DEFERRED COMPENSATION WAIVER
AND INSURANCE BENEFIT AGREEMENT
This Agreement is entered into this 27th day of September, 1999,
by and between SNAP-ON INCORPORATED, a Delaware corporation (the "Company"), and
XXXXXXXXX X. XXX (the "Executive").
WHEREAS, the Executive has a Cash Account under the Company's
Deferred Compensation Plan (the "Deferred Compensation Plan Balance"); 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 2 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) 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 February 1, 1996, between the Company and the Executive.
2. Executive's Waiver of Rights.
The Executive hereby waives any and all rights to receive Two Hundred
Thousand Dollars ($200,000) of the Executive's Cash Account under the
Company's Deferred Compensation Plan as of the date of this agreement
(the "Waived Existing Balance").
3. Split-Dollar Agreement.
The Company agrees 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 Ninety Thousand One Hundred Twenty-one
and 60/100 Dollars ($90,121.60) pursuant to Section 3 of the
Split-Dollar 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. Xxx (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's 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. Xxxxxxxxxx
Its Senior Vice President -
Transportation
/s/ /s/ Xxxxxxxxx X. Xxx
Xxxxxxxxx X. Xxx
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EXHIBIT A
SNAP-ON INCORPORATED
SPLIT-DOLLAR INSURANCE AGREEMENT
1. This Agreement is entered into this 27th day of September, 1999, by
and between SNAP-ON INCORPORATED, a Delaware corporation, and the HAY 1999
INSURANCE TRUST.
2. Definitions.
(a) "Company" means Snap-on Incorporated, a Delaware corporation, with
offices in Kenosha, Wisconsin.
(b) "Insureds" means Xxxxxxxxx X. and Xxxxxxxx X. Xxx.
(c) "Insurer" means Northwestern Mutual Life.
(d) "Owner" means the Hay 1999 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 Ninety Thousand One Hundred Twenty-one and 60/100 Dollars
($90,121.60) 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 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.
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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
/s/ Its Senior Vice President - Transportation
OWNER
HAY 1999 INSURANCE TRUST
/s/ Xxxxxx X. Xxx
Xxxxxx X. Xxx, Trustee
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SCHEDULE A
LIFE INSURANCE
Initial Face Insureds' Initial
Policy Number Amount Economic Benefit
15173092 $1,600,000 $701
SCHEDULE B
COLLATERAL ASSIGNMENT FORM
SNAP-ON INCORPORATED SPLIT-DOLLAR INSURANCE PLAN
Insurer: Northwestern Mutual Life
Insureds: Xxxxxxxxx X. and Xxxxxxxx X. Xxx
Policy No. 15173092
FOR VALUE RECEIVED, THIS ASSIGNMENT is made by the undersigned Owner
effective this 27th day of September, 1999.
1. Definitions.
(a) "Assignee" means Snap-on Incorporated, a Delaware corporation, of
Kenosha, Wisconsin.
(b) "Insureds" means Xxxxxxxxx X. and Xxxxxxxx X. Xxx.
(c) "Insurer" means Northwestern Mutual Life.
(d) "Owner" means the Hay 1999 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: 15173092 Face Amount: $1,600,000
(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.
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.
HAY 1999 INSURANCE TRUST
Xxxxxx X. Xxx, Trustee
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EXHIBIT B
Male Age 55/Female Age 54 CORPORATE SUMMARY
-------------------------------------------------------------------------------------------------------------------------
XXXXXXXXX AND XXXXXXXX XXX
CALCULATION OF NET PRESENT VALUE OF CORPORATE CASH FLOWS
September, 1999
-------------------------------------------------------------------------------------------------------------------------
Corporate Cost of Deferral
--------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5) (6)
63%(3) 63%(2) NPV Sum(4)
+NPV(5)
End of Net A/T
Year Annual Payment Death Net
Annual Account ----------------------------- Benefit Present
Yr. Age Deferral Balance Gross Net A/T Payable Value
------- ------- -------------- -------------- ------------ --------------- --------------- ------------------
1 55 200,000 218,000 0 0 137,340 132,338
2 56 0 237,620 0 0 149,701 138,994
3 57 0 259,006 0 0 163,174 145,985
4 58 0 282,316 0 0 177,859 153,328
5 59 0 307,725 0 0 193,867 161,040
6 60 0 335,420 0 0 211,315 169,140
7 61 0 365,608 0 0 230,333 177,648
8 62 0 398,513 0 0 251,063 186,583
9 63 0 434,379 0 0 273,659 195,968
10 64 0 473,473 0 0 298,288 205,825
11 65 0 442,309 67,685 42,642 278,654 214,698
12 66 0 408,340 67,685 42,642 257,254 222,591
13 67 0 371,314 67,685 42,642 233,928 229,507
14 68 0 330,956 67,685 42,642 208,502 235,447
15 69 0 286,965 67,685 42,642 180,788 240,409
16 70 0 239,015 67,685 42,642 150,580 244,392
17 71 0 186,750 67,685 42,642 117,653 247,391
18 72 0 129,781 67,685 42,642 81,762 249,399
19 73 0 67,685 67,685 42,642 42,642 250,408
------------------
20 74 0 0 67,685 42,642 0 250,408
-------------- ============ --------------- ------------------
200,000 676,849 426,415
============== ============ ===============
Corporate Cost of Life Insurance Survivor Benefit
--------------------------------------------------------- ------------------------------------
(7) (8) (9) (10) (11)
Sum(7) NPV Sum(7) (6)-(9) (10)/63%
+NPV(8) Net A/T
Corp. Values
Scheduled Premium Net in Excess of Lump
Premium Recovery Present Waived Sum
Outlay At Death Value Compensation Payable
------------------ ----------------- ----------------- --------------------- -------------
90,121 (90,121) 3,282 129,055 204,849
90,121 (180,241) 9,608 129,386 205,374
90,121 (270,362) 18,751 127,234 201,958
90,121 (360,482) 30,498 122,830 194,968
90,121 (450,603) 44,647 116,393 184,751
90,121 (540,724) 61,007 108,133 171,640
90,121 (630,844) 79,399 98,249 155,951
90,121 (720,965) 99,652 86,931 137,986
90,121 (811,085) 121,607 74,361 118,034
90,121 (901,206) 145,113 60,712 96,369
0 (901,206) 167,763 46,935 74,500
0 (901,206) 189,588 33,003 52,386
0 (901,206) 210,618 18,889 29,983
0 (901,206) 230,882 4,565 7,246
0 (901,206) 250,408 (9,998) (15,870)
(901,206) 0 250,408 (6,016) (9,549)
0 0 250,408 (3,017) (4,789)
0 0 250,408 (1,009) (1,602)
0 0 250,408 0 0
-----------------
0 0 250,408 0 0
-----------------
----------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Assumptions
Years to Defer 1 Interest Crediting Rate 9%
Deferral 200,000 NPV Interest Rate 6%
Years Before Pymts Begin 10 Year to Roll-Out 15
Tax Rate 37%
--------------------------------------------------------------------------------
EXHIBIT C
SNAP-ON INCORPORATED INSURANCE BENEFIT TRUST
(Established pursuant to the Deferred Compensation Waiver and
Insurance Benefit Agreement dated September 27, 1999, between
Snap-on Incorporated and Xxxxxxxxx X. Xxx)
(a) This Agreement made this 27th day of September, 1999, 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 Xxxxxxxxx X. Xxx dated September 27, 1999 (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 Xxxxxxxxx X. Xxx, Xxxxxxxx X. Xxx, the Hay 1999 Insurance Trust,
the beneficiary designated by Xxxxxxxxx X. Xxx pursuant to Section 4 of the Plan
or the estate of the survivor of Xxxxxxxxx X. Xxx and Xxxxxxxx X. Xxx (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.
-5-
(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.
-7-
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.
-8-
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 Xxxxxxxxx X. Xxx 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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