Exhibit 10.4
ASSISTED LIVING CONCEPTS, INC.
DEFERRED COMPENSATION PLAN
AS
AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2005
ARTICLE I
INTRODUCTION
This document governs the terms and
provisions of the Assisted Living Concepts, Inc. Deferred
Compensation Plan following the merger of the Assisted Living
Concepts, Inc. Deferred Salary Plan into the Assisted Living
Concepts, Inc. Deferred Compensation Plan. This document shall
govern the operation of those prior separate plans from and after
January 1, 2005, which plans had in turn replaced the prior
separate Extendicare Health Services, Inc. Deferred Compensation
Plan as amended and restated effective January 1, 2005 as
applicable to employees of Assisted Living Concepts, Inc. and the
prior Extendicare Health Services, Inc. Deferred Salary Plan as
amended and restated effective January 1, 2005 with respect to
employees of Assisted Living Concepts, Inc. No benefits shall be
payable to Assisted Living Concepts, Inc. employees under the terms
of the Extendicare Health Services, Inc. Deferred Compensation Plan
or Extendicare Health Services, Inc. Deferred Salary Plan, as
amended and restated effective as of January 1, 2005, but,
instead, the benefits previously provided by those plans are
provided for herein. This document applies only to amounts earned
or first vested after calendar year 2004. For periods prior to
calendar year 2005, Extendicare Health Services, Inc. and its
participating affiliates have maintained the Extendicare Health
Services, Inc. Deferred Compensation Plan and Extendicare Health
Services, Inc. Deferred Salary Plan by means of a series of
individual deferred compensation agreements with covered
executives. Amounts earned and vested prior to January 1,
2005, including past and future interest credited thereon, shall
remain subject to the terms of those individual agreements as
previously in effect (the “Frozen Agreements”) but no
further amounts shall be earned and vested under the Frozen
Agreements which have been assigned by Extendicare Health Services,
Inc. to, and assumed by, Assisted Living Concepts, Inc. All amounts
credited under the Frozen Agreements prior to January 1, 2005 which
were not yet vested as of January 1, 2005 and all deferrals to
the Deferred Compensation Plan and Deferred Salary Plan for periods
on or after January 1, 2005 (whether at the election of
participants or otherwise) shall be governed by the terms and
provisions of this document. Nothing in this document shall apply
to amounts earned and vested prior to 2005 and past and future
interest credited thereon. This document is intended to comply with
the provisions of Section 409A of the Internal Revenue Code
and shall be interpreted accordingly. If any provision or term of
this document would be prohibited by or inconsistent with the
requirements of Section 409A of the Code, then such provision or
term shall be deemed to be reformed to comply with Section 409A of
the Code.
ARTICLE II
DEFINITIONS
The following definitions shall be
applicable throughout the Plan:
2.1 “ Account ”
means the combination of the Participant’s Deferral Account
and Matching Account.
2.2 “ Administrator
” means the committee designated by the Corporation’s
Board of Directors under Plan Section 7.1, which shall be
responsible for administering and interpreting the Plan.
2.3 “ Beneficiary
” means the person, persons, or entity designated by the
Participant to receive any benefits payable under the Plan on or
after the Participant’s death. Each Participant shall be
permitted to name, change or revoke the Participant’s
designation of a Beneficiary in writing on a form and in the manner
prescribed by the Corporation; provided, however, that the
designation on file with the Corporation at the time of the
Participant’s death shall be controlling. Should a
Participant fail to make a valid Beneficiary designation or leave
no named Beneficiary surviving, any benefits due shall be paid to
such Participant’s spouse, if living; or if not living, then
any benefits due shall be paid to such Participant’s
estate.
2.4 “ Code ” means
the Internal Revenue Code of 1986, including any subsequent
amendments.
2.5 “ Corporation
” means Assisted Living Concepts, Inc., and each of its
affiliates which has adopted the Plan or may adopt the Plan;
provided, however, that for purposes of the power to amend or
terminate the Plan or take any other action under or with respect
to the Plan, except for the payment of benefits, the term
“Corporation” shall refer only to Assisted Living
Concepts, Inc.
2.6 “ Deferral Account
” means the account credited from time to time with
bookkeeping amounts equal to the portions of a Participant’s
compensation deferred pursuant to Section 3.2 and interest
credited on such amounts in accordance with Article IV.
2.7 “ Effective Date
” means January 1, 2005.
2.8 “ ERISA ”
means the Employee Retirement Income Security Act of 1974,
including any subsequent amendments.
2.9 “ Matching Account
” means the account credited from time to time with
bookkeeping amounts equal to matching contributions on behalf of
the Participant pursuant to Section 3.6 and interest credited
on such amounts in accordance with Article IV. The Matching
Account shall also hold those matching contributions (and interest
credited thereon) which had been credited to the account of the
Participant under a Frozen Agreement prior to 2005 which were not
vested prior to 2005.
2.10 “ Participant
” means a key management or highly compensated employee
designated as eligible to participate in the Plan for a Plan Year
under Section 3.1 (who shall be known as “Active
Participants” for such Plan Year) and any person who
previously participated in the Plan and is entitled to
benefits.
2.11 “ Plan ”
means the Assisted Living Concepts, Inc. Deferred Compensation
Plan, as set forth herein, and as may be amended from time to
time.
2.12 “ Plan Year ”
means the calendar year.
2.13 “ Separation from
Service ”
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(a) In General . The
Participant shall have a Separation from Service with the
Corporation if the Participant dies, retires, or otherwise has a
termination of employment with the Corporation. However, for
purposes of this Section 2.13, the employment relationship is
treated as continuing intact while the individual is on military
leave, sick leave, or other bona fide leave of absence if the
period of such leave does not exceed six months, or if longer, so
long as the individual retains a right to reemployment with the
Corporation under an applicable statute or by contract. For
purposes of this paragraph (a) of this Section 2.13, a leave
of absence constitutes a bona fide leave of absence only if there
is a reasonable expectation that the Participant will return to
perform services for the Corporation. If the period of leave
exceeds six months and the individual does not retain a right to
reemployment under an applicable statute or by contract, the
employment relationship is deemed to terminate on the first date
immediately following such six-month period. Notwithstanding the
foregoing, where a leave of absence is due to any medically
determinable physical or mental impairment that can be expected to
result in death or can be expected to last for a continuous period
of not less than six months, where such impairment causes the
Participant to be unable to perform the duties of his or her
position of employment or any substantially similar position of
employment, a 29-month period of absence may be substituted for
such six-month period.
(b) Termination of Employment
. Whether a termination of employment has occurred is determined
based on whether the facts and circumstances indicate that the
Corporation and Participant reasonably anticipated that no further
services would be performed after a certain date or that the level
of bona fide services the Participant would perform after such date
(whether as an employee or as an independent contractor) would
permanently decrease to no more than 20 percent of the average
level of bona fide services performed (whether as an employee or an
independent contractor) over the immediately preceding 36-month
period (or, the full period of services to the Corporation if the
Participant has been providing services to the Corporation less
than 36 months). Facts and circumstances to be considered in
making this determination include, but are not limited to, whether
the Participant continues to be treated as an employee for other
purposes (such as continuation of salary and participation in
employee benefit programs), whether similarly situated service
providers have been treated consistently, and whether the
Participant is permitted, and realistically available, to perform
services for other service recipients in the same line of business.
The Participant is presumed to have Separated from Service where
the level of bona fide services performed decreases to a level
equal to 20 percent or less of the average level of services
performed by the employee during the immediately preceding 36-month
period. The Participant will be presumed not to have Separated from
Service where the level of bona fide services performed continues
at a level that is 50 percent or more of the average level of
service performed by the Participant during the immediately
preceding 36-month period. No presumption applies to a decrease in
the level of bona fide services performed to a level that is more
than 20 percent and less than 50 percent of the average
level of bona fide services performed during the immediately
preceding 36-month period. The presumption is rebuttable by
demonstrating that the Corporation and the Participant reasonably
anticipated that as of a certain date the level of bona fide
services would be reduced permanently to a level less than or equal
to 20 percent of the average level of bona fide services
provided during the immediately preceding 36-month period or the
full period of services to the Corporation if the Participant has
been providing services to the Corporation less than 36 months
(or that the level of bona fide services would not be so reduced).
For example, the Participant may demonstrate that the Corporation
and the Participant reasonably anticipated that the Participant
would cease providing services, but that, after the original
cessation of services, business circumstances such as termination
of the Participant’s replacement caused the Participant to
return to employment. Although the Participant’s return to
employment may cause the Participant to be presumed to have
continued in employment because the Participant is providing
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services at a
rate equal to the rate at which the Participant was providing
services before the termination of employment, the facts and
circumstances in this case would demonstrate that at the time the
Participant originally ceased to provide services, the Corporation
reasonably anticipated that the Participant would not provide
services in the future. For purposes of this paragraph (b), for
periods during which the Participant is on a paid bona fide leave
of absence (as defined in paragraph (a) of this
Section 2.13) and has not otherwise terminated employment
pursuant to paragraph (a) of this Section 2.13, the
Participant is treated as providing bona fide services at a level
equal to the level of services that the Participant would have been
required to perform to receive the compensation paid with respect
to such leave of absence. Periods during which the Participant is
on an unpaid bona fide leave of absence (as defined in paragraph
(a) of this Section 2.13) and has not otherwise
terminated employment pursuant to paragraph (a) of this
Section 2.13, are disregarded for purposes of this paragraph
(b) of this Section 2.13 (including for purposes of
determining the applicable 36-month (or shorter) period).
(c) Asset Purchase
Transactions . Where as part of a sale or other disposition of
assets by the Corporation as seller to an unrelated service
recipient (buyer), a Participant of the Corporation would otherwise
experience a Separation from Service with the Corporation, the
Corporation and the buyer may retain the discretion to specify, and
may specify, whether a Participant providing services to the
Corporation immediately before the asset purchase transaction and
providing services to the buyer after and in connection with the
asset purchase transaction has experienced a Separation from
Service, provided that the asset purchase transaction results from
bona fide, arm’s length negotiations, all service providers
providing services to the Corporation immediately before the asset
purchase transaction and providing services to the buyer after and
in connection with the asset purchase transaction are treated
consistently (regardless of position at the Corporation) for
purposes of applying the provisions of any nonqualified deferred
compensation plan, and such treatment is specified in writing no
later than the closing date of the asset purchase transaction. For
purposes of this paragraph (c), references to a sale or other
disposition of assets, or an asset purchase transaction, refer only
to a transfer of substantial assets, such as a plant or division or
substantially all the assets of a trade or business.
(d) Dual Status . If a
Participant provides services both as an employee of the
Corporation and as an independent contractor of the Corporation,
the Participant must separate from service both as an employee and
as an independent contractor to be treated as having Separated from
Service. If a Participant ceases providing services as an
independent contractor and begins providing services as an
employee, or ceases providing services as an employee and begins
providing services as an independent contractor, the Participant
will not be considered to have a Separation from Service until the
Participant has ceased providing services in both capacities.
Notwithstanding the foregoing, if a Participant provides services
both as an employee of the Corporation and a member of the board of
directors of the Corporation, the services provided as a director
are not taken into account in determining whether the Participant
has a Separation from Service as an employee for purposes of this
Plan unless this Plan is aggregated with any plan in which the
Participant participates as a director under IRS
Regulation Section 1.409A-1(c)(2)(ii).
2.14 “ Unforeseeable
Emergency ” means a severe financial hardship to a
Participant resulting from an illness or accident of the
Participant or the Participant’s spouse, beneficiary or
dependent (as defined in Section 152(a) of the Code, without regard
to Section 151 (b)(1), (b)(2) and (d)(1)(B)), loss of the
Participant’s property due to casualty (including the need to
rebuild a home following damage to a home not otherwise covered by
insurance, for example, as a result of a natural disaster), or
other similar extraordinary and unforeseeable circumstances arising
as a result of events beyond the control of the
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Participant. For example, the imminent foreclosure of or eviction
from the Participant’s primary residence may constitute an
Unforeseeable Emergency. In addition, the need to pay for medical
expenses, including non-refundable deductibles, as well as for the
costs of prescription drug medication, may constitute an
Unforeseeable Emergency. Finally, the need to pay for funeral
expenses of a spouse, beneficiary or a dependent (as defined in
Code section 152(a), without regard to Section 151 (b)(1),
(b)(2) and (d)(1)(B)), may also constitute an Unforeseeable
Emergency. Except as otherwise provided above, the purchase of a
home and the payment of college tuition are not Unforeseeable
Emergencies. Whether a Participant is faced with an Unforeseeable
Emergency is to be determined based on the relevant facts and
circumstances of each case.
ARTICLE III
PARTICIPATION AND DEFERRALS
3.1 Determination of
Participants . Within a reasonable period of time prior to the
beginning of a Plan Year or at any time during a Plan Year, the
Administrator will designate employees who will be eligible to
become Active Participants in the Plan for that Plan Year (or the
remainder of such Plan Year). The Plan Administrator shall also
designate whether an individual is a Group A Participant or Group B
Participant. An employee designated as an Active Participant for a
Plan Year shall remain an Active Participant until the
employee’s Separation from Service or the Administrator or
the Board of Directors of the Corporation takes action to terminate
such employee’s participation effective on the first day of
any Plan Year subsequent to the date of such action by the
Administrator or the Board. Participation in deferral elections may
be terminated, participation in matching contributions may be
terminated or both may be terminated by such action.
3.2 Deferral Elections .
An Active Participant may elect to
defer up to 10% of his or her base salary during a Plan Year by
completing and filing such forms as required by the Corporation
prior to the first day of the Plan Year for which the base salary
is earned. Compensation deferred shall be retained by the
Corporation credited to the Participant’s Deferral Account
pursuant to Section 4.1 and paid in accordance with the terms
and conditions of the Plan. An employee who is not already eligible
to participant in any other deferred compensation plan of the
account balance type who becomes an Active Participant for the
first time during a Plan Year (for example, an employee designated
by the Administrator upon hire or promotion) may make an election
to defer base salary for services to be performed subsequent to the
election within 30 days after the effective date of
participation. The Participant’s base salary shall be
determined before reduction by any elective deferrals to this Plan
or to a plan described in Code Sections 402(g)(3), 125 and
132(f)(4). A Participant’s deferral election may provide for
a specified level of deferral to be taken from each of his base
salary payments during the year or, instead, may specify that the
amount of deferrals shall be taken out disproportionately in
accordance with specific directions provided by the Participant at
the time of the deferral election; provided, however, that the
amounts taken out pursuant to a disproportionate deferral election
shall never in the aggregate exceed 10% of the Participant’s
“assumed annual base salary”. A Participant’s
“assumed annual base salary” shall be the annual base
salary which would be payable to him during the Plan Year if his
base salary in effect on the first day of the Plan Year remained in
effect throughout the Plan Year.
3.3 Annual Elections .
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An Active Participant’s
deferral election under Section 3.2 shall be irrevocable for
the entirety of a Plan Year. An Active Participant must make a
separate deferral election for each Plan Year in accordance with
the procedures described in Section 3.2 above.
3.4 Unforeseeable Emergency .
In the event that a Participant makes application for a hardship
distribution under Section 6.3 and the Administrator
determines that an Unforeseeable Emergency exists, all deferral
elections otherwise in effect under this Article III and any
other nonqualified deferred compensation plan of the account
balance type shall immediately terminate upon such determination.
To resume deferrals thereafter, a Participant must make an election
satisfying the provisions of Section 3.2 as those provisions
apply to someone who is already an Active Participant in the
Plan.
3.5 401(k) Hardship . Any
deferral elections in effect under this Article III shall be
cancelled as required due to a hardship distribution described in
IRS Regulation Section 1.401(k)-1(d)(3) or any successor
thereto. To resume deferrals after the required suspension period,
a Participant must make an election satisfying the provisions of
Section 3.2 as those provisions apply to someone who is
already an Active Participant in the Plan.
3.6 Matching Contributions .
At the same time the Corporation credits elective deferral
contributions made pursuant to Section 3.2 to the Deferral
Account of a Group A Participant, the Corporation shall credit
Matching Contributions in an amount equal to 50% of those elective
deferral contributions to the Participant’s Matching
Account.
ARTICLE IV
ACCOUNTS; INTEREST
4.1 Credits to Accounts .
Bookkeeping amounts equal to the amounts deferred by a Participant
pursuant to Section 3.2 shall be credited to such
Participant’s Deferral Account as soon as practicable after
the deferred compensation would otherwise have been paid to such
Participant in the absence of deferral. Bookkeeping amounts equal
to the matc
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