Exhibit 10.6
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of the first day of May, 1999, by and between
PMA CAPITAL CORPORATION, a Pennsylvania corporation, (hereinafter the "Company")
and XXXXXXXXX X. XXXXX, III, of Philadelphia, Pennsylvania (hereinafter "Anton")
to set forth the terms and conditions upon which the Company shall continue to
employ Anton.
R E C I T A L S
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A. The Company and Anton have previously entered into the Employment
Agreement made as of the first day of April, 1995;
B. At its May 5, 1999 Board of Directors meeting, the Company
re-elected Anton to the position of Chairman of the Board, which pursuant to the
terms of the April 1, 1995 Employment Agreement extended Anton's Employment Term
to April 1, 2004;
C. The Company and Anton mutually desire to amend and restate the terms
of the Employment Agreement in order to continue the principal terms of the
April 1, 1995 Employment Agreement, to eliminate the contractual death benefit
provisions of the Employment Agreement and in lieu thereof to provide a new life
insurance policy for the benefit of Anton as described herein, and to revise the
terms of the life insurance policies issued on Anton's life by Manulife
Financial Life Insurance and Pacific Life Insurance Company;
STATEMENT OF AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and Anton agree as
follows:
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1. The Employment Term.
During the period beginning May 1, 1999 and ending April 30, 2004,
(hereinafter "Employment Term") the Company shall continue to employ Anton and
Anton agrees to be so employed. If at the annual organizational meeting of the
Board of Directors of the Company held in 2000 and in any subsequent year, Anton
is elected as Chairman of the Board of the Company, the Employment Term shall be
automatically extended for a further period of one year without the need for
further action by the Board of Directors or the execution of a formal amendment
to this Agreement.
2. Duties During the Employment Term.
Anton shall at all time throughout the Employment Term devote his full
time and his best efforts to the business of the Company and its subsidiaries
and affiliates.
3. Salary During the Employment Term.
During the Employment Term, the Company shall pay Anton on a bi-weekly
basis a salary of not less than $700,000 per year. Anton's annual salary may be
increased but not decreased by the Company at any time and from time to time.
4. Inability to Perform.
If for any reason during the Employment Term, Anton shall at any time
or from time to time be unable to perform the services required of him pursuant
to paragraph 2 hereof, he shall nevertheless be entitled to receive the salary
payments and other benefits provided by this Agreement until the end of the
Employment Term or until the date of his death, whichever first occurs;
provided, however, that if in such circumstance Anton is living at the end of
the Employment Term, he shall be considered to have then retired whereupon he
shall become entitled to the retirement benefit set forth in Paragraph 8 for his
lifetime; and provided, further, that nothing in this Paragraph shall impair
Anton's rights during his lifetime to receive the life
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insurance benefits set forth in Paragraph 10. Any question as to Anton's ability
to continue to perform services hereunder upon which the Company and Anton
cannot agree shall be determined by a qualified independent physician selected
by Anton (or, if Anton is unable to make such selection, such selection shall be
made by any adult member of his immediate family or his legal representative),
and approved by the Company, said approval not to be unreasonably withheld. The
determination of such physician made in writing to the Company and to Anton
shall be final and conclusive for all purposes of this Agreement.
5. Expenses.
The Company shall pay the ordinary and necessary business expenses
incurred by Anton in connection with the performance of his duties on behalf of
the Company.
6. Restrictive Covenant.
Anton shall not during or after the Employment Term, directly or
indirectly, either as principal, agent, stockbroker, or in any other capacity,
engage in or have a material financial interest in any business which competes
with the business of the Company or its affiliates as then being conducted.
7. Death.
Anton's employment shall immediately terminate upon his death and the
Company shall be relieved of all obligations to pay Anton, his heirs and
personal representatives any salary other than any portion of his annual salary
which has been accrued and unpaid to such date.
8. Retirement.
Anton may elect to retire from full time employment by the Company at any
time, and the Employment Term shall thereupon terminate on the date his
retirement becomes effective. Beginning on the date of his retirement and
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continuing throughout Anton's lifetime, the Company shall pay to Anton in each
month a retirement benefit equal to five percent (5%) of his annual salary on
the date of his retirement. It is the intention of the Company and Anton that
this retirement arrangement be unfunded for tax purposes and for purposes of
Title I of the Employee Retirement Income Security Act of 1974, as amended, and
that the benefit be paid out of the general assets of the Company. However, in
order to provide for the payment of the benefit to Anton, the Company shall
establish, no later than the date of Anton's retirement, an irrevocable grantor
trust (the "Trust") within the meaning of subpart E, part I, subchapter J,
chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended. The
trustee of the Trust shall be an independent third party such as a bank trust
department or other party with corporate trustee powers under Pennsylvania state
law (the "Trustee"). The Company shall make contributions to the Trust in an
amount, determined on a sound actuarial basis, which shall be sufficient to pay
Anton his retirement benefits as they become due. Such contributions may consist
of cash, annuity contract, insurance policies or other property acceptable to
the Trustee. Notwithstanding the foregoing, Trust assets shall be treated as
assets of the Company and shall remain subject to the general creditors of the
Company. Moreover, Anton shall have no property interest whatsoever in any asset
of the Trust or of the Company. Anton shall have only the rights of a general,
unsecured creditor against the Company with respect to the retirement benefit
under this paragraph 8. The establishment of the Trust shall not in any way
terminate the obligation of the Company to make the retirement payments required
to be made pursuant to this Paragraph 8.
9. Employee Benefit Plans.
No provision of this Agreement shall in any way abrogate or impair any
rights or privileges of Anton as an employee of the Company under any qualified
or unqualified retirement, pension, profit sharing, disability life insurance,
hospitalization or other employee plan or plans which are now in effect or which
may hereafter be adopted the Company. Any payments made by the Company pursuant
to Paragraph 4 hereof or any retirement payments made pursuant to
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Paragraph 8 of this Agreement shall be in addition to, and not in lieu of, all
benefits which Anton is or will entitled to receive under the Company's Pension
Plan and any supplementary retirement plan as well as any other qualified or
unqualified benefit plan or plans which presently are or hereafter become
available to the Company's employees.
10. Provisions for Life Insurance.
10.1 Manulife Financial Life Insurance.
Pursuant to prior Employment Agreements between Anton and the
Company dated May 1, 1991 and April 1, 1995, the Company and the trustee of the
Irrevocable Deed of Trust of Xxxxxxxxx X. Xxxxx, III, dated December 18, 1991
(the "1991 Trust") previously secured from The Manufacturer's Life Insurance
Company (U.S.A.) a life insurance policy on the life of Anton, which presently
is subject to a split-dollar agreement with the Company.
The Company and the Trustee of the 1991 Trust hereby agree to
replace the existing insurance policy with a new Manulife Financial Life
Insurance Policy ("Manulife Policy") on the life of Anton providing death
benefit of at least one million dollars ($1,000,000) payable to the 1991 Trust
in the event of Anton's death. The Manulife Policy will be subject to a separate
Amended and Restated Split-Dollar Insurance Agreement which the Company hereby
agrees to enter into with Anton and the 1991 Trust and which in all material
respects is similar to the form of agreement attached hereto as Appendix A
("Manulife Split-Dollar Agreement").
During the Employment Term and at all times thereafter during
Anton's lifetime, the Company shall:
(1) satisfy its obligations under the Manulife Split-Dollar
Agreement for all benefits granted to Anton thereunder, including
advancing its share of the annual premiums to the issuer of the
Manulife Policy; and
(2) pay to Anton a bonus to cover the owner's share of the
annual premiums as set forth below. Such bonus payment shall be
made at least thirty (30) days before the annual premium is due
for the Manulife Policy. The bonus
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shall be in an amount equal to that portion of the premium which
equals the economic benefit of the insurance protection then
provided to the owner of the Manulife Policy under such policy
and the Manulife Split-Dollar Agreement on the life of Anton. The
economic benefit referred to in the preceding sentence shall be
the lesser of (i) the P.S. 58 cost for the insurance protection
referred to therein (as determined under tables published by the
Internal Revenue Service ) and modified as appropriate (or, if
applicable, as specifically prescribed by the Internal Revenue
Service) to reflect that such insurance protection is on the life
of Anton and that the death benefit under the Manulife Policy is
payable upon the death of Anton, and (ii) if such insurance
protection is available from the issuer of the Manulife Policy as
term insurance, the premium for such insurance protection as
determined by reference to such issuer's current published
premium rate for one-year term life insurance protection
available to all standard risks.
10.2 Xxxx Xxxxxxx Life Insurance.
The Company and a trustee to be named by Anton or a
third-party to be selected by Anton (the "Owner") agree to secure from Xxxx
Xxxxxxx Mutual Life Insurance Company & Affiliated Companies a life insurance
policy on the life of Anton ("Xxxx Xxxxxxx Policy"). The Xxxx Xxxxxxx Policy,
which will provide an initial death benefit of approximately two million
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dollars ($2,000,000) payable to the Owner in the event of Anton's death, will be
subject to a separate Split-Dollar Agreement which the Company hereby agrees to
enter into with Anton and the Owner and which in all material respects is
similar to the form of agreement attached hereto as Appendix B ("Xxxx Xxxxxxx
Split-Dollar Agreement").
During the Employment Term and at all times thereafter during
Anton's lifetime, the Company shall satisfy its obligations under the Xxxx
Xxxxxxx Split-Dollar Agreement for all benefits granted to Anton thereunder,
including, but not limited to, advancing its share of the annual premiums to the
issuer of the Xxxx Xxxxxxx Policy. The Owner shall be solely responsible for the
payment of the Owner's share of the annual premiums pursuant to the Xxxx Xxxxxxx
Split-Dollar Agreement.
10.3 Pacific Life Insurance.
The trustee of the Irrevocable Deed of Trust of Xxxxxxxxx X.
Xxxxx, III, dated October 25, 1995, (the "1995 Trust") previously secured a
Pacific Mutual Life Insurance policy (policy #1A2304155-0) on the life of Anton
the premiums for which are being funded by the Company. The Company, Anton and
the 1995 Trust agree to replace this policy with a new life insurance policy on
the life of Anton secured from Pacific Life Insurance Company ("Pacific Life
Policy"). The Pacific Life Policy, which will provide a death benefit of
approximately one million five-hundred-thousand dollars ($1,500,000) payable to
the 1995 Trust in the event of Anton's death, will be subject to a separate
Split-Dollar Insurance Agreement which the Company hereby agrees to enter into
with Anton and the 1995 Trust and which in all material respects is similar to
the form of agreement attached hereto as Appendix C ("Pacific Life Split-Dollar
Agreement").
During the Employment Term and at all times thereafter during
Anton's lifetime, the Company shall:
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(1) satisfy its obligations under the Pacific Life
Split-Dollar Agreement for all benefits granted to Anton
thereunder, including advancing its share of the annual premiums
to the issuer of the Pacific Life Policy; and
(2) pay to Anton a bonus to cover the owner's share of the
annual premiums as set forth below. Such bonus payment shall be
paid at least thirty (30) days before the annual premium is due
for the Pacific Life Policy. The bonus shall be in an amount
equal to that portion of the premium which equals the economic
benefit of the insurance protection then provided to the owner of
the Pacific Life Policy under such policy and the Pacific Life
Split-Dollar Agreement on the life of Anton. The economic benefit
referred to in the preceding sentence shall be the lesser of (i)
the P.S. 58 cost for the insurance protection referred to therein
(as determined under tables published by the Internal Revenue
Service ) and modified as appropriate (or, if applicable, as
specifically prescribed by the Internal Revenue Service) to
reflect that such insurance protection is on the life of Anton
and that the death benefit under the Pacific Life Policy is
payable upon the death of Anton, and (ii) if such insurance
protection is available from the issuer of the Pacific Life
Policy as term insurance, the premium for such insurance
protection as determined by reference to such issuer's current
published premium rate for one-year term life insurance
protection available to all standard risks.
11. Contested Benefits.
If, for any reason, the Company shall fail to make any payment required
to be made pursuant to this Agreement, and Anton shall be required to bring one
or more actions at law or in equity against the Company, and/or its successors
and assigns, to enforce his rights under this Agreement, Anton shall be entitled
to recover from the Company his reasonable attorney's fees and expenses incurred
in connection with such action or actions in which a final order is entered in
Anton's favor.
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12. No Third Party Rights.
This Agreement may be amended from time to time hereafter by the joint
agreement of the Company and Anton without the consent or approval of any other
person or entity. Such amendment or amendments may, among other things, change
the persons to whom monies are to be paid or the amount to be paid to any person
or the time for the making of any payment except that no change may be made in
respect of the insurance plans set forth in Paragraph 10 hereof. This Agreement
shall not create in any person who is not a party a vested right to receive
monies unless the terms of this Agreement shall remain in full force and effect
at the time when a determination is required to be made concerning a payment or
payments hereunder to a person who is not a party.
13. Successors and Assigns of the Company.
This Agreement shall inure to the benefit of and be binding upon the
Company, its successors and assigns, and shall supersede and replace the
Employment Agreement between the Company and Anton dated as of April 1, 1993, as
amended by an Amendment and Supplement dated as of April 1, 1994, and the
Employment Agreement between the Company and Anton dated as of April 1, 1995.
IN WITNESS WHEREOF, the Company and Anton have executed this Agreement
as of the date and year first above written.
ATTEST:
/s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxx X. Xxxxxxxx
--------------------- -----------------------------
SECRETARY PRESIDENT
/s/ Xxxxxxxxx X. Xxxxx, III
-----------------------------
XXXXXXXXX X. XXXXX, III
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APPENDIX "A"
1999 AMENDED AND RESTATED
SPLIT-DOLLAR INSURANCE AGREEMENT
This 1999 AMENDED AND RESTATED SPLIT-DOLLAR INSURANCE AGREEMENT (the
"Agreement") made as of the __th day of May, 1999 by and among PMA Capital
Corporation (formerly Pennsylvania Manufacturers Corporation) (the "Company"),
Xxxxxxxxx X. Xxxxx, III, an employee of the Company (the "Employee"), and the
Irrevocable Deed of Trust of Xxxxxxxxx X. Xxxxx, III, dated December 18, 1991
(the "Owner").
R E C I T A L S
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WHEREAS, the Employee has rendered loyal and valuable service to the
Company; and
WHEREAS, the Owner presently owns Manufacturers Life Insurance Company
Policy Number 5835767-4 which insures the life of Employee and which is
presently subject to a split-dollar life insurance agreement dated December 20,
1991 (the "Existing Policy"); and
WHEREAS, in the Employment Agreement dated as of May 1, 1999 between
the Company and the Employee (the "Employment Agreement"), the Company agreed to
provide life insurance protection for the Employee by advancing a portion of the
annual premiums for such protection pursuant to a split-dollar life insurance
arrangement on the terms and conditions contained herein; and
WHEREAS, the Owner, the Employee and the Company have agreed that the
Owner will exchange the Existing Policy for a new policy of insurance on the
life of the Employee in accordance with Section 1035 of the Internal Revenue
Code of 1986, as amended; and
WHEREAS, the Owner has applied for the new policy insuring the life of
the Employee listed on Schedule A attached to this Agreement (the "Policy") and,
upon its issuance, will possess all incidents of ownership in and to the Policy;
and
WHEREAS, the purpose of this Agreement is to amend and restate the
Split-Dollar Agreement dated December 20, 1991 such that it is applicable to the
Policy and that all the terms of the split-dollar agreement among the Company,
the Employee and the Owner as of this date with respect to the Policy are set
forth in this Agreement; and
WHEREAS, the parties desire to enter into this amended and restated
split-dollar agreement with respect to the Policy to provide that the Company
will advance a portion of the annual premiums due on the Policy on the terms and
conditions hereinafter set forth, the Owner will collaterally assign the Policy
to the Company to secure the repayment of the amounts
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advanced, and the Company will have a security interest in the aggregate cash
surrender value of the Policy and in the proceeds thereof;
NOW THEREFORE, in consideration of the premises and the mutual promises
contained herein and intending to be legally bound, the parties hereby agree as
follows:
1. Policy. The parties have taken the actions necessary to cause the
insurance company identified on Schedule A (the "Insurer") to issue the Policy
to the Owner, and shall take any further action that may be necessary to cause
the Policy to conform to the provisions of this Agreement. The parties agree
that the Policy shall be subject to the terms and conditions of this Agreement
and of the collateral assignment filed with the Insurer relating to the Policy.
2. Ownership Rights. Except as otherwise provided herein, the Owner
shall be the sole and absolute owner of the Policy and may exercise all
ownership rights granted to the Owner thereunder.
3. Payment of Annual Premiums.
3.1 The Owner shall pay each annual premium for the Policy
(the "Premium") on or before its due date or within the grace period provided
therefor under the Policy (the "Premium Due Date") as follows:
3.1.1 At least ten (10) days before the Premium Due
Date, the Owner shall pay the portion of the Premium that would be includable in
the gross income of the insured for federal income tax purposes if not paid by
the Insured (the "Taxable Portion") and shall send evidence of its payment to
the Company.
3.1.2 Upon receipt of the Owner's evidence of
payment, the Company promptly shall advance to the Owner the remaining portion
of the Premium (the "Remaining Portion"), or in its discretion the Company may
pay its advance directly to the Insurer.
3.1.3 The obligation of the Company to advance the
Remaining Portion of the Premium under Section 3.1.2 is conditioned upon the
Owner's payment of the Taxable Portion of the Premium under Section 3.1.1.
3.2 The obligation of the Company to make the annual payments
provided in Section 3.1 hereof shall be governed by the Employment Agreement.
4. Proof of Payment of Advances. The Company shall, upon request,
promptly furnish the Owner evidence of timely payment of each advance paid
directly to the Insurer under Section 3.1.2.
5. Collateral Assignment of Policies. To secure the repayment to the
Company of the amounts it advances to the Owner under Section 3.1.2, the Owner
has, contemporaneously herewith, assigned the Policy to the Company as
collateral, under the instrument which in all material respects is the same as
the form attached hereto as Addendum 1. The collateral
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assignment of the Policy to the Company hereunder shall not be terminated,
altered or amended by the Owner, without the express written consent of the
Company. The parties hereto agree to take all action necessary to cause the
collateral assignment to conform to the provisions of this Agreement. In the
event of any inconsistency between the terms of this Agreement and the terms of
the collateral assignment, the terms of this Agreement shall control.
6. Limitation on Policy Disposition. During the period that the
collateral assignment of the Policy is in effect, the Owner shall not borrow
from, pledge, transfer or assign the Policy and shall not sell, surrender or
cancel the Policy, change the beneficiary designation provision or terminate the
dividend election without the express written consent of the Company, which
consent shall not be unreasonably withheld.
7. Policy Proceeds.
7.1 Upon the death of the Employee, the Company and the Owner
shall promptly take all action necessary to obtain the death benefit provided
under the Policy.
7.2 The Company shall have the unqualified right to receive a
portion of the Policy's death benefit equal to the total of the amount which the
Company advanced to the Existing Policy and the aggregate of the amounts that
the Company advanced with respect to the Policy under Section 3.1.2. The balance
of the death benefit, if any, shall be paid directly to the beneficiary or
beneficiaries designated by the Owner, in the manner and the amount or amounts
provided in the beneficiary designation provision of the Policy. In no event
shall the amount payable to the Company hereunder with respect to the Policy
exceed the amount of the Policy's death benefit. The parties agree that the
beneficiary designation provision of the Policy shall conform to the provisions
hereof.
8. Termination.
8.1 This Agreement shall terminate, without notice, upon the
surrender of the Policy by the Owner with the written consent of the Company as
provided in Section 6.
8.2 In addition, either the Owner or the Employee may
terminate this Agreement by written notice to the other parties hereto at any
time that the cash surrender value of the Policy at least equals the total
amount that the Company has advanced with respect to the Policy under Section
3.1.2. Such termination shall be effective as of the date of such notice. The
Company may not terminate this Agreement.
9. Release of Policy Collateral.
9.1 For sixty (60) days after the date of termination of this
Agreement, the Owner shall have the option of obtaining the release of the
collateral assignment of the Policy to the Company. To obtain such release, the
Owner shall pay or cause to be paid to the Company an amount equal to the
Policy's then cash surrender value. Upon receipt of that payment, the Company
promptly shall release the collateral assignment of the Policy.
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9.2 If the Owner fails to exercise such option within such
sixty (60) day period with respect to the Policy, then the Owner shall transfer
the Policy to the Company. Thereafter, neither the Owner, the Employee, nor
their respective heirs, assigns or beneficiaries shall have any further interest
in and to the Policy, either under the terms thereof or under this Agreement.
10. Insurer. The Insurer shall be fully discharged from its obligations
under the Policy by payment of the Policy death benefit to the beneficiary or
beneficiaries named in the Policy, subject to the terms and conditions of the
Policy. In no event shall the Insurer be considered a party to this Agreement,
or any modification or amendment hereof. No provision of this Agreement, nor of
any modification or amendment hereof, shall in any way be construed as
enlarging, changing, varying, or in any other way affecting the obligations of
the Insurer as expressly provided in the Policy, except insofar as the
provisions hereof are made a part of the Policy by the collateral assignment
executed by the Owner and filed with the Insurer in connection herewith.
11. Amendment. This Agreement may not be amended, altered or modified,
except by a written instrument signed by the parties hereto, or their respective
successors or assigns, and may not be otherwise terminated except as provided
herein.
12. Succession. This Agreement shall be binding upon and shall inure to
the benefit of the Company and its successors and assigns, and the Employee, the
Owner and their respective successors, assigns, heirs, executors, administrators
and beneficiaries.
13. Notices. Any notice, consent or demand required or permitted to be
given under the provisions of this Agreement shall be in writing, and shall be
signed by the party giving or making the same. If such notice, consent or demand
is mailed to a party hereto, it shall be sent by United States certified mail,
postage prepaid, addressed to such party's last known address as shown on the
records of the Company. The date of such mailing shall be deemed the date of
notice, consent or demand.
14. Captions. The captions of the Sections herein are inserted as a
matter of convenience of reference only and in no way define, limit or describe
the scope of this Agreement or any provisions hereof.
15. Governing Law. This Agreement, and the rights of the parties
hereunder, shall be governed by and construed in accordance with the internal
laws of the Commonwealth of Pennsylvania and shall be enforced in the
Commonwealth of Pennsylvania.
16. Trust Agreement. Recognizing that the Owner is a trustee and that the
Policy is held in trust, the parties agree that the terms of this Agreement
shall control in the event of any inconsistencies between the terms of this
Agreement and the terms of the trust agreement.
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IN WITNESS WHEREOF, the Company has caused this amendment and
restatement of the Split-Dollar Agreement to be executed by its duly authorized
officer and the Employee and the Owner have hereunto set their hands and seals
on the dates set forth below.
Attest: PMA CAPITAL CORPORATION
_____________________ By: _______________________________
_______________________________
XXXXXXXXX X. XXXXX, III
IRREVOCABLE DEED OF TRUST
OF XXXXXXXXX X. XXXXX, III,
DATED DECEMBER 18, 1991
By: _______________________________
Xxxxx X. Xxxxxx, Xxxxxxx
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Xxxxxxxx A
The following life insurance policy is subject to this 1999 Amended and
Restated Split-Dollar Life Insurance Agreement:
Approximate
Insurer Initial Face Amount
------- -------------------
The Manufacturer's Life Insurance Company $1,690,000
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XXXXXXXX "X"
1999 XXXX XXXXXXX
SPLIT-DOLLAR INSURANCE AGREEMENT
This SPLIT-DOLLAR INSURANCE AGREEMENT (the "Agreement") made as of the
__th day of May, 1999 by and among PMA Capital Corporation (the "Company"),
Xxxxxxxxx X. Xxxxx, III, an employee of the Company (the "Employee"), and the
Irrevocable Deed of Trust of Xxxxxxxxx X. Xxxxx, III, dated May 11, 1999 (the
"Owner").
R E C I T A L S
- - - - - - - -
WHEREAS, the Employee has rendered loyal and valuable service to the
Company; and
WHEREAS, in the Employment Agreement dated as of May 1, 1999 between
the Company and the Employee (the "Employment Agreement"), the Company agreed to
provide life insurance protection for the Employee by advancing a portion of the
annual premiums for such protection pursuant to a split-dollar life insurance
arrangement on the terms and conditions contained herein; and
WHEREAS, the Owner has applied for the policy insuring the life of the
Employee listed on Schedule A attached to this Agreement (the "Policy") and,
upon its issuance, will possess all incidents of ownership in and to the Policy;
and
WHEREAS, the parties desire to enter into this split-dollar agreement
with respect to the Policy to provide that the Company will advance a portion of
the annual premiums due on the Policy on the terms and conditions hereinafter
set forth, the Owner will collaterally assign the Policy to the Company to
secure the repayment of the amounts advanced, and the Company will have a
security interest in the aggregate cash surrender value of the Policy and in the
proceeds thereof;
NOW THEREFORE, in consideration of the premises and the mutual promises
contained herein and intending to be legally bound, the parties hereby agree as
follows:
1. Policy. The parties have taken the actions necessary to cause the
insurance company identified on Schedule A (the "Insurer") to issue the Policy
to the Owner, and shall take any further action that may be necessary to cause
the Policy to conform to the provisions of this Agreement. The parties agree
that the Policy shall be subject to the terms and conditions of this Agreement
and of the collateral assignment filed with the Insurer relating to the Policy.
2. Ownership Rights. Except as otherwise provided herein, the Owner
shall be the sole and absolute owner of the Policy and may exercise all
ownership rights granted to the Owner thereunder.
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3. Payment of Annual Premiums.
3.1 The Owner shall pay each annual premium for the Policy
(the "Premium") on or before its due date or within the grace period provided
therefor under the Policy (the "Premium Due Date") as follows:
3.1.1 At least ten (10) days before the Premium Due
Date, the Owner shall pay the portion of the Premium that would be includable in
the gross income of the insured for federal income tax purposes if not paid by
the Insured (the "Taxable Portion") and shall send evidence of its payment to
the Company.
3.1.2 Upon receipt of the Owner's evidence of
payment, the Company promptly shall advance to the Owner the remaining portion
of the Premium (the "Remaining Portion"), or in its discretion the Company may
pay its advance directly to the Insurer.
3.1.3 The obligation of the Company to advance the
Remaining Portion of the Premium under Section 3.1.2 is conditioned upon the
Owner's payment of the Taxable Portion of the Premium under Section 3.1.1.
3.2 The obligation of the Company to make the annual payments
provided in Section 3.1 hereof shall be governed by the Employment Agreement.
4. Proof of Payment of Advances. The Company shall, upon request,
promptly furnish the Owner evidence of timely payment of each advance paid
directly to the Insurer under Section 3.1.2.
5. Collateral Assignment of Policies. To secure the repayment to the
Company of the amounts it advances to the Owner under Section 3.1.2, the Owner
has, contemporaneously herewith, assigned the Policy to the Company as
collateral, under the instrument which in all material respects is the same as
the form attached hereto as Addendum 1. The collateral assignment of the Policy
to the Company hereunder shall not be terminated, altered or amended by the
Owner, without the express written consent of the Company. The parties hereto
agree to take all action necessary to cause the collateral assignment to conform
to the provisions of this Agreement. In the event of any inconsistency between
the terms of this Agreement and the terms of the collateral assignment, the
terms of this Agreement shall control.
6. Limitation on Policy Disposition. During the period that the
collateral assignment of the Policy is in effect, the Owner shall not borrow
from, pledge, transfer or assign the Policy and shall not sell, surrender or
cancel the Policy, change the beneficiary designation provision or terminate the
dividend election without the express written consent of the Company, which
consent shall not be unreasonably withheld.
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7. Policy Proceeds.
7.1 Upon the death of the Employee, the Company and the Owner
shall promptly take all action necessary to obtain the death benefit provided
under the Policy.
7.2 The Company shall have the unqualified right to receive a
portion of the Policy's death benefit equal to the total amount that it advanced
with respect to the Policy under Section 3.1.2. The balance of the death
benefit, if any, shall be paid directly to the beneficiary or beneficiaries
designated by the Owner, in the manner and the amount or amounts provided in the
beneficiary designation provision of the Policy. In no event shall the amount
payable to the Company hereunder with respect to the Policy exceed the amount of
the Policy's death benefit. The parties agree that the beneficiary designation
provision of the Policy shall conform to the provisions hereof.
8. Termination.
8.1 This Agreement shall terminate, without notice, upon the
surrender of the Policy by the Owner with the written consent of the Company as
provided in Section 6.
8.2 In addition, either the Owner or the Employee may
terminate this Agreement by written notice to the other parties hereto at any
time that the cash surrender value of the Policy at least equals the total
amount that the Company has advanced with respect to the Policy under Section
3.1.2. Such termination shall be effective as of the date of such notice. The
Company may not terminate this Agreement.
9. Release of Policy Collateral.
9.1 For sixty (60) days after the date of termination of this
Agreement, the Owner shall have the option of obtaining the release of the
collateral assignment of the Policy to the Company. To obtain such release, the
Owner shall pay or cause to be paid to the Company an amount equal to the
Policy's then cash surrender value. Upon receipt of that payment, the Company
promptly shall release the collateral assignment of the Policy.
9.2 If the Owner fails to exercise such option within such
sixty (60) day period with respect to the Policy, then the Owner shall transfer
the Policy to the Company. Thereafter, neither the Owner, the Employee, nor
their respective heirs, assigns or beneficiaries shall have any further interest
in and to the Policy, either under the terms thereof or under this Agreement.
10. Insurer. The Insurer shall be fully discharged from its obligations
under the Policy by payment of the Policy death benefit to the beneficiary or
beneficiaries named in the Policy, subject to the terms and conditions of the
Policy. In no event shall the Insurer be considered a party to this Agreement,
or any modification or amendment hereof. No provision of this Agreement, nor of
any modification or amendment hereof, shall in any way be construed as
enlarging, changing, varying, or in any other way affecting the obligations of
the Insurer as expressly provided in the Policy, except insofar as the
provisions hereof are made a part of the Policy by the collateral assignment
executed by the Owner and filed with the Insurer in connection herewith.
- 18 -
11. Amendment. This Agreement may not be amended, altered or modified,
except by a written instrument signed by the parties hereto, or their respective
successors or assigns, and may not be otherwise terminated except as provided
herein.
12. Succession. This Agreement shall be binding upon and shall inure to
the benefit of the Company and its successors and assigns, and the Employee, the
Owner and their respective successors, assigns, heirs, executors, administrators
and beneficiaries.
13. Notices. Any notice, consent or demand required or permitted to be
given under the provisions of this Agreement shall be in writing, and shall be
signed by the party giving or making the same. If such notice, consent or demand
is mailed to a party hereto, it shall be sent by United States certified mail,
postage prepaid, addressed to such party's last known address as shown on the
records of the Company. The date of such mailing shall be deemed the date of
notice, consent or demand.
14. Captions. The captions of the Sections herein are inserted as a
matter of convenience of reference only and in no way define, limit or describe
the scope of this Agreement or any provisions hereof.
15. Governing Law. This Agreement, and the rights of the parties
hereunder, shall be governed by and construed in accordance with the internal
laws of the Commonwealth of Pennsylvania and shall be enforced in the
Commonwealth of Pennsylvania.
16. Trust Agreement. Recognizing that the Owner is a trustee and that the
Policy is held in trust, the parties agree that the terms of this Agreement
shall control in the event of any inconsistencies between the terms of this
Agreement and the terms of the trust agreement.
- 19 -
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Employee and the Owner have
hereunto set their hands and seals on the dates set forth below.
Attest: PMA CAPITAL CORPORATION
_____________________ By: _________________________
__________________________________
XXXXXXXXX X. XXXXX, III
IRREVOCABLE DEED OF TRUST
OF XXXXXXXXX X. XXXXX, III,
DATED MAY 11, 1999
By: _________________________
Xxxxx X. Xxxxxx, Xxxxxxx
- 00 -
Xxxxxxxx A
The following life insurance policy is subject to this 1999 Xxxx
Xxxxxxx Split-Dollar Life Insurance Agreement:
Approximate
Insurer Initial Face Amount
------- -------------------
Xxxx Xxxxxxx Mutual Life Insurance Company $2,144,457
- 21 -
APPENDIX "C"
1999 PACIFIC LIFE
SPLIT-DOLLAR INSURANCE AGREEMENT
This SPLIT-DOLLAR INSURANCE AGREEMENT (the "Agreement") made as of the
__th day of May, 1999 by and among PMA Capital Corporation (the "Company"),
Xxxxxxxxx X. Xxxxx, III, an employee of the Company (the "Employee"), and the
Irrevocable Deed of Trust of Xxxxxxxxx X. Xxxxx, III, dated October 25, 1995
(the "Owner").
R E C I T A L S
- - - - - - - -
WHEREAS, the Employee has rendered loyal and valuable service to the
Company; and
WHEREAS, the Owner presently owns a policy which insures the life of
the Employee and which is not subject to a split-dollar life insurance
arrangement (the "Existing Policy"); and
WHEREAS, in the Employment Agreement dated as of May 1, 1999 (the
"Employment Agreement"), the Company agreed to provide life insurance protection
for the Employee by advancing a portion of the annual premiums for such
protection pursuant to a split-dollar life insurance arrangement on the terms
and conditions contained herein; and
WHEREAS, the Owner, the Company, and the Employee have agreed that the
Owner will exchange the Existing Policy for a new policy of insurance on the
life of the Employee in accordance with Section 1035 of the Internal Revenue
Code of 1986, as amended; and
WHEREAS, the Owner has applied for the new policy listed on Schedule A
attached to this Agreement (the "Policy") and, upon its issuance, will possess
all incidents of ownership in and to the Policy; and
WHEREAS, the parties desire to enter into this split-dollar agreement
with respect to the Policy to provide that the Company will advance a portion of
the annual premiums due on the Policy on the terms and conditions hereinafter
set forth, the Owner will collaterally assign the Policy to the Company to
secure the repayment of the amounts advanced, and the Company will have a
security interest in the aggregate cash surrender value of the Policy and in the
proceeds thereof;
NOW THEREFORE, in consideration of the premises and the mutual promises
contained herein and intending to be legally bound, the parties hereby agree as
follows:
1. Policy. The parties have taken the actions necessary to cause the
insurance company identified on Schedule A (the "Insurer") to issue the Policy
to the Owner, and shall take any further action that may be necessary to cause
the Policy to conform to the provisions of this
- 22 -
Agreement. The parties agree that the Policy shall be subject to the terms and
conditions of this Agreement and of the collateral assignment filed with the
Insurer relating to the Policy.
2. Ownership Rights. Except as otherwise provided herein, the Owner
shall be the sole and absolute owner of the Policy and may exercise all
ownership rights granted to the Owner thereunder.
3. Payment of Annual Premiums.
3.1 The Owner shall pay each annual premium for the Policy
(the "Premium") on or before its due date or within the grace period provided
therefor under the Policy (the "Premium Due Date") as follows:
3.1.1 At least ten (10) days before the Premium Due
Date, the Owner shall pay the portion of the Premium that would be includable in
the gross income of the insured for federal income tax purposes if not paid by
the Insured (the "Taxable Portion") and shall send evidence of its payment to
the Company.
3.1.2 Upon receipt of the Owner's evidence of
payment, the Company promptly shall advance to the Owner the remaining portion
of the Premium (the "Remaining Portion"), or in its discretion the Company may
pay its advance directly to the Insurer.
3.1.3 The obligation of the Company to advance the
Remaining Portion of the Premium under Section 3.1.2 is conditioned upon the
Owner's payment of the Taxable Portion of the Premium under Section 3.1.1.
3.2 The obligation of the Company to make the annual payments
provided in Section 3.1 hereof shall be governed by the Employment Agreement.
4. Proof of Payment of Advances. The Company shall, upon request,
promptly furnish the Owner evidence of timely payment of each advance paid
directly to the Insurer under Section 3.1.2.
5. Collateral Assignment of Policies. To secure the repayment to the
Company of the amounts it advances to the Owner under Section 3.1.2, the Owner
has, contemporaneously herewith, assigned the Policy to the Company as
collateral, under the instrument which in all material respects is the same as
the form attached hereto as Addendum 1. The collateral assignment of the Policy
to the Company hereunder shall not be terminated, altered or amended by the
Owner, without the express written consent of the Company. The parties hereto
agree to take all action necessary to cause the collateral assignment to conform
to the provisions of this Agreement. In the event of any inconsistency between
the terms of this Agreement and the terms of the collateral assignment, the
terms of this Agreement shall control.
6. Limitation on Policy Disposition. During the period that the
collateral assignment of the Policy is in effect, the Owner shall not borrow
from, pledge, transfer or assign the Policy and shall not sell, surrender or
cancel the Policy, change the beneficiary designation provision or
- 23 -
terminate the dividend election without the express written consent of the
Company, which consent shall not be unreasonably withheld.
7. Policy Proceeds.
7.1 Upon the death of the Employee, the Company and the Owner
shall promptly take all action necessary to obtain the death benefit provided
under the Policy.
7.2 The Company shall have the unqualified right to receive a
portion of the Policy's death benefit equal to the total amounts that it
advanced with respect to the Policy under Section 3.1.2, but such amounts shall
not include any amount that was transferred by the Owner from the Existing
Policy to the Policy. The balance of the death benefit, if any, shall be paid
directly to the beneficiary or beneficiaries designated by the Owner, in the
manner and the amount or amounts provided in the beneficiary designation
provision of the Policy. In no event shall the amount payable to the Company
hereunder with respect to the Policy exceed the amount of the Policy's death
benefit. The parties agree that the beneficiary designation provision of the
Policy shall conform to the provisions hereof.
8. Termination.
8.1 This Agreement shall terminate, without notice, upon the
surrender of the Policy by the Owner with the written consent of the Company as
provided in Section 6.
8.2 In addition, either the Owner or the Employee may
terminate this Agreement by written notice to the other parties hereto at any
time that the cash surrender value of the Policy at least equals the total
amount that the Company has advanced with respect to the Policy under Section
3.1.2. Such termination shall be effective as of the date of such notice. The
Company may not terminate this Agreement.
9. Release of Policy Collateral.
9.1 For sixty (60) days after the date of termination of this
Agreement, the Owner shall have the option of obtaining the release of the
collateral assignment of the Policy to the Company. To obtain such release, the
Owner shall pay or cause to be paid to the Company an amount equal to the total
amount that the Company has advanced with respect to the Policy under Section
3.1.2 together with any cash surrender value attributable thereto. Upon receipt
of that payment, the Company promptly shall release the collateral assignment of
the Policy.
9.2 If the Owner fails to exercise such option within such
sixty (60) day period with respect to the Policy, then the Owner shall transfer
the Policy to the Company. Thereafter, neither the Owner, the Employee, nor
their respective heirs, assigns or beneficiaries shall have any further interest
in and to the Policy, either under the terms thereof or under this Agreement.
10. Insurer. The Insurer shall be fully discharged from its obligations
under the Policy by payment of the Policy death benefit to the beneficiary or
beneficiaries named in the Policy, subject to the terms and conditions of the
- 24 -
Policy. In no event shall the Insurer be considered a party to this Agreement,
or any modification or amendment hereof. No provision of this Agreement, nor of
any modification or amendment hereof, shall in any way be construed as
enlarging, changing, varying, or in any other way affecting the obligations of
the Insurer as expressly provided in the Policy, except insofar as the
provisions hereof are made a part of the Policy by the collateral assignment
executed by the Owner and filed with the Insurer in connection herewith.
11. Amendment. This Agreement may not be amended, altered or modified,
except by a written instrument signed by the parties hereto, or their respective
successors or assigns, and may not be otherwise terminated except as provided
herein.
12. Succession. This Agreement shall be binding upon and shall inure to
the benefit of the Company and its successors and assigns, and the Employee, the
Owner and their respective successors, assigns, heirs, executors, administrators
and beneficiaries.
13. Notices. Any notice, consent or demand required or permitted to be
given under the provisions of this Agreement shall be in writing, and shall be
signed by the party giving or making the same. If such notice, consent or demand
is mailed to a party hereto, it shall be sent by United States certified mail,
postage prepaid, addressed to such party's last known address as shown on the
records of the Company. The date of such mailing shall be deemed the date of
notice, consent or demand.
14. Captions. The captions of the Sections herein are inserted as a
matter of convenience of reference only and in no way define, limit or describe
the scope of this Agreement or any provisions hereof.
15. Governing Law. This Agreement, and the rights of the parties
hereunder, shall be governed by and construed in accordance with the internal
laws of the Commonwealth of Pennsylvania and shall be enforced in the
Commonwealth of Pennsylvania.
16. Trust Agreement. Recognizing that the Owner is a trustee and that the
Policy is held in trust, the parties agree that the terms of this Agreement
shall control in the event of any inconsistencies between the terms of this
Agreement and the terms of the trust agreement.
- 25 -
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Employee and the Owner have
hereunto set their hands and seals on the dates set forth below.
Attest: PMA CAPITAL CORPORATION
_____________________ By: _________________________
__________________________________
XXXXXXXXX X. XXXXX, III
IRREVOCABLE DEED OF TRUST
OF XXXXXXXXX X. XXXXX, III,
DATED OCTOBER 25, 1995
By: _________________________
Xxxxx X. Xxxxxx, Xxxxxxx
- 00 -
Xxxxxxxx A
The following life insurance policy is subject to this 1999 Pacific
Life Split-Dollar Life Insurance Agreement:
Approximate
Insurer Initial Face Amount
------- -------------------
Pacific Life Insurance Co. $1,567,748
- 27 -
