SECOND AMENDMENT TO THE THIRD RESTATEMENT
OF THE ERO INDUSTRIES, INC.
RETIREMENT INCOME PLAN
The Third Restatement of the ERO Industries, Inc. Retirement Income
Plan (the "Plan") is hereby amended, effective July 1, 1996 (unless
otherwise set forth below), as follows:
1. Section 3.1 (Annual Compensation) shall be amended, effective
January 1, 1994, by adding the following paragraphs:
In addition to other applicable limitations set forth in the Plan,
and notwithstanding any other provision of the Plan to the
contrary, for Plan Years beginning on or after January 1, 1994,
the annual compensation of each Employee taken into account under
the Plan shall not exceed the OBRA '93 annual compensation limit.
The OBRA '93 annual compensation limit is $150,000, as adjusted
by the Commissioner for increases in the cost of living in
accordance with Section 401(a)(17)(B) of the Code. The cost-of-
living adjustment in effect for a calendar year applies to any
period, not exceeding 12 months, over which compensation is
determined (determination period) beginning in such calendar year.
If a determination period consists of fewer than 12 months, the
OBRA '93 annual compensation limit 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.
For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under Section 401(a)
(17) of the Code shall mean the OBRA '93 annual compensation
limit set forth in this provision.
If compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the
current Plan Year, the compensation for that prior determination
period is subject to the OBRA '93 annual compensation limit in
effect for that prior determination period. For this purpose,
for determination periods beginning before the first day of the
first plan year beginning on or after January 1, 1994, the OBRA
'93 annual compensation limit is $150,000.
2. Section 3.3 (Break In Service) shall be amended to read as
follows:
Break in Service shall mean, for purposes of determining Year of
Service, a Plan Year in which an Employee completes five hundred
(500) or fewer Hours of Service and, for purposes of determining
Year of Eligible Service, any twelve (12) consecutive month
period beginning on an Employee's first day of employment, and
succeeding anniversaries thereof, in which an Employee completes
five hundred (500) or fewer Hours of Service.
3. Section 3.9 (Employee) shall be amended by deleting the first
sentence thereof and inserting the following sentence:
Employee shall mean any common law employee of the Company,
excluding (i) any person serving only as a director, (ii) all
independent contractors, (iii) any person whose employment is
governed by the terms of a collective bargaining agreement with
the Company where retirement benefits were the subject of good
faith bargaining between employee representatives and the Company,
and (iv) any person who is a non-resident alien deriving no earned
income from the Company which constitutes income from sources in
the United States.
4. Section 3.32 (Year of Eligible Service) shall be amended
to read as follows:
Year of Eligible Service shall mean any twelve (12) consecutive
month period, beginning with the Employee's first day of
employment and ending on an Employee's anniversary of his first
day of employment, and succeeding anniversaries thereof, during
which period the Employee (i) was employed with the Company or
any member of its controlled group, and (ii) completed one
thousand (1,000) or more Hours of Service.
5. Article IV (Eligibility for Participation) shall be amended
to read as follows:
(a) Each Employee shall become a Participant hereunder upon the
January 1 or July 1 immediately following completion of a
Year of Eligible Service, or, if later, attainment of age 21.
(b) A Participant who terminates employment and is subsequently
reemployed as an Employee shall become a Participant again
on his date of reemployment.
(c) An Employee who terminates employment after being eligible
to become a Participant, but prior to the date upon which
he first becomes eligible to enter the Plan, and who then
is reemployed before incurring a Break in Service, shall be
eligible to become a Participant on his date of reemployment.
(d) An Employee who terminates employment before becoming eligible
to become a Participant and who is reemployed before incurring
a Break in Service shall be eligible to become a Participant
when he satisfies the eligibility requirements of paragraph
(a) hereof, based on his date of reemployment.
(e) An Employee who terminates employment before becoming a
Participant and who is reemployed after incurring a Break
in Service shall be eligible to become a Participant when
he satisfies the eligibility requirements of paragraph (a)
hereof, based on his date of reemployment.
6. Section 5.2 (Company Contributions) shall be amended to read
as follows:
Contributions of the Company to the Trust Fund for Matching
Contributions or Company Elective Contributions shall be made
in cash. Any contributions made hereunder shall be conditioned
upon the deductibility of such contribution under Section 404
of the Code and, to the extent the deduction is not allowed,
the nondeductible contribution shall be returned to the Company
within one (1) year of the date the Trust Fund is notified of
said nondeductibility. The Plan Administrator shall adjust
all Participants' accounts to reflect only the deductible portion
of the Company Elective Contributions and Matching Contributions
for the end of the Plan Year to which the nondeductible
contribution relates.
7. Paragraph (a) of Section 5.4 (Participant's Salary Reduction
Election) shall be amended to read as follows:
Each Participant shall have the option to enter into a written
(or by any other means approved by the Company) salary reduction
agreement, which agreement shall be applicable to all compensation
received thereafter. The salary reduction agreement shall provide
that the Participant agrees to accept a reduction in salary from
the Company equal to an integral percentage of from two percent
(2%) to fifteen percent (15%) of his Annual Compensation, subject
to the then effective dollar limitation in effect ($9,500 for
the 1996 calendar year) under Section 402(g) of the Code. The
amount by which Annual Compensation is reduced shall be treated
as a Company Elective Contribution and allocated to that
Participant's Elective Account.
8. Section 7.1 shall be amended to read as follows:
Section 7.1 Allocation of Matching Contributions and
Forfeitures.
(a) For each Participant who authorizes Company Elective
Contributions during the Plan Year, the Company shall
contribute each payroll period to the Plan, on behalf
of each such Participant, a "Matching Contribution" in
an amount equal to fifty percent (50%) of the Participant's
Company Elective Contribution, provided, however, that the
Matching Contribution shall not be made on the portion of a
Participant's Company Elective Contribution that exceeds six
percent (6%) of the Participant's compensation in each such
payroll period. Matching Contributions hereunder shall be
made to the Trust Fund no later than the time prescribed by
law for filing the Company's federal income tax return for
the Plan Year to which they relate, including any extensions
thereof.
(b) To the extent of one percent (1%) of the Participant's
compensation in each payroll period, Matching Contributions
shall be allocated to a Participant's 100% Account. Matching
Contributions allocated to a Participant in excess of one
percent (1%) of his compensation in each such payroll period,
and all Forfeitures, shall be allocated to a Participant's
Regular Account.
(c) The Company shall direct the Plan Administrator to establish
and maintain a Matching Contribution Account in the name
of each of its Participants on whose behalf Matching
Contributions are made.
(d) Notwithstanding anything in this Plan to the contrary, any
Matching Contributions (and interest thereon), whether
vested or not, that are associated with an excess elective
deferral under Section 5.4 or are associated with an excess
elective contribution under Section 7.2 shall be forfeited
within two and one-half months after the end of the Plan
Year in which such excess elective deferrals or excess
contributions were made and shall be reallocated as a
Forfeiture hereunder.
(e) As of the last day of the Plan Year, Forfeitures shall be
allocated to all Participants who are employed by the
Company at the close of business on the last day of the
Plan Year and who completed a Year of Service in such Plan
Year. A Participant eligible to share in Forfeitures for
the Plan Year shall share in such Forfeitures in the
proportion that his Annual Compensation bears to the Annual
Compensation of all eligible Participants for such Plan Year.
9. Paragraph (b) of Section 7.2 (Limitation of Company Elective
Contributions -- 401(k) Deferral Percentage Tests) shall be amended to
add the following sentence.
For purposes of determining a Participant's compensation hereunder,
if an Employee becomes a Participant during a Plan Year, his
compensation in such Plan Year for purposes of the actual deferral
percentage test provided for hereunder shall be his Annual
Compensation for the entire Plan Year, unless the Company, in
a manner applied uniformly for all Participants for such Plan Year,
determines that compensation shall be based only upon the portion
of Annual Compensation earned during the period in which the
Participant participated in the Plan.
10. The following Paragraph (f) shall be added to Section 9.3
(Other Forms of Settlement):
(f) If a distribution is one to which Sections 401(a)(11) and
417 of the Code do apply, such distribution may be made or
commence less than thirty (30) days after written explanation
of the forms of distribution is given (but not sooner than
seven (7) days after such explanation is given), provided
the requirements set forth in Section 1.417(e)-1T of the
Tax Regulations are met.
11. Section 10.6 (Participant Loans) shall be amended to read
as follows:
Upon application by an Employee who is a Participant or any other
party-in-interest, as defined in Section 3(14) of ERISA, and upon
a determination that the Employee or other party-in-interest is
deemed to have a "serious financial hardship," as determined in
accordance with Section 10.3(d) of the Plan, the Plan's trustee
may lend such Employee or other party-in-interest an amount such
that the aggregate of all of his outstanding loans under this Plan
and all other plans maintained by the Company or any member of its
controlled group does not exceed the lesser of: (1) fifty thousand
dollars ($50,000) (reduced by the excess, if any, of (A) the
highest outstanding balance of loans from the Plan and all other
plans maintained by the Company or any member of its controlled
group during the one (1) year period ending on the day before the
date on which such loan is made over (B) the outstanding balance
of loans from the Plan and all other plans maintained by the
Company or any member of its controlled group on the date on which
such loan is made); or (2) an amount which does not exceed one-half
(1/2) of the Vested Accounts, if any, under the Plan as of the date
on which the loan is approved. All loans shall follow a uniform,
nondiscriminatory policy. Loans shall not be made available to
highly compensated Employees in an amount greater than the amount
made available to other Employees.
In addition to such rules and regulations as the Plan Administrator
may adopt, all loans shall comply with the following terms and
conditions:
(a) An application for a loan by an Employee or other party-in-
interest shall be made in writing to the Plan Administrator,
whose action thereon shall be final. The Plan Administrator
shall specify the form of the application and any supporting
data required.
(b) The period of repayment for any loan shall be five (5) years,
unless the loan is used to acquire a dwelling unit which
within a reasonable time shall be used as the principal
residence of the Employee or other party-in-interest, in
which case the period of repayment shall be determined by
the Plan Administrator. Loans shall be repayable in
substantially equal amortized installments of both principal
and interest payable not less frequently than quarterly.
Loans to Employees shall be repaid through automatic payroll
deduction, and for parties-in-interest who are not Employees,
on such other terms and conditions as the Plan Administrator
deems appropriate. To the extent that such loan is unpaid at
the time a distribution of such Participant's Accounts becomes
payable, such unpaid amount shall be deducted from the amount
otherwise payable from his Account. Any loan described in
this Section 10.6 shall be considered an investment of the
Account from which it was borrowed. Such Account shall not
share in the allocation of earnings under the Plan to the
extent of such loan.
(c) Each loan shall bear interest at a rate which is two percent
(2%) above the prime rate, as such rate is charged from time
to time by area banking businesses.
(d) Each loan shall be supported by collateral equal to no more
than fifty percent (50%) of the Employee's or other party-
in-interest's entire Vested Accounts in the Trust Fund.
A loan also shall be supported by the Employee's or other
party-in-interest's promissory note for the amount of the
loan, including interest, payable to the order of the
trustee. The promissory note shall require that the unpaid
principal and interest will become due and payable if a loan
payment is not made by the last day of the calendar year
quarter following the calendar year quarter in which the
installment was due and owing. In the event of default,
foreclosure on the note and attachment of security will
not occur until a distributable event occurs in the Plan.
(e) Each loan shall be in an amount not less than one thousand
dollars ($1,000.00).
IN WITNESS WHEREOF, the Company has caused this Second Amendment
to the Plan to be executed by its duly authorized officer this ____
day of July, 1996.
ERO INDUSTRIES, INC.,
a Delaware corporation
By: /s/Ted J. Lueken
Its: Senior Vice President of Finance