<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from __________ to ____________
Commission file number 0-21933
SUMMIT HOLDING SOUTHEAST, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Florida 59-3409855
<S> <C>
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
</TABLE>
2310 A-Z Park Road, Lakeland, Florida 33801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 941-665-6060
Indicate by check mark whether the registrant (1) has filed all documents and
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of the last practicable date.
<TABLE>
<CAPTION>
Class Outstanding at October 31, 1997
----- -------------------------------
<S> <C>
Common Stock, $0.01 Par Value 5,791,100
</TABLE>
<PAGE> 2
SUMMIT HOLDING SOUTHEAST, INC.
AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
Table of Contents
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION 1
Item 1. Condensed Consolidated Financial Statements 1
Condensed Consolidated Balance Sheets as of September 30,
1997 and March 31, 1997 1
Condensed Consolidated Statements of Income for the three
and six months ended September 30, 1997 and 1996 2
Condensed Consolidated Statements of Cash Flows for the
six months ended September 30, 1997 and 1996 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk 8
PART II. OTHER INFORMATION 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 6. Exhibits and Reports on Form 8-K 8
</TABLE>
SIGNATURES
INDEX TO EXHIBITS
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SUMMIT HOLDING SOUTHEAST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except shares and per share amounts)
<TABLE>
<CAPTION>
September 30, March 31,
1997 1997
---- ----
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Investments:
Fixed maturities $228,006 $180,075
Equity securities 22,441 18,286
Short-term investments 6,223 14,733
----------------------
Total investments 256,670 213,094
Cash and cash equivalents 6,480 3,578
Premiums receivable (net of $1,701 and $2,566
allowance for doubtful accounts, respectively) 88,619 42,397
Reinsurance recoverable 113,391 92,324
Recoverable from Florida Special Disability Trust Fund 20,979 20,979
Accrued investment income 3,815 3,129
Property and equipment, net 1,425 1,452
Goodwill, net 43,712 44,651
Other intangible assets, net 10,022 11,078
Deferred income taxes 13,074 14,869
Other assets 7,220 8,694
----------------------
Total assets $565,407 $456,245
======================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Loss and loss adjustment expense reserve $358,679 $358,744
Note payable 25,040 32,675
Unearned premiums 60,352 11,961
Other policyholders' funds 12,970 16,786
Accounts payable and accrued expenses 7,142 5,163
Deferred revenue 4,469 3,915
Federal income taxes payable 2,622 585
----------------------
Total liabilities 471,274 429,829
----------------------
Shareholders' Equity:
Common stock, $.01 par; 20,000,000 shares authorized;
5,791,100 shares issued and outstanding 58 --
Additional paid-in capital 57,645 --
Series A, 4% cumulative preferred stock, $10.00 par;
5,000,000 shares authorized; 1,639,701 shares issued 16,397 --
and outstanding
Retained earnings 15,107 25,899
Net unrealized appreciation of available-for-sale
securities, less applicable deferred income taxes 4,926 517
---------------------
Total shareholders' equity 94,133 26,416
----------------------
Total liabilities and shareholders' equity $565,407 $456,245
======================
</TABLE>
See notes to condensed consolidated financial statements.
1
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SUMMIT HOLDING SOUTHEAST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
September 30 September 30
------------ ------------
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Audited)
<S> <C> <C> <C> <C>
REVENUE
Premiums earned $ 6,956 $24,239 $11,639 $49,029
Net investment income 4,091 3,205 7,485 6,363
Net realized investment gains 333 74 1,211 8
Administrative fees 6,933 8,309 15,087 17,432
Other income 55 112 171 216
----------------- -----------------
Total revenue 18,368 35,939 35,593 73,048
LOSSES AND EXPENSES
Losses and loss adjustment expenses 5,014 14,631 9,037 32,135
Other underwriting, general and administrative
expenses 6,930 15,920 14,242 30,532
Amortization and depreciation 1,133 870 2,282 2,499
Interest expense 736 895 1,485 1,831
----------------- -----------------
Total losses and expenses 13,813 32,316 27,046 66,997
----------------- -----------------
Income from continuing operations before income taxes 4,555 3,623 8,547 6,051
Income tax expense 1,490 1,246 2,943 2,400
----------------- -----------------
Income from continuing operations 3,065 2,377 5,604 3,651
Loss from disposition and discontinued operations
(net of income tax benefit of $371 and $501
in 1996, respectively) -- 638 -- 890
----------------- -----------------
Income before extraordinary charge 3,065 1,739 5,604 2,761
Extraordinary charge for conversion costs
(net of income-tax benefit of $226 in 1996) -- 375 -- 375
----------------- -----------------
NET INCOME $ 3,065 $ 1,364 $ 5,604 $ 2,386
================= =================
Earnings per common share $ 0.48 -- $ 0.92 --
================= =================
Weighted average number of common shares outstanding 6,018 -- 5,846 --
================= =================
</TABLE>
See notes to condensed consolidated financial statements.
2
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SUMMIT HOLDING SOUTHEAST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended September 30
---------------- ------------
1997 1996
---- ----
(Unaudited) (Audited)
<S> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES ............ $(12,076) $ (866)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities ................. (81,642) (46,158)
Disposal and maturity of investment securities ..... 46,717 51,806
Purchase of equipment .............................. (165) (258)
--------------------
Net cash (used in) provided by investing activities (35,090) 5,390
--------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from the issuance of capital stock .... 57,703 --
Payments on note payable ........................... (7,635) (7,500)
--------------------
Net cash provided by (used in) financing activities 50,068 (7,500)
--------------------
Net increase (decrease) in cash and cash equivalents 2,902 (2,976)
Cash and cash equivalents at beginning of period ... 3,578 10,702
--------------------
Cash and cash equivalents at end of period
Continuing operations .......................... 6,480 7,055
Operations held for disposition ................ -- 556
Discontinued operations ........................ -- 115
--------------------
Total ending cash and cash equivalents ..... $ 6,480 $ 7,726
====================
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 6
SUMMIT HOLDING SOUTHEAST, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 1 - BASIS OF PRESENTATION
ORGANIZATION
Summit Holding Southeast, Inc. ("Summit") is the holding company for
Bridgefield Employers Insurance Company ("Bridgefield"), the successor, as of
May 28, 1997, to Employers Self Insurers Fund ("ESIF"), and for Summit Holding
Corporation ("SHC"). On May 28, 1997, ESIF completed a conversion from a group
self-insurance fund to a stock property and casualty insurance company.
Concurrent with this conversion, ESIF's name was changed to Bridgefield, and the
new holding company, Summit, issued (i) 1.64 million shares of its Series A
preferred stock to the former policyholders or members of ESIF in exchange for
the extinguishment of the membership interests of such policyholders in ESIF
including the elimination of the assessibility feature of the membership
interests, and (ii) 5.79 million shares of its common stock to subscribing
former policyholders or members of ESIF, certain members of management, and the
public in a subscription offering and subsequent public offerings. At the same
time, and in connection with a recapitalization to simplify Summit's corporate
structure, all of the capital stock of SHC, which had been owned by ESIF and one
of its subsidiaries prior to the conversion, was acquired by Summit, and SHC
also became a wholly owned subsidiary of Summit. Also, as part of the
recapitalization, SHC's ownership of Bridgefield Casualty Insurance Company
("Bridgefield Casualty") was transferred to Bridgefield.
The conversion and recapitalization transactions described above are
considered to be similar to pooling of interests transactions. The historical
cost basis accounting of the predecessor companies has been retained, and the
Company's financial statements have been presented using pooling of interests
basis accounting. The conversion and recapitalization transactions had no impact
upon previously reported net income of the consolidated entities.
The terms and details of these transactions, and the preferred stock
and common stock issued by Summit in connection therewith, are more fully
described in Summit's Registration Statement on Form S-1 (No. 333-16499).
Subsequent to the conversion and recapitalization, Summit's insurance
subsidiaries, Bridgefield and Bridgefield Casualty (the "insurance
subsidiaries"), will continue to underwrite and assume the underwriting risks
with respect to workers' compensation insurance policies for Florida employers,
and Summit's administrative subsidiaries (SHC and subsidiaries) (the
"administrative subsidiaries") will continue to provide administrative services
for the insurance subsidiaries and for four unaffiliated self-insurance funds.
In the accompanying notes to condensed consolidated financial
statements, the "Company" refers to Summit and its consolidated subsidiaries.
BASIS OF FINANCIAL REPORTING
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Article 10 of
Regulation S-X. Accordingly, certain information and note disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. In the opinion of the
Company's management, all adjustments (consisting solely of normal recurring
adjustments and certain reclassifications) necessary for a fair presentation in
the accompanying condensed consolidated financial statements have been made. The
information included in this Form 10-Q should be read in conjunction with Item
2, Management's Discussion and Analysis of Financial Condition and Results of
Operations, and the consolidated financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1997.
The preparation of financial statements requires management to make
estimates and assumptions that affect the amounts reported in the accompanying
condensed consolidated financial statements and notes thereto. Actual results
may differ from these
4
<PAGE> 7
estimates, and interim results reflected in the accompanying financial
statements are not necessarily indicative of results for a full year.
RECLASSIFICATIONS
Certain amounts in the accompanying audited consolidated balance sheet
as of March 31, 1997 have been reclassified from that reported in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1997 in order to
better conform with the presentation in the accompanying unaudited condensed
consolidated balance sheet as of September 30, 1997.
NOTE 2 - REINSURANCE
Effective April 1, 1997, Bridgefield entered into quota share
reinsurance agreements, in addition to existing excess reinsurance agreements,
with American Re-Insurance Company, St. Paul Fire and Marine Insurance,
Constitution Reinsurance Corp., and Transatlantic Reinsurance Co. Accordingly,
beginning on that date and for the six months ended September 30, 1997,
Bridgefield ceded an aggregate of 75% of the net premiums on workers'
compensation policies earned during such period, and the reinsurers, in their
respective proportions, have assumed that same percentage of the risks under
such policies.
The ceding of 75% of the net premiums earned during the quarter and six
months ended September 30, 1997 has resulted in a reduction of premium revenue,
along with loss and loss adjustment expenses, from that recognized in the
corresponding periods of the prior year. Also, the Company received a ceding
commission relating to these quota share agreements, and such commission is
recognized on an earned basis.
These quota share agreements do not relieve Bridgefield from its
liability under the workers' compensation policies it issues, but they do make
the assuming reinsurers liable to Bridgefield for the reinsurance ceded.
Therefore, the Company is subject to credit risk with respect to the obligations
of its reinsurers involved in these and all other existing reinsurance
agreements. Although each of the aforementioned quota share reinsurers are
currently rated "A" or better by AM Best Company, any failure on the part of
these reinsurers, as well as those involved in the Company's other existing
reinsurance arrangements, could have a material adverse effect on the Company's
business, financial condition, and results of operations.
NOTE 3 - NOTE PAYABLE
On May 28, 1997, the date of ESIF's conversion, the Company entered
into a new credit facility with a national banking association whereby the
then-existing debt, consisting of a bank term loan and availability under a
revolving credit agreement, was restructured. Under this new credit facility,
the outstanding debt pertaining to the term loan was established at $32.7
million, and the maximum amount available for borrowings under the revolving
line of credit was established at $5.0 million. Maturities of the term loan and
the schedule of reductions in the amounts available under the revolving line of
credit are set forth in Note 14 to the consolidated financial statements
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1997. The interest rate applicable to the entire debt package was
initially established, and continues, at the prime lending rate plus 1% (9.5% at
September 30, 1997).
As of and for the quarter ended September 30, 1997, the Company
remained current in its obligation under the term loan and had complied with the
corresponding covenants described in Note 14 to the consolidated financial
statements contained in the aforementioned Annual Report on Form 10-K. Also as
of September 30, 1997, there were no borrowings against the revolving line of
credit. As collateral for the debt, Summit has pledged all of the issued and
outstanding stock of SHC and Bridgefield.
NOTE 4 - RESTRICTION ON RETAINED EARNINGS
Of the Company's retained earnings as of September 30, 1997 reported in
the corresponding accompanying condensed consolidated balance sheet,
approximately $237,000 is restricted as such amount represents the aggregate
value of the preferred stock preferences, including liquidation and unpaid
cumulative dividend preferences, in excess of the stated value of preferred
stock reported in such balance sheet.
5
<PAGE> 8
NOTE 5 - EARNINGS PER SHARE
Earnings per common share is based upon the weighted average number of
common shares outstanding, for the period from the date of the completion of the
offering through September 30, 1997, adjusted for the effect of the assumed
exercise of stock options. The resulting weighted average common shares
outstanding per the treasury method were calculated for both the three months
and six months ended September 30, 1997 for purposes of the earnings per share
calculation. At March 31, 1997 and prior to ESIF's conversion from a group
self-insurance fund to a stock property and casualty company, common shares were
inapplicable to ESIF as the predecessor of the Company.
NOTE 6 - CONTINGENCIES
The Internal Revenue Service is currently conducting an audit. The
Company's management cannot predict the results of the audit, and no assurance
can be given that the results of the audit will not have a material adverse
effect on the Company's business, financial condition, or results of operations.
The Company, in the normal course of business, is named as a defendant
in various legal actions arising principally from claims made under insurance
policies and contracts. Those actions are considered by the Company in
estimating the loss and the LAE reserve. The Company's management believes that
the resolution of those actions will not have a material effect on the Company's
financial position or results of operations.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NET INCOME. The Company realized net income during the quarter ended
September 30, 1997 of $3.1 million, or $0.48 per share, compared to $1.4 million
for the same quarter of the preceding year. Net income for the six months ended
September 30, 1997 was $5.6 million or $0.92 per share, compared to $2.4 million
achieved during the six month period ended September 30, 1996. Significant
factors contributing to this increase in the Company's income are as follows:
REVENUE: The Company's revenues is generated principally from three
sources: premiums earned on insurance policies written by the insurance
subsidiaries, administration fees earned from the management of four
unaffiliated self-insurance workers' compensation funds, and investment income
generated by the Company's invested assets, including cash and cash equivalent
balances.
For the quarter ended September 30, 1997, earned premiums declined $17.3 million
in comparison to that same quarter of the prior year. Similarly, premiums earned
during the six-month period ended September 30, 1997 declined $37.4 million from
that for the six-month period ended September 30, 1996. The bulk of this decline
is attributable to the quota share reinsurance agreements entered into by
Bridgefield effective April 1, 1997, as is more fully explained in Note 2 to the
accompanying condensed consolidated financial statements. The quota share ceded
premium for the three months ended September 30, 1997 and six months ended
September 30, 1997 was $22.1 million and $44.2 respectively. The quota share
ceded premium for the three months ended September 30, 1996 was $1.3 million.
Another cause of the decline in earned premiums pertains to Florida legislation
regarding managed care workers' compensation. Prior to 1997, and as permitted
by the Florida Department of Insurance (the "Florida DOI"), the Company offered
a 10% premium credit to those insureds who voluntarily participated in an
approved managed care workers' compensation arrangement. Effective January 1,
1997, the Florida legislation required all insured employers to participate in
managed care workers' compensation arrangements and, consequently, eliminated
the 10% premium credit. In response thereto, and based upon other rate-making
factors, the Florida DOI ordered an 11.2% overall workers' compensation
insurance rate reduction which applied to new and renewal policies written on
and after January 1, 1997. This rate reduction and the simultaneous elimination
of the premium credit had the effect of reducing renewal premiums by
approximately 4.5%, and thereby resulted in a decline of earned premiums, in
comparison to the same periods of the prior year, of approximately $1.4 million
and $2.8 million during the quarter ended and six-months ended September 30,
1997, respectively.
6
<PAGE> 9
Management's primary business strategy for improving the Company's return on
invested capital is to grow the Company's core workers' compensation business.
Key aspects of the Company's post-conversion business strategy include: (i)
continued use of both self-insurance and indemnity products; (ii) emphasis on
profitable underwriting results; (iii) proactive implementation of managed care;
(iv) leveraging of administrative service capabilities; and (v) emphasis on
excellent customer service.
ADMINISTRATIVE FEES. During the quarter ended and six-months ended
September 30, 1997, administrative fees declined $1.4 million and $2.3 million,
or 17% and 13%, respectively, from the same period of the prior year. This
decline resulted from the premiums of the administrative subsidiaries'
unaffiliated clients, upon which the Company's administrative fees are based,
being adversely impacted by both the aforementioned 11.2% premium rate reduction
and the competitive marketplace.
NET INVESTMENT INCOME. Net investment income was $4.1 million and $3.2
million for the quarter ended September 30, 1997 and 1996, respectively. For the
six-months ended September 30, 1997 and 1996, net investment income was $7.5
million and $6.4 million, respectively. This improvement is primarily
attributable to the increase in the volume of invested assets, a major
contributor of which was the proceeds from the issuance of Summit's capital
stock.
LOSS AND LOSS ADJUSTMENT EXPENSES. Loss and loss adjustment expenses
(LAE) realized a net decline of $9.6 million, or 66%, and $23.1 million, or 72%,
during the quarter ended and six-months ended September 30, 1997, respectively,
from that of the same periods in the prior year. The major source of this change
pertains to Bridgefield's new quota share reinsurance agreements discussed in
Note 2 to the accompanying condensed consolidated financial statements. As a
result of the quota share reinsurance transactions, the losses and LAE were
reduced by $15.0 million and $30.5 million during the quarter ended and
six-months ended September 30, 1997, respectively. The quota share ceded losses
for the three months ended September 30, 1996 was $0.8 million.
OTHER UNDERWRITING, GENERAL, AND ADMINISTRATIVE EXPENSES. For the
quarter ended September 30, 1997, other underwriting, general and administrative
expenses declined $9.0 million compared to the same quarter of 1996. During the
six-months ended September 30, 1997, these expenses declined $16.3 million, or
53%, from that of the six-months ended September 30, 1996. As explained in Note
2 to the accompanying condensed consolidated financial statements, Bridgefield
received a ceding commission relating to the quota share reinsurance agreements
entered into April 1, 1997. During the quarter ended and six-months ended
September 30, 1997, the insurance subsidiaries earned and recognized $9.0
million and $18.1 million, respectively, of such commission, which was recorded
as a reduction to other underwriting, general, and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
The insurance subsidiaries' primary sources of cash flows are from premiums
earned, investment income and the proceeds from the sale or maturity of invested
assets. Their primary cash requirements include the purchase of investment
securities and the payment of claims, agent commissions, reinsurance premiums
and management fees to the administrative subsidiaries. The administrative
subsidiaries' primary source of cash flow is service fees generated from the
insurance subsidiaries and other unaffiliated clients. The cash requirements of
the administrative subsidiaries include primarily the payment of salaries,
employee benefits, debt obligations and other operating expenses.
The Company's cash and cash equivalents of $6.5 million at September 30, 1997
increased $2.9 million from $3.6 million at March 31, 1997. Approximately $57.7
million of net proceeds were generated by Summit's issuance of its common stock
through the subscription and public offerings referenced in Note 1 to the
accompanying condensed consolidated financial statements. During the six months
ended September 30, 1997, net cash of $12.1 million was utilized in operations
primarily as a result of the aforementioned quota share reinsurance
transactions. Further, cash of $35.1 million was utilized for net purchases of
additional investments, and $7.6 million was used to fund payments on the
Company's note payable.
As further explained in Note 3 to the accompanying condensed consolidated
financial statements, the Company has a revolving credit agreement with a
national banking association under which up to $5.0 million presently may be
borrowed at an interest rate equal to the prime lending rate plus 1% (9.5% at
September 30, 1997). As of June 30, 1997, there were no borrowings against this
revolving line of credit.
At September 30, 1997, the Company's shareholders' equity equaled 16.6% of total
assets compared to 5.8% at March 31, 1997.
7
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As described in the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1997, the insurance subsidiaries are subject to state insurance
laws and regulations that limit the amount of dividends or distributions that
may be paid by an insurance company to its shareholders. In addition, conditions
imposed by the Florida DOI in connection with ESIF's conversion require that all
dividends or distributions by the insurance subsidiaries be approved by the
Florida DOI in advance. As a consequence of these legal restrictions and other
business considerations, the amount of dividends that may be paid by the
insurance subsidiaries to Summit may be limited, which may in turn limit the
amount of cash available to Summit for servicing its debt and other purposes.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of common stockholders of Summit Holding Southeast, Inc. was
held October 15, 1997, at which time the following matters were brought before
and voted upon by the stockholders.
1. The election of directors to serve until the year 2000 annual meeting
of stockholders. Duly elected were William B. Bull, John A. Gray and
Thomas S. Petcoff.
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
5,139,481 0 5,300
</TABLE>
2. The appointment of the firm of Ernst & Young, LLP, independent public
accountants, as auditors of the company for the fiscal year ending
December 31, 1997 was ratified and approved.
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
5,142,037 1,500 1,244
</TABLE>
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.5 Summit Holding Southeast, Inc. Retirement
Plan
11 Computation of Earnings Per Share
27 Financial Data Schedule (for SEC use only)
</TABLE>
(b) Reports on the Form 8-K. During the quarter ended September
30, 1997, the company filed one current report on Form 8-K
(dated August 20, 1997). It contained:
(a) the Board action to change the Registrant's fiscal year
end from March 31, to December 31.
8
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SIGNATURES
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 thereunto duly authorized.
Summit Holding Southeast, Inc.
Date: November 13, 1997 By: /s/ Russell L. Wall
----------------------------
Russell L. Wall,
Vice President of Finance,
Chief Financial Officer
(Principal Financial and
Accounting Officer and Duly
Authorized Officer)
9
<PAGE> 1
EXHIBIT 10.5
SUMMIT HOLDING SOUTHEAST, INC.
RETIREMENT PLAN
AMENDED AND RESTATED
EFFECTIVE SEPTEMBER 1, 1997
<PAGE> 2
SUMMIT HOLDING SOUTHEAST, INC.
RETIREMENT PLAN
AMENDED AND RESTATED
EFFECTIVE SEPTEMBER 1, 1997
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 -- INTRODUCTION ............................................................... 1
1.01 Establishment of Plan; Background ..................................... 1
1.02 Purpose ............................................................... 2
1.03 Plan Governs Distribution of Benefits ................................. 2
ARTICLE 2 -- DEFINITIONS................................................................. 3
Account .................................................................... 3
Act or ERISA ............................................................... 3
Adjustment ................................................................. 3
Affiliate .................................................................. 3
Affiliated Sponsor ......................................................... 3
Annuity Starting Date ...................................................... 3
Authorized Leave of Absence ................................................ 3
Beneficiary ................................................................ 4
Board ...................................................................... 4
Break in Service ........................................................... 4
Code ....................................................................... 5
Committee .................................................................. 5
Company .................................................................... 5
Company Stock .............................................................. 5
Company Stock Fund ......................................................... 5
Compensation ............................................................... 5
Credited Service ........................................................... 6
Distribution ............................................................... 7
Earnings ................................................................... 7
Effective Date ............................................................. 7
Eligible Employee .......................................................... 7
Employee ................................................................... 7
Employee Contributions ..................................................... 7
Employer ................................................................... 7
Employer Contributions ..................................................... 7
Employer Matching Contribution Account ..................................... 7
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
Employer Matching Contributions ............................................ 8
Employment ................................................................. 8
Employment Commencement Date ............................................... 8
Entry Date ................................................................. 8
Fiduciary .................................................................. 8
Forfeiture ................................................................. 8
Former Participant ......................................................... 8
Fund ....................................................................... 8
Highly Compensated Employee ................................................ 8
Hour of Service ............................................................ 8
Investment Fund ............................................................ 9
Maternity or Paternity Leave ............................................... 9
Ninety-Day Period of Continuous Employment ................................. 10
Non-highly Compensated Employee ............................................ 10
Normal Retirement Date ..................................................... 10
One-Year Break in Service .................................................. 10
Participant ................................................................ 10
Period of Eligibility Service .............................................. 10
Permanent Disability ....................................................... 10
Plan ....................................................................... 10
Plan Administrator or Administrator ........................................ 10
Plan Year .................................................................. 10
Pre-Tax Contribution Account ............................................... 10
Pre-Tax Contribution ....................................................... 11
Qualified .................................................................. 11
Qualified Nonelective Contribution Account ................................. 11
Qualified Nonelective Contribution ......................................... 11
Retirement ................................................................. 11
Spouse ..................................................................... 11
Stock Bonus Contribution Account ........................................... 11
Stock Bonus Contribution ................................................... 11
Termination Date ........................................................... 11
Treasury Regulation ........................................................ 12
Trust or Trust Agreement ................................................... 12
Trustee .................................................................... 12
Valuation Date ............................................................. 12
Voluntary After-Tax Contribution ........................................... 12
Voluntary After-Tax Contribution Account ................................... 12
Year of Eligibility Service ................................................ 12
Other Rules ................................................................ 12
ARTICLE 3 -- PARTICIPATION .......................................................... 14
3.01 Participation ......................................................... 14
3.02 Period of Eligibility Service ......................................... 15
</TABLE>
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3.03 Participation and Rehire .............................................. 16
3.04 Acquisitions .......................................................... 16
3.05 Not Contract for Employment ........................................... 16
3.06 Special Eligibility Rule for Stock Bonus Contribution ................. 16
ARTICLE 4 -- EMPLOYEE CONTRIBUTIONS; ROLLOVERS ...................................... 18
4.01 Employee Contributions ................................................ 18
4.02 Elections Regarding Employee Contributions ............................ 18
4.03 Change in Employee Contribution Percentage or Suspension
of Contribution ..................................................... 19
4.04 Deadline for Contributions and Allocation of Employee Contributions.... 20
4.05 Rollover Contribution ................................................. 20
ARTICLE 5 -- EMPLOYER CONTRIBUTIONS ................................................. 22
5.01 Employer Matching Contribution ........................................ 22
5.02 Stock Bonus Contributions ............................................. 22
5.03 Qualified Nonelective Contributions ................................... 22
5.04 Form and Timing of Contributions ...................................... 23
5.05 Forfeitures ........................................................... 23
ARTICLE 6 -- ACCOUNTS AND ALLOCATIONS ............................................... 24
6.01 Participant Accounts .................................................. 24
6.02 Allocation of Adjustments ............................................. 25
6.03 Plan Expenses ......................................................... 26
6.04 Investment Funds and Elections ........................................ 26
6.05 Errors ................................................................ 27
6.06 Valuation For Purposes of Distributions ............................... 27
ARTICLE 7 -- VESTING ............................................................... 28
7.01 Retirement ............................................................ 28
7.02 Permanent Disability .................................................. 28
7.03 Death ................................................................. 28
7.04 Other Termination Date ................................................ 28
7.05 Forfeitures ........................................................... 29
ARTICLE 8 -- DISTRIBUTIONS .......................................................... 31
8.01 Commencement of Distribution .......................................... 31
8.02 Method of Distribution ................................................ 32
8.03 Annuity Option for A&A Plan Benefits .................................. 32
8.04 Special Rules Applicable to Annuity Distributions ..................... 32
8.05 Death Benefits ........................................................ 33
8.06 Payment to Minors and Incapacitated Persons ........................... 33
</TABLE>
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8.07 Application for Benefits .............................................. 33
8.08 Special Distribution Rules ............................................ 34
8.09 Distributions Pursuant to Qualified Domestic Relations Orders ......... 34
8.10 Direct Rollovers ...................................................... 35
8.11 Participant Withdrawals After Age 59-1/2 .............................. 36
ARTICLE 9 -- IN-SERVICE WITHDRAWALS; LOANS .............................................. 37
9.01 Hardship Withdrawal of Account ........................................ 37
9.02 Definition of Hardship ................................................ 37
9.03 Maximum and Minimum Hardship Distribution ............................. 37
9.04 Procedure to Request Hardship ......................................... 39
9.05 Authority to Establish Loan Program ................................... 39
9.06 Eligibility for Loans ................................................. 39
9.07 Loan Amount ........................................................... 39
9.08 Maximum Number of Loans ............................................... 39
9.09 Assignment of Account ................................................. 40
9.10 Interest .............................................................. 40
9.11 Term of Loan .......................................................... 40
9.12 Level Amortization .................................................... 40
9.13 Directed Investment ................................................... 40
9.14 Other Requirements .................................................... 41
9.15 Distribution of Loan .................................................. 41
9.16 Suspension of Loan Repayments During Military Service ................. 41
9.17 Valuation for Purposes of In-Service Withdrawals or Loans ............. 41
9.18 Withdrawal from Voluntary After-Tax Contribution Account .............. 41
9.19 Withdrawal from Rollover Account ...................................... 42
9.20 Withdrawal from Employer Matching Contribution Account ................ 42
9.21 Other Rules for In-Service Distributions .............................. 42
ARTICLE 10 -- ADMINISTRATION OF THE PLAN................................................. 43
10.01 Named Fiduciaries .................................................... 43
10.02 Board of Directors ................................................... 43
10.03 Trustee .............................................................. 43
10.04 Committee ............................................................ 43
10.05 Standard of Fiduciary Duty ........................................... 46
10.06 Claims Procedure ..................................................... 46
10.07 Indemnification of Committee ......................................... 47
ARTICLE 11 -- AMENDMENT AND TERMINATION.................................................. 48
11.01 Right to Amend ....................................................... 48
11.02 Termination and Discontinuation of Contributions ..................... 48
11.03 IRS Approval of Termination .......................................... 49
</TABLE>
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ARTICLE 12 -- SPECIAL DISCRIMINATION RULES............................................... 50
12.01 Small Business Job Protection Act .................................... 50
12.02 Definitions .......................................................... 50
12.03 Limit on Pre-Tax Contributions ....................................... 53
12.04 Average Actual Deferral Percentage ................................... 55
12.05 Special Rules For Determining Average Actual Deferral Percentage ..... 56
12.06 Distribution of Excess ADP Deferrals ................................. 57
12.07 Average Actual Contribution Percentage ............................... 58
12.08 Special Rules For Determining Average Actual Contribution Percentages 59
12.09 Distribution of Excess ACP Contributions ............................. 59
12.10 Combined ACP and ADP Test ............................................ 61
12.11 Order of Applying Certain Sections of Article 12 ..................... 62
ARTICLE 13 -- HIGHLY COMPENSATED EMPLOYEES............................................... 63
13.01 In General ........................................................... 63
13.02 Highly Compensated Employees ......................................... 63
13.03 Former Highly Compensated Employee ................................... 63
13.04 Definitions .......................................................... 63
13.05 Other Methods Permissible ............................................ 65
ARTICLE 14 -- MAXIMUM BENEFITS........................................................... 66
14.01 General Rule ......................................................... 66
14.02 Combined Plan Limitation ............................................. 67
14.03 Definitions .......................................................... 68
ARTICLE 15 -- TOP HEAVY RULES ........................................................... 70
15.01 General .............................................................. 70
15.02 Definitions .......................................................... 70
15.03 Minimum Benefit ...................................................... 71
15.04 Combined Plan Limitation For Top Heavy Years ......................... 72
ARTICLE 16 -- MISCELLANEOUS.............................................................. 73
16.01 Headings ............................................................. 73
16.02 Action by Employer ................................................... 73
16.03 Spendthrift Clause ................................................... 73
16.04 Distributions Upon Special Occurrences ............................... 73
16.05 Discrimination ....................................................... 74
16.06 Release .............................................................. 74
16.07 Compliance with Applicable Laws ...................................... 74
16.08 Agent for Service of Process ......................................... 74
16.09 Merger ............................................................... 75
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16.10 Governing Law ........................................................ 75
16.11 Adoption of the Plan by an Affiliated Sponsor ........................ 75
16.12 Protected Benefits ................................................... 77
16.13 Location of Participant or Beneficiary Unknown ....................... 77
16.14 Qualified Military Service ........................................... 77
SCHEDULE A - AFFILIATED SPONSORS ........................................................ 79
SCHEDULE B - PREDECESSOR EMPLOYERS ...................................................... 80
SCHEDULE C - PRIOR EMPLOYER ACCOUNT ..................................................... 81
SCHEDULE D - SPECIAL RULES APPLICABLE TO ANNUITY DISTRIBUTIONS .......................... 82
</TABLE>
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SUMMIT HOLDING SOUTHEAST, INC.
RETIREMENT PLAN
AMENDED AND RESTATED SEPTEMBER 1, 1997
ARTICLE 1
INTRODUCTION
1.01 Establishment of Plan; Background.
(a) Effective May 1, 1992, Summit Consulting, Inc. adopted the
Summit Consulting, Inc. Retirement Plan (the "Prior Plan").
The Prior Plan was amended from time to time and at all times
was maintained as a plan meeting the requirements of Sections
401(a) and 401(k) of the Internal Revenue Code of 1986, as
amended, and of the Employee Retirement Income Security Act of
1974.
(b) Summit Consulting, Inc., was a 100% subsidiary of Summit
Holding Corporation and Summit Holding Corporation was owned
by Employers Self Insurers Fund, a Florida group
self-insurance fund ("ESIF"). ESIF entered into an Amended
Plan of Conversion and Recapitalization approved by the
Florida Department of Insurance on November 15, 1996, by
ESIF's Board of Trustees on April 15, 1997 and by ESIF's
eligible members on May 9, 1997 (the "Plan of Conversion"),
pursuant to which, among other things, ESIF was converted into
a stock insurance company (the "Conversion"), and all of
ESIF's common stock was owned by Summit Holding Southeast,
Inc., a Florida corporation ("SHSI"). Following the Plan of
Conversion, Summit Consulting, Inc. remained a 100% subsidiary
of Summit Holding Corporation, but Summit Holding Corporation
became a 100% subsidiary of SHSI. Furthermore, effective as of
the date of the Conversion, Summit Consulting, Inc.
transferred sponsorship of the Prior Plan to SHSI (but Summit
Consulting, Inc. continued to participate in the Prior Plan).
Therefore, the amendment and restatement of this Plan is made
by Summit Holding Southeast, Inc.
(c) Effective September 1, 1997, the Prior Plan is continued in an
amended and restated form as set forth in its entirety in this
document (the "Plan"). Notwithstanding this general effective
date, certain provisions of this Plan (as set forth in this
document) shall have effective dates earlier than September 1,
1997.
<PAGE> 9
1.02 Purpose.
Summit Holding Southeast, Inc. intends to operate the Summit Holding
Southeast, Inc. Retirement Plan for the purpose of enabling Eligible
Employees of the Employer and their Beneficiaries to accumulate funds
to provide for their retirement income requirements. The Plan is
intended to qualify, and the Trust established pursuant to the related
Trust Agreement is intended to be exempt from federal income tax, under
the pertinent provisions of the Internal Revenue Code of 1986, as
amended, and any successor Federal Income Tax statute of the same or
similar effect.
1.03 Plan Governs Distribution of Benefits.
The distribution of benefits for all Participants (whether employed by
the Employer before or after the Effective Date) shall be governed by
the provisions of this Plan. Nevertheless, early retirement benefits,
retirement-type subsidies, or optional forms of benefit protected under
Code Section 411(d)(6) ("Protected Benefits") shall not be reduced or
eliminated with respect to benefits accrued under such Protected
Benefits unless such reduction or elimination is permitted under the
Code, Treasury Regulations, authority issued by the Internal Revenue
Service or judicial authority.
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<PAGE> 10
ARTICLE 2
DEFINITIONS
Certain terms of this Plan have defined meanings which are set forth in this
Article and which shall govern unless the context in which they are used clearly
indicates that some other meaning is intended.
Account shall mean the Account established and maintained by the Committee or
Trustee for each Participant or their Beneficiaries to which shall be allocated
each Participant's interest in the Fund. Each Account shall be comprised of the
sub-accounts described in Section 6.01.
Act or ERISA shall mean Public Law No. 93-406, the Employee Retirement Income
Security Act of 1974, as the same may be amended from time to time.
Adjustment shall mean, for any Valuation Date, the aggregate earnings, realized
or unrealized appreciation, losses, expenses, and realized or unrealized
depreciation of the Fund since the immediately preceding Valuation Date. The
determination of the adjustment shall be made by the Trustee and shall be final
and binding.
Affiliate shall mean the Company and any corporation which is a member of a
controlled group of corporations (as defined in Code Section 414(b)) which
includes the Company; any trade or business which is under common control (as
defined in Code Section 414(c)) with the Company; any organization which is a
member of an affiliated service group (as defined in Code Section 414(m)) which
includes the Company; and any other entity required to be aggregated with the
Company pursuant to regulations under Code Section 414(o).
Affiliated Sponsor shall mean any corporation and any other entity that wishes
to adopt this Plan; provided, however, that any such entity described in this
paragraph must be designated by the Committee as an Affiliated Sponsor under the
Plan. See Section 16.11 for provisions relating to an Affiliated Sponsor's
adoption of the Plan. All Affiliated Sponsors, groups of employees designated as
participating in the Plan by such Affiliated Sponsors (if not all employees),
and the effective date of a company's designation as an Affiliated Sponsor shall
be specified in Schedule A.
Annuity Starting Date shall mean the first day of the first period for which an
account is payable as an annuity or, in the case of a benefit not payable in the
form of an annuity, the first day on which all events have occurred which
entitle the Participant to such benefit.
Authorized Leave of Absence shall mean any temporary layoff or any absence
authorized by the Employer under the Employer's standard personnel practices
provided that all
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<PAGE> 11
persons under similar circumstances must be treated alike in the granting of
such Authorized Leaves of Absence and provided further that the Participant
returns within the period of authorized absence. An absence due to service in
the Armed Forces of the United States shall be considered an Authorized Leave of
Absence to the extent required by federal law.
Beneficiary.
(a) Unmarried Participants. For unmarried Participants, any
individual(s), trust(s), estate(s), partnership(s),
corporation(s) or other entity or entities designated by the
Participant in accordance with procedures established by the
Committee to receive any distribution to which the Participant
is entitled under the Plan in the event of the Participant's
death. The Committee may require certification by a
Participant in any form it deems appropriate of the
Participant's marital status prior to accepting or honoring
any Beneficiary designation. Any Beneficiary designation shall
be void if the Participant revokes the designation or marries.
Any Beneficiary designation shall be void to the extent it
conflicts with the terms of a qualified domestic relations
order.
If an unmarried Participant fails to designate a Beneficiary
or if the designated Beneficiary fails to survive the
Participant and the Participant has not designated a
contingent Beneficiary, the Beneficiary shall be the surviving
descendants of the Participant (who shall take per stirpes)
and if there are no surviving descendants, the Beneficiary
shall be the Participant's estate. For the purposes of the
foregoing sentence, the term "descendants" shall include any
persons adopted by a Participant or by any of his descendants.
(b) Married Participants. A married Participant's Beneficiary
shall be his Spouse at the time of his death unless the
Participant has designated a non-spouse Beneficiary (or
Beneficiaries) with the written consent of his Spouse given in
the presence of a notary public on a form provided by the
Committee, or unless the terms of a qualified domestic
relations order require payment to a non-spouse Beneficiary. A
married Participant's designation of a non-spouse Beneficiary
in accordance with the preceding sentence shall remain valid
until revoked by the Participant or until the Participant
marries a Spouse who has not consented to a designation in
accordance with the preceding sentence.
For the purposes of this Section, revocation of prior Beneficiary designations
will occur when a Participant (i) files a valid designation with the Committee;
or (ii) files a signed statement with the Committee evidencing his intent to
revoke any prior designations.
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<PAGE> 12
Board shall mean the Board of Directors of the Company.
Break in Service shall occur under the following circumstances:
(i) The Eligible Employee ceases Employment due to discharge,
quit, retirement or death and does not return to Employment
for five or more consecutive years following such Termination
Date.
(ii) The Employee ceases Employment for any reason other than for
those reasons described in subparagraph (i) above or
subparagraph (iii) below and does not return to Employment for
six or more consecutive years following such Termination Date.
(iii) The Employee ceases Employment on account of Maternity or
Paternity Leave and does not return to Employment for seven or
more consecutive years following such Termination Date.
Code shall mean the Internal Revenue Code of l986, as amended. A reference to a
specific provision of the Code shall include such provision and any applicable
Treasury Regulation pertaining thereto.
Committee shall mean the Committee appointed by the Board under Article 10 to
administer the Plan. This term is interchangeable with "Plan Administrator."
Company shall mean Summit Holding Southeast, Inc. and its successors and assigns
which adopt this Plan.
Company Stock shall mean the voting common stock of the Company. The Company
Stock is intended to constitute "Qualifying Employer Securities" as defined in
ERISA Section 407(d)(5). It is hereby expressly provided that the Plan may
acquire and hold Qualifying Employer Securities.
Company Stock Fund shall mean the portion of a Participant's Account which is
invested in Company Stock as described in Section 6.04(e).
Compensation.
(a) Compensation shall mean the an Eligible Employee's base pay
and overtime earned after the Eligible Employee became a
Participant in the Plan. Accordingly, Compensation shall
exclude bonuses, commissions, the taxable value of any
qualified or non-qualified stock option, reimbursements or
other expense allowances, fringe benefits (cash and non-cash),
moving expenses, deferred compensation and welfare benefits.
Compensation shall include,
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<PAGE> 13
however, Pre-Tax Contributions under this Plan and salary
reduction pre-tax contributions to a Section 125 Plan
maintained by the Employer
(b) The annual Compensation of each employee taken into account
under the Plan shall not exceed the limitations of Code
Section 401(a)(17) in effect as of the beginning of the Plan
Year (e.g., $160,000 in 1997).
(c) Prior to January 1, 1997, Compensation of certain related
family members were aggregated as required by Code Section
414(q) and Code Section 401(a)(17). Effective January 1, 1997,
aggregation of Compensation among certain family members is
not longer required and is not applicable under the Plan.
Credited Service shall mean the number of years of service as an Employee of
Employer measured in accordance with the following rules:
(a) Except as provided below, an Employee shall receive Credited
Service for the elapsed time of his Employment from the date
on which the Employee first performs an Hour of Service for
the Employer to his Termination Date. If a Participant earns
Credited Service during two or more periods of Employment
(which are not otherwise disregarded), all such periods of
Credited Service shall be aggregated on the basis that 12
months of Credited Service equals one year of Credited
Service. Any Credited Service less than a whole year shall be
disregarded.
(b) Break in Service. Credited Service shall not include any
period of Employment which precedes a Break in Service if as
of the first day of the Break in Service, the Employee is not
vested in any portion of his Account.
(c) Employment with Affiliated Sponsors; Predecessor Businesses.
Credited Service shall not include any period of Employment
with any Affiliated Sponsor prior to its designation as an
Affiliated Sponsor or any period of Employment with a
predecessor business prior to or its acquisition by Employer
except to the extent provided in Schedule A or B and except as
provided in paragraphs (a) and (b) above.
(d) Military Service. Credited Service shall not include any
period of service in the military; except to the extent such
service is required to be credited under applicable federal
law.
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<PAGE> 14
(e) Employment with Affiliates. An Employee's service with an
Affiliate shall be considered Employment with the Employer.
(f) Double Counting Prohibited. Hours of Service earned under
paragraphs (a) through (e) above shall be counted only once.
Accordingly, an Employee may earn only one year of Credited
Service during any Plan Year.
Distribution shall mean payment by the Trustee to or for the benefit of a
Participant, Spouse, Beneficiary or other person entitled to benefits as
provided in this Plan.
Earnings shall have that meaning as defined in Section 4.01.
Effective Date shall mean September 1, 1997, the date of the Plan's amendment
and restatement.
Eligible Employee shall mean, except for those Employees identified in the
following sentence, all Employees employed by the Employer. The following
Employees shall not be considered Eligible Employees:
(i) any employee included in a collective bargaining unit for
which a labor organization is recognized as collective
bargaining agent unless such employee has been designated by
the Committee as an "Eligible Employee" for the purposes of
this Plan;
(ii) any "leased employee," within the meaning of Code Section
414(n)(2), with respect to the Employer or deemed employee
under Code Section 414(o); or
(iii) any Employee who is a nonresident alien and who does not
receive earned income from the Employer which constitutes
income from sources within the United States.
Employee shall mean any person employed by or on Authorized Leave of Absence
from the Employer, and any person who is a "leased employee" within the meaning
of Code Section 414(n)(2) with respect to the Employer. However, if such "leased
employees" constitute less than 20 percent of the Employer's combined non-highly
compensated work force, within the meaning of Code Section 414(n)(1)(C)(ii), the
term "Employee" shall not include "leased employees" covered by a plan described
in Code Section 414(n)(5).
Employee Contributions shall mean Pre-Tax Contributions and Voluntary After-Tax
Contributions.
Employer shall mean the Company and any Affiliated Sponsor. All Affiliated
Sponsors are listed on Schedule A.
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<PAGE> 15
Employer Contributions shall mean Employer Matching Contributions, Stock Bonus
Contributions and/or Qualified Nonelective Contributions.
Employer Matching Contribution Account shall mean the portion of a Participant's
Account attributable to the Employer Matching Contributions, and the total of
the Adjustments which have been credited to or deducted from a Participant's
Account with respect to such Employer Matching Contributions.
Employer Matching Contributions shall have that meaning as defined in Section
5.01.
Employment shall mean the active service of an Employee with the Employer.
Employment Commencement Date shall mean the date on which the Employee first
performs an Hour of Service as defined in Department of Labor Regulations.
Entry Date shall mean the first day of each calendar month.
Fiduciary shall mean any party named as a Fiduciary in Article 10 of the Plan.
Any party shall be considered a Fiduciary of the Plan only to the extent of the
powers and duties specifically allocated to such party under the Plan.
Forfeiture. See Section 5.05.
Former Participant shall have that meaning as defined in Section 3.03(a).
Fund shall mean the money and other properties held and administered by the
Trustee in accordance with the Plan and Trust Agreement. If the Committee so
directs, multiple trust funds may be established under this Plan, which together
shall comprise the Fund hereunder.
Highly Compensated Employee shall have that meaning as defined in Article 13.
Hour of Service shall mean:
(a) Each hour for which an Employee is paid, or entitled to
payment, for performance of duties for an Employer or
Employers.
(b) Each hour for which an Employee is paid, or entitled to
payment, by an Employer or Employers, on account of a period
of time during which no duties are performed (irrespective of
whether the employment relationship is terminated) due to
vacation, holiday, illness, incapacity, layoff, jury duty,
military duty, or leave of absence; provided that in no
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<PAGE> 16
event, shall an Employee receive credit for more than 501
Hours of Service for any single continuous period of
non-working time.
(c) Each hour for which an Employee is absent from work by reason
of (i) the pregnancy of the Employee, (ii) the birth of a
child of the Employee, (iii) the placement of a child with the
Employee in connection with the adoption of the child by the
Employee, or (iv) the caring for a child referred to in
paragraphs (i) through (iii) immediately following birth or
placement. Hours credited under this paragraph shall be
credited at the rate of eight (8) hours per day, but shall
not, in the aggregate, exceed the number of hours required to
prevent the Employee from incurring a One-Year Break in
Service (a maximum of 501 hours) during the first computation
period in which a One-Year Break in Service would otherwise
occur; provided, however, that this rule shall apply only
during the Plan Year in which the absence from work begins and
the immediately following Plan Year. This paragraph (c) shall
apply only to Participants who begin their absence from work
for a reason specified in this paragraph (c) on or after the
Effective Date.
(d) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by an Employer or
Employers. These hours shall be credited to the Employee for
the computation period or period to which the award or
agreement pertains, rather than the computation period in
which the award, agreement, or payment is made.
(e) In lieu of the foregoing, an Employee who is not compensated
on an hourly basis (such as salary, commission or piecework
employees) shall be credited with 45 Hours of Service for each
week (or 10 Hours of Service for each day) in which such
Employee would be credited with Hours of Service in hourly
pay. However, this method of computing Hours of Service may
not be used for any Employee whose Hours of Service is
required to be counted and recorded by any Federal law, such
as the Fair Labor Standards Act. Any such method must yield an
equivalency of at least 1,000 hours per computation period.
The following rules shall apply in determining whether an Employee completes an
"Hour of Service":
1. The same hours shall not be credited under subparagraphs (a)
or (b) above, as the case may be, and subparagraph (c) above.
2. The rules relating to determining hours of service for reasons
other than the performance of duties and for crediting hours
of service to particular periods of employment shall be those
rules stated in Department of
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<PAGE> 17
Labor regulations Title 29, Chapter XXV, subchapter C, part
2530, Sections 200b2(b) and 200b2(c), respectively.
Investment Fund shall mean the separate funds under the Trust Fund which are
distinguished by their investment objectives.
Maternity or Paternity Leave shall mean the Employee's cessation of Employment
on account of (i) the pregnancy of the Employee, (ii) the birth of the
Employee's child, (iii) the child's placement with the Employee in connection
with the Employee's adoption of such child, or (iv) caring for a child described
in (i) through (iii) above immediately following the child's birth or placement.
This definition shall be interpreted in accordance with Code Sections
410(a)(5)(E) and 411(a)(6)(E).
Ninety-Day Period of Continuous Employment shall have that meaning as defined in
Section 3.02.
Non-highly Compensated Employee shall mean an Employee of the Employer who is
not a Highly Compensated Employee.
Normal Retirement Date shall mean the date a Participant attains age sixty-five
(65).
One-Year Break in Service shall mean any Plan Year in which an Employee accrues
500 or fewer Hours of Service.
Participant shall mean an Employee who becomes eligible to participate in the
Plan as provided in Article 3.
Period of Eligibility Service shall mean either a Ninety-Day Period of
Eligibility Service or a Year of Eligibility Service, as the case may be.
Permanent Disability shall mean a disability of a Participant within the meaning
of Code Section 72(m)(7), to the extent that the Participant is, or would be,
entitled to disability retirement benefits under the federal Social Security Act
or to the extent that the Participant is entitled to recover benefits under any
long term disability plan or policy maintained by the Employer. The
determination of whether or not a Permanent Disability exists shall be
determined by the Committee and shall be substantiated by competent medical
evidence.
Plan shall mean the Plan as set forth in this document together with any
subsequent amendments hereto. See Section 1.01.
Plan Administrator or Administrator shall mean the Committee appointed by the
Board pursuant to Article 10 to administer the Plan. All references in the Plan
to the Administrator shall be deemed to apply to the Committee and vice versa.
The Committee
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<PAGE> 18
so appointed is hereby designated as the "Administrator" of the Plan within the
meaning of Section 3(16) of the Act.
Plan Year shall be the calendar year.
Pre-Tax Contribution Account shall mean the portion of a Participant's Account
attributable to Pre-Tax Contributions, and the total of the Adjustments which
have been credited to or deducted from a Participant's Account with respect to
Pre-Tax Contributions.
Pre-Tax Contribution shall mean contributions made to the Plan during the Plan
Year by the Employer, at the election of the Participant, in lieu of cash
compensation and that are made pursuant to a salary reduction agreement. Such
contributions are nonforfeitable when made and distributable only as specified
in Article 8 or Article 9.
Qualified, as used in "qualified plan" or "qualified trust" shall mean a plan
and trust which are entitled to the tax benefits provided respectively by
Sections 401 and 501 of the Code, and related provisions of the Code.
Qualified Nonelective Contribution Account shall mean the portion of a
Participant's Account attributable to Qualified Nonelective Contributions, and
the total of the Adjustments which have been credited to or deducted from a
Participant's Account with respect to Qualified Nonelective Contributions.
Qualified Nonelective Contribution shall have that meaning as defined in Section
5.03.
Retirement shall mean the Termination Date of a Participant on or after his
Normal Retirement Date.
Spouse shall mean the person who was married to the Participant (in a civil or
religious ceremony recognized under the laws of the state where the marriage was
contracted) immediately prior to the date on which payments to the Participant
from the Plan begin. If the Participant dies prior to the commencement of
benefits, Spouse shall mean a person who is married to a Participant (as defined
in the immediately preceding sentence) on the date of the Participant's death. A
Participant shall not be considered married to another person as a result of any
common law marriage whether or not such common law marriage is recognized by
applicable state law.
Stock Bonus Contribution Account shall mean the portion of a Participant's
Account attributable to Stock Bonus Contributions, and the total of the
Adjustments which have been credited to or deducted from a Participant's Account
with respect to such Stock Bonus Contributions.
Stock Bonus Contribution shall have that meaning as defined in Section 5.02.
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<PAGE> 19
Termination Date shall mean the first to occur of the following events:
(a) Voluntary resignation from service of the Employer; or
(b) Discharge from the service of the Employer by the Employer; or
(c) Retirement; or
(d) Death; or
(e) The first anniversary of the date the Employee ceases
Employment for any reason not described above (e.g., vacation,
holiday, sickness, disability, leave of absence, or layoff).
If, however, an Employee terminates his Employment on account of an event
described in paragraphs (a) - (c) above and the Employee performs an Hour of
Service within twelve months following such termination of Employment (or such
lesser period as provided in Treasury Regulation Section
1.410(a)-7(d)(iii)(B)), the Employee shall be considered as having been in
active Employment during such period of absence for purposes of determining the
Employee's eligibility to participate in the Plan and for purposes of
determining the Employee's nonforfeitable interest in his Account Balance.
Treasury Regulation means regulations pertaining to certain Sections of the Code
as issued by the Secretary of the Treasury.
Trust or Trust Agreement shall refer to the Fund established pursuant to one or
more agreements of trust entered into between the Employer and one or more
trustees (sometimes referred to as sub-trusts), which governs the creation and
maintenance of the Fund, and all amendments thereto which may hereafter be made.
It is expressly intended that (if the Committee so directs) multiple sub-trusts
may be established under this Plan, which together shall comprise the Trust Fund
hereunder and that all of the sub-trusts shall be considered to be a single
trust fund for purposes of Section 1.414(1)- 1(b)(1) of the Treasury
Regulations.
Trustee shall mean any institution or individual(s) who shall accept the
appointment of the Committee to serve as Trustee pursuant to the Plan.
Valuation Date shall mean March 31, June 30, September 30 and December 31 of
each Plan Year or such other day as selected by the Committee.
Voluntary After-Tax Contribution shall have the meaning as defined in Section
4.01(b).
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<PAGE> 20
Voluntary After-Tax Contribution Account shall mean the portion of a
Participant's Account attributable to Voluntary After-Tax Contributions and the
total of the Adjustments which have been credited to or deducted from a
Participant's Account with respect to such Voluntary After-Tax Contributions.
Year of Eligibility Service shall have the meaning as defined in Section 3.02.
Other Rules. A defined term, such as "Retirement", will normally govern the
definitions of derivatives therefrom, such as "Retire", even though such
derivatives are not specifically defined and even if they are or are not
initially capitalized. The masculine gender, where appearing in the Plan, shall
be deemed to include the feminine gender, unless the context clearly indicates
to the contrary. Singular and plural nouns and pronouns shall be interchangeable
as the factual context may allow or require. The words "hereof", "herein",
"hereunder" and other similar compounds of the word "here" shall mean and refer
to the entire Plan and not to any particular provision or Section.
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<PAGE> 21
ARTICLE 3
PARTICIPATION
3.01 Participation.
(a) Eligible Employees on the Effective Date. Any Eligible
Employee who participated in the Prior Plan and who is in
Employment with an Employer on the Effective Date shall
continue their participation in this Plan as of the Effective
Date.
(b) Other Employees. An Eligible Employee who does not satisfy the
requirements of paragraph (a) above and who is normally
scheduled to work more than thirty (30) hours per week
("Full-Time Employee"), shall become a Participant in the Plan
in accordance with Section 3.01(c) below. An Eligible Employee
who does not satisfy the requirements of paragraph (a) above
and who is normally scheduled to work thirty (30) or fewer
hours per week ("Part-Time Employee"), shall become a
Participant in the Plan in accordance with Section 3.01(d)
below. See Section 3.04 below for special rules that apply to
new Employees following an acquisition.
(c) Full-Time Employees. An Eligible Employee who is a Full-Time
Employee shall become a Participant in the Plan on the Entry
Date immediately following the later of (i) the date on which
the Employee has completed a Ninety Day Period of Continuous
Employment or (ii) the date the Employee becomes a member of
the class of Eligible Employees.
(d) Part-Time Employees. An Eligible Employee who is a Part-Time
Employee shall become a Participant in the Plan for all
purposes of the Plan on the Entry Date next following the
later of (i) the date on which the Eligible Employee has both
completed one Year of Eligibility Service and attained age 21
or (ii) the date the Employee becomes a member of the class of
Eligible Employees.
(e) Break in Service. If an Eligible Employee either (i) is not
employed or (ii) is no longer an Eligible Employee on the
earliest Entry Date on or after which such Employee satisfied
the requirements described above, but returns to work or again
becomes an Eligible Employee before incurring a Break in
Service, such Eligible Employee shall commence participation
on the next Entry Date after the date such Employee returns to
work or again becomes an Eligible Employee. If the Employee
returns to work or again becomes an Eligible Employee after a
Break in
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<PAGE> 22
Service, such Employee must again satisfy the requirements of
Section 3.01.
(f) Enrollment. An Eligible Employee who becomes eligible to
participate in this Plan will be asked to follow certain
procedures to enroll in the Plan, and pursuant to which he
will designate Beneficiaries and may elect to make Pre-Tax
Contributions. However, an Eligible Employee's participation
in the Plan shall not be contingent upon completion of such
enrollment process.
3.02 Period of Eligibility Service.
(a) Ninety Day Period of Eligibility Service. A Full-Time Employee
shall complete a Ninety Day Period of Continuous Employment.
(b) Year of Eligibility Service. A Year of Eligibility Service is
determined under the 1,000 Hours of Service method.
Accordingly, a Part-Time Employee shall receive one Year of
Eligibility Service upon completing a twelve consecutive month
period of Employment during which the Part-Time Employee earns
at least 1,000 Hours of Service. The initial twelve month
period shall be the twelve consecutive month period commencing
on the Part-Time Employee's date of hire or rehire. If the
Part-Time Employee fails to complete 1,000 Hours of Service
during this 12 month period, the Part-Time Employee shall
receive a Year of Eligibility Service upon completing at least
1,000 Hours of Service during a Plan Year (commencing with the
Plan Year during which the Part-Time Employee's first
anniversary of his date of hire occurs).
(c) Break in Service. For purposes of this Article 3, an Employee
shall not receive credit for any period of Employment which
precedes a Break in Service if, at the time of the Break in
Service, the Employee had never been a Participant in the
Plan.
(d) Authorized Leave of Absence. A period during which an Employee
is on Authorized Leave of Absence shall not count towards the
Employee's completion of the Period of Eligibility Service nor
toward the Employee's Break in Service if such Employee
resumes Employment immediately after the end of such
Authorized Leave of Absence.
(e) Transfer of Employment from an Affiliate. If an Employee
transfers employment directly from an Affiliate (that does not
participate in this Plan) to an Employer, such Employee shall
receive credit toward the Employee's Period of Eligibility
Service under this Plan for such Employee's Hours of Service
with the Affiliate.
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<PAGE> 23
3.03 Participation and Rehire.
(a) Status as a Participant. A Participant's participation in the
Plan shall continue until the Participant's Termination Date.
On or after his Termination Date, the Employee shall be known
as a "Former Participant" and his benefits shall thereafter be
governed by the provisions of Article 8. The individual's
status as a Former Participant shall cease as of the date the
individual ceases to have any balance in his Account. If a
Participant ceases to be an Eligible Employee but does not
have a Termination Date, then such person shall continue to be
known as a "Participant," but shall not be eligible to make
Pre-Tax Contributions and shall not be eligible to receive
Employer Contributions.
(b) Rehire of Person who was a Participant in this Plan. An
Eligible Employee who was a Participant in this Plan at the
time of his Termination Date and who is subsequently rehired
by an Employer, shall be eligible to participate in this Plan
on the date of his rehire or, if later, on the date he becomes
an Eligible Employee.
3.04 Acquisitions.
If a group of persons becomes employed by an Employer (or any of its
subsidiaries or divisions) as a result of an acquisition of another
employer, the Committee shall determine whether and to what extent
employment with such prior employer shall be treated as eligibility
service for purposes of Section 3.02, the applicable Entry Date (or
special entry date) for such acquired employees, and any other terms
and conditions which apply to eligibility to participate in this Plan.
Such terms and conditions shall be set forth in Schedule A or Schedule
B to this Plan by action of the Committee. Except to the extent
required by law, employees of an acquired business which is not
identified in Schedule A or Schedule B shall be treated as having first
accrued an Hour of Service as of the date of the Employer's acquisition
of such business.
3.05 Not Contract for Employment.
Participation in the Plan shall not give any Employee the right to be
retained in the Employer's employ, nor shall any Employee, upon
dismissal from or voluntary termination of his employment, have any
right or interest in the Fund, except as herein provided.
3.06 Special Eligibility Rule for Stock Bonus Contribution.
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<PAGE> 24
See Section 1.01 for background regarding the Conversion and Plan of
Conversion. Each Eligible Employee in Employment as of the Conversion
(expected to be May 28, 1997) ("Conversion Date") shall become a
Participant in the Plan as of the Conversion Date regardless of whether
the Eligible Employee had completed a Period of Eligibility Service.
The purpose of this special eligibility rule is to allow all Eligible
Employees who are in Employment on the Conversion Date to share in the
one-time Stock Bonus Contribution (see Section 5.02). All Eligible
Employees hired after the Conversion Date shall not become a
Participant until such Eligible Employees have satisfied the
requirements of Section 3.01.
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<PAGE> 25
ARTICLE 4
EMPLOYEE CONTRIBUTIONS; ROLLOVERS
4.01 Employee Contributions.
Except during periods of suspension as set forth in Section 4.03(b), a
Participant may elect to make Pre-Tax Contributions, Voluntary
After-Tax Contributions, or both by means of payroll deduction, as
provided below.
(a) Pre-Tax Contributions. A Participant may contribute as a
Pre-Tax Contribution any whole percentage from 1% to 16% of
his Earnings during any Plan Year. It is expressly intended
that, to the extent allowable by law, Pre-Tax Contributions
shall not be included in the gross income of the Participant
for income tax purposes and shall be deemed contributions
under a cash or deferred arrangement pursuant to Code Section
401(k).
(b) Voluntary After-Tax Contributions. A Participant may elect to
make after-tax contributions to the Plan which are known as
Voluntary After-Tax Contributions. A Participant may
contribute as an After-Tax Contribution any whole percentage
of the Participant's Earnings during the Plan Year up to 16%
less the percentage of Earnings the Participant elects to
contribute to the Plan as a Pre-Tax Contribution. The
Committee may, at any time, suspend the making of further
Voluntary After-Tax Contributions or reduce the maximum
percentage of Earnings that may be contributed to the Plan as
a Voluntary After-Tax Contribution. A Participant may make a
Voluntary After-Tax Contribution without making a Pre-Tax
Contribution and vice versa. However, no Employer Matching
Contribution will be made on Voluntary After-Tax
Contributions.
(c) The Committee may establish guidelines and rules in order to
effectuate the provisions of this Section.
(d) Earnings. For this purpose, "Earnings" means Compensation, as
defined in paragraph (a) of the definition set forth in
Article 2, and by disregarding paragraph (b) of such
definition. Earnings prior to becoming a Participant are
ignored.
4.02 Elections Regarding Employee Contributions.
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<PAGE> 26
(a) Procedure for Making Elections. Elections by a Participant to
make Employee Contributions to the Plan shall be made in
writing on a form prescribed by the Committee (or by such
other means as determined by the Committee) and by designating
on such form the percentage of Earnings that will be
contributed as a Pre-Tax Contribution and/or Voluntary After-
Tax Contribution during each pay period. The election to make
Employee Contributions shall be effective on the first payroll
period of the calendar quarter that is at least 30 days after
the Employer receives such election form (or such smaller
number of days as determined by the Committee on a
nondiscriminatory basis). However, Participants who complete
an election form within 30 days of becoming a Participant may
commence to make Pre-Tax Contributions effective on the first
day of the Participant's normal pay period (or as soon as
reasonably practicable thereafter) after the Employer receives
such election form.
(b) Additional Limitations of Employee Contributions. Pre-Tax
Contributions and Voluntary After-Tax Contributions shall be
subject to the limitations described in Section 12.02 (maximum
dollar contribution limit), Section 12.03 (ADP
non-discrimination test) and Article 14 (Code Section 415
limit).
4.03 Change in Employee Contribution Percentage or Suspension of
Contributions.
(a) Change of Contribution Percentage. A Participant may increase
or decrease the percentage of his Earnings contributed as a
Pre-Tax Contribution or Voluntary After-Tax Contribution once
each calendar quarter by delivery of written notice to the
Committee (or by such other means as determined by the
Committee). In order to be effective, the Participant must
notify the Committee at least 30 days prior to the date that
the increase or decrease will become effective (or such lesser
number of days as determined by the Committee on a
nondiscriminatory basis).
(b) Suspension of Contributions. A Participant may suspend his
Pre-Tax Contributions and/or Voluntary After-Tax Contributions
at any time by properly completing a form prescribed by the
Committee. The suspension of Pre-Tax Contributions and/or
Voluntary After-Tax Contributions will be effective on the
first day of the Participant's normal payroll period that
begins 30 days after the Participant delivers the completed
form to the Committee. A Participant may resume making Pre-Tax
Contributions and/or Voluntary After-Tax Contributions on or
after the calendar quarter which is after the effective date
of such suspension of contributions and only after informing
the Committee in writing at least 30 days prior to the date on
which the Pre-Tax
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<PAGE> 27
Contributions and/or Voluntary After-Tax Contributions are to
resume. The Committee, on a nondiscriminatory basis, may
prescribe a lesser number of days on which the suspension or
resumption of Pre-Tax Contributions and/or Voluntary After-Tax
Contributions is to be effective. A Participant's Employee
Contributions shall automatically be suspended beginning on
the first payroll period that commences after the Participant
is not in receipt of Earnings, the Participant's layoff or the
Participant's Authorized Leave of Absence without pay. A
Participant may continue to make Voluntary After-Tax
Contributions even though the Participant has suspended the
contribution of Pre-Tax Contributions and vice versa.
(c) Other Rules.
(1) See Section 9.03 for circumstances under which a
Participant's Pre- Tax Contributions and Voluntary
After-Tax Contributions could be suspended for a
period of at least 12 months after such Participant
receives a hardship distribution.
(2) In order to satisfy the provisions of Article 12 and
Article 14, the Committee may from time to time
either temporarily suspend the Employee Contributions
of Participants or reduce the maximum permissible
Employee Contribution that may be made to the Plan by
Employees.
(3) Any reduction, increase, or suspension of Pre-Tax
Contributions described in this Article 4.03 shall be
made in such manner as the Committee may prescribe
from time to time consistent with the provisions of
this Article.
4.04 Deadline for Contributions and Allocation of Employee Contributions.
Employee Contributions shall be deducted by the Employer from the
Participant's Earnings and paid to the Trustee as promptly as possible
after the end of each regular pay period but in no event later than 15
business days after the end of the month in which such Employee
Contributions have been retained by the Employer.
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<PAGE> 28
4.05 Rollover Contribution.
(a) Without regard to any limitation on contributions set forth in
this Article, an Eligible Employee may, if the Committee
consents (based on non-discriminatory criteria), transfer to
the Trustee during any Plan Year cash, provided such cash:
(1) was received by the Participant from a Qualified Plan
maintained by a previous employer of the Participant
and qualifies as a rollover contribution within the
meaning of Code Section 402(c)(4);
(2) was received by the Participant from an individual
retirement account or individual retirement annuity
and qualifies as a rollover contribution within the
meaning of Code Section 408(d)(3)(A)(ii)
(b) Such cash shall be held by the Trustee in the Employee's
Rollover Account. All such amounts so held shall at all times
be fully vested and nonforfeitable. Such amounts shall be
distributed to the Eligible Employee after his Termination
Date in the manner provided in Article 8.
(c) Unless the Committee determines otherwise, the Company Stock
Fund will not be available for balances in the Rollover
Account.
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<PAGE> 29
ARTICLE 5
EMPLOYER CONTRIBUTIONS
5.01 Employer Matching Contribution.
(a) Amount and Allocation of Employer Matching Contribution. The
Employer Matching Contribution shall be equal to 75% of a
Participant's Pre-Tax Contributions made during each payroll
period. However, such Employer Matching Contribution will not
exceed six percent (6%) of the Participant's Compensation for
such payroll period (ignoring compensation earned before
becoming a Participant).
(b) Make-Up Contribution. If a Participant is unable to continue
contributing to the Plan because the Participant has reached
the maximum contribution limit of Section 12.03 (Code Section
402(g)), the Employer shall nevertheless make the Employer
Matching Contribution described in subparagraph (a) above on
behalf of such Participant, in the manner determined by the
Committee, until the Participant's Employer Matching
Contribution for the Plan Year is equal to 75% of a
Participant's Pre-Tax Contributions made during such Plan
Year. However, such Employer Matching Contribution will not
exceed six percent (6%) of the Participant's annual
Compensation (ignoring compensation earned before becoming a
Participant).
5.02 Stock Bonus Contributions.
(a) Allocation of 100 Shares of Company Stock. As soon as
practicable following the effective date of the Conversion (as
described below), each Participant shall receive an allocation
of 100 shares of Company Stock. Such stock shall be allocated
to the Participant's Stock Bonus Contribution Account.
(b) Conversion. See Section 1.01 for background regarding the
Conversion. In general, the Conversion referred to above is
the act of the Employers Self Insurers Fund, a Florida group
self-insurance fund, converting to a stock insurance company
on or about May 28, 1997.
5.03 Qualified Nonelective Contributions.
In the sole discretion of the Board, an additional Employer
Contribution may be made to the Plan which shall be known as a
"Qualified Nonelective Contribution". Such contribution shall be made
in order to satisfy the requirements of Article 12,
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<PAGE> 30
and shall be allocated to the Qualified Nonelective Contribution
Accounts of those Non-highly Compensated Employees selected by the
Committee at the time such Qualified Nonelective Contribution is made,
or as soon thereafter as possible.
5.04 Form and Timing of Contributions.
(a) Employer Contributions shall be made in cash or in Qualifying
Employer Securities. Employer Matching Contributions and Stock
Bonus Contributions shall be delivered to the Trustee on or
before the date prescribed by the Code for filing the
Employer's federal income tax return, including authorized
extensions. Qualified Nonelective Contributions shall be
delivered to the Trustee on or before the last day of the
twelfth month following the close of the Plan Year to which
the contribution relates.
(b) Except as provided in this Section 5.05, all Employer
Contributions shall be irrevocable, shall never inure to the
benefit of any Employer, shall be held for the exclusive
purpose of providing benefits to Participants and their
Beneficiaries (and contingently for defraying reasonable
expenses of administering the Plan), and shall be held and
distributed by the Trustees only in accordance with this Plan.
(c) Upon an Employer's request and to the extent permitted by the
Code and other applicable laws and regulations thereunder, a
contribution (either Employee or Employer Contribution) which
was made by a mistake in fact, or conditioned upon the initial
qualification of the Plan under Code Section 401(a) or upon
the deductibility of the contribution under Section 404 of the
Code shall be returned to the Employer within one year after
the payment of the contribution, the denial of the Plan's
initial qualification, or the disallowance of the deduction
(to the extent disallowed) whichever is applicable. All
contributions to this Plan are expressly conditioned on the
deductibility of such contributions under Code Section 404 and
on the initial qualification of the Plan.
5.05 Forfeitures.
Forfeitures shall first be applied to restore amounts previously
forfeited pursuant to Section 7.05(c). Thereafter any remaining
Forfeitures shall be applied to reduce Plan administrative expenses
and/or reduce Employer Contributions. See Section 7.05 to determine
when a forfeiture of a Participant's Account occurs.
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<PAGE> 31
ARTICLE 6
ACCOUNTS AND ALLOCATIONS
6.01 Participant Accounts.
(a) Individual Account Plan. This Plan is an "individual account
plan," as that term is used in ERISA. A separate Account shall
be maintained for each Participant, former Participant or
Beneficiary, so long as he has an interest in the Trust Fund.
(b) Sub-Accounts. Each Account shall be divided (as appropriate)
into the following parts and sub-parts:
(1) The Pre-Tax Contribution Account, which shall reflect
Pre-Tax Contributions contributed to this Plan and
any Adjustments thereto.
(2) The Stock Bonus Contribution Account, which shall
reflect Stock Bonus Contributions contributed to this
Plan and any Adjustments thereto.
(3) The Employer Matching Contribution Account, which
shall reflect Employer Matching Contributions
contributed to this Plan and any Adjustments thereto.
(4) The Rollover Account, which shall reflect the value
of all investments derived from the Participant's
Rollover Contributions under this Plan and any
Adjustments thereto.
(5) The Voluntary After-Tax Contribution Account, which
shall reflect Voluntary After-Tax Contributions
contributed to the Plan and any Adjustments thereto.
(6) The Qualified Nonelective Contribution Account, which
shall reflect Qualified Nonelective Contributions
contributed to this Plan and any Adjustments thereto.
The Committee may divide any Account into such additional sub-
portions as the Committee deems to be necessary or advisable
under the circumstances or to establish other accounts or
sub-accounts as needed. The Committee may delegate the
responsibility for the maintenance of any Account or
sub-account(s).
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<PAGE> 32
(c) Value of Account as of Valuation Date. As of each Valuation
Date, each Participant's Account shall equal:
(1) his total Account as determined on the immediately
preceding Valuation Date, plus
(2) his Employee Contributions added to his Account since
the immediately preceding Valuation Date, plus
(3) his Employer Contributions added to his Account since
the immediately preceding Valuation Date, plus
(4) his Rollover Contributions or amounts transferred to
this Plan from the trustee of another Qualified plan
and which were added to his Account since the
immediately preceding Valuation Date, minus
(5) his Distributions, if any, since the immediately
preceding Valuation Date, plus or minus
(6) his allocable share of Adjustments.
6.02 Allocation of Adjustments.
The Adjustment for each Investment Fund shall be calculated as of each
Valuation Date. The Adjustment for a given Investment Fund shall be
allocated to each Account invested in such Investment Fund in the
proportion that each such Account bears to the total of all such
Accounts. Such Valuation shall occur prior to the allocation of
Employer Contributions, by taking into account (or reducing the Account
by) 50% of the Participant's Employee Contributions, Rollover
Contributions, loan repayments and transfers to this Plan from the
trustee of another Qualified plan, by taking into account (or reducing
the Account for) all Distributions, and Forfeitures, and by taking into
account (or reducing the Account by) 50% of the Participant's new loans
which for any of the above occurred since the prior Valuation Date.
Any cash or stock dividend received on shares of Company Stock
allocated to a Participant's Company Stock Fund shall be allocated to
such Fund. The adjustment allocable to a Participant's directed
investment of his or her loan shall be the interest payments made by
the Participant with respect to such loan since the immediately
preceding Valuation Date.
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<PAGE> 33
6.03 Plan Expenses.
The Committee may direct that expenses attributable to general Plan
administration be allocated among the Accounts of all Participants in
proportion to their Account balances. Furthermore, to the extent
permitted by ERISA, expenses attributable to a specific Participant's
Account may be charged to that Participant's Account (for example, any
brokerage commission attributable to Company Stock held in the
Participant's Account that is purchased or sold at the direction of the
Participant).
6.04 Investment Funds and Elections.
(a) Election of Investment Funds. Each Participant shall direct,
following such procedures as may be specified by the
Committee, to have his Account allocated or reallocated among
the Investment Funds.
(b) Initial Investment Direction. A Participant's initial
investment election must allocate his entire Account in 25%
increments among the Investment Funds, as of the date of the
directive, and all subsequent contributions to each
sub-account for so long as the election remains in effect. An
Employee who fails to make a proper investment election by the
deadline established by the Committee for such purpose, shall
be deemed to have elected to allocate the non-directed portion
of his Account in the Investment Fund that, in the Committee's
determination, best preserves principal.
(c) Subsequent Elections. Investment elections will remain in
effect until changed by a new election. New elections may be
made by a Participant in 25% increments among the Investment
Funds once each calendar quarter. New elections may change
future allocations to the Participant's Account, may
reallocate between the Investment Funds any amounts previously
credited to the Participant's Account, or may leave the
allocation of such prior amounts unchanged.
(d) Investment Options. The Committee shall select such Investment
Funds as are deemed appropriate and shall notify affected
Participants of such Investment Funds. The Committee may
modify, eliminate or select new Investment Funds from time to
time and shall notify affected Participants of such changes
and solicit new investment elections, if appropriate.
(e) Company Stock Fund. The Investments Funds selected by the
Committee shall include the Company Stock Funds described in
(i) and (ii) below:
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<PAGE> 34
(i) Employee and Employer Contributions. Effective
October 1, 1997, each Participant may elect to invest
the Participant's Employee and Employer Contributions
in the Company Stock Fund.
(ii) Stock Bonus Contribution Account. All amounts held in
the Participant's Stock Bonus Contribution Account
shall be allocated to the Company Stock Fund.
6.05 Errors.
Where an error or omission is discovered in any Participant's Account,
the Committee shall make appropriate corrective adjustments as of the
end of the Plan Year in which the error or omission is discovered. If
it is not practical to correct the error retroactively, then the
Committee shall take such action in its sole discretion as may be
necessary to make such corrective adjustments, provided that any such
actions shall treat similarly situated Participants alike and shall not
discriminate in favor of Highly Compensated Employees.
6.06 Valuation For Purposes of Distributions.
(a) For the purposes of Article 8, each Participant's Account
shall be valued as of the Valuation Date immediately preceding
the Distribution of the Participant's Account.
(b) Notwithstanding paragraph (a) above and notwithstanding
Section 8.01, if the Committee in its discretion determines
that there has been a significant change in the market value
of the assets held in the Fund since the Valuation Date which
precedes the proposed date of distribution, the Committee in
its discretion and on a non-discriminatory basis may postpone
the Distribution until a reasonable time following the next
Valuation Date and shall use the value of the Account computed
as of the later Valuation Date in determining the amount of
the Distribution.
(c) No person entitled to a Distribution shall receive interest or
other earnings on the Account from the applicable Valuation
Date described in subsection (a) or subsection (b) above, to
the date of actual Distribution to such person.
(d) This Section 6.06 shall not apply to the valuation of Accounts
for purposes of in-service withdrawals. Instead, see Section
9.17.
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<PAGE> 35
ARTICLE 7
VESTING
7.01 Retirement.
A Participant who has a Termination Date on or after his Normal
Retirement Date shall be 100% vested in his Account. Such Account will
be distributed on the date and in the form specified in Article 8.
7.02 Permanent Disability.
A Participant who has a Termination Date on account of Permanent
Disability shall become 100% vested in his Account as of the date of
such Permanent Disability and shall be entitled to a Distribution of
his Account on the date and in the form specified in Article 8.
7.03 Death.
A Participant who has a Termination Date on account of death shall
become 100% vested in his Account. The Participant's Beneficiary shall
receive a Distribution of such Account on the date and in the form
specified in Article 8.
7.04 Other Termination Date.
(a) In General. Upon a Participant's Termination Date for any
reason other than Retirement, Permanent Disability or death,
the Participant shall be entitled to the vested portion of his
Account, which shall be distributed on the date and in the
form specified in Article 8.
(b) 100% Vesting in Employee Contributions and Certain
Sub-Accounts. A Participant shall always be one hundred
percent (100%) vested in his Pre-Tax Contribution Account,
Voluntary After-Tax Contribution Account, Qualified
Nonelective Contribution Account, and Rollover Account.
(c) Vesting Schedule in Employer Contributions. Any Participant
who terminates Employment for any reason other than
Retirement, Permanent Disability or death shall be vested in
his Stock Bonus Contribution Account and Employer Matching
Contribution Account pursuant to the vesting schedule set
forth below.
- 29 -
<PAGE> 36
<TABLE>
<CAPTION>
Years of Credited Service
as of Termination Date Vested Percentage
---------------------- -----------------
<S> <C>
Less than 3 Years 0%
3 Years 33-1/3%
4 Years 66-2/3%
5 Years 100%
</TABLE>
(d) Prior Employer Account. See Schedule C for the vesting
provisions applicable to a Participant's Prior Employer
Account.
(e) Forfeiture. That portion of the Participant's Account which is
not vested upon the Participant's Termination Date shall be
forfeited in accordance with Section 7.05.
7.05 Forfeitures.
(a) No Distribution of Account Prior to Break in Service. A
Participant who has a Termination Date but who does not
receive a Distribution of his vested Account prior to
incurring a Break in Service shall, upon incurring the Break
in Service, forfeit the non-vested portion of his Account. If
the terminated Participant resumes Employment with the
Employer prior to incurring a Break in Service, then the
Participant's entire Account, unreduced by any forfeiture,
shall become his beginning Account on the date he resumes
participation in the Plan.
(b) Distribution of Vested Account Prior to Break in Service. A
Participant who has a Termination Date and receives a
Distribution of his entire vested Account prior to incurring a
Break in Service, shall, upon such Distribution, forfeit the
non-vested portion of his Account. A Participant who is not
vested in any portion of his Account shall be deemed to have
received a Distribution of his entire vested account upon his
Termination Date and the Participant's non-vested Account
shall be immediately forfeited.
(c) Repayment of Account; Restoration of Non-Vested Account.
Except as provided below, a Participant who is re-hired by the
Employer shall have the right to repay to the Plan the portion
of the Participant's Account which was previously distributed
to him. In the event the Participant repays the entire
Distribution he received from the Plan, the Employer shall
restore the non-vested portion of the Participant's Account. A
Participant's Account shall first be restored, to the extent
possible, out of forfeitures under the Plan in the Plan Year
in which he was reemployed. To the extent such forfeitures are
insufficient to restore the Participant's
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<PAGE> 37
Account, restoration shall be made from Employer
Contributions. A Participant who was deemed to have received a
Distribution of his vested Account (see subsection (b) above)
shall be deemed to have repaid such vested Account if such
Participant is rehired before incurring a Break in Service.
(d) Restrictions of Repayment Account. Notwithstanding anything to
the contrary in this Plan, a Participant shall not have the
right to repay to the Plan the portion of his Account which
was previously distributed to him after any of the following
events: (i) the Participant incurs a Break in Service before
returning to Employment, (ii) the Participant fails to repay
the prior Distribution within five years after the Participant
is re-employed by the Employer, or (iii) the Participant
received a Distribution of his entire Account balance at the
time of such earlier Distribution.
(e) Allocation of Forfeitures. See Section 5.05 for the allocation
of forfeitures.
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<PAGE> 38
ARTICLE 8
DISTRIBUTIONS
8.01 Commencement of Distribution.
The Participant's Account shall be distributed at the earliest of the
following dates:
(a) Termination of Employment. If a Participant has a Termination
Date other than on account of death, the Participant's Account
will normally commence to be distributed no later than 90 days
following the end of the calendar quarter in which such
Participant requests a Distribution of his Account. Such
request shall be made on a form provided by the Committee. See
Section 8.01(c) for circumstances where the Participant's
consent to a Distribution is not required.
(b) Death. If a Participant has a Termination Date on account of
death, the Participant's Account shall normally be distributed
within 90 days after the Participant's death unless the
particular facts and circumstances require a longer waiting
period.
(c) Consent of Participant. A Participant's consent to a
Distribution of his Account shall not be required in the
circumstances described below, and the Committee shall direct
the Trustee to distribute the Participant's Account as
provided below:
(i) Account Less Than $3,500. If the Participant's vested
Account balance is less than or equal to $3,500
($5,000 on or after January 1, 1998) at the time of
the Distribution (as well as at the time of any Prior
Distribution), such Account will normally be
distributed in a lump sum no later than 90 days after
the end of the calendar quarter in which such
Termination Date occurred.
(ii) Age 70-1/2. If a distribution is required under
Section 8.08 (relating to mandatory distributions for
Participants age 70-1/2), the Participant's Account
will be distributed as provided in such Section.
(iii) Retirement After Age 65. If a Participant has
incurred a Termination Date and is age 65 or older,
the Plan shall begin distribution of the
Participant's Account no later than 60 days following
the end of the Plan Year in which the Participant
attains
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<PAGE> 39
age 65 or, if later, within 60 days following the end
of the Plan Year in which the Participant has a
Termination Date.
(d) In-Service Withdrawals. Hardship withdrawals (see Article 9)
and age 59-1/2 distribution (see Section 8.11) shall normally
commence no later than 90 days after such request is approved
by the Committee.
(e) Committee Direction to Trustee. The Committee shall issue
directions to the Trustee concerning the recipient and the
distribution date of benefits which are to be paid from the
Trust pursuant to the Plan.
(f) Committee Guidelines. The Committee may establish for
administrative purposes, uniform and nondiscriminatory
guidelines concerning the commencement of benefits.
8.02 Method of Distribution.
(a) Except as provided in Section 8.03, the sole method of
distribution of a Participant's Account (regardless of whether
such distribution is made by reason of withdrawal or
Termination Date) shall be payment in a single lump sum.
(c) Distributions shall be made in cash.
8.03 Annuity Option for A&A Plan Benefits.
Assets (and applicable earnings) held in this Plan that were originally
contributed to Thrift Plan for Employees of Alexander & Alexander
Services, Inc. and Subsidiaries and transferred to this Plan shall be
separately accounted for ("A&A Plan Benefits"). A Participant (or
Beneficiary, if applicable) may elect to receive a distribution of his
or her A&A Plan Benefits in a lump sum, in the form of a joint and
survivor annuity (with or without a period certain), or in a single
life annuity.
8.04 Special Rules Applicable to Annuity Distributions.
This Section 8.04 shall apply to a Participant only if and when the
Participant elects to receive an annuity distribution of the
Participant's A&A Plan Benefit. After a Participant elects to receive a
Distribution of his A&A Plan Benefit in the form of an annuity, the
Participant's form of distribution and Beneficiary designation shall be
governed by Schedule D to the extent inconsistent with this Article 8.
In addition, the notice requirement of Schedule D shall apply.
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<PAGE> 40
8.05 Death Benefits.
(a) Death Benefits If Section 8.04 Applies. If the provisions of
Section 8.04 apply to the Participant (i.e., the Participant
previously elected to receive a Distribution of his or her A&A
Plan Benefits in the form of an annuity) and the Participant
dies prior to his Annuity Starting Date, the Participant's
Account shall be distributed in accordance with the
Pre-Retirement Survivor Annuity rules set forth in Schedule D.
(b) Death Benefits if Section 8.04 Does Not Apply. If the
provisions of Section 8.04 does not apply (i.e., the
Participant has never elected to receive a Distribution of his
or her A&A Plan Benefits in the form of an annuity) and the
Participant dies, the Participant's vested Account shall be
distributed to the Participant's Beneficiary in a lump sum.
The Participant's Account will not be distributed in a joint
and survivor annuity or single life annuity.
8.06 Payment to Minors and Incapacitated Persons.
In the event that any amount is payable to a minor or to any person
who, in the judgment of the Committee, is incapable of making proper
disposition thereof, such payment shall be made for the benefit of such
minor or such person in any of the following ways as the Committee, in
its sole discretion, shall determine:
(a) By payment to the legal representative of such minor or such
person;
(b) By payment directly to such minor or such person;
(c) By payment in discharge of bills incurred by or for the
benefit of such minor or such person. The Trustee shall make
such payments as directed by the Committee without the
necessary intervention of any guardian or like fiduciary, and
without any obligation to require bond or to see to the
further application of such payment. Any payment so made shall
be in complete discharge of the Plan's obligation to the
Participant and his Beneficiaries.
8.07 Application for Benefits.
The Committee may require a Participant or Beneficiary to complete and
file with the Committee certain forms as a condition precedent to the
payment of benefits. The Committee may rely upon all such information
given to it, including the Participant's current mailing address. It is
the responsibility of all persons
- 34 -
<PAGE> 41
interested in distributions from the Trust Fund to keep the Committee
informed of their current mailing addresses.
8.08 Special Distribution Rules.
(a) To the extent that the distribution rules described in this
Section provide a limitation upon distribution rules stated
elsewhere in this Plan, the distribution rules stated in this
Section shall take precedence over such conflicting rules.
However, under no circumstances shall the rules stated in this
Section be deemed to provide distribution rights to
Participants or their Beneficiaries which are more expansive
or greater than the distribution rights stated elsewhere in
this Plan. For example, if the Plan requires distributions to
commence at age 65 for Participants who have terminated
Employment, distributions must commence at age 65 and may not
be delayed to age 70-1/2.
(b) In no event may the distribution of a Participant's Account
commence later than April 1 following the later of the
calendar year in which the Participant (i) attains age 70-1/2
or (ii) terminates employment. However, a Participant who is a
5 Percent Owner (as defined in Section 13.04) must receive a
distribution of his Account no later than April 1 following
the calendar year in which the Participant attains age 70-1/2
(collectively the "required beginning date").
(c) The entire interest of each Participant shall be distributed,
beginning not later than the required beginning date, in a
single lump sum or, if the provisions of Section 8.04 apply,
in the manner described in Schedule D.
(d) If a Participant dies before the required beginning date, the
Participant's vested Account must be distributed in a lump sum
within five years after the death of the Participant or, if
the provisions of Section 8.04 apply, in the manner described
in Schedule D.
(e) Notwithstanding anything to the contrary herein, distributions
under the Plan will comply with Treasury Regulations issued
under Code Section 401(a)(9) and any other provisions
reflecting Code Section 401(a)(9) as prescribed by the
Commissioner of the Internal Revenue Service.
8.09 Distributions Pursuant to Qualified Domestic Relations Orders.
Notwithstanding anything to the contrary in this Plan, a "qualified
domestic relations order", as defined in Code Section 414(p), may
provide that any amount to be distributed to an alternate payee may be
distributed immediately even though the Participant is not yet entitled
to a distribution under the Plan. The
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<PAGE> 42
intent of this Section is to provide for the distribution of benefits
to an alternate payee as permitted by Treasury Regulation
1.401(a)-13(g)(3).
8.10 Direct Rollovers.
(a) In General. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Distributee's election
under this Section, a Distributee may elect, at the time and
in the manner prescribed by the Plan Administrator, to have
any portion of an eligible rollover distribution paid directly
to an eligible retirement plan specified by the Distributee in
a direct rollover.
(b) Definitions.
Eligible Rollover Distribution. An Eligible Rollover
Distribution is any distribution of all or any portion of the
balance to the credit of the Distributee, except that an
Eligible Rollover Distribution does not include (i) 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, or for a specified
period of ten years or more; (ii) any distribution to the
extent such distribution is required under Section 401(a)(9)
of the Code; and (iii) the portion of any distribution that is
not includable in gross income (determined without regard to
the exclusion for net unrealized appreciation with respect to
employer securities).
Eligible Retirement Plan. An Eligible Retirement Plan is an
individual retirement account described in Section 408(a) of
the Code, an individual retirement annuity described in
Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust described in
Section 401(a) of the Code, that accepts the Distributee's
Eligible Rollover Distribution. However, in the case of an
Eligible Rollover Distribution to the surviving spouse, an
Eligible Retirement Plan is an individual retirement account
or individual retirement annuity.
Distributee. A Distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's
spouse or former spouse who is an alternate payee under a
qualified domestic relations order, as defined in Section
414(p) of the Code, are Distributees with regard to the
interest of the spouse or former spouse.
- 36 -
<PAGE> 43
Direct Rollover. A Direct Rollover is a payment by the Plan to
the Eligible Retirement Plan specified by the Distributee.
(c) Waiver of 30-day Notice. If a distribution is one to which
Sections 401(a)(11) and 417 of the Internal Revenue Code do
not apply, such distribution may commence less than 30 days
after the notice required under section 1.411(a)-11(c) of the
Income Tax Regulations is given, provided that:
(1) the Plan Administrator clearly informs the
Participant that the Participant has a right to a
period of at least 30 days after receiving the notice
to consider the decision of whether or not to elect a
distribution (and, if applicable, a particular
distribution option), and
(2) the Participant, after receiving the notice,
affirmatively elects a distribution.
8.11 Participant Withdrawals After Age 59-1/2.
At any time after a Participant in active Employment attains age
59-1/2, such Participant may elect to withdraw all or part of his or her vested
Account (including any earnings thereon). In no event shall a Participant be
permitted to repay the amount of his or her in-service withdrawal. If the
Participant withdraws only a portion of his or her vested Account, the Committee
shall determine (in a nondiscriminatory manner) the source of the Accounts and
Investment Funds from which the withdrawal shall be made. Participants must be
in active Employment to request an age 59-1/2 withdrawal. A Participant may
receive only one age 59-1/2 withdrawal each calendar year. A Participant who
receives an age 59-1/2 withdrawal is not suspended from continuing or commencing
to make (in accordance with the Plan) Pre-Tax contributions to the Plan.
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<PAGE> 44
ARTICLE 9
IN-SERVICE WITHDRAWALS; LOANS
9.01 Hardship Withdrawal of Account.
(a) In General. Any Participant may request the Committee to
distribute to him part or all of his vested Account (other
than amounts held in the Participant's Qualified Nonelective
Contribution Account and certain earnings on the Participant's
Account as provided below).
(b) No Distribution of Earnings. Income or gain that is allocated
to the Participant's Pre-Tax Contribution Account may not be
distributed in a hardship withdrawal.
9.02 Definition of Hardship.
Hardship shall mean an immediate and heavy financial need experienced
by reason of:
(a) Expenses of any accident to or sickness of such Participant,
his Spouse or his dependents or expenses necessary to provide
medical care for such Participant, his Spouse or his
dependents;
(b) Purchase of a primary residence for such Participant;
(c) Payment of tuition and related educational fees for the next
twelve months of post-secondary education for the Participant,
his Spouse, children or dependents;
(d) The need to prevent the eviction of the Participant from his
principal residence or foreclosure on the Participant's
principal residence; or
(e) Other safe harbor financial hardships as commanded by Treasury
Regulations or other regulatory or judicial authority in the
firm and approved by the Committee.
9.03 Maximum and Minimum Hardship Distribution.
A hardship distribution cannot exceed the amount required to meet the
immediate financial need created by the hardship (after taking into
account applicable federal, state, or local income taxes and penalties)
and not reasonably available from other resources of the Participant.
In order to ensure compliance with this
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<PAGE> 45
requirement, the Committee may require the Participant to satisfy any
or all of the provisions described below in (a), (b), or (c) below as a
condition precedent to the Participant receiving a hardship
distribution:
(a) No Other Sources Available. Certification by the Participant
on a form provided by the Committee for such purpose that the
financial need cannot be relieved (1) through reimbursement or
payment by insurance; (2) by reasonable liquidation of the
Participant's assets; (3) by ceasing Employee Contributions
under the Plan; (4) by other in-service distributions
(including loans and other in-service withdrawals) under the
Plan and under any other plan maintained by the Employer; or
(5) by borrowing from commercial lenders on reasonable
commercial terms.
(b) Receipt of all Distributions Available; Suspension of Future
Contributions. Receipt by the Participant of all distributions
that he is eligible to receive (including loans and other
in-service withdrawals) under this Plan and under any other
plan maintained by the Employer.
In addition, the Participant must agree to the following
limitations and restrictions:
(1) The Participant's Pre-Tax Contributions and Voluntary
After-Tax Contributions shall automatically be
suspended beginning on the first payroll period that
commences after such Participant requests and
receives a hardship distribution. Such Participant
may resume making Pre-Tax Contributions and/or
Voluntary After-Tax Contributions only on the first
day of a calendar month which is at least 12 months
after the effective date of such suspension and only
after informing the Committee in writing at least 30
days (or such lesser time as specified by the
Committee) prior to the date on which the Pre-Tax
Contributions and/or Voluntary After-Tax
Contributions are to resume.
(2) The maximum Pre-Tax Contribution the Participant may
make for the calendar year following his hardship
distribution shall be reduced by the amount of
Pre-Tax Contributions made by the Participant during
the calendar year in which he received his hardship
distribution.
(3) The Participant shall be prohibited under a legally
enforceable agreement from making an employee
contribution to this Plan and any other plan
maintained by the Employer for at least 12 months
after the receipt of the hardship distribution. For
this purpose, the phrase "any other plan" includes
all qualified and nonqualified
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<PAGE> 46
plans of deferred compensation, stock option plans
and stock purchase plans. It does not include a
health or welfare plan including one that is part of
a section 125 cafeteria plan.
(c) Other. Any other condition or method approved by the Internal
Revenue Service.
9.04 Procedure to Request Hardship.
The request to receive a hardship distribution shall be made on such
forms and following such procedures as the Committee may prescribe from
time to time. Under no circumstances shall the Committee permit a
Participant to repay to the Plan the amount of any withdrawal by a
Participant under this Section.
9.05 Authority to Establish Loan Program.
The Committee is authorized and directed to administer the loan
program.
9.06 Eligibility for Loans.
Loans shall be available to all Participants on a reasonably equivalent
basis. For the purposes of receiving a loan, the term "Participant"
shall include any Former Participant who is a "party in interest" as
defined in Section 3(14) of ERISA.
9.07 Loan Amount.
(a) Minimum Loan. No loan of less than $500 will be made.
(b) Maximum Loan. A loan to any Participant (determined
immediately after the origination of the loan) shall not
exceed the lesser of:
(1) Fifty percent (50%) of the Participant's vested
balance in his Account as of the Valuation Date with
respect to which the loan is processed; or
(2) $50,000, reduced by the excess (if any) of (A) the
highest outstanding balance of loans from the Plan
during the one-year period ending on the day before
the date on which such loan was made, over (B) the
outstanding loan balance of loans from the Plan on
the date on which the loan was made.
9.08 Maximum Number of Loans.
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<PAGE> 47
No more than one loan may be outstanding at any time. Furthermore, at
least ten days must elapse between the payoff of a loan and the request
for a second loan.
9.09 Assignment of Account.
Each loan shall be supported by the Participant's promissory note for
the amount of the loan, including interest, payable to the order of the
Trustee. In addition, each loan shall be supported by an assignment of
fifty percent (50%) of the Participant's right, title and interest in
and to his Account and shall be supported by any other reasonable
security required by the Trustee.
9.10 Interest.
Interest shall be charged on any such loan at a rate equivalent to the
prime rate charged by a commercial lender at the beginning of the
calendar quarter in which the loan is made plus one percent (1%).
9.11 Term of Loan.
The maximum repayment term of any non-home loan is sixty (60) months.
The maximum repayment term of any home loan is ten years. Except for
Former Participants described in Section 9.06, the term of the loan may
not extend beyond the Participant's Termination Date. The Committee
may, in its discretion, establish a shorter repayment term than the
maximum repayment term otherwise permitted under the Plan.
9.12 Level Amortization.
Each loan shall provide for level amortization with payments to be made
at such regular intervals as the Committee determines in its
discretion, but not less frequently than once every three months over
the term of the loan. Loans to Participants in active Employment shall
be repaid through payroll deductions and the Participant shall be
required to authorize such payroll deduction as a condition to
receiving the loan.
9.13 Directed Investment.
A Participant who requests a loan shall be deemed to have directed the
Committee to invest assets held in his Account by the amount of the
loan, and until such loan is repaid, such loan shall be considered a
directed investment of the Participant's Account hereunder. The Plan
monies which are used to fund the Participant loan shall be withdrawn
first from a Participant's Voluntary After-Tax Contribution Account and
second from a Participant's Investment Funds on a pro rata basis (other
than from the Company Stock Fund) according to the value of the
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<PAGE> 48
Investment Funds as of the Valuation Date coincident with or
immediately preceding the date such loan is made. Amounts will be
withdrawn from the Company Stock Fund only after all other Investment
Funds have been depleted. Principal and interest payments on the loan
will be allocated to the Participant's Investment Funds according to
the Participant's investment election at the time of the payment.
However, if the Participant does not have an investment election in
place at the time of repayment, the principal and interest payments
will be allocated to the Participant's Investment Funds on a pro rata
basis based on the Participant's most recent investment election at the
time of repayment.
9.14 Other Requirements.
The Committee may establish such additional guidelines and rules as it
deems necessary. Such guidelines and rules shall be set forth in the
loan application and the terms specified in such loan application are
hereby incorporated by reference in the Plan. The Committee may amend
or modify the loan application as it deems necessary to carry out the
provisions of this Article Nine.
9.15 Distribution of Loan.
Loan proceeds will be distributed as soon as practicable after the loan
is approved and after the Participant completes all documentation
necessary to make such loan.
9.16 Suspension of Loan Repayments During Military Service.
The Committee may in its discretion suspend a Participant's obligation
to make loan repayments as permitted under Section 414(u)(4) of the
Internal Revenue Code.
9.17 Valuation for Purposes of In-Service Withdrawals or Loans.
The Participant's Account for purposes of determining the amount of an
in-service withdrawal or loan shall be determined as of the Valuation
Date preceding the date the Committee approves the in-service
distribution or loan. However, if the Committee in its discretion
determines that there has been a significant change in the market value
of the assets held in the Fund since the Valuation Date which precedes
the proposed date of distribution, the Committee in its discretion and
on a non-discriminatory basis may postpone the in-service distribution
or loan until a reasonable time following the next Valuation Date and
shall use the value of the Account computed as of the later Valuation
Date in determining the amount of the distribution. Alternatively, the
Committee may implement such other measures as it deems appropriate,
including suspension of withdrawals or special valuations,
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<PAGE> 49
to insure that each Participant's Account receives an appropriate
allocation of income or loss.
9.18 Withdrawal from Voluntary After-Tax Contribution Account.
Any Participant may request the Committee to distribute to him from 25%
to 100% of his or her Voluntary After-Tax Contribution Account in 25%
increments. Upon receipt of an in-service withdrawal from the
Participant's Voluntary After-Tax Contribution Account, the
Participant may not make additional Voluntary After-Tax Contributions
to the Plan for six months from the date of such in- service
withdrawal.
9.19 Withdrawal from Rollover Account.
Any Participant may request the Committee to distribute to him from 25%
to 100% of his or her Rollover Account in 25% increments. Upon receipt
of an in- service withdrawal from the Participant's Rollover Account,
the Participant may not make additional Pre-Tax Contributions or
Voluntary After-Tax Contributions to the Plan for six months from the
date of such in-service withdrawal.
9.20 Withdrawal from Employer Matching Contribution Account.
Once every twenty-four month period, any Participant may request the
Committee to distribute to him from 25% to 100% of his or her vested
interest in the Participant's Employer Matching Contribution Account in
25% increments. Upon receipt of an in-service withdrawal from the
Participant's Employer Matching Contribution Account, the Participant
may not make additional Pre-Tax Contributions or Voluntary After-Tax
Contributions to the Plan for six months from the date of such
in-service withdrawal.
9.21 Other Rules for In-Service Distributions.
(a) All in-service distributions shall me made in the form of a
single lump sum cash distribution.
(b) If the Participant withdraws only a portion of a vested
Account, the Committee shall determine (in a nondiscriminatory
manner) the source of the Accounts and Investment Funds from
which the withdrawal shall be made (with amounts withdrawn
from the Company Stock Fund last).
(c) In no event shall a Participant be permitted to repay the
amount of his or her in-service withdrawal.
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<PAGE> 50
(d) The request to receive an in-service distribution shall be
made on such forms and following such procedures as the
Committee may prescribe from time to time.
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<PAGE> 51
ARTICLE 10
ADMINISTRATION OF THE PLAN
10.01 Named Fiduciaries.
The following parties are named as Fiduciaries of the Plan and shall
have the authority to control and manage the operation and
administration of the Plan:
(i) The Company;
(ii) The Board;
(iii) The Trustee;
(iv) The Committee.
The Fiduciaries named above shall have only the powers and duties
expressly allocated to them in the Plan and in the Trust Agreement and
shall have no other powers and duties in respect of the Plan; provided,
however, that if a power or responsibility is not expressly allocated
to a specific named fiduciary, the power or responsibility shall be
that of the Company. No Fiduciary shall have any liability for, or
responsibility to inquire into, the acts and omissions of any other
Fiduciary in the exercise of powers or the discharge of
responsibilities assigned to such other Fiduciary under this Plan or
the Trust Agreement.
10.02 Board of Directors.
The Board shall have the power to appoint and remove the members of the
Committee. The Board shall have no other responsibilities with respect
to the Plan.
10.03 Trustee.
The Trustee shall exercise all of the powers and duties assigned to the
Trustee as set forth in the Trust Agreement. The Trustee shall have no
other responsibilities with respect to the Plan.
10.04 Committee.
(a) A Committee of one or more individuals shall be appointed by
and serve at the pleasure of the Board to administer the Plan.
Any Participant, officer, or director of the Employer shall be
eligible to be appointed a member of the Committee and all
members shall serve as such without
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<PAGE> 52
compensation. Upon termination of his employment with the
Employer, or upon ceasing to be an officer or director, if not
an employee, he shall cease to be a member of the Committee.
The Board shall have the right to remove any member of the
Committee at any time, with or without cause. A member may
resign at any time by written notice to the Committee and the
Board. If a vacancy in the Committee should occur, a successor
shall be appointed by the Board. The Committee shall by
written notice keep the Trustee notified of current membership
of the Committee, its officers and agents. The Committee shall
furnish the Trustee a certified signature card for each member
of the Committee and for all purposes hereunder the Trustee
shall be conclusively entitled to rely upon such certified
signatures.
(b) The Board shall appoint a Chairman and a Secretary from among
the members of the Committee. All resolutions, determinations
and other actions shall be by a majority vote of all members
of the Committee. The Committee may appoint such agents, who
need not be members of the Committee, as it deems necessary
for the effective performance of its duties, and may delegate
to such agents such powers and duties, whether ministerial or
discretionary, as the Committee deems expedient or
appropriate. The compensation of such agents shall be fixed by
the Committee; provided, however, that in no event shall
compensation be paid if such payment violates the provisions
of Section 408 of the Act and is not exempted from such
prohibitions by Section 408 of the Act.
(c) The Committee shall have complete control of the
administration of the Plan with all powers necessary to enable
it to properly carry out the provisions of the Plan. In
addition to all implied powers and responsibilities necessary
to carry out the objectives of the Plan and to comply with the
requirements of the Act, the Committee shall have the
following specific powers and responsibilities:
(1) To construe the Plan and Trust Agreement and to
determine all questions arising in the
administration, interpretation and operation of the
Plan;
(2) To amend any or all of the provisions of the Plan and
to terminate the Plan in whole or in part pursuant to
the procedures provided hereunder;
(3) To decide all questions relating to the eligibility
of Employees to participate in the benefits of the
Plan and Trust Agreement;
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(4) To determine the benefits of the Plan to which any
Participant, Beneficiary or other person may be
entitled;
(5) To keep records of all acts and determinations of the
Committee, and to keep all such records, books of
accounts, data and other documents as may be
necessary for the proper administration of the Plan;
(6) To prepare and distribute to all Plan Participants
and Beneficiaries information concerning the Plan and
their rights under the Plan, including, but not
limited to, all information which is required to be
distributed by the Act, the regulations thereunder,
or by any other applicable law;
(7) To file with the Secretary of Labor such reports and
additional documents as may be required by the Act
and regulations issued thereunder, including, but not
limited to, summary plan description, modifications
and changes, annual reports, terminal reports and
supplementary reports;
(8) To file with the Secretary of the Treasury all
reports and information required to be filed by the
Internal Revenue Code, the Act and regulations issued
under each;
(9) To do all things necessary to operate and administer
the Plan in accordance with its provisions and in
compliance with applicable provisions of federal law;
and
(10) To appoint and remove the Trustee.
(d) To enable the Committee to perform its functions, the Employer
shall supply full and timely information of all matters
relating to the compensation and length of service of all
Participants, their retirement, death or other cause of , and
such other pertinent facts as the Committee may require. The
Committee shall advise the Trustee of such facts and issue to
the Trustee such instructions as may be required by the
Trustee in the administration of the Plan. The Committee and
the Employer shall be entitled to rely upon all certificates
and reports made by a Certified Public Accountant selected or
approved by the Employer. The Committee, the Employer and its
officers and the Trustee, shall be fully protected in respect
of any action suffered by them in good faith in reliance upon
the advice or opinion of any accountant or attorney, and all
action so taken or suffered shall be conclusive upon each of
them and upon all other persons interested in the Plan.
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10.05 Standard of Fiduciary Duty.
Any Fiduciary, or any person designated by a Fiduciary to carry out
fiduciary responsibilities with respect to the Plan, shall discharge
his duties solely in the interests of the Participants and
Beneficiaries for the exclusive purpose of providing them with benefits
and defraying the reasonable expenses of administering the Plan. Any
Fiduciary shall discharge his duties with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent man
acting in a like capacity and familiar with such matter would use in
the conduct of an enterprise of a like character and with like aims.
Any Fiduciary shall discharge his duties in accordance with the
documents and instruments governing the Plan insofar as such documents
and instruments are consistent with the provisions of the Act.
Notwithstanding any other provisions of the Plan, no Fiduciary shall be
authorized to engage in any transaction which is prohibited by Sections
408 and 2003(a) of the Act or Section 4975 of the Code in the
performance of its duties hereunder.
10.06 Claims Procedure.
Any Participant, Former Participant, Beneficiary, or Spouse or
authorized representative thereof (hereinafter referred to as
"Claimant"), may file a claim for benefits under the Plan by submitting
to the Committee a written statement describing the nature of the claim
and requesting a determination of its validity under the terms of the
Plan. Within sixty (60) days after the date such claim is received by
the Committee, it shall issue a ruling with respect to the claim.
If special circumstances require an extension of time for processing,
the Committee shall send the Claimant written notice of the extension
prior to the termination of the 60-day period. In no case, however,
shall the extension of time delay the Committee's decision on such
appeal request beyond one hundred twenty (120) days following receipt
of the actual request.
If the claim is wholly or partially denied, written notice shall be
furnished to the Claimant, which notice shall set forth in a manner
calculated to be understood by the Claimant:
(1) The specific reason or reasons for denial;
(2) Specific reference to pertinent Plan provisions on which the
denial is based;
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(3) A description of any additional material or information
necessary for the Claimant to perfect the claim and an
explanation of why such material or information is necessary;
and
(4) An explanation of the claims review procedures.
Any Claimant whose claim for benefits has been denied, may appeal such
denial by resubmitting to the Committee a written statement requesting
a further review of the decision within sixty (60) days of the date the
Claimant receives notice of such denial. Such statement shall set forth
the reasons supporting the claim, the reasons such claim should not
have been denied, and any other issues or comments which the Claimant
deems appropriate with respect to the claim.
If the Claimant shall request in writing, the Committee shall make
copies of the Plan documents pertinent to his claim available for
examination of the Claimant.
Within sixty (60) days after the request for further review is
received, the Committee shall review its determination of benefits and
the reasons therefor and notify the Claimant in writing of its final
decision.
If special circumstances require an extension of time for processing,
the Committee shall send the Claimant written notice of the extension
prior to the termination of the 60-day period. In no case, however,
shall the extension of time delay the Committee's decision on such
appeal request beyond one hundred twenty (120) days following receipt
of the actual request.
Such written notice shall include specific reasons for the decision,
written in a manner calculated to be understood by the Claimant, with
specific references to the pertinent Plan provisions on which the
decision is based. The Committee's decision of appeal may be reviewed
by the Board, which shall have the right to overrule the Committee.
10.07 Indemnification of Committee. To the extent permitted under the Act,
the Plan shall indemnify the Board and the Committee against any cost
or liability which they may incur in the course of administering the
Plan and executing the duties assigned pursuant to the Plan except for
costs or liabilities attributable to gross and intentional negligence.
The Employer shall indemnify the Committee and the members of the Board
against any personal liability or cost not provided for in the
preceding sentence which they may incur as a result of any act or
omission in relation to the Plan or its Participants except for costs
or liabilities attributable to gross and intentional negligence. The
Employer may purchase fiduciary liability insurance to insure its
obligation under this Section.
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ARTICLE 11
AMENDMENT AND TERMINATION
11.01 Right to Amend.
The Company intends for the Plan to be permanent so long as the
corporation exists; however, it reserves (through action of the
Committee) the right to modify, alter, or amend this Plan or the Trust
Agreement, from time to time, to any extent that it may deem advisable,
including, but not limited to any amendment deemed necessary to insure
the continued qualification of the Plan under Sections 40l(a) and
401(k) of the Code or to insure compliance with the Act; provided,
however, that the Company shall not have the authority to amend this
Agreement in any manner which will:
(a) Permit any part of the Fund (other than such part as is
required to pay taxes and administrative expenses) to be used
for or diverted to purposes other than for the exclusive
benefit of the Participants or their Beneficiaries;
(b) Cause or permit any portion of the funds to revert to or
become the property of the Employer;
(c) Change the duties, liabilities, or responsibilities of the
Trustee without its prior written consent.
See Section 16.11(c) regarding the power of an Affiliated Sponsor to
amend or terminate the Plan.
11.02 Termination and Discontinuance of Contributions.
The Company shall have the right at any time and for any reason to
terminate this Plan (hereinafter referred to as "Plan Termination").
Upon Plan Termination, the Committee shall direct the Trustee with
reference to the disposition of the Fund, after payment of any expenses
properly chargeable against the Fund. The Trustee shall distribute all
amounts held in Trust to the Participants and others entitled to
Distributions based on each Participant's Account balance in the Plan.
In the event that this Plan is partially terminated, then the
provisions of this Section 11.02 shall apply, but solely with respect
to the Employees affected by the partial termination. The termination
of sponsorship of the Plan by any Affiliated Sponsor shall not affect
the sponsorship of the Plan by the Company or any other Affiliated
Sponsor.
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11.03 IRS Approval of Termination.
Notwithstanding Section 11.02, the Trustee shall not be required to
make any Distribution from this Plan in the event of complete or
partial termination until the authorized officials of the Internal
Revenue Service shall have determined that there will be no liability
against the Trustee by reason of such Distribution.
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ARTICLE 12
SPECIAL DISCRIMINATION RULES
12.01 Small Business Job Protection Act.
Certain provisions of the Code Section 401(k) and 401(m) were modified
as part of the Small Business Job Protection Act. This Article is not
intended to serve as a formal election of the various testing
methodologies available following such modifications. Instead, such
elections will be made at the time the applicable testing is performed
or as otherwise required in subsequent IRS pronouncements.
12.02 Definitions.
Actual Contribution Percentage or ACP shall mean the ratio (expressed
as a percentage) of (i) the sum of the Employer Matching Contributions
and Voluntary After-Tax Contributions on behalf of the Participant for
the Plan Year and, to the extent permitted in Treasury Regulations and
elected by the Employer, the Participant's Qualified Elective Deferrals
and Qualified Nonelective Contributions to (ii) the Participant's
Compensation for the Plan Year. The Employer, on an annual basis, may
elect to include or not to include Qualified Elective Deferrals and
Qualified Nonelective Contributions in computing the ACP for a Plan
Year. An Employer may elect on an annual basis to count a Participant's
Employer Matching Contribution toward satisfying the required minimum
contribution under Section 15.03 (minimum contribution for Non-Key
Employees in a top-heavy plan) in lieu of including such contributions
in the ACP. If a Participant (as defined below) does not receive an
allocation of Employer Contributions for a Plan Year, such
Participant's ACP for the Plan Year shall be zero.
Actual Deferral Percentage or ADP shall mean the ratio (expressed as a
percentage) of (i) the sum of Pre-Tax Contributions on behalf of a
Participant for the Plan Year (excluding any Excess Deferrals by a
Non-highly Compensated Employee) and, to the extent permitted in
Treasury Regulations and elected by the Employer, the Participant's
Qualified Nonelective Contributions to (ii) the Participant's
Compensation for the Plan Year. The Employer, on an annual basis, may
elect to include or not to include Qualified Nonelective Contributions
in computing the ADP for a Plan Year. In the case of a Participant (as
defined below) who does not make a Pre-Tax Contribution for a Plan Year
and is not allocated a Qualified Nonelective Contribution for such Plan
Year, such Participant's ADP for the Plan Year shall be zero.
Average Actual Contribution Percentage shall mean the average
(expressed as a percentage) of the Actual Contribution Percentages of
the Participants in a group.
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The percentage shall be rounded to the nearest one-hundredth of one
percent (four decimal places).
Average Actual Deferral Percentage shall mean the average (expressed as
a percentage) of the Actual Deferral Percentages of the Participants in
a group. The percentage shall be rounded to the nearest one-hundredth
of one percent (four decimal places).
Combined ADP and ACP Test shall have the meaning as defined in Section
12.10.
Compensation for purposes of this Article 12 shall be that definition
selected by the Committee that satisfies the requirements of Code
Sections 414(s) and 401(a)(17). Such definition may change from year to
year but must apply uniformly among all Eligible Employees being tested
under the Plan for a given Plan Year and among all Employees being
tested under any other plan that is aggregated with this Plan during
the Plan Year. If no such definition is elected by the Committee
(either formally or informally), Compensation shall have the meaning
described below.
If the Committee fails to select a different definition, Compensation
shall mean the gross annual earnings reported on the Participant's IRS
Form W-2 (box 1 or its comparable location as provided on Form W-2 in
future years) as required by Code Sections 6041(d) and 6051(a)(3). In
addition, Compensation shall include compensation which is not
includable in the Participant's IRS Form W-2 (Box 1) by reason of Code
Section 402(a)(8) (employee Salary Deferrals under a Code Section
401(k) plan) or Code Section 125 (salary deferrals under a cafeteria
plan). Compensation shall not include amounts paid or reimbursed by the
Employer for moving expenses if, at the time of the payment of such
moving expenses, it is reasonable to believe that the moving expenses
will be deductible by the Participant under Code Section 217.
Compensation shall be determined by ignoring any income exclusions
under Code Section 3401(a) based on the nature or location of
employment. In no event shall Compensation in excess of the limitations
of Code Section 401(a)(17) be taken into account for any Employee.
Employer Matching Contributions. For purposes of this Article 12, an
Employer Matching Contribution for a particular Plan Year includes only
those contributions that are (i) allocated to the Participant's Account
under the Plan as of any date within such Plan Year, (ii) contributed
to the Trust no later than the end of the 12-month period following the
close of such Plan Year, and (iii) made on account of such
Participant's Pre-Tax Contributions for the Plan Year.
Excess Deferrals shall have that meaning as defined in Section 12.03.
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Excess ACP Contributions shall have that meaning as defined in Section
12.09.
Excess ADP Deferrals shall have that meaning as defined in Section
12.06.
Highly Compensated Employee. See Article 13.
Maximum Combined Percentage shall have the meaning as defined in
Section 12.10.
Non-highly Compensated Employee. See Article 13.
Participant. For purposes of this Article 12, a Participant shall mean
any Eligible Employee who (i) is eligible to receive an allocation of
an Employer Matching Contribution, even if no Employer Matching
Contribution is allocated due to the Eligible Employee's failure to
make a required Pre-Tax Contribution, (ii) is eligible to make an
Employee Contribution, including an Eligible Employee whose right to
make an Employee Contribution has been suspended because of an election
not to participate or a hardship distribution, and (iii) is unable to
receive an Employer Matching Contribution or make an Employee
Contribution because his Compensation is less than a stated amount.
Pre-Tax Contributions. For purposes of this Article 12, a Pre-Tax
Contribution is taken into account only if the contribution (i) is
allocated to the Participant's Account under the terms of the Plan as
of any date within the Plan Year, and (ii) relates to Compensation that
would have been received by the Participant during the Plan Year or
within 2-1/2 months after the Plan Year but for the deferral election.
A Pre-Tax Contribution is considered to be allocated as of a date
within a Plan Year only if the allocation is not contingent on
participation in the Plan or performance of service after the Plan Year
to which the Pre-Tax Contribution relates.
Qualified Elective Deferral shall mean Pre-Tax Contributions designated
by the Committee as Qualified Elective Deferrals in order to meet the
ACP testing requirements of Section 12.07.
In addition, the following requirements must be satisfied:
(1) The aggregate of all Pre-Tax Contributions for the Plan Year
(including the Qualified Elective Deferrals) must satisfy the
ADP testing requirements set forth in Section 12.04(a).
(2) The aggregate of all Pre-Tax Contributions for the Plan Year
(excluding the Qualified Elective Deferrals) must satisfy the
ADP testing requirements set forth in Section 12.04(a).
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(3) Qualified Elective Deferrals must satisfy all other provisions
of this Plan applicable to Pre-Tax Contributions and shall
remain part of the Participant's Pre-Tax Contribution Account.
(4) Except as provided by this definition, Qualified Elective
Deferrals shall be excluded in determining whether any other
contribution or benefit satisfies the nondiscrimination
requirements of Code ss.ss. 401(a)(4) and 401(k)(3).
Qualified Nonelective Contribution shall mean an Employer contribution
designated by the Committee as a Qualified Nonelective Contribution in
order to meet the ADP testing requirements of Section 12.04 or the ACP
testing requirements of Section 12.07. In addition, the following
requirements must be satisfied:
(1) The Qualified Nonelective Contribution, whether or not used to
satisfy the requirements of Sections 12.04 or 12.07, must meet
the requirements of Code ss. 401(a)(4).
(2) Qualified Nonelective Contributions which are taken into
account in order to meet the requirements of Section 12.04 or
12.07 (as applicable) shall not be counted in determining
whether the testing requirements of any of such other Sections
are met.
(3) The Qualified Nonelective Contributions shall be subject to
all provisions of this Plan applicable to Pre-Tax
Contributions (except that Qualified Nonelective Contributions
cannot be distributed in a hardship distribution).
(4) Except as provided in this paragraph, the Qualified
Nonelective Contributions shall be excluded in determining
whether any other contribution or benefit satisfies the
nondiscrimination requirements of Code ss.ss. 401(a)(4) and
401(k)(3).
12.03 Limit on Pre-Tax Contributions.
(a) Notwithstanding any other provision of the Plan to the
contrary, the aggregate of a Participant's Pre-Tax
Contributions during a calendar year may not exceed the amount
established by the Secretary of the Treasury pursuant to Code
Section 402(g) ($9,500 in 1997). Any Pre-Tax Contributions in
excess of the foregoing limit ("Excess Deferral"), plus any
income and minus any loss allocable thereto, may be
distributed to the applicable Participant no later than April
15 following the calendar year in which the Pre-Tax
Contributions were made.
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(b) Any Participant who has an Excess Deferral during a calendar
year may receive a distribution of the Excess Deferral during
such calendar year plus any income or minus any loss allocable
thereto, provided (1) the Participant requests (or is deemed
to request) the distribution of the Excess Deferral, (2) the
distribution occurs after the date the Excess Deferral arose,
and (3) the Committee designates the distribution as a
distribution of an Excess Deferral.
(c) If a Participant makes a Pre-Tax Contribution under this Plan
and in the same calendar year makes a contribution to a Code
Section 401(k) plan containing a cash or deferred arrangement
(other than this Plan), a Code Section 408(k) plan (simplified
employee pension plan) or a Code Section 403(b) plan (tax
sheltered annuity) and, after the return of any Excess
Deferral pursuant to Section 12.03(a) and (b) the aggregate of
all such Pre-Tax Contributions and contributions exceed the
limitations contained in Code Section 402(g), then such
Participant may request that the Committee return all or a
portion of the Participant's Pre-Tax Contributions for the
calendar year plus any income and minus any loss allocable
thereto. The amount by which such Pre-Tax Contributions and
contributions exceed the Code Section 402(g) limitations will
also be known as an Excess Deferral.
(d) Any request for a return of Excess Deferrals arising out of
contributions to a plan described in Section 12.03(c) above
which is maintained by an entity other than the Employer must:
(1) be made in writing;
(2) be submitted to the Committee not later than the
March 1 following the Plan Year in which the Excess
Deferral arose (or such other date selected by the
Committee);
(3) specify the amount of the Excess Deferral; and,
(4) contain a statement that if the Excess Deferral is
not distributed, it will, when added to amounts
deferred under other plans or arrangements described
in Sections 401(k), 408(k),or 403(b) of the Code,
exceed the limit imposed on the Participant by
Section 402(g) of the Code for the year in which the
Excess Deferral occurred.
In the event an Excess Deferral arises out of contributions to
a plan (including this Plan) which is maintained by the
Employer, the Participant making the Excess Deferral shall be
deemed to have requested a return of the Excess Deferral.
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(e) Pre-Tax Contributions may only be returned to the extent
necessary to eliminate a Participant's Excess Deferral. Excess
Deferrals returned to the Participant under this Section 12.03
shall not be treated as annual additions under the Plan. In no
event shall the returned Excess Deferrals for a particular
calendar year exceed the Participant's aggregate Pre-Tax
Contributions for such calendar year.
(f) The income or loss allocable to a Pre-Tax Contribution that is
returned to a Participant pursuant to Section 12.03(a) or (c)
shall be determined by multiplying the income or loss
allocable to the Participant's Account for the calendar year
in which the Excess Deferral arose by a fraction. The
numerator of the fraction is the Excess Deferral. The
denominator of the fraction is the value of the Participant's
Account balance on the last day of the calendar year in which
the Excess Deferral arose reduced by any income allocated to
the Participant's Account for such calendar year and increased
by any loss allocated to the Participant's Account for such
calendar year.
(g) The income or loss allocable to an Excess Deferral that is
returned to a Participant pursuant to Section 12.03(b) shall
be determined using any reasonable method adopted by the Plan
to measure income earned or loss incurred during the Plan Year
or any other method authorized by the Internal Revenue Service
to compute the income earned or loss incurred for the period
commencing on January 1 of the calendar year in which the
Pre-Tax Contribution was made and ending on the date the
Excess Deferral was distributed.
(h) Any Employer Matching Contribution allocable to an Excess
Deferral that is returned to a Participant pursuant to this
Section 12.03 shall be forfeited notwithstanding the
provisions of Article 7 (vesting). For this purpose, however,
the Pre-Tax Contributions that are returned to the Participant
as an Excess Deferral shall be deemed to be first those
Pre-Tax Contributions for which no Employer Matching
Contribution was made and second those Pre-Tax Contributions
for which an Employer Matching Contribution was made.
Accordingly, if the Pre-Tax Contributions that are returned to
the Participant as Excess Deferrals were not matched, no
Employer Matching Contribution will be forfeited.
12.04 Average Actual Deferral Percentage.
(a) The Average Actual Deferral Percentage for Highly Compensated
Employees for each Plan Year and the Average Actual Deferral
Percentage
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for Non-highly Compensated Employees for the same Plan Year
must satisfy one of the following tests:
(1) The Average Actual Deferral Percentage for
Participants who are Highly Compensated Employees for
the Plan Year shall not exceed the Average Actual
Deferral Percentage for Participants who are
Non-highly Compensated Employees for the Plan Year
multiplied by 1.25; or
(2) The excess of the Average Actual Deferral Percentage
for Participants who are Highly Compensated Employees
for the Plan Year over the Average Actual Deferral
Percentage for Participants who are Non-highly
Compensated Employees for the Plan Year is not more
than two percentage points, and the Average Actual
Deferral Percentage for Participants who are Highly
Compensated Employees is not more than the Average
Actual Deferral Percentage for Participants who are
Non-highly Compensated Employees multiplied by 2.0.
(b) The permitted disparity between the Average Actual Deferral
Percentage for Highly Compensated Employees and the Average
Actual Deferral Percentage for Non-Highly Compensated
Employees may be further reduced as required by Section 12.10.
(c) If at the end of the Plan Year, the Plan does not comply with
the provisions of Section 12.04(a), the Employer may do any or
all of the following, except as otherwise provided in the Code
or Treasury Regulations:
(1) Distribute Pre-Tax Contributions to certain Highly
Compensated Employees as provided in Section 12.06;
(2) Make a Qualified Nonelective Contribution on behalf
of any or all of the Non-highly Compensated Employees
and aggregate such contributions with the Non-highly
Compensated Employees' Pre-Tax Contributions
Deferrals as provided in Section 12.02 (definition of
ADP).
12.05 Special Rules For Determining Average Actual Deferral Percentage.
(a) The Actual Deferral Percentage for any Highly Compensated
Employee for the Plan Year who is eligible to have Pre-Tax
Contributions allocated to his Account under two or more
arrangements described in ss. 401(k) of the Code that are
maintained by an Employer or its Affiliates shall be
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determined as if such Pre-Tax Contributions were made under a
single arrangement.
(b) If two or more plans maintained by the Employer or its
Affiliates are treated as one plan for purposes of the
nondiscrimination requirements of Code ss. 401(a)(4) or the
coverage requirements of Code ss. 410(b) (other than for
purposes of the average benefits test), all Pre-Tax
Contributions that are made pursuant to those plans shall be
treated as having been made pursuant to one plan.
(c) The determination and treatment of the Pre-Tax Contributions
and Actual Deferral Percentage of any Participant shall be in
accordance with such other requirements as may be prescribed
from time to time in Treasury Regulations.
12.06 Distribution of Excess ADP Deferrals.
(a) Pre-Tax Contributions exceeding the limitations of Section
12.04(a) ("Excess ADP Deferrals") and any income or loss
allocable to such Excess ADP Deferral shall be designated by
the Committee as Excess ADP Deferrals and shall be distributed
to Highly Compensated Employees whose Accounts were credited
with the largest dollar amount of Pre-Tax Contributions. In
determining the amount of Excess ADP Deferrals to be
distributed to each Highly Compensated Employee, the Committee
shall reduce the amount of Pre-Tax Contribution, for each
Highly Compensated Employee as follows:
(1) The Pre-Tax Contributions made by the Highly
Compensated Employee(s) with the highest dollar
amount of Pre-Tax Contributions will be reduced until
equal with the second highest amount of Pre-Tax
Contribution under the Plan; then
(2) The amount of Pre-Tax Contributions made by the two
(or more) Highly Compensated Employees with the
highest dollar amount of Pre-Tax Contributions will
be reduced until equal to the third highest dollar
amount of Pre-Tax Contributions under the Plan; then
(3) The steps described in (1) and (2) above shall be
repeated with respect to the third and successive
highest Pre-Tax Contributions under the Plan until
the Plan has distributed all Excess ADP Deferrals.
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(b) To the extent administratively possible, the Committee shall
distribute all Excess ADP Deferrals and any income or loss
allocable thereto prior to 2-1/2 months following the end of
the Plan Year in which the Excess ADP Deferrals arose. In any
event, however, the Excess ADP Deferrals and any income or
loss allocable thereto shall be distributed prior to the end
of the Plan Year following the Plan Year in which the Excess
ADP Deferrals arose. Excess ADP Deferrals shall be treated as
annual additions under the Plan.
(c) The income or loss allocable to Excess ADP Deferrals shall be
determined by multiplying the income or loss allocable to the
Participant's Account for the Plan Year in which the Excess
ADP Deferrals arose by a fraction. The numerator of the
fraction is the Excess ADP Deferral. The denominator of the
fraction is the value of the Participant's Account balance on
the last day of the Plan Year in which the Excess ADP
Deferrals arose reduced by any income allocated to the
Participant's Account for such Plan Year and increased by any
loss allocated to the Participant's Account for the Plan Year.
(d) If an Excess Deferral has been distributed to the Participant
pursuant to Section 12.03(a) or (b) for any taxable year of a
Participant, then any Excess ADP Deferral allocable to such
Participant for the same Plan Year in which such taxable year
ends shall be reduced by the amount of such Excess Deferral.
(e) Any Employer Matching Contribution allocable to an Excess ADP
Deferral that is returned to the Participant pursuant to this
Section 12.06 shall be forfeited notwithstanding the
provisions of Article 7 (vesting). For this purpose, however,
Pre-Tax Contributions that are returned to the Participant
shall be deemed to be first those Pre-Tax Contributions for
which no Employer Matching Contribution was made and second
those Pre-Tax Contributions for which an Employer Matching
Contribution was made. Accordingly, unmatched Pre-Tax
Contributions shall be returned as an Excess ADP Deferral
before matched Pre-Tax Contributions.
12.07 Average Actual Contribution Percentage.
(a) The Average Actual Contribution Percentage for Highly
Compensated Employees for each Plan Year and the Average
Actual Contribution Percentage for Non-highly Compensated
Employees for the same Plan Year must satisfy one of the
following tests:
(1) The Average Actual Contribution Percentage for
Participants who are Highly Compensated Employees for
the Plan Year shall not
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exceed the Average Actual Contribution Percentage for
Participants who are Non-highly Compensated Employees
for the Plan Year multiplied by 1.25; or
(2) The excess of the Average Actual Contribution
Percentage for Participants who are Highly
Compensated Employees for the Plan Year over the
Average Actual Contribution Percentage for
Participants who are Non-highly Compensated Employees
for the Plan Year is not more than two percentage
points, and the Average Actual Contribution
Percentage for Participants who are Highly
Compensated Employees is not more than the Average
Actual Contribution Percentage for Participants who
are Non-highly Compensated Employees multiplied by
2.0.
(b) If at the end of the Plan Year, the Plan does not comply with
the provisions of this Section 12.07(a), the Employer may do
any or all of the following in order to comply with such
provision as applicable (except as otherwise provided in the
Code or in Treasury Regulations):
(1) Aggregate Qualified Elective Deferrals with the
Employer Matching Contributions of Non-highly
Compensated Employees as provided in Section 12.02
(definition of ACP).
(2) Distribute or forfeit Employer Matching Contributions
to certain Highly Compensated Employees as provided
in Section 12.09.
(3) Make a Qualified Nonelective Contribution on behalf
of any or all of the Non-highly Compensated Employees
and aggregate such contributions with the Non-highly
Compensated Employees' Employer Matching
Contributions as provided in Section 12.01
(definition of ACP).
12.08 Special Rules For Determining Average Actual Contribution Percentages.
(a) The Actual Contribution Percentage for any Highly Compensated
Employee for the Plan Year who is eligible to have Employer
Matching Contributions or Voluntary After-Tax Contributions
allocated to his Account under two or more arrangements
described in ss.ss. 401(a) or 401(m) of the Code that are
maintained by an Employer or its Affiliates shall be
determined as if such contributions were made under a single
arrangement.
(b) If two or more plans maintained by the Employer or its
Affiliates are treated as one plan for purposes of the
nondiscrimination requirements of
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Code Section 401(a)(4) or the coverage requirements of Code
Section 410(b) (other than for purposes of the average
benefits test), all Employer Matching Contributions and
Voluntary After-Tax Contributions that are made pursuant to
those plans shall be treated as having been made pursuant to
one plan.
(c) The determination and treatment of the Actual Contribution
Percentage of any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the
Treasury.
12.09 Distribution of Excess ACP Contributions.
(a) Employer Matching Contributions and Voluntary After-Tax
Contributions exceeding the limitations of Section 12.07(a)
("Excess ACP Contributions") and any income or loss allocable
to such Excess ACP Contribution may be designated by the
Committee as Excess ACP Contributions and may be distributed
in the Plan Year following the Plan Year in which the Excess
ACP Contributions arose to those Highly Compensated Employees
whose Accounts were credited with largest aggregate amount of
Employer Matching Contributions and Voluntary After-Tax
Contributions during the preceding Plan Year. The amount of
Employer Matching Contributions and Voluntary After-Tax
Contributions to be distributed to a Highly Compensated
Employee shall be determined using the procedure described in
Section 12.06(a). To the extent possible, Voluntary After-Tax
Contributions shall be distributed first, followed by vested
Employer Matching Contributions.
(b) To the extent administratively possible, the Committee shall
distribute all Excess ACP Contributions and any income or loss
allocable thereto prior to 2-1/2 months following the end of
the Plan Year in which the Excess ACP Contributions arose. In
any event, however, the Excess ACP Contributions and any
income or loss allocable thereto shall be distributed prior to
the end of the Plan Year following the Plan Year in which the
Excess ACP Contributions arose.
(c) The income or loss allocable to Excess ACP Contributions shall
be determined by multiplying the income or loss allocable to
the Participant's Account for the Plan Year in which the
Excess ACP Contribution arose by a fraction. The numerator of
the fraction is the Excess ACP Contributions. The denominator
of the fraction is the value of the Participant's Account on
the last day of the Plan Year reduced by any income allocated
to the Participant's Account by such Plan Year and increased
by any loss allocated to the Participant's Account for the
Plan Year.
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(d) Amounts distributed to Highly Compensated Employees under this
Section 12.09 shall be treated as annual additions with
respect to the Employee who received such amount.
(e) Matching Contributions may be distributed to Highly
Compensated Employees only to the extent such Matching
Contributions are vested. Matching Contributions which are not
vested shall be forfeited to the extent necessary to correct
Excess ACP Contribution pursuant to this Section 12.09. For
this purpose, Matching Contributions shall first be comprised
of vested Employer Matching Contributions and second of
non-vested Employer Matching Contributions.
12.10 Combined ACP and ADP Test.
(a) The Plan must satisfy the Combined ACP and ADP Test described
in this Section 12.10 only if (1) the Average Actual Deferral
Percentage of the Highly Compensated Employees exceeds 125% of
the Average Actual Deferral Percentage of the Non-highly
Compensated Employees and (2) the Average Actual Contribution
Percentage of the Highly Compensated Employees exceeds 125% of
the Average Actual Contribution Percentage of the Non-highly
Compensated Employees.
(b) The Combined ACP and ADP Test is satisfied if the sum of the
Highly Compensated Employees' Average Actual Deferral
Percentage and Average Actual Contribution Percentage is equal
to or less than the Maximum Combined Percentage defined in
paragraph (c) below.
(c) The Maximum Combined Percentage shall be determined by
adjusting the Non-highly Compensated Employees' Average Actual
Deferral Percentage and Average Actual Contribution Percentage
in the following manner:
(1) The greater of the two percentages shall be
multiplied by 1.25; and
(2) The lesser of the two percentages shall be increased
by two percentage points; however, in no event shall
such adjusted percentage exceed twice the original
percentage.
The sum of (1) and (2) shall be the Maximum Combined
Percentage.
Notwithstanding the foregoing, the Maximum Combined Percentage
shall be determined in the following manner if such
calculation results in a higher Maximum Combined Percentage
than the formula specified above:
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(1) The lesser of the Average Actual Deferral Percentage
and Average Actual Contribution Percentage of the
Non-Highly Compensated Employees shall be multiplied
by 1.25; and
(2) The greater of such two percentages shall be
increased by two percentage points; however, in no
event shall such percentage exceed twice the original
percentage.
(d) In the event the Plan does not satisfy the Combined ADP and
ACP Test, the Highly Compensated Employees' Average Actual
Contribution Percentage shall be decreased by either
distributing Voluntary After-Tax Contributions or vested
Employer Matching Contributions to certain Highly Compensated
Employees by using the procedures described in Section 12.09
or by making a Qualified Nonelective Contribution as provided
in Section 12.07(b)(3) until the sum of such percentage and
the Highly Compensated Employees' Average Actual Deferral
Percentage equals the Maximum Combined Percentage.
(e) If Voluntary After-Tax Contributions or vested Employer
Matching Contributions are distributed to certain Highly
Compensated Employees in order to satisfy the Combined ADP and
ACP Test, income or loss allocable to such Employer Matching
Contributions shall also be distributed.
(f) To the extent administratively possible, the Committee shall
distribute the Voluntary After-Tax Contributions and vested
Employer Matching Contributions (if applicable) and allocable
income or loss prior to 2-1/2 months following the end of the
Plan Year for which the Combined ADP and ACP Test is computed.
In any event, however, such Voluntary After-Tax Contributions
and vested Employer Matching Contributions (if applicable) and
allocable income or loss shall be distributed by the end of
the Plan Year following the Plan Year for which the Combined
ADP and ACP Test is computed. Voluntary After-Tax
Contributions and vested Employer Matching Contributions that
are distributed pursuant to this Section 12.10 shall be
treated as annual additions under the Plan.
(g) The income or loss allocable to returned Voluntary After-Tax
Contributions or vested Employer Matching Contributions shall
be determined using the same procedures as Section 12.06(c).
12.11 Order of Applying Certain Sections of Article 12.
In applying the provisions of this Article 12, the determination and
distribution of Excess Deferrals shall be made first, the determination
and elimination of Excess
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ACP Deferrals shall be made second, the determination and elimination
of Excess ADP Contributions shall be made third and finally the
determination and any necessary adjustment related to the Combined ADP
and ACP Test shall be made.
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ARTICLE 13
HIGHLY COMPENSATED EMPLOYEES
13.01 In General.
For the purposes of this Plan, the term "Highly Compensated Employee"
is any active Employee described in Section 13.02 below and any Former
Employee described in Section 13.03 below. Various definitions used in
this Article are contained in Section 13.04. A Non-Highly Compensated
Employee is an Employee who is not a Highly Compensated Employee.
13.02 Highly Compensated Employees.
(a) An Employee is a Highly Compensated Employee if the Employee:
(1) is a 5 Percent Owner at any time during the
Determination Year or the Look Back Year; or
(2) receives Compensation in excess of $80,000 during the
Look Back Year.
The dollar amount described above shall be increased annually
as provided in Code ss. 414(q)(1).
13.03 Former Highly Compensated Employee.
A Former Employee is a Highly Compensated Employee if (applying the
rules of Section 13.02) the Former Employee was a Highly Compensated
Employee during a Separation Year or during any Determination Year
ending on or after the Former Employee's 55th birthday.
13.04 Definitions.
The following special definitions shall apply to this Article 13:
Compensation for purposes of this Article 13 shall mean the gross
annual earnings reported on the Participant's IRS Form W-2 (Box 1 -
Wages, Tips and Compensation, or its comparable location as provided on
Form W-2 in future years) as required by Code ss.ss. 6041(d) and
6051(a)(3). In addition, Compensation shall include compensation which
is not includable in the Participant's IRS Form W-2 (Box 1) by reason
of Code ss. 402(a)(8) (employee pre-tax contributions under a Code ss.
401(k) plan) or Code ss. 125 (salary deferrals under a cafeteria plan).
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Compensation shall not include amounts paid or reimbursed by the
Employer for moving expenses if, at the time of the payment of such
moving expenses, it is reasonable to believe that the moving expenses
will be deductible by the Participant under Code ss. 217. Compensation
shall be determined by ignoring any income exclusions under Code ss.
3401(a) based on the nature or location of employment. In no event
shall Compensation in excess of the limitations under Code Section
401(a)(17) be taken into account for any Employee.
Determination Year shall mean the Plan Year for which the ADP is
computed.
Employer for purposes of this Article 13 shall mean the Company and its
Affiliates.
5 Percent Owner shall mean any Employee who owns or is deemed to own
(within the meaning of Code ss. 318), more than five percent of the
value of the outstanding stock of the Employer or stock possessing more
than five percent of the total combined voting power of the Employer.
Former Employee shall mean an Employee (i) who has incurred a Severance
from Service or (ii) who remains employed by the Employer but who has
not performed services for the Employer during the Determination Year
(e.g., an Employee on Authorized Leave of Absence).
Look Back Year shall mean the Plan Year preceding the Determination
Year.
Separation Year shall mean any of the following years:
(1) An Employee who incurs a Termination Date shall have a
Separation Year in the Determination Year in which such
Termination Date occurs;
(2) An Employee who remains employed by the Employer but who
temporarily ceases to perform services for the Employer (e.g.,
an Employee on Authorized Leave of Absence) shall have a
Separation Year in the calendar year in which he last performs
services for the Employer;
(3) An Employee who remains employed by the Employer but whose
Compensation for a calendar year is less than 50% of the
Employee's average annual Compensation for the immediately
preceding three calendar years (or the Employee's total years
of employment, if less) shall have a Separation Year in such
calendar year. However, such Separation Year shall be ignored
if the Employee remains employed by the Employer and the
Employee's Compensation returns to a level comparable to the
Employee's Compensation immediately prior to such Separation
Year.
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13.05 Other Methods Permissible.
To the extent permitted by the Code, judicial decisions, Treasury
Regulations and IRS pronouncements, the Committee may (without further
amendment to this Plan) take such other steps and actions or adopt such
other methods or procedures (in addition to those methods and
procedures described in this Article 13) to determine and identify
Highly Compensated Employees (including adopting alternative
definitions of Compensation which satisfy Code ss. 414(q)(7) and are
uniformly applied).
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ARTICLE 14
MAXIMUM BENEFITS
14.01 General Rule.
(a) Notwithstanding any other provision of this Plan, for any Plan
Year, the Annual Additions to a Participant's Account, when
combined with the Annual Additions to the Participant's
Account under all other Qualified individual account plans
maintained by the Employer or its Affiliates shall not exceed
the lesser of (i) $30,000 or (ii) twenty-five percent (25%) of
the Participant's Compensation for such Plan Year (the
"maximum permissible amount").
(b) The Employer hereby elects that the Limitation Year for
purposes of Code ss. 415 shall be the Plan Year.
(c) For purposes of determining the limit on Annual Additions
under paragraph (a) of this Section, the dollar limit
described therein, to wit, $30,000, shall be increased for
each Plan Year to the extent permitted by law.
(d) If the amount to be allocated to a Participant's Account
exceeds the maximum permissible amount (and for this purpose
Employer Contributions shall be deemed to be allocated after
Employee Contributions), the excess will be disposed of as
follows. First, if the Participant's Annual Additions exceed
the maximum permissible amount as a result of (i) a reasonable
error in estimating the Participant's Compensation, (ii) a
reasonable error in estimating the amount of Employee
Contributions that the Participant could make under Codess.415
or (iii) other facts and circumstances that the Internal
Revenue Service finds justifiable, the Committee may direct
the Trustee to return to the Participant his Employee
Contributions for such Plan Year to the extent necessary to
reduce the excess amount. Such returned Employee Contributions
shall be ignored in performing the discrimination tests of
Article 12. Second, any excess annual additions still
remaining after the return of Employee Contributions shall be
reallocated as determined by the Committee among the
Participants whose accounts have not exceeded the limit in the
same proportion that the Compensation of each such Participant
bears to the Compensation of all such Participants. If such
reallocation would result in an addition to another
Participant's Account which exceeds the permitted limit, that
excess shall likewise be reallocated among the Participants
whose Accounts do not exceed the limit.
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However, if the allocation or reallocation of the excess
amounts pursuant to these provisions causes the limitations
ofss.415 of the Code to be exceeded with respect to each
Participant for the limitation year, then any such excess
shall be held unallocated in a 415 Suspense Account. If the
415 Suspense Account is in existence at any time during a
limitation year, other than the limitation year described in
the preceding sentence, all amounts in the 415 Suspense
Account shall be allocated and reallocated to Participants'
Accounts (subject to the limitations of Codess.415) before any
Contributions which would constitute annual additions may be
made to the Plan for that limitation year.
(e) If the Participant is covered under another qualified defined
contribution plan maintained by an Employer during any
limitation year, the annual additions which may be credited to
a Participant's account under this Plan for any such
limitation year shall not exceed the maximum permissible
amount reduced by the annual additions credited to a
Participant's account under all such plans for the same
limitation year. If a Participant's annual additions under
this Plan and such other plans would result in an excess
amount for a limitation year, the excess amount will be deemed
to consist of the annual additions last allocated (and for
this purpose, Employer Contributions shall be deemed to be
allocated after Employee Contributions). If an excess amount
is allocated to a Participant on an allocation date of this
Plan which coincides with an allocation date of another plan,
the excess amount attributed to this Plan will be the product
of
(i) the total excess amount as of such date, times
(ii) the ratio of (A) the annual additions allocated to
the Participant for the limitation year as of such
date under this Plan to (B) the total annual
additions allocated to the Participant for the
limitation year as of such date under this and all
the other qualified defined contribution plans
maintained by the Employer.
Any excess amount attributed to this Plan will be disposed in
the manner described in this Section 14.01 above.
14.02 Combined Plan Limitation.
If the Employer or its Affiliates maintains, or at any time maintained,
a Qualified defined benefit plan covering any Participant in this Plan,
the sum of the Participant's defined benefit plan fraction and defined
contribution plan fraction shall not exceed 1.0 in any limitation year
and the annual benefit otherwise payable to the Participant under such
defined benefit plan shall be frozen or
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reduced to the extent necessary so that the sum of such fractions shall
not exceed 1.0. This Section 14.02 shall not apply after December 31,
1999.
14.03 Definitions. For the purposes of this Article 14, the following
definitions shall apply:
(a) "Annual Addition" shall mean the sum of:
(1) Employee Contributions;
(2) Employer Contributions;
(3) Forfeitures; and
(4) Amounts described in Code ss.ss. 415(l)(1) and
419A(d)(2).
Annual Additions shall not include any amounts credited to the
Participant's Account resulting from Rollover Contributions.
(b) "Affiliates" shall have that meaning contained in Article 2
except that for purposes of determining who is an Affiliate
the phrase "more than 50 percent" shall be substituted for the
phrase "at least 80 percent" each place it appears in Code ss.
1563(a)(1).
(c) "Compensation" shall have the same meaning as defined in
Article 12 except that Compensation for purposes of Article 14
shall not include Pre-Tax Contributions under this Plan and
shall not include salary deferrals under a Code ss. 125
Cafeteria Plan. Effective January 1, 1998, "Compensation"
shall have the same meaning as defined in Article 12.
(d) "Defined Benefit Fraction" means a fraction, the numerator of
which is the sum of the Participant's projected annual
benefits under all the defined benefit plans (whether or not
terminated) maintained by the Employer or its Affiliates, and
the denominator of which is the lesser of (i) 125 percent of
the dollar limitation in effect for the limitation year
underss.415(b)(1)(A) of the Code or (ii) 140 percent of the
Highest Average Compensation. Notwithstanding the foregoing,
if the Participant was a Participant as of the first day of
the first Limitation Year beginning after December 31, 1986,
in one or more defined benefit plans maintained by the
Employer or its Affiliates which were in existence on May 6,
1986, the denominator of this fraction will not be less than
125 percent of the sum of the annual benefits under such plans
which the Participant had accrued as of the end of the last
limitation year beginning before January 1, 1987, but
determined without regard to any changes in the terms and
conditions of
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the Plan occurring after May 5, 1986. The preceding sentence
applies only if the defined benefit plans individually and in
the aggregate satisfied the requirements ofss.415 for all
limitation years beginning before January 1, 1987.
(e) "Defined Contribution Fraction" means a fraction, the
numerator of which is the sum of the Annual Additions to the
Participant's account under all the defined contribution plans
(whether or not terminated) maintained by the Employer or its
Affiliates for the current and all prior limitation years, and
the denominator of which is the sum of the Maximum Aggregate
Amounts for the current and all prior limitation years of
service with the Employer or its Affiliates (regardless of
whether a defined contribution plan was maintained by the
Employer or its Affiliates). The Maximum Aggregate Amount in
any limitation year is the lesser of (i) 125 percent of the
dollar limitation in effect underss.415(c)(1)(A) of the Code;
or (ii) 35 percent of the Participant's compensation for such
year. If the Employee was a Participant as of the first day of
the first Limitation Year beginning after December 31, 1986,
in one or more defined contribution plans maintained by the
Employer or its Affiliates which were in existence on May 6,
1986, the numerator of this fraction will be adjusted if the
sum of this fraction and the defined benefit fraction would
otherwise exceed 1.0 under the terms of this Plan. Under the
adjustment, an amount equal to the product of (i) the excess
of the sum of the fractions over 1.0 times and (ii) the
denominator of this fraction, will be permanently subtracted
from the numerator of this fraction.
(f) "Highest Average Compensation" means the average compensation
for the three consecutive years of service with the employer
that produces the highest average.
(g) "Projected Annual Benefit" means the annual retirement benefit
(adjusted to an actuarially equivalent straight life annuity
if such benefit is expressed in a form other than a straight
life annuity or qualified joint and survivor annuity) to which
the Participant would be entitled under the terms of the plan
assuming (i) the Participant will continue employment until
normal retirement age under the plan (or current age, if
later), and (ii) the Participant's compensation for the
current limitation year and all other relevant factors used to
determine benefits under the plan will remain constant for all
future limitation years.
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ARTICLE 15
TOP HEAVY RULES
15.01 General.
The provisions of this Article of the Plan shall become effective in
any Plan Year in which the Plan is determined to be Top Heavy and shall
supersede any conflicting provision of this Plan.
15.02 Definitions.
(a) Top Heavy. The Plan shall be Top Heavy for the Plan Year if,
as of the Valuation Date which coincides with or immediately
precedes the Determination Date, the value of the Participant
Accounts of Key Employees exceeds 60% of the value of all
Participant Accounts. If the Employer maintains more than one
plan, all plans in which any Key Employee participates and all
plans which enable this Plan to satisfy the
anti-discrimination requirements of Codess.ss.401(a)(4) and
410 must be combined with this Plan ( "Required Aggregation
Group") for the purposes of applying the 60% test described in
the preceding sentence. Plans maintained by the Employer which
are not in the required aggregation group may be combined at
the Employer's election with this Plan for the purposes of
determining Top Heavy status if the combined plan satisfies
the requirements of Codess.401(a)(4) and 410 ( "Permissive
Aggregation Group"). In determining the value of Participant
Accounts, all distributions made during the five-year period
ending on the Determination Date shall be included and any
unallocated Employer Contributions or forfeitures attributable
to the Plan Year in which the Determination Date falls shall
also be included. The Account of (i) any Employee who at one
time was a Key Employee but who is not a Key Employee for any
of the five Plan Years ending on the Determination Date; and
(ii) any Employee who has not performed services for the
Employer or a related employer maintaining a plan in the
aggregation group for the five Plan Years ending on the
Determination Date, shall be disregarded in determining Top
Heavy status.
If the Employer maintains a defined benefit plan during the
Plan Year which is subject to aggregation with this Plan, the
60% test shall be applied after calculating the present value
of the Participants' accrued benefits under the defined
benefit plan in accordance with the rules set forth in that
plan and combining the present value of such accrued benefits
with the Participant's account balances under this Plan.
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Solely for the purpose of determining if the Plan, or any
other plan included in the Required Aggregation Group, is
Top-Heavy, a Non-Key Employee's accrued benefit in a defined
benefit plan shall be determined under (i) the method, if any,
that uniformly applies for accrual purposes under all plans
maintained by the Affiliates, or (ii) if there is no such
method, as if such benefit accrued not more rapidly than the
slowest accrual rate permitted under the fractional accrual
rate of Code ss. 411(b)(1)(C).
(b) Key Employee. Any employee of the Employer who, during the
Plan Year or the four preceding Plan Years was an officer
receiving Compensation in excess of 50% of the limit described
in Codess.415(b)(1)(A), one of the ten employees of the
Employer owning the largest interests in the Employer and
receiving Compensation equal to or greater than the dollar
limit described in Codess.415(c)(1)(A), a greater than 5%
owner of the Employer, a greater than 1% owner of the Employer
receiving Compensation in excess of $150,000, or the
Beneficiary of a Key Employee. The Codess.415(b)(1)(A) and
415(c)(1)(A) limits referred to in the preceding sentence
shall be the specified dollar limit plus any increases
reflecting cost of living adjustments specified by the
Secretary of the Treasury.
(c) Determination Date. The last day of the Plan Year immediately
preceding the Plan Year for which Top Heavy status is
determined. For the first Plan Year, the Determination Date
shall be the last day of the first Plan Year.
(d) Non-Key Employee. Any Participant who is not a Key Employee.
(e) Employer. The term "Employer" shall include any Affiliate of
such Employer.
(f) Compensation. The term "Compensation" shall have that meaning
as defined in Article 14.
15.03 Minimum Benefit.
(a) Except as provided below, the Employer Contributions allocated
on behalf of any Non-Key Employee who is employed by the
Employer on the Determination Date shall not be less than the
lesser of (i) 3% of such Non-Key Employee's Compensation or
(ii) the largest percentage of Employer Contributions and
Pre-Tax Contributions, as a percentage of the Key Employee's
Compensation, allocated on behalf of any Key Employee for such
Plan Year. Pre-Tax Contributions allocated to the Accounts of
Non-Key Employees shall not be considered in determining
whether a Non-
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Key Employee has received the minimum contribution required by
this Section 15.03.
(b) The minimum allocation is determined without regard to any
Social Security contribution and shall be made even though,
under other Plan provisions, the Non-Key Employee would have
received a lesser allocation or no allocation for the Plan
Year because of the Non-Key Employee's failure to complete
1,000 Hours of Service, his failure to make mandatory employee
contributions, or his earning compensation less than a stated
amount.
(c) If the Employer maintains a defined benefit plan in addition
to this Plan, the minimum contribution and benefit
requirements for both plans in a Top Heavy Plan Year may be
satisfied by an allocation of Employer Contributions to the
Account of each Non-Key Employee in the amount of 5% of the
Non-Key Employee's compensation.
15.04 Combined Plan Limitation For Top Heavy Years.
In any Plan Year during which more than 90% of the Participant Account
balances are attributable to Key Employees, 100% or an equivalent
factor shall be substituted for 125% or an equivalent factor in the
combined plan fraction denominators set forth in the Section of this
Plan which limits maximum benefits pursuant to ss. 415 of the Code. In
any Plan Year during which more than 60% but not more than 90% of the
Participant Account balances are attributable to Key Employees, 100% or
an equivalent factor shall be substituted for 125% or an equivalent
factor in the combined plan fraction denominators unless the Account of
each Non-Key Employee participating in the Plan receives an allocation
which satisfies Section 15.03 above, except that for this purpose the
figure "4%" shall be substituted for "3%" where it appears in Section
15.03(a) and the figure "7.5%" shall be substituted for "5%" where it
appears in Section 15.03(c). This Section 15.04 shall cease to be
applicable after December 31, 1999.
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ARTICLE 16
MISCELLANEOUS
16.01 Headings.
The headings and sub-headings in this Plan have been inserted for
convenience of reference only and are to be ignored in any construction
of the provisions hereof.
16.02 Action by Employer.
Any action by an Employer under this Plan shall be by resolution of its
Board of Directors, or by any person or persons duly authorized by
resolution of said Board to take such action.
16.03 Spendthrift Clause.
Except as otherwise required by a "qualified domestic relations order"
as defined in Code Section 414(p), none of the benefits, payments,
proceeds or distributions under this Plan shall be subject to the claim
of any creditor of any Participant or Beneficiary, or to any legal
process by any creditor of such Participant or Beneficiary, and none of
them shall have any right to alienate, commute, anticipate or assign
any of the benefits, payments, proceeds or distributions under this
Plan except for the extent expressly provided herein to the contrary.
If any Participant shall attempt to dispose of the benefits provided
for him hereunder, or to dispose of the right to receive such benefits,
or in the event there should be an effort to see such benefits or the
right to receive such benefits by attachment, execution or other legal
or equitable process, such right to benefits shall pass and be
transferred, at the discretion of the Plan Administrator, to such one
or more as may be appointed by the Plan Administrator from among the
Beneficiaries, if any theretofore designated by the Participant, or
from the spouse, children or other dependents of the Participant, in
such shares as the Committee may appoint. Any appointment so made by
the Committee may be revoked by it at any time and further appointment
made by it which may include the Participant.
16.04 Distributions Upon Special Occurrences.
(a) Subject to Section 11.03, Pre-Tax Contributions and any income
attributable thereto, shall be distributed to Participants or
their Beneficiaries in a single lump sum as soon as
administratively feasible after the termination of the Plan,
provided that neither the Employer nor its Affiliates maintain
a successor plan.
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(b) Pre-Tax Contributions and any income attributable thereto
shall be distributed to Participants in a single lump sum as
soon as administratively feasible after the sale, to an entity
that is not an Affiliate, of substantially all of the assets
used by the Employer in the trade or business in which the
Participant is employed.
(c) After the sale of an incorporated Affiliate's interest in a
subsidiary to an entity that is not an Affiliate, Pre-Tax
Contributions and any income attributable thereto of a
Participant who continues to work for such subsidiary shall be
distributed in a lump sum as soon as administratively
feasible.
(d) The provisions of this Section 16.04 including the definitions
of terms such as "successor plan" and "substantially all of
the assets" shall be governed by Treasury Regulation ss.
1.401(k)-1(d)(1)(iii) or any successor Treasury Regulation
thereto.
16.05 Discrimination.
The Employer, the Committee, the Trustee and all other persons involved
in the administration and operation of the Plan shall administer and
operate the Plan and Trust in a uniform and consistent manner with
respect to all Participants similarly situated and shall not permit
discrimination in favor of Highly Compensated Employees.
16.06 Release.
Any payment to a Participant or Beneficiary, or to their legal
representatives, in accordance with the provisions of this Plan, shall
to the extent thereof be in full satisfaction of all claims hereunder
against the Trustee, Plan Administrator, Committee and the Employer,
any of whom may require such Participant, Beneficiary, or legal
representative, as a condition precedent to such payment, to execute a
receipt and release therefor in such form as shall be determined by the
Trustee, the Committee, or the Employer, as the case may be.
16.07 Compliance with Applicable Laws.
The Company, through the Plan Administrator, shall interpret and
administer the Plan in such manner that the Plan and Trust shall remain
in compliance with the Code, with the Act, and all other applicable
laws, regulations, and rulings.
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<PAGE> 84
16.08 Agent for Service of Process.
The agent for service of process of this Plan shall be the person
listed from time to time in the current records of the Secretary of
State of Georgia as the agent for the service of process for the
Company.
16.09 Merger.
In the event of any merger or consolidation of the Plan with any other
Plan, or the transfer of assets or liabilities by the Plan to another
Plan, each Participant must receive (assuming that the Plan would
terminate) the benefit immediately after the merger, consolidation, or
transfer which is equal to or greater than the benefit such Participant
would have been entitled to receive immediately before the merger,
consolidation, or transfer (assuming that the Plan had then
terminated), provided such merger, consolidation, or transfer took
place after the date of enactment of the Act.
16.10 Governing Law.
The Plan shall be governed by the laws of the State of Florida to the
extent that such laws are not preempted by Federal law.
16.11 Adoption of the Plan by an Affiliated Sponsor.
(a) The Committee shall determine which employers shall become
Affiliated Sponsors within the terms of the Plan. In order for
the Committee to designate an Employer as an Affiliated
Sponsor, the Committee must approve the addition of the
Affiliated Sponsor's identity to Schedule A (which approval
may be retroactive to an earlier effective date). The
Committee may also specify such terms and conditions
pertaining to the adoption of the Plan by the Affiliated
Sponsor as the Committee deems appropriate. With the
Committee's consent, an Affiliated Sponsor may limit
participation in the Plan to certain of its Employees.
(b) The Plan of the Affiliated Sponsor and of the Company shall be
considered a single plan for purposes of Treasury
Regulationsss.1.414(1)-1(b)(1). All assets contributed to the
Plan by the Affiliated Sponsor shall be held in a single fund
together with the assets contributed by the Company (and with
the assets of any other Affiliated Sponsors); and so long as
the Affiliated Sponsor continues to be designated as such, all
assets held in such fund shall be available to pay benefits to
all Participants and Beneficiaries covered by the Plan
irrespective of whether such Employees are employed by the
Company or by the Affiliated Sponsor. Nothing contained herein
shall be construed to prohibit the
-78-
<PAGE> 85
separate accounting of assets contributed by the Company and
the Affiliated Sponsors for purposes of cost allocation if
directed by the Committee or the holding of Plan assets in
more than one Trust Fund with more than one Trustee.
(c) So long as the Affiliated Sponsor's designation as such
remains in effect, the Affiliated Sponsor shall be bound by,
and subject to all provisions of the Plan and the Trust
Agreement. The exclusive authority to amend the Plan and the
Trust Agreement shall be vested in the Committee and no
Affiliated Sponsor shall have any right to amend the Plan or
the Trust Agreement. Any amendment to the Plan or the Trust
Agreement adopted by the Committee shall be binding upon every
Affiliated Sponsor without further action by such Affiliated
Sponsor.
(d) Each Affiliated Sponsor shall be solely responsible for making
an Employer Contribution with respect to its Employees and
solely responsible for making any contribution required by
Article 15. Furthermore, if an Affiliated Sponsor determines
to make a Qualified Nonelective Contribution on behalf of its
Employees, such Affiliated Sponsor shall be solely responsible
for making such contribution. Neither the Company nor any
other Affiliated Sponsor is obligated to make a Qualified
Nonelective Contribution on behalf of the Employees of a
different Affiliated Sponsor.
(e) The Company and each Affiliated Sponsor which is an Affiliate
will be tested on a combined basis to determine whether the
Company and such Affiliated Sponsors satisfy the Average
Actual Deferral Percentage Test and Average Actual
Contribution Percentage Test described in Article 12. An
Affiliated Sponsor which is not an Affiliate shall be tested
separately from the Company and those Affiliated Sponsors that
are Affiliates for purposes of the ADP and ACP test described
in Article 12.
(f) No Affiliated Sponsor other than the Company shall have the
right to terminate the Plan. However, any Affiliated Sponsor
may withdraw from the Plan by action of its board of directors
provided such action is communicated in writing to the
Committee. The withdrawal of an Affiliated Sponsor shall be
effective as of the last day of the Plan Year following
receipt of the notice of withdrawal (unless the Committee
consents to a different effective date). In addition, the
Committee may terminate the designation of an Affiliated
Sponsor to be effective on such date as the Committee
specifies. Any such Affiliated Sponsor which ceases to be an
Affiliated Sponsor shall be liable for all cost accrued
through the effective date of its withdrawal or termination
and any contributions owing as a result of Employee
Contributions by its
-79-
<PAGE> 86
Employees or any other contribution as provided in paragraphs
(d) and (e). In the event of the withdrawal or termination of
an Affiliated Sponsor as provided in this paragraph, such
Affiliated Sponsor shall have no right to direct that assets
of the Plan be transferred to a successor plan for its
Employees unless such a transfer is approved by the Committee
in its sole discretion.
16.12 Protected Benefits.
Early retirement benefits, retirement-type subsidies, or optional forms
of benefits protected under Code ss.411(d)(6) ("Protected Benefits")
shall not be reduced or eliminated with respect to benefits accrued
under such Protected Benefits unless such reduction or elimination is
permitted under the Code authority issued by the Internal Revenue
Service, or judicial authority.
16.13 Location of Participant or Beneficiary Unknown.
In the event that all or any portion of the distribution payable to a
Participant or his Beneficiary shall remain unpaid solely by reason of
the Committee's inability to ascertain the whereabouts of such
Participant or Beneficiary, the amount unpaid shall be forfeited.
However, such forfeiture shall not occur until five (5) years after the
amount first became payable. The Committee shall make a diligent effort
to locate the Participant or Beneficiary including the mailing of a
registered letter, return receipt requested, to the last known address
of such Participant or Beneficiary. In the event a Participant or
Beneficiary is located subsequent to his benefit being forfeited, such
benefit shall be restored and distributed.
16.14 Qualified Military Service.
Notwithstanding any provision of this Plan to the contrary,
contributions, benefits, and service credit with respect to qualified
military service will be provided in accordance with Section 414(u) of
the Internal Revenue Code.
IN WITNESS WHEREOF, the Company has caused this Plan to be duly
executed and its seal to be hereunto affixed on the date indicated below, but
effective as of September 1, 1997.
SUMMIT HOLDING SOUTHEAST, INC.
By:
--------------------------------
Title:
-----------------------------
Date:
------------------------------
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<PAGE> 87
SUMMIT CONSULTING, INC.
By:
------------------------------
Title:
----------------------------
Date:
-----------------------------
SUMMIT CLAIMS MANAGEMENT, INC.
By:
-------------------------------
Title:
----------------------------
Date:
-----------------------------
SUMMIT LOSS CONTROL SERVICES, INC.
By:
-------------------------------
Title:
----------------------------
Date:
-----------------------------
HERITAGE/SUMMIT HEALTHCARE, INC.
By:
-------------------------------
Title:
----------------------------
Date:
-----------------------------
BRIDGEFIELD CASUALTY INSURANCE
COMPANY
By:
-------------------------------
Title:
----------------------------
Date:
-----------------------------
BRIDGEFIELD EMPLOYERS INSURANCE
COMPANY
- 81 -
<PAGE> 88
By:
--------------------------------
Title:
-----------------------------
Date:
-----------------------------
-82-
<PAGE> 89
SCHEDULE A
AFFILIATED SPONSORS
<TABLE>
<CAPTION>
Name Effective Date of Affiliation
- ------------------------------------- -----------------------------
<S> <C>
Summit Consulting, Inc. 5/1/92
Summit Claims Management, Inc. 5/1/92
Summit Loss Control Services, Inc. 5/1/92
Bridgefield Casualty Insurance Company 1/1/96
Heritage/Summit Healthcare, Inc. 1/1/97
Bridgefield Employers Insurance Company 9/1/97
</TABLE>
-83-
<PAGE> 90
SCHEDULE B
PREDECESSOR EMPLOYERS
<TABLE>
<CAPTION>
PREDECESSOR EMPLOYER DATE OF ACQUISITION SPECIAL RULES
<S> <C> <C>
[NONE]
</TABLE>
-84-
<PAGE> 91
SCHEDULE C
PRIOR EMPLOYER ACCOUNT
[NONE]
-85-
<PAGE> 92
SCHEDULE D
SPECIAL RULES APPLICABLE TO ANNUITY DISTRIBUTIONS
(a) Automatic Form of Payment
(i) If a Participant does not have a Spouse on his Annuity
Starting Date, the Participant's vested Account shall be
distributed in the form of a Single Life Annuity unless the
Participant elects otherwise under Paragraph (b). If a
Participant has a Spouse on his Annuity Starting Date, the
Participant's vested Account shall be distributed in the form
of a Joint and 50% Survivor Annuity unless the Participant
(with spousal consent) otherwise elects under Paragraph (b).
(ii) Single Life Annuity is an annuity which may be purchased with
the Participant's vested Account or paid directly from the
Trust that provides level monthly payments during the
Participant's lifetime, with payments ceasing upon the
Participant's death.
(iii) Joint and 50% Survivor Annuity is an annuity which may be
purchased with the Participant's vested Account or paid
directly to the Participant for his life, and upon the
Participant's death, 50% of such monthly payment shall be
payable on a monthly basis to the Participant's Spouse for the
Spouse's life. Payments under the Joint and Survivor Annuity
shall cease on the later of the death of the Participant or
the death of the Participant's Spouse.
(b) Participant Election of an Optional Form of Payment
(i) Within 90 days of the Participant's Annuity Starting Date, the
Committee shall provide an election form on which the
Participant may elect an optional form of benefit. In addition
to the election form, the Committee shall provide each
Participant a written explanation of the applicable automatic
form of payment described in Paragraph (a) and of the optional
forms of payment described in Article 8. Such explanation
shall describe the circumstances under which the Joint and 50%
Survivor Annuity will be provided and explanation of the
financial effect of electing not to have such form.
Furthermore, the written explanation shall provide a general
description of the eligibility conditions (if any) and other
material features of the optional forms of payment including
sufficient information regarding the relative values of the
optional forms of payment and the automatic form of payment.
If payment is scheduled to commence prior to the Participant's
Normal Retirement Date, the written explanation must
-86-
<PAGE> 93
also inform the Participant of is rights (if any) to defer
receipt of the Distribution until his Normal Retirement Date.
If a Participant makes a request for additional information
that is received 90 days prior to the Annuity Starting Date,
such information must be furnished within 30 days. The
Participant will then be entitled to a 90 day period in which
to make or change an election, even if such 90-day period
extends beyond the Participant's Annuity Starting Date and, in
such case, the Participant's first payment shall be made after
such election form has been received, on a retroactive basis,
if necessary.
(ii) A married Participant's election to receive an optional form
of payment shall be valid only if the Participant's Spouse
(after receipt of the written explanation described in
Paragraph (b)(i) consents in writing on a form provided by the
Committee in the presence of a notary public or Plan
representative to the Participant's election. The Spouse's
consent must be made within 90 days of the Participant's
Annuity Starting Date and must acknowledge the effect of such
consent. However, if the Participant establishes to the
satisfaction of the Committee that his Spouse's consent cannot
be obtained because he has no Spouse, because his Spouse
cannot be located, or because of other circumstances as
determined by applicable Treasury Regulations, The Committee
may treat the Participant's election as an election for which
spousal consent was obtained. A Spouse's consent pursuant to
this paragraph shall be irrevocable.
(iii) A Participant may revoke his election of an optional form of
payment or make a new election (provided any required spousal
consent is obtained) at any time prior to his Annuity Starting
Date. Furthermore, the Participant's election shall cease to
be valid upon the marriage of the Participant or upon the
remarriage of the Participant following the death or divorce
of the Spouse giving the consent to the Participant's
election. If the Participant revokes his election or if such
election otherwise ceases to be valid, the Participant's
vested Account shall be payable under the applicable automatic
form of payment described in Paragraph (a).
(iv) If a Distribution is one to which Sections 401(a)(11) and 417
of the Internal Revenue Code do apply, such Distribution may
commence less than 30 days but not less than 7 days after the
notice described above is given, provided that:
(A) the Committee clearly informs the Participant that
the Participant has a right to a period of at least
30 days after receiving the notice to consider the
decision of (i) whether or not to elect a
Distribution and (ii) whether to waive a joint and
survivor annuity and elect an optional form of
distribution;
-87-
<PAGE> 94
(B) the Participant, after receiving the notice,
affirmatively elects a Distribution;
(C) the Participant is permitted to revoke an affirmative
Distribution election at least until the Annuity
Starting Date or, if later, at any time prior to the
expiration of the 7-day period that begins the day
after the explanation of the joint and survivor
annuity is provided to the Participant;
(D) the Participant's Annuity Starting Date is after the
date that the explanation of the joint and survivor
annuity is provided to the Participant; and
(E) the Distribution in accordance with the affirmative
election does not commence before the expiration of
the 7-day period that begins the day after the
explanation of the joint and survivor annuity is
provided to the Participant.
(c) Pre-Retirement Survivor Annuity
(i) Except as provided in subparagraph (iii) below, if a married
Participant dies prior to his Annuity Starting Date, the
Participant's vested Account shall be paid to the
Participant's Spouse in the form of a Single Life Annuity
payable for the life of the Spouse (the "Pre-Retirement
Survivor Annuity"). The Spouse may, however, elect to receive
the Participant's vested Account in a lump sum as provided in
Article 8. The election of an optional distribution form must
be made within ninety days of the Participant's death on a
form provided by the Committee for such purpose.
(ii) During the Applicable Period (defined below), the Plan shall
provide each Participant with a written explanation of the
Pre-Retirement Survivor Annuity. Such explanation shall
contain comparable information as provided in the notice
described in paragraph (b)(i). The "Applicable Period" shall
mean whichever of the following periods ends last:
(A) The period beginning with the first Plan Year in
which the Participant attains age 32 and ending with
the close of the Plan Year in which the Participant
attains age 34;
(B) A reasonable period of time ending after the Employee
becomes a Participant; or
(C) A reasonable period after Participant first becomes
subject to Code ss. 417.
-88-
<PAGE> 95
However, if a Participant terminates his Employment
prior to the attainment of age 35, the "Applicable
Period" shall mean the one-year period immediately
preceding and immediately following the Participant's
Termination Date. If the Participant is subsequently
re-hired on or after the attainment of age 35, the
Participant shall receive a new explanation within
the "Applicable Period" descried in the preceding
paragraph.
(iii) A married Participant may waive the Pre-Retirement Survivor
Annuity by properly completing and filing a form with the
Committee during the period beginning on the first day of the
Plan Year during which the Participant attains age 35 and
ending on the Participant's death. In addition, the married
Participant may name a non-spouse Beneficiary to receive the
death benefit. However, the married Participant's waiver of
the Pre-Retirement Survivor Annuity shall be void unless the
Participant's Spouse (after receipt of the explanation of the
Pre-Retirement Survivor Annuity described in subparagraph (ii)
above) consents in writing on a form provided by the Plan
Administrator in the presence of a notary public or Plan
representative to the Participant's waiver of the
Pre-Retirement Survivor Annuity. The Spouse's consent must
acknowledge the effect of such consent and must specifically
state the non-spouse beneficiary, if any, selected by the
Participant. However, if the Participant establishes to the
satisfaction of the Plan Administrator that his Spouse's
consent cannot be obtained because he has no Spouse, because
his Spouse cannot be located, or because of other
circumstances as determined by applicable Treasury
Regulations, the Committee may treat the Participant's
election as an election for which spousal consent was
obtained. A Spouse's consent pursuant to this paragraph shall
be irrevocable.
(iv) If the Participant waives the Pre-Retirement Survivor Annuity
(with spousal consent), the Participant's Account will be
distributed to the Participant's Beneficiary as provided in
Section 8.05(b). A married Participant may revoke his waiver
of the Pre-Retirement Survivor Annuity at any time prior to
his death. Furthermore, the Participant's waiver shall cease
to be valid upon the remarriage of the Participant following
the death or divorce of the spouse giving the consent to the
waiver of the Pre-Retirement Survivor Annuity. If the
Participant revokes his waiver or if such election otherwise
ceases to be valid, any death benefit payable to the
Participant's Spouse shall be determined pursuant to
subparagraph (i) above.
(v) If a unmarried Participant dies prior to his Annuity Starting
Date, the Participant's vested Account shall be distributed to
the Beneficiary as provided in Section 8.05(b).
-89-
<PAGE> 96
(vi) If a Participant dies on or after his Annuity Starting Date,
no death benefits will be paid under this Paragraph (c) or
under Section 8.05. Instead, any death benefits will be
determined in accordance with the distribution option selected
by the Participant. The Beneficiary may elect to accelerate
any death benefit into a lump sum by notifying the Committee
within ninety days of the Participant's death on a form
provided by the Committee for such purpose.
-90-
<PAGE> 1
EXHIBIT 11
COMPUTATION OF NET EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
SEPTEMBER 30 SEPTEMBER 30
------------ ------------
1997 1997
---- ----
<S> <C> <C>
Net income for period $3,063,304 $5,604,343
Accumulated preferred stock dividend for period (165,318) (237,195)
---------- ----------
Net earnings available to common stockholders $2,899,986 $5,367,148
Weighted number of common shares outstanding
during period 6,291,000 6,119,344
Net effect of dilutive stock options based upon the
treasury stock method (292,087) (301,700)
---------- ----------
Weighted number of shares used in calculating 5,998,913 5,817,644
primary earnings per share
PRIMARY NET EARNINGS PER SHARE $ 0.483 $ 0.923
========== ==========
Net effect of dilutive stock options based upon the
treasury method for fully diluted (273,292) (273,292)
Weighted number of shares used in calculating
fully diluted earnings per share 6,017,708 5,846,052
FULLY DILUTED NET EARNINGS PER SHARE $ 0.482 $ 0.918
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS OF SUMMIT HOLDING SOUTHEAST, INC. AS OF AND
FOR THE SIX-MONTH PERIOD ENDED SEPTEMBER 30, 1997, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH SUMMIT HOLDING SOUTHEAST, INC. AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTER AND SIX MONTH AND PERIOD ENDED SEPTEMBER 30, 1997.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<DEBT-HELD-FOR-SALE> 228,006
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 22,441
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 256,670
<CASH> 6,480
<RECOVER-REINSURE> 9,791
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 565,407
<POLICY-LOSSES> 358,679
<UNEARNED-PREMIUMS> 60,352
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 12,970
<NOTES-PAYABLE> 25,040
0
16,397
<COMMON> 58
<OTHER-SE> 77,678
<TOTAL-LIABILITY-AND-EQUITY> 565,407
11,639
<INVESTMENT-INCOME> 7,485
<INVESTMENT-GAINS> 1,211
<OTHER-INCOME> 15,258
<BENEFITS> 9,037
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 14,242
<INCOME-PRETAX> 8,547
<INCOME-TAX> 2,943
<INCOME-CONTINUING> 5,604
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,604
<EPS-PRIMARY> .92
<EPS-DILUTED> .92
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
