Exhibit 10.10
PHILLIPS PETROLEUM COMPANY
GRANTOR TRUST AGREEMENT
This Grantor Trust Agreement (the "Trust Agreement") is made as of this 1st day
of June, 1998 by and between PHILLIPS PETROLEUM COMPANY ("the Company") and
WACHOVIA BANK, N.A. ("the Trustee").
RECITALS
(a) WHEREAS, the Company has adopted the nonqualified deferred
compensation Plans and Agreements (the "Arrangements") as listed in
Attachment 1;
(b) WHEREAS, the Company has incurred or expects to incur liability under
the terms of such Arrangements with respect to the individuals
participating in such Arrangements (the "Participants and
Beneficiaries");
(c) WHEREAS, The Chase Manhattan Bank, N.A. ("Chase") currently serves as
trustee for the Arrangements;
(d) WHEREAS, the Company has determined that Chase shall no longer serve as
trustee for the Arrangements and that Wachovia Bank, N.A. shall serve
as successor trustee for the Arrangements effective as of June 1, 1998;
(e) WHEREAS, the Trustee wishes to serve as trustee for the Arrangements;
(f) WHEREAS, the Company and the Trustee deem it necessary and desirable to
enter into this written agreement of Trust for the Arrangements (the
"Trust Agreement") to amend and restate the terms and conditions of the
Trust for the Arrangements (the "Trust");
(g) WHEREAS, the Trust has been and is intended to be a "grantor trust"
with the corpus and income of the Trust treated as assets and income of
the Company for federal income tax purposes pursuant to Sections 671
through 679 of the Internal Revenue Code of 1986, as amended;
(h) WHEREAS, the Company desires that the terms of the Trust continue to
permit the particular identification of portions of the funds deposited
in trust to particular Arrangements and to permit the Trustee to
receive and act upon specific directions from the Company and others
with respect to the investment and reinvestment of such particularly
identified portions of the funds prior to a Change of Control;
(i) WHEREAS, subject to the claims of the creditors of the Company or its
Participating Subsidiaries, as defined herein, in the event of the
Insolvency (as herein defined) of the Company or its Participating
Subsidiaries, the Company hereby contributes to the Trust assets that
should be held therein until paid to Participants and their
Beneficiaries in such manner and at such times as specified in the
Arrangements and in this Trust Agreement;
(j) WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of
the Arrangements as an unfunded plan maintained for the purpose of
providing deferred compensation for a select group of management or
highly compensated employees for purposes of Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"); and
(k) WHEREAS, it is the intention of the Company to make contributions to
the Trust to provide itself with a source of funds (the "Fund") to
assist it in satisfying its liabilities under the Arrangements.
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 THE TRUST
(a) The Trust is intended to be a Grantor Trust, of which the Company is
the Grantor, within the meaning of subpart E, part 1, subchapter J,
chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended,
and shall be construed accordingly.
(b) The Company shall be considered a Grantor for the purposes of the
Trust.
(c) Subject to Section 5(b), the Trust hereby established is irrevocable by
the Company.
(d) The Company hereby agrees that the assets held in the Trust by Chase
for the Arrangements shall be transferred to the Trustee in the Trust
and shall become the principal of the Trust to be held, administered
and disposed of by the Trustee as provided in this Trust Agreement.
(e) 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 Participants and general
creditors as herein set forth. 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 Arrangements
and this Trust Agreement shall be unsecured contractual rights of
Participants and their Beneficiaries against the Company. Any assets
held by the Trust will be subject to the claims of the general
creditors of the Company under federal and state law in the event the
Company is Insolvent, as defined in Section 3(a) herein.
(f) The Company, in its sole discretion, may at any time, or from time to
time, make additional deposits of cash or other property acceptable to
the Trustee in the Trust to augment the principal to be held,
administered and disposed of by the Trustee as provided in this Trust
Agreement. Prior to a Change of Control, neither the Trustee nor any
Participant or Beneficiary shall have any right to compel additional
deposits.
(g) Upon a Change of Control, the Company shall, as soon as possible, but
in no event longer than thirty (30) days following the occurrence of a
Change of Control, as defined herein, make an irrevocable contribution
to the Trust in an amount that is sufficient to fund the Trust in an
amount equal to no less than one-hundred percent (100%) but no more
than
one-hundred and twenty (120%) of the Required Funding Amount, together
with the amount of the Expense Account as established by the Trustee
pursuant to Section 1(h). The determination of such Required Funding
Amount and the Expense Account to be contributed after a Change of
Control shall be determined by the Trustee in the same manner as the
determination of such amount required under paragraph (f) of this
Section 1, and such amounts shall be communicated to the Company by the
Trustee in writing
(h) The Trustee may from time to time earmark funds in the Fund to be held
in an Expense Account and used to pay the Trustee's fees and Trust
expenses, provided that the aggregate of all amounts credited to the
Expense Account prior to a Change of Control shall not be more than
$250,000, and after a Change of Control shall not be less than $250,000
nor more than two percent (2%) of the value of the Fund. To the extent
that there is a balance in the Expense Account, the Trustee shall
utilize such Expense Account for payment of its fees and expenses, and
in the absence of such a balance, the Trustee shall seek payment from
the Company. In the event that the Company shall fail or refuse to make
such payment within sixty (60) days of demand, the Trustee may satisfy
such obligations out of the assets of the Trust. If after a Change of
Control the Trustee satisfies obligations out of the assets of the
Trust, the Company shall immediately upon demand by the Trustee deposit
into the Trust Fund a sum equal to the amount demanded by the Trustee
to reimburse the Fund for such expenses. If such funds are not
deposited with sixty (60) days of such demand, the Trustee may, in its
discretion, commence legal action against the Company for recovery of
the amount paid out of the Trust and demanded by the Trustee.
(i) In its discretion, the Trustee may institute an action to collect a
contribution due the Trust following a Change of Control or in the
event that the Trust should ever experience a short-fall in the amount
of assets necessary to make payments pursuant to the terms of the
Arrangements, or if the Company should ever fail to contribute the
amounts requested by the Trustee pursuant to Sections I (f) or I (g).
SECTION 2. PAYMENTS TO PARTICIPANTS AND THEIR BENEFICIARIES
(a) Prior to a Change of Control, distributions from the Trust shall be
made by the Trustee to Participants and Beneficiaries at the direction
of the Company except as may otherwise be provided by this Trust. The
entitlement of a Participant or his or her Beneficiaries to benefits
under the Arrangements shall be determined by the Company or such party
or professional administrator as it shall designate under the
Arrangements as the Company's agent, and any claim for such benefits
shall be considered and reviewed under the procedures set out in the
Arrangements except as may otherwise be provided by this Trust.
(b) Notwithstanding Section 2(a), a Participant or Beneficiary who believes
that he is entitled to a distribution pursuant to one or more of the
Arrangements may make application to the Trustee for an independent
determination by the Trustee concerning his entitlement after he has
exhausted his administrative remedies under the Arrangement at issue.
In making its independent determination, the Trustee may consider
information provided it
by the Participant or Beneficiary or the Company. The Trustee shall, in
such case, reach its own independent determination as to the
Participant's or Beneficiary's entitlement to such benefits under the
Arrangement, even if the Trustee has been informed by the Company that
the individual is not entitled to the benefit. Such determination shall
be made within sixty (60) days of the Trustee's receipt of the
Participant's or Beneficiary's application for determination. If the
Trustee so desires, it may, in its sole discretion, make additional
inquiries and take such additional measures as it deems necessary in
order to enable it to determine whether such benefits claimed are due
and payable, including but not limited to, interviewing or requesting
affidavits from appropriate persons. The Trustee may engage an actuary,
independent of the Company, to assist it in determining whether
benefits are due and payable. In addition, the Trustee may engage its
own counsel or other experts it deems necessary. The cost of such
actuary, counsel, and other expert, and any other costs reasonably
incurred by the Trustee in making its determination shall be borne by
the Company. If the Company fails to pay any such costs when due, the
Trustee may use the assets of the Trust Fund to pay them as provided in
Section I(h). The determination of the Trustee shall be final and
binding on all parties. Upon determining that an individual is entitled
to receive payment of a benefit, the Trustee shall notify such
individual and the Company of the amount payable and the data upon
which such determination is based. The Company waives any right to
contest any amount paid over by the Trustee hereunder pursuant to a
good faith determination made by the Trustee notwithstanding any claim
by or on behalf of the Company (absent a manifest abuse of discretion
by the Trustee) that such payments should not be made.
(c) The Company may make payment of benefits directly to Participants or
their Beneficiaries as they become due under the terms of the
Arrangements. The Company shall notify the Trustee of its decision to
make payment of benefits directly to Participants or their
Beneficiaries prior to the time amounts are payable to such
individuals. The Trustee may reimburse the Company for such payments
upon presentation of proof satisfactory to the Trustee, in its
discretion, that such payments have in fact been made. In the event the
Company makes such payments directly, the Company may request the
Trustee within thirty (30) days of the making of the payment to
reimburse the Company for such payment from the Trust, and upon receipt
of evidence satisfactory to the Trustee that such payment has been
made, the Trustee shall pay such reimbursement to the Company. 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 Arrangements, the Company shall make the balance of each
such payment as it falls due in accordance with the Arrangements. The
Trustee shall notify the Company where principal and earnings are not
sufficient. Nothing in this Agreement shall relieve the Company of its
liabilities to pay benefits due under the Arrangements except to the
extent such liabilities are met by application of assets of the Trust.
(d) The Company shall provide the Trustee with a copy of each Arrangement
and shall provide the Trustee with a copy of any amendment to any
Arrangement within thirty (30) days of the adoption of the amendment.
The Trustee shall be entitled to rely on the terms of each Arrangement
as in effect prior to its amendment until the Trustee receives a copy
of such amendment.
(e) On or before each Funding Date, the Company shall deliver to the
Trustee a schedule of benefits due under the Arrangements. Such
information shall, for defined benefit obligations, consist of
information of the same type as is furnished by the Company to the
actuary for its tax qualified defined benefit plan for those
Participants actively employed, recognizing that individual benefit
amounts cannot be finalized until commencement of benefits and
application of certain federal tax limitations to the Participant's
qualified plan benefits. Such information for individual deferred
compensation account balances and defined contribution obligations
shall consist of such information as determined by the third party
recordkeeper. The Company agrees to cooperate at all times with the
Trustee to furnish updated data as is necessary to determine final
benefits due to each Participant and Beneficiary. Subsequent to a
Change of Control, the Trustee shall pay benefits due in accordance
with such schedule. After a Change of Control, the Company shall
continue to make the determination of benefits due to Participants or
their Beneficiaries and shall provide the Trustee with an updated
schedule of benefits due; provided however, a Participant or their
Beneficiaries may make application to the Trustee for an independent
decision as to the amount or form of their benefits due under the
Arrangements as provided by Section 2(b).
(f) The Trustee agrees that it will not itself institute any action at law
or at equity, whether in the nature of an accounting, interpleading
action, request for a declaratory judgment or otherwise, requesting a
court or administrative or quasi-judicial body to make the
determination required to be made by the Trustee under this Section 2
in the place and stead of the Trustee.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO THE TRUST BENEFICIARY
WHEN THE COMPANY IS INSOLVENT
(a) The Trustee shall cease payment of benefits to Participants and their
Beneficiaries if the Company is Insolvent. The Company shall be
considered "Insolvent" for purposes 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 proceeding as a debtor under the United
States Bankruptcy Code.
(b) At all times during the continuance of this Trust, 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
that the Company is 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 Participants or their Beneficiaries.
(2) Unless the Trustee has actual knowledge that the Company is
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
Participants or their Beneficiaries and shall hold the assets
of the Trust for the benefit of the Company's general
creditors. Nothing in this Trust Agreement shall in any way
diminish any rights of Participants or their Beneficiaries to
pursue their rights as general creditors of the Company with
respect to benefits due under the Arrangements or otherwise.
(4) The Trustee shall resume the payment of benefits to
Participants 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 Participants or their Beneficiaries under the terms of the
Arrangements for the period of such discontinuance, less the aggregate
amount of any payments made to Participants or their Beneficiaries by
the Company in lieu of the payments provided for hereunder during any
such period of discontinuance.
(d) For purposes of this Section 3, Company shall include its Participating
Subsidiaries, where "Participating Subsidiary" is defined as a
subsidiary of the Company, of which the Company beneficially owns,
directly or indirectly, more than 50% of the aggregate voting power of
all outstanding classes and series of stock, where such subsidiary has
adopted one or more of the Arrangements and has employed one or more
Participants.
SECTION 4. PAYMENTS WHEN A SHORT-FALL OF THE TRUST ASSETS OCCURS
(a) If there are not sufficient assets for the payment of benefits pursuant
to Section 2 or Section 3(c) hereof and the Company does not otherwise
make such payments within a reasonable time after demand from the
Trustee, the Trustee shall make payment of benefits from the Trust to
the Participants or their Beneficiaries as payments become due to those
individuals. If at any time the assets of the Trust are insufficient to
pay all Participants and Beneficiaries to whom a payment is then owed,
such payments shall be reduced pro rata based on the amounts then due
and payable.
(b) Upon receipt of a contribution from the Company necessary to make up
for a shortfall in the payments due, the Trustee shall resume payments
to all the Participants and Beneficiaries under the Arrangements. The
Trustee shall have the night to compel a contribution to the Trust from
the Company to make-up for any shortfall at any time.
SECTION 5. PAYMENTS TO THE COMPANY
(a) Except as provided in Sections 2(c), 3, 5(b) and 8(a), 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
payment of benefits have been made to Participants and their
Beneficiaries pursuant to the terms of the Arrangements.
(b) If this Trust is determined to not constitute: (i) a grantor trust as
set forth in paragraph (g) of the Recitals, or (ii) an unfunded
arrangement under ERISA as set forth in paragraph (j) of the Recitals,
by a federal court and appeals from that holding are no longer timely
or have been exhausted, this Trust shall terminate. The Board of
Directors of the Company may also terminate this Trust if it
determines, based upon an opinion of legal counsel which is
satisfactory to the Trustee, that either (i) judicial authority or the
opinion of the U.S. Department of Labor, Treasury Department or
Internal Revenue Service (as expressed in proposed or final
regulations, advisory opinions or rulings, or similar administrative
announcements) creates a significant risk that the Trust will be
funding for a pension benefit plan within the meaning of ERISA ("ERISA
Funding") or the Internal Revenue Code ("Tax Funding"), or (ii) ERISA
or the Internal Revenue Code requires the Trust to be amended in a way
that creates a significant risk that the Trust will be held to be ERISA
Funding or Tax Funding, and failure to so amend the Trust could subject
the Company to significant penalties. Upon any such termination, the
assets of the terminated Trust remaining after payment of the Trustee's
fees and expenses shall be distributed, in accordance with the written
directions of the Company, as follows:
(1) Prior to a Change of Control, such assets of the Trust shall
be transferred to a new trust established by the Company which
is not deemed to be ERISA Funding or Tax Funding, but which is
substantially similar in all other respects to this Trust, as
determined by the Trustee in its sole discretion, if the
Company determines that it is possible to establish such a
trust;
(2) Following a Change of Control or if the Company determines
that it is not possible or practical to establish the trust
pursuant to (1) above, then upon the written consent of a
seventy-five percent (75%) majority of the Participants and
Beneficiaries, the assets of the Trust may be distributed to
the Company; or
(3) If the Company determines that it is not possible or practical
to establish the trust pursuant to (1) above and the Company
either (i) fails to receive the consent of a seventy-five
percent (75%) majority of the Participants and Beneficiaries
within thirty (30) days of such termination, or (ii) upon the
direction of the Company, then the assets shall be distributed
to Participants and Beneficiaries, as the case may be, pro
rata based on the then present value of the benefits to which
they would have otherwise been entitled; provided, however
that in the event any portion of the Trust Fund Was been
identified with a particular Arrangement, the portion of the
Fund so identified with that Arrangement shall be first so
distributed to provide benefits of that Arrangement, and the
excess, if any, shall be so distributed pro rata to the extent
necessary to provide benefits of other
Arrangements. If a surplus remains in the Trust after such
distributions, it shall be returned to the Company.
SECTION 6. INVESTMENT AUTHORITY
(a) The Trustee shall not be liable in discharging its duties hereunder,
including without limitation its duty to invest and reinvest the Fund,
if it acts for the exclusive benefit of the Participants and their
Beneficiaries, in good faith and as a prudent person would act in
accomplishing a similar task and in accordance with the terms of this
Trust Agreement and any applicable federal or state laws, rules or
regulations.
(b) Subject to investment guidelines agreed to in writing from time to time
by the Company and the Trustee prior to a Change of Control, the
Trustee shall have the power in investing and reinvesting the Fund in
its sole discretion:
(1) To invest and reinvest in any readily marketable common and
preferred stocks, bonds, notes, debentures (including
convertible stocks and securities but not including any stock
or security of Phillips Petroleum Company other than a de
minimus amount held in a collective or mutual fund),
certificates of deposit or demand or time deposits (including
any such deposits with the Trustee) and shares of investment
companies and mutual funds, without being limited to the
classes or property in which the Trustees are authorized to
invest by any law or any rule of court of any state and
without regard to the proportion any such property may bear to
the entire amount of the Fund;
(2) To commingle for investment purposes all or any portion of the
Fund with assets of any other similar trust or trusts
established by the Company with the Trustee for the purpose of
safeguarding deferred compensation or retirement income
benefits of its employees;
(3) To retain any property at any time received by the Trustee;
(4) To sell or exchange any property held by it at public or
private sale, for cash or on credit, to grant and exercise
options for the purchase or exchange thereof, to exercise all
conversion or subscription rights pertaining to any such
property and to enter into any covenant or agreement to
purchase any property in the future;
(5) To participate in any plan of reorganization, consolidation,
merger, combination, liquidation or other similar plan
relating to property held by it and to consent to or oppose
any such plan or any action thereunder or any contract, lease,
mortgage, purchase, sale or other action by any person;
(6) To deposit any property held by it with any protective,
reorganization or similar committee, to delegate discretionary
power thereto, and to pay part of the expenses and
compensation thereof any assessments levied with respect to
any such property to deposit;
(7) To extend the time of payment of any obligation held by it;
(8) To hold uninvested any moneys received by it, without
liability for interest thereon, but only in anticipation of
payments due for investments, reinvestments, expenses or
disbursements;
(9) To exercise all voting or other rights with respect to any
property held by it and to grant proxies, discretionary or
otherwise, which shall be at the direction of the Financial
Administrator prior to a Change of Control;
(10) For the purposes of the Trust, to borrow money from others, to
issue its promissory note or notes therefor, and to secure the
repayment thereof by pledging any property held by it;
(11) To employ suitable contractors and counsel, who may be counsel
to the Company or to the Trustee, and to pay their reasonable
expenses and compensation from the Fund to the extent not paid
by the Company;
(12) To register investments in its own name or in the name of a
nominee; to hold any investment in bearer form; and to combine
certificates representing securities with certificates of the
same issue held by it in other fiduciary capacities or to
deposit or to arrange for the deposit of such securities with
any depository, even though, when so deposited, such
securities may be held in the name of the nominee of such
depository with other securities deposited therewith by other
persons, or to deposit or to arrange for the deposit of any
securities issued or guaranteed by the United States
government, or any agency or instrumentality thereof,
including securities evidenced by book entries rather than by
certificates, with the United States Department of the
Treasury or a Federal Reserve Bank, even though, when so
deposited, such securities may not be held separate from
securities deposited therein by other persons; provided,
however, that no securities held in the Fund shall be
deposited with the United States Department of the Treasury or
a Federal Reserve Bank or other depository in the same account
as any individual property of the Trustee, and provided,
further, that the books and records of the Trustee shall at
all times show that all such securities are part of the Trust
Fund;
(13) To settle, compromise or submit to arbitration any claims,
debts or damages due or owing to or from the Trust,
respectively, to commence or defend suits or legal proceedings
to protect any interest of the Trust, and to represent the
Trust in all suits or legal proceedings in any court or before
any other body or tribunal; provided, however, that the
Trustee shall not be required to take any such action unless
it shall have been indemnified by the Company to its
reasonable satisfaction against liability or expenses it might
incur therefrom;
(14) To hold and retain policies of life insurance or interests
therein, annuity contracts, and other property of any kind
which policies are contributed to the Trust by the Company or
any subsidiary of the Company or are purchased by the Trustee;
(15) To hold any other class of assets which may be contributed by
the Company and that is deemed reasonable by the Trustee,
unless expressly prohibited herein;
(16) Generally, to do all acts, whether or not expressly
authorized, that the Trustee may deem necessary or desirable
for the protection of the Fund.
(c) Prior to a Change of Control, the Company shall have the right, subject
to this Section to direct the Trustee with respect to investments,
including the right to identify portions of the funds in Trust to
particular Arrangements.
(1) The Company may at any time direct the Trustee to segregate
all or a portion of the Fund in a separate investment account
or accounts and may appoint one or more investment managers
and/or an investment committee established by the Company to
direct the investment and reinvestment of each such investment
account or accounts. In such event, the Company shall notify
the Trustee of the appointment of each such investment manager
and/or investment committee. No such investment manager shall
be related, directly or indirectly, to the Company, but
members of the investment committee may be employees of the
Company.
(2) Thereafter, the Trustee shall make every sale or investment
with respect to such investment account as directed in writing
by the investment manager or investment committee. It shall be
the duty of the Trustee to act strictly in accordance with
each direction. The Trustee shall be under no duty to question
any such direction of the investment manager or investment
committee, to review any securities or other property held in
such investment account or accounts acquired by it pursuant to
such directions or to make any recommendations to the
investment managers or investment committee with respect to
such securities or other property.
(3) Prior to a Change of Control, the Company may particularly
identify a portion of the Trust Fund with a particular
Arrangement, and the portion thus identified shall prior to a
Change of Control be invested as instructed by the Company and
shall be restricted in application to provide benefits or to
reimburse the Company pursuant to Section 2(c) for benefits
paid under such Arrangement as to which the particularly
identified portion has been identified.
(4) Notwithstanding the foregoing, the Trustee, without obtaining
prior approval or direction from an investment manager or
investment committee, shall invest cash balances held by it
from time to time in short term cash equivalents including,
but not limited to, through the medium of any short term
mutual fund established and maintained by the Trustee subject
to the instrument establishing such trust fund, U.S. Treasury
Bills, commercial paper (including such forms of commercial
paper as may be available through the Trustee's Trust
Department), certificates of deposit (including certificates
issued by the Trustee in its separate corporate capacity), and
similar Type securities, with a maturity not to exceed one
year; and, furthermore, sell such short term investments as
may be necessary to carry out the instructions of an
investment manager or investment committee regarding more
permanent type investment and directed distributions.
(5) The Trustee shall neither be liable nor responsible for any
loss resulting to the Fund by reason of any sale or purchase
of an investment directed by an investment manager or
investment committee nor by reason of the failure to take any
action with respect to any investment which was acquired
pursuant to any such direction in the absence of further
directions of such investment manager or investment committee.
(6) Notwithstanding anything in this Agreement to the contrary,
the Trustee shall be indemnified and saved harmless by the
Company from and against any and all personal liability to
which the Trustee may be subjected by carrying out any
directions of an investment manager or investment committee
issued pursuant hereto or for failure to act in the absence of
directions of the 'investment manager or investment committee
including, all expenses reasonably incurred in its defense in
the event the Company fails to provide such defense; provided,
however, the Trustee shall not be so indemnified if it
participates knowingly in, or knowingly undertakes to conceal,
an act or omission of an investment manager or investment
committee, having actual knowledge that such act or omission
is a breach of a fiduciary duty; provided further, however,
that the Trustee shall not be deemed to have knowingly
participated in or knowingly undertaken to conceal an act or
omission of an investment manager or investment committee with
knowledge that such act or omission was a breach of fiduciary
duty by merely complying with directions of an investment
manager or investment committee or for failure to act in the
absence of directions of an investment manager or investment
committee. The Trustee may rely upon any order, certificate,
notice, direction or other documentary confirmation purporting
to have been issued by the investment manager or investment
committee which the Trustee believes to be genuine and to have
been issued by the investment manager or investment committee.
The Trustee shall not be charged with knowledge of the
termination of the appointment of any investment manager or
investment committee until it receives written notice thereof
from the Company.
(d) Following a Change of Control, the Trustee shall have the sole and
absolute discretion in the management of the Trust assets and shall
have all the powers set forth under Section 6(b). In investing the
Trust assets, the Trustee shall consider:
(1) the needs of the Arrangements;
(2) the need for matching of the Trust assets with the liabilities
of the Arrangements; and
(3) the duty of the Trustee to act solely in the best interests of
the Participants and their Beneficiaries.
(e) The Trustee shall have the right, in its sole discretion, to delegate
its investment responsibility to an investment manager who may be an
affiliate of the Trustee. In the event the Trustee shall exercise this
right, the Trustee shall remain, at all times responsible for the acts
of an investment manager.
(f) The Company shall have the right at any time, 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 the
Company in a nonfiduciary capacity without the approval or consent of
any person in a fiduciary capacity; provided, however, that such assets
and asset values must be confirmed and agreed by the Trustee prior to
any such substitution as provided by this Section 6(g).
(g) Except for insurance contracts, the value of any assets reacquired
under Section 6(f) shall be determined as provided in this paragraph.
The value of any insurance contract reacquired under Section 6(f) shall
be the present value of future projected cash flow or benefits payable
under the Contract, but not less than the cash surrender value. The
projection shall include death benefits based on reasonable mortality
assumptions. including known facts specifically relating to the health
of the insured and the terms of the Contract to be reacquired. Values
shall be reasonably determined by the Trustee and may be based on the
determination of agents or experts selected by the Trustee. The Trustee
shall have the right, but shall be under no duty or obligation, to
secure confirmation of value by an agent or expert for all property to
be substituted for other property.
SECTION 7. INSURANCE CONTRACTS
(a) To the extent that the Trustee is directed by the Company prior to a
Change of Control to invest part or all of the Trust Fund in insurance
contracts, the type and amount thereof shall be specified by the
Company. The Trustee shall be under no duty to make inquiry as to the
propriety of the type or amount so specified.
(b) Each insurance contract issued shall provide that the Trustee shall be
the owner thereof with the power to exercise all rights, privileges,
options and elections granted by or permitted under such contract or
under the rules of the insurer. The exercise by the Trustee of any
incidents of ownership under any contract shall, prior to a Change of
Control, be subject to the direction of the Company. After a Change of
Control, the Trustee shall have all such rights.
(c) The 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 an
insurance policy held in the Trust Fund.
No insurer shall be deemed to be a party to the Trust and an insurer's
obligations shall be measured and determined solely by the terms of
contracts and other agreements executed by the insurer.
SECTION 8. DISPOSITION OF INCOME
(a) Subject to Sections 2(c) and 3, no income received by the Trust may be
returned to the Company, but shall be accumulated and reinvested within
the Trust, except for that portion of the assets of the Trust which is
determined by the Trustee to be in excess of one-hundred and twenty
percent (120%) of the Required Funding Amount. Following a
Change of Control, any return of assets pursuant to this Section 8, and
subject to Sections 2(c) and 3, shall be limited to that portion of the
assets which exceeds 120% of the sum of the Required Funding Amount and
the Expense Fund as determined by the Trustee in its discretion.
SECTION 9. ACCOUNTING BY THE TRUSTEE
(a) The 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 the Company and the Trustee and shall deliver
an accounting of such accounts and transactions to the Company within
forty-five (45) days following the close of each calendar year and
within forty-five (45) days after the removal or resignation of the
Trustee. The Trustee shall deliver to the Company reports of its
receipts and disbursements a Trustee hereunder on a quarterly basis.
The Trustee shall deliver to the 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. The
Company may approve such account by an instrument in writing delivered
to the Trustee. In the absence of the Company's filing with the Trustee
objections to any such account within ninety (90) days after its
receipt, the Company shall be deemed to have so approved such account.
In such case, or upon the written approval by the Company of any such
account, the Trustee shall, to the extent permitted by law, be
discharged from all liability to the Company for its acts or failures
to act described by such account. The foregoing, however, shall not
preclude the Trustee from having its accounting settled by a court of
competent jurisdiction. The Trustee shall be entitled to hold and to
commingle the assets of the Trust in one Fund for investment purposes
but at the direction of the Company prior to a Change of Control, the
Trustee shall create one or more sub-accounts.
(b) The Trustee shall from time to time permit public accountant(s)
selected by the Company (who may be employees of the Company) to have
access during ordinary business hours to such records as may be
necessary to audit the Trustee's accounts.
SECTION 10. RESPONSIBILITY OF THE 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 which is contemplated by, and in conformity with, the terms
of the Arrangements or this Trust and is given in writing by the
Company. 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, subject, however to Section 2(e) hereof.
(b) The Company hereby indemnifies the Trustee against losses, liabilities,
claims, costs and expenses in connection with the administration of the
Trust, unless resulting from the gross negligence or misconduct of
Trustee. To the extent the Company fails to make any payment on account
of an indemnity provided in this paragraph 10(b), in a reasonably
timely manner, the Trustee may obtain payment from the Trust Fund. If
the Trustee undertakes or defends any litigation arising in connection
with this Trust or to protect a Participant's or Beneficiary's rights
under the Arrangements, the Company agrees to indemnify the Trustee
against the Trustee's costs, reasonable expenses and liabilities
(including, without limitation, attorneys' 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 Fund.
(c) Prior to a Change of Control, 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. Following a
Change of Control, the Trustee shall select independent legal counsel
and may consult with counsel or other persons with respect to its
duties and with respect to the rights of Participants or their
Beneficiaries under the Arrangements.
(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 and may rely on
any determinations made by such agents and information provided to it
by the Company.
(e) The Trustee shall have, without exclusion, all powers conferred on the
Trustee by applicable law, unless expressly provided otherwise herein.
(f) Notwithstanding any powers 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.
SECTION 11. TAXES, COMPENSATION AND EXPENSES OF THE TRUSTEE
(a) The Company shall from time to time pay taxes of any and all kinds
whatsoever that at any time are lawfully levied or assessed upon the
Company or become payable by the Company in respect of the Trust Fund,
the income or any property forming a part thereof, or any security
transaction pertaining thereto. All references in this Trust Agreement
to the payment of taxes shall include interest and applicable
penalties. The Trustee shall comply with all Federal and State tax
filing requirements of the Trust and shall furnish to the Company for
its review and comment a draft copy of Form 1041 (U.S. Fiduciary Income
Tax Return) or any other tax filings for the Trust together with
supporting schedules a minimum of two weeks prior to the tax return
filing due date. To enable the
Company to make monthly tax accrual and to compute its estimated income
tax obligations, the Trustee will furnish, on or prior to the eighth
business day of the succeeding month, a monthly report identifying the
type and amount of income by source of investment (interest, dividends,
etc.).
(b) The Trustee's compensation shall be as agreed in writing from time to
time by the Company and the Trustee. The Company shall pay all
administrative expenses and the Trustee's fees and shall promptly
reimburse the Trustee for any fees and expenses of its agents. If not
so paid, the fees and expenses shall be paid from the Trust.
SECTION 12. RESIGNATION AND REMOVAL OF THE TRUSTEE
(a) Prior to a Change of Control, the Trustee may resign at any time by
written notice to the Company, which shall be effective sixty (60) days
after receipt of such notice unless the Company and the Trustee agree
otherwise. Following a Change of Control, the Trustee may resign only
after the appointment of a successor Trustee.
(b) The Trustee may be removed by the Company on sixty days (60) days
notice or upon shorter notice accepted by the Trustee prior to a Change
of Control. Subsequent to a Change of Control, the Trustee may only be
removed by the Company with the written consent of a seventy-five
percent (75%) majority of the Participants and Beneficiaries.
(c) If the Trustee resigns within two years after a Change of Control, as
defined herein, the Company, or if the Company fails to act within a
reasonable period of time following such resignation, the Trustee shall
apply to a court of competent jurisdiction for the appointment of a
successor Trustee or for instructions.
(d) 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 completed within sixty (60)
days after receipt of notice of resignation, removal or transfer,
unless the Company extends the time limit.
(e) If the Trustee resigns or is removed, a successor shall be appointed by
the Company, in accordance with Section 13 hereof, by the effective
date of resignation or removal under paragraph(s) (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 13. APPOINTMENT OF SUCCESSOR
(a) If the Trustee resigns or is removed in accordance with Section 12
hereof, the Company may appoint, subject to Section 12, any third party
national banking association with a market capitalization exceeding
$100,000,000 to replace the Trustee upon resignation or removal. The
successor Trustee shall have all of the rights and powers of the former
Trustee, including ownership rights in the Trust. 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 Section 8 and 9 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 14. AMENDMENT OR TERMINATION
(a) This Trust Agreement may be amended by a written instrument executed by
the Trustee and the Company. Prior to a Change of Control, the Company
may amend Attachment I to add new Arrangements or to delete
Arrangements which have been paid in full, and at any time and from
time to time may amend Attachment II, the list of individuals
authorized to act on behalf of the Company. Notwithstanding the
foregoing, no such amendment shall conflict with the terms of the
Arrangements or shall make the Trust revocable other than is provided
in Section 5(b).
(b) The Trust shall not terminate until the date on which Participants and
their Beneficiaries have received all of the benefits due to them under
the terms and conditions of the Arrangements.
(c) Upon written approval of a 75% of the majority of the Participants or
Beneficiaries entitled to payment of benefits pursuant to the terms of
the Arrangements, the Company may terminate this Trust prior to the
time all benefit payments under the Arrangements have been made. All
assets in the Trust at termination shall be returned to the Company.
(d) This Trust Agreement may not be amended or terminated by the Company
for two (2) years following a Change of Control without the written
consent of a seventy-five percent (75%) majority of the Participants
and Beneficiaries, and no such amendment shall adversely affect any
benefits of a Participant or Beneficiary without the written consent of
the affected person.
SECTION 15. DEFINITIONS OF A CHANGE OF CONTROL
(a) Change of Control shall mean:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 as amended (a "Person")) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under
the Securities Exchange Act of 1934) of twenty percent (20%)
or more of either (a) the then outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock")
or (b) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this
subsection (i), the following acquisitions shall not
constitute a Change of Control: (A) any acquisition directly
from the Company, (B) any acquisition by the Company, (C) any
acquisition by any employee benefit plan (or related trust)
sponsored or
maintained by the Company or any corporation controlled by the
Company or (D) any acquisition pursuant to a transaction which
complies with clauses (A), (B) and (C) of subsection (iii) of
this Section 15(a); or
(ii) Individuals who, as of January 12, 1998, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any
individual becoming a director subsequent to January 12, 1998,
whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with
respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or
on behalf of a Person other than the Board; or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the
Company or the acquisition of assets of another entity (a
"Corporate Transaction"), in each case, unless, following such
Corporate Transaction, (A) all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to
such Corporate Transaction beneficially own, directly or
indirectly, more than sixty percent (60%) of, respectively,
the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such
Corporate Transaction (including, without limitation, a
corporation which as a result of such transactions owns the
Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Corporate Transaction of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (B) no Person
(excluding any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Corporate
Transaction) beneficially own, directly or indirectly, twenty
percent (20%) or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the then
outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Corporate
Transaction and (C) at least a majority of the members of the
board of directors of the corporation resulting from such
Corporate Transaction were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the
action of the Board, providing for such Corporate Transaction;
or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
For purposes of this Section 15(a), the Incumbent Board, by a majority
vote, shall have the power to determine on the basis of information
known to them (a) the number of shares beneficially owned by any
person, entity or group; (b) whether there exists an agreement,
arrangement or understanding with another as to matters referred to in
this Section 15(a); and (c) such other matters with respect to which a
determination is necessary under this Section 15(a).
Notwithstanding anything to the contrary in Section 15(a)(i) or Section
15(a)(ii) or Section 15(a)(iii) or any other provision of this
Agreement, a Change of Control shall not have occurred (or be deemed to
have occurred) as a result of the consummation of the transactions
contemplated under the Agreement and Plan of Merger dated as of
November 18, 2001 by and among Phillips Petroleum Company,
CorvettePorsche Corp., Porsche Merger Corp., Corvette Merger Corp., and
Conoco Inc. ("Merger Agreement").
SECTION 16. 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) The Company hereby represents and warrants that all of the Arrangements
have been established, maintained and administered in accordance with
all applicable laws, including without limitation, ERISA- The Company
hereby indemnifies and agrees to hold the Trustee harmless from all
liabilities, including attorney's fees, relating to or arising out of
the establishment, maintenance and administration of the Arrangements.
To the extent the Company does not pay any of such liabilities in a
reasonably timely manner, the Trustee may obtain payment from the
Trust.
(c) Benefits payable to 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.
(d) The persons authorized to act for the Company are identified on
Attachment H and such list may be amended by the Company from time to
time without the consent of the Trustee. The individual identified as
the Financial Administrator shall have the power to act for the Company
with respect to all matters herein regarding the investment of Trust
assets, the authority to request reimbursements to be paid to the
Company and is the individual designated to receive requests for
contributions from the Trustee. The Senior Vice President and Chief
Financial Officer, or his successor, of the Company shall be the
Financial Administrator. The individual identified as the Benefits
Administrator shall have the power to act for the Company with respect
to all matters herein regarding the determination of benefits owed
under the Arrangements and the Payment of such benefits. The Executive
Vice President, Planning, Corporate Relations and Services of the
Company, or his successor, shall be the Benefits Administrator. Both
the Financial Administrator and the Benefits Administrator may, from
time to time, seek advice and guidance, or delegate functions assigned
under this Trust Agreement to them, to other individuals who shall be
identified on Attachment II as authorized to act for such
Administrator, and each Administrator shall have the authority to amend
the list of individuals who are authorized to so act on his or her
behalf in Attachment H and to communicate the amended list to the
Trustee. Further, both the Benefits and Financial Administrator may
delegate administrative functions to other specified individuals who
are identified in writing to the Trustee. The Trustee shall be entitled
to rely upon the latest list of authorized individuals received.
(e) This Trust Agreement shall be governed by and construed in accordance
with the laws of North Carolina.
IN WITNESS WHEREOF, this Grantor Trust Agreement has been executed on behalf of
the parties hereto on the day and year first above written.
PHILLIPS PETROLEUM COMPANY WACHOVIA BANK, N.A.
By: /s/ T. C. Morris By: /s/ Peter D. Quinn
--------------------------------- -----------------------------------
Its: Senior Vice President and Its: Vice President
Chief Financial Officer ----------------------------------
--------------------------------
ATTEST: ATTEST:
By: /s/ Dale Billam By: /s/ Ronald W. Darby
--------------------------------- -----------------------------------
Its: Corporate Secretary Its: Vice President and Assistant
-------------------------------- Secretary
----------------------------------
ATTACHMENT I
LIST OF ARRANGEMENTS
KEY EMPLOYEE DEFERRED COMPENSATION PLAN OF PHILLIPS PETROLEUM COMPANY:
PHILLIPS PETROLEUM COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN:
KEY EMPLOYEE SUPPLEMENTAL RETIREMENT PLAN OF PHILLIPS PETROLEUM COMPANY:
DEFINED CONTRIBUTION MAKEUP PLAN OF PHILLIPS PETROLEUM COMPANY:
KEY EMPLOYEE MISSED CREDITED SERVICE RETIREMENT PLAN OF PHILLIPS PETROLEUM
COMPANY
PRINCIPAL CORPORATE OFFICERS SUPPLEMENTAL RETIREMENT PLAN OF PHILLIPS PETROLEUM
COMPANY:
Annuity payments all in payout status
SUPPLEMENTAL RETIREMENT:
Annuity payments all in payout status accrued as a result of
participation in the Phillips Petroleum Company Key Employee Death
Protection Plan and the individual contracts for deferred compensation
PHILLIPS OIL COMPANY EXCESS BENEFIT PLAN:
One remaining participant in annuity payout
AMINOIL RETIREMENT CONTRACTS:
Contracts with J.B. Coffman and Guy Cessna - both in annuity payout
status
PHILLIPS PETROLEUM COMPANY EXECUTIVE SEVERANCE PLAN
The Trust Agreement is in all other respects ratified and confirmed
without amendment.
ATTACHMENT II
INDIVIDUALS AUTHORIZED TO ACT ON BEHALF OF THE COMPANY
FINANCIAL ADMINISTRATOR
J. A. Carrig
INDIVIDUALS AUTHORIZED TO ACT FOR FINANCIAL ADMINISTRATOR
J.W. Sheets
J. E. Durbin
F. M. Vallejo
BENEFITS ADMINISTRATOR
J. C. High
INDIVIDUALS AUTHORIZED TO ACT FOR BENEFITS ADMINISTRATOR
H. L. Black, Jr.