<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 31, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------
HORIZON PHARMACIES, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-2441557
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
275 W. PRINCETON DRIVE
PRINCETON, TEXAS 75407
(972) 736-2424
(Address, including zip code, of Principal Executive Offices)
HORIZON PHARMACIES, INC. 401(k) PLAN
(Full title of the plan)
COPIES TO:
HORIZON PHARMACIES, INC. DOUGLAS A. BRANCH, ESQ.
275 W. PRINCETON DRIVE PHILLIPS MCFALL MCCAFFREY MCVAY &
PRINCETON, TEXAS 75407 MURRAH, P.C.
TELEPHONE: (972) 736-2424 12TH FLOOR, ONE LEADERSHIP SQUARE
211 N. ROBINSON
(Name, address, including zip code, OKLAHOMA CITY, OKLAHOMA 73102
and telephone number, including TELEPHONE: (405) 235-4100
area code, of agent for service)
<TABLE>
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF SECURITIES TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 180,000 shares $10.82 $1,947,600 $575.00
Interests in the Plan (3) (3) (3) (3)
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on the number of shares estimated to be acquired by or
issued to the trustee (the "Trustee") of the trust established in
connection with the HORIZON Pharmacies, Inc. 401(k) Plan (the
"Plan"), or issued by the Company to the Plan, during the three-to-
five year period beginning with the effective date of this
Registration Statement.
(2) Estimated solely for purposes of calculating the registration
fee in accordance with Rule 457(c) and (h).
(3) Pursuant to Rule 416(c) under the Securities Act of 1933, there
are also registered hereunder such additional indeterminate number of
interests to be offered or sold pursuant to the employee benefit plan
described herein.
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- --------------------------------------------------------------------------------
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
HORIZON Pharmacies, Inc. (the "Registrant") will send or give to all
participants in the HORIZON Pharmacies, Inc. 401(k) Plan (the "Plan") the
document(s) containing information specified by Part I of this Form S-8
Registration Statement (the "Registration Statement") as specified in Rule
428(b)(1) promulgated by the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933 (the "1933 Act"). The
Registrant has not filed such document(s) with the Commission, but such
documents (along with the documents incorporated by reference into the
Registration Statement pursuant to Item 3 of Part II hereof) shall constitute
a prospectus that meets the requirements of Section 10(a) of the 1933 Act.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed by the Registrant with the Commission are
hereby incorporated by reference in this Registration Statement:
(a) The Registrant's prospectus dated July 8, 1997 filed pursuant to
Rule 424(b) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which contains audited financial statements for the Registrant's
latest fiscal year for which such statements have been filed;
(b) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the prospectus
referred to in (a) above;
(c) The Plan's latest Annual Report on Form 11-K, as filed pursuant to
Section 15(d) of the Exchange Act;
(d) The description of the Registrant's common stock, par value $.01
per share (the "Common Stock"), contained in the Registrant's Registration
Statement on Form 8-A filed with the Commission on April 21, 1997, and Form
8-A/A filed with the Commission on June 10, 1997, including any amendment to
such registration statement or report filed for the purpose of updating such
description; and
(e) All documents, reports and definitive proxy statements filed by the
Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange
Act, which are filed subsequent to the date hereof and prior to the filing of
a post-effective amendment which indicates the termination of the offering
made hereby.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
-2-
<PAGE>
The Bylaws of the Registrant provide that directors and officers of the
Registrant may be indemnified by the Registrant for acts taken by such
persons while acting in their capacities as officers or directors of the
Registrant to the extent that any such acts were taken in good faith and the
officer or director reasonably believed the acts to be in or not opposed to
the best interests of the Registrant, and, with respect to criminal action or
proceedings, the officer or director had no reasonable cause to believe his
conduct was unlawful. Insofar as indemnification for liabilities arising
under the 1933 Act may be permitted pursuant to the foregoing provisions, the
Registrant has been informed that in the opinion of the Commission such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
The following are exhibits to the Form S-8 Registration Statement.
Exhibit No. Name of Exhibit
----------- ---------------
4.1 Form of Stock Certificate, incorporated by reference to
Exhibit 4.1 to the Registrant's Amendment No. 1 to Form SB-2
Registration Statement (No. 333-25257) as filed with the
Commission on May 30, 1997.
4.2 HORIZON Pharmacies, Inc. 401(k) Plan.
5.1 Opinion of Phillips McFall McCaffrey McVay & Murrah, P.C.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Howard & Waltrip, P.C.
23.3 Consent of Phillips McFall McCaffrey McVay & Murrah, P.C.
24.1 Power of Attorney (included as part of the Signature Page).
The Registrant hereby undertakes, in lieu of an opinion of counsel
concerning compliance with the requirements of ERISA or an Internal Revenue
Service ("IRS") determination letter that the plan is qualified under Section
401 of the Internal Revenue Code, that it has submitted the plan and will
submit any amendments thereto to the IRS in a timely manner and has made and
will make all changes required by the IRS in order to qualify the plan.
ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3)
of the 1933 Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment
-3-
<PAGE>
thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20% change in the maximum offering price set
forth in the "Calculation of Registration Fee" table in the effective
Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or 15(d) of the Exchange Act that are incorporated by reference in
the Registration Statement;
(2) That, for the purpose of determining any liability under the 1933
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act
(and, where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by
the final adjudication of such issue.
-4-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirement for filing on Form S-8 and has duly caused this Form
S-8 Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Princeton, Texas, on this 30th day
of December, 1997.
HORIZON PHARMACIES, INC.
By: /s/ Ricky D. McCord
------------------------------------
Ricky D. McCord, President and Chief
Operating Officer
Know all men by these presents, that each person whose signature appears
below constitutes and appoints Ricky D. McCord as his true and lawful
attorney-in-fact and agent, with full power of substitution, for him, and in
his name, place and stead, in any and all capacities to sign any or all
amendments or post-effective amendment to this Registration Statement, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto the
said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons, in the
capacities and on the dates indicated.
<TABLE>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Ricky D. McCord Chairman of the Board of December 30, 1997
- -------------------------------- Directors, Chief Operating
Ricky D. McCord Officer and President
PRINCIPAL EXECUTIVE OFFICER
/s/ David W. Frauhiger Chief Financial Officer, December 30, 1997
- -------------------------------- Treasurer
David W. Frauhiger
PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER
/s/ Charlie K. Herr Director December 30, 1997
- --------------------------------
Charlie K. Herr
/s/ Carson A. McDonald Director December 30, 1997
- --------------------------------
Carson A. McDonald
/s/ Robert D. Mueller Director December 30, 1997
- --------------------------------
Robert D. Mueller
/s/ Sy S. Shahid Director December 30, 1997
- --------------------------------
Sy S. Shahid
/s/ Phillip H. Yeilding Director December 30, 1997
- --------------------------------
Phillip H. Yeilding
</TABLE>
-5-
<PAGE>
THE PLAN. Pursuant to the requirements of the Securities Act of 1933,
HORIZON Pharmacies, Inc., which administers the HORIZON Pharmacies, Inc.
401(k) Plan, has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Princeton, State of Texas, on this 30th day of December, 1997.
HORIZON PHARMACIES, INC. 401(k) PLAN
By: HORIZON Pharmacies, Inc.,
Plan Administrator
By: /s/ Ricky D. McCord
----------------------------------
Ricky D. McCord, President
<PAGE>
EXHIBIT INDEX
<TABLE>
Place at Which it Appears
Exhibit No. Name of Exhibit In Sequentially Numbered Pages
- ----------- --------------- ------------------------------
<S> <C> <C>
4.1 Form of Stock Certificate. Incorporated by reference to Exhibit 4.1 to the
Registrant's Amendment No. 1 to Form SB-2
Registration Statement (No. 333-25257), as filed
with the Commission on May 30, 1997.
4.2 HORIZON Pharmacies, Inc. 401(k) Plan.
5.1 Opinion of Phillips McFall McCaffrey McVay &
Murrah, P.C.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Howard & Waltrip, P.C.
23.3 Consent of Phillips McFall McCaffrey McVay &
Murrah, P.C.
24.1 Power of Attorney. Included as part of the Signature Page.
</TABLE>
<PAGE>
HORIZON PHARMACIES, INC.
401(k) PLAN
-------------------------------
FIRST AMENDMENT
-------------------------------
WHEREAS, Horizon Pharmacies, Inc., a Texas corporation ("the Company") has
adopted the Horizon Pharmacies, Inc. 401(k) Plan ("the Plan") which became
effective January 1, 1996; and
WHEREAS, the Company has the authority to amend the Plan pursuant to Section
8.1.1 of the Plan; and
WHEREAS, the Company desires to permit Employees to make Rollover Contributions
prior to participating in the Plan;
NOW, THEREFORE, the Plan is hereby amended pursuant to the authority stated in
Section 8.1.1 of the Plan to read as set forth on the attached page, which is
incorporated herein by reference as follows:
ARTICLE IV CONTRIBUTIONS
Section 4.4.1 Rollover Contribution: Amount
For illustrative purposes, the new provisions have been underlined, but only for
the purposes of this Amendment; their final form within the Plan shall not
include the underlining.
This Amendment shall be effective June 1, 1997. It is effective with respect to
Employees who terminate employment with the Employer on or after the effective
date of the Amendment so that the rights to benefits from the Plan, if any, of
Employees who terminated employment before that date shall be determined
according to the Plan as it was on the date they terminated employment, except
as may be otherwise specifically provided in this Amendment, and except to the
extent required by law.
This Amendment is adopted on condition that the Internal Revenue Service does
not ever determine, by ruling or determination letter, that this Amendment would
result in the Plan's failure to be "qualified" in the meaning of Section 401(a)
of the Internal Revenue Code of 1986, as amended, and exempt from taxation under
Section 501(a) of the Code. If the Internal Revenue Service does determine that
this Amendment would disqualify the Plan and it appears that no modification to
it which would be satisfactory to the Employer would also be acceptable to the
Service, then the Amendment shall be void and of no effect.
ADOPTED this 20 day of MAY, 1997
HORIZON PHARMACIES, INC.
By: /s/ David W. Frauhicer
--------------------------------
David W. Frauhicer
--------------------------------
Print or Type Name
Title: C.F.O.
--------------------------------
<PAGE>
4.3.4 SUPPLEMENTAL CONTRIBUTIONS: VESTING
At any time, a PARTICIPANT'S interest in his Supplemental Contribution
Account shall be fully vested and not subject to forfeiture prior to
the withdrawal or distribution of such balance pursuant to this PLAN.
4.4.1 ROLLOVER CONTRIBUTION: AMOUNT
The PLAN ADMINISTRATOR may accept Rollover Contributions from or on
behalf of a PARTICIPANT, AND ALSO FROM OR ON BEHALF OF ANY EMPLOYEE
WHO IS NOT A PARTICIPANT SOLELY BECAUSE HE HAS NOT YET ACCRUED THE
REQUIRED AMOUNT OF PRELIMINARY SERVICE (PURSUANT TO SECTIONS 3.2 AND
3.3). AN EMPLOYEE WHO MAKES SUCH AN EARLY ROLLOVER CONTRIBUTION SHALL
BE TREATED AS A PARTICIPANT FOR ALL PURPOSES, EXCEPT THAT HE SHALL NOT
RECEIVE AN ALLOCATION OR SHARE OF ANY EMPLOYER CONTRIBUTION, INCLUDING
ELECTIVE CONTRIBUTIONS, UNTIL HE SATISFIES THE REQUIREMENTS OF ARTICLE
III.
As used herein, Rollover Contribution means all or a portion of an
"eligible rollover distribution" described in CODE sec. 402(c), or an
amount paid or distributed out of an individual retirement account or
individual retirement annuity described in CODE sec. 408(d)(3)(A)(ii).
The PLAN ADMINISTRATOR may require such assurance and proofs of fact
from the PARTICIPANT as may be necessary to determine whether an
amount the PARTICIPANT desires to contribute is a Rollover
Contribution as defined herein. He may further require the PARTICIPANT
to agree to indemnify the PLAN for any adverse consequences which may
follow if a contribution proves not to have been a Rollover
Contribution. An EMPLOYEE on whose behalf a transfer described in this
Section is made shall agree to cooperate fully with the PLAN
ADMINISTRATOR in effecting any and all corrective measures which may
be required by an agency of the federal government to prevent the
PLAN'S disqualification as a result of the transfer.
4.4.2 ROLLOVER CONTRIBUTION ACCOUNT
For the benefit of any PARTICIPANT on whose behalf the PLAN has
accepted any Rollover Contribution, there shall be maintained a
Rollover Account. Rollover Accounts shall be adjusted as provided in
Article VI, and shall be closed when the balances of such accounts,
including allocable earnings, gains and losses, have been distributed
pursuant to this PLAN.
4.4.3 ROLLOVER CONTRIBUTIONS: ALLOCATION
Any Rollover Contribution received by the PLAN pursuant to this
Article IV shall be credited as it is received to the Rollover
Account(s) of the PARTICIPANT on whose behalf it was received.
4.4.4 ROLLOVER CONTRIBUTIONS: VESTING
The Rollover Contributions received by the PLAN on behalf of any
PARTICIPANT shall be fully vested in such PARTICIPANT and not subject
to forfeiture prior to the time they are distributed pursuant to this
PLAN.
22
<PAGE>
HORIZON PHARMACIES, INC.
401(k) PLAN
BY: /s/ David W. Frauhicer
-------------------------
(SIGNATURE)
David W. Frauhicer
-------------------------
(NAME PRINTED OR TYPED)
TITLE: [ILLEGIBLE]
-------------------------
DATE ADOPTED: 1/1/96
-------------------------
<PAGE>
OUTLINE OF KEY PLAN PROVISIONS
1. DEFINITION OF COMPENSATION (See PLAN Section 2.7):
Generally, "COMPENSATION" means wages that are reportable as income on IRS
Form W-2.
In addition, COMPENSATION means elective deferrals (including, for example,
Elective Contributions under this PLAN) and any amounts deferred under a
"cafeteria Plan".
2. MINIMUM PARTICIPATION STANDARDS (See PLAN Section 3.2):
An EMPLOYEE may participate in the PLAN as of any Entry Date when he or
she:
(a) is an EMPLOYEE
(b) is at least 21 years old
(c) has been an EMPLOYEE for at least 1 year, except that this
requirement is waived for EMPLOYEES hired prior to July 1, 1996.
3. BASIC CONTRIBUTIONS (See PLAN Sections 4.1.1 - 4.1.5):
(a) AMOUNT: Basic Matching Contributions may be made in an amount to be
determined by the EMPLOYER.
Also, an additional Basic Profit-Sharing Contribution may be
contributed in an amount to be determined by the EMPLOYER.
(b) ALLOCATION: Basic Matching Contributions shall be allocated to those
PARTICIPANTS who make Elective Contributions as a uniform percentage
of the PARTICIPANT'S Elective Contributions, EXCEPT that a
PARTICIPANT'S Elective Contributions in excess of 6% of the
PARTICIPANT'S ELECTIVE COMPENSATION shall not be taken into account.
Basic Profit-Sharing Contributions shall be allocated to
PARTICIPANTS who during that year accrue 1,000 HOURS OF SERVICE and
who are EMPLOYEES on the last day of the year on a pro rata basis
according to ELIGIBLE COMPENSATION.
(c) VESTING: Basic Matching and Profit-Sharing Contributions become
vested according to the following schedule:
---------------------------------------------------
---------------------------------------------------
YEARS OF SERVICE Vested Percentage
---------------------------------------------------
---------------------------------------------------
Less than 2 %
2 20%
3 40%
4 60%
5 80%
6 or more 100%
---------------------------------------------------
---------------------------------------------------
<PAGE>
4. ELECTIVE CONTRIBUTIONS (See PLAN Sections 4.2.1 - 4.2.5):
Elective deferrals may be contributed to the PLAN by PARTICIPANTS in
amounts equal to not more than 15% of their ELECTIVE COMPENSATION.
Elective Contributions are 100% vested at all times.
5. EXPENSES (See PLAN Section 6.4):
The Expenses of maintaining this PLAN which are not paid by the EMPLOYER
shall be satisfied directly out of the PLAN'S assets, except for certain
transactional charges which shall be paid by the particular PARTICIPANTS
involved.
6. INVESTMENTS (See PLAN Section 6.1.2):
PARTICIPANTS are permitted to direct the investment of amounts held by the
PLAN on their behalf.
7. FORM OF RETIREMENT BENEFIT (See PLAN Section 7.4):
Distributions are in the form of lump sums unless an optional form of
benefit is selected.
Married PARTICIPANTS cannot designate a non-spouse beneficiary of the death
benefit.
PLEASE NOTE
THE FOREGOING STATEMENTS ARE MERELY SUMMARIES OF SPECIFIC PLAN PROVISIONS,
PROVIDED FOR QUICK REFERENCE. THE PLAN TEXT ITSELF CONTROLS AND MUST BE REFERRED
TO FOR THE ACTUAL AND COMPLETE PLAN PROVISIONS.
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I STATEMENT OF PURPOSE AND INTENTIONS
1.1 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Intent to Qualify. . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II DEFINITIONS
2.1 Anniversary Date . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.2 Annuity Starting Date . . . . . . . . . . . . . . . . . . . . . . .2
2.3 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.4 Break in Service Year . . . . . . . . . . . . . . . . . . . . . . .2
2.5 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.6 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.7 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.8 Date of Employment . . . . . . . . . . . . . . . . . . . . . . . . .3
2.9 Date of Re-employment . . . . . . . . . . . . . . . . . . . . . . .3
2.10 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.11 Elective Compensation . . . . . . . . . . . . . . . . . . . . . . .3
2.12 Eligible Compensation . . . . . . . . . . . . . . . . . . . . . . .3
2.13 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.14 Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.15 Hour of Service . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.16 Individual Accounts . . . . . . . . . . . . . . . . . . . . . . . .7
2.17 Insurance Company . . . . . . . . . . . . . . . . . . . . . . . . .7
2.18 Limitation Year . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.19 Normal Retirement Age and Normal Retirement Date . . . . . . . . . .7
2.20 Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.21 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.22 Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . . .8
2.23 Plan Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.24 Preliminary Service . . . . . . . . . . . . . . . . . . . . . . . .8
2.25 Qualified Matching Contributions ("QMAC") . . . . . . . . . . . . .8
Qualified Nonelective Contributions ("QNC") . . . . . . . . . . . .8
2.
26 Required Beginning Date . . . . . . . . . . . . . . . . . . . . . .8
2.27 Retirement and Retirement Date . . . . . . . . . . . . . . . . . . .9
2.28 Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
2.29 Total and Permanent Disability . . . . . . . . . . . . . . . . . . .9
2.30 Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
2.31 Vested Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . .9
2.32 Years of Service . . . . . . . . . . . . . . . . . . . . . . . . . .9
ARTICLE III PARTICIPATION
3.1 Commencement of Participation . . . . . . . . . . . . . . . . . . 11
3.2 Minimum Participation Standards . . . . . . . . . . . . . . . . . 11
3.3 Preliminary Service . . . . . . . . . . . . . . . . . . . . . . . 11
3.4 Active Participation; Inactive Participation . . . . . . . . . . . 12
3.5 Cessation of Participation . . . . . . . . . . . . . . . . . . . . 12
3.6 Participation on Resumption of Employment . . . . . . . . . . . . 12
<PAGE>
ARTICLE IV CONTRIBUTIONS
4.1.1 Basic Contributions: Amount . . . . . . . . . . . . . . . . . . . 13
4.1.2 Basic Contribution Accounts . . . . . . . . . . . . . . . . . . . 13
4.1.3 Basic Contributions: Allocations . . . . . . . . . . . . . . . . . 14
4.1.4 Basic Contributions: Vesting . . . . . . . . . . . . . . . . . . . 15
4.1.5 Forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2.1 Elective Contributions: Amount . . . . . . . . . . . . . . . . . . 16
4.2.2 Elective Contribution Account . . . . . . . . . . . . . . . . . . 19
4.2.3 Elective Contributions: Allocations . . . . . . . . . . . . . . . 19
4.2.4 Elective Contributions: Vesting . . . . . . . . . . . . . . . . . 19
4.2.5 Elective Contributions: Withdrawals . . . . . . . . . . . . . . . 19
4.3.1 Supplemental Contributions: Amount . . . . . . . . . . . . . . . . 21
4.3.2 Supplemental Contribution Accounts . . . . . . . . . . . . . . . . 21
4.3.3 Supplemental Contributions: Allocations . . . . . . . . . . . . . 21
4.3.4 Supplemental Contributions: Vesting . . . . . . . . . . . . . . . 22
4.4.1 Rollover Contribution: Amount . . . . . . . . . . . . . . . . . . 22
4.4.2 Rollover Contribution Account . . . . . . . . . . . . . . . . . . 22
4.4.3 Rollover Contributions: Allocation . . . . . . . . . . . . . . . . 22
4.4.4 Rollover Contributions: Vesting . . . . . . . . . . . . . . . . . 22
ARTICLE V REQUIRED NON-DISCRIMINATION TESTING
5.1.1 Limitation on Additions . . . . . . . . . . . . . . . . . . . . . 23
5.1.2 Suspense Account . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.2.1 Top-Heavy Provisions: Application . . . . . . . . . . . . . . . . 27
5.2.2 Top-Heavy Determination . . . . . . . . . . . . . . . . . . . . . 27
5.2.3 Special Rules for Top-Heavy Plans . . . . . . . . . . . . . . . . 30
5.3 Actual Deferral Percentage Test . . . . . . . . . . . . . . . . . 31
5.4 Average Contribution Percentage Test . . . . . . . . . . . . . . . 34
5.5 Multiple Use of Alternative Limitation . . . . . . . . . . . . . . 38
ARTICLE VI ADMINISTRATION OF PLAN ASSETS
6.1.1 The Investment Fund . . . . . . . . . . . . . . . . . . . . . . . 40
6.1.2 Employee Directed Investments . . . . . . . . . . . . . . . . . . 40
6.2 Net Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.3 Distribution Adjustments . . . . . . . . . . . . . . . . . . . . . 41
6.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VII DISTRIBUTIONS
7.1 Termination of Employment (Including Disability) Before
Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.2 Death Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.3 Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.4 Form of Retirement Benefit . . . . . . . . . . . . . . . . . . . . 45
7.5 Retirement Benefits: Election of Forms and Commencement of
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
<PAGE>
ARTICLE VIII GENERAL PROVISIONS
8.1.1 Plan Modification: Authority . . . . . . . . . . . . . . . . . . . 50
8.1.2 Plan Modification: Merger . . . . . . . . . . . . . . . . . . . . 50
8.1.3 Plan Modification: Termination . . . . . . . . . . . . . . . . . . 50
8.2.1 Duties: Plan Administrator . . . . . . . . . . . . . . . . . . . . 50
8.2.2 Duties: Employer . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.3 Benefit Claims Procedure . . . . . . . . . . . . . . . . . . . . . 51
8.4 Review Procedure . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.5 Qualification of the Plan and Conditions of Contributions . . . . 52
8.6 Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.7 Spendthrift Clause . . . . . . . . . . . . . . . . . . . . . . . . 53
8.8 Annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.9 Limitations of the Employer's Liability . . . . . . . . . . . . . 53
8.10 Non-Guarantee of Employment . . . . . . . . . . . . . . . . . . . 54
8.11 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE IX DIRECT ROLLOVERS
9.1 General Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
<PAGE>
ARTICLE I
STATEMENT OF PURPOSE AND
INTENTIONS
1.1 PURPOSE
The EMPLOYER adopts this PLAN as a defined contribution retirement plan
of the profit-sharing type with a cash or deferred arrangement to provide
retirement benefits and incidental benefits to certain EMPLOYEES who
qualify for such benefits as more particularly provided herein.
1.2 INTENT TO QUALIFY
It is the EMPLOYER'S intent that this PLAN be a qualified plan in the
meaning of sec. 401 of the Internal Revenue Code of 1986, as amended,
that any trust that may become part hereof be exempt from tax under
sec. 501(a) of the CODE, and that contributions made by the EMPLOYER be
deductible under sec. 404 of the CODE. This PLAN shall be interpreted,
applied and administered in a manner consistent with this intent to
qualify. All amounts contributed to, accumulated and/or held pursuant to
this PLAN shall not be diverted to or used for other than the exclusive
benefit of the PARTICIPANTS or their beneficiaries until after such
amounts have been distributed from this PLAN. In the event that the
portion of this PLAN comprising the qualified cash or deferred
arrangement fails to qualify under the provisions of sec. 401(k) of the
CODE, the PLAN as a whole shall nonetheless be interpreted so as to
qualify under sec. 401(a) of the CODE.
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ARTICLE II
DEFINITIONS
For the purposes of this Plan, when the following terms appear in this Plan in
BOLDFACE type, they shall have the meanings indicated in this Article unless a
different meaning is clearly required by the context.
Whenever required by the context, masculine pronouns shall include the feminine,
and singular the plural.
2.1 ANNIVERSARY DATE means each January 1.
2.2 ANNUITY STARTING DATE means the first day of the first period for which
an amount is payable as an annuity or any other form.
2.3 BENEFICIARY is defined in Section 8.6, except as specifically provided
to the contrary elsewhere in this PLAN.
2.4 BREAK IN SERVICE YEAR means a twelve-consecutive-month period commencing
on an ANNIVERSARY DATE (or, for the purposes of determining an
EMPLOYEE'S PRELIMINARY SERVICE, each Preliminary Computation Period, as
described in Article III) and during which an EMPLOYEE (or former
EMPLOYEE) is credited with not more than 500 HOURS OF SERVICE.
2.5 CODE means the Internal Revenue Code of 1986, as amended, and all
regulations promulgated thereunder.
2.6 COMPANY means Horizon Pharmacies, Inc., a Texas corporation.
2.7 COMPENSATION means wages, salary, and/or other remuneration that is
receivable by an individual during a PLAN YEAR in exchange for SERVICE
and that is required to be reported as income on the individual's Form
W-2 for federal income tax purposes.
In addition, COMPENSATION shall include the following amounts:
(a) all elective deferrals (as defined by CODE sec. 402(g)(3)) made
by the PARTICIPANT during the PLAN YEAR pursuant to a cash or
deferred arrangement sponsored by the EMPLOYER, including those
described by Section 4.2.1 of this PLAN; and
(b) all COMPENSATION accrued by the PARTICIPANT during the PLAN YEAR
but which is not then included as taxable income of the
PARTICIPANT pursuant to a "cafeteria" or other such plan
maintained by the EMPLOYER according to CODE sec. 125.
In addition to other applicable limitations set forth in the PLAN, and
notwithstanding any other provision of the PLAN to the contrary, for
PLAN YEARS beginning on or after January 1, 1994, the annual
COMPENSATION of each EMPLOYEE taken into account under the PLAN shall
not exceed the OBRA '93 annual COMPENSATION limit. The OBRA '93 annual
compensation limit is $150,000, as adjusted by the Commissioner for
increases in the cost of living in accordance with section 401(a)(17)(B)
of the Internal Revenue Code. The cost-of-living adjustment in effect
for a calendar year applies to any period, not exceeding
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12 months, over which COMPENSATION is determined (determination period)
beginning in such calendar year. If a determination period consists of
fewer than 12 months, the OBRA '93 annual compensation limit will be
multiplied by a fraction, the numerator of which is the number of months
in the determination period, and the denominator of which is 12.
For PLAN YEARS beginning on or after January 1, 1994, any reference in
this PLAN to the limitation under section 401(a)(17) of the CODE shall
mean the OBRA '93 annual compensation limit set forth in this provision.
If COMPENSATION for any prior determination period is taken into account
in determining an EMPLOYEE'S benefits accruing in the current PLAN YEAR,
the COMPENSATION for the prior determination period is subject to the
OBRA '93 annual compensation limit in effect for that prior
determination period. For this purpose, for determination periods
beginning before the first day of the first PLAN YEAR beginning on or
after January 1, 1994, the OBRA '93 annual compensation limit is
$150,000.
In applying this limit, the family aggregation rules of CODE sec.
414(q)(6) shall apply, except that in applying such rules, the term
"family" shall include only the spouse of the EMPLOYEE and any lineal
descendants of the EMPLOYEE who have not attained age 19 before the
close of the PLAN YEAR. In addition, if this limit applies to a family
unit, then for the purposes of this PLAN, each affected family member
shall be credited with an amount of COMPENSATION on a pro rata basis, so
that such credited amount, when compared to the adjusted compensation
limit, shall have the same direct proportion that exists in comparing
that person's actual COMPENSATION to the sum of all that family's
affected members' COMPENSATION.
2.8 DATE OF EMPLOYMENT means the date on which an EMPLOYEE has his first
HOUR OF SERVICE.
2.9 DATE OF RE-EMPLOYMENT means the first date as of which an EMPLOYEE has
an HOUR OF SERVICE after his most recent termination of SERVICE, EXCEPT
that for the purposes of determining PRELIMINARY SERVICE, DATE OF
RE-EMPLOYMENT means the first date as of which an EMPLOYEE is credited
with an HOUR OF SERVICE after he most recently has accrued a BREAK IN
SERVICE YEAR which permits his prior PRELIMINARY SERVICE to be
disregarded.
2.10 EFFECTIVE DATE means January 1, 1996.
2.11 ELECTIVE COMPENSATION means that portion of a PARTICIPANT'S COMPENSATION
that is attributable to SERVICE performed while the PARTICIPANT HAD IN
EFFECT an election to have Elective Contributions made on his behalf,
pursuant to Article IV.
2.12 ELIGIBLE COMPENSATION means that portion of a PARTICIPANT'S COMPENSATION
that is attributable to SERVICE performed while the PARTICIPANT COULD
HAVE HAD IN EFFECT an election to have Elective Contributions made on
his behalf, pursuant to Article IV, regardless of whether the
PARTICIPANT made such an election or not.
2.13 EMPLOYEE means a natural person who performs SERVICE for the EMPLOYER in
exchange for COMPENSATION, including any LEASED EMPLOYEE (as described
below) but excluding any independent contractor who is not a LEASED
EMPLOYEE. For the purposes of this PLAN, EMPLOYEE shall be further
described as follows.
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(a) HIGHLY COMPENSATED EMPLOYEE ("HCE") means:
(1) The group of HCEs includes any EMPLOYEE who during the PLAN YEAR
performs services for the EMPLOYER and who (i) is a 5-percent
owner, (ii) receives compensation for the PLAN YEAR in excess of
the sec. 414(q)(1)(B) amount for the PLAN YEAR, (iii) receives
compensation for the PLAN YEAR in excess of the sec. 414(q)(1)(C)
amount for the PLAN YEAR and is a member of the top paid group of
EMPLOYEES within the meaning of sec. 414(q)(4), or (iv) is an
officer and receives compensation during the PLAN YEAR that is
greater than 50 percent of the dollar limitation in effect under
sec. 415(b)(1)(A). If no officer satisfies the compensation
requirement during the PLAN YEAR, the highest paid officer for
such year shall be treated as an HCE.
For purposes of determining who is an HCE, compensation means
compensation within the meaning of sec. 415(c)(3) as set forth in
the PLAN for purposes of determining the Section 415 limits,
except that amounts excluded pursuant to sections 125, 402(e)(3),
402(h)(1)(B) and 403(b) are included. If compensation used for
purposes of determining the Section 415 limits under the PLAN is
not defined as total compensation as provided under sec.
415(c)(3) and the regulations thereunder, then for purposes of
determining who is an HCE, compensation means compensation within
the meaning of sec. 1.415-2(d)(11)(I) of the Income Tax
Regulations, except that amounts excluded pursuant to sections
125, 402(e)(3), 402(h)(1)(B) and 403(b) are included.
(2) If an EMPLOYEE is a family member of either a 5-percent owner
(whether active or former) or an HCE who is one of the 10 most
HCEs ranked on the basis of compensation paid by the EMPLOYER
during such year, then the family member and the 5-percent owner
or top-ten HCE shall be aggregated. In such case, the family
member and 5-percent owner or top-ten HCE shall be treated as a
single EMPLOYEE receiving compensation and plan contributions or
benefits equal to the sum of the compensation and benefits of the
family member and 5-percent owner or top-ten HCE. For purposes of
this section, family member includes the spouse, lineal
ascendants and descendants of the EMPLOYEE or former EMPLOYEE,
and the spouses of such lineal ascendants and descendants.
(3) The determination of who is an HCE, including the determination
of the number and identity of EMPLOYEES in the top paid group,
the number of EMPLOYEES treated as officers and the compensation
that is taken into account, shall be made in accordance with the
sec. 414(q) and sec. 1.414(q)-1T of the temporary Income Tax
Regulations to the extent they are not inconsistent with the
method established above.
(b) KEY EMPLOYEE means (solely for the purposes of Section 5.2) an EMPLOYEE
who, at any time during the PLAN YEAR or 4 preceding PLAN YEARS, was:
(1) an officer of the EMPLOYER having an annual COMPENSATION greater
than 50% of the amount in effect under CODE sec. 415(b)(1)(A) for
any such PLAN YEAR; or
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(2) one of the ten EMPLOYEES having annual COMPENSATION greater than
the limitation in effect under CODE sec. 415(c)(1)(A) and owning
(or considered as owning within the meaning of CODE sec. 318) the
largest interests of the EMPLOYER; or
(3) a 5 percent owner of the EMPLOYER; or
(4) a 1 percent owner of the EMPLOYER having an annual COMPENSATION
of more than $150,000.
For the purposes of this PLAN, KEY EMPLOYEE shall be described more
particularly by (and in any event, interpreted consistent with) CODE
sec. 416(l)(I) and regulations promulgated thereunder.
(c) LEASED EMPLOYEE means a person who is employed (either as a
common law employee or an independent contractor) by a leasing
organization (but not by the EMPLOYER) and who performs services
for the EMPLOYER on a substantially full-time basis for a period
of at least one year, where such services are of a type
historically performed by EMPLOYEES within the business field of
the EMPLOYER, and where such services are provided pursuant to a
contract between the leasing organization and the EMPLOYER,
EXCEPT that if such person is covered under a money purchase
pension plan maintained by the leasing organization and which
provides (1) a nonintegrated employer contribution rate of at
least 7 1/2% of compensation for services performed prior to
January 1, 1987, and at least 10% of compensation for services
performed after December 31, 1986, with compensation being
determined according to CODE sec. 415(c)(3), but including
amounts contributed by the EMPLOYER pursuant to a salary
reduction agreement which are excludable from the EMPLOYEE'S
gross income under CODE sec. 125, 402(e)(3), 402(h), or 403(b);
(2) immediate participation; and (3) full and immediate vesting,
AND if the sum of all such persons is not more than 20% of the
EMPLOYER'S "nonhighly compensated workforce" (as defined in 26
CFR 1.414(n)-2(f)(3)(ii)), then for the purposes of this PLAN
such person is not a LEASED EMPLOYEE, and is at that time
ineligible for a benefit or any vested interest in this PLAN.
Any provisions of this Section and this PLAN to the contrary
notwithstanding, the term "LEASED EMPLOYEE" shall be more
specifically defined by, and LEASED EMPLOYEES shall be treated
under this PLAN consistent with, CODE sec. 414(n) and 26 CFR
1.414(n)-2.
2.14 EMPLOYER means the COMPANY, and any other person or business
organization which has adopted and maintains this PLAN on behalf of its
Employees with the consent of the COMPANY.
In addition, to the extent required for this PLAN'S qualification for
special tax treatment under the CODE, and to the extent otherwise
required by applicable law, including for example the determination of a
PARTICIPANT'S PRELIMINARY SERVICE and YEARS OF SERVICE, EMPLOYER also
means any predecessor organization which previously maintained this PLAN
on behalf of its employees (but only with regard to that period of time
during which the PLAN was maintained by such organization(s)), and any
employer which, together with the EMPLOYER (as otherwise defined in this
Section), is a member of a controlled group of corporations in the
meaning of CODE sec. 414(b), or is a member of a group of trades or
business (whether or not incorporated) under common control in the
meaning of CODE
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sec. 414(c), or is a member of an affiliated service group in the
meaning of CODE sec. 414(m), or is otherwise required to be aggregated
by CODE sec. 414(o).
2.15 HOUR OF SERVICE means:
(a) each hour for which an EMPLOYEE is paid, or entitled to payment,
by the EMPLOYER for the performance of duties;
(b) each hour for which an EMPLOYEE is directly or indirectly paid,
or entitled to payment, by the EMPLOYER on account of a period of
time during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including disability),
layoff, jury duty, military duty or leave of absence except with
respect to payments made or due under a plan maintained solely
for the purpose of complying with applicable workers'
compensation or unemployment compensation or disability insurance
laws or which are solely in reimbursement to the EMPLOYEE for
medical or medically-related expenses incurred by the EMPLOYEE;
however, no more than 501 HOURS OF SERVICE shall be credited
pursuant to this paragraph to an EMPLOYEE on account of any
single continuous period during which the EMPLOYEE performs no
duties (whether or not such period occurs in a single PLAN YEAR);
and
(c) each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the EMPLOYER; however,
an HOUR OF SERVICE shall not be credited under both this
paragraph and paragraph (a) or (b), above.
HOURS OF SERVICE credited under paragraphs (b) and (c), above, shall be credited
in accordance with Department of Labor Regulations found at 29 CFR sec.
2530.200b-2(b). HOURS OF SERVICE shall be credited to the appropriate PLAN YEAR
in accordance with 29CFR sec. 2530.200b-2(c).
HOURS OF SERVICE included pursuant to paragraph (a) shall be determined
according to records of employment maintained by the EMPLOYER. If such records
do not provide an adequate basis for determining the actual number of HOURS OF
SERVICE accrued by a particular EMPLOYEE (e.g. a salaried EMPLOYEE), then HOURS
OF SERVICE under paragraph (a) shall be credited to the EMPLOYEE on a weekly
basis and the EMPLOYEE shall be credited with 45 HOURS OF SERVICE for every week
in which he has accrued at least one HOUR OF SERVICE as otherwise described in
paragraph (a).
SPECIAL RULE FOR MATERNITY OR PATERNITY ABSENCES
If an EMPLOYEE is absent from work due to
(a) the pregnancy of the EMPLOYEE,
(b) the birth of a child to the EMPLOYEE,
(c) the placement of a child with the EMPLOYEE pursuant to the EMPLOYEE'S
adoption of the child, or
(d) the care of such child described in (b) or (c) above immediately
following its birth or placement,
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the EMPLOYEE shall nonetheless be credited with the number of HOURS OF
SERVICE which normally would have been credited to the EMPLOYEE but for
said absence (or, if the PLAN ADMINISTRATOR is unable to determine said
number, with eight (8) HOURS OF SERVICE for each regularly scheduled
workday the EMPLOYEE is absent), to a maximum of 501 HOURS OF SERVICE,
PROVIDED that this special crediting of HOURS OF SERVICE occurs during
only one PLAN YEAR, and
PROVIDED that the PLAN YEAR in which such HOURS OF SERVICE are credited
is the PLAN YEAR in which the absence begins, unless such crediting
would not be necessary to avoid a BREAK IN SERVICE YEAR in said PLAN
YEAR, in which case such HOURS OF SERVICE shall be credited as they
accrue in the PLAN YEAR immediately following the PLAN YEAR in which the
absence begins, and
PROVIDED that the crediting of such HOURS OF SERVICE shall be solely for
the purpose of avoiding a BREAK IN SERVICE YEAR, and shall not operate
to increase any EMPLOYEE'S or former EMPLOYEE'S vested percentage or
retirement benefit, nor shall the crediting have any other operative
effect regarding this PLAN, and
PROVIDED that, under rules established by the PLAN ADMINISTRATOR, the
EMPLOYEE may be required to provide to the PLAN ADMINISTRATOR written
certification from the EMPLOYEE'S attending doctor or other professional
attendant at birth or representative of the relevant adoption agency to
establish that the absence from work is for the reasons referred to
above.
2.16 INDIVIDUAL ACCOUNTS means, for any PARTICIPANT, those accounts which are
both listed below and maintained pursuant to this PLAN on his behalf.
(a) Basic Matching Contribution Account
(b) Basic Profit-Sharing Contribution Account
(c) Elective Contribution Account
(d) Rollover Contribution Account
(e) Supplemental Contribution Account
2.17 INSURANCE COMPANY means a legal reserve life insurance company, licensed
to do business in the state of Texas, with which the TRUSTEES have
entered into a contract to provide benefits under the PLAN.
2.18 LIMITATION YEAR, for purposes of determining the limitation on certain
additions to the PLAN for the benefit of an EMPLOYEE as described in
Section 5.1.1, means a twelve-consecutive-month period beginning on an
ANNIVERSARY DATE.
2.19 NORMAL RETIREMENT AGE and NORMAL RETIREMENT DATE are defined in Article
VII under "RETIREMENT".
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2.20 PARTICIPANT means an EMPLOYEE or former EMPLOYEE who has become a
PARTICIPANT or resumed participation pursuant to Section 3.1 or 3.6 and
who has not subsequently ceased to participate as provided in Section
3.5. A PARTICIPANT may be Active or Inactive as provided in Section 3.4.
2.21 PLAN means this Horizon Pharmacies, Inc. 401 (k) Plan.
2.22 PLAN ADMINISTRATOR means one or more persons appointed by the TRUSTEES
to control and manage the operation and administration of the PLAN. The
person or persons so appointed shall constitute a named fiduciary or
fiduciaries for purposes of the Employee Retirement Income Security Act
of 1974. If no PLAN ADMINISTRATOR is appointed, then the EMPLOYER (or
the TRUSTEE(S) if the PLAN is trusteed) shall be the PLAN ADMINISTRATOR.
2.23 PLAN YEAR means a period of time commencing on an ANNIVERSARY DATE and
ending with the day immediately preceding the next ANNIVERSARY DATE.
2.24 PRELIMINARY SERVICE is defined in Article III.
2.25 QUALIFIED MATCHING CONTRIBUTIONS ("QMAC") means Employer Contributions
(other than Elective Contributions) made to a plan for a PARTICIPANT on
account of any EMPLOYEE Contributions or Elective Contributions made to
a plan by or on behalf of the PARTICIPANT, PROVIDED that the amounts of
the Employer Contributions are subject to the nonforfeitability and
distribution limitations of Income Tax Reg. 26 CFR 1.401(k)-1(c) & (d)
the same as Elective Contributions.
QUALIFIED NONELECTIVE CONTRIBUTIONS ("QNC") means EMPLOYER Contributions
made to a plan which are not Matching Contributions (i.e. not made on
account of any employee or Elective Contribution) or Elective
Contributions, but which are subject to the nonforfeitability and
distribution limitations of Income Tax Reg. 26 CFR 1.401(k)-1(c) & (d)
the same as Elective Contributions.
2.26 REQUIRED BEGINNING DATE
(a) GENERAL RULE. REQUIRED BEGINNING DATE means, for any PARTICIPANT,
April 1 of the calendar year following the calendar year in which
the PARTICIPANT attains age 70 1/2.
(b) TRANSITION RULES: The REQUIRED BEGINNING DATE of any PARTICIPANT
who attained age 70 1/2 before January 1, 1988, shall be
determined according to (1) or (2) below:
(1) The REQUIRED BEGINNING DATE of a PARTICIPANT who is NOT a 5%
owner is April 1 of the calendar year following the later
of:
(A) the calendar year in which the PARTICIPANT attained age
70 1/2, or
(B) the calendar year in which the PARTICIPANT retires.
(2) The REQUIRED BEGINNING DATE of any PARTICIPANT who is a 5%
owner during any year beginning after December 31, 1979, is
April 1 of the calendar year following the later of:
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(A) the calendar year in which the PARTICIPANT attained age
70 1/2, or
(B) the earlier of
(i) the calendar year with or within which ends the PLAN
YEAR in which the PARTICIPANT becomes a 5% owner, or
(ii) the calendar year in which the PARTICIPANT retires.
(c) The REQUIRED BEGINNING DATE of any PARTICIPANT who is not a
5% owner, who attained age 70 1/2 during 1988, and who did
not retire as of January 1, 1989, is April 1, 1990.
(d) 5% owner, for purposes of this Section, means a PARTICIPANT
who is a 5% owner within the meaning of CODE sec. 416(l)
(except without regard to whether the PLAN is actually
top-heavy) at any time during the PLAN YEAR ending with or
within the calendar year in which the PARTICIPANT attains
age 66 1/2, or any subsequent PLAN YEAR.
2.27 RETIREMENT and RETIREMENT DATE are defined in Article VII under
"RETIREMENT".
2.28 SERVICE means employment of the EMPLOYEE by the EMPLOYER for the
performance of labor or duties by the EMPLOYEE on behalf of the EMPLOYER
and for which the EMPLOYEE is to be compensated by the EMPLOYER.
2.29 TOTAL AND PERMANENT DISABILITY means a physical or mental condition that
in the opinion of the PLAN ADMINISTRATOR precludes a person from
employment for which he is qualified because of his experience,
training, and education, and that is expected to continue for not less
than 12 months. The PLAN ADMINISTRATOR'S opinion regarding the degree
and permanence of the disability shall be supported by medical evidence.
2.30 TRUSTEES means those persons or the organization with which the
EMPLOYER has entered into a trust agreement to provide benefits under
the PLAN.
However, at any time that the PLAN is not trusteed, "TRUSTEES"
shall mean the COMPANY.
2.31 VESTED BENEFIT means, at any time, the sum of the PARTICIPANT'S vested
INDIVIDUAL ACCOUNT balances.
2.32 YEARS OF SERVICE
(a) GENERAL RULE
Subject to the exclusions set forth in (b) below, a PARTICIPANT'S
period of employment taken into account to determine his YEARS OF
SERVICE for the purposes of this PLAN shall be measured as follows.
A PARTICIPANT shall be credited with one YEAR OF SERVICE for each
twelve-consecutive-month period which commenced on an ANNIVERSARY
DATE on or after the EFFECTIVE DATE and during which the
PARTICIPANT accrued at least 1,000 HOURS OF SERVICE.
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In addition, if the PARTICIPANT was an EMPLOYEE on the EFFECTIVE DATE,
he shall also be credited with one YEAR OF SERVICE for each
twelve-consecutive-month period which commenced on an ANNIVERSARY DATE
prior to the EFFECTIVE DATE and during which the PARTICIPANT accrued at
least 1,000 HOURS OF SERVICE.
(b) EXCLUSIONS
If a PARTICIPANT or former PARTICIPANT accrues a BREAK IN SERVICE YEAR,
all YEARS OF SERVICE attributable to his employment prior to that BREAK
IN SERVICE YEAR shall thereafter be disregarded unless either
(1) his Vested Percentage is greater than zero at the time the BREAK
IN SERVICE YEAR has accrued, or
(2) the number of his consecutive BREAK IN SERVICE YEARS is less than
(A) or (B), whichever is greater, where
(A) equals 5, and
(B) equals the aggregate number of his YEARS OF SERVICE before
the BREAK IN SERVICE YEARS, not taking into account YEARS OF
SERVICE previously disregarded because of prior BREAK IN
SERVICE YEARS.
In addition, if a PARTICIPANT or former PARTICIPANT has at least five
consecutive BREAK IN SERVICE YEARS, all YEARS OF SERVICE attributable to
his employment subsequent to said five consecutive BREAK IN SERVICE
YEARS shall thereafter be disregarded for purposes of determining his
vested interest in the amount which had been allocated to his Basic
Contribution Account (pursuant to Section 4.1.3) prior to the period of
such five consecutive BREAK IN SERVICE YEARS.
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ARTICLE III
PARTICIPATION
3.1 COMMENCEMENT OF PARTICIPATION
An EMPLOYEE shall commence participation in the PLAN on the first Entry
Date on which he meets the PLAN'S Minimum Participation Standards.
Notwithstanding the above, the PRELIMINARY SERVICE requirement described
in Section 3.2(b) of the PLAN is waived with respect to EMPLOYEES who
are at least twenty-one (21) years of age and whose DATE OF EMPLOYMENT
is prior to July 1, 1996. Each such EMPLOYEE shall commence
participation in the PLAN on the Entry Date immediately following his
DATE OF EMPLOYMENT.
The Entry Dates shall be the EFFECTIVE DATE, and thereafter the first
day of each calendar quarter (i.e. each January 1, April 1, July 1, and
October 1).
3.2 MINIMUM PARTICIPATION STANDARDS
An EMPLOYEE meets the PLAN'S Minimum Participation Standards at any time
when he satisfies the following conditions:
(a) He is an EMPLOYEE.
(b) He is credited with at least one (1) year of PRELIMINARY SERVICE.
(c) He is at least twenty-one (21) years of age.
3.3 PRELIMINARY SERVICE
An EMPLOYEE shall be credited with a year of PRELIMINARY SERVICE for
each complete Preliminary Computation Period in which he has not less
than 1,000 HOURS OF SERVICE, whether or not he was continuously employed
during the Preliminary Computation Period.
Preliminary Computation Periods shall have a duration of twelve
consecutive months. Each EMPLOYEE'S initial Preliminary Computation
Period shall commence as of his DATE OF EMPLOYMENT (or, after a BREAK IN
SERVICE YEAR that permits his prior PRELIMINARY SERVICE to be
disregarded, his DATE OF RE-EMPLOYMENT). Thereafter, the Preliminary
Computation Periods shall commence as of each ANNIVERSARY DATE,
beginning with the first ANNIVERSARY DATE following the EMPLOYEE'S DATE
OF EMPLOYMENT (or DATE OF REEMPLOYMENT, if applicable).
If an EMPLOYEE accrues a BREAK IN SERVICE YEAR, then his PRELIMINARY
SERVICE attributable to his employment prior to that BREAK IN SERVICE
YEAR shall thereafter be disregarded unless either
(a) his Vested Percentage is greater than zero at the time the BREAK
IN SERVICE YEAR accrues, or
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(b) the number of his consecutive BREAK IN SERVICE YEARS is less than
(1) or (2), whichever is greater, where
(1) equals 5, and
(2) equals the aggregate number of his Years of PRELIMINARY
SERVICE before the BREAK IN SERVICE YEARS, not taking into
account Years of PRELIMINARY SERVICE previously disregarded
because of prior BREAK IN SERVICE YEARS.
3.4 ACTIVE PARTICIPATION; INACTIVE PARTICIPATION
Once an EMPLOYEE has commenced participation (or if he subsequently
ceased to participate, once he has resumed participation), he shall be
an Active PARTICIPANT with respect to each HOUR OF SERVICE accrued while
he is an EMPLOYEE. At any time thereafter at which he is not an
EMPLOYEE, but before his participation has ceased, he shall be an
Inactive PARTICIPANT.
3.5 CESSATION OF PARTICIPATION
A PARTICIPANT shall cease to participate in this PLAN (without regard to
his status as an EMPLOYEE) as of the first date on which he has most
recently terminated his employment as an EMPLOYEE and also has no rights
(present or contingent) to any benefit under this PLAN.
3.6 PARTICIPATION ON RESUMPTION OF EMPLOYMENT
A former EMPLOYEE who participated during the period of his prior
employment and who does not have BREAK IN SERVICE YEARS which permit his
PRELIMINARY SERVICE earned during his prior employment to be disregarded
shall resume participation as of his first HOUR OF SERVICE upon
resumption of employment as an EMPLOYEE.
Any other former EMPLOYEE shall commence participation as of the first
Entry Date which occurs on or after the date of his resumption of
employment as an EMPLOYEE and as of which he has satisfied the Minimum
Participation Standards described in Section 3.2.
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ARTICLE IV
CONTRIBUTIONS
4.1.1 BASIC CONTRIBUTIONS: AMOUNT
For each PLAN YEAR, the EMPLOYER may contribute amounts to the PLAN.
These amounts shall be called Basic Contributions, and shall be
determined according to the following provisions.
(a) BASIC MATCHING CONTRIBUTION
The EMPLOYER may contribute amounts as a match of Elective
Contributions for the PLAN YEAR. The amount of the match will
equal such amount as the EMPLOYER deems appropriate, EXCEPT that
a PARTICIPANT'S Elective Contributions in excess of six percent
(6%) of the PARTICIPANT'S ELECTIVE COMPENSATION for the PLAN YEAR
shall not be taken into account.
For the purposes of this subsection (a), the amount of Elective
Contributions to be matched shall be determined without regard to
any withdrawals of Elective Contributions that were made during
that PLAN YEAR (see Section 4.2.5).
(b) BASIC PROFIT-SHARING CONTRIBUTION
The EMPLOYER may also contribute as a Basic Contribution such
additional amount as the EMPLOYER deems appropriate.
(c) BASIC TOP-HEAVY CONTRIBUTION
If a PARTICIPANT is to be credited with some additional amount
pursuant to the "top-heavy" provisions of Section 5.2 of this
PLAN, such additional amount shall be contributed and credited as
an additional portion of the Basic Contribution for that PLAN
YEAR.
Any of the provisions of this Section to the contrary notwithstanding,
no amounts may be contributed to the PLAN as Basic Contributions in
excess of the maximum amount that the EMPLOYER may deduct from its net
income subject to federal income taxation for the EMPLOYER'S taxable year
on account of which such contributions have been made plus any amount
which may be currently contributed and "carried over" for succeeding
taxable years pursuant to CODE sec. 404(a)(3)(A)(ii) (assuming that the
EMPLOYER is subject to federal income taxation), nor shall such amounts
exceed the maximum amount which may be allocated consistently with the
limitations stated in Section 5.1.1.
Basic Contributions shall be allocated among the PLAN's PARTICIPANTS
pursuant to Section 4.1.3 in a uniform and nondiscriminatory manner.
4.1.2 BASIC CONTRIBUTION ACCOUNTS
Each PARTICIPANT shall have maintained on his behalf a Basic
Contribution Account, which shall be adjusted as provided in Article VI
and which shall be closed when the PARTICIPANT is entitled to no further
benefits under the terms of the PLAN.
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4.1.3 BASIC CONTRIBUTIONS: ALLOCATIONS
(a) BASIC MATCHING CONTRIBUTIONS: ALLOCATIONS
As of the last day of each calendar quarter, a portion of the
Basic Matching Contribution for the PLAN YEAR, if any, shall be
allocated to the Basic Matching Contribution Account of each
PARTICIPANT who is allocated an Elective Contribution for that
calendar quarter.
Each such PARTICIPANT shall be allocated a portion of that Basic
Matching Contribution, which portion shall equal a uniform
percentage (for example, 10%) of his Elective Contributions for
the PLAN YEAR, EXCEPT that a PARTICIPANT'S Elective Contributions
in excess of six percent (6%) of the PARTICIPANT'S ELECTIVE
COMPENSATION for the PLAN YEAR shall not be taken into account.
(b) BASIC PROFIT-SHARING CONTRIBUTIONS: ALLOCATIONS
As of the last day of each PLAN YEAR, after the allocation
described in subsection (a) above, a portion of the Basic
Profit-Sharing Contribution for the PLAN YEAR, if any, shall be
allocated to the Basic Profit-Sharing Contribution Account of
each PARTICIPANT who both (1) has not less than 1,000 HOURS OF
SERVICE in the PLAN YEAR and (2) is an EMPLOYEE on the last day
of the PLAN YEAR, and of each PARTICIPANT who terminated
employment as an EMPLOYEE during the PLAN YEAR for reason of his
death, TOTAL AND PERMANENT DISABILITY, or RETIREMENT (as defined
in Article VII).
Each such PARTICIPANT shall be allocated a portion of that Basic
Profit-Sharing Contribution so that such portion, when compared
with the entire amount of Basic Profit-Sharing Contribution that
is allocated to all such PARTICIPANTS for the PLAN YEAR pursuant
to this subsection, shall bear the same direct proportion that
the PARTICIPANT'S ELIGIBLE COMPENSATION for that PLAN YEAR bears
to the aggregate ELIGIBLE COMPENSATION of all such PARTICIPANTS
for that PLAN YEAR.
(c) BASIC TOP-HEAVY CONTRIBUTIONS: ALLOCATIONS
Also, as of the last day of each PLAN YEAR, each PARTICIPANT who
is entitled to be credited with an additional amount of Basic
Contribution pursuant to Section 5.2 of this PLAN shall have such
amount credited to his Basic Contribution Account.
(d) If the PLAN fails to satisfy CODE sec. 401(a)(4), 401(a)(26), or
410(b) because of the HOURS OF SERVICE and/or last day conditions
of this Section 4.1.3 (or of Section 4.1.5 if forfeitures are
reallocated), the conditions shall be suspended to the extent
necessary and the minimum number of additional PARTICIPANTS
needed to satisfy the tests shall receive an allocation for that
PLAN YEAR. PARTICIPANTS who are employed on the last day of the
PLAN YEAR shall be added first, in descending order of their
HOURS OF SERVICE during the PLAN YEAR. If necessary, PARTICIPANTS
who terminated SERVICE during the PLAN YEAR shall then be added,
also in descending order of HOURS OF SERVICE during the PLAN
YEAR.
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4.1.4 BASIC CONTRIBUTIONS: VESTING
(a) At any time, each PARTICIPANT'S interest in his Basic
Contribution Account balance (EXCEPT in Basic Matching
Contributions that are forfeited because they relate to excess
deferrals, excess contributions, or excess aggregate
contributions) shall be stated in terms of his Vested Percentage,
which shall be determined from the following schedule according
to his YEARS OF SERVICE:
YEARS OF SERVICE Vested Percentage
---------------------------------------------------
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
(b) Subsection (a) above notwithstanding, any PARTICIPANT'S Vested
Percentage automatically shall be 100% upon the occurrence of any
of the following events:
(1) his death while an EMPLOYEE;
(2) his termination of employment as an EMPLOYEE due to his
having incurred TOTAL AND PERMANENT DISABILITY while an
EMPLOYEE; or
(3) his attainment of NORMAL RETIREMENT AGE.
(c) Under no circumstances shall any amendment of this PLAN reduce
any PARTICIPANT'S Vested Percentage regarding any benefits
accrued under this PLAN as of the adoption date (or effective
date, if later) of such amendment. With regard to the effect
of such an amendment on subsequently accrued benefits, for
each PARTICIPANT whose Vested Percentage under the PLAN as
amended would at any future time be less than it would be if
determined without regard to such amendment, then provided
that the PARTICIPANT had completed at least three YEARS OF
SERVICE as of the adoption date (or effective date, if later)
of the amendment, such PARTICIPANT may irrevocably elect in a
writing delivered to the PLAN ADMINISTRATOR during the
election period described below to have his Vested Percentage
in his subsequently accrued benefits under this PLAN
determined without regard to such amendment.
For the purpose of this Section, the election period within
which such election may be delivered to the PLAN ADMINISTRATOR
shall begin as of the adoption date of the amendment, and shall
end on the sixtieth day after the latest of:
(1) the adoption date of the amendment;
(2) the effective date of the amendment; or
(3) the date on which the PARTICIPANT received written notice
of the amendment from the EMPLOYER or PLAN ADMINISTRATOR.
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4.1.5 FORFEITURES
(a) On the date as of which a PARTICIPANT accrues the fifth of five
(5) consecutive BREAK in SERVICE YEARS, if the balance credited
to his Basic Contribution Account exceeds his vested interest in
that Account, then his rights (under this PLAN) to such excess
shall be immediately forfeited, with the amount of such
excess becoming a Forfeiture.
Forfeitures may also result from the distribution of a
PARTICIPANT'S entire VESTED BENEFIT due to his termination of
employment as an EMPLOYEE, as further described in Section 7.1.
(b) All Forfeitures which occur pursuant to this PLAN shall be
deposited into a Suspense Account, and thereafter shall be
subject to disposition pursuant to Section 5.1.2.
Basic Matching Contributions that relate to excess deferrals,
excess contributions, or excess aggregate contributions shall be
forfeited and deposited into a Suspense Account, to be applied to
plan Expenses and future Employer Contributions pursuant to
Section 5.1.2.
4.2.1 ELECTIVE CONTRIBUTIONS: AMOUNT
(a) ELECTIVE DEFERRAL
Each PARTICIPANT may elect to defer his receipt of COMPENSATION
that has not yet become available to him. For each PLAN YEAR, the
total amount of COMPENSATION that may be deferred may equal not
more than fifteen percent (15%) of his ELECTIVE COMPENSATION for
the PLAN YEAR.
A PARTICIPANT may elect to defer COMPENSATION attributable to
bonuses at a rate that differs from the rate elected for other
COMPENSATION.
(For the purposes of this Section, the PARTICIPANT'S "ELECTIVE
COMPENSATION for the PLAN YEAR" shall include ELECTIVE
COMPENSATION attributable to SERVICE performed by the PARTICIPANT
during the PLAN YEAR and which, but for the PARTICIPANT'S
elective deferral, would have been received by the PARTICIPANT
within two and one-half months after the close of the PLAN YEAR.)
For each PLAN YEAR, on behalf of each PARTICIPANT who has made
such an elective deferral, the EMPLOYER shall contribute an
amount to the PLAN equal to the amount of the PARTICIPANT'S
elective deferral of COMPENSATION for the PLAN YEAR. This
contribution shall be called an Elective Contribution.
Each Elective Contribution shall be paid to the PLAN by the
EMPLOYER as soon as reasonably practicable (in no event later
than 90 days) after it is withheld by or otherwise paid to the
EMPLOYER. In addition, each Elective Contribution shall be paid
to the PLAN by the EMPLOYER no later than the last day of the
twelve-month period immediately following the PLAN YEAR with
respect to which the contribution is made.
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(b) ELECTION
A PARTICIPANT may elect to change the amount of his elective
deferrals, and therefore the amount of the Elective Contributions
made on his behalf, within the limits prescribed in subsection
(a) above. A PARTICIPANT may also elect to cease his elective
deferrals and Elective Contributions altogether, or, having done
so, may elect to recommence them.
A PARTICIPANT'S election to commence or recommence or to change
the amount of his elective deferrals may become effective only as
of the first day of any prospective calendar quarter. However, a
PARTICIPANT'S election to defer COMPENSATION attributable to
bonuses may take effect prior to the date the bonus is payable.
A PARTICIPANT'S election to cease his elective deferrals
altogether may become effective only as of the first day of any
prospective payroll period.
Any of the provisions of this subparagraph (b) to the contrary
notwithstanding, any election described by this subparagraph (b)
regarding elective deferrals may become effective only after
written notice delivered to the PLAN ADMINISTRATOR within a
reasonable time prior to the effective date of the election.
(c) LIMIT ON AMOUNT
The total sum of any PARTICIPANT'S elective deferrals for any
taxable year of the PARTICIPANT may not exceed the limit
prescribed by IRC Reg. 1.402(g)-1(c). (Generally, for taxable
years beginning in 1995, that limit equals $9,240, except for
adjustments made to take into account elective deferrals made to
annuity contracts under CODE sec. 403(b)).
For the purposes of this subsection (c), "elective deferrals" has
the meaning defined in IRC Reg. 1.402(g)-1(b), including (but not
limited to) Elective Contributions received by this PLAN on the
PARTICIPANT'S behalf.
For any PARTICIPANT, if this limit on elective deferrals is
exceeded, then the following corrective measures are permitted.
(1) The PARTICIPANT may notify the PLAN ADMINISTRATOR of the
excess deferral, and may request that the PLAN ADMINISTRATOR
distribute to the PARTICIPANT an amount not exceeding the
lesser of:
(A) the amount of the excess deferral, plus all income
allocable to the excess deferral;
(B) the sum of all amounts deferred by the PARTICIPANT and
contributed to the PLAN as Elective Contributions on
behalf of the PARTICIPANT with regard to the affected
taxable year, net of any allocable earnings, gains or
losses attributable to such amounts; or
(C) the balance of the PARTICIPANT'S Elective Contribution
Account as of the date of distribution, minus any
amounts of withholding that are legally required.
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In addition, the amount that may be included in a corrective
distribution shall be reduced by any excess contributions
previously distributed to the PARTICIPANT for the PLAN YEAR that
began with or within the affected taxable year of the
PARTICIPANT.
To be effective for the purposes of this PLAN, the PARTICIPANT'S
notice and request must be in writing and delivered to the PLAN
ADMINISTRATOR prior to the first April 15 following the close of
the affected taxable year of the PARTICIPANT.
To the extent that the PARTICIPANT has excess deferrals for the
taxable year calculated by taking into account only elective
deferrals under this PLAN and other PLANS of the EMPLOYER, and
absent actual notification by the PARTICIPANT, the PARTICIPANT
shall be deemed to have provided the notice described above in
this subsection.
(2) A corrective distribution of excess deferrals and allocable
income may be made during the affected taxable year of the
PARTICIPANT only if all of the following conditions are
satisfied.
(A) The PARTICIPANT has designated the amount of the
distribution as being attributable to an excess deferral.
(Because subsection (1) above limits the amount of the
corrective distribution to not more than the amount of
excess deferrals calculated by taking into account only
elective deferrals under this PLAN and other plans of the
EMPLOYER, and absent an actual designation by the
PARTICIPANT, the PARTICIPANT shall be deemed to have
provided the designation described above in this
subsection.)
(B) The corrective distribution is made after the date on which
the PLAN received the excess deferral.
(C) The PLAN has designated the amount of the distribution as
being attributable to an excess deferral.
(3) Not later than the first April 15 following the close of the
affected taxable year of the PARTICIPANT, and after receipt of
the PARTICIPANT'S written notice and request, the PLAN
ADMINISTRATOR may make the appropriate corrective distribution,
consistent with the provisions of this subparagraph (c).
The PLAN ADMINISTRATOR may require that before the corrective
distribution is made, the PARTICIPANT must provide to the PLAN
ADMINISTRATOR additional documentation evidencing the
PARTICIPANT'S representations regarding the excess deferrals.
The income allocable to excess deferrals for the affected taxable year
of the PARTICIPANT shall be determined according to the IRC Reg.
1.402(g)-1(d)(5).
In the event of a corrective distribution of excess deferrals and
allocable income, the balance of the PARTICIPANT'S Elective Contribution
Account shall be reduced accordingly.
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4.2.2 ELECTIVE CONTRIBUTION ACCOUNT
On behalf of each PARTICIPANT who has elected to defer some portion of
his COMPENSATION pursuant to this Article IV, there shall be maintained
an Elective Contribution Account, which shall be adjusted as provided in
Article VI and which shall be closed when the PARTICIPANT is entitled to
no further benefits under the terms of this PLAN.
4.2.3 ELECTIVE CONTRIBUTIONS: ALLOCATIONS
Any Elective Contribution received by the PLAN on behalf of a
PARTICIPANT shall be credited to the Elective Contribution Account of
that PARTICIPANT as of the date on which the contribution was received
by the PLAN, but in any event not later than the last day of the PLAN
YEAR with respect to which the PARTICIPANT deferred COMPENSATION so as
to receive the Elective Contribution.
4.2.4 ELECTIVE CONTRIBUTIONS: VESTING
The Elective Contributions received by the PLAN on behalf of any
PARTICIPANT shall be fully vested in such PARTICIPANT and not subject to
forfeiture prior to the time they are withdrawn or distributed pursuant
to this PLAN.
4.2.5 ELECTIVE CONTRIBUTIONS: WITHDRAWALS
(a) At any time before his RETIREMENT DATE, a PARTICIPANT may apply
to withdraw an amount from his Elective Contribution Account. The
application must be in writing and received by the PLAN
ADMINISTRATOR. If the PARTICIPANT has attained age 59 1/2 or is
not an EMPLOYEE as of the date of distribution, the PARTICIPANT
may withdraw up to the entire balance of his Elective
Contribution Account, including interest or other earnings.
Subject to the additional restrictions of this section, any
other PARTICIPANT may withdraw an amount that does not exceed
the balance of the account attributable to Elective
Contributions made on his behalf, excluding any interest or
other earnings.
(b) If the PARTICIPANT is an EMPLOYEE on the date as of which the
withdrawal is to be distributed, and if the PARTICIPANT has not
yet attained age 59 1/2 as of the date of distribution, the PLAN
ADMINISTRATOR may permit the distribution only to the extent that
the PLAN ADMINISTRATOR reasonably believes that the distribution
is necessary to satisfy an immediate and heavy financial need of
the PARTICIPANT, taking into account all relevant facts and
circumstances.
(1) Any of the following facts and circumstances shall
automatically be deemed by the PLAN ADMINISTRATOR to
constitute an immediate and heavy financial need of the
PARTICIPANT:
(A) expenses for medical care (as defined in CODE sec.
213(d)) that were either previously incurred by the
PARTICIPANT, the PARTICIPANT'S spouse, or any
dependents of the PARTICIPANT (with "dependents" being
as defined by CODE sec. 152) or that are necessary for
these persons to obtain such medical care;
(B) costs directly related to the purchase of a principal
residence for the PARTICIPANT (excluding mortgage
payments);
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(C) payment of tuition and related educational fees for the
next 12 months of post-secondary education for the
PARTICIPANT, or the PARTICIPANT'S spouse, children, or
dependents (as defined in CODE sec. 152);
(D) payments necessary to prevent the eviction of the
PARTICIPANT from the PARTICIPANT'S principal residence,
or foreclosure on the mortgage on that residence; or
(E) any other facts and circumstances that the Commissioner
of the Internal Revenue Service has included through
the publication of revenue rulings, notices, or other
documents of general applicability.
A financial need shall not fail to qualify as immediate and
heavy merely because such need was reasonably foreseeable or
voluntarily incurred by the PARTICIPANT.
(2) In requesting a withdrawal due to financial need, the
PARTICIPANT shall specifically identify the facts and
circumstances which have caused the financial need and shall
state the amount needed to satisfy the need, which may
include amounts necessary to pay any income taxes or
penalties reasonably anticipated to result from the
distribution. The PARTICIPANT shall further state that, to
the extent of the amount requested, the financial need
cannot otherwise be satisfied by:
(A) reimbursement or compensation by insurance or
otherwise;
(B) reasonable liquidation of the PARTICIPANT'S assets, but
only to the extent that such liquidation would not in
itself cause an immediate and heavy financial need;
(C) cessation of elective deferrals or any PARTICIPANT
contributions permitted by the PLAN;
(D) other distributions or nontaxable (at the time of the
loan) loans from this PLAN or any other plan maintained
by the EMPLOYER or any other employer; and/or
(E) borrowing from commercial sources on reasonable
commercial terms.
For the purposes of this subsection, the PARTICIPANT'S
resources shall be deemed to include those assets of the
PARTICIPANT'S spouse and minor children to the extent that
such assets are reasonably available to the PARTICIPANT.
(3) Before the withdrawal may be permitted, the PLAN
ADMINISTRATOR shall receive from the PARTICIPANT any
documentation that the PLAN ADMINISTRATOR requires in the
performance of his fiduciary duty to substantiate that the
withdrawal is necessary to satisfy the financial need
identified by the PARTICIPANT. Under no circumstances shall
the PLAN ADMINISTRATOR distribute more than the PLAN
ADMINISTRATOR reasonably believes is necessary to satisfy
the financial need identified by the Participant.
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(c) The PLAN ADMINISTRATOR shall approve or deny the
PARTICIPANT'S application for such a withdrawal within
a reasonable amount of time after receipt of such
application. If approved, payment shall be made by the
PLAN ADMINISTRATOR as soon as administratively
practicable, but in any event within ninety (90) days
after the PLAN ADMINISTRATOR'S receipt of the
PARTICIPANT'S application.
The PLAN ADMINISTRATOR shall also issue any denial of such
an application as soon as administratively practicable.
Such a denial shall be delivered in writing and shall state
specifically the reasons for such denial.
(d) The PLAN ADMINISTRATOR may limit the frequency of
withdrawals. Such limit shall apply uniformly to all
PARTICIPANTS.
(e) The amount of any withdrawal from an Elective
Contribution Account pursuant to this Section shall be
charged against that Account as of the date that the
withdrawal is distributed from the PLAN.
Absent written directions from the PARTICIPANT to the
contrary, a withdrawal shall be taken pro rata from the
PARTICIPANT'S balances in the PLAN's investment options
(described in Section 6.1.2) as of the date of
withdrawal.
4.3.1 SUPPLEMENTAL CONTRIBUTIONS: AMOUNT
For any PLAN YEAR in which the PLAN ADMINISTRATOR determines that the
average of the actual deferral ratios and/or the actual contribution
ratios of PARTICIPANTS who are HCE'S exceeds the limit determined
pursuant to Section 5.3(b) or 5.4(b), as applicable, the EMPLOYER may
make Supplemental Contributions that meet the requirements for QUALIFIED
NONELECTIVE CONTRIBUTIONS or QUALIFIED MATCHING CONTRIBUTIONS described
in Article II. Supplemental Contributions shall be made solely for the
purpose of complying with the limitations of the applicable Section, and
shall not exceed the amount necessary to satisfy the test described
therein, subject to the limits of Section 5. 1.
4.3.2 SUPPLEMENTAL CONTRIBUTION ACCOUNTS
A Supplemental Contribution Account shall be maintained on behalf of
each PARTICIPANT who will be allocated a portion of the Supplemental
Contribution. The account shall be adjusted as provided in Article VI
and shall be closed when the PARTICIPANT is entitled to no further
benefits under the terms of THE PLAN.
4.3.3 SUPPLEMENTAL CONTRIBUTIONS: ALLOCATIONS
As of the last day of the PLAN YEAR, a portion of the Supplemental
Contribution for the PLAN YEAR, if any, shall be allocated to the
Supplemental Contribution Account of each PARTICIPANT who (1) is not an
HCE; (2) is allocated an Elective Contribution for that PLAN YEAR; (3)
has not less than 1,000 HOURS OF SERVICE in the PLAN YEAR, and (4) is an
EMPLOYEE on the last day of the PLAN YEAR.
Each such PARTICIPANT shall be allocated a portion of that Supplemental
Contribution so that such portion, when compared with the entire amount
of Supplemental Contribution that is allocated to all such PARTICIPANTS
for the PLAN YEAR, shall bear the same direct proportion that the
PARTICIPANTS COMPENSATION for that PLAN YEAR bears to the aggregate
COMPENSATION of all such PARTICIPANTS for that PLAN YEAR.
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4.3.4 SUPPLEMENTAL CONTRIBUTIONS: VESTING
At any time, a PARTICIPANT'S interest in his Supplemental Contribution
Account shall be fully vested and not subject to forfeiture prior to the
withdrawal or distribution of such balance pursuant to this PLAN.
4.4.1 ROLLOVER CONTRIBUTION: AMOUNT
The PLAN ADMINISTRATOR may accept Rollover Contributions from or on
behalf of a PARTICIPANT.
As used herein, Rollover Contribution means all or a portion of an
"eligible rollover distribution" described in CODE sec. 402(c), or an
amount paid or distributed out of an individual retirement account or
individual retirement annuity described in CODE sec. 408(d)(3)(A)(ii).
The PLAN ADMINISTRATOR may require such assurance and proofs of fact
from the PARTICIPANT as may be necessary to determine whether an amount
the PARTICIPANT desires to contribute is a Rollover Contribution as
defined herein. He may further require the PARTICIPANT to agree to
indemnify the PLAN for any adverse consequences which may follow if a
contribution proves not to have been a Rollover Contribution. An
EMPLOYEE on whose behalf a transfer described in this Section is made
shall agree to cooperate fully with the PLAN ADMINISTRATOR in effecting
any and all corrective measures which may be required by an agency of
the federal government to prevent the PLAN's disqualification as a
result of the transfer.
4.4.2 ROLLOVER CONTRIBUTION ACCOUNT
For the benefit of any PARTICIPANT on whose behalf the PLAN has accepted
any Rollover Contribution, there shall be maintained a Rollover Account.
Rollover Accounts shall be adjusted as provided in Article VI, and shall
be closed when the balances of such accounts, including allocable
earnings, gains and losses, have been distributed pursuant to this PLAN.
4.4.3 ROLLOVER CONTRIBUTIONS: ALLOCATION
Any Rollover Contribution received by the PLAN pursuant to this Article
IV shall be credited as it is received to the Rollover Account(s) of the
PARTICIPANT on whose behalf it was received.
4.4.4 ROLLOVER CONTRIBUTIONS: VESTING
The Rollover Contributions received by the PLAN on behalf of any
PARTICIPANT shall be fully vested in such PARTICIPANT and not subject to
forfeiture prior to the time they are distributed pursuant to this PLAN.
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ARTICLE V
REQUIRED NON-DISCRIMINATION TESTING
5.1.1 LIMITATION ON ADDITIONS
(a) The Annual Additions to this PLAN for the benefit of a
PARTICIPANT in a LIMITATION YEAR are the sum of:
(1) Allocations to his Elective Contribution Account for the
LIMITATION YEAR, directly or indirectly, of the Elective
Contributions to the PLAN; and
(2) Allocations to his Basic Matching Contribution Account for
the LIMITATION YEAR, directly or indirectly, of the Basic
Matching Contributions to the PLAN; and
(3) Allocations to his Basic Profit-Sharing Account for the
LIMITATION YEAR, directly or indirectly, of the Basic
Profit-Sharing Contributions to the PLAN; and
(4) Allocations to his Supplemental Contribution Account for the
LIMITATION YEAR, directly or indirectly, of any Supplemental
Contributions to the PLAN; and
(5) Allocations to any individual medical account maintained an
behalf of the PARTICIPANT by the EMPLOYER pursuant to a
pension or annuity PLAN, as described in Sections 415(l)(1)
and 419A(d)(2) of the CODE.
Contributions shall not fail to be Annual Additions to this PLAN
merely because such contributions are excess contributions or
excess aggregate contributions, or merely because such excess
contributions or excess aggregate contributions are distributed.
Excess deferrals are Annual Additions only if they are not
distributed as provided in Article IV.
(b) A PARTICIPANT'S Maximum Annual Addition for a LIMITATION YEAR is
the lesser of:
(1) 25% of the PARTICIPANT'S compensation for the LIMITATION
YEAR; or
(2) the greater of:
(A) $30,000; or
(B) 25% of the defined benefit dollar limitation set forth
in Section 415(b)(1)(A) of the CODE as in effect for
the LIMITATION YEAR or such other amount as the
Secretary of the Treasury or his delegate may from time
to time authorize pursuant to Section 415(d) of the
CODE.
(c) Any provisions of this PLAN to the contrary notwithstanding, the
Annual Additions to this PLAN for the benefit of a PARTICIPANT in
a LIMITATION YEAR shall in no event exceed the PARTICIPANT'S
Maximum Annual Addition for that LIMITATION YEAR.
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If allocations pursuant to Article IV would otherwise result in
the limitation in the preceding sentence being exceeded for a
PARTICIPANT in a LIMITATION YEAR because of the allocation of
Forfeitures, if any, or because of a reasonable error in
estimating a PARTICIPANTS annual compensation, or because of a
reasonable error in determining the amount of elective deferrals
(within the meaning of CODE sec. 402(g)(3), or because of any
other facts and circumstances which the Internal Revenue service
finds to be appropriate consistent with sec. 415 of the CODE and
regulations promulgated thereunder, then the PLAN ADMINISTRATOR
shall reduce that PARTICIPANT'S Annual Additions, but only to the
extent that the sum of such Additions no longer exceeds his
Maximum Annual Additions.
This reduction of the PARTICIPANT'S Annual Additions shall be
accomplished by reducing the allocation (if any) to the
PARTICIPANT'S INDIVIDUAL ACCOUNTS of each of the allocated
amounts described below according to the order in which they are
listed. Each such amount shall be completely exhausted before the
next listed allocation is reduced.
The allocations to be reduced (and the order in which they shall
be reduced) shall be as follows:
(1) Elective Contributions and related Basic Matching
Contributions
(2) Basic Profit-Sharing Contributions
(3) Supplemental Contributions
The amount by which an Elective Contribution is reduced shall be
distributed to the PARTICIPANT on whose behalf it was received as
soon as administratively practicable, and shall include any
earnings and gains that have been allocated and which are
attributable to that returned amount.
The remaining surplus amounts created by the reductions described
above shall be reallocated to a Suspense Account established and
administered pursuant to Section 5.1.2.
(d) For purposes of this Section, "compensation" means a
PARTICIPANT'S wages, salaries, fees for professional service and
other amounts received for personal services actually rendered in
the course of employment with the EMPLOYER, but does not include:
(1) contributions made by the EMPLOYER on behalf of the
PARTICIPANT:
(A) for medical benefits within the meaning of CODE section
419A(f)(2) after the PARTICIPANT'S most recent
termination of employment as an EMPLOYEE or for medical
benefits as described by CODE section 416(l)(1), where
such contributions are treated as Annual Additions;
(B) to a plan of deferred compensation to the extent that,
before the application of CODE section 415 to that
plan, the contributions are not includible in the gross
income of the PARTICIPANT for the taxable year in which
contributed; or
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(C) to a simplified employee pension (according to CODE
section 408(k)) to the extent that such contributions
are deductible by the PARTICIPANT pursuant to CODE
section 219(b)(7);
(2) distributions from a plan of deferred compensation except
for amounts received by the PARTICIPANT pursuant to an
unfunded non-qualified plan of deferred compensation in the
year such amounts are includible in the PARTICIPANT'S gross
income;
(3) amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the
PARTICIPANT either becomes freely transferable or is no
longer subject to a substantial risk of forfeiture for
purposes of sec. 83 of the CODE and regulations thereunder;
(4) amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock
option; or
(5) other amounts which receive special tax benefits, such as
premiums for group term life insurance (but only to the
extent that the premiums are not includible in the gross
income of the PARTICIPANT), or contributions made by an
employer (whether or not under a salary reduction agreement)
towards the purchase of an annuity contract described in
sec. 403(b) of the CODE (whether or not the contributions
are excludable from the gross income of the PARTICIPANT); or
(6) elective deferrals (as defined by CODE sec. 402(g)(3)) made
by the PARTICIPANT and amounts accrued by the PARTICIPANT
but which are not then included as taxable income of the
PARTICIPANT pursuant to a "cafeteria" or other such plan
maintained by the EMPLOYER according to CODE sec. 125.
For any SELF-EMPLOYED INDIVIDUAL, "compensation" will include
EARNED INCOME.
For the purposes of this Section, the total amount of
compensation that is actually paid or made available to a
PARTICIPANT within a LIMITATION YEAR shall be the amount of
that PARTICIPANT'S compensation taken into account regarding
that LIMITATION YEAR.
(e) ADDITIONAL LIMITATION IN THE CASE OF DEFINED BENEFIT PLAN AND
DEFINED CONTRIBUTION PLAN FOR SAME EMPLOYEE
(1) In any case where a PARTICIPANT has at any time
participated in a defined benefit plan maintained by the
EMPLOYER, the limitation imposed by this Section (without
regard to this Additional Limitation) shall be reduced to
the extent necessary to prevent the PARTICIPANT'S
Combination Ratio from exceeding 1.0 in any LIMITATION
YEAR. A PARTICIPANT'S Combination Ratio is the sum of
his Defined Benefit Fraction and his Defined Contribution
Fraction.
(2) A PARTICIPANT'S Defined Benefit Fraction for a LIMITATION
YEAR is a fraction -
(A) the numerator of which is his projected annual benefit
(as defined in sec. 415(e) of the CODE and regulations
thereunder) to which the
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PARTICIPANT would be entitled under the defined benefit
plan as of the close of the LIMITATION YEAR;
(B) the denominator of which is the lesser of:
(i) the product of 1.25 (or, if the PLAN is top-heavy
as determined under the provisions of Section 5.2,
1.0) multiplied by the dollar limitation in effect
under sec. 415(b)(1)(A) of the CODE for such
LIMITATION YEAR, or
(ii) the product of 1.4 multiplied by the amount which
may be taken into account under sec. 415(b)(1)(B)
of the CODE with respect to such PARTICIPANT for
such LIMITATION YEAR.
(3) A PARTICIPANT'S Defined Contribution Fraction for a
LIMITATION YEAR is a fraction -
(A) the numerator of which is the sum of the Annual
Additions (as defined in this Section) to the
PARTICIPANT'S account for the PARTICIPANT'S benefit
as of the close of the LIMITATION YEAR and for all
prior LIMITATION YEARS; and
(B) the denominator of which is the sum of the lesser of
the following amounts determined for such LIMITATION
YEAR and for each prior LIMITATION YEAR of service
with the EMPLOYER:
(i) the product of 1.25 (or, if the PLAN is top-heavy
as determined under the provisions of Section 5.2,
1.0) multiplied by the dollar limitation in effect
under sec. 415(c)(1)(A) of the CODE for such
LIMITATION YEAR (determined without regard to
sec. 415(c)(6) of the CODE), or
(ii) the product of 1.4 multiplied by the amount which
may be taken into account under sec. 415(c)(1)(B)
of the CODE (or subsection (c)(7) or (8), if
applicable) with respect to such PARTICIPANT for
such LIMITATION YEAR.
(4) For purposes of this Additional Limitation, EMPLOYEE
contributions to any defined benefit plan maintained by the
EMPLOYER, whether mandatory or voluntary, shall be treated
as a separate defined contribution plan maintained by the
EMPLOYER.
(5) If an additional limitation is applicable, it shall be
imposed in this PLAN before any reduction in the limitation
on benefits payable under any defined benefit plan, unless
the applicable defined benefit plan provides expressly to
the contrary.
(f) AGGREGATION OF PLANS
For purposes of this Section, all qualified defined contribution
plans (without regard to whether a plan has been terminated)
ever maintained by the EMPLOYER will be treated as part of this
PLAN, and all qualified defined benefit plans (without
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regard to whether a plan has been terminated) ever maintained by the
EMPLOYER will be treated as one defined benefit plan.
EMPLOYEE contributions (whether mandatory or voluntary) to a qualified
defined benefit plan maintained by the EMPLOYER shall be treated as a
defined contribution plan maintained by the EMPLOYER.
Any qualified defined benefit or defined contribution plan maintained
by any member of a controlled group of corporations or group of trades
or businesses (whether or not incorporated) under common control
(within the meaning of sec. 414(b) and (c) of the CODE as modified by
sec. 415(h)) of which the EMPLOYER is a member shall be treated as a
plan maintained by the EMPLOYER.
5.1.2 SUSPENSE ACCOUNT
For any PLAN YEAR, after application of Section 5.1.1, if there remain
amounts which have been contributed to the PLAN but which cannot
otherwise be permissibly reallocated according to the terms of this
PLAN, then such excess amounts shall be held unallocated in a Suspense
Account.
Any provisions of this PLAN to the contrary notwithstanding, any amounts
held in a Suspense Account shall be applied toward EMPLOYER
contributions and PLAN expenses as such obligations accrue, with the
EMPLOYER making no further contributions to the PLAN until such time as
the Suspense Account balance has been exhausted.
Any Suspense Account balance which is maintained at any time shall not
share in any portion of the Net Adjustment described in Section 6.2
which is attributable to earnings, gains, or losses. No amounts held in
a Suspense Account may be distributed to any PARTICIPANT at any time
prior to termination of the PLAN. If there are amounts held in a
Suspense Account at a time when the PLAN is terminated, such amounts may
revert to the EMPLOYER according to Section 8.1.3.
5.2.1 TOP-HEAVY PROVISIONS: APPLICATION
The provisions of this Article shall become effective only if, as of the
first day of the applicable PLAN YEAR, the PLAN is top-heavy pursuant to
the Test described in Section 5.2.2.
5.2.2 TOP-HEAVY DETERMINATION
(a) Definitions
(1) AGGREGATION GROUP.
(A) REQUIRED AGGREGATION GROUP means
(i) each and every plan of the EMPLOYER in which a KEY
EMPLOYEE is a PARTICIPANT during the PLAN YEAR
containing the Determination Date or any of the four
preceding PLAN YEARS, including any plan that has
subsequently terminated, and
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(ii) each other plan of the EMPLOYER which enables any plan
described in subsection (l) above to meet the
participation and nondiscrimination requirements of the
CODE, including (but not limited to) the requirements
of CODE sections 401(a)(4) and 410.
(B) PERMISSIVE AGGREGATION GROUP means a Required Aggregation
Group or a plan described in subsection (A)(l) above
together with any other plan of the EMPLOYER which is not
required to be included in an Aggregation Group under
subsection (A)(ii) above but which may be so included if
such group would continue to meet the participation and
nondiscrimination requirements of the Internal Revenue CODE.
(C) TOP-HEAVY GROUP means any Required Aggregation Group found
to be top-heavy pursuant to subsection (b) of this Section
5.2.2.
(2) DETERMINATION DATE means
(A) in the case of the first PLAN YEAR, the last day of such PLAN
YEAR;
(B) in all other cases, the last day of the preceding PLAN YEAR.
(3) KEY EMPLOYEE and non-KEY EMPLOYEE are defined in Section 416(l)
of the CODE. For the purposes of determining who is a KEY
EMPLOYEE, "COMPENSATION" shall be determined according to CODE
sec. 415(c)(3), but including amounts contributed by the EMPLOYER
pursuant to a salary reduction agreement and which are excludable
from the EMPLOYEE'S gross income under CODE sec. 125, 402(e)(3),
402(h), or 403(b). KEY EMPLOYEE is also described in Article ii,
under the definition of "EMPLOYEE".
(4) PRESENT VALUE OF ACCRUED BENEFITS means, for this PLAN, the sum
of
(A) the account balances attributable to Basic and Elective
Contributions and Supplemental Contributions as of the most
recent Valuation Date occurring within a twelve-month period
ending on the Determination Date, and
(B) an adjustment for contributions due as of the Determination
Date.
If this PLAN is a member of an Aggregation Group, Present Value
of Accrued Benefits shall mean the sum of the account balances of
all EMPLOYER and nondeductible EMPLOYEE Contribution Accounts
maintained for the PARTICIPANT pursuant to all defined
contribution PLANS that belong to the group and of which he is a
member and also the sum of the present values of the vested
accrued benefits due the PARTICIPANT pursuant to all defined
benefit plans that belong to the group and of which the
PARTICIPANT is a member.
(5) VALUATION DATE means the last date in each PLAN YEAR on which
interest is allocated and account balances are determined.
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(b) Top-Heavy Test
The PLAN (or Aggregation Group) shall be top-heavy for each PLAN
YEAR if, as of the Determination Date, the PLAN's (or Aggregation
Group's) top-heavy ratio for the PLAN YEAR exceeds sixty percent
(60%). The top-heavy ratio is the Present Value of Accrued
Benefits of all KEY EMPLOYEES over the Present Value of Accrued
Benefits of all EMPLOYEES, excluding former Key EMPLOYEES.
Calculation of the top-heavy ratio shall be made in accordance
with sec. 416 of the CODE (with specific reference to CODE sec.
416(g)(3)) and the regulations promulgated thereunder and shall
take into account the following amounts:
(1) Present Value of Accrued Benefits as described in subsection
(a)(4) above;
(2) Amounts transferred to this PLAN pursuant to a merger,
consolidation or spinoff involving this PLAN and one or more
other plans; and
(3) The amount of all distributions to PARTICIPANTS or their
BENEFICIARIES during the PLAN YEAR that includes the
Determination Date and also during the four preceding PLAN
YEARS pursuant to this PLAN or pursuant to a terminated plan
which if it had not been terminated would have been required
to be included in an Aggregation Group, EXCEPT any
distribution which occurred after the Valuation Date but
prior to the Determination Date to the extent that such a
distribution has been included in the calculation of the
Present Value of Accrued Benefits.
Any rollover to this PLAN initiated by the EMPLOYEE and
transferred to this PLAN from a qualified plan maintained by an
unrelated employer shall not be taken into account.
However, calculation of the top-heavy ratio for any PLAN YEAR
shall not take into account the Present Value of Accrued Benefits
or the amount of all distributions made to any individual who has
not performed services for the EMPLOYER at any time during the
5-year period ending on such PLAN YEAR'S Determination Date.
For an Aggregation Group, each plan shall initially be tested
separately, and then the PLANS shall be aggregated by adding
together the results for each plan as of the Determination Dates
that fall within the same calendar year. If the Aggregation Group
includes two or more defined benefit plans, the same actuarial
assumptions will be specified within and used by such plans for
the purposes of this Section 5.2. Also, in such defined benefit
plans proportional subsidies shall be ignored and
non-proportional subsidies considered for the purposes of this
Section 5.2.2(b).
For a Required Aggregation Group, each PLAN shall be tested by
determining the Present Value of Accrued Benefits for non-Key
EMPLOYEES (1) pursuant to the method, if any, that uniformly
applies for accrual purposes under all plans maintained by the
affiliated EMPLOYERS; or (2) if there is no such method, as if
such Accrued Benefits accrued not more rapidly than the slowest
accrual rate permitted under the fractional accrual rates of
Section 411(b)(1)(C) of the CODE.
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5.2.3 SPECIAL RULES FOR TOP-HEAVY PLANS
(a) Application of Special Rules
(1) If, after application of the top-heavy test described in
Section 5.2.2(b), this PLAN is found not to be top-heavy,
then the special rules set forth below shall not apply to
this PLAN. In that event, the other applicable provisions in
this PLAN will govern.
(2) If, after application of the top-heavy test in Section
5.2.2(b), this PLAN is found to be top-heavy, then the
following special rules shall govern.
(b) Minimum Contribution
(1) For each PLAN YEAR in which the PLAN is top-heavy, each
non-KEY EMPLOYEE who is a PARTICIPANT and who has not
separated from SERVICE at the end of the PLAN YEAR,
including any PARTICIPANT who failed to complete 1,000 HOURS
OF SERVICE, and any who did not make an Elective
Contribution pursuant to Section 4.2.1, shall accrue not
less than the minimum contribution described below.
(2) The sum of the EMPLOYER'S contributions and any forfeitures
allocated to the INDIVIDUAL ACCOUNTS of each such
PARTICIPANT for each PLAN YEAR in which the PLAN is
top-heavy must equal not less than
(A) at least three percent (3%) of each such PARTICIPANT'S
Compensation for that PLAN YEAR; or
(B) if the highest percentage of COMPENSATION provided on
behalf of KEY EMPLOYEES who are PARTICIPANTS for that
PLAN YEAR is less than three percent (3%), then not
less than the same percentage of such COMPENSATION for
that PLAN YEAR for each non-KEY EMPLOYEE PARTICIPANT as
the largest percentage of such COMPENSATION provided on
behalf of KEY EMPLOYEE PARTICIPANTS for that PLAN YEAR.
(3) Any provisions of subsection (2) above to the contrary
notwithstanding, for each PLAN YEAR in which the EMPLOYER
maintains both a defined benefit plan and a defined
contribution plan and both plans are top-heavy, each non-KEY
EMPLOYEE who is a PARTICIPANT in both such PLANS shall be
credited with not less thana portion of the sum of the
EMPLOYER'S contributions and forfeitures made under the
terms of this PLAN for that PLAN YEAR equal to five
percent (5%) of his COMPENSATION.
In determining the minimum contribution or benefit that is
required for non-KEY EMPLOYEES by this Section, Elective
Contributions and matching contributions, if any, that are
allocated to KEY EMPLOYEES shall be taken into account. However,
to the extent that matching contributions made on behalf of
non-KEY EMPLOYEES are taken into account in meeting the Actual
Deferral Percentage Test and/or the Actual Contribution
Percentage Test described in Article V, such contributions may
not additionally be credited as part of any minimum contribution
or benefit required by this Section. Elective Contributions made
on behalf of non-KEY EMPLOYEES
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may not be credited as part of any minimum contribution or
benefit required by this Section.
If the EMPLOYER is required to contribute an additional amount to
the PLAN on behalf of a PARTICIPANT as a result of the operation
of this Article, that amount shall be credited to a Basic
Contribution Account established and maintained on his behalf.
5.3 ACTUAL DEFERRAL PERCENTAGE TEST
(a) For each PLAN YEAR, the PLAN ADMINISTRATOR shall perform (or have
performed) an Actual Deferral Percentage Test in order to ensure
that the PLAN'S cash or deferred arrangement satisfies the
requirements of CODE sec. 401(k)(3) and does not impermissibly
discriminate in favor of PARTICIPANTS who are HIGHLY COMPENSATED
EMPLOYEES ("HCE'S").
The Actual Deferral Percentage ("ADP") Test shall compare the ADP
of those PARTICIPANTS who are HCE'S with the ADP of those
PARTICIPANTS who are not HCE'S.
For any group of PARTICIPANTS, the group's ADP equals the average
(expressed as a percentage) of the actual deferral ratios of that
group's PARTICIPANTS, with each PARTICIPANT'S actual deferral
ratio calculated separately.
For any PLAN YEAR, a PARTICIPANT'S actual deferral ratio
consists of the amount of the PARTICIPANT'S Elective Contribution
for the PLAN YEAR (subject to the limitations of the following
paragraph) plus, at the discretion of the PLAN ADMINISTRATOR,
the amount of any QUALIFIED MATCHING CONTRIBUTIONS ("QMAC'S")
and QUALIFIED NONELECTIVE CONTRIBUTIONS ("QNC'S") that are
treated as Elective Contributions and included in the ADP
testing by the PLAN ADMINISTRATOR, with such sum expressed
as a percentage of his COMPENSATION. For this purpose, in any
PLAN YEAR, the PLAN ADMINISTRATOR may elect to limit the
COMPENSATION taken into account for every PARTICIPANT to
COMPENSATION received while participating in the PLAN.
However, the PLAN ADMINISTRATOR'S discretion in choosing to
include any QMAC'S or QNC'S is limited to the extent that such
inclusion satisfies the conditions and requirements set forth in
26 CFR 1.401(k)-1(b)(5).
In determining a PARTICIPANT'S actual deferral ratio, the
PARTICIPANT'S Elective Contributions may be taken into account
only to the extent that they satisfy the following conditions.
(1) The Elective Contribution must be allocated to an account
maintained on behalf of the PARTICIPANT as of a day within
the PLAN YEAR being considered. For the purpose of this
provision, an Elective Contribution shall be considered
allocated as of a date within a plan year only if both:
(A) the allocation is not contingent upon the PARTICIPANT'S
participation in a plan or performance of service on
any date subsequent to the date of allocation; and
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(B) the amount of the Elective Contribution is actually
paid to the plan pursuant to which the Elective
Contribution is made no later than the end of the
twelve-consecutive-month period immediately following
the plan year to which the contribution relates.
(2) The Elective Contribution relates to COMPENSATION that
either:
(A) would have been received by the PARTICIPANT in the plan
year but for the PARTICIPANT'S election to defer that
COMPENSATION, or
(B) is attributable to service performed by the PARTICIPANT
in the PLAN YEAR and, but for the PARTICIPANT'S
election to defer, would have been received by the
PARTICIPANT within two and one-half months after the
close of the plan year.
In addition, if with reference to a PLAN YEAR the PARTICIPANT was
an HCE and also participated in more than one cash or deferred
arrangement sponsored by the EMPLOYER, then all such cash or
deferred arrangements shall be aggregated and treated as one
arrangement for the purposes of determining the PARTICIPANT'S
actual deferral ratio for that PLAN YEAR. If these arrangements
have different plan years, these arrangements' plan years that
end with or within the same calendar year shall be aggregated and
treated for ADP purposes as a single arrangement and single plan
year. However, the preceding provisions to the contrary
notwithstanding, contributions and allocations under plans
described by CODE sec. 4975(e)(7) (i.e. "ESOP's") shall not be
aggregated.
(b) For each PLAN YEAR, the ADP for the group of Eligible
PARTICIPANTS who are HCE'S for that PLAN YEAR shall not exceed
the greater of (1) or (2), where
(1) equals 125% of the ADP for the group of Eligible
PARTICIPANTS who are non-HCE'S for that PLAN YEAR; and
(2) equals the lesser of (A) and (B), where
(A) equals 200% of the ADP for the group of Eligible
PARTICIPANTS who are non-HCE'S for that PLAN YEAR, and
(B) equals the ADP for the group of Eligible PARTICIPANTS
who are non-HCE'S for that PLAN YEAR, plus 2 percentage
points (or such other amount as may be prescribed by
the Secretary of the Treasury).
For the purposes of this subsection, "Eligible PARTICIPANTS"
means those PARTICIPANTS who during the PLAN YEAR were eligible
to have elected to defer some portion of their COMPENSATION for
that PLAN YEAR so as to receive an Elective Contribution,
regardless of whether such an election was actually made.
(c) If for a PLAN YEAR the ADP limits of subsection (b) above are
exceeded, the amount of excess contributions to be attributed to
each HCE shall be determined by the following leveling method.
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The PLAN ADMINISTRATOR shall reduce the amount of Elective
Contributions that are allocated pursuant to the PLAN for that
PLAN YEAR on behalf of the HCE with the highest actual deferral
ratio. This reduction shall be made only to the extent required
to (1) enable the PLAN to meet the ADP limits, or (2) cause the
HCE'S actual deferral ratio to equal the actual deferral ratio of
the HCE with the next highest actual deferral ratio, whichever
occurs first.
This process shall be repeated by the PLAN ADMINISTRATOR until
the ADP test limits of subsection (b) above have been met.
For each PLAN YEAR, the amount of excess contributions, if any,
for each HCE shall equal the sum of the HCE'S Elective
Contributions, plus any QUALIFIED NONELECTIVE CONTRIBUTIONS and
QUALIFIED MATCHING CONTRIBUTIONS that are treated as Elective
Contributions (determined prior to the application of this
subsection) in determining the HCE'S actual deferral ratio, minus
the product of the HCE'S actual deferral ratio (determined after
application of this subsection) multiplied by the HCE'S
COMPENSATION.
(d) After the close of the PLAN YEAR to which the excess
contributions are attributable, but within twelve months after
such PLAN YEAR'S close, the PLAN ADMINISTRATOR shall designate as
such and distribute to each HCE the amount (if any) of excess
contributions (plus any allocable income attributable to such
contributions) that were made on that HCE'S behalf, minus the sum
of any excess deferrals previously distributed to the HCE for the
HCE'S taxable year ending with or within that PLAN YEAR.
The income allocable to a PARTICIPANT'S excess contributions (the
"excess income") for the PLAN YEAR shall be determined separately
from the excess income for the period between the end of the PLAN
YEAR and the date as of which the corrective distribution is made
(the "gap period").
The excess income for the PLAN YEAR shall be determined by
multiplying the income for the PLAN YEAR allocable to the
PARTICIPANT'S Elective Contributions (and amounts treated as
Elective Contributions) by a fraction. The numerator of the
fraction is the amount of excess contributions made on behalf of
the PARTICIPANT for the PLAN YEAR. The denominator is the
PARTICIPANT'S INDIVIDUAL ACCOUNT balance attributable to Elective
Contributions (and amounts treated as Elective Contributions) as
of the end of the PLAN YEAR, with such balance reduced by the
gain allocable to such total balance for the PLAN YEAR and
increased by the loss allocable to such total balance for the
PLAN YEAR.
The excess income for the gap period may be calculated by
utilizing either a fractional method or a safe-harbor method,
with the choice of method being made by the PLAN ADMINISTRATOR in
his or her sole discretion.
Under the fractional method, the income for the gap period that
is allocable to the PARTICIPANT'S Elective Contributions is
multiplied by the same fraction that is used to determine the
excess income for the PLAN YEAR.
Under the safe-harbor method, the excess income for the gap
period shall equal the product of:
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(1) 10% of the PARTICIPANT'S excess income for the PLAN YEAR,
multiplied by
(2) the number of the calendar months that have elapsed since
the end of the PLAN YEAR. (In determining the number of
months that have elapsed, a distribution that occurs on or
before the fifteenth day of the month shall be deemed to
have been made as of the last day of the preceding month,
and a distribution occurring after such fifteenth day shall
be deemed to have occurred as of the first day of the next
subsequent month.)
(e) Any of the provisions of this Section to the contrary
notwithstanding, in determining the actual deferral ratio of a
PARTICIPANT who is an HCE, the family aggregation rules described
in paragraph (4) of the definition in Article II of Highly
Compensated EMPLOYEE shall apply, and the actual deferral ratio
of any such family aggregate shall equal the actual deferral
ratio determined by combining the contributions received by the
PLAN on behalf of and COMPENSATION paid to all eligible family
members.
After the actual deferral ratio of such a family aggregate has
been determined, the amount of excess contributions (if any) that
were allocated on behalf of the family aggregate shall be
determined and corrected according to the "leveling" method
described in subsection (c) above. The resulting excess
contributions shall be reallocated among those family members
whose contributions were combined to determine the actual
deferral ratio of the family aggregate, with each such member
being allocated an amount of excess contribution in proportion to
the contributions of each such member that have been combined.
(f) For the purposes of satisfying the limits specified in this
Section and in CODE sections 401(a)(4), 410(b), and 401(k), two
or more cash or deferred arrangements may be aggregated, provided
that such aggregation is consistent with the provisions of IRC
Regs. 1.401(k)-1(b)(3) and 1.401(k)-1(g)(1)(ii); for example,
cash or deferred arrangements may be aggregated pursuant to this
subsection only if the respective plans of which they are part
have the same plan years. All elective contributions that are
made under any plan that are aggregated with this plan for the
purposes of CODE sec. 401(a)(4) or sec. 410(b) (other than sec.
410(b)(2)(A)(ii) are to be treated as if they were made under a
single plan. In addition, if any plans are permissively
aggregated with this plan for the purposes of code sec. 401(k),
the aggregated plans must also satisfy CODE secs. 401(a)(4) and
410(b) as though they were a single plan.
5.4 AVERAGE CONTRIBUTION PERCENTAGE TEST
(a) For each PLAN YEAR, the PLAN ADMINISTRATOR shall perform (or have
performed) an Average Contribution Percentage Test in order to
ensure that the PLAN'S receipt and allocation of matching
contributions and/or employee contributions, if any, satisfy the
requirements of CODE sec. 401(m) and do not impermissibly
discriminate in favor of PARTICIPANTS who are HIGHLY COMPENSATED
EMPLOYEES ("HCE'S").
The Average Contribution Percentage ("ACP") Test shall compare
the ACP of those PARTICIPANTS who are HCE'S with the ACP of those
PARTICIPANTS who are not HCE'S.
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For any group of PARTICIPANTS, the group's ACP equals the average
(expressed as a percentage) of the actual contribution ratios of
that group's PARTICIPANTS, with each PARTICIPANT'S actual
contribution ratio calculated separately.
For any PLAN YEAR, a PARTICIPANT'S actual contribution ratio
consists of the sum of the following contributions (if any) which
have been received by the PLAN on the PARTICIPANT'S behalf for
that PLAN YEAR:
(1) "matching" employer contributions (within the meaning of
CODE sec. 401(m)(4)(A));
(2) employee contributions; and
(3) any Elective Contributions and QUALIFIED NONELECTIVE
CONTRIBUTIONS ("QNC'S') that the PLAN ADMINISTRATOR, in the
exercise of his sole discretion, chooses to take into
account for the purposes of ACP testing (except that the
PLAN ADMINISTRATOR'S discretion in choosing to include any
Elective Contributions and QNC'S is limited to the extent
that such inclusion satisfies the conditions and
requirements set forth in 26 CFR 1.401(m)-1(b)(5));
with such sum expressed as a percentage of the PARTICIPANT'S
COMPENSATION. For this purpose, in any PLAN YEAR, the PLAN
ADMINISTRATOR may elect to limit the COMPENSATION taken into
account for every PARTICIPANT to COMPENSATION received while
participating in the PLAN.
In determining a PARTICIPANT'S actual contribution ratio,
matching contributions made on behalf of the PARTICIPANT may
be taken into account only to the extent that they satisfy the
following conditions.
(1) The matching contribution must be allocated to an account
maintained on behalf of the PARTICIPANT as of a day within
the plan year being considered.
(2) The amount of the matching contribution is actually paid to
the plan pursuant to which the matching contribution is made
no later than the end of the twelve-consecutive-month period
immediately following the plan year to which the
contribution relates.
(3) The matching contribution is made on behalf of the
PARTICIPANT on account of the PARTICIPANT'S elective
contributions or employee contributions (if any) for the
plan year to which the matching contribution relates.
Matching contributions that are forfeited because they
relate to excess deferrals, excess contributions or excess
aggregate contributions shall not be taken into account.
(b) For each PLAN YEAR, the ACP for the group of Eligible
PARTICIPANTS who are HCE'S for that PLAN YEAR shall not exceed
the greater of (1) or (2), where
(1) equals 125% of the ACP for the group of Eligible
PARTICIPANTS who are non-HCE'S for that PLAN YEAR; and
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(2) equals the lesser of (A) and (B), where
(A) equals 200% of the ACP for the group of Eligible
PARTICIPANTS who are non-HCE'S for that PLAN YEAR; and
(B) equals the ACP for the group of Eligible PARTICIPANTS
who are non-HCE'S for that PLAN YEAR, plus 2 percentage
points (or such other amount as may be prescribed by
the Secretary of the Treasury).
For the purposes of this subsection, "Eligible PARTICIPANTS"
means those PARTICIPANTS who are directly or indirectly eligible
to make an employee contribution or to receive an allocation of
matching contributions (including matching contributions derived
from Forfeitures, if any) under the terms of this PLAN for the
PLAN YEAR being reviewed.
If a PARTICIPANT has "excess deferrals" according to Section
4.2.1(c) or "excess contributions" for the PLAN YEAR according
to Section 5.3, then such excess deferrals and/or excess
contributions shall be calculated and distributed prior to
determining the PARTICIPANT'S excess aggregate contributions for
the PLAN YEAR.
(c) If for a PLAN YEAR the ACP limits of subsection (b) above are
exceeded, the amount of excess aggregate contributions to be
attributed to each HCE shall be determined by the following
leveling method.
The PLAN ADMINISTRATOR shall reduce the EMPLOYEE contributions
and, if necessary, the matching contributions that had been
allocated pursuant to the PLAN YEAR for that PLAN YEAR on behalf
of the HCE with the highest actual contribution ratio. This
reduction shall be made only to the extent required to (1) enable
the PLAN to meet the ACP limits, or (2) cause the HCE'S actual
contribution ratio to equal the next highest actual contribution
ratio, whichever occurs first.
This process shall be repeated by the PLAN ADMINISTRATOR until
the ACP test limits of subsection (b) above have been met.
For each PLAN YEAR, the amount of excess aggregate contributions,
if any, for each HCE shall equal the sum of the HCE'S employee
contributions and matching contributions, if any, plus any
QUALIFIED NONELECTIVE CONTRIBUTIONS and Elective Contributions
that are treated as matching contributions (determined prior to
the application of this subsection) in determining the HCE'S
actual contribution ratio, minus the product of the HCE'S actual
contribution ratio (determined after application of this
subsection) multiplied by the HCE'S COMPENSATION.
Determinations of actual contribution ratios shall be rounded to
the nearest one-hundredth of one percent of the PARTICIPANT'S
COMPENSATION.
(d) After the close of the PLAN YEAR to which the excess aggregate
contributions are attributable, but within twelve months after
such PLAN YEAR'S close, the PLAN ADMINISTRATOR shall designate
the amount (if any) of the excess aggregate contributions (plus
any allocable income attributable to such contributions) that
are attributable to amounts received and accumulated under the
PLAN on each HCE'S behalf.
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Such excess aggregate contributions shall be forfeited, if
forfeitable. As of the last day of the PLAN YEAR, these forfeited
amounts shall be reallocated only to PARTICIPANTS who are NHCE'S
for the PLAN YEAR. This allocation shall be made on a pro rata
basis, with each such PARTICIPANT being allocated a portion of
the total forfeited amounts so that such portion, when compared
to the total of the forfeited amounts, shall bear the same direct
proportion that the amount of Basic Matching Contribution being
allocated to the PARTICIPANT pursuant to Section 4.1.1,
subsection (a), bears to the entire amount of Basic Matching
Contribution that is allocated to all such NHCE PARTICIPANTS
pursuant to Section 4.1.1(a).
If not forfeitable, the amount of the excess aggregate
contribution shall be distributed to the HCE on whose behalf the
excess aggregate contribution was received. If such excess
aggregate contributions are distributed more than 2 1/2 months
after the last day of the PLAN YEAR in which such excess amounts
arose, a 10% excise tax will be imposed on the EMPLOYER with
respect to these amounts.
The income allocable to a PARTICIPANT'S excess aggregate
contributions (the "excess income") for the PLAN YEAR shall be
determined separately from the excess income for the period
between the end of the PLAN YEAR and the date as of which the
corrective distribution is made (the "gap period").
The excess income for the PLAN YEAR shall be determined by
multiplying the income for the PLAN YEAR allocable to the
PARTICIPANT'S employee and matching contributions (and amounts
treated as matching contributions), if any, by a fraction. The
numerator of the fraction is the amount of excess contributions
made on behalf of the PARTICIPANT for the PLAN YEAR. The
denominator is the sum of the PARTICIPANT'S INDIVIDUAL ACCOUNTS'
balances attributable to employee and matching contributions
(plus balances attributable to amounts treated as matching
contributions), if any, as of the end of the PLAN YEAR, with such
sum reduced by the gain and increased by the loss allocable to
the total sum of such balances for the PLAN YEAR.
A PARTICIPANT'S excess income for the gap period may be
calculated by utilizing either a fractional method or safe-harbor
method, with the choice of method being made by the PLAN
ADMINISTRATOR in his or her sole discretion.
Under the fractional method, the income for the gap period that
is allocable to the PARTICIPANT'S employee and matching
contributions (and amounts treated as matching contributions), if
any, is multiplied by the same fraction that is used to determine
the excess income for the PLAN YEAR.
Under the safe-harbor method, the excess income for the gap
period shall equal the product of:
(1) 10% of the PARTICIPANT'S excess income for the PLAN YEAR,
multiplied by
(2) the number of calendar months that have elapsed since the
end of the PLAN YEAR. (In determining the number of months
that have elapsed, a distribution that occurs on or before
the fifteenth day of the month shall be deemed to have been
made as of the last day of the preceding month, and a
distribution occurring after such fifteenth day shall be
deemed to have occurred as of the first day of the next
subsequent month.)
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(e) Any of the provisions of this Section to the contrary
notwithstanding, in determining the actual contribution ratio of
a PARTICIPANT who is an HCE, the family aggregation rules
described in paragraph (4) of the definition in Article II of
HIGHLY COMPENSATED EMPLOYEE shall apply, and the actual
contribution ratio of any such family aggregate shall equal the
actual contribution ratio determined by combining the
contributions received by the PLAN on behalf of and COMPENSATION
paid to all eligible family members.
After the actual contribution ratio of such a family aggregate
has been determined, the amount of excess aggregate contributions
(if any) that were allocated on behalf of the family aggregate
shall be determined and corrected according to the "leveling"
method described in subsection (c) above. The resulting excess
aggregate contributions shall be reallocated among those family
members whose contributions were combined to determine the actual
contribution ratio of the family aggregate, with each such member
being allocated an amount of excess aggregate contribution in
proportion to the contributions of each such member that have
been combined.
(f) Any provisions of this Section to the contrary notwithstanding,
for the purposes of determining whether this PLAN satisfies the
ACP test, all employee and matching contributions that are made
under any plans that are aggregated with this PLAN for the
purposes of CODE sec. 401(a)(4) and/or 410(b) (other than CODE
section. 410(b)(2)(A)(ii)) shall be aggregated and treated as if
made under a single PLAN. In addition, if any plans are
permissively aggregated with this PLAN for the purposes of ACP
testing, then the aggregated PLANS must also satisfy CODE secs.
401(a)(4) and 410(b) as though they were a single plan.
Also, if a PARTICIPANT who is a HIGHLY COMPENSATED EMPLOYEE also
participates in other retirement plans sponsored by the EMPLOYER
to which employer matching contributions (as defined in CODE sec.
401(m)(4)(A)) or employee contributions are made, then all such
contributions made on the PARTICIPANT'S behalf shall be
aggregated for the purposes of this Section.
However, plans may be aggregated pursuant to this subsection (f)
only if they have the same plan year.
5.5 MULTIPLE USE OF ALTERNATIVE LIMITATION
(a) Any provisions of this PLAN to the contrary notwithstanding, if
for any PLAN YEAR a multiple use of the alternative limitation
occurs with respect to two or more cash or deferred arrangements
("CODA's") and/or plans maintained by the EMPLOYER, such multiple
use shall be corrected by reducing the actual deferral
percentage("ADP") or actual contribution percentage ("ACP") of
HCE'S who are eligible to participate in such CODA's and/or
plans.
(b) Multiple use of the alternative limitation occurs if the
following conditions are met:
(1) one or more HCE'S are eligible to defer compensation
pursuant to a CODA subject to CODE sec. 401(k) and sponsored
by the EMPLOYER, and also are allocated contributions
pursuant to a plan subject to CODE sec. 401(m) and sponsored
by the EMPLOYER, and
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(2) the ADP for the group of HCE'S eligible to defer
compensation pursuant to the CODA exceeds 125% of the ADP
for the group of non-HCE'S and the ACP for the group of
HCE'S allocated contributions pursuant to the PLAN subject
to CODE sec. 401(m) exceeds 125% of the ACP for the group
of non-HCE'S; and
(3) the sum of the ADP for the group of HCE'S eligible to defer
compensation pursuant to the CODA and the ACP for the group
of HCE'S allocated contributions pursuant to the PLAN
subject to CODE sec. 401(m) exceeds the "Aggregate Limit".
The "Aggregate Limit" is the greater of (A) and (B), where:
(A) equals the sum of:
(i) 125% of the greater of the ADP or the ACID for the
group of non-HCE'S; and
(ii) 2 plus the lesser of the ADP or the ACP for the
group of non-HCE'S; but not more than 200% of the
lesser of the ADP or the ACP for the group of
non-HCE'S; and
(B) equals the sum of:
(i) 125% of the lesser of the ADP or the ACP for the
group of non-HCE'S; and
(ii) 2 plus the greater of the ADP or the ACP for the
group of non-HCE'S, but no more than 200% of the
greater of the ADP or the ACID for the group of
non-HCE'S.
(c) So that there is no multiple use of the alternative limitation,
all HCE'S who were eligible to have deferred compensation under
the CODA and who were also allocated contributions under an
EMPLOYER-sponsored plan subject to CODE sec. 401(m) testing shall
have their ADP reduced in the manner described in 26 CFR
1.401(k)-1(f)(2).
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ARTICLE VI
ADMINISTRATION OF PLAN ASSETS
6.1.1 THE INVESTMENT FUND
All funds received by the PLAN pursuant to Article IV, including amounts
deposited with the INSURANCE COMPANY under an annuity or insurance
contract, shall be credited to an Investment Fund. The Investment Fund
shall be of a suitable nature to hold the funds and to provide the
benefits payable under this PLAN.
The PLAN ADMINISTRATOR shall create and maintain adequate records to
disclose the interest in the Investment Fund of each PARTICIPANT or,
where appropriate, his BENEFICIARY. Such records shall be in the form of
INDIVIDUAL ACCOUNTS, and credits and charges shall be made to such
accounts in the manner herein described. These amounts shall be
maintained for accounting purposes only and shall not represent any
segregated or identifiable portion of the Investment Fund.
All deposits to the Investment Fund shall be applied for the exclusive
benefit of PARTICIPANTS and their BENEFICIARIES, except for such
reasonable expenses as may be incurred in the establishment or operation
of the PLAN and which are not otherwise paid. Except as provided in
Sections 8.1.3 and 8.5, no amounts in the Investment Fund, nor any
earnings attributable thereto, may ever revert to the EMPLOYER prior to
full satisfaction of all liabilities under the PLAN.
6.1.2 EMPLOYEE DIRECTED INVESTMENTS
Amounts held in the Investment Fund shall be allocated among a variety
of investment options made available and selected by the TRUSTEES
pursuant to the contract with the INSURANCE COMPANY. Each PARTICIPANT
and BENEFICIARY may direct the allocation of the amounts held in the
Investment Fund on his behalf among these investment options.
To the extent that the PARTICIPANT or BENEFICIARY does not direct the
investment of such amounts received on his behalf, the remainder will
automatically be allocated to and invested in one of the funds or
accounts available under the INSURANCE COMPANY contract and pursuant to
the TRUSTEES' direction.
Each PARTICIPANT and BENEFICIARY may elect to redirect the investment of
amounts held in the Investment Fund on his behalf, provided that in any
calendar quarter a PARTICIPANT or BENEFICIARY may transfer out of the
Guaranteed Long-Term Account or the Guaranteed Interest Account no more
than $5,000.00 or 5% of his balance in such account, whichever is
greater. However, an exception will be made for any PARTICIPANT or
BENEFICIARY who elects to transfer his entire balance out of such an
account. In that event, the transfer can be made over a five-year period
in quarterly increments. The amount of each quarterly increment shall be
determined by multiplying the PARTICIPANT'S or BENEFICIARY'S then
current account balance by a fraction, the numerator of which is one,
and the denominator of which is the number of quarterly incremental
payments remaining to be made within the five-year period.
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Any of the above-specified directives to allocate, re-allocate, transfer
or remove funds from or among the various investment options shall be
effective for the purposes of this PLAN only prospectively as of the
first day of the calendar quarter (i.e. January 1, April 1, July 1, or
October 1) beginning not sooner than 15 days following the receipt by
the INSURANCE COMPANY of such directive.
6.2 NET ADJUSTMENTS
The Net Adjustment of amounts directed by PARTICIPANTS under Section
6.1.2 shall be determined and applied separately to the
PARTICIPANT-directed amounts in each investment fund or account. Amounts
that are not directed by PARTICIPANTS shall share in the Net Adjustment
attributable to the investment of all such amounts.
Earnings, gains and losses, and any expenses accrued to the Investment
Fund shall be allocated to the INDIVIDUAL ACCOUNTS in the following
manner:
(a) The PLAN ADMINISTRATOR shall periodically determine the Net
Adjustment for each calendar quarter. The Net Adjustment shall be
the sum of any earnings and gains experienced by the Investment
Fund during the calendar quarter, less any losses experienced by
the Investment Fund during that quarter, and less expenses for
that quarter (if any) to be allocated pursuant to Section 6.4.
The fair market value of the PLAN'S assets as of the last day of
the calendar quarter shall be used in determining such earnings,
gains and losses.
(b) The PLAN ADMINISTRATOR shall allocate the Net Adjustment for each
calendar quarter as of the last day of that quarter, but only to
those INDIVIDUAL ACCOUNTS remaining at the end of that quarter.
Individual Accounts that are closed on a date other than the last
day of a calendar quarter shall not be allocated a portion of the
Net Adjustment for that calendar quarter.
(c) The Net Adjustment shall be allocated according to each
INDIVIDUAL ACCOUNTS balance at the beginning of the calendar
quarter, adjusted in a uniform and consistent manner for any
contributions and distributions made during that quarter.
(d) An INDIVIDUAL ACCOUNT'S allocation of the PLAN's Net Adjustment
shall be made in the same proportion that such INDIVIDUAL
ACCOUNT'S balance bears to the sum of such balances of all
INDIVIDUAL ACCOUNTS.
6.3 DISTRIBUTION ADJUSTMENTS
The amount of any distribution from an account maintained on behalf of a
PARTICIPANT pursuant to the terms of this PLAN shall be debited from
that account as of the date such distribution is made.
6.4 EXPENSES
For any PLAN YEAR, the EMPLOYER may pay the expenses of operating and
maintaining the PLAN. Such payment shall be in addition to and
independent of any contributions to the PLAN or assets held by the PLAN.
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Absent prompt and timely payment by the EMPLOYER, the expenses of
operating and maintaining the PLAN for the PLAN YEAR shall first be paid
by application (and commensurate reduction) of the balance of any
Suspense Account that may be maintained under the terms of this PLAN,
and then shall become part of the Net Adjustment allocated pursuant to
Section 6.2, EXCEPT that any expenses attributable to the single sum
benefit payment fee for a distribution other than at death, TOTAL AND
PERMANENT DISABILITY or RETIREMENT shall be accounted as a loss to be
allocated solely as part of the next subsequent Net Adjustment of that
PARTICIPANT'S INDIVIDUAL ACCOUNTS.
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ARTICLE VII
DISTRIBUTIONS
7.1 TERMINATION OF EMPLOYMENT (INCLUDING DISABILITY) BEFORE RETIREMENT
(a) If a PARTICIPANT'S employment as an EMPLOYEE is terminated due to
his TOTAL AND PERMANENT DISABILITY, or due to any other reason
except his death or RETIREMENT, he may elect to receive his
VESTED BENEFIT. To be effective for the purposes of this PLAN,
such an election must be delivered in writing to the PLAN
ADMINISTRATOR before the ANNUITY STARTING DATE that he has
selected. In the election the PARTICIPANT shall specify a form in
which the VESTED BENEFIT is to be distributed from among the
forms described in Section 7.4, and also an ANNUITY STARTING DATE
(see Section 2.2), provided that no distribution under this
Section shall be made or commence before the PARTICIPANT'S date
of termination as an EMPLOYEE, nor later than the date which
would be the PARTICIPANT'S NORMAL RETIREMENT DATE had he not
terminated such employment until then.
(b) In any event, the PLAN ADMINISTRATOR (or TRUSTEE, as applicable)
shall distribute to the PARTICIPANT his entire VESTED BENEFIT in
a lump sum as soon as administratively practicable after the time
of his termination, provided that as of the ANNUITY STARTING DATE
the PARTICIPANT'S VESTED BENEFIT has not ever exceeded $3,500 as
of the date of any prior distribution to the PARTICIPANT. If the
PARTICIPANT'S entire VESTED BENEFIT equals zero as of the date
his SERVICE terminates, then the PARTICIPANT shall be deemed to
have received a distribution of his entire VESTED BENEFIT as of
that date of termination.
(c) Any distribution that is made to a PARTICIPANT pursuant to this
Section shall be in lieu of any and all other benefits, present
or contingent, to which the PARTICIPANT may be entitled under the
terms of this PLAN, with the difference between amount
distributed and the sum of all of his INDIVIDUAL ACCOUNTS'
balances becoming a Forfeiture as of the ANNUITY STARTING DATE,
subject to disposition pursuant to Section 4.1.5.
However, if a distribution is made pursuant to this Section to a
PARTICIPANT whose Vested Percentage is less than 100%, the
PARTICIPANT shall have until the end of a period of five
consecutive BREAK IN SERVICE YEARS, or five years after the first
date as of which the PARTICIPANT is subsequently reemployed by
the EMPLOYER, if earlier, to resume employment as an EMPLOYEE and
repay to the PLAN the amount previously distributed, whereupon
his INDIVIDUAL ACCOUNT balances shall be restored to the extent
of the amounts repaid, plus any amounts forfeited pursuant to
Section 4.1.5, provided that in any event such balances shall be
restored to not less than the amounts that existed immediately
prior to the distribution.
7.2 DEATH BENEFITS
(a) If a PARTICIPANT who is credited with a VESTED BENEFIT dies prior
to the ANNUITY STARTING DATE of his VESTED BENEFIT, then the PLAN
shall distribute a death benefit on his behalf.
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The amount of the death benefit shall be the actuarial equivalent
of his VESTED BENEFIT (after having taken into account any
security interest in his VESTED BENEFIT that the PLAN has as a
result of any currently outstanding loan to the PARTICIPANT).
(b) If the PARTICIPANT has a surviving spouse as of his date of
death, the death benefit shall be payable to such surviving
spouse. If the PARTICIPANT has no surviving spouse, the death
benefit will be paid to the PARTICIPANT'S designated
BENEFICIARY.
(c) The PARTICIPANT'S death benefit shall be distributed to the
surviving spouse or other designated BENEFICIARY in the form of a
lump sum, and the ANNUITY STARTING DATE of that benefit shall be
as soon as administratively practicable (in any event, within one
year) following the PARTICIPANT'S date of death. However, the
person to whom that benefit is to be distributed, whether
surviving spouse or other designated BENEFICIARY, may elect to
have the death benefit distributed in any other form of benefit
described in Section 7.4 and not precluded thereby. To be
effective for the purposes of this PLAN, such an election must be
in writing, and must be received by the PLAN ADMINISTRATOR prior
to the death benefit's ANNUITY STARTING DATE. Given such an
election, the ANNUITY STARTING DATE for the death benefit would
then occur within 90 days after receipt of that election.
In any event, any death benefit payable pursuant to this Section
shall commence or be distributed not later than the time period
described in (1) or (2) below, as appropriate:
(1) if payable to a surviving spouse (or child of the
PARTICIPANT, as provided below), not later than December 31
of the calendar year in which the PARTICIPANT would have
attained 70 1/2; or
(2) if payable to any other BENEFICIARY, not later than the
first anniversary of the PARTICIPANT'S death;
PROVIDED that, if said spouse or BENEFICIARY cannot be located
within the applicable time period specified above, the PLAN
ADMINISTRATOR may delay commencement or distribution of payments
for a period ending not later than the first day of the first
month beginning after the sixtieth day following the date on
which such spouse or BENEFICIARY has been identified and located
by the PLAN ADMINISTRATOR and the PLAN ADMINISTRATOR has received
any necessary documentation of death.
A death benefit payable to any surviving child of the PARTICIPANT
shall be treated as if payable to the surviving spouse for
purposes of (1) above in this subsection PROVIDED that such
benefit will become payable to the surviving spouse as of the
date such child reaches age 21 or as of such other time as
prescribed by the Secretary of the Treasury under regulations.
If a surviving spouse is eligible to receive death benefits under
this PLAN, and if that surviving spouse dies prior to the ANNUITY
STARTING DATE of those death benefits, then the death benefits to
which the deceased spouse had been entitled shall be payable on
his or her behalf within such a time-frame as would be
appropriate if the deceased spouse had been the PARTICIPANT, with
the date of
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death of the surviving spouse being substituted for the
PARTICIPANT'S. However, the exceptions provided in CODE sec.
401(a)(9)(B)(iv) shall not be available regarding any surviving
spouse of the PARTICIPANT'S surviving spouse.
(d) If a PARTICIPANT dies after his VESTED BENEFIT has been
distributed in the form of a lump sum, there shall be no benefit
payable from the PLAN as a result of his death. If his VESTED
BENEFIT has been distributed in the form of an annuity, any
benefit payable as a result of his death shall be determined
solely under the terms of the annuity that was distributed,
provided that the remaining portion of such benefit, if any,
shall be distributed to the beneficiary at least as rapidly as
provided in the terms of said annuity but in any event consistent
with CODE sec. 401(a)(9)(B).
If a PARTICIPANT dies while receiving the Payments from Account
described in Section 7.4 before his entire VESTED BENEFIT has
been distributed, his surviving spouse or BENEFICIARY may elect
in writing to the PLAN ADMINISTRATOR to receive the previously
undistributed portion of such VESTED BENEFIT in the form of a
lump sum; in any event, the remaining portion of such benefit, if
any, shall be distributed at least as rapidly as under the terms
of said Payments from Account in effect for the PARTICIPANT at
death.
7.3 RETIREMENT
A PARTICIPANT, regardless of his status as an EMPLOYEE, shall have
attained RETIREMENT Age when he has attained age 65, which shall be his
NORMAL RETIREMENT AGE.
A PARTICIPANT who has attained RETIREMENT Age may retire by
designating in writing to the PLAN ADMINISTRATOR a RETIREMENT DATE,
which shall be his RETIREMENT benefit's ANNUITY STARTING DATE, and
which may be the first day of any month after he has attained NORMAL
RETIREMENT AGE, but not later than the latest date permitted by the
provisions of Section 7.5 regarding Commencement of Payments. This
latter date shall be the RETIREMENT DATE of any PARTICIPANT who has
not, prior thereto, designated a RETIREMENT DATE.
If the date on which the PARTICIPANT attains NORMAL RETIREMENT AGE is
the first day of a month, that date shall be his NORMAL RETIREMENT DATE.
Otherwise, the PARTICIPANT'S NORMAL RETIREMENT DATE shall be the first
day of the first month following his attainment of NORMAL RETIREMENT
AGE.
Upon RETIREMENT, a PARTICIPANT shall commence to receive his VESTED
BENEFIT as provided in Section 7.5.
7.4 FORM OF RETIREMENT BENEFIT
(a) Unless an optional form of benefit has been selected pursuant to
subsection (b) below, the RETIREMENT benefit payable to a
PARTICIPANT at the time of his RETIREMENT shall be the actuarial
value of his VESTED BENEFIT distributed in the form of a Lump
Sum, which is a single payment in an amount equal to the
PARTICIPANT'S VESTED BENEFIT.
(b) A PARTICIPANT may elect to waive receipt of his RETIREMENT
benefit in the form of a Lump Sum, and instead to receive his
RETIREMENT benefit in one of the following forms.
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(1) Annuity for a Period Certain - monthly income payable for a
certain period elected by the PARTICIPANT of not more than
240 months. If the PARTICIPANT dies after his RETIREMENT
DATE, or if the PARTICIPANT'S surviving spouse (or, if none,
his BENEFICIARY) dies after commencement of payments, but
before the end of the certain period, payments will commence
or be continued for the remainder of the certain period to
the PARTICIPANT'S surviving spouse or, if the PARTICIPANT
was unmarried, his BENEFICIARY (or, if the annuity is
distributed pursuant to Section 7.2, to a beneficiary
designated by the PARTICIPANT'S surviving spouse or
BENEFICIARY, as applicable,) PROVIDED, however, that the
certain period elected shall not extend beyond (1) the life
expectancy of the PARTICIPANT, (2) the life expectancies of
the PARTICIPANT and his surviving spouse or designated
BENEFICIARY, as applicable, (3) if payable pursuant to
Section 7.2, the life expectancy of the surviving spouse or
designated BENEFICIARY, as applicable, or (4) 60 months, if
by operation of Section 8.6 the PARTICIPANT'S BENEFICIARY is
his estate.
However, this optional form may be elected only if the
amount of monthly benefit payable to the PARTICIPANT would
exceed 50% of the amount he would receive in the form of a
straight life annuity.
(2) Partial Distributions - payments in an amount specified by
the PARTICIPANT, except that the amount of each distribution
may not be less than $1,000.
(c) Solely for the purposes of distributing to a PARTICIPANT his
VESTED BENEFIT where such distribution has not occurred prior to
his REQUIRED BEGINNING DATE (see Section 7.5(b)(2) below), the
PARTICIPANT may elect to receive the distribution to commence as
of his REQUIRED BEGINNING DATE in the form of Payments from
Account, rather than in one of the forms of RETIREMENT benefit
payment already provided by this Article VII.
Payments from Account shall mean periodic payments in an amount
specified by the PARTICIPANT or his BENEFICIARY continuing until
such time as the PARTICIPANT'S VESTED BENEFIT (adjusted for
subsequent Net Adjustments) is exhausted, PROVIDED however that
the period over which said payments are to be made shall not
extend beyond (1) the life expectancy of the PARTICIPANT, (2) the
life expectancies of the PARTICIPANT and his designated
BENEFICIARY, (3) if payable pursuant to Section 7.2, the life
expectancy of the designated BENEFICIARY, or (4) 60 months, if by
operation of Section 8.6 the PARTICIPANTS BENEFICIARY is his
estate.
7.5 RETIREMENT BENEFITS: ELECTION OF FORMS AND COMMENCEMENT OF PAYMENTS
(a) APPLICABILITY OF THIS SECTION
In the case of a PARTICIPANT who will receive a distribution
pursuant to Section 7.1 due to his termination of employment
before his attainment of RETIREMENT Age, the form of the
distribution and the time of commencement of payments will be as
provided in that section. The form and time of commencement of
death benefits payable to BENEFICIARIES shall be governed
according to Section 7.2. The form and time of commencement of
any other benefits payable pursuant to this PLAN will be
determined according to this section and Section 7.4.
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In any event, all distributions required under this Section shall
be determined and made in accordance with the Income Tax
Regulations under CODE sec. 401(a)(9), including the minimum
distribution incidental benefit requirement of sec. 1.401(a)(9)-2
of the regulations.
(b) COMMENCEMENT OF PAYMENTS
(1) Unless a PARTICIPANT otherwise elects in a writing received
by the PLAN ADMINISTRATOR prior to the PARTICIPANT'S ANNUITY
STARTING DATE, payment of the PARTICIPANT'S VESTED BENEFIT
shall begin not later than the 60th day after the close of
the PLAN YEAR in which occurs the latest of:
(A) the PARTICIPANT'S attainment of NORMAL RETIREMENT AGE;
(B) the 10th anniversary of the date on which the
PARTICIPANT commenced participation in this PLAN; or
(C) the PARTICIPANTS termination of employment as an
EMPLOYEE,
provided that if the PARTICIPANT has failed to provide the
PLAN ADMINISTRATOR with sufficient information as to age and
marital status or any other relevant information, so that
the amounts of payment may not be determined, or if the
PARTICIPANT cannot be located, then the PLAN ADMINISTRATOR
may delay commencement of payments for not more than 60 days
after the earliest date on which the amount and form of
payment may be determined under the terms of this PLAN, or
the PARTICIPANT is located. The amount of payment in the
event of such a delay shall be retroactive to the
PARTICIPANT'S RETIREMENT DATE.
Notwithstanding any provisions of this paragraph (1) to the
contrary, the failure of a PARTICIPANT and the PARTICIPANT'S
spouse to consent to the distribution of a benefit while
that benefit is immediately distributable pursuant to this
Section shall be deemed to be an election to defer
commencement of payment of that benefit.
(2) Any provisions of this PLAN to the contrary notwithstanding,
the entire vested interest of the PARTICIPANT in benefits
under this PLAN:
(A) will be distributed to THE PARTICIPANT not later than
the PARTICIPANT'S REQUIRED BEGINNING DATE, or
(B) will be distributed, beginning not later than the
PARTICIPANT'S REQUIRED BEGINNING DATE, over the life of
the PARTICIPANT or over the lives of the PARTICIPANT
and a designated beneficiary (or over a period not
extending beyond the life expectancy of the PARTICIPANT
or the life expectancy of the PARTICIPANT and a
designated beneficiary).
For the purpose of determining the amount to be distributed
as of the PARTICIPANT'S REQUIRED BEGINNING DATE, his VESTED
BENEFIT shall be valued as of December 31 of the calendar
year immediately preceding his REQUIRED BEGINNING DATE.
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The PARTICIPANT may elect for these required distributions
to be paid in any of the forms of benefit described in
Section 7.4, subject to any spousal consent requirements
that may apply pursuant to this PLAN. Absent such an
election, these distributions automatically shall be payable
in the form described in Section 7.4(a).
(3) If a PARTICIPANT'S interest is to be distributed in a form
other than a Lump Sum, the following minimum distribution
rules shall apply on or after the PARTICIPANT'S REQUIRED
BEGINNING DATE.
(A) If the PARTICIPANT'S benefit is to be distributed over
(1) a period not extending beyond the life expectancy
of the PARTICIPANT or the joint life and last survivor
expectancy of the PARTICIPANT and the PARTICIPANT'S
BENEFICIARY, or (2) a period not extending beyond the
life expectancy of the BENEFICIARY, then the amount
required to be distributed for each calendar year,
beginning with distributions for the first distribution
calendar year, must at least equal the quotient
obtained by dividing the PARTICIPANT'S benefit by the
applicable life expectancy.
(B) For calendar years beginning before January 1, 1989, if
the PARTICIPANT'S spouse (if any) is not the
BENEFICIARY, the method of distribution selected must
assure that at least 50% of the present value of the
amount available for distribution is paid within the
life expectancy of the PARTICIPANT.
(C) For calendar years beginning after December 31, 1988,
the amount to be distributed each year, beginning with
distributions for the first distribution calendar year,
shall not be less than the quotient obtained by
dividing the PARTICIPANTS benefit by the lesser of (1)
the applicable life expectancy, or (2) if the
PARTICIPANT'S spouse (if any) is not the BENEFICIARY,
the applicable divisor determined from the table set
forth in Q&A-4 of section 1.401(a)(9)-2 of the Income
Tax Regulations. Distributions after the death of the
PARTICIPANT shall be distributed using the applicable
life expectancy referenced in subsection (3)(A) above
as the relevant divisor without regard to Regulations
sec. 1.401(a)(9)-2.
(D) The minimum distribution required for the PARTICIPANT'S
first distribution calendar year must be made on or
before the PARTICIPANT'S REQUIRED BEGINNING DATE. The
minimum distribution for other calendar years,
including the minimum distribution for the distribution
calendar year in which the PARTICIPANT'S REQUIRED
BEGINNING DATE occurs, must be made on or before
December 31 of that distribution calendar year.
If the PARTICIPANT'S benefit is distributed in the form of
an annuity purchased from an INSURANCE COMPANY, any such
distribution shall be made in accordance with the
requirements of CODE sec. 401(a)(9) and the regulations
promulgated thereunder.
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(4) Any additional amounts of VESTED BENEFIT accrued by the
PARTICIPANT after his REQUIRED BEGINNING Date shall be
distributed annually in the form of a lump sum consistent
with the requirements of CODE sec. 401(a)(9) and applicable
regulations.
(5) Once distributions have begun to a 5% owner under this
subsection, they must continue to be distributed even if the
PARTICIPANT ceases to be a 5% owner in a subsequent year.
(6) For the purposes of this subsection, "applicable life
expectancy" means the life expectancy (or joint and last
survivor expectancy) calculated using the attained age of
the PARTICIPANT (or designated beneficiary) as of the
PARTICIPANT'S (or designated beneficiary's) birthday in the
applicable calendar year reduced by one for each calendar
year which has elapsed since the date the life expectancy
was first calculated.
If the life expectancy is being recalculated, the applicable
life expectancy shall be the life expectancy as so
recalculated.
The applicable calendar year shall be the first distribution
calendar year, and if the life expectancy is being
recalculated, each such succeeding calendar year.
If annuity payments commence before the REQUIRED BEGINNING
DATE, the applicable calendar year is the year such payments
commence. If the distribution is in the form of an immediate
annuity purchased after the PARTICIPANT'S death with the
PARTICIPANT'S remaining VESTED BENEFIT, the applicable
calendar year is the year of purchase.
(7) Unless otherwise elected by the PARTICIPANT (or spouse, as
applicable) by the time distributions are required to begin,
life expectancies shall be recalculated annually. If such an
election has been made by the PARTICIPANT (or spouse, as
applicable), it shall be irrevocable as to the PARTICIPANT
(or spouse) and shall apply to all subsequent years.
The life expectancy of a nonspouse beneficiary may not be
recalculated.
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ARTICLE VIII
GENERAL PROVISIONS
8.1.1 PLAN MODIFICATION: AUTHORITY
The COMPANY reserves the right to amend, modify, or terminate the PLAN
at any time, provided that no amendment or modification shall act to
reduce the balances of the INDIVIDUAL ACCOUNTS of any PARTICIPANT
accrued to the time of such amendment or modification.
8.1.2 PLAN MODIFICATION: MERGER
No merger, consolidation, or transfer of the assets or liabilities of
this PLAN with or to any other qualified plan shall be undertaken
unless, after such merger, consolidation, or transfer, each PARTICIPANT
would, if the PLAN then terminated, receive a benefit not less than the
benefit he would have received had the PLAN terminated immediately prior
to such merger, consolidation, or transfer.
8.1.3 PLAN MODIFICATION: TERMINATION
Upon termination or partial termination of this PLAN, or the complete
discontinuance of contributions by the EMPLOYER (as defined in CODE
secs. 1.401-6(c) and 1.411(d)-2(d)), the rights of each affected
PARTICIPANT to benefits accrued to the date of termination or partial
termination, or the complete cessation of contributions by the EMPLOYER,
shall be fully vested to the extent funded.
If, after the allocation of the PLAN's assets pursuant to the PLAN's
termination, all liabilities of the PLAN have been satisfied in full and
there remain surplus PLAN assets not necessary to satisfy the
liabilities of the PLAN, such surplus shall revert to the EMPLOYER,
consistent with the provisions of the termination amendment of this
PLAN, and provided that no successor plan is established (with
"successor plan" having the same meaning as that described in
IRC Reg. 1.401(k)-1(d)(3)).
8.2.1 DUTIES: PLAN ADMINISTRATOR
The PLAN ADMINISTRATOR has the discretionary authority to control and
manage the operation and administration of the PLAN, including the
specific duties outlined below. The PLAN ADMINISTRATOR in his sole
discretion shall make such rules, regulations, interpretations, and
computations and shall take such other actions to administer the PLAN as
he may deem appropriate. Such rules, regulations, computations, and
other actions shall be conclusive and binding upon all persons.
Duties of the PLAN ADMINISTRATOR include, but are not limited to,
determination of benefits and eligibility to participate, payment of
funds to the INSURANCE COMPANY or TRUSTEE, authorization of benefit
payments and payment of any expenses incurred in the administration of
the PLAN. The PLAN ADMINISTRATOR may employ such consultants and
advisors as he deems necessary or desirable for carrying out his duties
under the PLAN.
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8.2.2 DUTIES: EMPLOYEE
Duties of the EMPLOYER include, but are not limited to, payment of funds
to the INSURANCE COMPANY or TRUSTEE, in addition to payment of any
expenses incurred in the administration of the PLAN. The EMPLOYER shall
indemnify and hold harmless any fiduciary who is an employee of the
EMPLOYER from any and all claims, loss, damages, expense (including
counsel fees), and liability (including amounts paid in settlement with
the EMPLOYER'S written consent) arising from any act or omission of the
fiduciary, except when the same is judicially determined to be done due
to the gross negligence or willful misconduct of the fiduciary.
8.3 BENEFIT CLAIMS PROCEDURE
Any PARTICIPANT in this PLAN, or his BENEFICIARY, may make a claim for
benefits due to him under this PLAN by delivering a written application
to the PLAN ADMINISTRATOR. If a claim is wholly or partially denied,
notice of the decision shall be furnished to the claimant by the PLAN
ADMINISTRATOR within 90 days after receipt of the claim by the PLAN
ADMINISTRATOR unless special circumstances require an extension of time
for processing the claim. If an extension of time is required the PLAN
ADMINISTRATOR shall furnish the claimant with written notice of that
fact, including the reason why an extension is required and an estimated
date upon which a final decision is expected, which shall be not later
than 180 days after the claim was made. In that event, if the claim is
denied in whole or part, written notice of denial shall be given as soon
as practicable, but not later than 180 days after the claim was made.
A notice of denial of a claim shall state:
(a) the specific reason or reasons for the denial;
(b) reference to the specific PLAN provisions upon which the denial
was based; and
(c) a description of any additional material or information necessary
for the claimant to perfect the claim and an explanation of why
such additional material or information is required.
If this notice is not furnished within the time provided in this
Section, the claim shall be deemed wholly denied.
8.4 REVIEW PROCEDURE
In the event that a claim is denied under this PLAN, the claimant or his
authorized representative may apply in writing to the PLAN ADMINISTRATOR
within 60 days of receiving notice of the denial or, if no written
notice of denial is received within the 180-day period prescribed in
Section 8.3, within 60 days after the expiration of said 180 day period,
asking that the denial be reviewed. This time limit may be extended by
the PLAN ADMINISTRATOR if an extension appears to be reasonable in view
of the nature of the claim and the pertinent circumstances. Upon receipt
of such application, the PLAN ADMINISTRATOR shall afford the claimant an
opportunity to review pertinent documents and to submit issues and
comments in writing. A decision on review shall be rendered by the PLAN
ADMINISTRATOR not later than 60 days after the claimant's application
for review unless an extension of time for processing is required, in
which case a decision will be made as soon as possible, but not later
than 120 days after the request for review was
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made. If an extension of time is required, the PLAN ADMINISTRATOR shall
give the claimant written notice of that fact before the extension
period begins. A decision on review shall be in writing and shall
include specific reasons for the decision and specific references to the
PLAN provisions on which the decision is based.
If the claimant has not received written decision on review within 60
days after the request for review was received, or within 120 days if an
extension of time was required, the claim will be considered wholly
denied on review.
8.5 QUALIFICATION OF THE PLAN AND CONDITIONS OF CONTRIBUTIONS
This PLAN, together with any insurance or annuity contracts or trust
agreement used in conjunction with it, is intended to meet the
requirements of the Internal Revenue SERVICE for approval as a
tax-exempt plan or trust under Section 401 of the CODE. Any amendments
which may be necessary to meet these requirements shall be made
retroactive to the date upon which the PLAN failed to meet these
requirements.
This PLAN is adopted with the intent and on the conditions that the
Internal Revenue service shall by ruling or determination letter
establish that the PLAN is "qualified" within the meaning of Section 401
of the CODE, that any trust which is part of this PLAN at its adoption
is exempt from taxation pursuant to Section 501 of the CODE and that
contributions to the PLAN by the employer are deductible pursuant to
Section 404 of the CODE. If any of these conditions are determined
initially by the Internal Revenue service not to be the case, all
contributions to this PLAN made prior to such determination by the
Internal Revenue service shall be returned to the person or persons who
made them and the PLAN shall terminate unless the EMPLOYER amends the
PLAN to meet these conditions and such amendment is determined by the
Internal Revenue service to meet these conditions, PROVIDED that the
application for such determination was made by the time prescribed by
law for filing the employer's return for the taxable year in which the
PLAN was adopted, or such later date as the Secretary of the Treasury
may prescribe.
Contributions to this PLAN are made with the intent and on the condition
that such contributions are deductible under Section 404 of the CODE. If
any contribution by the employer is disallowed as a deduction by the
Internal Revenue service then, to the extent the deduction is
disallowed, the contribution shall be refunded to the employer within
one year after the disallowance of the deduction. If any contribution by
the employer is made by a mistake of fact, such contribution shall be
refunded to the employer within one year after the payment of the
contribution.
If a refund occurs pursuant to this Section, the amount which shall be
returned to the employer shall be the excess of the amount which was
contributed over the amount (1) which was deductible, or (2) which would
have been contributed absent the mistake of fact (as the case may be),
without any earnings but net of any losses attributable to such excess.
8.6 BENEFICIARIES
Any payments due under the PLAN to a PARTICIPANT'S BENEFICIARY shall be
paid according to the BENEFICIARY designation last filed in writing with
the PLAN ADMINISTRATOR by the PARTICIPANT. If no such designation is
made, payments shall be made in the following order of priority:
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(a) to the surviving spouse of the PARTICIPANT;
(b) if no spouse survives the PARTICIPANT, then to the children of
the PARTICIPANT in equal shares, with a share by right of
representation to the then surviving children of any deceased
child; or
(c) if neither a spouse, children nor grandchildren survive the
PARTICIPANT, then to the PARTICIPANT'S estate.
8.7 SPENDTHRIFT CLAUSE
(a) GENERAL RULE
Subject to the exception specified in subsection (b) below,
benefits payable under this PLAN shall not be subject in any
manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, charge, garnishment, execution, or levy of
any kind, either voluntary or involuntary, including any such
liability which is for alimony or other payments for the support
of a spouse or former spouse, or for any other relative of the
EMPLOYEE, prior to actually being received by the person entitled
to the benefit under the terms of the PLAN except as provided
below, and any attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber, charge or otherwise dispose of any
right to benefits payable hereunder shall be void; also, the PLAN
shall not in any manner be liable for, nor subject to, the debts,
contracts, liabilities, engagements or torts of any person
entitled to benefits hereunder.
(b) EXCEPTION
The provisions of subsection (a) above to the contrary shall not
withstand a right to a benefit payable under this PLAN that has
been created, assigned or recognized pursuant to a "qualified
domestic relations order", as defined in CODE sec. 414(p).
Administration of the PLAN with respect to qualified domestic
relations orders shall at all times be consistent with CODE sec.
414, regulations promulgated thereunder, and any other provisions
of state and federal law that may be applicable. Payment of a
benefit to an alternate payee pursuant to a qualified domestic
relations order may be made prior to the time such payment could
be made to the PARTICIPANT, provided that such payment is
consistent with the provisions of this PLAN in all respects
except for the time of payment.
8.8 ANNUITIES
Any provisions of this PLAN to the contrary notwithstanding:
(a) any annuity contract distributed from this PLAN shall contain
express provisions sufficient to make such contract
nontransferable; and
(b) the terms of any annuity contract purchased and distributed by
the PLAN to a PARTICIPANT or PARTICIPANT'S spouse shall comply
and be consistent with the requirements of this PLAN.
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8.9 LIMITATIONS OF THE EMPLOYER'S LIABILITY
To the extent permitted by law, the liability of the EMPLOYER with
respect to any and all obligations arising from or in any way connected
with this PLAN shall be limited to amounts already contributed.
8.10 NON-GUARANTEE OF EMPLOYMENT
This PLAN shall not be considered to constitute a contract of employment
and nothing contained in the PLAN shall give any EMPLOYEE the right to
be retained in employment, nor shall anything contained in the PLAN
interfere with the EMPLOYER'S right to discharge or retire any EMPLOYEE
at any time. Participation in the PLAN shall not give any EMPLOYEE any
right or claim in any benefits except as specifically provided in this
PLAN.
8.11 APPLICABLE LAW
The provisions of this PLAN shall be governed, construed, and
administered in accordance with federal law, and to the extent that
state law is not preempted by federal law, the law of the state of
Texas.
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ARTICLE IX
DIRECT ROLLOVERS
9.1 GENERAL RULE
This Article applies to distributions made on or after January 1, 1993.
Notwithstanding any provision of the PLAN to the contrary that would
otherwise limit a distributee's election under this Article 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.
9.2 DEFINITIONS
(a) 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: 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; any
distribution to the extent such distribution is required under
section 401 (a)(9) of the CODE; and 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).
(b) 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.
(c) 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 the 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.
(d) Direct rollover: A direct rollover is a payment by the PLAN to
the eligible retirement plan specified by the distributee.
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Exhibit 5.1
December 29, 1997
HORIZON Pharmacies, Inc.
275 W. Princeton Drive
Princeton, Texas 75407
Re: HORIZON Pharmacies, Inc. (the "Company")
Form S-8 Registration Statement\
Our File No. 67114.00101
------------------------------------------
Gentlemen:
We have acted as counsel to the Company in connection with the
preparation of the Registration Statement on Form S-8 (the "Registration
Statement"), to be filed by the Company with the Securities and Exchange
Commission (the "Commission"), relating to 180,000 shares of the Company's
common stock, $.01 par value (the "Common Stock"), to be acquired by or
issued to the HORIZON Pharmacies, Inc. 401(k) Plan (the "Plan").
Based on the foregoing, we are of the opinion that the shares of Common
Stock to be acquired by, or issued to the Plan are validly authorized and,
upon issuance in accordance with the terms of the Plan, will be legally
issued, fully paid and nonassessable.
We are members of the bar of the State of Oklahoma and do not hold
ourselves out as experts on, or as generally familiar with, or qualified to
express opinions under law other than the law of the State of Oklahoma, the
general corporate law of the State of Texas, and the law of the United States
and the opinion given herein is limited thereto.
Very truly yours,
PHILLIPS MCFALL MCCAFFREY MCVAY
& MURRAH, P.C.
/s/ Phillips McFall McCaffrey McVay &
Murrah, P.C.
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-_______) pertaining to the HORIZON Pharmacies, Inc. 401(k)
Plan of our report dated April 4, 1997, except for the third and fourth
paragraphs of Note 6, as to which the date is May 31, 1997, with respect to
the 1996 financial statements of HORIZON Pharmacies, Inc. included in
Amendment No. 2 to the Registration Statement (Form SB-2 No. 333-25257) and
related Prospectus dated July 8, 1997, filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
Oklahoma City, Oklahoma
December 31, 1997
<PAGE>
Exhibit 23.2
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement on
Form S-8 (No. 333-____________) pertaining to the HORIZON Pharmacies, Inc.
401(k) Plan with respect to our report on the financial statements for the year
ended December 31, 1995 of HORIZON Pharmacies, Inc. dated April 24, 1996 and our
reports on the financial statements of the Farmington Store Acquisition and the
Vista Store Acquisition dated March 28, 1997 included in Amendment No. 2 to the
Registration Statement on Form SB-2 (No. 333-25257) and the related Prospectus
dated July 8, 1997 filed with the Securities and Exchange Commission; and our
reports on the financial statements of the following businesses included in the
Current Reports on Form 8-K and filed with the Securities and Exchange
Commission as indicated:
1. Report dated October 1, 1997 on the financial statements for the year
ended December 31, 1996 of Sun Country Drug, Inc. included in
Amendment No. 1 to Current Report on Form 8-K dated August 2, 1997
filed with the Securities and Exchange Commission on October 16, 1997;
2. Report dated October 19, 1997 on the financial statements for the year
ended December 31, 1996 of Revco Inc., dba Northridge Pharmacy, Inc.
included in Amendment No.1 to Quarterly Report on Form 10-QSB for the
fiscal quarter ended June 30, 1997 filed with the Securities and
Exchange Commission on October 24, 1997;
3. Report dated October 21, 1997 on the financial statements for the year
ended December 31, 1996 of Downey Drug, Inc., Inc. included in
Amendment No. 1 to Quarterly Report on Form 10-QSB for the fiscal
quarter ended June 30, 1997 filed with the Securities and Exchange
Commission on October 24, 1997;
4. Report dated November 7, 1997 on the financial statements for the year
ended December 31, 1996 of McCosh Drug, Inc., included in the Current
Report on Form 8-K/A filed with the Securities and Exchange Commission
on November 13, 1997; and
5. Report dated December 23, 1997 on the financial statements for the
years ended December 31, 1996 and December 31, 1995 of Kenn's
Pharmacy, Inc., included in the Current Report on Form 8-K/A filed
with the Securities and Exchange Commission on December 24, 1997.
Howard & Waltrip, P.C.
Certified Public Accountants
Dallas, Texas
December 29, 1997
<PAGE>
Exhibit 23.3
CONSENT OF COUNSEL
Phillips McFall McCaffrey McVay & Murrah, P.C., hereby consents to the
filing of its opinion of counsel as an exhibit to the Form S-8 Registration
Statement of HORIZON Pharmacies, Inc. ("HORIZON") for the registration of
180,000 shares of HORIZON common stock, par value $.01 per share.
PHILLIPS MCFALL MCCAFFREY MCVAY & MURRAH, P.C.
/s/ Phillips McFall McCaffrey McVay & Murrah, P.C.
Oklahoma City, Oklahoma
December 29, 1997
