EXHIBIT 10.55
TRUST AGREEMENT
BETWEEN
THE HILLHAVEN CORPORATION
AND
WACHOVIA BANK OF NORTH CAROLINA, N.A.
AS TRUSTEE,
FOR THE BENEFIT OF
PARTICIPATING EMPLOYEES
TRUST AGREEMENT made and entered into as of
January 16, 1995 by and between The Hillhaven Corporation, a
corporation organized under the laws of the State of
Nevada (the "Company"), and Wachovia Bank of North Carolina,
N.A., a national banking association, organized under the
laws of the United States of America (the "Trustee").
WITNESSETH:
WHEREAS, the Company has in place various non-
qualified and qualified employee benefit plans and
arrangements for the benefit of some or all of the
employees of the Company and certain of its subsidiaries
and affiliates and may from time to time adopt one or
more additional plans or arrangements;
WHEREAS, the Company and its subsidiaries or
affiliates have and will have certain legal obligations
under these employee benefit plans or arrangements;
WHEREAS, the Company wishes to establish a trust
to assist it in meeting certain of these obligations and
intends to make contributions and/or loans to such trust at
such time or times and in such amount or amounts as it
may determine;
WHEREAS, the Company intends that such contributions
shall be held by the Trustee and used for the purpose of
acquiring common stock of the Company and making payments
with respect to loans used to acquire common stock of the Company
all in accordance with the provisions of this Trust
Agreement;
WHEREAS, the Company intends that such loans made to
the Trustee by the Company shall be used for the exclusive
purpose of acquiring common stock of the Company in accordance
with the provisions of this Trust Agreement;
WHEREAS, inasmuch as the income and corpus of
such trust may and will be applied in discharge of the
legal obligations of the Company, its subsidiaries and
affiliates, such trust is intended to be a "grantor trust"
within the meaning of Section 671 of the Code; and
WHEREAS, the Company intends that the assets of
such trust at all times shall be subject to the claims
of bankruptcy and other general creditors of the Company
as provided in Section 17 of this Trust Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants herein contained, the Company and the Trustee
declare and agree as follows:
SECTION 1 Definitions.
As used in this Trust Agreement, the following
definitions apply to the terms indicated below:
1.1 "Administrator" or "Administrators" shall
refer to the committee, Company official(s) or other persons
listed in Schedule A charged with responsibility for
overseeing and administering the Plans and provision of
Benefits.
1.2 "Affiliate" shall refer to any subsidiary
or other firm related by direct or indirect stock
ownership that has adopted a Plan while each such entity
remains a subsidiary or related firm of the Company.
1.3 "Beneficiary" shall mean any person entitled
to receive benefits under any Plan on the death of a
Participant.
1.4 "Benefits" shall mean amounts that the
Company or an Affiliate has an obligation to pay to
Participants pursuant to any Plan or arrangement described in
Schedule A under which the Company has a legal obligation to (i)
pay from its general assets, (ii) provide for the payment
of by making contributions from its general assets, or
(iii) deliver in shares of Company Stock.
1.5 "Board of Directors" shall mean the Board
of Directors of the Company.
1.6 "Change in Control" shall be deemed to
occur if the Committee certifies to the Trustee that a
"Change in Control" as defined in the 1990 Stock Incentive Plan
has occurred or the occurrence of such a "Change in Control" is
evidenced by a filing made pursuant to Section 13(d) of the
Securities Exchange Act of 1934.
1.7 "Code" shall mean the Internal Revenue Code
of 1986 as it may be amended from time to time.
1.8 "Committee" shall mean such committee as
the Board of Directors shall appoint from time to time to
administer the Trust. The Committee shall consist of at
least three persons, including at all times the persons holding
the title of: Vice President, Treasurer; General Counsel, Senior
Vice President and Secretary; and the Senior Vice President and
Chief Financial Officer. Other members of the Committee (if any)
will be certified to the Trustee by the Secretary or Assistant
Secretary of the Board of Directors.
1.9 "Company Stock" shall mean the common stock
of the Company, par value $.75 per share.
1.10 "Daily Value" shall mean, with respect to
a share of Company Stock, the closing reported sales price
per share of Company Stock on the New York Stock Exchange
Composite Tape, or if Company Stock is not traded on
such stock exchange, the principal national securities
exchange on which Company Stock is traded, or if not so
traded, the mean between the highest bid and lowest asked
quotation on the over-the-counter market as reported by
the National Quotations Bureau, or any similar organization,
on any relevant date, or if not so reported, as
determined by the Committee in a manner consistently
applied.
1.11 "Director" shall mean the Senior Vice President,
Human Resources & Support Services for the Company.
1.12 "Eligible Participant" shall mean a
Participant who is an Employee who as of the date upon which
Eligible Participants are determined, either (a) holds an
unexercised vested option with respect to Company Stock granted
to him or her pursuant to the 1990 Stock Incentive Plan or the
1991 Performance Investment Plan, or (b) elected to purchase
stock pursuant to the Employee Monthly Stock Investment Plan (the
"EMSIP") within the 12-month period preceding such date.
1.13 "Employee" shall mean any individual who
is actively employed by the Company or an Affiliate.
1.14 "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended from
time to time.
1.15 "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended from time to time.
1.16 "Minimum Distribution Schedule" shall mean
the schedule (or schedules) set forth in Schedule B. An
additional Minimum Distribution Schedule shall be created each
time the Company makes a contribution to the Trust, unless such
contribution is used to pay an obligation of the Trust described
in Section 9 or is used to repay a loan described in Subsection
4.1.2.
1.17 "Other Assets" shall mean any asset or
investment aside from cash held by the Trust that is not
Company Stock.
1.18 "Participant Schedule" shall mean the
schedule prepared by the Company from time to time pursuant
to Subsection 5.2.
1.19 "Participants" shall mean those individuals
who participate in one or more of the Plans described in
Schedule A.
1.20 "Plans" shall mean the plans or arrangements
referred to in Schedule A, as amended from time to time.
1.21 "Trust" shall mean the trust established
pursuant to this Trust Agreement.
1.22 "Trust Fund" shall mean all Company Stock,
money and other property from time to time obtained by
the Trust and all investments and reinvestments made
therewith or proceeds thereof and all earnings and profits
thereon, less all payments and charges as authorized
herein.
SECTION 2 Establishment of the Trust.
2.1 Trust Fund. The Company hereby establishes
the Trust. The Trust Fund shall consist of such sums of
Company Stock, money and other property acceptable to the
Trustee as are from time to time paid to or otherwise
acquired by the Trustee. Except as otherwise provided in
Subsection 8.1.2, the Company shall have no duty or
obligation to make any contributions to the Trust and the
Trustee shall have no duty or obligation to require the
Company to make any contribution to the Trust. The Trust
Fund shall be held by the Trustee in trust and shall be
dealt with in accordance with the provisions of this
Trust Agreement. The Trustee, and any successor Trustee
appointed pursuant to Section 11 hereof or resulting under
Subsection 19.4 hereof, shall at all times be a bank and
trust company or other national banking association that
is neither a subsidiary of nor other firm related by
direct or indirect stock ownership to the Company.
2.2 Irrevocability. Except as provided in
Section 17 hereof, the Trust shall be for the exclusive
purpose of assisting the Company in funding Plans and
Benefits and defraying expenses of the Trust in accordance
with the provisions of this Trust Agreement. No part of
the income or corpus of the Trust Fund shall be recover-
able by the Company; provided, however, that the Trust
Fund shall be applied in discharge of the Company's legal
obligations as provided in this Trust Agreement.
2.3 Claims of Creditors. Notwithstanding anything
in this Trust Agreement or the Plans to the contrary, the
Trust Fund shall at all times be subject to the claims
of bankruptcy and other general creditors of the Company
as provided in Section 17 hereof. No Participant or
Plan shall have any claim against the Trust Fund other
than as a general unsecured creditor of the Company.
SECTION 3 Acceptance by the Trustee.
The Trustee accepts the Trust established under
this Trust Agreement on the terms and subject to the
provisions set forth herein. The Trustee agrees to
discharge and perform fully and faithfully all of the
duties and obligations imposed upon it under this Trust
Agreement.
SECTION 4 Investment of the Trust.
4.1 General Duty of Trustee. Except as
otherwise provided in this Subsection 4.1 or except as
otherwise expressly provided in this Trust Agreement, all
assets received by the Trustee other than Company Stock
shall be invested as soon as practicable in, and remain
invested in, Company Stock.
4.1.1 Upon direction of the Committee, the
Trustee shall acquire shares of Company Stock from the
Company.
4.1.2 From time to time, the Trustee shall have
the ability, upon direction of the Committee, to borrow funds for
the purpose of acquiring shares of Company Stock and/or issue one
or more notes to the Company in exchange for shares of Company
Stock. The Trustee shall have the ability to pledge any shares
so acquired as collateral. Subject to the requirements of
Subsection 8.1.4, the terms and conditions of any borrowing shall
be fair and reasonable. It is contemplated that any such
obligation shall be repaid using cash contributions and earnings
attributable to Company Stock held by the Trust Fund.
4.1.3 Notwithstanding anything herein to the
contrary, unless the Committee otherwise directs, cash or
Other Assets received by the Trustee shall be retained
and invested in Other Assets provided that, after payment
of the costs of the Trust, including, without limitation,
Trustee fees and expenses and, if applicable, debt repayment
described in Subsection 4.1.2, through the end of the
calendar year during which such cash or Other Assets are
received by the Trustee, any such cash or Other Assets
remaining shall be distributed by the Trustee to the
Administrators or the Director at the end of such calendar
year to fund such Plans or Benefits as determined by the
Committee taking into account the best interests of a broad
cross-section of Participants.
4.2 Additional Powers of Trustee. Subject to the
provisions of Section 4.1, the Trustee shall have the
following additional powers and authority with respect to
all property constituting a part of the Trust Fund:
4.2.1 To purchase securities or any other
kind of property and to retain such securities or other
property, regardless of diversification and without being
limited to investments authorized by law for the
investment of trust funds.
4.2.2 Subject to Subsection 7.2 hereof, to
sell, exchange or transfer any such property at public or
private sale for cash or on credit and grant options for
the purchase or exchange thereof, provided that, with respect
to any sale of shares of Company Stock (other than pursuant to
Subsection 7.2 hereof, and excluding any distribution of Company
Stock made pursuant to this Trust Agreement), such shares shall
first be offered for sale to the Company at the Daily Value
before being sold to one or more third parties.
4.2.3 Subject to Section 7 hereof, to
participate in any plan of reorganization, consolidation,
merger, combination, liquidation or other similar plan
relating to any such property, and to consent to or
oppose any such plan or any action thereunder, or any
contract, lease, mortgage, purchase, sale or other action
by any corporation or other entity any of the securities
of which may at any time be held in the Trust Fund, and
to do any act with reference thereto.
4.2.4 To deposit cash or any Other Assets
with any protective, reorganization or similar committee; to
delegate discretionary power to any such committee; and to
pay part of the expenses and compensation of any such
committee and any assessments levied with respect to any
property so deposited.
4.2.5 To exercise any conversion privilege
or subscription right available in connection with any such
property, and to do any act with reference thereto,
including the exercise of options, the making of
agreements or subscriptions and the payment of expenses,
assessments or subscriptions, which may be deemed necessary
or advisable in connection therewith, and to hold and
retain any securities or other property which it may so
acquire.
4.2.6 Subject to Subsection 9.4 hereof, to
commence or defend suits or legal proceedings and to
represent the Trust in all suits or legal proceedings; to
settle, compromise or submit to arbitration any claims,
debts or damages, due or owing to or from the Trust.
4.2.7 Subject to Section 7 hereof, to
exercise, personally or by general or limited power of
attorney, any right, including the right to vote,
appurtenant to any securities or other such property.
4.2.8 To hold cash awaiting investment
uninvested, and to maintain such additional cash balances
as it shall deem reasonable or necessary to meet
anticipated cash distributions from or administrative costs
of the Trust.
4.2.9 To invest cash or Other Assets at
Wachovia Bank of North Carolina, N.A. or another bank and
trust company or national banking association in any type
of interest-bearing investment, including, without limitation,
deposit accounts, certificates of deposit and repurchase
agreements.
4.2.10 To invest and reinvest all or any
specified portion of cash or Other Assets (i) through the
medium of any common trust fund which has been or may
hereafter be established and maintained by the Trustee, or
(ii) in shares of open end or closed end investment companies
provided that, prior to investing any portion of the Trust
Fund for the first time in any such common trust fund or
investment company, the Trustee shall advise the Company of
its intent to make such an investment and furnish to the
Company any information it may reasonably request with
respect to such investment.
4.2.11 To form corporations or partnerships
and to create trusts to hold title to any cash or Other
Assets constituting the Trust Fund, upon such terms and
conditions as may be deemed advisable.
4.2.12 To engage legal counsel, including
(except following the occurrence of a Change in Control)
counsel to the Company, or any other suitable agents, to
consult with such counsel or agents with respect to the
implementation or construction of this Trust Agreement, the
duties of the Trustee hereunder, the transactions
contemplated by this Trust Agreement or any act which the
Trustee proposes to take or omit, to rely upon the
advice of such counsel or agents, and to pay any such
counsel's or agent's reasonable fees, expenses and
compensation.
4.2.13 To register or hold any securities
or other property held by it in its own name or in the
name of any custodian of such property or of its
nominee, including the nominee of any system for the
central handling of securities, with or without the
addition of words indicating that such securities are held
in a fiduciary capacity, to deposit or arrange for the
deposit of any such securities with such a system and to
hold any securities in bearer form.
4.2.14 To make, execute and deliver, as
Trustee, any and all deeds, leases, notes, bonds,
guarantees, mortgages, conveyances, contracts, waivers,
releases or other instruments in writing that are
necessary or proper for the accomplishment of any of the
foregoing powers.
4.2.15 Pursuant to the direction of the
Committee as to all aspects of the transaction, including,
without limitation, interest rate, term and identity of lender,
to undertake a borrowing sufficient to enable the Trust to
acquire newly issued Company Stock.
4.2.16 Subject to Section 7 hereof,
generally, to exercise any of the powers of an owner with
respect to property held in the Trust Fund.
SECTION 5. Establishment and Maintenance of Participant
Schedule.
5.1 Form of Participant Schedule. The Trustee
may, from time to time, request the Company to prepare and
deliver to the Trustee in accordance with Subsection 5.2
hereof, a schedule that sets forth the name of each
Participant entitled to receive a Benefit under a Plan or
arrangement or such group of Participants that the Trustee may
need to know in order to carry out the provisions of this
Agreement.
5.2 Maintaining the Participant Schedule. At the
request of the Trustee, the Company shall from time to time
update the Participant Schedule. Each Participant Schedule
shall state the date as of which it applies, and the
Trustee shall be entitled to rely upon such Participant
Schedule, without a duty of further inquiry, until it
receives an updated Participant Schedule bearing a later
date. Each Participant Schedule shall contain all
information concerning a Participant which the Trustee will
need to complete its responsibilities under this Agreement.
SECTION 6 Maintenance of Trust.
6.1 Trust Assets and Allocation to Plans. The
Trustee shall hold all assets contributed or otherwise
obtained by the Trust and shall distribute such assets and
any earnings thereon to such Administrators, Participants or
the Director, as provided for and in accordance with this Trust
Agreement or use such assets to pay obligations of the Trust
described in Section 9 or to repay a loan described in
Subsection 4.1.2.
6.2 Valuation of Trust and Accounts. The Trustee
shall revalue the Trust Fund as of the last business day
of each calendar quarter. Shares of Company Stock shall
be valued at the Daily Value of Company Stock as of
such date.
SECTION 7 Voting and Tender of Company Stock Held in
Trust
7.1 Voting of Company Stock. The Trustee shall
vote the shares of Company Stock held by the Trust in accordance
with, and by soliciting and receiving, voting directions from
Eligible Participants. As soon as practicable following the
record date in question, the Company shall deliver to the
Trustee a Participant Schedule listing Eligible Participants
determined as of such record date. Each Eligible
Participant listed on such Participant Schedule shall have
the right to direct the vote with respect to that number
of shares of Company Stock held by the Trust as determined
by the following formula: multiply the shares held by the Trust
by a fraction for each Eligible Participant who has given voting
instructions. The numerator of such fraction shall equal the sum
of (1) shares purchased pursuant to the EMSIP by the Participant
during the preceding 12 months, and (2) the total vested,
unexercised options held by the Participant; the denominator
shall equal the total number of shares purchased pursuant to the
EMSIP during the preceding 12 months by all Eligible Participants
who have exercised their voting rights pursuant to this
Subsection 7.1, plus the total number of vested, unexercised
options held, by all Eligible Participants who have exercised
their voting rights pursuant to this Subsection 7.1. The
Trustee shall devise and implement a procedure to assure
confidentiality of any directions given by Eligible
Participants in respect of votes. All actions taken by
Eligible Participants pursuant to this Subsection 7.1 shall
be held confidential by the Trustee and shall not be
divulged or released to any person, other than (i) agents
of the Trustee who are not affiliated with the Company or
its Affiliates, (ii) by virtue of the execution by the
Trustee of any proxy, consent or letter of transmittal
for the shares of Company Stock held in the Trust, or
(iii) as may be required by court order.
7.2 Tender Rights. If any person shall commence a
tender or exchange offer with respect to Company Stock, the
Trustee shall tender the shares of Company Stock held by the
Trust by passing through tender or exchange rights to Eligible
Participants determined as of the commencement of such tender or
exchange offer. As soon as practicable following the
commencement of such tender or exchange offer, the Company
shall deliver to the Trustee a Participant Schedule
listing the Eligible Participants determined as of the
commencement of such tender or exchange offer. Each
Eligible Participant listed on such Participant Schedule
shall have the right to direct the tender or exchange of
that number of shares of Company stock held by the Trust
as determined by the following formula: multiply the shares held
by the Trust by a fraction for each Eligible Participant who has
given tender or exchange instructions. The numerator of such
fraction shall equal the sum of (1) shares purchased pursuant to
the EMSIP by the Participant during the preceding 12 months and
(2) the total vested, unexercised options held by the
Participant; the denominator shall equal the total number of
shares purchased pursuant to the EMSIP during the preceding 12
months by all Eligible Participants who have exercised their
voting rights pursuant to this Subsection 7.1, plus the total
number of vested, unexercised options held, by all Eligible
Participants who have exercised their exchange or tender rights
pursuant to this Subsection 7.2. The Trustee shall devise and
implement a procedure to assure the confidentiality of any
directions given by Eligible Participants in response to
such offers. All actions taken by Eligible Participants
pursuant to this Subsection 7.2 shall be held confidential
by the Trustee and shall not be divulged or released to
any person, other than (i) agents of the Trustee who are
not affiliated with the Company or its Affiliates, (ii) by
virtue of the execution by the Trustee of any proxy,
consent or letter of transmittal for the shares of
Company Stock held in the Trust, or (iii) as may be
required by court order.
7.3 Notices and Information Statements. The
Company shall provide the Trustee in a timely manner with
notices and information statements (including proxy
statements) when voting rights are to be exercised, and
with respect to tender, exchange or similar offers, notices
and offer materials, at the same time and in the same
manner (except to the extent the Exchange Act requires
otherwise) as such notices, information statements, and offer
materials are provided to shareholders of the Company
generally. The Trustee shall, in turn, provide all
material received by the Company pursuant to this
Subsection 7.3 to Eligible Participants described in
Subsections 7.1 and 7.2.
SECTION 8 Distributions from the Trust
8.1 Distributions of Company Stock from the Trust.
Distributions of Company Stock from the Trust shall be made (a)
in accordance with the Minimum Distribution Schedule, in the case
of Company Stock contributed to the Trust or acquired with cash
contributed to the Trust (other than cash contributed for the
purpose of repayment of a loan described in Subsection 4.1.2 or
payment of an obligation of the Trust described in Section 9), or
(b) in proportion to the principal payment made (or deemed
forgiven) with respect to the loan used to acquire such Company
Stock described in Subsection 4.1.2, in the case of Company Stock
acquired with the proceeds of such loan. For purposes of the
foregoing clause (b) of the preceding sentence, the proportion of
the principal payment made (or deemed forgiven) with respect to
the loan shall be determined by dividing the amount of the
principal payment made (or deemed forgiven) by the sum of such
principal payment and the principal balance of the loan remaining
after such payment.
8.1.1 Shares Released Pursuant to a Minimum
Distribution Schedule. The particular Plan with respect to
which any distribution from the Trust is made will be
determined by the Committee in accordance with the
following directions: (a) to the extent available, shares
of Company Stock sufficient to meet the obligations of the
1990 Stock Incentive Plan shall first be allocated to the
Administrator of such Plan, (b) remaining shares of
Company Stock (if any) to the extent available shall be
transferred to the Administrator to fund the 1991 Performance
Investment Plan, and (c) remaining shares of Company Stock (if
any) to the extent available shall be transferred to the
Administrator to fund the EMSIP, and (d) remaining shares (if
any) shall be transferred to the Director or Administrators to
fund such Plans or Benefits as determined by the Committee taking
into account the best interests of a broad cross-section of
Participants, provided that it is determined that such Plans or
Benefits constitute contractual liabilities of the Company or its
Affiliates.
8.1.2 Release of Shares acquired with the
Proceeds of a Loan. Shares of Company Stock to be distributed in
accordance with clause (b) of the first sentence of this
Subsection 8.1 shall be allocated in the same manner described in
Subsection 8.1.1 above. If a loan described in Subsection 4.1.2
is outstanding, and if the earnings attributable to the shares of
Company Stock acquired with the proceeds of such loan together
with any contributions made by the Company for the purpose of
repayment of such loan are not sufficient to enable the Trust to
make a scheduled repayment of principal under such loan that will
cause a release and distribution of shares sufficient to fund
Benefits described in 8.1.1(a), (b) and (c), then, to the extent
of any such deficiency, such repayment of principal shall be
deemed forgiven by the Company.
8.1.3 Reliance Upon Committee Instruction.
The Committee shall inform the Trustee in writing of how many
shares are required to fund 8.1.1(a), (b), (c), and (d). The
Trustee may rely upon written instructions received by the
Committee to carry out the instructions contained in this
Subsection 8.1 and shall have no responsibility to verify or
monitor the determinations made by the Committee. If no
direction regarding allocation of shares of Company Stock
pursuant to clause (d) of Subsection 8.1.1 is received by
the Trustee from the Committee by the date specified in
the Minimum Distribution Schedule or the date a principal
payment has been made or forgiven, whichever is applicable, the
shares of Company Stock subject to such allocation under
said clause (d) shall be distributed to the Director to
fund non-discretionary compensation of those Participants who are
Employees taking into account the best interests of a broad
cross-section of such Participants.
8.1.4 Acceleration. Notwithstanding
anything herein to the contrary, the Committee can direct
that the number of shares distributed in any year exceed
the number of shares required to be distributed under the
Minimum Distribution Schedule and/or that shares be
distributed prior to the date specified in such schedule,
provided that such acceleration satisfies the terms of any
restrictions contained in the Minimum Distribution Schedule, if
any. If, in any year, the Committee directs that the
number of shares distributed exceeds the number required
to be distributed pursuant to the Minimum Distribution
Schedule, such Schedule shall be revised by the Committee,
so that the remaining minimum distribution amounts will be
reduced proportionately to reflect the acceleration.
Notwithstanding anything herein to the contrary, if the Trustee
undertakes a loan to acquire Company Stock pursuant to Subsection
4.1, such loan shall at all times provide that principal payments
may be accelerated at any time at the discretion of the
Committee.
8.2 Significant Event. If an event occurs
that causes 30 percent or more of the Participants to
cease to be Employees within a 12-month period, as
certified by the Committee, then all remaining distribution
amounts under the Minimum Distribution Schedule will be
reduced in direct proportion to such reduction and, with
respect to Company Stock, the Minimum Distribution Schedule
will be correspondingly extended.
8.3 Protection of Trustee. The Trustee shall,
to the maximum extent permitted by applicable law, be
fully protected in acting upon any written statement,
affidavit or certification from the Company, the Committee or
the Director. The Trustee shall at all times, to the
maximum extent permitted by applicable law, be fully
protected in making distributions pursuant to Sections 4,
8, 9, 13 and 17 hereof.
8.4 Company Obligations. Notwithstanding the
provisions of this Trust Agreement, the Company and its
Affiliates shall remain obligated with respect to the
Benefits attributable to their respective employees.
Nothing in this Trust Agreement shall relieve the Company
or any of its Affiliates of their respective liabilities
with respect to the Benefits except to the extent such
amounts are paid to a Plan or a Participant from the
Trust, it nevertheless being the Company's intent that the
Trust Fund shall be applied in discharge of the Company's
legal obligations as provided in this Trust Agreement.
Notwithstanding anything herein to the contrary, no plan or
benefit may be funded pursuant to this Section 8 unless it gives
rise to a contractual obligation of the Company or its Affiliates
and it is a Benefit described in Schedule A.
8.5 Trustee as Holder of Legal Title to Trust
Assets. Subject to Section 17 hereof, the Trustee shall
hold legal title to all assets in the Trust for benefit
of the Participants and Employees.
8.6 Federal Income Tax Consequences of the
Trust. The Trust Fund may be applied in the discharge of
legal obligations of the Company as provided herein.
Accordingly, the Company shall take into account in
computing its tax liability, those items of income,
deductions and credits against tax attributable to assets
held in the Trust to which the Company would have been
entitled had the Trust not been in existence. The
Trustee shall notify the Company promptly after it becomes
aware of any tax liability assessed against, or imposed
upon, the Trust or the Trustee in its capacity as Trustee
of the Trust. The Company shall be responsible for all
matters in respect of such assessment or imposition, and
shall have sole responsibility for any defense in
connection therewith. Payments in respect of any tax
liability of the Company arising in connection with
earnings, gains or activities relating to the Trust,
including, without limitation, interest and penalties, shall
be made from the Trust Fund after a final determination
of such liability, unless the Company promptly pays such
liability. In the event the assets of the Trust are
insufficient to pay such liability, any deficit shall be
paid promptly by the Company.
SECTION 9 Expenses, Compensation and Indemnification
9.1 Expenses. The Trustee shall be reimbursed
by the Company for its reasonable expenses of
implementation, management and administration of the Trust,
including brokerage commissions and the reasonable
compensation of attorneys or other agents engaged by the
Trustee or by the Company to assist in such
implementation, management and administration.
9.2 Compensation. The Company shall pay the
Trustee compensation in accordance with the compensation
schedule attached hereto as Schedule C, unless the Company
and the Trustee otherwise agree in writing.
9.3 Charge on Trust Fund. All expenses and
compensation referred to in Sections 9.1 and 9.2 hereof
shall be a charge on the Trust Fund and shall constitute
a lien on the Trust Fund in favor of the Trustee and
shall be payable from the Trust Fund unless paid when due
by the Company.
9.4 Indemnification. The Company hereby agrees
to indemnify and hold harmless the Trustee from and
against any losses, costs, damages, claims or expenses,
including without limitation reasonable attorneys' fees,
which the Trustee may incur or pay out in connection
with, or otherwise arising out of:
9.4.1 the performance by the Trustee of
its duties hereunder, unless any such loss, cost, damage,
claim or expense is a result of negligence or willful
misconduct by the Trustee or the breach by the Trustee
of its fiduciary duties hereunder; or
9.4.2 any action taken by the Trustee in
good faith pursuant to the written direction of the
Company, the Committee or the Director.
In the event that any action or regulatory proceeding
shall be commenced or claim asserted which may entitle the
Trustee to be indemnified hereunder, the Trustee shall give
the Company written notice of such action or claim
promptly after becoming aware of such commencement or
assertion unless the Company has otherwise received notice
of such action or claim. The Company shall be entitled
to participate in and, upon notice to the Trustee, assume
the defense of any such action or claim using counsel
reasonably acceptable to the Trustee. The Trustee shall
cooperate with the Company in connection with the defense
of any such action or claim. Subject to Section 17 the
Trustee shall have no claim on the assets of the Trust
Fund in respect of amounts payable to the Trustee under
this Subsection 9.4.
9.5 Payment from Trust Fund. All payments of
expenses and compensation referred to in Subsections 9.1
and 9.2 hereof shall be made only with the written approval
of or at the direction of the Committee.
SECTION 10 Administration and Records
10.1 Records. Subject to Subsections 7.1 and
7.2, the Trustee shall keep or cause to be kept accurate
and detailed accounts of any investments, receipts,
disbursements and other transactions hereunder and all
accounts, books and records relating thereto shall be open
to inspection and audit at all reasonable times by any
person designated by the Company. The Trustee shall
preserve all such accounts, books and records, in original
form or on microfilm, magnetic tape or any other similar
process, for such period as the Trustee may determine,
but the Trustee may destroy such accounts, books and
records only after first notifying the Company in writing
of its intention to do so and transferring to the
Company, subject to Subsections 7.1 and 7.2 hereof, any of
such accounts, books and records that the Company shall
request.
10.2 Settlement of Accounts. Subject to
Subsections 7.1 and 7.2, within 60 days after the close
of each calendar year, and within 60 days after the
removal or resignation of the Trustee or the termination
of the Trust (or any portion thereof), the Trustee shall
file with the Company a written account setting forth all
investments, receipts, disbursements and other transactions
effected by it with respect to the Trust during the
preceding calendar year or during the period from the
close of the preceding calendar year to the date of such
removal, resignation or termination, including a description
of all investments and securities purchased and sold, with
the cost or net proceeds of such purchases or sales, and
showing all cash, securities and other property held at
the end of such calendar year or other period.
It shall be the duty of the Company to review
such written account promptly within 90 days from the date
of filing any such account and if, within such 90-day
period, the Company does not file with the Trustee a
written notice of objection to any of the Trustee's acts
or transactions, the initial account shall become an
account stated between the Trustee and the Company. If the
Company files a written notice of objection with the
Trustee, the Trustee may file with the Company an adjusted
account, in which case it shall be the duty of the
Company to review such adjusted account promptly within 30
days from the date of its filing. If, within such 30-day
period, the Company fails to file a written notice of
objection to any of the Trustee's acts or transactions as
so adjusted with the Trustee, the adjusted account shall
become an account stated between the Trustee and the
Company.
Unless an account is fraudulent, when it becomes
an account stated it shall be finally settled, and the
Trustee shall, to the maximum extent permitted by
applicable law, be forever released and discharged from
all liability and accountability with respect to the
propriety of its acts and transactions shown in such
account.
10.3 Audit. The Trustee shall from time to
time permit an independent public accountant selected by
the Company to have access during ordinary business hours
to such records as may be necessary to audit the
Trustee's accounts.
10.4 Judicial Settlement. Nothing contained in
this Trust Agreement shall be construed as depriving the
Trustee or the Company of the right to have a judicial
settlement of the Trustee's accounts. Upon any proceeding
for a judicial settlement of the Trustee's accounts or for
instructions the only necessary party thereto in addition
to the Trustee shall be the Company.
10.5 Delivery of Records to Successor. In the
event of the removal or resignation of the Trustee, the
Trustee shall deliver to the successor Trustee all records
which shall be required by the successor Trustee to
enable it to carry out the provisions of this Trust
Agreement.
10.6 Tax Filings. In addition to any returns
required of the Trustee by law (e.g., any information
return required to be filed on IRS Form 1041), the
Trustee shall prepare and file such tax reports and other
returns as the Company and the Trustee may from time to
time agree.
SECTION 11 Removal or Resignation of the Trustee and
Designation of Successor Trustee.
11.1 Removal. At any time prior to the
occurrence of a Change in Control, the Company may remove
the Trustee with or without cause upon at least 60 days'
notice in writing to the Trustee. At any time after
the occurrence of a Change in Control, the Trustee may
not be removed except for cause or by order of a court of
competent jurisdiction. No removal of the Trustee shall
be effective until the Company has appointed in writing
a successor Trustee, and such successor has accepted the
appointment in writing.
11.2 Resignation. Trustee may resign at any
time upon at least 60 days' notice in writing to the
Company, except that any such resignation shall not be
effective until the Company has appointed in writing a
successor Trustee, and such successor has accepted the
appointment in writing. At any time after 30 days
following the sending of such notice of resignation, if
the Company is unable to appoint a successor Trustee or
if a successor Trustee has not accepted an appointment,
the Trustee shall be entitled, at the expense of the
Company, to petition a United States District Court or any
of the courts of the State of Washington or other court
having jurisdiction to appoint its successor.
11.3 Successor Trustee. Subject to Subsection
2.1 hereof, each successor Trustee, during such period as
it shall act as such, shall have the powers and duties
herein conferred upon the Trustee, and the word "Trustee"
wherever used herein, except where the context otherwise
requires, shall be deemed to include any successor Trustee.
Upon designation of a successor Trustee and delivery to
the resigned or removed Trustee of written acceptance by
the successor Trustee of such designation, such resigned or
removed Trustee shall promptly assign, transfer, deliver and
pay over to such Trustee, in conformity with the
requirements of applicable law, the funds and properties in
its control or possession then constituting the Trust Fund.
SECTION 12 Enforcement of Trust Agreement.
12.1 Rights of Parties to Enforce the Trust
Agreement The Company and the Trustee shall have the
right to enforce any provision of this Trust Agreement. In
any action or proceeding affecting the Trust, the only
necessary parties shall be the Company and the Trustee
and, except as otherwise required by applicable law, no
other person shall be entitled to any notice or service
of process. Any judgment entered in such an action or
proceeding shall, to the maximum extent permitted by
applicable law, be binding and conclusive on all persons
having or claiming to have any interest in the Trust or
any Plan.
12.2 Limitation on Rights of Participants and
Beneficiaries Neither the Plans nor any Participant or
Beneficiary shall have any rights with respect to the
Trust Fund, no Plan shall be deemed to have any
beneficial interest in the Trust Fund and no Employee
shall be deemed to have any beneficial interest in the
Trust Fund arising from his participation in any
particular Plan.
SECTION 13 Termination.
13.1 Termination upon Specific Events. The Trust
shall be terminated as soon as practicable after the
Trustee has received written notice from the Committee that
one or more of the following events has occurred:
13.1.1 the Department of Labor or a court
of competent jurisdiction has determined (or, in the
Committee s sole discretion, would be likely to determine)
that the assets of the Trust are subject to Part 4 of
Subtitle B of Title I of ERISA,
13.1.2 the Internal Revenue Service or a
court of competent jurisdiction has determined (or, in the
Committee s sole discretion, would be likely to determine)
that any portion of the Trust Fund is presently taxable
to any Participant or Beneficiary, or
l3.1.3 a Change in Control has occurred.
In the event of a termination pursuant to this Subsection
13.1, the Trustee shall distribute all assets then
constituting the Trust Fund attributable to Company Stock to
the Administrator or Director to be distributed in the form of
Company Stock or cash (as provided pursuant to the terms of a
particular Plan) to Participants. Distributions shall first be
made to satisfy accrued, vested benefits described in (a) of
Subsection 8.1; remaining assets, if any, shall be distributed to
satisfy accrued, vested benefits described in (b) of Subsection
8.1; remaining assets, if any, shall then be distributed to
satisfy any exercises that have not yet been funded pursuant to
the plan described in (c) of Subsection 8.1. Remaining assets,
if any, shall then be used to fund the following plans (in the
following order): any obligation the Company or an Affiliate has
under the Annual Incentive Plan, any obligation the Company or an
Affiliate has under the Hillhaven Supplemental Executive
Retirement Plan, or any obligation the Company or an Affiliate
has under the Hillhaven Deferred Compensation Plan. Assets
remaining shall be allocated among Plans described in Schedule B,
in the order set out in such Schedule.
13.2 Termination in Other Events. Notwithstanding
anything herein to the contrary, the Trust shall terminate
on the earliest of (a) 21 years following the death of the
last surviving Participant included on the Participant Schedules
received by the Trustee in 1995, (b) the date on which the
Committee informs the Trustee in writing that the Company and
its Affiliates have no obligations under any Plans (or
the date on which there are no Plans) or (c) the date
on which the Trust contains no assets and retains no
claims to recover assets from the Company and its
Affiliates pursuant to any provision hereof, whichever shall
first occur. In the event of a termination described in
clauses (a) or (b) of this Section, the Trustee shall
distribute the assets remaining in the Trust Fund to all
Participants listed on the Participant Schedule in an equal
amount per Participant.
13.3 Limitation on Trustee Liability upon Total
Distribution; Continuation of Trustee Powers. Upon a
total distribution of the Trust assets pursuant to Section
8 or this Section 13.3, the Trustee shall be relieved from
all further liability. The powers of the Trustee
hereunder shall continue so long as any assets of the
Trust remain in its hands.
13.4 Nonapplicability of ERISA. Notwithstanding
anything herein to the contrary, no amount shall be
distributed to any Participant pursuant to this Section 13
if such distribution could, in the opinion of independent
counsel, cause the Trust to be subject to ERISA (other
than as an unfunded plan described in ERISA section
201(2)). Prior to a distribution pursuant to this Section, the
Committee shall provide the Trustee with a Schedule of
Participants eligible for a distribution (taking into account
this subsection 13.4).
SECTION 14 Amendment.
14.1 Amendments in General. The Company may,
in its sole discretion, from time to time amend, in whole
or in part, any or all of the provisions of this Trust
Agreement, including, without limitation, by adding to, or
subtracting from, Schedule A hereto one or more employee
benefit plans (within the meaning of Section 3(3) of
ERISA) or plans or arrangements that are not employee
benefit plans (within the meaning of such Section);
provided, that (a) in making any modification to Schedule A
hereto, the Company shall act in good faith taking into
account the best interests of a broad cross-section of
Participants, and (b) the Company shall ensure that at all
times Schedule A shall include at least one employee
benefit plan that is not an employee benefit plan within
the meaning of Section 3(3) of ERISA. Notwithstanding
anything herein to the contrary, no amendment shall be made to
Sections 2.2, 7, 8 or 13.
14.2 Specific Amendments. Notwithstanding Subsection
14.1, the Company may amend this Trust Agreement from time
to time in such a manner as may be necessary, in the
opinion of independent counsel, to prevent this Trust
Agreement or the Trust from becoming subject to ERISA and
to prevent the current taxation of the Trust Fund to
Participants.
SECTION 15 Nonalienation.
15.1 Prohibition Against Certain Transfers, Pledges,
Etc. Except as otherwise provided by this Trust Agreement
and except as otherwise may be required by applicable law,
(a) no amount payable to or in respect of any Plan,
Participant or Employee at any time under the Trust shall
be subject in any manner to alienation by anticipation,
sale, transfer, assignment, bankruptcy, pledge, attachment,
charge, or encumbrance of any kind, and any attempt to
so alienate, sell, transfer, assign, pledge, attach, charge,
or otherwise encumber any such amount, whether presently or
thereafter payable, shall be void and (b) the Trust Fund
shall in no manner be liable for or subject to the debts
or liabilities of any Participant.
SECTION 16 Communications.
16.1 To the Company, Board of Directors and
Committee. Communications to the Company, the Board of
Directors and the Committee shall be addressed to:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: Vice President, Treasurer
with a copy to:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: Senior Vice President and General
Counsel
provided, however, that upon the Company's written
request, such communications shall be sent to such other
address as the Company may specify.
16.2 To the Trustee. Communications to the
Trustee shall be addressed to:
Wachovia Bank of North Carolina, N.A.
301 N. Main Street
Winston-Salem, N.C. 27150
Attention: Steve Watts
Vice President
with a copy to:
Wachovia Bank of North Carolina, N.A.
301 N. Main Street
Winston-Salem, NC 27150
Attention: John Smith
Vice President
provided, however, that upon the Trustee's written request,
such communications shall be sent to such other address as
the Trustee may specify.
16.3 To a Participant. Communications to a
Participant or to his Beneficiaries shall be addressed to
the Participant or his Beneficiaries, respectively, at the
address indicated on the Participant Schedule as in effect
at the time of the communication.
16.4 Binding upon Receipt. No communication
shall be binding on the Trustee until it is received by
the Trustee, and no communication shall be binding on the
Company, the Board of Directors or the Committee until it
is received by the Company, the Board of Directors or the
Committee, respectively. A communication shall be deemed
binding on a Participant or the Participant's Beneficiaries
60 days following the date notice is given or sent pursuant to
Subsection 16.3.
16.5 Authority to Act. The Secretary of the
Company shall from time to time certify to the Trustee
the person or persons authorized to act for the Company,
the Committee and the Board of Directors, and shall
provide the Trustee with such information regarding the
Company as the Trustee may reasonably request. The Trustee
may continue to rely on any such certification until
notified to the contrary.
16.6 Authenticity of Instruments. The Trustee
shall be fully protected in acting upon any instrument,
certificate, or paper reasonably believed by it to be
genuine and to be signed or presented by the proper
person or persons, and the Trustee shall be under no duty
to make any investigation or inquiry as to any statement
contained in any such writing but may accept the same as
conclusive evidence of the truth and accuracy of the
statements therein contained.
SECTION 17 Claims of Company's Bankruptcy Creditors.
17.1 Bankruptcy Creditors. In the event of the
Company's "insolvency," the assets of the Trust shall be
available to pay the claims of any creditor of the
Company to whom a distribution may be made in accordance
with state and federal bankruptcy laws. The Company shall
be deemed to be "insolvent" if it is either (a) unable
to pay its debts and liabilities as they become due or
(b) subject to a pending proceeding as a debtor under the
federal Bankruptcy Code (or any successor federal statute)
or any state bankruptcy code. In the event the Company
becomes insolvent, the Board of Directors and the Chief
Executive Officer of the Company shall notify the Trustee
of the event as soon as practicable. Upon receipt of
such notice, or if the Trustee receives other written
allegations of the Company's insolvency from a third party
considered by the Trustee to be reliable and responsible,
the Trustee shall cease making any distributions from the
assets of the Trust, shall hold the assets in the Trust
for the benefit of the Company's creditors and shall take
such steps as are necessary to determine within a
reasonable period of time whether the Company is insolvent.
In making such determination, the Trustee may rely upon a
certificate of the Board of Directors and the Chief
Executive Officer of the Company or a determination by a
court of competent jurisdiction that the Company is or is
not insolvent. In the case of the Trustee's
determination of the Company's insolvency, the Trustee will
deliver assets of the Trust to satisfy claims of the
Company's creditors as directed pursuant to a final order
of a court of competent jurisdiction.
17.2 Resumption of Benefits; Restoration of
Accounts. In the event the Trustee ceases making
distributions by reason of Subsection 17.1, the Trustee
shall resume making distributions pursuant to Sections 4,
8, or 13 of this Agreement only after the Trustee has
determined that the Company is no longer insolvent or
upon receipt of an order of a court of competent
jurisdiction requiring such distributions. In making any
determination under this Section, the Trustee may rely
upon a certificate of the Board of Directors and the
Chief Executive Officer of the Company.
SECTION 18 Consolidation, Merger or Sale of the Company.
18.1 Consolidation, Merger or Sale of the
Company. Effective upon consolidation of the Company with,
or merger of the Company with or into, any corporation or
corporations, or any sale or conveyance of all or sub-
stantially all of the assets of the Company, the Trustee
shall deal with the corporation formed by such
consolidation, or with or into which the Company is
merged, or the person that acquires the assets of the
Company on the same basis as it dealt with the Company
prior to such transactions and, in such event, the term
"Company" within this Agreement shall mean such corporation
or person.
SECTION 19 Miscellaneous Provisions
19.1 Binding Effect. This Trust Agreement shall
be binding on the Company and the Trustee and their re-
spective successors and assigns.
19.2 Inquiry as to Authority. A third party
dealing with the Trustee shall not be required to make
inquiry as to the authority of the Trustee to take any
action nor be under any obligation to follow the proper
application by the Trustee of the proceeds of sale of any
property sold by the Trustee or to inquire into the
validity or propriety of any act of the Trustee.
19.3 Responsibility for Company Action. The
Trustee assumes no obligation or responsibility with respect
to any action required by this Trust Agreement on the
part of the Company, the Board of Directors, the
Committee, any Affiliate, the Participants or any
Beneficiaries. The Trustee shall be under no duties
except such duties as are specifically set forth as such
in this Trust Agreement or under applicable law, and no
implied covenant or obligation shall be read into this
Trust Agreement against the Trustee.
19.4 Successor to Trustee. Subject to
Subsection 2.1, any corporation into which the Trustee may
be merged or with which it may be consolidated, or any
corporation resulting from any merger, reorganization or
consolidation to which the Trustee may be a party, or any
corporation to which all or substantially all the trust
business of the Trustee may be transferred shall be the
successor of the Trustee hereunder without the execution or
filing of any instrument or the performance of any act.
19.5 Intercompany Agreements. The Company may
require any Affiliate to enter into such other agreement
or agreements as it shall deem necessary to obligate such
Affiliate to reimburse the Company for any other amounts
paid by the Company hereunder, directly or indirectly, in
respect of such Affiliate's employees.
19.6 Titles Not to Control. Titles to the
Sections of this Trust Agreement are included for
convenience only and shall not control the meaning or
interpretation of any provision of this Trust Agreement.
19.7 Laws of the State of Washington to Govern.
This Trust Agreement and the Trust established hereunder
shall be governed by and construed, enforced, and
administered in accordance with the laws of the State of
Washington, without reference to the principles of conflicts
of law thereof.
19.8 Fractional Shares. Notwithstanding anything
herein to the contrary, the Trustee may distribute any
fractional share otherwise required to be distributed to
Administrators or Participants pursuant to Sections 8 or
13, in cash in an amount equal to the Daily Value,
multiplied by such fraction.
IN WITNESS WHEREOF, this Trust Agreement has
been duly executed by the parties hereto as of the day
and year first above written.
THE HILLHAVEN CORPORATION
Attest: /s/ Ellen B. Alben By: /s/ Richard P. Adcock
Ellen B. Alben Richard P. Adcock
Assistant Secretary Senior Vice President
WACHOVIA BANK OF NORTH
CAROLINA, N.A. as Trustee
Attest: /s/ Donna Stern By: /s/ John N. Smith, III
Donna Stern John N. Smith, III
Assistant Secretary Vice President
STATE OF WASHINGTON
COUNTY OF PIERCE
On the 26th day of January, 1995, before me
personally came to me Richard P. Adcock, who, being by me duly
sworn, did depose and say that he resides at Gig Harbor,
Washington; that he is of THE HILLHAVEN CORPORATION, one of the
corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the
seal affixed to said instrument is such corporate seal; that it
was so affixed by order of the board of directors of said
corporation; and that he signed his name thereto by like order.
/s/ Helen Harmon
Helene Harmon
Notary Public
My commission expires 3/25/95
STATE OF NORTH CAROLINA
COUNTY OF FORSYTH
On the 27th day of January, 1995, before me
personally came to me John N. Smith, III, who, being by me
duly sworn, did depose and say that he resides at Winston-
Salem, North Carolina; that he is of WACHOVIA BANK OF NORTH
CAROLINA, N.A., one of the corporations described in and
which executed the foregoing instrument; that he knows the
seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by
order of the board of directors of said corporation; and that he
signed his name thereto by like order.
/s/ Sheri M. Utt
Sheri M. Utt
Notary Public
Commission Expires 2/18/95
Schedule A
LIST OF PLANS
The Hillhaven Corporation 1991 Performance Investment Plan
The Hillhaven Corporation 1990 Stock Incentive Plan
The Hillhaven Corporation Employee Monthly Stock Investment Plan
The Hillhaven Corporation Deferred Compensation Plan
The Hillhaven Corporation Supplemental Executive Retirement Plan
The Hillhaven Corporation Annual Incentive Plan
The Hillhaven Corporation Long Term Incentive Plan
Other non-discretionary based compensation
Schedule C
TRUSTEE'S COMPENSATION SCHEDULE
HILHAVEN GRANTOR TRUST
FEE ESTIMATE FOR
NON-QUALIFIED PLAN SERVICES
I. TRUSTEE SERVICES $15,750.00
II. PROXY ADMINISTRATION 0.00
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TOTAL TRUSTEE: $15,750.00
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