TRUST UNDER
CHARTWELL RE CORPORATION
EMPLOYMENT AGREEMENTS
This Trust Agreement made this 20th day of June 1994, by and between
Chartwell Re Corporation, a Delaware corporation (the "Company") and Shawmut
Bank CT (the "Trustee");
WHEREAS, the Company has entered into employment agreements (the
"Employment Agreements") effective as of December 8, 1993, March 31, 1993, and
January 1, 1994 with certain executives of the Company listed on Appendix 1
hereto (the "Executives") and may enter into similar agreements with other
executives in the future;
WHEREAS, the Company may incur liability under the terms of such
Employment Agreements with respect to the Executives;
WHEREAS, the Employment Agreements contemplate the establishment of
this trust (hereinafter called the "Trust") and the contribution by the Company
to the Trust of amounts that shall be held therein, in order to assist the
Company in meeting its obligations to provide supplemental benefits under the
Employment Agreements;
WHEREAS, the assets of this Trust shall be subject to the claims of
the Company's creditors in the event of the Company's Insolvency, as herein
defined, until paid to the Executives and their respective beneficiaries in such
manner and at such times as specified in the Employment Agreements;
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement; and
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) The Company hereby deposits with the Trustee in trust the sum of
$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 shall be irrevocable, but is subject
to termination in accordance with Section 12 hereof.
(c) The Trust is intended to be a grantor trust, of which the 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) The principal of the Trust, and any earnings thereon shall be
held separate and apart from other funds of the Company and shall be used
exclusively for the purposes herein set forth. The Executives and their
beneficiaries shall have no preferred claim on, or any beneficial ownership
interest in, any assets of the Trust. Any rights created under the Employment
Agreements and this Trust Agreement shall be mere unsecured contractual rights
of the Executives and their beneficiaries against the Company. Any assets held
by the Trust will be subject to the claims of the Company's general creditors
under federal and state law in the event that the Company is considered
Insolvent, as defined in Section 3(a) herein.
(e) As soon as practical following the end of each calendar year, or
otherwise as required pursuant to the Employment Agreements, the Company shall
contribute in cash to the Trustee hereunder an amount equal to the contributions
required to be made pursuant to the terms of the Employment Agreements. The
Trustee shall not have any right to compel such contributions.
Section 2. Payments to Executives and their Beneficiaries
(a) The Company shall deliver to the Trustee a schedule (the "Payment
Schedule") that indicates the name of each Executive for whom contributions are
being made, the amounts payable in respect of each Executive, and the time of
commencement and conditions for payment of such amounts (as provided for under
the Employment Agreements). Except as otherwise provided herein, the Trustee
shall make payments to the Executives and their beneficiaries in accordance with
such Payment Schedule The Company shall instruct the Trustee as to amounts to be
reported and/or withheld for any federal, state or local taxes that may be
required to be reported and/or withheld, with respect to the payment of benefits
pursuant to the terms of the Employment Agreements. The Trustee shall then pay
amounts so withheld (if any) to the appropriate taxing authorities. Payments
shall be made to each Executive in cash (or, if consented to by the Company and
the Executive, in kind).
(b) The entitlement of the Executives or their beneficiaries to
benefits shall be determined in accordance with the provisions of the Employment
Agreements.
(c) The Company may make payment of benefits directly to the
Executives or their beneficiaries as they become due under the terms of the
Employment Agreements. The Company shall notify the Trustee of its decision to
make payment of benefits directly prior to the time amounts payable to the
Executives or their beneficiaries are due.
In the event that the Company pays the entire amount due to an Executive (or his
beneficiary) pursuant to the terms of the Executive's Employment Agreement, then
the Trustee, upon receipt of certification from the Company that such payment
has been made, shall return to the Company all Trust assets that have been
credited to such Executive's Account (as defined in Section 5(a) hereof).
Section 3. Trustee Responsibility Regarding Payments to Trust
Beneficiary When the Company is Insolvent.
(a) The Trustee shall cease payment of benefits to the Executives and
their beneficiaries if the Company is Insolvent. The Company shall be considered
"insolvent" for purpose of this Trust Agreement if (i) the Company is unable to
pay its debts as they become due, or (ii) the Company is subject to a pending
procedure as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of the Company under federal and state law as set
forth below.
(1) The Board of Directors and the Chief Executive Officer of the
Company shall have the duty to inform the Trustee in writing of
the Company's becoming Insolvent. If a person claiming to be a
creditor of the Company alleges in writing to the Trustee that
the Company has become Insolvent, the Trustee shall determine
whether the Company is Insolvent and, pending such
determination, the Trustee shall discontinue payment of benefits
to the Executives or their beneficiaries.
(2) Unless the Trustee has actual knowledge of the Company's
becoming Insolvent, or has received notice from the Company or a
person claiming to be a creditor alleging that the Company is
Insolvent, the Trustee shall have no duty to inquire whether the
Company is Insolvent, The Trustee may in all events rely on such
evidence concerning the Company's solvency as may be furnished
to the Trustee and that provides the Trustee with a reasonable
basis for making a determination concerning the Company's
solvency.
(3) If at any time the Trustee has determined that the Company is
Insolvent, the Trustee shall discontinue payments to the
Executives or their beneficiaries and shall hold the assets of
the Trust for the benefit of the Company's general creditors and
shall deliver any undistributed assets of the Trust to satisfy
such claims as a court of competent jurisdiction may direct,
after deduction of the Trustee's fees and expenses and any other
expenses of the Trust including taxes accrued and unpaid at the
time. Nothing in this Trust Agreement shall in any way diminish
any rights of the Executives or their beneficiaries to pursue
their rights as general creditors of the Company with respect to
benefits due under the Employment Agreements or otherwise.
(4) The Trustee shall resume the payment of benefits to the
Executives or their beneficiaries in accordance with Section 2
of this Trust Agreement only after the Trustee has determined
that the Company is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits 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 to the
Executives or their beneficiaries under the terms of the Employment Agreements
for the period of such discontinuance, less the aggregate amount of any payments
made to the Executives or their beneficiaries by the Company in lieu of the
payments provided for hereunder during any such period of discontinuance.
Section 4. Payments to Company.
Except as provided in Sections 2(c) and 3 hereof, the Company shall
have no right or power to direct the Trustee to return to the Company or to
divert to others any of the Trust assets before all payments of benefits have
been made to the Executives and their beneficiaries pursuant to the terms of the
Employment Agreements.
Section 5. Accounts and Investment Authority.
a) Contributions to the Trust on behalf of each Executive and any
interest and earnings thereon shall be separately credited to an account (the
"Account") established and held by the Trustee for each such Executive. The
Trustee shall provide the Company and the Executive with certain investment
options as set forth on Appendix 2 (the "Investment Options").
Each Executive shall timely recommend to the Trustee, in writing, as
to the Investment Options in which the assets held in his Account shall be
invested; provided, however, that the ultimate investment authority shall reside
with the Trustee. In the event that an Executive fails to timely recommend
investments to the Trustee, then the Trustee shall in its own discretion use its
good faith efforts to invest and reinvest the assets credited to such
Executive's Account in the Investment Options.
From time to time the Company and the Trustee will review the
Investment Options and, at their discretion add and/or delete certain Investment
Options. Notwithstanding anything herein to the contrary the Trustee shall not
invest any assets held in the Trust in any securities or properties, the
investment in which the Company has advised the Trustee in writing could
reasonably be expected to have an adverse effect upon the Company or any of its
divisions, subsidiaries or affiliates.
(c) The Company shall instruct trustee as to what amounts each
Account shall be charged for payment of all federal, state and local taxes
deemed payable by the Company with respect to income or gains (offset by losses)
recognized by the Account, and such amounts shall be deducted from the Account
and distributed to the Company as of the end of the taxable year of the Company
during which such income was recognized. In the event the Account does not have
sufficient cash to make such distribution, the Company may cause the Trustee to
sell securities or property to provide sufficient cash. Prior to making a
payment to an Executive pursuant to Section 2(a) hereof, the Trustee shall
reduce the Executive's Account by the amount of federal, state and local taxes
deemed payable by the Company with respect to income or gains (offset by losses)
recognized by the Executive's Account since the end of the preceding taxable
year of the Company, including any taxes with respect to the distribution. For
purposes of determining taxes payable by the Company pursuant to this Agreement,
it shall be assumed that the Company pays all taxes at the maximum marginal rate
of federal income taxes and state and local income and franchise taxes
applicable to business corporations.
Section 6. Disposition of Income.
(a) During the term of this Trust, all income received by the Trust,
net of expenses, shall be accumulated and reinvested.
Section 7. Accounting by Trustee.
The trustee shall separately keep accurate and detailed records of
all investments, receipts, disbursements, and all other transactions required to
be made, with respect to the Account of each Executive, including such specific
records as shall be agreed upon in writing between the Company and the Trustee.
Within 60 days following the close of each calendar quarter and within 120 days
after the removal or resignation of the Trustee, the Trustee shall deliver to
the Company a written account of its administration of the Trust during such
quarter or during the period from the close of the last preceding quarter to the
date of such removal or resignation, setting forth separately with respect to
each Account, all investments, receipts, disbursements and other transactions
effected by it for each Executive, 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 for each
Executive at the end of such quarter or as of the date of such removal or
resignation, as the case may be.
Section 8.Powers, Duties and Responsibilities of Trustee
(a) The 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 the
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by the Company or any of the Executives
that is contemplated by, and in conformity with, the terms of the Employment
Agreements or this Trust. In the event of a dispute between the Company and a
party, the Trustee may apply to a court of competent jurisdiction to resolve the
dispute.
(b) If the Trustee undertakes or defends any litigation arising in
connection with this Trust, the Company agrees to indemnify the Trustee against
the Trustee's costs, expenses and liabilities (including, without limitation,
attorney's fees and expenses) relating thereto and to be primarily liable for
such payments. If the Company does not pay such costs, expenses and liabilities
in a reasonably timely manner, the Trustee may obtain payment from the Trust.
(c) The Trustee may consult with legal counsel (who may also be
counsel for the Company generally) with respect to any of its duties or
obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers conferred
on the Trustee by applicable law, unless expressly provided otherwise herein.
(f) Notwithstanding any power granted to the Trustee pursuant to
this Trust Agreement or to applicable law, the 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
of 1986, as amended.
(g) Subject to Section 5 and paragraph (f) of this Section 8, but in
amplification of (and not in limitation of) the powers given in paragraph (e) of
this Section 8, the Trustee shall have the following powers and authority in the
administration of the Trust;
(i) To invest all contributions, investments, and
reinvestments thereof and all additions thereto by way of contributions,
earnings and increments.
(ii) To sell for cash or on credit, to grant options,
convert, redeem, exchange for other securities or other property, or otherwise
to dispose of any securities or other property at any time held.
(iii) To settle, compromise or submit to arbitration, any
claims, debts or damages, due or owing to or from the Trust, to commence or
defend suits or legal proceedings and to represent the Trust in all suits or
legal proceedings.
(iv) To exercise any conversion privilege and/or subscription
right available in connection with any securities or other property at any time
held; to oppose or to consent to the reorganization, consolidation, merger, or
readjustment of the finances of any corporation, company or association or to
the sale, mortgage, pledge or lease of the property of any corporation, company
or association any of the securities of which may at any time be held and to do
any act with reference thereto, including the exercise of options, the making of
agreements or subscriptions, which may be deemed necessary or advisable in
connection therewith, and to hold and retain any securities or other property so
acquired.
(v) To exercise, personally or by general or by limited
power of attorney, any right, including the right to vote, appurtenant to any
securities or other property held at any time.
(vi) To borrow money from any lender in such amounts and
upon such terms and conditions as shall be deemed advisable or proper to carry
out the purposes of the Trust and to pledge any securities or other property for
the repayment of any such loan.
(vii) To hold cash uninvested for no more than five (5) days
without liability for interest, pending investment thereof or the payment of
expenses or making distributions therewith.
(viii) To register any securities held hereunder in the name
of the Trustee or in the name of a nominee with or without the addition of words
indicating that such securities are held in a fiduciary capacity and to hold any
securities in bearer form.
(ix) To make, execute and deliver, as Trustee, any and all
conveyances, contracts, waivers, releases or other instruments in writing
necessary or proper for the accomplishment of any of the foregoing powers.
Section 9. Compensation and Expenses of Trustee
The Company shall pay all administrative and Trustee's fees and
expenses, but if not so paid, such fees and expenses shall be paid from the
assets in Trust.
Section 10. Resignation and Removal of Trustee
(a) The Trustee may resign at any time by written notice to the
Company, which shall be effective 30 days after receipt of such notice unless
the Company and the Trustee agree otherwise.
(b) The Trustee may be removed by the Company on 30 days notice or
upon shorter notice accepted by Trustee.
(c) Upon resignation or removal of the Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the successor
Trustee. The transfer shall be complete within 30 days after receipt of notice
of resignation, removal or transfer, unless the Company extends the time limit.
(d) If the Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the effective date of
resignation or removal under paragraphs (a) or (b) of this section. If no such
appointment has been made, the Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions. All expenses of
the Trustee in connection with the proceeding shall be allowed as administrative
expenses of the Trust.
Section 11. Appointment of Successor
(a) If the Trustee resigns or is removed in accordance with Section
10(a) or (b) hereof, the Company may appoint any third party, such as a bank
trust department or other party that may be granted corporate trustee powers
under state law, as a successor to replace the Trustee upon resignation or
removal. The appointment shall be effective when accepted in writing by the new
Trustee, who shall have all of the rights and powers of the former Trustee,
including ownership rights in the Trust assets. The former Trustee shall execute
any instrument necessary or reasonably requested by the Company or 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 7 and 8 hereof. The successor Trustee shall not be responsible for and
the 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 12. Amendment or Termination
(a) This Trust Agreement may be amended by a written instrument
executed by the Trustee and the Company; provided, however, that no amendment
that alters or impairs the rights of any Executive hereunder (including, but not
limited to an amendment that changes or eliminates any of the available
investment options described in Section 5 hereof) may be made without the prior
written consent of the affected Executive.
(b) The Trust shall not terminate until the date on which the
Executives and their beneficiaries are no longer entitled benefits pursuant to
the terms of the Employment Agreements. Upon termination of the Trust any assets
remaining in the Trust shall be returned to Company.
(c) Upon written approval of the Executives or their beneficiaries
entitled to payment of benefits pursuant to the terms of the Employment
Agreements, the Company may terminate this Trust prior to the time all benefit
payments under the Employment Agreements have been made. All assets in the Trust
at termination shall be returned to the Company.
Section 13. 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) Benefits payable to the Executives and their beneficiaries 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 construed in accordance with and
governed by the laws of Connecticut without regard to its conflict of laws
principles.
Section 14. Effective Date.
The effective date of this Trust Agreement shall be as of January 1,
1994.
IN WITNESS WHEREOF, the parties hereto have executed the Trust as of the date
first above written
CHARTWELL RE CORPORATION
by:
SHAWMUT BANK CT, Trustee
by: