Document:

ex10-1_070212.htm

Exhibit 10.1

 

SEVERANCE AGREEMENT AND GENERAL RELEASE

 

THIS SEVERANCE AGREEMENT AND GENERAL RELEASE (this “Agreement") is made and entered into effective as of the 28th day of June, 2012, by and between Thomas Cox (hereinafter generally referred to as “Mr. Cox”) and Healthways, Inc. and its subsidiaries, affiliates and related entities, with a principal office of 701 Cool Springs Blvd., Franklin, Tennessee 37067 (as more fully defined in Paragraph 2 below, "Healthways").

W I T N E S S E T H:

WHEREAS, Mr. Cox is the Vice President and Chief Operating Officer of Healthways, and the parties have agreed that Mr. Cox’s last day of employment with Healthways will be the close of business on July 31, 2012 (the "Effective Date"); and

WHEREAS, Mr. Cox and Healthways are parties to a certain Employment Agreement dated December 31, 2010 (the “Employment Agreement”); and in connection therewith, and following a period of negotiations between the parties, Mr. Cox and Healthways wish to enter into this Agreement to terminate the Employment Agreement (not including those provisions expressly set forth herein that survive termination) and so that Mr. Cox may provide a general release of claims against Healthways in exchange for certain benefits and compensation set forth herein.

NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, it is agreed as follows:

1.           End of Employment; Transition Support.  Mr. Cox hereby confirms that his employment as Vice President and Chief Operating Officer of Healthways and any other duties and responsibilities that he may have as an officer or director or otherwise with Healthways, its subsidiaries, related entities and affiliates will end as of the Effective Date.  In consideration of the payments herein, Mr. Cox agrees from the Effective Date to October 31, 2012 (the “Transition Support Period”) to provide reasonable support and assistance, including being available by telephone and/or in person, to Healthways as Healthways shall reasonably request in order for Healthways to conduct an orderly transition of Mr. Cox’s duties and responsibilities.

2.           Release.  In consideration of the payments described in Paragraph 11 below and the mutual promises herein, Mr. Cox does hereby irrevocably and unconditionally release, acquit and discharge Healthways Inc., any related or affiliated companies and all other subsidiaries, assigns, predecessors or transferees, all present and former directors, officers, insurers, employees, servants and agents of any of them (together, individually and collectively, “Healthways”), from any and all manner of actions, charges, complaints, suits, proceedings, claims, liabilities, obligations, agreements, controversies, demands, costs, losses, debts and expenses whatsoever of any kind or nature, at law or in equity, up until the Effective Date, whether known or unknown, fixed or contingent, choate or inchoate, arising out of or in any way connected with the employment of Mr. Cox by Healthways and with his separation from employment with Healthways, including but not limited to any and all claims under the Employment Agreement or otherwise for pay, benefits, damages, or any other relief which were, might or could have been asserted in any court, before any arbitrator, or before any administrative agency, including without limitation, the Civil Rights Act of 1991; Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1866; the Americans with Disabilities Act; the Rehabilitation Act of 1973; the Age Discrimination in Employment Act; the Older Workers Benefit Protection Act; the Family and Medical Leave Act; the Employee Retirement Income Security Act of 1974; the Equal Pay Act; the Fair Labor Standards Act; the Vietnam Era Veteran's Readjustment Assistance Act; the Uniformed Service Employment and Reemployment Rights Act of 1994; the Worker Adjustment and Retraining Notification Act; the Fair Credit Reporting Act; the Immigration Reform and Control Act of 1986; the Occupational Safety and Health Act of 1970; the Employee Polygraph Protection Act; any and all “whistle blower” employee statutes or regulations (i.e., those providing protection to an employee who raises charges of illegality, impropriety, workplace misconduct, failure to adhere to policies and procedures, etc.), any amendments to any of the foregoing, and any other federal, state, or local statute, regulation, ordinance, or common law, including without limitation any law related to discrimination (i.e., those pertaining generally to race, color, sex, age, religion, national origin, sexual orientation, worker’s compensation or disability), retaliatory discharge (whether actual or constructive, and as and to the extent related to any of the foregoing), terms and conditions of employment, or termination of employment, to the full extent that such a release is allowed by law.  This provision does not include the release of claims with respect to any vested benefits under a plan governed by the Employee Retirement Income Security Act or any claim related to the rights and benefits granted by the express terms of this Agreement.

In consideration of the mutual promises and consideration given herein, Healthways does hereby irrevocably and unconditionally release, acquit and discharge Mr. Cox, his spouse and his heirs from any and all manner of actions, charges, complaints, suits, proceedings, claims, liabilities, obligations, agreements, controversies, demands, costs, losses, debts and expenses whatsoever of any kind or nature, at law or in equity, up until the Effective Date, whether known or unknown, fixed or contingent, choate or inchoate, arising out of or in any way connected with the employment of Mr. Cox by Healthways and with his separation from employment with Healthways, including but not limited to any claim under the Employment Agreement.

Both parties recognize and agree that these mutual releases are only for claims which have accrued as of the Effective Date, and do not include any claim for breach of this Agreement, nor any claim for breaches of the portions of the Employment Agreement reaffirmed by this Agreement (including, without limitation, Paragraph 12 hereof) after the Effective Date.

3.           Waiver.  Mr. Cox acknowledges that he is aware of his rights under the laws specifically and generally described above and that he waives those rights to the full extent that waiver is allowed by law; although the provisions of such waiver are not intended to be, nor shall the same be construed as, an indication that Mr. Cox has any legitimate causes of action under such provisions nor that Healthways has taken any actions in violation of such provisions.

4.           No Admission. Mr. Cox also expressly acknowledges that the payments described in Paragraph 11 shall not be considered an admission of liability or an admission that Healthways has violated any law, regulation or contract (express or implied). Mr. Cox further acknowledges that the payments provided hereunder also represent payment in full in satisfaction and resolution of all potential and/or disputed claims for back pay, severance pay, bonuses, equity grants/options, vacation pay (to the extent permitted by applicable law and except to the extent separately paid pursuant to company policy), compensatory, punitive, and/or liquidated damages, and damages or relief of any kind including costs, attorneys' fees, and expenses arising out of or pertaining to the unasserted claims released by this Agreement.

5.           No Pending Complaints.  Mr. Cox represents and warrants that he has not filed any complaint(s) or charge(s) against Healthways with the Equal Employment Opportunity Commission or the state commission empowered to investigate claims of employment discrimination, the United States Department of Labor, the Office of Federal Contract Compliance Programs, or with any other local, state or federal agency or court, and that if any such agency or court assumes jurisdiction of any complaint(s) or charge(s) against Healthways on behalf of Mr. Cox, then Mr. Cox will request such agency or court to withdraw from the matter and Mr. Cox will refuse any benefits derived therefrom, and the release contained in this Agreement shall apply to such claim.  This Agreement will not affect Mr. Cox’s right to hereafter file a charge with or otherwise participate in an investigation or proceeding conducted by the Equal Employment Opportunity Commission regarding matters which arose after the Effective Date and which are not the subject of this Agreement. Mr. Cox represents and warrants that he has no knowledge of any practice engaged in by Healthways that is or was a violation in any material respect of any applicable state law or regulations or of any federal law or regulations including, but not by way of limitation, the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder.

6.           Tax Liability.  Mr. Cox further acknowledges and agrees that any tax consequence which he may personally incur which arises from or is attributable to the payments described in Paragraph 11 is solely his responsibility, although Healthways agrees to continue making withholdings and deductions from such payments in accordance with Mr. Cox’s most current W-4 on file with Healthways.

7.           Civil Action Waiver.  In consideration of the payments described in Paragraph 11 below, Mr. Cox further agrees to neither institute nor in any manner voluntarily participate in, as a class member or otherwise, any civil action or arbitration against Healthways which is now pending or may hereafter be brought that concerns any matter encompassed by this Agreement.

8.           Return of Company Property.  Mr. Cox agrees to return, and shall not retain possession of, any and all copies of confidential and proprietary Healthways material, information and property in his possession or control (these include, without limitation, all documents, manuals, letterhead/stationary, business cards, computers, computer programs, phones, cds, diskettes, emails, customer lists, notebooks, reports and other written or graphic materials, including all copies thereof, in any way relating to Healthways/ business and prepared by Mr. Cox or obtained from Healthways during the course of Mr. Cox’s employment with Healthways); and regardless of whether any of the foregoing should be in electronic form, tangible form, or any combination thereof.

9.           Termination of Employment / Benefits Information.  Mr. Cox acknowledges that his employment with Healthways, together with his rights to continue to participate in (and Healthways corresponding obligation to provide, make contributions to or fund) any Healthways related benefits, deferred compensation plans (including bonus plans and the Corporate and Subsidiary Capital Accumulation Plan), 401k plans, stock incentive plans, insurance coverage and COBRA coverage, and any other Healthways monitored or provided benefit plan or program, will cease effective the close of business on the Effective Date except as specifically provided for in Paragraph 11 herein.

10.           Validity. If any term, condition, section or provision of this Agreement shall be held to be invalid or unenforceable, such invalidity shall not affect any other term, condition, section or provision hereof, and this Agreement shall be construed and enforced as if such term, condition, section or provision had not been included.

11.           Consideration.  In return for Mr. Cox’s execution, delivery and non-revocation of this Agreement and his faithful and strict adherence and compliance to the terms hereof, Healthways agrees to provide Mr. Cox, in addition to the other promises and consideration set forth herein, and in lieu of any severance pay and benefits set forth in the Employment Agreement or otherwise, the following:

(a) all Base Salary and benefits due through the Effective Date, such Base Salary payable in cash in accordance with Healthways’ regular payroll practices;

(b) an aggregate of $584,375, representing an amount equal to Mr. Cox’s Base Salary as of the Effective Date for a total of fifteen (15) months, $116,875 (net of applicable withholdings) of which will be paid promptly following the Revocation Period (as hereinafter defined) without this Agreement having been revoked by Mr. Cox, and $467,500 (net of applicable withholdings) of which will be paid on November 1, 2012, upon Mr. Cox’s completion of the support and assistance to be provided during the Transition Support Period;

(c) accelerated vesting of the first tranche of the Performance Cash Award granted pursuant to the Performance Cash Award Agreement between Healthways and Mr. Cox dated as of February 24, 2010, eligible for vesting based on Healthways’ results for the year ended December 31, 2010 and, accordingly, Healthways shall pay to Mr. Cox $84,883 in cash promptly upon expiration of the Revocation Period;

(d) accelerated vesting (to the extent not vested) of the restricted stock units set forth on Appendix A attached hereto and incorporated herein by reference, which Mr. Cox acknowledges and agrees represent all restricted stock units held by him.  Except as modified hereby, the restricted stock units will continue to be governed by the applicable Restricted Stock Unit Award Agreement (collectively, the “RSU Agreements”) and the Healthways Inc. 2007 Stock Incentive Plan (the “Plan”), and, in accordance with the RSU Agreements, Healthways will issue Mr. Cox on the Effective Date one share of Healthways’ common stock for each restricted stock unit set forth on Appendix A attached hereto; and

(e) $175,316 (approximate amount as of the Effective Date), which represents all amounts to which Mr. Cox is entitled to receive pursuant to the Corporate and Subsidiary Capital Accumulation Plan (the “CAP Plan”) as of the Effective Date, which amounts shall thereafter be paid to Mr. Cox in accordance with his election under Section 7 of the CAP Plan.

Mr. Cox holds the options set forth on Appendix B attached hereto and incorporated herein by reference to purchase shares of Healthways common stock pursuant to the Non-Qualified Stock Option Agreements (the “Option Award Agreements”) between Healthways and Mr. Cox issued in accordance with the terms of the Plan.  Mr. Cox acknowledges and agrees that the options set forth on Appendix B represent all options he holds as of the Effective Date.  Mr. Cox further acknowledges and agrees that such options (to the extent vested as of the Effective Date) shall continue to be governed in all respects by and in accordance with the respective Option Award Agreements and the Plan.

12.           Restrictive Covenants.  Mr. Cox agrees that Article IX of the Employment Agreement and the non-competition and non-solicitation provisions in the RSU Agreements and Option Award Agreements (collectively, the “Restrictive Covenants”) will remain in full force and effect after the Effective Date, provided that Mr. Cox shall only be subject to the Restrictive Covenants for a period of 15 months following the Effective Date.  Notwithstanding the provisions of the Restrictive Covenants (including Article IX.B.1 of the Employment Agreement), Healthways consents to Mr. Cox serving after the Effective Date in the capacity of an officer or director for and holding an equity interest in My Health Direct, Inc., and the Company shall not assert that such service or equity interest is in violation of this Agreement, the Restrictive Covenants or any other non-competition or non-solicitation provisions that may be applicable to Mr. Cox, provided Mr. Cox is not otherwise in breach of this Agreement or the Restrictive Covenants.

 

13.           Revocation.  Mr. Cox has consulted with his attorney before his execution of this Agreement.  Mr. Cox has been advised that he had twenty-one (21) days from the date this Agreement was first presented to him in which to consider executing this Agreement; and that his decision to execute prior to the expiration of such twenty-one (21) day period was knowingly and voluntarily made. Mr. Cox further acknowledges that this Agreement has been individually negotiated and is not part of a group exit incentive or other separation package.

By signing and returning this Agreement, Mr. Cox acknowledges that he has read carefully and fully understands the terms of this Agreement, has had an opportunity to consult with his attorney prior to signing it and is signing it knowingly and voluntarily and has not been coerced or threatened into signing it or promised anything else in exchange for signing it (other than the consideration provided in Paragraph 11 above).

 

Furthermore, Mr. Cox is aware that he has a right for a period of seven (7) days following his execution and delivery of this Agreement (the “Revocation Period”), to revoke this Agreement. Mr. Cox’s receipt, however, of any severance benefits under this Agreement is contingent on (1) his execution and delivery of this Agreement, (2) the return of all company property in accordance with Paragraph 8 above and (3) the expiration of the Revocation Period without this Agreement being revoked by Mr. Cox.

 

14.           Governing Law.  This Agreement shall be construed in accordance with the laws of the State of Tennessee, without regard to its conflict of laws or choice of laws provisions.  Each and every term of this agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto.

15.           Section 409A Provisions.  It is intended that (i) each payment or installment of payments provided under this Agreement is a separate “payment” for purposes of Code Section 409A and (ii) that the payments satisfy, to the greatest extent possible, the exemptions from the application of Code Section 409A, including those provided under Treasury Regulations 1.409A-1(b)(4) (regarding short-term deferrals), 1.409A-1(b)(9)(iii) (regarding the two-times, two year exception), and 1.409A-1(b)(9)(v) (regarding reimbursements and other separation pay). Notwithstanding anything to the contrary in this Agreement, if Healthways determines (i) that on the Effective Date or at such other time that Healthways determines to be relevant, Mr. Cox is a “specified employee” (as such term is defined under Treasury Regulation 1.409A-1(i)(1)) of Healthways and (ii) that any payments to be provided to Mr. Cox pursuant to this Agreement are or may become subject to the additional tax under Code Section 409A(a)(1)(B) or any other taxes or penalties imposed under Code Section 409A (“Section 409A Taxes”) if provided at the time otherwise required under this Agreement, then such payments will be delayed until the date that is six (6) months after the date of the Executive’s termination of employment with Healthways, or such shorter period that, as determined by Healthways, is sufficient to avoid the imposition of Section 409A Taxes (the “Payment Delay Period”). Any payments delayed pursuant to this Paragraph 15 will be made in a lump sum on the first day of the seventh month following Mr. Cox’s termination of employment, or such earlier date that, as determined by Healthways, is sufficient to avoid the imposition of any Section 409A Taxes. The parties acknowledge and agree that, to the extent applicable, this Agreement shall be interpreted in accordance with, and the parties agree to use their reasonable best efforts to achieve timely compliance with, Code Section 409A and the Treasury Regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date.  In addition, to the extent that any reimbursement (including expense reimbursements) provided for pursuant to this Agreement or other related agreement provides for a “deferral of compensation” within the meaning of Code Section 409A and the Treasury Regulations promulgated thereunder, such amounts shall be reimbursed in accordance with Section 1.409A-3(i)(1)(iv) of the Treasury Regulations.  Notwithstanding the foregoing, Healthways does not warrant that any payments provided herein will qualify for favorable treatment under Code Section 409A, and Healthways will not be liable to Mr. Cox for any tax, interest or penalties that Mr. Craft might owe as a result of any payments hereunder.

16.           Indemnification.  It is understood and agreed that Healthways will indemnify Mr. Cox in accordance with Healthways Restated Certificate of Incorporation, as amended, in connection with the defense of any action, suit or proceeding to which Mr. Cox is made a party by reason of being (or having been) an officer, director, or employee of Healthways or any of its subsidiaries.

17.           Integration.  Mr. Cox acknowledges and agrees that this Agreement contains the parties' entire understanding and supersedes and replaces any other agreement regarding the subject matter hereof, except that ARTICLE IX of the Employment Agreement has been incorporated herein and remains in full force and effect as modified by Paragraph 12.  Mr. Cox acknowledges that this Agreement is not executed in reliance upon any statement or representation made by Healthways outside of this Agreement and that the benefits and compensation provided or referenced hereunder are in lieu of all other benefits and compensation whatsoever, whether pursuant to the Employment Agreement or otherwise.

18.           Binding Effect / No Oral Modification.  This Agreement shall be binding upon Healthways, Mr. Cox and upon Mr. Cox’s heirs, administrators, representatives and executors.  The provisions of this Agreement may not be modified orally, but only in a writing signed by the parties to be charged.

I HAVE READ THE FOREGOING RELEASE, I FULLY UNDERSTAND ITS TERMS, I HAVE BEEN GIVEN 21 DAYS OR REASONABLE TIME TO CONSULT WITH AN ATTORNEY ABOUT IT, AND I HAVE SIGNED IT VOLUNTARILY THIS THE 28th DAY OF JUNE, 2012.

/s/ Thomas Cox

______________________________________                                                                         __June 28, 2012______________________

Thomas Cox                                                                                                              Date

/s/ Ben R. Leedle, Jr.

_____________________________________                                                                           __June 28, 2012______________________

On behalf of Healthways, Inc.                                                                                                  Date

  

  

  

Appendix A

Restricted Stock Units

 

   

	
Grant Date

	
Units

	
02/21/2012

	
28,447

	
12/02/2010

	
50,000

	
02/24/2010

	
1,150

	
02/12/2009

	
2,846

	
08/15/2008

	
7,777

	
Total

	
90,220

  

  

  

Appendix B

Options

	
Grant Price

	
Grant Date

	
Total Options Granted

	
Exercisable Options

	
Unvested Options

	
Total Outstanding Options

	
$7.4700

	
02/21/2012

	
51,873

	
0

	
51,873

	
51,873

	
$9.9600

	
12/02/2010

	
150,000

	
0

	
150,000

	
150,000

	
$15.4400

	
02/24/2010

	
17,234

	
8,617

	
8,617

	
17,234

	
$11.5700

	
02/12/2009

	
22,878

	
17,159

	
5,719

	
22,878

	
Totals:

	  	
241,985

	
25,776

	
216,209

	
241,985exhibit10_1.htm

EXHIBIT 10.1

SELECT COMFORT

EXECUTIVE INVESTMENT PLAN

 

(July 1, 2012 Restatement)

 

 

 

 

 

 

 

 

 

 

 

 

 

As Amended and Restated on July 1, 2012

 

  

  

  

TABLE OF CONTENTS

 

                                                    

	 	 Page
	
ARTICLE 1.  DESCRIPTION

	
  1

	
1.1           Plan Name

	
  1

	
1.2           Plan Purpose

	
  1

	
1.3           Plan Type

	
  1

	
1.4           Plan Effective Date

	
  1

	  	  
	
ARTICLE 2.  PARTICIPATION

	
  2

	
2.1           Eligibility

	
  2

	
2.2           Loss of Eligibility

	
  2

	
2.3           Transfer Among Participating Employers

	
  3

	
2.4           Multiple Employment

	
  3

	
2.5           Conditions of Participation

	
  3

	
2.6           Termination of Participation

	
  3

	  	  
	
ARTICLE 3.  BENEFITS

	
  4

	
3.1           Participant Accounts

	
  4

	
3.2           Participant Deferral Credits – Savings Account

	
  4

	
3.3           Participant Deferral Credits – Fixed Period (Strategy 1) Account

	
  5

	
3.4           Participant Deferral Credits – Fixed Period (Strategy 2) Account

	
  5

	
3.5           Participating Employer Credits

	
  6

	
3.6           Earnings Credits

	
  6

	
3.7           Vesting

	
  8

	  	  
	
ARTICLE 4.  DISTRIBUTION

	
  9

	
4.1           Distribution to Participant Before Termination Date

	
  9

	
4.2           Distribution of Savings and Retirement Accounts to Participant

  After Termination Date

	
 

  9

	
4.3           Distribution of Fixed Period (Strategy 1) and Fixed Period (Strategy 2)

  Accounts to Participant

	
 

10

	
4.4           Distribution to Beneficiary

	
11

	
4.5           Nondeductibility

	
12

	
4.6           Payment in Event of Incapacity

	
12

	
4.7           Five-Year Redeferral Election

	
12

	
4.8           Installment Distributions

	
12

	
4.9           Six-Month Suspension for Specified Employees

	
13

	  	  
	
ARTICLE 5.  SOURCE OF PAYMENTS; NATURE OF INTEREST

	
14

	
5.1           Establishment of Trust

	
14

	
5.2           Source of Payments

	
14

	
5.3           Status of Plan

	
14

	
5.4           Non-assignability of Benefits

	
14

 

 

i

  

  

 

	  	  
	
ARTICLE 6.  AMENDMENT, TERMINATION

	
15

	
6.1           Adoption

	
15

	
6.2           Amendment

	
15

	
6.3           Termination of Participation

	
15

	
6.4           Termination

	
16

	  	  
	
ARTICLE 7.  DEFINITIONS, CONSTRUCTION AND INTERPRETATION

	
17

	
7.1           Cross Reference

	
17

	
7.2           Governing Law

	
17

	
7.3           Headings

	
17

	
7.4           Number and Gender

	
17

	
7.5           Definitions

	
17

	  	  
	
ARTICLE 8.  ADMINISTRATION

	
21

	
8.1           Administrator

	
21

	
8.2           Plan Rules and Regulations

	
21

	
8.3           Administrator’s Discretion

	
21

	
8.4           Specialist’s Assistance

	
21

	
8.5           Indemnification

	
21

	
8.6           Benefit Claim Procedure

	
22

	
8.7           Disputes

	
23

	  	  
	
ARTICLE 9.  MISCELLANEOUS

	
24

	
9.1           Withholding and Offsets

	
24

	
9.2           Other Benefits

	
24

	
9.3           No Warranties Regarding Tax Treatment

	
24

	
9.4           No Rights to Continued Employment or Service Created

	
24

	
9.5           Special Provisions

	
24

	
9.6           Successors

	
24

ii  

  

  

SELECT COMFORT

EXECUTIVE INVESTMENT PLAN

 

ARTICLE 1.

DESCRIPTION

 

	
1.1  

	
Plan Name.

 

The name of the Plan is the “Select Comfort Executive Investment Plan.”

 

	
1.2  

	
Plan Purpose.

 

	
  

	
The purposes of the Plan are to:

 

	
(a)  

	
assist the Participating Employers in attracting and retaining Qualified Employees,

 

	
(b)  

	
provide a tax-deferred capital accumulation vehicle for Qualified Employees, and

 

	
(c)  

	
encourage additional retirement savings by Qualified Employees.

 

	
1.3  

	
Plan Type.

 

The Plan is an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees.  It is intended that the Plan is exempt from the provisions of Parts 2, 3 and 4 of Subtitle B of Title I of ERISA by operation of sections 201(2), 301(a)(3) and 401(a)(4) thereof, respectively, and from the provisions of Title IV of ERISA, to the extent otherwise applicable, by operation of section 4021(b)(6) thereof.  The Plan is also intended to be unfunded for tax purposes.  The Plan will be construed and administered in a manner that is consistent with and gives effect to the foregoing.  All amounts deferred under the Plan shall be subject to the provisions of Code section 409A.  The Plan is intended to comply in form and operation with Code Section 409A.

 

	
1.4  

	
Plan Effective Date.

 

The Plan was originally effective December 20, 2002 and was subsequently amended and restated, including the 2008 restatement of the Plan.  The Plan as amended and restated in this document is effective July 1, 2012.

 

1  

  

  

ARTICLE 2.

PARTICIPATION

 

	
2.1  

	
Eligibility.

 

	
(a)  

	
2009-2012 Plan Years.

 

	
(i)  

	
No Qualified Employees were eligible to defer Base Salary or Bonus during the 2009, 2010 and 2011 Plan Years and the first six months of the 2012 Plan Year and no Participating Employer credits were made to the any Retirement Plan Accounts during such time periods.

 

	
(ii)  

	
Prior to July 1, 2012, the Administrator will determine which Qualified Employees, if any, are eligible to defer Base Salary pursuant to Section 3.2(a)(iii) with respect to the period from July 1, 2012 to December 31, 2012 (the “2012 Partial Plan Year Service Period”).  At any time during the 2012 Partial Plan Year Service Period, the Administrator may determine that an individual who becomes a Qualified Employee after July 1, 2012 is eligible to defer Base Salary pursuant to Section 3.2(a)(iii) with respect to the remainder of such period.

 

	
(b)  

	
First Day of Plan Year.  Prior to the beginning of each Plan Year beginning on or after January 1, 2013, the Administrator will determine which Qualified Employees, if any, are eligible to defer Base Salary pursuant to Section 3.2(a) and Bonus pursuant to Section 3.2(b) with respect to the Plan Year.

 

	
(c)  

	
During Plan Year.  At any time during a Plan Year beginning on or after January 1, 2013, the Administrator may determine that an individual who becomes a Qualified Employee after the first day of a Plan Year is eligible to defer Base Salary pursuant to Section 3.2(a) and in accordance with Plan Rules (such determining the first payroll date such Qualified Employee will be eligible to defer Base Salary) with respect to the remainder of the Plan Year.

 

	
(d)  

	
Annual Determination.  The fact that an individual has been eligible to make deferral elections with respect to any particular Plan Year does not give the individual any right to make deferral elections with respect to any other Plan Year.

 

	
2.2  

	
Loss of Eligibility.

 

	
(a)  

	
Reasons.

 

	
(i)  

	
Ceasing to be Qualified Employee.  An Active Participant will cease to be eligible to defer Base Salary and Bonus as of the date on which he or she ceases to be a Qualified Employee.

 

	
(ii)  

	
Unforeseeable Emergency.  A Participant who, pursuant to Section 4.1(a), has received a distribution due to an Unforeseeable Emergency, is not eligible to defer Base Salary or Bonus with respect to the remainder of the Plan Year during which the revocation occurs or the distribution is received, as the case may be, and the immediately following Plan Year.

 

 

2

  

  

 

	
(iii)  

	
401(k) Hardship Withdrawal.  A Qualified Employee who receives a hardship withdrawal from a 401(k) plan maintained by a Participating Employer, or by any other employer required to be aggregated with the Participating Employer under Code section 414(b), (c), (m) or (o), is not eligible to defer Base Salary or Bonus under the Plan to the extent required to comply with the terms of the 401(k) plan.  For each Plan Year during which a deferral is not permitted, the deferral election is cancelled through the end of the Plan Year, with any new election subject to the deferral election requirements of Section 3.2.

 

	
(b)  

	
Affect on Deferral Elections.  An Active Participant’s deferral election for a Plan Year is irrevocable after the latest day on which the election may be made except in the event of a distribution under Section 2.2(a)(ii) or on account of a 401(k) hardship withdrawal under Section 2.2(a)(iii).

 

	
2.3  

	
Transfer Among Participating Employers.

 

An Active Participant who transfers employment from one Participating Employer to another Participating Employer and who continues to be a Qualified Employee after the transfer will, for the duration of the Plan Year during which the transfer occurs, continue to participate in the Plan, in accordance with the election in effect for the portion of the Plan Year before the transfer, as a Qualified Employee of such other Participating Employer.  In addition, an Active Participant who transfers to an Affiliate of a Participating Employer will, for the duration of the Plan Year during which the transfer occurs, continue to participate in Participant deferral Credits pursuant to Section 3.2 in accordance with the Active Participant’s election in effect before the transfer.

 

	
2.4  

	
Multiple Employment.

 

An Active Participant who is simultaneously employed as a Qualified Employee with more than one Participating Employer will participate in the Plan as a Qualified Employee of all such Participating Employers on the basis of a single deferral election pursuant to Section 3.2 applied ratably to his or her Base Salary or Bonus from each Participating Employer if his or her deferral election was made in a dollar amount or applied separately to his or her Base Salary or Bonus from each Participating Employer if his or her deferral election was made in a percentage.

 

	
2.5  

	
Conditions of Participation.

 

Each Qualified Employee, as a condition of participation in the Plan, is bound by all the terms and conditions of the Plan and the Plan Rules, and must furnish to the Administrator such pertinent information and execute such election forms and other instruments as the Administrator or Plan Rules may require by such dates as the Administrator or Plan Rules may establish.  All elections, directions, designations and similar actions required in connection with the Plan must be made in accordance with and are subject to the terms of the Plan and Plan Rules.

 

	
2.6  

	
Termination of Participation.

 

A Participant will cease to be such as of the date on which he or she is not then eligible to make deferrals and his or her entire vested Account balances have been distributed.

3  

  

  

ARTICLE 3.

BENEFITS

 

	
3.1  

	
Participant Accounts.

 

	
(a)  

	
Participant Accounts.  For each Participant, the Administrator will establish and maintain one or more separate bookkeeping accounts as follows:

 

	
(i)  

	
deferrals elected by the Participant pursuant to Section 3.2 will be credited to his or her Savings Account;

 

	
(ii)  

	
deferrals elected by the Participant pursuant to Section 3.3 will be credited to his or her Fixed Period (Strategy 1) Account that includes a subaccount established and maintained for the Participant in connection with each deferral election made pursuant to Section 3.3 prior to January 1, 2009;

 

	
(iii)  

	
deferrals elected by the Participant pursuant to Section 3.4 will be credited to his or her Fixed Period (Strategy 2) Account that includes a subaccount established and maintained for the Participant in connection with each deferral election made pursuant to Section 3.4 prior to January 1, 2009; and

 

	
(iv)  

	
credits made on the Participant’s behalf (if any) pursuant to Section 3.5 will be credited to his or her Retirement Account.

 

	
3.2  

	
Participant Deferral Credits – Savings Account.

 

	
(a)  

	
Base Salary.  Base Salary deferrals will be made in accordance with the following rules:

 

	
(i)  

	
An Active Participant may elect to defer up to fifty percent (50%) of his or her Base Salary for a Plan Year in accordance with Plan Rules.

 

	
(ii)  

	
An election made pursuant to this subsection will not be effective unless it is made on a properly completed election form received by the Administrator by a date specified by the Administrator which is prior to the first day of the Plan Year to which the election relates or, in the case of an individual who becomes eligible to participate after the first day of a Plan Year, within thirty (30) days after he or she becomes eligible to participate.  The special 30-day rule is only applicable to an individual who during the preceding 24-month period was not eligible to participate in this Plan or any other non-qualified deferred compensation plan maintained by the Company or an Affiliate that is required to be treated as a single plan with the Plan under Code Section 409A.

 

 

4

  

  

 

	
(iii)  

	
Notwithstanding the foregoing provisions of this Subsection (a), an Active Participant designated by the Administrator as eligible to make an election pursuant to Section 2.1(a)(ii) may elect,  in accordance with Plan Rules, to defer up to fifty percent (50%) of his or her Base Salary relating to services performed during the 2012 Partial Plan Year Service Period.  An election made pursuant to this clause (iii) will not be effective unless it is made on a properly completed election form received by the Administrator by a date specified by the Administrator which is prior to July 1, 2012 or, in the case of an individual who becomes eligible to participate after July 1, 2012, within thirty (30) days after he or she becomes eligible to participate.  The special 30-day rule is only applicable to an individual who during the preceding 24-month period was not eligible to participate in this Plan or any other non-qualified deferred compensation plan maintained by the Company or an Affiliate that is required to be treated as a single plan with the Plan under Code Section 409A.

 

	
(iv)  

	
Any election pursuant to this subsection applies only to Base Salary relating to services performed after the effective date of the election.

 

	
(b)  

	
Bonus.  Bonus deferrals will be made in accordance with the following rules:

 

	
(i)  

	
An Active Participant may elect to defer up to seventy-five percent (75%) of his or her Bonus for the Plan Year in accordance with Plan Rules.

 

	
(ii) 

	
An election made by an Active Participant pursuant to this subsection will not be effective unless it is made on a properly completed election form received by the Administrator prior to the first day of the Plan Year to which the election relates and shall apply to the bonus that relates solely to services performed on or after the beginning of such Plan Year.

 

	
(c)  

	
Limitations.  The Administrator may, prior to the effective date of a Participant’s election, limit the amount of the Participant’s deferral to be made under this section to account for other anticipated payroll deductions.  In addition, Plan Rules may specify individual or aggregate annual or lifetime deferral limitations.

 

	
(d)  

	
Allocation to Savings Account.  An Active Participant’s deferrals pursuant to this section will be allocated to his or her Savings Account.

 

	
(e)  

	
Timing of Credits.  Deferrals of an Active Participant’s Base Salary and Bonus pursuant to this section will be credited to his or her Savings Account as of the date on which the Participant would have otherwise received the Base Salary or Bonus but for his or her deferral election pursuant to this section.

 

	
3.3  

	
Participant Deferral Credits – Fixed Period (Strategy 1) Account.

 

No Future Deferrals.  No Base Salary or Bonus deferrals may be credited to a Fixed Period (Strategy 1) Account after December 31, 2008.

 

	
3.4  

	
Participant Deferral Credits – Fixed Period (Strategy 2) Account.

 

No Future Deferrals.  No Base Salary or Bonus deferrals may be credited to a Fixed Period (Strategy 2) Account after December 31, 2008.

 

5  

  

  

	
3.5  

	
Participating Employer Credits.

 

A Participating Employer may from time to time credit the Retirement Account of any Participant with an amount determined by the Participating Employer.  If a Participating Employer chooses to make such a credit, the Company will provide the Participant with a written notice that specifies the amount of the credit, the timing of the credit and, any conditions that the Participant must satisfy to be entitled to the credit.  Credits pursuant to this Section will be made, if at all, on a Participant-by-Participant basis.  If a Participating Employer chooses to credit the Retirement Account of a Participant pursuant to this Section, the Participating Employer is not, as a result, required to make any credit to the Retirement Account of any other Participant, whether or not he or she is otherwise similarly situated.

 

	
3.6  

	
Earnings Credits.

 

	
(a)  

	
Designation of Investment Funds.  The Administrator will designate two or more investment funds that will serve as the basis for determining adjustments pursuant to this Section.  The Administrator may, from time to time, designate additional investment funds or eliminate any previously designated investment funds.  The designation or elimination of a fund pursuant to this Subsection is not a Plan amendment.  The Administrator will not be responsible in any manner to any Participant or other person for any damages, losses, liabilities, costs or expenses of any kind arising in connection with any designation or elimination of an investment fund.

 

	
(b)  

	
Participant Direction.  A Participant must direct the manner in which amounts credited to his or her Accounts pursuant to Sections 3.2, 3.3, 3.4 and 3.5 will be deemed to be invested among the investment funds designated pursuant to Subsection (a).  Amounts will be deemed to be invested in accordance with the Participant’s direction on or as soon as administratively practicable after the amounts are credited to the Participant’s Account.  To the extent a Participant fails to direct the manner in which amounts credited to his or her Accounts will be deemed to be invested, such amounts will deemed to be invested in the manner specified in Plan Rules.

 

	
(c)  

	
Change in Direction for Future Credits.  A Participant may direct a change in the manner in which future credits to his or her Accounts pursuant to Section 3.2 or 3.5 will be deemed to be invested among the investment funds designated pursuant to Subsection (a).  The direction will be effective for deferrals credited to the Participant’s Account pursuant to Sections 3.2 or 3.5 at least 30 days (or such shorter period as Plan Rules may allow) after the date on which the Administrator receives the direction from the Participant.

 

	
(d)  

	
Change in Direction for Existing Account Balance.  A Participant may direct a change in the manner in which his or her existing Account balances under Sections 3.2, 3.3, 3.4 and 3.5 are deemed to be invested among the investment funds designated pursuant to Subsection (a).  The direction will be effective as soon as administratively practicable after the date on which the Administrator receives the direction from the Participant.

 

 

6

  

  

 

	
(e)  

	
Account Adjustment.  As of the close of business on each day on which the New York Stock Exchange is open for regular business, the Administrator will cause Participants’ Accounts to be separately adjusted, in a manner determined by the Administrator to be uniform and equitable, to reflect the income, expense, gains, losses, fees and the like (other than taxes) that would have resulted since the last adjustment had the Participant’s investment directions pursuant to this Section actually been implemented.  For purposes of this Subsection, an amount will be deemed to have been invested in accordance with a Participant’s direction by the fifth business day after (i) the date on which the amount is credited to the Participant’s Account in the case of a direction pursuant to Subsection (b) or Subsection (c) or (ii) the effective date of a direction pursuant to Subsection (d).  To the extent determined by the Administrator to be necessary in conjunction with any distribution pursuant to the Plan, the Administrator will cause the Account from which the distribution is to be made to be adjusted to reflect a good faith estimate by the Administrator of any fees and other expenditures payable after the date of the distribution in connection with deemed investment activity in the Account through and including the date of the distribution.  Any such estimate is binding on the Participating Employer and the person to whom the distribution is made.

 

	
(f)  

	
Obligations and Responsibilities of Administrator.  The sole obligation of the Administrator with respect to the designation or elimination of any investment fund designated pursuant to Subsection (a) is to act in accordance with the express terms of Subsection (a).  By way of example and without limiting the previous sentence, the Administrator is not required, and no course of conduct will cause it to be required, to investigate or monitor any designated fund to any extent or for any purpose or to take or refrain from taking any action with respect to a fund because of any aspect of the performance of the fund.  The designation of a limited number of investment funds is solely for administrative convenience and in no way reflects any endorsement of any such funds by the Administrator.

 

	
(g)  

	
Deemed Investment.  Trust assets are not required to be invested in accordance with a Participant’s directions and the balance of all Accounts pursuant to the Plan will be determined pursuant to this Section and other applicable Sections of the Plan without regard to the actual amount of Trust assets.

 

	
(h)  

	
Participant Responsibilities.  Each Participant is solely responsible for any and all consequences of his or her investment directions made pursuant to this Section.  Neither any Participating Employer, any of its directors, officers or employers, the Company’s Board nor the Administrator has any responsibility to any Participant or other person for any damages, losses, liabilities, costs or expenses of any kind arising in connection with any investment direction made by a Participant pursuant to this Section.

 

 

7

  

  

 

	
3.7  

	
Vesting.

 

	
(a)  

	
Each Participant always has a fully vested nonforfeitable interest in his or her Savings Account, Fixed Period (Strategy 1) Account and Fixed Period (Strategy 2) Account.

 

	
(b)  

	
A Participant will acquire a fully vested nonforfeitable interest in his or her Retirement Account if he or she dies or becomes Disabled on or prior to his or her Termination Date.

 

	
(c)  

	
A Participant whose Retirement Account is not otherwise fully vested will acquire a vested nonforfeitable interest in the portion of his or her Retirement Account to the extent provided in the following schedule based on the Participant’s Years of Service:

 

	
 

Full Years of Service

 

Less than One Year

At least One Year

At least Two Years

At least Three Years

Four or More Years

	
Vested

Interest

 

 0%

25%

50%

75%

100 %

8  

  

  

ARTICLE 4.

DISTRIBUTION

 

	
4.1  

	
Distribution to Participant Before Termination Date.

 

	
(a)  

	
Withdrawals Due to Unforeseeable Emergency.  Prior to a Participant’s Termination Date, a distribution will be made to a Participant from his or her vested Accounts if the Participant submits a written distribution request to the Administrator and the Administrator determines that the Participant has experienced an Unforeseeable Emergency.  The amount of the distribution may not exceed the lesser of (i) the amount necessary to satisfy the emergency, as determined by the Administrator consistent with the requirements of Code section 409A(a)(2)(B)(ii) or (ii) the vested balance of the Accounts.  The distribution will be made in the form of a lump sum cash payment as soon as administratively practicable (but not more than ninety ((90) days) after the Administrator’s determination that the Participant has experienced an Unforeseeable Emergency.  Any distribution pursuant to this Subsection will be made in the following order: first, from the Participant’s Savings Account; second, from his or her Fixed Period (Strategy 1) Account; third, from his or her Fixed Period (Strategy 2) Account; and fourth, from his or her Retirement Account.

 

	
(b)  

	
Reduction of Account Balance.  The balances of a Participant’s Accounts will be reduced (but not below zero) by the amount of the distribution as of the date of the distribution.

 

	
4.2  

	
Distribution of Savings and Retirement Accounts to Participant After Termination Date.

 

	
(a)  

	
Time.  Distribution to a Participant of the vested balance of his or her Savings and Retirement Accounts will be made or commence as soon as administratively practicable (but not more than ninety (90) days) after the Participant’s Termination Date.

 

	
(b)  

	
Form.  Distribution to the Participant of the vested balance of his or her Savings and Retirement Accounts will be made in the form of a single lump sum cash payment unless the Participant has made a written election to receive his or her distribution in the form of ten annual installment payments on a properly completed election form filed with the Administrator at the time of his or her written elections to defer Base Salary or Bonus pursuant to Section 3.2.

 

	
(c)  

	
Amount.

 

	
(i)  

	
Lump Sum.  The amount of a lump sum payment from a Participant’s Savings and Retirement Accounts will be equal to the vested balances of the Accounts.

 

	
(ii)  

	
Installments.  The amount of an installment payment from a Participant’s Savings and Retirement Accounts will be determined by dividing the vested balances of the Savings and Retirement Accounts by the total number of remaining payments (including the current payment).  The undistributed portion of a Savings or Retirement Account distributed in the form of installment payments will continue to be credited with earnings in accordance with Section 3.6.

 

 

9

  

  

 

	
(d)  

	
Reduction of Account Balances.  The balance of the Accounts will be reduced (but not below zero) by the amount of the distribution as of the date of the distribution.

 

	
4.3  

	
Distribution of Fixed Period (Strategy 1) and Fixed Period (Strategy 2) Accounts to Participant.

 

	
(a)  

	
Time.  Distribution to a Participant of the vested balance of each of his or her subaccounts under the Fixed Period (Strategy 1) Account and Fixed Period (Strategy 2) Account will be made or commence on the dates elected by the Participant at the time of his or her written elections to defer Base Salary or Bonus to a Fixed Period (Strategy 1) Account or Fixed Period (Strategy 2) Account.

 

	
(b)  

	
Form.  Distribution to the Participant of the vested balance of his or her subaccounts under the Fixed Period (Strategy 1) Account or Fixed Period (Strategy 2) Account will be made in the form of a lump sum cash payment or in the form of four annual installment cash payments, as elected by the Participant at the time of his or her written election to defer Base Salary or Bonus to a Fixed Period (Strategy 1) Account or Fixed Period (Strategy 2) Account.

 

	
(c)  

	
Amount.

 

	
(i)  

	
Lump Sum.  The amount of a lump sum payment from a Participant’s subaccount under the Fixed Period (Strategy 1) Account or Fixed Period (Strategy 2) Account will be equal to the vested balance of the subaccount.

 

	
(ii)  

	
Installments.  The amount of an installment payment from a Participant’s subaccount under the Fixed Period (Strategy 1) Account or Fixed Period (Strategy 2) Account will be determined by dividing the vested balance of the subaccount under the Fixed Period (Strategy 1) Account or Fixed Period (Strategy 2) Account, as the case may be, by the total number of remaining payments (including the current payment).  The undistributed portion of a subaccount distributed in the form of installment payments will continue to be credited with earnings in accordance with Section 3.6.

 

	
(d)  

	
Reduction of Subaccount Balances.  The balance of a subaccount under the Fixed Period (Strategy 1) Account and Fixed Period (Strategy 2) Account will be reduced (but not below zero) by the amount of the distribution as of the date of the distribution.

 

 

10

  

  

 

	
4.4  

	
Distribution to Beneficiary.

 

	
(a)  

	
Time.  Distribution to a Beneficiary will be made as soon as administratively practicable (but not more than ninety (90) days) after the Participant’s death.

 

	
(b)  

	
Form.  Distribution to the Beneficiary will be made in the form of a lump sum cash payment whether or not payments had commenced to the Participant in the form of installments prior to his or her death.

 

	
(c)  

	
Amount.  The amount of a lump sum payment will be equal to the balance of the deceased Participant’s Accounts.

 

	
(d)  

	
Reduction of Account Balance.  The balances of the Accounts will be reduced (but not below zero) by the amount of the distribution as of the date of the distribution.

 

	
(e)  

	
Beneficiary Designation.

 

	
(i)  

	
Each Participant may designate, on a form furnished by the Administrator, one or more primary Beneficiaries or alternative Beneficiaries to receive all or a specified part of his or her Accounts after his or her death, and the Participant may change or revoke any such designation from time to time.  No such designation, change or revocation is effective unless executed by the Participant and received by the Administrator during the Participant’s lifetime.

 

	
(ii)  

	
If a Participant—

 

	
(1)  

	
fails to designate a Beneficiary, or

 

	
(2)  

	
revokes a Beneficiary designation without naming another Beneficiary, or

 

	
(3)  

	
designates one or more Beneficiaries, none of whom survives the Participant or exists at the time in question,

 

for all or any portion of his or her Account, such Account or portion will be paid to the Participant’s surviving spouse or, if the Participant is not survived by a spouse, to the representative of the Participant’s estate.

 

	
(iii)  

	
The automatic Beneficiaries specified above and, unless the designation otherwise specifies, the Beneficiaries designated by the Participant, become fixed as of the Participant’s death so that, if a Beneficiary survives the Participant but dies before the receipt of the payment due such Beneficiary, the payment will be made to the representative of such Beneficiary’s estate.  Any designation of a Beneficiary by name that is accompanied by a description of relationship or only by statement of relationship to the Participant is effective only to designate the person or persons standing in such relationship to the Participant at the Participant’s death.

 

 

11

  

  

 

	
4.5  

	
Nondeductibility.

 

If the Company determines in good faith that there is a reasonable likelihood that any compensation paid to a Participant by an Affiliate for a taxable year of the Affiliate would not be deductible by the Affiliate solely by reason of the limitation under Code section 162(m), to the extent deemed necessary by the Company to ensure that the entire amount of any distribution to the Participant pursuant to the Plan is deductible, notwithstanding any other provision of the Plan or any election by the Participant to the contrary, all or any portion of the distribution may be deferred.  Any amounts deferred pursuant to this Section will continue to be credited with earnings in accordance with Section 3.6.  The deferred amounts and earnings thereon will be distributed to the Participant, or to his or her Beneficiary in the case of the Participant’s death, at the earliest possible date, as determined by the Company in good faith, on which the deductibility of compensation paid or payable to the Participant for the taxable year of the Affiliate during which the distribution is made will not be limited by Code section 162(m).

 

	
4.6  

	
Payment in Event of Incapacity.

 

If any individual entitled to receive any payment under the Plan is, in the judgment of the Administrator, physically, mentally or legally incapable of receiving or acknowledging receipt of the payment, and no legal representative has been appointed for the individual, the Administrator may (but is not required to) cause the payment to be made to any one or more of the following as may be chosen by the Administrator: the Beneficiary (in the case of the incapacity of a Participant); the institution maintaining the individual; a custodian for the individual under the Uniform Transfers to Minors Act of any state; or the individual’s spouse, children, parents, or other relatives by blood or marriage.  The Administrator is not required to see to the proper application of any such payment and the payment completely discharges all claims under the Plan against the Participating Employer, the Plan and Trust to the extent of the payment.

 

	
4.7  

	
Five-Year Redeferral Election.

 

Notwithstanding Section 4.2, a Participant may elect to change the form of his or her distribution or delay the commencement date specified in a prior distribution election.  An election pursuant to this Section 4.7 will not have any effect unless the election (a) is made on a properly completed form received by the Administrator at least twelve (12) months prior to the date that the Participant’s scheduled payment was to begin, (b) is not effective until at least twelve (12) months after the date on which the election is made, and (c) delays the payment at least five (5) years beyond the distribution date originally specified.  An election under this Section 4.7 will not change the form or time of distribution upon the Participant’s death as provided under Section 4.4.

 

	
4.8  

	
Installment Distributions.

 

With respect to any installment distribution, for purposes of Code Section 409A, each installment payment shall be considered a separate payment.

 

12  

  

  

	
4.9  

	
Six-Month Suspension for Specified Employees.

 

If a Participant is a Specified Employee on his or her Termination Date, distribution under this Plan made on account of such Participant’s Termination of Employment will be suspended and not made on until the first date following the end of the six-month period following the Participant’s Termination Date.  For this purpose, a ‘Specified Employee’ means a Participant who, on his or her Termination Date, is a ‘key employee’ (as defined below), and the Company or an Affiliate has stock that is traded on an established securities market (within the meaning of Code Section 409A(a)(2)(B)).  The Participant is a ‘key employee’ during the twelve (12) month period beginning on the April 1 immediately following a calendar year at any time during which such Participant was a key employee as defined in Code Section 416(i) (without regard to Code Section 416(i)(5)) of the Company or an Affiliate.  A Participant will not be treated as a Specified Employee if he or she would not be a ‘specified employee’ as defined under Treasury regulations issued under Code Section 409A.

 

13  

  

  

ARTICLE 5.

SOURCE OF PAYMENTS; NATURE OF INTEREST

 

	
5.1  

	
Establishment of Trust.

 

Each Participating Employer will establish a Trust, or become covered by a Trust established by another Participating Employer, with an independent corporate trustee.  The Trust must (a) be a grantor trust with respect to which the Participating Employer is treated as the grantor for purposes of Code section 677, (b) not cause the Plan to be funded for purposes of Title I of ERISA and (c) provide that the Trust assets will, upon the insolvency of a Participating Employer, be used to satisfy claims of the Participating Employer’s general creditors.  The Participating Employers may from time to time transfer to the Trust cash, marketable securities or other property acceptable to the Trustee in accordance with the terms of the Trust.  The Participating Employers will pay all taxes of any kind whatsoever payable in respect of Trust assets or any transaction with respect to Trust assets, other than taxes payable by a Participant or Beneficiary, or any other person claiming by, under or through a Participant or Beneficiary, in connection with a distribution from the Plan.

 

	
5.2  

	
Source of Payments.

 

	
(a)  

	
Each Participating Employer will pay, from its general assets, the portion of any benefit pursuant to Article 4 or Section 6.3 or 6.4 attributable to a Participant’s Accounts with respect to that Participating Employer, and all costs, charges and expenses relating thereto.

 

	
(b)  

	
The Trustee will make distributions to Participants and Beneficiaries from the Trust in satisfaction of a Participating Employer’s obligations under the Plan in accordance with the terms of the Trust.  The Participating Employer is responsible for paying any benefits attributable to a Participant’s Account with respect to that Participating Employer that are not paid by the Trust.

 

	
5.3  

	
Status of Plan.

 

Nothing contained in the Plan or Trust is to be construed as providing for assets to be held for the benefit of any Participant or any other person or persons to whom benefits are to be paid pursuant to the terms of this Plan, the Participant’s or other person’s only interest under the Plan being the right to receive the benefits set forth herein.  The Trust is established only for the convenience of the Participating Employers and the Participants, and no Participant has any interest in the assets of the Trust prior to distribution of such assets pursuant to the Plan.  To the extent the Participant or any other person acquires a right to receive benefits under this Plan or the Trust, such right is no greater than the right of any unsecured general creditor of the Participating Employer.

 

	
5.4  

	
Non-assignability of Benefits.

 

The benefits payable under the Plan and the right to receive future benefits under the Plan may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any charge or legal process.

 

14  

  

  

ARTICLE 6.

AMENDMENT, TERMINATION

 

	
6.1  

	
Adoption.

 

With the prior approval of the Administrator, an Affiliate may adopt the Plan and become a Participating Employer by furnishing to the Administrator a certified copy of a resolution of its Board adopting the Plan.

 

	
6.2  

	
Amendment.

 

	
(a)  

	
Right.  The Company reserves the right to amend the Plan at any time to any extent that it may deem advisable.

 

	
(b)  

	
Method.  To be effective, an amendment must be stated in a written instrument approved in advance or ratified by the Company’s Board and executed in the name of the Company by two of its officers.

 

	
(c)  

	
Binding Effect.  An amendment adopted in accordance with Subsection (b) is binding on all interested parties as of the effective date stated in the amendment; provided, however, that no amendment may retroactively deprive any Participant, or the Beneficiary of a deceased Participant, of any benefit to which he or she is entitled under the terms of the Plan in effect immediately prior to the effective date of the amendment or the date on which the amendment is adopted, whichever is later.

 

	
(d)  

	
Certain Amendments to Earnings Credit Method.  Any amendment that materially changes the method of determining the adjustments to Participants’ Accounts pursuant to Section 3.6 is effective with respect to the portion of the Accounts attributable to credits made before the date on which the amendment is adopted only if the Company’s Board determines in good faith that on that date, it is reasonably likely that, in the long run, the new method will not result in materially lower credit rate than the old method.

 

	
(e)  

	
Applicability to Participants Who Have Terminated Employment.  The provisions of the Plan in effect on a Participant’s Termination Date will, except as otherwise expressly provided by a subsequent amendment, continue to apply to such Participant.

 

	
6.3  

	
Termination of Participation.

 

Notwithstanding any other provision of the Plan to the contrary, if determined by the Administrator to be necessary to ensure that the Plan is exempt from ERISA to the extent contemplated by Section 1.3, or upon the Administrator’s determination that a Participant’s interest in the Plan has been or is likely to be includable in the Participant’s gross income for federal income tax purposes prior to the actual payment of benefits pursuant to the Plan, the Administrator may take any or all of the following steps:

 

	
(a)  

	
terminate the Participant’s future participation in the Plan;

 

 

15

  

  

 

	
(b)  

	
cause the Participant’s entire vested interest in the Plan to be distributed to the Participant in the form of an immediate lump sum cash payment; and/or

 

	
(c)  

	
transfer the benefits that would otherwise be payable pursuant to the Plan for all or any of the Participants to a new plan that is similar in all material respects (other than those which require the action in question to be taken).

 

	
6.4  

	
Termination.

 

The Company reserves the right to terminate the Plan in its entirety at any time.  Each Participating Employer reserves the right to cease its participation in the Plan at any time.  The Plan will terminate in its entirety or with respect to a particular Participating Employer as of the date specified by the Company or such Participating Employer in a written instrument adopted in the same manner as an amendment.  Upon the termination of the Plan in its entirety or with respect to any Participating Employer, the Company or Participating Employer, as the case may be, will either cause (a) any benefits to which Participants have become entitled prior to the effective date of the termination to continue to be paid in accordance with the provisions of Article 4 or (b) the vested Account balances of any or all Participants, or the Beneficiaries of any or all deceased Participants, to be distributed in the form of an immediate lump sum payment.  In all cases distribution shall be made in accordance with and subject to the requirements of Code section 409A.

 

16  

  

  

ARTICLE 7.

DEFINITIONS, CONSTRUCTION AND INTERPRETATION

 

	
7.1  

	
Cross Reference.

 

References within a Section of the Plan to a particular Subsection refer to that Subsection within the same Section and references within a Section or Subsection to a particular clause refer to that clause within the same Section or Subsection, as the case may be.  The definitions and rules of construction and interpretation set forth in this article apply in construing the Plan unless the context otherwise indicates.

 

	
7.2  

	
Governing Law.

 

To the extent that state law is not preempted by the provisions of ERISA, or any other laws of the United States, all questions pertaining to the construction, validity, effect and enforcement of the Plan will be determined in accordance with the internal, substantive laws of the State of Minnesota without regard to the conflict of law rules of the State of Minnesota or any other jurisdiction.

 

	
7.3  

	
Headings.

 

The headings of articles and Sections are included solely for convenience of reference; if there exists any conflict between such headings and the text of the Plan, the text will control.

 

	
7.4  

	
Number and Gender.

 

Wherever appropriate, the singular may be read as the plural, the plural may be read as the singular and one gender may be read as the other gender.

 

	
7.5  

	
Definitions.

 

The terms in this Section when used with initial capitalization have the following meanings, unless the context otherwise indicates.

 

2012 Partial Plan Year Service Period.  “2012 Partial Plan Year Service Period” means the period described in Section 2.1(a)(ii).

 

Account.  “Account” means the bookkeeping account maintained with respect to a Participant pursuant to Section 3.1 and may mean the Savings Account, Fixed Period (Strategy 1) Account, Fixed Period (Strategy 2) Account, or Retirement Account or all of them, as the context requires.

 

Active Participant.  “Active Participant” with respect to a Plan Year means a Qualified Employee who is eligible to make deferrals pursuant to the Plan for the Plan Year (or portion of the Plan Year).

 

Administrator.  “Administrator” means the Company or the person to whom administrative duties are delegated pursuant to the provisions of Section 8.1, as the context requires.

 

Affiliate.  “Affiliate” means the Company and any other company or trade or business, whether or not incorporated, that together with the Company is treated as a single employer pursuant to Code section 414(b) or 414(c).

 

 

17

  

  

 

Base Salary.  “Base Salary” for a Plan Year means the base salary payable in cash to an Active Participant by a Participating Employer for the Participant’s services during the Plan Year as a Qualified Employee, net of any contributions or deductions specified in Plan Rules.  Base Salary shall not include base salary payable for services performed following a Participant’s Termination Date.

 

Beneficiary.  “Beneficiary” with respect to a Participant is the person designated or otherwise determined under the provisions of Section 4.4(e) as the distributee of benefits payable after the Participant’s death.  A person designated or otherwise determined to be a Beneficiary under the terms of the Plan has no interest in or right under the Plan until the Participant in question has died.  A Beneficiary will cease to be such on the day on which all benefits to which he, she or it is entitled under the Plan have been distributed.

 

Board.  “Board” means the board of directors of the Affiliate in question.  When the Plan provides for an action to be taken by the Board, the action may be taken by any committee or individual authorized to take such action pursuant to a proper delegation by the board of directors in question.

 

Bonus.  “Bonus” for a Plan Year means the annual bonus earned by an Active Participant during the Plan Year for his or her services during the Plan Year as a Qualified Employee and paid in cash to the Participant by a Participating Employer during the Plan Year first following the Plan Year, net of any contributions or deductions specified in Plan Rules.

 

Code.  “Code” means the Internal Revenue Code of 1986, as amended.  Any reference to a specific provision of the Code includes a reference to that provision as it may be amended from time to time and to any successor provision.

 

Company.  “Company” means Select Comfort Corporation, a Minnesota corporation.

 

Disabled.  A Participant will be considered to be ‘Disabled’ only if the Participant, by reason of 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 twelve (12) months (i) is unable to engage in any substantial gainful activity, (ii) is receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company or an Affiliate, or (iii) is determined to be totally disabled by the Social Security Administration; provided, however, in all cases the Employee is considered ‘Disabled’ within the meaning of Code Section 409A(a)(2)(C).  The Board shall determine whether the Employee is Disabled on the basis of medical evidence satisfactory to the Board.

 

ERISA.  “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.  Any reference to a specific provision of ERISA includes a reference to that provision as it may be amended from time to time and to any successor provision.

 

Fixed Period (Strategy 1) Account.  “Fixed Period (Strategy 1) Account” with respect to a Participant means the Account and subaccounts maintained on his or her behalf pursuant to Section 3.1(a)(ii).

 

Fixed Period (Strategy 2) Account.  “Fixed Period (Strategy 2) Account” with respect to a Participant means the Account and subaccounts maintained on his or her behalf pursuant to Section 3.1(a)(iii).

 

 

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Participant.  “Participant” means a current or former Active Participant to whose Account amounts have been credited pursuant to Article 3 and who has not ceased to be a Participant pursuant to Section 2.6.

 

Participating Employer.  “Participating Employer” means the Company and any other Affiliate that has adopted the Plan, or all of them collectively, as the context requires.  An Affiliate will cease to be a Participating Employer upon a termination of the Plan as to its employees and the satisfaction in full of all of its obligations under the Plan or upon its ceasing to be an Affiliate.

 

Plan.  “Plan” means the Select Comfort Executive Investment Plan, as from time to time amended or restated.

 

Plan Rules.  “Plan Rules” are rules, policies, practices or procedures adopted by the Administrator pursuant to Section 8.2.

 

Plan Year.  ‘Plan Year’ means the calendar year; provided, that for purposes of Sections 2.2 and 2.3 the Plan Year also means the 2012 Partial Plan Year Service Period.

 

Qualified Employee.  “Qualified Employee” means an individual who performs services for a Participating Employer as an employee of the Participating Employer (as classified by the Participating Employer at the time the services are performed without regard to any subsequent reclassification) and who is determined by the Administrator to be in a select group of (a) management or (2) highly compensated employees of the Participating Employer.

 

Retirement Account.  “Retirement Account” with respect to a Participant means the Account maintained on his or her behalf pursuant to Section 3.1(a)(iv).

 

Savings Account.  “Savings Account” with respect to a Participant means the Account maintained on his or her behalf pursuant to Section 3.1(a)(i).

 

Termination Date.  “Termination Date” means the date on which a Participant has completely severed his or her employment relationship with the Participating Employer and all other Affiliates provided such termination constitutes a separation from service under Code Section 409A, or the Participant has experienced a change in his or her employment relationship that constitutes a ‘separation from service’ under Code Section 409A.  A Participant’s employment will be treated as remaining intact while the Participant is on a military leave, a sick leave or other bona fide leave of absence (pursuant to which there is a reasonable expectation that the Participant will return to perform services for a Participating Employer or other Affiliate) but only if the period of such leave does not exceed six (6) months, or if longer, so long as the Participant retains a right to reemployment with a Participating Employer or other Affiliate under applicable statute or by contract.

 

Trust.  “Trust” means any trust or trusts established by a Participating Employer pursuant to Section 5.1.

 

Trustee.  “Trustee” means the independent corporate trustee or trustees that at the relevant time has or have been appointed to act as Trustee of the Trust.

 

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Unforeseeable Emergency.  “Unforeseeable Emergency” means an unanticipated emergency that is caused by an event beyond the Participant’s control resulting in a severe financial hardship that cannot be satisfied through other means.  The existence of an unforeseeable emergency will be determined by the Administrator in its sole discretion.  An Unforeseeable Emergency will exist only if and to the extent the Administrator determines that it constitutes an ‘unforeseeable emergency’ under Code Section 409A.

 

Years of Service.  “Years of Service” for purposes of determining a Participant’s vested interest in his or her Retirement Account pursuant to Section 3.7, means the sum of a Qualified Employee’s periods of service as an employee with the Affiliates (measured in the case of any Affiliate from not earlier than the date on which it became an Affiliate), commencing as of the Qualified Employee’s employment commencement date and ending with the Qualified Employee’s Termination Date.

 

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ARTICLE 8.

ADMINISTRATION

 

	
8.1  

	
Administrator.

 

The general administration of the Plan and the duty to carry out its provisions is vested in the Company.  The Company may delegate such duty or any portion thereof to a named person or persons and may from time to time revoke such authority and delegate it to another person or persons.

 

	
8.2  

	
Plan Rules and Regulations.

 

The Administrator has the discretionary power and authority to make such Plan Rules as the Administrator determines to be consistent with the terms, and necessary or advisable in connection with the administration, of the Plan and to modify or rescind any such Plan Rules.

 

	
8.3  

	
Administrator’s Discretion.

 

The Administrator has the discretionary power and authority to make all determinations necessary for administration of the Plan, except those determinations that the Plan requires others to make, and to construe, interpret, apply and enforce the provisions of the Plan and Plan Rules whenever necessary to carry out its intent and purpose and to facilitate its administration, including, without limitation, the discretionary power and authority to remedy ambiguities, inconsistencies, omissions and erroneous benefit calculations.  In the exercise of its discretionary power and authority, the Administrator will treat all similarly situated persons uniformly.

 

	
8.4  

	
Specialist’s Assistance.

 

The Administrator may retain such actuarial, accounting, legal, clerical and other services as may reasonably be required in the administration of the Plan, and may pay reasonable compensation for such services.  All costs of administering the Plan will be paid by the Participating Employers.

 

	
8.5  

	
Indemnification.

 

The Participating Employers jointly and severally agree to indemnify and hold harmless, to the extent permitted by law, each director, officer, and employee of any Affiliates against any and all liabilities, losses, costs and expenses (including legal fees) of every kind and nature that may be imposed on, incurred by, or asserted against such person at any time by reason of such person’s services in connection with the Plan, but only if such person did not act dishonestly or in bad faith or in willful violation of the law or regulations under which such liability, loss, cost or expense arises.  The Participating Employers have the right, but not the obligation, to select counsel and control the defense and settlement of any action for which a person may be entitled to indemnification under this provision.

 

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8.6  

	
Benefit Claim Procedure.

 

	
(a)  

	
The Administrator will notify a Participant in writing, within 90 days of the Participant’s written application for benefits, of the Participant’s eligibility or noneligibility for benefits under the Plan.  If the Administrator determines that a Participant is not eligible for benefits or full benefits, the notice will:

 

	
(1)  

	
state the specific reasons for the denial of any benefits;

 

	
(2)  

	
provide a specific reference to the provision of the Plan on which the denial is based;

 

	
(3)  

	
provide a description of any additional information or material necessary for the claimant to perfect the claim, and a description of why it is needed;

 

	
(4)  

	
state that the claimant will be provided, on request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim;

 

	
(5)  

	
state the claimant’s right to bring a civil action under ERISA Section 502(a) following a continued denial of a claim after appeal review; and

 

	
(6)  

	
provide an explanation of the Plan’s claims review procedure and other appropriate information as to the steps to be taken if the Participant wishes to have the claim reviewed.  If the Administrator determines that there are special circumstances requiring additional time to make a decision, the Administrator will notify the Participant of the special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional 90-day period.

 

	
(b)  

	
If a Participant is determined by the Administrator not to be eligible for benefits or if the Participant believes that he or she or she is entitled to greater or different benefits, the Participant will be provided the opportunity to have his or her claim reviewed by the Administrator by filing a petition for review with the Administrator within 60 days after the Participant receives the notice issued by the Administrator.  The petition must state the specific reasons the Participant believes he or she is entitled to benefits or greater or different benefits.  Within 60 days after the Administrator receives the petition, the Administrator will give the Participant (and his or her counsel, if any) an opportunity to present his or her position to the Administrator in writing, and the Participant (or his or her counsel) may review the pertinent documents, and the Administrator will notify the Participant of its decision in writing within such 60-day period, stating specifically the basis of the decision written in a manner calculated to be understood by the Participant and the specific provisions of the Plan on which the decision is based.  If because of special circumstances requiring additional time to make a decision, the 60-day period is not sufficient, the decision may be deferred for up to another 60-day period at the election of the Administrator, but notice of this deferral must be given to the Participant.

 

 

22

  

  

 

	
(c)  

	
The same procedure applies to the Beneficiary of a deceased Participant.

 

	
(d)  

	
A claimant must exhaust the procedure described in this section before pursuing the claim in any other proceeding.

 

	
8.7  

	
Disputes.

 

	
(a)  

	
In the case of a dispute between a Participant or his or her Beneficiary and a Participating Employer, the Administrator or other person relating to or arising from the Plan, the United States District Court for the District of Minnesota is a proper venue for any action initiated by or against the Participating Employer, Administrator or other person and such court will have personal jurisdiction over any Participant or Beneficiary named in the action.

 

	
(b)  

	
Regardless of where an action relating to or arising from the participation in the Plan by any Participant is pending, the law as stated and applied by the United States Court of Appeals for the Eighth Circuit or the United States District Court for the District of Minnesota will apply to and control all actions relating to the Plan brought against the Plan, a Participating Employer, the Administrator or any other person or against any such Participant or his or her Beneficiary.

 

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ARTICLE 9.

MISCELLANEOUS

 

	
9.1  

	
Withholding and Offsets.

 

The Participating Employers and the Trustee retain the right to withhold from any compensation, deferral and/or benefit payment pursuant to the Plan, any and all income, employment, excise and other tax as the Participating Employers or Trustee deems necessary and the Participating Employers may offset against amounts then payable to a Participant or Beneficiary under the Plan any amounts then owing to the Participating Employers by such Participant or Beneficiary.

 

	
9.2  

	
Other Benefits.

 

Neither amounts deferred nor amounts paid pursuant to the Plan constitute salary or compensation for the purpose of computing benefits under any other benefit plan, practice, policy or procedure of a Participating Employer unless otherwise expressly provided thereunder.

 

	
9.3  

	
No Warranties Regarding Tax Treatment.

 

The Participating Employers make no warranties regarding the tax treatment to any person of any deferrals or payments made pursuant to the Plan and each Participant will hold the Administrator and the Participating Employers and their officers, directors, employees, agents and advisors harmless from any liability resulting from any tax position taken in good faith in connection with the Plan.

 

	
9.4  

	
No Rights to Continued Employment or Service Created.

 

Neither the establishment of nor participation in the Plan gives any individual the right to continued employment or service on the Company’s board of directors or limits the right of the Participating Employer to discharge, transfer, demote, modify terms and conditions of employment or service on the Company’s board of directors or otherwise deal with any individual without regard to the effect which such action might have on him or her with respect to the Plan.

 

	
9.5  

	
Special Provisions.

 

Special provisions of the Plan applicable only to certain Participants may be set forth on an exhibit to the Plan adopted in the same manner as an amendment to the Plan.  In the event of a conflict between the terms of the exhibit and the terms of the Plan, the exhibit controls.  Except as otherwise expressly provided in the exhibit, the generally applicable terms of the Plan control all matters not covered by the exhibit.

 

	
9.6  

	
Successors.

 

Except as otherwise expressly provided in the Plan, all obligations of the Participating Employers under the Plan are binding on any successor to the Participating 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 Participating Employer.

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