TRUST AGREEMENT
Exhibit
10(u)
THIS
TRUST AGREEMENT, effective as of October 1, 2006, is made by and between DNB
FINANCIAL CORPORATION ("Company") and DNB FIRST, NATIONAL ASSOCIATION
("Trustee").
WHEREAS,
the Company has adopted the nonqualified deferred compensation Plans listed
in
Appendix A (individually, a “Plan” and collectively, the "Plans");
WHEREAS,
the Company has incurred or expects to incur liability under the terms of the
Plans with respect to the individuals participating in the Plans and their
beneficiaries (individually a "Participant" and collectively the
"Participants");
WHEREAS,
the Company wishes to establish a trust (the "Trust") and to contribute to
the
Trust the assets that shall be held therein, subject to the claims of the
Company's creditors in the event of the Company's Insolvency, as defined in
Section 4, until paid to Participants in such manner and at such times as
specified in the Plans and this Trust Agreement;
WHEREAS,
it is the intention of the parties that this Trust shall constitute an unfunded
arrangement and shall not affect the status of any Plan subject to the Employee
Retirement Income Security Act of 1974, as amended, ("ERISA") as an unfunded
plan maintained for the purpose of providing deferred compensation for a select
group of management or highly compensated employees, or benefits under any
excess benefit plan as that term is defined in Section 3(36) of ERISA to certain
employees in excess of the limitations on contributions and benefits imposed
by
Section 415 of the Internal Revenue Code of 1986, as amended (the “Code”);
and;
WHEREAS,
it is the intention of the Company to make contributions to the Trust to provide
a source of funds to meet its liabilities under the Plans.
NOW
THEREFORE, the parties do hereby establish the Trust and agree that the Trust
shall be comprised, held and disposed of as follows:
Section
1. Establishment of Trust.
(a)
The
Company hereby establishes the Trust with the Trustee, consisting of such sums
of money and other property acceptable to the Trustee as from time to time
shall
be paid and delivered to and accepted by the Trustee from the Company (the
"Trust Fund"). The Trustee shall have no duty to determine or collect
contributions under the Plans and shall have no responsibility for any property
until it is received and accepted by the Trustee. The Company shall have the
sole duty and responsibility for the determination of the accuracy or
sufficiency of the contributions to be made under the Plans. All such money
and
other property paid or delivered to and accepted by the Trustee 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; notwithstanding the fact that
the
Trust is irrevocable, the Company may terminate the Plans (or any of them)
at
any time.
(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 Code, as amended, and shall be construed accordingly. The Company represents
and warrants to the Trustee that: (i) no Plan for which benefits are or may
become payable under this Trust is or shall be subject to Part 4 of Title I
of
ERISA; and (ii) any Plan subject to ERISA covers, and will cover, only (x)
a
select group of management or highly compensated employees as contemplated
by
Section 401(a) of ERISA and interpretations, opinions, and rulings of the
Department of Labor thereunder or (y) Participants in an excess benefit plan
as
defined in Section 3(36) of ERISA.
(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
of paying Participants under the Plans, expenses of the Trust and, in the event
of Insolvency, obligations of the Company to its general creditors as herein
set
forth. The Participants and their beneficiaries shall have no preferred claim
on, nor any beneficial ownership interest in, any assets of the Trust. Any
rights created under the Plans and this Trust Agreement shall be unsecured
contractual rights of the Participants and their beneficiaries against the
Company. Any assets held by the Trust will be subject to the claims of the
Company's general creditors under federal and state law in the event of
Insolvency, as defined in Section 4(a) herein.
(e)
In
addition to the contributions necessary to meet the Trust Funding Requirement
(as defined in Section 2), the Company, in its sole discretion, may at any
time,
or from time to time, make additional deposits of cash or other property in
trust with the Trustee to augment the principal to be held, administered and
disposed of by the Trustee as provided in this Trust Agreement. Neither the
Trustee nor any Participant or beneficiary shall have any right to compel such
additional deposits.
Section
2. Trust Funding Requirement
From
time
to time but in no event less frequently than monthly, the Company shall
contribute to the Trust (in cash, shares of Company common stock or other stock
for which Company common stock has been exchanged in accordance with the
applicable Plans (“Stock”) or other property as provided or permitted by the
respective applicable Plans) the amounts the Company is obligated to credit
to
each Participant’s account under a Plan (herein, a “Deferred Compensation
Account”), except that no amounts shall be contributed during any period to the
extent necessary to avoid the application of Section 409A(b)(3) of the Code
(as
amended by the Pension Protection Act of 2006). The Deferred Compensation
Account of each Participant shall be separate and segregated from the Deferred
Compensation Accounts of other Participants, but the Trustee shall nevertheless
be authorized to commingle cash or hold shares of Stock in a single name or
in
one or more aggregate certificates or in book entry, or in one or more accounts
under the Company’s dividend reinvestment plan, for purposes of achieving
economies or efficiencies in investments or administration or complying with
the
provisions of this Trust Agreement, so long as the Trustee maintains records
identifying the interests of each Participant
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therein.
The
Trustee may commingle the cash allocable to individual Accounts that would
not
otherwise be sufficiently large to purchase whole shares of Stock, for purposes
of investing it in Stock, but only to the extent that the Trustee maintains
records showing the fractional shares thereof allocable to each
Account.
Section
3. Payments to Plan Participants and Their Beneficiaries.
(a)
The
Company shall deliver to the Trustee a schedule (the "Payment Schedule") that
indicates the amounts payable in respect of each Participant and that provides
a
formula or other instructions acceptable to the Trustee for determining the
amounts so payable, the form in which such amount is to be paid (as provided
for
or available under the applicable Plan), and the time of commencement for
payment of such amounts. The Company shall be responsible for notifying the
Trustee of any change in the information on the Payment Schedule. Except as
otherwise provided herein, the Trustee shall make payments to the Participants
(including beneficiaries) in accordance with such Payment Schedule.
(b)
It is
the intent of the Company and the Trustee that the Company shall be responsible
for determining and effecting all federal, state and local tax aspects of the
Plans and the Trust Fund, including without limitation income taxes payable
on
the Trust Fund's income, if any, any required withholding of income or other
payroll taxes in connection with the payment of benefits from the Trust Fund
pursuant to the Plans, and all reporting required in connection with any such
taxes. To the extent that the Company is required by applicable law to pay
or
withhold such taxes or to file such reports, such obligation shall be a
responsibility allocated to the Company, as the case may be, hereunder. To
the
extent the Trustee is required by applicable law to pay or withhold such taxes
or to file such reports, the Company shall inform the Trustee of such
obligation, shall direct the Trustee with respect to the performance of such
obligations and shall provide the Trustee with all information required by
the
Trustee to meet such obligations. Notwithstanding the foregoing, the Company
may
elect to pay any applicable taxes directly. In the event the Company pays taxes
directly, such amounts may be reimbursed from Trust assets by the Trustee,
provided that the Company certifies the amount of taxes paid directly and
instructs the Trustee to remit a reimbursement of such taxes to the
Company.
(c)
The
entitlement of a Participant (including any beneficiaries) to benefits under
a
Plan shall be determined by the Company or such party as it shall designate
under the applicable Plan, and any claim for such benefits shall be considered
and reviewed under the procedures set out in the Plan. The Company shall notify
the Trustee of such determination and shall direct commencement of payments
of
such benefits.
(d)
The
Company may make payment of benefits directly to the Participants as they become
due under the terms of the Plans. The Company shall notify the Trustee of its
decision to make payment of benefits directly prior to the time such amounts
are
payable. If requested by the Company, the Trustee shall reimburse the Company
for any benefits under a Plan and Trust which are paid by the Company or
otherwise satisfied. In addition, if the principal of the Trust, together with
any earnings thereon, are not sufficient to make payment of benefits in
accordance with the terms of the Plans, the Company shall immediately make
up
the balance of each such
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payment
as it falls due. The Trustee shall notify the Company when principal and
earnings are not sufficient.
Section
4. Trustee Responsibility regarding Payments to Trust Beneficiary When Company
Is or Is Alleged to Be Insolvent.
(a)
The
Trustee shall cease payment of benefits to the 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. A determination
of Insolvency under the terms of this Trust Agreement does not constitute an
admission of insolvency by the Company for any other purpose.
(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 Insolvency. 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 and their beneficiaries. In
all
cases, the Trustee shall be entitled to conclusively rely upon the written
certification of the Board of Directors or the Chief Executive Officer of the
Company when determining whether the Company is Insolvent.
(2)
Unless the Trustee 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 Participants or their beneficiaries and shall
hold the assets of the Trust for the benefit of the Company's general creditors
except that the Trustee's fees and expenses may continue to be paid pursuant
to
Section 11 subject to any applicable bankruptcy rules. Nothing in this Trust
Agreement shall in any way diminish any rights of the Participants or their
beneficiaries to pursue their rights as general creditors of the Company with
respect to benefits due under the Plans or otherwise.
(4)
The
Trustee shall resume the payment of benefits to the Participants or their
beneficiaries in accordance with Section 3 of this Trust Agreement only after
the Trustee has determined that the Company is not Insolvent (or is no longer
Insolvent).
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(c)
Provided that there are sufficient assets if the Trustee discontinues the
payment of benefits from the Trust pursuant to Section 4(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to the
Participants or their beneficiaries under the terms of the Plans (as certified
to the Trustee by the Company) for the period of such discontinuance less the
aggregate amount of any payments made to the Participants or their beneficiaries
by the Company in lieu of the payments provided for hereunder during any such
period of discontinuance.
Section
5. Payments to Company.
Except
as
otherwise specifically provided in this Trust Agreement, 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 has been made
to
the Participants and their beneficiaries pursuant to the terms of the Plans
(as
certified to the Trustee by the Company). Notwithstanding the above, the Company
may direct the Trustee to transfer to the Company Trust Fund assets in an amount
necessary to avoid triggering taxable income to a Participant or beneficiary
if
such Participant or beneficiary would be required to recognize income tax on
such funds if they remain in the Trust. The Trustee shall be entitled to rely
solely on the Company's representation that the amount directed to be returned
to the Company could become taxable to a Participant or beneficiary and shall
have no duty to review the Company's determination of the amount.
Section
6. Investment and Administrative Authority.
(a)
Prior
to a “Change of Control” (as defined in Section 12 of this Agreement) the
Company shall establish and maintain written investment guidelines (the
"Investment Guidelines"), which may be revised by the Company from time to
time
consistent with the provisions of the applicable Plans, for the investment
of
the assets in the Trust Fund. The Trust Fund shall at all times be managed
in
accordance with the Investment Guidelines then in effect. The Company may
appoint and remove one or more investment managers from time to time to manage
specified portions of the Trust Fund. To the extent that assets of the Trust
Fund are not so managed by an investment manager appointed by the Company,
the
Company shall manage all such assets. The Company and each investment manager
shall designate in writing the persons who are authorized to represent such
party in dealing with the Trustee. Except as provided in subsection (b) below,
the Trustee shall have no investment duties for the Trust Fund. The Trustee
shall have no duty to inquire whether investment directions received from the
Company or an investment manager are in accordance with the terms of any Plan
or
the Investment Guidelines, or to review the assets purchased, retained or
sold.
(b)
After
a Change of Control, the Trustee shall have and exercise sole investment
discretion with respect to all of the Trust Fund in accordance with the
Investment Guidelines in effect immediately prior to a Change of Control, a
copy
of which shall be provided prior to a Change of Control to the Trustee by the
Company. The Trustee's sole responsibility with regard to investment discretion
shall be to exercise such discretion in accordance with the Investment
Guidelines. Thereafter, the Investment Guidelines may be changed from time
to
time by mutual agreement of the Trustee and the Company. The Trustee may, in
its
sole discretion, appoint,
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retain
or
terminate an investment manager (including any affiliate of the Trustee) to
manage all or a portion of the Trust Fund in accordance with the current
Investment Guidelines.
(c)
In
addition to those powers conferred by law, the Trustee shall have the following
powers:
(1)
The
Trustee may invest and reinvest the principal and income of the Trust and keep
it invested, without distinction between principal and income, as provided
in
the Investment Guidelines.
(2)
The
Trustee may collect and receive any and all money and other property due the
Trust and give full discharge therefor.
(3)
The
Trustee may settle, compromise or submit to arbitration any claims, debt or
damages due or owing to or from the Trust; the Trustee may also commence or
defend suits or legal proceedings to protect any interest of the Trust, and
may
represent the Trust in all suits or legal proceedings in any court or before
any
other body or tribunal.
(4)
The
Trustee may take all action necessary to pay for authorized transactions,
including the temporary advancement of cash or securities to settle security
purchases and/or foreign exchange or contracts for foreign exchange and any
property at any time held in the Trust Fund shall be security therefore to
the
extent of such advancement until it is repaid.
(5)
The
Trustee may appoint custodians, subcustodians or subtrustees, domestic or
foreign (including affiliates of the Trustee), as to part or all of the Trust.
The Trustee shall not be responsible or liable for any losses or damages
suffered by the Company arising as a result of the insolvency of any custodian,
subcustodian or subtrustee, except to the extent the Trustee was negligent
in
its selection or continued retention of such custodian, subcustodian or
subtrustee. In no event shall Trustee be liable for the acts or omissions of
any
custodian, subcustodian or subtrustee appointed pursuant to the direction of
the
Company or an investment manager.
(6)
The
Trustee may hold property in nominee name, in bearer form, or in book entry
form, in a clearinghouse corporation or in a depository (including an affiliate
of the Trustee), so long as the Trustee's records clearly indicate that the
assets held are a part of the Trust. The Trustee shall not be responsible for
any losses resulting from the deposit or maintenance of securities or other
property (in accordance with market practice, custom, or regulation) with any
recognized foreign or domestic clearing facility, book-entry system, centralized
custodial depository, or similar organization.
(7)
The
Trustee may generally do all acts, whether or not expressly authorized, which
the Trustee may deem necessary or desirable for the protection of the
Trust.
(d)
Notwithstanding any other provision of this Agreement, to the extent that a
Plan
or applicable Investment Guidelines permit or require investment of Trust assets
in Stock, the Trustee shall be authorized to accept, hold and purchase Stock,
reinvest income in Stock, and otherwise administer Stock for the benefit of
Participants, without any obligation to diversify
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investments
or investment risk for the benefit of any Participant, and without regard to
any
“prudent investor” or similar laws or rules, and notwithstanding that the
Trustee may be affiliated with the Company or otherwise personally interested
in
the Company, the Stock or any transactions in Stock; and the Trustee shall
have
no obligation to refrain from self-dealing in connection with any Stock or
any
interests in Stock administered by the Trustee. Without limiting the foregoing,
the Trustee shall not be obligated, even when requested by a Participant, to
sell or otherwise dispose of any Stock prior to distribution of the Stock to
the
Participant in accordance with the provisions of the applicable Plan, the
Participant’s applicable elections, and this Trust Agreement. The Company, and
by agreeing to defer compensation subject to this Trust Agreement each
Participant, for themselves and their respective successors and heirs, hereby
severally release, hold harmless and indemnify the Trustee, all successors
to
the Trustee in such capacity, and each of their agents and the respective
successors, personal representatives and heirs of each of the foregoing, from
and against all liability (including without limitation due to claims of
negligence), loss, cost, damages (including without limitation consequential
damages, lost profits, loss of expectation and punitive or exemplary damages
of
all kinds) and expense (including without limitation attorneys fees and costs
of
litigation) which the Company or any Participant or Participant’s personal
representatives, heirs or beneficiaries may now or hereafter suffer or incur
by
virtue of the Trustee’s acting or omitting to act based on the authority granted
to the Trustee in this subsection. The provisions of this subsection shall
survive the termination of this Trust Agreement.
(e)
Neither the Company nor the Trustee shall have discretion to vote any shares
of
Stock except pursuant to instructions received from Participants. The Trustee
shall be authorized, in its discretion, to take either of the following actions
in connection with shareholders meetings or other circumstances where a
Participant’s vote, approval or other action is requested: (i) to forward to
each Participant the materials received by the Trustee for the Participant
with
respect to the vote, approval or other action, along with a notification to
the
Participant to deliver the proxy card or other voting, approval or other
materials directly to the Company or elsewhere as the Company shall direct;
or
(ii) to forward to each Participant copies of the materials received with
respect to the vote, approval or other action, along with a notification to
the
Participant that the Trustee will vote or withhold votes, or provide or withhold
other approvals or actions, with respect to shares of Stock held in the
Participant’s deferred compensation account, only according to instructions
received from the Participant. In the case described in clause (ii) of this
subsection: (A) the Trustee shall have no authority to take any action with
respect to a vote, approval or other action requested of any Stock held in
a
Participant’s deferred compensation account in the absence of instructions from
the Participant; and (B) the Trustee shall only be authorized to vote or give
approval or take other actions with respect to fractional interests in any
Stock
held in a Participant’s deferred compensation account to the extent that the
Participant would have such authority if such Stock were held directly by such
Participant. The Company agrees, to the extent requested by the Trustee, to:
(I)
provide to the Trustee such numbers of copies of materials being distributed
to
shareholders as the Trustee may request in order to fulfill the Trustee’s
obligations to Participants under this Trust Agreement with respect thereto;
and
(II) deliver such materials directly to Participants, along with any
notification or other materials required by the Trustee, to addresses to be
provided by the Trustee.
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Section
7. Settlement and Income; Market Practice Settlements.
(a)
In
accordance with the Trustee's standard operating procedure, the Trustee shall
credit the Trust Fund with income, which shall include interest, dividends
and
return of capital, and maturity proceeds on securities on contractual payment
date net of any taxes or upon actual receipt. To the extent the Trustee credits
income on contractual payment date, the Trustee may reverse such accounting
entries to the contractual payment date if the Trustee reasonably believes
that
such amount will not be received.
(b)
In
accordance with the Trustee's standard operating procedure, the Trustee will
attend to the settlement of securities transactions on the basis of either
contractual settlement date accounting or actual settlement date accounting.
To
the extent the Trustee settles certain securities transactions on the basis
of
contractual settlement date accounting, the Trustee may reverse any entry
relating to such contractual settlement if the Trustee reasonably believes
that
such amount will not be received.
(c)
Settlements of transactions may be effected in trading and processing practices
customary in the jurisdiction or market where the transaction occurs. The
Company acknowledges that this may, in certain circumstances, require the
delivery of cash or securities (or other property) without the concurrent
receipt of securities (or other property) or cash. In such circumstances, the
Trustee shall have no responsibility for nonreceipt of payment (or late payment)
or nondelivery of securities or other property (or late delivery) by the
counterparty.
Section
8. Disposition of Income.
During
the term of this Trust, all income received by the Trust with respect to each
Deferred Compensation Account, net of expenses and taxes, shall be accumulated
and reinvested in and for the benefit of such Deferred Compensation
Account
according to
the
procedures and valuation provisions as are applicable under the Company’s
dividend reinvestment plan from time to time. In order to comply with this
requirement, the Trustee is authorized to deposit Stock held by it in one or
more accounts under the Company’s dividend reinvestment plan. The Trustee shall
have no liability to anyone whatsoever for any failure of the Company, any
administrator or any other agent of the Company to adhere to the provisions
of
the Company’s dividend reinvestment plan.
Section
9. Accounting by Trustee.
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. Within sixty (60) days following the close of each calendar year and
within ninety (90) 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 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
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the
Trust
at the end of such year or as of the date of such removal or resignation, as
the
case may be. If, within 120 days after the Trustee mails to the Company a
statement with respect to the Trust, the Company has not given the Trustee
written notice of any exception or objection thereto, the statement shall be
deemed to have been approved, and in such case, the Trustee shall not be liable
for any matters in such statements. The Company or its agent shall have the
right at its own expense and with prior written notice to the Trustee to inspect
the Trustee's books and records directly relating to the Trust Fund during
normal business hours.
Section
10. 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 which is contemplated by, and in conformity with,
the terms of the Plans (as certified to the Trustee by the Company) or this
Trust and is given in writing by the Company. In the event of a dispute between
the Company and a third party, the Trustee may apply to a court of competent
jurisdiction to resolve the dispute.
(b)
The
Trustee is not a party to and has no duties or responsibilities under any Plan
other than those that may be expressly contained in this Trust Agreement. In
any
case in which a provision of this Trust Agreement conflicts with any provision
in any Plan or Plans, this Trust Agreement shall control.
(c)
The
Trustee shall not be responsible for the title, validity or genuineness of
any
property or evidence of title thereto received by it or delivered by it pursuant
to this Trust Agreement and shall be held harmless in acting upon any notice,
request, direction, instruction, consent, certification or other instrument
believed by it to be genuine and delivered by the proper party or
parties.
(d)
The
Company agrees to indemnify and hold harmless the Trustee, its parent,
subsidiaries and affiliates, and each of their respective officers, directors,
employees and agents from and against all liability, loss and expense, including
reasonable attorneys' fees and expenses incurred by the Trustee or any of the
foregoing indemnitees arising out of or in connection with this Trust Agreement,
except as a result of the Trustee's own negligence, willful misconduct, bad
faith or breach of this Agreement or of its fiduciary duties. The Trustee shall
be fully indemnified by the Company for any action taken in accordance with,
or
any failure to act in the absence of, the Company's or an investment manager's
directions. 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 except where the Trustee is determined to be liable due to its
negligence, willful misconduct, bad faith, or breach of this Trust Agreement
or
of its fiduciary duties. If the Company does not pay such costs, expenses and
liabilities in a reasonably timely manner, the Trustee may obtain payment from
the Trust. This Section 10(d) shall survive the termination of this Trust
Agreement. The
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provisions
of this subsection shall supplement and shall not restrict the application
of
any other provisions of this Trust Agreement providing for indemnification,
hold-harmless or release of the Trustee, and in the event of a conflict in
application of this subsection and any other such provision, the provision
most
protective to the Trustee shall control.
(e)
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 and as
a
part of its reimbursable expenses under this Agreement, pay counsel's reasonable
compensation and expenses. The Trustee shall be entitled to rely on and may
act
upon advice of counsel on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice.
(f)
The
Trustee may hire agents, accountants, actuaries, investment advisors, financial
consultants or other professionals, including affiliates, to assist it in
performing any of its duties or obligations hereunder.
(g)
The
Trustee shall have without exclusion, all powers conferred on Trustees by
applicable law, unless expressly provided otherwise herein, provided, however,
that if an insurance policy is held as an asset of the Trust, 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 such policy.
(h)
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 Code.
(i)
Notwithstanding anything in this Trust Agreement to the contrary contained
herein, the Trustee shall not be responsible or liable for any losses to the
Trust resulting from any event beyond the reasonable control of the Trustee,
its
agents or custodians, including but not limited to nationalization, strikes,
expropriation, devaluation, seizure, or similar action by any governmental
authority, de facto or de jure; or enactment, promulgation, imposition or
enforcement by any such governmental authority of currency restrictions,
exchange controls, levies or other charges affecting the Trust's property;
or
the breakdown, failure or malfunction of any utilities or telecommunications
systems; or any order or regulation of any banking or securities industry
including changes in market rules and market conditions affecting the execution
or settlement of transactions; or acts of war, terrorism, insurrection or
revolution; or acts of God; or any other similar event; or any action or
omission taken by the Trustee consistent with the provisions of this Trust
Agreement.
(j)
The
Trustee shall not be liable for any act or omission of any other person, except
to the extent that such person is an agent of the Trustee (not appointed
pursuant to the direction of the Company or an investment manager) or under
the
control of the Trustee, in carrying out any responsibility imposed upon such
person and under no circumstances shall the Trustee be liable for any indirect,
consequential, or special damages with respect to its role as
Trustee.
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(k)
The
Trustee shall not be obligated to monitor, or to advise or give any notices
to
any Participant with respect to, the Stock, the Company or the market value,
trading prices or other events affecting the Stock or the Company.
(l)
The
provisions of this Section shall survive the termination of this Trust
Agreement.
Section
11. Compensation and Expenses of Trustee.
The
Company shall pay all Trustee's fees and expenses necessary for the Trustee
to
fulfill its duties hereunder as mutually agreed between the parties. If not
so
paid within sixty (60) days after an invoice is sent to the Company, the fees
and expenses shall be paid from the Trust. The Company acknowledges that as
part
of the Trustee's compensation, the Trustee may earn interest on balances
including disbursement balances and balances arising from purchase and sale
transactions. If the Trustee advances cash or securities to the Trust for any
purpose, or in the event that the Trustee shall incur or be assessed taxes,
interest, charges, expenses, assessments, or other liabilities in connection
with the performance of this Trust Agreement, except such as may arise from
its
own negligent failure to act or willful misconduct, any property at any time
held in the Trust Fund shall be, to the extent of the advance, security therefor
and the Trustee shall be entitled to collect from the Trust sufficient cash
for
reimbursement, and if such cash is insufficient, dispose of the assets of the
Trust Fund to the extent necessary to obtain reimbursement. To the extent the
Trustee advances funds to the Trust for disbursements or to effect the
settlement of purchase transactions, the Trustee shall be entitled to collect
from the Trust either (i) with respect to domestic assets, an amount equal
to
what would have been earned on the sums advanced (an amount approximating the
"federal funds" interest rate) or (ii) with respect to non-domestic assets,
the
rate applicable to the appropriate foreign market.
Section
12. Change of Control
(a)
For
purposes of this Agreement, a "Change of Control" shall mean any one or more
of
the following with respect to the Company:
(1)
a
change in control of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act") (or any successor provision) as it
may
be amended from time to time;
(2)
any
"persons" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act
in effect on the date first written above), other than Company, its primary
wholly owned subsidiary bank (“Bank’) or any "person" who on the date hereof is
a director of officer of Company or Bank, is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of
securities of Company representing 25% or more of the combined voting power
of
Company's then outstanding securities; or
(3)
during any period of two (2) consecutive years, individuals who at the beginning
of such period constitute the Board of Directors of Company or Bank cease for
any
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reason
to
constitute at least a majority thereof, unless the election of each director
who
was not a director at the beginning of such period has been approved in advance
by directors representing at least two-thirds of the directors then in office
who were directors at the beginning of the period.
(b)
The
Company shall have the duty to inform the Trustee in writing upon the occurrence
of a Change of Control. The Trustee shall be entitled to conclusively rely
upon
such written certification of the Company and shall have no responsibility
or
liability for determining whether a Change of Control has occurred.
Section
13. Resignation and Removal of Trustee.
(a)
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.
(b)
The
Trustee may be removed by the Company on sixty (60) days notice or upon shorter
notice accepted by the Trustee, except that after a Change of Control as defined
herein, the Trustee may not be removed by the Company for one year.
(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 ninety (90) days after receipt of the 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 14 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. The Trustee shall continue to fulfill its duties
hereunder and shall receive compensation pursuant to Section 11 until the
successor's appointment is effective. All expenses of the Trustee in connection
with the proceeding shall be allowed as administrative expenses of the
Trust.
(e)
If
the Trustee resigns within one year of a Change of Control, as defined herein,
the Trustee shall select a successor Trustee in accordance with the provisions
of Section 14(c) hereof prior to the effective date of the Trustee's
resignation.
Section
14. Appointment of Successor.
(a)
If
the Trustee resigns or is removed in accordance with Section 13 (a) or (b)
hereof, the Company shall appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee powers under
state law, as a successor to replace the Trustee upon such 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.
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(b)
The
successor Trustee need not examine the records and acts of any prior Trustee
and
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.
(c)
If
the Trustee resigns pursuant to the provisions of Section 13(e) hereof and
selects a successor Trustee, the Trustee may appoint any third party such as
a
bank trust department or other party that may be granted corporate trustee
powers under state law. The appointment of a successor Trustee shall be
effective when accepted in writing by the new Trustee. The new Trustee shall
have all the rights and powers of the former Trustee, including ownership rights
in Trust assets. The former Trustee shall execute any instrument necessary
or
reasonably requested by the successor Trustee to evidence the
transfer.
Section
15. Amendment or Termination.
(a)
Subject to Section 15(c), this Trust Agreement may be amended by a written
instrument which is executed by the Trustee and Company and which recites that
it is an amendment to this Trust Agreement. Notwithstanding the foregoing,
no
such amendment shall conflict with the terms of any Plan (as certified to the
Trustee by the Company) or shall make the Trust revocable.
(b)
The
Trust shall not terminate until the date on which the Participants and their
beneficiaries are no longer entitled to benefits pursuant to the terms of any
Plan (as certified to the Trustee by the Company). Upon termination of the
Trust
any assets remaining in the Trust shall be returned to the Company.
(c)
Notwithstanding any other provision in this Trust Agreement, this Trust
Agreement may not be amended within one year after the occurrence of a Change
of
Control, unless the Trustee determines, in its discretion, that such amendment
is necessary for the administration of the trust and does not conflict with
or
alter the provisions of any Plan.
Section
16. Miscellaneous.
(a)
Neither the Company nor the Trustee may assign this Trust Agreement without
the
prior written consent of the other, except that the Trustee may assign its
rights and delegate its duties hereunder to any corporation or entity which
directly or indirectly is controlled by, or is under common control with, the
Trustee. This Trust Agreement shall be binding upon, and inure to the benefit
of, the Company and the Trustee and their respective successors and permitted
assigns. Any entity which shall by merger, consolidation, purchase, or
otherwise, succeed to substantially all the trust business of the Trustee shall,
upon such succession and without any appointment or other action by the Company,
be and become successor trustee hereunder, upon notification to the
Company
(b)
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.
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(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)
Notwithstanding anything to the contrary contained elsewhere in this Trust
Agreement, any reference to a Plan or Plan provisions which require knowledge
or
interpretation of the Plan shall impose a duty upon the Company to communicate
such knowledge or interpretation to the Trustee. The Trustee shall have no
obligation to know or interpret any portion of any Plan and shall in no way
be
liable for any proper action taken contrary to any Plan.
(e)
This
Trust Agreement shall be governed by and construed in accordance with the
internal laws of the Commonwealth of Pennsylvania (without reference to rules
of
conflicts of law or choice of law) and applicable federal law. The parties
hereby expressly waive, to the full extent permitted by applicable law, any
right to trial by jury with respect to any judicial proceeding arising from
or
related to this Trust Agreement.
Section
17. Reliance of Representations.
(a)
The
Company and the Trustee each acknowledge that the other will be relying, and
shall be entitled to rely, on the representations, undertakings and
acknowledgments of the other as set forth in this Trust Agreement. The Company
and the Trustee each agree to notify the other promptly if any of its
representations, undertakings, or acknowledgments set forth in this Trust
Agreement ceases to be true.
(b)
The
Company and the Trustee hereby each represent and warrant to the other that
it
has full authority to enter into this Agreement upon the terms and conditions
hereof and that the individual executing this Trust Agreement on their behalf
has the requisite authority to bind the Company and the Trustee to
this.
IN
WITNESS WHEREOF, the parties have duly executed this Trust Agreement as of
the
date first set forth above.
|
DNB
FINANCIAL CORPORATION
By:
____________________________
Name:
______________________
Title:
_______________________
|
DNB
FIRST, NATIONAL ASSOCIATION, as Trustee
By:
____________________________
Name:
______________________
Title:
_______________________
|
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APPENDIX
A
to
RABBI
TRUST AGREEMENT
between
DNB
FINANCIAL CORPORATION
and
DNB
FIRST, NATIONAL ASSOCIATION
Name(s)
of Plans:
|
1.
|
DNB
Financial Corporation Incentive Equity and Deferred Compensation
Plan
adopted effective November 24,
2004.
|
|
2.
|
Deferred
Compensation Plan for Directors of DNB Financial Corporation adopted
effective October 1, 2006.
|
|
3.
|
DNB
Financial Corporation Deferred Compensation Plan adopted effective
October
1, 2006.
|
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