EXHIBIT 10.29
THE HILLHAVEN CORPORATION
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1994
TABLE OF CONTENTS
PAGE
Section 1 - Statement of Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2 - Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Actual Final Average Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4 Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.5 Change of Control Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.6 Date of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 Date of Enrollment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.8 Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 Early Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.11 Eligible Children . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.13 Employment or Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.14 Existing Retirement Benefit Plans Adjustment Factor . . . . . . . . . . . . . . . . . 5
2.15 Final Average Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 Normal Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.18 Prior Service Credit Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.19 Projected Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 Projected Final Average Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.21 Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.22 Surviving Spouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.23 Termination of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.24 Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.25 Year of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3 - Retirement Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 Normal Retirement Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Early Retirement Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Vesting of Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 Duration of Benefit Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 Recipients of Benefit Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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3.7 Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.8 Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4 - Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1 Commencement of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Withholding; Unemployment Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3 Recipients of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4 No Other Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.5 Withdrawal Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5 - Conditions Related to Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1 Administration of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 No Right to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 No Employment Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.4 Right to Terminate or Amend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.6 Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.7 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6 - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1 Nonassignability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.2 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.3 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.4 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.5 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.6 Successors in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.7 No Representation on Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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THE HILLHAVEN CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1994
SECTION 1 - STATEMENT OF PURPOSE
The Supplemental Executive Retirement Plan (the "Plan") was originally
adopted effective January 31, 1990, by The Hillhaven Corporation ("THC") to
attract, retain, motivate and provide financial security to highly compensated
management employees (the "Participants") who render valuable services to THC
and its Subsidiaries. The Plan is hereby amended and restated, effective
October 1, 1994.
SECTION 2 - DEFINITIONS
2.1 Acquisition. "Acquisition" refers to a company of
which substantially all of its assets or a majority of its capital stock are
acquired by, or which is merged with or into, THC or a Subsidiary.
2.2 Actual Final Average Earnings. "Actual Final Average
Earnings" means the highest average monthly Earnings for any 60 consecutive
months during the ten years, or actual employment period if less, preceding
Termination of Employment.
2.3 Agreement. "Agreement" means a written agreement
substantially in the form of Exhibit A between THC (or a Subsidiary or both)
and a Participant.
2.4 Committee. "Committee" means the Compensation
Committee of the Board of Directors of THC.
2.5 Change of Control Event. A "Change of Control Event"
shall be deemed to occur if any of the following events has occurred:
(i) A Person, alone or together with its
Affiliates and Associates, or "group", within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, becomes, after the
date hereof, the beneficial owner of 20% or more of the general voting
power of the Company. Notwithstanding the preceding sentence, a
Change of Control Event shall not be deemed to occur if the "Person"
described in the preceding sentence has acquired 20% or more of the
general voting power of the Company as consideration in a transaction
or series of related transactions involving the Company's acquisition
(by stock acquisition, merger, asset purchase or otherwise) of one or
more businesses approved prior to such transactions or series of
transactions by the Incumbent Board (as defined in (ii) below),
andprovided that, if such
transaction or series of transactions results in the merger,
consolidation or reorganization of the Company and such Person, the
Company is the surviving entity following such merger, consolidation
or reorganization.
(ii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board"), cease for any reason to
constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by
a vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual
whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors
of the Company, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Securities Exchange Act of 1934) shall be
considered as though such person were a member of the Incumbent Board.
(iii) Consummation or effectiveness of:
a. a merger, consolidation or
reorganization involving the Company (a "Business
Combination"), unless
1. the stockholders of the
Company, immediately before the Business Combination,
own, directly or indirectly immediately following the
Business Combination, at least fifty-one percent
(51%) of the combined voting power of the outstanding
voting securities of the corporation resulting from
the Business Combination (the "Surviving
Corporation") in substantially the same proportion as
their ownership of the voting securities immediately
and before the Business Combination, and
2. the individuals who were
members of the Incumbent Board immediately prior to
the execution of the agreement providing for the
Business Combination constitute at least a majority
of the members of the Board of Directors of the
Surviving Corporation, and
3. no Person (other than any
Person who, immediately prior to the Business
Combination, had beneficial ownership of twenty
percent (20%) or more of the then outstanding Voting
Securities) has Beneficial Ownership of twenty
percent (20%) or more of the combined voting power of
the Surviving Corporation's then outstanding voting
securities;
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b. a complete liquidation or
dissolution of the Company; or
c. the sale or other disposition of all
or substantially all of the assets of the Company to any
Person.
For purposes of determining whether a Change of Control Event has
occurred, the following additional definitions apply:
"Affiliate or Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934.
"Person" shall mean an individual, firm, corporation or other entity
or any successor to such entity, but "Person" shall not include the
Company, any subsidiary of the Company, any employee benefit plan or
employee stock plan (including a trust relating thereto) of the
Company or any subsidiary of the Company, or any Person organized,
appointed, established or holding Voting Stock by, for or pursuant to
the terms of such a plan. "Person" shall also not include National
Medical Enterprises, Inc. ("NME"), any subsidiary of NME, any
Affiliate or Associate of NME, any employee benefit plan or employee
stock plan of NME or any subsidiary of NME to the extent that such
entities, individually or collectively, own any or all of (x)
8,878,147 shares of the Company's common stock (approximately 31% of
the general voting power of the Company as of December 6, 1994)
registered in the name of NME or any subsidiary of NME as of the date
of this Agreement, or (y) such additional number of shares of the
Company's common stock issued to NME or any subsidiary of NME in
exchange for shares of the Company's Series C Preferred Stock or
Series D Preferred Stock so long as such exchange has been approved in
advance by the Incumbent Board.
"Voting Stock" shall mean shares of the Company's capital stock having
general voting power, with "voting power" meaning the power under
ordinary circumstances (and not merely upon the happening of a
contingency) to vote in the election of directors.
2.6 Date of Employment. "Date of Employment" means the
date on which a person became an Employee of THC or a Subsidiary, or the date
on which a person became an employee of NME or a subsidiary of NME prior to the
divestiture of THC by NME. Where a person is an employee of an entity that is
acquired by THC or a Subsidiary through an Acquisition, "Date of Employment"
means the effective date of the Acquisition; provided, the Committee, in its
sole discretion, may approve as a Date of Employment the date on which a person
began to perform services for the acquired entity in a position comparable to
one at THC which would have been eligible for participation in the Plan.
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2.7 Date of Enrollment. For purposes of determining
benefits under the Plan, "Date of Enrollment" means the date on which an
Employee first becomes a Participant in the Plan.
2.8 Disability. "Disability" means any Termination of
Employment during the life of a Participant and prior to Normal Retirement or
Early Retirement by reason of a Participant's total and permanent disability,
as determined by the Committee, in its sole and absolute discretion. A
Participant, who makes application for and qualifies for disability benefits
under THC's Group Long-Term Disability Plan or under any similar plan provided
by THC or a Subsidiary, as now in effect or as hereinafter amended (the "LTD
Plans"), shall usually qualify for Disability under this Plan, unless the
Committee determines that the Participant is not totally and permanently
disabled. A Participant who fails to qualify for disability benefits under the
LTD Plans (whether or not the Participant makes application for disability
benefits thereunder) shall not be deemed to be totally and permanently disabled
under this Plan, unless the Committee otherwise determines, based upon the
opinion of a qualified physician or medical clinic selected by the Committee to
the effect that a condition of total and permanent disability exists.
2.9 Early Retirement. "Early Retirement" means any
Termination of Employment during the life of a Participant prior to Normal
Retirement and after the Participant attains age 55 and has completed ten Years
of Service or attains age 62 with no minimum Years of Service.
2.10 Earnings. "Earnings" means the base salary paid to a
Participant by THC or a Subsidiary prior to any reduction as a result of
participation in The Hillhaven Corporation Deferred Compensation Plan,
Retirement Savings Plan, Deferred Savings Plan, or Flexible Benefit Plan (Code
Section 125), excluding bonuses, car and other allowances and other cash and
non-cash compensation.
2.11 Eligible Children. "Eligible Children" means all
natural or adopted children of a Participant under the age of 21, including any
child conceived prior to the death of a Participant.
2.12 Employee. "Employee" means any person who regularly
performs Services on a full-time basis (that is, works a minimum of 32 hours a
week) for THC or a Subsidiary and receives a salary plus employee benefits
normally made available to persons of similar status.
2.13 Employment or Service. "Employment" or "Service"
means any continuous period during which an Employee is actively engaged in
performing services for THC and its Subsidiaries plus the term of any leave of
absence approved by the Committee plus any continuous period of service
performed with NME or a subsidiary of NME immediately prior to the divestiture
of THC by NME. Service with an entity prior to its
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becoming a Subsidiary or a unit thereof or of THC shall be determined by the
Committee in its absolute discretion.
2.14 Existing Retirement Benefit Plans Adjustment Factor.
"Existing Retirement Benefit Plans Adjustment Factor" means the assumed benefit
the Participant would be eligible for under Social Security and all retirement
plans of THC and its Subsidiaries whether or not he participates in such plans.
This Factor will be used for calculating all benefits under the Plan and is a
projection of the benefits payable under the Social Security regulations and
retirement plans in effect on June 1, 1984 and once established for a
Participant will not thereafter be altered to reflect any reduction in benefits
under Social Security or such retirement plans unless the Participant is
transferred to different retirement plans or unless such company sponsored
retirement plans are substantially altered in terms of benefit provided. The
existing Retirement Benefit Plans Adjustment Factor is expressed as a
percentage and is determined by specific formula as approved by the Committee.
2.15 Final Average Earnings. "Final Average Earnings"
means the lesser of (i) Actual Final Average Earnings or (ii) if the
Participant has completed at least 60 months of Service, Projected Final
Average Earnings; provided that in the case of a Participant who receives one
or more Promotions, as described in Section 2.19 hereof, and whose most recent
(or only) Promotion is less than 60 months prior to his or her Termination of
Employment, "Final Average Earnings" shall mean Actual Final Average Earnings.
2.16 Normal Retirement. "Normal Retirement" means any
Termination of Employment during the life of a Participant on or after the date
on which the Participant attains age 65.
2.17 Participant. "Participant" means any Employee
selected to participate in this Plan by the Committee, in its sole and absolute
discretion and who completes a Plan Agreement with either THC or one or more
Subsidiaries or any combination of them. An Employee shall be eligible for
selection upon completion of a Year of Service in an eligible position. The
Date of Enrollment shall be retroactive to the date of appointment to an
eligible position. A Participant may be required to enter into more than one
Agreement depending on the entity employing him or her at any time and the
manner in which THC and such entity have agreed to allocate and assume
responsibility and liability for benefits accrued hereunder.
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2.18 Prior Service Credit Percentage. "Prior Service
Credit Percentage" means the percent to be applied to a Participant's Years of
Service with THC and its subsidiaries (and NME and its subsidiaries prior to
the divestiture of THC by NME) which is Prior to his Date of Enrollment in the
Plan, in accordance with the following formula:
Years of Service Prior Service Credit
After Date of Enrollment Percentage
------------------------ --------------------
During 1st year 25
During 2nd year 35
During 3rd year 45
During 4th year 55
During 5th year 75
After 5th year 100
2.19 Projected Earnings. "Projected Earnings" means the
actual Earnings of an Employee on the Date of Enrollment plus an assumed
increase of 8% per annum. In the case of a Participant who receives one or
more Promotions, his or her Date of Enrollment for purposes of this Section
2.19 shall be the effective date of his or her new salary pursuant to the most
recent Promotion. For purposes of this Section 2.19, a "Promotion" shall be a
substantial increase in duties and responsibilities with an attendant
substantial increase in compensation, as determined by the Committee in its
absolute discretion.
2.20 Projected Final Average Earnings. "Projected Final
Average Earnings" means the average of a Participant's Projected Earnings
during the 60 months preceding Termination of Employment.
2.21 Subsidiary. A "Subsidiary" of the Company is (i) any
corporation, partnership, venture or other entity in which the Company owns 50%
of the capital stock or otherwise has a controlling interest, or (ii) any
employer that has entered into a contract with THC or a Subsidiary (as defined
in clause (i) of this Section 2.21) for the receipt of management services at
one or more facilities owned by such entity, and, in either case, which has
adopted this Plan with the consent of the Committee.
2.22 Surviving Spouse. "Surviving Spouse" means the
person legally married to a Participant for at least one year prior to the
Participant's death or Termination of Employment.
2.23 Termination of Employment. "Termination of
Employment" means the ceasing of the Participant's Employment for any reason
whatsoever, whether voluntarily or involuntarily.
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2.24 Year. A "Year" is a period of twelve consecutive
calendar months.
2.25 Year of Service. "Year of Service" means each
complete Year (up to a maximum of 20) of continuous Service (up to age 65) as
an Employee of THC and its Subsidiaries beginning with the Date of Employment
with THC and its Subsidiaries or with NME and its subsidiaries immediately
prior to the divestiture of THC by NME. Years of Service shall be deemed to
have begun as of the first day of the calendar month of Employment and to have
ceased on the last day of the calendar month of Employment.
SECTION 3 - RETIREMENT BENEFITS
3.1 Normal Retirement Benefit.
(a) Upon a Participant's Normal Retirement, the
Company agrees to pay to the Participant a monthly Normal Retirement Benefit
for the Participant's lifetime which is determined in accordance with the
Benefit Formula set forth below, adjusted by the Vesting Percentage in Section
3.3 Except as provided below, the amount of such monthly Normal Retirement
Benefit will be determined by using the following formula:
R = A x [B1 + [B2 x C]] x [2.7% - D] x E
R = Normal Retirement Benefit
A = Final Average Earnings
B1 = Years of Service After Date of Enrollment
B2 = Years of Service Prior to Date of Enrollment
C = Prior Service Credit Percentage
D = Existing Retirement Benefit Plans Adjustment Factor
E = Vesting Percentage
Note: B1 and B2 Years of Service combined cannot exceed 20 years.
(b) In the event of the death or Disability of a
Participant at any age or the Normal or Early Retirement of a Participant after
age 60, the Normal or Early Retirement Benefit will be determined on the basis
of a Prior Service Credit Percentage of 100.
(c) If a Participant who is receiving a Normal
Retirement Benefit dies, his Surviving Spouse or Eligible Children shall be
entitled to receive (in accordance with Sections 3.5 and 3.6) 50% of the
Participant's Normal Retirement Benefit.
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(d) If a Participant who is eligible for Normal
Retirement dies while an Employee of the Company after attaining age 65, his
Surviving Spouse or Eligible Children shall be entitled to receive (in
accordance with Sections 3.5 and 3.6) the installments of the Normal Retirement
Benefit which would have been payable to the Surviving Spouse or Eligible
Children in accordance with this Section 3.1 as if the Participant had retired
on the day before he died.
3.2 Early Retirement Benefit.
(a) Upon a Participant's Early Retirement, THC
shall pay the Participant a monthly Early Retirement Benefit for the
Participant's lifetime commencing on the first day of the calendar month
following the date he attains age 65, calculated in accordance with Section 3.1
and Section 3.3 with the following adjustments:
(i) Only the Participant's actual Years of Service,
adjusted appropriately for the Prior Service Credit
Percentage, as of the date of Early Retirement shall
be used.
(ii) For purposes of determining the Actual Final Average
Earnings and Projected Final Average Earnings, only
the Participant's Earnings and Projected Earnings as
of the date of Early Retirement shall be used.
(iii) To arrive at the payments to commence at age 65 the
amount calculated under paragraphs (a)(i) and (a)(ii)
of this Section 3.2 will be reduced by .42% for each
month Early Retirement commences before age 62.
(b) Upon the written request of the Participant
prior to Termination of Employment, the Committee, in its sole and absolute
discretion, may authorize payment of the Early Retirement Benefit at a date
prior to the Participant's attainment of age 65; provided, however, that in
such event the amount calculated under paragraphs a(i), (ii) and (iii) of this
Section 3.2 shall be further reduced by .42% for each month that the date of
the commencement of payment precedes the date on which the Participant will
attain age 62.
(c) If a Participant dies after commencement of
payment of his Early Retirement Benefit, the Surviving Spouse or Eligible
Children shall be entitled to receive (in accordance with Sections 3.5 and 3.6)
50% of the Participant's Early Retirement Benefit.
(d) If a Participant dies after his Early
Retirement but before benefits have commenced, or while on Disability, the
Surviving Spouse or Eligible Children shall be entitled to receive (in
accordance with Sections 3.5 and 3.6) 50% of the benefit that would have been
payable on the date the Participant elected to have benefits commence.
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(e) If a Participant dies after becoming eligible
for Early Retirement but before taking Early Retirement or while on Disability,
the Surviving Spouse or Eligible Children shall entitled to receive (in
accordance with Sections 3.5 and 3.6) 50% of the Participant's Early Retirement
Benefit determined as if the Participant had retired on the day prior to his
death, with payments commencing on the first of the month following the
Participant's death. The benefits payable to a Surviving Spouse or Eligible
Children under this paragraph shall be no less than the benefits payable to a
Surviving Spouse or Eligible Children under Section 3.4 as if the Participant
had died immediately prior to age 55.
3.3 Vesting of Retirement. A Participant's interest in
his Retirement Benefit shall, subject to Sections 5.5 and 5.7, vest in
accordance with the following schedule:
Years of Service Vesting
---------------- -------
Less than 5 -0-
5 but less than 6 25%
6 through 20 5% per year additional
Notwithstanding the foregoing, a Participant who is at least 60 years old and
who has completed at least 5 Years of Service will be fully vested, subject to
Sections 5.5 and 5.7, in his Retirement Benefits. No Years of Service will be
credited for Service after age 65 or for more than 20 years.
3.4 Termination. Upon any Termination of Employment of
the Participant before Normal Retirement or Early Retirement for reasons other
than death or Disability, THC shall pay, commencing at age 65, to the
Participant a Retirement Benefit calculated under Sections 3.1 and 3.3 but with
the following adjustments:
(a) Only the Participant's actual Years of
Service, adjusted appropriately for the Prior Service Credit Percentage, as of
the date of Termination of Employment shall be used.
(b) For purposes of determining the Actual Final
Average Earnings and the Projected Final Average Earnings as used in Section
3.1, only the Participant's Earnings and Projected Earnings prior to the date
of his Termination of Employment shall be used.
(c)(i) If a Participant dies after commencement of
payment of his Retirement Benefit under this
Section 3.4, the Surviving Spouse or Eligible
Children shall be entitled at the
Participant's death to receive (in accordance
with Sections 3.5 and 3.6) 50% of the
Participant's Retirement Benefit.
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(ii) If a Participant, who has a vested interest
under Section 3.3, dies after Termination of
Employment but at death is not receiving any
Retirement Benefits under this Plan, the
Surviving Spouse or Eligible Children shall
be entitled to receive (in accordance with
Sections 3.5 and 3.6), commencing on the date
when the Participant would have attained age
65, 50% of the Retirement Benefit which would
have been payable to the Participant at age
65.
(iii) If a Participant, who has a vested interest
under Section 3.3, dies while still actively
employed by THC or a Subsidiary or on
Disability before he was eligible for Early
Retirement, his Surviving Spouse or Eligible
Children shall be entitled at Participant's
death to receive (in accordance with Sections
3.5 ad 3.6) 50% of the Retirement Benefit
calculated as if Participant were age 55 and
eligible for Early Retirement on the day
before Participant's death; however, the
combined reductions for Early Retirement and
early payment shall not exceed 35.28% of the
amount calculated under paragraphs a(i) and
(ii) of Section 3.2.
(d) To arrive at the payments to commence
at age 65, the amount calculated under paragraphs (a), (b), (c)(i) and (c)(ii)
of this Section 3.4 will be reduced by the maximum percentage reduction for
Early Retirement at age 55 (i.e., 35.28%).
3.5 Duration of Benefit Payment. Normal and Early
Retirement Benefit payments shall be for the life of the Participant.
Surviving Spouse Benefit payments shall be for the Surviving
Spouse's lifetime. All benefits payable to the Surviving Spouse are subject to
actuarial reduction if the Surviving Spouse is more than 3 years younger than
the Participant.
Eligible Children Benefit payments shall be made until the
youngest of the Eligible Children reaches 21.
3.6 Recipients of Benefit Payments. If a Participant
dies without a Surviving Spouse but is survived by any Eligible Children, then
benefits will be paid to the Eligible Children or their legal guardian, if
applicable. The total monthly benefit payable will be equal to the monthly
benefit that a Surviving Spouse would have received without actuarial
reduction. This benefit will be paid in equal shares to all Eligible Children
until the youngest of the Eligible Children attains age 21.
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If the Surviving Spouse dies after the death of the
Participant but is survived by Eligible Children, then the total monthly
benefit previously paid to the Surviving Spouse will be paid in equal shares to
all Eligible Children until the youngest of the Eligible Children attains age
21. When any of the Eligible Children reaches 21, his share will be
reallocated equally to the remaining Eligible Children.
3.7 Disability. Any Participant who is under Disability
upon reaching age 65 will be paid the Normal Retirement Benefit in accordance
with Sections 3.1 and 3.3.
Upon a Participant's Disability while an Employee of the
Company, the Participant will continue to accrue Years of Service during his
Disability until the earliest of:
(a) Recovery from Disability,
(b) 65th birthday, or
(c) Death.
If a Participant is receiving Disability payments, he shall
not be entitled to receive an Early Retirement Benefit.
For purposes of calculating the foregoing benefits, the
Participant's Actual Final Average Earnings and Projected Final Average
Earnings shall be determined using his Earnings and Projected Earnings up to
the date of Disability.
3.8 Change in Control. In the event of a Change of
Control Event while this Plan remains in effect, (i) a Participant's Retirement
Benefits hereunder (a) will be determined on the basis of receiving full Prior
Service Credit under Sections 3.1 and 3.2 for all Years of Service prior to his
Date of Enrollment and (b) will be fully vested in the Participant without
regard to his Years of Service with THC and its Subsidiaries, and (ii)
notwithstanding any other provisions of the Plan, a Participant will be
entitled to receive the Normal Retirement Benefit on or after age 60 with no
reduction by virtue of paragraphs (a)(iii) and (b) of Section 3.2.
SECTION 4 - PAYMENT
4.1 Commencement of Payments. Payments under this Plan
shall begin not later than the first day of the calendar month following the
occurrence of an event which entitles a Participant (or a Surviving Spouse or
Eligible Children) to payments under this Plan.
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4.2 Withholding; Unemployment Taxes. To the extent
required by the law in effect at the time payments are made, THC shall withhold
from payments made hereunder any taxes required to be withheld by the Federal
or any state or local government.
4.3 Recipients of Payments. All payments to be made by
THC under the Plan shall be made to the Participant during his lifetime. All
subsequent payments under the Plan shall be made by THC to Participant's
Surviving Spouse, Eligible Children or their legal guardian, if applicable.
4.4 No Other Benefits. THC shall pay no benefits
hereunder to the Participant, his Surviving Spouse, Eligible Children or their
legal guardian, if applicable, by reason of Termination of Employment or
otherwise, except as specifically provided herein.
4.5 Withdrawal Election. A Participant or his or her
beneficiary, as the case may be, may elect, at any time after he or she
commences to receive benefit payments under this Plan, to receive those
payments in a lump sum equal to 90% of the actuarial equivalent value of his or
her remaining vested benefits hereunder. No election to partially accelerate
benefits shall be allowed. The Participant shall make this election by giving
the Plan Administrator advance written notice of the election in a form
determined from time to time by the Committee. The actuarial equivalent of the
Participant's remaining vested benefit hereunder shall be, as determined by the
Committee in its absolute discretion, the single premium required, at the time
of distribution, to purchase the Participant's remaining vested benefits
hereunder as a nonqualified annuity from an insurance company rated AAA by both
Moody's and Standard and Poors. The Participant shall be paid the reduced
benefit amount within 60 days of his or her election. Once such amount is
paid, the Participant's participation in the Plan shall permanently terminate
for all purposes.
SECTION 5 - CONDITIONS RELATED TO BENEFITS
5.1 Administration of Plan. The Committee is hereby
authorized to administer the Plan and is given the authority in its sole and
unfettered discretion to interpret, construe and apply its provisions in
accordance with its terms. The Committee shall administer the Plan and shall
establish, adopt or revise such rules and regulations as it may deem necessary
or advisable for the administration of the Plan. All decisions of the
Committee shall be by vote or written consent of the majority of its members
and shall be final and binding. Members of the Committee shall not be eligible
to participate in the Plan while serving as a member of the Committee.
5.2 No Right to Assets. Neither a Participant nor any
other person shall acquire by reason of the Plan any right in or title to any
assets, funds or property of THC and its Subsidiaries whatsoever, including,
without limiting the generality of the foregoing, any specific funds or assets
which THC, in its sole discretion, may set aside in anticipation of a liability
hereunder. No trust shall be created in accordance with or by the execution or
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adoption of this Plan or any Agreement with a Participant, and any benefits
which become payable hereunder shall be paid from the general assets of THC;
provided, that one or more grantor trusts described in Section 671 of the
Internal Revenue Code of 1986, as amended, may be established to fund the Plan
in whole or in part, and benefits under this Plan may be paid in whole or in
part from such trust or trusts. A Participant shall have only an unsecured
contractual right to the amounts, if any, payable hereunder, against THC or one
or more Subsidiaries, as reflected in the Participant's one or more Agreements.
5.3 No Employment Rights. Nothing herein shall
constitute a contract of continuing employment or in any manner obligate THC
and its Subsidiaries to continue the service of a Participant, or obligate a
Participant to continue in the service of THC and its Subsidiaries, and nothing
herein shall be construed as fixing or regulating the compensation paid to a
Participant.
5.4 Right to Terminate or Amend. Except during any
two-year period after any Change of Control Event of THC, THC reserves the sole
right to terminate the Plan at any time and to terminate an Agreement with any
Participant at any time. In the event of termination of the Plan or of a
Participant's Agreement, a Participant shall be entitled to only the vested
portion of his accrued benefits under Section 3 of the Plan as of the time of
the termination of the Plan or his Agreement. All further vesting and benefit
accrual shall cease on the date of Plan or Agreement termination. Benefit
payments would be in the amounts specified and would commence at the time
specified in Section 3 as appropriate. THC further reserves the right in its
sole discretion to amend the Plan in any respect except that Plan benefits
cannot be reduced during any two-year period after any Change of Control Event
of THC. No amendment of the Plan (whether there has or has not been a Change
of Control Event of THC) that reduces the value of the benefits theretofore
accrued by and vested with respect to the Participant shall be effective.
5.5 Eligibility. Eligibility to participate in the Plan
is expressly conditional upon an Employee's furnishing to THC certain
information and taking physical examinations and such other relevant action as
may be reasonably requested by THC. Any Employee Participant who refuses to
provide such information or to take such action shall not be enrolled as or
cease to be a Participant under the Plan. Any Participant who commits suicide
during the two-year period beginning on the date of his Agreement, or who makes
any material misstatement of information or non-disclosure of medical history,
will not receive any benefits hereunder unless, in the sole discretion of the
Committee, benefits in a reduced amount are awarded.
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5.6 Offset. If at the time payments or installments of
payments are to be made hereunder, any Participant or his Surviving Spouse or
both are indebted to THC and its Subsidiaries, then the payments remaining to
be made to the Participant or his Surviving Spouse or both may, at the
discretion of the Committee, be reduced by the amount of such indebtedness;
provided, however, that an election by the Committee not to reduce any such
payment or payments shall not constitute a waiver of any claim for such
indebtedness.
5.7 Conditions Precedent. No Retirement Benefits will be
payable hereunder to any Participant (i) whose Employment with THC or a
Subsidiary is terminated because of his willful misconduct or gross negligence
in the performance of his duties or (ii) who within 3 years after Termination
of Employment becomes an employee with or consultant to any third party engaged
in any line of business in competition with THC and/or its Subsidiaries (a) in
a line of business in which Participant has performed Services for THC and its
Subsidiaries provided that a person who is also an employee of NME shall not be
construed to be a third party engaged in competition with THC and/or its
Subsidiaries or (b) that accounts for more than 10% of the gross revenues of
THC and its Subsidiaries taken as a whole. Notwithstanding the foregoing
paragraph, the Committee, in its sole discretion, may approve the payment of
Retirement Benefits to an Employee who would otherwise be ineligible under (ii)
above if the Committee determines that it is in THC's best interest to do so.
SECTION 6 - MISCELLANEOUS
6.1 Nonassignability. Neither a Participant nor any
other person shall have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in
advance any provision hereunder, or any part thereof, which are, and all rights
to which are, expressly declared to be unassignable and non-transferable. No
part of the amounts payable shall, prior to actual payment, be subject to
seizure or sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by a Participant or any other person, nor be
transferable by operation of law in the event of a Participant's or any
person's bankruptcy or insolvency. THC may assign this Plan to any Subsidiary
which employs any Participant.
6.2 Gender and Number. Wherever appropriate herein, the
masculine may mean the feminine and the singular may mean the plural or vice
versa.
6.3 Notice. Any notice required or permitted to be given
to the Committee under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail, to the principal office of
THC, directed to the attention of the Secretary of the Committee. Such notice
shall be deemed given as of the date of delivery or, if delivery is made by
mail, as of the date shown on the postmark or on the receipt for registration
or certification.
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6.4 Validity. In the event any provision of this Plan is
held invalid, void or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provision of this Plan.
6.5 Applicable Law. This Plan shall be governed and
construed in accordance with the laws of the State of Washington.
6.6 Successors in Interest. This Plan shall inure to the
benefit of, be binding upon, and be enforceable by, any corporate successor to
THC or successor to substantially all of the assets of THC.
6.7 No Representation on Tax Matters. THC makes no
representation to Participants regarding current or future income tax
ramifications of the Plan.
IN WITNESS WHEREOF, THC has executed this instrument effective
October 1, 1994.
THE HILLHAVEN CORPORATION, a Nevada corporation
By
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Its
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