EXHIBIT 10.3
NATIONAL GOLF PROPERTIES, INC.
DEFERRED COMPENSATION PLAN
TRUST AGREEMENT
This Agreement made as of June 1, 1997, by and between National Golf
Properties, Inc., a Maryland corporation, ("Company") and Imperial Trust Company
("Trustee");
(a) WHEREAS, Company has adopted the National Golf Properties, Inc.
Deferred Compensation Plan (the "Plan"), which is administered by a committee
(the "Committee");
(b) WHEREAS, Company has incurred or expects to incur liability under
the terms of the Plan with respect to the individuals participating in the Plan;
(c) WHEREAS, 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 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;
(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 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;
(e) WHEREAS, it is the intention of 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) Company hereby deposits with Trustee in trust $1,000.00, 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.
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(c) The Trust is intended to be a grantor trust, of which 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 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 Company.
Any assets held by the Trust will be subject to the claims of Company's general
creditors under federal and state law in the event of Insolvency, as defined in
Section 3(a) herein.
(e) 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 any Plan participant or
beneficiary shall have any right to compel such additional deposits.
Section 2. Payments to Plan Participants and Their Beneficiaries.
(a) Company shall deliver to 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 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,
Trustee shall make payments to the Plan participants and their beneficiaries in
accordance with such Payment Schedule. 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 of the Plan and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported, withheld and paid
by Company.
(b) The entitlement of a Plan participant or his or her beneficiaries to
benefits under the Plan shall be determined by 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.
(c) Company may make payment of benefits directly to Plan participants or
their beneficiaries as they become due under the terms of the Plan. Company
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
Plan, Company shall make the balance of each such payment as it falls due.
Trustee shall notify 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 Plan participants
and their beneficiaries if Company is Insolvent. Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) Company is unable to pay
its debts as they become due, or (ii) 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 Company under federal and state law as
set forth below.
(1) The Board of Directors of the Company (the "Board of
Directors") and the Chief Executive Officer of Company shall have the duty to
inform Trustee in writing of Company's Insolvency. If a person claiming to be a
creditor of Company alleges in writing to Trustee that Company has become
Insolvent, Trustee shall determine whether Company is Insolvent and, pending
such determination, Trustee shall discontinue payment of benefits to Plan
participants or their beneficiaries.
(2) Unless Trustee has actual knowledge of Company's
Insolvency, or has received notice from Company or a person claiming to be a
creditor alleging that Company is Insolvent, Trustee shall have no duty to
inquire whether Company is Insolvent. Trustee may in all events rely on such
evidence concerning Company's solvency as may be furnished to Trustee and that
provides Trustee with a reasonable basis for making a determination concerning
Company's solvency.
(3) If at any time Trustee has determined that Company is
Insolvent, Trustee shall discontinue payments to Plan participants or their
beneficiaries and shall hold the assets of the Trust for the benefit of
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 Company with respect to benefits due under the
Plan or otherwise.
(4) Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with Section 2 of this Trust
Agreement only after Trustee has determined that 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 Plan
participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to Plan
participants or their beneficiaries by Company in lieu of the payments provided
for hereunder during any such period of discontinuance.
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Section 4. Payments to Company.
Company shall have no right or power to direct Trustee to return to
Company or to divert to others any of the Trust assets before all payment of
benefits have been made to Plan participants and their beneficiaries pursuant to
the terms of the Plan.
Section 5. Investment Authority.
(a) Trustee may invest in securities (including stock or rights to
acquire stock) or obligations issued by Company. 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 Plan participants.
(b) Except as provided in this subsection (b) and subsection (c)
below, the Committee shall provide Trustee with all investment instructions.
Trustee shall neither affect nor change investments of the Trust Fund, except as
directed in writing by the Committee, and shall have no right, duty or
responsibility to recommend investments or investment changes; provided, that
Trustee may (a) deposit cash on hand from time to time in any bank savings
account, certificate of deposit, or other instrument creating a deposit
liability for a bank, including Trustee's own banking department, if Trustee is
a bank, without such prior direction or (b) invest in government securities,
bonds with specific ratings, or stock of "Fortune 500" companies, all within
broad investment guidelines established by the Committee from time to time.
(c) In the event of a "Change in Control", as defined in the Plan (a
"Change in Control"), the authority of the Committee to direct investments of
the Trust Fund shall cease and Trustee shall complete authority to direct
investments of the Trust Fund. The Chief Executive Officer of Company shall
notify Trustee in writing when a Change in Control has occurred. Trustee has no
duty to inquire whether a Change in Control has occurred and may rely on
notification by the Chief Executive Officer of Company of a Change in Control;
provided, however, that if any officer, former officer, director or former
director of Company or any subsidiary (other than the Chief Executive Officer of
Company), or any Participant notifies Trustee that there has been or there may
be a Change in Control, Trustee shall have the duty to satisfy itself as to
whether a Change in Control has in fact occurred. Company and its subsidiaries
shall indemnify and hold harmless Trustee for any damages or costs (including
attorneys' fees) that may be incurred because of reliance on the Chief Executive
Officer's notice or lack thereof.
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
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as shall be agreed upon in writing between Company and Trustee. Within 60 days
following the close of each calendar year and within 60 days after the removal
or resignation of Trustee, Trustee shall deliver to 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 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 Company which is contemplated by, and in conformity with,
the terms of the Plan or this Trust and is given in writing by Company. In the
event of a dispute between 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, 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
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
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 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.
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Section 9. Compensation and Expenses of Trustee.
Company shall pay all administrative and 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 Trustee.
(a) Trustee may resign at any time by written notice to Company, which
shall be effective 30 days after receipt of such notice unless Company and
Trustee agree otherwise.
(b) Trustee may be removed by Company on 30 days notice or upon shorter
notice accepted by Trustee.
(c) Upon a Change of Control, as defined in the Plan, Trustee may not be
removed by Company for two years.
(d) 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 60 days after receipt of notice of
resignation, removal or transfer, unless Company extends the time limit.
(e) 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 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 11. Appointment of Successor.
(a) If Trustee resigns or is removed in accordance with Section 10 hereof,
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 requested by 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
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.
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Section 12. Amendment or Termination.
(a) This Trust Agreement may be amended by a written
instrument executed by Trustee and Company. Notwithstanding the foregoing, no
such amendment shall conflict with the terms of the Plan or shall make the Trust
revocable.
(i) Subject to subsections (ii), (iii) and (iv) below,
this Agreement may be amended: (a) by Company and Trustee, provided, however,
that if an amendment would in any way adversely affect the rights accrued under
the Plan in the Trust Fund by any Participant or beneficiary, each and every
Participant and beneficiary whose rights in the Trust Fund would be adversely
affected must consent to the amendment before this Agreement may be so amended
and (b) by Company and Trustee as may be necessary to comply with laws which
would otherwise render the Trust void, voidable or invalid in whole or in part.
(ii) Notwithstanding that an amendment may be
permissible under subsection (i) above, this Agreement shall not be amended by
an amendment that would: (a) cause any of the assets of the Trust to be used for
or diverted to purposes other than for the exclusive benefit of Participants and
beneficiaries as set forth in the Plan, except as is required to satisfy the
claims of Company's general creditors pursuant to Section 3 or (b) be
inconsistent with the terms of the Plan, including the terms of the Plan
regarding termination, amendment or modification of Plan.
(iii) Any amendment to this Agreement shall be set forth
in writing and signed by Company and Trustee and, if consent of any Participant
or beneficiary is required under subsection (i), the Participant or beneficiary
whose consent is required. Any amendment may be current, retroactive or
prospective, in each case as provided herein.
(iv) In connection with the exercise of the rights under
this Section 12(a): (a) prior to a Change in Control, Trustee shall have no
responsibility to determine whether any proposed amendment complies with the
terms and conditions set forth in subsections (i) and (ii) above and may
conclusively rely on the directions of the Committee with respect thereto,
unless Trustee has knowledge of a proposed transaction or transactions that
would result in a Change in Control and (b) after a Change in Control, the power
of Company to amend this Agreement shall cease, and the power to amend that was
previously held by Company shall, instead, be exercised by a majority of the
Participants and, if a Participant is dead, his or her beneficiaries (who
collectively shall have one vote among them and shall vote in place of such
deceased Participant), with the consent of Trustee, provided that such amendment
otherwise complies with the requirements of subsections (i), (ii), and (iii)
above.
(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. Upon termination of the Trust any assets
remaining the Trust shall be returned to Company.
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(c) Upon written approval of participants or beneficiaries entitled to
payment of benefits pursuant to the terms of the Plan, Company may terminate
this Trust prior to the time all benefit payments under the Plan have been made.
All assets in the Trust at termination shall be returned to Company.
Section 13. General Administration.
(a) Until a Change in Control has occurred, this Section 13(a) shall be
effective and the Committee shall direct Trustee as to the administration of the
Trust in accordance with the following provisions:
(i) The Committee shall be identified to Trustee by a certificate
of an officer of the Company certifying the identity of the members of the
Committee. Persons authorized to give directions to Trustee on behalf of the
Committee shall be identified to Trustee by written notice from the Committee,
and such notice shall contain specimens of the authorized signatures. Trustee
shall be entitled to rely on such written notice as evidence of the identity and
authority of the persons appointed until a written cancellation of the
appointment, or the written appointment of a successor, is received by Trustee.
(ii) Directions by the Committee, or its delegate, to Trustee shall
be in writing and signed by the Committee or persons authorized by the
Committee, or may be made by such other method as is acceptable to Trustee.
(iii) Trustee may conclusively rely upon directions from the
Committee in taking any action with respect to this Agreement, including the
making of payments from the Trust Fund and the investment of the Trust Fund
pursuant to this Agreement. Trustee shall have no liability for actions taken
or for failure to act, on the direction of the Committee. Trustee shall have no
liability for failure to act in the absence of proper written directions.
(iv) Trustee may request instructions from the Committee and shall
have no duty to act or liability for failure to act if such instructions are not
forthcoming from the Committee. If requested instructions are not received
within a reasonable time, Trustee may, but is under to duty to, act on its own
discretion to carry out the provisions of this Agreement in accordance with this
Agreement and the Plan.
(b) In the event of a Change in Control, the authority of the Committee
to administer the Trust and direct Trustee, as set forth in Section 13(a) above,
shall cease, and Trustee shall have complete authority to administer the Trust.
Section 14. 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.
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(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 California.
Section 15. Effective Date.
The effective date of this Trust Agreement shall be June 1, 1997.
"Trustee"
Imperial Trust Company
By: /s/ Xxxx X. Xxxxx
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IMPERIAL TRUST COMPANY
By: XXXX X. XXXXX
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VICE PRESIDENT
"Company"
National Golf Properties, Inc.,
a Maryland corporation
By: /s/ Xxxxxxx X. Xxxxx
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By: /s/ Xxxxxxx X. Xxxxx
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