EXHIBIT 10.68
SMART & FINAL, INC.
TRUST FOR DEFERRED COMPENSATION PLANS
SMART & FINAL TRUST FOR DEFERRED COMPENSATION PLANS
WHEREAS, this Agreement, made effective as of the 17th day of October,
1996, by and between Smart & Final, Inc. (the "Company") and City National Bank
(the "Trustee"), evidences the terms of a trust to hold assets in respect of
certain non-qualified deferred compensation plans; and
WHEREAS, the Company has adopted the non-qualified deferred compensation
plan(s) as listed in Appendix A (each a "Plan," together the "Plans");
WHEREAS, the Company has incurred or expects to incur liability under the
terms of such Plan(s) with respect to the individuals participating in such
Plan(s);
WHEREAS, the Company wishes to establish a trust (hereinafter referred to
as 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(s);
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(s) as unfunded plans 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 for directors of the Company;
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(s);
NOW, THEREFORE, the parties do hereby establish the Trust, to be known as
the "SMART & FINAL, INC. TRUST FOR DEFERRED COMPENSATION PLANS," 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 shall become irrevocable upon approval by
the Board of Directors of 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.
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(d) The principal of the Trust, and any earnings thereon, shall be held
separate and apart from other funds of the Company and (subject to Section 1(f)
herein) 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(s) 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) After the Trust has become irrevocable pursuant to Section 1(b), within
90 days following the end of each Plan year, the Company shall deposit cash
and/or additional property to the Trust as follows:
(i) With respect to each Plan providing a "defined benefit" type of
benefit structure, an amount equal to the excess, if any, of the present value
of the accrued benefits thereunder over the fair market value of the Trust's
assets attributable or allocated to the Plan as of the end of the Plan year,
calculated using the actuarial assumptions specified in the Plan.
(ii) With respect to each other Plan, an amount equal to the excess,
if any, of the aggregate amount credited to participants' accounts over the fair
market value of the Trust's assets attributable or allocated to the Plan as of
the end of the Plan year.
Nothing contained in this subsection shall prohibit the Company from making
additional deposits into the Trust at any time in its sole and absolute
discretion.
(f) The Company in its sole and absolute discretion may elect to withdraw
at any time all or a portion of the amount by which the fair market value of the
Trust's assets exceeds one hundred and twenty-five percent (125%) of the sum of
the present value of the accrued benefits described in Section 1(e)(i) hereof
and the aggregate amount credited to participants' accounts described in Section
1(e)(ii) hereof, determined as of the date of such withdrawal.
(g) The Company may permit other affiliated corporations whose employees
participate in one or more Plans ("Affiliates") to contribute to this Trust.
The contributions and earnings thereon of each Affiliate shall be held in a
subtrust hereunder. The assets in each such subtrust shall be subject solely to
the claims of the participants employed by that respective Affiliate and its
creditors, the Affiliate shall be treated as the grantor of such subtrust, and
Sections 2, 3 and 4 herein shall be applied separately to each subtrust with
reference to the respective Affiliate as if the Affiliate were the "Company."
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2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES.
(a) The Company or such party as it shall designate in writing shall
deliver to the Trustee from time to time a written schedule or schedules (each,
a "Payment Schedule") that indicates the amounts payable in respect of each Plan
participant (and his or her beneficiaries) or 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(s)), 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 of the Plan(s) 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(s) shall be determined by the Company or such party as
it shall designate under the Plan(s), and any claim for such benefits shall be
considered and reviewed under the procedures set out in the Plan(s).
Notwithstanding the foregoing, upon a Change in Control (as defined in Section
12(d)), the responsibility of the Company and any of its delegates for
determining benefit entitlement or directing any payment or disbursement shall
cease and the Trustee shall have full authority and responsibility for such
matters.
(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(s). 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(s), 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. In addition, the Trustee shall provide the Company with
written confirmation of the fact and time of any payment hereunder within the
time limit agreed to by the Company and the Trustee from time to time.
(d) To enable the Trustee to perform its functions after a Change in
Control, the Company shall supply full and timely information to the Trustee on
all matters relating to the compensation of Plan participants, the date and
circumstances of the termination of employment or death of a Plan participant
and such other pertinent information as the Trustee may reasonably require. In
addition, each Plan participant shall cooperate with the Trustee by furnishing
any and all information reasonably requested by the Trustee and take such other
actions as may be requested in order to facilitate the administration of the
Trust and the payment of benefits hereunder.
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(e) The Trustee and its officers, directors and employees shall be entitled
to rely on all certificates and reports made by any duly appointed accountants,
actuaries and consultants, and on all opinions given by any properly consulted
legal counsel, which legal counsel may be counsel for the Trustee or the
Company.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING
PAYMENTS TO TRUST BENEFICIARY WHEN 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) it is unable
to pay its debts as they become due, or (ii) it is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code. For purposes of
this Section 3, if the Company is determined to be Insolvent, no affiliate in
which the Company has an equity interest shall be deemed to be an Insolvent
entity by reason of the Company's Insolvency. Similarly, the Insolvency of an
affiliate will not cause the Company to be deemed Insolvent.
(b) At all times during the continuance of this Trust, as provided in
Section l(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of the Company and its affiliates under federal and
state law, as set forth below.
(i) 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.
(ii) 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.
(iii) 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(s) or otherwise.
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(iv) 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).
(c) 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(s) 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 COMPANY.
Except as provided in Sections 1(f), 3 and 11 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 payment of benefits have been made to Plan participants and their
beneficiaries pursuant to the terms of the Plan(s).
SECTION 5. INVESTMENT AUTHORITY.
(a) Prior to a Change in Control, the Trustee shall invest and manage the
assets of the Trust in accordance with written directions from the
administrative committee appointed in accordance with the Plan(s) (the
"Committee"). Upon a Change in Control, the authority of the Company and the
Committee hereunder shall cease and the Trustee shall have the exclusive
authority and responsibility for the investment of Trust assets.
(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.
(c) Subject to the foregoing provisions of this Section 5, the Trustee
shall have, without exclusion, all powers conferred on the Trustee by applicable
law, unless expressly provided otherwise herein, and 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
Participants. The Trustee shall have full power and authority to invest and
reinvest the Trust funds in any investment permitted by law, under the standards
set forth in Section 8(a) including, without limiting the generality of the
foregoing, the power:
(i) To hold, invest and reinvest the principal or income of the Trust
in bonds, common or preferred stock, other securities, or other personal, real
or mixed tangible or intangible property
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provided, however, that in no event may the Trustee invest in securities
(including stock or rights to acquire stock) or obligations issued by the
Company or its affiliates, other than a de minimis amount held in common
investment vehicles in which the Trustee invests;
(ii) To deposit or invest all or any part of the assets of the Trust
Fund in savings accounts or certificates of deposit or other deposits which bear
a reasonable interest rate in a bank, including the commercial department of the
Trustee, if such bank is supervised by the United States or any State;
(iii) To hold in cash, without liability for interest, such portion
of the Trust funds which, in its discretion, shall be reasonable under the
circumstances, pending investments, or payment of expenses, or the distribution
of benefits;
(iv) To employ such agents including custodians and counsel-as may be
reasonably necessary and to pay them reasonable compensation; to settle,
compromise or abandon all claims and demands in favor of or against the Trust
assets;
(v) To cause title to property of the Trust to be issued, held or
registered in the individual name of the Trustee, or in the name of its
nominee(s) or agent(s), or in such form that title will pass by delivery;
(vi) To exercise all of the further rights, powers, options and
privileges granted, provided for, or vested in trustees generally under the laws
of the State of California, so that the powers conferred upon the Trustee herein
shall not be in limitation of any authority conferred by law, but shall be in
addition thereto;
(vii) To borrow money from any source (including the Trustee) and
to execute promissory notes, mortgages or other obligations and to pledge or
mortgage any Trust assets as security;
(viii) To lend certificates representing stocks, bonds, or other
securities to any brokerage or other firm selected by the Trustee;
(ix) To institute, compromise and defend actions and proceedings; to
pay or contest any claim; to settle a claim by or against the Trustee by
compromise, arbitration, or otherwise; to release, in whole or in part, any
claim belonging to the Trust to the extent that the claim is uncollectible;
(x) To use securities depositories or custodians and to allow such
securities as may be held by a depository or custodian to be registered in the
name of such depository or its nominee or in the name of such custodian or its
nominee;
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(xi) To invest the Trust funds from time to time in one or more
investment funds, which funds shall be registered under the Investment Company
Act of 1940;
(xii) To invest part or all of the Trust funds in insurance
contracts, the type and amount thereof to be specified by the Company. The
Trustee shall be under no duty to make inquiry as to the propriety of the type
or amount so specified. Each insurance contract issued shall provide that the
Trustee shall be the owner thereof with the power to exercise all rights,
privileges, options and elections granted by or permitted under such contract or
under the rules of the insurer. The exercise by the Trustee of any incidents of
ownership under any contract shall, prior to a Change in Control, be subject to
the direction of the Company or the Committee. 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 Trustee, or to loan to any person the proceeds of any borrowing
against such policy; and
(xiii) To do all other acts necessary or desirable for the proper
administration of the Trust Fund, as if the Trustee were the absolute owner
thereof. However, nothing in this section shall be construed to mean the
Trustee assumes any responsibility for the performance of any investment made by
the Trustee in its capacity as trustee under the operations of this Trust
Agreement.
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.
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 90 days following the close of each calendar
year and within 90 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. Upon the request of the
Company, the Trustee shall maintain records based upon information provided by
the Company or the Committee regarding the attribution or allocation of Trust
assets to each Plan.
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SECTION 8. RESPONSIBILITY OF 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; 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 which is contemplated by,
and in conformity with, the terms of the Plan(s) or this Trust and is given in
writing by the Company. 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) If the Trustee undertakes or defends any litigation arising in
connection with this Trust, the Company agrees to indemnify the Trustee against
the Trustee's reasonable costs, expenses and liabilities (including, without
limitation, attorneys' fees and expenses) relating thereto and to be primarily
liable for such payments; provided that the Trustee must first afford the
Company the opportunity to defend any action against the Trust or the Trustee in
connection with this Trust. If the Company does not pay such costs, expenses
and liabilities 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.
(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.
(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 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 Company shall pay the Trustee such reasonable compensation for its
services as may be agreed upon from time to time by the Company and the Trustee,
and the Trustee shall be reimbursed by the Company for its expenses that are
reasonably necessary and incident to its administration of the Trust. Following
reasonable consultation with the Company, such expenses shall include counsel
fees, if any,
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incurred by the Trustee for the purpose of determining its responsibilities
under the Trust. If not so paid, such compensation, fees and expenses shall be
paid from the Trust.
SECTION 10. RESIGNATION AND REMOVAL OF TRUSTEE;
APPOINTMENT OF SUCCESSOR.
(a) The Trustee may resign at any time by written notice to Company, which
shall be effective 30 days after receipt of such notice unless the Company and
the Trustee agree otherwise. If the Trustee resigns at any time after a Change
in Control, the Company shall appoint a successor Trustee which must be approved
by a majority of all Trust beneficiaries then in existence.
(b) The Trustee may be removed by the Company on 30 days' notice or upon
shorter notice accepted by the Trustee; provided that, after a Change in
Control, the Trustee may not be removed by the Company unless such removal is
approved by a majority of all Trust beneficiaries then in existence.
(c) Any successor Trustee may be a bank trust department or other party
that may be granted corporate trustee powers under state law. 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; provided that after a
Change in Control any extension must be approved by a majority of all Trust
beneficiaries then in existence.
(d) A successor Trustee must be appointed by the effective date of
resignation or removal of the original Trustee. If no such appointment has been
made, the original 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.
(e) 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 5, 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 11. AMENDMENTS OR TERMINATION.
(a) This Trust Agreement may be amended by a written instrument executed by
the Trustee and the Company, provided that after a Change in Control any
amendment of this Agreement must be approved by a majority of Trust
beneficiaries then in existence. Notwithstanding
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the foregoing, no such amendment shall conflict with the terms of the Plan(s) or
shall make the Trust revocable.
(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(s). Such date shall be determined by the Company and communicated
to the Trustee in writing. Upon termination of the Trust, any assets remaining
in the Trust shall be returned to the Company.
(c) Notwithstanding the foregoing, the Company may terminate the Trust upon
(i) written approval of all participants or beneficiaries entitled to payment of
benefits pursuant to the terms of the Plan(s), (ii) the exhaustion of all
appeals of a final determination of a court of competent jurisdiction that the
interests in the Trust of Trust beneficiaries is includible for federal income
tax purposes in the gross income of such Trust beneficiaries, without such
determination having been reversed (or the earlier expiration of the time to
appeal), (iii) a determination by the Company that applicable law requires the
Trust to be amended in a way that could make it taxable to its beneficiaries and
failure to so amend would subject the Company to material penalties, (iv) the
expiration of the maximum length of time for which trusts may be established
under any applicable state law, or (v) a determination of the Company to
terminate the Trust because the Company concludes, after consulting with legal
counsel, that judicial authority or the opinion of the U.S. Department of Labor
(as expressed in its proposed or final regulations, advisory opinions, or
similar administrative announcements) creates a significant possibility that the
Trust will not be considered a component of an unfunded plan maintained
primarily to provide deferred compensation for a select group of management or
highly compensated employees, as described in Section 201(2) of the Employee
Retirement Income Security Act of 1974, as amended. All assets in the Trust at
termination shall be returned to the Company.
SECTION 12. 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 California.
(d) For purposes of this Trust, "Change in Control" shall mean the purchase
or other acquisition by any person, entity or group of persons, within the
meaning of Sections 13(d) or 14(d) of the Securi-
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ties Exchange Act of 1934 ("Act"), or any comparable successor provisions, of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Act) of 30 percent or more of either the outstanding shares of common stock or
the combined voting power of the Company's then outstanding voting securities
entitled to vote generally, or the approval by the stockholders of the Company
of a reorganization, merger, or consolidation, in each case, with respect to
which persons who were stockholders of the company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own more
than 50 percent of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated Company's then
outstanding securities, or a liquidation or dissolution of the Company or of the
sale of all or substantially all of the Company's assets.
(e) This instrument may be executed in one or more counterparts, each of
which is legally binding and enforceable.
(f) Terms used in the masculine shall include the feminine and vice versa
and terms used in the singular shall include the plural and vice versa, unless
the context clearly indicates otherwise.
(g) This Trust Agreement shall inure to the benefit of, and be binding
upon, the parties hereto and their successors and assigns.
IN WITNESS WHEREOF, this Trust Agreement is executed this 17th day of
October, 1996.
SMART & FINAL, INC.
By: /s/XXXXX X. XXXXXXXX
-----------------------------------
CITY NATIONAL BANK
By: /s/XXXXXX X. XXXXXXX
-----------------------------------
XXXXXX X. XXXXXXX
Assistant Vice President
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