial right, title or interest in or to the Policies or the
proceeds payable under the Policies.
3.
Policy Endorsement. With respect to the Policy or Policies
naming an Employee as the insured, the Employer shall execute one
or more endorsements (as appropriate) (the “Policy
Endorsements”) documenting the right of the Employee to
designate the direct and contingent beneficiaries of the aggregate
death benefit proceeds of such Policy or Policies equal to three
times Employee’s Base Salary. 2
(a)
If the Employer owns more than one Policy naming the Employee
as the insured party and the death benefit from the earliest-issued
Policy exceeds an amount equal to three times the Employee’s
Base Salary, the remaining death benefit from such Policy and all
of the death benefit from later-issued Policies shall be paid to
the Employer.
(b)
If the Employer owns more than one Policy naming the Employee as
the insured party and the death benefit from the earliest-issued
Policy does not exceed an amount equal to three times the
Employee’s Base Salary, the Employee shall have the right to
designate the beneficiary for the entire amount of the death
benefit from the earliest-issued Policy, and to designate the
beneficiary of the death benefit from each successive Policy until
the aggregate death benefit payable to the Employee’s
beneficiary(ies) equals three times the Employee’s Base
Salary. The Employer shall retain the right to receive any
and all death benefits from such successive Policies to the extent
that such benefits exceed three times the Employee’s Base
Salary. &n
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