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EXHIBIT 10.3
TEXAS CAPITAL BANCSHARES, INC.
DEFERRED COMPENSATION AGREEMENT TRUST
THIS TRUST AGREEMENT made this 20th day of December, 1999 by and
between Texas Capital Bancshares, Inc. ("Bancshares") and Northern Trust Bank of
Texas, N.A. (the "Trustee").
WHEREAS, Bancshares has adopted a nonqualified deferred compensation
agreement (the "Deferred Compensation Agreement") by and between Bancshares and
Joseph M. Grant (the "Employee"); and
WHEREAS, Bancshares has incurred or expects to incur liability under
the terms of such Deferred Compensation Agreement with respect to the
individual(s) participating in such agreement; and
WHEREAS, Bancshares 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 Bancshares' creditors in the event of Bancshares'
Insolvency, as herein defined, until paid to Deferred Compensation Agreement
participant(s) and their beneficiaries in such manner and at such times as
specified in the Deferred Compensation Agreement; and
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 arrangement; and
WHEREAS, it is the intention of Bancshares 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 Deferred Compensation Agreement.
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
1.1 Bancshares hereby deposits with Trustee in trust the sum of $100 which shall
become the principal of the Trust to be held, administered and disposed of by
Trustee as provided in this Trust Agreement.
1.2 The Trust hereby established shall be irrevocable.
1.3 The Trust is intended to be a grantor trust, of which Bancshares 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.
1.4 The principal of the Trust, and any earnings thereon shall be held separate
and apart from other funds of Bancshares and shall be used exclusively for the
uses and purposes of Deferred Compensation Agreement participant(s) and general
creditors as herein set forth. Deferred Compensation Agreement 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
Deferred Compensation Agreement and this Trust Agreement shall be mere unsecured
contractual rights of Deferred Compensation Agreement participants and their
beneficiaries against Bancshares. Any assets held by the Trust will be subject
to the claims of Bancshares' general creditors under federal and state law in
the event of Insolvency, as defined in Section 3 herein.
1.5 Bancshares may, in its sole discretion, at any time, or from time to time,
make additional deposits with the Trustee to augment the principal to be held,
administered, or disposed of by Trustee as provided in this Trust Agreement.
Neither Trustee nor any Deferred Compensation Agreement participant or
beneficiary shall have any right to compel such additional deposits.
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SECTION 2. PAYMENTS TO DEFERRED COMPENSATION AGREEMENT
PARTICIPANTS AND THEIR BENEFICIARIES.
2.1 Bancshares shall deliver to Trustee a schedule (the "Payment Schedule") that
indicates the amounts payable in respect of each Deferred Compensation Agreement
participant (and his or her beneficiaries), that provides directions to Trustee
regarding the amounts so payable, the form in which such amount is to be paid
(as provided for or available under the Deferred Compensation Agreement), and
the time of commencement for payment of such amounts. Except as otherwise
provided herein, Trustee shall make payments to Deferred Compensation Agreement
participant(s) and their beneficiaries in accordance with such Payment Schedule.
Bancshares shall have the sole responsibility for all tax withholding filings
and reports. Trustee shall withhold such amounts from distributions as
Bancshares directs and shall follow the instructions of Bancshares with respect
to remission of such withheld amounts to appropriate governmental authorities..
2.2 The entitlement of a Deferred Compensation Agreement participant or his or
her beneficiaries to benefits under the Deferred Compensation Agreement shall be
determined by Bancshares or such party as it shall designate under the Deferred
Compensation Agreement, and any claim for such benefits shall be considered and
reviewed under the procedures set out in the Deferred Compensation Agreement.
2.3 Bancshares may make payment of benefits directly to Deferred Compensation
Agreement participant(s) or their beneficiaries as they become due under the
terms of the Deferred Compensation Agreement. Bancshares shall notify 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 Deferred Compensation Agreement,
Bancshares shall make the balance of each such payment as it falls due. Trustee
shall notify Bancshares where principal and earnings are not sufficient to make
a payment then due under the Payment Schedule.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST
BENEFICIARY WHEN BANCSHARES IS INSOLVENT.
3.1 Trustee shall cease payment of benefits to the Deferred Compensation
Agreement participant(s) and their beneficiaries if Bancshares is Insolvent.
Bancshares shall be considered "Insolvent" for purposes of this Trust Agreement
if (i) Bancshares is unable to pay its debts as they become due, or (ii)
Bancshares is subject to a pending proceeding as a debtor under the United
States Bankruptcy Code; or (iii) Bancshares is determined to be Insolvent by the
a state or federal regulatory banking authority exercising jurisdiction over
Bancshares.
3.2 At all times during the continuance of this Trust, as provided in Section 1
hereof, the principal and income of the Trust shall be subject to claims of
general creditors of Bancshares under federal and state law as set forth below.
(a.) The Board of Directors and the President of Bancshares shall have
the duty to inform Trustee in writing of Bancshares' Insolvency. If a person
claiming to be a creditor of Bancshares alleges in writing to Trustee that
Bancshares has become Insolvent, Trustee shall determine whether Bancshares is
Insolvent and, pending such determination, Trustee shall discontinue payment of
benefits to Deferred Compensation Agreement participant(s) or their
beneficiaries.
(b.) Unless Trustee has actual knowledge of Bancshares' Insolvency, or
has received notice from Bancshares or a person claiming to be a creditor
alleging that Bancshares is Insolvent, Trustee shall have no duty to inquire
whether Bancshares is Insolvent. Trustee may in all events rely on such evidence
concerning Bancshares' solvency as may be furnished to Trustee and that provides
Trustee with a reasonable basis for making a determination concerning
Bancshares' solvency. In no event shall `actual knowledge' be deemed to include
knowledge of Bancshares's credit status held by banking officers or banking
employees of Northern Trust Bank of Texas N.A. which has not been communicated
to the trust
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department of Trustee. Trustee may appoint an independent accounting, consulting
or law firm to make any determination of solvency required by Trustee under this
Section 3. In such event, Trustee may conclusively rely upon the determination
by such firm and shall be responsible only for the prudent selection of such
firm.
(c.) If at any time the Board of Directors or the CEO of Bancshares
notifies the Trustee or Trustee has determined that Bancshares is Insolvent,
Trustee shall discontinue payments to Deferred Compensation Agreement
participant(s) or their beneficiaries and shall hold the assets of the Trust for
the benefit of Bancshares' general creditors. Nothing in this Trust Agreement
shall in any way diminish any rights of Deferred Compensation Agreement
participants or their beneficiaries to pursue their rights as general creditors
of Bancshares with respect to benefits due under the Deferred Compensation
Agreement(s) or otherwise.
(d.) Trustee shall resume the payment of benefits to Deferred
Compensation Agreement participant(s) or their beneficiaries in accordance with
Section 2 of this Trust Agreement only after Trustee has determined that
Bancshares is not Insolvent (or is no longer Insolvent).
3.3 Provided that there are sufficient assets, if Trustee discontinues the
payment of benefits from the Trust pursuant to Section 3 hereof and subsequently
resumes such payments, the first payment following such discontinuance shall
include the aggregate amount of all payments due to Deferred Compensation
Agreement participant(s) or their beneficiaries under the terms of the Deferred
Compensation Agreement for the period of such discontinuance, less the aggregate
amount of any payments made to Deferred Compensation Agreement participant(s) or
their beneficiaries by Bancshares in lieu of the payments provided for hereunder
during any such period of discontinuance, all in accordance with the Payment
Schedule, which shall be modified by Bancshares as necessary to comply with the
provisions of this subparagraph (3.3).
SECTION 4. INVESTMENT AUTHORITY.
4.1 Bancshares shall have sole investment responsibility for the assets of the
Trust, and the Trustee shall act with respect to such assets only as directed by
Bancshares and shall have no investment review responsibility therefor; provided
that subject to written investment guidelines issued by Bancshares to the
Trustee from time to time, the Trustee shall have responsibility for the
short-term investment of any cash balances held in the Trust. Upon a
contribution to the Trust by Bancshares pursuant to Section 1.5, Bancshares
shall direct the Trustee to, as soon as practicable, purchase on behalf of the
Trust, Bancshares Common Stock at a price, as solely determined by Bancshares.
All rights associated with Bancshares Common Stock held by the Trustee shall be
exercised by the Trustee only as directed by Bancshares and in no event shall be
exercisable by Deferred Compensation Agreement Participant(s).
SECTION 5. DISPOSITION OF INCOME.
5.1 During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested in accordance with
Section 4 hereof.
SECTION 6. ACCOUNTING BY TRUSTEE.
6.1 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
Bancshares and Trustee. Within 30 days following the close of each calendar year
and within 30 days after the removal or resignation of Trustee, Trustee shall
deliver to Bancshares 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. In the absence of the filing in writing with
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Trustee by Bancshares of exceptions or objections to any such account within 90
days, Bancshares shall be deemed to have approved such account; in such case, or
upon the written approval by Bancshares of any such account, Trustee shall be
released, relieved and discharged with respect to all matters and things set
forth in such account as though such account had been settled by the decree of a
court of competent jurisdiction. Trustee may conclusively rely on determinations
of Bancshares of valuations for the assets of the Trust for which Trustee deems
there to be no readily determinable fair market value.
SECTION 7. RESPONSIBILITY OF TRUSTEE.
7.1 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 in writing by Bancshares in the event of a dispute between
Bancshares and a party, Trustee may apply to a court of competent jurisdiction
to resolve the dispute.
7.2 If Trustee undertakes or defends any litigation arising in connection with
this Trust, Bancshares 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
Bancshares does not pay such costs, expenses and liabilities in a reasonably
timely manner, trustee may obtain payment from the trust.
7.3 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.
7.4 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 Treasury Regulation Section 301.7701-2.
7.5 The duties of Trustee shall be governed solely by the terms of the Trust
without reference to the terms of the Deferred Compensation Agreement.
7.6 Bancshares (which has authority to do so under the laws of its state of
incorporation) shall indemnify Northern Trust Bank of Texas N.A., and defend it
and hold it harmless from and against any and all liabilities, losses, claims,
suits or expenses (including attorneys' fees) of whatsoever kind and nature
which may be imposed upon, asserted against or incurred by Northern Trust Bank
of Texas N.A. at any time by reason of its carrying out its responsibilities or
providing services under this Trust Agreement, or its status as Trustee, or by
reason of the breach by Bancshares of any representation or warranty made under
this Trust Agreement, or by reason of any act or failure to act under the Trust
Agreement, except to the extent that any such liability, loss, claim, suit or
expense arises directly from Trustee's negligence or willful misconduct in the
performance of responsibilities specifically allocated to it under the Trust
Agreement. This paragraph shall survive the termination of this Trust Agreement.
7.7 Trustee shall not be liable for any delay in performance, or
non-performance, or any obligation hereunder to the extent that such obligation
is due to forces beyond Trustee's reasonable control, including but not limited
to delays, errors or interruptions caused by third parties; any industrial,
juridical, governmental, civil or military action; acts of terrorism,
insurrection or revolution; nuclear fusion, fission or radiation; failure or
fluctuation in electrical power, heat, light, air conditioning or
telecommunications equipment; or acts of God.
SECTION 8. COMPENSATION AND EXPENSES OF TRUSTEE.
8.1 Bancshares shall pay all administrative and Trustee's fees and expenses. If
not so paid, the fees and expenses shall be paid from the trust.
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SECTION 9. RESIGNATION AND REMOVAL OF TRUSTEE.
9.1 Trustee may resign at any time by written notice to Bancshares, which shall
be effective 30 days after receipt of such notice unless Bancshares and Trustee
agree otherwise.
9.2 Trustee may be removed by Bancshares on 30 days notice or upon shorter
notice accepted by trustee.
9.3 Upon resignation or removal of Trustee and appointment of a successor
Trustee, all assets shall subsequently be transferred to the successor Trustee.
The resigning or removed Trustee is authorized, however, to reserve the amount
as necessary for the payment of fees and expenses incurred prior to resignation
or removal. The transfer shall be completed within 30 days after receipt of
notice of resignation, removal or transfer, unless Bancshares extends the time
limit. Bancshares's consent to extension of such time limit shall not be
unreasonably withheld.
9.4 If Trustee resigns or is removed, a successor shall be appointed, in
accordance with Section 10 hereof, by the effective date of resignation or
removal under 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 in connection with the proceeding shall be
allowed as administrative expenses of the Trust.
SECTION 10. APPOINTMENT OF SUCCESSOR.
10.1 If Trustee resigns or is removed in accordance with section 9 hereof,
Bancshares may appoint any independent 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 requested by Bancshares or the successor
Trustee to evidence the transfer.
SECTION 11. AMENDMENT OR TERMINATION.
11.1 This Trust Agreement may be amended by a written instrument executed by
Trustee and Bancshares. Notwithstanding the foregoing, no such amendment shall
conflict with the terms of the Deferred Compensation Agreement, as certified to
by Bancshares (upon which certification Trustee may conclusively rely), or shall
make the Trust revocable.
11.2 The Trust shall not terminate until the date on which there are no longer
any assets held in the Trust or Deferred Compensation Agreement participant(s)
and their beneficiaries are no longer entitled to benefits pursuant to the terms
of the Deferred Compensation Agreement, as certified to by Bancshares (upon
which certification Trustee may conclusively rely),. Upon termination of the
Trust any assets remaining in the Trust shall be returned to Bancshares.
11.3 Upon written approval of participants or beneficiaries entitled to payment
of benefits pursuant to the terms of the deferred compensation agreement,
Bancshares 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 Bancshares. Such approval shall be obtained and
certified to by Bancshares (upon which certification Trustee may conclusively
rely), and Trustee shall have no responsibility therefore.
SECTION 12. MISCELLANEOUS.
12.1 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.
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12.2 Benefits payable to Deferred Compensation Agreement 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.
12.3 This Trust Agreement shall be governed by and construed in accordance with
the laws of the state of Texas.
12.4 Any action required to be taken by the Bancshares shall be by resolution of
its board of directors or by written direction of one or more of its president,
any vice president or treasurer. The Trustee may rely upon a resolution or
direction filed with the Trustee and shall have no responsibility for any action
taken by the Trustee in accordance with any such resolution or direction.
12.5 Bancshares represents and warrants that the Deferred Compensation Agreement
is an unfunded deferred compensation arrangement which is not a pension plan
subject to the Employee Retirement Income Security Act of 1974.
12.6 In making payments to service providers pursuant to authorized directions,
Bancshares acknowledges that the Trustee is acting as paying agent, and not as
the payor, for tax information reporting and withholding purposes.
12.7 This Agreement shall inure to the benefit of, and be binding upon, each of
the parties and their respective successors and assigns.
SECTION 13. EFFECTIVE DATE.
13.1 The effective date of this Trust Agreement shall be the 20th day of
December, 1999.
In WITNESS WHEREOF, Bancshares and Trustee have caused this Trust Agreement to
be executed by its duly authorized officers as of the date first above written.
Texas Capital Bancshares, Inc. The Northern Trust Company
By: /s/ GREGORY B. HULTGREN By: /s/ DONNA H. BISHOP
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Gregory B. Hultgren Donna H. Bishop
Chief Financial Officer Vice President
(CORPORATE SEAL)
The undersigned, Larry A. Makel, does hereby certify that he/she is the
duly elected, qualified and acting Secretary of Texas Capital Bancshares, Inc.
("Bancshares") and further certifies that the person whose signature appears
above is a duly elected, qualified and acting officer of Bancshares with full
power and authority to execute this Trust Agreement on behalf of Bancshares and
to take such other actions and execute such other documents as may be necessary
to effectuate this Agreement.
/s/ LARRY A. MAKEL
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Secretary
Texas Capital Bancshares, Inc.