EXHIBIT 10.(iii)
DEFERRED COMPENSATION TRUST FOR MONROE BANCORP
(a) This Agreement made this ________ day of December, 1998 by and
between Monroe Bancorp (the "Company") and First Merchants Bank, N.A. and its
successors and assigns (the "Trustee");
WITNESS THAT:
(b) WHEREAS, the Company has promised to compensate the executives and
directors of the Company and its subsidiaries (the "Employees") for services
rendered to the Company or the subsidiaries by means of providing them with
retirement benefits payable as provided under the Monroe Bancorp Directors'
Deferred Compensation Plan and the Monroe Bancorp Executives' Deferred
Compensation Plan (the "Plans");
(c) WHEREAS, the Company wishes to establish a trust (hereinafter
called "Trust") and to contribute to the Trust assets that shall be held
therein, subject to the claims of the Company's creditors in the event of the
Company's Insolvency, as herein defined, until paid to the Employees and their
beneficiaries in such manner and at such times as specified in the Plans;
(d) WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plans
as unfunded plans maintained for the purposes 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;
(e) WHEREAS, it is the intention of the Company to make contributions
to the Trust to provide itself with a source of funds to assist it in the
meeting of 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:
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Section 1. Establishment of Trust.
(a) The Company hereby deposits with Trustee in trust $100.00, which
shall become the principal of the Trust to be held, administered and disposed of
by Trustee as provided in this Trust Agreement.
(b) The Trust hereby established shall be irrevocable by the Company.
(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, as 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 uses and purposes of Employees and general creditors as herein set
forth. Employees and their beneficiaries shall have no preferred claim on, or
any beneficial ownership interest in, any assets of the Trust. Any rights
created under the Plans and this Trust Agreement shall be mere unsecured
contractual rights of Employees 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 3(a) herein.
(e) 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
Trustee to augment the principal to be held, administered and disposed of by
Trustee as provided in this Trust Agreement. Neither Trustee nor Employees or
any beneficiaries shall have any right to compel such additional deposits,
pursuant to this Trust Agreement.
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Section 2. Payments to Employees and Their Beneficiaries.
(a) The Company shall deliver to Trustee a schedule (the "Payment
Schedule") that indicates (i) the amounts payable in respect of the Employees
(or their beneficiaries), reduced by any amount to be withheld for the payment
of any federal, state or local taxes, (ii) the form in which such amount is to
be paid (as provided for or available under the Plans), and (iii) the time of
commencement for payment of such amounts. Except as otherwise provided herein,
Trustee shall make the net payments to Employees and their beneficiaries in
accordance with such Payment Schedule. The Trustee shall distribute the amount
withheld from the Employee's or beneficiary's payment for taxes (as determined
by the Company) to the Company, and the Company shall make provision and be
responsible for the reporting of the withheld taxes and shall pay the withheld
taxes to the appropriate taxing authorities.
(b) The entitlement of the Employees or their beneficiaries to benefits
under the Plans shall be determined by the Company or such party as it shall
designate under the Plans, and any claim for such benefits shall be considered
and reviewed under the procedures set out in the Plans.
(c) The Company may make payment of benefits directly to Employees or
their beneficiaries as they become due under the terms of the Plans. The Company
shall notify Trustee of its decision to make payment of benefits directly prior
to the time amounts are payable to Employees or their beneficiaries. In
addition, if the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the terms of the
Agreement, the Company shall make the balance of each such amount as it falls
due. Trustee shall notify the Company where principal and earnings are not
sufficient.
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Section 3. Trustee Responsibility Regarding Payments to Trust
Beneficiary When Company is Insolvent.
(a) Trustee shall cease payment of benefits to the Employees and their
beneficiaries if the Company is Insolvent. The Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) The Company is unable to
pay its debts as they become due, or (ii) The Company is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, 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 Financial Officer of
the Company shall have the duty to inform Trustee in writing of Company's
Insolvency. If a person claiming to be a creditor of the Company alleges in
writing to Trustee that the Company has become Insolvent, Trustee shall
determine whether the Company is Insolvent and, pending such determination,
Trustee shall discontinue payment of benefits to the Employees or their
beneficiaries.
(2) Unless Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company or a person claiming to be a
creditor alleging that the Company is Insolvent, Trustee shall have no duty to
inquire whether the Company is Insolvent. Trustee may in all events rely on such
evidence concerning the Company's insolvency as may be furnished to Trustee and
that provides Trustee with a reasonable basis for making a determination
concerning the Company's solvency.
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(3) If at any time Trustee has determined that Company is
Insolvent, Trustee shall discontinue payments to Employees 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 Employees or their beneficiaries to pursue their rights
as general creditors of the Company with respect to benefits due under the Plans
or otherwise.
(4) Trustee shall resume the payment of benefits to the
Employees or their beneficiaries in accordance with Section 2 of this Trust
Agreement only after Trustee has determined that the Company is not Insolvent
(or is no longer Insolvent).
(c) Provided that there are sufficient assets, if 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
Employees or their beneficiaries under the terms of the Plans for the period of
such discontinuance, less the aggregate amount of any payments made to Employees
or their beneficiaries 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 Section 3 hereof, after the Trust has become
irrevocable, the Company shall have no right or power to direct Trustee to
return to the Company or to divert to others any of the Trust assets before all
payment of benefits have been made to Employees and their beneficiaries pursuant
to the terms of the Plans.
Section 5. Investment Authority.
(a) Trustee may invest in any kind of property it deems suitable and
proper, except that in no event may Trustee invest in securities (including
stock or rights to acquire stock) or
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obligations issued by the Company, other than a de minimis amount held in common
investment vehicles in which Trustee invests. All rights associated with assets
of the Trust shall be exercised by Trustee or the person designated by Trustee,
and shall in no event be exercisable by or rest with Employees.
(b) The Company shall have the right, at any time, and from time to
time, in its sole discretion, to substitute assets of equal fair market value
for any asset held by the Trust.
Section 6. Disposition of Income.
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
Section 7. Accounting by Trustee.
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 Trustee. Within 180 days following the close of each calendar year
and within 90 days after the removal or resignation of Trustee, 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 show separately), and showing all cash, securities and other property held
in the Trust at the end of such year or as of the date of such removal, or
resignation, as the case may be.
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Section 8. Responsibility of Trustee.
(a) 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
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 or this Trust and is given in
writing by the Company. In the event of a dispute between The Company and a
party, Trustee may apply to a court of competent jurisdiction to resolve the
dispute.
(b) If Trustee undertakes or defends any litigation arising in
connection with this Trust, the Company agrees to indemnify Trustee against
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, Trustee may obtain payment from the Trust.
(c) 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) 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) 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,
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
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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.
(f) Notwithstanding any powers granted to Trustee pursuant to this
Trust Agreement or to applicable law, Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
Section 9. Compensation and Expenses of Trustee.
The Trustee, and any successor corporate Trustee hereunder, shall be
entitled to receive compensation for its services in accordance with its
published schedule of charges in effect at the time such services are rendered.
In addition to the foregoing fees, compensation may be paid to any Authorized
Party (as defined in Section 13) and to any special Trustee in accordance with
the provisions of this Agreement. Any Authorized Party shall also be entitled to
receive and retain from any money market fund or similar entity payments as
authorized under Rule 12b-1 of the Investment Company Act, in connection with
the distribution of such fund's or entity's securities.
The Company may pay all administrative and Trustee's fees and expenses
at its sole discretion. If not so paid, the fees and expenses shall be paid from
the Trust.
Section 10. Resignation and Removal of Trustee.
(a) Trustee may resign at any time by written notice to the Company,
which shall be effective 90 days after receipt of such notice unless the Company
and Trustee agree otherwise.
(b) Trustee may be removed by the Company on 90 days notice or upon
shorter notice accepted by Trustee.
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(c) Upon resignation or removal of Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the successor
Trustee. The transfer shall be completed within 90 days after receipt of notice
of resignation, removal or transfer, unless the Company extends the time limit.
(d) If 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 paragraph(s) (a) or (b) of this section. If no such appointment
has been made, Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of Trustee may
apply to a court of competent jurisdiction for appointment of a successor or for
instructions. All expenses of Trustee in connection with the proceeding shall be
allowed as administrative expenses of the Trust.
Section 11. Appointment of Successor.
(a) If 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 trust
department or other party that may be granted corporate trustee powers under
state law, as a successor to replace 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 required 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
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Trustee or from any other past event, or any condition existing at the time it
becomes successor Trustee.
Section 12. Amendment or Termination.
(a) This Trust Agreement may be amended by a written instrument
executed by Trustee and the Company. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Agreement or shall make the Trust
revocable.
(b) The Trust shall not terminate until the date on which Employees and
their beneficiaries are no longer entitled to benefits pursuant to the terms of
the Plans. Upon termination of the Trust any assets remaining in the Trust shall
be returned to the Company.
(c) Upon written approval of the Employees or beneficiaries entitled to
payment of benefits pursuant to the terms of the Plans, the Company may
terminate this Trust prior to the time all benefit payments under the Plans have
been made. All assets in the Trust at termination shall be returned to the
Company.
Section 13. 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 Employees and their beneficiaries under this
Trust Agreement may not be anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subject to attachment, garnishment, levy,
execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of Indiana.
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Section 14. Effective Date.
The effective date of this Trust Agreement shall be January 1, 1999.
* * *
IN WITNESS WHEREOF, the Company and Trustee have caused this Trust
Agreement to be signed on their behalf by their respective officers the day and
year first above written.
MONROE BANCORP
By
ATTEST: Its
Its
FIRST MERCHANTS BANK, N.A.
By
ATTEST: Its
Its
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