Exhibit 10.3
ASSISTED LIVING CONCEPTS, INC.
EXECUTIVE RETIREMENT PROGRAM
AS
AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2005
ARTICLE I
INTRODUCTION
This document replaces the
Extendicare Health Services, Inc. Executive Retirement Program 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. Executive Retirement
Program, as amended and restated effective January 1, 2005,
but, instead, the benefits previously provided by that Program are
provided for herein. This document applies only to amounts earned
or first vested after calendar year 2004. Separately, Assisted
Living Concepts, Inc. has adopted a document to replace the
document which it had jointly maintained with Extendicare Health
Services, Inc. with respect to amounts earned and vested prior to
2005. That replacement document is referred to herein as the
“Frozen Plan”. No further amounts shall be earned and
vested under the Frozen Plan. All amounts credited under the Frozen
Plan prior to January 1, 2005 which were not yet vested as of
January 1, 2005 and all contributions to the Plan for periods
on or after January 1, 2005 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 earnings 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 account credited from time to time with bookkeeping
amounts equal to contributions on behalf of the Participant
pursuant to Section 3.2 and earnings credited on such amounts
in accordance with Article IV. The Account shall also hold
those contributions (and earnings thereon) which had been credited
to the account of the Participant under the Frozen Plan prior to
2005 which were not vested prior to 2005.
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 “ Base Salary
” means the base salary paid to a Participant by the
Corporation in a specified period prior to elective deferrals under
any deferred compensation plan or agreement between the Participant
and the Corporation and exclusive of bonuses, fringe benefits,
imputed income, or any other form of extra compensation.
2.4 “ 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.
2.5 “ Code ” means
the Internal Revenue Code of 1986, including any subsequent
amendments.
2.6 “ 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.
2.7 “ Effective Date
” means January 1, 2005.
2.8 “ ERISA ”
means the Employee Retirement Income Security Act of 1974,
including any subsequent amendments.
2.9 “ 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.
2.10 “ Plan ”
means the Assisted Living Concepts, Inc. Executive Retirement
Program, as set forth herein, and as may be amended from time to
time.
2.11 “ Plan Year ”
means the calendar year.
2.12 “ Separation from
Service ”
(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 2.12, 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 2.12, 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
-2-
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
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 2.12) and has not otherwise terminated employment
pursuant to paragraph (a) of this Section 2.12, 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 2.12) and has not otherwise
terminated employment pursuant to paragraph (a) of this
Section
-3-
2.12, are disregarded for purposes of
this paragraph (b) of this Section 2.12 (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).
2.13 “ 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 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.
-4-
ARTICLE III
PARTICIPATION AND CONTRIBUTIONS
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). 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.
3.2 Amount of Contributions.
For each month, beginning with the month in which falls the
Participant’s effective date of participation, the
Corporation shall make a contribution to the Account of the
Participant equal to 10% of the Participant’s Base Salary for
that month. The contribution for a month shall be credited to the
Participant’s Account as of the last day of the month for
which it is made. No contributions will be made for a Participant
for the calendar month in which occurs the date of his Separation
from Service with the Corporation or in any subsequent calendar
month.
3.3 Contributions Are
Hypothetical . The contributions under this Plan are
hypothetical contributions only.
ARTICLE IV
ACCOUNTS; EARNINGS
4.1 Credits to Accounts .
Bookkeeping amounts equal to the amounts contributed by the
Corporation pursuant to Section 3.2 shall be credited to such
Participant’s Account at the time specified in
Section 3.2.
4.2 Valuation of Account
.
(a) The Participant’s Account
shall be credited or charged with deemed earnings or losses as if
it were invested in accordance with paragraph (b) below.
(b) (i) The investment funds
available hereunder for the deemed investment of the Account shall
be such funds as the Administrator shall from time to time
determine. However, in no event shall the Corporation be required
to make any investment in any such fund and, to the extent such
investments are made, such investments shall remain an asset of the
Corporation subject to the claims of its general creditors.
(ii) On the date credited to the
Participant’s Account, contributions shall be deemed to be
invested in one or more of the investment funds designated by the
Participant for such deemed investment. Once made, the
Participant’s investment designation shall continue in effect
for all future contributions until changed by the Participant. Any
such change may be prospectively elected by the Participant at the
times established by the Administrator, which shall be no less
frequently than quarterly, and shall be effective only for
contributions, credited from and after its effective date.
-5-
(iii) A Participant may prospectively
elect to reallocate his Account balance among the investment funds
at the times established by the Administrator, which shall be no
less frequently than quarterly.
(iv) The valuation of the funds held
in the Account shall be accomplished in the same manner as though
the deemed investment in such funds had actually been made and are
valued at their fair market value price on valuation dates
hereunder.
(v) A Participant’s Account
shall be valued as of December 31 each year and at such other
times established by the Administrator, which shall be no less
frequently than quarterly.
(vi) All elections and designations
under this section shall be made in accordance with procedures
prescribed by the Administrator. The Administrator may prescribe
uniform percentages for such elections and designations.
(vii) The earnings (or losses)
provided for in this Section 4.2 shall continue to accrue on
the balance remaining in the Account during any period of
installment payments.
(c) The Corporation shall provide
annual reports to each Participant showing (a) the value of
the Account as of the most recent December 31 st , (b) the
amount of deferral made by the Participant for the Plan Year ending
on such date and (c) the amount of any investment gain or loss
and the costs of administration credited or debited to the
Participant’s Account.
4.3 Bookkeeping Accounts Only
. Each Participant’s Account shall be utilized solely as a
device for the measurement and determination of the amounts to be
paid to such Participant under the Plan. Participant Accounts shall
be bookkeeping accounts only and no Participant or Beneficiary
shall
| 
