Exhibit 10.15
COMMUNITY BANKS, INC.
401(K) PLAN
TABLE OF CONTENTS
ARTICLE 1...............................................................-3-
DEFINITIONS.............................................................-3-
1.1 ACP or ACP TEST.......................................-3-
1.2 ACTUAL DEFERRAL PERCENTAGE TEST.......................-3-
1.3 ADP or ADP TEST.......................................-4-
1.4 ADMINISTRATOR.........................................-4-
1.5 ADOPTING EMPLOYER.....................................-4-
1.6 AFFILIATED EMPLOYER...................................-4-
1.7 AGE...................................................-4-
1.8 ANNIVERSARY DATE......................................-4-
1.9 ANNUITY STARTING DATE.................................-5-
1.10 AVERAGE CONTRIBUTION PERCENTAGE TEST..................-5-
1.11 BENEFICIARY...........................................-7-
1.12 BREAK IN SERVICE......................................-7-
1.13 CODE..................................................-7-
1.14 COMPENSATION..........................................-7-
1.15 DISABILITY............................................-7-
1.16 EARLY RETIREMENT AGE..................................-7-
1.17 EARNED INCOME.........................................-7-
1.18 ELECTIVE DEFERRAL.....................................-8-
1.19 ELIGIBLE PARTICIPANT..................................-8-
1.20 EMPLOYEE..............................................-8-
1.21 EMPLOYER..............................................-8-
1.22 FIDUCIARY.............................................-8-
1.23 FISCAL YEAR...........................................-9-
1.24 FORFEITURE............................................-9-
1.25 HCE...................................................-9-
1.26 HIGHLY COMPENSATED EMPLOYEE...........................-9-
1.27 HOUR OF SERVICE.......................................-9-
1.28 KEY EMPLOYEE..........................................-9-
1.29 LEASED EMPLOYEE......................................-10-
1.30 LIMITATION YEAR......................................-10-
1.31 MATCHING CONTRIBUTION................................-10-
1.32 MATERNITY OR PATERNITY LEAVE.........................-10-
1.33 NHCE.................................................-10-
1.34 NON-ELECTIVE CONTRIBUTIONS...........................-10-
1.35 NON-HIGHLY COMPENSATED EMPLOYEE......................-10-
1.36 NON-KEY EMPLOYEE.....................................-10-
1.37 NORMAL RETIREMENT AGE................................-11-
1.38 NORMAL RETIREMENT DATE...............................-11-
1.39 OWNER-EMPLOYEE.......................................-11-
1.40 PARTICIPANT..........................................-11-
1.41 PARTICIPANT'S ACCOUNT................................-11-
1.42 PERMISSIVE AGGREGATION GROUP.........................-11-
1.43 PLAN.................................................-11-
1.44 PLAN YEAR............................................-11-
1.45 POLICY...............................................-11-
1.46 QMAC.................................................-11-
1.47 QNEC.................................................-11-
1.48 QUALIFIED JOINT AND SURVIVOR ANNUITY.................-11-
1.49 QUALIFIED MATCHING CONTRIBUTION......................-12-
1.50 QUALIFIED NON-ELECTIVE CONTRIBUTIONS.................-12-
1.51 QUALIFIED PRERETIREMENT SURVIVOR ANNUITY.............-12-
1.52 REQUIRED AGGREGATION GROUP...........................-12-
1.53 REQUIRED BEGINNING DATE..............................-12-
1.54 SECTION 415 COMPENSATION.............................-13-
1.55 SELF-EMPLOYED INDIVIDUAL.............................-13-
1.56 SHAREHOLDER-EMPLOYEE.................................-13-
1.57 SUPER TOP HEAVY......................................-13-
1.58 TERMINATION OF EMPLOYMENT............................-13-
1.59 TERMINATED PARTICIPANT...............................-14-
1.60 TOP HEAVY............................................-14-
1.61 TOP HEAVY MINIMUM ALLOCATION.........................-14-
1.62 TOP HEAVY RATIO......................................-14-
1.63 TRUSTEE..............................................-15-
1.64 TRUST FUND...........................................-15-
1.65 VALUATION DATE.......................................-15-
1.66 VESTED AGGREGATE ACCOUNT.............................-15-
1.67 VESTED INTEREST......................................-15-
1.68 YEAR OF SERVICE......................................-15-
ARTICLE 2..............................................................-17-
PLAN PARTICIPATION.....................................................-17-
2.1 ELIGIBILITY REQUIREMENTS.............................-17-
2.2 ENTRY DATE...........................................-17-
2.3 WAIVER OF PARTICIPATION..............................-18-
2.4 CESSATION OF PARTICIPATION...........................-18-
2.5 RESTRICTIONS ON OWNER-EMPLOYEES......................-18-
ARTICLE 3..............................................................-19-
CONTRIBUTIONS AND ALLOCATIONS..........................................-19-
3.1 EMPLOYER CONTRIBUTIONS...............................-19-
3.2 ALLOCATION OF EMPLOYER CONTRIBUTIONS.................-20-
3.3 ALLOCATION OF EARNINGS AND LOSSES....................-21-
3.4 ALLOCATION OF FORFEITURES............................-21-
3.5 TOP HEAVY MINIMUM ALLOCATION.........................-22-
3.6 FAILSAFE ALLOCATION..................................-22-
3.7 ROLLOVERS............................................-23-
ARTICLE 4..............................................................-24-
PLAN BENEFITS..........................................................-24-
4.1 BENEFIT UPON NORMAL OR EARLY RETIREMENT..............-24-
4.2 BENEFIT UPON LATE RETIREMENT.........................-24-
4.3 BENEFIT UPON DEATH...................................-24-
4.4 BENEFIT UPON DISABILITY..............................-24-
4.5 BENEFIT UPON TERMINATION.............................-24-
4.6 DETERMINATION OF VESTED INTEREST.....................-24-
ARTICLE 5..............................................................-26-
DISTRIBUTION OF BENEFITS...............................................-26-
5.1 BENEFIT UPON RETIREMENT..............................-26-
5.2 BENEFIT UPON DEATH...................................-26-
5.3 DISABILITY BENEFITS..................................-27-
5.4 BENEFIT UPON TERMINATION.............................-28-
5.5 CASH-OUT OF BENEFITS.................................-28-
5.6 RESTRICTIONS ON IMMEDIATE DISTRIBUTIONS..............-28-
5.7 RESTORATION OF FORFEITED ACCOUNT BALANCE.............-29-
5.8 SPOUSAL CONSENT REQUIREMENTS.........................-29-
5.9 APPLICATION OF CODE SECTION 401(a)(9)................-31-
5.10 STATUTORY COMMENCEMENT OF BENEFITS...................-31-
5.11 DETERMINATION OF LIFE EXPECTANCIES...................-31-
5.12 SEGREGATION OF BENEFIT BEFORE DISTRIBUTION...........-32-
5.13 DISTRIBUTION IN EVENT OF LEGAL INCAPACITY............-32-
5.14 DIRECT ROLLOVERS.....................................-32-
5.15 DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS............-33-
5.16 DISTRIBUTION OF EXCESS CONTRIBUTIONS.................-34-
5.17 DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS.......-35-
5.18 FINANCIAL HARDSHIP DISTRIBUTIONS.....................-36-
5.19 PROTECTED BENEFITS...................................-38-
ARTICLE 6..............................................................-39-
CODE SECTION 415 LIMITATIONS...........................................-39-
6.1 MAXIMUM ANNUAL ADDITION..............................-39-
6.2 ADJUSTMENTS TO MAXIMUM ANNUAL ADDITION...............-39-
6.3 MULTIPLE PLANS AND MULTIPLE EMPLOYERS................-40-
6.4 MULTIPLE PLAN REDUCTION..............................-40-
6.5 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS............-41-
ARTICLE 7..............................................................-43-
DUTIES OF THE TRUSTEE..................................................-43-
7.1 APPOINTMENT, RESIGNATION, REMOVAL AND SUCCESSION.....-43-
7.2 INVESTMENT ALTERNATIVES OF THE TRUSTEE...............-43-
7.3 VALUATION OF THE TRUST FUND..........................-45-
7.4 COMPENSATION AND EXPENSES............................-45-
7.5 PAYMENTS FROM THE TRUST FUND.........................-45-
7.6 PAYMENT OF TAXES.....................................-46-
7.7 ACCOUNTS, RECORDS AND REPORTS........................-46-
7.8 EMPLOYMENT OF AGENTS AND COUNSEL.....................-46-
7.9 DIVISION OF DUTIES AND INDEMNIFICATION...............-46-
7.10 APPOINTMENT OF INVESTMENT MANAGER....................-48-
7.11 ASSIGNMENT AND ALIENATION OF BENEFITS................-48-
7.12 EXCLUSIVE BENEFIT RULE...............................-48-
7.13 PURCHASE OF INSURANCE................................-48-
7.14 LOANS TO PARTICIPANTS................................-48-
7.15 DIRECTED INVESTMENT ACCOUNTS.........................-50-
ARTICLE 8..............................................................-52-
DUTIES OF THE ADMINISTRATOR............................................-52-
8.1 APPOINTMENT, RESIGNATION, REMOVAL AND SUCCESSION.....-52-
8.2 POWERS AND DUTIES OF THE ADMINISTRATOR...............-52-
8.3 EMPLOYMENT OF AGENTS AND COUNSEL.....................-52-
8.4 COMPENSATION AND EXPENSES............................-52-
8.5 CLAIMS PROCEDURES....................................-52-
8.6 QUALIFIED DOMESTIC RELATIONS ORDERS..................-53-
ARTICLE 9..............................................................-55-
AMENDMENT, TERMINATION AND MERGER......................................-55-
9.1 AMENDMENT............................................-55-
9.2 TERMINATION..........................................-55-
9.3 MERGER OR CONSOLIDATION..............................-55-
ARTICLE 10.............................................................-56-
MISCELLANEOUS PROVISIONS...............................................-56-
10.1 NO CONTRACT OF EMPLOYMENT............................-56-
10.2 TITLE TO ASSETS......................................-56-
10.3 QUALIFIED MILITARY SERVICE...........................-56-
10.4 FIDUCIARIES AND BONDING..............................-56-
10.5 SEVERABILITY OF PROVISIONS...........................-56-
10.6 GENDER AND NUMBER....................................-56-
10.7 HEADINGS AND SUBHEADINGS.............................-56-
10.8 LEGAL ACTION.........................................-56-
Community Banks, Inc.
401(K) PLAN
THIS AGREEMENT is made and entered into this day of , -----------------
- ---------------------------------- ----- , between COMMUNITY BANKS, INC.
(hereafter called the Employer) and TERRY L. BURROWES, ------------ EDDIE L.
DUNKLEBARGER, PATRICIA E. HOCH, SALLY J. LEAS, ERNEST L. LOWE and KATHY A. MULL
(hereafter called the Trustee).
WHEREAS, Peoples State Bank (the "Former Employer") originally established
a 401(k) profit sharing plan and trust with a cash or deferred arrangement, the
Peoples State Bank Employees' Profit Sharing Plan, originally effective as of
January 1, 1986 (the "Plan") to provide benefits to its eligible employees;
WHEREAS, the Former Employer amended and restated the Plan on January 1,
1993 to comply with changes in applicable law;
WHEREAS, the Employer previously merged the Peoples State Bank Employees
Stock Ownership Plan into the Plan, effective as of June 1, 1998;
WHEREAS, as the result of a corporate transaction, sponsorship of the Plan
was transferred to Community Banks, Inc. (the "Employer"), effective as of
January 1, 2000;
WHEREAS, the Employer now desires to amend and restate the Plan to comply
with applicable changes in law (including the Uniformed Services Employment and
Reemployment Rights Act, the Small Business Job Protection Act of 1996, the
Taxpayer Relief Act of 1997, and the IRS Reform and Restructuring Act of 1998);
WHEREAS, in conjunction with the amendment and restatement of the Plan to
comply with applicable changes in law, the Employer also desires to merge the
Community Banks, N.A. 401(k) Plan, a profit sharing plan of an Affiliated
Employer, into the Plan, effective as of January 1, 2000;
1
WHEREAS, the Employer desires to rename the Plan as the Community Banks,
Inc. 401(k) Plan, effective as of January 1, 2000; and
WHEREAS, in accordance with Section 9.1 of the Plan, the Employer maintains
the discretion to amend the Plan at any time.
NOW THEREFORE, effective as of January 1, 1997 (except that those Plan
provisions that do not relate to the new law changes described above shall not
be effective until January 1, 2000) or such other effective date as specifically
set forth herein, the Employer and the Trustee hereby amend and restate the Plan
to read as follows:
2
ARTICLE 1
DEFINITIONS
1.1 ACP or ACP TEST: The term ACP means the Average Contribution
Percentage as defined in Section 1.10(e). The term ACP Test means the
Average Contribution Percentage Test.
1.2 ACTUAL DEFERRAL PERCENTAGE TEST: The term Actual Deferral Percentage
Test means one of the following tests for Elective Deferrals: (a) the
ADP for Participants who are HCEs in the current Plan Year will not
exceed the current Plan Year's ADP for Participants who are NHCEs in
the current Plan Year multiplied by 1.25; or (b) the ADP for
Participants who are HCEs for the current Plan Year will not exceed
the current Plan Year's ADP for Participants who are NHCEs in the
current Plan Year multiplied by 2.0, provided that the ADP for
Participants who are HCEs in the current Plan Year does not exceed the
ADP for Participants who are NHCEs in the current Plan Year by more
than 2 percentage points. The ADP Test will be determined as follows:
(a) Actual Deferral Percentage: The term Actual Deferral Percentage
(ADP) means, for a specified group of Participants for a Plan
Year, the average of the ratios calculated separately for each
Participant in such group of (1) the amount of Employer
contributions actually paid on behalf of such Participant for the
Plan Year to (2) the Participant's Compensation for such Plan
Year. Employer contributions made on behalf of any Participant
will include a Participant's Elective Deferrals, including Excess
Elective Deferrals of HCEs, but excluding Excess Elective
Deferrals of NHCEs that arise solely from Elective Deferrals made
to this Plan or any other plans maintained by this Employer and
Elective Deferrals used in the ACP Test if the ADP Test is
satisfied both with and without exclusion of these Elective
Deferrals. Employer contributions for purposes of this paragraph
will include all QNECs. In computing ADPs, an Employee who would
be a Participant but for the failure to make Elective Deferrals
will be treated as a Participant on whose behalf no Elective
Deferrals are made.
(b) Highly Compensated Employees: A Participant is a HCE for a
particular Plan Year if he or she meets the definition of a HCE
in effect for that Plan Year. A Participant is a NHCE for a
particular Plan Year if he or she does not meet the definition of
a HCE in effect for that Plan Year. The ADP for any Participant
who is a HCE for the Plan Year and who is eligible to have
Elective Deferrals (and QNECs that are treated under paragraph
(a) as Elective Deferrals for purposes of the ADP Test) allocated
to his or her accounts under two or more arrangements described
in Codess.401(k) that are maintained by this Employer will be
determined as if such Elective Deferrals (and QNECs) were made
under a single arrangement. If a HCE participates in two or more
cash or deferred arrangements that have different Plan Years, all
cash or deferred arrangements ending with or within the same
calendar year will be treated as a single arrangement.
Notwithstanding the foregoing, certain plans will be treated as
separate if mandatorily disaggregated under regulations under
Code ss.401(k).
(c) Other Rules: In determining the ADP Test, (1) if this Plan
satisfies the requirements of Code ss.ss.401(k), 401(a)(4), or
410(b) only if aggregated with one or more other plans, or if one
or more other plans satisfy such requirements only if aggregated
with this Plan, then this section will be applied by determining
the ADP of Employees as if all such plans were a single plan.
Plans may be aggregated in order to satisfy Code ss.401(k) only
if they have the same Plan Year and use the same ADP testing
method; (2) Elective Deferrals, QNECs and QMACs must be made
before the last day of the twelve-month period immediately
following the Plan
3
Year to which contributions relate; (3) the Employer will
maintain records sufficient to demonstrate satisfaction of the
ADP Test and the amount of QNECs and/or QMACs used in such test;
and (4) the determination and treatment of the ADP amounts of any
Participant will satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
(d) Change To Prior Year Testing: The Employer can only elect to
change to prior year testing in accordance with the requirements
set forth in Notice 98-1 (or superseding guidance). If the
Employer does elect to change to prior year testing, the ADP for
NHCEs for the prior year will be determined by taking into
account only (1) Elective Deferrals for those NHCEs that were
taken into account for purposes of the ADP Test (and not the ACP
Test) under the current year testing method for the prior year,
and (2) QNECs that were allocated to the accounts of those NHCEs
for the prior year but that were not used to satisfy the ADP Test
or the ACP Test under the current year testing method for the
prior year. Thus, if the Employer elects to change to prior year
testing, the following contributions made for the prior year will
be disregarded: QNECs used to satisfy either the ADP Test or ACP
Test under the current year testing method for the prior testing
year, Elective Deferrals taken into account for purposes of the
ACP Test, and all QMACs. These limitations on double counting do
not apply for testing years beginning before January 1, 1999, and
if the Plan changes to prior year testing for the first time for
the 1998 Plan Year, the ADP for NHCEs will be the same as for the
1997 Plan Year.
1.3 ADP or ADP TEST: The term ADP means the Actual Deferral Percentage as
defined in Section 1.2(a). The term ADP Test means the Actual Deferral
Percentage Test.
1.4 ADMINISTRATOR: The term Administrator means the Employer unless
another Administrator is appointed by the Employer.
1.5 ADOPTING EMPLOYER: The term Adopting Employer means any business
entity which adopts this Plan with the consent of the Employer. An
Employee's transfer to or from any Employer or Adopting Employer will
not affect his or her Participant's Account balance, total Years of
Service and Years of Plan Participation. If the Adopting Employer is
not an Affiliated Employer, the Employees of the Adopting Employer
will be treated separately for purposes of allocating contributions
and Forfeitures and for testing under Code ss.401(a)(4), ss.401(k),
ss.401(m), ss.410 and, if the Employer and Adopting Employer do not
share Employees, ss.416. An Adopting Employer may terminate
participation by delivering written notice to the Trustee. If Plan
assets which have been allocated to the Employees of the terminating
Adopting Employer are not transferred within a reasonable time to a
successor Trustee, they will be distributed to the Employees of the
terminating Adopting Employer as if the Plan had been terminated under
Section 9.2.
1.6 AFFILIATED EMPLOYER: The term Affiliated Employer means any of the
following of which the Employer is a part: (1) a controlled group of
corporations as defined in Code ss.414(b); (2) a trade or business
(whether or not incorporated) under common control under Code
ss.414(c); (3) any organization (whether or not incorporated) which is
a member of an affiliated service group under Code ss.414(m); and (4)
any other entity required to be aggregated under Code ss.414(o).
1.7 AGE: The term Age means actual attained age.
1.8 ANNIVERSARY DATE: The term Anniversary Date means December 31st.
4
1.9 ANNUITY STARTING DATE: The term Annuity Starting Date means the first
day of the first period for which an amount is paid as an annuity, or,
in the case of a benefit not payable as an annuity, the first day all
events have occurred which entitle the Participant to such benefit.
The first day of the first period for which a benefit is to be
received by reason of Disability will be treated as the Annuity
Starting Date only if such benefit is not an auxiliary benefit.
1.10 AVERAGE CONTRIBUTION PERCENTAGE TEST: The term Average Contribution
Percentage Test (or ACP Test) means one of the following tests for
Matching Contributions and Employee contributions: (a) the ACP for
Participants who are HCEs in the current Plan Year will not exceed the
current Plan Year's ACP for Participants who are NHCEs in the current
Plan Year multiplied by 1.25; or (b) the ACP for Participants who are
HCEs in the current Plan Year will not exceed the current Plan Year's
ACP for Participants who are NHCEs in the current Plan Year multiplied
by 2.0, provided that the ACP for Participants who are HCEs in the
current Plan Year does not exceed the ACP for Participants who are
NHCEs in current Plan Year by more than 2 percentage points. The ACP
Test will be determined as follows:
(a) Multiple Use: If one or more HCEs participate in both a cash or
deferred arrangement and in a plan subject to the ACP Test
maintained by the Employer, and if the sum of the ADP and ACP of
those HCEs subject to either or both tests exceeds the Aggregate
Limit, then the ACP of those HCEs who also participate in a cash
or deferred arrangement will be reduced in the manner described
in Section 5.17 of the Plan so that the limit is not exceeded.
The amount by which each HCE's Contribution Percentage Amount is
reduced will be treated as an Excess Aggregate Contribution as
defined in Section 5.17. The ADP and the ACP of HCEs are
determined after any corrections required to meet the ADP Test
and the ACP Test and are deemed to be the maximum permitted under
such tests for the Plan Year. Multiple use does not occur if
either the ADP or the ACP of the HCEs does not exceed 1.25
multiplied by the ADP and the ACP of the NHCEs.
(b) Highly Compensated Employees: A Participant is a HCE for a
particular Plan Year if he or she meets the definition of a HCE
in effect for that Plan Year; and a Participant is a NHCE for a
particular Plan Year if he or she does not meet the definition of
a HCE in effect for that Plan Year. The Contribution Percentage
for any Participant who is a HCE and who is eligible to have
Contribution Percentage Amounts allocated to his or her account
under two or more plans described in Codess.401(a), or
arrangements described in Codess.401(k) that are maintained by
the Employer, will be determined as if the total of such
Contribution Percentage Amounts was made under each plan. If a
HCE participates in two or more cash or deferred arrangements
that have different plan years, all cash or deferred arrangements
ending with or within the same calendar year will be treated as a
single arrangement. Notwithstanding the foregoing, certain plans
will be treated as separate if mandatorily disaggregated under
regulations under Codess.401(m).
(c) Other Rules: In determining the ACP Test, (1) if this Plan
satisfies the requirements of Code ss.401(m), Codess.401(a)(4) or
Codess.410(b) only if aggregated with one or more other plans, or
if one or more other plans satisfy such requirements only if
aggregated with this Plan, then this section will be applied by
determining the Contribution Percentage of Employees as if all
such plans were a single plan. Plans may be aggregated in order
to satisfy Codess.401(m) only if they have the same Plan Year;
(2) in determining the Contribution Percentage test, Employee
contributions are considered to have been made in the Plan Year
in which contributed to the Plan, and Matching Contributions and
QNECs will be considered made for
5
a Plan Year if made no later than the end of the twelve-month
period beginning on the day after the close of the Plan Year; (3)
the Employer will maintain records sufficient to demonstrate
satisfaction of the ACP Test and the amount of QNECs or QMACs, or
both, used in such test; and (4) thedetermination and treatment
of the Contribution Percentage of any Participant will satisfy
such other requirements as may be prescribed by the Secretary of
the Treasury.
(d) Aggregate Limit: The term Aggregate Limit means the sum of (1)
125% of the greater of the ADP of Participants who are the NHCEs
for the current Plan Year or the ACP of Participants who are
NHCEs subject to Code ss.401(m) for the Plan Year beginning with
or within the current Plan Year of the CODA, and (2) the lesser
of 200% or two plus the lesser of such ADP or ACP. "Lesser" is
substituted for "greater" in (1) and "greater" is substituted for
"lesser" after "two plus the" in (2) if a larger Aggregate Limit
would result.
(e) Definitions: The term Average Contribution Percentage means the
average of the Contribution Percentages of the "eligible"
Participants in a group; the term Contribution Percentage means
the ratio (expressed as a percentage) of the Participant's
Contribution Percentage Amounts to the Participant's Compensation
for the Plan Year; and the term Contribution Percentage Amounts
means the sum of Employee Contributions, Matching Contributions,
and QMACs (to the extent not taken into account in the ADP Test)
made on behalf of the Participant for the Plan Year. Contribution
Percentage Amounts will not include Matching Contributions that
are forfeited either to correct Excess Aggregate Contributions or
because the contributions to which they relate are Excess
Deferrals, Excess Contributions, or Excess Aggregate
Contributions. The Employer will include as Contribution
Percentage Amounts all QNECs.
(f) "Eligible" Participant: For purposes of this Section, an
"eligible" Participant is any Employee who is eligible to make an
Employee Contribution, or an Elective Deferral (if the Employer
takes such contributions into account in the calculation of the
Contribution Percentage), or to receive a Matching Contribution
(including forfeitures) or a QMAC. If an Employee Contribution is
required as a condition of Plan participation, any Employee who
would be a Participant if such Employee made such a contribution
will be treated as an "eligible" Participant on behalf of whom no
Employee Contributions are made. An Employee Contribution means
any contribution made to the Plan by or on behalf of a
Participant that is included in the Participant's gross income in
the year in which made and that is maintained under a separate
account to which earnings and losses are allocated.
(g) Change To Prior Year Testing: The Employer can only elect to
change to prior year testing in accordance with the requirements
set forth in Notice 98-1 (or superseding guidance). If the
Employer does elect to change to prior year testing, the ACP for
NHCEs for the prior year will be determined by taking into
account only (1) Voluntary Employee Contributions for those NHCEs
for the prior year, and (2) Matching Contributions for those
NHCEs that were taken into account for purposes of the ACP Test
(and not the ADP Test) under the current year testing method for
the prior year, and (3) QNECs that were allocated to the accounts
of those NHCEs for the prior year but that were not used to
satisfy the ACP Test or the ADP Test under the current year
testing method for the prior year. Thus, if the Employer elects
to change to prior year testing, the following contributions made
for the prior year will be disregarded: QNECs used to satisfy
either the ADP Test or ACP Test under the current year testing
method for the prior testing year, QMACs taken into account for
purposes
6
of the ADP Test, and all Elective Deferrals. These limitations on
double counting do not apply for testing years beginning before
January 1, 1999, and if the Plan changes to prior year testing
for the first time for the 1998 Plan Year, the ACP for NHCEs will
be the same as for the 1997 Plan Year.
1.11 BENEFICIARY: The term Beneficiary means the recipient designated by
the Participant to receive the Plan benefits payable upon the
Participant's death. Subject to the provisions of Section 5.8
regarding the rights of a Participant's spouse, each Participant may
designate a Beneficiary on a form supplied by the Administrator, and
may change or revoke that designation by filing written notice with
the Administrator. In the absence of a designation, the Participant
will be deemed to have designated the following Beneficiaries (if then
living) in the following order: (1) his or her spouse, (2) his or her
children; and (3) his or her estate.
1.12 BREAK IN SERVICE: The term Break in Service means a Plan Year during
which an Employee does not complete more than 500 Hours of Service for
reasons other than an authorized leave of absence, which is any period
in which an Employee ceases active employment because of illness,
military service, or any other reason approved by the Employer. If a
Plan Year is less than 12 months, the 500 Hours of Service requirement
will be proportionately reduced.
1.13 CODE: The term Code means the Internal Revenue Code of 1986, as
amended, and the regulations and rulings promulgated thereunder by the
Internal Revenue Service.
1.14 COMPENSATION: The term Compensation means a Participant's Section 415
Compensation that is actually paid or made available in gross income
during the Plan Year. However, Compensation will not include a
Participant's reimbursements or other expenses allowances, fringe
benefits (cash and noncash), moving expenses, deferred compensation,
and welfare benefits. Compensation used to determine Plan benefits
will not exceed $160,000, as adjusted under Code ss.401(a)(17). A cost
of living adjustment in effect for a calendar year applies to any
period not exceeding 12 months over which Compensation is determined
(determination period) beginning in such calendar year. If a
determination period is less than 12 months, the adjusted $160,000
limitation will be multiplied by a fraction, the numerator of which is
the number of months in the determination period, and the denominator
of which is 12. Compensation of an Owner-Employee or a Self-Employed
Individual will equal Earned Income up to the adjusted $160,000
limitation.
1.15 DISABILITY: The term Disability means a physical or mental condition
arising after an Employee has become a Participant which qualifies the
Participant for benefits under an Employer-sponsored long-term
disability plan which is administered by an independent third party.
However, notwithstanding the foregoing, the term Disability will not
include any disability arising from (1) chronic or excessive use of
intoxicants or other substances; (2) intentionally self-inflicted
injury or sickness; (3) an unlawful act or enterprise by the
Participant; or (4) military service where the Participant is eligible
to receive a government sponsored military disability pension.
1.16 EARLY RETIREMENT AGE: Early Retirement Age means the first day of any
month coinciding with or following the date a Participant reaches Age
60 and completes 5 Years of Service.
1.17 EARNED INCOME: The term Earned Income means the net earnings from
self-employment in the trade or business with respect to which the
Plan is established, for which personal services of the individual are
a material income-producing factor. Net earnings will be determined
without regard to
7
items not included in gross income and the deductions allocable
thereto. Net earnings will be reduced by deductible contributions by
the Employer to a qualified retirement plan. Net earnings will be
determined with regard to the deduction allowed to the Employer by
Code ss.164(f) for taxable years beginning after December 31, 1989.
1.18 ELECTIVE DEFERRAL: The term Elective Deferrals means Employer
contributions made to the Plan at the election of the Participant in
lieu of cash compensation, and will include contributions made
pursuant to a salary reduction agreement or other deferral mechanism.
In any taxable year, a Participant's Elective Deferral is the sum of
all Employer contributions made on behalf of such Participant pursuant
to an election to defer under any qualified cash or deferred
arrangement under Code ss.401(k), any simplified employee pension cash
or deferred arrangement under Code ss.402(h)(1)(B), any eligible
deferred compensation plan under Code ss.457, any plan under Code
ss.501(c)(18), and any Employer contributions made for the purchase of
an annuity contract under Code ss.403(b) pursuant to a salary
reduction agreement. Elective Deferrals will not include any deferrals
properly distributed as excess Annual Additions under Section 6.5.
1.19 ELIGIBLE PARTICIPANT: The term Eligible Participant means a
Participant eligible to receive an allocation of Employer
contributions (other than Matching Contributions) allocable for a Plan
Year. Any Participant who is an Employee on the last day of the Plan
Year will be an Eligible Participant. Any Participant who terminates
employment with the Employer before the last day of the Plan Year will
only be an Eligible Participant for that Plan Year in accordance with
the following provisions:
(a) Retiring Participants: A Participant who terminates employment
before the last day of the Plan Year because of retirement after
Normal or Early Retirement Age will be an Eligible Participant
regardless of the number of Hours of Service the Participant
completes during that Plan Year.
(b) Deceased Participants: A Participant who terminates employment
before the last day of the Plan Year because of death will be an
Eligible Participant regardless of the number of Hours of Service
the Participant completes during that Plan Year.
(c) Disabled Participants: A Participant who terminates employment
before the last day of the Plan Year because of Disability will
be an Eligible Participant regardless of the number of Hours of
Service the Participant completes during that Plan Year.
(d) Terminated Participants: A Participant who terminates before the
last day of the Plan Year for reasons other than retirement,
death or Disability will be an Eligible Participant if he or she
completes at least 500 Hours of Service during that Plan Year.
1.20 EMPLOYEE: The term Employee means (1) any person employed by the
Employer as an employee; (2) except for purposes of determining
eligibility to participate in this Plan, any employee of an Affiliated
Employer; (3) any Self-Employed Individual who derives Earned Income
from the Employer; (4) any Owner-Employee; and (5) any Leased Employee
who is not covered by a plan described in Code ss.414(n)(5) provided
Leased Employees constitute more than 20% of the Employer's non-highly
compensated workforce.
1.21 EMPLOYER: The term Employer means Community Banks, Inc. (or any
successor thereto that sponsors this Plan) and any Adopting Employer.
8
1.22 FIDUCIARY: The term Fiduciary means any individual or entity which
exercises any discretionary authority or control over the management
of the Plan or over the disposition of the assets of the Plan; renders
investment advice for a fee or other compensation (direct or
indirect); or has any discretionary authority or responsibility over
Plan administration.
1.23 FISCAL YEAR: The term Fiscal Year means the Employer's accounting year
beginning January 1st and ending December 31st.
1.24 FORFEITURE: The term Forfeiture means the amount by which a
Participant's Account balance exceeds his or her Vested Interest upon
the earlier to occur of (1) the date the Participant receives a
distribution of his or her Vested Interest pursuant to Sections 5.4,
5.5, or 5.6; or (2) the date the Participant incurs 5 consecutive
Breaks in Service after Termination of Employment. No Forfeitures will
occur solely as a result of the withdrawal of a Participant's own
contributions to the Plan, or a Participant's transfer to an
Affiliated Employer or Adopting Employer. All Forfeitures will be
allocated to the Forfeiture Account pending allocation pursuant to
Section 3.4.
1.25 HCE: The term HCE means a Highly Compensated Employee.
1.26 HIGHLY COMPENSATED EMPLOYEE: The term Highly Compensated Employee (or
HCE) means, for Plan Years beginning after December 31, 1996, any
Employee (1) who during the Plan Year or the look-back year was a 5%
owner as defined in Code ss.416(i)(1); or (2) who for the look-back
year had Section 415 Compensation in excess of $80,000 as adjusted
under Code ss.415(d) (except that the base year will be the calendar
quarter ending September 30, 1996). The look-back year will be the 12
month period immediately preceding the Plan Year for which the
determination is being made. The determination of who is a highly
compensated former Employee is based on the rules for determining HCE
status as in effect for the Plan Year or the look-back year for which
the determination is being made, in accordance with temporary
regulation ss.1.414(q)-1T, A-4 and Notice 97-45. In determining if an
Employee is a Highly Compensated Employee for Plan Years beginning in
1997, amendments to Code ss.414(q) are treated as having been in
effect for Plan Years beginning in 1996.
1.27 HOUR OF SERVICE: The term Hour of Service means (a) each hour for
which an Employee is paid, or entitled to payment, for the performance
of duties for the Employer or an Affiliated Employer. These hours will
be credited to the Employee for the computation period in which the
duties are performed; and (b) each hour for which an Employee is paid,
or entitled to payment, by the Employer or an Affiliated Employer on
account of a period of time during which no duties are performed
(irrespective of whether the employment relationship has terminated)
due to vacation, holiday, illness, incapacity (including disability),
layoff, jury duty, military duty or leave of absence. No more than 501
hours will be credited under this Section for any single continuous
period (whether or not such period occurs in a single computation
period). Hours under this paragraph will be calculated and credited
pursuant to ss.2530.200b-2 of the Department of Labor Regulations
which are incorporated herein by this reference; and (c) each hour for
which back pay, irrespective of mitigation of damages, is either
awarded or agreed to by the Employer or an Affiliated Employer. The
same hours will not be credited both under section (a) or section (b)
above and under this section (c). These hours will be credited for the
computation period or periods to which the award or agreement pertains
rather than the computation period in which the award, agreement or
payment is made. In determining whether a Break in Service for
participation and vesting has occurred in a computation period, an
individual on Maternity or Paternity Leave will receive credit for up
to 501 hours which would otherwise have been credited to such
individual but for such absence, or in any case in which such hours
cannot be
9
determined, 8 hours per day of such absence. Hours credited for
Maternity of Paternity Leave will be credited in the computation
period in which the absence begins if the crediting is necessary to
prevent a Break in Service in that period, or in all other cases, in
the following computation period.
1.28 KEY EMPLOYEE: The term Key Employee means any Employee, Former
Employee, deceased Employee, or Beneficiary who at any time during the
Plan Year containing the Determination Date for the Plan Year in
question or any of the prior 4 Plan Years was (1) an officer of the
Employer whose Section 415 Compensation exceeds 50% of the amount in
effect under Code ss.415(b)(1)(A), except that no more than fifty
Employees (or, if lesser, the greater of three or 10% of the
Employees) will be treated as officers; (2) an owner (or was
considered an owner under Code ss.318) of one of the ten largest
interests in the Employer whose Section 415 Compensation exceeds 100%
of the dollar limitation in effect under Code ss.415(c)(1)(A), but if
two Employees own the same interest in the Employer, the Employee with
the greater annual Compensation will be treated as owning a larger
interest; (3) a 5% owner of the Employer as defined in Code
ss.416(i)(1)(B)(i); or (4) a 1% owner of the Employer as defined in
Code ss.416(i)(1)(B)(ii) whose annual Section 415 Compensation is more
than $150,000. For purposes of this Section, Section 415 Compensation
will include amounts contributed by the Employer on behalf of an
Employee pursuant to a salary reduction agreement which are excludible
from the Employee's gross income under Code ss.125, Code ss.402(e)(3),
Code ss.402(h), or Code ss.403(b).
1.29 LEASED EMPLOYEE: The term Leased Employee means any person within the
meaning of Code ss.414(n)(2) and Code ss.414(o) who is not an Employee
of the Employer and who, pursuant to an agreement between the Employer
and a leasing organization, has performed services for the Employer or
for the Employer and related persons as determined in accordance with
Code ss.414(n)(6) on a substantially full time basis for a period of
at least one year, and such services are performed under the primary
direction and control of the Employer. Contributions or benefits
provided to a Leased Employee by the leasing organization which are
attributable to services performed for the Employer will be treated as
provided by Employer.
1.30 LIMITATION YEAR: The term Limitation Year means the Plan Year.
1.31 MATCHING CONTRIBUTION: The term Matching Contribution means an
Employer contribution made to this or any other defined contribution
plan on behalf of a Participant on account of Voluntary Employee
Contributions made by such Participant, or on account of a
Participant's Elective Deferral, under a Plan maintained by the
Employer.
1.32 MATERNITY OR PATERNITY LEAVE: The term Maternity or Paternity Leave
means that an Employee is absent from work because of the Employee's
pregnancy; the birth of the Employee's child; the placement of a child
with the Employee in connection with the adoption of such child by the
Employee; or the need to care for such child for a period beginning
immediately following the child's birth or placement as set forth
above.
1.33 NHCE: The term NHCE means a Non-Highly Compensated Employee.
1.34 NON-ELECTIVE CONTRIBUTIONS: The term Non-Elective Contribution means a
contribution other than a Matching Contribution or a Qualified
Matching Contribution (1) that is made by the Employer, (2) that is
allocated to Participants' Accounts, and (3) that the Participant may
not elect to receive in cash until such contributions are distributed
from the Plan.
10
1.35 NON-HIGHLY COMPENSATED EMPLOYEE: The term Non-Highly Compensated
Employee means any Employee who is not a Highly Compensated Employee.
1.36 NON-KEY EMPLOYEE: The term Non-Key Employee means any Employee who is
not a Key Employee, including former Key Employees. For purposes of
making the allocations in Section 3.5, Non-Key Employee means a
Non-Key Employee who either is a Participant or would be a Participant
but for the reasons set forth in Section 3.5(a).
1.37 NORMAL RETIREMENT AGE: The term Normal Retirement Age means the date a
Participant reaches Age 65. There is no mandatory retirement age.
1.38 NORMAL RETIREMENT DATE: The term Normal Retirement Date means the
first day of the month coinciding with or next following Normal
Retirement Age.
1.39 OWNER-EMPLOYEE: The term Owner-Employee means (1) in the case of an
Employer or Affiliated Employer which is an unincorporated trade or
business, an individual who owns the entire interest in such Employer
or Affiliated Employer; and (2) in the case of an Employer or
Affiliated Employer which is a partnership, an individual who owns
more than 10% of either the capital interest or the profit interest in
such Employer or Affiliated Employer.
1.40 PARTICIPANT: The term Participant means any Employee who has met the
eligibility and participation requirements of the Plan. However, an
individual who is no longer an Employee will not be deemed a
Participant if his or her entire Plan benefit (1) is fully guaranteed
by an insurance company and is legally enforceable at the sole choice
of such individual against such insurance company, provided that a
contract, policy, or certificate describing the benefits to which such
individual is entitled under the Plan has been issued to such
individual; or (2) is paid in a lump sum distribution which represents
such individual's entire interest in the Plan.
1.41 PARTICIPANT'S ACCOUNT: The term Participant's Account means the
account to which is credited a Participant's share of Employer
contributions, Forfeitures which are not used to pay administrative
expenses or to reduce Employer contributions, and earnings and losses.
Each account will be divided into the following Employer contribution
sub-accounts: Elective Deferral Account; Matching Contribution
Account; Qualified Matching Contribution Account; Non-Elective
Contribution Account; and Qualified Non-Elective Contribution Account.
1.42 PERMISSIVE AGGREGATION GROUP: The term Permissive Aggregation Group
means a Required Aggregation Group plus any Employer plan(s) which
when considered as a group with the Required Aggregation Group would
continue to satisfy Code ss.401(a)(4) and ss.410.
1.43 PLAN: The term Plan means this 401(k) profit sharing plan and trust
agreement, which is named the Community Banks, Inc. 401(k) Plan.
1.44 PLAN YEAR: The term Plan Year means the Plan's accounting year
beginning January 1st and ending December 31st.
1.45 POLICY: The term Policy means an insurance policy or annuity contract
purchased by the Plan.
1.46 QMAC: The term QMAC means a Qualified Matching Contribution.
11
1.47 QNEC: The term QNEC means a Qualified Non-Elective Contribution.
1.48 QUALIFIED JOINT AND SURVIVOR ANNUITY: The term Qualified Joint and
Survivor Annuity means an immediate annuity for the life of the
Participant with a survivor benefit for the life of the Participant's
spouse which is not less than 50% nor more than 100% of the annuity
payable during the joint lives of the Participant and his spouse and
which is the amount of benefit which can be purchased with the
Participant's Vested Aggregate Account. The survivor benefit will be
50% unless a higher percentage is elected by the Participant.
1.49 QUALIFIED MATCHING CONTRIBUTION: The term Qualified Matching
Contribution means a Matching Contribution that (1) is used for the
purpose of satisfying the ADP Test or the ACP Test; (2) a Participant
may not elect to receive it in cash until distributed from the Plan;
and (3) is subject to the distribution and nonforfeitability
requirements of Code ss.401(k) when made to the Plan.
1.50 QUALIFIED NON-ELECTIVE CONTRIBUTIONS: The term Qualified Non-Elective
Contribution means a contribution (other than a Matching Contribution
or a QMAC) made by the Employer and allocated to a Participant's
Account and that (1) is used for the purpose of satisfying the ADP
Test or the ACP Test; (2) a Participant may not elect to receive in
cash until distributed from the Plan; and (3) is subject to the
distribution and nonforfeitability requirements of Code ss.401(k) when
made to the Plan. Qualified Non-Elective Contributions may be
considered in determining the Top Heavy Minimum Contribution under
Section 3.5. In lieu of distributing Excess Contributions under
Section 5.16 or Excess Aggregate Contributions under Section 5.17, the
Employer may make a Qualified Non-Elective Contribution on behalf of
Participants in an amount sufficient to satisfy the ADP Test and/or
the ACP Test, to the extent permitted in Sections 1.2 and 1.10.
1.51 QUALIFIED PRERETIREMENT SURVIVOR ANNUITY: The term Qualified
Preretirement Survivor Annuity means a survivor annuity for the life
of a deceased Participant's surviving spouse which is equal to the
amount of benefit which can be purchased by 50% of the deceased
Participant's Vested Aggregate Account determined at the date of
death. In determining a Participant's Vested Aggregate Account for
purposes of this Section, any security interest held by the Plan
because of a loan outstanding to the Participant will be taken into
consideration.
1.52 REQUIRED AGGREGATION GROUP: The term Required Aggregation Group means
(1) each qualified deferred compensation Plan of the Employer in which
at least one Key Employee participates or participated at any time
during the determination period (regardless of whether the plan has
terminated); and (2) any other qualified deferred compensation plan of
the Employer which enables a plan described in (1) to satisfy Code
ss.401(a)(4) or ss.410.
1.53 REQUIRED BEGINNING DATE: The term Required Beginning Date means, for a
Participant who is not a 5% owner, and except as otherwise provided in
paragraph (c), April 1st of the calendar year following the later of
the calendar year in which he or she reaches Age 70 1/2 or the
calendar year in which he or she actually retires; and for a
Participant who is a 5% owner, April 1st of the calendar year
following the calendar year in which he or she reaches Age 70 1/2.
(a) Definition Of 5% Owner: A Participant will be treated as a 5%
owner hereunder if such Participant is a 5% owner as defined in
Code ss.416 at any time during the Plan Year ending with or
within the calendar year in which such owner reaches Age 70 1/2.
Once distributions have begun to a 5% owner under this Section,
they must continue even if the Participant ceases to be a 5%
owner in a subsequent year.
12
(b) Pre-retirement Age 70 1/2 Distributions: The pre-retirement Age
70 1/2distribution option is only eliminated with respect to
Employees who reach Age 70 1/2in or after a calendar year that
begins after the later of December 31, 1998, or the adoption date
of this amended Plan. The pre-retirement Age 70 1/2distribution
option is an optional form of benefit under which benefits
payable in a particular distribution form (including any
modifications that may be elected after benefit commencement)
commence at a time during the period that begins on or after
January 1st of the calendar year in which an Employee attains age
70 1/2and ends April 1st of the immediately following calendar
year.
(c) Election To Defer Distribution: In order to defer distribution
until the calendar year following the calendar year in which his
or her retirement occurs, a Participant who is not a 5% owner who
reaches Age 70 1/2in years after 1995 must make an election to
defer by April 1st of the calendar year following the year in
which he or she reached Age 70 1/2(or by December 31, 1997 in the
case of a Participant who reached Age 70 1/2in 1996). If no such
election is made, the Participant will begin receiving
distributions by April 1st of the calendar year following the
year in which he or she reaches age 70 1/2(or by December 31,
1997 in the case of a Participant who reached Age 70 1/2in 1996).
(d) Election To Suspend Distribution: Any Participant who is not a 5%
owner who reaches Age 70 1/2 in years prior to 1997 may elect to
stop distributions and recommence by April 1st of the calendar
year following the year in which the Participant retires. A new
Annuity Starting Date will begin upon the benefit recommencement
date.
1.54 SECTION 415 COMPENSATION: The term Section 415 Compensation means a
Participant's Earned Income, wages, salaries, fees for professional
services and other amounts received for personal services actually
rendered in the course of employment with the Employer maintaining the
Plan (including, but not limited to, commissions paid salesmen,
compensation for services based on a percentage of profits,
commissions on insurance premiums, tips and bonuses). However, Section
415 Compensation does not include (a) Employer contributions to a
deferred compensation plan which are not includible in the Employee's
gross income for the taxable year in which contributed, or Employer
contributions under a simplified employee pension plan to the extent
such contributions are deductible by the Employee, or any
distributions from a plan of deferred compensation; (b) amounts
realized from a non-qualified stock option, or when restricted stock
(or property) held by the Employee either becomes freely transferable
or is no longer subject to a substantial risk of forfeiture; (c)
amounts realized from the sale, exchange or other disposition of stock
acquired under a qualified stock option; and (d) other amounts which
receive special tax benefits, or contributions made by an Employer
(whether or not under a salary reduction agreement) towards the
purchase of an annuity described in Code ss.403(b) (whether or not the
amounts are excludible from the gross income of the Employee). For
Limitation Years beginning after December 31, 1997, Section 415
Compensation will include any elective deferrals as defined in Code
ss.402(g)(3), and any amounts which are contributed or deferred at the
election of the Participant and which are not includible in gross
income by reason of Code ss.125 or ss.457. For purposes of Section
1.14, Section 415 Compensation will not exceed $160,000 as adjusted
under Code ss.401(a)(17).
1.55 SELF-EMPLOYED INDIVIDUAL: The term Self-Employed Individual means
anyone who owns an interest (other than stock) in the Employer and has
Earned Income for the Plan Year or who would have had Earned Income
but for the fact the Employer had no net profits for the Plan Year.
13
1.56 SHAREHOLDER-EMPLOYEE: The term Shareholder-Employee means, in the case
of an Employer or Affiliated Employer which is an electing small
business corporation, an individual who is an employee or officer of
such electing small business corporation and owns, or is considered as
owning within the meaning of Code ss.318(a)(1), on any day during the
taxable year of such corporation, more than 5% of the outstanding
stock of the corporation.
1.57 SUPER TOP HEAVY: The term Super Top Heavy means the Top Heavy Ratio
exceeds 90%.
1.58 TERMINATION OF EMPLOYMENT: The term Termination of Employment means
that a Participant has ceased to be an Employee for reasons other than
retirement, death, or Disability.
1.59 TERMINATED PARTICIPANT: The term Terminated Participant means a
Participant who has ceased to be an Employee for reasons other than
retirement, death or Disability.
1.60 TOP HEAVY: The term Top Heavy means for any Plan Year beginning after
December 31, 1983 (a) that the Top Heavy Ratio exceeds 60% and the
Plan is not part of a Required Aggregation Group or Permissive
Aggregation Group; or (b) that the Plan is a part of a Required
Aggregation Group but not a Permissive Aggregation Group and the Top
Heavy Ratio for the group exceeds 60%; or (c) that the Plan is a part
of a Required Aggregation Group and a Permissive Aggregation Group and
the Top Heavy Ratio for the Permissive Aggregation Group exceeds 60%.
1.61 TOP HEAVY MINIMUM ALLOCATION: The term Top Heavy Minimum Allocation
means an amount equal to 3% of the Section 415 Compensation of a
Non-Key Employee for the applicable Plan Year. The term Top Heavy
Extra Minimum Allocation means an amount equal to 4% of the Section
415 Compensation of a Non-Key Employee for the applicable Plan Year.
1.62 TOP HEAVY RATIO: In determining if this Plan is Top Heavy or Super Top
Heavy, the Top Heavy Ratio will be determined in accordance with the
following provisions:
(a) Rule 1: If the Employer maintains one or more defined
contribution plans (including SEPs) and has not maintained any
defined benefit plan which during the 5-year period ending on the
Determination Date had accrued benefits, the Top Heavy Ratio for
this Plan alone or for the Required or Permissive Aggregation
Group is a fraction, the numerator of which is the sum of the
account balances of all Key Employees as of the Determination
Date (including any part of any account balance distributed in
the 5-year period ending on the Determination Date), and the
denominator of which is the sum of the account balances
(including any part of any account balance distributed in the
5-year period ending on the Determination Date) determined under
Codess.416 and the regulations thereunder. Both the numerator and
the denominator of the Top Heavy Ratio will be increased to
reflect any contribution not actually made as of the
Determination Date but which is required to be taken into account
under Code Sectionss.416 and the regulations thereunder.
(b) Rule 2: If the Employer maintains one or more defined
contribution plans (including SEPs) and maintains or has
maintained one or more defined benefit plans which during the
5-year period ending on the Determination Date has had any
accrued benefits, the Top Heavy Ratio for any Required or
Permissive Aggregation Group is a fraction, the numerator of
which is the sum of account balances under the aggregated defined
contribution plans for all Key Employees determined in accordance
with paragraph (a) above, and the present value of accrued
benefits under the aggregated defined benefit plans for all Key
Employees as of the
14
Determination Date, and the denominator of which is the sum of
the account balances under the aggregated defined contribution
plans for all Participants, determined in accordance with
paragraph (a) above, and the present value of accrued benefits
under the aggregated defined benefit plans for all Participants
as of the Determination Date, all determined under Codess.416 and
the regulations thereunder. The accrued benefits under a defined
benefit plan in both the numerator and denominator of the Top
Heavy Ratio are increased for any distribution made in the 5-year
period ending on the Determination Date.
(c) Rule 3: For purposes of paragraphs (a) and (b), the value of
account balances and the present value of accrued benefits will
be determined as of the most recent Valuation Date that falls
within or ends with the 12-month period ending on the
Determination Date, except as provided in Code ss.416 and the
regulations thereunder for the first and second Plan Years of a
defined benefit plan. The account balances and accrued benefits
will be disregarded for a Participant (1) who is not a Key
Employee but who was a Key Employee in a prior year or (2) who
has not been credited with at least one Hour of Service with any
Employer maintaining the Plan at any time during the 5-year
period ending on the Determination Date. The calculation of the
Top Heavy Ratio and the extent to which distributions, rollovers,
and transfers are taken into account will be made in accordance
with Code ss.416 and the regulations thereunder. When aggregating
plans, the value of the account balances and accrued benefits
will be calculated with reference to the Determination Date that
falls within the same calendar year. The accrued benefit of a
Participant other than a Key Employee will be determined under
(1) the method, if any, that uniformly applies for accrual
purposes under all defined benefit plans maintained by the
Employer, or (2) effective as of the first Plan Year beginning
after December 31, 1986, if there is no such method, as if such
benefit accrued not more rapidly than the slowest accrual rate
permitted under the fractional rule of Code ss.411(b)(1)(C).
Deductible employee contributions will not be taken into account
in determining the Top Heavy Ratio.
(d) Definition Of Determination Date: In determining the Top Heavy
Ratio, the term Determination Date means the last day of the
preceding Plan Year except for the first Plan Year when the
Determination Date means the last day of such first Plan Year.
1.63 TRUSTEE: The term Trustee means the persons or entity named as trustee
or trustees in this Plan and any successor to such Trustee or
Trustees.
1.64 TRUST FUND: The term Trust Fund or Trust means the assets of the Plan.
1.65 VALUATION DATE: Except as otherwise provided in Section 1.62(c)
regarding the Top Heavy Ratio, the term Valuation Date means the date
on which the Trustee determines the value of the Trust Fund, which
must occur at least annually on the last day of each Plan Year. The
Administrator may also value the Trust Fund on such other dates deemed
necessary by the Administrator in a manner that does not discriminate
in favor of HCEs.
1.66 VESTED AGGREGATE ACCOUNT: The term Vested Aggregate Account means a
Participant's Vested Interest in the aggregate value of his or her
Participant's Account and any accounts attributable to the
Participant's own Plan contributions (including rollovers).
1.67 VESTED INTEREST: The term Vested Interest means a Participant's
nonforfeitable percentage in any account maintained on his or her
behalf by the Plan. A Participant's Vested Interest in his or her
Participant's Account will be determined in accordance with Section
4.6 of the Plan.
15
1.68 YEAR OF SERVICE: The term Year of Service means a 12-consecutive month
computation period in which an Employee completes for the Employer, an
Affiliated Employer or an Adopting Employer at least 500 Hours of
Service for vesting purposes under Section 4.6. An Employee will also
receive credit for all Years of Service with Tremont National Bank,
Peoples Safe Deposit Bank, and Peoples Bank if crediting of such Years
of Service does not cause the Plan to discriminate in favor of Highly
Compensated Employees. A Year of Service will be determined in
accordance with the following provisions:
(a) Reemployment Before A Break In Service: For eligibility purposes,
if a Participant terminates employment and is reemployed by the
Employer before incurring a Break in Service, such Participant
will continue to participate in the Plan and earn credit for
Years of Service in the same manner as if the termination of
employment had not occurred.
(b) Reemployment After A Break In Service: For eligibility purposes,
if a Participant who does not have a Vested Interest in his or
her Participant's Account terminates employment but is reemployed
by the Employer after a Break in Service occurs, such former
Participant's Years of Service before the Break in Service will
not be counted in computing his or her Years of Service if the
number of consecutive Breaks in Service equals or exceeds the
greater of five or the aggregate number of Years of Service. The
aggregate number of Years of Service will not include any Years
of Service previously disregarded hereunder by reason of prior
Breaks in Service. If a former Participant's Years of Service are
disregarded under this paragraph, he or she will be treated as a
new Employee for eligibility purposes. If a former Participant's
Years of Service may not be disregarded under this paragraph,
then he or she will continue to participate in the Plan, or, if
terminated, will participate immediately upon reemployment. If a
Participant who has a Vested Interest in his or her Participant's
Account terminates employment but is reemployed by the Employer
after a Break in Service occurs, such former Participant will
become a Participant in the Plan immediately upon being
reemployed by the Employer.
(c) Employees Under 2-Year Full And Immediate Vesting: If this Plan
at any time (1) provides in Section 2.1 that an Employee must
complete 2 Years of Service for eligibility purposes, and (2)
provides in Section 4.6 that an Employee will have a 100% Vested
Interest in his or her Participant's Account upon becoming a
Participant, then the Years of Service of an Employee who incurs
a Break in Service before satisfying such 2 Years of Service
eligibility requirement will not be counted for eligibility
purposes.
(d) Vesting Computation Period: In determining a Participant's Vested
Interest in his or her Participant's Account under Section 4.6,
the 12-consecutive month computation period will be the Plan
Year. If a former Participant is reemployed by the Employer after
a Break in Service occurs, such former Participant's Vested
Interest in his or her Participant's Account will be computed as
follows: (1) Years of Service prior to the Break in Service will
not be counted for purposes of computing his or her post-break
Vested Interest until the former Participant has completed a Year
of Service from the date of reemployment; (2) Years of Service
after a former Participant has incurred 5 consecutive Breaks in
Service will not be taken into account in determining the Vested
Interest in his or her Participant's Account which accrued before
such 5 year period; and (3) if a former Participant does not have
a Vested Interest in his or her Participant's Account, Years of
Service before any period of consecutive Breaks in Service will
not be taken into account if the number of consecutive Breaks in
16
Service within such period equals or exceeds the greater of 5 or
the aggregate number of Years of Service before such period.
17
ARTICLE 2
PLAN PARTICIPATION
2.1 ELIGIBILITY REQUIREMENTS: Any Employee who is not in an ineligible
class of Employees will be eligible to become a Participant in the
Plan in accordance with the following provisions:
(a) Age And Service Requirement: Anyone who is a Participant on
January 1, 2000 will continue to participate in the Plan. Any
other Employee who is not a member of an ineligible class of
Employees will be eligible to enter the Plan as a Participant,
when he or she reaches Age 21 and completes 6 months of service.
(b) Ineligible Classes Of Employees: All Employees are eligible to
participate in the Plan except for the following ineligible
classes of Employees: (1) Employees whose employment is governed
by the terms of a collective bargaining agreement between
Employee representatives and the Employer in which retirement
benefits were the subject of good faith bargaining, unless such
collective bargaining agreement expressly provides for the
inclusion of such Employees as Participants in the Plan; (2)
Employees whose Compensation is governed by the terms of a
collective bargaining agreement between Employee representatives
and the Employer in which retirement benefits were the subject of
good faith bargaining, unless such collective bargaining
agreement expressly provides for the inclusion of such Employees
as Participants in the Plan; (3) Employees who are non-resident
aliens who do not receive any earned income from the Employer
which constitutes income from sources within the United States;
(4) Leased Employees; and (5) Anyone who is deemed by the
Employer to be an independent contractor on his or her employment
commencement date and on the first day of each subsequent Plan
Year.
(c) Participation By Ineligible Employees: If an Employee who is not
a member of the eligible class of Employees becomes a member of
the eligible class, such Employee will participate in the Plan
immediately if he or she has satisfied the minimum age and
service requirements and would have previously become a
Participant had he or she been a member of the eligible class.
The participation of a Participant who becomes a member of an
ineligible class will be suspended, and such Participant will be
entitled to an allocation of Employer contributions and
Forfeitures for the Plan Year only to the extent of Hours of
Service completed while a member of an eligible class of
Employees. Upon returning to an eligible class of Employees, a
suspended Participant will immediately participate again in the
Plan. The Vested Interest of a Participant who ceases to be a
member of an eligible class will continue to increase in
accordance with Section 4.6.
(d) Participation By Former Participants: A former Participant will
again become a Participant immediately upon returning to the
employ of the Employer as a member of an eligible class of
Employees unless such former Participant's Years of Service may
be disregarded by reason of prior Breaks in Service as provided
in Section 1.68(c).
2.2 ENTRY DATE: An Employee who has satisfied the eligibility requirements
in Section 2.1 will enter the Plan as a Participant on the January
1st, April 1st, July 1st, or October 1st which coincides or next
follows the date on which he or she satisfies such requirements.
18
2.3 WAIVER OF PARTICIPATION: A Participant may, with the written consent
of both the Employer and the Participant's spouse, elect in writing to
waive participation in the Plan for any Plan Year. A waiver will be
permitted only if it does not adversely affect the Plan's tax
qualified status. An election to waive participation in the Plan for a
Plan Year will result in no allocation of Employer contributions or
Forfeitures for that Plan Year. If an Employee who has waived his or
her right to become a Participant subsequently elects to become a
Participant, the period of waiver will be considered as Years of
Service under the Plan for purposes of determining the Employee's
eligibility to participate, for determining the Employee's Vested
Interest in his or her Participant's Account, and for determining
eligibility for Normal or Early Retirement Age.
2.4 CESSATION OF PARTICIPATION: A Participant's active participation in
the Plan will cease if the Participant incurs a Break in Service or on
account of the Participant's death or Disability, or on account of
retirement on or after reaching Normal or Early Retirement Age. Upon
the occurrence of any such event, the benefits of such Participant, if
any, will be computed by the Administrator and distributed by the
Trustee as hereinafter provided.
2.5 RESTRICTIONS ON OWNER-EMPLOYEES: If this Plan provides contributions
or benefits for Employees some or all of whom are Owner-Employees,
such contributions or benefits can only be provided with respect to
the Earned Income of such Owner-Employee which is derived from the
trade or business with respect to which the Plan is established.
19
ARTICLE 3
CONTRIBUTIONS AND ALLOCATIONS
3.1 EMPLOYER CONTRIBUTIONS: Each Plan Year, the Employer will contribute
to the Plan such amount as it may in its sole discretion determine,
subject to the following provisions:
(a) Elective Deferrals: Effective January 1, 1993, each Participant
may enter into a salary reduction agreement as set forth below
authorizing the Employer to withhold a percentage of the
Participant's Compensation. The amount withheld will be deemed an
Elective Deferral which the Employer will contribute to the Plan
on the Participant's behalf. Each Participant's Elective Deferral
for any Plan Year will be determined as follows:
(1) Deferral Percentage: Each Participant may elect that up to
16% of his or her Compensation be withheld as an Elective
Deferral, but in no event may the dollar amount withheld be
more than $10,000 per calendar year as adjusted under Code
ss.402(g)(5). Elective Deferrals which exceed the adjusted
$10,000 limitation will be deemed Excess Elective Deferrals
and will be returned as set forth in Section 5.15. Elective
Deferrals must satisfy one of the ADP Tests, and Elective
Deferrals which do not satisfy one of the ADP Tests will be
deemed Excess Contributions and will be returned as set
forth in Section 5.16.
(2) Withdrawal Of Elective Deferrals: Elective Deferrals
(exclusive of the earnings thereon) can only be withdrawn
upon the earlier to occur of (1) the date the Participant
incurs a Termination of Employment; (2) the date the
Participant dies; (3) the date the Participant suffers a
Disability; (4) the date an event described in Code
ss.401(k)(10) occurs; (5) the date the Participant retires;
or (6) the date the Participant qualifies for a financial
hardship distribution under Section 5.18. Distribution will
be made in accordance with the provisions of Article 5.
(3) Salary Reduction Agreement: A Participant may, in accordance
with a written policy established by the Administrator,
amend his or her salary reduction agreement to change the
percentage being withheld. The Participant may also at any
time suspend or cancel his or her salary reduction agreement
upon reasonable written notice (not to exceed 30 days). If a
Participant cancels or suspends his or her salary reduction
agreement, the Participant will not be permitted to put a
new salary reduction agreement into effect until such time
as set forth in the written policy established by the
Administrator. If necessary to insure that the Plan
satisfies the ADP Test, the Employer may also amend or
terminate a Participant's salary reduction agreement on
written notice to the Participant.
(b) Matching Contributions: The Employer may contribute on behalf of
each Participant a Matching Contribution to be determined each
year by the Employer. Matching Contributions made for each Plan
Year must satisfy the ACP Test. Matching Contributions which do
not satisfy the ACP Test will be deemed Excess Aggregate
Contributions and will be returned as set forth in Section 5.17.
The Employer may elect to treat all or any portion of a Matching
Contribution as a Qualified Matching Contribution to the extent
necessary to satisfy the ACP Test.
20
(c) Non-Elective Contributions: The Employer may make a Non-Elective
Contribution in such an amount as determined by the Employer, and
the Employer will convey such amount to the Trustee in writing.
The Employer's determination of the amount of its Non-Elective
Contribution will be binding on the Trustee, the Administrator
and all Participants and may not be reviewed in any manner.
However, (1) no Non-Elective Contribution may exceed the maximum
amount deductible under Codess.404; (2) Non-Elective
Contributions will be limited as required by Codess.415; and (3)
no Non-Elective Contribution will be made for any Participant who
is not an Eligible Participant unless required by Section 3.5.
(d) Qualified Non-Elective Contributions: Subject to Notice 98-1, the
Employer may, in lieu of distributing Excess Contributions as set
forth in Section 5.16 or Excess Aggregate Contributions as set
forth in Section 5.17, elect to treat all of any portion of a
Non-Elective Contribution as a Qualified Non-Elective
Contribution sufficient to satisfy the ADP Test and/or the ACP
Test; or the Employer elect to make a Qualified Non-elective
Contribution in an amount sufficient to satisfy the ADP Test
and/or the ACP Test.
(e) Contribution For Mistakenly Excluded Employees: Notwithstanding
paragraph (c) to the contrary, if an Employee should have been
included as a Participant but is mistakenly excluded for any
reason, the Employer will make a Non-Elective Contribution equal
to the sum of (1) the amount which would have been contributed
for such Employee, and (2) the amount of earnings that would have
been credited to the excluded Employee's Participant's Account
but for the fact that the Employee was mistakenly excluded. Such
contributions will be made regardless of whether such amounts are
ever deductible by the Employer.
(f) Refund Of Contributions: If the Plan fails to initially satisfy
the qualification requirements of Codess.401(a) and the Employer
declines to amend the Plan to satisfy such requirements,
contributions made prior to the date such qualification is denied
must be returned to the Employer within 1 year of the date of
such denial, but only if the application for the qualification is
made by the time prescribed by law for filing the Employer's tax
return for the taxable year in which the Plan is adopted, or by
such later date as the Secretary of the Treasury may prescribe.
If a contribution is attributable in whole or in part to a good
faith mistake of fact, including a good faith mistake in
determining its deductibility under Codess.404, then an amount
may be returned to the Employer equal to the excess of the amount
contributed over the amount which would have been contributed had
the mistake not occurred. Earnings attributable to any such
excess contribution will not be returned, but losses attributable
to the excess contribution will reduce the amount so returned.
Such amount will be returned within 1 year of the date the
contribution was made or the deduction disallowed, as the case
may be.
3.2 ALLOCATION OF EMPLOYER CONTRIBUTIONS: Each Eligible Participant's
share of the various types of Employer contributions made under the
Plan will be allocated to his or her Participant's Account in
accordance with the following provisions:
(a) Elective Deferrals: Each Participant's Elective Deferrals
contributed under Section 3.1(a) will be allocated to the
Participant's Elective Deferral Account.
21
(b) Matching And Qualified Matching Contributions: Matching
Contributions will be allocated to an Eligible Participant's
Matching Contribution Account; and any Matching Contributions
that are treated as Qualified Matching Contributions will be
allocated to an Eligible Participant's Qualified Matching
Contribution Account. Any Participant who makes an Elective
Deferral during the Plan Year will receive an allocation of
Matching Contributions for the Plan Year regardless of any other
allocation rules to the contrary.
(c) Non-Elective Contributions: Non-Elective Contributions will be
allocated on the annual Valuation Date to each Eligible
Participant's Non-Elective Contribution Account in the ratio that
the Compensation of each Eligible Participant bears to the total
Compensation of all Eligible Participants.
(d) Qualified Non-Elective Contributions: QNECs, and Non-Elective
Contributions that are treated as QNECs, will be allocated to the
QNEC Account of each Eligible Participant who is a NHCE for the
Plan Year beginning with the one who has the lowest Compensation,
and only to the extent necessary to satisfy the ADP Test. The
amount so allocated for any such Participant will be the lesser
of the amount sufficient to satisfy the ADP Test or the
Participant's maximum Annual Addition for the Plan Year as set
forth in Section 6.1.
3.3 ALLOCATION OF EARNINGS AND LOSSES: As of each Valuation Date, accounts
which have not been distributed since the prior Valuation Date will
have the net income of the Trust Fund earned since the prior Valuation
Date allocated thereto as hereinafter set forth in this Section. Net
income is the net of any interest, dividends, unrealized appreciation
and depreciation, capital gains and losses, and investment expenses of
the Trust Fund as determined on each Valuation Date.
(a) Non-Segregated Accounts: Accounts which have not been segregated
from the general Trust Fund for investment purposes will have net
income allocated thereto in the ratio that the value of each
non-segregated account as of the preceding Valuation Date,
increased by the allocation of one-half of any Employer
contributions since the preceding Valuation Date, bears to the
total value of all non-segregated accounts as of the preceding
Valuation Date. The Forfeiture Account will share in the
allocation made under this paragraph.
(b) Segregated Accounts And Policy Dividends: Accounts which have
been segregated from the general Trust Fund for investment
purposes, including Directed Investment Accounts established
under Section 7.15 of the Plan, will only have the net income
earned thereon allocated thereto. Policy dividends or credits
will be allocated to the Participant's Account for whose benefit
the Policy is held.
3.4 ALLOCATION OF FORFEITURES: On each annual Valuation Date, any portion
of the Forfeiture Account which has not been used to pay
administrative expenses of the Plan will be allocated as follows:
Forfeitures attributable to Matching Contributions will be allocated
to the Participant's Account of each Eligible Participant who receives
an allocation of Matching Contributions for the Plan Year. Such
allocation will be made in the ratio that the Compensation of each
Eligible Participant who makes a Matching Contribution for the Plan
Year bears to the total Compensation of all such Eligible
Participants. Forfeitures attributable to Non-Elective Contributions
will be allocated to the Participant's Account of each Eligible
Participant who receives an allocation of Non-Elective Contributions
for the Plan Year. Such allocation will be made in the ratio that the
Compensation of each Eligible Participant who receives an allocation
of Non-Elective Contributions for the Plan Year bears to the total
Compensation of all such Eligible Participants.
22
3.5 TOP HEAVY MINIMUM ALLOCATION: In any Top Heavy Plan Year in which the
Employer makes a contribution to the Plan, each eligible Non-Key
Employee will receive the Top Heavy Minimum Allocation in accordance
with the following provisions:
(a) Who Must Receive Minimum Allocation: Except as otherwise provided
in paragraph (b), the Top Heavy Minimum Allocation will be made
for each eligible Non-Key Employee who is employed by the
Employer on the last day of the Plan Year, including those who
have failed to complete a Year of Service and who have been
excluded from becoming Participants in the Plan because (1) their
Compensation is less than a stated amount; (2) they declined to
make mandatory contributions (if required) to the Plan during the
time they were considered to be Participants; or (3) they failed
to make an elective contribution to a Codess.401(k) plan
maintained by the Employer. However, the Top Heavy Minimum
Allocation will not be required for any Non-Key Employee who also
participates in an Employer sponsored money purchase pension plan
or target benefit pension plan which provides a Top Heavy Minimum
Allocation to such Non-Key Employee and which is included with
this Plan in a Required Aggregation Group.
(b) Lesser Allocation Allowed: If the allocation made to the
Participant's Account of each Key Employee under Sections 3.2 and
3.4, including Elective Deferrals allocated under Section 3.2(a),
is less than 3% of each Key Employee's Section 415 Compensation,
and if this Plan is not required to be included in an Aggregation
Group to enable a defined benefit plan to meet the requirements
of Codess.401(a)(4) orss.410, the Employer's contribution will be
reallocated so the Top Heavy Minimum Allocation made to the
Participant's Account of each eligible Non-Key Employee is equal
to the largest percentage allocated to the Participant's Account
of a Key Employee. Such percentage will be equal to the ratio of
the sum of the Employer's contribution and Forfeitures allocated
on such Key Employee's behalf divided by his or her Section 415
Compensation.
(c) Participation In Multiple Plans: If a Non-Key Employee
participates in this Plan and in a defined benefit plan that is
part of a Top Heavy Required Aggregation Group, the minimum Top
Heavy benefit will be provided by this Plan as a 5% allocation in
lieu of any other allocations provided in this Section. A Non-Key
Employee who only participates in this Plan will not receive the
Top Heavy Extra Minimum Allocation.
3.6 FAILSAFE ALLOCATION: For any Plan Year in which the Plan fails to
benefit at least 70% of Non- Highly Compensated Employees who are
eligible to participate in the Plan, or in which the Plan fails to
benefit a percentage of Non-Highly Compensated Employees who are
eligible to participate in the Plan that is at least 70% of the
percentage of Highly Compensated Employees who benefit under the Plan,
an additional Employer contribution may be made and allocated first to
that group of Employees who were Participants but not Eligible
Participants for the Plan Year; next to that group of Employees who
have not satisfied the eligibility requirements of Section 2.1(a) and
are not members of an ineligible class of Employees as set forth in
Section 2.1(b); and then to that group of Employees who have not
satisfied the eligibility requirements of Section 2.1(a) and are
members of a non-statutory ineligible class of Employees as set forth
in Section 2.1(b). Within each group, individuals will be ranked by
service, and the individuals receiving an allocation will be those
with the highest number of Hours of Service during the Plan Year.
Allocations will be made under this Section only to the extent
necessary to insure that the Plan satisfies one of the ratio
percentage tests set forth in Code ss.ss.410(b)(1)(A) or (B) as
described above.
23
3.7 ROLLOVERS: With the consent of the Administrator, any Employee,
regardless of whether such Employee has become a Participant in the
Plan, may transfer amounts to this Plan from another qualified plan.
Such transferred amounts are hereafter called Rollovers. Rollovers
will be allocated to a Rollover Account in which the Employee will
have a 100% Vested Interest. Except for the portion a Participant
self-directs under Section 7.15, the Administrator may choose for
investment purposes to either segregate Rollover Accounts into
separate interest bearing accounts or to invest them as part of the
general Trust Fund, in which case such accounts will share in the
allocation of earnings and losses under Section 3.3(a). Rollover
Accounts will be administered as follows:
(a) Definition Of Rollover: The term Rollover means amounts
transferred to this Plan (1) in a trustee to trustee transfer
from another qualified plan; (2) from another qualified plan as a
lump sum distribution eligible for tax free rollover treatment
and which is transferred by the Participant to this Plan within
60 days following his receipt thereof; (3) from a conduit
individual retirement account if the only assets therein were
previously distributed to the Participant by another qualified
plan as a lump sum distribution which was eligible for a tax free
rollover within 60 days of receipt thereof and earnings on said
assets; or (4) from a conduit individual retirement account
meeting the requirements of subparagraph (3) and transferred to
this Plan within 60 days of receipt thereof.
(b) Withdrawal Of Rollovers: An Employee may withdraw all or any
portion of his or her Rollover Account at any time prior to
becoming a Participant in the Plan, but once an Employee has
become a Participant, withdrawal can only be made at such time as
the Employee is entitled to a distribution of his or her
Participant's Account under the provisions of Article 4. Any
amount withdrawn cannot be redeposited to the Rollover Account.
However, amounts which constitute or are treated as constituting
elective contributions as defined in regulation
ss.1.401(k)-1(g)(3) and which were transferred to this Plan in a
trustee to trustee transfer from another qualified plan may only
be withdrawn in accordance with the limitations set forth in
regulationss.1.401(k)-1(d). All withdrawal requests must contain
the Employee's address, social security number, birth date, and
the amount of the withdrawal. A Rollover withdrawal will not
prevent an Employee from accruing any future benefit attributable
to Employer contributions. An Employee's request to make a
Rollover withdrawal must satisfy the applicable spousal consent
requirements set forth in Section 5.8 of the Plan.
24
ARTICLE 4
PLAN BENEFITS
4.1 BENEFIT UPON NORMAL OR EARLY RETIREMENT: Every Participant who has
reached Normal or Early Retirement Age and retires will be entitled to
receive his or her Vested Aggregate Account balance determined as of
the most recent Valuation Date coinciding with or immediately
preceding the date of distribution. Distribution will made in
accordance with Section 5.1.
4.2 BENEFIT UPON LATE RETIREMENT: A Participant who has reached Normal or
Early Retirement Age may elect to remain employed and retire at a
later date. Such Participant will continue to participate in the Plan
and his or her Participant's Account will continue to receive
allocations under Article 3 until the Participant actually retires. A
Participant who elects late retirement may at any time (1) choose to
have distributed prior to actual retirement all or part of his or her
Vested Aggregate Account balance determined as of the most recent
Valuation Date coinciding with or immediately preceding the date of
distribution; or (2) choose to have such Vested Aggregate Account
balance transferred to another qualified retirement plan maintained by
the Employer. Upon actual retirement, the Participant will be entitled
to his or her undistributed Vested Aggregate Account balance
determined as of the most recent Valuation Date coinciding with or
immediately preceding the date of distribution. Distribution will be
made in accordance with Section 5.1.
4.3 BENEFIT UPON DEATH: Upon the death of a Participant prior to
Termination of Employment, or upon the death of a Terminated
Participant prior to distribution of his or her Vested Aggregate
Account, his or her Beneficiary will be entitled to the Participant's
Vested Aggregate Account balance determined as of the most recent
Valuation Date coinciding with or immediately preceding the date of
distribution. If any Beneficiary who is living on the date of the
Participant's death dies prior to receiving his or her the entire
death benefit, the remaining portion of such death benefit will be
paid in a lump sum to the estate of such deceased Beneficiary. The
Administrator's determination that a Participant has died and that a
particular person has a right to receive a death benefit will be
final. Distribution will be made in accordance with Section 5.2.
4.4 BENEFIT UPON DISABILITY: If a Participant suffers a Disability prior
to Termination of Employment, or if a Terminated Participant suffers a
Disability prior to distribution of his or her Vested Aggregate
Account, he or she will be entitled to his or her Vested Aggregate
Account balance determined as of the most recent Valuation Date
coinciding with or immediately preceding the date of distribution.
Distribution will be made in accordance with Section 5.3.
4.5 BENEFIT UPON TERMINATION: A Participant who incurs a Termination of
Employment will be entitled to his or her Vested Aggregate Account
balance as of the most recent Valuation Date coinciding with or
immediately preceding the date of distribution. Distribution to a
Terminated Participant who does not die prior to such distribution or
who does not suffer a Disability prior to such distribution will be
made in accordance with Section 5.4.
4.6 DETERMINATION OF VESTED INTEREST: A Participant's Vested Interest in
his or her Participant's Account will be determined in accordance with
the following provisions:
(a) 100% Vesting Upon Retirement, Death Or Disability: A Participant
will have a 100% Vested Interest in his Participant's Account
upon reaching Normal or Early Retirement Age prior to Termination
of Employment, or upon death or Disability prior to that date.
25
(b) Vesting Prior To Retirement, Death Or Disability: Except as
otherwise provided in paragraph (a) above, a Participant's Vested
Interest in his or her Participant's Account at any given time,
including Termination of Employment prior to Normal or Early
Retirement Age, death or Disability, will be determined in
accordance with the following: (1) a Participant's Vested
Interest in all Elective Deferrals, Matching Contributions,
Qualified Matching Contributions and Qualified Non-Elective
Contributions that are allocated to his or her Participant's
Account will be 100% upon entry into the Plan and at all times
thereafter; and (2) a Participant's Vested Interest in all
Non-Elective Contributions that are allocated to his or her
Participant's Account will be determined by the vesting schedule
which immediately follows this paragraph based on the number of
Years of Service the Participant has completed on the date of
determination.
Years Of Service Vested Interest
1 . . . . . . . . . 20%
2 . . . . . . . . . 40%
3 . . . . . . . . . 60%
4 . . . . . . . . . 80%
5 . . . . . . . . . 100%
(c) Amendments To Vesting Schedule: No Plan amendment may directly or
indirectly reduce a Participant's Vested Interest. If the Plan's
vesting schedule is amended, any Participant with at least three
Years of Service may, by filing a written request with the
Administrator 60 days after the latest of (1) the amendment's
adoption date, (2) the amendment's effective date, or (3) the
date the Participant receives written notice of the amendment,
elect to have the Vested Interest in his or her Participant's
Account computed by the vesting schedule in effect prior to the
amendment. A Participant who fails to make such an election will
have his or her Vested Interest computed under the new schedule.
However, notwithstanding the foregoing, a Participant's Vested
Interest in his or her Participant's Account will not be less
than it was as of the later of January 1, 2000 or the date this
amended Plan is actually adopted by the Employer.
(d) Accounts attributable to Peoples State Bank Employees Stock
Ownership Plan: Notwithstanding the foregoing, to the extent any
portion of a Participant's Account is attributable to amounts
transferred from the Peoples State Bank Employees Stock Ownership
Plan, such portion of the Participant's Account shall be fully
vested.
26
ARTICLE 5
DISTRIBUTION OF BENEFITS
5.1 BENEFIT UPON RETIREMENT: Unless a cash-out occurs under Section 5.5,
the retirement benefit a Participant is entitled to receive under
Section 4.1 or 4.2 will be distributed as follows:
(a) Form Of Distribution: Unless otherwise elected under Section 5.8,
a Participant's retirement benefit will be distributed as a
Qualified Joint and Survivor Annuity if the Participant is
married on the Annuity Starting Date and has not died before such
date. If the Participant is unmarried on the Annuity Starting
Date and has not died before such date, the Participant's
retirement benefit will be distributed as a life annuity.
(b) Optional Forms Of Distribution: If a Participant elects not to
receive the form of benefit described in paragraph (a), the
Participant may elect to have his or her retirement benefit
distributed (1) in one lump sum in cash or property; or (2) in
monthly, quarterly, semi-annual or annual cash installments over
a period certain that does not extend beyond the Participant's
life, or beyond the lives of the Participant and a designated
Beneficiary (or beyond the life expectancy of the Participant or
the joint and last survivor expectancy of the Participant and a
designated Beneficiary, in which event the lump sum value of the
benefit will either be segregated and separately invested by the
Trustee, or it will be invested in a nontransferable annuity
providing for installment payments.
(c) Time Of Distribution: Distribution will be made under this
Section within a reasonable time after the Participant's actual
retirement date, or within a reasonable time after the date a
Participant who elects late retirement under Section 4.2 requests
payment, but distribution must begin no later than the
Participant's Required Beginning Date.
5.2 BENEFIT UPON DEATH: Unless a cash-out occurs under Section 5.5, the
death benefit a deceased Participant's Beneficiary is entitled to
receive under Section 4.3 will be distributed as follows:
(a) Non-Spouse Beneficiary: A non-spouse Beneficiary may elect to
have any death benefit such Beneficiary is entitled to receive
distributed by one of the following methods unless a different
method has been chosen by the Participant: (1) in one lump sum in
cash or property; or (2) in monthly, quarterly, semi-annual or
annual cash installments over a period certain that does not
extend beyond the life of the Beneficiary (or beyond the life
expectancy of the Beneficiary), in which event the lump sum value
of the benefit will either be segregated and separately invested
by the Trustee, or it will be invested in a nontransferable
annuity providing for installment payments. Distribution will be
made within a reasonable time after the death of the Participant;
but distribution of a lump sum must be made by December 31st of
the calendar year which contains the 5th anniversary of the date
of the Participant's death, or installments must begin no later
than December 31st of the calendar year immediately following the
calendar year in which the Participant died.
(b) Surviving Spouse: Notwithstanding any other Beneficiary
designation made by a Participant, if a Participant is married on
the date of his or her death and dies before the Annuity Starting
Date, the Participant's surviving spouse will receive a minimum
death benefit as a Qualified Preretirement Survivor Annuity
unless such annuity has been waived in accordance with Section
5.8. The surviving spouse may elect to have any death benefit to
27
which he or she is entitled distributed by one of the following
methods unless a different method has been chosen by the
Participant: (1) in one lump sum in cash or property; or (2) in
monthly, quarterly, semi- annual or annual cash installments over
a period certain that does not extend beyond the life of the
surviving spouse or beyond the life expectancy of the surviving
spouse, in which event the lump sum value of the benefit will
either be segregated and separately invested by the Trustee, or
it will be invested in a nontransferable annuity providing for
installment payments.
(c) Time Of Distribution To A Surviving Spouse: The surviving spouse
may (1) elect to have any death benefit to which he or she is
entitled distributed within a reasonable time after the death of
the Participant; or (2) elect to defer distribution of the death
benefit, but distribution may not be deferred beyond December
31st of the calendar year in which the deceased Participant would
have attained Age 70 1/2.
(d) Death Of Surviving Spouse Before Distribution Begins: If the
surviving spouse dies before distribution begins, then
distribution will be made as if the surviving spouse were the
Participant. Distribution will be considered as having commenced
when the deceased Participant would have reached Age 70 1/2even
if payments have been made to the surviving spouse before that
date. However, if distribution to the surviving spouse commences
in the form of an irrevocable annuity over a period permitted
under paragraph (b) before the deceased Participant would have
reached Age 70 1/2, distribution will be considered as having
begun on the actual annuity commencement date.
(e) Participants In Pay Status: If a Participant who has started
receiving distribution of his or her retirement benefit dies
before the entire benefit has been distributed, the balance of
the benefit will be distributed to the Participant's Beneficiary
at least as rapidly as under the method of distribution being
used on the date of the Participant's death.
5.3 DISABILITY BENEFITS: Unless a cash-out occurs under Section 5.5, the
Disability benefit a Participant is entitled to receive under Section
4.4 will be distributed as follows:
(a) Form Of Distribution: Unless otherwise elected under Section 5.8,
a Participant's Disability benefit will be distributed as a
Qualified Joint and Survivor Annuity if the Participant is
married on the Annuity Starting Date and has not died before such
date. If the Participant is unmarried on the Annuity Starting
Date and has not died before such date, the Participant's
Disability benefit will be distributed as a life annuity.
(b) Optional Forms Of Distribution: If a Participant elects not to
receive the form of benefit described in paragraph (a), the
Participant may elect to have his or her Disability benefit
distributed (1) in one lump sum in cash or property; or (2) in
monthly, quarterly, semi-annual or annual cash installments over
a period certain that does not extend beyond the Participant's
life, or beyond the lives of the Participant and a designated
Beneficiary (or beyond the life expectancy of the Participant or
the joint and last survivor expectancy of the Participant and a
designated Beneficiary), in which event the lump sum value of the
benefit will either be segregated and separately invested by the
Trustee, or it will be invested in a nontransferable annuity
providing for installment payments.
28
(c) Time Of Distribution: Distribution will be made under this
Section within a reasonable time after the date on which the
Participant suffers the Disability, but distribution must begin
no later than the Participant's Required Beginning Date.
5.4 BENEFIT UPON TERMINATION: Unless a cash-out occurs under Section 5.5
or a prior distribution has been made under Section 5.2 or Section
5.3, the benefit a Terminated Participant is entitled to receive under
Section 4.5 will be distributed as follows:
(a) Form Of Distribution: Unless otherwise elected under Section 5.8,
a Terminated Participant's benefit will be distributed as a
Qualified Joint and Survivor Annuity if the Terminated
Participant is married on the Annuity Starting Date and has not
died before such date. If the Terminated Participant is unmarried
on the Annuity Starting Date and has not died before such date,
his or her benefit will be distributed as a life annuity.
(b) Optional Forms Of Distribution: If a Terminated Participant
elects not to receive the form of benefit described in paragraph
(a), the Terminated Participant may elect to have his or her
benefit distributed (1) in one lump sum in cash or property; or
(2) in monthly, quarterly, semi- annual or annual cash
installments over a period certain that does not extend beyond
the Participant's life, or beyond the lives of the Participant
and a designated Beneficiary (or beyond the life expectancy of
the Participant or the joint and last survivor expectancy of the
Participant and a designated Beneficiary), in which event the
lump sum value of the benefit will either be segregated and
separately invested by the Trustee, or it will be invested in a
nontransferable annuity providing for installment payments.
(c) Time Of Distribution: Distribution will be made under this
Section within a reasonable time after the last day of the Plan
Year in which Termination of Employment occurs, but distribution
must begin no later than the Required Beginning Date.
5.5 CASH-OUT OF BENEFITS: If the lump sum value of a Participant's benefit
does not exceed $5,000, the Administrator may distribute the benefit
in a lump sum without a Participant's consent as soon as practicable
after a Participant becomes eligible for a distribution thereof, but
distribution must occur no later than the date the benefit would
otherwise be distributable under the terms of the Plan. That portion
of a Participant's Account which is not a Vested Interest will be
treated as a Forfeiture, and if such Vested Interest is zero on the
date of distribution, a Participant will be deemed to have received a
distribution of such Vested Interest.
5.6 RESTRICTIONS ON IMMEDIATE DISTRIBUTIONS: If the lump sum value of a
Participant's benefit exceeds (or at the time of any prior
distribution exceeded) $5,000, and the benefit is immediately
distributable, the benefit may only be distributed with the consent of
a Participant and a Participant's spouse in accordance with this
Section. That portion of a Participant's Account which is not a Vested
Interest will be treated as a Forfeiture.
(a) Definition Of Immediately Distributable: A Participant's benefit
is immediately distributable if any part of the benefit could be
distributed to the Participant (or the Participant's surviving
spouse) before the Participant reaches (or would have reached if
not deceased) the later of his or her Normal Retirement Age or
Age 62.
29
(b) Consent Requirements: The consent of the Participant and the
Participant's spouse (or where either the Participant or the
Participant's spouse has died, the survivor) to any benefit that
is immediately distributable must be obtained in writing within
the 90-day period ending on the Annuity Starting Date. However,
(1) only the Participant need consent to the distribution of a
Qualified Joint and Survivor Annuity while the benefit is
immediately distributable; and (2) neither the Participant nor
the Participant's spouse will be required to consent to a
distribution that is required by Code ss.401(a)(9) or ss.415. If
this Plan upon termination does not offer an annuity option
(purchased from a commercial provider) and if neither the
Employer nor an Affiliated Employer maintains another defined
contribution plan other than an employee stock ownership plan
(ESOP) as defined in Code ss.4975(e)(7), the Participant's
benefit will, without the Participant's consent, be distributed
to the Participant. If the Employer or an Affiliated Employer
does maintain another defined contribution plan other than an
ESOP, the Participant's benefit will, without the Participant's
consent, be transferred to the other plan if the Participant does
not consent to an immediate distribution under the terms of this
Section.
(c) Notification Requirements: The Administrator must notify the
Participant and the Participant's spouse of the right to defer
any distribution until the benefit is no longer immediately
distributable. Notification will include a general explanation of
the material features and relative values of the optional forms
of benefit available under the Plan in a manner that would
satisfy the notice requirements of Codess.417(a)(3); and will be
provided no less than 30 days or more than 90 days prior to the
Annuity Starting Date. Distribution of the benefit may begin less
than 30 days before the Annuity Starting Date if (1) the
Administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days after
receiving the required notification to consider the decision of
whether to waive the Qualified Joint and Survivor Annuity and to
consent to another form of distribution; (2) the Participant is
permitted to revoke an affirmative distribution election at least
until the Annuity Starting Date, or, if later, at any time prior
to the expiration of the 7 day period that begins the day after
the explanation of the Qualified Joint and Survivor Annuity is
provided to the Participant; (3) the Annuity Starting Date is
after the date that the explanation of the Qualified Joint and
Survivor Annuity is provided to the Participant (but the Annuity
Starting Date may be before the date that any affirmative
distribution elections are made by the Participant and before the
date).
5.7 RESTORATION OF FORFEITED ACCOUNT BALANCE: If a Participant with a
partially Vested Interest in his or her Participant's Account
terminates employment with the Employer and receives (or is deemed to
have received) a distribution of such Vested Interest, and such
Participant is subsequently reemployed by the Employer, then such
Participant's Account balance will be restored to the amount on the
date of distribution if the Participant repays to the Plan the full
amount of the distribution which was attributable to Employer
contributions before the earlier of 5 years after the first date on
which the Participant is subsequently reemployed by the Employer or
the date on which the Participant incurs 5 consecutive Breaks in
Service following the date of distribution. If a Participant whose
Vested Interest in his or her Participant's Account is zero is deemed
to have received a distribution of such Vested Interest from the Plan
before the date on which the Participant incurs 5 consecutive Breaks
in Service, upon reemployment with the Employer, such Participant's
Account balance which is attributable to Employer contributions will
be restored to the amount on the date of the deemed distribution.
30
5.8 SPOUSAL CONSENT REQUIREMENTS: A married Participant's election not to
receive a Qualified Joint and Survivor Annuity (QJSA) under Section
5.1 or a Qualified Preretirement Survivor Annuity (QPSA) under Section
5.2, or an unmarried Participant's election not to receive a life
annuity under Section 5.1, must be made in accordance with the
following provisions:
(a) Election Not To Receive A QJSA: A married Participant's election
not to receive a Qualified Joint and Survivor Annuity, or an
unmarried Participant's election not to receive a life annuity,
must be in writing and must be made during the 90-day period
ending on the Annuity Starting Date. Such election may be revoked
in writing and a new election made at any time and any number of
times during the election period.
(b) Election Not To Receive A QPSA: A married Participant's election
not to receive a Qualified Preretirement Survivor Annuity must be
in writing and must be made during an election period beginning
on the first day of the Plan Year in which the Participant
reaches Age 35 and ending on the date of his or her death. The
election may be revoked in writing and a new election made at any
time and any number of times during the election period. A
Terminated Participant's election period concerning his or her
Vested Aggregate Account before his termination will not begin
later than such date.
(c) Special Pre-Age 35 QPSA Election: A Participant who has not yet
reached Age 35 as of the end of any current Plan Year may make a
special election not to receive a Qualified Preretirement
Survivor Annuity for the period beginning on the date of such
election and ending on the first day of the Plan Year in which
such Participant reaches Age 35. This election will not be valid
unless the Participant receives the same written explanation of
the Qualified Preretirement Survivor Annuity as described in
paragraph (d) below. Qualified Preretirement Survivor Annuity
coverage will be automatically reinstated as of the first day of
the Plan Year in which the Participant reaches Age 35. Any new
election on or after such date will be subject to the full
requirements of this Section 5.8.
(d) Required Written Explanation Of QJSA Or QPSA: In connection with
an election not to receive a Qualified Joint and Survivor
Annuity, the Administrator will, no less than 30 days and no more
than 90 days prior to the Annuity Starting Date, provide the
Participant with a written explanation of the terms and
conditions of the Qualified Joint and Survivor Annuity; the
Participant's right to make (and the effect of) an election to
waive the Qualified Joint and Survivor Annuity; the rights of the
Participant's spouse; and the right of the Participant to revoke
such election (and the effect thereof). In connection with an
election not to receive a Qualified Preretirement Survivor
Annuity, the Administrator will provide each Participant within
the Applicable Period as defined in paragraph (e) with a written
explanation of the Qualified Preretirement Survivor Annuity in
such terms and in such manner as would be comparable to the
written explanation applicable to a Qualified Joint and Survivor
Annuity as set forth in this paragraph.
(e) Applicable Period: The Applicable Period for a Participant is
whichever of the following periods ends last: (1) the period
beginning with the first day of the Plan Year in which the
Participant attains Age 32 and ending with the close of the Plan
Year preceding the Plan Year in which the Participant attains Age
35; (2) a reasonable period after the individual becomes
31
a Participant; (3) a reasonable period ending after
Codess.401(a)(11) ceases to apply to the Participant; or (4) a
reasonable period ending after Codess.417(a)(5) ceases to apply
with respect to the Participant. For purposes of this paragraph,
a reasonable period means the end of the two year period
beginning one year prior to the date the applicable event occurs,
and ending one year after that date.
(f) Participants Who Terminate Before Age 35: In the case of a
Participant who separates from service before the Plan Year in
which the Participant reaches Age 35, the notice required under
paragraph (d) will be provided within the two year period
beginning one year prior to separation from service and ending
one year after separation from service. If such Participant
thereafter returns to employment with the Employer, the
Applicable Period for such Participant will be redetermined.
(g) Elections Must Have Spousal Consent: A Participant's election not
to receive a Qualified Joint and Survivor Annuity or a
Participant's election not to receive a Qualified Preretirement
Survivor Annuity will not be effective (1) unless the
Participant's spouse consents in writing to the election; (2)
unless the election designates a specific Beneficiary (or form of
benefit) which may not be changed without spousal consent (or the
consent of the spouse expressly permits designations by the
Participant without any requirement of further spousal consent);
and (3) unless the spouse's consent acknowledges the effect of
the election and is witnessed by the Administrator or a notary
public.
(h) Additional Requirements For Spousal Consent: Notwithstanding
paragraph (g), a spouse's consent will not be required if there
is no spouse or if the spouse cannot be located, or if there are
other circumstances (as set forth in the Code) present which
preclude the necessity of such spouse's consent. Any consent by a
Participant's spouse (or establishment that consent cannot be
obtained) will be effective only with respect to such spouse. A
consent that permits designations by the Participant without any
requirement of further consent by the spouse must acknowledge
that the spouse has the right to limit consent to a specific
Beneficiary, and a specific form of benefit where applicable, and
that the spouse voluntarily elects to relinquish either or both
of such rights. A revocation of a prior election may be made by a
Participant without the spouse's consent at any time before the
commencement of benefits. No consent obtained under paragraph (g)
will be valid unless the Participant has received notice as
provided in paragraph (d).
5.9 APPLICATION OF CODE SECTION 401(a)(9): All distributions made under
the terms of the Plan will be determined and made in accordance with
the regulations issued under Code ss.401(a)(9), including the minimum
distribution incidental benefit requirement of regulation
ss.1.401(a)(9)-2, and any provisions in this Plan which reflect Code
ss.401(a)(9) will override any distribution options which are
inconsistent with such Code section and regulations.
5.10 STATUTORY COMMENCEMENT OF BENEFITS: Unless the Participant otherwise
elects, distribution of a Participant's benefit must begin no later
than the 60th day after the latest of the close of the Plan Year in
which the Participant (1) reaches the earlier of Age 65 or Normal
Retirement Age; (2) reaches the 10th anniversary of the year the
Participant commenced Plan participation; or (3) terminates service
with the Employer. However, the failure of a Participant and the
Participant's spouse to consent to a distribution while a benefit is
immediately distributable within the meaning of
32
Section 5.6 above will be deemed to be an election to defer
commencement of payment of any benefit sufficient to satisfy this
Section. In addition, if this Plan provides for early retirement, a
Participant who satisfied the service requirement for early retirement
prior to Termination of Employment will be entitled to receive his or
her Vested Aggregate Account balance, if any, upon satisfaction of the
age requirement for early retirement.
5.11 DETERMINATION OF LIFE EXPECTANCIES: If a Participant's Vested
Aggregate Account is distributed through other than the purchase of an
immediate annuity, the applicable calendar year will be the First
Distribution Calendar Year and, if life expectancy is being
recalculated, each succeeding calendar year. If annuity payments
commence before the Required Beginning Date, the applicable calendar
year is the year such payments commence. If distribution is in the
form of an immediate annuity purchased after the Participant's death
with the Participant's remaining interest, the applicable calendar
year is the year of purchase. For purposes of Section 5.2, payments
will be calculated by use of the return multiples specified in
regulation ss.1.72-9. Life expectancy of a surviving spouse may be
recalculated annually, but in the case of any other Beneficiary, life
expectancy will be calculated at the time payment first commences and
payments for any 12-consecutive month period will be based on such
life expectancy minus the number of whole years that have passed since
distribution commenced. The First Distribution Calendar Year is, for
distributions beginning before the Participant's death, the calendar
year immediately preceding the calendar year containing the
Participant's Required Beginning Date. For distributions beginning
after the death of a Participant, the First Distribution Calendar Year
is the calendar year in which distributions are required to begin
under Section 5.2.
5.12 SEGREGATION OF BENEFIT BEFORE DISTRIBUTION: As of the Valuation Date
coinciding with or next following the date a Participant terminates
employment with the Employer for any reason, the Administrator will,
until a distribution is made to the Participant or the Participant's
Beneficiary in accordance with Sections 5.1, 5.2, 5.3, 5.4 or 5.5,
direct the Trustee in a uniform nondiscriminatory manner to either (1)
invest the Participant's Vested Aggregate Account balance determined
as of such Valuation Date in a separate interest bearing account; or
(2) leave the Participant's Vested Aggregate Account balance as part
of the general Trust Fund, in which case such account will share in
the allocation of earnings and losses under Section 3.3(a).
5.13 DISTRIBUTION IN EVENT OF LEGAL INCAPACITY: If any person entitled to
benefits (the "Payee") suffers from a Disability or is under a legal
incapacity, payments may be made in one or more of the following ways
as directed by the Administrator: (a) to the Payee directly; (b) to
the guardian or legal representative of the Payee's person or estate;
(c) to a relative of the Payee, to be expended for the Payee's
benefit; or (d) to the custodian of the Payee under any Uniform Gifts
to Minors Act. The Administrator's determination of minority or
incapacity will be final.
5.14 DIRECT ROLLOVERS: A distributee may elect to have any portion of an
eligible rollover distribution paid directly to an eligible retirement
plan specified by the distributee in a direct rollover, which is a
payment by the Plan to the eligible retirement plan specified by the
distributee.
(a) Eligible Rollover Distribution: An eligible rollover distribution
is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover
distribution does not include any distribution that is one of a
series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy)
of
33
the distributee or for the joint lives (or joint life expectancies) of
the distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent
such distribution is required under Codess.401(a)(9), 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); and, effective as of January 1, 2000,
the portion of any hardship distribution made to a Participant,
pursuant to Section 5.18, attributable to elective deferrals.
(b) Eligible Retirement Plan: An eligible retirement plan is an
individual retirement account described in Code ss.408(a), an
individual retirement annuity described in Code ss.408(b), an
annuity plan described in Code ss.403(a), or a qualified trust
described in Code ss.401(a), that accepts the distributee's
eligible rollover distribution. However, in the case of an
eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account or
individual retirement annuity.
(c) Definition Of Distributee: For purposes of this Section, a
distributee includes an Employee or former Employee. In addition,
an Employee's or former Employee's Surviving Spouse and an
Employee's or former Employee's spouse or former Spouse who is
the alternate payee under a qualified domestic relations order as
defined in Code ss.414(p), are distributees with regard to the
interest of the Spouse or former Spouse.
5.15 DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS: Excess Elective Deferrals,
plus any income and minus any loss allocable thereto, will be
distributed no later than April 15th to any Participant to whose
account Excess Elective Deferrals were allocated for the preceding
year and who claims Excess Elective Deferrals for such taxable year.
Distribution of Excess Elective Deferrals will made in accordance with
the following provisions:
(a) Assignment Of Excess Elective Deferrals: A Participant may assign
to this Plan any Excess Elective Deferrals made during a taxable
year of the Participant by notifying the Administrator on or
before April 15th of the amount of the Excess Elective Deferrals
to be assigned to the Plan. A Participant will be deemed to
notify the Administrator of any Excess Elective Deferrals that
arise by taking into account only those Elective Deferrals made
to this Plan and any other plans of the Employer.
(b) Definition Of Excess Elective Deferrals: The term Excess Elective
Deferrals means Elective Deferrals that are includible in a
Participant's gross income under Codess.402(g) to the extent such
Participant's Elective Deferrals for a taxable year exceed the
dollar limitation under such Code Section. Excess Elective
Deferrals will be treated as Annual Additions under Section 6.1
of the Plan, unless such amounts are distributed no later than
the first April 15th following the close of the Participant's
taxable year. Excess Elective Deferrals that are distributed
after April 15th are includible in the Participant's gross income
in the taxable year in which deferred and the taxable year in
which distributed.
(c) Determination Of Income Or Loss: Excess Elective Deferrals will
be adjusted for any income or loss up to the end of the
Participant's taxable year and, at the discretion of the
Administrator, may be adjusted for income or loss up to the date
of distribution. The period between the end of the Participant's
taxable year and the date of distribution will be referred to as
the gap period, and any income earned therein will be allocated
at the discretion of the Administrator applied consistently to
all Participants and to all corrective distributions for the
34
taxable year. The income or loss allocable to a Participant's
Excess Elective Deferrals will be the amount determined by either
the method in subparagraph (1) or subparagraph (2) plus, if
applicable the amount determined in subparagraph (3):
(1) The amount determined by multiplying the income or loss
allocable to his Elective Deferrals for the taxable year
(and the gap period) by a fraction, the numerator of which
is the Participant's Excess Elective Deferrals for the year
and the denominator of which is (A) the Participant's
Account balance attributable to Elective Deferrals as of the
beginning of the Participant's taxable year plus any
Elective Deferrals allocated to the Participant's Account
during such taxable year and the gap period, if applicable,
or (B) solely with respect to taxable years beginning before
January 1, 1992, the Participant's Account balance
attributable to Elective Deferrals as of the end of the
Participant's taxable year, reduced by any gain and
increased by any loss allocable thereto during the taxable
year; or
(2) The amount determined by any reasonable method of allocating
income or loss to Excess Elective Deferrals for the taxable
year and for the gap period provided the method used is the
same method used by this Plan for allocating income or
losses to Participant's Accounts; and
(3) 10% of the amount determined under (1) multiplied by the
number of whole months between the end of the Participant's
taxable year and the distribution date, counting the month
of distribution if it occurs after the 15th of such month.
5.16 DISTRIBUTION OF EXCESS CONTRIBUTIONS: Excess Contributions, plus any
income and minus any loss allocable thereto, will be distributed no
later than the last day of each Plan Year to Participants to whose
accounts such Excess Contributions were allocated for the preceding
Plan Year. The amount of Excess Contributions to be distributed under
this Section will be reduced by the amount of any Excess Elective
Deferrals previously distributed to the Participant under Section 5.15
for the Participant's taxable year ending with or within the Plan
Year. Distribution of Excess Contributions will be made in accordance
with the following provisions:
(a) Allocation To Highly Compensated Employees: Excess Contributions
will be allocated to the HCEs with the largest amounts of
Employer contributions taken into account in calculating the ADP
Test for the year in which the Excess Contributions arose,
beginning with the HCE with the largest amount of such Employer
contributions and continuing in descending order until all the
Excess Contributions have been allocated. For purposes of the
preceding sentence, the "largest amount" is determined after
distribution of any Excess Contributions. If excess amounts are
distributed more than 2 1/2months after the last day of the Plan
Year in which they arose, a 10% excise tax will be imposed on the
Employer. Excess Contributions will be treated as Annual
Additions under Section 6.1.
(b) Definition Of Excess Contributions: The term Excess Contributions
means with respect to any Plan Year the excess of (a) the
aggregate amount of Employer contributions actually taken into
account in computing the ADP Test of Participants who are HCEs
for such Plan Year, over (b) the maximum amount of such
contributions permitted by the ADP Test (determined by reducing
contributions made on behalf of Participants who are HCEs in
order of their ADPs, beginning with the highest of such
percentages).
35
(c) Determination Of Income Or Loss: Excess Contributions will be
adjusted for any income or loss up to the end of the Plan Year
and, at the discretion of the Administrator, may be adjusted for
income or loss up to the date of distribution. The period, if
any, between the end of the Plan Year and the date of
distribution will be referred to as gap period, and any income
earned therein will be allocated at the Administrator's
discretion applied consistently to all Participants and to all
corrective distributions made for the Plan Year. The income or
loss allocable to each Participant's Excess Contributions will be
the amount determined by either the method in subparagraph (1) or
subparagraph (2) plus, if applicable, the amount determined under
subparagraph (3), as follows:
(1) The amount determined by multiplying the income or loss
allocable to his or her Elective Deferrals (and if
applicable, QNECs and/or QMACs) for the Plan Year (and the
gap period, if applicable) by a fraction, the numerator of
which is the Participant's Excess Contributions for the year
and the denominator of which is (A) the Participant's
Account balance attributable to Elective Deferrals (and if
applicable, QNECs and/or QMAC that are included in the ADP
test) as of the beginning of the Plan Year plus any Elective
Deferrals (and if applicable, QNECs and/or QMACs that are
included in the ADP test) allocated to the Participant
during such Plan Year and the gap period, if applicable, or
(B) solely with respect to Plan Years beginning before
January 1, 1992, the Participant's Account balance
attributable to Elective Deferrals (and if applicable, QNECs
and/or QMACs that are included in the ADP Test) as of the
end of the Plan Year reduced by any gain and increased by
any loss allocable thereto during the Plan Year; or
(2) The amount determined by any reasonable method of allocating
income or loss to the Participant's Elective Deferrals (and
if applicable, QNECs and/or QMACS) for the Plan Year and for
the gap period provided the method used is the same method
used for allocating income or losses to Participants'
Accounts; and
(3) 10% of the amount determined under (1) multiplied by the
number of whole months between the end of the Plan Year and
the distribution date, counting the month of distribution if
it occurs after the 15th of such month.
(d) Accounting For Excess Contributions: Excess Contributions will be
distributed from the Participant's Elective Deferral sub-account
and QMAC sub-account in proportion to the Participant's Elective
Deferrals and QMACs (to the extent used in the ADP Test) for the
Plan Year. Excess Contributions will be distributed from the
Participant's QNEC sub-account only to the extent the Excess
Contributions exceed the balance in the Participant's Elective
Deferral sub-account and QMAC sub-account.
5.17 DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS: Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto,
will be forfeited, if forfeitable, or if not forfeitable, distributed
no later than the last day of each Plan Year to Participants to whose
Accounts such contributions were allocated for the preceding Plan
Year. Distribution of Excess Aggregate Contributions will be made in
accordance with the following provisions:
(a) Allocation To Highly Compensated Employees: Excess Aggregate
Contributions will be allocated to the HCEs with the largest
Contribution Percentage Amounts taken into account in calculating
the ACP Test for the year in which the excess arose, beginning
with the HCE
36
with the largest amount of such Contribution Percentage Amounts
and continuing in descending order until all the Excess Aggregate
Contributions have been allocated. For purposes of the preceding
sentence, the "largest amount" is determined after distribution
of any Excess Aggregate Contributions. If Excess Aggregate
Contributions are distributed more than 2 1/2 months after the
last day of the Plan Year in which they arose, a 10% excise tax
will be imposed on the Employer with respect to those amounts.
Excess Aggregate Contributions will be treated as Annual
Additions under Section 6.1.
(b) Forfeitures Of Excess Aggregate Contributions: Forfeitures of
Excess Aggregate Contributions will be allocated (after all other
Forfeitures) to the Matching Contribution sub- account of each
Participant who is a NHCE who made Elective Deferrals or
Voluntary Employee Contributions in the ratio which each such
Participant's Compensation for the Plan Year bears to the total
Compensation of all such Participants for such Plan Year.
(c) Excess Aggregate Contribution: The term Excess Aggregate
Contribution means, with respect to any Plan Year, the excess of
(1) the aggregate Contribution Percentage Amounts taken into
account in computing the numerator of the Contribution Percentage
actually made on behalf of Participants who are HCEs for such
Plan Year, over (2) the maximum Contribution Percentage Amounts
permitted by the ACP Test (determined by reducing contributions
made on behalf of Participants who are HCEs in order of their
Contribution Percentage Amounts beginning with the highest of
such percentages). Such determination will be made after first
determining Excess Elective Deferrals and then determining Excess
Contributions. The terms Actual Contribution Percentage,
Contribution Percentage and Contribution Percentage Amount are
defined in Section 1.10 of the Plan.
(d) Determination Of Income: Excess Aggregate Contributions will be
adjusted for any income or loss up to the end of the Plan Year
and, at the discretion of the Administrator, may be adjusted for
income or loss up to the date of distribution. The period between
the end of the Plan Year and the date of distribution will be
referred to as the gap period, and any income earned during the
gap period will be allocated at the discretion of the
Administrator applied consistently to all Participants and to all
corrective distributions for the Plan Year. The income or loss
allocable to a Participant's Excess Aggregate Contributions will
be the amount determined by either the method in subparagraph (1)
or subparagraph (2) plus, if applicable, the amount determined
under subparagraph (3):
(1) The amount determined by multiplying the income or loss
allocable to his Voluntary Employee Contributions, Matching
Contributions (if not used in the ADP Test), QNECs and, to
the extent applicable, Elective Deferrals for the Plan Year
(and the gap period, if applicable) by a fraction, the
numerator of which is such Participant's Excess Aggregate
Contributions for the year and the denominator of which is
(A) the Participant's Account balance(s) attributable to
Contribution Percentage Amounts as of the beginning of the
Plan Year, plus any additional amounts attributable to
Contribution Percentage Amounts allocated to the Participant
during such Plan Year and the gap period, if applicable, or
(B) solely with respect to Plan Years beginning before
January 1, 1992, the Participant's Account balance
attributable to Contribution Percentage Amounts as of the
end of the Plan Year, reduced by any gain and increased by
any loss allocable thereto during the Plan Year; or
37
(2) The amount determined by any reasonable method of allocating
income or loss to the Participant's Voluntary Contributions,
Matching Contributions and QNECs for the Plan Year and for
the gap period, if applicable, provided the method used is
the same one used for allocating income or losses to
Participants' Accounts; and
(3) 10% of the amount determined under (1) multiplied by the
number of whole months between the end of the Plan Year and
the distribution date, counting the month of distribution if
it occurs after the 15th of such month.
(e) Accounting For Excess Aggregate Contributions: Excess Aggregate
Contributions will be forfeited if forfeitable, or will be
distributed on a pro-rata basis from the Participant's Voluntary
Employee Contribution Account, Matching Contribution sub-account
and QMAC sub-account, and if applicable, from the Participant's
QNEC sub-account or the Elective Deferral sub-account, or both.
5.18 FINANCIAL HARDSHIP DISTRIBUTIONS: A Participant may request in writing
to the Administrator that up to 100% of the Participant's Vested
Interest in his or her Elective Deferral Account (including any
earnings credited thereto as of the end of the last Plan Year ending
before July 1, 1989), Matching Contribution Account and Non-Elective
Contribution Account as of the Valuation Date immediately preceding
such request be distributed because of the Participant's financial
hardship, subject to the following provisions:
(a) Amount And Form Of Distribution: The maximum amount distributable
cannot exceed the amount required to relieve the financial
hardship, including amounts necessary to pay any federal, state
or local income taxes or penalties reasonably anticipated to
result from the distribution. A hardship distribution will only
be made in a lump sum provided the Participant's spouse, if any,
consents to the distribution in accordance with Section 5.8.
(b) Definition Of Financial Hardship: Financial hardship means an
immediate and heavy financial need that the Participant lacks
available resources to satisfy. For purposes of this Plan, the
following financial needs will be considered immediate and heavy:
(1) payment of medical expenses within the meaning of
Codess.213(d) that are incurred by the Participant, his spouse or
his children; (2) the purchase (excluding mortgage payments) of a
principal residence for the Participant; (3) payment of tuition
and related educational fees for the next 12 months of
post-secondary education for the Participant, the Participant's
spouse or the Participant's children; (4) the need to prevent the
eviction of the Participant from his or her principal residence
or foreclosure on the mortgage of the Participant's principal
residence; (5) payment of funeral expenses for a member of the
Participant's family; or (6) any other immediate and heavy
financial need as determined by the Administrator in a uniform
nondiscriminatory manner.
(c) Participant's Written Representations: Except as otherwise
provided in paragraph (d), a hardship distribution can only be
made to the extent a Participant's financial hardship cannot be
satisfied from other resources reasonably available to the
Participant, as determined by the Administrator on the basis of
all relevant facts and circumstances. However, the Administrator
may treat a distribution as necessary to satisfy a financial
hardship if the Administrator, in the absence of actual knowledge
to the contrary, relies upon the Participant's written
representation that the financial hardship cannot be relieved (1)
through reimbursement or compensation by insurance or otherwise;
(2) by liquidation of the Participant's assets, to
38
the extent such liquidation would not itself cause a financial
hardship; (3) by cessation of the Participant's Elective
Deferrals or Voluntary Employee Contributions to the Plan; or (4)
by other distributions or nontaxable (at the time of the loan)
loans from any other Employer-maintained plans or from any other
employer, or by borrowing from commercial sources on reasonable
commercial terms.
(d) Safe Harbor Deemed Distributions: If a Participant elects not to
comply with the written representation requirements set forth in
paragraph (c) with respect to a distribution made for one of the
reasons set forth in paragraphs (b)(1), (2), (3) or (4), then any
such distribution will be deemed to be necessary to satisfy a
financial hardship if the Participant has obtained all
distributions (other than financial hardship distributions) and
all nontaxable loans currently available under all plans
maintained by the Employer. Furthermore, by electing not to
comply with the requirements of paragraph (c), the Participant
cannot make Elective Deferrals and Voluntary Employee
Contributions to this Plan or any other plan maintained by the
Employer for at least 12 months after receipt of the hardship
distribution; and for the Participant's taxable year immediately
following the taxable year of the hardship distribution, the
Participant cannot make Elective Deferrals to this Plan or any
other plan maintained by the Employer in excess of the applicable
limit under Codess.402(g)(5) for such taxable year, minus the
amount of such Participant's Elective Deferrals made for the
taxable year in which the financial hardship distribution was
made.
(e) Restriction On Certain Transferred Assets: Notwithstanding any
provision in this Section to the contrary, no hardship
distribution can be made under this Section with respect to
benefits attributable to assets (including post-transfer earnings
thereon) and liabilities that are transferred, within the meaning
of Code ss.414(l), from a money purchase pension plan qualified
under Code ss.401(a) to this Plan (other than any portion of
those assets and liabilities attributable to Voluntary Employee
Contributions).
(f) Participants Who Are Not 100% Vested: If a distribution is made
under this Section at a time when the Participant has less than a
100% Vested Interest in his or her Non-Elective Contribution
sub-account and such Vested Interest may increase, a separate
account will be established for the Participant's Non-Elective
Contribution sub-account balance at the time of distribution, and
at any relevant time the Participant's Vested Interest in the
separate account will be equal to an amount ("X") determined by
the formula X = P[(AB+(R x D))-(RxD)]. In applying the formula,
"P" is the Vested Interest at the relevant time, "AB" is the
respective account balance at the relevant time, "D" is the
amount of the distribution, and "R" is the ratio of the
respective account balance at the relevant time to the respective
account balance after distribution.
5.19 PROTECTED BENEFITS: In addition to the distribution options contained
in this Article 5 and any other provision of the Plan, any portion of
a Participant's Account attributable to amounts transferred from a
tax-qualified plan through a plan merger or a "trustee-to-trustee"
transfer of assets may, at the election of the such Participant, be
distributed in accordance with the provisions of such merged or
transferee plan to the extent required by Code Section 411(d)(6) and
the regulations thereunder.
39
ARTICLE 6
CODE SECTION 415 LIMITATIONS
6.1 MAXIMUM ANNUAL ADDITION: The maximum Annual Addition (as defined in
paragraph (c) below) made to a Participant's various accounts
maintained under the Plan for any Limitation Year beginning after
December 31, 1986 will not exceed the lesser of the Dollar Limitation
set forth in Section 6.1(a) or the Compensation Limitation set forth
in Section 6.1(b), as follows:
(a) Dollar Limitation: The Dollar Limitation is $30,000, as annually
adjusted by the Secretary of the Treasury in accordance with
Codess.415(d).
(b) Compensation Limitation: The Compensation Limitation is an amount
equal to 25% of the Participant's Section 415 Compensation for
the Limitation Year. However, this limitation will not apply to
any contribution made for medical benefits within the meaning of
Code ss.401(h) or Code ss.419A(f)(2) after separation from
service which is otherwise treated as an Annual Addition under
Code ss.415(l)(1) or Code ss.419A(d)(2).
(c) Annual Additions: The term Annual Additions means the sum of the
following amounts credited to a Participant's Account for the
Limitation Year: (1) Employer contributions; (2) Employee
contributions; (3) Forfeitures; (4) amounts allocated, after
March 31, 1984, to an individual medical account, as defined in
Codess.415(l)(2), which is part of a pension or annuity plan
maintained by the Employer; and (5) amounts derived from
contributions paid or accrued after December 31, 1985, in taxable
years ending after such date, which are attributable to
post-retirement medical benefits, allocated to the separate
account of a key employee, as defined in Codess.419A(d)(3), under
a welfare fund, as defined in Codess.419(e), maintained by the
Employer. Notwithstanding the foregoing, a Participant's Annual
Additions do not include his or her rollovers, loan repayments,
repayments of prior Plan distributions or prior distributions of
mandatory contributions, direct transfers of contributions from
another plan to this Plan, deductible contributions to a
simplified employee pension plan, or voluntary deductible
contributions.
6.2 ADJUSTMENTS TO MAXIMUM ANNUAL ADDITION: In applying the limitation on
Annual Additions set forth in Section 6.1, the following adjustments
must be made:
(a) Short Limitation Year: In a Limitation Year of less than 12
months, the Defined Contribution Dollar Limitation in Section
6.1(a) will be adjusted by multiplying it by the ratio that the
number of months in the short Limitation Year bears to 12.
(b) Plans With Different Anniversary Dates: If a Participant
participates in multiple defined contribution plans sponsored by
the Employer which have different Anniversary Dates, the maximum
Annual Addition in this Plan for the Limitation Year will be
reduced by the Annual Additions credited to the Participant's
accounts in the other defined contribution plans for such
Limitation Year.
(c) Plans With The Same Anniversary Date: If a Participant
participates in multiple defined contribution plans sponsored by
the Employer which have the same Anniversary Date, then (1) if
only one of the plans is subject to Code ss.412, Annual Additions
will first be credited to the Participant's accounts in the plan
subject; and (2) if none of the plans are subject to Code
40
ss.412, the maximum Annual Addition in this Plan for a given
Limitation Year will equal the product of (A) the maximum Annual
Addition for such Limitation Year minus any other Annual
Additions previously credited to the Participant's account,
multiplied by the ratio that the Annual Additions which would be
credited to a Participant's accounts hereunder without regard to
the limitations in Section 6.1 bears to the Annual Additions for
all plans described in this paragraph.
6.3 MULTIPLE PLANS AND MULTIPLE EMPLOYERS: All defined benefit plans
(whether terminated or not) of the Employer will be treated as one
defined benefit plan, and all defined contribution plans (whether
terminated or not) of the Employer will be treated as one defined
contribution plan. In addition, all Affiliated Employers will be
considered a single employer.
6.4 MULTIPLE PLAN REDUCTION: For Plan Years beginning before January 1,
2000, if an Employee is, or has been, a Participant in one or more
Employer-sponsored defined benefit plans and in one or more
Employer-sponsored defined contribution plans, the sum of the defined
benefit plan fraction and the defined contribution plan fraction for
any Limitation Year may not exceed 1.0, determined in accordance with
the following:
(a) Defined Benefit Fraction: The Defined Benefit Fraction is a
fraction which has as its numerator the Participant's Projected
Annual Benefits determined as of the close of the Limitation Year
and which has as its denominator the lesser of 125% of the dollar
limitation for the Limitation Year determined under Codess.415(b)
andss.415(d), or 140% of the amount which may be taken into
account under Codess.415(b)(1)(B) for such Limitation Year.
Notwithstanding the foregoing, with respect to anyone who was a
Participant as of the first day of the first Limitation Year
beginning after December 31, 1986, in one or more defined benefit
plans maintained by the Employer which were in existence on May
6, 1986, the denominator of the defined benefit fraction will not
be less than 125% of the Current Accrued Benefit.
(b) Definitions: As used in paragraph (a) above, (1) the term
Projected Annual Benefits means the annual benefits payable to a
Participant under all defined benefit plans (whether terminated
or not) of the Employer as determined under
regulationss.1.415-7(b)(3); and (2) the term Current Accrued
Benefit means a Participant's accrued benefit under a defined
benefit plan, determined as if the Participant had separated from
service as of the close of the last Limitation Year beginning
before January 1, 1987, when expressed as an annual benefit
within the meaning of Codess.415(b)(2). In determining a
Participant's Current Accrued Benefit, the Administrator will
disregard any changes in the terms and conditions of the Plan
after May 5, 1986, and any cost of living adjustment occurring
after May 5, 1986. The Current Accrued Benefit will only be used
as set forth above if the defined benefit plans individually and
in the aggregate satisfied the requirements of Codess.415 for all
Limitation Years beginning before January 1, 1987.
(c) Defined Contribution Fraction: The Defined Contribution Fraction
is a fraction the numerator of which is the sum of the Annual
Additions to the Participant's Account under all the defined
contribution plans (whether terminated or not) maintained by the
Employer for the current Limitation Year and all prior Limitation
Years (including the Annual Additions attributable to the
Participant's non-deductible contributions to all Employer
maintained defined benefit plans, whether terminated or not, and
the Annual Additions attributable to all welfare benefit funds,
as defined in Codess.419(e), and individual medical accounts, as
defined
41
in Code ss.415(l)(2) maintained by the Employer), and the
denominator of which is the sum of the maximum aggregate amounts
for the current Limitation Year and all prior Limitation Years
the Employee was employed by the Employer (regardless of whether
a defined contribution plan was maintained by the Employer). The
maximum permissible aggregate amount in any Limitation Year is
the lesser of (1) 125% of the dollar limitation in effect in Code
ss.415(c)(1)(A) for such Limitation Year determined without
regard to Code ss.415(c)(6) and adjusted per regulation
ss.1.415-7(d)(1) and Notice 83-10, or (2) 35% of the
Participant's Section 415 Compensation.
(d) Transition Rule For Denominator: For defined contribution plans
in effect on or before July 1, 1982, the Administrator may elect
for any Limitation Year ending after December 31, 1982 that the
denominator will be the product of the denominator for the
Limitation Year ending in 1982 determined under the law in effect
for such Limitation Year, multiplied by the Transition Fraction,
which is a fraction which has as its numerator the lesser of
$51,875 or 1.4 multiplied by 25% of the Participant's Section 415
Compensation for the Plan Year ending in 1981, and which has as
its denominator the lesser of $41,500 or 25% of the Participant's
Section 415 Compensation for the Plan Year ending in 1981. In any
Top Heavy Limitation Year, $41,500 will be substituted for
$51,875 in determining the Transition Fraction unless the Extra
Minimum Allocation is being provided in Section 3.5. In a Super
Top Heavy Plan Year, $41,500 will always be substituted for
$51,875.
(e) Adjustment Of Fraction: If an Employee was a Participant as of
the end of the first day of the first Limitation Year beginning
after December 31, 1986 in one or more defined contribution plans
maintained by the Employer which were in existence on May 6,
1986, the numerator of the defined contribution fraction will be
adjusted if the sum of such defined contribution fraction and the
defined benefit fraction would otherwise exceed 1.0 under the
terms of this Plan. Under the adjustment, an amount equal to the
product of the excess of the sum of the defined benefit fraction
and the defined contribution fraction over 1.0 multiplied by the
denominator of the defined contribution fraction will be
permanently subtracted from the numerator of the defined
contribution fraction. The adjustment will be calculated using
the fractions as they would be computed as of the end of the last
Limitation Year beginning before January 1, 1987, disregarding
any changes in the terms and conditions of the Plan made after
May 5, 1986, but using the Codess.415 limitation applicable to
the first Limitation Year beginning on or after January 1, 1987.
(f) Top Heavy Adjustments To Multiple Plan Fraction: In any Top Heavy
Limitation Year, 100% will be substituted for 125% in paragraph
(a) and paragraph (c) above unless (1) a 7.5% allocation is being
provided to Non-Key Employees in Section 3.5, or (2) a Non-Key
Employee is being provided with a retirement benefit under a
defined benefit plan that is equal to 3% of his or her average
monthly Section 415 Compensation. However, in any Super Top Heavy
Limitation Year, 100% will be substituted for 125% in any event.
If the 100% limitation is exceeded for any Participant in any
Limitation Year, then (1) the Participant's accrued benefit in
the defined benefit plan will not be increased; (2) no Annual
Additions may be credited to the Participant's accounts under
this Plan; and (3) the Participant may not make any
contributions, whether voluntary or mandatory, to this Plan or
any other Employer sponsored qualified plan. 6.5 ADJUSTMENT FOR
EXCESSIVE ANNUAL ADDITIONS: If an allocation of Forfeitures or an
error in calculating a Participant's Compensation causes the
Annual Additions allocated to such Participant's Account to
exceed the maximum set forth in Section 6.1, such Participant's
Account will be adjusted as follows in order to reduce such
excess:
6.5 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS: If an allocation of
Forfeitures or an error in calculating a Participant's Compensation
causes the Annual Additions allocated to such
42
Participant's Account to exceed the maximum set forth in Section 6.1,
such Participant's Account will be adjusted as follows in order to
reduce such excess:
(a) Return Of Elective Deferrals And Employee Contributions: The
Administrator will return any Elective Deferrals and/or Employee
contributions (whether such Employee contributions are voluntary
or mandatory), and will distribute the gains attributable to
those Elective Deferrals and/or Employee contributions, to the
extent that such return or distribution would reduce the excess
amount in the Participant's Account.
(b) Reallocation In The Current Year: After the return of
contributions and the distribution of gains specified in
paragraph (a) have been made, and prior to the creation of a
Section 415 Suspense Account as set forth in paragraph (c) below,
any excess will be reallocated in accordance with Section 3.2 to
all Participants who have not yet attained their maximum Annual
Addition. If necessary, the Administrator will repeat the
reallocation until all Participants have reached their maximum
Annual Addition.
(c) Remaining Excess: If an excess amount still remains in a
Participant's Account, then (1) if the Participant is employed by
the Employer at the end of the Limitation Year, the Administrator
will hold the excess in the Section 415 Suspense Account and use
it to reduce Employer contributions (including any allocation of
Forfeitures) for the next Limitation Year (and each succeeding
Limitation Year if necessary) for the Participant; and (2) if the
Participant is not employed by the Employer at the end of a
Limitation Year, the excess may not be distributed to the
Participant but will be held unallocated in the Section 415
Suspense Account and will be used to reduce future Employer
contributions (including the allocation of Forfeitures) for all
remaining Participants in the next Limitation Year and each
succeeding Limitation Year if necessary.
(d) Earnings, Losses And Reallocation: If the Section 415 Suspense
Account is in existence at any time during a Limitation Year
pursuant to this Section, it will not share in the allocation of
the earnings or losses of the Trust Fund. If the Section 415
Suspense Account is in existence at any time during a particular
Limitation Year, all amounts in such account must be allocated
and reallocated to Participants' Accounts before any Employer
contributions or any Employee contributions may be made to the
Plan for that Limitation Year. Excess amounts in the Section 415
Suspense Account may not be distributed to Participants or former
Participants.
43
ARTICLE 7
DUTIES OF THE TRUSTEE
7.1 APPOINTMENT, RESIGNATION, REMOVAL AND SUCCESSION: This Plan will have
one or more individual Trustees, a corporate Trustee, or any
combination thereof, appointed as follows:
(a) Appointment Of Trustee: Each Trustee will be appointed by the
Employer and will serve until its successor has been named or
until such Trustee's resignation, death, incapacity, or removal,
in which event the Employer will name a successor Trustee. The
term Trustee will include the original and any successor
Trustees.
(b) Resignation Of Trustee: A Trustee may resign at any time by
giving 30 days written notice in advance to the Employer, unless
such notice is waived by the Employer. The Employer may remove a
Trustee by giving such Trustee 30 days written notice in advance.
Such removal may be with or without cause.
(c) Successor Trustee: Each successor Trustee will succeed to the
title to the Trust by accepting his appointment in writing and by
filing such written acceptance with the former Trustee and the
Employer. The former Trustee, upon receipt of such acceptance,
will execute all documents and perform all acts necessary to vest
the Trust Fund's title of record in any successor Trustee. No
successor Trustee will be personally liable for any act or
failure to act of any predecessor Trustee.
(d) Merger Of Corporate Trustee: If any corporate Trustee, before or
after qualification, changes its name, consolidates or merges
with another corporation, or otherwise reorganizes, any resulting
corporation which succeeds to the fiduciary business of such
Trustee will become a Trustee hereunder in lieu of such corporate
Trustee.
7.2 INVESTMENT ALTERNATIVES OF THE TRUSTEE: The Trustees will implement an
investment program based on the Employer's investment objectives and
the Employee Retirement Income Security Act of 1974. In addition to
powers given by law, the Trustee may:
(a) Property: Invest the Trust Fund in any form of property,
including common and preferred stocks, exchange covered call
options, bonds, money market instruments, mutual funds, savings
accounts, certificates of deposit, Treasury bills, insurance
policies and contracts, or in any other property, real or
personal, foreign or domestic, having a ready market including
securities issued by an institutional Trustee and/or affiliate of
the institutional Trustee. The Trustee may invest on margin. An
institutional Trustee may invest in its own deposits if they bear
a reasonable interest rate. The Trustee may retain, manage,
operate, repair, improve and mortgage or lease for any period on
such terms as it deems proper any real estate or personal
property held by the Trustee, including the power to demolish any
building or other improvements in whole or part. The Trustee may
erect buildings or other improvements, make leases that extend
beyond the term of this Trust, and foreclose, extend, renew,
assign, release or partially release and discharge mortgages or
other liens.
(b) Pooled Funds: The Trustee may transfer any assets of the Trust
Fund to a collective trust established to permit the pooling of
funds of separate pension and profit-sharing trusts provided the
Internal Revenue Service has ruled such collective trust to be
qualified under
44
Code ss.401(a) and exempt under Code ss.501(a) (or the applicable
corresponding provision of any other Revenue Act) or to any other
common, collective, or commingled trust fund which has been or
may hereafter be established and maintained by the Trustee and/or
affiliates of an institutional Trustee. Such commingling of
assets of the Fund with assets of other qualified trusts is
specifically authorized, and to the extent of the investment of
the Trust Fund in such a group or collective trust, the terms of
the instrument establishing the group or collective trust will be
a part hereof as though set forth herein.
(c) Employer Stock: The Trustee may invest the Trust Fund in the
common stock, debt obligations, or any other security issued by
the Employer or by an affiliate of the Employer within the
limitations provided under Sections 406, 407, and 408 of ERISA
provided that such investment does not constitute a prohibited
transaction under Code Section 4975. Any such investment will
only be made upon written direction of the Employer who will be
solely responsible for the propriety of such investment.
(d) Cash Reserves: The Trustee may retain in cash as much of the
Trust Fund as the Trustee may deem advisable to satisfy the
liquidity needs of the Plan and to deposit any cash held in the
Trust Fund in a bank account without liability for the highest
rate of interest available. If a bank is acting as Trustee, such
Trustee is specifically given authority to invest in deposits of
such Trustee. The Trustee may also hold cash un-invested at any
time and from time to time and in such amount or to such extent
as the Trustee deems prudent, and the Trustee will not be liable
for any losses which may be incurred as the result of the failure
to invest same, except to the extent provided herein or in ERISA.
(e) Reorganizations Etc: The Trustee may join in or oppose the
reorganization, recapitalization, consolidation, sale or merger
of corporations or properties, upon such terms as the Trustee
deems wise.
(f) Registration of Securities: The Trustee may cause any securities
or other property to be registered in the Trustee's own name or
in the name of the Trustee's nominee or nominees, and may hold
any investments in bearer form, but the records of the Trustee
will at all times show all such investments as part of the Trust
Fund.
(g) Proxies: The Trustee may vote proxies and if appropriate pass
them on to any investment manager which may have directed the
investment in the equity giving rise to the proxy.
(h) Ownership Rights: The Trustee may exercise all ownership rights
with respect to any assets held in the Trust Fund.
(i) Other Investments: The Trustee may accept and retain for such
time as the Trustee deems advisable any securities or other
property received or acquired as Trustee, whether or not such
securities or property would normally be purchased as investments
hereunder.
(j) Key Man Insurance: The Trustee, with the consent of the
Administrator, may purchase insurance Policies on the life of any
Participant whose employment is deemed to be key to the
Employer's financial success. Such key man Policies will be
deemed to be an investment of the Trust Fund and will be payable
to the Trust Fund as the beneficiary thereof. The Trustee may
exercise any and all rights granted under such Policies.
45
(k) Loans To The Trust: The Trustee may borrow or raise money for
purposes of the Plan in such amounts, and upon such terms and
conditions, as the Trustee deems advisable; and for any sum so
borrowed, the Trustee may issue a promissory note as Trustee, and
secure repayment of the loan by pledging all, or any part, of the
Trust Fund as collateral. No person lending money to the Trustee
will be bound to see to the application of the money lent or to
inquire into the validity or propriety of any borrowing.
(l) Agreements With Banks: The Trustee may with the consent of the
Employer and upon such terms as they in their discretion deem
necessary, enter into an agreement with a bank or trust company
providing for (a) the deposit of all or part of the funds and
property of the Trust with such bank or trust company, (b) the
appointment of such bank or trust company as the agent or
custodian of the Trustees for investment purposes, with such
discretion in investing and reinvesting the funds of the Trust as
the Trustees deem it necessary or desirable to delegate.
(m) Litigation: The Trustee may begin, maintain, or defend any
litigation necessary in connection with the administration of the
Plan, except that the Trustee will not be obliged or required to
do so unless indemnified to its satisfaction.
(n) Claims, Debts or Damages: The Trustee may settle, compromise, or
submit to arbitration any claims, debts, or damages due or owing
to or from the Plan.
(o) Miscellaneous: The Trustee may do all such acts and exercise all
such rights, although not specifically mentioned herein, as the
Trustee deems necessary to carry out the purposes of the Plan.
The Trustee will not be restricted to securities or other
property of the character expressly authorized by applicable law
for trust investments, subject to the requirement that the
Trustee discharge his duties with the care, skill, prudence, and
diligence, under the circumstances then prevailing, that a
prudent man acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of similar
character and with similar aims by diversifying the investments
to minimize the risks of large losses unless under the
circumstances it is clearly prudent not to do so.
7.3 VALUATION OF THE TRUST FUND: On each Valuation Date, the Trustee will
determine the net worth of the Trust Fund. The value of marketable
investments will be determined using the most recent price quoted on a
national securities exchange or over-the-counter market. The value of
non-marketable investments will be determined periodically by an
independent third-party appraiser as required by law, and the Trustees
will have no responsibility for the valuation of such assets.
7.4 COMPENSATION AND EXPENSES: The Trustee, either from the Trust Fund or
from the Employer, will be reimbursed for all of its expenses and will
be paid reasonable compensation as agreed upon from time to time with
the Employer; but no person who receives full-time pay from the
Employer will receive any fees for services to the Plan as Trustee or
in any other capacity. Expenses will be paid by each Adopting Employer
in the ratio that each Adopting Employer's Participants' Accounts
bears to the total of all the Participants' Accounts maintained by
this Plan.
7.5 PAYMENTS FROM THE TRUST FUND: The Trustee will pay Plan benefits and
other payments as the Administrator directs, and except as provided by
ERISA, the Trustee will not be responsible for the propriety of such
payments. Any payment made to a Participant, or a Participant's legal
representative or Beneficiary in accordance with the terms of the Plan
will, to the extent of such
46
payment, be in full satisfaction of all claims arising against the
Trust, the Trustee, the Employer, and the Administrator. Any payment
or distribution made from the Trust is contingent on the recipient
executing a receipt and release acceptable to the Trustee,
Administrator, or Employer.
7.6 PAYMENT OF TAXES: The Trustee will pay all taxes of the Trust Fund,
including property, income, transfer and other taxes which may be
levied or assessed upon or in respect of the Trust Fund or any money,
property or securities forming a part of the Trust Fund. The Trustee
may withhold from distributions to any payee such sum as the Trustee
may reasonably estimate as necessary to cover federal and state taxes
for which the Trustee may be liable, which are, or may be, assessed
with regard to the amount distributable to such payee. Prior to making
any payment, the Trustee may require such releases or other documents
from any lawful taxing authority and may require such indemnity from
any payee or distributee as the Trustee deems necessary.
7.7 ACCOUNTS, RECORDS AND REPORTS: The Trustee will keep accurate records
reflecting its administration of the Trust Fund and will make such
records available to the Employer for review and audit. Within 90 days
after each Plan Year, and within 90 days after its removal or
resignation, the Trustee will file with the Employer an accounting of
its administration of the Trust Fund during such year or from the end
of the preceding Plan Year to the date of removal or resignation. Such
accounting will include a statement of cash receipts and disbursements
since the date of its last accounting and will contain an asset list
showing the fair market value of investments held in the Trust Fund as
of the end of the Plan Year as determined under Section 7.3. The
Employer will review the accounting and will notify the Trustee in the
event of its disapproval of the report within 90 days, providing the
Trustee with a written description of the items in question. The
Trustees will have 60 days to provide the Employer with a written
explanation of the items in question. If the Employer again
disapproves of the report, the Trustee will file its accounting in a
court of competent jurisdiction for audit and adjudication.
7.8 EMPLOYMENT OF AGENTS AND COUNSEL: The Trustee may employ such agents,
counsel, consultants, or service companies as it deems necessary and
may pay their reasonable expenses and compensation. The Trustee will
not be liable for any action taken or omitted by the Trustee in good
faith pursuant to the advice of such agents and counsel. Any agent,
counsel, consultant, service company and/or its successors will
exercise no discretionary authority over investments or the
disposition of Trust assets, and their services and duties will be
ministerial only and will be to provide the Plan with those things
required by law or by the terms of the Plan without in any way
exercising any fiduciary authority or responsibility under the Plan.
The duties of a third party administrator will be to safe-keep the
individual records for all Participants and to prepare all required
actuarial services and disclosure forms under the supervision of the
Administrator and any Fiduciaries of the Plan. It is expressly stated
that the third party administrator's services are only ministerial in
nature and that under no circumstances will such third party
administrator exercise any discretionary authority whatsoever over
Plan Participants, Plan investments, or Plan benefits.
7.9 DIVISION OF DUTIES AND INDEMNIFICATION: The division of duties and the
indemnification of the Trustees of this Plan will be governed by the
following provisions:
(a) No Guarantee Against Loss: The Trustees will have the authority
and discretion to manage and control the Fund to the extent
provided in this instrument, but do not guarantee the Fund in any
manner against investment loss or depreciation in asset value, or
guarantee the adequacy of the Fund to meet and discharge all or
any liabilities of the Plan. Furthermore, the Trustees will not
be liable for the making, retention or sale of any investment or
47
reinvestment made by it, as herein provided, or for any loss to
or diminution of the Fund, or for any other loss or damage which
may result from the discharge of its duties hereunder, except to
the extent it is judicially determined that the Trustees have
failed to exercise the care, skill, prudence and diligence under
the circumstances then prevailing that a prudent person acting in
a like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and like aims.
(b) Representations Of The Employer: The Employer warrants that all
directions issued to the Trustees by it or the Plan Administrator
will be in accordance with the terms of the Plan and not contrary
to the provisions of the Employee Retirement Income Security Act
of 1974 and the regulations issued thereunder.
(c) Directions By Others: The Trustees will not be answerable for any
action taken pursuant to any direction, consent, certificate, or
other paper or document on the belief that the same is genuine
and signed by the proper person. All directions by the Employer,
a Participant or the Plan Administrator will be in writing. The
Plan Administrator will deliver to the Trustees certificates
evidencing the individual or individuals authorized to act as the
Administrator and will deliver to the Trustees specimens of their
signatures.
(d) Duties And Obligations Limited By The Plan: The duties and
obligations of the Trustees will be limited to those expressly
imposed upon it by this Plan or subsequently agreed upon by the
parties. Responsibility for administrative duties required under
the Plan or applicable law not expressly imposed upon or agreed
to by the Trustees, will rest solely with the Employer and with
the Administrator.
(e) Indemnification Of Trustees: The Trustees will be indemnified and
saved harmless by the Employer from and against any and all
liability to which the Trustees may be subjected, including all
expenses reasonably incurred in its defense, for any action or
failure to act resulting from compliance with the instructions of
the Employer, the employees or agents of the Employer, the
Administrator, or any other Fiduciary to the Plan, and for any
liability arising from the actions or non-actions of any
predecessor Trustees or Fiduciary or other Fiduciaries of the
Plan.
(f) Trustees Not Responsible For Application Of Payments: The
Trustees will not be responsible in any way for the application
of any payments it is directed to make or for the adequacy of the
Fund to meet and discharge any and all liabilities under the
Plan.
(g) Multiple Trustees: If more than one Trustee is appointed, any
single Trustee may act independently in undertaking any act
and/or transaction on behalf of the Trust unless the Trustees
have agreed by a majority of their number that a particular
action must be approved by a majority of their number before it
can be undertaken.
(h) Limitation Of Liability: No Trustee will be liable for the act of
any other Trustee or Fiduciary unless the Trustee has knowledge
of such act.
(i) Trustees As Participants Or Beneficiaries: Trustees will not be
prevented from receiving any benefits to which they may be
entitled as Participants or Beneficiaries in the Plan, so long as
the benefits are computed and paid on a basis which is consistent
with the terms of the Plan as applied to all other Participants
and Beneficiaries.
48
(j) No Self-Dealing: The Trustees will not (1) deal with the assets
of the Trust Fund in their own interest or for their own account;
(2) in their individual or in any other capacity, act in any
transaction involving the Trust Fund on behalf of a party (or
represent a party) whose interests are adverse to the interests
of the Plan, or its Participants or Beneficiaries; or (3) receive
any consideration for their own personal accounts from any party
dealing with the Plan in connection with a transaction involving
assets of the Trust Fund.
7.10 APPOINTMENT OF INVESTMENT MANAGER: The Trustee may appoint an
Investment Manager to manage and control the investment of all or any
portion of the Trust Fund. Each Investment Manager will be either an
investment advisor registered under the Investment Advisors Act of
1940; a bank as defined in that Act; or an insurance company qualified
to manage, acquire or dispose of any asset of the Trust under the laws
of more than one state. An Investment Manager will acknowledge in
writing that it is a Fiduciary of the Plan. The Trustee will enter
into an agreement with the Investment Manager specifying the duties
and compensation of the Investment Manager and further specifying any
other terms and conditions under which the Investment Manager will be
retained. The Trustee will not be liable for any act or omission of an
Investment Manager, and will not be liable for following the advice of
an Investment Manager with respect to any duties delegated by the
Trustee to the Investment Manager. The Trustee will have the power to
determine the portion of the Plan's assets to be invested by a
designated Investment Manager and to establish investment objectives
and guidelines for the Investment Manager to follow.
7.11 ASSIGNMENT AND ALIENATION OF BENEFITS: Except as may otherwise be
permitted under Code ss.401(a)(13)(C), or as may otherwise be
permitted under a Qualified Domestic Relations Order as provided in
Section 8.6, or as may otherwise be permitted under Section 7.14
relating to loans to Participants, no right or claim to, or interest
in, any part of the Trust Fund, or any payment therefrom, will be
assignable, transferable, or subject to sale, mortgage, pledge,
hypothecation, commutation, anticipation, garnishment, attachment,
execution, or levy of any kind, and the Trustees will not recognize
any attempt to assign, transfer, sell, mortgage, pledge, hypothecate,
commute, or anticipate the same, except to the extent required by law.
7.12 EXCLUSIVE BENEFIT RULE: All contributions made by the Employer or an
Affiliated Employer to the Trust Fund will be used for the exclusive
benefit of the Participants who are Employees of the Employer or
Affiliated Employer and for their Beneficiaries and will not be used
for nor diverted to any other purpose except the payment of the costs
of maintaining the Plan. All contributions made by an Adopting
Employer who is not an Affiliated Employer will be used for the
exclusive benefit of the Participants who are Employees of the
Adopting Employer and for their Beneficiaries and will not be used for
nor diverted to any other purpose except the payment of the Adopting
Employers' proportionate costs of maintaining the Plan pursuant to
Section 7.4.
7.13 PURCHASE OF INSURANCE: The purchase of insurance Policies on the life
of a Participant, other than key man insurance under Section 7.2(j),
is not currently permitted in this Plan.
7.14 LOANS TO PARTICIPANTS: The Employer, in accordance with a written loan
procedure established by the Employer, may permit loans to be made
from the Trust Fund to Participants and Beneficiaries on a
non-discriminatory basis. If made available, a Participant or
Beneficiary may make application to the Administrator requesting a
loan. The Administrator will have the sole right to approve or
disapprove the application provided that loans will be made available
to all Participants on a reasonably equivalent basis. All loans must
be evidenced by a legally enforceable agreement (which may include
more than one document) set forth in writing or in such other form as
may be
49
approved by the Internal Revenue Service, and the terms of such
agreement must specify the amount and term of the loan, and the
repayment schedule. Loans will not be made available to Highly
Compensated Employees in an amount greater than the amount made
available to other Employees, and no loan will be made to a
Participant who is an Owner-Employee or a Shareholder-Employee except
to the extent such loan is treated as a prohibited transaction under
Code ss.4975. Subject to the loan procedure, loans will be made in
accordance with the following:
(a) Minimum Loan And Maximum Loan: No loan will be less than $1,000
or, when added to the outstanding balance of all other loans to
the Participant, will exceed the lesser of (1) $50,000 reduced by
the excess, if any, of the Participant's highest outstanding
balance of loans during the 1-year period ending on the day
before the loan was made, over the Participant's outstanding
balance of loans on the day the loan was made; or (2) one-half of
the Participant's Vested Aggregate Account.
(b) Aggregation Of Loans: For purposes of the limitations in
paragraph (a) above, all loans from all plans of the Employer and
Affiliated Employers will be aggregated. An assignment or pledge
of any portion of the Participant's Vested Aggregate Account
balance, and a loan, pledge, or assignment with respect to any
insurance contract purchased under the Plan, will be treated as a
loan under this Section.
(c) Loans Must Bear Reasonable Interest: Any loan granted hereunder
must bear interest at a rate reasonable at the time of
application, considering the purpose of the loan and the rate
being charged by representative commercial banks in the local
area for a similar loan, unless the Administrator sets forth a
different method for determining loan interest rates in its loan
procedures such as using the prime rate or some other rate based
on the prime rate. The loan agreement will also provide for the
payment of principal and interest not less than quarterly. The
interest earned by the Trust on any loan granted hereunder will
be credited directly to the individual Participant's Account.
(d) Loans Must Be Secured: If a Participant's loan application is
approved by the Administrator, such Participant will be required
to execute a note, a loan agreement and an assignment of his or
her Vested Aggregate Account as collateral for the loan. The
Participant must obtain the consent of his or her spouse, if any,
within the 90 day period before the Participant's Vested
Aggregate Account is used as security for the loan. A new consent
is required if the Vested Aggregate Account is used for any
renegotiation, extension, renewal or other revision of the loan,
including any increase in the amount thereof. The consent must be
written, must acknowledge the effect of the loan, and must be
witnessed by a notary public or the Administrator. Such consent
will thereafter be binding with respect to the consenting Spouse
or any subsequent Spouse.
(e) Terms Of Repayment: The term of a loan will not exceed 5 years
except in the case of a loan for the purpose of acquiring any
house, apartment, condominium, or mobile home (not used on a
transient basis) which is used or is to be used within a
reasonable time as the principal residence of the Participant.
The term of a loan will be determined by the Administrator
considering the maturity dates quoted by representative
commercial banks in the local area for a similar loan.
Notwithstanding the foregoing, however, loans made prior to
January 1, 1987 which are used to acquire, construct, reconstruct
or substantially rehabilitate any dwelling unit which, within a
reasonable period of time is to be used (determined at the time
the loan is made) as a principal residence of the Participant or
a
50
member of his or her family within the meaning of
Codess.267(c)(4) may provide for periodic repayment over a
reasonable period of time that may exceed 5 years. Additionally,
loans made prior to January 1, 1987 may provide for periodic
payments which are made less frequently than quarterly and which
do not necessarily result in level amortization. The
Administrator may allow a grace period for the making of any
required installment payment, but any such period cannot extend
beyond the last day of the calendar quarter following the
calendar quarter in which the required installment was due.
(f) Suspension Of Installment Payments: Loan installment payments may
be suspended as permitted under Codess.414(u)(4) effective
December 12, 1994. Installment payments may also be suspended for
a period not longer than one year in which the Participant is on
a leave of absence, either without pay or at a rate of pay (after
income and employment tax withholding) that is less than the
amount of the installment payments required under the terms of
the loan. However, even if payments are suspended due to a leave
of absence, the loan must still be repaid by the latest date
permitted under the original terms of the loan and the payments
due after the leave ends (or, if earlier, after the first year of
the leave) must not be less than those required under the
original terms of the loan.
(g) Repayment Of Loan Before Distribution Of Benefit: If a
Participant has received a loan from the Plan and the Participant
or the Participant's Beneficiary is entitled to a payment from
the Trust Fund before the loan is repaid in full, the Trustee
will offset at the time of distribution the unpaid loan balance
(including accrued interest) from the total amount otherwise due
to the Participant or Beneficiary. If a valid spousal consent has
been obtained pursuant to paragraph (d) above, then
notwithstanding any other provision of this Plan, the portion of
the Participant's Vested Aggregate Account used as a security
interest for a loan will be taken into account in determining the
amount of the Vested Aggregate Account payable at the time of
death or distribution, but only if the reduction is used as a
repayment of the loan. If less than 100% of the Participant's
Vested Aggregate Account (determined without regard to the
preceding sentence) is payable to the Participant's surviving
spouse, then such Vested Aggregate Account will be adjusted by
first reducing the Vested Aggregate Account by the amount of the
security used as repayment of the loan, and then determining the
benefit payable to the surviving spouse.
(h) Immediate Repayment: A Participant's loan will become immediately
due and payable if the Participant fails to make principal and/or
interest payments for two successive calendar quarters. In such
event, the Administrator will reduce the Participant's Vested
Aggregate Account by the remaining principal and interest of the
loan, and such reduction will constitute a distributable event
(to the extent of the reduction) under the Plan. If the
Participant's Vested Aggregate Account is less than the amount
due, the Administrator will take whatever steps are necessary to
collect the balance due from the Participant.
7.15 DIRECTED INVESTMENT ACCOUNTS: If agreed to by the Trustees and
approved by the Employer, Participants will be given the option to
direct the investment of all or a portion of their Participant's
Account (and any Rollover Contributions and Voluntary Employee
Contributions) into a directed, or segregated investment selected by
the Participant; or among alternative investment funds established as
part of the overall Fund. Such alternative investment funds will be
under the full control of the management of the Trustees.
Alternatively, if investments outside the Trustees' control are
allowed, Participants may not direct that investments be made in
collectibles, other than U.S. Government gold and silver coins. In
this connection, a Participant's right to direct the investment of
51
his or her own Rollover Contributions and Voluntary Employee
Contributions will apply only to the selection of the desired fund.
The following rules will apply to the administration of such funds and
to the handling of Participants' investment directions:
(a) Investment Form: Eligible Participants will complete an
investment designation form stating the percentage to be invested
in or transferred to or from the available funds. A Participant
may change his or her investment election by filing a new
investment designation form with the Employer or the Employer's
designee. Such change will be effective no later than the first
day of the next Election Period. Election Periods will be
established at the discretion of the Employer but in any event
will occur no less frequently than once in every 12-month period
or, at the discretion of the Employer and the Trustee, once in
every 3-month or 6-month period or at such other more frequent
time which is uniformly available as determined by the Employer
and the Trustee.
(b) Transfers Between Funds: A Participant may elect to transfer all
or part of his or her account balance in one or more of the
investment funds from one investment fund to another investment
fund by filing an investment designation form with the Employer
or with the Employer's designee within a reasonable
administrative period prior to the next Election Period. The
funds will be transferred by the Trustee or the Employer's
designee as soon as practicable prior to, or by the start of, the
new Election Period.
(c) Administrator Responsibility: The Plan Administrator or the Plan
Administrator's designee will be responsible when transmitting
Employer and Employee contributions to show the dollar amount to
be credited to each investment fund for each Participant.
(d) No Administrator Liability: Except as otherwise provided herein,
neither the Trustee, nor the Employer, nor any Plan fiduciary
will be liable to the Participant or his or her Beneficiaries for
any loss resulting from action taken at the direction of the
Participant.
(e) Adoption Of Procedures: All investment designations by Plan
Participants are to be made in accordance with such procedures as
the Employer may adopt. At the discretion of the Employer and the
Trustees, such procedures will permit sufficient selection among
investment alternatives to satisfy the provisions of DOL
regulation ss.2550.404(c)-1.
52
ARTICLE 8
DUTIES OF THE ADMINISTRATOR
8.1 APPOINTMENT, RESIGNATION, REMOVAL AND SUCCESSION: Each Administrator
appointed by the Employer will continue until his death, resignation,
or removal by the Employer, and any Administrator may resign by giving
30 days written notice to the Employer. If an Administrator dies,
resigns, or is removed by the Employer, his successor will be
appointed as promptly as possible, and such appointment will become
effective upon its acceptance in writing by such successor. Pending
the appointment and acceptance of any successor Administrator, any
then acting or remaining Administrator will have full power to act.
8.2 POWERS AND DUTIES OF THE ADMINISTRATOR: The powers and duties of the
Administrator will include (a) appointing the Plan's attorney,
accountant, actuary, or any other party needed to administer the Plan;
(b) directing the Trustees with respect to payments from the Trust
Fund; (c) communicating with Employees regarding their participation
and benefits under the Plan, including the administration of all
claims procedures; (d) filing any returns and reports with the
Internal Revenue Service, Department of Labor, or any other
governmental agency; (e) reviewing and approving any financial
reports, investment reviews, or other reports prepared by any party
under (a) above; (f) establishing a funding policy and investment
objectives consistent with the purposes of the Plan and the Employee
Retirement Income Security Act of 1974; and (g) construing and
resolving any question of Plan interpretation. The Administrator's
interpretation of Plan provisions, including eligibility and benefits
under the Plan, is final, and unless it can be shown to be arbitrary
and capricious will not be subject to "de novo" review. If there is
more than one Administrator, the Administrators may delegate specific
responsibilities among themselves, including the authority to execute
documents unless the Employer revokes such delegation. The Employer
and Trustee will be notified in writing of any such delegation of
responsibilities, and the Trustee thereafter may rely upon any
documents executed by the appropriate Administrator.
8.3 EMPLOYMENT OF AGENTS AND COUNSEL: The Administrator may appoint such
actuaries, accountants, custodians, counsel, agents, consultants, and
other persons deemed necessary or desirable in connection with the
administration and operation of the Plan. The actions of any such
third parties will be subject to the limitations described in Section
7.8 of the Plan; and no such third parties will be given any authority
or discretion concerning the management and operation of the Plan that
would cause them to become Fiduciaries of the Plan.
8.4 COMPENSATION AND EXPENSES: The Administrator may receive such
compensation as agreed upon between the Employer and the
Administrator, provided that any person who already receives full-time
pay from the Employer may not receive any fees for services to the
Plan as Administrator or in any other capacity. In addition, the
Employer will pay all reasonable expenses incurred by the
Administrator in the performance of its duties under this Plan. If the
Employer fails to pay such expenses, the Trustee will reimburse the
Administrator out of the Trust Fund. Expenses will be paid by each
Adopting Employer in the ratio that each Adopting Employer's
Participants' Accounts bears to the total of all the Participants'
Accounts maintained by this Plan.
8.5 CLAIMS PROCEDURES: Upon retirement, death, Disability or Termination
of Employment, the Participant or representative of such Participant
may make application to the Administrator requesting payment of
benefits due and the manner of payment, in accordance with the
following:
53
(a) Automatic Payment If No Application Is Made: If no application
for benefits is made and no cash-out of benefits occurs under
Section 5.5, the Administrator will automatically pay a
Participant's Vested Aggregate Account balance in the form that
does not require spousal consent no later than the time
prescribed in Section 5.10.
(b) Denial Of Claim: If an application for benefits is made, the
Administrator will accept, reject, or modify such request and
will notify the Participant in writing setting forth the response
of the Administrator and in the case of a denial or modification
the Administrator will (1) state the specific reason or reasons
for the denial, (2) provide specific reference to pertinent Plan
provisions on which the denial is based, (3) provide a
description of any additional material or information necessary
for the Participant or his representative to perfect the claim
and an explanation of why such material or information is
necessary, and (4) explain the Plan's claim review procedure as
contained herein.
(c) Review Procedure: In the event the request is rejected or
modified, the Participant or his representative may within 60
days following receipt by the Participant or representative of
such rejection or modification, submit a written request for
review by the Plan Administrator of its initial decision. Within
60 days following such request for review, the Plan Administrator
will render its final decision in writing to the Participant or
representative stating specific reasons for such decision. If the
Participant or representative is not satisfied with the Plan
Administrator's final decision, the Participant or representative
can institute an action in a federal court of competent
jurisdiction; for this purpose, process would be served on the
Plan Administrator.
8.6 QUALIFIED DOMESTIC RELATIONS ORDERS: A Qualified Domestic Relations
Order, or QDRO, is a signed domestic relations order issued by a State
Court which creates, recognizes or assigns to an alternate payee(s)
the right to receive all or part of a Participant's Plan benefit. An
alternate payee is a Spouse, former Spouse, child, or other dependent
of a Participant who is treated as a Beneficiary under the Plan as a
result of the QDRO. The Administrator will determine if a domestic
relations order is a Qualified Domestic Relations Order as follows:
(a) Administrator's Determination: Promptly upon receipt of a
domestic relations order, the Administrator will notify the
Participant and any alternate payee(s) named in the order of such
receipt, and will include a copy of this Section 8.6. Within a
reasonable time after receipt of the order, not to exceed 60
days, the Administrator will make a determination as to whether
or not the order is a QDRO as defined in Code ss.414(p) and will
promptly notify the Participant and any alternate payee(s) in
writing of the determination.
(b) Specific Requirements Of QDRO: In order for a domestic relations
order to be a QDRO, it must specifically state all of the
following: (1) the name and last known mailing address (if any)
of the Participant and of each alternate payee covered by the
order. However, if the QDRO does not specify the current mailing
address of the alternate payee, but the Administrator has
independent knowledge of that address, the QDRO will still be
valid; (2) the dollar amount or percentage of the Participant's
benefit to be paid by the Plan to each alternate payee, or the
manner in which the amount or percentage will be determined; (3)
the number of payments or period for which the order applies; and
(4) the specific plan (by name) to which the order applies. The
domestic relations order will not be deemed a
54
QDRO if it requires the Plan to provide any type or form of
benefit, or any option not already provided for in the Plan, or
increased benefits, or benefits in excess of the Participant's
Vested Interest, or payment of benefits to an alternate payee
which are required to be paid to another alternate payee under
another QDRO.
(c) Disputed Orders: If there is a question as whether or not a
domestic relations order is a QDRO, there will be a delay in any
payout to any payee including the Participant, until the status
is resolved. In such event, the Administrator will segregate the
amount that would have been payable to the alternate payee(s) if
the order had been deemed a QDRO. If the order is not determined
to be a QDRO, or the status is not resolved (for example, it has
been sent back to the Court for clarification or modification)
within 18 months beginning with the date the first payment would
have to be made under the order, the Administrator will pay the
segregated amounts plus interest to the person(s) who would have
been entitled to the benefits had there been no order. If a
determination as to the Qualified status of the order is made
after the 18-month period, then the order will only be applied on
a prospective basis. If the order is determined to be a QDRO, the
Participant and alternate payee(s) will again be notified
promptly after such determination. Once an order is deemed a
QDRO, the Administrator will pay to the alternate payee(s) all
the amounts due under the QDRO, including segregated amounts plus
interest which may have accrued during a dispute as to the
order's qualification.
(d) Payment Prior To Termination Of Employment: A QDRO may provide
for the payment of benefits to an alternative payee prior to the
time a Participant has terminated employment. Further, such
payment can be made even if the affected Participant has not yet
reached the Earliest Retirement Age. For purposes of this
paragraph, the term Earliest Retirement Age means the earlier of
(1) the date on which the Participant is entitled to a
distribution under this Plan, or (2) the later of (i) the date
the Participant attains age 50, or (ii) the earliest date on
which the Participant could receive benefits under this Plan if
the Participant terminated employment with the Employer.
(e) Effect Of QDRO On Survivor Annuity Requirements: Notwithstanding
Section 5.1 and 5.2 to the contrary, a Participant's benefits
which are payable from the Plan in the form of either a Qualified
Joint and Survivor Annuity or a Qualified Preretirement Survivor
Annuity need not be paid in such form if such payment is
inconsistent with, or has been modified by, the terms of a
Qualified Domestic Relations Order.
55
ARTICLE 9
AMENDMENT, TERMINATION AND MERGER
9.1 AMENDMENT: The Employer, by action of its board of directors, will
have the right to amend the Plan at any time if the amendment complies
with the following requirements:
(a) General Requirements: Amendments must be in writing and cannot
(1) increase the responsibilities of the Trustee or Administrator
without written consent; (2) deprive any Participant or
Beneficiary of Plan benefits to which he or she is entitled; (3)
decrease the amount of any Participant's Account balance except
as permitted under Codess.412(c)(8); (4) permit any part of the
Trust Fund to be used for or diverted to purposes other than the
exclusive benefit of the Participants or their Beneficiaries
except as required to pay taxes and administration expenses, or
cause or permit any portion of the Trust Fund to revert to or
become the property of the Employer; or (5) eliminate or reduce a
retirement-type subsidy, or an early retirement benefit, or an
optional form of benefit with respect to benefits attributable to
service before the amendment. In the case of a retirement-type
subsidy, this provision will apply only with respect to a
Participant who satisfies the pre-amendment conditions for the
subsidy either before or after the amendment.
(b) Certain Corrective Amendments: For purposes of satisfying the
minimum coverage requirements of Codess.410(b), the
nondiscriminatory amount requirement of regulation
ss.1.401(a)(4)-1(b)(2), or the nondiscriminatory plan amendment
requirement of regulation ss.1.401(a)(4)-1(b)(4), a corrective
amendment may retroactively increase allocations for Employees
who benefited under the Plan during the Plan Year being
corrected, or may grant allocations to Employees who did not
benefit under the Plan during the Plan Year being corrected. In
addition, to satisfy the nondiscriminatory current availability
requirement of regulationss.1.401(a)(4)-4(b) for benefits, rights
or features, a corrective amendment may make a benefit, right or
feature available to Employees to whom it was previously not
available. A corrective amendment will not be taken into account
prior to the date of its adoption unless it satisfies the
applicable requirements of regulationss.1.401(a)(4)-11(g)(3)(ii)
through (vii), including the requirement that, in order to be
effective for the preceding Plan Year, such amendment must be
adopted by the 15th day of the 10th month after the close of the
preceding Plan Year.
9.2 TERMINATION: The Employer at any time can terminate the Plan and Trust
in whole or in part by filing written notice thereof with the
Administrator and Trustee or by completely discontinuing contributions
to the Plan. Upon termination of the Plan, the Trustee will continue
to administer the Trust until distribution has been made to the
Participants, which distribution must occur as soon as
administratively feasible after the termination of the Plan, and must
be made in accordance with the provisions of Article 5 of the Plan.
Upon termination of the Plan (whether partial or complete), or upon a
complete discontinuance of contributions to the Plan, any Participant
who is affected by such termination will have a 100% Vested Interest
in his Participant's Account.
9.3 MERGER OR CONSOLIDATION: This Plan and Trust may not be merged or
consolidated with, nor may any of its assets or liabilities be
transferred to, any other plan, unless the benefits payable to each
Participant if the Plan was terminated immediately after such action
would be equal to or greater than the benefits to which such
Participant would have been entitled if this Plan had been terminated
immediately before such action.
56
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 NO CONTRACT OF EMPLOYMENT: Except as otherwise provided by law,
neither the establishment of this Plan, any modification hereto, the
creation of any fund or account, nor the payment of any benefits, will
be construed as giving any Participant or other person any legal or
equitable rights against the Employer, any officer or Employee
thereof, or the Trustee, except as herein provided. Further, under no
circumstances will the terms of employment of any Participant be
modified or otherwise affected by this Plan.
10.2 TITLE TO ASSETS: No Participant or Beneficiary will have any right to,
or any interest in, any assets of the Trust upon separation from
service with the Employer, Affiliated Employer, or Adopting Employer,
except as otherwise provided by the terms of the Plan.
10.3 QUALIFIED MILITARY SERVICE: Notwithstanding any provision of this Plan
to the contrary, effective December 12, 1994, contributions, benefits
and service credit with respect to qualified military service will be
provided in accordance with Code ss.414(u).
10.4 FIDUCIARIES AND BONDING: The Fiduciaries of this Plan will have only
those powers and duties which are specifically given to the
Fiduciaries under the terms of this Plan. In addition, every Fiduciary
other than a bank, an insurance company, or a Fiduciary of an Employer
which has no common-law employees, will be bonded in an amount not
less than 10% of the amount of funds under such Fiduciary's
supervision, but such bond will not be less than $1,000 or more than
$500,000. The bond will provide protection to the Plan against any
loss for acts of fraud or dishonesty by a Fiduciary acting alone or in
concert with others. The cost of such bond will be an expense of
either the Employer or the Trust, at the election of the Employer.
10.5 SEVERABILITY OF PROVISIONS: If any Plan provision is held invalid or
unenforceable, such invalidity or unenforceability will not affect any
other provision of this Plan, and this Plan will be construed and
enforced as if such provision had not been included.
10.6 GENDER AND NUMBER: Words used in the masculine gender will be
construed as though they were also used in the feminine or neuter
gender where applicable, and words used in the singular form will be
construed as though they were also used in the plural form where
applicable.
10.7 HEADINGS AND SUBHEADINGS: Headings and subheadings are inserted for
convenience of reference. They constitute no part of this Plan and are
not to be considered in its construction.
10.8 LEGAL ACTION: In any claim, suit or proceeding concerning the Plan
and/or Trust which is brought against the Trustee or the
Administrator, this Plan and Trust will be construed and enforced
according to the laws of the state in which the Employer maintains its
principal place of business, to the extent that is not preempted by
the provisions of ERISA. Furthermore, unless otherwise prohibited by
law, either the Employer or the Trust, in the sole discretion of the
Employer, will reimburse the Trustee and/or the Administrator for all
costs, attorneys fees and other expenses associated with any such
claim, suit or proceeding.
57
IN WITNESS WHEREOF, this Plan and Trust have been executed by the
Employer and the Trustees on the day, month and year set forth on page 1 of this
Agreement.
COMMUNITY BANKS, INC.
By /s/ Anthony N. Leo
-------------------------------
Anthony N. Leo EVP
TRUSTEES
/s/ Terry L. Burrows
---------------------------------
Terry L. Burrows
/s/ Eddie L. Dunklebarger
---------------------------------
Eddie L. Dunklebarger
/s/ Patricia E. Hoch
---------------------------------
Patricia E. Hoch
/s/ Sally J. Leas
---------------------------------
Sally J. Leas
/s/ Ernest L. Lowe
---------------------------------
Ernest L. Lowe
/s/ Kathy A. Mull
---------------------------------
Kathy A. Mull
58
CERTIFICATE OF CORPORATE RESOLUTIONS
OF
COMMUNITY BANKS, INC.
The undersigned Secretary of Community Banks, Inc. (the "Corporation") certifies
that the following resolutions were adopted by the Corporation on the 11th day
of December, 1999, and that these resolutions have not been modified or
rescinded as of the date this certificate is executed.
Resolved, that the Corporation hereby assumes sponsorship of the
Peoples State Bank Employees' Profit Sharing Plan (the "Plan"), a
tax-qualified profit sharing plan with a cash or deferred arrangement
previously sponsored and maintained by Peoples State Bank, a wholly
owned subsidiary of the Corporation, effective as of January 1, 2000;
Resolved, that the Corporation hereby re-names the Plan as the
Community Banks, Inc. 401(k) Plan, effective as of January 1, 2000;
Resolved, that the Corporation hereby merges the Community Banks, N.A.
401(k) Plan (the "Community Plan"), a tax-qualified profit sharing
plan with a cash or deferred arrangement, into the Plan, effective as
of January 1, 2000;
Resolved, that the Corporation hereby authorizes Peoples States Bank
and Community Banks, N.A., wholly owned subsidiaries of the
Corporation, to adopt the Plan as Adopting Employers (as that term is
defined in the Plan) on behalf of their eligible employees, effective
as of January 1, 2000;
Resolved, that the Corporation hereby amends and restates the Plan to
comply with changes in applicable laws, including the Uniformed
Services Employment and Reemployment Rights Act, the Small Business
Job Protection Act of 1996, the Taxpayer Relief Act of 1997, and the
IRS Reform and Restructuring Act of 1998, effective as of January 1,
1997, and amends and restates the Plan to make certain other changes
effective as of January 1, 2000; and
Resolved, that the officers of the Corporation and their delegates are
authorized to take any actions as may be necessary to implement the
foregoing resolutions and that the Corporation hereby ratifies,
confirms, and approves any and all actions previously taken by such
officers or their delegates as though a resolution or certificate
authorizing such action(s) had been duly adopted by the Corporation
prior to the time such action was taken.
THIS CERTIFICATE is hereby executed this 16th day of December, 1999.
/s/ Patricia E. Hoch
---------------------------
Corporate Secretary
CERTIFICATE OF CORPORATE RESOLUTIONS
OF
PEOPLES STATE BANK OF EAST BERLIN
The undersigned Secretary of Peoples State Bank (the "Corporation") certifies
that the following resolutions were adopted by the Corporation on the 21st day
of December, 1999, and that these resolutions have not been modified or
rescinded as of the date this certificate is executed.
Resolved, that the Corporation hereby transfers sponsorship of the
Peoples State Bank Employees' Profit Sharing Plan (the "Plan"), a
tax-qualified profit sharing plan with a cash or deferred arrangement
to Community Banks, Inc., the corporate parent of the Corporation,
effective as of January 1, 2000;
Resolved, that the Corporation hereby adopts the Plan on behalf of its
eligible employees and becomes an "Adopting Employer" (as that term is
defined in the Plan), effective as of January 1, 2000;
Resolved, that the officers of the Corporation and their delegates are
authorized to take any actions as may be necessary to implement the
foregoing resolutions and that the Corporation hereby ratifies,
confirms, and approves any and all actions previously taken by such
officers or their delegates as though a resolution or certificate
authorizing such action(s) had been duly adopted by the Corporation
prior to the time such action was taken.
THIS CERTIFICATE is hereby executed this 21st day of December, 1999.
/s/ Sally J. Leas
------------------------------
Secretary
Amendment # 1 July 1, 2001
1.68 YEAR OF SERVICE: The term Year of Service means a 12-consecutive month
computation period in which an Employee completes for the Employer, an
Affiliated Employer or an Adopting Employer at least 500 Hours of
Service for vesting purposes under Section 4.6. An Employee will also
receive credit for all Years of Service with Tremont National Bank,
Peoples Safe Deposit Bank, Peoples Bank, and The Sentinel Agency, Inc.
if the crediting of such Years of Service does not cause the Plan to
discriminate in favor of Highly Compensated Employees. A Year of
Service will be determined in accordance with the following
provisions:
(a) Reemployment Before A Break In Service: For eligibility purposes,
if a Participant terminates employment and is reemployed by the
Employer before incurring a Break in Service, such Participant
will continue to participate in the Plan and earn credit for
Years of Service in the same manner as if the termination of
employment had not occurred.
(b) Reemployment After A Break In Service: For eligibility purposes,
if a Participant who does not have a Vested Interest in his or
her Participant's Account terminates employment but is reemployed
by the Employer after a Break in Service occurs, such former
Participant's Years of Service before the Break in Service will
not be counted in computing his or her Years of Service if the
number of consecutive Breaks in Service equals or exceeds the
greater of five or the aggregate number of Years of Service. The
aggregate number of Years of Service will not include any Years
of Service previously disregarded hereunder by reason of prior
Breaks in Service. If a former Participant's Years of Service are
disregarded under this paragraph, he or she will be treated as a
new Employee for eligibility purposes. If a former Participant's
Years of Service may not be disregarded under this paragraph,
then he or she will continue to participate in the Plan, or, if
terminated, will participate immediately upon reemployment. If a
Participant who has a Vested Interest in his or her Participant's
Account terminates employment but is reemployed by the Employer
after a Break in Service occurs, such former Participant will
become a Participant in the Plan immediately upon being
reemployed by the Employer.
(c) Employees Under 2-Year Full And Immediate Vesting: If this Plan
at any time (1) provides in Section 2.1 that an Employee must
complete 2 Years of Service for eligibility purposes, and (2)
provides in Section 4.6 that an Employee will have a 100% Vested
Interest in his or her Participant's Account upon becoming a
Participant, then the Years of Service of an Employee who incurs
a Break in Service before satisfying such 2 Years of Service
eligibility requirement will not be counted for eligibility
purposes.
(d) Vesting Computation Period: In determining a Participant's Vested
Interest in his or her Participant's Account under Section 4.6,
the 12-consecutive month computation period will be the Plan
Year. If a former Participant is reemployed by the Employer after
a Break in Service occurs, such former Participant's Vested
Interest in his or her Participant's Account will be computed as
follows: (1) Years of Service prior to the Break in Service will
not be counted for purposes of computing his or her post-break
Vested Interest until the former Participant has completed a Year
of Service from the date of reemployment; (2) Years of Service
after a former Participant has incurred 5 consecutive Breaks in
Service will not be taken into account in determining the Vested
Interest in his or her Participant's Account which accrued before
such 5 year period; and (3) if a former Participant does not have
a Vested Interest in his or her Participant's Account, Years of
Service before any period of consecutive Breaks in Service will
not be taken into account if the number of consecutive Breaks in
Service within such period equals or exceeds the greater of 5 or
the aggregate number of Years of Service before such period.
AMENDMENT # 2 JANUARY 1, 2002
1.68 YEAR OF SERVICE: The term Year of Service means a 12-consecutive month
computation period in which an Employee completes for the Employer, an
Affiliated Employer or an Adopting Employer (a) at least 1,000 Hours
of Service for eligibility purposes under Section 2.1; and (b) at
least 500 Hours of Service for vesting purposes under Section 4.6. An
Employee will also receive credit for all Years of Service with
Tremont National Bank, Peoples Safe Deposit Bank, Peoples Bank, The
Sentinel Agency, Inc., and Glen Rock State Bank if the crediting of
such Years of Service does not cause the Plan to discriminate in favor
of Highly Compensated Employees. A Year of Service will be determined
in accordance with the following provisions:
(a) Reemployment Before A Break In Service: For eligibility purposes,
if a Participant terminates employment and is reemployed by the
Employer before incurring a Break in Service, such Participant
will continue to participate in the Plan and earn credit for
Years of Service in the same manner as if the termination of
employment had not occurred.
(b) Reemployment After A Break In Service: For eligibility purposes,
if a Participant who does not have a Vested Interest in his or
her Participant's Account terminates employment but is reemployed
by the Employer after a Break in Service occurs, such former
Participant's Years of Service before the Break in Service will
not be counted in computing his or her Years of Service if the
number of consecutive Breaks in Service equals or exceeds the
greater of five or the aggregate number of Years of Service. The
aggregate number of Years of Service will not include any Years
of Service previously disregarded hereunder by reason of prior
Breaks in Service. If a former Participant's Years of Service are
disregarded under this paragraph, he or she will be treated as a
new Employee for eligibility purposes. If a former Participant's
Years of Service may not be disregarded under this paragraph,
then he or she will continue to participate in the Plan, or, if
terminated, will participate immediately upon reemployment. If a
Participant who has a Vested Interest in his or her Participant's
Account terminates employment but is reemployed by the Employer
after a Break in Service occurs, such former Participant will
become a Participant in the Plan immediately upon being
reemployed by the Employer.
(c) Employees Under 2-Year Full And Immediate Vesting: If this Plan
at any time (1) provides in Section 2.1 that an Employee must
complete 2 Years of Service for eligibility purposes, and (2)
provides in Section 4.6 that an Employee will have a 100% Vested
Interest in his or her Participant's Account upon becoming a
Participant, then the Years of Service of an Employee who incurs
a Break in Service before satisfying such 2 Years of Service
eligibility requirement will not be counted for eligibility
purposes.
(d) Vesting Computation Period: In determining a Participant's Vested
Interest in his or her Participant's Account under Section 4.6,
the 12-consecutive month computation period will be the Plan
Year. If a former Participant is reemployed by the Employer after
a Break in Service occurs, such former Participant's Vested
Interest in his or her Participant's Account will be computed as
follows: (1) Years of Service prior to the Break in Service will
not be counted for purposes of computing his or her post-break
Vested Interest until the former Participant has completed a Year
of Service from the date of reemployment; (2) Years of Service
after a former Participant has incurred 5 consecutive Breaks in
Service will not be taken into account in determining the Vested
Interest in his or her Participant's Account which accrued before
such 5 year period; and (3) if a former Participant does not have
a Vested Interest in his or her Participant's Account, Years of
Service before any period of consecutive Breaks in Service will
not be taken into account if the number of consecutive Breaks in
Service within such period equals or exceeds the greater of 5 or
the aggregate number of Years of Service before such period.
AMENDMENT # 2 JANUARY 1, 2002
4.6 DETERMINATION OF VESTED INTEREST: A Participant's Vested Interest in
his or her Participant's Account will be determined in accordance with
the following provisions:
(a) 100% Vesting Upon Retirement, Death Or Disability: A Participant
will have a 100% Vested Interest in his Participant's Account
upon reaching Normal or Early Retirement Age prior to Termination
of Employment, or upon death or Disability prior to that date.
(b) Vesting Prior To Retirement, Death Or Disability: Except as
otherwise provided in paragraph (a) above, a Participant's Vested
Interest in his or her Participant's Account at any given time,
including Termination of Employment prior to Normal or Early
Retirement Age, death or Disability, will be determined in
accordance with the following: (1) a Participant's Vested
Interest in all Elective Deferrals, Matching Contributions,
Qualified Matching Contributions and Qualified Non-Elective
Contributions that are allocated to his or her Participant's
Account will be 100% upon entry into the Plan and at all times
thereafter; and (2) a Participant's Vested Interest in all
Non-Elective Contributions that are allocated to his or her
Participant's Account will be determined by the vesting schedule
which immediately follows this paragraph based on the number of
Years of Service the Participant has completed on the date of
determination.
Years Of Service Vested Interest
1 . . . . . . . . . . . . . 20%
2 . . . . . . . . . . . . . 40%
3 . . . . . . . . . . . . . 60%
4 . . . . . . . . . . . . . 80%
5 . . . . . . . . . . . . . 100%
(c) Amendments To Vesting Schedule: No Plan amendment may directly or
indirectly reduce a Participant's Vested Interest. If the Plan's
vesting schedule is amended, any Participant with at least three
Years of Service may, by filing a written request with the
Administrator 60 days after the latest of (1) the amendment's
adoption date, (2) the amendment's effective date, or (3) the
date the Participant receives written notice of the amendment,
elect to have the Vested Interest in his or her Participant's
Account computed by the vesting schedule in effect prior to the
amendment. A Participant who fails to make such an election will
have his or her Vested Interest computed under the new schedule.
However, notwithstanding the foregoing, a Participant's Vested
Interest in his or her Participant's Account will not be less
than it was as of the later of January 1, 2000 or the date this
amended Plan is actually adopted by the Employer.
(d) Accounts attributable to Peoples State Bank Employees Stock
Ownership Plan: Notwithstanding the foregoing, to the extent any
portion of a Participant's Account is attributable to amounts
transferred from the Peoples State Bank Employees Stock Ownership
Plan, such portion of the Participant's Account shall be fully
vested.
(a) Accounts attributable to Glen Rock State 401(k) Plan:
Notwithstanding the foregoing, to the extent any portion of a
Participant's Account is attributable to amounts transferred from
the Glen Rock State Bank 401(k) Plan, and is not fully vested
under the terms of such plan, such portion of the Participant's
Account shall be vested in accordance with the generally
applicable terms of this Section 4.6.
AMENDMENT # 2 JANUARY 1, 2002
5.20 PRE-RETIREMENT DISTRIBUTIONS: A Participant who has reached Age 59 1/2
may request in writing that the Administrator distribute up to 100% of
the Participant's Elective Deferral Account within 60 days of such
written request. Distribution will be made in a lump sum payment
provided the Participant's spouse, if any, consents to the
distribution in accordance with Section 5.8. In addition, a
Participant who satisfies the requirements in paragraph (a) may
request in writing to the Administrator that within 60 days of such
request up to 100% of the Participant's Vested Interest in his or her
Non- Elective Contribution Account and Matching Contribution Account
be distributed, subject to the following provisions:
(a) Eligibility Requirements: On the date of distribution, the
portion of the Participant's Account being distributed must have
accumulated for at least two consecutive Plan Years, or the
Participant must have completed at least 5 Years of Plan
Participation. The Participant must also have reached Age 59 1/2
and must also have a 100% Vested Interest in the amount being
distributed.
(b) Amount And Form Of Distribution: The maximum amount of
Non-Elective Contributions and Matching Contributions
distributable hereunder is the Participant's Vested Interest
in his or her Non-Elective Contribution Account and Matching
Contribution Account as of the Valuation Date which coincides
with or immediately precedes the date of distribution.
Distribution will be made in a lump sum payment provided the
Participant's spouse, if any, consents to the distribution in
accordance with the provisions of Section 5.8.
(c) Restriction On Certain Transferred Assets: Notwithstanding any
provision in this Section to the contrary, no pre-retirement
distribution can be made under this Section with respect to
benefits attributable to assets (including post-transfer earnings
thereon) and liabilities that are transferred, within the meaning
of Code ss.414(l), from a money purchase pension plan qualified
under Code ss.401(a) to this Plan (other than any portion of
those assets and liabilities attributable to Voluntary Employee
Contributions).
(d) Participants Who Are Not 100% Vested: If a distribution is made
under this Section at a time when the Participant has less than a
100% Vested Interest in the sub-account from which all of any
part of the pre-retirement distribution is made, and such Vested
Interest may increase, a separate account will be established for
such sub-account at the time of distribution, and at any relevant
time the Participant's Vested Interest in the separate account
will be equal to an amount ("X") determined by the formula X =
P[(AB+(R x D))-(RxD)]. In applying the formula, "P" is the Vested
Interest at the relevant time, "AB" is the respective account
balance at the relevant time, "D" is the amount of the
distribution, and "R" is the ratio of the respective account
balance at the relevant time to the respective account balance
after distribution.