IRREVOCABLE DEED OF TRUST
Made this 2nd day of November, 1998.
CENTRAL SPRINKLER CORP., a Pennsylvania corporation, with offices at
451 North Cannon Avenue, Lansdale, Pa., 19446, and CENTRAL SPRINKLER CO., a
Pennsylvania corporation with offices at 451 North Cannon Avenue, Lansdale, Pa.,
19446 (hereinafter collectively and individually referred to as "CENTRAL") as
Settlors, and MELLON BANK N.A., a national banking association authorized and
engaged in the trust business in the Commonwealth of Pennsylvania, as the
Trustee, hereby agree as follows:
(A) CENTRAL and the Staff of the United States Consumer Product Safety
Commission ("Staff") have entered into a Consent Agreement dated October 2,
1998, and filed at CPSC Docket No. 98-2 (hereinafter called the "Consent
Agreement"), to resolve the matters set forth in the Administrative Complaint
filed on March 3, 1998 by the United States Consumer Product Safety Commission
(hereinafter called the "Commission")
(B) By Order dated October 13, 1998 (hereinafter called the "Order"), the
Commission accepted said Consent Agreement and imposed certain conditions and
obligations on CENTRAL.
(C) On October 2, 1998, Central and plaintiffs representing a nationwide
class of owners/operators of buildings containing Omega sprinklers entered into
a parallel Settlement Agreement resolving the claims of the settlement class
members against CENTRAL arising out of alleged defects in the Omega sprinklers,
in the litigation styled Hart v. Central Sprinkler Corp., et al.
Case No. BC17627, Los Angeles County, California Superior Court, ("Class Action
Settlement Agreement"). Such Class Action Settlement Agreement is subject to an
approval process as defined by law. Said approval process has not been
(D) The Consent Agreement, the Order and the Class Action Settlement
Agreement provide, inter alia for the creation of a trust, the Income and
principal of which are required to be used for the purposes of providing
reimbursement to owners of Omega sprinklers toward labor costs of removing and
replacing those sprinklers, as set forth in said Consent Agreement, the Order
and the Class Action Settlement Agreement.
(E) In the event of any inconsistency between any term, provision or the
intent of the final Class Action Settlement Agreement and/or any order relating
thereto, on the one hand, and any term, provision or the intent of the Consent
Agreement and/or the Order, on the other hand, the Consent Agreement and/or the
Order shall control for all purposes under this Trust.
SECOND: CREATION OF THE TRUST. CENTRAL hereby transfers and delivers to
the Trustee the property lined on Schedule "A" attached hereto and CENTRAL shall
make future contributions hereto in accordance with Appendix C of the Order.
The Trustee shall hold said property as provided in the Consent Agreement, the
Order and the Class Action Settlement Agreement, as a trust estate, and shall
invest and reinvest the same and shall distribute the net income (hereinafter
called "Income") and principal as set forth in the following provisions:
(A) During the term of this Trust, the Trustee shall distribute Income,
and to the extent that Income is exhausted, principal, to those persons entitled
thereto pursuant to the terms and conditions of the Consent Agreement, the Order
and the Class Action Settlement Agreement, as certified, in writing, to the
Trustee by CENTRAL's Board of Directors or the designee of CENTRAL's Board of
Directors. The Trustee shall be entitled to rely upon the written certification
of CENTRAL as to the persons entitled to distributions of the Income and
principal of this Trust as being in full accord with the Consent Agreement, the
Order and the Class Action Settlement Agreement.
(B) Promptly upon receiving such written certification of CENTRAL as to
the persons entitled to distributions of the Income and principal of this Trust,
the Trustee shall forward a copy thereof by overnight delivery to the Staff.
Unless the Trustee actually receives the Staff's objections to such written
certification of CENTRAL within fourteen (14) calendar days of the Trustee's
having dispatched the same to the Staff, the Trustee shall promptly make
distribution of Income and/or principal in accordance with said written
certification of CENTRAL, without any further liability on the part of the
Trustee as to the proper persons to receive such distributions. In the event
that the Trustee receives objections by the Staff to CENTRAL's written
certification within said fourteen (14) day period, the Trustee shall not make
any distribution pursuant to said written certification from CENTRAL until the
Trustee receives instructions relative to the same by way of a final,
non-appealable decision of the Commission.
THIRD: TRUST POWERS AND ADMINISTRATIVE PROVISIONS
(A) The Trustee shall have the following powers in addition to, and not as
a modification of, all common law and statutory powers, all of which shall be
exercised in a fiduciary capacity:
(1) To hold and retain any of the property coming into the Trustee's
possession hereunder. The Trustee shall not be obligated or permitted to accept
any asset other than cash.
(2) To invest in currency, bonds, notes, real estate, mortgages and
other "Legal investments" as set forth in Section 7302 of the Probate, Estates
and Fiduciaries Code (20 Pa. CSA Section 7302, et seq.) except that the Trustee
shall not be authorized to invest in stocks as defined in Section 7310 of the
said Pennsylvania Probate, Estates and Fiduciaries Code (20 Pa. CSA Section
7310) or real estate as defined in Section 7311 of the said Pennsylvania
Probate, Estates and Fiduciaries Code (20 Pa. CSA Section 7311). In no event
shall the Trustee be authorized or required to make any investment in any
securities issued by either of the Settlors or any subsidiary of the Settlors.
(3) To sell, at public or private sale, and to otherwise transfer or
assign any property at any time included in the Trust, upon such terms and
conditions as the Trustee shall deem wise.
(4) To cause any security or other property of the Trust to be issued,
held or registered in the name of a nominee or in such form that title will pass
(5) To exercise any conversion privilege or subscription right of
owners of any security in the Trust
(6) To carry, at the expense of the Trust, insurance of such kinds and
in such amounts necessary and appropriate to protect the Trust from any casualty
(7) To defend litigation with respect to the Trust or any Trust
property at the expense of the Trust. To the extent that such litigation is
brought against the Trust as a result of any action on the part of the Trustee,
the Trustee shall reimburse the Trust for all expenses incurred by the Trust in
the defense of such litigation. Nothing set forth herein is intended to affect
any liability that the Trustee may or may not have to the Trust arising out of
the Trustee's actions or the Trustee's failure to act.
(8) To allocate receipts and disbursements between principal or
(9) With the consent of the Staff, to employ and confer with Schneider
Downs and Company, C.P.A.'s, or such other organization selected by the Trustee,
for the provision of clerical services in the preparation and distribution of
proceeds checks to the intended beneficiaries of this Trust, and to pay the
reasonable value of such services to Schneider Downs and Company, C.P.A.'s, or
such other organization selected by the Trustee to perform such clerical
services, in accordance with the fee schedule marked Exhibit "A" , attached
hereto and made a part hereof.
(10) To create reserves out of income, as the Trustee deems advisable,
for the prompt payment of taxes and other obligations and to restore to Income
the unused portion of such reserves.
(11) To resign by giving written notice of the Trustee's resignation
to the Staff. Such resignation shall be effective on the date that the Trust
assets are transferred to the successor trustee. Upon the tender of such
resignation, it shall be the obligation and privilege of the Staff to select a
successor trustee or trustees to serve hereunder. In case of the merger or
consolidation of the Trustee, the resultant company shall become successor
Trustee hereunder after notice to the Staff and CENTRAL.
(B) At any time, the Staff shall have the right to remove the Trustee
for cause or for no cause at all. Such removal shall be effective upon the
Trustee having received written notice of its termination. Upon issuing notice
of removal to the Trustee, the Staff shall have the obligation and privilege to
select a successor Trustee or Trustees to serve hereunder. Nothing set forth
herein shall impair the right of the Trustee to make claims to the successor
trustee (with copy to the Staff) for all fees the Trustee reasonably feels to be
due to it as having been earned up to the date of termination. Further, the
successor trustee shall immediately reimburse the Trustee for all expenses for
which it is obligated to Schneider Downs and Company CPA's, or to the other
organization chosen by the Trustee to perform the clerical services referenced
above, up and to the effective date of the Trustee's termination as Trustee
(C) The Trustee shall be exempt from giving any bond or other security
in any jurisdiction.
(D) The Trustee shall be entitled to receive any compensation for
its services hereunder in accordance with the schedule attached hereto as
Exhibit "B." Such compensation shall be
charged wholly against Income. To the extent that the Income is insufficient to
pay the compensation due to the Trustee, the Trustee is authorized, in the
Trustee's sole discretion, to invade principal to satisfy the Trust's fee
obligations to the Trustee. In no event shall CENTRAL be responsible for paying
my compensation to the Trustee.
FOURTH: SPENDTHRIFT CLAUSE. The right of any beneficiary hereunder shall not
be subject to assignment, alienation, pledge, attachment or claims of creditors
until after payment has actually been made by the Trustee as herein provided.
FIFTH: TERM. This Trust shall terminate as provided in the Consent Agreement
and the Order. Upon termination of this Trust, all Income and principal then
remaining in the Trust Estate shall be distributed in accordance with the final
distribution plan created pursuant to Appendix C of the Order. The Trustee shall
have no discretion in the distribution of Income or principal from the Trust
but, rather, shall act only as set forth in Article SECOND (A) and (B) of this
(A) CENTRAL acknowledges that it understands the nature of an
irrevocable trust and specifically renounces all rights of amendment or
revocation with respect to this Deed of Trust.
(B) CENTRAL may only add cash hereto.
SEVENTH: GOVERNING LAW. This Agreement has been delivered to and accepted by
the Trustee in the Commonwealth of Pennsylvania and shall be governed in all
respects by the laws of said Commonwealth, without regard to its conflicts of
(A) The Trustee shall furnish to CENTRAL and to the Staff monthly
statements of Income, principal, investments and disbursements.
(B) The Trustee shall timely file or shall deliver to CENTRAL such
documents and other information as CENTRAL may reasonably require in order to
permit it to timely file such income tax and other returns and statements as are
reasonably required for CENTRAL to comply with applicable provisions of the
Internal Revenue Code and of any applicable federal or state tax law or
regulation promulgated thereunder.
NINTH SEVERABILITY. In any provision of this Trust is held to be illegal,
invalid or unenforceable, under present or future laws effective during the term
of this Trust, such provision shall be fully severable. Such determination
shall in no way limit or affect the enforceability and operative effect of any
and all other provisions of this Trust unless the severance of such illegal,
invalid or unenforceable provision would, in the sole and absolute discretion of
the Staff, cause the purposes of this Trust to fail. In the event that the Staff
so determines that the severance of an illegal, invalid or unenforceable
provision would operate to cause the purposes of this Trust to fail, the Staff,
in its sole
discretion, shall devise an alternative means by which the funds payable under
Appendix C of the Order will be distributed to the Trust beneficiaries.
TENTH: NOTICES. Any notices or communications required or permitted hereunder
shall be in writing and delivered by telex or telecopy pursuant to the
instructions listed below, or mailed by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows, or to
such other address or addresses as may hereafter be furnished by the parties
listed below to each other in compliance with the terms hereof:
To the Trustee: Mellon Bank, N.A.
ATTN: Mr. Erich C. Smith
One Mellon Bank Center, Suite 3810
Pittsburgh, PA 15258-0001
Telephone: (412) 234-5033
Fax: (412) 234-0112
To CENTRAL: Central Sprinkler Corp.
ATTN: Mr. E. Talbot Briddell
451 North Cannon Avenue
Lansdale, PA 19446
Telephone: (215) 362-0700
Fax: (215) 365-5385
With copy to: Morgan, Lewis & Bockius, LLP
ATTN: J. Gordon Cooney, Jr., Esquire
2000 One Logaqn Square
Philadelphia, PA 19103-6993
Telephone: (215) 963-5000
Fax: (215) 963-5299
To the Commission: U.S. Consumer Product Safety Commission
ATTN. Eric L Stone, Esquire
Office Of Compliance/Legal Division
Washington, DC 20207-0001
Telephone: (301) 504-0626 Ext. 1350
Fax: (301) 504-0359
All such notices and communications shall be effective when delivered at the
designated addresses or when the telex/telecopy communications received at the
designated addresses are confirmed by the recipient by return telex or telecopy
in conformity with the provisions hereof.
ELEVENTH: ENTIRE AGREEMENT. The entire agreement of the parties relating to
the subject matter of this Trust is contained herein, and this Trust supersedes
any prior oral or written agreements between CENTRAL and the Trustee concerning
the subject matter hereof. No failure to exercise or delay in exercising any
right, power or privilege hereunder shall operate as a waiver hereof, nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude any further exercise thereof, nor shall single or partial exercise of
any right, power or privilege hereunder preclude any further exercise thereof or
of any other right, power or privilege.
TWELFTH: HEADINGS. The headings used in this Trust as inserted for
convenience only and neither constitute a portion of this Trust nor in any
manner affect the construction of the provisions of this Trust.
THIRTEENTH: COUNTERPARTS. This Trust may be executed in any number of
counterparts, each of which shall constitute an original, but such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Trust the day and
year first above written.
ATTEST: CENTRAL SPRINKLER CORP.
By By XXXXXXXXXXXXXXXXX
Title Title Chief Executive Officer
ATTEST: CENTRAL SPRINKLER CORP.
By By Richard P. O'Leary
Title Title Chief Operating Officer
MELlON BANK, N.A.
By By XXXXXXXXXXXXXXXXXXX
Title Trust Officer Title Vice President
The fee schedule for the clerical services for the preparation and distribution
of the proceeds checks by Schneider Downs & Co., Inc., is as follows:
* $60 per hour for the initial two-years, and
* $65 per hour for the following two years.
Any related out-of-pocket costs shall be in addition to the above hourly rates.
If any other organization is chosen to perform these clerical services, this
schedule may be renegotiated as necessary.
The Trustee shall be entitled to receive annual compensation for its services in
accordance with its schedule in effect when the services are performed.
Currently the fee schedule for fixed-income accounts is as follows but the
Trustee reserves the right to change this schedule at any time.
Annual asset-based fee is determined by the following market value schedule:
o 0.65% of market value on the first $2 million,
o 0.55% of market value an the next $3 million, and
o 0.45% of market value on the balance.
Minimum annual fee: $13,000.
IRREVOCABLE DEED OF TRUST
(Initial Property to be Transferred into the Trust by CENTRAL)
$2,200,000 (Two Million, Two Hundred Thousand Dollars), the initial
contribution by CENTRAL to the Trust pursuant to Appendix C, Paragraph la, of
the United States Consumer Product Safety Commission Order dated October 13,
ACCEPTED AND APPROVED: ACCEPTED AND APPROVED:
Central Sprinkler Co. and Mellon Bank, N.A., Trustee
Central Sprinkler Corp.