Exhibit (10)(q)* to Report
on Form 10-K for Fiscal
Year Ended June 30, 1996
by Parker-Hannifin Corporation
Parker-Hannifin Corporation Executive Deferral Plan,
as amended as of August 17, 1995
and August 15, 1996
*Numbered in accordance with Item 601 of Regulation S-K.
PARKER-HANNIFIN CORPORATION
EXECUTIVE DEFERRAL PLAN
PARKER-HANNIFIN CORPORATION
EXECUTIVE DEFERRAL PLAN
Parker-Hannifin Corporation, an Ohio corporation (the "Company"),
hereby establishes this Executive Deferral Plan (the "Plan"), effective
October 1, 1994, for the purpose of attracting high quality executives
and promoting in its executives increased efficiency and an interest in
the successful operation of the Company by offering a deferral
opportunity to accumulate capital on favorable economic terms. The
benefits provided under the Plan shall be provided in consideration for
services to be performed after the effective date of the Plan, but prior
to the executive's retirement.
ARTICLE 1
Definitions
1.1 Account shall mean the sum of the Annual Deferral Account
and all LTI Deferral Accounts (vested and unvested).
1.2 Administrator shall mean the Company or, if applicable, the
committee appointed by the Board of Directors of the Company to
administer the Plan pursuant to Article 12 of the Plan.
1.3 Annual Deferral shall mean the amount of Compensation which
the Participant elects to defer for a Plan Year pursuant to Articles 2
and 3 of the Plan.
1.4 Annual Deferral Account shall mean the notional account
established with respect to a Participant's Annual Deferrals for
recordkeeping purposes pursuant to Article 4 of the Plan.
1.5 Beneficiary shall mean the person or persons or entity
designated as such in accordance with Article 13 of the Plan.
1.6 Board shall mean the Board of Directors of the Company.
1.7 Bonuses shall mean amounts paid in cash to the Participant
by the Company in the form of annual and other regular periodic bonuses
before reductions for deferrals under this Plan, the Savings Plan or the
Savings Restoration Plan. "Annual and other regular periodic bonuses"
shall include amounts payable under the Company's Return on Net Assets
Plan (RONA) and the Target Incentive Program, but shall exclude any
payments under any long-term incentive program, any volume incentive or
similar bonus program, and any other extraordinary bonus or incentive
program.
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1.8 Change in Control shall mean any of the following events have
occurred:
(i) any "person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then outstanding
securities eligible to vote for the election of the Board (the "Company
Voting Securities"); provided, however, that the event described in this
paragraph shall not be deemed to be a Change in Control by virtue of any
of the following situations: (A) an acquisition by the Company or any
Subsidiary; (B) an acquisition by any employee benefit plan sponsored or
maintained by the Company or any Subsidiary; (C) an acquisition by any
underwriter temporarily holding securities pursuant to an offering of
such securities; (D) a Non-Control Transaction (as defined in paragraph
(iii)); (E) as pertains to a Participant, any acquisition by the
Participant or any group of persons (within the meaning of Sections
13(d)(3) and 14(d)(2) of the Exchange Act) including the Participant (or
any entity in which the Participant or a group of persons including the
Participant, directly or indirectly, holds a majority of the voting
power of such entity's outstanding voting interests); or (F) the
acquisition of Company Voting Securities from the Company, if a majority
of the Board approves a resolution providing expressly that the
acquisition pursuant to this clause (F) does not constitute a Change in
Control under this paragraph (i);
(ii) individuals who, at the beginning of any period of twenty-
four (24) consecutive months, constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a majority thereof;
provided, that (A) any person becoming a director subsequent to the
beginning of such twenty-four (24) month period, whose election, or
nomination for election, by the Company's shareholders was approved by a
vote of at least two-thirds of the directors comprising the Incumbent
Board who are then on the Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is
named as a nominee for director, without objection to such nomination)
shall be, for purposes of this paragraph (ii), considered as though such
person were a member of the Incumbent Board; provided, however, that no
individual initially elected or nominated as a director of the Company
as a result of an actual or threatened election contest with respect to
directors or any other actual or threatened solicitation of proxies or
consents by or on behalf of any person other than the Board shall be
deemed to be a member of the Incumbent Board;
(iii) the consummation of a merger, consolidation, share
exchange or similar form of corporate reorganization of the Company or
any Subsidiary that requires the approval of the Company's stockholders,
whether for such transaction or the issuance of securities in connection
with the transaction or otherwise (a "Business Combination"), unless (A)
immediately following such Business Combination: (1) more than 50% of
the total voting power of the corporation resulting from such Business
Combination (the "Surviving
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Corporation") or, if applicable, the ultimate parent corporation which
directly or indirectly has beneficial ownership of 100% of the voting
securities eligible to elect directors of the Surviving Corporation
(the "Parent Corporation"), is represented by Company Voting Securities
that were outstanding immediately prior to the Business Combination (or,
if applicable, shares into which such Company Voting Securities were
converted pursuant to such Business Combination), and such voting power
among the holders thereof is in substantially the same proportion as the
voting power of such Company Voting Securities among the holders thereof
immediately prior to the Business Combination, (2) no person (other than
any employee benefit plan sponsored or maintained by the Surviving
Corporation or the Parent Corporation) is or becomes the beneficial owner,
directly or indirectly, of 20% or more of the total voting power of the
outstanding voting securities eligible to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving Corporation),
and (3) at least a majority of the members of the board of directors of the
Parent Corporation (or, if there is no Parent Corporation, the Surviving
Corporation), following the Business Combination, were members of the
Incumbent Board at the time of the Board's approval of the execution of
the initial agreement providing for such Business Combination (a "Non-
Control Transaction") or (B) the Business Combination is effected by
means of the acquisition of Company Voting Securities from the Company,
and a majority of the Board approves a resolution providing expressly
that such Business Combination does not constitute a Change in Control
under this paragraph (iii); or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or the sale or other
disposition of all or substantially all of the assets of the Company and
its Subsidiaries.
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any person acquires beneficial ownership
of more than 20% of the Company Voting Securities as a result of the
acquisition of Company Voting Securities by the Company which, by
reducing the number of Company Voting Securities outstanding, increases
the percentage of shares beneficially owned by such person; provided,
that if a Change in Control would occur as a result of such an
acquisition by the Company (if not for the operation of this sentence),
and after the Company's acquisition such person becomes the beneficial
owner of additional Company Voting Securities that increases the
percentage of outstanding Company Voting Securities beneficially owned
by such person, a Change in Control shall then occur.
Notwithstanding anything in this Plan to the contrary, if the
Participant's employment is terminated prior to a Change in Control, and
the Participant reasonably demonstrates that such termination was at the
request of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control (a "Third Party"),
then for all purposes of this Plan, the date immediately prior to the
date of such termination of employment shall be deemed to be the date of
a Change in Control for such Participant.
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1.9 Compensation shall mean the sum of the Participant's base
salary and anticipated Bonuses for a Plan Year before reductions for
deferrals under this Plan, the Savings Plan, the Savings Restoration
Plan, or the Benefits Plus Program.
1.10 Crediting Rate shall mean any notional gains or losses
equal to those generated as if the Participant's Account balance had
been invested in one or more of the investment portfolios designated as
available by the Administrator, less separate account fees and less
applicable administrative charges determined annually by the
Administrator.
The allocation of a Participant's Account shall be determined by
the Participant among one or more of the available portfolios. The
gains or losses shall be credited based upon the daily unit values for
the portfolio(s) selected by the Participant. The rules and procedures
for allocating the Account balance among the portfolios shall be
determined by the Administrator. Notwithstanding the method of
calculating the Crediting Rate, the Company shall be under no obligation
to purchase any investments designated by the Participant.
1.11 Disability shall mean any long term disability as defined
under the Company's long term disability plan. The Administrator, in
its complete and sole discretion, shall determine a Participant's
Disability. The Administrator may require that the Participant submit
to an examination on an annual basis, at the expense of the Company, by
a competent physician or medical clinic selected by the Administrator to
confirm Disability. On the basis of such medical evidence, the
determination of the Administrator as to whether or not a condition of
Disability exists or continues shall be conclusive.
1.12 Early Retirement Date shall mean age 55 with ten or more
years of employment with the Company; provided, however, that any Early
Retirement prior to age 60 must be with the consent of the Compensation
Committee of the Board.
1.13 Eligible Executive shall mean a key employee of the Company
or any of its subsidiaries who: (a) is designated by the Administrator
as eligible to participate in the Plan (subject to the restriction in
Sections 9.2, 10.3 and 11.2 of the Plan); and (b) qualifies as a member
of the "select group of management or highly compensated employees"
under ERISA.
1.14 ERISA shall mean the Employee Retirement Income Security
Act of 1974, as amended.
1.15 Financial Hardship shall mean an unexpected need for cash
arising from an illness, casualty loss, sudden financial reversal, or
other such unforeseeable occurrence as determined by the Administrator.
Cash needs arising from foreseeable events such as the purchase of a
residence or education expenses for children shall not, alone, be
considered a Financial Hardship.
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1.16 Fixed Crediting Rate shall mean an effective annual yield
equal to ninety percent (90%) of the sixty (60) month rolling average of
the Ten-Year United States Treasury Note as determined by the
Administrator on September 30 of the preceding year. Notwithstanding
the preceding sentence, with respect to the first Plan Year, the Fixed
Crediting Rate shall be determined as of September 30, 1994.
1.17 In-Service Distribution shall mean a distribution elected
by the Participant pursuant to Article 10 of the Plan.
1.18 LTI Payment shall mean the amount that would otherwise be
payable to an Eligible Executive for a Plan Year under any long-term
incentive program of the Company.
1.19 LTI Deferral shall mean the amount of any LTI Payment which
the Participant elects to defer with respect to a Plan Year pursuant to
Articles 2 and 3 of the Plan.
1.20 LTI Deferral Account shall mean the one or more notional
accounts established with respect to a Participant's LTI Deferrals for
recordkeeping purposes pursuant to Article 4 of the Plan.
1.21 Normal Retirement Date shall mean the date on which a
Participant attains age 65.
1.22 Participant shall mean an Eligible Executive who has
elected to participate and has completed a Participation Agreement
pursuant to Article 2 of the Plan.
1.23 Participation Agreement shall mean the Participant's
written election to participate in the Plan.
1.24 Plan Year shall mean the calendar year, except that the
first Plan Year shall be the year commencing October 1, 1994 and ending
December 31, 1994.
1.25 Retirement shall mean a termination of employment following
Normal or Early Retirement Date.
1.26 Salary shall mean the Participant's annual basic rate of
pay from the Company (excluding Bonuses, commissions and other non-
regular forms of compensation) before reductions for deferrals under
this Plan, the Savings Plan or the Savings Restoration Plan.
1.27 Savings Plan shall mean The Parker Retirement Savings Plan
as it currently exists and as it may subsequently be amended.
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1.28 Savings Restoration Plan shall mean the Parker-Hannifin
Corporation Savings Restoration Plan as it currently exists and as it
may subsequently be amended.
1.29 Scheduled Withdrawal shall mean a distribution of all or a
portion of the entire vested amount credited to the Participant's
Account requested by the Participant pursuant to the provisions of
Article 10 of the Plan.
1.30 Subsidiary shall mean any corporation or other entity in
which the Company has a direct or indirect ownership interest of 50% or
more of the total combined voting power of the then outstanding
securities or interests of such corporation or other entity.
1.31 Termination of Employment shall mean the Participant's
employment with the Company ceases for any reason whatsoever, whether
voluntary or involuntary, other than Retirement or death.
1.32 Unscheduled Withdrawal shall mean a distribution of all or
a portion of the entire amount credited to the Participant's Account
requested by the Participant pursuant to the provisions of Article 10 of
the Plan.
1.33 Valuation Date shall mean the end of the month in which the
Retirement, Termination of Employment, or death occurs, except in the
event of an election to delay retirement benefits under Article 5, in
which case the Valuation Date shall mean the November 30 of the year
preceding commencement of benefit payments.
ARTICLE 2
Participation
2.1 Participation Agreement/Deferrals.
(a) An Eligible Executive shall become a Participant in the Plan
on the first day of the Plan Year following appointment as an Eligible
Executive and submission to the Administrator of an Annual Participation
Agreement. To be effective, the Eligible Executive must submit the
Annual Participation Agreement to the Administrator during the
enrollment period designated by the Administrator. In the Annual
Participation Agreement, and subject to the restrictions in Article 3,
the Eligible Executive shall designate the Annual Deferral for the
covered Plan Year.
(b) With respect to those Participants who are eligible for an
LTI Payment, the Administrator shall provide for a separate enrollment
period and separate LTI Participation Agreements each year under which
the Participant may designate any LTI Deferrals for a specified Plan
Year.
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2.2 Continuation of Participation. An Eligible Executive who has
elected to participate in the Plan by making an Annual Deferral or LTI
Deferral shall continue as a Participant in the Plan for purposes of
such Annual Deferral or LTI Deferral even though such executive ceases
to be an Eligible Executive. However, a Participant shall not be
eligible to elect a new Annual Deferral or LTI Deferral unless the
Participant is an Eligible Executive for the Plan Year for which the
election is made.
ARTICLE 3
Executive Deferrals
3.1 Deferral Commitment.
(a) A Participant may elect in the Annual Participation
Agreement to defer an amount equal to a specified dollar amount of
Salary and a specified dollar amount or percentage of Bonuses to be
earned by such Participant during the next Plan Year.
(b) A Participant may elect in the LTI Participation Agreement
to defer an amount equal to a specified dollar amount or a percentage of
LTI Payment that may be payable to the Participant in the next Plan
Year.
(c) Annual Deferrals and LTI Deferrals under this Plan shall be
irrevocable.
3.2 Minimum Annual Deferral.
(a) The Annual Deferral for a Plan Year must equal at least five
thousand dollars ($5,000), from either Salary or Bonuses or a
combination of Salary and Bonuses.
(b) The LTI Deferral for a Plan Year must equal at least five
thousand dollars ($5,000).
(c) Where a Participant elects to defer a specified percentage
of Salary, Bonuses, and/or LTI Payment, the determination of whether the
Annual Deferral or LTI Deferral is at least five thousand dollars
($5,000) shall be made by multiplying the applicable elected percentages
of Salary, Bonuses, and/or LTI Payment to be deferred by the
Participant's anticipated Salary, Bonuses, and/or LTI Payment in the
Plan Year immediately preceding the Plan Year for which the Deferral is
being made. The Administrator may, in its sole discretion, permit
Participants to elect to defer amounts in the form of a percentage based
on anticipated future Salary, Bonuses, and/or LTI Payments.
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3.3 Maximum Deferral Commitment.
(a) The Annual Deferral for any Plan Year may not exceed 20% of
Salary plus 75% of Bonuses; provided, that the Annual Deferral may not
reduce the Participant's income to an amount below the old age,
survivor, and disability insurance wage base under Social Security.
(b) The LTI Deferral for a Plan Year may be 100% of the LTI
Payment.
(c) Notwithstanding the foregoing, the Administrator may reduce
the amount of an Annual Deferral and/or an LTI Deferral to the extent
necessary to insure the Participant will have sufficient earnings from
the Company from which to take any taxes required to be withheld from
the Participant's earnings under federal, state or local law.
3.4 Vesting. Subject to Section 11.4:
(a) The Participant's right to the value of his Annual Deferral
Account, as adjusted for gains and losses, shall be 100% vested at all
times.
(b) The Participant's right to the value of each LTI Deferral
Account, as adjusted for gains and losses, shall be 100% vested as of
the third June 30 following the time the LTI Deferral Account is
established; provided, however, that the Participant shall be fully
vested in all LTI Deferrals as of the time: (1) he reaches age 60; (2)
he retires prior to age 60 with permission of the Compensation Committee
of the Board; (3) he retires due to Disability; (4) he dies; (5) there
is a Change in Control; or (6) the Plan terminates.
ARTICLE 4
Accounts
4.1 Accounts. Solely for recordkeeping purposes, the Company
shall maintain for each Participant one Annual Deferral Account for all
Annual Deferrals, and shall maintain for each Participant a separate LTI
Deferral Account with respect to each LTI Deferral made by the
Participant.
4.2 Timing of Credits -- Pre-Termination. Each Plan Year, the
Company shall credit to the Annual Deferral Account a Participant's
Annual Deferrals at the time the deferrals would otherwise have been
paid to the Participant but for the Annual Deferral election, and shall
credit to a separate LTI Deferral Account a Participant's LTI Deferral
at the time the deferrals would otherwise have been paid to the
Participant but for the LTI Deferral election. The Company shall also
credit gains or losses to the Participant's Account each calendar
quarter, or as of the Valuation Date, using the Crediting Rate(s) in
effect at such time as elected by the Participant.
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4.3 Mid-Year Terminations. If a Participant's Termination of
Employment occurs other than at the end of a Plan Year, the Company
shall credit gains or losses to the Participant's Account from the first
day of such Plan Year to the Valuation Date.
4.4 Statement of Accounts. The Administrator shall provide
periodically to each Participant a statement setting forth the balance
of the Annual Deferral Account and each LTI Deferral Account maintained
for such Participant.
ARTICLE 5
Retirement Benefits
5.1 Amount. Upon Retirement, the Company shall pay to the
Participant a retirement benefit in the form provided in Section 5.2 of
the Plan, based on the balance of the Participant's Account as of the
Valuation Date. If paid as a lump sum, the retirement benefit shall be
equal to such balance. If paid in installments, the installments shall
be paid in amounts that will annually amortize such balance with
earnings and losses credited at the Crediting Rate over the period of
time benefits are to be paid.
5.2 Form of Retirement Benefits. The retirement benefit shall
be paid monthly over a period of one hundred eighty (180) months or
the number of months required to result in a monthly benefit of one
thousand dollars ($1,000), if less. Notwithstanding anything herein to
the contrary, the Participant may elect in the Participation Agreement
to have the retirement benefit paid in a lump sum or in installments
paid monthly over a period of sixty (60) or one hundred twenty (120)
months. Payment shall be made or shall begin as of the first day of the
calendar quarter next following the date sixty (60) days after the
Participant's Retirement unless the Participant elects in the
Participation Agreement for payments to begin on January l of a later
year. However, in all events payments shall commence on or before the
earlier of the date the retired Participant attains age seventy (70) or
the January 1 five years after Retirement. Except as provided under
Section 9.2, Participants may elect an alternative form of payout as
available under this Section 5.2 by written election filed with the
Administrator; provided, however, that if the Participant files the
election less than thirteen (13) months prior to the date of retirement,
the Annual Deferral Account and each LTI Deferral Account shall be
reduced by ten percent (10%).
5.3 Small Benefit Exception. Notwithstanding any of the
foregoing, if the sum of all benefits payable to the Participant is less
than or equal to five thousand dollars ($5,000), the Company may, in its
sole discretion, elect to pay such benefits in a single lump sum.
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ARTICLE 6
Termination Benefits
6.1 Amount. As of the first day of the calendar quarter
beginning at least sixty (60) days after Termination of Employment, the
Company shall pay to the Participant a termination benefit equal to the
balance as of the Valuation Date of the Annual Deferral Account and each
LTI Deferral Account in which he is vested under Section 3.4(b).
6.2 Form of Termination Benefits. The Company shall pay the
termination benefits in a single lump sum; provided, however, that
except following a Change in Control the Company may, in its sole
discretion, elect to pay the termination benefits over a period of three
(3) years in monthly installments, in which event the Company shall
credit interest on the unpaid vested balance of the Account after the
Valuation Date at the Fixed Crediting Rate in effect at the time of
Termination of Employment.
ARTICLE 7
Survivor Benefits
7.1 Pre-Commencement Survivor Benefit. If the Participant dies
prior to the time installment payments have commenced, the Company
shall pay to the Participant's Beneficiary within ninety (90) days after
the Participant's death a benefit equal to the balance of the
Participant's Account as of the Valuation Date.
7.2 Post-Commencement Survivor Benefit. If the Participant dies
after the time installment payments have commenced, the Company shall
pay to the Participant's Beneficiary an amount equal to the remaining
benefits payable to the Participant under the Plan over the same period
such benefits would have been paid to the Participant, in which event
the Company shall credit interest on the unpaid balance of the Account
at the Fixed Crediting Rate in effect at the date of the Participant's
death.
7.3 Small Benefit Payment. Notwithstanding any of the
foregoing, in the event the sum of all benefits payable to the
Beneficiary is less than or equal to five thousand dollars ($5,000), the
Company may, in its sole discretion, elect to pay such benefits in a
single lump sum.
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ARTICLE 8
Disability
If a Participant suffers a Disability, the Company shall pay the
benefit described in Article 5 to the Participant as if the date of the
Participant's Termination of Employment for Disability were the
Participant's Normal Retirement Date.
ARTICLE 9
Change in Control
9.1 Election.
(a) At the time the Participant is completing his initial
Participation Agreement, the Participant may elect that, if a Change in
Control occurs, the Participant (or after the Participant's death the
Participant's Beneficiary) shall receive a lump sum payment of the
balance of the Account within thirty (30) days after the Change of
Control. In the event such a distribution is made, the Participant
shall receive an additional adjustment payment calculated in accordance
with the formula set forth in Exhibit A hereto. Such balance shall be
determined as of the end of the month sixty (60) days prior to the month
in which the Change in Control occurs.
(b) In addition to any other amounts payable hereunder, in the
event it shall be determined that any payment, distribution or
acceleration of vesting of any benefit hereunder would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended, or any successor provision, or any interest or penalties are
incurred by the Participant with respect to such excise tax, then the
Participant shall be entitled to receive an additional "gross-up
payment" calculated as set forth in the change in control severance
agreement in effect between the Company and the Participant as of the
date of the Change in Control; provided, however, that if the
Participant does not have a change in control severance agreement, the
payment under this Section shall be determined in accordance with the
calculation set forth in the most recent change in control severance
agreement entered into by the Company and any executive of the Company;
provided, further, that there shall be no duplication of such additional
payment under this Plan and any change in control severance agreement.
9.2 Benefit Reduction on Withdrawal. If a Participant has not
made the election described in Section 9.1 above and, within thirty (30)
days after a Change of Control, the Participant (or Beneficiary) elects
under Section 10.2 to receive a distribution of the balance of the
Account, the lump sum payment (including the additional adjustment
payment) otherwise provided under Section 9.1(a) shall be reduced by an
amount equal to five percent (5%) of the total balance of the Account
(instead of the ten percent (10%)
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reduction otherwise provided for in Section 10.3). If a Participant
elects such a withdrawal, any on-going Annual Deferral shall cease,
any election of an LTI Deferral that otherwise would be effective
before the first day of the Plan Year beginning one full Plan Year
after such withdrawal shall not be effective, and the Participant
may not again be designated as an Eligible Executive until one entire
Plan Year following the Plan Year in which such withdrawal was made
has elapsed.
ARTICLE 10
Scheduled and Unscheduled Withdrawals
10.1 Payment of Scheduled Withdrawal. No later than the last day
of March of the Plan Year designated in the initial Annual Participation
Agreement for a Scheduled Withdrawal, the Company shall pay to the
Participant, in a lump sum or four approximately equal annual
installments, all or a portion of the vested balance in the Participant'
s Account.
10.2 Election. A Participant (or Beneficiary if the Participant
is deceased) may request an Unscheduled Withdrawal of all or any portion
of the vested balance credited to the Participant's Account, which shall
be paid in a single lump sum; provided, however, (i) that the minimum
withdrawal shall be twenty-five percent (25%) of the vested Account
balance, and (ii) that an election to withdraw seventy-five percent
(75%) or more of the vested Account balance shall be deemed to be an
election to withdraw the entire vested Account balance.
10.3 Withdrawal Penalty. There shall be a penalty deducted from
the Account prior to an Unscheduled Withdrawal equal to ten percent
(10%) of the Unscheduled Withdrawal, which shall be ratably allocated
among the Participant's Annual Deferral Account and each of his vested
LTI Deferral Accounts. If a Participant elects such a withdrawal, any
on-going Annual Deferral shall cease, any election of an LTI Deferral
that otherwise would be effective before the first day of the Plan Year
beginning one full Plan Year after such withdrawal shall not be
effective, and the Participant may not again be designated as an
Eligible Executive until one entire Plan Year following the Plan Year in
which such withdrawal was made has elapsed.
10.4 Small Benefit Exception. Notwithstanding any of the
foregoing, if the sum of all benefits payable to the Participant or
Beneficiary who has requested the Unscheduled Withdrawal is less than or
equal to five thousand dollars ($5,000), the Company may, in its sole
discretion, elect to pay out the entire vested Account balance (reduced
by the ten percent (10%) penalty) in a single lump sum.
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ARTICLE 11
Conditions Related to Benefits
11.1 Nonassignability. The benefits provided under the Plan may
not be alienated, assigned, transferred, pledged or hypothecated by or
to any person or entity, at any time or any manner whatsoever. These
benefits shall be exempt from the claims of creditors of any Participant
or other claimants and from all orders, decrees, levies, garnishment or
executions against any Participant to the fullest extent allowed by law.
11.2 Financial Hardship Distribution. Upon a finding that the
Participant or the Beneficiary has suffered a Financial Hardship, the
Administrator may in its sole discretion, permit the Participant to
request distribution of a portion or all of his vested benefits under
the Plan in the amount reasonably necessary to alleviate such Financial
Hardship. If a distribution is to be made to a Participant on account of
Financial Hardship, any on-going Annual Deferrals shall cease, any
election of an LTI Deferral that otherwise would be effective before the
first day of the Plan Year beginning one full Plan Year after such
withdrawal shall not be effective, and the Participant may not again be
designated as an Eligible Executive until one entire Plan Year following
the Plan Year in which such withdrawal was made has elapsed.
11.3 No Right to Company Assets. The benefits paid under the
Plan shall be paid from the general funds of the Company, and the
Participant and any Beneficiary shall be no more than unsecured general
creditors of the Company with no special or prior right to any assets of
the Company for payment of any obligations hereunder.
11.4 Protective Provisions. The Participant shall cooperate
with the Company by furnishing any and all information requested by the
Administrator, in order to facilitate the payment of benefits hereunder,
taking such physical examinations as the Administrator may deem
necessary and taking such other actions as may be requested by the
Administrator. If the Participant refuses to cooperate, the Company
shall have no further obligation to the Participant under the Plan. In
the event of a Participant's suicide during the first two (2) years of
participation in the Plan, or if the Participant makes any material
misstatement of information or nondisclosure of medical history, then no
benefits shall be payable to the Participant or the Participant's
Beneficiary or estate under the Plan beyond the sum of the Participant's
Annual Deferrals and LTI Deferrals.
11.5 Withholding. The Participant or the Beneficiary shall make
appropriate arrangements with the Company for satisfaction of any
federal, state or local income tax withholding requirements and Social
Security or other employee tax requirements applicable to the payment of
benefits under the Plan. If no other arrangements are made, the Company
may provide, at its discretion, for such withholding and tax payments as
may be required.
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ARTICLE 12
Administration of Plan
The Company shall administer the Plan, provided, however, that the
Company may elect by action of its Board of Directors to appoint a
committee of three (3) or more individuals to administer the Plan. All
references to the Administrator herein shall refer to the Company or, if
such committee has been appointed, the committee.
The Administrator shall administer the Plan and interpret,
construe and apply its provisions in accordance with its terms. The
Administrator shall further establish, adopt or revise such rules and
regulations as it may deem necessary or advisable for the administration
of the Plan. All decisions of the Administrator shall be final and
binding. The individuals serving on the committee shall, except as
prohibited by law, be indemnified and held harmless by the Company from
any and all liabilities, costs, and expenses (including legal fees), to
the extent not covered by liability insurance arising out of any action
taken by any member of the committee with respect to the Plan, unless
such liability arises from the individual's own gross negligence or
willful misconduct.
ARTICLE 13
Beneficiary Designation
The Participant shall have the right, at any time, to designate
any person or persons as Beneficiary (both primary and contingent) to
whom payment under the Plan shall be made in the event of the
Participant's death. The Beneficiary designation shall be effective
when it is submitted in writing to the Administrator during the
Participant's lifetime on a form prescribed by the Administrator.
The submission of a new Beneficiary designation shall cancel all
prior Beneficiary designations. Any finalized divorce or marriage of a
Participant subsequent to the date of a Beneficiary designation shall
revoke such designation, unless in the case of divorce the previous
spouse was not designated as Beneficiary and unless in the case of
marriage the Participant's new spouse has previously been designated as
Beneficiary. The spouse of a married Participant shall consent to any
designation of a Beneficiary other than the spouse, and the spouse's
consent shall be witnessed by a notary public.
If a Participant fails to designate a Beneficiary as provided
above, or if the Beneficiary designation is revoked by marriage,
divorce, or otherwise without execution of a new designation, or if
every person designated as Beneficiary predeceases the Participant or
dies prior to complete distribution of the Participant's benefits, then
the Administrator shall direct the distribution of such benefits to the
Participant's estate.
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ARTICLE 14
Amendment and Termination of Plan
14.1 Amendment of Plan. Except as provided in Section 14.3, the
Company may at any time amend the Plan in whole or in part, provided,
however, that such amendment; (a) shall not decrease the balance of the
Participant's Account at the time of such amendment; and (b) shall not
retroactively decrease the applicable Crediting Rate of the Plan prior
to the time of such amendment. The Company may amend the Crediting Rate
or Fixed Crediting Rate of the Plan prospectively, in which case, the
Company shall notify the Participant of such amendment in writing within
thirty (30) days after such amendment.
14.2 Termination of Plan. Except as provided in Section 14.3,
the Company may at any time terminate the Plan. If the Company
terminates the Plan, the date of such termination shall be treated as
the date of Retirement or Termination of Employment for the purpose of
calculating Plan benefits, and the Company shall pay to the Participant
the benefits the Participant is entitled to receive under the Plan in
monthly installments over a thirty-six (36) month period. Interest at
the Fixed Crediting Rate will be credited to the Participant's Account
prospectively commencing as of the date of the Plan's termination and
continuing until distribution under this Section is completed.
14.3 Amendment or Termination After Change in Control.
Notwithstanding the foregoing, the Company shall not amend or terminate
the Plan without the prior written consent of affected Participants for
a period of two calendar years following a Change in Control and shall
not thereafter amend or terminate the Plan in any manner which affects
any Participant (or Beneficiary of a deceased Participant) who commences
receiving payment of benefits under the Plan prior to the end of such
two year period following a Change in Control.
14.4 Company Action. Except as provided in Section 14.3 or
14.5, the Company's power to amend or terminate the Plan shall be
exercisable by the Company's Board of Directors or by the committee or
individual authorized by the Company's Board of Directors to exercise
such powers.
14.5 Constructive Receipt Termination. In the event the
Administrator determines that amounts deferred under the Plan have been
constructively received by Participants and must be recognized as income
for federal income tax purposes, the Plan shall terminate and
distributions shall be made to Participants in accordance with the
Provisions of Section 14.2 or as may be determined by the Administrator.
The determination of the Administrator under this Section shall be
binding and conclusive.
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ARTICLE 15
Miscellaneous
15.1 Successors of the Company. The rights and obligations of
the Company under the Plan shall inure to the benefit of, and shall be
binding upon, the successors and assigns of the Company.
15.2 ERISA Plan. The Plan is intended to be an unfunded plan
maintained primarily to provide deferred compensation benefits for "a
select group of management or highly compensated employees" within the
meaning of Sections 201, 301 and 401 of ERISA and therefore to be exempt
from Parts 2, 3 and 4 of Title I of ERISA.
15.3 Trust. The Company shall be responsible for the payment of
all benefits under the Plan. At its discretion, the Company may
establish one or more grantor trusts for the purpose of providing for
payment of benefits under the Plan. Such trust or trusts may be
irrevocable, but the assets thereof shall be subject to the claims of
the Company's creditors. Benefits paid to the Participant from any such
trust shall be considered paid by the Company for purposes of meeting
the obligations of the Company under the Plan.
15.4 Employment Not Guaranteed. Nothing contained in the Plan
nor any action taken hereunder shall be construed as a contract of
employment or as giving any Participant any right to continued
employment with the Company.
15.5 Gender, Singular and Plural. All pronouns and variations
thereof shall be deemed to refer to the masculine, feminine, or neuter,
as the identity of the person or persons may require. As the context
may require, the singular may be read as the plural and the plural as
the singular.
15.6 Captions. The captions of the articles and sections of the
Plan are for convenience only and shall not control or affect the
meaning or construction of any of its provisions.
15.7 Validity. If any provision of the Plan is held invalid,
void or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provisions of the Plan.
15.8 Waiver of Breach. The waiver by the Company of any breach
of any provision of the Plan by the Participant shall not operate or be
construed as a waiver of any subsequent breach by the Participant.
15.9 Applicable Law. The Plan shall be governed and construed
in accordance with the laws of Ohio except where the laws of Ohio are
preempted by ERISA.
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15.10 Notice. Any notice or filing required or permitted to be
given to the Company under the Plan shall be sufficient if in writing
and hand-delivered, or sent by first class mail to the principal office
of the Company, directed to the attention of the Administrator. Such
notice shall be deemed given as of the date of delivery, or, if delivery
is made by mail, as of the date shown on the postmark.
ARTICLE 16
Claims and Review Procedures
16.1 Claims Procedure. The Company shall notify a Participant
in writing, within ninety (90) days after his or her written application
for benefits, of his or her eligibility or noneligibility for benefits
under the Plan. If the Company determines that a Participant is not
eligible for benefits or full benefits, the notice shall set forth: (a)
the specific reasons for such denial; (b) a specific reference to the
provisions of the Plan on which the denial is based; (c) a description
of any additional information or material necessary for the claimant to
perfect his or her claim, and a description of why it is needed; and (d)
an explanation of the Plan's claims review procedure and other
appropriate information as to the steps to be taken if the Participant
wishes to have the claim reviewed. If the Company determines that there
are special circumstances requiring additional time to make a decision,
the Company shall notify the Participant of the special circumstances
and the date by which a decision is expected to be made, and may extend
the time for up to an additional ninety-day period.
16.2 Review Procedure. If a Participant is determined by the
Company not to be eligible for benefits, or if the Participant believes
that he or she is entitled to greater or different benefits, the
Participant shall have the opportunity to have such claim reviewed by
the Company by filing a petition for review with the Company within
sixty (60) days after receipt of the notice issued by the Company. Said
petition shall state the specific reasons which the Participant believes
entitle him or her to benefits or to greater or different benefits.
Within sixty (60) days after receipt by the Company of the petition, the
Company shall afford the Participant (and counsel, if any) an
opportunity to present his or her position to the Company orally or in
writing, and the Participant (or counsel) shall have the right to review
the pertinent documents. The Company shall notify the Participant of
its decision in writing within the sixty-day period, stating
specifically the basis of its decision, written in a manner calculated
to be understood by the Participant and the specific provisions of the
Plan on which the decision is based. If, because of the need for a
hearing, the sixty-day period is not sufficient, the decision may be
deferred for up to another sixty-day period at the election of the
Company, but notice of this deferral shall be given to the Participant.
In the event of the death of the Participant, the same procedures shall
apply to the Participant's beneficiaries.
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EXHIBIT A
The purpose of the adjustment payment to be added to the distribution
made pursuant to Section 9.1(a) (the "Make Whole Amount") is to offset
the Participant's inability to defer until retirement or later the
payment of taxes on the amounts deferred and the earnings and interest
that would have otherwise accrued between the date of the Change in
Control and the date on which the Participant elected to commence
receipt of his Account (the "Commencement Date") under the Plan.
The Make Whole Amount shall be calculated as follows:
1. The Participant's Account balance under the Plan as of the date of
the Change in Control (the "EDP Amount") will be projected forward
to the Commencement Date at an assumed tax-deferred annual
earnings rate equal to the Moody's Seasoned Baa Corporate Bond
Yield Average for the last twelve full calendar months prior to the
Change in Control (the "Moody's Rate") (such projected amount shall
be known as the "Projected Balance"). The Projected Balance will
then be converted into annual installment benefit payments based
upon the Participant's elected form of retirement payments under
the Plan, assuming continued tax-deferred earnings on the
undistributed balance at the Moody's Rate (the "Projected Annual
Payouts"). The Projected Annual Payouts will then be reduced for
assumed income taxes at the highest applicable federal, state and
local marginal rates of taxation in effect in the Participant's
taxing jurisdiction(s) for the calendar year in which the Make
Whole Amount is paid (the "Tax Rate"). The after-tax Projected
Annual Payouts will be known as the "After-Tax Projected
Benefits".
2. The term "Made Whole Amount", as used herein, shall mean the EDP
Amount plus the Make Whole Amount. The Make Whole Amount is the
amount which, when added to the EDP Amount, will yield After-Tax
Annuity Benefits (as hereinafter defined) equal to the After-Tax
Projected Benefits, based on the following assumptions:
a. The Made Whole Amount will be taxed at the Tax Rate upon
receipt by the Participant.
b. The after-tax Made Whole Amount will be deemed to be invested
by the Participant in a tax-deferred annuity that is structured to
make payments beginning on the Commencement Date in the same
form as elected by the Participant under the Plan (the
"Annuity").
c. The Annuity will accrue interest at the Moody's Rate, less
80 basis points (i.e., 0.80%).
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d. Annual Annuity payments will be taxed at the Tax Rate (after
taking into account the annuity exclusion ratio), yielding
"After-Tax Annuity Benefits".
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