EXHIBIT 10.5
ASSISTED LIVING CONCEPTS,INC.
DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
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Page
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ASSISTED LIVING CONCEPTS, INC. DEFERRED COMPENSATION PLAN
ARTICLE I
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NAME AND PURPOSE............................................................. 1
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ARTICLE II
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ELIGIBILITY.................................................................. 1
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ARTICLE III
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ELECTION..................................................................... 1
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3.1 Election of Deferral........................................... 1
3.2 Manner of Electing Deferral.................................... 1
ARTICLE IV
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VESTING...................................................................... 2
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4.1 Salary......................................................... 2
4.2 Bonus.......................................................... 2
ARTICLE V
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PARTICIPANT ACCOUNTS......................................................... 2
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ARTICLE VI
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DISTRIBUTIONS................................................................ 2
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6.1 Termination Distributions...................................... 2
6.2 Death Distributions............................................ 3
6.3 Unforeseen Emergency........................................... 3
6.4 Form of Distribution........................................... 3
ARTICLE VII
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ADMINISTRATION............................................................... 3
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7.1 Plan Administrator........................................... 3
7.2 Amendment and Termination.................................... 4
7.3 Indemnification.............................................. 4
7.4 Claims Procedure............................................. 4
ARTICLE VIII
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MISCELLANEOUS................................................................ 4
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8.1 Participant's Rights......................................... 4
8.2 Nonalienation................................................ 5
8.3 Limitation of Rights......................................... 5
8.4 Governing Law................................................ 5
8.5 Benefit Plans................................................ 5
Appendix A: Employees and Amount of Deferred Bonus Amounts Subject to Vesting
Provisions
Appendix B: Merrill Lynch Non-Qualified Deferred Compensation Plan Trust
Agreement
Schedule C: Sample Election Form
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ARTICLE I
NAME AND PURPOSE
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Effective as of October 29, 1996, Assisted Living Concepts, Inc. ("ALC,
Inc." or the "Company") hereby establishes the ALC, Inc. Deferred Compensation
Plan (the "Plan"). The Company intends to maintain this Plan primarily for the
purpose of providing deferred compensation for a select group of management or
highly compensated employees. The provisions of this Plan, including any
appendices that may be attached, shall be interpreted in a manner consistent
with this purpose.
ARTICLE II
ELIGIBILITY
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An employee of the Company shall be eligible under the Plan if (i) the
employee is listed in Appendix A and (ii) is a member of a select group of
management of highly compensated employees as described under Sections 201(2),
301(a)(3) and 401(a)(1) of ERISA. An eligible employee is hereinafter referred
to in this Plan as "Participant".
ARTICLE III
ELECTION
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3.1 Election of Deferral. Each Participant shall be entitled to make
an irrevocable election, as specified in Section 3.2, to defer receipt of all
or any portion of the base salary and/or any bonus otherwise payable by the
company to the Participant.
3.2 Manner of Electing Deferral. A Participant may elect to defer
the base salary and/or bonus otherwise payable to him for the initial Plan
period beginning November 1, 1996 and ending December 31, 1996, or for any
subsequent Plan year ("Election Period") by giving notice to ALC, Inc. and the
Plan Administrator prior to the beginning of the Election Period. The notice
shall set forth the Participant's irrevocable election as to the percentage of
the Participant's base salary and/or bonus for the Election Period. For
purposes of delivering notice of such election, an election may be in the form
of Exhibit A attached. An employee who becomes eligible to participate in the
Plan during a year may file an election to participate within 30 days after
becoming eligible, and such election shall be effective with respect to
earnings during the remainder of the calendar year and in subsequent calendar
years until the election is amended or terminated.
ARTICLE IV
VESTING
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4.1 Salary. A Participant shall be fully vested in any portion of the
Participant's salary deferral.
4.2 Bonus. A Participant shall be vested in any deferred bonus set by the
Board of Directors of the Company in accordance with the following schedule:
Years of Service Vested Percentages
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Less than 1 year -0-
1 year or more, but less than 2 33.33%
2 years or more, but less than 3 66.67%
3 years or more 100.00%
ARTICLE V
PARTICIPANT ACCOUNTS
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The Plan Administrator shall establish a trust account for each Participant
pursuant to the terms of the Merrill Lynch Non-Qualified Deferred Compensation
Plan Trust Agreement, a copy of which is attached hereto as Appendix B and
incorporated hereby this reference. Each such trust account is intended to be
maintained as a grantor trust under (S)(S)677-679 of the Internal Revenue Code
of 1986, as amended, and conform to the terms of a model "rabbi trust," under
Internal Revenue Procedure 92-64. The assets of the trust are to be held
invested and disposed of by the trustee, in accordance with the terms of the
trust. Notwithstanding any provision of the plan or the trust to the contrary,
the assets of the trust shall at all times be subject to the claims of the
Company's general creditors in the event of insolvency or bankruptcy.
ARTICLE VI
DISTRIBUTIONS
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6.1 Termination Distributions. The payment of a Participant's Account
shall commence within 60 days after the date on which the earlier of the
following events occurs:
6.1.1 The Participant terminates service with the Company for any
reason; or
6.1.2 The Participant's service is terminated by the Company for any
reason; provided, however the Participant was not terminated for gross
negligence or fraud.
6.2 Death Distributions. The Account of a deceased Participant shall be
distributed to the Participant's Beneficiary in a single sum as soon as
practicable after the Participant's death, but no earlier than 30 days after the
Participant's death. For this purpose, a beneficiary designation must be signed
by the Participant and delivered to the Plan Administrator on such form as
specified by the Plan Administrator. In the absence of a valid or effective
beneficiary designation, the beneficiary will be the Participant's surviving
spouse, or if there is no surviving spouse, the Participant's estate.
6.3 Unforeseeable Emergency. A distribution of the account of a
Participant may be made to the Participant in the event of an unforeseeable
emergency. For purposes of this Plan, an unforeseeable emergency is a severe
financial hardship to the Participant resulting from a sudden and unexpected
illness or accident of the Participant or of a dependent (as defined in Internal
Revenue Code section 152(a)) of the Participant, loss of the Participant's
property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the Partipant.
In any case, payment shall not be made to the extent that such financial
hardship is or may be relived (i) through reimbursement of compensation by
insurance or otherwise; (ii) by liquidation of the Participant's assets, to the
extent the liquidation of such assets would not itself cause severe financial
hardship, or (iii) by cessation of deferrals under this Plan. An unforeseeable
emergency shall not include the need to send a Participant's child to college or
the purchase of a home. Early withdrawals of amounts because of an unforeseeable
emergency shall be limited to the amount reasonably needed to meet the
emergency.
6.4 Form of Distribution. A distribution, at the election of the
Participant or the Participant's beneficiary, may be in a lump sum or in annual
payments not to exceed ten installments.
ARTICLE VII
ADMINISTRATION
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7.1 Plan Administrator. The Board shall appoint a committee of one or more
individuals to be the "plan administrator" within the meaning of ERISA Section
3(16)(A). The Plan Administrator shall have sole authority to control and manage
the operation and administration of the Plan and gave all powers, authority
and discretion necessary or appropriate to carry out the plan provisions, and to
interpret and apply the terms of the Plan to particular cases or circumstances.
All decisions, determination and interpretations of the Plan Administrator will
be binding on all interested parties, subject to the claims and appeal
procedures necessary to satisfy the minimum standard of
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fails to appoint a plan administrator, the Chief Financial Officer of ALC, Inc.
shall serve as Plan Administrator.
7.2 Amendment and Termination. The Board, by resolution or written
consent, may amend all or any provision of the Plan, and may terminate the Plan
in its entirety, at any time and for any reason. No amendment or termination of
the Plan will reduce any Participant's Account as of the effective date of such
amendment or termination.
7.3 Indemnification. The Company will indemnify and hold harmless the
Plan Administrator from all losses, claims, damages, expenses, and liabilities
(including reasonable attorneys' fees and amounts paid, with the approval of the
Board, in settlement of any claim) arising out of or resulting from the
implementation of a duty, act or decision with respect to the Plan, so long as
such duty, act or decision does not involve gross negligence or willful
misconduct on the part of any such individual.
7.4 Claims Procedure. A Participant or his Beneficiary designated pursuant
to Section 6.2 (the "Claimant") may file a written claim for benefits under the
Plan with the Plan Administrator. Within 60 days of the filing of the claim, the
Plan Administrator shall notify the Claimant of the Plan Administrator's
decisions whether to approve the claim. Such notice shall include specific
reasons for any denial of the claim. Within 60 days of the date the Claimant was
notified of the denial of a claim, the Claimant may appeal the Plan
Administrator's decision by making a written submission containing any pertinent
information. Any decision not appealed within such 60-day period shall be final,
binding and conclusive. The Plan Administrator shall receive information
submitted with an appeal and render a decision within 60 days of the submission
of the appeal. If it is not feasible for the Plan Administrator to render a
decision on an appeal within the prescribed 60-day period, the period may be
extended to a 120-day period.
ARTICLE VIII
MISCELLANEOUS
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8.1 Participant's Rights. Establishment of the Plan shall not be construed
as giving any Participant the right to receive any benefits not specifically
provided by the Plan. A Participant shall not have any interest in the base
salary and/or bonus deferred or income credited to his account until such
account is distributed in accordance with the Plan. All base salary and/or bonus
deferred or other property otherwise held for the account of a Participant under
the Plan shall remain the sole property of the Company, subject to the claims of
its general creditors and available for its use for whatever purposes are
desired. With respect to amounts deferred or otherwise held for the account of a
Participant, the Participant is merely a general creditor of the company; and
the obligation of the company hereunder is purely contractual and shall not be
funded or secured in any way.
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8.2 Nonalienation.
8.2.1 General Rules. No benefit or interest of any Participant
(including the Participant's spouse and Beneficiary) under the Plan will be
subject to assignment, alienation, anticipation, sale, transfer, pledge, or
encumbrance, whether voluntary or involuntary. Before distribution of a
Participant's Account, no Account balance will be subject to the debts,
contracts, liabilities, engagements or torts of the Participant. (See
Section 8.2.2 below for distributions pursuant to a domestic relations
order, and Section 6.2 for distributions upon the Participant's death.)
8.2.2 Domestic Relations Orders. The Plan Administrator shall honor a
court order affecting a Participant's Account, provided the order would
satisfy the requirements of a qualified domestic relations order under
ERISA Section 206(d) if the Plan were subject to Part II of Title I of
ERISA.
8.3 Limitation of Rights. Nothing in this Plan will be construed to give a
Participant the right to continue in the employ of the Company at any particular
position or to interfere with the right of the Company to discharge, lay off or
discipline a Participant at any time and for any reason, or to give the Company
the right to require any Participant to remain in it employ or to interfere with
the Participant's right to terminate his employment.
8.4 Governing Law. The Provisions of the Plan will be construed, enforced
and administered in accordance with the law of Oregon except to the extent
preempted by ERISA.
8.5 Benefit Plans. The amount of each Participant's base salary and/or
bonus which he elects to defer under the Plan shall not be deemed to be
compensation for the purpose of calculating the amount of a Participant's
benefits or contributions under a pension plan or retirement plan (qualified
under Section 401(a) of the Internal Revenue Code), the amount of life insurance
payable under any life insurance plan established or maintained by the Company,
or the amount of any disability benefit payments payable under any disability
plan established or maintained by the Company, except to the extent specifically
provided in any such plan.
IN WITNESS WHEREOF, the Company by its duly authorized officer has executed
this Deferred Compensation Plan ALC, Inc., on , 1997.
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ASSISTED LIVING CONCEPTS, INC.
By:
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Title:
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