Document:

Exhibit 10.8(b)

 

AMENDMENT NO. 1

TO

SKYWEST, INC.

1995
EMPLOYEE STOCK PURCHASE PLAN

 

THIS AMENDMENT, (the “Amendment”) is made
effective as of the 31st day of December 1995 by SkyWest, Inc.,
a Utah corporation (the “Company”).

 

RECITALS

 

WHEREAS, effective November 8, 1994, the
Company adopted the SkyWest Inc. 1995 Employee Stock Purchase Plan (the “Plan”)
for the purpose of providing a method whereby employees of the Company and
certain of its subsidiaries would have an opportunity to acquire a proprietary
interest in the Company.

 

WHEREAS, subsequent to the adoption of the
Plan, the Company has determined it advisable and in the best interests of the
Company to execute this Amendment to amend the Plan to incorporate the
modifications set forth below;

 

NOW THEREFORE, upon these premises, the Plan
is hereby modified, altered and amended in the following respects only:

 

1.     Amendments.

 

a.     Section 6.1
shall be amended to read in its entirety as follows:

 

6.1           Number
of Option Shares. On the applicable Offering Commencement Date, a
participating Employee shall be deemed to have been granted an option to
purchase on the Offering Termination Date a number of shares of Common Stock
determined by dividing such participating Employee’s contributions accumulated
prior to such Offering Termination Date and retained in the participating
Employee’s account as of the Offering Termination Date by the lower of (i) eighty-five
percent (85%) of the market value of a share of Common Stock on the offering
Commencement Date, or (ii) eighty-five percent (85%) of the market value
of a share of Common Stock on the Offering Termination Date; provided, however,
that the maximum number of shares of Common Stock an Employee may purchase
during each Offering shall be determined at the Offering Commencement Date by
dividing $25,000 ($12,500 in the case of a six-month Offering) by the market
value of a share of Common stock on the Offering Commencement Date, and
provided further that such purchase shall be subject to the limitations set
forth in Article 10 or any other applicable provisions of the Plan. For
purposes of this Section 6.1, the market value of a share of Common Stock
shall mean the closing sale price of the Common stock on the applicable date
(or the nearest prior business day on which shares of Common Stock traded on
the NASDAQ/NMS if no shares of Common Stock traded on the applicable date) as
reported on the NASDAQ/NMS or on such other exchange or quotation system on
which the Common Stock is then listed or quoted.

 

 

b.     Section 6.2
shall be amended to read in its entirety as follows:

 

6.2           Option
Price. The option price of Common Stock purchased with payroll deductions
made during each Offering for a participant therein shall be the lower of:

 

(a)           85%
of the closing sale price of the stock on the NASDAQ Stock Market/National
Market System (“NASDAQ/NMS”) (or such other exchange or quotation system on
which the Common Stock is then listed or quoted) on the applicable Offering
Commencement Date (or on the nearest prior business day on which shares of
Common Stock are traded on the NASDAQ/NMS if no shares of Common Stock are
traded on the applicable Offering Termination Date);

 

(b)           85%
of the NASDAQ/NMS closing sale price of the stock on the NASDAQ/NMS (or such
other exchange or quotation system on which the Common Shares is then listed or
quoted) on the applicable Offering Termination Date (or on the nearest prior
business day on which shares of Common Stock are traded on the NASDAQ/NMS if no
shares of Common Stock are traded on the applicable Offering Termination Date).

 

2.             Effective Date.
This amendment shall be effective as of December 31, 1995 and shall apply
to all existing options under the Plan and all options to be granted under the
terms of the Plan on or after December 31, 1995.

 

3.             Ratification. In
all respect, other than as specifically set forth in Section 1 above, the
Plan shall remain unaffected by this Amendment, the Plan shall continue in full
force and effect, subject to the terms and conditions thereof, and in the event
of any conflict, inconsistency, or incongruity between the provisions of this
Amendment and any provisions of the Plan the provisions of this Amendment shall
in all respects govern and control.

 

To record the adoption of this amendment Plan
by the Board and approval by the stockholders, the Company has caused its duly
authorized officer to affix the corporate name and seal hereto.

 

	
   

  	
  SKYWEST, INC.,

  
	
   

  	
  a Utah corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eric Christensen

  	
   

  
	
   

  	
  Its: VP Planning and Corporate SecretaryExhibit 10.8(c)

 

AMENDMENT No. 2

TO

SKYWEST, INC.

1995
EMPLOYEE STOCK PURCHASE PLAN

 

THIS
AMENDMENT, (the “Amendment”) is
made this 12th day of June, 2000, by SkyWest, Inc., a Utah
corporation (the “Company”) to be
effective July 1, 2000.

 

RECITALS

 

WHEREAS,
effective November 8, 1994, the Company adopted the SkyWest, Inc.
1995 Employee Stock Purchase Plan (the “Plan”)
for the benefit of employees of the Company and the employees of certain of its
subsidiaries, which Plan the Company has previously amended.

 

WHEREAS,
the Company has determined it is advisable and in the best interests of the
Company to amend the Plan to permit additional offerings through June 30,
2005; and to reflect the adjustment made to the Plan’s maximum share
limitations as a result of the Company’s 1998 two-for-one stock split;

 

NOW
THEREFORE, upon these premises, the Plan is hereby
modified, altered, and amended effective July 1, 2000, in the following
respects only:

 

1.          Amendments.

 

a.             Section 4.1
shall be amended to read in its entirety as follows:

 

4.1           Offerings. The Plan will be implemented
by ten annual offerings of Common Stock (the “Offerings”)
beginning on the 1st day of July in each of the years 1995
through 2004, with each Offering terminating on June 30 of the following
year; provided, however, that each annual Offering may, in the discretion of
the Committee exercised prior to the commencement thereof, be divided into two
six-month Offerings commencing, respectively, on July 1 and January 1,
and terminating on December 31 and June 30, respectively. The number
of shares of Common Stock that may be issued in any Offering shall not
cause the Plan to exceed the limitations of Section 10.1 below. As used in
the Plan, “Offering Commencement Date” means the July 1 or January 1,
as the case may be, on which the particular Offering begins and “Offering
Termination Date” means the December 31 or June 30, as the case may be,
on which the particular Offering terminates.

 

b.             Section 10.1
shall be amended to read in its entirety as follows:

 

10.1         Maximum Shares. The maximum number of
shares of Common Stock which may be issued under the Plan, subject to
adjustment as provided in Section 12.4 below, shall be 1,000,000 shares
for all Offerings. The foregoing limitation reflects the Company’s 1998
two-for-one stock split which resulted in the Plan’s original 500,000 maximum
share limitation being increased to 1,000,000 shares. If the total

 

 

number of shares for which options are
exercised on any Offering Termination Date in accordance with Article 6
exceeds the maximum number of shares set forth in this Section 10.1, the
Company shall make a pro-rata allocation of the shares available for delivery
and distribution in as nearly a uniform manner as shall be practicable and
as it shall determine to be equitable, and the balance of payroll deductions
credited to the account of each participant shall be returned to him as
promptly as possible.

 

2.             Effective Date. This amendment shall be
effective as of July 1, 2000, and shall apply to all options to be granted
under the terms of the Plan on or after July 1, 2000.

 

3.             Ratification. In all respects, other
than as specifically set forth in Section 1 above, the Plan shall remain
unaffected by this Amendment, the Plan shall continue in full force and effect,
subject to the terms and conditions thereof, and in the event of any conflict,
inconsistency, or incongruity between the provisions of this Amendment and any
provisions of the Plan the provisions of this Amendment shall in all respects
govern and control.

 

To record the adoption of this Amendment by
the Board, the Company has caused its duly authorized officer to affix the
corporate name and seal hereto.

 

	
   

  	
  SKYWEST, INC.,

  
	
   

  	
  A Utah corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jerry C. Atkin

  	
   

  
	
   

  	
  Its:

  	
  Chief Executive Officer

  

 

2Exhibit 10.12(a)

 

2004 RESTATEMENT

 

OF THE

 

SKYWEST, INC. EMPLOYEES’ RETIREMENT PLAN

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I: DEFINITIONS

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE II: ADMINISTRATION

  	
   

  	
  11

  
	
   

  	
   

  	
   

  
	
  2.1

  	
   

  	
  POWERS AND RESPONSIBILITIES OF THE EMPLOYER

  	
   

  	
  11

  
	
  2.2

  	
   

  	
  DESIGNATION OF ADMINISTRATIVE AUTHORITY

  	
   

  	
  12

  
	
  2.3

  	
   

  	
  POWERS AND DUTIES OF THE ADMINISTRATOR

  	
   

  	
  12

  
	
  2.4

  	
   

  	
  RECORDS AND REPORTS

  	
   

  	
  13

  
	
  2.5

  	
   

  	
  APPOINTMENT OF ADVISERS

  	
   

  	
  13

  
	
  2.6

  	
   

  	
  PAYMENT OF EXPENSES

  	
   

  	
  14

  
	
  2.7

  	
   

  	
  CLAIMS PROCEDURE

  	
   

  	
  14

  
	
  2.8

  	
   

  	
  CLAIMS REVIEW PROCEDURE

  	
   

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE III: ELIGIBILITY

  	
   

  	
  15

  
	
   

  	
   

  	
   

  
	
  3.1

  	
   

  	
  CONDITIONS OF ELIGIBILITY

  	
   

  	
  15

  
	
  3.2

  	
   

  	
  EFFECTIVE DATE OF PARTICIPATION

  	
   

  	
  15

  
	
  3.3

  	
   

  	
  DETERMINATION OF ELIGIBILITY

  	
   

  	
  16

  
	
  3.4

  	
   

  	
  TERMINATION OF PARTICIPATION

  	
   

  	
  16

  
	
  3.5

  	
   

  	
  OMISSION OF ELIGIBLE EMPLOYEE

  	
   

  	
  16

  
	
  3.6

  	
   

  	
  INCLUSION OF INELIGIBLE EMPLOYEE

  	
   

  	
  16

  
	
  3.7

  	
   

  	
  REHIRED EMPLOYEES AND BREAKS IN SERVICE

  	
   

  	
  17

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV: CONTRIBUTION AND ALLOCATION

  	
   

  	
  17

  
	
   

  	
   

  	
   

  
	
  4.1

  	
   

  	
  FORMULA FOR DETERMINING EMPLOYER CONTRIBUTION

  	
   

  	
  17

  
	
  4.2

  	
   

  	
  PARTICIPANT’S SALARY REDUCTION ELECTION

  	
   

  	
  18

  
	
  4.3

  	
   

  	
  TIME OF PAYMENT OF EMPLOYER CONTRIBUTIONS

  	
   

  	
  21

  
	
  4.4

  	
   

  	
  ALLOCATION OF CONTRIBUTIONS AND EARNINGS

  	
   

  	
  21

  
	
  4.5

  	
   

  	
  TOP HEAVY MINIMUM CONTRIBUTIONS

  	
   

  	
  23

  
	
  4.6

  	
   

  	
  ACTUAL DEFERRAL PERCENTAGE TESTS

  	
   

  	
  24

  
	
  4.7

  	
   

  	
  ADJUSTMENT TO SATISFY ADP TEST

  	
   

  	
  25

  
	
  4.8

  	
   

  	
  ACP TESTS

  	
   

  	
  28

  
	
  4.9

  	
   

  	
  ADJUSTMENT TO SATISFY ACP TESTS

  	
   

  	
  29

  
	
  4.10

  	
   

  	
  MAXIMUM ANNUAL ADDITIONS

  	
   

  	
  31

  
	
  4.11

  	
   

  	
  ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS

  	
   

  	
  33

  
	
  4.12

  	
   

  	
  ROLLOVERS AND PLAN-TO-PLAN TRANSFERS FROM QUALIFIED PLANS

  	
   

  	
  34

  
	
  4.13

  	
   

  	
  VOLUNTARY CONTRIBUTIONS

  	
   

  	
  36

  
	
  4.14

  	
   

  	
  DIRECTED INVESTMENT ACCOUNT

  	
   

  	
  36

  
	
  4.15

  	
   

  	
  QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTIONS

  	
   

  	
  39

  
	
  4.16

  	
   

  	
  QUALIFIED MILITARY SERVICE

  	
   

  	
  39

  
									

 

i

 

	
  ARTICLE V: VALUATIONS

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.1

  	
   

  	
  VALUATION OF THE TRUST FUND

  	
   

  	
  39

  
	
  5.2

  	
   

  	
  METHOD OF VALUATION

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI: VESTED BENEFITS AND DISTRIBUTIONS

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.1

  	
   

  	
  VESTED BENEFITS

  	
   

  	
  40

  
	
  6.2

  	
   

  	
  DISTRIBUTION OF BENEFITS UPON SEPARATION FROM EMPLOYMENT PRIOR TO
  DEATH

  	
   

  	
  40

  
	
  6.3

  	
   

  	
  BENEFICIARY DESIGNATIONS AND DISTRIBUTION UPON DEATH

  	
   

  	
  42

  
	
  6.4

  	
   

  	
  MINIMUM REQUIRED DISTRIBUTIONS

  	
   

  	
  44

  
	
  6.5

  	
   

  	
  LIMITED JOINT AND SURVIVOR ANNUITY RULES

  	
   

  	
  49

  
	
  6.6

  	
   

  	
  ROLLOVER DISTRIBUTIONS

  	
   

  	
  52

  
	
  6.7

  	
   

  	
  DISTRIBUTION FOR MINOR OR INCOMPETENT BENEFICIARY

  	
   

  	
  53

  
	
  6.8

  	
   

  	
  LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN

  	
   

  	
  53

  
	
  6.9

  	
   

  	
  PRE-RETIREMENT IN-SERVICE DISTRIBUTION

  	
   

  	
  54

  
	
  6.10

  	
   

  	
  ADVANCE DISTRIBUTION FOR HARDSHIP

  	
   

  	
  54

  
	
  6.11

  	
   

  	
  QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII: TRUSTEE

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.1

  	
   

  	
  BASIC RESPONSIBILITIES OF THE TRUSTEE

  	
   

  	
  56

  
	
  7.2

  	
   

  	
  INVESTMENT POWERS AND DUTIES OF THE TRUSTEE

  	
   

  	
  57

  
	
  7.3

  	
   

  	
  OTHER POWERS OF THE TRUSTEE

  	
   

  	
  57

  
	
  7.4

  	
   

  	
  LOANS TO PARTICIPANTS

  	
   

  	
  60

  
	
  7.5

  	
   

  	
  DUTIES OF THE TRUSTEE REGARDING PAYMENTS

  	
   

  	
  61

  
	
  7.6

  	
   

  	
  TRUSTEE’S COMPENSATION AND EXPENSES AND TAXES

  	
   

  	
  61

  
	
  7.7

  	
   

  	
  ANNUAL REPORT OF THE TRUSTEE

  	
   

  	
  61

  
	
  7.8

  	
   

  	
  AUDIT

  	
   

  	
  62

  
	
  7.9

  	
   

  	
  RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE

  	
   

  	
  62

  
	
  7.10

  	
   

  	
  TRANSFER OF INTEREST

  	
   

  	
  63

  
	
  7.11

  	
   

  	
  TRUSTEE INDEMNIFICATION

  	
   

  	
  64

  
	
  7.12

  	
   

  	
  EMPLOYER SECURITIES AND REAL PROPERTY

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII: AMENDMENT, TERMINATION AND MERGERS

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.1

  	
   

  	
  AMENDMENT

  	
   

  	
  64

  
	
  8.2

  	
   

  	
  TERMINATION

  	
   

  	
  64

  
	
  8.3

  	
   

  	
  MERGER, CONSOLIDATION OR TRANSFER OF ASSETS

  	
   

  	
  65

  
							

 

ii

 

	
  ARTICLE IX: TOP HEAVY

  	
   

  	
  65

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.1

  	
   

  	
  TOP HEAVY PLAN REQUIREMENTS

  	
   

  	
  65

  
	
  9.2

  	
   

  	
  DETERMINATION OF TOP HEAVY STATUS

  	
   

  	
  65

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X: MISCELLANEOUS

  	
   

  	
  67

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.1

  	
   

  	
  PARTICIPANT’S RIGHTS

  	
   

  	
  67

  
	
  10.2

  	
   

  	
  ALIENATION

  	
   

  	
  68

  
	
  10.3

  	
   

  	
  CONSTRUCTION OF PLAN

  	
   

  	
  69

  
	
  10.4

  	
   

  	
  GENDER AND NUMBER

  	
   

  	
  69

  
	
  10.5

  	
   

  	
  LEGAL ACTION

  	
   

  	
  69

  
	
  10.6

  	
   

  	
  PROHIBITION AGAINST DIVERSION OF FUNDS

  	
   

  	
  70

  
	
  10.7

  	
   

  	
  RECEIPT AND RELEASE FOR PAYMENTS

  	
   

  	
  70

  
	
  10.8

  	
   

  	
  ACTION BY THE EMPLOYERS

  	
   

  	
  70

  
	
  10.9

  	
   

  	
  NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY

  	
   

  	
  71

  
	
  10.10

  	
   

  	
  HEADINGS

  	
   

  	
  71

  
	
  10.11

  	
   

  	
  UNIFORMITY

  	
   

  	
  71

  

 

iii

 

2004 RESTATEMENT OF THE

SKYWEST, INC. EMPLOYEES’ RETIREMENT PLAN

 

This 2004 Restatement of the SkyWest, Inc. Employees’ Retirement Plan
is hereby made and entered into this           
day of June 2004, by and between SkyWest, Inc. (herein referred to as the “Employer”)
and Michael Kraupp, Alan Olson and Ann Olsen (herein referred to as the “Trustee”).

 

WITNESSETH:

 

WHEREAS, the Employer heretofore established a Profit Sharing Plan and
Trust effective April 1, 1977, known as SkyWest, Inc. Employees’ Retirement
Plan (herein referred to as the “Plan”) in recognition of the contribution made
to its successful operation by its employees and the employees of its
participating affiliates and for the exclusive benefit of its eligible
employees and the employees of its participating affiliates; and

 

WHEREAS, under the terms of the Plan, the Employer has the ability to
amend the Plan, provided the Trustees join in such amendment if the provisions
of the Plan affecting the Trustees are amended;

 

WHEREAS, the Plan has previously been amended and restated at various
times; and

 

WHEREAS, it is necessary and desirable to again amend and restate the
Plan;

 

NOW, THEREFORE, the Employer and the Trustees in accordance with the
provisions of the Plan pertaining to amendments thereof, hereby amend and
restate the Plan in its entirety to provide as follows effective January 1,
2004:

 

ARTICLE I

DEFINITIONS

 

1.1           “Act” means the
Employee Retirement Income Security Act of 1974, as it may be amended from time
to time.

 

1.2           “Administrator” means
SkyWest, Inc. unless another person or entity has been designated by SkyWest,
Inc. pursuant to Section 2.2 to administer the Plan on behalf of SkyWest, Inc..

 

1.3           “Affiliated Employer”
means any SkyWest Airlines, Inc. and any other corporation which is a member of
a controlled group of corporations (as defined in Code Section 414(b)) which
includes SkyWest, Inc.; any trade or business (whether or not incorporated)
which is under common control (as defined in Code Section 414(c)) with the
Employer; any organization (whether or not incorporated) which is a member of
an

 

1

 

affiliated service group (as defined in Code Section 414(m)) which
includes the Employer.

 

1.4           “Aggregate Account”
means, with respect to each Participant, the value of all accounts maintained
on behalf of a Participant, whether attributable to Employer or Employee
contributions, subject to the provisions of Section 9.2.

 

1.5           “Anniversary Date”
means the last day of the Plan Year.

 

1.6           “Annuity Starting Date”
means, with respect to any Participant, the first day of the first period for
which an amount is paid as an annuity under Section 6.1 below.

 

1.7           “Beneficiary” means the
person (or entity) to whom the share of a deceased Participant’s total account
is payable, subject to the restrictions of Sections 6.2 and 6.6.

 

1.8.          “Catch-Up Contribution”
means any Deferred Compensation Contributions on behalf of a Participant who
has or will attain age 50 or older during the Plan Year in question and which
constitutes a “catch-up” contribution within the meaning of Regulation Section
1.414(v)-1(a).  Catch-Up Contributions shall
not be taken into account for purposes of applying the limitations of Code
Sections 402(g) and 415 and shall be disregarded in applying the provisions of
this Plan that implement Sections 401(k)(3), 401(k)(11), 401(k)(12), 410 and
416 of the Code.

 

1.9           “Code” means the
Internal Revenue Code of 1986, as amended or replaced from time to time.

 

1.10         “Compensation” with
respect to any Participant means such Participant’s wages as defined in Code
Section 3401(a) and all other payments of compensation by the Employer (in the
course of the Employer’s trade or business) for a Plan Year for which the
Employer is required to furnish the Participant a written statement under Code
Sections 6041(d), 6051(a)(3) or 6052. 
Compensation must be determined without regard to any rules under Code
Section 3401(a) that limit the remuneration included in wages based on the
nature or location of the employment or the services performed (such as the
exception for agricultural labor in Code Section 3401(a)(2)).  For purposes of this Section, the
determination of Compensation shall be made by including amounts which are
contributed by the Employer pursuant to a salary reduction agreement and which
are not includible in the gross income of the Participant under Code Sections
125, 132(f)(4), 402(e)(3), 402(h)(1)(B), 403(b) or 457(b).

 

For a Participant’s initial year of participation in the component of
the Plan for which Compensation is being used, Compensation shall be recognized
for the entire Plan Year.

 

Compensation in excess of $200,000 shall be disregarded for all
purposes other than for purposes of salary deferral elections pursuant to
Section 4.2.  The $200,000 limit shall be
adjusted for increases in the cost of living in accordance with Code Section

 

2

 

401(a)(17)(B), except that the dollar increase in effect on January 1
of any calendar year shall be effective for the Plan Year beginning with or
within such calendar year.  For any short
Plan Year the Compensation dollar limit shall be an amount equal to the
Compensation limit for the calendar year in which the Plan Year begins
multiplied by the ratio obtained by dividing the number of full months in the
short Plan Year by 12.

 

1.11         “Contract” or “Policy”
means any life insurance policy, retirement income policy or annuity contract
(group or individual) issued pursuant to the terms of the Plan.

 

1.12         “Deferred Compensation
Contributions” with respect to any Participant means the amount of the
Participant’s Compensation which has been contributed to the Plan in accordance
with the Participant’s salary reduction and deferral election pursuant to
Section 4.2 excluding any such amounts distributed as excess “annual additions”
pursuant to Section 4.11(a)(2) below.

 

1.13         “Designated Investment
Alternative” means a specific investment identified by name by the Employer (or
such other Fiduciary who has been given the authority to select investment
options) as an available investment under the Plan to which Plan assets may be
invested by the Trustee pursuant to the investment direction of a Participant.

 

1.14         “Directed Investment
Option” means one or more of the following:

 

(a)           a Designated Investment
Alternative; and

 

(b)           any other investment
permitted by the Plan and the Participant Direction Procedures to which Plan
assets may be invested by the Trustee pursuant to the investment direction of a
Participant.

 

1.15         “Elective Contribution”
means (a) any Deferred Compensation Contributions, (b) any Employer matching
contribution made pursuant to Section 4.1(b) which is used to satisfy the “ADP”
test, and (c) any Employer Qualified Non-Elective Contribution made pursuant to
Section 4.1(c) and Section 4.7(b) which is used to satisfy the “ADP” test.  Any Elective Contributions (whether or not
used to satisfy the “ADP” test or the “ACP” test) shall be subject to the
requirements of Sections 4.2(b) and 4.2(c) and shall satisfy the
nondiscrimination requirements of Regulation Sections 1.401(k)-1(b)(5) and
1.401(m)-1(b)(5), the provisions of which are specifically incorporated herein
by reference.

 

1.16         “Eligible Employee” means
any Employee of: (i) SkyWest, Inc., (ii) SkyWest Airlines, Inc., an Affiliate
of SkyWest, Inc. that previously adopted the Plan for its employees; and (iii)
any other Affiliated Employer which, with the consent of SkyWest, Inc., adopts
the Plan in writing for its Employees. 
Notwithstanding the foregoing, Leased Employees are not Eligible
Employees and may not participate in the Plan. 
If SkyWest, Inc., SkyWest Airlines, Inc. or another Affiliated Employer
classifies a worker for personnel and/or payroll purposes as an independent
contractor or other form of non-Employee service provider and a court or
governmental authority subsequently

 

3

 

determines that the worker is or was in fact a common law Employee, the
reclassified worker shall not be an Eligible Employee and shall not participate
in the Plan.

 

1.17         “Employee” means any
person who is employed by SkyWest, Inc., SkyWest Airlines, Inc. or another
Affiliated Employer, and excludes any person who is employed as an independent
contractor.  Employee shall include
Leased Employees within the meaning of Code Sections 414(n)(2) unless such
Leased Employees are covered by a plan described in Code Section 414(n)(5) and
such Leased Employees do not constitute more than 20% of the recipient’s
non-highly compensated work force.

 

1.18         “Employer” means SkyWest,
Inc., any successor which shall maintain this Plan, SkyWest Airlines, Inc. and
any other Affiliated Employer that has adopted the Plan.  Any provision herein to the contrary, unless
the context otherwise clearly requires, SkyWest, Inc. shall be treated as the
sole Employer for purposes of Articles II, VII, VIII and X.

 

1.19         “Excess Aggregate
Contributions” means, with respect to any Plan Year, the excess of the
aggregate amount of the Employer matching contributions made pursuant to
Section 4.1(b) (to the extent such matching contributions are not used to
satisfy the “ADP” tests), after-tax voluntary Employee contributions made
pursuant to Section 4.13, Excess Contributions recharacterized as after-tax
voluntary Employee contributions pursuant to Section 4.7(a) and any qualified
non-elective contributions or elective deferrals taken into account pursuant to
Section 4.8(c) on behalf of Highly Compensated Participants for such Plan Year,
over the maximum amount of such contributions permitted under the limitations
of Section 4.8(a) (determined by hypothetically reducing contributions made on
behalf of Highly Compensated Participants in order of the actual contribution
ratios beginning with the highest of such ratios).  Such determination shall be made after first
taking into account corrections of any Excess Deferred Compensation pursuant to
Section 4.2 and taking into account any adjustments of any Excess Contributions
pursuant to Section 4.7.

 

1.20         “Excess Contributions”
means, with respect to a Plan Year, the excess of Elective Contributions made
on behalf of Highly Compensated Participants for the Plan Year over the maximum
amount of such contributions permitted under Section 4.6(a) (determined by
hypothetically reducing contributions made on behalf of Highly Compensated
Participants in order of the actual deferral ratios beginning with the highest
of such ratios).  Excess Contributions do
not include Catch-Up Contributions. 
Excess Contributions, including amounts recharacterized pursuant to
Section 4.7(a)(2), shall be treated as “annual additions” under Section
4.10(b).

 

1.21         “Excess Deferred
Compensation” means, with respect to any taxable year of a Participant, the
excess of the aggregate Deferred Compensation Contributions (excluding Catch-Up
Contributions) made on behalf of such Participant for such taxable year, over
the dollar limitation provided for in Code Section 402(g).  Excess Deferred Compensation shall be treated
as an “annual addition” pursuant to Section 4.10(b) when contributed to the
Plan unless distributed to the affected Participant not later than the first
April 15th following the close of the Participant’s taxable year.  Additionally, for

 

4

 

purposes of Sections 4.5 and 9.2, Excess Deferred Compensation shall
continue to be treated as Employer contributions even if distributed pursuant
to Section 4.2(f).  However, Excess
Deferred Compensation of Non-Highly Compensated Participants is not taken into
account for purposes of Section 4.6(a) to the extent such Excess Deferred
Compensation occurs pursuant to Section 4.2(d).

 

1.22         “Fiduciary” means any
person who (a) exercises any discretionary authority or discretionary control
respecting management of the Plan or exercises any authority or control
respecting management or disposition of its assets, (b) renders investment
advice for a fee or other compensation, direct or indirect, with respect to any
monies or other property of the Plan or has any authority or responsibility to
do so, or (c) has any discretionary authority or discretionary responsibility
in the administration of the Plan.

 

1.23         “Fiscal Year” means the
Employer’s accounting year of 12 months commencing on January 1 of each year
and ending the following December 31.

 

1.24         “415 Compensation” with
respect to any Participant means such Participant’s Compensation” determined
without regard to any rules under Code Section 3401(a) that limit the
remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for agricultural
labor in Code Section 3401(a)(2)).  “415
Compensation” 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 Participant and which is not includible in the gross income
of the Participant by reason of Code Sections 125, or 132(f)(4).

 

1.25         “Highly Compensated
Employee” means an Employee described in Code Section 414(q) and the
Regulations thereunder, and generally means any Employee who:

 

(a)           was a “5% owner” as
defined in Section 1.31(b) at any time during the “determination year” or the “look-back
year”; or

 

(b)           for the “look-back year”
had “415 Compensation” from the Employer in excess of $90,000.  The $90,000 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 “determination year” means the Plan Year, for which testing is
being performed, and the “look-back year” means the immediately preceding
12-month period.  The determination of
who is a Highly Compensated Employee shall be made in accordance with
Regulation Section 1.414(q)-lT, A-4 and IRS Notice 97-45 (or any superseding
guidance).

 

1.26         “Highly Compensated
Participant” means any Highly Compensated Employee who is eligible to
participate in the component of the Plan being tested.

 

5

 

1.27         “Hour of Service” means,
for purposes of eligibility for participation, (a) each hour for which an
Employee is directly or indirectly compensated or entitled to compensation by
the Employer for the performance of duties (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 directly or indirectly compensated or
entitled to compensation by the Employer (irrespective of whether the
employment relationship has terminated) for reasons other than performance of
duties (such as vacation, holidays, sickness, jury duty, disability, lay-off,
military duty or leave of absence) during the applicable computation period
(these hours will be calculated and credited pursuant to Department of Labor
regulation 2530.200b-2 which is incorporated herein by reference); and (c) each
hour for which back pay is awarded or agreed to by the Employer without regard
to mitigation of damages (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).  The same Hours of Service shall
not be credited both under (a) or (b), as the case may be, and under (c).

 

Notwithstanding 1.27(b) above, (i) no more than 501 Hours of Service
are required to be credited to an Employee on account of any single continuous
period during which the Employee performs no duties (whether or not such period
occurs in a single computation period); (ii) 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, or unemployment
compensation or disability insurance laws; and (iii) 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.

 

For purposes of 1.27(b) above, a payment shall be deemed to be made by
or due from the Employer regardless of whether such payment is made by or due
from the Employer directly, or indirectly through, among others, a trust fund,
or insurer, to which the Employer contributes or pays premiums and regardless of
whether contributions made or due to the trust fund, insurer, or other entity
are for the benefit of particular Employees or are on behalf of a group of
Employees in the aggregate.

 

For purposes of this Section, Hours of Service will be credited for employment
with other Affiliated Employers.  The
provisions of Department of Labor Regulation Sections 2530.200b-2(b) and (c)
are incorporated herein by reference.

 

1.28         “Inactive
Participant” means a Participant who is no longer an Eligible Employee.

 

1.29         “Income” means the income
or losses allocable to Excess Deferred Compensation, Excess Contributions or
Excess Aggregate Contributions which amount shall be allocated in the same
manner as income or losses are allocated pursuant to Section 4.4(d).

 

6

 

1.30         “Investment Manager”
means an entity that (a) has the power to manage, acquire, or dispose of Plan
assets and (b) acknowledges fiduciary responsibility to the Plan in
writing.  Such entity must be a person,
firm, or corporation registered as an investment adviser under the Investment
Advisers Act of 1940, a bank, or an insurance company.

 

1.31         “Key Employee” means a
key employee as defined in Code Section 416(i) and the Regulations
thereunder.  An Employee or former
Employee is considered a Key Employee if the Employee, at any time during the
Plan Year that contains the “Determination Date,” is:

 

(a)           an officer of the
Employer (as that term is defined within the meaning of the Regulations under
Code Section 416) having annual “415 Compensation” greater than $130,000 (as
adjusted under Code Section 416(i)(1) for any such Plan Year).

 

(b)           a “5% owner” of the
Employer.  A “5% owner” means any person
who owns (or is considered as owning within the meaning of Code Section 318)
more than 5% of the outstanding stock of the Employer or stock possessing more
than 5% of the total combined voting power of all stock of the Employer.  In determining percentage ownership
hereunder, employers that would otherwise be aggregated under Code Sections
414(b), (c), (m) and (o) shall be treated as separate employers.

 

(c)           a “1% owner” of the
Employer having annual “415 Compensation” from the Employer of more than
$150,000.  A “1% owner” means any person
who owns (or is considered as owning within the meaning of Code Section 318)
more than 1% of the outstanding stock of the Employer or stock possessing more
than 1% of the total combined voting power of all stock of the Employer In
determining percentage ownership hereunder, Employers that would otherwise be
aggregated under Code Sections 414(b), (c), (m) and (o) shall be treated as
separate employers.  However, in
determining whether an individual has “415 Compensation” of more than $150,000,
“415 Compensation” from each employer required to be aggregated under Code
Sections 414(b), (c), (m) and (o) shall be taken into account.

 

1.32         “Leased Employee” means
any person (other than an Employee of the recipient Employer) who pursuant to
an agreement between the recipient Employer and any other person or entity 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 at least one year under primary direction or control by the recipient
Employer.  A Leased Employee shall not be
an Eligible Employee.

 

1.33         “Non-Elective
Contribution” means the Employer contributions to the Plan other than Elective
Contributions.

 

1.34         “Non-Highly Compensated
Participant” means any Participant who is not a Highly Compensated Employee.

 

7

 

1.35         “Non-Key Employee” means
any Employee or former Employee (and such Employee’s or former Employee’s
Beneficiaries) who is not, and has never been a Key Employee.

 

1.36         “Normal Retirement Age”
means the Participant’s 65th birthday.

 

1.37         “Normal Retirement Date”
means the first day of the month coinciding with or next following the date the
Participant attains Normal Retirement Age.

 

1.38         “One-Year Break in
Service” means an eligibility computation period during which an Employee has
not completed more than 500 Hours of Service. 
Further, solely for the purpose of determining whether a Participant has
incurred a One-Year Break in Service, Hours of Service shall be recognized for “authorized
leaves of absence” and “maternity and paternity leaves of absence.”  Years of Service and One-Year Breaks in
Service shall be measured on the same computation period.  “Authorized leave of absence” means an
unpaid; temporary cessation from active employment with the Employer pursuant
to an established nondiscriminatory policy, whether occasioned by illness,
military service, or any other reason.  A
“maternity or paternity leave of absence” means an absence from work for any
period by reason of the Employee’s pregnancy, birth of the Employee’s child,
placement of a child with the Employee in connection with the adoption of such
child, or any absence for the purpose of caring for such child for a period
immediately following such birth or placement. 
For this purpose, Hours of Service shall be credited for the computation
period in which the absence from work begins, only if credit therefore is
necessary to prevent the Employee from incurring a One-Year Break in Service,
or, in any other case, in the immediately following computation period.  The Hours of Service credited for a “maternity
or paternity leave of absence” shall be those which would normal1y have been
credited but for such absence, or, in any case in which the Administrator is
unable to determine such hours normal1y credited, eight Hours of Service per
day.  The total Hours of Service required
to be credited for a “maternity or paternity leave of absence” shall not exceed
the number of Hours of Service needed to prevent the Employee from incurring a
One-Year Break in Service.

 

1.39         “Participant” means any
Eligible Employee who participates in the Plan and any former Eligible Employee
who has any Vested Benefit under the Plan.

 

1.40         “Participant Direction
Procedures” means such instructions, guidelines or policies, the terms of which
are incorporated herein, as shal1 be established pursuant to Section 4.14 and
observed by the Administrator and applied and provided to Participants who have
Participant Directed Accounts.

 

1.41         “Participant’s Combined
Account” means the total aggregate amount of each Participant’s Elective
Account, Non-Elective Account, Voluntary Account, Qualified Voluntary
Contribution Account and Transfer/Rollover Account, as applicable.

 

8

 

1.42         “Participant’s Directed
Account” means that portion of a Participant’s interest in the Plan with
respect to which the Participant has directed the investment in accordance with
the Participant Direction Procedure.

 

1.43         “Participant’s Elective
Account” means the account established and maintained by

the Administrator for each Participant with respect to the Participant’s
total interest in the Plan and Trust resulting from the Elective
Contributions.  A separate accounting
shall be maintained with respect to that portion of the Participant’s Elective
Account attributable to Deferred Compensation Contributions, Employer matching
contributions made pursuant to Section 4.1(b) and any Employer Qualified
Non-Elective Contributions.

 

1.44         “Participant’s
Non-Elective Account” means the account established and maintained by the
Administrator for each Participant with respect to such Participant’s total
interest in the Plan and Trust resulting from the Employer Non-Elective
Contributions.  A separate sub-account
and accounting shall be maintained with respect to that portion of the
Participant’s Non-Elective Account attributable to Employer matching
contributions made pursuant to Section 4.1(b), Employer discretionary
contributions made pursuant to Section 4.1(d) and any Employer Qualified
Non-Elective Contributions under Section 4.1(c).

 

1.45         “Participant’s
Transfer/Rollover Account” means the account established and maintained by the
Administrator for each Participant with respect to the Participant’s total
interest in the Plan resulting from (a) direct plan-to-plan transfer to the
Plan from another plan not constituting a distribution, and (b) amounts
transferred to the Plan, directly or indirectly, from another qualified plan or
individual retirement account as rollover distributions in accordance with
Section 4.12.  A separate accounting
shall be maintained with respect to that portion of the Participant’s
Transfer/Rollover Account attributable to transfers (within the meaning of Code
Section 414(1)) and “rollovers.”

 

1.46         “Plan” means this
instrument, including all amendments thereto.

 

1.47         “Plan Year” means
calendar year.

 

1.48         “Qualified Non-Elective
Contribution” means any Employer contributions made pursuant to Section 4.1(c),
Section 4.7(b) and Section 4.9(f).  Such
contributions may be used to satisfy the “ADP” tests or the “ACP” tests.

 

1.49         “Qualified Voluntary
Employee Contribution Account” means the account maintained pursuant to Section
4.15 to which a Participant’s tax deductible qualified voluntary employee
contributions made prior to 1987 are allocated.

 

1.50         “Regulation” means the
Income Tax Regulations as promulgated by the Secretary of the Treasury or its
delegate, and as amended from time to time.

 

1.51         “Top Heavy Plan” means a
plan described in Section 9.2(a).

 

9

 

1.52         “Top Heavy Plan Year”
means a Plan Year during which the Plan is a Top Heavy

Plan.

 

1.53         “Total and Permanent
Disability” means a physical or mental condition of a Participant resulting
from bodily injury, disease, or mental disorder which renders such Participant
incapable of continuing usual arid customary employment with the Employer.  The disability of a Participant shall be
determined by a licensed physician chosen by the Administrator.

 

1.54         “Trustee” means the
person or entity named as trustee herein or in any separate trust forming a
part of this Plan, and any successors.

 

1.55         “Trust Fund” means the
assets of the Plan and Trust as the same shall exist from time to time.

 

1.56         “Valuation Date” means
the Anniversary Date and may include any other date or dates deemed necessary
or appropriate by the Administrator for the valuation of Participant accounts
during the Plan Year, which may include any day that the Trustee, any transfer
agent appointed by the Trustee or the Employer or any stock exchange used by
such agent, are open for business.

 

1.57         “Vested Benefit” means
the nonforfeitable balance in any account maintained on behalf of a
Participant.  Each Participant is fully
(100%) vested in all of his or her accounts, as adjusted from time to time to
reflect investment gains and losses.

 

1.58         “Voluntary Contribution
Account” means the account established and maintained by the Administrator for
each Participant with respect to the Participant’s total interest in the Plan
resulting from the Participant’s after-tax voluntary Employee contributions as
described in Section 4.13 and recharacterized Excess Contribution under Section
4.7(a). Therefore, a separate accounting shall be maintained with respect to
that portion of the Voluntary Contribution Account attributable to after-tax
voluntary Employee contributions made pursuant to Section 4.13 and amounts
recharacterized as after-tax voluntary Employee contributions pursuant to
Section 4.7(a).

 

1.59         Year of Service” means a
computation period of 12 consecutive months, as hereinafter set forth, during
which an Employee has at least 1000 Hours of Service.

 

For purposes of eligibility to participate with respect to Employer
contributions under Sections 4.1(b) through (d) and the calculation of the
maximum Compensation matched under Section 4.1(b), the 12-month computation
periods shall be measured from the date on which the Employee first performs an
Hour of Service and each anniversary thereof. 
Notwithstanding the foregoing, if an individual ceases to be an Eligible
Employee, incurs a One-Year Break in Service, and subsequently returns to
Eligible Employee status, the individual’s computation periods for determining
such eligibility and maximum matching contributions beginning after such
One-Year Break in Service

 

10

 

shall be measured from the date he or she again performs an Hour of
Service and the Anniversaries thereof.

 

Notwithstanding the foregoing, for any short Plan Year, the
determination of whether an Employee has completed a Year of Service shall be
made in accordance with Department of Labor regulation 2530.203-2(c).

 

Years of Service with any Affiliated Employer shall be recognized.

 

ARTICLE II

ADMINISTRATION

 

2.1           POWERS AND
RESPONSIBILITIES OF THE EMPLOYER

 

(a)           In addition to the
general powers and responsibilities otherwise provided for in this Plan,
SkyWest, Inc., as the principal Employer, shall be empowered to appoint and
remove the Trustee and the Administrator from time to time as it deems
necessary for the proper administration of the Plan to ensure that the Plan is
being operated for the exclusive benefit of the Participants and their
Beneficiaries in accordance with the terms of the Plan, the Code, and the
Act.  SkyWest, Inc. may appoint counsel,
specialists, advisers, agents (including any nonfiduciary agent) and other
persons as it deems necessary or desirable in connection with the exercise of
its fiduciary duties under this Plan. 
SkyWest, Inc. may compensate such agents or advisers from the assets of
the Plan as fiduciary expenses (but not including any business (settler)
expenses of the Employers), to the extent not paid by the Employer.

 

(b)           SkyWest, Inc. may, by
written agreement or designation, appoint at its option one or more Investment
Managers (qualified under the Investment Company Act of 1940 as amended),
investment advisers, or other agents to provide direction to the Trustee with
respect to any or all of the Plan assets. 
Such appointment shall be given by SkyWest, Inc. in writing in a form
acceptable to the Trustee and shall specifically identify the Plan assets with
respect to which the Investment Manager or other agent shall have authority to
direct the investment.

 

(c)           SkyWest, Inc. shall
establish a “funding policy and method,” i.e., it shall determine whether the
Plan has a short run need for liquidity (e.g., to pay benefits) or whether
liquidity is a long run goal and investment growth (and stability of same) is a
more current need, or shall appoint a qualified person to do so.  SkyWest, Inc. or its delegate shall
communicate such needs and goals to the Trustee, who shall coordinate such Plan
needs with its investment policy.  Such “funding
policy and method” shall be consistent with the objectives of this Plan and
with the requirements of Title I of the Act.

 

(d)           SkyWest, Inc. shall
periodically review the performance of any Fiduciary or other person to whom
duties have been delegated or allocated by it under the provisions of this Plan
or pursuant to procedures established hereunder.  This requirement

 

11

 

may be satisfied by formal periodic review by SkyWest, Inc. or by a
qualified person specifically designated by it, through day-to-day conduct and
evaluation, or through other appropriate ways.

 

2.2           DESIGNATION OF
ADMINISTRATIVE AUTHORITY

 

SkyWest, Inc. shall be the Administrator and may appoint any person,
including, but not limited to, the Employees of the Employers, to perform the
duties of the Administrator.  Any person
so appointed shall signify acceptance by filing written acceptance with
SkyWest, Inc.  Upon the resignation or
removal of any individual performing the duties of the Administrator, SkyWest,
Inc. may designate a successor.

 

2.3           POWERS AND DUTIES OF
THE ADMINISTRATOR

 

The primary responsibility of the Administrator is to administer the
Plan for the exclusive benefit of the Participants and their Beneficiaries,
subject to the specific terms of the Plan. 
The Administrator shall administer the Plan in accordance with its terms
and shall have full discretionary power and authority to interpret and construe
the terms of the Plan and to resolve all questions arising in connection with
the administration, interpretation, and application of the Plan.  Any such determination by the Administrator
shall be conclusive and binding upon all persons.  The Administrator may establish procedures,
correct any defect, supply any information, or reconcile any inconsistency in
such manner and to such extent as shall be deemed necessary or advisable to
carry out the purpose of the Plan; provided, however, that any procedure,
discretionary act, interpretation or construction shall be done in a nondiscriminatory
manner based upon uniform principles consistently applied and shall be
consistent with the intent that the Plan shall continue to be deemed a
qualified plan under the terms of Code Section 401 (a), and shall comply with
the terms of the Act and all regulations issued pursuant thereto.  The Administrator shall have all powers
necessary or appropriate to accomplish the Administrator’s duties under the
Plan.

 

The Administrator shall be charged with the duties of the general
administration of the Plan as set forth under the terms of the Plan, including,
but not limited to, the following:

 

(a)           the discretion to
determine all questions relating to the eligibility of Employees to participate
or remain a Participant hereunder and to receive benefits under the Plan;

 

(b)           to compute, certify,
and direct the Trustee with respect to the amount and the kind of benefits to
which any Participant shall be entitled hereunder;

 

(c)           to authorize and direct
the Trustee with respect to all discretionary or otherwise directed
disbursements from the Trust;

 

(d)           to maintain all
necessary records for the administration of the Plan;

 

12

 

(e)           to interpret the
provisions of the Plan and to make and publish such rules for regulation of the
Plan as are consistent with the terms hereof;

 

(f)            to compute and certify
to the Employers and to the Trustee from time to time the sums of money
necessary or desirable to be contributed to the Plan;

 

(g)           to consult with the
Employers and the Trustee regarding the short and long-term liquidity needs of
the Plan in order that the Trustee can exercise any investment discretion in a
manner designed to accomplish specific objectives;

 

(h)           to act as the named
Fiduciary responsible for communications with Participants as needed to
maintain Plan compliance with Act Section 404(c), including, but not limited
to, the receipt and transmitting of Participant’s directions as to the
investment of their account(s) under the Plan and the formulation of policies,
rules, and procedures pursuant to which Participants may give investment
instructions with respect to the investment of their accounts;

 

(i)            to determine the
validity of, and take appropriate action with respect to, any qualified
domestic relations order received by it; and

 

(j)            to notify and assist
any Participant regarding the Participant’s rights, benefits, or elections
available under the Plan.

 

2.4           RECORDS AND REPORTS

 

The Administrator shall keep a record of all actions taken and shall
keep all other books of account, records, policies, and other data that may be
necessary for proper administration of the Plan and shall be responsible for
supplying all information and reports to the Internal Revenue Service,
Department of Labor, Participants, Beneficiaries and others as required by law.

 

2.5           APPOINTMENT OF ADVISERS

 

The Administrator, or the Trustee with the consent of the
Administrator, may appoint counsel, specialists, advisers, agents (including
nonfiduciary agents) and other persons as the Administrator or the Trustee
deems necessary or desirable in connection with the administration of this
Plan, including but not limited to agents and advisers to assist with the
administration and management of the Plan, and thereby to provide, among such
other duties as the Administrator may appoint, assistance with maintaining Plan
records and the providing of investment information to the Plan’s investment
fiduciaries and to Participants.

 

13

 

2.6           PAYMENT OF EXPENSES

 

All expenses of administration may be paid out of the Trust Fund unless
paid by the Employers.  Such expenses
shall include any expenses incident to the functioning of the Administrator, or
any person or persons retained or appointed by any Named Fiduciary incident to
the exercise of their duties under the Plan, including, but not limited to,
fees of accountants, counsel, Investment Managers, agents (including
nonfiduciary agents) appointed for the purpose of assisting the Administrator
or the Trustee in carrying out the instructions of Participants as to the
directed investment of their accounts and other specialists and their agents,
the costs of any bonds required pursuant to Act Section 412, and other costs
..of administering the Plan.  Until paid,
the expenses shall constitute a liability of the Trust Fund.

 

2.7           CLAIMS PROCEDURE

 

Claims for benefits under the Plan must be filed in writing with the
Administrator.  Written notice of the
disposition of a claim shall be furnished to the claimant within 90 days after
the application is filed, or such other period as is required by applicable law
or Department of Labor regulation.  In
the event a decision cannot be reached within 90 days, the Plan may obtain a
90-day extension of the claim resolution deadline to the extent permitted under
applicable Department of Labor regulations. 
In the event the claim is denied in whole or in part, the reasons for
the denial shall be specifically set forth in the notice in language calculated
to be understood by the claimant, pertinent provisions of the Plan shall be
cited, and, where appropriate, an explanation as to how the claimant can appeal
the claim denial will be provided.  In
addition, the claimant shall be furnished with an explanation of the Plan’s
claims review procedure.

 

2.8           CLAIMS REVIEW PROCEDURE

 

Any claimant who has been denied a benefit by a decision of the
Administrator pursuant to Section 2.7 shall be entitled to request the
Administrator to give further consideration to a claim by filing with the Administrator
a written appeal.  Such request, together
with a written statement of the reasons why the claimant believes the claim
should be allowed, shall be filed with the Administrator no later than 60 days
after receipt of the written notification of denial provided for in Section
2.7.  The Administrator shall then
reconsider within 60 days the claim on appeal. 
If the Administrator so determines, it may (but need not) conduct a
hearing within the 60-day period, at which the claimant may be represented by
an attorney or any other representative of such claimant’s choosing and expense
and at which the claimant shall have an opportunity to submit written and oral
evidence and arguments in support of the claim. 
Upon written notice to the Administrator, the claimant or the claimant’s
representative shall have an opportunity to review all documents in the
possession of the Administrator which are pertinent to the claim at issue and
its disallowance.  If a hearing is held,
either the claimant or the Administrator may cause a court reporter to attend
the hearing and record the proceedings. 
In such event, a complete written transcript of the proceedings shall be
furnished to both parties by the court reporter.  The full expense of any such court

 

14

 

reporter and such transcripts shall be borne by the party causing the
court reporter to attend the hearing.  A
final decision as to the allowance of the claim shall be made by the
Administrator within 60 days of receipt of the appeal (unless there has been an
extension of 60 days due to special circumstances, provided the delay and the
special circumstances occasioning it are communicated to the claimant within
the 60-day period).  Such communication
shall be written in a manner calculated to be understood by the claimant and
shall include specific reasons for the decision and specific references to the
pertinent Plan provisions on which the decision is based.

 

ARTICLE III

ELIGIBILITY

 

3.1           CONDITIONS OF
ELIGIBILITY

 

(a)           Any Eligible Employee
who has completed 90 days of employment with an Employer shall be eligible to
participate in the Plan with respect to Deferred Compensation Contributions
under Section 4.1(a) and 4.2 and after-tax Voluntary Contributions under
Section 4.13.  For purposes of this
Section, an Eligible Employee will be deemed to have completed 90 days of
employment if such individual is still an Employee at any time 90 days after
his or her most recent employment commencement date;

 

(b)           With respect to Employer
matching contributions pursuant to Section 4.1(b) and Employer Qualified
Non-Elective Contributions pursuant to Section 4.1(c), an Eligible Employee
shall not be eligible to participate hereunder until the date such Employee has
completed one Year of Service;

 

(c)           With respect to
Employer discretionary contributions pursuant to Section 4.1(d), an Eligible
Employee shall not be eligible to participate hereunder until the date such
Employee has completed two Years of Service.

 

3.2           EFFECTIVE DATE OF PARTICIPATION

 

With respect to Deferred Compensation Contributions pursuant to Section
4.2 and after-tax voluntary Employee contributions pursuant to Section 4.13, an
Eligible Employee shall become a Participant effective as of the first day of
month coinciding with or next following the date on which such Employee meets
the eligibility requirement of Section 3.1(a), provided the Employee is still
employed as of such date.  With respect
to Employer matching contributions pursuant to Section 4.1(b), Employer Qualified
Non-Elective Contributions pursuant to Section 4.1(c) and Employer
discretionary contributions pursuant to Section 4.1(d), an Eligible Employee
shall become a Participant effective on the date on which such Employee meets
the applicable one and two Year of Service eligibility requirements of Section
3.1(b) or (c) as the case may be.

 

15

 

If an Employee, who has satisfied the Plan’s eligibility requirements
and would otherwise become a Participant, shall go from a classification of an
Eligible Employee to a noneligible class of Employees, such Employee shall
become a Participant in the Plan on the date such Employee again becomes an
Eligible Employee, or, if later, the date that the Employee would have otherwise
entered the Plan had the Employee always been an Eligible Employee.  However, if such Employee incurs a One-Year
Break in Service, eligibility will be determined under the Break in Service
rules set forth in Section 3.7.

 

3.3           DETERMINATION OF ELIGIBILITY

 

The Administrator shall determine the eligibility of each Employee for
participation in the Plan based upon information furnished by the
Employer.  Such determination shall be
subject to review pursuant to Section 2.8, and shall be conclusive and binding
as long as is pursuant to the Plan and the Act.

 

3.4           TERMINATION OF
PARTICIPATION

 

A Participant shall cease to be an active Participant on the date he or
she ceases to be an Eligible Employee. 
An inactive Participant shall cease to be entitled to any contributions,
but shall continue to participate in the Plan as an inactive Participant, until
such time as the Participant’s Account is distributed pursuant to the terms of
the Plan.  A person shall cease to be a
Participant when his or her Vested Benefit has been fully distributed.

 

3.5           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 and allocated, then the Employer shall make a subsequent contribution, if
necessary after the application of Section 4.4(c), so that the omitted Employee
receives a total amount which the Employee would have received (including both
Employer contributions and earnings thereon) had the Employee not been
omitted.  Such contribution shall be made
regardless of whether it is deductible under applicable provisions of the Code.

 

3.6           INCLUSION OF INELIGIBLE
EMPLOYEE

 

If, in any Plan Year, any person who should not have been included as a
Participant in the Plan is erroneously included and discovery of such inclusion
is not made until after a contribution for the year has been made and
allocated, the Employer shall be entitled to recover the contribution made with
respect to the ineligible person provided the error is discovered within 12
months of the date on which it was made. 
Otherwise, the amount contributed with respect to the ineligible person
shall constitute a forfeiture for the Plan Year in which the discovery is
made.  Any such forfeitures shall be used
to satisfy and be treated as a part of the Employer’s matching contribution for
the year of forfeiture and succeeding Plan Years until fully reallocated.  Notwithstanding the foregoing, any Deferred
Compensation Contributions made by an ineligible person shall

 

16

 

be distributed to the person (along with any earnings attributable to
such Deferred Compensation Contributions).

 

3.7           REHIRED EMPLOYEES AND
BREAKS IN SERVICE

 

If any Participant becomes an Inactive Participant or ceases
participation due to severance from eligible employment with the Employer and
is reemployed by the Employer before a One-Year Break in Service occurs, the
Former Participant shall become a Participant (in the same manner as if
severance from employment with the Employer had not occurred) as of the
reemployment effective date.  If any
Participant becomes a Inactive Participant or ceases participation due to
severance from eligible employment with the Employer and is reemployed by the
Employer after a One-Year Break in Service has occurred, the Former Participant
shall again participate in the Plan as of the date of reemployment, and his or
her Years of Service for purposes of determining entitlement to share in
Employer contributions shall include his Years of Service prior to the One-Year
Break in Service.

 

ARTICLE IV

CONTRIBUTION AND ALLOCATION

 

4.1           FORMULA FOR DETERMINING
EMPLOYER CONTRIBUTION

 

For each Plan Year, the Employer shall contribute to the Plan:

 

(a)           An amount equal to the
total Deferred Compensation Contributions elected for the year by all
Participants under Section 4.2.

 

(b)           On
behalf of each Participant who is eligible to share in Employer matching
contributions for the Plan Year, a matching contribution for each payroll
period during the year that ends on or after the date the Participant satisfies
the Year of Service eligibility requirement set forth in Section 3.1(b) equal
to 100% of such Participant’s Deferred Compensation Contributions for that
payroll period, plus such discretionary percentage of the eligible Participant’s
Deferred Compensation Contributions for that payroll period (uniform as to all
eligible Participants for the same Plan Year) as the Employer determines, which
amount, if any, shall be deemed an Employer Elective Contribution.  Notwithstanding the foregoing:

 

(i)            No
Employer matching contribution under this Section 4.1(b) shall be made or due
with respect to Deferred Compensation Contributions for a payroll period to the
extent such Deferred Compensation Contributions exceeds:

 

(A)          2%
of the Participant’s Compensation for the payroll period in question if the
Participant has completed at least one but less than five Years of Service
prior to the close of that payroll period;

 

17

 

(B)           4%
of the Participant’s Compensation for the payroll period in question if the
Participant has completed at least five but less than ten Years of Service
prior to the close of that payroll period; and

 

(C)           6%
of the Participant’s Compensation for the payroll period in question if the
Participant has completed at least ten Years of Service prior to the close of
the payroll period.

 

(ii)           No
Highly Compensated Employee who is an officer of an Employer having the rank of
Vice President or higher shall be eligible for any Employer matching
contribution for any payroll period in which he is so employed.

 

In determining maximum matching contributions for any payroll period,
the annual dollar limitation on Compensation under Code Section 401(a)(17)
shall be applied on a cumulative basis for those periods in which the
Participant makes salary reduction contributions only, beginning with the first
payroll period in the Plan Year for which such Deferred Compensation
Contributions are made.

 

(c)           On behalf of each
Non-Highly Compensated Participant who has completed at least one Year of
Service prior to the close of the Plan Year to which the contributions relate
and is eligible therefore to share in the Qualified Non-Elective Contribution
for the Plan Year, a discretionary Qualified Non-Elective Contribution equal to
such uniform percentage of each eligible individual’s Compensation, if any, as
the Employer determines each year.

 

(d)           A discretionary amount,
which amount, if any, shall be deemed an Employer Non-Elective
Contribution.  Anything else to the
contrary notwithstanding, a Participant shall not be eligible to share in the
discretionary Employer Non-Elective Contribution described in this paragraph
unless and until such Participant has completed two Years of Service prior to
the close of the Plan Year to which the contribution relates.

 

(e)           Additionally, if
applicable, the Employer shall make the Top Heavy minimum contribution
described in Section 4.5 below.

 

(f)            All contributions by
the Employer shall be made in cash or in such property as is acceptable to the
Trustee.

 

4.2           PARTICIPANT’S SALARY
REDUCTION ELECTION

 

(a)           Each Participant may
elect to reduce his Compensation and in lieu thereof receive Deferred
Compensation Contributions for a Plan Year, in any whole multiple of 1% up to
100% of his Compensation, provided that no such Compensation reduction and
deferral election shall apply to that portion of the Participant’s Compensation
that the Employer must withhold for applicable employment taxes.  A deferral election (or modification of an
earlier election) may not be made with respect to Compensation which

 

18

 

is currently available on or before the date the Participant executes
such election.  For purposes of this
Section, Compensation shall be determined prior to any reductions made pursuant
to Code Sections 125, 132(f)(4), 402(e)(3) and 402(h)(1)(B) and without regard
to the limitations of Code Section 401(a)(17).

 

The amount by which Compensation is reduced shall be that Participant’s
Deferred Compensation Contribution and be treated as an Elective Contribution
and allocated to that Participant’s Elective Account.

 

(b)           The balance in each
Participant’s Elective Account shall be fully vested and, except as otherwise
provided herein, shall not be subject to forfeiture.

 

(c)           Notwithstanding
anything in the Plan to the contrary, amounts held in the Participant’s
Elective Account may not be distributable (including any offset of loans in
default) earlier than: (1) the Participant’s separation from employment, Total
and Permanent Disability, or death; (2) the Participant’s attainment of age
59-1/2; (3) the termination of the Plan without the existence at the time of
Plan termination of another defined contribution plan or the establishment of a
successor defined contribution plan by the Employer or an Affiliated Employer
within the period ending 12 months after distribution of all assets from the
Plan maintained by the Employer; or (4) 
the proven financial hardship of a Participant, subject to the
limitations of Section 6.10.

 

(d)           A Participant’s
Deferred Compensation Contributions shall not exceed, during any taxable year
of the Participant, the limitation imposed by Code Section 402(g), as in effect
at the beginning of such taxable year. 
If such dollar limitation is exceeded, a Participant will be deemed to
have notified the Administrator of such excess amount, which excess shall be
distributed under Section 4.2(f).  The
dollar limitation shall be adjusted annually pursuant to the method provided in
Code Section 415(d) in accordance with Regulations.  Any provision herein to the contrary
notwithstanding, this limitation shall not apply to Catch-Up Contributions.

 

(e)           In the event a
Participant has received a hardship distribution pursuant to Section 6.10(b) or
pursuant to Regulation 1.401(k)-1(d)(2)(iv)(B) from any other plan maintained
by the Employer, then no Deferred Compensation Contributions shall be made on
behalf of the Participant for six months following the distribution.

 

(f)            If a Participant’s
Deferred Compensation Contributions together with any elective deferrals (as
defined in Regulation Section 1.402(g)-1(b)) under another qualified cash or
deferred arrangement (as described in Code Section 401(k)), a simplified
employee pension (as described in Code Section 408(k)(6)), a simple individual
retirement account plan (as described in Code Section 408(p)), a salary
reduction arrangement (within the meaning of Code Section 3121(a)(5)(D)), a
deferred compensation plan under Code Section 457(b), or a trust described in
Code Section 501(c)(18) cumulatively exceed the limitation imposed by Code
Section 402(g) (as adjusted annually in accordance with the method provided in
Code Section 415(d) pursuant to the Regulations) for such Participant’s taxable
year, the Participant may, not

 

19

 

later than March 1 following the close of the Participant’s taxable
year, notify the Administrator in writing of such excess and request that the
Participant’s Deferred Compensation under this Plan be reduced by an amount
specified by the Participant.  In such
event, the Administrator may direct the Trustee to distribute such excess
amount (and any Income al1ocable to such excess amount) to the Participant not
later than the first April 15th following the close of the Participant’s
taxable year.  Any distribution of less
than the entire amount of Excess Deferred Compensation and Income shall be
treated as a pro rata distribution of Excess Deferred Compensation and Income
Contributions.  Any distribution on or
before the last day of the Participant’s taxable year must satisfy each of the
following conditions:

 

(1)           the
distribution must be made after the date on which the Plan received the Excess
Deferred Compensation;

 

(2)           the
Participant shal1 designate the distribution as Excess Deferred

Compensation; and

 

(3)           the
Plan must designate the distribution as a distribution of Excess Deferred
Compensation.

 

Any distribution made pursuant to this Section 4.2(f) shall be made
first from unmatched Deferred Compensation Contributions and, thereafter, from
Deferred Compensation Contributions which are matched.  Matching contributions which relate to such
Deferred Compensation Contributions shall be forfeited and applied as part of
the Employer’s matching contribution for the year of forfeiture and succeeding
Plan Years until fully utilized.

 

(g)           Notwithstanding Section
4.2(f) above, a Participant’s Excess Deferred Compensation shall be reduced,
but not below zero, by any distribution and/or recharacterization of Excess
Contributions pursuant to Section 4.7(a) for the Plan Year beginning with or
within the taxable year of the Participant.

 

(h)           Employer Elective
Contributions made pursuant to this Section may be segregated into a separate
account for each Participant in a federally insured savings account,
certificate of deposit in a bank or savings and loan association, money market
certificate, or other short-term debt security acceptable to the Trustee until
such time as the allocations pursuant to Section 4.4 have been made.

 

(i)            The Employers and the
Administrator shall implement the salary reduction elections provided for
herein in accordance with the following:

 

(1)           A
Participant may make an initial salary deferral election within a reasonable
time, not to exceed 30 days, after entering the Plan pursuant to Section
3.2.  If the Participant fails to make an
initial salary deferral election within such time, then such Participant may
thereafter make an election in accordance with the rules governing
modifications.  The Participant shall
make such an election by

 

20

 

entering into a written salary reduction agreement with the Employer
and filing such agreement with the Administrator.  Such election shall initially be effective
beginning with the pay period following the acceptance of the salary reduction agreement
by the Administrator, shall not have retroactive effect and shall remain in
force until revoked.

 

(2)           A
Participant may modify a prior election during the Plan Year and concurrently
make a new election by filing a written notice with the Administrator within a
reasonable time before the pay period for which such modification is to be
effective.  However, modifications to a
salary deferral election shall only be permitted semi-annually, during election
periods established by the Administrator prior to the first day of a Plan Year
and the first day of the seventh month of a Plan Year.  Any modification shall not have retroactive
effect and shall remain in force until revoked.

 

(3)           A
Participant may elect to prospectively revoke the Participant’s salary
reduction agreement in its entirety at any time during the Plan Year by
providing the Administrator with 30 days written notice of such revocation (or
upon such shorter notice period as may be acceptable to the Administrator).  Such revocation shall become effective as of
the beginning of the first pay period coincident with or next following the
expiration of the notice period. 
Furthermore, the termination of the Participant’s employment, or the
cessation of participation for any reason, shall be deemed to revoke any salary
reduction agreement then in effect, effective immediately following the close
of the pay period within which such termination or cessation occurs.

 

4.3           TIME OF PAYMENT OF
EMPLOYER CONTRIBUTIONS

 

The Employer may make its contributions to the Plan for a particular
Plan Year at such time as the Employer, in its sole discretion,
determines.  If the Employer makes a
contribution for a particular Plan Year after the close of that Plan Year, the
Employer will designate to the Trustee the Plan Year for which the Employer is
making its contribution.

 

4.4           ALLOCATION OF
CONTRIBUTIONS AND EARNINGS

 

(a)           The Administrator shall
establish and maintain appropriate accounts in the name of each Participant to
which the Administrator shall credit as of each Anniversary Date, or other
Valuation Date, all amounts allocated to each such Participant as set forth
herein.

 

(b)           The Employers shall
provide the Administrator with all information required by the Administrator to
make a proper allocation of the Employer contributions for each Plan Year.  Within a reasonable period of time after the
date of receipt by the Administrator of such information, the Administrator
shall allocate such contributions as follows:

 

21

 

(1)           To
each Participant’s Elective Account in an amount equal to each such Participant’s
Deferred Compensation Contributions for the year.

 

(2)           With
respect to matching contributions made pursuant to Section 4.1(b) on behalf of
a Participant (i) to the Participant’s Elective Account if the contributions
are used to satisfy the “ADP” test, or (ii) to his Participant Account if not
used to satisfy the “ADP” test.

 

(3)           With
respect to Employer Qualified Non-Elective Contributions made pursuant to
Section 4.1(c) on behalf of a Participant, (i) to the Participant’s Elective
Account if the contribution is used to satisfy the “ADP” test, or (ii) to his
Participant Account if not used to satisfy the “ADP” test.

 

(4)           With
respect to Employer discretionary contributions made pursuant to Section
4.1(d), to the Participant Account of each Participant who has completed at
least two Years of Service in the ratio that the Participant’s Compensation for
that Plan Year bears to the total Compensation of all Participants eligible to
share in that discretionary contribution for that Plan Year.

 

(c)           For any Top Heavy Plan
Year, Non-Key Employees shall also receive the additional minimum allocation,
if any, required under Section 4.5.

 

(d)           As of each Valuation
Date, before the current valuation period allocation of Employer contributions,
any earnings or losses (other than earnings or losses in Directed Investment
Accounts) of the Trust Fund shall be allocated in the same proportion that each
Participant’s and Former Participant’s nonsegregated accounts (other than
Directed Investment Accounts) bear to the total of all Participants’ and Former
Participants’ nonsegregated accounts as of such date.  Earnings or losses with respect to a
Participant’s Directed Account shall be allocated solely to that account in
accordance with Section 4.14.

 

Participants’ transfers from other qualified plans and after-tax
voluntary Employee contributions deposited in the general Trust Fund shall
share in any earnings and losses (net appreciation or net depreciation) of the
Trust Fund in the same manner provided above. 
Each Directed Investment Account and segregated account maintained on
behalf of a Participant shall be credited or charged with its separate earnings
and losses.

 

(e)           Notwithstanding anything
in this Section to the contrary, all information necessary to properly reflect
a given transaction may not be available until after the date specified herein
for processing such transaction, in which case the transaction will be
reflected when such information is received and processed.  Subject to express limits that may be imposed
under the Code, the processing of any contribution, distribution or other
transaction may be delayed for any legitimate business reason (including, but
not limited to, failure of systems or computer programs, failure of the means
of the transmission of data, force majeure, the failure of a service provider
to timely receive values or prices, and the correction for errors or omissions
or the errors or omissions of any service

 

22

 

provider).  The processing date
of a transaction will be binding for all purposes of the Plan.

 

(f)            Notwithstanding
anything to the contrary, if the Plan would otherwise fail the requirements of
Code Section 410(b) because any type of Employer contributions are not
allocated to a sufficient number of Participants for a Plan Year, then the
group of Participants eligible to share in the contribution shall be expanded
to include the minimum number of additional Participants necessary to satisfy
Code Section 410(b).  The specific
Participants who shall become eligible under the terms of this paragraph shall
be those who have not separated from service prior to the last day of the Plan
Year and have completed the greatest number of Hours of Service in the Plan
Year.  Nothing in this Section shall
permit the reduction of a Participant’s accrued benefit.  Therefore any amounts that have previously
been allocated to Participants may not be reallocated to satisfy these
requirements.  In such event, the
Employer shall make an additional contribution equal to the amount such
affected Participants would have received had they been included in the
allocations, even if it exceeds the amount which would be deductible under Code
Section 404.  Any adjustment to the
allocations pursuant to this paragraph shall be considered a retroactive
amendment adopted by the last day of the Plan Year.

 

4.5           TOP
HEAVY MINIMUM CONTRIBUTIONS

 

(a)           For any Top Heavy Plan
Year, the sum of the Employer contributions allocated to the Participant’s
Combined Account of each Non-Key Employee shall be equal to at least 3% of such
Non-Key Employee’s “415 Compensation” (reduced by contributions and
forfeitures, if any, allocated to each Non-Key Employee in any defined
contribution plan included with this Plan in a Required Aggregation
Group).  However, if (1) the sum of the
Employer contributions allocated to the Participant’s Combined Account of each
Key Employee for such Top Heavy Plan Year is less than 3% of each Key Employee’s
“415 Compensation” and (2) this Plan is not required to be included in an
Aggregation Group to enable a defined benefit plan to meet the requirements of
Code Section 401(a)(4) or 410, the sum of the Employer contributions allocated
to the Participant’s Combined Account of each Non-Key Employee shall be equal
to the largest percentage of 415 Compensation allocated to the Participant’s
Combined Account of any Key Employee.  In
determining whether a Non-Key Employee has received the required minimum
allocation, a Non-Key Employee’s Deferred Compensation Contributions and
matching contributions needed to satisfy the “ADP” tests pursuant to Section
4.6(a) shall not be taken into account.

 

(b)           For purposes of the
minimum allocations set forth above, the percentage allocated to the
Participant’s Combined Account of any Key Employee shall be equal to the ratio
of the sum of the Employer contributions allocated on behalf of such Key
Employee divided by the “415 Compensation” for such Key Employee.

 

(c)           The Top Heavy minimum
allocations shall be allocated to the Participant’s Combined Account of all
Non-Key Employees who are employed by the Employer on the last day of the Plan
Year.

 

23

 

4.6           ACTUAL
DEFERRAL PERCENTAGE TESTS

 

(a)           For
each Plan Year (“Testing Year”), the annual “ADP” for the Highly Compensated
Participant group for the Testing Year shall not exceed the greater of 125% of:
(1) the “ADP” of the Non-Highly Compensated Participant group for the Plan Year
immediately preceding the Testing Year in question (the “Prior Year”),
multiplied by 1.25, or (2) the lesser of (x) 200% of the ADP for the Highly for
the Non-Highly Compensated Participant group for the Prior Year or (y) the
Non-Highly Compensated Participant group ADP for the Prior Year, plus two
percentage points.  The provisions of
Code Section 401(k)(3) and Regulation Section 1.401(k)-1(b) are incorporated
herein by reference.

 

(b)           For the purposes of
this Plan “ADP” means, with respect to any group for a Testing or Prior Year,
as applicable, the average of the ratios, calculated separately for each
Participant in that group, whether or not contributing, of the amount of
Elective Contributions allocated to each Participant’s Elective Account for
such year to such Participant’s Compensation for such Plan year.  The actual deferral ratio for each
Participant and the “ADP” for each group shall be calculated to the nearest
one-hundredth of one percent.  Employer
Elective Contributions allocated to each Non-Highly Compensated Participant’s
Elective Account shall be reduced by Excess Deferred Compensation to the extent
such excess amounts are made under this Plan or any other plan maintained by
the Employer and by any matching contributions which relate to such Excess
Deferred Compensation.

 

(c)           For the purposes of
this Section, if two or more plans which include cash or deferred arrangements
are considered one plan for the purposes of Code Section 401(a)(4) or 410(b)
(other than Code Section 410(b)(2)(A)(ii)), the cash or deferred arrangements
included in such plans shall be treated as one arrangement.  Plans may be aggregated under this paragraph
(c) only if they have the same plan year. 
Notwithstanding the above, if two or more plans which include cash or
deferred arrangements are permissively aggregated under Regulation
1.410(b)-7(d), all plans permissively aggregated must use either the current
year testing method or the prior year testing method for the testing year.

 

(d)           If a Highly Compensated
Participant is a Participant under two or more cash or deferred arrangements
(other than a cash or deferred arrangement which is part of an employee stock
ownership plan as defined in Code Sections 4975(e)(7) or 409) of an Employer,
all such cash or deferred arrangements shall be treated as one arrangement for
the purpose of determining the actual deferral ratio with respect to such
Highly Compensated Participant.  However,
if the cash or deferred arrangements have different plan years, this paragraph
shall be applied by treating all cash or deferred arrangements ending with or
within the same calendar year as a single arrangement.

 

(e)           When calculating the “ADP”
for the Non-Highly Compensated Participant group, the prior year testing method
shall be used.  Any change from the prior
year

 

24

 

testing method to the current year testing method shall be made
pursuant to Internal Revenue Service Notice 98-1, Section VII (or superseding
guidance), the provisions of which are incorporated herein by reference.

 

(f)            This Section and
Section 4.7 may be applied separately (or will be applied separately to the
extent required by Regulations) to each plan within the meaning of Regulation
Section 1.401(k)-1(g)(11).  Furthermore,
the provisions of Code Section 401(k)(3)(F) may be used to exclude from
consideration all Non-Highly Compensated Employees who have not satisfied the
minimum age and service requirements of Code Section 410(a)(1)(A).

 

4.7           ADJUSTMENT TO SATISFY
ADP TEST

 

In the event (or if it is anticipated) that the initial allocations of
Elective Contributions made pursuant to Section 4.4 with respect to any Plan
Year do (or might) not satisfy the ADP test set forth in Section 4.6(a), the
Administrator shall adjust Excess Contributions pursuant to one or more of the
options set forth below, including a combination of those options if the
Employer so determines:

 

(a)           No later than the close
of the following Plan Year, the Highly Compensated Participant having the
largest dollar amount of Elective Contributions shall have a portion of his
Elective Contributions distributed and/or at his election recharacterized as an
after-tax voluntary Employee contribution pursuant to Section 4.13 until the
total amount of Excess Contributions has been distributed, or until the amount
of his Elective Contributions equals the Elective Contributions of the Highly
Compensated Participant having the second largest dollar amount of Elective
Contributions (again disregarding Catch-Up Contributions).  This process shall continue until the total
amount of Excess Contributions has been distributed.  In determining the amount of Excess
Contributions to be distributed and/or recharacterized with respect to an
affected Highly Compensated Participant, Catch-Up Contributions shall be
disregarded and the amount of Excess Contributions shall be reduced pursuant to
Section 4.2(f) by any Excess Deferred Compensation previously distributed to
such Participant for the taxable year ending with or within such Plan Year and
any forfeited matching contributions which relate to such Excess Deferred
Compensation.

 

(1)           With
respect to the distribution of Excess Contributions pursuant to (a) above, such
distribution:  (i) may be postponed but
not later than the close of the Plan Year following the Plan Year to which they
are allocable; (ii) shall be made first from unmatched Deferred Compensation
and, thereafter, proportionately from Deferred Compensation which is matched
and matching contributions which relate to such Deferred Compensation, if used
in the “ADP” tests pursuant to Section 4.6; (iii) shall be adjusted for Income;
and (iv) shall be designated by the Employer as a distribution of Excess
Contributions (and Income).

 

25

 

(2)           With
respect to the recharacterization of Excess Contributions pursuant to (a)
above, such recharacterized amounts:  (i)
shall be deemed to have occurred on the date on which the last of those Highly
Compensated Participants with Excess Contributions to be recharacterized is
notified of the recharacterization and the tax consequences of such
re-characterization; (ii) shall not exceed the amount of Deferred Compensation
Contributions on behalf of the Participant for the Plan Year; (iii) shall be
treated as after-tax voluntary Employee contributions for purposes of Code
Section 401(a)(4) and Regulation Section 1.401(k)-1(b); (iv) are not permitted
if the amount recharacterized plus after-tax voluntary Employee contributions
actually made by such Highly Compensated Participant, exceed the maximum amount
of after-tax voluntary Employee contributions (determined prior to application
of Section 4.8(a)) that such Highly Compensated Participant is permitted to
make under the Plan in the absence of recharacterization; and (v) shall be
adjusted for Income.

 

(3)           Any
distribution and/or recharacterization of less than the entire amount of Excess
Contributions shall be treated as a pro rata distribution and/or
recharacterization of Excess Contributions and Income.

 

(4)           Matching
contributions that relate to Excess Contributions shall be forfeited unless the
related matching contribution is distributed as an Excess Contribution pursuant
to (1) above or as an Excess Aggregate Contribution pursuant to Section
4.9.  All such forfeitures shall be used
to satisfy and applied as part of the Employer’s matching contribution for the
year of forfeiture and future Plan Years until fully utilized.

 

(b)           In lieu of correction
under subsection (a) above, or in combination with any corrective action under
subsection (a) above, within 12 months after the end of the Plan Year, the
Employer may make a special Qualified Non-Elective Contribution in accordance
with one of the following provisions which contribution shall be allocated to
the Participant’s Elective Account of each Non-Highly Compensated Participant
eligible to share in the allocation in accordance with such provision.  The Employer shall provide the Administrator
with written notification of the amount of the contribution being made and for
which provision it is being made pursuant to:

 

(1)           A
special Qualified Non-Elective Contribution may be made on behalf of each
Non-Highly Compensated Participant in an amount sufficient to satisfy (or to
prevent an anticipated failure of) one of the tests set forth in Section
4.6(a).  Such contribution shall be
allocated in the same proportion that each Non-Highly Compensated Participant’s
Compensation for the year (or prior year if the prior year testing method is
being used) bears to the total Compensation of all Non-Highly Compensated
Participants for such year.

 

(2)           A
special Qualified Non-Elective Contribution may be made on behalf of each
Non-Highly Compensated Participant who has elected to make salary reduction
contributions under Section 4.2 for the year in an amount

 

26

 

sufficient to satisfy (or to prevent an anticipated failure of) one of
the tests set forth in Section 4.6(a). 
Such contribution shall be allocated in the same proportion that each
such Non-Highly Compensated Participant’s Deferred Compensation Contributions
for the year bears to the total Deferred Compensation Contributions of all such
Non-Highly Compensated Participants for such year.

 

(3)           A
special Qualified Non-Elective Contribution may be made on behalf of Non-Highly
Compensated Participants in an amount sufficient to satisfy (or to prevent an
anticipated failure of) one of the tests set forth in Section 4.6(a).  Such contribution shall be allocated in equal
amounts (per capita).

 

(4)           A
special Qualified Non-Elective Contribution may be made on behalf of Non-Highly
Compensated Participants in an amount sufficient to satisfy (or to prevent an
anticipated failure of) one of the tests set forth in Section 4.6(a).  Such contribution shall be allocated to the
Non-Highly Compensated Participant having the lowest Compensation, until one of
the tests set forth in Section 4.6(a) is satisfied (or is anticipated to be satisfied),
or until such Non-Highly Compensated Participant has received the maximum “annual
addition” pursuant to Section 4.10.  This
process shall continue until one of the tests set forth in Section 4.6(a) is
satisfied (or is anticipated to be satisfied).

 

Notwithstanding the above, at SkyWest’s discretion, Non-Highly
Compensated Participants who are not employed by the Employer at the end of the
Plan Year (or at the end of the prior Plan Year if the prior year testing
method is being used) shall not be eligible to receive a special Qualified Non-Elective
Contribution and shall be disregarded.

 

Notwithstanding the above, if the testing method changes from the
current year testing method to the prior year testing method, then to prevent
the double counting of Qualified Non-Elective Contributions for the first
testing year for which the change is effective, any contribution on behalf of
Non-Highly Compensated Participants used to satisfy the “ADP” or “ACP” test
under the current year testing method for the prior year testing year shall be
disregarded.

 

(c)           If during a Plan Year,
it is projected that the aggregate amount of Elective Contributions to be
allocated to all Highly Compensated Participants under this Plan would cause
the Plan to fail the tests set forth in Section 4.6(a), then the Administrator
may automatically reduce the Deferred Compensation Contributions of Highly
Compensated Participants, beginning with the Highly Compensated Participant who
has the highest deferral ratio until it is anticipated the Plan will pass the
tests or until the actual deferral ratio equals the actual deferral ratio of
the Highly Compensated Participant having the next highest actual deferral
ratio.  This process may continue until
it is anticipated that the Plan will satisfy one of the tests set forth in
Section 4.6(a).  Alternatively, the
Employer may specify a maximum percentage of Compensation that may be deferred.

 

27

 

4.8           ACP TESTS

 

(a)           For each Plan Year (“Testing
Year”), the “ACP” for the Highly Compensated Participant group for that Testing
Year shall not exceed the greater of: 
(1) 125% of the ACP for the Non-Highly Compensated Participant group for
the Plan Year immediately preceding the Testing Year in question (the “Prior
Year”); or (2) the lesser of (x) 200% of the ACP for the Non-Highly Compensated
Participant group for the Prior Year or (y) the ACP for the Non-Highly
Compensated Participant group for the Prior Year plus two percentage
points.  The provisions of Code Section
401(m) and Regulation Sections 1.401(m)-1(b) and 1.401(m)-2 are incorporated
herein by reference.

 

(b)           “ACP” for a Testing
Year or Prior Year, as applicable, with respect to any Participant group, means
the average of the ratios (calculated separately for each Participant in each
group and rounded to the nearest one-hundredth of one percent) of:  (1) the sum of Employer matching
contributions made pursuant to Section 4.1(b) (to the extent such matching
contributions are not used to satisfy the “ADP” tests), after-tax voluntary
Employee contributions made pursuant to Section 4.13 and Excess Contributions
recharacterized as after-tax voluntary Employee contributions pursuant to
Section 4.7(a) on behalf of each such Participant for such year; to (2) the
Participant’s Compensation for such year.

 

(c)           For purposes of
determining “ACP,” only Employer matching contributions contributed to the Plan
prior to the end of the succeeding Plan Year shall be considered.  In addition, the Administrator may elect to
take into account Employer matching contributions pursuant to Section 4.1(b)
(to the extent such matching contributions are not used to satisfy the “ADP”
tests) and after-tax voluntary Employee contributions pursuant to Section 4.13,
elective deferrals (as defined in Regulation Section 1.402(g)-1(b)) and
qualified non-elective contributions (as defined in Code Section 401(m)(4)(C))
contributed to any plan maintained by the Employer.  Such elective deferrals and qualified
non-elective contributions shall be treated as Employer matching contributions
subject to Regulation Section 1.401(m)-1(b)(5) which is incorporated herein by
reference.  However, the Plan Year must
be the same as the plan year of the plan to which the elective deferrals and
the qualified non-elective contributions are made.

 

(d)           If two or more plans of
the Employer to which matching contributions, Employee contributions, or both,
are made are treated as one plan for purposes of Code Sections 401(a)(4) or
410(b) (other than the average benefits test under Code Section 410(b)(2)(A)(ii)),
such plans shall be treated as one plan. 
In addition, two or more plans of the Employer to which matching
contributions, Employee contributions, or both, are made may be considered as a
single plan for purposes of determining whether or not such plans satisfy Code
Sections 401(a)(4), 410(b) and 401(m). 
Any adjustment to the Non-Highly Compensated Participant actual
contribution ratio for the prior year shall be made in accordance with Internal
Revenue Service Notice 98-1 and any superseding guidance.  Plans may be aggregated under this paragraph
(d) only if they have the same plan year.

 

28

 

Notwithstanding the above, if two or more plans which include cash or
deferred arrangements are permissively aggregated under Regulation
1.410(b)-7(d), all plans permissively aggregated must use either the current
year testing method or the prior year testing method for the testing year.

 

(e)           If a Highly Compensated
Participant is a Participant under two or more plans (other than an employee
stock ownership plan as defined in Code Section 4975(e)(7) or 409) which are
maintained by the Employer or an Affiliated Employer to which matching
contributions, Employee contributions, or both, are made, all such contributions
on behalf of such Highly Compensated Participant shall be aggregated for
purposes of determining such Highly Compensated Participant’s actual
contribution ratio.  However, if the
plans have different plan years, this paragraph shall be applied by treating all
plans ending with or within the same calendar year as a single plan.

 

(f)            For purposes of
Sections 4.8(a) and 4.9, a Highly Compensated Participant and Non-Highly
Compensated Participant shall include any Employee eligible to have Employer
matching contributions (whether or not a deferral election was made or
suspended) or after-tax voluntary Employee contributions (whether or not
after-tax voluntary Employee contributions are made) allocated to the
Participant’s account for the Plan Year.

 

(g)           When calculating the “ACP”
for the Non-Highly Compensated Participant group, the prior year testing method
shall be used.  Any change from the prior
year testing method to the current year testing method shall be made pursuant
to Internal Revenue Service Notice 98-1, Section VII (or superseding guidance),
the provisions of which are incorporated herein by reference.

 

(h)           Notwithstanding
anything in this Section to the contrary, the provisions of this Section and
Section 4.9 may be applied separately (or will be applied separately to the
extent required by Regulations) to each plan within the meaning of Regulation
Section 1.401(k)-1(g)(11).  Furthermore,
the Plan may exclude from consideration all Non-Highly Compensated Employees
who have not satisfied the minimum age and service requirements of Code Section
410(a)(1)(A).

 

4.9           ADJUSTMENT TO SATISFY
ACP TESTS

 

In the event (or if it is anticipated) that the ACP tests in Section
4.8(a) will not be met in any Plan Year, the Administrator shall adjust Excess
Aggregate Contributions pursuant to one or more of the options set forth below,
including a combination of those options if the Employer so determines:

 

(a)           Not later than the
close of the following Plan Year the Administrator shall direct the Trustee to
distribute to the Highly Compensated Participant having the largest dollar
amount of contributions determined pursuant to Section 4.8(b)(1), a portion of
such contributions (and Income allocable to such contributions) until the total
amount of Excess Aggregate Contributions has been distributed, or until the
Participant’s remaining

 

29

 

contributions subject to the ACP test equals the amount of such
contributions determined pursuant to Section 4.8(b)(1) of the Highly Compensated
Participant having the second largest dollar amount of contributions.  This process shall continue until the total
amount of Excess Aggregate Contributions has been distributed.  The distribution of Excess Aggregate
Contributions shall be made in the following order:  (1) After-tax voluntary Employee
contributions including Excess Contributions recharacterized as after-tax
voluntary Employee contributions pursuant to Section 4.7(a)(2); and (2)
Employer matching contributions.

 

(b)           Any distribution of less
than the entire amount of Excess Aggregate Contributions (and Income) shall be
treated as a pro rata distribution of Excess Aggregate Contributions and
Income.  Distribution of Excess Aggregate
Contributions shall be designated by the Employer as a distribution of Excess
Aggregate Contributions (and Income).

 

(c)           Excess Aggregate
Contributions attributable to amounts other than after-tax voluntary Employee
contributions shall be treated as Employer contributions for purposes of Code
Sections 404 and 415 even if distributed from the Plan.

 

(d)           The determination of
the amount of Excess Aggregate Contributions with respect to any Plan Year
shall be made after first determining the Excess Contributions, if any, to be
treated as after-tax voluntary Employee contributions due to recharacterization
for the plan year of any other qualified cash or deferred arrangement (as
defined in Code Section 401(k)) maintained by the Employer that ends with or
within the Plan Year or which are treated as after-tax voluntary Employee
contributions due to recharacterization pursuant to Section 4.7(a).

 

(e)           If during a Plan Year
the projected aggregate amount of Employer matching contributions, after-tax
voluntary Employee contributions and Excess Contributions recharacterized as
after-tax voluntary Employee contributions to be allocated to all Highly
Compensated Participants under this Plan would, by virtue of the tests set
forth in Section 4.8(a), cause the Plan to fail such tests, then the
Administrator may automatically reduce proportionately or in the order provided
in Section 4.9(a) each affected Highly Compensated Participant’s projected
share of such contributions by an amount necessary to satisfy one of the tests
set forth in Section 4.8(a).

 

(f)            Notwithstanding
subsection (a) above or in combination with corrective action under subsection
(a) above, within 12 months after the end of the Plan Year, the Employer may
make a special Qualified Non-Elective Contribution in accordance with one of
the following provisions, as the Employer determines.  The Employer shall provide the Administrator
with written notification of the amount of the contribution being made and for
which provision it is being made pursuant to:

 

(1)           A
special Qualified Non-Elective Contribution may be made on behalf of Non-Highly
Compensated Participants in an amount sufficient to satisfy (or to prevent an
anticipated failure of) one of the tests set forth in Section 4.8.

 

30

 

Such contribution shall be allocated in the same proportion that each
Non-Highly Compensated Participant’s Compensation for the year (or prior year
if the prior year testing method is being used) bears to the total Compensation
of all Non-Highly Compensated Participants for such year.

 

(2)           A
special Qualified Non-Elective Contribution may be made on behalf of Non-Highly
Compensated Participants in an amount sufficient to satisfy (or to prevent an
anticipated failure of) one of the tests set forth in Section 4.8. Such
contribution shall be allocated to that each Non-Highly Compensated Participant
electing salary reductions pursuant to Section 4.2 in the same proportion that
each such Participant’s Deferred Compensation Contributions for the year (or at
the end of the prior Plan Year if the prior year testing method is being used)
bears to the total Deferred Compensation Contributions of all such Participants
for such year.

 

(3)           A
special Qualified Non-Elective Contribution may be made on behalf of Non-Highly
Compensated Participants in an amount sufficient to satisfy (or to prevent an
anticipated failure of) one of the tests set forth in Section 4.8. Such
contribution shall be allocated in equal amounts (per capita).

 

(4)           A
special Qualified Non-Elective Contribution may be made on behalf of Non-Highly
Compensated Participants in an amount sufficient to satisfy (or to prevent an
anticipated failure of) one of the tests set forth in Section 4.8.  Such contribution shall be allocated to the
Non-Highly Compensated Participant having the lowest Compensation, until one of
the tests set forth in Section 4.8 is satisfied (or is anticipated to be
satisfied), or until such Participant has received the maximum “annual addition”
pursuant to Section 4.10.  This process
shall continue until one of the tests set forth in Section 4.8 is satisfied (or
is anticipated to be satisfied).

 

Notwithstanding the above, at the Employer’s discretion, Non-Highly
Compensated Participants who are not employed at the end of the Plan Year shall
not be eligible to receive a special Qualified Non-Elective Contribution.

 

If the testing method changes from the current year testing method to
the prior year testing method, then to prevent the double counting of Qualified
Non-Elective Contributions for the first testing year for which the change is
effective, any special Qualified Non-Elective Contribution on behalf of
Non-Highly Compensated Participants used to satisfy the “ADP” or “ACP” test
under the current year testing method for the prior year shall be disregarded.

 

4.10         MAXIMUM ANNUAL ADDITIONS

 

(a)           Notwithstanding the
foregoing, but subject to Code Section 414(v), the maximum “annual additions”
credited to a Participant’s accounts for any “limitation year” shall equal the
lesser of:  (1) $40,000, as adjusted for
increases in the cost of living under

 

31

 

Code Section 415(d), or (2) 100% of the Participant’s “415 Compensation”
for such “limitation year.” If the contribution that would otherwise be
contributed or allocated to the Participant’s accounts would cause the “annual
additions” for the “limitation year” to exceed such maximum, the amount
contributed or allocated will be reduced so that the limit is met and any
amount in excess of the maximum “annual additions,” which would have been
allocated to such Participant may be allocated to other Participants.  For any short “limitation year,” the dollar
limitation in (1) above shall be reduced by a fraction, the numerator of which
is the number of full months in the short “limitation year” and the denominator
of which is 12.

 

(b)           The term “annual
additions” means the sum credited to a Participant’s accounts for any “limitation
year” of (1) Employer contributions (other than Catch-Up Contributions), (2)
Employee contributions, (3) forfeitures, (4) amounts allocated after March 31,
1984 to an individual medical account, as defined in Code Section 415(1)(2)
which is part of a pension or annuity plan maintained by the Employer and (5)
amounts derived from contributions paid or accrued which are attributable to
post-retirement medical benefits allocated to the separate account of a key
employee (as defined in Code Section 419A(d)(3)) under a welfare benefit plan
(as defined in Code Section 419(e)) maintained by the Employer.

 

(c)           For purposes of
applying the limitations of Code Section 415, the transfer of funds from one
qualified plan to another is not an “annual addition.” In addition, the
following are not Employee contributions for the purposes of Section
4.10(b)(2): (1) rollover contributions (as defined in Code Sections 402(e)(6),
403(a)(4), 403(b)(8) and 408(d)(3)); (2) repayments of loans made to a
Participant from the Plan; (3) repayments of distributions received by an
Employee pursuant to Code Section 411(a)(7)(B) (cash-outs); (4) repayments of
distributions received by an Employee pursuant to Code Section 411(a)(3)(D)
(mandatory contributions); and (5) Employee contributions to a simplified
employee pension excludable from gross income under Code Section 408(k)(6).

 

(d)           The “limitation year”
shall be the Plan Year.

 

(e)           For the purpose of this
Section, all qualified defined contribution plans (whether terminated or not)
ever maintained by the Employer shall be treated as one defined contribution
plan.  If the Employer is a member of a controlled
group of corporations, trades or businesses under common control (as defined by
Code Section 1563(a) or Code Section 414(b) and (c) as modified by Code Section
415(h)), is a member of an affiliated service group (as defined by Code Section
414(m)), or is a member of a group of entities required to be aggregated
pursuant to Regulations under Code Section 414(o), all Employees of such
Employers shall be considered to be employed by a single Employer.

 

(f)            If a Participant
participates in more than one defined contribution plan maintained by the
Employer which have different anniversary dates, the maximum “annual additions”
under this Plan shall equal the maximum “annual additions” for the

 

32

 

“limitation year” minus any “annual additions” previously credited to
such Participant’s accounts during the “limitation year.”

 

(g)           If a Participant
participates in both a defined contribution plan subject to Code Section 412
and a defined contribution plan not subject to Code Section 412 maintained by
the Employer which have the same anniversary date, “annual additions” will be
credited to the Participant’s accounts under the defined contribution plan
subject to Code Section 412 prior to crediting “annual additions” to the
Participant’s accounts under the defined contribution plan not subject to Code
Section 412.  If a Participant
participates in more than one defined contribution plan not subject to Code
Section 412 maintained by the Employer which have the same Anniversary Date,
the maximum “annual additions” under this Plan shall equal the product of (A)
the maximum “annual additions” for the “limitation year” minus any “annual
additions” previously credited under subparagraphs (1) or (2) above, multiplied
by (B) a fraction (i) the numerator of which is the “annual additions” which
would be credited to such Participant’s accounts under this Plan without regard
to the limitations of Code Section 415 and (ii) the denominator of which is
such “annual additions” for all plans described in this subparagraph.

 

(h)           Notwithstanding
anything contained in this Section to the contrary, the limitations,
adjustments and other requirements prescribed in this Section shall at all
times comply with the provisions of Code Section 415 and the Regulations
thereunder.

 

4.11         ADJUSTMENT FOR EXCESSIVE
ANNUAL ADDITIONS

 

(a)           If, as a result of a
reasonable error in estimating a Participant’s Compensation, a reasonable error
in determining the amount of elective deferrals (within the meaning of Code
Section 402(g)(3)) that may be made with respect to any Participant under the
limits of Section 4.10 or other facts and circumstances to which Regulation
Section 1.415-6(b)(6) shall be applicable, the “annual additions” under this
Plan would cause the maximum “annual additions” to be exceeded for any
Participant, the “excess amount” will be disposed of in one of the following
manners, as uniformly determined by the Administrator for all Participants
similarly situated.

 

(1)           Any
after-tax voluntary Employee contributions (plus attributable gains), to the
extent they would reduce the “excess amount,” will be distributed to the
Participant;

 

(2)           If,
after the application of subparagraph (1) above, an “excess amount” still
exists, any unmatched Deferred Compensation Contributions and, thereafter,
proportionately from Deferred Compensation Contributions which are matched and
matching contributions which relate to such Deferred Compensation
Contributions, will be reduced to the extent they would reduce the “excess
amount.” The Deferred Compensation Contributions (and any gains attributable to
such Deferred Compensation Contributions) will be distributed to the
Participant and the Employer matching contributions (and any gains attributable
to such

 

33

 

matching
contributions) will be forfeited and applied to reduce the Employer matching
contribution in the next “limitation year” and each succeeding “limitation
year” until fully utilized.

 

(3)           If, after the application of subparagraphs
(1) and (2) above, an “excess amount” still exists, and the Participant is
covered by the Plan at the end of the “limitation year,” the “excess amount”
will be used to reduce the Employer contribution for such Participant in the
next “limitation year,” and each succeeding “limitation year” if necessary;

 

(4)           If, after the application of subparagraphs
(1), (2) and (3) above, an “excess amount” still exists, and the Participant is
not covered by the Plan at the end of the “limitation year,” the “excess
amount” will be held unallocated in a “Section 415 suspense account.” The
“Section 415 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;

 

(5)           If a “Section 415 suspense account” is in
existence at any time during the “limitation year” pursuant to this Section, it
will not participate in the allocation of investment gains and losses of the
Trust Fund.  If a “Section 415 suspense
account” is in existence at any time during a particular “limitation year,” all
amounts in the “Section 415 suspense account” must be allocated and reallocated
to Participants’ accounts before any Employer contributions or any Employee
contributions may be made to the Plan for that “limitation year.” Except as
provided in (l) and (2) above, “excess amounts” may not be distributed to
Participants or Former Participants.

 

(b)           For purposes of this Section 4.11, “excess
amount” for any Participant for a “limitation year” shall mean the excess, if
any, of (1) the “annual additions” which would be credited to the Participant’s
account under the terms of the Plan without regard to the limitations of Code
Section 415 over (2) the maximum “annual additions” determined pursuant to Section
4.10.

 

(c)           For purposes of this Section, “Section 415
suspense account” shall mean an unallocated account equal to the sum of “excess
amounts” for all Participants in the Plan during the “limitation year.”

 

4.12         ROLLOVERS AND PLAN-TO-PLAN TRANSFERS FROM
QUALIFIED PLANS

 

(a)           With the consent of the Administrator,
amounts may be transferred (within the meaning of Code Section 414(1)) to this
Plan from another retirement plan meeting the requirements of Code Section
401(a) by Participants, provided the trust from which such funds are
transferred permits the transfer to be made and the transfer will not
jeopardize the tax exempt status of the Plan or Trust or create adverse tax
consequences for the Employer.  The amounts
transferred shall be accounted for in a separate

 

34

 

Participant’s
Transfer/Rollover Account.  Except as
permitted by Regulations (including Regulation Section 1.411(d)-4), amounts
attributable to elective contributions (as defined in Regulation
1.401(k)-1(g)(3)), including amounts treated as elective contributions, which
are transferred from another qualified plan in a plan-to-plan transfer (other
than a direct rollover) shall be subject to the distribution limitations
provided for in Regulation Section 1.401(k)-1(d).

 

(b)           With the consent of the Administrator, the
Plan may accept a “rollover” from another qualified plan by Participants,
provided the “rollover” will not jeopardize the tax exempt status of the Plan
or create adverse tax consequences for the Employer.  Prior to accepting any “rollovers” to which
this Section applies, the Administrator may require the Employee to establish
(by providing opinion of counselor otherwise) that the amounts to be rolled
over to this Plan meet the requirements of this Section.  The amounts rolled over shall be set up in a
separate Participant’s Transfer/Rollover Account.

 

For
purposes of this Section, the term “qualified plan” shall mean any tax
qualified plan under Code Section 401(a), or, any other plans from which
distributions are eligible to be rolled over into this Plan pursuant to the
Code.  The term “rollover” means: (1)
amounts transferred to this Plan directly from another qualified plan; (2)
distributions received by an Employee from other “qualified plans” which are
eligible for tax-free rollover to a “qualified plan” and which are transferred
by the Employee to this Plan within 60 days following receipt thereof; (3)
amounts transferred to this Plan from a conduit individual retirement account
provided that the conduit individual retirement account has no assets other
than assets which (A) were previously distributed to the Employee by another
“qualified plan,” (B) were eligible for tax-free rollover to a “qualified plan”
and (C) were deposited in such conduit individual retirement account within 60
days of receipt thereof; (4) amounts distributed to the Employee from a conduit
individual retirement account meeting the requirements of clause (3) above, and
transferred by the Employee to this Plan within 60 days of receipt thereof from
such conduit individual retirement account; and (5) any other amounts which are
eligible to be rolled over to this Plan pursuant to the Code.

 

(c)           Amounts in a Participant’s Transfer/Rollover
Account shall be held by the Trustee pursuant to the provisions of this Plan
and may not be withdrawn by, or distributed to the Participant, in whole or in
part, except as provided in paragraph (d) of this Section.  The Trustee shall have no duty or
responsibility to inquire as to the propriety of the amount, value or type of
assets transferred, nor to conduct any due diligence with respect to such
assets; provided, however, that such assets are otherwise eligible to be held
by the Trustee under the terms of this Plan.

 

(d)           The Administrator, at the election of the
Participant, shall direct the Trustee to distribute all or a portion of the
amount credited to the Participant’s Transfer/Rollover Account.  Any distributions of amounts held in a
Participant’s Transfer/Rollover Account shall be made in a manner which is
consistent with, and satisfies the provisions of Article VI, including, but not
limited to, all notice and consent requirements of Code Sections 417 and
411(a)(11) and the Regulations thereunder.

 

35

 

Furthermore,
such amounts shall not be considered as part of a Participant’s benefit in
determining whether an involuntary cash-out of benefits may be made without
Participant consent.

 

(e)           The Administrator may direct that Employee
transfers and rollovers made after a Valuation Date be segregated into a
separate account for each Participant until such time as the allocations
pursuant to this Plan have been made, at which time they may remain segregated
or be invested as part of the general Trust Fund or be directed by the
Participant pursuant to Section 4.14.

 

4.13         VOLUNTARY CONTRIBUTIONS

 

(a)           Each Participant may, in accordance with
nondiscriminatory procedures established by the Administrator, elect to make
after-tax voluntary Employee contributions to the Plan.  Such contributions must generally be paid to
the Trustee within a reasonable period of time after being received by the
Employer.

 

(b)           A Participant may elect at any time to
withdraw in a lump sum all or a portion of the balance from such Participant’s
Voluntary Contribution Account in a manner which is consistent with and
satisfies Section 6.2 below applied as if the Participant had separated from
employment.  If the Administrator
maintains sub-accounts with respect to after-tax voluntary Employee
contributions (and earnings thereon) which were made on or before a specified
date, a Participant shall be permitted to designate which sub-account shall be
the source for withdrawal.

 

In
the event such a withdrawal is made, or in the event a Participant has received
a hardship distribution from the Participant’s Elective Account pursuant to
Article VI or pursuant to Regulation 1.401(k)-1(d)(2)(iii)(B) from any other
plan maintained by the Employer, then the Participant shall be barred from
making any after-tax voluntary Employee contributions for a period of six
months after receipt of the withdrawal or distribution.

 

4.14         DIRECTED INVESTMENT ACCOUNT

 

(a)           Participants may, subject to a procedure
established by the Administrator (the Participant Direction Procedures) and
applied in a uniform nondiscriminatory manner, direct the Trustee, in writing
(or in such other form which is acceptable to the Trustee), to invest all of
their accounts in specific assets, specific funds or other investments
permitted under the Plan and the Participant Direction Procedures.  That portion of the interest of any
Participant so directing will thereupon be considered a Participant’s Directed
Account.

 

(b)           As of each Valuation Date, all Participant Directed
Accounts shall be charged or credited with the net earnings, gains, losses and
expenses as well as any appreciation or depreciation in the market value using
publicly listed fair market values when available or appropriate as follows:

 

36

 

(1)           to the extent that the assets in a
Participant’s Directed Account are accounted for as pooled assets or
investments, the al1ocation of earnings, gains and losses of each Participant’s
Directed Account shall be based upon the total amount of funds so invested in a
manner proportionate to the Participant’s share of such pooled investment; and

 

(2)           to the extent that the assets in the
Participant’s Directed Account are accounted for as segregated assets; the
allocation of earnings, gains and losses from such assets shall be made on a
separate and distinct basis.

 

(c)           Investment directions will be processed as
soon as administratively practicable after proper investment directions are
received from the Participant.  No
guarantee is made by the Plan, Employer, Administrator or Trustee that
investment directions will be processed on a daily basis, and no guarantee is
made in any respect regarding the processing time of an investment direction.  Notwithstanding any other provision of the
Plan, the Employer, Administrator or Trustee reserves the right to not value an
investment option on any given Valuation Date for any reason deemed appropriate
by the Employer, Administrator or Trustee. 
Furthermore, the processing of any investment transaction may be delayed
for any legitimate business reason (including, but not limited to, failure of
systems or computer programs, failure of the means of the transmission of data,
force majeure, the failure of a service provider to timely receive values or
prices, and correction for errors or omissions or the errors or omissions of
any service provider).  The processing
date of a transaction will be binding for all purposes of the Plan and
considered the applicable Valuation Date for an investment transaction.

 

(d)           The Participant Direction Procedures shall
provide an explanation of the circumstances under which Participants and their
Beneficiaries may give investment instructions, including, but need not be
limited to, the following:

 

(1)           the conveyance of instructions by the
Participants and their Beneficiaries to invest Participant Directed Accounts in
Directed investment Options;

 

(2)           the name, address and phone number of the
Fiduciary (and, if applicable, the person or persons designated by the
Fiduciary to act on its behalf) responsible for providing information to the
Participant or a Beneficiary upon request relating to the Directed Investment
Options;

 

(3)           applicable restrictions on transfers to and
from any Designated Investment Alternative;

 

(4)           any restrictions on the exercise of voting,
tender and similar rights related to a Directed Investment Option by the
Participants or their Beneficiaries;

 

37

 

(5)           a description of any transaction fees and
expenses which affect the balances in Participant Directed Accounts in
connection with the purchase or sale of Directed Investment Options; and

 

(6)           general procedures for the dissemination of
investment and other information relating to the Designated Investment
Alternatives as deemed necessary or appropriate, including but not limited to a
description of:  (i) the investment
vehicles available under the Plan, including specific information regarding any
Designated Investment Alternative; (ii) any designated Investment Managers; and
(iii) a description of the additional information which may be obtained upon
request from the Fiduciary designated to provide such information.

 

(e)           With respect to assets in a Participant’s
Directed Investment Account, the Participant or Beneficiary shall direct the
Trustee with regard to any voting, tender and similar rights associated with
the ownership of such assets, (hereinafter referred to as the “Stock Rights”)
as follows:

 

(1)           each Participant or Beneficiary shall direct
the Trustee to vote or otherwise exercise such Stock Rights in accordance with
the provisions, conditions and terms of any such Stock Rights;

 

(2)           such directions shall be provided to the
Trustee by the Participant or Beneficiary in accordance with the procedure as
established by the Administrator and the Trustee shall vote or otherwise
exercise such Stock Rights with respect to which it has received directions to
do so under this Section; and

 

(3)           to the extent to which a Participant or
Beneficiary does not instruct the Trustee to vote or otherwise exercise such
Stock Rights, such Participants or Beneficiaries shall be deemed to have
directed the Trustee that such Stock Rights remain nonvoted and unexercised.

 

(f)            Any information regarding investments
available under the Plan, to the extent not required to be described in the
Participant Direction Procedures, may be provided to the Participant in one or
more written documents (or in any other form including, but not limited to,
electronic media) which are separate from the Participant Direction Procedures
and are not thereby incorporated by reference into this Plan.

 

(g)           The Administrator may, in its discretion,
include in or exclude by amendment or other action from the Participant
Direction Procedures such instructions, guidelines or policies as it deems
necessary or appropriate to ensure proper administration of the Plan, and may
interpret the same accordingly.

 

(h)           The Plan is intended to constitute a plan
described in Section 404(c) of the Act and the regulations thereunder.  As a result the Trustees and other Plan
fiduciaries will have no liability for any losses that are the result of
investment directions given by Participants, Beneficiaries or alternate payees
under qualified domestic relations orders.

 

38

 

4.15         QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTIONS

 

(a)           Any voluntary Employee contribution to the
Plan attributable to taxable years ending before January 1, 1987, shall be
treated as a “Qualified Voluntary Employee Contribution” within the meaning of
Code Section 219(e)(2) as it existed prior to the enactment of the Tax Reform
Act of 1986, and held in a separate Qualified Voluntary Employee Contribution
Account.

 

(b)           A Participant may elect at any time to make
withdrawals from such Participant’s Qualified Voluntary Employee Contribution
Account in the same manner as if the Participant had separated from
employment.  Any distribution shall be
made in a manner which is consistent with and satisfies the provisions of
Section 6.2.

 

4.16         QUALIFIED MILITARY SERVICE

 

Notwithstanding
any provision of this Plan to the contrary, contributions, benefits and service
will be provided in accordance with Code Section 414(u).

 

ARTICLE V

VALUATIONS

 

5.1           VALUATION OF THE TRUST FUND

 

The
Administrator shall direct the Trustee, as of each Valuation Date, to determine
the net worth of the assets comprising the Trust Fund as it exists on the
Valuation Date.  In determining such net
worth, the Trustee shall value the assets comprising the Trust Fund at their
fair market value (or their contractual value in the case of a Contract or
Policy) as of the Valuation Date and shall deduct all expenses for which the
Trustee has not yet obtained reimbursement from the Employer or the Trust
Fund.  The Trustee may update the value
of any shares held in the Participant Directed Account by reference to the
number of shares held by that Participant, priced at the market value as of the
Valuation Date.

 

5.2           METHOD OF VALUATION

 

In
determining the fair market value of securities held in the Trust Fund which
are listed on a registered stock exchange, the Administrator shall direct the
Trustee to value the same at the prices they were last traded on such exchange
preceding the close of business on the Valuation Date.  If such securities were not traded on the
Valuation Date, or if the exchange on which they are traded was not open for
business on the Valuation Date, then the securities shall be valued at the
prices at which they were last traded prior to the Valuation Date.  Any unlisted security held in the Trust Fund
shall be valued at its bid price next preceding the close of business on the
Valuation Date, which bid price shall be obtained from a registered broker or
an investment banker.  In determining the
fair market value of assets other than securities for which trading or bid
prices can be

 

39

 

obtained,
the Trustee may appraise such assets itself, or in its discretion, employ one
or more appraisers for that purpose and rely on the values established by such
appraiser or appraisers.

 

ARTICLE VI

VESTED BENEFITS AND DISTRIBUTIONS

 

6.1           VESTED BENEFITS

 

Except
as otherwise expressly provided in this Plan document, each Participant shall
have a non-forfeitable right to his entire Combined Account balance and all of
his other accrued benefits under the Plan, as adjusted from time to time to
reflect investment gains and losses, without regard to Years of Service.

 

6.2           DISTRIBUTION OF BENEFITS UPON SEPARATION FROM
EMPLOYMENT PRIOR TO DEATH.

 

(a)           Upon a Participant’s separation from
employment with his Employer for any reason other than death, the Participant’s
entire Vested Benefit shall become distributable to him in accordance with the
provisions of this Section 6.2 and, if applicable, Section 6.5 below.  The Trustee shall distribute a Participant’s
Vested Benefit to the Participant in accordance with such directions as the
Administrator shall give.

 

(b)           Subject to Section 6.2(c) and Section 6.5 below,
distribution of a Participant’s entire Vested Benefit to the Participant shall
be made in the form of a lump sum distribution. 
That lump sum shall be paid in cash, or to the extent the Participant so
elects, in a combination of any shares of Employer stock held in his accounts
plus cash for the balance. 
Notwithstanding the foregoing, to the extent that a Participant’s
account secures the repayment of any Plan loan, following separation from
employment with the Employers, the Plan may distribute the promissory note
evidencing the loan in kind as part of the Participant’s lump sum distribution.

 

(c)           Notwithstanding Section 6.2(b) above, if a
former Participant’s Vested Benefit (calculated without regard to that portion
of his Transfer/Rollover Account that is attributable to rollover contributions
within the meaning of Code Sections 402(c), 403(a)(4), 403(b)(8),
408(d)(3)(A)(ii) and 457(e)(16) and the earnings allocable thereto) exceeds
$5,000, the Participant is entitled to elect to receive distribution in the
form of either (i) a lump sum payment of his entire account balance, or (ii)
monthly, quarterly, semi-annual or annual cash payments over a designated
period certain subject to the following rules:

 

(1)           The Participant must designate in writing on such
forms as the Administrator provides for this purpose, the payout period over
which any installment distribution is to be made.  Once the installment method and payout period
is elected, the Participant may not modify that election other than to cancel
the election and receive an immediate lump sum distribution of any then-

 

40

 

remaining
Vested Benefit on such forms as the Plan Administrator provides for that
purpose.

 

(2)           The period of installment payments elected
may not exceed the life expectancy of the Participant or the joint life
expectancy of the Participant and his designated Beneficiary at the time
distribution begins or otherwise cause the Plan to violate the provisions of
Section 6.4 below or Code Section 401(a)(9).

 

(3)           The amount of each such periodic installment
payment shall equal the product of (i) the Participant’s account balance on the
Valuation Date immediately preceding the date of distribution (or such other
Valuation Date as the Administrator reasonably determines); multiplied by (ii)
a fraction the numerator of which is one and the denominator of which is the
sum of one plus the remaining periodic distributions to be made after the
installment in question.  The final
installment payment shall be an amount equal to the Participant’s entire
remaining Vested Benefit.

 

(d)           Subject to Section 6.2(e) below, the payment
of a Participant’s Vested Benefit shall be made or begin, as applicable, as
soon as possible after his separation from employment, and in no event later
than the 60th day following the close of the Plan Year in which the Participant
separates from employment.

 

(e)           If a Participant’s Vested Benefit exceeds
$5,000 (calculated without regard to that portion of his Transfer/Rollover
Account that is attributable to rollover contributions within the meaning of
Code Sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii) and 457(e)(16) and
the earnings allocable thereto), the following provisions shall apply to that
Participant:

 

(1)           The Plan cannot make distribution to the
Participant without his consent until he attains age 65.  This restriction shall cease to apply when
the Participant dies.  If the Participant
does not consent to a pre-age 65 distribution of his Vested Benefit following
termination of his employment with an Employer, distribution of his Vested
Benefit shall be deferred until he attains age 65 unless the Participant (and
in the case of any Transfer/Rollover Account subject to Section 6.5 below, the
Participant’s spouse) later consents to a pre-age 65 distribution;

 

(2)           The Participant may elect to defer the
commencement of benefits beyond age 65 to a Participant-designated date that is
no later than the minimum required distribution deadline imposed under Section
6.4 below.  Any election by a Participant
to defer distribution shall be made on such forms and in accordance with such
uniform procedures as the Administrator determines; and

 

(3)           Where required under this Section 6.2(e), the
consent of the Participant (and, if applicable, his spouse) to commencement of
distribution prior to attaining age 65 shall be obtained in writing within the
90-day period ending on

 

41

 

the
“distribution starting date.”  The
“distribution starting date” is the first day of the first period for which an
amount is paid in any form.  The Plan
Administrator shall notify the Participant of the right to defer any
distribution until the Participant attains age 65. The notice 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 Section 6.5(e) below, and shall be provided no less than 30 days and
no more than 90 days prior to the distribution starting date.  The Participant (and, if applicable, spouse)
shall have at least 30 days from the date of the notice to elect or reject an
immediate distribution, but may waive the 30-day waiting period.

 

This subsection 6.2(e) shall
not apply to any Participant other than a Participant described in the first
sentence of this subsection 6.2(e).

 

(f)            Except as provided in Section 6.3(c) below,
if a Participant dies after separating from employment with his Employer and
after commencing installment distributions, his remaining Vested Benefit, if
any, shall continue to be distributed to his Beneficiary under the
Participant-elected method of installment distribution in effect at the time of
his death.  Notwithstanding the
foregoing, the deceased Participant’s Beneficiary may elect in writing on such
forms as the Administrator requires for this purpose to receive a distribution
of the remaining Vested Benefit in a single lump sum as soon as practicable
after the date such election is submitted to the Plan Administrator.

 

6.3           BENEFICIARY DESIGNATIONS AND DISTRIBUTION
UPON DEATH

 

(a)           Upon the death of a married Participant or
married Former Participant, the Participant’s entire Vested Benefit under the
Plan shall become payable to his surviving spouse, adjusted for gains and
losses in the same manner as other account balances are adjusted pending
distribution.  If, however, there is no
surviving spouse or if the Participant waives this mandatory survivor benefit
and the surviving spouse consents in the manner set forth in Section 6.5 for a
Qualified Election (other than the notice requirements therefor) to the
designation of another Beneficiary by the Participant, the deceased Participant’s
Vested Benefit shall instead be paid to the designated Beneficiary pursuant to
the distribution provisions of the Plan which would apply in the absence of
this subsection 6.3(a).  A Participant
may designate one or more alternative or contingent Beneficiaries as provided
in Section 6.3(b) below.

 

(b)           Any Beneficiary designation under this
Section 6.3(b) shall be in the written form prescribed by the Administrator and
shall be effective only when executed by the Participant and, if applicable under
Code Section 401(a)(11)(B)(iii)(I), his spouse, and filed with the
Administrator by the Participant.  A
Participant may, from time to time in like manner, revoke in writing the
Beneficiary designation and such action shall not require the consent of any
Beneficiary.  A Participant (with the
consent of his lawful spouse, if any) may designate multiple, contingent or
successive beneficiaries, and specify the proportionate distribution to each
such Beneficiary.  The following

 

42

 

Beneficiary rules shall
apply for purposes of this Section 6.3 as well as Sections 6.4 and 6.5:

 

(1)           If a named Beneficiary predeceases the
Participant, any prior designation of that Beneficiary shall be deemed revoked
on the date of the Beneficiary’s death.

 

(2)           If the Beneficiary shall survive the
Participant, but shall die before the entire Vested Benefit of the former
Participant has been paid, then, absent any other provision by the Participant,
the unpaid amount shall be payable to the estate of the deceased
Beneficiary.  If multiple Beneficiaries
are designated, absent express provision by the Participant, those named or
their survivors, shall share equally any benefits payable under this Plan.

 

(3)           In the absence of an effective Beneficiary
designation, the Administrator shall direct the Trustee to distribute the
Participant’s undistributed Vested Benefits to the Participant’s surviving
spouse, if any, or, if there is no surviving spouse, then to the estate of the
Participant.

 

(4)           Any spouse or named Beneficiary of a
Participant who cannot be located with reasonable efforts shall be deemed to
have predeceased the Participant for all purposes under the Plan.  If a Participant designates as a Beneficiary
an individual who is his spouse at the time of designation, and that
Beneficiary subsequently ceases to be the Participant’s lawful spouse as a
result of divorce, annulment or legal separation, the former spouse shall be
deemed to have predeceased the Participant unless a qualified domestic
relations order within the meaning of Code Section 414(p) provides otherwise.

 

(c)           If distribution of a Participant’s Vested
Benefit commences on account of separation from employment and the Participant
dies before distribution is completed, any remaining Vested Benefit shall be
distributed to his Beneficiary in the manner provided in Section 6.2(f)
above.  If distribution of a deceased
Participant’s Vested Benefit on account of his separation from employment with
an Employer has not commenced prior to the Participant’s date of death, the
deceased Participant’s Vested Benefit shall be paid to his Beneficiary in the
form of a single lump sum distribution as soon as reasonably practicable after
the Administrator is notified of the Participant’s death, and in no event later
than 60 days following the year of death.

 

(d)           Notwithstanding Section 6.3(c) above, if the
deceased Participant’s Vested Benefit at the time of death exceeds $5,000
(calculated without regard to that portion of his Transfer/Rollover Account
described in the first sentence of Section 6.2(e)), then subject to Section 6.4
below the Beneficiary may elect as follows:

 

(1)           To receive distribution in the form of either
(i) a lump sum payment of the deceased Participant’s entire remaining Vested
Benefit, or (ii)

 

43

 

monthly, quarterly,
semi-annual or annual cash payments over a designated period certain subject to
the following rules:

 

(i)            The Beneficiary must designate in writing on
such forms as the Administrator provides for such purpose the period over which
any installment distribution is to be made. 
Once the installment method and payout period is elected, the
Beneficiary may not modify that election other than to by electing on such forms
as the Plan Administrator provides for this purpose to cancel the election and
receive an immediate lump sum distribution of any then-remaining account
balance.

 

(ii)           The period of installment payments elected
may not exceed the life expectancy of the Beneficiary at the time distribution
begins or otherwise cause the Plan to violate the provisions of Section 6.4
below or Code Section 401(a)(9).

 

(iii)          The amount of each such periodic installment
payment shall equal the product of (i) the account balance on the Valuation
Date immediately preceding the date of distribution (or such other valuation
Date as the Administrator reasonably determines); multiplied by (ii) a fraction
the numerator of which is one and the denominator of which is the sum of one plus
the remaining periodic distributions to be made after the installment
distribution in question.  The final
installment payment shall be an amount equal to the Beneficiary’s entire
remaining account balance.

 

(2)           The Beneficiary may elect to defer the commencement
of benefits to a Beneficiary-designated date that is no later than the minimum
required distribution deadline imposed under Section 6.4 below, or by Code
Section 401(a)(9).  Any election by a
Beneficiary to defer distribution shall be made on such forms and in accordance
with such uniform procedures as the Administrator determines.

 

This Section 6.3(d) shall
only apply if the deceased Participant’s Vested Benefit at the time of death
exceeds $5,000 (calculated without regard to Transfer/Rollover Account balances
described in the first sentence of Section 6.2(e)).

 

6.4           MINIMUM REQUIRED DISTRIBUTIONS

 

(a)           The provisions of this Section 6.4 will apply
for purposes of determining required minimum distributions for the Plan Year
commencing on or after January 1, 2003 and take precedence over any
inconsistent provisions of the Plan.  All
distributions required under this Section 6.4 will be determined and made in
accordance with the Treasury Regulations under Section 401(a)(9) of the Code;
provided, however that notwithstanding the other provisions of this Section
6.4, distributions may be made under a designation made before January 1, 1984,
in accordance with Section 242(b)(2) of the

 

44

 

Tax Equity and Fiscal
Responsibility Act (TEFRA) and the provisions of the Plan that relate to
Section 242(b)(2) of TEFRA.

 

(b)           The Participant’s account balance will be
distributed, or begin to be distributed, to the Participant no later than the
Participant’s Required Beginning Date. 
If the Participant dies before distributions begin, the Participant’s
will be distributed, or begin to be distributed, no later than as follows:

 

(1)           If the Participant’s surviving spouse is the
Participant’s sole Designated Beneficiary, then distributions to the surviving
spouse will begin by December 31 of the calendar year immediately following the
calendar year in which the Participant died, or by December 31 of the calendar
year in which the Participant would have attained age 70-1/2, if later.

 

(2)           If the Participant’s surviving spouse is not
the Participant’s sole Designated Beneficiary, then, except as provided in
subsection 6.4(e) below, distributions to the Designated Beneficiary will begin
by December 31 of the calendar year immediately following the calendar year in
which the Participant died.

 

(3)           If there is no Designated Beneficiary as of
September 30 of the year following the year of the Participant’s death, the
Participant’s entire interest will be distributed by December 31 of the
calendar year containing the fifth anniversary of the Participant’s death.

 

(4)           If the Participant’s surviving spouse is the
Participant’s sole Designated Beneficiary and the surviving spouse dies after
the Participant but before distributions to the surviving spouse begin, this
Section 6.4(b), other than subsection (b)(1), will apply as if the surviving
spouse were the Participant.

 

(5)           If a Participant dies before distributions
begin and there is a Designated Beneficiary other than the Participant’s surviving
spouse, this Section 6.4 does not require distribution to begin by the date
specified in subsection (b)(2) above if the Designated Beneficiary duly elects
to defer distribution, but the Participant’s account balance must be
distributed by December 31 of the calendar year containing the fifth
anniversary of the Participant’s death. 
If the Participant’s surviving spouse is the Participant’s sole
Designated Beneficiary and the surviving spouse dies after the Participant but
before distribution to the Participant or surviving spouse begins, this
election will apply as if the surviving spouse were the Participant.  All elections as to the above five-year rule
or the life expectancy rule under subsections (b)(2) and (e)(1) apply only if
the Participant has a Designated Beneficiary by September 30 of the calendar
year following the Participant’s year of death and must be made not later than
the earlier of (i) September 30 of the calendar year in which distribution
would be required to begin under subsection (b)(2), or (ii) by September 30 of
the calendar year which contains the fifth anniversary of the Participant’s
(or, if applicable, surviving

 

45

 

spouse’s) death.  If neither the Participant nor Beneficiary makes
an election under this subsection (b)(5), distribution will be made in
accordance with Sections 6.4(b)(2) and 6.4(e) of the Plan.

 

For purposes of this
subsection (b) and subsection (e), unless subsection (b)(4) applies,
distributions are considered to begin on the Participant’s Required Beginning
Date.  If subsection (b)(4) applies,
distributions are considered to begin on the date distributions are required to
begin to the surviving spouse under this subsection (b).  If distributions under an annuity purchased
from an insurance company irrevocably commence to the Participant before the
Participant’s required beginning date (or to the Participant’s surviving spouse
before the date distributions are required to begin to the surviving spouse
under this subsection (b)), the date distributions are considered to begin is
the date distributions actually commence.

 

(c)           Unless the Participant’s interest is
distributed on or before the required beginning date, as of the first
distribution calendar year distributions will be made in accordance with
subsections (d) and (e) of this Section 6.4. 
If the Participant’s interest is distributed in the form of an annuity
purchased from an insurance company, distributions under that annuity will be
made in accordance with the requirements of Section 401(a)(9) of the Code and
the Treasury Regulations promulgated thereunder.

 

(d)           During the Participant’s lifetime, the
minimum amount that will be distributed for each distribution calendar year is
the lesser of:

 

(1)           The quotient obtained by dividing the
Participant’s account balance by the distribution period on the Uniform
Lifetime Table set forth in Section 1.401(a)(9)-9 of the Treasury Regulations,
using the Participant’s age as of the Participant’s birthday in the distribution
calendar year; or

 

(2)           If the Participant’s sole Designated
Beneficiary for the distribution calendar year is the Participant’s spouse, the
quotient obtained by dividing the Participant’s account balance by the number
in the Joint and Last Survivor Table set forth in Section 1.401(a)(9)-9 of the
Treasury Regulations, using the Participant’s and spouse’s attained ages as of
the Participant’s and spouse’s birthdays in the distribution calendar year.

 

Required minimum distributions will be determined
under this Section 6.4(d) beginning with the first distribution calendar year
and up to and including the distribution calendar year that includes the
Participant’s date of death.

 

(e)           The following minimum distribution rules
apply after a Participant’s death.

 

(1)           If the Participant dies on or after the date
distributions begin and there is a Designated Beneficiary, the minimum amount
that will be distributed for each distribution calendar year after the year of
the Participant’s death is the

 

46

 

quotient obtained by
dividing the Participant’s account balance by the longer of the remaining life
expectancy of the Participant or the remaining life expectancy of the
Participant’s Designated Beneficiary, determined as follows:

 

(i)            The Participant’s remaining life expectancy
is calculated using the age of the Participant in the year of death, reduced by
one for each subsequent year.

 

(ii)           If the Participant’s surviving spouse is the
Participant’s sole Designated Beneficiary, the remaining life expectancy of the
surviving spouse is calculated for each distribution calendar year after the
year of the Participant’s death using the surviving spouse’s age as of the
spouse’s birthday in that year.  For
distribution calendar years after the year of the surviving spouse’s death, the
remaining life expectancy of the surviving spouse is calculated using the age
of the surviving spouse as of the spouse’s birthday in the calendar year of the
spouse’s death, reduced by one for each subsequent calendar year.

 

(iii)          If the Participant’s surviving spouse is not
the Participant’s sole Designated Beneficiary, the Designated Beneficiary’s
remaining life expectancy is calculated using the age of the Beneficiary in the
year following the year of the Participant’s death, reduced by one for each
subsequent year.

 

(2)           If the Participant dies on or after the date
distributions begin and there is no Designated Beneficiary as of September 30
of the year after the year of the Participant’s death, the minimum amount that
will be distributed for each distribution calendar year after the year of the
Participant’s death is the quotient obtained by dividing the Participant’s
account balance by the Participant’s remaining life expectancy calculated using
the age of the Participant in the year of death, reduced by one for each
subsequent year.

 

(3)           Except as provided in Section 6.4(b)(5), if
the Participant dies before the date distributions begin and there is a
Designated Beneficiary, the minimum amount that will be distributed for each
distribution calendar year after the year of the Participant’s death is the
quotient obtained by dividing the Participant’s account balance by the
remaining life expectancy of the Participant’s Designated Beneficiary, determined
as provided in Section 6.4(e)(1).

 

(4)           If the Participant dies before the date
distributions begin and there is no Designated Beneficiary as of September 30
of the year following the year of the Participant’s death, distribution of the
Participant’s entire interest will be completed by December 31 of the calendar
year containing the fifth anniversary of the Participant’s death.

 

47

 

(5)           If the Participant dies before the date
distributions begin, the Participant’s surviving spouse is the Participant’s
sole Designated Beneficiary, and the surviving spouse dies before distributions
are required to begin to the surviving spouse under Section 6.4(b)(2), this
Section 6.4(e) will apply as if the surviving spouse were the Participant.

 

(f)            For purposes of this Section 6.4, the
following definitions apply:

 

(1)           “Designated Beneficiary” means the individual
who is designated as the Beneficiary under Section 6.2 of the Plan and is the
designated Beneficiary under Section 401(a)(9) of the Internal Revenue Code and
Section 1.401(a)(9)-1, Q&A-4, of the Treasury Regulations.

 

(2)           “Distribution calendar year” means 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 that 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
under Section 6.4(b).  The required
minimum distribution for the Participant’s first distribution calendar year
will be made on or before the Participant’s Required Beginning Date.  The required minimum distribution for other
distribution calendar years, including the required minimum distribution for
the distribution calendar year in which the Participant’s Required Beginning
Date occurs, will be made on or before December 31 of that distribution
calendar year.

 

(3)           “Life expectancy” means life expectancy as
computed by use of the Single Life Table in Section 1.401(a)(9)-9 of the
Treasury Regulations.

 

(4)           “Participant’s account balance” means 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 made and allocated 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.  The
account balance for the valuation calendar year includes any amounts rolled
over or transferred to the Plan either in the valuation calendar year or in the
distribution calendar year if distributed or transferred in the valuation
calendar year.

 

(5)           “Required Beginning Date” means April 1 of
the calendar year in which the Participant attains age 70 1⁄2; provided that in
the case of a Participant other than a five percent (5%) owner, the Required
Beginning Date is April 1 of the calendar year following the later of (i) the
calendar year in which the Participant attains age 70-1/2, or (b) the calendar
year in which the Participant ceases to be an Employee.

 

48

 

6.5           LIMITED JOINT AND SURVIVOR ANNUITY RULES

 

(a)           This Section 6.5 shall only apply to the
distribution of that portion of a Participant’s Transfer/Rollover Account that
is attributable to direct or indirect transfers to the Plan from another plan
that is subject to the survivor annuity requirements of Sections 401(a)(11)(A)
and 417 of the Code (a “417 Account”). 
This Section 6.5 shall not apply to any other account of a Participant.  This Section shall take precedence over any
conflicting provision in this Plan.

 

(b)           For purposes of this Section 6.5, the
following definitions shall apply:

 

(1)           “Election Period” means the period that begins
on the first day of the Plan Year in which the Participant attains age
thirty-five (35) and ends on the date of the Participant’s death.  If a Participant separates from employment
prior to the first day of the Plan Year in which age thirty-five (35) is attained,
the Election Period shall begin on the date of separation from employment with
respect to his account balances as of the date of separation.

 

(2)           “Earliest Retirement Age” means the earliest
date on which, under the Plan, the Participant could elect to receive benefits
under the Plan.

 

(3)           “Pre Age Thirty-Five (35) Waiver” means the
special Qualified Election that a Participant who will not attain age
thirty-five (35) as of the end of the current Plan Year can make to waive the
Qualified Pre-Retirement Survivor Annuity for the period beginning on the date
of such election and ending on the first day of the Plan Year in which the
Participant will attain age thirty-five (35). 
The Administrator shall provide to the Participant a written explanation
of the Qualified Pre-Retirement Survivor Annuity in such terms as are
comparable to the explanation required under Section 6.5(e) below.  Qualified Pre-Retirement Survivor Annuity
coverage shall be reinstated as of the first day of the Plan Year in which the Participant
attains age thirty-five (35), and any new waiver thereafter shall be subject to
the full requirements of this Section 6.5.

 

(4)           “Qualified Election” means a waiver of a
Qualified Annuity or a Qualified Pre-Retirement Survivor Annuity by a married
Participant (or, if deceased, by his spouse). 
Any waiver of a Qualified Annuity or a Qualified Pre-Retirement Survivor
Annuity by a married Participant or spouse shall not be effective unless: (i)
the 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 Annuity shall not be effective unless the election
designates a form of benefit payment that may not be changed without spousal
consent (or the Spouse expressly permits designations by the Participant
without any further spousal consent).  If
it is

 

49

 

established
to the satisfaction of a Plan representative that there is no Spouse or that
the Spouse cannot be located, the Participant’s 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 irrevocable by that Spouse but shall be effective only with respect to
that Spouse.  A consent that permits
designations by the Participant without any requirement 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 these
rights.  A Participant may revoke a prior
waiver without the consent of his Spouse at any time before the commencement of
benefits.  The number of revocations
shall not be limited.

 

(5)           “Qualified Annuity” means in the case of an
unmarried Participant, an immediate life annuity.  In the case of a married Participant, an immediate
annuity for the life of the Participant with a survivor annuity for the life of
the Participant’s Spouse which is fifty percent (50%) of the amount of the
annuity 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
417 Account balance.

 

(6)           “Qualified Pre-Retirement Survivor Annuity”
means an annuity for life of a Participant’s Surviving Spouse, the payments
under which are equal to the amount of benefits that can be purchased with 50%
of the Participant’s 417 Account balance as of the last day of the Plan Year in
which occurs the Participant’s death.

 

(7)           “Spouse (Surviving Spouse)” means the lawful
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 a spouse or former spouse) to the extent provided under a
qualified domestic relations order described in Section 414(p) of the Code.

 

(c)           Subject to
Section 6.5(f) below, 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 Participant’s 417
Account shall be paid in the form of a Qualified Annuity pursuant to the
purchase of annuity contracts which comply with the terms of this Plan.  The Participant may elect to have the annuity
contract distributed upon attainment of the Earliest Retirement Age under the
Plan.

 

(d)           Subject to Section 6.5(f) below, unless an optional form of benefit has been
selected pursuant to a Qualified Election made within the Election Period, if a
married Participant or married former Participant with a 417 Account dies
before the Annuity Starting Date, then the Vested Benefit in such 417 Account
shall be applied toward the purchase of a Qualified Pre-Retirement Survivor
Annuity contract which

 

50

 

complies
with the terms of this Plan and will provide payments to the Participant’s
Surviving Spouse commencing on the earliest date the deceased Participant could
have elected to receive retirement benefits under the Plan, unless the
Surviving Spouse makes a Qualified Election to waive the Qualified
Pre-Retirement Survivor Annuity or elects to defer distribution as provided in
the Plan.

 

(e)           The following notice requirements shall apply under this Section 6.5:

 

(1)           In the case of a Qualified Annuity, the Plan
Administrator shall, not less than 30 days and no more than 90 days prior to
the Annuity Starting Date, provide each Participant covered by this Article
with a written explanation of: (i) the terms and conditions of a Qualified
Annuity; (ii) a general description of the material features, and an
explanation of the relative values of the optional forms of benefit available
under the Plan; (iii) the Participant’s right to make and the effect of an
election to waive the Qualified Annuity form of benefit; (iv) the rights of a
Participant’s Spouse; and (v) the right to make, and the effect of, a revocation
of a previous election to waive the Qualified Annuity.

 

(2)           The Annuity Starting Date for a distribution
in a form other than a Qualified Annuity may be less than 30 days after receipt
of the written explanation described above if (i) the Participant has been
provided with information that clearly indicates that the Participant has at
least 30 days to consider whether to waive the Qualified Annuity and elect
(with spousal consent, if applicable) to a form of distribution other than a
Qualified Annuity; (ii) the Participant is permitted to revoke any affirmative
distribution election at least until the Annuity Starting Date or, if later, at
any time prior to the expiration of the seven day period that begins the day
after the explanation of the Qualified Annuity is provided to the Participant;
and (iii) the Annuity Starting Date is a date after the date that the written
explanation is provided to the Participant.

 

(3)           In the case of a Qualified Pre-Retirement
Survivor Annuity, the Plan Administrator shall provide each Participant covered
by this Article within the applicable period for the Participant a written
explanation of the Qualified Pre-Retirement Survivor Annuity in such terms and
in such manner as would be comparable to the explanation provided for meeting
the requirements of Section 6.5(e)(1) and (2) above.  The applicable period for the Participant is
the last to end of the following periods: 
(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 after the Participant commences participation; or (iii) a
reasonable period after this Section first applies to the Participant.  Notwithstanding the foregoing, notice must be
provided within a reasonable period after separation from employment in the
case of a Participant who separates from employment before attaining age 35.  For purposes of applying this Section
6.5(e)(3), a reasonable period ending after the enumerated events described
above is the end of the two year period beginning one year prior to the

 

51

 

date
the applicable event occurs, and ending one year after that date.  In the case of a Participant who separates
from employment before the Plan Year in which he attains age 35, 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 the Participant shall be re-determined.

 

(f)            If the present value of a Participant’s
Qualified Annuity or a Qualified Pre-Retirement Survivor Annuity does not
exceed $5,000 at the Annuity Starting Date, this Section 6.5 shall not apply to
the Participant’s 417 Account, and the Plan shall distribute that amount in
accordance with the rules of Sections 6.2 through 6.4 above.  For this purpose, present value shall be
determined under Section 417(e)(3) of the Code. 
Notwithstanding the above, no lump sum distribution shall be made
hereunder once benefits have commenced to be paid under this Section 6.5 unless
the Participant and his Spouse (or the Surviving Spouse, if applicable) so
consent.

 

6.6           ROLLOVER DISTRIBUTIONS

 

(a)           Anything in this Plan to the contrary
notwithstanding, a Distributee may elect at the time and in the manner
prescribed by the Administrator to have all or any portion of his Eligible
Rollover Distribution paid directly to an Eligible Retirement Plan specified by
the Distributee in a Direct Rollover.

 

(b)           For purposes of this Section 6.6 the
following definitions shall apply:

 

(1)           “Direct Rollover’ means a payment by the Plan
to the Eligible Retirement Plan specified by the Distributee of all or a
portion of the Distributee’s Vested Benefit.

 

(2)           “Distributee” means an Employee or former
Employee to whom a distribution is to be, or may be, made.  In addition, an Employee’s or former
Employee’s surviving spouse and an Employee’s or former Employee’s spouse or
former spouse who is an alternate payee under a qualified domestic relations
order, as defined in Section 414(p) of the Code, are Distributees with respect
to the interest of the spouse or former spouse.

 

(3)           “Eligible Retirement Plan” means 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, a qualified trust
described in Section 401(a) of the Code, which accepts the Distributee’s
Eligible Rollover Distribution. 
Additionally, an Eligible Retirement Plan shall mean an annuity contract
described in Section 403(b) of the Code and an eligible plan under Section 457
of the Code which is maintained by a state, political subdivision of a state,
or any agency or instrumentality of a state or political subdivision of a state
that agrees to separately account for amounts transferred to such plan from
this Plan.  The

 

52

 

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 an alternate payee
under a qualified domestic relations order as defined in Section 414(p) of the
Code.

 

(4)           “Eligible Rollover Distribution” is any
distribution of all or any portion of the account balance of the Distributee,
except that an Eligible Rollover Distribution does not include any distribution
that is (i) 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; (ii) required under Section 401(a)(9) of the Code; (iii) not
includable in gross income of the Distributee (determined without regard to the
exclusion for net unrealized appreciation with respect to Employer securities);
or (iv) made in the event of hardship pursuant to Section 6.10 below.  Notwithstanding the foregoing, the portion of
a distribution consisting of after-tax Employee contributions that are not
includible in income shall be an eligible rollover distribution if transferred
to an individual retirement account or annuity described in Code Section 408(a)
or (b) or to a defined contribution plan described in Code Sections 401(a) or
403(a) that agrees to separately account for such amounts, including the
portion that is includible in gross income and the portion that is not
includible in gross income.

 

6.7           DISTRIBUTION FOR MINOR OR INCOMPETENT
BENEFICIARY

 

In
the event a distribution is to be made to a minor or incompetent Beneficiary, then
the Administrator may direct that such distribution be paid to the legal
guardian, or if none in the case of a minor Beneficiary, to a parent of such
Beneficiary or a responsible adult with whom the Beneficiary maintains
residence, or to the custodian for such Beneficiary under the uniform Gift to
Minors Act or Gift to Minors Act, if such is permitted by the laws of the state
in which said Beneficiary resides.  Such
a payment to the legal guardian, custodian or parent of a minor Beneficiary
shall fully discharge the Trustee, Employer, and Plan from further liability on
account thereof.

 

6.8           LOCATION OF PARTICIPANT OR BENEFICIARY
UNKNOWN

 

In
the event that all, or any portion, of the distribution payable to a
Participant or Beneficiary hereunder shall, more than one year after the date
they are eligible to be paid, remain unpaid solely by reason of the inability
of the Administrator, after sending a registered letter, return receipt
requested, to the last known address, and after further diligent effort, to
ascertain the whereabouts of such Participant or Beneficiary, the amounts of
distributable shall be treated as a forfeiture and applied to reduce Employer
matching contributions for the year of forfeiture and succeeding Plan Years
until fully applied.  Notwithstanding the
foregoing, if the value of a Participant’s Vested benefit derived from Employer
and Employee contributions (including accumulated Qualified Voluntary Employee
Contributions) does not exceed $5,000, then the amount

 

53

 

distributable
may, in the sole discretion of the Administrator; either be treated as a
forfeiture and applied to reduce Employer matching contributions for the year
of forfeiture and succeeding Plan Years until fully applied, or if at least
$1,000, be paid directly to an individual retirement account described in Code
Section 408(a) or an individual retirement annuity described in Code Section
408(b) at the time it is determined that the whereabouts of the Participant or
the Beneficiary cannot be ascertained. 
In the event a Participant or Beneficiary is located subsequent to the
forfeiture, such benefit shall be restored, first from forfeitures, if any, and
then from an additional Employer contribution if necessary.  However, regardless of the proceeding, a
benefit which is lost by reason of escheat under applicable state law is not
treated as a forfeiture for purposes of this Section.

 

6.9           PRE-RETIREMENT IN-SERVICE DISTRIBUTION

 

At
such time as a Participant shall have attained the age of 59-1/2 years, the
Administrator, at the written election of the Participant who has not severed
employment with the Employer, shall direct the Trustee to distribute in a lump
sum all or a portion of the amount then credited to the accounts maintained on
behalf of the Participant (excluding any accounts subject to Section 6.5).  No distribution shall be made from the
Participant’s account unless the balance in the Participant’s account to be
distributed has accumulated for at least two years.  In the event that the Administrator makes
such a distribution, the Participant shall continue to be eligible to
participate in the Plan on the same basis as any other Employee.

 

6.10         ADVANCE DISTRIBUTION FOR HARDSHIP

 

The
Administrator, at the election of a Participant, shall direct the Trustee to
distribute to the Participant in any one Plan Year up to the lesser of 100% of
the Vested Participant’s Elective Account and Participant’s Account valued as
of the last Valuation Date or the amount necessary to satisfy the immediate and
heavy financial need of the Participant. 
Any distribution made pursuant to this Section shall be deemed to be
made as of the first day of the Plan Year or, if later, the Valuation Date
immediately preceding the date of distribution, and the Participant’s Elective
Account and Participant’s Account shall be reduced accordingly.  Withdrawal under this Section is deemed to be
on account of an immediate and heavy financial need of the Participant only if
the withdrawal is for:

 

(1)           Medical expenses described in Code Section
213(d) incurred by the Participant, the Participant’s spouse, or any of the
Participant’s dependents (as defined in Code Section 152) or necessary for
these persons to obtain medical care as described in Code Section 213(d);

 

(2)           The costs directly related to the purchase
(excluding mortgage payments) of a principal residence for Participant;

 

54

 

(3)           Payment of tuition, related educational fees,
and room and board expenses for the next 12 months of post-secondary education
for the Participant and the Participant’s spouse, children, or dependents; or

 

(4)           Payments necessary to prevent the eviction of
the Participant from the Participant’s principal residence or foreclosure on
the mortgage on that residence.

 

(b)           No distribution shall be made pursuant to
this Section unless the Administrator, based upon the Participant’s
representation and such other facts as are known to the Administrator,
determines that all of the following conditions are satisfied.

 

(1)           The distribution is not in excess of the
amount of the immediate and heavy financial need of the Participant.  The amount of the immediate and heavy
financial need may include any amounts necessary to pay any federal, state, or
local income taxes or penalties reasonably anticipated to result from the
distribution;

 

(2)           The Participant has obtained all
distributions, other than hardship distributions, and all nontaxable (at the
time of the loan) loans currently available under all plans maintained by the
Employer; and

 

(3)           The Plan, and all other plans maintained by
the Employer, provide that the Participant’s elective deferrals and after-tax
voluntary Employee contributions will be suspended for at least six months
after receipt of the hardship distribution or, the Participant, pursuant to a
legally enforceable agreement, will suspend elective deferrals and after-tax
voluntary Employee contributions to the Plan and all other plans maintained by
the Employer for at least six months after receipt of the hardship
distribution.

 

(c)           Notwithstanding the above, distributions from the Participant’s
Elective Account pursuant to this Section shall be limited, as of the date of
distribution, to the Participant’s Elective Account as of the end of the last
Plan Year ending before July 1, 1989, plus the total Participant’s Deferred
Compensation Contributions after such date, reduced by the amount of any
previous distributions pursuant to this Section 6.10 and Section 6.09.

 

(d)           Any distribution pursuant to this Section shall be made in a lump sum.

 

6.11         QUALIFIED DOMESTIC RELATIONS ORDER
DISTRIBUTION

 

All
rights and benefits, including elections, provided to a Participant in this
Plan shall be subject to the rights afforded to any “alternate payee” under a
“qualified domestic relations order.” 
Furthermore, a distribution to an “alternate payee” shall be permitted
if such distribution is authorized by a “qualified domestic relations order,”
even if the affected Participant has not separated from employment and has not
reached the

 

55

 

“earliest
retirement age” under the Plan.  For the
purposes of this Section 6.11, “alternate payee,” “qualified domestic relations
order” and “earliest retirement age” shall have the meaning set forth under
Code Section 414(p).

 

ARTICLE VII

TRUSTEE

 

7.1           BASIC RESPONSIBILITIES OF THE TRUSTEE

 

(a)           The Trustee shall have the following
categories of responsibilities:

 

(1)           Consistent with the “funding policy and
method” determined by SkyWest, Inc., to invest, manage, and control the Plan
assets subject, however, to the direction of each Participant with respect to
the Participant’s Directed Account, the Employers or an Investment Manager
appointed by the Employer or any agent of the Employers;

 

(2)           At the direction of the Administrator, to pay
benefits required under the Plan to be paid to Participants, or, in the event
of their death, to their Beneficiaries; and

 

(3)           To maintain records of receipts and
disbursements and furnish to the Employers and/or Administrator for each Plan
Year a written annual report pursuant to Section 7.7.

 

(b)           In the event that the Trustee shall be
directed by a Participant (pursuant to the Participant Direction Procedures),
or SkyWest, Inc., or an Investment Manager or other agent appointed by SkyWest,
Inc. with respect to the investment of any or all Plan assets, the Trustee
shall have no liability with respect to the investment of such assets, but
shall be responsible only to execute such investment instructions as so
directed.

 

(1)           The Trustee shall be entitled to rely fully
on the written (or other form acceptable to the Administrator and the Trustee,
including, but not limited to, voice recorded) instructions of a Participant
(pursuant to the Participant Direction Procedures), or SkyWest, Inc., or any
Fiduciary or nonfiduciary agent of SkyWest, Inc., in the discharge of such
duties, and shall not be liable for any loss or other liability, resulting from
such direction (or lack of direction) of the investment of any part of the Plan
assets.

 

(2)           The Trustee may delegate the duty of
executing such instructions to any nonfiduciary agent, which may be an
affiliate of the Trustee or any Plan representative.

 

(3)           The Trustee may refuse to comply with any
direction from the Participant in the event the Trustee, in its sole and
absolute discretion, deems such directions improper by virtue of applicable
law.  The Trustee shall not be

 

56

 

responsible
or liable for any loss or expense which may result from the Trustee’s refusal
or failure to comply with any directions from the Participant.

 

(4)           Any costs and expenses related to compliance
with the Participant’s directions shall be borne by the Participant’s Directed
Account, unless paid by the Employers.

 

(5)           Notwithstanding anything hereinabove to the
contrary, the Trustee shall not invest any portion of a Participant’s Directed
Account in “collectibles” within the meaning of that term as employed in Code
Section 408(m).

 

(c)           If there shall be more than one Trustee, they
shall act by a majority of their number, but may authorize one or more of them
to sign papers on their behalf.

 

7.2           INVESTMENT POWERS AND DUTIES OF THE TRUSTEE

 

(a)           The Trustee shall invest and reinvest the
Trust Fund to keep the Trust Fund invested without distinction between
principal and income and in such securities or property, real or personal,
wherever situated, as the Trustee shall deem advisable, including, but not
limited to, stocks, common or preferred, open-end or closed-end mutual funds,
bonds and other evidences of indebtedness or ownership, and real estate or any
interest therein.  The Trustee shall at
all times in making investments of the Trust Fund consider, among other
factors, the short and long-term financial needs of the Plan on the basis of
information furnished by the Employer. 
In making such investments, the Trustee shall not be restricted to
securities or other property of the character expressly authorized by the
applicable law for trust investments; however, the Trustee shall give due
regard to any limitations imposed by the Code or the Act so that at all times
the Plan may qualify as a qualified profit sharing plan and trust.

 

(b)           The Trustee may employ a bank or trust company
pursuant to the terms of its usual and customary bank agency agreement, under
which the duties of such bank or trust company shall be of a custodial,
clerical and record-keeping nature.

 

7.3           OTHER POWERS OF THE TRUSTEE

 

The
Trustee, in addition to all powers and authorities under common law, statutory
authority, including the Act, and other provisions of the Plan, shall have the
following powers and authorities, to be exercised in the Trustee’s sole
discretion:

 

(a)           To purchase, or subscribe for, any securities
or other property and to retain the same. 
In conjunction with the purchase of securities, margin accounts may be
opened and maintained;

 

(b)           To sell, exchange, convey, transfer, grant
options to purchase, or otherwise dispose of any securities or other property
held by the Trustee, by private contract or at public auction.  No person dealing with the Trustee shall be
bound to see to

 

57

 

the
application of the purchase money or to inquire into the validity, expediency,
or propriety of any such sale or other disposition, with or without
advertisement;

 

(c)           To vote upon any stocks, bonds, or other
securities; to give general or special proxies or powers of attorney with or
without power of substitution; to exercise any conversion privileges,
subscription rights or other options, and to make any payments incidental
thereto; to oppose, or to consent to, or otherwise participate in, corporate
reorganizations or other changes affecting corporate securities, and to
delegate discretionary powers, and to pay any assessments or charges in
connection therewith; and generally to exercise any of the powers of an owner
with respect to stocks, bonds, securities, or other property.  However, the Trustee shall not vote proxies
relating to securities for which it has not been assigned full investment
management responsibilities.  In those
cases where another party has such investment authority or discretion, the
Trustee will deliver all proxies to said party who will then have full
responsibility for voting those proxies;

 

(d)           To cause any securities or other property to
be registered in the Trustee’s own name, in the name of one or more of the
Trustee’s nominees, in a clearing corporation, in a depository, or in book entry
form or 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 Fund;

 

(e)           To borrow or raise money for the purposes of
the Plan in such amount, and upon such terms and conditions, as the Trustee
shall deem advisable; and for any sum so borrowed, to issue a promissory note
as Trustee, and to secure the repayment thereof by pledging all, or any part,
of the Trust Fund; and no person lending money to the Trustee shall be bound to
see to the application of the money lent or to inquire into the validity,
expediency, or propriety of any borrowing;

 

(f)            To keep such portion of the Trust Fund in
cash or cash balances as the Trustee may, from time to time, deem to be in the
best interests of the Plan, without liability for interest thereon;

 

(g)           To accept and retain for such time as the
Trustee may deem advisable any securities or other property received or
acquired as Trustee hereunder, whether or not such securities or other property
would normally be purchased as investments hereunder;

 

(h)           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;

 

(i)            To settle, compromise, or submit to
arbitration any claims, debts, or damages due or owing to or from the Plan, to
commence or defend suits or legal or administrative proceedings, and to
represent the Plan in all suits and legal and administrative proceedings;

 

58

 

(j)            To employ suitable agents and counsel and to
pay their reasonable expenses and compensation, and such agent or counsel may
or may not be agent or counsel for the Employer;

 

(k)
          To apply for and procure from responsible insurance companies, to be
selected by the Administrator, as an investment of the Trust Fund such annuity,
or other Contracts (on the life of any Participant) as the Administrator shall
deem proper; to exercise, at any time or from time to time, whatever rights and
privileges may be granted under such annuity, or other Contracts; to collect,
receive, and settle for the proceeds of all such annuity or other Contracts as
and when entitled to do so under the provisions thereof;

 

(l)            To invest funds of the Trust in time deposits
or savings accounts bearing a reasonable rate of interest or in cash or cash
balances without liability for interest thereon;

 

(m)          To invest in Treasury Bills and other forms
of United States government obligations;

 

(n)           To invest in shares of investment companies
registered under the Investment Company Act of 1940;

 

(o)           To sell, purchase and acquire put or call
options if the options are traded on and purchased through a national
securities exchange registered under the Securities Exchange Act of 1934, as
amended, or, if the options are not traded on a national securities exchange,
are guaranteed by a member firm of the New York Stock Exchange regardless of
whether such options are covered;

 

(p)           To deposit monies in federally insured
savings accounts or certificates of deposit in banks or savings and loan
associations;

 

(q)           To pool all or any of the Trust Fund, from
time to time, with assets belonging to any other qualified employee pension
benefit trust created by the Employer or any Affiliated Employer, and to
commingle such assets and make joint or common investments and carry joint
accounts on behalf of this Plan and Trust and such other trust or trusts,
allocating undivided shares or interests in such investments or accounts or any
pooled assets of the two or more trusts in accordance with their respective
interests;

 

(r)            To appoint a nonfiduciary agent or agents to
assist the Trustee in carrying out any investment instructions of Participants
and of any Investment Manager or Fiduciary, and to compensate such agent(s)
from the assets of the Plan, to the extent not paid by the Employer;

 

(s)           To do all such acts and exercise all such
rights and privileges, although not specifically mentioned herein, as the Trustee
may deem necessary to carry out the purposes of the Plan.

 

59

 

7.4           LOANS TO PARTICIPANTS

 

(a)           The Trustee may, at the Administrator’s
direction, make loans to Participants and Beneficiaries under the following
circumstances: (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 in an amount greater than the amount
made available to other Participants and Beneficiaries; (3) loans shall bear a
reasonable rate of interest; (4) loans shall be adequately secured; and (5)
loans shall provide for periodic repayment over a reasonable period of
time.  Each loan shall constitute a
Participant-directed investment by the borrower’s Participant Directed Account.

 

(b)           No Participant loan shall take into account
the present value of such Participant’s Qualified Voluntary Employee
Contribution Account.

 

(c)           Loans made pursuant to this Section (when added
to the outstanding balance of all other loans made by the Plan to the
Participant) shall, in accordance with a uniform and nondiscriminatory policy
established by the Administrator, be limited to the lesser of:

 

(1)           $50,000 reduced by the highest outstanding
balance of loans from the Plan to the Participant during the one year period
ending on the day before the date on which such loan is made, or

 

(2)           one-half of the present value of the
non-forfeitable accrued benefit of the Participant under the Plan.

 

For
purposes of this limit, all plans of the Employer shall be considered one plan.

 

(d)           Loans shall provide for level amortization
with payments to be made not less frequently than quarterly over a period not
to exceed five years.  However, loans
used to acquire any dwelling unit which, within a reasonable time, is to be
used (determined at the time the loan is made) as a “principal residence” of
the Participant shall provide for periodic repayment over a reasonable period
of time that may exceed five years.  For
this purpose, a “principal residence” has the same meaning as a “principal
residence” under Code Section 1034.  Loan
repayments may be suspended under this Plan as permitted under Code Section
414(u)(4).

 

(e)           Any loans granted or renewed shall be made
pursuant to a Participant loan program. 
Such loan program shall be established in writing by the Administrator
and must include, but need not be limited to, the following:

 

(1)           the identity of the person or positions
authorized to administer the

Participant
loan program;

 

(2)           a procedure for applying for loans;

 

60

 

(3)           the basis on which loans will be approved or
denied;

 

(4)           limitations, if any, on the types and amounts
of loans offered;

 

(5)           the procedure under the program for
determining a reasonable rate of interest;

 

(6)           the types of collateral which may secure a
Participant loan; and

 

(7)           the events constituting default and the steps
that will be taken to

preserve
Plan assets.

 

Such
Participant loan program shall be contained in a separate written document
which, when properly executed, is hereby incorporated by reference and made a
part of the Plan.  Furthermore, such
Participant loan program may be modified or amended in writing from time to time
without the necessity of amending this Section.

 

(f)            Notwithstanding anything in this Plan to the
contrary, if a Participant or Beneficiary defaults on a loan made pursuant to
this Section, then the loan default will be a distributable event to the extent
permitted by the Code and Regulations.

 

7.5           DUTIES OF THE TRUSTEE REGARDING PAYMENTS

 

At
the direction of the Administrator, the Trustee shall, from time to time, in
accordance with the terms of the Plan, make payments out of the Trust
Fund.  The Trustee shall not be
responsible in any way for the application of such payments.

 

7.6           TRUSTEE’S COMPENSATION AND EXPENSES AND TAXES

 

The
Trustee shall be paid such reasonable compensation as set forth in the
Trustee’s fee schedule (if the Trustee has such a schedule) or as agreed upon
in writing by SkyWest, Inc. and the Trustee. 
However, an individual serving as Trustee who already receives full-time
pay from an Employer shall not receive compensation from the Plan. In addition,
the Trustee shall be reimbursed for any reasonable expenses, including
reasonable counsel fees incurred by it as Trustee.  Such compensation and expenses shall be paid
from the Trust Fund unless paid or advanced by the Employers.  All taxes of any kind whatsoever that may be
levied or assessed under existing or future laws upon, or in respect of, the
Trust Fund or the income thereof, shall be paid from the Trust Fund.

 

7.7           ANNUAL REPORT OF THE TRUSTEE

 

(a)           Within a reasonable period of time after the
close of each Plan Year, the Trustee, or its agent, shall furnish to SkyWest,
Inc. and Administrator a written statement

 

61

 

of
account with respect to the Plan Year for which such contribution was made
setting forth:

 

(1)           the net income, or loss, of the Trust Fund;

 

(2)           the gains, or losses, realized by the Trust
Fund upon sales or other disposition of the assets;

 

(3)           the increase, or decrease, in the value of
the Trust Fund;

 

(4)           all payments and distributions made from the
Trust Fund; and

 

(5)           such further information as the Trustee
and/or Administrator deems appropriate.

 

(b)           SkyWest, Inc., promptly upon its receipt of
each such statement of account, shall acknowledge receipt thereof in writing
and advise the Trustee and/or Administrator of its approval or disapproval
thereof.  Failure by SkyWest, Inc. to
disapprove any such statement of account within 90 days after its receipt
thereof shall be deemed an approval thereof. 
The approval by SkyWest, Inc. of any statement of account shall be binding
on SkyWest, Inc. and the Trustee as to all matters contained in the statement
to the same extent as if the account of the Trustee had been settled by
judgment or decree in an action for a judicial settlement of its account in a
court of competent jurisdiction in which the Trustee, SkyWest, Inc. and all
persons having or claiming an interest in the Plan were parties.  However, nothing contained in this Section
shall deprive the Trustee of its right to have its accounts judicially settled
if the Trustee so desires.

 

7.8           AUDIT

 

(a)           If an audit of the Plan’s records shall be
required by the Act and the regulations thereunder for any Plan Year, the
Administrator shall direct the Trustee to engage on behalf of a Participant an
independent qualified public accountant for that purpose.

 

(b)           All auditing and accounting fees shall be an
expense of and may, at the election of the Employers, be paid from the Trust
Fund.

 

7.9           RESIGNATION, REMOVAL AND SUCCESSION OF
TRUSTEE

 

(a)           Unless otherwise agreed to by both the Trustee
and SkyWest, Inc., a Trustee may resign at any time by delivering to SkyWest,
Inc., at least 30 days before its effective date, a written notice of
resignation.

 

62

 

(b)           Unless otherwise agreed to by both the
Trustee and SkyWest, Inc., SkyWest, Inc. may remove a Trustee at any time by
delivering to the Trustee, at least 30 days before its effective date, a
written notice of such Trustee’s removal.

 

(c)           Upon the death, resignation, incapacity, or
removal of any Trustee, a successor may be appointed by SkyWest, Inc.; and such
successor, upon accepting such appointment in writing and delivering same to
SkyWest, Inc., shall, without further act, become vested with all the powers
and responsibilities of the predecessor as if such successor had been
originally named as a Trustee herein. 
Until such a successor is appointed, the remaining Trustee or Trustees
shall have full authority to act under the terms of the Plan.

 

(d)           SkyWest, Inc. may designate one or more
successors prior to the death, resignation, incapacity, or removal of a
Trustee.  In the event a successor is so
designated by SkyWest, Inc. and accepts such designation, the successor shall,
without further act, become vested with all the powers and responsibilities of
the predecessor as if such successor had been originally named as Trustee
herein immediately upon the death, resignation, incapacity, or removal of the
predecessor.

 

(e)           Whenever any Trustee hereunder ceases to
serve as such, the Trustee shall furnish to SkyWest, Inc. and Administrator a
written statement of account with respect to the portion of the Plan Year
during which the individual or entity served as Trustee.  This statement shall be either (1) included
as part of the annual statement of account for the Plan Year required under
Section 7.7, or (2) set forth in a special statement.  Any such special statement of account should
be rendered to SkyWest, Inc. no later than the due date of the annual statement
of account for the Plan Year.  The
procedures set forth in Section 7.7 for the approval by SkyWest, Inc. of annual
statements of account shall apply to any special statement of account rendered
hereunder and approval by SkyWest, Inc. of any such special statement in the
manner provided in Section 7.7 shall have the same effect upon the statement as
SkyWest, Inc.’s approval of an annual statement of account.  No successor to the Trustee shall have any
duty or responsibility to investigate the acts or transactions of any
predecessor who has rendered all statements of account required by Section 7.7
and this subparagraph.

 

7.10         TRANSFER OF INTEREST

 

Notwithstanding
any other provision contained in this Plan, the Trustee at the direction of the
Administrator shall transfer the Vested Benefit, if any, of a Participant to
another trust forming part of a pension, profit sharing or stock bonus plan
maintained by such Participant’s new employer and represented by said employer
in writing as meeting the requirements of Code Section 401(a), provided that
the trust to which such transfers are made permits the transfer to be made.

 

63

 

7.11         TRUSTEE INDEMNIFICATION

 

SkyWest,
Inc. agrees to indemnify and hold harmless the Trustee against any and all
claims, losses, damages, expenses and liabilities the Trustee may incur in the
exercise and performance of the Trustee’s power and duties hereunder, unless
the same are determined to be due to gross negligence or willful misconduct.

 

7.12         EMPLOYER SECURITIES AND REAL PROPERTY

 

The
Trustee shall be empowered to acquire and hold “qualifying employer securities”
and “qualifying employer real property,” as those terms are defined in the
Act.  The Plan is specifically intended
to allow Participants to elect to invest their Participant Directed Accounts in
common stock of SkyWest, Inc.

 

ARTICLE VIII

AMENDMENT, TERMINATION AND MERGERS

 

8.1           AMENDMENT

 

(a)           SkyWest, Inc. shall have the right at any
time to amend this Plan, subject to the limitations of this Section.  However, any amendment which affects the
rights, duties or responsibilities of the Trustee or Administrator may only be
made with the Trustee’s or Administrator’s written consent.  Any such amendment shall become effective as
provided therein upon its execution (including retroactive amendments).  The Trustee shall not be required to execute
any such amendment unless the amendment affects the duties of the Trustee
hereunder.

 

(b)           No amendment to the Plan shall be effective
if it authorizes or permits any part of the Trust Fund (other than such part as
is required to pay taxes and administration expenses) to be used for or
diverted to any purpose other than for the exclusive benefit of the
Participants or their Beneficiaries or estates; or causes any reduction in the
amount credited to the account of any Participant; or causes or permits any
portion of the Trust Fund to revert to or become property of any Employer.

 

(c)           Except as permitted by Regulations (including
Regulation Section 1.411(d)-4) or other IRS guidance, no Plan amendment or
transaction having the effect of a Plan amendment (such as a merger, plan
transfer or similar transaction) shall be effective if it eliminates, reduces
or modifies any “protected benefit” described in Code Section 411(d)(6) and the
Regulations thereunder.

 

8.2           TERMINATION

 

(a)           SkyWest, Inc. shall have the right at any
time to terminate the Plan by delivering to the Trustee and Administrator
written notice of such termination.  Upon
any full or partial termination, all amounts credited to the affected
Participants’ Combined

 

64

 

Accounts
shall remain 100% vested and shall not thereafter be subject to forfeiture, and
all unallocated forfeitures, shall be allocated to the accounts of all active
Participants during the year of termination in proportion to their Compensation
for the year of termination.

 

(b)           Upon the full termination of the Plan,
SkyWest, Inc. shall direct the distribution of the assets of the Trust Fund to
Participants in a manner which is consistent with and satisfies the provisions
of Article VI.  Distributions to a
Participant shall be made in cash or in property allocated to the Participant’s
account or through the purchase of irrevocable nontransferable deferred
commitments from an insurer except, however, for property distributions made
prior to the earlier of (1) the effective date of an amendment limiting
distribution in property to property allocated to the Participant’s account, or
(2) the adoption date of this amendment and restatement, distributions in
property are not limited to property in the Participant’s account.

 

8.3           MERGER, CONSOLIDATION OR TRANSFER OF ASSETS

 

This
Plan and Trust may be merged or consolidated with, or its assets and/or
liabilities may be transferred to any other plan and trust only if the benefits
which would be received by a Participant of this Plan, in the event of a
termination of the Plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation, and such transfer, merger or consolidation does not otherwise
result in the elimination or reduction of any Code Section 411(d)(6) “protected
benefits.”

 

ARTICLE IX

TOP HEAVY

 

9.1           TOP HEAVY PLAN REQUIREMENTS

 

For
any Top Heavy Plan Year, the Plan shall meet the minimum allocation
requirements of Code Section 416(c) pursuant to Section 4.4 of the Plan.

 

9.2           DETERMINATION OF TOP HEAVY STATUS

 

(a)           This Plan shall be a Top Heavy Plan for any
Plan Year in which, as of the Determination Date, (1) the Present Value of
Accrued Benefits of Key Employees and (2) the sum of the Aggregate Accounts of
Key Employees under this Plan and all plans of an Aggregation Group, exceeds
60% of the Present Value of Accrued Benefits and the Aggregate Accounts of all
Key and Non-Key Employees under this Plan and all plans of an Aggregation
Group.  If any Participant is a Non-Key
Employee for any Plan Year, but such Participant was a Key Employee for any
prior Plan Year, such Participant’s Present Value of Accrued Benefit and/or
Aggregate Account balance shall not be taken into account for purposes of
determining whether this Plan is a Top Heavy Plan (or whether any Aggregation Group
which includes this Plan is a Top Heavy Group). 
In addition, if a

 

65

 

Participant
or Former Participant has not performed any services for any Employer
maintaining the Plan at any time during the one year period ending on the
Determination Date, any accrued benefit for such Participant or Former
Participant shall not be taken into account for the purposes of determining
whether this Plan is a Top Heavy Plan.

 

(b)           Aggregate Account: A Participant’s Aggregate
Account as of the Determination Date is the sum of:

 

(1)           the Participant’s Combined Account balance as
of the most recent Valuation Date within a 12-month period ending on the
Determination Date.

 

(2)           an adjustment for any contributions due as of
the Determination Date.  Such adjustment
shall be the amount of any contributions actually made after the Valuation Date
but due on or before the Determination Date, except for the first Plan Year
when such adjustment shall also reflect the amount of any contributions made
after the Determination Date that are allocated as of a date in that first Plan
Year.

 

(3)           any Plan distributions made within the
one-year period ending on the Determination Date.  However, in the case of distributions made
after the Valuation Date and prior to the Determination Date, such
distributions are not included as distributions for top heavy purposes to the
extent that such distributions are already included in the Participant’s
Aggregate Account balance as of the Valuation Date.  Notwithstanding anything herein to the
contrary, all distributions under a terminated plan which if it had not been
terminated would have been required to be included in an Aggregation Group,
will be counted.  Further, distributions
from the Plan (including the cash value of life insurance policies) of a
Participant’s account balance because of death shall be treated as a
distribution for the purposes of this paragraph.

 

(4)           any Employee contributions, whether voluntary
or mandatory. However, amounts attributable to tax deductible qualified
voluntary employee contributions shall not be considered to be a part of the
Participant’s Aggregate Account balance.

 

(5)           with respect to unrelated rollovers and
plan-to-plan transfers (ones which are both initiated by the Employee and made
from a plan maintained by one employer to a plan maintained by another
employer), if this Plan provides the rollovers or plan-to-plan transfers, it
shall always consider such rollovers or plan-to-plan transfers as a
distribution for the purposes of this Section. 
If this Plan is the plan accepting such rollovers or plan-to-plan
transfers, it shall not consider such rollovers or plan-to-plan transfers as
part of the Participant’s Aggregate Account balance.  However, rollovers or plan-to-plan transfers
accepted prior to January 1, 1984 shall be considered as part of the
Participant’s Aggregate Account balance.

 

66

 

(6)           with respect to related rollovers and
plan-to-plan transfers (ones either not initiated by the Employee or made to a
plan maintained by the same employer), if this Plan provides the rollover or
plan-to-plan transfer, it shall not be counted as a distribution for purposes
of this Section.  If this Plan is the
plan accepting such rollover or plan-to-plan transfer, it shall consider such
rollover or plan-to-plan transfer as part of the Participant’s Aggregate
Account balance, irrespective of the date on which such rollover or
plan-to-plan transfer is accepted.

 

For
the purposes of determining whether two employers are to be treated as the same
employer in (5) and (6) above, all employers aggregated under Code Section
414(b), (c), (m) and (o) are treated as the same employer.

 

(c)           “Aggregation Group” has the meaning set forth
in Code Section 416(g)(2) and by the Regulations thereunder.

 

(d)           “Determination Date” means (a) the last day
of the preceding Plan Year, or (b) in the case of the first Plan Year, the last
day of such Plan Year.

 

(e)           Present Value of Accrued Benefit: In the case
of a defined benefit plan, the Present Value of Accrued Benefit for a
Participant other than a Key Employee, shall be as determined using the single
accrual method used for all plans of the Employer and Affiliated Employers, or
if no such single method exists, using a method which results in benefits
accruing not more rapidly than the slowest accrual rate permitted under Code
Section 411(b)(1)(C).  The determination
of the Present Value of Accrued Benefit shall be determined as of the most
recent Valuation Date that falls within or ends with the 12-month period ending
on the Determination Date except as provided in Code Section 416 and the
Regulations thereunder for the first and second plan years of a defined benefit
plan.

 

(f)            “Top Heavy Group” means an Aggregation Group
in which, as of the Determination Date, the sum of:  (1) the Present Value of Accrued Benefits of
Key Employees under all defined benefit plans included in the group, and (2)
the Aggregate Accounts of Key Employees under all defined contribution plans
included in the group, exceeds 60% of a similar sum determined for all
Participants.

 

ARTICLE X

MISCELLANEOUS

 

10.1         PARTICIPANT’S RIGHTS

 

This
Plan shall not be deemed to constitute a contract between any Employer and any
Participant or to be a consideration or an inducement for the employment of any
Participant or Employee.  Nothing
contained in this Plan shall be deemed to give any Participant or Employee the
right to be retained in the service of any Employer or to

 

67

 

interfere
with the right of any Employer to discharge any Participant or Employee at any
time regardless of the effect which such discharge shall have upon the Employee
as a Participant of this Plan.

 

10.2         ALIENATION

 

(a)           Subject to the exceptions provided below, and
as otherwise permitted by the Code and the Act, no benefit which shall be
payable out of the Trust Fund to any person (including a Participant or the
Participant’s Beneficiary) shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any
attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, or
charge the same shall be void; and no such benefit shall in any manner be
liable for, or subject to, the debts, contracts, liabilities, engagements, or
torts of any such person, nor shall it be subject to attachment or legal
process for or against such person, and the same shall not be recognized by the
Trustee, except to such extent as may be required by law.

 

(b)           Subsection (a) shall not apply to the extent
a Participant or Beneficiary is indebted to the Plan, by reason of a loan made
pursuant to Section 7.4.  At the time a
distribution is to be made to or for a Participant’s or Beneficiary’s benefit,
such proportion of the amount to be distributed as shall equal such
indebtedness shall be paid to the Plan, to apply against or discharge such
indebtedness.  Prior to making a payment,
however, the Participant or Beneficiary must be given written notice by the
Administrator that such indebtedness is to be so paid in whole or part from the
Participant’s Combined Account.  If the
Participant or Beneficiary does not agree that the indebtedness is a valid
claim against the Vested Participant’s Combined Account, the Participant or
Beneficiary shall be entitled to a review of the validity of the claim in
accordance with procedures provided in Sections 2.7 and 2.8.

 

(c)           Subsection (a) shall not apply to a
“qualified domestic relations order” defined in Code Section 414(p), and those
other domestic relations orders permitted to be so treated by the Administrator
under the provisions of the Retirement Equity Act of 1984.  The Administrator shall establish a written
procedure to determine the qualified status of domestic relations orders and to
administer distributions under such qualified orders.  Further, to the extent provided under a
“qualified domestic relations order,” a former spouse of a Participant shall be
treated as the spouse or surviving spouse for all purposes under the Plan.

 

(d)           Subsection (a) shall not apply to an offset
to a Participant’s accrued benefit against an amount that the Participant is
ordered or required to pay the Plan with respect to a judgment, order, or
decree issued, or a settlement entered into, on or after August 5, 1997, in
accordance with Code Sections 401(a)(13)(C) and (D).  In a case in which the survivor annuity
requirements of Section 6.5 above and Code Section 401(a)(11) apply with respect
to distributions from the Plan to the Participant, if the Participant has a
spouse at the time at which the offset is to be made:

 

68

 

(1)           either such spouse has consented in writing
to such offset and such consent is witnessed by a notary public or
representative of the Plan (or it is established to the satisfaction of a Plan
representative that such consent may not be obtained by reason of circumstances
described in Code Section 417(a)(2)(B)), or an election to waive the right of
the spouse to either a qualified joint and survivor annuity or a qualified
pre-retirement survivor annuity is in effect in accordance with the
requirements of Code Section 417(a),

 

(2)           such spouse is ordered or required in such
judgment, order, decree or settlement to pay an amount to the Plan in
connection with a violation of fiduciary duties, or

 

(3)           in such judgment, order, decree or
settlement, such spouse retains the right to receive the survivor annuity under
a qualified joint and survivor annuity provided pursuant to Code Section
401(a)(11)(A)(i) and under a qualified pre-retirement survivor annuity provided
pursuant to Code Section 401(a)(11)(A)(ii).

 

10.3         CONSTRUCTION OF PLAN

 

This
Plan and Trust shall be construed and enforced according to the Code, the Act
and the laws of the State of Utah, other than its laws respecting choice of
law, to the extent not pre-empted by the Act.

 

10.4         GENDER AND NUMBER

 

Wherever
any words are used herein in the masculine, feminine or neuter gender, they
shall be construed as though they were also used in another gender in all cases
where they would so apply, and whenever any words are used herein in the
singular or plural form, they shall be construed as though they were also used
in the other form in all cases where they would so apply.

 

10.5         LEGAL ACTION

 

In
the event any claim, suit, or proceeding is brought regarding the Trust and/or
Plan established hereunder to which the Trustee, the Employers or the
Administrator may be a party, and such claim, suit, or proceeding is resolved
in favor of the Trustee, the Employers or the Administrator, they shall be
entitled to be reimbursed from the Trust Fund for any and all costs, attorney’s
fees, and other expenses pertaining thereto incurred by them for which they
shall have become liable.  No action
seeking to recover benefits under the Plan or based on benefit amounts not paid
under the Plan may be brought, filed or commenced later than one year after
such benefits are denied under the Plan’s claims appeal procedures.

 

69

 

10.6         PROHIBITION AGAINST DIVERSION OF FUNDS

 

(a)           Except as provided below and otherwise
specifically permitted by law, it shall be impossible by operation of the Plan
or of the Trust, by termination of either, by power of revocation or amendment,
by the happening of any contingency, by collateral arrangement or by any other
means, for any part of the corpus or income of any Trust Fund maintained
pursuant to the Plan or any funds contributed thereto to be used for, or diverted
to, purposes other than the exclusive benefit of Participants, former
Participants, or their Beneficiaries.

 

(b)           In the event any Employer shall make an
excessive contribution under a mistake of fact pursuant to Act Section
403(c)(2)(A), the Employer may demand repayment of such excessive contribution
at any time within one (1) year following the time of payment and the Trustees
shall return such amount to the Employer within the one (1) year period.  Earnings of the Plan attributable to the
contributions may not be returned to the Employer but any losses attributable
thereto must reduce the amount so returned.

 

(c)           Except for Sections 3.5, 3.6, and 4.1(e), any
contribution by an Employer to the Trust Fund is conditioned upon the
deductibility of the contribution by the Employer under the Code and, to the
extent any such deduction is disallowed, the Employer may, within one (1) year
following the final determination of the disallowance, whether by agreement
with the Internal Revenue Service or by final decision of a competent
jurisdiction, demand repayment of such disallowed contribution and the Trustee
shall return such contribution within one (1) year following the
disallowance.  Earnings of the Plan
attributable to the contribution may not be returned to the Employer, but any
losses attributable thereto must reduce the amount so returned.

 

10.7         RECEIPT AND RELEASE FOR PAYMENTS

 

Any
payment to any Participant, the Participant’s legal representative,
Beneficiary, or to any guardian or committee appointed for such Participant or
Beneficiary in accordance with the provisions of the Plan, shall, to the extent
thereof, be in full satisfaction of all claims hereunder against the Trustee
and the Employers, either of whom may require such Participant, legal representative,
Beneficiary, guardian or committee, as a condition precedent to such payment,
to execute a receipt and release thereof in such form as shall be determined by
the Trustee or Employer.

 

10.8         ACTION BY THE EMPLOYERS

 

Whenever
any Employer under the terms of the Plan is permitted or required to do or
perform any act or matter or thing, it shall be done and performed by its Chief
Executive Officer, Chief Financial Officer or any other person duly authorized
by its legally constituted authority.

 

70

 

10.9         NAMED FIDUCIARIES AND ALLOCATION OF
RESPONSIBILITY

 

The
“named Fiduciaries” of this Plan are (1) the Employers, (2) the Administrator,
(3) the Trustee and (4) any Investment Manager appointed hereunder.  The named Fiduciaries shall have only those
specific powers, duties, responsibilities, and obligations as are specifically
given them under the Plan including, but not limited to, any agreement
allocating or delegating their responsibilities, the terms of which are
incorporated herein by reference.  In
general, the Employers shall have the sole responsibility for making the
contributions provided for under Section 4.1; and SkyWest, Inc. shall have the
authority to appoint and remove the Trustee and the Administrator; to formulate
the Plan’s “funding policy and method”; and to amend or terminate, in whole or
in part, the Plan.  The Administrator
shall have the sole responsibility for the administration of the Plan, including,
but not limited to, the items specified in Article II of the Plan, as the same
may be allocated or delegated thereunder. 
The Administrator shall act as the named Fiduciary responsible for
communicating with the Participant according to the Participant Direction
Procedures.  The Trustee shall have the
sole responsibility of management of the assets held under the Trust, except to
the extent directed pursuant to Article II or with respect to those assets, the
management of which has been assigned to an Investment Manager, who shall be
solely responsible for the management of the assets assigned to it, all as
specifically provided in the Plan.  Each
named Fiduciary may rely upon any such direction, information or action of
another named Fiduciary as being proper under the Plan, and is not required
under the Plan to inquire into the propriety of any such direction, information
or action.  No named Fiduciary shall
guarantee the Trust Fund in any manner against investment loss or depreciation
in asset value.  Any person or group may
serve in more than one Fiduciary capacity.

 

10.10       HEADINGS

 

The
headings and subheadings of this Plan have been inserted for convenience of
reference and are to be ignored in any construction of the provisions hereof.

 

10.11       UNIFORMITY

 

All
provisions of this Plan shall be interpreted and applied in a uniform,
nondiscriminatory manner.  In the event
of any conflict between the terms of this Plan and any Contract purchased
hereunder, the Plan provisions shall control.

 

71

 

IN
WITNESS WHEREOF, this Plan has been executed on the day and year first above
written.

 

	
   

  	
  SKYWEST,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Michael J. Kraupp

  	
   

  
	
   

  	
  Its:

  	
  Vice
  President of Finance and Assistant

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
  Name:
  Michael J. Kraupp

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Michael J. Krapp

  	
   

  
	
   

  	
  Michael
  Kraupp, Trustee

  
	
   

  	
   

  
	
   

  	
  /s/
  Alan Olson

  	
   

  
	
   

  	
  Alan
  Olson, Trustee

  
	
   

  	
   

  
	
   

  	
  /s/
  Ann Olson

  	
   

  
	
   

  	
  Ann
  Olsen, Trustee

  
							

 

CONFIRMATION
OF PRIOR ADOPTION OF PLAN

 

SkyWest
Airlines, Inc. consents to this restatement of the Plan.

 

	
   

  	
  SKYWEST
  AIRLINES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  Michael J. Kraupp

  	
   

  
	
   

  	
  Its:
  

  	
  Vice
  President of Finance and Assistant

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
  Name:
  Michael J. Kraupp

  
	
   

  	
   

  
	
   

  	
  Date:
  June 17, 2004

  

 

72

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