-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, YD6GqMyt0Yr9/Hd4k+wBMmZ4jp7QiWgIBPTfF3Ci1JviNG5MKnb40X/gQBRVxoCT teRBz2clgM/son+MXgX0aQ== 0000276477-95-000011.txt : 19950608 0000276477-95-000011.hdr.sgml : 19950608 ACCESSION NUMBER: 0000276477-95-000011 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950130 ITEM INFORMATION: Other events FILED AS OF DATE: 19950130 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HILLHAVEN CORP CENTRAL INDEX KEY: 0000276477 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-NURSING & PERSONAL CARE FACILITIES [8050] IRS NUMBER: 911459952 STATE OF INCORPORATION: NV FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10426 FILM NUMBER: 95503978 BUSINESS ADDRESS: STREET 1: 1148 BROADWAY PLZ CITY: TACOMA STATE: WA ZIP: 98402 BUSINESS PHONE: 2065724901 FORMER COMPANY: FORMER CONFORMED NAME: MERIT CORP DATE OF NAME CHANGE: 19600201 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): January 27, 1995 THE HILLHAVEN CORPORATION (Exact name of registrant as specified in its charter) Nevada 1-10426 91-1459952 (State or other (Commission (I.R.S. Employer jurisdiction of File Number) Identification No.) incorporation) 1148 Broadway Plaza, Tacoma, Washington 98402 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (206) 572-4901 Item 5. Other Events. The Hillhaven Corporation (the "Company") established The Hillhaven Corporation Grantor Stock Trust as of January 16, 1995, and, as of that same date, entered into an agreement (the "Stock Purchase Agreement") with Wachovia Bank of North Carolina, N.A. (the "Trustee") to sell to the Trustee on behalf of the Trust Fund an aggregate of 4.2 million shares of the Company's Common Stock, par value $0.75 per share (the "Shares"), at a purchase price per share equal to $21.01875 (the "Purchase Price"). The Purchase Price is equal to the average of the high and low prices of the Company's Common Stock on the New York Stock Exchange for the ten trading days immediately preceding the date of the Stock Purchase Agreement. The Stock Purchase Agreement provides that $0.75 per share of the Purchase Price will be paid in cash (with funds contributed to the Trustee by the Company), and the remainder will be evidenced by a Promissory Note. The purchase of 3,180,000 of the Shares was consummated on January 27, 1995. Under the terms of the Stock Purchase Agreement, the purchase of the remaining 1,020,000 Shares will be consummated as promptly as possible following the termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. A copy of the Company's press release is attached as Exhibit 99.04 hereto and by this reference is incorporated herein. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. THE HILLHAVEN CORPORATION By: /s/ Richard P. Adcock Richard P. Adcock Senior Vice President, Secretary and General Counsel Dated: January 30, 1995 EXHIBIT INDEX Exhibit 99.01 Trust Agreement Between The Hillhaven Corporation and Wachovia Bank of North Carolina, N.A., as Trustee, dated as of January 16, 1995 Exhibit 99.02 Stock Purchase Agreement, dated as of January 16, 1995 Exhibit 99.03 Non-Recourse Promissory Note, dated January 27, 1995 Exhibit 99.04 Press Release dated January 16, 1995 EX-99 2 TRUST AGREEMENT EXHIBIT 99.01 TRUST AGREEMENT BETWEEN THE HILLHAVEN CORPORATION AND WACHOVIA BANK OF NORTH CAROLINA, N.A. AS TRUSTEE, FOR THE BENEFIT OF PARTICIPATING EMPLOYEES TRUST AGREEMENT made and entered into as of January 16, 1995 by and between The Hillhaven Corporation, a corporation organized under the laws of the State of Nevada (the "Company"), and Wachovia Bank of North Carolina, N.A., a national banking association, organized under the laws of the United States of America (the "Trustee"). WITNESSETH: WHEREAS, the Company has in place various non- qualified and qualified employee benefit plans and arrangements for the benefit of some or all of the employees of the Company and certain of its subsidiaries and affiliates and may from time to time adopt one or more additional plans or arrangements; WHEREAS, the Company and its subsidiaries or affiliates have and will have certain legal obligations under these employee benefit plans or arrangements; WHEREAS, the Company wishes to establish a trust to assist it in meeting certain of these obligations and intends to make contributions and/or loans to such trust at such time or times and in such amount or amounts as it may determine; WHEREAS, the Company intends that such contributions shall be held by the Trustee and used for the purpose of acquiring common stock of the Company and making payments with respect to loans used to acquire common stock of the Company all in accordance with the provisions of this Trust Agreement; WHEREAS, the Company intends that such loans made to the Trustee by the Company shall be used for the exclusive purpose of acquiring common stock of the Company in accordance with the provisions of this Trust Agreement; WHEREAS, inasmuch as the income and corpus of such trust may and will be applied in discharge of the legal obligations of the Company, its subsidiaries and affiliates, such trust is intended to be a "grantor trust" within the meaning of Section 671 of the Code; and WHEREAS, the Company intends that the assets of such trust at all times shall be subject to the claims of bankruptcy and other general creditors of the Company as provided in Section 17 of this Trust Agreement. NOW, THEREFORE, in consideration of the mutual covenants herein contained, the Company and the Trustee declare and agree as follows: SECTION 1 Definitions. As used in this Trust Agreement, the following definitions apply to the terms indicated below: 1.1 "Administrator" or "Administrators" shall refer to the committee, Company official(s) or other persons listed in Schedule A charged with responsibility for overseeing and administering the Plans and provision of Benefits. 1.2 "Affiliate" shall refer to any subsidiary or other firm related by direct or indirect stock ownership that has adopted a Plan while each such entity remains a subsidiary or related firm of the Company. 1.3 "Beneficiary" shall mean any person entitled to receive benefits under any Plan on the death of a Participant. 1.4 "Benefits" shall mean amounts that the Company or an Affiliate has an obligation to pay to Participants pursuant to any Plan or arrangement described in Schedule A under which the Company has a legal obligation to (i) pay from its general assets, (ii) provide for the payment of by making contributions from its general assets, or (iii) deliver in shares of Company Stock. 1.5 "Board of Directors" shall mean the Board of Directors of the Company. 1.6 "Change in Control" shall be deemed to occur if the Committee certifies to the Trustee that a "Change in Control" as defined in the 1990 Stock Incentive Plan has occurred or the occurrence of such a "Change in Control" is evidenced by a filing made pursuant to Section 13(d) of the Securities Exchange Act of 1934. 1.7 "Code" shall mean the Internal Revenue Code of 1986 as it may be amended from time to time. 1.8 "Committee" shall mean such committee as the Board of Directors shall appoint from time to time to administer the Trust. The Committee shall consist of at least three persons, including at all times the persons holding the title of: Vice President, Treasurer; General Counsel, Senior Vice President and Secretary; and the Senior Vice President and Chief Financial Officer. Other members of the Committee (if any) will be certified to the Trustee by the Secretary or Assistant Secretary of the Board of Directors. 1.9 "Company Stock" shall mean the common stock of the Company, par value $.75 per share. 1.10 "Daily Value" shall mean, with respect to a share of Company Stock, the closing reported sales price per share of Company Stock on the New York Stock Exchange Composite Tape, or if Company Stock is not traded on such stock exchange, the principal national securities exchange on which Company Stock is traded, or if not so traded, the mean between the highest bid and lowest asked quotation on the over-the-counter market as reported by the National Quotations Bureau, or any similar organization, on any relevant date, or if not so reported, as determined by the Committee in a manner consistently applied. 1.11 "Director" shall mean the Senior Vice President, Human Resources & Support Services for the Company. 1.12 "Eligible Participant" shall mean a Participant who is an Employee who as of the date upon which Eligible Participants are determined, either (a) holds an unexercised vested option with respect to Company Stock granted to him or her pursuant to the 1990 Stock Incentive Plan or the 1991 Performance Investment Plan, or (b) elected to purchase stock pursuant to the Employee Monthly Stock Investment Plan (the "EMSIP") within the 12-month period preceding such date. 1.13 "Employee" shall mean any individual who is actively employed by the Company or an Affiliate. 1.14 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. 1.15 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. 1.16 "Minimum Distribution Schedule" shall mean the schedule (or schedules) set forth in Schedule B. An additional Minimum Distribution Schedule shall be created each time the Company makes a contribution to the Trust, unless such contribution is used to pay an obligation of the Trust described in Section 9 or is used to repay a loan described in Subsection 4.1.2. 1.17 "Other Assets" shall mean any asset or investment aside from cash held by the Trust that is not Company Stock. 1.18 "Participant Schedule" shall mean the schedule prepared by the Company from time to time pursuant to Subsection 5.2. 1.19 "Participants" shall mean those individuals who participate in one or more of the Plans described in Schedule A. 1.20 "Plans" shall mean the plans or arrangements referred to in Schedule A, as amended from time to time. 1.21 "Trust" shall mean the trust established pursuant to this Trust Agreement. 1.22 "Trust Fund" shall mean all Company Stock, money and other property from time to time obtained by the Trust and all investments and reinvestments made therewith or proceeds thereof and all earnings and profits thereon, less all payments and charges as authorized herein. SECTION 2 Establishment of the Trust. 2.1 Trust Fund. The Company hereby establishes the Trust. The Trust Fund shall consist of such sums of Company Stock, money and other property acceptable to the Trustee as are from time to time paid to or otherwise acquired by the Trustee. Except as otherwise provided in Subsection 8.1.2, the Company shall have no duty or obligation to make any contributions to the Trust and the Trustee shall have no duty or obligation to require the Company to make any contribution to the Trust. The Trust Fund shall be held by the Trustee in trust and shall be dealt with in accordance with the provisions of this Trust Agreement. The Trustee, and any successor Trustee appointed pursuant to Section 11 hereof or resulting under Subsection 19.4 hereof, shall at all times be a bank and trust company or other national banking association that is neither a subsidiary of nor other firm related by direct or indirect stock ownership to the Company. 2.2 Irrevocability. Except as provided in Section 17 hereof, the Trust shall be for the exclusive purpose of assisting the Company in funding Plans and Benefits and defraying expenses of the Trust in accordance with the provisions of this Trust Agreement. No part of the income or corpus of the Trust Fund shall be recover- able by the Company; provided, however, that the Trust Fund shall be applied in discharge of the Company's legal obligations as provided in this Trust Agreement. 2.3 Claims of Creditors. Notwithstanding anything in this Trust Agreement or the Plans to the contrary, the Trust Fund shall at all times be subject to the claims of bankruptcy and other general creditors of the Company as provided in Section 17 hereof. No Participant or Plan shall have any claim against the Trust Fund other than as a general unsecured creditor of the Company. SECTION 3 Acceptance by the Trustee. The Trustee accepts the Trust established under this Trust Agreement on the terms and subject to the provisions set forth herein. The Trustee agrees to discharge and perform fully and faithfully all of the duties and obligations imposed upon it under this Trust Agreement. SECTION 4 Investment of the Trust. 4.1 General Duty of Trustee. Except as otherwise provided in this Subsection 4.1 or except as otherwise expressly provided in this Trust Agreement, all assets received by the Trustee other than Company Stock shall be invested as soon as practicable in, and remain invested in, Company Stock. 4.1.1 Upon direction of the Committee, the Trustee shall acquire shares of Company Stock from the Company. 4.1.2 From time to time, the Trustee shall have the ability, upon direction of the Committee, to borrow funds for the purpose of acquiring shares of Company Stock and/or issue one or more notes to the Company in exchange for shares of Company Stock. The Trustee shall have the ability to pledge any shares so acquired as collateral. Subject to the requirements of Subsection 8.1.4, the terms and conditions of any borrowing shall be fair and reasonable. It is contemplated that any such obligation shall be repaid using cash contributions and earnings attributable to Company Stock held by the Trust Fund. 4.1.3 Notwithstanding anything herein to the contrary, unless the Committee otherwise directs, cash or Other Assets received by the Trustee shall be retained and invested in Other Assets provided that, after payment of the costs of the Trust, including, without limitation, Trustee fees and expenses and, if applicable, debt repayment described in Subsection 4.1.2, through the end of the calendar year during which such cash or Other Assets are received by the Trustee, any such cash or Other Assets remaining shall be distributed by the Trustee to the Administrators or the Director at the end of such calendar year to fund such Plans or Benefits as determined by the Committee taking into account the best interests of a broad cross-section of Participants. 4.2 Additional Powers of Trustee. Subject to the provisions of Section 4.1, the Trustee shall have the following additional powers and authority with respect to all property constituting a part of the Trust Fund: 4.2.1 To purchase securities or any other kind of property and to retain such securities or other property, regardless of diversification and without being limited to investments authorized by law for the investment of trust funds. 4.2.2 Subject to Subsection 7.2 hereof, to sell, exchange or transfer any such property at public or private sale for cash or on credit and grant options for the purchase or exchange thereof, provided that, with respect to any sale of shares of Company Stock (other than pursuant to Subsection 7.2 hereof, and excluding any distribution of Company Stock made pursuant to this Trust Agreement), such shares shall first be offered for sale to the Company at the Daily Value before being sold to one or more third parties. 4.2.3 Subject to Section 7 hereof, to participate in any plan of reorganization, consolidation, merger, combination, liquidation or other similar plan relating to any such property, and to consent to or oppose any such plan or any action thereunder, or any contract, lease, mortgage, purchase, sale or other action by any corporation or other entity any of the securities of which may at any time be held in the Trust Fund, and to do any act with reference thereto. 4.2.4 To deposit cash or any Other Assets with any protective, reorganization or similar committee; to delegate discretionary power to any such committee; and to pay part of the expenses and compensation of any such committee and any assessments levied with respect to any property so deposited. 4.2.5 To exercise any conversion privilege or subscription right available in connection with any such property, and to do any act with reference thereto, including the exercise of options, the making of agreements or subscriptions and the payment of expenses, assessments or subscriptions, which may be deemed necessary or advisable in connection therewith, and to hold and retain any securities or other property which it may so acquire. 4.2.6 Subject to Subsection 9.4 hereof, to commence or defend suits or legal proceedings and to represent the Trust in all suits or legal proceedings; to settle, compromise or submit to arbitration any claims, debts or damages, due or owing to or from the Trust. 4.2.7 Subject to Section 7 hereof, to exercise, personally or by general or limited power of attorney, any right, including the right to vote, appurtenant to any securities or other such property. 4.2.8 To hold cash awaiting investment uninvested, and to maintain such additional cash balances as it shall deem reasonable or necessary to meet anticipated cash distributions from or administrative costs of the Trust. 4.2.9 To invest cash or Other Assets at Wachovia Bank of North Carolina, N.A. or another bank and trust company or national banking association in any type of interest-bearing investment, including, without limitation, deposit accounts, certificates of deposit and repurchase agreements. 4.2.10 To invest and reinvest all or any specified portion of cash or Other Assets (i) through the medium of any common trust fund which has been or may hereafter be established and maintained by the Trustee, or (ii) in shares of open end or closed end investment companies provided that, prior to investing any portion of the Trust Fund for the first time in any such common trust fund or investment company, the Trustee shall advise the Company of its intent to make such an investment and furnish to the Company any information it may reasonably request with respect to such investment. 4.2.11 To form corporations or partnerships and to create trusts to hold title to any cash or Other Assets constituting the Trust Fund, upon such terms and conditions as may be deemed advisable. 4.2.12 To engage legal counsel, including (except following the occurrence of a Change in Control) counsel to the Company, or any other suitable agents, to consult with such counsel or agents with respect to the implementation or construction of this Trust Agreement, the duties of the Trustee hereunder, the transactions contemplated by this Trust Agreement or any act which the Trustee proposes to take or omit, to rely upon the advice of such counsel or agents, and to pay any such counsel's or agent's reasonable fees, expenses and compensation. 4.2.13 To register or hold any securities or other property held by it in its own name or in the name of any custodian of such property or of its nominee, including the nominee of any system for the central handling of securities, with or without the addition of words indicating that such securities are held in a fiduciary capacity, to deposit or arrange for the deposit of any such securities with such a system and to hold any securities in bearer form. 4.2.14 To make, execute and deliver, as Trustee, any and all deeds, leases, notes, bonds, guarantees, mortgages, conveyances, contracts, waivers, releases or other instruments in writing that are necessary or proper for the accomplishment of any of the foregoing powers. 4.2.15 Pursuant to the direction of the Committee as to all aspects of the transaction, including, without limitation, interest rate, term and identity of lender, to undertake a borrowing sufficient to enable the Trust to acquire newly issued Company Stock. 4.2.16 Subject to Section 7 hereof, generally, to exercise any of the powers of an owner with respect to property held in the Trust Fund. SECTION 5. Establishment and Maintenance of Participant Schedule. 5.1 Form of Participant Schedule. The Trustee may, from time to time, request the Company to prepare and deliver to the Trustee in accordance with Subsection 5.2 hereof, a schedule that sets forth the name of each Participant entitled to receive a Benefit under a Plan or arrangement or such group of Participants that the Trustee may need to know in order to carry out the provisions of this Agreement. 5.2 Maintaining the Participant Schedule. At the request of the Trustee, the Company shall from time to time update the Participant Schedule. Each Participant Schedule shall state the date as of which it applies, and the Trustee shall be entitled to rely upon such Participant Schedule, without a duty of further inquiry, until it receives an updated Participant Schedule bearing a later date. Each Participant Schedule shall contain all information concerning a Participant which the Trustee will need to complete its responsibilities under this Agreement. SECTION 6 Maintenance of Trust. 6.1 Trust Assets and Allocation to Plans. The Trustee shall hold all assets contributed or otherwise obtained by the Trust and shall distribute such assets and any earnings thereon to such Administrators, Participants or the Director, as provided for and in accordance with this Trust Agreement or use such assets to pay obligations of the Trust described in Section 9 or to repay a loan described in Subsection 4.1.2. 6.2 Valuation of Trust and Accounts. The Trustee shall revalue the Trust Fund as of the last business day of each calendar quarter. Shares of Company Stock shall be valued at the Daily Value of Company Stock as of such date. SECTION 7 Voting and Tender of Company Stock Held in Trust 7.1 Voting of Company Stock. The Trustee shall vote the shares of Company Stock held by the Trust in accordance with, and by soliciting and receiving, voting directions from Eligible Participants. As soon as practicable following the record date in question, the Company shall deliver to the Trustee a Participant Schedule listing Eligible Participants determined as of such record date. Each Eligible Participant listed on such Participant Schedule shall have the right to direct the vote with respect to that number of shares of Company Stock held by the Trust as determined by the following formula: multiply the shares held by the Trust by a fraction for each Eligible Participant who has given voting instructions. The numerator of such fraction shall equal the sum of (1) shares purchased pursuant to the EMSIP by the Participant during the preceding 12 months, and (2) the total vested, unexercised options held by the Participant; the denominator shall equal the total number of shares purchased pursuant to the EMSIP during the preceding 12 months by all Eligible Participants who have exercised their voting rights pursuant to this Subsection 7.1, plus the total number of vested, unexercised options held, by all Eligible Participants who have exercised their voting rights pursuant to this Subsection 7.1. The Trustee shall devise and implement a procedure to assure confidentiality of any directions given by Eligible Participants in respect of votes. All actions taken by Eligible Participants pursuant to this Subsection 7.1 shall be held confidential by the Trustee and shall not be divulged or released to any person, other than (i) agents of the Trustee who are not affiliated with the Company or its Affiliates, (ii) by virtue of the execution by the Trustee of any proxy, consent or letter of transmittal for the shares of Company Stock held in the Trust, or (iii) as may be required by court order. 7.2 Tender Rights. If any person shall commence a tender or exchange offer with respect to Company Stock, the Trustee shall tender the shares of Company Stock held by the Trust by passing through tender or exchange rights to Eligible Participants determined as of the commencement of such tender or exchange offer. As soon as practicable following the commencement of such tender or exchange offer, the Company shall deliver to the Trustee a Participant Schedule listing the Eligible Participants determined as of the commencement of such tender or exchange offer. Each Eligible Participant listed on such Participant Schedule shall have the right to direct the tender or exchange of that number of shares of Company stock held by the Trust as determined by the following formula: multiply the shares held by the Trust by a fraction for each Eligible Participant who has given tender or exchange instructions. The numerator of such fraction shall equal the sum of (1) shares purchased pursuant to the EMSIP by the Participant during the preceding 12 months and (2) the total vested, unexercised options held by the Participant; the denominator shall equal the total number of shares purchased pursuant to the EMSIP during the preceding 12 months by all Eligible Participants who have exercised their voting rights pursuant to this Subsection 7.1, plus the total number of vested, unexercised options held, by all Eligible Participants who have exercised their exchange or tender rights pursuant to this Subsection 7.2. The Trustee shall devise and implement a procedure to assure the confidentiality of any directions given by Eligible Participants in response to such offers. All actions taken by Eligible Participants pursuant to this Subsection 7.2 shall be held confidential by the Trustee and shall not be divulged or released to any person, other than (i) agents of the Trustee who are not affiliated with the Company or its Affiliates, (ii) by virtue of the execution by the Trustee of any proxy, consent or letter of transmittal for the shares of Company Stock held in the Trust, or (iii) as may be required by court order. 7.3 Notices and Information Statements. The Company shall provide the Trustee in a timely manner with notices and information statements (including proxy statements) when voting rights are to be exercised, and with respect to tender, exchange or similar offers, notices and offer materials, at the same time and in the same manner (except to the extent the Exchange Act requires otherwise) as such notices, information statements, and offer materials are provided to shareholders of the Company generally. The Trustee shall, in turn, provide all material received by the Company pursuant to this Subsection 7.3 to Eligible Participants described in Subsections 7.1 and 7.2. SECTION 8 Distributions from the Trust 8.1 Distributions of Company Stock from the Trust. Distributions of Company Stock from the Trust shall be made (a) in accordance with the Minimum Distribution Schedule, in the case of Company Stock contributed to the Trust or acquired with cash contributed to the Trust (other than cash contributed for the purpose of repayment of a loan described in Subsection 4.1.2 or payment of an obligation of the Trust described in Section 9), or (b) in proportion to the principal payment made (or deemed forgiven) with respect to the loan used to acquire such Company Stock described in Subsection 4.1.2, in the case of Company Stock acquired with the proceeds of such loan. For purposes of the foregoing clause (b) of the preceding sentence, the proportion of the principal payment made (or deemed forgiven) with respect to the loan shall be determined by dividing the amount of the principal payment made (or deemed forgiven) by the sum of such principal payment and the principal balance of the loan remaining after such payment. 8.1.1 Shares Released Pursuant to a Minimum Distribution Schedule. The particular Plan with respect to which any distribution from the Trust is made will be determined by the Committee in accordance with the following directions: (a) to the extent available, shares of Company Stock sufficient to meet the obligations of the 1990 Stock Incentive Plan shall first be allocated to the Administrator of such Plan, (b) remaining shares of Company Stock (if any) to the extent available shall be transferred to the Administrator to fund the 1991 Performance Investment Plan, and (c) remaining shares of Company Stock (if any) to the extent available shall be transferred to the Administrator to fund the EMSIP, and (d) remaining shares (if any) shall be transferred to the Director or Administrators to fund such Plans or Benefits as determined by the Committee taking into account the best interests of a broad cross-section of Participants, provided that it is determined that such Plans or Benefits constitute contractual liabilities of the Company or its Affiliates. 8.1.2 Release of Shares acquired with the Proceeds of a Loan. Shares of Company Stock to be distributed in accordance with clause (b) of the first sentence of this Subsection 8.1 shall be allocated in the same manner described in Subsection 8.1.1 above. If a loan described in Subsection 4.1.2 is outstanding, and if the earnings attributable to the shares of Company Stock acquired with the proceeds of such loan together with any contributions made by the Company for the purpose of repayment of such loan are not sufficient to enable the Trust to make a scheduled repayment of principal under such loan that will cause a release and distribution of shares sufficient to fund Benefits described in 8.1.1(a), (b) and (c), then, to the extent of any such deficiency, such repayment of principal shall be deemed forgiven by the Company. 8.1.3 Reliance Upon Committee Instruction. The Committee shall inform the Trustee in writing of how many shares are required to fund 8.1.1(a), (b), (c), and (d). The Trustee may rely upon written instructions received by the Committee to carry out the instructions contained in this Subsection 8.1 and shall have no responsibility to verify or monitor the determinations made by the Committee. If no direction regarding allocation of shares of Company Stock pursuant to clause (d) of Subsection 8.1.1 is received by the Trustee from the Committee by the date specified in the Minimum Distribution Schedule or the date a principal payment has been made or forgiven, whichever is applicable, the shares of Company Stock subject to such allocation under said clause (d) shall be distributed to the Director to fund non-discretionary compensation of those Participants who are Employees taking into account the best interests of a broad cross-section of such Participants. 8.1.4 Acceleration. Notwithstanding anything herein to the contrary, the Committee can direct that the number of shares distributed in any year exceed the number of shares required to be distributed under the Minimum Distribution Schedule and/or that shares be distributed prior to the date specified in such schedule, provided that such acceleration satisfies the terms of any restrictions contained in the Minimum Distribution Schedule, if any. If, in any year, the Committee directs that the number of shares distributed exceeds the number required to be distributed pursuant to the Minimum Distribution Schedule, such Schedule shall be revised by the Committee, so that the remaining minimum distribution amounts will be reduced proportionately to reflect the acceleration. Notwithstanding anything herein to the contrary, if the Trustee undertakes a loan to acquire Company Stock pursuant to Subsection 4.1, such loan shall at all times provide that principal payments may be accelerated at any time at the discretion of the Committee. 8.2 Significant Event. If an event occurs that causes 30 percent or more of the Participants to cease to be Employees within a 12-month period, as certified by the Committee, then all remaining distribution amounts under the Minimum Distribution Schedule will be reduced in direct proportion to such reduction and, with respect to Company Stock, the Minimum Distribution Schedule will be correspondingly extended. 8.3 Protection of Trustee. The Trustee shall, to the maximum extent permitted by applicable law, be fully protected in acting upon any written statement, affidavit or certification from the Company, the Committee or the Director. The Trustee shall at all times, to the maximum extent permitted by applicable law, be fully protected in making distributions pursuant to Sections 4, 8, 9, 13 and 17 hereof. 8.4 Company Obligations. Notwithstanding the provisions of this Trust Agreement, the Company and its Affiliates shall remain obligated with respect to the Benefits attributable to their respective employees. Nothing in this Trust Agreement shall relieve the Company or any of its Affiliates of their respective liabilities with respect to the Benefits except to the extent such amounts are paid to a Plan or a Participant from the Trust, it nevertheless being the Company's intent that the Trust Fund shall be applied in discharge of the Company's legal obligations as provided in this Trust Agreement. Notwithstanding anything herein to the contrary, no plan or benefit may be funded pursuant to this Section 8 unless it gives rise to a contractual obligation of the Company or its Affiliates and it is a Benefit described in Schedule A. 8.5 Trustee as Holder of Legal Title to Trust Assets. Subject to Section 17 hereof, the Trustee shall hold legal title to all assets in the Trust for benefit of the Participants and Employees. 8.6 Federal Income Tax Consequences of the Trust. The Trust Fund may be applied in the discharge of legal obligations of the Company as provided herein. Accordingly, the Company shall take into account in computing its tax liability, those items of income, deductions and credits against tax attributable to assets held in the Trust to which the Company would have been entitled had the Trust not been in existence. The Trustee shall notify the Company promptly after it becomes aware of any tax liability assessed against, or imposed upon, the Trust or the Trustee in its capacity as Trustee of the Trust. The Company shall be responsible for all matters in respect of such assessment or imposition, and shall have sole responsibility for any defense in connection therewith. Payments in respect of any tax liability of the Company arising in connection with earnings, gains or activities relating to the Trust, including, without limitation, interest and penalties, shall be made from the Trust Fund after a final determination of such liability, unless the Company promptly pays such liability. In the event the assets of the Trust are insufficient to pay such liability, any deficit shall be paid promptly by the Company. SECTION 9 Expenses, Compensation and Indemnification 9.1 Expenses. The Trustee shall be reimbursed by the Company for its reasonable expenses of implementation, management and administration of the Trust, including brokerage commissions and the reasonable compensation of attorneys or other agents engaged by the Trustee or by the Company to assist in such implementation, management and administration. 9.2 Compensation. The Company shall pay the Trustee compensation in accordance with the compensation schedule attached hereto as Schedule C, unless the Company and the Trustee otherwise agree in writing. 9.3 Charge on Trust Fund. All expenses and compensation referred to in Sections 9.1 and 9.2 hereof shall be a charge on the Trust Fund and shall constitute a lien on the Trust Fund in favor of the Trustee and shall be payable from the Trust Fund unless paid when due by the Company. 9.4 Indemnification. The Company hereby agrees to indemnify and hold harmless the Trustee from and against any losses, costs, damages, claims or expenses, including without limitation reasonable attorneys' fees, which the Trustee may incur or pay out in connection with, or otherwise arising out of: 9.4.1 the performance by the Trustee of its duties hereunder, unless any such loss, cost, damage, claim or expense is a result of negligence or willful misconduct by the Trustee or the breach by the Trustee of its fiduciary duties hereunder; or 9.4.2 any action taken by the Trustee in good faith pursuant to the written direction of the Company, the Committee or the Director. In the event that any action or regulatory proceeding shall be commenced or claim asserted which may entitle the Trustee to be indemnified hereunder, the Trustee shall give the Company written notice of such action or claim promptly after becoming aware of such commencement or assertion unless the Company has otherwise received notice of such action or claim. The Company shall be entitled to participate in and, upon notice to the Trustee, assume the defense of any such action or claim using counsel reasonably acceptable to the Trustee. The Trustee shall cooperate with the Company in connection with the defense of any such action or claim. Subject to Section 17 the Trustee shall have no claim on the assets of the Trust Fund in respect of amounts payable to the Trustee under this Subsection 9.4. 9.5 Payment from Trust Fund. All payments of expenses and compensation referred to in Subsections 9.1 and 9.2 hereof shall be made only with the written approval of or at the direction of the Committee. SECTION 10 Administration and Records 10.1 Records. Subject to Subsections 7.1 and 7.2, the Trustee shall keep or cause to be kept accurate and detailed accounts of any investments, receipts, disbursements and other transactions hereunder and all accounts, books and records relating thereto shall be open to inspection and audit at all reasonable times by any person designated by the Company. The Trustee shall preserve all such accounts, books and records, in original form or on microfilm, magnetic tape or any other similar process, for such period as the Trustee may determine, but the Trustee may destroy such accounts, books and records only after first notifying the Company in writing of its intention to do so and transferring to the Company, subject to Subsections 7.1 and 7.2 hereof, any of such accounts, books and records that the Company shall request. 10.2 Settlement of Accounts. Subject to Subsections 7.1 and 7.2, within 60 days after the close of each calendar year, and within 60 days after the removal or resignation of the Trustee or the termination of the Trust (or any portion thereof), the Trustee shall file with the Company a written account setting forth all investments, receipts, disbursements and other transactions effected by it with respect to the Trust during the preceding calendar year or during the period from the close of the preceding calendar year to the date of such removal, resignation or termination, including a description of all investments and securities purchased and sold, with the cost or net proceeds of such purchases or sales, and showing all cash, securities and other property held at the end of such calendar year or other period. It shall be the duty of the Company to review such written account promptly within 90 days from the date of filing any such account and if, within such 90-day period, the Company does not file with the Trustee a written notice of objection to any of the Trustee's acts or transactions, the initial account shall become an account stated between the Trustee and the Company. If the Company files a written notice of objection with the Trustee, the Trustee may file with the Company an adjusted account, in which case it shall be the duty of the Company to review such adjusted account promptly within 30 days from the date of its filing. If, within such 30-day period, the Company fails to file a written notice of objection to any of the Trustee's acts or transactions as so adjusted with the Trustee, the adjusted account shall become an account stated between the Trustee and the Company. Unless an account is fraudulent, when it becomes an account stated it shall be finally settled, and the Trustee shall, to the maximum extent permitted by applicable law, be forever released and discharged from all liability and accountability with respect to the propriety of its acts and transactions shown in such account. 10.3 Audit. The Trustee shall from time to time permit an independent public accountant selected by the Company to have access during ordinary business hours to such records as may be necessary to audit the Trustee's accounts. 10.4 Judicial Settlement. Nothing contained in this Trust Agreement shall be construed as depriving the Trustee or the Company of the right to have a judicial settlement of the Trustee's accounts. Upon any proceeding for a judicial settlement of the Trustee's accounts or for instructions the only necessary party thereto in addition to the Trustee shall be the Company. 10.5 Delivery of Records to Successor. In the event of the removal or resignation of the Trustee, the Trustee shall deliver to the successor Trustee all records which shall be required by the successor Trustee to enable it to carry out the provisions of this Trust Agreement. 10.6 Tax Filings. In addition to any returns required of the Trustee by law (e.g., any information return required to be filed on IRS Form 1041), the Trustee shall prepare and file such tax reports and other returns as the Company and the Trustee may from time to time agree. SECTION 11 Removal or Resignation of the Trustee and Designation of Successor Trustee. 11.1 Removal. At any time prior to the occurrence of a Change in Control, the Company may remove the Trustee with or without cause upon at least 60 days' notice in writing to the Trustee. At any time after the occurrence of a Change in Control, the Trustee may not be removed except for cause or by order of a court of competent jurisdiction. No removal of the Trustee shall be effective until the Company has appointed in writing a successor Trustee, and such successor has accepted the appointment in writing. 11.2 Resignation. Trustee may resign at any time upon at least 60 days' notice in writing to the Company, except that any such resignation shall not be effective until the Company has appointed in writing a successor Trustee, and such successor has accepted the appointment in writing. At any time after 30 days following the sending of such notice of resignation, if the Company is unable to appoint a successor Trustee or if a successor Trustee has not accepted an appointment, the Trustee shall be entitled, at the expense of the Company, to petition a United States District Court or any of the courts of the State of Washington or other court having jurisdiction to appoint its successor. 11.3 Successor Trustee. Subject to Subsection 2.1 hereof, each successor Trustee, during such period as it shall act as such, shall have the powers and duties herein conferred upon the Trustee, and the word "Trustee" wherever used herein, except where the context otherwise requires, shall be deemed to include any successor Trustee. Upon designation of a successor Trustee and delivery to the resigned or removed Trustee of written acceptance by the successor Trustee of such designation, such resigned or removed Trustee shall promptly assign, transfer, deliver and pay over to such Trustee, in conformity with the requirements of applicable law, the funds and properties in its control or possession then constituting the Trust Fund. SECTION 12 Enforcement of Trust Agreement. 12.1 Rights of Parties to Enforce the Trust Agreement The Company and the Trustee shall have the right to enforce any provision of this Trust Agreement. In any action or proceeding affecting the Trust, the only necessary parties shall be the Company and the Trustee and, except as otherwise required by applicable law, no other person shall be entitled to any notice or service of process. Any judgment entered in such an action or proceeding shall, to the maximum extent permitted by applicable law, be binding and conclusive on all persons having or claiming to have any interest in the Trust or any Plan. 12.2 Limitation on Rights of Participants and Beneficiaries Neither the Plans nor any Participant or Beneficiary shall have any rights with respect to the Trust Fund, no Plan shall be deemed to have any beneficial interest in the Trust Fund and no Employee shall be deemed to have any beneficial interest in the Trust Fund arising from his participation in any particular Plan. SECTION 13 Termination. 13.1 Termination upon Specific Events. The Trust shall be terminated as soon as practicable after the Trustee has received written notice from the Committee that one or more of the following events has occurred: 13.1.1 the Department of Labor or a court of competent jurisdiction has determined (or, in the Committee s sole discretion, would be likely to determine) that the assets of the Trust are subject to Part 4 of Subtitle B of Title I of ERISA, 13.1.2 the Internal Revenue Service or a court of competent jurisdiction has determined (or, in the Committee s sole discretion, would be likely to determine) that any portion of the Trust Fund is presently taxable to any Participant or Beneficiary, or l3.1.3 a Change in Control has occurred. In the event of a termination pursuant to this Subsection 13.1, the Trustee shall distribute all assets then constituting the Trust Fund attributable to Company Stock to the Administrator or Director to be distributed in the form of Company Stock or cash (as provided pursuant to the terms of a particular Plan) to Participants. Distributions shall first be made to satisfy accrued, vested benefits described in (a) of Subsection 8.1; remaining assets, if any, shall be distributed to satisfy accrued, vested benefits described in (b) of Subsection 8.1; remaining assets, if any, shall then be distributed to satisfy any exercises that have not yet been funded pursuant to the plan described in (c) of Subsection 8.1. Remaining assets, if any, shall then be used to fund the following plans (in the following order): any obligation the Company or an Affiliate has under the Annual Incentive Plan, any obligation the Company or an Affiliate has under the Hillhaven Supplemental Executive Retirement Plan, or any obligation the Company or an Affiliate has under the Hillhaven Deferred Compensation Plan. Assets remaining shall be allocated among Plans described in Schedule B, in the order set out in such Schedule. 13.2 Termination in Other Events. Notwithstanding anything herein to the contrary, the Trust shall terminate on the earliest of (a) 21 years following the death of the last surviving Participant included on the Participant Schedules received by the Trustee in 1995, (b) the date on which the Committee informs the Trustee in writing that the Company and its Affiliates have no obligations under any Plans (or the date on which there are no Plans) or (c) the date on which the Trust contains no assets and retains no claims to recover assets from the Company and its Affiliates pursuant to any provision hereof, whichever shall first occur. In the event of a termination described in clauses (a) or (b) of this Section, the Trustee shall distribute the assets remaining in the Trust Fund to all Participants listed on the Participant Schedule in an equal amount per Participant. 13.3 Limitation on Trustee Liability upon Total Distribution; Continuation of Trustee Powers. Upon a total distribution of the Trust assets pursuant to Section 8 or this Section 13.3, the Trustee shall be relieved from all further liability. The powers of the Trustee hereunder shall continue so long as any assets of the Trust remain in its hands. 13.4 Nonapplicability of ERISA. Notwithstanding anything herein to the contrary, no amount shall be distributed to any Participant pursuant to this Section 13 if such distribution could, in the opinion of independent counsel, cause the Trust to be subject to ERISA (other than as an unfunded plan described in ERISA section 201(2)). Prior to a distribution pursuant to this Section, the Committee shall provide the Trustee with a Schedule of Participants eligible for a distribution (taking into account this subsection 13.4). SECTION 14 Amendment. 14.1 Amendments in General. The Company may, in its sole discretion, from time to time amend, in whole or in part, any or all of the provisions of this Trust Agreement, including, without limitation, by adding to, or subtracting from, Schedule A hereto one or more employee benefit plans (within the meaning of Section 3(3) of ERISA) or plans or arrangements that are not employee benefit plans (within the meaning of such Section); provided, that (a) in making any modification to Schedule A hereto, the Company shall act in good faith taking into account the best interests of a broad cross-section of Participants, and (b) the Company shall ensure that at all times Schedule A shall include at least one employee benefit plan that is not an employee benefit plan within the meaning of Section 3(3) of ERISA. Notwithstanding anything herein to the contrary, no amendment shall be made to Sections 2.2, 7, 8 or 13. 14.2 Specific Amendments. Notwithstanding Subsection 14.1, the Company may amend this Trust Agreement from time to time in such a manner as may be necessary, in the opinion of independent counsel, to prevent this Trust Agreement or the Trust from becoming subject to ERISA and to prevent the current taxation of the Trust Fund to Participants. SECTION 15 Nonalienation. 15.1 Prohibition Against Certain Transfers, Pledges, Etc. Except as otherwise provided by this Trust Agreement and except as otherwise may be required by applicable law, (a) no amount payable to or in respect of any Plan, Participant or Employee at any time under the Trust shall be subject in any manner to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge, or encumbrance of any kind, and any attempt to so alienate, sell, transfer, assign, pledge, attach, charge, or otherwise encumber any such amount, whether presently or thereafter payable, shall be void and (b) the Trust Fund shall in no manner be liable for or subject to the debts or liabilities of any Participant. SECTION 16 Communications. 16.1 To the Company, Board of Directors and Committee. Communications to the Company, the Board of Directors and the Committee shall be addressed to: The Hillhaven Corporation 1148 Broadway Plaza Tacoma, Washington 98402 Attention: Vice President, Treasurer with a copy to: The Hillhaven Corporation 1148 Broadway Plaza Tacoma, Washington 98402 Attention: Senior Vice President and General Counsel provided, however, that upon the Company's written request, such communications shall be sent to such other address as the Company may specify. 16.2 To the Trustee. Communications to the Trustee shall be addressed to: Wachovia Bank of North Carolina, N.A. 301 N. Main Street Winston-Salem, N.C. 27150 Attention: Steve Watts Vice President with a copy to: Wachovia Bank of North Carolina, N.A. 301 N. Main Street Winston-Salem, NC 27150 Attention: John Smith Vice President provided, however, that upon the Trustee's written request, such communications shall be sent to such other address as the Trustee may specify. 16.3 To a Participant. Communications to a Participant or to his Beneficiaries shall be addressed to the Participant or his Beneficiaries, respectively, at the address indicated on the Participant Schedule as in effect at the time of the communication. 16.4 Binding upon Receipt. No communication shall be binding on the Trustee until it is received by the Trustee, and no communication shall be binding on the Company, the Board of Directors or the Committee until it is received by the Company, the Board of Directors or the Committee, respectively. A communication shall be deemed binding on a Participant or the Participant's Beneficiaries 60 days following the date notice is given or sent pursuant to Subsection 16.3. 16.5 Authority to Act. The Secretary of the Company shall from time to time certify to the Trustee the person or persons authorized to act for the Company, the Committee and the Board of Directors, and shall provide the Trustee with such information regarding the Company as the Trustee may reasonably request. The Trustee may continue to rely on any such certification until notified to the contrary. 16.6 Authenticity of Instruments. The Trustee shall be fully protected in acting upon any instrument, certificate, or paper reasonably believed by it to be genuine and to be signed or presented by the proper person or persons, and the Trustee shall be under no duty to make any investigation or inquiry as to any statement contained in any such writing but may accept the same as conclusive evidence of the truth and accuracy of the statements therein contained. SECTION 17 Claims of Company's Bankruptcy Creditors. 17.1 Bankruptcy Creditors. In the event of the Company's "insolvency," the assets of the Trust shall be available to pay the claims of any creditor of the Company to whom a distribution may be made in accordance with state and federal bankruptcy laws. The Company shall be deemed to be "insolvent" if it is either (a) unable to pay its debts and liabilities as they become due or (b) subject to a pending proceeding as a debtor under the federal Bankruptcy Code (or any successor federal statute) or any state bankruptcy code. In the event the Company becomes insolvent, the Board of Directors and the Chief Executive Officer of the Company shall notify the Trustee of the event as soon as practicable. Upon receipt of such notice, or if the Trustee receives other written allegations of the Company's insolvency from a third party considered by the Trustee to be reliable and responsible, the Trustee shall cease making any distributions from the assets of the Trust, shall hold the assets in the Trust for the benefit of the Company's creditors and shall take such steps as are necessary to determine within a reasonable period of time whether the Company is insolvent. In making such determination, the Trustee may rely upon a certificate of the Board of Directors and the Chief Executive Officer of the Company or a determination by a court of competent jurisdiction that the Company is or is not insolvent. In the case of the Trustee's determination of the Company's insolvency, the Trustee will deliver assets of the Trust to satisfy claims of the Company's creditors as directed pursuant to a final order of a court of competent jurisdiction. 17.2 Resumption of Benefits; Restoration of Accounts. In the event the Trustee ceases making distributions by reason of Subsection 17.1, the Trustee shall resume making distributions pursuant to Sections 4, 8, or 13 of this Agreement only after the Trustee has determined that the Company is no longer insolvent or upon receipt of an order of a court of competent jurisdiction requiring such distributions. In making any determination under this Section, the Trustee may rely upon a certificate of the Board of Directors and the Chief Executive Officer of the Company. SECTION 18 Consolidation, Merger or Sale of the Company. 18.1 Consolidation, Merger or Sale of the Company. Effective upon consolidation of the Company with, or merger of the Company with or into, any corporation or corporations, or any sale or conveyance of all or sub- stantially all of the assets of the Company, the Trustee shall deal with the corporation formed by such consolidation, or with or into which the Company is merged, or the person that acquires the assets of the Company on the same basis as it dealt with the Company prior to such transactions and, in such event, the term "Company" within this Agreement shall mean such corporation or person. SECTION 19 Miscellaneous Provisions 19.1 Binding Effect. This Trust Agreement shall be binding on the Company and the Trustee and their re- spective successors and assigns. 19.2 Inquiry as to Authority. A third party dealing with the Trustee shall not be required to make inquiry as to the authority of the Trustee to take any action nor be under any obligation to follow the proper application by the Trustee of the proceeds of sale of any property sold by the Trustee or to inquire into the validity or propriety of any act of the Trustee. 19.3 Responsibility for Company Action. The Trustee assumes no obligation or responsibility with respect to any action required by this Trust Agreement on the part of the Company, the Board of Directors, the Committee, any Affiliate, the Participants or any Beneficiaries. The Trustee shall be under no duties except such duties as are specifically set forth as such in this Trust Agreement or under applicable law, and no implied covenant or obligation shall be read into this Trust Agreement against the Trustee. 19.4 Successor to Trustee. Subject to Subsection 2.1, any corporation into which the Trustee may be merged or with which it may be consolidated, or any corporation resulting from any merger, reorganization or consolidation to which the Trustee may be a party, or any corporation to which all or substantially all the trust business of the Trustee may be transferred shall be the successor of the Trustee hereunder without the execution or filing of any instrument or the performance of any act. 19.5 Intercompany Agreements. The Company may require any Affiliate to enter into such other agreement or agreements as it shall deem necessary to obligate such Affiliate to reimburse the Company for any other amounts paid by the Company hereunder, directly or indirectly, in respect of such Affiliate's employees. 19.6 Titles Not to Control. Titles to the Sections of this Trust Agreement are included for convenience only and shall not control the meaning or interpretation of any provision of this Trust Agreement. 19.7 Laws of the State of Washington to Govern. This Trust Agreement and the Trust established hereunder shall be governed by and construed, enforced, and administered in accordance with the laws of the State of Washington, without reference to the principles of conflicts of law thereof. 19.8 Fractional Shares. Notwithstanding anything herein to the contrary, the Trustee may distribute any fractional share otherwise required to be distributed to Administrators or Participants pursuant to Sections 8 or 13, in cash in an amount equal to the Daily Value, multiplied by such fraction. IN WITNESS WHEREOF, this Trust Agreement has been duly executed by the parties hereto as of the day and year first above written. THE HILLHAVEN CORPORATION Attest: /s/ Ellen B. Alben By: /s/ Richard P. Adcock Ellen B. Alben Richard P. Adcock Assistant Secretary Senior Vice President WACHOVIA BANK OF NORTH CAROLINA, N.A. as Trustee Attest: /s/ Donna Stern By: /s/ John N. Smith, III Donna Stern John N. Smith, III Assistant Secretary Vice President STATE OF WASHINGTON COUNTY OF PIERCE On the 26th day of January, 1995, before me personally came to me Richard P. Adcock, who, being by me duly sworn, did depose and say that he resides at Gig Harbor, Washington; that he is of THE HILLHAVEN CORPORATION, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the board of directors of said corporation; and that he signed his name thereto by like order. /s/ Helen Harmon Helene Harmon Notary Public My commission expires 3/25/95 STATE OF NORTH CAROLINA COUNTY OF FORSYTH On the 26th day of January, 1995, before me personally came to me John N. Smith, III, who, being by me duly sworn, did depose and say that he resides at Winston- Salem, North Carolina; that he is of WACHOVIA BANK OF NORTH CAROLINA, N.A., one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the board of directors of said corporation; and that he signed his name thereto by like order. /s/ Sheri M. Utt Sheri M. Utt Notary Public Commission Expires 2/18/95 Schedule A LIST OF PLANS The Hillhaven Corporation 1991 Performance Investment Plan The Hillhaven Corporation 1990 Stock Incentive Plan The Hillhaven Corporation Employee Monthly Stock Investment Plan The Hillhaven Corporation Deferred Compensation Plan The Hillhaven Corporation Supplemental Executive Retirement Plan The Hillhaven Corporation Annual Incentive Plan The Hillhaven Corporation Long Term Incentive Plan Other non-discretionary based compensation Schedule B MINIMUM DISTRIBUTION SCHEDULE Schedule C TRUSTEE'S COMPENSATION SCHEDULE HILHAVEN GRANTOR TRUST FEE ESTIMATE FOR NON-QUALIFIED PLAN SERVICES I. TRUSTEE SERVICES $15,750.00 II. PROXY ADMINISTRATION 0.00 ---------- TOTAL TRUSTEE: $15,750.00 ========== HILLHAVEN GRANTOR TRUSTESTIMATE FORNON-QUALIFIED PLAN SERVICES
I. TRUSTEE SERVICES Trustee Charges for Assets Held Individual Assets Hillhaven Rate Per Market Value Market Value $1,000 Total First $500,000 $ 500,000 5.00 $ 2,500.00 Next 1,500,000 1,500,000 2.60 3,900.00 Next 8,000,000 8,000,000 .70 5,600.00 Next 40,000,000 12,500,000 .30 3,750.00 Next 50,000,000 .25 ------------ ----------- $ 22,500,000 $ 15,750.00
Insurance, Letter of Credit, Company Stock and Other Non-Cash Funding: The value of insurance, letter of credit, company stock or other non-cash funding, will be discounted by 75% when applying the ad valorem charges above. Hillhaven Total Market Value: $90,000,000 x .25 = $22,500,000* Change of Control: From the point of a change of control, the value of the insurance, letter of credit or other non-cash funding will be charged at 100% when applying the ad valorem charges above. Master Trust Plan Accounting: For Asset Pools: $750.00 For Plan Accounts: First 5, No Charge Consulting Services: Billable time plus out-of-pocket expenses. Automatic Cash Investing: For daily sweeping an automatic investment of cash in accounts not managed by Wachovia, a separate charge at the rate of $1.20 per $1,000 will be made on the average daily STIF balance. Wires: $10 each Total: $15,750.00* * The minimum fee for Nonqualified Plan Services is $2,500.00. II. PROXY ADMINISTRATION Proxy Handling: Addressing Proxies $.06 each, minimum $50.00 Addressing Labels $.04 each, minimum $50.00 Affixing Name and Address Labels to Envelopes, Proxies, etc. $.04 each label, minimum $50.00 Inserting the Enclosures: First Enclosures $.05 each Each Additional Enclosure $.035 each Tabulation of Returned Proxies: First (2) Elections $.37 each Additional Elections $.07 each Miscellaneous Out-of-Pocket Expenses: Postage expenses, mail processing, cost of materials, and reproduction expense will be charged at cost of materials plus labor. Fair and reasonable negotiated fees will be charged for extraordinary services. Also reimbursable to Wachovia at its cost are charges for travel, systems work, and other expenses. EX-99 3 STOCK PURCHASE AGREEMENT EXHIBIT 99.02 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT dated as of January 16, 1995, between The Hillhaven Corporation, a Nevada corporation (the "Company"), and Wachovia Bank of North Carolina, N.A., acting, except as otherwise expressly provided below, solely in its capacity as trustee under the Trust defined below and not in its individual capacity (the "Trustee"). WITNESSETH: WHEREAS, the Company has established, effective as of January 16, 1995, The Hillhaven Corporation Grantor Stock Trust (the "Trust"), and the accompanying Trust Fund; and WHEREAS, the Company has appointed the Trustee as the trustee of the Trust which has been established to hold the assets of the Trust Fund pursuant to the terms of the Trust Agreement dated as of January 16, 1995 by and between the Company and the Trustee (the "Trust Agreement"); and WHEREAS, the Trust Agreement provides that the assets of the trust created thereunder shall be invested primarily in shares of Company Stock (as defined in the Trust Agreement); and WHEREAS, the Company wishes to sell and the Trustee has determined to purchase shares of common stock, par value $0.75 per share (the "Company Stock") from the Company, in the amount and at the purchase price as set forth in this Agreement; NOW, THEREFORE, in consideration of these premises and the mutual promises contained herein, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Purchase; Purchase Price. Subject to the terms and conditions of this Agreement, the Trustee hereby agrees to purchase on behalf of the Trust Fund (the "Purchase") from the Company, and the Company hereby agrees to issue and sell for cash to the Trustee, up to 4.2 million shares (the "Shares") of Company Stock at a purchase price per share equal to $21.01875 (the "Purchase Price"; and the aggregate Purchase Price for all the Shares is hereinafter referred to as the "Aggregate Purchase Price"). The Purchase Price is equal to the average of the high and low prices of the Company Stock on the New York Stock Exchange for the ten trading days immediately preceding the date of this agreement. The Purchase shall occur in two steps. On the Initial Delivery Date (as defined below), the Trustee shall purchase on behalf of the Trust 3,180,000 shares of Company Stock, representing no more than 10% of the total outstanding shares of the Company after the issuance of such shares. On the Final Delivery Date (as defined below), the Trustee shall purchase as many of the Remaining Shares (as defined below) as allowed pursuant to the approval granted under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). 2. Delivery; Payment. The Purchase of the 3,180,000 shares of Company Stock shall be consummated at or about 2:00 p.m. (Pacific Standard Time) on January 27, 1995 (such date of delivery being hereinafter called the "Initial Delivery Date") at the offices of the Company. The Company will direct its transfer agent, Chemical Trust Company of California (the "Transfer Agent") to register the Shares in the name of the Trustee, as trustee under the Trust, or in the name of its nominee, which the Transfer Agent will do in book entry form on its records, against delivery to the Company by the Trustee of the applicable portion of the Aggregate Purchase Price therefor by wire transfer of immediately available funds. The Company will pay all stamp and other transfer taxes, if any, which may be payable in respect of the issuance, sale and delivery of the Shares, shall be entitled to any refund thereof. The Purchase of the 1,020,000 shares of Company Stock not purchased on January 25, 1995 (the "Remaining Shares") shall be consummated as promptly as possible following the termination of the applicable waiting period under the HSR Act (such date of delivery being hereinafter called the "Final Delivery Date") at the offices of the Company. The Company will direct the Transfer Agent to register the Shares in the name of the Trustee, as trustee under the Trust, or the name of its nominee, which the Transfer Agent will do in book entry form on its records, against delivery to the Company by the Trustee of the applicable portion of the Aggregate Purchase Price therefor by wire transfer of immediately available funds. The Company will pay all stamp and other transfer taxes, if any, which may be payable in respect of the issuance, sale and delivery of the Shares, shall be entitled to any refund thereof. 3. Representations, Warranties and Covenants of the Company. The Company hereby represents, warrants and covenants to the Trustee as follows: 3.1 The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Nevada with corporate power and authority to own, lease and operate its properties and conduct its business as described in its Annual Report for the year ended May 31, 1994 and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction where its ownership or leasing of properties or the conduct of its business requires such qualification. 3.2 The execution, delivery and performance of this Agreement and all other documents or instruments to be executed or delivered by the Company in connection with this Agreement are within the Company's powers and have been duly authorized by all necessary action. This Agreement and all other documents or instruments to be executed or delivered by the Company in connection with this Agreement are valid and binding upon the Company, and enforceable against the Company in accordance with their respective terms except as the enforceability thereof may be limited by the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether considered in a proceeding at law or in equity). 3.3 The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under (i) the Articles of Incorporation or Bylaws, each as amended and restated to date, of the Company, or (ii) any provision of any indenture, mortgage, deed of trust, agreement, instrument, order, arbitration award, judgment or decree to which the Company or any of its subsidiaries is a party or by which any of their respective assets are bound, or (iii) any statute, rule or regulation applicable to the Company or any of its subsidiaries of any court, bureau, board, agency or other governmental body having jurisdiction, which conflict, breach or default might have a material adverse effect. 3.4 The authorized, issued and outstanding capital stock of the Company is as set forth in Schedule 3.4, and the Company has no obligations to issue any additional shares pursuant to any options, warrants, conversion rights or other arrangements (other than in accordance with the Company's 1990 Stock Incentive Plan, the Company's 1991 Performance Investment Plan or the Company's 7 3/4% Convertible Subordinated Debentures due 2002); all shares of issued and outstanding capital stock of the Company have been duly authorized and are fully paid and nonassessable; the Shares have been duly and validly authorized for issuance and sale to the Trustee and the Shares when issued and delivered by the Company pursuant to this Agreement against payment of the consideration herein, will be validly issued and fully paid and nonassessable; and the issuance of the Shares hereunder is not subject to preemptive rights. The Company has full right and authority to issue, sell, transfer and deliver the Shares and will effectively transfer to the Trustee, on the Initial Delivery Date and the Final Delivery Date, the full right, title and interest therein and thereto, free and clear of all options, claims, charges, encumbrances, agreements, trusts, equities and rights, whether contingent or absolute, of any nature whatsoever. 3.5 Other than the termination of the applicable waiting period under the HSR Act, no authorization, approval or consent of any governmental authority or agency is necessary in connection with the sale of the Shares by the Company hereunder; the Shares are being issued pursuant to a valid exemption from registration under the Securities Act of 1933, as amended (the "Securities Act") and applicable state securities laws. 3.6 The Trust Agreement has been duly authorized by all necessary corporate action on the part of the Company. 4. Representations, Warranties and Covenants of the Trustee, as Trustee. The Trustee, in its capacity as such, represents, warrants and covenants as follows: 4.1 The Trustee (i) is a duly organized and validly existing trust company in good standing and with full authority to act as Trustee and exercise trust powers under the laws of the United States and (ii) has full corporate power and authority to execute and deliver the Trust Agreement and to carry out the transactions contemplated thereby. 4.2 The execution, delivery and performance of this Agreement will not violate (i) the Trustee's [charter] or By-Laws, each as amended or restated to date, (ii) any provision of any indenture, mortgage, deed of trust, agreement, instrument, order, arbitration award, judgment or decree to which the Trustee or the Trust is a party or by which it or the Trust or any of their respective assets are bound, or (iii) any statute, rule or regulation applicable to the Trustee or the Trust of any court, bureau, board, agency or other governmental body having jurisdiction, which conflict, breach or default might have a material adverse effect. 4.3 This Agreement and the Trust Agreement have been duly executed and delivered by the Trustee on behalf of the Trust and each constitutes the legal, valid and binding obligation of the Trust enforceable against the Trustee in accordance with their respective terms, except as the enforceability thereof may be limited by the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether considered in a proceeding at law or in equity). 4.4 The Trustee is acquiring the Shares on behalf of the Trust Fund pursuant to the Trust Agreement solely for investment purposes and not with a view toward, or for sale in connection with, any distribution thereof; provided, however, that the allocation, acquisition, holding and distribution of Shares are governed by the terms of the Trust Agreement. 4.5 No authorization, approval or consent of any governmental authority or agency is necessary in connection with the purchase of the Shares by the Trustee on behalf of the Trust hereunder. 5. Indemnification. The Company shall defend, indemnify and hold the Trustee harmless against any action, claim, proceeding, demand, loss, liability, damage or expense (including reasonable attorneys' fees) that the Trustee may suffer as a result of the breach by the Company of any representation, warranty or obligation of the Company hereunder. 6. Conditions to Closing. 6.1 Conditions to the Trustee's Obligations at Closing. The obligations of the Trustee hereunder are subject to the fulfillment at or before each Delivery Date of each of the following conditions: (a) The representations and warranties contained in Section 3 hereof shall be true on and as of each Delivery Date and, if either Delivery Date is a date other than the date hereof, the Trustee shall have been furnished with a certificate, dated such Delivery Date, to such effect, signed by an authorized officer of the Company. (b) The Trustee shall have issued its Note and received the aggregate proceeds of the Loan. (c) No order of any court or administrative agency shall be in effect which restrains or prohibits the transactions contemplated by this Agreement, and no suit, action or other proceedings by any governmental body or other person shall have been instituted which questions the validity or legality of the transactions contemplated by this Agreement. (d) Neither the Trustee nor the Company shall have determined that the purchase of the Shares would result in a prohibited transaction or otherwise violate the provisions of ERISA or other applicable law. 6.2 Conditions to the Company's Obligations at Delivery. The obligations of the Company hereunder are subject to the fulfillment at or before each Delivery Date of each of the following conditions: (a) The representations and warranties contained in Section 4 hereof shall be true on and as of each Delivery Date and, if either Delivery Date is a date other than the date hereof, the Company shall have been furnished with a certificate dated such Delivery Date, to such effect, signed by an authorized officer of the Trustee. (b) No order of any court or administrative agency shall be in effect which restrains or prohibits the transactions contemplated by this Agreement, and no suit, action or other proceedings by any governmental body or other person shall have been instituted which questions the validity or legality of the transactions contemplated by this Agreement. (c) Neither the Trustee nor the Company shall have determined that the purchase of the Shares would result in a prohibited transaction or otherwise violate the provisions of applicable law or ERISA. 7. Restrictive Legend. The Trustee understands that the certificate(s) representing the Shares will bear the following legend and that a notation restricting their transfer will be made on the stock transfer books of the Company: "The shares of stock represented by this certificate have not been registered under the Securities Act of 1933, as amended. Such shares may not be sold, assigned, pledged or otherwise transferred in the absence of an effective registration statement under said Securities Act covering the transfer or an opinion of counsel satisfactory to the issuer that registration under said Securities Act is not required." 8. Registration of Shares. Upon the written request of the Trustee, the Company agrees that, at the Company's expense, it will prepare and file, as promptly as practicable after such request, and use its reasonable efforts to cause to become effective, a registration statement on an appropriate form, including a final prospectus (the "Registration Statement"), under and complying with the Securities Act and the rules and regulations thereunder, relating to that number of the Shares as the Trustee shall have indicated in its request. Whenever Shares are so registered, the Company shall also use its reasonable efforts to register or qualify such shares covered by the Registration Statement under the "blue sky" or securities laws of such jurisdictions within the United States as the Trustee may reasonably request; provided, however, that the Company shall not be required to consent to the general service of process for all purposes in any jurisdiction where it is not then qualified to do business. 9. Expenses. The Company shall make such contributions to the Trust as are necessary for the Trust to pay all of the expenses of the Trust and the Trustee in connection with the authorization, preparation, execution and performance of this Agreement. 10. Integration; Amendment. This Agreement (including the documents delivered pursuant hereto) constitutes the entire agreement and understanding between the parties hereto relating to the purchase of the Shares and supersedes any prior agreement or understanding relating in any way to the transaction contemplated hereby. This Agreement may be modified or amended only by a written instrument executed by or on behalf of the parties hereto. The headings and captions contained herein are solely for the convenience of reference and do not constitute a part of this Agreement or affect in any way its meaning or construction. 11. Savings Clause. The invalidity, illegality or unenforceability of any one or more of the provisions of this Agreement shall in no way affect or impair the validity and enforceability of the remaining provisions hereof. In the event any such provision shall be so declared unenforceable due to its scope or breadth, it shall be narrowed to the scope or breadth permitted by law. 12. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. It shall not be necessary that any single counterpart thereof be executed by all parties so long as each party executed at least one counterpart. 13. Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Washington, without regard to any principles of conflicts of law. 14. Survival of Representations and Warranties. All representations and warranties in this Agreement shall survive both Delivery Dates. 15. Notices. Any notice or other communication required or permitted hereunder shall be in writing, either delivered by hand, by mail, or by telex, telefax or telegram (charges prepaid), and any such notice shall be effective when received at the address specified below (or, if by mail, three business days after deposited in the U.S. mails, registered or certified mail, postage prepaid and return receipt requested): If to the Company: The Hillhaven Corporation 1148 Broadway Plaza Tacoma, Washington 98402 Attn: Vice President, Treasurer With a copy to: The Hillhaven Corporation 1148 Broadway Plaza Tacoma, Washington 98402 Attn: Senior Vice President and General Counsel If to the Trustee: Wachovia Bank of North Carolina, N.A. 301 N. Main Street Winston-Salem, North Carolina 27150 Attn: Steve Watts, Vice President With a copy to: Wachovia Bank of North Carolina, N.A. 301 N. Main Street Winston-Salem, North Carolina 27150 Attn: John Smith, Vice President Addresses may be changed by written notice given pursuant to this Section. Any notice given hereunder may be given on behalf of any party by his counsel or other authorized representatives. 16. Specific Performance. The parties hereto acknowledge that damages would be an inadequate remedy for any breach of the provisions of this Agreement and agree that the obligations of the parties hereunder shall be specifically enforceable, and no party will take any action to impede the other from seeking to enforce such right of specified performance after any such breach. 17. Successors and Assigns; Assignability. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto, and their respective legal representatives, successors and assigns. This Agreement (a) shall not confer upon any person other than the parties hereto and their respective successors and assigns any rights or remedies hereunder; and (b) shall not be assignable by operation of law or otherwise by any party hereto. 18. Further Assurances. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement. 19. Certain Limitations. Except as otherwise expressly provided herein, the execution and delivery of this Agreement and the performance by the Trustee of this Agreement have been, or will be, effected by the Trustee solely in its capacity as Trustee and not individually. IN WITNESS WHEREOF, the parties hereof have duly executed and delivered this Agreement as of the date first above written. THE HILLHAVEN CORPORATION By: /s/ Richard P. Adcock Name: Richard P. Adcock Title: Senior Vice President WACHOVIA BANK OF NORTH CAROLINA, N.A., solely in its capacity as Trustee under The Hillhaven Corporation Grantor Stock Trust and not individually, except as otherwise expressly provided herein By: /s/ John N. Smith, III Name: John N. Smith, III Title: Vice President EX-99 4 PROMISSORY NOTE EXHIBIT 99.03 NON-RECOURSE PROMISSORY NOTE FOR VALUE RECEIVED this day of January 27, 1995, Wachovia Bank of North Carolina, N.A., acting solely in its capacity as trustee (the "Trustee") of The Hillhaven Corporation Grantor Stock Trust established pursuant to The Hillhaven Corporation Grantor Trust Agreement (the "Trust Agreement"), hereby promises to pay to order of The Hillhaven Corporation (the "Company") by December 31, 1999 (the "Final Maturity Date") the principal sum of sixty- four million, four hundred and fifty-four thousand, six hundred and twenty-five Dollars and No/100 cents ($64,454,625), together with interest on the unpaid principal balance hereof commencing on the date hereof at an adjustable annual rate equal to the prime rate as established by Bank of America, National Savings and Trust Association ("B of A"), in lawful money of the United Sates of America. Required loan payments shall be made in accordance with the attached payment schedule at quarterly intervals. The Trustee shall have the right to accelerate or prepay any amount of this Note at any time, without premium or penalty. All optional prepayments under this Note shall be applied to installments of principal in inverse order of maturity and shall be accompanied by accrued and unpaid interest on the amount prepaid. This Note is the Note referred to in, and is subject to and entitled to the benefits of, the Stock Purchase Agreement dated as of January 16, 1995 (the "Stock Purchase Agreement"), between the Company and the Trustee. Terms used herein shall have the meanings specified in the Stock Purchase Agreement unless otherwise specified herein. The Stock Purchase Agreement, among other things, contains provisions for repayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. Overdue principal and, to the extent permitted by law, overdue interest payable by the Trustee hereunder shall bear interest at an adjustable annual rate equal to one percent (1%) over the prime rate as established by B of A. The obligations of the Trust or Trustee hereunder are without recourse to the Trust or the Trustee or the assets of the Trust or the Trustee, except to the extent specifically provided in the Stock Purchase Agreement. Notwithstanding anything herein to the contrary, the Company may forgive any amount owed to it pursuant to this Note at any time in its sole discretion through written notice to the Trustee or as otherwise provided in the Trust Agreement. The Trustee hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note. This Note shall be binding upon the Trustee and its successors and assigns. This Note shall be construed and enforced in accordance with the laws of the State of Washington. Trustee of The Hillhaven Corporation Grantor Stock Trust By: /s/ John N. Smith, III John N. Smith, III Vice President PAYMENT SCHEDULE February 28, 1995 Interest payment due May 31, 1995 Interest payment due August 31, 1995 Interest payment due November 30, 1995 Interest payment due February 28, 1996 Interest payment due May 31, 1996 Interest payment due August 31, 1996 Interest payment due November 30, 1996 Interest payment due February 28, 1997 Interest payment due May 31, 1997 Interest payment due August 31, 1997 Interest payment due November 30, 1997 Interest payment due February 28, 1998 Interest payment due May 31, 1998 Interest payment due August 31, 1998 Interest payment due November 30, 1998 Interest payment due February 28, 1999 Interest payment due May 31, 1999 Interest payment due August 31, 1999 Interest payment due November 30, 1999 Interest payment due December 31, 1999 All unpaid principal and accrued and unpaid interest due EX-99 5 PRESS RELEASE EXHIBIT 99.04 CONTACT: Tim Carroll The Hillhaven Corporation Vice President, Investor Relations (206) 756-4806 HILLHAVEN ESTABLISHES GRANTOR TRUST FOR EMPLOYEE BENEFIT PLANS TACOMA, Washington (January 16, 1995) -- The Hillhaven Corporation(NYSE:HIL), one of the nation's largest diversified health care providers, today announced that it has created a grantor trust to pre-fund future obligations under existing Hillhaven employee benefit plans. Hillhaven has committed to transfer an aggregate of 4,200,000 newly issued shares of its common stock to the grantor trust. Hillhaven stated that the establishment of the trust will not effect earnings per share for financial reporting purposes and that Hillhaven's fully-diluted earnings per share calculations currently reflect the impact of shares included in these plans. Among the benefit plans supported by the grantor trust are the performance investment plan, the employee stock purchase plan and stock incentive plan, which already contemplate the issuance of more than the number of shares to be held by the trust. The issuance of shares to the trust will not change the number of shares to be issued pursuant to Hillhaven's existing stock-based benefit plans. The shares held by the trust will be entitled to receive dividends paid, if any, and to vote on matters presented to holders of common stock. Under the terms of the trust, decisions as to the voting of the shares held by the trust will be made by participants in Hillhaven's plans supported by the trust. Similarly, rights to participate in any tender or exchange offers relating to common shares will be passed through to such plan participants. Hillhaven stated that the creation of the grantor trust is expected to be viewed positively by rating agencies and banks. A number of public companies have created grantor trusts to fund their employee benefit plans. The Hillhaven Corporation is one of the nation's largest diversified health care providers, operating 363 nursing centers, retirement housing communities and pharmacy outlets in 36 states. Hillhaven offers an extensive array of health care services including subacute care, inpatient and outpatient rehabilitation, orthopedic and stroke recovery programs, post-operative care, long term care, specialized care for Alzheimer's disease, pharmacy services and retirement and assisted living services. -----END PRIVACY-ENHANCED MESSAGE-----