<PAGE> 1
As Filed With the Securities and Exchange Commission
on April 2, 1999
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
- --------------------------------------------------------------------------------
COVENTRY HEALTH CARE, INC.
(Exact name of Registrant as Specified in its Charter)
DELAWARE 52-207300
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
COVENTRY HEALTH CARE, INC.
6705 ROCKLEDGE DRIVE, SUITE 900 20817
BETHESDA, MARYLAND (Zip Code)
(Address of Principal Executive Offices)
COVENTRY HEALTH CARE, INC. RETIREMENT SAVINGS PLAN
(Full title of the plan)
SHIRLEY R. SMITH, ESQ.
6705 ROCKLEDGE DRIVE, SUITE 900
BETHESDA, MARYLAND
(Name and address of agent for service)
(301) 581-0600 (EXT. 2280)
(Telephone number, including area code, of agent for service)
Copy to:
BOB F. THOMPSON, ESQ.
BASS, BERRY & SIMS PLC
2700 FIRST AMERICAN CENTER
NASHVILLE, TENNESSEE 37238
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Proposed maximum Proposed maximum
Title of securities Amount to offering price aggregate offering Amount of
to be registered(1) be registered per share (2) price (2) registration fee
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
par value $.01 per share 500,000 shares $8.00 $4,000,000 $1,112
==================================================================================================================
</TABLE>
(1) In addition, pursuant to Rule 416(c) under the Securities Act of 1933, this
registration statement also covers an indeterminate amount of interests to be
offered or sold pursuant to the employee benefit plan described herein.
(2) The offering price is estimated solely for the purpose of determining the
amount of the registration fee. Such estimate has been calculated in accordance
with Rule 457(h) and is based upon the average of the high and low prices per
share of the Registrant's Common Stock as reported on The Nasdaq National Market
on April 1, 1999. Pursuant to Rule 457(h)(2), no separate registration fee is
required to be paid for the registration of plan interests.
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION
STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents previously filed by the Registrant with the
Commission are incorporated herein by reference:
(a) The Annual Report on Form 10-K of the Registrant, for
the fiscal year ended December 31, 1998 (filed March
30, 1999);
(b) The description of the Registrant's Common Stock
contained in the Registrant's Current Report on Form
8-K filed April 23, 1998.
All documents and reports subsequently filed by the Registrant pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), prior to the filing of a post-effective amendment
to this Registration Statement which indicates that all shares covered hereby
have been sold or which deregisters all such shares then remaining unsold shall
be deemed to be incorporated by reference in this Registration Statement and to
be a part hereof from the date of filing of such documents. Any statements
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or replaced for purposes hereof to the
extent that a statement contained herein (or in any other subsequently filed
document which also is incorporated or deemed to be incorporated by reference
herein) modifies or replaces such statement. Any statement so modified or
replaced shall not be deemed, except as so modified or replaced, to constitute a
part hereof.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law ("DGCL") provides that a
corporation may indemnify any of its directors and officers against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with any threatened, pending, or
completed action, suit or proceeding (civil, criminal, administrative or
investigative) if such person acted in good faith and in a manner that person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, in the case of a criminal proceeding, had no reasonable cause
to believe his or her conduct was unlawful. In actions brought by or in the
right of the corporation, the DGCL provides that no indemnification may be made
if the director or officer was adjudged
II-1
<PAGE> 3
to be liable to the corporation unless and only to the extent that the court in
which such action or suit was brought determines that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such court
deems proper.
In cases where the director or officer is successful, on the merits or
otherwise, in the defense of any action, suit or proceeding (or claims or issues
therein), the DGCL mandates that the corporation indemnify the director or
officer against expenses actually and reasonably incurred in the proceeding. In
other cases, the DGCL provides that indemnification shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper as such person has met the
applicable standard of conduct described above. Such determination shall be made
(1) by the board of directors by a majority vote of directors who were not
parties to such action, suit or proceeding, even though less than a quorum, or
(2) by a committee of such directors designated by majority vote of such
directors, even though less than a quorum, or (3) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion, or (4) by the stockholders. Expenses incurred by an officer or
director in such a matter may be paid by the corporation in advance upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation.
The Registrant's Bylaws provide that each director and officer of the
Registrant will be indemnified against all liability and reasonable expenses
incurred by him or her in connection with any claim, action, suit or proceeding,
provided that such person is successful with respect thereto or acted in good
faith, in a manner he or she believed to be in the best interests of the
Registrant, and, in the case of a criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. An officer or
director claiming indemnification who has not been wholly successful with
respect to his claim or proceeding will be entitled to indemnification if it has
been determined that such person has met the standards of conduct described
above (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (ii) if
such quorum is not obtainable, or even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(iii) by the stockholders. In addition, the Registrant may advance expenses to
an officer or director upon receipt of an undertaking by such person to repay
such amount unless he or she is entitled to indemnification.
The Registrant believes that its Bylaw provisions are necessary to
attract and retain qualified persons as directors and officers.
The Registrant has in effect a directors' and officers' liability
insurance policy which provides coverage for its directors and officers. Under
this policy, the insurer agrees to pay, subject to certain exclusions, for any
claim made against a director or officer of the Registrant for a wrongful act by
such director or officer, but only if and to the extent such director or officer
becomes legally obligated to pay such claim.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable
ITEM 8. EXHIBITS
See Exhibit Index (Page II-6)
II-2
<PAGE> 4
ITEM 9. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement
(or the most recent post-effective amendment hereof)
which individually or in the aggregate, represent a
fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing,
any increase or decrease in the volume of securities
offered (if the total dollar value of securities would
not exceed that which was registered) and any deviation
from the low or high and of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;
provided, however, that paragraphs (A)(1)(i) and (A)(1)(ii) do
not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section
13 or Section 15(d) of the Exchange Act, that are incorporated
by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
B. The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
C. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
II-3
<PAGE> 5
of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
D. The Registrant hereby undertakes to submit the Plan and any amendments
thereto to the Internal Revenue Service (the "IRS") in a timely manner
and to make all changes required by the IRS in order to qualify the
Plan under Section 401 of the Internal Revenue Code of 1986, as amended
to date.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Bethesda, State of Maryland, on the 30th day of
March, 1999.
COVENTRY HEALTH CARE, INC.
By: /s/ Allen F. Wise
------------------------------------------
Allen F. Wise, President, Chief Executive
Officer and Director
KNOW ALL MEN BY THESE PRESENTS, each person whose signature appears
below hereby constitutes and appoints Allen F. Wise and Dale B. Wolf his or her
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statements, and to file the same, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Allen Wise President, Chief Executive March 30, 1999
- --------------------------- Officer and Director
Allen F. Wise
/s/ Dale B. Wolf Senior Vice President, Chief March 30, 1999
- --------------------------- Financial Officer and Treasurer
Dale B. Wolf (Principal Financial and
Accounting Officer)
/s/ John H. Austin, M.D. Director March 30, 1999
- ---------------------------
John H. Austin, M.D.
Director March __, 1999
- ---------------------------
Thomas L. Blair
/s/ Gary M. Cain Director March 30, 1999
- ---------------------------
Gary M. Cain
</TABLE>
II-4
<PAGE> 6
<TABLE>
<S> <C> <C>
Director March __, 1999
- ------------------------------
Laurence DeFrance
Director March __, 1999
- ------------------------------
David J. Drury
Director March __, 1999
- ------------------------------
Emerson D. Farley, Jr., M.D.
/s/ Thomas J. Graf Director March 30, 1999
- ------------------------------
Thomas J. Graf
/s/ Patrick T. Hackett Director March 30, 1999
- ------------------------------
Patrick T. Hackett
Director March __, 1999
- ------------------------------
Richard H. Jones
/s/ Lawrence N. Kugelman Director March 30, 1999
- ------------------------------
Lawrence N. Kugelman
/s/ Rodman W. Moorhead, III Director March 30, 1999
- ------------------------------
Rodman W. Moorhead, III
Director March __, 1999
- ------------------------------
Elizabeth E. Tallett
</TABLE>
II-5
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Exhibit Description
- --------- -----------------------------------------------------------
<S> <C>
4 Coventry Health Care, Inc. Retirement Savings Plan
5 Opinion of Bass, Berry & Sims PLC
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Bass, Berry & Sims PLC (included in Exhibit 5)
24 Power of Attorney (included at pages II-4 and II-5)
</TABLE>
II-6
<PAGE> 1
EXHIBIT 4
COVENTRY HEALTH CARE, INC.
RETIREMENT SAVINGS PLAN
Defined Contribution Plan 7.7
Effective April 1, 1998
<PAGE> 2
TABLE OF CONTENTS
INTRODUCTION
ARTICLE I FORMAT AND DEFINITIONS
Section 1.01 ----- Format
Section 1.02 ----- Definitions
ARTICLE II PARTICIPATION
Section 2.01 ----- Active Participant
Section 2.02 ----- Inactive Participant
Section 2.03 ----- Cessation of Participation
Section 2.04 ----- Adopting Employers-Single Plan
ARTICLE III CONTRIBUTIONS
Section 3.01 ----- Employer Contributions
Section 3.01A ----- Rollover Contributions
Section 3.02 ----- Forfeitures
Section 3.03 ----- Allocation
Section 3.04 ----- Contribution Limitation
Section 3.05 ----- Excess Amounts
ARTICLE IV INVESTMENT OF CONTRIBUTIONS
Section 4.01 ----- Investment of Contributions
Section 4.01A ----- Investment in Qualifying Employer Securities
ARTICLE V BENEFITS
Section 5.01 ----- Retirement Benefits
Section 5.02 ----- Death Benefits
Section 5.03 ----- Vested Benefits
Section 5.04 ----- When Benefits Start
Section 5.05 ----- Withdrawal Privileges
Section 5.06 ----- Loans to Participants
3
<PAGE> 3
ARTICLE VI DISTRIBUTION OF BENEFITS
Section 6.01 ----- Form of Distribution
Section 6.01A ----- Distributions in Qualifying Employer Securities
Section 6.02 ----- Election Procedures
Section 6.03 ----- Notice Requirements
Section 6.04 ----- Distributions Under Qualified Domestic Relations
Orders
ARTICLE VII TERMINATION OF PLAN
ARTICLE VIII ADMINISTRATION OF PLAN
Section 8.01 ----- Administration
Section 8.02 ----- Records
Section 8.03 ----- Information Available
Section 8.04 ----- Claim and Appeal Procedures
Section 8.05 ----- Unclaimed Vested Account Procedure
Section 8.06 ----- Delegation of Authority
ARTICLE IX GENERAL PROVISIONS
Section 9.01 ----- Amendments
Section 9.02 ----- Direct Rollovers
Section 9.03 ----- Mergers and Direct Transfers
Section 9.04 ----- Provisions Relating to the Insurer and Other
Parties
Section 9.05 ----- Employment Status
Section 9.06 ----- Rights to Plan Assets
Section 9.07 ----- Beneficiary
Section 9.08 ----- Nonalienation of Benefits
Section 9.09 ----- Construction
Section 9.10 ----- Legal Actions
Section 9.11 ----- Small Amounts
Section 9.12 ----- Word Usage
Section 9.13 ----- Transfers Between Plans
Section 9.14 ----- Qualification of Plan
ARTICLE X TOP-HEAVY PLAN REQUIREMENTS
Section 10.01 ----- Application
Section 10.02 ----- Definitions
Section 10.03 ----- Modification of Vesting Requirements
Section 10.04 ----- Modification of Contributions
Section 10.05 ----- Modification of Contribution Limitation
PLAN EXECUTION
4
<PAGE> 4
INTRODUCTION
The Primary Employer is establishing a defined contribution 401(k)
savings plan for the exclusive benefit of certain of its employees.
It is intended that the plan qualify as a profit sharing plan under the
Internal Revenue Code of 1986, including any later amendments to the Code. The
Employer agrees to operate the plan according to the terms, provisions and
conditions set forth in this document.
Participant loans were offered under the Principal Health Care, Inc.
Select Savings Plan. This Plan will accept rollover loan notes from former
employees of Principal Health Care, Inc. who participated under such plan.
5
<PAGE> 5
ARTICLE I
FORMAT AND DEFINITIONS
SECTION 1.01--FORMAT.
Words and phrases defined in the DEFINITIONS SECTION of Article I shall
have that defined meaning when used in this Plan, unless the context clearly
indicates otherwise.
These words and phrases have an initial capital letter to aid in
identifying them as defined terms.
SECTION 1.02--DEFINITIONS.
ACCOUNT means, for a Participant, his share of the Investment Fund and
Qualifying Employer Securities Fund. Separate accounting records are
kept for those parts of his Account that result from:
(a) Elective Deferral Contributions
(b) Matching Contributions
(c) Rollover Contributions
If the Participant's Vesting Percentage is less than 100% as to any of
the Employer Contributions, a separate accounting record will be kept
for any part of his Account resulting from such Employer Contributions
and, if there has been a prior Forfeiture Date, from such Contributions
made before a prior Forfeiture Date.
A Participant's Account shall be reduced by any distribution of his
Vested Account and by any Forfeitures. A Participant's Account will
participate in the earnings credited, expenses charged and any
appreciation or depreciation of the Investment Fund. His Account is
subject to any minimum guarantees applicable under the Group Contract or
other investment arrangement.
ACTIVE PARTICIPANT means an Eligible Employee who is actively
participating in the Plan according to the provisions in the ACTIVE
PARTICIPANT SECTION of Article II.
ADOPTING EMPLOYER means an employer controlled by or affiliated with the
Employer and listed in the ADOPTING EMPLOYERS-SINGLE PLANS SECTION of
Article II.
AFFILIATED SERVICE GROUP means any group of corporations, partnerships
or other organizations of which the Employer is a part and which is
affiliated within the meaning of Code Section 414(m) and regulations
thereunder. Such a group includes at least two organizations one of
which is either a service organization (that is, an organization the
principal business of which is performing services), or an organization
the principal business of which is performing management functions on a
regular and continuing basis. Such service is of a type historically
performed by employees. In the case of a management organization, the
Affiliated Service Group shall include organizations related, within the
meaning of Code Section 144(a)(3), to either the management organization
or the organization for which it performs management functions. The term
Controlled Group, as it is used in this Plan, shall include the term
Affiliated Service Group.
6
<PAGE> 6
ALTERNATE PAYEE means any spouse, former spouse, child or other
dependent of a Participant who is recognized by a qualified domestic
relations order as having a right to receive all, or a portion of the
benefits payable under the Plan with respect to such Participant.
ANNUITY STARTING DATE means, for a Participant, the first day of the
first period for which an amount is payable in a single sum.
BENEFICIARY means the person or persons named by a Participant to
receive any benefits under this Plan upon the Participant's death.
Unless a qualified election has been made, for the purpose of
distributing any death benefits before Annuity Starting Date, the
Beneficiary of a married Participant shall be the Participant's spouse.
See the BENEFICIARY SECTION of Article IX.
CLAIMANT means any person who has made a claim for benefits under this
Plan. See the CLAIM AND APPEAL PROCEDURES SECTION of Article VIII.
CODE means the Internal Revenue Code of 1986, as amended.
COMPENSATION means, except as modified in this definition, the total
earnings paid or made available to an Employee by the Employer during
any specified period.
"Earnings" in this definition means Compensation as defined in the
CONTRIBUTION LIMITATION SECTION of Article III.
Compensation shall exclude the following:
bonuses
non-cash compensation
Compensation shall also include elective contributions. Elective
contributions are amounts excludable from the Employee's gross income
under Code Sections 125, 402(e)(3), 402(h) or 403(b), and contributed by
the Employer, at the Employee's election, to a Code Section 401(k)
arrangement, a simplified employee pension, cafeteria plan or
tax-sheltered annuity. Elective contributions also include Compensation
deferred under a Code Section 457 plan maintained by the Employer and
Employee contributions "picked up" by a governmental entity and,
pursuant to Code Section 414(h)(2), treated as Employer contributions.
For purposes of the EXCESS AMOUNTS SECTION of Article III, the Employer
may elect to use an alternative nondiscriminatory definition of
Compensation in accordance with the regulations under Code Section
414(s).
Compensation shall exclude earnings paid before the Employee's Entry
Date.
For Plan Years beginning after December 31, 1988, and before January 1,
1994, the annual Compensation of each Participant taken into account for
determining all benefits provided under the Plan for any year shall not
exceed $200,000. For Plan Years beginning on or after January 1, 1994,
the annual Compensation of each Participant taken into account for
determining all benefits provided under the Plan for any year shall not
exceed $150,000.
7
<PAGE> 7
The $200,000 limit shall be adjusted by the Secretary at the same time
and in the same manner as under Code Section 415(d). The $150,000 limit
shall be adjusted by the Commissioner for increases in the cost of
living in accordance with Code Section 401(a)(17)(B). The cost of living
adjustment in effect for a calendar year applies to any period, not
exceeding 12 months, over which pay is determined (determination period)
beginning in such calendar year. If a determination period consists of
fewer than 12 months, the annual compensation limit will be multiplied
by a fraction the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
In determining the Compensation of a Participant for purposes of the
annual compensation limit, the rules of Code Section 414(q)(6) shall
apply, except that in applying such rules, the term "family" shall
include only the spouse of the Participant and any lineal descendants of
the Participant who have not attained age 19 before the close of the
year. If, as a result of the application of such rules the adjusted
annual compensation limit is exceeded, then (except for purposes of
determining the portion of Compensation up to the integration level if
this Plan provides for permitted disparity) the limitation shall be
prorated among the affected individuals in proportion to each such
individual's Compensation as determined under this definition prior to
the application of this limitation.
If Compensation for any prior determination period is taken into account
in determining a Participant's benefits accruing in the current Plan
Year, the Compensation for that prior determination period is subject to
the annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the
first day of the first Plan Year beginning on or after January 1, 1989,
which are used to determine benefits in Plan Years beginning after
December 31, 1988 and before January 1, 1994, the annual compensation
limit is $200,000. For this purpose, for determination periods beginning
before the first day of the first Plan Year beginning on or after
January 1, 1994, which are used to determine benefits in Plan Years
beginning on or after January 1, 1994, the annual compensation limit is
$150,000.
Compensation means, for an Employee who is a Leased Employee, the
Employee's Compensation for the services he performs for the Employer,
determined in the same manner as the Compensation of Employees who are
not Leased Employees, regardless of whether such Compensation would be
received directly from the Employer or from the leasing organization.
COMPENSATION YEAR means each one-year period ending on the last day of
the Plan Year, including corresponding periods before April 1, 1998.
CONTRIBUTIONS means
Elective Deferral Contributions
Matching Contributions
Rollover Contributions
as set out in Article III, unless the context clearly indicates
otherwise.
CONTROLLED GROUP means any group of corporations, trades or businesses
of which the Employer is a part that are under common control. A
Controlled Group includes any group of corporations, trades or
businesses, whether or not incorporated, which is either a
parent-subsidiary group, a brother-sister group, or a combined group
within the meaning of Code Section 414(b), Code Section 414(c) and
regulations thereunder and, for purposes of determining contribution
limitations under the CONTRIBUTION LIMITATION SECTION of Article III, as
modified by Code Section 415(h) and, for the
8
<PAGE> 8
purpose of identifying Leased Employees, as modified by Code Section
144(a)(3). The term Controlled Group, as it is used in this Plan, shall
include the term Affiliated Service Group and any other employer
required to be aggregated with the Employer under Code Section 414(o)
and the regulations thereunder.
CUSTODIAL AGREEMENT means an agreement which establishes custodial
accounts which meet the requirements of Code Section 401(f).
CUSTODIAN means the custodian named in a Custodial Agreement, provided
that the custodian meets the requirements of Code Section 401(f).
DIRECT ROLLOVER means a payment by the Plan to the Eligible Retirement
Plan specified by the Distributee.
DISTRIBUTEE means an Employee or former Employee. In addition, the
Employee's or former Employee's surviving spouse and the Employee's or
former Employee's spouse or former spouse who is the alternate payee
under a qualified domestic relations order, as defined in Code Section
414(p), are Distributees with regard to the interest of the spouse or
former spouse.
ELECTIVE DEFERRAL CONTRIBUTIONS means Contributions made by the Employer
to fund this Plan in accordance with a qualified cash or deferred
arrangement as described in Code Section 401(k). See the EMPLOYER
CONTRIBUTIONS SECTION of Article III.
ELIGIBLE EMPLOYEE means any Employee of the Employer who meets the
following requirement.
His employment classification with the Employer is the following:
Nonbargaining class (not represented for collective bargaining
purposes by a bargaining unit which has bargained in good faith
with the Employer on the subject of retirement benefits).
ELIGIBLE RETIREMENT PLAN means an individual retirement account
described in Code Section 408(a), an individual retirement annuity
described in Code Section 408(b), an annuity plan described in Code
Section 403(a) or a qualified trust described in Code Section 401(a),
that accepts the Distributee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover Distribution to the
surviving spouse, an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
ELIGIBLE ROLLOVER DISTRIBUTION means any distribution of all or any
portion of the balance to the credit of the Distributee, except that an
Eligible Rollover Distribution does not include:
(a) Any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the Distributee or the joint
lives (or joint life expectancies) of the Distributee and the
Distributee's designated Beneficiary, or for a specified period
of ten years or more.
(b) Any distribution to the extent such distribution is required
under Code Section 401(a)(9).
(c) The portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
9
<PAGE> 9
EMPLOYEE means an individual who is employed by the Employer or any
other employer required to be aggregated with the Employer under Code
Sections 414(b), (c), (m) or (o). A Controlled Group member is required
to be aggregated with the Employer.
The term Employee shall also include any Leased Employee deemed to be an
employee of any employer described in the preceding paragraph as
provided in Code Sections 414(n) or 414(o).
EMPLOYER means the Primary Employer. This will also include any
successor corporation or firm of the Employer which shall, by written
agreement, assume the obligations of this Plan or any predecessor
corporation or firm of the Employer (absorbed by the Employer, or of
which the Employer was once a part) which became a predecessor because
of a change of name, merger, purchase of stock or purchase of assets and
which maintained this Plan.
EMPLOYER CONTRIBUTIONS means
Elective Deferral Contributions
Matching Contributions
as set out in Article III, unless the context clearly indicates
otherwise.
EMPLOYMENT COMMENCEMENT DATE means the date an Employee first performs
an Hour-of-Service.
ENTRY DATE means the date an Employee first enters the Plan as an Active
Participant. See the ACTIVE PARTICIPANT SECTION of Article II.
FISCAL YEAR means the Primary Employer's taxable year. The last day of
the Fiscal Year is December 31.
FORFEITURE means the part, if any, of a Participant's Account that is
forfeited. See the FORFEITURES SECTION of Article III.
FORFEITURE DATE means, as to a Participant, the last day of five
consecutive one-year Periods of Severance.
This is the date on which the Participant's Nonvested Account will be
forfeited unless an earlier forfeiture occurs as provided in the
FORFEITURES SECTION of Article III.
GROUP CONTRACT means the group annuity contract or contracts into which
the Primary Employer enters with the Insurer for the investment of
Contributions and the payment of benefits under this Plan. The term
Group Contract as it is used in this Plan is deemed to include the
plural unless the context clearly indicates otherwise.
HIGHLY COMPENSATED EMPLOYEE means a highly compensated active Employee
or a highly compensated former Employee.
A highly compensated active Employee means any Employee who performs
service for the Employer during the determination year and who, during
the look-back year is:
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<PAGE> 10
(a) An Employee who is a 5% owner, as defined in Section
416(i)(1)(B)(i), at any time during the determination year or
the look-back year.
(b) An Employee who receives compensation in excess of $75,000
(indexed in accordance with Section 415(d) during the look-back
year.
(c) An Employee who receives compensation in excess of $50,000
(indexed in accordance with Section 415(d) during the look-back
year and is a member of the top-paid group for the look-back
year.
(d) An Employee who is an officer, within the meaning of Section
416(i), during the look-back year and who receives compensation
in the look-back year greater than 50% of the dollar limitation
in effect under Section 415(b)(1)(A) for the calendar year in
which the look-back year begins. The number of officers is
limited to 50 (or, if lesser, the greater of 3 employees or 10%
of employees) excluding those employees who may be excluded in
determining the top-paid group.
(e) An Employee who is both described in paragraph b, c or d above
when these paragraphs are modified to substitute the
determination year for the look-back year and one of the 100
Employees who receive the most compensation from the Employer
during the determination year.
If no officer has satisfied the compensation requirement of (c) above
during either a determination year or look-back year, the highest paid
officer for such year shall be treated as a Highly Compensated Employee.
For this purpose, the determination year shall be the Plan Year. The
look-back year shall be the twelve-month period immediately preceding
the determination year.
A highly compensated former Employee means any Employee who separated
from service (or was deemed to have separated) prior to the
determination year, performs no service for the Employer during the
determination year, and was a highly compensated active Employee for
either the separation year or any determination year ending on or after
the Employee's 55th birthday.
If an Employee is, during a determination year or look-back year, a
family member of either a 5 percent owner who is an active or former
Employee or a Highly Compensated Employee who is one of the 10 most
highly compensated Employees ranked on the basis of compensation paid by
the Employer during such year, then the family member and the 5 percent
owner or top-ten highly compensated Employee shall be aggregated. In
such case, the family member and 5 percent owner or top-ten highly
compensated Employee shall be treated as a single Employee receiving
compensation and Plan contributions or benefits equal to the sum of such
compensation and contributions or benefits of the family member and 5
percent owner or top-ten highly compensated Employee. For purposes of
this definition, family member includes the spouse, lineal ascendants
and descendants of the Employee or former Employee and the spouses of
such lineal ascendants and descendants.
Compensation is compensation within the meaning of Code Section
415(c)(3), including elective or salary reduction contributions to a
cafeteria plan, cash or deferred arrangement or tax-sheltered annuity.
The top-paid group consists of the top 20% of employees ranked on the
basis of compensation received during the year.
Employers aggregated under Section 414(b), (c), (m) or (o) are treated
as a single Employer.
11
<PAGE> 11
HOUR-OF-SERVICE means, for an Employee, each hour for which he is paid,
or entitled to payment, for performing duties for the Employer.
Hours-of-Service shall be credited for employment with any other
employer required to be aggregated with the Employer under Code Sections
414(b), (c), (m) or (o) and the regulations thereunder for purposes of
eligibility and vesting. Hours-of-Service shall also be credited for any
individual who is considered an employee for purposes of this Plan
pursuant to Code Section 414(n) or Code Section 414(o) and the
regulations thereunder.
INACTIVE PARTICIPANT means a former Active Participant who has an
Account. See the INACTIVE PARTICIPANT SECTION of Article II.
INSURER means Principal Mutual Life Insurance Company and any other
insurance company or companies named by the Trustee or Primary Employer.
INVESTMENT FUND means the assets held for the purpose of providing
benefits for Participants. These funds result from Contributions made
under the Plan.
INVESTMENT MANAGER means any fiduciary (other than a trustee or Named
Fiduciary)
(a) who has the power to manage, acquire, or dispose of any assets
of the Plan; and
(b) who (1) is registered as an investment adviser under the
Investment Advisers Act of 1940, or (2) is a bank, as defined in
the Investment Advisers Act of 1940, or (3) is an insurance
company qualified to perform services described in subparagraph
(a) above under the laws of more than one state; and
(c) who has acknowledged in writing being a fiduciary with respect
to the Plan.
LATE RETIREMENT DATE means the first day of any month which is after a
Participant's Normal Retirement Date and on which retirement benefits
begin. If a Participant continues to work for the Employer after his
Normal Retirement Date, his Late Retirement Date shall be the earliest
first day of the month on or after he ceases to be an Employee. An
earlier or a later Retirement Date may apply if the Participant so
elects. An earlier Retirement Date may apply if the Participant is age
70 1/2. See the WHEN BENEFITS START SECTION of Article V.
LEASED EMPLOYEE means any person (other than an employee of the
recipient) who pursuant to an agreement between the recipient and any
other person ("leasing organization") has performed services for the
recipient (or for the recipient and related persons determined in
accordance with Code Section 414(n)(6)) on a substantially full time
basis for a period of at least one year, and such services are of a type
historically performed by employees in the business field of the
recipient employer. Contributions or benefits provided a Leased Employee
by the leasing organization which are attributable to service performed
for the recipient employer shall be treated as provided by the recipient
employer.
A Leased Employee shall not be considered an employee of the recipient
if:
(a) such employee is covered by a money purchase pension plan
providing (1) a nonintegrated employer contribution rate of at
least 10 percent of compensation, as defined in Code Section
415(c)(3), but including amounts contributed pursuant to a
salary reduction agreement which are
12
<PAGE> 12
excludable from the employee's gross income under Code Sections
125, 402(e)(3), 402(h) or 403(b), (2) immediate participation,
and (3) full and immediate vesting and
(b) Leased Employees do not constitute more than 20 percent of the
recipient's nonhighly compensated workforce.
LOAN ADMINISTRATOR means the person or positions authorized to
administer the Participant loan program.
The Loan Administrator is Jim Gillette.
MATCHING CONTRIBUTIONS means matching contributions made by the Employer
to fund this Plan. See the EMPLOYER CONTRIBUTIONS SECTION of Article
III.
NAMED FIDUCIARY means the person or persons who have authority to
control and manage the operation and administration of the Plan.
The Named Fiduciary is the Employer.
NONHIGHLY COMPENSATED EMPLOYEE means an Employee of the Employer who is
neither a Highly Compensated Employee nor a Family Member.
NONVESTED ACCOUNT means the part, if any, of a Participant's Account
that is in excess of his Vested Account.
NORMAL RETIREMENT AGE means the age at which the Participant's normal
retirement benefit becomes nonforfeitable. A Participant's Normal
Retirement Age is 65.
NORMAL RETIREMENT DATE means the earliest first day of the month on or
after the date the Participant reaches his Normal Retirement Age. Unless
otherwise provided in this Plan, a Participant's retirement benefits
shall begin on a Participant's Normal Retirement Date if he has ceased
to be an Employee on such date and has a Vested Account. Even if the
Participant is an Employee on his Normal Retirement Date, he may choose
to have his retirement benefit begin on such date. See the WHEN BENEFITS
START SECTION of Article V.
PARENTAL ABSENCE means an Employee's absence from work which begins on
or after the first Yearly Date after December 31, 1984,
(a) by reason of pregnancy of the Employee,
(b) by reason of birth of a child of the Employee,
(c) by reason of the placement of a child with the Employee in
connection with adoption of such child by such Employee, or
(d) for purposes of caring for such child for a period beginning
immediately following such birth or placement.
PARTICIPANT means either an Active Participant or an Inactive
Participant.
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<PAGE> 13
PERIOD OF MILITARY DUTY means, for an Employee
(a) who served as a member of the armed forces of the United States,
and
(b) who was reemployed by the Employer at a time when the Employee
had a right to reemployment in accordance with seniority rights
as protected under Section 2021 through 2026 of Title 38 of the
U. S. Code,
the period of time from the date the Employee was first absent from
active work for the Employer because of such military duty to the date
the Employee was reemployed.
PERIOD OF SERVICE means a period of time beginning on an Employee's
Employment Commencement Date or Reemployment Commencement Date
(whichever applies) and ending on his Severance from Service Date.
PERIOD OF SEVERANCE means a period of time beginning on an Employee's
Severance from Service Date and ending on the date he again performs an
Hour-of-Service.
A one-year Period of Severance means a Period of Severance of 12
consecutive months.
Solely for purposes of determining whether a one-year Period of
Severance has occurred for eligibility or vesting purposes, the
12-consecutive month period beginning on the first anniversary of the
first date of a Parental Absence shall not be a one-year Period of
Severance.
PLAN means the 401(k) savings plan of the Employer set forth in this
document, including any later amendments to it.
PLAN ADMINISTRATOR means the person or persons who administer the Plan.
The Plan Administrator is the Employer.
PLAN YEAR means a period beginning on a Yearly Date and ending on the
day before the next Yearly Date.
PREDECESSOR EMPLOYER means Principal Health Care, Inc.
PRIMARY EMPLOYER means Coventry Health Care, Inc.
QUALIFYING EMPLOYER SECURITIES means any instrument issued by the
Employer and meeting the requirements of Section 4975(e)(8) of the Code
and Section 407(d)(5) of the Employee Retirement Income Securities Act
of 1974, as amended ("ERISA").
QUALIFYING EMPLOYER SECURITIES FUND means the assets held in Qualifying
Employer Securities for the purpose of providing benefits for
Participants. This fund results from Contributions made under the Plan.
REEMPLOYMENT COMMENCEMENT DATE means the date an Employee first performs
an Hour-of-Service following a Period of Severance.
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<PAGE> 14
REENTRY DATE means the date a former Active Participant reenters the
Plan. See the ACTIVE PARTICIPANT SECTION of Article II.
RETIREMENT DATE means the date a retirement benefit will begin and is a
Participant's Normal or Late Retirement Date, as the case may be.
ROLLOVER CONTRIBUTIONS means the Rollover Contributions which are made
by or for a Participant according to the provisions of the ROLLOVER
CONTRIBUTIONS SECTION of Article III.
SEVERANCE FROM SERVICE DATE means the earlier of
(a) the date on which an Employee quits, retires, dies or is
discharged, or
(b) the first anniversary of the date an Employee begins a one-year
absence from service (with or without pay). This absence may be
the result of any combination of vacation, holiday, sickness,
disability, leave of absence or layoff.
Solely to determine whether a one-year Period of Severance has occurred
for eligibility or vesting purposes for an Employee who is absent from
service beyond the first anniversary of the first day of a Parental
Absence, Severance from Service Date is the second anniversary of the
first day of the Parental Absence. The period between the first and
second anniversaries of the first day of the Parental Absence is not a
Period of Service and is not a Period of Severance.
TEFRA means the Tax Equity and Fiscal Responsibility Act of 1982.
TEFRA COMPLIANCE DATE means the date a plan is to comply with the
provisions of TEFRA. The TEFRA Compliance Date as used in this Plan is,
(a) for purposes of contribution limitations, Code Section 415,
(1) if the plan was in effect on July 1, 1982, the first day
of the first limitation year which begins after December
31, 1982, or
(2) if the plan was not in effect on July 1, 1982, the first
day of the first limitation year which ends after July
1, 1982.
(b) for all other purposes, the first Yearly Date after December 31,
1983.
TOTALLY AND PERMANENTLY DISABLED means that a Participant is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to
result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months. The disability of a
Participant shall be determined by a licensed physician chosen by the
Plan Administrator. However, if the condition constitutes total
disability under the federal Social Security Acts, the Plan
Administrator may rely upon such determination that the Participant is
Totally and Permanently Disabled for the purposes of this Plan. The
determination shall be applied uniformly to all Participants.
15
<PAGE> 15
TRUST means an agreement of trust between the Primary Employer and
Trustee established for the purpose of holding and distributing the
Trust Fund under the provisions of the Plan. The Trust may provide for
the investment of all or any portion of the Trust Fund in the Group
Contract.
TRUST FUND means the total funds held under the Trust for the purpose of
providing benefits for Participants. These funds result from
Contributions made under the Plan which are forwarded to the Trustee to
be deposited in the Trust Fund.
TRUSTEE means the trustee or trustees under the Trust. The term Trustee
as it is used in this Plan is deemed to include the plural unless the
context clearly indicates otherwise.
VALUATION DATE means the date on which the value of the assets of the
Trust is determined. The value of each Account which is maintained under
this Plan shall be determined on the Valuation Date. In each Plan Year,
the Valuation Date shall be the last day of the Plan Year. In addition,
the Plan Administrator may designate from time to time, so long as the
Trustee agrees, that another date or dates shall be Valuation Dates with
respect to a specific Plan Year.
VESTED ACCOUNT means the vested part of a Participant's Account. The
Participant's Vested Account is determined as follows.
If the Participant's Vesting Percentage is 100%, his Vested Account
equals his Account.
If the Participant's Vesting Percentage is less than 100%, his Vested
Account equals the sum of (a) and (b) below:
(a) The part of the Participant's Account that results from Employer
Contributions made before a prior Forfeiture Date and all other
Contributions which were 100% vested when made.
(b) The balance of the Participant's Account in excess of the amount
in (a) above multiplied by his Vesting Percentage.
If the Participant has withdrawn any part of his Account resulting from
Employer Contributions, other than the vested Employer Contributions
included in (a) above, the amount determined under this subparagraph (b)
shall be equal to P(AB + D) - D as defined below:
P The Participant's Vesting Percentage.
AB The balance of the Participant's Account in excess of the amount
in (a) above.
D The amount of withdrawal resulting from Employer Contributions,
other than the vested Employer Contributions included in (a)
above.
The Participant's Vested Account is nonforfeitable.
VESTING PERCENTAGE means the percentage used to determine the
nonforfeitable portion of a Participant's Account attributable to
Employer Contributions which were not 100% vested when made.
A Participant's Vesting Percentage is determined by his Employment
Commencement Date as shown in the following schedules opposite the
number of whole years of his Vesting Service.
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<PAGE> 16
If his employment commencement date with Principal Health Care, Inc.
occurred before July 1, 1997, his Vesting Percentage is 100%.
If his employment commencement date with Principal Health Care, Inc.
occurs on or after July 1, 1997, but before April 1, 1998:
VESTING SERVICE VESTING
(whole years) PERCENTAGE
Less than 1 0
1 or more 100
If his Employment Commencement Date with the Primary Employer or
Adopting Employer occurs on or after April 1, 1998:
VESTING SERVICE VESTING
(whole years) PERCENTAGE
Less than 1 0
1 50
2 or more 100
However, the Vesting Percentage for a Participant who is an Employee on
or after the earliest of (i) the date he reaches his Normal Retirement
Age, (ii) the date of his death, or (iii) the date he becomes Totally
and Permanently Disabled, shall be 100% on such date.
If the schedule used to determine a Participant's Vesting Percentage is
changed, the new schedule shall not apply to a Participant unless he is
credited with an Hour-of-Service on or after the date of the change and
the Participant's nonforfeitable percentage on the day before the date
of the change is not reduced under this Plan. The amendment provisions
of the AMENDMENT SECTION of Article IX regarding changes in the
computation of the Vesting Percentage shall apply.
VESTING SERVICE means an Employee's Period of Service. If he has more
than one Period of Service or if all or a part of a Period of Service is
not counted, his Vesting Service shall be determined by adjusting his
Employment Commencement Date so that he has one continuous period of
Vesting Service equal to the aggregate of all his countable Periods of
Service. This period of Vesting Service shall be expressed as whole
years and fractional parts of a year (to two decimal places) on the
basis that 365 days equal one year.
However, Vesting Service is modified as follows:
Predecessor Employer Service included:
An Employee's service with a Predecessor Employer shall be
included as service with the Employer. This service includes
service performed while a proprietor or partner.
17
<PAGE> 17
Period of Military Duty included:
A Period of Military Duty shall be included as service with the
Employer to the extent it has not already been credited.
Period of Severance included (service spanning rule):
A Period of Severance shall be deemed to be a Period of Service
under either of the following conditions:
(a) the Period of Severance immediately follows a period
during which an Employee is not absent from work and ends
within 12 months; or
(b) the Period of Severance immediately follows a period
during which an Employee is absent from work for any
reason other than quitting, being discharged or retiring
(such as a leave of absence or layoff) and ends within 12
months of the date he was first absent.
Controlled Group service included:
An Employee's service with a member firm of a Controlled Group
while both that firm and the Employer were members of the
Controlled Group shall be included as service with the Employer.
YEARLY DATE means April 1, 1998, and each following January 1.
YEARS OF SERVICE means an Employee's Vesting Service disregarding any
modifications which exclude service.
18
<PAGE> 18
ARTICLE II
PARTICIPATION
SECTION 2.01--ACTIVE PARTICIPANT.
(a) An Employee shall first become an Active Participant (begin
active participation in the Plan) on the earliest date on or
after April 1, 1998, on which he is an Eligible Employee. This
date is his Entry Date.
(b) An Inactive Participant shall again become an Active Participant
(resume active participation in the Plan) on the date he again
performs an Hour-of-Service as an Eligible Employee. This date
is his Reentry Date.
Upon again becoming an Active Participant, he shall cease to be
an Inactive Participant.
(c) A former Participant shall again become an Active Participant
(resume active participation in the Plan) on the date he again
performs an Hour-of-Service as an Eligible Employee. This date
is his Reentry Date.
An Active Participant or an Eligible Employee may elect not to be an
Active Participant. The election may be for a specified or an indefinite
period of time. The election shall be made by filing a written request
with the Plan Administrator not to be an Active Participant. Employer
Contributions shall not be allocated to the Eligible Employee for any
period during which he is not an Active Participant. The Eligible
Employee may at any time revoke such election and,
a) if he has met all of the other eligibility requirements under
this section and his Entry Date has occurred, he shall become an
Active Participant as of the date of revocation, or
b) if he has met all of the other eligibility requirements under
this section and his Entry Date has not occurred, he shall
become an Active Participant as provided in this section, or
c) if he has not met all of the other eligibility requirements
under this section, he shall become an Active Participant as
provided in this section.
There shall be no duplication of benefits for a Participant under this
Plan because of more than one period as an Active Participant.
SECTION 2.02--INACTIVE PARTICIPANT.
An Active Participant shall become an Inactive Participant (stop
accruing benefits under the Plan) on the earlier of the following:
(a) The date on which he ceases to be an Eligible Employee (on his
Retirement Date if the date he ceases to be an Eligible Employee
occurs within one month of his Retirement Date).
(b) The effective date of complete termination of the Plan.
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<PAGE> 19
SECTION 2.03--CESSATION OF PARTICIPATION.
A Participant shall cease to be a Participant on the date he is no
longer an Eligible Employee and his Account is zero.
SECTION 2.04--ADOPTING EMPLOYERS - SINGLE PLAN.
Each of the employers controlled by or affiliated with the Employer and
listed below is an Adopting Employer. Each Adopting Employer listed below
participates with the Employer in this Plan. An Adopting Employer's agreement to
participate in this Plan shall be in writing.
If the Adopting Employer did not maintain its plan before its date of
adoption specified below, its date of adoption shall be the Entry Date for any
of its employees who have met the requirements in the ACTIVE PARTICIPANT SECTION
of Article II as of that date. Service with and earnings from an Adopting
Employer shall be included as service with and earnings from the Employer.
Transfer of employment, without interruption, between an Adopting Employer and
another Adopting Employer or the Employer shall not be considered an
interruption of service.
Contributions made by an Adopting Employer shall be treated as
Contributions made by the Employer. Forfeitures arising from those Contributions
shall be used for the benefit of all Participants.
An employer shall not be an Adopting Employer if it ceases to be
controlled by or affiliated with the Employer. Such an employer may continue a
retirement plan for its employees in the form of a separate document. This Plan
shall be amended to delete a former Adopting Employer from the list below.
If an employer ceases to be an Adopting Employer and does not continue a
retirement plan for the benefit of its employees, partial termination may result
and the provisions of Article VII apply.
ADOPTING EMPLOYERS
<TABLE>
<CAPTION>
NAME FISCAL YEAR END DATE OF ADOPTION
<S> <C> <C>
PRINCIPAL HEALTH CARE OF December 31 April 1, 1998
IOWA, INC.
PRINCIPAL HEALTH CARE December 31 April 1, 1998
MANAGEMENT CORPORATION
PRINCIPAL HEALTH CARE OF THE December 31 April 1, 1998
CAROLINAS, INC.
PRINCIPAL HEALTH CARE OF, December 31 April 1, 1998
DELAWARE, INC.
PRINCIPAL HEALTH CARE OF December 31 April 1, 1998
FLORIDA, INC.
PRINCIPAL HEALTH CARE OF December 31 April 1, 1998
GEORGIA, INC.
</TABLE>
20
<PAGE> 20
<TABLE>
<S> <C> <C>
PRINCIPAL HEALTH CARE OF December 31 April 1, 1998
ILLINOIS, INC.
PRINCIPAL HEALTH CARE OF December 31 April 1, 1998
INDIANA, INC.
PRINCIPAL HEALTH CARE OF December 31 April 1, 1998
LOUISIANA, INC.
PRINCIPAL HEALTH CARE OF December 31 April 1, 1998
KANSAS CITY, INC.
PRINCIPAL HEALTH CARE OF December 31 April 1, 1998
NEBRASKA, INC.
PRINCIPAL HEALTH CARE OF December 31 April 1, 1998
PENNSYLVANIA, INC.
PRINCIPAL HEALTH CARE OF December 31 April 1, 1998
ST. LOUIS, INC.
PRINCIPAL HEALTH CARE OF December 31 April 1, 1998
SOUTH CAROLINA, INC.
PRINCIPAL HEALTH CARE OF December 31 April 1, 1998
TENNESSEE, INC.
UNITED HEALTH CARE SERVICES December 31 April 1, 1998
OF IOWA, INC.
</TABLE>
21
<PAGE> 21
ARTICLE III
CONTRIBUTIONS
SECTION 3.01--EMPLOYER CONTRIBUTIONS.
Employer Contributions are conditioned on initial qualification of the
Plan. If the Plan is denied initial qualification, the provisions of the
QUALIFICATION OF PLAN SECTION of Article IX shall apply.
Employer Contributions for Plan Years which end on or after April 1,
1998, may be made without regard to current or accumulated net income, earnings,
or profits of the Employer. Notwithstanding the foregoing, the Plan shall
continue to be designed to qualify as a profit sharing plan for purposes of Code
Sections 401(a), 402, 412, and 417. Such Contributions will be equal to the
Employer Contributions as described below:
(a) The amount of each Elective Deferral Contribution for a
Participant shall be equal to 6% of his Compensation, unless he
elects otherwise. If a different percentage is elected by the
Participant, such percentage shall be equal to any percentage
(not to exceed 15%) of his Compensation as elected in his
elective deferral agreement.
An Employee who is eligible to participate in the Plan must file
an elective deferral agreement with the Employer. The elective
deferral agreement may be effective on a Participant's Entry
Date (Reentry Date, if applicable) or any following date. The
Participant shall make any change or terminate the elective
deferral agreement by filing a new elective deferral agreement.
A Participant's elective deferral agreement making a change may
be effective on any date. A Participant's elective deferral
agreement to stop Elective Deferral Contributions may be
effective on any date. The elective deferral agreement must be
in writing and completed before the beginning of the pay period
in which Elective Deferral Contributions are to start, change or
stop.
Elective Deferral Contributions are fully vested and
nonforfeitable.
(b) The amount of each Matching Contribution for a Participant shall
be equal to 100% of the Elective Deferral Contributions made for
him, disregarding any Elective Deferral Contributions in excess
of 3% of his Compensation, plus 50% of the Elective Deferral
Contributions made for him in excess of 3% of his Compensation
but disregarding any Elective Deferral Contributions in excess
of 6% of his Compensation.
The Employer shall make all of this Matching Contribution to the
Trustee in the form of Qualifying Employer Securities.
Matching Contributions are subject to the Vesting Percentage.
No Participant shall be permitted to have Elective Deferral
Contributions, as defined in the EXCESS AMOUNTS SECTION of Article III, made
under this Plan, or any other qualified plan maintained by the Employer, during
any taxable year, in excess of the dollar limitation contained in Code Section
402(g) in effect at the beginning of such taxable year.
The Employer shall pay to the Insurer its Contributions used to
determine the Actual Deferral Percentage, as defined in the EXCESS AMOUNTS
SECTION of Article III, to the Plan for each Plan Year as soon as
22
<PAGE> 22
administratively feasible after the amount otherwise would have been payable to
the Participant, but not later than the 15th business day of the following
month. The Employer shall pay to the Insurer its other contributions within the
time prescribed for filing the Employer's Federal income tax return for the Plan
Year, including extensions.
A portion of the Plan assets resulting from Employer Contributions (but
not more than the original amount of those Contributions) may be returned if the
Employer Contributions are made because of a mistake of fact or are more than
the amount deductible under Code Section 404 (excluding any amount which is not
deductible because the Plan is disqualified). The amount involved must be
returned to the Employer within one year after the date the Employer
Contributions are made by mistake of fact or the date the deduction is
disallowed, whichever applies. Except as provided under this paragraph and
Articles VII and IX, the assets of the Plan shall never be used for the benefit
of the Employer and are held for the exclusive purpose of providing benefits to
Participants and their Beneficiaries and for defraying reasonable expenses of
administering the Plan.
SECTION 3.01A--ROLLOVER CONTRIBUTIONS.
A Rollover Contribution may be made by or for an Eligible Employee if
the following conditions are met:
(a) The Contribution is a rollover contribution which the Code
permits to be transferred to a plan that meets the requirements
of Code Section 401(a).
(b) If the Contribution is made by the Eligible Employee, it is made
within sixty days after he receives the distribution.
(c) The Eligible Employee furnishes evidence satisfactory to the
Plan Administrator that the proposed transfer is in fact a
rollover contribution that meets conditions (a) and (b) above.
The Rollover Contribution may be made by the Eligible Employee or the
Eligible Employee may direct the trustee or named fiduciary of another plan to
transfer the funds which would otherwise be a Rollover Contribution directly to
this Plan. Such transferred funds shall be called a Rollover Contribution. The
Contribution shall be made according to procedures set up by the Plan
Administrator.
If the Eligible Employee is not an Active Participant at the time the
Rollover Contribution is made, he shall be deemed to be a Participant only for
the purposes of investment and distribution of the Rollover Contribution. He
shall not share in the allocation of Employer Contributions until the time he
meets all the requirements to become an Active Participant.
Rollover Contributions made by or for an Eligible Employee shall be
credited to his Account. The part of the Participant's Account resulting from
Rollover Contributions is fully (100%) vested and nonforfeitable at all times. A
separate accounting record shall be maintained for that part of his Rollover
Contribution which consists of voluntary contributions that were deducted from
the Participant's gross income for Federal income tax purposes.
SECTION 3.02--FORFEITURES.
The Nonvested Account of a Participant shall be forfeited as of the
earlier of the following: the date of the Participant's death, if prior to such
date he had ceased to be an Employee; or his Forfeiture Date. All or a part of a
Participant's Nonvested Account will be forfeited if, after he ceases to be an
Employee, he receives a distribution of his entire Vested Account or a
distribution of his Vested Account derived from Employer
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Contributions which were not 100% vested when made according to the provisions
of the VESTED BENEFITS SECTION of Article V or the SMALL AMOUNTS SECTION of
Article IX. If a Participant's Vested Account is zero on the date he ceases to
be an Employee, he shall be deemed to have received a distribution of his entire
Vested Account on such date. The forfeiture will occur as of the date he
receives the distribution or on the date such provision became effective, if
later. If he receives a distribution of his entire Vested Account, his entire
Nonvested Account will be forfeited. If he receives a distribution of his Vested
Account from Employer Contributions which were not 100% vested when made, but
less than his entire Vested Account, the amount to be forfeited will be
determined by multiplying his Nonvested Account by a fraction. The numerator of
the fraction is the amount of the distribution derived from Employer
Contributions which were not 100% vested when made and the denominator of the
fraction is his entire Vested Account derived from such Employer Contributions
on the date of distribution.
A Forfeiture shall also occur as described in the EXCESS AMOUNTS SECTION
of Article III.
Forfeitures may first be applied to pay expenses under the Plan which
would otherwise be paid by the Employer.
Forfeitures not used to pay expenses shall be applied to reduce the
earliest Employer Contributions made after the Forfeitures are determined.
Forfeitures shall be determined at least once during each taxable year of the
Employer. Upon their application, such Forfeitures shall be deemed to be
Employer Contributions.
Forfeitures of Matching Contributions which relate to excess amounts
shall be applied as provided in the EXCESS AMOUNTS SECTION of Article III.
If a Participant again becomes an Eligible Employee after receiving a
distribution which caused his Nonvested Account to be forfeited, he shall have
the right to repay to the Plan the entire amount of the distribution he received
(excluding any amount of such distribution resulting from Contributions which
were 100% vested when made). The repayment must be made before the earlier of
the date five years after the date he again becomes an Eligible Employee or the
end of the first period of five consecutive one-year Periods of Severance which
begin after the date of the distribution.
If the Participant makes the repayment provided above, the Plan
Administrator shall restore to his Account an amount equal to his Nonvested
Account which was forfeited on the date of distribution, unadjusted for any
investment gains or losses. If the amount of the repayment is zero dollars
because the Participant was deemed to have received a distribution or the plan
did not have repayment provisions in effect on the date the distribution was
made and he again performs an Hour-of-Service as an Eligible Employee within the
repayment period, the Plan Administrator shall restore the Participant's Account
as if he had made a required repayment on the date he performed such
Hour-of-Service. Restoration of the Participant's Account shall include
restoration of all Code Section 411(d)(6) protected benefits with respect to
that restored Account, according to applicable Treasury regulations. Provided,
however, the Plan Administrator shall not restore the Nonvested Account if a
Forfeiture Date has occurred after the date of the distribution and on or before
the date of repayment and that Forfeiture Date would result in a complete
forfeiture of the amount the Plan Administrator would otherwise restore.
The Plan Administrator shall restore the Participant's Account by the
close of the Plan Year following the Plan Year in which repayment is made.
Permissible sources for restoration are Forfeitures or Employer Contributions.
The Employer shall contribute, without regard to any requirement or condition of
the EMPLOYER CONTRIBUTIONS SECTION of Article III, such additional amount needed
to make the required restoration. The
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<PAGE> 24
repaid and restored amounts are not included in the Participant's Annual
Addition, as defined in the CONTRIBUTION LIMITATION SECTION of Article III.
SECTION 3.03--ALLOCATION.
The following Contributions for each Plan Year shall be allocated to
each Participant for whom such Contributions were made under the EMPLOYER
CONTRIBUTIONS SECTION of Article III:
Elective Deferral Contributions
Matching Contributions
These Contributions shall be allocated when made and credited to the
Participant's Account.
In determining the amount of Employer Contributions to be allocated to a
Participant who is a Leased Employee, contributions and benefits provided by the
leasing organization which are attributable to services such Leased Employee
performs for the Employer shall be treated as provided by the Employer and there
shall be no duplication of those contributions or benefits under this Plan.
SECTION 3.04--CONTRIBUTION LIMITATION.
(a) For the purpose of determining the contribution limitation set
forth in this section, the following terms are defined:
Aggregate Annual Addition means, for a Participant with respect
to any Limitation Year, the sum of his Annual Additions under
all defined contribution plans of the Employer, as defined in
this section, for such Limitation Year. The nondeductible
participant contributions which the Participant makes to a
defined benefit plan shall be treated as Annual Additions to a
defined contribution plan. The Contributions the Employer, as
defined in this section, made for the Participant for a Plan
Year beginning on or after March 31, 1984, to an individual
medical benefit account, as defined in Code Section 415(l)(2),
under a pension or annuity plan of the Employer, as defined in
this section, shall be treated as Annual Additions to a defined
contribution plan. Also, amounts derived from contributions paid
or accrued after December 31, 1985, in Fiscal Years ending after
such date, which are attributable to post-retirement medical
benefits allocated to the separate account of a key employee, as
defined in Code Section 419A(d)(3), under a welfare benefit
fund, as defined in Code Section 419(e), maintained by the
Employer, as defined in this section, are treated as Annual
Additions to a defined contribution plan. The 25% of
Compensation limit under Maximum Permissible Amount does not
apply to Annual Additions resulting from contributions made to
an individual medical account, as defined in Code Section
415(l)(2), or to Annual Additions resulting from contributions
for medical benefits, within the meaning of Code Section 419A,
after separation from service.
Annual Addition means the amount added to a Participant's
account for any Limitation Year which may not exceed the Maximum
Permissible Amount. The Annual Addition under any plan for a
Participant with respect to any Limitation Year, shall be equal
to the sum of (1) and (2) below:
(1) Employer contributions and forfeitures credited to his
account for the Limitation Year.
(2) Participant contributions made by him for the Limitation
Year.
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<PAGE> 25
Before the first Limitation Year beginning after December 31,
1986, the amount under (2) above is the lesser of (i) 1/2 of his
nondeductible participant contributions made for the Limitation
Year, or (ii) the amount, if any, of his nondeductible
participant contributions made for the Limitation Year which is
in excess of six percent of his Compensation, as defined in this
section, for such Limitation Year.
Compensation means all wages for Federal income tax withholding
purposes, as defined under Code Section 3401(a) (for purposes of
income tax withholding at the source), disregarding any rules
limiting the remuneration included as wages based on the nature
or location of the employment or the services performed.
Compensation also includes all other payments to an Employee in
the course of the Employer's trade or business, for which the
Employer must furnish the Employee a written statement under
Code Sections 6041(d) and 6051(a)(3). The Wages, Tips and Other
Compensation" box on Form W-2 satisfies this definition.
For any self-employed individual Compensation will mean earned
income.
For purposes of applying the limitations of this section,
Compensation for a Limitation Year is the Compensation actually
paid or made available during such Limitation Year.
Defined Benefit Plan Fraction means, with respect to a
Limitation Year for a Participant who is or has been a
participant in a defined benefit plan ever maintained by the
Employer, as defined in this section, the quotient, expressed as
a decimal, of
(1) the Participant's Projected Annual Benefit under all
such plans as of the close of such Limitation Year,
divided by
(2) on and after the TEFRA Compliance Date, the lesser of
(i) or (ii) below:
(i) 1.25 multiplied by the maximum dollar limitation
which applies to defined benefit plans
determined for the Limitation Year under Code
Sections 415(b) or (d) or
(ii) 1.4 multiplied by the Participant's highest
average compensation as defined in the defined
benefit plan(s),
including any adjustments under Code Section 415(b).
Before the TEFRA Compliance Date, this denominator is
the Participant's Projected Annual Benefit as of the
close of the Limitation Year if the plan(s) provided the
maximum benefit allowable.
The Defined Benefit Plan Fraction shall be modified as follows:
If the Participant was a participant as of the first day of the
first Limitation Year beginning after December 31, 1986, in one
or more defined benefit plans maintained by the Employer, as
defined in this section, which were in existence on May 6, 1986,
the denominator of this fraction will not be less than 125
percent of the sum of the annual benefits under such plans which
the Participant had accrued as of the close of the last
Limitation Year beginning before January 1, 1987, disregarding
any changes in the terms and conditions of the plan after May 5,
1986. The preceding sentence applies only if the defined benefit
plans individually and in the aggregate
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<PAGE> 26
satisfied the requirements of Code Section 415 for all
Limitation Years beginning before January 1, 1987.
Defined Contribution Plan Fraction means, for a Participant with
respect to a Limitation Year, the quotient, expressed as a
decimal, of
(1) the Participant's Aggregate Annual Additions for such
Limitation Year and all prior Limitation Years, under
all defined contribution plans (including the Aggregate
Annual Additions attributable to nondeductible accounts
under defined benefit plans and attributable to all
welfare benefit funds, as defined in Code Section 419(e)
and attributable to individual medical accounts, as
defined in Code Section 415(l)(2)) ever maintained by
the Employer, as defined in this section, divided by
(2) on and after the TEFRA Compliance Date, the sum of the
amount determined for the Limitation Year under (i) or
(ii) below, whichever is less, and the amounts
determined in the same manner for all prior Limitation
Years during which he has been an Employee or an
employee of a predecessor employer:
(i) 1.25 multiplied by the maximum permissible
dollar amount for each such Limitation Year, or
(ii) 1.4 multiplied by the maximum permissible
percentage of the Participant's Compensation, as
defined in this section, for each such
Limitation Year.
Before the TEFRA Compliance Date, this denominator is
the sum of the maximum allowable amount of Annual
Addition to his account(s) under all the plan(s) of the
Employer, as defined in this section, for each such
Limitation Year.
The Defined Contribution Plan Fraction shall be modified as
follows:
If the Participant was a participant as of the first day of the
first Limitation Year beginning after December 31, 1986, in one
or more defined contribution plans maintained by the Employer,
as defined in this section, which were in existence on May 6,
1986, the numerator of this fraction shall be adjusted if the
sum of the Defined Contribution Plan Fraction and Defined
Benefit Plan Fraction would otherwise exceed 1.0 under the terms
of this Plan. Under the adjustment, the dollar amount determined
below shall be permanently subtracted from the numerator of this
fraction. The dollar amount is equal to the excess of the sum of
the two fractions, before adjustment, over 1.0 multiplied by the
denominator of his Defined Contribution Plan Fraction. The
adjustment is calculated using his Defined Contribution Plan
Fraction and Defined Benefit Plan Fraction as they would be
computed as of the end of the last Limitation Year beginning
before January 1, 1987, and disregarding any changes in the
terms and conditions of the plan made after May 5, 1986, but
using the Code Section 415 limitations applicable to the first
Limitation Year beginning on or after January 1, 1987.
The Annual Addition for any Limitation Year beginning before
January 1, 1987, shall not be recomputed to treat all employee
contributions as Annual Additions.
For a plan that was in existence on July 1, 1982, for purposes
of determining the Defined Contribution Plan Fraction for any
Limitation Year ending after December 31, 1982, the Plan
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<PAGE> 27
Administrator may elect, in accordance with the provisions of
Code Section 415, that the denominator for each Participant for
all Limitation Years ending before January 1, 1983, will be
equal to
(1) the Defined Contribution Plan Fraction denominator which
would apply for the last Limitation Year ending in 1982
if an election under this paragraph were not made,
multiplied by.
(2) a fraction, equal to (i) over (ii) below:
(i) the lesser of (A) $51,875, or (B) 1.4,
multiplied by 25% of the Participant's
Compensation, as defined in this section, for
the Limitation Year ending in 1981;
(ii) the lesser of (A) $41,500, or (B) 25% of the
Participant's Compensation, as defined in this
section, for the Limitation Year ending in 1981.
The election described above is applicable only if the plan
administrators under all defined contribution plans of the
Employer, as defined in this section, also elect to use the
modified fraction.
Employer means any employer that adopts this Plan and all
Controlled Group members and any other entity required to be
aggregated with the employer pursuant to regulations under Code
Section 414(o).
Limitation Year means the 12-consecutive month period within
which it is determined whether or not the limitations of Code
Section 415 are exceeded. Limitation Year means each
12-consecutive month period ending on the last day of each Plan
Year, including corresponding 12-consecutive month periods
before April 1, 1998. If the Limitation Year is other than the
calendar year, execution of this Plan (or any amendment to this
Plan changing the Limitation Year) constitutes the Employer's
adoption of a written resolution electing the Limitation Year.
If the Limitation Year is changed, the new Limitation Year shall
begin within the current Limitation Year, creating a short
Limitation Year.
Maximum Permissible Amount means, for a Participant with respect
to any Limitation Year, the lesser of (1) or (2) below:
(1) The greater of $30,000 or one-fourth of the maximum
dollar limitation which applies to defined benefit plans
set forth in Code Section 415(b)(1)(A) as in effect for
the Limitation Year. (Before the TEFRA Compliance Date,
$25,000 multiplied by the cost of living adjustment
factor permitted by Federal regulations.)
(2) 25% of his Compensation, as defined in this section, for
such Limitation Year.
The compensation limitation referred to in (2) shall not apply
to any contribution for medical benefits (within the meaning of
Code Section 401(h) or Code Section 419A(f)(2)) which is
otherwise treated as an annual addition under Code Section
415(l)(1) or Code Section 419A(d)(2).
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<PAGE> 28
If there is a short Limitation Year because of a change in
Limitation Year, the Maximum Permissible Amount will not exceed
the maximum dollar limitation which would otherwise apply
multiplied by the following fraction:
Number of months in the short Limitation Year
---------------------------------------------
12
Projected Annual Benefit means a Participant's expected annual
benefit under all defined benefit plan(s) ever maintained by the
Employer, as defined in this section. The Projected Annual
Benefit shall be determined assuming that the Participant will
continue employment until the later of current age or normal
retirement age under such plan(s), and that the Participant's
compensation for the current Limitation Year and all other
relevant factors used to determine benefits under such plan(s)
will remain constant for all future Limitation Years. Such
expected annual benefit shall be adjusted to the actuarial
equivalent of a straight life annuity if expressed in a form
other than a straight life or qualified joint and survivor
annuity.
(b) The Annual Addition under this Plan for a Participant during a
Limitation Year shall not be more than the Maximum Permissible
Amount.
(c) Contributions which would otherwise be credited to the
Participant's Account shall be limited or reallocated to the
extent necessary to meet the restrictions of subparagraph (b)
above for any Limitation Year in the following order. Elective
Deferral Contributions that are not the basis for Matching
Contributions shall be limited. Matching Contributions shall be
limited to the extent necessary to limit the Participant's
Annual Addition under this Plan to his maximum amount. If
Matching Contributions are limited because of this limit,
Elective Deferral Contributions that are the basis for Matching
Contributions shall be reduced in proportion.
If, due to (i) an error in estimating a Participant's
Compensation as defined in this section, (ii) because the amount
of the Forfeitures to be used to offset Employer Contributions
is more than the amount of the Employer Contributions due for
the remaining Participants, (iii) as a result of a reasonable
error in determining the amount of elective deferrals (within
the meaning of Code Section 402(g)(3)) that may be made with
respect to any individual under the limits of Code Section 415,
or (iv) other limited facts and circumstances, a Participant's
Annual Addition is greater than the amount permitted in (b)
above, such excess amount shall be applied as follows. Elective
Deferral Contributions which are not the basis for Matching
Contributions will be returned to the Participant. If an excess
still exists, Elective Deferral Contributions that are the basis
for Matching Contributions will be returned to the Participant.
Matching Contributions based on Elective Deferral Contributions
which are returned shall be forfeited. If after the return of
Elective Deferral Contributions, an excess amount still exists,
and the Participant is an Active Participant as of the end of
the Limitation Year, the excess amount shall be used to offset
Employer Contributions for him in the next Limitation Year. If
after the return of Elective Deferral Contributions, an excess
amount still exists, and the Participant is not an Active
Participant as of the end of the Limitation Year, the excess
amount will be held in a suspense account which will be used to
offset Employer Contributions for all Participants in the next
Limitation Year. No Employer Contributions that would be
included in the next Limitation Year's Annual Addition may be
made before the total suspense account has been used.
(d) A Participant's Aggregate Annual Addition for a Limitation Year
shall not exceed the Maximum Permissible Amount.
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<PAGE> 29
If, for the Limitation Year, the Participant has an Annual
Addition under more than one defined contribution plan or a
welfare benefit fund, as defined in Code Section 419(e), or an
individual medical account, as defined in Code Section
415(l)(2), maintained by the Employer, as defined in this
section, and such plans and welfare benefit funds and individual
medical accounts do not otherwise limit the Aggregate Annual
Addition to the Maximum Permissible Amount, any reduction
necessary shall be made first to the profit sharing plans, then
to all other such plans and welfare benefit funds and individual
medical accounts and, if necessary, by reducing first those that
were most recently allocated. Welfare benefit funds and
individual medical accounts shall be deemed to be allocated
first. However, elective deferral contributions shall be the
last contributions reduced before the welfare benefit fund or
individual medical account is reduced.
If some of the Employer's defined contribution plans were not in
existence on July 1, 1982, and some were in existence on that
date, the Maximum Permissible Amount which is based on a dollar
amount may differ for a Limitation Year. The Aggregate Annual
Addition for the Limitation Year in which the dollar limit
differs shall not exceed the lesser of (1) 25% of Compensation
as defined in this section, (2) $45,475, or (3) the greater of
$30,000 or the sum of the Annual Additions for such Limitation
Year under all the plan(s) to which the $45,475 amount applies.
(e) If a Participant is or has been a participant in both defined
benefit and defined contribution plans (including a welfare
benefit fund or individual medical account) ever maintained by
the Employer, as defined in this section, the sum of the Defined
Benefit Plan Fraction and the Defined Contribution Plan Fraction
for any Limitation Year shall not exceed 1.0 (1.4 before the
TEFRA Compliance Date).
After all other limitations set out in the plans and funds have
been applied, the following limitations shall apply so that the
sum of the Participant's Defined Benefit Plan Fraction and
Defined Contribution Plan Fraction shall not exceed 1.0 (1.4
before the TEFRA Compliance Date). The Projected Annual Benefit
shall be limited first. If the Participant's annual benefit(s)
equal his Projected Annual Benefit, as limited, then Annual
Additions to the defined contribution plan(s) shall be limited
to the extent needed to reduce the sum to 1.0 (1.4). First, the
voluntary contributions the Participant may make for the
Limitation Year shall be limited. Next, in the case of a profit
sharing plan, any forfeitures allocated to the Participant shall
be reallocated to remaining participants to the extent necessary
to reduce the decimal to 1.0 (1.4). Last, to the extent
necessary, employer contributions for the Limitation Year shall
be reallocated or limited, and any required and optional
employee contributions to which such employer contributions were
geared shall be reduced in proportion.
If, for the Limitation Year, the Participant has an Annual
Addition under more than one defined contribution plan or
welfare benefit fund or individual medical account maintained by
the Employer, as defined in this section, any reduction above
shall be made first to the profit sharing plans, then to all
other such plans and welfare benefit plans and individual
medical accounts and, if necessary, by reducing first those that
were most recently allocated. However, elective deferral
contributions shall be the last contributions reduced before the
welfare benefit fund or individual medical account is reduced.
The annual addition to the welfare benefit fund and individual
medical account shall be limited last.
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SECTION 3.05--EXCESS AMOUNTS.
(a) For the purposes of this section, the following terms are
defined:
Actual Deferral Percentage means the ratio (expressed as a
percentage) of Elective Deferral Contributions under this Plan
on behalf of the Eligible Participant for the Plan Year to the
Eligible Participant's Compensation for the Plan Year. The
Elective Deferral Contributions used to determine the Actual
Deferral Percentage shall include Excess Elective Deferrals
(other than Excess Elective Deferrals of Nonhighly Compensated
Employees that arise solely from Elective Deferral Contributions
made under this Plan or any other plans of the Employer or a
Controlled Group member), but shall exclude Elective Deferral
Contributions that are used in computing the Contribution
Percentage (provided the Average Actual Deferral Percentage test
is satisfied both with and without exclusion of these Elective
Deferral Contributions). Under such rules as the Secretary of
the Treasury shall prescribe in Code Section 401(k)(3)(D), the
Employer may elect to include Qualified Nonelective
Contributions and Qualified Matching Contributions under this
Plan in computing the Actual Deferral Percentage. For an
Eligible Participant for whom such Contributions on his behalf
for the Plan Year are zero, the percentage is zero.
Aggregate Limit means the greater of (1) or (2) below:
(1) The sum of
(i) 125 percent of the greater of the Average Actual
Deferral Percentage of the Nonhighly Compensated
Employees for the Plan Year or the Average
Contribution Percentage of Nonhighly Compensated
Employees under the Plan subject to Code Section
401(m) for the Plan Year beginning with or
within the Plan Year of the cash or deferred
arrangement and
(ii) the lesser of 200% or two plus the lesser of
such Average Actual Deferral Percentage or
Average Contribution Percentage.
(2) The sum of
(i) 125 percent of the lesser of the Average Actual
Deferral Percentage of the Nonhighly Compensated
Employees for the Plan Year or the Average
Contribution Percentage of Nonhighly Compensated
Employees under the Plan subject to Code Section
401(m) for the Plan Year beginning with or
within the Plan Year of the cash or deferred
arrangement and
(ii) the lesser of 200% or two plus the greater of
such Average Actual Deferral Percentage or
Average Contribution Percentage.
Average Actual Deferral Percentage means the average (expressed
as a percentage) of the Actual Deferral Percentages of the
Eligible Participants in a group.
Average Contribution Percentage means the average (expressed as
a percentage) of the Contribution Percentages of the Eligible
Participants in a group.
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<PAGE> 31
Contribution Percentage means the ratio (expressed as a
percentage) of the Eligible Participant's Contribution
Percentage Amounts to the Eligible Participant's Compensation
for the Plan Year. For an Eligible Participant for whom such
Contribution Percentage Amounts for the Plan Year are zero, the
percentage is zero.
Contribution Percentage Amounts means the sum of the Participant
Contributions and Matching Contributions (that are not Qualified
Matching Contributions) under this Plan on behalf of the
Eligible Participant for the Plan Year. Such Contribution
Percentage Amounts shall not include Matching Contributions that
are forfeited either to correct Excess Aggregate Contributions
or because the Contributions to which they relate are Excess
Elective Deferrals, Excess Contributions or Excess Aggregate
Contributions. Under such rules as the Secretary of the Treasury
shall prescribe in Code Section 401(k)(3)(D), the Employer may
elect to include Qualified Nonelective Contributions and
Qualified Matching Contributions under this Plan which were not
used in computing the Actual Deferral Percentage in computing
the Contribution Percentage. The Employer may also elect to use
Elective Deferral Contributions in computing the Contribution
Percentage so long as the Average Actual Deferral Percentage
test is met before the Elective Deferral Contributions are used
in the Average Contribution Percentage test and continues to be
met following the exclusion of those Elective Deferral
Contributions that are used to meet the Average Contribution
Percentage test.
Elective Deferral Contributions means employer contributions
made on behalf of a participant pursuant to an election to defer
under any qualified cash or deferred arrangement as described in
Code Section 401(k), any simplified employee pension cash or
deferred arrangement as described in Code Section 402(h)(1)(B),
any eligible deferred compensation plan under Code Section 457,
any plan as described under Code Section 501(c)(18), and any
employer contributions made on behalf of a participant for the
purchase of an annuity contract under Code Section 403(b)
pursuant to a salary reduction agreement. Elective Deferral
Contributions shall not include any deferrals properly
distributed as excess Annual Additions.
Eligible Participant means, for purposes of the Actual Deferral
Percentage, any Employee who is eligible to make an Elective
Deferral Contribution, and shall include the following: any
Employee who would be a plan participant if he chose to make
required contributions; any Employee who can make Elective
Deferral Contributions but who has changed the amount of his
Elective Deferral Contribution to 0%, or whose eligibility to
make an Elective Deferral Contribution is suspended because of a
loan, distribution or hardship withdrawal; and, any Employee who
is not able to make an Elective Deferral Contribution because of
Code Section 415(c)(1) - Annual Additions limits. The Actual
Deferral Percentage for any such included Employee is zero.
Eligible Participant means, for purposes of the Average
Contribution Percentage, any Employee who is eligible to make a
Participant Contribution or to receive a Matching Contribution,
and shall include the following: any Employee who would be a
plan participant if he chose to make required contributions; any
Employee who can make a Participant Contribution or receive a
matching contribution but who has made an election not to
participate in the Plan; and any Employee who is not able to
make a Participant Contribution or receive a matching
contribution because of Code Section 415(c)(1) or 415(e) limits.
The Average Contribution Percentage for any such included
Employee is zero.
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Excess Aggregate Contributions means, with respect to any Plan
Year, the excess of:
(1) The aggregate Contributions taken into account in
computing the numerator of the Contribution Percentage
actually made on behalf of Highly Compensated Employees
for such Plan Year, over
(2) The maximum amount of such Contributions permitted by
the Average Contribution Percentage test (determined by
reducing Contributions made on behalf of Highly
Compensated Employees in order of their Contribution
Percentages beginning with the highest of such
percentages).
Such determination shall be made after first determining Excess
Elective Deferrals and then determining Excess Contributions.
Excess Contributions means, with respect to any Plan Year, the
excess of:
(1) The aggregate amount of Contributions actually taken
into account in computing the Actual Deferral Percentage
of Highly Compensated Employees for such Plan Year, over
(2) The maximum amount of such Contributions permitted by
the Actual Deferral Percentage test (determined by
reducing Contributions made on behalf of Highly
Compensated Employees in order of the Actual Deferral
Percentages, beginning with the highest of such
percentages).
A Participant's Excess Contributions for a Plan Year will be
reduced by the amount of Excess Elective Deferrals, if any,
previously distributed to the Participant for the taxable year
ending in that Plan Year.
Excess Elective Deferrals means those Elective Deferral
Contributions that are includible in a Participant's gross
income under Code Section 402(g) to the extent such
Participant's Elective Deferral Contributions for a taxable year
exceed the dollar limitation under such Code section. Excess
Elective Deferrals shall be treated as Annual Additions, as
defined in the CONTRIBUTION LIMITATION SECTION of Article III,
under the Plan, unless such amounts are distributed no later
than the first April 15 following the close of the Participant's
taxable year.
Matching Contributions means employer contributions made to this
or any other defined contribution plan, or to a contract
described in Code Section 403(b), on behalf of a participant on
account of a Participant Contribution made by such participant,
or on account of a participant's Elective Deferral
Contributions, under a plan maintained by the employer.
Participant Contributions means contributions made to any plan
by or on behalf of a participant that are included in the
participant's gross income in the year in which made and that
are maintained under a separate account to which earnings and
losses are allocated.
Qualified Matching Contributions means Matching Contributions
which are subject to the distribution and nonforfeitability
requirements under Code Section 401(k) when made.
Qualified Nonelective Contributions means any employer
contributions (other than Matching Contributions) which an
employee may not elect to have paid to him in cash instead of
being
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contributed to the plan and which are subject to the
distribution and nonforfeitability requirements under Code
Section 401(k).
(b) A Participant may assign to this Plan any Excess Elective
Deferrals made during a taxable year by notifying the Plan
Administrator in writing on or before the first following March
1 of the amount of the Excess Elective Deferrals to be assigned
to the Plan. A Participant is deemed to notify the Plan
Administrator of any Excess Elective Deferrals that arise by
taking into account only those Elective Deferral Contributions
made to this Plan and any other plans of the Employer or a
Controlled Group member and reducing such Excess Elective
Deferrals by the amount of Excess Contributions, if any,
previously distributed for the Plan Year beginning in that
taxable year. The Participant's claim for Excess Elective
Deferrals shall be accompanied by the Participant's written
statement that if such amounts are not distributed, such Excess
Elective Deferrals, when added to amounts deferred under other
plans or arrangements described in Code Sections 401(k), 408(k)
or 403(b), will exceed the limit imposed on the Participant by
Code Section 402(g) for the year in which the deferral occurred.
The Excess Elective Deferrals assigned to this Plan can not
exceed the Elective Deferral Contributions allocated under this
Plan for such taxable year.
Notwithstanding any other provisions of the Plan, Elective
Deferral Contributions in an amount equal to the Excess Elective
Deferrals assigned to this Plan, plus any income and minus any
loss allocable thereto, shall be distributed no later than April
15 to any Participant to whose Account Excess Elective Deferrals
were assigned for the preceding year and who claims Excess
Elective Deferrals for such taxable year.
The income or loss allocable to such Excess Elective Deferrals
shall be equal to the income or loss allocable to the
Participant's Elective Deferral Contributions for the taxable
year in which the excess occurred multiplied by a fraction. The
numerator of the fraction is the Excess Elective Deferrals. The
denominator of the fraction is the closing balance without
regard to any income or loss occurring during such taxable year
(as of the end of such taxable year) of the Participant's
Account resulting from Elective Deferral Contributions.
Any Matching Contributions which were based on the Elective
Deferral Contributions which are distributed as Excess Elective
Deferrals, plus any income and minus any loss allocable thereto,
shall be forfeited. These Forfeitures shall be used to offset
the earliest Employer Contribution due after the Forfeiture
arises.
(c) As of the end of each Plan Year after Excess Elective Deferrals
have been determined, one of the following tests must be met:
(1) The Average Actual Deferral Percentage for Eligible
Participants who are Highly Compensated Employees for
the Plan Year is not more than the Average Actual
Deferral Percentage for Eligible Participants who are
Nonhighly Compensated Employees for the Plan Year
multiplied by 1.25.
(2) The Average Actual Deferral Percentage for Eligible
Participants who are Highly Compensated Employees for
the Plan Year is not more than the Average Actual
Deferral Percentage for Eligible Participants who are
Nonhighly Compensated Employees for the Plan Year
multiplied by 2 and the difference between the Average
Actual Deferral Percentages is not more than 2.
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The Actual Deferral Percentage for any Eligible Participant who
is a Highly Compensated Employee for the Plan Year and who is
eligible to have Elective Deferral Contributions (and Qualified
Nonelective Contributions or Qualified Matching Contributions,
or both, if used in computing the Actual Deferral Percentage)
allocated to his account under two or more plans or arrangements
described in Code Section 401(k) that are maintained by the
Employer or a Controlled Group member shall be determined as if
all such Elective Deferral Contributions (and, if applicable,
such Qualified Nonelective Contributions or Qualified Matching
Contributions, or both) were made under a single arrangement. If
a Highly Compensated Employee participates in two or more cash
or deferred arrangements that have different Plan Years, all
cash or deferred arrangements ending with or within the same
calendar year shall be treated as a single arrangement.
Notwithstanding the foregoing, certain plans shall be treated as
separate if mandatorily disaggregated under the regulations
under Code Section 401(k).
In the event that this Plan satisfies the requirements of Code
Sections 401(k), 401(a)(4), or 410(b) only if aggregated with
one or more other plans, or if one or more other plans satisfy
the requirements of such Code sections only if aggregated with
this Plan, then this section shall be applied by determining the
Actual Deferral Percentage of employees as if all such plans
were a single plan. Plans may be aggregated in order to satisfy
Code Section 401(k) only if they have the same Plan Year.
For purposes of determining the Actual Deferral Percentage of an
Eligible Participant who is a five-percent owner or one of the
ten most highly-paid Highly Compensated Employees, the Elective
Deferral Contributions (and Qualified Nonelective Contributions
or Qualified Matching Contributions, or both, if used in
computing the Actual Deferral Percentage) and Compensation of
such Eligible Participant include the Elective Deferral
Contributions (and, if applicable, Qualified Nonelective
Contributions or Qualified Matching Contributions, or both) and
Compensation for the Plan Year of Family Members. Family
Members, with respect to such Highly Compensated Employees,
shall be disregarded as separate employees in determining the
Actual Deferral Percentage both for Participants who are
Nonhighly Compensated Employees and for Participants who are
Highly Compensated Employees.
For purposes of determining the Actual Deferral Percentage,
Elective Deferral Contributions, Qualified Nonelective
Contributions and Qualified Matching Contributions must be made
before the last day of the 12-month period immediately following
the Plan Year to which contributions relate.
The Employer shall maintain records sufficient to demonstrate
satisfaction of the Average Actual Deferral Percentage test and
the amount of Qualified Nonelective Contributions or Qualified
Matching Contributions, or both, used in such test.
The determination and treatment of the Contributions used in
computing the Actual Deferral Percentage shall satisfy such
other requirements as may be prescribed by the Secretary of the
Treasury.
If the Plan Administrator should determine during the Plan Year
that neither of the above tests is being met, the Plan
Administrator may adjust the amount of future Elective Deferral
Contributions of the Highly Compensated Employees.
Notwithstanding any other provisions of this Plan, Excess
Contributions, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of each
Plan Year to
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<PAGE> 35
Participants to whose Accounts such Excess Contributions were
allocated for the preceding Plan Year. If such excess amounts
are distributed more than 2 1/2 months after the last day of the
Plan Year in which such excess amounts arose, a ten (10) percent
excise tax will be imposed on the employer maintaining the plan
with respect to such amounts. Such distributions shall be made
beginning with the Highly Compensated Employee(s) who has the
greatest Actual Deferral Percentage, reducing his Actual
Deferral Percentage to the next highest Actual Deferral
Percentage level. Then, if necessary, reducing the Actual
Deferral Percentage of the Highly Compensated Employees at the
next highest level, and continuing in this manner until the
average Actual Deferral Percentage of the Highly Compensated
Group satisfies the Actual Deferral Percentage test. Excess
Contributions of Participants who are subject to the family
member aggregation rules shall be allocated among the Family
Members in proportion to the Elective Deferral Contributions
(and amounts treated as Elective Deferral Contributions) of each
Family Member that is combined to determine the combined Actual
Deferral Percentage.
Excess Contributions shall be treated as Annual Additions, as
defined in the CONTRIBUTION LIMITATION SECTION of Article III,
under the Plan.
The Excess Contributions shall be adjusted for income or loss.
The income or loss allocable to such Excess Contributions shall
be equal to the income or loss allocable to the Participant's
Elective Deferral Contributions (and, if applicable, Qualified
Nonelective Contributions or Qualified Matching Contributions,
or both) for the Plan Year in which the excess occurred
multiplied by a fraction. The numerator of the fraction is the
Excess Contributions. The denominator of the fraction is the
closing balance without regard to any income or loss occurring
during such Plan Year (as of the end of such Plan Year) of the
Participant's Account resulting from Elective Deferral
Contributions (and Qualified Nonelective Contributions or
Qualified Matching Contributions, or both, if used in computing
the Actual Deferral Percentage).
Excess Contributions shall be distributed from the Participant's
Account resulting from Elective Deferral Contributions. If such
Excess Contributions exceed the balance in the Participant's
Account resulting from Elective Deferral Contributions, the
balance shall be distributed from the Participant's Account
resulting from Qualified Matching Contributions (if applicable)
and Qualified Nonelective Contributions, respectively.
Any Matching Contributions which were based on the Elective
Deferral Contributions which are distributed as Excess
Contributions, plus any income and minus any loss allocable
thereto, shall be forfeited. These Forfeitures shall be used to
offset the earliest Employer Contribution due after the
Forfeiture arises.
(d) As of the end of each Plan Year, one of the following tests must
be met:
(1) The Average Contribution Percentage for Eligible
Participants who are Highly Compensated Employees for
the Plan Year is not more than the Average Contribution
Percentage for Eligible Participants who are Nonhighly
Compensated Employees for the Plan Year multiplied by
1.25.
(2) The Average Contribution Percentage for Eligible
Participants who are Highly Compensated Employees for
the Plan Year is not more than the Average Contribution
Percentage for Eligible Participants who are Nonhighly
Compensated Employees for the Plan Year multiplied by 2
and the difference between the Average Contribution
Percentages is not more than 2.
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<PAGE> 36
If one or more Highly Compensated Employees participate in both
a cash or deferred arrangement and a plan subject to the Average
Contribution Percentage test maintained by the Employer or a
Controlled Group member and the sum of the Average Actual
Deferral Percentage and Average Contribution Percentage of those
Highly Compensated Employees subject to either or both tests
exceeds the Aggregate Limit, then the Contribution Percentage of
those Highly Compensated Employees who also participate in a
cash or deferred arrangement will be reduced (beginning with
such Highly Compensated Employees whose Contribution Percentage
is the highest) so that the limit is not exceeded. The amount by
which each Highly Compensated Employee's Contribution Percentage
is reduced shall be treated as an Excess Aggregate Contribution.
The Average Actual Deferral Percentage and Average Contribution
Percentage of the Highly Compensated Employees are determined
after any corrections required to meet the Average Actual
Deferral Percentage and Average Contribution Percentage tests.
Multiple use does not occur if either the Average Actual
Deferral Percentage or Average Contribution Percentage of the
Highly Compensated Employees does not exceed 1.25 multiplied by
the Average Actual Deferral Percentage and Average Contribution
Percentage of the Nonhighly Compensated Employees.
The Contribution Percentage for any Eligible Participant who is
a Highly Compensated Employee for the Plan Year and who is
eligible to have Contribution Percentage Amounts allocated to
his account under two or more plans described in Code Section
401(a) or arrangements described in Code Section 401(k) that are
maintained by the Employer or a Controlled Group member shall be
determined as if the total of such Contribution Percentage
Amounts was made under each plan. If a Highly Compensated
Employee participates in two or more cash or deferred
arrangements that have different Plan Years, all cash or
deferred arrangements ending with or within the same calendar
year shall be treated as a single arrangement. Notwithstanding
the foregoing, certain plans shall be treated as separate if
mandatorily disaggregated under the regulations under Code
Section 401(m) or permissibly disaggregated as provided.
In the event that this Plan satisfies the requirements of Code
Sections 401(m), 401(a)(4), or 410(b) only if aggregated with
one or more other plans, or if one or more other plans satisfy
the requirements of Code sections only if aggregated with this
Plan, then this section shall be applied by determining the
Contribution Percentages of Eligible Participants as if all such
plans were a single plan. Plans may be aggregated in order to
satisfy Code Section 401(m) only if they have the same Plan
Year.
For purposes of determining the Contribution Percentage of an
Eligible Participant who is a five-percent owner or one of the
ten most highly-paid Highly Compensated Employees, the
Contribution Percentage Amounts and Compensation of such
Participant shall include Contribution Percentage Amounts and
Compensation for the Plan Year of Family Members. Family
Members, with respect to Highly Compensated Employees, shall be
disregarded as separate employees in determining the
Contribution Percentage both for employees who are Nonhighly
Compensated Employees and for employees who are Highly
Compensated Employees.
For purposes of determining the Contribution Percentage,
Participant Contributions are considered to have been made in
the Plan Year in which contributed to the Plan. Matching
Contributions and Qualified Nonelective Contributions will be
considered made for a Plan Year if made no later than the end of
the 12-month period beginning on the day after the close of the
Plan Year.
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<PAGE> 37
The Employer shall maintain records sufficient to demonstrate
satisfaction of the Average Contribution Percentage test and the
amount of Qualified Nonelective Contributions or Qualified
Matching Contributions, or both, used in such test.
The determination and treatment of the Contribution Percentage
of any Participant shall satisfy such other requirements as may
be prescribed by the Secretary of the Treasury.
Notwithstanding any other provisions of this Plan, Excess
Aggregate Contributions, plus any income and minus any loss
allocable thereto, shall be forfeited, if not vested, or
distributed, if vested, no later than the last day of each Plan
Year to Participants to whose Accounts such Excess Aggregate
Contributions were allocated for the preceding Plan Year. If
such Excess Aggregate Contributions are distributed more than
2 1/2 months after the last day of the Plan Year in which such
excess amounts arose, a ten (10) percent excise tax will be
imposed on the employer maintaining the plan with respect to
those amounts. Excess Aggregate Contributions will be
distributed beginning with the Highly Compensated Employee(s)
who has the greatest Contribution Percentage, reducing his
contribution percentage to the next highest level. Then, if
necessary, reducing the Contribution Percentage of the Highly
Compensated Employee at the next highest level, and continuing
in this manner until the Actual Contribution Percentage of the
Highly Compensated Group satisfies the Actual Contribution
Percentage Test. Excess Aggregate Contributions of Participants
who are subject to the family member aggregation rules shall be
allocated among the Family Members in proportion to the Employee
and Matching Contributions (or amounts treated as Matching
Contributions) of each Family Member that is combined to
determine the combined Contribution Percentage. Excess Aggregate
Contributions shall be treated as Annual Additions, as defined
in the CONTRIBUTION LIMITATION SECTION of Article III, under the
Plan.
The Excess Aggregate Contributions shall be adjusted for income
or loss. The income or loss allocable to such Excess Aggregate
Contributions shall be equal to the income or loss allocable to
the Participant's Contribution Percentage Amounts for the Plan
Year in which the excess occurred multiplied by a fraction. The
numerator of the fraction is the Excess Aggregate Contributions.
The denominator of the fraction is the closing balance without
regard to any income or loss occurring during such Plan Year (as
of the end of such Plan Year) of the Participant's Account
resulting from Contribution Percentage Amounts.
The numerator of the fractions is the Excess Aggregate
Contributions. The denominator of the fraction in (3) above is
the closing balance without regard to any income or loss
occurring during such Plan Year (as of the end of such Plan
Year) of the Participant's Account resulting from Contribution
Percentage Amounts. The denominator of the fraction in (4) above
is the closing balance without regard to any income or loss
occurring during such gap period (as of the end of such gap
period) of the Participant's Account resulting from Contribution
Percentage Amounts. The amount determined in (4) above shall not
be included for Plan Years beginning after December 31, 1991.
Excess Aggregate Contributions shall be distributed from the
Participant's Account resulting from Participant Contributions
that are not required as a condition of employment or
participation or for obtaining additional benefits from Employer
Contributions. If such Excess Aggregate Contributions exceed the
balance in the Participant's Account resulting from such
Participant Contributions, the balance shall be forfeited, if
not vested, or distributed, if vested, on a pro-rata basis from
the
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<PAGE> 38
Participant's Account resulting from Contribution Percentage
Amounts. These Forfeitures shall be used to offset the earliest
Employer Contribution due after the Forfeiture arises.
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ARTICLE IV
INVESTMENT OF CONTRIBUTIONS
SECTION 4.01--INVESTMENT OF CONTRIBUTIONS.
All Contributions are forwarded by the Employer to the (i) Insurer to be
deposited under the Group Contract, (ii) Trustee to be deposited in the Trust
Fund, or (iii) Custodian to be held under the terms of the Custodial Agreement.
Investment of Contributions which are directed to the Trust or Group
Contract is governed by the provisions of the Trust, the Group Contract and any
other funding arrangement in which the Trust Fund is or may be invested.
Investment of Contributions which are directed to the Custodian is governed
under the Custodial Agreement. To the extent permitted by the Trust, Custodial
Agreement, or Group Contract or other funding arrangement, the parties named
below shall direct the Contributions to any of the accounts available under the
Trust, Custodial Agreement or Group Contract and may request the transfer of
assets resulting from those Contributions between such accounts. A Participant
may not direct the Trustee to invest the Participant's Account in collectibles.
Collectibles means any work of art, rug or antique, metal or gem, stamp or coin,
alcoholic beverage or other tangible personal property specified by the
Secretary of Treasury. To the extent that a Participant does not direct the
investment of his Account, such Account shall be invested ratably in the
accounts available under the Trust, Custodial Agreement or Group Contract in the
same manner as the undirected Accounts of all other Participants. The Vested
Accounts of all Inactive Participants may be segregated and invested separately
from the Accounts of all other Participants.
The Trust Fund shall be valued at current fair market value as of the
last day of the last calendar month ending in the Plan Year and, at the
discretion of the Trustee, may be valued more frequently. The valuation shall
take into consideration investment earnings credited, expenses charged, payments
made and changes in the value of the assets held in the Trust Fund. The Account
of a Participant shall be credited with its share of the gains and losses of the
Trust Fund. That part of a Participant's Account invested in a funding
arrangement which establishes an account or accounts for such Participant
thereunder shall be credited with the gain or loss from such account or
accounts. That part of a Participant's Account which is invested in other
funding arrangements shall be credited with a proportionate share of the gain or
loss of such investments. The share shall be determined by multiplying the gain
or loss of the investment by the ratio of the part of the Participant's Account
invested in such funding arrangement to the total of the Trust Fund invested in
such funding arrangement.
At least annually, the Named Fiduciary shall review all pertinent
Employee information and Plan data in order to establish the funding policy of
the Plan and to determine appropriate methods of carrying out the Plan's
objectives. The Named Fiduciary shall inform the Trustee and any Investment
Manager of the Plan's short-term and long-term financial needs so the investment
policy can be coordinated with the Plan's financial requirements.
(a) Matching Contributions: The Primary Employer shall direct the
investment of such Matching Contributions and transfer of assets
resulting from those Contributions.
(b) Elective Deferral Contributions: The Participant shall direct the
investment of Elective Deferral Contributions and transfer of
assets resulting from those Contributions.
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(c) Rollover Contributions: The Participant shall direct the
investment of Rollover Contributions and transfer of assets
resulting from those Contributions.
In the event that the Employer has not received investment direction
from the Participant, the Participant's Account shall be invested in the Money
Market Account until the Participant elects otherwise.
However, the Named Fiduciary may delegate to the Investment Manager
investment discretion for Contributions and Plan assets which are not subject to
Participant direction.
SECTION 4.01A--INVESTMENT IN QUALIFYING EMPLOYER SECURITIES.
The Trustee shall invest all of the Matching Contributions in the
Qualifying Employer Securities Fund as long as the Plan Administrator so
directs.
Participants in the Plan shall be entitled to invest all or any portion
of their Elective Deferral Contributions and Rollover Contributions in the
Qualifying Employer Securities Fund.
Notwithstanding the preceding sentence, no portion of the Participant's
Account resulting from Elective Deferral Contributions shall be invested in the
Qualifying Employer Securities Fund unless in compliance with applicable Federal
and state securities laws (including any necessary filings under such Federal
and state securities laws) and the requirements of the Plan.
Once an investment in the Qualifying Employer Securities Fund is made
available to Eligible Employees, then it shall continue to be available unless
the Plan and Trust is amended to disallow such available investment. In the
absence of such election, such Eligible Employees shall be deemed to have
elected to have their Accounts invested wholly in other investment options of
the Investment Funds. Once an election is made, it shall be considered to
continue until a new election is made.
The Plan Administrator will allocate any cash and/or stock dividends the
Employer pays with respect to amounts held in the Qualifying Employer Securities
Fund to the Account of a Participant according to the shares of Qualifying
Employer Securities held by the Participant, determined on the record date. Any
dividends payable on the Qualifying Employer Securities shall, unless otherwise
directed by the Participant, be reinvested in additional shares of Qualifying
Employer Securities hereunder.
If the securities of the Employer are not publicly traded and if no
market or an extremely thin market exists for the Qualifying Employer
Securities, so that a reasonable valuation may not be obtained from the market
place, then such Qualifying Employer Securities must be valued at least annually
by an independent appraiser who is not associated with the Employer, the Plan
Administrator, the Trustee, or any person related to any fiduciary under the
Plan. The independent appraiser may be associated with a person who is merely a
contract administrator with respect to the Plan, but who exercises no
discretionary authority and is not a Plan fiduciary.
If there is a public market for Qualifying Employer Securities of the
type held by the Plan, then the Plan Administrator may use as the value of the
shares the price at which such shares traded in such market, or an average of
the bid and asked prices for such shares in such market, provided that such
value is representative of the fair market value of such shares in the opinion
of the Plan Administrator. If the Qualifying Employer Securities do not trade on
the annual valuation date or if the market is very thin on such date, then the
Plan Administrator may use the average of trade prices for a period of time
ending on such date, provided that such
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<PAGE> 41
value is representative of the fair market value of such shares in the opinion
of the Plan Administrator. The value of a Participant's Account held in the
Qualifying Employer Securities Fund may be expressed in units.
For purposes of determining the annual valuation of the Plan and for
reporting to Participants and regulatory authorities, the assets of the Plan
shall be valued at least annually on the Valuation Date which corresponds to the
last day of the Plan Year. The fair market value of Qualifying Employer
Securities shall be determined on such a Valuation Date. The average of the bid
and asked prices of Qualifying Employer Securities as of the date of the
transaction shall apply for purposes of valuing distributions and other
transactions of the Plan to the extent such value is representative of the fair
market value of such shares in the opinion of the Plan Administrator.
All purchases of Qualifying Employer Securities shall be made at a
price, or prices, which, in the judgment of the Plan Administrator, do not
exceed the fair market value of such Qualifying Employer Securities.
In the event that the Trustee acquires shares of Qualifying Employer
Securities by purchase from a "disqualified person" as defined in Code Section
4975(e)(2) or from a "party in interest" as defined in ERISA Section 2(14), in
exchange for cash or other assets of the Trust, the terms of such purchase shall
contain the provision that in the event that there is a final determination by
the Internal Revenue Service, the Department of Labor, or court of competent
jurisdiction that a fair market value of such shares of Qualifying Employer
Securities, as of the date of purchase was less than the purchase price paid by
the Trustee, then the seller shall pay or transfer, as the case may be, to the
Trustee, an amount of cash, shares of Qualifying Employer Securities, or any
combination thereof equal in value to the difference between the purchase price
and said fair market value for all such shares. In the event that cash and/or
shares of Qualifying Employer Securities are paid and/or transferred to the
Trustee under this provision, shares of Qualifying Employer Securities shall be
valued at their fair market value as of the date of said purchase, and interest
at a reasonable rate from the date of purchase to the date of payment shall be
paid by the seller on the amount of cash paid.
The Plan Administrator may direct the Trustee to sell, resell or
otherwise dispose of Qualifying Employer Securities to any person, including the
Employer, provided that any such sales to any disqualified person or a party in
interest, including the Employer, will be made at not less than the fair market
value and no commission is charged. Any such sale shall be made in conformance
with Section 408(e) of ERISA.
In the event the Plan Administrator directs the Trustee to dispose of
any Qualifying Employer Securities held as Trust assets under circumstances
which require registration and/or qualification of the securities under
applicable Federal or state securities laws, then the Employer, at its own
expense, will take or cause to be taken any and all such action as may be
necessary or appropriate to effect such registration and/or qualification.
If a Security Exchange Commission (SEC) filing is required, the
Qualifying Employer Securities provisions set forth in this Plan will not be
made available to Participants until the later of the effective date of the Plan
or the date the Plan and any other necessary documentation has been filed for
registration with the SEC by the Employer.
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ARTICLE V
BENEFITS
SECTION 5.01--RETIREMENT BENEFITS.
On a Participant's Retirement Date, his Vested Account shall be
distributed to him according to the distribution of benefits provisions of
Article VI and the provisions of the SMALL AMOUNTS SECTION of Article IX.
SECTION 5.02--DEATH BENEFITS.
If a Participant dies before his Annuity Starting Date, his Vested
Account shall be distributed according to the distribution of benefits
provisions of Article VI and the provisions of the SMALL AMOUNTS SECTION of
Article IX.
SECTION 5.03--VESTED BENEFITS.
A Participant may receive a distribution of his Vested Account at any
time after he ceases to be an Employee, provided he has not again become an
Employee. If such amount is not payable under the provisions of the SMALL
AMOUNTS SECTION of Article IX, it will be distributed only if the Participant so
elects.
If a Participant does not receive an earlier distribution according to
the provisions of this section or the SMALL AMOUNTS SECTION of Article IX, upon
his Retirement Date or death, his Vested Account shall be applied according to
the provisions of the RETIREMENT BENEFITS SECTION or the DEATH BENEFITS SECTION
of Article V.
The Nonvested Account of a Participant who has ceased to be an Employee
shall remain a part of his Account until it becomes a Forfeiture; provided,
however, if the Participant again becomes an Employee so that his Vesting
Percentage can increase, the Nonvested Account may become a part of his Vested
Account.
SECTION 5.04--WHEN BENEFITS START.
Benefits under the Plan begin when a Participant retires, dies or ceases
to be an Employee, whichever applies, as provided in the preceding sections of
this article. Benefits which begin before Normal Retirement Date for a
Participant who became Totally and Permanently Disabled when he was an Employee
shall be deemed to begin because he is Totally and Permanently Disabled. The
start of benefits is subject to the qualified election procedures of Article VI.
Unless otherwise elected, benefits shall begin before the sixtieth day
following the close of the Plan Year in which the latest date below occurs:
(a) The date the Participant attains age 65 (Normal Retirement Age,
if earlier).
(b) The tenth anniversary of the Participant's Entry Date.
(c) The date the Participant ceases to be an Employee.
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<PAGE> 43
Notwithstanding the foregoing, the failure of a Participant and spouse
to consent to a distribution while a benefit is immediately distributable,
within the meaning of the ELECTION PROCEDURES SECTION of Article VI, shall be
deemed to be an election to defer commencement of payment of any benefit
sufficient to satisfy this section.
The Participant may elect to have his benefits begin after the latest
date for beginning benefits described above, subject to the provisions of this
section. The Participant shall make the election in writing and deliver the
signed statement of election to the Plan Administrator before Normal Retirement
Date or the date he ceases to be an Employee, if later. The election must
describe the form of distribution and the date the benefits will begin. The
Participant shall not elect a date for beginning benefits or a form of
distribution that would result in a benefit payable when he dies which would be
more than incidental within the meaning of governmental regulations.
Benefits shall begin by the Participant's required beginning date, as
defined in the FORM OF DISTRIBUTION SECTION of Article VI.
Contributions which are used to compute the Actual Deferral Percentage,
as defined in the EXCESS AMOUNTS SECTION of Article III, may be distributed upon
disposition by the Employer of substantially all of the assets (within the
meaning of Code Section 409(d)(2)) used by the Employer in a trade or business
or disposition by the Employer of the Employer's interest in a subsidiary
(within the meaning of Code Section 409(d)(3)) if the transferee corporation is
not a Controlled Group member, the Employee continues employment with the
transferee corporation and the transferor corporation continues to maintain the
Plan. Such distributions made after March 31, 1988, must be made in a single
sum.
SECTION 5.05--WITHDRAWAL PRIVILEGES.
A Participant may withdraw that part of his Vested Account resulting
from his Rollover Contributions. A Participant may make such a withdrawal at any
time.
A Participant who has attained age 59 1/2 may withdraw all or any
portion of his Vested Account which results from the following Contributions:
Elective Deferral Contributions
Matching Contributions
Rollover Contributions
A Participant may make such a withdrawal at any time.
A Participant may withdraw all or any portion of his Vested Account
which results from the following Contributions
Elective Deferral Contributions
in the event of hardship due to an immediate and heavy financial need.
Withdrawals from the Participant's Account resulting from Elective Deferral
Contributions shall be limited to the amount of the Participant's Elective
Deferral Contributions. Immediate and heavy financial need shall be limited to:
(i) expenses incurred or necessary for medical care, described in Code Section
213(d), of the Participant, the Participant's spouse, or any dependents of the
Participant (as defined in Code Section 152); (ii) purchase (excluding mortgage
payments) of a principal residence for the Participant; (iii) payment of tuition
and related educational fees for
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the next 12 months of post-secondary education for the Participant, his spouse,
children or dependents; (iv) the need to prevent the eviction of the Participant
from his principal residence or foreclosure on the mortgage of the Participant's
principal residence; or (v) any other distribution which is deemed by the
Commissioner of Internal Revenue to be made on account of immediate and heavy
financial need as provided in Treasury regulations. The Participant's request
for a withdrawal shall include his written statement that an immediate and heavy
financial need exists and explain its nature.
No withdrawal shall be allowed which is not necessary to satisfy such
immediate and heavy financial need. Such withdrawal shall be deemed necessary
only if all of the following requirements are met: (i) the distribution is not
in excess of the amount of the immediate and heavy financial need of the
Participant (including amounts necessary to pay any Federal, state or local
income taxes or penalties reasonably anticipated to result from the
distribution); (ii) the Participant has obtained all distributions, other than
hardship distributions, and all nontaxable loans currently available under all
plans maintained by the Employer; (iii) the Plan, and all other plans maintained
by the Employer, provide that the Participant's elective contributions and
employee contributions will be suspended for at least 12 months after receipt of
the hardship distribution; and (iv) the Plan, and all other plans maintained by
the Employer, provide that the Participant may not make elective contributions
for the Participant's taxable year immediately following the taxable year of the
hardship distribution in excess of the applicable limit under Code Section
402(g) for such next taxable year less the amount of such Participant's elective
contributions for the taxable year of the hardship distribution. The Plan will
suspend elective contributions and employee contributions for 12 months and
limit elective deferrals as provided in the preceding sentence. A Participant
shall not cease to be an Eligible Participant, as defined in the EXCESS AMOUNTS
SECTION of Article III, merely because his elective contributions or employee
contributions are suspended.
A request for withdrawal shall be in writing on a form furnished for
that purpose and delivered to the Plan Administrator before the withdrawal is to
occur.
A forfeiture shall not occur solely as a result of a withdrawal.
SECTION 5.06--LOANS TO PARTICIPANTS.
Loans shall be made available to all Participants on a reasonably
equivalent basis. For purposes of this section, Participant means any
Participant or Beneficiary who is a party-in-interest, within the meaning of
Section 3(14) of the Employee Retirement Income Security Act of 1974. Loans
shall not be made to highly compensated employees, as defined in Code Section
414(q), in an amount greater than the amount made available to other
Participants.
No loans will be made to any shareholder-employee or owner-employee. For
purposes of this requirement, a shareholder-employee means an employee or
officer of an electing small business (Subchapter S) corporation who owns (or is
considered as owning within the meaning of Code Section 318(a)(1)), on any day
during the taxable year of such corporation, more than 5% of the outstanding
stock of the corporation.
A loan to a Participant shall be a Participant-directed investment of
his Account. No Account other than the borrowing Participant's Account shall
share in the interest paid on the loan or bear any expense or loss incurred
because of the loan. A loan will not be made if in order to make the loan, the
sale of Qualifying Employer Securities would be required.
The number of outstanding loans shall be limited to two. The minimum
amount of any loan shall be $500.
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Loans must be adequately secured and bear a reasonable rate of interest.
The amount of the loan shall not exceed the maximum amount that may be
treated as a loan under Code Section 72(p) (rather than a distribution) to the
Participant and shall be equal to the lesser of (a) or (b) below:
(a) $50,000 reduced by the highest outstanding loan balance of loans
during the one-year period ending on the day before the new loan
is made.
(b) The greater of (1) or (2), reduced by (3) below:
(1) One-half of the Participant's Vested Account.
(2) $10,000.
(3) Any outstanding loan balance on the date the new loan is
made.
For purposes of this maximum, a Participant's Vested Account does not include
any accumulated deductible employee contributions, as defined in Code Section
72(o)(5)(B), and all qualified employer plans, as defined in Code Section
72(p)(4), of the Employer and any Controlled Group member shall be treated as
one plan.
The foregoing notwithstanding, the amount of such loan shall not exceed
50% of the amount of the Participant's Vested Account reduced by any outstanding
loan balance on the date the new loan is made. For purposes of this maximum, a
Participant's Vested Account does not include any accumulated deductible
employee contributions, as defined in Code Section 72(o)(5)(B). No collateral
other than a portion of the Participant's Vested Account (as limited above)
shall be accepted. The Loan Administrator shall determine if the collateral is
adequate for the amount of the loan requested.
Notwithstanding any other provision of this Plan, the portion of the
Participant's Vested Account used as a security interest held by the Plan by
reason of a loan outstanding to the Participant shall be taken into account for
purposes of determining the amount of the Vested Account payable at the time of
death or distribution, but only if the reduction is used as repayment of the
loan.
Each loan shall bear a reasonable fixed rate of interest to be
determined by the Loan Administrator. In determining the interest rate, the Loan
Administrator shall take into consideration fixed interest rates currently being
charged by commercial lenders for loans of comparable risk on similar terms and
for similar durations, so that the interest will provide for a return
commensurate with rates currently charged by commercial lenders for loans made
under similar circumstances. The Loan Administrator shall not discriminate among
Participants in the matter of interest rates; but loans granted at different
times may bear different interest rates in accordance with the current
appropriate standards.
The loan shall by its terms require that repayment (principal and
interest) be amortized in level payments, not less frequently than quarterly,
over a period not extending beyond five years from the date of the loan. A loan
is not subject to this five-year repayment requirement if it is used to buy any
dwelling unit, which within a reasonable time, is to be used as the principal
residence of the Participant. The "reasonable time" will be determined at the
time the loan is made. The period of repayment for any loan shall be arrived at
by mutual agreement between the Loan Administrator and the Participant.
The Participant shall make a written application for a loan from the
Plan on forms provided by the Loan Administrator. The application must specify
the amount and duration requested. No loan will be approved
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unless the Participant is creditworthy. The Participant must grant authority to
the Loan Administrator to investigate the Participant's creditworthiness so that
the loan application may be properly considered.
Information contained in the application for the loan concerning the
income, liabilities, and assets of the Participant will be evaluated to
determine whether there is a reasonable expectation that the Participant will be
able to satisfy payments on the loan as due. Additionally, the Loan
Administrator will pursue any appropriate further investigations concerning the
creditworthiness and/or credit history of the Participant to determine whether a
loan should be approved.
Each loan shall be fully documented in the form of a promissory note
signed by the Participant for the face amount of the loan, together with
interest determined as specified above.
There will be an assignment of collateral to the Plan executed at the
time the loan is made.
In those cases where repayment through payroll deduction by the Employer
is available, installments are so payable, and a payroll deduction agreement
will be executed by the Participant at the time of making the loan.
Where payroll deduction is not available, payments are to be timely
made.
Any payment that is not by payroll deduction shall be made payable to
the Employer or Trustee, as specified in the promissory note, and delivered to
the Loan Administrator, including prepayments, service fees and penalties, if
any, and other amounts due under the note.
The promissory note may provide for reasonable late payment penalties
and/or service fees. Any penalties or service fees shall be applied to all
Participants in a nondiscriminatory manner. If the promissory note so provides,
such amounts may be assessed and collected from the Account of the Participant
as part of the loan balance.
Each loan may be paid prior to maturity, in part or in full, without
penalty or service fee, except as may be set out in the promissory note.
If any amount remains unpaid for more than 31 days after due, a default
is deemed to occur.
Upon default, the Plan has the right to pursue any remedy available by
law to satisfy the amount due, along with accrued interest, including the right
to enforce its claim against the security pledged and execute upon the
collateral as allowed by law.
If any payment of principal or interest or any other amount due under
the promissory note, or any portion thereof, is not made for a period of 90 days
after due, the entire principal balance whether or not otherwise then due, shall
become immediately due and payable without demand or notice, and subject to
collection or satisfaction by any lawful means, including specifically but not
limited to the right to enforce the claim against the security pledged and to
execute upon the collateral as allowed by law.
In the event of default, foreclosure on the note and attachment of
security or use of amounts pledged to satisfy the amount then due, will not
occur until a distributable event occurs in accordance with the Plan, and will
not occur to an extent greater than the amount then available upon any
distributable event which has occurred under the Plan.
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All reasonable costs and expenses, including but not limited to
attorney's fees, incurred by the Plan in connection with any default or in any
proceeding to enforce any provision of a promissory note or instrument by which
a promissory note for a Participant loan is secured, shall be assessed and
collected from the Account of the Participant as part of the loan balance.
If payroll deduction is being utilized, in the event that a
Participant's available payroll deduction amounts in any given month are
insufficient to satisfy the total amount due, there will be an increase in the
amount taken subsequently, sufficient to make up the amount that is then due. If
the subsequent deduction is also insufficient to satisfy the amount due within
31 days, a default is deemed to occur as above. If any amount remains past due
more than 90 days, the entire principal amount, whether or not otherwise then
due, along with interest then accrued and any other amount then due under the
promissory note, shall become due and payable, as above.
If the Participant ceases to be a party-in-interest (as defined in this
section), the balance of the outstanding loan becomes due and payable, and the
Participant's Vested Account will be used as available for distribution(s) to
pay the outstanding loan. The Participant's Vested Account will not be used to
pay any amount due under the outstanding loan before the date which is 31 days
after the date he ceased to be an Employee, and the Participant may elect to
repay the outstanding loan with interest on the day of repayment. If no
distributable event has occurred under the Plan at the time that the
Participant's Vested Account would otherwise be used under this provision to pay
any amount due under the outstanding loan, this will not occur until the time,
or in excess of the extent to which, a distributable event occurs under the
Plan.
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ARTICLE VI
DISTRIBUTION OF BENEFITS
SECTION 6.01--FORM OF DISTRIBUTION.
The form of benefit payable to or on behalf of a Participant is a single
sum payment. The distribution of benefits to a Participant shall begin by the
April 1 following the later of the calendar year in which the Participant
attains age 70 1/2 or the calendar year in which the Participant terminates
employment with Employer, subject to the following:
(i) If a Participant is a Five-Percent Owner, the distribution shall
begin no later than the April 1 following the calendar year in
which the Participant attains age 70 1/2.
(ii) A Participant who is receiving required minimum distributions
under Section 401(a)(9) of the Code as of January 1, 1997 but who
would not be required to receive such distributions under the
provisions of this subsection shall continue to receive the
required minimum distributions.
SECTION 6.01A--DISTRIBUTIONS IN QUALIFYING EMPLOYER SECURITIES.
In lieu of the cash distributions permitted under Section 6.01 above,
any portion of the Participant's Vested Account held in the Qualifying Employer
Securities Fund may be distributed in kind upon the election of the Participant.
Fractional shares valued as of the most recent Valuation Date shall be paid in
cash. The distribution shall include any dividends (cash or stock) on such whole
shares or any additional shares received as a result of a stock split or any
other adjustment to such whole shares since the Valuation Date preceding the
date of distribution.
Election of such distribution is subject to the qualified election
provisions of Article VI;.
SECTION 6.02--ELECTION PROCEDURES.
The Participant shall make any election under this section in writing.
The Plan Administrator may require such individual to complete and sign any
necessary documents as to the provisions to be made. Any election permitted
under (a) below shall be subject to the qualified election provisions of (b)
below.
(a) Death Benefits. A Participant may elect his Beneficiary.
(b) Qualified Election. The Participant may make an election at any
time during the election period. The Participant revoke the
election made (or make a new election) at any time and any
number of times during the election period. An election is
effective only if it meets the consent requirements below.
A Participant may make an election as to death benefits at any
time before he dies.
If the Participant's Vested Account has at any time exceeded
$5,000, any benefit which is immediately distributable requires
the consent of the Participant. The consent of the Participant
to a benefit which is immediately distributable must not be made
before the date the Participant is provided with the notice of
the ability to defer the distribution. Such consent shall be
made in
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writing. The consent shall not be made more than 90 days before
the Annuity Starting Date. The consent of the Participant shall
not be required to the extent that a distribution is required to
satisfy Code Section 401(a)(9) or Code Section 415. In addition,
upon termination of this Plan if the Plan does not offer an
annuity option (purchased from a commercial provider), the
Participant's Account balance may, without the Participant's
consent, be distributed to the Participant or transferred to
another defined contribution plan (other than an employee stock
ownership plan as defined in Code Section 4975(e)(7)) within the
same Controlled Group. A benefit is immediately distributable if
any part of the benefit could be distributed to the Participant
before the Participant attains the older of Normal Retirement
Age or age 62. Spousal consent is needed to name a Beneficiary
other than the spouse. If the Participant names a Beneficiary
other than his spouse, the spouse has the right to limit consent
only to a specific Beneficiary. The spouse can relinquish such
right. Such consent shall be made in writing. The spouse's
consent shall be witnessed by a plan representative or notary
public. The spouse's consent must acknowledge the effect of the
election, including that the spouse had the right to limit
consent only to a specific Beneficiary and that the
relinquishment of such right was voluntary. Unless the consent
of the spouse expressly permits designations by the Participant
without a requirement of further consent by the spouse, the
spouse's consent must be limited to the Beneficiary, class of
Beneficiaries, or contingent Beneficiary named in the election.
Spousal consent is not required, however, if the Participant
establishes to the satisfaction of the plan representative that
the consent of the spouse cannot be obtained because there is no
spouse or the spouse cannot be located. A spouse's consent under
this paragraph shall not be valid with respect to any other
spouse. A Participant may revoke a prior election without the
consent of the spouse. Any new election will require a new
spousal consent, unless the consent of the spouse expressly
permits such election by the Participant without further consent
by the spouse. A spouse's consent may be revoked at any time
within the Participant's election period.
SECTION 6.03--NOTICE REQUIREMENTS.
The Plan Administrator shall furnish to the Participant a written
explanation of the right of the Participant to defer distribution until the
benefit is no longer immediately distributable. The Plan Administrator shall
furnish the written explanation by a method reasonably calculated to reach the
attention of the Participant no less than 30 days and no more than 90 days
before the Annuity Starting Date.
SECTION 6.04--DISTRIBUTIONS UNDER QUALIFIED DOMESTIC RELATIONS ORDERS.
The Plan specifically permits distributions to an Alternate Payee under
a qualified domestic relations order as defined in Code Section 414(p), at any
time, irrespective of whether the Participant has attained his earliest
retirement age, as defined in Code Section 414(p), under the Plan. A
distribution to an Alternate Payee before the Participant's attainment of
earliest retirement age, as defined in Code Section 414(p), is available only
if:
a) the order specifies distributions at that time or permits an
agreement between the Plan and the Alternate Payee to authorize
an earlier distribution; and
b) if the present value of the Alternate Payee's benefits under the
Plan exceeds $5,000, and the order requires, the Alternate Payee
consents to any distribution occurring before the Participant's
attainment of earliest retirement age as defined in Code Section
414(p).
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Nothing in this section shall permit a Participant a right to receive a
distribution at a time otherwise not permitted under the Plan nor shall it
permit the Alternate Payee to receive a form of payment not permitted under the
Plan.
The Plan Administrator shall establish reasonable procedures to
determine the qualified status of a domestic relations order. Upon receiving a
domestic relations order, the Plan Administrator promptly shall notify the
Participant and an Alternate Payee named in the order, in writing, of the
receipt of the order and the Plan's procedures for determining the qualified
status of the order. Within a reasonable period of time after receiving the
domestic relations order, the Plan Administrator shall determine the qualified
status of the order and shall notify the Participant and each Alternate Payee,
in writing, of its determination. The Plan Administrator shall provide notice
under this paragraph by mailing to the individual's address specified in the
domestic relations order, or in a manner consistent with Department of Labor
regulations. The Plan Administrator may treat as qualified any domestic
relations order entered before January 1, 1985, irrespective of whether it
satisfies all the requirements described in Code Section 414(p).
If any portion of the Participant's Vested Account is payable during the
period the Plan Administrator is making its determination of the qualified
status of the domestic relations order, a separate accounting shall be made of
the amount payable. If the Plan Administrator determines the order is a
qualified domestic relations order within 18 months of the date amounts are
first payable following receipt of the order, the payable amounts shall be
distributed in accordance with the order. If the Plan Administrator does not
make its determination of the qualified status of the order within the 18 month
determination period, the payable amounts shall be distributed in the manner the
Plan would distribute if the order did not exist and the order shall apply
prospectively if the Plan Administrator later determines the order is a
qualified domestic relations order.
The Plan shall make payments or distributions required under this
section by separate benefit checks or other separate distribution to the
Alternate Payee(s).
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ARTICLE VII
TERMINATION OF PLAN
The Employer expects to continue the Plan indefinitely but reserves the
right to terminate the Plan in whole or in part at any time upon giving written
notice to all parties concerned. Complete discontinuance of Contributions under
the Plan constitutes complete termination of Plan.
The Account of each Participant shall be fully (100%) vested and
nonforfeitable as of the effective date of complete termination of the Plan. The
Account of each Participant who is included in the group of Participants deemed
to be affected by the partial termination of the Plan shall be fully (100%)
vested and nonforfeitable as of the effective date of the partial Plan
termination. The Participant's Account shall continue to participate in the
earnings credited, expenses charged and any appreciation or depreciation of the
Investment Fund until the Vested Account is distributed. A distribution under
this article will be a retirement benefit and shall be distributed to the
Participant according to the provisions of Article VI.
A Participant's Account which does not result from Contributions which
are used to compute the Actual Deferral Percentage, as defined in the EXCESS
AMOUNTS SECTION of Article III, may be distributed to the Participant after the
effective date of the complete or partial Plan termination. A Participant's
Account resulting from Contributions which are used to compute such percentage
may be distributed upon termination of the Plan without the establishment or
maintenance of another defined contribution plan, other than an employee stock
ownership plan (as defined in Code Section 4975(e) or Code Section 409) or a
simplified employee pension plan (as defined in Code Section 408(k)). Such a
distribution made after March 31, 1988, must be in a single sum.
Upon complete termination of Plan, no more Employees shall become
Participants and no more Contributions shall be made.
The assets of this Plan shall not be paid to the Employer at any time,
except that, after the satisfaction of all liabilities under the Plan, any
assets remaining may be paid to the Employer. The payment may not be made if it
would contravene any provision of law.
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ARTICLE VIII
ADMINISTRATION OF PLAN
SECTION 8.01--ADMINISTRATION.
Subject to the provisions of this article, the Plan Administrator has
complete control of the administration of the Plan. The Plan Administrator has
all the powers necessary for it to properly carry out its administrative duties.
Not in limitation, but in amplification of the foregoing, the Plan Administrator
has the power to construe the Plan, including ambiguous provisions, and to
determine all questions that may arise under the Plan, including all questions
relating to the eligibility of Employees to participate in the Plan and the
amount of benefit to which any Participant or Beneficiary may become entitled.
The Plan Administrator's decisions upon all matters within the scope of its
authority shall be final.
Unless otherwise set out in the Plan or Group Contract, the Plan
Administrator may delegate recordkeeping and other duties which are necessary
for the administration of the Plan to any person or firm which agrees to accept
such duties. The Plan Administrator shall be entitled to rely upon all tables,
valuations, certificates and reports furnished by the consultant or actuary
appointed by the Plan Administrator and upon all opinions given by any counsel
selected or approved by the Plan Administrator.
The Plan Administrator shall receive all claims for benefits by
Participants, former Participants and Beneficiaries. The Plan Administrator
shall determine all facts necessary to establish the right of any Claimant to
benefits and the amount of those benefits under the provisions of the Plan. The
Plan Administrator may establish rules and procedures to be followed by
Claimants in filing claims for benefits, in furnishing and verifying proofs
necessary to determine age, and in any other matters required to administer the
Plan.
Each Participant with an investment in the Qualifying Employer
Securities Fund, shall be entitled to direct the Trustee as to the exercise of
all voting powers over shares allocated to his Account with respect to
significant corporate matters provided that such Participant had such an
investment in his Account as of the most recent date coincident with or
preceding the applicable record date for which such records are available.
Specifically, each Participant with an investment in the Qualifying Employer
Securities Fund shall have a right to participate in voting with respect to the
approval or disapproval of any corporate merger or consolidation,
recapitalization, reclassification, liquidation, dissolution, sale of
substantially all assets of a trade or business, or such similar transactions as
may be prescribed in the Treasury Regulations. The Trustee shall vote all
Qualifying Employer Securities allocated or unallocated to a Participant's
Qualifying Employer Securities Account which are not voted by the Participant,
because the Participant has not directed (or not timely directed) the Trustee as
to the manner in which such Qualifying Employer Securities are to be voted, in
the same proportion of those shares of Qualifying Employer Securities for which
the Trustee has received proper direction on such matter.
In the event that a tender offer is made for some or all of the shares
of the Employer, each Participant shall have the right to direct whether those
shares allocated to his Account, whether or not vested, shall be tendered. This
right shall be exercised in the manner set forth herein. In the absence of a
written directive from or election by a Participant to the Plan Administrator,
the Plan Administrator shall direct the Trustee not to tender such shares.
Because the choice is to be given to the Participants, the Plan Administrator
and the Trustee shall not have fiduciary responsibility with respect to the
decision to tender or not or whether to tender all of such shares or only a
portion thereof.
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In order to facilitate the decision of Participants whether to tender
their shares in a tender offer (or how many shares to tender), the Plan
Administrator shall provide election forms for the Participants, whereby they
may elect to tender or not and whereby they may elect to tender all or a portion
of such shares. Unless otherwise limited by Federal securities law, such
election may be made or changed any time prior to the date before the expiration
date of the tender offer (with extensions); any election or change in election
must be received by the Plan Administrator, or designated representative of the
Plan Administrator, on or before the day preceding the expiration date of the
tender offer (with extensions, if any). The Plan Administrator may develop
procedures to facilitate Participants' choices, such as the use of facsimile
transmissions for the Employees located in areas physically remote from the Plan
Administrator. The election shall be binding on the Plan Administrator and the
Trustee. The Plan Administrator shall make every effort to distribute the notice
of the tender, election forms and other communications related to the tender
offer to all Participants as soon as practicable following the announcement of
the tender offer, including mailing such notice and form to Participants and
posting such notice in places designed to be reviewed by Participants.
As to shares which are not allocated to the Accounts of any Participant,
all such shares (in the aggregate) shall be tendered or not as the majority of
the shares held by Participants and directed by Participants are tendered or
not. The Plan Administrator shall direct the Trustee to tender all such
unallocated shares or not, in accordance with the elections of the Participants
having an allocation of the majority of the shares under the Plan.
Fractional Shares. After the expiration of the period during which
Participants may direct the Trustee to tender their shares, the Trustee shall
determine the total number of whole shares it was directed to tender, and the
total number of whole shares it was directed not to tender (either expressly or
by a Participant's failure to timely to respond). If the majority of the
allocated and unallocated whole shares of Qualifying Employer Securities were
directed to be tendered, then the Trustee also shall tender, as promptly as
practical, any allocated or unallocated fractional shares that are held in the
Plan. However, if the majority of the allocated or unallocated whole shares of
Qualifying Employer Securities were directed not to be tendered (either
expressly or by a Participant's failure timely to respond), the Trustee shall
not tender such shares.
In voting or tendering shares of Qualifying Employer Securities under
this section, the Trustee is directed and agrees to follow the instructions of
the Participants (or beneficiaries) as named fiduciaries in accordance with
ERISA Section 403(a)(1).
i) Each Participant's (or beneficiary's) voting or tendering
instructions under this section will be completely confidential.
The Trustee or his agent agrees to hold such instructions in
confidence and not to divulge or release such instructions to
any person, including particularly any employer, officer,
employer or director of an employer, or any person directly or
indirectly controlling, controlled by or under common control
with an employer (including any such person who is also a
Trustee); provided, however, that to the extent necessary to the
operation of the plan and the implementation of Participants'
voting or tendering rights, the Trustee may transmit such
instructions to a recordkeeper, auditor, tallier or similar
service provider who is not a person specified in the preceding
clause of this sentence and who agrees not to divulge or release
such instructions to any such person.
ii) Any of the Trustee's duties under this section may be performed
by an agent of the Trustee or by a service provider retained by
the Trustee, the Plan Administrator or the Employer.
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SECTION 8.02--RECORDS.
All acts and determinations of the Plan Administrator shall be duly
recorded. All these records, together with other documents necessary for the
administration of the Plan, shall be preserved in the Plan Administrator's
custody.
Writing (handwriting, typing, printing), photostating, photographing,
microfilming, magnetic impulse, mechanical or electrical recording or other
forms of data compilation shall be acceptable means of keeping records.
SECTION 8.03--INFORMATION AVAILABLE.
Any Participant in the Plan or any Beneficiary may examine copies of the
Plan description, latest annual report, any bargaining agreement, this Plan, the
Group Contract or any other instrument under which the Plan was established or
is operated. The Plan Administrator shall maintain all of the items listed in
this section in its office, or in such other place or places as it may designate
in order to comply with governmental regulations. These items may be examined
during reasonable business hours. Upon the written request of a Participant or
Beneficiary receiving benefits under the Plan, the Plan Administrator will
furnish him with a copy of any of these items. The Plan Administrator may make a
reasonable charge to the requesting person for the copy.
SECTION 8.04--CLAIM AND APPEAL PROCEDURES.
A Claimant must submit any required forms and pertinent information when
making a claim for benefits under the Plan.
If a claim for benefits under the Plan is denied, the Plan Administrator
shall provide adequate written notice to the Claimant whose claim for benefits
under the Plan has been denied. The notice must be furnished within 90 days of
the date that the claim is received by the Plan Administrator. The Claimant
shall be notified in writing within this initial 90-day period if special
circumstances require an extension of time needed to process the claim and the
date by which the Plan Administrator's decision is expected to be rendered. The
written notice shall be furnished no later than 180 days after the date the
claim was received by the Plan Administrator.
The Plan Administrator's notice to the Claimant shall specify the reason
for the denial; specify references to pertinent Plan provisions on which denial
is based; describe any additional material and information needed for the
Claimant to perfect his claim for benefits; explain why the material and
information is needed; inform the Claimant that any appeal he wishes to make
must be in writing to the Plan Administrator within 60 days after receipt of the
Plan Administrator's notice of denial of benefits and that failure to make the
written appeal within such 60-day period shall render the Plan Administrator's
determination of such denial final, binding and conclusive.
If the Claimant appeals to the Plan Administrator, the Claimant, or his
authorized representative, may submit in writing whatever issues and comments
the Claimant, or his representative, feels are pertinent. The Claimant, or his
authorized representative may review pertinent Plan documents. The Plan
Administrator shall reexamine all facts related to the appeal and make a final
determination as to whether the denial of benefits is justified under the
circumstances. The Plan Administrator shall advise the Claimant of its decision
within 60 days of his written request for review, unless special circumstances
(such as a hearing) would make rendering a decision within the 60-day limit
unfeasible. The Claimant must be notified within the 60-day limit if an
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extension is necessary. The Plan Administrator shall render a decision on a
claim for benefits no later than 120 days after the request for review is
received.
SECTION 8.05--UNCLAIMED VESTED ACCOUNT PROCEDURE.
At the time the Participant's Vested Account is distributable to the
Participant, spouse or Beneficiary without his consent according to the
provisions of Article VI or Article IX, the Plan Administrator, by certified or
registered mail addressed to his last known address and in accordance with the
notice requirements of Article VI, will notify him of his entitlement to a
benefit. If the Participant, spouse or Beneficiary fails to claim the Vested
Account or make his whereabouts known in writing within six months from the date
of mailing the notice, the Plan Administrator may treat such unclaimed Vested
Account as a forfeiture and apply it according to the forfeiture provisions of
Article III. If Article III contains no forfeiture provisions, such amount will
be applied to reduce the earliest Employer Contributions due after the
forfeiture arises.
If a Participant's Vested Account is forfeited according to the
provisions of the above paragraph and the Participant, his spouse or his
Beneficiary at any time make a claim for benefits, the forfeited Vested Account
shall be reinstated, unadjusted for any gains or losses occurring after the date
it was forfeited. The reinstated Vested Account shall then be distributed to the
Participant, spouse or Beneficiary according to the preceding provisions of the
Plan.
SECTION 8.06--DELEGATION OF AUTHORITY.
All or any part of the administrative duties and responsibilities under
this article may be delegated by the Plan Administrator to a retirement
committee. The duties and responsibilities of the retirement committee shall be
set out in a separate written agreement.
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ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01--AMENDMENTS.
The Employer may amend this Plan at any time, including any remedial
retroactive changes (within the specified period of time as may be determined by
Internal Revenue Service regulations) to comply with the requirements of any law
or regulation issued by any governmental agency to which the Employer is
subject. An amendment may not diminish or adversely affect any accrued interest
or benefit of Participants or their Beneficiaries or eliminate an optional form
of distribution with respect to benefits attributable to service before the
amendment nor allow reversion or diversion of Plan assets to the Employer at any
time, except as may be necessary to comply with the requirements of any law or
regulation issued by any governmental agency to which the Employer is subject.
No amendment to this Plan shall be effective to the extent that it has the
effect of decreasing a Participant's accrued benefit. However, a Participant's
Account may be reduced to the extent permitted under Code Section 412(c)(8). For
purposes of this paragraph, a Plan amendment which has the effect of decreasing
a Participant's Account or eliminating an optional form of benefit, with respect
to benefits attributable to service before the amendment shall be treated as
reducing an accrued benefit. Furthermore, if the vesting schedule of the Plan is
amended, in the case of an Employee who is a Participant as of the later of the
date such amendment is adopted or the date it becomes effective, the
nonforfeitable percentage (determined as of such date) of such Employee's
employer-derived accrued benefit will not be less than his percentage computed
under the Plan without regard to such amendment.
An amendment shall not decrease a Participant's vested interest in the
Plan. If an amendment to the Plan, or a deemed amendment in the case of a change
in top-heavy status of the Plan as provided in the MODIFICATION OF VESTING
REQUIREMENTS SECTION of Article X, changes the computation of the percentage
used to determine that portion of a Participant's Account attributable to
Employer Contributions which is nonforfeitable (whether directly or indirectly),
each Participant or former Participant
(a) who has completed at least three Years of Service on the date
the election period described below ends (five Years of Service
if the Participant does not have at least one Hour-of-Service in
a Plan Year beginning after December 31, 1988) and
(b) whose nonforfeitable percentage will be determined on any date
after the date of the change
may elect, during the election period, to have the nonforfeitable percentage of
his Account that results from Employer Contributions determined without regard
to the amendment. This election may not be revoked. An election does not need to
be provided for any Participant or former Participant whose nonforfeitable
percentage, determined according to the Plan provisions as changed, cannot at
any time be less than the percentage determined without regard to such change.
The election period shall begin no later than the date the Plan amendment is
adopted, or deemed adopted in the case of a change in the top-heavy status of
the Plan, and end no earlier than the sixtieth day after the latest of the date
the amendment is adopted (deemed adopted) or becomes effective, or the date the
Participant is issued written notice of the amendment (deemed amendment) by the
Employer or the Plan Administrator.
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<PAGE> 57
SECTION 9.02--DIRECT ROLLOVERS.
This section applies to distributions made on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a Distributee's election under this section, a Distributee may elect, at
the time and in the manner prescribed by the Plan Administrator, to have any
portion of an Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan, specified by the Distributee, in a Direct Rollover.
SECTION 9.03--MERGERS AND DIRECT TRANSFERS.
The Plan may not be merged or consolidated with, nor have its assets or
liabilities transferred to, any other retirement plan, unless each Participant
in the plan would (if the plan then terminated) receive a benefit immediately
after the merger, consolidation or transfer which is equal to or greater than
the benefit the Participant would have been entitled to receive immediately
before the merger, consolidation or transfer (if this Plan had then terminated).
The Employer may enter into merger agreements or direct transfer of assets
agreements with the employers under other retirement plans which are qualifiable
under Code Section 401(a), including an elective transfer, and may accept the
direct transfer of plan assets, or may transfer plan assets, as a party to any
such agreement. The Employer shall not consent to, or be a party to a merger,
consolidation or transfer of assets with a defined benefit plan if such action
would result in a defined benefit feature being maintained under this Plan. The
Employer shall not consent to, or be a party to a merger, consolidation or
transfer of assets with a plan which is subject tot he survivor annuity
requirements of Code Section 401(a)(11) if such action would result in a
survivor annuity feature being maintained under the Plan.
The Plan may accept a direct transfer of plan assets on behalf of an
Eligible Employee. If the Eligible Employee is not an Active Participant when
the transfer is made, the Eligible Employee shall be deemed to be an Active
Participant only for the purpose of investment and distribution of the
transferred assets. Employer Contributions shall not be made for or allocated to
the Eligible Employee, until the time he meets all of the requirements to become
an Active Participant.
The Plan shall hold, administer and distribute the transferred assets as
a part of the Plan. The Plan shall maintain a separate account for the benefit
of the Employee on whose behalf the Plan accepted the transfer in order to
reflect the value of the transferred assets. Unless a transfer of assets to the
Plan is an elective transfer, the Plan shall apply the optional forms of benefit
protections described in the AMENDMENTS SECTION of Article IX to all transferred
assets. A transfer is elective if: (1) the transfer is voluntary, under a fully
informed election by the Participant; (2) the Participant has an alternative
that retains his Code Section 411(d)(6) protected benefits (including an option
to leave his benefit in the transferor plan, if that plan is not terminating);
(3) if the transferor plan is subject to Code Sections 401(a)(11) and 417, the
transfer satisfies the applicable spousal consent requirements of the Code; (4)
the notice requirements under Code Section 417, requiring a written explanation
with respect to an election not to receive benefits in the form of a qualified
joint and survivor annuity, are met with respect to the Participant and spousal
transfer election; (5) the Participant has a right to immediate distribution
from the transferor plan under provisions in the plan not inconsistent with Code
Section 401(a); (6) the transferred benefit is equal to the Participant's entire
nonforfeitable accrued benefit under the transferor plan, calculated to be at
least the greater of the single sum distribution provided by the transferor plan
(if any) or the present value of the Participant's accrued benefit under the
transferor plan payable at the plan's normal retirement age and calculated using
an interest rate subject to the restrictions of Code Section 417(e) and subject
to the overall limitations of Code Section 415; (7) the Participant has a 100%
nonforfeitable interest in the transferred benefit; and (8) the transfer
otherwise satisfies applicable Treasury regulations.
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<PAGE> 58
SECTION 9.04--PROVISIONS RELATING TO THE INSURER AND OTHER PARTIES.
The obligations of an Insurer shall be governed solely by the provisions
of the Group Contract. The Insurer shall not be required to perform any act not
provided in or contrary to the provisions of the Group Contract. See the
CONSTRUCTION SECTION of this article.
Any issuer or distributor of investment contracts or securities is
governed solely by the terms of its policies, written investment contract,
prospectuses, security instruments, and any other written agreements entered
into with the Trustee.
Such Insurer, issuer or distributor is not a party to the Plan, nor
bound in any way by the Plan provisions. Such parties shall not be required to
look to the terms of this Plan, nor to determine whether the Employer, the Plan
Administrator, the Trustee, or the Named Fiduciary have the authority to act in
any particular manner or to make any contract or agreement.
Until notice of any amendment or termination of this Plan or a change in
Trustee has been received by the Insurer at its home office or an issuer or
distributor at their principal address, they are and shall be fully protected in
assuming that the Plan has not been amended or terminated and in dealing with
any party acting as Trustee according to the latest information which they have
received at their home office or principal address.
SECTION 9.05--EMPLOYMENT STATUS.
Nothing contained in this Plan gives an Employee the right to be
retained in the Employer's employ or to interfere with the Employer's right to
discharge any Employee.
SECTION 9.06--RIGHTS TO PLAN ASSETS.
No Employee shall have any right to or interest in any assets of the
Plan upon termination of his employment or otherwise except as specifically
provided under this Plan, and then only to the extent of the benefits payable to
such Employee in accordance with Plan provisions.
Any final payment or distribution to a Participant or his legal
representative or to any Beneficiaries, of such Participant under the Plan
provisions shall be in full satisfaction of all claims against the Plan, the
Named Fiduciary, the Plan Administrator, the Trustee, the Insurer, and the
Employer arising under or by virtue of the Plan.
SECTION 9.07--BENEFICIARY.
Each Participant may name a Beneficiary to receive any death benefit
that may arise out of his participation in the Plan. The Participant may change
his Beneficiary from time to time. Unless a qualified election has been made,
for purposes of distributing any death benefits before Retirement Date, the
Beneficiary of a Participant who has a spouse shall be the Participant's spouse.
The Participant's Beneficiary designation and any change of Beneficiary shall be
subject to the provisions of the ELECTION PROCEDURES SECTION of Article VI. It
is the responsibility of the Participant to give written notice to the Insurer
of the name of the Beneficiary on a form furnished for that purpose.
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<PAGE> 59
With the Employer's consent, the Plan Administrator may maintain records
of Beneficiary designations for Participants before their Retirement Dates. In
that event, the written designations made by Participants shall be filed with
the Plan Administrator. If a Participant dies before his Retirement Date, the
Plan Administrator shall certify to the Insurer the Beneficiary designation on
its records for the Participant.
If, at the death of a Participant, there is no Beneficiary named or
surviving, any death benefit under the Group Contract shall be paid under the
applicable provisions of the Group Contract.
SECTION 9.08--NONALIENATION OF BENEFITS.
Benefits payable under the Plan are not subject to the claims of any
creditor of any Participant, Beneficiary, or spouse. A Participant, Beneficiary
or spouse does not have any rights to alienate, anticipate, commute, pledge,
encumber or assign any of such benefits, except in the case of a loan as
provided in the LOANS TO PARTICIPANTS SECTION of Article V. The preceding
sentences shall also apply to the creation, assignment, or recognition of a
right to any benefit payable with respect to a Participant according to a
domestic relations order, unless such order is determined by the Plan
Administrator to be a qualified domestic relations order, as defined in Code
Section 414(p), or any domestic relations order entered before January 1, 1985.
SECTION 9.09--CONSTRUCTION.
The validity of the Plan or any of its provisions is determined under
and construed according to Federal law and, to the extent permissible, according
to the laws of the state in which the Employer has its principal office. In case
any provision of this Plan is held illegal or invalid for any reason, such
determination shall not affect the remaining provisions of this Plan, and the
Plan shall be construed and enforced as if the illegal or invalid provision had
never been included.
In the event of any conflict between the provisions of the Plan and the
terms of any contract or policy issued hereunder, the provisions of the Plan
control the operation and administration of the Plan.
SECTION 9.10--LEGAL ACTIONS.
The Plan, the Plan Administrator, the Trustee and the Named Fiduciary
are the necessary parties to any action or proceeding involving the assets held
with respect to the Plan or administration of the Plan or Trust. No person
employed by the Employer, no Participant, former Participant or their
Beneficiaries or any other person having or claiming to have an interest in the
Plan is entitled to any notice of process. A final judgment entered in any such
action or proceeding shall be binding and conclusive on all persons having or
claiming to have an interest in the Plan.
SECTION 9.11--SMALL AMOUNTS.
If the Vested Account of a Participant has never exceeded $5,000, the
entire Vested Account shall be payable in a single sum as of the earliest of his
Retirement Date, the date he dies, or the date he ceases to be an Employee for
any other reason. This is a small amounts payment. If a small amount is payable
as of the date the Participant dies, the small amounts payment shall be made to
the Participant's Beneficiary. If a small amount is payable while the
Participant is living, the small amounts payment shall be made to the
Participant. The small amounts payment is in full settlement of all benefits
otherwise payable.
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<PAGE> 60
No other small amounts payments shall be made.
SECTION 9.12--WORD USAGE.
The masculine gender, where used in this Plan, shall include the
feminine gender and the singular words as used in this Plan may include the
plural, unless the context indicates otherwise.
SECTION 9.13--TRANSFERS BETWEEN PLANS.
If an Employee previously participated in another plan of the Employer
which credited service under the elapsed time method for any purpose which under
this Plan is determined using the hours method, then the Employee's service
shall be equal to the sum of (a), (b) and (c) below:
(a) The number of whole years of service credited to him under the
other plan as of the date he became an Eligible Employee under
this Plan.
(b) One year or a part of a year of service for the applicable
service period in which he became an Eligible Employee if he is
credited with the required number of Hours-of-Service. If the
Employer does not have sufficient records to determine the
Employee's actual Hours-of-Service in that part of the service
period before the date he became an Eligible Employee, the
Hours-of-Service shall be determined using an equivalency. For
any month in which he would be required to be credited with one
Hour-of-Service, the Employee shall be deemed for purposes of
this section to be credited with 190 Hours-of-Service.
(c) The Employee's service determined under this Plan using the hours
method after the end of the applicable service period in which he
became an Eligible Employee.
If an Employee previously participated in another plan of the Employer
which credited service under the hours method for any purpose which under this
Plan is determined using the elapsed time method, then the Employee's service
shall be equal to the sum of (d), (e) and (f) below:
(d) The number of whole years of service credited to him under the
other plan as of the beginning of the applicable service period
under that plan in which he became an Eligible Employee under
this Plan.
(e) The greater of (1) the service that would be credited to him for
that entire service period using the elapsed time method or (2)
the service credited to him under the other plan as of the date
he became an Eligible Employee under this Plan.
(f) The Employee's service determined under this Plan using the
elapsed time method after the end of the applicable service
period under the other plan in which he became an Eligible
Employee.
Any modification of service contained in this Plan shall be applicable
to the service determined pursuant to this section.
If the Employee previously participated in the plan of a Controlled
Group member which credited service under a different method than is used in
this Plan, for purposes of determining eligibility and vesting the provisions
above shall apply as though the plan of the Controlled Group member were a plan
of the Employer.
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SECTION 9.14--QUALIFICATION OF PLAN.
The Employer intends to apply for an advance determination letter from
the Internal Revenue Service for the initial qualification of the Plan, and the
determination of the exempt status of the Trust.
If this Plan is denied initial qualification, it will terminate. The
Employer shall give written notice to the Trustee and Insurer of the denial in
sufficient time so the assets resulting from Contributions which were
conditioned on initial qualification of the Plan may be returned within one year
after the date of denial, but only if the application for the qualification is
made by the time prescribed by law for filing the Employer's return for the
taxable year in which the Plan is adopted, or such later date as the Secretary
of the Treasury may prescribe. The Employer shall notify the Insurer that the
Group Contract is to be terminated. The Plan assets which result from Employer
Contributions shall be returned to the Employer. The Trustee, the Plan
Administrator and the Named Fiduciary shall then be discharged from all
obligations under the Plan and the Insurer shall be discharged from all
obligations under the Group Contract. A Participant or Beneficiary shall not
have any right or claim to the assets or to any benefit under this Plan before
the Internal Revenue Service determines that the Plan and Trust qualify under
the provisions of Code Section 401(a).
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<PAGE> 62
ARTICLE X
TOP-HEAVY PLAN REQUIREMENTS
SECTION 10.01--APPLICATION.
The provisions of this article shall supersede all other provisions in
the Plan to the contrary.
For the purpose of applying the Top-heavy Plan requirements of this
article, all members of the Controlled Group shall be treated as one Employer.
The term Employer as used in this article shall be deemed to include all members
of the Controlled Group unless the term as used clearly indicates only the
Employer is meant.
The accrued benefit or account of a participant which results from
deductible voluntary contributions shall not be included for any purpose under
this article.
The minimum vesting and contribution provisions of the MODIFICATION OF
VESTING REQUIREMENTS and MODIFICATION OF CONTRIBUTIONS SECTIONS of Article X
shall not apply to any Employee who is included in a group of Employees covered
by a collective bargaining agreement which the Secretary of Labor finds to be a
collective bargaining agreement between employee representatives and one or more
employers, including the Employer, if there is evidence that retirement benefits
were the subject of good faith bargaining between such representatives. For this
purpose, the term "employee representatives" does not include any organization
more than half of whose members are employees who are owners, officers, or
executives.
SECTION 10.02--DEFINITIONS.
The following terms are defined for purposes of this article.
Aggregation Group means
(a) each of the Employer's retirement plans in which a Key Employee
is a participant during the Year containing the Determination
Date or one of the four preceding Years,
(b) each of the Employer's other retirement plans which allows the
plan(s) described in (a) above to meet the nondiscrimination
requirement of Code Section 401(a)(4) or the minimum coverage
requirement of Code Section 410, and
(c) any of the Employer's other retirement plans not included in (a)
or (b) above which the Employer desires to include as part of the
Aggregation Group. Such a retirement plan shall be included only
if the Aggregation Group would continue to satisfy the
requirements of Code Section 401(a)(4) and Code Section 410.
The plans in (a) and (b) above constitute the "required" Aggregation
Group. The plans in (a), (b) and (c) above constitute the "permissive"
Aggregation Group.
Compensation means, as to an Employee for any period, compensation as
defined in the CONTRIBUTION LIMITATION SECTION of Article III. For
purposes of determining who is a Key Employee, Compensation shall
include, in addition to compensation as defined in the CONTRIBUTION
LIMITATION SECTION of
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Article III, elective contributions. Elective contributions are amounts
excludable from the Employee's gross income under Code Sections 125,
402(e)(3), 402(h) or 403(b), and contributed by the Employer, at the
Employee's election, to a Code Section 401(k) arrangement, a simplified
employee pension, cafeteria plan or tax-sheltered annuity.
For purposes of Compensation as defined in this section, Compensation
shall be limited in the same manner and in the same time as the
Compensation defined in the DEFINITION SECTION of Article I.
Determination Date means as to this Plan for any Year, the last day of
the preceding Year. However, if there is no preceding Year, the
Determination Date is the last day of such Year.
Key Employee means any Employee or former Employee (including
Beneficiaries of deceased Employees) who at any time during the
determination period was
(a) one of the Employer's officers (subject to the maximum below)
whose Compensation (as defined in this section) for the Year
exceeds 50 percent of the dollar limitation under Code Section
415(b)(1)(A),
(b) one of the ten Employees who owns (or is considered to own, under
Code Section 318) more than a half percent ownership interest and
one of the largest interests in the Employer during any Year of
the determination period if such person's Compensation (as
defined in this section) for the Year exceeds the dollar
limitation under Code Section 415(c)(1)(A),
(c) a five-percent owner of the Employer, or
(d) a one-percent owner of the Employer whose Compensation (as
defined in this section) for the Year is more than $150,000.
Each member of the Controlled Group shall be treated as a separate
employer for purposes of determining ownership in the Employer.
The determination period is the Year containing the Determination Date
and the four preceding Years. If the Employer has fewer than 30
Employees, no more than three Employees shall be treated as Key
Employees because they are officers. If the Employer has between 30 and
500 Employees, no more than ten percent of the Employer's Employees (if
not an integer, increased to the next integer) shall be treated as Key
Employees because they are officers. In no event will more than 50
Employees be treated as Key Employees because they are officers if the
Employer has 500 or more Employees. The number of Employees for any Plan
Year is the greatest number of Employees during the determination
period. Officers who are employees described in Code Section 414(q)(8)
shall be excluded. If the Employer has more than the maximum number of
officers to be treated as Key Employees, the officers shall be ranked by
amount of annual Compensation (as defined in this section), and those
with the greater amount of annual Compensation during the determination
period shall be treated as Key Employees. To determine the ten Employees
owning the largest interests in the Employer, if more than one Employee
has the same ownership interest, the Employee(s) having the greater
annual Compensation shall be treated as owning the larger interest(s).
The determination of who is a Key Employee shall be made according to
Code Section 416(i)(1) and the regulations thereunder.
Non-key Employee means a person who is a non-key employee within the
meaning of Code Section 416 and regulations thereunder.
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Present Value means the present value of a participant's accrued benefit
under a defined benefit plan as of his normal retirement age (attained
age if later) or, if the plan provides non-proportional subsidies, the
age at which the benefit is most valuable. The accrued benefit of any
Employee (other than a Key Employee) shall be determined under the
method which is used for accrual purposes for all plans of the Employer
or if there is no one method which is used for accrual purposes for all
plans of the Employer, as if such benefit accrued not more rapidly than
the slowest accrual rate permitted under Code Section 411(b)(1)(C). For
purposes of establishing Present Value, any benefit shall be discounted
only for 7.5% interest and mortality according to the 1971 Group Annuity
Table (Male) without the 7% margin but with projection by Scale E from
1971 to the later of (a) 1974, or (b) the year determined by adding the
age to 1920, and wherein for females the male age six years younger is
used. If the Present Value of accrued benefits is determined for a
participant under more than one defined benefit plan included in the
Aggregation Group, all such plans shall use the same actuarial
assumptions to determine the Present Value.
Top-heavy Plan means a plan which is a top-heavy plan for any plan year
beginning after December 31, 1983. This Plan shall be a Top-heavy Plan
if
(a) the Top-heavy Ratio for this Plan alone exceeds 60 percent and
this Plan is not part of any required Aggregation Group or
permissive Aggregation Group.
(b) this Plan is a part of a required Aggregation Group, but not
part of a permissive Aggregation Group, and the Top-heavy Ratio
for the required Aggregation Group exceeds 60 percent.
(c) this Plan is a part of a required Aggregation Group and part of
a permissive Aggregation Group and the Top-heavy Ratio for the
permissive Aggregation Group exceeds 60 percent.
Top-heavy Ratio means the ratio calculated below for this Plan or for
the Aggregation Group.
(a) If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and the
Employer has not maintained any defined benefit plan which
during the five-year period ending on the determination date has
or has had accrued benefits, the Top-heavy Ratio for this Plan
alone or for the required or permissive Aggregation Group as
appropriate is a fraction, the numerator of which is the sum of
the account balances of all Key Employees as of the
determination date and the denominator of which is the sum of
all account balances of all employees as of the determination
date. Both the numerator and denominator of the Top-heavy Ratio
are adjusted for any distribution of an account balance
(including those made from terminated plan(s) of the Employer
which would have been part of the required Aggregation Group had
such plan(s) not been terminated) made in the five-year period
ending on the determination date. Both the numerator and
denominator of the Top-heavy Ratio are increased to reflect any
contribution not actually made as of the Determination Date, but
which is required to be taken into account on that date under
Code Section 416 and the regulations thereunder.
(b) If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and the
Employer maintains or has maintained one or more defined benefit
plans which during the five-year period ending on the
determination date has or has had accrued benefits, the
Top-heavy Ratio for any required or permissive Aggregation Group
as appropriate is a fraction, the numerator of which is the sum
of the account balances under the defined contribution plan(s)
of all Key Employees and the Present Value of accrued benefits
under the defined benefit plan(s) for all Key Employees, and the
denominator of which is the sum of the
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account balances under the defined contribution plan(s) for all
employees and the Present Value of accrued benefits under the
defined benefit plans for all employees. Both the numerator and
denominator of the Top-heavy Ratio are adjusted for any
distribution of an account balance or an accrued benefit
(including those made from terminated plan(s) of the Employer
which would have been part of the required Aggregation Group had
such plan(s) not been terminated) made in the five-year period
ending on the determination date.
(c) For purposes of (a) and (b) above, the value of account balances
and the Present Value of accrued benefits will be determined as
of the most recent valuation date that falls within or ends with
the 12-month period ending on the determination date, except as
provided in Code Section 416 and the regulations thereunder for
the first and second plan years of a defined benefit plan. The
account balances and accrued benefits of an employee who is not
a Key Employee but who was a Key Employee in a prior year will
be disregarded. The calculation of the Top-heavy Ratio and the
extent to which distributions, rollovers and transfers during
the five-year period ending on the determination date are to be
taken into account, shall be determined according to the
provisions of Code Section 416 and regulations thereunder. The
account balances and accrued benefits of an individual who has
performed no service for the Employer during the five-year
period ending on the determination date shall be excluded from
the Top-heavy Ratio until the time the individual again performs
service for the Employer. Deductible employee contributions will
not be taken into account for purposes of computing the
Top-heavy Ratio. When aggregating plans, the value of account
balances and accrued benefits will be calculated with reference
to the determination dates that fall within the same calendar
year.
Account, as used in this definition, means the value of an employee's
account under one of the Employer's retirement plans on the latest
valuation date. In the case of a money purchase plan or target benefit
plan, such value shall be adjusted to include any contributions made for
or by the employee after the valuation date and on or before such
determination date or due to be made as of such determination date but
not yet forwarded to the insurer or trustee. In the case of a profit
sharing plan, such value shall be adjusted to include any contributions
made for or by the employee after the valuation date and on or before
such determination date. During the first Year of any profit sharing
plan such adjustment in value shall include contributions made after
such determination date that are allocated as of a date in such Year.
The nondeductible employee contributions which an employee makes under a
defined benefit plan of the Employer shall be treated as if they were
contributions under a separate defined contribution plan.
Valuation Date means, as to this Plan, the last day of the last calendar
month ending in a Year.
Year means the Plan Year unless another year is specified by the
Employer in a separate written resolution in accordance with regulations
issued by the Secretary of the Treasury or his delegate.
SECTION 10.03--MODIFICATION OF VESTING REQUIREMENTS.
If a Participant's Vesting Percentage determined under Article I is not
at least as great as his Vesting Percentage would be if it were determined under
a schedule permitted in Code Section 416, the following shall apply. During any
Year in which the Plan is a Top-heavy Plan, the Participant's Vesting Percentage
shall be the greater of the Vesting Percentage determined under Article I or the
schedule below.
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<TABLE>
<CAPTION>
VESTING SERVICE NONFORFEITABLE
(whole years) PERCENTAGE
<S> <C>
Less than 2 0
2 20
3 40
4 60
5 80
6 or more 100
</TABLE>
The schedule above shall not apply to Participants who are not credited
with an Hour-of-Service after the Plan first becomes a Top-heavy Plan. The
Vesting Percentage determined above applies to all of the Participant's Account
resulting from Employer Contributions, including Contributions the Employer
makes before the TEFRA Compliance Date or when the Plan is not a Top-heavy Plan.
If, in a later Year, this Plan is not a Top-heavy Plan, a Participant's
Vesting Percentage shall be determined under Article I. A Participant's Vesting
Percentage determined under either Article I or the schedule above shall never
be reduced and the election procedures of the AMENDMENTS SECTION of Article IX
shall apply when changing to or from the schedule as though the automatic change
were the result of an amendment.
The part of the Participant's Vested Account resulting from the minimum
contributions required pursuant to the MODIFICATION OF CONTRIBUTIONS SECTION of
Article X shall not be forfeited because of a period of reemployment after
benefit payments have begun.
SECTION 10.04--MODIFICATION OF CONTRIBUTIONS.
During any Year in which this Plan is a Top-heavy Plan, the Employer
shall make a minimum contribution or allocation on the last day of the Year for
each person who is a Non-key Employee on that day and who either was or could
have been an Active Participant during the Year. A Non-key Employee is not
required to have a minimum number of hours-of-service or minimum amount of
Compensation, or to have had any Elective Deferral Contributions made for him in
order to be entitled to this minimum. The minimum contribution or allocation for
such person shall be equal to the lesser of (a) or (b) below:
(a) Three percent of such person's Compensation (as defined in this
article).
(b) The "highest percentage" of Compensation (as defined in this
article) for such Year at which the Employer's contributions are
made for or allocated to any Key Employee. The highest
percentage shall be determined by dividing the Employer
Contributions made for or allocated to each Key Employee during
such Year by the amount of his Compensation (as defined in this
article), which is not more than the maximum set out above, and
selecting the greatest quotient (expressed as a percentage). To
determine the highest percentage, all of the Employer's defined
contribution plans within the Aggregation Group shall be treated
as one plan. The provisions of this paragraph shall not apply if
this Plan and a defined benefit plan of the Employer are
required to be included in the Aggregation Group and this Plan
enables the defined benefit plan to meet the requirements of
Code Section 401(a)(4) or Code Section 410.
If the Employer's contributions and allocations otherwise required under
the defined contribution plan(s) are at least equal to the minimum above, no
additional contribution or reallocation shall be required. If the
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Employer's contributions and allocations are less than the minimum above and
Employer Contributions under this Plan are allocated to Participants, any
Employer Contributions (other than those which are allocated on the basis of the
amount made for such person) shall be reallocated to provide the minimum. The
remaining Contributions shall be allocated as provided in the preceding articles
of this Plan taking into account any amount which was reallocated to provide the
minimum. If the Employer's total contributions and allocations are less than the
minimum above after any reallocation provided above, the Employer shall
contribute the difference for the Year.
The minimum contribution or allocation applies to all of the Employer's
defined contribution plans in the aggregate which are Top-heavy Plans. If an
additional contribution or allocation is required to meet the minimum above, it
shall be provided in this Plan.
A minimum allocation under a profit sharing plan shall be made without
regard to whether or not the Employer has profits.
If a person who is otherwise entitled to a minimum contribution or
allocation above is also covered under a defined benefit plan of the Employer's
which is a Top-heavy Plan during that same Year, the minimum benefits for him
shall not be duplicated. The defined benefit plan shall provide an annual
benefit for him on, or adjusted to, a straight life basis of the lesser of (c)
two percent of his average pay multiplied by his years of service or (d) twenty
percent of his average pay. Average pay and years of service shall have the
meaning set forth in such defined benefit plan for this purpose.
For purposes of this section, any employer contribution made according
to a salary reduction or similar arrangement shall not apply before the first
Yearly Date in 1985. On and after the first Yearly Date in 1989, any such
employer contributions and employer contributions which are matching
contributions, as defined in Code Section 401(m), shall not apply in determining
if the minimum contribution requirement has been met, but shall apply in
determining the minimum contribution required. Forfeitures credited to a
Participant's Account are treated as employer contributions.
The requirements of this section shall be met without regard to
contributions under Chapter 2 of the Code (relating to tax on self-employment),
Chapter 21 of the Code (relating to Federal Insurance Contributions Act), Title
II of the Social Security Act or any other Federal or state law.
SECTION 10.05--MODIFICATION OF CONTRIBUTION LIMITATION.
If the provisions of subsection (e) of the CONTRIBUTION LIMITATION
SECTION of Article III are applicable for any Limitation Year during which this
Plan is a Top-heavy Plan, the benefit limitations shall be modified. The
definitions of Defined Benefit Plan Fraction and Defined Contribution Plan
Fraction in the CONTRIBUTION LIMITATION SECTION of Article III shall be modified
by substituting "1.0" in lieu of "1.25." The optional denominator for
determining the Defined Contribution Plan Fraction shall be modified by
substituting "$41,500" in lieu of "$51,875." In addition, an adjustment shall be
made to the numerator of the Defined Contribution Plan Fraction. The adjustment
is a reduction of that numerator similar to the modification of the Defined
Contribution Plan Fraction described in the CONTRIBUTION LIMITATION SECTION of
Article III, and shall be made with respect to the last Plan Year beginning
before January 1, 1984.
The modifications in the paragraph above shall not apply with respect to
a Participant so long as employer contributions, forfeitures or nondeductible
employee contributions are not credited to his account under this or any of the
Employer's other defined contribution plans and benefits do not accrue for such
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Participant under the Employer's defined benefit plan(s), until the sum of his
Defined Contribution and Defined Benefit Plan Fractions is less than 1.0.
[Signature pages not included in this Exhibit 4]
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EXHIBIT 5
B A S S, B E R R Y & S I M S P L C
A PROFESSIONAL LIMITED LIABILITY COMPANY
ATTORNEYS AT LAW
2700 FIRST AMERICAN CENTER 1700 RIVERVIEW TOWER
NASHVILLE, TENNESSEE 37238-2700 POST OFFICE BOX 1509
TELEPHONE (615) 742-6200 KNOXVILLE, TENNESSEE 37901-1509
TELECOPIER (615) 742-6293 TELEPHONE (423) 521-6200
TELECOPIER (423) 521-6234
March 30, 1999
Coventry Health Care, Inc.
6705 Rockledge Drive, Suite 100
Bethesda, Maryland 20817
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as your counsel in the preparation of a registration
statement on Form S-8 (the "Registration Statement") relating to the Coventry
Health Care, Inc. Retirement Savings Plan (the "Plan"), filed by you with the
Securities and Exchange Commission covering 500,000 shares of the Company's
common stock, par value $0.01 per share (the "Shares"), issuable pursuant to the
Plan. In so acting, we have examined and relied upon such records, documents and
other instruments as in our judgment are necessary or appropriate in order to
express the opinion hereinafter set forth and have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us as originals
and the conformity to the original documents of all documents submitted to us as
certified or photostatic copies.
Based upon the foregoing, we are of the opinion that the Shares, when
issued pursuant to and in accordance with the Plan, will be duly and validly
issued, fully paid and nonassessable.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Bass, Berry & Sims PLC
<PAGE> 1
Exhibit 23.1
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form S-8 registration statement of our reports dated February
16, 1999, included in Coventry Health Care, Inc.'s Form 10-K for the year ended
December 31, 1998, and to all references to our Firm included in this
registration statement.
/s/ Arthur Andersen LLP
Baltimore, Maryland
April 2, 1999
