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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: September 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _____ to _____
Commission File Number: 1-13049
CCA PRISON REALTY TRUST
(Exact name of Registrant as specified in its declaration of trust)
Maryland 62-1689525
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
10 Burton Hills Blvd., Suite 100, Nashville, Tennessee 37215
(Address and zip code of principal executive offices)
(615) 263-0200
(Registrant's telephone number, including area code)
2200 Abbott Martin Road, Suite 201, Nashville, Tennessee 37215
(Former name, former address and former fiscal
year if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
21,576,000
(Outstanding shares of the issuer's common shares,
$0.01 par value per share as of October 31, 1997)
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CCA PRISON REALTY TRUST
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
INDEX
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
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<S> <C>
Item 1. Financial Statements
a) Consolidated Balance Sheets 3
as of September 30, 1997 and April 23, 1997
b) Consolidated Statement of Income 4
for the period from July 18, 1997 to September 30, 1997
c) Consolidated Statement of Cash Flows 5
for the period from July 18, 1997 to September 30, 1997
d) Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 12
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About 16
Market Risk
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURE
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS.
CCA PRISON REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, APRIL 23,
1997 1997
<S> <C> <C>
ASSETS
REAL ESTATE PROPERTIES, AT COST
CORRECTIONAL AND DETENTION FACILITIES $ 381,539 $--
LESS - ACCUMULATED DEPRECIATION AND AMORTIZATION (2,110) --
--------- ---
NET REAL ESTATE PROPERTIES 379,429 --
CASH AND CASH EQUIVALENTS 41,714 1
OTHER ASSETS 425 --
--------- ---
TOTAL ASSETS $ 421,568 $ 1
========= ===
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
DISTRIBUTIONS PAYABLE $ 7,465 $--
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 184 --
--------- ---
TOTAL LIABILITIES 7,649 --
--------- ---
COMMITMENTS AND CONTINGENCIES -- --
SHAREHOLDERS' EQUITY
PREFERRED SHARES, $.01 PAR VALUE; 10,000,000 SHARES AUTHORIZED;
NONE OUTSTANDING -- --
COMMON SHARES, $.01 PAR VALUE; 90,000,000 SHARES AUTHORIZED;
21,576,000 AND 1,000 SHARES ISSUED AND OUTSTANDING , RESPECTIVELY 216 --
CAPITAL IN EXCESS OF PAR VALUE 414,841 1
ACCUMULATED DISTRIBUTIONS IN EXCESS OF NET INCOME (1,138) --
--------- ---
TOTAL SHAREHOLDERS' EQUITY 413,919 1
--------- ---
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 421,568 $ 1
========= ===
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
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CCA PRISON REALTY TRUST
CONSOLIDATED STATEMENT OF INCOME
PERIOD FROM JULY 18, 1997 TO SEPTEMBER 30, 1997
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<S> <C>
REVENUES
RENTAL $ 8,293
INTEREST 555
--------------
8,848
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EXPENSES
DEPRECIATION AND AMORTIZATION 2,131
GENERAL AND ADMINISTRATIVE 390
--------------
2,521
--------------
NET INCOME $ 6,327
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NET INCOME PER SHARE $ 0.29
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 21,965,280
==============
DISTRIBUTION DECLARED PER COMMON SHARE OUTSTANDING $ 0.346
==============
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THIS STATEMENT.
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CCA PRISON REALTY TRUST
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD JULY 18, 1997 TO SEPTEMBER 30, 1997
(UNAUDITED AND AMOUNTS IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 6,327
ADJUSTMENTS TO NET INCOME:
DEPRECIATION OF REAL ESTATE ASSETS 2,110
AMORTIZATION OF INTANGIBLES 21
CHANGES IN ASSETS AND LIABILITIES:
OTHER ASSETS (134)
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 184
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NET CASH PROVIDED BY OPERATING ACTIVITIES 8,508
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CASH FLOWS FROM INVESTING ACTIVITIES
ACQUISITION OF REAL ESTATE INVESTMENTS (378,539)
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NET CASH USED IN INVESTING ACTIVITIES (378,539)
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CASH FLOWS FROM FINANCING ACTIVITIES
PROCEEDS FROM INITIAL PUBLIC OFFERING, NET OF OFFERING COSTS OF $3,445 412,056
LOAN ORIGINATION COSTS (311)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 411,745
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NET INCREASE IN CASH AND CASH EQUIVALENTS 41,714
CASH AND CASH EQUIVALENTS, BEGINNING OF OPERATIONS 1
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CASH AND CASH EQUIVALENTS, END OF QUARTER $ 41,715
============
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
INCREASE IN DISTRIBUTIONS PAYABLE $ 7,465
REDUCTION IN SHAREHOLDERS' EQUITY THROUGH DISTRIBUTIONS
TO SHAREHOLDERS (7,465)
------------
$ -
============
INCREASE IN REAL ESTATE PROPERTIES DUE TO
CAPITALIZED DEVELOPMENT FEE PAID IN SHARES (3,000)
INCREASE IN SHAREHOLDERS' EQUITY THROUGH ISSUANCE OF
DEVELOPMENT FEE SHARES 3,000
------------
$ -
============
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THIS STATEMENT.
5
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CCA PRISON REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
1. ORGANIZATION AND OPERATIONS
CCA Prison Realty Trust (the "Company"), a Maryland real estate investment
trust, was formed April 23, 1997 to acquire, develop, and lease private and
public correctional and detention facilities. The Company plans to qualify as a
real estate investment trust ("REIT") under the Internal Revenue Code of 1986,
as amended (the "Code").
On July 18, 1997, the Company commenced operations after completing an initial
public offering of 21,275,000 common shares (including 2,775,000 shares issued
as a result of the exercise of an over-allotment option by the underwriters)
(the "Offering"). The 21,275,000 common shares were issued at an initial public
offering price of $21.00, generating gross proceeds of $446,775,000. The
aggregate proceeds to the Company, net of underwriters' discount and offering
costs, were approximately $412,056,000.
The following transactions occurred simultaneously with the completion of the
Offering (collectively, the "Formation Transactions"):
- The Company acquired the following nine correctional and detention
facilities (the"Initial Facilities") from Corrections Corporation of
America and certain of its subsidiaries (collectively, "CCA") for an
aggregate purchase price of $308.1 million:
(i) Houston Processing Center, located in Houston, Texas;
(ii) Laredo Processing Center, located in Laredo, Texas;
(iii) Bridgeport Pre-Parole Transfer Facility, located in
Bridgeport, Texas;
(iv) Mineral Wells Pre-Parole Transfer Facility, located in
Mineral Wells, Texas;
(v) West Tennessee Detention Facility, located in
Mason, Tennessee;
(vi) Leavenworth Detention Center, located in
Leavenworth, Kansas;
(vii) Eloy Detention Center, located in Eloy, Arizona;
(viii) Central Arizona Detention Center, located in
Florence, Arizona; and
(ix) T. Don Hutto Correctional Center, located in Taylor, Texas.
The Company purchased a 100% interest in the real property and all
tangible personal property associated with each of the Initial
Facilities from CCA. The real and personal property associated with
each of the Initial Facilities was used by CCA in the ownership and
operation of correctional and detention facilities. The Company will
continue to use the property in the same manner by leasing each of
the Initial Facilities back to CCA who will use the property in the
operation of correctional and detention facilities.
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- The Company entered into agreements with CCA to lease the Initial
Facilities back to CCA pursuant to long-term, non-cancelable triple
net leases (the "Leases") which require CCA to pay all operating
expenses, taxes, insurance and other costs. All of the Leases
provide for initial, annual base rents which aggregate $33.9
million, with 4% annual escalations, and have primary terms ranging
from 10-12 years which may be extended at the fair market rates for
three additional five-year periods upon the mutual agreement of the
Company and CCA. The obligations of CCA under the Leases are
cross-defaulted to each of the other Leases with respect to payment
defaults and certain other defaults.
- The Company entered into option agreements with CCA (the "Option
Agreements") pursuant to which the Company was granted the option to
acquire and leaseback to CCA any or all of five option facilities
(the "Option Facilities") from CCA at any time during the three-year
period following the acquisition of the Initial Facilities for CCA's
costs of developing, constructing and equipping such facilities,
plus 5% of such costs, aggregating approximately $219.6 million. In
addition, CCA granted the Company an option to acquire, at fair
market value, and lease back to CCA, any correctional or detention
facility acquired or developed and owned by CCA in the future for a
period of three years following the date CCA first receives inmates
at such facility.
- D. Robert Crants, III and Michael W. Devlin each received 150,000
Common Shares as a development fee and reimbursement for expenses
incurred in connection with the promotion and formation of the
Company.
- Finally, contemporaneously with the closing of the Offering, the
Company entered into a $150 million bank credit facility (the "Bank
Credit Facility") from a group of banks led by First Union National
Bank of Tennessee. The Company intends to use the Bank Credit
Facility principally to fund growth opportunities and for working
capital purposes. The Company's ability to borrow under the Bank
Credit Facility is subject to the Company's ongoing compliance with
a number of financial and other covenants. As of September 30, 1997,
no funds had been drawn on the Bank Credit Facility.
Additionally, on July 28, 1997, the Company exercised its option to
purchase from CCA the Northeast Ohio Correctional Center, located in
Youngstown, Ohio for a purchase price of $70.1 million. Annual first
year rentals to be received under the 10 year lease entered into
with CCA are $7.7 million. Lease terms are substantially similar to
those of the Initial Facilities.
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<PAGE> 8
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The consolidated financial statements of the Company include all the accounts of
the Company and its wholly-owned management subsidiary Prison Realty Management,
Inc. (a Tennessee corporation). All significant intercompany balances and
transactions have been eliminated.
The accompanying interim consolidated financial statements are unaudited,
however, the financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
in conjunction with the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the disclosures required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting solely of normal
recurring matters) necessary for a fair presentation of the financial statements
for this interim period have been included. The results of operations for the
interim period are not necessarily indicative of the results to be obtained for
the full fiscal year. These financial statements should be read in conjunction
with the prospectus filed as a part of the Company's Registration Statement
filed on Form S-11 pursuant to Rule 424 (b) of the Securities Act of 1933
(Commission File No. 333-25727) (the "Prospectus"), and the pro forma financial
statements and notes thereto included therein.
Cash and Cash Equivalents
The Company considers all short-term, highly-liquid investments that are readily
convertible to cash and have an original maturity of three months or less at the
time of purchase to be cash equivalents.
Real Estate Properties
Real estate properties are recorded at cost. Acquisition costs and transaction
fees directly related to each property are capitalized as a cost of the
respective property. The cost of real estate properties acquired is allocated
between land, buildings and improvements, and machinery and equipment based upon
estimated market values at the time of acquisition. Depreciation is provided for
on a straight-line basis over an estimated useful life of 40 years for building
and improvements and seven years for machinery and equipment.
Federal Income Taxes
The Company has elected to seek qualification as a REIT under the Code
commencing with its taxable period ending December 31, 1997. As a result, the
Company will generally not be subject to federal income tax on its taxable
income at corporate rates to the extent it distributes annually at least 95% of
its taxable income to its
8
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shareholders and complies with certain other requirements. Accordingly, no
provision has been made for federal income taxes in the accompanying
consolidated financial statements.
Leases and Rental Income
All Leases are accounted for as operating leases. Under this method, lease
payments are recognized as revenue as earned. Certain of the Leases provide for
scheduled annual rent increases.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could vary from those estimates.
Net Income per Share
Net income per share is calculated based on the weighted average number of
common shares outstanding, assuming exercise of outstanding share options, using
the treasury method.
3. REAL ESTATE PROPERTIES
As of September 30, 1997, the Company had investments in 10 leased real estate
properties totaling $379.4 million. Components of these real estate investments
at cost are as follows: land and land improvements - $5.5 million; building and
improvements - $364.1 million; and machinery and equipment - $9.8 million.
4. SHARE OPTION AND INCENTIVE PLANS
The Company has established share option and incentive plans for the purpose of
attracting and retaining qualified executive officers and key employees, as well
as non-employee trustees. In conjunction with the Offering, the Company granted
options with respect to 1,075,000 common shares to officers, employees and
trustees. The exercise price for such options is the initial public offering
price of $21.00. The term of such options is ten years from the date of grant.
In general, one-fourth of the 1,030,000 shares granted to executive officers and
employees vested immediately, with the remaining options becoming exercisable
ratably on the first, second, and third anniversary of the date of grant,
respectively. The options granted to the non-employee trustees vested at the
date of grant.
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Shares remaining for issuance under the share incentive and non-employee
trustees plans total 670,000 and 105,000, respectively.
5. DISTRIBUTION PAYABLE TO SHAREHOLDERS
On September 3, 1997, the Board of Trustees declared an initial distribution of
$0.346 per share for the quarter ended September 30, 1997, to shareholders of
record on September 30, 1997. The distribution was paid on October 15, 1997 and
represents a pro rata distribution for the period from July 18, 1997 through
September 30, 1997, based on the anticipated initial regular per share quarterly
distribution rate of $0.425.
6. EMPLOYEE BENEFIT PLAN
On September 3, 1997, the Board of Trustees adopted the CCA Prison Realty Trust
Employee Savings and Stock Ownership Plan whereby eligible employees may defer
certain percentages of their pretax compensation, subject to federal
limitations, for the purchase of Company common shares at current market prices.
Benefits are paid on death, retirement or termination. The Company may make
contributions to the plan, subject to approval by the plan administrator as
selected by the Board of Trustees. Company contributions made on behalf of
employees will vest ratably over five years. Contributions accrued by the
Company at September 30, 1997 totaled approximately $6,800.
7. EARNINGS PER SHARE
Statement of Financial Accounting Standards No. 128, Earnings per Share ("SFAS
128"), has been issued effective for fiscal periods ending after December 15,
1997. SFAS 128 establishes standards for computing and presenting earnings per
share. The Company is required to adopt the provisions of SFAS 128 in the fourth
quarter of 1997. Under the standards established by SFAS 128, earnings per share
is measured at two levels: basic earnings per share and diluted earnings per
share. Basic earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding during the year. Diluted
earnings per share is computed by dividing net income by the weighted average
number of common shares after considering the additional dilution related to
preferred shares, convertible debt, options, and warrants.
The Company's pro forma calculations of earnings per share as if the Company had
adopted SFAS 128 for the period ended September 30, 1997, are basic earnings per
share of $0.29 and diluted earnings per share of $0.29.
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8. SUBSEQUENT EVENTS
On October 1, 1997, the Company exercised its option to purchase the Torrance
County Detention Facility, located in Estancia, New Mexico, from CCA for $38.5
million. CCA will continue to operate the medium-security detention facility
under the terms of a 10 year operating lease, with terms substantially similar
to those of the Leases. Annual first year rent for the facility is expected to
be approximately $4.2 million. The Company used proceeds from the Offering and a
$600,000 draw on the Bank Credit Facility to fund the purchase.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this report.
Management's Discussion and Analysis of Financial Condition and Results of
Operations includes certain forward-looking statements about the Company's
business, revenues, prospects, expenditures and operating and capital
requirements. In addition, forward-looking statements may be included in various
other Company documents to be issued in the future and in various oral
statements by Company representatives to securities analysts and potential
investors from time to time. Any such statements are subject to risks that could
cause the actual results to vary materially. The risks and uncertainties
associated with the forward-looking information include the strength of the real
estate markets in which the Company operates, competitive market conditions,
general economic growth, interest rates and capital market conditions. The
Company discusses such risks in detail in its Prospectus.
OVERVIEW
The Company was formed as a Maryland real estate investment trust on April 23,
1997. The Company is a self-administered real estate investment trust ("REIT")
formed to capitalize on the opportunities created by the increased demand for
private correctional and detention facilities. The Company intends to qualify as
a REIT for federal income tax purposes commencing with its taxable year ending
December 31, 1997.
The principal business strategy of the Company is to acquire correctional and
detention facilities that meet the Company's investment criteria, from both
private prison managers and government entities, to expand its existing
facilities, and to lease all such facilities under long-term leases to qualified
third-party operators, including affiliates of the sellers. The Company's
initial investments are privately-managed facilities that are owned and operated
by Corrections Corporation of America, a Tennessee corporation or its
subsidiaries (collectively, "CCA"). However, the Company is pursuing other
opportunities, including acquisitions and lease backs of, or financings for,
correctional facilities owned and operated by various government entities and
private operators other than CCA. Substantially all of the Company's revenues
are derived from: (i) rents received under triple net leases of correctional and
detention facilities; and (ii) interest earned from the temporary investment of
funds in short-term investments.
The Company incurs operating and administrative expenses including, principally,
compensation expense for its executive officers and other employees, office
rental and related occupancy costs and various expenses incurred in the process
of acquiring additional properties. The Company is self-administered and managed
by its executive officers and staff, and does not engage a separate advisor or
pay an advisory fee for
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administrative or investment services, although the Company does engage legal,
accounting, tax and financial advisors from time to time. The primary non-cash
expense of the Company is depreciation of its correctional and detention
facilities.
The Company expects to leverage its portfolio of real estate equity investments
and will incur long and short-term indebtedness, and related interest expense,
from time to time.
The Company intends to make distributions to its shareholders in amounts not
less than the amounts required to maintain REIT status under the Code and, in
general, in amounts exceeding taxable income.
The Company began operations on July 18, 1997, with the purchase and immediate
leaseback of nine correctional and detention facilities using the proceeds of
the initial public offering of 21,275,000 shares (the "Offering"). A tenth
facility was purchased and leased back on July 28, 1997, also funded with
proceeds of the Offering. The Company earned approximately $.5 million in
interest income on proceeds of the offering prior to the purchase of real estate
properties. The pro forma financial statements as presented in the Company's
Prospectus assume (i) the purchase and leaseback of all properties effective
July 1, 1997, (ii) the issuance and sale of only 18,500,000 shares; and (iii)
initial borrowings under the Company's bank credit facility. For the
aforementioned reasons, the Company believes that period-to-period historical or
pro forma comparisons of operating information are not meaningful or useful for
the initial period from July 18, 1997, to September 30, 1997 (the "Initial
Period").
RESULTS OF OPERATIONS
For the period from July 18, 1997 to September 30, 1997, rental revenues of $8.3
million were generated from the immediate leaseback of ten correctional and
detention facilities purchased with proceeds of the Offering. Nine facilities
were purchased on July 18, 1997, and generated $6.9 million in lease revenues,
while a tenth correctional center was purchased July 28, 1997, and generated
$1.4 million. Lease rental amounts are initially set at rates approximating 11%
of the purchase price and provide for annual escalations of at least 4% at each
anniversary date over the 10-12 year terms of the Leases.
Interest income of $.5 million was earned during the Initial Period through
investment of the Offering proceeds prior to purchase of the real estate
properties. Interest rates generally ranged from 5.5% to 5.7%.
Depreciation of real estate properties totaled $2.1 million for the Initial
Period and was calculated from the purchase closing date to period end, as all
assets were considered immediately in use. Amortization expense for the Initial
Period related to the capitalized costs of $21,000 incurred with the
establishment of the Company's bank credit facility on July 18, 1997.
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General and administrative expenses incurred for the Initial Period were
approximately $.4 million, or 4.8% of lease revenues and consisted primarily of
management salaries and benefits, legal and other administrative costs. No
interest expense was incurred for the Initial Period as there were no draws on
the Company's bank credit facility.
LIQUIDITY AND CAPITAL RESOURCES
Upon completion of the Offering, the Company received approximately $412.1
million in net proceeds. The Company used these funds to purchase 10
correctional and detention facilities at a cost of $378.5 million. Initially,
cash on hand was invested by the Company in interest-bearing accounts and other
short-term, interest-bearing securities that are consistent with the Company's
election to seek qualification for taxation as a REIT. After the Company begins
utilizing its bank credit facility, cash available may be utilized to reduce
outstanding borrowings.
The Company expects to meet its short-term liquidity requirements generally
through its initial working capital and net cash provided by operations. The
Company believes that its net cash provided by operations will be sufficient to
allow the Company to make distributions necessary to enable the Company to
qualify as a REIT. All facilities owned by the Company will be leased to third
party under triple net leases, which require the lessee to pay substantially all
expenses associated with the operation of such facilities. As a result of these
arrangements, the Company does not believe it will be responsible for any major
expenses in connection with the facilities during the terms of the Leases. The
Company anticipates entering into similar leases with respect to all additional
properties.
The Company has reserved approximately $7.5 million in cash for the payment of
the prorated quarterly distribution declared by the Board of Trustees on
September 3, 1997. The cash distribution of $0.346 per share was paid on
October 15, 1997, to shareholders of record on September 30, 1997. The
distribution to the Company shareholders is in accordance with the Code's
requirements for qualification as a REIT and will be paid from cash from
operations.
The Company closed on a $150 million bank credit facility (the "Bank Credit
Facility") contemporaneously with the closing of the Offering. The Bank Credit
Facility will enable the Company to borrow generally at floating rates based on
a 150 basis point spread over LIBOR. The Company's ability to borrow under the
secured line of credit is subject to the Company's compliance with a number of
financial and other covenants. There were no draws on the Bank Credit Facility
during the period ended September 30, 1997.
The Company has no commitments with respect to other capital expenditures.
However, the Company has options at any time during a three-year period
beginning July 18, 1997, to purchase any or all of the four identified
facilities from CCA for CCA's costs of developing, constructing and equipping
the facilities, plus 5% or such costs, aggregating approximately $149.5
million. In addition, the Company has an option to acquire, at fair market
value, and lease back to CCA, any correctional or detention facility acquired or
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developed and owned by CCA in the future for a period of three years following
the date CCA first receives inmates at such facility.
The Company expects to meet its long-term liquidity requirements for the funding
of real estate property development and acquisitions by borrowing under the Bank
Credit Facility and by issuing in public or private transactions, equity or debt
securities. The Company anticipates that as a result of its initially low debt
to total capitalization and its intention to maintain a debt to total
capitalization of 50% or less, it will be able to obtain financing for its
long-term capital needs. However, there can be no assurance that such additional
financing or capital will be available on terms acceptable to the Company. The
Company may, under certain circumstances, borrow additional amounts in
connection with the renovation or expansion of facilities, the acquisition of
additional properties, or as necessary, to meet certain distribution
requirements imposed on REITs under the Code.
FUNDS FROM OPERATIONS
Management believes Funds from Operations is helpful to investors as a measure
of the performance of an equity REIT because, along with cash flows from
operating activities, financing activities and investing activities, it provides
investors with an understanding of the ability of the Company to incur and
service debt and make capital expenditures. The Company computes Funds from
Operations in accordance with standards established by the White Paper on Funds
from Operations approved by the Board of Governors of NAREIT in 1995, which may
differ from the methodology for calculating Funds from Operations utilized by
other equity REITs, and accordingly, may not be comparable to such other REITs.
The White Paper defines Funds from Operations as net income (loss), computed in
accordance with generally accepted accounting principles ("GAAP"), excluding
gains (or losses) from debt restructuring and sales of property, plus real
estate related depreciation and amortization and after adjustments for
unconsolidated partnerships and joint ventures. Further, Funds from Operations
does not represent amounts available for management's discretionary use because
of needed capital replacement or expansion, debt service obligations, or other
commitments and uncertainties. Funds from Operations should not be considered as
an alternative to net income (determined in accordance with GAAP) as an
indication of the Company's financial performance or to cash flows from
operating activities (determined in accordance with GAAP) as a measure of the
Company's liquidity, nor is it indicative of funds available to fund the
Company's cash needs, including its ability to make distributions. The Company
believes that in order to facilitate a clear understanding of the consolidated
operating results of the Company, Funds from Operations should be examined in
conjunction with net income as presented in the consolidated financial
statements.
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The following table presents the Company's Funds from Operations for the period
from July 18, 1997 to September 30, 1997:
Funds from Operations
Net Income $ 6,327
Add back real estate depreciation and amortization 2,110
--------
$ 8,437
========
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
16
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. EXHIBITS
10.1 Lease Agreement between the Company and CCA with respect to the
Torrance County Detention Facility.
10.2 CCA Prison Realty Trust Employee Savings and Stock Ownership Plan.
27 Financial Data Schedule. (For SEC use only)
B. Reports on Form 8-K
The Company filed a Current Report on Form 8-K on August 4, 1997, pursuant to
Item 2 of such form, with respect to the purchase of 10 correctional and
detention facilities from CCA. Certain financial statements of the Company were
incorporated into the Form 8-K by reference to the Company's Prospectus filed
with the Commission pursuant to Rule 424(b)(1) of the Securities Act of 1933, as
amended, on July 15, 1997.
17
<PAGE> 18
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Quarterly Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
CCA PRISON REALTY TRUST
/s/ Vida H. Carroll
- --------------------------
Vida H. Carroll
Chief Financial Officer
Date: November 11, 1997
EXHIBIT INDEX
10.1 Lease Agreement between the Company and CCA with respect to the
Torrance County Detention Facility.
10.2 CCA Prison Realty Trust Employee Savings and Stock Ownership Plan
27 Financial Data Schedule (for SEC use only)
18
<PAGE> 1
EXHIBIT 10.1
LEASE AGREEMENT
(TORRANCE COUNTY)
THIS LEASE AGREEMENT ("Lease") dated as of the 1st day of October,
1997, by and between CCA PRISON REALTY TRUST, a Maryland real estate investment
trust ("Landlord") and CORRECTIONS CORPORATION OF AMERICA, a Tennessee
corporation ("Tenant").
RECITALS
WHEREAS, Tenant (or one of Tenant's affiliates) has concurrently
conveyed to Landlord the property described in Exhibit A hereto, and Landlord
and Tenant desire that Landlord lease such property back to Tenant; and
WHEREAS, Landlord and Tenant have entered into a Master Agreement to
Lease dated July 18, 1997 (the "Master Agreement") which sets forth certain
agreements of the parties with respect to the lease of various properties
including the property that is the subject of this Lease;
NOW, THEREFORE, in consideration of the premises and of their
respective agreements and undertakings herein, Landlord and Tenant agree as
follows:
ARTICLE I
PREMISES AND TERM
1.1 Leased Property. Landlord hereby leases to Tenant and Tenant leases
from Landlord the Land located in Torrance County, New Mexico, described in
Exhibit A hereto, and all Improvements, Fixtures, and Personal Property thereon
or thereto (each as defined in the Master Agreement, and, together with said
Land, the "Leased Property"); such Leased Property collectively known and
described at the date hereof as the Torrance County Detention Facility;
SUBJECT, HOWEVER, to the lien of the mortgage debt described in Exhibit
B hereto, if any, and to all easements, liens, encumbrances, restrictions,
agreements, and other title matters existing as of the date hereof and listed in
Exhibit C hereto (collectively the "Permitted Exceptions").
1.2 Term. The initial term (the "Fixed Term") of the Lease shall be for
a fixed term of ten (10) years commencing on October 1, 1997 (the "Commencement
Date") and expiring on September 30, 2007 (the "Expiration Date"). The Term of
this Lease may be renewed on the mutual agreement of Landlord and Tenant as
follows: (i) provided that Tenant gives Landlord notice on or before the date
which is six (6) months prior to the Expiration Date, upon the mutual agreement
of Landlord and Tenant, the Lease shall be renewed for one (1) additional five
(5) year term (the "Extended Term") on the same terms and provisions (other than
with respect to renewal) as the Fixed Term, as set forth in the Lease; (ii)
provided that Tenant gives Landlord notice on or before the date which is six
(6) months prior to the expiration of the Extended Term, upon the mutual
agreement of Landlord and Tenant, the Lease shall be renewed for one (1)
additional five (5) year term (the "Second Extended Term") on the same terms and
provisions (other than with respect to renewal) as the Fixed Term, as set forth
in the Lease; and (iii) provided that Tenant gives Landlord notice on or before
the date which is six (6) months prior to the expiration of the Second Extended
Term, upon the mutual agreement of Landlord and Tenant, the Lease shall be
renewed for one (1)
<PAGE> 2
additional five (5) year term (the "Third Extended Term") on the same terms and
provisions (other than with respect to renewal) as the Fixed Term, as set forth
in the Lease. Tenant's right to so extend the Term of the Lease is conditioned
on Landlord's prior approval of the Extended Term, Second Extended Term, or
Third Extended Term, as the case may be. The term "Term" used in this Agreement
means the Fixed Term, Extended Term, Second Extended Term and Third Extended
Term, as appropriate. The term "Lease Year" means each twelve (12) month period
during the Term commencing on January 1 and ending on December 31, except the
first Lease Year of each Lease shall be the period from the Commencement Date
through the following December 31, and the last Lease Year shall end on the date
of termination of the Lease if a day other than December 31. Landlord may
terminate this Lease prior to the expiration of the Term hereof, at any time
following the date which is five (5) years from the date hereof, upon written
notice to Tenant not less than eighteen (18) months prior to the effective date
of such termination.
ARTICLE II
RENT
2.1 Base Rent. Tenant shall pay Landlord Base Rent for the Term in
advance in consecutive monthly installments payable on the first day of each
month during the Term, the Extended Term, Second Extended Term and the Third
Extended Term, commencing on the Commencement Date, in accordance with the Base
Rent Schedule attached hereto as Exhibit D. If the Commencement Date or the
Expiration Date shall be other than on the first day of a calendar month, the
initial (or final, as appropriate) monthly installment of Base Rent payable
pursuant to the Lease shall be prorated for the number of days until, in the
case of this initial monthly installment, the first day of the calendar month
following the Commencement Date and, in the case of the final monthly
installment, the Expiration Date.
2.2 Additional Rent. The Base Rent shall be subject to such increases
over the Term as determined pursuant to Section 2.02 of the Master Agreement.
2.3 Other Additional Rent. Tenant shall also pay all Other Additional
Rent with respect to the Leased Property, as set forth in the Master Agreement.
ARTICLE III
OTHER TERMS AND CONDITIONS
3.1 Master Agreement Incorporated Herein. All provisions of the Master
Agreement (except any provisions expressly therein not to be a part of an
individual lease of leased property) are hereby incorporated in and are a part
of this Lease of the Leased Property.
3.2 Recordation. At the request of Landlord or Tenant, a short form
memorandum of this Lease may be recorded in the real estate records of any
county which Landlord or Tenant deems appropriate in order to provide legal
notice of the existence hereof.
2
<PAGE> 3
IN WITNESS WHEREOF, the Landlord and the Tenant have executed this
Lease or caused the same to be executed by their respective duly authorized
officers as of the date first set forth above.
CCA PRISON REALTY TRUST
By:
--------------------------------
Title:
-----------------------------
CORRECTIONS CORPORATION OF AMERICA
By:
--------------------------------
Title:
------------------------------
EXHIBIT A
[legal description]
<PAGE> 4
EXHIBIT B
Mortgage Debt
Property: Torrance County Detention Facility
This property is subject to the following Mortgage Debt:
That certain deed of trust of First Union National Bank of
Tennessee, as Administrative Agent, dated October 1, 1997.
<PAGE> 5
EXHIBIT C
Permitted Exceptions
Property: Torrance County Detention Facility
<PAGE> 6
EXHIBIT D
Base Rent Schedule
Property: Torrance County Detention Facility
Tenant will pay to Landlord annual Base Rent of $4,235,000.00, payable
in equal monthly installments of $352,916.67.
Base Rent for the Extended Term, Second Extended Term and Third
Extended Term shall be equal to the fair market rental value of the Leased
Property as of the respective commencement dates thereof.
<PAGE> 1
EXHIBIT 10.2
CCA PRISON REALTY TRUST
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
<PAGE> 2
CCA PRISON REALTY TRUST
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I NAME OF PLAN................................................................................. 1
ARTICLE II DEFINITIONS...................................................................................1
2.1 Accrued Benefits..............................................................................1
2.2 Active Participant........................................................................... 1
2.3 Affiliated Employer...........................................................................1
2.4 Average Contribution Percentage of the Prohibited Group.......................................1
2.5 Average Contribution Percentage of the Protected Group........................................2
2.6 Average Deferral Ratio of the Prohibited Group................................................2
2.7 Average Deferral Ratio of the Protected Group.................................................2
2.8 Beneficiary.................................................................................. 2
2.9 Code..........................................................................................2
2.10 Company Stock................................................................................ 2
2.11 Company Stock Account.........................................................................2
2.12 Compensation................................................................................. 2
2.13 Contribution Percentage.......................................................................3
2.14 Deferral Ratio................................................................................3
2.15 Directed Investment Account.................................................................. 3
2.16 Effective Date............................................................................... 3
2.17 Employee..................................................................................... 3
2.18 Employee Rollover Account.................................................................... 3
2.19 Employer......................................................................................3
2.20 Employer Basic Contributions Account......................................................... 3
2.21 ESOP......................................................................................... 3
2.22 Exempt Loan.................................................................................. 4
2.23 Fiduciary.................................................................................... 4
2.24 Five Percent Owner........................................................................... 4
2.25 Forfeiture................................................................................... 4
2.26 Former Participant........................................................................... 5
2.27 415 Compensation............................................................................. 5
2.28 Highly Compensated Employee.................................................................. 5
2.29 Hour of Service.............................................................................. 5
2.30 Key Employee................................................................................. 6
2.31 Limitation Year...............................................................................7
2.32 Matching Employer Contributions...............................................................7
2.33 Matching Employer Contributions Account...................................................... 7
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
2.34 Non-Highly Compensated Employee.............................................................. 7
2.35 Non-Key Employee............................................................................. 7
2.36 Normal Retirement Date....................................................................... 7
2.37 One Year Break-In-Service.................................................................... 7
2.38 Other Investments Account.................................................................... 8
2.39 Participant.................................................................................. 8
2.40 Participation Account.........................................................................8
2.41 Participation Agreement...................................................................... 8
2.42 Permanent Disability......................................................................... 8
2.43 Plan......................................................................................... 8
2.44 Plan Administrator........................................................................... 8
2.45 Plan Year.....................................................................................8
2.46 Prohibited Group..............................................................................8
2.47 Protected Group.............................................................................. 8
2.48 Regulation................................................................................... 9
2.49 Retirement....................................................................................9
2.50 Salary Reduction Contributions ...............................................................9
2.51 Salary Reduction Contributions Account....................................................... 9
2.52 Termination Date............................................................................. 9
2.53 Trust........................................................................................ 9
2.54 Trustees..................................................................................... 9
2.55 Trust Fund................................................................................... 9
2.56 Unallocated Company Stock Suspense Account................................................... 9
2.57 Valuation Date............................................................................... 9
2.58 Vested...................................................................................... 10
2.59 Year of Service............................................................................. 10
ARTICLE III PARTICIPATION............................................................................... 10
3.1 Conditions of Eligibility................................................................... 10
3.2 Effective Date of Participation............................................................. 10
3.3 Participants Prior to Amendment and Restatement............................................. 11
3.4 Determination of Eligibility................................................................ 11
3.5 Participation............................................................................... 11
ARTICLE IV CONTRIBUTIONS............................................................................... 11
4.1 Contributions............................................................................... 11
4.2 Time of Payment of Contributions............................................................ 12
4.3 Exclusive Benefit of Participants........................................................... 12
4.4 Approval by IRS............................................................................. 12
ARTICLE V ROLLOVERS................................................................................... 13
5.1 Transfers From Other Plans.................................................................. 13
5.2 Separate Account............................................................................ 13
</TABLE>
iii
<PAGE> 4
<TABLE>
<S> <C> <C>
5.3 When Payable................................................................................ 13
5.4 Self-Employed Restrictions.................................................................. 13
5.5 Investment of Rollover...................................................................... 13
5.6 Restriction on Transfer..................................................................... 14
ARTICLE VI PARTICIPATION ACCOUNTS, ALLOCATIONS AND ADJUSTMENTS......................................... 14
6.1 Separate Accounts........................................................................... 14
6.2 Contributions and Forfeitures............................................................... 15
6.3 Allocations and Adjustments to Other Investment Accounts.................................... 16
6.4 Allocations And Adjustments to Company Stock Accounts....................................... 17
6.5 Dividends on Company Stock.................................................................. 18
6.6 Accounting Procedures....................................................................... 19
6.7 Determination of Eligibility................................................................ 19
6.8 Segregated Accounts......................................................................... 19
6.9 Maximum Annual Additions.....................................................................19
6.10 Nondiscrimination Test Compliance............................................................21
6.11 Return of Excess Contributions.............................................................. 22
6.12 Statement of Plan Interest.................................................................. 23
ARTICLE VII PAYMENT OF BENEFITS......................................................................... 23
7.1 When Benefits Become Distributable.......................................................... 23
7.2 Vested Portion of Participation Account..................................................... 24
7.3 Time For Distribution....................................................................... 25
7.4 Accounts of Terminated Participants; Forfeiture Accounts; Restorations...................... 26
7.5 Manner and Method of Distribution........................................................... 27
7.6 Designation of Beneficiary.................................................................. 29
7.7 Put Option.................................................................................. 30
7.8 Nonterminable Protections and Rights........................................................ 31
7.9 Limitations on Benefits and Distributions................................................... 31
7.10 Participant Loans............................................................................31
7.11 Advance Distribution for Hardship............................................................33
ARTICLE VIII NATURE OF PARTICIPANT'S INTEREST............................................................ 34
8.1 No Rights to Employment..................................................................... 34
8.2 No Present Value or Control Over Benefits................................................... 35
8.3 Alienation.................................................................................. 35
ARTICLE IX PLAN ADMINISTRATION......................................................................... 36
9.1 Plan Administrator.......................................................................... 36
9.2 Agent for Service of Process................................................................ 36
9.3 Reports and Statements...................................................................... 36
9.4 Determination of Accrued Benefits........................................................... 36
9.5 Claims Procedure............................................................................ 36
</TABLE>
iv
<PAGE> 5
<TABLE>
<S> <C> <C>
9.6 Appeal Procedure............................................................................ 36
ARTICLE X BONDING REQUIREMENTS........................................................................ 37
ARTICLE XI AMENDMENT, TERMINATION AND MERGER........................................................... 37
11.1 Amendment................................................................................... 37
11.2 Termination................................................................................. 38
11.3 Merger or Consolidation..................................................................... 38
ARTICLE XII TRUST AGREEMENT AND INVESTMENT POLICY....................................................... 38
12.1 Trust Agreement............................................................................. 38
12.2 Investment Policy........................................................................... 39
ARTICLE XIII GENERAL..................................................................................... 39
13.1 Receipt and Release......................................................................... 39
13.2 Source of Benefits.......................................................................... 39
13.3 Information From Participants............................................................... 40
13.4 Inspection of Plan Documents................................................................ 40
13.5 Restraint on Discretionary Decisions........................................................ 40
13.6 Titles...................................................................................... 40
13.7 Rules of Construction....................................................................... 40
13.8 State Law Governing Plan.................................................................... 40
13.9 Intention to Comply With Code............................................................... 40
13.10 Action by the Employer...................................................................... 41
13.11 Named Fiduciaries and Allocation of Responsibility.......................................... 41
13.12 Legal Action................................................................................ 41
13.13 Securities and Exchange Commission Approval................................................. 41
13.14 Indemnification............................................................................. 41
ARTICLE XIV DIVERSIFICATION............................................................................. 42
14.1 Diversification Election for Qualified Participants......................................... 42
14.2 Methods of Meeting Diversification Requirements of Section 14.1..............................42
14.3 Diversification Election for All Participants.............................................. 43
ARTICLE XV TOP HEAVY PROVISIONS........................................................................ 43
15.1 Top Heavy Plan Requirements................................................................. 43
15.2 Determination of Top Heavy Status........................................................... 44
15.3 Special Minimum Allocations................................................................. 46
ARTICLE XVI PARTICIPATING EMPLOYERS..................................................................... 47
16.1 Adoption by Other Employers................................................................. 47
16.2 Requirements of Participating Employers..................................................... 47
16.3 Designation of Agent........................................................................ 48
</TABLE>
v
<PAGE> 6
<TABLE>
<S> <C> <C>
16.4 Employee Transfers.......................................................................... 48
16.5 Participating Employer's Contribution....................................................... 48
16.6 Amendment................................................................................... 49
16.7 Discontinuance of Participation............................................................. 49
16.8 Plan Administrator's Authority.............................................................. 49
ARTICLE XVII VOTING OF COMPANY STOCK......................................................................49
17.1 General......................................................................................49
17.2 Definition of Registration-Type Securities...................................................49
</TABLE>
vi
<PAGE> 7
CCA PRISON REALTY TRUST
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
WHEREAS, CCA Prison Realty Trust, a Maryland real estate investment
trust ("Employer"), hereby establishes an employee savings and stock ownership
plan for the exclusive benefit of its employees on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of these premises and for the purposes
stated, the Employer adopts the following CCA Prison Realty Trust Employee
Savings and Stock Ownership Plan to be effective as of July 15, 1997:
ARTICLE I
NAME OF PLAN
This Plan shall be known as the CCA Prison Realty Trust Employee
Savings and Stock Ownership Plan (hereinafter referred to as the "Plan").
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following definitions shall apply:
2.1 Accrued Benefits. "Accrued Benefits" shall mean the Vested
balance of the Participation Account maintained for each Participant adjusted
for withdrawals, income, expenses, and realized and unrealized gains and losses
attributable thereto.
2.2 Active Participant. "Active Participant" shall mean a
Participant who, in a given Plan Year, is entitled to receive allocations of
contributions and forfeitures pursuant to Section 6.2.
2.3 Affiliated Employer. "Affiliated Employer" shall mean the
Employer and any corporation which is a member of a controlled group of
corporations (as defined in Code Section 414(b)) which includes such Employer;
any trade or business (whether or not incorporated) which is under common
control (as defined in Code Section 414(c)) with the Employer; any organization
(whether or not incorporated) which is a member of an affiliated service group
(as defined in Code Section 414(m)) which includes the Employer, and any other
entity required to be aggregated with the Employer pursuant to Regulations under
Code Section 414(o).
2.4 Average Contribution Percentage of the Prohibited Group.
"Average Contribution Percentage of the Prohibited Group" means the average of
the Contribution Percentages of the Prohibited Group for a Plan Year as
determined by adding together the Contribution Percentages of
<PAGE> 8
each Participant who is a member of the Prohibited Group for the Plan Year and
dividing the sum by the number of Participants who are members of the Prohibited
Group for that Plan Year.
2.5 Average Contribution Percentage of the Protected Group.
"Average Contribution Percentage of the Protected Group" means the average of
the Contribution Percentages for the Protected Group for a Plan Year as
determined by adding together the Contribution Percentages of each Participant
who is a member of the Protected Group for the Plan Year and dividing that sum
by the number of Participants who are members of the Protected Group for that
Plan Year.
2.6 Average Deferral Ratio of the Prohibited Group. "Average
Deferral Ratio of the Prohibited Group" means the average of the Deferral Ratios
of the Prohibited Group for a Plan Year as determined by adding together the
Deferral Ratios of each Participant who is a member of the Prohibited Group for
the Plan Year and dividing the sum by the number of Participants who are members
of the Prohibited Group for that Plan Year.
2.7 Average Deferral Ratio of the Protected Group. "Average
Deferral Ratio of the Protected Group" means the average of the Deferral Ratios
for the Protected Group for a Plan Year as determined by adding together the
Deferral Ratios of each Participant who is a member of the Protected Group for
the Plan Year and dividing that sum by the number of Participants who are
members of the Protected Group for that Plan Year.
2.8 Beneficiary. "Beneficiary" shall mean a person to whom a
deceased Participant's Accrued Benefits are payable, determined in accordance
with Section 7.6.
2.9 Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
2.10 Company Stock. "Company Stock" shall mean common shares issued
by the Employer (or by a corporation which is a member of the same controlled
group), which shares are voting common shares (or preferred shares convertible
into voting shares) and are "employer securities" under Code Section 409(l).
2.11 Company Stock Account. "Company Stock Account" shall mean the
account which reflects a Participant's interest in Company Stock held under the
ESOP.
2.12 Compensation. "Compensation" shall mean a Participant's total
salary and wages paid by the Employer for a Plan Year and shall include elective
deferrals made to a cafeteria plan or a 401(k) plan, including the Plan,
maintained by the Employer or elective deferrals made to a 403(b) annuity.
Compensation in excess of one hundred fifty thousand dollars ($150,000)
shall be disregarded. Such amount shall be adjusted for increases in the cost of
living in accordance with Code Section 401(a)(17)(B).
2
<PAGE> 9
2.13 Contribution Percentage. "Contribution Percentage" means the
ratio calculated separately for each employee, the numerator of which shall be
the Matching Employer Contributions paid under the Plan on his behalf for the
Plan Year, and the denominator of which shall be the Employee's Compensation for
the Plan Year.
2.14 Deferral Ratio. "Deferral Ratio" means, with respect to any
Participant, the ratio which is the result of dividing the sum of contributions
made on his behalf under Section 4.1 in a Plan Year by his Compensation prior to
his directing contributions in the form of salary reduction in that Plan Year.
2.15 Directed Investment Account. "Directed Investment Account"
shall mean the account which reflects a Participant's interest in investments
held pursuant to a diversification election under Section 14.1 or 14.3.
2.16 Effective Date. "Effective Date" of this Plan shall be July
15, 1997.
2.17 Employee. "Employee" shall mean any common-law employee of the
Employer, but excluding any person who is included in a unit of employees
covered by a collective bargaining agreement between employee representatives
and the Employer under which retirement benefits were the subject of good faith
bargaining between the parties, unless such agreement expressly provides for
such coverage in this Plan.
The term "Employee" shall also include any leased employees within the
meaning of Code Section 414(n)(2) unless such leased employees are covered by a
plan described in Code Section 414(n)(5) and such leased employees do not
constitute more than 20% of the recipient's non-highly compensated work force.
2.18 Employee Rollover Account. "Employee Rollover Account" shall
mean the account which reflects a Participant's interest in qualified rollover
contributions pursuant to Article V.
2.19 Employer. "Employer" shall mean CCA Prison Realty Trust and
any successor thereto which shall maintain this Plan. Unless the context of the
Plan clearly indicates to the contrary, "Employer" shall also be deemed to
include each Participating Employer (as defined in Section 16.1) as related to
its adoption of the Plan.
2.20 Employer Basic Contributions Account. "Employer Basic
Contributions Account" means the account of a Participant which is credited with
Employer contributions made pursuant to Section 4.1(a) hereof, together with
adjustments allocable thereto under the terms of the Plan.
2.21 ESOP. "ESOP" shall mean the portion of this Plan which
constitutes an employee stock ownership plan under Code Section 4975(e)(7) and
Regulation 54.4975-11.
3
<PAGE> 10
2.22 Exempt Loan. "Exempt Loan" shall mean a loan made to the Plan
by a disqualified person or any part of a loan to the Plan which is guaranteed
by a disqualified person and which satisfies the requirements of Section
2550.408b-3 of the Department of Labor Regulations and Regulation 54.4975-7(b).
2.23 Fiduciary. "Fiduciary" shall mean any person who:
(a) exercises any discretionary authority or
discretionary control respecting management of this Plan or exercises any
authority or control with respect to management or disposition of the Trust's
assets,
(b) renders investment advice for a fee or other
compensation, direct or indirect, with respect to any monies or other property
of the Trust or has any authority or responsibility to do so, or
(c) has any discretionary authority or discretionary
responsibility in the administration of the Plan, including, but not limited to,
the Trustees, the Employer and its representative body, and the Plan
Administrator.
2.24 Five Percent Owner. "Five Percent Owner" of the Employer shall
mean any person who owns (or is considered as owning within the meaning of Code
Section 318) more than five percent (5%) of the outstanding stock of the
Employer or stock possessing more than five percent (5%) of the total combined
voting power of all stock of the Employer. In determining percentage ownership
hereunder, employers that would otherwise be aggregated under Code Sections
414(b), (c) and (m), covering members of a controlled group of corporations,
partnerships, proprietorships, etc., and members of an affiliated service group,
respectively, shall be treated as separate employers.
2.25 Forfeiture. "Forfeiture" shall mean that portion of a
Participant's Participation Account that is not Vested, and occurs on the
earlier of:
(a) the distribution of the entire Vested portion of a
Participant's Participation Account, or
(b) the last day of the Plan Year in which the
Participant incurs five (5) consecutive One Year Breaks-in-Service.
For purposes of paragraph (a) above, in the case of a terminated
Participant with a Vested Participation Account of zero, such terminated
Participant shall be deemed to have received a distribution of the entire Vested
portion of such Participant's Participation Account. In addition, the term
"Forfeiture" shall include any amount deemed to be forfeited pursuant to any
other provision of this Plan.
4
<PAGE> 11
2.26 Former Participant. "Former Participant" shall mean a person
who has ceased to be a Participant for any reason. A Former Participant shall be
treated as a Highly Compensated Employee if such Former Participant was a Highly
Compensated Employee at the time of separation from service with the Employer or
was a Highly Compensated Employee any time after attaining age 55.
2.27 415 Compensation. "415 Compensation" shall mean compensation
as defined in Section 6.9(e).
2.28 Highly Compensated Employee. "Highly Compensated Employee"
shall mean any Participant or Former Participant who:
(a) was at any time during the relevant Plan Year or the
next preceding Plan Year a Five Percent Owner; or
(b) received during the preceding Plan Year 415
Compensation from the Employer in excess of eighty thousand dollars ($80,000)
and, if the Employer elects for a Plan Year, was in the top paid group of
Employees (as defined in Code Section 414(q)).
The definition of "Highly Compensated Employee" shall be determined
pursuant to Code Section 414(q), any Regulations issued thereunder, and any cost
of living adjustments (as issued by the Secretary of the Treasury or delegate)
applicable to the dollar figures specified above. For purposes of this Section,
the determination of 415 Compensation shall be made in accordance with Code
Section 414(q).
2.29 Hour of Service. "Hour of Service" means (1) each hour for
which an Employee is directly or indirectly compensated or entitled to
compensation by the Employer for the performance of duties during the applicable
computation period, (2) each hour for which an Employee is directly or
indirectly compensated or entitled to compensation by the Employer (irrespective
of whether the employment relationship has terminated) for reasons other than
performance of duties (such as vacation, holidays, sickness, jury duty,
disability, lay-off, military duty or leave of absence) during the applicable
computation period, and (3) each hour for which back pay is awarded or agreed to
by the Employer without regard to mitigation of damages.
Notwithstanding the above, (i) no more than five hundred one (501)
Hours of Service are required to be credited 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 computation period); (ii) an hour for
which an Employee is directly or indirectly paid, or entitled to payment, on
account of a period during which no duties are performed is not required to be
credited to the Employee if such payment is made or due under a plan maintained
solely for the purpose of complying with applicable worker's compensation, or
unemployment compensation or disability insurance laws; and (iii) Hours of
Service are not required to be credited for a payment which solely reimburses an
Employee for medical or medically related expenses incurred by the Employee.
5
<PAGE> 12
For purposes of this Section, a payment shall be deemed to be made by
or due from the Employer regardless of whether such payment is made by or due
from the Employer directly, or indirectly through, among others, a trust fund,
or insurer, to which the Employer contributes or pays premiums and regardless of
whether contributions made or due to the trust fund, insurer, or other entity
are for the benefit of particular Employees or are on behalf of a group of
Employees in the aggregate.
An Hour of Service must be counted for the purpose of determining a
Year of Service, a year of participation for purposes of Accrued Benefits, a One
Year Break-in-Service, and employment commencement date (or reemployment
commencement date). The provisions of Department of Labor Regulations Section
2530.200b-2(b) and (c) are incorporated herein by reference.
2.30 Key Employee. "Key Employee" shall mean an Employee as defined
in Code Section 416(i) and the Regulations thereunder. Generally, any Employee
or former Employee (as well as each of such Employee's Beneficiaries) is
considered a Key Employee if such Employee, at any time during the Plan Year or
any of the preceding four (4) Plan Years, has been included in one of the
following categories:
(a) an officer of the Employer (as that term is defined
within the meaning of the Regulations under Code Section 416) having annual 415
Compensation greater than fifty percent (50%) of the dollar limitation in effect
under Code Section 415(b)(1)(A) for any such Plan Year;
(b) one of the ten (10) employees having annual 415
Compensation from the Employer for a Plan Year greater than the dollar
limitation in effect under Code Section 415(b)(1)(A) for the calendar year in
which such Plan Year ends and owning (or considered as owning within the meaning
of Code Section 318) the largest interests in the Employer;
(c) a Five Percent Owner of the Employer as defined in
Section 2.18; or
(d) a One Percent Owner of the Employer having annual 415
Compensation from the Employer of more than one hundred fifty thousand dollars
($150,000). "One Percent Owner" shall mean any person who owns (or is considered
as owning within the meaning of Code Section 318) more than one percent (1%) of
the outstanding stock of the Employer or stock possessing more than one percent
(1%) of the total combined voting power of all stock of the Employer or, in the
case of an unincorporated business, any person who owns more than one percent
(1%) of the capital or profits interest in the Employer. In determining
percentage ownership hereunder, Employers that would otherwise be aggregated
under Code Sections 414(b), (c), and (m) shall be treated as separate Employers.
However, in determining whether an individual has 415 Compensation or more than
one hundred fifty thousand dollars ($150,000), 415 Compensation from each
Employer required to be aggregated under Code Sections 415(b), (c), and (m)
shall be taken into account.
For purposes of this Section, the determination of 415 Compensation
shall be made in accordance with Code Section 414(q)(7).
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2.31 Limitation Year. "Limitation Year" shall mean the twelve (12)
consecutive month period coinciding with the Plan Year hereinafter specified for
purposes of applying the limit on Annual Additions to a Participant's
Participation Account, as prescribed by Code Section 415(c).
2.32 Matching Employer Contributions. "Matching Employer
Contributions" means the contributions, if any, made pursuant to Section 4.1(c)
of the Plan.
2.33 Matching Employer Contributions Account. "Matching Employer
Contributions Account" means the account of a Participant which is credited with
Matching Employer Contributions, together with adjustments allocable thereto
under the terms of the Plan.
2.34 Non-Highly Compensated Employee. "Non-Highly Compensated
Employee" shall mean any Participant who is not a Highly Compensated Employee.
2.35 Non-Key Employee. "Non-Key Employee" shall mean any Employee
or former Employee (and such Employee's Beneficiaries) who is not a Key
Employee.
2.36 Normal Retirement Date. "Normal Retirement Date" shall mean
the date a Participant reaches the Normal Retirement Age (the later of (a) the
date a Participant attains age sixty-five (65) years, or (b) the date of the
fifth (5th) anniversary of the Participant's effective date of Plan
participation). A Participant shall become fully Vested in such Participant's
Participation Account upon attaining the Normal Retirement Age.
2.37 One Year Break-In-Service. "One Year Break-in-Service" shall
mean any Plan Year in which an Employee completes five hundred (500) or less
Hours of Service with the Employer. For the sole purpose of determining whether
or not an Employee has incurred a One Year Break-in-Service, Hours of Service
shall be recognized for "authorized leaves of absence" and "maternity and
paternity leaves of absence." Years of Service and One Year Breaks-in-Service
shall be measured on the same computation period.
"Authorized leave of absence" means an Employee's unpaid temporary
absence from active employment with the Employer pursuant to an established
nondiscriminatory policy, whether occasioned by illness, military service, or
any other reason. A "maternity or paternity leave of absence" means an unpaid
temporary absence from employment with the Employer occasioned by the Employee's
pregnancy, birth of the Employee's child, placement of a child with the Employee
in connection with the adoption of such child, or any absence for the purpose of
caring for such child for a period immediately following such birth or
placement. For this purpose, Hours of Service shall be credited for the
computation period in which the absence from work begins, only if credit thereof
is necessary to prevent the Employee from incurring a One Year Break-in-Service,
or, in any other case, in the immediately following computation period. The
Hours of Service credited for an "approved leave of absence" or a "maternity or
paternity leave of absence" shall be those which would normally have been
credited but for such absence, or in any case in which the Plan Administrator is
unable to determine such hours normally credited, eight (8) Hours of Service per
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day. The total Hours of Service required to be credited for an "approved leave
of absence" or a "maternity or paternity leave of absence" shall not exceed five
hundred one (501) hours.
2.38 Other Investments Account. "Other Investments Account" shall
mean the account which reflects a Participant's interest in certain assets of
the Trust Fund other than Company Stock.
2.39 Participant. "Participant" shall mean any Employee who has met
the eligibility and participation requirements of Article III of the Plan, and
has not for any reason become ineligible to participate further in the Plan.
2.40 Participation Account. "Participation Account" shall mean the
separate account maintained for each Participant pursuant to Section 6.1 for the
purpose of recording the Participant's proportionate interest in the Trust Fund
and shall include, without limitation, all sub-accounts maintained for each
Participant thereunder.
2.41 Participation Agreement. "Participation Agreement" has the
meaning set forth in Section 4.1(b) hereof.
2.42 Permanent Disability. "Permanent Disability" shall mean a
physical or mental condition of a Participant resulting from bodily injury,
disease or mental disorder which renders the Participant incapable of performing
the Participant's usual or customary employment duties and which can be expected
to result in death or last for a continuous period of twelve (12) months or
more, as determined by a qualified practicing physician (not in the employ of
the Employer) approved for such purpose by the Plan Administrator; except, that
a Participant who is eligible to receive Social Security disability benefits
shall be deemed to be so disabled without further proof.
2.43 Plan. "Plan" shall mean the CCA Prison Realty Trust Employee
Savings and Stock Ownership Plan, as amended from time to time.
2.44 Plan Administrator. "Plan Administrator" shall mean Prison
Realty Management, Inc., or any other person designated by the Employer to
administer the Plan on behalf of the Employer.
2.45 Plan Year. "Plan Year" shall mean the twelve (12) consecutive
month fiscal period beginning January 1st and ending the following December
31st.
2.46 Prohibited Group. "Prohibited Group" means those Participants
who are considered Highly Compensated Employees.
2.47 Protected Group. "Protected Group" means those Participants
who are not members of the Prohibited Group.
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2.48 Regulation. "Regulation" shall mean the income tax regulations
as promulgated by the Secretary of the Treasury or delegate, and as amended from
time to time.
2.49 Retirement. "Retirement" shall mean the termination of a
Participant's employment with the Employer following the Normal Retirement Date
as provided in Section 2.28.
2.50 Salary Reduction Contributions. "Salary Reduction
Contributions" means the contributions, if any, made pursuant to Section 4.1(b)
of the Plan.
2.51 Salary Reduction Contributions Account. "Salary Reduction
Contributions Account" means the account of the Participant which is credited
with Salary Reduction Contributions, together with adjustments allocable thereto
under the terms of the Plan.
2.52 Termination Date. "Termination Date" shall mean the date on
which a Participant's employment with the Employer is terminated because of the
first to occur of the following events:
(a) the Participant's death;
(b) the Participant's Permanent Disability;
(c) the Participant's Retirement; or
(d) the Participant's resignation or discharge prior to
any one of the foregoing events.
2.53 Trust. "Trust" shall mean the CCA Prison Realty Trust Employee
Savings and Stock Ownership Trust, maintained pursuant to an amended and
restated Trust Agreement entered into by and between the Employer and the
Trustees in conjunction with the amendment and restatement of this Plan.
2.54 Trustees. "Trustees" shall mean the person or persons
designated under the Trust to serve as fiduciaries thereunder.
2.55 Trust Fund. "Trust Fund" shall mean and include all of the
property received, held and administered by the Trustees under the terms of the
Trust.
2.56 Unallocated Company Stock Suspense Account. "Unallocated
Company Stock Suspense Account" shall mean an account containing Company Stock
acquired with the proceeds of a loan and maintained pursuant to Section 6.4(b).
2.57 Valuation Date. "Valuation Date" shall mean December 31st of
each Plan Year. The Plan Administrator may establish more frequent Valuation
Dates, if the Plan Administrator deems it appropriate.
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2.58 Vested. "Vested" shall mean that portion of a Participant's
Participation Account that is nonforfeitable.
2.59 Year of Service. "Year of Service" shall mean the computation
period of twelve consecutive months, herein set forth, during which an Employee
has at least one thousand (1,000) Hours of Service.
For purposes of eligibility for participation, the initial computation
period shall begin with the date on which the Employee first performs an Hour of
Service. The participation computation period shall shift to the Plan Year which
includes the anniversary of the date on which the Employee first performed an
Hour of Service.
For vesting purposes, the initial computation period shall begin with
the date on which an Employee first performs an Hour of Service. The vesting
computation period shall shift to the Plan Year which includes the anniversary
of the date on which the Employee first performed an Hour of Service, and the
vesting computation period shall remain the Plan Year for all purposes
thereafter.
For vesting purposes, Years of Service beginning prior to the Effective
Date of this Plan shall not be recognized.
Years of Service with any Affiliated Employer shall be recognized to
the extent otherwise allowed.
ARTICLE III
PARTICIPATION
3.1 Conditions of Eligibility. Any Employee shall be eligible to
participate in the Plan as of the date such Employee has satisfied both of the
following requirements: (1) completion of five hundred (500) Hours of Service in
any consecutive six-month period, and (2) attainment of age twenty-one (21)
years.
3.2 Effective Date of Participation.
(a) An Employee who has met the eligibility requirements
of Section 3.1 shall become a Participant effective as of the first day of the
Plan Year coinciding with or next preceding the date such Employee met such
requirements; provided, however, that the earliest date on which a Participation
Agreement may become effective is the July 1 or January 1 coinciding with or
next following the end of the six-month period referenced in clause (1) of
Section 3.1, except that any Employee who is deemed to meet such eligibility
requirements pursuant to Section 3.3 below may enter into a Participation
Agreement to become effective upon execution.
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(b) If any Former Participant is reemployed by the
Employer, such Former Participant shall resume participation in the Plan
effective as of the date of rehire.
3.3 Employment on the Effective Date. Any Employee who was an
Employee on September 15, 1997 shall be deemed to have satisfied the eligibility
requirements of Section 3.1 as of such date and shall become a Participant as
provided in Section 3.2.
3.4 Determination of Eligibility. The records of the Employer with
respect to dates and periods of employment, Hours of Service, leaves of absence,
age, and Compensation of the respective Participants shall be binding and
conclusive upon all persons. Any question concerning eligibility for
participation hereunder shall be decided by the Plan Administrator, whose
decision shall be binding and conclusive upon all persons; provided that the
criteria relating thereto shall be uniformly applied to all Employees and
Participants in like circumstances.
3.5 Participation. Participation shall be entirely voluntary on
the part of each Employee and any Employee may decline to become a Participant
by giving written notice of such intention to the Plan Administrator.
ARTICLE IV
CONTRIBUTIONS
4.1 Contributions.
(a) For each Plan Year, the Employer may contribute to
the Plan such amounts as shall be determined by the Employer.
(b) Each Participant may sign, but is not required to
sign, a written participation form (hereinafter referred to as the
"Participation Agreement"). The terms of the Participation Agreement shall
provide that the Participant agrees to accept a reduction in Compensation from
the Employer, subject to the limitations hereinafter described, only not to
exceed $9,500 for the 1997 calendar year, with this dollar limit adjusted for
percentage increases in the Consumer Price Index (CPI) according to procedures
by the Internal Revenue Service. In consideration of such Agreement, the
Employer will make a contribution to the Plan on behalf of the Participant in an
amount equal to the total amount by which the Participant's Compensation from
the Employer was reduced pursuant to the Participation Agreement.
(c) For each Plan Year, the Employer may in its
discretion contribute to the Plan for each Participant who is actively employed
on the last day of the Plan Year and on whose behalf Salary Reduction
Contributions have been made during the Plan Year an amount equal to a
percentage of such Salary Reduction Contributions, such percentage to be
determined from time to time by the Employer in its discretion; provided,
however, that any Participant who is not actively
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employed on the last day of the Plan Year due to Retirement, Permanent
Disability or death shall be eligible for Matching Employer Contributions
hereunder for such Plan Year.
(d) Notwithstanding the foregoing, the Employer's
contributions for any Plan Year shall not exceed the maximum amount allowable as
a deduction to the Employer under the provisions of Code Section 404; provided,
however, that to the extent necessary to provide the top heavy minimum
allocations, the Employer shall make a contribution even if it exceeds the
amount which is deductible under Code Section 404.
(e) The Employer's Board of Directors shall solely
determine the amount of any contributions to be made to the Plan pursuant to
subparagraphs (a) and (c) hereof. The Board's determination of such contribution
shall be binding on all Participants, the Employer, and the Trustees. Such
determination shall be final and conclusive and shall not be subject to change
as a result of a subsequent audit by the Internal Revenue Service or as a result
of any subsequent adjustment of the Employer's records. The Trustees shall have
no right or duty to inquire into the amount of the Employer's contributions or
the method used in determining the amount of the Employer's contribution, but
shall be accountable only for funds actually received by the Trustees.
4.2 Time of Payment of Contributions. The Employer shall pay to
the Trustees any contributions to the Plan for each fiscal year of the Employer
within the time prescribed by law, including extensions of time, for the filing
of the Employer's federal income tax return for the fiscal year.
4.3 Exclusive Benefit of Participants. Except as provided in
Section 4.4, all contributions shall be used for the exclusive benefit of the
Participants, or their Beneficiaries, as herein provided, and no part thereof
shall at any time revert to the Employer. Upon transfer of contributions to the
Trustees, all responsibility of the Employer with respect thereto shall cease,
and the Employer shall be in no way responsible for the acts of the Trustees or
for the administration of the Trust.
4.4 Approval by IRS. In the event this Plan and Trust are not
approved by the Internal Revenue Service, the Employer reserves the right to
reclaim all contributions made by it prior to initial formal notification of
such non-approval; provided, however, such contributions are returned within one
year after such determination, and the application for determination is 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. In addition, the Employer reserves the right to reclaim
within one (1) year of a disallowance any contribution made by it which is
subsequently determined to be non-deductible, or reclaim any contribution which
is made in error because of a good faith mistake of fact.
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ARTICLE V
ROLLOVERS
5.1 Transfers From Other Plans.
(a) With the consent of the Plan Administrator, amounts
may be transferred from other qualified plans, provided that the transfer will
not jeopardize the tax-exempt status of the Plan or Trust or create adverse tax
consequences for the Employer.
(b) Prior to accepting any transfers to which this
Article applies, the Plan Administrator may require a Participant to establish
that the amounts to be transferred to this Plan meet the requirements of this
Article and may also require a Participant to provide an opinion of counsel
satisfactory to the Employer that the amounts to be transferred meet the
requirements of this Article.
(c) For purposes of this Article, the term "qualified
plan" shall mean any tax qualified plan under Code Section 401(a).
5.2 Separate Account. Any amounts transferred to this Plan
pursuant to Section 5.1 shall be held by the Trustees in a separate account
herein referred to as an "Employee Rollover Account." Such account shall be
fully Vested at all times. Amounts in such account may not be withdrawn by, or
distributed to the Participant, in whole or in part, except as provided in
Article 5.3.
5.3 When Payable. At such date that the Participant receives a
distribution of benefits under this Plan, amounts credited to the Participant's
Employee Rollover Account shall be used to provide additional benefits to the
Participant.
5.4 Self-Employed Restrictions. Notwithstanding the foregoing, no
benefits which are attributable to amounts transferred to this Plan as a
rollover contribution from a self employed retirement plan, other than those
payable to a Participant upon death or Permanent Disability, may be payable from
the Participant's Employee Rollover Account prior to the Participant reaching
age fifty-nine and one-half (59 1/2) years. This limitation shall apply even if
the Participant's Employment with the Employer becomes terminated by reasons of
Retirement, voluntary resignation or discharge prior to reaching such age.
5.5 Investment of Rollover.
(a) The Trustees may direct that employee transfers
during a Plan Year pursuant to this Article be segregated into a separate
account for each Participant in a federally insured savings account, certificate
of deposit in a bank or savings and loan association, money market certificate,
or other short term debt security acceptable to the Trustees until the first day
of the following Plan Year.
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(b) Unless the Trustees direct that employee transfers be
segregated into a separate account as specified in paragraph (a) above, a
Participant's Employee Rollover Account shall be invested as part of the general
Trust Fund in the same manner as all Participants' Other Investments Accounts.
5.6 Restriction on Transfer. Notwithstanding anything herein to
the contrary, this Plan shall not accept any direct or indirect transfers from a
defined benefit plan, money purchase pension plan (including a target benefit
plan), stock bonus or profit sharing plan which would otherwise have provided
for a life annuity form of payment to the Participant.
ARTICLE VI
PARTICIPATION ACCOUNTS, ALLOCATIONS AND ADJUSTMENTS
6.1 Separate Accounts.
(a) The Trustees shall maintain a separate Participation
Account for each Participant for the purpose of recording the Participant's
proportionate interest in the Trust Fund. For accounting purposes, and in order
to identify the source of contributions giving rise to such interest, each
Participation Account shall be segregated into the individual sub-accounts
specified in (b) below. As of the Valuation Date, the Trustees shall calculate
the balance of each Participant's Participation Account based on the allocations
and adjustments provided for in this Article VI.
(b) A Participant's Participation Account shall be
subdivided into the following separate sub-accounts:
(i) Company Stock Account;
(ii) Other Investments Account;
(iii) Directed Investment Account;
(iv) Employer Basic Contributions Account;
(v) Salary Reduction Contributions Account;
(vi) Employer Matching Contributions Account; and
(vii) Employee Rollover Account.
In addition, the Plan Administrator may in its discretion establish one or more
additional sub-accounts.
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(c) The allocations and adjustments to Participants'
Participation Accounts for each Plan Year shall be determined in accordance with
this Article VI.
(d) If a Former Participant is reemployed after five (5)
consecutive One Year Breaks-in-Service, then separate Participation Accounts
shall be maintained for such Participant as follows:
(i) one account for nonforfeitable benefits
attributable to pre-break service, and
(ii) one account representing the Participant's
status in the Plan attributable to post-break service.
(e) Neither the allocation of contributions nor the
determination of the value of a Participation Account on any Valuation Date
shall vest in any Participant any right, title or interest in or to, or require
the segregation of, any of the assets of the Trust Fund, or in any manner
whatsoever enlarge the rights of Participants hereunder, or have any effect
whatsoever other than as expressly set forth in this Plan.
6.2 Contributions and Forfeitures.
(a) The Employer shall provide the Plan Administrator
with all information required by the Plan Administrator to make a proper
allocation of Employer contributions for the Plan Year. Within a reasonable
period of time after the date of receipt by the Plan Administrator of such
information, the Plan Administrator shall allocate such contributions to the
Participation Accounts in the following manner:
(i) The Plan Administrator shall allocate
contributions pursuant to Section 4.1(a) to the Employer Basic
Contributions Accounts of Participants who have completed a
Year of Service and who are actively employed on the last day
of the Plan Year in the same proportion that each
Participant's Compensation bears to the total Compensation of
all Participants; provided, however, that Participants who are
not actively employed on the last day of the Plan Year due to
Retirement, Permanent Disability or death shall be eligible to
share in the allocation of contributions for such Plan Year.
(ii) The Plan Administrator shall allocate
contributions pursuant to Section 4.1(b) to the Salary
Reduction Contribution Accounts of the Participants on whose
behalf such contributions are made.
(iii) The Plan Administrator shall allocate
contributions pursuant to Section 4.1(c) to the Employer
Matching Contribution Accounts of Participants on whose behalf
such contributions are made.
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(b) As of the end of each Plan Year, any amounts which
became Forfeitures since the end of the prior Plan Year shall first be made
available to reinstate previously forfeited account balances of Former
Participants, if any. The remaining Forfeitures, if any, shall be allocated to
each Active Participant in the same manner as Employer Basic Contributions
pursuant to Section 6.2(a) above.
6.3 Allocations and Adjustments to Other Investments Accounts.
(a) The Trustees shall credit the Other Investments
Account of each Participant with such Participant's allocable share of Employer
contributions under the Plan in cash, plus any cash dividends on Company Stock
allocated to such Participant's Company Stock Account and such Participant's
allocable share of any Forfeitures from Other Investments Accounts.
(b) The Other Investments Account of each Participant
shall be credited (or charged) as of each Valuation Date with the Participant's
allocable share of net income (or loss) of the Trust Fund as determined under
Section 6.3(d).
(c) The Other Investments Account of each Participant
shall be charged as of each Valuation Date for the Participant's share of any
cash payments made by the Trustees for the acquisition of Company Stock or for
the payment of any principal and/or interest on a loan incurred for the
acquisition of Company Stock, or for any dividends currently distributed to
Participants.
(d) The net income (or loss) of the Trust Fund for each
Plan Year will be determined as of each Valuation Date. As of each Valuation
Date or other valuation date, net income (or loss) attributable to each
investment fund provided by the Employer pursuant to Article XIV hereof shall be
allocated among the various Other Investment Accounts which are invested in that
particular fund. All remaining net income (or loss) will be allocated among and
credited to the Other Investments Accounts of Participants, pro rata, according
to the balance of each Other Investments Account (other than any portion of such
account which is a Directed Investment Account) as of the immediately preceding
Valuation Date (as reduced by any distributions during the Plan Year); In making
allocations hereunder, adjustments may be made in an equitable manner, to
accurately reflect earnings and losses based upon an average account balance
during the period. The net income (or loss) of the Trust Fund includes the
increase (or decrease) in the fair market value of the Trust Fund (other than
Company Stock), interest income, dividends and other income and gains (or
losses) attributable to the Trust Fund (other than dividends on Company Stock
and gains or losses on Company Stock) since the preceding Valuation Date,
reduced by any expenses charged to the Trust Fund for that Plan Year. The
determination of net income (or loss) of the Trust Fund for purposes of this
paragraph shall not take into account any dividends on Company Stock, which
shall be allocated or used in accordance with the provisions of Section 6.5.
(e) Any gain or loss realized by the Trustees on the sale
of shares of Company Stock allocated to Participants' Company Stock Accounts
shall be allocated to the Other Investments Accounts of Participants, pro rata,
according to the balance of their Company Stock Accounts
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immediately prior to such sale. Any net proceeds realized by the Trustees on the
sale of shares of Company Stock held in the Unallocated Company Stock Suspense
Account shall be allocated to the Other Investments Accounts of each Active
Participant for Plan Year of sale in the same proportion that each such Active
Participant's Compensation for the Plan Year bears to the total Compensation for
all Active Participants in such year.
6.4 Allocations and Adjustments to Company Stock Accounts.
(a) The Trustees shall from time to time, but not less
often than annually, credit the Company Stock Account of each Participant with
(1) such allocable shares of Company Stock (including fractional shares)
purchased and paid for by the Trustees (as determined under Section 6.4(c)) or
contributed in kind by the Employer, (2) any stock dividends on Company Stock
allocated to such Participant's Company Stock Account and (3) such Participant's
allocable share of any Forfeitures from Company Stock Accounts.
(b) All Company Stock acquired by the Trustees with the
proceeds of a loan shall initially be credited to the Unallocated Company Stock
Suspense Account, and will be allocated to the Company Stock Accounts of
Participants pursuant to Section 6.4(a) only as payments on the loan are made by
the Trustees and such Company Stock is released from the Unallocated Company
Stock Suspense Account. For each Plan Year during the duration of the loan, the
number of shares of Company Stock released from the Unallocated Company Stock
Suspense Account for allocation shall equal the number of encumbered shares held
immediately before release for the current Plan Year multiplied by a fraction.
The numerator of such fraction shall be the amount of principal and interest
paid on the loan for the Plan Year, and the denominator of such fraction shall
be the sum of the numerator plus the principal and interest to be paid for all
future Plan Years.
Notwithstanding the preceding sentence, if the loan is not an
Exempt Loan, or if the loan is an Exempt Loan that provides for annual payments
of principal and interest at a cumulative rate that is not less rapid at any
time than level annual payments of such amounts for ten (10) years and otherwise
meets the requirements of Regulation 54.4975-7(b)(8)(ii), the number of shares
of Company Stock released from the Unallocated Company Stock Suspense Account
for allocation for each Plan Year shall be determined solely with reference to
principal payments made during the Plan Year. Income earned with respect to
Company Stock in the Unallocated Company Stock Suspense Account shall be used,
at the discretion of the Trustees, to repay the loan used to purchase such
Company Stock.
(c) Shares of Company Stock released from the Unallocated
Company Stock Suspense Account by reason of dividends paid with respect to such
Company Stock shall be allocated among the Company Stock Accounts of
Participants as follows:
(i) First, Company Stock with a fair market value at
least equal to the amount of cash dividends paid with respect to the
Company Stock allocated (or allocable) to the Participants' Company
Stock Accounts shall be allocated to such Company Stock Accounts
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according to the number of shares of Company Stock allocated (or
allocable) to such accounts as of the record date.
(ii) Second, all remaining shares of Company Stock
released from the Unallocated Company Stock Suspense Account by reason
of dividends paid with respect to Company Stock held in the Unallocated
Company Stock Suspense Account shall be allocated to each Active
Participant's Company Stock Account in the same proportion that each
such Active Participant's Compensation for the Plan Year bears to the
total Compensation for all Active Participants in such year.
(d) The Trustees shall annually charge the Company Stock
Accounts of each Participant for their allocable shares of any Company Stock
sold during the Plan Year (consistent with Section 6.3(e)).
(e) Company Stock received by the Trust during a Plan
Year with respect to a contribution by the Employer for the preceding Plan Year
shall be allocated to the accounts of Participants as of the Valuation Date at
the end of such preceding Plan Year.
6.5 Dividends on Company Stock.
(a) The Trustees shall have the sole discretion to use
any cash dividends on Company Stock to pay principal and/or interest on any loan
incurred for the acquisition of Company Stock, retain such dividends for the
benefit of Participants, or distribute such dividends (to the extent on
allocated Company Stock) to Participants under Section 6.5(d).
(b) Any cash dividends received on shares of Company
Stock allocated (or allocable) to Participants' Company Stock Accounts shall be
allocated to the Other Investments Accounts of such Participants pursuant to
Section 6.3(a). Any stock dividends received on Company Stock allocated to
Participants' Company Stock Accounts shall be credited to the Company Stock
Accounts of such Participants pursuant to Section 6.4(a).
(c) Any cash dividends or stock dividends received on
shares held in the Unallocated Company Stock Suspense Account shall be: (1)
allocated as income of the Plan by allocating such dividends to the Other
Investments Accounts or Company Stock Accounts, as the case may be, of each
Active Participant according to the balance of each such account as of the
immediately preceding Valuation Date (as reduced by any distributions during the
Plan Year), except that such allocations may be made in an equitable manner so
as to take into account an average of such account balances during the Plan
Year, or (2) used by the Trustees to repay a loan incurred for the acquisition
of Company Stock.
(d) Cash dividends on Company Stock allocated to
Participants' Company Stock Accounts may be paid to such Participants, as
determined in the sole discretion of the Trustees, within ninety (90) days after
the close of the Plan Year in which the dividend is paid. Any cash
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dividends which are currently distributable to Participants under this Section
6.5(d) shall be charged to their Other Investments Accounts.
6.6 Accounting Procedures. The Trustees shall establish accounting
procedures for the purpose of making the allocations, valuations and adjustments
to Participation Accounts provided for in this Article VI. If the Trustees
determine that the strict application of such accounting procedures will not
result in an equitable and nondiscriminatory allocation among the Participants'
Participation Accounts, the Trustees may modify such procedures for the purpose
of achieving an equitable and nondiscriminatory allocation in accordance with
the general concepts of the Plan and the provisions of this Article VI and the
requirements of the Code and ERISA; provided, however, that such adjustments to
achieve equity shall not reduce the Vested portion of a Participant's
Participation Account. The Trustees shall maintain adequate records of the
aggregate cost basis of each class of Company Stock allocated to the
Participants' Participation Accounts. The Trustees shall also keep separate
records of shares of Company Stock acquired with the proceeds of a loan and
Employer contributions (and any earnings thereon) made for the purpose of
enabling the Trustees to repay such a loan.
6.7 Determination of Eligibility. For each Plan Year (as required
by the Trustees), the Employer shall furnish a written statement to the Trustees
setting forth the aggregate amount of any contribution and the names, dates of
employment and amounts of Compensation paid to or accrued for the benefit of
Active Participants. Employer contributions and Forfeitures, if any, shall be
allocated among the Participation Accounts of all Active Participants as of the
end of the Plan Year in which made or accrued, even though a contribution may
have been made in various installments during the year or, if not yet made, the
liability therefor has been officially accrued as of the last day of such year
and payment of same to the Trust Fund is made on a subsequent date. The Trustees
may rely in all respects upon the information so stated by the Employer for
purposes of determining the allocations and adjustments under this Plan.
6.8 Segregated Accounts. Any part of a Participant's Participation
Account that is segregated from the general assets of the Trust Fund such as an
Employee Rollover Account or a Directed Investment Account shall be disregarded
for purposes of the allocations and adjustments of this Article VI. Earnings and
allocations on such segregated amounts shall be determined and accomplished on a
separate basis, with appropriate charges for losses and expenses attributable to
such amounts.
6.9 Maximum Annual Additions.
(a) Notwithstanding any other provisions of this Plan,
the maximum "Annual Additions" (as hereinafter defined) credited to a
Participant's Participation Account under this Plan and any accounts under any
"Related Defined Contribution Plan" (as hereinafter defined) for any Limitation
Year shall not exceed the lesser of:
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<PAGE> 26
(i) Thirty thousand dollars ($30,000) (or, if
greater, one-fourth of the dollar limitation in effect under
Code Section 415(b)(1)(A)), or
(ii) Twenty-five percent (25%) of the
Participant's 415 Compensation for such Limitation Year.
In the event a Participant herein is also a participant at any
time in a Related Defined Contribution Plan, the sum of Annual Additions under
all such plans credited to a Participant's accounts in any Plan Year shall not
exceed the limitations described in (a) or (b) above, but such limitations shall
first be applied to reduce the Annual Additions under the Related Defined
Contribution Plan before being applied to reduce the Annual Additions under this
Plan.
(b) The term "Annual Additions" means the total amount of
Employer contributions, Employee contributions and Forfeitures allocated to a
Participant's Participation Account under this Plan and to a Participant's
accounts under a Related Defined Contribution Plan for a Limitation Year. If no
more than one-third (1/3) of the Employer contributions for a Limitation Year
are allocated to Highly Compensated Employees, the term "Annual Additions" shall
not include Forfeitures of Company Stock purchased with the proceeds of a loan
or Employer contributions which are applied by the Trustees to pay interest on a
loan incurred to purchase Company Stock.
(c) The term "Related Defined Contribution Plan" means
any defined contribution plan (as defined in Code Section 414(i)) which is
maintained by the Employer or any Affiliated Employer.
(d) For purposes of applying the limitations of Code
Section 415, Company Stock allocated to Participants' Participation Accounts
(except for allocations resulting from Forfeitures) and the transfer of funds
from one qualified plan to another are not Annual Additions.
(e) The term "415 Compensation" for any Limitation Year
shall include all amounts received or accrued as compensation for personal
services rendered to an Employer or Affiliated Employer as an employee,
including, but not limited to, wages, salaries, bonuses, commissions and fees,
but excluding amounts contributed by an Employer or Affiliated Employer to a
deferred compensation plan, amounts realized from the exercise of non-qualified
stock options or lapse of restrictions on restricted property, or amounts
realized from the sale, exchange or other disposition of stock acquired under a
qualified stock option. For the purpose of this Section, the determination of
415 Compensation shall be made by not including amounts that would otherwise be
excluded from a Participant's gross income by reason of the application of Code
Sections 125, 402(a)(8), 402(h)(1)(B) and, in the case of Employer contributions
made pursuant to a salary reduction agreement, Code Section 403(b); provided,
however, that effective for Plan Years beginning after December 31, 1997, 415
Compensation shall include the foregoing amounts.
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<PAGE> 27
(f) The dollar limitation under Code Section 415(b)(1)(A)
stated in paragraph (a)(1) above shall be adjusted annually as provided in Code
Section 415(d) pursuant to the Regulations. The adjusted limitation is effective
as of January 1st of each calendar year and is applicable to Limitation Years
ending with or within that calendar year.
(g) If, after making reallocations under this Plan
necessary to satisfy the requirements of Code Section 415 and the Regulations
thereunder, there is any amount remaining which cannot be reallocated to any
Active Participant as a result of the limitations contained herein, such amount
shall be maintained in a separate suspense account under the Trust to be
allocated among Active Participants in the next succeeding Limitation Year, as
if such amount were part of a Forfeiture for such next succeeding Limitation
Year.
6.10 Nondiscrimination Test Compliance
(a) Each Plan Year, the Plan Administrator shall monitor
the annual additions to the Participation Account of each Participant to ensure
that the tests set forth in subparagraphs (b) through (d) are satisfied.
(b) For each Plan Year,
(1) the Average Deferral Ratio of the Prohibited Group
for the Plan Year shall not exceed the Average
Deferral Ratio of the Protected Group for the
preceding Plan Year multiplied by one and one-quarter
(1.25), or
(2) the Average Deferral Ratio of the Prohibited Group
for the Plan Year shall not exceed the Average
Deferral Ratio of the Protected Group for the
preceding Plan Year multiplied by two (2.0) and the
excess of such Average Deferral Ratio of the
Prohibited Group over such Average Deferral Ratio of
the Protected Group shall not be more than two (2)
percentage points.
In the event that neither of these tests is satisfied,
adjustments shall be made pursuant to Section 6.11.
(c) For each Plan Year,
(1) the Average Contribution Percentage of the Prohibited
Group for the Plan Year shall not exceed the Average
Contribution Percentage of the Protected Group for
the preceding Plan Year multiplied by one and
one-quarter (1.25), or
(2) the Average Contribution Percentage of the Prohibited
Group for the Plan Year shall not exceed the lesser
of the Average Contribution Percentage of the
Protected Group for the preceding Plan Year
multiplied by two (2.0) or
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<PAGE> 28
the Average Contribution Percentage of the Protected
Group for the preceding Plan Year plus two (2)
percentage points.
If necessary to ensure compliance with this requirement, the
Plan Administrator may direct that Salary Reduction Contributions in the Plan
Year also be taken into account in calculating the Average Contribution
Percentage. In the event that neither of these tests is satisfied, adjustments
shall be made pursuant to Section 6.11.
(d) For each Plan Year, the sum of the Average Deferral Ratio of
the Prohibited Group for the Plan Year and the Average Contribution Percentage
of the Prohibited Group for the Plan Year shall not exceed the aggregate limit
described hereinbelow. The aggregate limit is the sum of (1) and (2) where
(1) is one and one-quarter (1.25) multiplied by the
greater of
(i) the Average Deferral Ratio of the Protected
Group for the preceding Plan Year, or
(ii) the Average Contribution Percentage of the
Protected Group for the preceding Plan Year,
and
(2) is the lesser of (i) or (ii) above multiplied by two
(2), but in no event more than lesser of (i) or (ii)
above plus two (2) percentage points.
The Average Deferral Ratio and Average Contribution Percentage
of the Prohibited Group shall be determined after any corrective distribution is
made to ensure compliance with subparagraphs (b) and (c) above. In the event the
aggregate limit is exceeded, adjustments shall be made pursuant to Section 6.11.
6.11 Return of Excess Contributions
In the event that contributions are credited to a
Participant's Participation Account in excess of the limitations described in
Section 4.1(b) or 6.10 hereinabove, such excess contributions shall be disbursed
to the Participant or recharacterized as follows:
(a) Contributions pursuant to Section 4.1(b) in excess of
the $9,500 limit described in Section 4.1(b) (including appropriate adjustments)
shall be distributed to the Participant, along with earnings and losses
allocated thereto, no later than April 15 following the calendar year in which
such contributions were made. It there has been a net investment loss, instead
of income, allocable to such excess Participant contributions, the amount of
such contributions to be distributed hereunder shall be reduced by such loss to
the extent permitted by section 401(k)(8) or 401(m)(6) of the Code.
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<PAGE> 29
(b) Contributions pursuant to Sections 4.1(b) and (c)
that exceed the maximum amount permitted by the nondiscrimination tests
described in Section 6.10 shall be distributed to the Participant, along with
earnings and losses allocable thereto no later than the last day of the
following Plan Year. The maximum amount of contributions permitted under the
limitations of Section 4.4 shall be determined by reducing the amount of such
contributions made on behalf of Highly Compensated Employees in the order of the
amounts of the Salary Reduction Contributions and Matching Employer
Contributions made on their behalf, beginning with the highest. This
determination of maximum amount shall be made in accordance with the provisions
of section 401(m) of the Code and regulations thereunder.
(c) The earnings and losses allocable to such excess
contributions for the Plan Year are determined by multiplying the earnings and
losses allocable to the Salary Reduction Contributions Account by a fraction.
The numerator of the fraction is the excess contribution to the respective
account for the Plan Year and the denominator is the total balance of the Plan
Year, reduced by Fund Earnings allocable to such account for the Plan Year. The
earnings and losses allocable to excess contributions for the period between the
end of the Plan Year and the date of the corrective distribution are equal to
ten percent (10%) of the Fund Earnings allocable to the excess contributions for
the Plan Year as determined under the preceding paragraph, multiplied by the
number of calendar months that have elapsed since the end of the Plan Year. In
this determination, a distribution on or before the fifteenth day of the month
will be treated as having been distributed on the last day of the preceding
month; a distribution made after the fifteenth day of the month will be treated
as having been distributed on the last day of the month.
6.12 Statement of Plan Interest. After each Plan Year, the Plan
Administrator shall provide each Participant with a statement of the
Participant's interest under the Plan as of the Valuation Date for such Plan
Year. In addition, the Plan Administrator shall furnish each Participant a
summary of the Trustees' annual report to the Employer for such Plan Year.
ARTICLE VII
PAYMENT OF BENEFITS
7.1 When Benefits Become Distributable. Accrued Benefits for a
Participant shall become distributable to such Participant (or for such
Participant's benefit) following such Participant's Termination Date.
The time, method and manner of any distribution under this Plan shall
be determined in accordance with the provisions of Sections 7.3 and 7.5.
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<PAGE> 30
7.2 Vested Portion of Participation Account.
(a) The Vested portion of a Participant's Salary
Reduction Contributions Account and Employee Rollover Account shall be one
hundred percent (100%) of such account at all times.
(b) If a Participant's employment with the Employer
terminates by reason of the Participant's death, Permanent Disability or
Retirement, the Vested portion of the Participant's Employer Basic Contributions
Account and Matching Employer Contributions Account shall be one hundred percent
(100%) of such account.
(b) If a Participant's employment with the Employer
terminates by reason of the Participant's resignation or discharge, the Vested
portion of the Participant's Employer Basic Contributions Account and Matching
Employer Contributions Account shall be contingent upon the number of Years of
Service to the Employer completed by the Participant and determined in
accordance with the following schedule:
<TABLE>
<CAPTION>
Years of Service Percentage (%)
Completed of Account Vested
------------------- -----------------
<S> <C>
Before One (1) Year of Service 0%
After One (1) Year of Service,
but prior to Two (2) Years of Service 20%
After Two (2) Years of Service,
but prior to Three (3) Years of Service 40%
After Three (3) Years of Service,
but prior to Four (4) Years of Service 60%
After Four (4) Years of Service,
but prior to Five (5) Years of Service 80%
After Five (5) Years of Service 100%
</TABLE>
(c) If a Former Participant is reemployed by the Employer
(and resumes Plan Participation as of the date of rehire in accordance with
Section 3.2(b)), then for purposes of the preceding vesting schedule, the
following rules shall apply:
(i) If reemployed prior to a One Year
Break-in-Service, a Participant shall continue to participate
in the Plan in the same manner as if such termination had not
occurred.
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<PAGE> 31
(ii) If reemployed after a One Year
Break-in-Service, a Participant shall be credited for vesting
purposes with Years of Service for both pre-break and
post-break service, subject to the following rules:
(A) Pre-break and post-break service
shall be used for computing Years of Service for
vesting purposes only after a Participant has been
employed for one (1) Year of Service following the
date of reemployment by the Employer.
(B) Each non-Vested Former Participant
shall lose credits otherwise allowable under (A)
above if such Former Participant's consecutive One
Year Breaks-in-Service equal or exceed the greater of
(i) five (5), or (ii) the aggregate number of
pre-break Years of Service.
(C) After five (5) consecutive One Year
Breaks-in-Service, a Former Participant's Vested
Participation Account balance attributable to
pre-break service shall not be increased as a result
of post-break service.
7.3 Time for Distribution.
(a) Distribution of the balance of a Participant's
Accrued Benefits generally shall commence as soon as practicable after the
Valuation Date next following such Participant's Termination Date, but not later
than the earliest applicable date required by the provisions of this Section
7.3.
(b) The Trustees shall begin to distribute Accrued
Benefits to a Participant (or for such Participant's benefit) as not later than
sixty (60) days following the close of the Plan Year in which the latest of the
following events shall occur:
(i) the date on which the Participant attains
age sixty-five (65) years;
(ii) the date of the tenth (10th) anniversary of
the year in which the Participant commenced participation in
the Plan; or
(iii) the Participant's Termination Date.
(c) Unless an earlier date is required under paragraph
(a), the Trustees, upon the written election of a Participant, shall begin to
distribute such Accrued Benefits to the Participant not later than one (1) year
following the close of the Plan Year:
(i) in which the Participant terminates
employment with the Employer by reason of Retirement,
Permanent Disability or death, or
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<PAGE> 32
(ii) which is the fifth (5th) Plan Year following
the Plan Year in which the Participant terminates employment
with the Employer for any other reason (except that this
subparagraph shall not apply if the Participant is reemployed
by the Employer before the end of such fifth (5th) Plan Year).
For purposes of this paragraph (c), the Accrued Benefits of a
Participant shall not include any Company Stock acquired by a loan until the
close of the Plan Year in which such loan is repaid in full.
(d) Unless an earlier date is required under paragraphs
(b) or (c), if a Participant's employment with the Employer terminates by reason
of the Participant's death, Permanent Disability or Retirement or such
termination occurs after the Participant reaches age sixty-five (65) years of
age, the Trustees shall begin to distribute a Participant's Accrued Benefits
within one (1) year following the close of the Plan Year during which such
termination takes place.
(e) If a Participant dies or suffers a Permanent
Disability following the Participant's Termination Date but before a
distribution has commenced, the Trustees shall begin to distribute the
Participant's Accrued Benefits not later than one (1) year following the close
of the Plan Year in which the Participant died or became disabled.
(f) Notwithstanding anything herein to the contrary, cash
dividends payable to Participants pursuant to Section 6.5(d) may be distributed
within ninety (90) days after the close of the Plan Year in which such dividends
are paid.
(g) If a distribution is one to which Sections 401(a)(11)
and 417 of the Internal Revenue Code do not apply, such distribution may
commence less than 30 days after the notice required under Regulation
1.411(a)-11(c) is given, provided that: (a) the Plan Administrator clearly
informs the Participant that the Participant has a right to a period of at least
30 days after receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular distribution option), and
(b) the Participant, after receiving the notice, affirmatively elects a
distribution.
7.4 Accounts of Terminated Participants; Forfeiture Accounts;
Restorations.
(a) Except as herein provided, following a Participant's
Termination Date, such Participant's Participation Account shall remain part of
the general assets of the Trust Fund and continue to share in the allocations
and adjustments provided for in Article VI up to (and including) the Valuation
Date immediately preceding the date a final distribution of Accrued Benefits is
made. For any distribution of Accrued Benefits, the value of a Participant's
Participation Account shall be determined as of the Valuation Date immediately
preceding the date such distribution is made.
(b) Following a Participant's Termination Date, the
portion of a Participant's Other Investments Account and Company Stock Account
that is not Vested shall be credited,
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<PAGE> 33
respectively, to an Other Investments Forfeiture Account and Company Stock
Forfeiture Account established and maintained in such Participant's name as of
the Valuation Date coincident with or next following such Participant's
Termination Date.
Such non-Vested amounts shall remain credited to the Other
Investments Forfeiture Account and Company Stock Forfeiture Account until the
earlier of: (1) such time as the amounts become a Forfeiture (in which case said
amounts shall be allocated in accordance with the provisions of Article VI), or
(2) such time as the Participant returns to the employ of the Employer and
resumes participation in the Plan (in which case said amounts shall be credited
to such Participant's Participation Account).
(c) If reemployed prior to five (5) consecutive One Year
Breaks-in-Service, and such Former Participant received (or was deemed to have
received) a distribution of the entire Vested Participation Account balance
prior to reemployment, a Former Participant's forfeited account balance shall be
reinstated if such Former Participant repays the full distributed amount before
the earlier of five (5) years after the first date on which the Former
Participant is subsequently reemployed by the Employer or the close of the first
period of five (5) consecutive One Year Breaks-in-Service commencing after the
distribution, or in the event of a deemed distribution, upon the reemployment of
such Former Participant. If a distribution occurs for any reason other than a
separation from service, the time for repayment may not end earlier than five
(5) years after the date of distribution. In the event the Former Participant
does repay the full distributed amount, or in the event of a deemed
distribution, the undistributed portion of such Former Participant's
Participation Account must be restored in full, unadjusted by any gains or
losses occurring subsequent to the Valuation Date coinciding with or preceding
the date of the distribution. The source for such reinstatement shall first be
any Forfeitures occurring during the year. If such source is insufficient, then
the Employer shall contribute an amount which is sufficient to restore any such
forfeited amounts; provided, however, that such a contribution shall be
specially allocated to such Former Participant for purposes of restoring the
forfeited account balance.
(d) For any installment form of distribution for plan
benefits, the Trustees must first segregate a Participant's Other Investments
Account into a separate account segregated from the general assets of the Trust
Fund.
7.5 Manner and Method of Distribution.
(a) When Accrued Benefits are to be distributed, the
Trustees shall distribute such benefits to the Participant, or in the case of he
Participant's death, to the Participant's Beneficiary.
(b) Distribution of a Participant's Accrued Benefits
shall be made in one of the following methods:
(i) by payment in a single sum; or
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<PAGE> 34
(ii) by payment in a series of substantially
equal installments over a period not to exceed five (5) years,
provided the maximum period over which the distribution of a
Participant's Company Stock Account may be made shall be
extended by one (1) year, up to five (5) additional years, for
each $100,000 (or fraction thereof) by which such
Participant's Company Stock Account balance exceeds $500,000
(with the aforementioned figures subject to cost-of-living
adjustments prescribed by the Secretary of the Treasury).
A Participant shall select the method in which such
Participant's Accrued Benefits shall be distributed. If a Participant so
desires, such Participant may direct how such Participant's Accrued Benefits are
to be paid to such Participant's Beneficiary. Notwithstanding any provision to
the contrary, if the value of a Participant's Accrued Benefits at the time of
any distribution does not equal or exceed $5,000, then such Participant's
Accrued Benefits shall be distributed in a single sum.
(c) Distributions of a Participant's Vested Company Stock
Account shall be made entirely in whole shares of Company Stock, cash, or a
combination of both, as determined by the Trustees; provided, however, that the
Trustees shall notify the Participant of the Participant's right to demand
distribution of such Participant's Vested Company Stock Account balance entirely
in whole shares of Company Stock (with the value of any fractional share paid in
cash). However, if the charter or by-laws of the Employer restrict ownership of
substantially all of the outstanding Company Stock to employees and the Trust,
then the distribution of a Participant's Vested Company Stock Account shall be
made entirely in the form of cash or other property, and the Participant is not
entitled to a distribution in the form of Company Stock. Distribution of the
Vested balance of a Participant's Other Investments Account, Directed Investment
Account and Employee Rollover Account will be made in cash.
(d) The Trustees will make a distribution from the Trust
only on instructions from the Plan Administrator.
(e) Except as otherwise provided herein, Company Stock
distributed by the Trustees may be restricted as to sale or transfer by the
by-laws or articles of incorporation of the Employer, provided such restrictions
are applicable to all Company Stock of the same class. If a Participant is
required to offer the sale of Company Stock to the Employer before offering to
sell Company Stock to a third party, in no event may the Employer pay a price
less than that offered to the distributee by another potential buyer making a
bona fide offer and in no event shall the Trustees pay a price less than the
fair market value of the Company Stock.
(f) If Company Stock acquired with the proceeds of a loan
is available for distribution and such stock consists of more than one class, a
distributee must receive substantially the same proportion of each such class.
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<PAGE> 35
(g) Notwithstanding the provisions of paragraph (a), if,
in the opinion of the Plan Administrator a Participant or other person entitled
to benefits under the Plan is under a legal disability or is in any way
incapacitated so as to be unable to manage his or her financial affairs, the
Plan Administrator may, until a claim is made by a conservator or other person
legally charged with the care of such person or of such person's estate, direct
the Trustees to make payment to a relative or friend of such person for such
person's benefit. Thereafter, any benefits under the Plan to which such
Participant or other person is entitled shall be paid to such conservator or
other person legally charged with the care of such person or such person's
estate, which shall then fully discharge the obligation of the Trustees to pay
benefits under the Plan with respect to such Participant.
(h) Notwithstanding the provisions of this Section 7.5,
if the distributee of any "eligible rollover distribution" (1) elects to have
such distribution paid directly to an "eligible retirement plan" and (2)
specifies the "eligible retirement plan" to which such distribution is to be
paid (in such form and such time as the Plan Administrator may prescribe), and
to the extent required by the Code and Regulations, such distribution shall be
made in the form of a direct trustee-to-trustee transfer to the "eligible
retirement plan" so specified; provided, however, that such "eligible rollover
distribution" would have been includible in the distributee's gross income if
not o transferred (determined without regard to Code Sections 402(c) and
403(a)(4)). "Eligible rollover distribution" and "eligible retirement plan"
shall have the meanings as contained in Code Section 401(a)(31).
7.6 Designation of Beneficiary.
(a) Each Participant from time to time, by
signing a form furnished by the Plan Administrator, may designate any legal or
natural person or persons (who may be designated contingently or successively)
to whom distribution of the Participant's Accrued Benefits shall be made if such
Participant dies before such Participant receives all of such benefits;
provided, however, if a married Participant designates a Beneficiary other than
such Participant's spouse, the designation will be invalid unless such
Participant's spouse consents in writing to such designation and acknowledges in
writing the effect of such designation, with such consent and acknowledgment
witnessed by a Plan representative or a notary public. However, the spouse's
consent shall not be required if it is established to the satisfaction of the
Plan Administrator that the required consent cannot be obtained because there is
no spouse, the spouse cannot be located, or because of such other circumstances
as the Secretary of the Treasury may by Regulation prescribe. Any designation by
an unmarried Participant shall be rendered ineffective by any subsequent
marriage and any consent of a spouse shall be effective only as to that spouse.
A Beneficiary designation form will be effective only when the signed form is
filed with the Plan Administrator while the Participant is alive and will cancel
all Beneficiary designation forms signed earlier.
(b) If a deceased Participant failed to properly
designate a Beneficiary as provided above, or if the Designated Beneficiary of a
deceased Participant dies before such Participant's death or dies before
complete payment of the Participant's benefits, the Trustees shall pay the
Participant's benefits as follows:
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<PAGE> 36
(i) to the surviving spouse of the Participant,
if any;
(ii) if the Participant leaves no surviving
spouse, to the Participant's surviving descendants, per
stirpes; or
(iii) if the Participant has no surviving spouse
or descendants, to the Participant's estate.
The term "Designated Beneficiary" as used in this Plan means
the person or persons designated by a Participant as the Participant's
Designated Beneficiary in the last effective Beneficiary designation form filed
with the Plan Administrator and to whom a deceased Participant's benefits are
payable under the Plan.
(c) Each Participant and each Designated Beneficiary must
file with the Plan Administrator from time to time in writing such person's post
office address and each change of post office address. Any communication,
statement or notice addressed to a Participant or Designated Beneficiary at the
person's last post office address filed with the Plan Administrator, or if no
address is filed with the Plan Administrator then, in the case of a Participant,
at the Participant's last post office address as shown on the Employer's
records, will be binding on the Participant and Designated Beneficiary for all
purposes of the Plan. The Employer, the Plan Administrator and the Trustees are
not required to search for or locate a Participant or Designated Beneficiary. If
a Participant or Designated Beneficiary are not located within a reasonable time
after the Accrued Benefits become payable, the Trustees may treat the amount as
a Forfeiture (to be restored if such Participant or Designated Beneficiary are
subsequently located).
7.7 Put Option.
(a) Subject to subparagraph (b) below, the Employer shall
issue a "put option" to any Participant who receives a distribution of Company
Stock. The put option shall permit the Participant to sell such Company Stock to
the Company at any time during two option periods, at the fair market value of
such shares. The first put option period shall be for at least sixty (60) days
beginning on the date of distribution. The second put option period shall be for
at least sixty (60) days beginning after the new determination of the fair
market value of Company Stock by the Trustees (and notice to the Participant) in
the following Plan Year.
The Employer may allow the Trustees to purchase shares of
Company Stock tendered to the Company under a put option. The payment for any
Company Stock sold under a put option shall begin not later than thirty (30)
days after the exercise of the put option, and shall be made in a lump sum or in
substantially equal annual installments over a period not exceeding five (5)
years, with adequate security and interest payable at a reasonable rate on any
unpaid balance (as determined by the Employer).
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<PAGE> 37
(b) Company Stock shall not be subject to the put option
under this Section 7.9 if such shares are publicly traded at the time that such
put option may be exercised.
7.8 Nonterminable Protections and Rights. Except as otherwise
specifically provided in Section 7.7 herein, no Company Stock acquired with the
proceeds of an Exempt Loan may be subject to a put, call, or other option, or
buy-sell or similar arrangement when held by and when distributed from the Trust
Fund, whether or not the Plan is then an ESOP. The protections and rights
granted in this Section and in Section 7.7 are nonterminable, and such
protections and rights shall continue to exist under the terms of this Plan so
long as any Company Stock acquired with the proceeds of an Exempt Loan is held
by the Trust Fund or by any Participant or other person for whose benefit such
protections and rights have been created, and neither the repayment of such loan
nor the failure of the Plan to be an ESOP, nor an amendment of the Plan shall
cause a termination of said protections and rights.
7.9 Limitations on Benefits and Distributions. All rights and
benefits, including elections, provided to a Participant in this Plan shall be
subject to the rights afforded to any "alternate payee" under a "qualified
domestic relations order"as those terms are defined in Code Section 414(p).
7.10 Participant Loans. A Participant may be granted a loan from
the Plan, subject to the terms and conditions as herein set forth. All loans
must conform to the specific provisions outlined in this Section 7.10 and any
applicable requirements of section 4975(d) and section 72(p) of the Code.
(a) Loans shall be made available to all Participants,
Beneficiaries and alternate payees on a reasonably equivalent basis. Loans shall
not be made available to Highly Compensated Employees in an amount greater than
that made available to other Employees.
(b) All loan applications must be made in writing
delivered to the Plan Administrator in such form and manner as the Plan
Administrator may require.
(c) The Plan Administrator shall review each loan
application and may, in its sole discretion, authorize and direct the Trustee to
make the loan from the Trust to the applicant.
(d) A loan may be granted to a Participant (and/or his
Beneficiary or alternate payee) no more than once in any six (6) month period.
(e) The minimum loan amount shall be one thousand dollars
($1,000).
(f) The maximum loan amount (when added to the
outstanding balance of all other loans made from the Plan) shall be the lesser
of:
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(i) one-half (1/2) of the Participant's interest
in his Participation Account (excluding amounts attributable
to accumulated deductible employee contributions as defined by
section 72(o) of the Code, if any), or
(ii) fifty thousand dollars ($50,000), reduced by
(1) the highest outstanding balance of
loans from the Plan during the one
(1)-year period ending on the date
before the date on which such loan
was made, over
(2) the outstanding balance of loans
from the Plan on the date on which
the loan was made.
For this purpose, all qualified plans of the Employer, all qualified plans or
trades or businesses which are under common control with the Employer (within
the meaning of Code section 414(b) or 414(c)), and all qualified plans of an
affiliated service group (within the meaning of Code section 414(m)) of which
the Employer is a part must be aggregated.
(g) Loans shall be made from such sub-accounts of each
Participant's Participation Account as the Plan Administrator in its sole
discretion may determine. Loans shall be repaid to the same sub-accounts from
which they are made.
(h) A Participant loan must be adequately secured so that no loss
to the Plan will occur in the event of default. The Participant's vested
interest in his Participation Account shall serve to collateralize the loan, as
shall be evidenced by a promissory note payable to the Trust and signed by the
Participant, stating that any loan balance, together with accrued interest,
shall become immediately due and payable upon default. A loan shall be deemed in
default thirty days after a Participant fails to made a required payment. Upon
default, the Participant's individual account balance shall be decreased by the
amount in default, which shall be considered a taxable distribution to the
Participant. Foreclosure of the loan may be delayed, however, as long as no loss
to the Plan occurs in consequence.
(i) The period of repayment for any loan shall be agreed upon by
the Plan Administrator and the borrowing Participant. In no event shall the loan
repayment period exceed five (5) years unless the loan is used to purchase the
principal residence of the Participant.
(j) The interest rate for the loan shall be determined by the
Administrator commensurate with the rates used by commercial lenders for loans
which would be made under similar circumstances. Loans made at different times
may bear different rates of interest due to changes in commercial interest
rates. The Plan Administrator shall review the interest rates on a quarterly
basis to determine if the rates correctly reflect current commercial rates.
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(k) The loan shall be amortized in level payment made no
less frequently than quarterly, and shall be repaid through payroll deductions.
If the Participant terminates employment prior to full repayment of the loan, he
may continue to make payment to the Trust according to the same schedule, upon
the approval of the Plan Administrator.
7.11 Advance Distribution for Hardship.
(a) The Plan Administrator, at the election of the
Participant, shall direct the Trustee to distribute to any Participant in any
one Plan Year up to the lesser of the total amount of the Participant's Salary
Reduction Contributions to the Plan as of the date of the distribution or the
amount necessary to satisfy the immediate and heavy financial need of the
Participant. Any distribution made pursuant to this Section 7.11 shall be deemed
to be made as of the first day of the Plan Year or, if later, the valuation date
immediately preceding the date of distribution, and the Participant's Salary
Reduction Contributions Account shall be reduced accordingly. The determination
of whether an immediate and heavy financial need exists shall be based on all
relevant facts and circumstances. A need shall not be disqualified because it
was reasonably foreseeable or voluntarily incurred. Withdrawal under this
Section shall be authorized only if the distribution is on account of:
(i) Medical expenses described in Code Section
213(d) incurred by the Participant, his spouse, or any of his
dependents (as defined in Code Section 152);
(ii) The purchase (excluding mortgage payments)
of a principal residence for the Participant;
(iii) Funeral expenses for a member of the
Participant's family;
(iv) Payment of tuition for the next semester or
quarter of post-secondary education for the Participant, his
spouse, children, or dependents; or
(v) The need to prevent the eviction of the
Participant from his principal residence or foreclosure on the
mortgage of the Participant's principal residence.
(b) No distribution shall be made pursuant to this
Section unless the Plan Administrator, based upon the Participant's
representation and such other facts as are known to the Plan Administrator,
determines that all of the following conditions are satisfied:
(i) The distribution is not in excess of the
amount of the immediate and heavy financial need of the
Participant; and
(ii) The Participant has obtained all
distributions, other than hardship distributions, and all
nontaxable loans currently available under all plans
maintained by the Employer.
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(c) Notwithstanding anything herein to the contrary, a
Participant's Salary Reduction Contributions and other elective deferrals for
the Participant's taxable year immediately following the taxable year of a
hardship distribution may not exceed the applicable limited under Code Section
402(g) for such next taxable year less the amount of such Participant's elective
deferrals for the taxable year of the hardship distributions.
(d) No distribution shall be made pursuant to this
Section unless the Administrator determines, based upon all relevant facts and
circumstances, that the amount to be distributed is no in excess of the amount
required to relieve the financial need and that such need cannot be satisfied
from other resources reasonably available to the Participant. For this purpose,
the Participant's resources shall be deemed to include those assets of his
spouse and minor children that are reasonably available to the Participant. A
distribution may be treated as necessary to satisfy a financial need if the
Administrator relies upon the Participant's representation that the need cannot
be relieved:
(i) Through reimbursement of compensation by
insurance or otherwise;
(ii) By reasonable liquidation of the
Participant's assets, to the extent such liquidation would not
itself cause an immediate and heavy financial need;
(iii) By cessation of Salary Reduction
Contributions under the Plan; or
(iv) By other distributions or loans from the
Plan or any other qualified retirement plan, or by borrowing
from commercial sources on reasonable commercial terms.
ARTICLE VIII
NATURE OF PARTICIPANT'S INTEREST
8.1 No Rights to Employment. Neither the establishment,
maintenance or modification of this Plan and its companion Trust Agreement, nor
the creation of any account or segregated fund for the purpose of recording a
Participant's proportionate interest in Employer contributions to the Trust Fund
under such Trust Agreement, nor the payment of any Accrued Benefits to a
Participant or Beneficiary shall be construed as giving a Participant or
Beneficiary any legal or equitable rights against the Employer or interests in
the Trust Fund other than those expressly provided for in this Plan; in
addition, no such facts and/or events shall be deemed to constitute a contract
between the Employer and any Participant or Beneficiary or, consideration,
inducement or condition of employment of any such Participant, and nothing
contained in this Plan shall be construed as conferring upon any Participant the
right to be retained in the employ of the Employer or interfere with the
Employer's right to terminate employment of such Participant at any time with or
without cause.
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8.2 No Present Value or Control Over Benefits. No Participant or
Beneficiary shall receive anything of present exchangeable value from the Trust
Fund or from the Employer in anticipation of or prior to the actual distribution
of such Participant's Vested interest therein made pursuant to the terms and
conditions of this Plan. In addition, no Participant or Beneficiary shall
exercise any control over the investment of the Trust Fund (except for the
control permitted by Directed Investment Accounts) or the use or disposition of
the Trust Fund by the Trustees.
8.3 Alienation.
(a) Subject to the exceptions provided below, no benefit
which shall be payable under this Plan to any person (including a Participant or
a Beneficiary) shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge, and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge to the
same shall be void; and no such benefit shall in any manner be liable for, or
subject to, the debts, contracts, liabilities, engagements, or torts of any such
person, nor shall it be subject to attachment or legal process for or against
such person, and the same shall not be recognized by the Trustees, except to
such extent as may be required by law.
(b) This provision shall not apply to the extent a
Participant or Beneficiary is indebted to the Plan, for any reason, under any
provision of the Plan. At the time a distribution is to be made to or for a
Participant's or Beneficiary's benefit, such proportion of the amount
distributed as shall equal such indebtedness shall be paid by the Trustees to
the Trustees or the Plan Administrator, at the direction of the Plan
Administrator, to apply against or discharge such indebtedness. Prior to making
a payment, however, the Participant or Beneficiary must be given written notice
by the Plan Administrator that such indebtedness is to be so paid in whole or
part from the Participant's Participation Account. If the Participant or
Beneficiary does not agree that the indebtedness is a valid claim against such
Participant's Vested Participation Account, such Participant shall be entitled
to a review of the validity of the claim in accordance with procedures provided
in the Plan.
(c) This provision shall not apply to a "qualified
domestic relations order" defined in Code Section 414(p), and those other
domestic relations orders permitted to be so treated by the Plan Administrator
under the provisions of the Retirement Equity Act of 1984. The Plan
Administrator shall establish a written procedure to determine the qualified
status of domestic relations orders and to administer distributions under such
qualified orders. Further, to the extent provided under a "qualified domestic
relations order," a former spouse of a Participant shall be treated as the
spouse or surviving spouse for all purposes under the Plan.
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ARTICLE IX
PLAN ADMINISTRATION
9.1 Plan Administrator. Administration of this Plan and
responsibility for its interpretation and implementation shall be entrusted to
the Plan Administrator.
9.2 Agent For Service of Process. The Plan Administrator, together
with any other person designated by the Employer, shall be the designated agents
for service of legal process upon the Plan or Trust.
9.3 Reports and Statements. The Plan Administrator shall be
responsible for the preparation, publication, distribution and filing of all
annual reports, Participation Account statements, registration statements, and
plan descriptions, required to be given to the Employer, Participants,
Beneficiaries or any federal agency by the laws and regulations promulgated
thereunder governing this Plan. The Plan Administrator shall be entitled to rely
upon all tables, valuations, certificates, reports, notices, opinions, and other
information furnished by the Employer, Trustees, any Participant or Beneficiary,
or any duly appointed actuary, accountant or legal counsel, for purposes of
preparing such reports, statements and descriptions.
9.4 Determination of Accrued Benefits. The Plan Administrator
shall determine the amount of Accrued Benefits which are payable under this
Plan, the party or parties entitled to receive distribution of same and shall
have the sole and exclusive right to establish such rules and procedures as may
reasonably be necessary for the proper and efficient administration of this
Plan.
9.5 Claims Procedure. The Plan Administrator may require any
Participant or Beneficiary claiming a right to receive benefits under this Plan
to apply for such benefits in writing and to provide satisfactory information to
prove the basis of such claim including, but not limited to, date of birth,
marital status, social security number, address, or relationship to the Plan or
Plan Participant.
9.6 Appeal Procedure. Whenever a claim for benefits by any
Participant or Beneficiary is to be denied, the Plan Administrator shall notify
the claimant in writing of such denial and set forth, in a manner calculated to
be understood by the claimant, the reasons and relevant Plan provisions upon
which the denial is based. The Plan Administrator shall advise the claimant
what, if any, additional material or information is necessary to complete the
claim.
In addition, the Plan Administrator's notice must advise the
claimant that, upon his or her written request delivered to the Plan
Administrator within sixty (60) days following the date of such notice, the
claimant will be given an opportunity to furnish additional material or
information relating to any matters in controversy and to request an informal
hearing before the Plan Administrator for the purpose of making a complete and
impartial review of such issues. If the claimant's request for a hearing is
submitted within the time allotted, the Plan Administrator shall
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set a time and date for conducting the informal hearing at the Plan
Administrator's office and the claimant shall be so notified in writing. The
date of any such hearing shall be no later than sixty (60) days following the
Plan Administrator's receipt of the claimant's request.
The Plan Administrator shall fairly and deliberately consider
all material and information presented by the Participant or Beneficiary in
support of the claim for benefits, but the Plan Administrator shall be guided
solely by the provisions of this Plan and the laws governing its operation. The
Plan Administrator shall make a final decision with respect to the matters
presented at the hearing no later than sixty (60) days following the date of
such hearing and provide the Participant or Beneficiary written notice of the
decision and the reasons upon which such decision is based.
ARTICLE X
BONDING REQUIREMENTS
Unless otherwise exempted by law, each Fiduciary shall be bonded in an
amount not less than ten percent (10%) of the amount of funds such Fiduciary
handles; provided, however, that the minimum bond shall be one thousand dollars
($1,000.00) and the maximum bond shall be five hundred thousand dollars
($500,000.00). The amount of funds handled shall be determined at the beginning
of each Plan Year by the amount of funds handled by such person, group or class
to be covered and their predecessors, if any, during the preceding Plan Year, or
if there is no preceding Plan Year, then by the amount of the funds to be
handled during the current Plan Year. The bond shall protect the Plan and Trust
Fund against any loss by reason of acts of fraud or dishonesty by the Fiduciary
alone, or in connivance with others. The surety issuing such bond shall be a
corporate surety company which is an acceptable surety on Federal bonds under
authority granted by the Secretary of the Treasury, and the bond shall be in a
form approved by the Secretary of Labor. The cost of such bond shall be an
expense of administering this Plan and the Trust Fund and may, at the election
of the Plan Administrator, be paid from the Trust Fund or by the Employer.
ARTICLE XI
AMENDMENT, TERMINATION AND MERGER
11.1 Amendment. The Employer shall have the right at any time to
amend the Plan. However, no such amendment shall authorize or permit any part of
the Trust Fund (other than such part as is required to pay taxes and
administration expenses) to be used for or diverted to purposes other than for
the exclusive benefit of the Participants or their Beneficiaries or estates; no
such amendment shall cause any reduction in the amount credited to the account
of any Participant or cause or permit any portion of the Trust Fund to revert to
or become the property of the Employer; and no such amendment which affects the
right, duties or responsibilities of the Trustees and Plan
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Administrator, respectively, may be made without the written consent of the
Trustees or Plan Administrator, as the case may be.
For purposes of this Section, a Plan amendment which has the effect of
(1) eliminating or reducing an early retirement benefit or a retirement-type
subsidy, (2) eliminating an optional form of benefit (as provided in
Regulations) or (3) restricting, directly or indirectly, the benefit provided to
any Participant prior to the amendment shall be treated as reducing the amount
credited to the account of a Participant except that an amendment described in
clause (2) (other than an amendment having an effect described in clause (1))
shall not be treated as reducing the amount credited to the account of a
Participant to the extent so provided in Regulations.
11.2 Termination. The Employer presently intends to maintain the
Plan and Trust throughout its existence. However, the Employer shall have the
right at any time to terminate the Plan by delivering to the Trustees and Plan
Administrator written notice of such termination. A complete discontinuance of
the Employer's contributions to the Plan shall be deemed to constitute a
termination. Upon any termination (full or partial) or complete discontinuance
of contributions, all amounts credited to the affected Participants'
Participation Accounts (then standing to the credit of such Participants on the
books of the Trustees, as determined in the manner prescribed in Article VI)
shall become 100% Vested and shall not thereafter be subject to forfeiture and
all unallocated amounts shall be allocated to the accounts of all Participants
in accordance with the provisions of Article VI. Upon such termination of the
Plan, the Employer, by written notice to the Trustees and Plan Administrator,
may direct either:
(a) complete distribution of the assets of the Trust Fund
to the Participants in a manner consistent with the requirements of Article VII;
or
(b) continuation of the Trust created by this agreement
and the distribution of benefits at such time and in such manner as though the
Plan had not been terminated.
11.3 Merger or Consolidation. This Plan and Trust may be merged or
consolidated with, or its assets and/or liabilities may be transferred to any
other Plan and Trust only if the benefits which would be received by a
Participant of this Plan, in the event of a termination of the Plan immediately
after such transfer, merger or consolidation, are at least equal to the benefits
the Participant would have received if the Plan had terminated immediately
before the transfer, merger or consolidation.
ARTICLE XII
TRUST AGREEMENT AND INVESTMENT POLICY
12.1 Trust Agreement. Concurrently with the establishment of this
Plan, the Employer has entered into a Trust Agreement for the purpose of
creating a trust to which Employer contributions
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shall be made in furtherance of this Plan. The Trust Agreement will incorporate
this Plan by reference, together with all amendments made from time to time, and
the rights of all persons under this Plan shall be subject to the terms of this
Plan and such Trust Agreement.
12.2 Investment Policy.
(a) The Trust is designed and intended to invest
primarily in Company Stock.
(b) With due regard to Section 12.2(a), the Trustees may
also invest funds in other property as described in the Trust Agreement or may
hold such funds in cash or cash equivalents.
(c) The Trust may not obligate itself to use the proceeds
of an Exempt Loan to acquire Company Stock from a particular holder thereof at
an indefinite time determined upon the happening of an event such as the death
of the holder.
(d) The Trust may not obligate itself to acquire Company
Stock acquired with the proceeds of an Exempt Loan under a put option binding
upon the Plan except as otherwise explicitly permitted by the Plan.
(e) All purchases of Company Stock shall be made at a
price which, in the judgment of the Trustees, does not exceed the fair market
value thereof. All sales of Company Stock shall be made at a price which, in the
judgment of the Trustees, is not less than the fair market value thereof.
ARTICLE XIII
GENERAL
13.1 Receipt and Release. Full payment of Accrued Benefits in
accordance with the terms of this Plan to any Participant, such Participant's
legal representative or Beneficiary, or to any guardian or other person
appointed for such Participant or Beneficiary, shall be in full satisfaction of
all claims hereunder against the Employer, the Plan Administrator and Trustees.
As a condition precedent to such payment, the Plan Administrator may, at its
discretion, require such Participant or Beneficiary to execute a receipt for the
benefits paid and a release of the Employer, the Plan Administrator and the
Trustees from any and all claims, demands, rights, and causes of action, known
or unknown, which such Participant or Beneficiary then has or may thereafter
acquire against them arising out of, existing under or related to establishment,
maintenance, operation and/or termination of this Plan and its companion Trust,
in such form as the Plan Administrator shall require.
13.2 Source of Benefits. The Trust Fund shall be the sole source of
all benefits provided for in this Plan, and the liability of the Trustees to
make any payment hereunder shall be limited to
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the available assets of the Trust Fund. The Employer does not guarantee any
payment of benefits hereunder to any person, and in no event shall the Employer
be liable or responsible for the payment of any such benefits. Neither the
Trustees, the Plan Administrator nor the Employer in any way guarantee the Trust
Fund from loss or depreciation.
13.3 Information From Participants. Participants, Former
Participants, Beneficiaries thereof and anyone claiming hereunder shall supply
the Employer and/or the Plan Administrator with such information as may from
time to time be requested of them; including, by way of illustration but not of
limitation, proof of age, marital status and heirship. The Employer, Plan
Administrator and Trustees shall be entitled to rely upon such information for
purposes of discharging their respective responsibilities under this Plan and
the Trust Agreement, and shall be fully protected against any liability arising
from any action taken by them in good faith and reliance upon any such
information.
13.4 Inspection of Plan Documents. The Plan and Trust Agreement,
modifications thereof and supplements thereto, may be inspected at the principal
office of the Employer during regular business hours, by any Participant, Former
Participant or Beneficiary.
13.5 Restraint on Discretionary Decisions. All provisions of this
Plan charging the Employer, Plan Administrator and Trustees to make decisions of
a discretionary nature with respect to any matter including, but not limited to,
determining the eligibility of Participants, the amount, time or manner of the
payment of benefits, and the forfeitability of benefits shall be uniformly and
consistently applied to all Employees and Participants in like circumstances,
without discrimination.
13.6 Titles. The titles of Articles and grouping of provisions in
this Plan have been inserted and arranged for convenience or reference only and
are to be ignored in any construction of the provisions hereof.
13.7 Rules of Construction. Whenever appropriate, words used in the
singular shall include the plural and words used in the masculine shall include
the feminine, and vice versa.
13.8 State Law Governing Plan. This Plan shall be construed,
regulated, enforced and administered in accordance with the laws of the State of
Tennessee.
13.9 Intention to Comply With Code. This Plan and its companion
Trust are intended to comply with Code Sections 401(a), 501(a) and 4975(e)(7),
respectively, and the Employee Retirement Income Security Act of 1974 (ERISA),
so as to qualify as an employee stock ownership plan and to qualify for the tax
exempt status accorded certain employee benefit plans and trusts under such Code
Sections, and any other Section or Sections of the Code relative thereto, and to
qualify the Employer's contributions to the Trust Fund established hereunder as
tax deductible under Code Section 404. If any provision of this Plan and its
companion Trust Agreement is subject to more than one interpretation or any term
used therein is subject to more than one construction, such
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ambiguity shall be resolved in favor of the interpretation or construction which
is consistent with this Plan's intention of being so qualified.
13.10 Action by the Employer. Whenever the Employer under the terms
of the Plan is permitted or required to do or perform any act or matter or
thing, it shall be done and performed by a person duly authorized by its legally
constituted authority.
13.11 Named Fiduciaries and Allocation of Responsibility. The "named
Fiduciaries" of this Plan are (1) the Employer, (2) the Plan Administrator and
(3) the Trustees. The named Fiduciaries shall have only those specific powers,
duties, responsibilities, and obligations as are specifically given them under
the Plan. In general, the Employer shall have the sole responsibility for making
the contributions provided for under Section 4.1; and shall have the sole
authority to appoint and remove the Trustees and the Plan Administrator; to
formulate the Plan's funding policy and method; and to amend or terminate, in
whole or in part, the Plan. The Plan Administrator shall have the sole
responsibility for the administration of the Plan, which responsibility is
specifically described in the Plan. The Trustees shall have the sole
responsibility of management of the assets held under the Trust, except those
assets, the management of which has been assigned to an investment manager, who
shall be solely responsible for the management of the assets assigned to it, all
as specifically provided in the Plan. Each named Fiduciary warrants that any
directions given, information furnished, or action taken by it shall be in
accordance with the provisions of the Plan, authorizing or providing for such
direction, information or action. Furthermore, each named Fiduciary may rely
upon any such direction, information or action of another named Fiduciary as
being proper under the Plan, and is not required under the Plan to inquire into
the propriety of any such direction, information or action. It is intended under
the Plan that each named Fiduciary shall be responsible for the proper exercise
of its own powers, duties, responsibilities and obligations under the Plan. No
named Fiduciary shall guarantee the Trust Fund in any manner against investment
loss or depreciation in asset value. Any person or group may serve in more than
one Fiduciary capacity.
13.12 Legal Action. In the event any claim, suit or proceeding is
brought regarding the Trust and/or Plan established hereunder to which the
Trustees or the Plan Administrator may be a party, and such claim, suit or
proceeding is resolved in favor of the Trustees or Plan Administrator, they
shall be entitled to be reimbursed from the Trust Fund for any and all costs,
attorneys' fees, and other expenses pertaining thereto incurred by them for
which they shall have become liable.
13.13 Securities and Exchange Commission Approval. The Employer may
request an interpretative letter from the Securities Exchange Commission stating
that the transfers of Company Stock contemplated hereunder do not involve
transactions requiring a registration of such Company Stock under the Securities
Act of 1933. In the event that a favorable interpretative letter is not
obtained, the Employer reserves the right to amend the Plan and Trust
retroactively to their Effective Dates in order to obtain a favorable
interpretative letter or to terminate the Plan.
13.14 Indemnification. Neither the Employer, any of its officers or
directors, nor the Plan Administrator shall be personally liable for any action
or inaction with respect to any duty or
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responsibility imposed upon such person by the terms of the Plan, unless such
action or inaction is judicially determined to be a breach of that person's
fiduciary responsibility with respect to the Plan under any applicable law. The
Employer may indemnify or purchase insurance to underwrite indemnity for the
Plan Administrator and/or the Employer's Board of Directors against any personal
liability or expense except for their own gross negligence.
ARTICLE XIV
DIVERSIFICATION
14.1 Diversification Election for Qualified Participants.
(a) Each "qualified Participant" may make a
diversification election within ninety (90) days after the close of each Plan
Year in the "qualified election period" with respect to at least twenty-five
percent (25%) of the Participant's Company Stock Account (to the extent such
portion exceeds the amount to which a prior election under this Section 14.1
applies). In the case of the election year in which the Participant can make
such Participant's last election, the preceding sentence shall be applied by
substituting "fifty percent (50%)" for "twenty-five percent (25%)." A
diversification election does not have to be offered if the value of a
Participant's Company Stock Account is $500 or less as of the Valuation Date
immediately preceding the first day of any qualified election period (or at or
below some other higher level established by Regulations or other Treasury
rules).
(b) The term "qualified Participant" means any
Participant who has completed at least ten (10) years of participation under the
Plan and has attained age fifty-five (55). The term "qualified election period"
means the six (6) Plan Year period beginning with the first Plan Year in which
the Participant first becomes a qualified Participant.
14.2 Methods of Meeting Diversification Requirements of Section
14.1. If a qualified Participant makes a diversification election in accordance
with Section 14.1, the Trustees shall:
(a) offer the Participant a distribution of the value
(determined as of the last preceding Valuation Date) of the portion of such
Participant's Participation Account covered by the election in the form of
Company Stock or cash (as determined by the Plan Administrator in a uniform and
nondiscriminatory manner) to be made within ninety (90) days after the period
during which the election may be made; or
(b) establish a Directed Investment Account with the
portion of such Participant's Participation Account covered by the election, and
offer such Participant at least three (3) investment options (not inconsistent
with Regulations), and invest such account accordingly within ninety (90) days
after the period during which the election may be made.
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14.3 Diversification Election for All Participants.
(a) Effective upon resolution of the Board of Directors
of the Plan Administrator, subject to the terms and conditions set forth herein,
each Participant may make a diversification election in accordance with the
terms hereof of up to twenty-five percent (25%) of the Participant's
Participation Account in increments of 10% in and among the investment funds
provided by the Employer; provided, however, the foregoing twenty-five percent
(25%) limit shall be reduced by any amount with respect to which a
diversification election has been made pursuant to section 14.1 hereof.
(b) Each Participant shall be entitled to make an initial
election at the time of enrollment in the Plan. Until the Participant makes a
new election, the initial election shall remain in effect and shall apply to all
present and future allocations to the Participant's Company Account. A
Participant shall be entitled to change his election in accordance with
subparagraph (c). Should a Participant fail to make an initial election for his
Company Stock Account to be invested in any investment fund or combination of
investment funds or fail to make an election with respect to twenty-five percent
(25%) of the Participant's Company Stock Account, such undesignated amount shall
be invested in the discretion of the Plan Administrator in accordance with the
terms of the Plan. The Trustees shall establish a Directed Investment Account
with the portion of a Participant's Participation Account covered by an election
hereunder.
(c) Each Participant shall be entitled to transfer assets
between and among investment funds. Such election to transfer assets shall
specify the percentage of the Participant's Participation Account balance to be
transferred and shall specify the funds involved. Each Participant shall be
entitled to elect such transfer as described herein in accordance with
procedures established by the Plan Administrator. Changes in investment
elections by Participants hereunder shall become effective at such time or times
as the Plan Administrator, in a uniform and nondiscriminatory manner, may
determine.
(d) Each election made pursuant to this Section shall be
made in such manner and at such time or times as the Plan Administrator in its
sole discretion may determine.
ARTICLE XV
TOP HEAVY PROVISIONS
15.1 Top Heavy Plan Requirements. For any Plan Year in which the
Plan is Top Heavy, the Plan shall provide the special minimum allocations and
special vesting required by Code Section 416(c).
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15.2 Determination of Top Heavy Status.
(a) This Plan shall be a Top Heavy Plan for any Plan Year
in which, as of the Determination Date, the Top-Heavy Ratio exceeds sixty
percent (60%).
(b) Top-Heavy Ratio: The Top-Heavy Ratio is (1) the
Present Value of Accrued Benefits of Key Employees and the sum of the Aggregate
Accounts of Key Employees under this Plan and all plans of an Aggregation Group,
to (2) the Present Value of Accrued Benefits and the Aggregate Accounts of all
Key and Non-Key Employees under this Plan and all plans of an Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year, but such Participant
was a Key Employee for any prior Plan Year, such Participant's Present Value of
Accrued Benefit and/or Aggregate Account balance shall not be taken into account
for purposes of determining whether this Plan is a Top Heavy Plan (or whether
any Aggregation Group which includes this Plan is a Top Heavy Group). In
addition, if a Participant or Former Participant has not performed any services
for any Employer maintaining the Plan at any time during the five-year period
ending on the Determination Date, any accrued benefit for such Participant or
Former Participant shall not be taken into account for purposes of determining
whether this Plan is a Top Heavy Plan.
(c) Aggregate Account: A Participant's Aggregate Account
as of the Determination Date is the sum of:
(i) the Participant's Participation Account
balance as of the most recent valuation occurring within a
twelve (12) month period ending on the Determination Date;
(ii) an adjustment for any contributions due as
of the Determination Date. Such adjustment shall be the amount
of any contributions actually made after the valuation date
but on or before the Determination Date, except for the first
Plan Year when such adjustment shall also reflect the amount
of any contributions made after the Determination Date that
are allocated as of a date in that first Plan Year;
(iii) any Plan distributions made within the Plan
Year that includes the Determination Date or within the four
(4) preceding Plan Years. However, in the case of
distributions made after the valuation date and prior to the
Determination Date, such distributions are not included as
distributions for top heavy purposes to the extent that such
distributions are already included in the Participant's
Participation Account balance as of the valuation date.
Distributions from the Plan (including the cash value of life
insurance policies) of a Participant's Participation Account
balance because of death shall be treated as a distribution
for the purposes of this paragraph.
44
<PAGE> 51
(iv) with respect to unrelated rollovers and
plan-to-plan transfers (ones which are both initiated by the
Employee and made from a plan maintained by one employer to a
plan maintained by another employer), if this Plan provides
the rollovers or plan-to-plan transfers, it shall always
consider such rollovers or plan-to-plan transfers as a
distribution for purposes of this Section. If this Plan is the
plan accepting such rollovers or plan-to-plan transfers, it
shall not consider such rollovers or plan-to-plan transfers as
a part of the Participant's Participation Account balance.
(v) with respect to related rollovers and
plan-to-plan transfers (ones either not initiated by the
Employee or made to a plan maintained by the same employer),
if this Plan provides the rollover or plan-to-plan transfer,
it shall not be counted as a distribution for purposes of this
Section. If this Plan is the plan accepting such rollover or
plan-to-plan transfer, it shall consider such rollover or
plan-to-plan transfer as part of the Participant's
Participation Account balance.
(vi) For purposes of determining whether two
employers are to be treated as the same employer in (4) and
(5) above, all employers aggregated under Code Section 414(b),
(c) or (m) are treated as the same employer.
(d) Aggregation Group: Aggregation Group means either a
Required Aggregation Group or a Permissive Aggregation Group as hereinafter
determined.
(i) Required Aggregation Group: In determining a
Required Aggregation Group hereunder, each plan of the
Employer in which a Key Employee is a participant in the Plan
Year containing the Determination Date or any of the four (4)
preceding Plan Years, and each other plan of the Employer
which enables any plan in which a Key Employee participates to
meet the requirements of Code Sections 401(a)(4) or 410, will
be required to be aggregated. Such group shall be known as a
Required Aggregation Group. In the case of a Required
Aggregation Group, each plan in the group will be considered a
Top Heavy Plan if the Required Aggregation Group is a Top
Heavy Group. No plan in the Required Aggregation Group will be
considered a Top Heavy Plan if the Required Aggregation Group
is not a Top Heavy Group.
(ii) Permissive Aggregation Group: The Employer
may also include any other plan not required to be included in
the Required Aggregation Group, provided the resulting group,
taken as a whole, would continue to satisfy the provisions of
Code Sections 401(a)(4) and 410. Such group shall be known as
a Permissive Aggregation Group. In the case of a Permissive
Aggregation Group, only a plan that is part of the Required
Aggregation Group will be considered a Top Heavy Plan if the
Permissive Aggregation Group is a Top Heavy Group. No plan in
the Permissive
45
<PAGE> 52
Aggregation Group will be considered a Top Heavy Plan if the
Permissive Aggregation Group is not a Top Heavy Group.
(iii) Only those plans of the Employer in which
the Determination Dates fall within the same calendar year
shall be aggregated in order to determine whether such plans
are Top Heavy Plans.
(iv) An Aggregation Group shall include any
terminated plan of the Employer if it was maintained within
the last five (5) years ending on the Determination Date.
(e) Determination Date: Determination Date means (a) the
last day of the preceding Plan Year, or (b) in the case of the first Plan Year,
the last day of such Plan Year.
(f) Present Value of Accrued Benefits: In the case of a
defined benefit plan, the Present Value of Accrued Benefits for a Participant
other than a Key Employee shall be as determined using the single accrual method
used for all plans of the Employer and Affiliated Employers, or if no such
single method exists, using a method which results in benefits accruing not more
rapidly than the slowest accrual rate permitted under Code Section 411(b)(1)(C).
(g) Top Heavy Group: Top Heavy Group means an Aggregation
Group in which, as of the Determination Date, the sum of:
(i) the Present Value of Accrued Benefits of Key
Employees under all defined benefit plans included in the
group, and
(ii) the Aggregate Accounts of Key Employees
under all defined contribution plans included in the group,
exceeds sixty percent (60%) of a similar sum determined for
all Participants.
(h) Notwithstanding the above, all top heavy
determinations made under this Section shall be consistent with Code Section 416
and the Regulations and rulings thereunder.
15.3 Special Minimum Allocations.
(a) Notwithstanding any other provision of this Plan, for
any Plan Year in which the Plan is Top Heavy, the sum of the Employer
Contributions and Forfeitures allocated to each Non-Key Employee's Participation
Account shall be equal to at least three percent (3%) of such Non-Key Employee's
415 Compensation. However, if (1) such allocation is less than three percent
(3%), and (2) this Plan is not required to be included in an Aggregation Group
to enable a defined benefit plan to meet the requirements of Code Sections
401(a)(4) or 410, such allocation must only be equal to the largest percentage
allocated to any Key Employee's Participation Account.
46
<PAGE> 53
(b) If the Employer is required to make an additional
contribution to satisfy (a) above, such additional amount shall be treated in
all respects as an Employer contribution under Section 4.1.
(c) No minimum allocation under (a) above shall be
required in this Plan for any Non-Key Employee who participates in another
defined contribution plan subject to Code Section 412 providing such benefits
included with this Plan in a Required Aggregation Group.
(d) For purposes of the minimum allocation under (a)
above, the percentage allocated to a Key Employee's Participation Account shall
be equal to the ratio of the sum of the Employer contributions and Forfeitures
allocated on behalf of such Key Employee divided by the 415 Compensation for
such Key Employee.
(e) For any Plan Year in which the Plan is Top Heavy, the
minimum allocations under (a) above shall be allocated to all Participation
Accounts for those Non-Key Employees who are Participants and who are employed
by the Employer on the last day of the Plan Year, including Non-Key Employees
who have failed to complete a Year of Service.
(f) Notwithstanding the above, the minimum allocations
under (a) shall be made only to the Employees required to receive such
allocations by Code Section 416 and the Regulations thereunder.
ARTICLE XVI
PARTICIPATING EMPLOYERS
16.1 Adoption by Other Employers. With the consent of CCA Prison
Realty Trust, any other corporation or entity, whether an affiliate or
subsidiary or not, may adopt this Plan and all of the provisions hereof, and
participate herein and be known as a Participating Employer, by a properly
executed document evidencing said intent and will of such Participating
Employer.
16.2 Requirements of Participating Employers.
(a) Each such Participating Employer shall be required to
use the same Trust Agreement as provided in this Plan, and shall be bound
thereby and be bound by any subsequent amendments thereto.
(b) The Trustees may, but shall not be required to,
commingle, hold and invest as one Trust Fund all contributions made by
Participating Employers, as well as all increments thereof.
47
<PAGE> 54
(c) The transfer of any Participant from or to an
Employer participating in this Plan, whether such Participant be an Employee of
the Employer or a Participating Employer, shall not affect such Participant's
rights under the Plan, and all amounts credited to such Participant's
Participation Account as well as accumulated service time with the transferor or
predecessor, and length of participation in the Plan, shall continue to such
Participant's credit.
(d) All rights and values forfeited by termination of
employment shall inure only to the benefit of the Employee-Participants of the
particular Employer by which the forfeiting Participant was employed, except if
the Forfeiture is for an Employee whose Employer is a member of an affiliated or
controlled group, then said Forfeiture shall inure to the benefit of the
Employee-Participants of the entire affiliated or controlled group. Should an
Employee of one ("First") Employer be transferred to an associated ("Second")
Employer (the Employer, an affiliate or subsidiary), such transfer shall not
cause any portion of such person's Participation Account (generated while an
Employee of "First" Employer) in any manner, or by any amount to be forfeited.
Such Employee's Participation Account for all purposes of the Plan, including
length of service, shall be considered as though such person had always been
employed by the "Second" Employer and as such had received contributions,
forfeitures, earnings or losses, and appreciation or depreciation in value of
assets totaling the amount so transferred.
(e) Any expenses of the Trust which are to be paid by the
Employer or borne by the Trust Fund shall be paid by each Participating Employer
in the same proportion that the total amount standing to the credit of all
Participants employed by such Participating Employer bears to the total standing
to the credit of all Participants.
16.3 Designation of Agent. Each Participating Employer shall be
deemed to be a part of this Plan; provided, however, that with respect to all of
its relations with the Trustees and Plan Administrator for the purpose of this
Plan, each Participating Employer shall be deemed to have designated irrevocably
CCA Prison Realty Trust as its agent.
16.4 Employee Transfers. It is anticipated that an Employee may be
transferred between Employers, and in the event of any such transfer, the
Employee involved shall continue to all accumulated service and eligibility. No
such transfer shall effect a termination of employment hereunder, and the
Employer to which the Employee is transferred shall thereupon become obligated
hereunder with respect to such Employee in the same manner as was the Employer
from whom the Employee was transferred.
16.5 Participating Employer's Contribution. Any contribution or
Forfeiture subject to allocation during each Plan Year shall be allocated among
all Participants of all Employers in accordance with the provisions of this
Plan. On the basis of the information furnished by the Plan Administrator, the
Trustees shall keep separate books and records concerning the affairs of each
Employer hereunder and as to the accounts and credits of the Employees of each
Participating Employer.
48
<PAGE> 55
16.6 Amendment. Amendment of this Plan shall only be by the written
adoption of such amendment by CCA Prison Realty Trust. Each Participating
Employer shall be deemed to consent to any such amendment.
16.7 Discontinuance of Participation. Any Participating Employer
shall be permitted to discontinue or revoke its participation in the Plan. At
the time of any such discontinuance or revocation, satisfactory evidence thereof
and of any applicable conditions imposed shall be delivered to the Trustees. The
Trustees shall thereafter transfer, deliver and assign Trust Fund assets
allocable to the Participants of such Participating Employer to such new Trustee
as shall have been designated by such Participating Employer, in the event that
it has established a separate pension plan for its Employees. If no successor is
designated, the Trustees shall retain such assets for the Employees of said
Participating Employer pursuant to the provisions of Article VII hereof. In no
such event shall any part of the corpus or income of the Trust as it relates to
such Participating Employer be used for or diverted for purposes other than for
the exclusive benefit of the Employees of such Participating Employer.
16.8 Plan Administrator's Authority. The Plan Administrator shall
have authority to make any and all necessary rules or regulations, binding upon
all Participating Employers and all Participants, to effectuate the purpose of
this Article.
ARTICLE XVII
VOTING OF COMPANY STOCK
17.1 General. If the Employer has a registration-type class of
securities (as defined in Section 17.2 below), each Participant (or Beneficiary)
shall be entitled to direct the Trustee as to the manner in which Company Stock
allocated to the Account of such Participant (or Beneficiary) is to be voted
with respect to all corporate matters submitted to shareholders. If the Employer
does not have a registration-type class of securities, each Participant (or
Beneficiary) shall be entitled to direct the Trustee as to the manner in which
Company Stock allocated to the Account of such Participant (or Beneficiary) is
to be voted with respect to the matters set forth in Code Section 409(e)(3), and
on all other matters the Plan Administrator shall be entitled to direct the
Trustee as to the manner in which all Company Stock held by the Trust is to be
voted. The Plan Administrator shall be entitled to direct the Trustee as to the
manner in which all shares held in the Unallocated Company Stock Expense
Account, and all allocated shares of Company Stock as to which no voting
instructions have been received, are to be voted.
17.2 Definition of Registration-Type Class of Securities. For
purposes of this Section XI, the term "registration-type class of securities"
shall have the meaning set forth in Code Section 409(e)(4).
49
<PAGE> 56
IN WITNESS WHEREOF, the Employer and Prison Realty Management, Inc., a
wholly owned subsidiary of the Employer, as a Participating Employer, have
caused this Plan to be executed as of this day of September, 1997.
CCA PRISON REALTY TRUST,
a Maryland real estate
investment trust
By:
-----------------------------
Its:
-----------------------------
ATTEST:
- ---------------------------------
Secretary/Assistant Secretary
PRISON REALTY MANAGEMENT, INC.,
a Tennessee corporation
By:
-----------------------------
Its:
-----------------------------
ATTEST:
- ---------------------------------
Secretary/Assistant Secretary
50
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CCA PRISON REALTY TRUST FOR THE PERIOD ENDED SEPTEMBER
30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-18-1997
<PERIOD-END> SEP-30-1997
<CASH> 41,714
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 41,714
<PP&E> 381,539
<DEPRECIATION> 2,110
<TOTAL-ASSETS> 421,568
<CURRENT-LIABILITIES> 7,649
<BONDS> 0
0
0
<COMMON> 216
<OTHER-SE> 413,703
<TOTAL-LIABILITY-AND-EQUITY> 421,568
<SALES> 8,293
<TOTAL-REVENUES> 8,848
<CGS> 2,131
<TOTAL-COSTS> 2,521
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,327
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,327
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,327
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
