Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AMERICAN WATER WORKS COMPANY, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 51-0063696
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
1025 Laurel Oak Road
Voorhees, New Jersey 08043
(Address of Principal Executive Offices)
SAVINGS PLAN FOR EMPLOYEES OF AMERICAN WATER WORKS
COMPANY, INC. AND ITS DESIGNATED SUBSIDIARIES
(Full Title of the Plan)
W. Timothy Pohl, Esquire, General Counsel and Secretary
American Water Works Company, Inc.
1025 Laurel Oak Road
Voorhees, New Jersey 08043
(Name and Address of Agent For Service)
(609) 346-8200
(Telephone Number, Including Area Code, of Agent For Service)
Copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attention: George W. Patrick, Esq.
(215) 994-2631
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------
Proposed Proposed
Title Of Maximum Maximum
Securities Amount Offering Aggregate Amount Of
To Be To Be Price Per Offering Registration
Registered Registered Share(2) Price(2) Fee
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par
value $1.25 per share 900,000 shares $29.22 $26,298,000 $7,757.91
Interests in the Plan(1) ---- ---- ---- ----
- ------------------------------------------------------------------------------------
</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) Estimated solely for purposes of determining the registration fee in
accordance with Rule 457(h) under the Securities Act of 1933 on the
basis of $29.22 per share, the average of the high and low prices
of the Company's Common Stock as reported on the New York Stock
Exchange on May 7, 1998.
EXHIBIT INDEX IS ON PAGE II-7
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<PAGE>
PART I
INFORMATION REQUIRED IN SECTION 10(a) PROSPECTUS
Item 1. Plan Information.
Information required by Part I to be contained in the Section 10(a)
prospectus is omitted from this Registration Statement in accordance with
the Introductory Note to Part I of Form S-8.
Item 2. Registrant Information and Employee Plan Annual Information.
Information required by Part I to be contained in the Section 10(a)
prospectus is omitted from this Registration Statement in accordance with
the Introductory Note to Part I of Form S-8.
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<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents filed or to be filed by the American Water
Works Company, Inc. ("the Company") with the Securities and Exchange
Commission (the "Commission") are incorporated by reference in this
Registration Statement as of their respective dates:
1. Annual Report on Form 10-K filed with the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), for the Company's fiscal year ended December 31,
1997.
2. Annual Report of the plan on Form 11-K filed with the
Commission pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), for the Plan's fiscal year ended
December 31, 1996.
3. The description of Common Stock of the Registrant
contained in the Registrant's Registration Statement No. 333-02279
on Form S-3.
All documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the
filing with the Commission of a post-effective amendment to this
Registration Statement that indicates that all securities offered have been
sold or effects the deregistration of the balance of such securities then
II-1
<PAGE>
remaining unsold shall be deemed to be incorporated herein by reference and
to be part hereof from the date of filing of such documents.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
As authorized by Section 145 of the Delaware General Corporation
Law, Section 8 of Article II of the Company's By-laws provides that the
Company shall indemnify any person who is a party to any suit or
proceeding, whether civil, criminal or administrative, because such person
is or was a director, officer or employee of the Company or is or was
serving at the request of the Company as a director, officer or employee of
another corporation or enterprise, including an employee benefit plan,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in
connection with such suit or proceeding to the extent that such person is
not otherwise indemnified and such indemnification is not prohibited by
applicable law; and the Board of Directors of the Company may, and on
request of any such person is required to, determine in each case whether
or not the standards in any applicable statute have been met, or such
determination may be made by independent legal counsel if the Board so
directs or if the Board is not empowered by statute to make such
determination.
Item 7. Exemption From Registration Claimed.
Not applicable.
Item 8. Exhibits.
See the Exhibit Index on page II-7.
II-2
<PAGE>
Item 9. Undertakings.
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 of 1933, as amended (the "Securities Act");
(ii) to reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the
most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in this Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) promulgated under the
Securities Act if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in this Registration Statement;
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
provided, however, that paragraphs (i) and (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 Company pursuant
to Section 13 or 15(d) of the Exchange Act that are incorporated by
reference in this 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.
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<PAGE>
(4) that, for purposes of determining any liability under the
Securities Act, each filing of the Company's annual report pursuant to
Section 13(a) or 15(d) of the Exchange Act that is incorporated by
reference in this 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.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Company, the Company has been advised that in the opinion of
the 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 Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of an action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Company
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act,
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 Voorhees, State of New Jersey, on
this 7th day of May, 1998.
AMERICAN WATER WORKS COMPANY, INC.
By: J. James Barr
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints W. Timothy Pohl as his true and lawful attorney-in-fact and agent
with full power of substitution and resubstitution for him in any and all
capacities to sign any and all amendments (including pre- or post-effective
amendments) to this Registration Statement on Form S-8 and to file the
same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, hereby ratifying and confirming all that such
attorney-in-fact, or his substitute, may do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
J. James Barr President, Chief Executive Officer, May 7, 1998
Chief Financial Officer and Director
Robert D. Sievers Comptroller May 7, 1998
(Chief Accounting Officer)
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Signature Title Date
--------- ----- ----
Marilyn Ware Lewis Chairman of the Board May 7, 1998
William O. Albertini Director May 7, 1998
William R. Cobb Director May 7, 1998
Henry G. Hager Director May 7, 1998
Anthony P. Terracciano Director May 7, 1998
Nancy W. Wainwright Director May 7, 1998
Paul W. Ware Director May 7, 1998
Ross A. Webber Director May 7, 1998
Horace Wilkins, Jr. Director May 7, 1998
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EXHIBIT INDEX
Exhibit Numbers are in accordance with
the Exhibit Table in Item 601 of Registration S-K
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Exhibit No. Document
- ----------- --------
2 Plan of Acquisition, Reorganization, Arrangement,
Liquidation, or Succession
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Savings Plan for Employees of American Water Works Company,
Inc. and Its Designated Subsidiaries
5 Opinion Re Legality
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Opinion of Dechert Price & Rhoads
23 Consents
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(a) Consent of Independent Accountants
(b) Consent of Dechert Price & Rhoads (contained in opinion
filed as Exhibit 5 to this Registration Statement)
24 Power of Attorney
-----------------
See pages II-5 and II-6 of this Registration Statement.
II-7
EXHIBIT 2
SAVINGS PLAN FOR EMPLOYEES OF
AMERICAN WATER WORKS COMPANY, INC.
AND ITS DESIGNATED SUBSIDIARIES
(AS AMENDED AND RESTATED MAY 7, 1998)
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INDEX
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Page No.
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Article I - Definitions........................................ 1
1.7 Safe Harbor
Article II - Eligibility to Participate......................... 11
Article III - Contributions...................................... 12
3.10(b) Safe Harbor
3.6 - 3.16 IRS Required
Article IV - Investment of Contributions........................ 24
Article V - Vesting............................................ 26
Article VI - Withdrawals Prior to Termination of
Employment......................................... 28
6.2 - 6.5 IRS Required
Article VII - Loans.............................................. 30
7.2 Safe Harbor
Article VIII - Distributions Upon Retirement or
Total Disability................................... 33
IRS Required
Article IX - Death Benefits..................................... 37
IRS Required
Article X - Severance From Service............................. 39
IRS Required
Article XI - Administration..................................... 40
Article XII - Rights of Participants............................. 41
IRS Required
Article XIII - Termination of the Plan............................ 42
IRS Required
Article XIV - Amendment.......................................... 43
IRS Required
Article XV - Revocability....................................... 44
IRS Required
Article XVI - Top-Heavy Provisions............................... 45
IRS Required
Article XVII - Distributions Upon Disposition of
Employer Assets or Subsidiaries.................... 49
IRS Required
Article XVIII - Miscellaneous Provisions........................... 50
IRS Required
<PAGE>
ARTICLE I
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DEFINITIONS
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When used in this Plan, the following terms shall have the meanings set
forth below unless a different meaning is plainly required by the context:
Section 1.1 "Actual Contribution Percentage" (ACP) means the ratio,
calculated separately for each eligible Employee, of the amount of Employee
Contributions and Matching Contributions made with respect to each such
Employee for the Plan Year to the Employee's Compensation for the portion
of the Plan Year during which the Employee was eligible to participate in
the Plan. Such Actual Contribution Percentage shall be calculated to the
nearest one-hundredth of one percent. For this purpose, Matching
Contributions which are forfeited because they relate to an Excess
Deferral, Excess Section 401(k) Contribution, or Excess Aggregate
Contribution shall not be taken into account. Furthermore, for purposes of
calculating the Actual Contribution Percentage for a Highly Compensated
Employee who is subject to the family aggregation rules of Internal Revenue
Code Section 414(q)(6) because that employee is either a 5% owner or one of
the ten most Highly Compensated Employees, the combined Actual Contribution
Percentage for the family group (treated as one Highly Compensated
Employee) must be determined by combining the Employee and Matching
contributions, and compensation of all eligible family members. Such
aggregation shall be done in accordance with Internal Revenue Service
Regulation 1.401(m)-1(f)(1)(ii)(C). The Employee and Matching
Contributions and compensation of eligible family members with respect to
such Highly Compensated Employee shall, therefore, be disregarded for
purposes of determining the Actual Contribution Percentage for the group of
Highly Compensated Employees and Non-Highly Compensated Employees. For
purposes of the foregoing, family members include an Employee's spouse, a
lineal ascendant or descendant, or a spouse of a lineal ascendant or
descendant.
The Actual Contribution Percentage for the Highly Compensated Employee and
Non-Highly Compensated Employee groups shall be calculated separately. The
ACP (calculated to the nearest one-hundredth of one percent) for each group
of eligible Employees shall be determined by averaging the individually
determined Actual Contribution Percentages for all Employees in such group.
If for any Plan Year, Employee and Matching Contributions are not made on
behalf of an eligible employee, the Actual Contribution Percentage for such
employee shall be zero for any such Plan Year.
If an Employee eligible to participate in the Plan is a member of the
Highly Compensated Group and is eligible to participate in more than one
plan (as described in Internal Revenue Code Section 401(a)) of the Employer
under which Employee Contributions and Matching Contributions are made on
behalf of the Employee, all such plans shall be treated as one plan for the
purpose of determining the Actual Contribution Percentage with respect to
such Employee.
However, plans that are not permitted to be aggregated under Internal
Revenue Service Regulation 1.401(m)-1(b)(3)(ii) are not aggregated for this
purpose. For purposes of this paragraph, if the plans have different plan
years, the
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plans are treated as a single plan with respect to the plan years ending
with or within the same calendar year.
At the discretion of the Employer and subject to Internal Revenue Service
Regulation 1.401(m)-1(b)(5), all or part of the Basic 401(k) Contributions
made with respect to an eligible Employee under Sections 3.2 and 3.3 for a
Plan Year may be treated as Matching Contributions and included in the
determination of the Employee's Actual Contribution Percentage.
Anything in the Plan to the contrary notwithstanding, to the extent that
such Basic 401(k) Contributions have been utilized in the determination of
an eligible Employee's Actual Deferral Percentage for a Plan Year, they
shall not be taken into account in determining such Employee's Actual
Contribution Percentage for a Plan Year. For purposes of this paragraph,
Basic 401(k) Contributions made under Sections 3.2 may only be used
provided one of the rules in subparagraphs (a) or (b) of Section 3.8 is
satisfied both with and without the exclusion of such contributions.
In addition, at the discretion of the Employer, Qualified Matching
Contributions (QMAC) made pursuant to Section 3.6 or 3.9(b) and/or
Qualified Non-Elective Contributions (QNEC) made pursuant to Section 3.9(c)
may be used to satisfy the Actual Contribution Percentage Test. Qualified
Matching Contributions, however, must be included in the Actual
Contribution Percentage test to the extent not used in the Actual Deferral
Percentage.
Section 1.2 "Actual Deferral Percentage" (ADP) means the ratio, calculated
separately for each eligible Employee, of the amount of Basic 401(k)
Contributions made with respect to each such Employee for the Plan Year to
the Employee's Compensation for the portion of the Plan Year during which
the employee was eligible to participate in the Plan. Such Actual Deferral
Percentage shall be calculated to the nearest one-hundredth of one percent.
Furthermore, for purposes of calculating the Actual Deferral Percentage for
a Highly Compensated employee who is subject to the family aggregation
rules of Internal Revenue Code Section 414(q)(6) because that employee is
either a 5% owner or one of the ten most Highly Compensated Employees, the
combined Actual Deferral Percentage for the family group (treated as one
highly compensated employee) must be determined by combining the Basic
401(k) contributions, and compensation of all eligible family members.
Such aggregation shall be done in accordance with Internal Revenue Service
Regulation 1.401(k)-1(g)(1)(ii)(C). The Basic 401(k) Contributions and
Compensation of all eligible family members with respect to such Highly
Compensated Employee shall, therefore, be disregarded for purposes of
determining the Actual Deferral Percentage for the group of Highly
Compensated Employees and Non-Highly Compensated Employees. For purposes
of the foregoing, family members include an Employee's spouse, a lineal
ascendant or descendant, or a spouse of a lineal ascendant or descendant.
The Actual Deferral Percentage (ADP) for the Highly Compensated and Non-
Highly Compensated Groups shall be calculated separately. The ADP
(calculated to the nearest one-hundredth of one percent) for each group of
eligible Employees shall be determined by averaging the individual Actual
Deferral Percentages for all Employees in such group.
If for any Plan Year, Basic 401(k) contributions are not made on behalf of
an eligible Employee, the Actual Deferral Percentage for such Employee
shall be zero for any such Plan Year.
2
<PAGE>
If an Employee eligible to participate in the Plan is a member of the
Highly Compensated Group and is eligible to participate in more than one
plan (described in Internal Revenue Code Section 401(k)) of the Employer
under which Section 401(k) Contributions are made on behalf of the
Employee, all such plans shall be treated as one plan for the purpose of
determining the Actual Deferral Percentage with respect to such Employee.
However, plans that are not permitted to be aggregated under Internal
Revenue Service Regulation 1.401(k)-1(b)(3)(ii)(B) are not aggregated for
this purpose. For purposes of this paragraph, if the plans have different
plan years, the plans are treated as a single plan with respect to the plan
years ending with or within the same calendar year.
At the discretion of the Employer and subject to Internal Revenue Service
Regulation 1.401(k)-1(b)(5), all or part of the Basic 401(k) Contributions
made with respect to an eligible Employee under Sections 3.6, 3.9(b) or (c)
maintained in the Employer 401(k) Contributions Account (QMAC/QNEC) for a
Plan Year may be included in the determination of the Employee's Actual
Deferral Percentage.
Anything in this Plan to the contrary notwithstanding, to the extent that
such Basic 401(k) Contributions have been utilized in the determination of
an eligible Employee's Actual Contribution Percentage for a Plan Year, they
shall not be taken into account in determining such Employee's Actual
Deferral Percentage for a Plan Year. Moreover, to the extent that such
Employer 401(k) Contributions are forfeited because the contributions to
which they relate are excess Elective Deferrals, excess Basic 401(k)
Contributions, or excess Aggregate Contributions, they shall not be taken
into account for purposes of this Section.
Section 1.3 "Annuity Starting Date" means the first day of the month
following the date the Insurer receives from the Plan Administrator such
written notice of a distribution as shall be required by the Insurer or, if
later, the first day of the month specified by the Participant or
Beneficiary for the commencement of benefit payments in accordance with
Article VIII and Article XI hereof. In the case of an Annuity Starting
Date that occurs on or after the Participant's Normal Retirement Age, such
date shall apply to any additional benefit accruals after the Annuity
Starting Date. In the case of an Annuity Starting Date that occurs prior
to the Participant's Normal Retirement Age, such date shall not apply to
any additional benefit accruals after the Annuity Starting Date.
Section 1.4 "Basic 401(k) Contributions Account" means the portion of a
Participant's interest in this Plan which is attributable to those
contributions made in accordance with Article III, Section 3.2, if
applicable, and earnings thereon. Such contributions shall be deemed to be
made in accordance with Section 401(k) of the Internal Revenue Code and
shall be deemed to result from a salary reduction agreement between the
Participant and the Employer under which the Participant has elected to
reduce his Compensation or to forego an increase in his Compensation by an
amount equal to the contribution being made to the Plan. Under no
circumstances, however, shall such salary reduction agreement be adopted
retroactively.
Section 1.5 "Beneficiary" means any individual, trust or other recipient
named by a Participant to receive benefits payable hereunder upon the
Participant's death, or the spouse, children or estate of the Participant,
all as provided in Article IX.
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Section 1.6 "Break In Service" means each 12 month period included in a
Period of Severance during which an Employee fails to perform one Hour of
Service. An individual who is absent from work for maternity or paternity
reasons shall not incur a Break In Service for the 12 consecutive month
period beginning on the first anniversary of the first day of such absence.
For purposes of this section, an absence from work for maternity or
paternity reasons means an absence (1) by reason of the pregnancy of the
individual, (2) by reason of a birth of a child of the individual, (3) by
reason of the placement of a child with the individual in connection with
the adoption of such child by such individual, or (4) for purposes of
caring for such child for a period beginning immediately following such
birth or placement.
Section 1.7 "Code" means the Internal Revenue Code of 1986, as amended.
Section 1.8 "Compensation" generally means the salary or wages, tips and
other compensation reportable to the Internal Revenue Service for Federal
Income Tax purposes. Compensation, therefore, means:
(a) Compensation within the meaning of Internal Revenue Code Section
3401(a), and all other payments of remuneration actually paid for a
Plan Year to an Employee by the Employer (in the course of the
Employer's trade or business) for which the Employer is required to
furnish an Employee a written statement under Internal Revenue Code
Sections 6041(d), 6051(a)(3) and 6052. Compensation shall be
determined without regard to any rules under Internal Revenue Code
Section 3401(a) that limit the remuneration included in salary or
wages based on the nature or location of the employment or the
services performed (such as the exception for agricultural labor in
Internal Revenue Code Section 3401(a)(2)); plus the following types of
elective contributions and deferred compensation under (b) and (c)
below:
(b) Any elective contributions made by the Employer on behalf of the
Employee that are excludible from the Employee's gross income under
Internal Revenue Code Sections 125, 402(e)(3), 402(h), and 403(b);
and
(c) Any deferred compensation under an eligible deferred compensation
plan within the meaning of Internal Revenue Code Section 457, and
any employee contributions described in Internal Revenue Code
Section 414(h)(2) that are picked up by the Employer and treated as
Employer Contributions.
The annual Compensation taken into account for determining all benefits
provided with respect to any Employee under this Plan for any Plan Year
beginning after December 31, 1988 shall not exceed $200,000. This
limitation shall be adjusted annually in the same manner as permitted under
Section 415(d) of the Internal Revenue Code except that the dollar increase
in effect on the first day of any calendar year is effective for Plan Years
beginning in such calendar year. The annual Compensation taken into
account for determining all benefits provided with respect to any Employee
under this Plan for any Plan Year beginning after December 31, 1993 shall
not exceed $150,000 (as adjusted under Section 401(a)(17) of the Code). If
the period for determining Compensation used in calculating an Employee's
allocations or benefits under the Plan is a short Plan Year (i.e. less than
twelve calendar months), the annual Compensation limit shall be an amount
equal to the otherwise applicable annual Compensation limit multiplied by
the ratio
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<PAGE>
obtained by dividing the number of full months in the short Plan Year by
twelve.
In determining the Compensation of a Participant, the rules of Internal
Revenue 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 $200,000 limitation 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 Section prior to the
application of the limitation.
Section 1.8A "Contribution Compensation" means Base Compensation, defined
as Compensation, but excluding all overtime, shift differential, bonuses,
commissions, employer contributions to this or any other employee benefit
plans and other forms of special compensation or expense allowances.
Contribution Compensation shall include amounts that would be paid to an
Employee during the Plan Year but for the Employee's election under this
Plan or a cafeteria plan described in Section 125 of the Code.
Section 1.9 "Computation Period" means a 12 consecutive month period
commencing on the Employee's Employment Commencement Date and each
anniversary thereof or, if applicable in accordance with Article II,
Section 2.2, the date the Employee first performs an Hour of Service
subsequent to the date he incurs a Break In Service and each anniversary
thereof.
Section 1.10 "Covered Employment Classification" means the class or
classes of Employees eligible to participate in this Plan. The Covered
Employment Classification shall include and shall be limited to all
Employees, with the exception of temporary and summer co-op program
employees, on the active employment rolls of the Employer on or after the
Effective Date.
Section 1.11 "Early Retirement Age" means the first day of the calendar
month coinciding with or immediately following the date a Participant
reaches age 55, provided that the sum of his age and Years of Service is at
least 70.
Section 1.12 "Effective Date" means August 1, 1993.
Section 1.13 "Elective Deferrals" means any Employer Contributions made at
the election of a Participant, in lieu of cash compensation, and shall
include contributions made pursuant to a salary reduction agreement or
other deferral mechanism. For any taxable year, a Participant's Elective
Deferrals are the sum of all Employer Contributions made on behalf of a
Participant, pursuant to a deferral election, to such Participant's Basic
Participant 401(k) Contributions Account, and under any other qualified
cash or deferred arrangement as described in Section 401(k) of the Internal
Revenue Code (IRC), any simplified employee pension cash or deferred
arrangement as described in IRC Section 402(h)(1)(B), and any plan as
described under IRC Section 501(c)(18). Elective Deferrals shall also
include Employer Contributions made on behalf of a Participant to an
annuity contract under IRC Section 403(b) under a salary reduction
agreement. Elective Deferrals shall not include any deferrals properly
distributed as excess Annual Additions.
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Section 1.14 "Employee" means any person on the active employment rolls of
the Employer on or after the Effective Date of this Plan and shall include
leased employees within the meaning of Section 414(n)(2) of the Internal
Revenue Code. Contributions or benefits provided to a leased employee by
the leasing organization which are attributable to services performed for
the Employer shall be treated as provided by the Employer. Notwithstanding
the foregoing, if such leased employees do not constitute more than twenty
percent of the Employer's non-highly compensated work force within the
meaning of Section 414(n)(5)(C)-(ii) of such Code, the term "Employee"
shall not include those leased employees covered by a plan described in
Section 414(n)(5) of such Code unless otherwise provided by the terms of
the Plan.
Section 1.15 "Employee Contribution" means all Employee after-tax
Contributions made to a Non-401(k) Account maintained under a qualified
defined contribution plan of the Employer.
Section 1.16 "Employer" means American Water Works Company, Inc. and its
designated subsidiaries. A subsidiary, for this purpose, is any
corporation, association or business trust, 50% or more of whose voting
stock (not including shares having voting power only upon the happening of
an event of default) is or was owned, directly or indirectly, by American
Water Works Company, Inc., or by any corporation which was a constituent in
a merger, consolidation, liquidation, transfer of substantially all of its
assets in exchange for stock, or similar combination of corporations with
or into the Company. A designated subsidiary is any subsidiary named from
time to time by the Board of Directors as such under this Plan, or any
subsidiary which, prior to September 15, 1977, was a Designated Subsidiary
under the Pension Plan (as defined therein). A subsidiary's status as a
designated subsidiary may be changed by the Board of Directors from time to
time.
Section 1.17 "Employer Contributions Account" means that portion of a
Participant's interest in this Plan which is equal to the sum of the
Employer 401(k) Contributions Account and the Employer Non-401(k)
Contributions Account.
Section 1.18 "Employer 401(k) Contributions Account" means that portion of
a Participant's interest in this Plan which is attributable to those
contributions made on behalf of a Participant in accordance with Article
III, Sections 3.6 and 3.9(b) or (c) (QMAC/QNEC), if applicable, and
earnings thereon. Such contributions shall be deemed to be made in
accordance with Section 401(k) of the Internal Revenue Code.
Section 1.19 "Employer Non-401(k) Contributions Account" means that
portion of a Participant's interest in this Plan which is attributable to
those contributions made on behalf of a Participant in accordance with
Article III, Section 3.5 and, if applicable, Section 3.6 and earnings
thereon. Such contributions shall not be deemed to be made in accordance
with Section 401(k) of the Internal Revenue Code.
Section 1.20 "Employment Commencement Date" means the date on which the
Employee first performs an Hour of Service.
Section 1.21 "Entry Date" means the first day of each January 1 or July 1,
provided, however, that no Entry Date shall occur prior to the Plan's
effective date.
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Section 1.22 "Excess Aggregate Contributions" means, with respect to a
plan year, the aggregate amount of employee and matching contributions
allocated to Highly Compensated Employees (including amounts that are
treated as matching contributions and used in the ACP test) that are in
excess of the limitations of the ACP test of Section 3.15 of this Plan.
Section 1.23 "Excess Section 401(k) Contributions" means, with respect to
any Plan Year, the Basic 401(k) Contributions allocated to Highly
Compensated Employees (including, if applicable, amounts contributed under
Sections 3.6 or 3.9 that are maintained in the Employer 401(k)
Contributions Account and used in the ADP test) that are in excess of the
limitations of the ADP test of Section 3.8 of this Plan.
Section 1.24 "Fiscal Year" means the 12 consecutive month period which
begins on each January 1 and ends on each December 31.
Section 1.25 "Highly Compensated Group" means, with respect to any Plan
Year, the group consisting of all Highly Compensated Employees who are
eligible to participate in the Plan. The term "Highly Compensated
Employee" includes Highly Compensated Active Employees and Highly
Compensated Former Employees.
A Highly Compensated Active Employee includes any Employee who performs
service for the Employer during the determination year and who, during the
look-back year: (1) received more than $75,000 (as adjusted pursuant to
Section 415(d) of the Internal Revenue Code) in annual Compensation from
the Employer; (2) received more than $50,000 (as adjusted pursuant to
Section 415(d) of the Internal Revenue Code) in annual Compensation from
the Employer and was a member of the top-paid group for such year; or (3)
was an officer of the Employer and received Compensation during such year
that is greater than 50% of the defined benefit plan dollar limitation
amount in effect under Internal Revenue Code Section 415(b)(1)(A). A
Highly Compensated Active Employee also includes: (1) Employees who are
both described in the preceding sentence if the term "determination year"
is substituted for the term "look-back year" and the Employee is one of the
100 Employees who received the most compensation from the Employer during
the determination year; and (2) Employees who are 5 percent owners (as
defined in Internal Revenue Code Section 416(i)(1)(B)(i)) at any time
during the look-back year or determination year.
If no officer has satisfied the Compensation requirement of (3) above
during either a determination year or look-back year, the highest paid
officer during the applicable year shall be treated as a Highly Compensated
Active Employee.
A Highly Compensated Former Employee includes 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
the applicable year, then the family member and the 5 percent owner or top-
ten
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<PAGE>
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 members and 5 percent owner or top-
ten Highly Compensated Employee. For purposes of this Section, family
member includes the spouse, lineal ascendants and descendants of the
Employee or former Employee and the spouses of such lineal ascendants and
descendants.
For purposes of this Section, the determination year shall be the Plan
Year. The look-back year shall be the twelve-month period immediately
preceding the determination year. Furthermore, the determination of who is
a Highly Compensated Employee (including the determinations of the number
and identity of Employees in the top-paid group, the top 100 Employees, and
the number of Employees treated as officers) and the Compensation that is
considered will be made in accordance with Section 414(q) of the Internal
Revenue Code. Compensation, therefore, means the compensation as defined
in Article I, Section 1.8 of the Plan plus any elective contributions made
by the Employer on behalf of the Employee that are excludible from the
Employee's gross income under Internal Revenue Code Sections 125,
402(e)(3), 402(h), and 403(b). The $50,000 and $75,000 Compensation
limitations of Section 414(q) of the Internal Revenue Code are indeed at
the same time and in the same manner as under Section 415(d) of such Code.
Section 1.26 "Hour of Service" means each hour for which an Employee is
paid, or entitled to payment, by the Employer for the performance of
duties. Hours under this paragraph shall be credited to the Employee for
the Computation Period or Periods in which the duties are performed.
Each Hour of Service shall be credited in accordance with Section
2530.200b-2 of the Department of Labor Regulations. Hours of Service will
be credited for employment with other members of an affiliated service
group (under Internal Revenue Code Section 414(m)), a controlled group of
corporations (under Section 414(b) of such Code), or a group of trades or
businesses under common control (under Section 414(c) of such Code), of
which the Employer is a member.
Hours of Service will also be credited for any leased employee considered
an Employee for purposes of this Plan under Internal Revenue Code Section
414(n). Where the Employer maintains the plan of a predecessor employer,
Hours of Service for such predecessor employer shall be treated as Hours of
Service for the Employer.
Section 1.27 "Matching Contribution" means an Employer contribution on
behalf of a Participant due to an Elective Deferral made by such
Participant made to a Basic 401(k) Contributions Account. Such term shall
also include any forfeitures allocated on the basis of employee
contributions, elective contributions, or matching contributions.
Section 1.28 "Named Fiduciary" means the designated fiduciary under this
Plan within the meaning of the Employee Retirement Income Security Act of
1974, as amended from time to time, and shall be the Plan Administrator.
Section 1.29 "Normal Retirement Age" means age 65.
8
<PAGE>
Section 1.30 "Participant" means an Employee who meets the eligibility
requirements as specified in Article II, Section 2.1 hereof and who has
taken all of the steps required by Article II to qualify for participation
in this Plan.
Section 1.31 "Participant Contributions Account" means that portion of a
Participant's interest in this Plan which is equal to the sum of the Basic
401(k) Contributions Account.
Section 1.32 "Period of Service" means a period of service commencing on
the Employee's Employment Commencement Date or Reemployment Commencement
Date and ending on the Employee's Severance From Service Date inclusive of
any Periods of Severance required to be taken into account in accordance
with Article V. For Participants who become Participants because of the
acquisition of Pennsylvania Gas and Water Company, the initial period of
service for vesting and eligibility will begin on the date of hire by
Pennsylvania Gas and Water Company closest to February 16, 1996, the
closing date under the Asset Purchase Agreement among Pennsylvania
Enterprises, Inc., Pennsylvania Gas and Water Company, American Water Works
Company, Inc. and Pennsylvania-
American Water Company.
Section 1.33 "Period of Severance" means the period of time commencing on
the Employee's Severance From Service Date and ending on the date the
Employee again performs an Hour of Service.
Section 1.34 "Plan" means the salary reduction savings plan set forth in
this document and all subsequent amendments and shall be known by the title
set forth on its cover page. The Plan is intended to be a profit-sharing
plan qualified under Section 401(a) of the Internal Revenue Code.
Section 1.35 "Plan Administrator" means the Retirement Plan Committee
appointed by the Board of Directors of American Water Works Company, Inc.
to administer the Plan.
Section 1.36 "Plan Recordkeeper" means the entity responsible for
maintaining Participant Account balances in accordance with the provisions
of the Plan and with performing additional functions as applicable to
assist with the administration of the Plan.
Section 1.37 "Plan Year" means the 12 consecutive month period used for
maintaining the financial records of the Plan and begins on each January 1
and ends on each December 31. The first Plan Year will be a short year,
beginning August 1, 1993 and ending December 31, 1993.
Section 1.38 "Qualified Joint and Survivor Annuity" means, for a married
Participant, an annuity for the life of a Participant with a survivor
annuity for the life of such Participant's spouse which is not less than
one-half, or greater than, the amount of the annuity payable during the
joint lives of the Participant and such Participant's spouse. A Qualified
Joint and Survivor Annuity for a Participant who is not married is an
annuity for the life of the Participant. Such Qualified Joint and Survivor
Annuity shall be the actuarial equivalent of any other form of annuity
available under this Plan. For the purposes of this Plan, the terms
Qualified Joint and Survivor Annuity and Joint and Survivor Annuity shall
be synonymous.
9
<PAGE>
Section 1.39 "Reemployment Commencement Date" means the first date
following a Period of Severance on which the Employee performs an Hour of
Service.
Section 1.40 "Rollover Account" means the portion of a Participant's, or
Employee's, interest in the Plan which is attributable to a rollover
contribution described in Section 18.3, if applicable, and earnings
thereon.
Section 1.41 "Severance From Service Date" means the earlier of:
(a) The date on which an Employee quits, retires, is discharged or dies;
or
(b) The first anniversary of the first date of a period in which the
Employee remains absent from service (with or without pay) with the
Employer for any reason other than quit, retirement, discharge or
death, such as vacation, holiday, sickness, disability, leave of
absence, layoff or an absence from work for maternity or paternity
reasons.
Notwithstanding the foregoing provisions of this Section, absence from
service with the Employer due to service in the armed forces of the United
States shall not result in a Severance from Service Date and shall be
considered in determining a Participant's Period of Service and Vesting
Service under the Plan, provided that a Participant complies with all of
the requirements of applicable federal law in order to be entitled to
reemployment and provided further that a participant returns to employment
with the Employer within the period provided by such law.
Section 1.42 "Total Disability" means a Participant's permanent and total
incapacity of engaging in any employment for the Employer for physical or
mental reasons. Total Disability shall be deemed to exist only when a
written application has been filed with the Plan Administrator by or on
behalf of such Participant and when such Total Disability is certified to
the Plan Administrator by a licensed physician approved by the Plan
Administrator.
Section 1.43 "Trust" means the legal entity created by the trust agreement
between the Employer and the Trustee, fixing the rights and liabilities
with respect to controlling and managing contributions to the Plan.
Section 1.44 "Trustee" means the trustee or any successor trustee or
trustees hereafter designated by the Board of Directors and named in the
trust agreement or any amendment thereto.
Section 1.45 "Valuation Date" means the date which shall be used hereunder
for purposes of determining account values which shall be monthly and can
be changed at the Plan Administrator's direction.
Section 1.46 "Vesting Service" means the number of whole years of an
Employee's aggregate Periods of Service whether or not such Periods of
Service are completed consecutively. For the purposes of determining the
number of whole years in accordance with this Section, all portions of non-
successive Periods of Service that are less than whole years shall be
aggregated on the basis that 12 months of service (30 days are deemed to be
a month in the case of the aggregation of fractional months) or 365 days of
service equal a whole year of service.
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<PAGE>
The singular form of any word shall include the plural and the masculine
gender shall include the feminine wherever necessary for the proper
interpretation of this Plan.
ARTICLE II
----------
ELIGIBILITY TO PARTICIPATE
--------------------------
Section 2.1 Each Employee who is employed in a Covered Employment
Classification shall be eligible to become a Participant as of the first
day of the first calendar month following completion of six months of
service and attainment of age 18.
Each Employee who has completed six months of service, and who has attained
age 18 as of August 1, 1993 will be immediately eligible to become a
Participant.
Section 2.2 An Employee who incurs a Break In Service prior to becoming
eligible to participate in this Plan shall be considered a new Employee
upon the date he first performs an Hour of Service subsequent to the date
he incurs a Break In Service. Such Employee's subsequent eligibility to
participate in this Plan shall be determined in accordance with Section
2.1.
Section 2.3 An Employee who incurs a Break In Service subsequent to
becoming eligible to participate in this Plan shall again become eligible
to participate in this Plan upon the date he first performs an Hour of
Service subsequent to the date he incurs a Break In Service.
Section 2.4 An Employee who is not employed in a Covered Employment
Classification shall not be eligible to participate in this Plan during the
period he is not employed in a Covered Employment Classification.
Section 2.5 An Employee who is excluded from participating in this Plan in
accordance with Section 2.4 of this Article who is subsequently employed in
a Covered Employment Classification shall be eligible to become a
Participant on the later of the date the Employee is employed in a Covered
Employment Classification or the date set forth in Section 2.1 of this
Article.
Section 2.6 The Plan Administrator shall notify in writing every Employee
of his eligibility and shall give the Employee an opportunity to become a
Participant.
Section 2.7 To become a Participant, an Employee must meet the
requirements of this Article and, at least 30 days prior to the first day
of the month the Employee wishes to become a Participant, the Employee must
execute an application specifying the rate of Basic 401(k) Contributions
for such Employee and the Employee must make an investment election as
described in Article IV hereof. No Employee shall become a Participant
until the Employee has met the requirements of this Article II.
11
<PAGE>
ARTICLE III
-----------
CONTRIBUTIONS
-------------
Section 3.1 For the purpose of funding this Plan, the Named Fiduciary
shall enter into a trust arrangement with a Trustee, or make other
arrangements as the Named Fiduciary shall deem appropriate for this
purpose.
Section 3.2 Each Participant may elect to make Basic 401(k) Contributions
in a whole percentage of not less than 1% or more than 10% of his
Contribution Compensation, as defined in Section 1.8A. Such contributions
shall be made by means of payroll deductions and the amounts deducted shall
be paid monthly to the Trustee by the Plan Administrator. Basic
Participant Contributions shall not be permitted subsequent to the date
upon which the Participant severs from service with the Employer.
The Participant shall make an election, in a manner prescribed by the
Retirement Plan Committee, designating contributions made under this
Section to be maintained in the Basic 401(k) Contributions Account.
Amounts maintained in the Basic 401(k) Contributions Account shall be
Elective Contributions as defined in Internal Revenue Service Regulation
1.401(k)-1(g)(3).
A Participant who makes a hardship withdrawal of his Basic 401(k)
Contributions shall be prohibited from making Basic Contributions for 12
months after the receipt of the hardship withdrawal.
Section 3.3 A Participant may elect to change the amount of his Basic
401(k) Contributions as of the first day of any month. Such changes shall
not be made more frequently than once in any calendar month.
A Participant's election to change the amount of his Basic 401(k)
Contributions must be made in the manner specified by the Retirement Plan
Committee. Contribution changes will be effective as soon as
administratively practicable, but not later than the second month following
the month in which the election change is made.
Section 3.4 A Participant may elect to suspend all of his Basic 401(k)
Contributions in the manner specified by the Retirement Plan Committee, to
be effective as soon as administratively practicable, but not later than
the second month following the month in which the suspension election is
made. Such Participant may elect to resume making Basic 401(k)
Contributions as of the first day of any month which succeeds the date of
suspension by at least one month. The Participant's election to resume
Basic 401(k) Contributions must be made in the manner specified by the
Retirement Plan Committee. Elections to resume Basic 401(k) Contributions
shall be effective as soon as administratively practicable, but not later
than the second month following the month in which the election to resume
is made.
Section 3.5 The Employer shall cause the Plan Administrator to make
monthly Matching Contributions to the Trustee which shall be credited to
each Participant's Employer Non-401(k) Contributions Account. The amount
of the Matching Contribution to be made for any particular month with
respect to any
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<PAGE>
particular Participant shall be equal to a percentage of a portion of the
Basic 401(k) Contributions actually made under Section 3.2 by such
Participant for that month. From time to time, the Plan Administrator will
establish the rate of Matching Contributions to be made under this Section
3.5.
Beginning August 1, 1993 and ending July 31, 1994 the amount of the
Matching Contribution to be made for any particular month and with respect
to any particular Participant shall be equal to 30% of the first 2% of the
Basic 401(k) Contributions actually made under Section 3.2 by such
Participant for that month. Beginning August 1, 1994 the amount of the
Matching Contribution to be made for any particular month and with respect
to any particular Participant shall be equal to 40% of the first 3% of the
Basic 401(k) Contributions actually made under Section 3.2 by such
Participant for that month. Such rate shall continue in effect until
further notice by the Plan Administrator.
Beginning January 1, 1996 and ending December 31, 1997 the amount of the
Matching Contribution to be made for any particular month and with respect
to any particular Participant shall be equal to 45% of the first 4% of the
Basic 401(k) Contributions actually made under Section 3.2 by such
Participant for that month. Beginning January 1, 1998 and ending December
31, 2000 the amount of the Matching Contribution to be made for any
particular month and with respect to any particular Participant shall be
equal to 50% of the first 4% of the Basic 401(k) Contributions actually
made under Section 3.2 by such Participant for that month.
Section 3.6 In addition to the monthly Matching Contributions described in
Section 3.5, the Employer may cause the Plan Administrator to make
additional Employer Contributions to the Trustee for any Plan Year. Such
additional Employer Contributions shall be made no later than the end of
the twelve-month period immediately following the Plan Year to which the
contribution relates. Any additional Employer Contributions made hereunder
may be credited to the Employer Contributions Account of all Participants
in the employ of the Employer on the last day of such Plan Year, or such
additional Employer Contributions may be credited to the Employer
Contributions Account of each Participant in the employ of the Employer on
the last day of the Plan Year who is not a member of the Highly Compensated
Group as of such date.
The allocation of additional Employer Contributions shall be made in the
same proportion as the Basic 401(k) Contributions made during such Plan
Year for each Participant in the allocation group bears to the sum of the
Basic 401(k) Contributions made by all such Participants in the allocation
group during such Plan Year. The amount of any additional Employer
Contributions as well as the group of Employees to whom such contributions
shall be allocated shall be determined by resolution of the Board of
Directors of the Employer prior to the last day of the Employer's Fiscal
Year. Contributions made under this Section shall be maintained in either
each Participant's Employer 401(k) Contributions Account or each
Participant's Employer Non-401(k) Account, at the Employer's sole
discretion. Amounts maintained in the Participant's Employer 401(k)
Contributions Account shall be Qualified Matching Contributions (QMAC) as
defined in Internal Revenue Service Regulation 1.401(k)-1(g)(13).
Such additional Employer Contributions in any year shall be limited to an
amount not greater than 15% of the Compensation paid or accrued by the
13
<PAGE>
Participants in the Plan during such Fiscal Year less Employer
Contributions made to the Plan during such Fiscal Year. For the purposes
of this paragraph, contributions made to a Participant's Basic Participant
401(k) Contributions Account under Section 3.2 shall be treated as Employer
Contributions. In the event that the Employer makes contributions to any
other profit sharing or stock bonus plan on behalf of any Participants
participating in this Plan, any additional Employer Contributions made
under this Section shall be limited in accordance with the applicable
provisions of Section 404 of the Internal Revenue Code.
Section 3.7 Notwithstanding anything in this Plan to the contrary,
Elective Deferrals made for any taxable year of a Participant under this
Plan and all other qualified plans, contracts, or arrangements maintained
by the Employer shall not exceed the Annual Limit on Elective Deferrals.
If a Participant's Elective Deferrals exceed the Annual Limit on Elective
Deferrals during such Participant's taxable year, the Participant may, not
later than the first March 1 following the close of his taxable year,
notify the Plan Administrator in writing of such excess and request that
his Elective Deferrals under the Plan be reduced by an amount specified by
the Participant. Said notice shall also require the Participant's
certification that the specified amount is an excess Elective Deferral.
The Plan Administrator may then, at his discretion, distribute such amount
(including any income or loss allocable thereto up to the date of
distribution) to the Participant not later than the first April 15
following the close of the Participant's taxable year. The income or loss
allocable to the Participant's excess Elective Deferrals under the Plan is
the income or loss allocable to the Participant's Basic 401(k)
Contributions Account under the Plan for the taxable year multiplied by a
fraction, the numerator of which is the Participant's excess Elective
Deferrals under the Plan for the taxable year and the denominator of which
is the account balance (determined without regard to any income or loss
occurring during the taxable year) of the Participant's Basic 401(k)
Contributions Account as of the end of such taxable year. The amount of
excess Elective Deferrals that may be distributed under this Section with
respect to a Participant for his taxable year shall be reduced by any
excess Basic 401(k) Contributions previously distributed to such
Participant (pursuant to Section 3.9) for the Plan Year beginning with or
within such taxable year. For purposes of applying the requirements of
Internal Revenue Code Sections 401(a)(4), 401(k)(3), and 415, excess
Elective Deferrals shall not be disregarded merely because they are excess
Elective Deferrals or because they are distributed in accordance with this
Section.
However, excess Elective Deferrals attributable to those Employees who are
not members of the Highly Compensated Group will not be taken into account
for purposes of applying the requirements of Internal Revenue Code Section
401(k)(3) to the extent such excess deferrals are made under a plan or
plans of the Employer. For the purposes of this Section, the following
definition shall apply:
(a) "Annual Limit on Elective Deferrals" means that amount of Elective
Deferrals which can be excluded from a Participant's gross income
for his taxable year. Such amount shall be determined in
accordance with Section 402(g) of the Internal Revenue Code as in
effect for a Participant's taxable year beginning in a calendar
year. The Annual Limit on Elective Deferrals for a Participant's
taxable year beginning in the 1987 calendar year shall be $7,000.
This amount shall be
14
<PAGE>
increased for the taxable year beginning in 1988 and subsequent
calendar years in the same manner as the defined benefit plan dollar
limitation amount is adjusted under Section 415(d) of the Internal
Revenue Code. For the taxable year following the taxable year in
which a Participant receives a hardship withdrawal, the Annual Limit
on Elective Deferrals shall be reduced by the amount of such
Participants' Basic 401(k) Contributions for the taxable year during
which the hardship withdrawal occurs. The Annual Limit on Elective
Deferrals for a Participant's taxable year shall be increased to the
extent that the Participant has Elective Deferrals under an Internal
Revenue Code Section 403(b) annuity for such taxable year provided
that this increase shall not cause the Annual Limit on Elective
Deferrals for any taxable year of a Participant to exceed $9,500.
Section 3.8 During each Plan Year the Basic 401(k) Contributions and
Employer 401(k) Contributions made under this Plan shall meet either of the
following rules:
(a) The Actual Deferral Percentage of the Highly Compensated Group
shall not exceed the product of
(i) the Actual Deferral Percentage of all other Employees who
are eligible to participate in this Plan, and
(ii) 1.25; or
(b) The Actual Deferral Percentage of the Highly Compensated Group
shall not exceed the lesser of the Actual Deferral Percentage of
all other Employees who are eligible to participate in this Plan by
more than two percentage points or the Actual Deferral Percentage
of the Highly Compensated Group shall not exceed the product of
(i) the Actual Deferral Percentage of all other Employees who
are eligible to participate in this Plan, and
(ii) 2.0.
For purposes of this Section, if two or more plans (which include cash or
deferred arrangements) are treated as a single plan for purposes of
Internal Revenue Code Section 401(a)(4) or 410(b) (other than Section
410(b)(2)(A)(ii)), the cash or deferred arrangements included in such plans
shall be treated as one arrangement for purposes of determining whether or
not such arrangements satisfy Internal Revenue Code Sections 401(a)(4),
401(k), 410(b) and 1.401(k)-1(b) of the Internal Revenue Service (IRS)
Regulations. Effective for Plan Years which begin after December 31, 1988,
notwithstanding the preceding sentence, applicable contributions and
allocations under an ESOP plan (within the meaning of Internal Revenue Code
Section 4975(e)(7)) shall not be combined with similar contributions or
allocations under any plan not described under such Internal Revenue Code
Section (a non-ESOP) for purposes of determining whether either the ESOP or
the non-ESOP satisfies IRS Regulation 1.401(k)-1(b) and Internal Revenue
Code Sections 401(a)(4), 401(k), and 410(b). Effective with the Plan Year
beginning after December 31, 1989, plans shall be aggregated under this
Section 3.8 only if they have the same plan year.
15
<PAGE>
The Plan Administrator shall limit the Basic 401(k) Contributions and
Employer 401(k) Contributions made with respect to the Highly Compensated
Group under Sections 3.2, and 3.6 of this Article to the extent necessary
in order to meet one of the rules specified in this Section.
Section 3.9 In the event the Basic 401(k) Contributions and Employer
401(k) Contributions made with respect to the Employees in the Highly
Compensated Group exceed both of the rules provided in subparagraphs (a)
and (b) of Section 3.8 as of the end of the Plan Year, the Employer shall
take such action as and to the extent necessary to bring the Plan into
compliance (in accordance with the provisions under Section 401(k) of the
Internal Revenue Code and the applicable regulations thereunder, as amended
from time to time) with one of the rules provided in Sections 3.8(a) or
3.8(b). At its discretion, the Employer may elect to correct such excess
amount pursuant to the options set forth in either (a), (b) or (c) below
(or any combination of such options):
(a) to distribute the Excess Section 401(k) Contributions (including
any income or loss allocable for the plan year) to each applicable
Employee in the Highly Compensated Group on or before the 15th day
of the third month following the end of the Plan Year. Excess
Section 401(k) Contributions distributed after this date will be
subject to the 10% excise tax payable by the Employer. In no event
shall such distribution be made later than the close of the
following Plan Year. Failure to correct Excess Section 401(k)
Contributions by the close of the plan year following the plan year
for which they were made will cause the plan to fail to satisfy the
requirements of IRC Section 401(a)(4) for the plan year for which
the Excess Section 401(k) Contributions were made and for all
subsequent years they remain uncorrected. The income or loss
allocable to an applicable Employee's Excess Section 401(k)
Contributions under the Plan is the income or loss allocable to
such Employee's Basic 401(k) Contributions Account and, if
applicable, Employer 401(k) Contributions Account for the Plan Year
multiplied by a fraction, the numerator of which is such Employee's
Excess Section 401(k) Contributions for the Plan Year and the
denominator is the sum of the account balances (determined without
regard to any income or loss occurring during the Plan Year) of the
Employee's Basic 401(k) Contributions Account and, if applicable,
Employer 401(k) Contributions Account as of the end of the Plan
Year. Any distribution of less than the entire amount of Excess
Section 401(k) Contributions is treated as a pro-rata distribution
of such contributions and income/loss. The amount of Excess
Section 401(k) Contributions that may be distributed under this
Section with respect to each applicable Employee for a Plan Year
shall be reduced by any Excess Elective Deferrals previously
distributed to such Employee (pursuant to Section 3.7) for the
Employee's taxable year ending with or within such Plan Year.
The amount of Excess Section 401(k) Contributions attributable to each
applicable Employee in the Highly Compensated Group shall be
determined by reducing the Actual Deferral Percentage of each
applicable Employee (beginning with the Employee with the highest
Actual Deferral Percentage) to the extent required to:
(i) enable the Plan to satisfy one of the rules set forth in
subparagraph (a) or (b) of Section 3.8, or
16
<PAGE>
(ii) cause the Actual Deferral Percentage of such Employee to equal
the Actual Deferral Percentage of the applicable Employee with
the next highest Actual Deferral Percentage.
This process shall be repeated until the Plan satisfies one of the rules
set forth in (a) and (b) of Section 3.8. The amount of Excess Section
401(k) Contributions for a Highly Compensated Employee is equal to the
total 401(k) contribution and other contributions taken into account for
the ADP test minus the product of such employee's Deferral Rates as
determined above and such employee's Compensation. Furthermore, the
determination and allocation of Excess Section 401(k) Contributions to
applicable Employees who are subject to the family aggregation rules of
Internal Revenue Code Section 414(q)(6) shall be made in the manner
prescribed under Internal Revenue Service Regulation 1.401(k)-1(f)(5)(ii);
and/or
(b) to make a contribution under Section 3.6 for any or all Employees who
are eligible to participate in this Plan and are not members of the
Highly Compensated Group as of the last day of the Plan Year.
Contributions made under this paragraph shall be maintained in the
Participant's Employer 401(k) Contributions Account and shall be
Qualified Matching Contributions (QMAC) as defined in Internal Revenue
Service Regulation 1.401(k)-1(g)(13). Such contributions shall be
nonforfeitable when made and must satisfy the distribution
requirements of Internal Revenue Service Regulation 1.401(k)-1(d) as
though they are elective contributions. Qualified Matching
Contributions shall satisfy the requirements of this paragraph without
regard to whether or not such contributions are actually treated as
elective contributions and may be treated as elective contributions
provided the requirements of Internal Revenue Service Regulation
1.401(k)-1(b)(5) are met.
(c) to make a Qualified Non-Elective Contribution (QNEC) as defined in
Internal Revenue Service Regulation 1.401(k)-1(g)(13), for any or all
employees eligible to participate in this plan who are not members of
the Highly Compensated Employee Group and are employed as of the last
day of the plan year. Contributions made under this paragraph shall
be allocated according to a percentage (as determined by the Employer)
of each eligible Non-Highly Compensated Employee's Compensation and
shall be maintained in the Participant's Employer 401(k) Contributions
Account. Such contributions shall be nonforfeitable when made and
must satisfy the distribution requirements of Internal Revenue Service
Regulation 1.401(k)-1(d) as though they are elective contributions.
Qualified Non-Elective Contributions shall satisfy the requirements of
this paragraph without regard to whether or not such contributions are
actually treated as elective contributions, and may be treated as
elective contributions provided the requirements of Internal Revenue
Service Regulation 1.401(k)-1(b)(5) are met.
The Plan Administrator shall maintain records sufficient to demonstrate
satisfaction of one of the rules specified in this Section (including the
amount of any Section 401(k) Contributions made under this Section and
Sections 3.6 and 3.9(b) or (c) which are used to meet the applicable rule)
or any other acceptable methods of compliance as set forth by the Internal
Revenue Service from time to time.
Section 3.10 Except as provided under Section 3.11 hereof, contributions
made under this Plan shall be limited, if necessary, so that the amount of
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Annual Additions made in any Limitation Year shall not exceed the Maximum
Permissible Amount. With respect to each Participant, all qualified
defined benefit plans ever maintained by the Employer shall be treated as
one defined benefit plan and all qualified defined contribution plans ever
maintained by the Employer shall be treated as one defined contribution
plan for purposes of applying the limitations of Section 415 of the
Internal Revenue Code (IRC). If the Employer is a member of a group which
constitutes any of the following: a controlled group of corporations (as
defined in IRC Section 414(b) as modified by IRC Section 415(h)), trades or
businesses (whether or not incorporated) which are under common control (as
defined in IRC Section 414(c) as modified by IRC Section 415(h), an
affiliated service group (as defined in IRC Section 414(m)), or any other
entity required to be aggregated with the Employer pursuant to IRC 414(o),
all such members shall be considered a single employer for the purposes of
applying the limitations of this Section and the purpose of determining
Compensation as defined in subparagraph (b) below. The following
definitions shall be used solely for purposes of Section 3.10, 3.11, 3.12,
3.13 and 3.14 unless specifically stated elsewhere in this Plan:
(a) "Annual Additions" means, with respect to any Limitation Year, the sum
of the following which are actually credited to a Participant's
Account or Accounts:
(i) all Employer Contributions, Basic 401(k) Contributions, and
(ii) all forfeitures, if any, allocated to a Participant
Contributions do not fail to be Annual Additions merely because such
contributions are excess Elective Deferrals, Excess Section 401(k)
Contributions, or excess Employee Contributions and Matching Contributions
or merely because such contributions are corrected through distribution or
recharacterization.
Amounts allocated, after March 31, 1984, to an individual medical
benefit account, as defined in Section 415(1)(2) of the Internal
Revenue Code, which is part of a defined benefit plan maintained
by the Employer, are treated as Annual Additions to a defined
contribution plan. In addition, amounts derived from
contributions paid or accrued after December 31, 1985, in taxable
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 Section 419A(d)(3), under a welfare
benefit fund, as defined in Section 419(e), maintained by the
Employer, are treated as Annual Additions to a defined
contribution plan.
(b) "Compensation" means the wage or salary paid to the Employee during a
Limitation Year including only those items defined in Section 1.415-
2(d)(2) and excluding those items in Section 1.415-2(d)(3) of the
Internal Revenue Service Regulations. Compensation taken into account
during a Limitation Year shall be the Compensation actually paid or
made available during such Limitation Year.
(c) "Defined Benefit Plan Fraction" means for each Limitation Year, a
fraction, the numerator of which is the sum of a Participant's
projected annual benefit under all qualified defined benefit plans
maintained by
18
<PAGE>
the Employer determined as of the end of the Limitation Year, and the
denominator of which, as of the end of the Limitation Year, is the
lesser of (a) or (b) below where:
(i) is equal to 1.25 times the defined benefit plan dollar limitation
amount in effect under Internal Revenue Code Section 415(b)(1)(A)
for such Limitation Year, and
(ii) is equal to 1.4 times the Participant's average annual
Compensation based on the three consecutive calendar years (or
any other uniformly applied twelve month period) during which the
Participant has the greatest aggregate Compensation from the
Employer.
(d) "Defined Contribution Plan Fraction" means for each Limitation Year, a
fraction, the numerator of which is the sum of the Annual Additions
with respect to any Participant as of the close of the Limitation Year
and all prior Limitation Years under this Plan and all other qualified
defined contribution plans maintained by the Employer, and the
denominator of which is the sum of the lesser of (a) or (b) below for
each Limitation Year during which the Participant is employed by the
Employer where:
(i) is equal to 1.25 times the defined contribution plan dollar
limitation amount in effect under Internal Revenue Code Section
415(c)(1)(A) for such Limitation Year (the prescribed dollar
limitation amount shall be equal to $30,000 or, if greater, 25%
of the defined benefit plan dollar limitation amount in effect
under Section 415(b)(1)(A) of such Code), and
(ii) is equal to 1.4 times 25% of the Participant's Compensation for
such Limitation Year, except that any contribution for medical
benefits (within the meaning of Section 419(A)(f)(2)) after
separation from service which is treated as an Annual Addition
shall not apply.
The Annual Addition for any Limitation Year beginning before January 1,
1987 shall not be recomputed to treat all Employee Contributions as Annual
Additions.
(e) "Excess Amounts" means any amounts under this Plan which are
attributable to Annual Additions for the Limitation Year which exceed
the Maximum Permissible Amount.
(f) "Limitation Year" means the Plan Year for this Plan. In lieu thereof,
the Employer may adopt any other 12 consecutive month period by
amending the Plan. If the Employer is a member of a controlled group
of corporations (as defined in Section 414(b) of the Internal Revenue
Code as modified by Section 415(h)), the election to use a twelve
consecutive month period other than the Plan Year must be made by all
members of the group that maintains the Plan.
(g) "Maximum Permissible Amount" means with respect to any Participant the
lesser of (a) or (b) below where:
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<PAGE>
(i) is equal to the defined contribution plan dollar limitation
amount in effect under Internal Revenue Code Section 415(c)(1)(A)
for such Limitation Year (the prescribed dollar limitation amount
shall be equal to $30,000 or, if greater, 25% of the defined
benefit plan dollar limitation amount in effect under Section
415(b)(1)(A) of such Code), and
(ii) is equal to 25% of the Participant's Compensation for such
Limitation Year, except that any contribution for medical
benefits (within the meaning of Section 419(A)(f)(2)) after
separation from service which is treated as an Annual Addition
shall not apply.
If a short Limitation Year is created because of an amendment changing
the Limitation Year to a different 12 consecutive month period, the
Maximum Permissible Amount will not exceed the defined contribution
plan dollar limitation amount determined under (a) of this
subparagraph multiplied by a fraction the numerator of which is the
number of months in the short Limitation Year and the denominator of
which is 12.
(h) "Suspense Account" means an account maintained under the Plan in which
Excess Amounts shall be held pursuant to Section 3.13. Excess Amounts
while held in the Suspense Account shall not be allocated to any
Participant. No earnings shall be credited to such Suspense Account.
The defined benefit plan dollar limitation amount prescribed under
subparagraph (c), (d), and (g) above shall be effective as of the first day
of each calendar year and shall apply to the Limitation Year that ends in
such calendar year. Said limitation shall be adjusted annually in
accordance with Section 415(d) of the Internal Revenue Code.
Section 3.11 In the event that any Participant is included in any other
qualified defined contribution plans maintained by the Employer during any
Limitation Year, the sum of such Participant's Annual Additions under all
such qualified defined contribution plans shall be subject to the
limitations set forth in Section 3.10. Any Excess Amounts which result
during a Limitation Year shall be deemed to have occurred under the other
qualified defined contribution plans before being deemed to result from
contributions allocated to a Participant's account under this Plan.
Section 3.12 In the event that any Participant is included in a qualified
defined benefit plan maintained by the Employer during any Limitation Year,
the sum of the Defined Contribution Plan Fraction and the Defined Benefit
Plan Fraction shall not exceed 1.0 with respect to such Participant for
such Limitation Year.
Section 3.13 If, as a result of the allocation of forfeitures, a
reasonable error in estimating a Participant's annual Compensation or a
reasonable error in determining the amount of Elective Deferrals that may
be made on behalf of a Participant under the limits of Internal Revenue
Code Section 415, or under other limited facts and circumstances set forth
by the Commissioner, any Excess Amounts are deemed to have occurred under
this Plan for a Limitation Year, such Excess Amounts shall be disposed of
in accordance with the provisions of Section 3.14 and shall not be deemed
Annual Additions for such Limitation Year.
20
<PAGE>
Section 3.14 Excess Amounts deemed to have occurred under this Plan will
be reduced in the following manner. Excess Amounts shall first be
considered to be attributable to contributions made to a Participant's
Basic 401(k) Contributions Account and corresponding Matching Contributions
for the Limitation Year and shall be deducted from the appropriate accounts
and disposed of in such a manner that the proportion between the Basic
401(k) Contributions and corresponding matching contribution shall not be
altered by the return of such Excess Amounts. The Basic 401(k)
Contributions shall be returned to the Participant. The match attributable
to such returned contribution shall be held in the Suspense Account. Any
Excess Amounts returned to a Participant pursuant to this Section shall be
disregarded in determining such Participant's Elective Deferrals, Actual
Deferral Percentage, and Actual Contribution Percentage.
Amounts held in the Suspense Account shall be released during the next
Limitation Year (and succeeding Limitation Years, if necessary) and
allocated and reallocated to all Participants during the next Limitation
Year (and succeeding Limitation Years, if necessary) before any Employer or
Employee Contributions are allocated during the next Limitation Year or
Years. Amounts allocated and reallocated in accordance with the preceding
sentence will be used to reduce Employer Contributions to the Plan during
the next Limitation Year (and succeeding Limitation Years, if necessary).
Section 3.15 During each Plan Year the amount of Matching Contributions
(including those Section 401(k) Contributions under Section 3.2 treated as
Matching Contributions) made under this Plan shall meet either of the
following rules:
(a) The Actual Contribution Percentage of the Highly Compensated Group
shall not exceed the product of
(i) the Actual Contribution Percentage of all other Employees who
are eligible to participate in this Plan, and
(ii) 1.25; or
(b) The Actual Contribution Percentage of the Highly Compensated Group
shall not exceed the lesser of the Actual Contribution Percentage of
all other Employees who are eligible to participate in this Plan by
more than two percentage points or the product of:
(i) the Actual Contribution Percentage of all other Employees who
are eligible to participate in this Plan, and
(ii) 2.0.
The rule set forth in this paragraph 3.15(b) shall be subject to any lesser
amount determined pursuant to Internal Revenue Service Regulation 1.401(m)-
2 prescribed to prevent the multiple use of this alternative limitation
with respect to the Highly Compensated Group. If applicable, such multiple
use shall be corrected by reducing the Actual Contribution Percentage for
those Employees included in the Highly Compensated Group who are eligible
to participate in both the arrangement subject to Internal Revenue Code
Section 401(k) and the Plan subject to Section 401(m) of said Code.
21
<PAGE>
If two or more plans (which include Employee Contributions and/or Matching
Contributions) are treated as a single plan for purposes of Internal
Revenue Code Section 401(a)(4) or 410(b) (other than Section
410(b)(2)(A)(ii)), said plans shall be treated as one plan for purposes of
determining whether or not such plans satisfy Internal Revenue Code
Sections 401(a)(4), 401(m), 410(b) and 1.401(m)-1(b) of the Internal
Revenue Service (IRS) Regulations. Effective for Plan Years which begin
after December 31, 1988, notwithstanding the preceding sentence, applicable
contributions and allocations under an ESOP plan (within the meaning of
Internal Revenue Code Section 4975(e)(7)) shall not be combined with
similar contributions or allocations under any plan not described under
such Internal Revenue Code Section (a non-ESOP) for purposes of determining
whether either the ESOP or the non-ESOP satisfies IRS Regulation 1.401(m)-
1(b) and Internal Revenue Code Sections 401(a)(4), 401(m), and 410(b).
Effective with the Plan Year beginning December 31, 1989, plans shall be
aggregated under this Section 3.15 only if they have the same plan year.
The Plan Administrator shall limit the Matching Contributions made with
respect to the Highly Compensated Group under, as applicable, Sections 3.5,
3.6, and 3.9 of this Article to the extent necessary in order to meet one
of the rules specified in this Section. The determination of the amount of
excess Matching Contributions, if any, made with respect to the Highly
Compensated Group as of the close of the Plan Year shall be made after
first determining any excess Elective Deferrals pursuant to Section 3.7 and
then determining any excess Section 401(k) Contributions pursuant to
Section 3.8.
Section 3.16 In the event the Matching Contributions made with respect to
the Employees in the Highly Compensated Group exceed both of the rules
provided in subparagraph (a) and (b) of Section 3.15 above as of the end of
the Plan Year, the Employer shall take such action to the extent necessary
to bring the Plan into compliance (in accordance with the provisions under
Section 401(m) of the Internal Revenue Code and the applicable regulations
thereunder, as amended from time to time) with one of such rules. At its
discretion, the Employer may elect to correct such Excess Aggregate
Contributions pursuant to the options set forth in either (a), (b) or (c)
below (or any combination of such options):
(a) to distribute (or if forfeitable, forfeit) the Excess Aggregate
Contributions (including any income or loss allocable for the Plan
Year) to each applicable Employee in the Highly Compensated Group on
or before the 15th day of the third month following the end of the
Plan Year. Excess Aggregate Contributions distributed after this date
will be subject to a 10% excise tax on the amount of Excess Aggregate
contributions payable by the employer. In no event shall such
distribution (or forfeiture) be made later than the close of the
following Plan Year. Failure to correct Excess Aggregate
Contributions by the end of the plan year following the plan year for
which they were made, will cause the plan to fail to meet the
requirements of IRC Section 401(a)(4) for the plan year and subsequent
plan years they remain uncorrected. The income or loss allocable to
an applicable Employee's Excess Aggregate Contributions under the Plan
is the income or loss allocable to the Employer Non-401(k)
Contributions Account and, if applicable, Employer 401(k)
Contributions Account and Participant Deferral Contributions Account
for the Plan Year multiplied by a fraction, the numerator of which is
such Employee's Excess Aggregate Contributions for the Plan Year and
the denominator is the sum of the
22
<PAGE>
account balances (determined without regard to any income or loss
occurring during the Plan Year) of the Employer Non-401(k)
Contributions Account and, if applicable, Employer 401(k)
Contributions Account and Participant Deferral Contributions Account
as of the end of the Plan Year. Any distribution of less than the
entire amount of Excess Aggregate Contributions is treated as a pro-
rata distribution of such contributions and income/loss. Moreover,
the method of distributing Excess Aggregate Contributions and Matching
Contributions shall meet the requirements of Internal Revenue Code
Section 401(a)(4) precluding discrimination in favor of Employees in
the Highly Compensated Group.
The amount of Excess Aggregate Contributions attributable to each
applicable Employee in the Highly Compensated Group shall be
determined by reducing the Actual Contribution Percentage of each
applicable Employee (beginning with the Employee with the highest
Actual Contribution Percentage) to the extent required to:
(i) enable the Plan to satisfy one of the rules set forth in
subparagraph (a) or (b) of Section 3.15; or
(ii) cause the Actual Contribution Percentage of such Employee to
equal the Actual Contribution Percentage of the applicable
Employee with the next highest Actual Contribution Percentage.
This process shall be repeated until the Plan satisfies one of the
rules set forth in (a) or (b) of Section 3.15. The amount of Excess
Aggregate Contributions for a Highly Compensated Employee is equal to
the total matching and other contributions taken into account for the
ACP test minus the product of the employee's contribution ratio as
determined above and the employee's compensation. Furthermore, the
determination and allocation of excess Matching Contributions to
applicable Employees who are subject to the family aggregation rules
of Internal Revenue Code Section 414(q)(6) shall be made in the manner
prescribed under Internal Revenue Service Regulation 1.401(m)-
1(f)(1)(ii)(C); and/or
(b) to make a contribution under Section 3.6 for any and all Employees who
are eligible to participate in this Plan and are not members of the
Highly Compensated Group as of the last day of the Plan Year.
Contributions made under this paragraph shall be maintained in the
Participant's Employer Non-401(k) Contributions Account.
(c) to make a contribution pursuant to Section 3.9(b) or (c) of this plan.
The Plan Administrator shall maintain records sufficient to demonstrate
satisfaction of one of the rules specified in this Section (including the
amount of any Section 401(k) Contributions made under Section 3.2 that are
treated as Matching Contributions) and any Section 401(k) Contributions
made under Sections 3.6 and 3.9(b) or (c) which are used in meeting the
applicable rule) or any other acceptable methods of compliance as set forth
by the Internal Revenue Service from time to time.
Forfeitures, if any, made available under this Section shall be held within
the Fixed Investment Fund and, except as otherwise provided in Section
13.3, used to reduce the next subsequent Employer Contribution due under
this Plan. No earnings shall be credited to such amounts. Notwithstanding
any contrary provision of this Plan, no such forfeiture may be allocated to
an Employee
23
<PAGE>
included in the Highly Compensated Group whose contributions are reduced
under this Section.
ARTICLE IV
----------
INVESTMENT OF CONTRIBUTIONS
---------------------------
Section 4.1 A Fixed Investment Fund, an Index Equity Investment Fund, an
Index Bond Fund, and American Water Works Company, Inc. Stock Fund shall be
maintained under this Plan. In addition to the aforementioned investment
funds, the Retirement Plan Committee shall have the right to add additional
investment options or to replace investment options from time to time. The
addition of any investment option shall not necessitate the elimination of
any existing investment option.
Section 4.2 The Fixed Investment Fund shall be invested in the general
assets of an insurance company in accordance with the provisions of the
contract(s) or in such other investment vehicles as may apply to this Plan,
which provide a fixed rate of return.
Section 4.3 The Index Equity Investment Fund shall be invested in a pool
of investments composed principally of equities available under the
contract(s) or in such other investment vehicles as may apply to this Plan,
which do not guarantee a stated rate of return or preservation of
principal.
Section 4.4 The Index Bond Fund shall be invested in a pool of investments
composed of high grade corporate and/or government bonds of varying
maturities which do not guarantee a stated rate of return or preservation
of principal.
Section 4.5 The American Water Works Company, Inc. Stock Fund shall be
invested entirely in shares of common stock of American Water Works
Company, Inc. Such American Water Works Company, Inc. shares shall be
newly issued shares or shares purchased in the open market or in privately
negotiated transactions. Dividends on shares of American Water Works
Company, Inc. stock held in such Stock Fund will be reinvested in American
Water Works Company, Inc. shares.
Section 4.6 The selection of investment choices with respect to
Participants' Basic 401(k) Contributions and Rollover Contributions among
the Fixed Investment Fund, the Index Equity Investment Fund, the Index Bond
Fund, and the American Water Works Company, Inc. Stock Fund, maintained
hereunder shall be the sole responsibility of each Participant and no
Employee or representative of the Plan Administrator, the Named Fiduciary
or the Employer is authorized to make any recommendation to any Participant
with respect to such investment choices.
At least 30 days prior to the date an Employee becomes a Participant, such
Employee must make an investment election which will apply to the
investment of the Participants' Basic 401(k) Contributions and Rollover
Contributions made with respect to such Employee. Such election shall be
made in the manner specified by the Retirement Plan Committee and shall be
made from the following:
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(a) Fixed Investment Fund
(b) Index Equity Investment Fund
(c) Index Bond Fund
(d) American Water Works Company, Inc. Stock Fund
(e) Any additional investment funds added pursuant to Section 4.1.
Any apportionment of investment elections among the available investment
funds shall be made in multiples of 1% only.
Section 4.7 A Participant may elect to change an investment election with
respect to the Participants' Basic 401(k) Contributions and Rollover
Contributions to be made hereunder from and after the first day of a
specified month. Such changes may not occur more often than once in any
calendar month. Such changes shall be limited to the choices described in
Section 4.6. A Participant's election to change an investment election
must be made in the manner specified by the Retirement Plan Committee
during the month for which the change is to be effective.
Section 4.8 A Participant may elect, in the manner specified by the
Retirement Plan Committee, to transfer any whole percentage of the value of
his Basic 401(k)Contributions Account or Rollover Account held in any of
the investment funds to any other investment fund. No more than one such
transfer may be elected in any one calendar month. Transfers shall be
valued as of the immediately preceding Valuation Date and shall be
effective as soon as administratively practicable, but not later than the
month following that in which the transfer election is made. Transfers
will be credited as provided in Section 4.10.
Section 4.9 Contributions made to this Plan by the Employer shall be
invested entirely in American Water Works Company, Inc. Stock. Dividends
on shares of American Water Works Company, Inc. stock held in the American
Water Works Company, Inc. Stock Fund will be reinvested in American Water
Works Company, Inc. shares.
Section 4.10 The value of a Participant's Accounts which are held in each
investment fund maintained hereunder shall be determined as of each
Valuation Date as follows:
(a) First, any transfers into or out of the Participant's Accounts in each
investment fund requested in the preceding month that remain to be
processed shall be effected.
(b) Second, Basic 401(k) Contributions and then Matching Contributions for
the month of the valuation are then posted to the Participant's
Accounts in each investment fund.
(c) Third, net earnings, gains or losses attributable to the investment
funds since the preceding Valuation Date shall be posted to the
Participant's Accounts in each such fund.
(d) Fourth, distributions attributable to withdrawals, terminations,
loans, retirements or death benefits will be deducted from the
Participant's Accounts within each investment fund.
Section 4.11 The amount of the net earnings, gains or losses and the
manner in which they are allocated to individual Participants' Accounts
shall be
25
<PAGE>
determined for each investment fund individually in accordance with the
particular contract(s) or investment vehicle(s) supporting such investment
fund and in accordance with the operating procedures of the Plan, as
applicable.
Section 4.12 Each Participant shall be entitled to direct the Plan
Administrator as to the manner in which the American Water Works Company,
Inc. Stock, including fractional shares, allocated to such Participant's
Account, are to be voted.
Section 4.13 The Plan Administrator shall provide each Participant with a
written statement of the value of his Participant Contributions Account and
his Employer Contributions Account maintained under this Plan. In no event
shall such statement be furnished less frequently than once each year.
ARTICLE V
---------
VESTING
-------
Section 5.1 The Participant's interest in his Basic 401(k) Contributions
Account, his Rollover Account and his Employer 401(k) Contributions Account
shall be fully vested at all times.
Section 5.2 The Participant's interest in his Employer Non-401(k)
Contributions Account shall become fully vested at the earliest to occur of
the following dates:
(a) The date of the Participant's death;
(b) The date the Participant incurs Total Disability;
(c) The date the Participant attains Normal Retirement Age;
(d) The date of termination of this Plan or the date of the complete
cessation of Employer Contributions hereunder; or
(e) The date the Participant becomes 100% vested in accordance with
Section 5.3.
Section 5.3 Prior to the date that the Participant becomes fully vested in
accordance with Section 5.2, the Participant shall become fully vested in
his Employer Non-401(k) Contributions Account after completion of five
years of Vesting Service.
The above paragraph notwithstanding, Qualified Matching Contributions
and/or Qualified Non-Elective Contributions made pursuant to Section 3.6 or
3.9(b) or (c) shall be fully vested at all times.
If any Participant shall have previously had a distribution from his
Employer Non-401(k) Contributions Account, his current vested interest in
his Employer Non-401(k) Contributions Account shall be equal to:
(a) the current value of his Employer Non-401(k) Contributions Account,
plus
26
<PAGE>
(b) the sum of any amounts previously distributed to the Participant from
his Employer Non-401(k) Contributions Account, multiplied by
(c) the percentage then applicable to the Participant in accordance with
the schedule of percentages stated in this Section, minus
(d) the sum of all amounts previously distributed to the Participant from
his Employer Non-401(k) Contributions Account.
Section 5.4 Subject to Section 5.5, in the event a Participant incurs a
Period of Severance, such Period of Severance shall be taken into account
for the purposes of determining the Participant's Period of Service if the
Participant again performs an Hour of Service within the 12 consecutive
month period that commences on the date he quit, was discharged or retired.
If the Participant fails to perform an Hour of Service within such 12
consecutive month period, the Period of Severance shall not count as a
Period of Service.
Section 5.5 Notwithstanding the provisions of Section 5.4 of this Article,
in the event a Participant severs from service with the Employer by reason
of a quit, discharge or retirement during an absence from service of 12
months or less for any reason other than a quit, discharge, retirement or
death, the following shall apply:
(a) If the Participant again performs an Hour of Service within 12 months
of the date on which he was first absent, such period of absence shall
be taken into account for the purposes of determining such
Participant's Period of Service.
(b) If the Participant fails to perform an Hour of Service within 12
months of the date on which he was first absent, the date on which he
severs from service by reason of a quit, discharge or retirement shall
be the Participant's Severance From Service Date and such period of
absence shall be treated as a Period of Severance.
Section 5.6 Service completed by a Participant with other related
employers (while related) shall be treated as service with the Employer for
the purposes of determining such Participant's vested interest under this
Plan. For this purpose, related employers include any of the following:
members of a controlled group of corporations (within the meaning of
Internal Revenue Code Section 414(b)), a group of trades or businesses
under common control (under Section 414(c) of such Code) of which the
Employer is a member, members of an affiliated service group (as defined in
Internal Revenue Code Section 414(m), and any other entity required to be
aggregated with the Employer pursuant to Section 414(o) of such Code.
Section 5.7 No amendment to the vesting provisions shall deprive a
Participant of his nonforfeitable right accrued without regard to such
amendment as of the later of the adoption date or effective date of the
amendment.
In the event an amendment is adopted which directly or indirectly affects
the computation of a Participant's nonforfeitable percentage, each
Participant with at least 3 years of Vesting Service with the Employer may
elect to have his nonforfeitable percentage computed under the Plan without
regard to such amendment.
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<PAGE>
Such election must be made in writing to the Plan Administrator any time
after the adoption of any such amendment, provided, however, that the
election period shall end no earlier than the later of 60 days following
the date the amendment is adopted/effective on the date the Participant is
given written notification of the amendment by the Employer or Plan
Administrator.
Section 5.8 Notwithstanding any provision of this Article to the contrary,
a Matching Contribution shall be forfeited if such contribution is reduced
from a Participant's account balance because the contribution to which it
relates is treated as Excess Section 401(k) Contribution, or excess
deferral.
ARTICLE VI
----------
WITHDRAWALS PRIOR TO TERMINATION OF EMPLOYMENT
----------------------------------------------
Section 6.1 At any time prior to termination of employment, a Participant
may elect to make one or more of the following optional withdrawals, but
only to the extent and under the conditions outlined in this Article. Such
withdrawal shall be limited to once in any six month period.
Section 6.2 A Participant who has attained age 59 1/2 may request a
withdrawal of all or a specified portion of his Participant Basic 401(k)
Contributions Account, his Employer Contributions Account, and his Rollover
Account. Any withdrawal made in accordance with this Section will be
withdrawn first from the Participant's Basic 401(k) Contributions Account.
Section 6.3 Prior to attaining age 59 1/2, a Participant may request a
hardship withdrawal of all or a specified portion of the distributable
amount of his Participant Deferral Contributions Account. For purposes of
a hardship withdrawal, the distributable amount is equal to the value of
his Participant Deferral Contributions Account as of the date of
distribution (including income allocable to such account but only to the
extent that the income was credited thereunder as of December 31, 1988)
reduced by the amount of previous distributions made on account of
hardship. A Participant may request a hardship withdrawal provided he
first withdraws the total amount available to him under his Rollover
Account.
For purposes of this Section, a hardship withdrawal is one that is
necessary in light of the immediate and heavy financial needs of the
Participant which cannot be met from other resources that are reasonably
available to the Participant. The Plan Administrator shall consider each
written request for hardship withdrawal individually in light of the
foregoing standard, provided that such standard shall be consistently
applied on a uniform and nondiscriminatory basis with respect to all
Participants.
A distribution may be treated as necessary to satisfy a financial need if
the Plan Administrator relies upon the employee's written representation
satisfactory to the Plan Administrator (unless the Plan Administrator has
actual knowledge to the contrary) that the financial need cannot reasonably
be relieved by any one or more of the following:
(a) Reimbursement or compensation by insurance;
(b) Reasonable liquidation of the Employee's assets;
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<PAGE>
(c) Cessation of Elective contributions under the Plan; and/or
(d) Other distributions or non-taxable loans from plans maintained by the
Employer or by any other Employer, or by borrowing from commercial
sources on reasonable commercial terms, in an amount sufficient to
satisfy the need.
For purposes of the above, a need cannot reasonably be relieved by one of
the actions stated above if the effect of such action would be to increase
the amount of the need.
A distribution will be deemed to be made on account of an immediate and
heavy financial need of a Participant if the withdrawal is on account of:
(a) Expenses for medical care (as described in Internal Revenue Code
Section 213(d)) previously incurred by the Participant, his spouse, or
dependents (as defined in Internal Revenue Code Section 152) or
necessary for these persons to obtain said medical care;
(b) Costs (excluding mortgage payments) directly related to the purchase
of a principal residence for the participant;
(c) Payment of tuition and related educational expenses for the next
twelve months of post-secondary education for the Participant, his
spouse, children, or dependents (as defined in Internal Revenue Code
Section 152); or
(d) Payments necessary to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage on that residence.
Under no circumstance shall a hardship withdrawal exceed the amount
necessary to satisfy the immediate and heavy financial need (including
amounts necessary to pay any federal, state, or local income taxes or
penalties reasonably anticipated to result from the withdrawal). The Plan
Administrator's determination in this respect shall be final.
Any provisions in this Plan to the contrary notwithstanding, Qualified
Matching Contributions and/or Qualified Non-Elective Contributions made
pursuant to Sections 3.6 or 3.9(b) or (c) may not be withdrawn prior to age
59 1/2 or separation from service.
Section 6.4 All withdrawals made pursuant to this Article shall be
distributed in a lump sum cash disbursement.
Section 6.5 All requests for withdrawals made pursuant to this Article
must be submitted in writing to the Plan Administrator within the 90-day
period ending on the Annuity Starting Date. If a Participant's vested
interest in the Plan exceeds (or at the time of any prior distribution
exceeded) $3,500, the Participant's request for a withdrawal shall be valid
only if the Participant has previously received the information described
in Section 8.5. All withdrawal requests made hereunder must specify the
total amount to be withdrawn from the Participant's Account(s). Unless
otherwise specified by the Participant, all withdrawals will be withdrawn
first from the Participant's Accounts held within the Fixed Investment
Fund. All such withdrawals shall be made as of the Valuation Date
coincident with or immediately following receipt by the Plan Recordkeeper
of proper written
29
<PAGE>
notification from the Plan Administrator or, if later, the Valuation Date
specified in such written notice.
ARTICLE VII
-----------
LOANS
-----
Section 7.1 A Participant in the Plan may borrow from the Plan, subject to
the following provisions of this Article VII and to such additional
standards as the Plan Administrator may adopt, by making prior written
application to the Plan Administrator. A Participant seeking a loan
hereunder must submit a written application (hereinafter referred to as the
"completed application") which shall (i) specify the terms pursuant to
which the loan is requested to be made, including the requested effective
date, (ii) authorize the repayment of the loan through payroll deductions,
(iii) provide all such information and documentation as the Plan
Administrator shall require, and (iv) include a promissory note, duly
executed by the Participant granting a security in the amount of the loan.
Section 7.2 Any loan to a Participant under this Article VII shall be
subject to the following requirements:
(a) The loan (when added to the outstanding balance of all other loans)
may not exceed the lesser of:
(i) $50,000 reduced by the excess (if any) of:
- The highest outstanding balance of loans from the Plan
during the one-year period ending on the day before the date
on which such loan was made, over
- The outstanding balance of loans from the Plan on the date
such loan was made; or
(ii) 50 percent of the value of the Participant's vested interest in
the Plan Accounts available for loans in Section 7.5 under the
Plan. For purposes of this Section 7.2, the value of a
Participant's vested interest shall be determined as of the
last Valuation Date which has been calculated at the time that
the loan application is submitted.
(b) The minimum amount which may be borrowed from the Plan by a
Participant shall be $1,000.00.
(c) The loan shall provide for a fixed rate of interest for the entire
term of the loan. The applicable interest rate for Plan loans shall
be consistent with the provisions of Code Section 4975(d)(1) and other
applicable legal requirements.
(d) The loan shall be for a term of one, two, three, four, or five years
at the Participant's discretion (a "personal loan").
30
<PAGE>
(e) A Participant shall be permitted only one loan in any Plan Year and no
more than one personal loan and one mortgage loan shall be outstanding
at any time.
(f) Notwithstanding the five-year limit in Section 7.2(d), any loan used
to acquire or construct any dwelling unit which, within a reasonable
time, is to be used as the principal residence of the Participant (a
"mortgage loan") may be for a term of up to 30 years; provided that
the term must be a multiple of 12 months.
(g) The Plan Administrator shall establish standards in accordance with
ERISA and the Code and such rules as it deems necessary which shall be
applied uniformly to all similarly situated Participants and shall
govern the Plan Administrator's approval or disapproval of completed
applications. The terms of each loan shall be set solely in
accordance with this Article VII and such standards adopted by the
Plan Administrator in accordance with Section 7.4 hereof. Such
standards prescribe for repayment at any time, a maximum and minimum
loan amount (within the limitations specified above), and may require
spousal consent for loans to married Participants and other relevant
factors.
Section 7.3 Promissory Note
(a) Each loan shall be evidenced by a promissory note executed by the
Participant and payable to the Plan Administrator, which note shall be
due and payable in full not later than the earliest to occur of: (i)
a fixed maturity date meeting the requirements of Section 7.2(d) or
(e) above; (ii) the Participant's death; or (iii) the time which the
Participant ceases to be an Employee covered under this Plan.
(b) The promissory note shall provide for the payment of equal monthly
installments of principal and interest on the unpaid balance of
principal at the fixed annual rate set forth in Section 7.2(c) on the
date the note is executed. The note shall further provide that the
monthly payments shall be made through automatic payroll deductions.
(c) The promissory note shall evidence such additional terms as are
required by this Article VII or by the Plan Administrator.
Section 7.4 The Plan Administrator shall, in accordance with its
established standards, review and approve or disapprove a completed
application as soon as practicable after its receipt thereof, and shall
promptly notify in writing the applying Participant of such approval or
disapproval.
Section 7.5 The Participant shall borrow only from his Employee Basic
401(k) Contributions Account and his Rollover Account, pro-rata against his
current investment funds.
Section 7.6 Each loan shall be made only from the account of the borrowing
Participant and shall be treated as an investment of the Participant's
Account or Accounts.
Section 7.7 Each loan to a Participant under this Article VII shall be
repaid in equal monthly amounts over a period meeting the requirements of
Section 7.2 hereof.
31
<PAGE>
The monthly installments must be paid through automatic payroll deductions
payable each month, except as provided by the Plan Administrator. No
prepayments will be permitted except with the written consent of the Plan
Administrator. If a loan is prepaid another loan in that category may not
be permitted until 12 months following the date of prepayment. All loan
repayments made through payroll deductions shall be transmitted by the
Company to the Trustee as soon as practicable after such amounts are
withheld.
Section 7.8 Each loan repayment of principal and interest will be
allocated proportionately to the Participant Contributions Accounts from
which the loan was taken as provided in Section 7.5 hereof according to the
Participant's current investment selection.
Section 7.9 Repayment of any loan under the Plan shall be secured by no
more than 50% of the Participant's interest in the Plan.
Section 7.10 If a Participant with an outstanding loan takes an authorized
leave of absence or incurs a temporary disability so the regular monthly
installment payments cannot be made on a payroll deduction basis, the
Participant will be required to make the regular monthly payments at such
time and place as shall be established by the Plan Administrator.
Section 7.11 If at any time prior to the full repayment of a loan to a
Participant under the Plan, the Participant should cease to be a
Participant under the Plan by reason of his or her retirement, death,
severance from employment, change to hourly status, or otherwise, or the
Plan should terminate, or an event of default otherwise occurs under the
documents evidencing the loan, the unpaid balance owed on the loan by the
Participant will be immediately due and payable in a lump sum. If the
Participant does not repay the full amount of the unpaid balance within the
time established by the Plan Administrator, the amount of any distribution
which would have otherwise been available to the Participant under the
terms of the Plan shall be reduced by the amount of outstanding principal
and interest on the loan at the time of such distribution and applied in
satisfaction of the Participant's loan obligations to the extent possible.
To the extent that the reduction in the amount of the distribution is
sufficient to discharge the Participant's total outstanding liability under
the loan, such reduction shall constitute a complete discharge of all
liability of the Participant to the Plan sufficient to fully discharge the
Participant's obligation under the loan. Interest on the outstanding
amount of the default loan shall continue to accrue until such time as the
balance of the defaulted loan amount is paid or such time as the
Participant would have been entitled to a distribution due to death,
disability or termination of employment. The Participant, his or her
estate, heirs, successors and assigns shall be liable for the payment of
the remaining amounts due under the loan and such Participant, his or her
estate, heirs, successors or assigns shall make payment upon written notice
by the Plan Administrator.
Section 7.12 Notwithstanding anything to the contrary contained herein,
each such loan shall be made only in accordance with the regulations and
rulings of the Internal Revenue Service and other applicable state or
federal laws. The Plan Administrator shall act in its sole discretion to
ascertain whether the requirement of such laws, regulations, and rulings
have been met.
32
<PAGE>
ARTICLE VIII
------------
DISTRIBUTIONS UPON RETIREMENT OR TOTAL DISABILITY
-------------------------------------------------
Section 8.1 For the purposes of this Article, the following definitions
shall apply:
(a) "Qualified Election" means a waiver of a Qualified Joint and Survivor
Annuity. The waiver must be in writing and must be consented to by
the Participant's Spouse. Further, such waiver must designate a
specific alternate Beneficiary and form of benefit. The Spouse's
consent to a waiver must be witnessed by a Plan representative or
notary public. Notwithstanding this consent requirement, if the
Participant establishes to the satisfaction of a Plan representative
that such written consent may not be obtained because there is no
Spouse or the Spouse cannot be located, a waiver will be deemed to be
a Qualified Election. Any consent necessary under this provision will
be valid only with respect to the Spouse who signs the consent, or in
the event of a deemed Qualified Election, the designated Spouse.
Additionally, a revocation of a prior waiver may be made by a
Participant without the consent of the Spouse at any time before the
commencement of benefits. The number of revocations shall not be
limited. No waiver obtained under this provision shall be valid
unless the Participant has previously received the information
described in Section 8.5.
(b) "Spouse" means the Spouse or surviving Spouse of the Participant,
provided that a former Spouse will be treated as the Spouse or
surviving Spouse to the extent provided under a qualified domestic
relations order as described in Section 414(p) of the Internal Revenue
Code. The Spouse, to be eligible, must be married to the Participant
on the earlier of the day on which the Participant dies or retires and
begins to receive benefit payments. It shall be the Participant's
sole responsibility to keep the Plan Administrator informed of his
marital status.
(c) "5 Percent Owner" means a 5 Percent Owner as described in Section 416
(i)(1)(B) of the Internal Revenue Code.
Section 8.2 A Participant shall be entitled to a distribution, in
accordance with Section 8.3 or Section 8.4, of his Participant
Contributions Account and his Employer Contributions Account upon his
severance from service with the Employer on or after his attainment of
Normal Retirement Age, or upon his severance from service by reason of his
incurring Total Disability. If the Participant continues in the employ of
the Employer beyond the Participant's Normal Retirement Age, such
distribution shall be deferred until the Participant's actual retirement
except as provided in Section 8.7.
Section 8.3 Except as provided in Section 11.7, unless an optional form of
benefit is selected within the 90-day period ending on the Annuity Starting
Date, a Participant's Participant Contributions Account and Employer
Contributions Account will be paid in a Lump Sum.
33
<PAGE>
Section 8.4 The optional form of benefit (pursuant to a Qualified
Election) available upon retirement or upon incurring Total Disability
shall be an immediate annuity purchased under the contract(s). A married
Participant can elect an annuity other than a Qualified Joint and Survivor
Annuity pursuant to a Qualified Election only. The Plan Administrator
shall furnish the Participant with a description of the optional forms
available in accordance with Section 8.5. The Participant shall then elect
the method or methods of payment provided, however, that:
(a) no method of payment providing for a guaranteed number of monthly
payments may be elected which would assure payment beyond the
actuarial life expectancy of the Participant and the Participant's
spouse determined on a joint and survivorship basis; and
(b) the value of any payment to a Beneficiary other than the Participant's
Spouse shall be less than 50% of the value of the Participant's
interest under this Plan determined as of the Participant's Annuity
Starting Date.
An election of any method or methods or payment made by a Participant in
accordance with this Section may be revoked by the Participant and a
subsequent election made at any time prior to the 30th day preceding the
Participant's Annuity Starting Date. Any election or revocation of a
previous election must be made in writing and submitted to the Plan
Administrator.
Section 8.5 The Plan Administrator shall provide each Participant
(excluding nonvested Participants who are no longer employed by the
Employer) with a written non-technical explanation of the forms of benefit
available under this Plan, including the Qualified Joint and Survivor
Annuity; the terms and conditions of a Qualified Joint and Survivor
Annuity; the Participant's right to make, and the effect of an election to
waive, the Qualified Joint and Survivor Annuity form of benefit; the rights
of a Participant's Spouse; the right to make, and the effect of a
revocation of, a previous election to waive the Qualified Joint and
Survivor Annuity; and the relative financial effect on the Participant's
annuity of such election. Such explanation shall also include a general
description of the eligibility conditions and other material features of
the optional forms of benefit available under this Plan (including
sufficient additional information to explain the relative values of the
optional forms of benefit). The information described above shall be
provided no less than 30 days and no more than 90 days before the Annuity
Starting Date. The information described in this Section shall also
include a written statement informing such Participant of the availability
of additional information and how this information may be obtained. The
Participant may request this information at any time prior to his actual
retirement date in accordance with Section 8.6.
Section 8.6 A Participant may make a written request to the Plan
Administrator for an explanation of the terms and conditions of the
Qualified Joint and Survivor Annuity and the specific financial effects of
any optional election available to the Participant. The Plan Administrator
shall then furnish to such Participant a written explanation, in non-
technical language, of the specific financial effects of a benefit election
in terms of dollars per annuity payment based on the value of the
Participant's Participant Contributions Account and Employer Contributions
Account as of the most recent Valuation Date for which such data is
available. This explanation
34
<PAGE>
shall be personally delivered or mailed (first class mail, postage prepaid)
within 30 days from the date of the Participant's request. The Plan
Administrator need comply with only one such request made by or with
respect to a particular Participant.
Section 8.7 With respect to the Participant's Annuity Starting Date,
distributions in accordance with this Article shall be made based on the
value of the Participant's Participant Contributions Account and Employer
Contributions Account as of the Valuation Date coincident with or
immediately following receipt by the Plan Recordkeeper of written
notification from the Plan Administrator, or if later, the Valuation Date
specified in such written notification, plus any Participant Contributions
or Employer Contributions which have been made to this Plan since such
Valuation Date.
The payment of benefits shall be made or shall commence to be made no later
than the 60th day following the close of the Plan Year in which the
distribution event occurs unless:
(a) the Participant shall have made a written irrevocable election to the
Plan Administrator prior to his severance from service with the
Employer, to defer payment to a later date which is not later than the
first Valuation Date of the calendar year next succeeding the
distribution event (such election may not be made, however, if the
exercise of the election will cause benefits payable under the Plan
with respect to the Participant, in the event of such Participant's
death, to be more than "incidental" within the meaning of paragraph
(b)(1)(i) of Internal Revenue Service Regulation 1.401-1) and the Plan
Administrator shall have so informed the Trustee in the distribution
notice, or
(b) the amount of such payment cannot be ascertained by such date.
Notwithstanding the preceding paragraph, the actual payment of benefits
must commence no later than April 1 of the calendar year following the
calendar year in which a Participant attains age 70 1/2, without regard to
the Participant's actual date of retirement or date of severance from
service by reason of his incurring Total Disability. For purposes of the
preceding sentence, a Participant who attained age 70 1/2 in the 1988
calendar year, who is not a 5 percent owner (as defined in Internal Revenue
Code Section 416(i)), and who has not retired by January 1, 1989 shall be
deemed to have attained age 70 1/2 in the 1989 calendar year. A
Participant who has attained age 70 1/2 before January 1, 1988 and who is
not a 5 percent owner (as defined in Internal Revenue Code Section 416 (i))
in the Plan Year ending with or within the calendar year in which the
individual attains age 66 1/2 or in any succeeding Plan Year, may defer the
commencement of benefit payments until April 1 of the calendar year
following the later to occur of:
(a) the calendar year in which the Participant attains age 70 1/2; or
(b) the calendar year in which the Participant's termination of employment
with the Employer occurs.
The distribution of the Participant's Participant Contributions Account and
Employer Contributions Account shall be made over one of the following
periods (determined on the basis consistent with the contract(s)):
(a) the life of the Participant,
35
<PAGE>
(b) the life of the Participant and designated Beneficiary,
(c) a period not extending beyond the life expectancy of the Participant,
or
(d) a period not extending beyond the life expectancy of the Participant
and a designated Beneficiary.
If a designation is revoked, any subsequent distribution must satisfy the
requirements of Section 401 (a)(9) of the Internal Revenue Code as amended.
Any changes in the designation will be considered to be a revocation of the
designation. However, the mere substitution or addition of another
Beneficiary (one not named in the designation) under the designation will
not be considered to be a revocation of the designation, so long as such
substitution or addition does not alter the period over which distributions
are to be made under the designation, directly or indirectly (for example,
by altering the relevant measuring life).
Any distribution required under the incidental death benefit requirements
of Section 401(a) of the Internal Revenue Code shall be treated as a
distribution required under Section 401(a)(9) of such Code.
Notwithstanding any provision of this Plan to the contrary, payment of
benefits will be made in accordance with Internal Revenue Code Section
401(a)(9) and the regulations thereunder (including Section 1.401(a)(9)-2
of such regulations).
Section 8.8 Anything in this Article to the contrary notwithstanding, the
"Qualified Election" set forth in Article VIII, Section 8.1(a) hereof is
not required of a Participant if
(a) the Participant does not elect a payment of benefits in the form of a
life annuity, and
(b) the Participant does not have in his or her Participant Contributions
Account and the Employer Contributions Account any assets from a
defined benefit plan and/or any assets from a defined contribution
plan which is subject to the funding standards of Section 412 of the
Internal Revenue Code.
Section 8.9 All payments made under this Article shall be made in cash, in
a lump sum, or annuity, or any combination thereof, provided that a
Participant to whom a distribution is payable may request, his distribution
from the American Water Works Company, Inc. Stock Fund be made in-kind
(except that payment shall be made in cash of (a) fractional shares on the
basis of the market value of American Water Works Company, Inc. shares on
the Valuation Date as of which the amount of the distribution is determined
and (b) his share of the portion, if any, of the American Water Works
Company, Inc. Stock Fund is not then invested in American Water Works
Company, Inc. shares).
36
<PAGE>
ARTICLE IX
----------
DEATH BENEFITS
--------------
Section 9.1 For the purposes of this Article, the term "Spouse" shall have
the same meaning as set forth in Article VIII, Section 8.1.
Section 9.2 If a Participant dies before the Annuity Starting Date, then
the Participant's Participant Contributions Account and Employer
Contributions Account shall be paid to the Participant's Spouse or, if it
is established to the satisfaction of a Plan representative that there is
no Spouse or that the Spouse cannot be located, to the Participant's
designated Beneficiary. Except as provided in Section 11.7, payment under
this Article shall be made as a lump sum, as an immediate annuity purchased
under the contract(s) or as a combination of such methods of payment. The
death benefit which shall become payable if a Participant dies after
benefits have commenced shall be provided in accordance with the particular
form of annuity which was payable to the Participant.
Section 9.3 The deceased Participant's surviving Spouse or designated
Beneficiary may make a written election to have the death benefit payable
hereunder distributed within a reasonable period after the Participant's
death. Such election must be made within the 90-day period ending on the
Annuity Starting Date and shall be valid only if the surviving Spouse or
designated Beneficiary has previously received the information described in
Section 9.4.
Section 9.4 The Plan Administrator shall furnish to the deceased
Participant's Spouse or designated Beneficiary (whichever is applicable) a
written non-technical explanation of the methods of payment which may be
selected. This explanation shall include a statement of the financial
effect (in terms of dollars) of each method of payment based on the value
of the Participant's Participant Contributions Account and Employer
Contributions Account as of the most recent Valuation Date for which such
data is available. Furthermore, such explanation shall inform the deceased
Participant's Spouse or designated Beneficiary of the right, if any, to
defer distribution of the death benefit payable hereunder to a later date.
Such explanation shall be provided no less than 30 days and no more than 90
days prior to the Annuity Starting Date.
Section 9.5 With respect to the Annuity Starting Date of any Participant's
Spouse or designated Beneficiary, the payment of death benefits in
accordance with this Article shall be made based on the value for the
Participant's Participant Contributions Account and Employer Contributions
Account as of the Valuation Date coincident with or immediately following
receipt by the Plan Recordkeeper of written notification from the Plan
Administrator or, if later, the Valuation Date specified in such written
notification plus any Participant Contributions or Employer Contributions
which have been made to this Plan since such Valuation Date.
The payment of death benefits shall be made or shall commence to be made in
the following manner:
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<PAGE>
(a) If the Participant dies after benefits have commenced, distribution of
such benefits will be continued in accordance with the form of annuity
in effect prior to the Participant's death.
(b) If the Participant dies before benefits have commenced, the entire
death benefit, if any, due as a result of the Participant's death,
will be distributed no later than December 31 of the calendar year
containing the fifth anniversary of the Participant's death except to
the extent that a written election is made to receive distributions in
accordance with (i) or (ii) below:
(i) If any portion of the Participant's benefit is payable to a
designated Beneficiary, distributions may be made in
substantially equal amounts over the life or life expectancy of
the designated Beneficiary commencing no later than December 31
of the calendar year immediately following the calendar year of
the Participant's death;
(ii) If the designated Beneficiary is the Participant's surviving
Spouse, the date distributions are required to begin in
accordance with (i) above shall not be earlier than the later
of December 31 of the calendar year immediately following the
calendar year of the Participant's death or December 31 of the
calendar year in which the Participant would have attained age
70 1/2, and, if the Spouse dies before payments begin,
subsequent distributions under a written designation which was
made before January 1, 1984, and such method of distribution
meets the requirements of Internal Revenue Code Section
401(a)(9) as in effect prior to January 1, 1984, then any
distributions can be made without regard to this Section. If
this designation is revoked, any subsequent distribution must
satisfy the requirements of Section 401(a)(9) of the Internal
Revenue Code of 1986, as amended, and the regulations
thereunder.
If such designation is revoked in writing subsequent to the date
distributions are required to begin, the Plan shall distribute by the end
of the calendar year following the calendar year in which the revocation
occurs the total amount not yet distributed which would have been required
to have been distributed to satisfy Section 401(a)(9) of the Internal
Revenue Code and the regulations thereunder, but for the designation. Any
changes in the designation will be considered to be a revocation of the
designation. However, the mere substitution or addition of another
Beneficiary (one not named in the designation) under the designation will
not be considered to be a revocation of the designation, so long as such
substitution or addition does not alter the period over which distributions
are to be made under the designation, directly or indirectly (for example,
by altering the relevant measuring life).
Any distribution required under the incidental death benefit requirements
of Section 401(a) of the Internal Revenue Code shall be treated as a
distribution required under Section 401(a)(9) of such Code.
Notwithstanding any provision of this Plan to the contrary, payment of
benefits will be made in accordance with Internal Revenue Code Section 401
(a)(9) and the regulations thereunder (including Section 1.401(a)(9)-2 of
such regulations).
38
<PAGE>
Section 9.6 Any designation of a Beneficiary for the payment of death
benefits under this Article shall be evidenced by a written instrument
filed with the Plan Administrator and signed by the Participant. If no
such designation is on file at the time of the Participant's death, or if
for any reason in the sole discretion of the Plan Administrator, such
designation is defective, then the Participant's Spouse, if living, the
Participant's children, if living, or the Participant's estate, in that
order of preference, shall be conclusively deemed to be the Beneficiary
designated to receive such benefit.
Section 9.7 All payments made under this Article shall be made in cash, in
a lump sum or annuity, or any combination thereof, provided that, a
Beneficiary to whom a distribution is payable may request, his distribution
from the American Water Works Company, Inc. Stock Fund be made in-kind
(except that payment shall be made in cash of (a) fractional shares on the
basis of the market value of American Water Works Company, Inc. shares on
the Valuation Date as of which the amount of the distribution is determined
and (b) his share of the portion, if any, of the American Water Works
Company, Inc. Stock Fund that is not then invested in American Water Works
Company, Inc. shares).
ARTICLE X
---------
SEVERANCE FROM SERVICE
----------------------
Section 10.1 Upon a Participant's severance from service with the Employer
prior to his attainment of Normal Retirement Age, other than by reason of
Total Disability or death, the Participant's vested interest in his
Participant Contributions Account and Employer Contributions Account shall
be determined in accordance with Article V hereof. Except as provided in
Section 8.7 and Section 10.2, distribution of the Participant's vested
interest in the Plan shall be made or commence to be made as soon as
practicable after the Valuation Date coincident with or next following the
Participant's attainment of Normal Retirement Age.
Section 10.2 If a Participant severs from service with the Employer in
accordance with Section 10.1 of this Article, the Participant may elect to
receive the distribution of his entire vested interest in the Plan at a
date earlier than his Normal Retirement Date in any method(s) described in
Article VIII, Section 8.3 and 8.4 hereof. Except as provided in Article
VIII, Section 8.7, payment of such benefits shall be made as soon as
practicable after the Valuation Date following such election.
If the vested interest of a Participant who severs from service with the
Employer has never exceeded $3,500, that vested interest may be distributed
without the Participant's consent. If the vested interest of a Participant
who severs from service with the Employer exceeds $3,500, that vested
interest may not be distributed without the Participant's consent. The
consent of the Participant's spouse, if any, shall not be required for
either such distribution.
Section 10.3 If a Participant severs from service with the Employer under
circumstances described in Section 10.1, the Participant's non-vested
39
<PAGE>
interest in the Plan shall be placed in a suspense account and held for
five complete calendar years. Any amounts credited to such a suspense
account will continue to be held in the American Water Works Company, Inc.
Stock Fund and any dividends credited thereto will be reinvested in that
Stock Fund.
Section 10.4 If within the period described in Section 10.3, the
Participant returns to employment and performs an Hour of Service, the
amount held in suspense on that Participant's behalf shall be restored to
his Account in the American Water Works Company, Inc. Stock Fund. If the
Participant does not return to employment and perform an Hour of Service
within the period described in Section 10.3 above, the amount held in
suspense on the Participant's behalf shall be forfeited and applied to
reduce the next Employer Contribution due under the Plan.
Section 10.5 All payments made under this Article shall be made in cash in
a lump sum or annuity, or any combination thereof, provided that, a
Participant to whom a distribution is payable may request, his distribution
from the American Water Works Company, Inc. Stock Fund be made in-kind
(except that payment shall be made in cash of (a) fractional shares on the
basis of the market value of American Water Works Company, Inc. shares on
the Valuation Date as of which the amount of the distribution is determined
and (b) his share of the portion, if any, of the American Water Works
Company, Inc. Stock Fund that is not then invested in American Water Works
Company, Inc. shares).
Section 10.6 Distributions Pursuant to a Qualified Domestic Relations
Order ("QDRO"). Unless otherwise provided by the QDRO, an Alternate Payee
shall be entitled to elect any distribution option that would be available
to a Participant following that Participant's "Severance From Service".
ARTICLE XI
----------
ADMINISTRATION
--------------
Section 11.1 The Plan Administrator and the Named Fiduciary shall
supervise and control the operation of this Plan in accordance with the
terms of this Plan and shall have the authority to determine all questions
arising in connection with the administration, interpretation, and
application of the terms of this Plan (subject to the provision that such
authority shall be applied consistently in a nondiscriminatory manner with
respect to all Participants).
Section 11.2 The Plan Administrator shall see that books of account are
kept which shall show all receipts and disbursements and a complete record
of the operation of the Plan, including, but not limited to, records of the
accounts of the Participants.
Section 11.3 The Plan Administrator will direct the investments of Plan
assets in accordance with the investment selections made pursuant to
Article IV.
Section 11.4 For the purpose of carrying out its duties, the Plan
Administrator may, in its discretion, designate a funding agent, firms or
corporations, or other entity, to carry out its responsibilities under the
40
<PAGE>
Plan (other than its responsibility under Section 4.12) as the Plan
Administrator may deem appropriate.
Section 11.5 In any case where the provisions of this Plan require the
consent or approval by the Plan Administrator of an election or request
made by an Employee, Participant or Beneficiary in order to make such
election or request effective, the Plan Administrator shall act on such
election or request as promptly as shall be reasonable under the
circumstances. In any case where action by the Plan Recordkeeper or the
Insurer is necessary in order to make operative an effective election or
request made by an Employee, Participant or Beneficiary, it shall be the
responsibility of the Plan Administrator to transmit such election or
request to the Plan Recordkeeper or the Insurer in writing and as promptly
as shall be reasonable under the circumstances.
The Plan Recordkeeper or the Trustee shall not be obliged to take action
with respect to any particular election or request unless the Plan
Recordkeeper or the Trustee shall have received the election or request in
such form and detail as they may reasonably require.
Section 11.6 In the event any Participant is denied a claim for benefits,
such Participant shall be advised in writing of the reasons for such
denial, in a manner calculated to be understood by such person, and shall
thereafter have the right to a full and fair review by the Plan
Administrator of the decision denying such claim for benefits, if a request
in writing is made promptly after such denial for such a review.
Section 11.7 Anything in this Plan to the contrary notwithstanding, for
any Participant whose nonforfeitable accrued benefit at his date of
severance does not exceed $3,500, and has never exceeded $3,500, (or such
other amount as may apply pursuant to Section 401(a) of the Internal
Revenue Code), the Plan Administrator, without Participant or Spousal
consent, shall authorize a lump sum cash disbursement of the Participant's
nonforfeitable interest in this Plan to the Participant, or if applicable,
such Participant's Spouse or Beneficiary. Such disbursements shall be made
as of the Valuation Date coincident with or next following receipt by the
Plan Recordkeeper of the proper authorization. No distribution may be made
under the preceding provisions of this Section 11.7 after a Participant's
Annuity Starting Date unless the Participant and, if applicable, his Spouse
(or where the Participant has died, the surviving Spouse) consent in
writing, pursuant to a Qualified Election, to such distribution within 90
days of the distribution date. For purposes of this Section 11.7,
"Spouse", and "Qualified Election" shall have the respective meaning set
forth in Article VIII hereunder.
ARTICLE XII
-----------
RIGHTS OF PARTICIPANTS
----------------------
Section 12.1 The adoption and maintenance of this Plan shall not be
construed as creating, modifying or affecting any contract of employment
between the Employer and any Employee, and the Employer shall have the
right, in its sole discretion, to deal in all respects, with Employees,
including, but not limited to, their hiring, discharge, compensation and
conditions of employment and otherwise as though this Plan did not exist.
No Employee
41
<PAGE>
shall have any right to question the action of the Employer in terminating
the liability to contribute to this Plan or in terminating this Plan in its
entirety. Each Participant shall have the right to see the record of the
Employer's accounts with respect to his own participation only and shall
have no right to inquire as to accounts with respect to other persons.
Section 12.2 The sole rights of a Participant under this Plan shall be to
have this Plan administered according to its provisions, to receive
whatever benefits to which he may be entitled hereunder and to name the
Beneficiary to receive any death benefits to which such person may be
entitled in accordance with the terms of this Plan.
Section 12.3 The purpose of the Plan is to provide every Employee with a
vehicle for convenient and regular savings. Amounts in the Plan, including
earnings, can be used for any of the Employee's financial needs, including
retirement planning. No right or interest of any kind of any Participant
in this Plan shall be transferable or assignable by the Participant or
subject to alienation, anticipation or encumbrance in any manner whatsoever
by the Participant, and insofar as the laws of any jurisdiction whose laws
may be applicable permit, no rights or interest of any kind of any
Participant shall be subject to garnishment, attachment, execution or levy
of any kind. The preceding also applies to the creation, assignment, or
recognition of a right to any benefit payable with respect to a Participant
pursuant to a domestic relations order, unless such order is determined to
be a qualified domestic relations order, as defined in Section 414(p) of
the Internal Revenue Code, or any domestic relations order entered before
January 1, 1985. Upon receipt of a domestic relations order, the Plan
Administrator shall, within a reasonable period of time, review the
domestic relations order to determine whether it is a qualified domestic
relations order. The Administrator shall promptly notify the Participant
and the alternate payee(s) of the procedures for determining whether such
order is qualified. Until such determination has been made, the
Administrator shall defer the payment of any disputed benefits.
ARTICLE XIII
------------
TERMINATION OF THE PLAN
-----------------------
Section 13.1 This Plan may be terminated by American Water Works Company,
Inc. at any time for any reason. Any other Employer may terminate its
participation in the Plan at any time for any reason.
Section 13.2 Except as provided in Article XV, each Participant and the
Beneficiary of each deceased Participant shall be vested with all rights to
any funds in the investment accounts as of the date of such termination,
and such funds shall be distributed to such persons within a reasonable
time in a manner consistent with the provisions of Article VIII, Article
IX, and Section 13.5 hereof; provided, however, that any such annuity
purchased therein may be purchased as a deferred annuity rather than as an
immediate annuity.
Section 13.3 Any forfeitures which shall have occurred pursuant to the
terms of the Plan prior to the termination of this Plan but which shall not
have been applied to reduce Employer Contributions, shall be distributed
pro-rata
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<PAGE>
to those Participants who were Employees of the Employer on the effective
date of the termination of this Plan in the same proportion that each such
Participant's Employer Non-401(k) Contributions Account bears to the sum of
such account balances of all such Participants. Any such amounts, if
applicable, shall be deemed Employer Non-401(k) Contributions and shall be
maintained in the Participant's Employer Non-401(k) Contributions Account.
Section 13.4 In the event of a partial termination of this Plan, each
Participant affected by such partial termination shall be vested with all
rights to any funds in the investment accounts as of the date of such
partial termination, and such funds shall be distributed to such persons
within a reasonable time in a manner consistent with the provisions of
Article VIII, Article IX, and Section 13.5, hereof; provided, however, that
any such annuity purchased therein may be purchased as a deferred annuity
rather than as an immediate annuity.
Section 13.5 Notwithstanding any provision of this Article to the
contrary, a distribution of any funds held in a Participant's Participant
Deferral Contributions Account and Employer 401(k) Contributions Account
may only be made upon Plan termination if the Employer does not establish
or maintain a successor plan. For this purpose, a successor plan is any
other defined contribution plan maintained by the Employer which exists at
the time the Plan is terminated or within the period ending twelve months
after the distribution of all assets from the Plan. However, if fewer than
two percent of the employees who are eligible under the Plan are or were
eligible under another defined contribution plan at any time during the
twenty four-month period beginning twelve months before the Plan
termination, the other plan is not a successor plan. In applying the
provisions of this Section, the term "defined contribution plan" has the
meaning specified under Internal Revenue Code Section 414(i) but does not
include an employee stock ownership plan (as defined in Internal Revenue
Code Section 4975(e) or 409) or a simplified employee pension plan (as
defined in Internal Revenue Code Section 408(k)). A distribution under
this section is subject to the consent and election rules contained in
Internal Revenue Code Sections 411(a)(11) and 417. In addition, a
distribution hereunder may only be made if it is a lump sum distribution.
For this purpose, the term "lump sum distribution" shall have the meaning
provided by Internal Revenue Code Section 402(e)(4), without regard to
subparagraphs (A)(i) through (iv), (B), and (H), thereof.
ARTICLE XIV
-----------
AMENDMENT
---------
Section 14.1 American Water Works Company, Inc. shall have the right, in
its sole discretion, to amend this Plan in whole or in part at any time and
from time to time. In addition, the Retirement Plan Committee shall have
the right to amend this Plan in whole or in part at any time and from time
to time, provided that any such amendment shall not materially increase the
cost of the Plan. Any amendment may be made retroactively effective.
Section 14.2 It is expressly understood, however, that the power of the
Employer to amend this Plan is subject to this Section 14.2 No amendment
shall be made which would:
43
<PAGE>
(a) deprive any Beneficiary of a then deceased Participant of the right to
receive the benefits to which the Beneficiary may be entitled,
(b) deprive any Participant of the benefits to which the Participant is
entitled,
(c) deprive any Participant of any of the proportionate interest in this
Plan to which the Participant would be entitled were he to sever from
service with the Employer on the date of such amendment or reduce a
Participant's accrued benefit determined (without regard to such
amendment) as of the later of the amendment's adoption date or
effective date. Notwithstanding the provisions of this subparagraph
(c), a Participant's accrued benefit may be reduced to the extent
permitted under Internal Revenue Code Section 412(c)(8), to the extent
it may be required to qualify (or as a condition of continued
qualification of this Plan) under Section 401(a) of the Internal
Revenue Code, or to the extent required by the Employee Retirement
Income Security Act of 1974, as amended from time to time. For
purposes of this subparagraph (c), an amendment which has the effect
of decreasing a Participant's accrued benefit or eliminating an
optional form of benefit, with respect to benefits attributable to
service before the later of the amendment's adoption date or effective
date, shall be treated as reducing an accrued benefit.
Section 14.3 Any merger or consolidation with, or transfer of assets or
liabilities to, any other plan shall not be permitted unless each
Participant's interest in this Plan immediately after such merger,
consolidation, or transfer (if this Plan had then terminated) is equal to
or greater than each Participant's interest in this Plan immediately prior
to the merger, consolidation, or transfer (if this Plan had then
terminated).
ARTICLE XV
----------
REVOCABILITY
------------
Section 15.1 This Plan is based upon the condition that it shall be
approved and qualified by the Internal Revenue Service as meeting the
requirements of the Internal Revenue Code and regulations issued thereunder
with respect to profit sharing plans. This Plan shall be established and
maintained in conformance with the Employee Retirement Income Security Act
of 1974, as amended from time to time.
Section 15.2 Any provisions of this Plan to the contrary notwithstanding,
if an initial formal determination shall be made that this Plan does not
qualify under the terms of Section 401 of the Internal Revenue Code there
shall be no vesting in any Participants of any assets of this Plan held by
the Insurer which are attributable to Employer Contributions and the
Insurer, upon receipt of written notice from the Employer, together with a
copy of such determination, shall transfer and pay over to the Employer all
of the net assets in this Plan which are attributable to Employer
Contributions and which remain after deduction of proper expenses of
termination. Such payment shall be made within one year after the
determination and shall apply only if the application for the determination
is made by the time prescribed by law for filing the Employer's tax return
for the taxable year in which the Plan
44
<PAGE>
was adopted, or such later date as the Secretary of the Treasury may
prescribe. The assets in this Plan which are attributable to Participant
Contributions shall be returned to the applicable Participants and this
Plan shall thereupon cease to exist.
Section 15.3 Any provisions of this Plan to the contrary notwithstanding,
Employer Contributions are expressly conditioned upon the deductibility of
such contributions under Section 404 of the Internal Revenue Code. Upon
the Employer's written request, Employer Contributions which where made by
a mistake of fact or conditioned upon their deductibility shall be returned
to the Employer. Furthermore, upon the Employer's written request, Basic
Participant Contributions made by a mistake of fact will be, to the extent
necessary, returned to the Participant. The return of any amount which
becomes due under this Section shall be made within one year of the payment
of the mistaken contribution or the disallowance of the deduction (to the
extent disallowed).
ARTICLE XVI
-----------
TOP-HEAVY PROVISIONS
--------------------
Section 16.1 The provisions of this Article XVI shall become operative for
any Plan Year which begins after 1983 in which this Plan is deemed to be a
Top-Heavy Plan in accordance with Section 16.3 hereof. The provisions of
Section 16.5 hereof shall remain in effect for all Plan Years once the Plan
or Aggregation Group is first deemed to be Top-Heavy.
Section 16.2 For the purposes of this Article, the following definitions
shall apply:
(a) "Compensation" has the meaning set forth in Article I, Section 1.8
herein.
(b) "Determination Date" means any date on which the Plan Administrator
tests the Plan to determine if the Plan is Top-Heavy. In the first
Plan Year the Determination Date shall be the last day of such Plan
Year. In all other Plan Years, the Determination Date shall be the
last day of the Plan Year which precedes the Plan Year for which the
test is being made.
(c) "Key Employee" means any Employee or former Employee who at any time
during the Plan Year or any of the four preceding Plan Years is:
(i) an officer of the Employer having an annual Compensation, while
an officer, greater than 50% of the amount in effect under
Section 415(b)(1)(A) of the Internal Revenue Code (the defined
benefit plan dollar limitation) for the calendar year in which
any such Plan Year ends;
(ii) one of the ten Employees owning the largest interests in the
Employer and having annual Compensation from the Employer of
more than the limitation in effect under Section 415(c)(1)(A)
of the Internal Revenue Code (the defined contribution plan
dollar limitation) for the calendar year in which such Plan
Year ends.
45
<PAGE>
However, any Employee included in this category must own more
than one-half percent interest in the Employer. If two
Employees have the same interest in the Employer, the Employee
having the greater annual Compensation from the Employer shall
be treated as having a larger interest;
(iii) a five (5) percent owner of the Employer;
(iv) a one (1) percent owner of the Employer having an annual
Compensation (within the meaning of Section 414(q)(7) of the
Internal Revenue Code)from the Employer of more than $150,000;
with the meaning set forth in Section 416(i)(1) of the Internal Revenue
Code. The Beneficiary of a Key Employee is treated as a Key Employee and
the Beneficiary of a former Key Employee is treated as a former Key
Employee.
(d) "Participant" includes any Plan Participant as well as any Employee
who is a member of the Covered Employment Classification and is
otherwise excluded from participating in this Plan merely because the
Employee's Compensation is less than a specified amount, if
applicable, as well as any Employee who is otherwise excluded from
participating in this Plan due to a failure to make mandatory Employee
contributions, if applicable.
(e) "Permissive Aggregation Group" means the group of plans of the
Employer that are required to be aggregated, plus one or more plans of
the Employer which are not part of a Required Aggregation Group but
which satisfy the requirements for qualification under Section
401(a)(4) and Section 410 of the Internal Revenue Code when considered
together with the Required Aggregation Group, as long as the benefits
provided under such plan or plans are comparable to the benefits
provided under this Plan. The plans shall be aggregated by adding the
results of each plan as of the determination date for each such plan
that falls within the same calendar year.
(f) "Required Aggregation Group" means the group of plans of the Employer
in which any Key Employee of the Employer participates or participated
at any time during the determination period (regardless of whether a
plan terminated). The determination period is the Plan Year
containing the Determination Date and the four preceding Plan Years.
In addition, any other plan or plans of the Employer combined with
this Plan in order to satisfy the requirements for qualification under
Section 401(a)(4) or Section 410 of the Internal Revenue Code shall be
included in the Required Aggregation Group. The plans shall be
aggregated by adding the results of each plan as of the determination
date for each such plan that falls within the same calendar year.
Section 16.3 As of each Determination Date the Plan Administrator shall
determine if the Plan is Top-Heavy in accordance with the following
paragraphs using information compiled as of the Valuation Date coincident
with or immediately preceding the Determination Date:
(a) First, the Plan Administrator shall determine the sum of the
Participant Contributions Accounts and the Employer Contributions
Accounts for all Participants except former Key Employees and, with
respect to Plan Years beginning after December 31, 1984, shall not
include any Employees who
46
<PAGE>
have not performed an Hour of Service for the Employer during the Plan
Year that includes the Determination Date and the four immediately
preceding Plan Years. Such sum shall include contributions made after
the Valuation Date but on or before the Determination Date; as well as
Withdrawals paid in accordance with Article VII, Distributions paid in
accordance with Article VIII, or Death Benefits paid in accordance
with Article IX which have been made during the Plan Year that
includes the Determination Date and the four immediately preceding
Plan Years.
(b) Second, the Plan Administrator shall determine the sum of the
Participant Contributions Accounts and the Employer Contributions
Accounts for all Participants who are or were Key Employees at any
time during the Plan Year that includes the Determination Date and the
four immediately preceding Plan Years. Such sum shall include
contributions made after the Valuation Date but on or before the
Determination Date; as well as Withdrawals paid in accordance with
Article VII, Distributions paid in accordance with Article VIII, or
Death Benefits paid in accordance with Article IX which have been made
during the Plan Year that includes the Determination Date and the four
immediately preceding Plan Years.
(c) Third, the amount determined in subparagraph (b) hereof shall be
divided by the amount determined in subparagraph (a) hereof. If the
Top-Heavy ratio is greater than sixty (60) percent, the Plan shall be
deemed to be a Top-Heavy Plan. In addition, this Plan shall be deemed
Top-Heavy if any of the following conditions exist:
(i) If the Top-Heavy ratio for this Plan exceeds sixty (60) percent
and this Plan is not part of any Required Aggregation Group or
Permissive Aggregation Group of plans;
(ii) If this Plan is part of a Required Aggregation Group of Plans
but not part of a Permissive Aggregation Group and the Top-
Heavy ratio for the group of plans exceeds sixty (60) percent;
or
(iii) If this Plan is part of a Required Aggregation Group and part
of a Permissive Aggregation Group of plans and the Top-Heavy
ratio exceeds sixty (60) percent.
Section 16.4 With respect to any Plan Year which this Plan is deemed to be
Top-Heavy in accordance with Section 16.3 hereof, the Employer shall cause
the Plan Administrator to make a minimum contribution to the Employer Non-
401(k) Contributions Account of each participant who is not a Key Employee.
Such contribution shall be an amount equal to the difference, if any, of
the amount determined under subparagraph (a) less the amounts determined
under subparagraphs (b) and, where applicable, (c) below where:
(a) is equal to the lesser of: (i) three (3) percent of such Participant's
Compensation (as defined in Section 16.2 hereof), or (ii) the largest
percentage of Compensation (as defined in Section 16.2 hereof)
provided on behalf of any Key Employee of that Plan Year, and
(b) is the sum of all amounts which have been or will be credited to such
Participant's Employer Contributions Account for the Plan Year, and
47
<PAGE>
(c) is the sum of all amounts which have been or will be credited to such
Participant's Participant Deferral Contributions Account for the Plan
Year, if applicable. The provisions of this subparagraph (c) shall be
effective for Plan Years beginning after December 31, 1984.
Effective for Plan Years beginning after December 31, 1988, however, in
determining whether a Participant who is not a Key Employee has received
the required minimum contribution under this Section the following amounts
shall not be taken into account:
(a) any amounts which have been or will be credited to such Participant's
Participant Deferral Contributions Account for the Plan Year, and
(b) any amounts which have been or will be credited to such Participant's
Employer Contributions Account for the Plan Year and which have been
utilized in the determination of the Actual Contribution Percentage or
Actual Deferral Percentage for said Plan Year.
Any Employer Contributions made under this Section 16.4 shall apply only to
applicable Participants who are in the employ of the Employer on the last
day of the Plan Year.
Section 16.5 With respect to any Plan Year for which this Plan is first
deemed to be Top-Heavy in accordance with Section 16.3 hereof and all
subsequent Plan Years thereafter, the provisions of Section 5.3 shall read
as follows:
"Section 5.3 Prior to the date that the Participant becomes fully
vested in accordance with Section 5.2, the Participant shall earn a
vested interest in his Employer Non-401(k) Contributions Account in
accordance with the following schedule:
Vesting Service Vested Interest
--------------- ---------------
Less than 2 years 0%
At least 2 years 20%
At least 3 years 40%
At least 4 years 60%
At least 5 years 80%
6 years or more 100%
If any Participant shall have previously had a distribution from his
Employer Non-401(k) Contributions Account, his current vested interest
in his Employer Non-401(k) Contributions Account shall be equal to:
(a) the current value of his Employer Non-401(k) Contributions
Account, plus
(b) the sum of any amounts previously distributed to the Participant
from his Employer Non-401(k)Contributions Account, multiplied by
(c) the percentage then applicable to the Participant in accordance
with the schedule of percentages stated in this Section, minus
48
<PAGE>
(d) the sum of all amounts previously distributed to the Participant
from his Employer Non-401(k) Contributions Account."
Section 16.6 With respect to any Plan Year for which this Plan is deemed
to be Top-Heavy either (a) or (b) below shall apply:
(a) If the Top-Heavy ratio determined under Section 16.3 is greater than
ninety (90) percent, the provisions of subparagraphs (c) and (d) of
Section 3.10 shall be amended by substituting the number "1.0 where
the number "1.25" is shown; provided however, that such substitution
shall not cause any reduction in the amount to which any Participant
was entitled under this Plan on the day before the Plan Year in which
the Plan first became Top-Heavy.
(b) If the Top-Heavy ratio determined under Section 16.3 is greater than
sixty (60) percent but less than ninety (90) percent, then either the
provisions of Section 16.6(a) shall become operative or the percentage
specified in Section 16.4(a) shall be increased by an additional one
percent.
Section 16.7 During any Plan Year in which the Plan Administrator
determines that the Plan is Top-Heavy, the contribution required under
Section 16.4 shall not be required if an Employee who is not a Key Employee
is included in another qualified defined benefit or defined contribution
plan maintained by the Employer provided an appropriate minimum required
contribution or benefit is made on behalf of such Employee under the other
qualified defined benefit or defined contribution plan.
ARTICLE XVII
------------
DISTRIBUTIONS UPON DISPOSITION OF EMPLOYER
ASSETS OF SUBSIDIARIES
------------------------------------------
Section 17.1 If the Employer is a corporation, any amounts held in a
Participant's Deferral Contributions Account and Employer 401(k)
Contributions Account may be distributed upon the disposition by the
Employer to an unrelated corporation of substantially all the assets
(within the meaning of Internal Revenue Code Section 409(d)(2)) used by the
Employer in a trade or business of the Employer or the disposition by the
Employer to an unrelated entity or individual of the Employer's interest in
a subsidiary (within the meaning of Internal Revenue Code Section
409(d)(3)). A distribution hereunder may be made only if the Employer
continues to maintain the Plan after the disposition and only with respect
to a Participant who continues employment with the purchaser of such assets
or with the subsidiary, whichever is applicable. In no event shall a
distribution pursuant to this Section be made later than the end of the
second calendar year after the calendar year in which the disposition
occurred. A distribution under this Section is subject to the consent and
election rules contained in Internal Revenue Code Sections 411(a)(11) and
417. In addition, a distribution hereunder may only be made if it is a
lump sum distribution. For this purpose, the term "lump sum distribution"
shall have the meaning provided by Internal Revenue Code Section 402(e)(4),
without regard to subparagraphs (A)(i) through (iv), (B), and (H), thereof.
49
<PAGE>
ARTICLE XVIII
-------------
MISCELLANEOUS PROVISIONS
------------------------
Section 18.1 This Plan is created for the exclusive benefit of Employees
and their Beneficiaries. If any provisions of this Plan are subject to
more than one interpretation, then among those interpretations which are
possible, the one which shall always be given to this Plan shall be the one
which is consistent with this Plan being an Employee Benefit Plan within
the meaning of Section 401 of the Internal Revenue Code and the Employee
Retirement Income Security Act of 1974, or as they may be amended or
replaced by any sections of the Federal Law of like intent and purpose.
Section 18.2 Except as provided by the terms of Article III, Sections 3.15
and 3.16 and Article XV hereof, no funds contributed hereunder or any
assets of this Plan shall ever revert to, or be used by, the Employer or
any successor of the Employer, nor shall any such funds or assets ever be
used other than for the exclusive purpose of providing benefits to
Participants and their beneficiaries and defraying reasonable expenses of
administering the Plan. If a Participant with an outstanding loan takes an
authorized leave of absence or incurs a temporary disability so the regular
monthly installment payments cannot be made on a payroll deduction basis,
the Participant will be required to make the regular monthly payments at
the time and place established by the Plan Administrator.
Section 18.3 With the written consent of the Plan Administrator, a
Participant or an Employee may, subject to such uniform and
nondiscriminatory terms and conditions as may be established from time to
time by the Plan Administrator in its sole discretion, request the Plan
Administrator to accept a rollover of a distribution of the value of the
Employee's account or benefit from the qualified plan of a former Employer.
A Rollover Contribution shall be accepted provided all of the following
conditions are met:
(a) The Rollover Contribution to this Plan is in cash;
(b) The Rollover Contribution does not include any after tax Employee
Contributions;
(c) The Plan Administrator receives a letter from the Employee's former
Employer stating that the distribution to the Employee is from a plan
qualified under Section 401(a) of the Code and that the distribution
is being made on account of the Employee's severance of employment;
and
(d) The Employee makes a written statement that the Rollover Contribution
shall be made to this Plan within sixty days of his receipt of the
distribution from the other qualified plan and that the proposed
Rollover Contribution, to the best of his knowledge, meets all Code
requirements for rollover treatment.
The Plan Administrator may require such information from a participant
desiring to make such a transfer as it deems necessary or desirable to
determine that the proposed transfer will meet the requirements of this
Section 18.3. Upon approval by the Plan Administrator, such amount shall
be
50
<PAGE>
transferred to this Plan and shall be credited to such Participant's
Rollover Account. A Participant shall always be 100% vested in his
Rollover Account. The Plan Administrator may establish and change from time
to time rules and restrictions applicable to the administration of Rollover
Accounts, including for this purpose rules and restrictions with respect to
the withdrawal of such Rollover Accounts, and to the extent permitted by
law, may permit the Plan to accept a rollover from an Employee, under the
Covered Employment Classification, who is not a Participant but who will be
eligible to become a Participant upon completion of the age and service
requirement set forth in Section 2.1.
Section 18.4 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.
(a) "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:
(i) any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period
of ten years or more;
(ii) any distribution to the extent such distribution is required
under Section 401(a)(9) of the Code; and
(iii) the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
(b) "Eligible Retirement Plan" means an individual retirement account
described in Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an annuity plan
described in Section 403(a) of the Code, or a qualified trust
described in Section 401(a) of the Code, that accepts the
distributee's eligible rollover distribution. However, in the case of
an eligible rollover distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account or individual
retirement annuity.
(c) "Distributee" 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 Section
414(p) of the Code, are distributees with regard to the interest of
the spouse or former spouse.
(d) "Direct Rollover" means a payment by the Plan to the eligible
retirement plan specified by the distributee.
51
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Executed this 7th day of May, 1998.
American Water Works Company, Inc.
By:__________________________________
W. Timothy Pohl
General Counsel and Secretary
52
EXHIBIT 5
Opinion of Dechert Price & Rhoads
May 7, 1998
American Water Works Company, Inc.
1025 Laurel Oak Road
Voorhees, NJ 08043
Gentlemen:
American Water Works Company, Inc. (the "Company") is about to file a
registration statement (the "Registration Statement") on Form S-8 with the
Securities and Exchange Commission relating to the offering of an
additional 900,000 shares (the "Additional Shares") of its Common Stock,
par value $1.25 per share, pursuant to the Savings Plan for Employees of
American Water Works Company, Inc. and Its Designated Subsidiaries (the
"Plan").
We are informed by the Company, and we have assumed for the purposes
of this opinion, that the Additional Shares will be either (a) outstanding
shares of Common Stock of the Company purchased by the Trustee of the Plan
in the open market or in private transactions, or (b) newly issued shares
of Common Stock of the Company purchased by the Trustee of the Plan
directly from the Company. The Company has 300,000,000 authorized shares
of Common Stock, of which approximately 80,000,000 are now outstanding and
approximately 68,000,000 are reserved for issuance in connection with
various other plans of the Company.
We have examined such corporate records of the Company and other
documents as we have deemed appropriate to give this opinion.
Based upon the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing
under the laws of the State of Delaware.
<PAGE>
American Water Works Company, Inc.
May 7, 1998
Page 2
2. The Additional Shares, (a) to the extent they are now outstanding,
have been validly issued and are fully paid and nonassessable, and (b) to
the extent they will be newly issued shares, have been duly authorized and,
when issued and sold in accordance with the Plan, and upon receipt by the
Company of the consideration therefor, will be validly issued, fully paid
and nonassessable.
3. No personal liability will attach to the ownership of the
Additional Shares under the laws of the State of Delaware.
4. The provisions of the written documents constituting the Plan
complies with the provisions of the Employee Retirement Income Security Act
of 1974, as amended.
We consent to the filing of this opinion as Exhibit 5 to the
Registration Statement.
Very truly yours,
Dechert Price & Rhoads
EXHIBIT 23(a)
Consent of Independent Accountants
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated February 4, 1998, which appears
on page 35 of the 1997 Annual Report to Shareholders of American Water
Works Company, Inc., which is incorporated by reference in American Water
Works Company, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1997. We also consent to the incorporation by reference in
the Registration Statement of our report dated June 20, 1997 appearing on
pages 6-7 of the Annual Report of the Savings Plan For Employees Of
American Water Works Company, Inc. And Its Designated Subsidiaries on Form
11-K for the year ended December 31, 1996.
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania 19103
May 7, 1998
