TALBERT MEDICAL MANAGEMENT HOLDINGS CORPORATION
DEFERRED COMPENSATION PLAN
EFFECTIVE __________________, 1997
TABLE OF CONTENTS
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Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 Selection, Enrollment, Eligibility . . . . . . . . . . . . . . 8
2.1 Selection by Committee. . . . . . . . . . . . . . . . . . . . 8
2.2 Enrollment Requirements . . . . . . . . . . . . . . . . . . . 8
2.3 Eligibility; Commencement of Participation. . . . . . . . . . 8
2.4 Termination of Participation and/or Deferrals . . . . . . . . 9
ARTICLE 3 Deferral Commitments, Interest Crediting, Taxes. . . . . . . . 9
3.1 Minimum Deferral. . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Maximum Deferral. . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Election to Defer, Effect of Election Form. . . . . . . . . . 10
3.4 Withholding of Deferral Amounts . . . . . . . . . . . . . . . 11
3.5 Interest Crediting Prior to Distribution. . . . . . . . . . . 11
3.6 Interest Crediting for Installment Distributions. . . . . . . 11
3.7 FICA and Other Taxes. . . . . . . . . . . . . . . . . . . . . 12
3.8 Annual Company Contribution Amount. . . . . . . . . . . . . . 12
3.9 Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.10 Rollovers . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 4 Short-Term Payout, Withdrawal Election . . . . . . . . . . . . 13
4.1 Short-Term Payout . . . . . . . . . . . . . . . . . . . . . . 13
4.2 Other Benefits Take Precedence Over Short-Term Payout . . . . 14
4.3 Withdrawal Election . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 5 Retirement Benefit . . . . . . . . . . . . . . . . . . . . . . 14
5.1 Retirement Benefit. . . . . . . . . . . . . . . . . . . . . . 14
5.2 Payment of Retirement Benefit . . . . . . . . . . . . . . . . 14
5.3 Death Prior to Completion of Retirement Benefit . . . . . . . 15
ARTICLE 6 Pre-Retirement Survivor Benefit. . . . . . . . . . . . . . . . 15
6.1 Pre-Retirement Survivor Benefit . . . . . . . . . . . . . . . 15
6.2 Payment of Pre-Retirement Survivor Benefit. . . . . . . . . . 15
6.3 Restriction in the Event of Suicide or Falsely Provided
Information . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 7 Termination Benefit. . . . . . . . . . . . . . . . . . . . . . 16
7.1 Termination Benefit . . . . . . . . . . . . . . . . . . . . . 16
7.2 Payment of Termination Benefit. . . . . . . . . . . . . . . . 16
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ARTICLE 8 Disability Benefit . . . . . . . . . . . . . . . . . . . . . . 16
8.1 Disability. . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.2 Continued Eligibility, Disability Benefit . . . . . . . . . . 17
ARTICLE 9 Beneficiary Designation. . . . . . . . . . . . . . . . . . . . 17
9.1 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.2 Beneficiary Designation, Change, Spousal Consent. . . . . . . 17
9.3 Acknowledgement . . . . . . . . . . . . . . . . . . . . . . . 18
9.4 No Beneficiary Designation. . . . . . . . . . . . . . . . . . 18
9.5 Doubt as to Beneficiary . . . . . . . . . . . . . . . . . . . 18
9.6 Discharge of Obligations. . . . . . . . . . . . . . . . . . . 18
ARTICLE 10 Leave of Absence. . . . . . . . . . . . . . . . . . . . . . . 18
10.1 Paid Leave of Absence . . . . . . . . . . . . . . . . . . . . 18
10.2 Unpaid Leave of Absence . . . . . . . . . . . . . . . . . . . 18
ARTICLE 11 Termination, Amendment or Modification. . . . . . . . . . . . 19
11.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 19
11.2 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11.3 Plan Agreement. . . . . . . . . . . . . . . . . . . . . . . . 20
11.4 Interest Rate in the Event of a Change of Control . . . . . . 20
11.5 Effect of Payment . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 12 Administration. . . . . . . . . . . . . . . . . . . . . . . . 20
12.1 Committee Duties. . . . . . . . . . . . . . . . . . . . . . . 20
12.2 Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.3 Binding Effect of Decisions . . . . . . . . . . . . . . . . . 20
12.4 Indemnity of Committee. . . . . . . . . . . . . . . . . . . . 21
12.5 Employer Information. . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 13 Other Benefits and Agreements . . . . . . . . . . . . . . . . 21
13.1 Coordination with Other Benefits. . . . . . . . . . . . . . . 21
ARTICLE 14 Claims Procedures . . . . . . . . . . . . . . . . . . . . . . 21
14.1 Presentation of Claim . . . . . . . . . . . . . . . . . . . . 21
14.2 Notification of Decision. . . . . . . . . . . . . . . . . . . 22
14.3 Review of a Denied Claim. . . . . . . . . . . . . . . . . . . 22
14.4 Decision on Review. . . . . . . . . . . . . . . . . . . . . . 22
14.5 Legal Action. . . . . . . . . . . . . . . . . . . . . . . . . 23
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ARTICLE 15 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
15.1 Establishment of the Trust. . . . . . . . . . . . . . . . . . 23
15.2 Interrelationship of the Plan and the Trust . . . . . . . . . 23
15.3 Distributions From the Trust. . . . . . . . . . . . . . . . . 23
ARTICLE 16 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 23
16.1 Unsecured General Creditor. . . . . . . . . . . . . . . . . . 23
16.2 Employer's Liability. . . . . . . . . . . . . . . . . . . . . 24
16.3 Nonassignability. . . . . . . . . . . . . . . . . . . . . . . 24
16.4 Not a Contract of Employment. . . . . . . . . . . . . . . . . 24
16.5 Furnishing Information. . . . . . . . . . . . . . . . . . . . 24
16.6 Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
16.7 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
16.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 25
16.9 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
16.10 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . 25
16.11 Spouse's Interest. . . . . . . . . . . . . . . . . . . . . . . 25
16.12 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
16.13 Incompetent. . . . . . . . . . . . . . . . . . . . . . . . . . 25
16.14 Court Order. . . . . . . . . . . . . . . . . . . . . . . . . . 26
16.15 Distribution in the Event of Taxation. . . . . . . . . . . . . 26
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TALBERT MEDICAL MANAGEMENT HOLDINGS CORPORATION
DEFERRED COMPENSATION PLAN
EFFECTIVE ___________________, 1997
PURPOSE
The purpose of this Plan is to provide specified benefits to
Directors and to a select group of management or highly compensated Employees
who contribute materially to the continued growth, development and future
business success of Talbert Medical Management Holdings Corporation, a
Delaware corporation, and its subsidiaries, if any, that sponsor this Plan.
This Plan shall be unfunded for tax purposes and for purposes of Title I of
ERISA.
ARTICLE 1
DEFINITIONS
For purposes hereof, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meanings:
1.1 "ACCOUNT BALANCE" shall mean (i) the Deferral Account balance plus
(ii) the vested Company Contribution Account balance. These balances
shall be a bookkeeping entry only and shall be utilized solely as a
device for the measurement and determination of the amounts to be paid
to a Participant, or his or her designated Beneficiary, pursuant to
this Plan.
1.2 "AFFILIATE" shall mean any corporation or other business entity that
has entered into a contractual obligation with an Employer to provide
professional medical services. If such contractual obligation ends,
without renewal or modification, the corporation or business entity
shall lose its status as an "Affiliate."
1.3 "ANNUAL COMPANY CONTRIBUTION AMOUNT" for any one Plan Year shall be
the amount determined in accordance with Section 3.8.
1.4 "ANNUAL DEFERRAL AMOUNT" shall mean that portion of a Participant's
Base Annual Salary, Bonus and/or Directors Fees that a Participant
elects to have deferred in accordance with Article 3 for any one Plan
Year. In the event of a Participant's Retirement, death or a
Termination of Employment prior to the end of a Plan Year, such year's
Annual Deferral Amount shall be the actual amount withheld prior to
such event.
1
1.5 "BASE ANNUAL SALARY" shall mean the annual compensation, excluding
bonuses, commissions, overtime, fringe benefits, stock options,
relocation expenses, incentive payments, non-monetary awards,
directors fees and other fees, automobile and other allowances, paid
to a Participant for employment services rendered (whether or not such
allowances are included in the Participant's gross income). Base
Annual Salary shall be calculated before reduction for compensation
voluntarily deferred or contributed by the Participant pursuant to all
qualified or non-qualified plans and shall be calculated to include
amounts not otherwise included in the Participant's gross income under
Code Sections 125, 402(e)(3), 402(h) or 403(b) pursuant to plans
established by any Employer; provided, however, that all such amounts
will be included in compensation only to the extent that, had there
been no such plan, the amount would have been payable in cash to the
Participant.
1.6 "BENEFICIARY" shall mean one or more persons, trusts, estates or other
entities, designated in accordance with Article 9, that are entitled
to receive benefits under this Plan upon the death of a Participant.
1.7 "BENEFICIARY DESIGNATION FORM" shall mean the form established from
time to time by the Committee that a Participant completes, signs and
returns to the Committee to designate one or more Beneficiaries.
1.8 "BOARD" shall mean the board of directors of the Company.
l.9 "BONUS" shall mean any compensation, in addition to Base Annual
Salary, paid to a Participant as an Employee under any Employer's
bonus and/or incentive plans.
1.10 "CHANGE OF CONTROL" shall mean the first to occur of any of the
following events:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control:
(i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company, or any corporation
2
controlled by the Company or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses
(i), (ii) and (iii) of subsection (c) of this Section 1.10; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of
the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all
of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 70% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding any employee
benefit plan (or related trust) of the Company of such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities
of such corporation except to the extent that such ownership
existed prior to the Business combination and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were members
of the Incumbent Board at the time of the
3
execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
1.11 "CLAIMANT" shall have the meaning set forth in Section 14.1.
1.12 "CODE" shall mean the Internal Revenue Code of 1986, as may be amended
from time to time.
1.13 "COMMITTEE" shall mean the committee described in Article 12.
1.14 "COMPANY" shall mean Talbert Medical Management Holdings Corporation,
a Delaware corporation.
1.15 "COMPANY CONTRIBUTION ACCOUNT" shall mean (i) the sum of a
Participant's Annual Company Contribution Amounts, plus (ii) interest
credited in accordance with all the applicable interest crediting
provisions of this Plan that relate to a Participant's Company
Contribution Account, less (iii) all distributions made to the
Participant or his or her Beneficiary pursuant to this Plan that
relate to the Participant's Company Contribution Account. This
account shall be a bookkeeping entry only and shall be utilized solely
as a device for the measurement and determination of the amounts to be
paid to the Participant, or his or her designated Beneficiary,
pursuant to this Plan.
1.16 "CREDITING RATE" shall mean, for each Plan Year, an interest rate,
stated as an annual rate, determined and announced by the Committee
before the Plan Year for which it is to be used that is equal to
either (i) the applicable "Moody's Rate" or (ii) such other rate as
determined by the Committee in its sole discretion. For purposes of
the foregoing, the Moody's Rate for a Plan Year shall be an interest
rate, stated as an annual rate, that (i) is published in Moody's Bond
Record under the heading of "Moody's Corporate Bond Yield Averages --
Av. Corp." and (ii) is equal to the average corporate bond yield
calculated for the month of September that immediately precedes the
Plan Year for which the rate is to be used.
1.17 "DEDUCTION LIMITATION" shall mean the following described limitations
on a benefit that may otherwise be distributable pursuant to the
provisions of this Plan. Except as otherwise provided, this
limitation shall be applied to all distributions that are subject to
the "Deduction Limitation" under this Plan. If an Employer determines
in good faith prior to a Change of Control that there is a reasonable
likelihood that any compensation paid to a Participant for a taxable
year of the Employer would not be deductible by the Employer solely by
reason of the limitation under Code Section 162(m), then to the extent
4
deemed necessary by the Employer to ensure that the entire amount of
any distribution to the Participant pursuant to this Plan prior to the
Change of Control is deductible, the Employer may defer all or any
portion of a distribution under this Plan. Any amounts deferred
pursuant to this limitation shall continue to be credited with
interest in accordance with Section 3.5 below, even if such amount is
an installment payment. The amounts so deferred and interest thereon
shall be distributed to the Participant or his or her Beneficiary (in
the event of the Participant's death) at the earliest possible date,
as determined by the Employer in good faith, on which the
deductibility of compensation paid or payable to the Participant for
the taxable year of the Employer during which the distribution is made
will not be limited by Code Section 162(m), or if earlier, the
effective date of a Change of Control. Notwithstanding anything to
the contrary in this Plan, the Deduction Limitation shall not apply to
any distributions made after a Change of Control
1.18 "DEFERRAL ACCOUNT" shall mean (i) the sum of all of a Participant's
Annual Deferral Amounts, plus (ii) the Participant's Rollover Amount,
if any, plus (iii) interest credited in accordance with all the
applicable interest crediting provisions of this Plan that relate to
the Participant's Deferral Account, less (iv) all distributions made
to the Participant or his or her Beneficiary pursuant to this Plan
that relate to the Participant's Deferral Account. This account shall
be a bookkeeping entry only and shall be utilized solely as a device
for the measurement and determination of the amounts to be paid to the
Participant, or his or her designated Beneficiary, pursuant to this
Plan.
1.19 "DIRECTOR" shall mean any member of the board of directors of any
Employer.
1.20 "DIRECTORS FEES" shall mean the annual fees paid by any Employer,
including retainer fees and meetings fees, as compensation for serving
on the board of directors or a committee thereof.
1.21 "DISABILITY" shall be determined by the Committee in its sole
discretion.
1.22 "DISABILITY BENEFIT" shall mean the benefit set forth in Article 8.
1.23 "ELECTION FORM" shall mean the form established from time to time by
the Committee that a Participant must complete, sign and return to the
Committee to make an election under the Plan.
1.24 "EMPLOYEE" shall mean a person who is employed by any Employer.
1.25 "EMPLOYER(S)" shall mean the Company and/or any of its subsidiaries
(now in existence or hereafter formed or acquired) that have adopted
the Plan as a sponsor. For this purpose, a subsidiary is any
corporation in which the Company possesses more than 50% of either (i)
the total combined voting
5
power of all classes of stock of such corporation or (ii) the total
combined value of shares of all classes of stock of such corporation.
1.26 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as it may be amended from time to time.
1.27 "PARTICIPANT" shall mean any Employee or Director (i) who is selected
to participate in the Plan, (ii) who elects to participate in the
Plan, (iii) who signs a Plan Agreement, an Election Form and a
Beneficiary Designation Form, (iv) whose signed Plan Agreement,
Election Form and Beneficiary Designation Form are acknowledged by the
Committee, (v) who commences participation in the Plan, and (vi) whose
Plan Agreement has not terminated. A spouse or former spouse of a
Participant shall not be treated as a Participant in the Plan, even if
he or she has an interest in the Participant's benefits under the Plan
as a result of applicable law or property settlements resulting from
legal separation or divorce.
1.28 "PLAN" shall mean the Company's Deferred Compensation Plan, which
shall be evidenced by this instrument and by each Plan Agreement, as
it may be amended from time to time.
1.29 "PLAN AGREEMENT" shall mean a written agreement, as may be amended
from time to time, which is entered into by and between an Employer
and a Participant. Each Plan Agreement executed by a Participant and
the Participant's Employer shall provide for the entire benefit to
which such Participant is entitled to under the Plan, and the Plan
Agreement bearing the latest date of acknowledgement by the Committee
shall govern such entitlement. The terms of any Plan Agreement may be
varied among Participants, and any Plan Agreement may provide
additional benefits not set forth in the Plan or limit the benefits
otherwise provided under the Plan; provided, however, that any such
additional benefits or benefit limitations must be agreed to by both
the Employer and the Participant.
1.30 "PLAN YEAR" shall mean the 12 consecutive month period beginning on
January 1 each year; provided, however, that the first Plan Year shall
be a short year beginning on __________, 1997 and ending on December
31, 1997.
1.31 "PREFERRED RATE" shall mean, for each Plan Year, an interest rate that
is the sum of the Crediting Rate and the Premium Rate for that Plan
Year.
1.32 "PREMIUM RATE" shall mean, for a Plan Year, an interest rate, if any,
determined by the Committee, in its sole discretion, which rate shall
be determined and announced before the commencement of the Plan Year
for which the rate applies. This rate may be zero for any Plan Year.
6
1.33 "PRE-RETIREMENT SURVIVOR BENEFIT" shall mean the benefit set forth in
Article 6.
1.34 "RETIREMENT," "Retires" or "Retired" shall mean, with respect to an
Employee, severance from employment from all Employers for any reason
other than a leave of absence, death or Disability on or after the
earlier of or the attainment of (i) age sixty-five (65) or (ii) age
fifty-five (55) with ten (10) Years of Service; and shall mean, with
respect to a Director who is not an Employee, severance of his or her
directorships with all Employers. If a Participant is both an
Employee and a Director, Retirement shall be deemed to occur when he
or she has severed his or her employment with all Employers, if he or
she has then either attained age sixty-five (65) or attained age
fifty-five (55) with ten (10) Years of Service, regardless of whether
he or she has severed his or her service as a Director. Despite the
foregoing, and for purposes of this Plan only, if a Participant (i)
transferred his or her employment from all Employers to an Affiliate,
or a Participant terminated his or her employment with all Employers
and became employed by an Affiliate within 30 days of such
termination, and (ii) remains employed by that Affiliate, another
Affiliate or any Employer until attaining age sixty-five (65) or age
fifty-five (55) with ten (10) Years of Service, he or she shall be
treated has having Retired under this Plan as of his or her
Termination of Employment.
1.35 "RETIREMENT BENEFIT" shall mean the benefit set forth In Article 5.
1.36 "ROLLOVER AMOUNT" shall mean the amount determined in accordance with
Section 3.10.
1.37 "SHORT-TERM PAYOUT" shall mean the payout set forth in Section 4.1.
1.38 "TERMINATION BENEFIT" shall mean the benefit set forth in Article 7.
1.39 "TERMINATION OF EMPLOYMENT" shall mean the ceasing of employment with
all Employers and Affiliates, voluntarily or involuntarily, for any
reason other than Retirement, Disability, death or an authorized leave
of absence. Despite the foregoing, a severance of a directorship
shall be treated as a Retirement in accordance with Section 1.34
above. Further, if an Affiliate ceases to be an Affiliate, the
Participant, for purposes of this Plan only, shall be treated as
having ceased employment with the Affiliate as of date that the
Affiliate ceases to be an Affiliate. However, for purposes of this
Plan only, if a Participant (i) transfers his or her employment from
an Employer to an Affiliate, or (ii) terminates his or her employment
with all Employers and is employed by an Affiliate within 30 days of
such termination, the Participant shall not be treated as having
experienced a Termination of Employment.
7
1.40 "TRUST" shall mean the trust established pursuant to that certain
[Master Trust Agreement], dated as of [____________, 1997], between
the Company and the trustee named therein, as amended from time to
time.
1.41 "YEARS OF SERVICE" shall mean the total number of full years in which
a Participant has been employed by one or more Employers, plus, in the
case of a Participant who has transferred his or her employment from
all Employers to an Affiliate, or who has terminated his or her
employment with all Employers and is employed by an Affiliate within
30 days of such termination, the total number of full years in which a
Participant has been employed by one or more Affiliates. For purposes
of this definition, a year of employment shall be a 365 day period (or
366 day period in the case of a leap year) that, for the first year of
employment, commences on the Employee's date of hiring and that, for
any subsequent year, commences on an anniversary of that hiring date.
If a Participant terminates employment and later is rehired, any full
years of employment for the prior period will be added to any full
years of employment for subsequent years. Any partial year of
employment shall not be counted. With respect to Participants who
were participants in the FHP International Corporation Deferred
Compensation Plan, Years of Service include any "Years of Service"
that the Participant may have accrued under that plan.
ARTICLE 2
SELECTION, ENROLLMENT, ELIGIBILITY
2.1 SELECTION BY COMMITTEE. Participation in the Plan is voluntary.
Participation in the Plan shall be limited to Directors and a select
group of management or highly compensated Employees of the Employers,
as determined by the Committee, in its sole discretion. From that
group, the Committee shall select, in its sole discretion, Employees
and Directors to participate in the Plan.
2.2 ENROLLMENT REQUIREMENTS. As a condition to participation, each
selected Employee or Director shall complete, execute and return to
the Committee a Plan Agreement, an Election Form and a Beneficiary
Designation Form, all before the later of (i) [__________, 1997], or
(ii) the date which is 30 days after he or she is selected to
participate in the Plan. In addition, the Committee shall have the
ability to amend and/or establish from time to time such other
enrollment requirements as it determines, in its sole discretion, are
necessary.
2.3 ELIGIBILITY; COMMENCEMENT OF PARTICIPATION. Provided an Employee or
Director selected to participate in the Plan has met all enrollment
requirements set forth in this Plan and required by the Committee,
including returning all required documents to the Committee within the
specified time period, that
8
Employee or Director shall commence participation in the Plan on the
first day of the month following the month in which the Employee or
Director completes all enrollment requirements. If an Employee or
Director fails to meet all such requirements within the required 30
day period (or, if earlier, by [___________, 1997]), that Employee or
Director shall not be eligible to participate in the Plan until the
first day of the Plan Year following the delivery to and
acknowledgement by the Committee of the required documents.
2.4 TERMINATION OF PARTICIPATION AND/OR DEFERRALS. If the Committee
determines in good faith that a Participant no longer qualifies as a
member of a select group of management or highly compensated
employees, as membership in such group is determined in accordance
with Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, the Committee
shall have the right, in its sole discretion, to (i) terminate any
deferral election the Participant has made for the Plan Year in which
the Participant's membership status changes, (ii) prevent the
Participant from making future deferral elections, and/or (iii)
immediately distribute the Participant's then Account Balance as a
Termination Benefit and terminate the Participant's participation in
the Plan. If the Committee chooses not to terminate the Participant's
participation in the Plan, the Committee may, in its sole discretion,
reinstate the Participant to full Plan participation at such time in
the future as the Participant again becomes a member of the select
group described above.
ARTICLE 3
DEFERRAL COMMITMENTS, INTEREST CREDITING, TAXES
3.1 MINIMUM DEFERRAL.
(a) MINIMUM. For each Plan Year, a Participant may elect to defer,
as his or her Annual Deferral Amount, one or more of the
following forms of compensation in the following minimum
percentages for each deferral elected:
Minimum
DEFERRAL Percentage
-------- ----------
Base Annual Salary 3%
Bonus 1%
Directors Fees 0%
If an election is made for less than the stated minimum amounts, or if
no election is made, then the amount deferred shall be zero.
9
(b) SHORT PLAN YEAR. If a Participant first becomes a Participant
after the first day of a Plan Year, the minimum Base Annual
Salary deferral shall be an amount equal to the minimum set forth
above, multiplied by a fraction, the numerator of which is the
number of complete months remaining in the Plan Year and the
denominator of which is 12.
3.2 MAXIMUM DEFERRAL. For each Plan Year, a Participant may elect to
defer, as his or her Annual Deferral Amount, Base Annual Salary, Bonus
and/or Directors Fees up to the following maximum percentages for each
deferral elected:
Maximum
Deferral Percentage
-------- ----------
Base Annual Salary 50%
Bonus 100%
Directors Fees 100%
Notwithstanding the foregoing, if a Participant first becomes a
Participant after the first day of a Plan Year, the maximum Annual
Deferral Amount shall be limited to the amount of compensation not yet
earned by the Participant as of the date the Participant submits a
Plan Agreement and Election Form to the Committee for acknowledgement.
3.3 ELECTION TO DEFER, EFFECT OF ELECTION FORM.
(a) FIRST PLAN YEAR. In connection with a Participant's commencement
of participation in the Plan, the Participant shall make an
irrevocable deferral election for the Plan Year in which the
Participant commences participation in the Plan, along with such
other elections as the Committee deems necessary or desirable
under the Plan. FOR THESE ELECTIONS TO BE VALID, THE ELECTION
FORM MUST BE COMPLETED AND SIGNED BY THE PARTICIPANT, TIMELY
DELIVERED TO THE COMMITTEE (IN ACCORDANCE WITH SECTION 2.3
ABOVE), AND ACKNOWLEDGED BY THE COMMITTEE.
(b) SUBSEQUENT PLAN YEARS. For each succeeding Plan Year, an
irrevocable deferral election for that Plan Year, and such other
elections as the Committee deems necessary or desirable under the
Plan, shall be made by timely delivering to the Committee, in
accordance with its rules and procedures before the end of the
Plan Year preceding the Plan Year for which the election is made,
a new Election Form. If no Election Form is timely delivered for
a Plan Year, no Annual Deferral Amount shall be withheld for that
Plan Year.
10
(c) PERCENTAGE ELECTED. With respect to each deferral election, the
percentage of Base Annual Salary, Bonus and/or Directors Fees
that is elected to be deferred must be a whole percentage between
the allowed minimum and maximum amounts.
3.4 WITHHOLDING OF DEFERRAL AMOUNTS. For each Plan Year, the Base Annual
Salary portion of the Annual Deferral Amount shall be withheld from
each regularly scheduled Base Annual Salary payroll, as determined by
the Committee in its sole discretion. The Bonus and/or Directors Fees
portion of the Annual Deferral Amount shall be withheld at the time
the Bonus or Directors Fees are or otherwise would be paid to the
Participant.
3.5 INTEREST CREDITING PRIOR TO DISTRIBUTION. Prior to any distribution
of benefits under Articles 4, 5, 6, 7 or 8, interest shall be credited
and compounded annually on (i) a Participant's Deferral Account as
though the Annual Deferral Amount for that Plan Year was withheld at
the beginning of the Plan Year and (ii) on a Participant's Company
Contribution Account as though the Annual Company Contribution Amount,
if any, was credited at the beginning of that Plan Year; provided,
however, that in either case, if the Plan Year is the first year of
Plan participation, the amount withheld and/or credited shall be
deemed withheld or credited on the date that the Participant commenced
participation in the Plan. The rate of interest for crediting shall
be the Preferred Rate, except as otherwise provided in this Plan,
which rate shall be treated as the nominal rate for crediting
interest. In the event of Retirement, Disability, death or
Termination of Employment prior to the end of a Plan Year, the basis
for that year's interest crediting will be a fraction of the full
year's interest, based on the number of full months that the
Participant was employed with the Employer during the Plan Year prior
to the occurrence of such event. If a distribution is made under this
Plan, for purposes of crediting interest up to the time of the
distribution, the Participant's Account Balance shall be reduced as of
the first day of the month in which the distribution is made.
3.6 INTEREST CREDITING FOR INSTALLMENT DISTRIBUTIONS. If a Participant's
benefits under this Plan are to be paid in equal monthly installments,
such payments shall be determined by amortizing the Participant's
specified benefit over the number of months elected, with payments
made at the beginning of each installment period, using the interest
rate specified below and treating the first installment payment as all
principal and each subsequent installment payment, first as interest
accrued for the preceding installment period on the unpaid Account
Balance and second as a reduction in the Account Balance. The
interest rate to be used to calculate installment payment amounts
shall be a fixed interest rate that is determined by averaging the
Preferred Rates for the Plan Year in which installment payments
commence and the four (4) preceding Plan Years. This rate shall be
treated as the nominal rate for making such
11
calculations. If a Participant has completed fewer than five (5) Plan
Years, this average shall be determined using the Preferred Rates for
the Plan Years during which the Participant participated in the Plan.
3.7 FICA AND OTHER TAXES.
(a) ANNUAL DEFERRAL AMOUNTS. For each Plan Year in which an Annual
Deferral Amount is being withheld, the Participant's Employer(s)
shall withhold from that portion of the Participant's Base Annual
Salary and/or Bonus that is not being deferred, in a manner
determined by the Employer(s), the Participant's share of FICA
and other employment taxes. If necessary, the Committee may
reduce the Annual Deferral Amount in order to comply with this
Section 3.7.
(b) COMPANY CONTRIBUTION ACCOUNT. When a Participant becomes vested
in a portion of his or her Company Contribution Account, and,
after vesting, when allocations are made of Annual Company
Contribution Amounts, the Participant's Employer(s) shall
withhold from the Participant's Base Annual Salary and/or Bonus
that is not deferred, in a manner determined by the Employer(s),
the Participant's share of FICA and other employment taxes. If
necessary, the Committee may reduce the vested portion of the
Participant's Company Contribution Account in order to comply
with this Section 3.7.
(c) DISTRIBUTIONS. The Participant's Employer(s), or the trustee of
the Trust, shall withhold from any payments made to a Participant
under this Plan all federal, state and local income, employment
and other taxes required by law to be withheld by the
Employer(s), or the trustee of the Trust, in connection with such
payments, in amounts and in a manner as required by law.
3.8 ANNUAL COMPANY CONTRIBUTION AMOUNT. For each Plan Year, an Employer,
in its sole discretion, may, but is not required to, credit any amount
it desires to any Participant's Company Contribution Account under
this Plan, which amount shall be for that Participant the Annual
Company Contribution Amount for that Plan Year. The amount so
credited to a Participant may be smaller or larger than the amount
credited to other Participants, and the amount credited to any
Participant for a Plan Year may be zero, even though one or more other
Participants receive an Annual Company Contribution Amount for that
Plan Year.
3.9 VESTING. Except as provided in Sections 6.3 and 7.1, a Participant
shall be (i) 100% vested in his or her Deferral Account and (ii)
vested in his or her Company Contribution Account in accordance with
the following schedule:
12
Years of Service on Date Vested Percentage of
of Termination of Employment Company Contribution Account
---------------------------- ----------------------------
Less than 5 years 0%
5 years or more 100%
Despite the foregoing, in the event of a Change of Control or the
Participant's death, a Participant's Company Contribution Account
shall immediately become 100% vested (if it is not so vested in
accordance with the above vesting schedule).
3.10 ROLLOVERS. If a Participant was a participant in the FHP
International Corporation Deferred Compensation Plan ("FHP Plan"), and
had a positive account balance in that plan on [___________, 1997],
that positive account balance, as determined as of that date, shall be
transferred to and added to the Participant's account balance under
this Plan, and shall be governed by the terms and conditions of this
Plan and shall be referred to as the "Rollover Amount." In addition,
any elections made by the Participant with respect to his or her
Account Balance shall apply to the Rollover Amount, except that if the
Participant Retires prior to January 1, 1999, that portion of his or
her Account Balance that represents an amount equal to the
Participant's positive account balance under the FHP Plan as of
[__________, 1997] (including earnings on that amount) shall be paid
in a lump sum in accordance with Article 5 below, regardless of
whether the Participant may have elected to receive his or her Account
Balance in installments.
ARTICLE 4
SHORT-TERM PAYOUT, WITHDRAWAL ELECTION
4.1 SHORT-TERM PAYOUT. In connection with each election to defer an
Annual Deferral Amount, a Participant may elect to receive a future
"Short-Term Payout" from the Plan with respect to that Annual Deferral
Amount. Subject to the Deduction Limitation, the Short-Term Payout
shall be a lump sum payment in an amount that is equal to the Annual
Deferral Amount plus interest credited in the manner provided in
Section 3.5 above on that amount, but using the applicable interest
rate set forth in Section 7.1 below, determined at the time that the
Short-Term Payout becomes payable (rather than the date of a
Termination of Employment). Subject to the other terms and conditions
of this Plan, each Short-Term Payout elected shall be paid, subject to
the Deduction Limitation, within 90 days of the first day of the Plan
Year that is at least 5 years after the first day of the Plan Year in
which the Annual Deferral Amount is actually deferred.
13
4.2 OTHER BENEFITS TAKE PRECEDENCE OVER SHORT-TERM PAYOUT. Should an
event occur that triggers a benefit under Article 5, 6, 7 or 8, any
Annual Deferral Amount, plus interest thereon, that is subject to a
Short-Term Payout election under Section 4.1 shall not be paid in
accordance with Section 4.1, but shall be paid in accordance with the
other applicable Article.
4.3 WITHDRAWAL ELECTION. A Participant may elect, at any time, to
withdraw all of his or her Account Balance, calculated as if there had
occurred a Termination of Employment as of the day of the election,
less a withdrawal penalty equal to 10% of such amount (the net amount
shall be referred to as the "Withdrawal Amount"). This election can
be made at any time before or after Retirement, Disability, death or
Termination of Employment, and whether or not the Participant (or
Beneficiary) is in the process of being paid pursuant to an
installment payment schedule. No partial withdrawals of the
Withdrawal Amount shall be allowed. The Participant shall make this
election by giving the Committee advance written notice of the
election in a form determined from time to time by the Committee. The
Participant shall be paid the Withdrawal Amount within 90 days of his
or her election. Once the Withdrawal Amount is paid, the
Participant's participation in the Plan shall terminate and the
Participant shall not be eligible to participate in the Plan in the
future. The payment of this Withdrawal Amount shall not be subject to
the Deduction Limitation.
ARTICLE 5
RETIREMENT BENEFIT
5.1 RETIREMENT BENEFIT. Subject to the Deduction Limitation, a
Participant who Retires shall receive, as a Retirement Benefit, his or
her Account Balance.
5.2 PAYMENT OF RETIREMENT BENEFIT. A Participant, in connection with his
or her commencement of participation in the Plan, shall elect on an
Election Form to receive the Retirement Benefit in a lump sum or, if
the Participant's Account Balance is at least $25,000 at the time of
his or her Retirement, in equal monthly payments (the latter
determined in accordance with Section 3.6 above) over a period of 60,
120 or 180 months. The Participant may annually change his or her
election to an allowable alternative payout period by submitting a new
Election Form to the Committee, provided that any such Election Form
is submitted at least 3 years prior to the Participant's Retirement
and is acknowledged by the Committee in its sole discretion. The
Election Form most recently acknowledged by the Committee shall govern
the payout of the Retirement Benefit (provided it was submitted at
least 3 years prior to the Participant's Retirement). If a
Participant does not make any election with respect to the payment of
the Retirement Benefit, then such benefit shall be payable in a lump
sum. The lump sum payment shall be made, or installment
14
payments shall commence, no later than 90 days after the date the
Participant Retires. Any payment made shall be subject to the
Deduction Limitation.
5.3 DEATH PRIOR TO COMPLETION OF RETIREMENT BENEFIT. If a Participant
dies after Retirement but before the Retirement Benefit is paid in
full, the Participant's unpaid Retirement Benefit payments shall
continue and shall be paid to the Participant's Beneficiary (i) over
the remaining number of months and in the same amounts as that benefit
would have been paid to the Participant had the Participant survived,
or (ii) in a lump sum, if requested by the Beneficiary and allowed in
the sole discretion of the Committee, that is equal to the
Participant's unpaid remaining Account Balance.
ARTICLE 6
PRE-RETIREMENT SURVIVOR BENEFIT
6.1 PRE-RETIREMENT SURVIVOR BENEFIT. Subject to the Deduction Limitation,
and except as provided in Section 6.3 below, the Participant's
Beneficiary shall receive a Pre-Retirement Survivor Benefit equal to
the Participant's Account Balance, if the Participant dies before he
or she Retires, experiences a Termination of Employment or suffers a
Disability.
6.2 PAYMENT OF PRE-RETIREMENT SURVIVOR BENEFIT. A Participant, in
connection with his or her commencement of participation in the Plan,
shall elect on an Election Form whether the Pre-Retirement Survivor
Benefit shall be received by his or her Beneficiary in a lump sum or
in equal monthly payments (the latter determined in accordance
with Section 3.6 above) over a period of 60, 120 or 180 months. The
Participant may annually change this election to an allowable
alternative payout period by submitting a new Election Form to the
Committee, which form must be acknowledged by the Committee in its
sole discretion. The Election Form most recently acknowledged by the
Committee prior to the Participant's death shall govern the payout of
the Participant's Pre-Retirement Survivor Benefit. If a Participant
does not make any election with respect to the payment of the
Pre-Retirement Survivor Benefit, then such benefit shall be paid in a
lump sum. Despite the foregoing, if the Participant's Account Balance
at the time of his or her death is less than $25,000, payment of the
Pre-Retirement Survivor Benefit may be made, in the sole discretion of
the Committee, in a lump sum or in monthly installment payments that
do not exceed five years in duration. The lump sum payment shall be
made, or installment payments shall commence, no later than 90 days
after the date the Committee is provided with proof that is
satisfactory to the Committee of the Participant's death. Any payment
made shall be subject to the Deduction Limitation.
15
6.3 RESTRICTION IN THE EVENT OF SUICIDE OR FALSELY PROVIDED INFORMATION.
In the event of a Participant's suicide within 2 years after the
Participant first becomes a Participant, or in the event the
Participant's death is determined to be from a bodily or mental cause
or causes, the information about which was withheld, knowingly
concealed, or falsely provided by the Participant if requested to
furnish evidence of good health, the Pre-Retirement Survivor Benefit
shall be equal to the sum of the Participant's Annual Deferral
Amounts, without interest, all determined as of his or her date of
death and payable in accordance with the provisions of Section 6.2
above.
ARTICLE 7
TERMINATION BENEFIT
7.1 TERMINATION BENEFIT. Subject to the Deduction Limitation, the
Participant shall receive a Termination Benefit, which shall be equal
to the Participant's Account Balance, with interest credited in
the manner provided in Section 3.5 above, but using the applicable
interest rate set forth in the following schedule, if a Participant
experiences a Termination of Employment prior to his or her
Retirement, death or Disability:
Years of Service on Date
of Termination of Employment Applicable Rate
---------------------------- ---------------
Less than 5 years Crediting Rate
5 or more years Preferred Rate
7.2 PAYMENT OF TERMINATION BENEFIT. The Termination Benefit shall be paid
in a lump sum within 90 days of the Termination of Employment. Any
payment made shall be subject to the Deduction Limitation.
ARTICLE 8
DISABILITY BENEFIT
8.1 DISABILITY.
(a) NO WAIVER OF DEFERRAL. A Participant who is determined by the
Committee to be suffering from a Disability shall be required to
fulfill that portion of the Annual Deferral Amount commitment
that occurs after his or her Disability to the extent of his or
her Base Annual Salary, Bonus and/or Directors Fees paid after
such Disability.
16
(b) RETURN TO WORK. If a Participant returns to employment, or
service as a Director, with an Employer after a Disability
ceases, the Participant may elect to defer an Annual Deferral
Amount for the Plan Year following his or her return to
employment or service and for every Plan Year thereafter while a
Participant in the Plan; provided such deferral elections are
otherwise allowed and an Election Form is delivered to and
acknowledged by the Committee for each such election in
accordance with Section 3.3 above.
8.2 CONTINUED ELIGIBILITY, DISABILITY BENEFIT. A Participant suffering a
Disability shall, for benefit purposes under this Plan, continue to be
considered to be employed, or in the service of an Employer as a
Director, and shall be eligible for the benefits provided for in
Articles 4, 5, 6 or 7 in accordance with the provisions of those
Articles. Notwithstanding the above, the Committee shall have the
right, in its sole and absolute discretion and for purposes of this
Plan only, and must in the case of a Participant who is otherwise
eligible to Retire, to terminate a Participant's employment or service
as a Director at any time (or in the case of a Participant who is
eligible to Retire, as soon as practical) after such Participant is
determined to be suffering from a Disability. Any payment made shall
be subject to the Deduction Limitation.
ARTICLE 9
BENEFICIARY DESIGNATION
9.1 BENEFICIARY. Each Participant shall have the right, at any time, to
designate his or her Beneficiary(ies) (both primary as well as
contingent) to receive any benefits payable under the Plan to a
beneficiary upon the death of a Participant. The Beneficiary
designated under this Plan may be the same as or different from the
Beneficiary designation under any other plan of an Employer in which
the Participant participates.
9.2 BENEFICIARY DESIGNATION, CHANGE, SPOUSAL CONSENT. A Participant shall
designate his or her Beneficiary by completing and signing the
Beneficiary Designation Form, and returning it to the Committee or its
designated agent. A Participant shall have the right to change a
Beneficiary by completing, signing and otherwise complying with the
terms of the Beneficiary Designation Form and the Committee's rules
and procedures, as in effect from time to time. If the Participant
names someone other than his or her spouse as a Beneficiary, a spousal
consent, in the form designated by the Committee, must be signed by
that Participant's spouse, notarized and returned to the Committee.
Upon the acknowledgement by the Committee of a new Beneficiary
Designation Form, all Beneficiary designations previously filed shall
be cancelled. The Committee shall be entitled to rely on the last
17
Beneficiary Designation Form filed by the Participant and acknowledged
by the Committee prior to his or her death.
9.3 ACKNOWLEDGEMENT. No designation or change in designation of a
Beneficiary shall be effective until received and acknowledged in
writing by the Committee
or its designated agent.
9.4 NO BENEFICIARY DESIGNATION. If a Participant fails to designate a
Beneficiary as provided in Sections 9.1, 9.2 and 9.3 above or, if all
designated Beneficiaries predecease the Participant or die prior
to complete distribution of the Participant's benefits, then the
Participant's designated Beneficiary shall be deemed to be his or her
surviving spouse. If the Participant has no surviving spouse, the
benefits remaining under the Plan to be paid to a Beneficiary shall be
payable to the executor or personal representative of the
Participant's estate.
9.5 DOUBT AS TO BENEFICIARY. If the Committee has any doubt as to the
proper Beneficiary to receive payments pursuant to this Plan, the
Committee shall have the right, exercisable in its discretion, to
cause the Participant's Employer to withhold such payments until this
matter is resolved to the Committee's satisfaction.
9.6 DISCHARGE OF OBLIGATIONS. The payment of benefits under the Plan to a
Beneficiary shall fully and completely discharge all Employers and the
Committee from all further obligations under this Plan with respect to
the Participant, and that Participant's Plan Agreement shall terminate
upon such full payment of benefits.
ARTICLE 10
LEAVE OF ABSENCE
10.1 PAID LEAVE OF ABSENCE. If a Participant is authorized by the
Participant's Employer for any reason to take a paid leave of absence
from the employment of the Employer, the Participant shall continue to
be considered employed by the Employer and the Annual Deferral Amount
shall continue to be withheld during such paid leave of absence in
accordance with Section 3.4.
10.2 UNPAID LEAVE OF ABSENCE. If a Participant is authorized by the
Participant's Employer for any reason to take an unpaid leave of
absence from the employment of the Employer, the Participant shall
continue to be considered employed by the Employer and the Participant
shall be excused from making deferrals until the earlier of the date
the leave of absence expires or the Participant returns to a paid
employment status. Upon such expiration or return, deferrals shall
resume for the remaining portion of the Plan Year in
18
which the expiration or return occurs, based on the deferral election,
if any, made for that Plan Year. If no election was made for that Plan
Year, no deferral shall be withheld.
ARTICLE 11
TERMINATION, AMENDMENT OR MODIFICATION
11.1 TERMINATION. Although the Employers anticipate that they will
continue the Plan for an indefinite period of time, there is no
guarantee that the Committee will continue the Plan or will not
terminate the Plan at any time in the future. Accordingly, the
Committee reserves the right to discontinue any Employer's sponsorship
of the Plan and/or to terminate the Plan, at any time, with respect to
any Employer's participating Employees or Directors. Upon the
termination of the Plan with respect to any Employer, the Plan
Agreements of the affected Participants who are employed by that
Employer, or are in the service of that Employer as Directors, shall
terminate and their Account Balances, determined as if they had
experienced a Termination of Employment on the date of Plan
termination or, if Plan termination occurs after the date upon which a
Participant was eligible to Retire, then with respect to that
Participant as if he or she had Retired on the date of Plan
termination, shall be paid to the Participants as follows. Prior to a
Change of Control, the Committee shall have the right, in its sole
discretion, and notwithstanding any elections made by the Participant,
to pay such benefits in a lump sum or in equal monthly installments
for up to 15 years, with interest credited during the installment
period as provided in Section 3.6. After a Change of Control, a
Participant's benefits shall be paid in a lump sum. The termination
of the Plan shall not adversely affect any Participant or Beneficiary
who has become entitled to the payment of any benefits under the Plan
as of the date of termination; provided however, that the Committee
shall have the right to accelerate installment payments by paying the
Participant's remaining Account Balance at the time of such
acceleration.
11.2 AMENDMENT. The Committee may, at any time, amend or modify the plan
in whole or in part with respect to any Employer; provided, however,
that no amendment or modification shall be effective to decrease or
restrict the value of a Participant's Account Balance in existence at
the time the amendment or modification is made, calculated as if the
Participant had experienced a Termination of Employment as of the
effective date of the amendment or modification, or, if the amendment
or modification occurs after the date upon which the Participant was
eligible to Retire, the Participant had Retired as of the effective
date of the amendment or modification. The amendment or modification
of the Plan shall not affect any Participant or Beneficiary who has
become entitled to the payment of benefits under the Plan as of the
date of the amendment or modification; provided, however, that the
Committee shall have
19
the right to accelerate installment payments by paying the
Participant's remaining Account Balance at the time of such
acceleration.
11.3 PLAN AGREEMENT. Despite the provisions of Sections 11.1 and 11.2
above, if a Participant's Plan Agreement contains benefits or
limitations that are not in this Plan document, the Employer may only
amend or terminate such provisions with the consent of the
Participant.
11.4 INTEREST RATE IN THE EVENT OF A CHANGE OF CONTROL. If a Change of
Control occurs, the applicable interest rate to be used in determining
a Participant's benefit in connection with a Termination of Employment
after a Change of Control, or a Plan termination, amendment or
modification under Sections 11.1 and 11.2, shall be the Preferred
Rate. However, the Crediting Rate for the applicable Plan Year, and
not the Preferred Rate, shall continue to be used as the discount rate
for determining present value
11.5 EFFECT OF PAYMENT. The full payment of the applicable benefit under
Section 4.3 or Articles 5, 6, 7 or 8 of the Plan shall completely
discharge all obligations to a Participant and his or her designated
Beneficiaries under this Plan and the Participant's Plan Agreement
shall terminate.
ARTICLE 12
ADMINISTRATION
12.1 COMMITTEE DUTIES. This Plan shall be administered by a Committee
which shall consist of the Board, or such committee as the Board shall
appoint. Members of the Committee may be Participants under this
Plan. The Committee shall also have full discretion and authority to
(i) make, amend, interpret, and enforce all appropriate rules and
regulations for the administration of this Plan, (ii) decide or
resolve any and all questions including interpretations of this Plan,
as may arise in connection with the Plan, and (iii) amend or terminate
the Plan in accordance with Sections 11.1 and 11.2 above.
12.2 AGENTS. In the administration of this Plan, the Committee may, from
time to time, employ agents and delegate to them such administrative
duties as it sees fit (including acting through a duly appointed
representative) and may from time to time consult with counsel who may
be counsel to any Employer.
12.3 BINDING EFFECT OF DECISIONS. The decision or action of the Committee
with respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the
rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in the
Plan.
20
12.4 INDEMNITY OF COMMITTEE. All Employers shall indemnify and hold
harmless the members of the Committee against any and all claims,
losses, damages, expenses or liabilities arising from any action or
failure to act with respect to this Plan, except in the case of
willful misconduct by the Committee or any of its members.
12.5 EMPLOYER INFORMATION. To enable the Committee to perform its
functions, each Employer shall supply full and timely information to
the Committee on all matters relating to the compensation of its
Participants, the date and circumstances of the Retirement,
Disability, death or Termination of Employment of its Participants,
and such other pertinent information as the Committee may reasonably
require.
ARTICLE 13
OTHER BENEFITS AND AGREEMENTS
13.1 COORDINATION WITH OTHER BENEFITS. The benefits provided for a
Participant and Participant's Beneficiary under the Plan are in
addition to any other benefits available to such Participant under any
other plan or program for employees of the Participant's Employer.
The Plan shall supplement and shall not supersede, modify or amend any
other such plan or program except as may otherwise be expressly
provided.
ARTICLE 14
CLAIMS PROCEDURES
14.1 PRESENTATION OF CLAIM. Any Participant or Beneficiary of a deceased
Participant (such Participant or Beneficiary being referred to below
as a "Claimant") may deliver to the Committee a written claim for a
determination with respect to the amounts distributable to such
Claimant from the Plan. If such a claim relates to the contents of a
notice received by the Claimant, the claim must be made within 60 days
after such notice was received by the Claimant.
The claim must state with particularity the determination desired by
the Claimant. All other claims must be made within 180 days of the
date on which the event that caused the claim to arise occurred.The
claim must state with particularity the determination desired by the
Claimant.
21
14.2 NOTIFICATION OF DECISION. The Committee shall consider a Claimant's
claim within a reasonable time, and shall notify the Claimant in
writing:
(a) that the Claimant's requested determination has been made, and
that the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in whole or
in part, to the Claimant's requested determination, and such
notice must set forth in a manner calculated to be understood by
the Claimant:
(i) the specific reason(s) for the denial of the claim, or any
part of it;
(ii) specific reference(s) to pertinent provisions of the Plan
upon which such denial was based;
(iii) a description of any additional material or information
necessary for the Claimant to perfect the claim, and an
explanation of why such material or information is
necessary; and
(iv) an explanation of the claim review procedure set forth in
Section 14.3 below.
14.3 REVIEW OF A DENIED CLAIM. Within 60 days after receiving a notice
from the Committee that a claim has been denied, in whole or in part,
a Claimant (or the Claimant's duly authorized representative) may file
with the Committee a written request for a review of the denial of the
claim. Thereafter, but not later than 30 days after the review
procedure began, the Claimant (or the Claimant's duly authorized
representative):
(a) may review pertinent documents;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Committee, in its sole
discretion, may grant.
14.4 DECISION ON REVIEW. The Committee shall render its decision on review
promptly, and not later than 60 days after the filing of a written
request for review of the denial, unless a hearing is held or other
special circumstances require additional time, in which case the
Committee's decision must be rendered within 120 days after such date.
Such decision must be written in a manner calculated to be understood
by the Claimant, and it must contain:
(a) specific reasons for the decision;
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(b) specific reference(s) to the pertinent Plan provisions upon which
the decision was based; and
(c) such other matters as the Committee deems relevant.
14.5 LEGAL ACTION. A Claimant's compliance with the foregoing provisions
of this Article 14 is a mandatory prerequisite to a Claimant's right
to commence any legal action with respect to any claim for benefits
under this Plan.
ARTICLE 15
TRUST
15.1 ESTABLISHMENT OF THE TRUST. The Company shall establish the Trust,
and the Employers shall at least annually transfer over to the Trust
such assets as the Employers determine, in their sole discretion, are
necessary to provide, on a present value basis, for their respective
future liabilities created with respect to the Annual Deferral
Amounts, Annual Company Contribution Amounts and interest credits on
those amounts for that year.
15.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of the
Plan and the Plan Agreement shall govern the rights of a Participant
to receive distributions pursuant to the Plan. The provisions of the
Trust shall govern the rights of the Employers, Participants and the
creditors of the Employers to the assets transferred to the Trust.
Each Employer shall at all times remain liable to carry out its
obligations under the Plan.
15.3 DISTRIBUTIONS FROM THE TRUST. Each Employer's obligations under the
Plan may be satisfied with Trust assets distributed pursuant to the
terms of the Trust, and any such distribution shall reduce the
Employer's obligations under this Agreement.
ARTICLE 16
MISCELLANEOUS
16.1 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries,
heirs, successors and assigns shall have no legal or equitable rights,
interests or claims in any property or assets of an Employer. For
purposes of the payment of benefits under this Plan, any and all of an
Employer's assets shall be, and remain, the general, unpledged
unrestricted assets of the Employer. An Employer's obligation under
the Plan shall be merely that of an unfunded and unsecured promise to
pay money in the future.
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16.2 EMPLOYER'S LIABILITY. An Employer's liability for the payment of
benefits shall be defined only by the Plan and the Plan Agreement, as
entered into between the Employer and a Participant. An Employer
shall have no obligation to a Participant under the Plan except as
expressly provided in the Plan and his or her Plan Agreement.
16.3 NONASSIGNABILITY. Neither a Participant nor any other person shall
have any right to commute, sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, transfer, hypothecate, alienate or
convey in advance of actual receipt, the amounts, if any, payable
hereunder, or any part thereof, which are, and all rights to which are
expressly declared to be, unassignable and non-transferable, except
that the foregoing shall not apply to any court order specified in
Section 16.14 below. No part of the amounts payable shall, prior to
actual payment, be subject to seizure, attachment, garnishment or
sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by a Participant or any other person, nor be
transferable by operation of law in the event of a Participant's or
any other person's bankruptcy or insolvency.
16.4 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan
shall not be deemed to constitute a contract of employment between any
Employer and the Participant. Such employment is hereby acknowledged
to be an "at will" employment relationship that can be terminated at
any time for any reason, or no reason, with or without cause, and with
or without notice, unless expressly provided in a written employment
agreement. Nothing in this Plan shall be deemed to give a Participant
the right to be retained in the service of any Employer, either as an
Employee or a Director, or to interfere with the right of any Employer
to discipline or discharge the Participant at any time.
16.5 FURNISHING INFORMATION. A Participant or his or her Beneficiary will
cooperate with the Committee by furnishing any and all information
requested by the Committee and take such other actions as may be
requested in order to facilitate the administration of the Plan and
the payments of benefits hereunder, including but not limited to
taking such physical examinations as the Committee may deem necessary.
16.6 TERMS. Whenever any words are used herein in the masculine, they
shall be construed as though they were in the feminine in all cases
where they would so apply; and whenever any words are used herein in
the singular or in the plural, they shall be construed as though they
were used in the plural or the singular, as the case may be, in all
cases where they would so apply.
16.7 CAPTIONS. The captions of the articles, sections and paragraphs of
this Plan are for convenience only and shall not control or affect the
meaning or construction of any of its provisions.
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16.8 GOVERNING LAW. Subject to ERISA, the provisions of this Plan shall be
construed and interpreted according to the laws of the State of
California without regard to its conflicts of laws principles.
16.9 NOTICE. Any notice or filing required or permitted to be given to the
Committee under this Plan shall be sufficient if in writing and either
hand-delivered or sent by registered or certified mail, to:
Talbert Medical Management Holdings Corporation
3540 Howard Way
Costa Mesa, California 92626
such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
Any notice or filing required or permitted to be given to a
Participant under this Plan shall be sufficient if in writing and
hand-delivered, or sent by mail, to the last known address of the
Participant.
16.10 SUCCESSORS. The provisions of this Plan shall bind and inure to
the benefit of the Participant's Employer and its successors and
assigns and the Participant and the Participant's designated
Beneficiaries.
16.11 SPOUSE'S INTEREST. The interest in the benefits hereunder of a
spouse of a Participant who has predeceased the Participant shall
automatically pass to the Participant and shall not be
transferable by such spouse in any manner, including but not
limited to such spouse's will, nor shall such interest pass under
the laws of intestate succession.
16.12 VALIDITY. In case any provision of this Plan shall be illegal or
invalid for any reason, said illegality or invalidly shall not
affect the remaining parts hereof, but this Plan shall be
construed and enforced as if such illegal or invalid provision
had never been inserted herein.
16.13 INCOMPETENT. If the Committee determines in its discretion that
a Benefit under this Plan is to be paid to a minor, a person
declared incompetent or to a person incapable of handling the
disposition of that person's property, the Committee may direct
payment of such benefit to the guardian, legal representative or
person having the care and custody of such minor, incompetent or
incapable person. The Committee may require proof of minority,
incompetency, incapacity or guardianship, as it may deem
appropriate prior to distribution of the benefit. Any payment of
a benefit shall be a payment for the account of the Participant
and the Participant's Beneficiary, as the case may be, and shall
be a complete discharge of any liability under the Plan for such
payment amount.
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16.14 COURT ORDER. The committee is authorized to make any payments
directed by court order in any action in which the Plan or the
Committee has been named as a party. In addition, if a court
determines that a spouse or former spouse of a Participant has an
interest in the Plan as the result of a property settlement or
otherwise, the Committee, in its sole discretion, shall have the
right, notwithstanding any election made by a Participant to
immediately distribute the spouse's or former spouse's interest
in the Plan to that spouse or former spouse.
16.15 DISTRIBUTION IN THE EVENT OF TAXATION.
(a) GENERAL. If, for any reason, all or any portion of a
Participant's benefit under this Plan becomes taxable to the
Participant prior to receipt, a Participant may petition the
Committee before a Change of Control, or the trustee of the
Trust after a Change of Control, for a distribution of that
portion of his or her benefit that has become taxable. Upon
the grant of such a petition, which grant shall not be
unreasonably withheld, a Participant's Employer shall
distribute to the Participant immediately available funds in
an amount equal to the taxable portion of his or her benefit
(which amount shall not exceed a Participant's unpaid Account
Balance under the Plan), less taxes withheld in accordance
with Section 3.7(c) above. If the petition is granted, the
tax liability distribution shall be made within 90 days of
the date when the Participant's petition is granted. Such
a distribution shall affect and reduce the benefits to be
paid under this Plan.
26
(b) TRUST. If the Trust terminates in accordance with section
[3.6(e)] of the Trust Agreement and benefits are distributed from
the Trust to a Participant in accordance with that Section, the
Participant's benefits under this Plan shall be reduced to the
extent of such distributions.
IN WITNESS WHEREOF, the Company has signed this Plan document as of
____________________, 1997.
TALBERT MEDICAL MANAGEMENT HOLDINGS CORPORATION,
a Delaware corporation
"COMPANY"
By:
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Title:
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