EXHIBIT 10.22
BEVERLY ENTERPRISES, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
(Effective as of December 31, 2002)
TABLE OF CONTENTS
<Table>
<Caption>
Page
----
ARTICLE 1 ESTABLISHMENT AND PURPOSE.............................................................................. 1
ARTICLE 2 DEFINITIONS............................................................................................ 1
ARTICLE 3 ADMINISTRATION......................................................................................... 4
ARTICLE 4 ELIGIBILITY AND PARTICIPATION.......................................................................... 6
ARTICLE 5 CONTRIBUTIONS TO PARTICIPANTS' ACCOUNTS................................................................ 7
ARTICLE 6 DISTRIBUTIONS.......................................................................................... 9
ARTICLE 7 DEFERRED COMPENSATION ACCOUNTS......................................................................... 12
ARTICLE 8 TRUST.................................................................................................. 14
ARTICLE 9 CHANGE IN CONTROL...................................................................................... 14
ARTICLE 10 RIGHTS OF PARTICIPANTS................................................................................. 15
ARTICLE 11 WITHHOLDING OF TAXES................................................................................... 15
ARTICLE 12 AMENDMENT AND TERMINATION.............................................................................. 15
ARTICLE 13 MISCELLANEOUS.......................................................................................... 16
ARTICLE 14 ADMINISTRATIVE INFORMATION............................................................................. 17
ARTICLE 15 ERISA RIGHTS........................................................................................... 17
</Table>
BEVERLY ENTERPRISES, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 Establishment. Effective as of December 31, 2002, the Company
hereby establishes this deferred compensation plan for a select group of
employees as described herein, which shall be known as the "Beverly Enterprises,
Inc. Executive Deferred Compensation Plan" (the "Plan"). The Plan is intended to
be an unfunded plan maintained primarily to provide deferred compensation
benefits for a select group of "management or highly compensated employees"
within the meaning of sections 201, 301, and 401 of ERISA, and therefore exempt
from the provisions of Parts 2, 3, and 4 of Title I of ERISA. The Plan is
intended to constitute a "nonqualified deferred compensation plan" for purposes
of Code section 3121(v)(2) as well as 4 U.S.C. section 114.
1.2 Purpose. The primary purposes of the Plan are (i) to provide a
select group of management or highly compensated employees with a capital
accumulation opportunity by deferring compensation on a pre-tax basis; (ii) to
provide the Company with a method of rewarding and retaining its highly
compensated executives; and (iii) to provide a nonqualified retirement program
with Company contributions to select individuals.
ARTICLE 2
DEFINITIONS
Whenever used herein, the following terms shall have the meanings set
forth below, and, when the defined meaning is intended, the term is capitalized:
(a) "Account" means the accounting entry made with respect to each
Participant for the purpose of maintaining a record of each
Participant's benefit under the Plan.
(b) "Affiliate" means any business entity 80% or more directly or
indirectly owned or controlled by the Company.
(c) "Annual Incentive Plan" means the Company's annual performance
bonus plan as constituted from time to time.
(d) "Change in Control" shall be deemed to have taken place if:
(i) any person, corporation, or other entity or group,
including any "group" as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, other than any employee
benefit plan then maintained by the Company, becomes the
beneficial owner of shares of the Company having 30 percent or
more of the total number of votes that may be cast for the
election of directors of the Company; (ii) as the result of,
or in connection with, any contested election for the board of
directors of the Company, or any tender or exchange offer,
merger or other business combination or sale of
1
assets, or any combination of the foregoing (a "Transaction"),
the persons who were directors of the company before the
Transaction shall cease to constitute a majority of the board
of directors of the Company or any successor to the Company or
its assets, or (iii) at any time (a) the Company shall
consolidate or merge with any other person, entity or group of
persons within the meaning of Section 3(a)(9) of the
Securities Exchange Act of 1934 and as used in Sections 13(d)
and 14(d) thereto, including a "group" as defined in Section
13(d) (collectively referred to as a "Person") and the Company
shall not be the continuing or surviving corporation, (b) any
Person shall consolidate or merge with the Company, and the
Company shall be the continuing or surviving corporation and
in connection therewith, all or part of the outstanding
Company stock shall be changed into or exchanged for stock or
other securities of any other Person or cash or any other
property, (c) the Company shall be a party to a statutory
share exchange with any other Person after which the Company
is a subsidiary of any other Person, or (d) the Company shall
sell or otherwise transfer fifty percent (50%) or more of the
assets or earning power of the Company and its subsidiaries
(taken as a whole) to any Person or Persons.
Notwithstanding anything to the contrary contained herein, a
Change in Control shall not include any transfer to a
consolidated subsidiary, reorganization, spin-off, split-up,
distribution, or other similar or related transaction(s) or
any combination of the foregoing in which the core business
and assets of the Company and its subsidiaries (taken as a
whole) are transferred to another entity ("Controlled") with
respect to which (1) the majority of the board of directors of
the Company (as constituted immediately prior to such
transaction(s)) also serve as directors of Controlled and
immediately after such transaction(s) constitute a majority of
Controlled's board of directors, and (2) more than 70% of the
shareholders of the Company (immediately prior to such
transaction(s)) become shareholders or other owners of
Controlled and immediately after the transaction(s) control
more than 70% of the ownership and voting rights of
Controlled.
(e) "Code" means the Internal Revenue Code of 1986, as it has been
and may be amended from time to time.
(f) "Committee" means the Nominating and Compensation Committee of
the board of directors of the Company as it may exist from
time to time.
(g) "Company" means Beverly Enterprises, Inc., a Delaware
corporation.
(h) "Compensation" means an Employee's Salary and Incentive
Compensation paid by the Employer for the Plan Year.
(i) "Discretionary Contributions" means those contributions
credited to a Participant's Account, if any, pursuant to
section 5.4.
2
(j) "Distribution Eligibility Requirement" means the completion of
five (5) years of combined participation in this Plan and the
SERP.
(k) "Eligible Employee" means an Employee who is eligible to
participate in the Plan pursuant to Section 4.1.
(l) "Employee" means any person employed by the Employer whose
wages are subject to withholding for purposes of the Federal
Insurance Contribution Act.
(m) "Employee Contributions" means those contributions credited to
a Participant's Account in accordance with the Participant's
deferral election pursuant to Section 5.1.
(n) "Employer" means the Company and each Affiliate that adopts
the Plan with the Company's permission.
(o) "ERISA" means the Employee Retirement Income Security Act of
1974, as it has been and may be amended from time to time.
(p) "Incentive Compensation" means such bonuses and other non
periodic amounts payable to an Employee in addition to his
Salary, which may be paid to the Employee in the current or a
subsequent Plan Year as determined by the Employer in
accordance with its general policies and procedures and its
sole discretion. Whether a payment qualifies as "Incentive
Compensation" shall be determined by the Committee in its sole
discretion.
(q) "Matching Contributions" means those contributions credited to
a Participant's Account, if any, pursuant to Section 5.5.
(r) "Participant" means an Eligible Employee who is participating
in the Plan pursuant to Section 4.2.
(s) "Plan" means the Beverly Enterprises, Inc. Executive Deferred
Compensation Plan, as set forth herein, and as it may be
amended from time to time.
(t) "Plan Year" means January 1 to December 31 of each calendar
year. The first Plan Year shall be a short plan year that
begins and ends on December 31, 2002.
(u) "Qualified Plan" means the Beverly Enterprises, Inc. 401(k)
SavingsPlus Plan.
(v) "Rabbi Trust" means the grantor trust that may be established
pursuant to Article 8.
(w) "Rabbi Trustee" means the trustee of the Rabbi Trust.
(x) "Salary" means the base annual compensation payable to an
Employee by the Employer for services rendered during a Plan
Year, before reduction for amounts deferred pursuant to the
Plan or to the Qualified Plan or any other deferred
3
compensation, 401(k), or cafeteria plan, which is payable in
cash to the Employee for services to be rendered during the
Plan Year provided that "Salary" shall exclude Incentive
Compensation.
(y) "SERP" means the Beverly Enterprises, Inc. Supplemental
Executive Retirement Plan.
(z) "SERP Contributions" means those contributions credited to a
Participant's Account, if any, pursuant to Section 5.6.
ARTICLE 3
ADMINISTRATION
3.1 Authority of the Committee. Subject to the provisions herein, the
Committee or its designee shall have full power and discretion to select
Employees for participation in the Plan; to determine the terms and conditions
of each Employee's participation in the Plan; to construe and interpret the Plan
and any agreement or instrument entered into under the Plan; to establish,
amend, or waive rules and regulations for the Plan's administration; to amend
(subject to the provisions of Articles 9 and 12 herein) the terms and conditions
of the Plan and any agreement entered into under the Plan; to adjudicate all
claims and appeals; and to make other determinations which may be necessary or
advisable for the administration of the Plan.
The Committee may designate persons other than members of the Committee
to carry out the day-to-day ministerial administration of the Plan under such
conditions and limitations as it may prescribe; provided, however, that the
Committee shall not delegate its authority with regard to the determination of
Eligible Employees or contributions pursuant to Article 5.
3.2 Decisions Binding. Subject to Section 3.4(b), all determinations
and decisions of the Committee or its designee as to any disputed question
arising under the Plan, including questions of construction and interpretation,
shall be final, conclusive, and binding on all parties and shall be given the
maximum possible deference allowed by law.
3.3 Claim Procedures. If a request for Plan benefits is denied in whole
or in part, the Participant or his beneficiary ("claimant") will be notified in
writing within 90 days after receipt of the claim. In some instances, the
Committee may require an additional 90 days to consider the claim. When
additional time is needed, the claimant will be notified within 90 days of
receipt of the claim of the special circumstances requiring the extension and
the date by which the Committee expects to render its benefit determination. The
extension may not exceed a total of 180 days from the date the claim was
originally filed.
If a claimant's initial request for benefits is denied, the notice of
the denial will include the specific reasons for denial and references to the
relevant Plan provisions on which the denial was based, a description of any
additional material or information necessary to perfect the claim and an
explanation of why such information is necessary, if applicable, and a
description of the Plan's review procedures and the time limits applicable
thereto, including a statement of the claimant's rights under Section 502(a) of
ERISA following an adverse benefits determination on review.
4
Within 60 days after receiving a denial, the claimant or his authorized
representative may appeal the decision by requesting a review by writing the
Committee. On appeal, the claimant may submit in writing any comments or issues
with respect to the claim and/or any additional documents or information not
considered during the initial review and, upon request and free of charge, the
claimant will be provided access to and copies of all documents, records and
other information relevant to the claim.
A decision on appeal will normally be given within 60 days of the
receipt of the appeal. If special circumstances warrant an extension, then the
decision will be made no later than 120 days after receipt of the appeal. If an
extension is required, the claimant will be provided a written notice of the
extension that shall indicate the special circumstances requiring the extension
and the date by which the Committee expects to render its final decision.
Subject to Section 3.4, the Committee's decision on appeal shall be final and
binding on all parties.
If a claimant's appeal is denied in whole or in part, the notice of the
decision on appeal shall include the specific reasons for the denial and
reference to the relevant Plan provisions on which the denial was based, a
statement that, upon request and free of charge, the claimant may review and
copy all documents, records and other information relevant to the claim for
benefits and a statement describing the Plan's binding arbitration procedures
(or, on or after a Change in Control, other contest procedures) and the
claimant's rights under Section 502(a) of ERISA.
3.4 Arbitration. (a) Pre Change in Control. The following provisions
shall apply before a Change in Control. Any individual making a claim for
benefits under this Plan may contest the Committee's decision to deny such claim
or appeal therefrom only by submitting the matter to binding arbitration before
a single arbitrator. Any arbitration shall be held in Fort Smith, Arkansas,
unless otherwise agreed to by the Committee. The arbitration shall be conducted
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association.
The arbitrator's authority shall be limited to the affirmation or
reversal of the Committee's denial of the claim or appeal, based solely on
whether or not the Committee's decision was arbitrary or capricious, and the
arbitrator shall have no power to alter, add to, or subtract from any provision
of this Plan. Except as otherwise required by ERISA, the arbitrator's decision
shall be final and binding on all parties, if warranted on the record and
reasonably based on applicable law and the provisions of this Plan. The
arbitrator shall have no power to award any punitive, exemplary, consequential,
special, or extracontractual damages, and under no circumstances shall an award
contain any amount that in any way reflects any of such types of damages. Each
party shall bear its own attorney's fees. Judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
(b) Post Change in Control. On and after a Change in Control, the
Committee's decisions shall be given no special deference, but rather shall be
reviewed de novo, and a claimant may contest any Committee decision through
arbitration or litigation, at the forum and the venue of his or her choice. The
Company shall be liable for all court or arbitration costs and legal fees if the
claimant makes such a challenge.
5
3.5 Indemnification. Each person who is or shall have been a member of
the Committee or acts pursuant to the Committee's direction, shall be
indemnified and held harmless by the Employer against and from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred by him in
connection with or resulting from any claim, action, suit, or proceeding to
which he or she may be a party, or in which he or she may be involved by reason
of any action taken or failure to act under the Plan, and against and from any
and all amounts paid by him in settlement thereof, with the Employer's approval,
or paid by him in satisfaction of any judgment in any such action, suit or
proceeding against him, provided he or she shall give the Employer an
opportunity, at its own expense, to handle and defend the same before he or she
undertakes to handle and defend it on his own behalf.
The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under the
Employer's Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Employer may have to indemnify them or hold
them harmless.
ARTICLE 4
ELIGIBILITY AND PARTICIPATION
4.1 Eligibility. The Committee shall determine, in its sole and
absolute discretion, which such Employees shall be eligible to participate from
time to time, and may modify such determinations at any time, provided that at
all times the Plan shall continue to qualify as an unfunded plan maintained
primarily to provide deferred compensation benefits to a select group of
management or highly compensated employees, within the meaning of sections 201,
301, and 401 of ERISA. Currently, to be eligible for selection by the Committee,
an Employee must (i) be in pay level D or above, (ii) have Salary scheduled to
be at least $90,000, and (iii) have Total Compensation for the Plan Year
scheduled to be at least $100,000. For purposes of this Section 4.1, the phrase
"Total Compensation" shall mean a Participant's scheduled Salary and target
bonus under the Company's Annual Incentive Plan for the Plan Year.
4.2 Participation. Each Eligible Employee shall become a Participant in
the Plan upon contributions being made to his Account pursuant to Article 5, and
the completion of all other applicable election and administrative forms
required by the Company.
In the event a Participant ceases to be eligible to participate in the
Plan, such Participant shall become an inactive Participant, retaining all the
rights described under the Plan, except the right to make any further deferrals,
until such time that the Participant again becomes an active Participant.
4.3 Partial Year Eligibility. In the event that an Employee first
becomes eligible to participate in the Plan after the beginning of a Plan Year,
the Employer shall notify the Employee of his eligibility to participate, and
the Employer shall provide each such Participant with a "Deferral Election
Form," and any additional enrollment forms that must be completed by the
Participant; provided, however, that such Participant must make his election
within 30 days thereof and may elect only to defer that portion of his
Compensation for such Plan Year which is to be earned after the filing of the
deferral election.
6
4.4 Notice. The Company shall notify an Employee within a reasonable
time of such Employee's gaining or losing eligibility for active participation
in the Plan.
ARTICLE 5
CONTRIBUTIONS TO PARTICIPANTS' ACCOUNTS
5.1 Compensation Deferrals. Effective as of January 1, 2003, and
subject to Sections 5.2 and 5.3, an Eligible Employee may elect to defer and
have credited to his Account for any Plan Year (i) up to one hundred percent
(100%) of his Incentive Compensation, and (ii) up to seventy-five percent (75%)
of his Salary; provided, however, that the amount of deferrals selected by the
Participant shall not reduce his non-deferred Compensation below the amount that
is required to be withheld for any state or federal payroll taxes (including
FICA/Medicare tax on deferred amounts), income tax, payments to be withheld
pursuant to the Qualified Plan or any other benefit plan of the Employer (other
than this Plan), and any other required or elected withholding. Deferrals shall
be credited to a Participant's Account on the business day the Compensation is
withheld from the Participant's pay check. The minimum amount of Salary that may
be deferred in any Plan Year is five percent (5%). The minimum amount of
Incentive Compensation that may be deferred in any Plan Year is the greater of:
(i) five percent (5%) of the Participant's Incentive Compensation for the Plan
Year or (ii) $1,000. The minimum deferral amounts will be prorated if a
Participant first becomes eligible to participate in the Plan after the
beginning of the Plan Year. Eligible Employees shall not be permitted to defer
any portion of their Compensation for the initial short Plan Year that begins
and ends on December 31, 2002. At the discretion of the Committee, deferrals may
also be permitted for awards under the Beverly Enterprises, Inc. Long-Term
Incentive Plan or other equity compensation.
5.2 Deferral Election. Eligible Employees and Participants shall make
their elections to defer all or a portion of their Salary for the Plan Year no
later than December 15 prior to the beginning of the Plan Year in which the
Salary is to be earned, or not later than thirty (30) calendar days following
notification of eligibility to participate for a partial Plan Year (with respect
to Salary not yet earned). Eligible Employees and Participants shall make their
elections to defer all or a portion of their Incentive Compensation for the Plan
Year before it is earned and substantially certain of payment, pursuant to rules
established by the Committee from time to time. Any deferral election a
Participant may have made under the Beverly Enterprises, Inc. Executive Deferred
Compensation Plan, originally established as of January 1, 1997, and as amended
and restated as of January 1, 2000, and August 18, 2000, shall not apply for
purposes of this Plan. Notwithstanding the foregoing, if an Eligible Employee
wishes to defer a portion of his Salary for the Plan Year beginning on January
1, 2003, such Eligible Employee must elect on or before December 9, 2002, to
defer all or a portion of his Salary to be earned for the pay periods beginning
on or after January 1, 2003. All Salary and Incentive Compensation deferral
elections under this Plan must be made before the Compensation is earned and
before the amount thereof is substantially certain of payment.
5.3 Length of Deferral and Modification of Elections. All deferral
elections shall be irrevocable for the Plan Year in which they are in effect,
and shall be made on a "Deferral Election Form," as described herein. Once made,
a Participant's deferral election shall remain in effect for all subsequent Plan
Years for which the Participant is an Eligible Employee unless and until the
Participant increases, decreases, or terminates such election by submitting a
new
7
Deferral Election Form to the Employer during the annual open enrollment period
prior to a Plan Year. Deferral election changes must be submitted to the
Employer no later than December 15 prior to the beginning of the Plan Year for
which the change is to be effective.
On the "Deferral Election Form" and related enrollment forms
Participants shall elect (i) the percentage or flat dollar amount of each
eligible component of Compensation to be deferred for the Plan Year; (ii) the
deemed investment elections of the amounts to be deferred, in accordance with
Section 7.2; and (iii) the time when a distribution of such deferrals and other
contributions for the Plan Year shall begin. Except as provided herein, an
election to receive Employee Contributions and deemed investment returns (or
losses) thereon with respect to a Plan Year upon termination of employment is
irrevocable and cannot be changed by the Participant.
5.4 Discretionary Contributions. The Committee may, within its sole
discretion, direct the Employer to make contributions to a Participant's Account
for the Plan Year based on the Participant's performance, the Company's
performance, or any other criteria determined by the Employer within its sole
discretion. Such contributions, if any, shall be referred to as "Discretionary
Contributions."
5.5 Matching Contributions. The Committee may, within its sole
discretion, direct the Employer to make contributions to a Participant's Account
for the Plan Year equal to (i) the matching contributions that would have been
contributed to the Qualified Plan on the Participant's behalf for the Plan Year
if the limitations imposed by Code sections 401(a)(17) and 402(g) had not been
in effect, less (ii) the total matching contributions made to the Qualified Plan
on the Participant's behalf for the Plan Year. In addition to or in the
alternative, the Employer may, within its sole discretion, make contributions to
a Participant's Account for the Plan Year equal to the matching contributions
that were not made on the Participant's behalf under the Qualified Plan for the
Plan Year due to his participation in this Plan. Contributions made under this
Section 5.5 shall be referred to as "Matching Contributions."
8
5.6 SERP Contributions. The Committee may, within its sole discretion,
direct the Employer to make contributions on behalf of the former SERP
participants whose names are set forth on Appendix A, in an amount determined in
accordance with the chart set forth below, or as determined by the Committee in
its sole discretion.
<Table>
<Caption>
AGE RANGE CONTRIBUTION FOR YEARS (PERCENTAGE OF SALARY)
--------- ---------------------------------------------
(AS OF 1/1 FOR THE
PLAN YEAR)
12/31/02 - 1/1/06 - 1/1/08 1/1/09 -
1/1/05 FORWARD
a 50 5.00% 7.50% 10.00%
50 - 59 7.50% 11.25% 15.00%
60 - 64 10.00% 15.00% 20.00%
</Table>
The Committee, within its sole discretion, may direct the Employer to
make additional contributions to the former SERP participants who are age 65 or
older, provided that they are still actively employed by the Employer and meet
the eligibility requirements set forth in Section 4.1.
In addition, for the initial Plan Year that begins and ends on December
31, 2002, the Employer shall make contributions to the Participant's Accounts
whose names are set forth on Appendix B in an amount equal to the amount set
forth in Appendix B, in lieu of such Participant's accrued benefit under the
SERP. Contributions made pursuant to this Section 5.6 shall be referred to as
"SERP Contributions."
As a condition to having SERP Contributions credited to his Account
pursuant to this Section 5.6, a Participant whose name is listed on Appendix A
or B shall waive his right to any and all benefit he had or may have had under
the SERP.
ARTICLE 6
DISTRIBUTIONS
6.1 General. Each Plan Year's contributions (and earnings) may have a
separate distribution schedule, commencing either at termination of employment
or at a specified future date while still employed, and payable either in a lump
sum or installments. The default election is a lump sum payable at termination.
Once a Participant elects a distribution form for termination of employment, his
election shall remain in effect for all subsequent Plan Years unless and until
the Participant changes his election by submitting a new Deferral Election Form
to the Employer.
9
6.2 Scheduled In-Service Distributions. A Participant may elect in the
manner prescribed by the Committee to receive all or a portion of the vested
portion of his Account while he is still employed by the Employer in either (i)
a single lump sum payment, or (ii) annual installment payments over a period of
two (2) to five (5) years; provided that the Participant has not previously
elected to receive a distribution of such amounts upon termination of
employment. If the amount the Participant elects to receive is less than $25,000
(for all years combined), payment shall be made in a single lump sum. If a
Participant elects to receive installment payments under (ii) above, the amount
of each installment payment shall be equal to the balance remaining in the
portion of the Participant's Account that is subject to such installment
election (as determined immediately prior to each such payment), multiplied by a
fraction, the numerator of which is one (1), and the denominator of which is the
total number of remaining installment payments. The installment amount shall be
adjusted annually to reflect gains and losses, if any, allocated to such
Participant's Account pursuant to Article 7.
A Participant's election under this Section 6.2 must specify the future
year in which the payment of the deferred amounts shall commence, provided that
the year in which distributions are to commence must be at least two (2) years
beyond the end of the Plan Year in which the compensation is deferred. Any
desired in-service distribution must be separately elected for each year
compensation is deferred. Thus, to elect a scheduled in-service withdrawal for
future plan years' deferrals, a new distribution election form must be submitted
during the applicable enrollment period. Once the applicable enrollment period
has passed, a scheduled in-service distribution cannot be elected for that plan
year's deferrals. Distributions under this Section 6.2 shall commence in
February of the year specified in the Participant's election. A Participant may
delay the commencement of in-service payments or amend his election as to the
form of the distribution at any time provided that such amendment must be made
in the manner specified by the Committee at least one (1) calendar year prior to
the date the distribution is to commence. If the Participant elects to delay his
distributions (as opposed to changing the form of distribution), the new
distribution date must be either at least one (1) year after the prior
distribution date or termination of employment. A maximum of two (2) changes are
permitted with respect to the time of payment and a maximum of two changes are
permitted with respect to the form of payment of contributions attributable to
each Plan Year; provided, however, the Committee may, within its sole
discretion, allow additional amendments.
If a Participant terminates employment not on account of his death or
long-term disability after meeting the Distribution Eligibility Requirement but
prior to the commencement of a previously elected in-service distribution, the
portion of the Participant's Account subject to the in-service election will
instead be distributed at the time of such termination in the same form of
distribution elected for termination. If a Participant terminates employment
with the Employer not due to death or long-term disability after meeting the
Distribution Eligibility Requirement and while receiving installment payments
pursuant to this Section 6.2, the remaining installment payments will be made to
the Participant when they become due pursuant to the in-service distribution
election. If a Participant's employment terminates due to his death, long-term
disability, or prior to the Participant meeting the Distribution Eligibility
Requirement while receiving installment payments pursuant to this Section 6.2,
the remaining installment payments will be paid in accordance with Section 6.4.
10
6.3 Distributions upon Meeting the Distribution Eligibility
Requirement. If a Participant terminates employment with the Employer after
meeting the Distribution Eligibility Requirement, the Participant may elect to
receive the vested balance credited to his Account in (i) a single lump sum
payment or, (ii) annual installment payments over a period of two (2) to fifteen
(15) years. If a Participant fails to make a distribution election or if the
vested balance credited to his Account to be distributed is less than $25,000,
payment shall be made in a single lump sum. The amount of each installment
payment under (ii) above shall be equal to the balance remaining in the portion
of the Participant's Account that is subject to such installment election (as
determined immediately prior to each such payment), multiplied by a fraction,
the numerator of which is one (1), and the denominator of which is the total
number of remaining installment payments. The installment amount shall be
adjusted annually to reflect gains and losses, if any, allocated to such
Participant's Account pursuant to Article 7. A Participant may amend his
distribution election at any time to change the form of distribution provided
that the amendment (a) be made in the manner specified by the Committee, and (b)
be made at least one (1) year prior to termination of employment. A Participant
may amend his election up to two times.
Distributions under (ii) above shall begin in February of the year
following the Participant's termination. Lump sum distributions under this
Section 6.3 shall commence in the calendar quarter following the Participant's
termination.
6.4 Termination of Employment Before Meeting the Distribution
Eligibility Requirement, Death or Disability. In the event of a Participant's
death, long-term disability (as determined by the Committee in its sole
discretion) or if a Participant's employment with the Employer terminates for
any reason prior to the date the Participant completes the Distribution
Eligibility Requirement, the unpaid vested portion of such Participant's Account
shall be paid to the Participant or (in the event of his death) the
Participant's designated beneficiary in a single lump sum payment the calendar
quarter following the Participant's termination of employment, death or
long-term disability. At the request of a deceased Participant's beneficiary,
the Committee may, within its sole discretion, change the form of distribution
from a lump sum to installment payments.
6.5 Nonscheduled In-Service Withdrawals. Notwithstanding any provision
of this Plan to the contrary, a Participant may at any time request a lump sum
distribution of all or a portion of his vested Account. In the event a
Participant requests a distribution under this Section 6.5, such Participant
will receive a portion of his vested Account equal to 90% of the requested
distribution, and the remaining 10% of the requested distribution will be
forfeited, and (ii) such Participant will be ineligible to participate in the
Plan for the remainder of the Plan Year in which the distribution is received
and for the immediately following Plan Year. The minimum amount that can be
withdrawn pursuant to this Section is the lesser of: (i) the Participant's
vested Account balance, or (ii) $25,000. Participants who have terminated
employment shall be eligible to request a withdrawal pursuant to this Section.
If a Participant is eligible to receive a distribution under this Section 6.5,
such distribution will be made within a reasonable time after the Participant's
request.
6.6 Financial Hardship. The Committee shall have the authority to alter
the timing or manner of payment of deferred amounts in the event that the
Participant establishes, to the
11
satisfaction of the Committee, severe financial hardship. In such event, the
Committee may, in its sole discretion, distribute all or a portion of such
Participant's vested Account to the Participant without penalty. Participants
who have terminated employment shall be eligible to request a withdrawal
pursuant to this Section.
For purposes of this Section 6.6, "severe financial hardship" shall
mean any financial hardship resulting from extraordinary and unforeseeable
circumstances arising as a result of one or more recent events beyond the
control of the Participant, including, but not limited to the following: (a) the
illness or injury of a Participant or dependent (the term dependent shall have
the meaning set forth in Code section 152(a)), (b) the casualty loss of a
Participant's real or personal property, or (c) other similar and unforeseeable
circumstances caused by events beyond the Participant's control that the
Committee, in its sole discretion, determines constitutes a severe financial
hardship. In any event, payment under this Section 6.6 may not be made to the
extent such emergency is or may be relieved: (i) through reimbursement or
compensation by insurance or otherwise; (ii) by liquidation of the Participant's
assets, to the extent the liquidation of such assets would not itself cause
severe financial hardship; and (iii) by cessation of deferrals under the Plan.
Withdrawals of amounts because of a severe financial hardship may only be
permitted to the extent reasonably necessary to satisfy the hardship, plus to
pay taxes on the withdrawal. Examples of what are not considered to be severe
financial hardships include the need to send a Participant's child to college or
the desire to purchase a home. The Participant's Account will be credited with
earnings (or losses) in accordance with the Plan up to the date of distribution.
A Participant requesting a hardship withdrawal is required to submit proof of
his severe financial hardship and proof that it is not compensated by other
means.
The Committee shall judge the severity of the financial hardship based
on the information submitted by the Participant. The Committee's decision with
respect to the severity of financial hardship and the manner in which, if at
all, the Participant's future deferral opportunities shall be ceased, and/or the
manner in which, if at all, the payment of deferred amounts to the Participant
shall be altered or modified, shall be final, conclusive, and not subject to
appeal.
6.7 Incompetence of Distributee. In the event that it shall be found
that a person entitled to receive payment under the Plan (including a designated
beneficiary) is a minor or is physically or mentally incapable of personally
receiving and giving a valid receipt for any payment due (unless prior claim
therefore shall have been made by a duly qualified committee or other legal
representative), such payment may be made to any person whom the Committee in
its sole discretion determines is entitled to receive it, and any such payment
shall fully discharge the Employer, the Company, the Committee, the Plan, the
Rabbi Trust, and the Rabbi Trust Trustee from any further liability to the
person otherwise entitled to payment hereunder, to the extent of such payment.
ARTICLE 7
DEFERRED COMPENSATION ACCOUNTS
7.1 Participants' Accounts. The Company shall establish and maintain an
individual bookkeeping Account for each Participant, and subaccounts for
different contribution sources, as determined by the Committee. The Employee
Contributions held in each Participant's Account shall be one hundred percent
(100%) vested at all times.
12
A Participant's Account shall also be credited with (i) Discretionary
Contributions, if any, made pursuant to Section 5.4, (ii) Matching
Contributions, if any, made pursuant to Section 5.5, (iii) SERP Contributions,
if any, made pursuant to Section 5.6, and (iv) any deemed earnings credit to
such amounts pursuant to Section 7.2 below.
A Participant shall vest in Discretionary Contributions and Matching
Contributions in accordance with the schedule determined by the Committee at the
time any such contributions are made. A Participant shall vest in SERP
Contributions in accordance with the following schedule:
Years of Participation % Vested
---------------------- --------
0-4 0%
5 and more 100%
For purposes of vesting in SERP Contributions, a Participant's years of
participation shall be the combined total of his years of participation in this
Plan and the SERP (without duplication of any years). The Committee, within its
sole discretion, may accelerate the vesting of SERP Contributions upon a
Participant's termination of employment. Notwithstanding anything in this Plan
to the contrary, upon the occurrence of a Change in Control, Participants shall
become fully vested in all amounts credited to their Accounts as of the date of
the Change in Control.
7.2 Earnings on Contributions. A Participant's Account shall be
credited with earnings (or losses) based on a deemed investment of the
Participant's Account, as directed by each Participant, which deemed investment
shall be in one or more benchmark funds among the investment options selected by
the Company from time to time. Until a Participant's insurance application is
processed and approved, his Account shall be credited with a money market rate
of return. Deemed earnings (and losses) on a Participant's Account shall be
based upon the daily unit valuation of the funds selected by such Participant,
and shall be credited to a Participant's Account each business day. Deemed
earnings (or losses) shall be paid out to a Participant at the same time as the
rest of his Account, pursuant to Article 6. Any portion of a Participant's
Account which is subject to distribution in installments shall continue to be
credited with deemed earnings (or losses) until fully paid out to the
Participant.
The Company reserves the right to change the options available for
deemed investments under the Plan from time to time, or to eliminate any such
option at any time. A Participant may specify a separate investment allocation
with respect to each Deferral Election Form or amended Deferral Election Form.
Participants may modify their deemed investment instructions each business day
with respect to any portion (whole percentages only) of their Account, provided
they notify the Company or its designee within the time and in the manner
specified by the Company. Changes will be effective at the closing price of the
funds the business day following the business day the change is received by the
Company's designee. Elections and amendments thereto pursuant to this Section
7.2 shall be made in the manner prescribed by the Company.
7.3 Designation of Beneficiary. Each Participant may designate a
beneficiary or beneficiaries who, upon the Participant's death, or physical or
mental incapacity will receive the
13
amounts that otherwise would have been paid to the Participant under the Plan.
All designations shall be signed by the Participant, and shall be in such form
as prescribed by the Committee. Each designation shall be effective as of the
date delivered to the Committee or its designee by the Participant.
Participants may change their beneficiary designations on such form as
prescribed by the Committee. The payment of amounts deferred under the Plan
shall be in accordance with the last unrevoked written beneficiary designation
that has been signed by the Participant and delivered to the Committee or its
designee prior to the Participant's death.
In the event that all the beneficiaries named by a Participant pursuant
to this Section 7.3 predecease the Participant, the deferred amounts that would
have been paid to the Participant or the Participant's beneficiaries shall be
paid to the Participant's estate.
In the event a Participant does not designate a beneficiary, or for any
reason such designation is ineffective, in whole or in part, the amounts that
otherwise would have been paid to the Participant or the Participant's
beneficiaries under the Plan shall be paid to the Participant's estate.
ARTICLE 8
TRUST
Nothing contained in this Plan shall create a trust of any kind or a
fiduciary relationship between the Employer and any Participant. Nevertheless,
the Employer may establish one or more trusts, with such trustee(s) as the
Committee may approve, for the purpose of providing for the payment of deferred
amounts and earnings thereon (collectively referred to hereinafter as the "Rabbi
Trust"). Such trust or trusts may be irrevocable, but the assets thereof shall
be subject to the claims of the Employer's general creditors upon the bankruptcy
or insolvency of the Employer.
ARTICLE 9
CHANGE IN CONTROL
9.1 Trust and Trustees. Upon the occurrence of a Change in Control, the
Rabbi Trust shall become irrevocable and the Employer shall not thereafter be
permitted to remove, terminate, or change the Rabbi Trustee without the prior
written consent of the majority of the Participants, with weighted voting as
measured by their account balances.
9.2 Advanced Funding. No later than 10 days after a Change in Control
occurs, the Employer shall make a contribution to the Rabbi Trust to the extent
required to fully fund all benefits that are or may become payable under the
Plan, together with all expenses of administering the Plan and Rabbi Trust. No
later than December 31 of each Plan Year thereafter, the Employer shall make
such additional contributions to the Rabbi Trust to fully fund the additional
benefits that may become payable to Participants or beneficiaries under the Plan
and the additional administrative, legal, and other Plan expenses.
9.3 Amendment and Termination. After the occurrence of a Change in
Control, neither the Employer nor the Committee may amend the Plan without the
prior approval of a
14
majority of the Participants. After a Change in Control, the Employer may not
terminate the Plan until either (i) all benefits have been paid in full, or (ii)
the majority of the Participants approve the same. For purposes hereof,
Participants' votes shall be weighted based on their relative Plan account
balances.
ARTICLE 10
RIGHTS OF PARTICIPANTS
10.1 Contractual Obligation. The Plan shall create an unfunded,
unsecured contractual obligation on the part of the Employer to make payments
from the Participants' Accounts when due. Payment of Account balances shall be
made out of the general assets of the Employer or from the trust or trusts
referred to in Article 8 above.
10.2 Unsecured Interest. No Participant or party claiming an interest
in deferred amounts of a Participant shall have any interest whatsoever in any
specific asset of the Employer. To the extent that any party acquires a right to
receive payments under the Plan, such right shall be equivalent to that of an
unsecured general creditor of the Employer. Each Participant, by participating
hereunder, agrees to waive any priority creditor status for wage payments with
respect to any amounts due hereunder. The Employer shall have no duty to set
aside or invest any amounts credited to Participants' Accounts under this Plan.
Accounts established hereunder are solely for bookkeeping purposes and the
Employer shall not be required to segregate any funds based on such Accounts.
10.3 Employment. Nothing in the Plan shall interfere with or limit in
any way the right of the Employer to terminate a Participant's employment at any
time, or confer upon any Participant any right to continue in the employ of the
Employer.
ARTICLE 11
WITHHOLDING OF TAXES
The Employer shall have the right to require Participants to remit to
the Employer an amount sufficient to satisfy federal, state, and local
withholding tax requirements, or to deduct from all payments made pursuant to
the Plan (or from a Participant's other Compensation) amounts sufficient to
satisfy withholding tax requirements. Employment taxes with respect to amounts
deferred hereunder shall be payable in accordance with Code section 3121(v)(2)
and may be withheld from a Participant's Compensation even if due prior to the
time of a distribution hereunder. The Employer makes no representations,
warranties, or assurances and assumes no responsibility as to the tax
consequences of this Plan or participation herein.
ARTICLE 12
AMENDMENT AND TERMINATION
Except as provided herein, the Employer reserves the right to amend,
modify, or terminate the Plan (in whole or in part) at any time by action of the
Company or the Committee, with or without prior notice. Except as described
below in this Article 12, no such amendment or termination shall in any material
manner adversely affect any Participant's rights to any vested
15
amounts already deferred or credited hereunder or deemed earnings thereon, up to
the point of amendment or termination, without the consent of the Participant.
The Company may terminate the Plan and commence termination payout for
all or certain Participants, or remove certain Employees as Participants, if it
is determined by the United States Department of Labor or a court of competent
jurisdiction that the Plan constitutes an employee pension benefit plan within
the meaning of section 3(2) of ERISA that is not exempt from the provisions of
Parts 2, 3, and 4 of Title I of ERISA, or if the IRS otherwise taxes or proposes
to tax amounts deferred hereunder prior to their scheduled payment date. If
payout is commenced pursuant to the operation of this Article 12, the payment of
deferred amounts and earnings thereon shall be made in the manner selected by
each Participant under Section 6.3 herein (other than the commencement date), as
if the Participant had met the Distribution Eligibility Requirement.
ARTICLE 13
MISCELLANEOUS
13.1 Notice. Any notice or filing required or permitted to be given to
the Employer under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail to the Beverly Enterprises,
Inc. Executive Deferred Compensation Plan Committee, and if mailed, shall be
addressed to the principal executive offices of the Employer. Notice mailed to a
Participant shall be at such address as is given in the records of the Employer.
Notices to the Employer shall be deemed given as of the date of delivery. Notice
to a Participant or beneficiary shall be deemed given as of the date of hand
delivery, or if delivery is made by mail, three (3) days following the postmark
date.
13.2 Nontransferability. Except as provided in Section 7.3 and this
Section 13.2, Participants' rights to deferred amounts and earnings credited
thereon under the Plan may not be sold, transferred, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of descent and
distribution, or pursuant to a domestic relations order, nor shall the Employer
make any payment under the Plan to any assignee or creditor of a Participant.
13.3 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
13.4 Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular, and the singular shall include the plural.
13.5 Costs of the Plan. All costs of implementing and administering the
Plan shall be borne by the Employer.
13.6 Successors. All obligations of the Employer under the Plan shall
be binding on any successor to the Employer, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation,
or otherwise, of all or substantially all of the business and/or assets of the
Employer.
16
13.7 Applicable Law. Except to the extent preempted by applicable
federal law, the Plan shall be governed by and construed in accordance with the
laws of the state of Delaware.
ARTICLE 14
ADMINISTRATIVE INFORMATION
14.1 Plan Sponsor and Administrator. The Plan described herein is
sponsored by:
Beverly Enterprises, Inc.
One Thousand Beverly Way
Fort Smith, Arkansas 72919
The Committee is the plan administrator and named fiduciary. Prior to a
Change in Control, the Committee has been granted complete fiduciary discretion
and authority to administer, operate, and interpret the Plan and make final
decisions on such issues as eligibility, payment of benefits, claims, and claims
appeals, unless such decisions have been delegated to another party. However,
many day-to-day questions can be answered by the Benefits Department.
The agent for the service of legal process for the Plan is the Company.
14.2 Plan Type and Plan Year. Documents and reports for the Plan are
filed with the United States Internal Revenue Service and the Department of
Labor under Employer Identification Number: 62-1691861.
The official Plan name is the Beverly Enterprises, Inc. Executive
Deferred Compensation Plan, which, for government purposes, is intended to be an
unfunded pension plan maintained by an employer for a select group of management
or highly compensated employees. Plan records are maintained on an annual basis
and December 31 is the end of the plan year.
14.3 Plan Funding. The Plan is unfunded and unsecured and benefits are
paid solely from the Employer's general assets.
ARTICLE 15
ERISA RIGHTS
Certain rights and protections are provided to Plan participants under
the Employee Retirement Income Security Act of 1974 (ERISA). These ERISA rights
include the following:
(a) Any Plan participant may contact the Benefits Department to
examine all Plan documents without charge. These may include
the Plan descriptions and all other documents filed with the
United States Department of Labor.
(b) Copies of Plan documents and other information may be obtained
by writing to the Committee. A reasonable charge may be
assessed for these copies.
17
(c) Each Plan participant has the right to receive a written
summary of the Plan's annual financial reports, if any.
However, this type of plan is not required to have either an
annual financial report or a summary annual report.
(d) An employee may not be discharged or discriminated against to
prevent his obtaining a benefit or exercising his ERISA
rights.
(e) If a claim for a benefit is denied, in whole or in part, you
have a right to know why this was done, to obtain copies of
documents relating to the decision without charge, and to
appeal any denial, all within certain time schedules.
The named fiduciary for this Plan is the Committee.
Under certain circumstances, outside assistance may be necessary to
resolve disputes between a Participant and Plan officials. For instance, if you
request a copy of plan documents or the latest annual report from the plan and
do not receive them within 30 days, you may file suit in a Federal court. In
such a case, the court may require the plan administrator to provide the
materials and pay you up to $110 a day until you receive the materials, unless
the materials were not sent because of reasons beyond the control of the
administrator. If a claim for benefits is denied or ignored, in whole or in
part, after a final review, the claim may be submitted to binding arbitration
(or, after a Change in Control, to either arbitration or a court, at the
Participant's election). If you are discriminated against for asserting your
rights, you may seek assistance from the U.S. Department of Labor, or you may
file suit in a Federal court. The court will decide who should pay court costs
and legal fees. If you are successful the court may order the person you have
sued to pay these costs and fees. If you lose, the court may order you to pay
these costs and fees, for example, if it finds your claim is frivolous.
For further information about this Plan, contact the Benefits
Department. Or, if you have any questions about this statement or about your
rights under ERISA, you may contact the nearest area office of the Pension and
Welfare Benefits Administration, United States Department of Labor, listed in
your telephone directory or the Division of Technical Assistance and Inquires,
Pension and Welfare Benefits Administration, U.S. Department of Labor, 200
Constitution Avenue N.W., Washington D.C. 20210. You may also obtain certain
publications about your rights and responsibilities under ERISA by calling the
publications hotline of the Pension and Welfare Benefits Administration.
IN WITNESS WHEREOF, Beverly Enterprises, Inc. has caused this document
to be executed by its duly authorized officer on ____________, 2002, effective
as of the date set forth above.
BEVERLY ENTERPRISES, INC.
By:
------------------------------------
Its:
-----------------------------------
18
APPENDIX A
PARTICIPANTS ELIGIBLE FOR SERP CONTRIBUTIONS
1. Partice Acosta
2. Douglas Babb
3. Linda Burch
4. Pamela Daniels
5. David Devereaux
6. Jeffrey Friemark
7. Blaise Mercadante
8. Chris Roussos
9. Richard Skelly
10. Cindy Susienka
11. Crystal Wright
19
APPENDIX B
PARTICIPANTS SERP CONTRIBUTIONS ON 12/31/02
1. Douglas Babb = $40,998
2. Crystal Wright = $63,058
20