Exhibit 10.236
U.S. TRUST CORPORATION 401(k) PLAN
As Amended and Restated
Effective as of
January 1, 2001
Table of Contents
Page
ARTICLE 1 DEFINITIONS........................................................2
ARTICLE 2 MEMBERSHIP........................................................11
ARTICLE 3 MATCHING CONTRIBUTIONS AND ESOP DIVIDENDS.........................15
ARTICLE 4 401(k) CONTRIBUTIONS..............................................18
ARTICLE 5 ROLLOVERS.........................................................20
ARTICLE 6 LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS......................22
ARTICLE 7 INVESTMENT OF ACCOUNTS............................................37
ARTICLE 8 NATURE OF INTEREST................................................46
ARTICLE 9 ACCOUNTS..........................................................47
ARTICLE 10 WITHDRAWALS AND LOANS.............................................51
ARTICLE 11 RETIREMENT........................................................60
ARTICLE 12 DISTRIBUTION OF BENEFITS..........................................61
ARTICLE 13 CERTAIN RIGHTS AND LIMITATIONS....................................70
ARTICLE 14 ADMINISTRATION OF THE PLAN........................................74
ARTICLE 15 MANAGEMENT OF THE TRUST FUND......................................86
ARTICLE 16 OTHER PARTICIPATING COMPANIES.....................................87
ARTICLE 17 AMENDMENT AND TERMINATION.........................................90
ARTICLE 18 CONSTRUCTION......................................................93
ARTICLE 19 TOP HEAVY PROVISIONS..............................................93
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U.S. Trust Corporation 401(k) PLAN
FOREWORD
This document sets forth the U.S. Trust Corporation 401(k) Plan (formerly
known as the "401(k) Plan and ESOP of United States Trust Company of New York
and Affiliated Companies") (the "Plan"), as amended and restated effective as of
January 1, 2001, except as otherwise provided herein. The Plan has been amended
and restated: (a) to reflect the merger of the Corporation with Charles Schwab
(as defined in Section 1.8 hereof), (b) to reflect the transfer of the
sponsorship of the Plan and settlor functions thereunder from United States
Trust Company of New York ("U.S. Trust"), as plan sponsor (within the meaning of
Section 3(16)(B) of ERISA), to U.S. Trust Corporation, effective as of January
1, 2001, and (c) in certain other respects.
The Plan has a "401(k)" feature and an "ESOP" feature. The 401(k) portion
of the Plan is intended to qualify as a cash or deferred profit-sharing plan
under sections 401(a) and 401(k) of the Code. Pursuant to section 401(a)(27) of
the Code, this portion of the Plan is intended to constitute a profit-sharing
plan under which contributions may be made by a Participating Company, in its
discretion, whether or not such Company has current or accumulated profits.
The ESOP portion of the Plan is intended to qualify as a stock bonus plan,
as defined in section 1.401-1(b)(iii) of the Regulations, and an employee stock
ownership plan, as defined in section 4975(e)(7) of the Code, and is designed to
invest primarily in Common Shares which meet the requirements for "qualifying
employer securities" under sections 4975(e)(8) and 409(l) of the Code. The ESOP
portion of the Plan consists of the portion of the Accounts of Members which are
comprised of ESOP Stock and Capital Stock. All rights and protections herein
provided with respect to Members' interests in the ESOP portion of the Plan
shall be non-terminable and shall continue under the terms of this Plan even in
the event the ESOP portion of the Plan ceases to be an employee stock ownership
plan within the meaning of section 4975(e)(7) of the Code.
The rights of any person who terminated employment, or who retired on or
before the effective date of a particular provision of the Plan, including
eligibility for benefits and the time and form in which benefits, if any, will
be paid, shall be determined solely under the terms of the Plan as in effect on
the date of the person's termination of employment or retirement, unless such
person is thereafter reemployed and again becomes a Member.
ARTICLE 1
DEFINITIONS
As used in this Plan, the following terms shall have the meanings described
in this Article 1:
1.1 Account means the separate account or accounts maintained for a Member
pursuant to Article 9.
1.2 Affiliated Company means the Company, any corporation which is included
in a controlled group of corporations (within the meaning of section 414(b) of
the Code) which includes the Company, any trade or business (whether or not
incorporated) which is under common control with the Company (within the meaning
of section 414(c) of the Code), any organization included in the same affiliated
service group (within the meaning of section 414(m) of the Code) as the Company,
and any other entity required to be aggregated with the Company pursuant to the
Regulations under section 414(o) of the Code. In identifying Affiliated
Companies for purposes of applying the provisions of Section 6.5 with respect to
the limitations on contributions, section 415(h) of the Code shall apply in
conjunction with the preceding sentence. Notwithstanding the foregoing, solely
for purposes of determining eligibility to become a Participating Company, the
definition in sections 414(b) and (c) of the Code shall be modified by
substituting the phrase "more than 50 percent" for the phrase "at least 80
percent" each place it appears in section 1563(a)(1).
1.3 Annual Incentive Plans means the Executive Incentive Plan of U.S. Trust
Corporation (the "EIP") and the Annual Incentive Plan of United States Trust
Company of New York and Affiliated Companies (the "AIP") and similar incentive
bonus plan arrangements (other than arrangements in which a bonus is
guaranteed).
1.4 Beneficiary means any person who, as determined under the rules of
Section 12.6, is entitled to receive a payment with respect to the interest of a
Member or Former Member upon the death of such Member or Former Member.
1.5 Board of Directors means the Board of Directors of the Company and such
committee thereof as it may from time to time appoint to act on its behalf with
respect to the Plan.
1.6 Break in Service means any Computation Period during which an Employee
is credited with not more than 500 Hours of Service.
1.7 Capital Stock means Common Shares that are held in the Schwab Stock
Fund.
1.8 Charles Schwab means The Charles Schwab Corporation and any corporation
which is included in a controlled group of corporations (within the meaning of
section 414(b) of the Code) which includes The Charles Schwab Corporation, any
trade or business (whether or not incorporated) which is under common control
with The Charles Schwab Corporation (within the meaning of section 414(c) of the
Code), any organization included in the same affiliated service group (within
the meaning of section 414(m) of the Code) as The Charles Schwab Corporation,
and any other entity required to be aggregated with The Charles Schwab
Corporation pursuant to the Regulations under section 414(o) of the Code.
1.9 Code means the Internal Revenue Code of 1986, as amended from time to
time.
1.10 Committee means the Administrative Committee appointed under Section
14.1 of the Plan
1.11 Common Shares means the common shares ($0.01 par value) of The Charles
Schwab Corporation.
1.12 Company means U.S. Trust Corporation, its successors and assigns.
1.13 Compensation means (a) for each Plan Year, the regular basic cash
salary, before taking into account any 401(k) Contributions, any salary
reduction contributions to a "cafeteria plan" within the meaning of section
125(d) of the Code or any elective amounts that are not includable in the gross
income of the Employee by reason of section 132(f)(4) of the Code and before
deductions for taxes or other items withheld, paid to an Employee for personal
services rendered to one or more Participating Companies for only such period in
a Plan Year during which the Employee was a Member in the Plan, exclusive of pay
for overtime, special pay, pay in the form of commissions and bonuses; and (b)
for any pay period within a Plan Year, the portion of a Member's Compensation
for the Plan Year, as determined under clause (a), that is paid to the Member in
such pay period.
The amount of Compensation taken into account under the Plan for any Plan
Year shall not exceed the Compensation Limit in effect for such Plan Year.
1.14 Compensation Limit means, for each Plan Year, the limitation on the
amount of compensation that may be taken into account under the Plan for any
Employee under section 401(a)(17) of the Code in effect for such Plan Year.
1.15 Computation Period means the 12-consecutive month period commencing
with the date on which a person first became an Employee and each successive
12-consecutive month period commencing on the anniversary thereof. With respect
to a person who suffers a Break in Service, the Computation Period shall be the
12-consecutive month period commencing with the date upon which he last became
an Employee and each successive 12-consecutive month period commencing on the
anniversary thereof.
1.16 Direct Rollover means a direct payment of a distribution by the Plan
to an Eligible Retirement Plan or to the Plan from an Eligible Retirement Plan
made in accordance with section 401(a)(31) of the Code and the Treasury
Regulations and the rulings and notices issued by the Internal Revenue Service
thereunder, and made in such manner as prescribed by the Committee.
1.17 Eligible Rollover Distribution means any distribution of all or any
portion of the balance to the credit of the Payee, except that an Eligible
Rollover Distribution does not include: any hardship distribution described in
Code section 401(k)(2)(B)(i)(IV); any distribution that is one of a series of
substantially equal periodic payments (not less frequently than annually) made
for the life (or life expectancy) of the Payee or the joint lives (or joint life
expectancies) of the Payee and the Payee's Designated Beneficiary, or for a
specified period of ten years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the Code; and the portion of
any distribution that is not includible in gross income (determined without
regard to the exclusion for net unrealized appreciation with respect to employer
securities).
1.18 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, or a qualified plan described in section 401(a) of the Code.
In the case of an Eligible Rollover Distribution to a surviving Spouse, an
Eligible Retirement Plan is an individual retirement account or individual
retirement annuity.
1.19 Employee means any person who is employed by the Company or an
Affiliated Company as a common-law employee; provided, however, that the term
"Employee" shall not include any person (a) who is treated as a "leased
employee" of any Affiliated Company under section 414(n)(2) of the Code, (b) who
is covered under a collective bargaining agreement which does not provide for
coverage under the Plan, if retirement benefits have been the subject of good
faith bargaining, or (c) who is a non-resident alien.
1.20 ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.21 ESOP Stock means Common Shares that are held in the ESOP Stock Fund.
No shares of ESOP Stock acquired with the proceeds of an Exempt Loan may be
subject to a put, call or other option, or to a buy-sell or similar arrangement,
while held by or distributed from the Plan. Except as provided in Regulations,
such rights and protections shall be non-terminable.
1.22 Former Member means any person who retains an interest in the Trust
Fund after he has ceased to be a Member.
1.23 401(k) Contribution means the contribution made to the Plan on behalf
of a Member pursuant to his election under Section 4.1 or 4.2.
1.24 401(k) Contribution Account means the portion of the Member's Account
to which 401(k) Contributions are allocated.
1.25 Highly Compensated Member shall mean, for any Plan Year, any person
who is a Member at any time during such Plan Year:
(a) and who, during such Plan Year or the immediately preceding Plan Year
was a five-percent owner, as defined in section 416(i)(1)(B)(i) of the Code; or
(b) received 414(q) Compensation, as hereinafter defined, in the
immediately preceding Plan Year in excess of $80,000, as adjusted for such year
under section 415(d) of the Code.
For purposes of this Section, "414(q) Compensation" shall mean compensation as
defined in Section 6.5(a).
1.26 Hour of Service, with respect to any Computation Period, shall mean
the following:
(a) Each hour for which an Employee is paid, or entitled to payment, for
the performance of duties for an Affiliated Company;
(b) Each hour for which an Employee is paid, or entitled to payment,
directly or indirectly (through an insurer, trust fund or otherwise) by an
Affiliated Company for a period of time during which no duties are performed
(irrespective of whether he has ceased to be an Employee) on account of
vacation, holiday, illness, incapacity, disability, layoff, or jury duty. It is
provided, however, that except as otherwise required by law, (1) no more than
501 hours shall be credited under this subsection (b) for any single continuous
period, (2) no such hours shall be credited under this subsection (b) if such
payment is made under a plan maintained solely for the purpose of complying with
the applicable worker's compensation, disability insurance or unemployment
compensation laws, and (3) no such hours shall be credited under this subsection
(b) for any payment which solely reimburses an Employee for medical or medically
related expenses incurred by the Employee;
(c) Each hour for which back pay, irrespective of mitigation of damages, is
awarded or agreed to by an Affiliated Company, exclusive of hours previously
credited under subsection (a) or (b), immediately above. No more than 501 hours
shall be credited under this subsection (c) for any single continuous period;
(d) The number of Hours of Service to be credited under subsections (a),
(b) and (c) above, and the periods to which Hours of Service are to be credited
under subsections (a), (b) and (c) above, shall be determined under the rules
set forth in section 2530.200b-2(b) and (c) of the Regulations issued by the
U.S. Department of Labor, except that each Employee shall be credited with 190
Hours of Service for each calendar month during which such Employee is credited
with at least one Hour of Service.
(e) In the case of any Employee who incurs any Leave (whether paid or
unpaid), including a maternity or paternity absence described in section
411(a)(6)(E)(i) of the Code and any Leave which is subject to the requirements
of the Family and Medical Leave Act of 1993, the Employee shall be credited, for
the period during which he is on such Leave, with the number of Hours of Service
with which he would normally have been credited for such period under the Plan
but for such Leave, as determined by the Committee.
1.27 Investment Committee means the Retirement and 401(k)/ESOP Investment
Committee appointed under Section 14.4.
1.28 Investment Fund means any separate investment fund maintained within
the Trust Fund pursuant to Section 7.1 or 7.2.
1.29 Leave means any period during which a person is an Employee but is
absent from active employment pursuant to an authorized leave of absence,
approved by an Affiliated Company on a nondiscriminatory basis under rules
uniformly applicable to all Employees similarly situated, for a period not to
exceed five years.
1.30 Matching Contribution means a Matching Contribution made to the Plan
pursuant to Article 3.
1.31 Matching Contributions Account means the portion of a Member's Account
to which Matching Contributions are allocated.
1.32 Member means any person included in the membership of the Plan
pursuant to Article 2.
1.33 Participating Company means the Company and any other Affiliated
Company participating in this Plan pursuant to Article 16 until such time as
such Affiliated Company ceases to participate in the Plan pursuant to Article
16.
1.34 Payee means any person who is entitled to receive a distribution from
the Plan, and who is a Member or Former Member, the surviving spouse of a Member
or Former Member, or the spouse or former spouse of a Member or Former Member
who is entitled to receive a distribution under the Plan by reason of a
Qualified Domestic Relations Order as defined in Section 13.2.
1.35 Plan means the U.S. Trust Corporation 401(k) Plan, as described herein
and as may hereafter be amended.
1.36 Plan Year means the calendar year.
1.37 Prior Plan means the Employees' Profit-Sharing Plan of United States
Trust Company of New York and Affiliated Companies, as in effect as of December
31, 1991 and any prior date.
1.38 Prior Service means service credited to an Employee under this Plan
for service with an entity that was acquired by or merged with the Company, as
set forth in Appendix B.
1.39 Qualified Member means a Member who has attained age fifty-five (55)
and who has participated in the ESOP portion of the Plan for ten (10) years.
1.40 Regulations means the applicable regulations issued under the Code,
ERISA or other applicable law by the Internal Revenue Service, the Department of
Labor or any other governmental authority and any proposed or temporary
regulations or rules promulgated by such authorities pending the issuance of
such regulations.
1.41 Retirement Plan means the U.S. Trust Corporation Employees' Retirement
Plan (formerly known as the Employees' Retirement Plan of United States Trust
Company of New York and Affiliated Companies).
1.42 Rollover Contributions means Rollover Contributions transferred to the
Plan pursuant to Section 5.1.
1.43 Trustee means United States Trust Company of New York, as trustee, and
any additional or successor trustee or trustees, who may from time to time act
as trustee of the Trust Fund pursuant to Article 15 hereof.
1.44 Trust Fund means the contributions deposited with and held by the
Trustee pursuant to Article 15, any property into which the same or any part
thereof may from time to time be converted, and any appreciation therein and
interest thereon.
1.45 Valuation Date means such daily, monthly, quarterly or annual dates as
the Committee, in its discretion, may designate for determining the fair market
value of the assets comprising any part of the Trust Fund, any Investment Fund,
or any Member's Account.
1.46 Vested means entitled to a benefit under the Plan that cannot be
forfeited due to a subsequent termination of employment.
1.47 Year of Service means any Computation Period during which an Employee
is credited with 1,000 or more Hours of Service.
ARTICLE 2
MEMBERSHIP
2.1 Commencement of Membership.
(a) Each Employee of a Participating Company who was a Member on January 1,
2001, shall continue to be a Member after that date until the termination of his
membership pursuant to Section 2.2 below.
(b) Each other Employee of a Participating Company shall become a Member on
the first day of the month immediately following the date on which:
(1) he receives Compensation from a Participating Company other than a
pension, severance pay, retainer or fee under contract, and
(2) subject to Section 2.1(c), he has completed at least three
consecutive months of employment with a Participating Company (without
regard to the number of Hours of Service such Employee completes during
such three month period), provided that such Employee is employed by a
Participating Company as of such date.
(c) Notwithstanding any provision of the Plan to the contrary, a Member
shall be eligible as of the first day of the month immediately following the
date on which he has completed at least one Year of Service, provided such
Employee is employed by a Participating Company as of such date, solely for
purposes of (i) receiving a Matching Contribution pursuant to Section 3.1 and
(ii) making an election with respect to awards under an Annual Incentive Plan
pursuant to Section 4.2.
(d) Notwithstanding any other provision of the Plan to the contrary, no
individual who provides services to a Participating Company pursuant to a
contract, arrangement or understanding with either such individual himself or
with an agency or leasing organization that treats the individual as either an
independent contractor or an employee of such agency or leasing organization
shall be eligible to be a Member of the Plan, even if such individual is later
determined (by judicial action or otherwise) to have been a common-law employee
of an Employer rather than an independent contractor or an employee of such
agency or leasing organization unless the contract specifically provides that
such Employee shall be eligible for membership in the Plan.
(e) Notwithstanding Section 2.1(b)(2), effective June 1, 2000, each
Employee of Charles Schwab who transfers employment directly to a Participating
Company shall become a Member on the first day of the month immediately
following the date on which he first satisfies each of the following conditions
(a) he receives a stated compensation from a Participating Company other than a
pension, severance pay, retainer or fee under contract, and (b) he completes at
least three consecutive months of service with a Participating Company, taking
into account for this purpose prior service with The Charles Schwab Corporation
and its affiliates (without regard to the number of Hours of Service such
Employee completes during such three month period), provided that such Employee
is employed by a Participating Company as of such date.
(f) Notwithstanding Section 2.1(c), effective June 1, 2000, each Employee
of Charles Schwab who transfers employment directly to a Participating Company
shall be eligible to receive a Matching Contribution pursuant to Section 3.1 and
to make an election with respect to awards under an Annual Incentive Plan
pursuant to Section 4.2 as of the later of (1)the date he becomes an Employee of
a Participating Company, or (2) the first day of the month immediately following
the date on which he has completed at least one Year of Service, taking into
account for this purpose prior service with The Charles Schwab Corporation and
its affiliates; provided such Employee is employed by a Participating Company as
of such date.
(g) For purposes of Section 2.1(b)(2) and (c), Prior Service shall be taken
into account.
2.2 Termination of Membership. An Employee's membership in the Plan shall
terminate only as follows:
(a) An Employee who ceases to be employed by any Affiliated Company prior
to his retirement under Article 11 for any reason, including his death, shall
cease to be a Member on the date he ceased to be an Employee.
(b) An Employee who retires under Article 11 shall cease to be a Member as
of the last Valuation Date of the Plan Year in which he retired under Article
11.
(c) Provided retirement benefits were the subject of good faith bargaining,
any Employee who becomes covered by a collective bargaining agreement shall
cease to be a Member on the effective date of the collective bargaining
agreement unless such agreement expressly provides for such Member's continued
participation in the Plan.
(d) Except as provided in Section 3.1(b), an Employee who transfers
employment from a Participating Company to The Charles Schwab Corporation shall
cease to be a Member and shall become a Former Member on the date of such
transfer.
Notwithstanding the foregoing, a person who is on Leave shall cease to be a
Member (and shall be treated as having retired under Article 11 or having
terminated employment with all Affiliated Companies, as applicable to him) (1)
as of the expiration of such Leave, unless prior to such expiration he resumes
his active employment with an Affiliated Company, or (2) at such earlier time as
he furnishes notice to the Affiliated Company with which he was last in active
employment that he does not intend to resume his active employment at the
expiration of such Leave.
2.3 Resumption of Membership. In the event that an Employee's membership in
the Plan is terminated in accordance with Section 2.2 of this Article, and he
again becomes an Employee of a Participating Company as described in Section
2.1(a), his membership in the Plan shall resume on the date as of which he again
became such an Employee.
2.4 Veterans' Rights. Notwithstanding any provision of this Plan to the
contrary, contributions, benefits, and service credit with respect to qualified
military service will be provided in accordance with Code section 414(u). Loan
repayments will be suspended under this Plan as permitted under Code section
414(u)(4).
ARTICLE 3
MATCHING CONTRIBUTIONS AND ESOP DIVIDENDS
3.1 Matching Contributions.
(a) Amounts. For the Plan Year beginning January 1, 1999, each
Participating Company shall pay to the Trustee as a Matching Contribution an
amount equal to sixty percent (60%) of each 401(k) Contribution made by each
Member described in Section 2.1(c) who is employed by that Participating Company
during such Plan Year, but only up to a maximum of five percent (5%) of such
Member's Compensation for such Plan Year and only if the Member is an Employee
on the last day of such Plan Year. For the Plan Year beginning on January 1,
2000, the percentage of sixty (60) in the prior sentence shall be increased to
eighty (80), and for each subsequent Plan Year the percentage shall be one
hundred (100). The Matching Contribution shall be made in Common Shares unless
the Company, in its discretion, elects to contribute cash, or a combination of
cash and Common Shares. The Matching Contribution shall be allocated to the
Member's Matching Contributions Account as of the last day of the Plan Year, and
shall be transferred to the Trustee for investment in accordance with the
provisions of Section 7.4(g).
(b) Determination of Vested Interest. A Member shall not be Vested in a
Matching Contribution allocated to his Account until completing five (5) Years
of Service. In determining whether this requirement is satisfied, any Year of
Service completed prior to a Break in Service by a Member who was not then
Vested will be disregarded, but only after the Member incurs five (5)
consecutive one-year Breaks in Service. If before then the Member completes a
Year of Service, any amounts forfeited pursuant to subsection (d) shall be
restored. With respect to an Employee of Charles Schwab who transfers employment
directly to a Participating Company, Years of Service for purposes of this
subsection (b) shall include service with Charles Schwab. For purposes of this
subsection (b), Prior Service shall be taken into account.
(c) Accelerated Vesting. A Member's interest in his Matching Contributions
will become Vested without regard to his Years of Service (i) on his 65th
birthday if he is then an Employee, or (ii) on his death while he is an
Employee.
(d) Forfeiture of Nonvested Amounts. Any nonvested portion of a Member's
Matching Contributions will be forfeited on the earlier of (i) the date of
distribution to the Member of the Vested balance of his Account, or (ii) the
date on which the Member incurs five (5) consecutive one-year Breaks in Service.
For purposes of this Article, if the Vested balance of a Member's Matching
Contribution is zero when the Member terminates employment, the Member will be
deemed to have received a distribution of his Vested balance.
(e) Application of Forfeited Amounts. Any forfeited Matching Contributions
may be used either to reduce restorative payments due under subsection (b) or to
reduce Participating Company Matching Contributions.
3.2 Distribution of Certain Dividends. Any dividends received by the
Trustee on Common Shares shall be allocated and credited to the Members'
Accounts. The portion of such dividends to be so allocated and credited to each
Member's Account shall be determined on the basis of the number of Common Shares
held in such Member's Account as compared to the total number of such shares
held in all Members' Accounts. The dividends allocated and credited to Members'
Accounts shall be invested by the Trustee in accordance with the provisions of
Article 7. Dividends paid on ESOP Stock and Capital Stock on and after March 31,
1999 that have not been allocated to a Matching Contributions Account shall
thereafter, subject to Section 3.2(b), be distributed to the Members at such
time and in such manner as is prescribed by the Committee in accordance with the
requirements that must be satisfied in order for a deduction to be allowed under
Code section 404(k) with respect to the amount of dividends being distributed.
To this end, the dollar value of the dividend distribution to any Member shall
not exceed the dollar value of the dividends allocated to that Member during the
period for which the distribution is made. Investment gains, if any, earned
prior to such distribution shall be retained in the Trust Fund. Investment
losses, if any, prior to such distribution shall be made up by liquidating other
shares of ESOP Stock or Capital Stock held in the Member's Account, but only if
such ESOP Stock or Capital Stock is not attributable to the Member's 401(k)
Contributions.
3.3 Time for Contribution. All contributions to be made by the
Participating Companies for any Plan Year pursuant to this Article shall be made
no later than by the due date (including any extensions) for filing the
Participating Companies' federal income tax returns for the taxable year
corresponding with such Plan Year.
3.4 Limitations on Contributions. Notwithstanding any provision of this
Article to the contrary, the amount of any contribution, and the allocation
thereof or of any shares of ESOP Stock, that otherwise would be required to be
made pursuant to the provisions of this Article shall be subject to, and shall
not exceed, the applicable limitations set forth in Article 6.
3.5 Notice to Members. As promptly as practicable after the close of each
Plan Year, the Committee shall notify each Member of the amount contributed to
the Plan for such Plan Year for the benefit of such Member pursuant to this
Article.
ARTICLE 4
401(k) CONTRIBUTIONS
4.1 Elective Payroll Contributions. In accordance with the rules set forth
in Section 4.3, each Member who is an Employee of a Participating Company may
elect to have his Compensation for each pay period within any Plan Year reduced
by an amount equal to any percentage thereof that is an integral multiple of 1%
(not to exceed 20%), and to have the Participating Company by which he is
employed contribute such amount to the Plan as a 401(k) Contribution on behalf
of the Member for such year. Such amount shall be credited to the Member's
401(k) Contribution Account.
4.2 Elective Incentive Award Contributions. In accordance with the rules
set forth in Section 4.3, a Member may elect, for each Plan Year, to have any
award that is otherwise payable to the Member during such year under the Annual
Incentive Plans (but in the case of an award under the EIP, only the part
thereof that is payable other than in the form of a grant of restricted stock
units) reduced by an amount equal to any whole percentage (not to exceed 100%)
of the dollar value of such award, and to have the Participating Company or
Companies by which he is employed contribute such amount to the Plan as a 401(k)
Contribution on behalf of the Member for such year. Any 401(k) Contribution made
pursuant to this Section on behalf of a Member during the period from January 1
to March 15 of any Plan Year shall be treated as follows:
(a) such Contribution shall be credited to the Member's Account as of
the final Valuation Date of the preceding Plan Year;
(b) such Contribution shall be treated as having been made for such
preceding Plan Year, for purposes of the 401(k) Nondiscrimination Test
described in Section 6.2(c), the section 415 Limitation described in
Section 6.5, and for purposes of the Deduction Limit described in Section
6.6(b);
(c) such Contribution shall be treated as a 401(k) Contribution for
the Plan Year during which such Contribution was made, for purposes of the
401(k) Dollar Limit described in Section 6.2(a).
4.3 Election Rules. (a) A Member who makes an election under Section 4.1 or
4.2 may revoke or modify any such election, or increase or decrease the amount
to be contributed, by communicating such election, revocation, or modification
directly to the Trustee in accordance with such rules and procedures as the
Committee shall prescribe. Any election under Section 4.1, or any revocation or
modification of such election shall be effective no later than the first day of
the first payroll period which starts at least two weeks after it has been made.
Any AIP/EIP election under Section 4.2, or any revocation or modification of
such election, with respect to the amount to be contributed for any Plan Year
shall be effective for such Plan Year only if it is made prior to December 15 of
the preceding Plan Year, or such other date as is prescribed by the Committee in
its discretion.
(a) The Committee may establish procedures pursuant to which a Member is
deemed to have elected a 401(k) Contribution under either Section 4.1 or 4.2.
The Member must be informed in advance of the deemed election and provided a
reasonable opportunity to revoke the deemed election in favor of a cash payment.
4.4 Limitation on Contributions. Notwithstanding any provision of this
Article to the contrary, the amount of any contribution otherwise required to be
made pursuant to a Member's election under any of the provisions of this Article
shall be subject to, and shall not exceed, the applicable limitations set forth
in Article 6.
4.5 Time and Manner of Contribution. All 401(k) Contributions required to
be made pursuant to a Member's election under Section 4.1 or 4.2 of this Article
shall be made as soon as practicable after the date on which the amounts to be
contributed would have been paid to the Member but for his election, but in any
event by no later than 15 days after such date. All 401(k) Contributions shall
be transferred to the Trustee for investment in accordance with the provisions
of Article 7. Such Contributions and earnings attributable thereto shall be
credited by the Committee to the Members' Accounts as provided in Article 9.
4.6 Notice to Members. As promptly as practicable after the close of each
Plan Year, the Committee shall notify all Members of the 401(k) Contributions
contributed to the Plan for such Plan Year on behalf of such Member and the
elections, if any, in effect for the member under Sections 4.1 and 4.2.
ARTICLE 5
ROLLOVERS
5.1 Rollover Contributions of Cash. The Plan may accept a cash rollover
from an Employee who is a Member if such rollover represents a Direct Rollover,
an earlier distribution to the Member from another qualified trust (the "Other
Plan") which is described in section 401(a) and exempt from tax under section
501(a) of the Code, or a rollover from a conduit Individual Retirement Account;
provided however, if the rollover is not a Direct Rollover, the amount to be
rolled over to the Plan constitutes an eligible rollover distribution as defined
in section 402 of the Code and the rollover occurs on or before the sixtieth
(60th) day following the Employee's receipt of the distribution from the Other
Plan or the Employee's receipt of the distribution from a conduit Individual
Retirement Account.
For purposes of this Section, a "conduit Individual Retirement Account" is
an Individual Retirement Account (as defined in section 408(a) of the Code) in
which the Employee has deposited only amounts representing a distribution from
an employer plan qualified under section 401(a) of the Code.
The cash rollover accepted by the Plan shall be separately accounted for
and the Member shall have a nonforfeitable interest in such account at all
times. The Member's rollover shall be invested as soon as practicable following
receipt thereof in accordance with Section 7.4. The Member's rollover Account
shall be adjusted to reflect its share of net earnings, losses, appreciation, or
depreciation as of each Valuation Date. The total amount of a Member's rollover
Account shall be distributed to the Member in any form provided for under this
Plan, as selected by the Member. Payment shall be made at the same time
distribution of the Member's benefit is paid.
5.2 Rollover Contributions of Common Shares and Related Interests. The Plan
may accept a rollover of Common Shares and Related Interests from an Employee
who is a Member, if such rollover constitutes a Direct Rollover.
The rollover of Common Shares and Related Interests accepted by the Plan
shall be separately accounted for and the Member shall have a nonforfeitable
interest in such account at all times. The Member's rollover of Common Shares
shall be initially credited to the Schwab Stock Fund and the Member may
thereafter elect to transfer such investment to one or more Investment Fund or
Funds in accordance with Section 7.5.
For purposes of this Section 5.2. the term "Related Interests" shall
include any certificate of participation or similar interest allocated to the
Member's account in the Eligible Retirement Plan from which the Direct Rollover
is received which constitutes a contingent future right to receive additional
Common Shares. Any Related Interest shall be credited to a separate rollover
account for the Member and not invested in any Investment Fund. If additional
Common Shares attributable to the Related Interest are received in the future,
such Common Shares shall be initially credited to the Schwab Stock Fund and the
Member may thereafter elect to transfer such investment to one or more
Investment Fund or Funds in accordance with Section 7.5.
The Member's rollover Account shall be adjusted to reflect its share of net
earnings, losses, appreciation, or depreciation as of each Valuation Date. The
total amount of a Member's rollover Account shall be distributed to the Member
in any form provided for under this Plan, as selected by the Member. Payment
shall be made at the same time distribution of the Member's benefit is paid.
5.3 Transfers. The Committee, in its discretion, may permit an amount
representing all or any part of a Member's Account under any other plan that the
Committee determines is qualified under section 401(a) of the Code and that is a
defined contribution plan to be transferred directly from such plan to this
Plan. Any amount so transferred to this Plan shall be credited to the member's
Account as provided in Article 9, and shall be invested in accordance with the
investment election in effect for such amount at the time it is transferred to
this Plan, as determined under Section 7.4.
ARTICLE 6
LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS
6.1 In General. Notwithstanding any other provision of the Plan to the
contrary, all contributions and allocations otherwise required to be made
pursuant to Article 3 or 4 shall be subject to each of the applicable
limitations set forth in this Article 6.
6.2 Limitations on 401(k) Contributions. The amount of 401(k) Contributions
otherwise permitted to be made on behalf of Members under Article 4 shall be
subject to the following limitations:
(a) 401(k) Dollar Limit. The aggregate amount of the 401(k) Contributions
that may be made to the Plan in any Plan Year on behalf of any Member shall not
exceed $10,500 (in 2001), as adjusted for increases in the cost of living in
accordance with section 402(g)(5) of the Code and the Regulations.
(b) 401(k) Percentage Limit. The aggregate amount of 401(k) Contributions a
Member may elect to have contributed to the Plan on his behalf for any Plan Year
under Sections 4.1 and 4.2 shall not exceed 20% of the Member's Compensation for
such year, or such lower percentage of the Member's Compensation for such year
as the Committee may determine in its discretion in order to satisfy the
requirements of this Section.
(c) 401(k) Nondiscrimination Test.
(1) In General. The Actual Deferral Percentage for the Plan Year for
the group of Highly Compensated Members shall not exceed the greater of:
(i) the product of the Actual Deferral Percentage for the immediately
preceding Plan Year of the group of those Members who are not Highly
Compensated Members multiplied by 1.25; or (ii) the product of the Actual
Deferral Percentage for the preceding Plan Year of the group of those
Members who are not Highly Compensated Members multiplied by 2.0, provided
that the Actual Deferral Percentage for the Plan Year of the group of
Highly Compensated Members does not exceed the Actual Deferral Percentage
for the immediately preceding Plan Year of the group of such other Members
by more than two percentage points. For purposes of this subsection (c),
the "Actual Deferral Percentage" for a Plan Year means, for each specified
group of Members, the average of the ratios (calculated separately for each
Member in such group) of (A) the amount of 401(k) Contributions made on
behalf of the Member for the Plan Year, to (B) the amount of the Member's
compensation (as defined in Section 6.5) for the Plan Year, where a
Member's Actual Deferral Percentage is zero if no 401(k) Contribution is
made on behalf of the Member for such Plan Year. For purposes of applying
the test under this paragraph (1) for any Plan Year beginning after
December 31, 1996, the Company may elect, by amending the Plan to provide
that it has made such election, to use the Actual Deferral Percentage of
the group of Members who are not Highly Compensated Members for the current
Plan Year rather than for the preceding Plan Year as otherwise provided in
this paragraph (1). If such an election is made, it may not be changed
except to the extent provided in applicable governmental regulations,
rulings, notices or announcements. In accordance with the preceding
sentence, the Company made such election for the Plan Year ending December
31, 2000.
(2) Special Rules for the 401(k) Nondiscrimination Test. The Actual
Deferral Percentage for each group of Members shall be calculated to the
nearest one-hundredth of 1%. The Committee shall maintain records
sufficient to demonstrate the satisfaction of the test set forth in this
subsection (c) for each Plan Year. To the extent required in the
Regulations, in calculating the Actual Deferral Percentage for any Plan
Year, 401(k) Contributions which are made for such Plan Year on behalf of a
Member who is not a Highly Compensated Member, and which exceed the
limitation on such contributions for such Plan Year set forth in Section
6.2(a), shall be disregarded.
(3) Aggregation Rules. If this Plan satisfies the requirements of Code
section 410(b) only if aggregated with one or more other plans, the Actual
Deferral Percentages of all Members will be determined as if all such plans
were a single plan. For purposes of the limitation on 401(k) Contributions
set forth in this Article, the Actual Deferral Percentage for any Member
who is a Highly Compensated Member for the Plan Year and who is eligible to
have such deferral contributions allocated to his account under two or more
plans or arrangements described in Code section 401(k) that are maintained
by the Company or any Affiliated Company will be determined as if all such
deferral contributions were made under a single arrangement.
6.3 Limitation on Matching Contributions.
(a) In General. The Actual Contribution Percentage for the Plan Year for
the group of Highly Compensated Members shall not exceed the greater of: (i) the
product of the Actual Contribution Percentage for the immediately preceding Plan
Year of the group of those Members who are not Highly Compensated Members
multiplied by 1.25; or (ii) the product of the Actual Contribution Percentage
for the preceding Plan Year of the group of those Members who are not Highly
Compensated Members multiplied by 2.0, provided that the Actual Contribution
Percentage for the Plan Year of the group of Highly Compensated Members does not
exceed the Actual Contribution Percentage for the immediately preceding Plan
Year of the group of such other Members by more than two percentage points. For
purposes of this subsection, the "Actual Contribution Percentage" for a Plan
Year means, for each specified group of Members, the average of the ratios
(calculated separately for each Member in such group) of (A) the amount of
Matching Contributions made on behalf of the Member for the Plan Year, to (B)
the amount of the Member's compensation (as defined in Section 6.5) for the Plan
Year, where a Member's Actual Contribution Percentage is zero if no Matching
Contribution is made on behalf of the Member for such Plan Year. The Actual
Contribution Percentage for each group of Members shall be calculated to the
nearest one-hundredth of 1%. The Committee shall maintain records sufficient to
demonstrate the satisfaction of the test set forth in this subsection for each
Plan Year. For purposes of applying the test under this subsection (a) for any
Plan Year beginning after December 31, 1996, the Company may elect, by amending
the Plan to provide that it has made such election, to use the Actual
Contribution Percentage of the group of Members who are not Highly Compensated
Members for the current Plan Year rather than for the preceding Plan Year as
otherwise provided in this subsection (a). If such an election is made, it may
not be changed except to the extent provided in applicable governmental
regulations, rulings, notices or announcements. In accordance with the preceding
sentence, the Company made such election for the Plan Year ending December 31,
2000.
(b) Aggregation Rules. If this Plan satisfies the requirements of Code
section 410(b) only if aggregated with one or more other plans, the Actual
Contribution Percentages of all Members will be determined as if all such plans
were a single plan. In addition, the Actual Contribution Percentage of a Member
who is a Highly Compensated Member for a Plan Year and who is eligible to
receive matching contributions allocated to his account under two or more plans
or arrangements described in Code section 401(k) that are maintained by the
Company or an Affiliated Company will be determined as if all such contributions
were made to a single plan.
(c) The determination of excess Matching Contributions under this Section
shall be made after first determining the excess deferrals under Section 6.2(a)
and then determining excess contributions under Section 6.2(c).
6.4 Multiple Use of Alternative Limitation.
(a) Limitation. Notwithstanding the foregoing provisions of this Article,
if, after the application of Sections 6.2 and 6.3, the sum of the Actual
Deferral Percentage and the Actual Contribution Percentage for the group of
Members who are Highly Compensated Members for a Plan Year exceeds the aggregate
limit (as defined below) for the Plan Year, then the contributions made for such
Plan Year for Members who are Highly Compensated Members shall be reduced so
that the aggregate limit is not exceeded. Such reductions shall be made first in
contributions made pursuant to Section 4.1 or 4.2 (but only to the extent a
Matching Contribution was not made with respect to such contributions) and then
in Matching Contributions. Reductions in contributions shall be made in the
manner provided in Section 6.8 or Section 6.9, whichever is applicable. The
amount by which a Highly Compensated Member's contributions is reduced in
accordance with the foregoing shall be treated as an excess contribution under
Section 6.8 or Section 6.9, whichever the case may be. For the purposes of this
Section, the Actual Deferral Percentage and Actual Contribution Percentage of
Members who are Highly Compensated Members are determined after any reductions
required for such Plan year under Sections 6.8 and 6.9, respectively.
No reduction, however, shall be required by this Section for a Plan Year if
either (i) the Actual Deferral Percentage of the Members who are Highly
Compensated members does not exceed 1.25 multiplied by the Actual Deferral
Percentage for the next preceding Plan Year for Members who are not Highly
Compensated Members, or (b) the Actual Contribution Percentage of Members who
are Highly Compensated Members does not exceed 1.25 multiplied by the Actual
Contribution Percentage for the next preceding Plan Year for Members who are not
Highly Compensated Members.
(b) Definition. For purposes of this Section, the term "aggregate limit"
for a Plan Year means the sum of (i) 125% of the greater of (A) the Actual
Deferral Percentage for the next preceding Plan Year for Members who are not
Highly Compensated Members or (B) the Actual Contribution Percentage for the
next preceding Plan Year for Members who are not Highly Compensated Members, and
(ii) the lesser of (A) 200% of, or (B) two percentage points plus, the lesser of
such Actual Deferral Percentage or Actual Contribution Percentage. If it would
result in a larger aggregate limit, the word "lesser" is substituted for the
word "greater" in subpart (i) of this paragraph and the word "greater" is
substituted for the word "lesser" the second place it is used in subpart (ii) of
this paragraph.
6.5 Section 415 Limitation. All contributions and allocations otherwise
required to be made under Articles 3 and 4 shall be subject to the following
limitations:
(a) Limitation. The Annual Addition to a Member's Account in respect of any
Plan Year shall not exceed the lesser of (1) 25% of the compensation of such
Member for the Plan Year or (2) $30,000 (as adjusted by the Internal Revenue
Service for such Plan Year for cost-of-living increases under section 415(d) of
the Code). For purposes of this subsection (a), the term "compensation" shall
mean the wages, salaries and other amounts actually paid or made available to a
Member for services actually rendered in the course of employment with an
Affiliated Company, to the extent such amounts are includible in the Member's
gross income for federal income tax purposes, including, but not limited to,
commissions, compensation for services on the basis of a percentage of profits,
commissions on insurance premiums, tips and bonuses, any elective deferral (as
defined in Code section 402(g)(3)), any amount which is contributed or deferred
at the election of the Employee under Code section 125 and any elective amounts
that are not includible in the gross income of the Employee by reason of section
132(f)(4) and excluding (i) employer contributions to a plan of deferred
compensation which are not included in the Member's gross income for federal
income tax purposes for the taxable year in which contributed, (ii) amounts
realized from the exercise of a nonqualified stock option or when restricted
stock held by the Member either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture, (iii) amounts realized from the
sale, exchange or other disposition of stock acquired under a qualified stock
option and (iv) other amounts which receive special tax treatment. The amount of
compensation, as so defined, taken into account under the Plan for any Plan Year
shall not exceed the Compensation Limit in effect for such Plan Year. Also for
purposes of this subsection, the term "Annual Addition" shall mean the sum of
the following amounts credited to the Member's Account or otherwise contributed
to the Plan on the Member's behalf for any Plan Year: (A) any contribution made
to the Plan pursuant to Article 3 and allocated to the Member's Account, (B) any
401(k) Contributions made to the Plan on the Member's behalf pursuant to Article
4, (C) any allocations as provided in subsection (c) below, (D) any amounts
contributed by or on behalf of the Member under any other qualified defined
contribution plan maintained by any Affiliated Company, and (E) such other
amounts as may be required to be included under the Code and Regulations.
(b) Reduction of Annual Addition. In the event that, as a result of the
allocation of forfeitures, a reasonable error in estimating a Member's annual
compensation, a reasonable error in determining the amount of 401(k)
Contributions that may be made with respect to any individual under the limits
of Code section 415, or under other limited facts and circumstances that the
Commissioner finds justify the availability of the rules set forth in this
paragraph, the Annual Addition which, without regard to subsection (a), would
have been credited to any Member's Account or otherwise contributed to the Plan
on the Member's behalf in respect of any Plan Year, must be reduced by reason of
the limitation of subsection (a) above, such reduction shall first be made, to
the extent necessary, by distributing the Member's 401(k) Contributions (plus
earnings attributable thereto). The distributed amounts shall be disregarded for
purposes of determining compliance with the limitations of Section 6.2(a) and
(c).
(c) 415(e) Limit. For Plan Years commencing prior to January 1, 2000, the
amounts credited to the Account or otherwise contributed under the Plan on
behalf of any Member for any Plan Year shall not exceed the amount permissible
under the overall limitation applicable to such Member for such year under
section 415(e) of the Code. In calculating the defined benefit plan fraction and
the defined contribution plan fraction, as defined under section 415(e) of the
Code, for the purpose of determining the aforesaid Code section 415(e)
limitation, an amount shall, to the extent permitted under section 1106(i)(4) of
P.L. 99-514 and section 235(g)(3) of P.L. 97-248, be subtracted from the
numerator of the defined contribution plan fraction so that the sum of the
defined benefit plan fraction and the defined contribution plan fraction does
not exceed 1.0 for the Plan Year. In addition, the aforesaid Code section 415(e)
limitation shall, to the extent permitted under section 1106(i)(3) of P.L.
99-514 and section 235(g)(4) of P.L. 97-248, be calculated by using the Member's
"current accrued benefit", as defined and determined under said provisions.
(d) Further Limitations. The Committee shall, to the extent required to
maintain the tax-qualified status of the Plan, apply the limitations contained
in this Section (after giving due consideration to the wishes of the Member) by
taking into account the benefits payable and the contributions made under any
other plans maintained by the Company or an Affiliated Company which are
qualified under section 401(a) of the Code.
6.6 Additional Limitations on Contributions. Contributions or allocations
otherwise required to be made pursuant to Article 3 or 4 shall be subject to the
following additional limitations:
(a) Profit Limitation. To the extent that the aggregate amount of
contributions a Participating Company otherwise would be required to make for
any Plan Year under Article 3 or 4 would exceed the Company's Net Operating
Income for such year, the Company shall not be required to make such excess
contributions. However, any part or all of such excess contributions may be made
by the Participating Company, in its sole discretion. For this purpose, a
Participating Company's Net Operating Income, with respect to any Plan Year,
shall mean its income for the year, determined before taking into account any
gains or losses realized on the sale or disposition of any securities and before
the payment or provision for the payment of Federal income taxes, but after
taking into account all other expenses, including, without limitation, any
contributions made by the Company under this Plan, the Retirement Plan and any
other plan of current or deferred compensation maintained by such Company.
(b) Deduction Limitation. The aggregate amount of contributions a
Participating Company is otherwise required to make for any Plan Year under
Article 3 or 4 shall not exceed the amount allowable as a deduction for federal
income tax purposes for such year with respect to such contributions.
6.7 Adjustments. Notwithstanding any other provision herein to the
contrary, at any time during the Plan Year, the Committee may make such
adjustments to or impose such restrictions on the amounts that otherwise are to
be contributed to the Plan on behalf of any Member or group of Members during
the balance of the year, as the Committee deems necessary in order for such
contributions not to exceed any of the limitations set forth in this Article 6,
or in order for the Plan to meet any other requirement for the Plan's continued
qualification under sections 401(a), and 401(k), of the Code.
In addition, notwithstanding any other provision herein to the contrary,
each contribution made under the Plan on behalf of a Member, and the allocation
with respect thereto to the Member's Account, is subject to such contribution
and allocation not causing the Plan to lose its qualification under sections
401(a), 401(k), and 401(m) of the Code. If it should be determined that any
contribution and allocation so made would otherwise cause the Plan to lose its
qualification under section 401(a), 401(k), or 401(m) of the Code, the Committee
may take whatever steps it determines to be necessary to preserve the Plan's
qualification under section 401(a), 401(k), or 401(m) of the Code, including (in
addition to the measures provided for in Sections 6.8 and 6.9) directing that
the Member's Account be adjusted to eliminate therefrom the amount so allocated
with respect to such contribution (and any income attributable thereto), and
directing that any amount so eliminated be returned to the Participating
Companies, or held in a suspense account for allocation to the Member in a
subsequent Plan Year, or reallocated to the Accounts of such other Members, in
such amounts, as the Committee determines in its discretion.
Any 401(k) Contributions so returned to the Participating Companies shall
be paid by them to those Members on whose behalf such amounts were contributed
to the Plan, as soon as practicable after the Participating Companies have
received them.
6.8 Correction of Excess 401(k) Contributions. If for any Plan Year the
contributions made on behalf of a Member for such year exceed the limitation
applicable to such contributions under Section 6.2(a) or (c), or if any part of
the 401(k) Contributions made on behalf of a Member during any taxable year of
the Member is designated as an excess deferral under subsection (b) below, such
excess contributions, or the amount so designated, shall be distributed to the
Member in accordance with the following rules; and any Matching Contribution
made with respect to any such distributed 401(k) Contribution shall be
forfeited:
(a) If the aggregate amount of the 401(k) Contributions made on behalf of a
Member for any Plan Year exceeds the dollar limit for such contributions under
Section 6.2(a), the excess amount so contributed, as adjusted for income or loss
allocable thereto, shall be designated by the Committee as an excess deferral
and earnings, and shall distributed to the Member by no later than April 15 next
following the close of such Plan Year.
(b) If the aggregate amount of the 401(k) Contributions made on behalf of a
Member under this Plan for any taxable year of the Member, when added to the
total amount deferred in such year under other plans or arrangements described
in sections 401(k), 408(k) or 403(b) of the Code, exceeds the limit applicable
to the Member under section 402(g) of the Code for such taxable year, the Member
may designate a portion of such excess amount as allocable to the 401(k)
Contributions made on the Member's behalf under this Plan for such year. Such
designation shall be made by filing with the Committee in accordance with such
procedures as it may prescribe a notice that specifies the amount so designated,
and which contains a certification by the Member that if the amount so
designated is not distributed, such amount, when added to his remaining 401(k)
Contributions plus the total amount deferred under other plans or arrangements
described in sections 401(k), 408(k) or 403(b) of the Code, will exceed the
limit applicable to the Member under section 402(g) of the Code for the taxable
year in question.
Such notice shall be submitted to the Committee no later than by March 1
next following the close of such taxable year. The amount so designated, as
adjusted for income or loss allocable thereto, shall be distributed to the
Member from his Account by no later than April 15 next following the close of
such taxable year.
(c) If as of the close of any Plan Year the aggregate amount of the 401(k)
Contributions made for such year on behalf of Members who are Highly Compensated
Members exceeds the limit for such contributions under Section 6.2(c), the
excess amount of such contributions, as adjusted for income or loss allocable
thereto, shall be designated by the Committee as an excess 401(k) Contribution
and earnings, and shall be distributed to those Members on whose behalf such
excess contributions were made. Such distributions shall be made by no later
than March 15 next following the close of such Plan Year. Any amount that
otherwise would be distributed to a Member in accordance with the second
preceding sentence shall be reduced, in accordance with Regulations or rulings
issued under section 401(k) of the Code, by any amounts distributed to the
Member under subsection (a) or (b) above.
(d) The amount of excess contributions to be distributed to any Member
under subsection (c) above shall be determined by reducing the Actual Deferral
Percentages of the Members who are Highly Compensated Members on the basis of
each Highly Compensated Member's contribution, beginning with those Highly
Compensated Members with the highest dollar amount of 401(k) Contributions,
until the aggregate amount of 401(k) Contributions for Members who are Highly
Compensated Members has been reduced to the amount permissible under Section
6.2(c). The excess contributions so determined shall be distributed to those
Highly Compensated Members for whom a reduction is made under the preceding
sentence. Any Matching Contributions made with respect to such excess
contributions shall be forfeited, if forfeitable.
(e) The amount of income or loss allocable to the excess contributions to
be distributed to any Member who is a Highly Compensated Member shall be
determined in accordance with the applicable provisions of the Regulations
issued under sections 401(k), 401(m), and 402(g) of the Code.
(f) Any amounts required to be distributed to a Member pursuant to
subsection (a), (b), (c) or (d) above shall be so distributed, notwithstanding
any other provision in this Plan to the contrary.
6.9 Correction of Excess Matching Contributions.
(a) If as of the close of any Plan Year the aggregate amount of the
Matching Contributions made for such year on behalf of Members who are Highly
Compensated Members exceeds the limit for such contributions under Section 6.3,
the excess amount of such contributions, as adjusted for income or loss
allocable thereto, shall be designated by the Committee as an excess Matching
Contribution and earnings, and shall be forfeited, if forfeitable, or
distributed to those Members on whose behalf such excess contributions were
made. Such distributions shall be made by no later than March 15 next following
the close of such Plan Year.
(b) The amount of excess contributions to be distributed to any Member (or
forfeited) under subsection (a) above shall be determined by reducing the Actual
Contribution Percentages of the Members who are Highly Compensated Members on
the basis of each Highly Compensated Member's contribution, beginning with those
Highly Compensated Members with the highest dollar amount of Matching
Contributions, until the aggregate amount of 401(k) Contributions for Members
who are Highly Compensated Members has been reduced to the amount permissible
under Section 6.3. The excess contributions so determined shall be distributed
to those Highly Compensated Members for whom a reduction is made under the
preceding sentence, or if forfeitable, forfeited.
(c) The amount of income or loss allocable to the excess Matching
Contributions shall be determined in accordance with the applicable provisions
of the Regulations issued under sections 401(k), 401(m), and 402(g) of the Code.
(d) Any amounts required to be distributed to a Member pursuant to
subsection (a), (b), or (c) above shall be so distributed, notwithstanding any
other provision in this Plan to the contrary.
ARTICLE 7
INVESTMENT OF ACCOUNTS
7.1 ESOP Stock Fund. There shall be maintained within the Trust Fund a
separate investment fund (referred to herein as the "ESOP Stock Fund"), which
shall be invested in ESOP Stock, except for temporary short-term investments
pending investment in such ESOP Stock or to provide liquid funds necessary to
make distributions pursuant to Article 12. The ESOP Stock held in the ESOP Stock
Fund was acquired pursuant to the terms of the Plan in effect prior to April 1,
1999.
Fractional shares of ESOP Stock that have been canceled in connection with
distributions made to Members, or in connection with the transfer of amounts by
Members from the ESOP Stock Fund to other Investment Funds as permitted under
Section 7.6, shall be aggregated and sold, in such amounts, and at such times,
as the Committee may direct in its discretion. The proceeds of any such sales in
connection with distributions to be made to Members shall be retained in the
ESOP Stock Fund as part of the reserve of liquid funds maintained for use in
connection with making distributions to Members pursuant to Article 12.
7.2 Other Investment Funds. In addition to the ESOP Stock Fund, there shall
be established and maintained within the Trust Fund such other separate
Investment Funds as the Investment Committee in its sole discretion may direct
from time to time, including, without limitation by specification, open-end
investment companies for which the Company or Affiliated Companies serve as the
investment adviser and/or provide other services and the Schwab Stock Fund,
which shall be invested primarily in Capital Stock, except for short-term
investments pending investment in Capital Stock or such reasonable amounts as
may be required to provide for distributions pursuant to Article 12. All
dividends received on shares of Capital Stock shall be reinvested in additional
shares of Capital Stock, except to the extent the Investment Committee otherwise
directs that any such cash dividends on shares of Capital Stock allocated to a
Member's Account shall be paid to such Member or his Beneficiary no later than
90 days after the close of the Plan Year in which such dividend is paid. The
Investment Committee may from time to time in its sole discretion, establish,
modify or eliminate any Investment Fund.
7.3 Investment of Dividends. Dividends on Common Shares held in a Matching
Contributions Account shall be reinvested in the Schwab Stock Fund. Any other
dividends on Common Shares which are allocated and credited to Members' Accounts
under Section 3.2 shall be invested in the Schwab Value Advantage Money Fund or
a comparable fund, unless the Investment Committee directs that such amounts
will be invested in the Schwab Stock Fund.
7.4 Investment of Other Contributions. Any 401(k) Contributions made on
behalf of a Member pursuant to Section 4.1 or 4.2, any Matching Contributions,
any cash or Common Shares rolled over to the Plan and credited to a Member's
Account pursuant to Sections 5.1 and 5.2 (hereinafter referred to as a "Rollover
Amount"), and any amounts transferred to the Plan pursuant to Section 5.3, shall
be invested in accordance with the following rules:
(a) Any 401(k) Contributions made on the Member's behalf, any cash credited
to the Rollover Amount or amount transferred to his Account pursuant to Section
5.3 shall be invested in such of the Plan's Investment Funds (other than the
ESOP Stock Fund), in such whole percentages as the Member shall have specified
in an election for such purpose.
(b) Any Common Shares in a rollover Account shall be initially credited to
the Schwab Stock Fund as soon as practicable following receipt thereof and the
Member may thereafter elect to transfer such investment to one or more of the
Plan's Investment Funds (other than the ESOP Stock Fund), in such whole
percentages as the Member shall have specified in an election for such purpose.
(c) In the case of any Rollover Amount (other than a Related Interest as
defined in Section 5.2) or transferred amount pursuant to Section 5.3, the
Member's investment election shall be effective as soon as practicable following
the date on which such Rollover Amount or transferred amount is transferred to
the Trustee.
(d) A Member shall be permitted to make any investment election for 401(k)
Contributions, Rollover Amounts (other than a Related Interest as defined in
Section 5.2), and amounts transferred pursuant to Section 5.2, and to make any
change in investment election as to such amounts, by communicating such election
or change in election directly to the Trustee in accordance with such rules and
procedures as the Committee shall prescribe. Any investment election, or any
change in investment election, made by use of a voice-response, on-line or other
electronic service shall be effective (1) in the case of 401(k) Contributions to
be made on the Member's behalf pursuant to Section 4.1, as of the first day of
the first payroll period which starts at least two weeks after such election or
change in election has been so made, (2) in the case of 401(k) Contributions to
be made on the Member's behalf pursuant to Section 4.2, with respect to any such
contributions or amounts received by the Trustee more than two weeks after such
election or change in election has been so made, and (3) in the case of any
Rollover Amount (other than a Related Interest as defined in Section 5.2), or
amount transferred pursuant to Section 5.3, the Member's investment election
shall be effective as soon as practicable following the date on which such
rollover or transfer is made to the Trustee.
(e) If no investment election made in accordance with the provisions of
this Section 7.4 is in effect for a Member at the time any 401(k) Contribution
is made to the Plan on his behalf, or if the Member fails to provide an
investment election in connection with a Rollover Amount or amounts transferred
to the Plan pursuant to Section 5.3, the entire portion of such Contribution, or
the cash portion if the Rollover Account and the amounts transferred pursuant to
Section 5.3 shall be invested in the Schwab Value Advantage Money Fund or a
comparable fund, until the Member provides an investment election.
(f) If a Member fails to provide an investment election with respect to
Common Shares transferred to a rollover Account pursuant to Section 5.2, such
Common Shares shall be invested in the Schwab Stock Fund until the Member
provides an investment election.
(g) Matching Contributions Accounts shall be invested in the Schwab Stock
Fund, unless the Committee, acting on behalf of the Company in a settlor
capacity, determines that Matching Contributions Accounts may be invested
pursuant to Member instructions in other Investment Funds.
7.5 Transfers Between Investment Funds. Subject to the provisions of this
Section, a Member may elect to have all or any portion of his interest in any
one or more of the Investment Funds transferred to any other Investment Fund or
Funds, in accordance with such rules as the Committee may determine from time to
time in its discretion.
(a) Limit on Transfers. No amounts may be transferred to the ESOP Stock
Fund from any other Investment Fund. No amounts may be transferred from the ESOP
Stock Fund to any other Investment Fund, except as provided in Section 7.6. No
amounts may be transferred to or from a Member's Matching Contributions Account,
except as provided in Section 7.6.
(b) Transfer of Assets. In order to give effect to the transfers referred
to above, the Trustee shall transfer from and to the respective Investment Funds
to which such transfers relate cash in the net amounts required to give effect
to all elections under this Section. For this purpose, the Trustee shall value
the interest of each Member in the Investment Funds to be transferred as to whom
it has received notice, and the Trustee shall effect such transfers as soon as
practicable.
(c) Delayed Transfer. In the event the Trustee, in its sole discretion,
determines that the transfer from any of the Investment Funds cannot be effected
without jeopardizing the maintenance of an orderly market in the securities held
in such Investment Fund, the Trustee shall so notify the Investment Committee in
writing, and shall make such transfer at the earliest time or times that it
considers practicable consistent with the maintenance of such orderly market.
The amount of any partial transfer from any Investment Fund pursuant to this
subsection shall be deemed allocable pro rata to all Members whose elections to
have transfers made from such Investment Fund have not yet been effected and
have not been revoked (pursuant to this subsection) prior to the date of such
partial transfer.
(d) Electronic Transfers. A Member shall be permitted to make an election
which shall apply to any transfer under this Section by communicating such
election directly to the Trustee by means of a voice-response, on-line or other
electronic service in accordance with such rules and procedures as the Committee
shall prescribe.
7.6 Diversification Rights with Respect to the ESOP Stock Fund.
Notwithstanding the two preceding Sections, a Qualified Member may elect at any
time to have an amount equal to 25 percent of the value of his Account invested
in Common Shares credited to him under the ESOP Stock Fund and the Matching
Contributions Account (to the extent such amount exceeds the amount to which a
prior election under this Section 7.6 applies) transferred to any other
Investment Fund. In the case of any Qualified Member who has attained age 60,
the 25% amount in the preceding sentence shall be increased to 50%.
7.7 Special Voting Rights and Tender Offer Response Provisions Regarding
Schwab Stock Fund and ESOP Stock Fund. Each Member, Former Member or Beneficiary
who has any portion of his interest in the Trust Fund invested in the Schwab
Stock Fund or the ESOP Stock Fund (hereinafter referred to collectively as the
"Stock Funds") shall have the right to instruct the Trustee with respect to the
voting of the shares of Capital Stock or ESOP Stock (hereinafter referred to
collectively as the "Shares") attributable to such interest or to direct the
Trustee to tender, exchange or sell such Shares in accordance with the following
provisions:
(a) Voting Rights. At least 30 days before each annual or special
shareholders' meeting of The Charles Schwab Corporation ("Schwab"), the Trustee
shall furnish to each Member, Former Member or Beneficiary with an interest in
the Stock Funds a copy of the proxy solicitation material, together with a form
requesting confidential instructions on how the Shares attributable to such
interests are to be voted. Upon timely receipt of such instructions, the Trustee
shall vote such Shares as instructed. The instructions received by the Trustee
from any individual Member, Former Member or Beneficiary shall be held by the
Trustee in strict confidence and shall not be divulged or released to any person
including officers or employees of Schwab, of the Company, or of any other
Affiliated Company. Neither the Trustee, the Investment Committee, nor the
Committee is required to make recommendations to Members, Former Members or
Beneficiaries on whether to vote or how to vote. Each Member, Former Member, or
Beneficiary, as a "named fiduciary" within the meaning of Section 402(a)(1) of
ERISA, shall also have the opportunity to direct the vote of a portion of any
Shares for which a signed voting direction instrument is not timely received by
the Trustee ("Undirected Shares"). Each such Member, Former Member or
Beneficiary shall be entitled to provide a direction with respect to a number of
Undirected Shares equal to the product of (a) the total number of Undirected
Shares, multiplied by (b) a fraction, the numerator of which is the number of
Shares allocated to the Account of such Member, Former Member, or Beneficiary
who is giving a voting instruction with respect to the Undirected Shares and the
denominator of which is the total number of Shares allocated to the Accounts of
all Members, Former Members and Beneficiaries who have given the Trustee voting
instructions with respect to Undirected Shares.
(b) Tender or Exchange Offers. In the event the Trustee receives a tender
or exchange offer or any other offer or option to sell any Shares held in the
Stock Funds, which offer or option requires a response with respect to such
Shares, the Trustee shall notify each Member with an interest in the Stock Funds
of such offer or option and utilize its best efforts to distribute or cause to
be distributed to such Member in a timely manner all information distributed to
shareholders of Schwab in connection with such offer or option. Each such
Member, Former Member or Beneficiary shall have the right from time to time with
respect to the Shares attributable to such interest to direct the Trustee in
writing as to the manner in which to respond to any offer or option to sell or
exchange such Shares which shall be pending or which may be made in the future
for all Shares or any portion thereof. A Member's, Former Member's or
Beneficiary's instructions shall remain in force until superseded in writing by
the Member, Former Member or Beneficiary. If the Trustee shall not timely
receive a direction from a Member to tender, exchange or sell pursuant to such
tender or exchange offer or other offer or option to sell:
(1) with respect to the Schwab Stock Fund, the Trustee shall not
tender, exchange or sell any such Shares held in the Schwab Stock Fund that
are attributable to such Member's, Former Member's or Beneficiary's
interest,
(2) with respect to the ESOP Stock Fund, each Member, Former Member,
or Beneficiary, as a "named fiduciary" within the meaning of Section
402(a)(1) of ERISA, shall also have the opportunity to direct the Trustee
to tender, exchange or sell pursuant to such tender or exchange offer a
portion of any Shares for which a signed direction instrument is not timely
received by the Trustee ("Undirected Shares"). Each such Member, Former
Member or Beneficiary shall be entitled to provide a direction with respect
to a number of Undirected Shares equal to the product of (a) the total
number of Undirected Shares, multiplied by (b) a fraction, the numerator of
which is the number of Shares allocated to the Account of such Member,
Former Member, or Beneficiary who is giving a tender or exchange
instruction with respect to the Undirected Shares and the denominator of
which is the total number of Shares allocated to the Accounts of all
Members, Former Members and Beneficiaries who have given the Trustee tender
or exchange instructions with respect to Undirected Shares.
Unless and until Shares are tendered, exchanged or sold, the individual
instructions received by the Trustee from Members, Former Members or
Beneficiaries shall be held by the Trustee in strict confidence and shall not be
divulged or released to any person, including officers or employees of Schwab,
of the Company, or of any other Affiliated Company; provided, however, that the
Trustee shall advise Schwab or the Company, at any time upon request, of the
total number of Shares not subject to instructions to tender, exchange or sell.
Neither the Trustee, the Investment Committee nor the Committee is required to
make recommendations to Members, Former Members or Beneficiaries as to whether
to tender or exchange or sell Shares.
The Trustee shall tender, exchange, or sell those Shares as to which valid
and timely tender or exchange instructions have been received by it and have not
been subsequently revoked by the Member, Former Member or Beneficiary prior to
the expiration date of the offer or option to which the tender, exchange or sell
instructions are submitted, determined as set forth above. Except as to those
Shares tendered or exchanged in accordance with the provisions of this
subsection (b), the Trustee shall be prohibited from tendering, exchanging or
otherwise depositing or forwarding for sale in connection with the offer or
option any Shares held in the Trust Fund and shall withdraw, prior to the
withdrawal date of the offer or option, any Shares previously tendered for sale
or exchanged as to which timely instructions to withdraw such Shares are
received.
The cash proceeds from the sale of any Shares tendered pursuant to this
subsection (b) shall be invested on behalf of the Member, Former Member or
Beneficiary effecting the tender in the Schwab Value Advantage Money Fund (or
such other Investment Fund as the Investment Committee shall determine in its
sole discretion) under the Trust Fund and any non-cash proceeds of such tender
or sale shall be deposited for the interest of the Member, Former Member or
Beneficiary in such other funding arrangement as the Investment Committee may
establish, in accordance with the terms and conditions of the Plan and the Trust
Agreement. Shares tendered but not purchased shall be returned by the Trustee as
soon as practicable to the Schwab Stock Fund or the ESOP Stock Fund (whichever
is applicable) for the interest of such Members, Former Members or Beneficiaries
as had an interest in such Shares prior to the tender offer. In the event only a
portion of the Shares tendered are purchased, those Shares tendered but not
purchased shall be returned in accordance with the preceding sentence for the
interest of Members, Former Members or Beneficiaries who had instructed Shares
attributable to their interest to be tendered on a proportional basis.
(c) Trustee's Discretion. Notwithstanding the provisions of subsection (a)
or (b) above, the Trustee shall not be required to exercise voting, tender,
exchange or similar rights with respect to Shares in the manner described in
subsection (a) or (b) above, and may exercise voting, tender, exchange or
similar rights with respect to Shares in such manner as it determines in its
discretion, if the Trustee determines that exercising voting, tender, exchange
or other rights in the manner described in subsection (a) or (b) above would be
contrary to the applicable provisions of ERISA.
ARTICLE 8
NATURE OF INTEREST
8.1 Interest in Trust Fund. Each Member shall have a beneficial interest in
the assets of the Trust Fund attributable to the contributions theretofore made
for his benefit, but no Member shall have a direct or indirect ownership right
or interest in any specific asset in the Trust Fund. Except for Matching
Contributions, such interest shall be fully Vested at all times and in no event
shall it be subject to forfeiture. Regardless of the extent to which such
interest is fully Vested, it shall remain subject to and shall be transferable
only in accordance with the terms and conditions of this Plan and the Trust
Agreement. It shall consist of the sum of his interests in the various
Investment Funds, and of his interest in his Account invested in any loan made
to him, as described in Section 10.4(e).
8.2 Interest in Stock Funds. The beneficial interest of each Member, Former
Member and Beneficiary in the Stock Funds shall be expressed in terms of numbers
of whole shares and fractional interests in shares with respect to the ESOP
Accounts and the Matching Contribution Accounts, but no Member shall have a
direct or indirect ownership right or interest in any Common Shares.
ARTICLE 9
ACCOUNTS
9.1 Accounts. The Committee shall maintain on the books of the Plan a
separate Account for each Member, Former Member and Beneficiary which shall
show, with respect to each Investment Fund the following:
(a) the amount of each contribution made on his behalf, any other amounts
allocated to his Account, any Rollover Amount (except a Related Interest as
defined in Section 5.2) and in respect of any transfer of funds credited to his
Account, which, in accordance with the provisions of Article 7, has been
invested in such Investment Fund;
(b) the amount credited to his Account in respect of any such contribution,
allocated amount or Rollover Amount and to such Investment Fund from any other
Investment Fund;
(c) any loan, withdrawal, distribution, or transfer;
(d) the Member's allocable share of the income and expenses and realized
and unrealized gains and losses;
(e) any amount that had been subject to the election described in Paragraph
A of Article V of the Prior Plan for any Plan Year commencing prior to January
1, 1980;
(f) any amount that had been subject to the election described in Paragraph
B of Article V of the Prior Plan for any Plan Year commencing after December 31,
1979 and prior to January 1, 1985, or commencing after December 13, 1988;
(g) any amount attributable to the Profit-Sharing Amount contributed to or
for the benefit of the Member under the terms of the Prior Plan for any Plan
Year commencing after December 31, 1984 and prior to January 1, 1989;
(h) any amount attributable to any 401(k) Contributions made hereunder on
behalf of each such Member and Former Member hereunder or to any Tax-Deferred
Savings Contributions made on behalf of a Member or Former Member under the
terms of the Prior Plan;
(i) any amount attributable to any Matching Contributions made hereunder on
behalf of each such Member and former Member hereunder;
(j) the amount deemed invested by such Member or Former Member in the
outstanding balance of any loan as described in Section 10.4(e); and
(k) the number of shares and fractional shares of ESOP Stock which have
been allocated and credited to such Member or Former Member's Account.
The Account maintained for each Member shall also show, with respect to any
Plan Year, the dollar amount of any contribution that is to be made to the Plan
on the Member's behalf for such year but which has not yet been made to the
Plan, or invested in any Investment Fund, as of the close of such year. In
addition to the foregoing, the Committee shall maintain on the books of the Plan
a separate rollover Account for any Related Interests (as defined in Section
5.2.) transferred to the Plan for a Member.
9.2 Cancellation of Shares. In the event of any complete distribution or
withdrawal to be made to a Member in cash from the Schwab Stock Fund, a number
of such Shares credited to the Account of the Member in such Fund shall be
canceled, and cash shall be segregated from the assets of such fund, for payment
to the Member in accordance with the provisions of the Plan. In the event that a
complete distribution or installment payments are to be made to a Member, Former
Member or Beneficiary of an interest in the Schwab Stock Fund in the form of
Capital Stock (and in cash for any fractional shares thereof), all Shares
credited to such person in the Schwab Stock Fund shall be canceled. Upon its
cancellation of such shares, the Trustee shall segregate from the assets of the
Schwab Stock Fund, on the date of such cancellation, the largest number of whole
shares of Capital Stock which, as of the Valuation Date coinciding with or
immediately preceding the date of such cancellation, did not have a value
exceeding the value of the Shares being canceled, and an amount of cash equal to
the difference, if any, as of such Valuation Date, between the value of the
whole shares being so segregated and the value of the Shares being canceled.
Such Capital Stock and cash shall be held by the Trustee for payment to the
Member in accordance with the provisions of the Plan.
9.3 Distribution of ESOP Stock. In the event that a complete distribution
or installment payments are to be made to a Member, Former Member or Beneficiary
of an interest in the ESOP Stock Fund, the Committee shall direct the Trustee to
segregate from the assets of such Fund the number of whole shares of the ESOP
Stock credited to the Member's Account as of the Valuation Date coinciding with
or immediately preceding the date on which the distribution is to be made or the
installment payments are to commence, as applicable, and an amount of cash
representing the fractional shares, if any, of such ESOP stock as of such
Valuation Date. Such ESOP Stock and cash shall be held by the Trustee for
payment to such person in accordance with the provisions of the Plan.
9.4 Statements of Account. The Committee shall submit to each Member,
Former Member and Beneficiary, as soon as practicable after the close of each
Plan Year, a statement setting forth
(a) in the case of the ESOP Stock Fund, the number of shares and fractional
shares of ESOP Stock allocated and credited to such person's Account during such
Plan Year and credited to such person's Account at the close of such Plan Year,
(b) the value of such person's interest in each Investment Fund at the
close of such Plan Year,
(c) the amount of the 401(k) Contributions made on behalf of such Member
and Former Member under Sections 4.1 and 4.2 for the last Plan Year,
(d) the amount of Matching Contributions made on behalf of such Members and
former Members for the last Plan Year, and
(e) such additional information as the Committee deems desirable.
9.5 Electronic Service. To the extent permitted by the Committee, and
subject to such rules and procedures as the Committee may prescribe, a Member
may obtain the following information by using a telephone, on-line or other
electronic service which is made available by the Committee, in its discretion,
for the purpose of allowing a Member to communicate directly with the Trustee:
(a) the balance of his Account, and the portion of such balance invested in
each Investment Fund or which consists of shares of ESOP Stock allocated to his
Account,
(b) his current investment elections as to future 401(k) Contributions, and
his current election as to the percentage of his Compensation, or the percentage
of his award under each of the Annual Incentive Plans, to be contributed to the
Plan on his behalf as a 401(k) Contribution,
(c) the amount in his Account available for a loan or a withdrawal,
(d) the balance of any outstanding Plan loan, and the amount of each
monthly payment under such loan,
(e) such other information as determined by the Committee.
ARTICLE 10
WITHDRAWALS AND LOANS
10.1 Hardship Withdrawals. A Member may make a hardship withdrawal from his
Account at any time of 401(k) Contributions made on his behalf, subject to the
following conditions:
(1) The withdrawal must be made on account of an "immediate and heavy
financial need" of the Member, as defined in section
1.401(k)-1(d)(2)(iv)(A) and (C) of the Treasury Regulations or in any
revenue ruling or notice issued by the Internal Revenue Service, and as
determined by the Committee in its sole discretion.
(b) The amount withdrawn may not exceed the lesser of
(1) the amount required to meet the Member's "immediate and heavy
financial need", or
(2) the balance of the Member's Account, reduced by
(i) the unpaid amount outstanding on any loan made to the Member
under Section 10.4(e),
(ii) all earnings credited to the Member's Account after December
31, 1988 (net of any negative earnings that may have been charged to
the Member's Account after such date) with respect to any 401(k)
Contributions (or any Tax-Deferred Savings Contributions or any
contributions with respect to Elective Profit-Sharing Amounts, as
defined in the applicable provisions of the Prior Plan) made to the
Plan on the Member's behalf, and
(iii) the portion of such Account, if any, invested in the ESOP
Stock Fund and the Member's Matching Contribution Account. For
purposes of clause (1) hereof, the amount required to meet a Member's
"immediate and heavy financial need" may include the amount of any
taxes and penalties payable with respect to the amount withdrawn by
the Member hereunder.
(c) The Member must also withdraw at such time, or must have previously
withdrawn, all amounts the Member may be permitted to withdraw under Section
10.2, and all employee contributions permitted to be withdrawn by the Member
under any other plan maintained by the Company or any other Affiliated Company.
In addition, the Member must have obtained all nontaxable loans currently
available under this Plan, and under any other plan maintained by the Company or
any other Affiliated Company, to the extent obtaining such loans is required
under section 401(k) of the Code and the Regulations issued thereunder.
(d) Notwithstanding any other provision of the Plan to the contrary, no
401(k) Contributions may be made on behalf of the Member for a period of 12
months following the Member's receipt of a hardship withdrawal hereunder that
includes any amounts attributable to any 401(k) Contributions made under the
Plan (or any contributions with respect to Elective Profit-Sharing Amounts under
the terms of the Prior Plan) on the Members' behalf. In addition, during such
12-month period, no employee contributions may be made by the Member, and no
amounts may be deferred at the Member's election, under any other plan
maintained by the Company or any other Affiliated Company.
(e) Notwithstanding the provisions of Section 6.2(a), the maximum amount of
401(k) Contributions that may be made on a Member's behalf for the Plan Year
following the Plan Year in which the Member makes a hardship withdrawal
described in subsection (d) above shall not exceed the 401(k) dollar limit (as
indexed) in accordance with section 402(g) for such following year, less the
amount of the 401(k) Contributions made on the Member's behalf for the Plan Year
in which such hardship withdrawal was made.
10.2 Discretionary Withdrawals. A Member may make discretionary withdrawals
from his Account, subject to the following conditions:
(a) No more than one discretionary withdrawal may be made by a Member
hereunder during any Plan Year.
(b) After attaining age 59-1/2, a Member may withdraw any portion or all of
his Account other than any amount (1) that, under Section 10.4(e), is deemed to
be invested in the outstanding balance of any loan made to the Member, or (2)
that is invested in the ESOP Stock Fund or allocated to the Member's Matching
Contributions Account and is not subject to diversification under Section 7.6.
(c) Prior to attaining age 59-1/2, a Member may withdraw any portion of his
Account other than
(1) any amount described in clause (1) or (2) of subsection (b) above,
(2) any amount that had been subject to the election provided for in
Paragraph B of Article V of the Prior Plan for any Plan Year commencing
after December 31, 1979 and prior to January 1, 1985,
(3) the Profit-Sharing Amount contributed for the benefit of the
Member under the Prior Plan for any Plan Year commencing after December 31,
1984,
(4) amounts attributable to any 401(k) Contribution made on his behalf
hereunder for any year or to any Tax-Deferred Savings Contributions made on
his behalf for any year under the terms of the Prior Plan and
(5) amounts described in clause (ii) of Section 10.1(b)(2).
10.3 Withdrawal Procedures. Withdrawals shall be made hereunder in
accordance with the following procedures:
(a) A Member who wishes to make a withdrawal under Section 10.1 or 10.2
shall communicate such request by means of a telephone, on-line or other
electronic service made available by the Committee in its discretion, subject to
such rules and procedures as the Committee shall prescribe, setting forth the
amount the Member wishes to withdraw and specifying those Investment Funds in
which the Member's Account is invested from which the withdrawal is to be made.
(b) In the case of a hardship withdrawal, the Member's request shall
include the amount needed and such information as may be required to make a
determination as to whether or not the conditions described in Section 10.1(a)
and (b)(1) will be met in the Member's case.
(c) After making a request for a withdrawal, the Trustee shall furnish the
Member with the documents which must be completed by the Member in order to make
the withdrawal. As soon as practicable after such documents have been completed
and filed by the Member (or in the case of a hardship withdrawal, after receipt
of such completed documents from the Member and approval of the Member's
request), the Trustee shall distribute the amount of the withdrawal so requested
(or approved) pro rata from the Investment Funds.
10.4 Loans to Members. Any Member who is actively employed by the Company
or who is a "party in interest," within the meaning of ERISA Section 3(14), with
respect to the Plan (hereinafter referred to as an "Eligible Member") may borrow
from the Eligible Member's Account, other than such Eligible Member's Matching
Contributions Account and his interest in the ESOP Stock Fund, in accordance
with the following provisions:
(a) Application. An Eligible Member may request a loan by communicating
such request by means of a telephone, on-line or other electronic service made
available by the Committee in its discretion, subject to such rules and
procedures as the Committee shall prescribe. Such request shall:
(1) specify the terms pursuant to which the loan is requested to be
made;
(2) provide such information and documentation as the Committee shall
require.
Upon receiving such request, the Trustee shall obtain such documentation as
the Committee may require, including the Eligible Member's execution of an
authorization for the repayment of the loan through payroll deductions and a
promissory note granting a security interest in his interest in the Trust Fund
not to exceed fifty percent (50%) of such interest (or such lesser amount of
such interest as the Committee may determine constitutes adequate security for
such loan under applicable laws and Regulations) to secure the loan.
A loan shall not be effective until such documents have been duly executed
by the Eligible Member in accordance with such procedures as the Committee may
establish from time to time.
(b) Terms. The Committee shall establish standards, determined in
accordance with applicable Regulations, which shall be uniformly applicable to
all Eligible Members similarly situated and shall govern the approval or
disapproval of Member loan applications. The terms for each loan shall be set
solely in accordance with such standards. Such standards shall prescribe the
annual rate of interest to be charged on each loan, which shall be a reasonable
rate of interest determined by reference to the prevailing rate of interest
charged by commercial lenders under similar circumstances in accordance with
applicable Regulations. Such standards may also prescribe a maximum percentage
of an Eligible Member's pay which may be subjected to payroll deductions with
loan repayment under varying circumstances, minimum and maximum repayment
periods, a required minimum loan amount (which may not exceed $1,000), loan
origination and maintenance fees, and other relevant factors. An Eligible Member
may not have more than two (2) loans outstanding at any time. An Eligible Member
may not refinance an existing loan or obtain a subsequent loan for the purpose
of repaying an existing loan; provided, however, that the Committee may
establish uniform guidelines to permit one or more subsequent loans prior to
full repayment of an outstanding loan and, with respect to any outstanding loan,
to permit the Eligible Member to reborrow an amount equal to the excess of the
original amount of the loan over the balance of the loan outstanding at the time
of such reborrowing. The maximum loan permitted (when added to the outstanding
balance of all other loans) shall not exceed the lesser of
(1) $50,000 reduced by the excess (if any) of
(i) the highest outstanding loan balance attributable to the
Eligible Member requesting the loan during the one-year period ending
on the day preceding the date of the loan, over
(ii) the outstanding balance of all other loans from the Plan to
the Eligible Member on the date of the loan, or
(2) 50 percent of the value of the Eligible Member's Vested interest
in his Account as of the Valuation Date immediately preceding the date on
which the Committee receives the completed application for the loan.
(c) Approval. The Committee shall establish a procedure for promptly
approving or disapproving loan applications after receipt thereof, and for
promptly notifying the applying Eligible Member of such approval or disapproval.
The Committee's review standards shall be those which would be used in a normal
commercial setting by an entity in the business of making similar types of
loans.
(d) Loan Proceeds. Subject to subsection (c) above, the Committee, upon
approval of a completed application, the Trustee shall transfer to the Eligible
Member cash in an aggregate amount equal to the amount of the loan. The
transferred amount shall be withdrawn pro-rata from each Investment Fund in
which the Eligible Member's Account is invested, other than amounts derived from
the ESOP Stock Fund that is not subject to diversification under Section 7.6.
(e) Investment in Loan. The unpaid balance owed by an Eligible Member on a
loan under the Plan shall not reduce the amount credited to his or her Account.
However, from the time of payment of the proceeds of the loan to the Eligible
Member, such Account shall be deemed invested, to the extent of such unpaid
balance, in such loan until the complete repayment thereof or distribution from
such Account.
(f) Repayment. Each loan to an Eligible Member under the Plan shall be
repaid in level amounts through regular payroll deductions; provided, however,
that an Eligible Member shall be permitted to prepay a loan in its entirety
without penalty (but without any change in the subsequent amortization
schedule). Except as otherwise permitted by the Code and Regulations, each loan
shall have a repayment period not to exceed 60 months, or 120 months if the loan
is used to acquire any dwelling unit which within a reasonable period of time is
to be used as the principal residence of the Eligible Member. Principal
residence status shall be determined by the Committee at the time the loan is
made. Any repayment of principal and interest on a loan made to an Eligible
Member under the Plan shall be invested in the Plan's Investment Funds in
accordance with the investment election in effect for the Eligible Member's
401(k) Contributions under Section 7.4 on the day on which such repayment is
received by the Trustee, or, if no such election is in effect on such day, in
the Schwab Value Advantage Money Fund or a comparable fund. Effective as of
April 1, 1999, if an Eligible Member's Account becomes distributable pursuant to
Article 12, any loan to such Eligible Member shall become due and shall be
repaid within 90 days after the date such Eligible Member terminates employment
with an Affiliated Company.
(g) Security. The loan shall be secured by the portion of the Eligible
Member's Account equal to the total amount of the loan. As a condition of any
loan to an Eligible Member hereunder, the Eligible Member shall agree in writing
that in the event of a default by the Eligible Member on such loan, the balance
of his Account may, to the extent used as security for the loan, be utilized as
an offset against, or otherwise may be applied to satisfy, the Eligible Member's
obligation to repay any amount outstanding on such loan
(h) Default. The failure to make any payment under the loan when due, under
any circumstances, shall constitute a default on the loan, except that,
effective as of April 1, 1999, an event of default shall not be deemed to occur
before the last day of the calendar quarter following the calendar quarter in
which such payment was due. Notwithstanding the foregoing, an event of default
shall not occur with respect to an Eligible Member whose Account becomes
distributable under Article 11 before the last day of the 90-day period
beginning on the date such Eligible Member terminates employment with an
Affiliated Company. Notwithstanding any other provision of the Plan, a loan made
pursuant to this Section shall be a first lien against the Eligible Member's
Account to the extent of the security interest in such Account. Any amount of
principal or interest due and unpaid on the loan at the time of any default
shall be satisfied by deduction from the Eligible Member's Account, to the
extent used as security for the loan as follows:
(1) in the case of an Eligible Member who is an Employee and who is
not, at the time of the default, eligible to receive a distribution of his
Account, at such time as he first becomes eligible to receive a
distribution of his Account for any reason; or
(2) in the case of any other Eligible Member, immediately upon such
default. The Committee shall take any commercially reasonable action it
deems necessary or desirable to satisfy any remaining obligations under the
loan.
(i) Administration. The loan program under the Plan shall be administered
in all respects by the Committee or its delegatee.
ARTICLE 11
RETIREMENT
11.1 Retirement Under Retirement Plan or Employment Agreement. Any Member
who is also a member of the Retirement Plan, or who is employed pursuant to an
employment agreement, and who terminates his employment under the early
retirement, normal retirement, postponed retirement or disability retirement
provisions of the Retirement Plan, shall also be deemed to have retired under
this Plan on the day on which he retired under the Retirement Plan or such
agreement.
11.2 Other Employees. Any Member who is not a member of the Retirement Plan
or who does not retire pursuant to the terms of an employment agreement shall be
retired on whichever of the following dates is applicable:
(a) Early Retirement. On the last day of any month ending after he has
attained age 55 which is not less than 30 days nor more than 90 days after the
Member has filed in accordance with such procedures as the Committee may
prescribe a request for his retirement on such date with the Committee.
(b) Normal Retirement. On the last day of the month in which the Member
attains age 65, if he elects to retire on such day.
(c) Postponed Retirement. If the Member continues as an Employee after the
last day of the month in which he attains age 65, on the last day of any month
thereafter on which the Member elects to retire.
(d) Disability Retirement. In the case of a Member who is suffering from a
mental or physical disability which entitles him to receive a benefit under the
long-term disability plan maintained by the Affiliated Companies, on the last
day of the month in which such disability arises.
ARTICLE 12
DISTRIBUTION OF BENEFITS
12.1 Distributions. A Member's Vested Account balance shall become
distributable to him upon his retirement under Article 11, or upon any other
termination of employment with the Affiliated Companies. Distributions shall be
made in accordance with the rules set forth hereinafter.
12.2 Commencement of Distributions. The distribution of a Member's Vested
Account balance hereunder shall be made, or shall commence, as soon as
practicable following the date on which the Member retires or otherwise
terminates employment. Any Member who retires under Article 11 may delay the
distribution of his Account balance until after the final Valuation Date on
which his Account is credited with any earnings or losses in any Investment
Fund, or with any ESOP Stock or Matching Contributions, to which he is entitled
in respect of any contribution made to the Trust Fund on his behalf after the
date of his retirement. As provided under Sections 12.3, 12.4, and 12.5, a
Member generally has the right to a period of at least thirty (30) days to make
certain decisions with respect to the distribution of his benefits. However, the
Committee may permit the Member to waive this right provided that (1) the
Committee clearly notifies the Member that the Member has a right to a period of
at least 30 days, and (2) the Member, after receiving the notice, affirmatively
elects to begin the distribution as soon as practicable.
12.3 Form and Amount of Distributions.
(a) Optional Forms of Payment. The Member shall elect to have the
distribution of his Account balance paid in the form of either
(1) a single lump-sum payment or
(2) prior to the Elimination Date (as defined in Section 12.3(c)),
installment payments. It is provided, however, that a Member shall not be
entitled to make the election described in the preceding sentence, and his
Account balance shall automatically be paid in the form of a single
lump-sum payment, unless
(i) he has retired under Section 11.1 or Section 11.2, other than
by reason of a disability retirement, and
(ii) as of the Valuation Date coinciding with or immediately
preceding the date on which the distribution of his Account is
scheduled to be made or commence, the balance of his Account exceeds
$5,000.
A Member shall make the election described in the preceding paragraph by
submitting to the Committee in accordance with such procedures as it may
establish notice of such election no more than 90 days, but no less than 30
days, prior to the date on which the distribution from his Account is to be made
or commence (the "Benefit Starting Date").
(b) Amount of Lump-Sum Payments. If the Member's Account balance is to be
paid in the form of a single lump-sum payment, the amount of such payment shall
be equal to the balance of his Account on the Valuation Date coinciding with or
immediately preceding the date on which the payment is to be made. In the case
of a Member who is eligible, but declines, to make the election described in the
second sentence of Section 12.2, any amount credited to his Account after the
Valuation Date referred to in the preceding sentence shall be distributed to the
Member, in the form of a single lump-sum payment, as soon as practicable after
the date on which such amount is credited to his Account.
(c) Rules for Installment Payments. Notwithstanding any other provision of
the Plan, the installment form of payment set forth in Section 12.3(a)(ii) shall
be eliminated from the Plan, effective with respect to distributions made as of
the earlier to occur of the following dates (the "Elimination Date") (i) 90 days
after the Member has received a summary plan description describing the
elimination of the installment form of payment from the Plan, or (ii) January 1,
2003. If, prior to the Elimination Date, the Member elects to have his Account
balance distributed in installment payments, the rules set forth in Appendix A
shall apply.
12.4 Payments in Cash or in Stock. Any distribution from any Investment
Fund, other than the Schwab Stock Fund and the ESOP Stock Fund, shall be made in
cash (or in-kind to a Schwab Rollover IRA or a Charles Schwab brokerage
account). Except as provided below, any distribution from the Schwab Stock Fund
and the ESOP Stock Fund shall be made in shares of Capital Stock or ESOP Stock
(and cash representing fractional shares thereof).
If a Member's Account balance is to be paid in the form of a single
lump-sum payment under Section 12.3, then such Member may elect to have the
portion of his Account balance invested in the Schwab Stock Fund, and/or in the
ESOP Stock Fund, paid to him, from each such fund, as follows:
(a) cash in an amount equal to the sum of (1) the value of the total number
of shares of Capital Stock or ESOP Stock, as applicable, being held for payment
by the Trustee to the Member under Section 9.2 or 9.3, as of the Valuation Date
on which the Trustee receives the proceeds of the sale of the Member's interest
in such fund, plus (2) the amount of cash being held by the Trustee for payment
to the Member under Section 9.2 or 9.3; or
(b) shares of Capital Stock or ESOP Stock held by the Trustee for such
member, plus the amount of cash representing the fractional shares, if any, of
such ESOP Stock or Capital Stock and cash being held by the Trustee for payment
to the Member pursuant to Section 9.2 or 9.3.
Such election shall be made on the election form described in Section
12.3(a) (or if the Member is not furnished with such an election form because he
is not eligible to make the election described in Section 12.3(a) on an election
form furnished to the Member by the Committee for such purpose and filed with
the Committee no more than 90 days, and no less than 30 days, before the Benefit
Starting Date, as defined in Section 12.3(a)).
12.5 Consent to Distribution Prior to Age 65. Notwithstanding the preceding
Sections of this Article 12, no distribution of a Member's Account balance to
the Member shall be made or commence prior to his attaining age 65 unless either
(a) the amount of such Account balance does not exceed $5,000 on the Valuation
Date coinciding with or immediately preceding the date on which such
distribution is to be made or commence, or (b) the Member consents in writing,
to have such distribution made or commence.
For purposes of clause (b) of the preceding paragraph, the Committee shall
furnish the Member with an explanation of the Member's right to defer his
distribution until he has attained age 65 and the effect of such deferral. Such
explanation shall be furnished no less than 30 days and no more than 90 days
before the date on which the distribution to the Member is to be made or
commence. The Member may provide his consent to the distribution only after
receiving such explanation. If the distribution to a Member of the balance of
his Account cannot immediately be made or commence by reason of his failure to
consent to such distribution as provided in clause (b) of the preceding
paragraph, distribution with respect to his Account shall be made or commence as
soon as practicable after the earliest to occur of the following: the date on
which the Member attains age 65, the date of the Member's death, or the date on
which the Committee receives in accordance with such procedures as the Committee
may establish notice from the Member requesting, and consenting to, the
immediate making or commencement of the distribution of the entire balance of
the Member's Account.
During the period that the Member's Account balance remains in the Plan by
reason of his failure to consent to an immediate distribution thereof, the
Member may direct the investment of his Account, pursuant to Article 7, as if he
were an active employee, but he may not borrow against, obtain a hardship
withdrawal from or take a partial withdrawal from his Account.
If the distribution of a Member's Account balance is deferred under the
above rules, then, no more than 90 days, and no less than 30 days, before the
distribution to him of his Accounts balance is made or commences under the
second preceding paragraph, such Member may make the election under Section
12.3(a) as to the form of payment for the distribution, and the election under
Section 12.4 as to whether a distribution from the Schwab Stock Fund, and/or
from the ESOP Stock Fund, is to be made in cash or in stock; provided, however,
that if the Member had terminated employment prior to becoming eligible to
retire under Article 11, and if he requests, and consents to, the distribution
of his Account prior to attaining age 65, he may not make the election contained
in Section 12.3(a), and his Account balance shall automatically be distributed
to him in the form of a single lump-sum payment.
12.6 Death Benefits.
(a) Distribution at Death. If any person ceases to be a Member by reason of
his death, or if any Former Member dies having an interest in the Trust Fund,
then, notwithstanding any of the foregoing provisions of this Article 12, the
Committee shall direct the Trustee to distribute to the Beneficiaries of such
Member or Former Member, at Beneficiary's election, in the form of (1) ESOP
Stock representing the Member's or Former Member's then interest in the ESOP
Stock Fund and Matching Contribution Account, (2) Capital Stock representing the
Member's or Former Member's then interest in the Schwab Stock Fund, and (3) cash
representing the Member's or Former Member's then interest in each of the other
Investment Funds. The distribution shall be made as soon as practicable
following the death of the Member or Former Member, and shall be made in the
form of a single lump-sum payment. The amounts included in such payment shall be
based on the Member's interest in each of the Investment Funds under the Plan as
of the Valuation Date coinciding with or immediately preceding the date on which
the payment is to be made.
(b) Designation of Beneficiary. A Member or Former Member may designate a
Beneficiary or Beneficiaries by submitting to the Committee in accordance with
such procedures as it may establish notice of such designation at any time prior
to his death, and may revoke or change the Beneficiaries so designated without
their consent by similar notices submitted to the Committee at any time and from
time to time prior to his death. Notwithstanding the foregoing, if the Member or
Former Member is married, his spouse must consent, in a notarized writing, to
such designation or any revocation or change thereof (unless the Committee makes
a determination in accordance with the Code and the Regulations that no such
consent is required). If the Member or Former Member fails to designate any
Beneficiary, or is deemed to have so failed because spousal consent, if
required, was not obtained, or if no designated Beneficiary survives the Member
or Former Member, then the Member's or Former Member's Beneficiary shall be his
surviving spouse, or, if none, his estate.
12.7 Distribution Requirements. Notwithstanding any other provision of the
Plan to the contrary, all distributions to be made with respect to a Member's
benefit under the Plan shall be subject to the following provisions unless
otherwise provided by law:
(a) The distribution of any benefit payable to a Member shall be made or
commence no later than by the earlier of (1) the 60th day after the close of the
Plan Year in which occurs the latest of the following: (i) the date on which the
Member attains age 65, (ii) the 10th anniversary of the date on which the Member
began to participate in the Plan or (iii) the date on which the Member retires
under Article 11 or otherwise terminates employment with all Affiliated
Companies; or (2) (i) in the case of a Member who is a "5% owner" (as defined in
Code section 416), the April 1 following the calendar year in which he attains
age 70 1/2. Notwithstanding the foregoing, a Member other than a 5% owner may
elect to defer distribution of benefits until the calendar year in which he
retires under Article 11 or otherwise terminates employment with all Affiliated
Companies or may elect to commence to receive distributions commencing April 1
following the calendar year in which he attains age 70 1/2. If the distribution
of a Member's benefit is required to be made to commence under this subsection
(a), then the Member shall elect the form and manner in which his benefit is to
be distributed under the provisions of Sections 12.3 and 12.4, as if he had
retired under Article 11, or had terminated employment with all Affiliated
Companies, as applicable, as of the date on which the payment of his benefit is
required to be made or commence under the preceding sentence; provided, however,
that the Member's benefit shall be paid over a period which does not extend
beyond the life expectancy of such Member or the joint life expectancies of such
Member and his Beneficiary. Notwithstanding any provision in the Plan to the
contrary, all benefit payments shall comply with section 401(a)(9) of the Code,
including the incidental death benefit requirements of Code section
401(a)(9)(G), and the Regulations or Internal Revenue Service rulings and
notices issued thereunder.
(b) With respect to any Capital Stock or ESOP Stock held in the Member's
Account, unless the Member withholds consent thereto under Section 12.5, the
distribution of the portion of his Account invested in Capital Stock or ESOP
Stock shall be made or commence not later than one year after the close of the
Plan Year in which he retires under Article 11 or otherwise terminates
employment with all Affiliated Companies. The distribution of such portion of
the Member's Account shall be made in the form of a single lump-sum payment, or
in the form of substantially equal periodic payments (not less frequently than
annually) over a period not exceeding five years.
(c) If distribution of a Member's benefit has commenced prior to a Member's
death, and such Member dies before his entire benefit is distributed to him,
distribution of the remaining portion of the Member's benefit to the Member's
Beneficiary or Beneficiaries shall be made at least as rapidly as under the
method of distribution in effect as of the date of the Member's death.
(d) If a Member dies before distribution of his benefit has commenced,
distributions to his Beneficiary or Beneficiaries shall be made on or before the
December 31 of the calendar year which contains the fifth anniversary of the
date of such Member's death.
12.8 Tax Withholding. Notwithstanding the provisions of this Article 12,
the Committee shall take such action as may be required to comply with the
tax-withholding provisions of the Code.
12.9 Direct Rollovers. This Section 12.9 applies to any distribution made
under the Plan which is an "Eligible Rollover Distribution". Notwithstanding any
provision of the Plan to the contrary, the "Payee" of any Eligible Rollover
Distribution made under the Plan may elect, at the time and in the manner
prescribed by the Committee, to have all or any portion of such distribution
paid as a "Direct Rollover" to an "Eligible Retirement Plan" specified by the
Payee.
12.10 Unclaimed Distribution. If the Committee cannot locate a person
entitled to receive a benefit under the Plan within a reasonable period (as
determined by the Committee in its discretion, but prior to the date the benefit
would otherwise escheat under applicable state laws), the amount of benefit will
be treated as a forfeiture during the Plan Year in which the period ends. If at
any time before final distributions are made from the Trust Fund following
termination of the Plan, a person who was entitled to a benefit which has been
forfeited under this Section makes a claim to the Committee or the Trustee for
his benefit, he will be entitled to receive, as soon as administratively
feasible, a benefit in an amount equal to the value of the forfeited benefit on
the date of forfeiture. This benefit will be reinstated from Participating
Company contributions made to the Plan for this purpose.
ARTICLE 13
CERTAIN RIGHTS AND LIMITATIONS
13.1 Benefits Payable Solely from Trust Fund. All benefits payable under
this Plan shall be paid or provided for solely from the Trust Fund, and no
Participating Company in the Plan shall have any liability or responsibility
therefor.
13.2 Prohibition Against Alienation of Benefits. Except insofar as may
otherwise be required by law or pursuant to the terms of a Qualified Domestic
Relations Order (as defined below), no benefit under the Plan shall be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt so to anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge the same shall be void; nor shall
any such benefit be in any manner liable for or subject to garnishment,
attachment, execution or levy, or liable for or subject to the debts, contracts,
liabilities, engagements or torts of the person entitled to such benefit; and in
the event that the Committee shall find that any Former Member or Beneficiary
has become bankrupt or has attempted to anticipate, alienate, sell, transfer,
assign, pledge, encumber or charge any benefits under the Plan, then payment of
such benefit shall, in the discretion of the Committee, cease and terminate, and
in that event the Committee shall hold or apply the same to or for the benefit
of such Former Member or Beneficiary or the children or other dependents of the
same, in such manner and in such proportion as the Committee may deem proper,
and any such application shall be a complete discharge of all liabilities of the
Plan and the Trustee therefor. For purposes of this Section 13.2, a "Qualified
Domestic Relations Order" means any judgment, decree, or order (including
approval of a property settlement agreement) which has been determined by the
Committee, in accordance with procedures established under the Plan, to
constitute a qualified domestic relations order with the meaning of section
414(p)(1) of the Code. To the extent provided by the terms of a Qualified
Domestic Relations Order, an alternate payee may at any time request
distribution from the Plan in the form of a lump sum, payable as soon as
practicable after such domestic relations order is determined by the Committee
to be so "qualified" and upon completion of the valuation and accounting process
in order to determine the amount of the distribution; provided that, if such
alternate payee's interest in the Plan does not exceed $5,000, such amounts
shall be distributed as soon as practicable regardless of whether the alternate
payee makes such a request.
The prohibition against assignment or alienation of benefits contained in
this Section 13.2 shall not apply to any loan to a Member made under this Plan
if such loan is secured by the Member's interest in the Trust Fund and is exempt
from the tax imposed by section 4975 of the Code by reason of section 4975(d)(1)
thereof.
Notwithstanding any provision in the Plan to the contrary, the Plan shall
honor a judgment, order, decree or settlement providing for the offset of all or
a part of a Member's or Former Member's benefit under the Plan, to the extent
permitted under Code Section 401(a)(13)(C); provided that the requirements of
Code Section 401(a)(13)(C)(iii) relating to the protection of the Member's
spouse (if any) are satisfied.
13.3 Incompetency. In the event that the Committee shall find that a Member
or other person entitled to a benefit under the Plan is unable to care for his
affairs because of illness or accident or because he is a minor, the Committee
may direct that any benefit payment due him, unless claim shall have been made
therefor by a duly appointed guardian, committee or other legal representative,
be paid to a spouse, child, parent or other blood relative of such person or to
anyone found by the Committee to have incurred expense for the support and
maintenance of such person, and any such payment so made shall be a complete
discharge of all liabilities of the Plan and Trustee therefor.
13.4 No Right to Continued Employment. The establishment and continuation
of the Plan shall not confer any legal rights upon any Member or any person to
continued employment, nor shall such establishment or continuation interfere
with the rights of a Participating Company to discharge any Member and to
otherwise treat him without regard to the effect which such discharge might have
upon him as a Member.
13.5 Payment of Taxes. The Trustee shall have the right to deduct and
withhold from any amount which it is otherwise obligated to pay under the Plan
that which it may be required to deduct or withhold pursuant to any applicable
statute, law, regulation or order of any jurisdiction whatsoever. The Trustee
shall not be required to pay any amount to any Beneficiary of any deceased
Member pursuant to the provisions of the Plan until such Beneficiary or the
legal representatives of the deceased Member shall have furnished the Trustee
with evidence satisfactory to the Trustee of the payment or the provision for
the payment of any estate, transfer, inheritance or death taxes which may be
payable with respect thereto.
13.6 Merger or Consolidations with Other Plans. In the event that the Plan
is merged or consolidated with any other plan, or in the event of any transfer
of assets or liabilities of the Plan to any other plan, the benefit which each
Member or Former Member would be entitled to receive if the Plan terminated
immediately after such merger, consolidation or transfer shall be at least equal
to the benefit which such Member or Former Member would have been entitled to
receive if the Plan had terminated immediately before the merger, consolidation
or transfer.
Moreover, the Company reserves the right, in its capacity as sponsor of the
Plan, to direct that Members' Accounts in the Plan be spun off and transferred
to a qualified plan maintained by the buyer in any transaction involving the
sale of assets of the Company, an Affiliated Company, or the sale of a
subsidiary of the Company, or an Affiliated Company, if such Members are
employed in the subsidiary that is being sold or in the division or operating
unit from which the assets are being sold. If such transfer of Members' Accounts
occurs, any Member who becomes employed by the buyer or an affiliate of the
buyer shall not be deemed to have incurred a termination of employment for
purposes of Section 12.1 of the Plan, and any future rights to withdrawals or
distributions of transferred Accounts shall be determined solely under the term
of the plan to which the Accounts are transferred.
13.7 Non-Diversion. It shall be impossible at any time for any part of the
Trust Fund to be used or diverted to purposes other than the exclusive purposes
of providing benefits to Members and their Beneficiaries, and paying the
reasonable expenses of the Plan and the Trust as determined by the Committee,
except under the following circumstances:
(a) In the case of a contribution which is made by a Participating Company
by mistake of fact, such contribution shall revert to the Participating Company
within one year after the payment of the contribution.
(b) Each contribution which a Participating Company makes under the Plan is
so made subject to the condition that such contribution is deductible under
section 404 of the Code. To the extent a deduction under section 404 of the Code
for a contribution by a Participating Company to the Plan is disallowed, such
contribution shall revert to such Participating Company within one year after
the disallowance of the deduction.
13.8 Use of Electronic Media. Notwithstanding any other provision of the
Plan, including any provision which requires the use of a written instrument, to
the extent permitted by applicable law, the Committee may establish procedures
for the use of electronic media in communications and transactions between the
Plan or the Committee and Members and Beneficiaries. Electronic media may
include but are not limited to, e-mail, the Internet, intranet systems and
automated telephonic response systems.
13.9 Administrative Conversions. Notwithstanding any other provision of the
Plan, during any period designated by the Committee for the purpose of
implementing or converting the Plan's administrative or other systems, the
Committee may temporarily suspend, in whole or in part, certain provisions of
the Plan, which may include, but are not limited to, a Member's right to change
contribution elections, investment elections and a Member's right to borrow or
withdraw from his Account or obtain a distribution from his Account.
ARTICLE 14
ADMINISTRATION OF THE PLAN
14.1 Appointment of the Committee. The Board of Directors shall appoint a
Committee, which shall consist of five Members who shall be officers of the
Company or any Participating Companies, all to be appointed by the Board of
Directors and to serve at the pleasure of the Board of Directors. Any vacancy in
the Committee arising by death, resignation or otherwise shall be filled by the
Board of Directors.
14.2 Duties and Powers of Committee. Except for such duties as are assigned
under the terms of the Plan to the Trustee, the Investment Committee, or to any
investment manager or adviser appointed under Section 15.4, the Committee shall
have sole responsibility for operation and administration of the Plan, and for
the proper execution of its provisions. The Committee shall also have the
discretionary authority to construe and interpret the Plan, supply omissions,
resolve ambiguities and inconsistencies and correct deficiencies in the language
of the Plan and to determine all questions arising under the Plan (including
without limitation factual questions). It shall maintain all necessary books of
accounts and records. In furtherance of the foregoing, the Committee shall have
the sole power and responsibility, in its discretion,
(a) to establish, interpret, enforce, amend and revoke from time to time
such rules and regulations for the administration of the Plan and the conduct of
its business as it deems appropriate, provided such rules and regulations are
uniformly applicable to all persons similarly situated;
(b) to determine the eligibility of persons for membership in the Plan, to
receive and approve or disapprove (where approval is required) elections of
Members to accept optional methods of distributions and to direct the manner in
which distributions shall be made (where such direction is applicable), to
otherwise determine the entitlement of Members, Former Members and their
Beneficiaries to benefits under the Plan and to decide any disputes which may
arise relative to the rights of the Members, Former Members and their
Beneficiaries, with respect to such benefits;
(c) to settle periodically the accounts of the Trustee;
(d) to keep all appropriate records and data pertaining to the interests of
the Members, Former Members and their Beneficiaries in the Plan;
(e) to retain such counsel and employ such accounting, actuarial, clerical,
recordkeeping, and such other assistance as in its judgment may from time to
time be required for the proper performance of its duties hereunder;
(f) to file all such reports with the appropriate governmental departments
and agencies and to disclose such information to the Members, Former Members and
their Beneficiaries with respect to the Plan as may be required under the
provisions of ERISA as the same may apply to plan administrators;
(g) to establish procedures to safeguard the confidentiality of information
relating to:
(1) the acquisition, holding, and disposition of Plan Shares in the
Schwab Stock Fund for the Accounts of Members, Former Members and
Beneficiaries, and the holding and disposition of shares of ESOP Stock in
the ESOP Stock Fund for the Accounts of Members, Former Members and
Beneficiaries, and
(2) the exercise of voting, tender and similar rights with respect to
the Capital Stock and the ESOP Stock attributable to Members' interests in
the Trust Fund that are invested in the Schwab Stock Fund and the ESOP
Stock Fund; and to monitor compliance with such procedures; and
(h) to appoint as a fiduciary of the Plan any person or entity that is
unaffiliated with the Company, and assign to such fiduciary responsibility for
carrying out activities with respect to the Members' interests in the Trust Fund
that are invested in the Schwab Stock Fund, the ESOP Stock Fund, or any other
Investment Funds in any situation determined by the Committee, in its
discretion, to involve a potential for undue employer influence upon Members
with regard to the direct or indirect exercise of shareholder rights with
respect to such Stock or any other material conflict or interest.
(i) to establish rules, regulations or administrative practices or
procedures deemed necessary by the Committee, in its sole discretion, to ensure
compliance with the applicable provisions of the federal and state securities
law, including, without limitation, the authority to suspend for a period of
time a Member's election under Section 7.5 to transfer all or any portion of his
interest from one or more Investment Funds to any other Investment Fund or
Funds.
Any action which the Committee is required or authorized to take shall, to
the extent permitted by applicable law, be final and binding upon each and every
person who is or may become interested in the Plan or Trust Fund. The Committee
shall be deemed to be the "Administrator" of the Plan for purposes of section
3(16)(A) of ERISA and, except as otherwise specifically provided in Sections 7.7
and 14.5, is also designated a "Named Fiduciary" of the Plan pursuant to section
402(a) of ERISA.
14.3 Conduct of Affairs of Committee. The Committee shall hold such
meetings upon such notice at such place or places and at such times as it may
from time to time deem appropriate. The Committee may act by a majority of its
members in office from time to time. The action of such majority may be taken at
a meeting of the Committee or pursuant to written consent of such majority
without a meeting. The Board of Directors shall appoint one of the Committee
members to act as Chairman, and a different person, who may but need not be a
member of the Committee, shall be appointed by the Board of Directors, or may be
elected or appointed by the Committee, to act as Secretary. The Committee may
authorize any one or more of its members to execute and deliver any documents on
behalf of the Committee. The Committee shall maintain a record of all actions
taken and determinations made by it in carrying out its responsibilities under
the Plan.
14.4 Appointment of Investment Committee. The Board of Directors shall
appoint an Investment Committee, which shall consist of five or more Members who
shall be officers of the Company or any Participating Companies, all to be
appointed by the Board of Directors and to serve at the pleasure of the Board of
Directors. Any vacancy in the Committee arising by death, resignation or
otherwise shall be filled by the Board of Directors.
14.5 Duties and Powers of the Investment Committee. Except for such duties
as are assigned under the terms of the Plan to the Committee, the Trustee; or to
any investment manager or adviser appointed under Section 15.4; or to any
Member, Former Member or Beneficiary under Section 7.4; the Investment Committee
shall have the sole discretion and responsibility to (a) establish for the Plan
a funding policy, within the meaning of section 402(b)(1) of ERISA and to
communicate the same to the Trustee; (b) establish, modify or eliminate
Investment Funds available to Members, Former Members and Beneficiaries under
Section 7.2; (c) establish investment performance guidelines for such Investment
Funds, and (d) monitor and evaluate the performance of the Investment Funds.
In furtherance of the foregoing, the Investment Committee shall have the
sole discretion and responsibility in its discretion to retain such counsel and
investment advisers, and employ such accounting, actuarial, clerical and such
other assistance as in its judgment may from time to time be required for the
performance of its duties hereunder; and to appoint as a fiduciary of the Plan
any person or entity that is unaffiliated with the Company, and assign to such
fiduciary responsibility for carrying out activities with respect to the
Members' interests in the Trust Fund that are invested in the Schwab Stock Fund,
the ESOP Stock Fund, or any other Investment Funds in any situation determined
by the Investment Committee, in its discretion, to involve a potential for undue
employer influence upon Members with regard to the direct or indirect exercise
of shareholder rights with respect to such Stock or any other material conflict
or interest.
Notwithstanding anything in Articles 7 through 12 to the contrary, in the
event the Investment Committee, in its sole discretion, determines that (i) a
request for a transfer from or to any Investment Fund (including a transfer of a
loan repayment amount), (ii) a hardship or discretionary withdrawal application,
(iii) a loan application, or (iv) a distribution upon a Member's separation,
retirement or death, cannot be effected within the period prescribed by the Plan
without jeopardizing the integrity of any Investment Fund or the Trust Fund, the
orderly liquidation of any assets of the Trust Fund, or the value of the
Members' interests in any Investment Fund or the Trust Fund, the Investment
Committee, on a uniform and nondiscriminatory basis, may delay all or any
portion of such transfer, withdrawal, loan, or distribution, and any related
valuations, and may take such other action as it may deem appropriate,
including, without limitation, the segregation of all or any portion of any
Investment Fund or Members' Accounts into a separate fund or sub-accounts,
respectively, until such time or times that it considers practicable consistent
with the maintenance of the integrity of such Investment Fund or the Trust Fund
or the value of such Plan Shares, or the orderly liquidation of assets of the
Trust Fund.
The Investment Committee shall be a "Named Fiduciary" of the Plan, within
the meaning of section 402(a)(2) of ERISA, in the exercise of such duties.
14.6 Conduct of Affairs of the Investment Committee. The Investment
Committee shall hold such meetings upon such notice at such place or places and
at such times as it may from time to time deem appropriate. The Investment
Committee may act by a majority of its members in office from time to time. The
action of such majority may be taken at a meeting of the Investment Committee or
pursuant to written consent of such majority without a meeting. The Board of
Directors shall appoint one of the Investment Committee members to act as
Chairman, and a different person, who may but need not be a member of the
Investment Committee, shall be appointed by the Board of Directors, or may be
elected or appointed by the Investment Committee, to act as Secretary. The
Investment Committee may authorize any one or more of its members to execute and
deliver any documents on behalf of the Investment Committee. The Investment
Committee shall maintain a written record of all actions taken and
determinations made by it in carrying out its responsibilities under the Plan.
14.7 Reports to Company. Within a reasonable time after the close of each
Plan Year, the Investment Committee shall prepare a report showing in reasonable
detail the assets of the Plan held by the Trustee and the liabilities of the
Plan and giving a brief account of the operation of the Plan for the prior Plan
Year, which report shall be submitted to the Board of Directors and the Board of
Directors of each Participating Company.
14.8 Delegation of Responsibilities. The Committee may, by unanimous
consent, delegate the following duties and responsibilities to one or more
Employees:
(a) authority to make initial determinations as to eligibility for
membership or benefits under the applicable plan provisions,
(b) preparation and distribution of communications to Members, Former
Members and their Beneficiaries,
(c) maintenance of compensation and employment records,
(d) preparation of reports and applications required by governmental
agencies,
(e) initial calculations of service, compensation, credit and benefits,
(f) orientation of new Members, advising Members, Former Members and their
Beneficiaries of their rights and options under the Plan and monitoring
completion of application, election and benefit forms by Members, Former Members
and their Beneficiaries,
(g) monitoring collection of contributions and proper application of the
contributions to effectuate the purposes of the Plan,
(h) preparation of reports concerning benefits,
(i) initial processing of claims and of loan applications,
(j) making recommendations to the Committee with respect to the merits of
claims and the administration of the Plan, and
(k) any other responsibilities which the Committee determines are
administrative or ministerial in nature and are designed to implement a policy,
interpretation, system, practice or procedure established by the Committee.
If any duties or responsibilities are delegated to any Employee pursuant to
this Section, the Committee shall periodically review the performance of such
Employee. Depending upon the circumstances, this requirement may be satisfied by
a formal review by the Committee at such time or times as the Committee in its
discretion may determine, through day-to-day contact and evaluation or in any
other manner determined to be appropriate by the Committee.
14.9 Duties and Powers Relating to the ESOP. In addition to the duties and
powers set forth above, the Investment Committee shall also have the
responsibility for making all determinations as to the continuing
appropriateness, under the applicable provisions of ERISA, of retaining Capital
Stock as an investment for the ESOP, including the power to direct the Trustee
to dispose of any Capital Stock held in the ESOP whenever it determines, in its
discretion, that the retention of such stock is no longer appropriate under
applicable ERISA standards.
14.10 Expenses and Liability. The expenses of administering the Plan shall
be paid from the Trust Fund unless paid by the Participating Companies. The
members of the Committee and Investment Committee shall serve without
compensation for their services as such, but shall be reimbursed by the Company
for any expenses they may individually or collectively incur in the performance
of their duties hereunder. No bond or other security shall be required of any
member of the Committee or the Investment Committee unless the member handles
funds or other property of the Plan or the trust established hereunder as
provided in section 412 of ERISA.
The Committee, Investment Committee and the respective members thereof
shall perform their respective duties with respect to the Plan solely in the
interest of the Members, Former Members and their Beneficiaries for the
exclusive purpose of providing benefits under the Plan to the same and defraying
the reasonable expenses of administering the Plan, with the care, skill,
prudence and diligence under the circumstances then prevailing that prudent men
acting in a like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like aims, and in
accordance with the provisions of this Plan. No member of the Committee or the
Investment Committee shall be personally liable for anything done or omitted to
be done by him unless it shall have been judicially determined that such member
failed to perform his duties under the Plan in the manner described hereinabove.
No member of the Committee or Investment Committee shall be personally
liable for any act or omission of any other person that constitutes a breach of
the latter's duties hereunder unless it shall have been judicially determined
that such member (a) knowingly participated in, or knowingly undertook to
conceal, such act or omission, knowing such act or omission constituted a breach
of the latter's duties hereunder, (b) enabled such act or omission to be
committed by failing to exercise the above-described degree of care, skill,
prudence and diligence, or (c) had knowledge of such act or omission and failed
to take reasonable efforts under the circumstances to remedy the breach.
No member of any Committee established pursuant to the Plan shall be liable
for any act or omission of such committee, or of any other member thereof,
occurring before such member became, or after such member ceased to be, a member
of the Committee. No member of the Committee shall be personally liable for any
act or omission of an Employee to whom any duty or responsibility was delegated
by the Committee in accordance with Section 14.5 unless it shall have been
judicially determined that (1) the Committee failed to act with the
above-described degree of care, skill, prudence and diligence in selecting such
Employee or in continuing such delegation to such Employee, or (2) the Committee
or a member thereof knowingly participated in, or knowingly undertook to
conceal, such act or omission, knowing such act or omission constituted a breach
of the Employee's duties.
14.11 Indemnification of Committee and Investment Committee Members. The
Company shall, to the maximum extent permitted under applicable law, indemnify
each member of the Committee and Investment Committee from and against any and
all claims, actions, demands, losses, damages, expenses and liabilities arising
from any act or omission of the member with respect to the performance of his
duties hereunder and for which the member is not reimbursed or otherwise made
whole under any contract or contracts of insurance. Such indemnification shall
include attorneys' fees and all other costs and expenses reasonably incurred by
the member in defense of any claim or action brought or asserted against him
arising from such act or omission. Notwithstanding the foregoing, the Company
shall not indemnify any member of the Committee or Investment Committee with
respect to any claims, actions, demands, losses, damages, expenses and
liabilities arising from any act or omission of the member with respect to the
performance of his duties hereunder if such act or omission is deemed by the
Company to constitute gross negligence, willful misconduct, criminal conduct or
dealing with the Plan or the trust established hereunder for his own benefit or
for his own account.
14.12 Claims Procedure. A Member, Former Member or Beneficiary may claim
any benefits under this Plan which such person believes is properly payable
pursuant to the provisions of the Plan by filing an application therefor. Such
claim shall be filed, on a form approved by the Committee, with the Company's
Vice President, Personnel. A copy of the claim shall promptly be transmitted to
the Secretary of the Committee, and shall be considered by the Company's
Vice-President, Personnel, within 90 days of the date on which he received the
claim. If the claim is denied in full or in part, the claimant shall be given
written notice setting forth, in a manner calculated to be understood by the
claimant,
(a) the specific reason or reasons for such denial,
(b) specific reference to the pertinent provision or provisions of the Plan
upon which such denial was based,
(c) a description of any additional information, documentation or other
material necessary for the claimant to perfect his claim and an explanation as
to why such information, documentation or material is required, and
(d) an explanation of the procedure for obtaining a review of the denial of
the claim.
The claimant or his duly authorized representative may request a review of
the denial of the claim by filing with the Secretary of the Committee a written
request for review within, and only within, the period of 60 days commencing
with the date the denial of the claim was received by the claimant. The claimant
and his duly authorized representative shall be given a reasonable opportunity
to review the documents of the Plan and trust agreement executed thereunder and
to submit their written issues and comments to the Committee at any time prior
to the expiration of the aforesaid 60-day period.
Within the period of 60 days starting on the date a request for review of a
denial of claim is received by the Committee, the Committee shall consider the
request and post its final decision to the claimant by registered or certified
mail. In the event that the Committee in its sole discretion determines that the
case presents special circumstances, such as the need for a hearing requiring an
extension of time for processing the request for review, the Committee shall
notify the claimant in writing, prior to the end of the initial 60-day review
period, of the need for such extension, and shall post its final decision to the
claimant by registered or certified mail not later than 120 days after the date
the request for review was received by the Committee. Such decision shall be in
writing, shall be written in a manner calculated to be understood by the
claimant, and shall fully set forth the reason or reasons for the decision, with
specific references to the pertinent provisions of the Plan upon which the
decision was based.
To the extent that a named fiduciary other than the Committee is appointed
to conduct the review procedure described above, such named fiduciary shall have
the same powers to interpret the Plan and make factual findings with respect
thereto as are granted to the Committee under Section 14.2 hereof.
ARTICLE 15
MANAGEMENT OF THE TRUST FUND
15.1 The Trustee. The Trust Fund shall be administered by United States
Trust Company of New York, as Trustee, under a trust agreement, and by such
additional or successor Trustee as may be designated by the Board of Directors
or pursuant to said trust agreement.
15.2 The Trust Agreement. The Company shall establish a trust under the
Plan pursuant to which the assets of the Plan shall be held and administered.
The terms and conditions of the trust agreement shall be determined by the Board
of Directors and may be amended by the same from time to time pursuant to
Article 17; provided that, except as otherwise provided in Section 13.7, at all
times it must be impossible under the terms of said agreement for any part of
the trust corpus or income to be used for, or diverted to, purposes other than
for the exclusive benefit of the Members, Former Members and their Beneficiaries
and for defraying the reasonable expenses of administering the Trust Fund. Said
trust agreement shall be deemed to form part of this Plan, and any and all
rights or benefits which may inure to any person under this Plan shall be
subject to all the terms and conditions of said agreement. Except for any
responsibilities specifically assigned hereunder to the Committee or to the
Investment Committee, or assigned by the Investment Committee to an independent
fiduciary pursuant to Section 14.2(i), or assigned hereunder to any investment
manager or adviser appointed by the Investment Committee pursuant to Section
15.4, the Trustee shall have the exclusive authority and discretion to manage
and control the assets of the trust, and shall exercise in its absolute and sole
discretion the powers and duties provided under the terms of the trust
agreement, including the investment and reinvestment of the principal and income
of the trust, without the prior authorization or consent of the Committee or
Investment Committee, any court or any other person or persons.
15.3 Compensation and Expenses. The compensation of the Trustee and all
expenses incurred in the administration of the trust shall be paid by the
Participating Companies.
15.4 Appointment of Investment Manager or Investment Adviser. The
Investment Committee shall have the power to appoint, remove or replace one or
more investment managers, investment advisers or independent agents and to
delegate to such manager, adviser or agent the authority and discretion to
manage (including the power to acquire and dispose of) the assets of the Plan
held in the Schwab Stock Fund, the ESOP Stock Fund or any other Investment Fund,
provided that (a) any such manager, adviser or agent with such authority or
discretion shall be either a bank or a registered investment adviser under the
Investment Advisers Act of 1940 and shall acknowledge that it is a fiduciary
with respect to the Plan and (b) the Investment Committee shall periodically
review and evaluate the investment performance and methods of each such manager,
adviser or agent with such authority and discretion.
ARTICLE 16
OTHER PARTICIPATING COMPANIES
16.1 Additional Participating Companies. With the written consent of the
Committee, any Affiliated Company may become a Participating Company by
delivering to the Committee and the Trustee a certified copy of a resolution
duly adopted by its board of directors to the effect that it (a) adopts the Plan
as then in effect and as it may thereafter be amended by the Board of Directors
and (b) agrees to become a party to the trust under which the assets of the Plan
are held in accordance with Article 15. If any Affiliated Company becomes a
Participating Company in accordance with the provisions of this Section 16.1, to
the extent determined by the Committee, all prior and contemporaneous service
performed as an Employee of such Participating Company shall be credited on a
cumulative basis for all purposes of the Plan, and the prior service of a Member
whose employment is transferred from one Participating Company to another shall
be credited for all purposes of the Plan. All such grants of service as of April
1, 1999, are listed in Appendix A.
16.2 Withdrawal of Participating Company. Any Participating Company, other
than the Company, may withdraw from participation in the Plan at any time by
delivering to the Committee and the Trustee a certified copy of a resolution
duly adopted by its board of directors terminating its participation in the
Plan. If the result of any merger, consolidation, sale of property or stock,
separation, reorganization or liquidation of any Participating Company, other
than the Company, is that such Participating Company ceases to be an Affiliated
Company, such Company shall be treated as having withdrawn from participation in
the Plan.
In the event of any withdrawal from participation in the Plan by a
Participating Company hereunder, the Committee shall direct the Trustee to
segregate and hold in further trust that portion of the Trust Fund which the
Committee, in its discretion, determines to be attributable to the interests in
the Plan of the Members employed by such withdrawing Participating Company and
their Beneficiaries, subject to the following conditions:
(a) If such withdrawing Participating Company elects to continue the Plan,
as adopted by it, on an independent basis, then the Committee shall direct the
Trustee to hold such segregated portion of the Trust Fund in a separate trust
under the same terms and conditions as the trust agreement executed pursuant to
Article 15. The Plan, as then in effect, shall be continued as a separate plan
for the exclusive benefit of the Members employed by such withdrawing
Participating Company and their Beneficiaries, and the board of directors of
such withdrawing Participating Company shall succeed to all the powers and
duties of the Board of Directors, including the appointment of a Committee
thereunder.
(b) If the Plan, as adopted by such withdrawing Participating Company, is
merged into, or consolidated with, another employee benefit plan which is
qualified under section 401(a) of the Code, the Committee shall direct the
Trustee to transfer the above-described segregated portion of the Trust Fund,
either in cash or kind, to the trust established or to be established under such
plan, and such transfer shall be a complete discharge of the responsibility of
the Trustee and the Committee therefor.
(c) If the Plan, as adopted by such withdrawing Participating Company, is
terminated, then the above-described segregated portion of the Trust Fund shall
be applied to the benefit of the Members employed by such withdrawing
Participating Company and their Beneficiaries in the manner prescribed in
Section 17.4.
For purposes of the foregoing, the portion of the Trust Fund that is
attributable to the interests in the Plan of the Members employed by any
withdrawing Participating Company and their Beneficiaries shall not include any
ESOP Stock held in the ESOP Suspense Subfund at the time of such Participating
Company s withdrawal from participation in the Plan.
16.3 Successor Companies. Any corporation which succeeds to the business or
assets of the Company shall, upon such succession and without any action by any
person, (a) be treated as having adopted this Plan and (b) have the same rights,
and have the same duties, responsibilities and obligations, as are conferred or
assigned to the Company hereunder. Any corporation which succeeds to all or any
part of the business and assets of any Participating Company, other than the
Company, may become a Participating Company hereunder only if it is eligible to
do so under Section 16.1 and then only in the manner described therein.
ARTICLE 17
AMENDMENT AND TERMINATION
17.1 Right to Amend Plan and Trust. Subject to the provisions hereinafter
set forth, the Company reserves the right at any time and from time to time by
action of its Board of Directors to modify or amend in whole or in part any or
all of the provisions of this Plan and the trust agreement executed pursuant to
Article 15 and delegates to the Committee the authority to modify or amend the
Plan where such modification or amendment is either
(a) necessary or appropriate to facilitate the administration, management
and interpretation of the Plan or to conform the Plan thereto, or
(b) necessary or appropriate to qualify or maintain the Plan as a plan
meeting the requirements of sections 401(a) and 401(k) of the Code, and, with
respect to the ESOP provisions, section 4975(e)(7) of the Code, and to qualify
or maintain the Trust as a trust exempt from taxation under section 501(a) of
the Code, respectively, or any other applicable section of law and Regulations;
provided that, in either case, any such modification or amendment adopted by the
Committee shall not materially increase the cost to the Company and Affiliated
Companies of maintaining the Plan.
No modification or amendment may be made which by reason thereof shall
(1) deprive any Member, Former Member or Beneficiary thereof receiving
any benefits under the Plan, without his consent, of any benefits under the
Plan to which he would otherwise be entitled or
(2) adversely affect the right of any Member, in the event that the
Plan is terminated, to participate in the assets of the Plan at termination
to the extent and in the manner provided in this Article without his
consent, and provided that no such modification or amendment shall make it
possible for any part of the assets of the Plan to be used for, or diverted
to, purposes other than for the exclusive purposes of providing benefits of
the Members, Former Members and their Beneficiaries and paying the
reasonable expenses of the Plan and Trust as determined by the Committee.
17.2 Right to Suspend or Discontinue Contributions. Each Participating
Company intends to continue this Plan and to make recurrent and substantial
contributions hereunder. Nevertheless, each Participating Company reserves the
right to suspend such contributions or to discontinue them altogether. In the
event of a complete discontinuance of contributions under the Plan by any
Participating Company, the Plan, as adopted by such Participating Company, shall
be deemed to have been terminated by it in accordance with the provisions of
Section 17.3.
17.3 Right to Terminate Plan. The Company reserves the right to terminate
this Plan in whole or in part at any time and from time to time; provided,
however, that in the event of such termination the rights of all Members, Former
Members or Beneficiaries affected by such termination to benefits accrued to the
date of such termination shall be nonforfeitable. Each Participating Company
reserves the right to terminate this Plan at any time as to the Members and
Former Members employed by it and their Beneficiaries; provided, however, that
in the event of such termination, the rights of all such Members, Former Members
and Beneficiaries to benefits accrued to the date of such termination shall be
nonforfeitable. In the event of any such termination, the assets of the Trust
Fund attributable to the interest in the Plan of the Members, Former Members and
Beneficiaries affected by such termination shall be distributed in the manner
prescribed in Section 17.4.
17.4 Effect of Termination. Upon the termination of the Plan by any
Participating Company pursuant to Section 17.3 or the complete discontinuance of
contributions to the Plan by any Participating Company in accordance with
Section 17.2, the Committee shall direct the Trustee to pay or provide for the
payment of all proper expenses of the Trustee in administering and closing out
that portion of the Trust Fund attributable to the participation herein of such
Participating Company, including any commissions to which the Trustee may be
entitled. The Committee shall then compute the respective interests of each
Member and Former Member who is or was employed by such Participating Company,
and of each Beneficiary of a Member or Former Member who was so employed, in the
remaining assets of such portion of the Trust Fund and shall direct the Trustee
to distribute such remaining assets to such Members, Former Members and
Beneficiaries, in the proportions of their respective interests, in the form,
time and manner as the Committee shall determine in accordance with applicable
law, in complete discharge of all liability of such Participating Company and
the Trustee therefor.
For purposes of the foregoing, if any Participating Company other than the
Company terminates the Plan pursuant to Section 17.3, or is treated under
Section 17.2 as having terminated the Plan due to a complete discontinuance of
contributions to the Plan, the portion of the Trust Fund attributable to the
participation of such Participating Company (the "Terminating Company") shall
include only those assets of the Trust Fund that are attributable to
contributions to the Plan made on behalf of the Terminating Company's employees
prior to such termination of the Plan.
ARTICLE 18
CONSTRUCTION
18.1 Plan Intended to Qualify. The Plan, as amended and restated, is
intended to continue to qualify under sections 401(a) and 401(k) of the Code,
and the ESOP provisions are intended to qualify as an employee stock ownership
plan within the meaning of section 4975(e)(7) of the Code. Notwithstanding
Section 17.1, the Company reserves the right to further amend the Plan by action
of the Board of Directors, retroactively if necessary, to the extent necessary
to retain such qualified status without regard to the effect such amendment may
have upon the Vested interest of any Member.
18.2 Governing Law. The Plan shall be governed by and construed in
accordance with the provisions of ERISA and, to the extent that ERISA is not
applicable, with the laws of the State of New York.
18.3 Words and Headings. As used herein, the masculine gender shall be
deemed to refer to the feminine, and the singular person shall be deemed to
refer to the plural, wherever appropriate. The subject headings and subheadings
appearing in the Plan are inserted for convenience and reference only, and in
the event of any conflict between the text of any provision of the Plan and the
heading thereof, the text shall control.
ARTICLE 19
TOP HEAVY PROVISIONS
19.1 Top Heavy Plan. The Plan will be considered a Top Heavy Plan for any
Plan Year if it is determined to be a Top Heavy Plan as of the last day of the
preceding Plan Year. Notwithstanding any other provisions in the Plan, the
provisions of this Article 19 shall apply and supersede all other provisions in
the Plan during each Plan Year with respect to which the Plan is determined to
be a Top Heavy Plan. In the event that any provisions of this Article 19 are no
longer required to maintain the qualified status of the Plan under section
401(a) of the Code, then such provisions shall be and become ineffective without
the necessity of further amendment of the Plan.
19.2 Special Definitions. For purposes of this Article 19 and as otherwise
used in this Plan, the following terms shall have the meanings set forth below:
(a) "Aggregation Group" shall mean the group composed of each qualified
retirement plan of the Company or another Affiliated Company in which a Key
Employee is a participant whether or not such plan was terminated and each other
qualified retirement plan of the Company or another Affiliated Company which
enables a plan of the Company or another Affiliated Company in which a Key
Employee is a participant to satisfy section 401(a)(4) or 410 of the Code. In
addition, the Company may choose to treat any other qualified retirement plan of
the Company or another Affiliated Company as a member of the Aggregation Group
if such Aggregation Group will continue to satisfy sections 401(a)(4) and 410 of
the Code with such plan being taken into account.
(b) "Key Employee" shall mean a "key employee" as defined in section 416(i)
of the Code and the Regulations issued thereunder.
(c) "Section 415 Compensation" shall mean compensation as defined in
Section 6.5(a).
(d) "Top Heavy Plan" shall mean a "top heavy plan" as defined in section
416(g) of the Code and the Regulations. The accrued benefit of a Member who has
not performed any service for the Company or another Affiliated Company at any
time during the five-year period ending on the determination date shall be
excluded from the calculation to determine top-heaviness.
19.3 Minimum Contributions. Subject to the provisions of Section 19.4, for
each Plan Year that the Plan is a Top Heavy Plan, the employer contributions
(other than contributions attributable to salary reduction or similar
arrangements) allocable to the Account of each Employee (other than a Key
Employee) who has satisfied the eligibility requirements to be a Member under
Article 2, is employed by a Participating Company at the end of the Plan Year,
and is not a Key Employee shall not be less than the lesser of (a) three percent
of such Member's Section 415 Compensation as limited by Section 19.3 hereof, or
(b) the percentage of Section 415 Compensation at which employer contributions
(including contributions attributable to salary reduction or similar
arrangements) for such Plan Year are made and allocated on behalf of the Key
Employee for whom such percentage is the highest. For the purpose of determining
the appropriate percentage under clause (b), all defined contribution plans
required to be included in an Aggregation Group shall be treated as one plan.
Clause (b) shall not apply if the Plan is required to be included in an
Aggregation Group which enables a defined benefit plan also required to be
included in said Aggregation Group to satisfy section 401(a)(4) or 410 of the
Code.
19.4 Adjustment to Maximum Benefits. For each Plan Year beginning before
January 1, 2000, that the Plan is a Top Heavy Plan, 1.0 shall be substituted for
1.25 as the multiplicand of the dollar limitation in determining the denominator
of the defined benefit plan fraction and of the defined contribution plan
fraction for purposes of section 415(e) of the Code. If, after substituting 90
percent for 60 percent wherever the latter appears in section 416(g) of the
Code, the Plan is not determined to be a Top Heavy Plan, the preceding sentence
shall not be applicable if the minimum employer contribution allocable to the
Account of any Member who is not a Key Employee as specified in clause (b) of
Section 19.1 is determined by substituting "four percent" for "three percent".
19.5 Special Rule. The Committee shall, to the maximum extent permitted by
the Code and in accordance with the Regulations, apply the provisions of this
Article 19 by taking into account the benefits payable and the contributions
made under the Retirement Plan to prevent inappropriate omissions or required
duplication of minimum benefits or contributions.
Executed this 7th day of November, 2001.
--------------------------
U.S. TRUST CORPORATION
By: /s/ John Kirby
----------------------------
Title: Executive Vice President
----------------------------
APPENDIX A
Installment Payments
(a) The following rules shall apply with respect to any Member who, prior
to the Elimination Date, elects the installment form of payment:
(1) Time of Payments. Installment payments shall be made annually. The
first installment payment shall be made on a date determined in accordance
with Section 12.2, and the remaining installment payments shall be made on
the anniversaries thereof.
(2) Number of Payments. The number of installment payments which shall
be made from each Investment Fund in which the Member's Account is invested
shall be the following:
(i) Any Investment Fund other than the Schwab Stock Fund and the
ESOP Stock Fund - 10 or 15 installment payments, as the Member selects
on the election form described in subsection (a) above.
(ii) The Schwab Stock Fund - 10 installment payments.
(iii) The ESOP Stock Fund - five installment payments.
(3) Amount of the Payments. The amount of the installment payments
shall be determined as follows:
(i) In the case of installment payments to be made from any
Investment Fund other than the Schwab Stock Fund and the ESOP Stock
Fund, each installment payment from such fund shall be in an amount
equal to the balance of the Member's Account invested in such fund as
of the Valuation Date coinciding with or immediately preceding the
date on which such payment is to be made, divided by the then
remaining number of installment payments to be made from such fund
(including the current installment payment).
(ii) In the case of installment payments to be made from the
Schwab Stock Fund, the Committee shall direct the Trustee to transfer
shares of Capital Stock to the Member in a series of annual
installments, all but the last of which shall consist of that number
of whole shares of such Capital Stock obtained by dividing by 10 the
number of such shares which is being held by the Trustee for payment
to the Member under Section 9.3 (but in no event less than 10 shares),
and the last of which shall consist of the remainder of the shares of
Capital Stock being so held, (y) transfer to the Member the cash which
is being held by the Trustee for payment to him under Section 9.3 with
the first installment payment of Capital Stock and (z) transfer to the
Member the amount of any dividends or other distributions received by
the Trustee with respect to the Capital Stock the Trustee is so
holding for payment to the Member with the first annual installment
payment of Capital Stock the Trustee makes to the Member after the
Trustee's receipt of such amount.
(iii) In the case of installment payments to be made from the
ESOP Stock Fund, the Committee shall direct the Trustee to transfer
shares of ESOP Stock to the Member in a series of annual installments,
all but the last of which shall consist of that number of whole shares
of ESOP Stock obtained by dividing by five the number of such shares
which is being held for payment to the Member under Section 9.3 (but
in no event less than 5 shares), and the last of which shall consist
of the remainder of the shares of ESOP stock being so held, (y)
transfer to the Member the cash which is being held by the Trustee for
payment to him under Section 9.3 with the first installment payment of
ESOP Stock and (z) transfer to the Member the amount of any dividends
or other distributions received by the Trustee with respect to the
ESOP Stock the Trustee is so holding for payment to the Member with
the first annual installment payment of ESOP Stock the Trustee makes
to the Member after the Trustee's receipt of such amount. It is
provided, however, that distributions of ESOP Stock with a value of
less than the "Applicable Amount" may be paid at the election of the
Member in a single lump-sum payment. For these purposes the
"Applicable Amount" shall be the amount, if any, established in a
uniform and nondiscriminatory manner by the Committee. The Applicable
Amount, once established, may be changed only in conformity with the
requirements of section 411(d)(6) of the Code and the Regulations
promulgated thereunder.
APPENDIX B
SUMMARY OF PROVISIONS RELATING TO
MERGERS AND ACQUISITIONS
Acquisition Acquisition Prior Service Prior Service Prior Service Counts Prior Service
Date Counts as Counts as as Eligibility Counts as Vesting
Eligibility Service Eligibility Service for Matching Service?
for Elective Service for AIP? Contributions?
Payroll
Contributions?
McMurrey 10/16/98 Yes No No No
Maier & Siebel 8/3/98 Yes No Yes No
Wood Island 8/3/98 Yes No Yes No
Radnor 2/1/99 Yes No Yes No
North Carolina Trust 9/1/99 Yes No Yes Yes
Resource Companies, 5/1/01 Yes Yes Yes Yes
Inc.