TRUST AGREEMENT FOR MARKETING CONSULTANTS AND THEIR ASSOCIATES (as modified)
Exhibit
3
TRUST
AGREEMENT FOR
MARKETING
CONSULTANTS AND THEIR ASSOCIATES
(as
modified)
By
and
among the undersigned parties, to-wit: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, male,
Panamanian, of legal age, married, attorney-at-law, bearer of national personal
identification card #8-99-303, acting herein in his capacity as Vice-President
and Legal Representative of the company known as GALA MANAGEMENT SERVICES,
INC.,
organized and existing pursuant to the laws of the Republic of Panama, through
public deed No. 5,875, issued by the Fifth Notary Public Office of the Panama
Circuit on July 23, 1981, authorized to perform this act by the Board of
Directors of the company, hereinafter “TRUSTEE,” the first part, and ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, male, Panamanian, of legal age, married, attorney-at-law, bearer
of national personal identification card #7-42-455, acting in his capacity
as
member of the MANAGEMENT COMMITTEE, as expressly authorized by the
latter,
WHEREAS:
1. On
March
1, 1987, a Trust Agreement was signed for the benefit of the associates of
CITIZENS INSURANCE COMPANY OF AMERICA (hereinafter the “Trust
Agreement”).
2. After
a
nine (9) year term, TRUSTEE as well as the MANAGEMENT COMMITTEE deem convenient
to amend the Trust Agreement, which as of the execution date of this document
shall be named “The Trust Agreement for Consultants and their Associates” (but
hereinafter shall be called the TRUST).
Therefore,
TRUSTEE and the MANAGEMENT COMMITTEE agree as follows:
FIRST:
(The
agreement) The parties agree that this shall be an irrevocable Trust Agreement,
subject to the clauses and stipulations contained in this document, as well
as
the Panamanian legal provisions, in general, and the provisions of Law 1 of
January 5, 1984 of the Republic of Panama, in particular.
SECOND:
(Settlor[s]) The parties further agree that, in addition to the person
originally designated as SETTLOR in the Trust Agreement executed on March 1,
1987, other persons may be incorporated to, or join, as Settlors in this Trust.
Notwithstanding the above, this right shall be limited, solely, to those persons
that, in connection with CITIZENS INSURANCE COMPANY OF AMERICA (hereinafter
CICA), are Marketing Consultants or their Associates to receive applications
for
CICA insurance coverage(s), as long as they are not citizens or residents of
the
United States of America or Panama. For effects of their incorporating to,
or
joining, the TRUST, the SETTLORS shall sign, with the autograph signatures
used
by them in all public and private acts, a document entitled “Joining Document”
through which they shall join this trust and shall grant to TRUSTEE the amounts
referred under the Third (III) Clause, Subparagraph (a).
THIRD:
(The
entrusted assets). The following are entrusted assets (hereinafter the ENTRUSTED
ASSETS), and consequently they shall be subject to the provisions of this
agreement:
(a) The
amounts that TRUSTEE shall receive, from time to time, from CICA, pursuant
to
the instructions given, or to be given, by the SETTLORS, by reason of the
assignments made, or to be made, in favor of TRUSTEE, of the amounts specified
in clause SIXTH (VI) of this agreement.
(b) The
Class
A common shares of stock of CITIZENS, INC. (hereinafter the SHARES), acquired
or
to be acquired, from time to time, by TRUSTEE, pursuant to this
agreement.
(c) The
dividends resulting from the SHARES.
(d) The
interests resulting from the amounts received by TRUSTEE, as indicated in
subparagraph (a) and (c) of the same Clause.
FOURTH:
(Settlors or Beneficiaries) The ENTRUSTED ASSETS shall be maintained by TRUSTEE
in its name, as fiduciary, but for the purpose of first, guarantee the
obligations that the SETTLORS have or will acquire with CITIZENS, CICA, the
insurance applicants and/or the insured thereof, the Marketing Consultants
and
their Associates, as well as with the trust or TRUSTEE.
Subject
to the provisions of the paragraph hereinabove, the beneficiaries of this trust
(hereinafter the SETTLORS or the BENEFICIARIES) are the SETTLORS (whose right
is
limited to a portion of the entire ENTRUSTED ASSET) and, in the event of death
of any one of them, BENEFICIARIES of their portion shall be those expressly
designated in the “Joining Document” and, in the absence of designation, the
heirs judicially declared. It shall be understood that no BENEFICIARY shall
be
named if he/she does not exist, has not been born, or has ceased to exist,
at
the time of the designation.
FIFTH:
(Purpose of the Trust). The purpose of this trust is to, in addition of
guaranteeing the obligations of the SETTLOR with CITIZENS, CICA, the insurance
applicants and/or the insured thereof, the Marketing Consultants and their
Associates, the trust, or TRUSTEE, by means of acquisition and accumulation
of
shares of stock of CICA, as well as the efficient administration of the
ENTRUSTED ASSETS, to provide the SETTLORS with a creation of capital mechanism
they may have available after reaching 65 years of age, or before, in the event
of disability; or their heirs, in the event of death.
SIXTH:
(Assignment). For the purposes of this trust, each of the SETTLORS hereby
assigns, in an irrevocable manner, to TRUSTEE, to be deposited into the TRUST
as
part of the ENTRUSTED ASSETS, an amount equal to five percent (5%) of all the
insurance premiums during the first year of the policies subject to commission
individually subscribed by the SETTLORS, or any of its associates, on or after
April 1, 1996 (hereinafter called the ASSIGNED AMOUNTS).
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CICA
shall calculate and forward the ASSIGNED AMOUNTS to TRUSTEE and shall
periodically provide to SETTLORS a statement of account detailing the
commissions and ASSIGNED AMOUNTS.
THE
TRUSTEE hereby shall be authorized to notify CICA that the assignment referred
in this Clause has been verified, in order that CICA may forward to TRUSTEE
said
sums in a periodic manner.
SEVENTH:
(Destination of Funds) The amounts received by TRUSTEE pursuant to the above
clause shall be deposited in its name in a first line bank or securities firms,
in checking accounts, saving accounts, money market accounts or fixed terms,
as
it may result more convenient for the interests of the trust.
With
the
monies received, and at its sole discretion, TRUSTEE shall acquire the SHARES
for this trust in the United States of America stock exchange market, through
brokerage firms or their agents in the Republic of Panama. Notwithstanding
the
provisions hereinabove, TRUSTEE may purchase the SHARES, without the mediation
of a broker, directly from CICA, CITIZENS, third parties, or SETTLORS, that
at
the moment of liquidation of all or part of their share in the trust, may be
offered for sale to TRUSTEE. The purchase of the SHARES shall be made in
accordance with the availability of cash and shares of stock, as well as
expenses of the TRUST. Now then, TRUSTEE may abstain from purchasing the SHARES
if at any moment, and at its sole discretion, said purchase may be interpreted
as a violation of its trust responsibilities, or if it results inconvenient
to
the interests of SETTLORS.
EIGHTH:
(No
liens or encumbrances) TRUSTEE may only use the ENTRUSTED ASSETS for the
purposes outlined in this agreement, except when deemed necessary to make one
or
more trust distribution or to cover the trust expenses (including its fees),
it
shall not sell, lien, pledge, hypothecate them.
NINTH:
(Proportionality) Subject to, except for the stipulations of Clause Fourth
(IV),
SETTLORS shall have a right to the benefits of this trust in the proportion
of
their contributions and the increments of their interests by reason of the
benefits derived from the ENTRUSTED ASSETS. Finally, depending on the number
of
complete years of being incorporated to the trust, their rights shall be
liquidated in conformity with the provisions of Clause Eleventh (11th).
In
view that the SHARES may not be fractioned, TRUSTEE shall be authorized, when
making distributions, to eliminate the fractions lesser to a half and shall
adjudicate same to those having fractions greater to a half, rounding them
upwards.
TENTH:
(Statements of account) TRUSTEE shall prepare and forward to each of the
SETTLORS, to their registered addresses, closing on December 31, but within
twenty (20) days following the closing, a statement of account detailing the
following:
(a) The
selling value of the SHARES as of the statement date.
(b) The
amount of SHARES
corresponding to the SETTLOR/BENEFICIARY in the trust.
(c) The
total of the ASSIGNED
AMOUNTS received by TRUSTEE or on behalf of SETTLOR, from the date it joined
the
trust, through the date of the statement of account.
(d) The
interests and dividends
accrued in favor of SETTLOR.
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(e) The
balance to be invested
for SETTLOR as of the date of the statement of account.
(f) The
total value in
the stock market of SETTLOR’s interest, on the closing date of the statement of
account. SETTLORS have the obligation to inform periodically any change in
their
business or residential postal addresses, to the effect that the statements
of
account sent by TRUSTEE reach their
addressees.
ELEVENTH:
(Liquidations) TRUSTEE shall liquidate SETTLOR’s total interest in the trust
when SETTLOR reaches 65 years of age, becomes totally disabled, or dies, or
if
the Agreement of Marketing Consultants and their Associates entered into by
and
between SETTLOR and CICA, terminates, as the case may be, or if TRUSTEE
exercises the right set forth in Clauses THIRTEENTH (XIII) and TWENTY-NINTH
(XXIX). In any of these events, but excepting the provisions of Clause FOURTH
(IV), it is stipulated that, depending on the number of complete years that
SETTLOR has been part of the trust, TRUSTEE shall liquidate the portion of
the
interest corresponding to the SETTLOR pursuant to the table inserted below,
deducting the expenses resulting from the delivery thereof, the debts resulting
from reversions due to erroneous credits and the sums that SETTLOR owes to
CITIZENS, CICA, the insurance applicants and/or the insured(s) thereof, the
Marketing Consultants and their Associates, and to the trust and/or the TRUSTEE,
for any reason.
The
liquidations shall be made as follows:
(a) At
the end of the
third year - 30% of the interest.
(b) At
the end of the
fourth year - 40% of the interest.
(c) At
the end of the
fifth year - 50% of the interest.
(d) At
the end of the
sixth year - 60% of the interest.
(e) At
the end of the
seventh year - 70% of the interest.
(f) At
the end of the
eighth year - 80% of the interest.
(g) At
the end of the
ninth year - 90% of the interest.
(h) At
the end of the
tenth year - 100% of the interest.
In
the
event of death or total disability of SETTLOR, the total interest shall be
liquidated, without taking into account number of year’s limitations, but in any
event, the corresponding deductions shall be made.
His/her
BENEFICIARIES pursuant to Clause FOURTH (IV) of this trust must make request
for
liquidation in writing by SETTLOR/BENEFICIARY or, in case of his/her death,
TRUSTEE shall decide the method and manner of delivering the
interests.
It
is
understood that when the entire interest corresponding to a SETTLOR is
delivered, then, immediately, the obligations and rights of the parties to
this
agreement shall cease.
TWELFTH:
(Lack
of rights) Pursuant to the provisions of the above clause, if a SETTLOR
terminates or is terminated from the Agreement as Marketing Consultant or
Associate of CICA before completing three (3) years of being part of this trust,
he/she shall not have any right to any part thereof, except in the event of
his/her death or total disability. Now then, in the events herein foreseen,
of
if any of the events mentioned in the above clause were to occur, if
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SETTLOR
has any pending obligations with CITIZENS, CICA, insurance applicants and/or
insured thereof, the Marketing Consultants or their Associates, the trust,
and/or the TRUSTEE, then TRUSTEE shall be authorized to pay first said
obligations.
Notwithstanding
anything provided above or to the contraryof this agreement, it is expressly
stipulated that in the event that TRUSTEE receives notification from CICA that
SETTLOR has breached the agreement entered with it, then, it is understood
that
SETTLOR, as well as its heirs and assigns, shall absolutely and entirely lose
all rights he/she has, or may have, derived from this trust
agreement.
THIRTEENTH:
(Trustee’s powers) At all times during the life of this agreement, and should
TRUSTEE deem it convenient, it may resign as fiduciary or terminate the trust
relationship with any SETTLOR/BENEFICIARY.
FOURTEENTH:
(Increase of interest) Once verified the interest portion of a SETTLOR that
has
not completed ten (10) years of being part of the trust, and unless it has
been
set forth in the above paragraph (Clause Twelfth (XII) of this agreement, then
the balance of the interest (that is, the portion to which he/she or any of
his/her fiduciary do not have any right, as stipulated in Clause Eleventh (XI)
of this agreement), shall be used to increase the trust and shall be distributed
proportionally among the SETTLORS remaining in the trust.
FIFTEENTH:
(Audit)
Every year, at the expense of the trust, an audit will be conducted of all
the
accounts kept by TRUSTEE related to this trust. A prestigious auditing firm,
with offices and operations in the Republic of Panama, shall perform said audit.
TRUSTEE thereof shall make the selection, however, the Management Committee
shall have the right to designate same, in which event, the designation made
by
it shall prevail.
SIXTEENTH:
(Limitation of responsibility) From the discharge of its duties, TRUSTEE shall
only be held responsible for fraud or gross negligence and will not incur any
liability whatsoever for errors made by third parties.
SEVENTEENTH:
(Taxes,
expenses and expense account) TRUSTEE, is hereby expressly empowered, to pay
from the ENTRUSTED ASSETS or the income derived by it, its fees and all expenses
incurred by this trust, as well as all taxes, contributions, liens and
encumbrances of any nature which may be incurred by this trust or the ENTRUSTED
ASSETS, being understood that the expenses shall be proportionally distributed
and in no event TRUSTEE’s own assets shall be compromised.
Likewise,
TRUSTEE shall be hereby authorized to constitute a special expense account
to
cover expenses incurred by the trust, including its fees.
EIGHTEENTH:
(Fees)
Due to this trust, FIDUCIARY shall have the right to receive fees pursuant
to
the following table:
(a) .5%
annually on the
first US$500,000
(b) 1%
annually on sums from US$500,001 through US$1,000,000
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(c) 1.5%
annually on sums from 1,000,001 through US$2,000,000
(d) 1.25%
annually on
sums from US$2,000,001 through US$3,000,000
(e) 1.00%
annually on sums from US$3,000,001 through US$4,000,000
(f) 0.75%
annually on sums from US$4,000,001 through US$4,000,000
(g) .5%
annually on sums
from US$5,000,001 through US$5,000,000
Fees
shall be calculated annually on the total contributions made to the trust during
its entire term and they shall be payable monthly.
NINETEENTH:
(Definition of operational expenses) It is understood that trust expenses shall
be:
Attorney’s
fees, auditor’s fees, taxes, postage, cables, telexes, long distance telephone
tolls, telefaxes, brokerage commissions, transfer of stocks, transportation
expenses, insurance premiums, performance bond premiums, and any other
operational expenses for the proper administration of the trust.
TWENTIETH:
(Notifications) FIDUCIARY hereby obliges itself to immediately notify SETTLORS,
at their registered addresses, of any request for information made by any
authority from Panama or the United States of America. Likewise, it shall notify
them of the enactment or collection of any new tax assessment or lien or
encumbrance that may affect this trust or the ENTRUSTED ASSETS, as well as
any
investigation or criminal legal action that may be initiated by or before any
authority of the above mentioned countries.
TWENTY-FIRST:
(Rendering of accounts) Notwithstanding anything contained to the contrary
in
Clause Tenth (X) of this agreement, whenever the MANAGEMENT COMMITTEE or the
FIDUCIARY requests it in writing, the FIDUCIARY shall render a detailed account
of its administration, including, without limitations, the sums received by
it,
the deposits made, purchase of shares, inventory of shares, interests and
dividends incurred, distributions made, sales effected, expenses incurred and
FIDUCIARY fees incurred by the trust.
TWENTY-SECOND:
(Indemnification) SETTLORS AND BENEFICIARIES shall indemnify FIDUCIARY, its
employees, directors, officers, agents, representatives, managers and
administrators, and hold them harmless and free from all liability or damage
which any one of them may suffer as a result of any legally imposed fine or
penalty arising from the operation of this trust, provided such event shall
not
have occurred as a result of gross negligence or a fraudulent act on the part
of
the FIDUCIARY and/or the others mentioned herein.
TWENTY-THIRD:
(Surety
bond) FIDUCIARY shall be required to secure and maintain, at all times, a surety
bond to protect SETTLORS and/or BENEFICIARIES against fraudulent acts, thefts
or
larceny committed by the FIDUCIARY or its employees or associates. Said bond
will be secured from and issued by a bonding or insurance company authorized
to
operate in the Republic of Panama for a bond amount which may, from time to
time, be increased or decreased by written request of THE MANAGEMENT COMMITTEE.
Initially said bond shall not be less than ONE MILLION DOLLARS
(US$1,000,000).
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TWENTY-FOURTH:
(Termination of trust relationship and/or trust) Except for any other provision
about termination of individual relationships, relating to all SETTLORS and/or
BENEFICIARIES, this agreement shall terminate for the following causes, as
set
forth in Law 1 of 1984, of the Republic of Panama, or if FIDUCIARY delivers
the
ENTRUSTED ASSETS to the new fiduciary designated by the MANAGEMENT COMMITTEE
or
Circuit Judge, and is bound to render account of its administration to SETTLORS,
having the right to retain any fees and expenses that remain
unpaid.
TWENTY-FIFTH:
(Applicable law and domicile) The laws of Panama govern this trust. Further,
it
shall be domiciled on the Sixth Floor of the building known as “Edificio
Fiduciario” [The Fiduciary Building], located on ▇▇▇ ▇▇▇▇▇▇ ▇▇. ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ of Panama. Notwithstanding, in the future, it may be subject to the
laws and jurisdiction of another country, and it may establish domicile in
any
other part of the world.
TWENTY-SIXTH:
(Resident agent) The firm of ▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇, with offices on ▇▇▇
▇▇▇▇▇▇ ▇▇. ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ of Panama is hereby designated as Resident
Agent of this trust.
TWENTY-SEVENTH:
(Attorneys’ fees) All legal expenses, notarial, documentary stamp tax and
attorney’s fees incurred from the preparation, authentication, notarization and
amendments of this agreement shall incur for the account of
SETTLORS.
TWENTY-EIGHTH:
(Confidentiality) FIDUCIARY, its employees, directors and associates are hereby
bound to maintain this trust, its capacity as fiduciary, as well as the
identities of SETTLORS and BENEFICIARIES strictly confidential, except when
authorized in writing by any SETTLOR in connection with his/her
interest.
Notwithstanding
anything contrary contained above, FIDUCIARY may disclose all or part of the
information related to this trust and the custody, if required by any competent
authority of Panama or of the United States of America.
TWENTY-NINTH:
(Authority to resign) FIDUCIARY is hereby authorized to resign its capacity
as
fiduciary of this trust, by prior written notification to the MANAGEMENT
COMMITTEE. In this event, the MANAGEMENT COMMITTEE has the right to appoint
a
new trust entity, to whom FIDUCIARY shall deliver the ENTRUSTED
ASSETS.
THIRTIETH:
(The
Management Committee and modifications to the trust agreement) The original
SETTLOR shall appoint a MANAGEMENT COMMITTEE comprised of a maximum of five
(5)
members, who shall hold office for one (1) year or until their successors are
appointed by said SETTLOR, who is vested with the authorities set forth in
this
Agreement. FIDUCIARY and said MANAGEMENT COMMITTEE, the latter acting with
the
consent of the majority, may agree, without reservations, to the modifications
to this trust agreement deemed convenient, without reservations, as well as
to
domicile it in, and make it subject to the laws and jurisdiction of another
country, as selected by it. The modifications convenient to the FIDUCIARY and
the MANAGEMENT COMMITTEE shall affect all of the SETTLORS and BENEFICIARIES,
independently of the date when they first joined or were incorporated to the
trust, and shall have immediate effects.
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THIRTY-FIRST:
(Subrogation) This Agreement replaces and subrogates the Trust Agreement entered
on March 1, 1987 by and between FIDUCIARY and SETTLOR, which agreement is
entitled “Agents’ Trust Agreement,” and it may not be rescinded, modified or
changed, except as set forth in the above clause.
For
the
record, this document is executed on October 2, 1996, in three (3) counterparts,
each deemed an original with equal force and effect.
/s/
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇ D.
FIDUCIARY
/s/
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇
▇.
▇▇▇▇▇▇
MANAGEMENT
COMMITTEE
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