UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 2002
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number 1-7784
CENTURYTEL, INC.
(Exact name of Registrant as specified in its charter)
Louisiana 72-0651161
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
100 CenturyTel Drive, Monroe, Louisiana 71203
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code - (318) 388-9000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
___________________ _________________________________________
Common Stock, par value $1.00 New York Stock Exchange
Berlin Stock Exchange
Preference Share Purchase Rights New York Stock Exchange
Berlin Stock Exchange
Corporate Units issued May 2002 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark if the Registrant is an accelerated filer (as defined
in Rule 12b-2 of the Act). Yes [X] No [ ]
The aggregate market value of voting stock held by non-affiliates (affiliates
being for these purposes only directors, executive officers and holders of more
than five percent of the Company's outstanding voting securities) was $4.2
billion as of June 28, 2002. As of February 28, 2003, there were 143,069,486
shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Proxy Statement to be furnished in connection with
the 2003 annual meeting of shareholders are incorporated by reference in Part
III of this Report.
PART I
Item 1. Business
General. CenturyTel, Inc. ("CenturyTel") is a regional integrated
communications company engaged primarily in providing local exchange telephone
services. For the year ended December 31, 2002, local exchange telephone
operations provided 88% of the consolidated revenues from continuing operations
of CenturyTel and its subsidiaries (the "Company"). All of the Company's
operations are conducted within the continental United States.
At December 31, 2002, the Company's local exchange telephone subsidiaries
operated approximately 2.4 million telephone access lines, primarily in rural,
suburban and small urban areas in 22 states, with the largest customer bases
located in Wisconsin, Missouri, Alabama, Arkansas, Washington, Michigan,
Louisiana, Colorado, Ohio and Oregon. According to published sources, the
Company is the eighth largest local exchange telephone company in the United
States based on the number of access lines served. For more information, see
"Telephone Operations."
On August 1, 2002, the Company sold substantially all of its wireless
operations for an aggregate of approximately $1.59 billion in cash. For
additional information, see "Recent acquisitions and dispositions" below.
The Company also provides long distance, Internet access, competitive
local exchange carrier, fiber network, security monitoring, and other
communications and business information services in certain local and regional
markets. For more information, see "Other Operations."
Recent acquisitions and dispositions. On July 1, 2002, the Company
completed the acquisition of approximately 300,000 telephone access lines in the
state of Alabama from Verizon Communications, Inc. ("Verizon") for approximately
$1.022 billion cash. On August 31, 2002, the Company completed the acquisition
of approximately 350,000 telephone access lines in the state of Missouri from
Verizon for approximately $1.179 billion cash. The assets purchased included (i)
telephone access lines and related property and equipment comprising Verizon's
local exchange operations in predominantly rural markets throughout Alabama and
Missouri, (ii) Verizon's assets used to provide digital subscriber line ("DSL")
and other high speed data services within the purchased exchanges and (iii)
approximately 2,800 route miles of fiber optic cable within the purchased
exchanges. The acquired assets did not include Verizon's cellular, personal
communications services ("PCS"), long distance, dial-up Internet, or directory
publishing operations, or rights under various Verizon contracts, including
those relating to customer premise equipment. The Company did not assume any
liabilities of Verizon other than (i) those associated with contracts,
facilities and certain other assets transferred in connection with the purchase
and (ii) certain employee-related liabilities, including liabilities for
postretirement health benefits.
On February 28, 2002, the Company purchased the fiber network and customer
base of KMC Telecom's operations in Monroe and Shreveport, Louisiana which
allows the Company to offer broadband and competitive local exchange services to
customers in these markets.
On July 31, 2000 and September 29, 2000, affiliates of the Company
acquired over 490,000 telephone access lines and related assets from Verizon in
four separate transactions for approximately $1.5 billion in cash. Under these
transactions:
o On July 31, 2000, the Company purchased approximately 231,000 telephone
access lines and related local exchange assets comprising 106 exchanges
throughout Arkansas for approximately $842 million in cash.
o On July 31, 2000, Spectra Communications Group, LLC ("Spectra")
purchased approximately 127,000 telephone access lines and related local
exchange assets comprising 107 exchanges throughout Missouri for
approximately $297 million cash. The Company currently owns 75.7% of
Spectra, which was organized to acquire and operate these Missouri
properties. At closing, the Company made a preferred equity investment
in Spectra of approximately $55 million (which represented a 57.1%
interest) and financed substantially all of the remainder of the
purchase price. In the first quarter of 2001, the Company purchased an
additional 18.6% interest in Spectra for $47.1 million.
o On September 29, 2000, the Company purchased approximately 70,500
telephone access lines and related local exchange assets comprising 42
exchanges throughout Wisconsin for approximately $197 million in cash.
o On September 29, 2000, Telephone USA of Wisconsin, LLC ("TelUSA")
purchased approximately 62,900 telephone access lines and related local
exchange assets comprising 35 exchanges throughout Wisconsin for
approximately $172 million in cash. The Company owns 89% of TelUSA,
which was organized to acquire and operate these Wisconsin properties.
At closing, the Company made an equity investment in TelUSA of
approximately $37.8 million and financed substantially all of the
remainder of the purchase price.
In August 2000, the Company acquired the assets of CSW Net, Inc., a
regional Internet service provider that offers dial-up and dedicated Internet
access, and web site and domain hosting to more than 18,000 customers in 28
communities in Arkansas.
On August 1, 2002, the Company sold substantially all of its wireless
operations to an affiliate of ALLTEL Corporation ("Alltel") and certain partners
in the Company's markets that exercised "first refusal" purchase rights for an
aggregate of approximately $1.59 billion in cash. In connection with this
transaction, the Company divested its (i) interests in its majority-owned and
operated cellular systems, which at June 30, 2002 served approximately 783,000
customers and had access to approximately 7.8 million pops (the estimated
population of licensed cellular telephone markets multiplied by the Company's
proportionate equity interest in the licensed operators thereof), (ii) minority
cellular equity interests representing approximately 1.8 million pops at June
30, 2002, and (iii) licenses to provide PCS covering 1.3 million pops in
Wisconsin and Iowa. As a result, the Company's wireless operations have been
reflected as discontinued operations in the Company's accompanying consolidated
financial statements.
In the second quarter of 2001, the Company sold to Leap Wireless
International, Inc. 30 PCS operating licenses for an aggregate of $205 million.
The Company received approximately $118 million of the purchase price in cash at
closing and collected the remainder in installments through the fourth quarter
of 2001.
In June 1999, the Company sold all of the operations of its Brownsville
and McAllen, Texas, cellular systems to Western Wireless Corporation for
approximately $96 million cash. The Company received its proportionate share of
the sale proceeds of approximately $45 million after-tax.
In May 1999, the Company sold substantially all of its Alaska telephone
and wireless operations for approximately $300 million after-tax. In February
2000, the Company sold its interest in Alaska RSA #1, which completed the
Company's divestiture of its Alaska operations.
The Company continually evaluates the possibility of acquiring additional
telecommunications assets in exchange for cash, securities or both, and at any
given time may be engaged in discussions or negotiations regarding additional
acquisitions. The Company generally does not announce its acquisitions until it
has entered into a preliminary or definitive agreement. Over the past few years,
the number and size of communications properties on the market has increased
substantially. Although the Company's primary focus will continue to be on
acquiring interests that are proximate to its properties or that serve a
customer base large enough for the Company to operate efficiently, other
communications interests may also be acquired and these acquisitions could have
a material impact upon the Company.
Pending Acquisition and Disposition. In connection with the August 2002
sale of its wireless operations to Alltel, the Company retained a minority
interest in one market, which it agreed to sell to Alltel for approximately $68
million, subject to several closing conditions. Alltel has asserted that some of
these closing conditions have not been satisfied, and the parties are currently
in discussions regarding such conditions. No assurance can be given that this
sale will occur.
On February 13, 2003, a federal bankruptcy court approved the Company's
$38 million bid to acquire the assets of Digital Teleport, Inc., a regional
fiber optics communications company providing wholesale data transport services
to other communications carriers over a currently usable 3,800 route mile
network located in Missouri, Arkansas, Oklahoma and Kansas. The Company intends
to use the acquired assets to sell services to new and existing customers and to
reduce the Company's reliance on third party transport providers. The
transaction is expected to be completed in the second quarter of 2003, subject
to regulatory approvals and other closing conditions.
Where to find additional information. Effective February 28, 2003, the
Company makes available free of charge on its website (www.centurytel.com)
filings made with the Securities and Exchange Commission ("SEC") on Forms 10-K,
10-Q and 8-K as soon as reasonably practicable after such filings are made with
the SEC.
Other. As of December 31, 2002, the Company had approximately 6,960
employees, approximately 1,900 of whom were members of 15 different bargaining
units represented by the International Brotherhood of Electrical Workers, the
Communications Workers of America, or the NTS Employee Committee. Relations with
employees continue to be generally good.
CenturyTel was incorporated under Louisiana law in 1968 to serve as a
holding company for several telephone companies acquired over the previous 15 to
20 years. CenturyTel's principal executive offices are located at 100 CenturyTel
Drive, Monroe, Louisiana 71203 and its telephone number is (318) 388-9000.
TELEPHONE OPERATIONS
According to published sources, the Company is the eighth largest local
exchange telephone company in the United States, based on the approximately 2.4
million access lines it served at December 31, 2002. All of the Company's access
lines are digitally switched. Through its operating telephone subsidiaries, the
Company provides services to predominantly rural, suburban and small urban
markets in 22 states. The table below sets forth certain information with
respect to the Company's access lines as of December 31, 2002 and 2001.
December 31, 2002 December 31, 2001
------------------------------------------------------------------------------
Number of Percent of Number of Percent of
State access lines access lines access lines access lines
------------------------------------------------------------------------------
Wisconsin (1) 490,116 21% 498,331 28%
Missouri (2) 478,207 20 130,651 7
Alabama 289,015 12 - -
Arkansas 268,220 11 271,617 15
Washington 188,733 8 189,868 11
Michigan 112,713 5 114,643 6
Louisiana 104,408 4 104,043 6
Colorado 96,799 4 97,571 6
Ohio 84,452 4 84,636 5
Oregon 76,751 3 78,592 4
Montana 65,666 3 65,974 4
Texas 48,931 2 51,451 3
Minnesota 30,930 1 31,110 2
Tennessee 27,365 1 27,660 2
Mississippi 24,156 1 23,579 1
New Mexico 6,565 - 6,396 -
Idaho 5,976 - 6,119 -
Wyoming 5,494 - 5,408 -
Indiana 5,468 - 5,490 -
Iowa 2,099 - 2,072 -
Arizona 1,986 - 1,937 -
Nevada 514 - 495 -
------------------------------------------------------------------------------
2,414,564 100% 1,797,643 100%
==============================================================================
(1) As of December 31, 2002 and 2001, approximately 61,060 and 61,990,
respectively, of these lines are owned and operated by CenturyTel's
89%-owned affiliate.
(2) As of December 31, 2002 and 2001, approximately 130,740 and 130,651,
respectively, of these lines are owned and operated by CenturyTel's
75.7%-owned affiliate.
As indicated in the following table, the Company has generally experienced
growth in its telephone operations over the past several years, a substantial
portion of which was attributable to the third quarter 2002 acquisitions of
telephone properties from Verizon, the third quarter 2000 acquisitions of
telephone properties from Verizon, the acquisitions of other telephone
properties and the expansion of services. A portion of the Company's access line
growth was offset by the May 1999 sale of the Company's Alaska telephone
operations.
<TABLE>
<CAPTION>
Year ended or as of December 31,
-------------------------------------------------------------------------------------------
2002 2001 2000 1999 1998
-------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Access lines 2,414,564 1,797,643 1,800,565 1,272,867 1,346,567
% Residential 76% 76 76 75 74
% Business 24% 24 24 25 26
Operating revenues $ 1,733,592 1,505,733 1,253,969 1,126,112 1,077,343
Capital expenditures $ 319,536 351,010 275,523 233,512 223,190
-------------------------------------------------------------------------------------------
</TABLE>
The Company hopes to expand its telephone operations by (i) acquiring
additional telephone properties, (ii) providing service to new customers, (iii)
increasing network usage and (iv) providing additional services which may be
made possible by advances in technology and improvements in the Company's
infrastructure. For information on developing competitive trends, see
"-Regulation and Competition."
Services
The Company's local exchange telephone subsidiaries derive revenue from
providing (i) local telephone services, (ii) network access services and (iii)
other related services. The following table reflects the percentage of telephone
operating revenues derived from these respective services:
<TABLE>
<CAPTION>
2002 2001 2000
-------------------------------------------------------------------------
<S> <C> <C> <C>
Local service 34.9% 32.6 32.6
Network access 56.1 58.1 58.0
Other 9.0 9.3 9.4
-------------------------------------------------------------------------
100.0% 100.0 100.0
=========================================================================
</TABLE>
Local service. Local service revenues are derived from the provision of
local exchange telephone services in the Company's service areas. Access lines
declined 1.1% in 2002 (exclusive of the 2002 Verizon acquisitions) and declined
0.2% in 2001. Internal access line growth during 2000 was 2.8%. The Company
believes the decline in the number of access lines during 2002 and 2001 is
primarily due to declines in second lines, soft general economic conditions in
the Company's markets and the displacement of traditional wireline telephone
services by other competitive service providers. Even when the economy recovers,
the Company believes that any rebound in access lines will be limited by
continued declines in second lines caused primarily by DSL substitution and the
impact of competitive services. Based on current conditions, the Company
expects to incur a decline in access lines of 1 to 2% for 2003.
The installation of digital switches, high-speed data circuits and related
software has been an important component of the Company's growth strategy
because it allows the Company to offer enhanced voice services (such as call
forwarding, conference calling, caller identification, selective call ringing
and call waiting) and data services (such as data private line, digital
subscriber line, frame relay and local area/wide area networks) and to thereby
increase utilization of existing access lines. In 2002 the Company continued to
expand the availability of enhanced services offered in certain service areas.
Network access. Network access revenues primarily relate to services
provided by the Company to long distance carriers, wireless carriers and other
customers in connection with the use of the Company's facilities to originate
and terminate interstate and intrastate long distance telephone calls. Certain
of the Company's interstate network access revenues are based on tariffed access
charges prescribed by the Federal Communications Commission ("FCC"); the
remainder of such revenues are derived under revenue sharing arrangements with
other local exchange carriers ("LECs") administered by the National Exchange
Carrier Association ("NECA"), a quasi-governmental non-profit organization
formed by the FCC in 1983 for such purposes.
Certain of the Company's intrastate network access revenues are derived
through access charges billed by the Company to intrastate long distance
carriers and other LEC customers. Such intrastate network access charges are
based on tariffed access charges, which are subject to state regulatory
commission approval. Additionally, certain of the Company's intrastate network
access revenues, along with intrastate and intra-LATA (Local Access and
Transport Areas) long distance revenues, are derived through revenue sharing
arrangements with other LECs.
In 2002 the Company incurred a reduction in its intrastate revenues
(exclusive of the properties acquired from Verizon in 2002) of approximately
$27.7 million compared to 2001 primarily due to (i) a reduction in intrastate
minutes (partially due to the displacement of minutes by wireless and instant
messaging services) and (ii) decreased access rates in certain states. The
Company believes such trend of decreased intrastate minutes will continue in
2003. Although the magnitude of such decrease cannot be precisely estimated, the
Company believes such decrease will be less than that incurred in 2002.
The Company is continuing to install fiber optic cable in certain high
traffic routes providing diversity, increased bandwidth capability and improved
quality of service for its telephone operations in strategic operating areas. At
December 31, 2002 the Company's telephone subsidiaries had over 15,100 miles of
fiber optic cable in use.
Other. Other telephone revenues include revenues related to (i) leasing,
selling, installing, maintaining and repairing customer premise
telecommunications equipment and wiring, (ii) providing billing and collection
services for long distance companies and (iii) participating in the publication
of local directories.
Certain large communications companies for which the Company currently
provides billing and collection services continue to indicate their desire to
reduce their billing and collection expenses, which has resulted and may
continue to result in future reductions of the Company's billing and collection
revenues.
For further information on the regulation of the Company's revenues, see
"-Regulation and Competition."
Federal Financing Programs
Certain of the Company's telephone subsidiaries receive long-term
financing from the Rural Utilities Service ("RUS") or the Rural Telephone Bank
("RTB"). The RUS has made long-term loans to telephone companies since 1949 for
the purpose of improving telephone service in rural areas. The RUS continues to
make new loans at interest rates that range from 5% to 7% based on borrower
qualifications and the cost of funds to the United States government. The RTB,
established in 1971, makes long-term loans at interest rates based on its
average cost of funds as determined by statutory formula (which ranged from
6.05% to 6.51% for the RTB's fiscal year ended September 30, 2002), and in some
cases makes loans concurrently with RUS loans. Some of the Company's telephone
plant is pledged or mortgaged to secure obligations of the Company's telephone
subsidiaries to the RUS and RTB. The Company's telephone subsidiaries that have
borrowed from government agencies generally may not loan or advance any funds to
CenturyTel, but may pay dividends if certain financial covenants are met.
For additional information regarding the Company's financing, see the
Company's consolidated financial statements included in Item 8 herein.
Regulation and Competition
Traditionally, LECs have operated as regulated monopolies. Consequently,
most of the Company's telephone operations have traditionally been regulated
extensively by various state regulatory agencies (generally called public
service commissions or public utility commissions) and by the FCC. As discussed
in greater detail below, passage of the Telecommunications Act of 1996 (the
"1996 Act"), coupled with state legislative and regulatory initiatives and
technological changes, fundamentally altered the telephone industry by reducing
the regulation of LECs and permitting competition in each segment of the
telephone industry. CenturyTel anticipates that these trends towards reduced
regulation and increased competition will continue.
State regulation. The local service rates and intrastate access charges of
substantially all of the Company's telephone subsidiaries are regulated by state
regulatory commissions which typically have the power to grant and revoke
franchises authorizing companies to provide communications services. Most of
such commissions have traditionally regulated pricing through "rate of return"
regulation that focuses on authorized levels of earnings by LECs. Most of these
commissions also (i) regulate the purchase and sale of LECs, (ii) prescribe
depreciation rates and certain accounting procedures and (iii) regulate various
other matters, including certain service standards and operating procedures.
In recent years, state legislatures and regulatory commissions in most of
the 22 states in which the Company operates have either reduced the regulation
of LECs or have announced their intention to do so, and it is expected that this
trend will continue. Wisconsin, Missouri, Alabama, Arkansas, Louisiana and
several other states have implemented laws or rulings which require or permit
LECs to opt out of rate of return regulation in exchange for agreeing to
alternative forms of regulation which typically permit the LEC greater freedom
to establish local service rates in exchange for agreeing not to charge rates in
excess of specified caps. As discussed further below, subsidiaries operating
over half of the Company's access lines in various states have agreed to be
governed by alternative regulation plans, and the Company continues to explore
its options for similar treatment in other states. Other states have imposed new
regulatory models that do not rely on "rate of return" regulation. The Company
believes that reduced regulatory oversight of certain of the Company's telephone
operations may allow the Company to offer new and competitive services faster
than under the traditional regulatory process. For a discussion of legislative,
regulatory and technological changes that have introduced competition into the
local exchange industry, see "-Developments Affecting Competition."
A portion of the Company's telephone operations in Wisconsin has been
regulated under an alternative regulation plan since June 1996; such plan was
subsequently modified in early 2000. In late 1999 and early 2000, most of the
Company's remaining Wisconsin telephone subsidiaries agreed to be subject to
alternative regulation plans. Each of these alternative regulation plans has a
five-year term and permits the Company to adjust local rates within specified
parameters if it meets certain quality-of-service and infrastructure-development
commitments. These plans also include initiatives designed to promote
competition. In November 2002, the Company applied to have its Wisconsin access
lines acquired in December 1998 regulated under a similar alternative regulation
plan. The Company's Wisconsin access lines acquired in mid-2000 continue to be
regulated under "rate of return" regulation.
All of the Company's Missouri LECs are regulated under a price-cap
regulation plan (effective in 2002) whereby basic service rates are adjusted
annually based on an inflation-based factor; non-basic services may be increased
up to 8% annually. The plan also allows the LECs to rebalance local basic
service rates up to four times in the first four years of such regulation as a
result of access rate or toll reductions.
Since 1995, the Company's Alabama LEC acquired as part of the acquisitions
from Verizon in 2002 has been subject to an alternative regulation plan. Under
this plan, local rates were frozen initially for five years, after which time
such rates can be increased by an amount equal to the consumer price index less
a 1% efficiency factor; non-basic service rates can be increased 10% per year.
In January 2003, the Company's Alabama LEC and the other independent LECs
in the state filed a Petition for Adoption of Streamlined Regulation Plan with
the Alabama Public Service Commission ("Alabama PSC"). As part of this proposed
plan, basic local service rates could be increased by 3% per year while
non-basic service rates could be increased as much as 7% per year. Access rates
could not be reduced unless the Alabama PSC offsets the revenue loss by some
other means. All rate adjustments proposed in the plan must be approved by the
Alabama PSC before being implemented. The Alabama PSC is expected to issue a
request for comments on the proposed plan in the second quarter of 2003.
The Company's Arkansas LECs, excluding the properties acquired from
Verizon in 2000, are regulated under an alternative regulation plan adopted in
1997, which initially froze access rates for three years, after which time such
rates can be adjusted based on an inflation-based factor. Local service rates
can be adjusted without commission approval; however, such rates are subject to
commission review if certain petition criteria are met. In addition, since 1995
the Company's Michigan LECs have been subject to a regulatory structure that
focuses on price and quality of service as opposed to traditional rate of return
regulation, and which relies more on existing federal and state law regarding
antitrust consumer protection and fair trade to provide safeguards for
competition and consumers.
Since 1997 all of the Company's LECs operating in Louisiana have been
regulated under a Consumer Price Protection Plan (the "Louisiana Plan"). This
form of regulation focuses on price and quality of service. Under the Louisiana
Plan, the Company's Louisiana LECs' local rates and access rates have remained
unchanged since 1997, but may currently be increased within certain parameters.
The Company's Louisiana LECs have the option to propose a new plan at any time
if the Louisiana Public Service Commission determines that (i) effective
competition exists or (ii) unforeseen events threaten the LEC's ability to
provide adequate service or impair its financial health.
Notwithstanding the movement towards alternative regulation, LECs
operating approximately 45% of the Company's total access lines continue to be
subject to "rate of return" regulation for intrastate purposes. These LECs
remain subject to the powers of state regulatory commissions to conduct earnings
reviews and adjust service rates, either of which could lead to revenue
reductions.
FCC regulation. The FCC regulates the interstate services provided by the
Company's telephone subsidiaries primarily by regulating the interstate access
charges that are billed to long distance companies and other LECs by the Company
for use of its local network in connection with the origination and termination
of interstate telephone calls. Additionally, the FCC has prescribed certain
rules and regulations for telephone companies, including regulations regarding
the use of radio frequencies; a uniform system of accounts; and rules regarding
the separation of costs between jurisdictions and, ultimately, between
interstate services.
Effective January 1, 1991, the FCC adopted price-cap regulation relating
to interstate access rates for the Regional Bell Operating Companies. All other
LECs may elect to be subject to price-cap regulation. Under price-cap
regulation, limits imposed on a company's interstate rates are adjusted
periodically to reflect inflation, productivity improvement and changes in
certain non-controllable costs. In May 1993 the FCC adopted an optional
incentive regulatory plan for LECs not subject to price-cap regulation. A LEC
electing the optional incentive regulatory plan would, among other things, file
tariffs based primarily on historical costs and not be allowed to participate in
the relevant NECA pooling arrangements. The Company has not elected price-cap
regulation or the optional incentive regulatory plan for its incumbent
operations; however, the properties acquired from Verizon in 2002 are operated
under price-cap regulation. In connection with this acquisition, the Company
obtained a waiver of the FCC's "all or nothing" rule. This waiver is valid until
the FCC reviews the future appropriateness of the "all or nothing" rule. Absent
the waiver, present rules require a carrier that purchases access lines subject
to price-cap regulation to convert all of its properties to price-cap
regulation.
On October 11, 2001, the FCC modified its interstate access charge rules
and universal service support system for rate of return local exchange carriers.
This order, among other things, (i) increased the caps on the subscriber line
charges ("SLC") to the levels paid by most subscribers nationwide; (ii) allowed
limited SLC deaveraging, which will enhance the competitiveness of rate of
return carriers by giving them pricing flexibility; (iii) lowered per minute
rates collected for federal access charges; (iv) created a new explicit
universal service support mechanism that will replace other implicit support
mechanisms in a manner designed to ensure that rate structure changes do not
affect the overall recovery of interstate access costs by rate of return
carriers serving high cost areas and (v) terminated the FCC's proceeding on the
represcription of the authorized rate of return for rate of return LECs, which
will remain at 11.25%. The effect of this order on the Company was revenue
neutral for interstate purposes; however, intrastate revenues were adversely
affected in Arkansas and Ohio as the intrastate access rates in these states
mirror the interstate access rates.
The FCC is pursuing rulemaking regarding the development of an appropriate
federal incentive plan for rate of return LECs. The Company is actively
monitoring this proceeding and has provided comments to the FCC on this issue.
High-cost support funds, revenue sharing arrangements and related matters.
A significant number of the Company's telephone subsidiaries recover a portion
of their costs under federal and state cost recovery mechanisms that
traditionally have allowed LECs serving small communities and rural areas to
provide communications services reasonably comparable to those available in
urban areas and at reasonably comparable prices.
As mandated by the 1996 Act, in May 2001 the FCC modified its existing
universal service support mechanism for rural telephone companies. The FCC
adopted an interim mechanism for a five-year period, effective July 1, 2001,
based on embedded, or historical, costs that will provide predictable levels of
support to rural local exchange carriers, including substantially all of the
Company's local exchange carriers. During 2002 and 2001 the Company's telephone
subsidiaries received $192.4 million (which included $9.9 million related to the
Company's operations acquired from Verizon in 2002) and $168.7 million,
respectively, from the federal Universal Service Fund, representing 9.8% and
8.0%, respectively, of the Company's consolidated revenues from continuing
operations for 2002 and 2001. Increasingly, wireless carriers have sought and
received payments from the Universal Service Fund, which the Company believes is
currently enhancing their ability to compete with wireline services and, in the
long term, could adversely impact the amount of funding available for LECs. In
addition, the Company's telephone subsidiaries received $31.7 million and $31.5
million in 2002 and 2001, respectively, from intrastate support funds.
In 1997, the FCC also established new programs to provide discounted
telecommunications services annually to schools, libraries and rural health care
providers. All communications carriers providing interstate telecommunications
services, including the Company's LECs and long distance operations, are
required to contribute to these programs. Prior to May 2001, the Company's LECs
recovered their funding contributions in their rates for interstate services.
Subsequent to May 2001, in accordance with a 2001 FCC order, such contributions
are not recovered through access charges but instead are charged as an explicit
item on customer's bills. The Company's contribution by its LEC and long
distance operations, both of which is passed on to its customers, was
approximately $10.6 million and $4.4 million, respectively, in 2002, and $6.4
million and $3.2 million, respectively, in 2001.
In late 2002, the FCC requested that the Federal-State Joint Board
("FSJB") on Universal Service review various FCC rules governing high cost
universal service support, including rules regarding eligibility to receive
support payments in markets served by LECs and competitive carriers. On February
7, 2003, the FSJB issued a notice for public comment on whether present rules
fulfill their purpose and whether or not modifications are needed. The Company
has been active in various dockets before the FCC and various state commissions
related to wireless carriers seeking support payments for service in the
Company's service areas.
In January 2003, the Louisiana Public Service Commission directed its
staff to review the feasibility of converting the $42 million Louisiana Local
Optional Service Fund ("LOS Fund") into a state universal service fund. A
recommendation by the Commission staff is expected by the end of 2003.
Currently, the LOS Fund is funded primarily by BellSouth, which proposes to
expand the base of contributors into the LOS Fund. The Company currently
receives approximately $21 million from the LOS Fund each year. There can be no
assurance that this funding will remain at current levels.
Some of the Company's telephone subsidiaries operate in states where
traditional cost recovery mechanisms, including rate structures, are under
evaluation or have been modified. See "- State Regulation." There can be no
assurance that these states will continue to provide for cost recovery at
current levels.
Substantially all of the Company's LECs (except for the properties
acquired from Verizon in 2002) concur with the common line tariff and certain of
the Company's LECs concur with the traffic sensitive tariffs filed by the NECA;
such LECs participate in the access revenue sharing arrangements administered by
the NECA for interstate services. All of the intrastate network access revenues
of the Company's LECs are based on access charges, cost separation studies or
special settlement arrangements. See "- Services."
Certain long distance carriers continue to request that certain of the
Company's LECs reduce intrastate access tariffed rates. Long distance carriers
have also aggressively pursued regulatory or legislative changes that would
reduce access rates. See "Services - Network Access" above for additional
information.
Developments affecting competition. The communications industry continues
to undergo fundamental changes which are likely to significantly impact the
future operations and financial performance of all communications companies.
Primarily as a result of legislative and regulatory initiatives and
technological changes, competition has been introduced and encouraged in each
sector of the telephone industry. As a result, the number of companies offering
competitive services has increased substantially.
As indicated above, in February 1996 Congress enacted the 1996 Act, which
obligates LECs to permit competitors to interconnect their facilities to the
LEC's network and to take various other steps that are designed to promote
competition. The 1996 Act imposes several duties on a LEC if it receives a
specific request from another entity which seeks to connect with or provide
services using the LEC's network. In addition, each incumbent LEC is obligated
to (i) negotiate interconnection agreements in good faith, (ii) provide
"unbundled" access to all aspects of the LEC's network, (iii) offer resale of
its telecommunications services at wholesale rates and (iv) permit competitors
to collocate their physical plant on the LEC's property, or provide virtual
collocation if physical collocation is not practicable. On February 20, 2003,
the FCC revised its rules outlining the obligations of incumbent LECs to lease
elements of their networks on an unbundled basis to competitors. The new
framework eliminates the prior obligation of incumbent LECs to lease their
high-speed data lines to competitors. Incumbent LECs will remain obligated to
offer other telecommunications services to resellers at wholesale rates. This
new rule also provides for a significant role of state regulatory commissions in
implementing these new guidelines and establishing wholesale service rates.
Under the 1996 Act's rural telephone company exemption, approximately 50%
of the Company's telephone access lines are exempt from certain of these
interconnection requirements unless and until the appropriate state regulatory
commission overrides the exemption upon receipt from a competitor of a bona fide
request meeting certain criteria. States are permitted to adopt laws or
regulations that provide for greater competition than is mandated under the 1996
Act. Management believes that competition in its telephone service areas has
increased and will continue to increase as a result of the 1996 Act and
additional FCC interpretations related to interconnection and the portability of
universal service support. While competition through use of the Company's
network is still limited in most of its markets, the Company will continue to
witness competition from a variety of resellers and facilities-based service
providers, including wireless and cable companies.
In addition to these changes in federal regulation, all of the 22 states
in which the Company provides telephone services have taken legislative or
regulatory steps to further introduce competition into the LEC business.
As a result of these regulatory developments, incumbent LECs ("ILECs")
increasingly face competition from competitive local exchange carriers
("CLECs"), particularly in high population areas. CLECs provide competing
services through reselling the ILECs' local services, through use of the ILECs'
unbundled network elements or through their own facilities. The number of
companies which have requested authorization to provide local exchange service
in the Company's service areas has increased substantially in recent years,
especially in the Company's Verizon markets acquired in 2002 and 2000, and it is
anticipated that similar action may be taken by others in the future.
In addition to facing direct competition from CLECs, ILECs increasingly
face competition from alternate communication systems constructed by long
distance carriers, large customers or alternative access vendors. These systems,
which have become more prevalent as a result of the 1996 Act, are capable of
originating or terminating calls without use of the ILECs' networks. Customers
may also use wireless or Internet voice service to bypass ILECs' switching
services. In addition, technological and regulatory developments have increased
the feasibility of competing services offered by cable television companies,
several of whom are pursuing these opportunities. Other potential sources of
competition include noncarrier systems that are capable of bypassing ILECs'
local networks, either partially or completely, through substitution of special
access for switched access or through concentration of telecommunications
traffic on a few of the ILECs' access lines. The Company anticipates that all
these trends will continue and lead to increased competition with the Company's
LECs.
Wireless telephone services increasingly constitute a significant source
of competition with LEC services, especially as wireless carriers expand and
improve their network coverage and continue to lower their prices. As a result,
some customers have chosen to completely forego use of traditional wireline
phone service and instead rely solely on wireless service. This trend is
particularly evident among younger customers, and in urban areas. The Company
anticipates this trend will continue, particularly if wireless service rates
continue to decline and the quality of wireless service in the Company's
markets improves. Technological and regulatory developments in cellular
telephone, personal communications services, digital microwave, coaxial cable,
fiber optics, local multipoint distribution services and other wired and
wireless technologies are expected to further permit the development of
alternatives to traditional landline services.
Historically, ILECs had little or no competition associated with
intra-LATA long distance calls in their service areas. Principally as a result
of recent state regulatory changes, companies offering competing toll services
have emerged in the Company's local exchange markets.
To the extent that the telephone industry increasingly experiences
competition, the size and resources of each respective competitor may
increasingly influence its prospects. Many companies currently providing or
planning to provide competitive communication services have substantially
greater financial and marketing resources than the Company, and several are not
subject to the same regulatory constraints as the Company.
The Company anticipates that the traditional operations of LECs will
continue to be impacted by continued technological developments as well as
legislative and regulatory initiatives affecting the ability of LECs to provide
new services and the capability of long distance companies, CLECs, wireless
companies, cable television companies and others to provide competitive LEC
services. Competition relating to services traditionally provided by LECs has
thus far affected large urban areas to a greater extent than rural, suburban and
small urban areas such as those in which the Company operates. The Company
intends to actively monitor these developments, to observe the effect of
emerging competitive trends in initial competitive markets and to continue to
evaluate new business opportunities that may arise out of future technological,
legislative and regulatory developments.
The Company anticipates that regulatory changes and competitive pressures
will continue to place downward pressure on its telephone revenues. However, the
Company anticipates that such reductions may be minimized by increases in
revenues attributable to the continued demand for enhanced services and new
product offerings. The Company expects its internal telephone revenues
(exclusive of the properties acquired from Verizon in 2002) to decline in 2003
primarily due to continued access line loss and reduced intrastate revenues;
however, the Company expects its internal consolidated revenues to increase in
2003 primarily due to expected increased demand for its long distance, DSL and
other product offerings, as discussed further below.
OTHER OPERATIONS
The Company provides long distance, Internet access, competitive local
exchange services, fiber network, security monitoring, and other communications
and business information services in certain local and regional markets. The
results of these operations, which accounted for 12.1% and 7.6%, respectively,
of the Company's operating revenues and operating income during 2002, are
reflected for financial reporting purposes in the "Other operations" section.
Long distance. In 1996 the Company began marketing long distance service
in its equal access telephone operating areas. At December 31, 2002, the Company
provided long distance services to approximately 648,800 customers.
Approximately 75% of the Company's long distance revenues are derived from
service provided to residential customers. Although the Company owns and
operates switches in LaCrosse, Wisconsin; Shreveport, Louisiana and Vancouver,
Washington which are utilized to provide long distance services, it anticipates
that most of its near-term long distance service revenues will be provided by
reselling service purchased from other facilities-based long distance providers.
The Company intends to continue to expand its long distance business,
principally through reselling arrangements.
Internet access. The Company began offering traditional Internet access
services to its telephone customers in 1995. In late 1999, the Company began
offering in select markets digital subscriber line ("DSL") Internet access
services, a high-speed premium-priced data service. At December 31, 2002, the
Company provided Internet access services to a total of approximately 179,400
customers, 131,500 of which receive traditional dial-up Internet service in
select markets in 17 states (which markets represent 85% of the access lines
served by the Company's LECs), and 47,900 of which receive retail DSL services
in markets that cover approximately 59% of the access lines served by the
Company's LECs.
Competitive local exchange services. In late 2000, the Company began
offering competitive local exchange telephone services, coupled with long
distance, Internet access and other Company services, to small to medium-sized
businesses in Monroe and Shreveport, Louisiana. On February 28, 2002, the
Company purchased the fiber network and customer base of KMC Telecom's
operations in Monroe and Shreveport, Louisiana, which allowed the Company to
offer broadband and competitive local exchange services to customers in these
markets. At December 31, 2002, the Company had approximately 141,000 equivalent
access lines in its competitive local exchange carrier business.
Fiber network. In connection with its long-range plans to sell capacity to
other carriers and certain businesses in or near certain of its select markets,
the Company began providing service in the second quarter of 2001 to customers
over a 700-mile fiber optic ring connecting several communities in southern and
central Michigan.
On February 13, 2003, a federal bankruptcy court approved the Company's
$38 million bid to acquire the assets of Digital Teleport, Inc., a regional
fiber optics communication company providing wholesale data transport services
to other communications carriers over a currently usable 3,800 route mile
network located in Missouri, Arkansas, Oklahoma and Kansas. The Company intends
to use the acquired assets to sell services to new and existing customers and to
reduce the Company's reliance on third party transport providers. The
transaction is expected to be completed in the second quarter of 2003, subject
to regulatory approvals and other closing conditions.
Security monitoring. The Company offers 24-hour burglary and fire
monitoring services to approximately 8,600 customers in select markets in
Louisiana, Arkansas, Mississippi, Texas and Ohio.
The Company also provides audiotext services; printing, database
management and direct mail services; and cable television services. From time to
time the Company also makes investments in other domestic or foreign
communications companies.
Certain service subsidiaries of the Company provide installation and
maintenance services, materials and supplies, and managerial, technical,
accounting and administrative services to the telephone and other operating
subsidiaries. In addition, the Company provides and bills management services to
subsidiaries and in certain instances makes interest-bearing advances to finance
construction of plant, purchases of equipment or acquisitions of other
businesses. These transactions are recorded by the Company's regulated telephone
subsidiaries at their cost to the extent permitted by regulatory authorities.
Intercompany profit on transactions with regulated affiliates is limited to a
reasonable return on investment and has not been eliminated in connection with
consolidating the results of operations of CenturyTel and its subsidiaries. Such
intercompany profit is reflected as a reduction of cost of sales and operating
expenses in "Other operations".
OTHER DEVELOPMENTS
The Company is in the process of developing an integrated billing and
customer care system which will provide the Company with, in addition to
standard billing functionality currently being provided by our legacy system,
custom built hardware and software technology for more efficient and effective
customer care, billing and provisioning systems. The costs to develop such
system have been capitalized in accordance with Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," and aggregated $139.5 million at December 31, 2002. A portion of
these billing system costs related to the wireless business ($30.5 million) was
written off as a component of discontinued operations in the third quarter of
2002 as a result of the sale of substantially all of the Company's wireless
operations on August 1, 2002. Excluding this write-off, the Company's aggregate
billing system costs are expected to approximate $180 million upon completion
and are expected to be amortized over a twenty-year period. The Company expects
to begin amortizing the billing system in 2003 as customer groups are migrated
to this new system. In addition, the Company expects to incur duplicative system
costs in 2003 until such time as all customers are migrated to the new system.
Such amortization and duplicative system costs are expected to reduce diluted
earnings per share by $.04 for 2003.
The system remains in the development stage and has required substantially
more time and money to develop than originally anticipated. Although the Company
expects to complete all phases of the system in early 2004, there is no
assurance that this deadline (or the Company's budget) will be met or that the
system will function as anticipated. If the system does not function as
anticipated, the Company may have to write off part or all of its remaining
costs.
SPECIAL CONSIDERATIONS
Risk Factors
We have a substantial amount of indebtedness.
Principally, as a result of our recent acquisitions, we have a
substantial amount of indebtedness. This could hinder our ability to adjust to
changing market and economic conditions, as well as our ability to access the
capital markets to refinance maturing debt in the ordinary course of business.
In connection with executing our business strategies, we are continuously
evaluating the possibility of acquiring additional communications assets, and we
may elect to finance acquisitions by incurring additional indebtedness. If we
incur significant additional indebtedness, our credit ratings could be adversely
affected. As a result, our borrowing costs would likely increase, our access to
capital may be adversely affected and our ability to satisfy our obligations
under our current indebtedness could be adversely affected.
Our operations have undergone material changes, and our actual operating
results will differ from the results indicated in our historical and pro
forma financial statements.
As a result of our recently completed Verizon acquisitions and wireless
divestiture, our mix of operating assets differs materially from those
operations upon which our historical financial statements are based.
Consequently, our historical financial statements may not be reliable as an
indicator of future results. Moreover, the pro forma financial information that
we have filed with the Securities and Exchange Commission, while helpful in
illustrating certain effects of our recently completed transactions and related
financings, does not attempt to predict or suggest future operating results. The
pro forma information was prepared for illustrative purposes only and is not
necessarily indicative of the operating results or financial position that would
have occurred if such transactions had been consummated on the dates and in
accordance with the assumptions described in such information, nor is it
necessarily indicative of our future operating results or financial position.
The results of operations for the Verizon assets acquired are reflected in our
consolidated results of operations subsequent to each acquisition.
Our future results will suffer if we do not effectively manage our growth.
Recently, we have rapidly expanded our operations primarily through
acquisitions and new product and service offerings, and we intend to pursue
similar growth opportunities in the future. Our future success depends, in part,
upon our ability to manage our growth, including our ability to:
o upgrade our billing and other information systems
o retain and attract technological, managerial and other key
personnel to work at our Monroe, Louisiana headquarters and
regional offices
o effectively manage our day to day operations while attempting
to execute our business strategy of expanding our wireline
operations and our emerging businesses
o realize the projected growth and revenue targets developed b
management for our newly acquired and emerging businesses, and
o continue to identify new acquisition or growth opportunities
that we can finance, complete and operate on attractive terms.
Our rapid growth poses substantial challenges for us to integrate new
operations into our existing business in an efficient and timely manner, to
successfully monitor our operations, costs, regulatory compliance and service
quality, and to maintain other necessary internal controls. We cannot assure you
that these efforts will be successful, or that we will realize our expected
operating efficiencies, cost savings, revenue enhancements, synergies or other
benefits. If we are not able to meet these challenges effectively, our results
of operations may be harmed.
We cannot assure you that we will acquire additional properties.
We hope to grow primarily through acquisitions of properties similar to
those currently operated by us. However, we cannot assure you that properties
will be available for purchase on terms attractive to us, particularly if they
are burdened by regulations, pricing plans or levels of competitive pressures
that are new or different from those historically applicable to our incumbent
properties. Moreover, we cannot assure you that we will be able to arrange
additional financing on terms acceptable to us.
If we cannot expand through acquisitions, our growth could be limited
primarily to growth associated with providing new or additional services. Our
access lines (exclusive of acquisitions) declined 1.1% in 2002 and 0.2% in 2001,
and we expect to incur a further decline of 1 to 2% for 2003.
We cannot assure you that our new billing system will be successful.
We are developing a new integrated billing and customer care system. The
system remains in the development stage and has required substantially more time
and money to develop than originally anticipated. We expect our aggregate costs
associated with the billing system to total $180 million upon completion of the
system (excluding a write-off that we recorded in the third quarter of 2002).
Although we expect to complete all phases of the system in early 2004, we cannot
assure you that this deadline (or our budget) will be met or that the system
will function as anticipated. If the system does not function as anticipated, we
may have to write off part or all of our remaining costs.
Our industry is highly regulated, and continues to undergo various
fundamental regulatory changes.
As a diversified full service incumbent local exchange carrier, or
ILEC, we have traditionally been subject to significant regulation from federal,
state and local authorities. This regulation restricts our ability to raise our
rates and to compete, and imposes substantial compliance costs on us. In recent
years, the communications industry has undergone various fundamental regulatory
changes that have generally reduced the regulation of telephone companies and
permitted competition in each segment of the telephone industry. These and
subsequent changes could adversely affect us by reducing the fees that we are
permitted to charge, altering our tariff structures, or otherwise changing the
nature of our operations and competition in our industry. We are unable to
predict the future actions of the various regulatory bodies that govern us, but
such actions could materially affect our business.
We face competition, which could adversely affect us.
As a result of various technological, regulatory and other changes, the
telecommunications industry has become increasingly competitive, and we expect
these trends to continue. The number of companies that have requested
authorization to provide local exchange service in our markets has increased in
recent years, and we anticipate that others will take similar action in the
future. As an ILEC, our competitors include competitive local exchange carriers,
or CLECs, and other providers (or potential providers) of communications
services, such as Internet service providers, wireless telephone companies,
satellite companies, alternative access providers, neighboring ILECs, long
distance companies and cable companies that may provide services competitive
with ours or services that we intend to introduce. Wireless telephone services,
in particular, increasingly constitute a significant source of competition with
LEC services, especially as wireless owners expand and improve their network
coverage and continue to lower their prices. We cannot assure you that we will
be able to compete effectively with all of these industry participants.
We expect competition to intensify as a result of new competitors and
the development of new technologies, products and services. We cannot predict
which future technologies, products or services will be important to maintain
our competitive position or what funding will be required to develop and provide
these technologies, products or services. Our ability to compete successfully
will depend on how well we market our products and services, and on our ability
to anticipate and respond to various competitive factors affecting the industry,
including a changing regulatory environment that may affect us differently from
our competitors, new services that may be introduced, changes in consumer
preferences, demographic trends, economic conditions and discount pricing
strategies by competitors.
Many of our current and potential competitors have market presence,
engineering, technical and marketing capabilities and financial, personnel and
other resources substantially greater than ours. In addition, some of our
competitors can raise capital at a lower cost than we can, and have
substantially stronger brand names. Consequently, some competitors may be able
to charge lower prices for their products and services, to develop and expand
their communications and network infrastructures more quickly, to adapt more
swiftly to new or emerging technologies and changes in customer requirements,
and to devote greater resources to the marketing and sale of their products and
services than we can.
While we expect our internal consolidated revenues to grow as the
economy improves, we expect our internal telephone revenues (exclusive of the
properties acquired from Verizon in 2002) to decline in 2003 primarily due to
continued access line loss and reduced intrastate revenues.
We could be harmed by rapid changes in technology.
The communications industry is experiencing significant technological
changes. Rapid changes in technology could result in the development of products
or services that compete with or displace those offered by traditional LECs. If
we cannot develop new products to keep pace with technological advances, or if
such products are not widely embraced by our customers, we could be adversely
impacted.
We are reliant on support funds provided under federal and state laws.
We receive a substantial portion of our revenues from the federal
Universal Service Fund and, to a lesser extent, intrastate support funds. These
governmental programs are reviewed and amended from time to time, and we cannot
assure you that they will not be changed or impacted in a manner adverse to us.
We could be harmed by the recent adverse developments affecting other
communications companies.
Recently, WorldCom, Inc. and several other large communications
companies have declared bankruptcy or suffered financial difficulties, which
caused our provision for uncollectible receivables to increase. Likewise, a
number of our suppliers have recently experienced financial challenges, which
could cause us to experience delays, interruptions or additional expenses
associated with upgrading and expanding our information systems and networks and
offering new products and services. Continued weakness in the communications
industry could have additional future adverse effects on us, including reducing
our ability to collect receivables and to access the capital markets on
favorable terms.
Our agreements and organizational documents and applicable law could
limit another party's ability to acquire us at a premium.
Under our articles of incorporation, each share of common stock that
has been beneficially owned by the same person or entity continually since May
30, 1987 generally entitles the holder to ten votes on all matters duly
submitted to a vote of shareholders. As of March 17, 2003, the holders of our
ten-vote shares held approximately 42% of our total voting power. In
addition, a number of other provisions in our agreements and organizational
documents, including our shareholder rights plan, and various provisions of
applicable law may delay, defer or prevent a future takeover of CenturyTel
unless the takeover is approved by our board of directors. This could deprive
our shareholders of any related takeover premium.
Forward-Looking Statements
This report on Form 10-K and other documents filed by us under the federal
securities laws include, and future oral or written statements or press releases
by us and our management may include, certain forward-looking statements,
including without limitation statements with respect to our anticipated future
operating and financial performance, financial position and liquidity, growth
opportunities and growth rates, business prospects, regulatory and competitive
outlook, investment and expenditure plans, investment results, financing
opportunities and sources (including the impact of financings on our financial
position, financial performance or credit ratings), pricing plans, strategic
alternatives, business strategies, and other similar statements of expectations
or objectives that are highlighted by words such as "expects," "anticipates,"
"intends," "plans," "believes," "projects," "seeks," "estimates," "hopes,"
"should," and "may," and variations thereof and similar expressions. Such
forward-looking statements are inherently speculative and are based upon several
assumptions concerning future events, many of which are outside of our control.
These forward-looking statements, and the assumptions upon which such statements
are based, are subject to uncertainties that could cause our actual results to
differ materially from such statements. These uncertainties include but are not
limited to those set forth below:
o our ability to effectively manage our growth, including without limitation
our ability to (i) integrate newly-acquired operations into our
operations, (ii) attract and retain technological, managerial and other
key personnel to work at our Monroe, Louisiana headquarters or regional
offices, (iii) achieve projected economies of scale and cost savings, (iv)
achieve projected growth and revenue targets developed by management in
valuing newly-acquired businesses, (v) successfully upgrade our billing
and other information systems in a timely and cost-efficient manner and
(vi) otherwise monitor our operations, costs, regulatory compliance, and
service quality and maintain other necessary internal controls.
o the risks inherent in rapid technological change, including without
limitation the risk that technologies will not be developed or embraced by
us on a timely or cost-effective basis or perform according to
expectations.
o the effects of ongoing changes in the regulation of the communications
industry, including without limitation (i) changes as a result of the
1996 Act and other similar federal and state legislation and federal
and state regulations enacted thereunder, (ii) greater than
anticipated interconnection requests or competition in our
predominately rural local exchange telephone markets resulting
therefrom, (iii) greater than anticipated reductions in revenues
received from the federal Universal Service Fund or other current or
future federal and state support funds designed to compensate LECs that
provide services in high-cost markets, (iv) our failure to successfully
transition from "rate of return" regulation to alternative regulation
plans, (v) the final outcome of regulatory and judicial proceedings with
respect to interconnection agreements and (vi) future judicial or
regulatory actions taken in response to the 1996 Act.
o the effects of greater than anticipated competition, including competition
from wireless carriers, competitive local exchange companies or cable
television companies in our local exchange markets.
o possible changes in the demand for, or pricing of, our products and
services, including without limitation (i) reduced demand for
traditional telephone services caused by greater use of wireless or
Internet communications or other factors, (ii) reduced demand for
second lines, (iii) lower than anticipated demand for premium
telephone services, (iv) lower than anticipated demand for our DSL
Internet access services, CLEC services or broadband services and (v)
reduced demand for our access or billing and collection services.
o our ability to successfully introduce new product or service offerings
on a timely and cost-effective basis, including without limitation our
ability to (i) expand successfully our long distance and Internet
offerings to new or acquired markets, (ii) offer bundled service
packages on terms attractive to our customers and (iii) successfully
initiate competitive local exchange and data services in our targeted
markets.
o our ability to collect receivables from financially troubled
communications companies.
o regulatory limits on our ability to change the prices for telephone
services in response to competitive pressures.
o any difficulties in our ability to expand through attractively priced
acquisitions, whether caused by regulatory impediments, financing
constraints, a decrease in the pool of attractive target companies, or
competition for acquisitions from other interested buyers.
o the possibility of the need to make abrupt and potentially disruptive
changes in our business strategies due to changes in competition,
regulation, technology, product acceptance or other factors.
o the lack of assurance that we can compete effectively against better-
capitalized competitors.
o the impact of terrorist attacks on our business.
o other risks referenced from time to time in our filings with the
Securities and Exchange Commission.
o the effects of more general factors, including without limitation:
* changes in general industry and market conditions and growth rates
* changes in interest rates or other general national, regional or local
economic conditions
* changes in legislation, regulation or public policy, including
changes in federal rural financing programs
* unanticipated increases in capital, operating or administrative
costs, or the impact of new business opportunities requiring significant
up-front investments
* the continued availability of financing in amounts, and on terms
and conditions, necessary to support our operations
* changes in our relationships with vendors, or the failure of these
vendors to provide competitive products on a timely basis
* changes in our senior debt ratings
* unfavorable outcomes of regulatory or legal proceedings, including
rate proceedings and environmental proceedings
* losses or unfavorable returns on our investments in other
communications companies
* delays in the construction of our networks
* changes in accounting policies or practices adopted voluntarily or as
required by generally accepted accounting principles.
For additional information, see the description of our business included
above, as well as Item 7 of this report. Due to these uncertainties, you are
cautioned not to place undue reliance upon these forward-looking statements,
which speak only as of the date made. We undertake no obligation to update or
revise any of our forward-looking statements for any reason, whether as a result
of new information, future events or developments, or otherwise.
OTHER MATTERS
The Company has certain obligations based on federal, state and local laws
relating to the protection of the environment. Costs of compliance through 2002
have not been material and the Company currently has no reason to believe that
such costs will become material.
For additional information concerning the business and properties of the
Company, see Item 7 elsewhere herein, and the Consolidated Financial Statements
and notes 2, 5, 6, 13, and 18 thereto set forth in Item 8 elsewhere herein.
Item 2. Properties.
The Company's properties consist principally of telephone lines, central
office equipment, and land and buildings related to telephone operations. As of
December 31, 2002 and 2001, the Company's gross property, plant and equipment of
approximately $6.9 billion and $5.7 billion, respectively, consisted of the
following:
<TABLE>
<CAPTION>
December 31,
2002 2001
-------------------------------------------------------------------------------
<S> <C> <C>
Telephone operations
Cable and wire 53.0% 52.5
Central office 31.3 31.9
General support 6.9 5.9
Information origination/termination equipment 0.6 0.7
Construction in progress 0.5 1.1
Other 0.1 0.1
-------------------------------------------------------------------------------
92.4 92.2
-------------------------------------------------------------------------------
Other operations 7.6 7.8
-------------------------------------------------------------------------------
100.0% 100.0
===============================================================================
</TABLE>
"Cable and wire" facilities consist primarily of buried cable and aerial
cable, poles, wire, conduit and drops. "Central office equipment" consists
primarily of switching equipment, circuit equipment and related facilities.
"General support" consists primarily of land, buildings, tools, furnishings,
fixtures, motor vehicles and work equipment. "Information
origination/termination equipment" consists primarily of premise equipment
(private branch exchanges and telephones) for official company use.
"Construction in progress" includes property of the foregoing categories that
has not been placed in service because it is still under construction.
The properties of certain of the Company's telephone subsidiaries are
subject to mortgages securing the debt of such companies. The Company owns
substantially all of the central office buildings, local administrative
buildings, warehouses, and storage facilities used in its telephone operations.
The Company's property in its Other Operations consist primarily of (i)
corporate general support assets, (ii) the fiber network in Michigan and (iii)
equipment to provide competitive local exchange and Internet access services.
For further information on the location and type of the Company's properties,
see the descriptions of the Company's operations in Item 1.
Item 3. Legal Proceedings.
Following the Company's rejection of an acquisition proposal publicly
disclosed by Alltel Corporation on August 15, 2001, the Company and its
directors were named as defendants in Hannahs v. CenturyTel, Inc., et al., a
case filed August 20, 2001 in the Fourth Judicial District Court, State of
Louisiana, which asserted breach of fiduciary duty and related claims and sought
injunctive relief pertaining to the Company's rejection of the acquisition
proposal, as well as unspecified monetary damages. This case was dismissed
without prejudice on March 24, 2003. Two other similar shareholder suits were
previously either voluntarily dismissed or stayed and administratively closed.
On December 26, 2001, AT&T Corp. and one of its subsidiaries filed a
complaint in the U.S. District Court for the Western District of Washington
(Case No. CV0121512) seeking money damages against CenturyTel of the Northwest,
Inc. The plaintiffs claim, among other things, that CenturyTel of the Northwest,
Inc. has breached its obligations under a 1994 stock purchase agreement to
indemnify the plaintiffs for various environmental costs and damages relating to
properties sold to the plaintiffs under such 1994 agreement. The Company has
investigated this claim and believes it has numerous defenses available. If the
plaintiffs are successful in recovering any sums under this litigation, the
Company believes it is entitled to indemnification under agreements with third
parties.
On March 13, 2002, the Arkansas Court of Appeals vacated two orders issued
by the Arkansas Public Service Commission ("APSC") in connection with the
Company's acquisition of its Arkansas LECs from Verizon in July 2000, and
remanded the case back to the APSC for further hearings. The Court took these
actions in response to challenges to the rates the Company has charged other
LECs for intrastate switched access service. On December 20, 2002, the APSC
approved the access rates established by the Company at the time of acquisition.
On January 29, 2003, AT&T filed with the APSC a petition for rehearing
related to this ruling.
From time to time, the Company is involved in other litigation incidental
to its business, including administrative hearings of state public utility
commissions relating primarily to rate making, actions relating to employee
claims, occasional grievance hearings before labor regulatory agencies and
miscellaneous third party tort actions. Currently, there are no material legal
proceedings of this nature.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Executive Officers of the Registrant
Information concerning the Company's Executive Officers, set forth at Item
10 in Part III hereof, is incorporated in Part I of this Report by reference.
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
CenturyTel's common stock is listed on the New York Stock Exchange and is
traded under the symbol CTL. The following table sets forth the high and low
sales prices, along with the quarterly dividends, for each of the quarters
indicated.
<TABLE>
<CAPTION>
Sales prices
------------ Dividend per
High Low common share
---- --- ------------
<S> <C> <C> <C>
2002:
First quarter $ 35.50 28.80 .0525
Second quarter $ 34.45 27.00 .0525
Third quarter $ 30.60 21.13 .0525
Fourth quarter $ 31.65 22.35 .0525
2001:
First quarter $ 39.88 25.45 .0500
Second quarter $ 30.42 26.90 .0500
Third quarter $ 36.50 28.30 .0500
Fourth quarter $ 35.79 30.25 .0500
</TABLE>
Common stock dividends during 2002 and 2001 were paid each quarter. As of
February 28, 2003, there were approximately 4,890 stockholders of record of
CenturyTel's common stock.
For information regarding shares of CenturyTel common stock authorized
for issuance under CenturyTel's equity compensation plans, see Item 12.
Item 6. Selected Financial Data.
The following table presents certain selected consolidated financial data
(from continuing operations) as of and for each of the years ended in the
five-year period ended December 31, 2002:
<TABLE>
<CAPTION>
Selected Income Statement Data
Year ended December 31,
------------------------------------------------------------------
2002 2001 2000 1999 1998
------------------------------------------------------------------
(Dollars, except per share amounts, and shares expressed in thousands)
<S> <C> <C> <C> <C> <C>
Operating revenues
Telephone $ 1,733,592 1,505,733 1,253,969 1,126,112 1,077,343
Other 238,404 173,771 148,388 128,288 91,915
------------------------------------------------------------------
Total operating revenues $ 1,971,996 1,679,504 1,402,357 1,254,400 1,169,258
==================================================================
Operating income
Telephone $ 543,113 423,420 376,290 351,559 334,604
Other 43,568 22,098 31,258 22,580 16,083
Corporate overhead costs
allocable to discontinued
operations (11,275) (20,213) (21,411) (19,416) (14,957)
------------------------------------------------------------------
Total operating income $ 575,406 425,305 386,137 354,723 335,730
==================================================================
Nonrecurring gains and
losses (pre-tax) $ 3,709 33,043 - 11,284 28,085
==================================================================
Income from continuing operations $ 189,919 144,146 124,229 135,520 117,128
==================================================================
Basic earnings per share from
continuing operations $ 1.34 1.02 .88 .97 .85
==================================================================
Basic earnings per share from
continuing operations, as adjusted
for goodwill amortization $ 1.34 1.35 1.15 1.20 1.08
==================================================================
Diluted earnings per share from
continuing operations $ 1.33 1.01 .88 .96 .84
==================================================================
Diluted earnings per share from
continuing operations, as adjusted
for goodwill amortization $ 1.33 1.34 1.13 1.18 1.06
==================================================================
Dividends per common share $ .210 .200 .190 .180 .173
==================================================================
Average basic shares outstanding 141,613 140,743 140,069 138,848 137,010
==================================================================
Average diluted shares
outstanding 142,879 142,307 141,864 141,432 140,105
==================================================================
</TABLE>
<TABLE>
<CAPTION>
Selected Balance Sheet Data
December 31,
------------------------------------------------------------------------
2002 2001 2000 1999 1998
------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Net property, plant and
equipment $ 3,531,645 2,736,142 2,698,010 2,000,789 2,093,526
Goodwill $ 3,427,281 2,087,158 2,108,344 1,267,908 1,500,532
Total assets $ 7,770,408 6,318,684 6,393,290 4,705,407 4,935,455
Long-term debt $ 3,578,132 2,087,500 3,050,292 2,075,212 2,551,963
Stockholders' equity $ 3,088,004 2,337,380 2,032,079 1,847,992 1,531,482
------------------------------------------------------------------------
</TABLE>
See Items 7 and 8 for a discussion of the Company's discontinued wireless
operations.
The following table presents certain selected consolidated operating data
as of the end of each of the years in the five-year period ended December 31,
2002:
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------------------------
2002 2001 2000 1999 1998
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Telephone access lines 2,414,564 1,797,643 1,800,565 1,272,867 1,346,567
Long distance customers 648,797 465,872 363,307 303,722 226,730
---------------------------------------------------------------------
</TABLE>
See Items 1 and 2 in Part I and Items 7 and 8 elsewhere herein for
additional information.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
OVERVIEW
CenturyTel, Inc. and its subsidiaries (the "Company") is a regional
integrated communications company engaged primarily in providing local exchange,
long distance, Internet access and data services to customers in 22 states.
On July 1, 2002, the Company acquired the local exchange telephone
operations of Verizon Communications, Inc. ("Verizon") in the state of Alabama
for approximately $1.022 billion cash. On August 31, 2002, the Company acquired
the local exchange telephone operations of Verizon in the state of Missouri for
approximately $1.179 billion cash. The results of operations for the Verizon
assets acquired are reflected in the Company's consolidated results of
operations subsequent to each respective acquisition. See "Acquisitions" below
and Note 2 of Notes to Consolidated Financial Statements for additional
information.
On August 1, 2002, the Company sold substantially all of its wireless
operations to an affiliate of ALLTEL Corporation ("Alltel") and certain other
purchasers in exchange for an aggregate of approximately $1.59 billion in cash.
As a result, the Company's wireless operations for the years ended December 31,
2002, 2001 and 2000 have been reflected as discontinued operations on the
Company's consolidated statements of income and cash flows. For further
information, see "Discontinued Operations" below.
On July 31, 2000 and September 29, 2000, affiliates of the Company
acquired over 490,000 telephone access lines and related local exchange assets
in Arkansas, Missouri and Wisconsin from affiliates of Verizon for an aggregate
of approximately $1.5 billion cash. The operations of these acquired properties
are included in the Company's results of operations beginning on the respective
dates of acquisition. See "Acquisitions" below and Note 2 of Notes to
Consolidated Financial Statements for additional information.
During the three years ended December 31, 2002, the Company has acquired
and sold various other operations, the impact of which has not been material to
the financial position or results of operations of the Company.
The net income of the Company for 2002 was $801.6 million, compared to
$343.0 million during 2001 and $231.5 million during 2000. Diluted earnings per
share for 2002 was $5.61 compared to $2.41 in 2001 and $1.63 in 2000. Income
from continuing operations (and diluted earnings per share from continuing
operations) was $189.9 million ($1.33), $144.1 million ($1.01) and $124.2
million ($.88) for 2002, 2001 and 2000, respectively. In accordance with the
provisions of Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142"), amortization of goodwill ceased effective
January 1, 2002. Had the results of operations for the years ended December 31,
2001 and 2000 been subject to the provisions of SFAS 142, income from continuing
operations (and diluted earnings per share) would have been $190.5 million
($1.34) for 2001 and $160.8 million ($1.13) for 2000 and net income (and diluted
earnings per share) would have been $399.3 million ($2.81) for 2001 and $278.0
million ($1.96) for 2000.
<TABLE>
<CAPTION>
Year ended December 31, 2002 2001 2000
---------------------------------------------------------------------------------------------------------
(Dollars, except per share amounts,
and shares in thousands)
<S> <C> <C> <C>
Operating income
Telephone $ 543,113 423,420 376,290
Other 43,568 22,098 31,258
Corporate overhead costs allocable to discontinued
operations (11,275) (20,213) (21,411)
----------------------------------------------------------------------------------------------------------
575,406 425,305 386,137
Nonrecurring gains and losses, net 3,709 33,043 -
Interest expense (221,845) (225,523) (183,302)
Other income and expense (63,814) 32 4,936
Income tax expense (103,537) (88,711) (83,542)
---------------------------------------------------------------------------------------------------------
Income from continuing operations 189,919 144,146 124,229
Discontinued operations, net of tax 611,705 198,885 107,245
---------------------------------------------------------------------------------------------------------
Net income $ 801,624 343,031 231,474
=========================================================================================================
Net income, as adjusted for goodwill amortization $ 801,624 399,297 278,029
=========================================================================================================
Basic earnings per share
From continuing operations $ 1.34 1.02 .88
From continuing operations, as adjusted for
goodwill amortization $ 1.34 1.35 1.15
From discontinued operations $ 4.32 1.41 .77
From discontinued operations, as adjusted for
goodwill amortization $ 4.32 1.48 .84
Basic earnings per share $ 5.66 2.43 1.65
Basic earnings per share, as adjusted for
goodwill amortization $ 5.66 2.83 1.98
Diluted earnings per share
From continuing operations $ 1.33 1.01 .88
From continuing operations, as adjusted for
goodwill amortization $ 1.33 1.34 1.13
From discontinued operations $ 4.28 1.40 .76
From discontinued operations, as adjusted for
goodwill amortization $ 4.28 1.47 .83
Diluted earnings per share $ 5.61 2.41 1.63
Diluted earnings per share, as adjusted for
goodwill amortization $ 5.61 2.81 1.96
Average basic shares outstanding 141,613 140,743 140,069
=========================================================================================================
Average diluted shares outstanding 142,879 142,307 141,864
=========================================================================================================
</TABLE>
During the three years ended December 31, 2002, the Company has recorded
certain nonrecurring items. Net income (and diluted earnings per share)
excluding nonrecurring items for 2002, 2001 and 2000 was $325.0 million ($2.27),
$225.7 million ($1.59; $1.98, as adjusted), and $228.8 million ($1.61; $1.94, as
adjusted), respectively. The Company believes this presentation of results of
operations excluding nonrecurring items is useful to investors because it (i)
reflects management's view of recurring operations upon which management bases
financial, operational, compensation and planning decisions and (ii) prevents
investors from misconstruing the significance of financial data impacted by
nonrecurring events. The following reconciliation table shows how the amounts
of various line items reported under generally accepted accounting principles
were impacted by these nonrecurring items.
<TABLE>
<CAPTION>
Year ended December 31, 2002 2001 2000
---------------------------------------------------------------------------------------------------------
(Dollars, except per share
amounts, in thousands)
<S> <C> <C> <C>
Operating income, as reported $ 575,406 425,305 386,137
Less nonrecurring items:
Reserve for uncollectible receivables,
primarily WorldCom (15,000) - -
Refund of access charges to interexchange carriers (7,645) - -
Other (1,929) (2,000) (504)
---------------------------------------------------------------------------------------------------------
Operating income, excluding nonrecurring items $ 599,980 427,305 386,641
=========================================================================================================
Nonrecurring gains and losses, net, as reported $ 3,709 33,043 -
Less nonrecurring items:
Gain on sale of assets 3,709 58,523 -
Write down of non-operating assets - (25,480) -
---------------------------------------------------------------------------------------------------------
Nonrecurring gains and losses, net, excluding
nonrecurring items $ - - -
=========================================================================================================
Other income and expense, as reported $ (63,814) 32 4,936
Less nonrecurring items:
Redemption premium on remarketable notes,
net of unamortized premium (59,949) - -
Write-off of nonoperating investment (781) - -
Costs associated with unsolicited takeover proposal (3,000) (6,000) -
Settlement of interest rate hedge contracts - - (7,947)
----------------------------------------------------------------------------------------------------------
Other income and expense, excluding nonrecurring items $ (84) 6,032 12,883
=========================================================================================================
Income tax expense, as reported $ (103,537) (88,711) (83,542)
Less: Tax effect of nonrecurring items 29,608 (8,666) 2,957
---------------------------------------------------------------------------------------------------------
Income tax expense, excluding nonrecurring items $ (133,145) (80,045) (86,499)
=========================================================================================================
Discontinued operations, net of tax, as reported $ 611,705 198,885 107,245
Less nonrecurring items:
Gain on sale of assets 805,628 185,133 20,593
Write down of wireless portion of billing system (30,491) - -
Write down of non-operating assets (1,702) (18,205) -
Proportionate share of nonrecurring charges
recorded by entities in which the Company
owns a minority interest - (10,054) (5,330)
Company's share of gain on sale of assets - 2,164 -
Minority interest effect of gain on sale of assets - (13) -
Tax effect of nonrecurring items (241,810) (58,032) (7,123)
----------------------------------------------------------------------------------------------------------
Income from discontinued operations, net of tax,
excluding nonrecurring items $ 80,080 97,892 99,105
=========================================================================================================
Net income, as reported $ 801,624 343,031 231,474
Less: Effect of nonrecurring items 476,638 117,370 2,646
---------------------------------------------------------------------------------------------------------
Net income, excluding nonrecurring items $ 324,986 225,661 228,828
=========================================================================================================
Basic earnings per share, as reported $ 5.66 2.43 1.65
Less: Effect of nonrecurring items 3.37 .83 .02
---------------------------------------------------------------------------------------------------------
Basic earnings per share, excluding nonrecurring items $ 2.29 1.60 1.63
=========================================================================================================
Basic earnings per share, excluding nonrecurring items,
as adjusted $ 2.29 2.00 1.96
=========================================================================================================
Diluted earnings per share, as reported $ 5.61 2.41 1.63
Less: Effect of nonrecurring items 3.34 .82 .02
---------------------------------------------------------------------------------------------------------
Diluted earnings per share, excluding nonrecurring items $ 2.27 1.59 1.61
=========================================================================================================
Diluted earnings per share, excluding nonrecurring items,
as adjusted $ 2.27 1.98 1.94
=========================================================================================================
</TABLE>
For additional information concerning the nonrecurring items described in
the above table, see "Telephone Operations", "Nonrecurring Gains and Losses,
Net", "Other Income and Expense", and "Discontinued Operations".
Contributions to operating revenues and operating income by the Company's
telephone and other operations for each of the years in the three-year period
ended December 31, 2002 were as follows:
<TABLE>
<CAPTION>
Year ended December 31, 2002 2001 2000
------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues
Telephone operations 87.9 % 89.7 89.4
Other operations 12.1 % 10.3 10.6
Operating income
Telephone operations 94.4 % 99.6 97.4
Other operations 7.6 % 5.2 8.1
Corporate overhead costs allocable
to discontinued operations (2.0)% (4.8) (5.5)
------------------------------------------------------------------------------
</TABLE>
In addition to historical information, management's discussion and
analysis includes certain forward-looking statements regarding events and
financial trends that may affect the Company's future operating results and
financial position. Such forward-looking statements are subject to uncertainties
that could cause the Company's actual results to differ materially from such
statements. Such uncertainties include but are not limited to: the Company's
ability to effectively manage its growth, including integrating newly-acquired
businesses into the Company's operations, hiring adequate numbers of qualified
staff and successfully upgrading its billing and other information systems; the
risks inherent in rapid technological change; the effects of ongoing changes in
the regulation of the communications industry; the effects of greater than
anticipated competition in the Company's markets; possible changes in the demand
for, or pricing of, the Company's products and services; the Company's ability
to successfully introduce new product or service offerings on a timely and
cost-effective basis; the Company's ability to collect its receivables from
financially troubled communications companies; and the effects of more general
factors such as changes in interest rates, in general market or economic
conditions or in legislation, regulation or public policy. These and other
uncertainties related to the business are described in greater detail in Item 1
included herein. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this report. The
Company undertakes no obligation to update any of its forward-looking statements
for any reason.
TELEPHONE OPERATIONS
The Company conducts its telephone operations in rural, suburban and small
urban communities in 22 states. As of December 31, 2002, approximately 91% of
the Company's 2.4 million access lines were in Wisconsin, Missouri, Alabama,
Arkansas, Washington, Michigan, Louisiana, Colorado, Ohio and Oregon. The
operating revenues, expenses and income of the Company's telephone operations
for 2002, 2001 and 2000 are summarized below.
<TABLE>
<CAPTION>
Year ended December 31, 2002 2001 2000
-------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Operating revenues
Local service $ 604,580 491,529 408,538
Network access 972,303 874,458 727,797
Other 156,709 139,746 117,634
-------------------------------------------------------------------------------
1,733,592 1,505,733 1,253,969
-------------------------------------------------------------------------------
Operating expenses
Plant operations 433,187 380,466 290,062
Customer operations 148,502 117,080 105,950
Corporate and other 211,924 186,483 163,761
Depreciation and amortization 396,866 398,284 317,906
-------------------------------------------------------------------------------
1,190,479 1,082,313 877,679
-------------------------------------------------------------------------------
Operating income $ 543,113 423,420 376,290
===============================================================================
</TABLE>
Local service revenues. Local service revenues are derived from the
monthly provision of local exchange telephone services in the Company's service
areas. Of the $113.1 million (23.0%) increase in local service revenues in 2002,
$102.8 million was due to the acquisition of the Verizon properties in 2002. The
remaining $10.3 million increase was primarily due to a $7.6 million increase
resulting from the provision of custom calling features to more customers and a
$1.8 million increase due to increased rates in certain jurisdictions. Of the
$83.0 million (20.3%) increase in local service revenues in 2001, $73.7 million
was due to the acquisition of the Verizon properties in 2000. The remaining $9.3
million increase was due to a $6.9 million increase due to increased rates in
certain jurisdictions and an increase in the number of customer access lines in
incumbent markets during most of 2001 and a $3.9 million increase due to the
increased provision of custom calling features. Internal access lines declined
1.1% and 0.2% during 2002 and 2001, respectively. Internal access line growth
during 2000 was 2.8%. The Company believes the decline in the number of access
lines during 2002 and 2001 is primarily due to declines in second lines, soft
general economic conditions in the Company's markets and the displacement of
traditional wireline telephone services by other competitive service providers.
Even when the economy recovers, the Company believes that any rebound in access
lines will be limited by continued declines in second lines caused primarily by
digital subscriber line substitution and the impact of competitive services.
Based on current conditions, the Company expects to incur a decline in access
lines of 1 to 2% for 2003.
Network access revenues. Network access revenues are primarily derived
from charges to long distance companies and other customers for access to the
Company's local exchange carrier ("LEC") networks in connection with the
completion of interstate or intrastate long distance telephone calls. Certain of
the Company's interstate network access revenues are based on tariffed access
charges filed directly with the Federal Communications Commission ("FCC"); the
remainder of such revenues are derived under revenue sharing arrangements with
other LECs administered by the National Exchange Carrier Association. Intrastate
network access revenues are based on tariffed access charges filed with state
regulatory agencies or are derived under revenue sharing arrangements with other
LECs.
Network access revenues increased $97.8 million (11.2%) in 2002 and $146.7
million (20.2%) in 2001 due to the following factors:
<TABLE>
<CAPTION>
2002 2001
increase increase
(decrease) (decrease)
--------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Acquisitions of Verizon properties in third quarter 2002 $ 98,014 -
Acquisitions of Verizon properties in third quarter 2000 - 139,866
Increased recovery from the federal Universal Service Fund ("USF") 13,832 8,507
One-time refund of access charges to interexchange carriers (7,645) -
Intrastate revenues due to decreased minutes of use and decreased
access rates in certain states (27,740) (3,048)
Partial recovery of increased operating costs through
revenue sharing arrangements with other telephone companies,
increased recovery from state support funds and return on rate base 9,756 16,252
Rate changes in certain jurisdictions 5,600 (916)
Revision of prior year revenue settlement agreements 1,912 (16,876)
Other, net 4,116 2,876
--------------------------------------------------------------------------------------------------
$ 97,845 146,661
==================================================================================================
</TABLE>
In 2002 the Company incurred a reduction in its intrastate revenues
(exclusive of the properties acquired from Verizon in 2002) of approximately
$27.7 million compared to 2001 primarily due to (i) a reduction in intrastate
minutes (partially due to the displacement of minutes by wireless and instant
messaging services) and (ii) decreased access rates in certain states. The
Company believes such trend of decreased intrastate minutes will continue in
2003. Although the magnitude of such decrease cannot be precisely estimated, the
Company believes such decrease will be less than that incurred in 2002.
Other revenues. Other revenues include revenues related to (i) leasing,
selling, installing, maintaining and repairing customer premise
telecommunications equipment and wiring ("CPE services"), (ii) providing billing
and collection services for long distance carriers and (iii) participating in
the publication of local directories. Other revenues increased $17.0 million
(12.1%) in 2002, of which $18.2 million was due to the properties acquired from
Verizon in 2002. Other revenues increased $22.1 million in 2001, primarily due
to a $20.5 million increase attributable to revenues contributed by the
properties acquired from Verizon in 2000. The remainder of the increase in 2001
was due primarily to a $7.0 million increase in revenues from CPE services
(primarily due to an increase in rates) which was partially offset by a $5.0
million decrease in billing and collection revenues.
Operating expenses. Plant operations expenses during 2002 and 2001
increased $52.7 million (13.9%) and $90.4 million (31.2%), respectively. Of the
$52.7 million increase in 2002, $58.4 million was attributable to the properties
acquired from Verizon in 2002 and $13.8 million related to increases in salaries
and benefits. Such increases were partially offset by a $16.4 million decrease
in access expenses primarily as a result of changes in certain optional calling
plans in Arkansas approved in late 2001 and a $3.0 million decrease in repairs
and maintenance expense. Of the $90.4 million increase in 2001, $87.3 million
was attributable to the properties acquired from Verizon in 2000. The remaining
$3.1 million increase was primarily due to a $6.1 million increase in salaries
and benefits, a $2.7 million increase in network operations expenses and a $2.6
million increase in digital subscriber line ("DSL") expenses. Such increases
were substantially offset by a $9.9 million decrease in engineering expenses.
Customer operations, corporate and other expenses increased $56.9 million
(18.7%) in 2002 and $33.9 million (12.6%) in 2001. Of the $56.9 million increase
in 2002, $47.2 million related to the Verizon acquisitions in 2002. The
remaining increase of $9.7 million was due primarily to a $7.7 million increase
in salaries and benefits, a $4.6 million increase in customer service expenses
and a $3.9 million increase in the provision for doubtful accounts. Such
increases were partially offset by a $5.0 million decrease in operating taxes
and a $1.4 million decrease in expenses related to the provision of CPE
services. The Company recorded a provision for uncollectible receivables for
telecommunications carriers, primarily related to the bankruptcy of WorldCom,
Inc., in the amount of $15.0 million during 2002. Such increase was partially
offset by an $11.1 million reduction in the provision for uncollectible
receivables for non-carrier customers. Of the $33.9 million increase in customer
operations, corporate and other expenses in 2001, $42.5 million related to the
Verizon properties acquired in 2000. The remaining $8.6 million decrease in 2001
was primarily due to a $4.3 million decrease in the provision for uncollectible
receivables and a $3.1 million decrease in operating taxes.
Depreciation and amortization decreased $1.4 million (0.4%) in 2002 and
increased $80.4 million (25.3%) in 2001. Of the $1.4 million decrease in 2002,
$58.0 million related to ceasing amortization of goodwill effective January 1,
2002 in accordance with the provisions of SFAS 142. Such decrease was
substantially offset by $38.0 million of depreciation and amortization related
to the properties acquired from Verizon in 2002 and a $21.8 million increase in
depreciation expense due to higher levels of plant in service in incumbent
markets. Of the $80.4 million increase in 2001, $65.2 million was attributable
to the properties acquired from Verizon in 2000 (which included $14.7 million of
amortization of goodwill) and the remainder was primarily due to higher levels
of plant in service in incumbent markets. The composite depreciation rate for
the Company's regulated telephone properties was 6.9% for 2002, 6.8% for 2001
and 7.2% for 2000.
Other. For additional information regarding certain matters that have
impacted or may impact the Company's telephone operations, see "Regulation and
Competition".
OTHER OPERATIONS
Other operations includes the results of continuing operations of
subsidiaries of the Company which are not included in the telephone segment
including, but not limited to, the Company's nonregulated long distance
operations, Internet operations, competitive local exchange carrier ("CLEC")
operations, fiber network business and security monitoring operations. The
operating revenues, expenses and income of the Company's other operations for
2002, 2001 and 2000 are summarized below.
<TABLE>
<CAPTION>
Year ended December 31, 2002 2001 2000
--------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Operating revenues
Long distance $ 146,536 117,363 104,435
Internet 58,665 39,057 23,491
Other 33,203 17,351 20,462
--------------------------------------------------------------------------------------
238,404 173,771 148,388
--------------------------------------------------------------------------------------
Operating expenses
Cost of sales and operating expenses 180,076 142,919 112,219
Depreciation and amortization 14,760 8,754 4,911
--------------------------------------------------------------------------------------
194,836 151,673 117,130
--------------------------------------------------------------------------------------
Operating income $ 43,568 22,098 31,258
======================================================================================
</TABLE>
Long distance revenues increased $29.2 million (24.9%) and $12.9 million
(12.4%) in 2002 and 2001, respectively. The $29.2 million increase in 2002 was
primarily attributable to the growth in the number of customers and increased
average minutes of use ($34.8 million), partially offset by a decrease in the
average rate charged by the Company per minute of use ($5.8 million). The $12.9
million increase in 2001 was due primarily to the growth in the number of
customers and increased minutes of use, primarily due to penetration of the
markets acquired from Verizon in 2000. The number of long distance customers as
of December 31, 2002, 2001, and 2000 was approximately 648,790, 465,870, and
363,300, respectively.
Internet revenues increased $19.6 million (50.2%) in 2002 due to growth in
the number of customers, primarily due to the expansion of the Company's DSL
product offering. Internet revenues increased $15.6 million (66.3%) in 2001
primarily due to a $12.6 million increase due to growth in the number of
customers (including growth in the Company's DSL product offering) and a $1.8
million increase due to Internet operations acquired in mid-2000.
Other revenues increased $15.9 million in 2002, of which $15.1 million was
due to increased revenues in the Company's CLEC business, primarily due to an
acquisition of certain CLEC operations in the first quarter of 2002. Other
revenues decreased $3.1 million in 2001 primarily due to the winding down of the
Company's third party call center operations during 2000.
Cost of sales and operating expenses increased $37.2 million (26.0%) in
2002 primarily due to (i) a $23.9 million increase in expenses associated with
the Company's long distance operations (of which $13.4 million was due to
increased payments to other carriers due to higher minutes of use partially
offset by a decrease in the rate per minute of use; $5.3 million related to
increased sales and marketing costs; $2.2 million was due to an increase in the
provision for doubtful accounts; and $2.3 million was due to an increase in
billing and collection costs); (ii) an $11.8 million increase in expenses
associated with the Company's CLEC operations primarily due to the expansion of
the business and operations acquired in the first quarter of 2002; and (iii) a
$12.3 million increase associated with expanding the Company's Internet
operations. Such increases were partially offset by a $7.4 million reduction in
expenses primarily due to the increased intercompany profit with regulated
affiliates (the recognition of which in accordance with regulatory accounting
principles acts to offset operating expenses).
Cost of sales and operating expenses increased $30.7 million (27.4%) in
2001 primarily due to (i) a $23.5 million increase in expenses related to the
provision of Internet access primarily due to the expansion of the Company's DSL
product offering, (ii) an increase of $9.3 million in expenses of the Company's
long distance operations primarily due to an increase in the number of customers
and an increase in marketing expenses, and (iii) an $8.3 million increase due to
the expansion of the Company's CLEC business. Such increases were partially
offset by a $6.5 million reduction in expenses due to the winding down of the
Company's third party call center operations during 2000.
Depreciation and amortization increased $6.0 million in 2002 and $3.8
million in 2001 primarily due to increased depreciation expense in the Company's
CLEC, Internet and fiber network businesses.
The Company incurred combined operating losses in 2002 and 2001 of $16.7
million and $16.5 million, respectively, in its CLEC and fiber network
businesses, and expects to incur a combined operating loss ranging from $13 to
$18 million in 2003 related to these operations.
Certain of the Company's service subsidiaries provide managerial,
operational, technical, accounting and administrative services, along with
materials and supplies, to the Company's telephone subsidiaries. In accordance
with regulatory accounting, intercompany profit on transactions with regulated
affiliates has not been eliminated in connection with consolidating the results
of operations of the Company. When the regulated operations of the Company no
longer qualify for the application of Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain Types of Regulation"
("SFAS 71"), such intercompany profit will be eliminated in subsequent financial
statements, the primary result of which will be a decrease in operating expenses
applicable to the Company's telephone operations and an increase in operating
expenses applicable to the Company's other operations. The amount of
intercompany profit with regulated affiliates which was not eliminated was
approximately $29.5 million, $22.0 million and $17.1 million in 2002, 2001 and
2000, respectively. For additional information applicable to SFAS 71, see
"Regulation and Competition -- Other Matters."
NONRECURRING GAINS AND LOSSES, NET
In 2002, the Company recorded a pre-tax gain of $3.7 million from the sale
of a PCS license.
In 2001, the Company's net favorable nonrecurring pre-tax gains
were $33.0 million. The Company recorded a pre-tax gain on the sale of its
remaining shares of Illuminet Holdings, Inc. ("Illuminet") common stock
aggregating $54.6 million ($35.5 million after-tax; $.25 per diluted share) and
a pre-tax gain of $4.0 million ($2.6 million after-tax; $.02 per diluted share)
on the sale of certain other assets. Additionally in 2001, the Company recorded
pre-tax charges of $25.5 million ($16.6 million after-tax; $.12 per diluted
share) due to the write-down in the value of certain non-operating investments
in which the Company owns a minority interest.
Certain other nonrecurring items for the three-year period ended December
31, 2002 are reflected in other line items of the Company's consolidated
financial statements. See "Results of Operations - Overview".
INTEREST EXPENSE
Interest expense decreased $3.7 million in 2002 compared to 2001 due to a
decrease in average debt outstanding and decreased rates.
Interest expense increased $42.2 million in 2001 compared to 2000
primarily due to an increase in interest expense related to outstanding
indebtedness incurred to acquire the Verizon operations.
OTHER INCOME AND EXPENSE
Other expense was $63.8 million in 2002 compared to other income of
$32,000 in 2001. Such decrease was primarily due to a $59.9 million pre-tax
charge related to the Company's payment of premium in connection with redeeming
its Series I remarketable notes, net of unamortized premium.
Other income decreased $4.9 million in 2001 compared to 2000 primarily due
to $6.0 million of costs incurred in 2001 associated with responding to an
unsolicited takeover proposal; a $1.7 million increase in minority interest
expense due primarily to increased profitability of certain of the Company's
majority-owned affiliates; and to other expense increases. These 2001 expense
increases were partially offset by a favorable comparison to expenses in 2000,
when the Company recorded a $7.9 million charge related to the settlement of
certain interest rate hedge contracts entered into in connection with financing
the 2000 Verizon acquisitions.
INCOME TAX EXPENSE
The Company's effective income tax rate (from continuing operations) was
35.3%, 38.1% and 40.2% in 2002, 2001 and 2000, respectively. The decrease in the
effective tax rate in 2002 compared to 2001 is primarily attributable to the
effect of ceasing amortization of goodwill (some of which was nondeductible for
tax purposes) effective January 1, 2002 in accordance with the provisions of
SFAS 142.
DISCONTINUED OPERATIONS
On August 1, 2002, the Company sold substantially all of its wireless
operations to Alltel and certain other purchasers for an aggregate of
approximately $1.59 billion in cash. As a result, the Company's wireless
operations for 2002 have been reflected as discontinued operations in the
Company's consolidated financial statements. The results of operations for 2001
and 2000 have been restated to conform to the 2002 presentation. The following
table summarizes certain information concerning the Company's wireless
operations for the periods presented.
<TABLE>
<CAPTION>
Year ended December 31, 2002 2001 2000
------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Operating revenues $ 246,705 437,965 443,569
Operating expenses, exclusive of corporate
overhead costs of $11.3 million, $20.2
million and $21.4 million (175,447) (305,351) (304,293)
Income from unconsolidated cellular entities 31,350 27,460 26,986
Minority interest expense (8,569) (11,510) (11,598)
Gain on sale of discontinued operations 803,905 - -
Nonrecurring gains - 166,928 20,593
Other income 188 4,707 3,157
Income tax expense (286,427) (121,314) (71,169)
------------------------------------------------------------------------------------------------
Income from discontinued operations, net of tax $ 611,705 198,885 107,245
================================================================================================
</TABLE>
Included in operating expenses for 2002 is a $30.5 million charge
associated with a write-off of all amounts expended to develop the wireless
portion of the Company's billing system currently in development. Depreciation
and amortization of long-lived assets and amortizable intangibles related to the
Company's wireless operations ceased effective March 19, 2002, the date of the
Company's definitive sales agreement with Alltel. Such cessation of depreciation
and amortization had the effect of reducing depreciation and amortization
expense approximately $20 million in 2002 and thereby contributing approximately
$.08 to the Company's diluted earnings per share for 2002.
The Company recorded an $803.9 million pre-tax gain on the sale of
substantially all of its wireless business in the third quarter of 2002.
Nonrecurring gains for 2001 relate to the sale of 30 PCS licenses to Leap
Wireless International, Inc. Nonrecurring gains for 2000 relate to the sale of
the Company's remaining Alaska cellular operations and its minority interest in
one other market.
For further information, see Notes 3 and 13 to the Company's consolidated
financial statements appearing elsewhere in this report.
ACQUISITIONS AND RELATED FINANCING ARRANGEMENTS
Verizon 2002 Acquisitions. On July 1, 2002, the Company completed the
acquisition of approximately 300,000 telephone access lines in the state of
Alabama from Verizon for approximately $1.022 billion cash. On August 31, 2002,
the Company completed the acquisition of approximately 350,000 telephone access
lines in the state of Missouri from Verizon for approximately $1.179 billion
cash.
On May 6, 2002, the Company issued and sold in an underwritten public
offering $500 million of equity units. Net proceeds to the Company from this
issuance were approximately $483.4 million. Each of the 20 million equity units
issued was priced at $25 and consists initially of a beneficial interest in a
CenturyTel senior unsecured note with a principal amount of $25 and a contract
to purchase shares of CenturyTel common stock no later than May 2005. The senior
notes mature in May 2007. Each purchase contract will generally require the
holder to purchase between .6944 and .8741 of a share of CenturyTel common stock
in May 2005 based on the then current stock price of CenturyTel common stock in
exchange for $25, subject to certain adjustments and exceptions. Accordingly,
upon full settlement of the purchase contracts in May 2005, the Company will
receive proceeds of $500 million and will deliver between 13.9 million and 17.5
million common shares in the aggregate. The senior notes are pledged by the
holders to secure their obligations under the purchase contracts. The total
distributions on the equity units will be at an initial annual rate of 6.875%,
consisting of interest (6.02%) and contract adjustment payments (0.855%), each
payable quarterly. On or after mid-February 2005, the senior notes will be
remarketed, at which time the remarketing agent will reset the interest rate on
the senior notes in order to generate sufficient proceeds to secure the holder's
obligation under the purchase contract. In the event of an unsuccessful
remarketing, the Company will exercise its right as a secured party to dispose
of the senior notes and satisfy in full the holder's obligation to purchase
common stock under the purchase contract.
On July 22, 2002, the Company entered into $800 million of credit
facilities, consisting of a $533 million three-year facility and a $267 million
364-day revolving facility with a one-year term-out option. These facilities
replaced credit facilities that matured during the third quarter of 2002.
In the third quarter of 2002, the Company issued $500 million of senior
notes due 2012 (which bear interest at 7.875%) and $165 million of convertible
senior debentures (which bear interest at 4.75% and which may be converted into
shares of CenturyTel common stock at a conversion price of $40.455 per share).
The Company used proceeds from the sale of equity units, senior notes and
convertible senior debentures, along with the $1.59 billion cash proceeds
received from the sale of substantially all of the Company's wireless operations
and utilization of its credit facilities, to finance the third quarter 2002
acquisitions of telephone properties in Alabama and Missouri from Verizon which
aggregated $2.201 billion, the redemption of $400 million principal amount in
remarketable debt securities (plus an associated $71.1 million premium payment)
in October 2002, and the Company's fourth quarter 2002 estimated tax payment,
which aggregated $290 million and included the obligation to pay taxes
associated with the sale of substantially all of its wireless operations.
Verizon 2000 Acquisitions. On July 31, 2000 and September 29, 2000,
affiliates of the Company acquired over 490,000 telephone access lines and
related assets from Verizon in four separate transactions for approximately $1.5
billion in cash. Under these transactions:
o On July 31, 2000, the Company purchased approximately 231,000 telephone
access lines and related local exchange assets comprising 106 exchanges
throughout Arkansas for approximately $842 million in cash.
o On July 31, 2000, Spectra Communications Group, LLC ("Spectra") purchased
approximately 127,000 telephone access lines and related local exchange
assets comprising 107 exchanges throughout Missouri for approximately $297
million cash. The Company currently owns 75.7% of Spectra, which was
organized to acquire and operate these Missouri properties. At closing,
the Company made a preferred equity investment in Spectra of approximately
$55 million (which represented a 57.1% interest) and financed
substantially all of the remainder of the purchase price. In the first
quarter of 2001, the Company purchased an additional 18.6% interest in
Spectra for $47.1 million.
o On September 29, 2000, the Company purchased approximately 70,500
telephone access lines and related local exchange assets comprising 42
exchanges throughout Wisconsin for approximately $197 million in cash.
o On September 29, 2000, Telephone USA of Wisconsin, LLC ("TelUSA")
purchased approximately 62,900 telephone access lines and related local
exchange assets comprising 35 exchanges throughout Wisconsin for
approximately $172 million in cash. The Company owns 89% of TelUSA, which
was organized to acquire and own these Wisconsin properties. At closing,
the Company made an equity investment in TelUSA of approximately $37.8
million and financed substantially all of the remainder of the purchase
price.
To finance these acquisitions on a short-term basis, the Company borrowed
$1.157 billion on a floating-rate basis under its $1.5 billion credit facility
with Bank of America, N.A. and Citibank, N.A. and borrowed $300 million on a
floating-rate basis under its 1997 credit facility with Bank of America, N.A.
On October 19, 2000, the Company issued $500 million of 8.375% Senior
Notes, Series H, due 2010, and $400 million of 7.75% Remarketable Senior Notes,
Series I, due 2012 (with a remarketing date of October 15, 2002). The net
proceeds of approximately $908 million (excluding the Company's payments of
approximately $12.3 million associated with related interest rate hedging) were
used to repay a portion of the $1.457 billion of aggregate indebtedness the
Company incurred under its credit facilities in connection with the Verizon
acquisitions.
ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141") and
SFAS 142. SFAS 141 requires all business combinations consummated after June 30,
2001 to be accounted for under the purchase method of accounting; the pooling of
interests method is no longer permitted. The Company adopted SFAS 141 on July 1,
2001. SFAS 142 requires goodwill recorded in a business combination to be
reviewed for impairment at least annually and to be written down only in periods
in which the recorded amount of goodwill exceeds its fair value. Effective
January 1, 2002, systematic amortization of goodwill is no longer permitted. The
Company adopted SFAS 142 effective January 1, 2002.
In October 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
also broadens the reporting of discontinued operations to include all components
of an entity with operations that can be distinguished from the rest of the
entity and that will be eliminated from the ongoing operations of the entity in
a disposal transaction. The Company adopted the provisions of SFAS 144 on
January 1, 2002. The Company's wireless operations have been reflected as
discontinued operations for 2002 in accordance with the provisions of SFAS 144.
Results of operations for 2001 and 2000 have been restated to conform to this
presentation. The adoption of the impairment portion of SFAS 144 did not have a
material effect on the results of operations of the Company.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations" ("SFAS 143"). SFAS 143, effective beginning January 1, 2003,
addresses financial accounting and reporting for legal obligations associated
with the retirement of tangible long-lived assets and requires that the fair
value of a liability for an asset retirement obligation be recognized in the
period in which it is incurred and be capitalized as part of the book value of
the long-lived asset.
Although the Company generally has had no legal obligation to remove
assets, depreciation rates of certain assets established by regulatory
authorities for the Company's telephone operations subject to SFAS 71 have
historically included a component for removal costs in excess of the related
estimated salvage value. SFAS 71 requires the Company to not remove this
accumulated liability for removal costs in excess of salvage value even though
there is no legal obligation to remove the assets. For the Company's telephone
operations not subject to SFAS 71 (the properties acquired from Verizon in 2002)
and its other operations, the Company has not accrued a liability for
anticipated removal costs in the past and will continue to expense the costs of
removal as incurred since there is no legal obligation to remove assets. The
Company does not expect the adoption of SFAS 143 to have a material effect on
its financial statements.
In December 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based
Compensation" ("SFAS 148"). SFAS 148, effective for fiscal years ending after
December 15, 2002, amends Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123") to provide alternative
methods of transition for a voluntary change to the fair value method of
accounting for stock-based compensation. In addition, SFAS 148 amends the
disclosure requirements of SFAS 123 to require prominent disclosure in both
annual and interim financial statements about the method of accounting for
stock-based compensation and the effect of the method used on reported results.
The Company has elected to account for employee stock-based compensation using
the intrinsic value method in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," as allowed by SFAS
123.
CRITICAL ACCOUNTING POLICIES
The Company's financial statements are prepared in accordance with
accounting principles that are generally accepted in the United States. The
preparation of these financial statements requires management to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues
and expenses. Management continually evaluates its estimates and judgments
including those related to (i) revenue recognition, (ii) allowance for doubtful
accounts, (iii) purchase price allocation, (iv) pension and postretirement
benefits and (v) long-lived assets. Actual results may differ from these
estimates. The Company believes the following critical accounting policies
involve a higher degree of judgment or complexity.
Revenue recognition. Certain of the Company's telephone subsidiaries
participate in revenue sharing arrangements with other telephone companies for
interstate revenue and for certain intrastate revenue. Under such sharing
arrangements, which are typically administered by quasi-governmental agencies,
participating telephone companies contribute toll revenue or access charges
within state jurisdictions and access charges in the interstate market. These
revenues are pooled by the administrative agencies and used to reimburse
exchange carriers for their costs. Typically, participating companies have 24
months to update or correct data previously submitted. As a result, revenues
earned through the various sharing arrangements are initially recorded based on
the Company's estimates. Historically, revisions of previous revenue estimates
have not been material.
Allowance for doubtful accounts. In evaluating the collectibility of its
accounts receivable, the Company assesses a number of factors, including a
specific customer's or carrier's ability to meet its financial obligations to
the Company, the length of time the receivable has been past due and historical
collection experience. Based on these assessments, the Company records both
specific and general reserves for uncollectible accounts receivable to reduce
the related accounts receivable to the amount the Company ultimately expects to
collect from customers and carriers. If circumstances change or economic
conditions worsen such that the Company's past collection experience is no
longer relevant, the Company's estimate of the recoverability of its accounts
receivable could be further reduced from the levels reflected in the
accompanying consolidated balance sheet.
Purchase price allocation. For the properties acquired from Verizon in
2002, the Company allocated the aggregate purchase price to the assets acquired
and liabilities assumed based on fair value at the date of acquisition. The fair
value of property, plant and equipment and identifiable intangible assets was
determined by an independent appraisal of such assets. The fair value of the
postretirement benefit obligation was determined through actuarial valuations.
The fair value of current assets and current liabilities was assumed to
approximate the recorded value at acquisition due to their short maturity. The
remaining unallocated acquisition cost was considered goodwill.
Pension and postretirement benefits. The amounts recognized in the
financial statements related to pension and postretirement benefits are
determined on an actuarial basis, which utilizes many assumptions in the
calculation of such amounts. A significant assumption used in determining the
Company's pension and postretirement expense is the expected long-term rate of
return on plan assets. For 2002, such expected return was assumed to range
between 8-10%, with 10% being used on the plans with the greatest amount of
assets. For the past several years, our actual return on plan assets has been
significantly lower than the 8-10% range. For 2003, the Company lowered its
expected long-term rate of return on plan assets to range from 8-8.25%,
reflecting the expected moderation of long-term rates of return in the financial
markets.
Another assumption used in the determination of the Company's pension and
postretirement benefit plan obligations is the appropriate discount rate, which
is generally based on the yield on high-quality corporate bonds. The Company
lowered its assumed discount rate to 6.75% at December 31, 2002 from 7.00% at
December 31, 2001. Changes in the discount rate do not have a material impact on
the Company's results of operations.
See "Pension and Medical Costs" for additional information.
Long-lived assets. Effective January 1, 2002, the Company was subject to
test for impairment of long-lived assets under two new accounting standards,
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"), and SFAS 144.
SFAS 142 requires goodwill recorded in business combinations to be
reviewed for impairment and requires write-downs only in periods in which the
recorded amount of goodwill exceeds the fair value. Under SFAS 142, impairment
of goodwill is tested by comparing the fair value of the reporting unit to its
carrying value (including goodwill). Estimates of the fair value of the
reporting unit are based on valuation models using techniques such as multiples
of earnings. If the fair value of the reporting unit is less than the carrying
value, a second calculation is required in which the implied fair value of
goodwill is compared to its carrying value. If the implied fair value of
goodwill is less than its carrying value, goodwill must be written down to its
implied fair value. The Company completed the initial transitional goodwill
impairment test (as of January 1, 2002) as well as the required annual test (as
of September 30, 2002) of SFAS 142 and has determined its goodwill is not
impaired. Prior to January 1, 2002, substantially all of the Company's goodwill
was amortized over 40 years. The Company's amortization of goodwill for the
years ended December 31, 2001 and 2000 totaled approximately $69.2 million and
$60.1 million, respectively.
Under SFAS 144, the carrying value of long-lived assets other than
goodwill is reviewed for impairment whenever events or circumstances indicate
that such carrying amount cannot be recoverable by assessing the recoverability
of the carrying value through estimated undiscounted net cash flows expected to
be generated by the assets. If the undiscounted net cash flows are less than the
carrying value, an impairment loss would be measured as the excess of the
carrying value of a long-lived asset over its fair value.
For additional information on the Company's critical accounting policies,
see "Accounting Pronouncements" and "Regulation and Competition - Other
Matters", and the footnotes to the Company's consolidated financial statements.
INFLATION
The effects of increased costs historically have been mitigated by the
Company's ability to recover certain costs applicable to its regulated telephone
operations through the rate-making process. While the rate-making process does
not permit the Company to immediately recover the costs of replacing its
physical plant, the Company has historically been able to recapture these costs
over time. Possible future regulatory changes may alter the Company's ability to
recover increased costs in its regulated operations. For the properties acquired
from Verizon in 2002, which are regulated under price-cap regulation for
interstate purposes, price changes are limited to the rate of inflation, minus a
productivity offset. For additional information regarding the current regulatory
environment, see "Regulation and Competition." As operating expenses in the
Company's nonregulated lines of business increase as a result of inflation, the
Company, to the extent permitted by competition, attempts to recover the costs
by increasing prices for its services and equipment.
MARKET RISK
The Company is exposed to market risk from changes in interest rates on
its long-term debt obligations. The Company has estimated its market risk using
sensitivity analysis. Market risk is defined as the potential change in the fair
value of a fixed-rate debt obligation due to a hypothetical adverse change in
interest rates. Fair value on long-term debt obligations is determined based on
a discounted cash flow analysis, using the rates and maturities of these
obligations compared to terms and rates currently available in the long-term
markets. The results of the sensitivity analysis used to estimate market risk
are presented below, although the actual results may differ from these
estimates.
At December 31, 2002, the fair value of the Company's long-term debt was
estimated to be $3.9 billion based on the overall weighted average rate of the
Company's long-term debt of 6.0% and an overall weighted maturity of 11 years
compared to terms and rates currently available in long-term financing markets.
With respect to the Company's fixed-rate long-term debt obligations, market
risk is estimated as the potential decrease in fair value of the Company's fixed
rate long-term debt resulting from a hypothetical increase of 60 basis points in
interest rates (ten percent of the Company's overall weighted average borrowing
rate). Such an increase in interest rates would result in approximately a $149.4
million decrease in fair value of the Company's long-term debt. As of December
31, 2002, after giving effect to interest rate swaps currently in place,
approximately 86% of the Company's long-term debt obligations were fixed rate.
The Company seeks to maintain a favorable mix of fixed and variable rate
debt in an effort to limit interest costs and cash flow volatility resulting
from changes in rates. From time to time, the Company uses derivative
instruments to (i) lock-in or swap its exposure to changing or variable interest
rates for fixed interest rates or (ii) to swap obligations to pay fixed interest
rates for variable interest rates. The Company has established policies and
procedures for risk assessment and the approval, reporting and monitoring of
derivative instrument activities. The Company does not hold or issue derivative
financial instruments for trading or speculative purposes. Management
periodically reviews the Company's exposure to interest rate fluctuations and
implements strategies to manage the exposure.
At December 31, 2002, the Company had outstanding a fair value interest
rate hedge associated with $500 million aggregate principal amount of its Series
H senior notes, due 2010, that pays interest at a fixed rate of 8.375%. This
hedge is a "fixed to variable" interest rate swap that effectively converts the
Company's fixed rate interest payment obligations under these notes into
obligations to pay variable rates equal to the six-month London InterBank
Offered Rate ("LIBOR") plus 3.59% with settlement and rate reset dates occurring
each six months through the expiration of the hedge in October 2010. At December
31, 2002, the Company realized a rate under this hedge of 4.96%. Interest
expense was reduced by $7.8 million in 2002 as a result of this hedge. The fair
market value of this hedge was $22.2 million at December 31, 2002 and is
reflected as an asset and as an adjustment to the underlying debt on the
December 31, 2002 balance sheet. With respect to this hedge, market risk is
estimated as the potential change in the fair value of the hedge resulting from
a hypothetical 10% increase in the forward rates used to determine the fair
value. A hypothetical 10% increase in the forward rates would result in a $14.5
million decrease in the fair value of this hedge.
At December 31, 2002, the Company also had outstanding a cash flow hedge
associated with $400 million of borrowings under its $800 million credit
facilities. Such hedge expires in October 2003. This hedge is designed to swap
the Company's future obligation to pay variable rate interest based on LIBOR
into obligations that lock-in a fixed rate of 2.49%. The fair value of this
hedge was $1.3 million at December 31, 2002 and is reflected as a liability and
Accumulated Other Comprehensive Loss (net of tax) on the December 31, 2002
balance sheet. A hypothetical 10% increase in the forward rates would result in
a $622,000 decrease in the fair value (liability) of this hedge.
DEVELOPMENT OF BILLING SYSTEM
The Company is in the process of developing an integrated billing and
customer care system. The costs to develop such system have been capitalized in
accordance with Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," and aggregated $139.5
million at December 31, 2002. A portion of these billing system costs related to
the wireless business ($30.5 million) was written off as a component of
discontinued operations in the third quarter of 2002 as a result of the sale of
substantially all of the Company's wireless operations on August 1, 2002. See
Note 4 to the Company's consolidated financial statements appearing elsewhere in
this report. Excluding this write-off, the Company's aggregate billing system
costs are expected to approximate $180 million upon completion and are expected
to be amortized over a twenty-year period. The Company expects to begin
amortization of the billing system in 2003 as customer groups are migrated to
this new system. In addition, the Company expects to incur duplicative system
costs in 2003 until such time as all customers are migrated to the new system.
Such amortization and duplicative system costs are expected to reduce diluted
earnings per share by $.04 for 2003.
The system remains in the development stage and has required substantially
more time and money to develop than originally anticipated. Although the Company
expects to complete all phases of the system in early 2004, there is no
assurance that this deadline (or the Company's budget) will be met or that the
system will function as anticipated. If the system does not function as
anticipated, the Company may have to write off part or all of its remaining
costs.
PENSION AND MEDICAL COSTS
The decline in equity markets in recent years, coupled with record low
interest rates and rising medical costs, have increased the Company's employee
benefits expenses, including defined benefit pension expenses and pre- and
post-retirement medical expenses. The Company expects these conditions will
result in higher pension and pre- and post-retirement medical expenses in 2003.
Based on the Company's current estimates, such costs are expected to increase
between $15 - 25 million in 2003 compared to 2002 amounts. As a result of
continued increases in medical costs, the Company discontinued its practice of
subsidizing post-retirement medical benefits for persons hired after January 1,
2003.
OTHER
In connection with the acquisitions of telephone properties from Verizon
in 2002, the Company had an independent appraisal performed to determine the
fair value of the property, plant and equipment acquired from Verizon. Such
appraisal was not completed until March 2003; therefore, the Company's December
31, 2002 balances of property, plant and equipment and goodwill, as presented in
the Company's fourth quarter 2002 earnings news release contained in a Current
Report on Form 8-K filed January 31, 2003, differ from those presented elsewhere
herein. As a result of the appraisal, property, plant and equipment was
increased by $202.6 million and goodwill was decreased by a like amount.
Depreciation expense calculated based on the appraised values of property, plant
and equipment is not materially different from that previously presented in the
above-described Form 8-K and therefore has not been changed.
LIQUIDITY AND CAPITAL RESOURCES
Excluding cash used for acquisitions, the Company relies on cash provided
by operations to provide for its cash needs. The Company's operations have
historically provided a stable source of cash flow which has helped the Company
continue its long-term program of capital improvements.
Operating activities. Net cash provided by operating activities from
continuing operations was $795.4 million, $575.5 million and $438.2 million in
2002, 2001 and 2000, respectively. The Company's accompanying consolidated
statements of cash flows identify major differences between net income and net
cash provided by operating activities for each of those years. For additional
information relating to the continuing and discontinued operations of the
Company, see Results of Operations.
Investing activities. Net cash used in investing activities from
continuing operations was $2.629 billion, $420.9 million and $1.914 billion in
2002, 2001 and 2000, respectively. Cash used for acquisitions was $2.245 billion
in 2002 (substantially all of which relates to the 2002 Verizon acquisitions),
$47.1 million in 2001 and $1.536 billion in 2000 (substantially all of which
relates to the 2000 Verizon acquisitions). Proceeds from the sales of assets
were $4.1 million in 2002 (excluding the Company's 2002 wireless divestiture)
and $58.2 million in 2001. Capital expenditures from continuing operations for
2002 were $319.5 million for telephone operations and $66.7 million for other
operations. Capital expenditures from continuing operations during 2001 and 2000
were $435.5 million and $391.1 million, respectively.
Financing activities. Net cash provided by (used in) financing activities
from continuing operations was $506.3 million in 2002, ($395.4) million in 2001
and $1.314 billion in 2000. Proceeds from the issuance of debt, net of debt
payments, were $531.4 million during 2002, compared to net payments of debt of
$375.6 million during 2001. Net proceeds from the issuance of debt was $1.340
billion during 2000 primarily due to an increase in borrowings due to the
purchase of assets from Verizon.
On May 6, 2002, the Company issued and sold in an underwritten public
offering $500 million of equity units. Net proceeds to the Company from this
issuance were approximately $483.4 million. Each of the 20 million equity units
issued was priced at $25 and consists initially of a beneficial interest in a
CenturyTel senior unsecured note with a principal amount of $25 and a contract
to purchase shares of CenturyTel common stock no later than May 2005. The senior
notes will mature in May 2007. Each stock purchase contract will generally
require the holder to purchase between .6944 and .8741 of a share of CenturyTel
common stock in May 2005 in exchange for $25, subject to certain adjustments and
exceptions. The total distributions on the equity units will be at an initial
annual rate of 6.875%, consisting of interest (6.02%) and contract adjustment
payments (0.855%). For additional information, see Note 6 to the Company's
consolidated financial statements appearing elsewhere in this report.
On July 22, 2002, the Company entered into $800 million of credit
facilities, consisting of a $533 million three-year facility and a $267 million
364-day revolving facility with a one-year term-out option. These facilities
replaced credit facilities that matured during the third quarter of 2002.
In the third quarter of 2002, the Company issued $500 million of senior
notes due 2012 (which bear interest at 7.875%) and $165 million of convertible
senior debentures (which bear interest at 4.75% and which may be converted into
shares of CenturyTel common stock at a conversion price of $40.455 per share).
Holders of the convertible senior debentures will have the right to require the
Company to purchase all or a portion of the debentures on August 1, 2006, August
1, 2010 and August 1, 2017 at par plus any accrued and unpaid interest to the
purchase date. For additional information, see Note 6 to the Company's
consolidated financial statements appearing elsewhere in this report.
On August 1, 2002, the Company sold substantially all of its wireless
operations to Alltel and certain other purchasers for an aggregate of
approximately $1.59 billion cash.
The Company used proceeds from the sale of equity units, senior notes and
convertible senior debentures, along with the proceeds received from the sale of
the Company's wireless operations and utilization of its $800 million credit
facilities, to finance the third quarter 2002 acquisitions of telephone
properties in Alabama and Missouri from Verizon which aggregated $2.201 billion,
the redemption of $400 million principal amount in remarketable debt securities
(plus an associated $71.1 million premium payment) in October 2002 and the
Company's fourth quarter 2002 estimated tax payment, which aggregated $290
million and included the obligation to pay taxes associated with the sale of
substantially all of its wireless operations.
In second quarter 2001, the Company completed the sale of 30 PCS operating
licenses for an aggregate of $195 million to Leap. The Company received
approximately $108 million of the purchase price in cash at closing and the
remainder was collected in installments through the fourth quarter of 2001. Such
proceeds, and the proceeds from the Company's above-described divestiture of its
wireless operations in 2002, are included as net cash provided by discontinued
operations on the statements of cash flows appearing elsewhere in this report.
In third quarter 2001, the Company sold its remaining shares of its investment
in Illuminet common stock for an aggregate of approximately $58.2 million.
Proceeds from these sales were used to repay indebtedness.
Other. Budgeted capital expenditures for 2003 total $370 million for
telephone operations and $30 million for other operations. The Company
anticipates that capital expenditures in its telephone operations will continue
to include the upgrading of its plant and equipment, including its digital
switches, to provide enhanced services, particularly in its newly acquired
markets, and the installation of fiber optic cable.
The Company continually evaluates the possibility of acquiring additional
telecommunications operations and expects to continue its long-term strategy of
pursuing the acquisition of attractive communications properties in exchange for
cash, securities or both. At any given time, the Company may be engaged in
discussions or negotiations regarding additional acquisitions. The Company
generally does not announce its acquisitions until it has entered into a
preliminary or definitive agreement. Over the past few years, the amount and
size of communications properties available to be purchased by the Company has
increased substantially. The Company may require additional financing in
connection with any such acquisitions, the consummation of which could have a
material impact on the Company's financial condition or operations.
Approximately 4.1 million shares of CenturyTel common stock and 200,000 shares
of CenturyTel preferred stock remain available for future issuance in connection
with acquisitions under CenturyTel's acquisition shelf registration statement.
The following table contains certain information concerning the Company's
material contractual obligations as of December 31, 2002.
<TABLE>
<CAPTION>
Payments due by period
------------------------------------------------------------------------------------------
Total contractual Less than After
obligations Total 1 year 1-3 years 4-5 years 5 years
------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term debt,
including current
maturities and
capital lease
obligations $ 3,648,869 70,737 702,188 635,619 (1) 2,240,325 (2)
-------------------------------------------------------------------------------------------
</TABLE>
(1) Includes $500 million aggregate principal amount of the Company's senior
notes, Series J, due 2007, which the Company is committed to remarket in 2005.
(2) Includes $165 million aggregate principal amount of the Company's
convertible debentures, Series K, due 2032, which can be put to the Company at
various dates beginning in 2006.
As of December 31, 2002, the Company had available $415.0 million of
undrawn committed bank lines of credit and the Company's telephone subsidiaries
had available for use $123.0 million of commitments for long-term financing from
the Rural Utilities Service and Rural Telephone Bank. In addition, in October
2000 the Company implemented a commercial paper program that authorizes the
Company to have outstanding up to $1.5 billion in commercial paper at any one
time. As of December 31, 2002, the Company had no commercial paper outstanding
under such program. The Company also has access to debt and equity capital
markets, including its shelf registration statements.
Moody's Investors Service ("Moody's") rates CenturyTel's long-term debt
Baa2 (with a stable outlook) and Standard & Poor's ("S&P") rates CenturyTel's
long-term debt BBB+ (with a stable outlook). The Company's commercial paper
program is rated P2 by Moody's and A2 by S&P.
The following table reflects the Company's debt to total capitalization
percentage and ratio of earnings to fixed charges and preferred stock dividends
as of and for the years ended December 31:
<TABLE>
<CAPTION>
2002 2001 2000
---------------------------------------------------------------------------
<S> <C> <C> <C>
Debt to total capitalization 54.2% 57.0 63.1
Ratio of earnings from continuing
operations to fixed charges
and preferred stock dividends 2.30 2.00 2.07
---------------------------------------------------------------------------
</TABLE>
REGULATION AND COMPETITION
The communications industry continues to undergo various fundamental
regulatory, legislative, competitive and technological changes. These changes
may have a significant impact on the future financial performance of all
communications companies.
Events affecting the communications industry. In 1996, the United States
Congress enacted the Telecommunications Act of 1996 (the "1996 Act"), which
obligates LECs to permit competitors to interconnect their facilities to the
LEC's network and to take various other steps that are designed to promote
competition. The 1996 Act provides certain exemptions for rural LECs such as
those operated by the Company. Under the 1996 Act's rural telephone company
exemption, approximately 50% of the Company's telephone access lines are
exempt from certain of these interconnection requirements unless and until
the appropriate state regulatory commission overrides the exemption upon
receipt from a competitor of a bona fide request meeting certain criteria.
On February 20, 2003, the FCC revised its rules outlining the obligations
of incumbent LECs to lease elements of their networks on an unbundled basis to
competitors. The new framework eliminates the prior obligation of incumbent LECs
to lease their high-speed data lines to competitors. Incumbent LECs will remain
obligated to offer other telecommunications services to resellers at wholesale
rates. This new rule also provides for a significant role of state regulatory
commissions in implementing these new guidelines and establishing wholesale
service rates.
Prior to and since the enactment of the 1996 Act, the FCC and a number of
state legislative and regulatory bodies have also taken steps to foster local
exchange competition. Coincident with this recent movement toward increased
competition has been the gradual reduction of regulatory oversight of LECs.
These cumulative changes have led to the continued growth of various companies
providing services that compete with LECs' services. Wireless services entities
also increasingly constitute a significant source of competition with LECs.
As mandated by the 1996 Act, in May 2001 the FCC modified its existing
universal service support mechanism for rural telephone companies. The FCC
adopted an interim mechanism for a five-year period, effective July 1, 2001,
based on embedded, or historical, costs that will provide predictable levels of
support to rural local exchange carriers, including substantially all of the
Company's local exchange carriers. During 2002 the Company's interstate revenues
from the federal universal service fund totaled approximately $192.4 million
(which includes $9.9 million from the Verizon properties acquired in 2002).
During 2001 and 2000, such revenues totaled $168.7 million and $146.4 million,
respectively. Increasingly, wireless carriers have sought and received payments
from the Universal Service Fund, which the Company believes is currently
enhancing their ability to compete with wireline services and, in the long term,
could adversely impact the amount of funding available for LECs.
On October 11, 2001, the FCC modified its interstate access charge rules
and universal service support system for rate of return local exchange carriers,
which includes the Company's local exchange carriers (excluding the properties
acquired from Verizon in 2002). This order, among other things, (i) increased
the caps on the subscriber line charges ("SLC") to the levels paid by most
subscribers nationwide; (ii) allowed limited SLC deaveraging, which is expected
to enhance the competitiveness of rate of return carriers by giving them pricing
flexibility; (iii) lowered per minute rates collected for federal access
charges, which might increase competition with CenturyTel's long distance
operations to the extent other carriers seek to take advantage of this change;
(iv) created a new explicit universal service support mechanism that will
replace other implicit support mechanisms in a manner designed to ensure that
rate structure changes do not affect the overall recovery of interstate access
costs by rate of return carriers serving high cost areas and (v) terminated the
FCC's proceeding on the represcription of the authorized rate of return for rate
of return LECs, which will remain at 11.25%. The effect of this order on the
Company was revenue neutral for interstate purposes; however, intrastate
revenues were adversely effected in Arkansas and Ohio as the intrastate access
rates in these states mirror the interstate access rates.
Recent events affecting the Company. During the last few years, several
states in which the Company has substantial operations took legislative or
regulatory steps to further introduce competition into the LEC business. The
number of companies which have requested authorization to provide local exchange
service in the Company's service areas has increased in recent years, especially
in the markets acquired from Verizon in 2002 and 2000, and it is anticipated
that similar action may be taken by others in the future.
State alternative regulation plans recently adopted by certain of the
Company's LECs have also affected revenue growth recently.
Certain long distance carriers continue to request that the Company reduce
intrastate access tariffed rates for certain of its LECs. In addition, the
Company has recently experienced reductions in intrastate traffic, partially due
to the displacement of minutes by wireless services. In 2002 the Company
incurred a reduction in its intrastate revenues (exclusive of the properties
acquired from Verizon in 2002) of approximately $27.7 million compared to 2001
primarily due to these factors. The Company believes such trend of decreased
intrastate minutes will continue in 2003. Although the magnitude of such
decrease cannot be precisely estimated, the Company believes such decrease will
be less than that incurred in 2002.
In August 2001, the Company was awarded an interim access rate increase by
the Wisconsin Public Service Commission ("WPSC") for the former Verizon
properties in Wisconsin in an amount of approximately $7.9 million annually. In
October 2002, the Company was awarded a permanent rate increase which will
result in an additional $8 to $10 million annually above the $7.9 million
awarded on an interim basis.
On August 29, 2002, the Wisconsin Court of Appeals upheld a ruling upon
appeal that ordered the Company to refund intrastate access charges collected
from interexchange carriers from December 1998 through December 2000 on the
Wisconsin properties acquired from Ameritech in December 1998. As a result of
this ruling, the Company recorded a one-time charge of $7.6 million ($.03 per
share) related to this refund in the third quarter of 2002. On October 31, 2001,
the WPSC approved a permanent rate increase of $8.3 million annually for these
properties. This increase was partially offset by a one-time reduction in
revenue of approximately $300,000 arising out of the WPSC's order to refund a
portion of the previously approved interim rates.
In August 2001, the Arkansas Public Utility Commission ("APUC") approved
tariff amendments that limited the number of minutes included for a flat rate in
certain optional calling plans in certain of the markets acquired from Verizon
in 2000. These revisions resulted in reductions of the Company's operating
expenses of approximately $17.5 million during 2002 compared to 2001.
On March 13, 2002, the Arkansas Court of Appeals vacated two orders issued
by the Arkansas Public Service Commission ("APSC") in connection with the
Company's acquisition of its Arkansas LECs from Verizon in July 2000, and
remanded the case back to the APSC for further hearings. The Court took these
actions in response to challenges to the rates the Company has charged other
LECs for intrastate switched access service. On December 20, 2002, the APSC
approved the access rates established by the Company at the time of acquisition.
On January 29, 2003, AT&T filed with the APSC a petition for rehearing related
to this ruling.
In January 2003, the Louisiana Public Service Commission directed its
staff to review the feasibility of converting the $42 million Louisiana Local
Optional Service Fund ("LOS Fund") into a state universal service fund. A
recommendation by the Commission staff is expected by the end of 2003.
Currently, the LOS Fund is funded primarily by BellSouth, which proposes to
expand the base of contributors into the LOS Fund. The Company currently
receives approximately $21 million from the LOS Fund each year. There can be no
assurance that this funding will remain at current levels.
Competition to provide traditional telephone services has thus far
affected large urban areas to a greater extent than rural, suburban and small
urban areas such as those in which the Company's telephone operations are
located. Although the Company does not believe that the increased competition it
has thus far experienced is likely to materially affect it in the near term, the
Company anticipates that regulatory changes and competitive pressures may result
in future revenue reductions. The Company expects its internal telephone
revenues (exclusive of the properties acquired from Verizon in 2002) to decline
in 2003 primarily due to continued access line loss and reduced intrastate
revenues; however, the Company expects its internal consolidated revenues to
increase in 2003 primarily due to expected increased demand for its long
distance, DSL and other product offerings.
Other matters. The Company's regulated telephone operations (except for
the properties acquired from Verizon in 2002) are subject to the provisions of
Statement of Financial Accounting Standards No. 71, "Accounting for the Effects
of Certain Types of Regulation" ("SFAS 71"). Actions by regulators can provide
reasonable assurance of the existence of an asset, reduce or eliminate the value
of an asset and impose a liability on a regulated enterprise. Such regulatory
assets are required to be recorded and, accordingly, reflected in the balance
sheet of an entity subject to SFAS 71. The Company is monitoring the ongoing
applicability of SFAS 71 to its regulated telephone operations due to the
changing regulatory, competitive and legislative environments, and it is
possible that changes in regulation, legislation or competition or in the demand
for regulated services or products could result in the Company's telephone
operations no longer being subject to SFAS 71 in the near future.
Statement of Financial Accounting Standards No. 101, "Regulated
Enterprises - Accounting for the Discontinuance of Application of FASB Statement
No. 71" ("SFAS 101"), specifies the accounting required when an enterprise
ceases to meet the criteria for application of SFAS 71. SFAS 101 requires the
elimination of the effects of any actions of regulators that have been
recognized as assets and liabilities in accordance with SFAS 71 but would not
have been recognized as assets and liabilities by nonregulated enterprises. SFAS
101 further provides that the carrying amounts of property, plant and equipment
are to be adjusted only to the extent the assets are impaired and that
impairment shall be judged in the same manner as for nonregulated enterprises.
The Company's consolidated balance sheet as of December 31, 2002 included
regulatory assets of approximately $3.2 million (primarily related to deferred
financing costs, regulatory proceedings and income taxes) and regulatory
liabilities of approximately $1.7 million (related to income taxes). Net
deferred income tax liabilities related to the regulatory assets and liabilities
quantified above were $1.1 million.
When the Company's regulated operations no longer qualify for the
application of SFAS 71, the Company does not expect to record any impairment
charge related to the carrying value of the property, plant and equipment of its
regulated telephone operations. Additionally, upon the discontinuance of SFAS
71, the Company would be required to revise the lives of its property, plant and
equipment to reflect the estimated useful lives of the assets. The Company does
not expect such revisions in asset lives to have a material impact on the
Company's results of operations. For regulatory purposes, the accounting and
reporting of the Company's telephone subsidiaries will not be affected by the
discontinued application of SFAS 71.
The Company has certain obligations based on federal, state and local laws
relating to the protection of the environment. Costs of compliance through 2002
have not been material, and the Company currently has no reason to believe that
such costs will become material.
Item 7a. Quantitative and Qualitative Disclosure About Market Risk
The Company is exposed to market risk from changes in interest rates on
its long-term debt obligations. The Company has estimated its market risk using
sensitivity analysis. Market risk is defined as the potential change in the fair
value of a fixed-rate debt obligation due to a hypothetical adverse change in
interest rates. Fair value on long-term debt obligations is determined based on
a discounted cash flow analysis, using the rates and maturities of these
obligations compared to terms and rates currently available in the long-term
markets. The results of the sensitivity analysis used to estimate market risk
are presented below, although the actual results may differ from these
estimates.
At December 31, 2002, the fair value of the Company's long-term debt was
estimated to be $3.9 billion based on the overall weighted average rate of the
Company's long-term debt of 6.0% and an overall weighted maturity of 11 years
compared to terms and rates currently available in long-term financing markets.
Market risk is estimated as the potential decrease in fair value of the
Company's fixed rate long-term debt resulting from a hypothetical increase of 60
basis points in interest rates (ten percent of the Company's overall weighted
average borrowing rate). Such an increase in interest rates would result in
approximately a $149.4 million decrease in fair value of the Company's long-term
debt. As of December 31, 2002, after giving effect to interest rate swaps
currently in place, approximately 86% of the Company's long-term debt
obligations were fixed rate.
The Company seeks to maintain a favorable mix of fixed and variable rate
debt in an effort to limit interest costs and cash flow volatility resulting
from changes in rates. From time to time, the Company uses derivative
instruments to (i) lock-in or swap its exposure to changing or variable interest
rates for fixed interest rates or (ii) to swap obligations to pay fixed interest
rates for variable interest rates. The Company has established policies and
procedures for risk assessment and the approval, reporting and monitoring of
derivative instrument activities. The Company does not hold or issue derivative
financial instruments for trading or speculative purposes. Management
periodically reviews the Company's exposure to interest rate fluctuations and
implements strategies to manage the exposure.
At December 31, 2002, the Company had outstanding a fair value interest
rate hedge associated with $500 million aggregate principal amount of its Series
H senior notes, due 2010, that pay interest at a fixed rate of 8.375%. This
hedge is a "fixed to variable" interest rate swap that effectively converts the
Company's fixed rate interest payment obligations under these notes into
obligations to pay variable rates equal to the six-month London InterBank
Offered Rate ("LIBOR") plus 3.59% with settlement and rate reset dates occurring
each six months through the expiration of the hedge in October 2010. At December
31, 2002, the Company realized a rate under this hedge of 4.96%. Interest
expense was reduced by $7.8 million in 2002 as a result of this hedge. The fair
market value of this hedge was $22.2 million at December 31, 2002 and is
reflected as an asset and as an adjustment to the underlying debt on the
December 31, 2002 balance sheet. With respect to this hedge, market risk is
estimated as the potential change in the fair value of the hedge resulting
from a hypothetical 10% increase in the forward rates used to determine the
fair value. A hypothetical 10% increase in the forward rates would result in a
$14.5 million decrease in the fair value of this hedge.
At December 31, 2002, the Company also had outstanding a cash flow hedge
associated with $400 million of borrowings incurred in the fourth quarter of
2002 under its $800 million credit facilities. Such hedge expires in October
2003. This hedge is designed to swap the Company's future obligation to pay
variable rate interest based on LIBOR into obligations that lock-in a fixed rate
of 2.49%. The fair value of this hedge was $1.3 million at December 31, 2002 and
is reflected as a liability and Accumulated Other Comprehensive Loss (net of
tax) on the December 31, 2002 balance sheet. A hypothetical 10% increase in the
forward rates would result in a $622,000 decrease in the fair value (liability)
of this hedge.
Item 8. Financial Statements and Supplementary Data
Report of Management
--------------------
The Shareholders
CenturyTel, Inc.:
Management has prepared and is responsible for the Company's consolidated
financial statements. The consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America and necessarily include amounts determined using our best judgments
and estimates with consideration given to materiality.
The Company maintains internal control systems and related policies and
procedures designed to provide reasonable assurance that the accounting records
accurately reflect business transactions and that the transactions are in
accordance with management's authorization. The design, monitoring and revision
of the systems of internal control involve, among other things, our judgment
with respect to the relative cost and expected benefits of specific control
measures. Additionally, the Company maintains an internal auditing function
which independently evaluates the effectiveness of internal controls, policies
and procedures and formally reports on the adequacy and effectiveness thereof.
The Company's consolidated financial statements have been audited by KPMG
LLP, independent certified public accountants, who have expressed their opinion
with respect to the fairness of the consolidated financial statements. Their
audit was conducted in accordance with auditing standards generally accepted in
the United States of America, which include the consideration of the Company's
internal controls to the extent necessary to form an independent opinion on the
consolidated financial statements prepared by management.
The Audit Committee of the Board of Directors is composed of independent
directors who are not officers or employees of the Company. The Committee meets
periodically with the independent certified public accountants, internal
auditors and management. The Committee considers the independence of the
external auditors and the audit scope and discusses internal control, financial
and reporting matters. Both the independent and internal auditors have free
access to the Committee.
/s/ R. Stewart Ewing, Jr.
R. Stewart Ewing, Jr.
Executive Vice President and Chief Financial Officer
Independent Auditors' Report
----------------------------
The Board of Directors
CenturyTel, Inc.:
We have audited the consolidated financial statements of CenturyTel, Inc.
and subsidiaries as listed in Item 15a(i). In connection with our audits of the
consolidated financial statements, we also have audited the financial statement
schedule as listed in Item 15a(ii). These consolidated financial statements and
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CenturyTel,
Inc. and subsidiaries as of December 31, 2002 and 2001, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2002, in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for goodwill and other intangible
assets in 2002.
/s/ KPMG LLP
KPMG LLP
Shreveport, Louisiana
January 29, 2003
<TABLE>
<CAPTION>
CENTURYTEL, INC.
Consolidated Statements of Income
Year ended December 31,
---------------------------------------------------------------------------------------------------
2002 2001 2000
---------------------------------------------------------------------------------------------------
(Dollars, except per share amounts,
and shares in thousands)
<S> <C> <C> <C>
OPERATING REVENUES
Telephone $ 1,733,592 1,505,733 1,253,969
Other 238,404 173,771 148,388
---------------------------------------------------------------------------------------------------
Total operating revenues 1,971,996 1,679,504 1,402,357
---------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Cost of sales and operating expenses (exclusive of
depreciation and amortization) 973,689 826,948 671,992
Corporate overhead costs allocable to
discontinued operations 11,275 20,213 21,411
Depreciation and amortization 411,626 407,038 322,817
---------------------------------------------------------------------------------------------------
Total operating expenses 1,396,590 1,254,199 1,016,220
---------------------------------------------------------------------------------------------------
OPERATING INCOME 575,406 425,305 386,137
---------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Nonrecurring gains and losses, net 3,709 33,043 -
Interest expense (221,845) (225,523) (183,302)
Other income and expense (63,814) 32 4,936
---------------------------------------------------------------------------------------------------
Total other income (expense) (281,950) (192,448) (178,366)
---------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAX EXPENSE 293,456 232,857 207,771
Income tax expense 103,537 88,711 83,542
---------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 189,919 144,146 124,229
DISCONTINUED OPERATIONS
Income from discontinued operations, net of
$286,427, $121,314, and $71,169 tax 611,705 198,885 107,245
---------------------------------------------------------------------------------------------------
NET INCOME $ 801,624 343,031 231,474
===================================================================================================
NET INCOME, AS ADJUSTED FOR GOODWILL
AMORTIZATION $ 801,624 399,297 278,029
===================================================================================================
</TABLE>
<TABLE>
<CAPTION>
CENTURYTEL, INC.
Consolidated Statements of Income
(Continued)
Year ended December 31,
-----------------------------------------------------------------------------------------------
2002 2001 2000
-----------------------------------------------------------------------------------------------
(Dollars, except per share amounts,
and shares in thousands)
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
From continuing operations $ 1.34 1.02 .88
From continuing operations, as adjusted for
goodwill amortization $ 1.34 1.35 1.15
From discontinued operations $ 4.32 1.41 .77
From discontinued operations, as adjusted for
goodwill amortization $ 4.32 1.48 .84
Basic earnings per share $ 5.66 2.43 1.65
Basic earnings per share, as adjusted for
goodwill amortization $ 5.66 2.83 1.98
DILUTED EARNINGS PER SHARE
From continuing operations $ 1.33 1.01 .88
From continuing operations, as adjusted for
goodwill amortization $ 1.33 1.34 1.13
From discontinued operations $ 4.28 1.40 .76
From discontinued operations, as adjusted for
goodwill amortization $ 4.28 1.47 .83
Diluted earnings per share $ 5.61 2.41 1.63
Diluted earnings per share, as adjusted for
goodwill amortization $ 5.61 2.81 1.96
DIVIDENDS PER COMMON SHARE $ .21 .20 .19
===============================================================================================
AVERAGE BASIC SHARES OUTSTANDING 141,613 140,743 140,069
===============================================================================================
AVERAGE DILUTED SHARES OUTSTANDING 142,879 142,307 141,864
===============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
CENTURYTEL, INC.
Consolidated Statements of Comprehensive Income
Year ended December 31,
------------------------------------------------------------------------------------------------
2002 2001 2000
------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
NET INCOME $ 801,624 343,031 231,474
OTHER COMPREHENSIVE INCOME, NET OF TAXES
Unrealized holding gains (losses):
Unrealized holding gains (losses) related
to marketable equity securities arising
during period, net of $5,385 and
($20,941) tax - 9,999 (38,891)
Less: reclassification adjustment for
gains included in net income, net
of ($19,100) tax - (35,470) -
Minimum pension liability adjustment:
Minimum pension liability adjustment,
net of ($19,312) tax (35,864) - -
Derivative instruments:
Net losses on derivatives hedging
variability of cash flows, net
of ($496) tax (921) - -
Less: reclassification adjustment for
losses included in net income,
net of $44 tax 82 - -
------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME $ 764,921 317,560 192,583
================================================================================================
COMPREHENSIVE INCOME, AS ADJUSTED
FOR GOODWILL AMORTIZATION $ 764,921 373,826 239,138
================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
CENTURYTEL, INC.
Consolidated Balance Sheets
December 31,
2002 2001
------------------------------------------------------------------------------------------------
(Dollars in thousands)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,661 3,496
Accounts receivable
Customers, less allowance of $15,314 and $13,908 161,319 118,376
Interexchange carriers and other, less allowance
of $18,648 in 2002 111,673 87,614
Materials and supplies, at average cost 10,150 10,916
Other 9,099 9,511
------------------------------------------------------------------------------------------------
Total current assets 295,902 229,913
------------------------------------------------------------------------------------------------
NET PROPERTY, PLANT AND EQUIPMENT 3,531,645 2,736,142
------------------------------------------------------------------------------------------------
INVESTMENTS AND OTHER ASSETS
Goodwill 3,427,281 2,087,158
Other 503,775 420,043
------------------------------------------------------------------------------------------------
Total investments and other assets 3,931,056 2,507,201
------------------------------------------------------------------------------------------------
ASSETS HELD FOR SALE 11,805 845,428
------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 7,770,408 6,318,684
================================================================================================
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 70,737 955,834
Short-term debt - 53,000
Accounts payable 64,825 61,056
Accrued expenses and other current liabilities
Salaries and benefits 63,937 46,588
Income taxes 40,897 4,554
Other taxes 28,183 23,383
Interest 59,045 49,191
Other 18,596 15,968
Advance billings and customer deposits 41,884 29,308
------------------------------------------------------------------------------------------------
Total current liabilities 388,104 1,238,882
------------------------------------------------------------------------------------------------
LONG-TERM DEBT 3,578,132 2,087,500
------------------------------------------------------------------------------------------------
DEFERRED CREDITS AND OTHER LIABILITIES 716,168 506,052
------------------------------------------------------------------------------------------------
LIABILITIES RELATED TO ASSETS HELD FOR SALE - 148,870
------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, $1.00 par value, authorized
350,000,000 shares, issued and outstanding
142,955,839 and 141,232,806 shares 142,956 141,233
Paid-in capital 537,804 524,668
Accumulated other comprehensive income (loss),
net of tax (36,703) -
Retained earnings 2,437,472 1,666,004
Unearned ESOP shares (1,500) (2,500)
Preferred stock - non-redeemable 7,975 7,975
------------------------------------------------------------------------------------------------
Total stockholders' equity 3,088,004 2,337,380
------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY $ 7,770,408 6,318,684
================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
CENTURYTEL, INC.
Consolidated Statements of Cash Flows
Year ended December 31,
---------------------------------------------------------------------------------------------------------
2002 2001 2000
---------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES FROM CONTINUING OPERATIONS
Net income $ 801,624 343,031 231,474
Adjustments to reconcile net income to net
cash provided by operating activities from
continuing operations
Income from discontinued operations, net of tax (611,705) (198,885) (107,245)
Depreciation and amortization 411,626 407,038 322,817
Deferred income taxes 71,112 57,944 31,854
Nonrecurring gains and losses, net (3,709) (33,043) -
Changes in current assets and current liabilities
Accounts receivable (13,481) 34,266 (74,736)
Accounts payable 3,769 (29,485) 36,493
Accrued taxes 43,046 1,078 (309)
Other current assets and other current
liabilities, net 34,939 9,083 11,902
Increase in noncurrent assets (30,543) (65,698) (46,026)
Increase in other noncurrent liabilities 33,719 9,919 10,677
Other, net 55,005 40,295 21,332
---------------------------------------------------------------------------------------------------------
Net cash provided by operating activities
from continuing operations 795,402 575,543 438,233
---------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES FROM CONTINUING OPERATIONS
Acquisitions, net of cash acquired (2,245,026) (47,131) (1,535,683)
Payments for property, plant and equipment (386,267) (435,515) (391,069)
Proceeds from sale of assets 4,144 58,184 -
Contribution from minority investor - - 20,000
Purchase of life insurance investment, net - (1,086) (5,753)
Other, net (1,378) 4,639 (1,089)
---------------------------------------------------------------------------------------------------------
Net cash used in investing activities
from continuing operations (2,628,527) (420,909) (1,913,594)
---------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES FROM CONTINUING OPERATIONS
Proceeds from issuance of debt 2,123,618 3,896 2,715,852
Payments of debt (1,592,246) (379,516) (1,375,895)
Payment of deferred hedge contracts - - (4,345)
Proceeds from issuance of common stock 29,125 7,351 7,996
Payment of debt issuance costs (12,999) - (4,274)
Payment of equity unit issuance costs (15,867) - -
Cash dividends (30,156) (28,653) (26,815)
Other, net 4,866 1,549 1,289
---------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing
activities from continuing operations 506,341 (395,373) 1,313,808
---------------------------------------------------------------------------------------------------------
Net cash provided by discontinued operations 1,326,949 232,828 116,815
---------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 165 (7,911) (44,738)
Cash and cash equivalents at beginning of year 3,496 11,407 56,145
---------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,661 3,496 11,407
=========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
CENTURYTEL, INC.
Consolidated Statements of Stockholders' Equity
Year ended December 31,
---------------------------------------------------------------------------------------------------------
2002 2001 2000
---------------------------------------------------------------------------------------------------------
(Dollars and shares in thousands)
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of year $ 141,233 140,667 139,946
Conversion of convertible securities into common stock - 254 254
Issuance of common stock through dividend
reinvestment, incentive and benefit plans 1,723 312 467
---------------------------------------------------------------------------------------------------------
Balance at end of year 142,956 141,233 140,667
---------------------------------------------------------------------------------------------------------
PAID-IN CAPITAL
Balance at beginning of year 524,668 509,840 493,432
Equity unit issuance costs and initial contract
adjustment liability (24,377) - -
Conversion of convertible securities into common stock - 3,046 3,046
Issuance of common stock through dividend
reinvestment, incentive and benefit plans 27,402 7,039 7,529
Amortization of unearned compensation and other 10,111 4,743 5,833
---------------------------------------------------------------------------------------------------------
Balance at end of year 537,804 524,668 509,840
---------------------------------------------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),
NET OF TAX
Balance at beginning of year - 25,471 64,362
Change in other comprehensive income (loss)
(net of reclassification adjustment
in 2001), net of tax (36,703) (25,471) (38,891)
---------------------------------------------------------------------------------------------------------
Balance at end of year (36,703) - 25,471
---------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance at beginning of year 1,666,004 1,351,626 1,146,967
Net income 801,624 343,031 231,474
Cash dividends declared
Common stock - $.21, $.20 and $.19 per share (29,757) (28,254) (26,416)
Preferred stock (399) (399) (399)
---------------------------------------------------------------------------------------------------------
Balance at end of year 2,437,472 1,666,004 1,351,626
---------------------------------------------------------------------------------------------------------
UNEARNED ESOP SHARES
Balance at beginning of year (2,500) (3,500) (4,690)
Release of ESOP shares 1,000 1,000 1,190
---------------------------------------------------------------------------------------------------------
Balance at end of year (1,500) (2,500) (3,500)
---------------------------------------------------------------------------------------------------------
PREFERRED STOCK - NON-REDEEMABLE
Balance at beginning and end of year 7,975 7,975 7,975
---------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY $ 3,088,004 2,337,380 2,032,079
=========================================================================================================
COMMON SHARES OUTSTANDING
Balance at beginning of year 141,233 140,667 139,946
Conversion of convertible securities into common stock - 254 254
Issuance of common stock through dividend
reinvestment, incentive and benefit plans 1,723 312 467
---------------------------------------------------------------------------------------------------------
Balance at end of year 142,956 141,233 140,667
=========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
CENTURYTEL, INC.
Notes to Consolidated Financial Statements
December 31, 2002
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation - The consolidated financial statements of
CenturyTel, Inc. and its subsidiaries (the "Company") include the accounts of
CenturyTel, Inc. ("CenturyTel") and its majority-owned subsidiaries and
partnerships. Certain of the Company's regulated telephone operations are
subject to the provisions of Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation."
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates.
Revenue recognition - Revenues are generally recognized when services are
provided or when products are delivered to customers. Revenue that is billed in
advance includes monthly recurring network access services, special access
services and monthly recurring local line charges. The unearned portion of this
revenue is initially deferred as a component of advanced billings and customer
deposits on the Company's balance sheet and recognized as revenue over the
period that the services are provided. Revenue that is billed in arrears
includes nonrecurring network access services, nonrecurring local services and
long distance services. The earned but unbilled portion of this revenue is
recognized as revenue in the period that the services are provided.
Certain of the Company's telephone subsidiaries participate in revenue
sharing arrangements with other telephone companies for interstate revenue and
for certain intrastate revenue. Such sharing arrangements are funded by toll
revenue and/or access charges within state jurisdictions and by access charges
in the interstate market. Revenues earned through the various sharing
arrangements are initially recorded based on the Company's estimates.
Property, plant and equipment - Telephone plant is stated at original cost.
Normal retirements of telephone plant are charged against accumulated
depreciation, along with the costs of removal, less salvage, with no gain or
loss recognized. Renewals and betterments of plant and equipment are capitalized
while repairs, as well as renewals of minor items, are charged to operating
expense. Depreciation of telephone plant is provided on the straight line method
using class or overall group rates acceptable to regulatory authorities; such
rates range from 1.8% to 25%.
Non-telephone property is stated at cost and, when sold or retired, a
gain or loss is recognized. Depreciation of such property is provided on the
straight line method over estimated service lives ranging from three to 30
years.
Long-lived assets - In July 2001, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). Under SFAS 142, effective January 1, 2002,
systematic amortization of goodwill is no longer permitted; instead, SFAS 142
requires goodwill recorded in a business combination to be reviewed for
impairment and to be written down only in periods in which the recorded amount
of goodwill exceeds its fair value. Impairment of goodwill is tested at least
annually by comparing the fair value of the reporting unit to its carrying value
(including goodwill). Estimates of the fair value of the reporting unit are
based on valuation models using criterion such as multiples of earnings. Each
adjustment reflected in the consolidated statements of income and comprehensive
income by use of the term "as adjusted for goodwill amortization" reflects the
effects of SFAS 142, as more fully described in Note 4. Prior to January 1,
2002, substantially all of the Company's goodwill was amortized over 40 years.
In October 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets (exclusive of goodwill) and also broadens the reporting of discontinued
operations to include all components of an entity with operations that can be
distinguished from the rest of the entity and that will be eliminated from the
ongoing operations of the entity in a disposal transaction. As a result of the
Company's agreement in March 2002 to sell its wireless operations (which was
consummated on August 1, 2002) (see Note 3), such operations have been reflected
as discontinued operations for the year ended December 31, 2002. Assets and
liabilities related to the Company's wireless operations are reflected as "Held
for sale" on the accompanying consolidated balance sheets. Results of operations
for 2001 and 2000 have been restated to conform to this presentation.
Affiliated transactions - Certain service subsidiaries of CenturyTel provide
installation and maintenance services, materials and supplies, and managerial,
operational, technical, accounting and administrative services to subsidiaries.
In addition, CenturyTel provides and bills management services to subsidiaries
and in certain instances makes interest bearing advances to finance construction
of plant and purchases of equipment. These transactions are recorded by the
Company's telephone subsidiaries at their cost to the extent permitted by
regulatory authorities. Intercompany profit on transactions with regulated
affiliates is limited to a reasonable return on investment and has not been
eliminated in connection with consolidating the results of operations of
CenturyTel and its subsidiaries. Intercompany profit on transactions with
nonregulated affiliates has been eliminated.
Income taxes - CenturyTel files a consolidated federal income tax return with
its eligible subsidiaries. The Company uses the asset and liability method of
accounting for income taxes under which deferred tax assets and liabilities are
established for the future tax consequences attributable to differences between
the financial statement carrying amounts of assets and liabilities and their
respective tax bases. Investment tax credits related to telephone plant have
been deferred and are being amortized as a reduction of federal income tax
expense over the estimated useful lives of the assets giving rise to the
credits.
Derivative financial instruments - Effective January 1, 2001, the Company
adopted Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 requires
all derivative instruments be recognized as either assets or liabilities at fair
value on the balance sheet. The Company uses derivative instruments to (i)
lock-in or swap its exposure to changing or variable interest rates for fixed
interest rates or (ii) swap obligations to pay fixed interest rates for variable
interest rates. The Company has established policies and procedures for risk
assessment and the approval, reporting and monitoring of derivative instrument
activities. The Company does not hold or issue derivative financial instruments
for trading or speculative purposes. Management periodically reviews the
Company's exposure to interest rate fluctuations and implements strategies to
manage the exposure.
Earnings per share - Basic earnings per share amounts are determined on the
basis of the weighted average number of common shares outstanding during the
year. Diluted earnings per share gives effect to all potential dilutive common
shares that were outstanding during the period.
Stock-based compensation - The Company accounts for employee stock compensation
plans using the intrinsic value method in accordance with Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," as allowed by
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). Options have been granted to employees at a price
either equal to or exceeding the then-current market price. Accordingly, the
Company has not recognized compensation cost in connection with issuing stock
options.
During 2002 the Company granted 1,983,150 options (the "2002 Options") at
market price. The weighted average fair value of each of the 2002 Options was
estimated as of the date of grant to be $11.66 using an option-pricing model
with the following assumptions: dividend yield - .7%; expected volatility - 30%;
risk-free interest rate - 3.4%; and expected option life - seven years.
During 2001 the Company granted 1,971,750 options (the "2001 Options") at
market price. The weighted average fair value of each of the 2001 Options was
estimated as of the date of grant to be $11.16 using an option-pricing model
with the following assumptions: dividend yield - .6%; expected volatility - 30%;
risk-free interest rate - 4.8%; and expected option life - seven years.
During 2000 the Company granted 1,565,750 options (the "2000 Options") at
market price. The weighted average fair value of each of the 2000 Options was
estimated as of the date of grant to be $12.46 using an option-pricing model
with the following assumptions: dividend yield - .5%; expected volatility - 25%;
risk-free interest rate - 5.3%; and expected option life - seven years.
If compensation cost for CenturyTel's options had been determined
consistent with SFAS 123, the Company's net income and earnings per share on a
pro forma basis for 2002, 2001 and 2000 would have been as follows:
<TABLE>
<CAPTION>
Year ended December 31, 2002 2001 2000
------------------------------------------------------------------------------------------
(Dollars in thousands,
except per share amounts)
<S> <C> <C> <C>
Net income, as reported $ 801,624 343,031 231,474
Less: Total stock-based employee compensation
expense determined under fair value based
method, net of tax $ (15,001) (8,971) (6,310)
--------------------------------------
Pro forma net income $ 786,623 334,060 225,164
======================================
Basic earnings per share
As reported $ 5.66 2.43 1.65
Pro forma $ 5.56 2.37 1.60
Diluted earnings per share
As reported $ 5.61 2.41 1.63
Pro forma $ 5.51 2.35 1.59
------------------------------------------------------------------------------------------
</TABLE>
Cash equivalents - The Company considers short-term investments with a maturity
at date of purchase of three months or less to be cash equivalents.
Discontinued operations - Pursuant to a definitive agreement signed March 19,
2002, on August 1, 2002, the Company sold substantially all of its wireless
operations to an affiliate of ALLTEL Corporation ("Alltel") and certain partners
in the Company's markets that exercised "first refusal" purchase rights for an
aggregate of approximately $1.59 billion in cash. As a result, the Company's
wireless operations have been reflected as discontinued operations for all
periods presented. See Note 3 for additional information.
Reclassifications - Certain amounts previously reported for prior years have
been reclassified to conform with the 2002 presentation.
(2) ACQUISITIONS
On July 1, 2002, the Company completed the acquisition of approximately
300,000 telephone access lines in the state of Alabama from Verizon
Communications, Inc ("Verizon") for approximately $1.022 billion cash. On August
31, 2002, the Company completed the acquisition of approximately 350,000
telephone access lines in the state of Missouri from Verizon for approximately
$1.179 billion cash. The assets purchased include (i) telephone access lines and
related property and equipment comprising Verizon's local exchange operations in
predominantly rural markets throughout Alabama and Missouri, (ii) Verizon's
assets used to provide digital subscriber line ("DSL") and other high speed data
services within the purchased exchanges and (iii) approximately 2,800 route
miles of fiber optic cable within the purchased exchanges. The acquired assets
did not include Verizon's cellular, personal communications services ("PCS"),
long distance, dial-up Internet, or directory publishing operations, or rights
under various Verizon contracts, including those relating to customer premise
equipment. The Company did not assume any liabilities of Verizon other than (i)
those associated with contracts, facilities and certain other assets transferred
in connection with the purchase and (ii) certain employee-related liabilities,
including liabilities for postretirement health benefits. For financing
arrangements related to these acquisitions, see Note 6.
The results of operations of the acquired properties are included in the
Company's results of operations from and after the respective acquisition dates.
The following table presents the Company's allocation of its aggregate
purchase price to the assets acquired and liabilities assumed in connection with
the acquisitions.
<TABLE>
<CAPTION>
(In thousands)
-------------
<S> <C>
Accounts receivable $ 49,716
Materials and supplies 1,458
Property, plant and equipment 855,752
Goodwill 1,304,786
Other assets 58,000
Accrued expenses and other liabilities (1,195)
Advanced billings and customer deposits (10,362)
Deferred credits and other liabilities (56,897)
-------------
Aggregate purchase price $ 2,201,258
=============
</TABLE>
The Company believes the entire amount of goodwill will be deductible for
income tax purposes.
The following pro forma information represents the consolidated results
of continuing operations of the Company for the years ended December 31, 2002
and 2001 as if the Verizon acquisitions in 2002 had been consummated as of
January 1, 2002 and 2001, respectively.
<TABLE>
<CAPTION>
2002 2001
----------- ---------
(Dollars in thousands,
except per share amounts)
<S> <C> <C>
Operating revenues from continuing operations $ 2,285,866 2,231,631
Income from continuing operations $ 214,638 181,936
Basic earnings per share from
continuing operations, as adjusted $ 1.51 1.62
Diluted earnings per share from
continuing operations, as adjusted $ 1.50 1.60
</TABLE>
The pro forma information is based on various assumptions and estimates,
and on the above-mentioned allocations of the aggregate Verizon purchase price
to the Verizon assets acquired. The pro forma information (i) reflects the
effect of reduced interest expense after August 1, 2002 as a result of reducing
outstanding indebtedness from utilization of proceeds received from the August
1, 2002 sale of substantially all of the Company's wireless operations described
in Note 3 and (ii) makes no pro forma adjustments to reflect any assumed
consummation of such sale (or any use of such sale proceeds) prior to August 1,
2002. The pro forma information is not necessarily indicative of the operating
results that would have occurred if the Verizon acquisitions had been
consummated as of January 1 of each respective period, nor is it necessarily
indicative of future operating results. The pro forma information does not give
effect to any potential revenue enhancements or cost synergies or other
operating efficiencies that could result from the acquisitions. The actual
results of operations of the Verizon properties are included in the consolidated
financial statements only from the respective dates of acquisition.
On July 31, 2000 and September 29, 2000, affiliates of the Company
acquired over 490,000 telephone access lines and related assets from Verizon in
four separate transactions for approximately $1.5 billion in cash. Under these
transactions:
o On July 31, 2000, the Company purchased approximately 231,000 telephone
access lines and related local exchange assets comprising 106 exchanges
throughout Arkansas for approximately $842 million in cash.
o On July 31, 2000, Spectra Communications Group, LLC ("Spectra") purchased
approximately 127,000 telephone access lines and related local exchange assets
comprising 107 exchanges throughout Missouri for approximately $297 million
cash. The Company currently owns 75.7% of Spectra, which was organized to
acquire and operate these Missouri properties. At closing, the Company made a
preferred equity investment in Spectra of approximately $55 million (which
represented a 57.1% interest) and financed substantially all of the remainder of
the purchase price. In the first quarter of 2001, the Company purchased an
additional 18.6% interest in Spectra for $47.1 million.
o On September 29, 2000, the Company purchased approximately 70,500
telephone access lines and related local exchange assets comprising 42 exchanges
throughout Wisconsin for approximately $197 million in cash.
o On September 29, 2000, Telephone USA of Wisconsin, LLC ("TelUSA")
purchased approximately 62,900 telephone access lines and related local exchange
assets comprising 35 exchanges throughout Wisconsin for approximately $172
million in cash. The Company owns 89% of TelUSA, which was organized to acquire
and operate these Wisconsin properties. At closing, the Company made an equity
investment in TelUSA of approximately $37.8 million and financed substantially
all of the remainder of the purchase price.
(3) DISCONTINUED OPERATIONS
Pursuant to a definitive agreement signed March 19, 2002, on August 1,
2002, the Company sold substantially all of its wireless operations to Alltel
and certain partners in the Company's markets that exercised "first refusal"
purchase rights for an aggregate of approximately $1.59 billion in cash. In
connection with this transaction, the Company divested its (i) interests in its
majority-owned and operated cellular systems, which at June 30, 2002 served
approximately 783,000 customers and had access to approximately 7.8 million
pops, (ii) minority cellular equity interests representing approximately 1.8
million pops at June 30, 2002, and (iii) licenses to provide PCS covering 1.3
million pops in Wisconsin and Iowa. Proceeds from the sale of the wireless
operations were used to partially fund the Company's acquisitions of telephone
properties in Alabama and Missouri during the third quarter of 2002.
As a result of the sale, the Company's wireless operations have been
reflected as discontinued operations in the Company's consolidated statements of
income and cash flows for the years ended December 31, 2002, 2001 and 2000.
Assets and liabilities related to the Company's wireless operations are
reflected as "Held for sale" on the accompanying consolidated balance sheets.
The depreciation and amortization of long-lived and amortizable intangible
assets related to the wireless operations ceased on March 19, 2002, the date of
the definitive agreement to sell such operations.
The Company had no outstanding indebtedness directly related to its
wireless operations; therefore, no interest expense was allocated to
discontinued operations. The following table represents certain summary income
statement information related to the Company's wireless operations that is
reflected in discontinued operations.
<TABLE>
<CAPTION>
Year ended December 31, 2002 2001 2000
------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Operating revenues $ 246,705 437,965 443,569
------------------------------------------------------------------------------------------
Operating income (1) $ 71,258 132,614 139,276
Nonrecurring gains and losses, net - 166,928 20,593
Income from unconsolidated cellular entities 31,350 27,460 26,986
Minority interest expense (8,569) (11,510) (11,598)
Gain on sale of discontinued operations 803,905 - -
Other income 188 4,707 3,157
------------------------------------------------------------------------------------------
Pre-tax income from discontinued operations $ 898,132 320,199 178,414
Income tax expense (286,427) (121,314) (71,169)
------------------------------------------------------------------------------------------
Income from discontinued operations $ 611,705 198,885 107,245
==========================================================================================
</TABLE>
(1) Excludes corporate overhead costs of $11.3 million, $20.2 million and
$21.4 million for 2002, 2001 and 2000, respectively, allocated to the wireless
operations. Included as a reduction in operating income for 2002 is a
$30.5 million charge associated with the write-off of all amounts expended to
develop the wireless portion of the Company's billing system currently in
development.
The following table represents certain summary cash flow statement
information related to the Company's wireless operations reflected as
discontinued operations.
<TABLE>
<CAPTION>
Year ended December 31, 2002 2001 2000
-----------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net cash provided by (used in) operating activities $ (250,684) (1) 87,585 117,096
Net cash provided by (used in) investing activities 1,577,633 (2) 145,243 (482)
Net cash provided by financing activities - - 201
------------------------------------------------------------------------------------------------------
Net cash provided by discontinued operations $ 1,326,949 232,828 116,815
======================================================================================================
</TABLE>
(1) Includes approximately $305 million estimated tax payment related to sale
of wireless operations.
(2) Includes cash proceeds of $1.59 billion from the sale of substantially all
of the Company's wireless operations.
The following table represents the net assets of the discontinued
wireless operations as of December 31, 2002 and December 31, 2001 that are
classified as held for sale on the consolidated balance sheets.
<TABLE>
<CAPTION>
December 31, 2002 2001
----------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Current assets $ - 70,360
Net property, plant and equipment - 263,421
Goodwill - 384,326
Other assets (1) 11,805 127,321
----------------------------------------------------------------------------
Assets held for sale $ 11,805 845,428
============================================================================
Current liabilities $ - 55,074
Deferred credits and other liabilities - 93,796
----------------------------------------------------------------------------
Liabilities related to assets
held for sale $ - 148,870
============================================================================
</TABLE>
(1) At December 31, 2002, represents the Company's minority interest in a
cellular partnership that the Company has agreed to sell to Alltel upon the
satisfaction of various closing conditions. The Company is currently in
discussions regarding whether these closing conditions have been met. No
assurance can be given that this sale will occur.
(4) INVESTMENTS AND OTHER ASSETS
Investments and other assets at December 31, 2002 and 2001 were composed
of the following:
<TABLE>
<CAPTION>
December 31, 2002 2001
-----------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Goodwill $ 3,427,281 2,087,158
Billing system development costs 139,451 139,503
Cash surrender value of life insurance contracts 93,664 99,835
Prepaid pension asset 54,695 42,353
Franchise costs 35,300 -
Customer base, less accumulated amortization of $729 21,971 -
Deferred interest rate hedge contracts 33,635 35,192
Debt issuance costs, net 23,491 12,108
Fair value of interest rate swap 22,163 -
Other 79,405 91,052
--------------------------------------------------------------------------------
$ 3,931,056 2,507,201
================================================================================
</TABLE>
The following information relates to the Company's goodwill as of
December 31, 2002 and 2001:
<TABLE>
<CAPTION>
December 31, 2002 2001
------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Carrying amount of goodwill
Telephone segment $ 3,382,113 2,074,036
Other operations 45,168 13,122
------------------------------------------------------------------------------
Total goodwill $ 3,427,281 2,087,158
==============================================================================
</TABLE>
During 2002, the Company completed the initial transitional goodwill
impairment test and the required annual test of SFAS 142 and determined its
goodwill was not impaired in either test. The increase in goodwill in the
telephone segment since December 31, 2001 is primarily due to the Verizon
acquisitions consummated in third quarter 2002 (see Note 2).
The following is a reconciliation of reported net income and reported
earnings per share to the amounts that would have been reported had the Company
been subject to SFAS 142 during 2001 and 2000.
<TABLE>
<CAPTION>
Year ended December 31, 2002 2001 2000
-----------------------------------------------------------------------------
(Dollars in thousands,
except per share amounts)
<S> <C> <C> <C>
Net income, as reported $ 801,624 343,031 231,474
Goodwill amortization, net of taxes - 56,266 46,555
-----------------------------------------------------------------------------
Net income, as adjusted $ 801,624 399,297 278,029
=============================================================================
Basic earnings per share, as reported $ 5.66 2.43 1.65
Goodwill amortization, net of taxes - .40 .33
-----------------------------------------------------------------------------
Basic earnings per share, as adjusted $ 5.66 2.83 1.98
=============================================================================
Diluted earnings per share, as reported $ 5.61 2.41 1.63
Goodwill amortization, net of taxes - .40 .33
-----------------------------------------------------------------------------
Diluted earnings per share, as adjusted $ 5.61 2.81 1.96
=============================================================================
</TABLE>
Amortization of goodwill and other intangibles from continuing operations
of $729,000, $58.4 million and $43.6 million for 2002, 2001 and 2000,
respectively, is included in "Depreciation and amortization" in the Company's
Consolidated Statements of Income. In accordance with SFAS 142, effective
January 1, 2002, goodwill is no longer subject to amortization but instead is
tested for impairment at least annually.
The Company is in the process of developing an integrated billing and
customer care system. The costs to develop such system have been capitalized in
accordance with Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," and aggregated $139.5
million at both December 31, 2002 and 2001. A portion of these billing costs
related to the wireless business ($30.5 million) was written off as a component
of discontinued operations in the third quarter of 2002 as a result of the sale
of substantially all of the Company's wireless operations on August 1, 2002.
Excluding this write-off, the Company's aggregate billing system costs are
expected to approximate $180 million upon completion and are expected to be
amortized over a twenty-year period. The Company expects to begin amortization
of the billing system in 2003 as customer groups are migrated to this new
system.
In connection with the acquisitions of properties from Verizon in 2002,
the Company assigned $35.3 million as an intangible asset associated with
franchise costs (which includes amounts necessary to maintain eligibility to
provide telecommunications services in its licensed service areas). Such asset
has an indefinite life and therefore is not subject to amortization currently.
The Company assigned $22.7 million to a customer base intangible asset in
connection with the acquisitions of Verizon properties in 2002. Such asset is
being amortized over 15 years; amortization expense for 2002 was $729,000 and is
expected to be $1.5 million for each of the next five years.
(5) PROPERTY, PLANT AND EQUIPMENT
Net property, plant and equipment at December 31, 2002 and 2001 was
composed of the following:
<TABLE>
<CAPTION>
December 31, 2002 2001
-------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Telephone
Cable and wire $ 3,643,167 3,009,720
Central office 2,150,217 1,829,945
General support 474,022 340,416
Information origination/termination 44,198 42,038
Construction in progress 32,507 64,560
Other 3,789 5,576
-------------------------------------------------------------------------------
6,347,900 5,292,255
Accumulated depreciation (3,136,107) (2,839,268)
-------------------------------------------------------------------------------
3,211,793 2,452,987
-------------------------------------------------------------------------------
Other, at cost
General support 346,037 309,500
Fiber network 74,305 72,410
Other 100,950 65,010
-------------------------------------------------------------------------------
521,292 446,920
Accumulated depreciation (201,440) (163,765)
-------------------------------------------------------------------------------
319,852 283,155
-------------------------------------------------------------------------------
Net property, plant and equipment $ 3,531,645 2,736,142
===============================================================================
</TABLE>
Depreciation expense was $410.9 million, $348.6 million and $279.2
million in 2002, 2001 and 2000, respectively. The composite depreciation rate
for telephone properties was 6.9% for 2002, 6.8% for 2001 and 7.2% for 2000.
(6) LONG-TERM AND SHORT-TERM DEBT
The Company's long-term debt as of December 31, 2002 and 2001 was as
follows:
<TABLE>
<CAPTION>
December 31, 2002 2001
---------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
CenturyTel
2.05%* senior credit facilities, due through 2005 $ 385,000 -
Senior credit facility - 300,000
4.85% note - 199,125
Senior notes and debentures:
7.75% Series A, due 2004 50,000 50,000
8.25% Series B, due 2024 100,000 100,000
6.55% Series C, due 2005 50,000 50,000
7.20% Series D, due 2025 100,000 100,000
6.15% Series E, due 2005 100,000 100,000
6.30% Series F, due 2008 240,000 240,000
6.875% Series G, due 2028 425,000 425,000
8.375% Series H, due 2010 500,000 500,000
7.75% Series I - 400,000
6.02% Series J, due 2007 (remarketable 2005) 500,000 -
4.75% Series K, due 2032 165,000 -
7.875% Series L, due 2012 500,000 -
9.38% notes, due through 2003 2,800 7,975
6.86%** Employee Stock Ownership
Plan commitment, due in installments through 2004 1,500 2,500
Unamortized net (discount) premium (5,084) 11,036
Fair value of derivative instrument related to
Series H senior notes 22,163 -
Other 146 175
---------------------------------------------------------------------------------------------------------
Total CenturyTel 3,136,525 2,485,811
---------------------------------------------------------------------------------------------------------
Subsidiaries
First mortgage debt
5.92%** notes, payable to agencies of the U. S. government
and cooperative lending associations, due in
installments through 2025 250,325 265,240
7.98% notes, due through 2017 5,500 5,419
Other debt
7.02%** unsecured medium-term notes, due through 2008 244,124 271,135
7.03%** notes, due in installments through 2020 5,361 6,725
6.46%** capital lease obligations, due through 2008 7,034 9,004
---------------------------------------------------------------------------------------------------------
Total subsidiaries 512,344 557,523
---------------------------------------------------------------------------------------------------------
Total long-term debt 3,648,869 3,043,334
Less current maturities 70,737 955,834
---------------------------------------------------------------------------------------------------------
Long-term debt, excluding current maturities $ 3,578,132 2,087,500
=========================================================================================================
</TABLE>
* variable interest rate at December 31, 2002
** weighted average interest rate at December 31, 2002
The approximate annual debt maturities for the five years subsequent to
December 31, 2002 are as follows: 2003 - $70.7 million; 2004 - $71.8 million;
2005 - $630.4 million; 2006 - $113.4 million (assuming the Company is not
required to purchase any of its Series K debentures in 2006 pursuant to the
put rights described below); and 2007 - $522.3 million.
Certain of the loan agreements of CenturyTel and its subsidiaries contain
various restrictions, among which are limitations regarding issuance of
additional debt, payment of cash dividends, reacquisition of capital stock and
other matters. In addition, the transfer of funds from certain consolidated
subsidiaries to CenturyTel is restricted by various loan agreements.
Subsidiaries which have loans from government agencies and cooperative lending
associations, or have issued first mortgage bonds, generally may not loan or
advance any funds to CenturyTel, but may pay dividends if certain financial
ratios are met. At December 31, 2002, restricted net assets of subsidiaries were
$264.7 million and subsidiaries' retained earnings in excess of amounts
restricted by debt covenants totaled $1.377 billion. At December 31, 2002, all
of the consolidated retained earnings reflected on the balance sheet was
available under CenturyTel's loan agreements for the declaration of dividends.
Some of the Company's telephone property, plant and equipment is pledged
to secure the long-term debt of subsidiaries.
On May 6, 2002, the Company issued and sold in an underwritten public
offering $500 million of equity units. Net proceeds to the Company from this
issuance were approximately $483.4 million. Each of the 20 million equity units
issued was priced at $25 and consists initially of a beneficial interest in a
CenturyTel senior unsecured note (Series J) with a principal amount of $25 and a
contract to purchase shares of CenturyTel common stock no later than May 2005.
The senior notes will mature in May 2007. Each purchase contract will generally
require the holder to purchase between .6944 and .8741 of a share of CenturyTel
common stock in May 2005 based on the then current stock price of CenturyTel
common stock in exchange for $25, subject to certain adjustments and exceptions.
Accordingly, upon full settlement of the purchase contracts in May 2005, the
Company will receive proceeds of $500 million and will deliver between 13.9
million and 17.5 million common shares in the aggregate. The senior notes are
pledged by the holders to secure their obligations under the purchase contracts.
The total distributions on the equity units will be at an initial annual rate of
6.875%, consisting of interest (6.02%) and contract adjustment payments
(0.855%), each payable quarterly. On or after mid-February 2005, the senior
notes will be remarketed, at which time the remarketing agent will reset the
interest rate on the senior notes in order to generate sufficient proceeds to
secure the holder's obligation under the purchase contract. In the event of an
unsuccessful remarketing, the Company will exercise its right as a secured party
to dispose of the senior notes and satisfy in full the holder's obligation to
purchase common stock under the purchase contract.
The senior note portion of the equity units is reflected on the balance
sheet as long-term debt in the amount of $500 million. Interest expense on the
senior notes is accrued at a rate of 6.02%, the initial interest rate. The
present value of the aggregate contract adjustment payments has been recorded as
an $11.6 million reduction to paid-in capital and as an equivalent liability.
The Company will amortize the difference between the aggregate amount of all
payments and the present value thereof as interest expense over the three-year
term of the purchase contracts. Upon making each such payment, the Company will
allocate most of the payment to the reduction of its $11.6 million liability,
and record the remainder as interest expense. The issuance costs of the equity
units have been allocated to the units' debt and equity components. The debt
issuance costs ($3.3 million) were computed based on typical costs of a debt
transaction and will be amortized to interest expense over the term of the
senior notes. The remainder of the issuance costs ($12.6 million) were treated
as a cost of raising equity and recorded as a charge to paid-in capital.
On July 22, 2002, the Company entered into $800 million of credit
facilities, consisting of a $533 million three-year facility and a $267 million
364-day revolving facility with a one-year term-out option. The Company had $385
million outstanding under these facilities at December 31, 2002. These
facilities replaced credit facilities that matured during the third quarter of
2002.
In the third quarter of 2002, the Company issued $500 million of senior
notes, Series L, due 2012 (which bear interest at 7.875%) and $165 million of
convertible senior debentures, Series K, due 2032 (which bear interest at 4.75%
and which may be converted into shares of CenturyTel common stock at a
conversion price of $40.455 per share). Holders of the convertible senior
debentures will have the right to require the Company to purchase all or a
portion of the debentures on August 1, 2006, August 1, 2010 and August 1, 2017.
In each case, the purchase price payable will be equal to 100% of the principal
amount of the debentures to be purchased plus any accrued and unpaid interest to
the purchase date. The Company will pay cash for all debentures so purchased on
August 1, 2006. For any such purchases on or after August 1, 2010, the Company
may choose to pay the purchase price in cash or shares of its common stock, or
any combination thereof (except that the Company will pay any accrued and unpaid
interest in cash).
On October 15, 2002, the Company redeemed $400 million principal amount
of its Series I Remarketable Senior Notes at par value, plus accrued interest.
In connection with such redemption, the Company also paid a premium of
approximately $71.1 million in accordance with the redemption provisions of the
associated remarketing agreement. Such premium payment (net of $11.1 million of
unamortized net premium primarily associated with the option payment received by
the Company in 2000 in connection with the original issuance of the remarketable
notes) is reflected as an Other Expense in the Company's results of operations
for year ended December 31, 2002.
At December 31, 2002, the Company had available $415.0 million of undrawn
committed bank lines of credit and the Company's telephone subsidiaries had
available for use $123.0 million of commitments for long-term financing from the
Rural Utilities Service and Rural Telephone Bank.
(7) DERIVATIVE INSTRUMENTS
During 2002, the Company entered into the following derivative
transactions:
(a) A cash flow hedge designed to lock in a fixed interest rate for
$100 million of the $500 million senior notes issued in the third
quarter of 2002. Such hedge was settled in the third quarter of
2002 for a $1.1 million payment by the Company. Such amount will
be amortized as additional interest expense over a ten-year
period, which equates to the term of the debt issuance hedged.
(b) A fair value hedge with respect to the Company's $500 million
aggregate principal amount of 8.375% Series H senior notes, due
2010. This hedge is a "fixed to variable" interest rate swap that
effectively converts the Company's fixed rate interest payment
obligations under these notes into variable rate obligations. As
of December 31, 2002, the Company realized an interest rate of
4.96% related to such hedge. Interest expense was reduced by $7.8
million in 2002 as a result of this hedge. The fair value of such
hedge at December 31, 2002 was $22.2 million and is reflected on
the accompanying balance sheet as both an asset (included in
"Other assets") and as an increase in the underlying debt
(included in "Long-term debt").
(c) A cash flow hedge designed to eliminate the variability of
interest payments for $400 million of variable rate debt under
the Company's $800 million credit facilities. Such hedge expires
in October 2003 and is designed to swap the Company's future
obligation to pay variable rate interest based on LIBOR into
obligations that lock-in a fixed rate of 2.49%. Such hedge was
deemed to be an effective hedge as of December 31, 2002 and its
value on such date ($1.3 million) is reflected as a liability and
Accumulated Other Comprehensive Loss (net of tax) on the
accompanying balance sheet.
(8) DEFERRED CREDITS AND OTHER LIABILITIES
Deferred credits and other liabilities at December 31, 2002 and 2001 were
composed of the following:
<TABLE>
<CAPTION>
December 31, 2002 2001
--------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Deferred federal and state income taxes $ 352,161 303,708
Accrued postretirement benefit costs 208,542 139,020
Additional minimum pension liability 56,388 -
Minority interest 26,067 23,248
Other 73,010 40,076
--------------------------------------------------------------------------------
$ 716,168 506,052
================================================================================
</TABLE>
(9) STOCKHOLDERS' EQUITY
Common stock - Unissued shares of CenturyTel common stock were reserved as
follows:
<TABLE>
<CAPTION>
December 31, 2002
------------------------------------------------------------------------------
(In thousands)
<S> <C>
Incentive compensation programs 13,452
Acquisitions 4,064
Employee stock purchase plan 4,870
Dividend reinvestment plan 484
Conversion of convertible preferred stock 435
Other employee benefit plans 1,655
------------------------------------------------------------------------------
24,960
==============================================================================
</TABLE>
Under CenturyTel's Articles of Incorporation each share of common stock
beneficially owned continuously by the same person since May 30, 1987 generally
entitles the holder thereof to ten votes per share. All other shares entitle the
holder to one vote per share. At December 31, 2002, the holders of 9.6 million
shares of common stock were entitled to ten votes per share.
Preferred stock - As of December 31, 2002, CenturyTel had 2.0 million shares of
authorized convertible preferred stock, $25 par value per share. At December 31,
2002 and 2001, there were 319,000 shares of outstanding preferred stock. Holders
of outstanding CenturyTel preferred stock are entitled to receive cumulative
dividends, receive preferential distributions equal to $25 per share plus unpaid
dividends upon CenturyTel's liquidation and vote as a single class with the
holders of common stock.
Shareholders' Rights Plan - In 1996 the Board of Directors declared a dividend
of one preference share purchase right for each common share outstanding. Such
rights become exercisable if and when a potential acquiror takes certain steps
to acquire 15% or more of CenturyTel's common stock. Upon the occurrence of such
an acquisition, each right held by shareholders other than the acquiror may be
exercised to receive that number of shares of common stock or other securities
of CenturyTel (or, in certain situations, the acquiring company) which at the
time of such transaction will have a market value of two times the exercise
price of the right.
(10) POSTRETIREMENT BENEFITS
The Company sponsors health care plans that provide postretirement
benefits to all qualified retired employees.
The following is a reconciliation of the beginning and ending balances
for the benefit obligation and the plan assets.
<TABLE>
<CAPTION>
December 31, 2002 2001 2000
---------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year $ 215,872 165,266 156,724
Service cost 6,669 6,373 4,727
Interest cost 15,962 14,512 10,907
Participant contributions 617 548 677
Acquisitions 56,539 - 15,730
Actuarial (gain) loss (29,534) 40,005 (14,773)
Benefits paid (12,363) (10,832) (8,726)
---------------------------------------------------------------------------------------------------------
Benefit obligation at end of year $ 253,762 215,872 165,266
=========================================================================================================
Change in plan assets (primarily listed stocks and bonds)
Fair value of plan assets at beginning of year $ 36,555 39,873 41,781
Return on assets (2,896) (1,379) (270)
Employer contributions 6,784 8,345 6,411
Participant contributions 617 548 677
Benefits paid (12,363) (10,832) (8,726)
---------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year $ 28,697 36,555 39,873
=========================================================================================================
</TABLE>
Net periodic postretirement benefit cost for 2002, 2001 and 2000 included
the following components:
<TABLE>
<CAPTION>
Year ended December 31, 2002 2001 2000
----------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Service cost $ 6,669 6,373 4,727
Interest cost 15,962 14,512 10,907
Expected return on plan assets (3,656) (3,987) (4,178)
Amortization of unrecognized actuarial loss 1,470 1,337 26
Amortization of unrecognized prior service cost (129) (129) (129)
----------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $ 20,316 18,106 11,353
==============================================================================================
</TABLE>
The following table sets forth the amounts recognized as liabilities for
postretirement benefits at December 31, 2002, 2001 and 2000.
<TABLE>
<CAPTION>
December 31, 2002 2001 2000
-----------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Benefit obligation $ (253,762) (215,872) (165,266)
Fair value of plan assets 28,697 36,555 39,873
Unamortized prior service cost (918) (1,046) (1,175)
Unrecognized net actuarial (gain) loss 14,573 33,925 (9,621)
------------------------------------------------------------------------------------------
Accrued benefit cost $ (211,410) (146,438) (136,189)
==========================================================================================
</TABLE>
Assumptions used in accounting for postretirement benefits as of December
31, 2002 and 2001 were:
<TABLE>
<CAPTION>
2002 2001
------------------------------------------------------------------------------
<S> <C> <C>
Weighted average assumptions
Discount rate 6.75% 7.0
Expected return on plan assets 10.0% 10.0
------------------------------------------------------------------------------
</TABLE>
For 2003, the Company lowered its expected return on plan assets from
10.0% to 8.25%.
For measurement purposes, the annual rate in the per capita cost of
covered health care benefits was assumed to range between 4.9%-5.7% for 2003,
reaching an ultimate trend of 4.5% in 2015. A one-percentage-point change in
assumed health care cost rates would have the following effects:
<TABLE>
<CAPTION>
1-Percentage 1-Percentage
Point Increase Point Decrease
--------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Effect on total of service and interest
cost components $ 1,474 (1,405)
Effect on postretirement benefit obligation $ 16,604 (15,584)
--------------------------------------------------------------------------------------
</TABLE>
(11) RETIREMENT AND SAVINGS PLANS
CenturyTel and certain subsidiaries sponsor defined benefit pension plans
for substantially all employees. CenturyTel also sponsors an Outside Directors'
Retirement Plan and a Supplemental Executive Retirement Plan to provide
directors and officers, respectively, with supplemental retirement, death and
disability benefits.
The following is a reconciliation of the beginning and ending balances
for the aggregate benefit obligation and the plan assets for the Company's
retirement and savings plans.
<TABLE>
<CAPTION>
December 31, 2002 2001 2000
---------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year $ 271,490 249,835 205,455
Service cost 10,353 7,760 5,928
Interest cost 20,053 17,829 15,381
Plan amendments - 1,205 3,387
Acquisitions 51,428 - 35,824
Actuarial (gain) loss 9,231 9,065 (3,726)
Benefits paid (16,299) (14,204) (12,414)
---------------------------------------------------------------------------------------------------------
Benefit obligation at end of year $ 346,256 271,490 249,835
=========================================================================================================
Change in plan assets (primarily listed stocks and bonds)
Fair value of plan assets at beginning of year $ 283,448 329,459 319,901
Return on plan assets (43,564) (33,184) (14,991)
Employer contributions 14,887 1,377 572
Acquisitions 51,428 - 36,391
Benefits paid (16,299) (14,204) (12,414)
---------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year $ 289,900 283,448 329,459
=========================================================================================================
</TABLE>
Net periodic pension expense (benefit) for 2002, 2001 and 2000 included
the following components:
<TABLE>
<CAPTION>
Year ended December 31, 2002 2001 2000
---------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Service cost $ 10,353 7,760 5,928
Interest cost 20,053 17,829 15,381
Expected return on plan assets (29,578) (31,901) (31,586)
Recognized net (gains) losses 1,328 (2,325) (7,107)
Net amortization and deferral 395 301 (602)
---------------------------------------------------------------------------------------------------------
Net periodic pension expense (benefit) $ 2,551 (8,336) (17,986)
=========================================================================================================
</TABLE>
The following table sets forth the combined plans' funded status and
amounts recognized in the Company's consolidated balance sheet at December 31,
2002, 2001 and 2000.
<TABLE>
<CAPTION>
December 31, 2002 2001 2000
---------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Benefit obligation $ (346,256) (271,490) (249,835)
Fair value of plan assets 289,900 283,448 329,459
Unrecognized transition asset (1,152) (1,404) (1,648)
Unamortized prior service cost 4,370 5,017 4,126
Unrecognized net actuarial (gain) loss 107,833 26,782 (49,336)
---------------------------------------------------------------------------------------------------------
Prepaid pension cost $ 54,695 42,353 32,766
=========================================================================================================
</TABLE>
As of December 31, 2002, substantially all of the pension plans had
benefit obligations in excess of plan assets.
Amounts recognized on the balance sheet consist of:
<TABLE>
<CAPTION>
December 31, 2002 2001 2000
---------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Prepaid pension cost $ 54,695 42,353 32,766
Additional minimum pension liability (reflected in Deferred
Credits and Other Liabilities) (56,388) - -
Intangible asset (reflected in Other Assets) 1,212 - -
Accumulated Other Comprehensive Loss 55,176 - -
---------------------------------------------------------------------------------------------------------
$ 54,695 42,353 32,766
=========================================================================================================
</TABLE>
Assumptions used in accounting for the pension plans as of December 2002
and 2001 were:
<TABLE>
<CAPTION>
2002 2001
--------------------------------------------------------------------------------
<S> <C> <C>
Discount rate 6.75% 7.0
Expected long-term rate of return on assets 8.0-10.0% 8.0-10.0
Weighted average rate of compensation increase 4.50% 4.50
--------------------------------------------------------------------------------
</TABLE>
For 2003, the Company lowered its expected long-term rate of return on
assets from 8-10% to 8-8.25%.
CenturyTel sponsors an Employee Stock Ownership Plan ("ESOP") which
covers most employees with one year of service with the Company and is funded by
Company contributions determined annually by the Board of Directors. The
Company's expense related to the ESOP during 2002, 2001 and 2000 was $9.3
million, $7.5 million, and $9.5 million, respectively. At December 31, 2002, the
ESOP owned an aggregate of 7.6 million shares of CenturyTel common stock.
CenturyTel and certain subsidiaries also sponsor qualified profit sharing
plans pursuant to Section 401(k) of the Internal Revenue Code (the "401(k)
Plans") which are available to substantially all employees of the Company. The
Company's matching contributions to the 401(k) Plans were $6.7 million in 2002,
$6.6 million in 2001 and $6.1 million in 2000.
(12) INCOME TAXES
Income tax expense from continuing operations included in the
Consolidated Statements of Income for the years ended December 31, 2002, 2001
and 2000 was as follows:
<TABLE>
<CAPTION>
Year ended December 31, 2002 2001 2000
-------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Federal
Current $ 21,019 24,032 42,295
Deferred 80,056 62,164 30,932
State
Current 11,406 6,735 9,393
Deferred (8,944) (4,220) 922
-------------------------------------------------------------------------------
$ 103,537 88,711 83,542
===============================================================================
</TABLE>
Income tax expense from continuing operations was allocated as follows:
<TABLE>
<CAPTION>
Year ended December 31, 2002 2001 2000
-------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Income tax expense in the consolidated statements of income $ 103,537 88,711 83,542
Stockholders' equity:
Compensation expense for tax purposes
in excess of amounts recognized for
financial reporting purposes (7,471) (1,051) (2,702)
Tax effect of the change in accumulated other
comprehensive income (loss) (19,763) (13,715) (20,941)
-------------------------------------------------------------------------------------------------
</TABLE>
The following is a reconciliation from the statutory federal income tax
rate to the Company's effective income tax rate from continuing operations:
<TABLE>
<CAPTION>
Year ended December 31, 2002 2001 2000
---------------------------------------------------------------------------------------------
(Percentage of pre-tax income)
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0 35.0
State income taxes, net of federal income tax benefit .5 .7 3.2
Amortization of nondeductible goodwill - 3.4 3.7
Amortization of investment tax credits (.1) (.2) (.3)
Amortization of regulatory liability (.3) (.7) (.8)
Other, net .2 (.1) (.6)
---------------------------------------------------------------------------------------------
Effective income tax rate 35.3% 38.1 40.2
=============================================================================================
</TABLE>
In accordance with SFAS 142, effective January 1, 2002, goodwill
amortization for financial reporting purposes ceased.
The tax effects of temporary differences that gave rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
2002 and 2001 were as follows:
<TABLE>
<CAPTION>
December 31, 2002 2001
--------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Deferred tax assets
Postretirement benefit costs $ 40,852 31,670
Regulatory support 11,414 12,163
Net state operating loss carryforwards 28,380 19,691
Other employee benefits 28,697 8,255
Other 18,720 21,036
--------------------------------------------------------------------------------------------
Gross deferred tax assets 128,063 92,815
Less valuation allowance (28,380) (19,691)
--------------------------------------------------------------------------------------------
Net deferred tax assets 99,683 73,124
--------------------------------------------------------------------------------------------
Deferred tax liabilities
Property, plant and equipment, primarily due to
depreciation differences (189,663) (152,506)
Goodwill (256,801) (218,461)
Deferred debt costs (2,400) (2,582)
Intercompany profits (2,980) (3,283)
--------------------------------------------------------------------------------------------
Gross deferred tax liabilities (451,844) (376,832)
--------------------------------------------------------------------------------------------
Net deferred tax liability $ (352,161) (303,708)
============================================================================================
</TABLE>
As of December 31, 2002 and 2001, the Company had available tax benefits
associated with state operating loss carryforwards of $28.4 million and $19.7
million, respectively, which expire through 2017. Such amounts were reserved in
total through the valuation allowance as it is likely that such operating loss
carryforwards will not be utilized prior to expiration.
(13) NONRECURRING GAINS AND LOSSES, NET
In the second quarter of 2002, the Company recorded a pre-tax gain of
$3.7 million from the sale of a PCS license.
In the second quarter of 2001, the Company recorded a pre-tax gain
(reflected in discontinued operations) of approximately $185.1 million ($117.7
million after-tax; $.83 per diluted share) due to the sale of 30 PCS licenses to
Leap Wireless International, Inc. ("Leap"). In conjunction with the sale of the
licenses to Leap, the Company also recorded a pre-tax charge (reflected in
discontinued operations) of $18.2 million ($11.6 million after-tax; $.08 per
share) due to the write down in the value of certain non-operating assets.
In the third quarter of 2001, the Company recorded a pre-tax gain on the
sale of its remaining common shares of Illuminet Holdings, Inc. aggregating
$54.6 million ($35.5 million after-tax; $.25 per diluted share). The Company
also recorded a pre-tax gain of $4.0 million ($2.6 million after-tax; $.02 per
diluted share) on the sale of certain other assets. Additionally in 2001, the
Company recorded pre-tax charges of $25.5 million ($16.6 million after-tax; $.12
per diluted share) due to the write-down in the value of certain non-operating
investments in which the Company owns a minority interest.
In the first quarter of 2000 the Company recorded a pre-tax gain
(reflected in discontinued operations) aggregating $9.9 million ($5.2 million
after tax) due to the sale of its remaining Alaska cellular operations.
In the third quarter of 2000 the Company recorded a pre-tax gain
(reflected in discontinued operations) aggregating $10.7 million ($6.4 million
after tax) due to the sale of its minority interest in a non-strategic cellular
partnership.
(14) EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators of
the basic and diluted earnings per share computations:
<TABLE>
<CAPTION>
Year ended December 31, 2002 2001 2000
---------------------------------------------------------------------------------------------------------
(Dollars, except per share
amounts, and shares in thousands)
<S> <C> <C> <C>
Income (Numerator):
Income from continuing operations $ 189,919 144,146 124,229
Discontinued operations, net of tax 611,705 198,885 107,245
---------------------------------------------------------------------------------------------------------
Net income 801,624 343,031 231,474
Dividends applicable to preferred stock (399) (399) (399)
---------------------------------------------------------------------------------------------------------
Net income applicable to common stock for
computing basic earnings per share 801,225 342,632 231,075
Dividends applicable to preferred stock 399 399 399
Interest on convertible securities, net of taxes - - 132
---------------------------------------------------------------------------------------------------------
Net income as adjusted for purposes of computing
diluted earnings per share $ 801,624 343,031 231,606
=========================================================================================================
Net income applicable to common stock for computing basic
earnings per share, as adjusted for goodwill amortization $ 801,225 398,898 277,630
=========================================================================================================
Net income as adjusted for purposes of computing diluted
earnings per share, as adjusted for goodwill amortization $ 801,624 399,297 278,161
=========================================================================================================
Shares (Denominator):
Weighted average number of shares outstanding
during period 141,796 141,021 140,440
Employee Stock Ownership Plan shares not
committed to be released (183) (278) (371)
---------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding during
period for computing basic earnings per share 141,613 140,743 140,069
Incremental common shares attributable to
dilutive securities:
Shares issuable under convertible securities 435 435 707
Shares issuable under outstanding stock options 831 1,129 1,088
---------------------------------------------------------------------------------------------------------
Number of shares as adjusted for purposes of
computing diluted earnings per share 142,879 142,307 141,864
=========================================================================================================
Basic earnings per share
From continuing operations $ 1.34 1.02 .88
From continuing operations, as adjusted for
goodwill amortization $ 1.34 1.35 1.15
From discontinued operations $ 4.32 1.41 .77
From discontinued operations, as adjusted for
goodwill amortization $ 4.32 1.48 .84
Basic earnings per share $ 5.66 2.43 1.65
Basic earnings per share, as adjusted for
goodwill amortization $ 5.66 2.83 1.98
Diluted earnings per share
From continuing operations $ 1.33 1.01 .88
From continuing operations, as adjusted for
goodwill amortization $ 1.33 1.34 1.13
From discontinued operations $ 4.28 1.40 .76
From discontinued operations, as adjusted for
goodwill amortization $ 4.28 1.47 .83
Diluted earnings per share $ 5.61 2.41 1.63
Diluted earnings per share, as adjusted for
goodwill amortization $ 5.61 2.81 1.96
</TABLE>
The weighted average number of options to purchase shares of common stock
that were excluded from the computation of diluted earnings per share because
the exercise price of the option was greater than the average market price of
the common stock was 3,285,000 for 2002, 1,346,000 for 2001 and 969,000 for
2000.
(15) STOCK OPTION PROGRAMS
CenturyTel maintains programs which allow the Board of Directors, through
the Compensation Committee, to grant (i) incentives to certain employees in any
one or a combination of several forms, including incentive and non-qualified
stock options; stock appreciation rights; restricted stock; and performance
shares and (ii) stock options to outside directors. As of December 31, 2002,
CenturyTel had reserved 13.5 million shares of common stock which may be issued
under CenturyTel's current incentive compensation programs.
Under the Company's programs, options have been granted to employees at a
price either equal to or exceeding the then-current market price. All of the
options expire ten years after the date of grant and the vesting period ranges
from immediate to three years.
Stock option transactions during 2002, 2001 and 2000 were as follows:
<TABLE>
<CAPTION>
Number Average
of options price
-------------------------------------------------------------------------------
<S> <C> <C>
Outstanding December 31, 1999 3,485,842 14.92
Exercised (369,308) 12.46
Granted 1,565,750 33.00
Forfeited (1,125) 13.33
-----------------------------------------------------------------
Outstanding December 31, 2000 4,681,159 21.16
Exercised (149,806) 15.91
Granted 1,971,750 28.14
Forfeited (135,583) 18.42
-----------------------------------------------------------------
Outstanding December 31, 2001 6,367,520 23.51
Exercised (1,366,560) 13.97
Granted 1,983,150 32.28
Forfeited (88,308) 28.59
-----------------------------------------------------------------
Outstanding December 31, 2002 6,895,802 27.95
=================================================================
Exercisable December 31, 2002 3,991,753 25.68
=================================================================
Exercisable December 31, 2001 3,342,216 17.81
=================================================================
</TABLE>
The following tables summarize certain information about CenturyTel's
stock options at December 31, 2002.
<TABLE>
<CAPTION>
Options outstanding
-----------------------------------------------------------------------------------------------------
Weighted average
Range of remaining contractual Weighted average
exercise prices Number of options life outstanding exercise price
-----------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
$ 11.67-17.64 1,382,141 2.8 $ 14.93
24.10-26.31 375,728 8.6 25.19
26.62-31.54 1,976,839 8.3 28.18
31.75-38.50 3,116,934 8.6 33.72
39.00-46.19 44,160 6.4 42.29
---------
11.67-46.19 6,895,802 7.6 27.95
=========
</TABLE>
<TABLE>
<CAPTION>
Options exercisable
-----------------------------------------------------------------------------------------------------
Range of Number of Weighted average
exercise prices options exercisable exercise price
-----------------------------------------------------------------------------------------------------
<C> <C> <C>
$ 11.67-17.64 1,382,141 $ 14.93
24.10-26.31 225,345 25.21
26.62-31.54 939,351 28.18
31.75-38.50 1,400,756 34.15
39.00-46.19 44,160 42.29
---------
11.67-46.19 3,991,753 25.68
=========
</TABLE>
(16) SUPPLEMENTAL CASH FLOW DISCLOSURES
The amount of interest actually paid by the Company, net of amounts
capitalized of $1.2 million, $3.5 million and $4.5 million during 2002, 2001 and
2000, respectively, was $210.9 million, $224.7 million and $164.0 million during
2002, 2001 and 2000, respectively. Income taxes paid were $325.5 million in
2002, $128.3 million in 2001 and $142.3 million in 2000.
CenturyTel has consummated the acquisitions of various operations, along
with certain other assets, during the three years ended December 31, 2002. In
connection with these acquisitions, the following assets were acquired and
liabilities assumed:
<TABLE>
<CAPTION>
Year ended December 31, 2002 2001 2000
------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Property, plant and equipment, net $ 866,575 - 607,415
Goodwill 1,335,157 33,183 917,468
Other investments - - 1,972
Long-term debt - - (378)
Deferred credits and other liabilities (56,897) 13,948 (44,465)
Other assets and liabilities, excluding
cash and cash equivalents 100,191 - 53,671
------------------------------------------------------------------------------------------
Decrease in cash due to acquisitions $ 2,245,026 47,131 1,535,683
==========================================================================================
</TABLE>
CenturyTel has disposed of various operations reflected within continuing
operations, along with certain other assets, during the three years ended
December 31, 2002. In connection with these dispositions, the following assets
were sold, liabilities eliminated, assets received and gain recognized:
<TABLE>
<CAPTION>
Year ended December 31, 2002 2001 2000
------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C>
Property, plant and equipment, net $ - (2,447) -
Marketable equity securities - (3,614) -
Other assets and liabilities, excluding cash and
cash equivalents (435) (19,080) -
Gain on sale of assets (3,709) (33,043) -
------------------------------------------------------------------------------------------
Increase in cash due to dispositions $ (4,144) (58,184) -
==========================================================================================
</TABLE>
For information on the Company's discontinued operations, see Note 3.
(17) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair
values of certain of the Company's financial instruments at December 31, 2002
and 2001.
<TABLE>
<CAPTION>
Carrying Fair
Amount value
--------------------------------------------------------------------------------------------
(Dollars in thousands)
December 31, 2002
<S> <C> <C> <C>
Financial assets
Interest rate swaps $ 22,163 22,163 (2)
Other $ 33,637 33,637 (2)
Financial liabilities
Long-term debt (including current maturities) $ 3,648,869 3,937,535 (1)
Interest rate swaps $ 1,290 1,290 (2)
Other $ 41,884 41,884 (2)
--------------------------------------------------------------------------------------------
December 31, 2001
Financial assets $ 25,601 25,601 (2)
Financial liabilities
Long-term debt (including current maturities) $ 3,043,334 3,040,242 (1)
Other $ 29,308 29,308 (2)
--------------------------------------------------------------------------------------------
</TABLE>
(1) Fair value was estimated by discounting the scheduled payment streams
to present value based upon rates currently available to the Company for
similar debt.
(2) Fair value was estimated by the Company to approximate carrying value.
The carrying amount of cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses approximates the fair value due to the
short maturity of these instruments and have not been reflected in the above
table.
(18) BUSINESS SEGMENTS
The Company's only separately reportable business segment is its
telephone operations. The operating income of this segment is reviewed by the
chief operating decision maker to assess performance and make business
decisions. Due to the sale of the Company's wireless operations, such operations
(which were previously reported as a separate segment) are classified as
discontinued operations. Other operations include, but are not limited to, the
Company's nonregulated long distance operations, Internet operations,
competitive local exchange carrier operations, fiber network business and
security monitoring operations.
The Company's telephone operations are conducted in rural, suburban and
small urban communities in 22 states. Approximately 91% of the Company's
telephone access lines are in Wisconsin, Missouri, Alabama, Arkansas,
Washington, Michigan, Louisiana, Colorado, Ohio and Oregon.
<TABLE>
<CAPTION>
Depreciation
Operating and Operating
revenues amortization income
----------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Year ended December 31, 2002
<S> <C> <C> <C>
Telephone $ 1,733,592 396,866 543,113
Other operations 238,404 14,760 43,568
Corporate overhead costs allocable to
discontinued operations - - (11,275)
----------------------------------------------------------------------------------------------------------
Total $ 1,971,996 411,626 575,406
==========================================================================================================
Year ended December 31, 2001
Telephone $ 1,505,733 398,284 423,420
Other operations 173,771 8,754 22,098
Corporate overhead costs allocable to
discontinued operations - - (20,213)
-----------------------------------------------------------------------------------------------------------
Total $ 1,679,504 407,038 425,305
==========================================================================================================
Year ended December 31, 2000
Telephone $ 1,253,969 317,906 376,290
Other operations 148,388 4,911 31,258
Corporate overhead costs allocable to
discontinued operations - - (21,411)
----------------------------------------------------------------------------------------------------------
Total $ 1,402,357 322,817 386,137
==========================================================================================================
Year ended December 31, 2002 2001 2000
---------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Operating income $ 575,406 425,305 386,137
Nonrecurring gains and losses, net 3,709 33,043 -
Interest expense (221,845) (225,523) (183,302)
Other income and expense (63,814) 32 4,936
----------------------------------------------------------------------------------------------------------
Income from continuing operations
before income tax expense $ 293,456 232,857 207,771
==========================================================================================================
Year ended December 31, 2002 2001 2000
---------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Capital expenditures
Telephone $ 319,536 351,010 275,523
Other operations 66,731 84,505 115,546
----------------------------------------------------------------------------------------------------------
Total $ 386,267 435,515 391,069
==========================================================================================================
December 31, 2002 2001 2000
---------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Total assets
Telephone $ 6,962,713 4,754,522 4,769,557
Other operations 795,890 718,734 721,600
Assets held for sale 11,805 845,428 902,133
----------------------------------------------------------------------------------------------------------
Total assets $ 7,770,408 6,318,684 6,393,290
==========================================================================================================
</TABLE>
Interexchange carriers and other accounts receivable on the balance
sheets are primarily amounts due from various long distance carriers,
principally AT&T, and several large local exchange operating companies.
(19) COMMITMENTS AND CONTINGENCIES
Construction expenditures and investments in vehicles, buildings and
equipment during 2003 are estimated to be $370 million for telephone operations
and $30 million for other operations.
On August 29, 2002, the Wisconsin Court of Appeals upheld a ruling upon
appeal that ordered the Company to refund access charges collected from
interexchange carriers from December 1998 through 2000 on the former properties
acquired from Ameritech. As a result of this ruling, the Company recorded a $7.6
million pre-tax charge related to this refund in the third quarter of 2002.
On December 26, 2001, AT&T Corp. and one of its subsidiaries filed a
complaint in the U.S. District Court for the Western District of Washington
(Case No. CV0121512) seeking money damages against CenturyTel of the Northwest,
Inc. The plaintiffs claim, among other things, that CenturyTel of the Northwest,
Inc. has breached its obligations under a 1994 stock purchase agreement to
indemnify the plaintiffs for various environmental costs and damages relating to
properties sold to the plaintiffs under such 1994 agreement. The Company has
investigated this claim and believes it has numerous defenses available. If the
plaintiffs are successful in recovering any sums under this litigation, the
Company believes it is entitled to indemnification under agreements with third
parties.
From time to time, the Company is involved in various other claims and
legal actions relating to the conduct of its business. In the opinion of
management, the ultimate disposition of these matters will not have a material
adverse effect on the Company's consolidated financial position or results of
operations.
CENTURYTEL, INC.
Consolidated Quarterly Income Statement Information
(Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
quarter quarter quarter quarter
---------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share amounts)
2002 (unaudited)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues $ 422,918 438,702 524,497 585,879
Operating income $ 119,049 109,531 157,716 189,110
Income from continuing operations $ 42,857 40,208 63,619 43,235
Net income $ 70,767 78,763 607,749 44,345
Basic earnings per share from continuing operations $ .30 .28 .45 .30
Basic earnings per share $ .50 .56 4.29 .31
Diluted earnings per share from continuing operations $ .30 .28 .45 .30
Diluted earnings per share $ .50 .55 4.26 .31
2001
---------------------------------------------------------------------------------------------------------
Operating revenues $ 411,602 409,250 423,973 434,679
Operating income $ 104,309 99,209 105,991 115,796
Income from continuing operations $ 26,851 21,069 59,570 36,657
Net income $ 46,722 154,241 92,305 49,763
Basic earnings per share from continuing operations $ .19 .15 .42 .26
Basic earnings per share from continuing operations,
as adjusted $ .27 .23 .50 .34
Basic earnings per share $ .33 1.10 .65 .35
Basic earnings per share, as adjusted $ .43 1.20 .75 .45
Diluted earnings per share from continuing operations $ .19 .15 .42 .26
Diluted earnings per share from continuing operations,
as adjusted $ .27 .23 .50 .34
Diluted earnings per share $ .33 1.09 .65 .35
Diluted earnings per share, as adjusted $ .43 1.19 .75 .45
---------------------------------------------------------------------------------------------------------
</TABLE>
Diluted earnings per share for the third quarter of 2002 included $3.72
per share related to the gain on the sale of substantially all of the Company's
wireless operations, net of amounts written off for costs expended related to
the wireless portion of the new billing system currently in development. Diluted
earnings per share for the fourth quarter of 2002 was negatively impacted by
$.27 per share related to the redemption premium on the Company Series I
remarketable notes that were redeemed in October 2002. On July 1 and August 31,
2002, the Company acquired nearly 650,000 telephone access lines and related
assets from Verizon. See Note 2 for additional information.
Diluted earnings per share for the second and third quarters of 2001
included $.75 and $.27 per share, respectively, of net gains on sales of assets.
See Note 13 for additional information.
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The name, age and office(s) held by each of the Registrant's executive
officers are shown below. Each of the executive officers listed below serves at
the pleasure of the Board of Directors.
Name Age Office(s) held with CenturyTel
---- --- ------------------------------
Glen F. Post, III 50 Chairman of the Board of Directors
and Chief Executive Officer
Karen A. Puckett 42 President and Chief Operating Officer
R. Stewart Ewing, Jr. 51 Executive Vice President and
Chief Financial Officer
Harvey P. Perry 58 Executive Vice President,
Chief Administrative Officer,
General Counsel and Secretary
David D. Cole 45 Senior Vice President -
Operations Support
Michael Maslowski 55 Senior Vice President and
Chief Information Officer
Each of the Registrant's executive officers, except for Ms. Puckett and
Mr. Maslowski, has served as an officer of the Registrant and one or more of its
subsidiaries in varying capacities for more than the past five years. Mr.
Maslowski has served as Senior Vice President and Chief Information Officer
since March 1999 and as Senior Information Systems Executive for Lucent
Technologies and for a joint venture between Lucent Technologies and Phillips
Consumer Communications from 1996 to early 1999.
Ms. Puckett has served as President and Chief Operating Officer since
August 2002, as Executive Vice President and Chief Operating Officer from July
2000 through August 2002, as Sales and Marketing Senior Officer of BroadStream
Communications from July 1999 through July 2000 and as Texas Region President
for GTE Wireless from 1996 to mid-1999. Commco Technology LLC (formerly
BroadStream Communications) filed for bankruptcy on December 18, 2000 in the
United States Bankruptcy Court, District of Connecticut (Bridgeport). Ms.
Puckett was an officer and employee of BroadStream Communications from July 1999
through July 2000.
Mr. Post has served as Chairman of the Board since June 2002, and
previously served as Vice Chairman of the Board from 1993 to 2002 and President
from 1990 to 2002. In May 1999, Messrs. Ewing and Perry were promoted from
Senior Vice President to Executive Vice President, and Mr. Perry was named Chief
Administrative Officer. Mr. Cole has served as Senior Vice President -
Operations Support since November 1998 and served as President - Wireless Group
from October 1996 to October 1998.
The balance of the information required by Item 10 is incorporated by
reference to the Registrant's definitive proxy statement relating to its 2003
annual meeting of stockholders (the "Proxy Statement"), which Proxy Statement
will be filed pursuant to Regulation 14A within the first 120 days of 2003.
Item 11. Executive Compensation.
The information required by Item 11 is incorporated by reference to the
Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table provides information as of December 31, 2002,
concerning shares of CenturyTel common stock authorized for issuance under
CenturyTel's existing equity compensation plans.
<TABLE>
<CAPTION>
(c)
Number of securities
remaining available for
(a) (b) future issuance under
Number of securities to Weighted-average plans (excluding
be issued upon conversion exercise price of securities reflected in
Plan category of outstanding options outstanding options column (a))
------------------ ------------------------- ------------------- -----------------------
<S> <C> <C> <C>
Equity compensation
plans approved by
security holders 6,895,802 $ 27.95 4,744,400
Employee Stock Purchase
Plan approved by shareholders - - 4,869,559
Equity compensation
plans not approved by
security holders - - 685,743
------------------------------------------------------------------------------------------------
Totals 6,895,802 $ 27.95 10,299,702
================================================================================================
</TABLE>
The balance of the information required by Item 12 is incorporated by
reference to the Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
The information required by Item 13 is incorporated by reference to the
Proxy Statement.
Item 14. Controls and Procedures
The Company's Chief Executive Officer, Glen F. Post, III, and the
Company's Chief Financial Officer, R. Stewart Ewing, Jr., have evaluated the
Company's disclosure controls and procedures within 90 days of the filing of
this annual report. Based on the evaluation, Messrs. Post and Ewing have
concluded that the Company's disclosure controls and procedures are effective in
providing reasonable assurance that they are timely alerted of all material
information required to be filed in this annual report. Since the date of
Messrs. Post's and Ewing's most recent evaluation, there have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect these controls. The design of any system of controls
is based in part upon certain assumptions about the likelihood of future events
and contingencies, and there can be no assurance that any design will succeed in
achieving its stated goals.
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
a. Financial Statements
(i) Consolidated Financial Statements:
Independent Auditors' Report on Consolidated Financial
Statements and Financial Statement Schedule
Consolidated Statements of Income for the years ended
December 31, 2002, 2001 and 2000
Consolidated Statements of Comprehensive Income for
the years ended December 31, 2002, 2001 and 2000
Consolidated Balance Sheets - December 31, 2002 and 2001
Consolidated Statements of Cash Flows for the years
ended December 31, 2002, 2001 and 2000
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 2002, 2001 and 2000
Notes to Consolidated Financial Statements
Consolidated Quarterly Income Statement Information
(unaudited)
(ii) Schedules:*
II Valuation and Qualifying Accounts
* Those schedules not listed above are
omitted as not applicable or not required.
b. Reports on Form 8-K.
The following items were reported in a Form 8-K filed October
8, 2002:
Item 5. Other events and Regulation FD Disclosure - Updated
information concerning Registrant's disposition of its
wireless operations and acquisitions of telephone properties
from Verizon.
Item 7. Financial Statements and Exhibits - Historical
financial statements of Verizon properties acquired and pro
forma financial information.
The following item was reported in a Form 8-K filed October
25, 2002:
Item 5. Other events and Regulation FD Disclosure - News
release announcing third quarter results of operations and
fourth quarter 2002 earnings expectations.
c. Exhibits:
3.1 Amended and Restated Articles of Incorporation of
Registrant, dated as of May 6, 1999,
(incorporated by reference to Exhibit 3(i) to
Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1999).
3.2 Registrant's Bylaws, as amended through February 25, 2003,
included elsewhere herein.
3.3 Governance Guidelines and Charters, all included
elsewhere herein.
(a) Corporate Governance Guidelines
(b) Charter of the Audit Committee of the
Board of Directors
(c) Charter of the Compensation Committee of
the Board of Directors
(d) Charter of the Nominating and Corporate
Governance Committee of the Board of Directors
(e) Charter of the Risk Evaluation Committee of the
Board of Directors
4.1 Note Purchase Agreement, dated September 1, 1989,
between Registrant, Teachers Insurance and
Annuity Association of America and the Lincoln
National Life Insurance Company (incorporated by
reference to Exhibit 4.23 to Registrant's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1989).
4.2 Rights Agreement, dated as of August 27, 1996,
between Registrant and Society National Bank, as
Rights Agent, including the form of Rights
Certificate (incorporated by reference to Exhibit
1 of Registrant's Current Report on Form 8-K
filed August 30, 1996) and Amendment No.1
thereto, dated May 25, 1999 (incorporated by
reference to Exhibit 4.2(ii) to Registrant's
Report on Form 8-K dated May 25, 1999) and
Amendment No. 2 thereto, dated and effective as
of June 30, 2000, by and between the Registrant
and Computershare Investor Services, LLC, as
rights agent (incorporated by reference to
Exhibit 4.1 of Registrant's Quarterly report on
10-Q for the quarter ended September 30, 2000).
4.3 Form of common stock certificate of the Registrant
(incorporated by reference to Exhibit 4.3 of the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 2000).
4.4 Instruments relating to the Company's public
senior debt
(a) Indenture dated as of March 31, 1994
between the Company and Regions Bank
(formerly First American Bank & Trust of
Louisiana), as Trustee (incorporated by
reference to Exhibit 4.1 of the Company's
Registration Statement on Form S-3,
Registration No. 33-52915).
(b) Resolutions designating the terms and conditions
of the Company's 7-3/4% Senior Notes, Series A,
due 2004 and 8-1/4% Senior Notes, Series B,
due 2024 (incorporated by reference to Exhibit
4.1 to Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1994).
(c) Resolutions designating the terms and
conditions of the Company's 6.55% Senior
Notes, Series C, due 2005 and 7.2% Senior
Notes, Series D, due 2025 (incorporated by
reference to Exhibit 4.27 to Registrant's
Annual Report on Form 10-K for the year
ended December 31, 1995).
(d) Resolutions designating the terms and
conditions of the Company's 6.15% Senior
Notes, Series E, due 2005; 6.30% Senior
Notes, Series F, due 2008; and 6.875%
Debentures, Series G, due 2028,
(incorporated by reference to Exhibit 4.9
to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1997).
(e) Form of Registrant's 8.375% Senior Notes,
Series H, Due 2010, issued October 19, 2000
(incorporated by reference to Exhibit 4.2
of Registrant's Quarterly Report on Form
10-Q for the Quarter ended September 30,
2000).
(f) For information on Registrant's Series J
notes and related First Supplemental
Indenture, see Item 4.8 below.
(g) Second Supplemental Indenture dated as of
August 20, 2002 between CenturyTel and
Regions Bank (successor-in-interest to
First American Bank & Trust of Louisiana
and Regions Bank of Louisiana), as Trustee,
designating and outlining the terms and
conditions of CenturyTel's 4.75%
Convertible Senior Debentures, Series K,
due 2032 (incorporated by reference to
Exhibit 4.3 of CenturyTel's registration
statement on Form S-4, File No.
333-100480).
(h) Form of 4.75% Convertible Debentures, Series
K, due 2032 (included in Exhibit 4.4(g)).
(i) Board resolutions designating the terms and
conditions of CenturyTel's 7.875% Senior
Notes, Series L, due 2012 (incorporated by
reference to exhibit 4.2 of CenturyTel's
registration statement on Form S-3, File
No. 333-100481).
(i) Form of 7.875% Senior Notes, Series L, due 2012
(included in Exhibit 4.4(i)).
(k) Registration Rights Agreement dated as of
August 26, 2002 by and among CenturyTel,
and Banc of America Securities LLC, J.P.
Morgan Securities Inc. and Wachovia
Securities, Inc. (incorporated by reference
to Exhibit 4.5 of CenturyTel's registration
statement on Form S-4, File No.
333-100480).
(l) Exchange and Registration Rights Agreement
dated as of August 26, 2002 by and among
CenturyTel and Banc of America Securities
LLC, J.P. Morgan Securities Inc. and
Wachovia Securities, Inc., as
representatives of the initial purchasers
named therein (incorporated by reference to
Exhibit 4.4 of CenturyTel's registration
statement on Form S-3, File No.
333-100481).
4.5 $533 Million Three-Year Revolving Credit
Facility, dated July 22, 2002, between
CenturyTel, Inc. and the lenders named therein
(incorporated by reference to Exhibit 10.1 of
Registrant's Quarterly Report on Form 10-Q for
the period ended June 30, 2002).
4.6 $267 Million 364-Day Revolving Credit Facility,
dated July 22, 2002, between CenturyTel, Inc. and
the lenders named therein (incorporated by
reference to Exhibit 10.2 of Registrant's
Quarterly Report on Form 10-Q for the period
ended June 30, 2002).
4.7 First Supplemental Indenture, dated as of
November 2, 1998, to Indenture between CenturyTel
of the Northwest, Inc. and The First National
Bank of Chicago (incorporated by reference to
Exhibit 10.2 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30,
1998).
4.8 Agreements relating to equity units issued by
CenturyTel in May 2002:
(a) Purchase Contract Agreement, dated as of May
1, 2002, between CenturyTel and Wachovia
Bank, National Association, as Purchase
Contract Agent (incorporated by reference to
Exhibit 4.13 to CenturyTel's Registration
Statement on Form S-3, File No. 333-84276).
(b) Pledge Agreement, dated as of May 1, 2002,
by and among CenturyTel, JPMorgan Chase
Bank, as Collateral Agent, Custodial Agent,
and Securities Intermediary, and Wachovia
Bank, National Association, as Purchase
Contract Agent (incorporated by reference to
Exhibit 4.15 to CenturyTel's Registration
Statement on Form S-3, File No. 333-84276).
(c) First Supplemental Indenture, dated as of
May 1, 2002, between CenturyTel and Regions
Bank, as Trustee, to the Indenture, dated as
of March 31, 1994, between CenturyTel and
Regions Bank, as Trustee, relating to
CenturyTel's Senior Notes, Series J, due
2007 issued in connection with the equity
units (incorporated by reference to Exhibit
4.2(b) to CenturyTel's Registration
Statement on Form S-3, File No. 333-84276).
10.1 Qualified Employee Benefit Plans (excluding
several narrow-based qualified plans that cover
union employees or other limited groups of
Company employees)
(a) Registrant's Employee Stock Ownership Plan
and Trust, as amended and restated February
28, 2002 and amendment thereto dated
December 31, 2002, both included elsewhere
herein.
(b) Registrant's Dollars & Sense Plan and
Trust, as amended and restated, effective
September 1, 2000 and amendment thereto
dated December 31, 2002, both included
elsewhere herein.
(c) Registrant's Amended and Restated
Retirement Plan, effective as of February
28, 2002, and amendment thereto dated
December 31, 2002, both included elsewhere
herein.
(d) Merger Agreement, dated September 18, 2001,
between Registrant and Regions Bank of
Louisiana, pursuant to which Registrant's
Stock Bonus Plan and PAYSOP were merged
into Registrant's Employee Stock Ownership
Plan (incorporated by reference to Exhibit
10(b) of Registrant's Quarterly Report on
Form 10-Q for the quarter ended September
30, 2001).
10.2 Stock-based Incentive Plans
(a) Registrant's 1983 Restricted Stock Plan,
dated February 21, 1984, as amended and
restated as of November 16, 1995 (incorporated
by reference to Exhibit 10.1(e) to Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1995) and amendment
thereto dated November 21, 1996,
(incorporated by reference to Exhibit
10.1(e) to Registrant's Annual Report on
Form 10-K for the year ended December 31,
1996), and amendment thereto dated February
25, 1997 (incorporated by reference to Exhibit
10.3 to Registrant's Quarterly Report
on Form 10-Q for the quarter ended March 31,
1997), and amendment thereto dated April 25,
2001 (incorporated by reference to Exhibit 10.1
of Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2001), and
amendment thereto dated April 17, 2000
(incorporated by reference to Exhibit 10.2(a)
to Registrant's Annual Report on Form 10-K for
the year ended December 31, 2001).
(b) Registrant's 1988 Incentive Compensation
Program, as amended and restated August 22,
1989 (incorporated by reference to Exhibit
19.8 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended September
30, 1989) and amendment thereto dated
November 21, 1996 (incorporated by
reference to Exhibit 10.1(g) to
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1996).
(c) Registrant's 1995 Incentive Compensation
Plan approved by Registrant's shareholders
on May 11, 1995 (incorporated by reference
to Exhibit 4.4 to Registration No. 33-60061) and
amendment thereto dated November 21, 1996
(incorporated by Reference to Exhibit 10.1 (l)
to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996), and
amendment thereto dated February 25, 1997
(incorporated by reference to Exhibit 10.1
to Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1997).
(i) Form of Stock Option Agreement,
pursuant to 1995 Incentive Compensation
Plan and dated as of May 22, 1995, entered
into by Registrant and its officers
(incorporated by reference to Exhibit 10.5
to Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995).
(ii) Form of Stock Option Agreement,
pursuant to 1995 Incentive Compensation
Plan and dated as of June 23, 1995,
entered into by Registrant and certain key
employees (incorporated by reference to
Exhibit 10.6 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended
June 30, 1995).
(iii) Form of Stock Option Agreement,
pursuant to 1995 Incentive Compensation
Plan and dated as of February 24, 1997,
entered into by Registrant and its
officers (incorporated by reference to
Exhibit 10.4 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended
June 30, 1997).
(iv) Form of Stock Option Agreement,
pursuant to 1995 Incentive Compensation
Plan and dated as of February 21, 2000,
entered into by Registrant and its
officers incorporated by reference to
Exhibit 10.1 (t) to Registrant's Annual
Report on Form 10-K for the year ended
December 31, 1999).
(v) Form of Restricted Stock and
Performance Share Agreement, dated as of
March 16, 1998, relating to equity
incentive awards granted in 1998 pursuant
to Registrant's 1995 Incentive
Compensation Plan (incorporated by
reference to Exhibit 10.3 to Registrant's
Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998).
(vi) Form of Restricted Stock and
Performance Share Agreement, dated as of
February 22, 1999, relating to equity
incentive awards granted in 1999 pursuant
to the Registrant's 1995 Incentive
Compensation Plan (incorporated by
reference to Exhibit 10.1(x) to
Registrant's Annual Report on Form 10-K
for the year ended December 31, 1999).
(d) Amended and Restated Registrant's 2000
Incentive Compensation Plan, as amended
through May 23, 2000 (incorporated by
reference to Exhibit 10.2 to Registrant's
Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000).
(i) Form of Stock Option Agreement,
pursuant to the 2000 Incentive
Compensation Plan and dated as of
May 21, 2001, entered into by
Registrant and its officers
(incorporated by reference to
Exhibit 10.2(e) to Registrant's
Annual Report on Form 10-K for the
year ended December 31, 2001).
(ii) Form of Stock Option Agreement,
pursuant to the 2000 Incentive
Compensation Plan and dated as of
February 25, 2002, entered into by
Registrant and its officers,
included elsewhere herein.
(e) CenturyTel's 2002 Directors Stock
Option Plan (incorporated by
reference to Exhibit 10.1 of
Registrant's Quarterly Report on
Form 10-Q for the period ended
September 30, 2002).
(i) Form of Stock Option Agreement,
pursuant to the 2002 Directors
Stock Option Plan, entered into by
CenturyTel in connection with
options granted to the outside
directors as of May 10, 2002
(incorporated by reference to
Exhibit 10.2 of Registrant's
Quarterly Report on Form 10-Q for
the period ended September 30,
2002).
(f) CenturyTel's 2002 Management Incentive
Compensation Plan (incorporated by
reference to Exhibit 10.3 of Registrant's
Quarterly Report on Form 10-Q for the
period ended September 30, 2002).
(i) Form of Stock Option Agreement,
pursuant to the 2002 Management
Incentive Compensation Plan,
entered into between CenturyTel and
certain of its officers and key
employees at various dates since
May 9, 2002 (incorporated by
reference to Exhibit 10.4 of
Registrant's Quarterly Report on
Form 10-Q for the period ended
September 30, 2002).
(ii) Form of Stock Option Agreement,
pursuant to the 2002 Management
Incentive Compensation Plan and
dated as of February 24, 2003,
entered into by Registrant and its
officers, included elsewhere
herein.
10.3 Other Non-Qualified Employee Benefit Plans
(a) Registrant's Key Employee Incentive Compensation
Plan, dated January 1, 1984, as amended and
restated as of November 16, 1995 (incorporated by
reference to Exhibit 10.1(f) to Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1995) and amendment thereto dated
November 21, 1996 (incorporated by reference to
Exhibit 10.1 (f) to Registrant's Annual Report
on Form 10-K for the year ended December 31,
1996), amendment thereto dated February 25,
1997 (incorporated by reference to Exhibit 10.2 to
Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997), amendment
thereto dated April 25, 2001 (incorporated by
reference to Exhibit 10.2 of Registrant's
Quarterly Report on Form 10-Q for the quarter
ended March 31, 2001) and amendment thereto dated
April 17, 2000 (incorporated by reference to
Exhibit 10.3(a) to Registrant's Annual Report on
Form 10-K for the year ended December 31, 2001).
(b) Registrant's Restated Supplemental
Executive Retirement Plan, dated April 3,
2000 (incorporated by reference to Exhibit
10.1(d) to Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31,
2000.)
(c) Registrant's Restated Supplemental Defined
Contribution Plan, restated as of July 17,
2001, (incorporated by reference to Exhibit
10.1 of Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30,
2001.)
(d) Registrant's Amended and Restated
Supplemental Dollars & Sense Plan,
effective as of January 1, 1999
(incorporated by reference to Exhibit 10.1
(q) to Registrant's Annual Report on Form
10-K for the year ended December 31, 1998).
(e) Registrant's Supplemental Defined Benefit
Plan, effective as of January 1, 1999
(incorporated by reference to Exhibit 10.1
(y) to Registrant's Annual Report on Form
10-K for the year ended December 31, 1998),
and amendment thereto dated February 28,
2002 (incorporated by reference to Exhibit
10.3(e) to Registrant's Annual Report on
Form 10-K for the year ended December 31,
2001).
(f) Registrant's Amended and Restated Salary
Continuation (Disability) Plan for
Officers, dated November 26, 1991
(incorporated by reference to Exhibit 10.16
of Registrant's Annual Report on Form 10-K
for the year ended December 31, 1991).
(g) Registrant's Restated Outside Directors'
Retirement Plan, dated as of November 16,
1995 (incorporated by reference to Exhibit
10.1(t) to Registrant's Annual Report on
Form 10-K for the year ended December 31,
1995) and amendment thereto dated April 17,
2000 (incorporated by reference to Exhibit
10.3(g) to Registrant's Annual Report on
Form 10-K for the year ended December 31,
2001) and amendment thereto dated December
31, 2002, included elsewhere herein.
(h) Registrant's Restated Deferred Compensation
Plan for Outside Directors, dated as of
November 16, 1995 (incorporated by
reference to Exhibit 10.1(u) to
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1995) and
amendment thereto dated April 17, 2000
(incorporated by reference to Exhibit
10.3(h) to Registrant's Annual Report on
Form 10-K for the year ended December 31,
2001).
(i) Registrant's Chairman/Chief Executive
Officer Short-Term Incentive Program
(incorporated by reference to Exhibit 10.6
to Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997).
(j) Registrant's 2001 Employee Stock Purchase Plan
(incorporated by reference to Registrant's 2001 Proxy
Statement).
10.4 Employment, Severance and Related Agreements
(a) Employment Agreement, originally dated May
24, 1993, as amended and restated through
February 22, 2000, by and between
Registrant and its former Chairman Clarke
M. Williams (incorporated by reference to
Exhibit 10.1(a) to Registrant's Quarterly
Report on Form 10-Q for the quarter ended
March 31, 2000).
(b) Change of Control Agreement, dated February
22, 2000 by and between Glen F. Post, III
and Registrant (incorporated by reference
to Exhibit 10.1(b) to Registrant's
Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000).
(c) Form of Change of Control Agreement, dated
February 22, 2000, by and between
Registrant and David D. Cole, R. Stewart
Ewing, Michael E. Maslowski and Harvey P.
Perry (incorporated by reference exhibit
10.1(c) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended
March 31, 2000).
(d) Form of Change of Control Agreement dated
July 24, 2000, by and between the
Registrant and Karen A. Puckett
(incorporated by reference to Exhibit
10.1(c) of Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31,
2000).
10.5 Other Agreements
(a) Asset Purchase Agreement, dated as of
October 22, 2001, between GTE Midwest
Incorporated (d/b/a Verizon Midwest) and
CenturyTel of Missouri, LLC (incorporated
by reference to Exhibit 2(a) of
Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2001).
(b) Asset Purchase Agreement, dated as of
October 22, 2001, between Verizon South,
Inc., Contel of the South, Inc. (d/b/a
Verizon Mid-States) and CenturyTel of
Alabama, LLC (incorporated by reference to
Exhibit 2(b) of Registrant's Quarterly
Report on Form 10-Q for the quarter ended
September 30, 2001).
(c) Stock Purchase Agreement, dated March 19,
2002, between Registrant and Alltel
Communications, Inc. (incorporated by
reference to Registrant's Current Report on
Form 8-K filed March 22, 2002), as amended
by Amendment No. 1 to Stock Purchase
Agreement, dated July 31, 2002
(incorporated by reference to Registrant's
Current Report on Form 8-K and Form 8-K/A
filed August 13, 2002).
21 Subsidiaries of the Registrant, included elsewhere herein.
23 Independent Auditors' Consent, included elsewhere herein.
99 Registrant's Chief Executive Officer and Chief Financial
Officer certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, included elsewhere herein.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CenturyTel, Inc.,
Date: March 27, 2003 By: /s/ Glen F. Post, III
-------------------------
Glen F. Post, III
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Executive Vice President and
/s/ R. Stewart Ewing, Jr. Chief Financial Officer
--------------------------
R. Stewart Ewing, Jr. March 27, 2003
Executive Vice President, Corporate
Secretary, General Counsel,
/s/ Harvey P. Perry Chief Administrative Officer
-------------------------- and Director
Harvey P. Perry March 27, 2003
/s/ Neil A. Sweasy Vice President and Controller
--------------------------
Neil A. Sweasy March 27, 2003
/s/ William R. Boles, Jr. Director
--------------------------
William R. Boles, Jr. March 27, 2003
/s/ Virginia Boulet Director
--------------------------
Virginia Boulet March 27, 2003
/s/ Calvin Czeschin Director
--------------------------
Calvin Czeschin March 27, 2003
/s/ James B. Gardner Director
--------------------------
James B. Gardner March 27, 2003
/s/ W. Bruce Hanks Director
--------------------------
W. Bruce Hanks March 27, 2003
/s/ R. L. Hargrove, Jr. Director
--------------------------
R. L. Hargrove, Jr. March 27, 2003
/s/ Johnny Hebert Director
--------------------------
Johnny Hebert March 27, 2003
/s/ F. Earl Hogan Director
--------------------------
F. Earl Hogan March 27, 2003
/s/ C. G. Melville, Jr. Director
--------------------------
C. G. Melville, Jr. March 27, 2003
/s/ Jim D. Reppond Director
--------------------------
Jim D. Reppond March 27, 2003
/s/ Joseph R. Zimmel Director
--------------------------
Joseph R. Zimmel March 27, 2003
CERTIFICATIONS
I, Glen F. Post, III, certify that:
1. I have reviewed this annual report on Form 10-K of CenturyTel, Inc;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: March 27, 2003
/s/ Glen F. Post, III
----------------------------------
Glen F. Post, III
Chairman of the Board of Directors
and Chief Executive Officer
I, R. Stewart Ewing, Jr. certify that:
1. I have reviewed this annual report on Form 10-K of CenturyTel, Inc;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: March 27, 2003
/s/ R. Stewart Ewing, Jr.
------------------------------
R. Stewart Ewing, Jr.
Executive Vice President and
Chief Financial Officer
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
CENTURYTEL, INC.
For the years ended December 31, 2002, 2001 and 2000
<TABLE>
<CAPTION>
Additions
Balance at charged to Deductions Balance
beginning costs and from Other at end
Description of period expenses allowance (1) changes of period
------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 2002
Allowance for doubtful accounts $ 13,908 34,045 (17,134) 3,143 (2) 33,962
Valuation allowance for
deferred tax assets $ 19,691 8,689 - - 28,380
Year ended December 31, 2001
Allowance for doubtful accounts $ 9,968 22,533 (18,593) - 13,908
Valuation allowance for
deferred tax assets $ 6,211 13,480 - - 19,691
Year ended December 31, 2000
Allowance for doubtful accounts $ 2,594 15,977 (12,485) 3,882 (2) 9,968
Valuation allowance for
deferred tax assets $ - 6,211 - - 6,211
</TABLE>
(1) Customers' accounts written-off, net of recoveries.
(2) Allowance for doubtful accounts at the date of acquisition of purchased
subsidiaries, net of allowance for doubtful accounts at the date of
disposition of subsidiaries sold.
Exhibit 3.2
BYLAWS
OF
CENTURYTEL, INC.
(as amended through February 25, 2003)
BYLAWS
CENTURYTEL, INC.
TABLE OF CONTENTS
ARTICLE I - Officers.........................................................1
Section 1. Required and Permitted Officers.........................1
Section 2. Election and Removal of Officers........................4
ARTICLE II - Board of Directors..............................................5
Section 1. Powers..................................................5
Section 2. Organizational and Regular Meetings.....................5
Section 3. Special Meetings........................................5
Section 4. Waiver of Notice........................................6
Section 5. Quorum..................................................6
Section 6. Notice of Adjournment...................................6
Section 7. Written Consents........................................6
Section 8. Voting..................................................6
Section 9. Use of Communications Equipment.........................7
Section 10. Indemnification.........................................7
Section 11. Certain Qualifications.................................11
ARTICLE III - Committees....................................................12
Section 1. Committees.............................................12
Section 2. Appointment and Removal of Committee Members...........13
Section 3. Procedures for Committees..............................13
Section 4. Meetings...............................................13
Section 5. Authority of Chairman to Appoint Committees............14
ARTICLE IV - Shareholders' Meetings.........................................14
Section 1. Place of Meetings......................................14
Section 2. Annual Meeting.........................................14
Section 3. Special Meetings.......................................14
Section 4. Notice of Meetings.....................................15
Section 5. Notice of Shareholder Nominations and
Shareholder Business...................................15
Section 6. Quorum.................................................17
Section 7. Voting Power Present or Represented....................18
Section 8. Voting Requirements....................................18
Section 9. Proxies................................................18
Section 10. Adjournments...........................................18
Section 11. Written Consents.......................................19
Section 12. List of Shareholders...................................19
Section 13. Procedure at Shareholders Meetings.....................19
ARTICLE V - Certificates of Stock...........................................19
ARTICLE VI - Registered Shareholders........................................20
ARTICLE VII - Loss of Certificate...........................................20
ARTICLE VIII - Checks.......................................................20
ARTICLE IX - Dividends......................................................20
ARTICLE X - Inapplicability of Louisiana Control Share Statute..............21
ARTICLE XI - Certain Definitions............................................21
ARTICLE XII - Amendments....................................................21
BYLAWS
(Amended entirely May 23, 1995)
(Amended Article I, Section I, Subsection 1.1(L),
added new Subsection 1.1(O), and amended
Subsection 1.2 - October 7, 1996)
(Amended Article III, Section 1.1(B), Section 1 by adding
new Subsection 1.3, Sections 3 and 4 amended
in their entirety - November 21, 1996)
(Amended Article I, Section I by adding, deleting, revising
or renumbering various paragraphs of Subsection 1.1
and by revising Subsection 1.2 - October 7, 1998)
(Amended Article I, Section I by adding or renumbering various
paragraphs of Subsection 1.1, by revising Subsection 1.2,
Article IV, Section 5, Subsections 5.2 and 5.7
amended in their entirety - November 19, 1998)
(Amended Article I, Section I by adding Subsection 1.1(G), amending
Subsection 1.2 and renumbering subsections - August 24, 1999)
(Amended Article III, Section 1.1(D) - November 18, 1999)
(Amended Article III in its entirety - February 25, 2003)
ARTICLE I
OFFICERS
Section 1. Required and Permitted Officers
1.1 Officers. The officers of the Corporation shall be a Chairman of
the Board; a Chief Executive Officer; a President; a Secretary; and a Treasurer.
The Board may elect such other officers as the Board may determine. An officer
need not be a Director and any two or more of the offices may be held by one
person, provided, however, that a person holding more than one office may not
sign in more than one capacity any certificate or any instrument required to be
signed by two officers. The required and permitted officers and duties thereof
are as follows:
A. Chairman of the Board (Chairman). The Chairman shall preside at all
meetings of the shareholders and Directors, ensure that all orders, policies and
resolutions of the Board are carried out and perform such other duties as may be
prescribed by the Board of Directors or these Bylaws.
B. Vice Chairman. The Board may from time to time elect one or more
Vice Chairmen. The Vice Chairman shall serve in the absence or inability of the
Chairman to serve. In the event of the death, resignation or permanent inability
of the Chairman to serve, the Vice Chairman shall automatically succeed to the
office of Chairman until such time as the Board of Directors duly elects a new
Chairman. In the event that there is more than one Vice Chairmen, then the one
who has served in that capacity for the longest period of time shall serve in
the absence of the Chairman or assume the office of Chairman, as the case may
be.
C. Chief Executive Officer (CEO). The CEO, subject to the powers of the
Chairman and the supervision of the Board of Directors, shall have general
supervision, direction and control of the business and affairs of the
Corporation. He may sign, execute and deliver in the name of the Corporation
powers of attorney, contracts, bonds and other obligations and shall perform
such other duties as may be prescribed from time to time by the Board of
Directors or these Bylaws. The CEO shall have general supervision and direction
of the officers of the Corporation and all such powers as may be reasonably
incident to such responsibilities except where the supervision and direction of
an officer is delegated expressly to another by the Board of Directors or these
Bylaws. Without limiting the generality of the foregoing the CEO shall establish
the annual salaries of each non-executive officer of the Corporation, unless
otherwise directed by the Board, and the annual salaries of each officer of the
Corporation's subsidiaries, unless otherwise directed by the respective boards
of directors of such subsidiaries.
D. President. The President may sign, execute and deliver in the name
of the Corporation powers of attorney, contracts, bonds, and other obligations
and shall perform such other duties as may be prescribed from time to time by
the Board of Directors, the Chairman, the CEO, or these Bylaws.
E. Chief Operating Officer (COO). The COO, subject to the powers of the
CEO and the supervision of the Board of Directors, shall manage the day-to-day
operations of the Corporation, shall perform such other duties as may be
prescribed by the Board of Directors or the CEO, and shall have the general
powers and duties usually vested in the chief operating officer of a
corporation. Without limiting the generality of the foregoing, the COO shall
supervise any other officer designated by the CEO and shall have all such powers
as may be reasonably incident to such responsibilities. Unless otherwise
provided by law or the Board of Directors, he may sign, execute and deliver in
the name of the Corporation powers of attorney, contracts, and bonds.
F. Chief Financial Officer. The Chief Financial Officer shall be the
principal financial officer of the Corporation. He shall manage the financial
affairs of the Corporation and direct the activities of the Treasurer,
Controller and other officers responsible for the Corporation's finances. He
shall be responsible for all internal and external financial reporting. Unless
otherwise provided by law or the Board of Directors, he may sign, execute and
deliver in the name of the Corporation powers of attorney, contracts, bonds, and
other obligations, and shall perform such other duties as may be prescribed from
time to time by the Board of Directors or by these Bylaws.
G. Chief Administrative Officer (CAO). The CAO, subject to the
supervision of the Board of Directors, shall be in general and active charge of
the administrative functions of the Corporation, shall perform such other duties
as may be prescribed by the Board of Directors and shall have the general powers
and duties usually vested in the chief administrative officer of a corporation.
Without limiting the generality of the foregoing, the CAO shall have the
authority to hire and discharge employees and agents of the Corporation under
his supervision, other than officers, and shall oversee the development and
implementation of the Corporation's administrative policies.
H. Chief Information Officer (CIO). The CIO, subject to the powers of
the CEO, shall be responsible for identifying and addressing the Corporation's
information systems needs. The CIO shall be responsible for identifying changes
and trends in computer and systems technology that affect the Corporation and
its operations, determining long-term corporate-wide information needs and
developing overall strategy for information needs and systems development. The
CIO shall be responsible for assuring the integrity of corporate data,
proprietary information and related intellectual property stored in the
Corporation's information systems.
I. General Counsel. The General Counsel shall be directly responsible
for advising the Board of Directors, the Corporation, and its officers and
employees in matters affecting the legal affairs of the Corporation. He shall
determine the need for and, if necessary, select outside counsel to represent
the Corporation and approve all fees in connection with their representation. He
shall also have such other powers, duties and authority as may be prescribed to
him from time to time by the CEO, the Board of Directors, or these Bylaws.
J. Treasurer. As directed by the Chief Financial Officer, the Treasurer
shall have general custody of all the funds and securities of the Corporation.
He may sign, with the CEO, President, Chief Financial Officer or such other
person or persons as may be specifically designated by the Board of Directors,
all bills of exchange or promissory notes of the Corporation. He shall perform
such other duties as may be prescribed from time to time by the Chief Financial
Officer or these Bylaws.
K. Controller. As directed by the Chief Financial Officer, the
Controller shall be responsible for the development and maintenance of the
accounting systems used by the Corporation and its subsidiaries. The Controller
shall be authorized to implement policies and procedures to ensure that the
Corporation and its subsidiaries maintain internal accounting control systems
designed to provide reasonable assurance that the accounting records accurately
reflect business transactions and that such transactions are in accordance with
management's authorization. Additionally, as directed by the Chief Financial
Officer, the Controller shall be responsible for internal and external financial
reporting for the Corporation and its subsidiaries.
L. Assistant Treasurer. The Assistant Treasurer shall have such powers
and perform such duties as may be assigned by the Treasurer. In the absence or
disability of the Treasurer, the Assistant Treasurer shall perform the duties
and exercise the powers of the Treasurer.
M. Secretary. The Secretary shall keep the minutes of all meetings of
the shareholders, the Board of Directors and its committees or subcommittees. He
shall cause notice to be given of meetings of shareholders, of the Board of
Directors and of any committee or subcommittee of the Board. He shall have
custody of the corporate seal and general charge of the records, documents and
papers of the Corporation not pertaining to the duties vested in other officers,
which shall at all reasonable times be open to the examination of any Director.
He may sign or execute contracts with any other officer thereunto authorized in
the name of the Corporation and affix the seal of Corporation thereto. He shall
perform such other duties as may be prescribed from time to time by the Board of
Directors or these Bylaws.
N. Assistant Secretary. The Assistant Secretary shall have powers and
perform such duties as may be assigned by the Secretary. In the absence or
disability of the Secretary, the Assistant Secretary shall perform the duties
and exercise the powers of the Secretary.
O. Executive Vice President(s). The Executive Vice President(s) shall,
in addition to exercising such powers and performing such duties associated with
any other office held thereby, assist the CEO in discharging the duties of that
office in any manner requested, and shall perform any other duties as may be
prescribed by the Board of Directors, by the CEO or by these Bylaws.
P. Senior Vice President(s). The Senior Vice President(s) shall, in
addition to exercising such powers and performing such duties associated with
any other office held thereby, perform such duties as may be prescribed from
time to time by the Board of Directors, by the CEO or by these Bylaws (or, with
respect to any Senior Vice President(s) who reports to the COO, by the COO).
Q. Vice President(s). The Vice President(s) shall have such powers and
perform such duties as may be assigned to them by the Board of Directors, the
CEO, the President, or any Executive Vice President, Senior Vice President or
other officer to whom they report. A Vice President may sign and execute
contracts and other obligations pertaining to the regular course of his duties.
R. Assistant Vice President(s). The Assistant Vice President(s) shall
have such powers and perform such duties as may be assigned to them by the Board
of Directors, the CEO, the President or the officer to whom they report. An
Assistant Vice President may sign and execute contracts and other obligations
pertaining to the regular course of his duties.
1.2 Executive Officer Group. The Executive Officer Group shall be
comprised of the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Operating Officer, the Chief Financial Officer, the Chief
Administrative Officer, the Chief Information Officer and each Executive or
Senior Vice President.
Section 2. Election and Removal of Officers
2.1 Election. The officers shall be elected annually by the Board of
Directors at its first meeting following the annual meeting of the shareholders
and, at any time, the Board may remove any officer (with or without cause, and
regardless of any contractual obligation to such officer) and fill a vacancy in
any office, but any election to, removal from or appointment to fill a vacancy
in any office, and the determination of the terms of employment thereof, shall
require the affirmative votes of (a) a majority of the Directors then in office
and (b) a majority of the Continuing Directors, voting as a separate group.
2.2 Removal. In addition, the Chief Executive Officer is empowered in
his sole discretion to remove or suspend any officer or other employee of the
Corporation who (a) fails to respond satisfactorily to the Corporation
respecting any inquiry by the Corporation for information to enable it to make
any certification required by the Federal Communications Commission under the
Anti-Drug Abuse Act of 1988, (b) is arrested or convicted of any offense
concerning the distribution or possession of, or trafficking in, drugs or other
controlled substances, or (c) the Chief Executive Officer believes to have been
engaged in actions that could lead to such an arrest or conviction.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Powers
In addition to the powers and authorities by these Bylaws expressly
conferred upon it, the Board of Directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Articles of Incorporation or by these Bylaws required to be exercised or
done by the shareholders.
Section 2. Organizational and Regular Meetings
The Board of Directors shall hold an annual organizational meeting,
without notice, immediately following the adjournment of the annual meeting of
the shareholders and shall hold a regular meeting on the first Tuesday after the
twentieth day in the months of February, May, August and November of each year.
The Secretary shall give not less than five days' written notice to each
Director of all regular meetings, which notice shall state the time and place of
the meeting.
Section 3. Special Meetings
3.1 Call of Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board or, if he is absent or
unable or unwilling to act, by the President. Upon the written request of any
two Directors delivered to the Chairman of the Board, the President or the
Secretary of the Corporation, a special meeting shall be called.
3.2 Notice. Written notice of the time and place of special meetings
shall be delivered personally to the Directors or sent to each Director by
letter or by telegram, charges prepaid, addressed to him at his address shown in
the Corporation's records. In case such notice is mailed or telegraphed, it
shall be deposited in the United States mail at least 72 hours prior to the
meeting or delivered to an overnight mail delivery service or to the telegraph
company in the place in which the principal office of the corporation is located
at least 48 hours prior to the meeting. In case such notice is personally
delivered as above provided, it shall be so delivered at least 24 hours prior to
the meeting. The foregoing notwithstanding, if the Chairman or the President
shall determine, in his sole discretion, that the subject of the special meeting
is urgent and must be considered by the Board without delay, notice may be given
by personal delivery or by telephone not less than 12 hours prior to the time
set for the meeting, provided a confirming telegram or overnight letter is sent
to the Director contemporaneously. Such mailing, telegraphing, telephoning or
personal delivery as above provided shall be due, legal and personal notice to
such Director.
Section 4. Waiver of Notice
Any Director may waive notice of a meeting by written waiver executed
either before or after the meeting. Directors present at any regular or special
meeting shall be deemed to have received due, or to have waived, notice thereof,
provided that a director who participates in a meeting by telephone shall not be
deemed to have received or waived due notice if, at the beginning of the
meeting, he objects to the transaction of any business because the meeting is
not lawfully called.
Section 5. Quorum
A majority of the authorized number of Directors as fixed by or
pursuant to the Articles of Incorporation shall be necessary to constitute a
quorum for the transaction of business, provided, however, that a minority of
the Directors, in the absence of a quorum, may adjourn from time to time, but
may not transact any business. If a quorum is present when the meeting convened,
the directors present may continue to do business, taking action by vote of a
majority of a quorum, until adjournment, notwithstanding the withdrawal of
enough directors to leave less than a quorum or the refusal of any director
present to vote.
Section 6. Notice of Adjournment
Notice of the time and place of holding an adjourned meeting need not
be given to absent Directors if the time and place is fixed at the meeting
adjourned.
Section 7. Written Consents
Anything to the contrary contained in these Bylaws notwithstanding, any
action required or permitted to be taken by the Board of Directors may be taken
without a meeting, if all members of the Board of Directors shall individually
or collectively consent in writing to such action. Such written consent or
consents shall be filed with the minutes of the proceedings of the Board. Such
action by written consent shall have the same force and effect as a unanimous
vote of such Directors at a meeting.
Section 8. Voting
At all meetings of the Board, each Director present shall have one
vote. At all meetings of the Board, all questions, the manner of deciding which
is not otherwise specifically regulated by law, the Articles of Incorporation or
these Bylaws, shall be determined by a majority of the Directors present at the
meeting, provided, however, that any shares of other corporations owned by the
Corporation shall be voted only pursuant to resolutions duly adopted upon the
affirmative votes of (a) 80% of the Directors then in office and (b) a majority
of the Continuing Directors, voting as a separate group.
Section 9. Use of Communications Equipment
Meetings of the Board of Directors may be held by means of telephone
conference calls or similar communications equipment provided that all persons
participating in the meeting can hear and communicate with each other.
Section 10. Indemnification
10.1 Definitions. As used in this Section:
(a) The term "Expenses" shall mean any expenses or costs
(including, without limitation, attorney's fees, judgments, punitive or
exemplary damages, fines and amounts paid in settlement). If any of the
foregoing amounts paid on behalf of Indemnitee are not deductible by Indemnitee
for federal or state income tax purposes, the Corporation will reimburse
Indemnitee for tax liability with respect thereto by paying to Indemnitee an
amount which, after taking into account taxes on such amount, equals
Indemnitee's incremental tax liability.
(b) The term "Claim" shall mean any threatened, pending
or completed claim, action, suit, or proceeding, whether civil, criminal,
administrative or investigative and whether made judicially or extra-judicially,
or any separate issue or matter therein, as the context requires.
(c) The term "Determining Body" shall mean (i) those
members of the Board of Directors who are not named as parties to the Claim for
which indemnification is being sought ("Impartial Directors"), if there are at
least three Impartial Directors, or (ii) a committee of at least three directors
appointed by the Board of Directors (regardless of whether the members of the
Board of Directors voting on such appointment are Impartial Directors) and
composed of Impartial Directors or (iii) if there are fewer than three Impartial
Directors or if the Board of Directors or a committee appointed thereby so
directs (regardless of whether the members thereof are Impartial Directors),
independent legal counsel, which may be the regular outside counsel of the
Corporation.
(d) The term "Indemnitee" shall mean each director and officer
and each former director and officer of the Corporation.
10.2 Indemnity. (a) To the extent any Expenses incurred by Indemnitee
are in excess of the amounts reimbursed or indemnified pursuant to policies of
liability insurance maintained by the Corporation, the Corporation shall
indemnify and hold harmless Indemnitee against any such Expenses actually and
reasonably incurred in connection with any Claim against Indemnitee (whether as
a subject of or party to, or a proposed or threatened subject of or party to,
the Claim) or in which Indemnitee is involved solely as a witness or person
required to give evidence, by reason of his position (i) as a director or
officer of the Corporation, (ii) as a director or officer of any subsidiary of
the Corporation or as a fiduciary with respect to any employee benefit plan of
the Corporation, or (iii) as a director, officer, employee or agent of another
corporation, partnership, limited liability company, joint venture, trust or
other for-profit or not-for-profit entity or enterprise, if such position is or
was held at the request of the Corporation, whether relating to service in such
position before or after the effective date of this Section 10, if (i) the
Indemnitee is successful in his defense of the Claim on the merits or otherwise
or (ii) the Indemnitee has been found by the Determining Body (acting in good
faith) to have met the Standard of Conduct; provided that (a) the amount of
Expenses for which the Corporation shall indemnify Indemnitee may be reduced by
the Determining Body to such amount as it deems proper if it determines in good
faith that the Claim involved the receipt of a personal benefit by Indemnitee
and (b) no indemnification shall be made in respect of any Claim as to which
Indemnitee shall have been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable for willful or intentional
misconduct in the performance of his duty to the Corporation or to have obtained
an improper benefit, unless, and only to the extent that, a court shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, the Indemnitee is fairly and
reasonably entitled to indemnity for such Expenses as the court shall deem
proper; and provided further that, if the Claim involves Indemnitee by reason of
his position with an entity or enterprise described in clause (ii) or (iii) of
this Section 10.2(a) and if Indemnitee may be entitled to indemnification with
respect to such Claim from such entity or enterprise, Indemnitee shall be
entitled to indemnification hereunder only (x) if he has applied to such entity
or enterprise for indemnification with respect to the Claim and (y) to the
extent that indemnification to which he would be entitled hereunder but for this
proviso exceeds the indemnification paid by such other entity or enterprise.
(b) For purposes of this Section, the Standard of Conduct
is met when conduct by an Indemnitee with respect to which a Claim is asserted
was conduct that he reasonably believed to be in, or not opposed to, the best
interest of the Corporation, and, in the case of a Claim which is a criminal
action or proceeding, conduct that the Indemnitee had no reasonable cause to
believe was unlawful. The termination of any Claim by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that Indemnitee did not meet the
Standard of Conduct.
(c) Promptly upon becoming aware of the existence of any
Claim, Indemnitee shall notify the Chief Executive Officer of the existence of
the Claim, who shall promptly advise the members of the Board of Directors
thereof and that establishing the Determining Body will be a matter presented at
the next regularly scheduled meeting of the Board of Directors. After the
Determining Body has been established the Chief Executive Officer shall inform
Indemnitee thereof and Indemnitee shall immediately notify the Determining Body
of all facts relevant to the Claim known to such Indemnitee. Within 60 days of
the receipt of such notice and information, together with such additional
information as the Determining Body may request of Indemnitee, the Determining
Body shall report to Indemnitee of its determination whether Indemnitee has met
the Standard of Conduct. The Determining Body may extend the period of time for
determining whether the Standard of Conduct has been met, but in no event shall
such period of time be extended beyond an additional 60 days.
(d) If, after determining that the Standard of Conduct
has been met, the Determining Body obtains facts of which it was not aware at
the time it made such determination, the Determining Body on its own motion,
after notifying the Indemnitee and providing him an opportunity to be heard,
may, on the basis of such facts, revoke such determination, provided that, in
the absence of actual fraud by Indemnitee, no such revocation may be made later
than 30 days after final disposition of the Claim.
(e) Indemnitee shall promptly inform the Determining Body
upon his becoming aware of any relevant facts not theretofore provided by him to
the Determining Body, unless the Determining Body has obtained such facts by
other means.
(f) In the case of any Claim not involving a proposed,
threatened or pending criminal proceeding (i) if Indemnitee has, in the good
faith judgment of the Determining Body, met the Standard of Conduct, the
Corporation may, in its sole discretion, assume all responsibility for the
defense of the Claim, and, in any event, the Corporation and Indemnitee each
shall keep the other informed as to the progress of the defense of the Claim,
including prompt disclosure of any proposals for settlement; provided that if
the Corporation is a party to the Claim and Indemnitee reasonably determines
that there is a conflict between the positions of the Corporation and Indemnitee
with respect to the Claim, then Indemnitee shall be entitled to conduct his
defense with counsel of his choice; and provided further that Indemnitee shall
in any event be entitled at his expense to employ counsel chosen by him to
participate in the defense of the Claim; and (ii) the Corporation shall fairly
consider any proposals by Indemnitee for settlement of the Claim. If the
Corporation proposes a settlement of the Claim and such settlement is acceptable
to the person asserting the Claim or the Corporation believes a settlement
proposed by the person asserting the Claim should be accepted, it shall inform
Indemnitee of the terms of such proposed settlement and shall fix a reasonable
date by which Indemnitee shall respond. If Indemnitee agrees to such terms, he
shall execute such documents as shall be necessary to make final the settlement.
If Indemnitee does not agree with such terms, Indemnitee may proceed with the
defense of the Claim in any manner he chooses, provided that if Indemnitee is
not successful on the merits or otherwise, the Corporation's obligation to
indemnify such Indemnitee as to any Expenses incurred by following his
disagreement shall be limited to the lesser of (A) the total Expenses incurred
by Indemnitee following his decision not to agree to such proposed settlement or
(B) the amount that the Corporation would have paid pursuant to the terms of the
proposed settlement. If, however, the proposed settlement would impose upon
Indemnitee any requirement to act or refrain from acting that would materially
interfere with the conduct of Indemnitee's affairs, Indemnitee shall be
permitted to refuse such settlement and proceed with the defense of the Claim,
if he so desires, at the Corporation's expense in accordance with the terms and
conditions of these Bylaws without regard to the limitations imposed by the
immediately preceding sentence. In any event, the Corporation shall not be
obligated to indemnify Indemnitee for an amount paid in settlement that the
Corporation has not approved.
(g) In the case of a Claim involving a proposed,
threatened or pending criminal proceeding, Indemnitee shall be entitled to
conduct the defense of the Claim and to make all decisions with respect thereto,
with counsel of his choice; provided that the Corporation shall not be obligated
to indemnify Indemnitee for an amount paid in settlement that the Corporation
has not approved.
(h) After notification to the Corporation of the
existence of a Claim, Indemnitee may from time to time request of the Chief
Executive Officer or, if the Chief Executive Officer is a party to the Claim as
to which indemnification is being sought, any officer who is not a party to the
Claim and who is designated by the Chief Executive Officer (the "Disbursing
Officer"), which designation shall be made promptly after receipt of the initial
request, that the Corporation advance to Indemnitee the Expenses (other than
fines, penalties, judgments or amounts paid in settlement) that he incurs in
pursuing a defense of the Claim prior to the time that the Determining Body
determines whether the Standard of Conduct has been met. The Disbursing Officer
shall pay to Indemnitee the amount requested (regardless of Indemnitee's
apparent ability to repay the funds) upon receipt of an undertaking by or on
behalf of Indemnitee to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation under the
circumstances, provided that if the Disbursing Officer does not believe such
amount to be reasonable, he shall advance the amount deemed by him to be
reasonable and Indemnitee may apply directly to the Determining Body for the
remainder of the amount requested.
(i) After a determination that the Standard of Conduct
has been met, for so long as and to the extent that the Corporation is required
to indemnify Indemnitee under these Bylaws, the provisions of Paragraph (h)
shall continue to apply with respect to Expenses incurred after such time except
that (i) no undertaking shall be required of Indemnitee and (ii) the Disbursing
Officer shall pay to Indemnitee the amount of any fines, penalties or judgments
against him which have become final for which the Corporation is obligated to
indemnify him or any amount of indemnification ordered to be paid to him by a
court.
(j) Any determination by the Corporation with respect to
settlement of a Claim shall be made by the Determining
Body.
(k) The Corporation and Indemnitee shall keep confidential
to the extent permitted by law and their fiduciary obligations all
facts and determinations provided pursuant to or arising out of the operation of
these Bylaws and the Corporation and Indemnitee shall instruct its or his agents
and employees to do likewise.
10.3 Enforcement. (a) The rights provided by this Section shall be
enforceable by Indemnitee in any court of competent jurisdiction.
(b) If Indemnitee seeks a judicial adjudication of his
rights under this Section, Indemnitee shall be entitled to recover from the
Corporation, and shall be indemnified by the Corporation against, any and all
Expenses actually and reasonably incurred by him in connection with such
proceeding, but only if he prevails therein. If it shall be determined that
Indemnitee is entitled to receive part but not all of the relief sought, then
Indemnitee shall be entitled to be reimbursed for all Expenses incurred by him
in connection with such proceeding if the indemnification amount to which he is
determined to be entitled exceeds 50% of the amount of his claim. Otherwise, the
Expenses sought incurred by Indemnitee in connection with such judicial
adjudication shall be appropriately prorated.
(c) In any judicial proceeding described in this subsection,
the Corporation shall bear the burden of proving that Indemnitee is not
entitled to Expenses sought with respect to any Claim.
10.4 Saving Clause. If any provision of this Section is determined by a
court having jurisdiction over the matter to require the Corporation to do or
refrain from doing any act that is in violation of applicable law, the court
shall be empowered to modify or reform such provision so that, as modified or
reformed, such provision provides the maximum indemnification permitted by law
and such provision, as so modified or reformed, and the balance of this Section,
shall be applied in accordance with their terms. Without limiting the generality
of the foregoing, if any portion of this Section shall be invalidated on any
ground, the Corporation shall nevertheless indemnify and Indemnitee to the full
extent permitted by any applicable portion of this Section that shall not have
been invalidated and to the full extent permitted by law with respect to that
portion that has been invalidated.
10.5 Non-Exclusivity. (a) The indemnification and payment of Expenses
provided by or granted pursuant to this Section shall not be deemed exclusive of
any other rights to which Indemnitee is or may become entitled under any
statute, article of incorporation, bylaw, authorization of shareholders or
directors, agreement or otherwise.
(b) It is the intent of the Corporation by this Section
to indemnify and hold harmless Indemnitee to the fullest extent permitted by
law, so that if applicable law would permit the Corporation to provide broader
indemnification rights than are currently permitted, the Corporation shall
indemnify and hold harmless Indemnitee to the fullest extent permitted by
applicable law notwithstanding that the other terms of this Section would
provide for lesser indemnification.
10.6 Successors and Assigns. This Section shall be binding upon the
Corporation, its successors and assigns, and shall inure to the benefit of
Indemnitee's heirs, personal representatives, and assigns and to the benefit of
the Corporation, its successors and assigns.
10.7 Indemnification of Other Persons. The Corporation may indemnify
any person not a director or officer of the Corporation to the extent authorized
by the Board of Directors or a committee of the Board expressly authorized by
the Board of Directors.
Section 11. Certain Qualifications
No person shall be eligible for nomination, election or service as a
director of the Corporation who shall (i) in the opinion of the Board of
Directors fail to respond satisfactorily to the Corporation respecting any
inquiry of the Corporation for information to enable the Corporation to make any
certification required by the Federal Communications Commission under the
Anti-Drug Abuse Act of 1988 or to determine the eligibility of such persons
under this section; (ii) have been arrested or convicted of any offense
concerning the distribution or possession of, or trafficking in, drugs or other
controlled substances, provided that in the case of an arrest the Board of
Directors may in its discretion determine that notwithstanding such arrest such
persons shall remain eligible under this Section; or (iii) have engaged in
actions that could lead to such an arrest or conviction and that the Board of
Directors determines would make it unwise for such person to serve as a director
of the Corporation. Any person serving as a director of the Corporation shall
automatically cease to be a director on such date as he ceases to have the
qualifications set forth in this Section, and his position shall be considered
vacant within the meaning of the Articles of Incorporation of the Corporation.
ARTICLE III
COMMITTEES
Section 1. Committees
1.1 Standing Committees. The Board of Directors shall have the
standing committees specified below:
A. The Executive Committee shall consist of three or more Directors
(the exact number of which shall be set from time to time by the Board), one of
whom shall be the Chairman of the Board, who shall also serve as chairman of the
Executive Committee. To the full extent permitted by law and the Articles of
Incorporation, the Executive Committee shall have and may exercise all of the
powers of the Board in the management of the business and affairs of the
Corporation when the Board is not in session.
B. The Compensation Committee shall consist of three or more Directors
(the exact number of which shall be set from time to time by the Board), who
shall have such qualifications, powers and responsibilities as specified in any
charter that may from time to time be adopted by the Compensation Committee and
approved by the Board of Directors.
C. The Nominating and Corporate Governance Committee shall consist of
three or more Directors (the exact number of which shall be set from time to
time by the Board), who shall have such qualifications, powers and
responsibilities as specified in any charter that may from time to time be
adopted by the Nominating and Corporate Governance Committee and approved by the
Board of Directors.
D. The Audit Committee shall consist of three or more Directors (the
exact number of which shall be set from time to time by the Board), who shall
have such qualifications, powers and responsibilities as specified in any
charter that may from time to time be adopted by the Audit Committee and
approved by the Board of Directors.
E. The Risk Evaluation Committee shall consist of three or more
Directors (the exact number of which shall be set from time to time by the
Board), who shall have such qualifications, powers and responsibilities as
specified in any charter that may from time to time be adopted by the Risk
Evaluation Committee and approved by the Board of Directors.
1.2 Special Purpose Committees. The Board may authorize on an ad hoc
basis special pricing committees in connection with the issuance of securities
or such other special purpose committees as may be necessary or appropriate in
connection with the Board's management of the business and affairs of the
Corporation.
1.3 Subcommittees. As necessary or appropriate, each of the standing
committees listed in Section 1.1 may organize a standing or ad hoc subcommittee
for such purposes within the scope of its powers as it sees fit, and may
delegate to such subcommittee any of its powers as may be necessary or
appropriate to enable such subcommittee to discharge its duties and
responsibilities. Any such subcommittee shall be composed solely of members of
the standing committee, which shall appoint and replace such subcommittee
members. Each subcommittee member shall hold office during the term designated
by the standing committee, provided that such term shall automatically lapse if
such member ceases to be a member of the standing committee or fails to meet any
other qualifications that may be imposed by the standing committee.
Section 2. Appointment and Removal of Committee Members
Subject to Section 5 below, Directors shall be appointed to or removed
from a committee only upon the affirmative votes of:
1. A majority of the Directors then in office; and
2. A majority of the Continuing Directors, voting as a separate group.
Each member of a committee shall serve until his or her successor is
duly appointed and qualified.
Section 3. Procedures for Committees
Each committee or subcommittee may adopt such charters, procedures or
regulations as it shall deem necessary for the proper conduct of its functions
and the performance of its responsibilities, provided that such charters,
procedures or regulations are consistent with (i) the Company's articles of
incorporation, bylaws and corporate governance guidelines, (ii) applicable laws,
regulations and stock exchange listing standards, and (iii) any regulations or
procedures specified for such committee by the Board of Directors or for such
subcommittee by the standing committee that authorized its organization under
Section 1.3 (collectively, the "Governing Standards"). Unless otherwise
determined by a committee or subcommittee, each meeting thereof shall be
convened pursuant to the notice requirements pertaining to meetings of the full
Board. Each committee and subcommittee shall keep written minutes of its
meetings.
Section 4. Meetings
A committee or subcommittee may invite to its meetings other directors,
representatives of management, counsel or other persons whose pertinent advice
or counsel is sought by the committee or subcommittees. A majority of the
members of any committee or subcommittee shall constitute a quorum and action by
a majority (or by any super-majority required by the Governing Standards) of a
quorum at any meeting of a committee or subcommittee shall be deemed action by
the committee or subcommittee. The committee or subcommittee may also take
action without meeting if all members thereof consent in writing thereto.
Meetings of a committee or subcommittee may be held by telephone conference
calls or other communications equipment provided each person participating may
hear and be heard by all other meeting participants. Each committee shall make
regular reports to the Board. All recommendations or actions of any committee or
subcommittee shall be subject to approval or ratification by the full Board of
Directors unless the committee or subcommittee possesses plenary power to act
independently with respect to such matter and the submission of such matter to
the full Board for action would be prohibited by, or contrary to the intent and
purpose of, any Governing Standards.
Section 5. Authority of Chairman to Fill Vacancies
Whenever the Board of Directors is not in session, the Chairman may
fill vacancies in any committees with the concurrence of the Nominating and
Corporate Governance Committee. Any such action by the Chairman shall be subject
to ratification or disapproval by the Board at its next meeting.
ARTICLE IV
SHAREHOLDERS' MEETINGS
Section 1. Place of Meetings
Unless otherwise required by law or these Bylaws, all meetings of the
shareholders shall be held at the principal office of the Corporation or at such
other place, within or without the State of Louisiana, as may be designated by
the Board of Directors.
Section 2. Annual Meeting
An annual meeting of the shareholders shall be held on the date and at
the time as the Board of Directors shall designate for the purpose of electing
directors and for the transaction of such other business as may be properly
brought before the meeting. If no annual shareholders' meeting is held for a
period of 18 months, any shareholder may call such meeting to be held at the
registered office of the Corporation as shown on the records of the Secretary of
State of the State of Louisiana.
Section 3. Special Meetings
Special meetings of the shareholders, for any purpose or purposes, may
be called by the Chairman of the Board, the President or the Board of Directors.
Subject to the terms of any outstanding class or series of Preferred Stock that
entitles the holders thereof to call special meetings, the holders of a majority
of the Total Voting Power shall be required to cause the Secretary of the
Corporation to call a special meeting of shareholders pursuant to La. R.S.
12:73B (or any successor provision). Such requests of shareholders must state
the specific purpose or purposes of the proposed special meeting, and the
business to be brought before such meeting by the shareholders shall be limited
to such purpose or purposes.
Section 4. Notice of Meetings
Except as otherwise provided by law, the authorized person or persons
calling a shareholders' meeting shall cause written notice of the time and place
of the meeting to be given to all shareholders of record entitled to vote at
such meeting at least 10 days and not more than 60 days prior to the day fixed
for the meeting. Notice of the annual meeting need not state the purpose or
purposes thereof, unless action is to be taken at the meeting as to which notice
is required by law, the Articles of Incorporation or the Bylaws. Notice of a
special meeting shall state the purpose or purposes thereof. Any previously
scheduled meeting of the shareholders may be postponed, and (unless provided
otherwise by law or the Articles of Incorporation) any special meeting of the
shareholders may be canceled, by resolution of the Board of Directors upon
public notice given prior to the date previously scheduled for such meeting of
shareholders.
Section 5. Notice of Shareholder Nominations and Shareholder Business
5.1 Business Brought Before Meetings. At any meeting of the
shareholders, only such business shall be conducted as shall have been properly
brought before the meeting. Nominations for the election of directors at a
meeting at which directors are to be elected may be made by or at the direction
of the Board of Directors, or a committee duly appointed thereby, or by any
shareholder of record entitled to vote generally for the election of directors
who complies with the procedures set forth below. Other matters to be properly
brought before a meeting of the shareholders must be (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, including matters covered by Rule 14a-8 of the Securities and
Exchange Commission, (b) otherwise properly brought before the meeting by or at
the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by any shareholder of record entitled to vote at such meeting
who complies with the procedures set forth below.
5.2 Required Notice. A notice of the intent of a shareholder to make a
nomination or to bring any other matter before the meeting shall be made in
writing and received by the Secretary of the Corporation not more than 180 days
and not less than 90 days in advance of the first anniversary of the preceding
year's annual meeting of shareholders or, in the event of a special meeting of
shareholders or annual meeting scheduled to be held either 30 days earlier or
later than such anniversary date, such notice shall be received by the Secretary
of the Corporation within 15 days of the earlier of the date on which notice of
such meeting is first mailed to shareholders or public disclosure of the meeting
date is made. In no event shall the public announcement of an adjournment of a
shareholders' meeting commence a new time period for the giving of a
shareholder's notice as described above.
5.3 Contents of Notice. Every such notice by a shareholder shall
set forth:
(a) the name, age, business address and residential address of
the shareholder of record who intends to make a nomination or bring up any other
matter, and any beneficial owner or other person acting in concert with such
shareholder;
(b) a representation that the shareholder is a holder of
record of shares of the Corporation's capital stock that accord such shareholder
the voting rights specified in paragraph 5.1 above and that the shareholder
intends to appear in person at the meeting to make the nomination or bring up
the matter specified in the notice;
(c) with respect to notice of an intent to make a nomination,
a description of all agreements, arrangements or understandings among the
shareholder, any person acting in concert with the shareholder, each proposed
nominee and any other person or persons (naming such person or persons) pursuant
to which the nomination or nominations are to be made by the shareholder;
(d) with respect to notice of an intent to make a nomination,
(i) the name, age, business address and residential address of each person
proposed for nomination, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of capital stock of the Corporation
of which such person is the beneficial owner, and (iv) any other information
relating to such person that would be required to be disclosed in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had such nominee been nominated by the Board of Directors; and
(e) with respect to notice of an intent to bring up any other
matter, a complete and accurate description of the matter, the reasons for
conducting such business at the meeting, and any material interest in the matter
of the shareholder and the beneficial owner, if any, on whose behalf the
proposal is made.
5.4 Other Required Information. Notice of an intent to make a
nomination shall be accompanied by the written consent of each nominee to serve
as a director of the Corporation if so elected and an affidavit of each such
nominee certifying that he meets the qualifications specified in Section 11 of
Article II of these Bylaws. The Corporation may require any proposed nominee to
furnish such other information or certifications as may be reasonably required
by the Corporation to determine the eligibility and qualifications of such
person to serve as a director.
5.5 Disqualification of Certain Proposals. With respect to any proposal
by a shareholder to bring before a meeting any matter other than the nomination
of directors, the following shall govern:
(a) If the Secretary of the Corporation has received
sufficient notice of a proposal that may properly be brought before the meeting,
a proposal sufficient notice of which is subsequently received by the Secretary
and that is substantially duplicative of the first proposal shall not be
properly brought before the meeting. If in the judgment of the Board of
Directors a proposal deals with substantially the same subject matter as a prior
proposal submitted to shareholders at a meeting held within the preceding five
years, it shall not be properly brought before any meeting held within three
years after the latest such previous submission if (i) the proposal was
submitted at only one meeting during such preceding period and it received
affirmative votes representing less than 3% of the total number of votes cast in
regard thereto, (ii) the proposal was submitted at only two meetings during such
preceding period and it received at the time of its second submission
affirmative votes representing less than 6% of the total number of votes cast in
regard thereto, or (iii) the proposal was submitted at three or more meetings
during such preceding period and it received at the time of its latest
submission affirmative votes representing less than 10% of the total number of
votes cast in regard thereto.
(b) Notwithstanding compliance with all of the procedures set
forth above in this Section, no proposal shall be deemed to be properly brought
before a meeting of shareholders if, in the judgment of the Board, it is not a
proper subject for action by shareholders under Louisiana law.
5.6 Power to Disregard Proposals. At the meeting of shareholders, the
chairman shall declare out of order and disregard any nomination or other matter
not presented in accordance with the foregoing procedures or which is otherwise
contrary to the foregoing terms and conditions.
5.7 Rights and Obligations of Shareholders Under Federal Proxy Rules.
Nothing in this Section shall be deemed to modify (i) any obligations of a
shareholder to comply with all applicable requirements of the Securities
Exchange Act of 1934 and the regulations promulgated thereunder with respect to
the matters set forth in this Section of the Bylaws or (ii) any rights or
obligations of shareholders with respect to requesting inclusion of proposals in
the Corporation's proxy statement or soliciting their own proxies pursuant to
the proxy rules of the Securities and Exchange Commission.
5.8 Rights of Preferred Shareholders. Nothing in this Section shall be
deemed to modify any rights of holders of any outstanding class or series of
Preferred Stock to elect directors or bring other matters before a shareholders'
meeting in the manner specified by the terms and conditions governing such
stock.
Section 6. Quorum
6.1 Establishment of Quorum. At all meetings of shareholders, the
holders of a majority of the Total Voting Power shall constitute a quorum to
organize the meeting, provided, however, that at any meeting the notice of which
sets forth any matter that, by law or the Articles of Incorporation, must be
approved by the affirmative vote of the holders of a specified percentage in
excess of a majority of the Total Voting Power present or represented at the
shareholders' meeting, the holders of that specified percentage shall constitute
a quorum, and further provided that when specified business is to be voted on by
a class or series of stock voting as a class, the holders of a majority of the
voting power of such class or series shall constitute a quorum of such class or
series for the transaction of such business. Shares of Voting Stock as to which
the holders have voted or abstained from voting with respect to any matter
considered at a meeting, or which are subject to Non-Votes (as defined in
Section 6.3 below), shall be counted as present for purposes of constituting a
quorum to organize a meeting.
6.2 Withdrawal. If a quorum is present or represented at a duly
organized meeting, such meeting may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum, or the refusal of any shareholders present to vote.
6.3 Non-Votes. As used in these Bylaws, "Non-Votes" shall mean the
number of votes as to which the record holder or proxy holder of shares of
Capital Stock has been precluded from voting thereon (whether by law,
regulations of the Securities and Exchange Commission, rules or bylaws of any
national securities exchange or other self-regulatory organization, or
otherwise), including without limitation votes as to which brokers may not or do
not exercise discretionary voting power under the rules of the New York Stock
Exchange with respect to any matter for which the broker has not received voting
instructions from the beneficial owner of the voting shares.
Section 7. Voting Power Present or Represented
For purposes of determining the amount of Total Voting Power present or
represented at any annual or special meeting of shareholders with respect to
voting on any particular matter, shares as to which the holders have abstained
from voting, and shares which are subject to Non-Votes (as defined in Section
6.3), will be treated as not present and not cast.
Section 8. Voting Requirements
When a quorum is present at any meeting, the vote of the holders of a
majority of the Total Voting Power present in person or represented by proxy
shall decide any question brought before such meeting, unless the question is
one upon which, by express provision of law or the Articles of Incorporation, a
different vote is required, in which case such express provision shall govern
and control the decision of such question. Directors shall be elected by
plurality vote.
Section 9. Proxies
At any meeting of the shareholders, every shareholder having the right
to vote shall be entitled to vote in person or by proxy appointed by an
instrument in writing subscribed by such shareholder and bearing a date not more
than 11 months prior to the meeting, unless the instrument provides for a longer
period, but in no case will an outstanding proxy be valid for longer than three
years from the date of its execution. The person appointed as proxy need not be
a shareholder of the Corporation.
Section 10. Adjournments
10.1 Adjournments of Meetings. Adjournments of any annual or special
meeting of shareholders may be taken without new notice being given unless a new
record date is fixed for the adjourned meeting, but any meeting at which
directors are to be elected shall be adjourned only from day to day until such
directors shall have been elected.
10.2 Lack of Quorum. If a meeting cannot be organized because a quorum
has not attended, those present may adjourn the meeting to such time and place
as they may determine, subject, however, to the provisions of Section 10.1
hereof. In the case of any meeting called for the election of directors, those
who attend the second of such adjourned meetings, although less that a quorum as
fixed in Section 6.1 hereof, shall nevertheless constitute a quorum for the
purpose of electing directors.
Section 11. Written Consents
Any action required or permitted to be taken at any annual or special
meeting of shareholders may be taken only upon the vote of the shareholders,
present in person or represented by duly authorized proxy, at an annual or
special meeting duly noticed and called, as provided in these Bylaws, and may
not be taken by a written consent of the shareholders pursuant to the Business
Corporation Law of the State of Louisiana.
Section 12. List of Shareholders
At every meeting of shareholders, a list of shareholders entitled to
vote, arranged alphabetically and certified by the Secretary or by the agent of
the Corporation having charge of transfers of shares, showing the number and
class of shares held by each shareholder on the record date for the meeting,
shall be produced on the request of any shareholder.
Section 13. Procedure at Shareholders' Meetings
The Chairman of the Board, or in his absence, the Vice Chairman, shall
preside as chairman at all shareholders' meetings. The organization of each
shareholders' meeting and all matters relating to the manner of conducting the
meeting shall be determined by the chairman, including the order of business,
the conduct of discussion and the manner of voting. Meetings shall be conducted
in a manner designed to accomplish the business of the meeting in a prompt and
orderly fashion and to be fair and equitable to all shareholders, but it shall
not be necessary to follow Roberts' Rules of Order or any other manual of
parliamentary procedure.
ARTICLE V
CERTIFICATES OF STOCK
Certificates of stock issued by the Corporation shall be numbered and
shall be entered into the books of the Corporation as they are issued. They
shall exhibit the holder's name and number of shares and shall be signed by the
President or any Vice President and by the Treasurer, Secretary or any Assistant
Secretary, all in the manner required by law.
ARTICLE VI
REGISTERED SHAREHOLDERS
The Corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof and accordingly shall not
be bound to recognize any beneficial, equitable or other claim to or interest in
such share on the part of any other person, whether or not it shall have express
or other notice thereof, except as expressly provided by the laws of Louisiana.
ARTICLE VII
LOSS OF CERTIFICATE
Any person claiming a certificate of stock to be lost or destroyed
shall make an affidavit or affirmation of that fact, and the Board of Directors,
the General Counsel or the Secretary may, in his or its discretion, require the
owner of the lost of destroyed certificate or his legal representative, to give
the Corporation a bond, in such sum as the Board of Directors, the General
Counsel or the Secretary may require, to indemnify the Corporation against any
claim that may be made against the Corporation on account of the alleged loss or
destruction of any such certificate; a new certificate of the same tenor and for
the same number of shares as the one alleged to be lost or destroyed, may be
issued without requiring any bond when, in the judgment of the Board of
Directors, the General Counsel or the Secretary, it is proper to do so.
ARTICLE VIII
CHECKS
All checks, drafts and notes of the Corporation shall be signed by such
officer or officers or such other person or persons as the Board of Directors
may from time to time designate.
ARTICLE IX
DIVIDENDS
Dividends upon the capital stock of the Corporation, subject to the
provisions of the Articles of Incorporation, if any, may be declared by the
Board of Directors at any regular or special meetings, pursuant to law.
ARTICLE X
INAPPLICABILITY OF LOUISIANA CONTROL SHARE STATUTE
Effective May 23, 1995, the provisions of La. R.S.12:135 through
12:140.2 shall not apply to control share acquisitions of shares of the
Corporation's Capital Stock.
ARTICLE XI
CERTAIN DEFINITIONS
The terms Capital Stock, Continuing Directors, Total Voting Power and
Voting Stock shall have the meanings ascribed to them in the Articles of
Incorporation, provided, however, that for purposes of Sections 3 and 6 of
Article IV of these Bylaws, Total Voting Power shall mean the total number of
votes that holders of Capital Stock are entitled to cast generally in the
election of directors.
ARTICLE XII
AMENDMENTS
These Bylaws may only be altered, amended or repealed in the manner
specified in the Articles of Incorporation.
Exhibit 3.3(a)
CenturyTel, Inc.
CORPORATE GOVERNANCE GUIDELINES
1. Director Qualifications
The Board will have a majority of independent directors. The Nominating
and Corporate Governance Committee is responsible for reviewing with the Board,
on an annual basis, the requisite skills and characteristics of new Board
members as well as the composition of the Board as a whole. This assessment will
include members' independence qualifications, as well as consideration of
diversity, age, skills and experience in the context of the needs of the Board.
All directors must meet any additional qualifications established under the
Company's organizational documents.
Nominees for directorship will be selected by the Nominating and
Corporate Governance Committee in accordance with the qualifications and
criteria described in these guidelines, as well as the policies and principles
in the Committee's charter and any selection guidelines or criteria adopted
thereunder. The invitation to join the Board should be extended on behalf of the
full Board by the Chairman of the Nominating and Corporate Governance Committee
and the Chairman of the Board.
The Board presently has 13 members. It is the sense of the Board that
a size of 11 to 13 is about right. However, the Board would be willing to go
to a somewhat larger size in order to accommodate the availability of an
outstanding candidate. It is the general sense of the Board that no more
than two management directors should serve on the Board.
The Board expects directors who change the job or responsibility they
held when they were elected to the Board to volunteer to resign from the Board.
It is not the sense of the Board that in every such instance the director should
necessarily leave the Board. There should, however, be an opportunity for the
Board, through the Nominating and Corporate Governance Committee, to review the
continued appropriateness of Board membership under the circumstances.
No director may serve on more than two other unaffiliated public
company boards, unless this prohibition is waived by the Board. Directors should
advise the Chairman of the Board and the Chairman of the Nominating and
Corporate Governance Committee in advance of accepting an invitation to serve on
another public company board. No director may be appointed or nominated to a new
term if he or she would be age 72 or older at the time of the election or
appointment.
The Board does not believe it should establish term limits. While term
limits could help insure that there are fresh ideas and viewpoints available to
the Board, they hold the disadvantage of losing the contribution of directors
who have been able to develop, over a period of time, increasing insight into
the Company and its operations and, therefore, provide an increasing
contribution to the Board as a whole. As an alternative to term limits, the
Nominating and Corporate Governance Committee will review each director's
continuation on the Board every three years. This will allow each director the
opportunity to conveniently confirm his or her desire to continue as a member of
the Board.
The Board has adopted a standard that no director qualifies as
"independent" unless the Board affirmatively confirms that the director (and any
organization with which the director is affiliated) receives no payments from
CenturyTel, Inc. or its subsidiaries (the "Company") other than director's fees
or a pension or other form of deferred compensation for prior service (provided
such compensation is not contingent in any way on continued service). In
addition, (i) no director who is a former employee of the Company can be
"independent" until five years after the employment has ended; (ii) no director
who is, or in the past five years has been, affiliated with or employed by a
(present or former) auditor of the Company can be "independent" until five years
after the end of either the affiliation or the auditing relationship; (iii) no
director can be "independent" if he or she is, or in the past five years has
been, part of an interlocking directorate in which an executive officer of the
Company serves on the compensation committee of another company that
concurrently employs the director; and (iv) directors with immediate family
members (as defined in the New York Stock Exchange Listed Company Manual) in the
foregoing categories are likewise subject to the five-year "cooling-off"
provision for purposes of determining "independence." The Board may determine a
director to be independent if a family member is employed by the Company in a
non-executive officer position, and may make other reasonable determinations or
interpretations consistent with the foregoing standards.
Once the Board has determined that a director is independent, the
director may not engage in any transaction with the Company, either directly or
indirectly through an immediate family member or related entity, without such
transaction being approved by the Board.
2. Director Responsibilities
The basic responsibility of the directors is to exercise their business
judgment to act in what they reasonably believe to be in the best interests of
the Company and its shareholders. In discharging that obligation, directors
should be entitled to rely on the honesty and integrity of the Company's senior
executives and its outside advisors and auditors. The directors shall also be
entitled to have the Company purchase reasonable directors' and officers'
liability insurance on their behalf, to the benefits of indemnification to the
fullest extent permitted by law and the Company's articles of incorporation,
by-laws and any indemnification agreements, and to exculpation as provided by
state law and the Company's articles of incorporation.
Directors are expected to attend Board meetings and meetings
of committees on which they serve, and to spend the time needed and meet as
frequently as necessary to properly discharge their responsibilities.
Information and data that are important to the Board's understanding of the
business to be conducted at a Board or committee meeting should generally be
distributed in writing to the directors before the meeting, and directors should
review these materials in advance of the meeting.
The Board has no policy with respect to the separation of the offices
of Chairman and the Chie Executive Officer. The Board believes that this issue
is part of the succession planning process and that it is in the best interests
of the Company for the Board to make a determination when it elects a new chief
executive officer.
The Chairman will establish the agenda for each Board meeting. Each
Board member is free to suggest the inclusion of items on the agenda. Each Board
member is free to raise at any Board meeting subjects that are not on the agenda
for that meeting. The Board will review the Company's long-term strategic plans
and the principal issues that the Company will face in the future during at
least one Board meeting each year.
The non-management directors will meet in executive session at least
quarterly. The director who presides at each of these meetings will be an
independent director chosen annually by the non-management directors, and will
be disclosed in the annual proxy statement.
The Board believes that the management speaks for the Company.
Individual Board members may, from time to time, meet or otherwise communicate
with various constituencies that are involved with the Company. However, it is
expected that Board members would do this with the knowledge of the management
and, absent unusual circumstances or as contemplated by the committee charters,
only at the request of management.
3. Board Committees
The Board will have at all times an Audit Committee, a Compensation
Committee and a Nominating and Corporate Governance Committee. All of the
members of these committees will be independent directors under the criteria
established by the New York Stock Exchange. Committee members will be appointed
by the Board upon recommendation of the Nominating and Corporate Governance
Committee with consideration of the desires of individual directors. It is the
sense of the Board that consideration should be given to rotating committee
members periodically, but the Board does not believe that rotation should be
mandated as a policy.
Each key committee will have its own charter. The charters will set
forth the purposes, goals and responsibilities of the committees as well as
qualifications for committee membership, procedures for committee member
appointment and removal, committee structure and operations and committee
reporting to the Board. The charters will also provide that each key committee
will annually evaluate its performance.
The Chairman of each committee, in consultation with the committee
members, will determine the frequency and length of the committee meetings
consistent with any requirements set forth in the committee's charter. The
Chairman of each committee, in consultation with members of the committee and
others specified in the committee's charter, will develop the committee's
agenda.
The Board and each committee have the power to hire independent legal,
financial or other advisors as they may deem necessary, without consulting or
obtaining the approval of any officer of the Company in advance.
Each committee may meet in executive session as often as it deems
appropriate.
The Board may, from time to time, establish or maintain additional
committees as necessary or appropriate.
4. Director Access to Officers and Employees
Directors have full and free access to officers and employees of the
Company. Any meetings or contacts that a director wishes to initiate may be
arranged through the CEO or the Secretary or directly by the director. The
directors will use their judgment to ensure that any such contact is not
disruptive to the business operations of the Company and will, to the extent not
inappropriate, copy the CEO on any written communications between a director and
an officer or employee of the Company.
The Board welcomes regular attendance at each Board meeting of
senior officers of the Company. If the CEO wishes to have additional Company
personnel attendees on a regular basis, this suggestion should be brought to the
Board for approval.
5. Director Compensation
The form and amount of director compensation will be determined by the
Nominating and Corporate Governance Committee in accordance with the policies
and principles set forth in its charter, and such Committee will conduct an
annual review of director compensation. The Nominating and Corporate Governance
Committee will consider whether directors' independence may be jeopardized if
director compensation and perquisites exceed customary levels, or if the Company
makes substantial charitable contributions to organizations with which a
director is affiliated.
6. Director Orientation and Continuing Education
The Nominating and Corporate Governance Committee shall develop an
Orientation Program for new directors. Once it is developed, all new directors
must participate in the Company's Orientation Program, which should be conducted
as soon as practicable after new directors are elected or appointed. This
orientation will include presentations by senior management to familiarize new
directors with the Company's strategic plans, its significant financial,
accounting and risk management issues, its corporate compliance programs (which
includes its code of business conduct and ethics), its principal officers, and
its internal and independent auditors. All other directors are also invited to
attend the Orientation Program. The Company will also endeavor to periodically
update directors on industry, technological and regulatory developments, and to
provide adequate resources to support directors in understanding the Company's
business and matters to be acted upon at board and committee meetings.
7. CEO Evaluation and Management Succession
The Nominating and Corporate Governance Committee will conduct an
annual review of the CEO's performance. The Board of Directors will review the
Nominating and Corporate Governance Committee's report in order to ensure that
the CEO is providing the best leadership for the Company in the long- and
short-term.
The Nominating and Corporate Governance Committee should report
periodically to the Board on succession planning. The entire Board will
consult periodically with the Nominating and Corporate Governance Committee
regarding potential successors to the CEO. The CEO should at all times make
available his or her recommendations and evaluations of potential successors,
along with a review of any development plans recommended for such individuals.
8. Annual Performance Evaluation
The Board of Directors will conduct an annual self-evaluation to
determine whether it and its committees are functioning effectively. The
Nominating and Corporate Governance Committee will receive comments from all
directors and report annually to the Board with an assessment of the Board's
performance, which will be discussed with the full Board. The assessment will
focus on the Board's contribution to the Company and specifically focus on areas
in which the Board or management believes that the Board could improve.
9. Waivers of the Code of Business Conduct and Ethics
Any waiver of the Company's policies, principles or guidelines relating
to business conduct or ethics for executive officers or directors may be made
only by the Audit Committee, and will be promptly disclosed as required by law
or stock exchange regulation.
* * * * * * * * * *
o Originally adopted by the Nominating and Corporate Governance Committee
and the Board of Directors on February 17, 2003 and February 25, 2003,
respectively.
Exhibit 3.3(b)
CENTURYTEL, INC.
CHARTER OF AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
I. SCOPE OF RESPONSIBILITY
A. General
Subject to the limitations noted in Section VI, the primary function of
the Audit Committee is to assist the Board of Directors (the "Board") in
fulfilling its oversight responsibilities by (1) overseeing the Company's system
of financial reporting, auditing, controls and legal compliance, (2) monitoring
the operation of such system and the integrity of the Company's financial
statements, (3) monitoring the qualifications and independence of the outside
auditors, and the performance of the outside and internal auditors, and (4)
reporting to the Board periodically concerning activities of the Audit
Committee.
B. Relationship to Other Groups
The management of the Company is responsible primarily for developing
the Company's accounting practices, preparing the Company's financial
statements, maintaining internal controls, maintaining disclosure controls and
procedures, and preparing the Company's disclosure documents in compliance with
applicable law. The internal auditors are responsible primarily for objectively
assessing the Company's internal controls. The outside auditors are responsible
primarily for auditing and attesting to the Company's financial statements and
evaluating the Company's internal controls. Subject to the limitations noted in
Section VI, the Audit Committee, as the delegate of the Board, is responsible
for overseeing this process and discharging such other functions as are assigned
by law, the Company's organizational documents, or the Board. The functions of
the Audit Committee are not intended to duplicate, certify or guaranty the
activities of management or the internal or outside auditors.
The Audit Committee will strive to maintain an open and free avenue of
communication among management, the outside auditors, the internal auditors, and
the Board. The outside and internal auditors will report directly to the Audit
Committee.
II. COMPOSITION
The Audit Committee will be comprised of three or more directors
selected by the Board in accordance with the Company's bylaws, each of whom will
meet the standards of independence or other qualifications required from time to
time by the New York Stock Exchange, Section 10A(m)(3) of the Securities
Exchange Act of 1934 (the "Exchange Act") and the rules and regulations of the
Securities and Exchange Commission (the "SEC"). The Audit Committee's
chairperson shall be designated by the Board. The Audit Committee may form and
delegate authority to subcommittees consisting of one or more members when
appropriate, including the authority to grant preapprovals of audit and
permitted non-audit services by the outside auditors, subject to any limitations
or reporting requirements established by law or the Company's procedures.
III. MEETINGS
The Audit Committee will meet at least four times annually, or more
frequently if the Committee determines it to be necessary. To foster open
communications, the Audit Committee may invite to its meetings other directors
or representatives of management, the outside auditors, the internal auditors,
counsel or other persons whose pertinent advice or counsel is sought by the
Committee. The agenda for meetings will be prepared in consultation among the
Committee chair (with input from Committee members), management, the outside
auditors, the internal auditors and counsel. The Audit Committee will maintain
written minutes of all its meetings and provide a copy of all such minutes to
every member of the Board.
IV. POWERS
The Audit Committee shall have the sole authority to appoint or replace
the outside auditors. The Audit Committee shall be directly responsible for the
compensation and oversight of the work of the outside auditors (including
resolution of disagreements between management and the outside auditors
regarding financial reporting) for the purpose of preparing or issuing an audit
report or related work. The Audit Committee shall also have the sole authority
to (a) appoint or replace the chief internal auditing executive, (b) appoint or
replace any firm engaged to provide internal auditing services and (c) grant
waivers to directors or executive officers from the code of ethics and business
conduct contained in the Company's corporate compliance procedures.
The Audit Committee shall have the authority, to the extent it deems
necessary or appropriate, to retain independent legal, accounting or other
advisors. The Company shall provide appropriate funding, as determined by the
Audit Committee, for payment of compensation to the outside auditor for the
purpose of rendering or issuing an audit report and to any advisors employed by
the Audit Committee.
The Audit Committee shall have the power to (a) obtain and review any
information that the Audit Committee deems necessary to perform its oversight
functions and (b) conduct or authorize investigations into any matters within
the Audit Committee's scope of responsibilities.
The Audit Committee shall have the power to issue any reports or
perform any other duties required by (a) the Company's articles of incorporation
or bylaws, (b) applicable law or (c) rules or regulations of the SEC, the New
York Stock Exchange, or any other self-regulatory organization having
jurisdiction over the affairs of the Audit Committee.
The Audit Committee shall have the power to consider and act upon any
other matters concerning the financial affairs of the Company as the Audit
Committee, in its discretion, may determine to be advisable in connection with
its oversight functions.
V. PERIODIC OVERSIGHT TASKS
The Audit Committee, to the extent it deems necessary or appropriate or
to the extent required by applicable laws or regulations, will perform the
oversight tasks delineated in the Audit Committee Checklist. The checklist will
be updated annually to reflect changes in regulatory requirements, authoritative
guidance, and evolving oversight practices. The most recently updated checklist
will be considered to be an addendum to this charter.
VI. LIMITATIONS
The Committee's failure to investigate any matter, to resolve any
dispute or to take any other actions or exercise any of its powers in
connection with the good faith exercise of its oversight functions shall in
no way be construed as a breach of its duties or responsibilities to the
Company, its directors or its shareholders.
The Audit Committee is not responsible for preparing the Company's
financial statements, planning or conducting the audit of such financial
statements, determining that such financial statements are complete and accurate
or prepared in accordance with generally accepted accounting standards, or
assuring compliance with applicable laws or the Company's policies, procedures
and controls, all of which are the responsibility of management or the outside
auditors. The Audit Committee's oversight functions involve substantially lesser
responsibilities than those associated with the audit performed by the outside
auditors. In connection with the Audit Committee's oversight functions, the
Committee may rely on (i) management's representations that the financial
statements have been prepared with integrity and objectivity and in conformity
with accounting principles generally accepted in the United States and (ii) the
representations of the outside auditors.
In carrying out its oversight functions, the Audit Committee believes
its policies and procedures should remain flexible in order to best react to a
changing environment.
* * * * * * * * * *
o Originally adopted and approved by the Audit Committee and Board on
November 18, 1999.
o Amended by the Board on February 28, 2001, February 26, 2002 and
February 25, 2003, in each case following prior approval thereof by the
Audit Committee.
<TABLE>
<CAPTION>
ADDENDUM
AUDIT COMMITTEE CHECKLIST
First Second Third Fourth As
Quarter Quarter Quarter Quarter Needed
Annual Audit Planning
---------------------
<S> <C> <C> <C> <C> <C>
1. appoint or replace the outside auditors X
and approve the compensation and other terms of the
outside auditors' annual engagement
2. pre-approve all auditing services X X
3. review significant relationships X X
between the outside auditors and the Company,
including those described in written statements
of the outside auditors furnished to the Audit
Committee under ISB Standard No. 1
4. discuss the scope and comprehensiveness X X
of the audit plan, including changes from prior
years and the coordination of the efforts of the
outside and internal auditors
Review Earnings Releases and other Non-SEC Reports
--------------------------------------------------
5. discuss the Company's earnings release X X X X
with management and the outside auditors prior to
its release
6. discuss with management the Company's
financial information and earnings guidance provided X X X X
to analysts and rating agencies
Review of Financial Information in SEC Reports
----------------------------------------------
7. review with management and the outside X X X X
auditors the Company's financial information, and any
report, opinion or review rendered on the financial
statements by management or the outside auditors
(including under SAS No.71)
8. review and discuss reports from the outside X X
auditors on:
(a) the Company's critical accounting policies
(b) all alternative treatments of financial
information within GAAP that have been discussed with management,
ramifications of the use of such alternative treatments, and the
treatment preferred by the outside auditors
(c) other material written communications between
the outside auditors and management, such as any management
letter or schedule of unadjusted differences
9. review and discuss reports from the outside
auditors on: X X X X X
(a) conditions or matters, if any, that must
be reported under generally accepted auditing standards
(including SAS No.61), including:
(i) difficulties or disputes with
management or the internal auditors encountered during
the audit
(ii) the outside auditors' views regarding
the Company's financial disclosures, the quality of the
Company's accounting principles as applied, the underlying
estimates and other significant judgments made by
management in preparing the financial statements, and the
compatibility of the Company's principles and judgments
with prevailing practices and standards
(b) matters, if any, that must be reported
under the federal securities laws (including Section 10A
of the Exchange Act)
(c) communications, if any, with the
national office of the outside auditors pertaining to the
Company's financial affairs
10. discuss with management and the outside auditors X X X X
significant financial reporting issues and judgments made in
connection with the preparation of the Company's financial
statements, including any (a) significant changes in the
Company's use or application of accounting principles or
policies, (b) major issues as to the adequacy of the Company's
internal controls, its disclosure controls and procedures, or its
financial reporting processes, and (c) special steps adopted in
light of material control deficiencies
11. discuss with management and the outside auditors X X X X
the effect of regulatory and accounting initiatives as well
as off-balance sheet structures on the Company's financial
statements
12. discuss the Company's major financial risk X X X X X
exposures and the steps management has taken to monitor and
control such exposures
13. review the accounting implications of significant X X X X X
new transactions, if any
Conduct of Meetings
-------------------
14. in connection with each periodic report of the Company,
review:
(a) management's required disclosure, if any, X
to the Audit Committee under ss.302 of the Sarbanes-Oxley
Act regarding significant deficiencies in internal controls
or reportable fraud
(b) the contents of the certifications of the X X X X
Company's CEO and CFO included in such report
15. receive reports, if any, regarding non-audit services X X X X
that the Chairman (or any subcommittee) pre-cleared the outside
auditor to perform since the last meeting
16. review the extent to which the Company has implemented X
changes in practices or controls that were previously recommended
to or approved by the Audit Committee
17. receive reports regarding significant changes X
to GAAP or regulations impacting the Audit Committee
18. meet in executive session with the outside auditors, X X X X X
internal auditors and management, as necessary
Annual Reports
--------------
19. recommend to the Board whether the audited financial X
statements should be included in the Company's 10-K report
20. approve the annual proxy statement report of the audit X
committee required by the rules of the SEC
21. review and approve the disclosures in each 10-K report X
regarding management's internal control report, upon effectiveness
of the applicable rules implementingss.404 of the Sarbanes-Oxley Act
Oversight of the Company's Outside Auditors
-------------------------------------------
22. pre-clear the engagement of the outside auditors X
to conduct any non-audit services not pre-cleared by the Chairman
(or a subcommittee)
23. obtain and review a report from the outside auditors X
regarding (a) the outside auditor's internal quality-control
procedures, (b) any material issues raised by the most recent
internal quality-control review, or peer review, of the firm,
or by any inquiry or investigation by governmental or professional
authorities within the preceding five years respecting any audit
engagement, (c) any steps taken to deal with any such issues,
(d) all relationships between the outside auditors and the
Company and (e) assurances that the outside auditing firm is
registered in good standing with the Public Company Accounting
Oversight Board (once the applicable rules become effective);
evaluate the qualifications, performance and independence of the
outside auditors
24. review and evaluate the lead audit partner and ensure X
his rotation as required by law
25. review and approve hiring policies for employees or X
former employees of the outside auditors
Oversight of the Company's Internal Auditors
--------------------------------------------
26. review the performance of the chief internal X
auditing executive, and replace if necessary
27. meet, if possible, with the entire internal X
auditing staff
28. review the significant reports to management prepared X X X X X
by the internal auditing department and management's responses
29. discuss with the outside auditors and management the X
internal audit department's plans, responsibilities, preliminary
budget, independence and staffing (including the use of third
party firms) and any recommended changes thereto
Compliance Oversight Responsibilities
-------------------------------------
30. establish and monitor procedures for the receipt, X
retention and treatment of confidential, anonymous complaints
received by the Company regarding accounting, controls or
auditing matters
31. discuss any correspondence with regulators or X
governmental agencies and any published reports which raise
material issues regarding the Company's financial statements
or accounting policies
32. review the adequacy of the Company's disclosure X
controls and procedures
33. review reports on "related party" transactions X
34. solicit, as necessary, germane reports or information X
from other committees with related oversights functions
35. review periodically the procedures established by the X
Company to monitor its compliance with debt covenants
36. consult periodically with counsel concerning the Audit X
Committee's responsibilities or legal matters that may have a
material impact on the Company's financial statements, controls,
or corporate compliance procedures
Self Assessment
---------------
37. review annually the Audit Committee's own performance X
38. verify that all Committee members remain eligible to X
serve
Charter
-------
39. review this checklist and the related Audit Committee X
charter annually, and consider, adopt and submit to the Board any
proposed changes
40. include a copy of the Audit Committee charter as an X
appendix to the proxy statement at least once every three years
41. periodically review the charter of the internal audit X
department, and consider and adopt necessary changes
</TABLE>
* * * * * * * * * *
Last Revised: February 11, 2003.
Exhibit 3.3(c)
CENTURYTEL, INC.
-----------------
CHARTER OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
-----------------
I. PURPOSE
The Compensation Committee is appointed by the Board principally to
discharge the Board's responsibilities relating to compensation of the Company's
executive officers, to oversee the administration of the Company's executive
compensation plans and programs, and to produce an annual report on executive
compensation for inclusion in the Company's proxy statement.
II. COMPOSITION
The Committee will consist of at least three directors, each of whom
will be appointed and replaced by the Board. Each member of the Committee will
meet the independence requirements of the New York Stock Exchange, Rule 16b-3
promulgated under the Securities Exchange Act of 1934, and Section 162(m) of the
Internal Revenue Code. The Committee's chairman will be designated by the Board.
The Committee may form and delegate authority to subcommittees when appropriate.
III. MEETINGS
The chairman of the Committee will preside at each meeting and, in
consultation with the other members of the Committee and management, will set
the frequency of, and the agenda for, each meeting.
IV. AUTHORITY AND RESPONSIBILITIES
In furtherance of the purpose of the Committee described above, the
Committee will have the following authority and responsibilities:
1. The Committee will periodically review and approve goals and
objectives relating to compensation of the executive officers, evaluate the
performance of the executive officers in light of these goals and objectives,
and recommend to the Board the compensation levels of the executive officers
based on this evaluation.
2. The Committee will periodically review the Company's incentive
compensation plans and equity-based plans, and will oversee the administration
of the Company's other executive compensation plans and programs.
3. The Committee will review, adopt and submit to the Board for its
approval (i) any proposed plan or arrangement offering or providing any
incentive, retirement or other compensation, benefits or perquisites to one
or more of the Company's executive officers (other than any plan or arrangement
offering benefits that do not discriminate in scope, terms or operation in
favor of executive officers and that are generally available to all salaried
employees) and (ii) any significant amendment or change to any such plan or
arrangement.
4. The Committee will review, adopt and submit to the Board for its
approval (i) any proposed employment, severance or change-in-control contract
between the Company and an executive officer or proposed executive officer and
(ii) any proposed extension or significant amendment thereto.
5. The Committee will exercise all powers allocated to it under the
Company's benefit plans, including the powers to (i) grant stock options and
other equity-based awards thereunder and (ii) establish performance goals
thereunder and determine whether such goals have been attained. The Committee
will also have the authority to delegate responsibility in accordance with the
terms and conditions of each such applicable plan.
6. The Committee, in consultation with management, will oversee
compliance with regulations governing executive compensation, including Rule
16b-3 and Section 162(m).
7. The Committee will issue executive compensation reports to the
Company's shareholders in the manner required under the rules and regulations
of the U.S. Securities and Exchange Commission.
8. The Committee will make regular reports to the Board.
9. The Committee will have the sole authority to retain and terminate
any compensation consultant retained to assist the Committee in discharging its
functions, and may, to the extent it deems necessary or appropriate, retain
independent legal, financial or other advisors. The Committee will approve
related fees and other retention terms.
10. The Committee will oversee, monitor, review or approve such other
employment or compensation-related matters, and will perform such other
services, as may be delegated to it from time to time by the Board.
11. The Committee will review and reassess the adequacy of this Charter
annually and recommend any proposed changes to the Board for approval. The
Committee will annually review its own performance.
* * * * * * * * * *
----------
o Originally adopted and approved by the Committee and the Board on
February 11, 2003, and February 25, 2003, respectively.
Exhibit 3.3(d)
CENTURYTEL, INC.
--------------------
CHARTER OF THE NOMINATING AND CORPORATE GOVERNANCE
COMMITTEE OF THE BOARD OF DIRECTORS
--------------------
I. PURPOSE
The Nominating and Corporate Governance Committee is appointed by the
Board principally to (1) assist the Board by identifying individuals qualified
to serve as directors and officers of the Company, and to recommend to the Board
nominees for such positions, (2) monitor the composition of the Board and its
committees, (3) recommend to the Board a set of corporate governance guidelines
applicable to the Company and (4) lead the Board in its annual review of the
Board's performance.
II. COMPOSITION
The Committee shall consist of at least three directors, each of whom
shall be appointed and replaced by the Board. Each member of the Committee shall
meet the independence requirements of the New York Stock Exchange. The
Committee's chairperson shall be designated by the Board. The Committee may form
and delegate authority to subcommittees when appropriate.
III. MEETINGS
The chairperson of the Committee will preside at each meeting and, in
consultation with the other members of the Committee, will set the frequency of,
and the agenda for, each meeting.
IV. AUTHORITY AND RESPONSIBILITIES
In furtherance of the purpose of the Committee described above, the
Committee shall have the following authority and responsibilities:
1. The Committee shall lead the search for individuals qualified to
serve as directors, and to recommend to the Board a slate of directors to be
elected annually by the shareholders. In connection therewith, the Committee (i)
shall consider candidates submitted by shareholders and others in accordance
with the Company's bylaws, (ii) shall monitor the performance and contributions
of incumbent directors and (iii) may, to the extent it deems necessary or
appropriate, develop and recommend to the Board specific criteria for selecting
director nominees. The Committee shall also recommend to the Board a slate of
officers to be elected annually by the Board and individuals to fill vacancies
as the need arises.
2. The Committee shall monitor the operation of the Board's
committees. In connection therewith, the Committee (i) shall recommend to the
Board a slate of directors to be elected annually to serve as committee members
and directors to fill committee vacancies as needed and (ii) may recommend to
the Board changes in committee structure, including the creation and elimination
of committees.
3. The Committee shall, no less than annually, review and reassess
the adequacy of the corporate governance guidelines applicable to the Company
and recommend any proposed changes to the Board for approval.
4. The Committee shall receive comments from all directors and report
annually to the Board with an assessment of the Board's performance, to be
discussed with the full Board.
5. The Committee may make recommendations to the Board concerning
the size and composition of the Board, the term of membership of directors, and
the frequency, content and structure of Board meetings.
6. The Committee shall review and oversee any director orientation
or continuing director education programs established by the Company.
7. The Committee shall conduct an annual review of the CEO's
performance, and report its findings to the Board. The Committee shall also
periodically report to the Board on succession planning for the senior executive
officers.
8. The Committee shall review annually director compensation
and benefits.
9. The Committee shall make regular reports to the Board.
10. The Committee shall have the sole authority to retain and terminate
any search firm to be used to identify director or officer candidates and may,
to the extent it deems necessary or appropriate, retain independent legal,
financial or other advisors. The Committee shall approve related fees and other
retention terms.
11. The Committee shall also discharge any additional functions that
may be delegated or assigned to it by the Board from time to time, including (i)
considering questions of conflict of interest of directors or executive officers
and (ii) considering significant corporate governance issues or shareholder
relations issues that may arise from time to time.
12. The Committee shall review and reassess the adequacy of this Charter
annually and recommend any proposed changes to the Board for approval. The
Committee shall annually review its own performance.
* * * * * * * * * *
----------
o Originally adopted and approved by the Committee and the Board on
January 30, 2003 and February 25, 2003, respectively.
Exhibit 3.3(e)
CENTURYTEL, INC.
--------------------
CHARTER FOR RISK EVALUATION COMMITTEE
OF THE BOARD OF DIRECTORS
--------------------
I. PURPOSE
The Risk Evaluation Committee is appointed by the Board to identify,
monitor and manage risks to the Company's business, properties and employees.
II. COMPOSITION
The Committee will consist of at least three directors, each of whom
will be appointed and replaced by the Board. The Committee's chairman will be
designated by the Board. The Committee may form and delegate authority to
subcommittees when appropriate.
III. MEETINGS
The chairman of the Committee will preside at each meeting and, in
consultation with the other members of the Committee and management, will set
the frequency of, and the agenda for, each meeting; provided, however, that any
member of the Committee may call a meeting in his or her discretion. To assist
it in discharging its functions, the Committee may invite to its meetings other
directors or representatives of management, counsel and other persons whose
pertinent advice or counsel is sought by the Committee.
IV. AUTHORITY AND RESPONSIBILITIES
In furtherance of the purpose of the Committee described above, the
Committee will have the following authority and responsibilities:
1. The Committee will review periodically the Company's major risk
exposures in the areas listed below:
(a) risks to the Company's properties (including its information
systems) posed by casualty events, terrorism or sabotage
(b) risks to the Company's business caused by potential or actual
regulatory developments or the Company's failure to comply with
applicable telecommunications regulations
(c) risks to the Company's business caused by the failure to
comply with environmental, safety, health or other similar laws
(d) risks of injury to the Company's employees
(e) risks of potential, threatened or pending rate cases
or lawsuits.
2. The Committee will review periodically the steps that the Company
has taken or could take to mitigate major risks identified above or any others
subsequently identified. In connection therewith, the Committee will
periodically review and adjust the scope and coverage of the Company's insurance
programs, subject to receiving the approval or ratification of the Board for
material changes to such programs.
3. The Committee will oversee the operation of the Company's corporate
compliance program and procedures. In connection therewith, the Committee (i)
will review periodically the effectiveness and adequacy of the Company's
corporate compliance program and procedures and recommend to the Board any
necessary proposed changes thereto and (ii) may, to the extent it deems
necessary or appropriate, investigate or cause to be investigated any material
instance of noncompliance.
4. The Committee will oversee the Company's risk management, loss
prevention and safety programs and activities.
5. The Committee will monitor the functions of the Board to ensure that
management (or the chairpersons of other Board committees) are periodically
making presentations to the Board regarding:
(a) financial risks (including interest rate hedging, leverage and
financing strategies)
(b) operational or business risk (including entering new lines of
business, developing new information technology systems, adopting new
technological or competitive strategies, or entering into new strategic
or business relations)
(c) any other major risks not monitored by the Committee,
including legal risks.
6. The Committee will make regular reports to the Board summarizing the
Company's insurance programs and the Committee's activities.
7. The Committee will also discharge any additional functions that
may be delegated or assigned to it by the Board from time to time.
8. The Committee will review and reassess the adequacy of this Charter
annually and recommend any proposed changes to the Board for approval.
The Committee will annually review its own performance.
* * * * * * * * * *
----------
o Originally adopted and approved by the Committee and the Board on
February 18, 2003 and February 25, 2003, respectively.
Exhibit 10.1(a)
CENTURYTEL, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(As Amended and Restated February 28, 2002)
TABLE OF CONTENTS
SECTION 1.....................................................................3
DEFINITIONS AND EFFECTIVE DATES......................................3
1.1 Account............................................3
1.2 Active Participant.................................3
1.3 Adjustment Date....................................3
1.4 Approved Absence...................................3
1.5 Break in Service...................................3
1.6 Company Stock......................................4
1.7 Compensation.......................................4
1.8 Date of Employment.................................6
1.9 Date of Reemployment...............................6
1.10 Disability.........................................6
1.11 Eligibility Computation Periods....................6
1.12 Employee...........................................7
1.13 Employer...........................................7
1.14 Entry Date.........................................7
1.15 ESOP Account.......................................8
1.16 ESOP Trust.........................................8
1.17 Highly Compensated Employee........................8
1.18 Hour of Service....................................9
1.19 Leased Employee...................................11
1.20 Limitation Year...................................12
1.21 Merger Account....................................12
1.22 Normal Retirement Age.............................12
1.23 Participant.......................................12
1.24 PAYSOP Account....................................12
1.25 Plan Administrator................................12
1.26 Plan Year.........................................12
1.27 Rollover Account..................................13
1.28 Stock Bonus Account...............................13
1.29 Stock Bonus and PAYSOP Trust......................13
1.30 Suspense Account..................................13
1.31 Top Heavy Valuation Date..........................13
1.32 Trust or Trusts...................................13
1.33 Trustee...........................................13
1.34 Valuation Date....................................14
1.35 Vesting Computation Period........................14
1.36 Year of Service...................................14
1.37 Effective Dates...................................16
SECTION 2....................................................................18
ELIGIBILITY.........................................................18
2.1 Participation.....................................18
2.2 Determination of Eligibility......................19
2.3 Omission of Eligible Employee.....................19
2.4 Inclusion of Ineligible Employee..................19
2.5 Election Not to Participate.......................19
SECTION 3....................................................................21
CONTRIBUTIONS.......................................................21
3.1 Contributions by Employer.........................21
3.2 Determination of Contribution.....................21
3.3 Time of Payment of Contribution...................22
3.4 Benefits Provided Through Trust or Trusts.........22
3.5 Exclusive Benefit.................................22
3.6 Return of Contributions...........................22
SECTION 4....................................................................24
ACCOUNTS OF PARTICIPANTS............................................24
4.1 Individual Accounts for Each Participant..........24
4.2 Allocation of Employer Contributions..............24
4.3 Allocation of Forfeitures.........................24
4.4 Year-End Valuation of Accounts....................25
4.5 Interim Valuation of Accounts.....................25
4.6 Debiting of Distributions.........................26
4.7 Effective Date of Entries.........................26
LIMIT ON ANNUAL ADDITIONS...........................................26
4.8 Coverage Under This Plan Only.....................26
4.9 Coverage Under A Prototype Plan...................28
4.10 Coverage Under A Non-Prototype Plan...............30
4.11 Combined Limits...................................30
4.12 Definitions.......................................30
SECTION 5....................................................................37
BENEFITS PAYABLE AFTER NORMAL RETIREMENT............................37
5.1 Optional Methods of Payment Available
at Retirement.....................................37
5.2 Manner of Payment Following Commencement
of Payments.......................................38
5.3 Required Beginning Date...........................38
5.4 Determination of Amount to be Distributed
Each Year.........................................38
5.5 Age 65 Distributions..............................40
5.6 Definitions.......................................40
5.7 Small Accounts....................................40
SECTION 6....................................................................41
BENEFITS PAYABLE IN THE EVENT OF DEATH OR DISABILITY................41
6.1 Death Distribution Provisions.....................41
6.2 Definitions.......................................42
6.3 Designation of Beneficiary........................44
6.4 Failure to Designate a Beneficiary or
Select a Method of Payment........................45
6.5 Disability of a Participant.......................45
6.6 Transitional Rule.................................45
SECTION 7....................................................................48
BENEFITS PAYABLE UPON BREAK IN SERVICE..............................48
OR EMPLOYMENT TERMINATION...........................................48
7.1 Vesting Schedule..................................48
7.2 Distributions.....................................50
7.3 Restrictions on Immediate Distributions...........52
7.4 Payment of Account Balance........................54
7.5 Treatment of Accounts in Pay Status...............55
7.6 Direct Rollovers..................................55
7.7 Amendment of Vesting Schedule.....................56
SECTION 8....................................................................58
FORM OF DISTRIBUTION................................................58
8.1 Payment in Shares or Cash.........................58
8.2 Dividends.........................................58
SECTION 9....................................................................59
MERGER OR CONSOLIDATION.............................................59
9.1 Merger or Consolidation...........................59
9.2 Merger Accounts...................................59
9.3 Merger Agreement or Agreement Relating to
Transfer of Assets................................59
SECTION 10...................................................................61
CLAIMS PROCEDURE....................................................61
10.1 Filing of a Claim for Benefits....................61
10.2 Notification to Claimant of Decision..............61
10.3 Review Procedure..................................62
10.4 Decision on Review................................62
10.5 Agent for Service of Process......................62
SECTION 11...................................................................63
ADOPTION BY OTHER COMPANIES.........................................63
11.1 Rights of Other Companies to Participate..........63
11.2 Control of Plan by the Employer...................63
11.3 Allocations of Contributions and Forfeitures......63
11.4 Withdrawal of Employer or Adopting Companies......64
11.5 Amendment of Plan.................................64
11.6 Termination of One or More Parties................65
11.7 Reference to Employer in Plan.....................65
SECTION 12...................................................................66
PROVISIONS RELATING TO PARTICIPANTS.................................66
12.1 Information Required of Participants..............66
SECTION 13...................................................................67
PLAN ADMINISTRATOR..................................................67
13.1 Administration by Plan Administrator..............67
13.2 Appointment of Committee..........................67
13.3 Majority Action...................................67
13.4 Powers of the Plan Administrator..................68
13.5 Duties of the Plan Administrator..................70
13.6 Expenses..........................................70
SECTION 14...................................................................71
ROLLOVERS...........................................................71
14.1 Rollover Contributions............................71
14.2 Definition of Rollover Contribution...............71
14.3 Definition of Rollover Amount.....................71
14.4 Conduit Rollovers.................................72
SECTION 15...................................................................74
TRADES OR BUSINESSES UNDER COMMON CONTROL...........................74
15.1 Definitions.......................................74
15.2 Allocation........................................74
15.3 Participation and Vesting.........................75
15.4 Vesting and Distributions.........................75
SECTION 16...................................................................76
TOP HEAVY PLAN RULES................................................76
16.1 Key Employee......................................76
16.2 Non-Key Employee..................................76
16.3 Super Top Heavy Plan..............................76
16.4 Top Heavy Plan....................................77
16.5 Top Heavy Ratio...................................77
16.6 Top Heavy Plan Year...............................79
16.7 Top Heavy Compensation............................80
16.8 Determination Date................................80
16.9 Valuation Date....................................80
16.10 Aggregation Group.................................80
16.11 Present Value of Accrued Benefits..................81
TOP HEAVY REQUIREMENTS..............................................81
16.12 Top Heavy Plan Requirements......................81
16.13 Top Heavy Reduction..............................81
16.14 Minimum Allocations..............................82
16.15 Top Heavy Vesting................................83
16.16 Minimum Required Distribution....................83
16.17 Alternative Effective Date.......................84
SECTION 17...................................................................85
ESOP PROVISIONS.....................................................85
17.1 Exempt Loans......................................85
17.2 ESOP Voting Rights................................87
17.3 Rights on Tender or Exchange Offer................89
17.4 Special Limitation Rules..........................91
17.5 Limitation on Electing Shareholder................91
17.6 Investment Diversification........................91
17.7 Company Stock Distributions.......................92
SECTION 18...................................................................94
STOCK BONUS PLAN PROVISIONS.........................................94
18.1 Stock Bonus Voting Rights.........................94
18.2 Rights on Tender or Exchange Offer................96
18.3 Investment Diversification........................97
SECTION 19...................................................................98
PAYSOP PROVISIONS...................................................98
19.1 Nature of the Plan................................98
19.2 Definitions.......................................98
19.3 Eligibility and Participation.....................99
19.4 Employer Contributions............................99
19.5 Participant's Accounts............................100
19.6 Expenses..........................................103
19.7 Distributions.....................................104
19.8 Future of the Plan................................104
SECTION 20...................................................................105
QUALIFIED DOMESTIC RELATIONS ORDERS.................................105
20.1 Domestic Relations Order..........................105
20.2 Alternate Payee...................................105
20.3 Qualified Domestic Relations Order................105
PROCEDURES..........................................................106
20.4 Notice...........................................106
20.5 Determination of Qualification...................106
20.6 Deferral of Payment..............................106
20.7 Payment after Deferral...........................106
20.8 Payments after Eighteen Months...................107
20.9 Payments Under Qualified Domestic
Relations Order..................................107
20.10 Non-qualification.................................108
20.11 Effective Dates...................................108
SECTION 21...................................................................109
AMENDMENT AND TERMINATION OF PLAN;..................................109
ASSIGNMENT OF BENEFITS..............................................109
21.1 Amendment.........................................109
21.2 Termination; Discontinuance of Contributions......110
21.3 Assignment of Benefits............................111
STATE OF LOUISIANA
PARISH OF OUACHITA
BE IT KNOWN that on this 28th day of February, 2002, before me,
Notary Public, duly commissioned and qualified in and for the Parish of
Ouachita, State of Louisiana, therein residing and in the presence of the
undersigned witnesses:
PERSONALLY CAME AND APPEARED:
CENTURYTEL, INC. represented herein by its Executive Vice President
and Chief Financial Officer, R. Stewart Ewing, Jr., as Plan Sponsor.
The Plan Sponsor appoints Regions Morgan Keegan Trust as Trustee of
the CenturyTel, Inc. Employee Stock Ownership Trust and the CenturyTel, Inc.
Stock Bonus and PAYSOP Trust.
WHEREAS, the Plan Sponsor has previously established the CenturyTel,
Inc. Employee Stock Ownership Plan; and
WHEREAS, by Merger Agreement dated September 18, 2001, the CenturyTel,
Inc. Stock Bonus Plan and PAYSOP was merged into this Plan; and
WHEREAS, the Plan Sponsor desires to incorporate into this Plan certain
provisions of the Stock Bonus Plan and PAYSOP, including but not limited to
specific provisions relating to PAYSOP Accounts of Participants; and
WHEREAS, the Plan Sponsor desires to amend its Employee Stock Ownership
Plan and Trust (including the Stock Bonus Plan and PAYSOP, as merged into the
Employee Stock Ownership Plan) to comply with the General Agreement on Tariffs
and Trade portion of the Uruguay Round Agreements Act ("GATT"), the Retirement
Protection Act of 1994 ("RPA '94"), the Uniformed Services Employment and
Reemployment Rights Act of 1994 ("USERRA"), the Small Business Job Protection
Act of 1996 ("SBJPA"), the Taxpayer Relief Act of 1997 ("TRA '97"), the Internal
Revenue Service Restructuring and Reform Act of 1998 ("RRA '98"), and the
Community Renewal Tax Relief Act of 2000 ("CRA"), and other technical
corrections and statutory revisions; and
WHEREAS, the Plan Sponsor desires that the Employee Stock Ownership
Plan, as amended and restated, shall constitute a qualified employee benefit
plan under Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code") for the exclusive benefit of employees who participate herein, and shall
constitute an employee stock ownership plan under Section 4975(e)(7) of the
Code; and
WHEREAS, the Plan Sponsor desires that the separate trusts provided for
herein shall constitute exempt trusts under Section 501(a) of the Code;
NOW, THEREFORE, effective September 18, 2001, except as may be
indicated in specific Sections hereof and in Section 1.37, the Settlor hereby
amends and restates its Employee Stock Ownership Plan, upon the terms and
conditions as provided herein. The primary purpose of the Employee Stock
Ownership Plan is to invest in employer securities.
SECTION 1
DEFINITIONS AND EFFECTIVE DATES
1.1 Account.
The ESOP Account, the Stock Bonus Account, the PAYSOP Account, the
Merger Account, the Rollover Account, and the Suspense Account of a Participant,
whether or not such accounts have been combined into one account.
1.2 Active Participant.
A Participant who has completed a Year of Service within the Plan Year
ending on the Adjustment Date, whether or not the Participant is employed on
such date.
1.3 Adjustment Date.
The last day of each Plan Year.
1.4 Approved Absence.
An absence from work not exceeding one year, including absence due to
temporary disability, granted to and/or approved for the Employee by an Employer
in a uniform and nondiscriminatory manner; or an absence from work for service
in the Armed Forces or other government services, provided that, and only so
long as, reemployment rights are protected by law.
1.5 Break in Service.
A twelve (12) consecutive month period (computation period) during
which a Participant does not complete more than five hundred (500) Hours of
Service with the Employer. Any Break in Service shall be deemed to have
commenced on the first day of the Plan Year in which it occurs. No Break in
Service shall be deemed to occur during an Employee's initial Eligibility
Computation Period solely because of the failure of the Employee to complete
more than five hundred (500) Hours of Service during any one Plan Year occurring
in part during such twelve-month period if the Employee completes a Year of
Service during such initial Eligibility Computation Period. A Break in Service
shall not be deemed to have occurred during any period of Approved Absence if
the Employee returns to the service of the Employer on or before the last day of
the Approved Absence. A leave of absence mandated by the Family and Medical
Leave Act of 1993 is not included in determining whether an Employee has
incurred a Break in Service.
1.6 Company Stock.
Shares of voting common stock, $1.00 par value, issued by the Employer.
1.7 Compensation.
Compensation will mean compensation as that term is defined in Section
4.12(b) of the Plan, and will include any amount which is contributed by the
Employer pursuant to a salary reduction agreement and which is not includible in
the gross income of the Employee under Sections 125, 402(e)(3), 402(h)(1)(B) or
403(b) of the Code.
Notwithstanding the foregoing, Compensation for purposes of this
Section shall not include: (i) reimbursements or other expense allowances,
fringe benefits (cash or noncash), moving expenses, deferred compensation, and
welfare benefits; (ii) overtime; (iii) completion bonuses, Christmas bonuses,
retirement bonuses, and other broad-based bonuses not included under the
Employer's normal compensation programs; (iv) restricted stock awards under the
Restricted Stock Plan or the Key Employee Incentive Compensation Plan; (v) stock
options, performance shares and similar forms of compensation; and (vi)
severance pay in any form.
For Plan Years beginning on or after January 1, 1989, and before
January 1, 1994, the annual compensation of each Participant taken into account
for determining all benefits provided under the Plan for any Plan Year shall not
exceed $200,000. This limitation shall be adjusted by the Secretary at the same
time and in the same manner as under Section 415(d) of the Code, except that the
dollar increase in effect on January 1 of any calendar year is effective for
Plan Years beginning in such calendar year and the first adjustment to the
$200,000 limitation is effective on January 1, 1990.
For Plan Years beginning on or after January 1, 1994, the annual
compensation of each Participant taken into account for determining all benefits
provided under the Plan for any Plan Year shall not exceed $150,000, as adjusted
for increases in the cost-of-living in accordance with Section 401(a)(17)(B) of
the Code. The cost-of-living adjustment in effect for a calendar year applies to
any determination period beginning in such calendar year.
If a determination period consists of fewer than 12 months, the annual
compensation limit is an amount equal to the otherwise applicable annual
compensation limit multiplied by a fraction, the numerator of which is the
number of months in the short determination period, and the denominator of which
is 12.
If compensation for any prior determination period is taken into
account in determining a Participant's allocations for the current Plan Year,
the compensation for such prior determination period is subject to the
applicable annual compensation limit in effect for that prior period. For this
purpose, in determining allocations in Plan Years beginning on or after January
1, 1989, the annual compensation limit in effect for determination periods
beginning before that date is $200,000. In addition, in determining allocations
in Plan Years beginning on or after January 1, 1994, the annual compensation
limit in effect for determination periods beginning before that date is
$150,000.
Compensation shall include only that compensation which is actually
paid to the Participant during the determination period. Except as provided
elsewhere in this plan, the determination period shall be the Plan Year.
For employees of San Marcos Telephone Company, Inc., SM Telecorp, Inc.,
and subsidiaries thereof, who become participants in the Plan on or after June
20, 1993, compensation for the Plan Year ending December 31, 1993 shall be
recognized commencing as of the effective date of participation of each such
employee pursuant to Section 2.1.
1.8 Date of Employment.
The date on which an Employee first performs an Hour of Service
for the Employer.
1.9 Date of Reemployment.
The first date occurring after an Employee's Break in Service on which
he performs an Hour of Service.
1.10 Disability.
A Participant shall be considered disabled if the Participant is unable
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or to last for a continuous period of at least twelve (12) months. A
Participant shall only be considered disabled after proof of such disability
satisfactory to the Employer is furnished (which proof shall include a
determination of approval for Social Security disability benefits or, if such is
not available, a written statement of a licensed physician appointed or approved
by the Employer).
1.11 Eligibility Computation Periods.
In determining Years of Service and Breaks in Service for purposes of
eligibility, the initial Eligibility Computation Period is the twelve (12)
consecutive month period beginning on an Employee's Date of Employment or Date
of Reemployment. Subsequent Eligibility Computation Periods shall be twelve (12)
consecutive month periods beginning on the first anniversary of an Employee's
Date of Employment or Date of Reemployment and succeeding anniversaries thereof.
Years of Service, and Breaks in Service, for eligibility purposes will
be measured on the same Eligibility Computation Period.
1.12 Employee.
Those persons regularly employed by the Employer, including employees
of any other employer required to be aggregated with the Employer under Sections
414(b), (c), (m) or (o) of the Code. The term Employee shall also include any
leased employee deemed to be an employee of the Employer as provided in Sections
414(n) or (o) of the Code. The term Employee shall not include any
owner-employee, as defined in Code Section 401(c)(3), or self-employed
individual, as defined in Code Section 401(c)(i).
The term Employee shall not include an individual who is retained by
the Employer pursuant to a contract or agreement that specifies that the
individual is not eligible to participate in the Plan, an individual whose basic
compensation for services rendered is not paid by or on behalf of the Employer,
or an individual who is not classified as a common-law employee by the Employer,
regardless of any subsequent reclassification of such individual as a
"common-law employee" of the Employer by the Employer, any governmental agency,
or any court.
1.13 Employer.
CenturyTel, Inc.
1.14 Entry Date.
(a) The January 1 or July 1 on which or immediately following the date
on which an Employee satisfies the requirements of Section 2.1; or
(b) In the case of an Employee whose Years of Service are disregarded
pursuant to Section 1.36(c), such Employee will be treated as a new Employee for
eligibility purposes. If an Employee's Years of Service may not be disregarded
pursuant to Section 1.36(c), such Employee shall continue to participate in the
Plan, or, if terminated, shall participate immediately upon his Date of
Reemployment.
1.15 ESOP Account.
The individual account of a Participant to which has been credited his
share of Employer contributions and forfeitures, and earnings and losses
thereon, under the CenturyTel, Inc. Employee Stock Ownership Plan. This Account
includes the account balance of the Participant under the CenturyTel, Inc.
Employee Stock Ownership Plan as of the effective date of the merger of the
CenturyTel, Inc. Stock Bonus Plan and PAYSOP into the CenturyTel, Inc. Employee
Stock Ownership Plan. This Account, for the 2001 Plan Year and thereafter, shall
be credited with the Participant's share of Employer contributions designated by
the Employer as ESOP contributions, and shall be credited with forfeitures
arising from Participants' ESOP Accounts, and earnings and losses.
1.16 ESOP Trust.
The CenturyTel, Inc. Employee Stock Ownership Trust.
1.17 Highly Compensated Employee.
A highly compensated employee means any Employee who (1) was a five
percent (5%) owner at any time during the year or the preceding year, or (2) for
the preceding year had compensation from the Employer in excess of $80,000 and,
if the Employer so elects, was in the top-paid group for the preceding year. The
$80,000 amount is adjusted at the same time and in the same manner as under Code
Section 415(d), except that the base period is the calendar quarter ending
September 30, 1996.
For this purpose the applicable year of the Plan for which a
determination is being made is called a determination year and the preceding
twelve (12) month period is called a look-back year.
A highly compensated former employee is based on the rules applicable
to determining highly compensated employee status as in effect for that
determination year in accordance with Section 1.414(g)-1T, A04 of the temporary
Income Tax Regulations and Notice 97-45.
In determining whether an Employee is a highly compensated employee for
years beginning in 1997, the amendments to Code Section 414(g) stated above are
treated as having been in effect for years beginning in 1996.
1.18 Hour of Service.
Each hour for an Employee under (a) through (c), determined from the
employment records of the Employer. Any ambiguity which may arise shall be
resolved in favor of crediting Employees with an Hour of Service.
(a) Each hour for which an Employee is paid, or entitled to payment,
for the performance of duties for the Employer. These hours will be credited to
the Employee for the computation period in which the duties are performed;
(b) Each hour for which an Employee is paid, or entitled to payment,
by the Employer on account of a period of time during which no duties are
performed (irrespective of whether the employment relationship has terminated)
due to vacation, holiday, illness, incapacity (including disability), layoff,
jury duty, military duty, leave of absence or paid time off (PTO). No more than
five hundred one (501) Hours of Service will be credited under this paragraph
for any single continuous period (whether or not such period occurs in a single
computation period). Hours under this paragraph will be calculated and credited
pursuant to Section 2530.200(b) of the Department of Labor Regulations, which is
incorporated herein by this reference; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same Hours of
Service will not be credited both under paragraph (a) and/or (b), as the case
may be, and under this paragraph (c). These hours will be credited to the
Employee for the computation period or periods to which the award or agreement
pertains rather than the computation period in which the award, agreement or
payment is made.
Notwithstanding the above, (i) an hour for which an Employee is
directly or indirectly paid, or entitled to payment, on account of a period
during which no duties are performed is not required to be credited to the
Employee if such payment is made or due under a plan maintained solely for the
purpose of complying with applicable worker's compensation, unemployment
compensation or disability insurance laws; and (ii) Hours of Service are not
required to be credited for a payment which solely reimburses an Employee for
medical or medically-related expenses incurred by the Employee.
Hours of Service will be credited for employment with other members of
an affiliated service group (under Section 414(m)), a controlled group of
corporations (under Section 414(b)), or a group of trades or businesses under
common control (under Section 414(c)) of which the Employer is a member, and any
other entity required to be aggregated with the Employer pursuant to Section
414(o) and the regulations thereunder.
Hours of Service will also be credited for any individual considered an
Employee for purposes of this Plan under Section 414(n) or Section 414(o) and
the Regulations thereunder.
Solely for purposes of determining whether a Break in Service, as
defined in Section 1.5, for participation and vesting purposes has occurred in a
computation period, an individual who is absent from work for maternity or
paternity reasons shall receive credit for the Hours of Service which would
otherwise have been credited to such individual but for such absence, or in any
case in which such hours cannot be determined, eight Hours of Service per day of
such absence. For purposes of this paragraph, an absence from work for maternity
or paternity reasons means an absence (1) by reason of the pregnancy of the
individual, (2) by reason of the birth of a child of the individual, (3) by
reason of the placement of a child with the individual in connection with the
adoption of such child by the individual, or (4) for purposes of caring for such
child for a period beginning immediately following such birth or placement. The
Hours of Service credited under this paragraph shall be credited (1) in the
computation period in which the absence begins if the crediting is necessary to
prevent a Break in Service in that period, or (2) in all other cases, in the
following computation period.
Hours of Service shall be determined under the terms of the Family and
Medical Leave Act of 1993 and the Uniformed Services Employment and Reemployment
Rights Act of 1994.
1.19 Leased Employee.
(a) Any person (other than an employee of the recipient) who pursuant
to an agreement between the recipient and any other person ("leasing
organization") has performed services for the recipient (or for the recipient
and related persons determined in accordance with Code Section 414(n)(6)) on a
substantially full time basis for a period of at least one year, and such
services are performed under primary direction and control by the recipient.
Contributions or benefits provided a leased employee by the leasing organization
which are attributable to services performed for the recipient employer shall be
treated as provided by the recipient employer.
(b) A leased employee shall not be considered an employee of the
recipient if: (i) such employee is covered by a money purchase pension plan
providing: (1) a nonintegrated employer contribution rate of at least ten
percent (10%) of compensation, as defined in Code Section 415(c)(3), but
including amounts contributed pursuant to a salary reduction agreement which are
excludable from the leased employee's gross income under Section 125, Section
402(e)(3), Section 402(h)(1)(B) or Section 403(b) of the Code, (2) immediate
participation, and (3) full and immediate vesting; and (ii) leased employees do
not constitute more than twenty percent (20%) of the recipient's nonhighly
compensated workforce.
1.20 Limitation Year.
The Plan Year unless any other twelve (12) consecutive month period is
designated pursuant to a written resolution adopted by the Employer.
1.21 Merger Account.
The account maintained for a Participant with respect to a plan which
has merged with this Plan or transferred its assets to this Plan, in accordance
with Section 9.2.
1.22 Normal Retirement Age.
The fifty-fifth (55th) birthday of a Participant, at which time the
Participant shall become fully vested.
1.23 Participant.
An Employee who has satisfied the participation requirements of, and
has begun participating in, the Plan, pursuant to Section 2.1.
1.24 PAYSOP Account.
The individual account of a Participant to which has been credited his
share of Employer contributions and forfeitures, and earnings and losses
thereon, under the PAYSOP portion of the CenturyTel, Inc. Stock Bonus Plan and
PAYSOP prior to its merger into this Plan. The PAYSOP Accounts of Participants
shall be administered in accordance with Section 20 of this Plan.
1.25 Plan Administrator.
The Committee referred to in Section 13 of this Plan.
1.26 Plan Year.
The calendar year.
1.27 Rollover Account.
The account maintained in accordance with Section 14.1 for each
Participant who has made a rollover contribution.
1.28 Stock Bonus Account.
The individual account of a Participant to which has been credited his
share of Employer contributions and forfeitures, and earnings and losses
thereon, under the CenturyTel, Inc. Stock Bonus Plan and PAYSOP. This Account
includes the account balance of the Participant under the CenturyTel, Inc. Stock
Bonus Plan and PAYSOP as of the effective date of the merger of the CenturyTel,
Inc. Stock Bonus Plan and PAYSOP into the CenturyTel, Inc. Employee Stock
Ownership Plan. This Account, shall be credited with the Participant's share of
Employer contributions designated as Stock Bonus contributions, and shall be
credited with forfeitures arising from Participants' Stock Bonus Accounts, and
earnings and losses.
1.29 Stock Bonus and PAYSOP Trust.
The CenturyTel, Inc. Stock Bonus and PAYSOP Trust.
1.30 Suspense Account.
The account maintained in accordance with Section 4.8.
1.31 Top Heavy Valuation Date.
The date specified in Section 16.9 of this Plan.
1.32 Trust or Trusts.
The ESOP Trust and/or the Stock Bonus and PAYSOP Trust, the assets of
both of which are available to pay benefits under this Plan.
1.33 Trustee.
Regions Morgan Keegan Trust.
1.34 Valuation Date.
The date on which the Trustee shall make a revaluation of each Trust
pursuant to Section 4.4.
1.35 Vesting Computation Period.
For purposes of determining Years of Service and Breaks in Service for
computing an Employee's nonforfeitable (vested) right to the Account balance
derived from Employer contributions, the computation period shall be the Plan
Year.
1.36 Year of Service.
A twelve (12) consecutive month period (computation period) during
which an Employee completes at least five hundred (500) Hours of Service.
Effective January 1, 1994, a Year of Service is a twelve-consecutive month
period (computation period) during which an Employee completes at least one
thousand (1,000) Hours of Service. All of an Employee's Years of Service shall
be counted, subject to the following qualifications and exceptions:
(a) A Year of Service will not be credited for any period of Approved
Absence after the Employee incurs a Break in Service during such absence from
the service of the Employer;
(b) Service performed prior to a Break in Service shall not be taken
into account until the Employee has completed a Year of Service after such Break
in Service. Such Year of Service will be measured by the twelve (12) consecutive
month period beginning on the Employee's Date of Reemployment and, if necessary,
subsequent twelve (12) consecutive month periods beginning on anniversaries of
the Employee's Date of Reemployment;
(c) In the case of an Employee who does not have any nonforfeitable
right to his Regular Account, Years of Service, whether or not consecutive,
before a period of consecutive one (1) year Breaks in Service shall not be taken
into account if the number of consecutive one-year Breaks in Service in such
period equals or exceeds the greater of five (5) or the aggregate number of
Years of Service. Such aggregate number of Years of Service will not include any
Years of Service disregarded under the preceding sentence by reason of prior
Breaks in Service;
(d) In the case of a Participant who has five (5) or more consecutive
one-year Breaks in Service, all service after such Breaks in Service will be
disregarded for purposes of vesting the Employer-derived Account balance that
accrued before such Breaks in Service. Such Participant's pre-break service will
count in vesting the post-break Employer-derived Account balance only if either:
(i) such Participant has any nonforfeitable interest in
the Account balance attributable to Employer
contributions at the time of separation from service;
or
(ii) upon returning to service the number of consecutive
one-year Breaks in Service is less than the number of
Years of Service.
Separate accounts will be maintained for the Participant's pre-break
and post-break Employer-derived Account balance. Both Accounts will share in the
earnings and losses of the Trusts;
(e) A Participant who does not meet the definition of Disability
contained in Section 1.10 but who has been approved for benefits under the
CenturyTel, Inc. Long Term Disability Plan shall be credited for all purposes
under this Plan with service during the time the Participant is on disability
leave and eligible for benefits under such plan;
(f) Any Employee who was employed by Central Telephone of Ohio
("Central") on March 31, 1992 who became employed by the Employer on or about
April 1, 1992 pursuant to an offer of employment by the Employer, shall, upon
eligibility to participate in this Plan, be credited for all purposes under this
Plan with service performed prior to April 1, 1992 for Centel Corporation,
Central, or any member of a controlled group in which Centel Corporation and
Central were members;
(g) Service with San Marcos Telephone Company, Inc., SM Telecorp,
Inc., and subsidiaries thereof, and any successors thereto by merger or
otherwise, shall be counted for all purposes under this Plan; and
(h) Service performed for Spectra Communications Group, LLC by an
Employee shall, upon such Employee's eligibility to participate in this Plan, be
credited for all purposes under the Plan.
1.37 Effective Dates.
The general effective date of this Restatement shall be January 1,
2001; provided, however, that amendments to certain Sections of the Plan shall
be effective as stated in each such Section, and the amendments to the Sections
listed below shall have effective dates as listed below:
SECTION # EFFECTIVE DATE
--------- --------------
1.7 Plan Years beginning after
December 31, 1996.
1.17 Plan Years beginning after
December 31, 1996.
1.19 Plan Years beginning after
December 31, 1996.
4.12 (d) Limitation Years beginning
after December 31, 1994.
6.2 (f) Calendar Years commencing
after December 31, 1998.
5.7; 7.2(a); 7.3 Plan Years beginning after
August 5, 1997.
20.3
Judgments, orders and decrees
issued, and settlement
agreements entered into, on
or after August 5, 1997.
SECTION 2
ELIGIBILITY
2.1 Participation.
Every Participant in the Plan prior to this Amendment and Restatement
shall continue to participate in the Plan as of the effective date hereof.
Additionally, every Employee who has completed one (1) Year of Service during an
Eligibility Computation Period, shall become a Participant in the Plan as of the
Entry Date. However, Employees whose terms of employment are subject to a
collective bargaining agreement, which does not provide for their coverage under
this Plan, as well as Employees for whom union representation negotiations have
begun, which negotiations do not provide for their coverage under this Plan, are
not eligible to participate. Self-employed individuals (as defined in Code
Section 401(c)(1)) and owner-employees (as defined in Code Section 401(c)(3))
are not eligible to participate in the Plan.
Employees employed by Century Business Communications, LLC (formerly
Century Business Communications, Inc., and formerly Century Printing &
Publishing, Inc.), CenturyTel Interactive Company (formerly Century Interactive
Communications, Inc., and formerly Interactive Communications, Inc.), CenturyTel
Security Systems, Inc., CenturyTel of Northwest Arkansas, LLC, CenturyTel of
Central Arkansas, LLC, CenturyTel of Central Wisconsin, LLC, Telephone USA of
Wisconsin, LLC, Spectra Communications Group, LLC, CenturyTel Holdings, Inc.,
and CenturyTel Investments of Texas, Inc., and any wholly-owned subsidiaries or
affiliates of any of the foregoing, are not eligible to participate in the Plan.
Employees of CenturyTel of Pecoco, Inc.(formerly Pecoco, Inc.) and its
subsidiaries are eligible to participate in the Plan as of April 27, 1997.
Non-represented Employees of CenturyTel of the Northwest, Inc. (formerly Pacific
Telecom, Inc.) and Pacific Telecom Cellular, Inc., their subsidiaries, and their
Affiliates prior to the acquisition of Pacific Telecom, Inc. by Century
Telephone Enterprises, Inc. or an Affiliate thereof are eligible to participate
in the Plan as of January 1, 1999.
2.2 Determination of Eligibility.
The Plan Administrator shall determine the eligibility of each
Employee for participation in the Plan. Such determination shall be conclusive
and binding upon all persons.
2.3 Omission of Eligible Employee.
If, in any Plan Year, any Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such omission is
not made until after a contribution by the Employer for the year has been made,
the Employer shall make a subsequent contribution, if necessary, so that, after
the application of Section 4.2, the omitted Employee receives a total amount
which the Employee would have received had he not been omitted. Such
contribution shall be made regardless of whether or not it is deductible in
whole or in part in any taxable year under applicable provisions of the Code.
2.4 Inclusion of Ineligible Employee.
If, in any year, any person who should not have been included as a
Participant in the Plan is erroneously included and discovery of such incorrect
inclusion is not made until after a contribution for the year has been made, the
Employer shall not be entitled to recover the contribution made with respect to
the ineligible person regardless of whether or not a deduction is allowable with
respect to such contribution. In such event, the amount contributed with respect
to the ineligible person shall constitute a forfeiture for the Plan Year in
which the discovery is made.
2.5 Election Not to Participate.
An Employee may, subject to the approval of the Employer, elect
voluntarily not to participate in the Plan. The election not to participate must
be communicated to the Employer, in writing, at least thirty (30) days before
the beginning of a Plan Year. The foregoing election not to participate shall
not be available with respect to partners in a partnership.
SECTION 3
CONTRIBUTIONS
3.1 Contributions by Employer.
For the current Plan Year and for each Plan Year thereafter, the
Employer may make a contribution to the Trust in cash or shares of Company
Stock. The Employer's contribution for any Plan Year shall not exceed the
maximum amount allowable as a deduction to the Employer under Section 404 of the
Code.
Notwithstanding the foregoing, the Employer shall make a contribution
to the extent necessary to provide the top heavy minimum allocations under
Section 16.14, even if such contribution exceeds current or accumulated net
profits or the maximum amount deductible from the Employer's income for the
year.
3.2 Determination of Contribution.
The Employer shall determine the amount of any contributions to be made
by it to the Trust under the terms of this Agreement. The Employer's
determination of such contributions shall be binding on all Participants and the
Trustee.
The Employer shall designate whether a contribution to the Plan is an
ESOP contribution or a Stock Bonus contribution. Any contribution not designated
by the Employer shall be an ESOP contribution.
The Trustee shall have no right or duty to inquire into the amount of
the Employer's annual contribution, the method used in determining the amount of
the Employer's contribution, or the designation of the contribution as an ESOP
contribution or a Stock Bonus contribution by the Employer, but shall be
accountable only for funds actually received by it.
3.3 Time of Payment of Contribution.
The Employer shall pay to the Trustee its contribution for each Plan
Year within the time prescribed by law, including extensions of time, for the
filing of its Federal income tax return for such year.
3.4 Benefits Provided Through Trust or Trusts.
Benefits under this Plan shall be funded through the CenturyTel, Inc.
Employee Stock Ownership Trust and the CenturyTel, Inc. Stock Bonus and PAYSOP
Trust, each established by agreement between CenturyTel, Inc. and Regions Morgan
Keegan Trust. The Trustee of each Trust shall receive Employer contributions,
hold and invest each Trust in accordance with the applicable Trust agreement,
and distribute benefits to Participants in accordance with this Plan and
directions of the Committee.
3.5 Exclusive Benefit.
Any and all contributions made by the Employer to the Trust shall be
irrevocable, and neither such contributions nor any income therefrom shall be
used for, or diverted to, purposes other than for the exclusive benefit of
Participants or their beneficiaries under the Plan.
3.6 Return of Contributions.
Any contribution made by the Employer because of a mistake of fact must
be returned to the Employer within one year of the contribution.
In the event that the Commissioner of Internal Revenue determines that
the Plan is not initially qualified under the Internal Revenue Code, any
contribution made incident to that initial qualification by the Employer must be
returned to the Employer within one year after the date the initial
qualification is denied, but only if the application for qualification is made
by the time prescribed by law for filing the Employer's return for the taxable
year in which the Plan is adopted, or such later date as the Secretary of the
Treasury may prescribe.
In the event the deduction of a contribution made by the Employer is
disallowed under Section 404 of the Code, such contribution (to the extent
disallowed) must be returned to the Employer within one year of the
disallowance of the deduction.
SECTION 4
ACCOUNTS OF PARTICIPANTS
4.1 Individual Accounts for Each Participant.
The Plan Administrator or, if the Plan Administrator so determines, the
Trustee, shall maintain an ESOP Account, a Stock Bonus Account and, if
applicable, a PAYSOP Account for each Participant. With respect to a Participant
who incurs five (5) consecutive one-year Breaks in Service before receiving a
distribution, the vested portion of such Participant's ESOP Account and Stock
Bonus Account shall remain in such Accounts, and the nonvested portion of the
Participant's ESOP Account and Stock Bonus Account shall be forfeited as
provided in Section 7.2. The PAYSOP Accounts of Participants are fully vested at
all times in accordance with Section 7.1(b) and Section 19.5.
4.2 Allocation of Employer Contributions.
Contributions made by the Employer for a Plan Year shall, as of the
Adjustment Date occurring within such Plan Year, be allocated among and posted
to the ESOP Account and/or Stock Bonus Account (as determined by the Employer
pursuant to Section 3.2) of each Active Participant in the proportion which the
Compensation paid to such Active Participant for such year bears to the total
Compensation of all Active Participants for such year.
4.3 Allocation of Forfeitures.
The amount of forfeitures determined under Section 7.2 shall be
reallocated as of the Adjustment Date on which forfeitures occurred to the
applicable ESOP and/or Stock Bonus Accounts of Active Participants by adding the
total amount of forfeitures in ESOP Accounts to the Employer's contribution for
the year designated as an ESOP contribution, and adding the total amount of
forfeitures in Stock Bonus Accounts to the Employer's contribution for the year
designated as a Stock Bonus contribution, and allocating the sums so computed to
Participants' ESOP and Stock Bonus Accounts in accordance with Section 4.2. If
there were no Employer contributions for the year, forteitures in ESOP Accounts
shall be allocated to Participants' ESOP Accounts, and forfeitures in Stock
Bonus Accounts shall be allocated to Participants' Stock Bonus Accounts, in
accordance with Section 4.2.
4.4 Year-End Valuation of Accounts.
The Trustee or Trustees, as of each Adjustment Date, shall determine
the net worth of the assets of each Trust fund. In determining such net worth,
the Trustee or Trustees shall value the assets of each Trust fund at their fair
market value as of such Adjustment Date, and shall deduct all liabilities of the
Plan and all expenses payable from each such Trust fund for which the Trustee
has not yet obtained reimbursement. Such valuation shall not include any
contribution for the year made by the Employer as of the Valuation Date.
As of each Adjustment Date, before allocation of forfeitures and
Employer contributions for the year, the Trustee or Trustees shall credit the
Account of each Participant with dividends paid on shares of Company Stock
allocated to such Participant's Account, and thereafter shall adjust the net
credit balance in the Accounts of all Participants (whether or not active)
upward or downward, pro-rata, so that the total of such net credit balances will
equal the net worth of all Trust funds as of the Adjustment Date. As used herein
the term "net credit balance" means the balance to the credit of each
Participant as of the immediately preceding Adjustment Date or Interim Valuation
Date, if later, as reduced for payments from the Accounts and forfeitures on or
subsequent to such date.
4.5 Interim Valuation of Accounts.
As of the end of any month, the Plan Administrator may request the
Trustee or Trustees to determine, in accordance with the rules of Section 4.4,
the then net worth of the assets constituting each Trust fund. The last day of
each month as of which the Plan Administrator has requested the Trustee or
Trustees to determine the aforementioned net worth is referred to herein as an
"Interim Valuation Date."
All distributions which are to be made as of or after any such Interim
Valuation Date, but prior to the next succeeding Adjustment Date, or, if
earlier, the next succeeding Interim Valuation Date, shall be made as if the
credit balances to all Participants' Accounts had actually been credited or
debited so that the total credit balances of all Accounts would equal the net
worth of the assets constituting all Trust funds as of such Interim Valuation
Date.
4.6 Debiting of Distributions.
The amounts, if any, paid to or on behalf of a Participant at any time
shall, concurrent with such payment, be debited against his Account.
4.7 Effective Date of Entries.
Each Account entry which, in accordance with the provisions hereof,
needs to be made shall be considered as having been made on the date herein
specified regardless of the date of actual entry.
LIMIT ON ANNUAL ADDITIONS
4.8 Coverage Under This Plan Only.
(a) If the Participant does not participate in, and has never
participated in another qualified plan maintained by the Employer, or a welfare
benefit fund, as defined in Section 419(e) of the Code, maintained by the
Employer, or an individual medical account, as defined in Section 415(l)(2) of
the Code, maintained by the Employer, or a simplified employee pension, as
defined in Section 408(k) of the Code, maintained by the Employer, which
provides an annual addition as defined in Section 4.12, the amount of annual
additions which may be credited to the Participant's Account for any Limitation
Year will not exceed the lesser of the maximum permissible amount or any other
limitation contained in this Plan. If the Employer contribution that would
otherwise be contributed or allocated to the Participant's Account would cause
the annual additions for the Limitation Year to exceed the maximum permissible
amount, the amount contributed or allocated will be reduced so that the annual
additions for the Limitation Year will equal the maximum permissible amount.
(b) Prior to determining the Participant's actual compensation for the
Limitation Year, the Employer may determine the maximum permissible amount for a
Participant on the basis of a reasonable estimate of the Participant's
compensation for the Limitation Year, uniformly determined for all Participants
similarly situated.
(c) As soon as is administratively feasible after the end of the
Limitation Year, the maximum permissible amount for the Limitation Year will be
determined on the basis of the Participant's actual compensation for the
Limitation Year.
(d) If, pursuant to Section 4.8(c) or as a result of the allocation of
forfeitures, there is an excess amount, the excess will be disposed of as
follows:
(i) Any nondeductible voluntary employee contributions
(plus attributable earnings), to the extent they
would reduce the excess amount, will be returned to
the Participant;
(ii) If after the application of paragraph (i) an excess
amount still exists, any elective deferrals (plus
attributable earnings), to the extent they would
reduce the excess amount, will be distributed to the
Participant;
(iii) If after the application of paragraph (ii) an excess
amount still exists, and the Participant is covered
by the Plan at the end of the Limitation Year, the
excess amount in the Participant's Account will be
used to reduce Employer contributions (including any
allocation of forfeitures) for such Participant in
the next Limitation Year, and each succeeding
Limitation Year if necessary;
(iv) If after the application of paragraph (ii) an excess
amount still exists, and the Participant is not
covered by the Plan at the end of a Limitation Year,
the excess amount will be held unallocated in a
Suspense Account. The Suspense Account will be
applied to reduce future Employer contributions for
all remaining Participants in the next Limitation
Year, and each succeeding Limitation Year if
necessary;
(v) If a Suspense Account is in existence at any time
during a Limitation Year pursuant to this Section, it
will not participate in the allocation of the Trust's
investment gains and losses. If a Suspense Account is
in existence at any time during a particular
Limitation Year, all amounts in the Suspense Account
must be allocated and reallocated to Participants'
Accounts before any Employer or any Employee
contributions may be made to the Plan for that
Limitation Year. Excess amounts may not be
distributed to Participants or former Participants.
4.9 Coverage Under A Prototype Plan.
(a) This Section applies if, in addition to this Plan, the Participant
is covered under a qualified master or prototype defined contribution plan
maintained by the Employer, a welfare benefit fund maintained by the Employer,
an individual medical account maintained by the Employer, or a simplified
employee pension maintained by the Employer that provides an annual addition as
defined in Section 4.12 during any Limitation Year. The annual additions which
may be credited to a Participant's Account under this Plan for any such
Limitation Year will not exceed the maximum permissible amount reduced by the
annual additions credited to a Participant's account under the other qualified
master or prototype defined contribution plans, and welfare benefit funds for
the same Limitation Year. If the annual additions with respect to the
Participant under other qualified master or prototype defined contribution
plans, welfare benefit funds, individual medical accounts, and simplified
employee pensions maintained by the Employer are less than the maximum
permissible amount and the Employer contribution that would otherwise be
contributed or allocated to the Participant's Account under this Plan would
cause the annual additions for the Limitation Year to exceed this limitation,
the amount contributed or allocated will be reduced so that the annual additions
under all such plans and funds for the Limitation Year will equal the maximum
permissible amount. If the annual additions with respect to the Participant
under such other qualified master or prototype defined contribution plans,
welfare benefit funds, individual medical accounts, and simplified employee
pensions in the aggregate are equal to or greater than the maximum permissible
amount, no amount will be contributed or allocated to the Participant's Account
under this Plan for the Limitation Year.
(b) Prior to determining the Participant's actual compensation for the
Limitation Year, the Employer may determine the maximum permissible amount for a
Participant in the manner described in Section 4.8(b).
(c) As soon as is administratively feasible after the end of the
Limitation Year, the maximum permissible amount for the Limitation Year will be
determined on the basis of the Participant's actual compensation for the
Limitation Year.
(d) If, pursuant to Section 4.9(c) or as a result of the allocation of
forfeitures, a Participant's annual additions under this Plan and such other
plans would result in an excess amount for a Limitation Year, the excess amount
will be deemed to consist of the annual additions last allocated, except that
annual additions attributable to a simplified employee pension will be deemed to
have been allocated first, followed by annual additions to a welfare benefit
fund or individual medical account, regardless of the actual allocation date.
(e) If an excess amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation date of another
plan, the excess amount attributed to this Plan will be the product of:
(i) the total excess amount allocated as of such date, times
(ii) the ratio of (A) the annual additions allocated to
the Participant for the Limitation Year as of such
date under this Plan to (B) the total annual
additions allocated to the Participant for the
Limitation Year as of such date under this and all
the other qualified master or prototype defined
contribution plans.
(f) Any excess amount attributed to this Plan will be disposed in the
manner described in Section 4.8(d).
4.10 Coverage Under A Non-Prototype Plan.
If the Participant is covered under another qualified defined
contribution plan maintained by the Employer which is not a master or prototype
plan, annual additions which may be credited to the Participant's Account under
this Plan for any Limitation Year will be limited in accordance with Section 4.9
as though the other plan were a master or prototype plan.
4.11 Combined Limits.
If the Employer maintains, or at any time maintained, a qualified
defined benefit plan covering any Participant in this Plan, the sum of the
Participant's defined benefit plan fraction and defined contribution plan
fraction will not exceed 1.0 in any Limitation Year. If the sum of the defined
benefit plan fraction and the defined contribution plan fraction shall exceed
1.0 in any Limitation Year for any Participant in this Plan, the Plan
Administrator shall adjust the numerator of the defined benefit plan fraction so
that the sum of both fractions shall not exceed 1.0 in any Limitation Year for
such Participant. This Section 4.11 does not apply for Limitation Years
beginning on or after January 1, 2000.
4.12 Definitions.
(a) Annual additions: The sum of the following amounts credited to a
Participant's Account for the Limitation Year:
(i) Employer contributions;
(ii) Employee contributions;
(iii) Forfeitures;
(iv) Amounts allocated, after March 31, 1984, to an individual
medical account, as defined in Section 415(l)(2) of the
Code, which is part of a pension or annuity plan
maintained by the Employer are treated as annual additions
to a defined contribution plan. Also amounts derived from
contributions paid or accrued after December 31, 1985, in
taxable years ending after such date, which are
attributable to post-retirement medical benefits,
allocated to the separate account of a key employee, as
defined in Section 419A(d)(3) of the Code, under a welfare
benefit fund, as defined in Section 419(e) of the Code,
maintained by the Employer are treated as annual additions
to a defined contribution plan; and
(v) Allocations under a simplified employee pension.
For this purpose, any excess amount applied under Sections 4.8(d) or
4.9(f) in the Limitation Year to reduce Employer contributions will be
considered annual additions for such Limitation Year.
(b) Compensation: For purposes of this Section, compensation shall
mean Section 415 safe-harbor compensation. Compensation is defined as all of a
Participant's wages, salaries, and fees for professional services and other
amounts received (without regard to whether or not an amount is paid in cash)
for personal services actually rendered in the course of employment with the
Employer maintaining the Plan to the extent that the amounts are includable in
gross income (including, but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage of profits, commissions
on insurance premiums, tips, bonuses, fringe benefits, and reimbursements, or
other expense allowances under a nonaccountable plan [as described in Section
1.61-2(c)]), and excluding the following:
(i) Employer contributions to a plan of deferred
compensation which are not includible in the
Employee's gross income for the taxable year in which
contributed, or Employer contributions under a
simplified employee pension plan, or any
distributions from a plan of deferred compensation;
(ii) Amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property)
held by the Employee either becomes freely
transferable or is no longer subject to a substantial
risk of forfeiture;
(iii) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock
option; and
(iv) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not
under a salary reduction agreement) towards the
purchase of an annuity described in Section 403(b) of
the Code (whether or not the amounts are actually
excludable from the gross income of the Employee).
For any self-employed individual, compensation will mean earned income.
For purposes of applying the limitations of this Section, compensation for a
Limitation Year is the compensation actually paid or includable in gross income
during such Limitation Year.
Notwithstanding the preceding sentence, compensation for a Participant
in a defined contribution plan who is permanently and totally disabled (as
defined in Section 22(e)(3) of the Code) is the compensation such Participant
would have received for the Limitation Year if the Participant had been paid at
the rate of compensation paid immediately before becoming permanently and
totally disabled; for Limitation Years beginning before January 1, 1997, such
imputed compensation for the disabled Participant may be taken into account only
if the Participant is not a highly compensated employee (as defined in Section
414(q) of the Code) and contributions made on behalf of such Participant are
nonforfeitable when made.
For Limitation Years beginning after December 31, 1997, for purposes of
applying the limitations of this Section, compensation paid or made available
during such Limitation Year shall include any elective deferral (as defined in
Code Section 402(g)(3)), and any amount which is contributed or deferred by the
Employer at the election of the Employee and which is not includible in the
gross income of the Employee by reason of Code Section 125 or 457.
(c) Defined benefit fraction: A fraction, the numerator of which is
the sum of the Participant's projected annual benefits under all defined benefit
plans (whether or not terminated) maintained by the Employer, and the
denominator of which is the lesser of one hundred twenty-five percent (125%) of
the dollar limitation determined for the Limitation Year under Sections 415(b)
and (d) of the Code or one hundred forty percent (140%) of the highest average
compensation, including any adjustments under Section 415(b) of the Code.
Notwithstanding the above, if the Participant was a participant as of
the first day of the first Limitation Year beginning after December 31, 1986, in
one or more defined benefit plans maintained by the Employer which were in
existence on May 6, 1986, the denominator of this fraction will not be less than
one hundred twenty-five percent (125%) of the sum of the annual benefits under
such plans which the Participant had accrued as of the close of the last
Limitation Year beginning before January 1, 1987, disregarding any changes in
the terms and conditions of the Plan after May 5, 1986. The preceding sentence
applies only if the defined benefit plans individually and in the aggregate
satisfied the requirements of Section 415 of the Code for all Limitation Years
beginning before January 1, 1987.
(d) Defined contribution dollar limitation: $30,000, as adjusted under
Code Section 415(d).
(e) Defined contribution fraction: A fraction, the numerator of which
is the sum of the annual additions to the Participant's account under all
defined contribution plans (whether or not terminated) maintained by the
Employer for the current and all prior limitation years (including the annual
additions attributable to the Participant's nondeductible employee contributions
to all defined benefit plans, whether or not terminated, maintained by the
Employer, and the annual additions attributable to all welfare benefit funds,
individual medical accounts, and simplified employee pensions maintained by the
Employer), and the denominator of which is the sum of the maximum aggregate
amounts for the current and all prior limitation years of service with the
Employer (regardless of whether a defined contribution plan was maintained by
the Employer). The maximum aggregate amount in any limitation year is the lesser
of one hundred twenty-five percent (125%) of the dollar limitation determined
under Sections 415(b) and (d) of the Code in effect under Section 415(c)(1)(A)
of the Code or thirty-five percent (35%) of the Participant's compensation for
such year.
If the Employee was a participant as of the end of the first day of the
first Limitation Year beginning after December 31, 1986, in one or more defined
contribution plans maintained by the Employer which were in existence on May 6,
1986, the numerator of this fraction will be adjusted if the sum of this
fraction and the defined benefit fraction would otherwise exceed 1.0 under the
terms of this Plan. Under the adjustment, an amount equal to the product of (1)
the excess of the sum of the fractions over 1.0, times (2) the denominator of
this fraction, will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the fractions as they would be
computed as of the end of the last Limitation Year beginning before January 1,
1987, and disregarding any changes in the terms and conditions of the Plan made
after May 5, 1986, but using the Code Section 415 limitation applicable to the
first Limitation Year beginning on or after January 1, 1987.
The annual addition for any Limitation Year beginning before January 1,
1987, shall not be recomputed to treat all Employee contributions as annual
additions.
(f) Employer: For purposes of this Section, Employer shall mean the
Employer and all members of a controlled group of corporations (as defined in
Section 414(b) of the Code as modified by Section 415(h)), all commonly
controlled trades or businesses (as defined in Section 414(c) of the Code as
modified by Section 415(h)) or affiliated service groups (as defined in Section
414(m) of the Code) of which the Employer is a part, and any other entity
required to be aggregated with the Employer pursuant to regulations under
Section 414(o) of the Code.
(g) Excess amount: The excess of the Participant's annual additions
for the Limitation Year over the maximum permissible amount.
(h) Highest average compensation: The average compensation for the
three consecutive Years of Service with the Employer that produces the highest
average. A Year of Service with the Employer is the twelve (12) consecutive
month period defined in Section 1.36 of this Plan.
(i) Limitation year: The calendar year. All qualified plans maintained
by the Employer must use the same Limitation Year. If the Limitation Year is
amended to a different twelve (12) consecutive month period, the new Limitation
Year must begin on a date within the Limitation Year in which the amendment is
made.
(j) Master or prototype plan: A plan the form of which is the subject
of a favorable opinion letter from the Internal Revenue Service.
(k) Maximum permissible amount: The maximum annual addition that may
be contributed or allocated to a Participant's Account under the Plan for any
Limitation Year shall not exceed the lesser of:
(i) the defined contribution dollar limitation, or
(ii) 25 percent of the Participant's compensation for the
Limitation Year.
The compensation limitation referred to in (ii) shall not apply to any
contribution for medical benefits (within the meaning of Section 401(h) or
Section 419A(f)(2) of the Code) which is otherwise treated as an annual addition
under Section 415(l)(1) or 419A(d)(2) of the Code.
If a short Limitation Year is created because of an amendment changing
the Limitation Year to a different twelve (12) consecutive month period, the
maximum permissible amount will not exceed the defined contribution dollar
limitation multiplied by the following fraction:
Number of months in the short Limitation Year
12
(l) Projected annual benefit: The annual retirement benefit (adjusted
to an actuarially equivalent straight life annuity if such benefit is expressed
in a form other than a straight life annuity or qualified joint and survivor
annuity) to which the Participant would be entitled under the terms of the Plan
assuming:
(i) the Participant will continue employment until Normal
Retirement Age under the Plan (or current age, if
later), and
(ii) the Participant's compensation for the current
Limitation Year and all other relevant factors used
to determine benefits under the Plan will remain
constant for all future Limitation Years.
SECTION 5
BENEFITS PAYABLE AFTER NORMAL RETIREMENT
5.1 Optional Methods of Payment Available at Retirement.
All sums credited to a Participant's Account shall become fully vested
upon attainment of Normal Retirement Age. Upon actual retirement at or after
Normal Retirement Age, a Participant shall be entitled to receive the full
amount credited to his Account as of the Valuation Date or Interim Valuation
Date immediately preceding the month in which payment is to be made, which
amount shall be paid to the Participant in one lump sum within the later of: (i)
sixty (60) days after the close of the Plan Year in which the Participant
retires, or (ii) sixty (60) days after the distributable amount has been
determined, unless prior to the date of his retirement he elects, in the manner
prescribed by the Plan Administrator, any one of the following method or
methods:
(a) Payment of the entire amount of the Participant's Account in one
lump sum at some future date, not later than one year after Normal Retirement
Date;
(b) Payment in substantially equal annual, quarterly or monthly
installments (including net investment income, gain or loss) until the value of
such Participant's Account is exhausted. Unless the Participant elects
otherwise, the payment period for a Participant's ESOP Account shall not exceed
five (5) years. This five (5) year payment period for ESOP Accounts shall be
extended by one (1) year, up to five (5) additional years, for each $100,000 (or
fraction thereof) by which such Participant's Account balance exceeds $500,000
(the dollar amounts herein are subject to cost of living adjustments prescribed
by the Secretary of the Treasury; for the 2001 Plan Year, these amounts are
$155,000 and $780,000, respectively); or
(c) Any combination of the foregoing.
Notwithstanding anything contained in this Section 5.1, lump sum,
installment or any other benefits may not be paid directly from the Plan in any
form of a life annuity or through the distribution of property in any form of a
life annuity.
In addition, if the Participant's spouse is not the designated
beneficiary, the method of distribution selected must assure that at least fifty
percent (50%) of the present value of the amount available for distribution is
paid within the life expectancy of the Participant.
All distributions required under this Section shall be determined and
made in accordance with the proposed regulations under Section 401(a)(9) of the
Code, including the minimum distribution incidental benefit requirement of
Section 1.401(a)(9)-2 of the proposed regulations.
Any distribution under this Section 5.1 shall comply with the consent
requirements contained in Section 7.3.
5.2 Manner of Payment Following Commencement of Payments.
Following the commencement of payments under Section 5.1, a Participant
and the Plan Administrator may, notwithstanding the fact that periodic benefits
are being paid, agree that as of any subsequent date the balance credited to
such Participant's Account shall be paid to or applied for the benefit of the
Participant in accordance with any other payout method of Section 5.1.
5.3 Required Beginning Date.
The entire interest of a Participant must be distributed or begin to be
distributed no later than the Participant's required beginning date, as defined
in Section 6.2(f).
5.4 Determination of Amount to be Distributed Each Year.
If a Participant's interest is to be distributed in other than a
single-sum, the following minimum distribution rules shall apply on or after the
required beginning date:
(a) If a Participant's benefit is to be distributed over (1) a period
not extending beyond the life expectancy of the Participant or the joint life
and last survivor expectancy of the Participant and the Participant's designated
beneficiary or (2) a period not extending beyond the life expectancy of the
designated beneficiary, the amount required to be distributed for each calendar
year, beginning with distributions for the first distribution calendar year,
must at least equal the quotient obtained by dividing the Participant's benefit
by the applicable life expectancy.
(b) For calendar years beginning before January 1, 1989, if the
Participant's spouse is not the designated beneficiary, the method of
distribution selected must assure that at least fifty percent (50%) of the
present value of the amount available for distribution is paid within the life
expectancy of the Participant.
(c) For calendar years beginning after December 31, 1988, the amount
to be distributed each year, beginning with distributions for the first
distribution calendar year shall not be less than the quotient obtained by
dividing the Participant's benefit by the lesser of (1) the applicable life
expectancy or (2) if the Participant's spouse is not the designated beneficiary,
the applicable divisor determined from the table set forth in Q&A-4 of Section
1.401(a)(9)-2 of the proposed regulations. Distributions after the death of the
Participant shall be distributed using the applicable life expectancy in Section
5.4(a) above as the relevant divisor without regard to proposed regulations
Section 1.401(a)(9)-2.
(d) The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the Participant's required
beginning date. The minimum distribution for other calendar years, including the
minimum distribution for the distribution calendar year in which the
Participant's required beginning date occurs, must be made on or before December
31 of that distribution calendar year.
5.5 Age 65 Distributions.
Upon the attainment of the age of 65 years, a Participant shall be
entitled to elect a distribution of all or a portion of his Account in the Plan.
A Participant who elects to receive a distribution pursuant to this Section 5.5
shall continue to be eligible to participate in the Plan on the same basis as
any other Participant.
5.6 Definitions.
For purposes of this Section, the definitions contained in Section 6.2
shall apply.
5.7 Small Accounts.
Any provision of the Plan to the contrary notwithstanding, the
Administrator shall have the authority to direct the settlement of a
Participant's Account having a balance of less than $5,000.00 by the payment of
one lump sum.
SECTION 6
BENEFITS PAYABLE IN THE EVENT OF DEATH OR DISABILITY
6.1 Death Distribution Provisions.
Upon the death of a Participant, his or her beneficiary shall be
entitled to receive the full amount credited to his Account. Upon the death of a
Participant, the following distribution provisions shall take effect:
(a) If the Participant dies after distribution of his or her interest
has begun, the remaining portion of such interest will continue to be
distributed at least as rapidly as under the method of distribution being used
prior to the Participant's death.
(b) If the Participant dies before distribution of his or her interest
begins, distribution of the Participant's entire interest shall be completed by
December 31 of the calendar year containing the fifth anniversary of the
Participant's death except to the extent that an election is made to receive
distributions in accordance with (i) or (ii) below:
(i) if any portion of the Participant's interest is
payable to a designated beneficiary, distributions
may be made over the life expectancy or over a period
certain not greater than the life expectancy of the
designated beneficiary commencing on or before
December 31 of the calendar year immediately
following the calendar year in which the Participant
died;
(ii) if the designated beneficiary is the Participant's
surviving spouse, the date distributions are required
to begin in accordance with (i) above shall not be
earlier than the later of (1) December 31 of the
calendar year in which the Participant died and (2)
December 31 of the calendar year in which the
Participant would have attained age 70 2.
If the Participant has not made an election pursuant to this Section
6.1(b) by the time of his or her death, the Participant's designated beneficiary
must elect the method of distribution no later than the earlier of (1) December
31 of the calendar year in which distributions would be required to begin under
this Section, or (2) December 31 of the calendar year which contains the fifth
anniversary of the date of death of the Participant. If the Participant has no
designated beneficiary, or if the designated beneficiary does not elect a method
of distribution, distribution of the Participant's entire interest must be
completed by December 31 of the calendar year containing the fifth anniversary
of the Participant's death.
(c) For purposes of Section 6.1(b) above, if the surviving spouse dies
after the Participant, but before payments to such spouse begin, the provisions
of Section 6.1(b), with the exception of paragraph (ii) therein, shall be
applied as if the surviving spouse were the Participant.
(d) For purposes of this Section 6.1, any amount paid to a child of
the Participant will be treated as if it had been paid to the surviving spouse
if the amount becomes payable to the surviving spouse when the child reaches the
age of majority.
(e) For the purposes of this Section 6, distribution of a
Participant's interest is considered to begin on the Participant's required
beginning date (or, if Section 6.1(c) above is applicable, the date distribution
is required to begin to the surviving spouse pursuant to Section 6.1(b) above).
If distribution in the form of an annuity irrevocably commences to the
Participant before the required beginning date, the date distribution is
considered to begin is the date distribution actually commences.
6.2 Definitions.
For purposes of this Section and Section 5, the following definitions
shall apply:
(a) Applicable life expectancy. The life expectancy (or joint and last
survivor expectancy) calculated using the attained age of the Participant (or
designated beneficiary) as of the Participant's (or designated beneficiary's)
birthday in the applicable calendar year reduced by one for each calendar year
which has elapsed since the date life expectancy was first calculated. If life
expectancy is being recalculated, the applicable life expectancy shall be the
life expectancy as so recalculated. The applicable calendar year shall be the
first distribution calendar year, and if life expectancy is being recalculated
such succeeding calendar year.
(b) Designated beneficiary. The individual who is designated as the
beneficiary under the Plan in accordance with Section 401(a)(9) and the proposed
regulations thereunder.
(c) Distribution calendar year. A calendar year for which a minimum
distribution is required. For distributions beginning before the Participant's
death, the first distribution calendar year is the calendar year immediately
preceding the calendar year which contains the Participant's required beginning
date. For distributions beginning after the Participant's death, the first
distribution calendar year is the calendar year in which distributions are
required to begin pursuant to this Section 6.1 above.
(d) Life expectancy. Life expectancy and joint and last survivor
expectancy are computed by use of the expected return multiples in Tables V and
VI of Section 1.72-9 of the income tax regulations.
Unless otherwise elected by the Participant (or spouse, in the case of
distributions described in Section 6.1(b)(ii) above) by the time distributions
are required to begin, life expectancies shall be recalculated annually. Such
election shall be irrevocable as to the Participant (or spouse) and shall apply
to all subsequent years. The life expectancy of a nonspouse beneficiary may not
be recalculated.
(e) Participant's benefit.
(i) The Account balance as of the last valuation date in
the calendar year immediately preceding the
distribution calendar year (valuation calendar year)
increased by the amount of any contributions or
forfeitures allocated to the Account balance as of
dates in the valuation calendar year after the
valuation date and decreased by distributions made in
the valuation calendar year after the valuation date.
(ii) Exception for second distribution calendar year. For
purposes of paragraph (i) above, if any portion of
the minimum distribution for the first distribution
calendar year is made in the second distribution
calendar year on or before the required beginning
date, the amount of the minimum distribution made in
the second distribution calendar year shall be
treated as if it had been made in the immediately
preceding distribution calendar year.
(f) Required beginning date. The required beginning date of a
Participant is the later of the April 1 of the calendar year following the
calendar year in which the Participant attains age 70 2 or retires, except that
benefit distributions to a five percent (5%) owner must commence by the April 1
of the calendar year following the calendar year in which the Participant
attains age 702.
(g) 5-Percent owner.
(i) A Participant is treated as a 5-percent owner for
purposes of this Section if such Participant is a
5-percent owner as defined in Section 416 of the Code
at any time during the Plan Year ending with or
within the calendar year in which such owner attains
age 70 2.
(ii) Once distributions have begun to a 5-percent owner
under this Section, they must continue to be
distributed, even if the Participant ceases to be a
5-percent owner in a subsequent year.
6.3 Designation of Beneficiary.
A Participant at the time he joins the Plan shall designate a
beneficiary or beneficiaries to receive the sums credited to his Account in the
event of his death, which designation may be changed by the Participant from
time to time. To be effective, the original designation of beneficiaries and any
subsequent change must be in writing on the form provided for that purpose by
the Plan Administrator.
The beneficiary of a Participant who is married at the time of his
death shall be his surviving spouse unless his surviving spouse consents in
writing on the form provided for that purpose by the Plan Administrator to the
designation of another beneficiary. A consent by a Participant's spouse shall
not be effective unless such consent is witnessed by the Plan Administrator or a
Notary Public.
6.4 Failure to Designate a Beneficiary or Select a Method of Payment.
In the event that no beneficiary is properly designated or in the event
that a beneficiary designated by the Participant predeceased the Participant and
no new designation of beneficiary is made, the Plan Administrator, in its
discretion, may direct the Trustee to make payment of all sums to which the
deceased Participant is entitled to either:
(a) any one or more of the next of kin (including the surviving
spouse) of the Participant and in such proportions as the Plan Administrator may
determine; or
(b) the legal representative or representatives of the estate of the
last to die of the Participant or his beneficiary.
If a Participant who is married at the time of his death has not
properly designated a beneficiary other than his spouse in accordance with the
last paragraph of Section 6.3, the Participant's beneficiary shall be his
surviving spouse.
6.5 Disability of a Participant.
In the event of the Disability of a Participant prior to attaining
Normal Retirement Age, such Participant shall be entitled to receive the entire
amount credited to his Account. Payment shall begin as soon as administratively
feasible after the close of the Plan Year in which the Administrator receives
proof of the Participant's Disability, and shall be made in accordance with any
of the methods provided in Section 5, as selected by the Participant. Any
distribution hereunder shall comply with the consent requirements contained in
Section 7.3.
6.6 Transitional Rule.
Notwithstanding the other requirements of this Section, distribution on
behalf of any Employee, including a 5-percent owner, may be made in accordance
with all of the following requirements (regardless of when such distribution
commences):
(a) The distribution by the Plan is one which would not have
disqualified such Plan under Section 401(a)(9) of the Code as in effect prior to
amendment by the Deficit Reduction Act of 1984.
(b) The distribution is in accordance with a method of distribution
designated by the Employee whose interest in the Plan is being distributed or,
if the Employee is deceased, by a beneficiary of such Employee.
(c) Such designation was in writing, was signed by the Employee or the
beneficiary, and was made before January 1, 1984.
(d) The Employee had accrued a benefit under the plan as of December
31, 1983.
(e) The method of distribution designated by the Employee or the
beneficiary specifies the time at which distribution will commence, the period
over which distributions will be made, and in the case of any distribution upon
the Employee's death, the beneficiaries of the Employee listed in order of
priority.
A distribution upon death will not be covered by this transitional rule
unless the information in the designation contains the required information
described above with respect to the distributions to be made upon the death of
the Employee.
For any distribution which commences before January 1, 1984, but
continues after December 31, 1983, the Employee, or the beneficiary to whom such
distribution is being made, will be presumed to have designated the method of
distribution under which the distribution is being made if the method of
distribution was specified in writing and the distribution satisfies the
requirements in (a) and (e) above.
If a designation is revoked any subsequent distribution must satisfy
the requirements of Section 401(a)(9) of the Code and the proposed regulations
thereunder. If a designation is revoked subsequent to the date distributions are
required to begin, the Plan must distribute by the end of the calendar year
following the calendar year in which the revocation occurs the total amount not
yet distributed which would have been required to have been distributed to
satisfy Section 401(a)(9) of the Code and the proposed regulations thereunder,
but for the Section 242(b)(2) election. For calendar years beginning after
December 31, 1988, such distributions must meet the minimum distribution
incidental benefit requirements in Section 1.401(a)(9)-2 of the proposed
regulations. Any changes in the designation will be considered to be a
revocation of the designation. However, the mere substitution or addition of
another beneficiary (one not named in the designation) under the designation
will not be considered to be a revocation of the designation, so long as such
substitution or addition does not alter the period over which distributions are
to be made under the designation, directly or indirectly (for example, by
altering the relevant measuring life). In the case in which an amount is
transferred or rolled over from one plan to another plan, the rules in Q&A J-2
and Q&A J-3 shall apply.
SECTION 7
BENEFITS PAYABLE UPON BREAK IN SERVICE
OR EMPLOYMENT TERMINATION
7.1 Vesting Schedule.
Any Participant who incurs a Break in Service during a vesting
computation period for reasons other than his retirement, death or disability
shall be entitled to receive at the time and in the manner described hereinafter
that percentage of the amount credited to his Account as of the Valuation Date
or Interim Valuation Date coincident with or immediately preceding the Break in
Service, determined as follows:
(a) An ESOP Account, a Stock Bonus Account, and a Merger Account
shall be vested in accordance with the following schedule:
YEARS OF SERVICE VESTED PERCENTAGE
less than 5 0
5 or more 100
(b) A Rollover Account and a PAYSOP Account shall be fully vested at
all times.
Notwithstanding the above provisions of this Section 7.1, a
Participant's vested interest shall not be less than it was before this
amendment and restatement. Also, notwithstanding the above vesting schedule, an
Employee's right to his or her Account balance is nonforfeitable upon the
attainment of Normal Retirement Age.
Finally, notwithstanding the above vesting schedule, an Employee's
right to his or her Account balance shall fully vest and become nonforfeitable
automatically upon the occurrence of any of the following events, each of which
shall constitute a "Change of Control": (i) the acquisition by any person of
beneficial ownership of 30% or more of the outstanding shares of the Company
Stock, or 30% or more of the combined voting power of the Employer's then
outstanding securities entitled to vote generally in the election of directors;
provided, however, that for purposes of this sub-item (i), the following
acquisitions shall not constitute a Change of Control: (a) any acquisition
(other than a Business Combination (as defined below) which constitutes a Change
of Control under sub-item (iii) hereof) of Company Stock directly from the
Employer, (b) any acquisition of Company Stock by the Employer or its
subsidiaries, (c) any acquisition of Company Stock by any employee benefit plan
(or related trust) sponsored or maintained by the Employer or any corporation
controlled by the Employer, or (d) any acquisition of Company Stock by any
corporation pursuant to a Business Combination that does not constitute a Change
of Control under sub-item (iii) hereof; or (ii) individuals who, as of January
1, 2000, constitute the Board of Directors of the Employer (the "Incumbent
Board") cease for any reason to constitute at least a majority of the Board of
Directors; provided, however, that any individual becoming a director subsequent
to such date whose election, or nomination for election by the Employer's
shareholders, was approved by a vote of at least two-thirds of the directors
then comprising the Incumbent Board shall be considered a member of the
Incumbent Board, unless such individual's 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 Incumbent Board;
or (iii) consummation of a reorganization, share exchange, merger or
consolidation (including any such transaction involving any direct or indirect
subsidiary of the Employer), or sale or other disposition of all or
substantially all of the assets of the Employer (a "Business Combination");
provided, however, that in no such case shall any such transaction constitute a
Change of Control if immediately following such Business Combination: (a) the
individuals and entities who were the beneficial owners of the Employer's
outstanding Company Stock and the Employer's voting securities entitled to vote
generally in the election of directors immediately prior to such Business
Combination have direct or indirect beneficial ownership, respectively, of more
than 50% of the then outstanding shares of common stock, and more than 50% of
the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors of the surviving or successor
corporation, or, if applicable, the ultimate parent company thereof (the
"Post-Transaction Corporation"), and (b) except to the extent that such
ownership existed prior to the Business Combination, no person (excluding the
Post-Transaction Corporation and any employee benefit plan or related trust of
either the Employer, the Post-Transaction Corporation or any subsidiary of
either corporation) beneficially owns, directly or indirectly, 20% or more of
the then outstanding shares of common stock of the corporation resulting from
such Business Combination or 20% or more of the combined voting power of the
then outstanding voting securities of such corporation, and (c) at least a
majority of the members of the board of directors of the Post-Transaction
Corporation were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board of Directors, providing for
such Business Combination; or (iv) approval by the shareholders of the Employer
of a complete liquidation or dissolution of the Employer. For purposes of the
immediately preceding sentence, the term "person" shall mean a natural person or
entity, and shall also mean the group or syndicate created when two or more
persons act as a syndicate or other group (including, without limitation, a
partnership or limited partnership) for the purpose of acquiring, holding, or
disposing of a security, except that "person" shall not include an underwriter
temporarily holding a security pursuant to an offering of the security.
7.2 Distributions.
(a) If an Employee terminates service, and the value of the Employee's
vested Account balance derived from Employer and Employee contributions is not
greater than $5,000, the Employee will receive a distribution of the value of
the entire vested portion of such Account balance and the nonvested portion
will be treated as a forfeiture. If an Employee would have received a
distribution under the preceding sentence but for the fact that the Employee's
vested Account balance exceeded $5,000 when the Employee terminated service
and if at a later time such Account balance is reduced such that is not
greater than $5,000, the Employee will receive a distribution of such Account
balance and the nonvested portion will be treated as a forfeiture. For
purposes of this Section, if the value of an Employee's vested Account balance
is zero, the Employee shall be deemed to have received a distribution of such
vested Account balance. A Participant's vested Account balance shall not
include accumulated deductible employee contributions within the meaning of
Section 72(o)(5)(B) of the Code for Plan Years beginning prior to January 1,
1989.
(b) If an Employee terminates service, and elects, in accordance with
the requirements of this Section 7, to receive the value of the Employee's
vested Account balance, the nonvested portion will be treated as a forfeiture.
If the Employee elects to have distributed less than the entire vested portion
of the Account balance derived from Employer contributions, the part of the
nonvested portion that will be treated as a forfeiture is the total nonvested
portion multiplied by a fraction, the numerator of which is the amount of the
distribution attributable to Employer contributions and the denominator of
which is the total value of the vested Employer-derived Account balance.
(c) If an Employee receives or is deemed to receive a distribution
pursuant to this Section and the Employee resumes employment covered under this
Plan, the Employee's Employer-derived Account balance will be restored to the
amount on the date of distribution if the Employee repays to the Plan the full
amount of the distribution attributable to Employer contributions before the
earlier of five (5) years after the first date on which the Participant is
subsequently re-employed by the Employer, or the date the Participant incurs
five (5) consecutive one-year Breaks in Service following the date of the
distribution. If an Employee is deemed to receive a distribution pursuant to
this Section, and the Employee resumes employment covered under this Plan before
the date the Participant incurs five (5) consecutive one-year Breaks in Service,
upon the reemployment of such Employee, the Employer-derived Account balance of
the Employee will be restored to the amount on the date of such deemed
distribution.
In the event restoration is required under this Section 7.2(c), the
sources of restoration, in the order listed, shall be:
(i) Forfeitures. To the extent used for restoration, they
shall not be reallocated, or used to reduce the
Employer contribution, as normally provided in
Section 4.3.
(ii) Employer contribution. Notwithstanding Section 3.1,
the Employer shall make any contribution required for
restoration.
Such restoration shall be made for the year in which repayment occurs
within the time prescribed by law, including extensions of time, for the filing
of the Employer's Federal income tax return for such year.
For purposes of applying the limitations of Code Sections 415(c) and
(e), and Section 4.8 and 4.9 of this Plan, the repayment by the Participant and
the restoration provided for above shall not be treated as annual additions.
7.3 Restrictions on Immediate Distributions.
(a) If the value of a Participant's vested Account balance derived
from Employer and Employee contributions exceeds (or at the time of any prior
distribution exceeded) $5,000, and the Account balance is immediately
distributable, the Participant must consent to any distribution of such Account
balance. The Plan Administrator shall notify the Participant of the right to
defer any distribution until the Participant's Account balance is no longer
immediately distributable. Such notification shall include a general description
of the material features, and an explanation of the relative values of, the
optional forms of benefit available under the Plan in a manner that would
satisfy the notice requirements of Section 417(a)(3), and shall be provided no
less than thirty (30) days and no more than ninety (90) days prior to the
annuity starting date. However, distribution may commence less than thirty (30)
days after the notice described in the preceding sentence is given, provided the
distribution is one to which Sections 401(a)(11) and 417 of the Code do not
apply, the Plan Administrator clearly informs the Participant that the
Participant has a right to a period of at least thirty (30) days after receiving
the notice to consider the decision of whether or not to elect a distribution
(and, if applicable, a particular distribution option), and the Participant,
after receiving the notice, affirmatively elects a distribution.
(b) The consent of the Participant shall not be required to the extent
that a distribution is required to satisfy Section 401(a)(9) or Section 415 of
the Code. In addition, upon termination of this Plan if the Plan does not offer
an annuity option (purchased from a commercial provider) and if the Employer or
any entity within the same controlled group as the Employer does not maintain
another defined contribution plan (other than an employee stock ownership plan
as defined in Section 4975(e)(7) of the Code), the Participant's Account balance
will, without the Participant's consent, be distributed to the Participant.
However, if any entity within the same controlled group as the Employer
maintains another defined contribution plan (other than an employee stock
ownership plan as defined in Section 4975 (e)(7) of the Code) then the
Participant's account balance will be transferred, without the Participant's
consent, to the other plan if the Participant does not consent to an immediate
distribution.
(c) An Account balance is immediately distributable if any part of the
Account balance could be distributed to the Participant (or surviving spouse)
before the Participant attains (or would have attained if not deceased) the
later of Normal Retirement Age or age 62.
(d) For purposes of determining the applicability of the foregoing
consent requirements to distributions made before the first day of the first
Plan Year beginning after December 31, 1988, the Participant's vested Account
balance shall not include amounts attributable to accumulated deductible
employee contributions within the meaning of Section 72(o)(5)(B) of the Code.
(e) If the value of a Participant's vested Account balance derived
from Employer and Employee contributions:
(i) for Plan Years beginning after August 6, 1997, exceeds
$3,500 (or exceeded $3,500 at the time of any prior
distribution),
(ii) for Plan Years beginning after August 5, 1997, and
for a distribution made prior to March 22, 1999,
exceeds $5,000 (or exceeded $5,000 at the time of any
prior distribution),
(iii) and for Plan Years beginning after August 5, 1997,
and for a distribution made after March 21, 1999,
that either exceeds $5,000 or is a remaining payment
under a selected optional form of payment that
exceeded $5,000 at the time the selected payment
began,
and the Account balance is immediately distributable, the Participant must
consent to any distribution of such Account balance.
7.4 Payment of Account Balance.
Unless the Participant elects otherwise, distribution of benefits will
begin no later than the 60th day after the latest of the close of the Plan Year
in which:
(a) the Participant attains age 65 (or Normal Retirement Age, if
earlier);
(b) occurs the 10th anniversary of the year in which the Participant
commenced participation in the Plan; or
(c) the Participant terminates service with the Employer.
Notwithstanding the foregoing, the failure of a Participant to consent to a
distribution while a benefit is immediately distributable, within the meaning of
Section 7.3 of the Plan, shall be deemed to be an election to defer commencement
of payment of any benefit sufficient to satisfy this Section.
7.5 Treatment of Accounts in Pay Status.
If payments are to be made under Section 5.1(b) or (c), at the
election of the Plan Administrator:
(a) The Participant's Account shall continue to share in the annual
and interim valuations of the trust fund and in the adjustment of the accounts
for investment income, gains or losses as provided in Sections 4.4 and 4.5; or
(b) The Plan Administrator may instruct the trustee to segregate the
Participant's Account which shall then be separately valued and adjusted each
year to reflect the actual income derived thereon and any distributions made
therefrom under this Plan.
7.6 Direct Rollovers.
(a) This Section applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Plan to the contrary that would
otherwise limit distributee's election under this Section, a distributee may
elect, at the time and in the manner prescribed by the Plan Administrator, to
have any portion of an eligible rollover distribution that is equal to at least
$500 paid directly to an eligible retirement plan specified by the distributee
in a direct rollover. The distributee may select only one (1) eligible
retirement plan to which a direct rollover may be made.
(b) Definitions
(i) Eligible rollover distribution: An eligible rollover
distribution is any distribution of all or any portion of
the balance to the credit of the distributee, except that an
eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made
for the life (or life expectancy) of the distributee or the
joint lives (or joint life expectancies) of the distributee
and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to
the extent such distribution is required under Section
401(a)(9) of the Code; any hardship distribution described
in Code Section 401(k)(2)(B)(i)(IV) received after December
31, 1998; the portion of any other distribution that is not
includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to
employer securities); and any other distribution(s) that is
reasonably expected to total less than $200 during a year.
(ii) Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in Section 408(a) of
the Code, an individual retirement annuity described in
Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified plan described in
Section 401(a) of the Code, that accepts the distributee's
eligible rollover distribution. However, in the case of an
eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account
or individual retirement annuity.
(iii) Distributee: A distributee includes an Employee or
former Employee. In addition, the Employee's or
former Employee's surviving spouse and the Employee's
or former Employee's spouse or former spouse who is
the alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of the
Code, are distributees with regard to the interest of
the spouse or former spouse.
(iv) Direct rollover: A direct rollover is a payment by
the Plan to the eligible retirement plan specified by
the distributee.
7.7 Amendment of Vesting Schedule.
If the Plan's vesting schedule is amended, or the Plan is amended in
any way that directly or indirectly affects the computation of the Participant's
nonforfeitable percentage or if the Plan is deemed amended by an automatic
change to or from a top-heavy vesting schedule, each Participant with at least
three (3) Years of Service with the Employer may elect, within a reasonable
period after the adoption of the amendment or change, to have the nonforfeitable
percentage computed under the Plan without regard to such amendment or change.
For Participants who do not have at least one (1) Hour of Service in any Plan
Year beginning after December 31, 1988, the preceding sentence shall be applied
by substituting "five (5) Years of Service" for "three (3) Years of Service"
where such language appears.
The period during which the election may be made shall commence with
the date the amendment is adopted or deemed to be made and shall end on the
latest of:
(a) 60 days after the amendment is adopted;
(b) 60 days after the amendment becomes effective; or
(c) 60 days after the Participant is issued written notice of
the amendment by the Employer or Plan Administrator.
SECTION 8
FORM OF DISTRIBUTION
8.1 Payment in Shares or Cash.
Any distributions under Sections 5, 6, and 7 shall be made by the
Trustee by distributing whole shares of Company Stock, as determined by the
Trustee, at the market value of such shares on a national securities exchange or
a national quotation system, with the value of any fractional shares paid in
cash.
The Trustee may, with the consent of the Participant or if the
Participant is deceased, his beneficiary, make distributions under Sections 5, 6
and 7 in cash. With respect to a cash-out distribution under Section 5.7, 7.2(a)
or 7.3, the consent of the Participant to a cash distribution shall be deemed
unless the Participant instructs the Trustee in writing that the Participant
desires a distribution in shares of Company Stock. The amount of cash to be
distributed to a Participant for shares actually allocated to his Account shall
be determined based on the market value of the shares of Company Stock as of the
trading date immediately preceding the distribution.
8.2 Dividends.
Cash dividends on shares of Company Stock allocated to Accounts of
Participants who are entitled to receive distributions from the Plan may be paid
to Participants currently, or at such time as payment is otherwise due under
Sections 5, 6, and 7, as determined in the sole discretion of the Plan
Administrator, exercised in a uniform and nondiscriminatory manner.
SECTION 9
MERGER OR CONSOLIDATION
9.1 Merger or Consolidation.
In the event of a merger or consolidation of this Plan with any other
plan, or in the event of a transfer of assets or liabilities of this Plan to any
other plan, each Participant in the Plan will receive a benefit immediately
after the merger, consolidation, or transfer (as if the Plan then terminated)
which is at least equal to the benefit the Participant would have been entitled
to immediately before such merger, consolidation, or transfer (as if the Plan
had then terminated).
9.2 Merger Accounts.
In the event any other plan transfers its assets to this Plan or merges
with this Plan, this Plan being the surviving plan, the Plan Administrator, or
if the Plan Administrator so determines, the Trustee, shall create a "Merger
Account" for each Participant whose accounts are transferred to this Plan. A
Participant's Merger Account shall be paid to the Participant or his
beneficiaries in accordance with Sections 5, 6, 7 and 8. Merger Accounts shall
participate in the earnings and losses of the Trusts in the same manner as
Regular Accounts.
9.3 Merger Agreement or Agreement Relating to Transfer of Assets.
Upon instructions of the Plan Administrator, the Trustee shall enter
into a merger agreement with any other plan or shall enter into an agreement
respecting the transfer of assets of this Plan to another plan or from any other
plan to this Plan; however, if this Plan is a profit-sharing plan which does not
provide for a life annuity form of payment to Participants, the Plan
Administrator shall not enter into any agreement for the transfer of assets from
another plan to this Plan if the proposed transferor plan is a defined benefit
plan, money purchase pension plan (including a target benefit plan), stock
bonus, or profit sharing plan which would otherwise provide for a life annuity
form of payment to the participants in such plan.
SECTION 10
CLAIMS PROCEDURE
10.1 Filing of a Claim for Benefits.
(a) Every Participant and beneficiary (the claimant) who thinks he is
entitled to a benefit under the Plan or who is not satisfied that the correct
benefit is being paid shall have the right to file a claim for such benefit at
any time.
(b) Such claim must be filed in writing with the Plan Administrator.
The claim shall set forth the grounds on which it is based, but no particular
form of written claim is required.
10.2 Notification to Claimant of Decision.
(a) The Plan Administrator shall furnish notice of its decision (to
grant the claim or to deny it in whole or in part) to the claimant within sixty
(60) days after the claim is filed. If the Plan Administrator fails to give
notice within sixty (60) days after the claim is filed, it shall be considered
wholly denied.
(b) If the claim is denied in whole or in part, the notice of denial
by the Plan Administrator to the claimant shall set forth in writing in a manner
calculated to be understood by the claimant:
(i) The specific reason or reasons for the denial;
(ii) Specific reference to pertinent plan provisions on
which the denial is 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 Plan's claim review procedure
as set forth in Section 10.3.
10.3 Review Procedure.
(a) A claimant may appeal the denial of a claim, including a claim
considered denied, to the Plan Administrator for a full and fair review of the
claim.
(b) A request for review of a denied claim must be made in writing to
the Plan Administrator within sixty (60) days after the date of the notice
denying the claim or within sixty (60) days after the date on which the claim is
considered denied.
(c) The claimant or his authorized representative shall have the
right, during the review procedure, to review all pertinent documents and to
submit issues and comments in writing to the Plan Administrator.
10.4 Decision on Review.
(a) A decision on review shall be made promptly by the Plan
Administrator and not later than sixty (60) days after it receives the request
for review.
(b) The decision on review shall be in writing and shall include
specific reasons for the decision, written in a manner calculated to be
understood by the claimant and specific references to pertinent Plan provisions
on which the decision is based.
10.5 Agent for Service of Process.
In any action against the Plan or Trust, the Plan Administrator, whose
address is 100 CenturyTel Drive, Monroe, Louisiana 71203, shall be the agent for
service of process of the Plan and Trust.
SECTION 11
ADOPTION BY OTHER COMPANIES
11.1 Rights of Other Companies to Participate.
Any other corporation, association, joint venture, proprietorship or
partnership (hereinafter called adopting companies) may adopt the terms of this
Plan by a resolution of the Board of Directors of such entity in the form
specified by the Plan Administrator, provided that the Board of Directors of the
Employer and the Plan Administrator both approve such participation. Unless
otherwise provided in the Plan or in a separate written agreement, all
subsidiaries of the Employer shall be deemed to be adopting companies
participating in the Plan. A newly formed subsidiary, or a subsidiary acquired
by the Employer, shall be deemed to be an adopting company as of the date of
formation or acquisition, as the case may be, unless otherwise provided in the
Plan or in a separate written agreement.
11.2 Control of Plan by the Employer.
The administrative powers and control of the Employer as provided in
the Plan, shall not be deemed diminished under the Plan by reason of
participation of adopting companies in the Plan, and such administrative powers
and control specifically granted herein to the Employer with respect to the
appointment of the Plan Administrator and Trustee and other matters shall apply
only with respect to the Employer. The Plan Administrator, under the control of
the Employer, shall also be the Plan Administrator for the adopting companies.
11.3 Allocations of Contributions and Forfeitures.
The amounts forfeited by Employees of the Employer and adopting
companies shall be allocated across company lines in accordance with the
provisions of Section 4.3 hereof to all Participants who were Employees of the
Employer and applicable adopting companies during the Plan Year in which such
forfeitures occurred and the contributions made by the Employer and each
adopting company shall be allocated across company lines in accordance with the
provisions of Section 4.2 hereof to Participants who were Employees of the
Employer and applicable adopting companies during the Plan Year for which each
contribution is made. One member of an affiliated group may make contributions
on behalf of another member of such group in accordance with Regulations Section
1.404(a)-10, as amended.
11.4 Withdrawal of Employer or Adopting Companies.
The Employer or adopting company may withdraw at any time without
affecting the others in the Plan. Such withdrawal may be accompanied by such
amendments to the Plan as the withdrawing Employer or adopting company shall
deem proper to continue a plan for its Employees separate and distinct from this
Plan, but, if such withdrawing party does not provide for the continuance of a
separate plan for its Employees, such withdrawal shall constitute a termination
of this Plan with respect to that withdrawing party. The Employer may in its
absolute discretion terminate any adopting company's participation at any time.
Withdrawal from the Plan by any party shall not affect the continued operation
of the Plan with respect to the other participating parties.
11.5 Amendment of Plan.
The participation in the Plan of adopting companies shall not limit the
power of the Employer under Trust Section 4.1; provided, however, that the
Employer shall deliver notice of each amendment to the Plan to each adopting
company within thirty (30) days of such amendment. Amendments by the Employer
shall be binding upon all adopting companies to the extent accepted by such
adopting companies. Acceptance by each such company shall be presumed unless the
Employer and Trustee are given written notice of refusal to accept within sixty
(60) days after the date of the amendment. The Employer and each adopting
company may modify the provisions of the Plan as it pertains only to its own
Employees by the adoption of an amendment to the Plan specifying such
modifications which shall pertain only to its Employees except to the extent
that Employer amendments are presumed accepted by the adopting companies, and
shall not affect the continued operation of the Plan with respect to any other
party.
11.6 Termination of One or More Parties.
The Plan may be terminated by all parties at any time in the manner
described in Trust Section 4.2, on the part of each party. The Plan may be
terminated in the manner described above with respect to one, but less than all
the parties hereto and the Plan continued for the remaining parties.
11.7 Reference to Employer in Plan.
Except as provided in this Section 11 and unless the context indicates
otherwise, references to "Employer" in this Plan shall mean the Employer and all
adopting companies.
SECTION 12
PROVISIONS RELATING TO PARTICIPANTS
12.1 Information Required of Participants.
Each Participant shall furnish to the Plan Administrator such
information as the Plan Administrator shall deem necessary and desirable for
purposes of administering the Plan.
Any notice or information which, according to the provisions of the
Plan, must be filed with the Plan Administrator shall be deemed so filed if
addressed to 100 CenturyTel Drive, Monroe, Louisiana 71203, and either delivered
in person or mailed to such address, postage fully paid.
SECTION 13
PLAN ADMINISTRATOR
13.1 Administration by Plan Administrator.
This Plan shall be administered by a Committee, which shall be the
"Plan Administrator" and "named fiduciary."
13.2 Appointment of Committee.
The Board of Directors of the Employer shall fix the number of persons
to be members of the Committee (which number of voting members shall always be
an odd number) and shall appoint persons from among the officers and Employees
of the Employer to serve as members of the Committee. The Committee shall have
complete control of the administration of the Plan. Members of the Committee
shall serve without remuneration for so long as it is mutually agreeable to them
and to the Employer but they shall be reimbursed for all expenses incurred by
them in the performance of their duties. Any member may resign by delivering his
written resignation to the Employer and to the other members of the committee.
The Board of Directors of the Employer may remove or replace any member of the
Committee, or fill any vacancy, no matter how created, by notifying the member
concerned and the other members of the Committee in writing.
13.3 Majority Action.
Action taken by a majority of the members of the Committee shall, to
the extent lawful, be binding upon the Employees, Participants, and all persons
claiming any right under the Plan through any Employee or Participant. The
Committee may act by vote, at a meeting, or in writing, without a meeting. Any
act of the Committee shall be sufficiently evidenced if certified to by any two
members thereof or by any person not a member of the Committee but who is
designated, in writing, as the Secretary of the Committee by a majority thereof.
A member of the Committee who is a Participant shall not vote on any question
relating specifically to himself, and in the event the remaining members of the
Committee are unable to agree to a determination of such question, another
person shall be selected by the Board of Directors of the Employer for the
purpose of making such determination.
13.4 Powers of the Plan Administrator.
The Committee as Plan Administrator shall have the following powers:
(a) To make rules and regulations for the administration of the Plan
which are not inconsistent with the terms and provisions hereof;
(b) To construe all terms, provisions, conditions and limitations
of this Plan;
(c) To correct any defect or supply any omission or reconcile any
inconsistency that may appear in the Plan, in such manner and to such extent as
it shall deem expedient to carry this Plan into effect for the greatest benefit
of all interested parties;
(d) To select, employ and compensate from time to time such
consultants, actuaries, accountants, attorneys, and other agents and employees
as the Plan Administrator may deem necessary or advisable in the proper and
efficient administration of this Plan and Trust to carry out nonfiduciary and
fiduciary responsibilities (other than trustee responsibilities as defined in
Section 405(c)(3) of ERISA);
(e) To determine all questions relating to the eligibility of
Employees to become Participants, and to determine the amount of compensation
upon which the allocation of each Participant shall be calculated;
(f) To make all determinations and computations concerning the
benefits, credits and debits to which any Participant or beneficiary is entitled
under the Plan;
(g) To determine all questions relating to the administration of this
Plan and Trust (1) when differences of opinion arise between the Employer, the
Trustee, a Participant, or any of them, and (2) whenever it is deemed advisable
to determine such questions in order to promote the uniform administration of
the Plan for the greatest benefit of all parties concerned;
(h) To appoint any Employee of the Employer to act as Secretary for
the Plan Administrator, and to authorize the Secretary so appointed to act for
the Plan Administrator in all routine matters connected with the administration
of the Plan;
(i) To determine whether a Participant is disabled for the purposes of
Section 6.5 hereof;
(j) To appoint an investment manager or managers (as defined
in Section 3(38) of ERISA) to manage (including the power to acquire and dispose
of) all or any part of the assets of the Plan; and
(k) To provide for the allocation of fiduciary responsibilities (other
than trustee responsibilities as defined in Section 405(c)(3) of ERISA). Actions
dealing with fiduciary responsibilities shall be taken in writing and the
performance of agents, counsel, and fiduciaries to whom fiduciary
responsibilities have been delegated shall be reviewed periodically.
The foregoing list of express powers is not intended to be either
complete or conclusive, but the Plan Administrator shall, in addition, have such
powers as it may reasonably determine to be necessary to the performance of its
duties under the Plan and Trust. The decision or judgment of the Plan
Administrator on any question arising in connection with the exercise of any of
its powers or any matter of Plan administration or the determination of benefits
shall be final, binding and conclusive upon all parties concerned.
13.5 Duties of the Plan Administrator.
The Committee as Plan Administrator shall, as a part of its general
duty to supervise and administer the Plan:
(a) Establish and maintain the Accounts described herein and direct
the maintenance of such other records and the preparation of such forms as are
required for the efficient administration of the Plan;
(b) Give the Trustee specific directions in writing in respect to:
(i) The making of distribution payments, giving the names
of the payees, the amounts to be paid and the time or
times when payments shall be made; and
(ii) The making of any other payments which the Trustee is
not by the terms of the trust agreement authorized to
make without a direction in writing by the Plan
Administrator; and
(c) Prepare an annual report, as of the end of the Plan Year.
13.6 Expenses.
The Employer shall reimburse each Trust fund for all expenses (other
than normal brokerage charges which are included in the cost of securities
purchased or charged to proceeds in the case of sales) incurred in the
administration of the Plan under Section 1.5 of each Trust, including the
expenses and fees of the Trustee, except that any such expenses not so
reimbursed by the Employer shall be paid from the appropriate Trust fund.
SECTION 14
ROLLOVERS
14.1 Rollover Contributions.
If the Plan Administrator instructs the Trustee in writing to accept
Rollover Contributions, any Employee who is a Participant or who will become a
Participant if he completes a Year of Service in an Eligibility Computation
Period may make a Rollover Contribution at any time. The Trustee shall credit
the fair market value of any Rollover Contribution to a Rollover Account of the
contributing Participant as of the date the Rollover Contribution is made. A
Rollover Account shall be fully vested and shall be paid to the Participant or
his beneficiaries in accordance with Section 5, 6, 7 and 8. Rollover Accounts
shall participate in the earnings and losses of the Trust Fund, but not in
forfeitures or Employer contributions.
14.2 Definition of Rollover Contribution.
The term Rollover Contribution is defined as the contribution of a
Rollover Amount as defined in Section 14.3 to the Trustee on or before the
sixtieth (60th) day immediately following the day the contributing Participant
receives the Rollover Amount.
14.3 Definition of Rollover Amount.
The term Rollover Amount is defined as a distribution which meets the
following requirements:
(a) the amount distributed to the Participant is deposited to the
Plan no later than the sixtieth day after such distribution was received by
the Participant;
(b) the amount distributed is not one of a series of substantially
equal periodic payments made for the life (or life expectancy) of the
Participant or the joint lives (or joint life expectancies) of the Participant
and the Participant's designated beneficiary, or for a specified period of ten
years or more;
(c) the amount distributed is not required under Code Section
401(a)(9);
(d) if the amount distributed included property such property is
rolled over, or if sold the proceeds of such property may be rolled over;
(e) the amount distributed is includible in gross income (determined
without regard to the exclusion for net unrealized appreciation with respect to
employer securities).
In addition, if the Plan Administrator so instructs the Trustee in
writing, the Plan will accept any eligible rollover distribution (as defined in
Section 7.6) directly to the Plan.
Rollover Amounts which relate to distributions prior to January 1,
1993, must be made in accordance with paragraphs (a) through (e) and
additionally meet the requirements of paragraph (f):
(f) The distribution from the qualified plan constituted the
Participant's entire interest in such Plan and was distributed within one
taxable year to the Participant:
(i) on account of separation from service, a Plan
termination, or in the case of a profit-sharing or
stock bonus plan, a complete discontinuance of
contributions under such plan within the meaning of
Code Section 402(a)(6)(A), or
(ii) in one or more distributions which constitute a
qualified lump sum distribution within the meaning of
Code Section 402(e)(4)(A), determined without
reference to subparagraphs (B) and (H).
14.4 Conduit Rollovers.
A Rollover Contribution may also be made through an individual
retirement account (IRA) qualified under Code Section 408 where the IRA was used
as a conduit from a qualified plan, the Rollover Contribution is made in
accordance with the rules provided under paragraphs (a) through (f), above, and
the Rollover Contribution does not include any regular IRA contributions, or
earnings thereon, which the Participant may have made to the IRA. Rollover
Contributions, which relate to distributions prior to January 1, 1993, may be
made through an IRA in accordance with paragraphs (a) through (f), above, and
additional requirements as provided in the previous sentence. The Trustee shall
not be held responsible for determining the tax free status of any Rollover
Contribution made under this Plan.
SECTION 15
TRADES OR BUSINESSES UNDER COMMON CONTROL
15.1 Definitions.
All employees of all corporations which are members of a controlled
group of corporations (as defined in Section 414(b) of the Code) and all
employees of all trades or businesses (whether or not incorporated) which are
under common control (as defined in Section 414(c) of the Code) will be treated
as employed by a single employer.
Such other trades or businesses in a group with the Employer are
hereinafter called "Associated Employer." The term "transferred participant"
means an Employee of the Employer who was a Participant in this Plan and who is
employed by an Associated Employer after his services with the Employer are
terminated.
In addition to the foregoing, Hours of Service will also be credited
for any individual required under Section 414(m) or 414(n) of the Code to be
considered an employee of any employer aggregated under Section 414(b), (c), or
(m) or the Code.
Any Leased Employee as defined in Section 1.19(a), excluding any Leased
Employee described in Section 1.19(b), shall be treated as an employee of the
recipient employer.
15.2 Allocation.
No Employee shall be credited with any compensation for a year under
Section 4.2 of this Plan except with respect to compensation actually paid to
him by the Employer or accrued by the Employer with respect to him.
15.3 Participation and Vesting.
All of an Employee's service with an Associated Employer shall be
counted as service with the Employer for all purposes of this Plan, except as
otherwise provided in the Plan or in a separate written agreement.
15.4 Vesting and Distributions.
In determining whether a transferred participant incurs a Break in
Service under this Plan, his service with the Employer shall be combined with
his service with an Associated Employer. In determining whether a transferred
participant subsequently incurs a Break in Service with the Employer for vesting
and distribution purposes, his Hours of Service with Associated Employers shall
be counted.
SECTION 16
TOP HEAVY PLAN RULES
16.1 Key Employee.
Any Employee or former Employee (and the beneficiaries of such
Employee) who at any time during the determination period was an officer of the
Employer if such individual's annual compensation exceeds fifty percent (50%) of
the dollar limitation under Section 415(b)(1)(A) of the Code, an owner (or
considered an owner under Section 318 of the Code) of one of the ten largest
interests in the Employer if such individual's compensation exceeds one hundred
percent (100%) of the dollar limitation under Section 415(c)(1)(A) of the Code,
a five percent (5%) owner of the Employer, or a one percent (1%) owner of the
Employer who has an annual compensation of more than $150,000. Annual
compensation means compensation as defined in Section 415(c)(3) of the Code, but
including amounts contributed by the Employer pursuant to a salary reduction
agreement which are excludable from the Employee's gross income under Section
125, Section 402(e)(3), Section 402(h)(1)(B) or Section 403(b) of the Code. The
determination period is the Plan Year containing the determination date and the
four (4) preceding Plan Years.
The determination of who is a Key Employee will be made in accordance
with Section 416(i)(1) of the Code and the regulations thereunder.
16.2 Non-Key Employee.
Any Employee who is not a Key Employee.
16.3 Super Top Heavy Plan.
For any Plan Year beginning after December 31, 1983, this Plan is a
Super Top Heavy Plan if any of the following conditions exists:
(a) If the top heavy ratio for this Plan exceeds ninety percent (90%)
and this Plan is not part of any required aggregation group or permissive
aggregation group of plans.
(b) If this Plan is a part of a required aggregation group of plans
but not part of a permissive aggregation group and the top heavy ratio for the
group of plans exceeds ninety percent (90%).
(c) If this Plan is a part of a required aggregation group and part of
a permissive aggregation group of plans and the top heavy ratio for the
permissive aggregation group exceeds ninety percent (90%).
16.4 Top Heavy Plan.
For any Plan Year beginning after December 31, 1983, this Plan is a Top
Heavy Plan if any of the following conditions exists:
(a) If the top heavy ratio for this Plan exceeds sixty percent (60%)
and this Plan is not part of any required aggregation group or permissive
aggregation group of plans.
(b) If this Plan is a part of a required aggregation group of plans but
not part of a permissive aggregation group and the top heavy ratio for the group
of plans exceeds sixty percent (60%).
(c) If this Plan is a part of a required aggregation group and part of
a permissive aggregation group of plans and the top heavy ratio for the
permissive aggregation group exceeds sixty percent (60%).
16.5 Top Heavy Ratio.
(a) If the Employer maintains one or more defined contribution plans
(including any Simplified Employee Pension Plan) and the Employer has not
maintained any defined benefit plan which during the five (5) year period ending
on the determination date(s) has or had accrued benefits, the top heavy ratio
for this Plan alone or for the required or permissive aggregation group as
appropriate is a fraction, the numerator of which is the sum of the account
balances of all Key Employees as of the determination date(s) (including any
part of any account balance distributed in the five (5) year period ending on
the determination date(s)), and the denominator of which is the sum of all
Account balances (including any part of any Account balance distributed in the
five (5) year period ending on the determination date(s)), both computed in
accordance with Section 416 of the Code and the regulations thereunder. Both the
numerator and denominator of the top heavy ratio are adjusted to reflect any
contribution not actually made as of the determination date, but which is
required to be taken into account on that date under Section 416 of the Code and
the regulations thereunder.
(b) If the Employer maintains one or more defined contribution plans
(including any Simplified Employee Pension Plan) and the Employer maintains or
has maintained one or more defined benefit plans which during the five (5) year
period ending on the determination date(s) has or has had any accrued benefits,
the top heavy ratio for any required or permissive aggregation group as
appropriate is a fraction, the numerator of which is the sum of account balances
under the aggregated defined contribution plan or plans for all Key Employees,
determined in accordance with (a) above, and the present value of accrued
benefits under the aggregated defined benefit plan or plans for all Key
Employees as of the determination date(s), and the denominator of which is the
sum of the account balances under the aggregated defined contribution plan or
plans for all Participants determined in accordance with (a) above, and the
present value of accrued benefits under the defined benefit plan or plans for
all Participants as of the determination date(s), all determined in accordance
with Section 416 of the Code and the regulations thereunder. The accrued
benefits under a defined benefit plan in both the numerator and denominator of
the top heavy ratio are increased for any distribution of an accrued benefit
made in the five (5) year period ending on the determination date.
(c) For purposes of (a) and (b) above, the value of account balances
and the present value of accrued benefits will be determined as of the most
recent valuation date that falls within or ends with the twelve (12) month
period ending on the determination date, except as provided in Section 416 of
the Code and the regulations thereunder for the first and second plan years of a
defined benefit plan. The account balances and accrued benefits of a Participant
(1) who is not a Key Employee but who was a Key Employee in a prior year, or (2)
who has not been credited with at least one Hour of Service with any employer
maintaining the Plan at any time during the five (5) year period ending on the
determination date will be disregarded. The calculation of the top heavy ratio,
and to the extent to which distributions, rollovers, and transfers are taken
into account will be made in accordance with Section 416 of the Code and the
regulations thereunder. Deductible employee contributions will not be taken into
account for purposes of computing the top heavy ratio. When aggregating plans
the value of account balances and accrued benefits will be calculated with
reference to the determination dates that fall within the same calendar year.
The accrued benefit of a Participant other than a Key Employee shall be
determined under (a) the method, if any, that uniformly applies for accrual
purposes under all defined benefit plans maintained by the Employer, or (b) if
there is no such method, as if such benefit accrued not more rapidly than the
slowest accrual rate permitted under the fractional rule of Section 411(b)(1)(C)
of the Code.
16.6 Top Heavy Plan Year.
For a particular Plan Year commencing after December 31, 1983, the Plan
is a Top Heavy Plan.
16.7 Top Heavy Compensation.
For any Top Heavy Plan Year, compensation as defined in Code Section
415(c)(3) and Regs. Section 1.415-2(d), not in excess of $200,000 (or such other
amounts as the Secretary of Treasury or his delegate may designate), which shall
be considered as compensation for all purposes of Section 16 of this Plan.
16.8 Determination Date.
The last day of the preceding Plan Year, or, in the case of the first
Plan Year, the last day of such Plan Year.
16.9 Valuation Date.
The last day of the Plan Year, on which Account balances or accrued
benefits are valued for purposes of calculating the Top Heavy Ratio.
16.10 Aggregation Group.
Either a Required Aggregation Group or a Permissive Aggregation Group
as hereinafter determined.
(a) Required Aggregation Group: (i) Each qualified plan of the
Employer in which at least one Key Employee participates or participated at any
time during the determination period (regardless of whether the Plan has
terminated), and (ii) any other qualified plan of the Employer which enables a
plan described in (i) to meet the requirements of Sections 401(a)(4) or 410 of
the Code. In the case of a Required Aggregation Group, each plan in the group
will be considered a Top Heavy Plan if the Required Aggregation Group is a Top
Heavy Group. No plan in the Required Aggregation Group will be considered a Top
Heavy Plan if the Required Aggregation Group is not a Top Heavy Group.
(b) Permissive Aggregation Group: The required aggregation group of
plans plus any other plan or plans of the Employer which, when considered as a
group with the required aggregation group, would continue to satisfy the
requirements of Sections 401(a)(4) and 410 of the Code.
In the case of a Permissive Aggregation Group, only a plan that is part
of the Required Aggregation Group will be considered a Top Heavy Plan if the
Permissive Aggregation Group is a Top Heavy Group. No plan in the Permissive
Aggregation Group will be considered a Top Heavy Plan if the Permissive
Aggregation Group is not a Top Heavy Group.
16.11. Present Value of Accrued Benefits.
The present value of an accrued benefit under a defined benefit plan
shall be based on the interest and mortality rates specified in such defined
benefit plan.
TOP HEAVY REQUIREMENTS
16.12. Top Heavy Plan Requirements.
If the Plan is or becomes top heavy in any Plan Year beginning after
December 31, 1983, the provisions of this Section 16 will supersede any
conflicting provisions in the Plan.
16.13. Top Heavy Reduction.
(a) In Section 4.9(a), 1.0 shall be substituted for 1.25 unless the
extra minimum allocation is being made pursuant to Section 16.14. However, for
any Plan Year in which this Plan is a Super Top Heavy Plan, 1.0 shall be
substituted for 1.25 in any event.
(b) $41,500 shall be substituted for $51,875 in determining the
"transition fraction" of Section 4.9(b).
16.14. Minimum Allocations.
(a) Except as otherwise provided in (c) and (d) below, the Employer
contributions and forfeitures allocated on behalf of any Participant who is not
a Key Employee shall not be less than the lesser of three percent of such
Participant's compensation or in the case where the Employer has no defined
benefit plan which designates this Plan to satisfy Section 401 of the Code, the
largest percentage of Employer contributions and forfeitures, as a percentage of
the Key Employee's compensation, as limited by Section 401(a)(17) of the Code,
allocated on behalf of any Key Employee for that year. The minimum allocation is
determined without regard to any Social Security contribution. This minimum
allocation shall be made even though, under other Plan provisions, the
Participant would not otherwise be entitled to receive an allocation, or would
have received a lesser allocation for the year because of (i) the Participant's
failure to complete 1,000 Hours of Service (or any equivalent provided in the
Plan), or (ii) the Participant's failure to make mandatory employee
contributions to the Plan, or (iii) compensation less than a stated amount.
(b) For purposes of computing the minimum allocation, compensation
will mean compensation as defined in Section 1.7 of the Plan.
(c) The provision in (a) above shall not apply to any Participant who
was not employed by the Employer on the last day of the Plan Year.
(d) The provision in (a) above shall not apply to any Participant to
the extent the Participant is covered under any other plan or plans of the
Employer and the Employer has elected that the minimum allocation or benefit
requirement applicable to top heavy plans will be met in the other plan or
plans.
(e) The minimum allocation required (to the extent required to be
nonforfeitable under Section 416(b) of the Code) may not be forfeited under
Section 411(a)(3)(B) or 411(a)(3)(D) of the Code.
16.15. Top Heavy Vesting.
For any Plan Year in which this Plan is top-heavy, the following
vesting schedule will automatically apply to the Plan, but only if the
application of such schedule results in a higher vested percentage for the
Participant:
YEARS OF SERVICE VESTED PERCENTAGE
---------------- -----------------
2 20%
3 40%
4 60%
5 80%
6 100%
The minimum vesting schedule applies to all benefits within the meaning of
Section 411(a)(7) of the Code except those attributable to employee
contributions, including benefits accrued before the effective date of Section
416 of the Code and benefits accrued before the Plan became top-heavy. Further,
no decrease in a Participant's nonforfeitable percentage may occur in the event
the Plan's status as top-heavy changes for any Plan Year. However, this Section
does not apply to the Account balance of any Employee who does not have an Hour
of Service after the Plan has initially become top-heavy and such Employee's
Account balance attributable to Employer contributions and forfeitures will be
determined without regard to this Section.
16.16. Minimum Required Distribution.
A Key Employee's benefits shall be distributed to him or begin to be
distributed to him under Section 5 no later than the taxable year in which he
attains age 70 1/2 regardless of when he retires.
16.17. Alternative Effective Date.
Notwithstanding any other provision of this Plan and Trust, the
effective date otherwise provided for the application of this Section 16 shall
be extended in accordance with any legislative act of Congress.
SECTION 17
ESOP PROVISIONS
17.1 Exempt Loans.
(a) Subject to the provisions of this Section 17.1, the Trustee may
incur installment obligations from time to time to finance the acquisition of
Company Stock for the Trust or to repay a prior loan. Any such loan which is
made or guaranteed, directly or indirectly, by a disqualified person or party in
interest is referred to herein as an "exempt loan".
(b) An exempt loan must be primarily for the benefit of the
Participants and beneficiaries of this Plan. At the time the loan is made, the
interest rate and price of Company Stock to be acquired with loan proceeds
should not be such that the Plan assets might be drained off. The terms of a
loan must, at the time the loan is made, be at least as favorable to the Plan as
the terms of a comparable loan resulting from arms length negotiations between
independent parties.
(c) The proceeds of an exempt loan must be used within a reasonable
time after receipt by the Plan and Trust only for any or all of the following
purposes:
(i) To acquire Company Stock;
(ii) To repay such loan; or
(iii) To repay a prior exempt loan. A new loan the proceeds
of which are so used must satisfy the provisions of
this paragraph (c).
Except as otherwise provided in this section 17, or as otherwise
required by applicable law, no Company Stock acquired with the proceeds of an
exempt loan may be subject to a put, call, or other option, or buy-sell or
similar arrangement while held by and when distributed from this Plan, whether
or not this Plan is then an ESOP.
(d) An exempt loan shall be without recourse against the Plan and
Trust; and only Company Stock acquired with the proceeds of the exempt loan or
with the proceeds of a prior exempt loan repaid with the proceeds of the current
exempt loan may be given as collateral.
(e) No person entitled to payment under the exempt loan shall have any
rights to the assets of the Plan and Trust other than:
(i) Collateral given for the loan,
(ii) Contributions other than contributions of Company
Stock that are made to the Plan to meet its
obligations under the loan, and
(iii) Earnings attributable to such collateral and the
investment of such contributions.
The payment made with respect to an exempt loan by the Plan and Trust
during a Plan Year shall not exceed an amount equal to the sum of such
contribution and earnings received during or prior to the year less such
payments in prior years. Such contributions and earnings shall be accounted for
separately on the books of account of the Plan until the loan is repaid.
(f) In the event of a default upon an exempt loan, the value of the
Plan assets transferred in satisfaction of the loan shall not exceed the amount
of default. If the lender is a disqualified person, the loan shall provide for a
transfer of Plan assets upon default only upon and to the extent of the failure
of the Plan to meet the payment schedule of the loan.
(g) The interest rate of an exempt loan must not be in excess of a
reasonable rate of interest.
(h) An exempt loan shall provide for the release from encumbrance
under this subsection (h) of the Plan assets used as collateral for the loan
in one of the two methods described in this subsection (h):
(i) For each Plan Year during the duration of the loan, the
number of securities released must equal the number of
encumbered securities held immediately before release for
the current Plan Year multiplied by a fraction, the
numerator of which is the amount of principal and interest
paid for the year and the denominator of which is the sum
of the numerator plus the principal and interest to be
paid for all future years. The number of future years on
the loan must be definitely ascertainable and must be
determined without taking into account any possible
extensions or renewal periods. If the interest rate under
the loan is variable, the interest to be paid in the
future years must be computed by using the interest rate
applicable as of the end of the Plan Year.
(ii) The number of shares of Company Stock to be released from
encumbrance may be determined solely with reference to
principal payments provided the following requirements are
satisfied. The loan must provide for annual payments of
principal and interest at a cumulative rate that is not
less rapid at any time than level annual payments of such
amounts for ten (10) years. Interest included in any
payment is disregarded only to the extent that it would be
determined to be interest under standard loan amortization
tables. This subparagraph (h)(ii) is not applicable from
the time, that, by reason of a renewal, extension or
refinancing, the sum of the expired duration of the exempt
loan, the renewal period, the extension period, and the
duration of the new exempt loan exceeds ten (10) years.
(i) All assets acquired by the Plan and Trust with the proceeds of an
exempt loan shall be held in a Suspense Account, and shall be released from
encumbrance under subsection (h). For purposes of the allocation to be made
under Section 4.2, assets released from the Suspense Account shall be treated as
having been contributed to the Plan in the Plan Year in which they are released,
and shall be allocated to Participant's ESOP Accounts in non-monetary units.
Income with respect to Company Stock acquired with the proceeds of an exempt
loan shall be allocated as provided in Sections 4.4 and 4.5 except to the extent
that income from such Company Stock is to be used to repay the loan.
17.2 ESOP Voting Rights.
Each Participant in the Plan (or, in the event of the Participant's
death, the Participant's beneficiary) is, for purposes of this Section 17.2,
hereby designated a "named fiduciary" within the meaning of Section 403(a)(1) of
ERISA and shall be entitled to direct the Plan and Trustee as to the manner in
which Company Stock allocated to the ESOP Account of such Participant is to be
voted on each matter brought before an annual or special stockholders' meeting
of the Employer. Before each such meeting of stockholders, the Trustee shall
cause to be furnished to each Participant (or beneficiary) a copy of the proxy
solicitation material, together with a form requesting confidential directions
on how such shares of stock allocated to such Participant's ESOP Account shall
be voted on each such matter. Upon timely receipt of such directions the Trustee
shall on each such matter vote as directed the number of votes attributable, as
provided below, to the shares allocated to the ESOP Account of such Participant.
The instructions received by the Trustee from Participants shall be
held by the Trustee in strict confidence and shall not be divulged or released
to any person, including officers or employees of the Employer or any affiliate;
provided, however, that to the extent necessary for the operation of the Plan,
such instructions may be relayed by the Trustee to a recordkeeper, auditor or
other person providing services to the Plan if such person (i) is not the
Employer, an affiliate or any employee, officer or director thereof, and (ii)
agrees not to divulge such directions to any other person, including employees,
officers and directors of the Employer and its affiliates.
The number of votes attributable to each Participant shall be
determined as follows:
(a) first, the total number of shares of Company Stock allocated
to such Participant's ESOP Account as of the record date for the matter
requiring the vote shall be determined:
(b) next, the total number of votes attributable to all Company
Stock owned by the Plan and allocated to ESOP Accounts of Participants shall
be determined;
(c) next, the number of votes attributable to allocated shares
shall be determined by multiplying the total number of available votes by a
fraction, the numerator of which shall be the number of allocated shares, and
the denominator of which shall be total shares;
(d) next, the number of votes determined under (c), above, shall
be attributed to each Participant, in the ratio which the number of shares
allocated to such Participant's ESOP Account as of the immediately preceding
Valuation Date bears to the total number of shares allocated to all
Participants' ESOP Accounts as of such date.
Each Participant, as a named fiduciary, shall also be entitled to
separately direct the vote of a portion of the number of votes with respect to
which a signed voting-direction instrument is not timely received from the
Participants and a portion of the number of votes with respect to any shares of
stock not then released pursuant to Section 17.1(h) and (i) and held in the
Suspense Account and a portion of the number of votes with respect to any shares
of stock released pursuant to Section 17.1(h) and (i) and not allocated to
Participants' ESOP Accounts ("Undirected ESOP Votes"). Such direction with
respect to each Participant who timely elects to direct the vote of Undirected
ESOP Votes as a named fiduciary shall be with respect to a number of Undirected
ESOP Votes equal to the total number of Undirected Votes multiplied by a
fraction, the numerator of which is the total number of votes attributable to
shares of stock allocated to the ESOP Account of such Participant and the
denominator of which is the total number of votes attributable to the ESOP
Accounts of all Participants who timely elect to vote Undirected ESOP Votes as a
named fiduciary.
17.3 Rights on Tender or Exchange Offer.
Each Participant (or, in the event of the Participant's death, the
Participant's beneficiary) is, for purposes of this Section 17.3, hereby
designated a "named fiduciary" within the meaning of Section 403(a)(1) of ERISA
and shall have the right, to the extent of the number of shares of Company Stock
allocated to such Participant's ESOP Account, to direct the Trustee in writing
as to the manner in which to respond to a tender or exchange offer with respect
to shares of Company Stock. Each Participant, as a named fiduciary, shall also
be entitled to separately direct the tender of a portion of the shares of
Company Stock not released pursuant to Section 17.1(h) and (i) and held in the
Suspense Account and a portion of the shares of Company Stock released pursuant
to Section 17.1(h) and (i) and not allocated to Participants' ESOP Accounts.
Such direction shall be with respect to the total of the number of shares of
Company Stock in the Suspense Account and the number of shares of Company stock
released and not allocated multiplied by a fraction, the numerator of which is
the total shares of Company Stock allocated to the Participant's ESOP Account
and the denominator of which is the total number of shares of Company Stock
which are allocated to the ESOP Accounts of all Participants. The Trustee shall
use its best efforts to timely distribute or cause to be distributed to each
Participant (or beneficiary) such information as will be distributed to
stockholders of the Employer in connection with any such tender or exchange
offer. Upon timely receipt of such instructions, the Trustee shall respond as
instructed with respect to shares of Company Stock allocated to such
Participant's ESOP Account. The instructions received by the Trustee from
Participants shall be held by the Trustee in strict confidence and shall not be
divulged or released to any person, including officers or employees of the
Employer or any affiliate; provided, however, that to the extent necessary for
the operation of the Plan, such instructions may be relayed by the Trustee to a
recordkeeper, auditor or other person providing services to the Plan if such
person (i) is not the Employer, an affiliate or any employee, officer or
director thereof, and (ii) agrees not to divulge such directions to any other
person, including employees, officers and directors of the Employer and its
affiliates. If the Trustee shall not receive timely instruction from a
Participant (or beneficiary) as to the manner in which to respond to such a
tender or exchange offer, the Trustee shall not tender or exchange any shares of
Company Stock allocated to the ESOP Account of such Participant with respect to
which such Participant has the right of direction. In effecting the foregoing,
to the extent possible, the Trustee shall tender or exchange shares of Company
Stock entitled to one vote per share prior to shares of Company Stock having
greater than one vote per share. 17.4 Special Limitation Rules.
Any Employer contributions which are used by the Trustee (not later
than the due date, including extensions, for filing the Company's Federal income
tax return for the Plan Year) to pay interest on an exempt loan shall not be
included as annual additions under Section 4.8; provided, however, that the
provisions of this Section 17.4 shall be applicable only for a Plan Year in
which not more than one-third (1/3) of the Employer contributions applied to pay
principal and/or interest on an exempt loan are allocated to Participants who
are highly compensated employees, as defined in Section 414(q) of the Code; and
the Committee shall reallocate such Employer contributions to the extent
necessary to satisfy this special rule.
17.5 Limitation on Electing Shareholder.
[RESERVED]
17.6 Investment Diversification.
Each Participant in the Plan who has attained age fifty-five (55) and
has completed at least ten (10) years of participation in the Plan shall be
permitted to direct the investment of twenty-five percent (25%) of the total
number of shares of Company Stock acquired by or contributed to the Plan after
December 31, 1986 and allocated to his ESOP Account, Stock Bonus Account, and
PAYSOP Account in the Plan, reduced by the number of shares of Company Stock
previously diversified pursuant to an election under this paragraph. This
election may be made within the ninety (90) day period following the end of each
Plan Year during the six (6) Plan Year period beginning with the first Plan Year
in which the Participant is eligible to make the election. For the last Plan
Year in which the Participant can make an election, this paragraph shall be
applied by substituting "fifty percent (50%)" for "twenty-five percent (25%)"
herein.
If a Participant elects to diversify pursuant to the preceding
paragraph, the Committee shall facilitate such diversification by making
available to the Participant at least three (3) investment options which are not
Company Stock, and which are consistent with the requirements of regulations
promulgated by the Secretary of the Treasury. These investment options may be
provided either in this Plan or in another qualified plan sponsored by the
Employer. The number and type of investment options available, and the
determination regarding the inclusion of the investment options in this Plan or
another qualified plan, shall be at the sole discretion of the Committee.
The Trustee shall comply with any diversification election hereunder
within ninety (90) days following the ninety (90) day election period by either
(i) substituting other investment assets in this Plan for the Company Stock as
to which the election is made, or (ii) if the Participant's investment options
are made available under another qualified plan, transferring to such qualified
plan the net cash proceeds realized from the sale by the Plan of the shares of
Company Stock for which diversification is elected.
The provisions of this Section 17.6 shall apply to a Participant's ESOP
Account, Stock Bonus Account and PAYSOP Account.
17.7 Company Stock Distributions.
(a) Notwithstanding the provisions of Sections 5, 6, 7 and 8,
distributions of Company Stock from Participants' ESOP Accounts in the Plan
shall be made in accordance with this Section 17.7, unless the application of
Sections 5, 6, 7 and 8 would result in an earlier distribution date.
(b) Unless the Participant (or his beneficiary, if the Participant is
deceased) elects otherwise, if a Participant retires, dies or becomes disabled
while employed by the Employer, distribution of Company Stock in his ESOP
Account will be made or commenced as soon as practicable following the date on
which the Participant retires, dies or becomes disabled, but not later than the
sixtieth (60th) day next following the close of the Plan Year during which the
Participant retires, dies or becomes disabled.
(c) Unless the Participant elects otherwise, upon termination of
employment of the Participant with the Employer for reasons other than
retirement, death or disability, distribution of Company Stock in his ESOP
Account will be made not later than the later of:
(i) one (1) year after the close of the Plan Year which
is the fifth (5th) Plan Year following the Plan Year
in which his employment terminates, unless the
Participant is reemployed by the Employer before the
end of such year; or
(ii) the earlier of:
(A) the Plan Year in which an Exempt Loan is
fully repaid with respect to distributions
of Company Stock acquired with the proceeds
of that Exempt Loan; or
(B) the sixtieth (60th) day following the end of
the Plan Year in which the Participant
attains Normal Retirement Age.
(d) Any distribution hereunder shall comply with the consent
requirements contained in Sections 411(a)(11) and 409(o) of the Code.
SECTION 18
STOCK BONUS PLAN PROVISIONS
18.1 Stock Bonus Voting Rights.
Each Participant in the Plan (or, in the event of the Participant's
death, the Participant's beneficiary) is, for purposes of this Section 18.1,
hereby designated a "named fiduciary" within the meaning of Section 403(a)(1) of
ERISA and shall be entitled to direct the Plan and Trustee as to the manner in
which Company Stock allocated to the Stock Bonus Account of such Participant is
to be voted on each matter brought before an annual or special stockholders'
meeting of the Employer. Before each such meeting of stockholders, the Trustee
shall cause to be furnished to each Participant (or beneficiary) a copy of the
proxy solicitation material, together with a form requesting confidential
directions on how such shares of stock allocated to such Participant's Stock
Bonus Account shall be voted on each such matter. Upon timely receipt of such
directions the Trustee shall on each such matter vote as directed the number of
votes attributable, as provided below, to such Participant.
The instructions received by the Trustee from Participants shall be
held by the Trustee in strict confidence and shall not be divulged or released
to any person, including officers or employees of the Employer or any affiliate;
provided, however, that to the extent necessary for the operation of the Plan,
such instructions may be relayed by the trustee to a recordkeeper, auditor or
other person providing services to the Plan if such person (i) is not the
Employer, an affiliate or any employee, officer or director thereof, and (ii)
agrees not to divulge such directions to any other person, including employees,
officers and directors of the Employer and its affiliates.
The number of votes attributable to each Participant shall be
determined as follows:
(a) first, the total number of shares of Company Stock
allocated to such Participant's Stock Bonus Account as
of the record date for the matter requiring the vote
shall be determined;
(b) next, the total number of votes attributable to all
Company Stock owned by the Plan and allocated to
Stock Bonus Accounts of Participants shall be
determined;
(c) next, the number of votes attributable to allocated
shares shall be determined by multiplying the total
number of available votes by a fraction, the
numerator of which shall be the number of allocated
shares, and the dominator of which shall be total
shares;
(d) next, the number of votes determined under (c),
above, shall be attributed to each Participant, in
the ratio which the number of shares allocated to
such Participant's Stock Bonus Account as of the
immediately preceding Valuation Date bears to the
total number of shares owned by the Plan and
allocated to Stock Bonus Accounts of Participants as
of such date.
Each Participant, as a named fiduciary, shall also be entitled to
separately direct the vote of a portion of the number of votes with respect to
shares of stock allocated to Stock Bonus Accounts of Participants for which a
signed voting-direction instrument is not timely received from the Participants
and a portion of the number of votes with respect to any shares of stock
purchased with Employer contributions designated as Stock Bonus contributions,
not then allocated to Stock Bonus Accounts of Participants ("Undirected Stock
Bonus Votes"). Such direction with respect to each Participant who timely elects
to direct the vote of Undirected Stock Bonus Votes as a named fiduciary shall be
with respect to a number of Undirected Votes equal to the total number of
Undirected Votes multiplied by a fraction, the numerator of which is the total
number of votes attributable to such Participant's Stock Bonus Account and the
denominator of which is the total number of votes attributable to Stock Bonus
Accounts of all Participants who timely elect to vote Undirected Stock Bonus
Votes as a named fiduciary.
18.2 Rights on Tender or Exchange Offer.
Each Participant (or, in the event of the Participant's death, the
Participant's beneficiary) is, for purposes of this Section 18.2, hereby
designated a "named fiduciary" within the meaning of Section 403(a)(1) of ERISA
and shall have the right, to the extent of the number of shares of Company Stock
allocated to such Participant's Stock Bonus Account to direct the Trustee in
writing as to the manner in which to respond to a tender or exchange offer with
respect to shares of Company Stock. Each Participant, as a named fiduciary,
shall also be entitled to separately direct the tender of a portion of the
shares of Company Stock purchased with Employer contributions designated as
Stock Bonus contributions and not allocated to Stock Bonus Accounts of
Participants. Such direction shall be with respect to the number of such
unallocated shares of Company Stock multiplied by a fraction, the numerator of
which is the total shares of Company Stock allocated to the Participant's Stock
Bonus Account and the denominator of which is the total number of shares of
Company Stock which are allocated to the Stock Bonus Accounts of all
Participants. The Trustee shall use its best efforts to timely distribute or
cause to be distributed to each Participant (or beneficiary) such information as
will be distributed to stockholders of the Employer in connection with any such
tender or exchange offer. Upon timely receipt of such instructions, the Trustee
shall respond as instructed with respect to shares of Company Stock allocated to
such Participant's Stock Bonus Account. The instructions received by the Trustee
from Participants shall be held by the Trustee in strict confidence and shall
not be divulged or released to any person, including officers or employees of
the Employer or any affiliate; provided, however, that to the extent necessary
for the operation of the Plan, such instructions may be relayed by the Trustee
to a recordkeeper, auditor or other person providing services to the Plan if
such person (i) is not the Employer, an affiliate or any employee, officer or
director thereof, and (ii) agrees not to divulge such directions to any other
person including employees, officers and directors of the Employer and its
affiliates. If the Trustee shall not receive timely instruction from a
Participant (or beneficiary) as to the manner in which to respond to such a
tender or exchange offer, the Trustee shall not tender or exchange any shares of
Company Stock allocated to the Stock Bonus Account of such Participant with
respect to which such Participant has the right of direction. In effecting the
foregoing, to the extent possible, the Trustee shall tender or exchange shares
of Company Stock entitled to one vote per share prior to shares of Company Stock
having greater than one vote per share.
18.3 Investment Diversification.
The investment diversification rights provided for in Section 17.6
shall apply to Participants' Stock Bonus Accounts.
SECTION 19
PAYSOP PROVISIONS
19.1 Nature of the Plan.
(a) This Tax Credit Employee Stock Ownership Plan ("PAYSOP") is an
addition to the Stock Bonus Plan previously established by the Employer and
merged into this Plan. The PAYSOP forms a part of an ESOP and a Stock Bonus Plan
under Section 401(a) of the Internal Revenue Code and is a Tax Credit Employee
Stock Ownership Plan under Section 409 of the Code. The PAYSOP is intended to
make available to the Company the payroll-based employee stock ownership credit
described in Section 41 of the Code and is designed to be invested primarily (or
exclusively) in Company Stock.
(b) The PAYSOP has been and will be funded through the Stock Bonus and
PAYSOP Trust established under the ESOP and is administered by the Plan
Administrator described in Section 13 of the ESOP. The interests of Participants
under the PAYSOP shall be reflected by separate PAYSOP Accounts under the Plan.
Except as otherwise provided in this Section 19 or other Sections of this Plan,
the provisions of the ESOP shall generally apply to the PAYSOP.
19.2 Definitions.
Except to the extent that they are inconsistent with this Section 19,
all of the definitions included in Section 1 of the ESOP apply to this Tax
Credit Employee Stock Ownership Plan. Additional specific terms are defined
below in this Section 19.2.
(a) PAYSOP - This CenturyTel, Inc. Tax Credit Employee Stock Ownership
Plan established by the Employer as an addition to the Stock Bonus Plan.
(b) PAYSOP Account - The Account of a Participant which reflects his
interest under the Plan attributable to PAYSOP contributions.
(c) Stock Bonus Plan - The CenturyTel, Inc.Stock Bonus Plan, as merged
into the CenturyTel, Inc. Employee Stock Ownership Plan and Trust.
(d) PAYSOP Contributions - Employer contributions made to the Plan by
the Company pursuant to Section 19.4 of the PAYSOP.
(e) PAYSOP Compensation - The compensation of each Participant within
the meaning of Section 415(e)(3) of the Code and the regulations thereunder.
(f) ESOP - The CenturyTel, Inc. Employee Stock Ownership Plan and
Trust, into which the Stock Bonus Plan was merged.
19.3 Eligibility and Participation.
Each Participant under the ESOP will be eligible to share in the
allocation of PAYSOP Contributions under Section 19.4 as of each Adjustment
Date, provided that he is eligible to share in the allocation of Employer
Contributions and forfeitures as described in Section 4 of the ESOP.
19.4 Employer Contributions.
(a) PAYSOP Contributions shall be paid to the Plan for each Plan Year
for which the Employer elects the payroll-based employee stock ownership credit
available under Section 41 of the Code in any amount not exceeding the following
percentages of PAYSOP Compensation of those Participants eligible to share in
the allocation of such Employer Contributions for that Plan Year:
Compensation Paid Applicable
During Calendar Year Percentage
1984 .50
1985 .50
1986 .50
1987 .50
(b) PAYSOP Contributions shall be paid to the Plan not later than
thirty (30) days after the due date (including extensions) for filing the
Employer's Federal income tax return for that Plan Year. PAYSOP Contributions
may be paid in shares of Company Stock or in cash, as determined by the
Employer's Board of Directors; provided, however, that PAYSOP Contributions in
cash shall be used by the Trustee to acquire Company Stock within thirty (30)
days.
(c) In the event that any Employer Contributions are paid to the Plan
by reasons of a mistake of fact, such contributions may be returned to the
Employer by the Trustee (upon the request of the Employer) within one year after
payment to the Plan.
19.5 Participant's Accounts.
(a) A PAYSOP Account shall be established for each Participant under
the PAYSOP. It will be credited annually with shares of Company Stock (including
fractional shares) representing his allocable share of PAYSOP Contributions, as
well as Company Stock acquired with any dividends on Company Stock allocated to
his PAYSOP Account (or with any net income of the Trust attributable to the
PAYSOP). Each Participant shall at all times have a one hundred percent (100%)
vested (nonforfeitable) interest in the balance of his PAYSOP Account.
The allocations to the PAYSOP Accounts of Participants for each Plan
Year shall be made in the following manner.
(b) Employer Contributions - PAYSOP Contributions under Section
19.4(a) for each Plan Year will be allocated among the PAYSOP Accounts of
Participants (so entitled under Section 19.3) as of the Adjustment Date in the
ratio which the PAYSOP Compensation of each such Participant bears to the total
PAYSOP Compensation of all such Participants for that Plan Year. For purposes of
this allocation, however, PAYSOP Compensation of each Participant shall not
exceed one hundred thousand dollars ($100,000) for each Plan Year.
(c) Net Income and Dividends - Each Participant's PAYSOP Account shall
share in any net income of the Trust attributable to the PAYSOP in the manner
outlined in Section 4 of the ESOP. His PAYSOP Account shall also be credited
with the amount of any dividends received on Company Stock allocated to such
PAYSOP Account. All such amounts shall be allocated as of each Adjustment Date,
but shall be reinvested in shares of Company Stock for allocation purposes.
(d) Allocation Limitations - The limitations outlined in Sections 4.8
and 4.9 of the ESOP shall be applied by including each Participant's share of
PAYSOP Contributions as Employer Contributions. In no event, however, shall the
allocation of PAYSOP Contributions to a Participant's PAYSOP Account be reduced
to comply with such limitation until after reductions have been made to the
Participant's other Accounts under the ESOP.
For each Plan Year, no more than one-third (1/3) of the PAYSOP
Contributions under Section 19.4(a) may be allocated to the PAYSOP Accounts of
Participants who are officers of the Employer, shareholders owning more than ten
percent (10%) of Company Stock, as determined under Section 415(c)(6)(B)(iv) of
the Code, or Participants whose PAYSOP Compensation for that Plan Year exceeds
$60,000. The $60,000 amount shall be adjusted (after 1985) for increases in the
cost of living, pursuant to regulations prescribed under Section 415(c)(6) and
(d)(1) of the Code. The Plan Administrator may reallocate PAYSOP Contributions
for any Plan Year in order to satisfy this additional limitation in accordance
with the principles of Section 4.8.
(e) Voting Company Stock -
(i) Each Participant (or beneficiary) shall be entitled to
direct the voting rights with respect to the shares of
Company Stock owned by the PAYSOP, but only to the extent
required by Sections 401(a)(22) and 409(e)(3) of the Code
and the regulations thereunder.The number of votes to which
each Participant is entitled shall be determined under
(ii), below. On all other matters, the Plan Administrator
need not solicit instructions from Participants. Prior to
the holding of each annual or special meeting of Company
shareholders, the Committee will send to all Participants
who have Company Stock in their PAYSOP Accounts the proxy
statements for such meeting, together with a form to be
sent to the Trustee which will indicate the number of votes
to which the Participant is entitled, and on which may be
set forth each Participant's instructions as to the manner
of voting the shares, including fractional shares, of
Company Stock. Upon receipt of such instructions, the
Trustee will vote the Company Stock in accordance with such
instructions including fractional shares, which shares
shall be aggregated with the fractional shares of other
Participants with such accounts to the lowest whole number
thereof for the purposes of voting. All shares of Company
Stock held in PAYSOP Accounts of Participants for which no
instructions have been received by the Trustee as to the
manner of voting such shares prior to the established
deadline for such meeting shall not be voted by the
Trustee.
(ii) The number of votes available to each Participant shall
be determined as follows:
(1) first, the total number of votes
attributable to Company Stock owned by the
PAYSOP shall be determined;
(2) next, the amount of votes determined under
(i), above, shall be allocated to each
Participant in the ratio which such
Participant's PAYSOP Account balance as of
the immediately preceding Valuation Date
bears to the total PAYSOP Account balances
of all Participants as of such date.
(f) Rights on Tender or Exchange Offer - Each Participant (or, in the
event of the Participant's death, the Participant's beneficiary) is, for
purposes of this Section 19.5(f), hereby designated a "named fiduciary" within
the meaning of Section 403(a)(1) of ERISA and shall have the right, to the
extent of the number of shares of Company Stock allocated to such Participant's
PAYSOP Account, to direct the Trustee in writing as to the manner in which to
respond to a tender or exchange offer with respect to shares of Company Stock.
Each Participant, as a named fiduciary, shall also be entitled to separately
direct the tender of a portion of the shares of Company Stock not allocated to
Accounts of Participants. Such direction shall be with respect to the number of
such unallocated shares of Company Stock multiplied by a fraction, the numerator
of which is the total shares of Company Stock allocated to the Participant's
PAYSOP Account and the denominator of which is the total number of shares of
Company Stock which are allocated to the PAYSOP Accounts of all Participants.
The Trustee shall use its best efforts to timely distribute or cause to be
distributed to each Participant (or beneficiary) such information as will be
distributed to stockholders of the Employer in connection with any such tender
or exchange offer. Upon timely receipt of such instructions, the Trustee shall
respond as instructed with respect to shares of Company Stock allocated to such
Participant's PAYSOP Account. The instructions received by the Trustee from
Participants shall be held by the Trustee in strict confidence and shall not be
divulged or released to any person, including officers or employees of the
Employer or any affiliate; provided, however, that to the extent necessary for
the operation of the Plan, such instructions may be relayed by the Trustee to a
recordkeeper, auditor or other person providing services to the Plan if such
person (i) is not the Employer, an affiliate or any employee, officer or
director thereof, and (ii) agrees not to divulge such directions to any other
person including employees, officers and directors of the Employer and its
affiliates. If the Trustee shall not receive timely instruction from a
Participant (or beneficiary) as to the manner in which to respond to such a
tender or exchange offer, the Trustee shall not tender or exchange any shares of
Company Stock allocated to the Participant's PAYSOP Account with respect to
which such Participant has the right of direction. In effecting the foregoing,
to the extent possible, the Trustee shall tender or exchange shares of Company
Stock entitled to one vote per share prior to shares of Company Stock having
greater than one vote per share.
(g) Investment Diversification - The investment diversification rights
provided for in Section 17.6 shall apply to Participants' PAYSOP Accounts. 19.6
Expenses.
If brokerage commissions charged with respect to the purchase or sale
of Company Stock of the PAYSOP exceed the lesser of the following amounts, they
shall be paid by the Employer:
(a) the sum of -
(i) 10% of the first $100,000 of the dividends paid to
the PAYSOP with respect to Company Stock during the
Plan Year, and
(ii) 5% of the amount of such dividends in excess of $100,000,
or
(b) $100,000.
19.7 Distributions.
(a) All distributions of benefits from a Participant's PAYSOP Account
shall be made at the same time and in the same manner outlined in Sections 5, 6,
7 and 8 of the ESOP.
(b) No Company Stock allocated to a Participant's PAYSOP Account may
be distributed before the end of the eighty-fourth (84th) month beginning after
the Adjustment Date as of which such Company Stock is allocated to such PAYSOP
Account, except in the event of his retirement, disability, death or other
termination of service. This eighty-four (84) month restriction shall not apply
in the case of certain divisive corporate reorganizations, as provided in
Section 409(d)(2) and (3) of the Code.
19.8 Future of the Plan.
The PAYSOP may be amended or terminated by the Company in accordance
with the provisions of Section 21. The PAYSOP may be amended or terminated
without there being an amendment or termination of the ESOP.
The Employer specifically reserves the right to amend the PAYSOP
retroactively in order to satisfy the applicable requirements of Sections 401(a)
and 409 of the Code.
SECTION 20
QUALIFIED DOMESTIC RELATIONS ORDERS
DEFINITIONS
20.1 Domestic Relations Order.
Any judgment, decree, or order (including approval of a property
settlement agreement) that relates to the provision of child support, alimony
payments, or marital property rights to a spouse, former spouse, child or other
dependent of a Participant, made pursuant to a state domestic relations law,
including a community property law.
20.2 Alternate Payee.
Any spouse, former spouse, child or other dependent of a Participant
who is recognized by a Qualified Domestic Relations Order as having a right to
receive all, or a portion of, the benefits payable under the Plan with respect
to a Participant.
20.3 Qualified Domestic Relations Order.
A Domestic Relations Order as described in Section 414(p) of the Code
which:
(a) Creates or recognizes the existence of an Alternate Payee's right
to, or assigns to an Alternate Payee the right to, receive all or a portion of
the benefits payable with respect to a Participant under the Plan; and
(b) Clearly specifies the following:
(i) the name and last known mailing address (if
available) of the Participant and each Alternate
Payee to which the order relates (unless the Plan
Administrator has reason to know such addresses
independently);
(ii) the amount or percentage of the Participant's benefits to
be paid to an Alternate Payee or the manner in which the
amount is to be determined; and
(iii) the number of payments or period for which payments are
required. A Qualified Domestic Relations Order does not
include an order which:
(a) requires the Plan to provide any type or form of benefit, or any
option, not otherwise provided under the Plan;
(b) requires the Plan to provide increased benefits, i.e., provides
for the payment of benefits in excess of the benefits to which the Participant
would be entitled in the absence of the order; or
(c) requires the payment of benefits to an Alternate Payee that are
required to be paid to another Alternate Payee under a previously existing
Qualified Domestic Relations Order.
PROCEDURES
20.4 Notice.
Upon receipt of a Domestic Relations Order, the Plan Administrator
shall promptly notify the Participant and any Alternate Payee of receipt of the
order and of the Plan's procedures for determining whether the order is a
Qualified Domestic Relations Order.
20.5 Determination of Qualification.
Within a reasonable period of time after receipt of the order (as
defined in regulations to be prescribed by the Secretary of Labor), the Plan
Administrator shall determine whether the order is qualified and notify the
Participant and any Alternate Payee of such determination.
20.6 Deferral of Payment.
During any time period during which the issue of whether a Domestic
Relations Order is qualified is being determined, any amount which would be
payable pursuant to the terms of the order shall be deferred and the amounts so
payable will be segregated into a separate account.
20.7 Payment after Deferral.
If, within eighteen (18) months after payment is deferred in accordance
with Section 20.6, the Plan Administrator determines that the Domestic Relations
Order is qualified, the amounts segregated into the separate accounts, plus
earnings thereon, shall be paid to the Alternate Payee(s) specified in the
order, in accordance with the terms of the order (subject, however, to the
provisions of Code Section 414 (p), this Section 20 and other applicable
provisions of the Plan).
20.8 Payments after Eighteen Months.
If, after eighteen (18) months have elapsed after the deferral of
benefits pursuant to Section 20.6, the Plan Administrator determines that the
order is qualified, the Plan Administrator shall make payments pursuant to the
order; however, such payments shall be made prospectively only, and any amounts
segregated into the special account for periods before the determination that
the order is qualified shall be paid to the person or persons who would have
received the amounts if the order had not been issued. Neither the Plan, nor the
Plan Administrator, shall be liable for payments to any Alternate Payee for any
period before the order is determined to be qualified.
20.9 Payments Under Qualified Domestic Relations Order.
Payments may be made to an Alternate Payee prior to, coincident with,
or after the Participant's termination of employment if made pursuant to a
Qualified Domestic Relations Order. A distribution to an Alternate Payee may be
made out of a Participant's Account on a date coincident with the Participant's
"earliest retirement age," defined as the earlier of (i) the date on which the
Participant is entitled to a distribution under the Plan, or (ii) the later of
(A) the date the Participant attains age 50, or (B) the earliest date on which
the Participant could begin receiving benefits under the Plan if he had
separated from service. In addition, this Plan specifically authorizes
distributions to an Alternate Payee under a Qualified Domestic Relations Order
prior to the Participant's attainment of the earliest retirement age (as defined
above and in Section 414(p) of the Code) but only if: (1) the order specifies
distribution at the earlier date or permits an agreement between the Plan and
the Alternate Payee authorizing an earlier distribution; and (2) the Alternate
Payee consents to a distribution prior to the Participant's earliest retirement
age if the present value of the Alternate Payee's benefits under the Plan
exceeds $5,000. Nothing in this Section 20 shall provide a Participant with a
right to receive a distribution at a time not otherwise permitted under the
Plan, nor shall it provide the Alternate Payee with a right to receive a form of
payment not permitted under the Plan.
20.10. Non-qualification.
If the Plan Administrator determines that the order is not qualified,
or if eighteen (18) months have expired since deferral of benefits, the Plan
Administrator shall pay the amounts segregated pursuant to Section 20.6 above to
the person or persons who would have received the amounts if the order had not
been issued.
20.11 Effective Dates.
The provisions of this Section 20 shall be effective for orders issued
on or after January 1, 1985; however, the Plan Administrator may treat any order
issued before such date as a Qualified Domestic Relations Order if it otherwise
meets the requirements of this Section 20. Additionally, the Plan Administrator
shall treat a Domestic Relations Order received before January 1, 1985 as a
Qualified Domestic Relations Order to the extent payments are being made
pursuant to the order.
SECTION 21
AMENDMENT AND TERMINATION OF PLAN;
ASSIGNMENT OF BENEFITS
21.1 Amendment.
The Employer shall have the right at any time, and from time to time,
to amend, in whole or in part, any or all of the provisions of the Plan.
However, no such amendment shall authorize or permit any part of a Trust fund
(other than such part as is required to pay taxes and administration expenses)
to be used for or diverted to purposes other than for the exclusive benefit of
the Participants or their beneficiaries or estates. Any such amendment shall
become effective upon the adoption thereof by an appropriate written instrument
executed by order of the Board of Directors or upon such later date as may be
specified in such instrument provided that any amendment affecting the powers
and duties of the Trustee shall not be effective until the date it is accepted
in writing by the Trustee.
No amendment to the Plan shall be effective to eliminate or restrict an
optional form of benefit. The preceding sentence shall not apply to a Plan
amendment that eliminates or restricts the ability of a Participant to receive
payment of his or her Account balance under a particular optional form of
benefit if the amendment satisfies the conditions in (1) and (2) below:
(1) The amendment provides a single-sum distribution form that
is otherwise identical to the optional form of benefit eliminated or
restricted. For purposes of this condition (1), a single-sum
distribution form is otherwise identical only if it is identical in all
respects to the eliminated or restricted optional form of benefit (or
would be identical except that it provides greater rights to the
Participant) except with respect to the timing of payments after
commencement.
(2) The amendment is not effective unless the amendment
provides that the amendment shall not apply to any distribution with an
annuity starting date earlier than the earlier of: (i) the 90th day
after the date the Participant receiving the distribution has been
furnished a summary that reflects the amendment and that satisfies the
ERISA requirements at 29 CFR 2520.104b-3 relating to a summary of
material modifications or (ii) the first day of the second Plan Year
following the Plan Year in which the amendment is adopted.
21.2. Termination; Discontinuance of Contributions.
The Employer shall have the right at any time to terminate this Plan.
Such termination shall be effective upon execution by the Employer of an
appropriate instrument terminating the Plan as authorized by the Board of
Directors or upon such later date as may be specified in such instrument. A copy
of such instrument shall be delivered to the Trustee.
Upon termination or partial termination of the Plan by any method, the
Accounts of all Participants shall become fully vested and the Plan
Administrator shall direct the Trustee to distribute all assets remaining in the
Plan to Participants, their beneficiaries or estates in the ratio of the
Participants' Account balances in the Plan.
In the event the Employer completely discontinues contributions for a
fixed or indeterminate period, but without terminating this Plan, the Accounts
of Participants shall be completely vested and nonforfeitable at the values
determined by the Trustee as of the close of the year in which contributions
have been suspended, and all adjustments in Participant's Accounts thereafter
made under the terms of the Plan and Trust with respect to the amounts so vested
shall similarly be completely vested in favor of each Participant but no
distribution shall be made of any Account except on actual termination of the
Plan or the occurrence of any of the events stated in Sections 5, 6, and 7 and
then only in the manner provided in such Sections.
21.3. Assignment of Benefits.
No benefit or interest available hereunder will be subject to
assignment or alienation, either voluntarily or involuntarily. The interest of
each Participant or beneficiary shall be held subject to the maximum restraint
on alienation permitted or required by applicable Louisiana or Federal law. The
preceding sentences shall also apply to the creation, assignment, or recognition
of a right to any benefit payable with respect to a Participant pursuant to a
Domestic Relations Order, unless such order is determined to be a Qualified
Domestic Relations Order, as defined in Section 414(p) of the Code.
THUS DONE AND SIGNED on the day first above shown, in the presence of
the undersigned competent witnesses, who hereunto sign their names with the said
appearers and me, Notary after reading of the whole.
WITNESSES: CENTURYTEL, INC.
/s/ Sandra Post /s/ R. Stewart Ewing, Jr.
_________________________________ By:____________________________
R. Stewart Ewing, Jr.
Executive Vice-President
/s/ Linda Vaughn and Chief Financial Officer
_________________________________
/s/ G. Robert Collier, Jr.
____________________________
NOTARY PUBLIC
Exhibit 10.1(a)
AMENDMENTS TO THE
CENTURYTEL, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
STATE OF LOUISIANA
PARISH OF OUACHITA
BE IT KNOWN, that on this 31st day of December, 2002, before me, a
Notary Public, duly commissioned and qualified in and for the Parish of
Ouachita, State of Louisiana, therein residing, and in the presence of the
undersigned witnesses:
PERSONALLY CAME AND APPEARED:
CENTURYTEL, INC., represented herein by its Executive Vice-President
and Chief Financial Officer, R. Stewart Ewing, Jr., as Plan Sponsor, which
hereby executes the following amendments to the CenturyTel, Inc. Employee Stock
Ownership Plan:
1. Preamble:
"These amendments to the Plan are adopted to reflect certain provisions
of the Economic Growth and Tax Relief Reconciliation Act of 2001
("EGTRRA"). These amendments are intended to constitute good faith
compliance with the requirements of EGTRRA and are to be construed in
accordance with EGTRRA and guidance issued thereunder. Except as
otherwise provided herein, each amendment shall be effective as of the
first day of the first Plan Year beginning after December 31, 2001."
2. Section 4.12(d) is hereby amended to read as follows:
"(d) Defined contribution dollar limitation: $30,000, as adjusted under
Code Section 415(d). For Limitation Years beginning after December 31,
2001, the limitation shall be $40,000, as adjusted for increases in the
cost-of-living under Section 415(d) of the Code."
3. The first paragraph of Section 4.12(k) is hereby amended to read
as follows:
"(k) Maximum permissible amount: The maximum annual addition that may
be contributed or allocated to a Participant's Account under the Plan
for any Limitation Year shall not exceed the lesser of:
(i) The defined contribution dollar limitation, or
(ii) Twenty-five percent (25%) of the Participant's compensation
for the Limitation Year. For Plan Years beginning after
December 31, 2001, this percentage shall be one hundred
percent (100%)."
4. Insert the following as the fifth paragraph of Section 1.7:
"For Plan Years beginning after December 31, 2001, the annual
compensation of each Participant taken into account in determining
allocations for any Plan Year beginning after December 31, 2001, shall
not exceed $200,000 as adjusted for cost-of-living increases in
accordance with Code Section 401(a)(17)(B). Annual compensation means
compensation during the Plan Year or such other consecutive 12-month
period over which compensation is otherwise determined under the Plan
(the determination period). The cost-of-living adjustment in effect for
a calendar year applies to annual compensation for the determination
period that begins with or within such calendar year."
5. Insert the following as the second paragraph of Section 16.1:
"For Plan Years beginning after December 31, 2001, any Employee or
former Employee (including any deceased Employee) who at any time
during the Plan Year that includes the determination date was an
officer of the Employer having annual compensation greater than
$130,000 (as adjusted under Code Section 416(i)(1) for Plan Years
beginning after December 31, 2002), a 5-percent owner of the Employer,
or a 1-percent owner of the Employer having annual compensation of more
than $150,000. For this purpose, annual compensation means compensation
within the meaning of Code Section 415(c)(3). The determination of who
is a Key Employee will be made in accordance with Code Section
416(i)(1) and the applicable regulations and other guidance of general
applicability issued thereunder."
6. Insert the following as the second paragraph of Section 16.5(c):
"For Plan Years beginning after December 31, 2001, for purposes of (a)
and (b), above, the provisions of this paragraph shall apply. The
present value of accrued benefits and the amounts of account balances
of an Employee as of the determination date shall be increased by the
distributions made with respect to the Employee under the plan and any
plan aggregated with the Plan under Code Section 416(g)(2) during the
1-year period ending on the determination date. The preceding sentence
shall also apply to distributions under a terminated plan which, had it
not been terminated, would have been aggregated with the Plan under
Code Section 416(g)(2)(A)(i). In the case of a distribution made for a
reason other than severance from employment, death, or disability, this
provision shall be applied by substituting `5-year period' for `1-year
period.' The accrued benefits and accounts of any individual who has
not performed services for the Employer during the 1-year period ending
on the determination date shall not be taken into account."
7. Insert the following as the second paragraph of Section 7.6(b)(i):
"For distributions made after December 31, 2001, a portion of a
distribution shall not fail to be an eligible rollover distribution
merely because the portion consists of after-tax employee contributions
which are not includable in gross income. However, such portion may be
transferred only to an individual retirement account or annuity
described in Code Section 408(a) or (b), or to a qualified defined
contribution plan described in Code Section 401(a) or 403(a) that
agrees to separately account for amounts so transferred, including
separately accounting for the portion of such distribution which is
includable in gross income and the portion of such distribution which
is not so includable."
8. Insert the following as the second paragraph of Section 7.6
(b)(ii):
"For distributions made after December 31, 2001, an eligible retirement
plan shall also mean an annuity contract described in Code Section
403(b) and an eligible plan under Code Section 457(b) which is
maintained by a state, political subdivision of a state, or any agency
or any instrumentality of a state or political subdivision of a state
and which agrees to separately account for amounts transferred into
such plan from this Plan. The definition of eligible retirement plan
shall also apply in the case of a distribution to a surviving spouse,
or to a spouse or former spouse who is the alternate payee under a
qualified domestic relations order, as defined in Code Section 414(p)."
9. Insert the following at the end of Section 7.2(a):
"For purposes of this Section, and Section 7.3, the value of a
Participant's nonforfeitable account balance shall be determined
without regard to that portion of the account balance that is
attributable to rollover contributions (and earnings allocable thereto)
within the meaning of Code Sections 402(c), 403(a)(4), 403(b)(8),
408(d)(3)(A)(ii) and 457(e)(16). If the value of the Participant's
nonforfeitable account balance as so determined is $5,000 or less, the
Plan may immediately distribute the Participant's entire nonforfeitable
account balance."
10. Section 1.7 is amended by inserting the following as the last
paragraph thereof:
"For Plan Years beginning on and after January 1, 2001, for purposes of
the definition of compensation contained in this Section 1.7, and
Sections 1.17, 1.19(b), 4.12(b) and 16.8 of the Plan, compensation paid
or made available during such years shall include elective amounts that
are not includable in the gross income of the Employee by reason of
Code Section 132(f)(4)."
THUS DONE AND SIGNED on the day first above shown, in the presence of
the undersigned competent witnesses, who hereunto sign their names with the said
appearer and me, Notary, after reading of the whole.
WITNESSES: CENTURYTEL, INC.
/s/ Linda Vaughn /s/ R. Stewart Ewing, Jr.
_________________________________ BY:________________________________
R. Stewart Ewing, Jr.
Executive Vice-President
/s/ Linda Reeves and Chief Financial Officer
_________________________________
_____________________________________
NOTARY PUBLIC
Exhibit 10.1(b)
CENTURYTEL, INC. DOLLARS & SENSE PLAN AND TRUST
As Amended and Restated Effective September 1, 2000
CenturyTel, Inc. (the "Company") previously established the CenturyTel,
Inc. Dollars & Sense Plan (the "Plan"), for the exclusive benefit of eligible
employees of the Company and its participating affiliates. The Plan is intended
to constitute a qualified profit sharing plan, as described in Code Section
401(a), which includes a qualified cash or deferred arrangement, as described in
Code Section 401(k). Effective July 1, 1993, the San Marcos Telephone Company,
Inc. and SM Telecorp Companies Retirement Plan was merged into the Plan.
Effective January 10, 1998, assets from the PacifiCorp K Plus Employee Savings
Plan attributable to participants thereunder who immediately prior to the date
of transfer were employees of Pacific Telecom, Inc. were transferred to the
Plan.
This amendment and restatement hereby effectuates a merger into this
Plan of the CenturyTel, Inc. Frozen Savings Plan, previously the Universal
Telephone, Inc. Employees' Savings Plan, originally effective September 1, 1986,
and amended and restated, and renamed as the CenturyTel, Inc. Frozen Savings
Plan, effective October 1, 1997.
The provisions of the Plan and Trust relating to the Trustee constitute
the trust agreement which is entered into by and between CenturyTel, Inc. and T.
Rowe Price Trust Company. This amendment and restatement also serves to remove
Merrill Lynch Trust Company, FSB as trustee and to appoint T. Rowe Price Trust
Company as trustee. The Trust is intended to be tax exempt, as described in Code
Section 501(a).
The Plan is intended to comply with the qualification requirements of
the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA),
the Uruguay Round Agreements Act (GATT), the Small Business Job Protection Act
of 1996 (SBJPA), the Taxpayer Relief Act of 1997 (TRA `97), and the
Restructuring and Reform Act of 1998 (RRA `98), and is intended to comply in
operation therewith. To the extent that the Plan, as set forth below, is
subsequently determined to be insufficient to comply with such requirements and
any regulations issued, the Plan shall later be amended to so comply.
The Plan constitutes an amendment and restatement of the CenturyTel,
Inc. Dollars & Sense Plan effective September 1, 2000, which was originally
established effective as of May 1, 1986, and its related trust agreement.
The CenturyTel, Inc. Dollars & Sense Plan and Trust, as set forth in
this document, is hereby amended and restated effective as of September 1, 2000.
The Plan and Trust were last restated generally effective January 1, 1998.
ARTICLE I
DEFINITIONS
1.1 Accrued Benefit. The balance in a Participant's or Beneficiary's
account, including contributions, forfeitures, income, expenses, gains and
losses (whether or not realized) allocated or attributable thereto, which
account shall consist of its pro rata proportion of all commingled Trust assets
or any Trust assets separately earmarked therefor. Said account balance shall
be determined as of the most recent Valuation Date. Each Accrued Benefit shall
be divided into one or more of the following subaccounts, to the extent
applicable:
(a) Additional Match Account;
(b) Elective Deferral Account;
(c) Employer Match Account;
(d) ESOP Transfer Account;
(e) Frozen After-Tax Account;
(f) Frozen Other Employer Account;
(g) Frozen Pre-Tax Account;
(h) Frozen Qualified Nonelective Account;
(i) Frozen Rollover Account;
(j) Prior Match Account;
(k) Qualified Non-Elective Contribution Account;
(l) Qualified Matching Contribution Account;
(m) Rollover/Transfer Account; and
(n) Voluntary After-Tax Account.
The foregoing accounts, which are designated as functional accounts, are derived
from the source of the funds contributed thereto.
1.2 Active Participant. Any Participant on whose behalf
contributions are being made to the Plan.
1.3 Additional Match Account. The portion of a Participant's Accrued
Benefit which consists of Additional Match Contributions made to the Plan for
the Plan Year by the Employer and, if applicable, amounts transferred from the
Predecessor Plans as set forth on Exhibit A.
1.4 Additional Match Contributions. Matching Contributions made
to the Plan for the Plan Year by the Employer pursuant to Section 3.2(b)
of the Plan.
1.5 Administrator or Plan Administrator. The person, persons or
entity designated by the Employer pursuant to Article XII to administer and
operate the Plan.
1.6 Affiliated Employer. The Employer and any corporation which is a
member of a controlled group of corporations (as defined in Section 414(b) of
the Code) which includes the Employer, any trade or business (whether or not
incorporated) which is under common control (as defined in Section 414(c) of the
Code) with the Employer, any organization (whether or not incorporated) which is
a member of an affiliated service group (as defined in Section 414(m) of the
Code) which includes the Employer, and any other entity required to be
aggregated with the Employer pursuant to regulations under Section 414(o) of the
Code.
1.7 Beneficiary. The person or persons so designated by the
Participant to receive his benefits under the Plan in the event of his death.
1.8 Code. The Internal Revenue Code of 1986, as amended.
1.9 Company. CenturyTel, Inc. or any successor by merger, purchase
or otherwise.
1.10 Company Stock. Shares of voting common stock, $1.00 par value,
issued by the Company.
1.11 Compensation. All of each Participant's W-2 earnings, including
any amount which is contributed by the Employer pursuant to a salary reduction
agreement and which is not includible in the gross income of the Employee under
Section 125, 402(e)(3), 402(h)(1)(B), 403(b), 408(p)(2)(A)(i) or 457 of the
Code, and excluding (i) overtime, (ii) completion bonuses and Christmas bonuses,
(iii) restricted stock awards under the Company's Restricted Stock Plan or Key
Employee Incentive Compensation Plan, (iv) severance pay or termination
allowance in any form, and (v) reimbursements or other expense allowances, cash
and non-cash fringe benefits, moving expenses, deferred compensation and welfare
benefits. For any Self-Employed Individual covered under the Plan, Compensation
will mean Earned Income. Compensation shall include only that Compensation which
is actually paid to the Participant during the applicable period. Except as
provided elsewhere in this Plan, the applicable period shall be the Plan Year.
The annual Compensation of each Participant taken into account under
the Plan for any year shall not exceed $170,000, as adjusted for Cost-of-Living
Increases pursuant to Code Sections 401(a)(17) and 415(d). The Cost-of-Living
Increase in effect for a calendar year applies to any determination period
beginning in such calendar year.
If a determination period consists of fewer than twelve (12) months,
the annual compensation limit is an amount equal to the otherwise applicable
annual compensation limit multiplied by a fraction, the numerator of which is
the number of months in the short determination period, and the denominator of
which is twelve (12).
For purposes of determining Highly Compensated Employees and Key
Employees, and for purposes of Section 5.4(j), Compensation for the entire Plan
Year shall be used. For purposes of determining ADP and ACP, Compensation shall
be limited to amounts paid to a Covered Employee while a Participant.
1.12 Cost of Living Increase. An automatic increase (without necessity
of Plan amendment) in a dollar value set forth or described in the Plan, for the
purpose of reflecting increases in the cost of living to the extent prescribed
in or pursuant to regulations under Section 415(d) of the Code.
1.13 Covered Employee. Any Employee eligible to participate in th
Plan pursuant to Article II who is not excluded from participation pursuant to
Section 2.2.
1.14 Distribution Date. The date on which a Participant reaches
retirement, dies while in the active employ of the Employer, becomes totally
and permanently disabled, or otherwise terminates employment.
1.15 Earned Income. The annual net earnings from self-employment in
the trade or business with respect to which the Plan is established, provided
that personal services of the individual are a material income-producing factor.
Net earnings will be determined without regard to items not included in gross
income and the deductions allocable to such items. Net earnings are reduced by
contributions by the Employer to a qualified plan to the extent deductible under
Section 404 of the Code. Earned Income will in all events be defined in a way
which complies with Section 401(c)(2) of the Code and other applicable
provisions of the Code.
Net earnings shall be determined with regard to the deduction allowed
to the Employer by Section 164(f) of the Code for taxable years beginning after
December 31, 1989.
1.16 Effective Date. The effective date of this amendment and
restatement shall be September 1, 2000.
1.17 Elective Deferral Account. The portion of a Participant's Accrued
Benefit which consists of Elective Deferrals made to the Plan for the Plan Year
by the Employer on behalf of the Participant and, if applicable, amounts
transferred from the Predecessor Plans as set forth on Exhibit A.
1.18 Elective Deferrals. Contributions made to the Plan for the Plan
Year by the Employer at the election of the Participant in lieu of cash
compensation, pursuant to Section 3.1 of the Plan, including contributions made
pursuant to a salary reduction agreement.
1.19 Employee. Any person, including a Self-Employed Individual,
employed by the Employer maintaining the Plan or of any other Employer required
to be aggregated with such Employer under Section 414(b), (c), (m) or (o) of the
Code and shall include Leased Employees within the meaning of Section 414(n)(2)
or (o) of the Code. Notwithstanding the foregoing, if such Leased Employees
constitute less than twenty percent of the Employer's non-highly compensated
work force within the meaning of Section 414(n)(5)(C)(ii) of the Code, the term
"Employee" shall not include those Leased Employees covered by a plan described
in Section 414(n)(5) of the Code unless otherwise provided by the terms of the
Plan.
1.20 Employer. The Company, any successor to the Company and any
Affiliated Employer which is a Participating Employer under the Plan.
1.21 Employer Contribution Accounts. The portion of a Participant's
Accrued Benefit consisting of his Employer Match Account and his Additional
Match Account.
1.22 Employer Match Account. The portion of a Participant's Accrued
Benefit which consists of Employer Match Contributions made to the Plan for
the Plan Year by the Employer.
1.23 Employer Match Contributions. Matching Contributions made to
the Plan for the Plan Year by the Employer pursuant to Section 3.2(a)
of the Plan.
1.24 Entry Date. The first day on which a Covered Employee elects to
participate in the Plan.
1.25 ERISA. The Employee Retirement Income Security Act of 1974, as
amended.
1.26 ESOP. The CenturyTel, Inc. Employee Stock Ownership Plan and
Trust.
1.27 ESOP Transfer Account. The portion of a Participant's Accrued
Benefit which consists of amounts transferred to the Plan from the CenturyTel,
Inc. Employee Stock Ownership Plan and Trust pursuant to diversification
elections with respect to such plan under Section 401(a)(28) of the Code.
1.28 Family Member. An Employee's spouse and lineal ascendants or
descendants and the spouses of such lineal ascendants or descendants.
1.29 Frozen Accounts. Collectively, a Participant's Frozen After-Tax
Account, Frozen Other Employer Account, Frozen Pre-Tax Account, Frozen
Qualified Nonelective Account, and Frozen Rollover Account.
1.30 Frozen After-Tax Account. The portion of a Participant's Accrued
Benefit which consists of amounts transferred from the Frozen Predecessor Plans
as set forth on Exhibit B.
1.31 Frozen Other Employer Accounts. The portion of a Participant's
Accrued Benefit which consists of amounts attributable to "Employer Contribution
Account" and "Merger Account" amounts as such terms were defined under the
Frozen Plan prior to October 1, 1997 and amounts transferred from the Frozen
Predecessor Plans as set forth on Exhibit B.
1.32 Frozen Plan. The CenturyTel, Inc. Frozen Savings Plan, which is
hereby merged into this Plan pursuant to this amendment and restatement of the
Plan.
1.33 Frozen Predecessor Plans. Plans which were merged, in whole or
in part, into the Frozen Plan, which were:
(a) Kingsley Telephone Company Retirement Savings Plan, a
qualified profit sharing plan, as described in Code Section 401(a),
which included a qualified cash or deferred arrangement, as described
in Code Section 401(k), originally effective January 1, 1988 and merged
into the Frozen Plan effective on or about October 1, 1997;
(b) Lake Dallas Telephone Company, Inc. 401(k) Profit Sharing
Plan, a qualified profit sharing plan, as described in Code Section
401(a), which included a qualified cash or deferred arrangement, as
described in Code Section 401(k), originally effective January1, 1985
and merged into the Frozen Plan effective on or about October 1, 1997;
and
(c) Savings Plan for Employees of the National Telephone
Cooperative Association and its Member Systems, a qualified profit
sharing plan, as described in Code Section 401(a), which included a
qualified cash or deferred arrangement, as described in Code Section
401(k), originally effective September 1, 1977 and merged into the
Frozen Plan, in part, effective on or about October 1, 1997.
1.34 Frozen Pre-Tax Account. The portion of a Participant's Accrued
Benefit which consists of amounts attributable to "Employee Deferral Account"
amounts as such term was defined under the Frozen Plan prior to October 1, 1997
and amounts transferred from the Frozen Predecessor Plans as set forth on
Exhibit B.
1.35 Frozen Qualified Nonelective Account. The portion of a
Participant's Accrued Benefit which consists of amounts transferred from the
Frozen Predecessor Plans as set forth on Exhibit B.
1.36 Frozen Rollover Account. The portion of a Participant's Accrued
Benefit which consists of amounts attributable to "Rollover Account" amounts as
such term was defined under the Frozen Plan prior to October 1, 1997 and amounts
transferred from the Frozen Predecessor Plans as set forth on Exhibit B.
1.37 Highly Compensated Employee. The term Highly Compensated
Employee includes active Highly Compensated Employees and former Highly
Compensated Employees.
An active Highly Compensated Employee includes any Employee who:
(1) was a five-percent (5%) owner at any time during the
year or the preceding year, or
(2) for the preceding year had compensation within
the meaning of Section 415(c)(3) of the Code from the Employer
in excess of $80,000. The $80,000 amount is adjusted at the
same time and in the same manner as under Code Section 415(d),
except that the base period is the calendar quarter ending
September 30, 1996. The applicable year of the Plan for which
a determination is being made is called a determination year
and the preceding twelve (12) month period is called a
look-back year.
A former Highly Compensated Employee is determined based on the rules
applicable to determining highly compensated employee status as in effect for
the determination year, in accordance with Temp. Regulations Section
1.414(q)-1T, A-4, and Notice 97-45.
1.38 Inactive Participant. Any Employee or former Employee who has
ceased to be an Active Participant and on whose behalf an account is maintained
under the Plan.
1.39 Investment Options. Any regulated investment companies registered
under the Investment Company Act of 1940, any common trust fund or collective
investment fund of T. Rowe Price Associates, Inc. qualified under Sections 401
and 501 of the Code, and any other funding vehicle which the Employer permits
under the terms of the Plan. The initial Investment Options under the Plan are
as listed on Exhibit C. The Employer may change the available Investment Options
from time to time, by attaching a new Exhibit C hereto, without the necessity of
amending the Plan.
1.40 Leased Employee. Any person (other than an Employee of the
recipient) who, pursuant to an agreement between the recipient and any other
person ("leasing organization"), has performed services for the recipient (or
for the recipient and related persons determined in accordance with Section
414(n)(6) of the Code) on a substantially full time basis for a period of at
least one (1) year, and such services are performed under primary direction by
the recipient employer.
Any Leased Employee shall be treated as an Employee of the recipient
Employer. However, contributions or benefits provided by the leasing
organization which are attributable to Service performed for the recipient
Employer shall be treated as provided by the recipient Employer. The preceding
sentence shall not apply to any Leased Employee if Leased Employees do not
constitute more than twenty percent (20%) of the Employer's non-highly
compensated force and, if such Employee is covered by a money purchase pension
plan providing: (a) a nonintegrated Employer contribution rate of at least ten
percent (10%) of Compensation as defined in Section 415(c)(3) of the Code, but
including amounts contributed by the Employer pursuant to a salary reduction
agreement which are excludible from the Employee's gross income under Section
125, 402(e)(3), 402(h)(1)(B) or 403(b) of the Code, (b) full and immediate
vesting, and (c) each employee of the leasing organization (other than employees
who perform substantially all of their services for the leasing organization)
immediately participate in the plan. Item (c) shall not apply to any individual
whose compensation from the leasing organization in each Plan Year during the
4-year period ending with the Plan Year is less than $1,000.
1.41 Matching Contributions. Contributions to the Plan made by the
Employer and allocated to a Participant's account by reason of the
Participant's Elective Deferrals.
1.42 Net Profits. Current and accumulated earnings of the Employer,
before federal and state taxes and contributions to this Plan or any other
qualified plan.
1.43 Non-Highly Compensated Employee. An Employee of the Employer
who is neither a Highly Compensated Employee nor a Family Member.
1.44 Normal Retirement Age. Age fifty-five (55).
1.45 Normal Retirement Date. The date on which a Participant attains
age fifty-five (55).
1.46 Owner-Employee. A sole proprietor, if the Employer is a sole
proprietorship, or a partner who owns either more than ten percent (10%) of the
capital interests or more than ten percent (10%) of the profits interest, if the
Employer is a partnership.
1.47 Participant. Any Covered Employee of the Employer who has met the
eligibility requirements as specified in Article II.
1.48 Participating Employer. Any Affiliated Employer other than:
Spectra Communications Group, L.L.C.
Telephone USA of Wisconsin, L.L.C.
CenturyTel Security Systems, Inc.
1.49 Plan. The retirement plan set forth herein as amended from time
to time.
1.50 Plan Year. The calendar year.
1.51 Predecessor Plans. Plans which were merged, in whole or in
part, into the Plan, which were:
(a) San Marcos Telephone Company, Inc. and SM Telecorp
Companies Retirement Plan, a qualified profit sharing plan, as
described in Code Section 401(a), which included a qualified cash or
deferred arrangement, as described in Code Section 401(k), merged, in
whole, into the Plan effective July 1, 1993; and
(b) PacifiCorp K Plus Employee Savings Plan, a qualified
profit sharing plan, as described in Code Section 401(a), which
included a qualified cash or deferred arrangement, as described in Code
Section 401(k), merged, in part, into the Plan effective January 10,
1998.
1.52 Prior Match Account. The portion of a Participant's Accrued
Benefit which consists of amounts transferred from the Predecessor Plans as
set forth on Exhibit A.
1.53 Qualified Matching Contribution Account. The portion of a
Participant's Accrued Benefit which consists of Qualified Matching
Contributions made to the Plan for the Plan Year by the Employer.
1.54 Qualified Matching Contributions. Matching Contributions made by
the Employer and allocated to the Participant's account that the Participant may
not elect to receive in cash until distributed from the Plan, which are fully
vested when made, which are subject to the distribution restrictions as provided
in Article VI of this Plan, and which the Employer elects to treat as Qualified
Matching Contributions.
1.55 Qualified Non-Elective Contribution Account. The portion of a
Participant's Accrued Benefit which consists of Qualified Non-Elective
Contributions made to the Plan for the Plan Year by the Employer.
1.56 Qualified Non-Elective Contributions. Contributions (other than
Matching Contributions) made by the Employer and allocated to the Participant's
account that the Participant may not elect to receive in cash until distributed
from the Plan, which are fully vested when made, which are subject to the
distribution restrictions as provided in Article VI of said Plan, and which the
Employer elects to treat as Qualified Non-Elective Contributions.
1.57 Rollover/Transfer Account. The portion of a Participant's Accrued
Benefit established in accordance with Section 3.5 of the Plan.
1.58 Self-Employed Individual. An individual who has Earned Income for
the taxable year from the trade, business or partnership with respect to which
the Plan is established; also, an individual who would have had Earned Income
but for the fact the trade, business or partnership had no Net Profits for the
taxable year.
1.59 Sponsor. The Sponsor of this Plan shall be CenturyTel, Inc..
1.60 Trust Agreement. The agreement between the Employer and the
Trustee under which the assets of the Plan are held, administered and managed.
1.61 Trustee. The individual or corporate Trustee or Trustees under
the Trust Agreement as they may be constituted from time to time.
1.62 Valuation Date. The last day of each Plan Year and such other
dates as may be necessary for the proper administration of the Plan.
1.63 Voluntary After-Tax Account. That portion of a Participant's
Accrued Benefit attributable to amounts transferred from the Predecessor Plans
as set forth on Exhibit A.
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.1 Active Participation. Each Covered Employee shall be eligible
to participate in the Plan on the Entry Date coincident with or following the
date of employment of such Covered Employee.
2.2 Exclusion of Certain Employees. The following Employees are
excluded from participation in the Plan:
(a) Employees whose compensation and conditions of employment
are covered by a collective bargaining agreement to which the Employer
is a party unless the agreement calls for the Employee's participation
in the Plan;
(b) Temporary Employees hired specifically to fill temporary
or occasional needs;
(c) Employees who are non-resident aliens and who receive no
Earned Income from the Employer which constitutes income from sources
within the United States; and
(d) Employees of any Affiliated Employer which is not a
Participating Employer under the Plan.
In the event an Employee who is not a member of the eligible class of
Employees becomes a member of the eligible class, such Employee shall be
eligible to participate immediately.
In the event a Participant is no longer a member of an eligible class
of Employees and becomes ineligible to participate, such Employee shall be
eligible to participate immediately upon returning to an eligible class of
Employees.
2.3 Re-employment. A former Participant shall become a Participant
immediately upon returning to the employ of the Employer if such former
Participant is a member of the eligible class of Employees when re-employed.
2.4 Waiver of Participation. The Employer may grant a waiver of
participation to any Employee who so requests. Whether or not such waiver shall
be granted, and the terms and conditions (including duration) thereof, shall be
made in accordance with written and objective rules and shall be applied in a
uniform and nondiscriminatory manner. Notwithstanding the foregoing, any
Employee who has met the Plan's eligibility requirements shall be considered an
"Eligible Participant" for purposes of Sections 3.7 and 3.8 of the Plan.
ARTICLE III
CONTRIBUTIONS
3.1 Elective Deferral Contributions. Subject to the limitation on
Annual Additions as described in Article V of the Plan, for any Plan Year:
(a) Participant Election. A Participant may elect to defer, in
the form of Employer contributions to the Plan on his behalf,
Compensation that would otherwise be paid to him but for the deferral
of such Compensation, in an amount expressed as a whole percentage from
one percent (1%) to sixteen percent (16%) of his Compensation as he
shall elect in writing on a form prescribed by the Employer. The
Employer may change from time to time, in writing, without the
necessity of amending the Plan, the minimum and maximum percentages of
Compensation that a Participant can elect to defer hereunder. Such
salary deferral contributions shall be accomplished through the direct
reduction of Compensation in each payroll period during which the
election is in effect. A Participant may elect to increase, decrease or
discontinue his salary deferral contributions by submitting a written
request to the Employer on a form prescribed by the Employer.
The Employer shall pay to the Trustee all salary deferral
contributions no later than fifteen (15) days after the end of the
month which includes the last day of the payroll period for which such
contributions were deducted. A separate account shall be established
for each Participant and such Participant's salary deferral
contributions, as adjusted for withdrawals thereof, investment gain and
losses, and income or expenses, shall be credited to such account. A
Participant shall at all times have a nonforfeitable interest in his
Elective Deferral Account.
(b) Elective Deferrals. With respect to any taxable year, a
Participant's Elective Deferrals are the sum of all Employer
contributions made on behalf of such Participant pursuant to an
election to defer under any qualified CODA as described in Section
401(k) of the Code, any simplified employee pension or cash or deferred
arrangement as described in Section 408(k)(b) of the Code, any SIMPLE
IRA plan described in Section 408(p) of the Code, any eligible deferred
compensation plan under Section 457 of the Code, any plan described
under Section 501(c)(18) of the Code, and any Employer contributions
made on the behalf of Participant for the purchase of an annuity
contract under Section 403(b) of the Code pursuant to a salary
reduction agreement. Elective Deferrals shall not include any deferrals
properly distributed as excess Annual Additions.
(c) Limitation on Elective Deferrals. No Participant shall be
permitted to have Elective Deferrals made under this Plan, or any other
qualified plan maintained by the Employer, during any taxable year, in
excess of the dollar limitation contained in Section 402(g) of the Code
in effect at the beginning of such taxable year. Notwithstanding any
other provisions of the Plan, the Employer may distribute to the
Participant, not later than April 15 following the calendar year to
which the deferral is attributable, any deferral in excess of the
aforesaid limit together with any income (or minus any loss) allocable
thereto. A Participant is deemed to notify the Plan Administrator of
any Excess Elective Deferrals that arise by taking into account only
those Elective Deferrals made to this Plan and any other plans of this
Employer. Excess Deferrals that are distributed after April 15 are
includible in the Participant's gross income in both the taxable year
in which deferred and the taxable year in which distributed. The
Employer may also distribute to the Participant any deferrals, together
with any income allocable thereto which the Participant has advised the
Employer (in writing by March 1) represent excess deferrals because of
amounts deferred by the Participant during the preceding calendar year
under any other plans or arrangements described in Section 401(i),
408(k) or 403(b) of the Code.
For purposes of the above, "Excess Elective Deferrals" shall
mean those Elective Deferrals that are includible in a Participant's
gross income under Section 402(g) of the Code to the extent such
Participant's Elective Deferrals for a taxable year exceed the dollar
limitation under such Code section. Excess Elective Deferrals shall be
treated as Annual Additions under the Plan, unless such amounts are
distributed no later than the first April 15 following the close of
Participant's taxable year.
Determination of income or loss: Excess Elective Deferrals
shall be adjusted for any income or loss. The income or loss allocable
to Excess Elective Deferrals is the income or loss allocable to the
Participant's Elective Deferral Account for the taxable year multiplied
by a fraction, the numerator of which is such Participant's Excess
Elective Deferrals for the year and the denominator is the
Participant's account balance attributable to Elective Deferrals
without regard to any income or loss occurring during such taxable
year.
3.2 Employer Contributions.
(a) Employer Match Contributions. Subject to the limitation on
Annual Additions as described in Article V of the Plan, for any Plan
Year, the Employer shall contribute to the Plan on behalf of each
eligible Participant in the form of a Matching Contribution, an amount
equal to a percentage of such Participant's Elective Deferral
Contributions as established by the Employer. The Employer Match
Contribution to be made by the Employer for each period shall be equal
to fifty-five percent (55%) of each Participant's Elective Deferrals,
provided that no Employer Match Contribution shall be made based upon a
Participant's Employee Deferrals in excess of six percent (6%) of his
Compensation for such period. The percentage matching rate and
percentage of considered Compensation as stated in the preceding
sentence shall continue in effect until otherwise changed by resolution
of the Employer's Board of Directors. Matching Contributions made on
behalf of a Participant, as adjusted for withdrawals thereof,
investment gain and losses, and income or expenses, shall be credited
to such Participant's Employer Match Account. Any Matching
Contributions made under this Section 3.2(a) on behalf of a Participant
during the Plan Year, which are attributable to Excess Deferrals, shall
be deemed forfeited.
Employer Match Contributions shall be fully vested at all times.
(b) Additional Match Contributions. Subject to the limitation
on Annual Additions as described in Article V of the Plan, for any Plan
Year, the Employer may make an additional Matching Contribution to the
Plan in such amount as the Employer may, in its discretion, determine.
Any such Additional Match Contribution shall be made on behalf of each
eligible Participant who was an Active Participant in the Plan at any
time during the Plan for the Plan Year and who was an Employee on the
last day of the Plan Year, and shall be allocated to each such eligible
Participant's Additional Match Account in the same proportion as the
Employer Match Contributions on behalf of such Participant bears to the
Employer Match Contributions on behalf of all Participants. Additional
Match Contributions made on behalf of a Participant, as adjusted for
withdrawals thereof, investment gain and losses, and income or
expenses, shall be credited to such Participant's Additional Match
Account.
Additional Match Contributions shall be fully vested at all times.
(c) Payment. All Employer contributions made pursuant to this
Section 3.2 of the Plan shall become due on the last day in such Plan
Year, unless actually paid prior thereto. The Employer shall pay to the
Trustee all Employer contributions not later than the due date
(including extensions) of the Employer's federal income tax return for
the taxable year ending with or within the Plan Year.
(d) Qualified Matching Contributions. The Employer may make
Qualified Matching Contributions to the Plan. A separate account shall
be established for that portion of a Participant's Accrued Benefit
attributable to such Qualified Matching Contributions and such account
shall be adjusted for withdrawals thereof, and investment gain and
losses and income or expenses allocable thereto. A Participant shall at
all times have a nonforfeitable interest in his Qualified Matching
Contributions Account.
The Employer shall pay to the Trustee all Qualified Matching
Contributions no later than thirty (30) days after the close of the
Plan Year for which such contributions are deemed to be made, or such
other time as provided in applicable regulations under the Code.
3.3 Contribution Limitation. The Employer shall make all
contributions to the Plan without regard to current or accumulated earnings and
profits for the taxable year or years ending with or within such Plan Year. Not
withstanding the foregoing, the Plan shall continue to be designed to qualify as
a profit sharing plan for purposes of Sections 401(a), 402 and 417 of the Code.
In no event shall Employer contributions in the aggregate exceed fifteen percent
(15%) of all Participants' compensation as reportable on the Participants' IRS
Form W-2 or such greater amount deductible for federal income tax purposes under
Section 404 of the Code.
3.4 Payroll Taxes. The Employer shall withhold from the Compensation
of each Participant, any FICA or other payroll taxes as the Employer determines
necessary with respect to salary deferral contributions.
3.5 Rollovers and Transfers.
(a) A Covered Employee may pay over to the Trust an amount
which constitutes a qualified rollover contribution under Section
402(c) or 408(d)(3) of the Code.
(b) The Trustee may accept a direct transfer of funds,
pursuant to Section 401(a)(31) of the Code from a plan which the
Trustee reasonably believes to be qualified under Section 401(a) of the
Code, in which a Covered Employee was a Participant.
(c) The Trustee may accept a transfer of funds from the ESOP
pursuant to diversification elections of Participants under Section
401(a)(28) of the Code.
(d) Any such rollover or transfer to the Plan shall constitute
a part of the Covered Employee's Accrued Benefit under the Plan, shall
be accounted for separately and shall be fully vested at all times.
3.6 Average Actual Deferral Percentage Test Under Section 401(k) of
the Code.
(a) General Tests. Notwithstanding any other provisions in the
Plan, for any Plan Year, the Employer shall be permitted to limit the
amount which may be deferred by any Highly Compensated Employee (as
defined in Article I of the Plan) to the extent necessary to ensure
that the Plan satisfies one of the following tests:
(i) The Average Actual Deferral Percentage for
Eligible Participants who are Highly Compensated Employees for
the Plan Year shall not exceed the Average Actual Deferral
Percentage for Eligible Participants who are Non-Highly
Compensated Employees for the Plan Year multiplied by 1.25; or
(ii) the Average Actual Deferral Percentage for
Eligible Participants who are Highly Compensated Employees for
the Plan Year shall not exceed the Average Actual Deferral
Percentage for Eligible Participants who are Non-Highly
Compensated Employees for the Plan Year multiplied by two (2),
provided that the Average Actual Deferral Percentage for
Eligible Participants who are Highly Compensated Employees
does not exceed the Average Actual Deferral Percentage for
Eligible Participants who are Non-Highly Compensated Employees
by more than two (2) percentage points.
(b) Definitions. For purposes of this Section 3.6 of the Plan,
the following definitions shall apply:
(i) Actual Deferral Percentage (ADP) shall mean, for
a specified group of Participants for a Plan Year, the average
of the ratio (calculated separated for each Participant in
such group) of (1) the amount of Employer contributions
actually paid over to the Trust on behalf of such Participant
for the Plan Year to (2) the Compensation of the Participant
while a Participant during such Plan Year. Employer
contributions on behalf of any Participant shall include: (1)
any Elective Deferrals made pursuant to the Participant's
deferral election (including Excess Elective Deferrals of
Highly Compensated Employees), but excluding (a) Excess
Elective Deferrals of Non-Highly Compensated Employees that
arise solely from Elective Deferrals made under the Plan or
plans, of this Employer, and (b) Elective Deferrals that are
taken into account in the Contribution Percentage Test
(provided the ADP test is satisfied both with and without
exclusion of these Elective Deferrals); and (2) at the
election of the Employer, Qualified Non-Elective Contributions
and Qualified Matching Contributions. For purposes of
computing Actual Deferral Percentages, an Employee who would
be a Participant but for the failure to make Elective
Deferrals shall be treated as a Participant on whose behalf no
Elective Deferrals are made.
(ii) Average Actual Deferral Percentage shall mean
the average (expressed as a percentage) of the Actual Deferral
Percentages of the Eligible Participants in a group of either
Highly Compensated Employees or Non-Highly Compensated
Employees.
(iii) Eligible Participant shall mean any Employee of
the Employer who is otherwise eligible under the Plan to have
Elective Deferrals or Qualified Non-Elective Contributions
allocated to his account for the Plan Year.
(c) Special Rules. The following special rules shall apply for
purposes of this Section 3.6:
(i) A Participant is a Highly Compensated Employee
for a particular Plan Year if he or she meets the definition
of a Highly Compensated Employee in effect for that Plan Year.
Similarly, a Participant is a Non-Highly Compensated Employee
for a particular Plan Year if he or she does not meet the
definition of a Highly Compensated Employee in effect for that
Plan Year.
(ii) The Actual Deferral Percentage for any Eligible
Participant who is a Highly Compensated Employee for the Plan
Year and who is eligible to have Elective Deferrals or
Qualified Non-Elective Contributions or Qualified Matching
Contributions allocated to his account under two or more
plans, or arrangements, described in Section 401(k) of the
Code that are maintained by the Employer or an Affiliated
Employer shall be determined as if all such Elective
Deferrals, Qualified Non-Elective Contributions and Qualified
Matching Contributions were made under a single arrangement.
If a Highly Compensated Employee participates in two or more
cash or deferred arrangements that have different Plan Years,
all cash or deferred arrangements ending with or within the
same calendar year shall be treated as a single arrangement.
Notwithstanding the foregoing, certain plans will be treated
as separate if mandatorily disaggregated under regulations
under Section 401(k) of the Code.
(iii) For purposes of determining the ADP test,
Elective Deferrals, Qualified Non-Elective Contributions and
Qualified Matching Contributions must be made before the last
day of the 12-month period immediately following the Plan Year
to which contributions relate.
(iv) The Employer shall maintain records sufficient
to demonstrate satisfaction of the ADP test and the amount of
Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, used in such test.
(v) The determination and treatment of the Elective
Deferrals, Qualified Non-Elective Contributions, Qualified
Matching Contributions and Actual Deferral Percentage of any
Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
(vi) In the event that this Plan satisfies the
requirements of Section 401(k), 401(a)(4) or 410(b) of the
Code only if aggregated with one or more other plans, or if
one or more other plans satisfy the requirements of such
sections of the Code only if aggregated with this Plan, then
this Section shall be applied by determining the ADP of
Employees as if all such plans were a single plan. Plans may
be aggregated in order to satisfy Section 401(k) of the Code
only if they have the same Plan Year and use the same ADP
testing method.
(d) Distribution of Excess Contributions. Notwithstanding any
other provisions of this Plan, Excess Contributions, plus any income
and minus any loss allocable thereto, shall be distributed no later
than the last day of each Plan Year to Participants to whose accounts
such Excess Contributions were allocated for the preceding Plan Year.
If such excess amounts are distributed more than 2 1/2 months after the
last day of the Plan Year in which such excess amounts arose, a ten
percent (10%) excise tax will be imposed on the Employer maintaining
the Plan with respect to such amounts. Excess Contributions are
allocated to the Highly Compensated Employees with the largest amounts
of Employer contributions taken into account in calculating the ADP
test for the year in which the excess arose, beginning with the Highly
Compensated Employee with the largest amount of such Employer
contributions and continuing in descending order until all the Excess
Contributions have been allocated. For purposes of the preceding
sentence, the "largest amount" is determined after distribution of any
Excess Contributions.
Excess Contributions (including the amounts recharacterized)
shall be treated as Annual Additions under the Plan.
Determination of Income or Loss: Excess Contributions shall be
adjusted for any income or loss up to the date of distribution. The
income or loss allocable to Excess Contributions allocated to each
Participant is the income or loss allocable to the Participant's
Elective Deferral Account (and, if applicable, the Qualified
Non-Elective Contribution Account or the Qualified Matching
Contribution Account or both) for the Plan Year up to the date of
distribution multiplied by a fraction, the numerator of which is such
Participant's Excess Contributions for the year and the denominator is
the Participant's account balance attributable to Elective Deferrals
(and Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, if any of such contributions are included in
the ADP test) without regard to any income or loss occurring during
such Plan Year.
Accounting for Excess Contributions: Excess Contributions
allocated to a Participant shall be distributed from the Participant's
Elective Deferral Account and Qualified Matching Contribution Account
(if applicable) in proportion to the Participant's Elective Deferrals
and Qualified Matching Contributions (to the extent used in the ADP
test) for the Plan Year. Excess Contributions shall be distributed from
the Participant's Qualified Non-Elective Contribution Account only to
the extent that such Excess Contributions exceed the balance in the
Participant's Elective Deferral Account and Qualified Matching
Contribution Account.
For purposes of this Section, "Excess Contributions" shall
mean, with respect to any Plan Year, the excess of:
(i) The aggregate amount of Employer Contributions
actually taken into account in computing the ADP of Highly
Compensated Employees for such Plan Year, over
(ii) The maximum amount of such contributions
permitted by the ADP test (determined by hypothetically
reducing contributions made on behalf of Highly Compensated
Employees in order of the ADPs, beginning with the highest of
such percentages).
(e) Qualified Non-Elective Contributions. In lieu of
distributing Excess Contributions as provided in Section 3.6(d) above,
the Employer may make Qualified Non-Elective Contributions on behalf of
Employees that are sufficient to satisfy the Actual Deferral Percentage
test. In addition, in lieu of distributing Excess Aggregate
Contributions as provided in Section 3.7 of the Plan, the Employer may
make Qualified Non-Elective Contributions on behalf of Non-Highly
Compensated Employees that are sufficient to satisfy either the Actual
Deferral Percentage test or the Average Contribution Percentage test,
or both, pursuant to regulations under the Code.
For purposes of this Section, "Qualified Non-Elective
Contributions" shall mean contributions (other than Matching
Contributions or Qualified Matching Contributions) made by the Employer
and allocated to Participant's accounts that the Participant may not
elect to receive in cash until distributed from the Plan, that are
fully vested when made and that are distributable only in accordance
with the distribution provisions that are applicable to Elective
Deferrals and Qualified Matching Contributions.
3.7 Limitations on Employee Contributions and Employer
Matching Contributions.
(a) General Tests. Notwithstanding any other provisions in the
Plan, for any Plan Year, the Employer shall be permitted to limit the
contributions, as described in Section 3.2 of the Plan, for any Highly
Compensated Employee to the extent necessary to ensure that the Plan
satisfies one of the following tests:
(i) the Average Contribution Percentage for Eligible
Participants who are Highly Compensated Employees for the Plan
Year shall not exceed the Average Contribution Percentage for
Eligible Participants who are Non-Highly Compensated Employees
for the Plan Year multiplied by 1.25; or
(ii) the Average Contribution Percentage for Eligible
Participants who are Highly Compensated Employees for the Plan
Year shall not exceed the Average Contribution Percentage for
Eligible Participants who are Non-Highly Compensated Employees
for the Plan Year multiplied by two (2), provided that the
Average Contribution Percentage for Eligible Participants who
are Highly Compensated Employees does not exceed the Average
Contribution Percentage for Eligible Participants who are
Non-Highly Compensated Employees by more than two (2)
percentage points.
(b) Definitions. For purposes of this Section 3.7 of the Plan,
the following definitions shall apply:
(i) Average Contribution Percentage (ACP) shall mean
the average (expressed as a percentage) of the Contribution
Percentages of the Eligible Participants in a group.
(ii) Contribution Percentage shall mean the ratio
(expressed as a percentage) of the Participant's Contribution
Percentage Amounts to the Compensation of the Participant
while a Participant during the Plan Year.
(iii) Eligible Participant shall mean any Employee
who is eligible to make Employee Contributions or an Elective
Deferral (if the Employer takes such contributions into
account in the calculation of the Contribution Percentage) or
to receive a Matching Contribution (including forfeitures) or
a Qualified Matching Contribution. If an Employee Contribution
is required as a condition of participation in the Plan, any
Employee who would be a Participant in the Plan if such
Employee made such a contribution shall be treated as an
Eligible Participant on behalf of whom no Employee
Contributions were made.
(iv) Aggregate Limit shall mean the sum of (1) 125%
of the greater of the Average Deferral Percentage of the
Non-Highly Compensated Employees for the Plan Year or the
Average Contribution Percentage of Non-Highly Compensated
Employees under the Plan subject to Section 401(m) of the Code
for the Plan Year beginning with or within the Plan Year of
the CODA and (2) the lesser of 200% or two plus the lesser of
such Average Deferral Percentage or Average Contribution
Percentage.
(v) Contribution Percentage Amounts shall mean the
sum of the Employee Contributions, Matching Contributions and
Qualified Matching Contributions (to the extent not taken into
account for purposes of the Average Deferral Percentage test)
made under the Plan on behalf of the Participant for the Plan
Year. Such Contribution Percentage Amounts shall not include
Matching Contributions that are forfeited either to correct
Excess Aggregate Contributions or because the contributions to
which they relate are Excess Deferrals, Excess Contributions
or Excess Aggregate Contributions. The Employer may include
Qualified Non-Elective Contributions in the Contribution
Percentage Amounts. The Employer also may elect to use
Elective Deferrals in the Contribution Percentage Amounts so
long as the Average Deferral Percentage test is met before the
Elective Deferrals are used in the Actual Deferral Percentage
test and continues to be met following the exclusion of those
Elective Deferrals that are used to meet the Actual Deferral
Percentage test.
(vi) Employee Contribution shall mean any
contribution made to the plan by or on behalf of a Participant
that is included in the Participant's gross income in the year
in which made and that is maintained under a separate account
to which earnings and losses are allocated.
(vii) Matching Contribution shall mean an Employer
contribution made to this or any other defined contribution
plan on behalf of a Participant on account of an Employee
Contribution made by such Participant, or on account of a
Participant's Elective Deferral, under a plan maintained by
the Employer.
(c) Special Rules. The following special rules shall apply for
purposes of this Section 3.7:
(i) A Participant is a Highly Compensated Employee
for a particular Plan Year if he or she meets the definition
of a Highly Compensated Employee in effect for that Plan Year.
Similarly, a Participant is a Non-Highly Compensated Employee
for a particular Plan Year if he or she does not meet the
definition of a Highly Compensated Employee in effect for that
Plan Year.
(ii) For purposes of this Section, the Contribution
Percentage for any Eligible Participant who is a Highly
Compensated Employee for the Plan Year and who is eligible to
have Contribution Percentage Amounts allocated to his or her
account under two or more plans described in Section 401(a) of
the Code or arrangements described in Section 401(k) of the
Code that are maintained by the Employer or an Affiliated
Employer shall be determined as if the total of such
Contribution Percentage Amounts was made under each plan. If a
Highly Compensated Employee participates in two or more cash
or deferred arrangements that have different Plan Years, all
cash or deferred arrangements ending with or within the same
calendar year shall be treated as a single arrangement.
Notwithstanding the foregoing, certain plans shall be treated
as separate if mandatorily disaggregated under regulations
under Section 401(m) of the Code.
(iii) In the event that this Plan satisfies the
requirements of Section 401(m), 401(a)(4) or 410(b) of the
Code only if aggregated with one or more other plans, or if
one or more other plans satisfy the requirements of Section
401(b) of the Code only if aggregated with this Plan, then
this Section 3.7 of the Plan shall be applied by determining
the contribution percentages of Eligible Participants as if
all such plans were a single plan. Plans may be aggregated in
order to satisfy Section 401(m) of the Code only if they have
the same Plan Year and use the same ACP testing method.
(iv) Multiple Use: If one or more Highly Compensated
Employees participate in both a CODA and a plan subject to the
Average Contribution Percentage test maintained by the
Employer and the sum of the Average Deferral Percentage and
Average Contribution Percentage of those Highly Compensated
Employees subject to either or both test exceeds the Aggregate
Limit, then the Average Contribution Percentage of those
Highly Compensated Employees who also participate in a CODA
will be reduced (beginning with such Highly Compensated
Employee whose Average Contribution Percentage is the highest)
so that the limit is not exceeded. The amount by which each
Highly Compensated Employee's Contribution Percentage Amounts
is reduced shall be treated as an Excess Aggregate
Contribution. The Average Deferral Percentage and Average
Contribution Percentage of the Highly Compensated Employees
are determined after any corrections required to meet the
Average Deferral Percentage and Average Contribution
Percentage tests. Multiple use does not occur if both the
Average Deferral Percentage and Average Contribution
Percentage of the Highly Compensated Employees does not exceed
1.25 multiplied by the Average Deferral Percentage and Average
Contribution Percentage of the Non-Highly Compensated
Employees.
(v) For purposes of determining the Contribution
Percentage test, Employee Contributions are considered to have
been made in the Plan Year in which contributed to the Trust.
Matching Contributions and Qualified Non-Elective
Contributions will be considered made for a Plan Year if made
no later than the end of the twelve-month period beginning on
the day after the close of the Plan Year.
(vi) The Employer shall maintain records sufficient
to demonstrate satisfaction of the ACP test and the amount of
Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, used in such test.
(vii) The determination and treatment of the
Contribution Percentage of any Participant shall satisfy such
other requirements as may be prescribed by the Secretary of
the Treasury.
(d) Distribution of Excess Aggregate Contributions.
Notwithstanding any other provision of this Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto,
shall be forfeited, if forfeitable, or if not forfeitable, distributed
no later than the last day of each Plan Year to Participants to whose
accounts such Excess Aggregate Contributions were allocated for the
preceding Plan Year. Excess Aggregate Contributions are allocated to
the Highly Compensated Employees with the largest Contribution
Percentage Amounts taken into account in calculating the ACP test for
the year in which the excess arose, beginning with the Highly
Compensated Employee with the largest amount of such Contribution
Percentage Amounts and continuing in descending order until all the
Excess Aggregate Contributions have been allocated. For purposes of the
preceding sentence, the "largest amount" is determined after
distribution of any Excess Aggregate Contributions. If such Excess
Aggregate Contributions are distributed more than 2 1/2 months after
the last day of the Plan Year in which such excess amounts arose, a ten
percent (10%) excise tax will be imposed on the Employer maintaining
the Plan with respect to those amounts. Excess Aggregate Contributions
shall be treated as Annual Additions under the Plan.
Determination of Income or Loss: Excess Aggregate
Contributions shall be adjusted for any income or loss up to the date
of distribution. The income or loss allocable to Excess Aggregate
Contributions allocated to each Participant is the income or loss
allocable to the Participant's Matching Contribution Account, Qualified
Matching Contribution Account (if any, and if all amounts therein are
not used in the ADP test) and, if applicable, Qualified Non-Elective
Contribution Account and Elective Deferral Account for the Plan Year up
to the date of distribution multiplied by a fraction, the numerator of
which is such Participant's Excess Aggregate Contributions for the year
and the denominator is the Participant's account balance(s)
attributable to Contribution Percentage Amounts without regard to any
income or loss occurring during such Plan Year.
Forfeitures of Excess Aggregate Contributions: Forfeitures of
Excess Aggregate Contributions shall be applied to reduce Employer
contributions.
Accounting for Excess Aggregate Contributions: Excess
Aggregate Contributions allocated to a Participant shall be forfeited,
if forfeitable, or distributed on a pro rata basis from the Matching
Contribution Account and Qualified Matching Contribution Account (and,
if applicable, the Participant's Qualified Non-Elective Contribution
Account or Elective Deferral Account, or both).
For purposes of this Section, "Excess Aggregate Contributions"
shall mean, with respect to any Plan Year, the excess of:
(i) The aggregate Contribution Percentage Amounts
taken into account in computing the numerator of the
Contribution Percentage actually made on behalf of Highly
Compensated Employees for such Plan Year, over
(ii) The maximum Contribution Percentage Amounts
permitted by the ACP test (determined by hypothetically
reducing contributions made on behalf of Highly Compensated
Employees in order of their Contribution Percentages beginning
with the highest of such percentages).
Such determination shall be made after first determining
Excess Elective Deferrals pursuant to Section 3.1 and then determining
Excess Contributions pursuant to Section 3.6.
ARTICLE IV
ALLOCATION OF FUNDS
4.1 Allocation of Employer Contributions. Employer Match
Contributions made pursuant to Section 3.2(a) of the Plan shall be allocated to
the Employer Match Accounts of the Participants for whom such contributions are
made. Additional Match Contributions made pursuant to Section 3.2 of the Plan
shall be allocated to the Additional Match Accounts of the Participants for whom
such contributions are made.
4.2 Allocation of Net Earnings or Losses of the Trust. Subject to the
provisions of Section 3.1 of the Trust Agreement, as of each Valuation Date, the
net earnings or losses of the Trust, including capital gains and losses whether
or not realized, since the preceding Valuation Date shall be allocated to the
Accrued Benefit of all Participants (or Beneficiaries) in accordance with the
ratio which the Accrued Benefit of each Participant bears to the aggregate of
all such Accrued Benefits; provided, however, that earnings or losses of
accounts for which Participants direct investment shall be specifically
allocated to such accounts.
4.3 Valuations. In determining the earnings or losses of the Trust,
as of each Valuation Date the Trust shall be valued at fair market value.
4.4 Accounting for Distributions. All withdrawals of Participant
contributions, all distributions made to a Participant or his Beneficiary, and
any transfers to another qualified plan shall be charged to the appropriate
subaccount of the Participant's Accrued Benefit.
4.5 Separate Accounts. A separate account shall be established and
maintained to reflect the Accrued Benefit for each Participant, with subaccounts
to separately show the division described in Section 1.1 of the Plan.
4.6 Investment of Funds.
(a) Investment Control. Subject to the provisions of
subsections (b), (c), (d) and (e) below, and only to the extent
accepted by the Trustee, the management and control of the Trust shall
be vested in the Trustee.
(b) Investment Limitations. The Trustee shall invest all funds
received from the Employer and all Fund earnings in the Investment
Options in the manner from time to time directed in writing by the
Employer.
(c) Participant Directed Investments.
(i) Participants, subject to such reasonable
restrictions as the Employer or Sponsor may impose for
administrative convenience, may designate what percentage of
all contributions other than Employer Match Contributions,
and all accounts other than Employer Match Accounts,
Additional Match Accounts and Qualified Matching
Contribution Accounts will be invested in the Investment
Options.
(ii) Employer Match Contributions, Employer Match
Accounts, Additional Match Accounts, and Qualified Matching
Contribution Accounts shall be invested entirely in Company
Stock; provided, however, that a Participant who has attained
age fifty-five (55) may direct the investment of the balances
in such accounts.
(d) Participant Election. If a Participant does not make a
written designation of an Investment Option, the Employer shall direct
the Trustee to invest all amounts held or received on account of such
Participant in the Investment Option which in the opinion of the
Employer best protects principal.
(e) Employer Securities. Participants may direct that
contributions will be invested in Qualifying Employer Securities
(within the meaning of Section 407(d)(5) of ERISA), subject to such
restrictions as the Employer or the Trustee may impose for
administrative convenience or legal compliance. Participants must
provide such directions in a form satisfactory to the Trustee.
(f) Facilitation. Notwithstanding any instruction from any
Participant for investment of funds in an Investment Option as provided
for herein, the Trustee shall have the right to hold uninvested any
amounts intended for investment until such time as investment may be
made in accordance with subsection (b), (c) or (e) above and the Trust
Agreement.
ARTICLE V
LIMITATION ON ALLOCATIONS
5.1 Participants Not Covered Under Other Plans.
(a) If the Participant does not participate in, and has never
participated in another qualified plan maintained by the Employer, or a
welfare benefit fund (as defined in Section 419(e) of the Code)
maintained by the Employer, or an individual medical account (as
defined in Section 415(1)(2) of the Code), maintained by the Employer,
which provides an Annual Addition (as defined in Section 5.4 below),
the amount of Annual Additions which may be credited to the Accrued
Benefit of the Participant for any Limitation Year shall not exceed the
lesser of the Maximum Permissible Amount or any other limitation
contained in this Plan. If contributions for and/or allocations to the
Accrued Benefit of the Participant would cause the Annual Additions for
the Limitation Year to exceed the Maximum Permissible Amount, the
amount contributed or allocated will be reduced so that the Annual
Additions for the Limitation Year will equal the Maximum Permissible
Amount.
(b) Prior to determining a Participant's actual Compensation
for the Limitation Year, the Employer may determine the Maximum
Permissible Amount for the Participant on the basis of a reasonable
estimation of the Participant's Compensation for the Limitation Year,
uniformly determined for all participants similarly situated.
(c) As soon as is administratively feasible after the end of
the Limitation Year, the Maximum Permissible Amount for the Limitation
Year will be determined on the basis of the Participant's actual
Compensation for the Limitation Year.
(d) If, for any Limitation Year the maximum Annual Additions
is exceeded by reason of allocation of forfeitures, a reasonable error
in estimating a Participant's Compensation, a reasonable error in
determining the amount of Elective Deferrals or under other limited
facts and circumstances approved by the Internal Revenue Service, then,
any such excess shall be disposed of in the following order:
(i) any non-deductible voluntary employee
contributions, and any income attributable thereto, to the
extent they would reduce the excess amount, shall be returned
to the Participant;
(ii) if after the application of paragraph (i) an
excess amount still exists, elective deferrals, and any income
attributable thereto, to the extent they would reduce the
excess amount, shall be returned to the Participant;
(iii) if after the application of paragraph (ii) an
excess amount still exists, and the Participant is covered by
the Plan at the end of the Limitation Year, the excess amount
in the Participant's account shall be used to reduce Employer
contributions (including any allocation of forfeitures) for
such Participant in the next Limitation Year, and each
succeeding Limitation Year, if necessary;
(iv) if after the application of paragraph (ii) an
excess amount still exists, and the Participant is not covered
by the Plan at the end of the Limitation Year, the excess
amount shall be held unallocated in a suspense account. The
suspense account shall be used to reduce future Employer
contributions (including allocations of any forfeitures) for
all remaining Participants in the next Limitation Year, and
each succeeding Limitation Year if necessary;
(v) if a suspense account is in existence at any time
during the Limitation Year pursuant to this Section, no
investment gains or losses or other income may be allocated to
such suspense account, and amounts held in the account may not
be distributed to the Participants or Beneficiaries. Any
balance which may be in the account upon termination of the
Plan shall revert to the Employer. If a suspense account is in
existence at any time during a particular Limitation Year, all
amounts in the suspense account must be allocated and
reallocated to Participants' accounts before any Employer or
any Employee contributions may be made to the Plan for that
Limitation Year. Excess amounts may not be distributed to
Participants or former Participants.
5.2 Participants Covered Under Other Defined Contribution Plans.
(a) This Section applies if, in addition to this Plan, the
Participant is covered under another qualified master or prototype
defined contribution plan maintained by the Employer, a welfare benefit
fund (as defined in Section 419(e) of the Code) maintained by the
Employer, or an individual medical account (as defined in Section
415(1)(2) of the Code) maintained by the Employer, which provides an
Annual Addition as defined in Section 5.4(a), during any Limitation
Year. The Annual Additions which may be credited to the Accrued Benefit
of a Participant under this Plan for any such Limitation Year shall not
exceed the Maximum Permissible Amount reduced by the Annual Additions
credited to the Accrued Benefit of a Participant under the other plans
and welfare benefit funds for the same Limitation Year. If the Annual
Additions with respect to the Participant under other defined
contribution plans and welfare funds maintained by the Employer are
less than the Maximum Permissible Amount and the Employer contributions
that would otherwise be contributed or allocated to the Accrued Benefit
of the Participant under this plan would cause the Annual Additions for
the Limitation Year to exceed the Maximum Permissible Amount, the
amount contributed or allocated will be reduced to that the Annual
Additions under all plans and funds for the Limitation Year shall equal
the Maximum Permissible Amount. If Annual Additions with respect to the
Participant under such other defined contribution plans and welfare
benefit funds in the aggregate are equal to or grater than the Maximum
Permissible Amount, no amount will be contributed or allocated to the
Accrued Benefit of the Participant under this Plan for the Limitation
Year.
(b) Prior to determining the Participant's actual Compensation
for the Limitation Year, the Employer may determine the Maximum
Permissible Amount for a Participant in the manner described in Section
5.1(b).
(c) As soon as administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the Limitation Year
shall be determined on the basis of the Participant's actual
Compensation for the Limitation Year.
(d) If pursuant to Section 5.2(c) or as a result of the
allocation of forfeitures, a Participant's Annual Additions under this
Plan and such other plans would result in an excess amount for a
Limitation Year, the excess amount shall be deemed to consist of the
Annual Additions last allocated, except that Annual Additions
attributable to a welfare benefit fund or individual medical account
will be deemed to have been allocated first regardless of the actual
allocation date.
(e) If an excess amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation date of
another plan, the excess amount attributed to this Plan will be the
product of:
(i) the total excess amount allocated as of such date,
(ii) the ratio of (1) the Annual Additions allocated
to the Participant for the Limitation Year as of such date
under this Plan to (2) the total Annual Additions allocated to
the Participant for the Limitation Year as of such date under
this and all the other qualified master or prototype defined
contributions plans.
(f) Any excess amount attributed to this Plan shall be
disposed of in the manner described in Section 5.1(d).
(g) If the Participant is covered under another qualified
defined contribution plan maintained by the Employer which is not a
master or prototype plan, Annual Additions which may be credited to the
Participant's account under this Plan for any Limitation Year will be
limited in accordance with Sections (a) through (f) above as though the
other plan were a master or prototype plan.
5.3 Participants Covered Under Both Defined Benefit and Defined
Contribution Plans. If the Employer maintains, or at any time maintained, a
qualified defined benefit plan covering any Participant in this Plan, the sum of
the Participant's Defined Benefit Fraction and Defined Contribution Fraction
shall not exceed 1.0 in any Limitation Year. If the combined fraction exceeds
1.0 for any Plan Year, the Participant's benefit under any defined benefit plan
(to the extent it has not been distributed or used to purchase an annuity
contract) shall be limited so that the combined fraction does not exceed 1.0
before any defined contribution limits shall be enforced.
This Section 5.3 shall not apply for Limitation Years beginning on or
after January 1, 2000.
5.4 Definitions. For purposes of Section 5.1 through 5.3, the
following definitions shall apply:
(a) Annual Additions shall mean the sum of the following
amounts credited to a Participant's Account for the Limitation Year:
(i) Employer contributions,
(ii) Employee contributions excluding rollovers
and plan-to-plan transfers under Section 3.5,
(iii) forfeitures,
(iv) amounts allocated to an individual medical account,
as defined in Section 415(1)(2) of the Code, which is part of
a pension or annuity plan maintained by the Employer, and
(v) amounts derived from contributions which are
attributable to post-retirement medical benefits, allocated
to the separate account of a Key Employee, as defined in
Section 419A(d)(3) of the Code, under a welfare benefit
fund, as defined in Section 419(e) of the Code, maintained
by the Employer.
For this purpose, any excess amount applied under Section 5.1
or 5.2 in the Limitation Year to reduce Employer contributions will be
considered Annual Additions for such Limitation Year.
(b) Compensation for purposes of this Article V shall mean a
Participant's Earned Income, wages, salaries and fees for professional
services and other amounts received (without regard to whether or not
an amount is paid in cash) for personal services actually rendered in
the course of employment with the Employer maintaining the Plan to the
extent that the amounts are includible in gross income (including, but
not limited to, commissions paid salesmen, compensation for services on
the basis of a percentage of profits, commissions on insurance
premiums, tips, bonuses, fringe benefits, and reimbursements or other
expense allowances under a nonaccountable plan (as described in
Regulation Section 1.62-2(c)), and excluding the following:
(i) Employer contributions to a plan of deferred
compensation which are not includible in the Employee's gross
income for the taxable year in which contributed, or Employer
contributions under a simplified employee pension plan to the
extent such contributions are deductible by the Employee, or
any distributions from a plan of deferred compensation;
(ii) amounts realized from the exercise of a
non-qualified stock option, or when restricted stock (or
property) held by the Employee either becomes freely
transferable or is no longer subject to a substantial risk of
forfeiture;
(iii) amounts realized from the sale, exchange or
other disposition of stock acquired under a qualified stock
option; and
(iv) other amounts which received special tax
benefits, or contributions made by the Employer (whether or
not under a salary reduction agreement) towards the purchase
of an annuity described in Section 403(b) of the Code (whether
or not the amounts are actually excludible from the gross
income of the Employee).
For purposes of applying the limitations of this Article,
Compensation for a Limitation Year is the Compensation actually paid or
includible in gross income during such year.
Notwithstanding the above, Compensation for a Participant who
is permanently and totally disabled (as defined in Code Section
22(e)(3)) is the Compensation such Participant would have received for
the Limitation Year if the Participant had been paid at the rate of
Compensation paid immediately before becoming permanently and totally
disabled; for Limitation Years beginning before January 1, 1997, such
imputed Compensation for the disabled Participant may be taken into
account only if the Participant is not a Highly Compensated Employee
(as defined in Section 1.37 of the Plan) and contributions made on
behalf of such Participant are nonforfeitable when made.
For purposes of applying the limitations of this Section,
Compensation paid or made available during such Limitation Year shall
include any elective deferral (as defined in Code Section 401(g)(3)),
and any amount which is contributed or deferred by the Employer at the
election of the Employee and which is not includible in the gross
income of the Employee by reason of Code Section 125 or 457.
(c) Defined Benefit Fraction shall mean a fraction, the
numerator of which is the sum of the Participant's projected annual
benefit under all defined benefit plans (whether or not terminated)
maintained by the Employer, and the denominator of which is the lesser
of 125% of the dollar limitation in effect for the Limitation Year
under Section 415(b) and (d) of the Code or one hundred forty percent
(140%) of the Highest Average Compensation including any adjustments
under Section 415(b) of the Code.
Notwithstanding the above, if the Participant was a
Participant as of the first day of the first Limitation Year beginning
after December 31, 1986, in one or more defined benefit plans
maintained by the Employer which were in existence on May 6, 1986, the
denominator of this fraction will not be less than 125% of the sum of
the annual benefits under such plans which the Participant had accrued
as of the close of the last Limitation Year beginning before January 1,
1987, disregarding any changes in the terms and conditions of the Plan
after May 5, 1986. The preceding sentence applies only if the defined
benefit plans individually and in the aggregate satisfied the
requirements of Section 415 of the Code for all Limitation Years
beginning before January 1, 1987.
(d) Defined Contribution Dollar Limitation shall mean $30,000,
as adjusted under Code Section 415(d).
(e) Defined Contribution Fraction shall mean a fraction, the
numerator of which is the sum of the Annual Additions to the
Participant's account under all defined contribution plans (whether or
not terminated) maintained by the Employer for the current and all
prior Limitation Years (including the annual Additions attributable to
the Participant's nondeductible Employee Contributions to all defined
benefit plans, whether or not terminated, maintained by the Employer
and the annual Additions attributable to all welfare benefit funds, as
defined in Section 419(e) of the Code, and individual medical accounts,
as defined in Section 415(1)(2) of the Code, maintained by the
Employer), and the denominator of which is the sum of the maximum
aggregate amount for the current and all prior Limitation Years of
Service with the Employer (regardless of whether a defined contribution
plan was maintained by the Employer). The maximum aggregate amount in
any Limitation Year is the lesser of one hundred twenty-five percent
(125%) of the dollar limitation determined under Section 415(b) and (d)
of the Code or thirty-five percent (35%) of the Participant's
Compensation for such year.
If the Employee was a Participant as of the end of the first
day of the first Limitation Year beginning after December 31, 1986, in
one or more defined contribution plans maintained by the Employer which
were in existence on May 6, 1986, the numerator of this fraction will
be adjusted if the sum of this fraction and the defined benefit
fraction would otherwise exceed 1.0 under the terms of this Plan. Under
the adjustment, an amount equal to the product of (1) the excess of the
sum of the fractions over 1.0 times (2) the denominator of this
fraction, will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the fractions as they
would be computed as of the end of the last Limitation Year beginning
before January 1, 1987, and disregarding any changes in the terms and
conditions of the Plan made after May 5, 1986, but using the Section
415 limitation applicable to the first Limitation Year beginning on or
after January 1, 1987.
Annual Additions for any Limitation Year beginning before
January 1, 1987, shall not be recomputed to treat all Employees
Contributions as an Annual Addition.
(f) Employer shall mean the Employer that adopts this Plan,
and all members of a controlled group of corporations (as defined in
Section 414(b) of the Code as modified by Section 415(h) of the Code),
all commonly controlled trades or businesses (as defined in Section
414(c) of the Code as modified by Section 415(h) of the Code) or
affiliated service groups (as defined in Section 414(m) of the Code) of
which the adopting Employer is a part and any other entity required to
be aggregated with the Employer pursuant to regulations under Section
414(o) of the Code.
(g) Excess Amount shall mean the excess of the Participant's
Annual Additions for the Limitation Year over the Maximum Permissible
Amount.
(h) Highest Average Compensation shall mean the average
Compensation for the three consecutive Years of Service (as measured by
the Limitation Year) with the Employer that produces the highest
average.
(i) Limitation Year shall mean the calendar year. If the
Limitation Year is amended to a different 12 consecutive month period,
the new Limitation Year must begin on a date within the Limitation Year
in which the amendment is made.
(j) Maximum Permissible Amount shall mean the maximum Annual
Additions that may be contributed or allocated to a Participant's
account under this Plan for any Limitation Year shall not exceed the
lesser of:
(i) the defined contribution dollar limitation, or
(ii) twenty-five percent (25%) of the Participant's
Compensation for the Limitation Year.
The Compensation limitation referred to in (ii) above shall
not apply to any contribution for medical benefits (within the meaning
of Code Section 401(h) or 419A(f)(2)) which is otherwise treated as an
Annual Addition under Section 415(l)(1) or 419A(d)(2) of the Code.
If a short Limitation Year is created because of an amendment
changing the Limitation Year to a different twelve (12) consecutive
month period, the Maximum Permissible Amount shall not exceed the
defined contribution dollar limitation, multiplied by the following
fraction:
Number of months in the short Limitation Year
12
(k) Projected Annual Benefit shall mean the annual retirement
benefit (adjusted to an actuarially equivalent straight life annuity if
such benefit is expressed in a form other than a straight life annuity
or qualified joint and survivor annuity) to which a Participant would
be entitled under the terms of the Plan assuming:
(i) The Participant will continue employment until
the Normal Retirement Age under the Plan (or current age if
later), and
(ii) the Participant's Compensation for the current
Limitation Year and all other relevant factors used to
determine benefits under the Plan remain constant for all
future Limitation Years.
ARTICLE VI
ENTITLEMENT TO BENEFITS
6.1 Retirement. A Participant shall be deemed to have reached
retirement upon his termination of employment on or after reaching his Normal
Retirement Date.
As of his Distribution Date, a retired Participant shall be entitled to
the full value of his Accrued Benefit, which shall be deemed to be one hundred
percent (100%) vested and nonforfeitable upon reaching his Normal Retirement
Date whether or not the Participant continues his employment with the Employer
beyond such date.
6.2 Disability. In the event that a Participant, at any time prior to
his retirement or other termination of employment with the Employer, shall
become totally and permanently disabled, and if proof of such disability
satisfactory to the Employer is furnished (which proof shall include a
determination of approval for Social Security benefits or, if such is not
available, a written statement of a licensed physician appointed or approved by
the Employer), then, as of his Distribution Date, such Participant shall be
entitled to the full value of his Accrued Benefit which shall be deemed to be
one hundred percent (100%) vested and nonforfeitable. For purposes of this
Section 6.2, total and permanent disability shall mean the inability to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or to last
for a continuous period of at least twelve (12) months.
6.3 Death. In the event of the death of a Participant prior to his
retirement, disability or other termination of employment with the Employer, the
full value of his Accrued Benefit, which shall be deemed to be one hundred
percent (100%) vested and nonforfeitable shall become payable (according to the
provisions of Article VII of the Plan), to his designated Beneficiary, upon
submission of proof of death satisfactory to the Employer.
6.4 Termination of Employment. In the event a Participant terminates
employment with the Employer for any reason other than retirement, disability or
death, such Participant shall become entitled to the vested portion of his
Accrued Benefit, payable according to the provisions of Article VII of the Plan,
which shall be determined as follows:
(a) A Participant shall at all times be one hundred percent
(100%) vested in the portion of his Accrued Benefit derived from his
Elective Deferral Account, Qualified Non-Elective Contribution Account,
Qualified Matching Contribution Account and Rollover/ Transfer Account.
(b) A Participant shall at all times be one hundred percent
(100%) vested in the portion of his Accrued Benefit derived from his
Employer Contribution Accounts.
6.5 Other Permitted Distributions.
(a) Hardship. In addition to the in-service withdrawals
described in Section 7.9, where applicable, distributions of Elective
Deferrals (and earnings thereon accrued as of December 31, 1988),
amounts from the Participant's Rollover/Transfer Account and amounts
from the Participant's Frozen Accounts (other than earnings on a Frozen
Pre-Tax Account, and on any "Employer Contribution Account" in a Frozen
Other Contribution Account, allocated after December 31, 1988) may be
made on account of financial hardship if the distribution is necessary
in light of the immediate and heavy financial needs of the Participant.
Notwithstanding the preceding, for Plan Years beginning after December
31, 1988, amounts attributable to Qualified Non-Elective Contributions
and Qualified Matching Contributions may not be distributed merely on
account of hardship. Also, income allocated to Elective Deferrals,
Frozen Pre-Tax Accounts and any "Employer Contribution Account" within
Frozen Other Employer Accounts after December 31, 1988 may not be
distributed on account of hardship. For purposes of this Section,
hardship is defined as an immediate and heavy financial need of the
Employee where such Employee lacks other available resources.
(i) The following are the only financial needs
considered immediate and heavy: unreimburseable medical care
expenses (within the meaning of Section 213(d) of the Code)
incurred (or to be incurred) by the Employee, the Employee's
spouse, children or dependents (as defined in Code Section
152); the purchase (excluding mortgage payments) of a
principal residence of the Employee; payment of
unreimburseable tuition and related educational fees for the
next twelve months of post-secondary education for the
Employee, the Employee's spouse, children or dependents (as
defined in Code Section 152); the payment of funeral expenses
for an Employee's family member; or the need to prevent the
eviction of the Employee from, or a foreclosure on the
mortgage of, the Employee's principal residence.
(ii) A distribution will be considered as necessary
to satisfy an immediate and heavy financial need of the
Employee only if:
(1) The Employee has obtained all
distributions, other than hardship distributions, and
all nontaxable loans under all plans maintained by
the Employer;
(2) All plans maintained by the Employer
provide that the Employee's Elective Deferrals (and
Employee Contributions) will be suspended for twelve
months after the receipt of the hardship
distribution;
(3) The distribution is not in excess of the
amount of an immediate and heavy financial need
(including amounts necessary to pay any federal,
state or local income taxes or penalties reasonably
anticipated to result from the distribution); and
(4) All plans maintained by the Employer
provide that the Employee may not make Elective
Deferrals for the Employee's taxable year immediately
following the taxable year of the hardship
distribution in excess of the applicable limit under
Section 402(g) of the Code for such taxable year less
the amount of such Employee's Elective Deferrals for
the taxable year of the hardship distribution.
(iii) Processing of applications and distributions of
amounts under this Section, on account of a bona fide
financial hardship, must be made as soon as administratively
feasible.
(iv) There is no minimum amount for a hardship
withdrawal, and there is no restriction on the number of
hardship withdrawals permitted to a Participant.
(b) Attainment of Age 59 1/2.
(i) A Participant shall be permitted to withdraw all
or a portion of his vested Accrued Benefit under the Plan, on
or after the attainment of age 59 1/2.
(ii) There is no minimum amount for an age-59 1/2
withdrawal, and there is no restriction on the number of
age-59 1/2 withdrawals permitted to a Participant.
(c) Distribution Upon Plan Termination. The full value of a
Participant's Accrued Benefit shall be distributed to the Participant
(or his Beneficiary) as soon as administratively feasible after the
termination of the Plan, provided that neither the Employer nor an
Affiliated Employer maintains a successor plan.
(d) Distribution Upon Sale of Assets. The full value of a
Participant's Accrued Benefit may at the Participant's discretion be
distributed to the Participant as soon as administratively feasible
after the sale, to an entity that is not an Affiliated Employer, of
substantially all of the assets used by the Employer in the trade or
business in which the Participant is employed. If such entity continues
to maintain this Plan, this provision shall not apply with respect to
Employees who continue employment with the entity acquiring such
assets.
(e) Distribution Upon Sale of Subsidiary. The full value of a
Participant's Accrued Benefit may at the Participant's discretion be
distributed to the Participant as soon as administratively feasible
after the sale, to an entity that is not an Affiliated Employer, of an
incorporated Affiliated Employer's interest in a subsidiary of which
the Participant is employed. If such entity continues to maintain this
Plan, this provision shall not apply with respect to Employees who
continue employment with such subsidiary.
ARTICLE VII
DISTRIBUTION OF BENEFITS
7.1 General. The requirements of this Article shall apply to any
distribution of a Participant's interest and will take precedence over any
inconsistent provisions of this Plan.
All distributions required under this Article shall be determined and
made in accordance with the Income Tax Regulations under Section 401(a)(9),
including the minimum distribution incidental benefit requirement of Regulations
Section 1.401(a)(9)-2.
7.2 Method of Distribution. A Participant may elect to have his
Accrued Benefit distributed in the following manner:
(a) a single lump sum;
(b) a portion paid in a lump sum, and the remainder paid later
(partial payment);
(c) periodic installments over a period not to exceed fifteen
(15) years; or
(d) only with respect to a Participant's Frozen Accounts, a
single life annuity, a single life annuity with a five (5) year or ten
(10) year term certain or a joint and 50% or 100% survivor annuity.
Any annuity option with respect to Frozen Accounts permitted and
selected by a Participant shall be provided through the purchase of a
non-transferable single premium contract from an insurance company which must
conform to the terms of the Plan and which shall be distributed to the
Participant or Beneficiary in complete satisfaction of the benefit due.
In the absence of an election by the Participant, distribution will be
made in a lump sum payment in cash.
Notwithstanding any other provision of this Article VII, and except
with respect to a Participant's Frozen Accounts, lump sum, installment, or any
other benefits may not be paid from the Plan in any form of a life annuity or
through the distribution of property in any form of a life annuity.
7.3 Installment Payments. If all or any portion of a Participant's
Accrued Benefit is to be paid in installments, the Participant shall determine
the period over which such installments shall be paid. The total amount to be so
distributed shall continue to be invested in those assets currently retained in
the Trust, and any income, gain or loss attributable thereto (but not Employer
contributions or forfeitures) shall be reflected in the installment
distributions.
7.4 Spousal Consent. Except as may be provided in Article VIII with
respect to a Participant's Frozen Accounts, a Participant is not required to
obtain spousal consent in order to receive a distribution of his Accrued
Benefit.
7.5 Commencement of Benefits.
(a) Unless the Participant elects otherwise, distribution of
benefits will begin no later than the 60th day after the latest of the
close of the Plan Year in which:
(i) the Participant attains age 65 (or the Normal
Retirement Age specified in the Plan, if earlier);
(ii) occurs the 10th anniversary of the year in which
the Participant commenced participation in the Plan; or
(iii) the Participant terminates Service with the
Employer.
(b) Notwithstanding the foregoing, the failure of a
Participant to consent to a distribution while a benefit is immediately
distributable within the meaning of Section 7.6 of the Plan, shall be
deemed to be an election to defer commencement of payment of any
benefit sufficient to satisfy this Section.
7.6 Minimum Required Distributions.
(a) Required Beginning Date. The entire interest of a
Participant must be distributed or begin to be distributed no later
than the Participant's Required Beginning Date.
(b) Limits on Distribution Periods. As of the first
distribution calendar year, distributions, if not made in a single sum,
may only be made over one of the following periods (or a combination
thereof):
(i) a period certain not extending beyond the life
expectancy of the Participant, or
(ii) a period certain not extending beyond the joint
life and last survivor expectancy of the Participant and a
designated Beneficiary.
(c) Minimum Amounts to be Distributed. If the Participant's
interest is to be distributed in other than a single sum, the following
minimum distribution rules shall apply on or after the required
beginning date:
(i) If a Participant's benefit is to be distributed
over (a) a period not extending beyond the life expectancy of
the Participant or the joint life and last survivor expectancy
of the Participant and the Participant's designated
Beneficiary or (b) a period not extending beyond the life
expectancy of the designated Beneficiary, the amount required
to be distributed for each calendar year, beginning with
distributions for the first distribution calendar year, must
at least equal the quotient obtained by dividing the
Participant's benefit by the applicable life expectancy.
(ii) The amount to be distributed each year,
beginning with distributions for the first distribution
calendar year shall not be less than the quotient obtained by
dividing the Participant's benefit by the lesser of (a) the
applicable life expectancy or (b) if the Participant's spouse
is not the designated Beneficiary, the applicable divisor
determined from the table set froth in Q&A-4 of Section
4.401(a)(9)-2 of the Income Tax Regulations. Distributions
after the death of the Participant shall be distributed using
the applicable life expectancy in Section 7.6(c)(i) above as
the relevant divisor without regard to Regulations Section
1.401(a)(9)-2.
(iii) The minimum distribution required for the
Participant's first distribution calendar year must be made on
or before the Participant's Required Beginning Date. The
minimum distribution for other calendar years, including the
minimum distribution for the distribution calendar year in
which the Employee's required beginning date occurs, must be
made on or before December 31 of that distribution calendar
year.
7.7 Distribution of Death Benefits.
(a) Method of Distributions.
(i) If the Participant dies after distribution of his
or her interest has begun, the remaining portion of such
interest will continue to be distributed at least as rapidly
as under the method of distribution being used prior to the
Participant's death.
(ii) If the Participant dies before distribution of
his or her interest begins, distribution of the Participant's
entire interest shall be completed by December 31 of the
calendar year containing the fifth anniversary of the
Participant's death except to the extent that an election is
made to receive distributions in accordance with (1) or (2)
below:
(1) if any portion of the Participant's
interest is payable to a designated Beneficiary,
distributions may be made over the life or over a
period certain not greater than the life expectancy
of the designated Beneficiary commencing on or before
December 31, of the calendar year immediately
following the calendar year in which the Participant
died;
(2) if the designated Beneficiary is the
Participant's surviving spouse, the date
distributions are required to begin in accordance
with (1) above shall not be earlier than the later of
(a) December 31 of the calendar year immediately
following the calendar year in which the Participant
died and (b) December 31 of the calendar year in
which the Participant would have attained age 70 1/2.
If the Participant has not made an election
pursuant to this Section (a) by the time of his or
her death, the Participant's designated Beneficiary
must elect the method of distribution no later than
the earlier of (a) December 31 of the calendar year
in which distributions would be required to begin
under this Section, or (b) December 31 of the
calendar year which contains the fifth anniversary of
the date of death of the Participant. If the
Participant has no designated Beneficiary, or if the
designated Beneficiary does not elect a method of
distribution, distribution of the Participant's
entire interest must be completed by December 31 of
the calendar year containing the fifth anniversary of
the Participant's death.
(iii) For purposes of Section 7.7(a)(ii) above, if
the surviving spouse dies after the Participant, but before
payments to such spouse begin, the provisions of Section
7.7(a)(ii), with the exception of Paragraph (2) therein, shall
be applied as if the surviving spouse were the Participant.
(iv) For purposes of this Section 7.7, any amount
paid to a child of the Participant will be treated as if it
had been paid to the surviving spouse if the amount becomes
payable to the surviving spouse when the child reaches the age
of majority.
(v) For the purposes of this Section 7.7,
distribution of a Participant's interest is considered to
begin on the Participant's Required Beginning Date (or, if
Section 7.7(a)(iii) above is applicable, the date distribution
is required to begin to the surviving spouse pursuant to
Section 7.7(a)(ii) above).
(b) Definitions.
(i) Applicable Life Expectancy. The life expectancy
(or joint life and last survivor expectancy) is calculated
using the attained age of the Participant (or designated
Beneficiary) as of the Participant's (or designated
Beneficiary's) birthday in the applicable calendar year
reduced by one for each calendar year which has elapsed since
the date life expectancy was first calculated. If life
expectancy is being recalculated, the applicable life
expectancy shall be the life expectancy as so recalculated.
The applicable calendar year shall be the first distribution
calendar year, and if life expectancy is being recalculated,
such succeeding calendar year.
(ii) Designated Beneficiary. The individual who is
designated as the Beneficiary under the Plan in accordance
with Section 401(a)(9) of the Code and the regulations
thereunder.
(iii) Distribution Calendar Year. A calendar year for
which a minimum distribution is required. For distributions
beginning before the Participant's death, the first
distribution calendar year is the calendar year immediately
preceding the calendar year which contains the Participant's
required beginning date. For distributions beginning after the
Participant's death, the first distribution calendar year is
the calendar year in which distributions are required to begin
pursuant to Section 7.7(a) above.
(iv) Life Expectancy. Life expectancy and joint life
and last survivor expectancy are computed by use of the
expected return multiples in Tables V and VI of Section 1.72-9
of the Income Tax Regulations.
Unless otherwise elected by the Participant (or
spouse, in the case of distributions described in Section
7.6(a)(ii)(2) above) by the time distributions are required to
begin, life expectancies shall be recalculated annually. Such
election shall be irrevocable as to the Participant (or
spouse) and shall apply to all subsequent years. The life
expectancy of a nonspouse Beneficiary may not be recalculated.
(v) Participant's Benefit.
(1) The account balance as of the last
Valuation Date in the calendar year immediately
preceding the distribution calendar year (valuation
calendar year) increased by the amount of any
contributions or forfeitures allocated to the account
balance as of the dates in the valuation calendar
year after the Valuation Date and decreased by
distributions made in the valuation calendar year
after the Valuation Date.
(2) Exception for second distribution
calendar year. For purposes of paragraph (1) above,
if any portion of the minimum distribution for the
first distribution calendar year is made in the
second distribution calendar year on or before the
required beginning date, the amount of the minimum
distribution made in the second distribution calendar
year shall be treated as if it has been made in the
immediately preceding distribution calendar year.
(vi) Required Beginning Date.
(1) General Rule. The required beginning
date of a Participant is the later of the April 1 of
the calendar year following the calendar year in
which the Participant attains age 70 1/2 or retires
except that benefit distributions to a 5-percent
owner must commence by the April 1 of the calendar
year following the calendar year in which the
Participant attains age 70 1/2.
(2) Deferral or Cessation of Distributions.
(A) Any Participant attaining age 70
1/2 in years after 1995 may elect by April 1
of the calendar year following the year in
which the Participant attained age 70 1/2
(or by December 31, 1997 in the case of a
Participant attaining age 70 1/2 in 1996) to
defer distributions until the calendar year
following the calendar year in which the
Participant retires. If no such election is
made the Participant will begin receiving
distributions by the April 1 of the calendar
year following the year in which the
Participant attained age 70 1/2 (or by
December 31, 1997 in the case of a
Participant attaining age 70 1/2 in 1996).
(B) Any Participant attaining age 70
1/2 in years prior to 1997 may elect to stop
distributions and recommence by the April 1
of the calendar year following the year in
which the Participant retires. There will be
a new annuity starting date upon
recommencement.
(3) 5-Percent Owner. A Participant is
treated as a 5-percent owner for purposes of this
Section if such Participant is a 5-percent owner as
defined in Section 416 of the Code at any time during
the Plan Year ending with or within the calendar year
in which such owner attains age 70 1/2.
(4) Distributions Begun. Once distributions
have begun to a 5-percent owner under this Section,
they must continue to be distributed, even if the
Participant ceases to be a 5-percent owner in a
subsequent year.
7.8 Distribution Upon Termination of Employment and Restrictions on
Immediate Distribution. If the value of a Participant's vested account balance
derived from employer and employee contributions exceeds (or at the time of any
prior distribution exceeded) $5,000, and the account balance is immediately
distributable, the Participant must consent to any distribution of such account
balance. The consent of the Participant shall be obtained in writing within the
90-day period ending on the annuity starting date. The annuity starting date is
the first day of the first period for which an amount is paid as an annuity or
any other form. The Plan Administrator shall notify the Participant of the right
to defer any distribution until the Participant's account balance is no longer
immediately distributable. Such notification shall include a general description
of the material features, and an explanation of the relative values of the
optional forms of benefit available under the Plan, in a manner that would
satisfy the notice requirements of Section 417(a)(3) of the Code, and shall be
provided no less than 30 days and no more than 90 days prior to the annuity
starting date.
The consent of the Participant shall not be required to the extent that
a distribution is required to satisfy Section 401(a)(9) or 415 of the Code. In
addition, upon termination of this Plan, if the Plan does not offer an annuity
option (purchased from a commercial provider), the Participant's account balance
may, without the Participant's consent, be distributed to the Participant or
transferred to another defined contribution plan (other than an employee stock
ownership plan as defined in Section 4975(e)(7) of the Code) within the same
controlled group.
An account balance is immediately distributable if any part of the
account balance could be distributed to the Participant (or surviving spouse)
before the Participant attains (or would have attained if not deceased) the
later of Normal Retirement Age or age 62.
For purposes of determining the applicability of the foregoing consent
requirements to distributions made before the first day of the first Plan Year
beginning after December 31, 1988, the Participant's vested account balance
shall not include amounts attributable to accumulated deductible Employee
Contributions within the meaning of Section 72(o)(5)(B) of the Code.
In the absence of an election to receive an immediate distribution, the
Participant's Accrued Benefit shall remain invested in the commingled Trust
assets. The following provisions shall apply to termination benefits:
(a) The distribution of benefits to a Participant who has
reached his Distribution Date by reason of a termination of employment
other than retirement, disability or death shall be deferred until the
first date the Participant would have been eligible for retirement
under the Plan unless the Participant elects to commence distribution
of such benefits at an earlier date. Prior to the commencement of
benefits, the deferred benefits shall, in the discretion of the
Employer, remain invested in the commingled Trust assets or be
transferred to a Segregated Account.
(b) If the vested portion of the Accrued Benefit of a
Participant who terminates employment for reasons other than
retirement, disability or death is less than 100%, so that his
Distribution Date does not coincide with the date on which he ceases to
be an Employee, such Accrued Benefit shall, in the discretion of the
Employer, remain invested in the commingled assets of the Trust or be
transferred to a Segregated Account pending distribution. The
Participant may elect to receive the vested portion of his Accrued
Benefit at any time prior to the Distribution Date.
(c) If a Participant separates from service before satisfying
the age requirement for early retirement, but has satisfied the Service
requirement, the Participant will be entitled to elect an early
retirement benefit upon satisfaction of such age requirements.
7.9 Distribution From After-Tax and Rollover/Transfer Accounts.
(a) Voluntary After-Tax and Frozen After-Tax Accounts. A
Participant may withdraw any amount from his Voluntary After-Tax
Account and Frozen After-Tax Account at such times as permitted by the
Employer by submitting a written request to the Administrator
specifying the amount to be withdrawn. A distribution from either such
account shall be calculated on a pro-rata basis; thus, such
distribution shall be considered in part a return of contributions and
in part earnings on such contributions. However, if on May 5, 1986,
Voluntary After-Tax Accounts and/or Frozen After-Tax Accounts were
available for distribution under the terms of the Plan, the Frozen
Plan, a Predecessor Plan, or a Frozen Predecessor Plan, prior to
separation of service, then the pro-rata rules will not apply to
after-tax contributions made to such accounts prior to January 1, 1987.
The Participant may designate whether the distribution is to be made
from pre-1987 or post-1986 contributions.
(b) Rollover/Transfer Account. A Participant may withdraw any
amount from his Rollover/Transfer Account, not in excess of the value
of his account, at such times as permitted by the Employer by
submitting a written request to the Administrator specifying the amount
to be withdrawn.
Subject to the provisions of this Section 7.9 and Sections 6.5(a) and
(c) of the Plan, the Participant's Voluntary After-Tax Account, Frozen After-Tax
Account, and Rollover/Transfer Account shall be payable at the same time, in the
same manner, and, in the event of death, to the same Beneficiary as is his
Elective Deferral and Employer Contribution Accounts.
7.10 Direct Rollover.
(a) Applicability. Notwithstanding any provision of the Plan
to the contrary that would otherwise limit a distributee's election
under this Article, a distributee may elect, at the time and in the
manner prescribed by the Plan Administrator, to have any portion of an
eligible rollover distribution paid directly to an eligible retirement
plan specified by the distributee in a direct rollover.
(b) Definitions.
(i) Eligible Rollover Distribution. An eligible
rollover distribution is any distribution of all or any
portion of the balance to the credit of the distributee,
except that an eligible rollover distribution does not include
any distribution that is one of a series of substantially
equal periodic payments (not less frequently than annually)
made for the life (or life expectancy) of the distributee or
the joint lives (or joint life expectancies) of the
distributee and the distributee's designated Beneficiary, or
for a specified period of ten years or more; any distribution
to the extent such distribution is required under Section
401(a)(9) of the Code; any hardship distribution described in
Code Section 401(k)(2)(B)(i)(iv) received after December 31,
1998; and the portion of any distribution that is not
includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to
Employer securities).
(ii) Eligible Retirement Plan. An eligible retirement
plan is an individual retirement account described in Section
408(a) of the Code, an individual retirement annuity described
in Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust described in
Section 401(a) of the Code, that accepts the distributee's
eligible rollover distribution. However, in the case of an
eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account
or individual retirement annuity.
(iii) Distributee. A distributee includes an Employee
or former Employee. In addition, the Employee's or former
Employee's surviving spouse and the Employee's or former
Employee's spouse or former spouse who is the alternate payee
under a qualified domestic relations order, as described in
Section 414(p) of the Code, are distributees with regard to
the interest of the spouse or former spouse.
(iv) Direct Rollover. A direct rollover is a payment
by the plan to the eligible retirement plan specified by the
distributee.
ARTICLE VIII
ANNUITY REQUIREMENTS
To the extent applicable, provisions of this Article shall take
precedence over any conflicting provisions of the Plan.
8.1 Applicability. The provisions of this Article shall apply to the
Frozen Accounts of a Participant who is eligible for payment in the form of an
annuity and who elects payment in the form of an annuity. The provisions of this
Article shall only apply with respect to a Participant's Frozen Accounts.
8.2 Qualified Joint and Survivor Annuity. Unless an optional form of
benefit is selected pursuant to a qualified election within the 90-day period
ending on the annuity starting date, a married Participant's vested Accrued
Benefit attributable to Frozen Accounts will be paid in the form of a Qualified
Joint and Survivor Annuity and an unmarried Participant's vested Accrued Benefit
attributable to Frozen Accounts will be paid in the form of a life annuity. The
Participant may elect to have such annuity distributed upon attainment of the
earliest retirement age under the Plan.
8.3 Qualified Preretirement Survivor Annuity. Unless an optional form
of benefit has been selected within the election period pursuant to a qualified
election, if a Participant dies before his annuity starting date, then the
Participant's vested Accrued Benefit attributable to Frozen Accounts shall be
applied toward the purchase of an annuity for the life of the surviving spouse.
The surviving spouse may elect to have such annuity distributed immediately
after the Participant's death.
8.4 Definitions
(a) Election Period. The period which begins on the first day
of the Plan Year in which the Participant attains age 35 and ends on
the date of the Participant's death. If a Participant separates from
Service prior to the first day of the Plan Year in which age 35 is
attained, with respect to the account balance as of the date of
separation, the election period shall begin on the date of separation.
(b) Earliest Retirement Age. The earliest date on which, under
the Plan, the Participant could elect to receive retirement benefits.
(c) Qualified Election. A waiver of a Qualified Joint and
Survivor Annuity or a Qualified Preretirement Survivor Annuity. Any
waiver of a Qualified Joint and Survivor Annuity or a Qualified
Preretirement Survivor Annuity shall not be effective unless: (i) the
Participant's spouse consents in writing to the election; (ii) the
election designates a specific Beneficiary, including any class of
Beneficiaries or any contingent Beneficiaries, which may not be changed
without spousal consent (or the spouse expressly permits designations
by the Participant without any further spousal consent); (iii) the
spouse's consent acknowledges the effect of the election; and (iv) the
spouse's consent is witnessed by a Plan representative or notary
public. Additionally, a Participant's waiver of the Qualified Joint and
Survivor Annuity shall not be effective unless the election designates
a form of benefit payment which may not be changed without spousal
consent (or the spouse expressly permits designations by the
Participant without any further spousal consent). If it is established
to the satisfaction of a Plan representative that there is no spouse or
that the spouse cannot be located, a waiver will be deemed a qualified
election.
Any consent by a spouse obtained under this provision (or
establishment that the consent of a spouse may not be obtained) shall
be effective only with respect to such spouse. A consent that permits
designations by the Participant without any requirement of further
consent by such spouse must acknowledge that the spouse has the right
to limit consent to a specific Beneficiary, and a specific form of
benefit where applicable, and that the spouse voluntarily elects to
relinquish either or both of such rights. A revocation of a prior
waiver may be made by a Participant without the consent of the spouse
at any time before the commencement of benefits. The number of
revocations shall not be limited. No consent obtained under this
provision shall be valid unless the Participant has received notice as
provided in Section 8.5 below.
(d) Qualified Joint and Survivor Annuity. An immediate annuity
for the life of the Participant with a survivor annuity for the life of
the spouse which is not less than 50% and not more than 100% of the
amount of the annuity which is payable during the joint lives of the
Participant and the spouse and which is the amount of benefit which can
be purchased with the Participant's vested account balance. The
percentage of the survivor annuity under the Plan shall be 50%.
(e) Spouse (Surviving Spouse). The spouse or surviving spouse
of the Participant, provided that a former spouse will be treated as
the spouse or surviving spouse (and a current spouse will not be
treated as the spouse or surviving spouse to the extent provided) under
a qualified domestic relations order as described in Section 414(p) of
the Code.
(f) Annuity Starting Date. The first day of the first period
for which an amount is paid as an annuity or any other form.
(g) Vested Account Balance. The aggregate value of the
Participant's vested account balances derived from Employer and
Employee contributions (including rollovers), whether vested before or
upon death, including the proceeds of insurance contracts, if any, on
the Participant's life. The provisions of this Article shall apply to a
Participant who is vested in amounts attributable to Employer
contributions, Employee contributions or both at the time of death or
distribution.
8.5 Notice Requirements.
(a) In the case of a Qualified Joint and Survivor Annuity as
described in Section 8.4(d) of this Article, the Plan Administrator
shall no less than 30 days and no more than 90 days prior to the
annuity starting date provide each Participant a written explanation
of: (i) the terms and conditions of a Qualified Joint and Survivor
Annuity; (ii) the Participant's right to make and the effect of an
election to waive the Qualified Joint and Survivor Annuity form of
benefit; (iii) the rights of a Participant's spouse; and (iv) the right
to make, and the effect of, a revocation of a previous election to
waive the Qualified Joint and Survivor Annuity.
(b) In the case of a Qualified Preretirement Survivor Annuity
as described in Section 8.3 of this Article, the Plan Administrator
shall provide each Participant within the applicable notice period a
written explanation of the Qualified Preretirement Survivor Annuity in
such terms and in such manner as would be comparable to the explanation
provided for meeting the requirements of Section 8.5(a) applicable to a
Qualified Joint and Survivor Annuity.
The applicable notice period means with respect to a
Participant, whichever of the following periods ends last:
(i) the period beginning with the first day of the
Plan Year in which the Participant attains age 32 and ending
with the close of the Plan Year preceding the Plan Year in
which the Participant attains age 35,
(ii) a reasonable period ending after the individual
becomes a Participant,
(iii) a reasonable period ending after notice is
required because of the cessation of a benefit subsidy as
described in subsection (c) below,
(iv) a reasonable period ending after this Article
first applies to the Participant,
(v) a reasonable period after separation from Service
in the case of a Participant who separates before attaining
age 35.
For purposes of applying the preceding paragraph, a
reasonable period ending after the enumerated events described
in (ii), (iii) and (iv) is the end of the two-year period
beginning one year prior to the date the applicable event
occurs, and ending one year after that date. In the case of a
Participant who separates from Service before the Plan Year in
which age 35 is attained, notice shall be provided within the
two-year period beginning one year prior to separation and
ending one year after separation. If such a Participant
thereafter returns to employment with the Employer, the
applicable period for such Participant shall be redetermined.
(c) Notwithstanding the other requirements of this Section
8.5, the respective notices prescribed by this Section need not be
given to a Participant if (i) the Plan "fully subsidizes" the costs of
a Qualified Joint and Survivor Annuity or Qualified Preretirement
Survivor Annuity and (ii) the Plan does not allow the Participant to
waive the Qualified Joint and Survivor Annuity or Qualified
Preretirement Annuity and does not allow a married Participant to
designate a nonspouse Beneficiary. For purposes of this Section 8.5(c),
a plan fully subsidizes the costs of a benefit if no increase in cost
or decrease in benefits to the Participant may result from the
Participant's failure to elect another benefit
(d) If a distribution is one to which Sections 401(a)(11) and
417 of the Internal Revenue Code do not apply, such distribution may
commence less than 30 days after the notice required under Section
1.411(a)-11(c) of the Income Tax Regulations is given, provided that
(i) the Plan Administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days after receiving
the notice to consider the decision of whether or not to elect a
distribution (and, if applicable, a particular distribution option),
and (ii) the Participant, after receiving the notice, affirmatively
elects a distribution.
8.6 Spousal Consent. A Participant is required to obtain spousal
consent for a distribution of his Accrued Benefit attributable to Frozen
Accounts if the provisions of this Article VIII apply to such Frozen Accounts
pursuant to Section 8.1.
ARTICLE IX
BENEFICIARY AND PARTICIPANT INFORMATION
9.1 Designation of Beneficiary.
(a) Each Participant from time to time may designate any
person or persons (who may be named contingently or successively) to
receive any benefits payable under the Plan upon or after his death,
and any such designation may be changed from time to time by the
Participant by filing a new designation. Each designation will revoke
all prior designations made by the Participant, shall be in writing in
the form prescribed by the Employer and shall be effective only when
the written designation is filed with the Employer during his lifetime.
(b) The beneficiary of a Participant who is married at the
time of his death shall be his surviving spouse unless his surviving
spouse consents in writing on the form provided for that purpose by the
Plan Administrator to the designation of another beneficiary. A consent
by a Participant's spouse shall not be effective unless such consent is
witnessed by the Plan Administrator or a Notary Public.
(c) In the absence of a valid Beneficiary designation (except
in conjunction with the election of a form of benefit payment which
does not require the designation of a specific Beneficiary) or if, at
the time any benefit becomes payable to a Beneficiary, there is no
living Beneficiary properly designated by the Participant to receive
the benefit, the Employer shall direct the Trustee to distribute such
benefit to the Participant's spouse, if then living. If there is no
surviving spouse, then the benefit shall be paid to the Participant's
then living descendants, if any, per stirpes, otherwise to the
Participant's then living parent or parents, equally, otherwise to the
Participant's estate.
9.2 Information to be Furnished by Participant and Beneficiaries. Any
communications, addressed to a Participant or Beneficiary at his last post
office address filed with the Employer, shall be binding on the Participant or
Beneficiary for all purposes of the Plan. Except for the Employer's sending of a
registered letter to the last known address, neither the Trustees nor the
Employer shall be obliged to search for any Participant or Beneficiary.
If a benefit is forfeited because the Participant or Beneficiary cannot
be found, such benefit will be reinstated if a claim is made by the Participant
or Beneficiary.
ARTICLE X
LOANS TO PARTICIPANTS
Subject to the consent of the Trustee, the Plan Administrator shall
establish a loan program under which:
(1) Loans shall be made available to all Participants and
Beneficiaries on a reasonably equivalent basis.
(2) Loans shall not be made available to Highly Compensated Employees
(as defined in Section 414(q) of the Code) in an amount greater than the amount
made available to other Employees.
(3) Loans must be adequately secured and bear a reasonable interest
rate.
(4) No Participant loan shall exceed 50% of the present value of the
Participant's vested Accrued Benefit.
(5) A Participant is not required to obtain the consent of his or her
spouse, if any, to use of the account balance as security for the loan.
(6) In the event of default, foreclosure on the note and attachment
of security will not occur until a distributable event occurs in the Plan.
(7) No loans will be made to any shareholder-employee or
Owner-Employee. For purposes of this requirement, a shareholder-employee means
an Employee or officer of an electing small business (Subchapter S) corporation
who owns (or is considered as owning within the meaning of Section 318(a)(1) of
the Code), on any day during the taxable year of such corporation, more than 5%
of the outstanding stock of the corporation.
(8) Loan repayments will be suspended under the Plan as permitted
under Code Section 414(u)(4).
(9) Loans are only available from a Participant's Elective Deferral
Account and Rollover/Transfer Account.
Notwithtstanding any other provision of this Plan, the portion of the
Participant's vested account balance used as a security interest held by the
Plan by reason of a loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the account balance payable at
the time of death or distribution, but only if the reduction is used as
repayment of the loan. If less than 100% of the Participant's vested account
balance (determined without regard to the preceding sentence) is payable to the
surviving spouse, then the account balance shall be adjusted by first reducing
the vested account balance by the amount of the security used as repayment of
the loan, and then determining the benefit payable to the surviving spouse.
No loan to any Participant or Beneficiary can be made to the extent
that such loan when added to the outstanding balance of all other loans to the
Participant or Beneficiary would exceed the lesser of (a) $50,000 reduced by the
excess (if any) of the highest outstanding balance of loans during the one year
period ending on the day before the loan is made, over the outstanding balance
of loans from the Plan on the date the loan is made, or (b) one-half the present
value of the nonforfeitable Accrued Benefit of the Participant. For the purpose
of the above limitation, all loans from all plans of the Employer and other
members of a group of Employers described in section 414(b), (c), (m) and (o) of
the Code are aggregated. Furthermore, any loan shall by its terms require that
repayment (principal and interest) be amortized in level payments, not less
frequently than quarterly, over a period not extending beyond five years from
the date of the loan, unless such loan is used to acquire a dwelling unit which
within a reasonable time (determined at the time the loan is made) will be used
as the principal residence of the Participant. An assignment or pledge of any
portion of the Participant's interest in the Plan and a loan, pledge or
assignment with respect to any insurance contract purchased under the Plan, will
be treated as a loan under this paragraph.
ARTICLE XI
TOP HEAVY PROVISIONS
11.1 Applicability. Notwithstanding any other provisions of the Plan
or Adoption Agreement to the contrary, if for any Plan Year the Plan becomes a
Top Heavy Plan, the requirements of this Article XI of the Plan shall be
applied for such Plan Year.
11.2 Definitions. The following terms shall have the following
meanings in the determination of whether or not the Plan is a Top Heavy Plan:
(a) Determination Date. For any Plan Year subsequent to the
first Plan Year, the last day of the preceding Plan Year. For the first
Plan Year of the Plan, the last day of that year.
(b) Employer. The Employer who adopted this Plan and any other
Employer some or all of whose Employees participate in this Plan or in
a retirement plan which is aggregated with this Plan as part of a
permissive or required aggregation group.
(c) Employer Group. A group of Employers who, for purposes of
Section 416 of the Code, are treated as a single Employer under Section
414(b), (c) or (m) of the Code.
(d) Key Employee. Any Employee or former Employee (and the
beneficiaries of such Employee) who, at any time during the
determination period, was an officer of the Employer if such
individual's annual Compensation exceeds 50% of the dollar limitation
under Section 415(b)(1)(A) of the Code, an owner (or considered an
owner under Section 318 of the Code) of one of the ten largest
interests in the Employer if such individual's Annual Compensation
exceeds 100% of the dollar limitation under Section 415(c)(1)(A) of the
Code, a 5-percent owner of the Employer, or a 1-percent owner of the
Employer who has Annual Compensation of more than $150,000. Annual
Compensation means Compensation as defined in Section 415(c)(3) of the
Code, but including amounts contributed by the Employer pursuant to a
salary reduction agreement which are excludible from the Employee's
gross income under Section 125, 402(e)(3), 401(h)(1)(B) or 403(b) of
the Code. The determination period is the Plan Year containing the
Determination Date and the 4 preceding Plan Years. The determination of
who is a Key Employee will be made in accordance with Section 416(i)(l)
of the Code and the regulations thereunder.
(e) Non-Key Employee. Any Employee or former Employee (or
Beneficiaries of such Employee) who is not considered to be a Key
Employee.
(f) Permissive Aggregation Group. The required aggregation
group of plans plus any other plan or plans of the Employer which, when
considered as a group with the required aggregation group, would
continue to satisfy the requirements of Sections 401(a)(4) and 410 of
the Code.
(g) Present Value. Present value shall be based only on the
interest and mortality rates specified in the Adoption Agreement.
(h) Required Aggregation Group. (i) Each qualified plan of the
Employer in which at least one Key Employee participates or
participated at any time during the determination period (regardless of
whether the plan has terminated), and (ii) any other qualified plan of
the Employer which enables a plan described in (i) to meet the
requirements of Section 401(a)(4) or 410 of the Code.
(i) Top Heavy Plan. For any Plan Year, this Plan is Top Heavy
if any of the following conditions exist:
(i) If the Top Heavy Ratio for this Plan exceeds 60%
and this Plan is not part of any required aggregation group or
permissive aggregation group of plans.
(ii) If this Plan is a part of a required aggregation
group of plans but not part of a permissive aggregation group
of the Top Heavy Ratio for the group of plans exceeds 60%.
(iii) If this Plan is a part of a required
aggregation group and part of a permissive aggregation group
of plans and the Top Heavy Ratio for the permissive
aggregation group exceeds 60%.
(j) Top Heavy Ratio.
(i) If the Employer maintains one or more defined
contribution plans (including any Simplified Employee Pension
Plan) and the Employer has not maintained any defined benefit
plan which during the 5-year period ending on the
determination date(s) has or has had Accrued Benefits, the Top
Heavy Ratio for this Plan alone or for the required or
permissible aggregation group as appropriate is a fraction,
the numerator of which is the sum of the account balances of
all Key Employees as of the determination date(s) (including
any part of any account balance distributed in the 5-year
period ending on the determination date(s)), and the
denominator of which is the sum of all account balances
(including any part of any account balance distributed in the
5-year period ending on the determination date(s)), both
computed in accordance with Section 416 of the Code and the
regulations thereunder. Both the numerator and denominator of
the Top Heavy Ratio are increased to reflect any contribution
not actually made as of the determination date, but which is
required to be taken into account on that date under Section
416 of the Code and the regulations thereunder.
(ii) If the Employer maintains one or more defined
contribution plans (including any Simplified Employee Pension
Plan) and the Employer maintains or has maintained one or more
defined benefit plans which during the 5-year period ending on
the determination date(s) has or has had any accrued benefits,
the Top Heavy Ratio for any required or permissive aggregation
group as appropriate is a fraction, the numerator of which is
the sum of account balances under the aggregated defined
contribution plan or plans for all Key Employees, determined
in accordance with (a) above, and the present value of accrued
benefits under the aggregated defined benefit plan or plans
for all Key Employees as of the determination date(s), and the
denominator of which is the sum of the account balances under
the aggregated defined contribution plan or plans for all
Participants, determined in accordance with (a) above, and the
present value of accrued benefits under the defined benefit
plan or plans for all Participants, determined in accordance
with (a) above, and the present value of accrued benefits
under the defined benefit plan or plans for all Participants
as of the determination date(s), all determined in accordance
with Section 416 of the Code and the regulations thereunder.
The accrued benefits under a defined benefit plan in both the
numerator and denominator of the Top Heavy Ratio are increased
for any distribution of an accrued benefit made in the five
year period ending on the determination date.
(iii) For purposes of (i) and (ii) above, the value
of account balances and the present value of accrued benefits
will be determined as of the most recent Valuation Date that
falls within or ends with the twelve (12) month period ending
on the determination date, except as provided in Section 416
of the Code and the regulations thereunder for the first and
second plan years of a defined benefit plan. The account
balances and accrued benefits of a Participant (1) who is not
a Key Employee but who was a Key Employee in a prior year, or
(2) who has not been credited with at least one Hour of
Service with any employer maintaining the Plan at any time
during the 5-year period ending on the determination date will
be disregarded. The calculation of the Top Heavy Ratio, and
the extent to which distributions, rollovers and transfers are
taken into account will be made in accordance with Section 416
of the Code and the regulations thereunder. Deductible
employee contributions will not be taken into account for
purposes of computing the Top Heavy Ratio. When aggregating
plans, the value of account balances and accrued benefits will
be calculated with reference to the determination dates that
fall within the same calendar year.
The accrued benefit of a Participant other than a Key
Employee shall be determined under (1) the method, if any,
that uniformly applies for accrual purposes under all defined
benefit plans maintained by the Employer, or (2) if there is
no such method, as if such benefit accrued not more rapidly
than the slowest accrual rate permitted under the fractional
rule of Section 411(b)(1)(C) of the Code.
(k) Valuation Date. December 31 in each Plan Year, the date as
of which account balances or Accrued Benefits are valued for purposes
of calculating the Top Heavy Ratio.
(l) Present Value. For purposes of establishing the present
value of accrued benefits under defined benefit plans required to be
aggregated with this Plan to compute the Top Heavy Ratio, any benefit
shall be discounted only for mortality and interest based on the
mortality assumptions and interest rate specified in such defined
benefit plan.
11.3 Minimum Compensation. For any Plan Year in which the Plan is Top
Heavy, only the first $170,000 (or such larger amount as may be prescribed by
the Secretary of Treasury or his delegate) of a Participant's annual
Compensation shall be taken into account for purposes of determining Employer
contributions under the Plan.
11.4 Minimum Allocation.
(a) Except as otherwise provided in (c) and (d) below, the
Employer contributions and forfeitures allocated on behalf of any
Participant who is not a Key Employee shall not be less than the lesser
of three percent of such Participant's Compensation or in the case
where the Employer has no defined benefit plan which designates this
Plan to satisfy Section 401 of the Code, the largest percentage of
Employer contributions (including any salary deferral contribution) and
forfeitures, as a percentage of the Key Employee's Compensation, as
limited by Section 401(a)(17) of the Code, allocated on behalf of any
Key Employee for that year. The minimum allocation is determined
without regard to any Social Security contribution. This minimum
allocation shall be made even though under other plan provisions, the
Participant would not otherwise be entitled to receive an allocation,
would have received a lesser allocation for the year because of (i) the
Participant's failure to complete 1,000 hours of service (or any
equivalent provided in the Plan), (ii) the Participant's failure to
make mandatory employee contributions (including elective deferral
contributions) to the Plan, or (iii) Compensation less than a stated
amount. Neither Elective Deferrals nor Matching Contributions may be
taken into account for the purpose of satisfying the minimum Top Heavy
contribution requirements.
(b) For purposes of computing the minimum allocation,
Compensation will mean Compensation as defined in Section 1.11 of the
Plan, as limited by Section 401(a)(17) of the Code.
(c) The provision in (a) above shall not apply to any
Participant who was not employed by the Employer on the last day of the
Plan Year.
(d) The Employer hereby designates that the minimum allocation
or benefit requirement applicable to Top Heavy plans will be met in any
other plan or plans maintained by the Employer, and the provision in
(a) above shall not apply to any Participant to the extent the
Participant is covered under any other such plan or plans of the
Employer.
(e) The minimum allocation or benefit requirement applicable
to Top Heavy plans (to the extent required to be nonforfeitable under
section 416(b) of the Code) may not be forfeited under Section
411(a)(3)(B) or 411(a)(3)(D) of the Code.
11.5 Vesting. For any Plan Year in which this Plan is Top Heavy, each
Employee's interest in his or her Account Balance attributable to Employer
contributions shall be fully vested and nonforfeitable. The minimum vesting
schedule applies to all benefits within the meaning of Section 411(a)(7) of the
Code except those attributable to employee contributions, including benefits
accrued before the effective date of Section 416 of the Code and benefits
accrued before the Plan became Top Heavy. Further, no decrease in a
Participant's nonforfeitable percentage may occur in the event the Plan's status
as Top Heavy changes for any Plan Year. However, this Section does not apply to
the account balances of any Employee who does not have an hour of service after
the Plan has initially become Top Heavy and such Employee's account balance
attributable to Employer contributions and forfeitures will be determined
without regard to this Section.
ARTICLE XII
ADMINISTRATION OF THE PLAN
12.1 Duties and Responsibilities of Fiduciaries; Allocation of
Fiduciary Responsibility. A fiduciary to the Plan shall have only those specific
powers, duties, responsibilities and obligations as are explicitly given him
under the Plan and Trust Agreement. In general, the Employer shall have the sole
responsibility for making contributions to the Plan required under Article III
of the Plan, appointing the Trustee and the Plan Administrator, and determining
the funds available for investment under the Plan. The Plan Administrator shall
have the sole responsibility for the administration of the Plan, as more fully
described in Section 12.2. It is intended that each fiduciary shall be
responsible only for the proper exercise of his own powers, duties,
responsibilities and obligations under the Plan and Trust Agreement, and shall
not be responsible for any act or failure to act of another fiduciary. A
fiduciary may serve in more than one fiduciary capacity with respect to the
Plan.
12.2 Powers and Responsibilities of the Plan Administrator.
(a) Administration of the Plan. The Plan Administrator shall
have all powers necessary to administer the Plan, including the power
to construe and interpret the Plan documents; to decide all questions
relating to an individual's eligibility to participate in the Plan; to
determine the amount, manner and timing of any distribution of benefits
or withdrawal under the Plan; to approve and insure the repayment of
any loan to a Participant under the Plan; to resolve any claim for
benefits in accordance with Section 12.7; and to appoint or employ
advisors, including legal counsel, to render advice with respect to any
of the Plan Administrator's responsibilities under the Plan. Any
construction, interpretation or application of the Plan by the Plan
Administrator shall be final, conclusive and binding. All actions by
the Plan Administrator shall be taken pursuant to uniform standards
applied to all persons similarly situated. The Plan Administrator shall
have no power to add to, subtract from or modify any of the terms of
the Plan, or to change or add to any benefits provided by the Plan, or
to waive or fail to apply any requirements of eligibility for a benefit
under the Plan.
(b) Records and Reports. The Plan Administrator shall be
responsible for maintaining sufficient records to reflect the
Compensation of each Participant for purposes of determining the amount
of contributions that may be made by or on behalf of the Participant
under the Plan. The Plan Administrator shall be responsible for
submitting all required reports and notification relating to the Plan
to Participants or their Beneficiaries, the Internal Revenue Service
and the Department of Labor.
(c) Furnishing Trustee with Instructions. The Plan
Administrator shall be responsible for furnishing the Trustee with
written instructions regarding all contributions to the Trust, all
distributions to Participants and all loans to Participants. In
addition, the Plan Administrator shall be responsible for furnishing
the Trustee with any further information respecting the Plan which the
Trustee may request for the performance of its duties or for the
purpose of making any returns to the Internal Revenue Service or
Department of Labor as may be required of the Trustee.
(d) Rules and Decisions. The Plan Administrator may adopt such
rules as it deems necessary, desirable or appropriate in the
administration of the Plan. All rules and decisions of the Plan
Administrator shall be applied uniformly and consistently to all
Participants in similar circumstances. When making a determination of
calculation, the Plan Administrator shall be entitled to rely upon
information furnished by a Participant or Beneficiary, the Employer,
and the legal counsel of the Employer or the Trustee.
(e) Application and Forms for Benefits. The Plan Administrator
may require a Participant or Beneficiary to complete and file with it
an application for a benefit, and to furnish all pertinent information
requested by it. The Plan Administrator may rely upon all such
information so furnished to it, including the Participant's or
Beneficiary's current mailing address.
12.3 Allocation of Duties and Responsibilities. The Plan Administrator
may by written instrument allocate among its members or employees any of its
duties and responsibilities not already allocated under the plan or may carry
out any of the Plan Administrator's duties and responsibilities under the Plan.
Any such duties or responsibilities thus allocated must be described in the
written instrument. If a person other than an Employee of the Employer is so
designated, such person must acknowledge in writing his acceptance of the duties
and responsibilities allocated to him.
12.4 Appointment of the Plan Administrator. The Employer shall
designate the Plan Administrator who shall administer the Plan. Such Plan
Administrator may consist of an individual, a committee of two or more
individuals, whether or not, in either such case, the individual or any of such
individuals are Employees of the Employer, a consulting firm or other
independent agent, the Trustee (with its consent) or the Employer itself. Except
as the Employer shall otherwise expressly determine, the Plan Administrator
shall be charged with the full power and the responsibility for administering
the Plan in all its details. If no Plan Administrator has been appointed by the
Employer, or if the person designated as Plan Administrator by the Employer is
not serving as such for any reason, the Employer shall be deemed to be the Plan
Administrator of the Plan. The Plan Administrator may be removed by the
Employer, or may resign by giving notice in writing to the Employer, and in the
event of the removal, resignation or death, or other termination of service by
the Plan Administrator, the Employer shall, as soon as practicable, appoint a
successor Plan Administrator, such successor thereafter to have all of the
rights, privileges, duties and obligations of the predecessor Plan
Administrator.
12.5 Expenses. The Employer shall pay all expenses authorized and
incurred by the Plan in the administration of the Plan (including Trustee's
fees) except to the extent such expenses are paid from the Trust.
12.6 Liabilities. The Plan Administrator and each person to whom
duties and responsibilities have been allocated pursuant to Section 12.3 may be
indemnified and held harmless by the Employer with respect to any alleged breach
of responsibilities performed or to be performed hereunder.
12.7 Claims Procedure.
(a) Filing a Claim. Any Participant or Beneficiary under the
Plan may file a written claim for a Plan Benefit with the Plan
Administrator or with a person named by the Plan Administrator to
receive claims under the Plan.
(b) Notice of Denial of Claim. In the event of a denial or
limitation of any benefit or payment due to or requested by any
Participant or Beneficiary under the Plan ("Claimant"), Claimant shall
be given a written notification containing specific reasons for the
denial or limitation of his benefit. The written notification shall
contain specific reference to the pertinent Plan provisions on which
the denial or limitation of his benefit is based. In addition, it shall
contain a description of any other material or information necessary
for the Claimant to perfect a claim, and an explanation of why such
material or information is necessary. The notification shall further
provide appropriate information as to the steps to be taken if the
Claimant wishes to submit his claim for review. This written
notification shall be given to a Claimant within 90 days after receipt
of his claim by the Plan Administrator unless special circumstances
require an extension of time for processing the claim. If such an
extension of time for processing is required, written notice of the
extension shall be furnished to the claimant prior to the termination
of said 90-day period, and such notice shall indicate the special
circumstances which make the postponement appropriate.
(c) Right of Review. In the event of denial or limitation of
his benefit, the Claimant or his duly authorized representative shall
be permitted to review pertinent documents and to submit to the Plan
Administrator issues and comments in writing. In addition, the Claimant
or his duly authorized representative may make a written request for a
full and fair review of his claim and its denial by the Plan
Administrator; provided, however, that such written request must be
received by the Plan Administrator (or its delegate to receive such
requests) within 60 days after receipt by the Claimant of written
notification of the denial or limitation of the claim. The 60-day
requirement may be waived by the Plan Administrator in appropriate
cases.
(d) Decision on Review. A decision shall be rendered by the
Plan Administrator within 60 days after the receipt of the request for
review, provided that where special circumstances require an extension
of time for processing the decision, it may be postponed on written
notice to the Claimant (prior to the expiration of the initial 60-day
period) for an additional 60 days after the receipt of such request for
review. Any decision by the Plan Administrator shall be furnished to
the Claimant in writing and shall set forth the specific reasons for
the decision and the specific Plan provisions on which the decision is
based.
(e) Court Action. No Participant, Beneficiary or other
Claimant shall have the right to seek judicial review of a denial of
benefits, or to bring any action in any court to enforce a claim for
benefits prior to filing a claim for benefits or exhausting his rights
to review under this Section 12.7.
ARTICLE XIII
AMENDMENT, TERMINATION AND MERGER
13.1 Amendments.
(a) The Employer expressly reserves the right to amend this
Plan and Trust from time to time. No such amendment shall in any way
impair, reduce or affect any Participant's vested and nonforfeitable
rights in the Trust.
(b) No amendment to the Plan shall be effective to the extent
that it has the effect of decreasing a Participant's Accrued Benefit.
Notwithstanding the preceding sentence, a Participant's account balance
may be reduced to the extent permitted under Section 412(c)(8) of the
Code. For purposes of this paragraph, a plan amendment which has the
effect of decreasing a Participant's account balance or eliminating an
optional form of benefit, with respect to benefits attributable to
service before the amendment shall be treated as reducing an Accrued
Benefit. Furthermore, if the vesting schedule of a plan is amended, in
the case of an Employee who is a Participant in the Plan as of the
later of the date such amendment is adopted or the date it becomes
effective, the nonforfeitable percentage (determined as of such date)
of such Employee's right to his Employer-derived Accrued Benefit will
not be less than his percentage computed under the Plan without regard
to such amendment.
13.2 Plan Termination; Discontinuance of Employer Contributions.
(a) The Employer may terminate the Plan at any time in whole
or in part. In the event of the dissolution, merger, consolidation or
reorganization of the Employer, the Plan shall automatically terminate
and the Trust shall be liquidated as provided in paragraph (b) below
unless the Plan is continued by a successor Employer in accordance with
Section 13.3.
(b) Upon the complete or partial termination of the Plan or
the complete discontinuance of Employer contributions under the Plan,
the Accrued Benefit of all Participants affected thereby shall become
fully vested and nonforfeitable, and the Plan Administrator shall
direct the Trustee to distribute assets remaining in the Trust, after
payment of any expenses properly chargeable thereto, to Participants or
their Beneficiaries.
13.3 Successor Employer. In the event of the dissolution, merger,
consolidation or reorganization of the Employer, provision may be made by which
the Plan and Trust shall be continued by a successor Employer, in which case
such successor Employer shall be substituted for the Employer under the Plan.
The substitution of the successor Employer shall constitute an assumption of
Plan liabilities by the successor Employer, and the successor Employer shall
have all powers, duties and responsibilities of the Employer under the Plan.
13.4 Merger, Consolidation or Transfer. In the event of a merger or
consolidation of the Plan with, or transfer of assets or liabilities of the Plan
to, any other plan of deferred compensation maintained or to be established for
the benefit of all or some of the Participants of the Plan, the transaction
shall be structured so that each Participant would (if the Plan then terminated)
receive a benefit immediately after the merger, consolidation or transfer which
is equal to or greater than the benefit the Participant would have been entitled
to receive immediately before the merger, consolidation or transfer (if this
Plan had then terminated).
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1 Exclusive Benefit of Participants and Beneficiaries.
(a) All assets of the Trust shall be retained for the
exclusive benefit of Participants and their Beneficiaries, and shall be
used only to pay benefits to such persons or to pay reasonable fees and
expenses of the Trust and of the administration of the Plan. The assets
of the Trust shall not revert to the benefit of the Employer, except as
otherwise specifically provided in Section 14.1(b).
(b) Contributions to the Trust under this Plan are subject to
the following conditions:
(i) If a contribution or any part thereof is made to
the Trust by the Employer under a mistake of fact, such
contribution or part thereof shall be returned to the Employer
within one year after the date the contribution is made;
(ii) In the event that the Commissioner of Internal
Revenue determines that the Plan is not initially qualified
under the Internal Revenue Code, any contribution made
incident to that initial qualification by the Employer must be
returned to the Employer within one year after the date the
initial qualification is denied, but only if the application
for the qualification is made by the time prescribed by law
for filing the Employer's return for the taxable year in which
the Plan is adopted, or such later date as the Secretary of
the Treasury may prescribe; and
(iii) Contributions to the Trust are specifically
conditioned on their deductibility under the Code and, to the
extent a deduction is disallowed for any such contribution,
such amount shall be returned to the Employer within one year
after the date of the disallowance of the deduction.
14.2 Nonguarantee of Employment. Nothing contained in this Plan shall
be construed as a contract of employment between the Employer and any Employee,
or as a right of any Employee to be continued in the employment of the Employer,
or as a limitation of the right of the Employer to discharge any of its
Employees, with or without cause.
14.3 Rights to Trust Assets. No Employee, Participant or Beneficiary
shall have any right to, or interest in, any assets of the Trust upon
termination of employment or otherwise, except as provided under the Plan. All
payments of benefits under the Plan shall be made solely out of the assets of
the Trust.
14.4 Nonalienation of Benefits. Except as provided under Article X of
the Plan, with respect to Plan loans, benefits payable under the Plan shall not
be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution or levy of any
kind, voluntary or involuntary; provided, however, that the Trustee shall not be
hereby precluded from complying with a qualified domestic relations order
described in Section 414(p) of the Code, or any domestic relations order entered
before January 1, 1985, requiring deduction from distributions to a recipient in
pay status for alimony or support payments. Any attempt to anticipate, alienate,
sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any
right to benefits payable hereunder shall be void. The Trust shall not in any
manner be liable for, or subject to, the debts, contracts, liabilities,
engagements or torts of any person entitled to benefits hereunder.
14.5 Gender . The use of the masculine pronoun shall extend to and
include the feminine gender wherever appropriate, the use of the singular shall
include the plural and the use of the plural shall include the singular wherever
appropriate.
14.6 Titles and Headings. The titles or headings of the respective
Articles and Sections are inserted merely for convenience and shall be given no
legal effect.
14.7 Compliance with Laws, Rules and Regulations. If any of the
provisions of this Plan or of the Trust Agreement are at any time in any way
inconsistent with any laws of the United States of America or the laws of any
state if not preempted by ERISA, or any regulations of the Internal Revenue
Service, U.S. Department of Labor, or any other Federal or state regulatory
authority, in a manner that adversely affects the qualified status of the Plan
under Section 401(a) of the Code or the tax-exempt status of the Trust under
Section 501(a) of the Code, or may result in any civil penalties under ERISA or
any other law, then the Employer, the Administrator and the Trustee shall comply
with the requirements of such laws or regulations, rather than with the
provisions of the Plan and Trust which are inconsistent therewith. The Employer,
Administrator and Trustee shall incur no liability for following such laws,
rules or regulations.
14.8 Qualified Military Service. Notwithstanding any provision of this
Plan to the contrary, contributions, benefits and service credit with respect to
qualified military service will be provided in accordance with Section 414(u) of
the Code.
TRUST AGREEMENT
The Employer has established a Plan to provide retirement, death and
disability benefits for eligible Employees and their Beneficiaries pursuant to
section 401 of the Internal Revenue Code of 1986, as amended. As part of the
Plan, the Employer has requested T. Rowe Price Trust Company to serve as Trustee
pursuant to the Trust established for the investment of contributions under the
Plan upon the terms and conditions set forth in this Agreement. Unless the
context of this Trust Agreement clearly indicates otherwise, the terms defined
in Article I of the Plan entered into by the Employer, of which this Trust
Agreement forms a part, shall, when used herein, have the same meaning as in
said Plan.
ARTICLE I
Accounts
1.1 Establishing Accounts
The Trustee shall open and maintain a trust account for the Plan and,
as part thereof, Participant's accounts for such individuals as the
Administrator shall, from time to time, give written notice to the
Trustee as being Participants in the Plan. The Trustee shall also open
and maintain such other accounts as may be appropriate or desirable to
aid in the administration of the Plan. A separate account shall be
maintained for each Participant and shall be credited with the
contributions made and any forfeitures allocated to each such
Participant pursuant to the Plan (and all earnings thereon). The
Trustee shall open and maintain as a part of the Trust a separate
account for each Participant who makes required or voluntary
contributions, each such account to be credited with the Participant's
required or voluntary contributions (and all earnings attributable to
such contributions).
1.2 Charges Against Accounts
Upon receipt of written instructions from the Administrator, the
Trustee shall charge the appropriate account of the Participant for
any withdrawals or distributions made under the Plan and any
forfeiture of unvested interests attributable to Employer
contributions which may be required under the Plan. The Administrator
will give written instructions to the Trustee specifying the manner in
which Employer contributions and any forfeiture of the nonvested
portion of accounts, as allocated by the Administrator in accordance
with the provisions of the Plan, are to be credited to the various
accounts maintained for Participants.
1.3 Prospectus to be Provided
The Administrator shall ensure that a Participant who makes a required
or voluntary contribution has previously received or receives a copy of
the then current prospectus relating to the Investment Options.
Delivery of such a required or voluntary contribution, pursuant to the
provisions of the Plan by the Administrator to the Trustee, shall
entitle the Trustee to assume that the Participant has received such a
prospectus.
ARTICLE II
2.1 Receipt of Contributions
The Trustee shall accept and hold in the trust contributions made by
the Employer and Participants under the Plan. The Administrator shall
give written instructions to the Trustee specifying the specific
Participants' accounts to which contributions are to be credited, the
amount of each such credit which is attributable to Employer
contributions and the amount, if any, which is attributable to the
Participants' required or voluntary contributions. If written
instructions are not received by the Trustee, or if such instructions
are received but are deemed by the Trustee to be unclear, upon notice
to the Employer, the Trustee may elect to hold all or part of any such
contribution in cash, without liability for rising security prices or
distributions made pending receipt by it from the Administrator of
written instructions or other clarifications. If any contributions or
earnings are less than any minimum which the then current prospectus
for the Investment Options require, the Trustee may hold the specified
portion of the contributions or earnings in cash, without interest,
until such time as the proper amount has been contributed or earned so
that the investment in the Investment Options required under the Plan
may be made.
ARTICLE III
Investment Powers of the Trustee
3.1 Investment of Trust Assets.
The Trustee shall invest the amount of each contribution made hereunder
and all earnings thereon in full and fractional shares of the
Investment Options in accordance with the current prospectus for such
Investment Option, in such amounts and proportions as shall from time
to time be designated by the Administrator, or the Participant if the
Plan so permits, on forms provided by T. Rowe Price Associates, Inc. or
a subsidiary thereof, and shall credit such Investment Options to the
accounts of each Participant on whose behalf or by whom the
contributions are made and any forfeitures are allocated. All dividends
and capital gain distributions received on the Investment Options held
by the Trustee in each account, shall, if received in cash, be
reinvested in such Investment Options in accordance with the current
prospectus for such Investment Option and shall in any event be
credited to such account. The Trustee shall deliver, or cause to be
executed and delivered, to the Administrator all notices, prospectuses,
financial statements, proxies and proxy soliciting materials relating
to the Investment Options held hereunder. The Trustee shall not vote
any of the shares of the Investment Options held hereunder, except in
accordance with the written instructions of the Administrator and/or
Participant. The obligations of the Trustee hereunder may be delegated
by it as provided in Sections 9.1 and 9.2 of this Trust Agreement.
The Trustee shall sell shares and purchase shares in the Investments
Options to accomplish any change in investments desired by the Employer
as indicated in any amended Plan or other instruction in accordance
with the terms of the Plan.
3.2 Directed Investments.
With respect to any directions received by the Trustee with regard to
the investment of Employer and Participant contributions, designating
the investments to be made in the Investment Options by Participants,
the Trustee is authorized and empowered to make and deal with such
investments as provided in such direction and shall have in connection
with such investments all powers herein provided.
3.3 General Investment Powers.
To the extent that the Trustee is not given appropriate directions with
respect to investments, then, the Trustee shall be authorized and
empowered to invest and reinvest all of the funds in any of the
Investment Options which, in the opinion of the Trustee, offers
reasonable possibilities for preservation of capital.
3.4 Other Powers of the Trustee
The Trustee is authorized and empowered with respect to the Trust:
(a) subject to the requirement of investment in shares of the
Investment Options, the Trustee may sell, exchange, convey,
transfer or otherwise dispose of, either at public or private
sale, any property, any time held by it, for such
consideration and on such terms and conditions as to credit or
otherwise as the Trustee may deem best;
(b) subject to the provisions of Section 3.1 hereof, and subject
to the provisions of Section 3.7 hereof, to vote in person or
by proxy any shares of the Investment Options held by it and
to join in, or to dissent from and to oppose, the
reorganization, consolidation, liquidation, sale or merger of
any corporation or properties in which it may be interested as
Trustee, upon such terms and conditions as it may deem wise;
(c) to make, execute, acknowledge and deliver any and all
documents of transfer and conveyance and any and all other
instruments that may be necessary or appropriate to carry out
the powers herein granted;
(d) to register any investment held in the trust in its own name,
in the name of the Trust or in the name of a nominee, and to
hold any investment in bearer form, but the books and records
of the Trustee shall at all times show that all such
investments are part of the Trust;
(e) to employ suitable agents and counsel (who may also be counsel
for the Employer) and to pay their reasonable expenses and
compensation;
(f) to borrow or raise monies for the purpose of the Trust from
any source and for any sum so borrowed to issue its promissory
note as Trustee, and to secure the repayments thereof by
pledging all or any part of the Trust, but nothing herein
contained shall obligate the Trustee to render itself liable
individually for the amount of any such borrowing; and no
person loaning money to the Trustee shall be bound to see to
the application of money loaned or to inquire into the
validity, expedience or propriety of any such borrowing; and
(g) if any dispute shall arise as to the persons to whom payments
and the delivery of any monies or property shall be made by
the Trustee or the amounts thereof, to retain such payments
and/or postpone such delivery until actual adjudication of
such dispute shall have been made in a court of competent
jurisdiction or until the Trustee shall be indemnified against
loss to his satisfaction.
Each and all of the foregoing powers may be exercised without court
order or approval. No one dealing with the Trustee need inquire
concerning the validity or propriety of anything that is done or need
see to the application of any money paid or property transferred to or
upon the order of the Trustee.
3.5 General Powers
The Trustee shall have all of the powers necessary or desirable to do
all acts, take all such proceedings and exercise all such rights and
privileges, whether or not expressly authorized herein, which it may
deem necessary or proper for the administration and protection of the
property of the Trust and to accomplish any action provided for in the
Plan.
3.6 Employer Securities
The Administrator and/or Participants in the Plan may direct that all
or a portion of the Fund be invested in Qualifying Employer Securities
within the meaning of Section 407(d)(5) of the Employee Retirement
Income Security Act of 1974, as amended, and the Trustees shall follow
the proper directions of the Administrator and/or Participants as to
such investment.
The Trustee shall be fully entitled to rely upon the directions of the
Administrator and/or Participants as to investments in Qualifying
Employer Securities and the Employer shall indemnify and hold harmless
the Trustee against any and all claims, liabilities and expenses
arising out of or related to such directions and the acquisition and
retention of Qualifying Employer Securities pursuant thereto.
As a condition of acquiring or retaining Qualifying Employer Securities
pursuant to this Section 3.6, the Trustee may, in its discretion,
require assurances satisfactory to it that the acquisition and holding
of such Qualifying Employer Securities will not constitute prohibited
transactions under Section 406 of ERISA, or under Section 4975 of the
Code.
The Trustee shall deliver, or cause to be executed and delivered to the
Administrator, all notices, prospectuses, financial statements, proxies
and proxy-soliciting materials relating to Qualifying Employer
Securities held by it.
3.7 Voting, Tendering and Exchanging Company Stock
Each Participant in the Plan (or, in the event of the Participant's
death, the Participant's Beneficiary) is, for purposes of this Section
3.7, hereby designated a "named fiduciary" within the meaning of ERISA
Section 403(a)(1).
(a) Instructed Share Voting. Each Participant (or, if applicable,
Beneficiary), as a named fiduciary, shall be entitled to direct
the Plan and Trustee as to the manner in which Company Stock
allocated to such Participant's (or Beneficiary's) accounts is to
be voted on each matter brought before an annual or special
stockholders' meeting of the Company. Before each such meeting of
stockholders, the Trustee shall cause to be furnished to each
Participant (or, if applicable, Beneficiary) a copy of the proxy
solicitation material, together with a form requesting
confidential directions on how such shares of Company Stock
allocated to such Participant's (or Beneficiary's) accounts shall
be voted on each such matter. Upon timely receipt of such
directions, the Trustee shall on each such matter, vote as
directed the number of votes attributable to such Participant (or
Beneficiary).
The number of votes attributable to each Participant (or, if
applicable, Beneficiary) shall be determined as follows:
(1) first, the total number of votes attributable to
Company Stock held in the Plan shall be determined;
(2) second, the number of votes determined under (1),
above, shall be attributed to each Participant (or,
if applicable, Beneficiary), in the ratio which the
number of shares of Company Stock allocated to such
Participant's accounts as of the record date bears to
the total number of shares of Company Stock held in
the Plan as of such date.
Each Participant (or, if applicable, Beneficiary), as a named
fiduciary, shall be entitled to separately direct the vote of
a portion of the number of votes with respect to which a
signed voting-direction instrument is not timely received from
other Participants (or, if applicable, Beneficiaries)
("Undirected Votes"). Such direction with respect to each
Participant (or, if applicable, Beneficiary) who timely elects
to direct the vote of Undirected Votes as a named fiduciary
shall be with respect to a number of Undirected Votes equal to
the total number of Undirected Votes multiplied by a fraction,
the numerator of which is the total number of votes
attributable to such Participant (or Beneficiary) and the
denominator of which is the total number of votes attributable
to all Participants (or, if applicable, Beneficiaries) who
timely elect to vote Undirected Votes as a named fiduciary.
(b) Responding to Tender and Exchange Offers. Each Participant (or,
if applicable, Beneficiary), as a named fiduciary, shall have the
right, to the extent of the number of shares of Company Stock
allocated to such Participant's (or Beneficiary's) accounts, to
direct the Trustee in writing as to the manner in which to
respond to such tender or exchange offer with respect to shares
of Company Stock. The Trustee shall use its best efforts to
timely distribute or cause to be distributed to each Participant
(or, if applicable, Beneficiary) such information as will be
distributed to stockholders of the Company in connection with any
such tender or exchange offer. Upon timely receipt of such
instructions, the Trustee shall respond as instructed with
respect to shares of Common Stock allocated to such Participant's
accounts. If the Trustee shall not receive timely instructions
from a Participant (or, if applicable, Beneficiary) as to the
manner in which to respond to such a tender or exchange offer,
the Trustee shall not tender or exchange any shares of Company
Stock with respect to which such Participant (or Beneficiary) has
the right of direction. In effecting the foregoing, to the extent
possible, the Trustee shall tender or exchange shares of Company
Stock entitled to one vote per share prior to shares of Company
Stock having greater than one vote per share.
Any instructions received by the Trustee from Participants (or, if
applicable, Beneficiaries) pursuant to this Section 3.7 shall be held
by the Trustee in strict confidence and shall not be divulged or
released to any person, including officers or Employees of the Company
or a Related Company; provided, however, that to the extent necessary
for the operation of the Plan, such instructions may be relayed by the
Trustee to a recordkeeper, auditor or other person providing services
to the Plan if such person (i) is not the Company, an Affiliated
Employer or any Employee, officer or director thereof, and (ii) agrees
not to divulge such directions to any other person, including
Employees, officers and directors of the Company and its Affiliated
Employers.
3.8 Registration and Disclosure for Company Stock
The Plan Administrator shall be responsible for determining the
applicability (and, if applicable, complying with) the requirements of
the Securities Act of 1933, as amended, the California Corporate
Securities Law of 1968, as amended, and any other applicable blue sky
law. The Plan Administrator shall also specify what restrictive legend
or transfer restriction, if any, is required to be set forth on the
certificates for the securities and the procedure to be followed by the
Trustee to effectuate a resale of such securities.
ARTICLE IV
4.1 Distributions from a Participant's Account
Distribution from the Trust shall be made by the Trustee in accordance
with proper written directions or the Administrator in accordance with
the provisions of Articles VII and VIII of the Plan, and the
Administrator shall have the sole responsibility for determining that
the directions given conform to provisions of the Plan and applicable
law, including (without limitation) responsibility for calculating the
vested interests of the Participants, for calculating the amounts
payable to a Participant pursuant to Article VII of the Plan, and for
determining the proper person to whom benefits are payable under the
Plan.
ARTICLE V
5.1 Reports of the Trustee and the Administrator
The Trustee shall keep accurate and detailed records of all receipts,
investments, disbursements and other transactions required to be
performed hereunder with respect to the Trust. Not later than ninety
(90) days after the close of each Plan Year (or after the Trustee's
resignation or removal pursuant to Article XI hereof), the Trustee
shall file with the Administrator a written report or reports
reflecting the receipts, disbursements and other transactions effected
by it with respect to the Trust during such Plan Year (or period ending
with such resignation or removal) and the assets and liabilities of the
Trust at the close of each Plan Year. Such report or reports shall be
open to inspection by any Participant for a period of one hundred
eighty (180) days immediately following the date on which it is filed
with the Administrator. Except as otherwise prescribed by ERISA, upon
the expiration of such one hundred eighty (180) days period, the
Trustee shall be forever released and discharged from all liability and
accountability to anyone with respect to its acts, transactions,
duties, obligations or responsibilities as shown in or reflected by
such report, except with respect to any such acts or transactions as to
which the Administrator shall have filed written objections with the
Trustee within such one hundred eighty (180) day period, and except for
willful misconduct or lack of good faith on the part of the Trustee.
ARTICLE VI
6.1 Trustee's Fees and Expenses of the Trust
The Trustee's fees for performing its duties hereunder shall be such
reasonable amounts as shall be established by it from time to time. The
Trustee will furnish the Administrator with its current schedule of
fees and shall give written notice to the Administrator whenever its
fees are changed or revised. Such fees, any taxes of any kind
whatsoever which may be levied or assessed upon or in respect of the
Trust, and any and all expenses incurred by the Trustee in the
performance of its duties, including fees for legal services rendered
to the Trustee, shall, unless paid by the Employer, be paid from the
Trust in the manner provided for in the Plan.
All fees of the Trustee and taxes and other expenses charged to a
Participant's account will be collected by the Trustee from the amount
of any contribution to be credited or distribution to be charged to
such account or, if there are no such contributions or distributions,
shall be paid by redeeming or selling assets credited to such accounts.
ARTICLE VII
Duties of the Employer and the Administrator
7.1 Information and Data to be Furnished the Trustee.
In addition to making the contributions called for in Article II
hereof, the Employer, through the Administrator, agrees to furnish the
Trustee with such information and data relative to the Plan as is
necessary for the proper administration of the Trust established
hereunder.
7.2 Limitation of Duties.
Neither the Employer nor any of its officers, directors or partners,
nor the Administrator shall have any duties or obligations with respect
to this Trust Agreement, except those expressly set forth herein and in
the Plan.
ARTICLE VIII
8.1 Liability of the Trust
(1) The Trustee shall not be responsible in any way for the
collection of contributions provided for under the Plan, the
adequacy of the assets of the Plan to meet the Plan's obligation,
the propriety of any contribution, the purpose or the propriety
of any distribution made pursuant to Article VII thereof or of
any allocation of contributions or forfeitures, or any other
action or nonaction taken pursuant to the Administrator's
request. The Trustee shall not be responsible for the
administration of the Plan, its validity or effect, or the
qualification of the Plan under the Code. The Trustee shall be
under no duty to take any action other than as herein specified
with respect to the Trust unless the Administrator shall furnish
the Trustee with instructions in proper form and such
instructions shall have been specifically agreed to by the
Trustee in writing; or to defend or engage in any suit with
respect to the Trust unless the Trustee shall have first agreed
in writing to do so and shall have been fully indemnified to the
satisfaction of the Trustee. The Trustee, unless it knows that
the instruction constitutes a breach of the Administrator's
duties or responsibilities under the Plan, may conclusively rely
upon and shall be protected in acting upon any written order from
the Administrator or any other notice, request, consent,
certificate or other instrument or paper believed by it to be
genuine and to have been properly executed and, so long as it
acts in good faith, in taking or omitting to take any other
action.
(2) The Employer shall indemnify and hold the Trustee (including its
affiliates, representatives and agents) harmless from and against
any liability, cost or other expense, including, but not limited
to, the payment of attorney's fees that the Trustee may incur in
connection with this Agreement or the Plan unless such liability,
cost or other expenses (whether direct or indirect) arises from
the Trustee's own willful misconduct or gross negligence. The
Employer recognizes that a burden of litigation may be imposed
upon the Trustee as a result of some act or transaction for which
it has no responsibility or over which it has no control under
this Agreement. Therefore, the Employer agrees to indemnify and
hold harmless and, if requested, defend the Trustee (including
its affiliates, representatives and agents) from any expenses
(including counsel fees, liabilities, claims, damages, actions,
suits or other charges) incurred by the Trustee in prosecuting or
defending against any such litigation.
(3) The Trustee shall not be liable for, and the Employer will
indemnify and hold harmless the Trustee (including its
affiliates, representatives and agents) from and against all
liability or expense (including counsel fees) because of (i) any
investment action taken or omitted by the Trustee in accordance
with any direction of the Employer or Participant, or investment
inaction in the absence of directions from the Employer or a
Participant or (ii) any investment action taken by the Trustee
pursuant to an order to purchase or sell securities placed by the
Employer or a Participant directly with a broker, dealer or
issuer. It is understood that although, when the Trustee is
subject to the direction of the Employer or a Participant, the
Trustee will perform certain ministerial duties with respect to
the portion of the Trust subject to such direction (the "Directed
Fund"). Such duties do not involve the exercise of any
discretionary authority or other authority to manage and control
assets of the Directed Fund and will be performed in the normal
course of business by officers and Employees of the Trustee or
its affiliates, representatives or agents who may be unfamiliar
with investment management. It is agreed that the Trustee is not
undertaking any duty or obligation, express or implied, to
review, and will not be deemed to have any knowledge of or
responsibility with respect to, any transaction involving the
investment of the Directed Fund as a result of the performance of
its ministerial duties. Therefore, in the event that "knowledge"
of the Trustee shall be a prerequisite of imposing a duty upon or
determining liability of the Trustee under the Plan or this Trust
or any law or regulation regulating the conduct of the Trustee,
with respect to the Directed Fund, as a result of any act or
omission of the Employer of any Participant, or as a result of
any transaction engaged in by any of them, then the receipt and
processing of investment orders or other documents relating to
Plan assets by an officer or other Employee of the Trustee or its
affiliates, representatives or agents engaged in the performance
of purely ministerial functions shall not constitute "knowledge"
of the Trustee.
ARTICLE IX
Delegation of Powers
9.1 Delegation by the Trustee.
The Trustee may delegate, by instrument in writing, to a person
(individual, corporate or other entity) appointed as agent or custodian
by it, any of the powers or functions of the Trustee hereunder other
than the investment of the Trust assets, including (without
limitation):
o custodianship of all or any part of the assets of the Trust;
o maintaining and accounting for the Trust and for Participant
and other accounts as a part thereof;
o distribution of benefits as directed by the Administrator; and
o preparation of the annual report on the status of the Trust.
The agent or custodian so appointed may act as agent for the Trustee,
without investment responsibility, for fees to be mutually agreed upon
by the Employer and the agent or custodian and paid in the same manner
as Trustees' fees. The Trustee shall not be responsible for any act or
omission of the agent or custodian arising from any such delegation,
except to the extent provided in Article VIII hereof.
If the Plan has more than one (1) Trustee, then fiduciary duties may be
allocated among such Trustees.
9.2 Delegation with Employer Approval
The Trustee and the Employer may, by mutual agreement, arrange for the
delegation by the Trustee to the Administrator or any agent of the
Employer of any powers or functions of the Trustee hereunder other than
the investment and custody of the Trust assets. The Trustee shall not
be responsible for any act or omission of such person or persons
arising from any such delegation, except to the extent provided in
Article VIII hereof.
ARTICLE X
10.1 Amendment
As provided in Article XII of the Plan, and subject to the limitations
set forth therein, the Plan and Trust Agreement may be amended at any
time, in whole or in part, by the Employer. No amendment to the Plan or
Trust Agreement shall place any greater burden on the Trustee without
the Trustee's written consent.
ARTICLE XI
11.1 Resignation or Removal of Trustee
The Trustee may resign at any time upon ninety (90) days notice in
writing to the Employer, and may be removed by the Employer at any time
upon ninety (90) days notice in writing to the Trustee. Upon such
resignation or removal, the Employer shall appoint a successor Trustee
or Trustees. Upon receipt by the Trustee of written acceptance of such
appointment by the successor Trustee, the Trustee shall transfer and
pay over to such successor the assets of the Trust and all records
pertaining thereto, provided that any successor Trustee shall agree not
to dispose of any such records without the Trustee's consent. The
successor Trustee shall be entitled to rely on all accounts, records
and other documents received by it from the Trustee, and shall not
incur any liability whatsoever for such reliance. The Trustee is
authorized, however, to reserve such sum of money or property as it may
deem advisable for payment of all its expenses, or for payment of any
other liabilities constituting a charge on or against the assets of the
Trust or on or against the Trustee, with any balance or of such reserve
remaining after the payment of all such items to be paid over to the
successor Trustee. Upon the assignment, transfer and payment over of
the assets of the Trust, and obtaining a receipt thereof from the
successor Trustee, the Trustee shall be released and discharged for any
and all claims, demands, duties and obligations arising out of the
Trust and its management thereof, excepting only claims based upon the
Trustee's willful misconduct or lack of good faith. The successor
Trustee shall hold the assets paid over to it under terms similar to
those of an agreement that qualifies under section 401 of the code. If
within thirty (30) days after the Trustee's resignation or removal, the
Employer has not appointed a successor Trustee which has accepted such
appointment, the Trustee shall, unless it elects to terminate the Trust
pursuant to Article XII hereof, appoint such successor itself.
ARTICLE XII
Termination of the Trust Agreement
12.1 Term of the Trust Agreement.
This Trust Agreement shall continue so long as the Plan is in full
force and effect. If the Plan ceases to be in full force and effect,
this Trust Agreement shall thereupon terminate unless expressly
extended by the Employer.
12.2 Termination by the Trustee
The Trustee may elect to terminate the Agreement if within thirty (30)
days after its resignation or removal pursuant to Article XI the
Employer has not appointed a successor Trustee which has accepted such
appointment. Termination of the Agreement shall be effected by
distributing all assets thereof to the Participants or other persons
entitled thereto pursuant to the direction of the Administrator (or in
the absence of such direction, as determined by the Trustee) as
provided in Article VII of the Plan, subject to the Trustee's right to
reserve Trusts as provided in Article XI hereof. Upon the completion of
such distribution, the Trustee shall be relieved from all further
liability with respect to all amounts so paid, other than any liability
arising out of the Trustee's willful misconduct or lack of good faith.
12.3 Failure of Initial Qualification
Anything herein to the contrary notwithstanding, if a final
determination letter is received from the Internal Revenue Service that
the Plan as herein set forth or as amended prior to the receipt of such
ruling does not qualify under Section 401 and 501 of the Code as to the
Employer for the first taxable year for which it has been adopted by
the Employer, the Employer, at its option, may withdraw all
contributions theretofore made by it and any income earned thereon,
less all expenses incurred, at the then current value thereof, and the
Plan shall thereupon terminate and all rights of each Participant or
his Beneficiary in the contributions made on his behalf by the Employer
shall cease and come to an end. In the event of termination of the Plan
pursuant to this Article there shall also be forthwith paid to each
Participant the then value, if any, of his salary reduction and
Rollover/Transfer Accounts. In the event of the receipt of such an
adverse determination letter and the termination of the Plan as to an
Employer, no Participant or Beneficiary of a Participant shall have a
right or claim against the Trust or to any benefit under the Plan, and
no benefits shall be paid to any Participant, former Participant or his
Beneficiary.
ARTICLE XIII
Miscellaneous
13.1 No Diversion of Assets
At no time shall it be possible for any part of the assets of the Trust
to be used for or diverted to purposes other than for the exclusive
benefit of Participants and their Beneficiaries or revert to the
Employer, except as specifically provided in the Plan or this Trust
Agreement.
13.2 Notices
Any notice from the Trustee to the Employer or from the Employer to the
Trustee provided for in this Plan and Trust Agreement shall be
effective if sent by first class mail at their respective last address
of record.
13.3 Multiple Trustees
In the event that there shall be two (2) or more Trustees serving
hereunder, any action taken or decision made by any such Trustees may
be taken or made by a majority of them with the same effect as if all
had joined therein, if there be more than two (2), or unanimously if
there be two (2).
13.4 Conflict with Plan
In the event of any conflict between the provisions of the Plan and
those of this Trust Agreement, the former shall prevail.
13.5 Applicable Law
This Trust Agreement shall be construed in accordance with the laws of
the state where the Trustee has its principal place of business.
THUS DONE AND SIGNED this 1st day of September, 2000.
CENTURYTEL, INC.
/s/ R. Stewart Ewing, Jr.
By:____________________________________
R. Stewart Ewing, Jr.
THUS DONE AND SIGNED this 1st day of September, 2000.
T. ROWE PRICE TRUST COMPANY
By:_____________________________________
-xiv-
TABLE OF CONTENTS
ARTICLE I...................................................................1
DEFINITIONS........................................................1
1.1 Accrued Benefit..................................1
1.2 Active Participant...............................1
1.3 Additional Match Account.........................1
1.4 Additional Match Contributions...................1
1.5 Administrator or Plan Administrator..............1
1.6 Affiliated Employer..............................1
1.7 Beneficiary......................................2
1.8 Code.............................................2
1.9 Company..........................................2
1.10 Company Stock....................................2
1.11 Compensation.....................................2
1.12 Cost of Living Increase..........................2
1.13 Covered Employee.................................3
1.14 Distribution Date................................3
1.15 Earned Income....................................3
1.16 Effective Date...................................3
1.17 Elective Deferral Account........................3
1.18 Elective Deferrals...............................3
1.19 Employee.........................................3
1.20 Employer.........................................3
1.21 Employer Contribution Accounts...................3
1.22 Employer Match Account...........................4
1.23 Employer Match Contributions.....................4
1.24 Entry Date.......................................4
1.25 ERISA............................................4
1.26 ESOP.............................................4
1.27 ESOP Transfer Account............................4
1.28 Family Member....................................4
1.29 Frozen Accounts..................................4
1.30 Frozen After-Tax Account.........................4
1.31 Frozen Other Employer Accounts...................4
1.32 Frozen Plan......................................4
1.33 Frozen Predecessor Plans.........................4
1.34 Frozen Pre-Tax Account...........................5
1.35 Frozen Qualified Nonelective Account.............5
1.36 Frozen Rollover Account..........................5
1.37 Highly Compensated Employee......................5
1.38 Inactive Participant.............................6
1.39 Investment Options...............................6
1.40 Leased Employee..................................6
1.41 Matching Contributions...........................6
1.42 Net Profits......................................6
1.43 Non-Highly Compensated Employee..................6
1.44 Normal Retirement Age............................6
1.45 Normal Retirement Date...........................6
1.46 Owner-Employee...................................7
1.47 Participant......................................7
1.48 Participating Employer...........................7
1.49 Plan.............................................7
1.50 Plan Year........................................7
1.51 Predecessor Plans................................7
1.52 Prior Match Account..............................7
1.53 Qualified Matching Contribution Account..........7
1.54 Qualified Matching Contributions.................7
1.55 Qualified Non-Elective Contribution Account......8
1.56 Qualified Non-Elective Contributions.............8
1.57 Rollover/Transfer Account........................8
1.58 Self-Employed Individual.........................8
1.59 Sponsor..........................................8
1.60 Trust Agreement..................................8
1.61 Trustee..........................................8
1.62 Valuation Date...................................8
1.63 Voluntary After-Tax Account......................8
ARTICLE II..................................................................8
ELIGIBILITY AND PARTICIPATION......................................8
2.1 Active Participation.............................8
2.2 Exclusion of Certain Employees...................8
2.3 Re-employment....................................9
2.4 Waiver of Participation..........................9
ARTICLE III.................................................................9
CONTRIBUTIONS......................................................9
3.1 Elective Deferral Contributions..................9
3.2 Employer Contributions...........................11
(a) Employer Match Contributions................11
(b) Additional Match Contributions..............11
(c) Payment.....................................12
(d) Qualified Matching Contributions............12
3.3 Contribution Limitation..........................12
3.4 Payroll Taxes....................................12
3.5 Rollovers and Transfers..........................12
3.6 Average Actual Deferral Percentage Test
Under Section 401(k) of the Code.................13
(a) General Tests...............................13
(b) Definitions.................................13
(i) Actual Deferral Percentage........13
(ii) Average Actual Deferral
Percentage........................14
(iii) Eligible Participant..............14
(c) Special Rules...............................14
(d) Distribution of Excess Contributions.........15
(e) Qualified Non-Elective Contributions.........16
3.7 Limitations on Employee Contributions
and Employer Matching Contributions..............16
(a) General Tests...............................16
(b) Definitions.................................17
(i) Average Contribution Percentage...17
(ii) Contribution Percentage...........17
(iii) Eligible Participant..............17
(iv) Aggregate Limit...................17
(v) Contribution Percentage Amounts...17
(vi) Employee Contribution.............18
(vii) Matching Contribution.............18
(c) Special Rules...............................18
(d) Distribution of Excess Aggregate
Contributions...............................19
ARTICLE IV..................................................................21
ALLOCATION OF FUNDS................................................21
4.1 Allocation of Employer Contributions.............21
4.2 Allocation of Net Earnings or Losses of the Trust21
4.3 Valuations.......................................21
4.4 Accounting for Distributions.....................21
4.5 Separate Accounts................................21
4.6 Investment of Funds..............................21
(a) Investment Control..........................21
(b) Investment Limitations......................21
(c) Participant Directed Investments............21
(d) Participant Election........................22
(e) Employer Securities.........................22
(f) Facilitation................................22
ARTICLE V...................................................................22
LIMITATION ON ALLOCATIONS..........................................22
5.1 Participants Not Covered Under Other Plans.......22
5.2 Participants Covered Under Other Defined
Contribution Plans...............................23
5.3 Participants Covered Under Both Defined Benefit
and Defined Contribution Plans...................25
5.4 Definitions......................................25
(a) Annual Additions............................25
(b) Compensation................................26
(c) Defined Benefit Fraction....................27
(d) Defined Contribution Dollar Limitation......27
(e) Defined Contribution Fraction...............27
(f) Employer....................................28
(g) Excess Amount...............................28
(h) Highest Average Compensation................28
(i) Limitation Year.............................28
(j) Maximum Permissible Amount..................28
(k) Projected Annual Benefit....................29
ARTICLE VI..................................................................29
ENTITLEMENT TO BENEFITS............................................29
6.1 Retirement.......................................29
6.2 Disability.......................................29
6.3 Death............................................30
6.4 Termination of Employment........................30
6.5 Other Permitted Distributions....................30
(a) Hardship....................................30
(b) Attainment of Age 591/2.....................31
(c) Distribution Upon Plan Termination..........32
(d) Distribution Upon Sale of Assets............32
(e) Distribution Upon Sale of Subsidiary........32
ARTICLE VII.................................................................32
DISTRIBUTION OF BENEFITS...........................................32
7.1 General..........................................32
7.2 Method of Distribution...........................32
7.3 Installment Payments.............................33
7.4 Spousal Consent..................................33
7.5 Commencement of Benefits.........................33
7.6 Minimum Required Distributions...................33
(a) Required Beginning Date.....................33
(b) Limits on Distribution Periods..............34
(c) Minimum Amounts to be Distributed...........34
7.7 Distribution of Death Benefits...................35
(a) Method of Distributions.................35
(b) Definitions.............................36
(i) Applicable Life Expectancy........36
(ii) Designated Beneficiary............36
(iii) Distribution Calendar Year........36
(iv) Life Expectancy...................36
(v) Participant's Benefit.............37
(vi) Required Beginning Date...........37
7.8 Distribution Upon Termination of Employment
and Restrictions on Immediate Distribution.......38
7.9 Distribution From After-Tax and Rollover/
Transfer Accounts................................39
(a) Voluntary After-Tax and Frozen After-Tax
Accounts....................................39
(b) Rollover/Transfer Account...................39
7.10 Direct Rollover..................................39
(a) Applicability...............................39
(b) Definitions.................................40
(i) Eligible Rollover Distribution....40
(ii) Eligible Retirement Plan..........40
(iii) Distributee.......................40
(iv) Direct Rollover...................40
ARTICLE VIII................................................................40
ANNUITY REQUIREMENTS...............................................40
8.1 Applicability....................................40
8.2 Qualified Joint and Survivor Annuity.............41
8.3 Qualified Preretirement Survivor Annuity.........41
8.4 Definitions......................................41
(a) Election Period.............................41
(b) Earliest Retirement Age.....................41
(c) Qualified Election..........................41
(d) Qualified Joint and Survivor Annuity........42
(e) Spouse (Surviving Spouse)...................42
(f) Annuity Starting Date.......................42
(g) Vested Account Balance......................42
8.5 Notice Requirements..............................42
8.6 Spousal Consent..................................44
ARTICLE IX..................................................................44
BENEFICIARY AND PARTICIPANT INFORMATION............................44
9.1 Designation of Beneficiary.......................44
9.2 Information to be Furnished by Participant
and Beneficiaries................................44
ARTICLE X...................................................................44
LOANS TO PARTICIPANTS..............................................44
ARTICLE XI..................................................................46
TOP HEAVY PROVISIONS...............................................46
11.1 Applicability....................................46
11.2 Definitions......................................46
(a) Determination Date..........................46
(b) Employer....................................46
(c) Employer Group..............................46
(d) Key Employee................................46
(e) Non-Key Employee............................46
(f) Permissive Aggregation Group................47
(g) Present Value...............................47
(h) Required Aggregation Group..................47
(i) Top Heavy Plan..............................47
(j) Top Heavy Ratio.............................47
(k) Valuation Date..............................48
(l) Present Value...............................49
11.3 Minimum Compensation.............................49
11.4 Minimum Allocation...............................49
11.5 Vesting..........................................50
ARTICLE XII.................................................................50
ADMINISTRATION OF THE PLAN.........................................50
12.1 Duties and Responsibilities of Fiduciaries;
Allocation of Fiduciary Responsibility...........50
12.2 Powers and Responsibilities of the Plan
Administrator....................................50
(a) Administration of the Plan..................50
(b) Records and Reports.........................51
(c) Furnishing Trustee with Instructions........51
(d) Rules and Decisions.........................51
(e) Application and Forms for Benefits..........51
12.3 Allocation of Duties and Responsibilities........51
12.4 Appointment of the Plan Administrator............51
12.5 Expenses.........................................52
12.6 Liabilities......................................52
12.7 Claims Procedure.................................52
(a) Filing a Claim..............................52
(b) Notice of Denial of Claim...................52
(c) Right of Review.............................52
(d) Decision on Review..........................53
(e) Court Action................................53
ARTICLE XIII................................................................53
AMENDMENT, TERMINATION AND MERGER..................................53
13.1 Amendments.......................................53
13.2 Plan Termination; Discontinuance of
Employer Contributions...........................53
13.3 Successor Employer...............................54
13.4 Merger, Consolidation or Transfer................54
ARTICLE XIV.................................................................54
MISCELLANEOUS PROVISIONS...........................................54
14.1 Exclusive Benefit of Participants
and Beneficiaries................................54
14.2 Nonguarantee of Employment.......................55
14.3 Rights to Trust Assets...........................55
14.4 Nonalienation of Benefits........................55
14.5 Gender...........................................55
14.6 Titles and Headings..............................55
14.7 Compliance with Laws, Rules and Regulations......55
14.8 Qualified Military Service.......................56
TRUST AGREEMENT.............................................................57
ARTICLE I...................................................................57
Accounts...........................................................57
1.1 Establishing Accounts............................57
ARTICLE II..................................................................58
2.1 Receipt of Contributions.........................58
ARTICLE III.................................................................58
Investment Powers of the Trustee...................................58
3.1 Investment of Trust Assets.......................58
3.2 Directed Investments.............................59
3.3 General Investment Powers........................59
3.4 Other Powers of the Trustee......................59
3.5 General Powers...................................60
3.6 Employer Securities..............................60
3.7 Voting, Tendering and Exchanging Company Stock...61
3.8 Registration and Disclosure for Company Stock....62
ARTICLE IV..................................................................62
4.1 Distributions from a Participant's Account.......62
ARTICLE V...................................................................63
5.1 Reports of the Trustee and the Administrator.....63
ARTICLE VI..................................................................63
6.1 Trustee's Fees and Expenses of the Trust.........63
ARTICLE VII.................................................................64
Duties of the Employer and the Administrator.......................64
7.1 Information and Data to be Furnished the Trustee.64
7.2 Limitation of Duties.............................64
ARTICLE VIII................................................................64
8.1 Liability of the Trust...........................64
ARTICLE IX..................................................................65
Delegation of Powers...............................................65
9.1 Delegation by the Trustee........................65
9.2 Delegation with Employer Approval................66
ARTICLE X...................................................................66
10.1 Amendment........................................66
ARTICLE XI..................................................................66
11.1 Resignation or Removal of Trustee................66
ARTICLE XII.................................................................67
Termination of the Trust Agreement.................................67
12.1 Term of the Trust Agreement......................67
12.2 Termination by the Trustee.......................67
12.3 Failure of Initial Qualification.................67
ARTICLE XIII................................................................68
Miscellaneous......................................................68
13.1 No Diversion of Assets...........................68
13.2 Notices..........................................68
13.3 Multiple Trustees................................68
13.4 Conflict with Plan...............................68
13.5 Applicable Law...................................68
EXHIBIT A
PREDECESSOR PLAN ACCOUNTS
Predecessor Plan Date of Employee After-Tax Rollover Prior
Name/Account Name Transfer Pre-Tax Match
____________________________________________________________________________
San Marcos Telephone 07/01/93
Company, Inc.and SM
Telecorp Companies
Retirement Plan:
o Pre-Tax -
o After-Tax -
o Rollover -
o Prior Match -
____________________________________________________________________________
PacifiCorp K Plus 01/10/98
Employee Savings
Plan: 1
o Pre-Tax -
o After-Tax -
o Rollover -
o Company Match 2 -
____________________________________________________________________________
--------
1 Account Names were provided by the recordkeeper and not specifically
identified in plan document for the PacifiCorp K Plus Employee Savings Plan.
2 A former PacifiCorp K Plus Employee Savings Plan participant's
interest in the PacifiCorp K Plus Employee Stock Ownership Plan was liquidated
and deposited to his or her Company Match Account under the plan prior to the
date of transfer to the Plan.
EXHIBIT B
FROZEN PREDECESSOR PLAN ACCOUNTS
____________________________________________________________________________
Frozen Plan Name/ Date of Employee After-Tax Rollover Other
Account Name Merger Pre-Tax Employer
____________________________________________________________________________
Kingsley Telephone 10/01/97
Company Retirement
Savings Plan:
o Elective Deferral* -
o Employer* -
____________________________________________________________________________
Lake Dallas Telephone 10/01/97
Company, Inc. 401(k)
Profit Sharing Plan:
o Employee Deferral* -
o Rollover* -
o Employer Matching* -
o Employer Discretionary* -
____________________________________________________________________________
Savings Plan for On or
Employees of the About
National Telephone 10/01/97
Cooperative Association
and Its Member Systems:
o Employee
Contribution 401(k)* -
o Employee
Contribution Non 401(k)* -
o Rollover Contribution* -
o Employer Contribution* -
____________________________________________________________________________
*Account names as recorded on prior recordkeeper's accounting.
EXHIBIT C
INVESTMENT OPTIONS
(Plan ss. 1.39)
T. Rowe Price Summit Cash Reserves Fund
PIMCO Total Return Fund
BGI Asset Allocation Fund
T. Rowe Price Equity Index 500 Fund
Janus Fund
T. Rowe Price Equity Income Fund
Janus Overseas Fund
MSDW Institutional Small Company Growth Portfolio Fund
T. Rowe Price Mid-Cap Growth Fund
BGI LifePath Income Fund
BGI LifePath 2010 Fund
BGI LifePath 2020 Fund
BGI LifePath 2030 Fund
BGI LifePath 2040 Fund
CenturyTel, Inc. Common Stock
Exhibit 10.1(b)
AMENDMENTS TO THE
CENTURYTEL, INC. DOLLARS & SENSE
PLAN AND TRUST
CENTURYTEL, INC., represented herein by its Executive Vice-President and
Chief Financial Officer, R. Stewart Ewing, Jr., as Plan Sponsor and Employer,
does hereby execute the following amendments to the CenturyTel, Inc. Dollars &
Sense Plan and Trust:
1. Preamble:
"These amendments to the Plan are adopted to reflect certain
provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001
("EGTRRA"). These amendments are intended to constitute good faith
compliance with the requirements of EGTRRA and are to be construed in
accordance with EGTRRA and guidance issued thereunder. Except as otherwise
provided herein, each amendment shall be effective as of the first day of
the first Plan Year beginning after December 31, 2001."
2. Article X is hereby amended to delete paragraph (7) thereof, and to
re-number paragraphs (8) and (9) as (7) and (8), respectively.
3. Section 5.4(d) is hereby amended to read as follows:
"(d) Defined Contribution Dollar Limitation shall mean $30,000, as
adjusted under Code Section 415(d). For Limitation Years beginning after
December 31, 2001, the limitation shall be $40,000, as adjusted for
increases in the cost-of-living under Section 415(d) of the Code."
4. The first paragraph of Section 5.4(j) is hereby amended to read as
follows:
"(j) Maximum Permissible Amount shall mean the maximum Annual
Additions that may be contributed or allocated to a Participant's Account
under the Plan for any Limitation Year, not to exceed the lesser of:
(i) the defined contribution dollar limitation, or
(ii) twenty-five percent (25%) of the Participant's Compensation for the
Limitation Year. For Plan Years beginning after December 31, 2001,
this percentage shall be one hundred percent (100%)."
5. Insert the following as the second sentence of the second paragraph of
Section 1.11:
"For Plan Years beginning after December 31, 2001, the annual
Compensation of each Participant taken into account in determining
allocations for any Plan Year beginning after December 31, 2001, shall not
exceed $200,000 as adjusted for Cost-of-Living Increases in accordance with
Code Section 401(a)(17)(B). Annual Compensation means Compensation during
the Plan Year or such other consecutive 12-month period over which
Compensation is otherwise determined under the Plan (the determination
period)."
6. Insert the following as the second paragraph of Section 11.2(d):
"For Plan Years beginning after December 31, 2001, any Employee or
former Employee (including any deceased Employee) who at any time during
the Plan Year that includes the determination date was an officer of the
Employer having annual Compensation greater than $130,000 (as adjusted
under Code Section 416(i)(1) for Plan Years beginning after December 31,
2002), a 5-percent owner of the Employer, or a 1-percent owner of the
Employer having annual Compensation of more than $150,000. For this
purpose, annual Compensation means compensation within the meaning of Code
Section 415(c)(3). The determination of who is a Key Employee will be made
in accordance with Code Section 416(i)(1) and the applicable regulations
and other guidance of general applicability issued thereunder."
7. Insert the following as the second paragraph of Section 11.2(j)(iii):
"For Plan Years beginning after December 31, 2001, for purposes of (i)
and (ii), above, the provisions of this paragraph shall apply. The present
value of accrued benefits and the amounts of account balances of an
Employee as of the determination date shall be increased by the
distributions made with respect to the Employee under the plan and any plan
aggregated with the Plan under Code Section 416(g)(2) during the 1-year
period ending on the determination date. The preceding sentence shall also
apply to distributions under a terminated plan which, had it not been
terminated, would have been aggregated with the Plan under Code Section
416(g)(2)(A)(i). In the case of a distribution made for a reason other than
severance from employment, death, or disability, this provision shall be
applied by substituting `5-year period' for `1-year period.' The accrued
benefits and accounts of any individual who has not performed services for
the Employer during the 1-year period ending on the determination date
shall not be taken into account."
8. Insert the following as the second paragraph of Section 11.4(a):
"For Plan Years beginning after December 31, 2001, Matching
Contributions shall be taken into account for purposes of satisfying the
minimum contribution requirements of Code Section 416(c)(2) and the Plan.
The preceding sentence shall apply with respect to matching contributions
under the Plan or, if the Plan provides that the minimum contribution
requirement shall be met in another plan, such other plan. Matching
Contributions that are used to satisfy the minimum contribution
requirements shall be treated as matching contributions for purposes of the
actual contribution percentage test and other requirements of Code Section
401(m)."
9. Insert the following as the second paragraph of Section 7.10(b)(i):
"For distributions made after December 31, 2001, a portion of a
distribution shall not fail to be an eligible rollover distribution merely
because the portion consists of after-tax employee contributions which are
not includable in gross income. However, such portion may be transferred
only to an individual retirement account or annuity described in Code
Section 408(a) or (b), or to a qualified defined contribution plan
described in Code Section 401(a) or 403(a) that agrees to separately
account for amounts so transferred, including separately accounting for the
portion of such distribution which is includable in gross income and the
portion of such distribution which is not so includable."
10. Insert the following as the third paragraph of Section 7.10(b)(i):
"Effective for distributions made after December 31, 2001, any amount
that is distributed on account of hardship shall not be an eligible
rollover distribution and the distributee may not elect to have any portion
of such a distribution paid directly to an eligible retirement plan."
11. Insert the following as the second paragraph of Section 7.10(b)(ii):
"For distributions made after December 31, 2001, an eligible
retirement plan shall also mean an annuity contract described in Code
Section 403(b) and an eligible plan under Code Section 457(b) which is
maintained by a state, political subdivision of a state, or any agency or
any instrumentality of a state or political subdivision of a state and
which agrees to separately account for amounts transferred into such plan
from this Plan. The definition of eligible retirement plan shall also apply
in the case of a distribution to a surviving spouse, or to a spouse or
former spouse who is the alternate payee under a qualified domestic
relations order, as defined in Code Section 414(p)."
12. Insert the following as the fifth paragraph of Section 7.8:
"The value of a Participant's nonforfeitable account balance shall be
determined without regard to that portion of the account balance that is
attributable to rollover contributions (and earnings allocable thereto)
within the meaning of Code Sections 402(c), 403(a)(4), 403(b)(8),
408(d)(3)(A)(ii) and 457(e)(16). If the value of the Participant's
nonforfeitable account balance as so determined is $5,000 or less, the Plan
may immediately distribute the Participant's entire nonforfeitable account
balance."
13. Insert the following as the second paragraph of Section 6.4:
"For distributions made after December 31, 2001, if an Employee so
elects, a Participant's Elective Deferral Contributions, qualified
non-elective contributions, qualified matching contributions, and earnings
attributable to these contributions shall be distributed on account of the
Participant's severance from employment. However, such a distribution shall
be subject to the other provisions of the Plan regarding distributions,
other than provisions that require a separation from service before such
amounts may be distributed."
14. Section 1.11 is amended by inserting the following as the last
paragraph thereof:
"For Plan Years beginning on and after January 1, 2001, for purposes
of the definition of Compensation contained in this Section 1.11, and
Sections 1.37, 1.40, 5.4(b) and 11.3 of the Plan, Compensation paid or made
available during such years shall include elective amounts that are not
includible in the gross income of the Employee by reason of Code Section
132(f)(4)."
15. Insert the following as Section 3.7(c)(viii):
"(viii) The multiple use test described in Treasury Regulation Section
1.401(m)-2 and this Section of the Plan shall not apply for Plan Years
beginning after December 31, 2001."
16. Delete the first sentence of Section 3.1(c) and insert the following
in lieu thereof:
"(c) No Participant shall be permitted to have Elective Deferrals made
under this Plan, or any other qualified plan maintained by the Employer
during any taxable year, in excess of the dollar limitation contained in
Code Section 402(g) in effect for such taxable year, except to the extent
permitted under Section 3.1(d) of this Plan and Code Section 414(v), if
applicable."
17. Insert the following as Section 3.1(d):
"(d) All Employees who are eligible to make Elective Deferral
Contributions under this Plan and who have obtained age 50 before the close
of the Plan Year shall be eligible to make catch-up contributions in
accordance with, and subject to the limitations of, Code Section 414(v).
Such catch-up contributions shall not be taken into account for purposes of
the provisions of the Plan implementing the required limitations of Code
Sections 402(g) and 415. The Plan shall not be treated as failing to
satisfy the provisions of the Plan implementing the requirements of Code
Sections 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416, as applicable,
by reason of the making of such catch-up contributions."
18. Delete Section 6.5(a)(ii)(2) and insert the following in lieu thereof:
"(2) All plans maintained by the Employer provide that the Employee's
Elective Deferrals (and Employee Contributions) will be suspended for six
months after receipt of the hardship distribution;"
THUS DONE AND SIGNED this 31st day of December, 2002.
CENTURYTEL, INC.
/s/ R. Stewart Ewing, Jr.
BY:______________________________
R. Stewart Ewing, Jr.
Executive Vice-President and
Chief Financial Officer
THUS DONE AND SIGNED this _________ day of _____________, 200___.
T. ROWE PRICE TRUST COMPANY
BY:______________________________
Exhibit 10.1(c)
CENTURYTEL RETIREMENT PLAN
As Amended and Restated February 28, 2002
CenturyTel, Inc. (the "Company") hereby amends and restates the
CenturyTel Retiremenet Plan (the "Plan"), which has previously been established
for the exclusive benefit of eligible employees of certain subsidiaries and
affiliates of the Company, and other entities permitted to adopt the Plan by the
Company. The Plan is intended to constitute a qualified defined benefit pension
plan, as described in Code Section 401(a).
The provisions of the Plan and Trust relating to the Trustee constitute
the trust agreement which is entered into by and between CenturyTel, Inc., the
adopting employers and Bankers Trust Company, N.A.. The Trust is intended to be
tax exempt, pursuant to Code Section 501(a).
The Plan, as amended and restated, is intended to comply with the
qualification requirements of the Uniformed Services Employment and Reemployment
Rights Act of 1994 (USERRA), the General Agreement of Tariffs and Trade portion
of the Uruguay Round Agreements Act (GATT), the Retirement Protection Act of
1994 (RPA '94), the Small Business Job Protection Act of 1996 (SBJPA), the
Taxpayer Relief Act of 1997 (TRA '97), the Restructuring and Reform Act of 1998
(RRA '98), and the Community Renewal Tax Relief Act of 2000 (CRA), and is
intended to comply in operation therewith. To the extent that the Plan, as set
forth below, is subsequently determined to be insufficient to comply with such
requirements and any regulations issued, the Plan shall later be amended to so
comply.
This Amendment and Restatement of the CenturyTel Retirement Plan, as
set forth in this document, is effective as of January 1, 2002, except as
otherwise indicated in specific Sections hereof.
TABLE OF CONTENTS
ARTICLE I....................................................................1
EFFECTIVE DATE AND APPLICATION......................................1
1.1 Effective Date....................................1
1.2 Qualification.....................................1
1.3 Sponsoring and Adopting Employers.................1
1.4 Incorporation of Trust Agreement..................1
ARTICLE II...................................................................2
DEFINITIONS.........................................................2
2.1 Accrued Benefit...................................2
2.2 Actuarial Equivalency or Actuarial Equivalent.....2
2.3 Adopting Entity...................................2
2.4 Affiliate.........................................3
2.5 Alternative Joint and Survivor Annuity............3
2.6 Annuity Starting Date.............................3
2.7 Beneficiary.......................................4
2.8 Benefit Computation Period........................4
2.9 Board.............................................4
2.10 Break in Service..................................4
2.11 Code..............................................4
2.12 Committee.........................................4
2.13 Company...........................................4
2.14 Compensation......................................4
2.15 Computation Period................................6
2.16 Credited Service..................................6
2.17 Disability or Disabled............................6
2.18 Early Retirement Date.............................6
2.19 Eligibility Computation Period....................6
2.20 Eligible Employee.................................6
2.21 Employee..........................................6
2.22 Employer..........................................6
2.23 ERISA.............................................7
2.24 Average Annual Compensation.......................7
2.25 Hour of Service...................................7
2.26 Layoff............................................8
2.27 Leave of Absence..................................8
2.28 Monthly Compensation..............................9
2.29 Normal Form.......................................9
2.30 Normal Retirement Age.............................9
2.31 Normal Retirement Date............................9
2.32 Participant.......................................9
2.33 Plan..............................................9
2.34 Plan Administrator................................9
2.35 Plan Year.........................................9
2.36 Prior Plan........................................9
2.37 Qualified Domestic Relations Order................9
2.38 Qualified Joint and Survivor Annuity..............9
2.39 Required Beginning Date...........................9
2.40 Single Life Annuity...............................10
2.41 Social Security Covered Compensation..............10
2.42 Spouse............................................10
2.43 Trust Agreement...................................10
2.44 Trustee...........................................11
2.45 Vesting Computation Period........................11
2.46 Year of Credited Service..........................11
2.47 Year of Eligibility Service.......................11
2.48 Year of Service...................................11
2.49 Year of Vesting Service...........................11
ARTICLE III..................................................................12
ELIGIBILITY AND PARTICIPATION.......................................12
3.1 Eligible Employees................................12
3.2 Requirements for Participation....................13
3.3 Effective Time of Participation...................13
3.4 Reassignment and Reemployment.....................13
3.5 Waiver of Participation...........................13
ARTICLE IV...................................................................14
CREDITING OF SERVICE................................................14
4.1 Eligibility Service...............................14
4.2 Vesting Service...................................14
4.3 Credited Service..................................14
4.4 Reemployment after Break in Service...............15
4.5 Transition Rules and Short and
Overlapping Computation Periods...................16
4.6 Special Rules for Service Under Prior Plan........17
4.7 Transfers between Company, Affiliates and
Adopting Entities.................................17
ARTICLE V....................................................................19
BENEFITS ON RETIREMENT, DEATH, DISABILITY
AND TERMINATION OF EMPLOYMENT.......................................19
5.1 Normal Retirement.................................19
5.2 Early Retirement..................................19
5.3 Deferred Retirement...............................19
5.4 Disability Retirement.............................19
5.5 Spouse's Benefit..................................19
5.6 Benefit on Termination of Employment..............20
5.7 Limitations on Pensions...........................22
ARTICLE VI...................................................................25
COMPUTATION OF BENEFIT AMOUNTS......................................25
6.1 Normal Retirement Benefit.........................25
6.2 Early Retirement Benefit..........................26
6.3 Deferred Retirement Benefit.......................27
6.4 Disability Retirement Benefit.....................28
6.5 Spouse's Benefit..................................28
6.6 Benefits for Terminated Vested Employees..........29
6.7 Reduction for Other Benefits......................29
6.8 Cost of Living Adjustment.........................30
ARTICLE VII..................................................................31
TIMING AND FORM OF BENEFIT PAYMENTS.................................31
7.1 Commencement of Benefits..........................31
7.2 Normal Form.......................................32
7.3 Waiver of Normal Form.............................32
7.4 Timing of Election and Spousal Consent............33
7.5 Notice Requirements...............................34
7.6 Special Rules for Death of Participant or
Beneficiary.......................................34
7.7 Optional Forms of Payment.........................35
7.8 Annuity Form of Payment...........................37
7.9 Mandatory Lump Sum Distribution of
Small Benefits....................................37
7.10 Minimum Distributions Required Under
Code Section 401(a)(9)............................38
7.11 Early Commencement Election.......................39
7.12 Suspension of Benefits............................39
7.13 Eligible Rollover Distributions...................41
ARTICLE VIII.................................................................43
MEDICAL BENEFITS....................................................43
8.1 Eligibility.......................................43
8.2 Medical Benefits..................................43
8.3 Separate Medical Benefits Account.................43
8.4 Limitation on Contributions.......................44
8.5 Satisfaction of Liabilities.......................44
8.6 Forfeiture of Benefits............................44
ARTICLE IX...................................................................45
FUNDING.............................................................45
9.1 Plan Assets.......................................45
9.2 Trust Agreement...................................45
9.3 Insurance Arrangements............................45
9.4 Contributions.....................................45
9.5 Exclusive Benefit.................................45
9.6 Return of Contributions...........................45
9.7 Prohibition Against Assignment or
Alienation of Benefits............................46
ARTICLE X....................................................................47
FIDUCIARY RESPONSIBILITIES AND PLAN ADMINISTRATION..................47
10.1 Allocation of Fiduciary Responsibilities..........47
10.2 Committee.........................................47
10.3 Committee Action by Majority Vote.................47
10.4 Plan Administrator................................47
10.5 Committee Reliance on Professional Advice.........48
10.6 Plan Administration Expenses......................48
10.7 Responsibilities of Trustee.......................48
10.8 Investment Management by Trustee..................48
10.9 Allocation of Investment Management
Responsibilities..................................48
10.10 Appointment and Removal of Investment Managers....48
10.11 Ascertainment of Plan Financial Needs.............49
10.12 Delegation of Company's Duties....................49
10.13 Benefit Claim Procedure...........................49
10.14 QDRO Procedures...................................50
10.15 Service in Multiple Fiduciary Capacities..........50
ARTICLE XI...................................................................51
CO-SPONSORSHIP OF PLAN AND MERGERS WITH OTHER PLANS.................51
11.1 Co-sponsorship of Plan by Affiliates..............51
11.2 Co-sponsorship of Plan by Adopting Entities.......51
11.3 Merger with Plan of Affiliate.....................51
ARTICLE XII..................................................................53
DURATION AND AMENDMENT..............................................53
12.1 Reservation of Right to Suspend or Terminate Plan.53
12.2 Reservation of Right to Amend Plan................53
12.3 Transactions Subject to Code Section 414(l).......53
ARTICLE XIII.................................................................55
DISTRIBUTION UPON PLAN TERMINATION..................................55
13.1 Vesting on Plan Termination.......................55
13.2 Allocation of Assets on Plan Termination..........55
13.3 Provision for Benefits After Plan Termination.....56
13.4 Computation of Benefits After Plan Termination....56
13.5 Continued Employment Not Required After
Plan Termination..................................56
13.6 Data in Company Records on Plan Termination.......56
13.7 Satisfaction of Liabilities on Plan Termination...56
13.8 High-25 Distribution Restrictions.................57
ARTICLE XIV..................................................................59
INTERCHANGE OF BENEFIT OBLIGATIONS..................................59
14.1 Interchange Agreement Permitted...................59
ARTICLE XV...................................................................60
GENERAL PROVISIONS..................................................60
15.1 No Employment Rights Conferred....................60
15.2 Integration Clause................................60
15.3 Incapacity of Recipient...........................60
15.4 ERISA Fiduciary Duties............................60
15.5 Compliance with State and Local Law...............60
15.6 Usage.............................................60
15.7 Titles and Headings...............................60
15.8 Severability Clause...............................60
15.9 USERRA - Military Service Credit..................61
ARTICLE XVI..................................................................62
TOP-HEAVY REQUIREMENTS..............................................62
16.1 In General........................................62
16.2 Definitions.......................................62
16.3 Determination of Top-Heavy Ratio..................63
16.4 Top-Heavy Minimum Benefits........................65
16.5 Termination of Top-Heavy Status...................66
16.6 Interpretation....................................66
ARTICLE I
EFFECTIVE DATE AND APPLICATION
1.1 Effective Date. The effective date of this Amendment and
Restatement of the Plan shall be January 1, 2002, except as otherwise indicated
in specific Sections hereof.
1.2 Qualification. It is the intention of the Company that the
Plan shall satisfy the requirements of ERISA, that the Plan shall be qualified
under Section 401(a) of the Code, and that the Trust established under the Plan
shall be exempt from taxation under Section 501(a) of the Code. If the
Commissioner of Internal Revenue determines that the Plan as restated does not
qualify under Section 401(a) of the Code, the Plan may be retroactively amended
to so qualify.
1.3 Sponsoring and Adopting Employers. The Company is the adopting
sponsor of the Plan. Any Affiliate or Adopting Entity approved by the Company
may also adopt the Plan, by a statement in writing, signed by the Affiliate or
Adopting Entity and approved by the Company. The statement shall include the
effective date of adoption of the Plan by the adopting Affiliate or Adopting
Entity and may include any special provisions applicable only to employees of
such adopting Affiliate or Adopting Entity.
1.4 Incorporation of Trust Agreement. The Trust Agreement(s)
established under the Plan shall be incorporated into, and made a part of, the
Plan in accordance with Section 9.2.
ARTICLE II
DEFINITIONS
The following terms, when used with an initial capital letter in this
Plan, shall have the following meanings unless the context clearly requires a
different meaning.
2.1 "Accrued Benefit" means, for any Participant as of any
determination date, the amount of retirement income (whether or not vested) that
would be payable to the Participant as of his Normal Retirement Date in
accordance with the provisions of Section 6.1, based on the Participant's
Credited Service and Final Average Compensation as of the date of determination.
2.2 "Actuarial Equivalency" or "Actuarial Equivalent" means a
benefit under which the present value of the expected payments is equal to the
present value of the expected benefit otherwise payable under the Plan,
determined on the basis of the following mortality and interest assumptions:
Mortality: UP- 1984 Morality Table
Interest Rate: 8% per annum
Notwithstanding the foregoing, for determinations of cash amounts,
interest shall be the annual rate of interest on 30 year Treasury securities for
the September preceding the year in which the cash amount is paid and mortality
shall be as provided in the mortality table prescribed by the Commissioner of
Internal Revenue under Section 417(e)(3)(A)(ii)(I) of the Internal Revenue Code.
For valuing benefits accrued on or before December 31, 1987, the
Consumer Price Index shall be assumed to increase at least two percent (2%) per
annum.
When the term "Actuarial Value" is used herein, it shall mean the
present value of a benefit computed using the factors and assumptions provided
in this Section 2.2.
If the actuarial factors for determining equivalent benefits are
changed by Plan amendment, the benefit actually paid in any form shall not be
less than the amount determined for the same form by applying the prior factors
to the Participant's Accrued Benefits as of the date the change is adopted or is
effective, whichever is later.
2.3 "Adopting Entity" means an entity which, with approval of the
Company, adopts this Plan for the benefit of its eligible employees.
2.4 "Affiliate" means:
(a) any corporation that is a member of a controlled group of
corporations (as defined in Section 1563(a) of the Code, without regard
to Sections 1563(a)(4) and 1563(e)(3)(C) of the Code) with the Company;
(b) any unincorporated business under common control with the
Company, as determined under Section 414(c) of the Code and, to the
extent not inconsistent therewith, under such rules as may be adopted
by the Board;
(c) a member of any affiliated service group that includes
the Company, as determined under Section 414(m) of the Code; or
(d) except to the extent otherwise provided in Treasury
Regulations, a leasing organization with respect to the periods of
service performed by any individual who is a leased employee (within
the meaning of Section 414(n) of the Code) with respect to an Affiliate
(determined without regard to this paragraph (e)) or any related person
(within the meaning of Section 144(a)(3) of the Code).
A corporation, unincorporated business, or other organization shall
qualify as an Affiliate only with respect to the period during which it
satisfies one or more of the applicable descriptions in paragraphs (a) through
(d), above. Except as otherwise specifically provided in the Plan, the
employment of an individual with an Affiliate for purposes of the Plan shall not
include any period with respect to which the corporation, unincorporated
business, or other organization constituting the Affiliate fails to satisfy one
or more of the applicable descriptions in paragraphs (a) through (d), above, and
an individual's employment with an Affiliate shall be considered terminated for
purposes of the Plan no later than the date on which the corporation,
unincorporated business, or other organization constituting the Affiliate ceases
to satisfy any of the applicable descriptions in paragraphs (a) through (d),
above. Paragraphs (c) and (d), above, shall apply solely for purposes of
determining an individual's Eligibility Service and Vesting Service, and shall
not apply for any other purpose under the Plan, including, without limitation,
for purposes of determining his Credited Service.
2.5 "Alternative Joint and Survivor Annuity" means an optional
form of benefit payment provided under Section 7.7(a), which may be elected by a
Participant (with Spousal consent) pursuant to Section 7.3.
2.6 "Annuity Starting Date" has the same meaning as in Code
Section 417(f), i.e., the first day of the first period for which an amount is
payable as an annuity or, in the case of a benefit not payable in the form of an
annuity, the first day on which all events have occurred which entitle the
Participant to payment of such benefit.
2.7 "Beneficiary" means any individual designated or deemed
designated by a Participant or former Participant to receive a benefit under the
Plan after the death of the Participant or former Participant.
2.8 "Benefit Computation Period" means the period determined under
Section 4.3(a).
2.9 "Board" means the Board of Directors of the Company, the
executive committee of the Board, and any other committee of the Board
authorized to act on its behalf.
2.10 "Break in Service" means a Computation Period in which an
Employee fails to complete more than five hundred (500) Hours of Service with
the Employer.
2.11 "Code" means the Internal Revenue Code of 1986, as amended.
2.12 "Committee" means the committee appointed by the Board to
administer the Plan pursuant to Article IX.
2.13 "Company" means CenturyTel, Inc.
2.14 "Compensation" means the sum of (a) and (b), as adjusted under
(c), (d),and (e) and after applying the provisions of (f), (g) and (h):
(a) All nondeferred compensation reportable on Form W-2
except the following:
(1) Overtime or premium pay.
(2) Imputed income from expense reimbursements or
fringe benefits.
(3) Prizes and awards (such as employee recognition
awards and safety awards).
(4) Payment for termination of employment (such as
retirement bonuses, disability benefits and severance
pay).
(5) Long-term incentive compensation.
(b) Salary reduction amounts elected by the Participant
under a qualified cash or deferred arrangement or a
cafeteria plan.
(c) During periods of reduced compensation because of
such causes as illness, disability or leave of
absence, compensation shall be figured at the last
regular rate before the start of the period.
(d) The maximum amount of annual compensation taken into
account for any year for a Participant shall be
$150,000 plus any cost-of-living adjustment
authorized for the year by applicable regulations.
For the Plan Years beginning before January 1, 1997,
for purposes of this limit, the following shall apply
to any Participant who is a highly compensated
employee (as defined in Internal Revenue Code Section
414(q) and related Treasury Regulations) and is
either a five percent owner or one of the 10 highest
paid employees:
(1) The Participant's compensation shall be
aggregated with any compensation paid by the Employer
to the Participant's spouse and to the Participant's
lineal descendants under age 19.
(2) If the $150,000 limit is exceeded in the
aggregate, pay counted for each aggregated employee
shall be reduced pro rata to stay within the limit.
(e) The reduction in the maximum compensation counted
under (d) to $150,000 shall be made providing a
Participant with the greater of the following
(formula with extended wear-away):
(1) The Participant's benefit accrued under
the Plan as of December 31, 1993 based on
compensation up to the maximum permitted amount of
compensation in each earlier year, plus the benefit
accrued on the basis of service after that date and
on compensation at the reduced level.
(2) The Participant's benefit accrued on the
basis of service before and after December 31, 1993
and on compensation at the reduced level.
(f) A bonus earned in one calendar year and paid in
the following calendar year, including any bonus paid
in the year following employment termination, shall
be treated as received in the year in which the bonus
is paid or, if earlier, the year in which employment
terminates.
(g) A lump sum payment in lieu of an increase in base
salary shall not be treated as a bonus and shall be
counted as salary received one-twelfth in each
calendar month of employment in the year in which the
lump sum amount is paid.
(h) For the month in which a Participant terminates
employment, Compensation shall be pro-rated based on
a fraction, the numerator of which is the number of
days worked by the Participant in the month and the
denominator is thirty (30).
2.15 "Computation Period" means an Eligibility Computation Period,
Vesting Computation Period or Benefit Computation Period, as is appropriate in
the context in which used. Years of Service and Breaks in Service will be
measured on the same Computation Period (Eligibility, Vesting or Benefit, as
applicable)
2.16 "Credited Service" means the number of Years of Credited
Service credited to a Participant for benefit accrual purposes pursuant to
Section 4.3.
2.17 "Disability" or "Disabled" means the total disability of an
Employee as evidenced by the Employee's inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or to last for a continuous
period of at least twelve (12) months. An Employee shall only be considered
disabled after proof of such disability satisfactory to the Employer is
furnished (which proof shall include a determination of approval for Social
Security disability benefits or, if such is not available, a written statement
of a licensed physician appointed or approved by the Employer).
2.18 "Early Retirement Date" means any date prior to his Normal
Retirement Date on which an Employee actually retires or is retired pursuant to
Section 5.2.
2.19 "Eligibility Computation Period" means the period determined
under Section 4.1(a).
2.20 "Eligible Employee" means an Employee described in Section 3.1.
2.21 "Employee" means any person regularly employed by the
Employer, including employees of any other employer required to be aggregated
with the Employer under Section 414(b), (c), (m) or (o) of the Code. The term
Employee shall not include any leased employee deemed to be an employee of the
Employer as provided in Sections 414(n) or (o) of the Code, or any
owner-employee, as defined in Code Section 401(c)(3), or self-employed
individual, as defined in Code Section 401(c)(1).
The term Employee shall not include an individual who is retained by
the Employer pursuant to a contract or agreement that specifies that the
individual is not eligible to participate in the Plan, an individual whose basic
compensation for services rendered is not paid by or on behalf of the Employer,
or an individual who is not classified as a common-law employee by the Employer,
regardless of any subsequent reclassification of such individual as a
"common-law employee" of the Employer by the Employer, any governmental agency,
or any court.
2.22 "Employer" means the Company, any Affiliate which has adopted
this Plan, and any Adopting Entity. This Plan is a single plan maintained by
multiple employers in which all of the Plan assets are available to pay benefits
for all Participants in the Plan.
2.23 "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
2.24 "Final Average Compensation" means the Participant's average
Monthly Compensation over the sixty (60) consecutive calendar months of highest
Monthly Compensation in the last one hundred twenty (120) months of employment
with the Employer. Months separated by a period when the Employee is not in such
employment shall be treated as consecutive. If an Employee has fewer than sixty
(60) months of compensation, all months shall be used. For purposes of computing
Final Average Compensation, Compensation for Employees of CenturyTel, Inc., any
Affiliate or any Adopting Entity (not including former employees of Pacific
Telecom, Inc. who became employees of CenturyTel, Inc. or an Affiliate thereof
as of the date of acquisition of Pacific Telecom, Inc. by CenturyTel, Inc. or an
Affiliate thereof) shall only be counted beginning with the 1999 Plan Year.
2.25 "Hour of Service" means:
(a) Each hour for which an Employee is compensated by the
Employer, or is entitled to be so compensated, for service rendered by
him to the Employer. These hours will be credited to the Employee for
the computation period in which the duties are performed.
(b) Each hour for which an Employee is compensated by the
Employer, or is entitled to be so compensated, on account of a period
of time during which no services are rendered by him to the Employer
(irrespective of whether the employment relationship has terminated)
due to vacation, holiday, illness, incapacity (including disability),
layoff, jury duty, military duty or leave of absence. No more than five
hundred and one (501) Hours of Service shall be credited pursuant to
this subparagraph (b) on account of any single continuous period during
which an Employee renders no services to the Employer (whether or not
such period occurs in a single computation period). Hours under this
paragraph will be calculated and credited pursuant to Section
2530.200b-2 of the Department of Labor Regulations which are
incorporated herein by this reference.
(c) Each hour for which back pay, without regard to
mitigation of damages, has been awarded or agreed to by the Employer.
The same Hours of Service shall not be credited both under
subparagraph (a) or subparagraph (b), whichever shall be applicable,
and also under this subparagraph (c). The hours will be credited to
the Employee for the computation period or periods to which the award
or agreement pertains rather than the computation period in which the
payment is made.
An Employee whose compensation is not determined on an hourly basis or
for whom hourly employment records are not maintained shall be credited with
forty-five (45) Hours of Service per week.
Hours of Service will be credited for eligibility, participation and
vesting purposes for employment with other members of an affiliated service
group (under Section 414(m) of the Code), a controlled group of corporations
(under Section 414(b) of the Code), or a group of trades or businesses under
common control (under Section 414(c) of the Code), of which the Employer is a
member, and any other entity required to be aggregated with the Employer
pursuant to Section 414(o) of the Code and the regulations thereunder. Hours of
Service for purposes of determining Years of Credited Service shall only include
Hours of Service with the Employer. Hours of Service will be credited for
eligibility, participation and vesting purposes for periods during which an
Eligible Employee is on Layoff or a Leave of Absence.
Hours of Service will also be credited for any individual considered an
Employee under Section 414(n) or (o) of the Code, and regulations thereunder.
Solely for purposes of determining whether a Break in Service for
participation and vesting purposes has occurred in a computation period, an
individual who is absent from work for maternity or paternity reasons shall
receive credit for the Hours of Service which would otherwise have been credited
to such individual but for such absence, or in any case in which such hours
cannot be determined, eight (8) Hours of Service per day of such absence. For
purposes of this paragraph, an absence from work for maternity or paternity
reasons means an absence (i) by reason of the pregnancy of the individual, (ii)
by reason of a birth of a child of the individual, (iii) by reason of the
placement of a child with the individual in connection with the adoption of such
child by such individual, or (iv) for purpose of caring for such child for a
period beginning immediately following such birth or placement. The Hours of
Service credited under this paragraph shall be credited only (i) in the
computation period in which the absence begins if the crediting is necessary to
prevent a Break in Service in that period, or (ii) in all other cases, in the
following computation period.
2.26 "Layoff" means the termination of employment due to the
reduction of the Employer's work force. An Employee shall continue as laid off
until (i) the Employee retires, dies or resumes employment at the request of the
Employer, (ii) the Employer notifies the Employee that employment has been
terminated, (iii) the Employee elects to terminate employment, or the employee
fails to return to work when recalled, or (iv) twelve (12) months have elapsed
since the date of the Layoff. Termination of a Layoff under (ii), (iii) or (iv)
above, shall be effective as of the date of the Layoff.
2.27 "Leave of Absence" means (i) a leave authorized by the
Employer if the Employee returns within the time prescribed by the Employer and
otherwise fulfills all the conditions of the leave imposed by the Employer, (ii)
absence because of Disability, or (iii) periods of military service if the
Employee returns with employment rights protected by law. If a person on Leave
of Absence fails to meet the conditions of the leave or fails to return to work
when required, employment shall terminate and termination of the Leave of
Absence shall be effective as of the date the leave began unless the failure is
due to death or retirement. In authorizing Leaves of Absence, the Employer shall
treat all Employees similarly situated alike as much as possible.
2.28 "Monthly Compensation" shall mean a Participant's Compensation
determined under Section 2.14 for a Plan Year, divided by twelve (12).
2.29 "Normal Form" means the form of benefit payable to a
Participant pursuant to Section 7.2 of this Plan.
2.30 "Normal Retirement Age" means age sixty-five (65).
2.31 "Normal Retirement Date" means the first day of the calendar
month coinciding with or following the date the Participant attains Normal
Retirement Age.
2.32 "Participant" means an Employee participating in the Plan in
accordance with the provisions of Article III.
2.33 "Plan" means the provisions of this CenturyTel Retirement
Plan, as set forth herein and as may be amended from time to time.
2.34 "Plan Administrator" means the Committee.
2.35 "Plan Year" means the calendar year, except that the first
plan year with respect to each Employer shall mean the period from the Effective
Date with respect to such Employer to December 31 of such year.
2.36 "Prior Plan" means the Pacific Telecom Retirement Plan.
2.37 "Qualified Domestic Relations Order" means a "qualified
domestic relations order" within the meaning of ERISA Section 206(d).
2.38 "Qualified Joint and Survivor Annuity" means, for any
Participant who has a Spouse at his retirement date, an annuity payable monthly
for the lifetime of the Participant and a survivor annuity payable monthly to
the Spouse (if living) upon the Participant's death which is fifty-percent (50%)
of the amount of the annuity payable during the lifetime of the Participant.
2.39 "Required Beginning Date" means
(1) General Rule. The required beginning date of a
Participant is the later of the April 1 of the calendar year
following the calendar year in which the Participant attains
age 70 1/2 or retires except that benefit distributions to a
5-percent owner must commence by the April 1 of the calendar
year following the calendar year in which the Participant
attains age 70 1/2 .
(2) Deferral or Cessation of Distributions.
(A) Any Participant attaining age 70 1/2 in
years after 1995 may elect by April 1 of the calendar
year following the year in which the Participant
attained age 70 1/2 (or by December 31, 1997 in the
case of a Participant attaining age 70 1/2 in 1996)
to defer distributions until the calendar year
following the calendar year in which the Participant
retires. If no such election is made the Participant
will begin receiving distributions by the April 1 of
the calendar year following the year in which the
Participant attained age 70 1/2 (or by December 31,
1997 in the case of a Participant attaining age 70
1/2 in 1996).
(B) Any Participant attaining age 70 1/2 in
years prior to 1997 may elect to stop distributions
and recommence by the April 1 of the calendar year
following the year in which the Participant retires.
There will be a new annuity starting date upon
recommencement.
(3) 5-Percent Owner. A Participant is treated as a
5-percent owner for purposes of this Section if such
Participant is a 5-percent owner as defined in Section 416 of
the Code at any time during the Plan Year ending with or
within the calendar year in which such owner attains age 70
1/2 .
(4) Distributions Begun. Once distributions have
begun to a 5-percent owner under this Section, they must
continue to be distributed, even if the Participant ceases to
be a 5-percent owner in a subsequent year.
2.40 "Single Life Annuity" means an annuity payable monthly in
equal installments for the life of a Participant, which terminates upon the
death of the Participant and does not provide any survivor benefits.
2.41 "Social Security Covered Compensation"" means the covered
compensation amount for a person with the Participant's Social Security
retirement age, as determined in accordance with applicable regulations. The
Committee may, in its discretion, use a table of Social Security Covered
Compensation published by the Internal Revenue Service with rounded amounts.
2.42 "Spouse" means any individual who is legally married to a
Participant as of any applicable date, provided that a former spouse shall be
treated as the spouse of a Participant to the extent provided under a Qualified
Domestic Relations Order.
2.43 "Trust Agreement" means the Trust Agreement between
CenturyTel, Inc. and Bankers Trust Company, as from time to time amended and in
effect, and any other or additional trust agreement under the Plan, so
designated for such purpose by the Board, between the Company, any adopting
Affiliate, or Adopting Entity, and any Trustee at any time acting thereunder.
2.44 "Trustee" means the trustee under a Trust Agreement.
2.45 "Vesting Computation Period" means the period determined
under Section 4.2(a).
2.46 "Year of Credited Service" means a Benefit Computation Period
in which an Employee meets the requirements of Section 4.3(b) and is credited
with a Year of Credited Service thereunder.
2.47 "Year of Eligibility Service" means an Eligibility Computation
Period in which an Employee meets the requirements of Section 4.1(b) and is
credited with a Year of Eligibility Service thereunder.
2.48 "Year of Service" means a Plan Year in which an Employee
completes one thousand (1000) or more Hours of Service (whether or not
continuous) with the Company, a participating Affiliate, or an Adopting Entity.
2.49 "Year of Vesting Service means a Vesting Computation Period in
which an Employee meets the requirements of Section 4.2(b) and is credited with
a Year of Vesting Service thereunder.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Eligible Employees. Any Employee of an Employer shall be
eligible to participate in the Plan, except for the following:
(a) Any Employee covered by a collective bargaining agreement
that does not provide for participation in this Plan.
(b) A leased employee treated as an employee for pension
purposes solely because of Code Section 414(n).
(c) A "casual employee" as categorized in the Employer's
personnel policies, generally including workers who are on call, have
no regular established work week and no fixed days or hours of work.
(d) A temporary employee hired specifically to fill
temporary or occasional needs.
(e) An employee of CenturyTel, Inc. or an Affiliate who was
on disability under the CenturyTel, Inc. Long Term Disability Plan as
of January 1, 1999, until such time as the employee returns to active
employment.
(f) An employee of an Affiliate or other entity which is
not an adopting Affiliate or an Adopting Entity.
(g) Employees of the following Affiliates:
(i) Century Business Communications, LLC;
(ii) CenturyTel Interactive Company;
(iii) CenturyTel Security Systems, Inc.;
(iv) CenturyTel of Northwest Arkansas, LLC;
(v) CenturyTel of Central Arkansas, LLC;
(vi) CenturyTel of Central Wisconsin, LLC;
(vii) Telephone USA of Wisconsin, LLC;
(viii) Spectra Communications Group, LLC;
(ix) CenturyTel Holdings, Inc;
(x) CenturyTel Investments of Texas, Inc.;
(xi) CentruyTel of Alabama, LLC; and
(xii) CenturyTel of Missouri, LLC.
Effective January 1, 1999, the Company became the sponsor of this Plan,
and Employees of the Company, any adopting Affiliate, and any Adopting Entity
became eligible to participate in this Plan effective January 1, 1999.
3.2 Requirements for Participation. To be eligible to
participate in the Plan, an Employee must:
(a) Be an Eligible Employee under Section 3.1;
(b) Complete one (1) Year of Eligibility Service, as
determined under Section 4.1; and
(c) Attain age twenty-one (21).
3.3 Effective Time of Participation. An Eligible Employee who
meets the requirements of Section 3.2 shall be a Participant in the Plan as of
the first day of the Eligibility Computation Period in which the Employee meets
such requirements.
3.4 Reassignment and Reemployment. In the event an Employee who is
not a member of the eligible class of Employees becomes a member of the eligible
class, such Employee shall be eligible to participate immediately.
In the event a Participant is no longer a member of the eligible class
of Employees and becomes ineligible to participate, such Employee shall be
eligible to participate immediately upon returning to the eligible class of
Employees.
A former Participant shall become a Participant immediately upon
returning to the employ of the Employer if such former Participant is a member
of the eligible class of Employees when re-employed.
3.5 Waiver of Participation. The Employer may grant a waiver of
participation to any Employee who so requests. Whether or not such waiver shall
be granted, and the terms and conditions (including duration) thereof, shall be
made in accordance with written and objective rules and shall be applied in a
uniform and nondiscriminatory manner.
ARTICLE IV
CREDITING OF SERVICE
4.1 Eligibility Service.
(a) A Year of Eligibility Service for purposes of satisfying
Section 3.2(b) shall be measured on an employment year, which is the
twelve (12) month period starting on the date the Employee first
performs an Hour of Service for the Employer, or an anniversary of such
date (Eligibility Computation Period).
(b) An Employee shall be credited with a Year of Eligibility
Service for each Eligibility Computation Period in which the Employee
completes at least one thousand (1000) Hours of Service.
(c) For purposes of computing Years of Eligibility Service,
an Employee's service shall also include service credited under
Sections 4.6 and 4.7.
4.2 Vesting Service.
(a) For Plan Years ending prior to January 1, 1999, a Year of
Vesting Service shall be measured on an employment year, which is the
twelve (12) month period starting on the date the Employee first
performs an Hour of Service for the Employer, or an anniversary of such
date. For Plan Years commencing on or after January 1, 1999, a Year of
Vesting Service shall be measured on a Plan Year (Vesting Computation
Period).
(b) Subject to the provisions of Section 4.5(d), an Employee
shall be credited with a Year of Vesting Service for each Plan Year in
which the Employee completes at least one thousand (1000) Hours of
Service.
(c) For purposes of computing Years of Vesting Service, an
Employee's service shall include service credited under Section 4.6. In
the case of an Employee who was enrolled in and met the eligibility and
disability requirements of the CenturyTel, Inc. Long-Term Disability
Plan (the "LTD Plan") and who has not retired and become eligible for a
disability benefit under this Plan, service shall also include the
period of time (i) commencing with the beginning of the disability
covered by the LTD Plan and (ii) ending when eligibility for benefits
under the LTD Plan ceases.
4.3 Credited Service.
(a) For Plan Years ending prior to January 1, 1999, a Year of
Credited Service shall be measured on an employment year, which is the
twelve (12) month period starting on the date the Participant first
performs an Hour of Service for the Employer, or an anniversary of such
date. For Plan Years commencing on or after January1, 1999, service for
purposes of determining an Employee's Years of Credited Service shall
be measured on a Plan Year (Benefit Computation Period).
(b) Subject to the provisions of Section 4.5(a), below, an
Employee shall be credited with a full Year of Credited Service for any
Plan Year in which he has been credited, for service with the Employer,
with at least one thousand (1000) Hours of Service.
(c) In the case of an Employee who was eligible to the
participate in the Plan and who was enrolled in and met the eligibility
and disability requirements of the CenturyTel, Inc. Long-Term
Disability Plan (the "LTD Plan"), who has not retired and become
eligible for a disability benefit under this Plan, and who has
completed ten (10) Years of Service, service for purposes of
determining an Employee's Years of Credited Service shall also include
the period of time (i) commencing with the beginning of the disability
covered by the LTD Plan and (ii) ending when eligibility for benefits
under the LTD Plan ceases, with his rate of compensation immediately
prior to his Disability being deemed to continue during such period for
the purpose of computing Final Average Compensation.
(d) Subject to the provisions of Section 4.6, service of
Employees of CenturyTel, Inc., any adopting Affiliate, and any Adopting
Entity (other than former employees of Pacific Telecom, Inc. who became
employees of CenturyTel, Inc. or an Affiliate thereof as of the date of
acquisition of Pacific Telecom, Inc. by CenturyTel, Inc, or an
Affiliate thereof) shall begin to be counted for purposes for computing
Years of Credited Service effective January 1, 1999. Such Employees
shall not be credited with Years of Credited Service for years
beginning before January 1, 1999.
(e) Notwithstanding the foregoing provisions of this Section
4.3, Credited Service shall not include any period of an individual's
employment during which the individual is not classified by the
Company, an Affiliate or an Adopting Entity as a common-law employee of
the Company, an Affiliate, or an Adopting Entity regardless of any
subsequent reclassification of such individual as a "common-law"
employee of the Company, an Affiliate or an Adopting Entity by the
Company, an Affiliate, an Adopting Entity, any governmental agency, or
any court.
4.4 Reemployment after Break in Service.
(a) When an Employee who has a vested interest in his or her
benefit under Section 5.6(b) incurs a Break in Service, and thereafter
is reemployed by the Employer and the number of Years of Service before
the Break in Service is greater than the number of consecutive Breaks
in Service, then the break in the Employee's employment shall be
bridged, and there shall be added to the service that has accumulated
since his reemployment the aggregate of all previous periods of service
that the Employee had prior to the break, provided that the Employee
had at least one (1) Year of Service preceding the Break in Service.
(b) Upon retirement or separation from service following the
bridging of a Break in Service hereunder, the Employee's benefits under
this Plan shall be based on his Final Average Compensation and Years of
Credited Service both before and after the Break in Service.
(c) Notwithstanding the foregoing, if the application of the
bridging of service provisions contained in this Section 4.4 would
result in a lower or reduced benefit for a Participant, then the
provisions of this Section 4.4 shall not apply to such Participant.
4.5 Transition Rules and Short and Overlapping Computation Periods
(a) For each Computation Period commencing prior to 1999, if
a Participant was credited in a Plan Year with less than 2080 of Hours
of Service, the Participant will be credited for such Computation
Period with a fraction of a Year of Credited Service (not in excess of
one (1)), where the numerator of the fraction is the number of Hours of
Service credited to the Participant during such Computation Period and
the denominator is 2080. For Plan Years commencing in 1999 and
thereafter, a Participant shall be credited with one (1) full Year of
Credited Service if the Participant completes one thousand (1000) Hours
of Service during such Plan Year. For the 1998 Plan Year, each
Participant's Year of Credited Service shall be determined pursuant to
(c)(iii) below.
(b) If the compensation (if any) used to determine a
Participant's accrued benefit under any benefit formula in the Plan is
so defined as to cause application of the preceding subsection (a)
otherwise to violate the prohibition against double proration in 29
C.F.R. ss.2530.204-2(d), then the Participant's compensation under such
definition for any Plan Year during which the Participant is credited
with less than 2080 of Hours of Service in the Plan Year shall be
adjusted by multiplying the Participant's compensation under such
definition for the Plan Year by a fraction, the numerator of which is
2080 Hours of Service, and the denominator of which is the number of
Hours of Service credited to the Participant during such Plan Year.
(c) For any short and/or overlapping computation period
for vesting, break in service or benefit accrual purposes which arose
due to the changes in the Computation Periods for Years of Vesting
Service and Years of Credited Service, commencing on or after
January 1, 1999, the following rules shall apply:
(i) For vesting purposes, a Participant who is
credited with 1000 Hours of Service in both the
Computation Period commencing in 1998 and the overlapping
Computation Period commencing January 1, 1999 shall
be credited with two (2) Years of Service for vesting
purposes.
(ii) For Break in Service purposes, an Employee who has
terminated employment will have a One-Year Break in
Service for each of the Computation Periods
commencing in 1998 and commencing on January 1, 1999
if the Employee has not more than 500 Hours of
Service in such Computation Periods, respectively.
(iii) For benefit accrual purposes, a Participant shall
be credited with a pro-rated portion of a Year of
Credited Service for the Computation Period
commencing in 1998 if the Participant completes a
pro-rated portion of 1000 Hours of Service by
December 31, 1998. The pro-rated portion of the
1000-hour requirement shall be determined by
multiplying the number of calendar days between the
participant's employment anniversary date and
December 31, 1998 times 2.7.
4.6 Special Rules for Service Under Prior Plan. An Eligible
Employee shall be credited with service for all purposes under this Plan,
including eligibility, participation, vesting and benefit accrual, for service
credited under the terms of the Prior Plan. Notwithstanding the preceding
sentence, this Section 4.6 shall not be applied in a manner which, in
conjunction with the service crediting rules above, would result in an Employee
being credited with more than one Year of Service in any Plan Year, and in such
event, the Employee's service credit will be limited to one (1) year of service.
An Employee will receive service credit under this Section 4.6 only if the
Employee is a participant in this Plan upon his initial hire by the Employer,
and only if this Plan receives a transfer of benefit liabilities and assets with
respect to such Employee from the Prior Plan.
4.7 Transfers between Company, Affiliates and Adopting Entities
(a) Transfer of employment between the Company, an
adopting Affiliate, or an Adopting Entity shall not be considered a
termination of employment.
(b) Service for an Affiliate or Adopting Entity shall
only be counted after the date of affiliation, or such earlier date
fixed by the Company in a statement of adoption.
(c) Years of Eligibility Service and Years of Vesting
Service shall be counted for service with the Company, any Affiliate,
and any Adopting Entity. Except as provided in (d) below, Years of
Credited Service shall be counted for service with an Employer, and a
nonadopting Affiliate only if the obligation to pay benefits based on
service with such Affiliate is assumed from a plan maintained by the
Affiliate, as evidenced by a statement of assumption signed by the
Company, provided to the Committee and communicated to Employees.
(d) Years of Credited Service shall be counted for
service with CenturyTel, Inc. or any Affiliate beginning as of January
1, 1999, and service with CenturyTel, Inc. or any adopting Affiliate
prior to January 1, 1999, shall not be counted under this Plan for
purposes of determining Years of Credited Service.
(e) An Employee's Year of Credited Service for the
year in which the Employee transfers to or from employment with an
Employer shall be determined as follows:
(i) The total number of days worked by the
Employee for an Employer during a Plan Year
shall be divided by 365.
(ii) The total number of hours worked by the
Employee for the Company, any Affiliate and
any Adopting Entity for the Plan Year shall
be determined and shall be utilized to
determine if the Employee would have been
entitled to be credited with a Year of
Credited Service under Section 4.3 if the
Employee had worked for an Employer during
the entire Plan Year.
(iii) The result of the determination under (ii)
above, shall be multiplied by the
fraction resulting from the computation
under (i) above, and the result shall be the
fractional Year of Credited Service, if any,
credited to the Employee under this Plan for
such Plan Year.
ARTICLE V
BENEFITS ON RETIREMENT, DEATH, DISABILITY
AND TERMINATION OF EMPLOYMENT
5.1 Normal Retirement. An Employee who attains Normal Retirement
Age shall have the right to retire with a fully vested and nonforfeitable basic
benefit computed in accordance with Section 6.1, subject to the limitations
contained in Section 5.7, commencing as of the first day of the month coinciding
with or immediately following his retirement.
5.2 Early Retirement.
(a) An Employee who has attained age fifty-five (55) and
completed five (5) Years of Credited Service may retire before
attaining Normal Retirement Age and shall be entitled to a benefit
hereunder.
(b) The benefit provided on Early Retirement under this
Section 5.2 shall be a fully vested and nonforfeitable benefit computed
in accordance with Section 6.2, subject to the limitations contained in
Section 5.7.
5.3 Deferred Retirement. An Employee who continues to work for the
Employer after his Normal Retirement Age shall be entitled to a deferred
retirement benefit, computed in accordance with Section 6.3, subject to the
limitations contained in Section 5.7.
5.4 Disability Retirement. An Employee shall be entitled to a
disability retirement benefit if he becomes Disabled. An Employee's disability
retirement benefit will be computed in accordance with Section 6.4, and will
commence as of the first day of the month coinciding with or following the
Employee's Normal Retirement Age; provided, however, that an Employee may elect
an early commencement of his disability retirement benefit pursuant to Section
7.11.
5.5 Spouse's Benefit. A Spouse of a Participant shall be entitled
to a benefit computed in accordance with Section 6.5 if the Participant dies
before the Annuity Starting Date and if the requirements of (a) or (b), below,
are met, and the requirement of (c), below, is met.
(a) the Participant was employed by the Employer on his date
of death and had earned a nonforfeitable right to benefits hereunder.
(b) (i) the Participant had terminated employment with the
Employer after attaining Normal Retirement Age or becoming eligible for
an early retirement benefit under Section 5.2 or a disability
retirement benefit under Section 5.4; or
(ii) the Participant had terminated employment with
the Employer after earning a nonforfeitable right to benefits hereunder
but prior to attaining Normal Retirement Age or becoming eligible for
an early or disability retirement benefit hereunder.
(c) the Participant was legally married to the surviving
spouse at death and was so married for the year preceding death.
The spouse of a Participant who has a Platteville employee contribution
account under the Plan shall be entitled to a benefit determined under Section
6.5(d) upon the death of the Participant.
No Spouse's benefit shall be payable to the Spouse of a Participant who
dies before the Annuity Starting Date without having met the requirements of
this Section 5.5. Except as otherwise provided in the Plan, whether a
Participant has earned a nonforfeitable right to a benefit shall be determined
in accordance with Section 5.6(b).
5.6 Benefit on Termination of Employment.
(a) A Participant who terminates employment prior to becoming
eligible for a normal, early or disability retirement benefit
hereunder, and prior to his death, shall be entitled to a benefit
computed in accordance with Section 6.6, subject to the vesting
schedule contained in subparagraph (b) below, and the limitations
contained in Section 5.7.
(b) Participants shall earn a nonforfeitable interest in
their benefits under this Plan according to the following schedule:
YEARS OF VESTING SERVICE VESTING PERCENTAGE
less than five (5) 0%
five (5) or more 100%
Notwithstanding the foregoing schedule, a Participant's right to
benefits under this Plan shall be fully vested and nonforfeitable upon
attainment of Normal Retirement Age, upon meeting the requirements for
an early retirement benefit under Section 5.2, and upon meeting the
requirements for a disability benefit under Section 5.4.
(c) Notwithstanding the vesting schedule in (b), above, a
Participant's Accrued Benefit shall fully vest and become
nonforfeitable automatically upon the occurrence of any of the
following events, each of which shall be referred to herein as a
"Change of Control":
(i) the acquisition by any person of beneficial
ownership of 30% or more of the outstanding shares of the Company's
common stock, $1.00 par value per share (the "Common Stock"), or 30%
or more of the combined voting power of the Company's then outstanding
securities entitled to vote generally in the election of directors;
provided, however, that for purposes of this subsection (i), the
following acquisitions shall not constitute a Change of Control:
(A) any acquisition (other than a Business
Combination (as defined below) which constitutes a
Change of Control under Section 5.6(c)(iii)) of
Common Stock directly from the Company,
(B) any acquisition of Common Stock by the
Company or its subsidiaries,
(C) any acquisition of Common Stock by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation
controlled by the Company, or
(D) any acquisition of Common Stock by any
corporation pursuant to a Business Combination that
does not constitute a change of control under Section
5.6(c)(iii); or
(ii) individuals who, as of January 1, 2000,
constitute the Board of Directors of the Company (the "Incumbent
Board") cease for any reason to constitute at least a majority of
the Board of Directors, provided, however, that any individual
becoming a director subsequent to such date whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least two-thirds of the directors then
comprising the Incumbent Board shall be considered a member of
the Incumbent Board, unless such individual's 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 Incumbent Board; or
(iii) consumption of a reorganization, share exchange,
merger or consolidation (including any such transaction involving any
direct or indirect subsidiary of the Company), or sale or other
disposition of all or substantially all of the assets of the
Company (a "Business Combination"); provided, however, that in no
such case shall any transaction constitute a Change of Control if
immediately following such Business Combination:
(A) the individuals and entities who were
the beneficial owners of the Company's outstanding
Common Stock and the Company's voting securities
entitled to vote generally in the election of
directors immediately prior to such Business
Combination have direct or indirect beneficial
ownership, respectively, of more than 50% of the then
outstanding shares of common stock, and more than 50%
of the combined voting power of the then outstanding
voting securities entitled to vote generally in the
election of directors of the surviving or successor
corporation, or, if applicable, the ultimate parent
company thereof (the "Post-Transaction Corporation"),
and
(B) except to the extent that such ownership
existed prior to the Business Combination, no person
(excluding the Post-Transaction Corporation and any
employee benefit plan or related trust of either the
Company, the Post-Transaction Corporation or any
subsidiary of either corporation) beneficially owns,
directly or indirectly, 20% or more of the then
outstanding shares of common stock of the corporation
resulting from such Business Combination or 20% or
more of the combined voting power of the then
outstanding voting securities of such corporation;
and
(C) at least a majority of the members of
the board of directors of the Post-Transaction
Corporation were members of the Incumbent Board at
the time of the execution of the initial agreement,
or of the action of the Board of Directors, providing
for such Business Combination; or
(d) approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
For purposes of this Section 5.6(c), the term "person" shall
mean a natural person or entity, and shall also mean the group
or syndicate created when two or more persons act as a
syndicate or other group (including, without limitation, a
partnership or limited partnership) for the purpose of
acquiring, holding, or disposing of a security, except that
"person" shall not include an underwriter temporarily holding
a security pursuant to an offering of the security.
5.7 Limitations on Pensions.
(a) In addition to any other limits set forth in the Plan,
and notwithstanding any other provision of the Plan, in no event shall
the annual amount of any retirement benefit payable with respect to a
Participant under the Plan exceed the maximum annual amount permitted
by Section 415 of the Code for a retirement benefit payable in the
form and commencing at the age provided for with respect to the
Participant. The determination in the preceding sentence shall be made
after taking into account the retirement benefits payable with respect
to the Participant under all other defined benefit plans required to
be aggregated with this Plan under Section 415(f)(1)(A) of the Code,
and after taking into account the annual additions with respect to the
Participant under all defined contribution plans required to be
aggregated under Section 415(f)(1)(B) of the Code.
(b) If the limits imposed by subsection (a), above, with
respect to a Participant would otherwise be exceeded, the retirement
benefits and annual additions with respect to the Participant under the
plans described in subsection (a), above, shall be reduced until those
limits are satisfied. For purposes of applying the preceding sentence,
the retirement benefits payable with respect to the Participant under
the defined benefit plans described in subsection (a), above, shall be
reduced before the annual additions with respect to the Participant are
reduced under the defined contribution plans described in subsection
(a), above. Among plans of the same type (defined benefit or defined
contribution), reductions shall be made in reverse chronological order,
that is, on a plan-by-plan basis, beginning with the plan under which
the Participant most recently accrued a benefit or was allocated an
annual addition, and ending with the plan under which the Participant
least recently accrued a benefit or was allocated an annual addition.
(c) The limits imposed by subsection (a), above, shall be
applied on the basis of:
(i) before January 1, 2000, an interest rate
assumption of five percent (5%) per annum, compounded
annually, and on and after January 1, 2000, in accordance with
Section 415(b)(2)(E) of the Code,, as amended by Section 767
of the Uruguay Round Agreements Act (as subsequently amended
by Section 1449 of the Small Business Job Protection Act of
1996),
(ii) the definition of compensation in Treas. Reg. ss.
1.415-2(d)(11)(i),
(iii) any cost-of-living increase that the Plan is
permitted to take into account under Section 415(d)
of the Code,
(iv) any applicable transition rule prescribed in
Section 1106(i) of the Tax Reform Act of 1986, and
(v) any other applicable transition rule that
preserves a Participant's accrued benefit under the Plan as of
the effective date of the enactment or amendment of Section
415 of the Code.
(d) Notwithstanding the foregoing, the application of this
Section 5.7 shall not cause a Participant's accrued benefit (including
any optional benefit) determined under the provisions of the Plan to be
less than the greater of:
(i) the Participant's accrued benefit based on all
service credited under the Plan taking into account the
limitations of Section 415 of the Code in effect as of the
date of the determination; or
(ii) the sum of
(A) the Participant's accrued benefit under
the terms of the Prior Plans in effect as of December
31, 1999, taking into account the limitations of
Section 415 of the Code in effect as of December 7,
1994, and
(B) the Participant's accrued benefit based
solely on service after December 31, 1999, taking
into account the limitations of Section 415 of the
Code in effect as of the date of the determination.
(e) This Section 5.7 is intended to satisfy the requirements
imposed by Section 415 of the Code and shall be construed in a manner
that will effectuate this intent. This Section 5.7 shall not be
construed in a manner that would impose limitations that are more
stringent than those required by Section 415 of the Code.
ARTICLE VI
COMPUTATION OF BENEFIT AMOUNTS
6.1 Normal Retirement Benefit.
(a) Except as provided in Section 6.1(b) and subject to the
limitations contained in Section 5.7, the basic benefit on normal retirement for
a person retiring on or after January 1, 1990 is a monthly pension for the life
of the Participant equal to the sum of:
(i) Years of Credited Service (YCS) as of
December 31, 1998, up to a maximum of thirty (30),
times the sum of 1.3 percent of Final Average Pay
(FAP) plus .65 percent of Final Average Pay in excess
of Social Security Covered Compensation (SSCC) as
follows:
YCS (up to 30) X ((1.3%X FAP) + (.65 X (FAP - SSCC))), and
(ii) Years of Credited Service (YCS) accrued
after December 31, 1998, up to a maximum of thirty
(30), taking into account Years of Credited Service
under clause (i), above, first in determining the
thirty (30) year maximum, times the sum of 0.50
percent of Final Average Pay plus 0.50 percent of
Final Average Pay in excess of Social Security
Covered Compensation (SSCC) as follows:
YCS (up to 30, taking into account benefit
years under (i), above, first) X ((0.50% X
FAP) + (FAP - SSCC))).
(b) For Participants covered by a collective bargaining
agreement which provides for participation in this Plan, and subject to the
limitations contained in Section 5.7, the basic benefit on normal retirement for
a person retiring on or after January 1, 1990 is a monthly pension for the life
of the Participant equal to the number of Years of Credited Service (YCS), up to
a maximum of thirty (30), times the sum of 1.3 percent of Final Average Pay
(FAP) plus .65 percent of Final Average Pay in excess of Social Security Covered
Compensation (SSCC) as follows:
YCS (up to 30) X ((1.3% X FAP + (.65% X (FAP - SSCC))).
(c) Notwithstanding the provisions of (a) and (b), above,
the benefit of former employees of Pacific Telecom, Inc. who were on long-term
disability under the Pacific Telecom, Inc. Long-Term Disability Plan as of
December 31,1998 shall, subject to the limitations contained in Section 5.7, be
computed in accordance with the benefit formula contained in Section 6.1(b),
above.
(d) If a Participant either becomes covered by a
collective bargaining agreement which provides for participation in this Plan or
ceases to be so covered, the Participant's basic benefit shall be determined by
applying Section 6.1(a) above to the time period during which the Participant is
not covered by a collective bargaining agreement which provides for
participation in this Plan, and Section 6.1(b) above shall apply to the time
period during which the Participant is so covered. In the event a Participant's
basic benefit is determined under both Section 6.1(a) and (b) for periods within
a single Plan Year, the Participant shall not be given duplicate credit under
both Section 6.1(a) and 6.1(b), but each period shall be counted only once in
determining the Participant's basic benefit.
(e) (i) The benefits for certain employees of certain
Affiliates and Adopting Entities, and benefits
attributable to transfers of assets from other plans
to this Plan are determined in accordance with
Exhibit "A".
(ii) The entities reflected on Exhibit "A" as of the
date of execution of this Amended and Restated Plan
are as follows:
Alascom, Inc./RCA (including Telephone Utilities of Alaska,
Greatland Telephone Company, Sitka Telephone Company and
PACOM, Inc.)
Inter-Island Telephone Co.
Telephone Utilities International
Cencom, Inc., Cencom of Wisconsin, Inc. and
Weyauwega Telephone Co.
National Gateway Telecom
Pacific Corp Trans, Inc.
Contel (Glacier State Telephone Company)
Upsouth Peninsula
Telecommunications, Inc.
Telephone Utilities of Wyoming, Inc.
Turtle Lake Telephone Company
Postville Telephone Company
Tharp Telephone Company
PACCOM Leasing
Northland Telephone Company
Wayside Telephone Company
Shell Lake Telephone Company
North-West Telecommunications/Platteville
Pacific Telecom Service Company
Casco Telephone Company
Ameritech
CSW NET
CenturyTel of Upper Michigan, Inc.
6.2 Early Retirement Benefit.
On early retirement, the basic benefit shall be the normal retirement
benefit under Section 6.1 reduced as follows. The amount of basic benefit
attributable to the appropriate percentage of Final Average Pay determined under
Section 6.1(a) or 6.1(b) (the Base Benefit) and the amount attributable to the
appropriate percentage of Final Average Pay in excess of Social Security Covered
Compensation determined under Section 6.1(a) or 6.1(b) (the Excess Benefit)
shall be adjusted to the Annuity Starting Date by the percentages prescribed in
the following table, interpolating between ages through the last full month.
Age at Benefit Base Benefit Excess Benefit
Starting Date Percentage Percentage
64 100% 92%
63 100% 84%
62 100% 76%
61 95% 72%
60 90% 68%
59 84% 64%
58 78% 60%
57 72% 56%
56 66% 52%
55 60% 48%
6.3 Deferred Retirement Benefit.
(a) On deferred retirement, the basic benefit shall be that
for normal retirement based on Years of Credited Service and Final Average Pay
at actual retirement.
(b) A Participant who works past the month in which normal
retirement benefits would have begun shall be notified in writing during that
month that benefits will not be started, except for payments under Section 7.10.
The notification shall contain the information required by applicable law and
regulations on suspension of benefits.
(c) If benefits start under Section 7.10 to a Participant
during employment the following shall apply:
(i) The starting date under Section 7.10 shall be the
Annuity Starting Date.
(ii) All provisions with respect to the time, form
and amount of benefit shall apply as of the Annuity
Starting Date. The form of benefit determined as of
that date shall be final and shall not be reopened at
later termination of employment. The amount of
benefit for service to the Annuity Starting Date
shall not be changed by later changes in Final
Average Pay.
(iii) Additional accruals shall be calculated at each
calendar year-end after the Annuity Starting Date as
follows:
(A) The additional benefit shall be
based on additional service and on Final Average
Pay as of the year-end.
(B) Added benefits shall be in the form
determined under (ii) above.
(C) In the year in which the Employee
terminates employment the date of termination shall
be substituted for year-end.
(iv) The preretirement death benefit for a spouse
under Section 5.5 will not apply if the Participant
dies after the Annuity Starting Date.
6.4 Disability Retirement Benefit. The annual benefit amount
payable to a disabled Participant shall be computed in the same manner as the
basic benefit under Section 6.1, determined on the basis of Years of Credited
Service and Final Average Pay at retirement and Social Security Covered
Compensation at Disability.
6.5 Spouse's Benefit. The benefit payable to a Spouse who
qualifies for a Spouse's benefit under Section 5.5 shall be determined as
follows:
(a) If at death the Participant is age fifty-five
(55) or over, or actively employed by the Employer with thirty (30) or more
Years of Service, the benefit of the Spouse shall be the amount payable to the
Spouse as beneficiary under the survivor annuity portion of the Qualified Joint
and Survivor Annuity with respect to the Participant, determined as though the
Participant had retired on the first day of the month in which death occurs. On
the death of a Participant with thirty (30) or more Years of Service before age
fifty-five (55), the Participant shall be assumed to be age fifty-five (55) for
purposes of this subparagraph (a).
(b) If the Participant does not meet the requirements
of (a), above, at death, the benefit of the Spouse shall be the amount payable
to the Spouse as beneficiary under the survivor annuity portion of the Qualified
Joint and Survivor Annuity with respect to the Participant, determined as though
the Participant had separated from service on the date of death, if not already
separated, and had survived until age fifty-five (55).
(c) Notwithstanding the foregoing, if at the time of
death the Actuarial Value of the Participant's Accrued Benefit is such that the
provisions of Section 7.9 would have applied to require a lump sum payment of
such Participant's Accrued Benefit if the Participant had terminated employment
on the date or his or her death, the Spouse shall be paid the amount of the lump
sum payment as determined under Section 7.9.
(d) In addition to any benefit to which a Spouse may
be entitled under this Plan, a Spouse of a Participant who has a Platteville
employee contribution account under the Plan shall be entitled to a benefit upon
the death of the Participant equal to the value of such account.
6.6 Benefits for Terminated Vested Employees.
(a) The benefit amount payable on or after Normal Retirement
Age to a Participant who terminates employment prior to death, disability or
meeting the requirements for Early Retirement under Section 5.2, and with a
nonforfeitable interest (in whole or in part) in his accrued benefit hereunder
shall be computed in accordance with Section 6.1, based on Years of Credited
Service, Final Average Pay and Social Security Covered Compensation at
termination of employment.
(b) If a terminated vested Participant elects early
commencement of benefits under Section 7.1(f), the benefit payable on such an
early commencement of benefits shall be the Accrued Benefit, reduced to the
Annuity Starting Date under the following table, interpolating between ages
through the last full month.
Age at Annuity Benefit
Starting Date Percentage
64 88%
63 78%
62 68%
61 61%
60 54%
59 48%
58 43%
57 38%
56 34%
55 30%
6.7 Reduction for Other Benefits.
(a) If an Employee becomes entitled to workers' compensation
benefits for disability, the normal retirement basic benefit shall be reduced as
follows:
(i) Each monthly benefit shall be reduced by the
amount of any workers' compensation installment payment for
that month.
(ii) The total benefit shall be reduced actuarially
by the portion of any lump sum workers' compensation award
that is actuarially attributable to years after normal
retirement date.
(b) If an Employee becomes entitled to benefits under any
other defined benefit pension maintained by an Employer, based on service
counted for purposes of determining Years of Credited Service under this Plan,
the Employee's benefit under this Plan shall be reduced by the Actuarial
Equivalent of the Employee's benefit based on such service under the other Plan.
6.8 Cost of Living Adjustment
(a) The amount currently payable to each Participant who has
no Hours of Service after December 31, 1987, or to the Spouse or other
beneficiary of such a Participant, shall be adjusted by the amount under (b),
below, as follows:
(i) The adjustment shall be made each January 1
beginning with the first January that is at least twelve (12)
months after benefits payments commence.
(ii) The adjustment shall be made to the benefit
actually being paid after conversion to an optional form.
(b) The adjustment under (a) shall be the lesser of:
(i) The percentage increase in the U.S. Consumer
Price Index (all items) during the twelve (12) months ending
with the September index preceding the adjustment date, and
(ii) Two (2) Percent.
(c) If the Consumer Price Index decreases during the period
described in (b)(i), no downward adjustment in retirement benefits shall be
made. Any such decrease shall offset any subsequent increases.
(d) The benefit of a Participant who has Hours of Service
after December 31, 1987 shall not be adjusted as provided above. The amount of
the benefit shall be at least as much as the actuarial equivalent of the
Participant's accrued benefit under the Prior Plan as of December 31, 1987,
including the value of potential cost-of-living adjustments.
ARTICLE VII
TIMING AND FORM OF BENEFIT PAYMENTS
7.1 Commencement of Benefits. Subject to the provisions of
Sections 7.9 and 7.10, benefits to a Participant (or Spouse under Sections 5.5
and 6.5) shall commence as of the following dates:
(a) For normal retirement benefits under Section 5.1 and
6.1, as of the last day of the month in which the Participant's Normal
Retirement Date occurs, unless the Participant elects deferred retirement.
(b) For early retirement benefits under Section 5.2 and
6.2, benefits shall commence as of the last day of the month after the
Participant attains Normal Retirement Age, unless the Participant elects to
commence benefits as of the first day of any month coincident with or following
the date of early retirement, in which event benefits shall commence as of the
last day of such month.
(c) For deferred retirement benefits under Sections 5.3
and 6.3, benefits shall commence as of the last day of the month following the
first day of the month coinciding with or following the date on which the
Participant actually retires and elects to commence receiving benefits.
(d) For disability benefits under Sections 5.4 and 6.4,
benefits shall commence as of the Participant's Normal Retirement Age, provided
that, if otherwise eligible for early retirement, the Participant may elect for
benefits to commence on or after the Participant's meeting the requirements for
early retirement. If the Participant notifies the Committee in writing that
disability benefits under this Plan would reduce any other disability benefit,
the Committee shall defer payment until the other benefit stops.
(e) For benefits of a Spouse under Section 5.5 and 6.5,
benefits under Section 6.5(a) shall commence as of the last day of the month
following the first day of the month coinciding with or following the date of
death of the Participant, benefits under Section 6.5(b) shall commence on the
last day of the month following the first day of the month coinciding with or
following the later of the date of death of the Participant or the date on which
the Participant would have attained age fifty-five (55), and benefits for a
Spouse under Section 6.5(d) shall be paid as soon as administratively feasible
following the date of death of the Participant.
(f) For benefits of a terminated vested Participant under
Sections 5.6 and 6.6, benefits shall normally commence as of the last day of the
month after the Participant reaches Normal Retirement Age, provided that a
Participant may elect to commence receiving benefits as of the last day of any
month after the first day of the month coinciding with or following the date the
Participant attains age fifty-five (55). In such event, benefits shall be
reduced as provided in Section 6.6(b).
7.2 Normal Form. Unless a Participant elects another form
of payment in accordance with Section 7.3,
(a) a Participant who is married as of the commencement date
of his benefits shall receive benefits in the form of a Qualified Joint
and Survivor Annuity.
(b) a Participant who is not married on the commencement date
of his benefits shall receive his benefits in the form of a Single Life Annuity.
7.3 Waiver of Normal Form.
(a) a Participant may elect, subject to the provisions of
this Section 7.3 and during the applicable election period, to waive the Normal
Form of benefit and to receive his benefits in an optional form provided in
Section 7.7 pursuant to the following terms and conditions:
(i) a married Participant may elect to waive the
Qualified Joint and Survivor Annuity provided in Section
7.2(a) above in favor of an Alternative Joint and Survivor
Annuity, a Single Life Annuity, or any other optional form of
benefit provided in Section 7.7.
(ii) an unmarried Participant may elect to waive the
Single Life Annuity provided under Section 7.2(b) above in
favor of any optional form of benefit provided in Section 7.7.
(iii) any election hereunder of an alternative form
of benefit must specify such form, and any election of an
alternative form of joint and survivor annuity must be
accompanied by proof of the age of the designated beneficiary
satisfactory to the Committee.
(iv) a married Participant shall not be entitled to
waive the Spouse's benefit provided in Section 5.5.
(b) Any election under this Section 7.3 may be revoked,
either automatically in the circumstances described in Section 7.6, below, or by
filing a written revocation with the Committee in a form and in a manner
acceptable to the Committee. After any such revocation, a new election under
Section 7.6(a) above may be made at any time before the commencement of benefits
to the Participant (or during such other period permitted or required by law).
However, except as provided in Section 7.12(b) or as the Committee may otherwise
provide on the basis of uniform and nondiscriminatory rules, any election under
Section 7.3(a) shall be irrevocable after benefits have commenced to the
Participant.
7.4 Timing of Election and Spousal Consent. An election or
revocation of an election under Sections 7.2 and 7.3 shall be subject to the
following terms and conditions:
(a) Any election or revocation of a form of benefit shall be
made within the ninety (90) day period ending on the date of commencement of
benefits to the Participant (or during such other period permitted or required
by law), and shall be made by giving written notice in such form and manner as
may be required by the Committee.
(b) The election by a married Participant of any form of
benefit other than a Qualified Joint and Survivor Annuity shall be ineffective
unless the Spouse consents in writing to the election, the election designates a
specific alternate beneficiary, including any class of beneficiaries or any
contingent beneficiaries, and/or a form of benefit payment, which may not be
changed without Spousal consent (or the Spouse expressly permits designations by
the Participant without any further Spousal consent), the consent of the Spouse
acknowledges the effect of the election, and the consent of the Spouse is
witnessed by a notary public or plan representative. The consent of the Spouse
must acknowledge the effect of the election of the form of benefit that the
Participant has made, as well as the effect of the designation of any
beneficiary or beneficiaries other than the Spouse which a Participant has made.
The consent of the Spouse shall be irrevocable unless the Participant and the
Spouse agree to a revocation.
(c) Spousal consent as provided in (b), above, shall not be
required if the Committee determines that the consent cannot be obtained because
there is no Spouse, the Spouse cannot be located, or in any other circumstance
specified by any written guidance issued by the Internal Revenue Service.
(d) The consent of a Spouse pursuant to (b), above, shall be
effective only with respect to that Spouse. Also, any establishment that the
consent of a Spouse cannot be obtained under (c), above, shall be effective only
with respect to that Spouse. A consent that permits designations by the
Participant without any requirements of further consent by the Spouse must
acknowledge that the Spouse has the right to limit consent to a specific
beneficiary, and a specific form of benefit where applicable, and that the
Spouse voluntarily elects to relinquish either or both of such rights.
(e) Any consent by a Spouse pursuant to (b), above, shall be
effective only as long as the Participant makes no change in the designated
beneficiary or class of beneficiaries.
7.5 Notice Requirements. Not less than thirty (30) days nor more
than ninety (90) days before the date of commencement of benefits to a
Participant (or during such other period permitted or required by law), the
Committee shall provide to each Participant a written explanation of:
(a) The material features and relative financial values of
the alternative forms of benefits to which the Participant is entitled, or which
the Participant could elect to receive, under the Plan;
(b) In the case of a married Participant, his right to elect
to waive the Normal Form of benefit provided in Section 7.2(a) above, the effect
of such an election, and the requirements (including any spousal consent
requirements) applicable to his election;
(c) In the case of an unmarried Participant, his right to
elect or receive, and the effect of such an election, any other form of benefit
as an alternative benefit to the normal form of benefit specified in Section
7.2(b) above;
(d) In the case of a Participant who is entitled to elect
commencement of a form of payment before attaining Normal Retirement Age, his
right not to elect such early commencement; and
(e) The terms and conditions (if any) under which an election
by a Participant, or a consent by the Spouse of a married Participant, may be
revoked, and the effect of such revocation.
The notice requirement contained in this Section 7.5 shall not apply in
the case of a lump sum cash out distribution to a Participant pursuant to
Section 7.9.
The commencement date for a benefit in a form other than a Qualified
Joint and Survivor Annuity may be less than thirty (30) days after receipt of
the written explanation described above provided: (a) the Participant has been
provided with information that clearly indicates that the Participant has at
least thirty (30) days to consider whether to waive the Qualified Joint and
Survivor Annuity and elect (with Spousal consent) a form of distribution other
than a Qualified Joint and Survivor Annuity; (b) the Participant is permitted to
revoke any affirmative distribution election at least until the commencement
date of his benefit or, if later, at any time prior to the expiration of the
seven (7) day period that begins the day after the explanation of the Qualified
Joint and Survivor Annuity is provided to the Participant; and (c) the
commencement date of the Participant's benefit is a date after the date that the
written explanation was provided to the Participant.
7.6 Special Rules for Death of Participant or Beneficiary.
(a) If the designated Beneficiary with respect to an
Alternative Joint and Survivor Annuity dies before the Annuity Starting Date for
the Participant, the election of such annuity (including, if applicable, any
election pursuant to Section 7.3, above, to waive the Spouse's benefit) shall be
void, and the Participant shall be deemed not to have previously elected an
Alternative Joint and Survivor Annuity. If the designated Beneficiary with
respect to an Alternative Joint and Survivor Annuity dies before the
Participant, but after the Annuity Starting Date for the Participant, the amount
of the benefit thereafter payable to the Participant shall not be affected in
any way as a result thereof.
(b) If a Participant dies before his Annuity Starting Date
without having made a valid election of an optional form of payment described in
Section 7.7, no individual shall have a right to any payment under the Plan with
respect to the Participant, unless the Participant is survived by a spouse who
is entitled to a Spouse's benefit.
(c) If a Participant dies before his Annuity Starting Date
after terminating employment with the Employer and after having made (and not
revoked) a valid election of an Alternative Joint and Survivor Annuity leaving
the designated Beneficiary with respect to the Alternative Joint and Survivor
Annuity surviving him, the Beneficiary shall be eligible to receive the survivor
annuity payable under such Alternative Joint and Survivor Annuity as if the
Employee had died on the day following his Annuity Starting Date.
(d) If a Participant dies before his Annuity Starting Date
after terminating employment with the Employer and after having made (and not
revoked) a valid election of a lump sum distribution described in Section
7.7(b), the lump sum distribution shall be paid to the Participant's designated
Beneficiary (or, if the Participant has not designated a Beneficiary, or if none
of his designated Beneficiaries survives him, the lump sum distribution shall be
paid to the executor of the Participant's will or the administrator of his
estate).
(e) If a Participant dies before his Annuity Starting Date
after terminating employment with the Employer and after having made (and not
revoked) a valid election of a Ten-Year Certain and Life Annuity Option
described in Section 7.7(c), the Participant's designated Beneficiary shall be
eligible to receive the ten-year certain payments pursuant to such option as if
the Employee had died on the day following his Annuity Starting Date (or, if the
Participant has not designated a Beneficiary, or if none of his designated
Beneficiaries survives him, the ten-year certain payments pursuant to such
option shall be paid to the executor of his will or the administrator of his
estate).
(f) If a Participant dies on or after his Annuity Starting
Date, any distribution that was scheduled to be paid to him on or before his
date of death but that was not paid to him on or before his date of death due to
administrative or other delay, shall be paid instead to the executor of his will
or the administrator of his estate.
7.7. Optional Forms of Payment.
(a) Alternative Joint and Survivor Annuity.
(i) Under the Alternative Joint and Survivor Annuity,
a reduced amount shall be payable to the retired Employee for
his lifetime. The Beneficiary, if surviving at the retired
Employee's death, shall be entitled to receive thereafter a
lifetime survivor benefit in an amount equal to 100 percent of
the reduced amount that had been payable to the retired
Employee.
(ii) The reduced amount payable to the retired
Employee shall be the Actuarial Equivalent of the amount
determined under Section 6.1, 6.2, 6.3 and/or 6.4, as the case
may be. The appropriate actuarial factor shall be determined
for any Employee and his Beneficiary as of the commencement
date of the Employee's benefits.
(iii) If an Employee designates any individual other
than his or her spouse as his Beneficiary, the annual amount
of the Employee's annuity under the Alternative Joint and
Survivor Annuity shall be not less than fifty percent (50%) of
the annual benefit calculated as a single life annuity, and
the Beneficiary's survivor annuity under the Alternative Joint
and Survivor Annuity shall be reduced to the extent necessary
to reflect any adjustment required by this paragraph (iii) in
the amount of the Employee's annuity under the Alterative
Joint and Survivor Annuity.
(b) Lump Sum Distribution Option.
(i) Any Employee who qualifies for a benefit under
Section 5.1, 5.2, 5.3, 5.4 or 5.6 may elect to receive his or
her benefit in the form of a lump sum distribution if the
Actuarial Value of the vested, accrued benefit of the
Participant is over $5,000 but not over $10,000. The amount of
any such lump sum distribution shall be the Actuarial
Equivalent (as of the Annuity Starting Date for the Employee)
of his benefit computed under Section 6.1 (or in the case of a
terminated vested Employee's benefit, as computed under
Section 6.6) as a single life annuity commencing on his
Annuity Starting Date.
(ii) If the Actuarial Value of the Spouse's death
benefit under Section 5.5 and 6.5 is greater than $5,000 and
not over $10,000, the Spouse may elect to receive his or her
benefits as a lump sum.
(iii) Notwithstanding anything to the contrary in
Section 7.7, the payment of a benefit in the form of a lump
sum distribution shall be made in a single taxable year of the
recipient and shall be made on or as soon as practicable after
the commencement date of the Employee's benefits.
(c) Ten-Year Certain and Life Annuity Option.
(i) A Participant in the Plan shall be eligible to
elect to receive his benefits in the form of an annuity that
is actuarially equivalent to the Plan's Single Life Annuity
and that provides equal monthly payments for the life of the
Participant, with the condition that if the Participant dies
before he has received one-hundred twenty (120) monthly
payments, the Participant's designated Beneficiary shall
receive monthly payments in the same amount as the Participant
until a total of one-hundred twenty (120) monthly payments
have been made to the Participant and his Beneficiary
combined.
(d) Early Retirement Annuity Option
(i) On Early Retirement, a Participant in the Plan
shall be eligible to elect to receive his benefits in the form
of an annuity under which the monthly payments before first
eligibility for Social Security retirement benefits (either
age 62 or age 65, as elected by the Participant) are increased
by a temporary supplement and the remaining payments are
reduced so as to provide approximately equal payments
throughout when combined with Social Security.
7.8 Annuity Form of Payment. All benefits, except those benefits
paid in a lump sum distribution pursuant to Section 7.7(b) or 7.9, shall be
payable in monthly installments as follows:
(a) The first installment shall be paid to the retired
Employee (or Spouse, in the case of a Spouse's benefit) as of the commencement
date determined in accordance with Section 7.1;
(b) Where installments are to be paid to a Beneficiary under
an Alternative Joint and Survivor Annuity, the first installment to the
Beneficiary shall be paid as of the beginning of the first month following the
death of the Participant;
(c) The final installment shall be paid as of the beginning
of the month during which the death of the retired Employee or Beneficiary, as
the case may be, occurs, except that disability benefit installments shall cease
prior to the death of the retired Employee if and when such Employee ceases to
satisfy the disability conditions of Section 5.4; and
(d) A check in payment of a monthly installment may be
mailed, in the discretion of the Committee, before the date as of which the
payment is made.
7.9 Mandatory Lump Sum Distribution of Small Benefits. If a
former Employee is entitled to a termination benefit and the Actuarial Value of
such termination benefit does not exceed $5,000, the former Employee shall
receive such termination benefit in the form of a lump sum payment equal to the
Actuarial Value of the termination benefit otherwise payable to him under the
Plan. If a Spouse is entitled to a Spouse's benefit and the Actuarial Value of
such Spouse's benefit does not exceed $5,000, the Spouse shall receive such
Spouse's benefit in the form of a lump sum payment equal to the Actuarial Value
of the Spouse's benefit otherwise payable to the Spouse under the Plan.
Notwithstanding the foregoing, this Section 7.8 shall not apply in the case of a
former Employee or a Spouse who is otherwise eligible to elect immediate
commencement of a termination benefit or Spouse's benefit.
7.10 Minimum Distributions Required Under Code Section 401(a)(9).
The following subsections limit the timing of benefit distributions under the
Plan:
(a) Any benefit that is payable to a Participant hereunder
shall be distributed or commence not later than the Participant's Required
Beginning Date. The benefit shall be distributed, in accordance with Section
401(a)(9) of the Code (including the incidental benefit rules applicable
thereunder),
(i) in a lump sum (to the extent otherwise permitted
under the Plan, including, without limitation, under Section
7.7(b) or 7.9),
(ii) over the life of the Participant,
(iii) over the lives of the Participant and the
Participant's Beneficiary,
(iv) over a period not extending beyond the
Participant's life expectancy,
(v) over a period not extending beyond the joint and
last survivor expectancy of the Participant and the
Participant's Beneficiary.
If the Participant's entire interest is to be distributed over a period of more
than one (1) year, then the amount to be distributed each year shall be no less
than the amount prescribed under Section 401(a)(9) of the Code.
(b) If the distribution of the Participant's benefit has
commenced in conformity with subsection (a), above, and the Participant dies
before his entire benefit has been distributed to him, the remaining portion of
his benefit shall be distributed to his Beneficiary at least as rapidly as under
the method of distribution that was in effect as of the date of the
Participant's death.
(c) Subject to subsection (d), below, if the Participant dies
before distribution of his benefit has commenced, any benefit that is payable
under the terms of the Plan shall be distributed within five (5) years after the
Participant's death.
(d) Subsection (c), above, shall not apply to:
(i) any portion of the Participant's benefit payable
to (or for the benefit of) a Beneficiary that is distributed
(in accordance with Section 401(a)(9) of the Code) over the
Beneficiary's life (or a period not extending beyond his life
expectancy) commencing within one (1) year after the date of
the Participant's death (or such later date as may be
prescribed under Section 401(a)(9) of the Code), or
(ii) any portion of the Participant's benefit payable
to his Spouse that is distributed over the Spouse's life (or a
period not extending beyond the Spouse's life expectancy)
commencing no later than the date on which the Participant
would have attained age 70 1/2 ; provided that if the Spouse
dies before payments to such Spouse begin, subsections (c) and
(d) shall apply as if the Spouse were the Participant; and
further provided that any amount paid to the child of the
Participant shall be treated as if it had been paid to the
Spouse of the Participant if such amount is payable to the
Spouse upon such child's reaching majority (or such other
event as may be prescribed by the regulations under Section
401(a)(9) of the Code).
(e) For purposes of this Section 7.10, the life expectancy of
the Participant and his Spouse shall be recomputed on an annual basis, but the
life expectancy of any non-Spouse Beneficiary shall be computed only on the date
as of which the distribution commences.
(f) This Section 7.10 shall apply notwithstanding any other
provision of the Plan. The sole purpose of this Section 7.10 is to limit the
manner in which the benefit payments may be made under the Plan in accordance
with Section 401(a)(9) of the Code. This Section 7.10 does not confer any rights
or benefits upon any Participant, spouse, Beneficiary, or any other person.
(g) This Section 7.10 shall not apply to any method of
distribution designated in writing by a Participant under the terms of the Plan
or a Prior Plan before January 1, 1984, in accordance with Section 242(b)(2) of
the Tax Equity and Fiscal Responsibility Act of 1982 (as in effect before the
amendments made by the Tax Reform Act of 1984).
(h) Any Participant who does not elect a form of distribution
before his distribution is required to commence under this Section 7.10 shall
receive the distribution in the form provided for under Section 7.2.
7.11 Early Commencement Election. Notwithstanding any other
provision in the Plan, and subject to the provisions of Sections 7.2 - 7.6 and
Section 7.9, the Participant (or his Spouse, in the case of a Spouse's benefit)
may elect a commencement date that precedes the normal commencement date if he
is otherwise eligible to do so under the terms of the Plan. The election shall
be in writing, in a form acceptable to the Committee, and executed and filed
with the Committee during the ninety (90) day period ending on the commencement
date of the Employee's benefits, or during such other period permitted or
required by law.
7.12 Suspension of Benefits.
(a) No benefit shall be paid or payable with respect to a
Participant (including a retired or terminated Employee) during any month in
which he is credited with forty (40) or more Hours of Service as a regular or
temporary employee of the Employer. For purposes of this Section 7.12 only, the
term "Employer" shall mean the applicable Employer and any Affiliate of such
Employer (as determined under Section 2.4, but disregarding the phrase "other
than the Company" in Section 2.4(a)). Thus,
(i) a retired or terminated Employee's benefit shall
be suspended during any month during which he is credited with
forty (40) or more Hours of Service as a regular or temporary
employee of the Employer; and
(ii) the benefit of a Participant other than a
retired or terminated Employee shall be suspended during any
month during which he is credited with forty (40) or more
Hours of Service as a regular or temporary employee of the
Employer.
The preceding provisions of this subsection (a) shall apply, even though the
retired or terminated Employee's or Participant's service as a regular or
temporary employee of the Employer does not constitute "Section 203(a)(3)(B)
service" described in 29 C.F.R. ss.2530.203-3(c), and even though the procedures
regarding notice, review, and administration otherwise prescribed under 29
C.F.R. ss.2530.203-3 are not observed.
(b) If a Participant (including a retired or terminated
Employee) is reemployed or remains in employment as a regular or temporary
employee of the Employer, as described in subsection (a), above, the
commencement date of his benefit shall occur no earlier than the first day of
the first month in which he ceases to be so employed, and his benefit shall be
calculated, in accordance with Sections 4.3 and 4.4, to take such employment
into account. If a retired or terminated Employee, subject to subsections (a)(i)
or (ii), above, becomes entitled to have his benefit resume, the amount and form
of the benefit shall be governed by the generally applicable provisions of the
Plan, as if he had then first retired.
(c) (i) If the benefit of a Participant (including a
retired or terminated Employee) is suspended during any period after his Age 65
Normal Retirement Date pursuant to subsection (a), above, the amount of his
benefit determined under subsection (b), above, shall not be less than the
actuarial equivalent of the Single Life Annuity that would have been payable to
him (or that he could have elected to receive) commencing on the day after his
Age 65 Normal Retirement Date (or if later, the day his benefits were
suspended), had his benefit not been suspended. For this purpose, actuarial
equivalence shall be determined using an interest rate of seven percent (7%) per
annum and the TPF&C 1971 Forecast Mortality Table for Males (with ages set back
2 years).
(ii) If the benefit of a Participant
(including a retired or terminated Employee) is
suspended pursuant to subsection (a), above, during
any period after his Normal Retirement Date (but
before his Age 65 Normal Retirement date, if later),
and his employment during such period constitutes
"section 203(a)(3)(B) service" described in 29 C.F.R.
ss.2530.203-3(c), the Company shall notify the
Participant of such suspension or delay by personal
delivery or first class mail during the first
calendar month in which the benefit is to be
suspended, shall afford him a review of such
suspension under the procedure specified in Section
9.13, and shall otherwise administer such suspension
and any subsequent resumption or commencement of
benefit payments in a manner consistent with 29
C.F.R. ss.2530.203-3.
(d) If an Employee subject to subsection (a)(i) or (ii),
above, previously received a total distribution of his benefit in accordance
with Section 7.7(b) or 7.9, the amount of the Single Life Annuity used to
determine his benefit upon retirement under subsection (b), above, shall be
reduced by the amount of the Single Life Annuity upon which such total
distribution was based.
7.13 Eligible Rollover Distributions
(a) Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under this Section
7.13, a distributee may elect, at the time and in the manner prescribed by the
Plan Administrator, to have any portion of an eligible rollover distribution
paid directly to an eligible retirement plan specified by the distributee in a
direct rollover.
(b) Definitions.
(i) Eligible rollover distribution: An eligible
rollover distribution is any distribution of all or any
portion of the balance to the credit of the distributee,
except that an eligible rollover distribution does not
include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of
the distributee and the distributee's designated beneficiary,
or for a specified period of ten (10) years or more; any
distribution to the extent such distribution is required under
Section 401(a)(9) of the Code; and the portion of any
distribution that is not includible in gross income
(determined without regard to the exclusion for eligible
rollover distributions or the exclusion for net unrealized
appreciation with respect to employer securities).
(ii) Eligible retirement plan: An eligible retirement
plan is an individual retirement account described in Section
408(a) of the Code, an individual retirement annuity described
in Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust described in
Section 401(a) of the Code, that accepts the distributee's
eligible rollover distribution. However, in the case of an
eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account
or individual retirement annuity.
(iii) Distributee: A distributee includes an Employee
or former Employee. In addition, the Employee's or former
Employee's surviving spouse and the Employee's or former
Employee's spouse or former spouse who is the alternate payee
under a qualified domestic relations order, as defined in
Section 414(p) of the Code, are distributees with regard to
the interest of the spouse or former spouse.
(iv) Direct rollover: A direct rollover is a payment
by the Plan to the eligible retirement plan specified by the
distributee.
ARTICLE VIII
MEDICAL BENEFITS
8.1 Eligibility
(a) Medical benefits under this Article shall be provided
to a Participant, or the dependents of a Participant, who:
(i) Has terminated employment, commenced receiving
pension benefits on early, normal or deferred retirement, and
qualifies for post-retirement medical benefits under the
CenturyTel, Inc. Welfare Benefits Plan or successor thereto.
(ii) Retires and commences benefits on or after
January 1, 1998.
(iii) Is not covered by a collective bargaining
agreement at retirement.
(iv) Has never been a "key employee" as defined in
Section 416(i) of the Internal Revenue Code.
(b) The term "benefits" used alone in this Plan shall refer
to pension benefits under Article V and Article VI and not to medical benefits
provided under this Article.
8.2 Medical Benefits
(a) The medical benefits provided under this Plan to
Participants eligible under Section 8.1 shall be all medical benefits, as
defined in Internal Revenue Code Section 213(d)(1), provided to such
Participants after retirement under the CenturyTel, Inc. Welfare Benefits Plan
or successor thereto. The provisions of such Welfare Benefits Plan can limit
medical benefits to retired Participants who meet further eligibility
requirements. Any medical benefits to which retired Participants are entitled
under such Welfare Benefits Plan that are not provided under this Plan due to
insufficiency of funding or otherwise, shall be paid from a welfare benefits
trust established by the Company for that purpose or from the Employer's general
assets.
(b) The document evidencing the CenturyTel, Inc. Welfare
Benefits Plan or successor thereto, including all of the separate documents
incorporated into it, is incorporated by reference as part of this Plan. This
incorporation by reference shall include any amendments made from time to time
to the CenturyTel, Inc. Welfare Benefits Plan and any successor plan.
8.3 Separate Medical Benefits Account
(a) Subject to 8.4, each Employer may make contributions to
fund the medical benefits provided in Section 8.2 for its Employees. A separate
account shall be maintained for all such contributions, and earnings on them.
Any medical benefits for Participants shall be paid only from such account.
(b) Investment earnings and losses of the trust fund shall be
allocated to the accounts in Section 8.3(a) in proportion to the investment
earnings and losses of the entire trust.
8.4 Limitation on Contributions
The aggregate actual contributions (measured from January 1,
1989) to fund medical benefits shall not exceed twenty five (25) percent of the
total actual contributions (measured from January 1, 1989) to the Plan,
disregarding in such total any contributions to fund past service credits.
8.5 Satisfaction of Liabilities
(a) Unless all obligations under Section 8.2 have been
satisfied, no part of the medical benefits account shall be used for any purpose
other than payment of either of the following:
(i) Medical benefits.
(ii) Necessary or appropriate expenses attributable
to the administration of the medical benefits account.
(b) Following satisfaction of the obligations under Section
8.2, any amounts remaining in the medical benefits account shall be returned to
the Employers on an equitable basis as determined by the Committee.
8.6 Forfeiture of Benefits
If a person's interest in the medical benefits account is
forfeited prior to termination of the Plan, the amount forfeited shall be
applied as soon as possible to reduce the Employer's contributions to fund
medical benefits.
ARTICLE IX
FUNDING
9.1 Plan Assets. The assets of the Plan shall be held in of one or
more Trust Funds and/or one or more arrangements with insurance companies for
the funding of benefits, as determined by the Company.
9.2 Trust Agreement. Each Trust Fund shall be established and
maintained pursuant to a Trust Agreement that contains such provisions as the
Company shall determine. The terms of each Trust Agreement are hereby
incorporated into and made a part of the Plan.
9.3 Insurance Arrangements. Each arrangement with an insurance
company shall be established and maintained pursuant to a written contract or
policy between the Company and an insurance company qualified to do business in
a State, which shall contain such provisions as the Company shall determine.
9.4 Contributions. The Company intends to make contributions to
the Plan sufficient to comply with the minimum funding standards imposed by the
Code. The Company's contributions shall be determined annually, or more
frequently, by the Board. Each contribution made to the Plan shall be made on
the condition that it is currently deductible under Section 404 of the Code for
the taxable year with respect to which the contribution is made and without
regard to any subsequent amendment improving benefits under the Plan.
9.5 Exclusive Benefit. Except as provided in this Section 9.5 and
in Section 9.6, all Company contributions to the Plan and all property of the
Plan, including income from investments and other sources, shall be used for the
exclusive benefit of Employees, retired Employees, former Employees, and
Beneficiaries and shall be used to provide benefits under the Plan and to pay
the reasonable expenses of administering the Plan and the Trust, except to the
extent that such expenses are paid by the Company. Any forfeitures arising under
the Plan shall be applied to reduce the Company's contributions to the Plan and
shall not be used to increase the benefit that any Employee, retired Employee,
former Employee, or Beneficiary would otherwise be entitled to receive under the
Plan. Except as provided in Section 9.6, it shall be impossible at any time
prior to the satisfaction of all liabilities under the Plan for any portion of
the assets of the Plan to be used for, or diverted to, purposes other than the
exclusive benefit of Employees, retired Employees, former Employees, and
Beneficiaries; provided, however, that after all liabilities under the Plan have
been satisfied, any assets remaining in the Trust that are attributable to
erroneous actuarial computations shall be distributed to the Company, except as
otherwise required by Section 4044(d)(3)(A) of ERISA.
9.6 Return of Contributions. Notwithstanding any other provision
of the Plan, the Company shall be entitled upon request to the return of any
contribution made to the Plan (adjusted, in the case of any contribution
described in subsection (a) or (c), below, to reflect any investment losses
allocable thereto, but not to reflect any investment gains allocable thereto):
(a) within one (1) year after the payment of the
contribution, in the case of a contribution made by mistake of fact;
(b) within one (1) year after the date of denial of the
Plan's qualification, if the contribution is conditioned on initial
qualification of the Plan under Section 401(a) of the Code; or
(c) within one (1) year after the disallowance of the
deduction, to the extent the deduction is disallowed, if the contribution is
conditioned on the deductibility of the contribution under Section 404 of the
Code.
9.7 Prohibition Against Assignment or Alienation of Benefits.
Benefits under the Plan may not be anticipated, assigned (either at law or in
equity), alienated, or subjected to attachment, garnishment, levy, execution, or
other legal or equitable process, provided that:
(a) an arrangement whereby benefit payments are paid to a
Participant's savings or checking account in a financial institution is not
prohibited;
(b) once a Participant begins receiving benefits under the
Plan, such Participant may assign or alienate the right to future payments if
such transaction is limited to assignments or alienations that:
(i) are voluntary and revocable,
(ii) with respect to a particular benefit payment, do
not in the aggregate exceed ten percent (10%) of such payment,
and
(iii) neither are for the purpose, nor have the
effect, of defraying administrative costs of the Plan; and
(c) payments made in accordance with a Qualified Domestic
Relations Order are not prohibited.
For purposes of subsection (b), above, an attachment, garnishment, levy,
execution or other legal or equitable process is not considered a voluntary
assignment or alienation.
ARTICLE X
FIDUCIARY RESPONSIBILITIES AND PLAN ADMINISTRATION
10.1 Allocation of Fiduciary Responsibilities. Fiduciary
responsibilities in connection with the Plan shall be allocated in accordance
with the provisions of this Article X and shall be carried out in accordance
with the Plan and applicable law. It is intended that, to the extent permitted
by applicable law, each fiduciary shall be obligated to discharge only the
responsibilities assigned to him and that he shall not be charged with the
responsibilities assigned to any other fiduciary.
10.2 Committee. The Committee shall consist of not less than three
(3) nor more than eleven (11) persons to be appointed by and serve at the
pleasure of the Board of Directors of CenturyTel, Inc.
10.3 Committee Action by Majority Vote. The Committee may act,
with or without a meeting, by a vote of a majority of its members then in
office.
10.4 Plan Administrator. The Committee shall be the Plan
Administrator and shall be responsible for the administration of the Plan. In
addition to any implied powers and duties that may be necessary or appropriate
to the conduct of its affairs, the Committee shall have the following powers and
duties, including the discretionary power:
(a) to make and enforce such rules and regulations as it
shall determine to be necessary or proper for the administration of the Plan;
(b) to interpret the Plan and to decide all matters arising
thereunder, including the right to remedy possible ambiguities, inconsistencies,
and omissions;
(c) to determine the right of any person to benefits under
the Plan and the amount of such benefits;
(d) to issue instructions to a Trustee or insurance company
to make disbursements from the Trust, and to make any other arrangement
necessary or appropriate to provide for the orderly payment and delivery of
disbursements from the Trust;
(e) to delegate to other persons such of its responsibilities
as it may determine;
(f) to retain an Enrolled Actuary;
(g) to employ suitable agents, actuaries, auditors, legal
counsel, and other advisers as it may determine;
(h) to allocate among its members such of its responsi-
bilities as it may determine; and
(i) to prepare, file, and distribute such forms, statements,
descriptions, returns, and reports relating to the Plan as may be required by
law.
The foregoing list of express powers is not intended to be
either complete or conclusive, but the Committee shall, in addition, have such
powers as it may reasonably determine to be necessary to the performance of its
duties under the Plan. The decision or judgment of the Committee on any question
arising in connection with the exercise of any of its powers or any matter of
Plan Administration or the determination of benefits shall be final, binding and
conclusive upon all parties concerned.
10.5 Committee Reliance on Professional Advice. The Committee is
authorized to obtain, and act on the basis of, tables, valuations, certificates,
opinions, and reports furnished by an enrolled actuary, accountant, legal
counsel, or other advisers.
10.6 Plan Administration Expenses. All reasonable expenses of
administering the Plan (including, without limitation, the expenses of the
Committee) shall be paid out of the assets of the Trust, in accordance with and
to the extent provided in the provisions of the Trust Agreement, except to the
extent paid by the Company without request by the Company for reimbursement from
the Trust.
10.7 Responsibilities of Trustee. Each Trustee shall be responsible
for the custody of the assets of the Plan assigned to it, making disbursements
at the order of the Committee, and accounting for all receipts and disbursements
with respect to the assets of the Plan assigned to it.
10.8 Investment Management by Trustee. Each Trustee shall be
responsible for managing the investment of the Plan assets in its custody, or
any part thereof, when directed to do so by CenturyTel, Inc. in accordance with
the terms of the Trust Agreement.
10.9 Allocation of Investment Management Responsibilities.
CenturyTel, Inc. shall have the sole fiduciary responsibility for determining
whether investment of the Plan assets held by a Trustee shall be managed by the
Trustee, or by one or more investment managers, or whether both the Trustee and
one or more investment managers are to participate in investment management and,
if so, how investment responsibility is to be divided.
10.10 Appointment and Removal of Investment Managers. CenturyTel,
Inc. shall have the sole fiduciary responsibility for the appointment or removal
of any investment manager and shall enter into an investment management
agreement with each investment manager appointed by it on such terms and
conditions consistent with the provisions of this Plan as it shall deem
advisable. Each investment manager shall be responsible for managing the
investment of such portion of the Trust as shall be placed under its management
pursuant to the investment management agreement.
10.11 Ascertainment of Plan Financial Needs. CenturyTel, Inc. shall
have the sole fiduciary responsibility for periodically ascertaining the
financial needs of the Plan, including the Plan's liquidity needs, and shall
convey the pertinent information to the Trustee and/or investment managers
responsible for managing the investments of the Trust.
10.12 Delegation of Company's Duties. CenturyTel, Inc. shall
designate, in accordance with its normal practice, such of its officers or other
employees as it shall consider appropriate to carry out its duties under the
foregoing Sections 10.8, 10.9, 10.10 and 10.11.
10.13 Benefit Claim Procedure.
(a) If an individual is denied any benefits (in whole or in
part) to which he believes he is entitled under the Plan, he may file a claim
for benefits as set forth herein. Any claim for benefits under the Plan shall be
delivered in writing by the claimant to the Plan Administrator. The claim shall
identify the benefits requested and shall include a statement of the reasons why
the benefits should be granted. The Plan Administrator shall grant or deny the
claim. If the claim is denied in whole or in part, the Plan Administrator shall
give written notice to the claimant, setting forth: (i) the reasons for the
denial, (ii) specific reference to pertinent Plan provisions on which the denial
is based, (iii) a description of any additional material or information
necessary for the perfection of the claim and an explanation of why such
material or information is necessary, and (iv) an explanation of the Plan's
claim review procedure. The notice described in the preceding sentence shall be
furnished to the claimant within a period of time not exceeding ninety (90) days
after receipt of the claim; except that such period of time may be extended, if
special circumstances should require, for an additional ninety (90) days
commencing at the end of the initial ninety (90) day period. Written notice of
such an extension shall be given to the claimant before the expiration of the
initial ninety (90) day period and shall indicate the special circumstances
requiring the extension and the date by which the final decision is expected to
be rendered. In exercising its responsibilities pursuant to this Section 10.13,
the Plan Administrator shall have the discretionary power to interpret the Plan
and to decide all matters arising thereunder, including the right to remedy
possible ambiguities, inconsistencies, and omissions.
(b) A claimant who has been denied a claim for benefits, in
whole or in part, may, within a period of sixty (60) days thereafter, request a
review of such denial by filing a written notice of appeal with the Committee.
In connection with an appeal, the claimant (or his duly authorized
representative) may review pertinent documents and may submit evidence and
arguments in writing to the Committee. The Committee shall decide the questions
presented by the appeal, either with or without holding a hearing, and shall
issue to the claimant a written notice setting forth: (i) the specific reasons
for the decision and (ii) the specific reference to pertinent Plan provisions on
which the decision is based. The notice described in the preceding sentence
shall be issued within a period of time not exceeding sixty (60) days after
receipt of the request for review; except that such period of time may be
extended, if special circumstances (including, but not limited to, the need to
hold a hearing) should require, for an additional sixty (60) days commencing at
the end of the initial sixty (60) day period. Written notice of such an
extension shall be provided to the claimant prior to the expiration of the
initial sixty (60) day period. The decision of the Committee shall be final and
conclusive. In the event that the Plan Administrator is a member of the
Committee, he shall not participate in the decision of the Committee or in any
of the proceedings with respect thereto.
10.14 QDRO Procedures. The Committee shall establish written
procedures to determine the qualified status of domestic relations orders and to
administer distributions under Qualified Domestic Relations Orders. Such
procedures shall be consistent with any regulations prescribed under Section
206(d) of ERISA. The Committee shall promptly notify the Participant and any
alternate payee (as defined in Section 206(d)(3)(K) of ERISA) of the receipt of
an order and the procedures for determining the qualified status of domestic
relations orders. Within a reasonable period after receipt of an order, the
Committee shall determine whether the order is qualified and shall notify the
Participant and each alternate payee of such determination. During any period in
which the qualified status of a domestic relations order is being determined (by
the Committee, by a court, or otherwise), the Committee shall direct the Trustee
to account separately for the amounts that would have been payable to each
alternate payee if the order had been determined to be a Qualified Domestic
Relations Order. If within eighteen (18) months of the receipt of the order, the
order (or modification thereof) is determined to be a Qualified Domestic
Relations Order, the Committee shall direct the Trustee to pay the segregated
amounts (plus any interest thereon) to the person or persons entitled thereto.
If within eighteen (18) months of the receipt of the order, it is determined
that the order is not qualified, or the issue as to whether the order is
qualified is not resolved, then the Committee shall direct the Trustee to pay
the segregated amount (plus any interest thereon) to the person or persons who
would have been entitled to such amounts if there had been no order. Any
determination that an order is qualified that is made after the close of the
eighteen (18) month period shall be applied prospectively only.
10.15 Service in Multiple Fiduciary Capacities. Any person or group
of persons may serve in more than one (1) fiduciary capacity with respect to the
Plan, in accordance with Section 402(c)(1) of ERISA.
ARTICLE XI
CO-SPONSORSHIP OF PLAN AND MERGERS WITH OTHER PLANS
11.1 Co-sponsorship of Plan by Affiliates. Any Affiliate, with the
specific approval of the Board and the Affiliate's board of directors (or other
governing body, if applicable), may join in this Plan as a co-sponsor.
Thereupon, such Affiliate shall be included in the definition of Company
hereunder and shall have the obligation to make contributions to this Plan
sufficient to fund the benefits of its Employees and their Beneficiaries. In any
such case, this Plan shall remain a single plan with any and all of its assets
derived from Company contributions (regardless of the entity to whose
contributions such assets can be traced) available to pay the benefits to each
Participant and Beneficiary hereunder and any other liabilities of the Plan. A
list of the Affiliates that have become co-sponsors of the Plan pursuant to this
Section 11.1, together with the respective effective dates of their
co-sponsorship, appears in Exhibit A.
11.2 Co-sponsorship of Plan by Adopting Entities. Any Adopting
Entity, with the specific approval of the Board and the Adopting Entity's board
of directors (or other governing body, if applicable), may join in this Plan as
a co-sponsor. Thereupon, such Adopting Entity shall be included in the
definition of Company hereunder and shall have the obligation to make
contributions to this Plan sufficient to fund the benefits of its Employees and
their Beneficiaries. A list of the Adopting Entities that have become
co-sponsors of the Plan pursuant to this Section 11.2, together with the
respective effective dates of their co-sponsorship, appears in Exhibit A.
11.3 Merger with Plan of Affiliate.
(a) Any other pension or retirement plan, sponsored by an
Affiliate, may be merged into this Plan, with this Plan as the surviving
instrument, with the specific approval of the Board and, if applicable, the
board of directors (or other governing body, if applicable) of the Affiliate.
Thereupon, if the employer sponsoring the merged plan is an Affiliate, the
Affiliate shall become a co-sponsor of the Plan, and included in the definition
of Company hereunder. In any such case, the Plan shall remain a single plan with
any and all of its assets derived from Company contributions (regardless of the
entity to whose contributions such assets can be traced) available to pay the
benefits of each Participant and Beneficiary hereunder and any other liabilities
of the Plan.
(b) The assets of the merged plan shall be transferred to
the Trustee and be assets of the Plan, and the liabilities of the merged plan
shall be liabilities of the Plan.
(c) Each Participant in the merged plan shall become a
Participant in the Plan on the merger date, with accrued or vested benefits
under the Plan equal to his accrued or vested benefits under the merged plan,
and thereafter shall continue to participate in the Plan in accordance with its
terms. Furthermore, each Participant in the merged plan who is an Employee on
the merger date shall be entitled to Credited Service for his service under the
merged plan and the greater of (i) his accrued or vested benefits under the Plan
on account of such Credited Service or (ii) his accrued or vested benefits under
the merged plan.
(d) It is the intention, and it shall be the effect, of this
Section 11.3 that any merger of a plan into this Plan be carried out in
accordance with Section 12.3.
ARTICLE XII
DURATION AND AMENDMENT
12.1 Reservation of Right to Suspend or Terminate Plan. Except as
otherwise provided herein, while it is the intention of the Company that the
Plan shall remain in effect indefinitely, the Board reserves the right to
suspend or terminate the Plan in whole or in part, at any time and from time to
time, and for any reason whatsoever that in the Board's sole discretion appears
to it to make such action advisable.
12.2 Reservation of Right to Amend Plan. Except as otherwise
provided herein, the Plan may be amended in accordance with the procedures set
forth in this Section 12.2. The Board by duly adopted written resolution or by
unanimous written consent may modify or amend the Plan in whole or in part,
prospectively or retroactively, at any time and from time to time. The Board by
duly adopted written resolution or by unanimous written consent may delegate the
power to so modify or amend the Plan to one or more officers of the Company,
subject to such conditions as the Board may in its sole discretion impose.
Notwithstanding the preceding sentence, and without the necessity of a
delegation of authority from the Board, the General Counsel of the Company may
adopt any amendment or modification to the Plan that is, in the opinion of such
General Counsel, necessary or appropriate to comply with applicable laws and
regulations, including without limitation ERISA and the Code. The officers of
the Company may take all actions necessary or appropriate to implement or
effectuate any amendment or modification to the Plan described herein. Any
modification or amendment of the Plan by one or more officers of the Company
(including without limitation the General Counsel) shall be adopted by a written
instrument executed by such officer or officers. Notwithstanding the foregoing,
no amendment shall reduce any benefit, that is accrued or treated as accrued
under Section 411(d)(6) of the Code, of any Participant, or the percentage (if
any) of such benefit that is vested, on the later of the date on which the
amendment is adopted or the date on which the amendment becomes effective.
12.3 Transactions Subject to Code Section 414(l). Except as
otherwise provided herein, the Plan may be merged into or consolidated with
another plan, and its assets or liabilities may be transferred to another plan.
However, to the extent that Section 401(a)(12) or 414(l) of the Code is
applicable and in accordance therewith, no such merger, consolidation, or
transfer shall be consummated unless each Employee, retired Employee, former
Employee, and Beneficiary under the Plan would, if the resulting plan then
terminated, receive a benefit immediately after the merger, consolidation, or
transfer that is equal to or greater than the benefit he would have been
entitled to receive immediately before the merger, consolidation, or transfer,
if the Plan had then terminated; provided that the foregoing provisions of this
Section 12.3 shall not apply if such alternative requirements as may be imposed
by the regulations under Section 414(l) of the Code are satisfied. For purposes
of the preceding sentence, the benefit of an Employee, retired Employee, former
Employee, or Beneficiary upon the deemed termination of a plan shall be
determined without regard to any requirement under Title IV of ERISA or
otherwise that (a) the Employer or any other person make additional
contributions to the Plan in connection with its termination, or (b) any assets
of the Plan attributable to employee contributions remaining after satisfaction
of all liabilities described in Section 4044(a) of ERISA be distributed to
Participants pursuant to Section 4044(d)(3) of ERISA. Any liability transferred
from the Plan to another plan pursuant to this Section 12.3 shall result in the
extinguishment of such liability hereunder immediately upon such transfer, and
no benefit previously payable under the Plan on account of such liability shall
be payable under the Plan following such transfer.
ARTICLE XIII
DISTRIBUTION UPON PLAN TERMINATION
13.1 Vesting on Plan Termination. In case of a termination or
partial termination of the Plan, the rights of all affected Employees, retired
Employees, and Beneficiaries to benefits accrued under the Plan to the date of
such termination or partial termination, to the extent then funded, shall be
nonforfeitable.
13.2 Allocation of Assets on Plan Termination. Upon termination of
the Plan, the Committee shall allocate the assets of the Plan in accordance with
the following priority schedule, after providing for reasonable Plan
administration expenses:
(a) First, there shall be paid any portion of a
Participant's accrued benefits derived from any non-mandatory contributions by
him to the Plan;
(b) Second, there shall be paid any portion of a
Participant's accrued benefits derived from any mandatory contributions by him
to the Plan;
(c) Third, there shall be allocated to (i) the benefit of
each retired Employee (or Beneficiary) that was being paid on the date three (3)
years prior to the date of termination, and (ii) the benefit of each Employee
(or former Employee or Beneficiary) that would have been in pay status three (3)
years prior to the date of termination if the Employee or former Employee had
retired prior to such earlier date and if his benefit had commenced (in the
normal form of annuity under the Plan) as of the beginning of such three (3)
year period, an amount that is sufficient to provide such benefit, payable from
the date of termination based on the provisions of the Plan as in effect during
the five (5) year period ending on such date and under which the benefit was or
would have been the least;
(d) Fourth, there shall be allocated to each benefit an
mount that together with any amount allocated under subsection (c), above, is
sufficient to provide the portion of the benefit that is guaranteed by the
Pension Benefit Guaranty Corporation, as provided under Title IV of ERISA
(without regard to Sections 4022(b)(5) and 4022(b)(6) thereof);
(e) Fifth, there shall be allocated to each benefit an
amount that together with any amounts allocated under subsections (c) and (d),
above, is sufficient to provide each such benefit, to the extent it is
nonforfeitable;
(f) Sixth, there shall be allocated to each benefit the
amount that together with any amounts allocated under subsections (c) through
(e), above, is sufficient to provide the accrued benefit on the date of the
termination; and
(g) Seventh, after all liabilities of the Plan have been
satisfied, any residual assets shall be distributed to the Company, except as
otherwise required by Section 4044(d)(3)(A) of ERISA.
If the assets of the Plan are insufficient to provide in full the
amounts required under subsections (a) through (d), above, such assets shall be
allocated pro rata among the benefits described in the subsection for which the
required amounts first cannot be provided in full. If the assets of the Plan are
insufficient to provide in full the amounts required under subsection (e),
above, the assets available for allocation under subsection (e) shall be
allocated first to provide the amounts required under such subsection on the
basis of the terms of the Plan as in effect at the beginning of the five (5)
year period ending on the date of the Plan termination. If the assets of the
Plan are insufficient to provide such amounts in full, the assets shall be
allocated among such amounts on a pro rata basis. If the assets of the Plan are
sufficient to provide such amounts in full, then any remaining assets shall be
allocated to provide the amounts under such subsection based on the benefits
resulting from each successive amendment during the five (5) year period until
the available assets are insufficient to provide the amounts required under
subsection (e). The assets available for allocation with respect to the benefits
resulting from the first such amendment shall be allocated on a pro rata basis.
13.3 Provision for Benefits After Plan Termination. The provision
of benefits pursuant to Section 13.2 may be made, in the discretion of
CenturyTel, Inc., by the purchase of annuities or by continuing in existence any
Trust Agreements or arrangements with insurance companies entered into pursuant
to the Plan and making provision therefrom for benefits, or both, or by
immediate distribution from the Plan, or by any combination of these means, as
CenturyTel, Inc., in its sole discretion, shall determine.
13.4 Computation of Benefits After Plan Termination. The benefits
specified in Section 13.2 shall be computed in accordance with the provisions of
Article VI or the Schedules of the Plan, as applicable, except that, to the
extent permitted by law, the periods of Vesting Service and Credited Service
used in the computation of benefits for Employees shall be regarded as ended as
of the Plan termination date and only Average Annual Compensation as of that
date shall be taken into account.
13.5 Continued Employment Not Required After Plan Termination. The
payment of benefits on termination of the Plan shall not be contingent on an
Employee's continuing in the service of the Company or any other employer after
the termination of the Plan, except to the extent such service is otherwise
required under the Plan to become eligible for a particular benefit or form of
payment.
13.6 Data in Company Records on Plan Termination. In all cases
benefits on termination of the Plan shall be determined, to the extent permitted
by law, on the basis of the Employee's age, Vesting Service, Credited Service,
and Average Annual Compensation as shown by the Company's records as of the Plan
termination date.
13.7 Satisfaction of Liabilities on Plan Termination. In the case
of all benefits for which provision is made for the purchase of annuities from
an insurance company, the delivery of an annuity contract or certificate of the
insurance company from which the annuity is purchased to each Employee, retired
Employee, former Employee, or Beneficiary to whom such benefits are payable
shall, to the extent permitted by applicable law, serve to relieve the Plan from
any further obligations for the payment of such benefits. In the case of all
benefits for which provision is not made through the purchase of annuities from
an insurance company, the judgment of CenturyTel, Inc. as to the adequacy of the
alternative provision shall be final to the extent permitted by applicable law.
If such alternative provision made as of the Plan termination date should
thereafter at any time appear, in the judgment of CenturyTel, Inc., inadequate
or more than sufficient to continue the payment of the amounts previously
estimated to be payable, the remaining payments of such benefits shall be
adjusted pro rata in the order of precedence set forth in Section 13.2.
13.8 High-25 Distribution Restrictions.
(a) Upon the termination of the Plan, the benefit of each
highly compensated employee and each highly compensated former employee (both as
defined in Section 414(q) of the Code) shall be limited to a benefit that is
nondiscriminatory under Section 401(a)(4) of the Code.
(b) The annual payments under the Plan with respect to a
Participant shall not exceed the annual payments that would be made with respect
to the Participant under a straight life annuity that is the actuarial
equivalent of his Accrued Benefit. The preceding sentence shall not apply to a
Participant for a calendar year if: (i) the Participant is not among the
twenty-five (25) highly compensated employees and highly compensated former
employees (both as defined in Section 414(q) of the Code) of an adopting
Affiliate or Adopting Entity with the greatest compensation in that calendar
year or any prior calendar year; (ii) after satisfying all benefits payable to
the Participant under the Plan, the value of Plan assets does not fall below 110
percent of the Plan's current liabilities (as defined in Section 412(l)(7) of
the Code); (iii) the value of the benefits payable with respect to the
Participant under the Plan is less than one percent (1%) of the value of the
Plan's current liabilities (as defined in Section 412(l)(7) of the Code and
determined before distribution to the Participant); or (iv) the value of the
benefits payable with respect to the Participant under the Plan does not exceed
the amount described in Section 411(a)(11)(A) of the Code. If the Plan is
terminated while the restrictions pursuant to this subsection (b) are in effect,
amounts in excess of those restrictions shall first be applied in a
nondiscriminatory manner to the satisfaction of any Plan liabilities to
Participants who are not subject to the restrictions, and any balance remaining
shall then be applied in a nondiscriminatory manner to any Plan liabilities that
may be outstanding with respect to Participants who are subject to the
restrictions.
(c) This Section 13.8 is intended to satisfy the requirement
of Treas. Reg. ss.1.401(a)(4)-5(b). This Section 13.8 shall not be construed in
a manner that would impose limitations that are more stringent than those
required by Section 1.401(a)(4)-5(b) of the Treasury Regulations. If Congress
should provide by statute, or the United States Treasury Department or the
Internal Revenue Service should provide by regulation, ruling, or other guidance
of general applicability, that the foregoing restrictions are no longer
necessary for the Plan to meet the requirements of Section 401(a) of the Code or
any other applicable provision of the Internal Revenue Code then in effect, such
restrictions shall become void and shall no longer apply, without the necessity
of further amendment to the Plan.
ARTICLE XIV
INTERCHANGE OF BENEFIT OBLIGATIONS
14.1 Interchange Agreement Permitted. Agreements may be made by
the Company with Affiliates other than the Company for an interchange of the
obligations to which they may be subject under similar pension plans. These
agreements shall provide that:
(a) pension plans shall be maintained on a consistent and
substantially uniform basis by all of the companies participating in such
interchange agreements;
(b) advance provision for the payment of pensions shall be
made by each company in such amounts as may be necessary to provide for and
fulfill all requirements of its plan as in effect from time to time; and
(c) the vesting service and credited service of the
Participants under the pension plans sponsored by the companies that are parties
to such agreements shall include service with all such companies.
ARTICLE XV
GENERAL PROVISIONS
15.1 No Employment Rights Conferred. Neither the action of the
Company establishing this Plan nor any action taken by the Company under the
Plan shall be construed as giving to any Employee a right to be retained in the
service of the Company.
15.2 Integration Clause. No Employee, retired Employee, former
Employee, Beneficiary, or any other person shall be entitled to or have any
vested right in or claim to a benefit under the Plan, except as expressly
provided herein.
15.3 Incapacity of Recipient. Benefit payments to a retired
Employee or a Beneficiary unable to execute a proper receipt therefor may be
made to a relative or other person, selected by the Committee, for the benefit
of the retired Employee or the Beneficiary, and the receipt executed by such
person shall discharge the obligations of the Plan and the Committee to such
retired Employee or Beneficiary and anyone claiming through either of them.
15.4 ERISA Fiduciary Duties. Nothing in the Plan shall relieve or
be deemed to relieve any Plan fiduciary from any responsibility, obligation, or
duty imposed by or under ERISA.
15.5 Compliance with State and Local Law. The provisions of this
Plan relating to an Employee's age of retirement shall not be applied in
circumstances that would cause such provisions to be in violation of applicable
state or local law. In such circumstances, the Employee Benefits Committee as
Plan Administrator shall modify the application of such provisions to the extent
necessary to comply with applicable state or local law, but only to the extent
such laws are not preempted by federal law.
15.6 Usage. Words in the masculine gender shall include the
feminine gender and the plural shall include the singular unless the context
indicates otherwise.
15.7 Titles and Headings. The titles to Articles and the headings
of Sections, subsections, paragraphs, and subparagraphs in this Plan are placed
herein for convenience of reference only and, as such, shall be of no force or
effect in the interpretation of the Plan.
15.8 Severability Clause. In the event any provision of the Plan
is held to be in conflict with or in violation of any state or federal statute,
rule, or decision, all other provisions of this Plan shall continue in full
force and effect. In the event that the making of any payment or the provision
of any other benefit required under the Plan is held to be in conflict with or
in violation of any state or federal statute, rule, or decision or otherwise
invalid or unenforceable, such conflict, violation, invalidity, or
unenforceability shall not prevent any other payment or benefit from being made
or provided under the Plan, and in the event that the making of any payment in
full or the provision of any other benefit required under the Plan in full would
be in conflict with or in violation of any state or federal statute, rule or
decision or otherwise invalid or unenforceable, then such conflict, violation,
invalidity or unenforceability shall not prevent such payment or benefit from
being made or provided in part, to the extent that it would not be in conflict
with or in violation of any state or federal statute, rule or decision or
otherwise invalid or unenforceable, and the maximum payment or benefit that
would not be in conflict with or in violation of any state or federal statute,
rule or decision or otherwise invalid or unenforceable, shall be made or
provided under the Plan.
15.9 USERRA - Military Service Credit. Notwithstanding any
provision of this Plan to the contrary, contributions, benefits and service
credit with respect to qualified military service will be provided in accordance
with Section 414(u) of the Code.
ARTICLE XVI
TOP-HEAVY REQUIREMENTS
16.1 In General. This Article XVI shall apply only if the Plan is
Top-Heavy, as defined below. If, as of any Determination Date, as defined below,
the Plan is Top-Heavy, the provisions of Section 16.4, below, shall take effect
as of the first day of the Plan Year next following the Determination Date and
shall continue to be in effect until the first day of any subsequent Plan Year
following a Determination Date as of which it is determined that the Plan is no
longer Top-Heavy.
16.2 Definitions. For purposes of this Article XVI, the following
definitions shall apply, and shall be interpreted in accordance with the
provisions of Section 416 of the Code and the regulations thereunder:
(a) "Aggregation Group" means a group of CenturyTel, Inc.
Plans consisting of each CenturyTel, Inc. Plan in the Required Aggregation Group
and each other CenturyTel, Inc. Plan selected by the Committee for inclusion in
the Aggregation Group that would not, by its inclusion, prevent the group of
CenturyTel, Inc. Plans included in the Aggregation Group from continuing to meet
the requirements of Sections 401(a)(4) and 410 of the Code.
(b) "Average Compensation" means the Participant's average
Compensation, as defined in Section 16.2(c), below, for the period of
consecutive years (not exceeding five) during which the Participant had the
greatest aggregate Compensation from the Company, excluding (i) years ending
before 1984, and (ii) years commencing after the last Top-Heavy Year, and
adjusted, in accordance with Section 416(c)(1)(D)(ii) of the Code, for years not
included in a year of Vesting Service.
(c) "Compensation" means compensation for a calendar year
within the meaning of Section 415 of the Code and the regulations thereunder,
but shall not exceed the annual compensation limit in effect for the calendar
year under Section 401(a)(17) of the Code.
(d) "Determination Date" means the December 31 immediately
preceding the Plan Year for which the determination is made.
(e) "CenturyTel Plan" means any stock bonus, pension, or
profit-sharing plan of the Company and the Affiliates intended to qualify under
Section 401(a) of the Code.
(f) "Key Employee" means any employee of the Employer who
satisfies the criteria set forth in Section 416(i)(1) of the Code. For purposes
of determining who is a Key Employee, compensation shall mean compensation as
defined in Section 415 of the Code and the regulations thereunder.
(g) "Required Aggregation Group" means a group of one or more
CenturyTel Plans including each CenturyTel Plan in which a Key Employee is a
Participant and each CenturyTel Plan that enables any CenturyTel Plan in which a
Key Employee is a Participant to meet the requirements of Section 401(a)(4) or
410 of the Code.
(h) "Top-Heavy" means that the plan is included in an
Aggregation Group under which, as of the Determination Date, the sum of the
present value of the cumulative accrued benefits for Key Employees under all
defined benefit plans in the Aggregation Group and the aggregate of all accounts
of Key Employees under all defined contribution plans in the Aggregation Group
exceeds sixty percent (60%) of the analogous sum determined for all employees.
The determination of whether the Plan is Top-Heavy shall be made in accordance
with Section 416(g)(2)(B) of the Code and the regulations thereunder.
(i) "Top-Heavy Ratio" means the percentage calculated in
accordance with Section 16.2(h) hereof and Section 416(g)(2) of the Code and the
Regulations thereunder.
(j) "Top-Heavy Year" means a Plan Year for which the Plan is
Top-Heavy.
Unless otherwise specified herein, other terms in this Article XVI have
the respective meanings ascribed thereto by the other provisions of the Plan.
16.3 Determination of Top-Heavy Ratio. In determining the Top-Heavy
Ratio with respect to any Plan Year, the following rules shall apply:
(a) The accrued benefit of any current Participant shall be
calculated, as of the most recent valuation date that is within a twelve (12)
month period ending on the Determination Date, as if the Participant had
voluntarily terminated employment as of such valuation date. Such valuation date
shall be the same valuation date used for computing plan costs for purposes of
the minimum funding provisions of Section 412 of the Code. Unless, as of the
valuation date, the Plan provides for a nonproportional subsidy, the present
value of the accrued benefit shall reflect a benefit commencing at age
sixty-five (65) (or attained age, if later). If, as of the valuation date, the
Plan provides for a nonproportional subsidy, the benefit shall be assumed to
commence at the age at which the benefit is most valuable.
(b) The present value of such accrued benefit shall be
calculated by multiplying the accrued benefit by the appropriate factor in the
following table based on the Participant's age as of the Determination Date.
Age Deferred
Annuity Factor
To Age 65
19 0.36752
20 0.39337
21 0.42104
22 0.45067
23 0.48240
24 0.51637
25 0.55274
26 0.59169
27 0.63340
28 0.67806
29 0.72589
30 0.77713
31 0.83202
32 0.89084
33 0.95388
34 1.02145
35 1.09389
36 1.17156
37 1.25486
38 1.34422
39 1.44010
40 1.54301
41 1.65348
42 1.77212
43 1.89957
44 2.03654
45 2.18380
46 2.34220
47 2.51265
48 2.69619
49 2.89392
50 3.10709
51 3.33707
52 3.58536
53 3.85366
54 4.14383
55 4.45797
56 4.79844
57 5.16786
58 5.56923
59 6.00589
60 6.48169
61 7.00098
62 7.56874
63 8.19069
64 8.87343
65 9.62458
66 9.41000
67 9.19088
68 8.96748
69 8.73999
70 8.50892
(c) The Plan shall be aggregated with all CenturyTel Plans
included in the Aggregation Group.
16.4 Top-Heavy Minimum Benefits.
(a) In any Top-Heavy Year, each Participant shall be
entitled to the greater of:
(i) the Pension he otherwise is entitled to under the
Plan, or
(ii) an annual benefit that, when expressed as a
benefit commencing at his Normal Retirement Date (with no ancillary
benefits), is equal to two percent (2%) of the Participant's Average
Compensation for each of the Participant's first ten (10) years of
Credited Service after 1983 during which the Plan is Top-Heavy.
The annual benefit described in paragraph (ii), above, shall
not be adjusted to take into account the availability of preretirement
death benefits under the Plan.
(b) A Participant who has completed at least three (3) years
of Vesting Service and who is credited with an Hour of Service in a Top-Heavy
Year shall have a nonforfeitable right to his Accrued Benefit.
(c) For each Top-Heavy Year, the Annual Compensation of each
Participant taken into account under the Plan for all Plan Years (including Plan
Years before the first Top-Heavy Year) shall not exceed his Compensation (as
defined in Section 16.2(c)); provided that any benefits accrued before a
Top-Heavy Year (determined without regard to any Plan amendments adopted after
the end of the Plan Year next preceding the Top-Heavy Year) shall not be reduced
as a result of the application of this subsection (c).
(d) The benefit required by Section 16.4(a) and vested
pursuant to the provisions of Section 16.4(b) shall not be forfeitable under
provisions that otherwise would be permitted by Section 411(a)(3)(B) (relating
to suspension of benefits upon reemployment) or 411(a)(3)(D) (relating to
forfeitures upon withdrawal of mandatory contributions) of the Code.
(e) The Plan shall meet the requirements of this Section
16.4 without taking into account, in accordance with Section 416(e) of the
Code, contributions or benefits under Chapter 21 of the Code (relating to the
Federal Insurance Contributions Act), Title II of the Social Security Act,
or any other federal or state law.
(f) The requirements of this Section 16.4 shall not apply
with respect to any employee included in a unit of employees covered by an
agreement that the Secretary of Labor finds to be a collective bargaining
agreement between employee representatives and one or more Affiliates if there
is evidence that retirement benefits were the subject of good faith bargaining
between such employee representatives and the Affiliate.
16.5 Termination of Top-Heavy Status. If, for any Plan Year after
a Top-Heavy Year, the Plan is no longer Top-Heavy, the provisions of Section
16.4, above, shall not apply with respect to such Plan Year; provided that
(a) the Accrued Benefit of any Participant shall not be
reduced on account of the operation of this Section 16.5;
(b) each Participant shall remain fully vested in any portion
of the Participant's Accrued Benefit that was fully vested before the Plan
ceased to be Top-Heavy; and
(c) any Participant who was a Participant in a Top-Heavy Year
and who has completed at least five (5) years of Vesting Service as of
the first day of the Plan Year in which the Plan is no longer Top-Heavy
may elect to remain subject to the provisions of Section 16.4(b).
16.6 Interpretation. This Article XVI is intended to satisfy the
requirements imposed by Section 416 of the Code and shall be construed in a
manner that will effectuate this intent. This Article XVI shall not be construed
in a manner that would impose requirements that are more stringent than those
imposed by Section 416 of the Code.
THUS DONE AND SIGNED, this 31st day of December, 2002.
CENTURYTEL, INC.
/s/ R. Stewart Ewing, Jr.
By:__________________________
Exhibit 10.1(c)
AMENDMENTS TO THE
CENTURYTEL RETIREMENT PLAN
CENTURYTEL, INC., represented herein by its Executive Vice-President
and Chief Financial Officer, R. Stewart Ewing, Jr., does hereby execute the
following amendments to the CenturyTel Retirement Plan:
1. Preamble:
"These amendments to the Plan are adopted to reflect certain provisions of
the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA").
These amendments are intended to constitute good faith compliance with the
requirements of EGTRRA and are to be construed in accordance with EGTRRA
and guidance issued thereunder. Except as otherwise provided herein, each
amendment shall be effective as of the first day of the first Plan Year
beginning after December 31, 2001."
2. Insert the following as the last paragraph of Section 2.2:
"Notwithstanding any other Plan provision to the contrary, effective for
distributions with annuity starting dates on or after January 1, 2003, the
applicable mortality table used for purposes of adjusting any benefit or
limitation under Code Section 415(b)(2)(B), (C), or (D) set forth in this
Plan and the applicable mortality table used for purposes of satisfying the
requirements of Code Section 417(e) set forth in this Plan is the table
prescribed in Rev. Rul. 2001-62."
3. Insert the following as the second paragraph of Section 2.14(d):
"For Plan Years beginning after December 31, 2001, the annual compensation
of each Participant taken into account in determining allocations for any
Plan Year beginning after December 31, 2001, shall not exceed $200,000 as
adjusted for cost-of-living increases in accordance with Code Section
401(a)(17)(B). Annual compensation means compensation during the Plan Year
or such other consecutive 12-month period over which compensation is
otherwise determined under the Plan (the determination period). The
cost-of-living adjustment in effect for a calendar year applies to annual
compensation for the determination period that begins with or within such
calendar year."
4. Insert the following as the second paragraph of Section 16.2(f):
"For Plan Years beginning after December 31, 2001, `Key Employee' means any
Employee or former Employee (including any deceased Employee) who at any
time during the Plan Year that includes the determination date was an
officer of the Employer having annual compensation greater than $130,000
(as adjusted under Code Section 416(i)(1) for Plan Years beginning after
December 31, 2002), a 5-percent owner of the Employer, or a 1-percent owner
of the Employer having annual compensation of more than $150,000. For this
purpose, annual compensation means compensation within the meaning of Code
Section 415(c)(3). The determination of who is a Key Employee will be made
in accordance with Code Section 416(i)(1) and the applicable regulations
and other guidance of general applicability issued thereunder."
5. Insert the following as Section 16.3(d):
"For Plan Years beginning after December 31, 2001, the present value of
accrued benefits and the amounts of account balances of an Employee as of
the determination date shall be increased by the distributions made with
respect to the Employee under the plan and any plan aggregated with the
Plan under Code Section 416(g)(2) during the 1-year period ending on the
determination date. The preceding sentence shall also apply to
distributions under a terminated plan which, had it not been terminated,
would have been aggregated with the Plan under Code Section
416(g)(2)(A)(i). In the case of a distribution made for a reason other than
severance from employment, death, or disability, this provision shall be
applied by substituting `5-year period' for `1-year period.' The accrued
benefits and accounts of any individual who has not performed services for
the Employer during the 1-year period ending on the determination date
shall not be taken into account."
6. Insert the following as Section 16.3(e):
"The accrued benefits and accounts of any individual who has not performed
services for the Employer during the 1-year period ending on the
determination date shall not be taken into account."
7. Insert the following as Section 16.4(g):
"For purposes of satisfying the minimum benefit requirements of Code
Section 416(c)(1) and this Plan, in determining Years of Service with the
Employer, any service with the Employer shall be disregarded to the extent
that such service occurs during a Plan Year when the Plan benefits (within
the meaning of Code section 410(b)) no Key Employee or former Key
Employee."
7. Insert the following as the second sentence of Section 7.13(b)(i):
"For distributions made after December 31, 2001, a portion of a
distribution shall not fail to be an eligible rollover distribution merely
because the portion consists of after-tax employee contributions which are
not includable in gross income. However, such portion may be transferred
only to an individual retirement account or annuity described in Code
Section 408(a) or (b), or to a qualified defined contribution plan
described in Code Section 401(a) or 403(a) that agrees to separately
account for amounts so transferred, including separately accounting for the
portion of such distribution which is includable in gross income and the
portion of such distribution which is not so includable."
8. Insert the following as the third sentence of Section 7.13(b)(ii):
"For distributions made after December 31, 2001, an eligible retirement
plan shall also mean an annuity contract described in Code Section 403(b)
and an eligible plan under Code Section 457(b) which is maintained by a
state, political subdivision of a state, or any agency or any
instrumentality of a state or political subdivision of a state and which
agrees to separately account for amounts transferred into such plan from
this Plan. The definition of eligible retirement plan shall also apply in
the case of a distribution to a surviving spouse, or to a spouse or former
spouse who is the alternate payee under a qualified domestic relations
order, as defined in Code Section 414(p)."
9. Section 2.14 is amended by inserting the following as Section 2.14(i):
"(i) For Plan Years beginning on and after January 1, 2001, for purposes of
the definition of compensation contained in this Section 2.14, and Sections
5.7(c) and 16.2(c) of the Plan, compensation paid or made available during
such years shall include elective amounts that are not includable in the
gross income of the Employee by reason of Code Section 132(f)(4)."
THUS DONE AND SIGNED, this 31st day of December, 2002.
CENTURYTEL, INC.
/s/ R. Stewart Ewing, Jr.
BY:____________________________________
R. Stewart Ewing, Jr.
Executive Vice-President
and Chief Financial Officer
Exhibit 10.2(d)(ii)
FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT
UNDER THE AMENDED AND RESTATED
CENTURYTEL, INC.
2000 INCENTIVE COMPENSATION PLAN
(February 25, 2002 Grants)
THIS AGREEMENT is entered into as of February 25, 2002 by and between
CenturyTel, Inc., a Louisiana corporation ("CenturyTel"), and __________________
("Optionee").
WHEREAS Optionee is a key employee of CenturyTel or one of its
subsidiaries (collectively, the "Company") and CenturyTel considers it desirable
and in its best interest that Optionee be given an incentive to advance the
interests of CenturyTel by possessing an option to purchase shares of the common
stock, $1.00 par value per share, of CenturyTel (the "Common Stock") under the
Amended and Restated CenturyTel, Inc. 2000 Incentive Compensation Plan (the
"Plan"), which was approved by the Board of Directors of CenturyTel on February
22, 2000, approved by the shareholders at CenturyTel's 2000 Annual Meeting of
Shareholders and amended and restated by the Board of Directors on May 23, 2000;
NOW, THEREFORE, in consideration of the premises, it is agreed as
follows:
1.
Grant of Option
1.01 CenturyTel hereby grants to Optionee effective February 25, 2002
(the "Date of Grant") the right, privilege and option to purchase __________
shares of Common Stock (the "Option") at an exercise price of $32.99 per share.
1.02 The Option is a non-qualified stock option and shall not be
treated as an incentive stock option under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
2.
Time of Exercise
2.01 Subject to the provisions of the Plan and the other provisions of
this Agreement, the Optionee shall be entitled to exercise the Option as
follows:
With respect to 1/3 of the shares
covered by the Option......... beginning February 25, 2003
With respect to 2/3 of the shares
covered by the Option, less any
shares previously issued...... beginning February 25, 2004
With respect to all of the shares
covered by the Option, less any
shares previously issued...... beginning February 25, 2005.
The Option shall expire and may not be exercised later than ten years after the
Date of Grant.
2.02 Notwithstanding the foregoing, the Option shall become
accelerated and immediately exercisable in full (a) if Optionee dies while he
is employed by the Company, (b) if Optionee becomes disabled within the meaning
of Section 22(e)(3) of the Code ("Disability") while he is employed by the
Company, (c) if Optionee retires from employment with the Company on or after
attaining the age of 55 ("Retirement") or (d) pursuant to the provisions of
the Plan.
3.
Conditions for Exercise of Option
During Optionee's lifetime, the Option may be exercised only by him
or by his legal representative. The Option must be exercised while Optionee is
employed by the Company, or, to the extent exercisable at the time of
termination of employment, within 190 days of the date on which he ceases to
be an employee, except that (a) if he ceases to be an employee because of
Retirement, the Option may be exercised within three years from the date on
which he ceases to be an employee, (b) if an Optionee's employment is
terminated for cause, the unexercised portion of the Option is immediately
terminated, and (c) in the event of Optionee's Disability or death, the
Option may be exercised by the Optionee or, in the case of death, by his estate
or by the person to whom such right devolves from him by reason of his death
within two years after the date of his Disability or death; provided, however,
that the Option and all option gain, as defined in Section 4.01, shall at all
times be subject to the forfeiture provisions of Section 4 hereof; and provided
further that no Option may be exercised later than ten years after the Date
of Grant.
4.
Forfeiture of Option and Option Gain
4.01 If, at any time during Optionee's employment by the Company or
within 18 months after termination of employment, Optionee engages in any
activity in competition with any activity of the Company, or inimical, contrary
or harmful to the interests of the Company, including, but not limited to: (a)
conduct relating to Optionee's employment for which either criminal or civil
penalties against Optionee may be sought, (b) conduct or activity that results
in termination of Optionee's employment for cause, (c) violation of Company
policies, including, without limitation, the Company's insider trading policy,
(d) accepting employment with, acquiring a 5% or more equity or participation
interest in, serving as a consultant, advisor, director or agent of, directly or
indirectly soliciting or recruiting any employee of the Company who was employed
at any time during Optionee's tenure with the Company, or otherwise assisting in
any other capacity or manner any company or enterprise that is directly or
indirectly in competition with or acting against the interests of the Company or
any of its lines of business (a "competitor"), except for (A) any isolated,
sporadic accommodation or assistance provided to a competitor, at its request,
by Optionee during Optionee's tenure with the Company, but only if provided in
the good faith and reasonable belief that such action would benefit the Company
by promoting good business relations with the competitor and would not harm the
Company's interests in any material respect or (B) any other service or
assistance that is provided at the request or with the written permission of the
Company, (e) disclosing or misusing any confidential information or material
concerning the Company, or (f) participating in a hostile takeover attempt, then
(i) the Option shall terminate effective the date on which Optionee engages in
such activity, unless terminated sooner by operation of another term or
condition of this Agreement or the Plan, and (ii) Optionee shall pay in cash to
the Company, without interest, any option gain realized by Optionee from
exercising all or a portion of the Option during the period beginning one year
prior to termination of employment (or one year prior to the date Optionee first
engages in such activity if no termination occurs) and ending on the date on
which the Option terminates. For purposes hereof, "option gain" shall mean the
difference between the closing market price of the Common Stock on the date of
exercise minus the exercise price, multiplied by the number of shares purchased.
4.02 If Optionee owes any amount to the Company under Section 4.01
above, Optionee acknowledges that the Company may deduct such amount from any
amounts the Company owes Optionee from time to time for any reason (including
amounts owed to Optionee as wages or other compensation, fringe benefits, or
vacation pay). Whether or not the Company elects to make any such set-off in
whole or in part, if the Company does not recover by means of set-off the full
amount Optionee owes it, Optionee agrees to pay immediately the unpaid balance
to the Company.
4.03 Optionee may be released from Optionee's obligations under
Sections 4.01 and 4.02 above only if the Committee determines in its sole
discretion that such action is in the best interests of the Company.
5.
Preference Share Purchase Rights
Upon exercise of an Option at a time when preference share purchase
rights to purchase shares of Series BB Participating Cumulative Preference Stock
or other securities or property of the Company (the "Rights" and each a "Right")
remain outstanding pursuant to that certain Rights Agreement dated as of August
27, 1996 between CenturyTel and the Rights Agent named therein, as amended (the
"Rights Agreement"), or any successor rights agreement, then Optionee shall
receive Rights in conjunction with Optionee's receipt of shares of Common Stock
on the terms and conditions of the Rights Agreement.
6.
Additional Conditions
Anything in this Agreement to the contrary notwithstanding, if at any
time CenturyTel further determines, in its sole discretion, that the listing,
registration or qualification (or any updating of any such document) of the
shares of Common Stock issuable pursuant to the exercise of an Option is
necessary on any securities exchange or under any federal or state securities or
blue sky law, or that the consent or approval of any governmental regulatory
body is necessary or desirable as a condition of, or in connection with the
issuance of shares of Common Stock pursuant thereto, or the removal of any
restrictions imposed on such shares, such shares of Common Stock shall not be
issued, in whole or in part, unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to CenturyTel. CenturyTel agrees to promptly take any and all
actions necessary or desirable in order that all shares of Common Stock issuable
hereunder shall be issued as provided herein.
7.
Attorneys' Fees and Expenses
Should any party hereto retain counsel for the purpose of enforcing, or
preventing the breach of, any provision hereof, including, but not limited to,
the institution of any action or proceeding in court to enforce any provision
hereof, to enjoin a breach of any provision of this Agreement, to obtain
specific performance of any provision of this Agreement, to obtain monetary or
liquidated damages for failure to perform any provision of this Agreement, or
for a declaration of such parties' rights or obligations hereunder, or for any
other judicial remedy, then the prevailing party shall be entitled to be
reimbursed by the losing party for all costs and expenses incurred thereby,
including, but not limited to, attorneys' fees (including costs of appeal).
8.
No Contract of Employment Intended
Nothing in this Agreement shall confer upon Optionee any right to
continue in the employment of the Company or to interfere in any way with the
right of the Company to terminate Optionee's employment relationship with the
Company at any time.
9.
Taxes
The Company may make such provisions as it may deem appropriate
for the withholding of any federal, state and local taxes that it determines
are required to be withheld on the exercise of the Option.
10.
Binding Effect
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, legal
representatives and successors. Without limiting the generality of the
foregoing, whenever the word "Optionee" is used in any provision of this
Agreement under circumstances where the provision appropriately applies to the
heirs, executors, administrators or legal representatives to whom this Option
may be transferred by will or by the laws of descent and distribution, the word
"Optionee" shall be deemed to include such person or persons.
11.
Inconsistent Provisions
Optionee agrees that the Option granted hereby is subject to the
provisions of the Plan as fully as if all such provisions were set forth in
their entirety in this Agreement. If any provision of this Agreement
conflicts with a provision of the Plan, the Plan provision shall control.
Optionee acknowledges that a copy of the Plan was distributed or made
available to Optionee and that Optionee was advised to review such Plan prior to
entering into this Agreement. Optionee waives the right to claim that the
provisions of the Plan are not binding upon Optionee and Optionee's heirs,
executors, representatives and administrators.
12.
Adjustments to Options
Appropriate adjustments shall be made to the number and class of shares
of Common Stock subject to the Option and to the exercise price in certain
situations described in Section 10.6 of the Plan.
13.
Termination of Option
The Committee, in its sole discretion, may terminate the Option.
However, no termination may adversely affect the rights of Optionee to the
extent that the Option is currently exercisable on the date of such termination.
14.
Severability
If any term or provision of this Agreement, or the application thereof
to any person or circumstance, shall at any time or to any extent be invalid,
illegal or unenforceable in any respect as written, Optionee and CenturyTel
intend for any court construing this Agreement to modify or limit such provision
so as to render it valid and enforceable to the fullest extent allowed by law.
Any such provision that is not susceptible of such reformation shall be ignored
so as to not affect any other term or provision hereof, and the remainder of
this Agreement, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid, illegal or
unenforceable, shall not be affected thereby and each term and provision of this
Agreement shall be valid and enforced to the fullest extent permitted by law.
15.
Entire Agreement; Modification
The Plan and this Agreement contain the entire agreement between the
parties with respect to the subject matter contained herein and may not be
modified, except as provided in the Plan, as it may be amended from time to time
in the manner provided therein, or in this Agreement, as it may be amended from
time to time by a written document signed by each of the parties hereto. Any
oral or written agreements, representations, warranties, written inducements, or
other communications made prior to the execution of the Agreement shall be void
and ineffective for all purposes.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
CENTURYTEL, INC.
By:
-------------------------------
{insert name}
Optionee
Exhibit 10.2(f)(ii)
FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT
UNDER THE CENTURYTEL, INC.
2002 MANAGEMENT INCENTIVE COMPENSATION PLAN
(February 24, 2003 Grants)
THIS AGREEMENT is entered into as of February 24, 2003 by and between
CenturyTel, Inc., a Louisiana corporation ("CenturyTel"), and ________________
("Optionee").
WHEREAS, Optionee is a key employee of CenturyTel or one of its
subsidiaries (collectively, the "Company") and CenturyTel considers it desirable
and in its best interest that Optionee be given an incentive to advance the
interests of CenturyTel by possessing an option to purchase shares of the common
stock, $1.00 par value per share, of CenturyTel (the "Common Stock") under the
CenturyTel, Inc. 2002 Management Incentive Compensation Plan (the "Plan"), which
was approved by the Board of Directors of CenturyTel on February 26, 2002, and
approved by the shareholders at CenturyTel's 2002 Annual Meeting of Shareholders
on May 9, 2002;
NOW, THEREFORE, in consideration of the premises, it is agreed
as follows:
1.
Grant of Option
1.01 In consideration of future services, CenturyTel hereby grants to
Optionee,
effective February 24, 2003 (the "Date of Grant"), the right, privilege and
option to purchase _______ shares of Common Stock (the "Option") at an exercise
price of $27.48 per share.
1.02 The Option is a non-qualified stock option and shall not be treated as an
incentive stock option under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
2.
Time of Exercise
2.01 Subject to the provisions of the Plan and the other provisions
of this Agreement, the Optionee shall be entitled to exercise the Option
as follows :
With respect to 1/3 of the shares
covered by the Option......... beginning February 24, 2004
With respect to 2/3 of the shares
covered by the Option, less any
shares previously issued...... beginning February 24, 2005
With respect to all of the shares
covered by the Option, less any
shares previously issued...... beginning February 24, 2006.
The Option shall expire and may not be exercised later than ten years after the
Date of Grant. 2.02.....Notwithstanding the foregoing, the Option shall become
accelerated and immediately exercisable in full (a) if Optionee dies while he is
employed by the Company, (b) if Optionee becomes disabled within the meaning of
Section 22(e)(3) of the Code ("Disability") while he is employed by the Company,
(c) if Optionee retires from employment with the Company on or after attaining
the age of 55 ("Retirement") or (d) pursuant to the provisions of the Plan.
3.
Conditions for Exercise of Option
During Optionee's lifetime, the Option may be exercised only by him or
by his legal representative. The Option must be exercised while Optionee is
employed by the Company, or, to the extent exercisable at the time of
termination of employment, within 190 days of the date on which he ceases to be
an employee, except that (a) if he ceases to be an employee because of
Retirement, the Option may be exercised within three years from the date on
which he ceases to be an employee, (b) if an Optionee's employment is terminated
for cause, the unexercised portion of the Option is immediately terminated, and
(c) in the event of Optionee's Disability or death, the Option may be exercised
by the Optionee or, in the case of death, by his estate or by the person to whom
such right devolves from him by reason of his death within two years after the
date of his Disability or death; provided, however, that the Option and all
option gain, as defined in Section 4.01, shall at all times be subject to the
forfeiture provisions of Section 4 hereof; and provided further that no Option
may be exercised later than ten years after the Date of Grant.
4.
Forfeiture of Option and Option Gain
4.01. If, at any time during Optionee's employment by the Company or
within 18 months after termination of employment, Optionee engages in any
activity in competition with any activity of the Company, or inimical, contrary
or harmful to the interests of the Company, including but not limited to: (a)
conduct relating to Optionee's employment for which either criminal or civil
penalties against Optionee may be sought, (b) conduct or activity that results
in termination of Optionee's employment for cause, (c) violation of Company
policies, including, without limitation, the Company's insider trading policy
and corporate compliance program, (d) accepting employment with, acquiring a 5%
or more equity or participation interest in, serving as a consultant, advisor,
director or agent of, directly or indirectly soliciting or recruiting any
employee of the Company who was employed at any time during Optionee's tenure
with the Company, or otherwise assisting in any other capacity or manner any
company or enterprise that is directly or indirectly in competition with or
acting against the interests of the Company or any of its lines of business (a
"competitor"), except for (A) any isolated, sporadic accommodation or assistance
provided to a competitor, at its request, by Optionee during Optionee's tenure
with the Company, but only if provided in the good faith and reasonable belief
that such action would benefit the Company by promoting good business relations
with the competitor and would not harm the Company's interests in any
substantial manner or (B) any other service or assistance that is provided at
the request or with the written permission of the Company, (e) disclosing or
misusing any confidential information or material concerning the Company, (f)
engaging in, promoting, assisting or otherwise participating in a hostile
takeover attempt of the Company or any other transaction or proxy contest that
could reasonably be expected to result in a Change of Control (as defined in the
Plan) not approved by the Company's Board of Directors or (g) making any
statement or disclosing any information to any customers, suppliers, lessors,
lessees, licensors, licensees, regulators, employees or others with whom the
Company engages in business that is defamatory or derogatory with respect to the
business, operations, technology, management, or other employees of the Company,
or taking any other action that could reasonably be expected to injure the
Company in its business relationships with any of the foregoing parties or
result in any other detrimental effect on the Company, then (i) the Option shall
terminate without any payment to Optionee effective the date on which Optionee
engages in such activity, unless terminated sooner by operation of another term
or condition of this Agreement or the Plan, and (ii) Optionee shall pay in cash
to the Company, without interest, any option gain realized by Optionee from
exercising all or a portion of the Option during the period beginning one year
prior to termination of employment (or one year prior to the date Optionee first
engages in such activity if no termination occurs) and ending on the date on
which the Option terminates. For purposes hereof, "option gain" shall mean the
difference between the closing market price of the Common Stock on the date of
exercise minus the exercise price, multiplied by the number of shares purchased.
4.02. If Optionee owes any amount to the Company under Section 4.01
above, Optionee acknowledges that the Company may deduct such amount from any
amounts the Company owes Optionee from time to time for any reason (including
without limitation amounts owed to Optionee as salary, wages or other
compensation, fringe benefits, or vacation pay). Whether or not the Company
elects to make any such set-off in whole or in part, if the Company does not
recover by means of set-off the full amount Optionee owes it, Optionee hereby
agrees to pay immediately the unpaid balance to the Company.
4.03. Optionee may be released from Optionee's obligations under
Sections 4.01 and 4.02 above only if the Compensation Committee (the
"Committee") determines in its sole discretion that such action is in the best
interests of the Company.
5.
Preference Share Purchase Rights
Upon exercise of an Option at a time when preference share purchase
rights to purchase shares of Series BB Participating Cumulative Preference Stock
or other securities or property of the Company (the "Rights" and each a "Right")
remain outstanding pursuant to that certain Rights Agreement dated as of August
27, 1996 between CenturyTel and the Rights Agent named therein, as amended by
Amendment No. 1 to Rights Agreement dated May 25, 1999 and Amendment No. 2 to
Rights Agreement dated June 30, 2000, and as may be further amended (the "Rights
Agreement"), or any successor rights agreement, then Optionee shall receive
Rights in conjunction with Optionee's receipt of shares of Common Stock on the
terms and conditions of the Rights Agreement.
6.
Additional Conditions
Anything in this Agreement to the contrary notwithstanding, if at any
time CenturyTel further determines, in its sole discretion, that the listing,
registration or qualification (or any updating of any such document) of the
shares of Common Stock issuable pursuant to the exercise of an Option is
necessary on any securities exchange or under any federal or state securities or
blue sky law, or that the consent or approval of any governmental regulatory
body is necessary or desirable as a condition of, or in connection with the
issuance of shares of Common Stock pursuant thereto, or the removal of any
restrictions imposed on such shares, such shares of Common Stock shall not be
issued, in whole or in part, unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to CenturyTel. CenturyTel agrees to promptly take any and all
actions necessary or desirable in order that all shares of Common Stock issuable
hereunder shall be issued as provided herein.
7.
Attorneys' Fees and Expenses
Should any party hereto retain counsel for the purpose of enforcing, or
preventing the breach of, any provision hereof, including, but not limited to,
the institution of any action or proceeding in court to enforce any provision
hereof, to enjoin a breach of any provision of this Agreement, to obtain
specific performance of any provision of this Agreement, to obtain monetary or
liquidated damages for failure to perform any provision of this Agreement, or
for a declaration of such parties' rights or obligations hereunder, or for any
other judicial remedy, then the prevailing party shall be entitled to be
reimbursed by the losing party for all costs and expenses incurred thereby,
including, but not limited to, attorneys' fees (including costs of appeal).
8........
No Contract of Employment Intended
Nothing in this Agreement shall confer upon Optionee any right to
continue in the employment of the Company or to interfere in any way with the
right of the Company to terminate Optionee's employment relationship with the
Company at any time.
9.
Taxes
The Company may make such provisions as it may deem appropriate for the
withholding of any federal, state and local taxes that it determines are
required to be withheld on the exercise of the Option.
10.
Binding Effect
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, legal
representatives and successors. Without limiting the generality of the
foregoing, whenever the word "Optionee" is used in any provision of this
Agreement under circumstances where the provision appropriately applies to the
heirs, executors, administrators or legal representatives to whom this Option
may be transferred by will or by the laws of descent and distribution, the word
"Optionee" shall be deemed to include such person or persons.
11.
Inconsistent Provisions
Optionee agrees that the Option granted hereby is subject to the
provisions of the Plan as fully as if all such provisions were set forth in
their entirety in this Agreement. If any provision of this Agreement conflicts
with a provision of the Plan, the Plan provision shall control. Optionee
acknowledges that a copy of the Plan was distributed or made available to
Optionee and that Optionee was advised to review such Plan prior to entering
into this Agreement. Optionee waives the right to claim that the provisions of
the Plan are not binding upon Optionee and Optionee's heirs, executors,
representatives and administrators.
12.
Adjustments to Options
Appropriate adjustments shall be made to the number and class of shares
of Common Stock subject to the Option and to the exercise price in certain
situations described in Section 4.5 of the Plan.
13.
Termination of Option
The Committee, in its sole discretion, may terminate the Option.
However, no termination may adversely affect the rights of Optionee to the
extent that the Option is currently exercisable on the date of such termination.
14.
Severability
If any term or provision of this Agreement, or the application thereof
to any person or circumstance, shall at any time or to any extent be invalid,
illegal or unenforceable in any respect as written, Optionee and CenturyTel
intend for any court construing this Agreement to modify or limit such provision
so as to render it valid and enforceable to the fullest extent allowed by law.
Any such provision that is not susceptible of such reformation shall be ignored
so as to not affect any other term or provision hereof, and the remainder of
this Agreement, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid, illegal or
unenforceable, shall not be affected thereby and each term and provision of this
Agreement shall be valid and enforced to the fullest extent permitted by law.
15.
Entire Agreement; Modification
The Plan and this Agreement contain the entire agreement between the
parties with respect to the subject matter contained herein and may not be
modified, except as provided in the Plan, as it may be amended from time to time
in the manner provided therein, or in this Agreement, as it may be amended from
time to time by a written document signed by each of the parties hereto. Any
oral or written agreements, representations, warranties, written inducements, or
other communications made prior to the execution of the Agreement shall be void
and ineffective for all purposes.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
CENTURYTEL, INC.
By:
-----------------------------
Name:
Title:
{insert name}
Optionee
Exhibit 10.3(g)
AMENDMENT TO THE
CENTURYTEL, INC. OUTSIDE DIRECTORS' RETIREMENT PLAN
1995 RESTATEMENT
This Amendment to the CenturyTel, Inc. Outside Directors' Retirement
Plan 1995 Restatement, is executed this 31st day of December, 2002, effective
as of May 31, 2002.
1. Delete Section 2.09 in its entirety and insert the following in
lieu thereof:
" 2.09 "COMPENSATION" shall mean moneys designated as Directors'
fees which are paid to the Participant as an annual retainer,
whether paid currently, accrued or deferred, as in effect as of
May 31, 2002. In addition, fees paid for attending one special
meeting of the Board, as in effect as of May 31, 2002, shall also
be included as Compensation. Compensation shall be limited to the
amounts in effect as of May 31, 2002, and shall not be increased
or decreased for any subsequent adjustments to the annual retainer
or special meeting fee paid to Directors.
2. Add the following as the second sentence of Section 2.19:
"No Years of Benefit Accrual Service shall accrue for service
after May 31, 2002, and benefits under this Plan shall be
determined based on a Participant's full and fractional Years
of Benefit Accrual Service as of such date."
3. Add the following as the second sentence of Article III:
"Effective as of May 31, 2002, no Outside Directors other than
Outside Directors already participating in the Plan as of such
date shall be eligible to participate in the Plan."
4. Add the following at the end of Section 5.04:
" Notwithstanding the foregoing sentence, accrual of Years of
Benefit Accrual Service by Participants shall cease as of May
31, 2002, and Accrued Benefits computed under the foregoing
schedule shall be based on full and fractional Years of
Benefit Accrual Service of Participants as of May 31, 2002."
IN WITNESS WHEREOF, CenturyTel, Inc. has executed this amendment in its
corporate name on the date indicated above.
CENTURYTEL, INC.
/s/ R. Stewart Ewing, Jr.
By:_______________________________
R. Stewart Ewing, Jr.
Executive Vice President and
Chief Financial Officer
EXHIBIT 21
CENTURYTEL, INC.
SUBSIDIARIES OF THE REGISTRANT
AS OF DECEMBER 31, 2002
State of
Subsidiary incorporation
Actel, LLC Delaware
Century Business Communications, LLC Louisiana
Century Interactive Fax, Inc. Louisiana
CenturyTel Arkansas Holdings, Inc. Arkansas
CenturyTel Holdings, Inc. Louisiana
CenturyTel Interactive Company, Inc. Louisiana
CenturyTel Internet Services, LLC Louisiana
CenturyTel Investments, LLC Louisiana
CenturyTel Investments of Texas, Inc. Delaware
CenturyTel Long Distance, Inc. Louisiana
CenturyTel Michigan Network, LLC Louisiana
CenturyTel Midwest - Michigan, Inc. Michigan
CenturyTel of Adamsville, Inc. Tennessee
CenturyTel of Alabama, LLC Louisiana
CenturyTel of Arkansas, Inc. Arkansas
CenturyTel of Central Arkansas, LLC Arkansas
CenturyTel of Central Indiana, Inc. Indiana
CenturyTel of Central Louisiana, LLC Louisiana
CenturyTel of Central Wisconsin, LLC Delaware
CenturyTel of Chatham, LLC Louisiana
CenturyTel of Chester, Inc. Iowa
CenturyTel of Claiborne, Inc. Tennessee
CenturyTel of Colorado, Inc. Colorado
CenturyTel of Cowiche, Inc. Washington
CenturyTel of Eagle, Inc. Colorado
CenturyTel of East Louisiana, LLC Louisiana
CenturyTel of Eastern Oregon, Inc. Oregon
CenturyTel of Evangeline, LLC Louisiana
CenturyTel of Fairwater-Brandon-Alto, LLC Delaware
CenturyTel of Forestville, LLC Delaware
CenturyTel of Idaho, Inc. Delaware
CenturyTel of Inter Island, Inc. Washington
CenturyTel of Lake Dallas, Inc. Texas
CenturyTel of Larsen-Readfield, LLC Delaware
CenturyTel of Michigan, Inc. Michigan
CenturyTel of Minnesota, Inc. Minnesota
CenturyTel of Missouri, LLC Louisiana
CenturyTel of Monroe County, LLC Wisconsin
CenturyTel of Montana, Inc. Oregon
CenturyTel of Mountain Home, Inc. Arkansas
CenturyTel of North Louisiana, LLC Louisiana
CenturyTel of North Mississippi, Inc. Mississippi
CenturyTel of Northern Michigan, Inc. Michigan
CenturyTel of Northern Wisconsin, LLC Delaware
CenturyTel of Northwest Arkansas, LLC Delaware
CenturyTel of Northwest Louisiana, Inc. Louisiana
CenturyTel of Northwest Wisconsin, LLC Delaware
CenturyTel of Odon, Inc. Indiana
CenturyTel of Ohio, Inc. Ohio
CenturyTel of Ooltewah-Collegedale, Inc. Tennessee
CenturyTel of Oregon, Inc. Oregon
CenturyTel of Port Aransas, Inc. Texas
CenturyTel of Postville, Inc. Iowa
CenturyTel of Redfield, Inc. Arkansas
CenturyTel of Ringgold, LLC Louisiana
CenturyTel of San Marcos, Inc. Texas
CenturyTel of South Arkansas, Inc. Arkansas
CenturyTel of Southeast Louisiana, LLC Louisiana
CenturyTel of Southern Wisconsin, LLC Louisiana
CenturyTel of Southwest Louisiana, LLC Louisiana
CenturyTel of the Gem State, Inc. Idaho
CenturyTel of the Midwest-Kendall, LLC Delaware
CenturyTel of the Midwest-Wisconsin, LLC Delaware
CenturyTel of the Northwest, Inc. Washington
CenturyTel of the Southwest, Inc. New Mexico
CenturyTel of Upper Michigan, Inc. Michigan
CenturyTel of Washington, Inc. Washington
CenturyTel of Wisconsin, LLC Louisiana
CenturyTel of Wyoming, Inc. Wyoming
CenturyTel Security Systems Holding Company, LLC Louisiana
CenturyTel Service Group, LLC Louisiana
CenturyTel Solutions, LLC Louisiana
CenturyTel Supply Group, Inc. Louisiana
CenturyTel Web Solutions, LLC Louisiana
CenturyTel/Area Long Lines, Inc. Wisconsin
CenturyTel/Tele-Max, Inc. Texas
CenturyTel/Teleview of Wisconsin, Inc. Wisconsin
Spectra Communications Group, LLC Delaware
Telephone USA of Wisconsin, LLC Delaware
Certain of the Company's smaller subsidiaries have been intentionally
omitted from this exhibit pursuant to rules and regulations of the Securities
and Exchange Commission.
EXHIBIT 23
Independent Auditors' Consent
The Board of Directors
CenturyTel, Inc.:
We consent to incorporation by reference in the Registration Statements
(No. 333-91361, No. 333-84276 and No. 333-100481) on Form S-3, the
Registration Statements (No. 33-46562, No. 33-60061, No. 333-67815, No.
333-91351, No. 333-37148, No. 333-60806, No. 333-64992, No. 333-65004 and No.
333-89060) on Form S-8, the Registration Statements (No. 33-31314 and No.
33-46473) on combined Form S-8 and Form S-3, and the Registration Statements
(No. 33-48956, No. 333-17015 and No. 333-100480) on Form S-4 of CenturyTel, Inc.
of our report dated January 29, 2003, relating to the consolidated balance
sheets of CenturyTel, Inc. and subsidiaries as of December 31, 2002 and 2001,
and the related consolidated statements of income, comprehensive income, cash
flows, and stockholders' equity and related financial statement schedule for
each of the years in the three-year period ended December 31, 2002, which report
appears in the December 31, 2002 annual report on Form 10-K of CenturyTel, Inc.
/s/ KPMG LLP
KPMG LLP
Shreveport, Louisiana
March 26, 2003
Exhibit 99
CenturyTel, Inc.
March 27, 2003
VIA EDGAR TRANSMISSION
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549
Re: CenturyTel, Inc. Certification of Contents of Form 10-K for
the year ending December 31, 2002, pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
Ladies and Gentlemen:
CenturyTel, Inc. (the "Company") filed today, via EDGAR, its annual
report on Form 10-K for the year ending December 31, 2002. The undersigned,
acting in their capacities as the Chief Executive Officer and the Chief
Financial Officer of the Company, certify that the Form 10-K fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, and that the information contained in the Form 10-K fairly presents, in
all material respects, the financial condition and results of operations of the
Company for the period covered by such report.
This certification is being furnished as an exhibit to the Form 10-K
solely to comply with the requirements of Section 906 of the Sarbanes-Oxley Act
of 2002, Pub. L. No. 107-204, and should not be deemed to be filed with the
Securities and Exchange Commission, either as a part of the Form 10-K or
otherwise.
A signed original of this written statement required by Section 906 has
been provided to the Company and will be retained by the Company and furnished
to the Securities and Exchange Commission or its staff upon request.
Very truly yours,
/s/ Glen F. Post, III /s/ R. Stewart Ewing, Jr.
---------------------------- -------------------------------
Glen F. Post, III R. Stewart Ewing, Jr.
Chairman of the Board of Directors Executive Vice President and
and Chief Executive Officer Chief Financial Officer