Exhibit 4.1
UNITED WISCONSIN SERVICES, INC.
TERMS AND CONDITIONS
OF THE
DIVIDEND REINVESTMENT AND DIRECT STOCK PURCHASE PLAN
The Dividend Reinvestment and Direct Stock Purchase Plan (the "Plan") of
United Wisconsin Services, Inc., (the "Company") provides each holder or record
of shares ("Record Owner") and Beneficial Owner (as defined below) of shares of
the Company's common stock, no par value per share (the "Common Stock"), with a
convenient and economical way of purchasing additional shares of Common Stock
through the automatic reinvestment of cash dividends of Common Stock and/or
through optional cash payments. An individual who is not a Record Owner or
Beneficial Owner may become a full participant in the Plan through the Plan's
direct stock purchase component by making cash payments for shares in the Plan.
An investor who participates in any feature of the Plan is hereafter referred to
as a "Participant."
PURPOSE
1. Purpose of the Plan
The purpose of the Plan is to provide interested investors, Record Owners
and Beneficial Owners with a convenient means of investing in the Company
through new investments in Common Stock and through the regular reinvestment of
cash dividends paid on Common Stock. Shares of the Common Stock for the Plan
may be purchased, in the discretion of the Company, either directly from the
Company through the reinvestment agent (the "Reinvestment Agent") and/or in the
open market.
If shares are purchased from the Company, the proceeds from such purchases
will be received by the Company and will be used from time to time for general
corporate purposes.
ADVANTAGES
2. Advantages of the Plan
Participants in the Plan may elect to have all or a designated portion of
cash dividends on their shares of Common Stock automatically reinvested
and/or build their ownership in the Company through additional cash
investment of not less than $100 per calendar quarter and not more than
$100,000 in any calendar year. (See Section 4 for information on who is
eligible to participate.)
Participants in the Plan will pay the Market Price (as defined in Section
15) for shares whether reinvesting all or a designated portion of their cash
dividends or purchasing additional shares through the cash investment option
available under the Plan.
All service charges and brokerage commissions, if any, in connection with
purchases under the Plan will be paid by the Company.
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Full investment under the Plan is possible because the Plan permits
fractions of shares, as well as full shares, to be purchased for Participants.
In addition, dividends with respect to such fractions, as well as with respect
to full shares, will be used to purchase additional shares for Participants.
Regular statements will provide Participants with a record of each transaction.
(See Section 21 for information regarding frequency of reports.) All share
purchases, by reinvestment of dividends or by optional cash payments, will be
credited to the Participant's account established for the Plan (a
"Noncertificated Share Account").
ADMINISTRATION
3. Plan Administrator
The Reinvestment Agent administers the Plan for Participants. The present
Reinvestment Agent is Firstar Trust Company ("Firstar").
The Reinvestment Agent maintains a continuing record of all Participants'
Noncertificated Share Accounts, sends statements of account to each Participant,
and performs other duties relating to the Plan. The Reinvestment Agent will
hold for safekeeping the certificates for shares purchased for each Participant
under the Plan until termination of the shareholder's participation in the Plan,
or until a written request is received from the Participant for withdrawal of
the shares.
Should Firstar cease to act as the Reinvestment Agent under the Plan, the
Company may perform these administrative duties itself or may designate another
agent. In such event, all references herein to Firstar or the Registration
Agent shall be deemed to be references to the Company or such other agent as the
Company may designate.
Participants can contact the Reinvestment Agent either by telephone at
(414) 276-3737 or by mail addressed to:
Firstar Trust Company
615 E. Michigan Street, 4th Floor
Milwaukee, Wisconsin 53202
PARTICIPATION
4. Eligibility for Participation in the Plan
All Record Owners and Beneficial Owners of the Common Stock are eligible to
participate in all features of the Plan. A Beneficial Owner is a shareholder
who beneficially owns shares of Common Stock that are registered in a name other
than his or her own name (e.g., the shares are held in the name of a broker,
bank or other nominee). Record Owners and Beneficial Owners may make optional
cash payments whether or not they also have elected to reinvest dividends on
Common Stock registered in their names.
You must be a Record Owner or Beneficial Owner to participate in the
dividend reinvestment feature of the Plan and only shares of Common Stock of
which you are the Record Owner or Beneficial Owner may have their dividends
reinvested pursuant to the Plan.
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The Company may refuse participation in the Plan in its entirety, or
participation through any particular option under the Plan, to shareholders
residing in states whose securities laws do not exempt from registration shares
offered pursuant to the Plan, or pursuant to any particular participation option
under the Plan.
5. How to Participate
In order to participate in the Plan, a Record Owner must properly complete
an authorization card furnished by the Reinvestment Agent (the "Authorization
Card") and return it to the Reinvestment Agent. An Authorization Card and
postage-paid envelope are enclosed with this Prospectus and additional cards may
be obtained at any time by shareholders by written or oral request to the
Reinvestment Agent (see Section 3). Telephone requests or general inquiries may
also be made by calling the Reinvestment Agent at (414) 276-3737 (see Section
3).
Beneficial Owners who wish to participate in the Plan must instruct their
broker, bank or other nominee to complete and sign the Authorization Card and
return it to the Plan Administrator. See Section 7 for a discussion of the
Broker and Nominee Form (the "B&N Form") which is required to be used for
optional cash payments of a Beneficial Owner whose broker, bank or other nominee
holds the Beneficial Owner's shares in the name of a securities depository. See
also Section 12.
An Authorization Card will be mailed to all new holders of record of Common
Stock by the Reinvestment Agent. Authorization Cards may also be obtained at
any time by written request to the Reinvestment Agent.
Shareholders who do not wish to participate in the Plan will receive cash
dividends, as declared, in the usual manner.
If a shareholder returns a properly executed Authorization Card to the
Reinvestment Agent without electing an investment option, such Authorization
Card will be deemed to indicate the intention of such shareholder to apply all
cash dividends, together with any optional cash payments, toward the purchase of
additional shares of Common Stock.
If a Participant's shares are registered in more than one name or in a
representative capacity (i.e., join tenants, trustees, etc.), all registered
holders must sign the Authorization Card exactly as their names appear on the
Company's stock transfer records.
6. The Authorization Card
The Authorization Card provides for the purchase by any entity, whether or
not a record holder of the Company's Common Stock, of additional shares of
Common Stock through the following investment options offered under the Plan:
- Full Dividend Reinvestment -- Record Owners may reinvest cash
dividends on all shares owned by the Participant. Optional cash
payments of not less than $100 may also be made quarterly.
- Partial Dividend Reinvestment -- Record Owners may reinvest cash
distributions on less than all of the shares owned by the Participant
and continue to receive cash dividends on
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the other shares. Optional cash payments of not less than $100 may
also be made quarterly.
- Optional Payments Only -- Record Owners may invest by making optional
cash payments of not less than $100 per calendar quarter.
- Initial Direct Purchase -- Investors who are not currently Record
Owners may participate in the Plan by making a cash payment of not
less than $100 to the Plan.
Cash dividends on shares credited to the Participant's Noncertificated
Share Account under the Plan are automatically reinvested to purchase additional
shares.
7. WHAT DOES THE BROKER AND NOMINEE FORM PROVIDE?
The B&N Form must be submitted for optional cash payments of a Beneficial
Owner whose broker, bank or other nominee holds the Beneficial Owner's shares
in the name of a registered security depository. A B&N Form must be delivered
to the Plan Administrator each time that such broker, bank or other nominee
transmits optional cash payments on behalf of a Beneficial Owner. B&N Forms
will be furnished at any time upon request to the Reinvestment Agent (see
Section 3).
Prior to submitting the B&N Form, the broker, bank or other nominee for a
Beneficial Owner must have established participation in the Plan by means of a
duly completed and executed Authorization card on behalf of the Beneficial Owner
(see Sections 5 and 6).
The Reinvestment Agent will make purchases for the Plan once a month on the
first business day of each month (the "Investment Date"). Accordingly, the B&N
Form and appropriate instructions must be received by the Reinvestment Agent no
later than the 25th day of the preceding month or the optional cash payment will
not be invested until the following Investment Date.
8. Partial Participation Under the Plan
A shareholder who desires the dividends on only some full shares to be
reinvested under the Plan may indicate such number of shares on the
Authorization Card. Cash dividends will continue to be made on the remaining
shares.
9. Changing the Method of Participation in the Plan After Enrollment
A Participant may change his/her method of participation in the Plan after
enrollment by submitting a revised Authorization Card or sending a written
request signed by all registered owners to the Reinvestment Agent at the address
specified in Section 3. A change in dividend reinvestment will be effective
with the next Dividend Payment Date (as defined in Section 10), if the request
for change is received at least two weeks before that Date.
10. When a Shareholder or Investor May Join the Plan
If an Authorization Card specifying a dividend reinvestment feature is
properly completed and received by the Reinvestment Agent at least two weeks
before the record date established for the payment of a particular dividend,
reinvestment of dividends will commence with that dividend payment.
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If an Authorization Card is received from a shareholder after the record
date established for a particular dividend, the reinvestment of such dividends
will begin on the dividend payment date following the next record date if such
shareholder is still a holder of record.
Dividend payment dates are anticipated to be in March, June, September and
December each year ("Dividend Payment Date").
Record Owners and Beneficial Owners wishing to make additional optional
cash payments through the Plan or investors not owning shares but wishing to
make an initial direct purchase through the Plan may do so at any time.
INITIAL DIRECT PURCHASE AND OPTIONAL CASH PAYMENTS
11. Shareholders Eligible to Make Optional Cash Payments
Record Owners who have executed an Authorization Card, and Beneficial
Owners who have executed an Authorization Card and a B&N Form, are eligible to
make optional cash payments of not less than $100 in the aggregate for any
quarter (noncumulative from quarter to quarter). The maximum aggregate amount
of optional cash payments under the Plan may not exceed $100,000 in any calendar
year.
12. How to Make an Initial Direct Purchase or Optional Cash Payments
A new Participant may make an initial cash payment when enrolling in the
Plan by sending the Reinvestment Agent a check or money order, payable to
Firstar Trust Company, for not less than $100, with a completed Authorization
Card.
Once a Participant has enrolled in the Plan and the initial investment is
made, whether of dividends or through an initial direct purchase through the
Plan, a Participant will have the ability to make optional cash payments. Any
check or money order for an optional cash payment must be made to Firstar Trust
Company and should be accompanied by a properly completed Authorization Card.
Checks and forms should be mailed to Firstar Trust Company (see Section 3 for
address), Attention: Dividend Reinvestment. Beneficial Owners whose broker,
bank or other nominee holds the shares of the Beneficial Owner in a registered
securities depository must make their optional cash payments through the use of
the B&N Form rather than through the use of an Authorization Card.
Initial direct purchases and subsequent optional cash payments must be in
United States dollars, payable at a United States bank, and may not be less than
$100 for initial direct purchases or $100 in the aggregate for any quarterly
period between Dividend Payment Dates for optional cash payments (noncumulative
from quarter to quarter). The same amount need not be sent each time, and there
is no obligation to make an optional cash payment in any quarter. Do not send
cash.
Optional cash payments of Participants can be refunded if a written request
is received by the Reinvestment Agent at the above address at least two business
days prior to the Investment Date (see Section 16).
Optional cash payments received on or prior to each Investment Date will be
invested on that Investment Date. No interest will be paid on funds held
between receipt and investment. You are therefore strongly encouraged to send
your optional cash payments so that they are received by the Reinvestment Agent
close to, but not later than the Investment Date (see Section 16)
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COSTS
13. Expenses to Participants in Connection with Purchases Under the Plan
Participants will incur no brokerage commissions, service or other charges
for purchases made under the Plan. Any costs of administration of the Plan will
be borne by the Company. However, charges will be incurred by a Participant
upon the sale of his or her shares (see Sections 25, 27 and 28), and certain
fees may be charged to Participants by brokers when shares are held by brokers.
The benefit of any reduced brokerage commission charges will be passed on, pro
rata, to Participants.
PURCHASES
14. Number of Shares will be Purchased for Participants
The number of shares to be purchased will be determined by the amount of
the Participant's dividends and/or optional cash payments or initial direct
purchase payments, being reinvested or paid and the Market Price (as defined in
Section 15) of the shares. Each Participant's Noncertificated Share Account in
the Plan will be credited with the number of shares, including fractional shares
computed to three decimal places, equal to the amount of the dividends and/or
optional cash to be reinvested or paid divided by the applicable purchase price
of the shares.
15. Determination of the Purchase Price of Shares
Shares may be purchased from the Company through the Reinvestment Agent or
may be purchased, in the discretion of the Company, in the open market by the
Reinvestment Agent. For shares purchased from the Company through the
Reinvestment Agent, the price per share will be the average of the high and low
sale prices of the shares (the "Market Price") on the Reinvestment Date (defined
as the date on which dividends are paid and can first be reinvested in the
Company by the Reinvestment Agent) on the NYSE as reported by THE WALL STREET
JOURNAL. If no shares were traded on the Reinvestment Date, the Market Price
will be based on the most recent date immediately prior to the Reinvestment
Date that the shares were traded. For shares purchased on the open market, the
price per share will be the average price of all shares purchased for the Plan
in respect of any Reinvestment Date.
16. Timing of Investment of Dividends, and/or Initial Direct Purchases or
Optional Cash Payments.
Dividend reinvestment payments will be invested in additional shares and
credited to a Participant's Noncertificated Share Account within thirty days of
each Reinvestment Date. If any dividend reinvestment payments are not
reinvested by the Reinvestment Agent within thirty days after a Reinvestment
Date, such dividend payments will be returned to the Participant without any
interest thereon.
Record Owners and Beneficial Owners wishing to make additional optional
cash payments through the Plan may do so at any time. The Reinvestment Agent
will make purchases for the Plan once a month on the first business day of each
month (the "Investment Date") to satisfy these investment requests.
Accordingly, Participants and interested investors should send cash investments
so as to reach the Reinvestment Agent by the 25th day of the preceding month.
17. Reinvestment of all dividends on shares credited to a Participant's
Noncertificated Share Account under the Plan
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Regardless of the investment option chosen, all cash dividends on shares
held in the Plan for all Participants are automatically reinvested in additional
shares of Common Stock.
SHARE CERTIFICATES
18. Issuance of Certificates to Participants for Shares Purchased Under the
Plan
Although the Company reserves the right at any time to issue certificates
for any number of shares in a Participant's Noncertificated Share Account,
certificates for shares will not be issued except as described in Section 19.
Shares purchased under the Plan will be credited to a Participant's
Noncertificated Share Account and will be shown on a Participant's statement of
account. Certificates for the shares purchased pursuant to the Plan will be
issued to Participants upon their written request, except that no certificates
will be issued for fractional shares. A Participant requesting a certificate
for all the shares in Participant's Noncertificated Share Account will receive
cash for a fractional share only if participation in the Plan is terminated.
(See Section 19 for how a Participant may obtain certificates.) Cash dividends
on all shares held in the Participant's Noncertificated Share Account under the
Plan will be automatically reinvested to purchase additional shares which will
be reflected in the Participant's Noncertificated Share Account. If a
Participant is a Beneficial Owner, such request should be placed through such
Participant's broker, banker or other nominee.
19. How a Participant May Obtain Certificates for Shares Purchased Under the
Plan
A Participant who has purchased shares under the Plan may obtain
certificates for those shares in the Participant's Noncertificated Share Account
at any time by sending a written request to that effect to the Reinvestment
Agent. If a Participant is a Beneficial Owner,such request should be placed
through such Participant's broker, bank or other nominee. No certificates will
be issued for fractional shares, but a Participant requesting termination of
participation in the Plan will receive, in cash, the Market Price of any
fractional share as well as one certificate, unless otherwise requested by the
Participant, for all whole shares held for such terminating Participant in the
Noncertificated Share Account. This notice should be mailed to the Reinvestment
Agent (see Section 3 for address). The Company, however, reserves the right at
any time to issue certificates to Participants for any shares in their
Noncertificated Share Accounts. (See Sections 24-27 for information on
termination of participation.)
20. Depositing Common Stock Held in Certificate Form in a Participant's
Noncertificated Share Account
Common Stock certificates registered in a Participant's name may be
surrendered to the Reinvestment Agent for deposit to the Participant's
Noncertificated Share Account. This procedure enables Participants to avoid
the necessity of safekeeping certificates. The Participant should contact the
Reinvestment Agent (see Section 3) for the proper procedure to deposit
certificates.
Common Stock certificates may be deposited in a Participant's
Noncertificated Share Account whether or not the Participant has previously
authorized reinvestment of dividends on Common Stock registered in the
Participant's name. However, as with all other shares held in the Participant's
Noncertificated Share Account, all dividends on any shares deposited will
automatically be reinvested.
PARTICIPANTS' RECORDS AND ACCOUNTS
21. Type of Reports Sent to Participants in the Plan
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As soon as practicable after each Reinvestment Date (in the case of
dividend reinvestment) or Investment Date (in the case of initial direct
purchases or optional cash payments) a Participant in the Plan will receive a
statement indicating the Market Price, the number of shares purchased and the
number of shares in the Participant's Noncertificated Share Account. In
addition to the above information, a statement to a Participant in the dividend
reinvestment feature of the Plan will also show the total dividend payment and
the amount of the dividend payment reinvested. Each of these statements is a
record of the cost of purchases under the Plan and should be retained for tax
purposes.
In addition, each Participant will receive copies of the Company's annual
and quarterly reports to shareholders, notices of annual and special meetings,
proxy statements and income tax information for reporting dividends. Beneficial
owners whose shares are registered in names other than their own (for instance,
in the name of a broker, bank nominee or other record holder) must arrange to
obtain their copies of such reports from the record holder.
22. Name Under Which Accounts Will Be Maintained and Certificates Registered
When Issued
A Participant's Noncertificated Share Account will be maintained in the
name or names which appear on the Company's shareholder records.
A certificate for shares, when delivered to a Participant, will be
registered in the name or names in which the Noncertificated Share Account is
maintained. Upon written request, certificates can be registered and issued in
names other than the account name, provided that the request bears the signature
of the Participant or Participants and the signature(s) are guaranteed by a
commercial bank or a member of the NYSE.
MODIFICATION OR TERMINATION BY A PARTICIPANT
23. Modifying the Manner of Participation in the Plan
A Participant may change participation from partial to total dividend
reinvestment, from total to partial dividend reinvestment, or may simply
change the number of shares that are enrolled in the Plan by executing and
delivering a new Authorization Card to the Reinvestment Agent (see Section 3
for address). Beneficial Owners must use the B&N Form to change their
Participation. Notices to change dividend reinvestment must be received by
the Reinvestment Agent at least two weeks before any Dividend Payment Date to
be effective as of that date.
24. Terminating Participation in the Plan
A Participant may terminate participation in the Plan by notifying the
Reinvestment Agent in writing to that effect. Notices will be effective only
upon receipt by the Reinvestment Agent. Notices to discontinue dividend
reinvestment received by the Reinvestment Agent at least two weeks before any
Dividend Payment Date will be effective as of that date. After termination,
dividends will be paid to the shareholder in cash unless and until the
shareholder rejoins the Plan. In order to re-enter the Plan after termination,
a shareholder must complete a new Authorization Card.
25. Selling Shares Held in the Plan Through the Reinvestment Agent
A Participant can instruct the Reinvestment Agent to sell any or all of
the whole shares held in the Plan. The written notification to the
Reinvestment Agent should include the number of shares that are to be sold.
The Reinvestment Agent will make the sale as soon as practicable after
receipt of a Participant's request and will then issue to the Participant a
check for the proceeds less brokerage commission and transfer taxes (if any).
In its discretion, the Reinvestment Agent also may effect a net share
exchange between a selling Participant and another Participant's optional
cash purchase or reinvestment of dividends.
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No Participant shall have the authority or power to direct the date or
sales price at which shares may be sold. The request must indicate the
number of shares which may be sold and not the dollar amount to be obtained.
Any such request that does not clearly indicate the number of shares which
may be sold will be returned to the Participant with no action taken.
A withdrawal/termination form will be provided on the stub of the account
statement for this purpose. This notice should be addressed to the
Reinvestment Agent (see Section 3 for address).
26. Status of Shares Held in the Noncertificated Share Account When a
Participant Terminates Participation in the Plan
A certificate for the shares held in the Noncertificated Share Account will
be issued to the Participant upon the Participant's written request or upon a
Participant's termination of participation in the Plan. No fractional shares
will be issued. (See Section 18 for information on share certificates and
Section 19 for information on the cash payment for fractional shares in the
Noncertificated Share Account.)
27. Receiving Cash in Lieu of Full Share Certificates upon Termination of
Participation
The Participant may request, in his or her written notification of
termination, that the Reinvestment Agent sell all full and fractional shares
held in the account under the Plan in which case the Reinvestment Agent will
sell the shares and deliver the Market Price of any fractional share and the
proceeds from the sale of full shares, less brokerage commissions and any taxes
payable in connection with the sale, to the Participant.
28. Selling Record Shares and Remaining in the Plan
If a Participant should sell or transfer all of his or her record shares of
Common Stock, the Reinvestment Agent, at its discretion, may continue to
reinvest the dividends on the shares credited to his or her Noncertificated
Share Account under the Plan until notified in writing by the Participant to
withdraw from the Plan, or may terminate the Participant's participation and
sell all of the shares credited to the Participant's Noncertificated Share
Account. Upon termination, the Reinvestment Agent will remit to the former
Participant the proceeds from any sale, less any related brokerage commission
and applicable taxes, and payment for any fractional shares.
29. Selling or Transferring Some but not All of the Common Stock Credited to
the Participant's Noncertificated Share Account
If a Participant is reinvesting dividends on only a portion of his or her
record shares, the Common Stock sold or transferred will be considered to be the
shares receiving cash dividends to the extent possible. Dividend reinvestment
will only be reduced when the number of shares of Common Stock sold or
transferred exceeds the number of shares receiving cash dividends. For example,
if a Participant owns 1,000 shares of Common Stock and has authorized dividends
on 600 of those shares to be reinvested under the Plan, such Participant could
sell up to 400 of his or her record shares without reducing the number of shares
which participate in the dividend reinvestment option of the Plan.
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30. Stopping the Reinvestment of Dividends from the Participant's Record Shares
and Receiving Them in Cash and Still Remaining in the Plan
A Participant who terminates the reinvestment of dividends paid on his or
her record shares, may leave shares acquired through the Plan in the
Participant's Plan Noncertificated Share Account. Dividends paid on shares left
in the Plan will continue to be automatically reinvested.
31. Re-enrolling in the Plan
Generally, a shareholder may again become a Participant at any time.
However, the Company reserves the right to reject any Authorization Form from a
previous Participant on grounds of excessive enrolling and termination. This
reservation is intended to minimize administrative expenses and to encourage use
of the Plan as a long-term investment service.
OTHER INFORMATION
32. Dividend Payment Dates
Dividend Payment Dates are anticipated to be in March, June, September and
December each year.
33. Voting of Participant's Shares at Annual Meetings of Shareholders
The Reinvestment Agent will obtain voting instructions from the Participant
for all full and fractional shares which are held by the Reinvestment Agent for
the Participant's Noncertificated Share Account on the record date established
by the Company for determining shareholders entitled to vote. In the absence of
voting instructions from the Participant, shares accumulated under the Plan will
not be voted.
34. Company Issuance of a Stock Dividend, Declaration of a Stock Split or
Making a Rights Offering
Any stock dividends or split shares distributed by the Company on shares
held by the Reinvestment Agent for the Participant will be credited to the
Participant's Noncertificated Share Account on a pro rata basis. In the event
that the Company makes available to its common shareholders rights to purchase
additional shares, debentures or other securities, the Reinvestment Agent will
sell such rights accruing on shares held by the Reinvestment Agent for
Participants and invest the proceeds in Common Stock of the Company prior to or
with the next regular cash dividend. A Participant who wishes to exercise
purchase rights must request that a stock certificate be sent to him or her by
the Reinvestment Agent prior to the record date for the rights offering.
35. Pledging Shares Credited to a Participant's Account
Shares in a Participant's Noncertificated Share Account in the Plan may not
be pledged, assigned or otherwise encumbered unless withdrawn from the
Noncertificated Share Account.
36. Responsibility of the Company or the Reinvestment Agent Under the Plan
In administering the Plan, neither the Company nor the Reinvestment Agent
nor any agent of either of them will be liable for any act done in good faith,
without negligence, or for any omission to act including, without limitation,
any claims for liability arising out of failure to terminate the Participant's
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Noncertificated Share Account upon his or her death prior to receipt of notice
in writing of such death and with respect to the prices at which shares are
purchased or sold for the Participant's Noncertificated Share Account and the
times such purchases or sales are made.
All notices from the Reinvestment Agent to a Participant will be addressed
to the Participant's last known address. Beneficial Owners will receive all
notices and other mailings through their broker, bank or other nominee.
Participant's should notify the Reinvestment Agent promptly in writing of any
change in address.
The risk to Participants is the same as with any other investment in shares
of Common Stock of the Company. It should be recognized that a Participant
loses any advantage otherwise available from being able to select the timing of
his or her investment. It should also be recognized that, like any investment,
the Company cannot assure the Participant of a profit or protect the Participant
against a loss on the shares purchased by the Participant under the Plan, nor
can the Company control purchases by the Reinvestment Agent. The Company also
cannot guarantee that dividends on shares of its common stock might not be
reduced or eliminated.
37. Modification, Suspension or Termination of the Plan
While the Company hopes to continue the Plan indefinitely, the Company
reserves the right to suspend or terminate the Plan at any time. It also
reserves the right to make modifications or amendments to the Plan and in
particular reserves the right to refuse optional cash payments from any
shareholder who, in the sole discretion of the Company, is attempting to
circumvent the interest of the Plan by making excessive optional cash payments
through multiple Noncertificated Share Accounts. To the extent practicable,
notice of any such suspension, termination, modification or amendment will be
sent to all Participants at least 30 days prior to the effective date. Any
modification will be deemed to be accepted by Participants who do not withdraw
prior to the effectiveness of the modification.
If the Plan is terminated, each Participant will receive (1) a certificate
for all whole shares of Common Stock held in the Participant's Noncertificated
Share Account and (2) a check representing the value of any fractional share
held in the Participant's Noncertificated Share Account and any uninvested
optional cash payment held in the account.
FEDERAL INCOME TAX CONSEQUENCES
Participants should consult their personal tax advisors with specific
reference to their own tax situations and potential changes in the applicable
laws as to all federal, state, local, foreign and other tax matters in
connection with the reinvestment of dividends and purchases of Common Stock
under the Plan, the Participant's tax basis and holding period for Common Stock
acquired under the Plan and the character, amount and tax treatment of any gain
or loss realized on the disposition of Common Stock. The following is only a
brief summary of some of the principal federal income tax considerations
applicable to the Plan.
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38. Tax Treatment of Dividends Received by a Participant
Participants in the Plan who are reinvesting dividends will be treated
for federal income tax purposes as having received with respect to each
Reinvestment Date a dividend equal to the purchase price of the shares
purchased by dividend reinvestment on that date (i.e., the amount that would
have been received as a cash dividend) plus the cash dividend actually
received (if any). Dividends will be taxed in the following manner: (i) if
the dividend is paid by the Company out of its current or accumulated
earnings and profits, it will be taxed as ordinary income; (ii) if the
Company has no current or accumulated earnings and profits, the dividend will
be treated as a return of capital, which results in a reallocation of basis
between shares previously owned and shares acquired by dividend reinvestment;
and (iii) if all capital has been returned under (ii), the dividend will be
treated as capital gain income.
Participants who acquire shares under the Plan, except those shares
acquired as a return of capital, will have a tax basis in the shares so acquired
equal to the amount being paid for those shares increased by any brokerage fees
treated as a dividend to the Participant. Except for those dividends treated as
a return of capital, the holding period for tax purposes for all Participants
will begin on the day following the Reinvestment Date on or for which the shares
are acquired. A Participant will not realize any taxable income when the
Participant receives certificates for whole shares previously credited to the
Participant's Noncertificated Share Account, either upon the Participant's
request for those shares or upon withdrawal from the Plan.
A Participant will realize gain or loss when shares are sold or exchanged,
or when the Participant receives a cash adjustment for a fraction of a share
credited to the Participant's Noncertificated Share Account upon withdrawal from
the Plan. The amount of such gain or loss will be the difference between the
amount which the Participant receives for the shares, or fraction of a share,
and the Participant's tax basis.
39. Tax Treatment of Service Charges, Brokerage Commissions, and other
administrative Expenses of the Plan Paid by the Company
In connection with purchases of shares on the open market, service charges
and brokerage commissions paid by the Company on the behalf of Participants will
likely be treated as distributions subject to income tax in the same manner as
dividends. With respect to administrative expenses, such expenses paid by the
Company are not likely to be treated as constructive distributions to
Participants and, as a result, not subject to income tax.
40. Provisions for Participants Whose Dividends are Subject to Income Tax
Backup Withholding
In the case of those Participants whose dividends are subject to United
States income tax backup withholding, the Reinvestment Agent will apply the net
amount of their dividends, after the deduction for taxes, to the purchase of
shares of Common Stock. As a general matter, the Company is currently required
to withhold for United States income tax purposes 31% of all dividend payments
to a shareholder if (i) the Participant fails to furnish its taxpayer
identification number (the "TIN") to the Company as required, (ii) the Internal
Revenue Service (the "IRS") notifies the Company that the TIN furnished by the
Participant is incorrect, (iii) the IRS notifies the Company that the
Participant has failed properly to report certain payments as required or (iv)
the Participant fails to certify, when and as required to do so, under penalties
of perjury, that it is not subject to backup withholding. Shareholders may be
requested by the Company or their broker to submit all information and
certifications required in order to exempt them from back-up withholding if such
exemption is available to them.
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41. Tax Treatment of Cash Received by a Participant upon the Sale of Shares
Purchased by the Participant Pursuant to the Plan
Assuming that the shares are held as capital assets, a Participant who
receives a cash payment for any full or fractional shares then held in his or
her Plan account will recognize either short-term or long-term capital gain
or loss, depending on his or her particular circumstances, the tax basis of
his or her shares, and the period of time he or she has held his or her
shares. Federal law requires the Company to notify the IRS of all sales of
stock made under the Plan during the year. If a Participant sells any shares
from the Plan, he or she will be sent a Form 1099B for each sale pursuant to
federal income tax regulations.
42. Federal Income Tax Consequences of Participation in the Plan by an IRA,
Keogh Plan, 401(k) Plan, Simplified Pension Account or any Corporate
Employer-sponsored Retirement Plan
The tax consequences of participation in the Plan by retirement plans
differ from those outlined above for individuals. Since the law and regulations
regarding the federal income tax consequences of retirement plan participation
are complex and subject to change, those considering such participation should
consult with their own retirement plan trustees, custodians or tax advisors for
specific information.
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