SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------
FORM 11-K
Annual Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
Pilgrim Capital Corporation
Formerly Known as Pilgrim America Capital Corporation
(MARK ONE):
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996].
For the fiscal year ended DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED].
For the transition period from ____________ to _____________
Commission file number 0-19799
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below: PILGRIM AMERICA CAPITAL CORPORATION 401(k)
PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office: PILGRIM CAPITAL CORPORATION, TWO
NORTH RENAISSANCE SQUARE, 40 NORTH CENTRAL AVENUE, 12TH FLOOR, PHOENIX, ARIZONA
85004-4424
<PAGE>
REQUIRED INFORMATION
FINANCIAL STATEMENTS
ITEM 1. AUDITED STATEMENT OF FINANCIAL CONDITION
The Audited Statements of Net Assets Available for Benefits as of
December 31, 1998 and 1997 attached to this Report on Form 11-K as page
2 of Exhibit A are incorporated by reference herein.
ITEM 2. AUDITED STATEMENT OF INCOME AND CHANGES
The Audited Statements of Changes in Net Assets Available for Benefits
for the years ended December 31, 1998 and 1997 attached to this Report
on Form 11-K as page 3 of Exhibit A are incorporated by reference
herein.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by
the undersigned hereunto duly authorized.
Pilgrim America Capital Corporation
401 (k) Plan
Date: July 14, 1999 /s/ James Hennessy
------------------------------------
James Hennessy
Executive Vice President
2
<PAGE>
EXHIBIT INDEX
Exhibit 23 Consent of KPMG LLP
Exhibit 99 Pilgrim America Capital Corporation 401K Plan
3
<PAGE>
PILGRIM AMERICA CAPITAL
CORPORATION 401(k) PLAN
Financial Statements and Supplemental Schedules
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
401(k) PLAN
INDEX
PAGE
Independent Auditors' Report 1
Statements of Net Assets Available for Benefits - December 31, 1998
and 1997 2
Statements of Changes in Net Assets Available for Benefits -
Years ended December 31, 1998 and 1997 3
Notes to Financial Statements 4
SCHEDULE
1 Line 27a - Schedule of Assets Held for Investment Purposes -
December 31, 1998 13
2 Line 27d - Schedule of Reportable Transactions - Year ended
December 31, 1998 14
All other schedules are omitted because they are not applicable based on
disclosure requirements of the Department of Labor Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Pilgrim America Capital Corporation 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits
of the Pilgrim America Capital Corporation 401(k) Plan (the Plan) as of December
31, 1998 and 1997 and the related statements of changes in net assets available
for benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Pilgrim
America Capital Corporation 401(k) Plan as of December 31, 1998 and 1997 and the
changes in net assets available for benefits for the years then ended in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes and reportable transactions are presented for purposes
of additional analysis and are not a required part of the basic financial
statements but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. These supplemental schedules are the
responsibility of the Plan's management. The supplemental schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated, in all material
respects, in relation to the basic financial statements taken as a whole.
KPMG LLP
Los Angeles, California
June 25, 1999
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
401(k) PLAN
Statements of Net Assets Available for Benefits
December 31, 1998 and 1997
1998 1997
---------- ----------
Assets:
Investments, at fair value:
Pilgrim America Capital Corporation common stock $2,724,025 $1,078,306
Pooled separate accounts 29,195 53,062
Mutual funds 1,222,200 1,054,156
Participant loans 1,505 --
---------- ----------
3,976,925 2,185,524
---------- ----------
Employer's contribution receivable 7,860 5,921
Employees' contribution receivable 8,172 6,625
---------- ----------
16,032 12,546
---------- ----------
Dividends receivable -- 802
Interest receivable 295 142
---------- ----------
3,993,252 2,199,014
Accrued expenses 22,057 21,988
---------- ----------
Net assets available for benefits $3,971,195 $2,177,026
========== ==========
See accompanying notes to financial statements.
2
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
401(k) PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 1998 and 1997
1998 1997
---------- ----------
Additions to net assets attributed to:
Interest $ 2,619 $ 1,445
Dividends 18,931 29,317
Net appreciation in fair value of investments 1,089,611 646,300
---------- ----------
1,111,161 677,062
---------- ----------
Contributions:
Employer 423,728 257,692
Employee 424,269 288,430
Rollovers 67,837 --
---------- ----------
915,834 546,122
---------- ----------
Total additions 2,026,995 1,223,184
---------- ----------
Deductions from net assets attributed to:
Benefits paid to terminated participants 181,368 167,518
Administrative expenses 51,458 67,555
---------- ----------
Total deductions 232,826 235,073
---------- ----------
Net increase 1,794,169 988,111
Net assets available for benefits:
Beginning of year 2,177,026 1,188,915
---------- ----------
End of year $3,971,195 $2,177,026
========== ==========
See accompanying notes to financial statements.
3
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(1) DESCRIPTION OF THE PLAN
(A) GENERAL
The Pilgrim America Capital Corporation 401(k) Plan (the Plan) is a
qualified defined contribution plan covering substantially all
full-time employees of Pilgrim America Capital Corporation and its
subsidiaries (the Company). The Plan is subject to the provisions of
the Employee Retirement Income Security Act of 1974 (ERISA). The
following description of the Plan provides only general information.
Participants should refer to the Plan agreement for a more complete
description of the Plan's provisions.
(B) ELIGIBILITY
Employees are eligible to participate in the Plan after attaining age
21 and completing a minimum service requirement as detailed in the
Plan agreement.
(C) PARTICIPANT LOANS
Participants may borrow against their vested salary deferral account
balances, with a minimum loan amount of $1,000 and the maximum loan
amount of $50,000 reduced by the highest outstanding loan balance
during the previous 12 months or 50% of their vested salary deferral
account balances. Interest is to be charged on participant loans at a
rate commensurate with the prevailing interest rate charged on similar
commercial loans under like circumstances by persons in the business
of lending money.
(D) PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contribution (salary deferral) and an allocation of (a) the Company's
contribution and (b) Plan earnings. The first allocation is based on
participant-deferred contributions, and the second allocation is based
on account balances. The benefit to which a participant is entitled is
the benefit that can be provided from the participant's account.
(E) EMPLOYER CONTRIBUTIONS
Matching contributions are made by the Company at an amount equal to
100% of the employee's contributions with the amount limited to the
lesser of 7% of the employee's annual compensation or $10,000 in 1998
and $9,500 in 1997.
(F) EMPLOYEE CONTRIBUTIONS
Employee contributions are made to the Plan on a pretax basis. Such
contributions are limited to the lesser of 10% of the employee's
annual compensation or the maximum allowable annual amount under
Internal Revenue Service regulations, which was $10,000 and $9,500 in
1998 and 1997, respectively.
(Continued)
4
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(G) INVESTMENT FUNDS
Participants direct the investment of their accounts among the
available investment options. The following is a description of each
investment option as of December 31, 1998:
* Pilgrim America Capital Corporation common stock - investment in
the common stock of the Company.
* Cortland Trust Money Market - an open-end diversified money
market fund managed by Cortland Trust, Inc. designed for
investors who seek a high level of current income while
preserving capital and liquidity by investing a minimum of 80% of
the fund's assets in U.S. Government obligations, bank
investments, trust instruments, corporate commercial trust
instruments and other instruments maturing in 13 months or less.
* Pilgrim Government Securities Income Fund - an open-end mutual
fund designed for investors who seek a high level of current
income while preserving capital and liquidity by investing a
minimum of 70% of the fund's assets in U.S. Government
obligations.
* Pilgrim High Yield Fund I - an open-end mutual fund designed for
investors who seek a high level of current income with capital
appreciation as a secondary objective by investing in high-yield
fixed income securities.
* Pilgrim MagnaCap Fund - an open-end mutual fund designed for
investors who seek long-term growth of capital with income as a
secondary consideration while preserving their capital by
investing in common stocks.
* Pilgrim Asia-Pacific Equity Fund - an open-end mutual fund
designed for investors who seek long-term capital appreciation by
investing in equity securities listed on stock exchanges in
countries in the Asia-Pacific region or issued by companies based
in this region.
* Pilgrim MidCap Value Fund - an open-end mutual fund designed for
investors who seek long-term capital appreciation by investing
mainly in, but not limited to, equity securities issued by
companies with middle market capitalizations (between $200
million and $5 billion).
* Pilgrim LargeCap Leaders Fund - an open-end mutual fund designed
for investors who seek long-term capital appreciation by
investing mainly in, but not limited to, equity securities issued
by companies with large market capitalizations (over $5 billion).
* Pilgrim Bank & Thrift Fund - an open-end management investment
company designed for investors who seek long-term capital
appreciation with income as a secondary objective by investing
primarily in the equity securities of national- and
state-chartered banks other than money-center banks, thrifts, the
holding or parent companies of such depository institutions and
in savings accounts of mutual thrifts.
* Pilgrim Prime Rate Trust - a closed-end management investment
company designed for investors who seek a high level of current
income while preserving capital by investing in a portfolio of
senior, collateralized corporate loans whose interest rates float
with the prime lending rate or London Inter-Bank Offered Rate
(LIBOR).
(Continued)
5
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
* First American Prime Obligation Class C Institutional Account - a
sweep vehicle money market account designed to hold contributions
until they can be invested into one or more of the investment
funds discussed above.
(H) VESTING
Participants are immediately vested in their salary deferral and
voluntary contributions plus the earnings thereon. Vesting in the
remainder of their account is based on years of continuous service as
follows:
COMPLETED YEARS OF
SERVICE PERCENTAGE VESTED
------------------ -----------------
1 33.33%
2 66.67
3 100.00
======
Participants become 100% vested upon death, permanent disablement or
attaining age 65.
(I) PAYMENT OF BENEFITS
On termination of service, participants with vested account balances
may choose to have their benefits paid in a lump sum or in monthly
amounts over a period of time specified by the Plan agreement.
(J) FORFEITURES
The nonvested portion of a terminated employee's account is placed in
a segregated account and is considered forfeited after the participant
incurs five consecutive years in which they work 500 hours or less.
Upon forfeiture, the amounts in the segregated account plus the
earnings thereon are to be used to reduce future employer
contributions or applied to administrative expenses of the Plan. As of
December 31, 1998 and 1997, amounts held in the segregated accounts
awaiting potential forfeiture totaled $12,271 and $50,477,
respectively.
(K) ADMINISTRATIVE EXPENSES
Expenses of the Plan are to be borne by the Plan unless assumed by the
Company. The Plan applied $55,003 and $45,567 of forfeiture accounts
against administrative expenses for the years ended December 31, 1998
and 1997, respectively.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF ACCOUNTING
The accompanying financial statements have been prepared using the
accrual basis of accounting. Benefits payable to participants are
included as a component of the Plan's net assets available for
benefits.
(Continued)
6
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(B) INVESTMENTS
Investments in Pilgrim America Capital Corporation common stock and
mutual funds are valued at quoted market prices. Investments in pooled
accounts are valued at their participation unit share of the total
pooled funds as determined by the custodian, which approximates fair
value.
Purchases and sales of securities are recorded on a trade-date basis.
Dividend income is recorded on the ex-dividend date. Net appreciation
(depreciation) in the fair value of investments includes both realized
and unrealized gains and losses.
(C) USE OF ESTIMATES
The Plan administrator has made a number of estimates and assumptions
relating to the reporting of net assets and changes therein to prepare
these financial statements in conformity with generally accepted
accounting principles. Actual results could differ from these
estimates.
(3) RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500-C/R
The following is a reconciliation of net assets available for benefits from
the financial statements to Form 5500-C/R:
DECEMBER 31
-------------------------
1998 1997
---------- -----------
Net assets available for benefits per the
financial statements $3,971,195 $ 2,177,026
Amounts allocated to withdrawing participants -- (8,914)
---------- -----------
Net assets available for benefits per
Form 5500-C/R $3,971,195 $ 2,168,112
========== ===========
The following is a reconciliation of benefits paid to participants
according to the financial statements to Form 5500-C/R:
YEAR ENDED DECEMBER 31
----------------------
1998 1997
-------- --------
Benefits paid to participants per the financial
statements $181,368 $167,518
Add amounts allocated to withdrawing participants -- 8,914
-------- --------
Benefits paid to participants per the Form
5500-C/R $181,368 $176,432
======== ========
Amounts allocated to withdrawing participants are recorded on Form 5500-C/R
for benefit claims that have been processed and approved for payment prior
to December 31 but not yet paid as of that date.
(Continued)
7
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(4) INVESTMENTS
The following represents the changes in net assets of the Plan during 1998:
<TABLE>
<CAPTION>
PILGRIM
AMERICA PILGRIM
CAPITAL GOVERNMENT
CORPORATION CORTLAND TRUST SECURITIES PILGRIM HIGH
COMMON STOCK MONEY MARKET INCOME FUND YIELD FUND I
------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
Additions:
Interest $ 1,351 $ 738 $ 6 $ 69
Dividends -- 1,610 53 5,636
Net appreciation
(depreciation) in fair
value of investments 1,062,492 -- 4 (5,095)
Contributions:
Employer 24,877 44 -- 7,601
Employee 9,037 63 -- 24,167
---------- ------- -------- --------
33,914 107 -- 31,768
---------- ------- -------- --------
1,097,757 2,455 63 32,378
---------- ------- -------- --------
Deductions:
Benefits paid 61,885 10,755 -- 18,964
Administrative expenses -- 51,458 -- --
---------- ------- -------- --------
61,885 62,213 -- 18,964
---------- ------- -------- --------
Transfers - participant elected 654,721 46,250 (4,610) (40,740)
---------- ------- -------- --------
Net increase (decrease) 1,690,593 13,508) (4,547) (27,326)
Beginning of year 1,078,306 31,486 4,907 68,910
---------- ------- -------- --------
End of year $2,768,899 $17,978 $ 360 $ 41,584
========== ======= ======== ========
</TABLE>
(Continued)
8
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
<TABLE>
<CAPTION>
PILGRIM PILGRIM PILGRIM
PILGRIM ASIA-PACIFIC MIDCAP VALUE LARGECAP
MAGNACAP FUND EQUITY FUND FUND LEADERS FUND
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Additions:
Interest $ 70 $ 37 $ 77 $ 37
Dividends 684 -- -- --
Net appreciation
(depreciation) in fair
value of investments 44,988 (20,201) 3,889 23,051
Contributions:
Employer 45,140 23,466 41,211 19,731
Employee 51,212 24,541 53,299 16,282
--------- --------- --------- ---------
96,352 48,007 94,510 36,013
--------- --------- --------- ---------
142,094 27,843 98,476 59,101
--------- --------- --------- ---------
Deductions:
Benefits paid 23,281 7,677 15,107 3,551
Administrative expenses -- -- -- --
--------- --------- --------- ---------
23,281 7,677 15,107 3,551
--------- --------- --------- ---------
Transfers - participant elected (43,433) (38,310) (46,006) (76,871)
--------- --------- --------- ---------
Net increase (decrease) 75,380 (18,144) 37,363 (21,321)
Beginning of year 275,730 125,543 204,586 128,240
--------- --------- --------- ---------
End of year $ 351,110 $ 107,399 $ 241,949 $ 106,919
========= ========= ========= =========
</TABLE>
(Continued)
9
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
<TABLE>
<CAPTION>
FIRST AMERICAN
PILGRIM PRIME PILGRIM BANK & PRIME PARTICIPANT
RATE TRUST THRIFT FUND OBLIGATION LOANS TOTAL
------------- -------------- -------------- ----------- -----
<S> <C> <C> <C> <C> <C>
Additions:
Interest $ 110 $ 91 $ -- $ 33 $ 2,619
Dividends 7,157 1,591 2,200 -- 18,931
Net appreciation
(depreciation) in fair
value of investments (9,897) (9,620) -- -- 1,089,611
Contributions:
Employer 610 45,173 215,875 -- 423,728
Employee 9,065 56,046 248,394 -- 492,106
--------- --------- --------- ------- ----------
9,675 101,219 464,269 -- 915,834
--------- --------- --------- ------- ----------
7,045 93,281 466,469 33 2,026,995
--------- --------- --------- ------- ----------
Deductions:
Benefits paid 13,481 24,247 20 2,400 181,368
Administrative expenses -- -- -- -- 51,458
--------- --------- --------- ------- ----------
13,481 24,247 20 2,400 232,826
--------- --------- --------- ------- ----------
Transfers - participant elected (5,554) (262) (449,057) 3,872 --
--------- --------- --------- ------- ----------
Net increase (decrease) (11,990) 68,772 17,392 1,505 1,794,169
Beginning of year 84,977 165,325 9,016 -- 2,177,026
--------- --------- --------- ------- ----------
End of year $ 72,987 $ 234,097 $ 26,408 $ 1,505 $3,971,195
========= ========= ========= ======= ==========
</TABLE>
All the investments are participant-directed, except for the First American
Prime Obligation.
(Continued)
10
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
The following represents the changes in net assets of the Plan during
1997:
<TABLE>
<CAPTION>
PILGRIM
AMERICA PILGRIM
CAPITAL CORTLAND GOVERNMENT PILGRIM
CORPORATION TRUST MONEY SECURITIES PILGRIM HIGH PILGRIM ASIA-PACIFIC
COMMON STOCK MARKET INCOME FUND YIELD FUND I MAGNACAP FUND EQUITY FUND
------------ ----------- ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Additions:
Interest $ -- $ 9 $ 1 $ 76 $ 120 $ 169
Dividends -- 3,853 208 6,682 1,198 --
Net appreciation
(depreciation) in fair
value of investments 554,989 -- 82 4,005 55,421 (100,443)
Contributions:
Employer -- 514 1,199 14,502 32,376 41,916
Employee -- 637 1,689 14,801 37,567 44,495
---------- --------- -------- --------- --------- ---------
-- 1,151 2,888 29,303 69,943 86,411
---------- --------- -------- --------- --------- ---------
554,989 5,013 3,179 40,066 126,682 (13,863)
---------- --------- -------- --------- --------- ---------
Deductions:
Benefits paid 42,905 7,802 -- 7,982 18,094 30,052
Administrative expenses -- 67,240 -- -- -- --
---------- --------- -------- --------- --------- ---------
42,905 75,042 -- 7,982 18,094 30,052
---------- --------- -------- --------- --------- ---------
Transfers - participant elected 382,227 (1,767) (120) (26,282) (22,285) (46,080)
---------- --------- -------- --------- --------- ---------
Net increase (decrease) 894,311 (71,796) 3,059 5,802 86,303 (89,995)
Beginning of year 183,995 103,282 1,848 63,108 189,427 215,538
---------- --------- -------- --------- --------- ---------
End of year $1,078,306 $ 31,486 $ 4,907 $ 68,910 $ 275,730 $ 125,543
========== ========= ======== ========= ========= =========
<CAPTION>
FIRST
PILGRIM PILGRIM PILGRIM PILGRIM AMERICAN
MIDCAP VALUE LARGECAP PRIME RATE BANK & PRIME
FUND LEADERS FUND TRUST THRIFT FUND OBLIGATION TOTAL
------------ ------------ ---------- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Additions:
Interest $ 184 $ 109 $ -- $ -- $ 777 $ 1,445
Dividends -- 312 7,960 9,104 -- 29,317
Net appreciation
(depreciation) in fair
value of investments 40,741 23,894 5,549 62,062 -- 646,300
Contributions:
Employer 52,189 25,435 -- 479 89,082 257,692
Employee 61,329 28,443 -- 562 98,907 288,430
--------- --------- -------- -------- ---------- ----------
113,518 53,878 -- 1,041 187,989 546,122
--------- --------- -------- -------- ---------- ----------
154,443 78,193 13,509 72,207 188,766 1,223,184
--------- --------- -------- -------- ---------- ----------
Deductions:
Benefits paid 28,551 30,257 1,001 779 95 167,518
Administrative expenses -- -- -- -- 315 67,555
--------- --------- -------- -------- ---------- ----------
28,551 30,257 1,001 779 410 235,073
--------- --------- -------- -------- ---------- ----------
Transfers - participant elected (74,356) (64,931) (1,232) 41,308 (186,482) --
--------- --------- -------- -------- ---------- ----------
Net increase (decrease) 51,536 (16,995) 11,276 112,736 1,874 988,111
Beginning of year 153,050 145,235 73,701 52,589 7,142 1,188,915
--------- --------- -------- -------- ---------- ----------
End of year $ 204,586 $ 128,240 $ 84,977 $165,325 $ 9,016 $2,177,026
========= ========= ======== ======== ========== ==========
</TABLE>
All the investments are participant-directed, except for the First American
Prime Obligation.
(Continued)
11
<PAGE>
PILGRIM AMERICA CAPITAL CORPORATION
401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(5) INVESTMENTS OVER 5%
The following investments comprise over 5% of the Plan's net assets at
December 31, 1998 and 1997, respectively:
DECEMBER 31
------------------------
1998 1997
---------- -----------
Pilgrim America Capital Corporation
common stock $2,724,025 $ 1,078,306
Pilgrim Bank & Thrift Fund 230,122 164,284
Pilgrim MagnaCap Fund 350,492 274,273
Pilgrim Equity Fund -- 125,018
Pilgrim MidCap Value Fund 239,784 203,380
Pilgrim LargeCap Leaders Fund -- 127,430
========== ===========
(6) INCOME TAXES
The Internal Revenue Service has determined and informed the Company by a
letter dated November 14, 1996 that the Plan is designed in accordance with
applicable sections of the Internal Revenue Code. The Plan has been amended
since receiving the determination letter. However, the Plan administrator
and the Plan's tax counsel believe that the Plan is designed and is
currently being operated in compliance with the applicable requirements of
the Internal Revenue Code.
(7) PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right under the Plan agreement to discontinue its contributions at any time
and to terminate the Plan, subject to the provisions of ERISA. In the event
of Plan termination, participants will become 100% vested in their
accounts.
(8) SUBSEQUENT EVENTS
Effective June 21, 1999, Pilgrim America Capital Corporation changed its
name to Pilgrim Capital Corporation. Subsequent to December 31, 1998,
certain amendments were made to the plan document to comply with various
tax and law changes as well as to clarify eligibility of new employees of
the Company.
12
<PAGE>
SCHEDULE 1
PILGRIM AMERICA CAPITAL CORPORATION
401(k) PLAN
Line 27a - Schedule of Assets Held for Investment Purposes
December 31, 1998
<TABLE>
<CAPTION>
NUMBER
IDENTITY OF ISSUER, BORROWER, OF SHARES CURRENT
LESSOR OR SIMILAR PARTY DESCRIPTION HELD COST VALUE
----------------------------- ----------- --------- ---- -------
<S> <C> <C> <C> <C>
*Pilgrim America Capital Corporation Common stock 108,961 $ 1,107,654 $ 2,724,025
Cortland Trust Money Market Fund 29,195 29,195 29,195
*First Trust National Association First American Prime Obligation
Class C 75,476 75,476 75,476
*Pilgrim Group, Inc. Prime Rate Trust 7,839 76,285 72,999
*Pilgrim Group, Inc. Bank & Thrift Fund 9,347 203,036 230,122
*Pilgrim Group, Inc. MagnaCap Fund 21,529 346,517 350,492
*Pilgrim Group, Inc. High Yield Fund I 6,542 42,756 40,366
*Pilgrim Group, Inc. Government Securities Income Fund 28 355 360
*Pilgrim Group, Inc. Asia-Pacific Equity Fund 20,787 182,000 106,428
*Pilgrim Group, Inc. MidCap Value Fund 15,933 233,769 239,784
*Pilgrim Group, Inc. LargeCap Leaders Fund 6,724 90,352 106,173
Participant loans 2 loans, 8.00% to 8.50% -- -- 1,505
======= =========== -----------
$ 3,976,925
===========
</TABLE>
* Party in interest.
See accompanying independent auditors' report.
13
<PAGE>
SCHEDULE 2
PILGRIM AMERICA CAPITAL CORPORATION
401(k) PLAN
Line 27d - Schedule of Reportable Transactions
Year ended December 31, 1998
IDENTITY OF DESCRIPTION PURCHASE SELLING
PARTY INVOLVED OF ASSETS PRICE PRICE
- ----------------------- -------------------------- ----------- -----------
Pilgrim America Capital
Corporation Common stock $ 651,772 $ --
Common stock -- 39,714
First Trust National First American Prime 1,453,430 --
Association Obligation Class C
Money Market -- 1,380,003
Pilgrim Group, Inc. Mutual Fund accounts:
MagnaCap Fund 128,121 --
MagnaCap Fund -- 99,012
Asia-Pacific Equity Fund 53,040 --
Asia-Pacific Equity Fund -- 55,936
MidCap Value Fund 123,097 --
MidCap Value Fund -- 91,257
LargeCap Leaders Fund 47,038 --
LargeCap Leaders Fund -- 91,521
Bank & Thrift Fund 138,797 --
Bank & Thrift Fund -- 63,022
=========== ===========
EXPENSES CURRENT
INCURRED IN VALUE ON
CONNECTION WITH COST OF TRANSACTION NET GAIN
TRANSACTION SECURITIES DATE OR (LOSS)
--------------- ----------- ----------- ---------
$ -- $ 651,772 $ 651,772 $ --
-- 29,843 39,714 9,871
-- 1,453,430 1,453,430 --
-- 1,380,003 1,380,003 --
-- 128,121 128,121 --
-- 63,944 49,012 35,068
-- 53,040 53,040 --
-- 90,349 55,936 (34,413)
-- 123,097 123,097 --
-- 66,909 91,257 24,348
-- 47,038 47,038 --
-- 80,876 91,521 10,645
-- 138,797 138,797 --
-- 48,141 63,022 14,881
==== =========== =========== =======
See accompanying independent auditors' report.
14
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Pilgrim Capital Corporation:
We consent to the incorporation by reference in the Registration Statements
No.333-06597 on Form S-8 of Pilgrim America Capital Corporation of our report
dated June 25, 1999 relating to the statements of net assets available for
benefits of the Pilgrim America Capital Corporation 401(k) Plan as of December
31, 1998 and 1997 and the related statement of changes in net assets avaiable
for benefits for each of the years in the two-year period ended December 31,
1998 and related schedules, which report appears in the December 31, 1998 annual
report on Form 11-K of the Pilgrim America Capital Corporation 401(k) Plan.
KPMG LLP
Los Angeles, California
July 14, 1999
PILGRIM AMERICA CAPITAL
CORPORATION 401(k) PLAN
SECTION 1
NAME OF PLAN
This Plan shall be known as the "Pilgrim America Capital Corporation
401(k) Plan." The Plan will be considered a profit sharing plan even though
contributions are not dependent on profits.
<PAGE>
SECTION 2
DEFINITIONS
2.1 "AMENDMENT EFFECTIVE DATE" means January 1, 1997, the date as of
which this complete amendment and restatement of the Plan is effective, except
as otherwise stated.
2.2 "ANNUITY STARTING DATE" means the Valuation Date as of which the
distribution is made. A Participant's Annuity Starting Date must be no less than
30 and not more than 90 days after the date the Participant receives the notice
described in Section 9.4.
2.3 "BOARD" means the board of directors of the Company.
2.4 "BREAK IN SERVICE" means the Plan Year in which a person completes
500 or fewer Hours of Employment.
2.5 "CODE" means the Internal Revenue Code of 1986, as amended.
2.6 "COMPANY" means Pilgrim America Capital Corporation.
2.7 "COMPANY STOCK" means common stock issued by Company (or a member
of the controlled group of corporations of which Company is a member) which is
readibly tradeable on an established securities market.
2.8 "COMPENSATION" means the gross amount of wages, as shown on Form
W-2 provided by the Company, received during the Plan Year by an Employee after
he becomes a Participant for services rendered with respect to the Company, plus
amounts contributed through a salary reduction arrangement to a qualified plan
which meets the requirements of Code Section 401(k) or a plan meeting the
requirements of Code Section 125, but excluding any severance pay.
The Compensation of each Participant taken into account under the Plan
for any Plan Year shall not exceed $150,000 (as adjusted in accordance with
Section 415(d) of the Code).
2
<PAGE>
Prior to January 1, 1997, in determining the Compensation of a
Participant for purposes of this limit, the rules of Section 414(q)(6) of the
Code shall apply, except that in applying such rules, the term "family" shall
include only the spouse of the Participant and any lineal descendants of the
Participant who have not attained age 19 before the close of the Plan Year. If,
as a result of the applications of such rules, the Compensation limit is
exceeded, then the limit shall be pro rated among the affected individuals in
proportion to each such individual's Compensation as determined under this
Section prior to the application of this limit.
2.9 "CONTROLLED GROUP" means the Company and all other entities
required to be aggregated with the Company under Section 414(b), (c) or (m) of
the Code or regulations issued pursuant to Section 414(o) of the Code. The
purposes of Section 16.11, in determining which entities shall be aggregated
under Section 414(b) or (c) of the Code, the modifications made by Section
415(h) of the Code shall be applied.
2.10 "DISTRIBUTION NOTICE PERIOD" means the period beginning not more
than 90 days and ending not less than 30 days before the Valuation Date.
2.11 "EMPLOYEE" means all persons classified as an employee by an
Employer.
2.12 "EMPLOYER" means the Company, Pilgrim Group, Inc. or any other
member of the Controlled Group which has, with the consent of the Board, adopted
the Plan.
2.13 "ENTRY DATE" means January 1, April 1, July 1 or October 1 of each
calendar year.
2.14 "FIVE PERCENT OWNER" means any person who owns (or is considered
as owning within the meaning of Section 318 of the Code) more than five percent
of the outstanding stock of any corporation in the Controlled Group or stock
possessing more than five percent of the total combined voting power of all
stock of any corporation in the Controlled Group or who owns more than five
percent of the capital or profits interest an unincorporated entity in the
Controlled Group.
3
<PAGE>
2.15 "HOURS OF EMPLOYMENT" for a person compensated on the basis of a
certain amount for each hour worked during a given period means:
(a) Each hour for which a person is directly or indirectly
paid, or entitled to payment, by the Employer for the performance of
duties and for reasons other than the performance of duties; provided
that
(1) no more than 501 Hours of Employment shall be
credited on account of a single continuous period during which
no duties are performed, and
(2) no Hours of Employment shall be credited if
payment was made or due
(A) under a Plan maintained solely for the
purpose of complying with applicable worker's
compensation or unemployment compensation or
disability insurance laws; or
(B) solely as reimbursed for medical or
medically related expenses incurred by the Employee.
(b) Each hour for which back pay, irrespective of mitigation
of damages, has been either awarded or agreed to by the Employer. Such
Hours of Employment shall be credited for the periods to which the
award or agreement pertains rather than the periods in which the award,
agreement, or payment is made, and no Hours of Employment shall be
credited under this paragraph which would duplicate any hours credited
above.
For a person who is not compensated on the basis of a certain
amount for each hour worked during a given period, credit shall be
given at the rate of 10 Hours of Employment for each calendar day of
employment with the Employer for which he would be credited with one or
more Hours of Employment if (a) or (b) above applied. For a person on a
leave of absence pursuant to Section 11.1 or 11.4, credit for such
leave shall be given for the number of regularly scheduled working
hours included in the period of such leave.
4
<PAGE>
Hours of Employment shall be calculated in accordance with
Department of Labor Regulation Section 2530.200b-2(b) and (c).
2.16 "NORMAL RETIREMENT DATE" means the date on which a Participant
terminates his employment with the Company and all other Employers (except by
death) provided such date is on or after such Participant's attainment of age
65.
2.17 "PARTICIPANT" means an Employee who has satisfied the eligibility
requirements of Section 3 and who has not become a former Participant under
Section 3.4.
2.18 "PLAN ADMINISTRATOR" means the Company.
2.19 "PLAN YEAR" mean the 12-month period commencing on January 1 and
ending December 31.
2.20 "QUALIFIED PLAN" means any plan qualified under Section 401 of the
Code. For purposes of Sections 17 and 18 only, the term "Qualified Plan" also
means a simplified employee pension described in Section 408(k) of the Code.
2.21 "QUALIFIED PRERETIREMENT SURVIVOR ANNUITY" means a life annuity
payable to the surviving spouse of a Participant who dies prior to his Annuity
Starting Date.
5
<PAGE>
2.22 "SERVICE" means one year of Service for each 12-month period in
which a person completes 1,000 Hours of Employment measured from the date the
Participant first completes an Hour of Employment to the anniversary date which
is 12 months after such date. If a person has less than 1,000 Hours of
Employment in any 12-month period of employment with the Employer, measured from
the date the Participant first completes an Hour of Employment to the
anniversary date which is 12 months after such date, he shall receive a pro-rata
part of a year of Service based on the ratio of his Hours of Employment to
1,000. No more than one year of Service may be earned in any 12-month period for
any purpose of the Plan. Notwithstanding the foregoing, Participants who
participated in the Plan on May 1, 1995 and who would have less Service when
calculated under these rules than under the rules of Service which were in
effect under the Plan prior to May 1, 1995, shall have their Service calculated
under the rules for Service which were in effect prior to May 1, 1995.
2.23 "TRUSTEE" means the trustee or any successor trustee appointed
pursuant to Section 12 hereof.
2.24 "VALUATION DATE" means each March 31, June 30, September 30 and
December 31, and such other valuation dates as are determined in a
nondiscriminatory manner by the Plan Administrator.
6
<PAGE>
SECTION 3
ELIGIBILITY
3.1 PRIOR PARTICIPANTS. Each employee who was a Participant on December
31, 1995, shall continue to be a Participant on January 1, 1996.
3.2 NEW PARTICIPANTS. On and after January 1, 1996, each Employee not
described in Section 3.1 shall become a Participant hereunder as of the later
of:
(a) the first Entry Date after the Employee attains age 21,
and
(b) the first Entry Date following the calendar quarter in
which the Employee begins working for the Employer if he begins working
for the Employer during the first 15 days of a calendar quarter or the
second Entry Date immediately following the calendar quarter if the
Employee begins working for the Employer at any other time during a
calendar quarter. Notwithstanding the foregoing, a person who transfers
employment directly from Nicholas-Applegate Capital Management to the
Employer during the first quarter of 1999 shall be deemed to have
commenced working for the Employer during the first fifteen days of
that quarter. In addition, effective January 1, 1998, (i) a person
whose employment is transferred to the Employer as a result of the
Employer's acquisition of substantially all of its assets, (ii)
employees of an employer which is merged into the Employer, and (iii)
the employees of a corporation or other entity which, with the consent
of the Board, adopts the Plan during the calendar quarter in which it
becomes a member of the Controlled Group as a result of its acquisition
by the Employer, shall be deemed to have commenced working for the
Employer during the first fifteen days of the calendar quarter in which
such transaction takes place.
7
<PAGE>
If a person is not an Employee when satisfying one of the
above requirements, he shall not become a Participant until the day he
becomes an Employee.
3.3 FORMER PARTICIPANTS. A former Participant who is reemployed by an
Employer shall become a Participant on the date he is reemployed as an Employee.
3.4 CESSATION OF PARTICIPATION. A person shall cease to be a
Participant and shall become a former Participant when he
(a) has ceased to be employed by an Employer, and
(b) has no undistributed account balance under the Plan.
8
<PAGE>
SECTION 4
CONTRIBUTIONS
4.1 BASIC PAYROLL REDUCTION CONTRIBUTIONS. A Participant may elect to
have up to 7% of his Compensation contributed by an Employer to the Plan on a
pre-tax basis through payroll reductions. Each Participant shall elect on forms
provided by the Plan Administrator in increments of 1% the percentage of his
Compensation under this Section to be credited to his Salary Reduction Account.
4.2 ADDITIONAL PAYROLL REDUCTION CONTRIBUTIONS. A Participant who has
elected to have 7% of his Compensation contributed by the Employer to the Plan
under Section 4.1 may elect to have up to an additional 3% of his Compensation
contributed by the Employer to the Plan on a pre-tax basis through payroll
reductions. Each Participant shall elect on forms provided by the Plan
Administrator in increments of 1% the percentage of his Compensation under this
Section to be credited to his Salary Reduction Account.
4.3 MAXIMUM PAYROLL REDUCTION CONTRIBUTION. The maximum amount which
may be contributed to the Plan by a Participant on a pre-tax basis under Section
4.1 and 4.2 and any other Qualified Plan maintained by an Employer in any
calendar year is limited to $7,000 (or such higher amount prescribed by
applicable law). If the Participant's pre-tax contributions reach this maximum,
the Plan Administrator shall stop the Participant's payroll reduction
contributions for the remainder of the calendar year.
4.4 EMPLOYER MATCHING CONTRIBUTIONS. The Employer will contribute to
the Plan an amount equal to 100% of the amount by which each Participant elected
to have his Compensation reduced under Section 4.1. Any such contributions shall
be paid to the Trustee when such salary reduction contributions are made. If a
Participant's pre-tax contributions for a calendar year reach the maximum amount
set out in Section 4.3 and, as a result, the Participant is no longer eligible
to make pre-tax contributions to the Plan, the Participant will continue to
receive matching contributions for each payroll period during the remainder of
the calendar year in an amount equal to:
9
<PAGE>
(a) The lesser of (i) 100% of $7,000 (or such higher amount
prescribed by applicable law) or (ii) an amount equal to 100% of the
amount by which each Participant elected to have his Compensation
reduced under Section 4.1 from the beginning of the calendar year
through the end of such payroll period, minus
(b) The amount of matching contributions previously made on
behalf of the participant from the beginning of the calendar year
through the end of such payroll period. Employer Matching Contributions
may be made in the discretion of the Company in the form of cash or in
the form of Company Stock.
4.5 ELECTIONS. Each election by a Participant under Section 4.1 and 4.2
shall be effective until suspended or amended. Each election shall be effective
only when made on a form prescribed by the Plan Administrator or filed with the
Company.
4.6 CHANGES IN A SUSPENSION OF PAYROLL REDUCTIONS.
(a) Changes in Payroll Reductions. Each Participant's payroll
reduction percentage under Sections 4.1 and 4.2 shall continue in
effect until the Participant shall change such percentage. As of the
first day of each calendar quarter, a Participant may in his discretion
change such percentage by written notice to the Company on forms
prescribed by the Plan Administrator before the first day of the
calendar quarter on which the change is to take effect.
10
<PAGE>
(b) (1) Suspension of Payroll Reductions. A Participant may at
any time suspend his contributions effective on the first day of the
following month by giving written notice to the Company on forms
prescribed by the Plan Administrator.
(2) Suspension of Payroll Reductions During Government or
Military Service. Suspension of a Participant's contributions shall be
permitted during any period of military service, or of government
service approved by the Company, regardless of the duration of such
period.
(3) Resumption of Payroll Reductions After Suspension. As of
the first day of each calendar quarter, a Participant who has suspended
his contributions under Section 4.6(b)(1) may at any time resume them
by giving written notice to the Company on forms prescribed by the Plan
Administrator prior to the first day of the payroll period in which
such resumption is to take effect.
4.7 TAX DEDUCTIONS. All Employer contributions are made conditioned
upon their deductibility for Federal income tax purposes under Section 404 of
the Code. Amounts contributed by an Employer shall be returned to such Employer
from the Plan by the Trustee under the following circumstances:
(a) If the contribution was made by the Employer by a mistake
of fact, the excess of the amount of such contribution over the amount
that would have been contributed had there been no mistake of fact
shall be returned to the Employer within one year after the payment of
the contribution; and
11
<PAGE>
(b) If an Employer makes a contribution which is not
deductible under Section 404 of the Code, such contribution (but only
to the extent disallowed) shall be returned to such Employer within one
year after the disallowance of the deduction. Earnings attributable to
the contribution shall not be returned to the Employer, but losses
attributable to such excess contribution shall be deducted from the
amount to be returned. In the event (a) or (b) above apply, the
Employer will distribute any salary reduction amounts returned to such
Employer (less any losses) to the Employees who elected to reduce their
salary by such amounts.
4.8 ROLLOVER CONTRIBUTIONS AND TRANSFERS. The Plan Administrator may
direct the Trustee to accept from or on behalf of an Employee any cash or other
assets the receipt of which would constitute a rollover contribution as defined
in Section 408(d)(3)(A)(ii) of the Code or an eligible rollover contribution as
defined in Section 402(c)(4) of the Code which is excludable from income under
Section 402(c)(1) of the Code. The Plan Administrator may also direct the
Trustee to accept from the trustee of another Qualified Plan a direct transfer
of cash or other assets which constitute an eligible rollover contribution.
Notwithstanding the preceding sentence, the Trustee may not accept the direct
transfer of any assets from any Qualified Plan which would cause the Plan to be
subject to the requirements of Section 401(a)(11) of the Code. Any contributions
under this Section shall be segregated in a separate account and shall be fully
vested at all times. Unless accepted on a Valuation Date, the assets of such
account will be segregated from the other assets of the Plan until the Valuation
Date next following the date they are accepted, and thereafter will share in the
allocation of earnings and losses under Section 6.5. Such amounts shall not be
considered as a contribution by a Participant for purposes of Sections 4.1 or
16.11. Upon written notice to the Trustee, all or any portion of a rollover or
eligible rollover account maintained on behalf of a Participant shall be
distributed to him or her or transferred to another Qualified Plan or an
individual retirement account, as directed by the Participant.
12
<PAGE>
4.9 LOAN. The Plan Administrator shall make loans available to
Participants who are employed with an Employer on the date the loan is made (and
subject to the terms of this Section 4.9, to an interested party as defined in
Section 3(14) of the Employee Retirement Income Securities Act of 1974, even if
such interested party is no longer an Employee) pursuant to a uniform and
non-discriminatory policy. Notwithstanding the above, loans shall not be made
available to highly compensated employees (as defined in Section 414(q) of the
Code) in an amount greater than the amount made available to other employees.
All loans shall comply with the following terms and conditions.
(a) Loan Applications. A Participant must file with the Plan
Administrator a loan application on forms which she will make available
for such purpose.
(b) Criteria for Approval. The Plan Administrator shall
determine whether a Participant qualifies for a loan, applying such
criteria as a commercial lender of funds would apply in like
circumstances with respect to the Participant and his general ability
to repay the loan. To assist the Plan Administrator in making this
determination the Participant shall be required to provide such
supporting information deemed necessary by the Plan Administrator.
(c) Loan Limits. No loan shall be made if immediately after
the loan the unpaid balance of all loans by this Plan and all other
plans maintained by the Controlled Group to the Participant would
exceed the lesser of
(1) $50,000, or
13
<PAGE>
(2) 50% of the vested portion of the Participant's
accounts under this Plan. Notwithstanding the foregoing:
(3) the $50,000 limitation in (1) above shall be
reduced by the highest outstanding loan balance for the
one-year period ending on the day before a new loan is made
minus the outstanding balance of existing loans to the
Participant on the date of the new loan.
(d) Repayment Period. A fixed period for repayment of the loan
not in excess of 5 years shall be specified in the loan agreement;
provided, that if the loan is used to acquire any dwelling unit which
within a reasonable time is used as a principal residence of the
Participant, the specified repayment period may be longer than 5 years.
(e) Manner and Timing of Repayments. Loans will be repaid
(principal and interest) through substantially equal payroll
deductions; provided, that Participant may at any time prepay the
entire amount due on the loan in one lump sum. Upon a Participant's
termination of employment, the entire loan balance shall become due and
payable immediately and shall be set off against any distribution due
to the Participant.
(f) Security. Each loan shall be secured by assignment of the
Participant's accounts in the Plan and by the Participant's collateral
promissory note for the amount of the loan, including interest thereon,
payable to the order of the Trustee. However, in no event shall more
than 50% of the Participant's vested interest in the Plan (determined
immediately after origination or the loan) be used security for the
loan.
14
<PAGE>
(g) Interest. Each loan shall bear a reasonable rate of
interest commensurate with the prevailing interest rate charged on
similar commercial loans under like circumstances by persons in the
business of lending money.
(h) Investment of Account. Any loan made to Participant shall
be treated as a segregated investment of his account. As such, all
payments of principal and interest made by the Participant shall be
credited only to the account of such Participant.
(i) Minimum Loan. The minimum amount of any loan shall be
$1,000.00.
(j) Order of Investment Liquidation. The Company shall
liquidate a portion of each Fund in which the Participant's account is
invested to provide the proceeds for any loan to the Participant. The
amount of each such Fund to be liquidated shall be equal to the loan
amount multiplied by the percentage of the Participant's accounts which
are invested in such Fund as of the Valuation Date coinciding with or
proceeding the date as of which the loan is made. Provided, however,
that the closed-end funds shall not be liquidated unless there are
insufficient amounts in the other investment funds to provide the
proceeds for the loan. Loan repayments must be made through payroll
deduction.
(k) Loans Limited to Employees. Except as otherwise provided
in this Section 4.9, no loan shall be made to any Participant who has
terminated employment with all Employers.
(l) Default. Generally, a default shall occur upon the failure
of a Participant to timely remit repayments under the loan when due. In
such event, the Plan Administrator shall take such reasonable actions
which a prudent fiduciary in like circumstances would take to protect
and preserve Plan assets, including foreclosing on any collateral and
commencing such other legal action for collection which the Plan
Administrator deems necessary and advisable. However, the Trustee shall
not be required to commence such actions immediately upon a default.
Instead, the Plan Administrator may grant the Participant reasonable
rights to cure any default, provided such actions would constitute a
prudent and reasonable course of conduct for a professional lender in
like circumstances and in compliance with the Internal Revenue Code. In
addition, if no risk of loss of principal or income would result to the
Plan, the Plan Administrator may choose, in its discretion, to defer
enforcement proceedings. If the qualified status of the Plan is not
jeopardized, the Plan Administrator may treat a loan that has been
defaulted upon and not cured within a reasonable period of time as a
deemed distribution from the Plan.
15
<PAGE>
(m) Penalty. A participant who received a loan will be unable
to make pre-tax contributions to the Plan for a period of twelve months
after the Valuation Date as of which the loan is made. Moreover, the
maximum amount of a Participant's pre-tax contributions to the Plan or
any other plan maintained by the Controlled Group for the calendar year
following the calendar year of the loan may not exceed $7,000 (or such
higher amount prescribed by applicable law) reduced by the amount of
such Participant's pre-tax contributions for the calendar year of the
loan.
4.10 HARDSHIP WITHDRAWALS.
(a) Requirements. A Participant in the employment of an
Employer may withdraw as of any date all or any part of the vested
portion of his Matching Contribution Account, Rollover Account or
Salary Reduction Account (but not the earnings credited to his Salary
Reduction Account after such date as is set forth in Treasury
Regulations under Section 401(k) of the Code) only upon a showing of
substantial hardship to the Plan Administrator. The Plan Administrator
will grant a distribution on account of hardship only if the
distribution is made on account of an immediate and heavy financial
need of the Participant and is necessary to satisfy such financial
need.
16
<PAGE>
(b) Determination of Immediate and Heavy Financial Need. A
distribution will be deemed to be made on account of an immediate and
heavy financial need of the Participant only if the distribution is on
account of:
(1) expenses for medical care described in Section
213(d) of the Code previously incurred by the Participant, the
Participant's spouse or any of the Participant's dependents
(as defined in Section 152 of the Code) or necessary for these
persons to obtain medical care described in Section 213(d) of
the Code;
(2) costs directly related to the purchase (excluding
mortgage payments) of a principal residence of the
Participant;
(3) the payment of tuition and related educational
fees (excluding expenses for room and board) for the next 12
months of post-secondary education for the Participant, the
Participant's spouse, or the Participant's children or
dependents (as defined in Section 152 of the Code); or
(4) payments necessary to prevent the eviction of the
Participant from his principal residence or foreclosure on the
mortgage of the Participant's principal residence.
(c) Amount Necessary to Satisfy Financial Need. A distribution
will be deemed to be necessary to satisfy an immediate and heavy
financial need of a Participant if the following requirements are
satisfied:
17
<PAGE>
(1) The distribution is not in excess of the amount
of the immediate and heavy financial need of the Participant
(which may include any amounts necessary to pay any federal,
state or local income tax or penalties reasonably anticipated
to result from the distribution); and
(2) The Participant has obtained all distributions,
other than hardship distributions, and all nontaxable (at the
time of the loan) loans currently available under all plans
maintained by the Controlled Group.
In addition a Participant who receives a hardship withdrawal will be
unable to make pre-tax contributions to the Plan or any other qualified
or nonqualified plan or deferred compensation maintained by the
Controlled Group, including stock option and stock purchase plans and a
cash or deferred arrangement that is part of a cafeteria plan within
the meaning of Section 125 of the Code (but not the cafeteria plan
itself), for a period of twelve months after the Valuation Date as of
which the hardship distribution is made. Moreover, the maximum amount
of a Participant's pre-tax contributions to the Plan or any other plan
maintained by the Controlled Group for the calendar year following the
calendar year of the hardship withdrawal may not exceed $7,000 (or such
higher amount prescribed by applicable law) reduced by the amount of
such Participant's pre-tax contributions for the calendar year of the
hardship withdrawal.
(d) Deadlines for Submission of Withdrawal Applications. An
application for a withdrawal must be received by the Plan Administrator
at least 5 days preceding the date as of which the withdrawal is to be
made.
(e) Order of Investment Liquidation. The Company shall
liquidate a portion of each Fund in which the Participant's accounts
are invested to provide the proceeds for any withdrawal to the
Participant. The amount of each such fund to be liquidated shall be
equal to the withdrawal amount multiplied by the percentage of the
Participant's accounts which are invested in such fund as the
Validation Date coinciding with or preceding the date as of which the
withdrawal is made. Provided, however, that the closed-end funds shall
not be liquidated unless there are insufficient amounts in the other
investment funds to provide the proceeds for the withdrawal.
18
<PAGE>
4.11 VESTING AFTER WITHDRAWALS. If a withdrawal under Section 4.10 is
made by a Participant whose matching Contribution Account was not 100% vested at
the time of such withdrawal, then the Company shall separately record the
portion of his Matching Contribution Account which was not vested at the time of
the withdrawal, and the vested amount of such portion from time to time shall
equal an amount ("X") determined by the following formula:
X=P(AB + (R X D)) - (R X D)
For purposes of applying such formula: "P" is the vested percentage at the
relevant time; "AB" is the account balance at the relevant time; "D" is the
amount previously withdrawn by the Participant; and "R" is the ratio of the
account balance at the relevant time to the account balance after the
withdrawal. If a person who has received a withdrawal hereunder is subsequently
entitled to an allocation of Employer contributions, the Company shall
separately record such contributions and vesting with respect to such
contributions shall be in accordance with Section 8.2.
19
<PAGE>
SECTION 5
DISTRIBUTIONS OF EXCESS AMOUNTS
5.1 DISTRIBUTIONS OF EXCESS ELECTIVE DEFERRALS. If a Participant's
Elective Deferrals (as defined in Section 5.5(f)) for any calendar year exceed
$7,000 (or such higher amount prescribed by applicable law), then the
Participant may file an election form prescribed by the Plan Administrator with
the Company designating in writing the amount of such excess Elective Deferrals
to be distributed from this Plan. Any such election form must be filed with the
Company no later than the March 1 following the close of such calendar year in
order for the Company to act on it. If such an election form is timely filed,
the Trustee shall distribute to the Participant the amount of such excess
Elective Deferrals which the Participant has allocated to this Plan together
with any income or less any loss allocable to such amount on or before the April
15 following the close of such calendar year. In the case of Highly Compensated
Employees (as defined in Section 5.5(i)), the Trustee shall also distribute to
the Participant any Matching Contributions (as defined in Section 5.5(k)) which
were contributed on account of the Elective Deferrals being distributed, even if
such Matching Contributions are vested. For purposes of the preceding sentence,
the income or loss allocable to such excess amount will be determined under such
reasonable method as the Plan Administrator shall establish that does not
discriminate in favor of Highly Compensated Employees (as defined in Section
5.5(j)).
5.2 LIMITATIONS ON PRE-TAX CONTRIBUTIONS FOR HIGHLY COMPENSATED
EMPLOYEES. The Plan Administrator is authorized to reduce to the extent
necessary the maximum deferral percentage under Sections 4.1 and 4.2 for Highly
Compensated Employees, prior to the close of the Plan Year if the Plan
Administrator reasonably believes that such reduction is necessary to prevent
the Plan from failing both tests in Section 5.2(a). Such adjustments shall be
made in accordance with rules prescribed by the Plan Administrator.
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(a) Actual Deferral Percentage Tests.
(1) The Plan satisfies this subparagraph if the
Actual Deferral Percentage (as defined in Section 5.5(b)) for
the group of Highly Compensated Employees is not greater than
125% of the Actual Deferral Percentage for the group of
Non-Highly Compensated Employees (as defined in Section
5.5(m)).
(2) The Plan satisfies the subparagraph if:
(A) the excess of the Actual Deferral
Percentage for the group of Highly Compensated
Employees over the Actual Deferral Percentage for the
group of Non-Highly Compensated Employees is not more
than two percentage points, and
(B) the Actual Deferral Percentage for the
group of Highly Compensated Employees is not more
than twice the Actual Deferral Percentage of
Non-Highly Compensated Employees.
(b) Distributions of Excess Contributions if Tests are Failed.
If for any Plan Year the Plan satisfies neither of the tests set forth
in Section 5.2(a), within 12 month after the last day of such Plan Year
the Trustee shall return to each Highly Compensated Employee his
portion of the Excess Contribution (as defined in Section 5.5 (h)) for
such Plan Year (plus the income or less the loss allocable to such
Excess Contributions) plus any Matching Contributions which were
contributed on account of the Excess Contributions being distributed
even if such Matching Contributions are vested. The Excess
contributions returned to each Highly Compensated Employee shall be
taken, pro
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<PAGE>
rata, from each of the investment funds in which such Employee is
invested at the time such contributions are returned. Provided,
however, that no refunds shall be made out of the closed-end funds
unless there are insufficient amounts in the other investments funds to
return the Excess Contributions. If such Excess Contributions are not
returned within the first 2-1/2 months after the last day of such Plan
Year, the Employer shall timely file any appropriate tax forms or
reports with respect to any and all tax liability arising for failure
to timely distribute the Excess Contributions. The portion of each
Highly Compensated Employee's Excess Contributions for a Plan Year
shall be determined by reducing the pre-tax contributions made on
behalf of Highly Compensated Employees in a manner such that those
Highly Compensated Employees with the highest Actual Deferral amounts
shall each have their pre-tax contributions reduced to the extent
necessary but not below the next highest Actual Deferral amounts and
then those Highly Compensated Employees with Actual Deferral amounts
greater than or equal to this level shall each have their pre-tax
contributions reduced (or further reduced, as the case may be) to the
extent necessary but not below the next highest level of Actual
Deferral amounts, and this reduction process shall continue through
each successively lower level of Actual Deferral amounts until the
Actual Deferral Percentage for the group of Highly Compensated
Employees satisfies one of the tests set forth in Section 5.2(a). The
income or loss allocable to a Highly Compensated Employee's portion of
the Excess Contribution will be determined under such reasonable method
as the Plan Administrator shall establish that does not discriminate in
favor of Highly Compensated Employees.
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<PAGE>
(c) Coordination with Distributions of Elective Deferrals. If
the Trustee is required to distribute both Elective Deferrals and
Excess Contributions for a Plan Year, the Trustee shall instruct the
Plan Administrator or recordkeeper to:
(1) calculate and distribute the Elective Deferrals
before determining the Excess Contributions to be distributed
to Highly Compensated Employees;
(2) calculate the Average Deferral Percentage in
accordance with Section 5.5(b) including the amount of excess
Elective Deferrals distributed pursuant to (1) above; and
(3) distribute Excess Contributions to Participants
by reducing the Excess Contributions distributed to a
Participant by the amount of excess Elective Deferrals
distributed to such Participant.
(d) Election to Make Additional Company Contributions.
Notwithstanding 5.2(b) and 5.2(c) above, the Company may elect, in lieu
of the distribution described in 5.2(b) above, to have Employers make
additional Qualified Nonelective Contributions (as defined in Section
5.5(o)) or Qualified Matching Contributions (as defined in Section
5.5(n)) which are treated as Elective Deferrals under the Plan and
that, in combination with the Elective Deferrals, satisfy the Actual
Deferral Percentage test set forth in Section 5.2(a). Any such
additional Qualified Nonelective Contributions or Qualified Matching
Contributions will be credited to the Participants' Matching
Contribution Account.
5.3 LIMITATIONS ON MATCHING CONTRIBUTIONS FOR HIGHLY COMPENSATED
EMPLOYEES. The Plan Administrator is authorized to reduce to the extent
necessary the maximum amount of matching contributions under Section 4.4
contributed on behalf of any Highly Compensated Employee prior to the close of
the Plan Year if the Plan Administrator reasonably believes that such adjustment
is necessary to prevent the Plan from failing both tests in Section 5.3(a). Such
reduction shall be made in accordance with rules prescribed by the Plan
Administrator.
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<PAGE>
(a) Actual Contribution Percentage Tests.
(1) The Plan satisfies this subparagraph if the
Actual Contribution Percentage (as defined in Section 5.5(a))
for the group of Highly Compensated Employees is not greater
than 125% of the Actual Contribution Percentage for the group
of all Non-Highly Compensated Employees.
(2) The Plan satisfies this subparagraph if:
(A) the excess of the Actual Contribution
Percentage for the group of Highly Compensated
Employees over the Actual Contribution Percentage for
the group of Non-Highly Compensated Employees is not
more than two percentage points, and
(B) the Actual Contribution Percentage for
the group of Highly Compensated Employees is not more
than twice the Actual Contribution Percentage of
Non-Highly Compensated Employees.
(b) Distribution of Matching Contributions if Tests are
Failed. If for any Plan Year the Plan fails to satisfy either of the
tests set forth in Section 5.3(a), the Trustee shall return to each
Highly Compensated Employee the vested portion of his portion of the
Excess Aggregate Contribution (as defined in Section 5.5(g)) (plus the
income or less the losses allocable to such Excess Aggregate
Contributions) for such Plan Year within 12 months after the last day
of such Plan Year. The nonvested portion shall be forfeited. The Excess
contributions returned to each Highly Compensated Employee shall be
taken, pro rata, from each of the investment funds in which such
Employee is invested at the
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<PAGE>
time such contributions are returned. Provided, however, that no
refunds shall be made out of the closed-end funds unless there are
insufficient amounts in the other investments funds to return the
Excess Contributions. If such Excess Aggregate Contributions are not
returned within the 2-1/2 month after the last day of such Plan Year,
the Company shall timely file any appropriate tax forms or reports with
respect to any and all tax liability arising for failure to timely
distribute the Excess Aggregate Contributions. The portion of each
Highly Compensated Employee's Excess Aggregate Contributions for a Plan
Year which shall be distributed shall be determined first by reducing
the Matching Contributions on behalf of Highly Compensated Employees in
a manner such that those Highly Compensated Employees with the highest
Actual Contribution amounts shall each have the Matching Contributions
on their behalf reduced to the extent necessary but not below the next
highest level of Actual Contribution amounts and then those Highly
Compensated Employees with Actual Contribution amounts greater than or
equal to this level shall each have the Matching Contributions on their
behalf reduced (or further reduced, as the case may be) in the same
manner to the extent necessary but not below the next highest level of
Actual Contribution amounts, and this reduction process shall continue
through each successively lower level of Actual Contribution amounts
until the Actual Contribution Percentage for the group of Highly
Compensated Employees satisfies one of the tests set forth in Section
5.3(a). The income or loss allocable to a Highly Compensated Employee's
portion of the Excess Aggregate Contributions will be determined under
such reasonable method as the Plan Administrator shall establish that
does not discriminate in favor of Highly Compensated Employees.
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<PAGE>
(c) Election to Make Additional Employer Contributions.
Notwithstanding 5.3(a) above, the Company may elect, in lieu of the
distribution described in 5.3(a) above, to have Employers make an
additional Qualified Nonelective Contribution that, in combination with
the Matching Contributions (as defined in Section 5.5(k)) for the Plan
Year, satisfies the Actual Contribution Percentage test set forth in
Section 5.3(a). Any such additional Qualified Nonelective Contributions
will be credited to the Participants' Matching Contribution Account.
5.4 LIMITATIONS ON MULTIPLE USE OF ALTERNATIVE LIMITATION:
(a) Determination of Multiple Use. The Plan Administrator will
determine whether or not multiple use of the Alternative Limitation (as
defined in Section 5.5(e)) has occurred. Such determination will be
made in accordance with Section 401(m)(9) of the Code.
(b) Correction of Multiple Use. If a multiple use of the
Alternative Limitation occurs, the Plan Administrator shall correct
such multiple use by reducing the Actual Contribution Percentages of
Highly Compensated Employees in the manner set forth in Section 5.3(b)
so that there is no multiple use of the Alternative Limitation.
5.5 DEFINITIONS AND SPECIAL RULES. For purposes of this Section 5:
(a) The Actual Contribution Percentage for a group for a Plan
Year means the average of the ratios (calculated separately for each
Employee in the group) of:
(1) the total amount of matching contributions
credited to the Employee's Matching Contributions Account
pursuant to Section 5.5(1) for the Plan Year plus any
Qualified Nonelective Contributions (as defined in Section
5.5(o)) and Elective Deferrals which the Company elects to
treat as Matching Contributions in accordance with Section 5.7
to
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<PAGE>
(2) the Employee's Compensation for the portion of
such Plan Year while the individual is an Employee. The Actual
Contribution Percentage for each group will be calculated to
the nearest 100th of 1% of the Employee's Compensation.
(b) The Actual Deferral Percentage for a group for a Plan Year
means the average of the ratios (calculated separately for each
Employee in the group) of:
(1) the total amount of contributions credited to the
Employee's Salary Reduction Account for the Plan Year plus any
Qualified Nonelective Contributions (as defined in Section
5.5(o)) and Qualified Matching Contributions (as defined in
Section 5.5(n)) which the Company elects to treat as Elective
Deferrals in accordance with Section 5.6 to
(2) the Compensation for the portion of such Plan
Year while the individual is an Employee. The Actual Deferral
Percentage for each group will be calculated to the nearest
100th of 1% of the Employee's Compensation.
(c) The Actual Deferral Percentages and the Actual
Contribution Percentages of Non-Highly Compensated Employees shall be
determined as of the Plan Year preceding the Plan Year for which the
Plan must satisfy the discrimination requirements of section 5.2(a) or
5.3(a), unless the Company elects to determine such as of the Plan Year
for which the Plan must satisfy one of the discrimination requirements
of section 5.2(a) or 5.3(a). Any such election shall not be changed
except as provided by the Secretary of the Treasury.
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<PAGE>
(d) Effective January 1, 1999, if the Company applies Section
410(b)(4)(B) of the Code in determining whether the Plan satisfies
section 410(b) of the Code by excluding from consideration employees
who have not met minimum age and service requirements, the Company may
exclude from consideration all Non-Highly Compensated Employees who
have not met the minimum age and service requirements of Section
410(a)(1)(A) of the Code for purposes of satisfying the tests in
sections 5.2(a) and 5.3(a).
(e) Alternative Limitation means the alternative methods of
compliance with Sections 401(k)(3)(A)(ii)(II) and 401(m)(2)(A)(ii) of
the Code as set forth in Sections 5.2(a)(2) and 5.3(a)(2) respectively.
(f) The Elective Deferrals for a calendar year mean the sum of
any salary reduction amounts for the Plan Year which relate to
Compensation that would have been received in the Plan Year but for the
election to defer and which are pre-tax or deductible contributions
under:
(1) a qualified cash or deferred arrangement as
defined in Section 401(k) of the Code;
(2) a simplified employee pension as defined in
Section 408(k) of the Code;
(3) a plan under which such salary reduction amounts
are used to purchase an annuity contract under Section 403(b)
of the Code;
(4) any plan described in Section 501(c)(18) of the
Code.
(g) The Excess Aggregate Contributions for a Plan Year means
the excess of the aggregate amount of Matching Contributions made on
behalf of Highly Compensated Employees for such Plan Year over the
maximum amount of such contributions which could have been made for
such Plan Year without causing the Plan to fail both the tests in
Section 5.2(a).
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<PAGE>
(h) The Excess Contributions for a Plan Year means the excess
of the aggregate amount of pre-tax contributions under Sections 4.1 and
4.2 made on behalf of Highly Compensated Employees for such Plan Year
over the maximum amount of such contributions which could have been
made for such Plan Year without causing the Plan to fail both the tests
in Section 5.2(a).
(i) "Highly Compensated Employee" means an Employee who, (i)
during the Plan Year in question or the preceding Plan Year was at any
time Five Percent Owner; or (ii) received Compensation in excess of
$80,000 during the preceding Plan Year and, if the Company elects, was
in the top-paid group of Employees (as defined in Section 414(q) of the
Code, based upon the exclusion of all employees excludable under
Section 414(q)(8) of the Code for the Plan Year. The $80,000 amount in
(ii) above shall automatically be adjusted to the extent the
corresponding amounts under Section 415(d) of the Code are adjusted by
the Secretary of the Treasury, except that the base period is the
calendar quarter ending September 30, 1996.
(j) Matching Contributions means:
(1) Any Employer contribution made to a Qualified
Plan on account of an Employee contribution to a Qualified
Plan maintained by an Employer;
(2) Any Employer contribution made to a Qualified
Plan on account of an Elective Deferral to a Qualified Plan
maintained by an Employer;
29
<PAGE>
(3) Any discretionary Employer contribution that is
allocated to Participants on account of an Employee
contribution or Elective Deferral to a Qualified Plan
maintained by an Employer; and
(4) A forfeiture allocated on the basis of Employee
contributions, Matching Contributions or Elective Deferrals.
(k) Nonelective Contributions means Employer contributions
(other than Matching Contributions) made to a Qualified Plan maintained
by an Employer which the Employee may not elect to have paid to him in
cash or other benefits in lieu of being contributed to such Qualified
Plan.
(l) Non-Highly Compensated Employee means any Employee who is
not a Highly Compensated Employee but who is eligible to participate in
the Plan.
(m) Qualified Matching Contributions means any Employer
Contribution made on account of an Employee's Elective Deferral;
provided that:
(1) such contributions are 100% vested and
nonforfeitable when made; and
(2) such contributions are not distributable to a
Participant or his beneficiaries earlier than:
(A) The Participant's retirement, death,
disability or separation from service.
(B) The Participant's attainment of age
59-1/2.
(C) One of the following events:
(i) the termination of the Plan
without the establishment, within the
12-month period after the distribution of
all of the assets of the Plan, or
maintenance of another defined contribution
plan other than an employee stock ownership
plan as defined in Section 4975(e)(7) of the
Code or a simplified employee pension plan
as defined in Section 4089(k) of the Code;
provided, however, that if fewer than 2% of
the Participants of the Plan at the time of
the termination are eligible under another
defined contribution plan at any time during
the 24 month period beginning 12 months
before the time of the termination such
other defined contribution plan will not be
considered to be a successor plan;
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<PAGE>
(ii) the disposition of
substantially all the assets (within the
meaning of Section 409(d)(2) of the Code)
used in a trade or business with respect to
a Participant who continues employment with
the unrelated corporation acquiring such
assets;
(iii) the disposition of the
interest in a subsidiary (within the meaning
of Section 409(d)(3) of the Code) with
respect to a Participant who continues
employment with such subsidiary.
Notwithstanding the foregoing, an event
shall not be treated as an event described
in (i), (ii) or (iii) above with respect to
any Participant unless he receives a lump
sum distribution (as defined in Section
402(d)(4) of the Code without regard to
clauses (i), (ii), (iii) and (iv) of
subparagraph (A), subparagraph (B) or
subparagraph (H) thereof); and an event
shall not be treated as an event described
in (ii) or (iii) above unless the transferor
continues to maintain the Plan.
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<PAGE>
(n) Qualified Nonelective Contributions means any Employer
Contribution other than a Matching Contribution; provided that:
(1) such contributions are 100% vested and nonforfeitable when
made; and
(2) such contributions are not distributable to a Participant
or his beneficiaries earlier than:
(A) The Participant's retirement, death, disability
or separation from service.
(B) The Participant's attainment of age 59-1/2.
(C) One of the following events:
(i) the termination of the Plan without the
establishment, within the 12-month period after the
distribution of all of the assets of the Plan, or
maintenance of another defined contribution plan
other than an employee stock ownership plan as
defined in Section 4975(e)(7) of the Code or a
simplified employee pension plan as defined in
Section 408(k) of the Code; provided, however, that
if fewer than 2% of the Participants of the Plan at
the time of the termination are eligible under
another defined contribution plan at any time during
the 24 month period beginning 12 months before the
time of the termination, such other defined
contribution plan will not be considered to be a
successor plan;
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<PAGE>
(ii) the disposition of substantially all
the assets (within the meaning of Section 409(d)(2)
of the Code) used in trade or business with respect
to a Participant who continues employment with the
unrelated corporation acquiring such assets;
(iii) the disposition of the interest in a
subsidiary (within the meaning of Section 409(d)(3)
of the Code) with respect to a Participant who
continues employment with such subsidiary.
Notwithstanding the foregoing, an event shall not be
treated as an event described in (i), (ii) or (iii)
above with respect to any Participant unless he
receives a lump sum distribution (as defined in
Section 402(d)(4) of the Code without regard to
clauses (i), (ii), (iii) and (iv) of subparagraph
(A), subparagraph (B) or subparagraph (H) thereof);
and an event shall not be treated as an event
described in (ii) or (iii) above unless the
transferor continues to maintain the Plan.
(o) The Plan may be disaggregated under Section
1.410(b)-6(b)(3) and Section 1.410(b)-7(c)(3) of the Treasury
Regulations for any Plan Year in order to pass the Actual Contribution
Percentage and Actual Deferral Percentages tests set forth in this
Section.
5.6 ELECTION TO TREAT QUALIFIED NONELECTIVE CONTRIBUTIONS AND QUALIFIED
MATCHING CONTRIBUTIONS AS ELECTIVE DEFERRALS. Notwithstanding anything to the
contrary, the Company may elect to treat all or part of the Qualified
Nonelective Contributions and Qualified Matching Contributions as Elective
Deferrals provided that each of the following is satisfied:
33
<PAGE>
(a) The Nonelective Contributions including Qualified
Nonelective Contributions treated as Elective Deferrals for purposes of
calculating the Actual Deferral Percentage satisfy the requirements of
Section 401(a)(4) of the Code;
(b) The Nonelective Contributions excluding:
(1) Qualified Nonelective Contributions treated as
Elective Deferrals for purposes of calculating the Actual
Deferral Percentage; and
(2) Qualified Nonelective Contributions treated as
Matching Contributions for purposes of calculating the Actual
Contribution Percentage satisfy the requirements of Section
401(a)(4) of the Code;
(c) The Qualified Nonelective Contributions and Qualified
Matching Contributions for a Plan Year are allocated to Participants as
of a date within that Plan Year;
(d) The Qualified Nonelective Contributions and Qualified
Matching Contributions for a Plan Year relate to Compensation that
would have been received by the Employee in the Plan Year but for the
Employee's election to defer;
(e) If the Qualified Nonelective Contributions or Qualified
Matching Contributions are made to another plan or plans, this Plan and
such other plan(s) must be aggregated for purposes of Section 410(b) of
the Code (other than the average benefit percentage test); and
(f) The Qualified Nonelective Contributions and Qualified
Matching Contributions for a Plan year are actually paid to the trust
on or before twelve (12) months after the end of the Plan Year.
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<PAGE>
5.7 ELECTION TO TREAT QUALIFIED NONELECTIVE CONTRIBUTIONS AND ELECTIVE
DEFERRALS AS MATCHING CONTRIBUTION. Notwithstanding anything to the contrary,
the Company may elect to treat all or part of the Qualified Nonelective
Contributions and Elective Deferrals as Matching Contributions provided that
each of the following is satisfied:
(a) The Nonelective Contributions including Qualified
Nonelective contributions treated as Matching Contributions for
purposes of calculating the Actual Contribution Percentage satisfy the
requirements of Section 401(a)(4) of the Code;
(b) The Nonelective Contributions excluding:
(1) Qualified Nonelective Contributions treated as
Matching Contributions for purposes of calculating the Actual
Contribution Percentage; and
(2) Qualified Nonelective Contributions treated as
Elective Deferrals for purposes of calculating the Actual
Deferral Percentage satisfy the requirement of Section
401(a)(4) of the Code;
(c) The Elective Deferrals both including and excluding the
Elective Deferrals treated as Matching Contributions for purposes of
calculating the Actual Contribution Percentage satisfy the requirements
of Section 401(k)(3) of the Code;
(d) The Qualified Nonelective Contributions for a Plan Year
are allocated to Participants as of a date within that Plan Year;
(e) The Qualified Nonelective Contributions and Qualified
Matching contributions for a Plan Year relate to Compensation that
would have been received by the Employee in the Plan Year or within
2-1/2 months after the Plan Year, but for the Employee's election to
defer; and
(f) If Qualified Nonelective Contributions and Elective
Deferrals are made to another plan or plans, this Plan and such other
plan(s) must be aggregated for purposes of Section 410(b) of the Code
(other than the average benefit percentage test).
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<PAGE>
SECTION 6
ALLOCATION
6.1 ESTABLISHMENT OF ACCOUNTS. The Plan Administrator shall establish
and maintain for each Participant a Salary Reduction Account, a Matching
Contribution Account, and a Rollover Account. All amounts by which an Employee
elects to have his salary reduced under Sections 4.1 and 4.2 shall be credited
to his Salary Reduction Account, all Employer contributions under Section 4.4
shall be credited to his Matching Contribution Account, and all direct transfer
and rollover amounts received on behalf of a Participant under Section 4.8 shall
be credited to his Rollover Accounts.
6.2 404(C) PLAN. This Plan is intended to constitute a Plan described
in Section 404(c) of the employee Retirement Income Security Act. The Plan
fiduciaries shall be relieved of liability for any losses which are the direct
and necessary result of investment instructions given by Participants or
Beneficiaries.
6.3 PARTICIPANT'S SELECTION OF INVESTMENT FUND. Each Participant shall
designate the percentages of contributions under Section 4 for such Plan Year
allocable to his accounts which are to be invested in such funds as selected by
the Company and in Company Stock. Such a designation shall be made by the
Participant on or prior to the first day of any calendar quarter on a form made
available to him by the Plan Administrator. Any such designation shall continue
in effect for successive Plan years unless changed in the same manner by the
Participant. The current investment choices available under the Plan will change
effective January 1, 1996. Any elections made with respect to investment choices
prior to January 1, 1996 will no longer be effective. New choices need to be
made with respect to investments on and after January 1, 1996. If no designation
is made, the Participant's existing accounts which are not currently invested in
Pilgrim Group funds shall be invested in the Pilgrim Money Market Fund or, in
the discretion of the Plan Administrator, in commercial or savings accounts with
the Trustee or any other bank, trust company or other financial institution,
including those affiliated in ownership with the Trustee (a "Trustee Account"),
and all contributions to the Plan shall cease. If no designation is made and
Participant's existing accounts are invested in Pilgrim Group funds or a Trustee
Account, the Participant's account will continue to be invested in such funds in
accordance with the Participant's most recent investment elections and all
contributions to the Plan shall cease.
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<PAGE>
6.4 TRANSFERS BETWEEN INVESTMENT FUNDS. As of the day following the
Valuation Date, a Participant may elect on forms to be provided by the Plan
Administrator, to transfer all or any portion of his accounts in Company Stock
or such investment funds as he has selected to Company Stock or any of the other
such funds. A Participant whose accounts are invested in Company Stock may elect
to transfer all or any portion of his accounts invested in Company Stock on a
weekly basis, to the Pilgrim Money Market Fund or, in the discretion of the Plan
Administrator, in a Trustee Account. Any amounts the Participant elects to
transfer to the Pilgrim Money Market Fund, or to a Trustee Account, from Company
Stock shall remain invested in such fund until the next valuation date, at which
time the Participant may transfer such amounts to any of the other investment
funds available under the Plan or to Company Stock. Such transfers shall be
subject to such reasonable requirements as may be established by the Plan
Administrator and the Trustee.
The Plan Administrator shall also be responsible for: (i) ensuring that
information relating to the purchase, holding and sale of Company Stock and the
exercise of voting, tender and similar rights with respect to Company Stock by
Participants and beneficiaries is maintained in accordance with procedures
designed to safeguard the confidentiality of such information, except to the
extent necessary to comply with federal laws or state laws not pre-empted by the
Employee Retirement Income Security Act; (ii) that such confidentiality
procedures are being followed; and (iii) that an independent fiduciary is
appointed where the Plan Administrator determines that a potential for undue
Company influence exists with regard to the direct or indirect exercise of
shareholder rights.
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<PAGE>
6.5 ALLOCATION OF EARNINGS OR LOSSES. As of each Valuation Date, all
appreciation or depreciation in the fair market value of the Plan assets since
the preceding Valuation Date shall be allocated to the accounts of each
Participant. The allocations shall be made by dividing the fair market value of
the Plan assets as of the prior Valuation Date into the value of each account as
of such date (reduced by any amounts distributed on or after such date) and
multiplying the quotient by the total appreciation or depreciation to be
allocated so as to determine the share of each such account. For purposes of
determining the share of each such account, valuation of the assets as of the
preceding Valuation Date shall equal:
(a) the assets as of the preceding Valuation Date, including
contributions allocated as of such preceding Valuation Date and
excluding assets distributed as of the preceding Valuation Date; plus
(b) two-thirds of the contributions which are made to the Plan
during the first month after such preceding Valuation Date; plus
(c) one-third of the contributions which are made to the Plan
during the second month after such preceding Valuation Date.
6.6 SPECIAL TRANSFER RULES. Effective on or about February 5, 1996, all
assets in the Plan will be transferred from investments with the Principal
Financial Group to new investments selected by the employer, pursuant to
instructions on the Participants' enrollment forms. Due to the magnitude of the
change, the investments will probably not actually be transferred on February 5,
1996. Assets which are not transferred on February 5, 1996, will continue to
share in the earnings of the funds in which they were invested on February 5,
1996, until such time as the transfer has been completed.
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<PAGE>
6.7 VOTING COMPANY STOCK. Each Participant or Beneficiary shall be
entitled to direct the Trustee as to the manner in which the Company Stock which
is entitled to vote and which is allocated to the Account of such Participant or
Beneficiary is to be voted. If the Participant or Beneficiary fails to give the
Trustee timely instructions as to how to vote any Company Stock as to which the
Trustee otherwise has the right to vote, the Trustee shall not exercise its
power to vote such Company Stock and shall consider the Participant or
Beneficiary's failure to give timely instructions as an exercise of the
Participant or Beneficiary's rights and a directive to the Trustee not to vote
said Company Stock. The Trustee shall not vote Company Stock which a Participant
or Beneficiary fails to exercise voting rights pursuant to this Section.
39
<PAGE>
SECTION 7
DISTRIBUTIONS AT RETIREMENT
7.1 NORMAL RETIREMENT DISTRIBUTIONS. Upon a Participant's Normal
Retirement Date, the Participant's accounts shall become fully vested (if not
already fully vested) and shall be distributed to him in accordance with Section
9.1(b).
7.2 REQUIRED MINIMUM DISTRIBUTIONS. Notwithstanding anything to the
contrary contained in the Plan, the entire interest of a Participant will be
distributed in accordance with Section 401(a)(9) of the Code and the regulations
thereunder beginning no later than the Participant's Required Beginning Date as
determined under Section 7.3 below. Minimum distributions will be made based on
the life expectancy of such Participant. Notwithstanding the preceding, a
Participant who was a Participant prior to October 21, 1996 may elect, at any
time prior to his Required Beginning Date, to receive the entire amount of his
accounts in a lump sum or in installments over the joint life expectancy of the
Participant and his spouse or designated beneficiary.
7.3 REQUIRED BEGINNING DATE. The Required Beginning Date of a
Participant who is a Five Percent Owner shall be April 1 of the calendar year
following the year during which the Participant attains age 70 1/2. A
Participant who attains age 70 1/2 on or after January 1, 1996 and who is not a
Five Percent Owner with respect to the Plan Year ending in the calendar year in
which the Participant attains age 70 1/2 may elect in accordance with procedures
established by the Plan Administrator to defer his Required Beginning Date until
a date not later than the April 1 following the calendar year in which occurs
the later of the date such Participant attains age 70 1/2 or the date on which
the Participant terminates employment. Effective January 1, 1999, the Required
Beginning Date a Participant who is not a Five Percent Owner and who attains age
70 1/2 during or after the 1999 calendar year shall be the April 1 following the
calendar year in which occurs the later of the date such Participant attains 70
1/2 and the date on which the Participant terminates employment.
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SECTION 8
DISTRIBUTIONS AT TERMINATION OF EMPLOYMENT (VESTING)
8.1 DISTRIBUTIONS UPON TERMINATION OF EMPLOYMENT. A Participant whose
employment with the Company and any other Employer is terminated prior to the
earliest of his death or Normal Retirement Date shall receive the vested portion
of his accounts in accordance with Section 9.l(a).
8.2 DETERMINATION OF VESTED PORTION.
(a) A Participant's Salary Reduction Account and Rollover
Account shall be 100% vested and nonforfeitable at all times.
(b) Participants who participated in the Plan on or before
December 31, 1994 shall be 100% vested in their Matching Contribution
Accounts at all times. For Participants who began participating in the
Plan after December 31, 1994, the portion of a Participant's Matching
Contribution Account which shall be vested and nonforfeitable shall be
determined in accordance with the following schedule:
YEARS OF PERCENTAGE OF
SERVICE ACCOUNT VOTED
------- -------------
<1 0%
1 33 1/3%
2 66 2/3%
3 100%
(c) Notwithstanding any provision herein to the contrary, a
Participant's account shall be 100% vested and nonforfeitable upon
attainment of Normal Retirement Age.
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8.3 FORFEITURES. The nonvested portion of the Matching Contribution
Account of a Participant whose employment with the Company and any other
Employer is terminated prior to the earliest of his death or Normal Retirement
Date shall be forfeited immediately when such Participant incurs five
consecutive one-year Breaks in Service. The nonvested amounts shall be placed in
a separate account until forfeited and shall be credited with an allocation of
earnings and losses pursuant to Section 6.5. If the Participant is not employed
again by the Company and any other Employer on the date a forfeiture occurs
under this Section, any forfeited amounts plus earnings and losses thereon shall
be used to reduce future Employer contributions or pay Plan administrative
expenses. Following such forfeiture, the Participant shall be 100% vested in the
balance, if any, of his accounts. If a Participant terminates employment with no
vested interest in his Matching Contribution Account, such Participant shall be
treated as receiving a distribution of the vested portion of his Matching
Contribution Account on the last day of the Plan Year in which his termination
occurs, provided he is not employed by the Company and any other Employer on
such date.
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SECTION 9
PAYMENT OF BENEFITS
9.1 TIMING OF DISTRIBUTIONS.
(a) Termination Before Normal Retirement Date. If a
Participant's employment is terminated prior to his Normal Retirement
Date for any reason other than his death, and if the Participant's
vested accounts exceed (or at the time of any prior distribution
exceeded) $3,500 ($5,000 after December 31, 1997), the Participant
shall receive the notice described in Section 9.4 as well as benefit
election forms during the Distribution Notice Period coinciding with or
next following the dates he terminates employment. If the Participant
properly completes his benefit election forms and returns them to the
Company on or before the Valuation Date immediately following such
Distribution Notice Period, distribution of his vested accounts will
commence in the form elected by the Participant as of such Valuation
Date, which shall be his Annuity Starting Date. If a Participant fails
to properly complete and timely return his election forms when he is
first eligible to receive a distribution, distribution of his accounts
will commence in the form of a lump sum within 60 days after his
attainment of age 65. Notwithstanding the preceding, the Participant
may notify the Company at any time after his termination of employment
but prior to his attaining age 65 that he wants to receive the notice
described in Section 9.4. The Plan Administrator shall distribute such
notice and benefit election forms during the first Distribution Notice
Period following such request. If such Participant properly completes
and returns his benefit election forms on or before the Valuation Date
immediately following the receipt of such notice, distribution of his
accounts will commence in the form elected by the Participant in
accordance with Section 9.2 as of such Valuation Date, which shall be
his Annuity Starting Date.
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(b) Distributions to Participants Terminating Employment on or
after Normal Retirement Date. If a Participant's employment is
terminated on or after his Normal Retirement Date but before his
Required Beginning Date for any reason other than his death, and if the
Participant's accounts exceed (or at the time of any previous
distribution exceeded) $3,500 ($5,000 after December 31, 1997) as of
his termination date, the Participant shall receive the notice
described in Section 9.4 as well as benefit election forms during the
Distribution Notice Period coinciding with or next following the date
he terminates employment. If the Participant properly completes his
benefit election forms and returns them before the Valuation Date
immediately following such Distribution Notice Period, the
Participant's benefits will commence in the form elected by the
Participant as of such Valuation Date, which shall be his Annuity
Starting Date. If the Participant fails to properly complete and return
his benefit election forms on or before the Valuation Date immediately
following such Distribution Notice Period, distribution of his accounts
will be made in the form of a lump sum within 60 days after the
Valuation Date immediately following such Distribution Notice Period.
(c) Distributions to Participants Remaining Employed Until Age
70-1/2. If a Participant remains employed by an Employer until the
Distribution Notice Period immediately preceding the Valuation Date
coinciding with or immediately preceding his Required Beginning Date,
the Participant shall receive the notice described in Section 9.4 as
well as benefit election forms during such Distribution Notice Period.
If the Participant completes his benefit election forms and returns
them before the Valuation Date immediately following such Distribution
Notice Period, the Participant's benefits will commence in the form
elected by the Participant as of such Valuation Date. If the
Participant fails to properly complete and return his benefit election
forms on or before the Valuation Date immediately following such
Distribution Notice Period, distribution of his accounts will be made
in the form of a lump sum no later than his Required Beginning Date.
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9.2 FORM OF DISTRIBUTION.
(a) Lump Sum. Subject to Section 9.3, if a Participant has a
termination of employment with the Employer for a reason other than his
death, unless such person was a Participant prior to October 21, 1996,
and has elected one of the options available under the Plan in effect
prior to such date, in accordance with (b) below, the Participant shall
have his accounts distributed in the form of a lump sum.
(b) Optional Methods of Distribution. In lieu of the
distribution of his accounts in the form of a lump sum, an Employee who
was a Participant prior to October 21, 1996 may elect in accordance
with Sections 9.2(c), 9.2(d) and 9.2(e) below, to have his accounts
distributed in a form available under the Plan in effect prior to such
date.
(c) Timely Election. An option set forth in 9.2(b) above must
be elected on a form furnished by the Plan Administrator for that
purpose within the 90 day period ending on the Annuity Starting Date,
but not before the Participant receives the notice described in Section
9.4.
(d) Effective Date of Option. An option selected under 9.2(b)
above shall become effective on the Annuity Starting Date.
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(e) Change or Revocation. An election made under this Section
may not be validly changed or revoked except as follows:
(1) Any election made by the Participant may be
changed or revoked without limitation if the Participant files
with the Company a written request before the Annuity Starting
Date as of which benefits are to commence.
(2) If the Participant dies before the date an option
becomes effective, any election made under Section 9.2 shall
be considered void.
(f) Small Benefits. Notwithstanding the foregoing, if a
Participant terminates employment prior to his Required Beginning Date,
and if the Participant's vested accounts are less than or equal to
$3,500 ($5,000 after December 31, 1997) as of the date he terminates
employment (or were less than or equal to $3,500 ($5,000 after December
31, 1997) at the time of any previous distribution), his accounts shall
be distributed in a lump sum as soon as practicable following the
Valuation Date coinciding with or next following his termination of
employment.
(g) Valuation of Accounts. Any distribution under this Plan
shall be based on the value of the Participant's accounts on the
Valuation Date which coincides with or immediately precedes the date as
of which distribution commences.
9.3 SPOUSAL CONSENT TO AN ANNUITY FORM OF BENEFIT OR TO AN ALTERNATE
BENEFICIARY. If a Participant (who participated in the Plan prior to October 21,
1996) elects an optional form of benefit in the form of an annuity other than a
joint and survivor annuity, or designates a beneficiary other than his spouse or
changes to a beneficiary other than his spouse, such election, designation or
change in designation will be effective only if the Participant's spouse
consents thereto in writing within the 90 day period ending on the Participant's
Annuity Starting Date. The spouse's consent must: (a) designate a form of
benefits which may not be changed without further spousal consent; (b) be
irrevocable and acknowledge the effect of such designation or election; and (c)
be witnessed by a Plan representative or a notary public. Any such consent must
be filed with the Company in order to be effective. No consent need be obtained
in the event the Participant has no spouse or the Participant's spouse cannot be
located. In this event, the Participant must certify on a form provided by the
Plan Administrator that he has no spouse or that his spouse cannot be located in
order for his beneficiary designation or election of an annuity to be effective.
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9.4 DISTRIBUTION NOTICE. During the Distribution Notice Periods
specified in Section 9.1, the Plan Administrator shall give to the participant a
written notification in nontechnical terms of:
(a) the material features and the relative values of the
optional forms of benefits under the Plan,
(b) the terms and conditions of the joint and survivor annuity
and the financial effect upon the Participant's benefit in terms of
dollars per benefit payment,
(c) the Participant's right to make, and the effect of, an
election out of the joint and survivor annuity,
(d) in the case of a married Participant, the rights of the
Participant's spouse with respect to any such election,
(e) the right of the Participant to make, and the effect of, a
revocation of any such election before the commencement of benefits,
and
(f) the right, if any, of the Participant to defer receipt of
a distribution.
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SECTION 10
DISTRIBUTIONS AT DEATH
10.1 DISTRIBUTION UPON DEATH. Upon the death of a Participant while in
the employment of an Employer, the Participant's accounts shall become fully
vested (if not already fully vested) and shall be distributed in a lump sum to
his spouse or beneficiaries in accordance with Sections 10.2, 10.3 and 10.4
within sixty (60) days after the Valuation Date coinciding with or next
following his date of death. Upon the death of a Participant after termination
of his employment with the Employer, the vested portion of the Participant's
remaining account balances shall be distributed in a lump sum to his spouse or
beneficiaries in accordance with Sections 10.2, 10.3 and 10.4 within sixty (60)
days after the Valuation Date coinciding with or next following his date of
death. Any distribution hereunder shall be based on the value of the
Participant's accounts as of the last Valuation Date before such distribution.
10.2 DISTRIBUTION TO SPOUSE. Upon the death of a Participant, the
entire balance of his account shall be distributed to his surviving spouse, if
any, unless the surviving spouse has consented in the manner required under
Section 10.5 to a designated beneficiary and one or more designated
beneficiaries survives the Participant.
10.3 DESIGNATION OF BENEFICIARY. Each Participant shall have the right
to name and change primary and contingent beneficiaries under the Plan on a form
provided for that purpose by the Plan Administrator. If upon the death of the
Participant, the Participant has no surviving spouse or the Participant's
surviving spouse has consented to the designation of a beneficiary in the manner
required under Section 10.5, the entire balance of his account shall be divided
among the primary or contingent beneficiaries designated by such Participant who
survived the Participant.
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<PAGE>
10.4 BENEFICIARY NOT DESIGNATED. In the event the Participant has no
surviving spouse and has either failed to designate a beneficiary or no
designated beneficiary survives him, the amount otherwise payable to a
beneficiary under the provisions of this Section shall be paid to the
Participant's executor or administrator.
10.5 SPOUSAL CONSENT TO DESIGNATION OF BENEFICIARY. The spouse of a
Participant may consent in writing to the designation of a beneficiary other
than the spouse or to a change in the designation of a beneficiary other than
the spouse. The spouse's consent must acknowledge the effect of such designation
of an alternate beneficiary (or change in the alternate beneficiary) and must be
witnessed by a notary public or Plan representative. Any such consent must be
filed with the Plan Administrator in order to be effective. No consent need be
obtained in the event the Participant has no spouse or the Participant's spouse
cannot be located. In this event, the Participant must certify on a form
provided by the Plan Administrator that he has no spouse or that his spouse
cannot be located in order for his beneficiary designation to be effective.
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<PAGE>
SECTION 11
LEAVES OF ABSENCE AND TRANSFERS
11.1 SERVICE CREDIT WHILE ON MILITARY LEAVE. As long as The Uniformed
Services Employment and Reemployment Rights Act of 1994 ("USERRA") or any
similar law shall remain in force, providing for reemployment rights for all
persons in military service, as therein defined, an Employee who leaves the
employment of an Employer for military service in the Armed Forces of the United
States, as defined in such Act from time to time in force, shall, for all
purposes of this Plan, be considered as having been in the employment of such
Employer, with the time of his service in the military credited to his Service;
provided that upon such Employee being discharged from the military service of
the United States he applies for re-employment with such Employer and takes all
other necessary action to be entitled to, and to be otherwise eligible for,
reemployment rights, as provided by USERRA, or any similar law from time to time
in force.
11.2 MILITARY LEAVE - RIGHTS WITH RESPECT TO ELECTIVE CONTRIBUTIONS.
(a) Any Employee who is reemployed while entitled to veterans'
reemployment rights under USERRA and who has either (i) suspended his
contributions during military service, or (ii) made less than the
maximum amount of contributions permitted by this section during his
period of military service, shall be permitted to make the
contributions described in Section 4.1 and 4.2 to the Plan with respect
to the period of his military service during the period which begins on
the Employee's date of reemployment with the Employer and ends upon the
earlier of:
(1) the end of the period equal to three times the
Employee's period of military service; or
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<PAGE>
(2) five years.
(b) The maximum amount of contributions which Employee can
make during this period shall be the maximum amount of contributions
that he would have been permitted to make to the Plan during the period
of military service had he continued to be employed by an Employer
during such period and received Compensation during such period equal
to the Compensation Employee would have received during the period of
military service had Employee worked for an Employer during such
period. If the Compensation Employer would have received during the
period was not reasonably certain, the Employee's average Compensation
from Employer during the 12 month period immediately preceding the
period of military service shall be deemed to be such Compensation.
(c) If such Employee's former Employer makes a contribution
under Section 4.4 during a period when Employee was on military leave
of absence and if the Employee later returns to employment and makes
the contributions described in Section 4.4 for this period, such
Employer shall make such Matching Contributions on behalf of Employer
as would have been made had Employee's contributions actually been made
during the period of military service.
11.3 TREATMENT OF CONTRIBUTIONS WITH RESPECT TO MILITARY LEAVE.
(a) Contributions under Section 11.2 will be taken into
account for purposes of the limitations of Sections 402(g) or 415 of
the Code in the year to which the contributions relate, not the year in
which the contributions are made. In addition, such contributions will
not cause the Plan to be treated as failing to meet the requirements of
Sections 401(a)(4), 401(a)(26), 401(k)(3), 401(m), 410(b) or 416 of the
Code.
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<PAGE>
(b) Notwithstanding any provision of this Plan, contributions, benefits and
service credit with respect to qualified military service will be
provided in accordance with Section 414(u) of the Code. Loan repayments
will be suspended under this Plan during a period of qualified military
service as permitted under Section 414(u)(4) of the Code.
11.4 MATERNITY OR PATERNITY ABSENCE. In the case of any Employee who is
absent from work
(a) by reason of the pregnancy of the individual,
(b) by reason of the birth of a child of the individual,
(c) by reason of the placement of a child with the individual
in connection with the adoption of such child by such individual, or
(d) for purposes of caring for such child for a period
beginning immediately following such birth or placement, the Employee
shall be credited with the number of Hours of Employment described in
Section 11.3(a) solely for purposes of determining whether a Break in
Service has occurred. In order to receive credit under this Section, an
Employee must furnish written proof to the Company establishing (i)
that the absence from work is for one of the reasons described in this
Section and (ii) the number of days for which the Employee was absent.
11.5 SERVICE DURING MATERNITY OR PATERNITY ABSENCE.
(a) Number of Hours Credited. The Hours of Employment for
which an Employee will receive credit for purposes of determining
whether a Break in Service has occurred under Section 2.21 are as
follows:
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(1) The Hours of Employment which otherwise would
normally have been credited to such Employee but for such
absence, or
(2) in any case in which the Plan is unable to
determine the Hours of Employment described in paragraph (a),
eight Hours of Employment per day of such absence, provided
that the total number of Hours of Employment credited under
this Section shall not exceed 501 Hours of Employment.
(b) Plan Year to Which Hours are Credited. The Hours of
Employment described in this Section shall be treated as Hours of
Employment:
(1) only in the Plan Year in which the absence from
work begins if the Employee would be prevented from incurring
a Break in Service in such year solely because the period of
absence is treated as Hours of Employment as provided in this
Section, or
(2) in any other case, in the immediately following
Plan Year.
11.6 OTHER LEAVES OF ABSENCE. An Employee on an Employer-approved leave
of absence not described in Section 11.1 above shall for all purposes of this
Plan be considered as having continued in the employment of that Employer for
the period of such leave, provided that the Employee returns to the active
employment of the Employer before or at the expiration of such leave. Such
approved leaves of absence shall be given on a uniform, non-discriminatory basis
in similar fact situations.
Notwithstanding any other provision of the Plan, a Participant who is
on an Employer-approved leave of absence will share in the allocations of
Employer contributions under Section 4.4 for the Plan Year in which such leave
of absence begins but will not share in such allocations for any subsequent Plan
Year ending before the Participant's return from such leave of absence.
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11.7 TRANSFERS.
(a) In the event that:
(1) a Participant is transferred to employment with a member
of the Controlled Group in a status as a non-Employee; or
(2) a person is transferred from employment with a member of
the Controlled Group in a status as a non-Employee to employment with
an Employer under circumstances making such a person an Employee; or
(3) a person was employed by a member of the Controlled Group
in a status as a non-Employee, terminated his employment and was
subsequently employed by an Employer as an Employee; or
(4) a Participant was employed by an Employer as an Employee,
terminated his employment and was subsequently employed by a member of
the Controlled Group in a status as a non-Employee;
(b) then the following provisions of this Subsection shall apply:
(1) transfer to employment with a member of the Controlled
Group as a non-Employee shall not be considered termination of
employment with an Employer, and such transferred person shall continue
to be entitled to the benefits provided in the Plan, as modified by
this Section;
(2) any employment with a member of the Controlled Group by a
non-Employee will be deemed to be employment by an Employer;
(3) amounts earned from a member of the Controlled Group by a
non-Employee shall not constitute Compensation hereunder;
(4) termination of employment with a member of the Controlled
Group which has not adopted the Plan by a person entitled to benefits
under this Plan (other than to transfer to employment with another
member of the Controlled Group) shall be considered as termination of
employment with all Employers;
(5) all other terms and provisions of this Plan shall fully
apply to such person and to any benefits to which he may be entitled
hereunder. Notwithstanding anything in this Plan to the contrary, a
Participant who is no longer employed by a member of the Controlled
Group which includes the Company as a member shall be considered a
terminated Employee.
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SECTION 12
TRUSTEE
The Company shall select a Trustee or Trustees to hold and administer
the assets of the Plan and shall enter into trust agreements with such Trustees.
The Company may change the Trustee or Trustees from time to time subject to the
terms of the trust agreement.
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SECTION 13
ADMINISTRATION
13.1 APPOINTMENT OF PLAN ADMINISTRATOR. The Company has appointed a
Plan Administrator who shall serve without remuneration at the pleasure of the
Company. Upon death, resignation, removal or inability of the Plan Administrator
to continue, the Company shall appoint a successor. If, at any time, the Company
has not appointed a Plan Administrator, then the Company shall have all of the
duties, responsibilities, powers and authorities given to the Plan
Administrator.
13.2 CONSTRUCTION. The Plan Administrator shall have the discretionary
authority to construe, interpret and administer all provisions of the Plan and
to determine a Participant's eligibility for benefits on a uniform,
non-discriminatory basis in similar fact situations.
13.3 DECISIONS AND DELEGATION. The Plan Administrator may appoint such
agents as it may deem necessary for the effective exercise of its duties, and
may, to the extent not inconsistent herewith, delegate to such agents any powers
and duties, both administerial and discretionary, as the Plan Administrator may
deem expedient or appropriate.
The Plan Administrator shall not make any decision or take any action
covering exclusively her own benefits under the Plan. All such matters shall be
decided by the Board.
13.4 DUTIES OF THE PLAN ADMINISTRATOR. The Plan Administrator shall, as
part of its general duty to supervise and administer the Plan, direct the
Trustee specifically in writing in regard to:
(a) distribution of payments, including the names of the
payees, the amounts to be paid and the time or times when payments
shall be made;
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(b) any other payments which the Trustee is not authorized to
make without direction in writing by the Plan Administrator;
(c) the purchase of annuity contracts, giving the names of the
persons for whose benefit they shall be purchased and the purchase
price; and
(d) preparation of an annual report for the Company, as of the
end of each Plan Year, in such form as the Company may require.
The Plan Administrator shall also be responsible for: (i) ensuring that
information relating to the purchase, holding and sale of Company Stock and the
exercise of voting pursuant to Section 6.7 hereof, tender and similar rights
with respect to Company Stock by Participants and beneficiaries is maintained in
accordance with procedures designed to safeguard the confidentiality of such
information, except to the extent necessary to comply with federal laws or state
laws not pre-empted by the Employee Retirement Income Security Act; (ii) that
such confidentiality procedures are being followed; and (iii) that an
independent fiduciary is appointed where the Plan Administrator determines that
a potential for undue influence exists with regard to the direct or indirect
exercise of shareholder rights.
13.5 RECORDS OF THE PLAN ADMINISTRATOR. All acts and determinations of
the Plan Administrator and all such records, together with such other documents
as may be necessary for the proper administration of the Plan, shall be
preserved in the custody of such Plan Administrator. Such records and documents
shall at all times be open for inspection and copying by any person designated
by the Trustee.
13.6 EXPENSES. Any expense incurred by the Plan Administrator with
respect to employment of agents, attorneys or other persons, including expenses
incurred in maintaining the qualified status of the Plan and the exempt status
of the related trust shall be paid from the assets of such trust unless paid by
the Company and/or other Employers.
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SECTION 14
CLAIM PROCEDURE
14.1 CLAIM. A Participant or beneficiary or other person who believes
that he is being denied a benefit to which he is entitled (hereinafter referred
to as "Claimant") may file a written request for such benefit with the Plan
Administrator, setting forth his claim.
14.2 CLAIM DECISION. Upon receipt of a claim, the Plan Administrator
shall advise the Claimant that a reply will be forthcoming within 90 days and
shall in fact deliver such reply in writing within such period. The Plan
Administrator may, however, extend the reply period for an additional 90 days
for reasonable cause. If the claim is denied in whole or in part, the Plan
Administrator will adopt a written opinion using language calculated to be
understood by the Claimant setting forth:
(a) the specific reason or reasons for the denial;
(b) specific reference to pertinent Plan provisions on which
the denial is based;
(c) a description of any additional material or information
necessary for the Claimant to perfect the claim and an explanation why
such material or such information is necessary;
(d) appropriate information as to the steps to be taken if the
Claimant wishes to submit the claim for review; and
(e) the time limits for requesting a review under Section 14.3
and a review under Section 14.4.
14.3 REQUEST FOR REVIEW. Within 60 days after the receipt by the
Claimant of the written opinion described above, the Claimant may request in
writing that the Plan Administrator review the prior determination. The Claimant
or his duly authorized representative may, but need not, review the pertinent
documents and submit issues and comments in writing for reconsideration by the
Plan Administrator. If the claimant does not request a review of the Plan
Administrator's determination within such 60-day period, he shall be barred and
estopped from challenging the prior determination.
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14.4 REVIEW ON APPEAL. Within 60 days after the Plan Administrator's
receipt of a request for review, she will review her prior determination. After
considering all materials presented by the Claimant, the Plan Administrator will
render a written opinion, written in manner calculated to be understood by the
Claimant, setting forth the specific reasons for the decision and containing
specific reference to the pertinent Plan provisions on which the decision is
based. If special circumstances require that the 60-day time period be extended,
the Plan Administrator will so notify the Claimant and will render the decision
as soon as possible but not later than 120 days after receipt of the request for
review. The Plan Administrator shall possess and exercise discretionary
authority to make determinations as to a Participant's eligibility for benefits
and to construe the terms of the Plan. The decision of the Plan Administrator
shall be final and non-reviewable unless found to be arbitrary and capricious by
a court of competent review. Such decision will be binding the Company and the
Claimant.
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SECTION 15
AMENDMENT AND TERMINATION
15.1 AMENDMENT. The Company shall have the right, by a resolution
adopted by action of the Board, at any time and from time to time to amend, in
whole or in part, any or all of the provisions of the Plan. No such amendment,
however, shall authorize or permit any part of the assets of the Plan (other
that such part as is required to pay taxes and administration expenses of the
Plan) to be used for or diverted to purposes other than for the exclusive
benefit of the Participants or their beneficiaries; no such amendment shall
cause any reduction in amount credited to any Participant's account or cause or
permit any portion of the assets of the Plan to revert to or become the property
of any Employer.
15.2 TERMINATION; DISCONTINUANCE OF CONTRIBUTIONS. The Company shall
have the right at any time to terminate this Plan. Upon termination, partial
termination, or complete discontinuance of contributions, all Participants'
accounts (or, in the case of a partial termination, the accounts of all affected
Participants) shall become fully vested, and shall not thereafter be subject to
forfeiture.
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SECTION 16
MISCELLANEOUS
16.1 PARTICIPANTS' RIGHTS. Neither the establishment of the Plan hereby
created, nor any modification thereof, nor the creation of any fund or account,
nor the payment of any benefits, shall be construed as giving to any Participant
or other person any legal or equitable right against any Employer, any officer
or Employee thereof, the Trustee or the Board except as herein provided. Under
no circumstances shall the terms of employment of any Participant be modified or
in any way terms of employment of any Participant be modified or in any way
affected hereby.
16.2 SPENDTHRIFT CLAUSE.
(a) Except as provided in Section 4.9, no benefit or
beneficial interest provided under the Plan shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, either voluntary or involuntary, and any attempt
to so alienate, anticipate, sell, transfer, assign, pledge, encumber or
charge the same shall be null and void. No such benefit or beneficial
interest shall be liable for or subject to the debts, contracts,
liabilities, engagements, or torts of any person to whom such benefits
or funds are or may be payable;
(b) Notwithstanding the foregoing, effective August 5, 1997, a
Participant's benefit will be offset against any amount the Participant
is ordered or required to pay to the Plan pursuant to an order or
requirement which arises under a judgment of conviction for a crime
involving the Plan, under a civil judgment entered by a court after
August 5, 1997 in an action involving a fiduciary breach, or pursuant
to a settlement agreement after August 5, 1997 between the Participant
and the Department of Labor or the Pension Benefit Guaranty
Corporation, provided that no offset shall be made if the Participant
has a spouse at the time at which the offset is to be made unless:
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(1) either such spouse has consented in writing to
such offset and such consent is witnessed by a notary public
or representative of the Plan (or it is established to the
satisfaction of a plan representative that such consent may
not be obtained by reason of circumstances described in
Section 417(a)(2)(B) of the Code), or an election to waive the
right of the spouse to either a qualified joint and surviving
annuity or a qualified preretirement survivor annuity is in
effect;
(2) such spouse is ordered or required in such
judgment, order, decree, or settlement to pay an amount to the
plan in connection with such an action; or
(3) in such judgment, order, decree, or settlement,
such spouse retains the right to receive the survivor annuity
under a qualified joint and survivor annuity and under a
qualified preretirement survivor annuity. For purposes of this
Section 16.2(b) a qualified joint and survivor annuity and a
qualified preretirement survivor annuity shall be deemed to be
provided only if the survivor annuity is determined as if (i)
the participant terminated employment on the date of the
offset; (ii) there was no offset; (iii) the Plan permitted
commencement of benefits only on or after Normal Retirement
Age; (iv) the Plan provided a qualified joint and survivor
annuity under which the Participant's account balances are
used to purchase an annuity under which the survivor annuity
is 50 percent of the amount of the annuity which is payable
during the joint life of the Participant and the spouse; and
(v) the amount of the qualified preretirement survivor annuity
under the Plan is equal to the amount of the survivor annuity
payable under clause (iv).
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16.3 DELEGATION OF AUTHORITY BY COMPANY. Whenever the Company, under
the terms of this Plan, is permitted or required to do or perform any act it
shall be done and performed by any officer duly authorized by the Board of
Directors of the Company.
16.4 DISTRIBUTION TO MINORS. In the event that any portion of the Plan
becomes distributable to a minor or other person under legal disability (as
determined by the laws of the jurisdiction in which he or she then resides), the
Plan Administrator shall direct that such distribution be made to the legal
representative of such minor or other person.
16.5 CONSTRUCTION OF PLAN. This Plan shall be construed according to
the laws of the State of Arizona, and all provisions of the Plan shall be
administered according to the laws of such State.
16.6 GENDER, NUMBER AND HEADINGS. Whenever any words are used herein in
the masculine gender, they shall be construed as though they were also used in
the feminine gender in all cases where they would so apply, and wherever any
words are used herein in the singular form, they shall be construed as though
they were also used in the plural form in all cases where they would so apply.
Headings of Sections and Subsections are inserted for convenience of reference,
constitute no part of the Plan and are not to be considered in the construction
of the Plan.
16.7 SEPARABILITY OF PROVISIONS. If any provisions of this Plan shall
be for any reason invalid or unenforceable, the remaining provisions shall
nevertheless be carried into effect.
16.8 DIVERSION OF ASSETS. No part of the assets of the Plan shall be
used for, or diverted to, purposes other than the exclusive benefit of
Participants or their beneficiaries. Except as provided in Section 4.7, no
Employer shall have any beneficial interest in the assets of the Plan and no
part of the assets of the Plan shall revert or be repaid to an Employer,
directly or indirectly.
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16.9 SERVICE OF PROCESS. Plan Administrator shall constitute the Plan's
agent for service of process.
16.10 MERGER. In the event of any merger or consolidation with, or
transfer of assets or liabilities to, any other plan, each Participant shall (as
if the Plan had then terminated) receive a benefit immediately after the merger,
consolidation or transfer which is equal to or greater that the benefit he would
have entitled to receive immediately before the merger, consolidation or
transfer (if the Plan had then terminated).
16.11 BENEFIT LIMITATION.
(a) Notwithstanding any other provision hereof, the amounts
allocated to a Participant during the Limitation Year under the Plan
and allocated to the Participant under any other defined contribution
Plan to which an Employer has contributed shall be proportionately
reduced, to the extent necessary, so that the Annual Addition does not
exceed the least of:
(1) $30,000; or
(2) 25% of the Participants' compensation from an
Employer during the Limitation Year; or
(3) such other limits set forth in Section 415 of the
Code. The amount set forth in subparagraph (1) above shall
automatically be adjusted to reflect adjustments made by
applicable law.
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(b) For purposes of this Section, Limitation Year means the 12
monthly period commencing on January 1 and ending on December 31.
(c) In addition, the amounts allocated to Participant during
the Limitation Year under this Plan, and allocated to such Participant
under any other defined contribution plan to which an Employer has
contributed and which has the same Limitation Year as the Plan, shall
be proportionately reduced to the extent necessary, so that the sum of
the defined benefit plan fraction and the defined contribution Plan
fraction does not exceed the limits set forth in Section 415(e) of the
Code.
(d) If as a result of the allocation of forfeitures, a
reasonable error in estimating a Participant's remuneration, a
reasonable error in determining the amount of elective deferrals
(within the meaning of Section 402(g)(3) of the Code) that may be made
with respect to a Participant under the limits of Section 415 of the
Code or other limited facts and circumstances, the Annual Additions
under the Plan for a particular Participant exceed the limitations in
this Section, the excess amounts will not be deemed Annual Additions of
the Limitation Year and will be treated as follows:
(1) First, the portion of the excess attributable to
amounts by which a Participant elected to have his salary
reduced under Sections 4.1 and 4.2 (together with any income
or less any loss allocable to such amounts) shall be returned
to such Participant to the extent that the return would reduce
the excess amount in the Participant's Accounts, such amount
to be returned on or before the April 15 following the close
of such Limitation Year.
(2) Second, any Employer contributions under Section
4.4 which are Attributable to the contributions returned in
(1) above shall be held in a suspense account and used to
reduce Employer contributions otherwise due under Section 4.
(3) Third, to the extent required to reduce the
excess amount, other Employer contributions under Section 4
shall be held in a suspense account and used to reduce
Employer contributions otherwise due under Section 4.
(e) For purposes of this Section, Annual Additions means the
sum for the Limitation Year of Employer contributions, Employee
contributions (determined without regard to any rollover contributions
as defined in Sections 402(a)(5), 403(a)(4), 403(b)(8) and 408(d)(3) of
the Code and without regard to Employee contributions to a simplified
employee pension plan which are excludable from gross income under
Section 408(k)(6) of the Code) and forfeitures.
(f) For purposes of this Section, the term "Compensation"
shall include a Participant's wages, salaries, and other amounts
received for personal services actually rendered in the course of
employment with an Employer (including, but not limited to, commissions
paid salesmen, compensation for services on the basis of a percentage
of profits, commissions on insurance premiums, tips and bonuses),
contributions made to the Plan under Section 4.1 or 4.2 and amounts
contributed at the election of a Participant and which are not included
in the Participant's taxable income by reason of Section 125 of the
Code, but excluding:
(1) Contributions made by an Employer to a plan of
deferred compensation to the extent that the contributions are
not includible in the gross income of the Participant for the
taxable year in which contributed, or Employer contributions
made on behalf of a Participant to a simplified employee
pension plan described in Section 408(k) of the Code to the
extent such contributions are deductible by the Participant
under Section 219(b)(7) of the Code, or any distributions from
a plan of deferred compensation;
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(2) Amounts realized from the exercise of a
non-qualified stock option, or when restricted stock (or
property) held by a Participant either becomes freely
transferable or is no longer subject to a substantial risk of
forfeiture;
(3) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option;
(4) Other amounts which receive special tax benefits,
such as premiums for group term life insurance, or
contributions made by an Employer (whether or not under a
salary reduction agreement) towards the purchase of an annuity
contract described in Section 403(b) of the Code (whether or
not the contributions are excludible from the gross income of
the Participant).
16.12 COMMENCEMENT OF BENEFITS.
(a) Notwithstanding any other Section of the Plan, the payment
of benefits under the Plan to the Participant will begin not later than
the 60th day after the close of the Plan Year in which the least of the
following occurs:
(1) the date on which the Participant attains age 65;
or
(2) the 10th anniversary of the date on which the
Participant commenced participation in the Plan; or
(3) the Participant's termination of employment with
all Employers.
(b) Notwithstanding Subsection (a) or any other provision of
the Plan, if the amount of payment cannot be ascertained, or if it is
not possible to make payment because the Plan Administrator cannot
locate the Participant after making reasonable efforts to do so, a
retroactive payment may be made no later than sixty days after the
earliest date on which the amount of such payment can be ascertained or
the date on which the Participant is located, whichever is applicable.
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(c) (1) If the Plan Administrator is unable to locate any
person entitled to receive distribution from an account hereunder, such
account shall be forfeited and used to reduce Employer contributions on
the date 2 years after
(A) the date the Plan Administrator sends by
certified mail a notice concerning the benefits to such person
at his last known address or
(B) the Plan Administrator determines that there is
no last known address.
(2) If an account is forfeited under (c)(1) and a person
otherwise entitled to the account subsequently files a claim with the
Plan Administrator during any Plan Year, before any allocations for
such Plan Year are made the account will be restored to the amount
which was forfeited without regard to any earnings or losses that would
have been allocated. Such restoration shall first be taken out of
forfeitures which have not been allocated and if such forfeitures are
insufficient to restore such person's account balance, restoration
shall be made by an Employer contribution to the Plan.
16.13 QUALIFIED DOMESTIC RELATIONS ORDER. Notwithstanding anything in
the Plan to the contrary, benefits may be distributed in accordance with the
terms of a Qualified Domestic Relations Order ("QDRO"). For this purpose a QDRO
is any Domestic Relations Order determined by the Plan Administrator to be a
Qualified Domestic Relations Order within the meaning of Section 414(p) of the
Code pursuant to this Section.
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(a) A Domestic Relations Order means a judgment, decree, or
order (including the approval of a property settlement agreement) which
(1) relates to the provision of child support,
alimony payments, or marital property rights to a spouse,
former spouse, child or other dependent of a Participant,
(2) is made pursuant to a state domestic relations
law, and
(3) creates or recognizes the existence of an
Alternative Payee's right, or assigns to the Alternate Payee
the right, to receive all or a portion of the benefits of the
Participant under the Plan.
An "Alternate Payee" includes any spouse, former
spouse, child or other dependent of a Participant who is
designated by the Domestic Relations Order as having a right
to receive all or a portion of the benefits payable under the
Plan with respect to he concerned Participant.
(b) To be a QDRO, the Domestic Relations Order must meet the
specifications set forth in Section 414(p) of the Code and must clearly
specify the following:
(1) Name and last known mailing address of the
Participant.
(2) Name and last known mailing address of each
Alternate Payee covered by the Domestic Relations Order.
(3) The amount or the percentage of the Participant's
benefit to be paid to each Alternate Payee, or the manner in
which such amount or percentage is to be determined.
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(4) The number of payments or period to which the
Domestic Relations Order applies.
(5) Each plan to which the Domestic Relations Order
applies.
(c) The status of any Domestic Relations Order as a QDRO shall
be determined under the following procedures:
(1) Promptly upon receiving a Domestic Relations
Order, the Plan Administrator will
(A) refer the Domestic Relations Order to
legal counsel for the Plan to render an opinion
within 90 days (or such earlier period as shall be
provided by applicable law) whether the Domestic
Relations Order is a QDRO, and
(B) notify the affected Participant and any
Alternate Payee of the receipt by the Plan of the
Domestic Relations Order and of this procedure.
(2) Promptly upon receiving the determination made by
the Plan's legal counsel of the status of the Domestic
Relations Order, the affected Participant and each Alternate
Payee (or any representative designated by an Alternative
Payee by written notice to the Plan Administrator) shall be
furnished a copy of such determination. The notice of
determination shall state
(A) whether the Plan's legal counsel has
determined that the Domestic Relations Order is a
QDRO, and
(B) once such legal counsel determines
whether the Domestic Relations Order constitutes a
QDRO, that the Plan Administrator will commence any
payments currently due under the Plan to the person
or persons entitled thereto after the expiration of a
period of 60 days commencing on the date of the
mailing of the notice unless prior thereto the Plan
Administrator receives notice of the institution of
legal proceedings practical after such 60 day period,
ascertain the dollar amount currently payable to each
payee pursuant to the Plan and the QDRO, and any such
amounts shall be disbursed by the Plan.
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(3) If there is a dispute on the status of a Domestic
Relations Order as a QDRO, there shall be a delay in making
payments. The Plan Administrator shall direct that the amounts
otherwise payable be held in a separate account within the
Plan. If within 18 months thereafter, the Domestic Relations
Order is determined not to be a valid QDRO, or the status of
the Domestic Relations Order has not been finally determined,
the segregated or escrow amounts (including interest thereon)
shall be paid to the person or persons who are listed on the
Domestic Relations Order. Any determination thereafter that
the Domestic Relations Order is a QDRO shall be applied
prospectively only.
(A) If a domestic relations order requires
payment to an Alternate Payee in an immediate lump
sum, the order shall not lose its status as a
Qualified Domestic Relations Order merely because of
the immediate lump sum provision.
16.14 WRITTEN EXPLANATION OF ROLLOVER TREATMENT. The Plan Administrator
shall, when making an eligible rollover distribution, provide a written
explanation to the recipient of such distribution of his right to roll over such
distribution to an eligible retirement plan and, if applicable, his right to the
special five or ten-year averaging and capital gains tax treatment in the Code.
Such written explanation will be provided to the recipient in accordance with
rules prescribed by the Internal Revenue Service.
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16.15 LEASED EMPLOYEES. Any person who is a leased employee (within the
meaning of Section 414(n) of the Code) of any member of the Controlled Group
shall be treated for all purposes of the Plan as if he were employed by a member
of the Controlled Group which has not adopted the Plan.
16.16 SPECIAL DISTRIBUTION OPTION. Notwithstanding any provision of the
Plan to the contrary that would otherwise limit a Distributee's (as hereinafter
defined) 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 (as hereinafter defined) paid directly to an
Eligible Retirement Plan (as hereinafter defined) specified by the Distributee
in a Direct Rollover.
(a) 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: (a) any
distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the Distributee or the joint lives (or joint life
expectancies) of the Distributee and the Distributee's designated
beneficiary, or for a specified period of ten years or more; (b) any
distribution to the extent such distribution is required under Section
401(a)(9) of the Code; and (c) the portion of any distribution that is
not includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to Employer
securities).
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(b) An Eligible Retirement Plan is (a) an individual
retirement account described Section 408(a) of the Code, (b) an
individual retirement annuity described in Section 408(b) of the Code,
(c) an annuity plan described in Section 403(a) of the Code, or (d) 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 a surviving spouse, an Eligible
Retirement Plan is only an individual retirement account or individual
retirement annuity.
(c) A distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the
Alternate Payee under a Qualified Domestic Relations Order, as defined
in Section 414(p) of the Code, are Distributees with regard to the
interest of the spouse or former spouse.
(d) A Direct Rollover payment is a payment by the Plan to the
Eligible Retirement Plan specified by the Distributee.
16.17 LIMITATIONS ON SPECIAL DISTRIBUTION OPTION.
(a) Notwithstanding the provisions of the immediately
preceding Section entitled Special Distribution Option, the amount
which may be paid directly to the trustee of another eligible
retirement plan under such Section shall be no less than the smaller of
$500 or the total amount of the eligible rollover distribution which
would otherwise be includible in the Participant's taxable income; and
no amount shall be so paid unless the amount of such distributions in
any calendar year which are otherwise eligible for such payment are
reasonably expected to total $200 or more.
(b) The Plan Administrator shall provide notice of the special
distribution option described in the preceding Section to the
Participant in accordance with rules prescribed by the Internal Revenue
Service.
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SECTION 17
TOP-HEAVY DEFINITIONS
17.1 "ACCRUED BENEFITS" means "the present value of accrued benefits"
as that phrase is defined under regulations issued under Section 416 of the
Code. For purposes of Sections 17 and 18 hereof, the Accrued Benefits of any
Participant (other than a key employee) shall be determined under the single
accrual rate used by all Qualified Plans of the Company which are defined
benefit plans, or if there is no single accrual rate, Accrued Benefits shall be
determined as accruing no more rapidly than the slowest rate permitted under
Section 411(b)(1)(C) of the Code.
17.2 "BENEFICIARIES" means the person or persons to whom the share of a
deceased Participant's accounts are payable.
17.3 "DETERMINATION DATE" means for a Plan Year the last day of the
preceding Plan Year.
17.4 "FORMER KEY EMPLOYEE" means any person presently or formerly
employed by the Controlled Group (and the Beneficiaries of such person) who
during the Plan Year is not classified as a Key Employee but who was classified
as a Key Employee in a previous Plan Year; provided, however, that a person who
has not performed any services for the Controlled Group at any time during the
five year period ending on the Determination Date (and the Beneficiaries of such
persons) shall not be considered a Former Key Employee.
17.5 "KEY EMPLOYEE" means any person presently or formerly employed by
the Controlled Group (and the Beneficiaries of such person) who is a "key
employee" as that term is defined in Section 416(I) of the Code and the
regulations thereunder; provided, however, that a person who has not performed
any services for the Controlled Group at any time during the five year period
ending on the Determination Date (and the Beneficiaries of such persons) shall
not be considered a Key Employee. For purposes of determining whether a person
is a Key Employee, the definition of Top Heavy Compensation shall be applied.
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17.6 "NON-KEY EMPLOYEE" means any person presently or formerly employed
by the Controlled Group (and the Beneficiaries of such person) who is not a Key
Employee or a Former Key Employee; provided, however, that a person who has not
performed any services for the Controlled Group at any time during the five year
period ending on the Determination Date (and the Beneficiaries of such persons)
shall not be considered a Non-Key Employee.
17.7 "PERMISSIVE AGGREGATION GROUP" means each Qualified Plan of the
Controlled Group in the Required Aggregation Group plus each other Qualified
Plan which is not part of the Required Aggregation Group but which satisfies the
requirements of Sections 401(a)(4) and 410 of the Code when considered together
with the Required Aggregation Group.
17.8 "REQUIRED AGGREGATION GROUP" means each Qualified Plan (including
any terminated Qualified Plan) of the Controlled Group in which a Key Employee
participates during the Plan Year containing the Determination Date or any of
the four preceding Plan Years and each other Qualified Plan (including any
terminated Qualified Plan) of the Controlled Group which during this period
enables any Qualified Plan (including any terminated Qualified Plan) in which a
Key Employee participates to meet the requirements of Section 401(a)(4) or 410
of the Code.
17.9 "SUPER TOP-HEAVY GROUP" means, for a Plan Year, the Required
Aggregation Group if, and only if, the sum of the Accrued Benefits (valued as of
the Determination Date for such Plan Year) under all Qualified Plans (including
any terminated Qualified Plans) in the Required Aggregation Group for Key
Employees exceeds 90% of the sum of the Accrued Benefits (valued as of such
Determination Date) under all qualified Plans (including any terminated
Qualified Plans) in the Required Aggregation Group for all Key Employees and
Non-Key Employees; provided, however, that the Required Aggregation Group will
not be a Super Top-Heavy Group for a Plan Year if the sum of the Accrued
Benefits (valued as of the Determination Date for such Plan Year) under all
Qualified Plans (including any terminated Qualified Plans) in the Required
Aggregation Group for Key Employees does not exceed 90% of the sum of the
Accrued Benefits (valued as of such Determination Date) under all Qualified
Plans in the Permissive Aggregation Group for all Key Employees and Non-Key
Employees. If the Qualified Plans in the Required or Permissive Aggregation
Group have different Determination Dates, the Accrued Benefits under each such
Plan shall be calculated separately, and the Accrued Benefits as of
Determination Dates for such Plans that fall within the same calendar year shall
be aggregated.
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17.10 "TOP-HEAVY COMPENSATION" means compensation within the meaning of
Section 415 of the Code.
17.11 "TOP-HEAVY GROUP" means, for a Plan Year, the Required
Aggregation Group if, and only if, the sum of the Accrued Benefits (valued as of
the Determination Date for such Plan Year) under all Qualified Plans (including
any terminated Qualified Plans) in the Required Aggregation Group for Key
Employees exceeds 60% of the sum of the Accrued Benefits (valued as of such
Determination Date) under all Qualified Plans (including any terminated
Qualified Plans) in the Required Aggregation Group for all Key Employees and
Non-Key Employees; provided, however, that the Required Aggregation Group will
not be a Top-Heavy Group for a Plan Year if the sum of the Accrued Benefits
(valued as of the Determination Date for such Plan Year) under all Qualified
Plans (including any terminated Qualified Plans) in the Required Aggregation
Group for Key Employees does not exceed 60% of the sum of the Accrued Benefits
(valued as of such Determination Date) under all Qualified Plans in the
Permissive Aggregation Group for all Key Employees and Non-Key Employees. If the
Qualified Plans in the Required or Permissive Aggregation Group have different
Determination Dates, the Accrued Benefits under each such Plan shall be
calculated separately, and the Accrued Benefits as of Determination Dates for
such Plans that fall within the same calendar year shall be aggregated.
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SECTION 18
TOP-HEAVY RULES
18.1 SPECIAL TOP-HEAVY RULES. If for any Plan Year the Plan is part of
a Top-Heavy Group, then, effective as of the first day of such Plan Year the
following provisions shall apply to Participants who accrue an Hour of
Employment on or after the first day of such Plan Year. A new Section 6.5 is
added as follows:
18.2 MINIMUM ALLOCATION IF PLAN IS PART OF TOP-HEAVY GROUP.
Notwithstanding the foregoing, for each Plan Year in which the Plan is part of a
Top-Heavy Group, the sum of the Employer contributions and forfeitures allocated
under the Plan to the account of each Non-Key Employee who is both a Participant
and Employee on the last day of such Plan Year shall be at least equal to the
lesser of three percent of such Non-Key Employee's Top-Heavy Compensation for
such Plan Year or the largest percentage of Top-Heavy Compensation allocated to
the account of any Key Employee; provided, however, that if for any Plan Year a
Non-Key Employee is a Participant in both this Plan and one or more defined
contribution plans, the Employer need not provide the minimum allocation
described in the preceding sentence for such Non-Key Employee if the Employer
satisfies the minimum allocation requirement of Section 416(c)(2)(B) of the Code
for the Non-Key Employee in such other defined contribution plans. Amounts which
a Non-Key Employee or Key Employee elects to contribute on a pre-tax basis to a
Qualified Plan which meets the requirements of Section 401(k) of the Code shall
be considered an Employer contribution for purposes of Section 17.11; provided,
however, that such pre-tax contributions made by Non-Key Employees may not be
taken into account in determining the minimum allocation provided under this
Section 6.5. In addition, matching contributions made on behalf of Non-Key
Employees may not be taken into account in determining the minimum allocation
provided under this Section 6.5.
18.3 ADJUSTMENTS IN SECTION 415 LIMIT. If for any Plan Year, the Plan
is part of a Super Top-Heavy Group, or the Plan is part of a Top-Heavy Group and
fails to provide an allocation of Employer contributions and forfeitures on
behalf of each Non-Key Employee who is both a Participant and Employee on the
last day of such Plan Year equal to at least the lesser of four percent of each
such Non-Key Employee's Top-Heavy Compensation or the largest percentage of
Top-Heavy Compensation allocated on behalf of any Key Employee for the Plan
Year, effective as of the first day of such Plan Year the adjustments to the
limits in Section 16.11 set forth in Section 416(h) of the Code shall be
applied.
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IN WITNESS WHEREOF, the Company and each Employer has caused this
Amendment to be executed by one of its duly authorized officers this _______ day
of _____________, 1999.
PILGRIM AMERICA CAPITAL CORPORATION
By
-------------------------------------
Its
------------------------------------
PILGRIM GROUP, INC.
By
-------------------------------------
Its
------------------------------------
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PILGRIM AMERICA CAPITAL
CORPORATION 401(k) PLAN
TABLE OF CONTENTS
Page
SECTION 1 - NAME OF PLAN.......................................................1
SECTION 2 - DEFINITIONS........................................................2
2.1 "Amendment Effective Date"........................................2
2.2 "Annuity Starting Date"...........................................2
2.3 "Board"...........................................................2
2.4 "Break in Service"................................................2
2.5 "Code"............................................................2
2.6 "Company".........................................................2
2.7 "Company Stock"...................................................2
2.8 "Compensation"....................................................2
2.9 "Controlled Group"................................................3
2.10 "Distribution Notice Period".....................................3
2.11 "Employee".......................................................3
2.12 "Employer".......................................................4
2.13 "Entry Date".....................................................4
2.14 "Five Percent Owner".............................................4
2.15 "Hours of Employment"............................................4
2.16 "Normal Retirement Date".........................................5
2.17 "Participant"....................................................6
2.18 "Plan Administrator".............................................6
2.19 "Plan Year"......................................................6
2.20 "Qualified Plan".................................................6
2.21 "Qualified Preretirement Survivor Annuity".......................6
2.22 "Service"........................................................6
2.23 "Trustee"........................................................7
2.24 "Valuation Date".................................................7
SECTION 3 - ELIGIBILITY........................................................8
3.1 Prior Participants................................................8
3.2 New Participants..................................................8
3.3 Former Participants...............................................9
3.4 Cessation of Participation........................................9
SECTION 4 - CONTRIBUTIONS.....................................................10
4.1 Basic Payroll Reduction Contributions............................10
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4.2 Additional Payroll Reduction Contributions.......................10
4.3 Maximum Payroll Reduction Contribution...........................10
4.4 Employer Matching Contributions..................................10
4.5 Elections........................................................11
4.6 Changes in a Suspension of Payroll Reductions....................11
4.7 Tax Deductions...................................................12
4.8 Rollover Contributions and Transfers.............................13
4.9 Loan.............................................................14
4.10 Hardship Withdrawals............................................17
4.11 Vesting After Withdrawals.......................................20
SECTION 5 - DISTRIBUTIONS OF EXCESS AMOUNTS...................................22
5.1 Distributions of Excess Elective Deferrals.......................22
5.2 Limitations on Pre-Tax Contributions for Highly Compensated
Employees......................................................22
5.3 Limitations on Matching Contributions for Highly Compensated
Employees......................................................25
5.4 Limitations on Multiple Use of Alternative Limitation............28
5.5 Definitions and Special Rules....................................28
5.6 Election to Treat Qualified Nonelective Contributions and
Qualified Matching Contributions as Elective Deferrals.........35
5.7 Election to Treat Qualified Nonelective Contributions and
Elective Deferrals as Matching Contribution....................37
SECTION 6 - ALLOCATION........................................................39
6.1 Establishment of Accounts........................................39
6.2 404(c) Plan......................................................39
6.3 Participant's Selection of Investment Fund.......................39
6.4 Transfers Between Investment Funds...............................40
6.5 Allocation of Earnings or Losses.................................41
6.6 Special Transfer Rules...........................................41
6.7 Voting Company Stock.............................................42
SECTION 7 - DISTRIBUTIONS AT RETIREMENT.......................................43
7.1 Normal Retirement Distributions..................................43
7.2 Required Minimum Distributions...................................43
7.3 Required Beginning Date..........................................43
SECTION 8 - DISTRIBUTIONS AT TERMINATION OF EMPLOYMENT (VESTING)..............45
8.1 Distributions Upon Termination of Employment.....................45
8.2 Determination of Vested Portion..................................45
8.3 Forfeitures......................................................46
SECTION 9 - PAYMENT OF BENEFITS...............................................47
9.1 Timing of Distributions..........................................47
9.2 Form of Distribution.............................................49
9.3 Spousal Consent to an Annuity Form of Benefit or to an Alternate
Beneficiary....................................................50
9.4 Distribution Notice..............................................51
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SECTION 10 - DISTRIBUTIONS AT DEATH...........................................53
10.1 Distribution Upon Death.........................................53
10.2 Distribution to Spouse..........................................53
10.3 Designation of Beneficiary......................................53
10.4 Beneficiary Not Designated......................................54
10.5 Spousal Consent to Designation of Beneficiary...................54
SECTION 11 - LEAVES OF ABSENCE AND TRANSFERS..................................55
11.1 Service Credit While on Military Leave..........................55
11.2 Military Leave - Rights With Respect To Elective Contributions..55
11.3 Treatment of Contributions With Respect to Military Leave.......56
11.4 Maternity or Paternity Absence..................................57
11.5 Service During Maternity or Paternity Absence...................57
11.6 Other Leaves of Absence.........................................58
11.7 Transfers.......................................................59
SECTION 12 - TRUSTEE..........................................................61
SECTION 13 - ADMINISTRATION...................................................62
13.1 Appointment of Plan Administrator...............................62
13.2 Construction....................................................62
13.3 Decisions and Delegation........................................62
13.4 Duties of the Plan Administrator................................62
13.5 Records of the Plan Administrator...............................63
13.6 Expenses........................................................63
SECTION 14 - CLAIM PROCEDURE..................................................65
14.1 Claim...........................................................65
14.2 Claim Decision..................................................65
14.3 Request for Review..............................................65
14.4 Review on Appeal................................................66
SECTION 15 - AMENDMENT AND TERMINATION........................................67
15.1 Amendment.......................................................67
15.2 Termination; Discontinuance of Contributions....................67
SECTION 16 - MISCELLANEOUS....................................................68
16.1 Participants'Rights.............................................68
16.2 Spendthrift Clause..............................................68
16.3 Delegation of Authority by Company..............................70
16.4 Distribution to Minors..........................................70
16.5 Construction of Plan............................................70
16.6 Gender, Number and Headings.....................................70
16.7 Separability of Provisions......................................70
16.8 Diversion of Assets.............................................71
16.9 Service of Process..............................................71
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16.10 Merger.........................................................71
16.11 Benefit Limitation.............................................71
16.12 Commencement of Benefits.......................................74
16.13 Qualified Domestic Relations Order.............................76
16.14 Written Explanation of Rollover Treatment......................79
16.15 Leased Employees...............................................79
16.16 Special Distribution Option....................................79
16.17 Limitations on Special Distribution Option.....................80
SECTION 17 - TOP-HEAVY DEFINITIONS............................................82
17.1 "Accrued Benefits"..............................................82
17.2 "Beneficiaries".................................................82
17.3 "Determination Date"............................................82
17.4 "Former Key Employee"...........................................82
17.5 "Key Employee"..................................................82
17.6 "Non-Key Employee"..............................................83
17.7 "Permissive Aggregation Group"..................................83
17.8 "Required Aggregation Group"....................................83
17.9 "Super Top-Heavy Group".........................................84
17.10 "Top-Heavy Compensation".......................................84
17.11 "Top-Heavy Group"..............................................84
SECTION 18 - TOP-HEAVY RULES..................................................86
18.1 Special Top-Heavy Rules.........................................86
18.2 Minimum Allocation if Plan is Part of Top-Heavy Group...........86
18.3 Adjustments in Section 415 Limit................................87
SIGNATURE PAGE................................................................86
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PILGRIM AMERICA
CAPITAL CORPORATION
401(k) PLAN
