EXHIBIT 4.1
1993 AMENDMENT TO THE FHP INTERNATIONAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN (AMENDING AND
RESTATING THE FHP INTERNATIONAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN IN ITS ENTIRETY)
FHP INTERNATIONAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
AMENDED AND RESTATED
JUNE 7, 1993
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . 2
1.01 ACCOUNTS . . . . . . . . . . . . . . . . . . . 2
1.02 AFFILIATE. . . . . . . . . . . . . . . . . . . 2
1.03 BENEFICIARY. . . . . . . . . . . . . . . . . . 2
1.04 BOARD. . . . . . . . . . . . . . . . . . . . . 2
1.05 CODE . . . . . . . . . . . . . . . . . . . . . 3
1.06 COMMITTEE. . . . . . . . . . . . . . . . . . . 3
1.07 COMPANY. . . . . . . . . . . . . . . . . . . . 3
1.08 COMPENSATION . . . . . . . . . . . . . . . . . 3
1.09 DISTRIBUTION DATE. . . . . . . . . . . . . . . 4
1.10 EFFECTIVE DATE . . . . . . . . . . . . . . . . 4
1.11 ELIGIBLE EMPLOYEE. . . . . . . . . . . . . . . 4
1.12 EMPLOYER . . . . . . . . . . . . . . . . . . . 4
1.13 EMPLOYER CONTRIBUTION. . . . . . . . . . . . . 4
1.14 ERISA. . . . . . . . . . . . . . . . . . . . . 4
1.15 ESOP FUND. . . . . . . . . . . . . . . . . . . 4
1.16 ESOP SUSPENSE SUBFUND. . . . . . . . . . . . . 5
1.17 EXEMPT LOAN. . . . . . . . . . . . . . . . . . 5
1.18 FINANCED SHARES. . . . . . . . . . . . . . . . 5
1.19 HIGHLY COMPENSATED EMPLOYEE. . . . . . . . . . 5
1.20 HOUR OF SERVICE. . . . . . . . . . . . . . . . 5
1.21 INACTIVE PARTICIPANT . . . . . . . . . . . . . 6
1.22 INVESTMENT FUND. . . . . . . . . . . . . . . . 6
1.23 LIMITATION YEAR. . . . . . . . . . . . . . . . 6
1.24 NON-HIGHLY COMPENSATED EMPLOYEE. . . . . . . . 6
1.25 NORMAL RETIREMENT AGE. . . . . . . . . . . . . 7
1.26 PARTICIPANT. . . . . . . . . . . . . . . . . . 7
1.27 PAYSOP FUND. . . . . . . . . . . . . . . . . . 7
1.28 PERIOD OF SEVERANCE. . . . . . . . . . . . . . 7
1.29 PERMANENT AND TOTAL DISABILITY . . . . . . . . 8
1.30 PLAN . . . . . . . . . . . . . . . . . . . . . 8
1.31 PLAN YEAR. . . . . . . . . . . . . . . . . . . 8
1.32 PRETAX DEFERRALS . . . . . . . . . . . . . . . 8
1.33 ROLLOVER CONTRIBUTIONS . . . . . . . . . . . . 8
1.34 SERVICE. . . . . . . . . . . . . . . . . . . . 9
1.35 STOCK. . . . . . . . . . . . . . . . . . . . . 10
1.36 TRUST FUND . . . . . . . . . . . . . . . . . . 10
1.37 TRUSTEE. . . . . . . . . . . . . . . . . . . . 10
1.38 VALUATION DATE . . . . . . . . . . . . . . . . 10
ARTICLE II ELIGIBILITY AND PARTICIPATION . . . . . . . . . . 11
2.01 PARTICIPATION IN THE PLAN. . . . . . . . . . . 11
2.02 ENROLLMENT IN THE PLAN . . . . . . . . . . . . 12
2.03 REEMPLOYMENT . . . . . . . . . . . . . . . . . 12
2.04 EMPLOYMENT AFTER NORMAL RETIREMENT AGE . . . . 12
2.05 TERMINATION OF PARTICIPATION . . . . . . . . . 12
2.06 INACTIVE PARTICIPATION AND TRANSFERS . . . . . 12
ARTICLE III CONTRIBUTIONS . . . . . . . . . . . . . . . . . . 14
3.01 CONTRIBUTION OF PARTICIPANT DEFERRALS. . . . . 14
3.02 LIMITATION ON PARTICIPANT'S PRETAX
DEFERRALS. . . . . . . . . . . . . . . . . . . 15
3.03 EMPLOYER MATCHING CONTRIBUTIONS. . . . . . . . 17
3.04 EMPLOYER ESOP CONTRIBUTIONS. . . . . . . . . . 17
3.05 PARTICIPANT CONTRIBUTIONS. . . . . . . . . . . 17
3.06 ROLLOVER CONTRIBUTIONS . . . . . . . . . . . . 17
3.07 LIMITATION ON REVERSION OF CONTRIBUTIONS . . . 17
3.08 LIMITATION OF LIABILITY. . . . . . . . . . . . 18
3.09 MAKE-UP CONTRIBUTIONS. . . . . . . . . . . . . 18
ARTICLE IV PARTICIPANT'S ACCOUNT: ALLOCATIONS. . . . . . . . 19
4.01 PARTICIPANT ACCOUNTS . . . . . . . . . . . . . 19
4.02 ALLOCATION OF PRETAX DEFERRALS . . . . . . . . 20
4.03 ALLOCATION OF EMPLOYER MATCHING
CONTRIBUTIONS. . . . . . . . . . . . . . . . . 20
4.04 LIMITATION ON ALLOCATION OF EMPLOYER
MATCHING CONTRIBUTIONS . . . . . . . . . . . . 21
4.05 ALLOCATION OF EMPLOYER ESOP
CONTRIBUTIONS. . . . . . . . . . . . . . . . . 22
ARTICLE V ESOP SUSPENSE SUBFUND . . . . . . . . . . . . . . 24
5.01 ESTABLISHMENT OF ESOP SUSPENSE SUBFUND . . . . 24
5.02 RELEASE OF SHARES IN ESOP SUSPENSE
SUBFUND. . . . . . . . . . . . . . . . . . . . 24
5.03 ALLOCATION OF SHARES RELEASED FROM ESOP
SUSPENSE SUBFUND . . . . . . . . . . . . . . . 25
ARTICLE VI ALLOCATION LIMITATIONS . . . . . . . . . . . . 27
6.01 BASIC LIMITATION ON ANNUAL ADDITIONS . . . . . 27
6.02 PARTICIPATION IN THIS PLAN AND A DEFINED
BENEFIT PLAN . . . . . . . . . . . . . . . . . 29
6.03 REDUCTION IN ANNUAL ADDITIONS AND
ELIMINATION OF EXCESS AMOUNTS. . . . . . . . . 29
ARTICLE VII INVESTMENTS: ALLOCATION OF GAINS AND
LOSSES. . . . . . . . . . . . . . . . . . . . . . 30
7.01 INVESTMENT OF ACCOUNTS . . . . . . . . . . . . 30
7.02 TRANSFERS OF EXISTING ACCOUNT BALANCES
BETWEEN INVESTMENT FUNDS . . . . . . . . . . . 31
7.03 ALLOCATION OF INVESTMENT FUND GAINS AND
LOSSES . . . . . . . . . . . . . . . . . . . . 31
7.04 PURCHASE AND SALE OF STOCK . . . . . . . . . . 32
7.05 RIGHTS, WARRANTS, OR OPTIONS . . . . . . . . . 32
7.06 PARTICIPANT RIGHTS CONCERNING STOCK. . . . . . 33
7.07 SALE OF STOCK. . . . . . . . . . . . . . . . . 34
7.08 TENDERS AND EXCHANGES OF STOCK . . . . . . . . 34
7.09 VALUATION OF STOCK . . . . . . . . . . . . . . 37
7.10 PLAN MAY BORROW TO BUY STOCK . . . . . . . . . 37
7.11 USE OF EXEMPT LOAN PROCEEDS. . . . . . . . . . 38
7.12 ALLOCATION OF STOCK DIVIDENDS AND SPLITS . . . 39
7.13 REINVESTMENT OF DIVIDENDS. . . . . . . . . . . 39
7.14 ALLOCATION OF DIVIDENDS OTHER THAN STOCK
DIVIDENDS. . . . . . . . . . . . . . . . . . . 40
7.15 RESERVE FUND . . . . . . . . . . . . . . . . . 40
7.16 SPECIAL INVESTMENT ELECTION BY QUALIFIED
PARTICIPANTS . . . . . . . . . . . . . . . . . 42
ARTICLE VIII WITHDRAWALS AND LOANS . . . . . . . . . . . . . . 43
8.01 POST AGE 59-1/2 WITHDRAWALS. . . . . . . . . . 43
8.02 FINANCIAL HARDSHIP WITHDRAWALS . . . . . . . . 43
8.03 WITHDRAWALS FROM ROLLOVER ACCOUNT. . . . . . . 44
8.04 AMOUNT AND PAYMENT OF WITHDRAWALS. . . . . . . 44
8.05 LOANS TO PARTICIPANTS. . . . . . . . . . . . . 45
8.06 DEBITING OF INVESTMENT FUNDS . . . . . . . . . 46
ARTICLE IX RETIREMENT, DISABILITY AND DEATH
BENEFITS. . . . . . . . . . . . . . . . . . . . . 48
9.01 RETIREMENT BENEFITS. . . . . . . . . . . . . . 48
9.02 DISABILITY BENEFITS. . . . . . . . . . . . . . 48
9.03 DEATH BENEFITS . . . . . . . . . . . . . . . . 48
ARTICLE X TERMINATION BENEFITS AND VESTING
REQUIREMENTS. . . . . . . . . . . . . . . . . . . 49
10.01 BENEFIT PAYABLE . . . . . . . . . . . . . . . . . 49
10.02 VESTING REQUIREMENTS . . . . . . . . . . . . . . 49
10.03 EFFECT OF TERMINATION OF EMPLOYMENT; PERIOD OF
SEVERANCE AND REEMPLOYMENT. . . . . . . . . . . . 50
10.04 DISPOSITION OF FORFEITURES. . . . . . . . . . . . 50
ARTICLE XI DISTRIBUTION OF BENEFITS. . . . . . . . . . . . . 52
11.01 FORM OF BENEFITS FOR RETIREMENT AND OTHER
TERMINATION . . . . . . . . . . . . . . . . . . . 52
11.02 TIMING OF DISTRIBUTIONS . . . . . . . . . . . . . 52
11.03 RIGHTS, OPTIONS AND RESTRICTIONS ON STOCK . . . . 53
11.04 SPECIAL DISTRIBUTION AND PAYMENT REQUIREMENTS . . 54
ARTICLE XII COMMITTEE . . . . . . . . . . . . . . . . . . . . 56
12.01 APPOINTMENT OF COMMITTEE. . . . . . . . . . . . . 56
12.02 MANNER OF ACTION. . . . . . . . . . . . . . . . . 56
12.03 CHAIRMAN, SECRETARY AND EMPLOYMENT OF
SPECIALISTS . . . . . . . . . . . . . . . . . . . 56
12.04 SUBCOMMITTEES . . . . . . . . . . . . . . . . . . 56
12.05 OTHER AGENTS. . . . . . . . . . . . . . . . . . . 56
12.06 RECORDS . . . . . . . . . . . . . . . . . . . . . 57
12.07 POWERS AND DUTIES . . . . . . . . . . . . . . . . 57
12.08 INTERESTED MEMBERS. . . . . . . . . . . . . . . . 58
12.09 INDEMNIFICATION . . . . . . . . . . . . . . . . . 58
12.10 CONCLUSIVENESS OF ACTION. . . . . . . . . . . . . 58
12.11 PAYMENT OF EXPENSES . . . . . . . . . . . . . . . 58
12.12 CLAIMS PROCEDURE. . . . . . . . . . . . . . . . . 59
ARTICLE XIII AMENDMENT TO THE PLAN . . . . . . . . . . . . . . 61
13.01 RIGHT TO AMEND. . . . . . . . . . . . . . . . . . 61
ARTICLE XIV TERMINATION OF THE PLAN . . . . . . . . . . . . . 62
14.01 RIGHT TO TERMINATE. . . . . . . . . . . . . . . . 62
14.02 CORPORATE REORGANIZATION. . . . . . . . . . . . . 62
14.03 PLAN MERGER AND CONSOLIDATION . . . . . . . . . . 62
ARTICLE XV TRUST AND THE TRUSTEE . . . . . . . . . . . . . . 63
15.01 BOARD TO SELECT TRUSTEE . . . . . . . . . . . . . 63
ARTICLE XVI ADOPTION BY AFFILIATE . . . . . . . . . . . . . . 64
16.01 AFFILIATE PARTICIPATION . . . . . . . . . . . . . 64
16.02 ACTION BINDING ON PARTICIPATING AFFILIATES. . . . 64
16.03 TERMINATION OF PARTICIPATION OF AFFILIATE . . . . 64
ARTICLE XVII TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . 66
17.01 DEFINITIONS . . . . . . . . . . . . . . . . . . . 66
17.02 DETERMINATION OF TOP HEAVY STATUS - SINGLE
PLAN. . . . . . . . . . . . . . . . . . . . . . . 68
17.03 DETERMINATION OF TOP HEAVY STATUS - MULTIPLE
PLANS . . . . . . . . . . . . . . . . . . . . . . 68
17.04 EFFECT OF TOP HEAVY STATUS. . . . . . . . . . . . 69
ARTICLE XVIII MISCELLANEOUS. . . . . . . . . . . . . . . . . 72
18.01 VOLUNTARY PLAN. . . . . . . . . . . . . . . . . . 72
18.02 NONALIENATION OF BENEFITS . . . . . . . . . . . . 72
18.03 INABILITY TO RECEIVE BENEFITS . . . . . . . . . . 72
18.04 LOST PARTICIPANTS . . . . . . . . . . . . . . . . 73
18.05 LIMITATION OF RIGHTS. . . . . . . . . . . . . . . 73
18.06 ABSENCE OF GUARANTY . . . . . . . . . . . . . . . 73
18.07 INVALID PROVISIONS. . . . . . . . . . . . . . . . 73
18.08 ONE PLAN. . . . . . . . . . . . . . . . . . . . . 73
18.09 GOVERNING LAW . . . . . . . . . . . . . . . . . . 73
ARTICLE XIX DIRECT ROLLOVERS. . . . . . . . . . . . . . . . . 75
19.01 DIRECT ROLLOVERS. . . . . . . . . . . . . . . . . 75
19.02 DEFINITIONS . . . . . . . . . . . . . . . . . . . 75
INTRODUCTION
FHP International Corporation and its wholly owned subsidiary,
FHP, Inc. previously established the FHP Corporation Employee
Stock Ownership Plan, hereinafter referred to as the "Plan",
effective June 6, 1986, for the benefit of the employees of their
respective subsidiaries.
Effective July 1, 1987, the FHP Corporation Tax Savings Plan was
merged into this Plan and the resulting Plan was renamed the FHP
International Corporation Employee Stock Ownership Plan. Also
effective July 1, 1987, the Plan was amended and restated to
incorporate the provisions of the merged plans and to make
various plan design changes. That restatement was intended to be
a continuation of the FHP Corporation Employee Stock Ownership
Plan as originally effective June 6, 1986. Effective July 1,
1990, the Plan was amended and restated in its entirety in order
to incorporate several amendments adopted since the last
restatement and to incorporate several design changes. This
amendment and restatement incorporates Amendment Number One to
the Plan as restated effective July 1, 1990, and makes certain
other miscellaneous changes to the Plan.
The Plan as amended and restated is intended to qualify under
Code Section 401(a). It consists of three separate, but
complimentary, parts which are designed to satisfy the specific
rules applicable to each part. The first part is an employee
stock ownership plan intended to qualify under Code Section
4975(e)(7), the second part is a cash or deferred arrangement
intended to qualify under Code Section 401(k) and the third part
is a payroll based tax credit employee stock ownership plan
intended to qualify under Code Sections 41 and 409. No additional
employer contributions were or will be allocated to the third
part as of any date after December 31, 1986.
The purpose of this Plan is to enable participating employees to
share in the growth and prosperity of the Company by providing
them with a common stock ownership interest in FHP International
Corporation, as well as to enable employees to accumulate capital
for retirement through a convenient method of regular savings in
a tax-efficient manner.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Plan with their
first letters capitalized, they have the meaning specified below.
Additional words and phrases used in the Plan are not defined in
this Article I, but, for convenience, are defined as they are
introduced in the text. Unless the context indicates otherwise,
the masculine pronoun refers to a man or a woman. Words in the
singular include the plural, and vice versa, unless the context
indicates otherwise.
1.01 ACCOUNTS
"Accounts" means a Participant's Employer Contribution
Account, his PAYSOP Account, his Pretax Deferral Account and his
Rollover Account. These Accounts are described in Section 4.01
of the Plan.
1.02 AFFILIATE
"Affiliate" means the Company and each other entity
which is controlled by or under common control with the Company
or is a member of the same affiliated service group, within the
meaning of Code Sections 414 and 1563. Any other organization
which is permitted to treat Stock as "employer securities" under
Code Section 409(1) is also an Affiliate if it adopts the Plan
pursuant to Article XVI of the Plan.
1.03 BENEFICIARY
"Beneficiary" means the person or persons (who may be
named contingently or successively) designated by a Participant
to receive his Accounts in the event of his death. Each
Participant may designate a Beneficiary on a form prescribed by
the Committee. The designation will be effective when filed with
the Committee, and will revoke all prior designations by the same
Participant. A married Participant who designates a Beneficiary
other than his spouse must obtain and submit to the Committee the
spouse's written, notarized consent to the designation of each
such Beneficiary on a form that discloses to the spouse the
potential effect of such consent the designation will not be
valid until the Committee receives such notarized consent. If no
Beneficiary is designated at the time of the Participant's death,
or if no person so designated survives the Participant, the
Beneficiary will be the Participant's spouse, or if the deceased
Participant has no surviving spouse, his estate.
1.04 BOARD
"Board" means the board of directors of FHP, Inc.
1.05 CODE
"Code" means the Internal Revenue Code of 1986 as it
currently exists and includes any subsequent amendments.
1.06 COMMITTEE
"Committee" means the Committee described in Article
XII.
1.07 COMPANY
"Company" means FHP, Inc.
1.08 COMPENSATION
"Compensation" means the total salary and wages paid
for a Plan Year or other specified period to a Participant by the
Employer for services rendered. It includes salary, wages,
commission, tips, bonuses and overtime compensation reportable on
federal form W-2 or its equivalent and amounts of salary
reduction elected by the Participant in connection with pretax
deferrals under the FHP International Corporation Employee Stock
Ownership Plan and/or a benefit plan sponsored by an Affiliate
and qualified under Code Section 125. It excludes (1) any amount
(other than the pretax deferrals described above) contributed by
the Employer to any pension plan or plan of deferred
compensation, (2) any amount, regardless if it is or becomes
reportable on federal form W-2, which is (i) paid by the Employer
(other than the salary reduction described above) for other
fringe benefits, such as health and welfare, hospitalization,
group life insurance benefits, stock options or perquisites, or
(ii) paid by the Employer in lieu of the benefits described in
(i) above, such as a cash out of credits generated under a plan
qualified under Code Section 125, (3) any reimbursement for
expenses or allowances, including automobile allowances and
moving allowances and (4) any amount realized when a stock option
is exercised at a price below fair market value on the date of
the exercise.
A Participant's annual Compensation in excess of two
hundred thousand dollars is disregarded for all purposes under
the Plan.
Such dollar limit will be adjusted each year pursuant
to Code Section 401(a)(17). This paragraph is effective July 1,
1989.
Compensation will be recognized as of an employee's
effective date of participation pursuant to Section 2.01 and
2.02. Compensation for any Plan Year shall be determined by
counting Compensation for the payroll periods ending with or
within such Plan Year.
1.09 DISTRIBUTION DATE
"Distribution Date" means the date as of which the
vested portion of a Participant's Accounts is distributed, as
described in Section 9.01 (in the case of Normal Retirement Age),
Section 9.02 (in the case of Permanent and Total Disability),
Section 9.03 (in the case of death) and Section 10.01 (in the
case of any other termination of employment).
1.10 EFFECTIVE DATE
"Effective Date" means the original effective date of
the Plan, which is June 6, 1986.
1.11 ELIGIBLE EMPLOYEE
"Eligible Employee" means any person who is employed by
an Employer provided he is not one of the following:
(a) a per diem, on-call, or temporary employee, or
(b) an employee whose terms of employment are covered
by a collective bargaining agreement between the Employer and
employee representatives where there is evidence retirement
benefits were the subject of good faith bargaining unless the
bargaining agreement expressly provides for participation in the
Plan.
1.12 EMPLOYER
"Employer" means the Company and any Affiliate which
adopts the Plan in accordance with Article XVI.
1.13 EMPLOYER CONTRIBUTION
"Employer Contribution" means contributions to the Plan
made by an Employer pursuant to Sections 3.03 and 3.04. It
includes the Employer Matching Contribution described in Section
3.03 and the Employer ESOP Contribution described in Section
3.04.
1.14 ERISA
"ERISA" means the Employee Retirement Income Security
Act of 1974, as it currently exists and includes any subsequent
amendments.
1.15 ESOP FUND
"ESOP Fund" means the portion of the Trust Fund
consisting of assets allocated to all Participants' ESOP
Accounts, unallocated assets representing contributions under
Section 3.03 and unallocated assets representing the proceeds of
any Exempt Loan (the ESOP Suspense Subfund).
1.16 ESOP SUSPENSE SUBFUND
"ESOP Suspense Subfund" means the portion of the Trust
Fund consisting of unallocated assets representing the proceeds
of any Exempt Loan. The ESOP Suspense Subfund is part of the ESOP
Fund.
1.17 EXEMPT LOAN
"Exempt Loan" means any loan (or other extension of
credit) to the Plan or Trust not prohibited by Code Section
4975(c). It includes a loan which meets the requirements of Code
Section 4975(d)(3) and related regulations and the proceeds of
which are used to finance the acquisition of stock and/or
refinance an Exempt Loan.
1.18 FINANCED SHARES
"Financed Shares" means shares of Stock acquired under
the Plan with the proceeds of an Exempt Loan.
1.19 HIGHLY COMPENSATED EMPLOYEE
"Highly Compensated Employee" means an individual
described in Code Section 414(q).
1.20 HOUR OF SERVICE
"Hour of Service" means:
(a) Each hour for which a person is directly or
indirectly paid by, or entitled to payment from an Affiliate for
the performance of duties. These hours are credited to the
person in the computation period in which the duties are
performed.
(b) Each hour for which a person is directly or
indirectly paid by, or entitled to payment from an Affiliate on
account of a period of time during which no duties are performed
(irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty or leave
of absence. However, a person is not entitled to credit for such
hours if payment is made or due under a plan maintained solely
for the purpose of complying with applicable worker's
compensation, unemployment compensation or disability insurance
laws, or if such payment solely reimburses a person for his
medical or medically related expenses. No more than 501 hours
are credited for any single continuous period of time during
which no duties are performed.
In the case of a payment which is made or due on
account of a period during which a person performs no duties, and
which results in crediting of hours under this subsection (b), or
in the case of an award or agreement for back pay, to the extent
that such award or agreement is made with respect to a period
described in this subsection (b), the number of hours and the
computation period in which they are to be credited is determined
according to Section 2530.200(b)-2(b) and (c) of Title 29 of the
Code of Federal Regulations.
(c) Each hour for which a person is entitled to back
pay, regardless of mitigation of damages, which has been either
awarded or agreed to by an Affiliate. These hours are credited to
the person in the computation period to which the award,
agreement or payment pertains. However, a person will not be
credited with hours under this subsection (c) if he received
credit for the same hours under subsections (a) or (b).
(d) Notwithstanding the above, an exempt employee will
be credited with 90 Hours of Service for each bi-weekly pay
period (or 95 Hours of Service in the case of a semi-monthly pay
period) during which he would receive credit for at least one
Hour of Service under subsections (a) through (c) above. For
purposes of this subsection an exempt employee is defined under
the Fair Labor Standards Act.
1.21 INACTIVE PARTICIPANT
"Inactive Participant" means a person who was a
Participant but who is transferred to and is in a position of
employment in which he is no longer an Eligible Employee.
1.22 INVESTMENT FUND
"Investment Fund" means the funds in which a
Participant may invest his Pretax Deferral and Rollover Accounts
according to Section 7.01.
1.23 LIMITATION YEAR
"Limitation Year" means the twelve month period
beginning July 1 and ending the following June 30, as that term
is used in Section 6.01.
1.24 NON-HIGHLY COMPENSATED EMPLOYEE
"Non-Highly Compensated Employee" means a person
employed by an Affiliate who is not a Highly Compensation
Employee.
1.25 NORMAL RETIREMENT AGE
"Normal Retirement Age" means a Participant's 65th
birthday. This Section is effective September 7, 1989.
1.26 PARTICIPANT
"Participant" means any Eligible Employee who is a
Participant as provided in Article II. Where appropriate to the
context, it also includes an Inactive Participant.
1.27 PAYSOP FUND
"PAYSOP Fund" means any Eligible Employee who is a
Participant as provided in Article II. Where appropriate to the
context, it also includes an Inactive Participant.
1.28 PERIOD OF SEVERANCE
"Period of Severance" means, for any person, an
interruption in his Service under the Plan. A Period of
Severance begins on the date the person no longer is credited
with Service under the Plan and ends on the date the person
returns to active employment with an Affiliate. A person whose
employment with all Affiliates is terminated, or deemed
terminated, for any reason will incur:
(a) a one year Period of Severance if he fails to
return to active employment as an employee and render one or more
Hours of Service before the first annual anniversary of the date
of such termination.
(b) a five year Period of Severance if he fails to
return to active employment as an employee and render one or more
Hours of Service before the fifth annual anniversary of the date
of such termination.
For purposes of this Section, a person who is absent
from employment for maternity or paternity reasons will not be
treated as having incurred a one year Period of Severance until
the second anniversary of such absence, or a five year Period of
Severance until the sixth anniversary of such absence, or such
earlier time permitted under applicable regulations.
Absence for maternity or paternity reasons means a
person is absent because:
(1) the person is pregnant,
(2) the person gave birth to a child;
(3) an adopted child is placed with the person, or
(4) the person is caring for his natural or adopted
child immediately after the child is born or placed with the
person.
The provisions of this paragraph will not apply unless
the person provides information to the Committee, within the time
limits established by the Committee, sufficient to establish that
the absence is for maternity or paternity reasons and the
duration of the absence.
1.29 PERMANENT AND TOTAL DISABILITY
"Permanent and Total Disability" means a physical or
mental condition which renders a person unable to engage in any
substantial gainful activity for an Affiliate by reason of any
medically determinable physical or mental impairment which can bc
expected to result in death or to be of long-continued or
indefinite duration.
The Committee will determine, based on whatever
competent medical evidence it requires, whether a person is
Permanently and Totally Disabled.
1.30 PLAN
"Plan" means the FHP International Corporation Employee
Stock Ownership Plan as described in this document and includes
any subsequent amendments. Before July 1, 1987, the Plan was
named the FHP Corporation Employee Stock Ownership Plan.
1.31 PLAN YEAR
"Plan Year" means the twelve month period beginning
July 1 and ending the following June 30. The Company or the
Committee may treat the initial Plan Year as including the entire
period beginning July 1, 1985 and ending June 30, 1986 for any
purpose under the Plan, notwithstanding the fact that the Plan's
Effective Date occurred after July 1, 1985.
1.32 PRETAX DEFERRALS
"Pretax Deferrals" means contributions to the Plan made
by the Employer at the election of a Participant in amounts equal
to reductions in the Participant's Compensation under Section
3.01.
1.33 ROLLOVER CONTRIBUTIONS
"Rollover Contributions" means contributions to the
Plan made by an Eligible Employee pursuant to Section 3.06.
1.34 SERVICE
"Service" means, with respect to any person, his period
or periods of employment with all Affiliates which are counted as
Service according to the following rules.
(a) Each person is credited with Service under the
Plan for the period or periods during which the person maintains
an employment relationship with any Affiliate. A person's
employment relationship is deemed to commence on the date the
person first renders one Hour of Service, and is deemed to
continue during the following periods:
(i) Periods of leave of absence with or without
pay granted to the person by an Affiliate in a like and
nondiscriminatory manner for any purpose including, but not
limited to, sickness, accident or military leave. The person is
not considered to have terminated employment during such leave
of absence unless he fails to return to the employ of an
Affiliate at or prior to the expiration date of the leave. If he
fails to so return, he is deemed to have terminated as of the
date the leave began but he is given credit for Service through
the earlier of the first anniversary of the date his leave of
absence began or the date his employment terminates.
(ii) In case of a person who terminates employment
and who is later reemployed by an Affiliate before he incurs a
one year Period of Severance, the period between his date of
termination and date of reemployment.
(b) Except as provided in Subsection (c) all periods
of a person's Service, whether or not consecutive, are
aggregated. Service is measured in elapsed years and fractions of
years whereby each twelve complete calendar months constitutes
one year, each complete calendar month constitutes one-twelfth of
a year and partial calendar months which when aggregated equal
thirty days constitute one-twelfth of a year.
(c) In the case of a person who terminates employment
before he becomes a Participant and who is not reemployed before
the date he incurs the greater of:
(i) a five year Period of Severance (as described
in Section 1.28(b)), or
(ii) a Period of Severance greater than his
service before the date he terminated employment, his service
before he terminated employment will be disregarded.
For individuals who were previously employed by Charter
Community Hospital, Inc. and who became Eligible Employees prior
to May 31, 1993 as a result of the Company entering into
employment relationships with such individuals, Service will
include such an individual's service with Charter Community
Hospital, Inc. prior to becoming an employee of the Company for
purposes of determining the vested percentage of such individual
under Section 10.02 of the Plan. Service with Charter Community
Hospital, Inc. will not be included for any other purpose under
the Plan.
1.35 STOCK
"Stock" means shares of common stock issued by the
Company's parent, FHP International Corporation, which are
readily tradable on an established securities market. At the
Company's discretion, stock may also include other types of stock
which qualify as "employer securities" under Code Section 409(1).
1.36 TRUST FUND
"Trust Fund" means the Stock and other assets of the
Plan held by the Trustee and subject to the trust agreement
described in Article XV. Trust Fund includes, but is not limited
to, the Investment Funds, the ESOP Fund, the ESOP Suspense
Subfund, and the PAYSOP Fund.
1.37 TRUSTEE
"Trustee" means the person, persons, bank and/or other
entity selected by the Board to hold the Trust Fund according to
Article XV.
1.38 VALUATION DATE
"Valuation Date" means September 30, December 31, March
31, and June 30 of each Plan Year. Notwithstanding the preceding
sentence, upon a determination by the Committee, in its sole
discretion, that more frequent Valuation Dates are
administratively feasible, Valuation Date also means the last day
of any other months selected by the Committee. Valuation Date
may also mean any date selected by the Committee in the event the
Committee, in its sole discretion, determines that events
affecting the market value of the Trust Fund require an interim
Valuation Date.
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.01 PARTICIPATION IN THE PLAN
(a) EMPLOYEES HIRED ON OR AFTER JANUARY 1, 1993.
Each Eligible Employee hired on or after January 1,
1993 will become a Participant on the first day of the month
coinciding with or immediately following the later of (i) the
date he attains age 21; (ii) the date he completes 12 months of
Service; or (iii) the date he becomes an Eligible Employee.
(b) EMPLOYEES HIRED ON OR BEFORE DECEMBER 31, 1992.
An Eligible Employee hired on or before December 31,
1992 may become a Participant upon satisfaction of the
requirements set forth in Section 2.01(a). Furthermore, such an
Eligible Employee will become a Participant, even if prior to the
satisfaction of the requirements set forth in Section 2.01(a), on
the January 1 or July 1 that coincides with or next follows the
later of (i) the date he attains age 21; (ii) the later of the
date he first completes 1,000 Hours of Service during an
Eligibility Period (as defined below) or the date he completes 6
months of Service; or (iii) the date he becomes an Eligible
Employee.
"Eligibility Period" means the 12-month period
beginning on the date an employee first completes an Hour of
Service. If an employee fails to complete 1,000 Hours of Service
during such 12-month period, Eligibility Period means any Plan
Year, beginning with the Plan Year which begins immediately
following the date he first completes an Hour of Service. The
1,000 Hours of Service requirement under subsection 2.01(b)(ii)
is met on the date the Eligible Employee actually has accrued
1,000 Hours of Service under the Plan.
(c) OTHER ELIGIBILITY RULES.
Each Eligible Employee who was a Participant on June
30, 1990 remained a Participant when the Plan was restated
effective July 1, 1990.
Each Eligible Employee who was an employee in the FHP
Corporation Tax Savings Plan on June 30, 1987 but not a
Participant in this Plan on June 30, 1987, became a Participant
in this Plan on July 1, 1987, for the sole purpose of continuing
his Pretax Deferrals.
He did not become a Participant for any purpose not
related to Pretax Deferrals until he otherwise became a
Participant under the generally applicable provisions of Section
2.01.
2.02 ENROLLMENT IN THE PLAN
If a Participant wishes to make Pretax Deferrals or a
Rollover Contribution, he must complete and file a form on which
he designates a Beneficiary. In addition, he must authorize his
Employer to reduce his Compensation by the amount of the
deferrals pursuant to Section 3.01, if applicable, and he must
designate the allocation of his Pretax Deferrals and/or his
Rollover Contributions among the Investment Funds. The form must
be delivered to the Committee no less than fifteen days before
participation is to begin. If a Participant declines to make
Pretax Deferrals when first eligible, he may elect to make such
deferrals beginning as of the first day of the first payroll
period of any month thereafter, provided he delivers a completed
election form to the Committee no less than 15 days before such
payroll period.
2.03 REEMPLOYMENT
A Participant whose employment with all Affiliates
terminated and who is subsequently reemployed and becomes an
Eligible Employee again, becomes a Participant on the date he
becomes an Eligible Employee again. He may not begin Pretax
Deferrals until the first day of the first payroll period of any
month that coincides with or next follows the date he again
becomes an Eligible Employee.
An employee who was not a Participant when his
employment with all Affiliates terminated and who is later
reemployed by an Affiliate becomes a Participant in the Plan
pursuant to the provisions of Section 2.01. Hours of Service
before he terminated employment will be considered in determining
his eligibility to become a Participant.
2.04 EMPLOYMENT AFTER NORMAL RETIREMENT AGE
A Participant who continues employment as an Eligible
Employee after his Normal Retirement Age continues to be a
Participant for all purposes of the Plan.
2.05 TERMINATION OF PARTICIPATION
A Participant will cease to be a Participant on the
date on which he or his Beneficiary receives distribution of the
entire vested portion of his Accounts under the Plan due to his
termination of employment, retirement, death or Permanent and
Total Disability.
2.06 INACTIVE PARTICIPATION AND TRANSFERS
A Participant who transfers to an employment status
with an Affiliate in which he is no longer an Eligible Employee
becomes an Inactive Participant. An Inactive Participant is not
eligible to make Pretax Deferrals from his Compensation earned
after the date of his transfer. Employer Contributions will not
be allocated to his ESOP Account after the date of his transfer.
If a Participant becomes an Inactive Participant, his
Accounts will continue to be held under the Plan until he becomes
entitled to a distribution under the provisions of Articles IX
and X. An Inactive Participant will continue to have the right
to direct the investment of his Accounts under the provisions of
Article VII and to make withdrawals under the provisions of
Article VIII.
An employee who transfers to an employment status with
an Affiliate in which he is an Eligible Employee may become a
Participant pursuant to Section 2.01. He will not be eligible to
make Pretax Deferrals from his Compensation earned while he was
not a Participant. Employer Contributions to his Employer
Contribution Account will not be based on his Compensation earned
before the date he transferred and became a Participant.
ARTICLE III
CONTRIBUTIONS
3.01 CONTRIBUTION OF PARTICIPANT DEFERRALS
(a) PRETAX DEFERRALS.
Upon enrollment or reenrollment in the Plan, each
Participant may elect to make Pretax Deferrals from 1% to 10% in
a fixed whole percentage, from his Compensation. The Committee
may modify the above limit, or set initial or interim limits for
Pretax Deferrals for any Participant who is a Highly Compensated
Employee, or any class of Participants who are Highly Compensated
Employees. Such limits may include the suspension or reduction
of Pretax Deferrals above a specified dollar amount or percentage
of Compensation. The amount of Compensation otherwise payable to
the Participant for each payroll period while an election under
this Section 3.01 is in effect will be reduced by the amount of
the Participant's Pretax Deferrals. The Employer will make
contributions to the Plan equal to the amount deferred. Such
contributions will be allocated to the Participant's Pretax
Deferral Account as of the last day of the payroll period in
which such amounts are deferred.
(b) CHANGE IN PERCENTAGE OR SUSPENSION OF DEFERRALS.
A Participant's Pretax Deferral percentage rate will
remain in effect, notwithstanding any change in his Compensation,
until he terminates employment or elects to change the
percentage. A Participant may elect to change his deferral
percentage as of any January 1, April 1, July 1 or October 1,
provided the election is delivered to the Committee no less than
15 days before the effective date of the change.
A Participant may suspend his Pretax Deferrals at any
time. The suspension will be effective as soon as
administratively possible following receipt of an election form
from the Participant. A Participant may resume making Pretax
Deferrals on any January 1, April 1, July 1 or October 1 after
the effective date of his election to suspend Pretax Deferrals.
To resume Pre-tax Deferrals the Participant must file an new
election form with the Committee at least 15 days before the
election will be effective.
(c) CALENDAR YEAR LIMITATION
Notwithstanding the provisions of subsections (a) and
(b) above, if a Participant's Pretax Deferral election in effect
during any calendar year would cause his Pretax Deferrals for
such year to exceed $7,000, his Pretax Deferrals will
automatically be suspended once they reach $7,000.
The Participant's Pretax Deferrals will automatically
resume on the following January 1. Unless the Participant elects
to change his Pretax Deferral percentage according to subsection
(b) above, his Pretax Deferrals will resume at the percentage
rate in effect on the date of the suspension.
The preceding $7,000 limit will be adjusted each
calendar year, beginning with the 1988 calendar year, as
permitted under Code Section 402(g)(5).
If, for any reason, a Participant's total elective
deferrals (within the meaning of Code Section 402(g)(3)) to all
his employers' plans for any calendar year exceeds the applicable
dollar limitation under this subsection (c) for the calendar
year, the Participant may elect distribution of the excess. Such
distribution will be made no later than April 15 of the following
calendar year, in an amount equal to the portion of such excess
which was contributed to this Plan.
(d) STATUS OF DEFERRAL CONTRIBUTIONS
Pretax Deferrals constitute Employer contributions
under the Plan and are intended to qualify as elective
contributions under Code Section 401(k).
3.02 LIMITATION ON PARTICIPANT'S PRETAX DEFERRALS
(a) Notwithstanding Section 3.01, the Pretax Deferral
percentage rate elected by one or more Participants under Section
3.01 will be modified as provided in Subsection (c) of this
Section 3.02 if the requirements of Subsection (b) of this
Section 3.02 are not satisfied.
(b) For each Plan Year an "Actual Deferral Percentage"
will be determined for each Participant. Such percentage will be
determined by dividing the Participant's Pretax Deferrals
allocated to his Pretax Deferral Account during the Plan Year, if
any, by his Earnings as defined in Section 6.01(c), including
salary reductions, if any, elected by the Participant for the
Plan Year under this Plan and salary reductions, if any, elected
under a Plan sponsored by the Employer and qualified under Code
Section 125. Notwithstanding the preceding sentence, at the
Committee's election Earnings may be determined under an
alterative definition as permitted in Treasury Regulation Section
1.414(s)-1 and any subsequent rulings affecting such regulation
Section.
The average of the Actual Deferral Percentages for all
Participants who are Highly Compensated Employees for the Plan
Year (the "High Average"), when compared to the average of the
Actual Deferral Percentages for all Participants who are
Non-Highly Compensated Employees for the Plan Year (the "Low
Average"), must meet one of the following requirements:
(i) The High Average must be no greater than the
Low Average times one and twenty-five hundredths; or
(ii) The excess of the High Average over the Low
Average must not be greater than two percentage points and the
High Average must be no greater than the Low Average times two.
(c) If the Committee determines, in its discretion,
that Participants' Pretax Deferrals for a Plan Year will not meet
one of the requirements of Subsection (b), the Committee, in its
discretion, may suspend or reduce future Pretax Deferrals of
certain Participants who are Highly Compensated Employees to the
extent necessary to meet the requirements.
The suspension or reduction of Participants' future
Pretax Deferrals will be accomplished by reducing the Pretax
Deferral percentage rate of Participants who are Highly
Compensated Employees in order of their Actual Deferral
Percentage Rates, beginning with the Participant with the highest
percentage rate and decreasing in descending order until one of
the requirements of Subsection (b) is met.
If Participants' Pretax Deferrals actually made for a
Plan Year do not meet one of the requirements of Subsection (b),
the Committee will determine, in its discretion, the amount of
Pretax Deferrals of certain Participants who are Highly
Compensated Employees which must be reduced in order to meet one
of the requirements of Subsection (b). The reduction in
Participants' Pretax Deferrals will be accomplished by reducing
the actual Pretax Deferrals of Participants who are Highly
Compensated Employees in order of their Actual Deferral
Percentage rates, beginning with the Participant with the
highest percentage rate and decreasing actual Pretax Deferrals in
descending order until one of the requirements of Subsection (b)
is met.
The amount of the reduction attributable to each
Participant (and any income allocated to such reduction) will be
distributed to the Participant on or before the last day of the
immediately following Plan Year.
(d) The Committee's determination under Subsection (c)
will be made in a reasonable, consistent, and nondiscriminatory
manner. The Committee will not be liable to any Participant (or
his Beneficiary, if applicable) for any losses caused by
inaccurately estimating the amount of any Participant's Pretax
Deferrals or the earnings attributable to such Pretax Deferrals.
(e) This Section 3.02 will be applied after taking
into account any reductions in, or repayments of, Pretax
Deferrals required by Sections 3.01, 5.01, and 17.05.
3.03 EMPLOYER MATCHING CONTRIBUTIONS
The amount of Employer Matching Contributions, if any,
for each Plan Year will be determined by the Board in its sole
discretion. The Employer Matching Contributions may be made in
cash and/or shares, as determined by the Board in its sole
discretion.
3.04 EMPLOYER ESOP CONTRIBUTIONS
The amount of Employer ESOP Contributions, if any, for
each Plan Year will be determined by the Board in its sole
discretion. The Employer ESOP Contributions may be made in cash
and/or shares, as determined by the Board in its sole discretion.
3.05 PARTICIPANT CONTRIBUTIONS
On and after July 1, 1987, no Participant is required
or permitted to make contributions other than Pretax Deferrals or
Rollover Contributions.
3.06 ROLLOVER CONTRIBUTIONS
Subject to the Committee's approval, an Eligible
Employee may make a Rollover Contribution to the Plan which does
not exceed the maximum amount of rollover contribution he is then
permitted under Code Section 402(a)(5). The contribution must be
in cash and must meet all the applicable rollover requirements
under Code Section 402(a)(5). The Committee will establish
uniform and nondiscriminatory procedures for the treatment of
Rollover Contributions.
An Eligible Employee's Rollover Contribution is
credited to his Rollover Account. He is at all times one hundred
percent vested in the value of his Rollover Account. He may
direct the investment of his Rollover Contribution, and redirect
the investment of his Rollover Account according to Article VII.
If an Eligible Employee is not a Participant according to Section
2.01, his Rollover Account is his sole interest in the Plan.
Effective January 1, 1993, Rollover Contributions must satisfy
all applicable rollover requirements of Code Section 402(c)(4).
3.07 LIMITATION ON REVERSION OF CONTRIBUTIONS
Except as provided in subsections (a), (b) and (c)
below, contributions made under the Plan are held for the
exclusive benefit of Participants and their Beneficiaries and may
not revert to the Employer.
(a) A contribution which is made by a mistake of fact,
may be returned to the Employer within one year after it is
contributed to the Plan.
(b) All employer contributions to the Plan are
conditioned on their deductibility under Code Section 404. To the
extent the deduction is disallowed, the amount disallowed may be
returned to the Employer within one year after the disallowance.
(c) All contributions to the Plan are conditioned on
the Plan's qualification under Code Sections 401(a), 409 and
4975(c)(7). If the Plan does not so qualify, any contributions
may be returned to the Employer within one year after the
qualification is denied.
3.08 LIMITATION OF LIABILITY
Each payment to the Trust Fund pursuant to Section
3.01(a) equal to the amount of a Participant's Pretax Deferral is
in complete discharge of the financial obligations of the
Employer under the Plan with respect to the Participant's
corresponding reduction in Compensation.
3.09 MAKE-UP CONTRIBUTIONS
In addition to other Employer Contributions described
in Section 3.03 and 3.04, an Employer may make special make-up
contributions to the Plan, if necessary. A make-up contribution
will be necessary if there are insufficient forfeitures under the
Plan to restore a Participant's Employer Contributions Account
pursuant to Section 10.03, if a Participant or Beneficiary's
Accounts must be reinstated pursuant to Section 18.04, or if a
mistake or omission in the allocation of contributions is
discovered and cannot be corrected by revising prior allocations.
ARTICLE IV
PARTICIPANT'S ACCOUNT: ALLOCATIONS
4.01 PARTICIPANT ACCOUNTS
The Committee will maintain the following Accounts for
each Participant:
(a) An EMPLOYER CONTRIBUTION ACCOUNT which is:
(i) credited with the Participant's share of the
Employer Matching Contributions and Employer ESOP Contributions;
(ii) adjusted for investment results and
expenses; and
(iii) charged with distributions.
(b) A PAYSOP ACCOUNT which is:
(i) credited with the Participant's share of
PAYSOP contributions made under this Plan for the period ending
December 31, 1986;
(ii) adjusted for investment results and
expenses: and
(iii) charged with distributions.
(c) A PRETAX DEFERRAL ACCOUNT which is:
(i) credited with the Participant's Pretax
Deferrals made under this Plan on and after July 1, 1987;
(ii) credited with his Pretax Deferral Account
transferred to this Plan from the FHP Corporation Tax Savings
Plan as of July 1, 1987;
(iii) adjusted for investment results and
expenses: and
(iv) charged with withdrawals and distributions.
(d) A ROLLOVER ACCOUNT which is:
(i) credited with the Participant's Rollover
Contributions made to this Plan on and after July 1, 1987;
(ii) credited with his Rollover Account
transferred to this Plan from the FHP Corporation Tax Savings
Plan as of July 1, 1987;
(iii) adjustment for investment results and
expenses; and
(iv) charged with withdrawals and distributions.
4.02 ALLOCATION OF PRETAX DEFERRALS
Employer contributions which result from a
Participant's Pretax Deferrals pursuant to Section 3.01 will be
allocated to the Participant's Pretax Deferral Account. An
allocation will occur as of the last day of each payroll period
during which the Participant has Pretax Deferrals withheld from
his Compensation. The amount of the allocation will equal the
amount of the Participant's Pretax Deferrals withheld during such
payroll period.
4.03 ALLOCATION OF EMPLOYER MATCHING CONTRIBUTIONS
(a) The Employer Matching Contributions for each Plan
Year are allocated as of the last day of the Plan Year to the
Employer Contributions Account of each person who was a
Participant during the Plan Year, provided the Participant:
(i) is employed as an Eligible Employee on the
last day of the Plan Year; or
(ii) terminated employment during the Plan Year
on or after attaining Normal Retirement Age as defined in Section
1.25;
or
(iii) died during the Plan Year; or
(iv) became Permanently and Totally Disabled
during the Plan Year.
(b) Each Participant who meets the requirements of
Subsection (a) above is allocated a portion of the Employer
Matching Contributions. His portion of the Employer Matching
Contributions equal twenty-five percent of the amount of his
Pretax Deferrals for the Plan Year which:
(i) he directed to be invested in FHP
International Corporation stock and which remain so invested on
the last day of the Plan Year; and
(ii) do not exceed six percent of his Compensation
for the Plan Year.
(c) No more than five hundred dollars in Employer
Matching Contributions will be allocated to a Participant's
Employer Contribution Account in any Plan Year. Any Employers
Matching Contributions remaining after this allocation process
will be added to the Employer ESOP Contribution for the Plan Year
and allocated among all Participants as provided in Section 4.05.
(d) If the Employer Matching Contribution available
for a Plan Year is not sufficient to allocate the amounts
described in Subsection (b), each Participant will be allocated a
prorata share of the available Employer Matching Contribution.
The prorata share will be determined by multiplying his
contribution determined under Subsection (b) (without considering
the limitation in Subsection (c)) by a fraction where the
numerator is the available Employer Matching Contribution and the
denominator is the Employer Matching Contribution necessary in
order to allocate all the amounts described in Subsection (b)
(without considering the limitation in Subsection (c)).
(e) If any portion of the Employer Matching
Contributions is contributed in shares, the allocation of such
portion to Participants' Employer Contributions Accounts will be
made in shares and fractions of shares to the nearest thousandth
of a share.
4.04 LIMITATION ON ALLOCATION OF EMPLOYER MATCHING
CONTRIBUTIONS
(a) Notwithstanding Section 3.03, the Employer
Matching Contribution allocated to one or more Participants under
Section 4.03(b)(i) will be modified as provided in Subsection (c)
of this Section 4.04 if the requirements of Subsection (b) of
this Section 4.04 are not satisfied.
(b) For each Plan Year an "Actual Contribution
Percentage" will be determined for each Participant. Such
percentage will be determined by dividing the Employer Matching
Contributions allocated to the Participant's Employer
Contribution Account during the Plan Year, if any, by his
Earnings as defined in Section 6.01(c), including salary
reductions, if any, elected by the Participant for the Plan Year
under this Plan and salary reduction, if any, elected under a
plan sponsored by the Employer and qualified under Code Section
125.
The average of the Actual Contribution Percentages for
all Participants who are Highly Compensated Employees for the
Plan Year (the "High Average"), when compared to the average of
the Actual Contribution Percentages for all Participants who are
Non-Highly Compensated Employees for the Plan Year (the "Low
Average"), must meet one of the following requirements:
(i) The High Average must be no greater than the
Low Average times one and twenty-five hundredths; or
(ii) The excess of the High Average over the Low
Average must not be greater than two percentage points and the
High Average must be no greater than the Low Average times two.
(c) If the Committee determines, in its discretion,
that allocations of Employer Matching Contributions to
Participants' Employer Contribution Accounts for a Plan Year do
not meet one of the requirements of Subsection (b), the Committee
will determine, in its discretion, the amount of Employer
Matching Contributions of certain Participants who are Highly
Compensated Employees which must be reduced in order to meet one
of the requirements of Subsection (b). The reduction will be
accomplished by reducing the allocations to Participants who are
Highly Compensated Employees in order of their Actual
Contribution Percentage rates, beginning with the Participant
with the highest percentage rate and decreasing in descending
order until one of the requirements of Subsection (b) is met.
The reduced amounts will be added to the Employer ESOP
Contribution for the Plan Year and allocated among all
Participants as provided in Section 4.05.
(d) The Committee's determination under Subsection (c)
will be made in a reasonable, consistent, and nondiscriminatory
manner. The Committee will not bc liable to any Participant (or
his Beneficiary, if applicable) for any losses caused by
inaccurately estimating the amount of any Employer Matching
Contributions.
(e) For the Plan Year ending in June 30, 1989, each
Participant's Actual Contribution Percentage will be determined
by dividing the Employer Matching Contributions, if any, and the
Employee After-Tax Contributions, under the FHP Money Purchase
Pension Plan, if any, allocated to his accounts during the Plan
Year by the applicable amount described above.
4.05 ALLOCATION OF EMPLOYER ESOP CONTRIBUTIONS
(a) The Employer ESOP Contributions for each Plan Year
are allocated as of the last day of the Plan Year to the Employer
Contribution Account of each Participant, provided the
Participant:
(i) is employed as an Eligible Employee on the
last day of the Plan Year; or
(ii) terminated employment during the Plan Year
on or after attaining age 65; or
(iii) died during the Plan Year; or
(iv) became Permanently and Totally Disabled
during the Plan Year.
(b) Each Participant who meets the requirements of
Subsection (a) above is allocated a portion of the Employer ESOP
Contributions equal to the total Employer ESOP Contributions for
the Plan Year times the ratio of his Compensation for the Plan
Year to the total of all such Participants' Compensation for the
Plan Year.
Notwithstanding any other provisions of the Plan, for
each Participant who commenced participation in the Plan on
January 1, 1989, his Employer ESOP Contributions, if any,
allocated to his Employer Contribution Account for the Plan Year
ending June 30, 1990 shall be reduced, but not to less than zero,
by the amount of Employer ESOP Contributions allocated to such
Account as of June 30, 1989 which were attributable to his
Compensation earned before January 1, 1989.
(c) If any portion of the Employer ESOP Contributions
is contributed in shares, the allocation of such portion to
Participants' Employer Contributions Accounts will be made in
shares and fractions of shares to the nearest thousandth of a
share.
ARTICLE V
ESOP SUSPENSE SUBFUND
5.01 ESTABLISHMENT OF ESOP SUSPENSE SUBFUND
Financed Shares acquired by the ESOP Fund with the
proceeds of an Exempt Loan are held in an ESOP Suspense Subfund.
Some or all of the Employer Matching Contributions and Employer
ESOP Contributions may be applied to repay any outstanding Exempt
Loan.
5.02 RELEASE OF SHARES IN ESOP SUSPENSE SUBFUND
Financed Shares are released from the ESOP Suspense
Subfund periodically as the Exempt Loan is repaid. The number of
Financed Shares released is determined as follows:
(a) GENERAL RULE - For each Plan Year until the Exempt
Loan is repaid, the number of Financed Shares released from the
ESOP Suspense Subfund equals the number of unreleased Financed
Shares immediately before the release for the current Plan Year
multiplied by a fraction. The numerator of the fraction is the
amount of principal and interest paid on the Exempt Loan for the
Plan Year. The denominator of the fraction is the sum of the
numerator plus the total payments of principal and interest on
that Exempt Loan projected to be paid for all future Plan Years
during the duration of the Exempt Loan.
However, if the Exempt Loan is repaid with the
proceeds of a subsequent Exempt Loan (a "Substitute Loan"), the
repayment won't release all the Financed Shares in the ESOP
Suspense Subfund. Instead, the Financed Shares will be released
on the basis of payments of principal and interest on the
Substitute Loan.
(b) SPECIAL RULE - The Committee may elect at the time
an Exempt Loan is incurred, or the provisions of the Exempt Loan
may provide, that the number of Financed Shares released from the
ESOP Suspense Subfund is to be determined solely with reference
to principal payments on the Exempt Loan. This method may be used
only if:
(i) the Exempt Loan provides for annual payments
of principal and interest at a cumulative rate that is not less
rapid at any time than level annual payments for ten years;
(ii) no more than an amount that would be
determined to be interest under standard loan amortization tables
is disregarded, and
(iii) the entire duration of the Exempt Loan
repayment period does not exceed ten years, even if the Exempt
Loan is renewed, extended or refinanced.
(c) The provisions under this Section 5.02 for the
release of Financed Shares are to be applied and construed in a
manner consistent with Section 54.4975-7(b)(8) of Title 26 of the
Code of Federal Regulations.
5.03 ALLOCATION OF SHARES RELEASED FROM ESOP SUSPENSE
SUBFUND
Shares of Stock released from the ESOP Suspense Subfund
for a Plan Year are held in the ESOP Fund on an unallocated basis
until allocated by the Committee. Shares of Stock released in
connection with a payment on Exempt Loan from Employer
Contributions arc allocated as described in Subsection (a).
Shares of Stock released in connection with a payment on an
Exempt Loan from cash dividends on Stock are allocated as
described in Subsection (b).
(a) A Participant who received an allocation of
Employer Contributions for the Plan Year will receive an
allocation of Stock as of the last day of the Plan Year equal to:
(i) the total shares released in connection with
all payments on an Exempt Loan during the Plan Year from Employer
Contributions, times
(ii) the ratio of his allocation of Employer
Contributions for the Plan Year to the total Employer
Contributions for the Plan Year. Stock will be allocated in
shares and fractions of shares to the nearest thousandth of a
share.
At the time of such allocation of shares of Stock, the
Participant's ESOP Account will be debited with its share of the
Trust's cash payments on the Exempt Loan.
(b) A Participant who received an allocation of Cash
Dividends in his Employer Contribution Account on a Valuation
Date will receive an allocation of Stock on the Valuation Date
equal to:
(i) the total shares released in connection with
all payments on an Exempt Loan during the period since the
immediately preceding Valuation Date to the current Valuation
Date from Cash Dividends received on Stock held in the ESOP Fund,
times
(ii) the ratio of shares in the Participant's
Employer Contributions Account on the immediately preceding
Valuation Date to the total shares of all Participants' Employer
Contribution Accounts on the immediately preceding Valuation Date
(disregarding shares distributed to Participants as of such
Valuation Date.)
At the time of such allocation of shares of Stock, the
Participant's Employer Contribution Account will be debited with
its share of the Trust's cash payment on the Exempt Loan.
(c) All Stock in the ESOP Fund as of the last day of
the Plan Year, other than Stock held in the ESOP Suspense
Subfund, must be Contributions Accounts as of such day. All
shares allocated under this Section 5.03 will be allocated to the
nearest thousandth of a share.
ARTICLE VI
ALLOCATION LIMITATIONS
6.01 BASIC LIMITATION ON ANNUAL ADDITIONS
(a) Notwithstanding any other provisions of the Plan
and subject to the provisions of Subsections (b), (c) and (d)
below, the amount of Annual Additions, as defined below,
allocated to a Participant for any Limitation Year, as defined in
Section 1.23, will not exceed the lesser of:
(i) $30,000; or
(ii) twenty-five percent of the Participant's
Earnings (as defined below) for the Limitation Year.
The dollar limitation referred to in Subsection (a)(i)
above is adjusted as of January 1 of each Plan Year pursuant to
Code Section 415. The adjusted amount applies for the Limitation
Year which ends within that Plan Year.
(b) For purposes of this Article VI a Participant's
Annual Additions means the amount of:
(i) Employer and Affiliate contributions,
(ii) Participant contributions,
(iii) forfeitures, and
(iv) contributions for post retirement medical
benefits, to the extent required by Code Section 415(e) or
419A(d)(2), allocated to his Accounts under this Plan and his
accounts under all other defined contribution plans (as defined
in Code Section 414(i)) adopted by an Affiliate.
Notwithstanding the above paragraph, if no more than
one-third of the total Employer Contributions for the Plan Year
which are deductible under Code Section 404(a)(9) are allocated
to the Accounts of Participants who are Highly Compensated
Employees during the Plan Year, then any Employer Contributions
which are used by the Trust to pay interest on an Exempt Loan,
and any Financed Shares which are allocated as forfeitures, are
not included as Annual Additions. The Employer Contributions
must be used to pay such interest not later than the due date
including extensions, for filing the Employer's Federal income
tax return for the Plan Year.
(c) For purposes of this Article VI, a Participant's
Earnings means his earned income, wages, salaries, commissions
and bonuses received from all Affiliates. It excludes the
following:
(i) Contributions by an Affiliate to a plan of
deferred compensation which are not included in the Participant's
gross income for the taxable year in which contributed, or any
distribution from a plan of deferred compensation;
(ii) Amounts realized from the exercise of a
non-qualified stock option, or when restricted stock (or
property) held by the Participant either becomes freely
transferable or is no longer subject to a substantial risk of
forfeiture;
(iii) Amounts realized from the sale, exchange or
other disposition of stock acquired under a qualified stock
option; and
(iv) Other amounts which received special tax
benefits, including Pretax Deferrals under this Plan and salary
reduction under any other tax qualified program.
Earnings for any Limitation Year are the amount
actually paid or includable in gross income during such year. A
Participant's annual Earnings in excess of two hundred thousand
dollars are disregarded for all purposes under the Plan. Such
dollar limit will be adjusted each year pursuant to Code Section
401(a)(17). This dollar limit is effective July 1, 1989.
(d) Under certain circumstances, the dollar limitation
described in Subsection (a)(i) above for a Limitation Year may be
increased. The increase occurs only if not more than one-third
of the total Employer Contributions for the Plan Year are
allocated to the Accounts of Participants who are Highly
Compensated Employees during the Plan Year. The amount of the
increase will be the lesser of:
(i) the dollar amount otherwise applicable for
the Plan Year; or
(ii) the amount of Employer Contributions
allocated to Participants' Employer Contribution Accounts as of
each Valuation Date during the Plan Year that ends in the
Limitation Year representing Stock which is:
(A) contributed to the Trust for that Plan
Year;
(B) purchased not later than sixty days
after the due date (including extensions) for filing the
Employer's Federal that Plan Year from Employer Contributions
which were made in cash; or
(C) released from the ESOP Suspense Subfund
as a result of payments on an Exempt Loan for that Plan Year.
6.02 PARTICIPATION IN THIS PLAN AND A DEFINED BENEFIT PLAN
If a Participant is or has been a participant in a
qualified defined benefit plan (as defined in Code Section 4140)
maintained by an Affiliate, the sum of the Participant's defined
benefit plan fraction and defined contribution plan fraction (as
defined in Code Section 415(e) for any year will not exceed one.
In calculating the defined contribution plan fraction, the
Committee may, at its discretion, make the election described in
Code Section 415(e)(6).
6.03 REDUCTION IN ANNUAL ADDITIONS AND ELIMINATION OF EXCESS
AMOUNTS
If the limitations described in Section 6.01 and 6.02
would otherwise be exceeded for a Participant for a Limitation
Year, the excess will be eliminated as follows:
(a) First, amounts attributable to the Participant's
employee after-tax contributions under the FHP Money Purchase
Pension Plan will be returned to the Participant, pursuant to the
applicable provisions of such plan.
(b) Second, amounts attributable to the Participant's
Pretax Deferrals will be reduced. The amount of the reduction
will be returned to the Participant as cash compensation and will
be subject to all federal, state, municipal, and/or county taxes,
and other deductions which apply to cash compensation;
(c) Third, the provisions of any other plans
established by an Affiliate which have caused the limits to be
exceeded for the Participant will be applied. The provisions of a
defined benefit plan will be applied before the provisions of a
defined contribution plan.
(d) Fourth, the excess allocations of Employer
Matching Contributions and if necessary Employer ESOP
Contributions will be removed from the Participant's Employer
Contribution Account and will be reallocated to other
Participants' Employer Contribution Accounts. The reallocation
will be allocated on a basis proportional to Compensation, as
provided in Section 4.05. However, if the reallocation of the
excess amounts causes the limitations of Sections 6.01 and 6.02
to be exceeded for all other Plan Participants for the Limitation
Year, then the remaining excess amounts will be held unallocated
in a suspense account. If a suspense account exists at any time
during a Limitation Year, other than the Limitation Year
described in the preceding sentence, all amounts in the suspense
account must be allocated to Participants' Accounts (subject to
the limitations of Code Section 415) before any Employer
Contributions which are Annual Additions may be made to the Plan
for that Limitation Year.
ARTICLE VII
INVESTMENTS: ALLOCATION OF GAINS AND LOSSES
7.01 INVESTMENT OF ACCOUNTS
Each Participant's Accounts are invested in the Trust
Fund. The Participant's Employer Contribution Account and PAYSOP
Account are invested primarily in Stock. Except as provided in
Section 7.16, the Participant has no right to direct the
investments of such Accounts. Each Participant has the right to
direct the investment of his Pretax Deferrals Account and
Rollover Account in any of the Plan's Investment Funds. The
Committee will select the Investment Funds available under the
Plan.
Upon enrollment, reenrollment, and as of any January 1,
April 1, July 1, and October 1, the Participant may designate the
Investment Fund(s) in which his future Pretax Deferrals, if any,
are invested. A Rollover Contribution must be accompanied by a
written notice to the Committee designating the Investment Funds
in which the contribution will be invested.
The Committee will establish uniform nondiscriminatory
rules regarding the designation of Investment Funds.
This Plan is intended to constitute a plan described in
Section 404(c) of ERISA, and the regulations thereunder. As a
result, with respect to elections described in this Plan and any
other exercise of control by a Participant or his or her
Beneficiary over assets in the Participant's Accounts, such
Participant or Beneficiary shall be solely responsible for such
actions and neither the Trustee, the Committee, the Company, nor
any other person or entity which is otherwise a fiduciary shall
be liable for any loss or liability which results from such
Participant's or Beneficiary's exercise of control.
The Committee shall provide to each Participant or his
or her Beneficiary the information described in Section
2550.404c-1(b)(2)(i)(B)(1) of the Department of Labor
Regulations. Upon request by a Participant or his or her
Beneficiary, the Committee shall provide the information
described in Section 2550.404c-1(b)(2)(i)(B)(2) of the Department
of Labor Regulations.
With respect to Stock held in a Participant's Pretax
Deferrals Account and Rollover Account, the Committee shall take
such actions and establish such procedures as it deems necessary
to ensure the confidentiality of information relating to the
purchase, sale, and holding of such Stock, and the exercise of
voting, tender and similar rights with respect to Stock by a
Participant or his or her Beneficiary. Notwithstanding the
foregoing, such information may be disclosed to the extent
necessary to comply with applicable state and federal laws.
In the event of a tender or exchange offer with respect
to the Company, or in the event of a contested election with
respect to the Board, the Company shall, at its own expense,
appoint an independent fiduciary to carry out the Committee's
administrative functions with respect to such Stock. Such
independent fiduciary shall not be an "affiliate" of the Company
as such term is defined in Section 2550.404c-1(e)(3) of the
Department of Labor Regulations. To the extent that ERISA
Section 404(c) applies to a Participant's or Beneficiary's
exercise of control concerning Stock, the Participant or
Beneficiary shall not, notwithstanding Sections 7.06 and 7.08, be
considered a "Named Fiduciary" (as defined in ERISA Section 402)
with respect to such Stock.
The Committee may take such other actions or implement
such other procedures as it deems necessary or desirable in order
that the Plan comply with Section 404(c) of ERISA.
7.02 TRANSFERS OF EXISTING ACCOUNT BALANCES BETWEEN
INVESTMENT FUNDS
Each Participant has the right as of any January 1,
April 1, July 1, or October 1 to have all or part of his Pretax
Deferral Account and Rollover Account transferred between the
Investment Funds. Such transfers may be made on a total basis or
may be applied separately to each Account. The Committee will
establish uniform and nondiscriminatory rules regarding the
transfer of assets between Investment Funds.
7.03 ALLOCATION OF INVESTMENT FUND GAINS AND LOSSES
As of each Valuation Date, the Committee will determine
the net investment gain or loss, after adjustment for applicable
expenses, if any, of each Investment Fund since the immediately
preceding Valuation Date.
The net investment gain or loss of each such Investment
Fund will be apportioned to each Participant's Accounts. The
apportionment will be in the same proportions as the following
for the Participant bears to the total of the following for all
Participants:
(a) The balance of the Participant's Account which was
held in such Investment Fund as of the immediately preceding
Valuation Date;
(b) One-half of the Participant's Pretax Deferrals, if
any, allocated to the Account since the immediately preceding
Valuation Date which were directed by the Participant to be
invested in such Investment Fund;
(c) One-half of the Participant's loan repayments, if
any, made to the Account since the immediately preceding
Valuation Date which were directed by the Participant to be
invested in such Investment Funds;
(d) One-half of the Participant's Rollover
Contribution, if any, made to the Account since the immediately
preceding Valuation Date which was directed by the Participant to
be invested in such Investment Funds;
(e) An adjustment to reflect any transfers, to or from
the portion of the Account invested in such Investment Fund,
which were made effective after the allocation of gains or losses
as of the immediately preceding Valuation Date; and
(f) A reduction for any withdrawals, distributions or
loan proceeds paid from the portion of the Account invested in
such Investment Fund and paid after the allocation of gains or
losses as of the immediately preceding Valuation Date.
All withdrawals, distributions and loan proceeds which
are paid as of a Valuation Date shall be paid after the
allocation of net investment gain or loss applicable to such
Valuation Date has been apportioned pursuant to this Section.
The amounts paid out will not share in the allocation of net
investment gain or loss in the subsequent Valuation Date.
7.04 PURCHASE AND SALE OF STOCK
The Trustee may acquire Stock in the open market or
from the Company or any other person, including a party in
interest, provided that no commission shall be paid in connection
with the Trustee's acquisition from a party in interest. Neither
the Employer, nor the Committee, nor any Trustee shall have any
responsibility or duty to time any transaction involving Stock in
order to anticipate market conditions or changes in Stock value,
nor shall any such person have any responsibility or duty to sell
Stock held in the Trust Fund in order to maximize return or
minimize loss.
7.05 RIGHTS, WARRANTS, OR OPTIONS
Subject to the provisions applicable to nonvoting
rights pursuant to Section 7.08 hereof, stock rights (including
warrants and options) issued with respect to Stock shall, unless
otherwise directed by the Committee, be exercised by the Trustee
on behalf of Participants to the extent that cash is available.
Rights which cannot be exercised because of the lack of cash
shall, unless otherwise directed by the Committee, be sold and
the proceeds shall be invested in Stock.
7.06 PARTICIPANT RIGHTS CONCERNING STOCK
(a) PARTICIPANTS' RIGHT TO INSTRUCT VOTING. Effective
September 7, 1989, all voting rights on Stock held in the Plan
shall be exercised by the Trustee as and to the extent directed
by the Participants acting in their capacity as "Named
Fiduciaries" (as defined in ERISA section 402) with respect to
allocated and unallocated shares in accordance with the following
provisions:
(1) Timely Receipt of Instructions Required. As
soon as practicable before each annual or special shareholders'
meeting of FHP International Corporation, the Trustee shall
furnish to each Participant a copy of the proxy solicitation
materials sent generally to shareholders, together with a form
requesting confidential directions on how Stock allocated to such
Participant's Accounts and a proportionate share of any
unallocated shares (including fractional shares to 1/1000th of a
share) are to be voted. The Company and the Committee will
cooperate with the Trustee to ensure that Participants receive
the requisite information in a timely manner. Upon timely
receipt of such voting directions, the Trustee (after combining
votes of fractional shares to give effect to the greatest extent
to Participants' directions) shall vote the shares as directed.
The voting directions received by the Trustee from Participants
or Beneficiaries shall be held by the Trustee in strict
confidence and shall not be divulged or released to any person,
except as may be necessary to facilitate the tabulation of such
voting directions.
(2) VOTING OF ALLOCATED SHARES. Each Participant
shall be entitled to direct the voting of Stock (including
fractional shares to 1/1000th of a share) allocated to his
Accounts.
With respect to all corporate matters submitted to
shareholders, Stock allocated to the Accounts of Participants
shall be voted in accordance with the directions of such
Participants, as Named Fiduciaries, as to the Trustee. With
respect to Stock allocated to a deceased Participant, such
Participant's Beneficiary, as Named Fiduciary, shall be entitled
to direct the voting with respect to such allocated shares as if
such Beneficiary were the Participant. Any allocated shares of
Stock with respect to which no directions are received shall be
voted by the Trustee in the same manner as provided in subsection
(3) below for unallocated shares.
(3) VOTING OF UNALLOCATED SHARES. Each Participant
shall, as a Named Fiduciary, also be entitled to direct the
Trustee to vote a portion of the unallocated shares of Stock with
respect to all corporate matters submitted to shareholders. Such
direction shall apply to a number of votes equal to the total
number of votes attributable to unallocated Stock multiplied by a
fraction, the numerator of which is the number of votes
attributable to Stock allocated to the Participant's Accounts,
and the denominator of which is the total number of votes
attributable to Stock allocated to the Accounts of Participants
who have provided directions to the Trustee under this Section.
Fractional shares shall be rounded to the nearest 1/1000th of a
share.
7.07 SALE OF STOCK
Subject to the rights of Participants in a tender offer
as described in Section 7.08, the Committee may direct the
Trustee to sell shares of Stock to any person, including FHP
International Corporation or the Company, provided that any sale
to FHP International Corporation or the Company or any other
"disqualified person" within the meaning of Code section 4975 or
"party in interest" within the meaning of ERISA section 3(14) is
made at a price which is not less than adequate consideration as
defined in ERISA section 3(18) and that no commission is charged
with respect to the sale. If the Trustee is unable to make
payments of principal or interest on an Exempt Loan when due, the
Committee may direct the Trustee, unless prohibited by the Code
or ERISA, to sell any shares of Stock not yet released from the
ESOP Suspense Subfund and to apply the proceeds to such Exempt
Loan payment, or to obtain another Exempt Loan in an amount
sufficient to make such payment. This Section is effective
September 7, 1989.
7.08 TENDERS AND EXCHANGES OF STOCK
(a) PARTICIPANTS' RIGHT TO INSTRUCT TENDER. Effective
September 7, 1989, all tender or exchange decisions with respect
to Stock held in the Plan shall be made by the Participants
acting in their capacity as Named Fiduciaries with respect to
both allocated and unallocated shares in accordance with the
following provisions:
(1) TIMELY RECEIPT OF INSTRUCTIONS REQUIRED. In
the event an offer is received by the Trustee (including a tender
offer for Stock subject to Section 14(d)(1) of the Securities
Exchange Act of 1934 ("Exchange Act") or subject to Rule 13e-4
promulgated under the Exchange Act, as those provisions may from
time to time be amended) to sell or exchange any Stock held by
the Trust, the Trustee shall advise each Participant who has
Stock allocated to his Accounts in writing of the terms of the
offer as soon as practicable and shall furnish each Participant
with a form by which he may direct the Trustee confidentially
whether to tender or exchange shares of Stock allocated to his
Accounts and a proportionate share of any unallocated shares
(including fractional shares to 1/1000th of a share). The
materials furnished to each Participant shall include such
related documents as are prepared by any person and provided to
the shareholders of FHP International Corporation pursuant to the
Exchange Act. The Committee and the Trustee may also provide
Participants with such other materials concerning the offer as
the Trustee or the Committee in its discretion determines to be
appropriate; provided, however, that prior to any distribution of
materials by the Committee, the Trustee shall be furnished with
sufficient numbers of complete copies of all such materials. The
Company and the Committee will cooperate with the Trustee to
ensure that Participants receive the requisite information in a
timely manner. Upon timely receipt of such tender directions, the
Trustee (after combining fractional shares to give effect to the
greatest extent to Participants' directions) shall tender the
shares as directed.
(2) ALLOCATED SHARES. The Trustee shall tender or not
tender shares of Stock allocated to the Accounts of any
Participant (including fractional shares to 1/1000th of a share)
as and to the extent instructed by the Participant as a Named
Fiduciary. With respect to Stock allocated to the Accounts of a
deceased Participant, such Participant's Beneficiary, as a Named
Fiduciary, shall be entitled to direct the Trustee whether to
tender such shares as if such Beneficiary were the Participant.
The instructions received by the Trustee from Participants or
Beneficiaries shall be held by the Trustee in strict confidence
and shall not be divulged or released to any person, including
directors, officers of employees of FHP International Corporation
or the Company, except as otherwise required by law. Any
allocated shares of Stock with respect to which no directions are
received shall be treated in the same manner as provided in
subsection (3) below for unallocated shares.
(3) UNALLOCATED SHARES. Each Participant shall, as a
Named Fiduciary, also be entitled to direct the Trustee with
respect to the tender of a portion of the unallocated shares of
Stock. Such direction shall apply to such number of unallocated
shares multiplied by a fraction, the numerator of which is the
number of shares of Stock allocated to the Participant's
Accounts, and the denominator of which is the total number of
shares of Stock allocated to the Accounts of Participants who
have provided directions to the Trustee under this Section.
Fractional shares shall be rounded to the nearest 1/1000th of a
share.
(4) WITHDRAWAL OF TENDER. In the event, under the
terms of a tender offer or otherwise, any Stock tendered for sale
or exchange may be withdrawn from such offer, the Trustee shall
follow any instructions respecting the withdrawal of such Stock
from such offer in the same manner and the same proportion as
shall be timely received by the Trustee from the Participants,
as Named Fiduciaries, entitled under this Section 7.08 to give
instructions regarding the sale or exchange of such shares.
(5) RIGHT TO TENDER ON PRO RATA BASIS. In the event
the Trustee receives an offer to tender for sale or exchange less
than all of the Stock held by the Trust (allocated and
unallocated), each Participant who has been allocated Stock
subject to such offer shall be entitled to direct the Trustee as
provided in Sections 7.08(a)(1), (2) and (3). Shares will be
tendered first from the Accounts of Participants who timely
instruct the Trustee to tender and then, to the extent additional
shares are directed to be tendered, from unallocated shares of
Stock and then from allocated shares of Stock for which no
direction is received.
(6) SIMULTANEOUS TENDER OFFERS. In the event an offer
is received by the Trustee and instructions are solicited from
Participants pursuant to Section 7.08(a) regarding such offer,
and prior to the termination of such offer a second offer is
received by the Trustee for the Stock subject to the first offer,
the Trustee shall use its best efforts under the circumstances to
solicit instructions from the Participants (i) with respect to
shares tendered for sale or exchange pursuant to the first offer,
whether to withdraw such shares, if possible, and, if withdrawn,
whether to tender such shares for sale or exchange pursuant to
the second offer and (ii) with respect to shares not tendered for
sale or exchange pursuant to the first offer, whether to tender
such shares for sale or exchange pursuant to the second offer.
The Trustee shall follow all such instructions received in a
timely manner from Participants in the same manner and in the
same proportion as provided in this Section 7.08(a). With
respect to any such subsequent offer for Stock subject to an
earlier offer (including successive offers from one or more
existing offerors), the Trustee shall act in the manner as
described in the above provisions of this Section 7.08.
(b) TENDER IS NOT A WITHDRAWAL. A Participant's
instruction to the Trustee to tender for sale or exchange shares
of Stock will not be deemed a withdrawal or suspension from the
Plan or a forfeiture of any portion of the Participant's interest
in the Plan. Funds received in exchange for tendered shares will
be credited to the Accounts of Participants whose shares were
tendered and will be used by the Trustee to reinvest in Stock, if
available, and if not, in such other investments as permitted
under the trust agreement established under Article XV.
(c) TRUSTEE TO TAKE ALL NECESSARY ACTION. The Trustee
shall take all steps necessary, including appointment of a
corporate trustee and/or an outside independent administrator, to
the extent such action, after consultation with the Committee, is
deemed necessary to maintain confidentiality of the Participants'
responses or to discharge adequately its fiduciary obligations.
(d) TRUSTEE MAY OPT FOR NO PARTICIPATION IN SELF
TENDER. Subject to the provisions of the trust agreement, in the
event FHP International Corporation or the Company initiates an
offer described in Section 7.08(a)(1), FHP International
Corporation, the Company or the Committee may direct the Trustee
not to tender for sale or exchange any Stock in such offer. In
such event, the foregoing provisions of this Section 7.08 shall
have no effect, and the Trustee shall not tender for sale or
exchange any Stock (allocated or unallocated) in such offer.
7.09 VALUATION OF STOCK
When it becomes necessary to value Stock held by the
Plan, the value shall be the current fair market value of the
Stock, determined in accordance with applicable legal
requirements. If the Stock is publicly traded, its fair market
value shall, except as otherwise required by the standards
applicable to prudent fiduciaries, be based on the most recent
closing price in such public trading, as reported IN THE WALL
STREET JOURNAL or such other publication of general circulation
as may be designated by the Committee. If the Stock cannot be so
valued on the basis of its closing price in recent public
trading, its fair market value shall be determined by the Trustee
in good faith based on all relevant factors for determining the
fair market value of securities, including an independent
appraisal by a person who customarily makes such appraisals, if
such an appraisal of the fair market value of the Stock as of the
relevant date has been obtained. In the case of a transaction
between the Plan and an Employer or another party in interest,
the fair market value of the Stock must be determined as of the
date of the transaction rather than as of some other Valuation
Date occurring before or after the transaction. In other cases,
the fair market value of the Stock shall be determined as of the
most recent Valuation Date.
7.10 PLAN MAY BORROW TO BUY STOCK
The Company may direct the Trustee to incur debt
obligations in order to finance or refinance the acquisition of
Stock for the Trust Fund. Any such direction must specify all of
the terms and conditions of an Exempt Loan and any other
documents which are to be executed in connection with the Exempt
Loan. The Trustee will have no responsibility to determine
whether the debt obligation is an Exempt Loan. The Trustee will
have no authority to modify the terms, conditions, or documents
of an Exempt Loan and will only be responsible for executing the
documents on behalf of the Plan.
Any Exempt Loan will be incurred only if it is
primarily for the benefit of the Participants and their
Beneficiaries. The Exempt Loan must not require the use of Plan
assets other than those described in this Section 7.10. The
Exempt Loan must be at least as favorable to the Plan as the
terms of a comparable loan resulting from an arm's length
negotiation between independent parties.
The Trustee will not be responsible or liable for
inquiring into the purpose of an Exempt Loan nor will it be
responsible for determining the various limitations described in
this document are met.
All Exempt Loans must bear a reasonable rate of
interest and must be for a specific term. Such loans may not be
payable at the demand of any person, except in the case of
default. Loan repayment will be made by the Trustee at the
direction of the Company. The payments must not exceed the
amount of Employer Contributions in the current or prior Plan
Years and the earnings on such contributions.
Any Exempt Loan must be without recourse to the Plan.
In the event of default on an Exempt Loan, the value of Trust
assets which may be transferred in satisfaction of the loan will
not exceed the amount of the default. The Trust assets which may
be pledged as collateral for an Exempt Loan are limited to the
Stock acquired with the proceeds of the loan or a prior loan
which is repaid with the proceeds of the Exempt Loan. In
addition, the only Trust assets a lender may have any rights to
are: (a) the collateral given for the loan; (b) cash
contributions made to the Plan for the ultimate purpose of making
loan payments; and (c) earnings attributable to the collateral or
to cash contributions. With respect to Stock purchased with the
proceeds of an Exempt Loan, the protections stated in Sections
7.11 and 11.03 are non-terminable, notwithstanding the fact that
the Exempt Loan is repaid or the Plan ceases to be an employee
stock ownership plan.
7.11 USE OF EXEMPT LOAN PROCEEDS
The proceeds of an Exempt Loan must be used within a
reasonable time after receipt by the Plan only for any or all of
the following purposes:
(a) to acquire Stock;
(b) to repay an Exempt Loan;
(c) to repay a prior Exempt Loan in a transaction
creating a Substitute Loan, as described in Section 5.02(a).
Except as provided in Section 11.04 or as otherwise
required by applicable law, no Stock acquired with the proceeds
of an Exempt Loan may be subject to a put, call, or other option
or buy-sell or similar arrangement while held by and when
distributed from the Plan. This provision continues to be apply
to Stock even if the Plan ceases to be an employee stock
ownership plan under Section 4975(e)(7) of the Code or if the
PAYSOP portion of the Plan ceases to be a tax credit employee
stock ownership plan under Code Section 409.
7.12 ALLOCATION OF STOCK DIVIDENDS AND SPLITS
(a) Stock received by the Trust as a result of a Stock
split or Stock dividend on Stock held in Participant's Employer
Contribution Accounts will be allocated as of the Valuation Date
coincident with or following the date of such split or dividend,
to each Participant who has an Employer Contribution Account on
such date. The amount allocated will bear substantially the same
proportion to the total number of shares received as the number
of shares in the Participant's Employer Contribution Account
immediately before the allocation bears to the total number of
shares allocated to such Accounts of all Participants immediately
before the allocation. The shares will be allocated to the
nearest one thousandth of a share.
(b) Stock received by the Trust as a result of a Stock
split or Stock dividend on Stock held in Participant's Pretax
Deferral Accounts and Rollover Accounts will be allocated as of
the Valuation Date coincident with or following the date of such
split or dividend, to each Participant who has a Pretax Deferral
and/or Rollover Account. The amount allocated will bear
substantially the same proportion to the total number of shares
received as the number of shares in the Participant's Pretax
Deferral Account and/or Rollover Account bears to the total
number of shares allocated to such Accounts of all Participants
immediately before the allocation. The shares will be allocated
to the nearest one thousandth of a share.
(c) Stock received by the Trust as a result of a Stock
dividend on Stock held in the ESOP Suspense Subfund shall be
governed by Section 7.13.
7.13 REINVESTMENT OF DIVIDENDS
Upon direction of the Committee, (a) cash dividends may
be reinvested as soon as practicable by the Trustee in shares of
Stock for Participant's Accounts, (b) stock dividends may be
allocated to Participant's Accounts, or (c), if cash or stock
dividends are paid on shares held in the ESOP Suspense Subfund
they may be applied to retire an Exempt Loan. Cash dividends may
be reinvested in Stock purchased as provided in Section 7.04 or
purchased from the Accounts of Participants who receive cash
distributions.
Notwithstanding the foregoing, upon the direction of the
Committee, the trustee may use cash or stock dividends on stock
held in the ESOP Fund to add to the Reserve Fund. At the
direction of the Committee, stock dividends may be sold and the
proceeds used for the purposes set forth above.
7.14 ALLOCATION OF DIVIDENDS OTHER THAN STOCK DIVIDENDS
At the direction of the Committee, dividends in cash or
in property other than Stock which are actually received by the
Trust during a Plan Year may be applied by the Trustee to the
purchase of Stock, as provided in Section 7.13. Dividends in
property other than Stock which are received by the Trustee in
respect of Stock held by the Trust shall, to the extent
practicable, be sold or exchanged for the ultimate purpose of
acquiring additional Stock.
Stock released from the ESOP Suspense subfund due to
the use of dividends to make payments on an Exempt Loan will be
allocated pursuant to Section 5.03(b).
Stock purchased by the Trustee for the Trust out of
dividends and out of the proceeds of rights or warrants sold (or
exercised, to the extent of the bargain element if such exercise
is made with Employer Contributions) will be allocated, as of the
Valuation Date coincident with or following the date such shares
were purchased, to the Account of each Participant who has an
Account on such Valuation Date.
(a) Stock purchased with dividends on Stock held in
Participants' Employer Contribution Accounts will be allocated to
each Participant's Employer Contribution Account.
(b) Stock purchased with dividends on Stock held in
Participants' PAYSOP Accounts will be allocated to each
Participant's PAYSOP Account.
(c) Stock purchased with dividends on Stock held in
Participants' Pretax Deferral Accounts and Rollover Accounts will
be allocated to each Participant's Pretax Deferral Account and
Rollover Account.
Shares allocated to an Account under subsections (a),
(b) or (c) above will be allocated in an amount which bears
substantially the same proportion to the total number of shares
purchased as the ratio that the number of shares in such Account
on the Valuation Date immediately preceding such purchase bears
to the total number of shares that were allocated to such
Accounts of all Participants on such preceding Valuation Date
(disregarding the shares that were distributed to Participants as
of such preceding Valuation Date).
Shares allocated under this Section will be allocated
to the nearest one thousandth of a share.
7.15 RESERVE FUND
The portion of the ESOP Fund not invested in Stock is
referred to as the Reserve Fund. The Reserve Fund will normally
be held in cash and short-term, liquid assets except to the
extent that special circumstances, such as the lack of a market
for assets received in kind, prevent the conversion of assets to
such form. The Reserve Fund will also be limited to the amount
needed to meet current requirements of the Plan to make cash
distributions provided under Article XI, to pay expenses to the
extent permissible under Section 12.11, and to exercise rights
under Section 7.05. In the case of cash distributions, the
Reserve Fund may be used to make purchases of Stock from the
Accounts of the Participants receiving such distributions. As the
Company and the Trustee shall agree, the amount to be maintained
in such cash Reserve Fund shall be determined by the Company and
communicated to the Trustee in writing.
As of each Valuation Date, the Committee will determine
the net gain or loss, after adjustment for applicable expenses,
if any, in the Reserve Fund since the immediately preceding
Valuation Date. The net gain or loss of the Reserve Fund will be
apportioned to each Participant's Employer Contribution Account.
The apportionment will be in the same proportion as the following
for the Participant bears to the total of the following for all
Participants:
(a) The balance of the Participant's Employer
Contribution Account as of the immediately preceding Valuation
Date, determined after allocation as of such Valuation Date of
Employer Contributions and the net gain or loss of the Reserve
Fund;
(b) A reduction to reflect any transfers from the
Participant's Employer Contribution Account, pursuant to Section
7.16, which were made effective after the allocation of net gain
or loss of the Reserve Fund as of the immediately preceding
Valuation Date; and
(c) A reduction for any distributions paid from the
Employer Contribution Account after the allocation of net gain or
loss of the Reserve Fund as of the immediately preceding
Valuation Date.
The result of this allocation of net gain or loss of
the Reserve Fund may be expressed in dollars and cents, or shares
and fractional shares of Stock having the same value as such
dollars and cents on the date as of which the allocation is made.
However, conversion to full and fractional shares of
Stock will be made only to the extent necessary to reflect
anticipated purchases from the Reserve Fund of Stock allocated to
the Accounts of Participants who are to receive cash
distributions as of the Valuation Date in question.
7.16 SPECIAL INVESTMENT ELECTION BY QUALIFIED PARTICIPANTS
(a) Each Participant who has attained age fifty-five
and has been a Participant for at least ten years may direct the
investment of a portion of the value of his Employer Contribution
Account and PAYSOP Account into the Investment Funds described in
Section 7.01.
(b) Investment direction is available during the
ninety day period following the last day of each of the five Plan
Years immediately following the Plan Year in which the
Participant first meets both of the eligibility requirements of
Subsection (a) above.
(c) The portion of the Participant's Employer
Contribution Account and PAYSOP Account subject to his direction
is twenty-five percent of the value of such Accounts as of the
last day of the Plan Year to which the direction applies. The
twenty-five percent limit is reduced to reflect any investment
directions pursuant to this Section 7.16 in a previous Plan Year.
In the last period during which a Participant may direct
investments pursuant to this Section 7.16, the limit on the
amount of such Accounts which are subject to his direction will
be increased to fifty percent.
(d) A Participant's investment direction under this
Section 7.16 must be provided to the Committee in writing within
the applicable ninety day period. The investment direction must
specify the portion of the Participant's Employer Contribution
Account and/or PAYSOP Account, which will be invested in the
Investment Funds, in a fixed whole percent, and the Investment
Funds in which such portion will be invested. The investment
direction will be effective no later than one hundred eighty days
after the last day of the Plan Year to which the direction
applies.
ARTICLE VIII
WITHDRAWALS AND LOANS
8.01 POST AGE 59-1/2 WITHDRAWALS
A Participant who has attained age 59-1/2 may withdraw
up to one hundred percent of the value of his Pretax Deferral
Account, determined as of the most recent Valuation Date (a)
which precedes the date the withdrawal request is received by the
Committee on a written form prescribed by the Committee, and (b)
for which the allocation process described in Section 7.03 has
been completed. A Participant may not withdraw from his Employer
Contribution Account or PAYSOP Account except as provided in
Articles IX, X, and XI.
8.02 FINANCIAL HARDSHIP WITHDRAWALS
A Participant who has a financial hardship may withdraw
up to one hundred percent of the value of his Pretax Deferral
Account, determined as of the most recent Valuation Date (a)
which precedes the date the withdrawal request is received by the
Committee on a written form prescribed by the Committee, and (b)
for which the allocation process described in Section 7.03 has
been completed.
(a) A withdrawal must be on account of a hardship.
Effective April 1, 1989, a withdrawal will be deemed to be on
account of a hardship if:
(i) The distribution is for the purpose of:
(A) paying medical expenses described in
Code Section 213(d) incurred by the Participant, his spouse or
his dependents;
(B) purchasing the Participant's principal
residence (excluding mortgage payments);
(C) paying tuition for the next semester or
quarter of post-secondary education for the Participant, his
spouse or his dependents;
(D) preventing the Participant's eviction
from his principal residence or foreclosure on the mortgage on
the Participant's principal residence; or
(E) any other purpose specified by the
Internal Revenue Service as a deemed immediate and heavy
financial need; and
(ii) All of the following are satisfied:
(A) the distribution is not in excess of the
amount of the financial need;
(B) the Participant has obtained all
distributions, other than hardship withdrawals, and all
nontaxable loans under the Plan or any other plan maintained by
an Affiliate;
(C) the Participant does not make Pretax
Deferrals to this Plan or any other plan maintained by an
Affiliate for at least twelve months after he receives the
hardship distribution; and
(D) the Participant's Pretax Deferrals made
in the calendar year immediately following the calendar year in
which the withdrawal occurs do not exceed the limitation of Code
Section 402(g) (as adjusted) for such calendar year, less the
Participant's Pretax Deferrals made in the calendar year in which
the withdrawal was received.
The Committee will determine whether the Participant
has met the requirements of Subsections (i) and (ii) above.
(iii) The amount to be withdrawn may not
exceed the smaller of the total value, determined under this
Section 8.02, of the Participant's Pretax Deferral Account and
the amount necessary to meet the Participant's financial
hardship.
Effective January 1, 1989, a Participant may not
withdraw any earnings credited to his Pretax Deferral Account on
and after such date.
8.03 WITHDRAWALS FROM ROLLOVER ACCOUNT
At any time a Participant may withdraw up to one
hundred percent of the value of his Rollover Account, determined
as of the most recent Valuation Date (a) which precedes the date
the withdrawal request is received by the Committee on a written
form prescribed by the Committee, and (b) for which the
allocation process described in Section 7.03 has been completed.
8.04 AMOUNT AND PAYMENT OF WITHDRAWALS
Application for a withdrawal shall be made on such
forms as the Committee prescribes. Payment will be made to the
Participant as soon as administratively possible following the
date the Committee receives and approves the withdrawal request
from the Participant.
The amount of such withdrawal shall be taken from the
Participant's Account(s) at such time and paid to the Participant
in a single sum.
A Participant may not make more than two withdrawals
under the Plan in any Plan Year. No withdrawal under this Article
VIII shall cause forfeiture of any interests of the Participant
in the Plan.
8.05 LOANS TO PARTICIPANTS
A Participant who is actively employed by an Affiliate
may borrow from his Pretax Deferral Account and Rollover Account
in accordance with the terms and conditions for loans established
by the Committee. Such terms and conditions include, but are not
limited to, the following:
(a) A Participant may have no more than one loan from
this Plan outstanding at any time.
(b) The Participant must apply for the loan, sign a
note payable to the Trustee in the proper amount on a form
prescribed by the Committee, and authorize payroll deductions for
payment of interest and principal, all in accordance with
procedures adopted by the Committee.
Any loan processing fees (charged by a person other
than the Employer) shall be deducted from the principal amount
available to the Participant.
(c) The period of repayment for any loan shall be
arrived at by mutual agreement between the Committee and the
Participant.
However, the period of repayment, including any
extensions resulting from the consolidation of a loan into a
subsequent loan, shall not extend beyond the earlier of five
years or the date such Participant terminates employment with the
Employer.
The five year limit shall not apply to any portion of
the loan used to acquire the Participant's principal place of
residence.
(d) The amount of the loan must be at least $1,000,
but may not exceed the lesser of.
(i) $50,000 reduced by (A) the Participant's
current outstanding loan balance under all plans qualified under
Code Section 401(a) and maintained by an Affiliate, and (B) the
excess of the Participant's highest outstanding loan balance
under such plans during the twelve months preceding the date of
the loan over the Participant's current outstanding loan balance
under such plans; or
(ii) 50% of the vested portion of the
Participant's Pretax Deferred Account under this Plan valued on
the Applicable Valuation Date immediately before the date the
request for a loan is received. "Applicable Valuation Date" means
the most recent Valuation Date (A) which precedes the date the
loan request is received by the Committee on a written form
prescribed by the Committee, and (B) for which the allocation
process described in Section 7.03 has been completed.
(e) All loans shall bear an interest rate equal to two
percentage points above the published prime lending rate of Bank
of America N.T.& S.A on the last business day of the month
preceding the month in which the request for a loan is received,
provided, however, that no loan shall bear a rate of interest
which exceeds the maximum rate permitted by law. The interest
rate so determined shall be fixed for the term of the loan.
(f) The Committee shall establish a loan account for
the Participant, and shall credit the loan account with an amount
equal to the principal amount of the loan granted. The principal
amount shall be withdrawn from Investment Funds according to
rules established by the Committee. Each repayment of principal
on the loan received by the Trustee from the Participant shall
reduce the balance credited to the loan account and each payment
of principal and interest shall increase pro-rata the amount
invested in each Investment Fund according to rules established
by the Committee.
(g) Repayment shall be accomplished through regular
payroll deductions. The Committee may restrict loan amounts if
withholdings of principal and interest would exceed twenty
percent of Compensation in each payroll period. A Participant
shall be entitled to prepay, without penalty, the total accrued
interest and outstanding principal amount of the loan. Such
prepayment may be made by increasing the amount of his payroll
deductions or by any other means.
(h) If a Participant terminates employment with all
Affiliates, incurs a Permanent and Total Disability or undergoes
bankruptcy prior to his repayment of the total principal and
interest on a note held by his loan account, the note in the
Participant's Account shall be cancelled and the unpaid principal
balance deemed distributed to him by the Trust Fund.
(i) The foregoing provisions of this Section 8.05
notwithstanding, the Committee reserves the right to stop
granting loans to Participants at any time.
8.06 DEBITING OF INVESTMENT FUNDS
If a Participant elects to withdraw less than the total
value of any Account, or elects to borrow less than the total
value of any Account, and the Account is invested in more than
one Investment Fund, the withdrawal or loan will be made from
each of the Investment Funds according to rules established by
the Committee.
ARTICLE IX
RETIREMENT, DISABILITY AND DEATH BENEFITS
9.01 RETIREMENT BENEFITS
The retirement benefit payable under the Plan in the
case of a Participant whose employment with all Affiliates
terminates on or after he attains Normal Retirement Age is one
hundred percent of the value of his Accounts on his Distribution
Date. The Participant's Distribution Date is the Valuation Date
coincident with or immediately following the date the terminated
Participant's request for a distribution on a written form
prescribed by the Committee is received by the Committee.
9.02 DISABILITY BENEFITS
The disability benefit payable under the Plan in the
case of a Participant whose employment with all Affiliates
terminates because he is Permanently and Totally Disabled is one
hundred percent of the value of his Accounts on his Distribution
Date.
The Participant's Distribution Date is the Valuation
Date coinciding with or immediately following the date the
Permanently and Totally Disabled Participant's request for a
distribution on a written form prescribed by the Committee is
received by the Committee.
9.03 DEATH BENEFITS
The death benefit payable to a Beneficiary under the
Plan in the case of a Participant whose employment with an
Affiliate terminates due to his death (or who dies after
termination of employment under Sections 9.01 and 9.02, but
before his Distribution Date under such Sections) is one hundred
percent of the value of his Accounts on the Distribution Date.
The Distribution Date with respect to such Participant is the
Valuation Date coincident with or immediately following the date
the request for a distribution by the deceased Participant's
Beneficiary (or if no Beneficiary has been designated, the
representative of his estate) is received by the Committee on a
written form prescribed by the Committee.
ARTICLE X
TERMINATION BENEFITS AND VESTING REQUIREMENTS
10.01 BENEFIT PAYABLE
The benefit payable under the Plan in the case of a
Participant whose employment with all Affiliates terminates for
any reason other than because he became Permanently and Totally
Disabled, died, or retired on or after his Normal Retirement Age
is the vested portion (determined pursuant to Section 10.02) of
the value of his Accounts on his Distribution Date. The
Participant's Distribution Date is the Valuation Date coincident
with or immediately following the date the terminated
Participant's request for a distribution on a written form
prescribed by the Committee is received by the Committee.
10.02 VESTING REQUIREMENTS
(a) The vested portion of a Participant's PAYSOP
Account, Pretax Deferral Account, and Rollover Account is always
one hundred percent.
(b) The vested portion of a Participant's Employer
contribution Account is based on his Service as of the date his
employment terminates, as follows:
(i) With respect to a Participant who terminates
employment on or after July 1, 1989 and before July 1, 1990:
Years of Service Vested Portion
---------------- --------------
Less than 1 year 0%
1 but less than 2 10%
2 but less than 3 20%
3 but less than 4 30%
4 but less than 5 40%
5 but less than 6 60%
6 but less than 7 80%
7 or more years 100%
(ii) With respect to a Participant who terminates
employment on or after July 1, 1990 and who was hired before July
1, 1990:
Years of Service Vested Portion
---------------- --------------
Less than 1 year 0%
1 but less than 2 10%
2 but less than 3 20%
3 but less than 4 30%
4 but less than 5 40%
5 or more years 100%
(iii) With respect to a Participant who
terminates employment after July 1, 1990 and who was first hired
on or after July 1, 1990:
Years of Service Vested Portion
---------------- --------------
Less than 5 years 0%
5 or more years 100%
(c) Notwithstanding the provisions of Subsection (b)
above, when a Participant reaches his Normal Retirement Age, (as
defined in Section 1.25) his vested portion in his Accounts is
always one hundred percent.
10.03 EFFECT OF TERMINATION OF EMPLOYMENT; PERIOD OF
SEVERANCE AND REEMPLOYMENT
(a) If a Participant terminates employment when he is
not one hundred percent vested in his Employer Contribution
Account, the non-vested portion of his Employer Contribution
Account is forfeited on the date of termination. If the
Participant is reemployed before the date on which he incurs a
five year Period of Severance, the portion of his Employer
Contribution Account which was forfeited is reinstated as of the
date he is reemployed. If the Participant later terminates
employment before he is one hundred percent vested in his
Employer Contribution Account, the vested portion of such Account
will not be determined under Section 10.02(b). Instead, such
vested portion will be determined by multiplying the appropriate
vested portion from Section 10.02(b) times the sum of (i) plus
(ii) and then subtracting (ii) from the result. For this purpose:
(i) is the value of (and/or the number of shares
in) the Participant's Employer Contribution Account as of the
Valuation Date coinciding with or immediately following his most
recent termination of employment; and
(ii) is the amount (and/or the number of shares)
previously distributed to the Participant due to his prior
termination of employment.
(b) If a Participant terminates employment when he is
not one hundred percent vested in his Employer Contribution
Account and is reemployed after incurring a five year Period of
Severance, the portion of his Employer Contribution Account that
was forfeited as a result of his termination of employment will
not be reinstated.
10.04 DISPOSITION OF FORFEITURES
All amounts forfeited under any provisions of this Plan
are first applied to reinstate forfeited amounts of other
Participants pursuant to Section 10.03(a). Any remaining
forfeitures are used to reduce the Employer Contributions
required pursuant to Sections 3.03 and 3.04 for the Plan Year in
which they arc forfeited. Forfeitures are first charged against
the portion of a Participant's Employer Contribution Account not
invested in Stock, with any balance charged against the remainder
of his Employer Contribution Account (at the fair market value of
Stock). Financed Shares are forfeited only after all other
amounts in a Participant's Accounts have been forfeited.
ARTICLE XI
DISTRIBUTION OF BENEFITS
11.01 FORM OF BENEFITS FOR RETIREMENT AND OTHER TERMINATION
Amounts distributable pursuant to Articles IX and X are
distributed, at the Participant's or, if applicable,
Beneficiary's election, in one of the following forms:
(a) A single sum payment in cash of the value of his
benefit as of his Distribution Date; or
(b) A single sum distribution consisting of the whole
shares of Stock held in his Accounts as of his Distribution Date
and a single sum payment in each of the value of the remaining
portion of his benefit as of his Distribution Date.
A Participant's or Beneficiary's election may not be
changed or revoked following his Distribution Date.
11.02 TIMING OF DISTRIBUTIONS
(a) Notwithstanding the provisions of Articles IX and
X, if a Participant's employment terminates for any reason and
the value of the vested portion of his Accounts on the Valuation
Date coinciding with or immediately following the date he
terminates employment does not exceed $3,500, his Distribution
Date is the Valuation Date coinciding with or immediately
following the date he terminates employment. Except as provided
in Section 11.04, if a Participant who is otherwise entitled to
elect a Distribution Date does not make an election in the manner
established by the Committee, his Distribution Date is the
Valuation Date coinciding with or immediately following the date
he reaches age sixty-five.
(b) Distributions under the Plan pursuant to Articles
IX, X and XI are made as soon as practicable following the
applicable Distribution Date but in no event later than sixty
days after the end of the Plan Year in which the Participant
reaches age sixty-five, reaches the tenth anniversary of the date
he began participation in the Plan, or terminates employment,
whichever is latest.
With respect to a Participant who attained age seventy
and one-half before January 1, 1988, his entire interest in this
Plan will be distributed by the April 1 following the later of
the calendar year in which the Participant attains age 70-1/2 or
the calendar year in which he retires. In addition, the entire
interest of a Participant in this Plan who attains age seventy
and one-half after December 31, 1987 will be distributed not
later than April 1 following the later of the calendar year in
which the Participant attains age seventy and one-half or
December 31, 1989. After a Participant's entire interest under
the Plan has been distributed under the preceding sentences, his
Account balances under the Plan as of the last day of each Plan
Year thereafter will be distributed to him as soon as practicable
after such Plan Year. Effective for payments made on or after
January 1, 1993 to Participants who have attained age 70-1/2, the
Participant shall be allowed to elect that the minimum amount
required to be distributed under Code Section 401(a)(9) be
distributed in lieu of the distribution of his entire interest as
described above.
(c) If a Participant terminates employment before his
Normal Retirement Age and elects pursuant to Section 10.01(c) to
have his Distribution Date be the Valuation Date coinciding with
or immediately following the date he reaches age 65, he shall
continue to be allowed to direct the investment of his Pre-tax
Deferral Account and Rollover Account according to the terms of
this Plan until such Accounts are distributed or forfeited.
(d) No shares of Stock allocated to a Participant's
PAYSOP Account may be distributed to the Participant before the
end of the eighty-fourth month beginning after the Valuation Date
as of which such shares of Stock were allocated to his PAYSOP
Account.
This restriction will not apply if the distribution is:
(i) due to the Participant's retirement,
Permanent and Total Disability, death or other termination of
employment with all Affiliates;
(ii) due to a corporate reorganization described
in Code Section 409(d)(2) and (3);
(iii) due to Plan termination; or
(iv) a distribution of cash dividends.
11.03 RIGHTS, OPTIONS AND RESTRICTIONS ON STOCK
(a) If Stock is distributed from the Plan at a time
when it is not readily tradable on an established public market,
then the provisions of this Section apply.
(b) Any shares of Stock distributed by the Trust are
subject to a "right of first refusal". The right of first
refusal must provide that, before any subsequent transfer, the
shares must first be offered for purchase in writing to the
Company, and then to the Trust, at the then fair market value. A
bona fide written offer from an independent prospective buyer is
deemed to be the fair market value of the Stock for this purpose.
The Company and the Committee (on behalf of the Trust) have a
total of fourteen days to exercise the right of first refusal on
the same terms offered by a prospective buyer. The Company may
require that a Participant entitled to a distribution of Stock
execute an appropriate stock transfer agreement (evidencing the
right of first refusal) before receiving a certificate for Stock.
(c) The Company will issue a "put option" to any
Participant who receives a distribution of Stock. The put option
must permit the Participant to sell the distributed Stock to the
Company at any time during two option periods, at the fair market
value of the shares. The first put option period is for at least
sixty days beginning on the date of distribution. The second put
option period is for at least sixty days beginning after the new
determination of the fair market value of Stock by the Committee
(and notice to the Participant) in the following Plan Year. The
put option must provide that if the Participant exercises the put
option, the Company, or the Plan if the Plan so elects, will
repurchase the Stock as follows:
(i) If the distribution is a total distribution,
payment of the fair market value of a Participant's Employer
Contribution Account and PAYSOP Account will be made in five
substantially equal annual payments. The first installment will
be paid not later than thirty days after the Participant
exercises the put option. The Plan will pay a reasonable rate of
interest and provide adequate security on amounts not paid after
thirty days.
(ii) If the distribution is not a total
distribution, the Plan will pay the Participant an amount equal
to the fair market value of the Stock repurchased no later than
thirty days after the Participant exercises the put option.
(d) The rights and protections with regard to Stock
acquired with the proceeds of an exempt loan, including the
provisions of this Section 11.03, are not terminable should the
exempt loan be paid or the Plan cease to qualify as an Employee
Stock Ownership Plan under Code Section 4975.
11.04 SPECIAL DISTRIBUTION AND PAYMENT REQUIREMENTS
(a) Notwithstanding any other provision of the Plan,
other than the provision requiring the Participant's consent to a
distribution in excess of $3,500, a Participant may elect to have
his Employer Contribution Account and PAYSOP Account distributed
as follows:
(i) If the Participant terminates employment
after attaining his Normal Retirement Age, or on account of his
death, or Permanent and Total Disability, the distribution of
such portion of the Participant's Employer Contribution Account
and PAYSOP Account will begin not later than one year after the
close of the Plan Year in which such event occurs unless the
Participant elects otherwise under other provisions of this Plan.
(ii) If the Participant separates from service for
any reason other than those described in clause (i) above, and is
not reemployed by the Employer at the end of the fifth Plan Year
following the Plan Year in which he terminates employment,
distribution of such portion of the Participant's Employer
Contribution Account and PAYSOP Account will begin not later than
one year after the close of the fifth Plan Year following the
Plan Year in which the Participant terminates employment unless
the Participant elects otherwise under other provisions of this
Plan.
(iii) If the Participant terminates employment
for any reason other than those described in clause (i) above,
and is reemployed by the Employer as of the last day of the fifth
Plan Year following the Plan Year in which he terminates
employment, distribution to the Participant, prior to any
subsequent separation from service, shall be in accordance with
terms of the Plan other than this Section 11.04.
For purposes of this Section 11.04, Stock shall not
include any Stock acquired with the proceeds of an Exempt Loan
until the close of the Plan Year in which such loan is repaid in
full.
(b) Distributions required under this Section 11.04
shall be made in substantially equal annual payments over a
period of five years unless the Participant otherwise elects
under provisions of this Plan other than this Section 11.04. In
no event shall such distribution period exceed the period
permitted under Code Section 401(a)(9).
(c) The portion of a Participant's Employer
Contribution Account and PAYSOP Account attributable to Stock
which was acquired by the Plan after December 31, 1986, shall be
determined by multiplying the number of shares of such Stock held
in the Employer Contribution Account and PAYSOP Account by a
fraction, the numerator of which is the number of shares acquired
by the Plan after December 31, 1986 and allocated to
Participants' Employer Contribution Accounts and PAYSOP Accounts
(not to exceed the number of shares held by the Plan on that date
of distribution) and the denominator of which is the total number
of such shares held by the Plan at the date of the distribution.
ARTICLE XII
COMMITTEE
12.01 APPOINTMENT OF COMMITTEE
A Committee consisting of at least three members will
be appointed by the Board to administer the Plan on behalf of the
Company. A vacancy on the Committee which results from death,
resignation or otherwise, will be filled from time to time by
appointment of a new Committee member by the Board, and a member
of the Committee may be removed at any time at the discretion of
the Board.
12.02 MANNER OF ACTION
A majority of the members of the Committee at the time
in office will constitute a quorum for the transaction of
business. All resolutions adopted, and other actions taken by
the Committee at any meeting will be by the vote of a majority of
those present at the meeting. Upon the unanimous written consent
of the members at the time in office, action of the Committee may
bc taken without a meeting.
12.03 CHAIRMAN, SECRETARY AND EMPLOYMENT OF SPECIALISTS
The Company may appoint a Chairman of the Committee.
The Committee will elect a Secretary who may, but need not, be a
member of the Committee. They may authorize one or more of their
number or any agent to execute or deliver any instrument or
instruments on their behalf, and may employ such counsel,
auditors, and other specialists and such clerical, medical,
actuarial and other services as they may require in carrying out
the provisions of the Plan.
12.04 SUBCOMMITTEES
The Committee may appoint one or more subcommittees and
delegate such of its power and duties as it deems desirable to
any such subcommittee, in which case every reference in the Plan
made to the Committee is deemed to mean or include the
subcommittees as to matters within their jurisdiction. The
members of any subcommittee will consist of such officers or
other employees of the Company and such other persons as the
Committee may appoint.
12.05 OTHER AGENTS
The Committee may also appoint one or more persons or
agents to aid it in carrying out its duties as Plan Administrator
and Named Fiduciary, as defined in ERISA, and delegate such of
its power and duties as it deems desirable to such persons or
agents.
12.06 RECORDS
All resolutions, proceedings, acts and determinations
of the Committee shall be recorded by the Secretary thereof or
under his supervision, and all such records, together with such
documents and instruments as may be necessary for the
administration of the Plan, shall be preserved in the custody of
the Secretary.
12.07 POWERS AND DUTIES
(a) The Committee has full power to administer the
Plan and to construe and apply all of its provisions on behalf of
the Company. The Company is the Plan Administrator. The Company
is the Named Fiduciary within the meaning of ERISA Section
402(a). The Company and Committee may delegate to any other
person or organizations any of its powers and duties with respect
to the operation of this Plan. The Committee's powers and duties,
unless properly delegated, include, but are not limited to:
(i) Deciding questions relating to eligibility,
continuity of Service and amount of benefits;
(ii) Deciding disputes which may arise with regard
to the rights of employees, Participants and their legal
representatives or Beneficiaries under the terms of the Plan.
Such decisions by the Committee shall be deemed final in each
case;
(iii) Obtaining such information from the Employer
with respect to employees as shall be necessary to determine the
rights and benefits of such employees under the Plan. The
Committee may rely conclusively upon such information furnished
by the Employer;
(iv) Compiling and maintaining all records
necessary for the Plan;
(v) Furnishing the Employer, upon request, such
reports with respect to the administration of the Plan as are
reasonable and appropriate;
(vi) Authorizing the Trustee to make payment of
all benefits as they become payable under the Plan;
(vii) Engaging such legal, administrative,
actuarial, investment, accounting, consulting and other
professional services as the Committee deems proper;
(viii) Adopting rules and regulations for the
administration of the Plan not inconsistent with the Plan;
(ix) Doing and performing such other actions as
may be provided for in other parts of this Plan; and
(x) Allocating Stock to such appropriate Accounts
as the Committee determines.
12.08 INTERESTED MEMBERS
No Committee member shall participate in any action of
the Committee on a matter in which such member has a specialized
individual interest as a Participant in the Plan. Such matters
shall be determined by a majority of the remainder of the members
of the Committee.
12.09 INDEMNIFICATION
The Company shall and does by the following items
indemnity and hold the members of the Committee and each of them,
harmless from the effects and consequences of their acts,
omissions and conduct in their official capacities, except to the
extent that the effects and consequences thereof shall result
from their own willful misconduct, breach of good faith or gross
negligence in the performance of their duties. The Company shall
have the right, but not the obligation, to conduct the defense of
such members in any proceeding to which this Section applies.
The foregoing right of indemnification shall not be exclusive of
other rights to which each such member may be entitled as a
matter of law or by other indemnity coverage provided by the
Company.
The Company's obligations under this Section may be
satisfied through purchase of a policy or policies of insurance
providing equivalent protection.
12.10 CONCLUSIVENESS OF ACTION
Any action on matters within the discretion of the
Committee shall be conclusive, final and binding upon all
Participants of the Plan and upon all persons claiming any rights
hereunder including Beneficiaries.
12.11 PAYMENT OF EXPENSES
The members of the Committee shall serve without
compensation for services as such. However, the Company may
reimburse such members for all necessary and proper expenses
incurred in carrying out their duties under the Plan. The
compensation or fees of accountants, counsel, employee benefit
consultants, and other specialists and any other costs of
administering the Plan or Trust, unless paid directly by the
Company are paid from the Trust Fund and will be charged against
Participants' Accounts.
Investment costs and taxes that are paid from the Trust
Fund are paid as follows. Brokerage commissions, transfer taxes,
and other charges and expenses in connection with the purchase
and sale of securities are added to the cost of such securities,
as the case may be. There will be no commission on transactions
with the Company or any other party in interest involving Stock.
Taxes, if any, applicable to the Trust Fund which are payable by
the Trustee will be charged against Participants' Accounts, other
than any excise tax payable directly by the Trustee pursuant to
Section 4975 of the Code.
12.12 CLAIMS PROCEDURE
Benefits are provided from this Plan through procedures
initiated by the Committee, and the Participant need not file a
claim. However, if a Participant or Beneficiary believes he is
entitled to a benefit, or a benefit different from the one he
receives, then the Participant or Beneficiary may file a claim
for the benefit by writing a letter to the Committee.
If any claim for benefits under the Plan is wholly or
partially denied, the claimant will be given a written notice of
the denial within ninety days after the claim is received.
However, if special circumstances require an extension of time,
and written notice of the extension is furnished to the claimant,
he will be given a written notice of the denial within one
hundred and eighty days after the claim is received. Notice of
the denial will state the following information:
(a) The specific reason or reasons for the denial;
(b) Specific reference to pertinent Plan provisions on
which denial is based;
(c) A description of any additional material or
information necessary for the claimant to perfect the claim and
an explanation of why the material or information is necessary;
(d) An explanation that a full and fair review by the
Committee of the decision denying the claim may be requested by
the claimant or his authorized representative by filing with the
Company, within sixty days after the claimant receives the
denial, a written request for review; and
(e) If a request for review is filed, the claimant or
his authorized representative may review pertinent documents and
submit issues and comments in writing within the same sixty day
period specified in paragraph (d) above.
The decision of the Committee upon review will be made
by the Committee's delegate, will be made promptly, and not later
than sixty days after the Committee's receipt of the request for
review. However, if special circumstances require an extension
of time for processing, the claimant will be so notified and a
decision will be rendered as soon as possible, but not later than
one hundred and twenty days after receipt of the request for
review. If the claim is denied, wholly or in part, the claimant
will be given a copy of the decision promptly. The decision will
be in writing and will include specific reasons for the denial,
specific references to the pertinent Plan provisions on which the
denial is based and will be written in a manner calculated to be
understood by the claimant.
ARTICLE XIII
AMENDMENT TO THE PLAN
13.01 RIGHT TO AMEND
The Board, or the Committee if authorized by the Board,
has the right to amend the Plan at any time and, from time to
time, to any extent that IT deems advisable. No amendment will
increase the duties or responsibilities of the Trustee without
the Trustees written consent. No amendment may be made to this
Plan which attempts to transfer any part of the corpus or income
of the Trust Fund for purposes other than the exclusive benefit
of Participants and their Beneficiaries. No amendment may deprive
any Participant or Beneficiary of any benefits to which he is
entitled under the Plan with respect to contributions previously
made to the Plan. No amendment may eliminate or reduce an early
retirement benefit or eliminate an optional form of distribution.
ARTICLE XIV
TERMINATION OF THE PLAN
14.01 RIGHT TO TERMINATE
The Board has the right to terminate the Plan in whole
or in part at any time. In the event of a termination, partial
termination or complete discontinuation of contributions, each
affected Participant will become one hundred percent vested in
the value of all his Accounts.
14.02 CORPORATE REORGANIZATION
In the event the Company is dissolved or liquidated or
shall by appropriate legal proceedings be adjudged bankrupt, or
in the event judicial proceedings of any kind result in the
involuntary dissolution of the Company, the Plan shall be
terminated. The merger, consolidation or reorganization of the
Company, or the sale of the Company or of all or substantially
all of its assets or stock, shall not terminate the Plan if there
is delivery to the Company, by its successor or by the purchaser
of all or substantially all of its stock or assets, a written
instrument requesting that it bc substituted for the Company and
agreeing to perform all the provisions hereof which the Company
is required to perform hereunder. Upon the receipt of said
instrument, with the approval of the Company, the successor or
the purchaser shall be substituted for the Company herein, and
the Company shall be relieved and released from all obligations
of any kind, character or description herein or in any trust
agreement.
14.03 PLAN MERGER AND CONSOLIDATION
In the event that the Plan and Trust Fund merges or
consolidates with, or transfers its assets or liabilities to, any
other qualified plan of deferred compensation, no Participant
herein shall, solely on account of such merger, consolidation or
transfer, have an account balance on the day following such event
which is less than his account balance on the day preceding such
event. For the purpose of this Section, a Participant's account
balance shall be calculated based upon the assumption that a plan
termination and distribution of assets occurred on each of the
above-mentioned days. In no event will this provision be
construed to require full vesting upon a merger, consolidation,
or transfer of assets unless the Plan is subsequently partially
or wholly terminated or contributions are completely
discontinued.
ARTICLE XV
TRUST AND THE TRUSTEE
15.01 BOARD TO SELECT TRUSTEE
The Board will select a Trustee to hold and invest the
Trust Fund in accordance with the terms of a trust agreement
and/or other contract. The Trustee must be an individual or
individuals, a bank or trust company incorporated under the laws
of the United States or of any state and qualified to operate as
a trustee, a legal reserve life insurance company, or a
combination of such entities. The Board may, from time to time,
change the Trustee then serving under the trust agreement and/or
other contract to another Trustee or elect to terminate the trust
and/or other contract and hold the Plan assets in any other
method acceptable under ERISA.
Any trust agreement and/or other contract are
designated as and constitute a part of the Plan. Any rights which
a person has under this Plan are subject to all of the terms and
provisions of the trust agreement and/or other contract.
ARTICLE XVI
ADOPTION BY AFFILIATE
16.01 AFFILIATE PARTICIPATION
An Affiliate may become a party to the Plan and Trust
Agreement by adopting the Plan for the benefit of any specified
group of its Employees, effective as of the date specified in
such adoption:
(a) By filing with the Company a certified copy of a
resolution of its board of directors to that effect, and/or such
other instruments as the Company may require; and
(b) By the Company's filing with the then Trustee a
copy of such resolution, together with a certified copy of
resolutions of the Board approving such adoption.
The Company may require an adopting Affiliate to
execute an instrument of adoption in such form as is acceptable
to the Company. Except as provided below, an Employee of an
Affiliate shall earn Service only with respect to periods for
which his employer is an Affiliate. Notwithstanding the above,
to the extent explicitly provided by the Company in a stock or
asset acquisition, merger or other similar transaction, an
Employee of a Affiliate shall earn Service with respect to
periods of employment with such Affiliate prior to the time it
became an Affiliate.
16.02 ACTION BINDING ON PARTICIPATING AFFILIATES
As long as the Company is party to the Plan and the
Trust Agreement it shall be empowered to act thereunder for any
Employer in all matters respecting the Committee and the Trustee
and the designation of Affiliates, and any action taken by the
Company with respect thereto shall automatically include and be
binding upon any Employer which is a party to the Plan.
16.03 TERMINATION OF PARTICIPATION OF AFFILIATE
The Company reserves the right, in its sole discretion
and at any time, to terminate the participation in this Plan of
any or all Affiliates. Such termination shall be effective
immediately upon notice of such termination from the Company to
the Trustee and the Affiliate being terminated. In event of such
termination, this Plan shall not terminate, but the portion of
the Plan attributable to the Affiliate shall become a separate
Plan, and the Company shall inform the Trustee of the portion of
the Trust Fund that is then attributable to the participation of
such terminated Affiliate. Such portion shall as soon thereafter
as is administratively feasible be set apart by the Trustee as a
separate Trust which shall be part of the separate Plan of such
terminated Affiliate. Thereafter the administration, control, and
operation of the Plan with respect to such terminated Affiliate
shall be on a separate basis (with the Affiliate assuming the
functions assigned to the Company hereunder) in accordance with
the terms hereof, or as such terms may be amended by appropriate
action of such terminated Affiliate in accordance with the
provisions of Article XIII.
ARTICLE XVII
TOP-HEAVY PROVISIONS
17.01 DEFINITIONS
Wherever used in this Article XVII, the following words
and phrases have the meaning specified below:
(a) "Accumulated Account" means the total value of an
employee's Accounts as of the Valuation Date which coincides with
or immediately precedes the Determination Date. Accumulated
Accounts includes:
(i) amounts attributable to employee
contributions (other than deductible employee contributions),
(ii) amounts rolled over or transferred directly
from a plan sponsored by an unrelated employer (within the
meaning of Code Section 414(b), (c) or (m)), but only if received
by the Plan before January 1, 1984.
(iii) amounts rolled over or transferred directly
from a plan sponsored by a related employer (within the meaning
of Code Section 414(b), (c) or (m)), without regard to when
received by the Plan, and
(iv) distributions to the employee during the
Plan Year which includes the Determination Date and the four
immediately preceding Plan Years, unless already reflected in the
employee's Accounts. The preceding sentence shall also apply to
distributions under a terminated plan which, if it had not been
terminated would have been required to be included in the
Aggregation Group. Accumulated Accounts will not include any
distribution rolled over or transferred directly to a related
employer (within the meaning of Code Section 414(b), (c) or (m)).
With respect to a Nonkey Employee who was Key Employee with
respect to a plan in a prior year, Accumulated Accounts will not
include any of the employee's Accounts. Accumulated Accounts
will not include the Accounts of an employee who has not
performed any service for the Employer during the five year
period ending on the Determination Date. However, if the employee
again performs services his Accounts will be included.
(b) "Determination Date" means in any Plan Year the
last day of the immediately preceding Plan Year.
(c) "Key Employee" means at any given time an
employee, a deceased employee, or the beneficiary of a deceased
employee who during the current Plan Year or any of the four
immediately preceding Plan Years is:
(i) an officer of an Employer with annual
earnings from the Employer (in the officer year) greater than
150% of the maximum dollar limit under Code Section 415(c)(1)(a)
in effect for the calendar year in which the Plan Year ends. In
any Plan Year, officer will not include more than the lesser of:
(A) fifty employees, or
(B) the greater of three employees or ten
percent of the greatest number of employees the Employer had
during the current Plan Year or any of the four immediately
preceding Plan Years. Such limited number of officers will be
selected from the group of all persons otherwise considered
officers under this paragraph (i) in the current Plan Year or
four immediately preceding Plan Years, selecting only those who
had the highest annual earnings in such five year period;
(ii) an employee who owns, during the Plan Year
containing the Determination Date or any of the four preceding
Plan Years, at least a one-half percent interest in the Employer,
unless at least ten other employees own, during the Plan Year
containing the Determination Date or any of the four immediately
preceding Plan Years, a greater percent interest than such
employee. However, an employee will not be considered an owner
under this paragraph (ii) unless his annual earnings from the
Employer for the Plan Year of ownership are greater than the
maximum dollar amount under Code Section 415(c)(1)(A) in effect
for the calendar year in which such Plan Year ends. An employee's
ownership interest during a Plan Year is his greatest ownership
interest at anytime during the Plan Year. If two employees have
the same ownership interest, the employee with the greater
earnings in the Plan Year of such ownership will be deemed to
have the greater ownership interest;
(iii) an employee who owns at least five percent
of an Employer; or
(iv) an employee who owns at least one percent of
an Employer and has annual earnings from the Employer of more
than $150,000.
For purposes of determining the number of officers of
the Employer, all employees of organizations required to be
aggregated under Code Section 414(b), (c) and (m) will be
considered employees of the Employer. For purposes of
determining earnings from the Employer, all earnings, as stated
on Form W-2 for the calendar year ending within the Plan Year,
from all organizations required to be aggregated under Code
Section 414(b), (c) and (m) will be treated as earned from the
Employer. For purposes of determining ownership interest, each
entity that would otherwise be aggregated under Code Section
414(b), (c) and (m) will be treated as a separate Employer.
Ownership includes any interest constructively owned under the
applicable provisions of the Code.
Employee will not include any employee or beneficiary
of an employee who did not have earnings from an Employer during
the five year period ending on the Determination Date.
(d) "Nonkey Employee" means at any given time an
employee who is not a Key Employee.
17.02 DETERMINATION OF TOP HEAVY STATUS - SINGLE PLAN
If this Plan is the only retirement plan qualified
under Code Section 401(a) maintained by an Affiliate, the rules
of this Section 17.02 will apply to determine if this Plan is Top
Heavy. The Plan will be Top Heavy during a Plan Year if as of
the Determination Date in such Plan Year the value of the
Accumulated Accounts under the Plan of all Key Employees exceeds
sixty percent of the value of Accumulated Accounts under the Plan
of all employees.
17.03 DETERMINATION OF TOP HEAVY STATUS - MULTIPLE PLANS
(a) If an Affiliate maintains more than one retirement
plan qualified under Code Section 401(a), the rules of this
Section 17.03 will apply to determine if this Plan is Top Heavy.
This Plan will be Top Heavy during a Plan Year if the
Plan is required to be in the Aggregation Group on the Plan's
Determination Date for such Plan Year and the Aggregation Group
is Top Heavy.
The Aggregation Group is Top Heavy if the value of the
Accumulated Accounts for all Key Employees of all the plans in
the group exceeds sixty percent of the value of the Accumulated
Accounts for all employees of all the plans in the group. The
Accumulated Accounts of each plan will be determined separately
as of each plan's Determination Date and then aggregated by
calendar year. If a plan in the Aggregation Group is a defined
benefit plan (as defined in Code Section 414(j), for purposes of
this subsection (a) value of the Accumulated Accounts means the
present value of benefits as defined under the top heavy
provisions of such plan.
(b) The Aggregation Group consists of all the
Affiliate's retirement plans qualified under Code Section 401(a)
which are either required or permitted to be in the Aggregation
Group.
A plan is required to be in the Aggregation Group if
during the Plan Year containing the Determination Date or any of
the four preceding Plan Years:
(1) the Plan has at least one Key Employee, or
(2) the Plan is required to be aggregated with a
plan with at least one Key Employee so that the later plan meets
the requirements of Code Sections 401(a)(4) or 410.
A plan, which has been formally terminated, has ceased
crediting service for benefit accruals and vesting, and has been
or is distributing all plan assets to participants or their
beneficiaries as soon as administratively feasible, is required
to be in the Aggregation Group if it was maintained during the
Plan Year containing the Determination Date or any of the four
preceding Plan Years and it would, but for the fact that it
terminated, be required to be in the Aggregation Group pursuant
to the preceding sentence.
A plan is permitted to be in the Aggregation Group if
it is not required to be in the Aggregation Group, provided
including it does not prevent the Aggregation Group as a whole
from meeting the requirements of Code Sections 402(a)(4) and 410.
17.04 EFFECT OF TOP HEAVY STATUS
If the Plan is Top Heavy for any Plan Year, the
requirements of this Section 17.04 apply during such Plan Year,
superseding all other Plan provisions inconsistent with its
terms.
(a) MINIMUM VESTING
The vested portion of a Participant who has completed
one Hour of Service in any Plan Year in which the Plan is Top
Heavy is determined under the schedule designated below in this
Section 17.04(a) or the applicable schedules in Section 10.02,
whichever is more favorable to the Participant:
SERVICE VESTED PORTION
------- --------------
less than 2 years 0%
2 but less than 3 years 20%
3 but less than 4 years 40%
4 but less than 5 years 60%
5 but less than 6 years 80%
6 or more years 100%
In each Plan Year in which the Plan is not Top
Heavy, which occurs immediately after a Plan Year in which the
Plan is Top Heavy, an employee who is participating in the Plan
during the Election Period has the right to elect to continue to
be subject to the vesting schedule in this subparagraph (a). The
Election Period begins on the date the Plan is determined not to
be Top Heavy and ends on the later of sixty days after the Plan
is determined not to be Top Heavy or sixty days after the
employee is given written notice that the Plan is no longer Top
Heavy.
(b) MINIMUM CONTRIBUTION
On the last day of any Plan Year in which the Plan is
Top Heavy an Employer Contribution will be allocated to the
appropriate Account of each employee who is eligible to
participate in the Plan pursuant to Section 2.01 on such date.
The amount of such contribution, when aggregated with all other
contributions allocated to the Participant's Pretax Deferral
Account and Employer Contribution Account and his employer
contribution account under the FHP Money Purchase Pension Plan
during the Plan Year must equal the lesser of-
(i) Three percent of the Participant's earnings,
as stated on Form W-2 for the calendar year ending within such
Plan Year,
or
(ii) A percent of the Participant's earnings, as
defined in subsection (1) above, equal to the percentage at which
contributions (including Pretax Deferrals) are allocated pursuant
to Sections 4.02, 4.03, and 4.05 (or required to be allocated)
for the Plan Year for the Key Employee for whom such percentage
is the highest for the year.
The Employer will make an additional contribution to
the Plan sufficient to make the allocation described above.
This Subsection (b) applies without regard to
contributions or benefits under Social Security or any other
Federal or State law.
(c) ADJUSTMENT TO LIMITATION ON ANNUAL ADDITIONS
(i) If an Affiliate also maintains a qualified
defined benefit plan (as defined in Code Section 414(j) the
denominator of both the defined benefit plan fraction and defined
contribution plan fraction, as described in Code Section 415(e),
for the Limitation Year ending in such Plan Year will be adjusted
by substituting one for one and twenty-five one hundredths in
each place the figure occurs.
(ii) The adjustments referred to in paragraph (i)
are not required if:
(A) the Plan would not be Top Heavy if
ninety percent were substituted for sixty percent in Sections
17.02 and 17.03, and
(B) Subsection (b)(i) above is adjusted by
substituting four percent for three percent where the figure
occurs.
(iii) The adjustments referred to in paragraph (i)
above do not apply to any Participant as long as no Employer
Contributions, forfeitures, salary deferrals or nondeductible
voluntary contributions are allocated to such Participant's
Accounts and the Participant does not accrue any benefits under
the defined benefit plan.
ARTICLE XVIII
MISCELLANEOUS
18.01 VOLUNTARY PLAN
The Plan is purely voluntary on the part of the Company
and Employer and neither the establishment of the Plan nor any
amendment thereof, nor the creation of any fund or account, nor
the payment of any benefits shall be construed as giving any
person a legal or equitable right as against the Company, an
Employer, the Trustee or the Committee unless the same shall be
specifically provided for in this Plan or conferred by
affirmative action of the Committee or the Company in accordance
with the terms and provisions of this Plan.
Nor shall such actions be construed as giving any
Employee or Participant the right to be retained in the service
of the Employer.
All Employees and/or Participants shall remain subject
to discharge to the same extent as though this Plan had not been
established.
18.02 NONALIENATION OF BENEFITS
Participants and their Beneficiaries shall be entitled
to all the benefits specifically set out under the terms of the
Plan, but neither said benefits nor any of the property rights
therein shall be assignable or distributable to any creditor or
other claimant of such Participant. A Participant shall not have
the right to anticipate, assign, pledge, accelerate or in any way
dispose of or encumber any of the monies or benefits or other
property which may be payable or become payable to such
Participant or his Beneficiary.
The preceding sentence shall also apply to the creation,
assignment, or recognition of a right to any benefit payable with
respect to Participant pursuant to a domestic relations order,
unless such order is determined to be a qualified domestic
relations order, as defined in Code Section 414(p).
18.03 INABILITY TO RECEIVE BENEFITS
If the Committee receives evidence that (a) a person
entitled to receive any payment under the Plan is physically or
mentally incompetent to receive payment and to give a valid
release therefor, and (b) another person or an institution is
then maintaining or has custody of such person, and no guardian,
committee or other representative of the estate of such person
has been duly appointed by a court of competent jurisdiction,
such payment may be made to such other person or institution
referred to in (b) above. The release to such other person or
institution shall be a valid and complete discharge for the
payment.
18.04 LOST PARTICIPANTS
If the Committee is unable within two years after a
distribution becomes due, and after reasonable and diligent
effort, to locate a Participant or Beneficiary who is entitled to
payment under the Plan, the payment due such person shall become
a forfeiture; provided, however, that if the Participant or
Beneficiary later files a claim for his benefit it shall be
reinstated. Notification by certified or registered mail to the
last known address of the Participant or Beneficiary shall be
deemed a reasonable and diligent effort to locate such person.
18.05 LIMITATION OF RIGHTS
Nothing in the Plan expressed or implied is intended or
shall be construed to confer upon or give to any person, firm or
association other than the Company, an Employer, the Participant
and their successors in interest any right, remedy or claim under
or by reason of this Plan.
18.06 ABSENCE OF GUARANTY
Each Participant (and his Beneficiary) assumes all risk
connected with any decreased in the market value of any assets
held under the Plan. Neither the Company nor the Employer in any
way guarantees the Trust Fund from loss or depreciation, or the
payment of any amount that may be or become due to any person
from the Trust Fund. The Trust Fund shall be the sole source of
distributions to be made under this Plan.
18.07 INVALID PROVISIONS
In case any provision of this Plan shall be held
illegal or invalid for any reason, said illegality or invalidity
shall not affect the remaining parts of this Plan, but this Plan
shall be construed and enforced as if said illegal and invalid
provisions had never been inserted herein.
18.08 ONE PLAN
This Plan may be executed in any number of
counterparts, each of which shall be deemed an original and said
counterparts shall constitute but one and the same instrument and
may be sufficiently evidenced by any one counterpart.
18.09 GOVERNING LAW
The Plan shall be governed by and construed in
accordance with the Federal laws governing employee benefit plans
qualified under the Code and in accordance with the laws of the
State of California where such laws are not preempted by the
aforementioned federal laws.
ARTICLE XIX
DIRECT ROLLOVERS
19.01 DIRECT ROLLOVERS
This Article applies to distributions made on or after
January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election
under this Article, a distributee may elect, at the time and in
the manner prescribed by the Committee, to have any portion of an
eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct
rollover.
19.02 DEFINITIONS
(a) Eligible rollover distribution: An eligible
rollover distribution is any distribution of all or any portion
of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period
of ten years or more; any distribution to the extent such
distribution is required under Section 401(a)(9) of the Code; and
the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
(b) Eligible retirement plan: An eligible retirement
plan is an individual retirement account described in Section
408(a) of the Code, an individual retirement annuity described in
Section 408(b) of the Code, an annuity plan described in Section
403(a) of the Code, or a qualified plan described in Section
401(a) of the Code, that accepts the distributee's eligible
rollover distribution. However, in the case of an eligible
rollover distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account or individual
retirement annuity.
(c) Distributee: 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) Direct rollover: A direct rollover is a payment
by the Plan to the eligible retirement plan specified by the
distributee.
IN WITNESS WHEREOF, this Restated Plan is adopted as of
June 7, 1993.
FHP INTERNATIONAL CORPORATION
By: /S/ Jack D. Massimino
Title: Executive Vice
President
Date: 6/9/93
FHP, INC.
By: /s/ Jack D. Massimino
Title: Executive Vice
President
Date: 6/9/93