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EXHIBIT 4(a)
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The Progressive Retirement Security Program (1999 Amendment and
Restatement), as further amended on August 1, 1999
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THE PROGRESSIVE RETIREMENT SECURITY PROGRAM
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(1999 Amendment and Restatement)
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TABLE OF CONTENTS
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ARTICLE 1
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INTRODUCTION
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1.1 NAME OF PLAN 1
1.2 EFFECTIVE DATE 1
1.3 TYPE AND PURPOSE OF PLAN 1
ARTICLE 2
DEFINITIONS
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2.1 ACCOUNT 1
2.2 ACTIVE LTSP PARTICIPANT 1
2.3 ACTIVE SDRP PARTICIPANT 1
2.4 ADMINISTRATOR 1
2.5 AFFILIATED COMPANY 1
2.6 ANNIVERSARY SHARES 1
2.7 ARTICLE 1
2.8 BENEFICIARY 1
2.9 BOARD 2
2.9A BROKERAGE ACCOUNT 2
2.10 CODE OR IRC 2
2.11 COMPANY 2
2.12 COMPANY STOCK FUND 2
2.13 COMPENSATION 2
2.14 COMPENSATION DEFERRAL AGREEMENT 2
2.15 CONTRIBUTIONS 2
2.16 COVERED EMPLOYEE 2
2.17 COVERED EMPLOYMENT 2
2.18 DISABILITY OR DISABLED 2
2.19 EFFECTIVE DATE 2
2.20 ELIGIBLE COMPENSATION 3
2.21 EMPLOYEE 3
2.22 EMPLOYER 3
2.23 EMPLOYER FORFEITURE ACCOUNT 3
2.24 EMPLOYER MATCHED CONTRIBUTIONS 3
2.25 EMPLOYER SDRP CONTRIBUTIONS 3
2.26 EMPLOYMENT 3
2.27 ENTRY DATE 3
2.28 ERISA 3
2.29 EXCESS ADP CONTRIBUTIONS 3
2.30 EXCESS AGGREGATE CONTRIBUTIONS 3
2.31 EXCESS DEFERRAL 3
2.32 FORMER EMPLOYER SUPPLEMENTAL CONTRIBUTION ACCOUNT 3
2.33 FORMER PARTICIPANT 3
2.34 FORMER PAYSOP ACCOUNT 3
2.35 FUND 3
2.36 HARDSHIP 3
2.37 HIGHLY COMPENSATED EMPLOYEE 4
2.38 INACTIVE LTSP PARTICIPANT 4
2.39 INACTIVE SDRP PARTICIPANT 4
2.40 INVESTMENT FUNDS 4
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2.41 MATERNITY OR PATERNITY ABSENCE 5
2.42 MERGER 5
2.43 NON-HIGHLY COMPENSATED EMPLOYEE 5
2.44 NORMAL RETIREMENT AGE 5
2.45 NORMAL RETIREMENT DATE 5
2.46 PARTICIPANT 5
2.47 PARTNERSHIP SHARE 5
2.48 PAYROLL DEDUCTION AGREEMENT 5
2.49 PLAN 5
2.50 PLAN YEAR 5
2.51 POST-TAX CONTRIBUTIONS 5
2.52 PRE-TAX CONTRIBUTIONS 5
2.53 QUALIFIED DOMESTIC RELATIONS ORDER (QDRO) 5
2.54 RETIREMENT 5
2.55 SECTION 5
2.56 SERVICE, HOUR OF SERVICE and YEAR OF SERVICE 5
2.57 SPOUSE 5
2.58 STOCK 5
2.59 TERMINATION OF EMPLOYMENT 5
2.60 TRUST 5
2.61 TRUST AGREEMENT 6
2.62 TRUSTEE 6
2.63 VALUATION DATE 6
ARTICLE 3
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PARTICIPATION
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3.1 ELIGIBILITY FOR PARTICIPATION 6
3.2 COMMENCEMENT OF PARTICIPATION 6
3.3 TRANSFERS OF EMPLOYMENT 6
3.4 SUSPENSION OF CONTRIBUTIONS 7
3.5 FORMER PARTICIPANTS AND RE-PARTICIPATION 7
ARTICLE 4
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DEPOSITS AND CONTRIBUTIONS
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4.1 PRE-TAX CONTRIBUTIONS 7
4.2 POST-TAX CONTRIBUTIONS 7
4.3 EMPLOYER MATCHED CONTRIBUTIONS 7
4.3A SDRP CONTRIBUTIONS 8
4.4 CHANGE IN AMOUNT OF CONTRIBUTIONS 8
4.5 SUSPENSION OF CONTRIBUTIONS 8
4.6 REMITTANCE OF CONTRIBUTIONS 9
4.7 RETURN OF CONTRIBUTIONS 9
ARTICLE 5
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MAXIMUM CONTRIBUTIONS
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5.1 LIMITATIONS ON PRE-TAX CONTRIBUTIONS 9
5.2 LIMITATIONS ON POST-TAX CONTRIBUTIONS AND EMPLOYER MATCHED CONTRIBUTIONS 12
5.3 PROCEDURE IF MULTIPLE USE LIMITATION IS EXCEEDED 15
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ARTICLE 6
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ACCOUNTS
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6.1 ACCOUNTS 15
6.2 ACCOUNTS REPRESENT UNDIVIDED INTERESTS 16
6.3 ACCOUNT VALUES 16
6.4 VALUATION OF INVESTMENT FUNDS 16
6.5 ALLOCATION OF NET GAIN OR LOSS OF INVESTMENT FUNDS TO ACCOUNTS 16
6.6 BASIS OF VALUATION 16
6.7 ADMINISTRATION OF PRE-TAX CONTRIBUTION ACCOUNT 17
6.8 ADMINISTRATION OF POST-TAX CONTRIBUTION ACCOUNT 17
6.9 ADMINISTRATION OF EMPLOYER MATCHED CONTRIBUTION ACCOUNT 17
6.9A ADMINISTRATION OF EMPLOYER SDRP CONTRIBUTION ACCOUNT 17
6.10 ADMINISTRATION OF FORMER PAYSOP ACCOUNT 17
6.11 ADMINISTRATION OF THE FORMER EMPLOYER SUPPLEMENTAL CONTRIBUTION ACCOUNT 17
6.12 ADMINISTRATION OF THE SUSPENSE ACCOUNT 17
6.13 ADMINISTRATION OF THE EMPLOYER FORFEITURE ACCOUNT 18
6.14 CREDITING OF CONTRIBUTIONS 18
6.15 EMPLOYEE CONTRIBUTION RECORDS 18
6.16 UNIT ACCOUNTING 18
ARTICLE 7
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RETIREMENT, DISABILITY OR DEATH
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7.1 BENEFIT AT RETIREMENT 18
7.2 DISABILITY BENEFIT 19
7.3 DEATH BENEFIT 19
ARTICLE 8
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VESTING AND TERMINATIONS
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8.1 VESTING 19
8.2 TERMINATION OF EMPLOYMENT 20
8.3 FORFEITURES 20
8.4 REEMPLOYMENT 20
ARTICLE 9
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PAYMENT OF BENEFITS
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9.1 APPLICATION FOR PAYMENT 21
9.2 TIME OF PAYMENT 21
9.3 FORM OF PAYMENT 22
9.4 DETERMINATION OF VALUE OF PAYMENT 22
9.5 CLAIMS PROCEDURE 22
9.6 FACILITY OF PAYMENT 23
ARTICLE 10
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WITHDRAWALS AND LOANS DURING EMPLOYMENT
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10.1 IN-SERVICE WITHDRAWALS FROM PRE-TAX CONTRIBUTION ACCOUNT 23
10.2 IN-SERVICE WITHDRAWALS FROM POST-TAX CONTRIBUTION ACCOUNT 24
10.3 IN-SERVICE WITHDRAWALS FROM EMPLOYER MATCHED CONTRIBUTION ACCOUNT 24
10.4 NO WITHDRAWALS AVAILABLE FROM OTHER ACCOUNTS 24
10.5 PAYMENT OF WITHDRAWALS 25
10.6 LOANS TO PARTICIPANTS 25
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ARTICLE 11
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SERVICE
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11.1 SERVICE 27
11.2 PRIOR SERVICE REINSTATED 28
11.3 YEAR OF SERVICE 28
ARTICLE 12
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PLAN OPERATION AND ADMINISTRATION
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12.1 POWERS OF ADMINISTRATOR 29
12.2 NONDISCRIMINATORY EXERCISE OF AUTHORITY 29
12.3 RELIANCE ON TABLES, ETC. 29
12.4 NAMED FIDUCIARY 29
12.5 INDEMNIFICATION 29
12.6 NOTICES TO ADMINISTRATOR 30
ARTICLE 13
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AMENDMENT AND TERMINATION OF THE PLAN
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13.1 AMENDMENT 30
13.2 TERMINATION 31
13.3 LIQUIDATION OF THE FUND 31
ARTICLE 14
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ADOPTION OF THE PLAN BY OTHER EMPLOYERS
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14.1 ADOPTION WITH APPROVAL 31
14.2 PROCEDURE FOR ADOPTION 31
14.3 EFFECT OF ADOPTION 31
14.4 TERMINATION OF ADOPTION 32
ARTICLE 15
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LIMITATIONS OF ANNUAL ADDITIONS
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15.1 GENERAL LIMITATIONS 32
15.2 EXCESS AMOUNT 32
15.3 AGGREGATION OF PLANS OF THE EMPLOYER 33
15.4 DEFINITIONS 33
15.5 TOP-HEAVY PLAN REQUIREMENTS 34
ARTICLE 16
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INVESTMENT OF CONTRIBUTIONS
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16.1 INVESTMENT FUNDS 38
16.2 ADMINISTRATION OF COMPANY STOCK FUND 38
16.3 DEPOSIT OF CONTRIBUTIONS 39
16.4 INVESTMENT ELECTIONS OF PARTICIPANTS 39
16.5 ELECTION TO TRANSFER INTEREST BETWEEN INVESTMENT FUNDS 39
16.6 OTHER PROVISIONS CONCERNING INVESTMENT ELECTIONS AND TRANSFERS 39
16.7 FORMER PAYSOP ACCOUNTS 40
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ARTICLE 17
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MISCELLANEOUS PROVISIONS
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17.1 HEADINGS 40
17.2 PLAN NOT CONTRACT OF EMPLOYMENT 40
17.3 VESTED RIGHTS 40
17.4 SEVERABILITY 40
17.5 GENERAL UNDERTAKING 40
17.6 ACTION BY COMPANY 40
17.7 NO RESPONSIBILITY FOR ACTS OF AN INSURER 40
17.8 SPENDTHRIFT 40
17.9 NUMBER AND GENDER 41
17.10 GOVERNING LAW 41
17.11 MERGER, CONSOLIDATION, AND TRANSFER OF ASSETS 41
17.12 RECEIPT OF ASSETS FROM QUALIFIED PLANS 41
17.13 INTERPRETATION OF PLAN 41
17.14 SATISFACTION OF CLAIMS 42
17.15 SERVICE OF PROCESS 42
17.16 WARRANTIES 42
17.17 LEASED EMPLOYEES 42
17.18 DIRECT ROLLOVER DISTRIBUTIONS 42
17.19 PLAN ADDENDA 43
17.20 ADJUSTMENT 43
17.21 USERRA MODEL AMENDMENT 43
17.22 ELECTRONIC COMMUNICATIONS 43
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ARTICLE 1
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INTRODUCTION
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1.1 NAME OF PLAN
This Plan shall be known as The Progressive Retirement Security
Program. Prior to July 1, 1994, this Plan was known as The Progressive
Corporation Long-Term Savings Plan.
1.2 EFFECTIVE DATE
Except as otherwise expressly provided herein, this Plan, as amended
and restated, shall be effective as of April 1, 1999.
1.3 TYPE AND PURPOSE OF PLAN
Pursuant to Section 401(a)(27) of the Code, the Plan is hereby
designated as a profit-sharing plan. The primary purpose of the Plan
is to encourage Employee savings, to facilitate Employee Stock
ownership and to provide benefits upon a Participant's or Former
Participant's Retirement, death, Disability or Termination of
Employment.
ARTICLE 2
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DEFINITIONS
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The following terms, when used herein with initial capital letters, shall have
the meaning given to them in this Article 2.
2.1 ACCOUNT shall mean one of several records maintained pursuant to
Section 6 to record a Participant's, Former Participant's, or
Beneficiary's interest in the Investment Funds.
2.2 ACTIVE LTSP PARTICIPANT shall have the meaning set forth in Article 3.
2.3 ACTIVE SDRP PARTICIPANT shall have the meaning set forth in Article 3.
2.4 ADMINISTRATOR, which is the administrator for purposes of ERISA and
the plan administrator for purposes of the Code, shall mean
Progressive Casualty Insurance Company, an Ohio corporation, or its
successors.
2.5 AFFILIATED COMPANY shall mean any corporation, trade or business if it
and the Company are members of a controlled group of corporations, or
are under common control, or are members of an affiliated service
group, within the meaning of Code Sections 414(b), 414(c), and 414(m),
respectively; provided, however, that for purposes of Code Section
415, the definitions prescribed by Code Sections 414(b) and 414(c)
shall be modified as provided by Code Section 415(h) by substituting
"more than 50%" common control for "at least 80%" common control. This
term shall also include any entity required to be treated as an
Affiliated Company under Code Section 414(o).
2.6 ANNIVERSARY SHARES shall mean such shares of Stock, if any, as may be
awarded on or before February 28, 1992 to Employees by the Company
upon completion of five (5) year increments of Years of Service.
2.7 ARTICLE shall mean an Article of this Plan.
2.8 BENEFICIARY as to a Participant or Former Participant who is married
at the time of his death, shall mean his Spouse or such other
person(s) as he has designated with the consent of his Spouse, and, as
to a Participant or Former Participant who is not married at the time
of his death, shall be such person(s) as he has designated. A
Participant or Former Participant may change his Beneficiary
designation at any time, provided that no such change shall be
effective as to any married Participant or Former Participant who
predeceases his Spouse, unless the Spouse has consented to the change.
Each consent of a Spouse shall be irrevocable, but shall be effective
only with respect to the particular Beneficiary designation to which
it pertains. All Beneficiary designations (including changes) and
consents of a
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Spouse shall be made in writing on such forms as the Administrator
shall prescribe, and shall become effective only when received by the
Administrator; provided, however, that a Beneficiary designation
(including a change) or a consent of a Spouse received by the
Administrator after the designating Participant's death shall be
disregarded.
In the absence of a Beneficiary designation, or if the designated
Beneficiary is no longer living or in existence at the time of the
Participant's or Former Participant's death, all benefits due from the
Plan upon the Participant's or Former Participant's death shall be
paid to the Participant's or Former Participant's (i) Spouse, if the
Participant or Former Participant was married at the time of his/her
death or (ii) estate, if the Participant or Former Participant was not
married at the time of his/her death. Notwithstanding the foregoing,
consent of a Spouse shall not be required if the Participant or Former
Participant and his/her Spouse are legally separated or the Spouse
cannot be located.
2.9 BOARD shall mean the Board of Directors of the Company.
2.9A BROKERAGE ACCOUNT as to each Participant shall mean a Participant's
interest in an Investment Fund consisting of Participant-managed
brokerage accounts.
2.10 CODE OR IRC shall mean the Internal Revenue Code of 1986, as the same
may be amended from time to time.
2.11 COMPANY shall mean The Progressive Corporation or its successor(s).
2.12 COMPANY STOCK FUND shall mean an Investment Fund consisting
principally of Stock.
2.13 COMPENSATION of a Participant or Former Participant for a Plan Year
shall mean all amounts that are received by him/her during such Plan
Year from the Employer that are reported as wages on IRS Form W-2 for
such Plan Year, plus (i) the amount contributed by the Employer to the
Trustee pursuant to a Compensation Deferral Agreement reduced by
amounts required by Section 5.1(c), and (ii) amounts of pay reduced in
accordance with an arrangement established by the Employer which
qualifies under Section 125 of the Code. However, the maximum annual
dollar amount that will be recognized as Compensation is $150,000 in
all cases. Such $150,000 limit shall be automatically adjusted in
accordance with regulations under Section 401(a)(17) of the Code. If,
as a result of the application of the rules of Section 414(q)(6) of
the Code, the adjusted $150,000 limit is exceeded, then the limit
shall be prorated among the affected individuals in proportion to each
such individual's Compensation, as determined under this Section 2.13
prior to the application of the limit. In applying the rules of
Section 414(q)(6) of the Code, 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.
2.14 COMPENSATION DEFERRAL AGREEMENT shall mean an arrangement pursuant to
which the Employee agrees to reduce his Eligible Compensation,
pursuant to Section 4.1 hereof, and the Employer agrees to contribute
to the Plan the amount equal to the amount reduced as a Pre-Tax
Contribution. The Compensation Deferral Agreement shall also serve to
provide such other information about the Participant as the
Administrator shall require.
2.15 CONTRIBUTIONS shall mean a Participant's Pre-Tax Contributions and
Post-Tax Contributions.
2.16 COVERED EMPLOYEE shall mean an Employee of the Employer, earning
Eligible Compensation, excluding (i) any such Employee whose terms and
conditions of Employment are negotiated with the Employer by or
through a certified or recognized collective bargaining organization
unless such negotiation provides for his/her inclusion, (ii) those
Employees classified by the Employer as temporary under its personnel
policies and procedures, and (iii), effective January 1, 1999,
Employees who are not residents of the United States. Notwithstanding
the provisions of clause (ii) above, an Employee who has been
classified by the Employer as temporary under its personnel policies
and procedures and who performs at least one thousand (1,000) Hours of
Service during any twelve (12) consecutive month period beginning on
his/her date of hire (or any anniversary thereof) shall be considered
a Covered Employee effective as of the first day following such twelve
(12) consecutive month period.
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2.17 COVERED EMPLOYMENT shall mean the period or periods during which an
Employee is a Covered Employee.
2.18 DISABILITY OR DISABLED shall mean that a Participant shall be totally
disabled (as defined in the Long-Term Disability Plan coverage
provided by the Company, whether or not such Participant is eligible
for such coverage) for a period of twelve (12) consecutive calendar
months beginning on the first day of disability absence.
2.19 EFFECTIVE DATE shall mean July 1, 1994.
2.20 ELIGIBLE COMPENSATION of a Participant shall mean his base salary,
straight time hourly wages, overtime pay, vacation pay, holiday pay,
jury duty pay, taxable sick pay, military pay, funeral pay, lump sum
salary adjustments and retroactive payments of any of the foregoing
items pursuant to any back pay award (but only to the extent such
retroactive payments are actually paid in periods during which a
Compensation Deferral Agreement is in effect). However, the maximum
annual dollar amount that will be recognized as Eligible Compensation
is $150,000 per year in all cases. Such $150,000 limit shall be
automatically adjusted in accordance with regulations under Section
401(a)(17) of the Code.
2.21 EMPLOYEE shall mean any person who renders services to an Employer or
Affiliated Company as a common law employee (including any common law
employee who is employed as an officer).
2.22 EMPLOYER shall mean the Company. The term Employer shall also include
any Affiliated Company which adopts the Plan pursuant to Article 14,
but only for such period as such company continues in its adoption of
the Plan.
2.23 EMPLOYER FORFEITURE ACCOUNT shall mean the Account maintained and
administered in accordance with Section 6.13 hereof.
2.24 EMPLOYER MATCHED CONTRIBUTIONS shall mean those amounts contributed by
the Employer pursuant to Section 4.3 hereof.
2.25 EMPLOYER SDRP CONTRIBUTIONS shall mean those amounts contributed by
the Employer pursuant to Section 4.3A.
2.26 EMPLOYMENT shall mean the period or periods during which an individual
is an Employee.
2.27 ENTRY DATE shall mean the first day of the pay period coincident with
or immediately following the date on which a Participant satisfies the
requirements for participation contained in Section 3.1(b).
2.28 ERISA shall mean the Employee Retirement Income Security Act of 1974,
as the same may be amended from time to time hereafter.
2.29 EXCESS ADP CONTRIBUTIONS shall mean the amount of the Pre-Tax
Contributions of the Highly Compensated Employees for the Plan Year
above the maximum amount permitted under Section 5.1.
2.30 EXCESS AGGREGATE CONTRIBUTIONS shall mean the amount of the Post-Tax
Contributions and Employer Matching Contributions of the Highly
Compensated Employees for the Plan Year above the maximum amount of
such Post-Tax Contributions and Employer Matching Contributions
permitted under Section 5.2(d).
2.31 EXCESS DEFERRAL shall mean a Pre-Tax Contribution in excess of the
permitted maximum deferral amount set forth in Section 5.1(d), or an
amount designated as such by the Employee where the excess is
generated by aggregation of pre-tax contributions to plans other than
this Plan.
2.32 FORMER EMPLOYER SUPPLEMENTAL CONTRIBUTION ACCOUNT, as to each
Participant shall mean the Account derived from the Employer
Supplemental Contributions (within the meaning of the Plan as
previously in effect), if any, made in respect of the Participant
during periods that the Plan provided for such contributions.
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2.33 FORMER PARTICIPANT shall mean a Participant who has terminated
Employment but who has one or more Accounts remaining in the Plan.
2.34 FORMER PAYSOP ACCOUNT shall mean the Account described in Section
6.10.
2.35 FUND shall mean the assets held by the Trustee in accordance with the
provisions of the Plan and the Trust Agreement.
2.36 HARDSHIP shall mean an immediate and heavy financial need of a
Participant arising from any of the following items:
(a) Expenses for medical care described in Code Section 213(d)
previously incurred by the Participant or his/her Spouse or
dependents (as defined in Code Section 152).
(b) Purchase (excluding mortgage payments) of a principal
residence for the Participant.
(c) Payment of tuition, related educational fees, and room and
board expenses, for the next twelve months of post-secondary
education for the Participant or his/her Spouse or
dependents.
(d) Prevention of the eviction of the Participant from his
principal residence or the foreclosure on the mortgage of
the Participant's principal residence.
2.37 HIGHLY COMPENSATED EMPLOYEE shall mean any Employee or former Employee
who, during the Plan Year or the preceding Plan Year:
(a) was at any time a five percent owner; or
(b) received annual Compensation from the Employer in excess of
$80,000, as adjusted for increases in the cost of living;
In determining which Employees are Highly Compensated Employees, an
Employee not described in paragraph [b] above for the preceding year
will not be treated as falling under the category described in
paragraph [b] for the current year. The Employer may adopt any
reasonable, nondiscriminatory tie-breaking or rounding rules necessary
to determine which Employees are Highly Compensated Employees, provided
that such rules are uniformly and consistently applied. In determining
an individual's Compensation under this section, Compensation from each
Employer required to be aggregated under Code Sections 414(b), (c), (m)
and (o) will be taken into account. For purposes of this section, the
determination of Compensation will be made without regard to Code
Sections 125, 402(a)(8), 402(h)(1)(B) and, in the case of Employer
contributions made pursuant to a salary reduction agreement, without
regard to Code Section 403(b).
A former Employee will be treated as a Highly Compensated Employee if
such Employee separated from service (or was deemed to have separated)
prior to the Plan Year, performs no service for the Employer during the
Plan Year, and was a Highly Compensated Employee for either the
separation year or any Plan Year ending on or after the Employee's 55th
birthday.
The determination of who is a Highly Compensated Employee will be made
in accordance with Code Section 414(q).
2.38 INACTIVE LTSP PARTICIPANT shall have the meaning set forth in Article
3.
2.39 INACTIVE SDRP PARTICIPANT shall have the meaning set forth in Article
3.
2.40 INVESTMENT FUNDS shall mean the funds established from time to time by
the Trustee pursuant to Section 16.1.
2.41 MATERNITY OR PATERNITY ABSENCE shall mean an absence from work by an
Employee for any period
(a) By reason of pregnancy of the Employee,
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(b) By reason of the birth of a child of the Employee,
(c) By reason of the placement of a child with the Employee in
connection with the adoption of such child by such Employee,
or
(d) For purposes of caring for such child for a period
immediately following such birth or placement.
An absence will not be considered a "Maternity or Paternity Absence"
unless the Employee provides the Administrator with information within
5 working days demonstrating that the absence is for one of the four
permitted reasons outlined above.
Nothing in this Plan shall require the Employer to grant a paid or
unpaid leave of absence to any Employee.
2.42 MERGER shall mean the merger of The Progressive Corporation
Supplemental Retirement Plan into this Plan, effective July 1, 1994.
2.43 NON-HIGHLY COMPENSATED EMPLOYEE means an Employee not considered a
Highly Compensated Employee under Section 2.37.
2.44 NORMAL RETIREMENT AGE shall mean attainment by the Participant of age
65.
2.45 NORMAL RETIREMENT DATE shall mean the first of the month following the
date on which a Participant attains Normal Retirement Age.
2.46 PARTICIPANT shall mean a Covered Employee who has satisfied and
continues to satisfy the requirements set forth in Section 3.1(a)
and/or 3.1(b) for participation and shall include an Active LTSP
Participant, Active SDRP Participant, Inactive LTSP Participant and
Inactive SDRP Participant.
2.47 PARTNERSHIP SHARE shall mean the share of Stock awarded on or before
October 30, 1991 to all Employees upon completion of 30 calendar days
from his or her date of employment.
2.48 PAYROLL DEDUCTION AGREEMENT shall mean an arrangement pursuant to which
an Employee agrees, pursuant to Section 4.2 hereof, to have a
stipulated percentage of his Eligible Compensation deducted from such
Eligible Compensation and deposited in the Fund as a Post-Tax
Contribution. The Payroll Deduction Agreement shall also serve to
provide such other information about the Participant as the
Administrator shall require.
2.49 PLAN shall mean The Progressive Retirement Security Program, as set
forth in this document, as the same may be amended or restated from
time to time hereafter.
2.50 PLAN YEAR shall mean a calendar year.
2.51 POST-TAX CONTRIBUTIONS shall mean those amounts contributed by the
Participant pursuant to a Payroll Deduction Agreement and to Section
4.2 hereof. These may have been formerly known as Optional Employee
Contributions, but hereafter shall be Post-Tax Contributions.
2.52 PRE-TAX CONTRIBUTIONS shall mean those amounts which the Employer is
obligated to contribute to the Plan pursuant to a Compensation Deferral
Agreement and to Section 4.1 hereof. These may have been formerly known
as Deferred Income Contributions, but hereafter shall be Pre-Tax
Contributions.
2.53 QUALIFIED DOMESTIC RELATIONS ORDER (QDRO) shall mean any judgment,
decree or order as defined in Section 414(p) of the Code.
2.54 RETIREMENT shall mean a Participant's or Former Participant's
Termination of Employment on or after his/her Normal Retirement Date.
2.55 SECTION shall mean a Section of this Plan.
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2.56 SERVICE, HOUR OF SERVICE and YEAR OF SERVICE for purposes of this Plan
are defined in Article 11 hereof, except that, for purposes of Article
3 Year of Service shall mean any 12 consecutive month period beginning
on the date an Employee first performs on Hour of Service (or any
anniversary thereof) during which the Employee completes at least 1,000
Hours of Service. However, an Employee who is exempt under the
provisions of the Fair Labor Standards Act shall be credited with
forty-five (45) hours of service for each week that such Employee would
have earned at least one (1) hour of service as defined in
subparagraphs (a)(i) through (iii) of Section 11.1 during such week.
2.57 SPOUSE shall mean the legal spouse of a Participant or Former
Participant on the date of his/her death.
2.58 STOCK means the Common Stock, $1.00 par value, of the Company.
2.59 TERMINATION OF EMPLOYMENT shall mean the earlier of (i) the last day
worked after which an Employee quits, retires, is discharged, or dies,
or (ii) the first anniversary of the first date of continuous absence
from employment for any other reason.
2.60 TRUST shall mean the Trust created and maintained by the Trust
Agreement and known as The Progressive Retirement Security Program
Trust.
2.61 TRUST AGREEMENT shall mean the agreement of trust between the Company
and Trustee executed in furtherance of the Plan, as the same may be
amended from time to time hereafter.
2.62 TRUSTEE shall mean the person (or persons), bank or trust company
selected from time to time by the Company to serve as Trustee (or
co-Trustees) under the Plan.
2.63 VALUATION DATE shall mean such date or dates as shall be established
from time to time by the Administrator for the purpose of valuing the
Investment Funds and adjusting Accounts hereunder, which dates need not
be uniform with respect to each Investment Fund or Account; provided,
however, that each Investment Fund shall be valued, and each Account
shall be adjusted no less often than quarterly.
ARTICLE 3
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PARTICIPATION
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3.1 ELIGIBILITY FOR PARTICIPATION
(a) Each Covered Employee shall be eligible to become an LTSP
Participant in the Plan (pursuant to Section 3.2), after the
later of (i) thirty (30) calendar days from his/her date of
employment or (ii) the date he/she becomes a Covered
Employee.
(b) Each Covered Employee shall be eligible to become an SDRP
Participant in the Plan as of the Entry Date coincident with
or immediately following the date such Covered Employee both
attains age twenty-one (21) and has completed a Year of
Service, provided that such Covered Employee is a Covered
Employee on such Entry Date.
3.2 COMMENCEMENT OF PARTICIPATION
(a) A Covered Employee who meets the eligibility provisions of
Section 3.1(a) hereof may become an Active LTSP Participant
by filing a Compensation Deferral Agreement or a Payroll
Deduction Agreement with the Administrator and providing such
other information as the Administrator shall require. The
Compensation Deferral Agreement will stipulate the amount of
the Participant's Pre-Tax Contributions. The Payroll
Deduction Agreement will stipulate the amount of the
Participant's Post-Tax Contributions. Such Participant's
Pre-Tax Contributions and Post-Tax Contributions shall be
effective as of the first payroll period next following
receipt and processing of the Participant's Compensation
Deferral Agreement or Payroll Deduction Agreement (as
applicable) by the Administrator.
(b) A covered Employee who meets the eligibility provisions of
Section 3.1(b) shall automatically become an Active SDRP
Participant on the Entry Date referred to in Section 3.1(b).
6
<PAGE> 14
3.3 TRANSFERS OF EMPLOYMENT
(a) An Active LTSP Participant who transfers from Covered
Employment to Employment other than Covered Employment shall
become an Inactive LTSP Participant and his/her
Contributions, if applicable, shall be suspended in
accordance with Section 4.5 hereof.
(b) An Active SDRP Participant who transfers from Covered
Employment to Employment other than Covered Employment shall
become an Inactive SDRP Participant and his/her SDRP
Contributions shall cease automatically.
(c) An Inactive LTSP Participant who transfers from Employment
other than Covered Employment to Covered Employment will
become an Active LTSP Participant on the date such Employee
resumes Covered Employment. Should such Active LTSP
Participant elect to make Pre-Tax Contributions or Post-Tax
Contributions hereunder, such Contributions will be effective
with the first payroll period next following receipt and
processing of the Active Participant's Compensation Deferral
Agreement or Payroll Deduction Agreement (as applicable) by
the Administrator.
(d) An Inactive SDRP Participant who transfers from Employment
other than Covered Employment to Covered Employment will
become an Active SDRP Participant on the date such Employee
resumes Covered Employment.
3.4 SUSPENSION OF CONTRIBUTIONS
An Active LTSP Participant whose Contributions are suspended pursuant
to Section 4.5 at his/her option shall continue to be considered an
Inactive LTSP Participant.
3.5 FORMER PARTICIPANTS AND RE-PARTICIPATION
(a) Termination of Employment shall cause an Active Participant
or Inactive Participant to become and remain a Former
Participant until such time he/she has no remaining Accounts
under the Plan.
(b) A Former Participant who returns to Employment other than
Covered Employment shall become an Inactive Participant.
(c) Any individual who ceases to be an Active LTSP Participant or
Inactive LTSP Participant (including Former Participants)
because of a Termination of Employment and who subsequently
returns to Covered Employment will become an Active LTSP
Participant on the date such Employee resumes Covered
Employment. Should such Active LTSP Participant elect to make
Pre-Tax Contributions or Post-Tax Contributions hereunder,
such Contributions will be effective with the first payroll
period next following receipt and processing of the Active
LTSP Participant's Compensation Deferral Agreement or Payroll
Deduction Agreement (as applicable) by the Administrator.
(d) Any individual who ceases to be an Active SDRP Participant or
Inactive SDRP Participant (including Former Participants)
because of a Termination of Employment and who subsequently
returns to Covered Employment will become an Active SDRP
Participant on the date such Employee resumes Covered
Employment.
ARTICLE 4
---------
DEPOSITS AND CONTRIBUTIONS
--------------------------
4.1 PRE-TAX CONTRIBUTIONS
Each Active LTSP Participant may, pursuant to a Compensation Deferral
Agreement, have the Employer contribute on his or her behalf an amount
to the Plan known as Pre-Tax Contributions (as defined in Section 2.52)
of not less than one percent (1%) or more than eighteen percent (18%)
(in any percentage
7
<PAGE> 15
to one tenth of a percent) of his/her Eligible Compensation subject to
the limitations of Sections 5.1 and Article 15. The percentage
contributed under this Section 4.1, when combined with the percentage
contributed under Section 4.2, cannot exceed eighteen percent (18%) of
the Active LTSP Participant's Eligible Compensation in the aggregate.
4.2 POST-TAX CONTRIBUTIONS
Each Active LTSP Participant may elect, pursuant to a Payroll Deduction
Agreement, to contribute an amount of not less than one percent (1%) or
more than eighteen percent (18%) (in any percentage to one tenth of a
percent) of his/her Eligible Compensation, subject to limitations of
Section 5.2 and Article 15. The percentage contributed under this
Section 4.2, when combined with the percentage contributed under
Section 4.1, cannot exceed eighteen percent (18%) of the Active LTSP
Participant's Eligible Compensation in the aggregate.
4.3 EMPLOYER MATCHED CONTRIBUTIONS
The Employer shall contribute in respect of each Active LTSP
Participant Employer Matched Contributions equal to one hundred percent
(100%) on the first one percent and fifty percent (50%) on up to the
next four percent of such Active LTSP Participant's Pre-Tax
Contributions and/or Post-Tax Contributions. For purposes of
determining the amount of Employer Matched Contributions to be
allocated to each Active LTSP Participant for a particular payroll
period, only Pre-Tax Contributions and Post-Tax Contributions
attributable to such payroll period, both of which in the aggregate do
not exceed five percent (5%) of Eligible Compensation for such payroll
period, will be taken into consideration. The Employer Matched
Contribution will first be attributable to Pre-Tax Contributions, if
any, and then to Post-Tax Contributions, if any. The Employer, with the
approval of its Board of Directors, may increase or decrease the amount
of Employer Matched Contributions at any time and from time to time for
any reason.
4.3A SDRP CONTRIBUTIONS
Each pay period the Employer shall contribute a percentage of the FICA
Taxable Compensation paid to each Active SDRP Participant during such
pay period determined in accordance with the following table, based on
such Active SDRP Participant's Years of Service, as defined in Section
2.56, as of the first day of such pay period:
CONTRIBUTION
YEARS OF SERVICE PERCENTAGE
---------------- ----------
Less than 5 years 1%
At least 5 years but
less than 10 years 2%
At least 10 years but
less than 15 years 3%
At least 15 years but
less than 20 years 4%
20 years or more 5%
Each Employer SDRP Contribution shall be promptly allocated to such
Active SDRP Participant's Account as soon as practicable after it is
made. For purposes of this Section, an Active SDRP Participant's "FICA
Taxable Compensation" for a given Plan Year shall consist of that
portion of his or her Eligible Compensation which is not in excess of
the dollar amount specified as the maximum contribution and benefit
base applicable to old-age, survivors, and disability insurance under
Title II of the Social Security Act, as in effect on the first day of
such Plan Year (the "Taxable Wage Base").
8
<PAGE> 16
4.4 CHANGE IN AMOUNT OF CONTRIBUTIONS
(a) The percentage of Eligible Compensation designated by a
Participant as his/her Pre-Tax Contributions and/or Post-Tax
Contributions shall continue in effect, notwithstanding any
change in his/her Eligible Compensation, until he/she elects
to change such percentage.
(b) An Active LTSP Participant may elect to change his/her
percentage of Pre-Tax Contributions and/or Post-Tax
Contributions by filing an election with the Administrator in
such manner as the Administrator shall specify. Any such
change shall become effective with the first payroll period
next following receipt and processing of the Participant's
revised Compensation Deferral Agreement or Payroll Deduction
Agreement (as applicable) by the Administrator.
4.5 SUSPENSION OF CONTRIBUTIONS
(a) An Active LTSP Participant may elect to suspend all of
his/her Pre-Tax Contributions and/or Post Tax Contributions
by filing a written election with the Administrator on such
forms as the Administrator shall specify. Such suspension
shall become effective with the first payroll period next
following receipt and processing of the suspension request by
the Administrator.
(b) The Pre-Tax and Post-Tax Contributions of a Participant who
becomes an Inactive LTSP Participant pursuant to Section
3.3(a) (Transfers of Employment) shall be suspended
automatically beginning with the first payroll period
thereafter, and may not be resumed until he/she becomes an
Active LTSP Participant pursuant to Article 3.
(c) All suspensions of Pre-Tax and Post-Tax Contributions shall
be indefinite in duration and a Participant shall not be
permitted to make up such suspended Contributions.
(d) An Active LTSP Participant who has elected to suspend all of
his/her Pre-Tax Contributions and/or Post-Tax Contributions
shall be eligible to resume making such Contributions as of
the first payroll period next following receipt and
processing of a new Compensation Deferral Agreement or
Payroll Deduction Agreement (as applicable) by the
Administrator.
4.6 REMITTANCE OF CONTRIBUTIONS
It is the Company's intent to remit Contributions to the Trustee as
soon as practical after the close of the payroll period for which they
are attributable. In no event, however, will Contributions be remitted
to the Trustee later than ninety (90) days following the date they are
deducted from the Participant's Eligible Compensation. In no event
will Employer Matched Contributions and Employer SDRP Contributions be
remitted to the Trustee later than ninety (90) days following the
close of the month in which they are granted.
4.7 RETURN OF CONTRIBUTIONS
Except as provided in Section 15.2, in Section 6.13 regarding
forfeitures, and in this Section 4.7, the assets of the Plan shall
never revert to or be used by the Employer. Contributions made by the
Employer to the Trust by reason of a mistake of fact may be returned
to the Employer within one year after the payment of the contribution.
Furthermore, contributions made by the Employer to the Trust are
conditioned upon the deductibility of the contribution under Code
Section 404 and, to the extent the deduction is disallowed, may be
returned to the Employer within one year after disallowance of the
deduction. Any amount returned to the Employer by reason of this
Section 4.7 shall not include earnings attributable thereto and shall
be reduced by any losses attributable thereto.
9
<PAGE> 17
ARTICLE 5
---------
MAXIMUM CONTRIBUTIONS
---------------------
5.1 LIMITATIONS ON PRE-TAX CONTRIBUTIONS
(a) For purposes of determining the maximum Pre-Tax Contribution,
contributions by the Employer designated as Pre-Tax
Contributions shall be expressed as a percentage of
Compensation for each Participant and each Covered Employee
who is eligible to be, but who is not, a Participant.
(b) The Actual Deferral Percentage for each Participant and
Covered Employee for the Plan Year shall be determined in
accordance with Code Section 401(k) and the regulations
thereunder.
The Actual Deferral Percentage for eligible Highly
Compensated Employees for the Plan Year shall be the average
of the ratios of the eligible Highly Compensated Employees.
This will be compared to the Actual Deferral Percentage for
the Non-highly Compensated Employees for the Plan Year, which
will be the average of the ratios of the eligible Non-highly
Compensated Employees.
The Actual Deferral Percentage for any Plan Year for eligible
Highly Compensated Employees shall not exceed the greater of
either (i) or (ii) below:
(i) One hundred and twenty-five percent (125%) of the
Actual Deferral Percentage of the eligible Non-highly
Compensated Employees, or
(ii) The lesser of the amounts determined under (A) or (B)
following (or such other amount as may be prescribed
in applicable regulations under the Code to prevent
multiple use of the alternative limitation set forth
in this clause (ii)):
(A) Two hundred percent (200%) of the Actual
Deferral Percentage of eligible Non-highly
Compensated Employees, or
(B) The Actual Deferral Percentage of the
eligible Non-highly Compensated Employees
plus two percentage points (2%).
Notwithstanding any other provision of this Plan, the Pre-Tax
Contributions shall be limited to the extent necessary to
meet this test.
Effective for Plan Years beginning on or after January 1,
1999, the following provisions shall apply in lieu of the
preceding provisions of this Section 5.1(b): The Actual
Deferral Percentage for each Participant and Covered Employee
for the Plan Year shall be determined in accordance with Code
Section 401(k) and the regulations thereunder.
The Actual Deferral Percentage for eligible Highly
Compensated Employees for a Plan Year shall be the average of
the ratios of the eligible Highly Compensated Employees for
that Plan Year. This will be compared to the Actual Deferral
Percentage for the Non-highly Compensated Employees for the
prior Plan Year, which will be the average of the ratios of
the eligible Non-highly Compensated Employees for the prior
Plan Year.
The Actual Deferral Percentage for any Plan Year for eligible
Highly Compensated Employees shall not exceed the greater of
either (i) or (ii) below:
(i) One hundred and twenty-five percent (125%) of the
Actual Deferral Percentage of the eligible Non-highly
Compensated Employees for the prior Plan Year, or
(ii) The lesser of the amounts determined under (A) or (B)
following (or such other amount as may be prescribed
in applicable regulations under the Code to prevent
multiple use of the alternative limitation set forth
in this clause (ii)):
10
<PAGE> 18
(A) Two hundred percent (200%) of the Actual
Deferral Percentage of eligible Non-highly
Compensated Employees for the prior Plan
Year, or
(B) The Actual Deferral Percentage of the
eligible Non-highly Compensated Employees for
the prior Plan Year plus two percentage
points (2%).
Notwithstanding any other provision of this Plan, the Pre-Tax
Contributions shall be limited to the extent necessary to meet this
test.
(c) PROCEDURE TO LIMIT PRE-TAX CONTRIBUTIONS
(i) PRIOR TO THE END OF THE PLAN YEAR
The Administrator may determine prior to the end of
the Plan Year whether there is a reasonable
expectation that the Actual Deferral Percentage
results satisfy the test contained in Section
5.1(b).
In the event that the test described in Section
5.1(b) will not be satisfied, the following
procedure will be followed:
(A) The future Pre-Tax Contributions, previously
authorized, for each Highly Compensated
Employee whose Pre-Tax Contributions are at
the highest dollar amount shall be reduced
by a uniform amount, not to exceed one
dollar ($1.00) such that the Actual Deferral
Percentage for the Highly Compensated
Employees will satisfy a test in Section
5.1(b). If the test is still not satisfied
after the adjustments in the immediately
preceding sentence have been made, then
similar adjustments shall be made to the
Pre-Tax Contributions for each Highly
Compensated Active Participant whose Pre-Tax
Contributions are at the next highest dollar
amount until such time as the Actual
Deferral Percentage for the Highly
Compensated Employees will satisfy a test in
Section 5.1(b). The process shall continue
until such time as a test in Section 5.1(b)
is satisfied, or the reduction has
eliminated all future contributions.
(B) Any such reduction of future, previously
authorized Pre-Tax Contributions shall remain
in force until the January 1 immediately
following.
(C) The amount resulting from a reduction in a
Participant's future Pre-Tax Contribution in
Section 5.1(c)(i)(B) shall be treated as
taxable income to the Employee for the month
in which the reduction occurs and subsequent
months through the end of the Plan Year. The
Employer shall withhold those taxes required
by law on such increase in taxable income.
(ii) SUBSEQUENT TO END OF PLAN YEAR
(A) If it is determined subsequent to the end of
the Plan Year that the test in Section 5.1(b)
has not been met, the Excess ADP
Contributions and the income allocable
thereto for the Highly Compensated Employees
must be calculated.
(1) AMOUNT
The amount of Excess ADP Contributions
for each Highly Compensated Employee
is determined using the leveling
method as set forth in Section
5.1(c)(i)(A).
(2) DESIGNATION AND DISTRIBUTION
Such Excess ADP Contributions are to
be designated as such by the Company
and must be distributed to the
appropriate Highly Compensated
11
<PAGE> 19
Employee within twelve months of the
close of the Plan Year, reduced by
Excess Deferrals previously
distributed, if any. Any Employer
Matched Contributions relating to such
Excess ADP Contributions shall be
considered to have been made in
respect of the Highly Compensated
Employee's Post-Tax Contributions to
the extent possible, and otherwise
shall be forfeited and applied in
accordance with Section 6.13.
(3) CALCULATION OF INCOME FOR PLAN YEAR
The income allocable to the Excess ADP
Contribution must also be distributed
within twelve months of the close of
the Plan Year. The determination of
allocable income for the Plan Year is
made by multiplying the net gain (as
set forth in Article 6) for the Plan
Year allocable to Pre-Tax
Contributions by a fraction, the
numerator of which is the Excess ADP
Contribution for the Highly
Compensated Employee for the Plan Year
and the denominator of which is the
sum of (i) such Employee's total
Pre-Tax Contribution Account balance
as of the beginning of the Plan Year,
plus (ii) such Employee's Pre-Tax
Contributions for the Plan Year.
(d) MAXIMUM DEFERRAL
(i) The maximum annual amount of any Participant's
Pre-Tax Contributions beginning in the calendar year
1987 is $7,000. Such $7,000 amount shall be
automatically adjusted in subsequent years in the
same manner as the $90,000 amount is adjusted under
Code Section 415(d).
(ii) (A) If the maximum deferral set forth in Section
5.1(d)(i) above is exceeded for a Non-highly
Compensated Employee, such amount may not be
considered when performing the test in
Section 5.1(b).
(B) If a Highly Compensated Employee has an
Excess Deferral, regardless of distribution
after the close of the Plan Year as set
forth in (v) below, it must be taken into
account in the performance of the test in
Section 5.1(b).
(iii) CORRECTIVE DISTRIBUTION DURING PLAN YEAR
If there has been an Excess Deferral, a corrective
distribution may be made to the Employee DURING THE
PLAN YEAR IF:
(A) The Employee requests such distribution and
designates in writing the distribution as an
Excess Deferral, and
(B) The correcting distribution is made after
the Plan received the amount of the Excess
Deferral, and
(C) The Plan designates in writing the
distribution as a distribution of an Excess
Deferral.
(D) CALCULATION OF INCOME DURING PLAN YEAR
The income allocable to the Excess Deferral
is to be distributed with the Excess
Deferral. The determination of allocable
income during the Plan Year is made by
multiplying the income allocable to Pre-Tax
Contributions for the period from the
beginning of the Plan Year to the date on
which the distribution is made by a
fraction, the numerator of which is the
amount of Excess Deferral made by the
Employee for the Plan Year, and the
denominator of which is the sum of (i) such
Employee's total Pre-Tax Contribution
Account balance as of the beginning of the
Plan Year plus (ii) such Employee's Pre-Tax
Contributions for such Plan Year through the
date of distribution.
12
<PAGE> 20
(iv) CORRECTIVE DISTRIBUTION AFTER THE END OF THE PLAN
YEAR
(A) If the Employee notifies the Plan of the
amount of Excess Deferrals not later than
March 15 following the close of the Plan
Year, then not later than April 15 following
the close of the Plan Year, the Plan may
distribute the Excess Deferrals and any
income allocable to such amount.
(B) CALCULATION OF INCOME FOR THE PLAN YEAR
The income allocable to the Excess Deferral
must also be distributed by the April 15
following the close of the Plan Year. The
determination of allocable income for the
Plan Year is made by multiplying the net gain
(as set forth in Article 6) for the Plan Year
allocable to Pre-Tax Contributions by a
fraction, the numerator of which is the
amount of Excess Deferrals made by the
Employee in the Plan Year, and the
denominator of which is the sum of (i) such
Employee's total Pre-Tax Contribution Account
balance as of the beginning of the Plan Year,
plus (ii) such Employee's Pre-Tax
Contributions for the Plan Year.
(v) No corrective distribution of Excess Deferrals will
be permitted after the April 15 following the close
of the Plan Year for which there was a Pre-Tax
Contribution.
(vi) Any Excess Deferral remaining in the Plan shall be
subject to the Pre-Tax Contribution withdrawal
restrictions found in Section 9.1 and shall be
includable in the Employee's gross income when
distributed from the Plan.
(e) A Participant's Pre-Tax Contributions may also be limited
under Article 15.
5.2 LIMITATIONS ON POST-TAX CONTRIBUTIONS AND EMPLOYER MATCHED
CONTRIBUTIONS
(a) For purposes of determining the maximum Post-Tax Contribution
and Employer Matched Contribution, a Contribution Deferral
Percentage shall be determined for each Participant and each
Employee who is eligible to be, but who is not, a
Participant.
(b) The Contribution Deferral Percentage for each Participant and
Covered Employee shall be determined in accordance with Code
Section 401 (m) and the regulations thereunder. The
Contribution Deferral Percentage for eligible Highly
Compensated Employees for the Plan Year shall be the average
of the ratios of the eligible Highly Compensated Employees.
This will be compared to the Contribution Deferral Percentage
for the Non-highly Compensated Employees for the Plan Year,
which will be the average of the ratios of the eligible
Non-highly Compensated Employees.
Effective for Plan Years beginning on or after January 1,
1999, the following provisions shall apply in lieu of the
preceding provisions of this Section 5.2(b): The Contribution
Deferral Percentage for each Participant and Covered Employee
shall be determined in accordance with Code Section 401(m)
and the regulations thereunder. The Contribution Deferral
Percentage for eligible Highly Compensated Employees for a
Plan Year shall be the average of the ratios of the eligible
Highly Compensated Employees for that Plan Year. This will be
compared to the Contribution Deferral Percentage for the
Non-highly Compensated Employees for the prior Plan Year,
which will be the average of the ratios of the eligible Non-
highly Compensated Employees for the prior Plan Year.
(c) The Contribution Deferral Percentage for any Plan Year for
eligible Highly Compensated Employees shall not exceed the
greater of either (i) or (ii) below:
(i) One hundred and twenty-five percent (125%) of the
Contribution Deferral Percentage of the eligible
Non-highly Compensated Employees, or
13
<PAGE> 21
(ii) The lesser of the amounts determined under (A) or (B)
following (or such other amount as may be prescribed
in applicable regulations under the Code to prevent
multiple use of the alternative limitation set forth
in this clause (ii)):
(A) Two hundred percent (200%) of the
Contribution Deferral Percentage of eligible
Non-highly Compensated Employees, or
(B) The Contribution Deferral Percentage of the
eligible Non-highly Compensated Employees
plus two percentage points (2%).
Effective for Plan Years beginning on or after January 1,
1999, the following provisions shall apply in lieu of the
preceding provisions of this Section 5.2(c):
The Contribution Deferral Percentage for any Plan Year for
eligible Highly Compensated Employees shall not exceed the
greater of either (i) or (ii) below:
(i) One hundred and twenty-five percent (125%) of the
Contribution Deferral Percentage of the eligible
Non-highly Compensated Employees for the prior Plan
Year, or
(ii) The lesser of the amounts determined under (A) or
(B) following (or such other amount as may be
prescribed in applicable regulations under the
Code to prevent multiple use of the alternative
limitation set forth in this clause (ii)):
(A) Two hundred percent (200%) of the
Contribution Deferral Percentage of eligible
Non-highly Compensated Employees for the
prior Plan Year, or
(B) The Contribution Deferral Percentage of the
eligible Non-highly Compensated Employees for
the prior Plan Year plus two percentage
points (2%).
(d) PROCEDURE TO LIMIT POST-TAX AND EMPLOYER MATCHED CONTRIBUTION
(i) PRIOR TO THE END OF THE PLAN YEAR
The Administrator may determine prior to the end of
the Plan Year whether there is a reasonable
expectation that the Contribution Deferral
Percentage results satisfy either of the tests
contained in Section 5.2(c). In the event that
neither of the tests described in Section 5.2 will
be satisfied, the following procedure will be
followed:
(A) The future unmatched Post-Tax Contributions,
previously authorized, for each Highly
Compensated Employee whose unmatched
Post-Tax Contributions are at the highest
dollar amount shall be reduced by a uniform
amount, not to exceed one dollar ($1.00)
such that the Contribution Deferral
Percentage for the Highly Compensated
Employees will satisfy a test in Section
5.2(c). If a test in Section 5.2(c) is still
not satisfied after the adjustments in the
immediately preceding sentence have been
made, then similar adjustments shall be made
to the unmatched Post-Tax Contributions for
each Highly Compensated Active Participant
whose unmatched Post-Tax Contributions are
at the next highest dollar amount until such
time as the Contribution Deferral Percentage
for the Highly Compensated Employees will
satisfy a test in Section 5.2(c). This
process shall continue until one of the
tests is satisfied, or there are no further
unmatched Post-Tax Contributions to reduce,
or the Contribution Deferral Percentage
would be reduced below the highest level
attributable to a Highly Compensated
Employee.
(B) In the event that none of the tests
described in Section 5.2(c) will be
satisfied under (A) above, the future
matched Post-Tax Contributions and the
Employer Matched Contributions attributable
to them for each Highly Compensated Employee
whose matched Post-Tax Contributions and
Employer Matched Contributions attributable
to them are at the highest dollar amount
shall be
14
<PAGE> 22
reduced by a uniform amount, not to exceed
one dollar ($1.00), such that the
Contribution Deferral Percentage for the
Highly Compensated Employees will satisfy a
test in Section 5.2(c). If a test in Section
5.2(c) is still not satisfied after the
adjustments in the immediately preceding
sentence have been made, then similar
adjustments shall be made to the matched
Post-Tax Contributions and attributable
Employer Matched Contributions for each
Highly Compensated Active Participant whose
matched Post-Tax Contributions and Employer
Matched Contributions attributable to them
are at the next highest dollar amount until
such time as the Contribution Deferral
Percentage for the Highly Compensated
Employees will satisfy a test in Section
5.2(c). This process shall continue until
such time as a test in Section 5.2(c) is
satisfied.
(C) Any such reduction of future Post-Tax
Contributions or Employer Matched
Contributions shall remain in force until the
January 1 immediately following.
(D) The amount resulting from a reduction in an
Active Participant's future Post-Tax
Contribution in Section 5.2 will not be
considered a Contribution and no future
Employer Matched Contributions will be made
relating to such.
(ii) SUBSEQUENT TO THE END OF THE PLAN YEAR
(A) If it is determined subsequent to the end of
the Plan Year that the tests in Section
5.2(c) have not been met, the Excess
Aggregate Contributions and the income
allocable thereto for the Highly Compensated
Employees must be calculated.
(1) AMOUNT
The amount of Excess Aggregate
Contributions for each Highly
Compensated Employee is determined
using the leveling method as set forth
in Sections 5.2(d)(i)(A) and
5.2(d)(i)(B).
(2) DESIGNATION AND DISTRIBUTION
Such Excess Aggregate Contributions are
to be designated as such by the Company
and to the extent consisting of
Post-Tax Contributions, must be
distributed to the appropriate Highly
Compensated Employee within twelve
months of the close of the Plan Year,
and, to the extent consisting of
Employer Matched Contributions, shall
be forfeited and applied in accordance
with Section 6.13.
(3) CALCULATION OF INCOME FOR PLAN YEAR
The income allocable to the Excess
Aggregate Contribution must also be
distributed within twelve months of the
close of the Plan Year. The
determination of allocable income for
the Plan Year is made by multiplying
the net gain (as set forth in Article
6) for the Plan Year allocable to
Post-Tax Contributions and Employer
Matched Contributions by a fraction,
the numerator of which is the Excess
Aggregate Contribution for the Highly
Compensated Employee for the Plan Year
and the denominator of which is the sum
of (i) such Employee's total Post-Tax
Contribution Account balance plus
Employer Matched Contribution Account
balance as of the beginning of the Plan
Year plus (ii) such Employee's Post-
Tax Contributions and Employer Matched
Contributions for the Plan Year.
15
<PAGE> 23
(e) A Participant's Post-Tax and Employer Matched Contributions
may also be limited under Article 15.
5.3 PROCEDURE IF MULTIPLE USE LIMITATION IS EXCEEDED
(a) If it is determined subsequent to the performance of the
tests in Sections 5.1 and 5.2 and subsequent to the end of
the Plan Year, that there has been an impermissible multiple
use of the alternative limitations set forth in Sections
5.1(b)(ii) and 5.2(c)(ii), the Contribution Deferral
Percentage for each Highly Compensated Employee must be
reduced in the same manner as set forth in Section 5.2(d) so
that there is no multiple use of the alternative limitation.
The required reduction shall be treated as an Excess
Aggregate Contribution, in the same manner as set forth in
Section 5.2(d)(ii).
(b) If the reduction in (a) above is not sufficient, then the
Actual Deferral Percentage for each Highly Compensated
Employee must be reduced in the same manner as set forth in
Section 5.1(c) so that there is no multiple use of the
alternative limitation. The required reduction shall be
treated as an Excess ADP Contribution, in the same manner as
set forth in Section 5.1(c)(ii).
ARTICLE 6
---------
ACCOUNTS
--------
6.1 ACCOUNTS
The Administrator shall maintain in the name of each Participant or
Former Participant such of the following Accounts as shall be
applicable:
(a) A Pre-Tax Contribution Account;
(b) A Post-Tax Contribution Account;
(c) An Employer Matched Contribution Account;
(d) An Employer SDRP Contribution Account;
(e) A Former PAYSOP Account; and
(f) A Former Employer Supplemental Contribution Account;
Such Accounts shall be administered in the manner hereinafter
provided.
6.2 ACCOUNTS REPRESENT UNDIVIDED INTERESTS
The portion of balances standing to the credit of the Pre-Tax
Contribution Account, the Post-Tax Contribution Account, the Employer
Matched Contribution Account, the Employer SDRP Contribution Account,
the Former PAYSOP Account, the Former Employer Supplemental
Contribution Account, the Employer Forfeiture Account and the suspense
account referred to in Section 6.12 that is invested in one of the
Investment Funds shall represent an undivided interest in such fund.
6.3 ACCOUNT VALUES
The value of an Account on any date shall be its value determined on
the coinciding or immediately preceding Valuation Date plus any
contributions and other amounts subsequently credited thereto, and
less any distributions and other amounts subsequently charged thereto.
6.4 VALUATION OF INVESTMENT FUNDS
As of each Valuation Date, the Trustee shall compute the value of each
Investment Fund from which shall be determined the net gain and loss
of such Fund since the immediately preceding Valuation Date.
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<PAGE> 24
The net gain or loss shall include any unrealized and realized profits
or losses, and any dividends, interest, or other income and any
expenses which are due or accrued, but shall not include contributions
made by the Employer or a Participant and distributions made to a
Participant, Former Participant or Beneficiary. The cost basis for
shares of Company Stock purchased since the prior Valuation Date shall
be the average cost per share; such average based on all purchase and
sale prices in the Fund since the prior Valuation Date.
6.5 ALLOCATION OF NET GAIN OR LOSS OF INVESTMENT FUNDS TO ACCOUNTS
(a) As of each Valuation Date, the net gain or loss of each
Investment Fund shall be allocated among the appropriate
Accounts in proportion to the ratio of:
(i) The value of the portion of each such Account that
is, and has been continuously, invested in such
Investment Fund as of the immediately preceding
Valuation Date; to
(ii) The aggregate of the amounts computed under clause
(i) above for all Accounts that are invested in
such Investment Fund as of such immediately
preceding Valuation Date.
(b) The Administrator may, however, adopt such procedures as it
considers equitable to establish a proportionate crediting of
the net gain or loss of the Investment Fund or Investment
Funds for contributions made since the last Valuation Date.
(c) In determining the value of the appropriate Accounts under
Section 6.5 as of the immediately preceding Valuation Date,
there shall be excluded any amounts forfeited in accordance
with Section 8.3 since such date.
6.6 BASIS OF VALUATION
In determining the value of any Investment Fund pursuant to the
provisions of Section 6.4, the Trustee shall use the following values:
securities listed on any nationally recognized securities exchange
shall be valued at the closing price reported on any such exchange on
the Valuation Date, or, if there were no sales on the Valuation Date,
then at the quoted bid price on the Valuation Date. Securities not
listed on a recognized stock exchange shall be valued at the quoted
closing bid price on the Valuation Date. A unit of participation in a
common trust fund maintained by the Trustee or a share in a mutual
fund shall be valued at the unit value, or share price respectively,
in effect on the Valuation Date. Securities with respect to which
there were no available sale prices or bid prices on the Valuation
Date, and any other investments, shall be valued at prices deemed by
the Trustee to represent the fair market value thereof on the
Valuation Date.
6.7 ADMINISTRATION OF PRE-TAX CONTRIBUTION ACCOUNT
(a) There shall be credited to the Pre-Tax Contribution Account
of a Participant all Pre-Tax Contributions made pursuant to
Section 4.1 and all Qualified Plan Rollover Contributions
made pursuant to Section 17.12 on behalf of such Participant.
(b) There shall be charged against such Account withdrawals by
the Participant pursuant to Section 10.1 hereof.
6.8 ADMINISTRATION OF POST-TAX CONTRIBUTION ACCOUNT
(a) There shall be credited to the Post-Tax Contribution Account
of a Participant all Post-Tax Contributions made by such
Participant under this Plan.
(b) There shall be charged against such Account withdrawals by
the Participant in accordance with Section 10.2 hereof.
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<PAGE> 25
6.9 ADMINISTRATION OF EMPLOYER MATCHED CONTRIBUTION ACCOUNT
(a) There shall be credited to the Employer Matched Contribution
Account of a Participant all Employer Matched Contributions
made on behalf of such Participant under this Plan.
(b) There shall be charged against such Account withdrawals by
the Active Participant in accordance with Section 10.3
hereof.
6.9A ADMINISTRATION OF EMPLOYER SDRP CONTRIBUTION ACCOUNT
There shall be credited to the Employer SDRP Contribution Account of a
Participant all Employer SDRP Contributions made on behalf of such
Participant under this Plan. No withdrawals or loans are permitted
from such Account.
6.10 ADMINISTRATION OF FORMER PAYSOP ACCOUNT
No further amounts shall be credited to the Former PAYSOP Account.
Such Account shall consist of stock and funds of the Participant's or
Former Participant's former PAYSOP and former Supplemental PAYSOP
Account (as such contributions ceased, effective December 31,1987). No
withdrawals or loans are permitted from such Account.
6.11 ADMINISTRATION OF THE FORMER EMPLOYER SUPPLEMENTAL CONTRIBUTION
ACCOUNT
No amounts attributable to Plan Years after 1988 shall be credited to
the Former Employer Supplemental Contribution Account of a Participant
or Former Participant (as such provision ceased to be effective as of
December 31, 1988). No withdrawals or loans are permitted from such
Account.
6.12 ADMINISTRATION OF THE SUSPENSE ACCOUNT
(a) There shall be credited to a suspense account the amount of
any Contributions, Employer Matched Contributions and
Employer SDRP Contributions for a Participant which are in
excess of the amount permitted under Article 15 hereof.
(b) The balance in such suspense account at the close of such
Plan Year shall be accounted for as follows:
(i) The Post-Tax Contributions considered as excess
under (a) above, including gains or less losses,
shall be returned to the Participant before the end
of the next Plan Year.
(ii) All such other Contributions, Employer Matched
Contributions and Employer SDRP Contributions that
are considered as excess under (a) above shall
remain credited to this suspense account and
reallocated in the following Plan Year as Employer
Matched Contributions and Employer SDRP
Contributions for such Plan Year (and succeeding
Plan Years if necessary).
6.13 ADMINISTRATION OF THE EMPLOYER FORFEITURE ACCOUNT
(a) There shall be credited to the Employer Forfeiture Account
all funds creditable to such Account as provided in Section
8.3 hereof.
(b) There shall be charged against such Account all amounts
withdrawn from time to time and reallocated as Employer
Matched Contributions or Employer SDRP Contributions.
6.14 CREDITING OF CONTRIBUTIONS
Pre-Tax Contributions and Post-Tax Contributions shall be credited to
the appropriate Account or Accounts of such Participants no later than
the end of the quarter for which such contributions are attributable
or as soon thereafter as administratively possible. Employer Matched
Contributions and Employer SDRP Contributions made for the benefit of
Participants with respect to a particular Plan Year
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<PAGE> 26
shall be credited to the appropriate Accounts of such Participants no
later than the end of the quarter for which such Contributions are
attributable or as soon thereafter as administratively possible.
6.15 EMPLOYEE CONTRIBUTION RECORDS
The Administrator shall maintain a Pre-Tax Contribution record in the
name of each Participant or Former Participant, in which shall be
entered, in dollars and cents, the amount of each Pre-Tax Contribution
made on behalf of such Participant; and a Post-Tax Contribution record
in which shall be entered, in dollars and cents, the amount of each
Post-Tax Contribution made by such Participant. Each such record shall
at all times carry a current cumulative balance as of the preceding
Valuation Date plus Contributions, distributions and withdrawals made
in the interim since such Valuation Date.
6.16 UNIT ACCOUNTING
The Administrator may, for administrative purposes, establish unit
values for one or more Investment Funds or any portion thereof and
maintain the Accounts setting forth each Participant's interest in
such Investment Fund (or any portion thereof) in terms of such units,
all in accordance with such rules and procedures as the Administrator
shall deem to be fair, equitable and administratively practicable. In
the event that unit accounting is thus established for any Investment
Fund (or any portion thereof) the value of a Participant's interest in
that Investment Fund (or any portion thereof) at any time shall be an
amount equal to the then value of a unit in such Investment Fund (or
any portion thereof) multiplied by the number of units then credited
to the Participant.
ARTICLE 7
---------
RETIREMENT, DISABILITY OR DEATH
-------------------------------
7.1 BENEFIT AT RETIREMENT
Upon attaining his/her Normal Retirement Age hereunder, a Participant
shall be one hundred percent (100%) vested in and eligible to receive
upon separation from service the value of his/her Pre-Tax Contribution
Account, Post-Tax Contribution Account, Employer Matched Contribution
Account, Employer SDRP Contribution Account, Former PAYSOP Account,
and Former Employer Supplemental Contribution Account in the manner
provided in Article 9 hereof.
7.2 DISABILITY BENEFIT
A Participant who is Disabled shall be one hundred percent (100%)
vested in and eligible to receive the value of his/her Pre-Tax
Contribution Account, Post-Tax Contribution Account, Employer Matched
Contribution Account, Employer SDRP Contribution Account, Former
PAYSOP Account, and Former Employer Supplemental Contribution Account
in the manner provided in Article 9 hereof.
7.3 DEATH BENEFIT
Upon the death of a Participant, his/her Beneficiary shall be eligible
to receive one hundred percent (100%) of the value of his/her Pre-Tax
Contribution Account, Post-Tax Contribution Account, Employer Matched
Contribution Account, Employer SDRP Contribution Account, Former
PAYSOP Account, and Former Employer Supplemental Contribution Account
in the manner provided in Article 9 hereof. Notwithstanding anything
in the Plan to the contrary, as to each Participant for whom funds
were transferred to an Employer SDRP Contribution Account as a result
of the Merger, such Participant's Beneficiary shall not be entitled to
receive the value of such Participant's Employer SDRP Contribution
Account, unless such Beneficiary is named in a single written
designation that expressly applies to both the Long-Term Savings Plan
portion and the Self-Directed Retirement Plan portion of The
Progressive Retirement Security Program. In the absence of such a
designation, such Participant's Employer SDRP Contribution Account
shall be paid upon such Participant's death to such Participant's
"Beneficiary" under and within the meaning of The Progressive
Corporation Supplemental Retirement Plan, as in effect immediately
prior to the Merger.
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<PAGE> 27
ARTICLE 8
---------
VESTING AND TERMINATIONS
------------------------
8.1 VESTING
A Participant is vested in his/her Accounts as follows:
(a) PARTICIPANT ACCOUNTS
Each Participant and Former Participant is one hundred
percent (100%) vested in his/her Pre-Tax Contribution
Account, Post-Tax Contribution Account, and Former PAYSOP
Account.
(b) EMPLOYER MATCHED CONTRIBUTION ACCOUNT
(i) Each Participant and Former Participant shall be vested
in his/her Employer Matched Contribution Account in
accordance with the following schedule:
Vested
YEARS OF SERVICE PERCENTAGE
Less than 1 0%
1 but less than 2 25%
2 but less than 3 50%
3 but less than 4 75%
4 or more 100%
(ii) Notwithstanding (i) above, and due to the fact that
class year vesting was eliminated effective December
31,1988, this transitional vesting section shall apply
to any Participant for whom it produces a greater
vested benefit than (i) above. A Participant's vested
benefit in his/her Employer Matched Contribution
Account as of December 31,1988 will be frozen (for
calculation purposes only) and the amount maintained
separately. To calculate the vested percentage of a
Participant's Employer Matched Contribution Account,
the frozen December 31,1988 balance will be added to
the subsequent Employer Matched Contributions. This
sum will be multiplied by the appropriate vested
percentage corresponding to the Participant's Years of
Service as determined in (i) above.
(c) FORMER EMPLOYER SUPPLEMENTAL CONTRIBUTION ACCOUNT AND EMPLOYER
SDRP CONTRIBUTION ACCOUNT
Each Participant or Former Participant shall be vested in
his/her Former Employer Supplemental Contribution Account and
Employer SDRP Contribution Account in accordance with the
following schedule:
Vested
YEARS OF SERVICE PERCENTAGE
---------------- ----------
Less than 5 0%
5 or more 100%
(d) SPECIAL VESTING PROVISIONS FOR MIDLAND EMPLOYEES
Effective June 30, 1998, and notwithstanding anything to the
contrary set forth in the Addendum attached hereto entitled
"Addendum to The Progressive Retirement Security Program
("Plan") Re: Former Participants Under The Midland Companies'
Employee Savings Plan" ("Midland Addendum"), each Participant
shall be fully vested in the balance of his/her Midland
Matching Contribution Account, as defined in the Midland
Addendum.
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<PAGE> 28
8.2 TERMINATION OF EMPLOYMENT
The final vesting status of a Participant who terminates his/her
Employment for any reason other than Retirement, Disability or death
shall be determined as of his/her Termination of Employment, taking
into consideration the provisions of Section 11.1. Such Participant
shall become a Former Participant and shall be eligible to receive the
value of his/her Pre-Tax Contribution Account, Post-Tax Contribution
Account, Former PAYSOP Account, and the vested portion of his/her
Employer Matched Contribution Account, the vested portion of his/her
Employer SDRP Contribution Account and the vested portion of his/her
Former Employer Supplemental Contribution Account as provided in
Article 9 hereof.
8.3 FORFEITURES
If a Former Participant who terminated Employment for reasons other
than Retirement, Disability or death does not return to Employment
during the Plan Year in which his/her Termination of Employment
occurs, or if he/she dies after his/her Termination of Employment
during that Plan Year, then the following provisions shall apply to
the non-vested portion of his/her Employer Matched Contribution
Account, Employer SDRP Contribution Account and Former Employer
Supplemental Contribution Account:
a) If he/she is 0% vested in his/her Employer SDRP Contribution
Account and/or his/her Former Employer Supplemental
Contribution Account, he/she shall be deemed to have received
a distribution of $0.00 Dollars from such Employer SDRP
Contribution Account, and/or Former Employer Supplemental
Contribution Account, as the case may be, and the balance of
such Account(s) shall be provisionally forfeited and such
forfeiture shall be applied in accordance with Section 6.13
hereof.
b) If he/she is less than 100% vested in his/her Employer
Matched Contribution Account, the non-vested portion of such
Account shall be provisionally forfeited and such forfeiture
shall be applied in accordance with Section 6.13 hereof as of
the earlier of (i) the date he/she receives a distribution of
the vested portion of such Account, (ii) the fifth
anniversary of the date of his/her Termination of Employment
or (iii) the date he/she dies.
8.4 REEMPLOYMENT
If a Participant who ceased to be an Employee returns to active
Employment, an amount equal to the value of the provisionally
forfeited non-vested portion of his/her Employer Matched Contribution
Account, Employer SDRP Contribution Account and Former Employer
Supplemental Contribution Account, determined as of the Valuation Date
coincident with or next following the date he/she last ceased to be an
Employee, will be reinstated by crediting such amounts to the
Employee's respective Employer Matched Contribution Account, Employer
SDRP Contribution Account and Former Employer Supplemental
Contribution Account. The amounts so reinstated will be made from any
unapplied forfeitures then available under the Plan, provided,
however, that if unapplied forfeitures are less than the amount to be
reinstated, the Employer will make a supplemental contribution to
eliminate such insufficiency.
ARTICLE 9
---------
PAYMENT OF BENEFITS
-------------------
9.1 APPLICATION FOR PAYMENT
Application for distribution of benefits under this Plan shall be made
by a Participant or Former Participant (or other claimant) in
accordance with Section 9.5 hereof and approved by the Administrator
before payment commences.
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<PAGE> 29
9.2 TIME OF PAYMENT
(a) Distribution of benefits to a Participant (or Former
Participant) on account of Retirement shall be made as soon
as practicable after the Valuation Date coincident with or
next following his/her Retirement.
(b) Distribution of benefits to a Participant on account of
Disability shall be made as soon as practicable after the
Valuation Date coincident with or next following the Disabled
Participant's application pursuant to Section 9.1.
(c) In no event, however, will benefit payments to a Participant
(or Former Participant) commence later than April 1 of the
calendar year next following the later of (i) the calendar
year in which such Participant (or Former Participant)
attains age seventy and one-half (70-1/2) or (ii) the
calendar year in which the Participant (or former
Participant) terminates employment. Notwithstanding the
foregoing, benefit payments to a Participant who is a 5%
Owner shall commence no later than April 1 of the calendar
year next following the calendar year in which the
Participant attains age seventy and one-half (70-1/2). For
purposes of this provision, the term "5% Owner" shall have
the meaning set forth in Section 15.5(h) (iii) of the Plan.
Any individual who receives a distribution of benefits prior
to age fifty-nine and one-half (59-1/2) shall be advised by
the Administrator that an additional federal income tax
penalty may be imposed on all or a portion of such
distribution unless made on account of death or Disability.
(d) In the case of a Participant (or Former Participant) who dies
before benefit payments have commenced all benefits in
respect of such Participant (or Former Participant) shall be
paid to his or her Beneficiary in a lump sum as soon as
practicable after the Valuation Date coincident with or next
following his or her death.
(e) Subject to Section 9.2(h), distribution of benefits to a
Participant who terminates Employment for reasons other than
Retirement, Disability or death shall be made as soon as
practicable after the Valuation Date coincident with or next
following the date of his/her Termination of Employment where
the Participant (or Former Participant) has made proper
application.
(f) If proper application has been made, distribution shall be
made, in any event, not later than sixty (60) days after the
close of the Plan Year in which the Participant or Former
Participant attains age sixty-five (65) or terminates his/her
Employment, whichever is later.
Where the amount to be distributed cannot be determined,
distribution may be delayed, but in no event beyond sixty
(60) days after such amount is determined.
(g) Notwithstanding anything to the contrary in this Section 9.2,
while such Participant is in the employ of the Employer, no
distribution from the Former PAYSOP Account may be made from
a Participant's Account before the end of the eighty-fourth
month beginning after the month in which it was allocated. In
fact, no withdrawals are permitted from the Former PAYSOP
Account pursuant to Section 10.4.
(h) Notwithstanding anything provided in this Section 9.2 to the
contrary, if the lump sum value of a Participant's Accounts
does not exceed Five Thousand Dollars ($5,000), as
determined quarterly by the Administrator, the
Administrator, shall direct that the lump sum value of such
Accounts be paid in total, in cash (unless the Employee
elects Company Stock from his/her Former PAYSOP Account or
Company Stock Fund pursuant to Section 9.4), as soon as
administratively feasible following the Participant's
Termination of Employment, whether or not application for
payment has been made in accordance with Section 9.1.
Distribution will not be made without the Participant's
consent if the lump sum value of the Participant's Accounts
is $5,000 or more at the time of proposed distribution or at
the time of any prior distribution. Such Five Thousand
Dollar ($5,000) amount shall be automatically adjusted in
subsequent years in accordance with regulations under the
Code.
(i) No distribution shall be made to any Participant before his
Normal Retirement Date unless:
22
<PAGE> 30
(i) his prior written consent has been obtained by the
Administrator; or
(ii) the aggregate balance of his Accounts, determined as
of the Valuation Date coinciding with or immediately
preceding the proposed date of distribution, does not
exceed $5,000.
If the Participant's consent is required under this Section
9.2(i), but is not obtained by the Administrator prior to the
time the distribution is to be made under Section 9.2, the
distribution shall be made as soon as reasonably practicable
following the earlier of (1) the Participant's Normal
Retirement Date, (2) the date the Administrator receives
satisfactory evidence of the Participant's death, or (3) the
date the Administrator obtains the Participant's written
consent.
(j) All distributions under the Plan will comply with code
Section 401(a)(9) and the regulations thereunder.
9.3 FORM OF PAYMENT
A Participant, Former Participant or Beneficiary shall receive the
value of his/her Accounts payable in cash or shares of Company Stock
(if invested in Company Stock Fund at Termination) as elected by the
Participant in the form of a lump sum payment. However, a Participant
may elect to receive in-kind distributions of securities held in his
Brokerage Account.
However, if a Participant's entire Account consists of only the
Partnership Share, the distribution shall be in cash (due to the small
value of such an Account).
9.4 DETERMINATION OF VALUE OF PAYMENT
The value of the Accounts to be distributed to a Participant, Former
Participant or Beneficiary shall be determined as of the earliest
Valuation Date that is at least seven (7) days after receipt of a
written request for such distribution.
9.5 CLAIMS PROCEDURE
(a) The Administrator shall establish reasonable procedures under
which a claimant, who may be a Participant, Former
Participant or Beneficiary, may present a claim for benefits
under this Plan.
(b) Unless such claim is allowed in full by the Administrator,
written notice of the denial shall be furnished to the
claimant within ninety (90) days (which may be extended by a
period not to exceed an additional ninety (90) days if
special circumstances so require and proper written notice to
the claimant is given prior to the expiration of the initial
ninety (90) day period) setting forth the following in a
manner calculated to be understood by the claimant:
(i) The specific reason(s) for the denial;
(ii) Specific reference(s) to any pertinent
provision(s) of the Plan or rules promulgated
pursuant thereto on which the denial is based;
(iii) A description of any additional information or
material as may be necessary to perfect the claim,
together with an explanation of why it is
necessary; and
(iv) An explanation of the steps to be taken if the
claimant wishes to resubmit his/her claim for review.
(c) Within a reasonable period of time after the denial of the
claim, but in any event, not to be more than sixty (60) days,
the claimant or his/her duly authorized representative may
make written application to the Administrator for a review of
such denial. The claimant or his/her representative, may
review documents held by the Administrator and pertinent to
the denial of such claim, and may submit a written statement
of issues and comments.
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<PAGE> 31
(d) If an appeal is timely filed, the Administrator shall conduct
a full and fair review of the claim and mail or deliver to
the claimant its written decision within sixty (60) days
after the claimant's request for review (which may be
extended by a period not to exceed an additional sixty (60)
days if special circumstances or a hearing so require and
proper written notice to the claimant is given prior to the
expiration of the initial sixty (60) day period). Such
decision shall:
(i) Be written in a manner calculated to be
understandable by the claimant;
(ii) State the specific reason(s) for the decision; and
(iii) Make specific reference to pertinent provision(s) of
the Plan.
9.6 FACILITY OF PAYMENT
If the Administrator determines that a Participant, Former Participant
or Beneficiary entitled to receive benefits under this Plan is (at the
time such benefit is payable) a minor or physically, mentally or
legally incompetent to receive such benefit and that another person or
an institution has legal custody of such minor or incompetent
individual, the Administrator may cause payment to be made to such
person or institution having custody of such Participant, Former
Participant or Beneficiary. Such payment, to the extent made, shall
operate as a complete discharge of obligation by the Administrator,
the Employer, the Trustee and the Fund.
ARTICLE 10
----------
WITHDRAWALS AND LOANS DURING EMPLOYMENT
---------------------------------------
10.1 IN-SERVICE WITHDRAWALS FROM PRE-TAX CONTRIBUTION ACCOUNT
(a) If a Participant has attained age 59-1/2, such Participant
may at any time, by filing written application with the
Administrator, make an in-service withdrawal from his/her
Pre-Tax Contribution Account.
(b) (i) If a Participant has not attained age 59-1/2, such
Participant may make an in-service withdrawal of
not less than $250.00 from his/her Pre-Tax
Contribution Account only in the event of Hardship
and only to the extent that such in-service
withdrawal is necessary to satisfy the Hardship.
The Participant must request the withdrawal in
writing from the Administrator.
(ii) SAFE-HARBOR
A request for an in-service withdrawal will be deemed
to be necessary to satisfy a Hardship only if all of
the following requirements are met:
(A) The amount of the withdrawal does not exceed
the amount of the Hardship plus amounts
necessary to pay any federal, state or local
income taxes or penalties reasonably
anticipated to result from the withdrawal, and
(B) The Participant has obtained all withdrawals
(other than Hardship withdrawals) and all
nontaxable loans available under this Plan and
any other plan maintained by the Employer, and
(C) The Participant certifies in writing that the
amount of the requested Hardship withdrawal is
necessary to satisfy an immediate and heavy
financial need and that such need cannot
reasonably be relieved (i) through
reimbursement or compensation by insurance or
otherwise, (ii) by liquidation of assets,
(iii) by discontinuing Plan contributions,
(iv) by other distributions or non-taxable
loans from any other plans maintained by
Progressive or any other current or former
employer of the Participant or (v) by
borrowing from commercial sources on
reasonable commercial terms.
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<PAGE> 32
(c) The amount of the Pre-Tax Contribution Account available for
withdrawal shall include:
(i) The Pre-Tax Contributions and earnings as of December
31, 1988, and
(ii) The Pre-Tax Contributions made on or after January
1, 1989, but shall not include any income on such
Account subsequent to that date.
10.2 IN-SERVICE WITHDRAWALS FROM POST-TAX CONTRIBUTION ACCOUNT
(a) A Participant may at any time file a written application with
the Administrator to make a voluntary withdrawal of not less
than $250.00 from his/her Post-Tax Contribution Account for
any reason.
(b) The entire Post-Tax Contribution Account balance including
income attributable to such Account, is available for
withdrawal. Any withdrawal will be processed as follows:
(i) First, from the pre-1987 Post-Tax Contribution
Account balance,
(ii) Next, from income on the pre-1987 Post-Tax
Contribution Account balance together with
Contributions (and income thereon) made to the
post-1986 Post-Tax Contribution Account.
Such amount shall be on a pro rata basis between
Contributions and income thereon, pursuant to Code Section
72.
10.3 IN-SERVICE WITHDRAWALS FROM EMPLOYER MATCHED CONTRIBUTION ACCOUNT
(a) An Active Participant may file a written application with the
Administrator to make a withdrawal from his/her vested
Employer Matched Contribution Account balance not to exceed
the following:
(i) if the Active Participant has been a Participant in
the Plan for less than five (5) years, an amount
equal to the sum of all Employer Matched
Contributions made in respect to such Participant at
least two (2) years prior to the date of the
withdrawal; or
(ii) if the Active Participant has been a Participant in
the Plan for at least five (5) years, the entire
vested balance of such Participant's Employer Matched
Contribution Account.
An Active Participant may make such a withdrawal no more
frequently than once per Plan Year.
(b) An in-service withdrawal from an Active Participant's
Employer Matched Contribution Account is not available unless
the Active Participant has filed an application and is
eligible to receive a withdrawal of Contributions pursuant to
either 10.1 or 10.2, subject to the further requirement that
a withdrawal of all available Post-Tax Contributions pursuant
to 10.2 must first occur.
10.4 NO WITHDRAWALS AVAILABLE FROM OTHER ACCOUNTS
(a) No withdrawals under any circumstances shall be available
from:
(i) The non-vested portion of the Employer Matched
Contribution Account,
(ii) The Former PAYSOP Account,
(iii) The Former Employer Supplemental Contribution
Account, or
(iv) The Employer SDRP Contribution Account.
(b) No withdrawals are available to anyone other than an Active
Participant and Inactive Participants as specifically noted
in Sections 10.1 and 10.2; that is, no Former Participants or
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<PAGE> 33
Beneficiaries are eligible to make withdrawals from any
Accounts, as they may request distribution pursuant to
Section 9.1.
10.5 PAYMENT OF WITHDRAWALS
(a) Withdrawals shall be processed not less frequently than
bi-weekly. Withdrawals shall be distributed as soon as
practicable after the date the Participant's application for
withdrawal is received, provided full documentation is
enclosed.
(b) The amount of the withdrawal shall be based upon the value of
the Participant's Pre-Tax Contribution Account, Post-Tax
Contribution Account, and Employer Matched Contribution
Account (as restricted by Section 10.3) as applicable,
determined as of the Valuation Date coincident with or
immediately preceding the Administrator's receipt of a
request for such withdrawal; provided, however, all Stock
shall be valued using the closing price on the business day
immediately preceding the date the withdrawal is processed.
(c) Unless the Participant otherwise directs in writing, each
withdrawal shall be charged to each of the Investment Funds
(other than the Brokerage Account) in which any portion of
his/her Accounts are invested in the proportion that the
balance held in such Investment Fund bears to the aggregate
balance held in all such Investment Funds. Notwithstanding
anything in this Plan to the contrary, no withdrawals shall
be made from any Participant's Brokerage Account.
10.6 LOANS TO PARTICIPANTS
(a) As approved by the Administrator, a Participant may at any
time borrow an amount as set forth in Section 10.6(b) under
the terms and conditions of this Section 10.6.
(b) The Administrator shall investigate each application for a
loan. In addition to such rules and regulations as the
Administrator may adopt, all loans shall comply with the
following terms and conditions:
(i) An application for a loan by a Participant shall be
made to the Administrator in such manner as the
Administrator shall prescribe. The loan application
will include a promissory note executed by the
borrowing Participant obligating the Participant to
repay the loan through payroll deduction of
substantially level payments made no less
frequently than quarterly within the term described
in Section 10.6(b)(vi).
(ii) No loans will be available for the purchase of a
primary residence.
(iii) Each loan shall be secured by the borrower's entire
right, title and interest in and to the trust fund
(not to exceed the amount of the loan), evidenced
by the Participant's collateral promissory note for
the amount of the loan, including interest, payable
to the order of the Trustee.
(iv) The minimum loan amount shall be one thousand
dollars ($1,000).
(v) The loan amount requested must be a multiple of
$100. The outstanding balance of each loan amount
(plus the highest outstanding balance of all other
loans made from this Plan within the immediately
preceding twelve-month period) shall not exceed the
lesser of:
(A) $50,000; or
(B) Fifty percent (50%) of the Participant's
vested Account(s) based on the
Participant's Pre-Tax Contribution
Account, Post-Tax Contribution Account,
and Employer Matched Contribution Account.
(vi) Effective January 1, 1999, the period of repayment
of any loan shall not exceed four (4) years.
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<PAGE> 34
(vii) Repayment Options: A loan may be prepaid without
penalty by paying the balance of the loan plus
accrued interest in a lump sum payment.
(viii) Each loan shall bear interest at a rate to be set
and reviewed periodically by the Administrator and,
in determining the interest rate, the Administrator
shall take into consideration commercial interest
rates currently being charged by persons in the
business of lending money for loans which would be
made under similar circumstances. The Administrator
shall not discriminate among Participants in the
matter of interest rates. To the extent permitted
by law, the interest rate on any loan will not be
adjusted.
(ix) Effective January 1, 1999, no application for a
loan by the Participant will be approved if it
would cause the Participant to have more than two
(2) loans outstanding.
(x) Effective January 1, 1999, the Administrator may
deduct from the proceeds of each loan any fee, not
to exceed $50.00, imposed by any third party
administrator for processing loans.
(c) (i) Loans shall be processed not less frequently
than bi-weekly. For all purposes relating to loans,
the value of the Participant's Account shall be
determined as of the Valuation Date coinciding with
or immediately following receipt of a loan
application by the Administrator; provided,
however, all Stock shall be valued using the
closing price on the business day immediately
preceding the date the withdrawal is processed.
(d) A Participant whose Employment terminates shall have 30 days
from the date of termination to repay the loan. Repayment
must be made by check or money order in a lump sum for the
remaining loan balance plus accrued interest. However, a
Participant whose active Employment terminates as a result of
a leave of absence approved by his or her Employer may
continue to repay his or her loan in installments payable in
the amounts and at the times that payroll deduction payments
would have been made had he continued in active Employment.
(e) In the event of a default on any loan the entire outstanding
principal balance of the loan plus all accrued interest
shall be immediately due and payable and the Administrator
is authorized (to the extent permitted by law) to take any
and all actions necessary or appropriate to collect such
sums. However, foreclosure on and reduction of a
Participant's Plan benefits in repayment of a loan shall not
occur until an event has occurred which would entitle the
Participant or his/her Beneficiary to receive a distribution
of his/her Plan benefits, provided that the amount of such
distribution shall be reduced by the outstanding principal
amount of the loan plus all accrued interest. For purposes
of the preceding provisions, "default" means any of the
following events:
(i) failure of any Participant whose Employment has
terminated to repay the entire outstanding
principal balance of the loan plus accrued interest
within the time specified in Section 10.6(d); or
(ii) any other failure of a Participant to make any
required payment of principal or interest on any
loan within thirty (30) days following the date
such payment was due.
(f) Anything in this Section 10.6 to the contrary
notwithstanding, all loans will comply with the terms of Code
Section 72(p).
(g) The source of funds for each loan shall be those Trust
assets comprising first, the Participant's Post-Tax
Contribution Account, followed by the Participant's Pre-Tax
Contribution Account, and finally, the vested portion of the
Participant's Employer Matched Contribution Account. Within
each such Account funds for the Participant's loan shall be
withdrawn from each Investment Fund (other than the
Brokerage Account) in which any portion of such Account is
invested in the proportion that the balance held in such
Investment Fund bears to the aggregate balance held in all
such Investment Funds, unless the Participant elects
otherwise in writing. Notwithstanding anything in this Plan
to the contrary, funds invested in a Brokerage Account shall
not be available for loans to any Participant.
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<PAGE> 35
(h) Funds paid by a Participant in repayment of a loan shall be
invested in the same manner as the Participant has elected
for Pre-Tax and/or Post-Tax Contributions, as applicable.
(i) Notwithstanding the foregoing, no loan shall be made to a
Participant during the period in which the Administrator is
making a determination of whether a domestic relations order
affecting the Participant's Account is a Qualified Domestic
Relations Order. Further, if the Administrator is in receipt
of a Qualified Domestic Relations Order with respect to any
Participant's Account, it may prohibit such Participant from
obtaining a loan until the alternate payee's rights under
such order are satisfied.
(j) In the event that a payment is required to be made to a
Beneficiary upon the death of a Participant or an alternate
payee pursuant to a Qualified Domestic Relations Order, while
the Participant whose Account is the subject of such order
has a loan outstanding, the Administrator, in its discretion,
may direct that the Participant's promissory note be
transferred to such Beneficiary or alternate payee, as
applicable.
ARTICLE 11
----------
SERVICE
-------
11.1 SERVICE
An Employee's eligibility for benefits under the Plan shall be based
on his Period of Service. For purposes of this Article 11, the
following terms shall have the meanings shown.
(a) HOUR OF SERVICE shall mean each hour credited to an Employee
in accordance with the following provisions:
(i) An Employee shall be credited with one Hour of
Service for each hour for which such Employee is
paid, or entitled to payment, by an Employer for
the performance of duties during the applicable
computation period, with such Hours of Service
being credited for the Plan Year in which the
duties were performed.
(ii) An Employee shall be credited with an Hour of
Service for each hour for which back pay,
irrespective of mitigation of damages, has been
either awarded or agreed to by an Employer for the
performance of services during a Plan Year, with
such Hours of Service being credited for the Plan
Year or Plan Years to which the award or agreement
pertains (rather than the Plan Year or Plan Years
in which the award, agreement, or payment is made).
(iii) An Employee also shall be credited with one Hour
of Service for each hour for which he is paid, or
entitled to payment, by an Employer on account of
a period of time during which no duties are
performed (irrespective of whether the employment
relationship has terminated) due to vacation,
holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or
leave of absence but excluding payments for
reimbursement for medical or medically related
expenses and payments under a plan maintained
solely for the purpose of complying with
applicable workmen's compensation or unemployment
compensation and disability insurance laws;
provided, however, that not more than 501 Hours of
Service shall be credited to an Employee under
this paragraph (c), on account of any single
continuous period during which the Employee
performs no duties for an Employer (whether or not
such period occurs in a single computation
period). A payment shall be deemed to be made by
or due from an Employer regardless of whether such
payment is made by or due from the Employer
directly, or indirectly through, among others, a
trust fund, or insurer, to which the Employer
contributes or pays premiums. Such Hours of
Service shall be
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<PAGE> 36
credited for the Plan Year or, on a ratable basis,
for the Plan Years with respect to which the
payments are made.
(b) PERIOD OF SEVERANCE shall mean the period of time which
begins on an Employee's Termination of Employment date and
which ends if he/she again completes an Hour of Service.
(c) PERIOD OF SERVICE shall include the periods described in (i)
and (ii) below.
(i) Period of Service shall include each period of time
beginning on an Employee's date of employment or
re-employment, as applicable, and ending on his/her
next succeeding Termination of Employment.
(ii) Period of Service shall include the Period of
Severance following an Employee's Termination of
Employment date which resulted from his/her having
quit, retired, or been discharged, if he/she again
performs an Hour of Service before the first
anniversary of the earlier of:
(A) The date on which he/she quit, retired, or
was discharged, or
(B) The date on which he/she began an absence
during which he/she quit, retired, or was
discharged.
(iii) An Employee's Period of Service shall be determined
by aggregating all the periods required to be taken
into account under this Section 11.1(c) with less
than whole years aggregated on the basis that
twelve (12) months equals one (1) year and where
any beginning or final fraction of a month shall
equal one twelfth (1/12th) of a Year of Service. If
the final month of employment includes the annual
anniversary of their first date of employment, the
Employee must work through such anniversary date in
order to receive that month of Service.
(d) DETERMINATION OF TERMINATION OF EMPLOYMENT
(i) A Termination of Employment shall be deemed not to
have occurred when an Employee is or has been
absent from his employment either with or without
pay due to:
(A) A leave of absence granted by the
Employer, provided the Employee resumes
his employment promptly on the termination
of such leave. The decision of the
Employer on all questions of leaves of
absence shall be final and conclusive.
(B) Service in the Armed Forces of the United
States, including the Merchant Marine, to
the extent the Employee retains
reemployment rights with the Employer by
law. Should an Employee fail to report for
employment within the time required by
law, or should he/she take employment
elsewhere following military service
before resuming employment with the
Company, his/her Termination of Employment
date shall be deemed to be the day he/she
loses his reemployment rights with the
Company under the law.
(ii) The Termination of Employment for a Maternity or
Paternity Absence shall be the first anniversary of
the first day of absence from employment due to a
Maternity or Paternity Absence.
11.2 PRIOR SERVICE REINSTATED
Upon reemployment of an Employee whose Termination of Employment under
Section 11.1 occurred on or after the Effective Date as defined in
Section 2.19, whether or not distribution has been made, any pre-break
Period of Service shall be restored as of the date of his employment.
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<PAGE> 37
11.3 YEAR OF SERVICE
An Employee shall be credited with one Year of Service for each full
year in his/her Period of Service.
ARTICLE 12
----------
PLAN OPERATION AND ADMINISTRATION
---------------------------------
12.1 POWERS OF ADMINISTRATOR
The Administrator will have full power to administer the Plan in all
its details. Such power includes, but is not limited to, the following
authority:
(a) to make and enforce such rules and regulations as it deems
necessary or proper for the efficient administration of the
Plan;
(b) to interpret the Plan and to decide all matters arising
thereunder, including the right to resolve or remedy any
ambiguities, inconsistencies or omissions. All such
interpretations shall be final and binding;
(c) to compute the amount of benefits which will be payable to
any Participant, Former Participant, Beneficiary or other
person in accordance with the provisions of the Plan;
(d) to authorize disbursements from the Trust;
(e) to keep such records and submit such filings, elections,
applications, returns or other documents or forms as may be
required under ERISA, the Code or other applicable law;
(f) to appoint such agents, counsel, accountants and consultants
as may be desirable to assist in administering the Plan;
(g) To exercise the other powers that are expressly granted to
it herein, or that are impliedly necessary for it to carry
out any of its responsibilities hereunder; and
(h) by written instrument, to delegate any of the foregoing
powers and fiduciary responsibilities in accordance with
Section 405 of ERISA.
12.2 NONDISCRIMINATORY EXERCISE OF AUTHORITY
The Administrator shall exercise its authority in a nondiscriminatory
manner so that all persons similarly situated will receive
substantially the same treatment.
12.3 RELIANCE ON TABLES, ETC.
The Administrator will be entitled, to the extent permitted by law, to
rely conclusively on all tables, valuations, certificates, opinions
and reports which are furnished by any accountant, Trustee, counsel or
other expert who is retained by the Administrator to assist it in
administering the Plan.
12.4 NAMED FIDUCIARY
The Administrator will be a "named fiduciary" for purposes of ERISA
with authority to control and manage the operation and administration
of the Plan, and will be responsible for complying with all of the
reporting and disclosure requirements of ERISA.
12.5 INDEMNIFICATION
In addition to whatever rights of indemnification to which employees,
officers and directors of the Company and of the other Employers may
be entitled under the articles of incorporation, regulations, or
bylaws of the Company or such Employers, under any provision of law,
or under any other agreement, the Company shall satisfy any liability
actually and reasonably incurred by any such employee, officer or
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<PAGE> 38
director, including expenses, attorney's fees, judgments, fines and
amounts paid in settlement, in connection with any threatened,
pending, or completed action, suit, or proceeding which is related to
the exercise or failure to exercise by such person or persons of any
of the powers, authority, responsibilities, or discretion of the
Company, the Employers or the Administrator provided under the Plan or
the Trust Agreement, or reasonably believed by such person or persons
to be provided thereunder, and any action taken by such person or
persons in connection therewith.
12.6 NOTICES TO ADMINISTRATOR
The Administrator shall designate one or more addresses where notices
and other communications to the Administrator shall be sent. No notice
or other communication shall be considered to have been given to or
received by the Administrator until it has been delivered to the
Administrator's attention at one of such designated addresses.
ARTICLE 13
----------
AMENDMENT AND TERMINATION OF THE PLAN
-------------------------------------
13.1 AMENDMENT
The Company may amend the Plan and Trust Agreement in any respect at
any time, for any reason and as to all Employers by action of the
Company's Board of Directors, provided, however, that any amendment
that is required by law or that will not require any Employer to
increase the contributions it must make to the Plan may be approved by
the Company's Chairman, President or Chief Executive Officer, or the
holder of any similar successor office, which approval shall be
conclusively evidenced by such officer's execution of such amendment,
and further provided that the Company may not:
(a) amend the Plan or Trust Agreement in such manner as would
cause or permit any part of the assets of the Trust to be
diverted to purposes other than for the exclusive benefit of
Participants, Former Participants and their Beneficiaries
(except as permitted herein), unless such amendment is
permitted by law, governmental regulation or ruling;
(b) amend the Plan or Trust Agreement retroactively in such a
manner as would deprive any Participant or Former Participant
of any benefit to which he/she was entitled under the Plan by
reason of Contributions made prior to the amendment, unless
such amendment is necessary to conform the Plan or Trust
Agreement to, or satisfy the conditions of, any law,
governmental regulation or ruling, or to permit the Trust and
the Plan to meet the requirements of Sections 401(a) and
501(a) of the Code;
(c) to amend the Plan or Trust Agreement in such manner as would
increase the duties or liabilities of the Trustee or reduce
its fee for services thereunder, unless the Trustee consents
thereto in writing;
(d) amend the Plan to reduce a Participant's vesting percentage
determined as of the later of the date such amendment is
effective or adopted; or
(e) amend the Plan to revise the vesting schedule unless:
(i) Each Participant's vesting percentage under such
amendment is not less at any time than the vesting
percentage determined without regard to such
amendment; or
(ii) Each Participant who has completed three or more
Years of Service (whether or not consecutive) is
permitted to make an election to have his/her
vesting percentage determined without respect to
such amendment; such an election shall be
irrevocable and shall be made within the period
beginning with the date on which such amendment is
adopted and ending no later than the latest of the
following:
(A) Sixty (60) days after the day such
amendment is adopted;
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(B) Sixty (60) days after the date such
amendment becomes effective; or
(C) Sixty (60) days after the day the
Participant is issued written notice of
the amendment.
13.2 TERMINATION
The Company has established the Plan with the bona fide intention and
expectation that contributions will be continued indefinitely, but the
Company will have no obligation or liability whatsoever to maintain
the Plan for any given length of time and may discontinue
contributions under the Plan, terminate the Plan or permit any
Employer to withdraw from the Plan at any time for any reason by
action of the Company's Board of Directors without any liability
whatsoever for any such discontinuance, termination or withdrawal. In
the event of the termination or partial termination of the Plan or the
complete discontinuance of contributions under the Plan, the balance
of each affected Participant's Accounts shall be nonforfeitable. Upon
termination of the Plan, the Trustee will distribute to each
Participant, Former Participant or Beneficiary, as the case may be,
the value of the Participant's, Former Participant's or Beneficiary's
Accounts, determined as of the Valuation Date coinciding with or
immediately following the date of termination, in a single lump sum
cash payment. However, if a successor plan is established within the
meaning of, and within the time limits prescribed by, Section
401(k)(2)(B)(i)(II) of the Code or applicable regulations thereunder,
distributions shall be made to Participants and Former Participants
only in accordance with Articles 7 and 10. Upon the completion of
distributions to all Participants, Former Participants or
Beneficiaries, as the case may be, no Participant, Former Participant,
Beneficiary or person claiming under or through them, will have any
claims in respect of the Plan.
13.3 LIQUIDATION OF THE FUND
The Trust and the Fund shall continue in existence after the
termination of the Plan for such period of time as may be required to
complete the liquidation thereof in accordance with the terms of this
Article 13.
ARTICLE 14
----------
ADOPTION OF THE PLAN BY OTHER EMPLOYERS
---------------------------------------
14.1 ADOPTION WITH APPROVAL
Any Affiliated Company or corporation (hereinafter referred to as
"Participating Employer") may adopt and become a party to this Plan
with the consent of the Company and subject to such terms and
conditions as the Company may require or approve.
14.2 PROCEDURE FOR ADOPTION
A Participating Employer may adopt the Plan and become an Employer
hereunder by executing an instrument in writing evidencing such
adoption on the order of its Board of Directors and filing a copy
thereof with the Company. Upon approval of the Participating
Employer's adoption of the Plan by the Company and the delivery of the
instruments evidencing the Participating Employer's adoption of the
Plan and the Company's approval thereof to the Trustee, the
Participating Employer's adoption of the Plan shall be effective as of
the date specified in said instruments.
14.3 EFFECT OF ADOPTION
(a) If there is more than one Employer hereunder, the costs and
expenses in connection with the Plan and Fund each year shall
be shared by all Employers.
(b) Each Participating Employer shall also pay for that portion
of the Contribution of the Employers attributable to Pre-Tax
Contributions made under the Plan by its Covered Employees
but the Contributions of Employers included in an affiliated
group under the Code with the Company may be paid by the
Company on behalf of itself and the other Participating
Employers or may be
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<PAGE> 40
allocated among such Participating Employers by the Company
as will permit the deduction for purposes of Federal taxes.
(c) Each Participating Employer, as a condition of continued
participation in this Plan, delegates to the Company the sole
power and authority to administer and operate the Plan,
including the power and authority to:
(i) Appoint and remove the Trustee;
(ii) Consent to the adoption of this Plan by other
Participating Employers;
(iii) Amend or terminate the Plan or Trust; and
(iv) Determine the amount of Employer contributions.
14.4 TERMINATION OF ADOPTION
(a) Each Participating Employer may elect separately to withdraw
from the Plan, but amendments may be made only by the
Company. Any such withdrawal shall be expressed in an
instrument in writing executed by the withdrawing
Participating Employer on order of its Board of Directors and
filed with the Company and the Trustee.
(b) Upon withdrawal from the Plan by a Participating Employer,
and subject to the provisions of ERISA, the Code, and other
applicable law, the portion of the Fund attributable to the
proportionate interests of the Participants affected by said
termination of participation may, in the discretion of the
Company:
(i) Be retained in the Fund and benefits paid in
accordance with the terms of the Plan in effect at
the time the Participating Employer terminated its
participation in the Plan;
(ii) Be transferred (along with the liability for the
payment of benefits) to another qualified
retirement plan maintained by the Participating
Employer terminating participation in the Plan; or
(iii) Be dealt with in any other manner consistent with
the provisions of ERISA, the Code, or other
applicable law.
In the event the portion of the Fund attributable to the
proportionate interests of the Participants and Former
Participants affected by the termination of participation of
a Participating Employer is retained in the Fund, the
Administrator may direct the Trustee to segregate such
portion of the Fund.
ARTICLE 15
----------
LIMITATIONS OF ANNUAL ADDITIONS
-------------------------------
15.1 GENERAL LIMITATIONS
Notwithstanding anything provided herein to the contrary, the maximum
annual addition, as defined in Section 15.4, credited to the Accounts
of a Participant for any Plan Year shall not exceed the lesser of:
(a) Twenty-five percent (25%) of the Participant's compensation
as defined in Code Section 415(c)(3) for that Plan Year; or
(b) Thirty thousand dollars ($30,000) (or, if greater, one fourth
of the dollar limitation in effect under Code Section
415(b)(1)(A)), provided that as of January 1 of each Plan
Year, the dollar limitation as adjusted by the Commissioner
of Internal Revenue for such Plan Year shall be substituted
for the dollar amount specified in this Section 15.1(b).
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<PAGE> 41
15.2 EXCESS AMOUNT
(a) Prior to the determination of a Participant's actual
compensation for a Plan Year, the maximum annual addition for
a Participant may be determined on the basis of a reasonable
estimation of his/her compensation for a Plan Year with
Contributions then appropriately limited.
(b) If such additions exceed the maximum due to a reasonable
error in estimating a Participant's annual Compensation or
under other limited facts and circumstances which the
Commissioner of Internal Revenue finds justifiable, such
excess Post-Tax Contributions and Income shall be returned
to Employees pursuant to Section 5.2 (except that the
Employer Match attributable to any such Post-Tax
Contributions shall be deposited in a suspense account as
described below). Should an excess remain (Pre-Tax
Contributions, Employer Matched Contributions, Employer SDRP
Contributions), a suspense account shall be established to
hold such excess and such excess shall be allocated in the
succeeding Plan Year (and subsequent Plan Years as
necessary) as the Employer Matched Contribution and/or
Employer SDRP Contribution for all Plan Participants.
15.3 AGGREGATION OF PLANS OF THE EMPLOYER
(a) If the Employer is or becomes a member of a group of
employers which constitute a controlled group of
corporations (within the meaning of Code Section 414(b) as
modified by Code Section 415(h)) or which constitute trades
or businesses under common control (within the meaning of
Code Section 414(c) as modified by Code Section 415(h)) or
which constitute an affiliated service group (within the
meaning of Code Section 414(m)), such group of employers
shall be treated as one employer for purposes of this
Article 15.
(b) For purposes of applying the limitation of this Article 15,
all defined benefit plans (whether or not terminated) of the
Employer shall be treated as one defined benefit plan and
all defined contribution plans (whether or not terminated)
shall be treated as one defined contribution plan. However,
multi-employer plans shall not be aggregated with
multi-employer plans. If an Employer maintains both a plan
which is not a multi-employer plan and a plan which is a
multi-employer plan, the plan which is not a multi-employer
plan shall be aggregated with the multi-employer plan only
to the extent that the benefits provided under the
multi-employer plan are provided by such Employer with
respect to the Participant.
(c) If an excess amount results from the aggregation of annual
additions under this Plan and under any other defined
contribution plan sponsored by the Employer:
(i) The excess amount shall be attributable to the
plan under which annual additions were last
allocated; or
(ii) If annual additions were allocated on a date under
this Plan which coincides with an allocation date
of the other defined contribution plan, the excess
amount attributable to this Plan shall be a pro
rata portion of the excess amount determined by the
ratio of the annual additions that would have been
allocated to the Participant under this Plan to the
total annual additions that would have been
allocated to the Participant under all such defined
contribution plans (with the ratio being determined
without regard to the limitations imposed by this
Article 15).
15.4 DEFINITIONS
For purposes of this Article 15:
(a) (i) ANNUAL ADDITION means the sum of the following
amounts allocated on behalf of a Participant for a
Plan Year:
(A) Employer Matched Contributions;
(B) Forfeitures;
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<PAGE> 42
(C) Pre-Tax Contributions;
(D) Post-Tax Contributions;
(E) Employer SDRP Contributions;
(F) Partnership Share Contribution, if
applicable;
(G) Anniversary Share Contributions, if
applicable; and
(H) Amounts allocated to separate medical
accounts under Code Section 415(I) and
419A(d)(2).
(ii) Annual additions shall not include:
(A) The forfeitures and/or Employer
contributions which are used to restore a
Participant's (or Beneficiary's) benefit
under Section 8.4 hereof,
(B) Loan repayments, or
(C) Transfers of Funds from another qualified
plan.
(b) COMPENSATION shall be as defined in Code Section 415(c)(3).
(c) DEFINED BENEFIT PLAN means a qualified plan as defined in
Code Section 414(j).
(d) DEFINED CONTRIBUTION PLAN means a qualified plan as defined
in Code Section 414(i).
(e) EXCESS AMOUNT means the excess of the Participant's annual
addition for the Plan Year over the maximum annual addition
permitted under this Article 15 for the Plan Year.
(f) MULTI-EMPLOYER PLAN means a multi-employer plan as defined in
Code Section 414(f).
15.5 TOP-HEAVY PLAN REQUIREMENTS
(a) GENERAL RULE. For any Plan Year for which this Plan is a
top-heavy plan as defined in Section 15.5(g) below, any other
provisions of this Plan to the contrary notwithstanding, this
Plan shall be subject to the following provisions:
(i) The vesting provisions of Section 15.5(b) below:
(ii) The minimum Contribution provisions of Section
15.5(c) below;
(iii) The limitation on Compensation set by Section
15.5(c) below; and
(iv) The limitation on Contributions set by Section
15.5(e) below.
(b) VESTING PROVISIONS. Each Participant who has completed at
least three Years of Service and has completed an Hour of
Service during any Plan Year in which the Plan is a top-heavy
plan shall have a nonforfeitable right to the benefit accrued
under this Plan.
Each Participant's nonforfeitable accrued benefit shall not
be less than his/her nonforfeitable accrued benefit
determined as of the last day of the last Plan Year in which
the Plan was a top-heavy plan. If the Plan ceases to be top
heavy, each Participant with three or more years of service,
whether or not consecutive, shall have his/her nonforfeitable
accrued benefit determined in accordance with this Article 15
and separately in accordance with the terms of Article 8, and
such will be considered an amendment to the vesting schedule
to be governed by Section 13.1(e).
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(c) MINIMUM CONTRIBUTION PROVISIONS
(i) Each Covered Employee who is a Non-key employee (as
defined in Section 15.5(i) below) and who has not
separated from service as of the last day of the
Plan Year shall be entitled to have a contribution
made on his/her behalf by the Employer of not less
than the lesser of:
(A) Three percent (3%) (the "Minimum
Contribution Percentage") of the Covered
Employee's Compensation for such Plan
Year, or
(B) The largest percentage of Compensation
allocated to the Account of any Key
Employee for such Plan Year. Such
allocations shall include all Pre-Tax
Contributions made pursuant to Section 4.1
of the Plan during such Plan Year.
The contribution required by this Section
15.5(c)(i) shall be made regardless of the Non-key
employee's level of compensation or whether he/she
has earned credit for a 1,000 Hours of Service in
the Plan Year.
(ii) Where Section 15.5(c)(i) is found to apply after
calculation of the amounts to be allocated has been
made, Section 15.5(c)(i) shall be implemented by
first reducing the Forfeitures to be allocated
among the Accounts of Key Employees to the extent
necessary; then by the Employer contributing an
additional amount of current or accumulated profits
to the extent necessary; and finally by reducing
the contribution allocated to the Accounts of Key
Employees and reallocating it to Non-key Employees
to the extent necessary.
(iii) For purposes of this Section 15.5, Compensation
shall be as defined in Section 2.13 of the Plan;
however, excluding any Pre-Tax Contributions made
pursuant to Section 4.1.
(d) LIMITATION ON COMPENSATION. Compensation taken into account
under this Section 15.5 and Eligible Compensation under
Article 4 for purposes of computing contributions under this
Plan shall not exceed the first two hundred thousand dollars
($200,000) for any Plan Year in which the Plan is deemed to
be top heavy. Such amount shall be adjusted automatically for
each Plan Year to the amount prescribed by the Secretary of
the Treasury or his/her delegate pursuant to regulations for
the calendar year in which such Plan Year commences.
(e) LIMITATION ON CONTRIBUTIONS. In the event that the Employer
also maintains a defined benefit plan providing benefits on
behalf of Participants in this Plan, one of the two following
provisions shall apply:
(i) If, for the Plan Year, this Plan would not be a
top-heavy plan as defined in Section 15.5(g) below
if "ninety percent (90%)" were substituted for
"sixty percent (60%)," then Section 15.5(c) shall
apply for such Plan Year as if amended so that
"four percent (4%)" were substituted for "three
percent (3%)."
(ii) If, for the Plan Year, this Plan would continue to
be a top-heavy plan as defined in Section 15.5(g)
below if "ninety percent (90%)" were substituted
for "sixty percent (60%)," then the denominator of
both the defined contribution plan fraction and
the defined benefit plan fraction shall be
calculated as set forth in Section 15.4 hereof for
the limitation year ending in such Plan Year by
substituting "1.0" for "1.25" in each place such
figure appears, except with respect to any
individual for whom there are no Employer
contributions or accruals for such individual
under the defined benefit plan.
(f) COORDINATION WITH OTHER PLANS. In the event that the Employer
maintains a top-heavy defined benefit plan under which
contributions are provided on behalf of participants under
this plan, the amount of contributions and forfeitures
allocated hereunder to the account of each Non-key Employee
also covered under the defined benefit plan shall be at least
5% of average annual compensation for years in the testing
period.
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If the plan is subject to Section 15.5(e)(ii) but the
employer does not substitute "1.0" for "1.25" as required by
Section 15.5(e)(ii), the amount of contributions and
forfeitures allocated hereunder to such participant shall be
7-1/2% of average annual compensation during the testing
period.
(g) TOP-HEAVY PLAN DEFINITION. This Plan shall be a top-heavy
plan for any Plan Year if, as of the determination date (as
defined in Section 15.5(g)(i) below), the present value
aggregate of the Accounts under the Plan for Participants
(including Former Participants) who are Key Employees (as
defined in Section 15.5(h) below) exceeds sixty percent (60%)
of the present value of the aggregate of the Accounts of all
Employees or if this Plan is required to be in an aggregation
group (as defined in Section 15.5(g)(iii) below) which for
such Plan Year is a top- heavy group (as defined in Section
15.5(g)(iv) below).
(i) DETERMINATION DATE means for any Plan Year the last
day of the immediately preceding Plan Year (except
that for the first Plan Year of this Plan the
determination date means the last day of such Plan
Year).
(ii) The present value of the aggregate of the Accounts
shall be the sum of the Account balances determined
as of the most recent Valuation Date that is within
the 12- month period ending on the determination
date, and the adjustment for contributions due as
of the determination date, and as described in the
Regulations under the Code, as amended.
(iii) AGGREGATION GROUP means the group of plans, if any,
that includes both the group of plans that are
required to be aggregated and the group of plans
that are permitted to be aggregated.
(A) The group of plans that are required to be
aggregated (the required aggregation
group) includes:
(1) Each plan of the Employer for a
Plan Year containing the
Determination Date or any of the
four preceding years in which a
Key Employee is a participant,
including collectively bargained
plans and terminated plans
maintained at any time within the
last five years ending on the
applicable termination date; and
(2) Each other plan of the Employer,
including collectively bargained
plans of the Employer, which
enables a plan in which a Key
Employee is a participant to meet
the requirements of either Code
Section 401(a)(4) or Code Section
410 prohibiting discrimination as
to contributions or benefits in
favor of Employees who are
officers, shareholders, or the
highly compensated, or prescribing
the minimum participation
standards.
(B) The group of plans that are permitted to
be aggregated (the permissive aggregation
group) includes the required aggregation
group plus any plan that is not part of
the required aggregation group that the
Administrator certifies as constituting a
plan within the permissive aggregation
group. Such plans may be added to the
permissive aggregation group only if,
after the addition, the aggregation group
as a whole continues to meet the
requirements of both Code Sections
401(a)(4) and 410.
(iv) TOP-HEAVY GROUP means the aggregation group, if as
of the applicable determination date, the sum of
the present value of the cumulative accrued
benefits for Key Employees under all defined
benefit plans included in the aggregation group
plus the aggregate of the accounts of Key
Employees under all defined contribution plans
included in the aggregation group exceeds sixty
percent (60%) of the sum of the present value of
the cumulative accrued benefits for all Employees,
excluding former Key Employees under all such
defined benefit plans plus the aggregate accounts
for all Employees, excluding former Key Employees
under such defined contribution
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<PAGE> 45
plans. If the aggregation group that is a
top-heavy group is a required aggregation group,
each plan in the group will be top-heavy. If the
aggregation group that is a top-heavy group is a
permissive aggregation group, only those plans
that are part of the required aggregation group
will be treated as top heavy. If the aggregation
group is not a top-heavy group, no plan within
such group will be top heavy.
(v) In determining whether this Plan constitutes a
top-heavy plan, the Committee (or its agent) shall
make the following adjustments in connection
therewith:
(A) When more than one plan is aggregated, the
Administrator shall determine separately
for each plan as of each plan's
determination date the present value of
the accrued benefits or account balance.
The results shall then be aggregated by
adding the results of each plan as of the
determination dates for such plans that
fall within the same calendar year.
(B) In determining the present value of the
cumulative accrued benefit or the amount
of the account of any Employee, such
present value or account shall include the
amount in dollar value of the aggregate
distributions made to such Employee
under the applicable plan during the
five-year period ending on the
determination date unless reflected in
the value of the accrued benefit or
account balance as of the most recent
Valuation Date. Such amounts shall
include distributions to such Employees
which represented the entire amount
credited to their accounts under the
applicable plan.
(C) Further, in making such determination,
such present value or such account shall
include any rollover contribution (or
similar transfer) as follows:
(1) If the rollover contribution (or
similar transfer) is initiated by
the Employee and made to or from a
plan maintained by another
Employer, the plan providing the
distribution shall include such
distribution in the present value
or such account.
(2) If the rollover contribution (or
similar transfer) is not initiated
by the Employee or made from a
plan maintained by another
Employer, the plan accepting the
distribution shall include such
distribution in the present value
or such account. The plan making
the distribution shall not include
the distribution in the present
value or such account.
(D) Further, in making such determination,
in any case where an individual is a
Non-key Employee, as defined in Section
15.5(i) below, with respect to an
applicable plan, but was a Key Employee
with respect to such plan for any prior
Plan Year, any accrued benefit and any
account of such Employee shall be
altogether disregarded. For this
purpose, to the extent that a Key
Employee is deemed to be a Key Employee
if he/she met the definition of Key
Employee within any of the four
preceding Plan Years, this provision
shall apply following the end of such
period of time.
(E) If any individual has not performed any
services for any Employer maintaining the
Plan at any time during the five-year
period ending on the determination date,
any accrued benefit and Account of such
individual shall not be taken into
account.
(h) KEY EMPLOYEE means any Employee, former Employee or
Beneficiary of an Employee or former Employee under this Plan
who, at any time during the Plan Year of the determination
date or during any of the four preceding Plan Years, is or
was one of the following:
(i) An officer of the Employer having an annual
Compensation greater than fifty percent (50%) of
the amount in effect under Section 415(b)(1)(A) for
any such Plan Year. Whether an individual is an
officer shall be determined by the Committee on the
basis
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<PAGE> 46
of all the facts and circumstances, such as an
individual's authority, duties and terms of
office, not on the mere fact that the individual
has the title of an officer. For any such Plan
Year, there shall be treated as officers no more
than the lesser of:
(A) Fifty (50) Employees; or
(B) Ten percent (10%) of the Employees or, if
greater than ten percent (10%), three
Employees.
For this purpose, the highest paid officers shall
be selected and business organizations other than
corporations shall be deemed to have no officers.
(ii) One of the ten Employees having annual Compensation
from the Employer of more than the limitation in
affect under Code Section 415(c)(1)(A) and owning
(or considered as owning, in accordance with
applicable principles, such as Code Section 318 or
a successor provision) the largest interests 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. An Employee
who has some ownership interest is considered to
be one of the top ten owners unless at least ten
other Employees own a greater interest than that
Employee.
However, an Employee will not be considered a top
ten owner for a Plan Year if the Employee earns
less than the maximum dollar limitation on
contributions and other annual additions to a
Participant's Account in a defined contribution
Plan under the Code, as amended, as in effect for
the calendar year in which the determination date
falls.
(iii) Any person who owns (or is considered as owning, in
accordance with applicable principles, such as Code
Section 318 or a successor provision) more than
five percent (5%) of the outstanding stock of the
Employer or stock possessing more than five percent
(5%) of the combined total voting power of all
stock of the Employer.
(iv) Any person who owns (or is considered as owning,
in accordance with applicable principles, such as
Code Section 318 or a successor provision) more
than one percent (1%) of the outstanding stock of
the Employer or stock possessing more than five
percent (5%) of the combined total voting power of
all stock of the Employer and receives annual
Compensation from the Employer of more than one
hundred and fifty thousand dollars ($150,000). For
purposes of this subsection, Compensation means
all items includable as compensation for purposes
of applying the limitations on contributions and
other annual additions to a Participant's account
in a defined contribution plan and the maximum
benefit payable under a defined benefit plan under
the Code.
(i) NON-KEY EMPLOYEE means any Employee (and any Beneficiary of
an Employee) who is not a Key Employee as defined in this
Section 15.5.
(j) COLLECTIVE BARGAINING RULES. The provisions of Sections
15.5(b), 15.5(c) and 15.5(d) do not apply with respect to any
Employee included in a unit of Employees covered by a
collective bargaining agreement unless retirement benefits
were the subject of good faith bargaining.
ARTICLE 16
----------
INVESTMENT OF CONTRIBUTIONS
---------------------------
16.1 INVESTMENT FUNDS
The Trustee shall establish and maintain the Company Stock Fund and
such other Investment Funds as are specified from time to time by the
Company. In this regard, the Company may choose to offer as
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<PAGE> 47
Investment Funds any investment vehicles, including: (i) securities
issued by investment companies advised by affiliates of the Trustee,
(ii) guaranteed investment contracts chosen by the Trustee, (iii)
collective investment trusts maintained by the Trustee for qualified
plans and (iv) participant-managed brokerage accounts.. Each such
Investment Fund shall be held and administered by the Trustee as a
separate, common fund within the Trust Fund. The interest of each
Participant or Former Participant under the Plan in any such
Investment Fund shall be an undivided interest. Any dividends,
interest, or other income received by the Trustee in respect of any
Investment Fund shall be reinvested by the Trustee in that Investment
Fund.
16.2 ADMINISTRATION OF COMPANY STOCK FUND
Stock to be held in the Company Stock Fund shall be purchased at fair
market value on the open market or from the Company through the sale
of treasury Stock or the issuance of authorized but previously
unissued shares at the option of the Company. Such Stock may also be
obtained through the exercise of stock rights. The Trustee shall vote
the shares of Stock allocated to the Accounts of each Participant or
Former Participant in accordance with such Participant's or Former
Participant's written instructions. If a Participant's or Former
Participant's voting instructions are not received by
the Trustee by the tenth day prior to any meeting of shareholders of
the Company, the Trustee shall vote the shares of stock allocated to
such Participant's or Former Participant's Accounts in the same
proportion as those shares for which voting instructions are received
by the Trustee.
The Trustee shall vote the shares of Stock held in the Company Stock
Fund which have not been allocated to Participants' or Former
Participants' Accounts as of the record date of any meeting of
shareholders of the Company in the same proportion as those allocated
shares for which voting instructions are received by the Trustee.
16.2A ADMINISTRATION OF BROKERAGE ACCOUNTS
The Administrator shall determine the terms, conditions, procedures
and limitations applicable to Brokerage Accounts including, without
limitation, (i) limitations on the types of investments which may be
purchased and held in such accounts, (ii) procedures for engaging in
investment transactions in such accounts, (iii) procedures for
effectuating transfers to and from such accounts and other Investment
Funds, (iv) the minimum balance required to open such accounts and (v)
any fees to be charged with respect to such accounts. All such terms,
conditions, procedures and limitations shall apply uniformly to
similarly situated Participants.
16.3 DEPOSIT OF CONTRIBUTIONS
All Employer Matched Contributions, Partnership Shares, Anniversary
Shares, and contributions to Former PAYSOP Account shall be invested
by the Trustee in the Company Stock Fund at all times. However,
effective January 1, 1999, any Participant who is 100% vested in
his/her Employer Matched Contribution Account may elect to transfer
any portion of such Account to or from any of the Investment Funds
available under the Plan in accordance with Section 16.5. All Pre-Tax
Contributions, Post-Tax Contributions, Employer SDRP Contributions and
Qualified Plan Rollover Contributions and contributions to the Former
Employer Supplemental Contribution Account made hereunder in respect
of a Participant shall be invested by the Trustee in such Investment
Funds as the Administrator shall direct based on the Participant's
investment election made in accordance with Section 16.4 (or, in the
case of a Participant who fails to make such an investment election,
in such Investment Fund as the Administrator shall specify from time
to time) and shall be credited to the Participant's Accounts in
accordance with Article 6.
16.4 INVESTMENT ELECTIONS OF PARTICIPANTS
Each Participant shall make an investment election in the manner
prescribed by the Administrator, directing the manner in which his
Pre-Tax Contributions, Post-Tax Contributions, Employer SDRP
Contributions, Qualified Plan Rollover Contributions and contributions
to the Former Employer Supplemental Contribution Account shall be
invested by the Trustee. Such investment election shall specify that
such Pre-Tax Contributions, Post Tax Contributions, Employer SDRP
Contributions,
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Qualified Plan Rollover Contributions and contributions to the Former
Employer Supplemental Contribution Account shall be deposited in one
or more of the Investment Funds in percentages that are each an
integral multiple of 1% and that in the aggregate equal 100%. Each
Participant's investment election shall remain in effect until he
changes it in accordance with such procedures and limitations as are
prescribed by the Administrator. Each investment election change made
by a Participant pursuant to this Section 16.4 shall apply only to
Pre-Tax Contributions, Post-Tax Contributions, Employer SDRP
Contributions, Qualified Plan Rollover Contributions and contributions
to the Former Employer Supplemental Contribution Account received by
the Trustee after the change is made. Pre-Tax Contributions, Post-Tax
Contributions, Employer SDRP Contributions, Qualified Plan Rollover
Contributions and contributions to the Former Employer Supplemental
Contribution Account deposited in an Investment Fund pursuant to this
Section 16.4 may be transferred to another Investment Fund only in
accordance with Section 16.5.
16.5 ELECTION TO TRANSFER INTEREST BETWEEN INVESTMENT FUNDS
Subject to Section 16.3, a Participant who has an interest in any
Investment Fund may elect to transfer all or a portion of such
interest to any of the other Investment Funds in accordance with such
procedures and limitations as are prescribed by the Administrator.
16.6 OTHER PROVISIONS CONCERNING INVESTMENT ELECTIONS AND TRANSFERS
The procedures and limitations prescribed by the Administrator
pursuant to Sections 16.4 and 16.5 may include, without limitation,
provisions which (i) limit transfers to specified dollar amounts or
percentages (ii) limit to not less than four the number of transfers
that each Participant may make each Plan Year (iii) limit to not less
than four the number of investment election changes that each
Participant may make each Plan Year (iv) limit the dates as of which
transfers and investment election changes may become effective and (v)
impose waiting periods or other restrictions in connection with
multiple transfers in and out of the same Investment Fund. All such
procedures and limitations shall apply uniformly to similarly situated
Participants. Each investment election and investment election change
made in accordance with this Article 16 and with the procedures and
limitations established by the Administrator shall be given effect as
soon as practicable following the date the investment election or
investment election change is received by the Administrator. Each
transfer request made in accordance with this Article 16 and with the
procedures and limitations established by the Administrator shall be
given effect within one week following the Administrator's receipt of
the request.
16.7 FORMER PAYSOP ACCOUNTS
Notwithstanding the first sentence of Section 16.3, a Participant who
has held a Former PAYSOP Account for at least ten (10) years and who
has attained age 55, may elect to transfer all or any portion of the
balance of his Former PAYSOP Account from the Company Stock Fund to
any of the other Investment Funds at any time.
ARTICLE 17
----------
MISCELLANEOUS PROVISIONS
------------------------
17.1 HEADINGS
The headings of the Plan have been inserted for convenience of
reference only and are not to be deemed controlling in any
constructions of the provisions herein (other than with respect to
defined terms).
17.2 PLAN NOT CONTRACT OF EMPLOYMENT
The existence of the Plan shall not create or change any contract of
Employment between the Employer and its Employees, whether
Participants or Former Participants hereunder or not. The right of the
Employer to take corrective, disciplinary or other action with respect
to its Employees, including terminating their respective Employment at
any time for any reason, shall not be affected by any
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<PAGE> 49
provision of this Plan, and the Employer will not be deemed
responsible to provide continuing Employment for any reason, at any
time solely by reason of this Plan.
17.3 VESTED RIGHTS
No person shall have any vested rights under the Plan except to the
extent that such rights may accrue to him/her as provided under the
Plan. Furthermore, any person with vested rights under the Plan shall
look solely to the Plan and the assets thereunder for satisfaction of
such vested rights.
17.4 SEVERABILITY
If any provision of the Plan shall be invalid, such provision shall be
fully severable, and the remainder of the Plan and the application
thereof shall not be affected thereby.
17.5 GENERAL UNDERTAKING
All parties to this Plan and any persons claiming any interest
whatsoever hereunder shall perform all and any acts that may be
necessary for carrying out its terms. This Plan and the acts and
decisions of the parties hereto, shall be binding upon the heirs,
executors, administrators, successors, and assignees of any party
hereto or any persons claiming any benefit hereunder.
17.6 ACTION BY COMPANY
Whenever, under the terms of the Plan or Trust Agreement, the Company
is required or permitted to take action, such action may be taken,
unless otherwise provided by the Plan or Trust Agreement or by action
of the Board, by any officer of the Company.
17.7 NO RESPONSIBILITY FOR ACTS OF AN INSURER
Neither the Employer, the Company, the Administrator nor the Trustee
shall be responsible for any action or inaction of an insurer, nor
shall they be required to institute legal action in connection with
the same.
17.8 SPENDTHRIFT
Benefits and interests under this Plan shall not be anticipated,
assigned (in law or in equity), alienated, subjected to attachment,
garnishment, levy, execution, or other legal or equitable process, or
be otherwise subject to the claim of creditors, except under the terms
of a Qualified Domestic Relations Order.
17.9 NUMBER AND GENDER
Any use of the singular shall be interpreted to include the plural and
the plural the singular. Any use of the masculine, feminine or neuter
shall be interpreted to include the masculine, feminine and neuter, as
the context shall require.
17.10 GOVERNING LAW
To the extent not preempted by Federal law, the provisions of the Plan
shall be construed, regulated and administered under the laws of the
State of Ohio.
17.11 MERGER, CONSOLIDATION, AND TRANSFER OF ASSETS
Before this Plan can be merged or consolidated with any other plan, or
its assets or liabilities transferred to another plan, each
Participant in the Plan must be entitled to receive a benefit
immediately after the merger, transfer or consolidation (as if the
Plan had then terminated) which is equal to or greater than the
benefit he/she would have been entitled to receive immediately before
the merger, consolidation or transfer (as if the Plan had then
terminated).
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<PAGE> 50
17.12 RECEIPT OF ASSETS FROM QUALIFIED PLANS
An Employee (whether or not otherwise a Participant) may make a
rollover contribution to the Plan at any time consisting of a
"Qualified Plan Rollover Contribution" or an "Individual Retirement
Account Rollover Contribution" (each defined below).
Any rollover contribution shall be held in the Participant's Pre-Tax
Contribution Account, shall be invested in accordance with the
direction of the Participant pursuant to Article 16 and shall be
distributed as provided in Articles 7 and 9.
"Qualified Plan Rollover Contribution" means an "eligible rollover
distribution" within the meaning of Section 402(c)(4) of the Code. The
Employee may transfer any portion of the cash he receives in such
distribution ( or the cash proceeds of the sale of other property
received in such distribution) to the trust under this Plan provided
that the Administrator receives such amounts from the Employee on or
before the 45th day after the day on which he received the property
distributed. The maximum amount which may be transferred shall not
exceed the fair market value of all the property received in
the distribution reduced by (a) the sum of (i) the amount of the
Employee's own contributions under such Plan and (ii) any other
amounts considered as contributed by him (determined by applying
Section 72(f) of the Code) less (b) any amounts previously distributed
to him from such other plan and not includable in his gross income.
The amount so transferred must consist of cash distributed from such
other plan or any portion of the cash proceeds from the sale of
distributed property other than case, to the extent permitted by
Section 402(c) of the Code.
"Individual Retirement Account Rollover Contribution" means the entire
amount received by an Employee from an individual retirement account
representing the entire amount in the account (the "qualifying
amount") if no part of the amount in the account is attributable to
any source other than a rollover contribution from (i) an employee's
trust described in Section 401(a) of the Code, which is exempt from
tax under Section 501(a) of the Code, or (ii) a qualified annuity plan
meeting the requirements of Section 403(a) and any earnings on such
sums. An Individual Retirement Account Rollover Contribution will be
accepted only if the entire qualifying amount was received by the
Employee in cash and only such cash amount is included in the
Individual Retirement Account Rollover Contribution.
17.13 INTERPRETATION OF PLAN
It is the intent of the Company that this Plan shall qualify under
Code Section 401(a) and Code Section 501 and meet all applicable
requirements of ERISA. Accordingly, the Plan and Trust Agreement shall
be construed and interpreted in such manner as to give effect to this
intent and shall be administered at all times and in all respects in a
nondiscriminatory manner.
17.14 SATISFACTION OF CLAIMS
Any payment to any Participant, Former Participant or Beneficiary in
accordance with the terms of the Plan, shall, to the extent thereof,
be in full satisfaction of all claims hereunder, whether they be
against the Employer, the Company, the Administrator, or the Trustee,
any of whom may require the Participant, Former Participant or
Beneficiary (or legal representative), as a condition precedent to
such payment to execute a release and receipt therefor.
17.15 SERVICE OF PROCESS
The Administrator shall be the designated agent of the Plan for the
service of process in connection with all matters affecting the Plan.
17.16 WARRANTIES
Neither the Company, any Employer, the Administrator, nor the Trustee
warrant against any loss or diminution in the value of Accounts.
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17.17 LEASED EMPLOYEES
Notwithstanding anything herein to the contrary, any person who, with
respect to any Employer or Affiliated Company, is a leased employee
shall be treated as an Employee for all Plan purposes, except
eligibility to participate, entitlement to Contributions and Employer
Matched Contributions and Crediting of Service. For purposes of the
preceding sentence, "leased employee" means any person who provides
services to a recipient, but who is not an employee of the recipient,
if (i) such services are provided pursuant to an agreement between the
recipient and any other person ("leasing organization") (ii) such
person has performed such services for the recipient (or for the
recipient and related persons) on a substantially full-time basis for
a period of at least one (1) year and (iii) such services are of a
type historically performed, in the business field of the recipient,
by employees, excluding, however, any such person who (i) is covered
by a plan which is maintained by the leasing organization and which 1)
is a money purchase pension plan with a non-integrated employer
contribution rate for each participant of at least 10% of compensation
2) is a plan that provides full and immediate vesting and 3), is a
plan that permits each employee of the leasing organization (other
than employees who perform substantially all of their services for the
leasing organization) to immediately participate in such plan and (ii)
performs services for a recipient as to which leased employees
(determined without regard to the preceding provisions) do not
constitute more than 20% of the recipient's non-highly compensated
work force. However, if any such leased employee becomes an Employee,
he shall be credited with Service for all periods that he was, with
respect to any Employer or Affiliated Company, a leased employee, in
accordance with and subject to the provisions and limitations of
Article 11 of the Plan, as if he had been an Employee during such
periods.
17.18 DIRECT ROLLOVER DISTRIBUTIONS
(a) 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.
(b) Eligible rollover distribution: An eligible rollover
distribution is any distribution of all or any portion of
the balance to the credit of the distributee, except that an
eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made
for the life (or life expectancy) of the distributee or the
joint lives (or joint life expectancies) of the distributee
and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to
the extent such distribution is required under Section
401(a)(9) of the Code; and the portion of any distribution
that is not includable in gross income (determined without
regard to the exclusion for net unrealized appreciation with
respect to employer securities).
(c) Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in Section 408(a) of
the Code, an individual retirement annuity described in
Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust described in
Section 401(a) of the Code, that accepts the distributee's
eligible rollover distribution. However, in the case of an
eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account
or individual retirement annuity.
(d) Distributee: A distributee includes an employee or former
employee. In addition, the employee's or former employee's
surviving spouse and the employee's or former employee's
spouse or former spouse who is the alternate payee under a
qualified domestic relations order, as defined in Section
414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
(e) Direct rollover: A direct rollover is a payment by the plan
to the eligible retirement plan specified by the
distributee.
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17.19 PLAN ADDENDA
The Addendum attached hereto entitled "Addendum to The Progressive
Retirement Security Program (formerly known as The Progressive
Corporation Long-Term Savings Plan) ("Plan") Re: Former Participants
Under The Progressive Corporation Supplemental Retirement Plan" is
hereby incorporated herein by reference and made a part hereof. The
Addendum attached hereto entitled "Addendum to The Progressive
Retirement Security Program ("Plan") Re: Former Participants Under The
Midland Companies' Employee Savings Plan" is hereby incorporated
herein by reference and made a part hereof.
17.20 ADJUSTMENT
In the event of any merger, reorganization, consolidation,
recapitalization, share dividend, share split, combination of shares
or other change in corporate structure of the Company affecting the
Stock, such substitution or adjustment shall be made in the aggregate
number of shares of Stock available for issuance under the Plan, and
the number of shares of Stock held in the Plan, as may be approved by
the Company, in its sole discretion.
17.21 USERRA MODEL AMENDMENT
Notwithstanding any provision of this plan to the contrary,
contributions, benefits and service credit with respect to qualified
military service will be provided in accordance with section 414(u) of
the Internal Revenue Code. Loan repayments will be suspended under
this plan as permitted under section 414(u) of the Internal Revenue
Code.
17.22 ELECTRONIC COMMUNICATIONS
Notwithstanding any provision in this Plan to the contrary,
Compensation Deferral Agreements and cancellations or amendments
thereto, investment elections, changes or transfers, loans, withdrawal
elections, and any other decision or election by a Participant (or
Beneficiary) under this Plan may be accomplished by electronic or
telephonic means which are not otherwise prohibited by law and which
are in accordance with procedures and/or systems approved or arranged
by the Administrator or its delegates.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officers as of this 1st day of December, 1998.
THE PROGRESSIVE CORPORATION
By: /s/ DAVID M. SCHNEIDER
---------------------------
David M. Schneider
Title: Secretary
---------------------------
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FIRST AMENDMENT TO
THE PROGRESSIVE RETIREMENT SECURITY PROGRAM
(1999 AMENDMENT AND RESTATEMENT)
WHEREAS, The Progressive Retirement Security Program is currently
maintained pursuant to a 1999 Amendment and Restatement ("Plan") and
WHEREAS, it is deemed desirable to amend the Plan further;
NOW, THEREFORE, the Plan is hereby amended in the respects hereinafter
set forth:
1. Effective August 1, 1999, the following is hereby added to Section
2.16 of the Plan:
"Notwithstanding anything in the Plan to the contrary,
Covered Employees shall not include any person classified by
an Employer or any Affiliated Company as an independent
contractor or as an employee of an entity other than an
Employer or Affiliated Company."
IN WITNESS WHEREOF, The Progressive Corporation has hereunto caused
this Amendment to be executed by its duly authorized representative, effective
as of the date set forth above.
THE PROGRESSIVE CORPORATION
By: /s/ DAVID M. SCHNEIDER
------------------------------
Title: Secretary
------------------------------
