EXHIBIT 10.26
DEFERRED SAVINGS PLAN
OF
THE HILLHAVEN CORPORATION
Application will be made to the Internal Revenue Service for an advance
determination that the Deferred Savings Plan of The Hillhaven Corporation (the
"Plan") satisfies the requirements of Sections 401(a), 401(k) and other
applicable provisions of the Internal Revenue Code.
DEFERRED SAVINGS PLAN
OF
THE HILLHAVEN CORPORATION
ARTICLE SECTION CONTENTS PAGE
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I DEFINITIONS 1
II COMMITTEE AND OTHER FIDUCIARIES 16
2.1 Duties and Relationship of Fiduciaries 16
2.2 Appointment of Committee 17
2.3 Powers and Duties of Committee 17
2.4 Funding Policy 20
2.5 Investment Manager 20
2.6 Organization of Committee - Allocation
and Delegation of Duties 20
2.7 Compensation and Expenses of
Committee 21
2.8 Records of the Committee 21
2.9 Resignation and Removal of Members 21
2.10 Appointment of Successors 22
III PARTICIPATION OF EMPLOYEES 23
3.1 Eligibility to Participate 23
3.2 Application for Participation 23
3.3 Committee to Determine
Eligibility 24
3.4 Termination and Recommencement
of Active Participation 24
3.5 Termination of Participation 25
3.6 Military Service 25
3.7 Leaves of Absence 25
IV COMPENSATION DEFERRAL CONTRIBUTIONS 27
4.1 Compensation Deferral Contributions
by Participants 26
4.2 Elections to Change Compensation
Deferral Contributions 28
4.3 Maximum Amount Subject to Deferral 29
4.4 Non-Applicability of Limitation on
Compensation Deferrals by Highly
Compensated Employees 29
(i)
ARTICLE SECTION CONTENTS PAGE
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4.5 Provisions for Return of Annual
Compensation Deferral
Contributions in Excess of
Deferral Limitation 29
4.6 Employer's Contribution 31
4.7 Non-Applicability of Limitations
on Matching Contributions for
Highly Compensated Employees 32
4.8 Separate Accounts 32
4.9 Conditional Contributions 32
V DETERMINATION AND VESTING OF
PARTICIPANTS' INTERESTS 34
5.1 Determination of Participants'
Interests 34
5.2 Vesting of Participants' Interests 36
5.3 Forfeiture For Cause 38
5.4 Election of Former Vesting
Schedule 38
5.5 Changes in Vesting Schedule 39
VI PAYMENT OF BENEFITS OTHER THAN
DEATH BENEFITS 40
6.1 Termination of Employment 40
6.2 Commencement of Benefits 40
6.3 Normal Form of Benefits 41
6.4 Automatic Cashouts 41
6.5 Forfeitures; Restoration 42
6.6 Facility of Payment 43
6.7 Special Distribution Rules 43
6.8 Withdrawal of Compensation Deferrals
by Participants 44
VII DISTRIBUTIONS UPON DEATH;
DESIGNATIONS OF BENEFICIARIES 46
7.1 Form of Death Benefits Provided 46
7.2 Designation of Beneficiary 46
7.3 Additional Requirements for
Distribution 47
VIII CONTINUANCE AND AMENDMENT OF PLAN 49
8.1 Continuance of the Plan Not a
Contractual Obligation of
the Company 49
(ii)
ARTICLE SECTION CONTENTS PAGE
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8.2 Plan Merger or Consolidation 49
8.3 Distribution of Trust Fund on
Termination or Partial Termination
of Plan 50
8.4 Amendments 50
IX ADMINISTRATION OF THE TRUST FUND 51
9.1 The Trust Agreement 51
X MISCELLANEOUS 52
10.1 Right of Company and Affiliates
to Dismiss Employees 52
10.2 Benefits Provided Solely From the
Trust Fund 52
10.3 Notice of Participants to be Filed
with Committee 52
10.4 Plan Intended to Conform to
Provisions of Federal Internal
Revenue Code Relative to
Employee's Trusts 52
10.5 Amendment and Successor Code or
Act or Sections Thereof 53
10.6 Claims Procedure 53
10.7 Context to Control 55
10.8 Gender and Number 56
10.9 More Than One Capacity 56
10.10 Service of Process 56
10.11 Indemnification 56
10.12 Missing Participants 57
10.13 Administrative Mistake 57
10.14 Information to be Furnished
to Committee 57
10.15 Spendthrift Trust Provisions 58
10.16 Withholding 59
10.17 Severability 60
XI TOP HEAVY PLAN RULES 61
11.1 Applicability 61
11.2 Definitions 61
11.3 Top-Heavy Status 62
11.4 Minimum Contributions 65
11.5 Maximum Annual Addition 66
11.6 Vesting Rules 67
11.7 Non-Eligible Employees 67
(iii)
DEFERRED SAVINGS PLAN
OF
THE HILLHAVEN CORPORATION
The undersigned, THE HILLHAVEN CORPORATION, a corporation organized
and doing business under the laws of the State of Nevada, does hereby constitute
and adopt the following Deferred Savings Plan, to be effective as of the
Effective Date (as defined below), to wit:
ARTICLE I
DEFINITIONS
When used herein, the following words shall have the following
meanings unless the context clearly indicates otherwise:
1.1 "Act" shall mean the Employee Retirement Income Security Act of
1974 (Public Law 93-406), all amendments thereto and all regulations issued
thereunder.
1.2 "Active Participant" shall mean a Participant who is employed by
the Employer and who is currently making Employee Mandatory Compensation
Deferral Contributions to the Plan.
1.3 "Administrator" - see "Committee," Paragraph 1.10.
1.4 "Affiliate" shall mean
(a) Any corporation which is included in a controlled group of
corporations, within the meaning of Section 414(b) of the Code, of which group
the Company is also a member,
(b) Any trade or business which is under common control with the
Company within the meaning of Section 414(c) of the Code,
(c) Any member of an affiliated service group, within the meaning
of Section 414(m) of the Code, that includes the Company, and
(d) Any other entity required to be aggregated with the Company
pursuant to regulations under Section 414(o) of the Code.
Notwithstanding the foregoing, an entity shall be deemed to be an
Affiliate only with respect to periods during which the test under Code Section
414(b), (c), (m), or (o), as applicable, is met.
1.5 "Age" for any specified year shall be deemed to have been
attained at the arrival of the birthday during the latest of the number of years
in question.
1.6 "Beneficiary" shall mean a person who under this Plan becomes
entitled to receive a Participant's interest upon his death, unless otherwise
indicated by the context.
1.7 "Board of Directors" shall mean the Board of Directors of THE
HILLHAVEN CORPORATION.
1.8 "Claims Coordinator' shall mean the Claims Coordinator
hereinafter provided for in Paragraph 10.6.
1.9 "Code" shall mean the Internal Revenue Code of 1986, all
amendments thereto and all regulations issued thereunder.
1.10 "Committee" shall mean the Administration Committee hereinafter
provided for in Article II. Each member of the Committee shall be a "Named
Fiduciary" as defined by Section 402(a) of the Act. The Administration Committee
shall also be the "Administrator" provided for in Section 3(16)(A) of said Act.
1.11 "Company" shall mean THE HILLHAVEN CORPORATION.
1.12 "Compensation," for any calendar year, means the entire amount of
salary, wages and other remuneration reported by the Employer on Internal
Revenue Service Form W-2 for such calendar year, subject, however, to the
following adjustments:
(a) There shall be excluded from "Compensation" all of the
following amounts:
(i) "Holiday" and de minimis gifts.
--------------
(ii) Insurance premiums and any other imputed income not
paid in cash to the Employee.
(iii) Payments to an Employee designated as reimbursement for
voluntary contributions of the Employee to an individual retirement
arrangement.
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(iv) Except as provided in Subparagraph (b) below, payments
to or pursuant to any employee benefit plan, including, but not limited to
pensions, retirement benefits, stock bonuses, stock options, stock
appreciation rights and payments in lieu of dividends on shares of
restricted stock.
(v) In the case of an Employee working outside of the
United States, amounts in excess of the Employee's base pay intended to
reimburse the Employee for the higher cost of living outside of the United
States, such as foreign service premiums or hardship allowances.
(vi) Automobile, parking or other transportation-related
allowances, if any.
(vii) Club memberships or dues.
(viii) Relocation allowances and distributions from a Deferred
Compensation Master Plan of the Company or an Affiliate.
(ix) Professional association dues.
(x) Education or tuition allowances or reimbursements.
(xi) Uniforms or uniform allowances.
(xii) Any amount paid to a Covered Employee by the Employer
on account of a period of time during which no duties are performed by the
Covered Employee.
(xiii) Any payments made or due under a plan maintained solely
for the purpose of complying with workers compensation or unemployment
compensation or disability insurance laws.
(xiv) Any payment which solely reimburses the Employee for
expenses incurred by the Employee.
(xv) Any payments made to the Employee as severance pay.
(b) "Compensation" for a Plan Year shall also include amounts
which otherwise would be included in "Compensation" under the preceding
provisions of this Paragraph 1.12 but which are deferred by a Participant
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under this Plan in accordance with Section 401(k) of the Code or which are not
includible in income by reason of a salary reduction arrangement recognized
under Section 125 of the Code.
(c) Notwithstanding the foregoing, no amount payable to an
Employee by an Employer shall be deemed to be Compensation unless the
Compensation (i) is payable to the Employee with respect to a period of time (A)
during which the Employee is a Covered Employee and (B) following the date as of
which such Covered Employee becomes an Active Participant, as provided in
Paragraph 3.1, and (ii) does not exceed $200,000 in any Plan Year, as that
amount may be adjusted by the Secretary of the Treasury.
1.13 "Compensation Committee" shall mean the Compensation Committee of
the Board of Directors of the Company.
1.14 "Compensation Deferral Contribution" shall mean the amount paid
into the Trust Fund by the Employer at the election of the Employee pursuant to
Paragraphs 4.1.1, 4.1.2 and 4.1.3.
1.15 "Computation Period" shall mean each Plan Year (calendar year)
that includes or commences after an Employee's Employment Commencement Date.
1.16 "Contribution" shall mean any amount paid into the Trust Fund by
the Employer in accordance with Article IV.
1.17 "Covered Employee" shall mean an Employee who is employed by an
Employer in Category I, as that category is established and determined by the
Employer, or such other categories as are designated by an Employer in
resolutions adopted by the Employer, and from whose salary or wages income tax
or social security tax is required by law to be and is being withheld by the
Employer, provided, however, that no person shall be a Covered Employee
hereunder (i) while a member of a collective bargaining unit covered by a
collective bargaining agreement with respect to which retirement benefits were
the subject of good faith bargaining between employee representatives and the
Company or an Affiliate, which agreement does not specifically provide for
coverage of such EmploYee under this Plan, (ii) while a nonresident alien and
while receiving no earned income from the Company or an Affiliate which
constitutes income from sources within the United States, (iii) while in
Employment as a self-employed person, within the meaning of
4
Section 401(c)(1) of the Code, (iv) while a "leased employee" within the meaning
of Code Section 414(n), or (v) while a Highly Compensated Employee.
1.18 "Effective Date" shall mean the earliest date following the date
the Company ceases to be an Affiliate of National Medical Enterprises, Inc. (the
"Spin-off Date") that it is administratively practicable to implement the Plan,
such date to be determined by the Committee; provided, however, in no event
shall the "Effective Date" be later than the sixtieth (60th) day following the
Spin-off Date.
1.19 "Employee" shall mean a person who is employed by the Company or
an Affiliate, and a person required to be treated as a "leased employee"
pursuant to Code Section 414(n); provided, however, that an independent
contractor shall not be deemed to be an Employee.
1.20 "Employee Mandatory Compensation Deferral Contributions" shall
mean Employee Compensation Deferral Contributions made pursuant to Paragraphs
4.1.1 and 4.1.3.
1.21 "Employee Voluntary Compensation Deferral Contributions" shall
mean Employee Compensation Deferral Contributions made pursuant to Paragraphs
4.1.2 and 4.1.3.
1.22 "Employer" means THE HILLHAVEN CORPORATION (or any covered
division, operating unit, facility or part thereof designated by the Board of
Directors in the event the Plan has not been extended to all such parts), and
any Affiliate thereof which has adopted this Plan with the approval of THE
HILLHAVEN CORPORATION (or any covered division, operating unit, facility or part
of such Affiliate designated by the Board of Directors of such Affiliate with
the approval of ThE HILLHAVEN CORPORATION in the event the Plan has not been
extended to all such parts). "Employer" shall also mean any successor in
interest to ThE HILLHAVEN CORPORATION, or any Affiliate thereof, resulting from
merger, consolidation, or transfer of assets substantially as a whole, which may
expressly agree in writing to continue this Plan as hereinafter provided,
provided that in the case of such a successor in interest to an Affiliate,
continuation of this Plan with respect to such successor shall be subject to
approval of the Compensation Committee.
1.23 "Employment" - see "Service," Paragraph 1.38.
1.24 "Employment Commencement Date" shall mean each of the following:
5
(a) In the case of an Employee who is an Employee on the day
prior to the date the Company ceases to be an Affiliate of National Medical
Enterprises, Inc. (the "Spin-off Date'), the Employee's most recent date of hire
by the Company or an Affiliate.
(b) In the case of an Employee who is not an Employee on the day
prior to the Spin-off Date, the date on or after the Spin-off Date on which an
Employee first performs an Hour of Service in any capacity for the Company or an
Affiliate with respect to which the Employee is compensated or is entitled to
compensation by the Company or the Affiliate.
(c) In the case of an Employee whose Employment terminates on or
after the Spin-off Date and who is reemployed by the Company or an Affiliate,
the term "Employment Commencement Date" shall mean either (i) his "Employment
Commencement Date" prior to the Spin-off Date, as defined in (a) above, or his
"Employment Commencement Date' coinciding with or following the "Spin-off Date,
as defined in (b) above, or (ii) if the Participant incurs a One Year Break in
service, "Employment Commencement Date" shall also mean the first day following
the termination of Employment on which the Employee performs an Hour of Service
for the Company or an Affiliate with respect to which he is compensated or
entitled to compensation by the Company or Affiliate.
1.25 "Entry Date" shall mean the Effective Date, and each January 1
thereafter, except as otherwise provided in Paragraph 3.1(b).
1.26 "Fiduciary" shall include all of the following, to the extent
they are deemed to be such under the Act:
(a) Any administrator, officer, trustee, or custodian of the
Plan;
(b) Any person exercising any discretionary authority or
discretionary control respecting management of the Plan;
(c) Any person exercising authority or control respecting
management or disposition of Plan assets;
(d) Any person rendering investment advice for a fee or other
compensation with respect to Plan property, or with the authority or
responsibility to do so, except as provided otherwise in the Act;
6
(e) Any person who possesses any discretionary authority or
responsibility in the administration of the Plan; and
(f) Any person designated under or to whom fiduciary duties are
delegated pursuant to Section 405(c)(1)(B) of the Act.
1.27 "Highly Compensated Employee" shall mean any Employee who is
described below.
(a) "Highly Compensated Employee" shall include any Employee who
(i) was a Five Percent Owner during the Determination Year
or the Look Back Year;
(ii) received Compensation from an Employer in excess of
$75,000 during the Look Back Year;
(iii) received Compensation from an Employer in excess of
$50,000 during the Look Back Year and was in the "top-paid group" of
Employees for such Look Back Year;
(iv) was at any time an officer during the Look Back Year
and received Compensation greater than fifty percent (50%) of the amount in
effect under Section 415(b)(1)(A) of the Code in such Look Back Year; or
(v) was an Employee described in Subparagraph (ii), (iii),
or (iv) above during the Determination Year and was a member of the group
consisting of the 100 Employees paid the greatest Compensation during the
Determination Year.
(b) Determination of a Highly Compensated Employee shall be in
accordance with the following definitions and special rules:
(i) "Determination Year" means the Plan Year for which the
determination of Highly Compensated Employee is being made.
(ii) "Look Back Year" is the twelve (12) month period
preceding the Determination Year.
(iii) An Employee shall be treated as a Five Percent Owner
for any Determination Year or Look Back Year if at any time during such
Year such
7
Employee was a Five Percent Owner (as defined in Paragraph 11.2(b)).
(iv) An Employee is in the "top-paid group" of Employees for
any Determination Year or Look Back Year if such Employee is in the group
consisting of the top twenty percent (20%) of the Employees when ranked on
the basis of Compensation paid during such Year.
(v) For purposes of this Paragraph, no more than fifty (50)
Employees (or, if lesser, the greater of three (3) Employees or ten percent
(10%) of the Employees) shall be treated as officers. To the extent
required by Code Section 414(q), if for any Determination Year or Look Back
Year no officer of the Employer is described in this Section, the highest
paid officer of the Employer for such year shall be treated as described in
this section.
(vi) If any individual is a "family member" with respect to
a Five Percent Owner or of a Highly Compensated Employee in the group
consisting of the ten (10) Highly Compensated Employees paid the greatest
Compensation during the Determination Year or Look Back Year, then
(A) such individual shall not be considered a separate
Employee, and
(B) any Compensation paid to such individual (and any
applicable contribution or benefit on behalf of such individual) shall
be treated as if it were paid to (or on behalf of) the Five Percent
Owner or Highly Compensated Employee.
For purposes of this Subparagraph (vi), the term "family member" means, with
respect to any Employee, such Employee's Spouse and lineal ascendants or
descendants and the spouses of such lineal ascendants or descendants.
(c) For purposes of this Paragraph, the term "Compensation"
means Limitation Earnings as defined in Paragraph 1.30; provided, however, the
determination under this Subparagraph (c) shall be made without regard to Code
Sections 125, 402(a)(8), and 401(h)(1)(B), and in the case of Employer
contributions made pursuant to a salary reduction agreement, without regard to
Code Section 403(b).
8
(d) For purposes of determining the number of Employees in the
"top-paid" group under this Paragraph, the following Employees shall be
excluded:
(i) Employees who have not completed six (6) months of
Service,
(ii) Employees who normally work less than 17-l/2 hours per
week,
(iii) Employees who normally work not more than six (6) months
during any Plan Year, and
(iv) Employees who have not attained age 21,
(v) Except to the extent provided in Treasury Regulations,
Employees who are included in a unit of employees covered by an agreement
which the Secretary of Labor finds to be a collective bargaining agreement
between Employee representatives and Employer, and
(vi) Employees who are nonresident aliens and who receive no
earned income (within the meaning of Section 911(d)(2) from the Employer
which constitutes income from sources within the United States (within the
meaning of Section 861(a)(3)).
An Employer may elect to apply Subparagraphs (i) through (vi) above by
substituting a shorter period of Service, smaller number of hours or months, or
lower age for the period of service, number of hours or months, or (as the case
may be) than as specified in such Subparagraphs.
(e) A former Employee shall be treated as a Highly Compensated
Employee if
(i) such Employee was a Highly Compensated Employee when
such Employee incurred a Severance, or
(ii) such Employee was a Highly Compensated Employee at any
time after attaining age fifty-five (55).
(f) Code Sections 414(b), (c), (m), and (o) shall be applied
before the application of this Section. Also, the term "Employee" shall include
"leased employees," within the meaning of Code Section 414(n), unless such
leased Employee is covered under a "safe
9
harbor" plan of the leasing organization and not covered under a qualified plan
of the Employer.
(g) Notwithstanding the foregoing, for purposes of determining
Covered Employee status only, the Committee may in its sole discretion establish
rules and procedures for purposes of identifying Highly Compensated Employees,
which rules and procedures may result in an Employee being deemed to be a
Highly Compensated Employee, whether or not such Employee is an individual
described in Code Section 414(q).
1.28 "Hour of Service" shall include:
(a) Each hour for which an Employee is directly or indirectly
paid, or entitled to payment, by the Company or an Affiliate for the performance
of duties during the applicable computation period. Such hours shall be credited
to the Employee for the applicable computation period or periods as required by
Labor Reg. Subsection 2530.200b-2.
(b) Each hour for which back pay is awarded to the Employee or
agreed to by the Company or an Affiliate. Such hours shall be credited to the
Employee for the computation period or periods to which the award or agreement
pertains and shall be calculated irrespective of mitigation of damages, but no
Hour of Service shall be counted both under this paragraph and under the first
paragraph of this Paragraph 1.28.
(c) Any Hour of Service required to be credited to the Employee
under any law of the United States or any rule or regulation issued thereunder;
provided, however, that no hour shall be credited to the Employee both under
this paragraph and under any of the other paragraphs of this Paragraph 1.28.
(d) Each hour (i) for which the Employee is directly or
indirectly paid, or entitled to payment, by reasons (such as vacation, sickness
or disability) other than the performance of duties during the applicable
computation period as required by Paragraphs (b) and (c) of Labor Reg.
Subsection 2530.200b-2, and (ii) during a temporary layoff (even if of
indefinite duration) or a Company or an Affiliate-approved leave of absence.
Notwithstanding the foregoing, for purposes of crediting an Employee with Hours
of Service under this Plan, an Employee shall be credited with 45 Hours of
Service for each week for which the Employee is required to be credited with at
least one Hour of Service under the above
10
provisions, subject to the limitations of Subparagraph (d) above.
Except as determined by the Chief Executive Officer of the
Company or his designee, or as required under Section 414 (a) of the Code, any
service or employment completed by an individual as an employee of a corporation
or trade or business prior to the date on which the corporation or trade or
business becomes an Affiliate shall not be taken into account for purposes of
determining Hours of Service or for any other purposes under this Plan.
1.29 "Investment Manager" means any fiduciary (other than (i) a
trustee or a fiduciary named in this Plan instrument, or (ii) who is identified
as a fiduciary pursuant to the procedure set forth in this instrument), (l) who
has the power to manage, acquire or dispose of any asset of the Plan, (2) who
has acknowledged in writing that he is a fiduciary with respect to the Plan, and
(3) who is (i) registered as an investment adviser under the Investment Advisers
Act of 1940; or (ii) is a bank, as defined in that Act; or (iii) is an insurance
company qualified to manage, acquire or dispose of the assets of retirement
plans under the laws of more than one State.
1.30 "Limitation Earnings" shall mean, for purposes of applying the
limitations in Paragraphs 5.1(e) and (f) of this Plan, the entire amount paid to
an Employee by the Company or an Affiliate which is included in the Employee's
income for federal income tax purposes during a Plan Year including, but not
limited to, commissions paid to salesmen, compensation for services on the basis
of percentage of profits, commissions on insurance premiums, tips and bonuses,
imputed income and excluding the following:
(a) Company or Affiliate contributions to a plan of deferred
compensation (whether funded or unfunded or qualified or non-qualified) which
are not included in an Employees gross income for the taxable year in which
contributed, salary reduction contributions which qualify for treatment under
Section 401(k) or Section 125 of the Code which are made to any plan maintained
by the Company or an Affiliate, Company or Affiliate contributions under a
simplified employee pension plan to the extent such contributions are deductible
by the Employee, or any distributions from a plan of deferred compensation,
except that any amount received by an Employee pursuant to an unfunded non-
qualified plan may be considered to be "Compensation" for purposes of this
Paragraph 5.1(h) in the Plan Year such amount is includible in the gross income
of the Employee;
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(b) Amounts realized from exercise of a non-qualified stock
option, or when restricted stock (or property) held by the Employee becomes
freely transferable, or no longer subject to a substantial risk of forfeiture;
(c) Amounts realized in the sale, exchange or other disposition
of stockacquired under a qualified stock option;
(d) Other amounts which received special tax benefits, or
contributions made by the Company or an Affiliate (whether or not under a salary
reduction agreement) towards the purchase of an annuity described in Section
403(b) of the Code (whether or not the amounts are actually excludable from the
gross income of the Employee).
1.31 "Named Fiduciary"(ies)" - see "Committee," Paragraph 1.10.
1.32 "Normal Retirement Date' shall be the Participant'S sixtieth (60)
birthday.
1.33 "One Year Break in Service" means a Computation Period at the end
of which the Employee's Employment is terminated and during which the Employee
has not completed more than five hundred (500) Hours of Service. Such One Year
Break in Service shall be deemed to occur on the last day of such Computation
Period. Solely for purposes of determining whether an Employee has sustained a
One Year Break in Service, an Employee's Hours of Service shall include the
following:
(a) Any period of absence by reason of the pregnancy of the
Employee, by reason of the birth of a child of the Employee, by reason of the
placement of a child with the Employee in connection with the adoption of the
child by the Employee, or for purposes of caring for the child for a period
beginning immediately following the birth or placement.
(b) The number of Hours of Service with which an Employee
described in Subparagraph (a) above shall be credited shall be --
(i) The number which otherwise normally would have been
credited to the Employee but for the absence, or
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(ii) If the number described in Subparagraph (i) above is not
capable of being determined, eight (8) Hours of Service per day of such
absence,
provided that the total number of hours treated as Hours of Service under this
Subparagraph (b) shall not exceed five hundred one (501) and that these Hours of
Service shall be taken into account solely for purposes of determining whether
or not the Employee has incurred a One Year Break in Service.
(c) The Hours described in Subparagraph (b) shall be credited to
the Computation Period --
(i) In which the absence from work begins, if the Employee
would be prevented from incurring a One Year Break in Service in that
Computation Period solely because the period of absence is treated as Hours
of Service under this Paragraph 1.33, or
(ii) In any other case, in the immediately following
Computation Period.
(d) The above provisions of Subparagraphs (a)-(c) of this
Paragraph 1.33 shall not apply unless the Employee provides such timely
information as the Committee may reasonably require to establish:
(i) That the absence is for one or more of the reasons
described in Subparagraph (a), and
(ii) The number of days for which there was such an absence.
1.34 "Participant" shall mean any person for whom an account is
maintained under this Plan and whose account, representing such person's
interest in the Trust Fund, has not been distributed or otherwise disposed of in
accordance with applicable law.
1.35 "Plan" shall mean the Deferred Savings Plan set forth in and by
this document and the related Trust and all subsequent amendments thereto.
1.36 "Plan Year" shall mean a twelve-month period beginning on each
January l and ending on each subsequent December 31; provided, however, the
first Plan Year of the Plan shall be the period beginning on the Effective Date
and ending December 31, 1990.
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1.37 "Qualified Election" shall mean a Participant's designation of
Beneficiary made under this Plan in accordance with the requirements of this
Paragraph 1.37 and in the manner and form as prescribed by the Committee. No
designation of Beneficiary other than or in addition to the Participant's Spouse
shall be deemed to be a Qualified Election unless the Spouse, if any, of the
Participant consents in writing to such designation of Beneficiary and
acknowledges the effect of such consent. The Spouse's consent to a designation
of Beneficiary must be witnessed by a notary public or a Plan Representative.
Notwithstanding this consent requirement, if the Participant warrants to the
Committee that such written consent may not be obtained because there is no
Spouse or the Spouse cannot be located or for any other reason as the Committee
determines to be consistent with the requirements of Section 417 of the Code, a
related designation of Beneficiary without spousal consent may be deemed a
Qualified Election; provided, however, that the Committee may require the
Participant in such case to produce such evidence of the Spouse's unavailability
or other circumstances as the Committee deems to be appropriate. A Qualified
Election under this provision will be valid only with respect to the Spouse who
consented to the Qualified Election, or in the event of a Qualified Election to
which the Spouse's consent has not been obtained, with respect to that Spouse
whose consent was not obtained (e.g., that Spouse who cannot be located). Any
change in a prior designation of Beneficiary by a Participant shall be subject
to the foregoing rules. Subject to the foregoing (relating to a change by a
Participant), the consent by a Spouse to a designation of Beneficiary shall be
irrevocable. The number of changes in Beneficiary designations shall not be
limited. A designation of Beneficiary which, by reason of a failure to obtain
required spousal consent could not be given effect when made, may later be given
effect if at the relevant date the Participant has no Spouse or is not then
otherwise required to have spousal consent.
1.38 "Service" or "Employment" means service for or employment by the
Company or an Affiliate, which service or employment is completed as an
Employee. Except as determined in writing by the Chief Executive Officer of the
Company or his designee, or as required under Section 414(a) of the Code, any
service or employment completed by an individual as an employee of a corporation
or trade or business prior to the date on which the corporation or trade or
business becomes an Affiliate shall not be taken into account for purposes of
determining Hours of Service or for any other purposes under this Plan.
14
1.39 "Spouse" shall mean, for purposes of payment of benefits
following the death of a Participant, the person to whom the Participant was
married on the date of such Participant's death.
1.40 "Total and Permanent Disability" means total and permanent
incapacity of a Participant, due to physical impairment or legally established
mental incompetence, to perform the usual duties of his Employment, which
disability shall be determined by the Committee based on competent medical
advice.
1.41 "Trust Agreement" means the Agreement between the Company and the
Trustee or Trustees covering the administration of the Trust Fund and includes
the succession of the Trustee or Trustees.
1.42 "Trust Fund" means the assets of the Trust established pursuant
to this Plan and the Trust Agreement hereinafter referred to, out of which the
benefits under this Plan shall be paid.
1.43 "Trustee" means the Trustee or Trustees of the Trust Fund
established pursuant to this Plan and any successor Trustee or Trustees.
1.44 "Valuation Date" shall mean the last business day of each Plan
quarter which shall be the last business day in each March, June, September, and
December. These shall be the dates as of which the dollar value of each
Participant's account is determined in accordance with the terms of the Trust
Agreement and such dollar value, plus Participant Compensation Deferral
Contributions and Employer Contributions credited to the Participant's account
during the Plan quarter and minus any withdrawals or distributions during the
Plan quarter, shall be the Participant's interest for all purposes until the
next Valuation Date.
1.45 "Year of Service" shall mean each Computation Period in which the
Employee has completed not less than one thousand (1,000) Hours of Service,
except as modified by Paragraph 5.2 of Article V. Notwithstanding any provision
of this Plan to the contrary, except as determined in writing by the Chief
Executive Officer of the Company or his designee, or as required under Section
414(a) of the Code, any service or employment completed by an individual as an
employee of a corporation or trade or business prior to the date on which the
corporation or trade or business becomes an Affiliate shall not be taken into
account for purposes of determining Hours of Service or for any other purposes
under this Plan.
15
ARTICLE II
COMMITTEE AND OTHER FIDUCIARIES
2.1 Duties and Relationship of Fiduciaries
--------------------------------------
Each Fiduciary shall at all times discharge his duties in
conformance with the provisions of the Act and as required for the
administration of a qualified plan under the Code.
It shall be the responsibility of every Fiduciary and of every
person handling funds or other property of the plan to be bonded to the extent
required by the Act. The Committee may direct the Trustee to pay the cost of all
such bonds from the Trust assets, if and to the extent that the Company does not
pay such costs in a timely fashion, and the Trustee shall be protected in
relying on such directions.
Each Fiduciary, and each member of the Board of Directors, the
Compensation Committee, the Committee, the Claims Coordinator designated under
paragraph 10.6.1 of Article x, the Trustee, and each executive officer (as such
term is used in rules of the Securities and Exchange Commission promulgated
under the Securities Exchange Act of 1934) performing duties in connection with
the Plan, shall be responsible only for acts and omissions in connection with
the exercise of the Powers, duties and functions specifically allocated to such
person under the terms of this Plan and the Trust Agreement. No person shall be
responsible for any acts or omissions in connection with the powers, functions
and duties allocated to any other person under the terms of this Plan and the
Trust Agreement. Except to the extent provided in the Act or the Code, no
person shall have any duty to question whether any other person is fulfilling
the responsibilities imposed on such other Person by this Plan, the Trust
Agreement, or the Act. No Person shall have any liability for a breach of
fiduciary responsibility of any other person with respect to the Plan or the
Trust unless such person participates knowingly in such breach, knowingly
undertakes to conceal such breach, has actual knowledge of such breach and fails
to take reasonable remedial action to remedy such breach, or, through negligence
in performing his own specific fiduciary responsibilities, has enabled such
other person to commit a breach of such other person's fiduciary
responsibilities. Wherever this Plan or the Trust Agreement provides that a
Fiduciary has the power to
16
appoint another person or entity with discretionary authority or control
respecting the operation or administration of the Plan or the Trust Fund, the
responsibility of the appointing Fiduciary with respect to such appointment
shall be limited to the selection of the appointee and periodic review of the
performance of the appointee in accordance with the standards of the Act. Any
violation of fiduciary responsibilities by the appointee which is not a
proximate result of the failure of the appointing Fiduciary properly to select
or supervise the appointee, and in which breach the appointing Fiduciary did not
otherwise participate, will not be considered to be a breach by the appointing
Fiduciary.
2.2 Appointment of Committee
------------------------
The Committee shall be appointed by the Compensation Committee
and shall consist of not less than three (3) nor more than five (5) Employees,
the exact number of which shall be established by the Compensation Committee
from time to time. Such members of the Committee shall hold office for a term
certain, as designated by the Compensation Committee, unless a member resigns or
is removed by the Compensation Committee prior to the expiration of the
designated term of office.
2.3 Powers and Duties of Committee
------------------------------
The Committee shall have all discretionary powers necessary to
supervise the administration of the Plan and control its operations, except such
as may be expressly reserved to the Company, its Board of Directors, or the
Compensation Committee. In addition to any powers and authority conferred on
the Committee elsewhere in the Plan or by law, the Committee shall have, but not
by way of limitation, the discretionary fiduciary power and authority to
establish rules and regulations from time to time for the conduct of the
Committee's business and the administration and effectuation of this Plan, to
administer, interpret, construe and apply this Plan and to decide all questions
which may arise or which may be raised under this Plan by any Employee,
Participant, former Participant, Beneficiary or other person whatsoever,
including but not limited to all questions relating to eligibility to
participate in the Plan, the amount of Years of Service of any Participant, and
the amount of benefits to which any Participant or his Beneficiary may be
entitled. Further, the Committee shall have the discretionary power and
authority to perform or cause to be performed such acts as it may deem in its
sole
17
discretion to be necessary, appropriate or convenient in the efficient
administration of the Plan. Any action taken in good faith by the Committee in
the exercise of authority conferred upon it by this Plan shall be conclusive and
binding upon the participants and their Beneficiaries. All discretionary powers
conferred upon the Committee shall be absolute. All such discretionary powers
shall be exercised in a uniform and nondiscriminatorY manner.
Any action taken by the Committee shall be by majority vote. In
the event that the members reach a tie decision on an issue before the
Committee, a temporary member shall be appointed by the Compensation Committee
in order to create an odd number of voting members. The Compensation Committee
may in its discretion appoint a standby temporary member to act in such capacity
until replaced or removed.
The Committee, from time to time, shall direct the Trustee
concerning the payments to be made out of the Trust Fund pursuant to this Plan
and shall have such other powers respecting the administration of the Trust Fund
as may be conferred upon it hereunder or under the Trust Agreement.
The Trustee shall invest and reinvest the Trust Fund, or any part
thereof, in any manner that it deems advisable subject to the right hereby
reserved to the Committee to direct the Trustee with respect to the investment
and reinvestment of the Trust Fund, including the right to direct the Trustee to
establish segregated investment funds for the investment of participant
accounts, in accordance with participant directions &nd the provisions of the
plan. In its sole discretion, the Committee may appoint an Investment Committee
consisting of from three (3) to five (5) members to act in its place with
respect to the direction of the Trustee as to the investment of the Trust Fund
in accordance with this paragraph 2.3, the determination of a funding policy in
accordance with paragraph 2.4, and the appointment of an Investment Manager in
accordance with paragraph 2.5.
With respect to its powers to direct the Trustee on the
investment of the Trust Fund, the Committee shall have the power to direct the
Trustee to invest and reinvest any and all money or property of any description
at any time held by it and constituting part of the Trust Fund in accordance
with the following powers:
18
The Committee, without previous application to or subsequent
ratification of any court, tribunal or commission, or any federal or state
governmental agency, except as hereinafter provided, may direct the Trustee to
invest in bonds, notes, debentures, mortgages, commercial paper, preferred
stock, common stocks, sell covered call options or invest in other securities,
rights, obligations, or property, real or personal, including shares and
certificates of participation issued by investment companies or investment
trusts, trust funds of the Trust created for qualified employee benefit plans,
annuity contracts, life insurance contracts, including ordinary and term life
insurance contracts on the lives of key employees of the Company, for the
benefit of the Trust Fund and the employee Participants as a whole in order to
protect their interests in the premises.
The Committee may direct the Trustee to invest in the stock or
securities of the Employer, including any bonds or debentures of the Employer,
provided, however, that such investments may be made only in "qualifying
employer securities," as that term is defined in the Act.
The Committee may direct the Trustee to sell, grant options
therefor, exchange, pledge, or encumber, mortgage, deed in trust or other form
of hypothecation, or otherwise dispose of the whole or any part of the Trust
Fund on such terms and for such property or cash, or part cash and credit as the
Committee may deem best, and it may direct the Trustee to retain, hold,
maintain, or continue any securities or investments which the Trustee may hold
as part of the Trust Fund for such length of time as the Committee may deem
advisable, and generally, in all respects, the Committee may direct the Trustee
to do all such other things and exercise each and every right, power and
privilege in connection with and in relation to the Trust Fund as could be done,
exercised or executed by an individual holding and owning said property in
absolute and unconditional ownership including directing the Trustee as to the
manner of voting any stock or securities, whether of the Employer or otherwise,
held in said Trust Fund. The Committee, in directing the Trustee as to the
investment of the Trust Fund, shall not be bound as to the character of any
investment by any statute, rule of court, or custom governing the investment of
trust funds other than the Act or the Code, and Amendments thereto, and other
Regulations and Rulings thereunder which are valid interpretations of the Act,
Code and Amendments.
19
The Committee shall have no right or authority to authorize the
Trustee to make advances to a Participant or to make any distribution except as
provided in Article VII herein.
2.4 Funding Policy
--------------
The Committee, promptly upon its formation and periodically
thereafter shall determine, at a duly constituted meeting of said Committee, a
funding policy and method consistent with the objectives of the Plan, and with
all requirements of law and an investment and reinvestment policy consistent
therewith. All actions taken at such meeting, and the reasons therefor, shall be
recorded in the minutes of the meeting. Such policy and method shall be
communicated in writing to the Trustee and any then acting Investment Manager.
and thereafter none of the powers of the Committee, the Trustee or any
Investment Manager set forth herein shall be exercised in any manner
inconsistent with such objectives.
2.5 Investment Manager
------------------
The Committee may, from time to time, and in writing, authorize
or direct the Trustee to delegate the management of the plan assets or any part
thereof, including the right to acquire and dispose of such assets, to an
Investment Manager. Such authority or direction of the Trustee to so delegate
may be revoked by the Committee at any time, and the Committee may authorize or
direct the Trustee at any time to revoke any such delegation.
2.6 Organization of Committee - Allocation and Delegation of Duties
---------------------------------------------------------------
The Committee may appoint one of its own members as Chairman, and
may adopt such by-laws and regulations as it deems desirable for the conduct" of
its affairs and appoint a secretary and one or more assistant secretary or
secretaries. The Committee may, at any duly constituted meeting thereof,
allocate specific fiduciary responsibilities, other than trustee
responsibilities, among the members of the Committee. Any member of such
Committee may also, at such meeting, designate other persons to carry out any
fiduciary duties which are the responsibility of such member, other than trustee
responsibilities. Either of such actions shall be recorded in the minutes of
said meeting, and may be revoked at any time by action taken at another such
meeting recorded in the minutes thereof, and communicated to the person to whom
such duties were delegated.
20
Any determination of the Committee may be made by a majority of
the Committee at a meeting thereof or without a meeting by a resolution or
memorandum signed by all members, and, except as provided otherwise herein,
shall be final and conclusive on the Employer, the Trustee, all Participants and
Beneficiaries claiming any rights hereunder, and as to all third parties dealing
with the Committee or with the Trustee. All notices, directions, information and
other communications from the Committee to the Trustee shall be in writing.
2.7 Compensation and Expenses of Committee
--------------------------------------
The members of the Committee shall serve without compensation but
shall be reimbursed for any necessary expenditures incurred in the discharge of
their duties as members of said Committee. The compensation of all agents,
counsel, or other persons (who may be officers or members of the Employer)
retained or employed by the Committee shall be fixed by the Committee, subject
to the approval of the Compensation Committee. Any such reimbursement or
payment shall be made by the Trustee out of the Trust Fund; provided, however,
that all or any part of any such reimbursement or payment may be made by the
Employer if it shall so determine.
2.8 Records of the Committee
------------------------
The Committee shall keep a record of all of its proceedings and
shall keep or cause to be kept all such books of account, records and other data
as may be necessary or advisable in its judgment for the administration of this
Plan and to reflect properly the affairs thereof, and to determine the amounts
of vested and forfeitable interests of the respective Participants in the Trust
Fund, and the amount of all retirement benefits or other benefits hereunder. As
a part thereof, it shall maintain or cause to be maintained a separate account
for each Participant, which account in each year shall reflect such information
required by Paragraph 5.1(c). Any person dealing with the Committee may rely on
a certificate or memorandum signed by a person who, pursuant to a written
resolution of the Committee, is authorized to execute such instrument.
2.9 Resignation and Removal of Members
----------------------------------
Any member of the Committee may resign at any time by giving
written notice to the other members and to the Compensation Committee, effective
as therein stated or otherwise upon receipt. Any member who leaves the
21
Employment of the Employer shall be deemed to have resigned as a member of the
Committee on the date of his termination of Employment. Any member of the
Committee may at any time be removed by the Compensation Committee.
2.10 Appointment of Successors
-------------------------
Upon the death, resignation or removal of any member, the
Compensation Committee shall at its next regular meeting, or at a special
meeting or by unanimous written consent if so desired, appoint a successor
member by resolution. Notice of appointment of a successor member shall be made
by an authorized member of the Compensation Committee in writing to the Trustee
and to the Committee. Until receipt by the Trustee of such written notice of any
change in membership of the Committee, the Trustee shall not be charged with
knowledge or notice of such change.
22
ARTICLE III
PARTICIPATION OF EMPLOYEES
3.1 Eligibility to Participate
--------------------------
(a) Any Employee shall be eligible to become an Active
Participant as of the Effective Date, provided that on such Effective Date such
person is a Covered Employee.
(b) Any Employee who is not an Active Participant solely because
he is not a Covered Employee shall be eligible to become an Active Participant
following commencement or recommencement of Covered Employee status, provided
the Committee receives his application to enroll in the Plan within thirty (30)
days following the date the Covered Employee is notified of his status as a
Covered Employee and receives an application to enroll, Such Covered Employee
shall become an Active Participant as soon as administratively feasible
following the Committee's receipt of the properly completed application to
enroll, but in no event earlier than the first day of the first payroll period
after the Committee's receipt of the application. Commencement or recommencement
of active participation shall be subject to such requirements as the Committee
reasonably may establish regarding applications to enroll and verification of
eligibility and Covered Employee status.
(c) Any Employee who has not become an Active Participant solely
because of a failure or declination to enroll within the thirty (30) day period
described in Paragraph 3.1(b) shall be eligible to become an Active Participant
as of any subsequent Entry Date that such person is a Covered Employee.
(d) Any Employee who previously was an Active Participant shall
be eligible to become an Active Participant again, subject to the provisions of
Paragraph 3.4.
3.2 Application for Participation
-----------------------------
Active Participation in this Plan by Covered Employees is
voluntary. In order to become an Active Participant, except as provided in
Section 3.1(b), a Covered Employee must apply for participation prior to the
23
Entry Date on which he desires to become an Active Participant and must make
Employee Mandatory Compensation Deferral Contributions hereunder as provided in
Article IV. Except as provided in paragraph 3.4, each applicant who is
determined by the Committee to be eligible for active participation shall become
an Active Participant as of the next Entry Date following such application.
3.3 committee to Determine Eligibility
----------------------------------
As soon as feasible after a properly completed application of a
Covered Employee is received by the Employer, the Employer shall certify to the
Committee in writing such information as the Committee may require in order to
perform its duties hereunder. Any such certification of information to the
Committee pursuant to this Plan shall, for all purposes of the Plan, be binding
on all interested parties provided that whenever any Employee proves to the
satisfaction of the Employer that his period of employment or his compensation
as so certified is incorrect, the Employer shall correct such certification.
The determination of the Committee as to the identity of the
respective Participants and as to their respective interests shall be binding
upon the Company or Affiliates, the Trustee, the Employees, the Participants,
and all BeneficiarieS.
3.4 Termination and Recommencement of Active Participation
------------------------------------------------------
A person shall cease to be an Active Participant upon cessation
of status as a Covered Employee, or upon suspension of Employee Mandatory
Compensation Deferral ContributionS in accordance with paragraph 4.2. A
Participant shall not be entitled to a distribution of any portion of an amount
solely by reason of cessation of Active Participant status. A Participant whose
Active Participant status ceases solely because such person ceases to be a
Covered Employee shall again be eligible to be an Active Participant following
recommencement of Covered Employee status in accordance with the provisions of
paragraph 3.1(b), the terms and conditionS of the Plan as then in effect and
such requirements as the Committee reasonably may establish regarding
applications to enroll and verification of eligibility and Covered Employee
status. A Participant whose Active Participant status ends solely by reason of
suspension of Employee Mandatory Compensation Deferral
24
Contributions shall be eligible to recommence Active participant status in
accordance with the provisions of Article IV.
3.5 Termination of Participation
----------------------------
Following admission, participation of a Participant as such shall
continue until such Participant's interest hereunder shall have been distributed
pursuant to the provisions of Articles VI and VII hereof, or otherwise disposed
of in accordance with applicable law.
3.6 Military Service
----------------
A Participant's Employment shall be deemed to have terminated
when he leaves his Employment with the Company or an Affiliate to become a
member of the Armed Forces of the United States. If he returns to the Employment
by the Company or an Affiliate within ninety (90) days (or such longer period as
may be prescribed by law) from the date he first became entitled to his
discharge (and after submitting proof of his honorable discharge), he shall
receive credit for vesting purposes for such time spent in the military and if,
subsequent to his becoming a member of the Armed Forces of the United States,
the unvested portion of his account is forfeited pursuant to Article VI, it
shall be restored to what it was prior to such military leave (adjusted to
reflect investment earnings or losses for the period of military service). His
vested interest in any such restored account shall be determined as provided in
Paragraph 6.7.
3.7 Leaves of Absence
-----------------
An Employee's Employment shall not be considered terminated for
purposes of the Plan during a period of leave of absence with the consent of the
Company or an Affiliate, provided that he returns to the employ of the Company
or an Affiliate at the expiration of such leave. Leaves of absence shall mean
leaves granted by the Company or an Affiliate, in accordance with rules
uniformly applied to all Employees, for reasons of health or public service or
for reasons determined by the Company or an Affiliate to be in its best
interests.
25
ARTICLE IV
COMPENSATION DEFERRAL CONTRIBUTIONS
4.1 Compensation Deferral Contributions by Participants
---------------------------------------------------
4.1.1 Employee Mandatory Compensation Deferral Contributions
------------------------------------------------------
Subject to the limitations on contributions under this
Article IV, commencing as of the Effective Date each Active Participant shall
contribute to the Trust Fund under the Plan for each pay Period during which he
is an Active Participant a sum equal to three percent (3%) of the Compensation
which otherwise would have been paid to him by the Employed for such pay Period,
excluding any port ion of such Compensation Payable to him by the Employer as a
bonus. An Active Participant's election to make Employee Mandatory Compensation
Deferrals with respect to Compensation otherwise Payable as a bonus shall be in
accordance with Paragraph 4.1.3. The Employee Mandatory Compensation Deferral
Contributions of Active Participants shall be collected by the Employer by
payroll deductions and shall be paid over by the Employee to the Trustee to be
held and administered in trust for said Participants.
4.1.2 Employee Voluntary Compensation Deferral Contributions
------------------------------------------------------
Subject to the limitations on contributions under this
Article IV, any Active Participant who is making Employee Mandatory Compensation
Deferral Contributions for a pay period in accordance with Paragraph 4.1.1 may
also make Employee Voluntary Compensation Deferral Contributions to the Trust
Fund under the Plan for each such pay Period in an amount not in excess of seven
Percent (7%) of the Compensation which otherwise would have been Paid to him by
the Employer for such pay period, excluding any Portion of Compensation Payable
to him by the Employer as a bonus. An Active Participant's election to make
Employee Voluntary Compensation Deferrals with respect to Compensation otherwise
Payable as a bonus shall be in accordance with Paragraph 4.1.3. Notwithstanding
the foregoing seven percent (7%) of Compensation limitation on an Active
Participant's Employee Voluntary Compensation Contributions for a Payroll
Period, prior to any Entry Date coinciding with the first day of a Plan Year the
Committee may determine to increase the maximum percentage
26
amount each Active Participant may defer under this Paragraph 4.1.2 for such
Plan Year, up to the maximum permissible under this Article IV and Paragraph
5.1(e). The Active Participant will notify the Committee of the amount he
desires to contribute. Employee Voluntary Compensation Deferral Contributions
shall be made by payroll deduction and shall be paid over by the Employer to the
Trustee to be held and administered in trust for said Participant. The
contributions described in this Paragraph 4.l.2 and Paragraph 4.1.3(b) shall be
purely voluntary.
4.1.3 Separate Bonus Deferral Election
--------------------------------
An Active Participant's election to make Compensation
Deferrals shall not apply to that portion of his Compensation payable to him by
the Employer as a bonus, unless such Active Participant makes a separate
Compensation Deferral election with respect to that portion otherwise payable as
a bonus, as follows:
(a) An Active Participant who is making Employee Mandatory
Compensation Deferrals for a pay period in accordance with Paragraph 4.1.1 may
elect to make Employee Mandatory Compensation Deferrals for each pay period in
an amount equal to three percent (3%) of that portion of his Compensation which
would otherwise be payable to him by the Employer for the pay period as a bonus.
(b) An Active Participant who is making Employee Mandatory
Compensation Deferrals for a pay period with respect to that portion of his
Compensation otherwise payable as a bonus may also elect to make Employee
Voluntary Compensation Deferrals for each pay period in an amount equal to up to
ninety-seven percent (97%) of that portion of his Compensation which would
otherwise be payable to him by the Employer for the pay period as a bonus.
(c) Notwithstanding any provision to the contrary in this
Plan, the effective date of an Active Participant's Compensation Deferral
election with respect to the portion of such Active Participant's Compensation
otherwise payable to him by the Employer as a bonus shall be determined in
accordance with rules prescribed by the Committee; provided, however, such rules
shall not permit a Compensation Deferral election to be made by an Active
Participant on a date that is later than a date otherwise determined in
accordance with Article III or this Article IV.
27
4.1.4 Payover of Compensation Deferral Contributions
----------------------------------------------
The Compensation Deferral Contributions on behalf of
Active Participants shall be paid over by the Employer to the Trustee as soon as
practicable after the receipt thereof, but in any event not later than the close
of the Plan Year following the Plan Year to which they pertain.
4.2 Elections to Change Compensation Deferral Contributions
-------------------------------------------------------
(a) Upon written notice filed with the Committee prior to an
Entry Date, an Active Participant may suspend his Employee Mandatory
Compensation Deferral Contributions altogether as of such Entry Date. Such
Participant may recommence making Compensation Deferral Contributions as of any
subsequent Entry Date by filing appropriate forms with the Committee prior to
such Entry Date so long as he is a Covered Employee on such Entry Date. Employee
Voluntary Compensation Deferral Contributions shall be suspended automatically
during any period in which the Participants Employee Mandatory Compensation
Deferral Contributions are suspended.
(b) Upon written notice filed with the Committee prior to an
Entry Date, an Active Participant may increase, decrease, or suspend altogether
his Employee Voluntary Compensation Deferral Contributions as of such Entry
Date.
(c) Participants shall not be permitted to make up suspended
Compensation Deferral Contributions.
4.3 Maximum Amount Subject to Deferral
----------------------------------
No Participant shall be permitted to make Compensation Deferral
Contributions to this Plan in excess of $7,000 during any calendar year, as that
amount may be adjusted from time to time by the Secretary of the Treasury (the
"Deferral Limitation"). In the event a Participant's Compensation Deferral
Contributions exceed the Deferral Limitation for any calendar year for any
reason, such excess contributions and any income allocable thereto shall be
returned to the Participant, as provided in Paragraph 4.5.
28
4.4 Non-Applicability of Limitation on Compensation Deferrals by
------------------------------------------------------------
Highly Compensated Employees
- ----------------------------
Participant Compensation Deferral Contributions under the Plan
for the Plan Year by or on behalf of Highly Compensated Employees shall not
exceed the limitations on such contributions under Section 401(k) of the Code
because no Employee who is a Highly Compensated Employee is eligible to
participate in this Plan. In the event Compensation Deferral Contributions are
made on behalf of a Highly Compensated Employee in any Plan Year due to error or
otherwise, such contributions shall be deemed to have been made due to a mistake
of fact and shall be returned to the Employer in accordance with Paragraph 4.9.
4.5 Provisions for Return of Annual Compensation Deferral
-----------------------------------------------------
Contributions in Excess of Deferral Limitation
- ----------------------------------------------
(a) In the event that due to error or otherwise, an amount of a
Participant's Compensation in excess of the Deferral Limitation as defined in
Paragraph 4.3 is deferred for any calendar year under this Plan pursuant to such
Participant's Compensation deferral agreement (but without regard to amounts
deferred under any other plan), to the extent administratively feasible, the
excess Compensation Deferral Contribution, if any, together with income
allocable to such amount shall be distributed to the Participant on or before
the first April 15 following the close of the calendar year in which such excess
contribution is made. The amount of excess Compensation Deferral Contributions
that may be distributed to a Participant under this Section for any taxable year
shall be reduced by any excess Compensation Deferral Contributions previously
distributed to such Participant in accordance with this Paragraph 4.5 for the
Plan Year beginning with or within such taxable year.
(i) Income on Compensation Deferral Contributions in excess
of the Deferral Limitation shall be determined by multiplying the income
for the calendar year allocable to the Participant's Compensation Deferral
Contributions by a fraction, the numerator of which is the excess amount
for the calendar year, and the denominator of which is the balance of the
Participant's Compensation Deferral Account as of the last day of the
calendar year, reduced by the gain allocable to such contributions for the
calendar year and increased by the loss allocable to such contributions for
the calendar year.
29
(ii) Allocable income for the period between the last day of
the calendar year and the date of the corrective distribution may be
calculated under the fractional method ((i) above), or under the "safe
harbor" method set forth in the regulations prescribed by the Secretary of
the Treasury under Section 401(k) of the Code. Under the "safe harbor"
method, allocable income is ten (10%) of the income calculated under the
fractional method for the prior calendar year multiplied by the number of
calendar months since the last day of the calendar year. A distribution on
or before the 15th of the month is treated as made on the last day of the
preceding month, a distribution after the 15th of the month is treated as
made on the first day of the next month.
(iii) The Committee shall not be liable to any Participant
(or his Beneficiary, if applicable) for any losses caused by misestimating
the amount of any Compensation Deferral Contributions in excess of the
limitations of this Article IV and any income allocable to such excess.
(b) In accordance with rules and procedures as may be
established by the Committee, a Participant may submit a claim to the Committee
in which he certifies in writing the specific amount of his Compensation
Deferral Contributions for the current or preceding calendar year which, when
added to amounts deferred for such calendar year under other plans or
arrangements described in Section 401(k), 408(k) or 403(b) of the Code, will
cause the Participant to exceed the Deferral Limitation under Section 402(g) of
the Code for the calendar year in which the deferral occurred. Any such claim
must be submitted to the Committee no later than the March 1 of the calendar
year following the calendar year of deferral. To the extent the amount specified
by the Participant does not exceed the amount of the Participant's Compensation
Deferral Contributions under the Plan for the applicable calendar year, the
Committee shall treat the amount specified by the Participant in his claim as a
Compensation Deferral Contribution in excess of the Deferral Limitation for such
calendar year and return such excess and any income allocable thereto to the
Participant, as provided in (a) above.
(c) In the event that for any reason a Participant's
Compensation Deferral Contributions in excess of the Deferral Limitation for any
calendar year are not distributed to the Participant by the time prescribed in
(a) above, such excess shall be held in the
30
Participant's Compensation Deferral Account until distribution can be made in
accordance with the provisions of this Plan.
(d) To the extent required by regulations under Section 402(g)
or 415 of the Code, any excess Compensation Deferral Contributions distributed
to a Participant in accordance with this Paragraph shall be treated as an Annual
Addition under Paragraph 5.1(e) for the Plan Year for which the excess
Compensation Deferral Contribution was made.
4.6 Employer's Contribution
-----------------------
4.6.1 Contribution
------------
Subject to amendment or termination of the Plan and
applicable limitations herein, as of the last day of each pay period following
the Effective Date, the Employer will contribute for each Active Participant who
has completed at least three (3) Years of Service as of the last day of such pay
period an amount equal to the Participant's Compensation Deferral Contributions
pursuant to Paragraph 4.1 above for the pay period not in excess of the first
four percent (4%) of the Participant's Compensation for the pay period.
4.6.2 Requirement for Net Profits
---------------------------
Contributions by an Employer shall be made without regard
to current or accumulated profits for the year; provided, however, that the Plan
shall be designed to qualify as a profit sharing plan for purposes of Sections
401(a) et seq. of the Code.
4.6.3 Entity Contributing
-------------------
The Contribution attributable to each Participant shall be
made by his Employer. If a Participant has been employed by more than one
Employer during any pay period, each such Employer shall be responsible for the
portion of the Contribution attributable to the Compensation earned by the
Participant from such Employer.
4.6.4 Time for Payment
----------------
The Employer shall make payment of its Contributions for
each pay period in cash as soon as administratively practicable following the
last day of such payroll period, provided that the total amount of the
31
Employer Contribution for each taxable year shall be paid in full not later than
the date prescribed by the federal income tax law to entitle the Employer to a
deduction for the year with respect to which said Contribution is made.
4.7 Non-Applicability of Limitations on Matching Contributions for
--------------------------------------------------------------
Highly Compensated Employees
- ----------------------------
Employer's Contributions under the Plan for the Plan Year can not
exceed the limitations on contributions on behalf of Highly Compensated
Employees under Section 401(m) of the Code because no Employee who is a Highly
Compensated Employee is eligible to participate in this Plan. In the event
Employer Contributions are made on behalf of a Highly Compensated Employee in
any Plan Year due to error or otherwise, such contributions shall be deemed to
have been made due to a mistake of fact and shall be returned to the Employer in
accordance with Paragraph 4.9.
4.8 Separate Accounts
-----------------
The Committee shall keep or cause to be kept separate accounts
for each Participant; however, the Trustee shall not be required to make
physical segregation of Contributions, and the Trustee shall be authorized to
hold both Employer and Participant Compensation Deferral Contributions in a
common trust fund if the Trustee decides that such would be preferable for
reasons of investment or management.
4.9 Conditional Contributions
-------------------------
Notwithstanding anything to the contrary herein contained,
contributions of the Employer shall be, and hereby are, made subject to the
conditions that (l) the Plan and Trust qualify as a tax exempt plan under
Section 401 of the Code and (2) such contributions are deductible under Section
404 of the Code. In the event that the Commissioner of Internal Revenue shall
determine that the Plan and Trust shall not qualify initially, any contribution
of the Employer made while the Plan and Trust shall not have qualified shall be
repaid to the Employer, in whole or in part, by the Trustee, within one year
after the date of the denial of qualification of the Plan and Trust. In the
event that the Commissioner of Internal Revenue shall determine that a deduction
for the Employer's contribution shall be disallowed, the excess of such
contribution over the amount that would have been contributed had there not
occurred a mistake in determining the deductibility of the contribution shall be
repaid to the Employer, in whole or in part, by the
32
Trustee, within one year after the disallowance of the deduction. In the case of
a contribution of the Employer which is made by reason of mistake of fact, the
excess of such contribution over the amount that would have been contributed had
there not occurred a mistake of fact shall be repaid to the Employer, in whole
or in part, by the Trustee, within one year after the payment of the
contribution. With respect to contributions for which a deduction is disallowed
or made by reason of mistake of fact, (l) earnings attributable to the excess
contribution, shall not be returned to the Employer, but shall be applied as
soon as administratively feasible to reduce Employer Contributions to the Plan,
(2) losses attributable thereto shall reduce the amount to be repaid and (3) if
the repayment of the excess would cause the balance of a Participant's account
to be reduced to less than the amount of the Participant's account had the
excess contribution not been made, the amount of the repayment shall be limited
to the excess of the excess contribution over the amount of the Participant's
account had the excess contribution not been made. Any amounts repaid to the
Employer by the Trustee pursuant to this Paragraph shall be repaid without
liability therefor on the part of the Trustee, to any Participant, Beneficiary
or any other person whomsoever.
The Trustee shall have no duty to inquire into the existence of a
mistake of fact when informed thereof by the Committee. By way of example, and
not by way of limitation, any contribution made by the Employer which causes the
Plan or any other plan to be disqualified under the provisions of Section
401(k), 401(m) or 415 of the Code shall be deemed to have been made by a mistake
of fact to the extent of the portion of such contribution which would cause such
disqualification.
33
ARTICLE V
DETERMINATION AND VESTING OF PARTICIPANTS' INTERESTS
5.1 Determination of Participants' Interests
----------------------------------------
Each participant shall be credited with:
(a) Allocation of Contributions: The Employer Contributions to
---------------------------
the Trust Fund for a pay period calculated in accordance with paragraph 4.6.1
shall be allocated to the accounts of Active participants who have completed at
least three (3) Years of Service as of the last day of the pay period. Employee
Compensation Deferral Contributions to the Trust Fund for a pay period shall be
allocated to the accounts of participants in the actual amounts of Compensation
Deferral Contributions on behalf of such participants for the pay period.
(b) Investment of Participants' Accounts: Contributions on
behalf of a participant shall be invested in the Investment Fund established by
the Committee for this purpose. The Committee shall maintain an account for each
participant showing the dollar value of his current interest in the Investment
Fund as of each Valuation Date.
(c) Allocation of Earnings of Investment Funds: Earnings,
------------------------------------------
losses, gains and changes in fair market value of the Investment Fund shall be
allocated as of each Valuation Date to the accounts of participants. The amount
of said earnings, losses, gains and changes in fair market value shall be
allocated in the ratio which the dollar value of each participant's account in
an Investment Fund prior to allocation hereunder and prior to allocation of
contributions under subparagraph (a) above plus one-half (1/2) of his Employee
Mandatory Compensation Deferral Employee Voluntary Compensation Deferral
Contributions and Employer Contributions made since the previous allocation
date, less any distribution since the previous allocation date, bears to the
dollar value of the accounts of all participants prior to such allocation plus
one-half (1/2) of their Employee Mandatory Compensation Deferral, Employee
Voluntary Compensation Deferral Contribution, and Employer Contributions made
since the previous allocation date, less any distribution since the previous
allocation date.
(d) Forfeitures: All amounts representing forfeitures described
-----------
in paragraph 6.5, shall be used to restore forfeitures in accordance with
paragraph 6.5 or to reduce the amount the Employer agrees to pay to the
34
Trustee as its Contribution hereunder and shall be allocated as a portion of the
Employer Contribution under Paragraph 5.1(a). The amount represented by
forfeitures shall not be applied to increase the benefits any Participant would
otherwise receive hereunder at any time prior to the termination of the Trust or
upon complete discontinuance by the Employer of contributions hereunder.
(e) Overall Contribution Limitation: Notwithstanding the
-------------------------------
foregoing provisions of this Paragraph 5.1, the annual additions allocated to
the account of any Participant, together with the annual additions to his
account in any other defined contribution plan, as defined in Section 414(i) of
the Code maintained by the Company or an Affiliate shall not for any Plan Year
(the "Limitation Year") exceed the lesser of (1) twenty-five percent (25%) of
such Participant's Limitation Earnings or (2) $30,000 (or if greater, one-fourth
(1/4) of the defined benefit dollar limitation set forth in Section 415(b) of
the Code as in effect for the Plan Year). For purposes of this Subparagraph (e),
annual additions for a Plan Year shall mean the sum for such Plan Year of (l)
the Participant's share of Employer Contributions, (2) such Participant's
Compensation Deferral Contributions, (3) any forfeitures allocated to the
Participant, and (4) any amounts described in Section 415(l)(1) or 419(A)(d)(2)
of the Code, but shall not include the amount of any rollover contributions as
that term is used in Section 415(c)(2) of the Code or any transfers from another
tax-qualified plan.
(f) Combined Plan Limitation: In the event a Participant
------------------------
hereunder notifies the Committee that he also is a participant in any qualified
defined benefit plan (within the meaning of Section 415(k) of the Code) of the
Company or an Affiliate, then the benefit payable under such other defined
benefit plan, or any of them, shall be reduced for so long and to the extent
necessary to provide that the sum of the "defined benefit fraction" as defined
and the "defined contribution fraction" as defined in Section 415(e) of the
Code, for any Plan Year shall not exceed 1.
(g) Corrective Adjustments: In the event that corrective
----------------------
adjustments in any Participant's account are required pursuant to Subparagraph
5.1(e), the annual addition to his account shall be reduced by one or more of
the following corrective adjustments, as determined by the Committee:
35
(i) Return to the Employer of that portion, or all of the
Employer Contributions under Subparagraph 5.1(a) required to ensure
compliance with Subparagraph 5.1(e);
(ii) Return to the Employer that portion, or all, of the
Participant's Employee Voluntary Compensation Deferral Contributions under
Paragraph 4.1 required to ensure compliance with Subparagraph 5.1(e);
(iii) Return to the Employer that portion, or all, of a
Participant's Employee Mandatory Compensation Deferral Contributions under
Paragraph 4.1 required to ensure compliance with Subparagraph 5.1(e).
The amount of any Participant's Compensation Deferral Contributions returned to
the Employer in accordance with this Paragraph shall thereafter be paid to the
Participant as current Compensation, after the withholding of any federal, state
or local income taxes on such amount.
(h) For purposes of Subparagraphs 5.1(e), (f), and (g), the
status of an entity as an Affiliate shall be determined by reference to the
percentage tests set forth in Code Section 415(h).
5.2 Vesting of Participants' Interests
----------------------------------
A Participant shall always be 100% vested in the value of all
accounts attributable to his Compensation Deferral Contributions to this Plan. A
Participant shall be vested in accounts attributable to Employer's Contributions
to this Plan under Paragraph 4.6.1 of Article IV and allocated to him under
Paragraph 5.1 of this Article V, in accordance with the following schedule
(subject to the provisions of Section 5.3):
Years of Service Percentage Vested
---------------- -----------------
Less than 3 0%
3 30%
4 40%
5 60%
6 80%
7 100%
36
provided, that when any Participant shall reach his Normal Retirement Date or
shall die or shall suffer Total and Permanent Disability (in each such case
while an Employee), his entire interest in the Trust Fund shall become vested
without regard to his period of Employment. Any portion of the interest of a
Participant which shall not have become vested, as herein provided, shall be a
forfeitable interest.
Any interest in the Trust Fund shall be and become payable to
such Participant or his Beneficiaries only as and to the extent provided in this
Plan; and a Participant or former Participant" who dies having designated a
Beneficiary, shall cease to have any interest hereunder or in his separate trust
account, and his Beneficiary shall become entitled to payment thereof as herein
provided by virtue of the terms of this Plan and not as a result of any transfer
of said interest or account.
For purposes of computing Years of Service for use in the
application of Paragraph 4.6.1 and this Paragraph 5.2, the following rules shall
apply:
(a) Years of Service credited to a Participant subsequent to the
Participant's incurring five (5) consecutive One Year Breaks in Service shall
not be taken into account for purposes of calculating the percentage of vesting
of that portion of such Participant's"account which is attributable to Employer
Contributions made prior to the first such One Year Break in Service.
(b) In the case of a Participant who has not completed at least
three (3) Years of Service, if such a Participant sustains at least five (5)
consecutive One Year Breaks in Service, Years of Service before the first such
One Year Break in Service shall not be taken into account for purposes of the
allocation of the Employer Contributions in accordance with Paragraph 4.6.1 or
calculating the percentage of vesting of that portion of such Participant's
account which is attributable to Employer Contributions made after the last such
One Year Break in Service. (Such aggregate number of Years of Service before the
first such break shall not include any Years of Service not required to be taken
into account by reason of any prior One Year Break in Service.)
37
5.3 Forfeiture For Cause
--------------------
To the extent permitted by applicable law, the Committee shall
cause any and all of the Employer Contributions credited to a Participant'S
account, including earnings credited thereon in accordance with Paragraph
5.1(c), to be forfeited (subject to the provisions of Section 6.5) if the
participant has not completed at least-five (5) Years of Service and the
Committee at any time determineS that:
(a) The participant has been convicted in a court of law of the
crime of embezzlement of funds or assets of the Employer or of its nursing home
residents;
(b) The participant has consciously and intentionally divulged
Employer confidential information to the competitors of the Employer which is
clearly and unequivocally detrimental to the Employer and such action has been
fully and completely documented under oath;
(c) The participant has engaged in other criminal conduct which
is clearly and unequivocally detrimental to the Employer, and such conduct has
been fully and completely documented under oath; or
(d) Within the two (2) years immediately following his
termination of Employment with the Employer, the participant engages in any
capacity in a business other than National Medical Enterprises or one of its
subsidiaries that is in substantial, direct competition with the business of,
and in the geographical areas served by, any of the operating units, including
the Corporate office of Hillhaven for which the Employee worked during the three
(3) years immediately preceding his or her termination.
5.4 Election of Former Vesting Schedule
-----------------------------------
In the event the vesting schedule of this Plan is amended within
the meaning of Code Section 411(a)(10), then, to the extent required by said
Section 411(a)(10), any participant who has completed at least three (3) Years
of Service, may elect to have his vested interest in Employer Contributions
determined without regard to such amendment by notifying the Committee in
writing during the election period as hereafter defined. The election period
shall begin on the date such amendment is adopted and shall end no earlier than
the latest of the following dates:
38
(a) the date which is sixty (60) days after the date the
amendment is adopted;
(b) the date which is sixty (60) days after the day the
amendment becomes effective; or
(c) the date which is sixty (60) days after the day the
Participant is issued written notice of the amendment by the Committee. Such
election shall be available only to an individual who is a Participant at the
time such election is made and such election shall be irrevocable.
5.5 Changes in Vesting Schedule
---------------------------
In the event that the vesting schedule of this Plan is amended,
the vested interest of any person who is a Participant on the date such
amendment is adopted, or on the effective date of such amendment, if later,
shall not be less than the vested interest computed under the Plan without
regard to such amendment.
39
ARTICLE VI
PAYMENT OF BENEFITS OTHER THAN DEATH BENEFITS
6.1 Termination of Employment
-------------------------
(a) If a Participant's Employment terminates for any reason
other than death, the Participant shall be entitled to a payment of his vested
interest in the Trust in the form of distribution provided in Paragraph 6.3,
commencing as provided in Paragraph 6.2. No distribution shall be made under
this or any other provision of this Plan of any amount which has not become
vested under the express provisions of this Plan. In the event a Participant's
Employment terminates but his Employment has recommenced prior to the
distribution of his entire vested interest, any undistributed portion of his
vested interest shall remain in the Plan until such Participant's account again
becomes distributable due to termination of Employment.
(b) Notwithstanding the foregoing, if a Participant ceases to be
an Employee by reason of a transaction described in Code Section
401(k)(10)(A)(ii) or (iii), such Participant shall be entitled to distribution
of his entire vested interest in the Trust Fund under this Article VI as if, for
purposes of this Plan only, such event constitutes a termination of Employment.
6.2 Commencement of Benefits
------------------------
(a) A Participant's vested interest in the Trust that becomes
payable for any reason shall be distributed as soon as practicable following
such Participant's attainment of age seventy (70) and not later than the April 1
following the calendar year in which the Participant attains age seventy and
one-half (70 1/2), unless (i) the Participant elects, in accordance with the
following provisions of this Paragraph 6.2, distribution as of an earlier date
which is administratively practicable and acceptable to the Committee following
the Committee's verification of termination of Employment and any other relevant
information, or (ii) the provisions of Paragraph 6.4 apply.
(b) In the case of a Participant whose distributable interest,
determined as of the Valuation Date immediately preceding the date of the
Participant's termination of Employment, adjusted as provided in Paragraph 1.44,
exceeds thirty-five hundred dollars ($3,500), distribution shall be made as soon
as
40
administratively practicable following the valuation Date coinciding with or
next following the later of (i) the Participant's termination of Employment, or
(ii) the receipt by the Committee of the properly completed application of the
Participant, and any other required documentation to request distribution,
including the Participant'S consent to the distribution in accordance with (d)
below. The amount to be distributed shall be the Participant's account balance
as of the Valuation Date last preceding the date of distribution, adjusted as
provided in Paragraph l.44.
(c) If a Participant described in (b) above fails to consent to
distribution of his distributable interest following the Participant's
termination of Employment such a Participant shall be deemed to have made an
election to defer distribution. to attainment of age seventy (70), unless prior
to and in accordance with (b) above, the Participant submits a request for an
earlier distribution.
(d) Any written consent by a Participant to receive distribution
of his distributable interest prior to his attainment of age seventy (70) shall
not be valid unless such consent is made both (A) after the Participant receives
a written notice advising him of his right to defer distribution to his
attainment of age seventy (70) and (B) within the ninety (90) day period ending
on the Participant's "Benefit Payment Date." The notice to the Participant
advising him of his right to defer distribution shall be given no less than
thirty (30) nor more than ninety (90) days prior to the Participant's Benefit
Payment Date. For purposes of this Subparagraph (d), "Benefit Payment Date"
shall mean the first day of the first period for which the Participant's
distributable interest is paid.
6.3 Normal Form of Benefits. The distributable interest of a
-----------------------
Participant shall be paid in a single sum payment.
6.4 Automatic Cashouts
------------------
Notwithstanding the preceding provisions of this Article VI or
the provisions of Article VII, if the value of a Participant's distributable
interest, determined as of the Valuation Date immediately preceding the date of
the Participant's termination of Employment, adjusted as provided in Paragraph
1.44 does not exceed thirty-five hundred dollars ($3,500), the Committee shall
direct that the distributable interest be paid in a single
41
sum as soon as practicable following such termination of Employment, without
regard to whether the Participant consents to payment prior to the Participant's
attainment of age seventy (70). The amount to be distributed shall be the
Participant's account balance as of the Valuation Date preceding the date his
Employment terminated, adjusted as provided in Paragraph 1.44.
6.5 Forfeitures: Restoration
------------------------
(a) Any non-vested amounts held in the Trust shall be forfeited
as of the earlier of the date the Participant's total distributable interest is
paid to him, or the date such Participant incurs five (5) consecutive One Year
Breaks in Service.
(b) Any amounts forfeited by Participants during the Plan Year
in accordance with Subparagraph (a) above shall be applied to reduce Employer
Contributions to the Plan.
(c) A Participant whose distributable interest is paid prior to
sustaining five (5) consecutive One Year Breaks in Service and who subsequently
is reemployed as an Employee prior to incurring five (5) consecutive One Year
Breaks in Service, shall notify the Committee of such reemployment (and supply
the Committee with such information regarding the Participant's Employment and
participation as the Committee may require). As soon as practicable following
such notification (and furnishing of such information to the Committee), if
the Committee determines that the Participant is entitled to a restoration, the
Participant shall be fully restored in amounts forfeited in accordance with (a)
above (without adjustment of such forfeited amounts for Trust gain or loss
occurring between the date of forfeiture and the date of restoration). Such
restored amounts may be paid from forfeitures in the Plan Year of restoration,
or succeeding Plan Years, if necessary. Any subsequent distribution of benefits
shall be offset by an amount reflecting the distributable interest previously
paid to the participant, so that the distribution is computed as follows:
(i) First, the values P, AB, D, and R shall be determined,
where P is the vested percentage applicable to such distribution, AB is the
value for purposes of such distribution of the Participant's accounts
attributable to Employer's Contributions to this Plan under Paragraph 4.6.1
and allocated to him under Paragraph 5.1, D is the amount previously
42
distributed to the Participant with respect to Employer Contributions to
this Plan under Paragraph 4.6.1 and allocated to him under Paragraph 5.1,
and R is the ratio of AB to the amount previously forfeited.
(ii) Second, the Employee's vested portion of the accounts
attributable to Employer's Contributions to this Plan under Paragraph 4.6.1
and allocated to him under Paragraph 5.1 shall not be less than amount
("X") determined by the formula:
X = (P (AB + (R x D))) - (R x D).
These rules shall in all cases be applied so that the distribution is determined
in a manner consistent with Treas. Reg. (S) 1.411(a)-7(d).
6.6 Facility of Payment
-------------------
If any payee under the Plan is a minor, or if the Committee
reasonably believes that any payee is legally incapable of giving a valid
receipt and discharge for any payment due him, the Administration Committee may
have such payment, or any part thereof, made to the person (or persons or
institution) whom it reasonably believes is caring for or supporting such payee,
unless it has received due notice of claim therefor from a duly appointed
guardian of such payee. Any such payment shall be a payment for the account of
such payee and shall, to the extent thereof, be a complete discharge of any
liability under the Plan to such payee.
6.7 Special Distribution Rules
--------------------------
Notwithstanding the provisions of Paragraph 6.2 relating to
distribution of benefits to a Participant prior to his attainment of age seventy
(70), distribution of a Participant's vested interest in the Plan shall be paid
or commence to be paid within sixty (60) days following the later of (i) the
Plan Year in which he attains age sixty-two (62), or (ii) the Plan Year in which
his termination of Employment occurs; provided, however, that if an election by
the Participant is required to be made for distribution to commence, such
election is filed with the Committee in a timely manner.
43
6.8 Withdrawal of Compensation Deferrals by Participants
----------------------------------------------------
Subject to the succeeding provisions of this Paragraph 6.8, while
still employed by the Employer, a Participant may make a withdrawal of his
Compensation Deferral Contributions.
(a) A withdrawal of a Participant's Compensation Deferral
Contributions may be made in accordance with rules of uniform application which
the Committee may from time to time prescribe; provided, however, that no
Participant may make a withdrawal from such Account prior to a determination by
the Committee that such Participant has a hardship need determined in accordance
with (b) below, and such withdrawal is necessary on account of such need, in
accordance with (c) below.
(b) For purposes of this Paragraph 6.8, a withdrawal may be
considered to be on account of a hardship need if the Committee determines that
such withdrawal is necessary to meet an immediate and heavy financial need of
the Participant. In accordance with regulations prescribed by the Secretary of
the Treasury under Section 401(k) of the Code, an immediate and heavy financial
need shall include, but shall not be limited to, the following:
(i) A medical need incurred by the Participant, his Spouse
or dependents;
(ii) The purchase of primary residence for the Participant
(excluding mortgage payments);
(iii) Payment of tuition for the next semester or quarter of
post-secondary education for the Participant, his Spouse, children, or
dependents;
(iv) The need to prevent either the eviction of the
Participant from his principal residence or the foreclosure of a mortgage
on such principal residence.
(c) For purposes of this Paragraph 6.8, a withdrawal will be
treated as necessary on account of a hardship need of the Participant to the
extent the amount of the withdrawal is not in excess of the amount required to
meet such hardship need and to the extent such hardship may not be satisfied
from other resources reasonably available to the Participant. A distribution
generally
44
may be treated as necessary on account of a hardship need of a Participant if
the Committee reasonably relies on the Participant's written representations to
the Committee that the hardship cannot be relieved
(i) through reimbursement or compensation by insurance or
otherwise,
(ii) by reasonable liquidation of assets, if such
liquidation would not itself cause an immediate and heavy financial need,
(iii) by the cessation of Participant Compensation Deferral
Contributions to the Plan, or
(iv) by other distributions or non-taxable loans from plans
of the Company or any other Employer, or by borrowing from commercial
sources on reasonable commercial terms.
For purposes of this Paragraph 6.8, a Participant's resources shall be deemed to
include those assets of his spouse and minor children that are reasonably
available to the Participant.
(d) The amount available for withdrawal shall not exceed the
lesser of (i) the amount of the hardship need, or (ii) the Participant's
Compensation Deferral Contributions (less any amounts previously withdrawn). The
Participant's Compensation Deferral Contributions shall be determined as of the
Valuation Date which occurs at least thirty (30) days prior to the delivery of
the Participant's written request for withdrawal to the Committee, plus any
Compensation that was deferred after such Valuation Date pursuant to such
Participant's Compensation deferral agreement. If the total amount of the
Participant's Compensation Deferral Contributions available for withdrawal,
calculated as provided in this subsection (d) is more than five hundred
dollars ($500) the minimum amount which may be withdrawn shall be five hundred
dollars ($500). If the total amount of such Participant's Compensation Deferral
Contributions available for withdrawal is five hundred dollars ($500) or less,
the total available amount must be withdrawn.
(e) Distribution of a hardship withdrawal shall be made within
sixty (60) days after the approval by the Committee of the Participant's written
request for the hardship withdrawal.
45
ARTICLE VII
DISTRIBUTIONS UPON DEATH;
DESIGNATIONS OF BENEFICIARIES
7.1 Form of Death Benefits Provided
-------------------------------
(a) In the case of a Participant who dies before payment of his
distributable interest, his interest which becomes available for distribution on
account of death shall be paid to the Participant's Beneficiary in a single sum
payment within one (1) year after the interest becomes available for
distribution.
(b) In the case of a Participant who dies after payment of his
distributable interest, no benefits shall be payable to any person.
(c) For purposes of this Paragraph 7.l, the value of a
Participant's distributable interest shall be the Participant's account balance,
adjusted as provided in Paragraph 1.44, as of the Valuation Date last preceding
the date as of which the Participant's interest is distributed.
(d) A Participant's interest in the Trust which becomes
distributable by reason of the Participant's death shall be distributed as soon
as practicable after the Committee receives the necessary documentation of the
Participant's death.
7.2 Designation of Beneficiary
--------------------------
(a) Whenever a Participant may be permitted to designate a
Beneficiary to receive benefits under this Plan, such designation shall be made,
pursuant to a Qualified Election, by the execution and delivery to the Committee
of an instrument in a form satisfactory to the Committee. A Participant shall
have the right to change or revoke any such Beneficiary designation by filing a
new designation and notice of revocation with the Committee, and, subject to the
rules governing Qualified Elections, no notice to any Beneficiary nor consent by
any Beneficiary shall be required to effect any such change or revocation.
(b) If a deceased Participant shall have failed properly to
designate a Beneficiary, or if the Administration Committee receives no response
from a designated Beneficiary after giving notice to such
46
Beneficiary by certified mail to such person at his last known address as shown
in the Plan's records (or if the certified letter is returned to the Committee
by the United States Postal Service as undeliverable), or if for any reason the
designations shall be legally ineffective, or if all Beneficiaries shall have
predeceased the Participant, any distribution required to be made under the
provisions of this Plan from the Trust Fund shall be made by payment: (i) in the
form of a single sum, to the person to whom the Participant lawfully is married
as of the date of the Participant's death, or if no such Spouse survives, (ii)
in a single sum, to the qualified representative of Participant's estate who
files notice of a claim with the Committee, provided however, that if no
qualified representative of the deceased Participant's estate has filed notice
of a claim within one year following the Participant's death, the Committee in
its discretion may (I) make the distribution under this Subparagraph (b) to such
persons as establish to the satisfaction of the Committee that they are heirs at
law of the Participant, or (II) deposit such distributable amount into a general
account at Trustee's bank which holds such undeliverable distributions;
provided, however, that Trustee's bank may cause property held by it to escheat
to the State of Washington or to such other state as may be required or
permitted by applicable law.
(c) The determination by the Committee as to which persons, if
any, qualify within the foregoing categories (including the categories referred
to in Subparagraphs (b)(i) and (ii)) shall be final and conclusive upon all
persons. In the event that the deceased Participant was not a resident of
Washington at the date of his death, the Committee, in its discretion, may
require the establishment of ancillary administration in Washington.
7.3 Additional Requirements for Distribution
----------------------------------------
(a) The Committee or Trustee, or both, may require the execution
and delivery of such documents, papers and receipts as the Committee or Trustee
may determine necessary or appropriate in order to establish the fact of death
of the deceased Participant and of the right and identity of any Beneficiary or
other person or persons claiming any benefits under this Article VII.
(b) The Committee or the Trustee, or both, may as a condition
precedent to the payment of death benefits hereunder, require an inheritance tax
release and/or such security as the Committee or Trustee, or both,
47
may deem appropriate as protection against possible liability for state or
federal death taxes attributable to any death benefits.
(c) Notwithstanding any other provision in this Article VII regarding
the time within which a Participant's distributable interest will be paid, if,
in the opinion of the Committee, there are or reasonably may be conflicting
claims or other legal impediments to the payment of such distributable interest
to a payee, such payment may be delayed for so long as is necessary to resolve
such conflict, potential conflict, or other legal impediment, but not beyond the
date permitted by applicable law.
48
ARTICLE VIII
CONTINUANCE AND AMENDMENT OF PLAN
8.1 Continuance of the Plan Not a Contractual Obligation of the
-----------------------------------------------------------
Company
- -------
It is the expectation of the Company that it will continue this
Plan indefinitely, but the continuance of this Plan is not assumed as a
contractual obligation by the Company, and is not a consideration for or an
inducement or condition of the employment of any person and the right is
reserved to the Company by action of its Board of Directors at any time to
discontinue this Plan, which action shall be binding on all Affiliates. The
discontinuance of this Plan by the Company shall not have the effect of
revesting in the Company or any Affiliate any part of the Trust Fund.
Upon the termination or partial termination of the Plan or
complete discontinuance of contributions by Board resolution or otherwise, the
interests of affected Participants at such times shall thereupon be
nonforfeitable and the Trustee shall continue to administer the Trust in
accordance with the provisions hereof.
Notwithstanding any provision to the contrary in this Paragraph,
a termination or partial termination shall not be deemed to occur by reason of
any event unless such event is required by Code Section 411 to be treated as a
termination or partial termination, and further, Participant's interests in the
Plan in the case of such event shall vest only to the extent required by Code
Section 411.
8.2 Plan Merger or Consolidation
----------------------------
Notwithstanding the foregoing provisions hereof, no merger or
consolidation of this Plan with any other plan, nor transfer of the assets or
liabilities of this Plan to any other plan, shall be permitted or be effective
unless the provisions of such merged, consolidated or transferee plan are such
that each participant of this Plan would, if said new plan were terminated
immediately following said merger consolidation or transfer, receive a
benefit equal to or greater than each said participant would have received had
this Plan been terminated immediately prior to such merger, consolidation or
transfer.
49
8.3 Distribution of Trust Fund on Termination or Partial Termination
----------------------------------------------------------------
of Plan
- -------
If the Plan shall at any time be deemed terminated or partially
terminated within the meaning of Section 411 of the Code, the Committee shall
determine or cause to be determined the value of the Trust Fund and of the
respective interests of the Participants and the manner of disposition of
Participants' interests. To the extent permitted by Code Section
401(k)(10)(A)(i) following the termination or partial termination of the Plan,
the Committee may direct the Trustee to distribute each affected Participant's
interest in the Trust Fund in accordance with the applicable provisions of
Article VI without regard to whether such Participant's Employment is then
terminated.
8.4 Amendments
----------
The Company, by action of the Compensation Committee, may at any
time and from time to time amend this Plan; provided, however, that no amendment
shall be made at any time pursuant to which the Trust Fund may be diverted to
purposes other than for the exclusive benefit of the Participants and their
Beneficiaries; and provided further, that no amendment shall decrease the
percentage of the interest of any Participant which shall theretofore have
become vested, nor shall any amendment discriminate in favor of Employees who
are officers, shareholders, or highly compensated Employees. Any amendment of
the Plan by the Company shall be binding on each Affiliate, without any further
action by any such Affiliate.
Notwithstanding anything herein to the contrary, however, the
Plan may be amended at any time if necessary to conform to the provisions and
requirements of the Act and the Code, or any amendments thereto, or regulations
issued pursuant thereto, or any similar act or any amendments thereto, and no
such amendment shall be considered prejudicial to any interest of any
Participant hereunder or his Beneficiaries.
50
ARTICLE IX
ADMINISTRATION OF THE TRUST FUND
9.1 The Trust Agreement
-------------------
Concurrently with the adoption of this Plan, the Company has
executed a Trust Agreement providing for the administration of the Trust Fund by
[to be determined], herein called "Trustee," containing such provisions as the
Company has deemed appropriate with respect to the powers and authority of the
Trustee as to the investment and reinvestment of the Trust Fund, the income
therefrom and the general administration thereof, subject to the right of the
Committee to direct the Trustee with respect to investment of the Trust Fund and
to remove therefrom any such investment as hereinbefore provided, the
limitations on the liability of the Trustee, on authority of the Committee to
settle the accounts of the Trustee on behalf of all persons having any interest
in the Trust Fund, and from time to time to appoint a new Trustee in place of
any then acting Trustee of the Trust Fund. All taxes upon or in respect of the
Trust Fund or its assets and all expenses of administration (including
reasonable compensation of the Trustee, its agents and counsel) of the Trust
Fund and special trust accounts established pursuant to this Plan shall be
withdrawn by the Trustee from the Trust Fund, or, as to items clearly allocable
to any special trust account, from such special trust account prior to
distribution thereof, unless the Company shall elect to bear such expenses. At
the election of the Company, any or all expense incurred in the preparation or
adoption of the Plan or Trust Agreement may be chargeable to and withdrawn from
the Trust Fund or said expenses may be borne by the Company. The Trust Agreement
shall be deemed to form a part of this Plan, and any and all rights or benefits
which accrue to any person under this Plan shall be subject to all the terms and
provisions of said Trust Agreement insofar as they are not in direct conflict
with this Plan.
51
ARTICLE X
MISCELLANEOUS
10.1 Right of Company and Affiliates to Dismiss Employees
----------------------------------------------------
The adoption and maintenance of the Plan shall not be deemed to
constitute a contract between the Company or Employer or any Affiliate and any
Employee, or to be a consideration for or an inducement or condition of the
Employment of any person. Neither the action of the Company in establishing this
Plan nor any action taken by it or by the Committee under the provisions hereof,
nor any provisions of this Plan shall be construed as giving to any Employee the
right to be retained in its employ or the employ of an Affiliate or any right to
any payment whatsoever except to the extent of the benefits provided for by this
Plan to be paid from the Trust Fund. The Company and its Affiliates expressly
reserve the right at any time to dismiss any Employee without any liability for
any claim either against the Company or any of its Affiliates or against the
Trust Fund for any payment whatsoever except to the extent provided for in this
Plan.
10.2 Benefits Provided Solely From the Trust Fund
--------------------------------------------
All benefits payable under this Plan shall be paid or provided
for solely from the Trust Fund and the Employer assumes no liability or
responsibility therefor.
10.3 Notice of Participants to be Filed with Committee
-------------------------------------------------
Whenever provision is made herein that a Participant may exercise
any option or designate any Beneficiary, the action of each Participant shall be
evidenced by a written notice thereof signed by the Participant on a form, if
any, furnished by the Committee for such purpose and filed with such Committee,
which shall not be effective until received by the Committee.
10.4 Plan Intended to Conform to Provisions of Federal Internal
----------------------------------------------------------
Revenue Code Relative to Employee's Trusts
- ------------------------------------------
It is the intention of the Company that it shall be impossible
for any part of the Trust Fund to be used for or diverted to purposes other than
for the exclusive benefit of Participants and their Beneficiaries. This
Paragraph shall be construed to
52
follow the spirit and intent of the present Act, Code and Regulations or any
future federal law and regulations governing trusts for the exclusive benefit of
employees, to the end that the Trust Fund shall be incapable of such diversion,
whether by operation or natural termination of the Trust by power of revocation,
by amendment or by any other means, except as expressly allowed by any such law
or regulations.
10.5 Amendment and Successor Code or Act or Sections Thereof
-------------------------------------------------------
Whenever a reference is made in this Plan to the Code or Act or
to a section of the Code or Act, such reference shall be deemed to refer to such
Code or Act or section as the same may be amended from time to time, and to any
successor Code or Act or section thereto.
10.6 Claims Procedure
----------------
10.6.1 Filing of Claims
----------------
If a Participant, former Participant, or Beneficiary does
not receive payment of the benefits to which such person believes he is entitled
under the Plan or has any other grievance with respect to his benefits under the
Plan, such person or his authorized representative (such person or his
authorized representative, if any, is hereinafter referred to as the "Claimant")
may make a claim in the manner herein provided. For purposes of this Paragraph
10.6, the pension benefit election form completed by a Participant or a
Beneficiary shall not be deemed a claim, and such requesting party shall not be
deemed a Claimant. All claims under the Plan shall be made in writing, signed by
the Claimant and submitted to the Claims Coordinator to be designated from time
to time by the Committee. The Claims Coordinator shall be designated by the
Committee and may be, but need not be, an Employee or a member of the Committee.
The Claims Coordinator may require all claims to be filed on forms supplied by
him. Each claim shall contain sufficient information (other than information
available to the Committee and the Claims Coordinator from their own records) to
allow the Claims Coordinator to make a determination as to said claim; a claim
shall not be deemed to be properly filed unless it contains such sufficient
information. If a claim does not contain such sufficient information, the Claims
Coordinator shall indicate to the Claimant any additional information which is
necessary for the Claims Coordinator to make a determination as to the claim.
The Claims Coordinator
53
shall consider each claim which is properly filed and shall issue his
determination thereon in writing within ninety (90) days after the date on which
such claim is properly filed, unless special circumstances require an extension
of time for processing the claim, in which event the Claims Coordinator shall
(a) furnish the Claimant with written notice of such extension within ninety
(90) days after the date on which the claim is properly filed, and (b) issue his
written determination on the claim not later than one hundred eighty (180) days
after the date on which the claim is properly filed. If the claim is granted,
the appropriate distribution, adjustment or other action shall be made or taken.
If the Claims Coordinator denies the claim in whole or in part, he shall furnish
a copy of his written determination to the Claimant upon the issuance thereof,
and such written determination shall set forth, in a manner calculated to be
understood by the Claimant, the following information:
(a) The specific reasons for the denial;
(b) Specific references to the pertinent Plan provisions upon
which the denial is based;
(c) An explanation of the appeals procedure and arbitration
provisions of this Plan.
If the Claims Coordinator takes no action on a claim within
ninety (90) days after it is properly filed, the Claims Coordinator shall be
deemed to have denied such claim for purposes of the appeals procedure set forth
in Paragraph 10.6.2 of this Article X.
10.6.2 Appeals Procedure
-----------------
If the Claims Coordinator denies a claim in whole or in
part, the Claimant who made such claim may appeal from such denial. Such appeal
must be submitted in writing and signed by the Claimant within sixty (60) days
after the denial is communicated to the Claimant. The Committee may require
appeals to be made on forms supplied by it. An appeal may be accompanied by such
issues, comments and documentation as the Claimant deems pertinent. The Claimant
may review pertinent documents at reasonable times throughout the period
beginning with the communication to the Claimant of the denial of the claim and
ending with the date of the communication to the Claimant of the decision
reached by the Committee upon the Claimant's appeal. The Committee, in its
discretion, may hold a hearing on any appeal upon reasonable notice to the
Claimant. The Committee shall
54
issue its written decision on each appeal within sixty (60) days after the
receipt thereof, unless special circumstances (such as the need to hold a
hearing or obtain additional information) require an extension of the time for
processing the appeal, in which event the Committee shall issue its decision as
soon as possible but not later than one hundred twenty (120) days after the date
on which the appeal was filed. Each decision issued by the Committee shall set
forth, in a manner calculated to be understood by the Claimant, the specific
reasons for the decision, specific references to the pertinent Plan provisions
on which the decision is based and an explanation of the arbitration provisions
set forth in Paragraph 10.6.3 of this Article X. If the Committee fails to issue
a written decision on an appeal within one hundred twenty (120) days after the
date on which the appeal was filed, the Committee shall be deemed to have denied
the appeal.
10.6.3 Arbitration
-----------
A Claimant may contest the Committee's denial of his
appeal only by submitting the matter to arbitration. In such event, the Claimant
and the Committee shall select an arbitrator from a list of names supplied by
the American Arbitration Association in accordance with such Association's
procedures for selection of arbitrators, and the arbitration shall be conducted
in accordance with the rules of such Association. The arbitrator's authority
shall be limited to the affirmance or reversal of the Committee's denial of the
appeal, and the arbitrator shall have no power to alter, add to or subtract from
any provision of this Plan or the Trust Agreement. Except as otherwise required
by the Act, the arbitrator's decision shall be final and binding on all parties,
if warranted on the record and reasonably based on applicable law and the
provisions of this Plan and the Trust Agreement. No action for distribution of
benefits or with respect to a Participant's, former Participant's or
Beneficiary's interest in the Plan shall be brought in any court unless and
until all of his rights and remedies under this Paragraph 10.6. including the
arbitration provisions of this Paragraph 10.6.3. have been exhausted.
10.7 Context to Control
------------------
The headings of articles and paragraphs are included solely for
convenience or reference, and if there be any conflict between such headings and
the text of the Plan, the text shall control.
55
10.8 Gender and Number
-----------------
Any gender, including neuter, shall include the other(s) and the
singular shall include the plural, and vice versa.
10.9 More Than One Capacity
----------------------
Any person or group of persons may serve in more than one
fiduciary capacity with respect to this Plan and/or the Trust created hereunder,
including service both as a Trustee or Co-Trustee and as a member of the
Committee.
10.10 Service of Process
------------------
Any member of the Committee who is then acting as such or the
chief legal officer of The Hillhaven Corporation shall be authorized to receive
service of process on behalf of the Plan.
10.11 Indemnification
---------------
The Company hereby agrees to indemnify and hold harmless any
member of the Committee, the Claims Coordinator, any member of the Compensation
Committee and any member of the Board of Directors and any other Employee
(including any "executive officer" as such term is used in rules of the
Securities and Exchange Commission promulgated under the Securities Exchange Act
of 1934), and the estate and heirs of such Committee member, Claims Coordinator,
Board member or Employee, from and against any and all liabilities, expenses,
penalties, costs, damages or losses (including, without limitation, reasonable
attorneys' fees and court costs) incurred by such Committee member, Board
member, Employee, estate or heirs arising out of or in connection with any
actual or alleged act or omission of such person in connection with the
operation or administration of the Plan or the Trust Fund; provided, however,
(a) the Company shall not indemnify or hold harmless any such Committee member,
Claims Coordinator, Board member, Employee or estate or heirs from or against
any such liability, expense, penalty, costs, damage or loss to the extent that
such liability, expense, penalty, cost, damage or loss is covered by fiduciary
liability insurance, (b) the Employer shall not indemnify or hold harmless any
such Committee member, Claims Coordinator, Board member, Employee or estate or
heirs from any liability, expense, penalty, cost, damage or loss arising out of
or in connection with the willful misconduct of such Committee member, Claims
Coordinator, Board member or Employee, and (c) in no event shall the Company's
duty to indemnify any such Committee member, Claims
56
Coordinator, Board member, Employee, estate or heirs be satisfied out of Plan
assets.
10.12 Missing Participants
--------------------
If the Trustee is unable to effect delivery of any amount payable
hereunder to the Participant entitled thereto, it shall so advise the Committee
and the Committee shall give written notice by certified mail to such
Participant at his or her last known address as shown in the Plan's records. If
there is no response to such certified notice or the certified letter is
returned to the Committee by the United States Postal Service as undeliverable,
then in that event the Committee shall so advise the Trustee. The Trustee, upon
such notice, shall deposit the amount payable to such Participant into a general
account at Trustee's bank which holds such undeliverable distributions;
provided, however, that Trustee's bank may cause property held by it to escheat
to the State of Washington or to such other state as may be required or
permitted by applicable law.
10.13 Administrative Mistake
----------------------
Notwithstanding anything to the contrary herein contained, if the
Committee should discover that a mistake has been made in crediting Compensation
Deferral Contributions or Employer contributions, or earnings to the account of
any Participant, the Committee may request the Employer to make a special
contribution to the account of said Participant and may take any other
administrative action which it deems necessary or appropriate to remedy the
mistake in question. If the Committee should discover that a mistake has been
made in calculating the amount of any excess Compensation Deferral
Contributions, or earnings on such excess amount, which amount is required to be
distributed to a Participant, as provided in Paragraph 4.5, the Committee may
take such administrative action as it deems necessary or appropriate to remedy
the mistake in question.
10.14 Information to be Furnished to Committee
----------------------------------------
For the purpose of enabling the Committee to determine the
portion of the Participant's interest in the Trust Fund which is vested and
distributable, the Company or its Affiliate shall certify to the Committee in
writing any of the following information specified by the Committee as soon as
possible following the Participant's
57
(a) retirement, or (b) death, or (c) possible Total and Permanent Disability,
(d) termination of Employment, or (e) the occurrence after termination of
Employment of one or more One Year Break(s) in Service:
(i) Name, address, and Social Security number;
(ii) Date on which Participant shall have retired or died or
on which his Employment otherwise terminated;
(iii) Number of Years of Service;
(iv) Reason for termination of Employment; and
(v) The date upon which any One Year Break in Service
occurs subsequent to a termination of Employment.
10.15 Spendthrift Trust Provisions
----------------------------
Except as otherwise provided under this Plan, all distributions
by the Trustee shall be paid only to the person or persons entitled thereto, and
all such payments shall be made directly into the hands of such person or
persons and not into the hands of any other person or corporation whatsoever, to
the end that said payments shall not be liable for the debts, contracts, or
engagements of any such designated person or persons, or taken in execution by
attachment or garnishment, or by any other legal or equitable proceedings; nor
shall any such designated person or persons have any right to alienate,
anticipate, commute, pledge, encumber, assign, or hypothecate any such payments
or the benefits, proceeds or any interest arising out of this Plan and Trust.
To the extent required under Section 414(p) of the Code, the
value of a Participant's vested interest in the Trust Fund may be paid in
accordance with the applicable provisions of a "qualifying domestic relations
order" which creates or recognizes the existence of an alternate payee's right
to, or assigns to an alternate payee the right to, receive all or a portion of
the Participant's vested interest in the Trust Fund.
For purposes of this Paragraph 10.16, a "qualified domestic
relations order" means any judgment, decree, or order (including approval of a
property settlement agreement) which relates to the provision of
58
child support, alimony payments, or marital property rights to a spouse, former
spouse, child or other dependent of the Participant, is made pursuant to a State
domestic relations law (including community property law), and satisfies the
requirements of Section 414(p) of the Code. Notwithstanding the requirements of
Section 414(p) of the Code, the Committee may direct the Trustee to distribute
all or a portion of a Participant's vested interest in the Trust fund to an
alternate payee in accordance with a qualified domestic relations order which
provides for distribution prior to the date the Participant attains age fifty
(50).
The Committee shall adopt procedures for determining the
qualified status of an order and for the payment of benefits in accordance with
such order. Such procedures shall be in writing, provide for the prompt
notification upon the receipt of such order of each person specified in the
order as entitled to benefits, and shall permit an alternate payee to designate
a representative to receive copies of notices with respect to such order. Within
a reasonable period of time after the receipt of a domestic relations order the
Committee shall determine whether such order is a qualified domestic relations
order and notify the Participant and alternate payee of such determination. Any
requirement pursuant to Section 414(p) of the Code that any amount subject to or
potentially subject to a domestic relations order be segregated shall be deemed
satisfied by a notation on the books and records of the Plan that such amount is
or may be so subject; provided, however, that each Participant and alternate
payee, shall be obligated to keep the Committee fully informed of the status of
any potential legal claims involving an account under the Plan and in the
absence of any such information the Committee may rely on information previously
supplied to it or may make such other determinations regarding the existence or
non-existence of such claims as it deems reasonable under the circumstances, and
shall have no liability for so doing.
10.16 Withholding
-----------
There shall be deducted from all payments under this Plan the
amount of any taxes required to be withheld by any federal, state or local
government. The Participants and their Beneficiaries, distributees and personal
representatives will bear any and all federal, foreign, state, local or other
income or other taxes imposed on amounts paid under this Plan.
59
10.17 Severability
------------
In the event any provision of this Plan would invalidate the
Plan, that provision shall be deemed null and void, and the Plan shall be
construed as if it did not contain such provision.
60
ARTICLE XI
TOP HEAVY PLAN RULES
11.1 Applicability
-------------
(a) Notwithstanding any provision in this Plan to the contrary,
the provisions of this Article XI shall apply in the case of any Plan Year in
which the Plan is determined to be a Top-Heavy Plan under the rules of Paragraph
11.3.
(b) Except as is expressly provided to the contrary, the rules
of this Article XI shall be applied after the application of the Affiliate rules
of Paragraph 1.5.
11.2 Definitions
-----------
(a) For purposes of this Article XI, the term "Key Employee"
shall mean any Employee or former Employee who, at any time during the Plan Year
or any of the four (4) preceding Plan Years, is or was --
(i) An officer of the Company having an annual compensation
greater than fifty percent (50%) of the amount in effect under Code Section
415(b)(1)(A) for this Plan Year. However, no more than fifty (50)
Employees (or, if lesser, the greater of three (3) or ten percent (10%) of
the Employees) shall be treated as officers;
(ii) One of the ten (10) employees having annual
compensation from the Company of more than the limitation in effect under
Code Section 415(c)(1)(A) and owning (or considered as owning within the
meaning of Code Section 318) the largest interests in the Company. For this
purpose, if two (2) Employees have the same interest in the Company, the
employee having greater annual compensation from the Company shall be
treated as having a larger interest;
(iii) A Five Percent Owner of the Company; or
(iv) A One Percent Owner of the Company having an annual
compensation from the Company of more than one hundred fifty thousand
dollars ($150,000).
61
(b) For purposes of this Paragraph 11.2, the term "Five Percent
Owner" means any person who owns (or is considered as owning within the meaning
of Code Section 318) more than five percent (5%) of the outstanding stock of the
Company or stock possessing more than five percent (5%) of the total combined
voting power of all stock of the Company. The rules of Subsections (b), (c). and
(m) of Code Section 414 shall not apply for purposes of applying these ownership
rules. Thus, this ownership test shall be applied separately with respect to
every Affiliate.
(c) For purposes of this Paragraph 11.2, the term "One Percent
Owner" means any person who would be described in Paragraph (b) if "one percent
(1%)" were substituted for "five percent (5%)" each place where it appears
therein.
(d) For purposes of this Paragraph 11.2, the rules of Code
Section 318(a)(2)(C) shall be applied by substituting "five percent (5%)" for
"fifty percent (50%)."
(e) For purposes of this Article XI. the term "Non-Key Employee"
shall mean any Employee who is not a Key Employee.
(f) For purposes of this Article XI, the terms "Key Employee"
and "Non-Key Employee" include their Beneficiaries.
11.3 Top-Heavy Status
----------------
(a) The term "Top-Heavy Plan" means, with respect to any Plan
Year --
(i) Any defined benefit plan if, as of the Determination
Date, the present value of the cumulative accrued benefits under the Plan
for Key Employees exceeds sixty percent (60%) of the present value of the
cumulative accrued benefits under the plan for all Employees, and
(ii) Any defined contribution plan if, as of the
Determination Date. the aggregate of the account balances of Key Employees
under the Plan exceeds sixty percent (60%) of the present value of the
aggregate of the account balances of all Employees under the plan.
62
For purposes of this Paragraph (a), the term "Determination Date" means, with
respect to any Plan Year, the last day of the preceding Plan Year. In the case
of the first Plan Year of any plan, the term "Determination Date" shall mean the
last day of that Plan Year.
The present value of account balances under a defined
contribution plan shall be determined as of the most recent Valuation Date that
falls within a twelve (12) month period ending on the Determination Date. The
present value of accrued benefits under a defined benefit plan shall be
determined as of the same Valuation Date used for computing plan costs for
minimum funding. The present value of the cumulative accrued benefits of a Non-
Key Employee shall be determined under either:
(i) the method, if any, that uniformly applies for accrual
purposes under all plans maintained by affiliated companies, within the
meaning of Code Sections 414(b), (c), (m) or (o); or
(ii) if there is no such method, as if such benefit accrued
not more rapidly than the lowest accrual rate permitted under the
fractional accrual rate of Section 411(b)(1)(C) of the Code.
(b) Each plan maintained by the Company required to be included
in an Aggregation Group shall be treated as a Top-Heavy Plan if the Aggregation
Group is a Top-Heavy Group.
(i) The term "Aggregation Group" means --
(A) Each Plan of the Company in which a Key Employee
is a Participant, and
(B) Each other plan of the Company which enables any
plan described in Subdivision (A) to meet the requirements of Code
Sections 401(a)(4) or 410.
Also, any plan not required to be included in an Aggregation Group under
the preceding rules may be treated as being part of such group if the group
would continue to meet the requirements of Code Sections 401(a) (4) and 410
with the plan being taken into account. If an Aggregation Group is not a
Top Heavy Group, no plan included in the Top Heavy Group shall be a Top
Heavy Plan, whether or not such Plan would be a Top Heavy Plan under any
other test.
63
(ii) The term "Top-Heavy Group" means any Aggregation Group
if the sum (as of the Determination Date) of --
(A) The present value of the cumulative accrued
benefits for Key Employees under all defined benefit plans included in
the group, and
(B) The aggregate of the account balances of Key
Employees under all defined contribution plans included in the group
exceeds sixty percent (60%) "of a similar sum determined for all Employees.
(iii) For purposes of determining --
(A) The present value of the cumulative accrued
benefit of any Employee, or
(B) The amount of the account balance of any Employee,
such present value or amount shall be increased by the aggregate
distributions made with respect to the Employee under the plan during the
five (5) year period ending on the Determination Date. The preceding rule
shall also apply to distributions under a terminated plan which, if it had
not been terminated, would have been required to be included in an
Aggregation Group. Also, any rollover contribution or similar transfer
initiated by the Employee and made after December 31, 1983 to a plan shall
not be taken into account with respect to the transferee plan for purposes
of determining whether such plan is a Top-Heavy Plan (or whether any
Aggregation Group which includes such plan is a Top-Heavy Group).
(c) If any individual is a Non-Key Employee with respect to any
plan for any Plan Year, but the individual was a Key Employee with respect to
the plan for any prior Plan Year, any accrued benefit for the individual (and
the account balance of the individual) shall not be taken into account for
purposes of this Paragraph 11.3.
(d) If any individual has not received any Compensation from the
Company (other than benefits under the Plan) at any time during the five (5)
year period ending on the Determination Date, any accrued benefit for
64
such individual (and the account balance of the individual) shall not be taken
into account for purposes of this Paragraph 11.3
11.4 Minimum Contributions
---------------------
For each Plan Year in which the Plan is Top-Heavy, the minimum
contributions for that year shall be determined in accordance with the rules of
this Paragraph 11.4.
(a) Except as provided below, the minimum contribution
(including amounts deferred under a cash or deferred arrangement under Section
401(k) of the Code) for each Non-Key Employee who satisfies the requirements of
Article III to be a Participant in the Plan (including but not limited to the
"One Year of Service" requirement, but without regard to any requirements (i)
that a Participant complete a minimum number of Hours of Service in order to
share in an allocation of Company Contributions for a year, other than the "One
Year of Service" requirement for participation, as set forth in Article III,
(ii) that a Participant elected to make Compensation Deferral Contributions to
the Plan, or (iii) relating to the Non-Key Employee's level of Compensation)
shall be not less than three percent (3%) of his Compensation.
(b) Subject to the following rules of this Paragraph (b), the
percentage set forth in Paragraph (a) above shall not be required to exceed the
percentage at which contributions (including amounts deferred under a cash or
deferred arrangement under Section 401(k) of the Code) are made (or are required
to be made) under the Plan for the year for the Key Employee for whom the
percentage is the highest for the year. This determination shall be made by
dividing the contributions for each Key Employee by so much of his total
compensation for the year as does not exceed two hundred thousand dollars
($200,000). For purposes of this Paragraph (b), all defined contribution plans
required to be included in an Aggregation Group shall be treated as one plan.
However, the rules of this Paragraph (b) shall not apply to any plan required to
be included if an Aggregation Group if the plan enables a defined benefit plan
to meet the requirements of Code Sections 401(a)(4) or 410.
(c) The requirements of this Paragraph 11.4 must be satisfied
without taking into account contributions under chapters 2 or 21 of the Code,
title II of the Social Security Act, or any other Federal or State law.
65
(d) In the event a Participant is covered by both a defined
contribution and a defined benefit plan maintained by the Company, both of which
are determined to be top-heavy, the defined minimum benefit will be satisfied
under the defined benefit plan, offset by any contributions under the defined
contribution plan, in accordance with regulations issued under Code Section
416(f).
(e) In no instance may the Plan take into account an Employee's
compensation in excess of the first two hundred thousand dollars ($200,000) (or
such greater amount as may be permitted pursuant to Section 416(d) (2) of the
Code). For purposes of this Paragraph 11.4, an Employee's Compensation shall be
determined in accordance with the rules of Code Section 415.
11.5 Maximum Annual Addition
-----------------------
(a) Except as set forth below, in the case of any Top-Heavy Plan
the rules of 415 of the Code shall be applied by substituting "1.0" for "1.25."
(b) The rule set forth in Paragraph (a) above shall not apply if
the requirements of both Subparagraphs (i) and (ii), below, are satisfied.
(i) The requirements of this Subparagraph (i) are satisfied
if the rules of Paragraph 11.4(a) above would be satisfied after
substituting "four percent (4%)" for "three percent (3%)" where it appears
therein.
(ii) The requirements of this Subparagraph (ii) are
satisfied if the Plan would not be a Top-Heavy Plan if "ninety percent
(90%)" were substituted for "sixty percent (60%)" each place it appears in
Paragraph 11.3(a)(ii).
(c) The rules of Paragraph (a) shall not apply with respect to
any Employee as long as there are no --
(i) Company Contributions," forfeitures, or voluntary
nondeductible contributions allocated to the Employee under a defined
contribution plan maintained by the Company, or
(ii) Accruals by the Employee under a defined benefit plan
maintained by the Company.
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11.6 Vesting Rules
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In the event that the Plan is determined to be Top-Heavy in
accordance with the rules of Paragraph 11.3, then the vested status of each
Non.Key Employee as of such date shall be equal to the vested status determined
under the vesting provisions of this Plan as then in effect, or if better, under
the vesting schedule set forth below:
Years of Service Nonforfeitable Percentage
---------------- -------------------------
2 20%
3 40%
4 60%
5 80%
6 or more 100%
11.7 Non-Eligible Employees
----------------------
The rules of this Article XI shall not apply to any Employee
included in a unit of employees covered by an agreement which the Secretary of
Labor finds to be a collective bargaining agreement between employee
representatives and one or more employers if there is evidence that retirement
benefits were the subject of good faith bargaining between such employee
representatives and the employer or employers.
If the Plan is or becomes a Top.Heavy Plan, as defined in
Paragraph 11.1(b), in any Plan Year, the provisions of this Article XI shall
Supersede any conflicting provisions in the Plan.
IN WITNESS WHEREOF, this document has been executed this 31st day of
January, 1990.
THE HILLHAVEN CORPORATION
By [NOT LEGIBLE]
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By [NOT LEGIBLE]
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