<PAGE> 1
As filed with the Securities and Exchange Commission on June 29, 1999
Registration No. 33-___
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
HCR MANOR CARE, INC.
(Exact name of registrant as specified in its charter)
34-1687107
Delaware (I.R.S. Employer
(State of incorporation) Identification Number)
HCR MANOR CARE, INC.
333 North Summit Street
Toledo, Ohio 43604-2617
(419) 252-5500
(Address of principal executive offices)
MANOR CARE, INC.
RETIREMENT SAVINGS & INVESTMENT PLAN
(FULL TITLE OF THE PLAN)
------------------
R. Jeffrey Bixler Copies to: Mark D. Gerstein
Vice President, General Counsel and Secretary Latham & Watkins
HCR Manor Care, Inc. Sears Tower, Suite 5800
333 North Summit Street Chicago, Illinois 60606
Toledo, Ohio 43604-2617 (312) 876-7700
(419) 252-5500 Counsel to Registrant
(Name, address, including zip code, and
telephone number, including area code, of agent for service)
--------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
<S> <C> <C> <C> <C>
Title of each class of Amount Proposed maximum Proposed maximum Amount of
securities to be registered(1) to be registered offering price per share (2) aggregate offering price registration fee
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per share 1,300,000 Shares $25.47 $33,111,000.00 $9,204.86
===================================================================================================================================
</TABLE>
(1) In addition, pursuant to Rule 416(c) of the Securities Act of 1933, this
registration statement also covers an indeterminate amount of interests to
be offered or sold pursuant to the employee benefit plan described herein.
(2) Estimated solely for the purpose of calculating the registration fee.
Pursuant to Rule 457(h), the proposed maximum offering price per share is
based upon the average of the high and low prices reported on the New York
Stock Exchange for the Company's Common Stock on June 25, 1999, which was
$25.47 per share.
================================================================================
<PAGE> 2
PART I
Item 1. Plan Information
Not required to be filed with this Registration Statement.
Item 2. Registrant Information and Employee Plan Annual Information
Not required to be filed with this Registration Statement.
PART II
Item 3. Incorporation of Documents by Reference
The documents listed below have been filed by HCR Manor Care,
Inc., a Delaware corporation (the "Company"), with the Securities and Exchange
Commission (the "Commission") and are incorporated in this Registration
Statement by reference:
a. The Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998;
b. The Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1999;
c. All other reports filed by the Company pursuant to
Section 13(a) and 15(d) of the Securities Exchange Act of 1934 since the end of
the Company's fiscal year ended December 31, 1998; and
d. The description of the Company's Common Stock
contained in the Company's Registration Statement on Form 8-A filed on September
12, 1991 pursuant to Section 12 of the Securities Exchange Act of 1934,
including any amendments or reports filed for the purpose of updating such
description.
All documents filed by the Company or the Manor Care, Inc.
Retirement Savings & Investment Plan (the "Plan") pursuant to Section 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934 prior to the filing
of a post-effective amendment which indicates that all securities offered have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference in this Registration Statement and to be
part hereof from the date of filing such documents.
Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Registration Statement to the extent that a
statement contained herein, or in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
<PAGE> 3
Item 4. Description of Securities
Not required to be filed with this Registration Statement.
Item 5. Interests of Named Experts and Counsel
The validity of the issuance of the shares of common stock
registered hereby has been passed upon by R. Jeffrey Bixler who serves as
Vice President, General Counsel and Secretary of the Company.
Item 6. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of
Delaware (the "DGCL") provides, in summary, that Delaware corporations such as
the Company may, under certain circumstances, indemnify their directors and
officers, as well as other employees and individuals, against all expenses and
liabilities (including attorneys' fees) incurred by them as a result of suits
brought against them in their capacity as a director, officer, employee or agent
of the corporation, if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, if they had no reasonable
cause to believe their conduct was unlawful. A corporation may also indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that the person is or was
a director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation or other enterprise against expenses (including attorneys'
fees) incurred by the person in connection with the defense or settlement of
such action if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation except that no indemnification may be made against expenses in
respect of any claim, issue or matter as to which they shall have been adjudged
to be liable to the corporation unless and only to the extent that the court in
which such action or suit was brought shall determine upon application that
despite the adjudication of liability but in view of all the circumstances of
the case, they are fairly and reasonably entitled to indemnity for such expenses
which such court shall deem proper. Any such indemnification may be made by the
corporation only as authorized in each specific case upon a determination by the
stockholders or disinterested directors that indemnification is proper because
the indemnitee has met the applicable standard of conduct. Article III, Section
14 of the Company's Amended and Restated By-Laws entitles officers and directors
of the Company to indemnification to the full extent permitted by Section 145 of
DGCL, as the same may be supplemented or amended from time to time.
Article III, Section 14 of the Company's Amended and Restated
By-Laws provides:
Section 14. INDEMNIFICATION. The Corporation shall
indemnify every person who was or is a party or is or
was threatened to be made a party to any action,
suit, or proceeding, whether civil, criminal,
administrative or investigative, by reason of the
fact that he is or was a director or officer of the
Corporation or, while a director or officer of the
Corporation, is or was serving at the request of the
Corporation as a director, officer, employee, agent
or trustee of another corporation, partnership, joint
venture, trust, employee benefit plan or other
enterprise, against expenses (including counsel
fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding, to
the full extent permitted by applicable law. Expenses
incurred by a person who is or was a director or
<PAGE> 4
officer of the Corporation in appearing at,
participating in or defending any such action, suit
or proceeding shall be paid by the Corporation at
reasonable intervals in advance of the final
disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the
director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to
be indemnified by the Corporation as authorized by
this Section 14. If a claim under this Section 14 is
not paid in full by the Corporation within ninety
days after a written claim has been received by the
Corporation, the claimant may at any time thereafter
bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be paid also the
expense of prosecuting such claim. It shall be a
defense to any such action (other than an action
brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final
disposition where the required undertaking, if any is
required, has been tendered to the Corporation) that
the claimant has not met the standards of conduct
which make it permissible under the Delaware General
Corporation Law or other applicable law for the
Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors (or any
committee thereof), independent legal counsel, or its
stockholders) to have made a determination prior to
the commencement of such action that indemnification
of the claimant is proper in the circumstances
because he has met the applicable standard of conduct
set forth in the Delaware General Corporation Law or
other applicable law, nor an actual determination by
the Corporation (including its Board of Directors (or
a committee thereof), independent legal counsel, or
its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant
has not met the applicable standard of conduct.
The Company has entered into separate indemnification
agreements with directors and officers of the Company, pursuant to which the
Company will indemnify such directors and officers to the fullest extent
permitted by Delaware law, as the same may be amended from time to time.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
Item 7. Exemption from Registration Claimed
Not applicable.
<PAGE> 5
Item 8. Exhibits
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
4 Manor Care, Inc. Retirement Savings and Investment Plan
5 Opinion of R. Jeffrey Bixler, General Counsel of the Company
23.1 Consent of Ernst & Young LLP
23.2 Consent of R. Jeffrey Bixler (included in the opinion filed as Exhibit 5)
</TABLE>
Pursuant to Item 8 of the instructions to Form S-8, the
undersigned registrant hereby undertakes to submit the Manor Care, Inc.
Retirement Savings and Investment Plan, and any amendment thereto, to the
Internal Revenue Service ("IRS") in a timely manner, and has made or will make
all changes required by the IRS in order to qualify such plans under Section
401(a) of the Internal Revenue Code of 1986, as amended.
Item 9. Undertakings
a. The undersigned registrant and the Plan hereby
undertake:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
Registration Statement;
(i) To include any prospectus required
by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts
or events arising after the effective date of the
Registration Statement (or the most recent
post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change
in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered
(if the total dollar value of securities offered
would not exceed that which was registered) and any
deviation from the low or high end of the estimated
maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent
change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table
in the effective registration statement;
(iii) To include any material information
with respect to the plan of distribution not
previously disclosed in the Registration Statement or
any material change to such information in the
Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
shall not apply to information contained in periodic reports
filed by the registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
<PAGE> 6
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.
b. The undersigned registrant and the Plan hereby undertake
that, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934
and each filing of the Plan's annual report pursuant to section 15(d)
of the Securities Exchange Act of 1934 that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
c. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933 and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
<PAGE> 7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Toledo, State of Ohio, on June 28, 1999.
HCR MANOR CARE, INC.
By: /s/ R. Jeffrey Bixler
---------------------------------------
R. Jeffrey Bixler, Vice President,
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
)
/s/ Stewart Bainum, Jr. Chairman of the Board, Director )
- ------------------------------------ )
Stewart Bainum, Jr. )
)
)
/s/ Joseph H. Lemieux Director )
- ------------------------------------ )
Joseph H. Lemieux ) June 28, 1999
)
)
/s/ William H. Longfield Director )
- ------------------------------------ )
William H. Longfield )
)
)
/s/ Frederic V. Malek Director )
- ------------------------------------ )
Frederic V. Malek )
)
)
/s/ Geoffrey G. Meyers Executive Vice President and Chief )
- ------------------------------------ Financial Officer (Principal Financial )
Geoffrey G. Meyers Officer) )
)
)
/s/ Spencer C. Moler Vice President and Controller (Principal )
- ------------------------------------ Accounting Officer) )
Spencer C. Moler )
)
/s/ Paul A. Ormond President and Chief Executive Officer )
- ------------------------------------ (Principal Executive Officer); Director )
Paul A. Ormond )
)
)
/s/ Robert G. Siefers Director )
- ------------------------------------ )
Robert G. Siefers )
)
)
/s/ Stewart Bainum Director )
- ------------------------------------ )
Stewart Bainum )
)
)
/s/ Gail R. Wilensky Director )
- ------------------------------------ )
Gail R. Wilensky )
)
)
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ M. Keith Weikel Senior Executive Vice President and Chief )
- ------------------------------------ Operating Officer; Director )
M. Keith Weikel )
)
)
/s/ Thomas L. Young Director )
- ------------------------------------ )
Thomas L. Young )
</TABLE>
Pursuant to the requirements of the Securities Act of 1933,
the plan administrator has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Toledo, State of Ohio, on June 28, 1999.
MANOR CARE, INC. RETIREMENT SAVINGS &
INVESTMENT PLAN
By: HCR MANOR CARE, INC.
EMPLOYEE BENEFITS COMMITTEE
PLAN ADMINISTRATOR
By: /s/ Wade B. O'Brian
----------------------------
Name: Wade B. O'Brian
--------------------------
Title: Chairman
-------------------------
<PAGE> 9
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- ----
<S> <C> <C>
*4 Manor Care, Inc. Retirement Savings and Investment Plan E-_
*5 Opinion of R. Jeffrey Bixler E-_
*23.1 Consent of Ernst & Young LLP E-_
*23.2 Consent of R. Jeffrey Bixler (included in opinion filed as Exhibit 5) E-_
</TABLE>
- ----------------------
* Filed herewith
<PAGE> 1
Exhibit 4
MANOR CARE, INC. RETIREMENT
SAVINGS & INVESTMENT PLAN
TABLE OF CONTENTS
-----------------
Page
----
SECTION ONE PURPOSE OF PLAN......................................... 1
A. Purpose............................................................ 1
B. Voluntary Participation............................................ 2
SECTION TWO DEFINITIONS............................................. 2
SECTION THREE REQUIREMENTS FOR ELIGIBILITY............................ 22
SECTION FOUR PARTICIPATION IN THE PLAN............................... 23
A. Participants in Predecessor Plans.................................. 23
B. Participation in the Cash or Deferred Arrangement.................. 24
C. Information to Participants........................................ 24
D. Rollover Amount.................................................... 24
SECTION FIVE ADMINISTRATION OF THE PLAN.............................. 25
A. Responsibility for Administration of the Plan...................... 25
B. Appointment of Administrative Committee............................ 25
C. Responsibility for Administration of the Trust Fund................ 26
D. Delegation of Powers............................................... 26
E. Records............................................................ 26
F. General Administrative Powers...................................... 26
G. Appointment of Professional Assistance and Investment Manager...... 27
H. Actions by the Administrative Committee............................ 28
I. Directives of the Administrative Committee......................... 28
J. Discretionary Acts................................................. 28
K. Payment of Fees and Expenses....................................... 29
L. Plan Administrator................................................. 29
M. Allocation and Delegation of Administrative
Committee Responsibilities......................................... 29
SECTION SIX CONTRIBUTIONS........................................... 30
A. Salary Reduction Contributions..................................... 30
B. Company Matching Contributions..................................... 32
C. Nondiscrimination Rules Applicable to Salary
Reduction Contributions............................................ 35
D. Nondiscrimination Rules Applicable to Company
Matching Contributions............................................. 38
E. Additional Adjustments............................................. 40
-i-
<PAGE> 2
Page
----
SECTION SEVEN ALLOCATION TO PARTICIPANTS' ACCOUNTS.................... 41
A. Maintenance of Accounts............................................ 41
B. Method of Allocating Salary Reduction Contributions................ 41
C. Method of Allocating Company Matching Contributions................ 42
D. Limitation on Annual Additions..................................... 42
E. Limitations on Annual Additions Due to
Participation in Other Defined Contribution Plans.................. 45
F. Limitations on Annual Additions Due to
Participation in Defined Benefit Plans............................. 45
G. Definitions Relating to Annual Additions Limitations............... 46
H. Change of Employee Status.......................................... 48
SECTION EIGHT EVALUATION OF TRUST FUND................................ 49
SECTION NINE PARTICIPANTS' ACCOUNTS.................................. 50
A. Separate Accounts.................................................. 50
B. Accounts of Participants Transferred to an
Affiliated Company................................................. 51
C. Annual Adjustment of Participant's Accounts........................ 51
D. Investment of Contributions........................................ 51
E. Treatment of Participants Transferred to In-Home
Health, Inc........................................................ 53
F. Special Rules Regarding Choice Hotels International, Inc. Stock.... 54
SECTION TEN COMMON TRUST FUND....................................... 55
SECTION ELEVEN DISABILITY BENEFITS..................................... 55
A. Disability Retirement Benefits..................................... 55
B. Determination of Disability........................................ 55
SECTION TWELVE RETIREMENT BENEFITS..................................... 56
SECTION THIRTEEN DEATH BENEFITS.......................................... 57
A. Death Benefits..................................................... 57
B. Designation of Beneficiaries....................................... 57
C. Failure of Participant to Designate................................ 58
D. Beneficiaries' Rights.............................................. 58
-ii-
<PAGE> 3
Page
----
SECTION FOURTEEN EMPLOYMENT TERMINATION BENEFITS......................... 59
A. Vesting Upon Termination of Employment............................. 59
B. Counting Years of Service.......................................... 59
C. Forfeiture of Non-Vested Amount.................................... 60
SECTION FIFTEEN PAYMENT OF BENEFITS..................................... 62
A. Retirement, Disability and Death Benefits.......................... 62
B. Employment Termination Benefits.................................... 63
C. Methods of Payment of Benefits..................................... 66
D. Required Distributions............................................. 69
E. Distribution of Small Account Balances............................. 71
F. Loans to Participants.............................................. 72
G. Benefits of Persons Who Cannot Be Located.......................... 74
H. Pre-Retirement Distributions....................................... 76
I. Post-Age 59 1/2 Withdrawals........................................ 76
J. Distribution for Minor Beneficiary................................. 77
K. Hardship Withdrawals............................................... 77
L. Eligible Rollover Distributions.................................... 78
SECTION SIXTEEN RIGHT OF FIRST REFUSAL.................................. 80
SECTION SEVENTEEN STOCK CERTIFICATE LEGEND................................ 82
SECTION EIGHTEEN BENEFIT CLAIMS PROCEDURE................................ 82
A. Claims for Benefits................................................ 82
B. Request for Review of Denial....................................... 83
C. Decision on Review of Denial....................................... 83
SECTION NINETEEN INALIENABILITY OF BENEFITS.............................. 84
A. In General......................................................... 84
B. Qualified Domestic Relations Orders................................ 84
SECTION TWENTY INVESTMENT OF TRUST FUND................................ 86
SECTION TWENTY-ONE AMENDMENT OF THE PLAN................................... 87
SECTION TWENTY-TWO PERMANENCY OF THE PLAN.................................. 88
A. Right to Terminate Plan............................................ 88
B. Merger or Consolidation of Plan.................................... 88
-iii-
<PAGE> 4
Page
----
SECTION TWENTY-THREE DISCONTINUANCE OF CONTRIBUTIONS AND TERMINATION.... 89
A. Discontinuance of Contributions.................................... 89
B. Termination of Plan and Trust...................................... 89
C. Rights to Benefits Upon Termination of Plan or
Complete Discontinuance of Contributions........................... 90
D. Transfer of Accounts to the Choice Hotels
International, Inc. Retirement Savings and
Investment Plan.................................................... 90
SECTION TWENTY-FOUR STATUS OF EMPLOYMENT RELATIONS..................... 91
SECTION TWENTY-FIVE BENEFITS PAYABLE BY TRUST.......................... 92
SECTION TWENTY-SIX EXCLUSIVE BENEFIT OF TRUST FUND.................... 92
A. Limitation Upon Reversions......................................... 92
B. Mistake of Fact.................................................... 92
SECTION TWENTY-SEVEN APPLICABLE LAW..................................... 93
SECTION TWENTY-EIGHT INTERPRETATION OF THE PLAN AND TRUST............... 93
SECTION TWENTY-NINE ADOPTION OF PLAN BY AFFILIATED COMPANIES........... 93
SECTION THIRTY TOP-HEAVY CONTINGENCY PROVISIONS................... 94
A. Application........................................................ 94
B. Definition of Top-Heavy Plan....................................... 94
C. Consideration of Multiple Plans in Determining
Top-Heavy Status of Plan........................................... 96
D. Minimum Benefits................................................... 98
E. Special Vesting Rules.............................................. 99
F. Adjustment of Section 415 Limitations in Plan
Years in Which the Plan Is a Top-Heavy Plan........................ 100
-iv-
<PAGE> 5
THE MANOR CARE, INC.
RETIREMENT SAVINGS AND INVESTMENT PLAN
--------------------------------------
Effective January 1, 1992, Manor Care, Inc. (the "Sponsoring Company")
amended and restated the Manor Care, Inc. Employee Stock Ownership, Profit
Sharing and Retirement Plan and Trust (the "Prior Plan") and renamed the plan
the Manor Care, Inc. Retirement Savings and Investment Plan (the "Plan"). Also
effective as of January 1, 1992, no further contributions accrued under the
Manor Healthcare Corp. Employee Stock Ownership, Profit Sharing and Retirement
Plan and Trust (the "Manor Healthcare Plan") and the Quality Inns Employees'
Profit-Sharing, Savings and Retirement Plan (the "Quality Inns Plan") and the
assets of the Manor Healthcare Plan and the Quality Inns Plan were subsequently
transferred to this Plan. Effective November 1, 1996, the Sponsoring Company
hereby amends and restates the Plan in accordance with the terms and conditions
set forth below.
SECTION ONE
PURPOSE OF PLAN
---------------
DESIGNATION. The Plan is designated the "Manor Care, Inc. Retirement
Savings and Investment Plan."
A. PURPOSE. The purpose of the Plan is to provide retirement,
disability, death and employment termination benefits for the Participating
Companies' eligible employees and their beneficiaries. To provide such benefits,
the Participating Companies propose to make contributions to a trust established
in accordance with the requirements of law. Such contributions and any income
derived therefrom shall be for the exclusive benefit
- 1 -
<PAGE> 6
of the Participating Companies' employees and their beneficiaries and shall not
be used for, or diverted to, any other purpose.
B. VOLUNTARY PARTICIPATION. An Employee who completes the eligibility
requirements set forth in Section Three of the Plan may voluntarily elect to
participate in the Plan by notifying the Administrative Committee as described
in subparagraph (i) of Paragraph A of Section Six.
SECTION TWO
DEFINITIONS
-----------
As used in the Plan:
A. "Accounts" shall mean a Participant's Company Contribution Account, his
Salary Reduction Contribution Account, and, if applicable, his Company Stock
Account, his Voluntary Account and/or his Rollover Account. The term "Accounts"
shall also include any additional accounts established by the Administrative
Committee, in its sole discretion.
B. "Administrative Committee" shall mean the person or persons or entity
appointed to administer the Plan in accordance with the provisions of Section
Five of the Plan. Notwithstanding the foregoing, "Administrative Committee" may
also include any individual or committee to which the Administrative Committee
has delegated authority to act with respect to a specific activity. The
Administrative Committee shall be the "named fiduciary," as referred to in
Section 402(a) of ERISA, with respect to the management, operation and
administration of the Plan.
- 2 -
<PAGE> 7
C. "Affiliated Company" shall mean (i) a member of a controlled group of
corporations of which the Sponsoring Company is a member, as determined in
accordance with Section 414(b) of the Internal Revenue Code and the regulations
issued thereunder, (ii) a trade or business which is under common control with
the Sponsoring Company, as determined in accordance with Section 414(c) of the
Internal Revenue Code and the regulations issued thereunder, or (iii) a member
of an affiliated service group of which the Sponsoring Company is a member, as
determined in accordance with Section 414(m) of the Internal Revenue Code. For
this purpose, a "controlled group of corporations" shall mean a controlled group
of corporations as defined in Section 1563(a) of the Internal Revenue Code,
determined without regard to subsections 1563(a)(4) and 1563(e)(3)(C), except
that, with respect to the limitations set forth in Paragraphs D, E and F of
Section Seven of the Plan and the definitions set forth in Paragraph G of
Section Seven of the Plan, the phrase "more than 50%" shall be substituted for
the phrase "at least 80%" whenever such percentage appears in Section 1563(a)(1)
of the Internal Revenue Code. In addition, "Affiliated Company" shall also
include any other entity designated by the Board of Directors, in its sole
discretion, in which any Participating Company owns an equity interest which
exceeds fifty percent (50%).
D. "Average Contribution Percentage" shall mean the average of the ratios,
calculated separately for each applicable Employee, by which the amount of the
Company Matching
- 3 -
<PAGE> 8
Contributions allocated to such Employee with respect to such Plan Year bears to
the amount of such Employee's compensation (as defined in Section 414(s) of the
Internal Revenue Code) for such Plan Year or, at the election of the
Administrative Committee, that portion of the Plan Year during which the
Employee was eligible to participate in the cash or deferred arrangement under
the Plan.
E. "Average Deferral Percentage" shall mean the average of the ratios,
calculated separately for each applicable Employee, by which the amount of the
Salary Reduction Contributions contributed to the Trust on behalf of such
Employee for a given Plan Year bears to the amount of such Employee's
compensation (as defined in Section 414(s) of the Internal Revenue Code) for
such Plan Year, or, at the election of the Administrative Committee, for the
portion of the Plan Year during which the Employee was eligible to participate
in the cash or deferred arrangement under the Plan.
F. "Beneficiary" shall mean any person entitled to receive benefits which
are payable upon or after a Participant's death pursuant to Section Thirteen of
the Plan.
G. "Board of Directors" shall mean the Board of Directors of the Sponsoring
Company or any individual or committee to which the Board of Directors has
delegated authority to act with respect to a specific activity.
H. "Company Contribution Account" shall mean the separate account
maintained for a Participant reflecting Company Matching
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<PAGE> 9
Contributions allocated to such Participant pursuant to Paragraph B of Section
Six of the Plan together with the total amount in such Participant's Matching
Account under the Prior Plan, in his Matching Account under the Manor Healthcare
Plan immediately prior to the merger of that plan into this Plan and/or in the
Participant's Company Contribution Accounts in the Quality Inns Plan immediately
prior to the merger of that plan into this Plan, as adjusted for earnings or
losses thereon in accordance with the provisions of Section Nine of the Plan.
I. "Company Matching Contributions" shall mean the contributions made
by the Participating Company to each Participant's Company Contribution Account
pursuant to Paragraph B of Section Six of the Plan.
J. "Company Stock" shall mean common stock issued by the Sponsoring
Company.
K. "Company Stock Account" shall mean the separate account maintained
on behalf of a Participant reflecting the Company Stock allocated to such
Participant's Company Stock Account under the Prior Plan or under the Manor
Healthcare Plan, together with any cash or stock dividends on such Company
Stock.
L. "Compensation" shall mean basic cash compensation, before any
payroll deductions for taxes or any other purposes, including regular
commissions paid by the Participating Companies to an Employee in respect of
such Employee's service to the Participating Companies during the Plan Year
increased by any amounts by which the Employee has elected to reduce his base
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<PAGE> 10
salary with respect to such Plan Year under any qualified "cash or deferred
arrangement" (as described in Section 401(k) of the Internal Revenue Code)
contained in this Plan or any other qualified retirement plan maintained by the
Participating Companies or under any "cafeteria plan" (as described in Section
125 of the Internal Revenue Code) maintained by the Participating Companies.
Compensation shall not include any amounts paid to the Employee as (i) bonuses,
(ii) overtime pay, (iii) except as otherwise provided in the preceding sentence,
any amounts paid during that Plan Year on account of the Employee under this
Plan or under any other employee pension benefit plan (as defined in Section
3(2) of ERISA), and (iv) except as otherwise provided in the preceding sentence,
any amounts which are not includible in the Employee's income for federal income
tax purposes.
In determining the Compensation of an Employee for a Plan Year, if the
Employee is either a Five-Percent Owner or one of the ten (10) Highly
Compensated Employees paid the greatest Compensation during the Plan Year, then
any Compensation paid by the Participating Companies during such Plan Year to
the spouse of such Employee or to any lineal descendants of such Employee who
have not attained age nineteen (19) prior to the close of the Plan Year shall be
treated as Compensation paid to such Employee for such Plan Year.
Prior to January 1, 1994, for purposes of determining the Plan
contributions or benefits for a Plan Year and for purposes of applying the
various nondiscrimination rules under the 7
- 6 -
<PAGE> 11
Internal Revenue Code, Compensation in any Plan Year shall not include any
amounts in excess of Two Hundred Thousand Dollars ($200,000), as adjusted for
increases in the cost of living pursuant to Section 401(a)(17) of the Internal
Revenue Code. Effective January 1, 1994, the above referenced dollar limitation
shall be reduced to One Hundred and Fifty Thousand Dollars ($150,000), as
adjusted for increases in the cost of living pursuant to Section 401(a)(17) of
the Internal Revenue Code. In 1996, the One Hundred and Fifty Thousand Dollar
($150,000) limitation, as adjusted for increases in the cost of living, is One
Hundred and Fifty-Five Dollars ($155,000).
M. "Effective Date" of this amendment and restatement of the Plan
shall mean January 1, 1992.
N. "Eligibility Computation Period" for each Employee shall mean a
twelve (12) consecutive month period beginning on the date such Employee first
performs an Hour of Service with a Participating Company or an Affiliated
Company; provided, however, that if the Employee does not complete one thousand
(1,000) or more Hours of Service during such twelve (12) month period, the
Eligibility Computation Period shall be the Plan Year, beginning with the Plan
Year immediately following the Plan Year within which the Employee first
performs an Hour of Service with a Participating Company or an Affiliated
Company. If the Employee has a One-Year Break in Service prior to becoming
eligible to participate in the Plan and is subsequently rehired, his Eligibility
Computation Period shall be determined pursuant
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<PAGE> 12
to this Paragraph beginning on the date the Employee first completes an Hour of
Service with the Participating Company or the Affiliated Company immediately
following his rehire.
O. "Eligibility Year of Service" shall mean an Eligibility Computation
Period during which an Employee completes one thousand (1,000) or more Hours of
Service.
P. "Eligible Participant" shall mean any Participant who (i) completed
at least one thousand (1,000) Hours of Service with the Participating Companies
during such Plan Year, (ii) was employed by a Participating Company or an
Affiliated Company on the last day of the Plan Year, and (iii) elected, pursuant
to Paragraph A of Section Six, to reduce his Compensation during such Plan Year.
Q. "Employee" shall mean any person who is employed by a Participating
Company; provided, however, that the term "Employee" shall not include (i) any
person included in a unit of employees covered by a collective bargaining
agreement (as so determined by the Secretary of Labor) between employee
representatives and a Participating Company if retirement benefits were the
subject of good faith bargaining between such employee representatives and the
Participating Company unless such collective bargaining agreement expressly
provides for the inclusion of such persons as Participants in the Plan and (ii)
nonresident aliens who receive no earned income (within the meaning of section
911(d)(2) of the Internal Revenue Code) from the Participating Companies which
constitutes income from sources
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<PAGE> 13
within the United States (within the meaning of section 861(a)(3) of the
Internal Revenue Code). Leased Employees shall be considered Employees for
purposes of the provisions of this Plan, but shall not be eligible to
participate in the Plan.
R. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time. References in the Plan to any Section of
ERISA shall include any successor provision thereto.
S. "Excess Aggregate Contributions" shall mean, with respect to any
Plan Year, the excess of (i) the sum of all Company Matching Contributions made
to the Trust on behalf of the Highly Compensated Employees for such Plan Year
over (ii) the maximum amount of such Company Matching Contributions for such
Plan Year permitted under the Average Contribution Percentage Test.
T. "Family Member" shall mean, with respect to an Employee, such
Employee's spouse, his lineal ascendants and descendants, and the spouses of
such lineal ascendants and descendants.
U. "Fiscal Year" shall mean the customary fiscal year of a
Participating Company.
V. "Five-Percent Owner" shall mean an individual who (i) owns (or is
considered as owning within the meaning of Section 318 of the Internal Revenue
Code) more than five percent (5%) of the outstanding stock of a Participating
Company or an Affiliated Company or stock possessing more than five percent (5%)
of the
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<PAGE> 14
total combined voting power of all stock of a Participating Company or an
Affiliated Company provided such entity is a corporation or (ii) owns more than
five percent (5%) of the capital or profits interest in a Participating Company
or an Affiliated Company if such entity is not a corporation.
W. "Highly Compensated Employee" shall mean an Employee who at any
time during the current Plan Year or the immediately preceding Plan Year (i) was
a Five-Percent Owner, (ii) received more than $75,000 in compensation from the
Participating Companies and the Affiliated Companies, (iii) received more than
$50,000 in compensation from the Participating Companies and the Affiliated
Companies and was one of the top twenty percent (20%) highest paid employees
during the Plan Year, or (iv) was an officer of a Participating Company or an
Affiliated Company and received compensation from the Participating Companies
and the Affiliated Companies of more than $45,000 during the Plan Year (or such
larger amount as may then constitute fifty percent (50%) of the amount in effect
under Section 415(b)(1)(A) of the Internal Revenue Code in respect of the Plan
Year); provided, however, that an Employee not falling within clause (ii), (iii)
or (iv) above for the preceding Plan Year shall not be treated as falling within
clause (ii), (iii) or (iv) above for the current Plan Year unless he is a member
of the group consisting of the one hundred (100) employees of the Participating
Companies and the Affiliated Companies paid the greatest compensation by the
Participating Companies and the Affiliated Companies during the
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<PAGE> 15
current Plan Year. For purposes of this paragraph, the term "compensation"
shall mean "compensation" as defined in Section 414(q)(7) of the Internal
Revenue Code.
The $75,000 and $50,000 amounts in clauses (ii) and (iii) above shall
be adjusted annually in accordance with the pronouncements of the Secretary of
the Treasury or his delegate. For purposes of clause (iv) above, no more than
fifty (50) employees (or, if lesser, the greater of three (3) employees or ten
percent (10%) of all employees) shall be treated as officers, and if for any
Plan Year no officer of a Participating Company or any Affiliated Company is
described in clause (iv) above, then the highest paid officer of the
Participating Companies or the Affiliated Companies for such Plan Year shall be
treated as described in clause (iv) above.
Any former Employee who was a Highly Compensated Employee when he
separated from service or was a Highly Compensated Employee at any time after
attaining age fifty-five (55) shall at all times thereafter be treated as a
Highly Compensated Employee under the Plan.
X. "Hour of Service" shall be determined from records maintained by
the Participating Companies and the Affiliated Companies and shall include the
following:
(i) PERFORMANCE OF DUTIES. Each hour for which an Employee is
directly or indirectly paid, or entitled to payment, by a Participating Company
or an Affiliated Company for the performance of duties. Each such Hour of
Service shall be
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<PAGE> 16
credited to the Eligibility Computation Period or the Plan Year, as the case may
be, in which the duties were performed.
(ii) BACK PAY. Each hour for which back pay (irrespective of
mitigation of damages) has been either awarded or agreed to by a Participating
Company or an Affiliated Company. Each such Hour of Service shall be credited to
the Eligibility Computation Period or the Plan Year, as the case may be, to
which the agreement or award for back pay pertains rather than to the
Eligibility Computation Period or Plan Year, as the case may be, in which the
award, agreement or payment is made.
(iii) NON-WORKING TIME PAY. Each hour for which an Employee is
directly or indirectly paid, or entitled to payment, by a Participating Company
or an Affiliated Company on account of a period of time during which no duties
are performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), lay-off, jury duty or lease of absence. Each such Hour of Service
shall be computed and credited in accordance with Department of Labor Regulation
Section 2530.200b.
(iv) NO DUPLICATION. An Employee shall not be credited with any
Hour of Service under both clause (ii) above and clause (i) or (iii) above (as
the case may be) with respect to the same item.
(v) MATERNITY AND PATERNITY LEAVE. Solely for purposes of
determining whether an Employee has incurred a One-Year Break in Service, such
Employee shall be credited for up
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<PAGE> 17
to five hundred and one (501) Hours of Service in respect of any period of
absence attributable to a maternity or paternity leave, based upon the number of
Hours of Service which otherwise normally would have been credited to such
Employee but for such absence or, in any case in which the Plan is unable to
determine the number of Hours of Service which would have normally been so
credited, then such Employee shall be credited with eight (8) Hours of Service
per day of absence. Any such Hours of Service attributable to a maternity or
paternity leave shall be credited in the Eligibility Computation Period or the
Plan Year, as the case may be, in which the maternity or paternity absence
begins if such crediting will prevent the Employee from incurring a One-Year
Break in Service in such Eligibility Computation Period or Plan Year. Otherwise,
such Hours of Service shall be credited in the Eligibility Computation Period or
the Plan Year, as the case may be, following the Eligibility Computation Period
or Plan Year in which the maternity or paternity leave begins. For these
purposes, a maternity or paternity leave of absence shall include any time
during which an Employee is absent from work for any period: (a) by reason of
the pregnancy of the Employee; (b) by reason of the birth of a child of the
Employee; (c) by reason of the placement of a child with the Employee in
connection with the adoption of such child by such individual; or (d) for
purposes of caring for such child for a period beginning immediately following
such birth or placement.
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<PAGE> 18
Y. "Ineligible Participant" shall mean any Participant who (i) has not
completed at least one thousand (1,000) Hours of Service with the Participating
Companies during the Plan Year, (ii) was not employed by a Participating Company
or an Affiliated Company on the last day of the Plan Year, or (iii) did not
elect, pursuant to Paragraph A of Section Six, to reduce his Compensation.
Z. "Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended from time to time. References in the Plan to any Section of the
Internal Revenue Code shall include any successor provision thereto.
AA. "Investment Election" shall mean the form, filed with the
Administrative Committee or its delegate, or such other procedure as may be
specified by the Administrative Committee at any time, and from time to time,
through which a Participant may designate the manner in which his Accounts
(other than his Company Stock Account) shall be allocated among the Investment
Funds.
BB. "Investment Election Date" shall mean March 15, June 15, September
15, or December 15 of each Plan Year, or such other dates as may be established
by the Administrative Committee. On and after August 1, 1996, "Investment
Election Date" shall mean the first business day of each month.
CC. "Investment Fund" shall mean each fund, contract, or other
arrangement designated by the Administrative Committee as
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<PAGE> 19
an Investment Fund in which Participants may direct their Accounts to be
invested.
DD. "Investment Manager" shall mean any party that (i) is either (a)
registered as an investment adviser under the Investment Advisers Act of 1940,
(b) a bank (as defined in the Investment Advisers Act of 1940), or (c) an
insurance company qualified to manage, acquire and dispose of Plan assets under
the laws of more than one State, (ii) acknowledges in writing that it is a
fiduciary with respect to the Plan, and (iii) is granted the power to manage,
acquire or dispose of any asset of the Plan pursuant to Paragraph G of Section
Five hereof.
EE. "Leased Employee" shall mean any individual who performs services for
a Participating Company or an Affiliated Company in a capacity other than as a
common-law employee if (i) the services are provided pursuant to one or more
agreements between the Participating Company or the Affiliated Company and one
or more leasing organizations, (ii) the individual has performed services for
the Participating Company or the Affiliated Company on a substantially full-time
basis for a period of at least one year, and (iii) such services are of a type
historically performed, in the business field of the Participating Company or
the Affiliated Company, by employees. This paragraph shall be interpreted in
accordance with the provisions of Section 414(n) of the Internal Revenue Code
and the regulations thereunder.
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<PAGE> 20
FF. "Manor Healthcare Plan" shall mean the Manor Healthcare Corp.
Employee Stock Ownership, Profit Sharing and Retirement Plan and Trust as it
existed prior to being merged into this Plan.
GG. "Maximum Reduction Amount" shall mean Seven Thousand Dollars
($7,000) per calendar year, as adjusted for increases in the cost of living
pursuant to Section 402(g)(5) of the Internal Revenue Code. In 1996, the
Maximum Reduction Amount is Nine Thousand and Five Hundred Dollars ($9,500).
HH. "Net Profits" shall mean, with respect to any Fiscal Year that ends
within a Plan year with respect to which a determination of Net Profits is made,
the Sponsoring Company's consolidated net income or profit for such Fiscal Year
determined upon the basis of the Sponsoring Company's books of account in
accordance with generally accepted accounting principles, without any reduction
for taxes based upon income, or for contributions made by the Sponsoring Company
to this Plan. "Net Profit" shall not include capital gains or losses or income
or loss which is determined to be of a nonrecurring nature. Such determination
shall be made solely by the Administrative Committee.
II. "One-Year Break in Service" shall mean an Eligibility Computation
Period or a Plan Year, as the case may be, during which an Employee does not
complete more than five hundred (500) Hours of Service.
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<PAGE> 21
JJ. "Participant" shall mean an eligible Employee who becomes a
Participant in the Plan as provided in Section Four of the Plan.
KK. "Participating Company" shall mean the Sponsoring Company or any
Affiliated Company which adopts the Plan and Trust pursuant to the provisions of
Section Thirty of the Plan.
LL. "Plan" shall mean the Manor Care, Inc. Retirement Savings and
Investment Plan as set forth in this document, and as hereafter amended.
MM. "Plan Year" shall mean the twelve (12)-consecutive month period
ending on December 31.
NN. "Prior Plan" shall mean the Manor Care, Inc. Employee Stock
Ownership, Profit Sharing and Retirement Plan and Trust as it existed prior to
being amended and restated herein.
OO. "Quality Inns Plan" shall mean the Quality Inns Employees' Profit-
Sharing, Savings and Retirement Plan as it existed prior to being merged into
this Plan.
PP. "Retirement Date" of a Participant shall mean the Participant's
sixty-fifth (65th) birthday.
QQ. "Rollover Account" shall mean the separate account maintained for a
Participant reflecting any rollover made by such Participant pursuant to
Paragraph D of Section Four, as adjusted by earnings or losses thereon pursuant
to the provisions of Section Nine of the Plan.
RR. "Rollover Amount" shall mean any rollover amount or rollover
contribution defined in (i) Section 402(a)(5) or Section
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<PAGE> 22
403(a)(4) of the Internal Revenue Code (relating to certain distributions from
an employees' trust or employee annuity described in Section 401(a) or 403(a) of
the Internal Revenue Code), (ii) Section 408(d)(3) of the Internal Revenue Code
(relating to certain distributions from an individual retirement account or an
individual retirement annuity), or (iii) former Section 409(b)(3)(C) of the
Internal Revenue Code (relating to certain distributions from a retirement
bond).
SS. "Salary Reduction Contribution" shall mean the cumulative amount the
Participating Company contributes to the Trust each Plan Year equal to the
amount by which a Participant elected to reduce his Compensation for such Plan
Year pursuant to Section Six.
TT. "Salary Reduction Contribution Account" shall mean the account
maintained for a Participant reflecting the Salary Reduction Contributions (if
any) made on behalf of such Participant pursuant to the "cash or deferred
arrangement" set forth in Paragraph A of Section Six together with the total
amount in such Participant's Elective Account under the Prior Plan and/or in his
Elective Account under the Manor Healthcare Plan immediately prior to the merger
of that plan into this Plan, as adjusted by earnings or losses thereon in
accordance with the provisions of Section Nine of the Plan. All amounts held in
a Participant's Salary Reduction Contribution Account shall not be distributable
to such Participant (or to his Beneficiary) before the earliest of:
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<PAGE> 23
(a) His attainment of age fifty-nine and one-half (59-1/2), his
Termination of Employment, his death, or his retirement after attaining
Retirement Date or after sustaining a Total and Permanent Disability;
(b) The termination of the Plan without the establishment or maintenance
of another defined contribution plan (other than an employee stock ownership
plan as defined in Section 4975(e)(7) of the Internal Revenue Code);
(c) The sale or other disposition by a corporate Participating Company of
substantially all of the assets (within the meaning of Section 409(d)(2) of the
Internal Revenue Code) used by the Participating Company in a trade or business,
but only with respect to a Participant who continues employment with the
corporation acquiring such assets; or
(d) The sale or other disposition by a corporate Participating Company of
its interests in a subsidiary (within the meaning of Section 409(d)(3) of the
Internal Revenue Code), but only with respect to a Participant who continues
employment with such subsidiary.
UU. "Sponsoring Company" shall mean Manor Care, Inc.
VV. "Termination of Employment" shall mean termination of employment with
all Participating Companies and all Affiliated Companies, whether voluntarily or
involuntarily, other than by reason of a Participant's death or his retirement
after attaining his Retirement Date or after sustaining a Total and Permanent
Disability.
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<PAGE> 24
WW. "Total and Permanent Disability" shall mean physical and/or mental
incapacity of such a nature that it prevents a Participant from engaging in or
performing the principal duties of his customary employment or occupation on a
continuing or sustained basis.
XX. "Trust" shall mean the legal entity resulting from the Trust Agreement
between the Sponsoring Company and the Trustee, which entity receives the
Participating Companies' and the Participants' contributions, and holds, invests
and disburses funds pursuant to the instructions of and to or for the benefit of
Participants and their Beneficiaries.
YY. "Trust Agreement" shall mean the Manor Care, Inc. Retirement Savings
and Investment Trust Agreement executed by the Sponsoring Company and the
Trustee as amended from time to time.
ZZ. "Trust Fund" shall mean the total of contributions made by the
Participating Companies and the Participants to the Trust pursuant to the Plan
together with the assets of the Prior Plan and the assets of the Manor
Healthcare Plan and the Quality Inns Plan transferred to the Plan upon the
merger of those plans into this Plan, increased by profits, gains, income and
recoveries received, and decreased by losses, depreciation, benefits paid and
expenses incurred in the administration of the Trust. The Trust Fund shall
include all assets acquired by investment and reinvestment which are held in the
Trust by the Trustee.
AAA. "Trustee" shall mean the party or parties, individual or corporate,
named in the Trust Agreement and any duly appointed
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<PAGE> 25
additional or successor Trustee acting thereunder. The Trustee and the
Investment Managers, if any, shall be the "named fiduciaries" referred to in
Section 402(a) of ERISA with respect to the control, management and disposition
of the assets of the Trust.
BBB. "Valuation Date" shall mean the last day of each month or any other
date the Administrative Committee, in its sole discretion, shall select as a
Valuation Date.
CCC. "Voluntary Account" shall mean the total amount in a Participant's
Voluntary Account under the Prior Plan, in his Voluntary Account under the Manor
Healthcare Plan immediately prior to the merger of that plan into this Plan,
and/or in his Participant Contribution Accounts under the Quality Inns Plan
immediately prior to the merger of that plan into this Plan, as adjusted for
earnings or losses thereon in accordance with the provisions of Section Nine of
the Plan.
DDD. "Year of Service" shall mean a Plan Year during which an Employee
completes one thousand (1,000) or more Hours of Service. "Year of Service" shall
also include all Years of Service earned by a Participant under provisions of
this Plan as of December 31, 1991 together with all Years of Service earned
under the terms of the Manor Healthcare Plan or the Quality Inns Plan as of
December 31, 1991. In addition, the Board of Directors, in its sole discretion,
may elect to grant Years of Service in connection with a stock or asset
acquisition to reflect employment periods prior to the date of such stock or
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<PAGE> 26
asset acquisition. 'Years of Service,' in the case of an individual who
transfers from the employment of Choice Hotels International, Inc. to the
employment of a Participating Company prior to June 1, 1998, shall also include
all Years of Service earned with respect to service performed on behalf of
Choice Hotels International, Inc.
EEE. Wherever appropriate, words used in the Plan in the singular may
mean the plural, the plural may mean the singular, and the masculine may mean
the feminine.
SECTION THREE
REQUIREMENTS FOR ELIGIBILITY
----------------------------
Any Employee (other than a Leased Employee) shall be eligible to elect to
have Salary Reduction Contributions made on his behalf under the Plan and to
share in the allocations of Company Matching Contributions under the Plan as of
the first day of the first full pay period of the month following the date upon
which such Employee has (i) completed an Eligibility Year of Service and (ii)
attained age twenty-one (21), provided such Employee is employed by a
Participating Company on such date. Any Employee who does not elect to have
Salary Reduction Contributions made on his behalf under the Plan as of the first
day of the first full pay period of the first month on which he is first
eligible shall be allowed to make a subsequent election to have Salary Reduction
Contributions made on his behalf as of
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<PAGE> 27
the first business day of any subsequent month. Leased Employees shall not be
eligible to participate in the Plan.
Any Participant who otherwise meets the requirements of this Section
Three, who suffers a Termination of Employment, and who is subsequently rehired
by a Participating Company, shall become eligible to elect to have Salary
Reduction Contributions made on his behalf under the Plan effective as of the
date of his rehire and to share in the allocations of the Company Matching
Contributions under the Plan provided the individual meets the criteria of an
Eligible Participant for such Plan Year and provided further that the period of
time between the individual's initial date of Termination of Employment and the
individual's date of rehire does not exceed the greater of (a) five (5) years or
(b) the period of the individual's employment performed prior to the date of his
initial Termination of Employment. Notwithstanding the foregoing, a Participant
who suffers a Termination of Employment with vested Accounts in the Plan and who
is not subsequently rehired until the occurrence of a period of absence greater
than (a) or (b) above shall be treated as a new Employee for purposes of
determining such individual's eligibility to participate in the Plan.
SECTION FOUR
PARTICIPATION IN THE PLAN
-------------------------
A. PARTICIPANTS IN PREDECESSOR PLANS. Any Employee or former
Employee who was a participant in the Prior Plan
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<PAGE> 28
immediately prior to the Effective Date shall continue to be a Participant in
the Plan on the Effective Date. Any Employee or former Employee who was a
participant in the Manor Healthcare Plan or in the Quality Inns Plan immediately
prior to the Effective Date shall become a Participant in this Plan on the
Effective Date.
B. PARTICIPATION IN THE CASH OR DEFERRED ARRANGEMENT. Upon meeting
the eligibility requirements set forth in Section Three, each eligible Employee
shall be notified that he is so eligible.
C. INFORMATION TO PARTICIPANTS. Each Participant shall be provided
with such information as is required by ERISA within the time prescribed for
providing such information. In addition, each Participant shall be provided with
a designation of beneficiary form with which he may designate one or more
Beneficiaries to receive benefits in the event of his death. The designation of
beneficiary form shall include an explanation of the spousal death benefit rules
of Section Thirteen.
D. ROLLOVER AMOUNT. Any Employee (other than a Leased Employee) may
file a written petition with the Administrative Committee requesting that it
direct the Trustee to accept a Rollover Amount from such Employee. An Employee
may make such election prior to satisfaction of the age and service requirements
described in Section Three. The Administrative Committee, in its sole
discretion, shall determine whether or not such Employee shall be permitted to
contribute a Rollover Amount
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<PAGE> 29
to the Trust. Any written petition filed pursuant to this Paragraph D shall set
forth the amount of such Rollover Amount and a statement, satisfactory to the
Administrative Committee, that such contribution constitutes a Rollover Amount.
Any Rollover Amount contributed to the Trust shall be maintained in a
separate, fully-vested Rollover Account on behalf of the Employee. The Employee
may direct the investment of such Rollover Account in accordance with the
provisions of Section Nine of the Plan. The Rollover Account shall be
distributed to an Employee or, where applicable, his Beneficiary at the same
time and in the same manner as provided in the Plan for the distribution of
other Accounts in the Plan.
SECTION FIVE
ADMINISTRATION OF THE PLAN
--------------------------
A. RESPONSIBILITY FOR ADMINISTRATION OF THE PLAN. The
Administrative Committee shall be responsible for the management, operation and
administration of the Plan.
B. APPOINTMENT OF ADMINISTRATIVE COMMITTEE. The Board of Directors
of the Sponsoring Company shall appoint an Administrative Committee consisting
of at least one (1) but not more than seven (7) persons. The Administrative
Committee shall be responsible for the management, operation and administration
of the Plan. Any member of the Administrative Committee may resign upon ten
(10) days prior written notice to the Board of Directors of the Sponsoring
Company. The Board of Directors of
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<PAGE> 30
the Sponsoring Company shall be authorized to remove any member of the
Administrative Committee at any time and in its sole discretion to appoint a
successor whenever a vacancy on the Administrative Committee occurs.
C. RESPONSIBILITY FOR ADMINISTRATION OF THE TRUST FUND. The
Trustee shall be responsible for the administration of the Trust Fund in
accordance with the provisions of the Trust Agreement.
D. DELEGATION OF POWERS. The Administrative Committee may appoint
such assistants or representatives as it deems necessary for the effective
exercise of its duties in administering the Plan and Trust. The Administrative
Committee may delegate to such assistants and representatives any powers and
duties, both ministerial and discretionary, as it deems expedient or
appropriate.
E. RECORDS. All acts and determinations with respect to the
administration of the Plan made by the Administrative Committee and any
assistants or representatives appointed by it shall be duly recorded by the
Administrative Committee or by the assistant or representative appointed by it
to keep such records. All records, together with such other documents as may be
necessary for the administration of the Plan, shall be preserved in the custody
of the Administrative Committee or the assistants or representatives appointed
by it.
F. GENERAL ADMINISTRATIVE POWERS. The Administrative Committee
shall have all powers necessary to administer the Plan
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<PAGE> 31
in accordance with its terms, including the power to construe the Plan and to
determine all questions that may arise thereunder. In the exercise of such
powers under the Plan, the Administrative Committee shall have discretionary
authority to interpret the terms of the Plan and to determine eligibility for
and entitlement to Plan benefits in accordance with the terms of the Plan. Any
interpretation or determination made pursuant to such discretionary authority
shall be given full force and effect, unless it can be shown that the
interpretation or determination was arbitrary and capricious.
G. APPOINTMENT OF PROFESSIONAL ASSISTANCE AND INVESTMENT MANAGER.
The Administrative Committee may engage accountants, attorneys, physicians and
such other personnel as it deems necessary or advisable. The Administrative
Committee, in its sole discretion, may appoint one or more Investment Managers
to manage (including the power to acquire or dispose of) all or any of the
assets of the Trust provided that such appointment is approved by the Board of
Directors of the Sponsoring Company. The functions of any such persons engaged
by the Administrative Committee shall be limited to the specific services and
duties for which they are engaged, and such persons shall have no other duties,
obligations or responsibilities under the Plan or Trust. Such persons shall
exercise no discretionary authority or discretionary control respecting the
management of the Plan, and, unless engaged specifically as Investment Manager,
shall exercise no authority or control respecting management or disposition of
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the assets of the Trust. The fees and costs of such services shall be an
administrative expense of the Plan to be paid out of the Trust Fund, except to
the extent that such fees and costs are paid by the Participating Companies.
H. ACTIONS BY THE ADMINISTRATIVE COMMITTEE. All actions of the
Administrative Committee shall be taken pursuant to the decision of a majority
of the then members of the Administrative Committee.
I. DIRECTIVES OF THE ADMINISTRATIVE COMMITTEE. Directives of the
Administrative Committee to the Trustee shall be delivered in writing, signed by
an appropriate member of the Administrative Committee.
J. DISCRETIONARY ACTS. Any discretionary actions of the
Administrative Committee or the Sponsoring Company with respect to the
administration of the Plan shall be made in a manner which does not discriminate
in favor of stockholders, officers and Highly Compensated Employees. In the
event the Administrative Committee exercises any discretionary authority under
the Plan with respect to a Participant who is a member of the Administrative
Committee, such discretionary authority shall be exercised solely and
exclusively by those members of the Administrative Committee other than such
Participant, or, if such Participant is the sole member of the Administrative
Committee, such discretionary authority shall be exercised solely and
exclusively by the Board of Directors of the Sponsoring Company.
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<PAGE> 33
K. PAYMENT OF FEES AND EXPENSES. The members of the Administrative
Committee and their assistants and representatives shall be entitled to payment
from the Trust Fund for all reasonable costs, charges and expenses incurred in
the administration of the Plan and Trust, including, but not limited to,
reasonable fees for accounting, legal and other services rendered, to the extent
incurred by the members of the Administrative Committee or their assistants and
representatives in the course of performance of their duties under the Plan and
the Trust, except to the extent that such fees and costs are paid by the
Participating Companies. Notwithstanding any other provision of the Plan or
Trust, no person who receives full-time pay from the Participating Companies
shall receive compensation from the Trust Fund, except for reimbursement of
expenses properly and actually incurred.
L. PLAN ADMINISTRATOR. The Sponsoring Company shall be the
"administrator" (as defined in Section 3(16)(A) of ERISA) of the Plan, and shall
be responsible for the performance of all reporting and disclosure obligations
under ERISA and all other obligations required or permitted to be performed by
the Plan administrator under ERISA. The Vice President of Human Resources of the
Sponsoring Company shall be the designated agent for service of legal process.
The Trustee may also receive service of legal process for the Plan.
M. ALLOCATION AND DELEGATION OF ADMINISTRATIVE COMMITTEE
RESPONSIBILITIES. The Administrative Committee may upon approval
- 29 -
<PAGE> 34
of a majority of the members of the Administrative Committee, (i) allocate among
any of the members of the Administrative Committee any of the responsibilities
of the Administrative Committee under the Plan or (ii) designate any person,
firm or corporation that is not a member of the Administrative Committee to
carry out any of the responsibilities of the Administrative Committee under the
Plan. Any such allocation or designation shall be made pursuant to a written
instrument executed by a majority of the members of the Administrative
Committee.
SECTION SIX
CONTRIBUTIONS
-------------
A. SALARY REDUCTION CONTRIBUTIONS. On behalf of each Participant
who has elected to reduce his Compensation pursuant to subparagraph (i) of this
Paragraph A, the Participating Company employing such Participant shall
contribute to the Trust each Plan Year the Salary Reduction Contributions as
elected by such Participant.
(i) COMPENSATION REDUCTION ELECTION. A Participant may elect
to reduce his Compensation through regular payroll deductions by notifying the
Administrative Committee, no later than the first business day of the month as
of which such election is intended to become effective, pursuant to such
notification procedures as the Administrative Committee may establish, from time
to time. Such election shall remain in
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<PAGE> 35
effect for subsequent Plan Years until suspended or revoked pursuant to
subparagraph (iii) of this Paragraph A.
The aggregate amount by which a Participant may elect to reduce his
Compensation under this Plan and under the Manor Care, Inc. Nonqualified
Retirement Savings and Investment Plan, shall be in whole percentages of his
Compensation determined without regard to the Two Hundred Thousand Dollar
($200,000) limitation or the One Hundred Fifty Thousand Dollar ($150,000)
limitation, as the case may be, described in Paragraph L of Section Two and
shall not exceed fifteen percent (15%) of his Compensation for any Plan Year. In
no event may the total amount by which a Participant elects to reduce his
Compensation under this Plan with respect to a Plan Year exceed the Maximum
Reduction Amount.
(ii) MAXIMUM REDUCTION AMOUNT. If the amount of the Salary
Reduction Contributions made to the Plan for any calendar year (together with
any other salary reduction contributions made during the calendar year to any
other plans which contain qualified "cash or deferred arrangements" as described
in Section 401(k) of the Internal Revenue Code) with respect to any Participant
exceeds the Maximum Reduction Amount, the full amount of such excess (the
"Excess Deferrals") shall be returned to the Participant (together with any
earnings attributable thereto for the calendar year) by no later than the April
15 following the end of such calendar year; provided, however, that the amount
of Excess Deferrals that shall be distributed to such Participant for such
calendar year shall be reduced by the amount of any
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<PAGE> 36
Excess Contributions (as defined in Paragraph C of this Section Six) previously
distributed to such Participant for the Plan Year beginning with such calendar
year. With respect to the Plan Year beginning January 1, 1996, each Participant
eligible to receive an allocation of Company Matching Contributions will receive
100% of such allocation of Company Matching Contributions in the form of shares
of Company Stock.
(iii) SUSPENSION OF REDUCTIONS. A Participant may, by filing
the appropriate form, elect to suspend his Compensation reductions. Such
voluntary suspension shall be effective as of the first day of the first
applicable payroll period commencing after the receipt and completion of
processing of the appropriate form by the Administrative Committee. Any such
suspension shall remain in effect until the following month, at which time the
Participant may recommence such Compensation reductions. During such period of
suspension, the Salary Reduction Contributions made on behalf of such
Participant shall be suspended. A Participant may not make up suspended
Compensation reductions. The Compensation reductions of a Participant and the
Salary Reduction Contributions made on behalf of such Participant shall be
suspended automatically for any payroll period in which such Participant does
not receive any Compensation.
B. COMPANY MATCHING CONTRIBUTIONS.
(i) AMOUNT OF CONTRIBUTIONS. On behalf of each Eligible
Participant, the Participating Company employing such Eligible Participant shall
contribute to the Trust out of its Net
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<PAGE> 37
Profits each Plan Year an amount (the "Company Matching Contribution") equal to
a percentage of the amount of Salary Reduction Contributions made on behalf of
such Eligible Participant during such Plan Year. The aggregate amount of the
Company Matching Contribution which may be allocated to each Eligible
Participant's Company Contribution Account for such Plan Year under this Plan
and under the Manor Care, Inc. Nonqualified Retirement Savings and Investment
Plan shall not exceed six percent (6%) of his Compensation, determined without
regard to the Two Hundred Thousand Dollar ($200,000) limitation or the One
Hundred and Fifty Thousand Dollar ($150,000) limitation, as the case may be,
described in Paragraph L of Section Two. For these purposes, Compensation shall
be determined after increasing such Eligible Participant's Compensation, as
defined in Paragraph L of Section Two, by any basic cash compensation which such
Eligible Participant has elected to defer through any nonqualified deferred
compensation program established by the Sponsoring Company. This percentage
shall be based upon the Eligible Participant's Years of Service in accordance
with the following schedule:
Years of Service Matching Percentage
---------------- -------------------
1 to 5 years 25%
6 to 9 years 75%
10 or more years 100%
Notwithstanding the above, however, the combination of the Company Matching
Contribution made to this Plan for any Plan Year
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<PAGE> 38
when combined with Company Matching Contribution made with respect to such Plan
Year under the Manor Care, Inc. Nonqualified Retirement Savings and Investment
Plan shall not exceed six percent (6%) of the Net Profits of the Sponsoring
Company determined with respect to the fiscal year that ends within such Plan
Year. If the combined Company Matching Contributions would otherwise exceed the
six percent (6%) limitation, then the amount of available Company Matching
Contributions shall be pro-rated among the two plans based upon the relative
Company Matching Contributions otherwise due to both programs.
(ii) REMITTANCE OF COMPANY MATCHING CONTRIBUTIONS. Each
Participating Company shall make its Company Matching Contributions to the Trust
in cash by no later than the last date, including any extensions thereof, for
filing its federal income tax return for its Fiscal Year ending with or after
the last day of such Plan Year.
(iii) INCLUSION OF INELIGIBLE PARTICIPANT. If, in any Plan
Year, any person who should not have been included as a Participant in the Plan
is erroneously included and discovery of such incorrect inclusion is not made
until after a contribution for the Plan Year has been made and allocated, the
Participating Company shall not be entitled to recover the contribution made
with respect to the Ineligible Participant regardless of whether or not a
deduction is allowable with respect to such contribution. In such event, the
amount contributed with respect
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<PAGE> 39
to the Ineligible Participant shall constitute a forfeiture for the Plan Year in
which the discovery is made.
C. NONDISCRIMINATION RULES APPLICABLE TO SALARY REDUCTION
CONTRIBUTIONS. Notwithstanding any other provisions of the Plan, the Average
Deferral Percentage (as defined below) of the Highly Compensated Employees for a
Plan Year shall not exceed the GREATER of (i) one hundred and twenty-five
percent (125%) of the Average Deferral Percentage of all the other Employees
(the "Remaining Employees") for such Plan Year, or (ii) a percentage amount
which is equal to the lesser of (a) the Average Deferral Percentage of the
Remaining Employees for such Plan Year plus two (2) percentage points or (b) two
hundred percent (200%) of the Average Deferral Percentage of the Remaining
Employees for such Plan Year. For purposes of this test (hereinafter the
"Average Deferral Percentage Test"), only Employees who are eligible to
participate in the cash or deferred arrangement under the Plan shall be counted.
In calculating each Employee's Average Deferral Percentage ratio, the
Salary Reduction Contributions made on behalf of such Employee shall be taken
into account only if they relate to Compensation that either (i) would have been
received by the Employee in the Plan Year but for the deferral election or (ii)
was attributable to services performed by the Employee in the Plan Year and
would have been received by the Employee within two and one-half (2-1/2) months
after the close of the Plan Year but for the deferral election. In addition, in
calculating each
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<PAGE> 40
Employee's Average Deferral Percentage ratio, the Salary Reduction Contributions
made on behalf of such Employee shall be taken into account for a Plan Year only
if such contributions were allocated to the Employee under the Plan as of a date
within that Plan Year, which requirement shall be deemed satisfied if the
allocations are not contingent upon the Employee's participation in the Plan or
the performance of services on any date subsequent to the end of the Plan Year
and the contributions are actually paid to the Trust no later than the end of
the twelve (12) month period immediately following the Plan Year to which the
contributions relate. Notwithstanding the foregoing, the Administrative
Committee may, in its sole discretion, adjust the percentage by which a
Participant has elected to reduce his Compensation in order to enable the Plan
to satisfy the nondiscrimination test.
If two (2) or more plans maintained by a Participating Company or an
Affiliated Company which contain qualified "cash or deferred arrangements" under
Section 401(k) of the Internal Revenue Code are aggregated for purposes of
Section 401(a)(4) or Section 410(b) of the Internal Revenue Code, all such cash
or deferred arrangements shall be treated as one cash or deferred arrangement
for purposes of this Average Deferral Percentage Test. If a Highly Compensated
Employee participates in two or more plans described in Section 401(a) of the
Internal Revenue Code which are maintained by a Participating Company or an
Affiliated Company and to which contributions subject to Section
- 36 -
<PAGE> 41
401(k) of the Internal Revenue Code are made, all such contributions shall be
aggregated for purposes of this Average Deferral Percentage Test. Finally, if
any Highly Compensated Employee who is either a Five-Percent Owner or in the
group consisting of the ten (10) Highly Compensated Employees paid the greatest
Compensation by the Participating Companies and the Affiliated Companies during
the Plan Year has a Family Member participating in this Plan, then any
compensation paid to such Family Member shall be aggregated with the
compensation of such Highly Compensated Employee and any Salary Reduction
Contributions made on behalf of such Family Member shall be aggregated with the
Salary Reduction Contributions made on behalf of such Highly Compensated
Employee for purposes of this Average Deferral Percentage Test.
The amount of any Excess Contributions (as defined below) for a Plan Year
(together with any earnings or losses allocable thereto for the Plan Year) shall
be distributed to the Highly Compensated Employees based upon the respective
portions of the Excess Contributions attributable to each such Highly
Compensated Employee. The amount of the Excess Contributions to be distributed
to each such Highly Compensated Employee for a Plan Year shall be determined by
use of a leveling method, under which the Average Deferral Percentage ratio of
the Highly Compensated Employee with the highest ratio shall be reduced to the
extent necessary to enable the Plan to satisfy the Average Deferral Percentage
Test or to cause such Highly Compensated Employee's
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<PAGE> 42
Average Deferral Percentage ratio to equal the ratio of the Highly Compensated
Employee with the next highest ratio. This process shall be repeated until the
Plan satisfies the Average Deferral Percentage Test.
Any corrective distribution of Excess Contributions shall be made no later
than the last day of the Plan Year following the Plan Year for which such Excess
Contributions were made. The amount of any Excess Contributions to be
distributed to a Highly Compensated Employee for a Plan Year shall be reduced by
the amount of any Excess Deferrals (as defined in subparagraph (ii) of Paragraph
A of this Section Six) which were previously distributed to such Highly
Compensated Employee for his taxable year ending with or within such Plan Year.
D. NONDISCRIMINATION RULES APPLICABLE TO COMPANY MATCHING
CONTRIBUTIONS. Notwithstanding any other provisions of the Plan, the Average
Contribution Percentage of the Highly Compensated Employees for any Plan Year
shall not exceed the greater of (i) one hundred and twenty-five percent (125%)
of the Average Contribution Percentage applicable to all other Employees (the
"Remaining Employee") for such Plan Year or (ii) a percentage amount which is
equal to the lesser of (a) the Average Contribution Percentage of the Remaining
Employees for such Plan Year plus two (2) percentage points or (b) two hundred
percent (200%) of the Average Contribution Percentage of the Remaining Employees
for such Plan Year. For purposes of this test (hereinafter the "Average
Contribution Percentage Test"), only
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<PAGE> 43
Employees who are eligible to participate in the cash or deferred arrangement
under the Plan shall be counted.
If a Highly Compensated Employee participates in two (2) or more plans
described in Section 401(a) of the Internal Revenue Code which are maintained by
a Participating Company or an Affiliated Company and to which contributions
subject to Section 401(m) of the Internal Revenue Code are made, all such
contributions shall be aggregated for purposes of this Average Contribution
Percentage Test. In addition, if two (2) or more plans maintained by a
Participating Company or an Affiliated Company to which contributions subject to
Section 401(m) of the Internal Revenue Code are made are aggregated for purposes
of Internal Revenue Code Section 401(a)(4) or 410(b) (other than the average
benefits test under Section 410(b)(2)(A)(ii)), all such plans shall be treated
as one plan for purposes of this Average Contribution Percentage Test.
Furthermore, if any Highly Compensated Employee who is either a Five-Percent
Owner or in the group consisting of the ten (10) Highly Compensated Employees
paid the greatest Compensation by the Participating Companies and the Affiliated
Companies during the Plan Year has a Family Member (as defined in Paragraph C of
this Section Six) participating in this Plan, any compensation paid to such
Family Member and any Company Matching Contributions allocated to such Family
Member shall be aggregated with the compensation and the Company Matching
Contributions of such Highly Compensated Employee for purposes of this Paragraph
D.
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<PAGE> 44
The amount of any Excess Aggregate Contributions for a Plan Year (together
with earnings or losses allocable to such contributions for such Plan Year)
shall be forfeited by the Highly Compensated Employees on whose behalf such
Excess Aggregate Contributions were contributed to the Trust, based upon the
respective portions of the Excess Aggregate Contributions attributable to each
such Highly Compensated Employee. The amount of the Excess Aggregate
Contributions for a Plan Year to be forfeited by each such Highly Compensated
Employee shall be determined by the use of a leveling method, under which the
Average Contribution Percentage ratio of the Highly Compensated Employee with
the highest ratio shall be reduced to the extent necessary to enable the Plan to
satisfy the Average Contribution Percentage Test for such Plan Year or to cause
such Highly Compensated Employee's ratio to equal the ratio of the Highly
Compensated Employee with the next highest Average Contribution Percentage
ratio. This process shall be repeated until the Plan satisfies the Average
Contribution Percentage Test for such Plan Year.
Any Excess Aggregate Contributions (together with earnings or losses
thereon) which are forfeited under this Paragraph D shall be treated in the same
manner as forfeitures of Non-Vested Amounts under Paragraph C of Section
Fourteen of the Plan.
E. ADDITIONAL ADJUSTMENTS. In accordance with regulations issued by
the Internal Revenue Service under Internal Revenue Code Sections 401(k) and
401(m), the Administrative Committee
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<PAGE> 45
may, in its sole discretion, treat some or all of the Company Matching
Contributions as being subject to the Average Deferral Percentage Test described
in Paragraph C, above, and may make such other adjustments to the amounts
contributed and allocated under the Plan as may be necessary to comply with the
multiple use test established under Treasury Regulation Section 1.401(m)-2.
SECTION SEVEN
ALLOCATION TO PARTICIPANTS' ACCOUNTS
------------------------------------
A. MAINTENANCE OF ACCOUNTS. There shall be maintained on behalf of
each Participant a Company Contribution Account, a Salary Reduction Contribution
Account, and, if applicable, a Company Stock Account, a Voluntary Account and/or
a Rollover Account. The Participant's interest in his Company Contribution
Account shall be subject to the vesting schedule set forth in Paragraph A of
Section Fourteen. The Participant's interest in his Salary Reduction
Contribution Account, and, if applicable, his Company Stock Account, his
Voluntary Contribution Account and/or his Rollover Account shall be one hundred
percent (100%) vested at all times.
B. METHOD OF ALLOCATING SALARY REDUCTION CONTRIBUTIONS. Subject to
the limitations of Paragraph D of this Section Seven, the Salary Reduction
Contributions for each Plan Year shall be allocated among the Salary Reduction
Contribution Accounts of all Participants who elected to reduce their
Compensation for such
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<PAGE> 46
Plan Year pursuant to the provisions of Paragraph A of Section Six. The amount
to be allocated to each such Participant's Salary Reduction Contribution Account
for such Plan Year shall be equal to the amount by which such Participant
elected to reduce his Compensation for such Plan Year pursuant to the provisions
of Paragraph A of Section Six.
C. METHOD OF ALLOCATING COMPANY MATCHING CONTRIBUTIONS. Subject to
the limitations of Paragraph D of this Section Seven, the Company Matching
Contribution for each Plan Year shall be allocated among the Company
Contribution Accounts of all Eligible Participants (as defined in Paragraph B of
Section Six of the Plan) in an amount (not to exceed six percent (6%) of each
such Eligible Participant's Compensation) equal to a percentage of the amount by
which each such Eligible Participant elected to reduce his Compensation for such
Plan Year pursuant to the provisions of Paragraph A of Section Six, which
percentage shall be based upon the Eligible Participant's Years of Service in
accordance with the following schedule:
Years of Service Matching Percentage
---------------- -------------------
1 to 5 years 25%
6 to 9 years 75%
10 or more years 100%
D. LIMITATION ON ANNUAL ADDITIONS.
(i) Notwithstanding any other provisions of the Plan, the sum of the
Annual Additions to a Participant's Accounts for any Limitation Year shall not
exceed the lesser of (i) Thirty
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<PAGE> 47
Thousand Dollars ($30,000) or, if greater, one-fourth (1/4) of the dollar
limitation then in effect under Section 415(b)(1)(A) of the Internal Revenue
Code, or (ii) twenty-five percent (25%) of such Participant's Limitation Year
Compensation. The term "Annual Additions" to a Participant's Accounts for any
Limitation Year shall mean the sum of:
(a) All Participating Company contributions allocated to the
Participant's Accounts for the Plan Year ending with such Limitation Year; and
(b) If employee contributions are permitted under the Plan, the
amount of such Participant's employee contributions (excluding any Rollover
Amount) for the Plan Year ending with such Limitation Year.
(ii) In the event that it is determined that, but for the limitations
contained in subparagraph (i) of this Paragraph D, the Annual Additions to a
Participant's Accounts for any Limitation Year would be in excess of the
limitations contained herein, such Participant's allocable share of the Company
Matching Contribution shall be reduced to the extent necessary to bring such
Annual Additions within the limitations contained in subparagraph (i) of this
Paragraph D.
(iii) If and to the extent that the amount of any Participant's share
of the Company Matching Contribution is reduced in accordance with the
provisions of subparagraph (ii) of this Paragraph D, the amount of such
reductions shall be maintained in a suspense account under the Trust
(hereinafter
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<PAGE> 48
referred to as the "Suspense Account") to be allocated among Participants in the
next succeeding Plan Year, in accordance with the provisions of Paragraph B of
this Section Seven, as if such amount were part of the Company Matching
Contribution for such next succeeding Plan Year (and succeeding Plan Years, as
necessary). In addition, the following rules shall apply to any Suspense Account
established in accordance with this subparagraph (iii):
(a) No portion of the net income, loss, appreciation or
depreciation in the value of the Trust Fund may be allocated to such Suspense
Account.
(b) The maximum Company Matching Contribution for any Plan Year
in which a Suspense Account exists may not exceed the difference between:
(A) The maximum Company Matching Contribution which could
be allocated among all Eligible Participants for such Plan Year in accordance
with the provisions of this Section Seven,
Less
----
(B) The full amount of the Suspense Account.
(c) In the event that the Plan is terminated at a time when a
Suspense Account exists and in the further event that the full amount of such
Suspense Account cannot be allocated among the Participants in the Plan as of
the date of the termination of the Plan due to the restrictions set forth in
this Section Seven, then, notwithstanding any other provision of this
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<PAGE> 49
Plan or the Trust Agreement to the contrary, the amount of such Suspense Account
that cannot be allocated among the Participants shall revert to the
Participating Companies.
E. LIMITATIONS ON ANNUAL ADDITIONS DUE TO PARTICIPATION IN OTHER
DEFINED CONTRIBUTION PLANS. In the event that any Participant in this Plan is a
participant in any other Defined Contribution Plan (whether or not terminated)
maintained by a Participating Company or an Affiliated Company, the total amount
of Annual Additions to such Participant's accounts in all such Defined
Contribution Plans shall not exceed the limitations set forth in Paragraph D of
this Section Seven. If it is determined that as a result of the limitations set
forth in this Paragraph E the Annual Additions to a Participant's Accounts in
this Plan must be reduced, such reduction shall be accomplished in accordance
with the provisions of Paragraph D of this Section Seven.
F. LIMITATIONS ON ANNUAL ADDITIONS DUE TO PARTICIPATION IN DEFINED
BENEFIT PLANS. In the event that any Participant in this Plan is a participant
in one or more Defined Benefit Plans (whether or not terminated) maintained by a
Participating Company or an Affiliated Company, then for any Limitation Year the
sum of the Defined Benefit Plan Fraction for such Limitation Year and the
Defined Contribution Plan Fraction for such Limitation Year shall not exceed one
(1.0). If it is determined that as a result of the limitations set forth in this
Paragraph F the Annual Additions to a Participant's Accounts in this Plan must
be
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<PAGE> 50
reduced, such reduction shall be accomplished in accordance with the provisions
of Paragraph D of this Section Seven.
G. DEFINITIONS RELATING TO ANNUAL ADDITIONS LIMITATIONS. For
purposes of Paragraphs D, E, F and this Paragraph G of Section Seven, the
following definitions shall apply:
(i) "Retirement Plan" shall mean (a) any profit-sharing, pension
or stock bonus plan described in Sections 401(a) and 501(a) of the Internal
Revenue Code, (b) any annuity plan or annuity contract described in Sections
403(a) or 403(b) of the Internal Revenue Code, (c) any qualified bond purchase
plan described in former Section 405(a) of the Internal Revenue Code, and (d)
any individual retirement account, individual retirement annuity or retirement
bond described in Sections 408(a), 408(b) or former Section 409 of the Internal
Revenue Code.
(ii) "Defined Contribution Plan" shall mean a Retirement Plan
which provides for an individual account for each participant and for benefits
based solely on the amount contributed to the participant's accounts, and any
income, expenses, gains and losses, and any forfeitures of accounts of other
participants which may be allocated to such participant's account.
(iii) "Defined Benefit Plan" shall mean any Retirement Plan which
does not meet the definition of a Defined Contribution Plan.
(iv) "Defined Benefit Plan Fraction," for any Limitation Year,
shall mean a fraction (a) the numerator of which
- 46 -
<PAGE> 51
is the projected annual benefit of the Participant (the annual benefit to which
such participant would be entitled under the terms of the Defined Benefit Plan
on the assumptions that he continues employment until his normal retirement age
as determined under the terms of such Defined Benefit Plan, that his
compensation continues at the same rate as in effect in the Limitation Year
under consideration until the date of his normal retirement age and that all
other relevant factors used to determine benefits under such Defined Benefit
Plan remain constant as of the current Limitation Year for all future Limitation
Years) under all Defined Benefit Plans maintained by the Participating Companies
and the Affiliated Companies, determined as of the close of the Limitation Year,
and (b) the denominator of which is the lesser of (I) the product of the dollar
limitation in effect under Section 415(b)(1)(A) of the Internal Revenue Code for
such Limitation Year multiplied by one and twenty-five one-hundredths (1.25) or
(II) the product of the Participant's average compensation for his high three
years multiplied by one and four tenths (1.4).
(v) "Defined Contribution Plan Fraction," for any Limitation
Year, shall mean a fraction (a) the numerator of which is the sum of the Annual
Additions to the Participant's accounts under all Defined Contribution Plans
maintained by the Participating Companies and the Affiliated Companies in such
Limitation Year, and (b) the denominator of which is the sum of the lesser of
the following amounts for such Limitation Year and
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<PAGE> 52
for all prior Limitation Years during which he performed service recognized
under such plans: (I) the product of the dollar limitation in effect under
Section 415(c)(1)(A) of the Internal Revenue Code for each such Limitation Year
times one and twenty-five one-hundredths (1.25) or (II) the product of
twenty-five percent (25%) of such Participant's Limitation Year Compensation for
such Limitation Year times one and four tenths (1.4).
(vi) "Limitation Year" shall mean the twelve (12) consecutive
month period ending on December 31 of each year.
(vii) "Limitation Year Compensation" shall mean the aggregate of
all wages, salaries, and other amounts paid for personal services rendered which
are received by an Employee from the Participating Companies and the Affiliated
Companies within a Limitation Year, to the extent that such amounts are
includible in gross income. Limitation Year Compensation shall not include
deferred compensation, stock options and other distributions which receive
special tax benefit. Limitation Year Compensation shall be calculated in
accordance with the provisions of Section 415(c)(3) of the Internal Revenue Code
and the regulations issued thereunder.
H. CHANGE OF EMPLOYEE STATUS. If any Participant does not suffer a
Termination of Employment but ceases to be an Employee by reason of becoming (i)
a nonresident alien or (ii) included in a unit of employees covered by a
collective bargaining agreement with regard to which there has been good faith
bargaining with
- 48 -
<PAGE> 53
respect to retirement benefits, then unless the applicable collective bargaining
agreement otherwise provides, during the period that such Participant is not an
Employee, (a) such Participant shall not receive any further allocation of any
contributions under the Plan, other than an allocation of the Salary Reduction
Contributions made on behalf on such Participant for the period of time during
which he was an Employee and an allocation of the Company Matching Contribution
for the Plan Year in which he ceased to be an Employee if he completed one
thousand (1,000) or more Hours of Service with the Participating Companies
during the portion of such Plan Year prior to the date on which he so ceased to
be an Employee, and (b) such Participant's Accounts shall continue to share in
the earnings or losses of the Trust Fund. If any person who derives Compensation
from the Company does not become a Participant in the Plan because he is not an
Employee and he subsequently qualifies as an Employee, such person shall become
eligible to become a Participant in the Plan immediately upon such change of
status if he has then fulfilled the requirements for eligibility set forth in
Section Three.
SECTION EIGHT
EVALUATION OF TRUST FUND
------------------------
The Trustee shall evaluate the Trust Fund at fair market value as of
the close of business on the last day of the Plan Year. In making such
evaluation, the Trustee shall deduct all charges, expenses and other
liabilities, if any, contingent or
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otherwise, then chargeable against the Trust Fund and not otherwise payable by
the Participating Companies, in order to give effect to income realized and
expenses paid or incurred, losses sustained and unrealized gains or losses
constituting appreciation or depreciation in the value of Trust investments
since the last previous valuation. All such charges shall be allocated among the
Accounts of the Participants in an equitable manner based upon the source and
nature of such charges and the Investment Funds in which each such Account has
been invested. As soon as practicable after such valuation, the Trustee shall
deliver in writing to the Administrative Committee and to the Board of Directors
of the Sponsoring Company a valuation of the Trust Fund, including a separate
breakdown of each Participant's Accounts, together with a statement of the
amount of net income or loss (including appreciation or depreciation in the
value of Trust investments) since the last previous valuation.
SECTION NINE
PARTICIPANTS' ACCOUNTS
----------------------
A. SEPARATE ACCOUNTS. A separate Company Contribution Account, a
separate Salary Reduction Contribution Account, and, if applicable, a separate
Company Stock Account, a separate Voluntary Account, a separate Rollover Account
and any other account deemed necessary by the Administrative Committee shall be
maintained for each Participant. The amount contributed by a Participant or
allocated to such Participant shall be credited to
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his Accounts in the manner set forth in Sections Six and Seven hereof. All
payments to a Participant or his Beneficiaries shall be charged against the
respective Accounts of such Participant.
B. ACCOUNTS OF PARTICIPANTS TRANSFERRED TO AN AFFILIATED COMPANY. If
a Participant is transferred to an Affiliated Company which has not adopted the
Plan, the amount in the Trust which is credited to his Accounts shall continue
to be governed by the provisions of the Plan and Trust.
C. ANNUAL ADJUSTMENT OF PARTICIPANT'S ACCOUNTS. Promptly after
preparation of the Trustee's evaluation, as provided in Section Eight above, the
Accounts of each Participant shall be adjusted so that the amount of net income,
loss, appreciation or depreciation in the value of assets invested in an
Investment Fund shall be allocated equitably and exclusively to the
Participants' Accounts invested in such Investment Fund.
D. INVESTMENT OF CONTRIBUTIONS.
(i) PARTICIPANT-DIRECTED INVESTMENTS. In accordance with
procedures established by the Administrative Committee, each Participant shall
have the opportunity, on or before each Investment Election Date, to make an
Investment Election with the Administrative Committee or its delegate. This
election shall be effective beginning on the Investment Election Date following
its receipt by the Administrative Committee or its delegate and shall continue
in effect until revoked or modified as of a subsequent Investment Election Date.
Any such modification or revocation of an Investment Election shall be effective
on the Investment
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Election Date following the receipt by the Administrative Committee or its
delegate of a new Investment Election. The following restrictions shall apply to
such investment elections:
(a) No election may be made in violation of any applicable investment
contract or other agreement establishing an Investment Fund;
(b) Transfers among the available Investment Funds may be made only in
whole percentage multiples of one percent (1%) of the balances therein; and
(c) Prior to January 1, 1997, no shares of Company Stock which have
been allocated to a Participant's Company Contribution Account or Company Stock
Account may be liquidated or otherwise converted into another form of investment
except in the case of a distribution of benefits from such Account. On and after
January 1, 1997, shares of Company Stock which have been allocated to a
Participant's Company Contribution Account or Company Stock Account may be
liquidated or otherwise converted into another form of investment. Any shares of
Company Stock which must be acquired by the Trust to effectuate an investment
election shall be purchased on the open market (or otherwise acquired in any
other manner as may be specified from time to time by the Administrative
Committee) as soon as practicable after the next applicable Valuation Date. Any
dividends paid with respect to Company Stock shall be used to purchase
additional whole or partial shares of Company Stock as soon as practicable after
the next Valuation Date.
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In addition, the Administrative Committee, in its sole discretion, may
from time to time establish special Investment Election Dates to provide the
Participants with additional opportunities to designate the manner in which
their Accounts shall be allocated among the then-available Investment Funds.
(ii) ADMINISTRATIVE COMMITTEE DIRECTED INVESTMENTS. All Accounts
(other than Company Stock Accounts) not subject to an Investment Election filed
with the Administrative Committee pursuant to subparagraph (i) above shall be
invested in a money market fund or other liquid or pooled fund investment
vehicle selected by the Administrative Committee.
E. TREATMENT OF PARTICIPANTS TRANSFERRED TO IN-HOME HEALTH, INC. In
the event that a Participant is transferred to the employ of In-Home Health,
Inc., such Participant's Hours of Service performed on behalf of In-Home Health,
Inc. shall be recognized in determining such Participant's Years of Service
under this Plan when computing the vested amount in such Participant's Company
Contribution Account under this Plan. However, no further benefits shall accrue
under this Plan with respect to compensation earned by such Participant as an
employee of In-Home Health, Inc. Finally, so long as the Sponsoring Company is
in 'effective control' of In-Home Health, Inc., as defined by Treas. Reg. (S)
414(c)-2(c)(2), such Participant shall not be entitled to receive a distribution
from this Plan until such Participant terminates employment with In-Home Health,
Inc.
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F. SPECIAL RULES REGARDING CHOICE HOTELS INTERNATIONAL, INC. STOCK.
It is anticipated that the Sponsoring Company shall cause a stock dividend to be
paid in shares of Choice Hotels International, Inc. stock and that such dividend
shall be paid with respect to all shares of Company Stock including Company
Stock allocated to the Company Stock Accounts and the Company Contribution
Accounts of Participants under this Plan. The Administrative Committee shall
establish a uniform and non-discriminatory set of procedures pursuant to which a
Participant may elect that all or any portion of the Choice Hotels
International, Inc. stock received with respect to Company Stock held in a
Company Stock Account or Company Contribution Account be liquidated and the
proceeds therefrom reinvested among the then-available investment funds. It is
anticipated that such election period shall occur in November and December of
1996. Choice Hotels International, Inc. stock which is not so liquidated will be
retained in the Participant's Company Stock Account and Company Contribution
Account. Such shares may not be liquidated prior to the payment of benefits to
such Participant from his Company Stock Account and Company Contribution Account
in accordance with the provisions of the Plan. Any dividends payable with
respect to Choice Hotels International, Inc. stock retained by the Plan will be
reinvested in additional shares of Choice Hotels International, Inc. stock.
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SECTION TEN
COMMON TRUST FUND
-----------------
The fact that for administrative purposes separate Accounts are
maintained for each Participant shall not be deemed to segregate for such
Participant, or to give such Participant any direct interest in, any specific
assets in the Trust Fund held by the Trustee. All such assets may be held and
administered by the Trustee as a commingled fund.
SECTION ELEVEN
DISABILITY BENEFITS
-------------------
A. DISABILITY RETIREMENT BENEFITS. If a Participant retires by
reason of a Total and Permanent Disability while in the employ of a
Participating Company or an Affiliated Company, his Company Contribution Account
shall fully vest, and he shall be entitled to receive benefits equal to the
total amount in his Accounts in the Plan as determined in accordance with the
provisions of Paragraph A of Section Fifteen hereof. Such benefits shall be paid
at the time and in the manner specified in Section Fifteen of the Plan.
B. DETERMINATION OF DISABILITY. The Administrative Committee shall
determine whether a Participant has suffered a Total and Permanent Disability
and its determination in that respect shall be binding upon the Participant. In
making its determination, the Administrative Committee may (i) require the
Participant to submit to medical examinations by doctors selected
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by the Administrative Committee or (ii) rely upon a determination that the
Participant is entitled to disability benefits payable under Title II of the
Social Security Act, 42 U.S.C. 301 et seq., or similar subsequent section, as
-- ---
evidenced by a Certificate of Social Security Insurance Award. The provisions
of this Section Eleven shall be uniformly and consistently applied to all
Participants.
SECTION TWELVE
RETIREMENT BENEFITS
-------------------
If a Participant is employed by a Participating Company or an
Affiliated Company on his Retirement Date, his Company Contribution Account
shall fully vest at that time. If the Participant continues in a Participating
Company's employ after his Retirement Date, he shall continue to be eligible to
elect to have Salary Reduction Contributions made on his behalf under the Plan
and to share in the allocations of Company Matching Contributions under the Plan
until his actual retirement. Upon retirement on or after attaining his
Retirement Date, a Participant shall be entitled to receive benefits equal to
the total amount in his Accounts in the Plan as determined in accordance with
the provisions of Paragraph A of Section Fifteen hereof. Such benefits shall be
paid at the time and in the manner specified in Section Fifteen of the Plan.
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SECTION THIRTEEN
DEATH BENEFITS
--------------
A. DEATH BENEFITS. Upon the death of a Participant who is employed
by a Participating Company or an Affiliated Company at the time of his death,
such deceased Participant's Company Contribution Account shall fully vest, and
his Beneficiary shall be entitled to receive benefits equal to the total amount
in the deceased Participant's Accounts in the Plan as determined in accordance
with the provisions of Paragraph A of Section Fifteen hereof. Upon the death of
a Participant who is not employed by a Participating Company or an Affiliated
Company at the time of his death, such deceased Participant's Beneficiary shall
be entitled to receive benefits equal to the vested amount in the deceased
Participant's Accounts in the Plan as determined in accordance with the
provisions of Paragraph A of Section Fourteen. In either event, such benefits
shall be paid at the time and in the manner specified in Section Fifteen of the
Plan.
B. DESIGNATION OF BENEFICIARIES. Subject to rules contained in the
following paragraph, each Participant may designate one or more Beneficiaries
and contingent Beneficiaries by delivering a written designation thereof over
his signature to the Administrative Committee. Again subject to the rules
contained in the following paragraph, a Participant may designate different
Beneficiaries at any time by delivering a new written designation over his
signature to the Administrative Committee. Any such designation shall become
effective only upon its receipt
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by the Administrative Committee. The last effective designation received by the
Administrative Committee shall supersede all prior designations. A designation
of a Beneficiary shall be effective only if the designated Beneficiary survives
the Participant.
Notwithstanding the above, if a Participant is married at the time of
his death, such Participant's surviving spouse shall be his Beneficiary, unless
such spouse has waived this right and consented to the Participant's designation
of a different Beneficiary. Any such spousal consent must be in writing, must
acknowledge the effect of the waiver, and must be witnessed by a notary public.
Any subsequent designation of a Beneficiary by the Participant shall require a
new spousal consent, unless the spouse's original consent expressly permits
future changes without additional spousal consent.
C. FAILURE OF PARTICIPANT TO DESIGNATE. If a Participant fails to
designate a Beneficiary, or if no designated Beneficiary survives the
Participant, the Participant shall be deemed to have designated the following
Beneficiaries (if then living) in the following order of priority: (1) his
spouse, (2) his children, including adopted children and stepchildren, in equal
shares, (3) his parents, in equal shares, and (4) his estate.
D. BENEFICIARIES' RIGHTS. Whenever the rights of a Participant are
stated or limited in the Plan, his Beneficiaries shall be bound thereby.
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SECTION FOURTEEN
EMPLOYMENT TERMINATION BENEFITS
-------------------------------
A. VESTING UPON TERMINATION OF EMPLOYMENT. In the event of the
Termination of Employment of a Participant, such Participant shall be entitled
to receive (i) one hundred percent (100%) of the amounts (if any) in his Salary
Reduction Contribution Account, his Company Stock Account, his Voluntary
Account, and his Rollover Account, and (ii) the following percentage of the
amount in his Company Contribution Account, based upon the number of his Years
of Service prior to such Termination of Employment, as follows:
Years of Service Percentage
---------------- ----------
Less than 3 years None
3 years 20%
4 years 40%
5 years 60%
6 years 80%
7 or more years 100%
Such benefits shall be paid at the time and in the manner set forth in Section
Fifteen of the Plan.
B. COUNTING YEARS OF SERVICE. For purposes of this Section
Fourteen, all Years of Service (whether or not continuous) shall be taken into
account, except Years of Service which are disregarded as follows:
(i) In the case of any Participant who has a One-Year Break in
Service, Years of Service before such break shall not be taken into account
until such Participant has completed a Year of Service after such break.
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(ii) In the case of any Participant who has no vested amount in the
Plan attributable to Participating Company contributions, Years of Service
before any period of consecutive One-Year Breaks in Service shall not be taken
into account if the number of consecutive One-Year Breaks in Service equals or
exceeds the greater of (a) five (5) or (b) the aggregate number of Years of
Service before such break. Such aggregate number of Years of Service before such
break shall be deemed not to include any Years of Service not required to be
taken into account under this Paragraph B by reason of any prior breaks in
service.
(iii) In the case of any Participant who has five (5) or more
consecutive One-Year Breaks in Service, Years of Service after such break shall
not be taken into account for purposes of determining the vested amount in his
Company Contribution Account which accrued prior to such break.
C. FORFEITURE OF NON-VESTED AMOUNT. The excess of (i) the amount
in the Company Contribution Account of a Participant whose Termination of
Employment has occurred, over (ii) the vested amount in such Company
Contribution Account as determined in accordance with the vesting schedule set
forth in Paragraph A of this Section Fourteen (such difference being referred to
herein as the "Non-Vested Amount") shall be forfeited upon the earlier of (i)
the Participant's receipt of a distribution of his total vested Accounts under
the Plan, or (ii) his incurring his second (2nd) consecutive One-Year Break in
Service following such Termination of Employment. For this purpose, if such a
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Participant had no vested Accounts in the Plan upon his Termination of
Employment, he shall be deemed to have received a distribution of zero dollars
($0) from the Plan upon his Termination of Employment, representing a
distribution of his total vested Accounts under the Plan.
If a Participant who has received a distribution of his total vested
Accounts under the Plan (i) is rehired by a Participating Company and performs
more than five hundred (500) Hours of Service in any Plan Year before incurring
five (5) consecutive One-Year Breaks in Service and (ii) repays the full amount
of his prior distribution within five (5) years of the date on which he is
rehired by the Participating Company, any previously forfeited Non-Vested Amount
shall be restored to his Company Contribution Account, and he shall continue to
earn future Years of Service for purposes of determining the vested amount in
such Account without regard to his cessation of employment. The funds needed to
restore such a Participant's Non-Vested Amount shall be drawn first from any
Account balances forfeited under the provisions of this Paragraph C or under the
provisions of Paragraph G of Section Fifteen during the Plan Year in which such
restoration is required. If such sources are not sufficient to fully restore the
previously forfeited Non-Vested Amount to the Participant's Company Contribution
Account, the Participating Company which rehired such Employee shall make a
special contribution earmarked to fund the remainder of the amount needed.
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Subject to the immediately preceding paragraph and to the provisions
of Paragraph G of Section Fifteen, all Non-Vested Amounts which are forfeited
during a Plan Year under this Paragraph C shall be used to reduce the future
cost of benefits by applying such forfeited Non-Vested Amounts to the current or
the following year's Company Matching Contribution required under the Plan.
SECTION FIFTEEN
PAYMENT OF BENEFITS
-------------------
A. RETIREMENT, DISABILITY AND DEATH BENEFITS. The Administrative
Committee shall make distribution of the benefits payable to a Participant (or,
if applicable, his Beneficiary) upon such Participant's retirement on or after
attaining his Retirement Date or upon sustaining a Total and Permanent
Disability or upon such Participant's death while employed by a Participating
Company or an Affiliated Company. Such distribution shall be made as soon as
administratively feasible following the close of the Plan Year in which such
retirement, Total and Permanent Disability or death occurs, and shall be based
upon the balance in such Participant's Accounts as of the Valuation Date
coincident with or immediately preceding such distribution.
At the request of the Participant (or, if applicable, his
Beneficiary), the Administrative Committee shall make such distribution prior to
the close of the Plan Year in which such
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retirement, Total and Permanent Disability, or death occurs. In such event, the
benefit payable to the Participant (or, if applicable, his Beneficiary) shall be
based upon the balances in such Participant's Accounts as of the Valuation Date
immediately preceding the distribution, supplemented, where applicable, by an
amount representing any Salary Reduction Contributions contributed to the Plan
on behalf of such Participant subsequent to such Valuation Date and any Rollover
Amounts contributed to the Plan by such Participant subsequent to such Valuation
Date.
Notwithstanding the foregoing, if the total benefits payable to a
Participant under this Paragraph A exceed Three Thousand Five Hundred Dollars
($3,500), such benefits may not be distributed to such Participant before he
reaches his Retirement Date unless he consents to an earlier distribution.
B. EMPLOYMENT TERMINATION BENEFITS. The Administrative Committee
shall make an employment termination benefit distribution to a Participant (or,
if applicable, his Beneficiary) as soon as administratively feasible following
the close of the Plan Year in which the Participant's Termination of Employment
occurs. The benefits payable to a Participant (or, if applicable, his
Beneficiary) upon such Participant's Termination of Employment shall be based
upon the vested amount (as provided in Paragraph A of Section Fourteen) in his
Company Contribution Account and the total amount in his other Accounts as of
the Valuation Date coincident with or immediately preceding the date on which
the distribution is made.
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At the request of the Participant (or, if applicable, his
Beneficiary), the Administrative Committee shall, if administratively feasible,
make such distribution prior to the close of the Plan Year in which the
Participant's Termination of Employment occurs. In such event, the benefit
payable to the Participant or Beneficiary shall be based upon the vested amount
(as provided in Paragraph A of Section Fourteen) in such Participant's Company
Contribution Account and the total amount in his other Accounts as of the
Valuation Date immediately preceding the distribution, supplemented, where
applicable, by an amount representing any Salary Reduction Contributions
contributed to the Plan on behalf of such Participant subsequent to such
Valuation Date and any Rollover Amounts contributed to the Plan by such
Participant subsequent to such Valuation Date. In the event that an Employee
incurs a Termination of Employment after the attainment of age fifty-five (55),
any distribution made to such Employee shall be exempt from the ten percent
(10%) additional tax on early distributions imposed under Section 72(t) of the
Internal Revenue Code.
Notwithstanding the foregoing, if the total vested benefits payable to
a Participant under this Paragraph B exceed Three Thousand Five Hundred Dollars
($3,500), such benefits may not be distributed to such Participant before he
reaches his Retirement Date unless he consents to an earlier such distribution.
In the event that a distribution is made pursuant to this Paragraph B
to a Participant who, at the time of such
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distribution, is not one hundred percent (100%) vested in the amount in his
Company Contribution Account, the following rules shall apply:
(i) ESTABLISHMENT OF SEPARATE LEDGER ACCOUNT. The Administrative
Committee shall establish a separate ledger account (hereinafter referred to as
the "Separate Account") for such Participant as of the time of such
distribution. The balance in such Participant's Company Contribution Account
immediately following such distribution shall be transferred to this Separate
Account and shall constitute the initial balance of this Separate Account. For
this purpose, all references to a Participant's Company Contribution Account in
the Plan shall be deemed applicable to such Participant's Separate Account.
(ii) SUBSEQUENT PAYMENTS. In the event that after such distribution
the former Employee is rehired by a Participating Company but then again incurs
a Termination of Employment at a time when such Participant is less than one
hundred percent (100%) vested in his Separate Account, then the nonforfeitable
portion of such Participant's Separate Account for purposes of Paragraph A of
Section Fourteen shall be an amount equal to:
(A) The vesting percentage set forth in Paragraph A of
Section Fourteen applicable to such Participant at the time of such subsequent
distribution,
Multiplied by:
-------------
(B) The sum of the present balance in the Separate
Account PLUS the sum of all prior distribution amounts,
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Less:
----
The sum of all prior distribution amounts.
C. METHODS OF PAYMENT OF BENEFITS. Except as otherwise provided in
this Section Fifteen, the Administrative Committee shall make distribution of
the benefits payable under Paragraph A or B of this Section Fifteen in
accordance with the method of distribution set forth below selected by the
Participant (or in the case of death benefits, by the Participant's
Beneficiary):
(i) TOTAL DISTRIBUTION. Benefits may be paid in the form of a
total distribution of the amount payable, in cash, to the Participant or
Beneficiary within one taxable year of such Participant or Beneficiary.
(ii) ANNUITY PAYMENTS. Benefits may be paid as an annuity for a
fixed number of years without regard to the duration of the life of the
Participant or Beneficiary. Any benefit in the form of annuity payments shall be
provided by the purchase of a nontransferable immediate or deferred payment
annuity contract from an insurance company selected by the Administrative
Committee. Any annuity contract so purchased shall be delivered to the
Participant or Beneficiary.
(iii) INSTALLMENT PAYMENTS. Benefits may be paid (a) in the form
of approximately equal annual, semi-annual, quarterly or monthly installments,
over a fixed period of time, or (b) in the form of annual payments over a
specified period of years in an amount for each year equal to the value of the
Participant's Accounts as of the Valuation Date for such year multiplied by a
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fraction whose numerator is one (1) and whose denominator is the number of years
remaining in such specified period of years.
At the election of a Participant or Beneficiary, the payment of any
benefits to the Participant in installments may be accelerated and the unpaid
balance distributed to such Participant or Beneficiary in a single distribution.
(iv) LIMITS ON DEFERRED PAYMENTS. In the event that benefits are
distributed in the form of annuity payments or installment payments, such
benefits shall be paid in substantially equal periodic amounts over a period of
years such that the cost or present value of the payments to be made to the
Participant during his life expectancy is greater than one-half (1/2) of the
amount credited to his Accounts at the date such payments commence. In no event
may the Trustee pay to a Participant or Beneficiary interest only on his
benefits.
(v) DISTRIBUTION OF COMPANY STOCK. Notwithstanding the
foregoing, the distribution of the benefits attributable to that portion of the
Participant's Company Stock Account and Company Contribution Account held in the
form of Company Stock shall be made (i) in cash if the aggregate number of
shares in such accounts is fifty (50) or less, or (ii) in cash or Company Stock
or both if the aggregate number of shares in such accounts is more than fifty
(50). Prior to making a distribution of benefits, the Administrative Committee
shall advise the Participant (or, if applicable, his Beneficiary) in writing of
the right to demand that that portion of the Participant's
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Company Stock Account and Company Contribution Account held in the form of
Company Stock be distributed solely in Company Stock, if such accounts contain
in the aggregate greater than fifty (50) shares. If the Participant (or, if
applicable, his Beneficiary) fails to make such demand in writing within ninety
(90) days after receipt of such written notice, the Administrative Committee
shall direct the Trustee to make distribution of that portion of the
Participant's Company Stock Account and Company Contribution Account held in
Company Stock in such form as the Administrative Committee, in its sole
discretion, shall determine.
If a Participant (or, if applicable, his Beneficiary) demands that
that portion of the Participant's Company Stock Account and Company Contribution
Account held in the form of Company Stock be distributed solely in Company
Stock, and if such accounts contain in the aggregate greater than fifty (50)
shares, the distribution of such applicable portion of his Company Stock Account
and Company Contribution Account held in the form of Company Stock shall be made
entirely in whole shares or other units of Company Stock. Any cash balance in
the Participant's Company Stock Account shall be used to acquire for
distribution the maximum number of whole shares or other units of Company Stock
at the then fair market value. Any fractional unit of the unexpended balance
shall be distributed in cash. If Company Stock is not available for purchase by
the Trustee, then the Trustee shall hold such balance until Company Stock is
acquired
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and then make such distribution. If the Trustee is unable to purchase the
Company Stock required for distribution, it shall make distribution in cash
within one (1) year after the date the distribution was to be made, except in
the case of a retirement distribution, which shall be made within sixty (60)
days after the close of the Plan Year in which the Participant's retirement
occurs.
D. REQUIRED DISTRIBUTIONS. Notwithstanding any other provision of
the Plan to the contrary, unless a Participant elects otherwise, or fails to
submit proper documentation, the distribution of his benefits under the Plan
shall begin no later than the sixtieth (60th) day after the close of the Plan
Year in which the LATEST of the following events occurs: (i) the Participant
reaches his Retirement Date, (ii) the ten (10) year anniversary of the date the
Participant commenced participation in the Plan occurs, or (iii) the Participant
terminates employment with the Participating Companies and all Affiliated
Companies.
Also notwithstanding any other provision of the Plan to the contrary
and in accordance with the provisions of Section 401(a)(9) of the Internal
Revenue Code, the distribution of a Participant's benefits under the Plan shall
commence no later than April 1 of the calendar year following the calendar year
in which the Participant attains age seventy and one-half (70-1/2), regardless
of whether the Participant is still employed by a Participating Company or an
Affiliated Company at that time.
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However, distribution to a Participant who (i) attained age seventy and one-half
(70-1/2) prior to January 1, 1988 and (ii) was not a Five-Percent Owner at any
time during the five (5) Plan Year period ending in the calendar year in which
the Participant attained age seventy and one-half (70-1/2) need not begin until
such Participant actually retires. In addition, benefits payable to or on behalf
of any Participant who, on or before December 31, 1983, made a valid designation
of method of distribution (as described in Section 242(b)(2) of the Tax Equity
and Fiscal Responsibility Act of 1982) shall (if such designation has not been
revoked by the Participant) be paid in accordance with such designation;
provided, however, that the Administrative Committee may disregard, accelerate
the payments under, or otherwise modify such designation to the extent it deems
necessary to preserve the tax-qualified status of the Plan and Trust.
All benefit distributions must be paid over a period of time which
does not exceed the life expectancy of the Participant or the combined life
expectancy of the Participant and his Designated Beneficiary (as defined below).
In the event a Participant dies AFTER distribution of his benefits has begun,
but before the Participant's full benefits have been distributed, the remaining
portion of such benefits shall be distributed at least as rapidly as under the
method of distribution being used as of the date of his death. In the event a
Participant dies PRIOR TO commencement of the receipt of benefits, the death
benefits attributable to such Participant shall be distributed
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within five (5) years of the Participant's death, provided, however, that any
portion of the death benefits which is payable to (or for the benefit of) a
Designated Beneficiary may be distributed, commencing within one (1) year of the
Participant's death, over the life of such Designated Beneficiary (or over a
period not extending beyond the life of such Designated Beneficiary) and further
provided that if the Designated Beneficiary is the Participant's surviving
spouse, distribution need not begin earlier than the date on which the
Participant would have attained age seventy and one-half (70-1/2). For purposes
of this paragraph, the term "Designated Beneficiary" shall mean an individual
designated (or deemed to be designated under Paragraph C of Section Thirteen) as
a Beneficiary by the Participant.
E. DISTRIBUTION OF SMALL ACCOUNT BALANCES. Notwithstanding any other
provision of the Plan to the contrary, if the total value of the vested Accounts
to be distributed to a Participant (or, if applicable, his Beneficiary) on
account of such Participant's retirement after attaining his Retirement Date or
after sustaining a Total and Permanent Disability, his death, or his Termination
of Employment is Three Thousand Five Hundred Dollars ($3,500) or less, the
Administrative Committee shall distribute such benefits to such Participant (or,
if applicable, his Beneficiary) in the form of a single payment of the total
amount of such benefits. Such payment shall be made no later than sixty (60)
days after the Valuation Date of the Plan Year
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within which such Participant so retires after attaining his Retirement Date or
after sustaining a Total and Permanent Disability, dies or incurs a Termination
of Employment, or as soon thereafter as is administratively feasible. Such
payment shall be in full discharge of all obligations under the Plan with
respect to such Participant or Beneficiary. However, no distribution may be made
pursuant to this Paragraph E after the date benefit payments commence under the
Plan without the written consent of the Participant (or, if the Participant has
died, his surviving spouse).
F. LOANS TO PARTICIPANTS. Pursuant to the procedures and limitations
stated in that certain document entitled "Rules and Procedures Governing Plan
Loans to Participants," upon the written application of a Participant, the
Administrative Committee shall make a loan or loans to the Participant,
provided:
(i) that the total amount of any such loan to a Participant (when
added to the outstanding balance of all previous loans, if any, made to the
Participant by the Plan) shall not exceed the LESSER of (a) Fifty Thousand
Dollars ($50,000) reduced by the excess (if any) of (I) the highest outstanding
balance of all previous loans, if any, made to the Participant by the Plan
during the one-year period ending on the day before the date the loan is made,
over (II) the outstanding balance of all previous loans, if any, made to such
Participant by the Plan on the date the loan is made, or (b) fifty percent
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(50%) of the total vested amount of the Participant's Accounts at the time of
the loan; and
(ii) that the amount of the loan shall not be less than Seven
Hundred Fifty Dollars ($750) or such other amount as the Administrative
Committee may determine in its sole discretion.
Interest shall be charged on such a loan at the prevailing rate of
interest at the time of making the loan which persons in the business of lending
money for loans would charge in similar circumstances.
Each such loan shall be secured by a portion of the Participant's
vested Accounts not otherwise used to secure loans to the Participant equal to
the amount of the loan; provided, however, that at the time the loan is made no
more than fifty percent (50%) of the total vested amount of the Participant's
Accounts may be used to secure loans to the Participant under the Plan. Each
such loan shall be considered an investment of the individual Accounts of the
Participant used to secure the loan.
Each loan made to a Participant pursuant to this Paragraph F shall be
subject to substantially level amortization over the term of the loan, with
payments due not less frequently than quarterly. Each loan by its terms shall be
required to be repaid within five (5) years of the date of the loan is made;
provided, however, that a "home loan" (as described in Section 72(p)(2)(B)(ii)
of the Internal Revenue Code) may, in the discretion of the Administrative
Committee, be repaid over a reasonable period of time in excess of five (5)
years.
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Each such loan shall be repaid through salary withholding or other
means approved by the Administrative Committee. In the event a Participant does
not repay all or any portion of such loan when the same becomes due and payable,
in addition to any legal remedies which the Administrative Committee may have,
the Administrative Committee shall, upon the occurrence of an event permitting a
distribution of the Participant's Accounts under this Plan, deduct the unpaid
amount of such loan from the Participant's Accounts in the Plan.
The Participant loan program established under this Paragraph F shall
be subject to the terms and conditions of the "Rules and Procedures Governing
Plan Loans to Participants." Such "Rules and Procedures Governing Plan Loans to
Participants" shall contain, at a minimum, the information required under
Department of Labor Regulations Section 2550.408b-1(d)(2). The terms and
conditions of the "Rules and Procedures Governing Plan Loans to Participants"
shall be established and approved by the Administrative Committee, which shall
have the authority to amend such terms and conditions from time to time. A copy
of the most recent "Rules and Procedures Governing Plan Loans to Participants"
shall at all times be maintained by the Administrative Committee or its
delegate.
G. BENEFITS OF PERSONS WHO CANNOT BE LOCATED. If the Administrative
Committee determines in good faith that a Participant or Beneficiary entitled to
receive a benefit payment hereunder cannot be located, the Administrative
Committee shall
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nevertheless give written notice to such person of the fact that such benefit
payment is payable to him under the Plan. Such written notice shall be given by
United States mail to the person entitled to the benefit payment (according to
the records of the Plan) at the last known address of such person. In addition,
the Administrative Committee shall use such other means as are reasonably
available to it in order to ascertain the location of such person. If such
Participant or Beneficiary makes no claim for such benefit payment before the
earlier of (i) a period of two (2) years after the giving of such written notice
or (ii) the termination of the Plan, then the Administrative Committee shall
declare a forfeiture of the benefit otherwise payable to such person, provided
such person has not yet been located.
Notwithstanding the foregoing, if a claim for payment of such benefit
is thereafter made by the Participant or Beneficiary, such benefit shall be
reinstated and paid in full. If such a valid claim for payment of benefits is
subsequently made, the funds needed to pay such benefit shall be drawn first
from any amounts forfeited under the provisions of this Paragraph G or under the
provisions of Paragraph C of Section Fourteen during the Plan Year in which such
payment is required. If such sources are not sufficient to fully pay such
benefits, the Participating Company which last employed the Participant to whom
such benefits are attributable shall make a special contribution earmarked to
fund the remainder of the amount needed.
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Subject to the immediately preceding paragraph and to the provisions
of Paragraph C of Section Fourteen, all amounts which are forfeited during a
Plan Year under this Paragraph G shall be used to reduce the future cost of
benefits by applying such forfeited amounts to the current or following year's
Company Matching Contribution of the Participating Companies.
H. PRE-RETIREMENT DISTRIBUTIONS. A Participant may elect to withdraw
all or any portion of his Voluntary Account prior to his retirement, death,
Total and Permanent Disability or Termination of Employment. Only one such
withdrawal may be made during any Plan Year. Amounts withdrawn from a
Participant's Voluntary Account shall be distributed to the electing Participant
within sixty (60) days following the first day of the month following the
election. No pre-retirement distributions from a Participant's other Accounts in
the Plan shall be made for any reasons other than the Participant's death, Total
and Permanent Disability, or Termination of Employment.
I. POST-AGE 59 1/2 WITHDRAWALS. A Participant may withdraw any
portion, including earnings thereon, of his vested Accounts at any time on or
after attaining age 59 1/2, provided such Participant gives at least thirty (30)
days advance written notice to the Administrative Committee. After making an
initial post-age 59 1/2 withdrawal, a Participant may make additional
withdrawals of any remaining amounts in his vested Accounts upon giving the
applicable thirty (30) day advance notice at any time prior to his Termination
of Employment.
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J. DISTRIBUTION FOR MINOR BENEFICIARY. In the event a distribution
is to be made to a minor, then the Administrative Committee may, in its sole
discretion, direct that such distribution be paid to the legal guardian, or if
none, to a parent of such Beneficiary or a responsible adult with whom the
Beneficiary maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted
by the laws of the state in which said Beneficiary resides. Such a payment to
the legal guardian or parent of a minor Beneficiary shall fully discharge the
Trustee, Participating Companies and Plan from further liability on account
thereof.
K. HARDSHIP WITHDRAWALS. A Participant who has not reached age
fifty-nine and one-half (59-1/2) may withdraw an amount from his Salary
Reduction Contribution Account prior to Termination of Employment only if such
Participant displays, to the satisfaction of the Administrative Committee or its
delegate, that such withdrawal is necessary in light of a financial hardship,
that the amount requested to be withdrawn does not exceed the amount required to
meet the financial needs created by the hardship and that such an amount is not
reasonably available from the other resources of the Participant. The amounts
which may be withdrawn under this Paragraph K shall not include earnings and
gains on a Participant's Salary Reduction Contribution Account and may not
exceed the value of such Salary Reduction Contribution Account at the time of
withdrawal.
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The following expenses shall be deemed to constitute an immediate and
heavy financial need: (i) medical expenses incurred by the Participant, his
spouse or dependents; (ii) the purchase of a principal residence of the
Participant (excluding mortgage payments); (iii) the payment of tuition for the
next semester or quarter of post-secondary education for the Participant, his
spouse, children or dependents; and (iv) expenses needed to prevent the eviction
of the Participant from, or the foreclosure of the mortgage on, the
Participant's principal residence. A withdrawal shall be permitted under this
Paragraph only if the Participant has obtained all loans currently available
under all plans maintained by the Participating Company.
A Participant who has received a withdrawal pursuant to this Paragraph
shall not be permitted to make or receive Salary Reduction Contributions for
twelve (12) months after receipt of the hardship distribution, and his salary
reduction elections shall be suspended for such period. Furthermore, for the
calendar year following the withdrawal, the Maximum Reduction Amount for the
Participant shall be reduced by the amount of the Participant's Salary Reduction
Contributions for the calendar year during which the withdrawal occurred.
L. ELIGIBLE ROLLOVER DISTRIBUTIONS. Notwithstanding any provision of
the Plan to the contrary that would otherwise limit a Distributee's election
under this Paragraph L, with respect to all distributions made from the Plan on
and after January 1,
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1993, a Distributee may elect, at the time and in the manner prescribed by the
Administrative Committee, to have all or any portion of an Eligible Rollover
Distribution paid directly to an Eligible Retirement Plan specified by the
Distributee in a Direct Rollover.
As used in this Paragraph L, the following terms shall have the
following meanings:
(i) "Eligible Rollover Distribution" shall mean any distribution of
all or any portion of the balance to the credit of a Distributee under the Plan,
except that the term 'Eligible Rollover Distribution' shall not include any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the Distributee or the joint lives (or joint life expectancies) of the
Distributee and the Distributee's designated beneficiary, any distribution that
is one of a series of substantially equal periodic payments (not less frequently
than annually) made for a specified period of ten (10) years or more, any
distribution to the extent such distribution is required under Section 401(a)(9)
of the Internal Revenue Code or the portion of any distribution that is not
includible in gross income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
(ii) "Eligible Retirement Plan" shall mean an individual retirement
account described in Section 408(a) of the Internal Revenue Code, an individual
retirement annuity described in
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Section 408(b) of the Internal Revenue Code, an annuity plan described in
Section 403(a) of the Internal Revenue Code or a qualified trust described in
Section 401(a) of the Internal Revenue Code, that accepts the Distributee's
Eligible Rollover Distribution. In the case of an Eligible Rollover Distribution
made to the surviving spouse of an Employee or former Employee, the term
'Eligible Retirement Plan' shall mean an individual retirement account described
in Section 408(a) of the Internal Revenue Code or an individual retirement
annuity described in Section 408(b) of the Internal Revenue Code.
(iii) "Distributee" shall mean an Employee or former Employee. In
addition, the term 'Distributee' shall mean the surviving spouse of an Employee
or former Employee, or the spouse or former spouse of an Employee or former
Employee who is an alternate payee under a qualified domestic relations order
(as defined in Section 414(p) of the Internal Revenue Code), with regard to the
interest of such surviving spouse, spouse or former spouse under the Plan.
(iv) "Direct Rollover" shall mean a payment by the Plan to the
Eligible Retirement Plan specified by the Distributee.
SECTION SIXTEEN
RIGHT OF FIRST REFUSAL
----------------------
If any Participant, Beneficiary or any other person to whom shares of
Company Stock are distributed from the Plan (the "Selling Participant") shall,
at any time, desire to sell some or
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all of such shares (the "Offered Shares") to a third party (the "Third Party"),
the Selling Participant shall give written notice of such desire to the
Sponsoring Company and to the Administrative Committee, which notice shall
contain the number of shares offered for sale, the proposed terms of the sale,
and the names and addresses of both the Selling Participant and the Third Party.
The Sponsoring Company shall have a right of first refusal for a period of
fourteen (14) days from the date the Selling Participant gives such written
notice to the Sponsoring Company and to the Administrative Committee to acquire
the Offered Shares. The selling price and terms shall be the same as offered by
the Third Party.
If the Sponsoring Company does not exercise its right of first refusal
within the required fourteen (14) day period provided above, the Selling
Participant shall have the right, at any time following the expiration of such
fourteen (14) day period, to dispose of the Offered Shares to the Third Party;
provided, however, that (i) no disposition shall be made to the Third Party on
terms more favorable to the Third Party than those set forth in the written
notice delivered by the Selling Participant above, and (ii) if such disposition
shall not be made to a Third Party on the terms offered to the Sponsoring
Company, the Offered Shares shall again be subject to the right of first refusal
set forth above.
The closing pursuant to the exercise of the right of first refusal
under this Section Sixteen shall take place at such place
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agreed upon between the Administrative Committee and the Selling Participant,
but not later than ten (10) days after the Sponsoring Company shall have
notified the Selling Participant of the exercise of the right of first refusal.
At such closing, the Selling Participant shall deliver certificates representing
the Offered Shares duly endorsed in blank for transfer, or with stock powers
attached duly executed in blank with all required transfer tax stamps attached
or provided for, and the Sponsoring Company shall deliver the purchase price, or
an appropriate portion thereof, to the Selling Participant.
SECTION SEVENTEEN
STOCK CERTIFICATE LEGEND
------------------------
Certificates for shares distributed pursuant to the Plan shall contain
the following legend:
"The shares represented by this certificate are transferable only upon
compliance with the terms of the MANOR CARE, INC. RETIREMENT SAVINGS AND
INVESTMENT PLAN (the "Plan"), effective as of January 1, 1992, which grants
Manor Care, Inc. a right of first refusal, a copy of said Plan being on file in
the office of Manor Care, Inc."
SECTION EIGHTEEN
BENEFIT CLAIMS PROCEDURE
------------------------
A. CLAIMS FOR BENEFITS. Any claim for benefits under the Plan shall
be made in writing to the Administrative Committee. If such claim for benefits
is wholly or partially denied, the
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Administrative Committee shall, within ninety (90) days after receipt of the
claim, notify the Participant or Beneficiary of the denial of the claim. Such
notice of denial shall (i) be in writing, (ii) be written in a manner calculated
to be understood by the Participant or Beneficiary, and (iii) contain (a) the
specific reason or reasons for denial of the claim, (b) a specific reference to
the pertinent Plan provisions upon which the denial is based, (c) a description
of any additional material or information necessary to perfect the claim, along
with an explanation of why such material or information is necessary, and (d) an
explanation of the claim review procedure as set forth in this Section Eighteen.
B. REQUEST FOR REVIEW OF DENIAL. Within sixty (60) days after the
receipt by a Participant or Beneficiary of a written notice of denial of the
claim, or such later time as shall be deemed reasonable taking into account the
nature of the benefit subject to the claim and any other attendant
circumstances, the Participant or Beneficiary may file a written request with
the Administrative Committee that it conduct a full and fair review of the
denial of the claim for benefits.
C. DECISION ON REVIEW OF DENIAL. The Administrative Committee shall
deliver to the Participant or Beneficiary a written decision on the claim within
sixty (60) days after the receipt of the aforesaid request for review. Such
decision shall (i) be written in a manner calculated to be understood by the
Participant or Beneficiary, (ii) include the specific reason or
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reasons for the decision, and (iii) contain a specific reference to the
pertinent Plan provisions upon which the decision is based.
SECTION NINETEEN
INALIENABILITY OF BENEFITS
--------------------------
A. IN GENERAL. The right of any Participant or Beneficiary to any
benefit or payment under the Plan or Trust or to any separate Account maintained
as provided by the Plan shall not be subject to voluntary or involuntary
transfer, alienation, or assignment, and, to the fullest extent permitted by
law, shall not be subject to attachment, execution, garnishment, sequestration,
or other legal or equitable process. In the event a Participant or Beneficiary
who is receiving or is entitled to receive benefits under the Plan attempts to
assign, transfer or dispose of such right, or if an attempt is made to subject
said right to such process, such assignment, transfer or disposition shall be
null and void.
B. QUALIFIED DOMESTIC RELATIONS ORDERS. Notwithstanding Paragraph A,
benefits shall be payable to an individual other than a Participant in
accordance with the applicable requirements of a Qualified Domestic Relations
Order (as defined below) pursuant to the following provisions:
(i) The term "Qualified Domestic Relations Order" shall mean any
judgment, decree, or order (including approval of a property settlement
agreement) which relates to the provision
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of child support, alimony payments, or marital property rights to a spouse,
former spouse, child or other dependent of a Participant, which creates or
recognizes the existence of an alternative payee's right to, or assigns to an
alternate payee the right to, receive all or a portion of the benefits payable
with respect to a Participant under the Plan, and which meets the following
requirements:
(a) Such order shall specify the name and last known mailing address
(if any) of the Participant and each alternate payee covered by the order;
(b) Such order shall specify the amount or percentage of the
Participant's benefits to be paid by the Plan to each such alternate payee or
the manner in which such amount or percentage is to be determined;
(c) Such order shall specify the number of payments or period to which
the order applies;
(d) Such order shall specify each plan to which the order applies;
(e) Such order shall not require the Plan to provide any type or form
of benefits or any option not otherwise provided under the Plan;
(f) Such order shall not require the Plan to provide increased
benefits (determined on the basis of actuarial value); and
(g) Such order shall not require the payment of benefits to an
alternate payee which are required to be paid to
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another alternate payee under another order previously determined to be a
Qualified Domestic Relations Order.
(ii) The Administrative Committee shall determine a set of
nondiscriminatory and reasonable procedures to determine the qualified status of
domestic relations orders and to administer distributions under such qualified
orders in accordance with Section 414(p) of the Internal Revenue Code.
(iii) To the extent that a Qualified Domestic Relations Order provides
that a former spouse is to be treated as the Participant's spouse for purposes
of the death benefits payable under this Plan, the Participant's current spouse
shall NOT be treated as the Participant's spouse for that
purpose.
SECTION TWENTY
INVESTMENT OF TRUST FUND
------------------------
At a meeting duly called for such purpose, the Administrative
Committee shall establish a funding policy and method consistent with the
objectives of the Plan and the requirements of Title I of ERISA. The
Administrative Committee shall meet at least annually to review such funding
policy and method. In establishing and reviewing such funding policy and method,
the Administrative Committee shall endeavor to determine the Plan's short-term
and long-term objectives and financial needs, taking into account the need for
liquidity to pay benefits and the need for investment growth.
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SECTION TWENTY-ONE
AMENDMENT OF THE PLAN
---------------------
The Sponsoring Company may amend the Plan at any time, and from time
to time, pursuant to written resolutions of the Board of Directors of the
Sponsoring Company. No such amendment, however, shall have the effect of
reducing any then nonforfeitable percentage of benefits of any Participant as
computed in accordance with the vesting schedule under Paragraph A of Section
Fourteen of the Plan. If the vesting schedule under Paragraph A of Section
Fourteen of the Plan is amended and such amendment would, at any time, decrease
the percentage of vested benefits which any Participant would have been entitled
to receive had the vesting schedule not been so amended, then each Participant
who is employed on the date such amendment is adopted, or the date such
amendment is effective, whichever is later, and who has three (3) or more Years
of Service as of the end of the period within which such Participant may make
the election provided for herein shall be permitted, beginning on the date such
amendment is adopted, to irrevocably elect to have his vested interest computed
without regard to such amendment. Written notice of such amendment and the
availability of such election must be given to each such Participant, and each
such Participant shall be granted a period of sixty (60) days after the later of
(i) his receipt of such notice, or (ii) the effective date of such amendment,
within which to make such election. Such election shall be exercised by the
Participant by
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delivering or sending written notice thereof to the Administrative Committee
prior to the expiration of such sixty (60) day period.
SECTION TWENTY-TWO
PERMANENCY OF THE PLAN
----------------------
A. RIGHT TO TERMINATE PLAN. The Participating Companies
contemplate that the Plan shall be permanent and that they shall be able to make
contributions to the Plan. Nevertheless, in recognition of the fact that future
conditions and circumstances cannot now be entirely foreseen, each Participating
Company reserves the right to terminate either the Plan or both the Plan and the
Trust with respect to such Participating Company, and the Sponsoring Company
reserves the right to terminate either the Plan or both the Plan and the Trust
with respect to all the Participating Companies.
B. MERGER OR CONSOLIDATION OF PLAN. The Plan may not be merged or
consolidated with, nor may its assets or liabilities be transferred to, any
other plan, unless each Participant would (if the other plan then terminated)
receive a benefit immediately after the merger, consolidation, or transfer which
is equal to or greater than the benefit he would have been entitled to receive
immediately before the merger, consolidation, or transfer (if the Plan had then
terminated).
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SECTION TWENTY-THREE
DISCONTINUANCE OF CONTRIBUTIONS AND TERMINATION
-----------------------------------------------
A. DISCONTINUANCE OF CONTRIBUTIONS. Whenever a Participating
Company determines that it is impossible or inadvisable for it to make further
contributions as provided in the Plan, the Board of Directors of the such
Participating Company may, without terminating its participation in the Trust,
adopt an appropriate resolution permanently discontinuing all further
contributions by such Participating Company. A certified copy of such resolution
shall be delivered to the Administrative Committee and the Trustee. Thereafter,
the Administrative Committee and the Trustee shall continue to administer all
the provisions of the Plan which are necessary and remain in force, other than
the provisions relating to contributions by such Participating Company. However,
the Trust shall remain in existence with respect to such Participating Company
and all of the provisions of the Trust Agreement shall remain in force.
B. TERMINATION OF PLAN AND TRUST. If the Board of Directors of a
Participating Company determines to terminate the Plan and Trust completely with
respect to such Participating Company, the Plan and Trust shall be terminated
with respect to such Participating Company as of the date specified in certified
copies of resolutions of such Board of Directors of the Participating Company
delivered to the Administrative Committee and the Trustee. If the Board of
Directors of the Sponsoring Company determines to terminate the Plan and Trust
completely
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with respect to all the Participating Companies, the Plan and Trust shall be
terminated with respect to all the Participating Companies as of the date
specified in certified copies of resolutions of the Board of Directors of the
Sponsoring Company delivered to the Administrative Committee and the Trustee.
Upon such termination or partial termination of the Plan and Trust, after
payment of all expenses and proportional adjustment of the Accounts of the
Participants affected by such termination to reflect such expenses, profits or
losses of the Trust, and allocations of any previously unallocated funds to the
date of termination, the Participants affected by such termination shall be
entitled to receive the amount then credited to their respective Accounts in the
Plan. The Administrative Committee may make payment of such amount in cash or in
assets of the Trust Fund.
C. RIGHTS TO BENEFITS UPON TERMINATION OF PLAN OR COMPLETE
DISCONTINUANCE OF CONTRIBUTIONS. Upon the termination or partial termination of
the Plan or the complete discontinuance of contributions by a Participating
Company, the right of each Participant affected by such termination or such
discontinuance of contributions to the amount credited to his Accounts at such
time shall be nonforfeitable without reference to any formal action on the part
of any Participating Company, the Administrative Committee, or the Trustee.
D. TRANSFER OF ACCOUNTS TO THE CHOICE HOTELS INTERNATIONAL, INC.
RETIREMENT SAVINGS AND INVESTMENT PLAN. Effective November
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1, 1996, it is anticipated that the Sponsoring Company shall cause a stock
dividend to be paid in shares of Choice Hotels International, Inc. stock and
that after such stock dividend, Choice Hotels International, Inc. shall no
longer be part of the same controlled group as the Sponsoring Company. It is
further anticipated that Choice Hotels International, Inc. shall establish the
Choice Hotels International, Inc. Retirement Savings and Investment Plan on or
about November 1, 1996. As soon as practicable after the Trustee is notified of
the establishment of the Choice Hotels International, Inc. Retirement Savings
and Investment Plan, the Trustee shall cause to be transferred to the trust fund
established for the Choice Hotels International, Inc. Retirement Savings and
Investment Plan an amount equal to the current value of the Accounts
attributable to all Participants in the Plan who are employed by Choice Hotels
International, Inc. on or about November 1, 1996.
SECTION TWENTY-FOUR
STATUS OF EMPLOYMENT RELATIONS
------------------------------
The adoption and maintenance of the Plan and Trust shall not be deemed
to constitute a contract between any Participating Company and its Employees or
to be consideration for, or an inducement or condition of, the employment of any
person. Nothing herein contained shall be deemed (i) to give to any Employee the
right to be retained in the employ of a Participating Company; (ii) to affect
the right of a
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Participating Company to discipline or discharge any Employee at any time; (iii)
to give a Participating Company the right to require any Employee to remain in
its employ; or (iv) to affect any Employee's right to terminate his employment
at any time.
SECTION TWENTY-FIVE
BENEFITS PAYABLE BY TRUST
-------------------------
All benefits payable under the Plan shall be paid or provided for
solely from the Trust, and the Participating Companies assume no liability or
responsibility therefor.
SECTION TWENTY-SIX
EXCLUSIVE BENEFIT OF TRUST FUND
-------------------------------
A. LIMITATION UPON REVERSIONS. Except as provided in Paragraph B
below, the assets of the Trust Fund shall not inure to the benefit of the
Participating Companies and shall be held for the exclusive purposes of
providing benefits to Participants and their Beneficiaries and defraying
reasonable expenses of administering the Plan.
B. MISTAKE OF FACT. In the event that all or any portion of a
contribution made to the Trust is based upon a mistake of fact, the excess
amount of the contribution attributable to the mistake of fact shall be returned
to the Participating Company making such contribution as promptly as
practicable, but in no event later than one (1) year after the payment of the
contribution.
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SECTION TWENTY-SEVEN
APPLICABLE LAW
--------------
The Plan and the Trust which is a part thereof shall be construed,
regulated, interpreted, and administered under and in accordance with the laws
of the State of Maryland, other than its laws respecting choice of law, to the
extent not preempted by ERISA.
SECTION TWENTY-EIGHT
INTERPRETATION OF THE PLAN AND TRUST
------------------------------------
It is the intention of the Participating Companies that the Plan and
the Trust established to implement the Plan shall comply with the provisions of
Sections 401 and 501 of the Internal Revenue Code, the requirements of ERISA,
and the corresponding provisions of any subsequent laws, and the provisions of
the Plan and Trust Agreement shall be construed to effectuate such intention.
SECTION TWENTY-NINE
ADOPTION OF PLAN BY AFFILIATED COMPANIES
----------------------------------------
Any Affiliated Company, whether or not presently existing, may, with
the approval of the Board of Directors of the Sponsoring Company, adopt the Plan
and Trust by means of appropriate corporate action of such Affiliated Company
and by executing such documents as the Board of Directors of the Sponsoring
Company may require in order for such Affiliated Company to become a party to
the Trust. Any such Affiliated
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Company which adopts the Plan and Trust as provided above shall thereafter be
included within the meaning of the term "Participating Company" when used in the
Plan and Trust.
SECTION THIRTY
TOP-HEAVY CONTINGENCY PROVISIONS
--------------------------------
A. APPLICATION. The provisions of this Section Thirty-One are
included in the Plan pursuant to Section 401(a)(10)(B)(ii) of the Internal
Revenue Code and shall become applicable only if the Plan becomes a Top-Heavy
Plan (as defined below) under Section 416(g) of the Internal Revenue Code for
any Plan Year.
B. DEFINITION OF TOP-HEAVY PLAN. The determination as to whether
the Plan has become a Top-Heavy Plan for any such Plan Year shall be made as of
the last day of the immediately preceding Plan Year, or, in the case of the
first Plan Year, the last day of such Plan Year (the "Determination Date"), and
the Plan shall be a "Top-Heavy Plan" only if the aggregate of the Account
balances under the Plan for Key Employees (as defined below) exceeds sixty
percent (60%) of the aggregate of the Account balances under the Plan for all
Participants. For such purpose, the aggregate Account balances shall be computed
and adjusted pursuant to Section 416(g) of the Internal Revenue Code and the
regulations thereunder.
As used herein, the term "Key Employee" shall mean any Employee or
former Employee who at any time during the current Plan Year or any of the four
(4) preceding Plan Years meets the
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criteria under Section 416(i)(1) of the Internal Revenue Code. A Key Employee
shall include the following:
(i) an officer of a Participating Company or an Affiliated Company if
such individual's annual Compensation from the Participating Companies and all
Affiliated Companies exceeds fifty percent (50%) of the dollar limitation then
in effect under Section 415(b)(1)(A) of the Internal Revenue Code for such Plan
Year;
(ii) an actual or constructive owner (using the attribution rules of
Section 318 of the Internal Revenue Code) of both more than a one-half of one
percent (1/2%) interest in the total ownership value of, and of one of the ten
(10) largest percentage ownership interests in value in, a Participating Company
or an Affiliated Company if such individual's Compensation from the
Participating Companies and all Affiliated Companies exceeds one hundred percent
(100%) of the dollar limitation then in effect under Section 415(c)(1)(A) of the
Internal Revenue Code for such Plan Year;
(iii) a Five-Percent Owner;
(iv) a "one-percent owner" (as defined in Section 416(i)(1)(B)(ii) of
the Internal Revenue Code) of a Participating Company or an Affiliated Company
having an annual Compensation from the Participating Companies and all
Affiliated Companies of more than One Hundred Fifty Thousand Dollars ($150,000);
or
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<PAGE> 100
(v) the Beneficiary of any deceased Employee or former Employee
described in subparagraph (i), (ii), (iii) or (iv) above.
For purposes of subparagraph (i) above, no more than fifty (50)
employees (or, if lesser, the greater of three (3) employees or ten percent
(10%) of all employees) shall be treated as officers. For purposes of this
Section Thirty, the term "compensation" shall mean "compensation" as defined in
Section 414(q)(7) of the Internal Revenue Code.
C. CONSIDERATION OF MULTIPLE PLANS IN DETERMINING TOP-HEAVY STATUS OF
PLAN. All plans of the Participating Companies or the Affiliated Companies
which are included in a Required Aggregation Group or in a Permissive
Aggregation Group (both as defined below) with this Plan shall be considered
together in determining whether this Plan is a Top-Heavy Plan. Each plan of a
Participating Company or an Affiliated Company which is required to be included
in an aggregation group shall be treated as a Top-Heavy Plan if such group is a
Top-Heavy Group (as defined below). For these purposes, a "Required Aggregation
Group" shall mean (i) each plan of a Participating Company or an Affiliated
Company in which a Key Employee is a participant plus (ii) each other plan of a
Participating Company or an Affiliated Company which is required to exist in
order for the plans contained in (i) above to meet the nondiscrimination
requirements of Section 401(a)(4) or 410 of the Internal Revenue Code. A
"Permissive Aggregation Group" shall mean (i) a Required
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<PAGE> 101
Aggregation Group plus (ii) any other plan (or plans) of a Participating Company
or an Affiliated Company which is able to separately meet the nondiscrimination
requirements of Sections 401(a)(4) and 410 of the Internal Revenue Code and
which the Sponsoring Company elects to include within such group.
An aggregation group (either permissive or required) shall be a "Top-
Heavy Group" only if the sum of (a) the present value of the cumulative accrued
benefits for Key Employees under all defined benefit plans included in such
group and (b) the total of the account balances for Key Employees under all
defined contribution plans included in such group exceeds sixty percent (60%) of
the accrued benefits and account balances determined for all employees covered
under such plans. For these purposes, account balances shall be computed and
adjusted pursuant to the principles of Section 416(g) of the Internal Revenue
Code. In determining the cumulative accrued benefits and account balances for
purposes of this top-heavy test:
(i) the present value of the cumulative accrued benefits of all Key
Employees shall be increased by the aggregate distributions made with respect to
each such individual under the plan during the previous five (5) years (ending
on the Determination Date). This subparagraph (i) shall also apply to
distributions under a terminated plan which would have been required to be
included in an aggregation group had it not been terminated;
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<PAGE> 102
(ii) the extent to which rollovers and transfers must be taken into
account shall be made in accordance with Section 416 of the Internal Revenue
Code and the regulations thereunder; and
(iii) the account balances and accrued benefits of (a) a Participant
who is not currently a Key Employee but who was a Key Employee in a prior year
or (b) a Participant who is a Key Employee but who has not performed any
services for a Participating Company or an Affiliated Company at any time during
the five (5)-year period ending on the Determination Date, shall be disregarded.
D. MINIMUM BENEFITS. For any Plan Year in which the Plan is a Top-
Heavy Plan, each Participant who is not a Key Employee (a "Non-Key Employee")
and who is employed on the last day of the Plan Year shall receive a minimum
allocation of Participating Company contributions (other than Salary Reduction
Contributions) to his Accounts under this Plan which, when combined with the
amount of any other Participating Company or Affiliated Company contributions
and/or forfeitures allocated to such Participant's accounts under any other
defined contribution plans maintained by the Participating Companies and the
Affiliated Companies shall be no less than the lesser of (i) three percent (3%)
of his Limitation Year Compensation (as defined in subparagraph (vii) of
Paragraph G of Section Seven of the Plan) during such Plan Year or (ii) a
percentage of such Participant's Limitation Year Compensation during such Plan
Year which is equal to the highest
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<PAGE> 103
percentage of Limitation Year Compensation which any Key Employee received in
the form of Participating Company contributions to his Accounts in this Plan for
such Plan Year. A Participant who is a Non-Key Employee need not complete one
thousand (1,000) Hours of Service during the Plan Year in order to receive such
an allocation. Any contributions made to a Non-Key Employee's accounts under
this or any other defined contribution plans maintained by the Participating
Companies and the Affiliated Companies which are made on behalf of such Non-Key
Employee pursuant to a cash or deferred arrangement satisfying the requirements
of Section 401(k) of the Internal Revenue Code may not be used to satisfy this
minimum allocation requirement. Prior to January 1, 1994, for purposes of this
Paragraph D, a Participant's Limitation Year Compensation during any Plan Year
shall not include any amounts in excess of Two Hundred Thousand Dollars
($200,000), as adjusted for increases in the cost-of-living pursuant to Section
401(a)(17) of the Internal Revenue Code. Effective January 1, 1994, the above
referenced dollar limitation shall be reduced to One Hundred and Fifty Thousand
Dollars ($150,000), as adjusted for increases in the cost of living pursuant to
Section 401(a)(17) of the Internal Revenue Code.
E. SPECIAL VESTING RULES. As of the first day of any Plan Year in
which the Plan has become a Top-Heavy Plan, the vesting schedule contained in
Paragraph A of Section Fourteen shall be
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<PAGE> 104
revised to provide for vesting in accordance with the following schedule:
Years of Service Vested
---------------- ------
Less than 2 years 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 or more years 100%
In the event the vesting schedule is revised in accordance with this
Paragraph E and the Plan is later determined to no longer constitute a Top-Heavy
Plan, the vesting schedule shall revert to the schedule specified in Paragraph A
of Section Fourteen as to the effect of vesting arising from future Years of
Service, but any Participant who has three (3) or more Years of Service as of
the time of such change may irrevocably elect to have his vested interest
computed without regard to such change in the vesting schedule, in accordance
with the principles set forth in Section Twenty-One of the Plan.
F. ADJUSTMENT OF SECTION 415 LIMITATIONS IN PLAN YEARS IN WHICH THE
PLAN IS A TOP-HEAVY PLAN. For any Plan Year in which the Plan is a Top-Heavy
Plan, the reference to a factor of one and twenty-five one-hundredths (1.25) in
subparagraphs (iv) and (v) of Paragraph G of Section Seven of the Plan shall be
modified so as to constitute a reference to a factor of one (1.0). This
modification shall not be made, however, if (i) the Account balances
attributable to Key Employees do not exceed ninety percent (90%) of the total
Account balances under the Plan and
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<PAGE> 105
(ii) the Participating Companies have chosen to make the additional contribution
specified in Section 416(h)(2)(A)(ii)(II) of the Internal Revenue Code.
<PAGE> 1
Exhibit 5
HCR Manor Care, Inc. June 28, 1999
333 North Summit Street
Toledo, Ohio 43604-2607
Re: Registration Statement on Form S-8 with respect to
1,300,000 shares of Common Stock, par value $.01 per share
----------------------------------------------------------
Ladies and Gentlemen:
This will refer to the preparation and filing by HCR Manor
Care, Inc. (the "Company") with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), of a
Registration Statement on Form S-8 (the "Registration Statement") relating to
the issuance by the Company of 1,300,000 shares of the Company's Common Stock,
par value $.01 per share (the "Shares"), pursuant to the Manor Care, Inc.
Retirement Savings & Investment Plan (the "Plan").
In my capacity as General Counsel of the Company, I am
familiar with the proceedings taken and proposed to be taken by the Company in
connection with the authorization, issuance and sale of the Shares, and for the
purposes of this opinion, have assumed such proceedings will be timely completed
in the manner presently proposed. In addition, I have made such legal and
factual examinations and inquiries, including an examination of originals or
copies certified or otherwise identified to my satisfaction of such documents,
corporate records and instruments, as I have deemed necessary or appropriate for
purposes of this opinion.
In my examination, I have assumed the genuineness of all
signatures, the authenticity of all documents submitted to me as originals and
the conformity to authentic original documents of all documents submitted to me
as copies.
Subject to the foregoing, it is my opinion that the Shares
have been duly authorized and, when issued and delivered pursuant to the Plan,
and when the Registration Statement shall have become effective, will be legally
issued and will be fully paid and nonassessable.
I consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to me contained under the heading
"Interests of Named Experts and Legal Counsel".
Very truly yours,
/s/ R. Jeffrey Bixler
---------------------------
R. Jeffrey Bixler
Vice President, General
Counsel and Secretary
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8) and related Prospectuses pertaining to the Manor Care, Inc. Retirement
Savings and Investment Plan of our reports (a) dated January 28, 1999, with
respect to the consolidated financial statements and schedule of HCR Manor Care,
Inc. included in its Annual Report (Form 10-K) and (b) dated June 4, 1999, with
respect to the financial statements and schedules of the Manor Care, Inc.
Retirement Savings and Investment Plan included in the Plan's Annual Report
(Form 11-K), both for the year ended December 31, 1998, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Toledo, Ohio
June 25, 1999
