1999 AMENDED AND RESTATED
SPLIT-DOLLAR INSURANCE AGREEMENT
This 1999 AMENDED AND RESTATED SPLIT-DOLLAR INSURANCE AGREEMENT (the
"Agreement") made as of the 12th 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 advanced, and the Company
will have a security interest in the aggregate cash surrender value of the
Policy and in the proceeds thereof;
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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 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
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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.
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
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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
/s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxx X. Xxxxxxxx
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By: /s/ Xxxxxxxxx X. Xxxxx, III
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XXXXXXXXX X. XXXXX, III
IRREVOCABLE DEED OF TRUST
OF XXXXXXXXX X. XXXXX, III,
DATED DECEMBER 18, 1991
By: Xxxxx X. Xxxxxx, Trustee
------------------------
Xxxxx X. Xxxxxx, Trustee
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Schedule A
The following life insurance policy is subject to this 1999 Amended and
Restated Split-Dollar Life Insurance Agreement:
Approximate
Insurer Initial Face Amount
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The Manufacturer's Life Insurance Company $1,690,000
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ADDENDUM "1"
COLLATERAL ASSIGNMENT
A . FOR VALUE RECEIVED the undersigned hereby assigns, transfers and
sets over to PMA Capital Corporation, a Pennsylvania Corporation, its successors
and assigns (the "Assignee") the Policy issued by The Manufacturer's Life
Insurance Company (U.S.A.) (the "Insurer") and any supplementary contracts
issued in connection therewith (together, the "Policy"), upon the life of
Xxxxxxxxx X. Xxxxx, III, a resident of the Commonwealth of Pennsylvania, and all
claims, options, privileges, rights, titles and interests therein and thereunder
(except as provided in Paragraph B. hereof), subject to all the terms and
conditions of the Policy and to all superior liens, if any, which the Insurer
may have against the Policy. The undersigned by this instrument agrees and the
Assignee by the acceptance of this assignment agrees to the conditions and
provisions herein set forth.
B . It is expressly understood and agreed that the Assignee shall have
the sole right to collect from the Insurer the net proceeds of the Policy when
it becomes a claim by death or maturity and that all other rights under the
Policy, including, by way of illustration and not limitation, the right to
surrender the Policy, the right to obtain loans or advances on the Policy, the
right to designate and change the beneficiary, and the right to elect and to
receive dividends, are reserved exclusively to the undersigned and are excluded
from this assignment and do not pass by virtue hereof and may be exercised by
the undersigned on its sole signature. Nothing herein shall affect funds, if
any, now or hereafter held by the Insurer for the purpose of paying premiums
under the Policy.
C . This assignment is made and the Policy is to be held as collateral
security for any and all liabilities of the undersigned to the Assignee, either
now existing or that may hereafter arise under the Insurance Agreement
(collectively, the "Liabilities").
D . The Assignee covenants and agrees with the undersigned as follows:
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D1 . That any balance of sums received hereunder from the Insurer
remaining after payment of the then existing Liabilities, matured or unmatured,
shall be paid by the Assignee to the persons entitled thereto under the terms of
the Policy had this assignment not been executed; and
D2 . That the Assignee shall upon request forward without
unreasonable delay to the Insurer the Policy for endorsement for any designation
or change of beneficiary or any election of an optional mode of settlement.
E . The Insurer is hereby authorized to recognize the Assignee's claims
to rights hereunder without investigating the reason for any action taken by the
Assignee after the Policy becomes a claim by death or maturity, including the
application to be made by the Assignee of any amounts to be paid to the
Assignee. The sole signature of the Assignee shall be sufficient for the
exercise of the rights under the Policy assigned hereby and the sole receipt of
the Assignee for any sums received shall be a full discharge and release
therefor to the Insurer. Checks for all or any part of the sums payable under
the Policy and assigned herein, shall be drawn to the exclusive order of the
Assignee if, when, and in such amounts as may be, requested by the Assignee.
F . The exercise of any right, option, privilege or power given herein
to the Assignee shall be at the option of the Assignee; the Assignee may
exercise any such right, option, privilege, or power without notice to, or
assent by, or without affecting the liability of, or releasing any interest
hereby assigned by, the undersigned.
G . The Assignee may take or release other security, may release any
party primarily or secondarily liable for any of the Liabilities, may grant
extensions, renewals or indulgences with respect to the Liabilities, or may
apply to the Liabilities in such order as the Assignee shall determine, the
proceeds of the Policy hereby assigned or any amount received on account of the
Policy by the exercise of any right permitted under this assignment, without
resorting to other security.
H . The undersigned declares that no proceedings in bankruptcy are
pending against it and that its property is not subject to any assignment for
the benefit of creditors.
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Signed and sealed as of the ___ day of ______________, 1999.
Witness: IRREVOCABLE DEED OF TRUST OF
XXXXXXXXX X. XXXXX, III, DATED
DECEMBER 18, 1991
_________________________ By: __________________________
Xxxxx X. Xxxxxx, Trustee
Owner
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CORPORATION'S CONSENT
As of the day of _________, 1999, PMA Capital Corporation, having
reviewed the foregoing collateral assignment, does hereby consent and agree to
the terms and conditions therein set forth.
Attest: PMA CAPITAL CORPORATION
By:______________________ By: __________________________
Title: Secretary Title:
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