EXHIBIT 4.2
1994-1 AMENDMENT TO THE FHP INTERNATIONAL
CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
AMENDMENT 1994-1
FHP International Corporation
Employee Stock Ownership Plan
WHEREAS, FHP International Corporation and FHP, Inc.
(collectively, the "Companies") maintain the FHP International
Corporation Employee Stock Ownership Plan (the "Plan"); and
WHEREAS, the Plan has applied to the Internal Revenue
Service for a determination letter regarding the tax-qualified
status of the Plan; and
WHEREAS, the Internal Revenue Service has requested
that certain technical corrections be made to the Plan in
connection with its application for a determination letter; and
WHEREAS, it is also necessary to amend the Plan to
comply with the reduction to the limitation on compensation under
Section 401(a)(17) of the Internal Revenue Code of 1986, as
amended;
NOW, THEREFORE, BE IT RESOLVED, the Plan is hereby
amended, effective July 1, 1989 (except as otherwise stated
below), as follows:
1. The second paragraph of Section 1.08 of the Plan
is amended to read as follows:
"A Participant's annual Compensation in excess of
$200,000 is disregarded for all purposes under the
Plan. Such dollar limit will be adjusted each year
pursuant to Code Section 401(a)(17). For purposes of
the $200,000 limitation, the Compensation of any
Participant who is either a 5% owner (as defined in
Section 416(i)(1) of the Code), or one of the ten most
highly paid Highly Compensated Employees during the
Plan Year ("First Participant") shall be aggregated
with the Compensation of any Participant who has not
attained age 19 and is a lineal descendant of the First
Participant and any Participant who is the spouse of
the First Participant. In any case in which such
aggregation would produce Compensation in excess of the
$200,000 limitation, the amount of the First
Participant's Compensation that is considered under the
Plan shall be reduced until the $200,000 limitation is
met. This paragraph is effective July 1, 1989."
2. Effective July 1, 1994, Section 1.08 of the Plan
is amended by adding the following paragraph at the end thereof:
"Notwithstanding the foregoing, for Plan Years
beginning on or after January 1, 1994, the $200,000
limit referred to above shall be reduced to $150,000
adjusted in accordance with Section 401(a)(17)(B) of
the Code. For purposes of applying the $150,000 limit,
the rules set forth in the preceding paragraphs shall
continue to apply, except that "$150,000" shall replace
"$200,000" each place it appears. The $150,000 limit
shall be adjusted in increments of $10,000."
3. The third sentence of Section 7.09 of the Plan is
amended to read as follows:
"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 and who meets requirements similar to
the requirements of Treasury Regulations promulgated
under Code Section 170(a)(1), if such an appraisal of
the fair market value of the Stock as of the relevant
date has been obtained."
4. Effective January 1, 1994, Section 11.04 of the
Plan is amended by adding the following subsection at the end
thereof to read as follows:
"(d) Notwithstanding anything else contained
herein, if a distribution is one to which Sections
401(a)(11) and 417 of the Code do not apply, such
distribution may commence less than 30 days after the
notice required under Treasury Regulation Section
1.411(a)-11(c) is given, provided that:
(i) the Committee clearly informs the Participant
that the Participant has a right to a period of at least 30 days
after receiving the notice to consider the decision of whether or
not to elect a distribution (and, if applicable, a particular
distribution option), and
(ii) the Participant, after receiving the notice,
affirmatively elects a distribution."
5. Clauses (i) and (ii) of subsection 17.01(c) of the
Plan are amended to read as follows:
"(i) an officer of an Employer with annual
earnings from the Employer greater than 50% of the
maximum dollar limit under Code Section 415(b)(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 is one of the ten employees
of the Employer having annual compensation from such Employer of
more than the limitation in effect under Section 415(c)(1)(A) of
the Code and owning (or considered as owning within the meaning
of Section 318 of the Code) both more than a 1/2% interest and
the largest interests in such Employer. 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."
IN WITNESS WHEREOF, the Companies have caused their
duly authorized officers to execute this Amendment 1994-1 to the
Plan on this 1st day of June, 1994.
FHP, INC.
By: /s/ Mark B. Hacken
Its: President and Chief Executive
Officer
FHP INTERNATIONAL CORPORATION
By: /s/ Mark B. Hacken
Its: President and Chief Executive
Officer