TRUST UNDER HARRIS & HARRIS GROUP, INC. DEFERRED COMPENSATION AGREEMENT
TRUST
UNDER
XXXXXX
& XXXXXX GROUP, INC.
This
Trust Agreement made this second day of February, 2000, by and between Xxxxxx
& Xxxxxx Group, Inc., a corporation organized under the laws of the State of
New York (the "Company") and Xxxxxxx X. Xxxxxx (the "Trustee");
WHEREAS,
the Company has entered into a deferred compensation agreement (the "Deferred
Compensation Agreement") (attached hereto as Appendix "A") effective as of
October 19, 1999, with Xxxxxxx X. Xxxxxx (the "Executive") pursuant to the
Executive's employment agreement;
WHEREAS,
the Company may incur liability under the terms of the Deferred Compensation
Agreement with respect to the Executive;
WHEREAS,
the Deferred Compensation Agreement contemplates 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 Agreement;
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 herein defined, until
paid to the Executive (or his beneficiary) in such manner and at such times
as
specified in the Deferred Compensation Agreement;
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
Agreement as an unfunded plan maintained for the purpose of providing deferred
compensation for a highly compensated employee 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
1 Establishment
of Trust.
(1) 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.
(2) The
Trust
hereby established shall be irrevocable, but is subject to termination in
accordance with Section 12 hereof.
(3) The
Trust
is intended to be a grantor trust, of which the Company is the grantor, within
the meaning of subpart E, part 1, subchapter J, chapter 1, subtitle A of the
Internal Revenue Code of 1986, as amended, and shall be construed
accordingly.
(4) 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 Executive and his beneficiary shall have no
preferred claim on, or any beneficial ownership interest in, any assets of
the
Trust. Any rights created under the Deferred Compensation Agreement and this
Trust Agreement shall be a mere unsecured contractual right of the Executive
and
his beneficiary 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(1) herein.
(5) On
the
last business day of each month, or otherwise as required pursuant to the
Deferred Compensation Agreement, 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 Agreement. The Trustee shall
not have any right or duty to compel such contributions.
Section
2 Payments
to Executive and Beneficiary.
(1) The
Trustee shall make payment to the Executive or his beneficiary in accordance
with the directions of the Company. With respect to payments to Trust
Beneficiaries, the Company shall be solely responsible for determining the
amounts of income that are taxable and reportable, determining the nature and
amounts of taxes to be withheld and for withholding, remitting and reporting
all
such income and taxes to the applicable government entities. The Trustee shall
have no duties with respect thereto.
(2) The
entitlement of the Executive or his beneficiary to benefits shall be determined
by the Company in accordance with the provisions of the Deferred Compensation
Agreement.
(3) The
Company may make payment of benefits directly to the Executive or his
beneficiary as they become due under the terms of the Deferred Compensation
Agreement. The Company shall notify the Trustee of its decision to make a direct
payment of benefits prior to the time amounts payable to the Executive or his
beneficiary are due. In the event that the Company pays the entire amount due
to
the Executive or his beneficiary pursuant to the terms of the Deferred
Compensation Agreement, then the Trustee, upon receipt of a certification from
the Company that such payment has been made, shall return all remaining Trust
assets to the Company.
Section
3 Trustee
Responsibility Regarding Payments When the Company
Is Insolvent.
(1) The
Trustee shall cease payment to the Executive and his beneficiary 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.
(2) At
all
times during the continuance of this Trust, as provided in Section 1(4) 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 Financial 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 hereunder.
(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 Executive or his beneficiary 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 right of the Executive
or
his beneficiary to pursue rights as a general creditor of the Company with
respect to benefits due under the Deferred Compensation Agreement or
otherwise.
(4) The
Trustee shall resume the payment of benefits to the Executive or his beneficiary
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).
(3) Provided
that there are sufficient assets, if the Trustee discontinues the payment of
benefits from the Trust pursuant to Section 3(2) hereof and subsequently resumes
such payments, the first payment following such discontinuance shall include
the
aggregate
amount of all payments due to the Executive or his beneficiary under the terms
of the Deferred Compensation Agreement for the period of such discontinuance,
less the aggregate amount of any payments made to the Executive or his
beneficiary by the Company in lieu of the payments provided for hereunder during
any such period of discontinuance.
Section
4 Payments
to
Company.
Except
as
provided in Sections 2(3) 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 Executive
and
his beneficiary pursuant to the terms of the Deferred Compensation
Agreement.
Section
5 Accounts
and Investment Authority.
(1) The
Trustee shall determine the manner in which the assets shall be invested;
subject to the investment guidelines established for the Trust by the Company
from time to time. 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 (including
accounts or deposits in the Trustee's Banking Department), mortgages and other
obligations, insurance contracts and annuities, common trust funds, shares
or
participations in any investment company, fund or trust, including a registered
investment company from which the Trustee or its affiliates received
compensation for providing investment advisory, custodial, transfer agency
or
other services, and all other property, tangible and intangible, real, personal
and mixed of every kind and nature. The Company acknowledges that interests
in
registered investment companies are not bank deposits and are not insured by,
guaranteed by, obligations of, or otherwise supported by the United States
of
America, the Federal Deposit Insurance Corporation, PNC Bank, National
Association or any bank or government entity. In making such investments, the
Trustee shall not be restricted by any state law or statute designating
investments eligible for trust funds.
(2) The
Trustee is authorized to hold uninvested, from time to time, without liability
for interest thereon, such amounts as are necessary for the cash requirements
of
the Plan; and to hold assets of the Trust in cash or equivalents, government
securities, or straight debt securities in varying proportions when and for
so
long as, in the opinion of the Trustee, prevailing market and economic
considerations indicate that it is in the best interest of the Trust to do
so.
(3) The
Trustee is authorized to cause any securities or other property to be registered
in its own name or in the name of one or more of its nominees or a nominee
or
nominees of any national registered securities depository which it has selected
and to hold any investment in bearer or other negotiable form provided that
the
books and records of the Trustee at all times show that such investments are
part of the Trust. In compliance herewith, the Trustee may give to any
registrar, transfer agent, or insurer, including but not limited to
corporations, state, or Federal authorities or agents, any bond or other
guarantee which may be required. Any registrar, transfer agent, or insurer
shall
be fully protected and saved harmless from any action either at law or in equity
for acting upon or in compliance with the instructions received in writing
from
the Trustee.
(4) The
Trustee shall have the power to vote upon any stocks, bonds or other securities;
to give general or special proxies or powers of attorney with or without power
of substitution; to exercise any conversion privileges, subscription rights,
or
other options, and to make any payments incidental thereto; to oppose or to
consent to, or otherwise participate in, corporate reorganizations or other
changes affecting corporate securities, to delegate discretionary powers, and
to
pay any assessments or charges in connection therewith; and generally to
exercise any of the powers of an owner with respect to stocks, bonds,
securities, or other properties held as part of the Trust.
(5) The
Trustee shall have the power to settle, compromise, or submit to arbitration
any
claims, debts, or damage due or owing to or from the Trust, to commence or
defend suits or legal or administrative proceedings, and to represent the Trust
in all legal and administrative proceedings, provided, however, the Trustee
shall not be obligated to take any action or to appear and participate in any
action which would subject it to expense or liability unless it is first
indemnified in an amount and manner satisfactory to it, or is furnished with
funds sufficient, in its sole judgment, to cover the same.
(6) In
addition to the foregoing powers, the Trustee shall have all of the powers,
rights and privileges conferred upon trustees by the fiduciary laws of the
Commonwealth of Pennsylvania to the extent such law is not preempted by federal
law, and the power to do all acts, take all proceedings, and execute all rights
and privileges, although not specifically mentioned herein, as the Trustee
may
deem necessary to administer the Trust and to carry out the purposes of this
Trust.
(7) Notwithstanding
anything to the contrary, the Company may reserve to itself the exclusive
authority to direct the Trustee as to the acquisition, retention or disposition
of all or any portion of the assets of the Trust and, to the extent the Company
reserves such authority, the Trustee shall not be responsible for the management
and control of such assets other than to serve as custodian of them. Upon
receipt by the Trustee of a written notice from the Company advising the Trustee
that the Company has reserved such authority, the Trustee shall, pursuant to
such notice, invest all or any portion of the Trust designated in such notice
only in accordance with the instructions of the Company. The Trustee shall
be
under no duty to question any instruction of the Company. Any such instruction
may be of a continuing nature or otherwise and may be changed or revoked in
writing by the Company at any time. In the absence of such a written direction,
the Trustee shall have full authority as to the acquisition, retention or
disposition of the assets of the Trust. The Company may revoke or amend the
investment powers that it reserves to itself provided such revocation or
amendment is in writing and is consented to in advance by the
Trustee.
(8) In
no
event may the Trustee invest in securities (including stock or rights to acquire
stock) or obligations issued by the Company or affiliate, other than a de
minimis amount held in common investment vehicles in which the Trustee
invests.
Section
6 Disposition
of Income.
During
the term of this Trust, all income received by the Trust, net of expenses,
shall
be accumulated and reinvested.
Section
7 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,
including such specific records as may 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
all
investments, receipts, disbursements and other transactions effected by it
for
the 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 the Executive at
the
end of such quarter or as of the date of such removal or resignation, as the
case may be. The Company may approve the account either by written notice of
approval delivered to the Trustee or by failure to object in writing to the
Trustee within one hundred and eighty (180) days from the date on which the
account was delivered to the Trustee. Upon receipt of written approval of the
accounting, or upon the expiration of the 180-day period without written
objections, the account shall be approved, and the Trustee shall be released
and
discharged with respect to the account as if the account had been settled and
allowed by a decree of a court of competent jurisdiction. Nothing herein
contained, however, shall be deemed to preclude the Trustee of its right to
have
its account settled by a court of competent jurisdiction.
Section
8 Responsibility
of Trustee.
(1) 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 the Executive that is contemplated by, and
in
conformity with, the terms of the Deferred Compensation Agreement or this Trust;
and provided further, that the Trustee shall incur no liability to any person
for any reasonable action or failure to act taken pursuant to a reasonable
determination of the existence or nonexistence of an event of Insolvency
pursuant to Section 3 hereunder. 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.
(2) If
the
Trustee undertakes, defends or settles any pending or threatened claim or
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.
(3) 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 shall
be fully protected in reasonably relying upon the advice of
counsel.
(4) Provided
there is a prior consultation with the Company, 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.
(5) The
Trustee shall have, without exclusion, all powers conferred on the Trustee
by
applicable law, unless expressly provided otherwise herein.
(6) 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.
Section
9 Compensation
and Expenses of Trustee.
The
Company shall pay all administrative and Trustee's fees and expenses. If the
Company fails to pay such fees and expenses in a reasonably timely manner,
Trustee may obtain payment from the Trust.
Section
10 Resignation
and Removal of Trustee.
(1) 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.
(2) The
Trustee may be removed by the Company on 30 days notice or upon shorter notice
accepted by Trustee.
(3) 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.
(4) 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 (1) or (2) 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
11 Appointment
of Successor.
(1) If
the
Trustee resigns or is removed in accordance with Section 10(1) or (2) hereof,
the Company may appoint any third party, such as a bank trust department or
other party that may be granted corporate trustee powers under state law, as
a
successor to replace 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.
(2) 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
12 Amendment
or Termination.
(1) 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 the Executive hereunder may be made without the prior written consent
of the Executive.
(2) The
Trust
shall not terminate until the date on which the Executive and his beneficiary
are no longer entitled to benefits pursuant to the terms of the Deferred
Compensation Agreement. Upon termination of the Trust any assets remaining
in
the Trust shall be returned to Company.
(3) Upon
written approval of the Executive or his beneficiary entitled to payment
pursuant to the terms of the Deferred Compensation Agreement, the Company may
terminate this Trust prior to the time all benefit payments under the Deferred
Compensation Agreement have been made. All assets in the Trust at termination
shall be returned to the Company.
Section
13 Miscellaneous.
(1) 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.
(2) Benefits
payable to the Executive and his beneficiary 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.
(3) This
Trust Agreement shall be construed in accordance with and governed by the laws
of the Commonwealth of Pennsylvania without regard to its conflict of laws
principles.
Section
14 Effective
Date.
The
effective date of this Trust Agreement shall be as of February 2,
2000.
IN
WITNESS WHEREOF, the parties hereto have executed the Trust as of the date
first
above written.
XXXXXX
& XXXXXX GROUP, Inc.
By:
/s/
Xxx
X. Xxxxxxxxxx
Xxx
X.
Xxxxxxxxxx
President
PNC
BANK,
Trustee
By:
/s/
Xxxxxx X. Xxxxxx
Xxxxxx
X.
Xxxxxx, Vice President
