Exhibit 10.20
TRUST UNDER DEFERRED COMPENSATION PLAN
This Trust Agreement (the "Trust Agreement") is made this 22nd
day of August, 2001, by and between Aeroflex Incorporated, a Delaware
corporation (the "Company") and American Stock Transfer & Trust Co.(the
"Trustee").
WHEREAS, the Company has adopted the Aeroflex Incorporated Key
Employee Deferred Compensation Plan (the "Plan") and amendments to the employ-
ment agreements listed on Appendix A (such amendments, the "Amendments"); and
WHEREAS, the Company has incurred or expects to incur
liability under the terms of the Plan and the Amendments; and
WHEREAS, the Company wishes to establish a trust (hereinafter
called the "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 Plan participants and
their beneficiaries in such manner and at such times as specified in the Plan;
and
WHEREAS, it is the intention of the parties that this Trust
Agreement shall constitute an unfunded arrangement and shall not affect the
status of the Plan as an unfunded plan 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; and
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 Plan;
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 deposits with the Trustee in trust
$100, 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 is revocable by the Company;
it shall become irrevocable upon a Change in Control, as defined herein.
(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 Plan participants and general
creditors as herein set forth. Plan participants 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 Plan and this Trust Agreement shall
be mere unsecured contractual rights of Plan 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 3(a) herein.
(e) The Company, in its sole discretion, may at any time, or
from time to time, make additional deposits, with respect to some or all Plan
participants, 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 Plan participant or
beneficiary shall have any right to compel such additional deposits. Upon a
Change in Control, the Company shall, as soon as practicable, but in no event
longer than 30 days following the Change in Control, make an irrevocable
contribution to the Trust in an amount that is sufficient to pay each Plan
participant or beneficiary the benefits to which Plan participants or their
beneficiaries would be entitled pursuant to the terms of the Plan and the
Amendments as of the date on which the Change in Control occurred.
Section 2. 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 Plan
participant (and his or her beneficiaries), 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 Plan), and the time of commencement for payment of such amounts. Except as
otherwise provided herein, the Trustee shall make payments to the Plan
participants 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
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of the Plan and the Amendments and shall 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 a Plan participant or his or her
beneficiaries to benefits under the Plan shall be determined by the Company or
such party as it shall designate under the Plan, and any claim for such benefits
shall be considered and reviewed under the procedures set out in the Plan and
the Amendments.
(c) The Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the terms of the
Plan and the Amendments. The Company shall notify the Trustee of its decision to
make payment of benefits directly prior to the time amounts are payable to
participants 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 Plan and the Amendments, the Company shall make
the balance of each such payment as it falls due. The Trustee shall notify the
Company where principal and earnings are not sufficient.
Section 3. Trustee Responsibility Regarding Payments to Trust Benefi-
ciary When the Company Is Insolvent.
(a) The Trustee shall cease payment of benefits to Plan
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.
(b) At all times during the continuance of this Trust
Agreement, 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.
(c) 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 Plan
participants or their beneficiaries.
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(d) Unless the 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, 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.
(e) If at any time the Trustee has determined that the Company
is Insolvent, the Trustee shall discontinue payments to Plan participants 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 Plan participants or their beneficiaries to pursue
their rights as general creditors of the Company with respect to benefits due
under the Plan or otherwise.
(f) The Trustee shall resume the payment of benefits to Plan
participants 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).
(g) 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 Plan
participants or their beneficiaries under the terms of the Plan and the
Amendments for the period of such discontinuance, less the aggregate amount of
any payments made to Plan participants or their beneficiaries by the Company in
lieu of the payments provided for hereunder during any such period of
discontinuance.
Section 4. Payments to the Company.
Except as provided in Section 3 hereof, after the Trust has
become irrevocable, 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 Plan participants and their
beneficiaries pursuant to the terms of the Plan and the Amendments.
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Section 5. Investment Authority.
(a) All rights associated with assets of the Trust shall be
exercised by the Trustee or the person designated by the Trustee, and shall in
no event be exercisable by or rest with Plan participants, provided that the
Company shall be entitled to direct the Trustee with respect to the exercise of
any powers otherwise reserved to the Trustee hereunder. The Company shall have
the right, at any time, and from to time in its sole discretion, to substitute
assets of equal fair market value for any asset held by the Trust. This right is
exercisable by the Company in a nonfiduciary capacity without the approval or
consent of any person in a fiduciary capacity.
(b) Subject to Section 5(a) above, the Trustee shall have the
following powers and authority with respect to all property constituting part of
the Trust:
(i) To retain, sell, exchange, manage, lend, improve, or
transfer or otherwise dispose of any such property at
public or private sale for cash or on credit.
(ii) To invest and reinvest any money held in the Trust
hereunder in any common, collective or commingled
Trust fund established and maintained by a bank.
(iii) To participate in any agreement of reorganization,
consolidation, merger, combination, liquidation or
other similar agreement relating to any such
property, and to consent to or oppose any such
agreement or an action thereunder, or any contract,
lease, mortgage, purchase, sale or other action by
any corporation or other entity.
(iv) To deposit any such property with any protective,
reorganization or similar committee; to delegate
discretionary power to any such committee; and to pay
part of the expenses and compensation of any such
committee and any assessments levied with respect to
any property so deposited.
(v) To exercise any conversion privilege or subscription
right available in connection with any such property;
to oppose or to consent to the reorganization,
consolidation, merger or read-
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justment of the finances of any corporation, company
or association, or to the sale, mortgage, pledge or
lease of the property of any corporation, company or
association any of the securities of which may at any
time be held in the Trust and to do any act with
reference thereto, including the exercise of options,
the making of agreements or subscriptions and the
payment of expenses, assessments or subscriptions,
which may be deemed necessary or advisable in
connection therewith, and to hold and retain any
securities or other property which it may so acquire.
(vi) To commence or defend suits or legal proceedings and
to represent the Trust in all suits or legal
proceedings; to settle, compromise or submit to
arbitration any claims, debts or damages, due or
owing to or from the Trust; provided, however, that
the Trustee shall notify the Company of all such
suits, legal proceedings and claims and shall obtain
the written consent of the Company before settling,
compromising or submitting to binding arbitration any
claim, suit or legal proceeding of any nature
whatsoever, which consent shall not unreasonably be
withheld.
(vii) To exercise, personally or by general or limited
power of attorney, any right, including the right to
vote, appurtenant to any securities or other such
property.
(viii) To borrow money from any lender in such amounts and
upon such terms and conditions as shall be deemed
advisable or proper to carry out the purposes of the
Trust and to pledge any securities or other property
for the repayment of any such loan.
(ix) To hold mortgages (including deeds of trust) in its
own name or in the name of a nominee of the Trustee,
with or without the addition of words indicating that
any such mortgage is held in a fiduciary capacity,
and to cause to be formed a corporation, partnership,
trust or other entity to hold title to any mortgage
with the aforesaid powers, all upon such terms and
conditions as may be deemed advisable; to review or
extend or participate in the renewal or extension of
any mortgage, and to agree to a reduction in the rate
of interest on any mortgage or to any
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other modification or change in the terms of any
mortgage or of any guarantee pertaining thereto, in
any manner and to any extent that may be deemed
advisable for the protection of assets of the Trust
or the preservation of any covenant or condition of
any mortgage or in the performance of any guarantee
or to enforce any default in such manner and to such
extent as may be deemed advisable; and to exercise
and enforce any and all rights of foreclosure, to bid
on any property on foreclosure, to take a deed in
lieu of foreclosure with or without paying a
consideration therefor and in connection therewith to
release the obligation on the note or bond secured by
such mortgage, and to exercise and enforce in any
action, suit or proceeding at law or in equity any
rights or remedies in respect of any such mortgage or
guarantee.
(x) To register any securities held by the Trustee in its
own name or in the name of a nominee of the Trustee
or any custodian of such property, including the
nominee of any system for the central handling of
securities, with or without the addition of words
indicating that such securities are held in a
fiduciary capacity; to deposit or arrange for the
deposit of any such securities with such a system and
to hold any securities in bearer form, provided that
the Trustee shall at all times remain responsible for
the safe custody and disposition of the assets of the
Trust.
(xi) To make, execute and deliver, as Trustee, any and all
deeds, leases, notes, bonds, guarantees, mortgages,
conveyances, contracts, waivers, releases or other
instruments in writing necessary or proper for the
accomplishment of any of the foregoing powers.
(xii) To hold cash (including, without limitation, in
non-interest bearing accounts) in time or demand
deposits including deposits with the Trustee, such
deposits to pay a reasonable amount of interest.
(xiii) To select one or more broker-dealers to effect
securities trans actions on behalf of the Trust,
which broker-dealers may be an affiliate of the
Trustee.
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(xiv) To exercise, generally, any of the powers which an
individual owner might exercise in connection with
property either real, personal or mixed held by the
Trust, and to do all other acts that the Trustee may
deem necessary or proper to carry out any of the
powers set forth in this Section 5 or otherwise in
the best interests of the Trust.
Section 6. Disposition of Income.
(a) During the term of this Trust Agreement, all income
received by the Trust, net of expenses and taxes, shall be accumulated and
reinvested.
Section 7. Accounting by the 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 30 days following the close of each calendar
year and within 30 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 the Trust at the end of such year or as of the date of
such removal or resignation, as the case may be.
Section 8. Responsibility of the 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. 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) In the execution of its powers hereunder, the Trustee
shall not be liable for any loss to the Trust assets arising (i) in consequence
of the failure, depreciation or loss of any investments made in good faith or
(ii) by reason of any act
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or omission made in good faith or of any other matter or thing except, in each
case, liability for breach of trust arising from the fraud, wilful misconduct or
gross negligence of the Trustee, and the Company agrees to indemnify the Trustee
against, and to be primarily liable for, any such loss and an cost and expenses
incurred by the Trustee in defending against any such loss. If the Company does
not pay such costs, expenses and losses 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 and the Company agrees to indemnify the Trustee against,
and to be primarily liable for, any loss (and costs and expenses incurred by the
Trustee in defending against any such loss) arising out of any actions or
omissions of the Trustee taken or omitted in good faith reliance on any such
advice.
(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 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 the Trustee, or to loan to
any person the proceeds of any borrowing against such policy.
(f) 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 Agreement 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.
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Section 9. Compensation and Expenses of the Trustee.
The Company shall pay the Trustee's fees and expenses. If not
so paid, the fees and expenses shall be paid from the Trust.
Section 10. Resignation and Removal of the Trustee.
(a) The Trustee may resign at any time by written notice to
the Company, which shall be effective 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 60 days
notice or upon shorter notice accepted by the Trustee; provided however that the
Trustee may not be removed by the Company for one (1) following a Change in
Control.
(c) If the Trustee resigns or is removed within one (1) year
following a Change in Control, the Trustee shall select a successor Trustee in
accordance with the provisions of Section 11(b) hereof prior to the effective
date of the Trustee's resignation or removal.
(d) 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 60 days after receipt
of notice of resignation, removal or transfer, unless the Company extends the
time limit.
(e) 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 paragraph(s) (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 11. 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 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
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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) If the Trustee resigns pursuant to the provisions of
Section 10(c) 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.
(c) 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.
(a) This Trust Agreement may be amended by a written
instrument executed by the Trustee and the Company. Notwithstanding the
foregoing, no such amendment shall conflict with the terms of the Plan or the
Amendments or shall make the Trust revocable after it has become irrevocable in
accordance with Section 1(b) hereof.
(b) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits pursuant
to the terms of the Plan or the Amendments, unless sooner revoked in accordance
with Section 1(b) hereof. Upon termination of the Trust any assets remaining in
the Trust shall be returned to the Company.
(c) Upon written approval of participants or beneficiaries
entitled to payment of benefits pursuant to the terms of the Plan or the
Amendments, the Company may terminate this Trust Agreement prior to the time all
benefit payments under the Plan have been made. All assets in the Trust at
termination shall be returned to the Company.
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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 Plan 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.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of New York, without regard to its principles of
conflicts of laws.
(d) For purposes of this Agreement, Change in Control shall
have the meaning assigned thereto in the Employment Agreement entered into as of
March 1, 1999 between the Company and its Chief Executive Officer, as such
Employment Agreement is in effect on the date hereof.
Section 14. Effective Date.
The effective date of this Trust Agreement shall be August 22,
2001.
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IN WITNESS WHEREOF, the undersigned have hereunto set their
hands as of the date first above written.
AEROFLEX INCORPORATED
By: /s/ Michael Gorin
--------------------------------------
Name: Michael Gorin
Title: President
AMERICAN STOCK TRANSFER
& TRUST CO.
By: /s/ Herbert Lemmer
-------------------------------------
Name: Herbert Lemmer
Title: Vice President
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