Document:

exv10w1

 

Exhibit 10.1

Beverly Enterprises, Inc.

Enhanced Supplemental Executive Retirement Plan

Effective as of January 1, 2004

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page

	ARTICLE 1	 	ESTABLISHMENT AND PURPOSE
	 	 	1	 
	ARTICLE 2	 	DEFINITIONS
	 	 	1	 
	ARTICLE 3	 	ADMINISTRATION
	 	 	4	 
	ARTICLE 4	 	ELIGIBILITY AND PARTICIPATION
	 	 	7	 
	ARTICLE 5	 	CONTRIBUTIONS TO PARTICIPANTS’ ACCOUNTS
	 	 	8	 
	ARTICLE 6	 	DISTRIBUTIONS
	 	 	9	 
	ARTICLE 7	 	DEFERRED COMPENSATION ACCOUNTS
	 	 	11	 
	ARTICLE 8	 	TRUST
	 	 	12	 
	ARTICLE 9	 	CHANGE IN CONTROL
	 	 	12	 
	ARTICLE 10	 	RIGHTS OF PARTICIPANTS
	 	 	13	 
	ARTICLE 11	 	WITHHOLDING OF TAXES
	 	 	13	 
	ARTICLE 12	 	AMENDMENT AND TERMINATION
	 	 	13	 
	ARTICLE 13	 	MISCELLANEOUS
	 	 	14	 
	ARTICLE 14	 	ADMINISTRATIVE INFORMATION
	 	 	15	 
	ARTICLE 15	 	ERISA RIGHTS
	 	 	15	 

 

 

Beverly Enterprises, Inc.

Enhanced Supplemental Executive Retirement Plan

ARTICLE 1

ESTABLISHMENT AND PURPOSE

     1.1 Establishment. Effective as of January 1, 2004, 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.
Enhanced Supplemental Executive Retirement 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 attract and
retain executives to key positions with the Company, and (ii) to provide such
executives retirement benefits that are competitive with what similar companies
provide to similar employees.

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 bookkeeping 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)	 	“Cause” means the Participant’s (i) conviction of or guilty
plea or plea of no contest to any felony or crime involving moral
turpitude; (ii) theft or embezzlement or misappropriation of
property from the Company or an Employer or any act of dishonesty or
fraud involving the Company or an Employer; (iii) any abuse of
alcohol or drugs; (iv) any material violation of any Company policy
or ethics code; or (v) material misconduct or material failure to
substantially perform the duties of his position.
	 
	 	(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

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	 	 	 	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 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 Entity”) 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 Entity and immediately after such transaction(s)
constitute a majority of Controlled Entity’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 Entity and immediately after the
transaction(s) control more than 70% of the ownership and voting
rights of Controlled Entity.
	 
	 	(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, and any successor by merger, purchase or otherwise.
	 
	 	(h)	 	“Compensation” means an Employee’s Salary and Incentive
Compensation paid by the Employer for the Plan Year.

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	 	(i)	 	“Competitive Employment” means owning a direct or indirect
ownership interest in or working as an employee or independent
contractor (including a director, manager, or consultant) of any
entity (including a sole proprietorship) the Committee determines,
in its sole discretion, is in competition with the Company or any
Affiliate, at any time until the later of (a) three (3) years from
the Participant’s termination of employment with an Employer, or (b)
while the Participant is in pay status (i.e., receiving or entitled
to receive a benefit) hereunder.
	 
	 	(j)	 	“Distribution Eligibility Requirement” means the first of the
following events to occur while the Participant is still in
full-time active employment with an Employer at least the
Participant’s initial pay band level upon entry into the Plan or
above: (i) completion of ten (10) years of participation in this
Plan; or (ii) the attainment of age 60.
	 
	 	(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)	 	“Employer” means the Company and each Affiliate that adopts
the Plan with the Company’s permission.
	 
	 	(n)	 	“Enhanced SERP Contributions” means those contributions
credited to a Participant’s Account pursuant to Article 5.
	 
	 	(o)	 	“ERISA” means the Employee Retirement Income Security Act of
1974, as it has been and may be amended from time to time.
	 
	 	(p)	 	“Imputed Compensation” means an Inactive Participant’s Deemed
Salary and Deemed Incentive Compensation for each Plan Year (or
portion thereof) he is an Inactive Participant as set forth in
Section 4.2.
	 
	 	 	 	An Inactive Participant’s Deemed Salary equals his Salary for the
last Plan Year he was an active Participant increased by 4% per
year for each Plan Year he is an Inactive Participant. In the case
of a Participant who becomes an Inactive Participant because he is
terminated without Cause within two (2) years following a Change in
Control, his Salary for his last Plan Year of active Plan
participation shall not be less than his Salary immediately prior
to the Change in Control.
	 
	 	 	 	An Inactive Participant’s Deemed Incentive Compensation will equal
100% of the target bonus set for the Inactive Participant’s pay
band for the Plan Year (based on the pay band the Participant was
in at the time of his death or disability, or, in the case of a
termination within two years after a Change in Control, based on
the greater of his pay band at the time of termination or his pay
band at the time of the Change in Control), provided that the
target bonus for a given Plan Year for

3

 

	 	 	 	purposes of determining an Inactive Participant’s Deemed Incentive
Compensation will not be less than 75% of the Inactive
Participant’s Deemed Salary for the Plan Year.
	 
	 	(q)	 	“Inactive Participant” means a Participant who has terminated
employment with an Employer due to (i) death, (ii) total and
permanent disability, as determined by the Committee in its sole
discretion, or (iii) involuntary termination without Cause within
two (2) years following a Change in Control, and is eligible to
receive the Enhanced SERP Contributions for Inactive Participants
described in Section 5.2. Such individual shall remain an Inactive
Participant until the earlier of (i) in the case of disability, such
time as he ceases to be totally and permanently disabled (as
determined by the Committee in its sole discretion), or (ii) he
would have met the Distribution Eligibility Requirement had his
employment not terminated due to death, total and permanent
disability, or involuntary termination without Cause within two (2)
years following a Change in Control.
	 
	 	(r)	 	“Incentive Compensation” means the most recent annual bonus
and/or other non-periodic annual incentive paid to an Employee in
addition to his Salary. Whether a payment qualifies as “Incentive
Compensation” shall be determined by the Committee in its sole
discretion.
	 
	 	(s)	 	“Participant” means an Eligible Employee who is participating
in the Plan pursuant to Section 4.2. Except for purposes of Section
5.1, the term Participant shall also include Inactive Participants.
	 
	 	(t)	 	“Plan” means the Beverly Enterprises, Inc. Enhanced
Supplemental Executive Retirement Plan, as set forth herein, and as
it may be amended from time to time.
	 
	 	(u)	 	“Plan Year” means January 1 to December 31 of each calendar
year.
	 
	 	(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 Beverly
Enterprises, Inc. 401(k) SavingsPlus Plan or the Beverly
Enterprises, Inc. Executive Deferred Compensation Plan, or any other
deferred 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.

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

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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 or its designee may require an additional 90 days to consider the
claim. When additional time is needed, the claimant will be notified in
writing within 90 days after receipt of the claim of the special circumstances
requiring the extension and the date by which the Committee or its designee
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 the claim involves a determination of whether or not the claimant is
disabled (a “Disability Claim”), such claim will generally be decided and the
claimant notified of the decision within 45 days after receipt of the claim;
provided that the Committee may obtain two 45-day extensions if the proper
written notice, which contains the information described above, is given to the
claimant before the end of each applicable 45-day period.

     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.

     If the denied claim is a Disability Claim, the following additional
information will be provided with the denial notice: (a) if an internal rule,
guideline, protocol, or other similar criterion was relied upon in making the
adverse determination, either the specific rule, guideline, protocol, or other
similar criterion, or a statement that such a rule, guideline, protocol, or
other similar criterion was relied upon in making the adverse determination and
that a copy of such rule, guideline, protocol, or other criterion will be
provided free of charge to the claimant upon written request; and (b) if the
adverse benefit determination is based on a medical necessity or experimental
treatment or similar exclusion or limit, either an explanation of the
scientific or

5

 

clinical judgment for the determination, applying the terms of the Plan to
the claimant’s medical circumstances, or a statement that such explanation will
be provided free of charge upon written request.

     Within 60 days after receiving a denial (180 days in the case of a
Disability Claim), 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. On appeal, the Committee will not give deference to the
initial adverse benefit determination.

     If the appeal involves a Disability Claim, the following additional
procedures shall apply to the review on appeal: (i) it will be conducted by a
Plan fiduciary that is neither the individual who made the initial adverse
benefit determination, nor the subordinate of such individual; (ii) if the
initial adverse decision was based in whole or in part on a medical judgment,
the reviewer will consult with a health care professional who has appropriate
training and experience in the field of medicine involved in the medical
judgment and who is not the same person (or his or her subordinate) that was
consulted in connection with the initial benefits decision; and (iii) upon
request, the claimant will be provided the identification of the expert whose
advise was obtained in connection with the initial benefit decision, if any,
regardless of whether or not the advice was relied upon.

     A decision on appeal will normally be given within 60 days (45 days in the
case of a Disability Claim) after the receipt of the appeal. If special
circumstances warrant an extension as determined by the Committee in its sole
discretion, then the decision will be made no later than 120 days after receipt
of the appeal (90 days in the case of a Disability Claim). 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. In addition, if the appeal
involved a Disability Claim, the denial notice will include the additional
information for Disability Claims described in (a) and (b) above, as
applicable.

     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 only after first exhausting the Plan’s claims review procedures and then
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

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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 expressly prohibited 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, after first exhausting the Plan’s review procedures, 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 is the
prevailing party.

     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, defended and held harmless by the Employer against and from any
loss, cost, damage, 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, defend 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.

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     4.2 Participation. Each Eligible Employee shall automatically become a
Participant in the Plan upon being selected by the Committee pursuant to
Section 4.1 above. The Company shall notify an Employee within a reasonable
time of such Employee’s gaining or losing eligibility for active participation
in the Plan, and it shall provide each such Participant with any enrollment
forms that must be completed by the Participant. In the event a Participant
ceases to be eligible to participate in the Plan, such Participant shall retain
all the rights described under the Plan, except the right to receive any
further Enhanced SERP Contributions (except as provided below for Inactive
Participants, if applicable), until such time that the Participant again
becomes an active Participant.

     If a Participant terminates his employment with an Employer due to death
or total and permanent disability, as determined by the Committee within its
sole discretion, or within two (2) years following a Change in Control, the
Participant is involuntary terminated not for Cause, such Participant shall
cease being an active Participant, become an Inactive Participant and be
eligible to receive the Enhanced SERP Contributions for Inactive Participants
described in Section 5.2. Such individual shall remain an Inactive Participant
until the earlier of (a) in the case of disability, such time as he ceases to
be totally and permanently disabled (as determined by the Committee in its sole
discretion), or (b) he would have met the Distribution Eligibility Requirement
had his employment not terminated due to death, total and permanent disability,
or involuntary termination without Cause within two (2) years following a
Change in Control.

     The Eligible Employees who are currently participating in the Plan are set
forth in Appendix A.

ARTICLE 5

CONTRIBUTIONS TO PARTICIPANTS’ ACCOUNTS

     5.1 Enhanced SERP Contributions. Prior to a Change in Control, the
Employer will credit a contribution to each Participant’s Account for each Plan
Year equal to the percentage of such Participant’s Compensation determined by
the Committee, within its sole discretion, and as set forth in Appendix B.
Prior to a Change in Control, the Committee may modify or amend Appendix B at
any time for any reason in its sole discretion without further amending the
Plan. Following a Change in Control, contributions will be credited to each
active Participant’s Account equal to the greater of (a) the amount that would
have been allocated if each Participant had become an Inactive Participant on
the date of the Change in Control, was eligible for contributions under Section
5.2 based on his Imputed Compensation, and the Plan continued until each such
Participant would have satisfied the Distribution Eligibility Requirement, or
(b) the amount creditable based on the Participant’s actual Compensation and
the contribution percentage set forth on Schedule B from time to time.

     5.2 Enhanced SERP Contributions for Inactive Participants. For each Plan
Year that a former active Participant qualifies as an Inactive Participant, the
Employer shall credit a contribution to each such Inactive Participant’s
Account equal to the percentage set forth in Appendix B for each Inactive
Participant immediately prior to his death or disability, or in the case of the
Participant’s involuntary termination without Cause within two (2) years
following a Change in Control, a percentage that is at least equal to the
percentage set forth in Appendix B for the Inactive Participant immediately
prior to the Change in Control (or, if greater, the

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percentage set forth on Appendix B for the Inactive Participant
immediately prior to his termination of employment), multiplied by such
Participant’s Imputed Compensation for the Plan Year.

     5.3 Involuntary Termination Without Cause. If a Participant’s employment
is terminated by his or her Employer without Cause prior to the time the
Participant meets the Distribution Eligibility Requirement, the Committee may,
in its sole discretion, direct the Employer to credit a contribution to the
Participant’s Account before it is distributed pursuant to Article 6 below,
equal up to (as a maximum) an amount determined by treating the Participant as
if his employment terminated due to death or disability, he became an Inactive
Participant, and was entitled to contributions under Section 5.2 above until
such time as he would have otherwise met the Distribution Eligibility
Requirement.

     5.4 Vesting and Forfeiture. Except as provided below, a Participant will
become 100% vested in all amounts credited to his Account upon the earlier of
(i) meeting the Distribution Eligibility Requirement, (ii) becoming an Inactive
Participant, (iii) a Change in Control, or (iv) involuntary termination of
employment without Cause. In the event a Participant’s employment terminates
before the occurrence of one of the vesting events describe above (a) by the
Employer for Cause, or (b) voluntarily by the Participant for any reason, such
Participant shall forfeit all amounts credited to his Account and no further
benefits will be payable by the Plan. In addition, if prior to a Change in
Control a Participant is terminated for Cause, he shall forfeit all amounts
credited to his Account, whether or not otherwise vested, and no benefit shall
be payable hereunder, even if the Participant has otherwise met the
Distribution Eligibility Requirement. Moreover, in the event the Participant
is ever engaged in Competitive Employment (within the time frames specified in
such definition), such Participant (x) shall forfeit all amounts credited to
his Account (whether or not vested) and no further benefits will be provided by
the Plan, and (y) any amounts previously paid shall be returned to the Company.
Finally, all benefits hereunder payable prior to a Change in Control are
expressly conditioned on the Participant signing a General Waiver and Release
(including a noncompete and nonsolicitation clause) in a form approved by the
Committee.

     5.5 Timing of Contributions. The Employer will credit the contributions
required pursuant to this Article 5 to each Participant’s Account no later than
December 31 of the Plan Year to which the contributions relate (the
“Contribution Due Date”). An Employer may defer crediting such contributions
to a Participant’s Account for a period not to exceed 12 months from the
Contribution Due Date. In such event, however, interest will accrue on the
delinquent contributions at the rate of 6.5% per annum calculated on the basis
of a 365-day year until the contribution is actually made, and the Employer
will be required to credit an additional amount to such Participant’s Account
at the time it credits the contributions required pursuant to this Article 5
(the “Actual Contribution Date”) equal to the interest that accrues on the
delinquent contributions between the Contribution Due Date and the Actual
Contribution Date.

ARTICLE 6

DISTRIBUTIONS

     6.1 Distributions. If a Participant retires or otherwise terminates
employment with the Employer after he meets the Distribution Eligibility
Requirement or otherwise becomes fully

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vested in his Account pursuant to Section 5.4, and prior to a Change in
Control, conditioned on him signing a General Waiver and Release (including a
noncompete and nonsolicitation clause) in a form approved by the Committee, the
Participant may elect to receive the vested balance credited to his Account in
(i) a single lump sum cash payment or, (ii) except in the case of death,
disability, or involuntary termination without Cause within two (2) years after
a Change in Control, annual cash installment payments over a period of five
(5), ten (10), or fifteen (15) years. Each Participant shall be required to
elect a distribution option when he first becomes eligible to participate in
the Plan. If a Participant fails to make a distribution election, 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; provided, however, the
Committee may, within its sole discretion, allow additional amendments while
the Participant is actively employed.

     Distributions under (ii) above shall begin in February of the year
following the Participant’s termination. Lump sum distributions under this
Section 6.1 shall be made in the calendar quarter following the quarter in
which the Participant’s employment terminated. Notwithstanding the foregoing,
distributions following a Participant’s death, disability, or involuntary
termination without Cause within two (2) years after a Change in Control, shall
be payable only in a single lump sum, and shall be made in the calendar quarter
immediately following the date the Participant would have met the Distribution
Eligibility Requirement if his employment had not terminated and he continued
to work until such time.

     In the event of a Participant’s death after he has begun receiving
installment payments hereunder but prior to the date the entire balance of the
Participant’s Account is distributed, the unpaid vested portion of such
Participant’s Account shall be paid to the Participant’s designated beneficiary
in the form of a single lump sum as soon as administratively practicable
following the date the Company is notified of the Participant’s death.

     6.2 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.

10

 

ARTICLE 7

DEFERRED COMPENSATION ACCOUNTS

     7.1 Participants’ Accounts. The Company shall establish and maintain an
individual bookkeeping Account for each Participant, which shall be credited
with the Enhanced SERP Contributions made under Article 5 and any deemed
earnings credited pursuant to 7.2 below.

     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. 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 that 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. In addition, the Company may require a Participant to make the
same deemed investment elections under this Plan as the Participant makes for
amounts credited to his benefit under any other plan or program sponsored or
maintained by the Participant’s Employer including, without limitation, the
Beverly Enterprises, Inc. Executive Deferred Compensation Plan and the Beverly
Enterprises, Inc. 401(k) SavingsPlus Plan. 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 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.

11

 

     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 either to (i) the Participant’s
estate, or (ii) if the Participant designated a beneficiary under another plan
or program maintained by his Employer, the designated beneficiary under such
other plan or program if the Committee so chooses in its sole discretion.

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.

     If the Employer decides to utilize a Rabbi Trust, then, unless determined
otherwise by the Committee, the Rabbi Trust will be the same trust that
informally funds the benefits payable under the Beverly Enterprises, Inc.
Executive Deferred Compensation Plan or any successor thereto (the “EDCP
Trust”); provided that the assets of the EDCP Trust that are intended to
informally fund the benefits payable under this Plan shall be accounted for
separately from the EDCP Trust’s other assets.

ARTICLE 9

CHANGE IN CONTROL

     9.1 Trust and Trustees. Upon the occurrence of a Change in Control, the
Rabbi Trust shall become irrevocable (if it is then revocable) 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 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.

12

 

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. Notwithstanding anything in this Plan to the contrary,
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 in Article 9 and otherwise 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 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

13

 

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 or other government agency otherwise
taxes or proposes to tax amounts deferred hereunder prior to their scheduled
payment date, or if any statute or regulation otherwise alters the intended
effect or benefits under the Plan or Rabbi Trust. 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 6.1 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. Enhanced Supplemental Executive Retirement 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.

     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.

14

 

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. Enhanced
Supplemental Executive Retirement 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.
	 
	 	(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.

15

 

	 	(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 Employee Benefits
Security Administration, United States Department of Labor, listed in your
telephone directory or the Division of Technical Assistance and Inquires,
Employee Benefits Security 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 Employee Benefits Security Administration.

16exv10w2

 

Exhibit 10.2

FIRST AMENDMENT

TO THE

BEVERLY ENTERPRISES, INC.

EXECUTIVE DEFERRED COMPENSATION PLAN

(Effective as of December 31, 2002)

     First Amendment made effective the 11th day of March, 2004, by Beverly
Enterprises, Inc. (the “Corporation”).

W I T N E S S E T H:

     WHEREAS, the Corporation sponsors the Beverly Enterprises, Inc. Executive
Deferred Compensation Plan, effective as of December 31, 2002 (the “Plan”);

     WHEREAS, the Plan is an unfunded plan maintained primarily to provide
deferred compensation and retirement benefits for a select group of management
or highly compensated employees within the meaning of sections 201, 301, and
401 of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), and it is therefore exempt from the provisions of Parts 2, 3, and 4
of Title I of ERISA;

     WHEREAS, although it is not required, pursuant to Article 8 of the Plan
the Corporation has established a grantor trust to provide for the payment of
benefits from the Plan, provided that the assets of such trust are subject to
the claims of the Corporation’s general creditors upon its bankruptcy or
insolvency (the “Rabbi Trust”);

     WHEREAS, the Corporation desires to amend the Plan to establish a new
Retention Enhancement Program (“REP”) component thereunder for the
Corporation’s current Chief Executive Officer and any other current or future
employee of the Corporation (or its subsidiaries or affiliates) that the
Nominating and Compensation Committee (“Committee”) selects from time to time
to participate in the REP, under which the Corporation will provide such
individuals with additional retirement, death and disability benefits, and such
benefits will be informally funded by the Rabbi Trust; and

     WHEREAS, Article 12 of the Plan provides that prior to a Change in Control
(as defined in the Plan), which has not occurred, the Corporation or Committee
may amend the Plan at any time;

     NOW, THEREFORE, the Plan is hereby amended effective as of April 1, 2004,
as follows:

1. A new sentence is added to the end of Section 2(a) of the Plan to read as
follows:

     “To the extent applicable, the term “Account” includes Participants’ REP
Accounts.”

 

2. New Sections 2(x) and 2(y) are added to the Plan, with the existing Sections
2(x) and 2(y) and the subsequent Sections in Article 2 and the appropriate
cross references being renumbered accordingly, to read as follows:

	 	“(x)	 	 “REP Account” means the accounting entry made with respect to
each REP Participant for the purpose of maintaining a record of each
REP Participant’s Retention Enhancement Program (“REP”) benefits
under Article 16 of this Plan.”
	 
	 	“(y)	 	“REP Participant” means a Participant who is currently
eligible to be credited with REP Contributions under Article 16 of
the Plan or who has a REP Account balance under the Plan.”

3. A new Article 16 is added to the Plan to read as follows:

"ARTICLE 16

RETENTION ENHANCEMENT PROGRAM

     16.1 Eligibility and Participation. The Committee shall determine, in its
sole and absolute discretion, the Eligible Employees and/or Participants that
shall be eligible to receive REP Contributions under this Article 16 from time
to time. Each such chosen Eligible Employee and/or Participant will
automatically become a participant in the Plan if he is not already a
Participant, and shall be referred to as a REP Participant for purposes of this
Article 16. The Company shall notify each Employee that has been selected to
be a REP Participant of his eligibility under this Article 16, and such REP
Participants shall be listed on Appendix C to this Plan, which the Committee
may modify from time to time.

     16.2 REP Contributions and Earnings. The Committee may, within its sole
discretion, direct the Employer to credit contributions to a REP Participant’s
REP Account from time to time in an amount determined by the Committee in its
sole discretion. In the event that a REP Participant is terminated without
Cause prior to the time he attains age 65, the Committee may, within its sole
discretion, direct the Employer to credit additional termination contributions
to the Participant’s REP Account in an amount determined by the Committee in
its sole discretion. Such termination contributions may be credited to the REP
Participant’s REP Account in a single lump sum or installments at any time
prior to the date distributions of the REP Participant’s REP Account begin.
All such contributions made pursuant to this Section 16.2 shall be referred to
as “REP Contributions,” and shall be unfunded, unsecured contractual
obligations of the Employer, as provided in Article 10 hereof with respect to
all Accounts hereunder.

     Earnings and/or losses will be credited to the amounts allocated to a REP
Participant’s REP Account in accordance with the provisions of Section 7.2 that
apply to Participants’ Accounts.

2

 

     16.3 Vesting.

     (a) Notwithstanding anything in this Plan to the contrary, except as
provided in (b) below, a REP Participant will vest in all amounts credited to
his REP Account upon the occurrence of the first of the following events:

	 	(i)	 	the REP Participant attains age 65 while actively
employed by his Employer;
	 
	 	(ii)	 	the Company undergoes a Change in Control;
	 
	 	(iii)	 	the REP Participant dies or becomes totally
disabled, as determined by the Committee in its sole
discretion; or
	 
	 	(iv)	 	the REP Participant’s employment is terminated by
his Employer without Cause.

     (b) If (i) a REP Participant’s employment is terminated for Cause, (ii) a
REP Participant terminates his employment prior to the occurrence of one of the
events described in (i) - (iv) above for any reason, or (iii) at any time the
REP Participant accepts competitive employment or otherwise engages in
competition with the Employer (as determined by the Committee in its sole
discretion), then such REP Participant shall forfeit all amounts credited to
his REP Account, whether or not otherwise vested, shall return any prior
payments to the Employer, and shall not be entitled to any further benefits
under this Article 16.

     For purposes of this Article 16, the term “Cause” shall have the meaning
given to such term in each REP Participant’s respective employment agreement
with his Employer. In absence of such an employment agreement, the Committee
shall determine whether or not Cause exists for a REP Participant’s termination
in its sole discretion.

     16.4 Timing of Distributions. Upon commencement of participation in the
Plan, a REP Participant shall elect in writing his desired distribution option.
A REP Participant may elect to receive a distribution of his vested REP
Account balance in accordance with the provisions of Section 6.3 that apply to
Participants’ Accounts. Such distributions will begin at the appropriate time
specified in Section 6.3 after the occurrence of the later of:

     (a) the REP Participant’s termination of employment with the Company and
his Employer; and

     (b) the REP Participant being vested under Section 16.3.

     In the event that a REP Participant dies or becomes totally disabled, as
determined by the Committee in its sole discretion, the unpaid vested portion
of his REP Account will be paid to the REP Participant (or his beneficiary in
the case of death) in accordance with the provisions of Section 6.4; provided
that in the event of the REP Participant’s total disability, the Committee

3

 

may, in its sole discretion, distribute the REP Participant’s REP Account
in annual installment payments in accordance with the REP Participant’s
election over a period of two (2) to fifteen (15) years. The other termination
of employment provisions of Section 6.4 shall not apply. In the event of a
termination without Cause prior to age 65, if the Committee chooses to continue
crediting contributions to the REP Participant’s REP Account pursuant to
Section 16.2, no distributions shall be permitted hereunder until either age 65
or such contributions otherwise cease.”

4

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