EXHIBIT 10(a)
ALLETE, INC.
DIRECTOR COMPENSATION TRUST AGREEMENT
EFFECTIVE OCTOBER 11, 2004
TABLE OF CONTENTS
PAGE
Section 1 Establishment of Trust 3
Section 2 Payments to Plan Participants and Their Beneficiaries 5
Section 3 Trustee Responsibility Regarding Payments to Trust
Beneficiary When Company is Insolvent 6
Section 4 Payments to the Company 7
Section 5 Investment Authority 7
Section 6 Disposition of Income 9
Section 7 Accounting by Trustee 9
Section 8 Responsibility of Trustee 9
Section 9 Compensation and Expenses of Trustee 10
Section 10 Resignation and Removal of Trustee 10
Section 11 Appointment of Successor 10
Section 12 Amendment or Termination 11
Section 13 Miscellaneous 11
Section 14 Effective Date 12
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TRUST UNDER THE ALLETE DIRECTOR COMPENSATION DEFERRAL PLAN
This Agreement effective as of this 11th day of October, 2004, by and between
ALLETE, Inc. ("Company") and Marshall & Ilsley Trust Company N.A. ("Trustee");
WHEREAS, Company has adopted a non-qualified deferred compensation plan for its
non-employee directors known as the ALLETE Director Compensation Deferral Plan
("Plan");
WHEREAS, Company has incurred or expects to incur liability under the terms of
such Plan with respect to the individuals participating in such Plan;
WHEREAS, Company wishes to establish a trust (hereinafter called "Trust") and to
contribute to the Trust assets that shall be held therein, subject to the claims
of Company's creditors in the event of Company's Insolvency, as herein defined,
until paid to Plan participants and their beneficiaries in such manner and at
such time as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust shall constitute an
unfunded arrangement and shall not affect the status of the Plan as an unfunded
plan maintained for the purpose of providing deferred compensation for a select
group non-employee directors of ALLETE, Inc.;
WHEREAS, it is the intention of the Company to make contributions to the Trust
to provide itself with a source of funds to assist it in the meeting of its
liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that the
Trust shall be comprised, held and disposed of as follows:
Section 1. ESTABLISHMENT OF TRUST.
(a) Company hereby deposits with Trustee in trust Ten Dollars
($10.00), which shall become the principal of the Trust to be
held, administered and disposed of by Trustee as provided in
this Trust Agreement.
(b) Except as provided elsewhere herein, the Trust hereby
established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which Company
is the grantor, within the meaning of subpart E, part I,
subchapter J, chapter 1, subtitle A of the Internal Revenue
Code of 1986, as amended, and shall be construed accordingly.
(d) 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 uses and purposes of Plan
participants and general creditors as herein set forth. Plan
participants 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 Plan and this Trust
Agreement shall be mere unsecured contractual rights of Plan
participants 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 of Insolvency, as defined in Section 3(a) herein.
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(e) Company, in its sole discretion, may at any time, or from time
to time, make additional deposits of cash or other property in
trust with Trustee to augment the principal to be held,
administered and disposed of by Trustee as provided in this
Trust Agreement. Neither Trustee nor any Plan participant or
beneficiary shall have any right to compel such additional
deposits.
(f) After a Change in Control described in Section 1(f)(1) the
following shall occur with respect to the Trust. The assets
shall be held for participants who had benefit rights under the
Plan for which the Trust was created before the Change in
Control occurred (the "previous participants"). If the Company
makes further contributions for benefits owed to participants
under the Plan who first become participants after the change
in control, other than contributions for previous participants,
such contributions and any insurance contracts or other assets
purchased with such contributions shall be held in a new
subtrust separate from any existing subtrust for previous
participants. The subtrust for previous participants shall be a
separate subtrust, and shall cover all the benefits provided by
the Plan for a previous participant, including benefits accrued
after the Change in Control, and additional contributions made
after the Change in Control.
(1) A "Change in Control" shall be deemed to have occurred
as of the first day that any one or more of the
following conditions shall have been satisfied:
a. The commencement of proceedings for dissolution or
liquidation of the Company;
b. A reorganization, merger or consolidation of the
Company with one or more unrelated corporations, as a
result of which the Company is not the surviving
corporation;
c. The sale, exchange, transfer or other disposition of
shares of the common stock of the Company (or shares
of the stock of any person that is a shareholder of
the Company) in one or more transactions, related or
unrelated, to one or more Persons unrelated to the
Company if, as a result of such transactions, any
Person (or any Person and its affiliates) owns more
than twenty percent (20%) of the voting power of the
outstanding common stock of the Company;
d. A reorganization, merger or consolidation of the
Company with one or more unrelated corporations, if
immediately after the consummation of such
transactions less than a majority of the board of
directors of the surviving corporation is comprised
of Continuing Directors. The Continuing Directors
shall mean (i) each member of the Board of Directors
of the Company, while such person is a member of the
Board, who is not the other party to the transaction,
as Affiliate or Associate (as these terms are defined
in the Exchange Act) of such other party to the
transactions, or a representative of such other party
or of any such Affiliate or Associate, and was a
member of the Board immediately prior to the initial
public announcement of a proposal relating to a
reorganization, merger or consolidation involving
such other party, or an Affiliate or Associate of
such other party of (ii) any person who subsequently
becomes a member of the Board, while such person is a
member of the Board,
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who is not the other party to the transaction, or an
Affiliate or Associate thereof, or a representative
of such other party to the transaction or of any such
Affiliate or Associate if such person's nomination
for election to the Board is recommended or approved
by two-thirds of the Continuing Directors then in
office:
e. The sale of all or substantially all the assets of
the Company. The distribution by the Company to its
shareholders of all of its shares of common stock of
ADESA, Inc., representing its residual interest in
ADESA, Inc., following ADESA, Inc.'s Initial Public
Offering, however, shall not be a Change in Control
of the Company.
Notwithstanding the above, a Change in Control of the
Company shall not occur as a result of the distribution
by the Company to its shareholders of all of its shares
of common stock of ADESA, Inc., representing a residual
interest in ADESA, Inc., following ADESA, Inc.'s initial
public offering.
As used herein, the term Person shall have the meaning
ascribed to such term in Section 3(a)(9) of the Exchange
Act, as used in Sections 13(d) and 14(d) thereof
including usage in the definition of a "group" in
Section 13(d) thereof.
(2) The Company shall give written notice to the Trustee of
any impending or actual Change of Control of the
Company. Only if and when Trustee shall receive such
notice the Trustee shall hold, administer, distribute
and enforce the terms of this Trust pursuant to the
terms of this Section. Alternatively, three members of
the Board of Directors may advise the Trustee of a
change in control.
Section 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES.
(a) In the event the Trust makes payments to Plan participants or their
beneficiaries, the Company shall deliver to Trustee a schedule (the
"Payment Schedule") that indicates the amounts payable in respect of
each Plan participant (and his or her beneficiaries), that provides a
formula or other instructions acceptable to Trustee for determining the
amounts so payable, the form in which such amount is to be paid (as
provided for or available under the Plan), and the time of commencement
for payment of such amounts. Except as otherwise provided herein,
Trustee shall make payments to the Plan participants and their
beneficiaries in accordance with such Payment Schedule. The Trustee
shall make provision for the reporting and withholding of any federal,
state or local taxes that may be required to be withheld with respect
to the payment of benefits pursuant to the terms of the Plan and shall
pay amounts withheld to the appropriate taxing authorities or determine
that such amounts have been reported, withheld and paid by Company.
(b) The entitlement of a Plan participant or his or her beneficiaries to
benefits under the Plan shall be determined by Company or such party as
it shall designate under the Plan, and any claim for such benefits
shall be considered and reviewed under the procedures set out in the
Plan.
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(c) Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under
the terms of the Plan. Company shall notify Trustee of its
decision to make payment of benefits directly prior to the time
amounts are payable to participant or their beneficiaries. In
addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in
accordance with the terms of the Plan, Company shall make the
balance of each such payment as it falls due. Trustee shall
notify Company where principal and earnings are not sufficient.
Section 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY
WHEN COMPANY IS INSOLVENT.
(a) Trustee shall cease payment of benefits to Plan participants
and their beneficiaries if the Company is Insolvent. Company
shall be considered "Insolvent" for purposes of this Trust
Agreement if (i) Company is unable to pay its debts as they
become due, (ii) Company is subject to a pending proceeding as
a debtor under the United States Bankruptcy Code, or (iii)
Company is determined to be insolvent by any state or federal
regulatory authority.
(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 Trustee in
writing of Company's Insolvency. If a person claiming to
be a creditor of Company alleges in writing to Trustee
that Company has become Insolvent, Trustee shall
determine whether Company is Insolvent and, pending such
determination, Trustee shall discontinue payment of
benefits to Plan participants or their beneficiaries.
(2) Unless Trustee has actual knowledge of Company's
Insolvency, or has received notice from Company or a
person claiming to be a creditor alleging that Company
is Insolvent, Trustee shall have no duty to inquire
whether Company is Insolvent. Trustee may in all events
rely on such evidence concerning Company's solvency as
may be furnished to Trustee and that provides Trustee
with a reasonable basis for making a determination
concerning Company's solvency.
(3) If at any time Trustee has determined that Company is
Insolvent, Trustee shall discontinue payments to Plan
participants or their beneficiaries and shall hold the
assets of the Trust for the benefit of Company's general
creditors. Nothing in this Trust Agreement shall in any
way diminish any rights of Plan participants or their
beneficiaries to pursue their rights as general
creditors of Company with respect to benefits due under
the Plan or otherwise.
(4) Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with
Section 2 of this Trust Agreement only after
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Trustee has determined that Company is not Insolvent (or
is no longer Insolvent).
(c) Provided that there are sufficient assets, if 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 Plan participants or
their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any
payments made to Plan participants or their beneficiaries by
Company in lieu of the payments provided for hereunder during
any such period of discontinuance.
Section 4. PAYMENTS TO THE COMPANY.
(a) Except as provided in Section 3 and Section 4(b) and (c)
hereof, Company shall have no right or power to direct Trustee
to return to the Company or to divert to others any of the
Trust assets before all payment of benefits have been made to
Plan participants and their beneficiaries pursuant to the terms
of the Plan.
(b) The Company shall have the right at anytime, and from time to
time in its sole discretion, to substitute assets of equal fair
market value for any asset held by the Trust. This right is
exercisable by Company in a nonfiduciary capacity without the
approval or consent of any person in a fiduciary capacity.
(c) In the event the Trust shall have Excess Assets credited to its
account hereunder, the Board of Directors, at its option, may
direct the Trustee to return to the Company that part of the
assets equal to such Excess Assets. As used herein, the term
"Excess Assets" are assets credited to the account exceeding
one-hundred percent of the present value of the benefits due
participants in the Plan. The determination of the existence of
Excess Assets shall be solely the responsibility of the Company
and Trustee shall be fully protected and indemnified for any
return of assets pursuant to this Section 4(c).
Section 5. INVESTMENT AUTHORITY.
(a) Trustee may invest in securities (including stock or rights to
acquire stock) or obligations issued by Company. All rights
associated with assets of the Trust shall be exercised by
Trustee at the direction of the Company or the person
designated thereby as Administrator ("designee"), and shall in
no event be exercisable by or rest with Plan participant.
(b) In addition to the general investment powers set forth above in
this Section 5, the following provisions shall apply:
(i.) Investment Guidelines and Directives. The Trustee shall
manage, acquire, or dispose of the assets of the Trust
in accordance with this Agreement and the directions of
the Company or its designee. To the extent permitted by
law, the Trustee shall not be liable for any investment
made pursuant to the Company's or its designee's
direction.
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(ii.) Trustee Powers. The Trustee shall have the following
powers, rights and duties subject to the Section 8 and
the other provisions of this Trust Agreement:
(A) To receive and hold all contributions paid to
it by the Company; provided, however, that the
Trustee shall have no duty to require any
contributions to be made to it;
(B) To effectuate the written investment
instructions given by the Company or its
designee without regard to any law now or
hereafter in force limiting investments of
fiduciaries;
(C) To retain in the Trust for investment, any
property deposited by the Trustee hereunder;
(D) To have the authority to invest and reinvest
assets of the Trust in shares of common or
preferred stock, bonds, notes, debentures,
short-term securities, partnerships, mutual
funds (including any such fund from which the
Trustee or any affiliate thereof receives an
investment management fee or any other fee),
common Trust funds, and other property, real or
personal, of any kind; to purchase and sell
"put" or "call" options on publicly traded
securities; and to acquire, hold, manage,
operate, sell, contract to sell, grant options
with respect to, convey, exchange, transfer,
abandon, lease, manage, and otherwise deal with
respect to assets of the Trust;
(E) To acquire, hold or dispose of insurance or
annuity contracts as directed by the Company or
its designee;
(F) To borrow from anyone such amount or amounts of
money necessary to carry out the purpose of
this Trust and for that purpose to mortgage or
pledge all or any part of the Trust;
(G) To retain in the Trust for investment or
pending distributions, any portion of the Trust
in cash deemed appropriate by the Trustee,
notwithstanding that Trustee or any affiliate
thereof may accrue interest on such amounts;
(H) To establish accounts in any affiliate of the
Trustee and in such other banks and financial
institutions as the Trustee deems appropriate
to carry out the purposes of the Trust;
(I) To deposit securities with a clearing
corporation as defined in Article Eight of the
Uniform Commercial Code; to hold the
certificates representing securities, including
those in bearer form, in bulk form with, and to
merge such certificates into, certificates of
the same class of the same issuer which
constitutes assets of other accounts or owners,
without certification as to the ownership
attached; and to utilize a book-entry system
for the transfer or pledge of securities held
by the Trustee or by a clearing corporation,
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provided that the records of the Trustee shall
indicate the actual ownership of the securities
and other property of the Trust Fund.
(J) To participate in and use the Federal
book-entry Account system, a service provided
by the Federal Reserve Bank for its member
banks for deposit of Treasury securities.
(K) To hold securities or property in the name of
the Trustee or its nominee or nominees or in
such other form as it determines best with or
without disclosing the Trust relationship,
providing the records of the Trust shall
indicate the actual ownership of such
securities or other property.
Section 6. DISPOSITION OF INCOME.
(a) During the Term of this Trust, all income received by the Trust, net
expenses and taxes, shall be accumulated and reinvested.
Section 7. ACCOUNTING BY TRUSTEE.
(a) Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be
made, including such specific records as shall be agreed upon in
writing between Company and Trustee. Within 60 days following the close
of each calendar year and within 60 days after the removal or
resignation of Trustee, Trustee shall deliver to Company a written
account of its administration of the Trust during such year or during
the period from the close of the last preceding year to the date of
such removal or resignation, setting forth all investments, receipts,
disbursements and other transactions effected by it, including a
description of all securities and investments purchased and sold with
the cost or net proceeds of such purchases or sales (accrued interest
paid or receivable being shown separately), and showing all cash,
securities and other property held in the Trust at the end of such year
or as of the date of such removal or resignation, as the case may be.
Section 8. RESPONSIBILITY OF TRUSTEE.
(a) Trustee shall act with the care, skill, prudence and diligence under
the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided however,
that Trustee shall incur no liability to any person for any action
taken pursuant to a direction, request or approval given by Company
which is contemplated by, and in conformity with, the terms of the Plan
or this Trust and is given in writing (or any other mutually acceptable
form) by Company. In the event of a dispute between Company and a
party, Trustee may apply to a court of competent jurisdiction to
resolve the dispute.
(b) If Trustee undertakes or defends any litigation arising in connection
with this Trust, Company agrees to indemnify Trustee against Trustee's
costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily
liable for such payments. If Company does not pay such costs, expenses
and liabilities in a reasonable timely manner, Trustee may obtain
payment from the Trust.
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(c) Trustee may consult with legal counsel (who may also be counsel for
Company generally) with respect to any of its duties or obligations
hereunder.
(d) Trustee 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) Trustee shall have, without exclusion, all powers conferred on trustees
by applicable law, unless expressly provided otherwise herein, provided
however, that if an insurance policy is held as an asset of the Trust,
Trustee shall have no power to name a beneficiary of the policy other
than the Trust, to assign the policy (as distinct from conversion of
the policy to a different form) other than to a successor Trustee, or
to loan to any person the proceeds of any borrowing against such
policy.
(f) However, notwithstanding the provisions of Section 8(e) above, Trustee
may loan to Company the proceeds of any borrowing against an insurance
policy held as an asset of the Trust.
(g) Notwithstanding any powers granted to Trustee pursuant to this Trust
Agreement or to applicable law, Trustee shall not have any power that
could give this Trust the objective of carrying on a business and
dividing the gains therefrom, within the meaning of section 301.7701-2
of the Procedures and Administrative Regulations promulgated pursuant
to the Internal Revenue Code.
Section 9. COMPENSATION AND EXPENSES OF TRUSTEE.
(a) Company shall pay all administrative and Trustee's fees and expenses.
If not so paid, the fees and expenses shall be paid from the Trust.
Section 10. RESIGNATION AND REMOVAL OF TRUSTEE.
(a) Trustee may resign at any time by written notice to Company, which
shall be effective 60 days after receipt of such notice unless Company
and Trustee agree otherwise.
(b) Trustee may be removed by Company on 60 days notice or upon shorter
notice accepted by Trustee.
(c) Upon resignation or removal of Trustee and appointment of a successor
Trustee, all assets shall subsequently be transferred to the successor
Trustee. The transfer shall be completed within 60 days after receipt
of notice of resignation, removal or transfer, unless Company extends
the time limit.
(d) If Trustee resigns or is removed, a successor shall be appointed, in
accordance with Section 11 hereof, by the effective date or resignation
or removal under paragraphs (a) or (b) of this section. If no such
appointment has been made, Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions. All
expenses of Trustee in connection with the proceeding shall be allowed
as administrative expenses of the Trust.
Section 11. APPOINTMENT OF SUCCESSOR
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(a) If Trustee resigns or is removed in accordance with Section 10(a) or
(b) hereof, 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 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 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 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
Trustee and Company. Notwithstanding the foregoing, no such amendment
shall conflict with the terms of the Plan or shall make the Trust
revocable after it has become irrevocable in accordance with Section
1(b) hereof.
(b) The Trust shall not terminate until the date on which Plan participants
and their beneficiaries are no longer entitled to benefits pursuant to
the terms of the Plan. Upon termination of the Trust, any assets
remaining in the Trust shall be returned to Company.
(c) Upon written approval of participants or beneficiaries entitled to
payment of benefits pursuant to the terms of the Plan, Company may
terminate this Trust prior to the time all benefits payments under the
Plan have been made. All assets in the Trust at termination shall be
returned to 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 Plan participants 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 governed by and construed in accordance
with the laws of the State of Minnesota.
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Section 14. EFFECTIVE DATE.
The effective date of this Trust Agreement shall be October 11, 2004.
IN WITNESS WHEREOF, the Company and Trustee have caused this Agreement to
be duly executed on the date indicated below first above written.
ALLETE, INC.
By: /s/ Randal D. Carter
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Title: Manager, Executive Compensation and Employee Benefits
----------------------------
Attest: /s/ Cindy Lundgren
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Title: Executive Secretary
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MARSHALL & ILSLEY TRUST COMPANY N.A.
By: /s/ Michael C. Wieber
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Title: V.P.
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Attest: /s/ Scott D. Siebert
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Title: A.V.P.
----------------------------
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