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Exhibit 10.16
DEFERRED COMPENSATION AGREEMENT
AGREEMENT made as of the lst day of April, 1996, by and between Xxxx
Xxxxx Xxxxxx, L.P., a limited partnership organized under the laws of the State
of Delaware (the "Company"), and Xxxxx X. Xxxxxxxx (the "Executive").
The Company recognizes that the Executive's contribution to the
growth and success of the Company has been substantial. The Company desires to
assure itself of the continued employment of the Executive by providing an
incentive for her to continue her employment with the Company.
In order to effect the foregoing, the Company and the Executive wish
to enter into a Deferred Compensation Agreement on the terms and conditions set
forth below.
Accordingly, in consideration of the premises and covenants
hereinafter contained, the parties hereto agree as follows:
Section 1. Deferred Compensation Account; Contributions to Trust.
(a) The Company shall credit to a book reserve (the "Deferred
Compensation Account") established for this purpose, commencing as of April,
1996, and for each month thereafter through and including March, 2006, an amount
equal to 20% of the Executive's base salary for such month; provided that the
Executive is employed with the Company on the last business day of such month.
The Deferred Compensation Account shall be debited or credited with amounts
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representing all losses or earnings debited or credited to an account (the
"Account") established in respect of the Executive under the Trust (as
hereinafter defined).
(b) Any amounts represented by credits made to the Deferred
Compensation Account in accordance with the first sentence of paragraph (a)
above shall be contributed by the Company on the last business day of each month
to the trust (the "Trust") established under the Trust Agreement annexed as
Exhibit A hereto (such agreement as amended or supplemented and any successor
agreement hereinafter referred to as the "Trust Agreement"). Amounts contributed
to the Trust and credited to the Executive's Account thereunder shall be
invested and reinvested, at the direction of the Executive, in accordance with
the provisions of the Trust Agreement.
(c) The Executive agrees on behalf of herself and her
designated beneficiary to assume all risk in connection with any debits or
credits made to her Account under the Trust by reason of losses or earnings on
investments made in accordance with the provisions of the Trust Agreement.
Section 2. Benefit Payments.
(a) On the earlier of (i) April 1, 2006 and (ii) the earliest
date reasonably practicable following the Executive's termination of employment
with the Company for any reason, the Company shall pay (or cause to be paid from
the Trust) to the Executive or to the Executive's beneficiary or estate (in the
event of her death) in cash a lump sum amount equal to the vested amount
(determined pursuant to
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Section 3 hereof) reflected in the Deferred Compensation Account as of the date
of such termination.
(b) The beneficiary referred to in paragraph (a) above may be
designated or changed by the Executive (without the consent of any prior
beneficiary) on a form provided by the Company and delivered to the Company
before her death. If no such beneficiary shall have been designated, or if no
designated beneficiary shall survive the Executive, the lump sum payment payable
under paragraph (a) above shall be payable to the Executive's estate.
Section 3. Vesting.
(a) Except as provided in paragraph (b) below, the Executive's
interest in the Deferred Compensation Account shall vest at the rate of 20% per
year, commencing on the first anniversary of April 1, 1996, and on each of the
following four anniversaries thereof, thereby becoming 100% vested on April 1,
2001, but only if the Executive is actively employed by the Company and has
remained continuously so employed from the date hereof to and including the
applicable anniversary date. The Executive shall not be deemed to be actively
employed for a period during which the Executive remains on the payroll for the
purpose of collecting salary pursuant to a severance or similar termination
arrangement.
(b) In the event that (i) the Executive dies, (ii) the
Executive's employment is terminated by reason of Disability (as hereinafter
defined), (iii) the Executive's employment is terminated by the Company for
other than Cause
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(as hereinafter defined) or (iv) the Executive terminates employment for Good
Reason (as hereinafter defined), then the Executive's Deferred Compensation
Account shall be 100% vested.
For purposes of this Agreement:
Termination of employment by reason of "Disability" shall mean, if,
as a result of the Executive's incapacity due to physical or mental illness, the
Executive shall have been absent from her duties hereunder on a full-time basis
for the entire period of six consecutive months.
"Cause" shall mean (i) the willful and continued failure by the
Executive to substantially perform her duties hereunder after demand for
substantial performance is delivered by the Company that specifically identifies
the manner in which the Company believes the Executive has not substantially
performed her duties, or (ii) the Executive's conviction of any crime (whether
or not involving the Company) constituting a felony or (iii) the willful
engaging by the Executive in misconduct that is materially injurious to the
Company, monetarily or otherwise (including, but not limited to, conduct that
constitutes competitive activity) or that subjects, or if generally known, would
subject the Company to public ridicule or embarrassment. For purposes of this
paragraph, no act, or failure to act, on the Executive's part shall be
considered "willful" unless done, or omitted to be done, by her not in good
faith and without reasonable belief that her action or omission was in the best
interest of the Company. Notwithstanding the foregoing, the Executive shall not
be deemed to have been terminated for Cause without (x) reasonable written
notice to the Executive setting forth the reasons for the Company's intention to
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terminate for Cause, (y) an opportunity for the Executive, together with her
counsel, to be heard before the Board (as hereinafter defined) and (z) delivery
to the Executive of a notice of termination from the Board finding that in the
good faith opinion of the Board the Executive was guilty of the conduct set
forth above in clauses (i) - (iii) hereof, and specifying the particulars
thereof in detail.
"Good Reason" shall mean (i) the assignment to the Executive of a
title or duties inconsistent with those of a senior executive of the Company or
(ii) a reduction by the Board of the Executive's salary. "Board" shall mean the
board of directors of the Company's general partner or such other managing board
or committee as is vested with authority to hire and/or discharge executive
officers of the Company.
Section 4. Unfunded Arrangement.
It is the intention of the parties hereto that the arrangement
described in this Agreement be unfunded for tax purposes and for purposes of
Title I of the Employee Retirement Income Security Act of 1974, as amended.
Nothing contained in this Agreement or the Trust Agreement and no action taken
pursuant to the provisions of this Agreement or the Trust Agreement shall create
or be construed to create a fiduciary relationship between the Company and the
Executive, her designated beneficiary or any other person. Any funds that may be
invested under the provisions of the Trust Agreement shall continue for all
purposes to be a part of the general funds of the Company and no person other
than the Company shall by virtue of the provisions of this Agreement have any
interest in such funds. To the extent
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that any person acquires a right to receive payments from the Company under this
Agreement, such right shall be no greater than the right of any unsecured
general creditor of the Company. This Agreement constitutes a mere promise by
the Company to make a benefit payment in the future.
Section 5. Nonalienation of Benefits.
The right of the Executive or any other person to the payment of
deferred compensation or other benefits under this Agreement shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment or garnishment by creditors of the Executive or
the Executive's beneficiary or estate.
Section 6. No Right to Employment.
Nothing contained herein shall be construed as conferring upon the
Executive the right to continue in the employ of the Company as an executive or
in any other capacity.
Section 7. Effect on Other Benefits.
Any deferred compensation payable under this Agreement shall not be
deemed salary or other compensation to the Executive for the purpose of
computing benefits to which she may be entitled under any pension plan or other
arrangement of the Company for the benefit of its employees.
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Section 8. Binding Agreement.
This Agreement shall be binding upon and inure to the benefit of the
Company, its successors and assigns and the Executive and her heirs, executors,
administrators and legal representatives.
Section 9. Governing Law.
This Agreement shall be construed in accordance with and governed by
the laws of the State of New York without regard to its conflict of laws
principles.
Section 10. Validity.
The invalidity or unenforceability of any provision or provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
Section 11. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
Section 12. Arbitration.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in the City of New York in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction.
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Fees and expenses payable to the American Arbitration Association and the
arbitrator shall be shared equally by the Company and by the Executive, but the
parties shall otherwise bear their own costs in connection with the arbitration;
provided that the arbitrator shall be entitled to include as part of the award
to the prevailing party the reasonable legal fees and expenses incurred by such
party in an amount not to exceed $25,000.
Section 13. Amendment.
The Agreement may be amended in whole or in part by a written
instrument executed by both parties hereto.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officers and the Executive has hereunto set her
hand and seal as of the date first above written.
XXXX XXXXX XXXXXX, L.P.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------
Xxxxxxx X. Xxxxxx, Vice Chairman
EXECUTIVE:
/s/ Xxxxx X. Xxxxxxxx
----------------------------------
Xxxxx X. Xxxxxxxx
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EXHIBIT A
TRUST UNDER
XXXX XXXXX LAUREN CORPORATION
DEFERRED COMPENSATION AGREEMENTS
(a) This Trust Agreement made this _____ day of ___________, 1993,
by and between Xxxx Xxxxx Xxxxxx Corporation (the "Company") and
______________________ (the "Trustee");
(b) WHEREAS, the Company has entered into deferred compensation
agreements (the "Deferred Compensation Agreements") effective as of April 4,
1993, with certain executives of the Company listed on Appendix 1 hereto (the
"Executives") and may enter into similar agreements with other executives in the
future;
(c) WHEREAS, the Company may incur liability under the terms of
such Deferred Compensation Agreements with respect to the Executives;
(d) WHEREAS, the Deferred Compensation Agreements contemplate the
establishment of this trust (hereinafter called the "Trust") and the
contribution by the Company to the Trust of amounts that shall be held therein,
in order to assist the Company in meeting its obligations under the Deferred
Compensation Agreements;
(e) WHEREAS, the assets of this Trust shall be subject to the
claims of the Company's creditors in the event of the Company's Insolvency, as
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herein defined, until paid to the Executives and their respective beneficiaries
in such manner and at such times as specified in the Deferred Compensation
Agreements;
(f) WHEREAS, it is the intention of the parties that this Trust
shall constitute an unfunded arrangement and shall not affect the status of the
Deferred Compensation Agreements as unfunded plans 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") ;
NOW, THEREFORE, the parties do hereby establish the Trust and agree
that the Trust shall be comprised, held and disposed of as follows:
Section 14. Establishment of Trust.
(a) The Company hereby deposits with the Trustee in trust the sum of
[$__________], which shall become the principal of the Trust to be held,
administered and disposed of by the Trustee as provided in this Trust Agreement.
(b) The Trust hereby established shall be irrevocable, but is
subject to termination in accordance with Section 12 hereof.
(c) The Trust is intended to be a grantor trust, of which the
Company is the grantor, within the meaning of subpart E, part I, subchapter J,
chapter 1, subtitle A of the Internal Revenue Code of 1986, an amended, and
shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon, shall be
held separate and apart from other funds of the Company and shall be used
exclusively for the purposes herein set forth. The Executives and their
beneficiaries
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shall have no preferred claim on, or any beneficial ownership interest in, any
assets of the Trust. Any rights created under the Deferred Compensation
Agreements and this Trust Agreement shall be mere unsecured contractual rights
of the Executives and their beneficiaries against the Company. Any assets held
by the Trust will be subject to the claims of the Company's general creditors
under federal and state law in the event that the Company is considered
Insolvent, as defined in Section 3(a) herein.
(e) On the last business day of each month, or otherwise as required
pursuant to the Deferred Compensation Agreements, the Company shall contribute
in cash to the Trustee hereunder an amount equal to the contributions required
to be made pursuant to the terms of the Deferred Compensation Agreements. The
Trustee shall not have any right to compel such contributions.
Section 15. Payments to Executives and their Beneficiaries.
(a) The Company shall deliver to the Trustee a schedule (the
"Payment Schedule") that indicates the name of each Executive for whom
contributions are being made, the amounts contributed in respect of each
Executive, a formula or other instructions acceptable to the Trustee for
determining the amounts payable in respect of each Executive, and the time of
commencement and conditions for payment of such amounts (as provided for under
the Deferred Compensation Agreements). Except as otherwise provided herein, the
Trustee shall make payments to the Executives 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 Deferred Compensation Agreements and shall
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pay amounts withheld to the appropriate taxing authorities or determine that
such amounts have been reported, withheld and paid by the Company.
(b) The entitlement of the Executives or their beneficiaries to
benefits shall be determined in accordance with the provisions of the Deferred
Compensation Agreements.
(c) The Company may make payment of benefits directly to the
Executives or their beneficiaries as they become due under the terms of the
Deferred Compensation Agreements. The Company shall notify the Trustee of its
decision to make payment of benefits directly prior to the time amounts payable
to the Executives or their beneficiaries are due. In the event that the Company
pays the entire amount due to an Executive (or his beneficiary) pursuant to the
terms of the Executive's Deferred Compensation Agreement, then the Trustee, upon
receipt of certification from the Company that such payment has been made, shall
return to the Company all Trust assets that have been credited to such
Executive's Account (as defined in Section 5(a) hereof).
Section 16. Trustee Responsibility Regarding Payments to Trust
Beneficiary When the Company Is Insolvent.
(a) The Trustee shall cease payment of benefits to the Executives
and their beneficiaries if the Company is Insolvent. The Company shall be
considered "Insolvent" for purpose of this Trust Agreement if (i) the Company is
unable to pay its debts as they become due, or (ii) the Company is subject to a
pending procedure as a debtor under the United States Bankruptcy Code.
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(b) At all times during the continuance of this Trust, as provided
in Section 1(d) hereof, the principal and income of the Trust shall be subject
to claims of general creditors of the Company under federal and state law as set
forth below.
(1) The Board of Directors and the Chief Executive Officer of
the Company shall have the duty to inform the Trustee in writing of the
Company's becoming Insolvent. If a person claiming to be a creditor of the
Company alleges in writing to the Trustee that the Company has become
Insolvent, the Trustee shall determine whether the Company is Insolvent
and, pending such determination, the Trustee shall discontinue payment of
benefits to the Executives or their beneficiaries.
(2) Unless the Trustee has actual knowledge of the Company's
becoming Insolvent, or has received notice from the Company or a person
claiming to be a creditor alleging that the Company is Insolvent, the
Trustee shall have no duty to inquire whether the Company is Insolvent.
The Trustee may in all events rely on such evidence concerning the
Company's solvency as may be furnished to the Trustee and that provides
the Trustee with a reasonable basis for making a determination concerning
the Company's solvency.
(3) If at any time the Trustee has determined that the Company
is Insolvent, the Trustee shall discontinue payments to the Executives or
their beneficiaries and shall hold the assets of the Trust for the benefit
of the Company's general creditors. Nothing in this Trust Agreement shall
in any way diminish any rights of the Executives or their beneficiaries to
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pursue their rights as general creditors of the Company with respect to
benefits due under the Deferred Compensation Agreements or otherwise.
(4) The Trustee shall resume the payment of benefits to the
Executives or their beneficiaries in accordance with Section 2 of this
Trust Agreement only after the Trustee has determined that the Company is
not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to the
Executives or their beneficiaries under the terms of the Deferred Compensation
Agreements for the period of such discontinuance, less the aggregate amount of
any payments made to the Executives or their beneficiaries by the Company in
lieu of the payments provided for hereunder during any such period of
discontinuance.
Section 17. Payments to Company.
Except as provided in Sections 2(c) and 3 hereof, the Company shall
have no right or power to direct the Trustee to return to the Company or to
divert to others any of the Trust assets before all payments of benefits have
been made to the Executives and their beneficiaries pursuant to the terms of the
Deferred Compensation Agreements.
Section 18. Accounts and Investment Authority.
(a) Contributions to the Trust on behalf of each Executive and any
interest and earnings thereon shall be separately credited to an account (the
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"Account") established and held by the Trustee for each such Executive. Each
Executive shall timely instruct the Trustee, in writing, as to the manner in
which the assets held in his Account shall be invested. Assets may be invested
in any one or more of the mutual funds managed by the Vanguard Group of
Investment Companies, subject to their rules. In the event that an Executive
fails to timely instruct the Trustee, then the Trustee shall use its good faith
efforts to invest and reinvest the assets credited to such Executive's Account
in any such mutual fund or in cash or marketable securities or other investments
as it deems prudent under the circumstances. Without limitation of and in
addition to the foregoing, the term "investments" as used in this Section shall
include stocks of all kinds and classes (other than stocks of the Company or any
affiliate), bonds, notes, debentures, savings bank accounts and other interest
bearing deposits, mortgages and other obligations, insurance contracts and
annuities, common trust funds, shares or participations in any investment
company, fund or trust, and all other property, tangible and intangible, real,
personal and mixed of every kind and nature.
(b) In no event may the Trustee invest in securities (including
stock or rights to acquire stock) or obligations issued by the Company or
affiliates, other than a de minimis amount held in common investment vehicles in
which the Trustee invests.
Section 19. Disposition of Income.
(a) During the term of this Trust, all income received by the Trust,
net of expenses, shall be accumulated and reinvested.
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Section 20. Accounting by Trustee.
The Trustee shall separately keep accurate and detailed records of
all investments, receipts, disbursements, and all other transactions required to
be made, with respect to the Account of each Executive, including such specific
records as shall be agreed upon in writing between the Company and the Trustee.
Within 60 days following the close of each calendar quarter and within 120 days
after the removal or resignation of the Trustee, the Trustee shall deliver to
the Company a written account of its administration of the Trust during such
quarter or during the period from the close of the last preceding quarter to the
date of such removal or resignation, setting forth separately with respect to
each Account, all investments, receipts, disbursements and other transactions
effected by it for each Executive, including a description of all securities and
investments purchased and sold with the cost or net proceeds of such purchases
or sales (accrued interest paid or receivable being shown separately), and
showing all cash, securities and other property held in the Trust for each
Executive at the end of such quarter or as of the date of such removal or
resignation, as the case may be.
Section 21. Responsibility of Trustee.
(a) The Trustee shall act with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent person acting
in like capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims; provided, however, that the
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by the Company or any of the Executives
that is contemplated by, and in
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conformity with, the terms of the Deferred Compensation Agreements or this
Trust. In the event of a dispute between the Company and a party, the Trustee
may apply to a court of competent jurisdiction to resolve the dispute.
(b) If the Trustee undertakes or defends any litigation arising in
connection with this Trust, the Company agrees to indemnify the Trustee against
the Trustee's costs, expenses and liabilities (including, without limitation,
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.
(c) The Trustee may consult with legal counsel (who may also be
counsel for the Company generally) with respect to any of its duties or
obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers conferred
on the Trustee by applicable law, unless expressly provided otherwise herein.
(f) Notwithstanding any power granted to the Trustee pursuant to
this Trust Agreement or to applicable law, the Trustee shall not have any power
that could give this Trust the objective of carrying on a business and dividing
the gains therefrom, within the meaning of section 301.7701-2 of the Procedure
and Administrative Regulations promulgated pursuant to the Internal Revenue Code
of 1986, as amended.
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Section 22. Compensation and Expenses of Trustee.
The Company shall pay all administrative and Trustee's fees and
expenses.
Section 23. Resignation and Removal of Trustee.
(a) The Trustee may resign at any time by written notice to the
Company, which shall be effective 30 days after receipt of such notice unless
the Company and the Trustee agree otherwise.
(b) The Trustee may be removed by the Company on 30 days' notice or
upon shorter notice accepted by Trustee.
(c) Upon resignation or removal of the Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the successor
Trustee. The transfer shall be completed within 30 days after receipt of notice
of resignation, removal or transfer, unless the Company extends the time limit.
(d) If the Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the effective date of
resignation or removal under paragraphs (a) or (b) of this section. If no such
appointment has been made, the Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions. All expenses of
the Trustee in connection with the proceeding shall be allowed as administrative
expenses of the Trust.
Section 24. Appointment of Successor.
(a) If the Trustee resigns or is removed in accordance with Section
10(a) or (b) hereof, the Company may appoint any third party, such as a bank
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trust department or other party that may be granted corporate trustee powers
under state law, as a successor to replace the Trustee upon resignation or
removal. The appointment shall be effective when accepted in writing by the new
Trustee, who shall have all of the rights and powers of the former Trustee,
including ownership rights in the Trust assets. The former Trustee shall execute
any instrument necessary or reasonably requested by the Company or the successor
Trustee to evidence the transfer.
(b) The successor Trustee need not examine the records and acts of
any prior Trustee and may retain or dispose of existing Trust assets, subject to
Sections 7 and 8 hereof. The successor Trustee shall not be responsible for and
the Company shall indemnify and defend the successor Trustee from any claim or
liability resulting from any action or inaction of any prior Trustee or from any
other past event, or any condition existing at the time it becomes successor
Trustee.
Section 25. Amendment or Termination.
(a) This Trust Agreement may be amended by a written instrument
executed by the Trustee and the Company; provided, however, that no amendment
that alters or impairs the rights of any Executive hereunder (including, but not
limited to an amendment that changes or eliminates any of the available
investment options described in Section 5 hereof) may be made without the prior
written consent of the affected Executive.
(b) The Trust shall not terminate until the date on which the
Executives and their beneficiaries are no longer entitled to benefits pursuant
to the
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terms of the Deferred Compensation Agreements. Upon termination of the Trust any
assets remaining in the Trust shall be returned to Company.
(c) Upon written approval of the Executives or their beneficiaries
entitled to payment of benefits pursuant to the terms of the Deferred
Compensation Agreements, the Company may terminate this Trust prior to the time
all benefit payments under the Deferred Compensation Agreements have been made.
All assets in the Trust at termination shall be returned to the Company.
Section 26. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to the Executives and their beneficiaries under
this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment, garnishment,
levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be construed in accordance with and
governed by the laws of New York without regard to its conflict of laws
principles.
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Section 27. Effective Date.
The effective date of this Trust Agreement shall be as of ________
__, 199_.
IN WITNESS WHEREOF, the parties hereto have executed the Trust as of
the date first above written.
XXXX XXXXX XXXXXX CORPORATION
By:__________________________________
[ ], Trustee
By:__________________________________
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APPENDIX 1
List of Executives
