EXHIBIT 10.d
DEFERRED COMPENSATION WAIVER
AND INSURANCE BENEFIT AGREEMENT
This Agreement is entered into this 30th day of January, 1998, by and
between SNAP-ON INCORPORATED, a Delaware corporation (the "Company"), and XXXXXX
X. XXXXXX (the "Executive").
WHEREAS, the Executive has a Cash Account under the Company's Deferred
Compensation Plan (the "Deferred Compensation Plan Balance"); and
WHEREAS, the Executive has previously deferred at least Seven Thousand
Seven Hundred Fifty Dollars ($7,750) per month for the period beginning on
February 27, 1998, and ending on December 31, 1998; and
WHEREAS, the Executive may earn a bonus for calendar year 1998 which would
be payable in 1999; and
WHEREAS, the Company is willing to establish the Split-Dollar Life
Insurance Agreement described in Section 3 of this Agreement ("Split-Dollar
Agreement"); and
WHEREAS, as of the date of this Agreement, the Executive and the Company
believe that the net Present Value of the Company's obligations under the
Split-Dollar Agreement are equivalent to the Present Value of the Executive's
waiver of rights under Section 1 of this Agreement.
NOW, THEREFORE, in consideration of the respective terms and conditions set
forth herein, the Company and the Executive hereby agree as follows:
1. Definitions.
a. Waived Deferred Compensation Plan Rights. The estimated payments to
the Executive attributable to the Executive's Waived Existing Balance (as
defined in Section 2.a), the Waived Salary Amounts (as defined in Section
2.b) and the Waived Bonus Amount (as defined in Section 2.c) calculated
based on the assumptions set forth in Exhibit B to this Agreement.
b. Change of Control. This term shall have the meaning given in it
Section 1.c. of the Senior Officer Agreement.
c. Committee. The Organization and Compensation Committee of the Board
of Directors of the Company.
d. Deferred Compensation Plan. The Snap-on Incorporated Deferred
Compensation Plan.
e. Present Value. The Present Value of a payment shall be determined
based on the assumptions set forth in Exhibit B to this Agreement.
f. Senior Officer Agreement. The Restated Senior Officer Agreement
dated January 29, 1996, between the Company and the Executive
2. Executive's Waiver of Rights.
a. The Executive hereby waives any and all rights to receive One
Million Dollars ($1,000,000) of the Executive's Cash Account under the
Company's Deferred Compensation Plan as of the date of this agreement and
Three Hundred Thousand Dollars of the Executive's Cash Account under the
Company's Deferred Compensation Plan as of February 17, 1998 (the "Waived
Existing Balance").
b. The Executive hereby waives any and all rights to (i) Seven
Thousand Seven Hundred Fifty Dollars ($7,750) of his base salary per month
for the period beginning on February 27, 1998, and ending on December 31,
1998, which he has previously deferred and (ii) Seven Thousand Seven
Hundred Fifty Dollars ($7,750) of his base salary for the period beginning
on January 1, 1999, and ending on January 31, 1999 (the "Waived Salary
Amounts").
c. The Executive hereby waives any and all rights to Two Hundred Seven
Thousand Dollars ($207,000) of the bonus which would otherwise be payable
to the Executive in 1999 with respect to the Company's performance in 1998
(the "Waived Bonus Amount").
d. In the event that the Executive's employment by the Company (as
defined in the Executive's Senior Officer Agreement) is terminated for any
reason prior to the time(s) when the Executive would have otherwise earned
the right to receive some or all of the compensation waived under Sections
2.b or 2.c of this Agreement, the Executive hereby waives a portion of
other compensation otherwise payable to him equal to the Present Value of
the amount of compensation waived under Sections 2.b and 2.c of this
Agreement which the Executive did not earn the right to receive prior to
the termination of the Executive's employment, based on the assumptions set
forth in Exhibit B to this Agreement. This waiver shall first apply to any
compensation otherwise payable to the Executive pursuant to the Executive's
Senior Officer Agreement as a result of the Executive's termination, then
to any bonus which would otherwise be payable to the Executive, then to any
salary which would otherwise be payable to the Executive and then to any
amount which would otherwise be payable to the Executive pursuant to the
Company's Supplemental Retirement Plan for Officers.
3. Split-Dollar Agreement.
a. The Company and the Executive agree to enter into the Split-Dollar
Agreement attached as Exhibit A to this Agreement. The Company agrees to
pay the first ten (10) annual premium payments of Five Hundred Thirty-Three
Thousand Six
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Hundred Ten Dollars ($533,610) pursuant to Section 3 of the Split-Dollar
Agreement, subject to adjustment as provided in this Agreement.
b. In the event that the Executive does not earn the compensation
waived under Sections 2.b and 2.c of this Agreement and does not waive
sufficient compensation pursuant to Section 2.d of this Agreement to offset
such unearned compensation, the Company's obligation to make future premium
payments under Section 3 of the Split-Dollar Agreement shall be adjusted so
that the net Present Value of the Company's premium payments under Section
3 of the Split-Dollar Agreement (as recovered under Section 5 of the
Split-Dollar Agreement) plus the net Present Value of any death benefit
required to be paid under Section 4 of this Agreement, shall be equivalent
to the Present Value of the Executive's Waived Deferred Compensation Plan
Rights (as adjusted to reflect compensation actually waived) based on the
assumptions set forth in Exhibit B to this Agreement.
4. Payments Upon Death of Executive and Executive's Wife.
a. In the event of the death of the survivor of the Executive and
Xxxxxxxx X. Xxxxxx (the "Executive's wife") prior to the repayment to the
Company under Section 5 of the Split-Dollar Agreement, the Company will pay
to the beneficiary designated pursuant to Section 4.b or 4.c of this
Agreement the amount (if any) by which the Present Value of the Executive's
Waived Deferred Compensation Plan Rights exceeds the net Present Value of
the Company's premium payments under Section 3 of the Split-Dollar
Agreement (as recovered under Section 5 of the Split-Dollar Agreement).
These calculations shall be made based on the assumptions set forth in
Exhibit B to this Agreement. The death benefits based on the Waived
Deferred Compensation Plan Rights are shown in column 11 of Exhibit B to
this Agreement.
b. The Executive may designate a beneficiary or beneficiaries who,
upon the death of the survivor of the Executive and the Executive's wife
are to receive the amounts that are paid under Section 4.a of this
Agreement. All designations shall be in writing to the Company in such form
as it requires or accepts and signed by the Executive. The designation
shall be effective only if and when delivered to the Company during the
lifetime of the Executive. The Executive also may change his beneficiary or
beneficiaries by a signed, written instrument delivered to the Company. The
payment of amounts shall be in accordance with the last unrevoked written
designation of beneficiary that has been signed and delivered to the
Company.
c. In the event the Executive does not designate a beneficiary or if
for any reason such designation is ineffective, in whole or in part, for
any reason including the death of a beneficiary prior to the death of the
survivor of the Executive and the Executive's wife, any amount payable
under Section 4.a of this Agreement shall be paid to the estate of the
survivor of the Executive and the Executive's wife, and in such event, the
term "beneficiary" shall include such estate.
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5. Equivalence of Benefits.
The Company and the Executive agree that the net Present Value of the
Company's premium payment obligation under Section 3 of the Split-Dollar
Agreement (as recovered under Section 5 of the Split-Dollar Agreement) plus
the net Present Value of any death benefit required to be paid under
Section 4 of this Agreement are equivalent to the Present Value of the
Executive's Waived Deferred Compensation Plan Rights based on the
assumptions set forth in Exhibit B to this Agreement.
6. Funding Upon a Change of Control.
a. In the event that a Change of Control of the Company occurs, the
Company shall immediately transfer to an irrevocable grantor trust
established by the Company which is substantially identical to the trust
attached as Exhibit C to this Agreement and contains such other
supplemental provisions as are required by the trustee which are not
inconsistent with Exhibit C (the "Trust") an amount equal to (i) the
aggregate unpaid premiums required to be paid by the Company under Section
3 of this Agreement plus (ii) an additional amount equal to the death
benefit required to be paid under Section 4.a of this Agreement if the
survivor of the Executive and the Executive' wife dies in the year in which
the Company's final premium payment is due.
b. The Trust is an administrative and funding vehicle for the
Company's general assets contributed to the Trust for the purpose of
ultimately satisfying obligations under this Agreement. In the event that
the Company transfers assets to the Trust for the express purpose of
ultimately satisfying its obligations under this Agreement then, subject to
the terms of the Trust and limited by assets available and held by the
Trustees of the Trust for the purpose of funding the benefits provided by
this Agreement, payments may be made from such Trust in satisfaction of
Company's obligations hereunder. The transfer of assets by the Company to
the Trust for this purpose shall not increase, decrease or vary in any way
the rights and obligations of the parties to this Agreement, nor shall the
Executive, the Executive's wife or the owner of the insurance policy held
pursuant to the Split-Dollar Agreement have any ownership rights with
respect to such assets nor shall the assets be treated as a trust fund of
any kind for the benefit of any such person; provided that as and when any
such person is entitled to receive payments hereunder, such person may,
subject to the terms of the Trust and limited by the terms of this
Agreement, obtain such payments from the Trust. The Executive, the
Executive's wife or the owner of the insurance policy held pursuant to the
Split-Dollar Agreement may enforce and obtain satisfaction of such payment
rights against the assets held by the Trust for the purpose of satisfying
such obligations of the Company.
7. Successors and Binding Agreements.
a. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise)
to all or substantially all
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of the business and/or assets of the Company expressly to assume and to
agree to perform this Agreement in the same manner and to the same extent
the Company would be required to perform if no succession had taken place.
This Agreement shall be binding upon and inure to the benefit of the
Company and any such successor, and such successor shall thereafter be
deemed the "Company" for purposes of this Agreement.
b. This Agreement shall inure to the benefit of and be enforceable by
the Executive's respective personal or legal representative, executor,
administrator, successor, heirs, distributees and/or legatees.
c. Neither the Company nor the Executive may assign, transfer or
delegate this Agreement or any rights or obligations hereunder except as
expressly provided in this Agreement.
8. Notices.
All communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or five (5) business days
after having been mailed by United States registered or certified mail,
return receipt requested, postage prepaid, addressed to the Company (to the
attention of the Secretary of the Company) at its principal executive
office and to the Executive at his principal residence, or to such other
address as any party may have furnished to the other in writing in
accordance herewith, except that notices of a change of address shall be
effective only upon receipt.
9. Governing Law.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Wisconsin without
giving effect to the principles of conflict of laws of such state, except
that Section 10 shall be construed in accordance with the Federal
Arbitration Act if arbitration is chosen as the method of resolution.
10. Settlement of Disputes; Arbitration.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled, at the election of the Executive, the
Executive's wife or the owner of the insurance policy held pursuant to the
Split-Dollar Agreement, either by arbitration in Chicago, Illinois in
accordance with the rules of the American Arbitration Association then in
effect or by litigation. Judgment may be entered on the arbitrator's award
in any court having jurisdiction.
11. Certain Limitations.
Nothing in this Agreement shall grant the Executive any right to remain an
executive, director or employee of the Company or of any its subsidiaries
for any period of time.
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12. Miscellaneous.
a. Expenses. All costs and expenses of administering this Agreement
shall be borne by the Company.
b. Action by the Company. Any action required or permitted to be taken
under this Agreement by the Company shall be by resolution of the Board of
Directors, by the duly authorized Committee of the Board of Directors, or
by a person or persons authorized by resolution of the Board of Directors
or the Committee.
IN WITNESS WHEREOF the parties have signed and sealed this Agreement as of
the date first above written.
In the presence of SNAP-ON INCORPORATED
/s/ By /s/Xxxxxxx X. Monetmurro
--------------------------- ------------------------
Its Senior Vice President
------------------------
/s/ /s/Xxxxxx X. Xxxxxx
--------------------------- -----------------------------
Xxxxxx X. Xxxxxx
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EXHIBIT A
SNAP-ON INCORPORATED
SPLIT-DOLLAR INSURANCE AGREEMENT
1. This Agreement is entered into this 30th day of January, 1998, by and
between SNAP-ON INCORPORATED, a Delaware corporation, and the XXXXXX 1998
INSURANCE TRUST.
2. Definitions.
(a) "Company" means Snap-on Incorporated, a Delaware corporation,
with offices in Kenosha, Wisconsin.
(b) "Insureds" means Xxxxxx X. Xxxxxx and Xxxxxxxx X. Xxxxxx.
(c) "Insurer" means Northwestern Mutual Life.
(d) "Owner" means the Xxxxxx 1998 Insurance Trust, who may or may not
be the same person as the Insureds.
(e) "Policy" means the policy or policies of insurance on the lives
of the Insureds issued by the Insurer and listed on Schedule "A" attached hereto
together with any supplementary contracts issued by the Insurer in conjunction
therewith
(f) "Policy Interest" means the interest of the Company in the
Policy. Policy Interest is an amount equal to the aggregate premiums paid by the
Company. The existence of the Company's Policy Interest shall be evidenced by
filing with the Insurer an assignment in substantially the form attached hereto
as Schedule "B."
3. Premium Payments.
(a) The Company agrees to pay up to the first ten (10) annual premium
payments of Five Hundred Thirty-Three Thousand Six Hundred Ten Dollars
($533,610) as they become due. The Owner shall be responsible for paying all
premium payments not paid by the Company.
(b) Policy dividends shall be applied to purchase paid-up additional
insurance protection.
4. Policy Ownership.
(a) Except as provided in subparagraph (b), the Owner shall be the
sole and exclusive owner of the Policy. This includes all the rights of "owner"
under the terms of the Policy except as otherwise provided in this Section 4,
including but not limited to the right to designate beneficiaries and select
settlement options.
(b) Neither the Owner nor the Company shall have the right to obtain
a cash loan from the Insurer in accordance with the loan provisions of the
Policy.
(c) In exchange for the Company's payment of its premium contribution
under Section 3, the Owner shall assign to the Company the following limited
ownership rights in the Policy:
(1) The right to recover its Policy Interest from
the cash value of the Policy in the event of
the termination of this Agreement as provided
in Section 5.
(2) The right to recover its Policy Interest from
the proceeds of the Policy in the event of the
death of the survivor of the Insureds.
(d) To secure the Company's interest in the Policy the Owner shall
execute an Assignment of the Policy to the Company in substantially the form
attached hereto as Schedule B.
(e) It is agreed that benefits will be paid under the Policy by the
Insurer only by separate checks to the parties entitled thereto.
5. Termination of Plan.
(a) This Agreement may be terminated by the Owner by giving notice in
writing to the Company. In the event of termination of this Agreement the Owner
shall, at its election:
(1) Repay to the Company within 60 days of the date
of termination an amount equal to the Company's
Policy Interest. Or,
(2) Execute any and all instruments that may be
required to vest ownership of the Policy in the
Company; and the Company shall refund to Owner
that part of any payment by the Owner under
Section 3 for the premium payment period in
which termination occurred representing the
unexpired portion of that period. Thereafter,
Owner shall have no further interest in the
Policy.
(b) This Plan shall terminate on the sixteenth anniversary of the
issuance of the Policy.
6. 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
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discharge it from all claims, suits and demands of all persons whatsoever. It
shall in no way be bound by or be deemed to have notice of the provisions of
this Agreement.
7. The Company and the Owner may amend this Agreement. Such amendment
shall be in writing and signed by the Company and Owner.
8. This Agreement shall bind and inure to the benefit of the Company and
its successors and assigns; Owner and his/her heirs, executors, administrators
and assigns; and any Policy beneficiary.
IN WITNESS WHEREOF the parties have signed and sealed this Agreement on
the date first above written.
In the presence of SNAP-ON INCORPORATED
/s/
------------------------- By /s/Xxxxxxx X. Xxxxxxxxxx
Its Senior Vice President
OWNER
Xxxxxx 1998 Insurance Trust
/s/ /s/ Trustee
------------------------- -------------------------------------
/s/ /s/ Trustee
------------------------- -------------------------------------
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SCHEDULE A
LIFE INSURANCE
Initial Face Insureds' Initial
Policy Number Amount Economic Benefit
------------- ------ ----------------
14538602 $17,267,686 $4,183
SCHEDULE B
COLLATERAL ASSIGNMENT FORM
SNAP-ON INCORPORATED SPLIT-DOLLAR INSURANCE PLAN
Insurer: Northwestern Mutual Life
Insureds: Xxxxxx X. Xxxxxx and Xxxxxxxx X. Xxxxxx
Policy No. 14538602
FOR VALUE RECEIVED, THIS ASSIGNMENT is made by the undersigned Owner
effective this 30th day of January, 1998.
1. Definitions.
(a) "Assignee" means Snap-on Incorporated, a Delaware
corporation, of Kenosha, Wisconsin.
(b) "Insureds" means Xxxxxx X. Xxxxxx and Xxxxxxxx X. Xxxxxx.
(c) "Insurer" means Northwestern Mutual Life.
(d) "Owner" means the Xxxxxx 1998 Insurance Trust.
(e) "Policy" means the following policy or policies of insurance
issued by the Insurer on the lives of the Insureds, together with any
supplementary contracts issued in conjunction therewith:
Policy Number: 14538602 Face Amount: $17,267,686
(f) "Policy Interest" means the Assignee's "Policy Interest" as
set forth in the Split-Dollar Plan. The Insurer shall be entitled to rely on the
Assignee's certification of the amount of its Policy Interest.
(g) "Split-Dollar Plan" means that certain plan of even date
herewith, between the Owner and the Assignee. The Insurer is not bound by nor
deemed to have notice of the provisions of the Split-Dollar Plan.
2. Introduction. Under the Split-Dollar Plan, the Assignee has agreed
to assist the Owner in payment of premiums on the Policy. In consideration of
such premium payments by the Assignee, the Owner grants herein to the Assignee
certain limited interests in the Policy.
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3. Assignment. The Owner hereby assigns, transfers and sets over to
the Assignee, its successors and assigns, the following specific rights in the
Policy and subject to the following terms and conditions:
(a) The right to recover its Policy Interest from the cash value
of the Policy in the event of the Policy's surrender by the Owner.
(b) The right to recover its Policy Interest from the proceeds of
the Policy in the event of the death of the survivor of the Insureds.
4. Insurer. The Insurer is hereby authorized to recognize, and is
fully protected in recognizing:
(a) The claims of the Assignee to rights hereunder, without
investigating the reasons for such action by the Assignee, or the validity or
the amount of such claims.
(b) The Owner's request for surrender of the Policy with or
without the consent of the Assignee. Upon surrender, the Policy shall be
terminated and of no further force or effect.
5. Release of Assignment. Upon payment to the Assignee of its policy
interest, the Assignee shall execute a written release of this assignment.
IN WITNESS WHEREOF the Owner has executed this assignment on the date
first above written.
Xxxxxx 1998 Insurance Trust
Trustee
------------------------ --------------------------------------------
Trustee
------------------------ --------------------------------------------
EXHIBIT B
SNAP-ON INCORPORATED
CALCULATION OF NET PRESENT VALUE OF CORPORATE CASH FLOWS
January, 1998
--------------------------------------------------------------------------------------------------
Corporate Cost of Deferral Program
-----------------------------------------------------------------------------
(1) (2) (3) (4) (5) (6)
63%(3) 63%(2) NPV Sum (4)
+NPV(3)
Annual Payment
------------------------
Net A/T
Deferred End of Year Death Net
Compen- Account Net Benefit Present
Yr. Age sation Balance Gross A/T Payable Value
------- ------- ------------ ------------- ------------ ----------- ------------- -----------
1,300,000
58 300,000 1,732,740 0 0 1,091,626 1,051,865
59 0 1,888,686 0 0 1,189,872 1,104,773
1 60 0 2,058,668 0 0 1,296,961 1,160,342
1 61 0 2,243,948 0 0 1,413,687 1,218,705
5 62 0 2,096,251 320,782 202,093 1,320,638 1,271,242
5 63 0 1,935,262 320,782 202,093 1,219,215 1,317,977
7 64 0 1,759,783 320,782 202,093 1,108,663 1,358,926
8 65 0 1,568,511 320,782 202,093 988,162 1,394,095
9 66 0 1,360,025 320,782 202,093 856,816 1,423,479
10 67 0 1,132,775 320,782 202,093 713,648 1,447,062
11 68 0 885,073 320,782 202,093 557,596 1,464,816
12 69 0 615,077 320,782 202,093 387,499 1,476,705
13 70 0 320,782 320,782 202,093 202,093 1,482,680
14 71 0 0 320,782 202,093 0 1,482,680
15 72 0 0 0 0 0 1,482,680
73 0 0 0 0 0 1,482,680
------------ -----------
1,600,000 0 2,202,925
============ ===========
----------------------------------------------------------------------------------------
Corporate Cost of Waiver Program Survivor Benefit
------------------------------------- ------------------------
(7) (8) (9) (10) (11)
Sum(7) NPV Sum (7) (6)-(9) (10)/63%
+NPV(8)
Net A/T
Premium Corp. Value
Scheduled Recovery Net In Excess of Lump
Premium At Present Waived Sum
Yr. Age Outlay Death Value Compensation Payable
------- ------- ------------ ------- ----------- ------------ ---------
58 533,610 (533,610) 19,436 1,032,430 1,638,777
59 533,610 (1,067,220) 56,892 1,047,881 1,663,304
1 60 533,610 (1,600,830) 111,029 1,049,313 1,665,576
1 61 533,610 (2,134,440) 180,583 1,038,123 1,647,814
5 62 533,610 (2,668,050) 264,358 1,006,883 1,598,228
5 63 533,610 (3,201,660) 361,227 956,749 1,518,650
7 64 533,610 (3,735,270) 470,125 888,801 1,410,796
8 65 533,610 (4,268,879) 590,046 804,049 1,276,269
9 66 533,610 (4,802,489) 720,044 703,435 1,116,564
10 67 533,610 (5,336,099) 859,224 587,837 933,075
11 68 0 (5,336,099) 993,336 471,481 748,382
12 69 0 (5,336,099) 1,122,562 354,143 562,132
13 70 0 (5,336,099) 1,247,082 235,598 373,966
14 71 0 (5,336,099) 1,367,066 115,614 183,514
15 72 0 (5,336,099) 1,482,680 0 0
73 (5,336,099) 0 1,482,680 0 0
---------------------------------------------------------------------------------------------
Assumptions
Additional
Deferral 300,000
Initial Tax Rate 37%
Deferral 1,300,000 Interest Crediting Rate 9%
Years to Waive 1 NPV Interest Rate 6%
Years to Defer 4 Year to Roll-Out (End of
Year) 15
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EXHIBIT C
SNAP-ON INCORPORATED INSURANCE BENEFIT TRUST
(Established pursuant to the Deferred Compensation Waiver and
Insurance Benefit Agreement dated January 30, 1998, between
Snap-on Incorporated and Xxxxxx X. Xxxxxx)
(a) This Agreement made this ______ day of December, 1998, by and between
SNAP-ON INCORPORATED, a Delaware Corporation (the "Company") and THE NORTHERN
TRUST COMPANY ("Trustee");
(b) WHEREAS, Company has entered into a Deferred Compensation Waiver And
Insurance Benefit Agreement with Xxxxxx X. Xxxxxx dated January 30, 1998 (the
"Plan").
(c) WHEREAS, Company has incurred liability under the terms of such Plan.
(d) WHEREAS, Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of Company's Insolvency, as herein defined, until used to
pay insurance premiums as required by Section 3 of the Plan or used to pay a
death benefit as required by Section 4 of the Plan;
(e) WHEREAS, all payments made pursuant to the Plan are made to or for
the benefit of Xxxxxx X. Xxxxxx, Xxxxxxxx X. Xxxxxx, the Xxxxxx X. Xxxxxx 1998
Insurance Trust, the beneficiary designated by Xxxxxx X. Xxxxxx pursuant to
Section 4 of the Plan or the estate of the survivor of Xxxxxx X. Xxxxxx and
Xxxxxxxx X. Xxxxxx (the "Plan Beneficiaries");
(f) WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan for purposes of Title I of the Employee Retirement Income
Security Act of 1974;
(g) WHEREAS, it is the intention of Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust.
(a) Company hereby deposits with Trustee in trust One Hundred Dollars
($100.00) which shall become the principal of the Trust to be held, administered
and disposed of by the Trustee as provided in this Trust Agreement.
(b) The Trust hereby established is revocable by Company; it shall become
irrevocable upon a Change of Control, as defined herein.
(c) The Trust is intended to be a grantor trust, of which Company is the
grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) Company shall have the right at any time, and from time to time in
its sole discretion, to substitute assets of equal fair market value for any
asset held by the Trust. This right is exercisable by Company in a nonfiduciary
capacity without the approval or consent of any person in a fiduciary capacity.
(e) The principal of the Trust, and any earnings thereon, shall be held
separate and apart from other funds of Company and shall be used exclusively for
the uses and purposes of the Plan and general creditors as herein set forth.
(f) No Plan Beneficiary shall have any preferred claim on, or any
beneficial ownership interest in, any asset of the Trust. Any rights created
under the Plan and this Trust Agreement shall be mere unsecured contractual
rights of the Plan Beneficiaries against Company. Any assets held by the Trust
will be subject to the claims of Company's general creditors under federal and
state law in the event of Insolvency, as defined in Section 3(a) herein.
(g) Upon a Change of Control, Company shall immediately make an
irrevocable contribution to the Trust as required by Section 5 of the Plan. The
Trustee shall have no duty to enforce any funding obligations of the Company and
the duties of the Trustee shall be governed solely by the terms of this Trust
Agreement.
Section 2. Payments Under the Plan.
(a) Upon a Change of Control, Company shall deliver to Trustee a schedule
(the "Payment Schedule") that directs the Trustee regarding the amounts payable
under the Plan, the form in which such amounts are to be paid, and the dates on
which such amounts are payable. Except as otherwise provided herein, the Trustee
shall make payments in accordance with such Payment Schedule. The Company shall
have the sole responsibility for all tax withholding, related filings and
reports. The Trustee shall withhold for taxes such amounts from distributions as
the Company directs and shall follow the instructions of the Company with
respect to the remission of such withheld amounts to the appropriate
governmental authorities.
(b) Company may make payments directly as they become due under the terms
of the Plan. Company shall notify Trustee of its decision to make payments
directly prior to the time amounts are payable under the Plan. In addition, if
the principal of the Trust, and any earnings thereon, are not sufficient to make
payments in accordance with the terms of the Plan, Company shall make the
balance of each such payment as it falls due. Trustee shall notify Company where
principal and earnings are not sufficient.
(c) The entitlement of Plan Beneficiaries to benefits under the Plan
shall be determined under the Plan, and any claim for such benefits shall be
considered and reviewed under the procedure set out in the Plan.
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Section 3. Trustee Responsibility Regarding Payments When Company is
Insolvent.
(a) Trustee shall cease payments under the Plan if the Company is
Insolvent. Company shall be considered "Insolvent" for purposes of this Trust
Agreement if (i) Company is unable to pay its debts as they become due, or (ii)
Company is subject to a pending proceeding as a debtor under the United States
Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Sections 1(e) and 1(f) hereof, the principal and income of the Trust shall be
subject to claims of general creditors of Company under federal and state law as
set forth below.
(1) The Board of Directors and the Chief Executive Officer of
Company shall have the duty to inform Trustee in writing of Company's
Insolvency. If a person claiming to be a creditor of Company alleges in
writing to Trustee that Company has become Insolvent, Trustee shall
determine whether Company is Insolvent and, pending such determination,
Trustee shall discontinue payment of benefits under the Plan.
(2) Unless Trustee has actual knowledge of Company's Insolvency,
or has received notice from Company or a person claiming to be a creditor
alleging that Company is Insolvent, Trustee shall have no duty to inquire
whether Company is Insolvent. Trustee may in all events rely on such
evidence concerning Company's solvency as may be furnished to Trustee and
that provides Trustee with a reasonable basis for making a determination
concerning Company's solvency. In no event shall "actual knowledge" be
deemed to include knowledge of Company's credit status held by banking
officers or banking employees of The Northern Trust Company which has not
been communicated to the Trust Department of Trustee. The Trustee may
appoint an independent accounting, consulting or law firm to make any
determination of solvency required by Trustee under this Section 3. In
such event, Trustee may conclusively rely upon the determination by such
firm and shall be responsible only for the prudent selection of such
firm.
(3) If at any time Trustee has determined that Company is
Insolvent, Trustee shall discontinue payments under the Plan and shall
hold the assets of the Trust for the benefit of Company's general
creditors. Nothing in this Trust Agreement shall in any way diminish any
rights as general creditors of Company with respect to benefits due under
the Plan or otherwise.
(4) Trustee shall resume the payments under the Plan in accordance
with Section 2 of this Trust Agreement only after Trustee has determined
that Company is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee discontinues
the payments from the Trust pursuant to Section 3(b) hereof and subsequently
resumes such payments, the first payment following such discontinuance shall
include the aggregate amount of all payments due under the terms of the Plan for
the period of such discontinuance, less the aggregate amount of any payments
made by Company in lieu of the payments provided for
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hereunder during any such period of discontinuance, all in accordance with the
Payment Schedule. The Payment Schedule may only be modified by the Company with
the written consent of all Plan Beneficiaries as necessary to comply with the
provisions of this paragraph. The Company shall be responsible for securing the
written consent of all Plan Beneficiaries and providing such consents to the
Trustee.
Section 4. Payments to Company.
Except as provided in Section 3 hereof, after the Trust has become
irrevocable, Company shall have no right or power to direct Trustee to return to
Company or to divert to others any of the Trust assets before all payments of
benefits have been made pursuant to the terms of the Plan. The Trustee shall be
entitled to rely on the written representations of the Company and all Plan
Beneficiaries that all such payments have been made. The Company shall be
responsible for securing the written representations of all Plan Beneficiaries
and providing such representations to the Trustee.
Section 5. Disposition of Income.
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
Section 6. Accounting by Trustee.
Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between
Company and Trustee, which records may be audited annually (or at such other
times as agreed by the Company and the Trustee) by the Company or anyone named
by the Company. Within thirty (30) days following the close of each calendar
year and within thirty (30) days after the resignation of Trustee, Trustee shall
deliver to Company a written account of its administration of the Trust during
such year or during the period from the close of the last preceding year to the
date of such resignation, setting forth all investments, receipts, disbursements
and other transactions effected by it, including a description of all securities
and investments purchased and sold with the cost or net proceeds of such
purchases or sales (accrued interest paid or receivable being shown separately),
and showing all cash, securities and other property held in the Trust at the end
of such year or as of the date of such resignation, as the case may be. In the
absence of the filing in writing with the Trustee by the Company of exceptions
or objections to any such account within ninety (90) days, the Company shall be
deemed to have approved such account; in such case, or upon the written approval
by the Company of any such account, the Trustee shall be released, relieved and
discharged with respect to all matters and things set forth in such account as
though such account had been settled by the decree of a court of competent
jurisdiction. The Trustee may conclusively rely on determinations of the Company
of valuations for assets of the Trust for which the Trustee deems there to be no
readily determinable fair market value and on the determination of the issuer of
any insurance contracts with respect to the fair market value of such insurance
contracts.
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Section 7. Responsibility of Trustee.
(a) Trustee shall act with the care, skill, prudence, and diligence under
the circumstances then prevailing that a prudent person acting in like capacity
and familiar with such matters would use in the conduct of an enterprise of a
like character and with like aims; provided, however, that Trustee shall incur
no liability to any person for any action taken pursuant to a direction, request
or approval given by Company which is contemplated by, and in conformity with,
the terms of this Trust and is given in writing by Company. In the event of a
dispute between Company and a party, Trustee may apply to a court of competent
jurisdiction to resolve the dispute.
(b) If Trustee undertakes or defends any litigation arising in connection
with this Trust, Company agrees to indemnify Trustee against Trustee's costs,
expenses and liabilities (including, without limitation, attorneys' fees and
expenses) relating thereto and to be primarily liable for such payments. If
Company does not pay such costs, expenses and liabilities in a reasonably timely
manner, Trustee may obtain payment from the Trust.
(c) Trustee may consult with legal counsel (who may also be counsel for
Company generally) with respect to any of its duties or obligations hereunder.
(d) Trustee shall have, without exclusion, all powers conferred on
Trustees by applicable law, unless expressly provided otherwise herein.
(e) Notwithstanding any powers granted to Trustee pursuant to this Trust
Agreement or to applicable law, Trustee shall not have any power that could give
this Trust the objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
(f) To invest and reinvest part or all of the trust fund in any real or
personal property (including investments in any stocks, bonds, debentures,
mutual fund shares (including those for which the Trustee or its affiliate is
advisor), notes, commercial paper, treasury bills, options, commodities, futures
contracts, partnership interests, venture capital investments, any interest
bearing deposits held by any bank or similar financial institution, and any
other real or personal property) and to diversify such investments so as to
minimize the risk of large losses unless under the circumstances it is clearly
prudent not to do so; except that the Company may from time to time establish
investment guidelines and the trustee shall follow such investment guidelines.
(g) To retain in cash such amounts as the trustee considers advisable and
as are permitted by applicable law and to deposit any cash so retained in any
depository (including any bank acting as trustee) which the trustee may select.
(h) To manage, sell, insure and otherwise deal with all real and personal
property held by the trustee on such terms and conditions as the trustee shall
decide.
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(i) To vote stock and other voting securities personally or by proxy (and
to delegate the trustee's powers and discretions with respect to such stock or
other voting securities to such proxy), to exercise subscription, conversion and
other rights and options (and make payments from the trust fund in connection
therewith), to take any action and to abstain from taking any action with
respect to any reorganization, consolidation, merger, dissolution,
recapitalization, refinancing and any other program or change affecting any
property constituting a part of the trust fund (and in connection therewith to
delegate the trustee's discretionary powers and to pay assessments,
subscriptions and other charges from the trust fund), to hold or register any
property from time to time in the trustee's name or in the name of a nominee or
to hold it unregistered or in such form that title shall pass by delivery and,
with the approval of the Company, to borrow from anyone, including any bank
acting as trustee, to the extent permitted by law, such amounts from time to
time as the trustee considers desirable to carry out this trust (and to mortgage
or pledge all or part of the trust fund as security).
(j) To make payments from the trust fund of amounts that have become
payable under the Plan pursuant to Section 2 to the extent not already paid by
the Company or that are required to be made to the creditors of the Company
pursuant to Section 3.
(k) To employ counsel and to begin, maintain or defend any litigation
necessary in connection with the administration of this trust except that,
unless otherwise required by law, the trustee shall not be obliged or required
to do so unless indemnified to the trustee's satisfaction.
(l) To withhold, if the trustee considers it advisable, all or any part
of any payment required to be made hereunder as may be necessary and proper to
protect the trustee or the trust fund against any liability or claim on account
of any estate, inheritance, income or other tax or assessment attributable to
any amount payable hereunder, and to discharge any such liability with any part
or all of such payment so withheld, provided that at least ten days prior to
discharging any such liability with any amount so withheld the trustee shall
notify the Company in writing of the trustee's intent to do so.
(m) The Company (which has the authority to do so under the laws of its
state of incorporation) shall indemnify the Trustee and defend it and hold it
harmless from and against any and all liabilities, losses, claims, suits or
expenses (including attorneys' fees), of whatsoever kind and nature which may be
imposed upon, asserted against or incurred by the Trustee at any time by reason
of its provision of services under this Trust Agreement, its status as Trustee,
or by reason of any act or failure to act under this Trust Agreement, or any
action taken in accordance with any directions which conform with the terms of
this Trust Agreement, or acts omitted due to absence of such directions, from
the Company, except to the extent, such liability, loss, claim, suit or expense
arises directly from the Trustee's negligence or willful misconduct in the
performance of responsibilities specifically allocated to it under this Trust
Agreement. This paragraph shall survive the termination of the Trust Agreement.
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(n) To furnish the Company with such information in the trustee's
possession as the Company may need for tax or other purposes.
(o) To employ agents, attorneys, accountants, actuaries and other persons
(who also may be employed by the Company, the Company or others), to delegate
discretionary powers to such persons and to reasonably rely upon information and
advice furnished by such persons; provided that each such delegation and the
acceptance thereof by each such person shall be in writing; and provided further
that the trustee may not delegate its responsibilities as to the management or
control of the assets of the trust fund.
(p) To perform all other acts which in the trustee's judgment are
appropriate for the proper management, investment and distribution of the trust
fund.
(q) The trustee may invest any part or all of the trust assets for which
it has investment responsibility in any common, collective or commingled trust
fund or pooled investment fund that is maintained by a bank or trust company
(including a bank or trust company acting as trustee) provided such investments
are consistent with applicable investment requirements and guidelines. To the
extent that any trust assets are invested in any such fund, the provisions of
the documents under which such common, collective or commingled trust fund or
pooled investment fund are maintained shall govern any investments therein.
Section 8. Compensation and Expenses of Trustee.
Company shall pay all administrative and Trustee's fees and expenses. If
not so paid, the fees and expenses shall be paid from the Trust.
Section 9. Resignation of Trustee.
(a) Trustee may resign at any time by written notice to Company, which
shall be effective thirty (30) days after receipt of such notice unless Company
and Trustee agree otherwise.
(b) The Trustee may not be removed by Company.
(c) Upon resignation of Trustee and appointment of a successor Trustee,
all assets shall subsequently be transferred to the successor Trustee. The
transfer shall be completed within thirty (30) days after receipt of notice of
resignation or transfer, unless Company extends the time limit. The Company's
consent to the extension of time for the transfer of trust assets shall not be
unreasonably withheld.
(d) If Trustee resigns, a successor shall be appointed, in accordance
with Section 10(a) hereof, by the effective date of the resignation under
Section 9(a). If no such appointment has been made, Trustee may apply to a court
of competent jurisdiction for appointment of a successor or for instructions.
All expenses of Trustee in connection with the proceeding shall be allowed as
administrative expenses of the Trust.
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Section 10. Appointment of Successor.
(a) If Trustee resigns a successor Trustee shall be appointed by the
written consent of the Company and all Plan Beneficiaries. The Company shall be
responsible for securing the written consent of all Plan Beneficiaries and
providing such consents to the former Trustee and the new Trustee. Any third
party such as a bank trust department or other party that may be granted
corporate trustee powers under state law may be appointed successor Trustee. The
appointment of a successor Trustee shall be effective when accepted in writing
by the new Trustee. The new Trustee shall have all the rights and powers of the
former Trustee, including ownership rights in Trust assets. The former Trustee
shall execute any instrument necessary or reasonably requested by the successor
Trustee to evidence the transfer.
(b) The successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets, subject to
Sections 6 and 7 hereof. The successor Trustee shall not be responsible for and
Company shall indemnify and defend the successor Trustee from any claim or
liability resulting from any action or inaction of any prior Trustee or from any
other past event, or any condition existing at the time it becomes successor
Trustee.
Section 11. Amendment or Termination.
(a) This Trust Agreement may be amended by a written instrument executed
by Trustee and the Company. Notwithstanding the foregoing, no such amendment
shall conflict with the terms of the Plan or shall make the Trust revocable
after it has become irrevocable in accordance with Section 1(b) hereof. The
Trustee be shall entitled to rely upon the written determination and
representation of the Company and all Plan Beneficiaries that such amendment
does not conflict with the terms of the Plan. The Company shall be responsible
for securing the written determination of all Plan Beneficiaries and providing
such determinations to the Trustee.
(b) The Trust shall not terminate until the date on which no one is
entitled to payments pursuant to the terms of the Plan unless sooner revoked in
accordance with Section 1(b) hereof. Upon termination of the Trust any assets
remaining in the Trust shall be returned to Company. The Trustee shall be
entitled to rely upon the written determination and representation of the
Company and the Plan Beneficiaries as to such non-entitlement. The Company shall
be responsible for securing the written determination of all Plan Beneficiaries
and providing such determinations to the Trustee.
(c) Upon written approval of all Plan Beneficiaries the Company may
terminate this Trust prior to the time all benefit payments under the Plan have
been made. All assets in the Trust at termination shall be returned to Company.
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Section 12. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Amounts payable under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged, encumbered or
subjected to attachment, garnishment, levy, execution or other legal or
equitable process.
(c) This Trust Agreement shall be governed by and construed in accordance
with the laws of Wisconsin.
(d) For purposes of this Trust, Change of Control shall have the meaning
given it in Section 1.c. of the Restated Senior Officer Agreement between the
Company and Xxxxxx X. Xxxxxx dated January 29, 1996. The Company shall
immediately notify the Trustee of any Change of Control. The Trustee may
conclusively rely upon such notice and shall have no duty to determine whether a
Change of Control has occurred.
(e) Where written approval, consent, determination or other communication
is required of or by the Plan Beneficiaries under any provision of this Trust
Agreement, the Company shall certify to the Trustee that the responding Plan
Beneficiaries are all of the Plan Beneficiaries under the terms of the Plan and
this Trust Agreement at that time, and the Trustee may rely on such
certification.
Section 13. Effective Date.
The effective date of this Trust Agreement shall be the date written
above.
In the presence of SNAP-ON INCORPORATED
______________________________ By ______________________________
______________________________ Its ______________________________
THE NORTHERN TRUST COMPANY, Trustee
By ______________________________
Its ______________________________
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