VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
ENROLLMENT INFORMATION
AND FORMS
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
Questions & Answers
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The following is a list of questions contained in the Questions & Answers
section:
HOW THE PROGRAM WORKS
1. What is the Volume Services, Inc. Deferred Compensation Plan? (An Overview)
2. What are the advantages of the Plan?
3. What are the trade-offs if I participate?
4. Does my participation affect my other Volume Services, Inc. benefit plans?
ELIGIBILITY/DEFERRAL ELECTIONS
5. Who is eligible to participate in the Plan?
6. How much can I defer?
7. When do I make my election to defer?
8. Can I change my deferral election?
9. What elections can I make?
DEFERRAL CREDITING OPTIONS
10. What are my Deferral Crediting Options?
ACCESS TO YOUR MONEY
11. Can I get money from my account prior to the date I elect for deferral
payments to begin?
12. When do I receive distribution of my deferral account balance?
13. Can I transfer, pledge or assign my deferral account balance?
EXCEPTIONAL CONDITIONS
14. What happens in the event of a Change in Control or a Change in
Financial Condition at Volume Services, Inc.?
15. Can the Plan be amended or discontinued?
TAX CONSIDERATIONS
16. What are some of the more common tax related questions for this Plan?
ENROLLMENT AND ADMINISTRATION
17. How do I sign up for the Plan?
18. Who can I talk to if I have questions about the Plan or the enrollment
package?
19. Can I reallocate my money between the Deferral Crediting Options?
20. How do I check my account balance?
21. What types of services can I expect from the Deferral Service Center at BPS?
22. What can I expect when I call the Deferral Service Center?
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
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Questions & Answers
The Volume Services, Inc. Deferred Compensation Plan ("the Plan") provides a
significant tax-advantaged opportunity for you to accumulate wealth to help meet
your retirement income needs and other future income needs, such as college
expenses or a home purchase. You are encouraged to review the Plan with your
financial advisors to determine how it can help in meeting your personal
financial goals.
The following is a summary of the main provisions of the Plan in a Question and
Answer format. As with any plan summary, the official and controlling provisions
of the Plan are contained in the Plan document, which you may obtain on request
from the Vice President of Human Resources at The Support Center in Spartanburg,
SC. In the case of any differences, the official Plan document will always
govern. The Plan is subject to continued compliance with Internal Revenue Code
of 1986, as amended (the "Code") and certain reporting, disclosure and
enforcement provisions of Employee Retirement Security Act of 1974, as amended
("ERISA").
HOW THE PROGRAM WORKS
1. What is the Volume Services, Inc. Deferred Compensation Plan ("the
Plan")? - An Overview
The Plan is a nonqualified (unfunded) deferred compensation plan that
allows you to make a pre-tax deferral of base salary and bonus
compensation, allocate it to various financial growth options, and have
it paid to you in the future. You may also receive certain Company
matching contributions, solely at the discretion of the Committee.
Generally speaking, your funds under this Plan will not become
available to you until retirement, death, disability, termination of
your employment, or in a specific future year you select. You may defer
up to 50% of your base salary and 100% of bonus, or both, in increments
of 1%. A minimum combined (salary and bonus) annual deferral of 1% of
salary is required.
You may choose to have your deferral accrue earnings as if held in the
following Funds: Stable Investment Fund, Enhanced Stock Market Fund,
Evergreen Short Intermediate Bond Fund, Invesco Dynamics Fund or the
Tomorrow Fund.
As a nonqualified plan, your deferral cannot and will not actually be
invested in these funds in your name. But, your deferral account will
reflect the results of the crediting option(s) you select as if the
account were invested in these options. The Company retains the right
to change the crediting options, and to amend or terminate the Plan in
its sole discretion at any time. You are a unsecured general creditor
of the Company as to your funds.
2. What are the advantages of the Plan?
A. Reduced Current Income Taxes.
Your current federal taxable income is reduced by the amount
you elect to defer. However, you will be taxed at the ordinary
income rates in effect at the time of distribution of your
account to you. All states with income taxes, except
Pennsylvania and New Jersey, follow the federal tax law and
exclude the amount you defer from current taxable income.
Please consult with your personal tax advisor regarding the
specific laws for your particular state.
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VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
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Questions & Answers
B. More Dollars Available for Investment.
Deferrals into this Plan can be more efficient than most other outside
investments because the deferral puts to work pre-tax rather than
after-tax dollars. For example:
Outside This
Investment Plan
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Compensation $1.00 $1.00
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Current Income
Tax @ 36% - .36 - .00
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Net Funds Invested $ .64 $1.00
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C. Tax-Deferred Accumulation.
Pre-tax dollars can generate much higher results than after-tax
investment dollars, even assuming identical rates of return. The
following hypothetical example illustrates this principle.
[Bar Chart Appears Here]
Taxable Investment ($112,650)
Tax Deferred Investment ($247,115)
Taxable vs. Deferred Investment
After-Tax Lump Sum Payout after 20 years of deferrals
This hypothetical example assumes:
o You make 20 annual investments of:
- $3,200 (after-tax equivalent of $5,000) to the outside
investment
- $5,000 pre-tax to the Volume Services, Inc. plan
o Both programs earn 8%
o Your tax bracket is 36%
o Actual results will vary based on the actual yield of the
investment and your tax bracket. This example only illustrates the
benefit of investing pre-tax dollars.
It does not illustrate the Plan's provisions or investment returns
on amounts deferred under the Plan.
You can do your own benefit estimates using the "Sample Benefit
Calculation Worksheet" in the "Benefit Calculator" section
contained in your enrollment booklet. Based on your own
assumptions as to the investment rate and deferral period, you can
estimate your accumulation of pre-tax investment on either a
single year's contribution or a series of contributions over a
specified number of years.
D. Possible Future Tax Savings
You may achieve additional income tax savings when you receive
your deferral account, provided that you are in a lower tax
bracket at that time.
E. Company Matching Contribution
You must defer salary into this Plan to receive a Company match.
At the sole discretion of the Committee, Volume Services, Inc. may
match some of your deferral within this Plan.
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VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
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Questions & Answers
3. What are the trade-offs if I participate?
A. Reduced Current Cash Flow.
By deferring your compensation, you reduce your current cash flow.
Therefore, if you require a greater amount of current income,
deferral may not be appropriate for you. However, the cash flow
reduction may be significantly less than the amount deferred,
since your deferral is in pre-tax dollars. For example, if your
tax rate is 36%, deferring $10,000 only reduces your after-tax
income by $6,400, but you have $10,000 working for you in your
deferral account.
B. The Plan Is Unfunded.
Based on current IRS regulations, your deferred account must be
hypothetical in nature and therefore cannot hold any actual funds
or assets. As a participant, your right to receive payments under
the Plan in the event of Volume Services, Inc.'s bankruptcy or
insolvency (as remote as that may seem) or that of a subsidiary
offering this Plan, will be the same as any other unsecured
general creditor. Note that the Plan does not create a trust
relationship between you, or any other person, and Volume
Services, Inc. In connection with the program, Volume Services,
Inc. may acquire a life insurance policy on your life, and may
manage an asset pool or assets within an insurance policy in a
manner similar to the aggregate allocations of the participant
group in the plan, but you will not have an ownership or
beneficial interest in it, nor in any asset Volume Services, Inc.
may acquire in connection with the Plan.
C. Restricted Access To Your Money.
In general, you do not have access to your deferrals and earnings
until retirement or the specific year you specify on your election
form except as noted.
D. Possible Higher Tax Rate.
The benefits of your deferral tax may be smaller than you would
otherwise expect if, at the time of distribution, you are in a
higher tax bracket than when you deferred.
E. Investment Risk
Based upon your selection of the various Deferral Crediting
Options offered, and the performance of those choices, the value
of your deferred account may be greater or smaller than your
initial deferral.
4. Does my participation affect my other Volume Services, Inc. benefit
plans?
Your participation has no effect on most of your other benefits, such
as life and disability insurance. However, your base salary and bonus
compensation deferred under this Plan will not be calculated as part of
your pay for purposes of the 401(k) plan for applicable employees of
Volume Services, Inc.
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VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
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Questions & Answers
ELIGIBILITY/DEFERRAL ELECTIONS
5. Who is eligible to participate in the Plan?
You are eligible to participate in the Plan on an annual basis if you
are an employee of Volume Services, Inc. or a wholly-owned subsidiary
thereof and are designated an equity owner of the company. In addition,
you are eligible if you are an employee and are deemed a highly
compensated employee of Volume Services, Inc. by the Committee.
6. How much can I defer?
You may defer a portion of your annual base salary and bonus
compensation, in increments of 1%. You may defer up to 50% of your base
salary and up to 100% of your bonus compensation. The minimum annual
deferral is 1% of salary.
You should think of your election to defer as irrevocable and carefully
assess the impact on your personal financial situation.
7. When do I make my election to defer?
Normally, the deferral election must be made on or before December 31
prior to the year in which the income is earned, unless you are a newly
eligible employee. Newly eligible employees must make deferral
elections during the first 30 days after becoming eligible. For 1997,
however, your election to defer 1998 base salary and bonus compensation
payable in 1999, must be made by December 31, 1997.
8. Can I change my deferral election?
Once you have made your annual deferral election, you may not change it
until the next annual deferral election period, except that you may
discontinue a base salary deferral election at any time which will
become effective on the next pay period. However, you will not be able
to elect to defer base salary again until the next annual deferral
enrollment period if you stop your base salary deferral mid-year. Bonus
deferral elections can only be discontinued based upon a financial
hardship. The distribution date you elect cannot be changed.
Although the distribution date you elect cannot be changed, the form
can be changed. In the calendar year prior to your year of distribution
(but no less than 60 days prior to that date) you will have an
opportunity to change the form of payment (how many installments will
be made to you).
9. What elections can I make?
Each year you will be able to elect to defer both base salary and bonus
compensation. Each deferral item will be treated as a separate
election. For each, you will select how much you wish to defer, how you
want it paid (lump sum or installments), and when you wish to receive
it in the future. You have two elective options as to when you may
receive payment: (1) at retirement; or (2) a specific future year. This
specific future year may not be less than 3 years from your year of
deferral (1 year if you are age 55 or older by the expiration of the
annual election period), and not be later than the year in which you
turn age 70.
When you make an election to defer, you will also determine how you
want your deferral amounts allocated among the various Deferral
Crediting Options available to you (See the section entitled "Deferral
Crediting Options"). These allocations can be changed later.
You will also have the opportunity to elect to have your deferral
accounts automatically distributed to you within 45 days following a
Change in Control or a Change in Financial Condition of Volume
Services, Inc., or a wholly-owned subsidiary for which you work.
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VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
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Questions & Answers
You will also designate a beneficiary(ies) to receive all of your
deferral accounts in the event of your death. Beneficiary(ies) can be
changed later.
DEFERRAL CREDITING OPTIONS
10. What are my Deferral Crediting Options?
Your deferral account will accrue earnings, according to your election
in the following Funds: Stable Investment Fund, Enhanced Stock Market
Fund, Evergreen Short Intermediate Bond Fund, Invesco Dynamics Fund,
and the Tomorrow Retirement Funds. Your deferrals will be credited to
the Stable Value Fund if you should somehow fail to provide an
allocation election. You continue to accrue earnings until your account
is fully distributed. Deferrals allocated to as if held in Funds will
track the value (both up and down) of the Funds you select. Refer to
the section entitled "Deferral Crediting Options" of this enrollment
booklet for details on these Deferral Crediting Options. You will also
be able to make a reallocation once per calendar month. The Company
retains the right to change these Deferral Crediting Options as it may
determine in its sole discretion.
ACCESS TO YOUR MONEY
11. Can I get money from my account prior to the date I elect for deferral
payments to begin.?
At any time, you may withdraw all or part of your deferral account
balance only under the following circumstances.
A. Financial Hardship Distributions
In the event of unusual, extraordinary expenses or unforeseen
financial hardship, you may petition the Volume Services, Inc.
Deferred Compensation Plan Committee for a distribution of the
amount reasonably necessary to meet your financial need. This
definition of hardship is more stringent than the hardship
provision in the 401(k) plan, and does not, for instance, include
college expenses or costs in connection with a home purchase. It
does encompass hardship generated by unforeseen circumstances,
such as medical expenses, family loss of income by layoff, etc.
The Plan Committee may approve or deny the request in its sole
discretion, and distribution is limited to the amount necessary to
resolve the hardship plus your income tax liability on the
distribution. If approved, this distribution is not subject to any
penalty income taxes, but is ordinary income for federal and state
income tax purposes.
B. Withdrawals Subject to Partial Forfeiture
Any request to the Plan Committee for an unscheduled distribution
which is not due to financial hardship requires Plan Committee
approval, and is subject to a 10% permanent forfeiture on the
amount withdrawn. In addition, you will be prohibited from
deferring under the Plan at the next annual enrollment, but may
resume deferring the following Plan year. This forfeiture
provision is necessary to prevent constructive receipt and the
resulting income tax consequences for the other Plan participants.
The distribution you receive (net of the forfeiture) is not
subject to any penalty income taxes, but will be taxed as ordinary
income for federal and state income taxes.
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VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
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Questions & Answers
C. Loans
Unlike the 401(k) plan, loans are not permitted under this Plan.
Current law would not provide favorable income tax treatment for
the Plan if loans were permitted.
12. When do I receive distribution of my deferral account balance?
You can elect when you wish to receive distribution of your deferral
account balance, selecting: (1) a specific future year of your choice
(not less than 3 years from the year of deferral if you are under age
55, 1 year if you are over, and not later than the year you turn age
70); or (2) retirement, which means full retirement or disability
retirement under a Volume Services, Inc. qualified plan. Each year and
each element of compensation (base salary or bonus compensation) will
be a separate election.
Normal distributions will be made annually, or in quarterly
installments. Annual payments will be made as of the first business day
of January. Quarterly payments will be made as of the first business
day of each quarter. Total distribution of an account must be made by
age 85. Each annual or quarterly installment will be equal to a
fraction of the account balance as of the date the installment is paid,
the numerator of the fraction being 1 and the denominator being the
number of years (or quarters) remaining in the payment schedule. For
example, the respective fractions for a five (5) year annual
installment schedule are 1/5 for the first installment; 1/4 for the
second; 1/3 for the third; 1/2 for the fourth; and 1/1 (balance) for
the fifth and final installment.
Distributions may also occur at termination of employment, disability,
death or a Change in Control or a Change in Financial Condition. Refer
to Exhibit B for a summary of the Plan's distribution provisions.
A. Retirement
You can elect to receive distribution of your deferral account
beginning at full retirement or disability retirement under a
Volume Services, Inc. qualified plan. You will elect to have your
account paid in a lump sum or installments over not more than 15
years. You may elect a different schedule in the calendar year
prior to retirement or the date distribution is scheduled to begin
(but at least sixty days prior to the date of the first
distribution). Installments may not continue beyond age 85. If you
are already receiving payments based upon a Specific Future Year
election at the time you retire, those payments will continue as
scheduled.
B. Specific Future Year
You can elect to receive distribution of your deferral account
starting in a specific future year of your choice, either before
or after your anticipated retirement (but no later than the year
in which you turn age 70). If you are age 55 or older, the
deferral must be for a minimum period of one calendar tax year. If
you are under age 55 the deferral must be for a minimum period of
3 calendar tax years.
A Specific Future Year election might be appropriate if you know
you will have a need for income at a specific future time. For
example, if your child will enter college 10 years from now, you
might decide to defer current salary and/or bonus compensation and
to have it paid beginning in your child's freshman college year in
4 annual installments. Thus, if the amount of your deferral was
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VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
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Questions & Answers
$10,000 and it grew to $20,000, you might expect to receive four
annual payments of approximately $5,000. As another use, you might
determine to pick a specific future year after your anticipated
retirement (but not later than the year you turn age 70) to begin
distribution of your deferral account in order to help provide
yourself with income in the later years of your retirement. The
amounts deferred could be paid out in installments not to exceed
15 years of annual installments.
C. Disability
If you become totally and permanently disabled while actively
employed at Volume Services, Inc., you will receive the entire
balance of your account paid out in five (5) annual installments
with the first to begin within ninety (90) days following the date
of disability. However, you may petition the Committee for a
shorter distribution schedule, including lump sum, based upon
hardship.
D. Death
In the event of your death while actively employed by the Company,
your beneficiary(ies) will receive distribution of your remaining
account balance in five (5) annual installments with the first to
begin within ninety (90) days of your date of death. However, your
beneficiary(ies) may petition the Committee for a shorter
distribution schedule, including lump sum, based upon hardship.
E. Any Termination Other Than Retirement, Death or Disability
In the event you terminate from the Company for any reason other
than retirement, death, or disability, you will receive your
account balance in (5) annual installments with the first to begin
within ninety (90) days of your date of termination of employment.
However, you may petition the Committee for a shorter distribution
schedule including lump sum, based upon hardship.
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VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
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Questions & Answers
F. Small Accounts
Upon your death, permanent disability or termination of
employment, the Plan Committee in its sole discretion may decide
to distribute your entire account balance in a lump sum if your
account balance is less than $200,000.
G. Change in Control
At the time you make your annual deferral election, you may also
elect to receive your entire deferral account balance in a lump
sum within 45 days after a Change in Control of the company as
determined by the Committee.
H. Change in Company's Financial Condition
At the time you make your annual deferral election, you may also
elect to receive your entire deferral account balance in a lump
sum within 45 days after a Change in Financial Condition of the
company as determined by the Committee or resulting from the loss
of the company's bank line of credit.
13. Can I transfer, pledge or assign my deferral account balance?
No. Your rights to your account balance cannot be assigned to another,
nor can you pledge or assign your account balance to secure a bank loan
or other indebtedness. Such a transaction could make your account
subject to current taxation.
EXCEPTIONAL CONDITIONS
14. What happens in the event of a Change in Control or a Change in
Financial Condition at Volume Services, Inc.?
At the time you make your normal deferral election, you may also elect
to receive your entire deferral account balance in a lump sum within 45
days after a Change in Control.
15. Can the Plan be amended or discontinued?
The Volume Services, Inc. Board of Directors retains the right to amend
or terminate the Plan at any time. However, your accrued benefits at
the time of any amendment, suspension or termination of the Plan cannot
be reduced (subject to investment risk changes in value).
TAX CONSIDERATIONS
16. What are some of the more common tax-related questions for this Plan?
Am I taxed on my deferrals or earnings credited to them?
Under current tax law, neither your deferral nor the earnings on them
are subject to federal income tax prior to withdrawal from the Plan, as
long as you make a timely election. All states (in states with income
taxes), except Pennsylvania and New Jersey, follow the federal law and
exclude the amount you defer from current taxable income. Under current
law, there will be no income tax liability until you actually receive a
payment. Check with your legal counsel concerning your specific state
or local (city, county) tax laws.
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VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
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Questions & Answers
What about Social Security and Medicare Taxes?
Deferred amounts (both salary and bonus) are subject to these taxes at
the time of deferral. These amounts will be deducted from salary not
deferred. The eventual payment of your deferral accounts, including
earnings, will not be subject to these taxes under current law.
Likewise, distribution payments from the Plan will not reduce your
Social Security benefits after retirement under current law.
How will my distributions be taxed?
Under current law, distributions from your account are taxed as
ordinary income when received and no special tax advantages or
penalties apply. Federal, state and local income taxes will be withheld
from your payments when they are actually made.
Based upon Federal law effective January 1, 1997, it may also be
possible to avoid state income taxes on your distribution. In general,
to be exempt from state income tax on your distribution you must:
1. Be a resident in a state (e.g., Florida, Texas) which does not
impose an income tax, prior to the time you begin receiving
distribution of your account, and
2. Have elected to receive your account distribution in a minimum of
ten (10) annual installments. If you plan to elect to defer until
retirement or later, you may wish to elect distribution of the
(10) annual installments or more initially even if you have no
idea where you plan to live after retirement. Or, prior to
severance from the Company for any reason, you may wish to review
your prior distribution elections (to the extent they may be
changed) to determine if a change might assist you to qualify for
an exemption.
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VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
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Questions & Answers
Here again, we recommend you consult with your personal financial
or tax advisor as to the arrangement most appropriate for your
situation.
How will my distribution payments be reported?
Payments made to you will be reported on a W-2 Form. Payments to
survivors, in the event of your death, will be reported on Form 1099-R.
Is my distribution eligible to be rolled over to an IRA?
No, because this is not a tax-qualified plan under the Internal Revenue
Code. When electing a Plan distribution, we encourage you to seek
professional tax advice to determine the best course of action in light
of your financial circumstances.
Will the Plan benefits paid to my beneficiaries be included in my gross
estate for federal tax purposes?
Yes. The cumulative amounts in your account at the time of death will
be included in your estate. However, the amount in your account may not
increase your taxable estate if your beneficiary is your spouse and the
benefit qualifies for the estate tax marital deduction. You should
consult with your own legal counsel concerning beneficiary designations
and planning for the benefits in the event of your death to obtain the
most appropriate result for your personal situation.
ENROLLMENT & ADMINISTRATION
17. How do I sign up for the Plan?
In order to enroll in this Plan, you must complete the Participation
and Deferral Election Form, Beneficiary Designation Form(s), and
Acknowledgment Form for Insurance. Please return the forms postmarked
no later than December 31, 1997 to Benefit Plan Services (BPS), Volume
Services, Inc.'s third party administrator of this Plan, using the
enclosed prepaid self-addressed envelope.
18. Who can I talk to if I have questions about the Plan or the enrollment
package?
During or following this enrollment period, you should address your
questions to the Deferral Service Center at BPS, at 1-800-340-8151,
during normal business hours (8:30 a.m. - 5:00 p.m. Eastern Time,
Mon.-Fri.).
The address for communication with BPS is:
Deferral Service Center
c/o Benefit Plan Services
One Securities Centre, Suite 1300
3490 Piedmont Road, N.E.
Atlanta, Georgia 30305
19. Can I reallocate my money between the Deferral Crediting Options?
Yes. once each calendar month (after your deferrals have begun), you
may reallocate among the various Deferral Crediting Options available
under the Plan. Unless you indicate otherwise, your reallocation will
change all your current allocations to your new allocation. Daily
valuations will be made on all accounts so no particular day is
advantaged or disadvantaged. You do this by calling the Deferral
Service Center at 1-800-340-8151 during normal business hours.
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VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
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Questions & Answers
Please note, neither BPS nor Volume Services, Inc. will give you advice
concerning your deferral allocations. You must consult your personal
financial advisor or planner for such advice.
20. How do I check my account balance?
You may call the Deferral Service Center Voice Response Unit at
1-800-340-8151 if you want to determine the balance in your account.
The Voice Response System is available 24 hours a day and can handle
many common inquiries like your account balance 24 hours a day. You
will need your Personal Identification Number (PIN) that was previously
assigned to you in order to access the system.
21. What types of services can I expect from the Deferral Service Center at
BPS?
As manager of the Deferral Service Center, BPS will provide the
following: allocation among Deferral Crediting Options, account
balances and statements; beneficiary election and payout change forms;
processing of hardship withdrawals; and W-2 reports. BPS will also
handle inquiries related to account balances, reallocation among
Deferral Crediting Options, payout checks, tax withholding and will
provide information directly to financial planners (if authorized by
participants). A $14.50 annual fee will be charged for these services,
but the Company will pay the annual fee for these services until and
unless you are notified otherwise. Participants may call BPS at
1-800-340-8151.
22. What can I expect when I call the Service Center?
All calls during normal business hours (8:30 a.m. - 5:00 p.m., Eastern
Time, Mon. - Fri.) will be handled by an administrative operator fully
trained in Plan provisions, who will handle your request (e.g., balance
inquiries, reallocation). You may leave a message on voice mail after
normal business hours.
11
Exhibit A
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
Comparison of Nonqualified Deferral and Qualified 401(k) plan
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Nonqualified Deferral
Plan Principal Characteristics Qualified
401(k) plan
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Yes Deferral on Pre-Tax Basis Yes
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Yes FICA/Medicare Withheld on Deferrals Yes
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Yes FICA/Medicare Withheld on Company Match No
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Yes Earnings Accumulate Tax Deferred Yes
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No Actual Funds or Assets Held in Participant Accounts Yes
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No Funds or Assets avoid the claims of Company's general creditors Yes
in bankruptcy
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Yes Distributions Subject to Income Taxes Yes
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Yes Federal Income Tax Statutory Withholding on Yes(1)
Lump Sum Payments
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No Rollover into an IRA Allowed Yes
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No 5 or 10 Year Income Tax Averaging Yes(2)
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Yes(3) Hardship Withdrawals Available Yes
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No Loans Against Accounts Available Yes
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No 10% penalty tax for pre-age 59 1/2 distribution Yes
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No Change in deferral amount during plan year Yes
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(1) If not rolled over.
(2) Under recent legislation, five year forward averaging will be
eliminated on lump sum qualified plan distributions beginning in
taxable years after 1999.
(3) "Hardship" definition is more stringent than in the 401(k) plan. See
Question 11A.
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Exhibit B
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
PAYOUTS & DISTRIBUTIONS
================================================================================
EVENT DISTRIBUTION
OF ACCOUNT BALANCE
- -------------------------------------------------------------------------------------------------------------------------
PARTICIPANT Retirement Up to 15 annual installments
ELECTION
OPTIONS
------------------------------------------------------------------------------------
Fixed Future Year (Not less than 3 Up to 15 annual installments
years from year of deferral) and
not later than the year you turn
age 70
- -------------------------------------------------------------------------------------------------------------------------
OTHER Termination or Disability 5 annual installments
OCCURRENCES
----------------------------------------------------------------------------------
Death No distribution begun: 5 annual
installments.
Distribution begun: Balance of
payments due.
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Loans Are prohibited in nonqualified plans
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Financial Hardship Amount necessary to relieve hardship
only
(Plan Committee Approval)
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Non-hardship Withdrawal Amount less 10%, and loss of
participation for one Plan Year
----------------------------------------------------------------------------------
Small Accounts Lump Sum at Plan Committee's
(Less than $200,000 balance) discretion upon death, disability or
termination of employment.
- -------------------------------------------------------------------------------------------------------------------------
Note: The timing and form of your distribution election will be made prior to
income being earned. However, you will be given the ability to change
the form of distribution (but not the timing) in the calendar year
prior to (but not less than 60 days prior to) the year of distribution.
Under your two election options you can select up to 15 annual
installments. Retirement means separation from full-time service with
the Company under a Company qualified Plan, including a disability
retirement. In the event of your termination, or disability, you will
be paid in 5 annual installments, except the distribution may be
accelerated upon request for reason of financial hardship. In the event
of your death, your beneficiary can select up to 5 annual installments
if no distribution of your account is underway, your beneficiary will
receive the balance of the payments due.
13
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
Benefit Calculator
================================================================================
Instructions
The Sample Benefit Calculation Worksheet offers a way for you to project the
potential benefit provided by the Volume Services, Inc. Deferred Compensation
Plan. This worksheet is only an aid for helping you determine how much you might
like to defer, and is not intended to suggest or guarantee the actual
performance of your deferral. Please note: For ease of calculation, the
schedules are based on "per $1,000".
There are two calculation schedules in this section. Use Version A along with
Schedule A to estimate the benefit associated with a single year's deferral to
the payout date. Use Version B along with Schedule B to estimate the benefit
associated with a continuous series of deferrals to the payout date.
The calculation schedules show benefits assuming various long-term interest
rates from 8 to 12%. If you want to assume retirement, or benefit payment,
beginning at age 65, use the row showing your current age in the Age column on
the schedules. If you want to assume retirement, or benefit payment, beginning
at a time other than age 65, you must calculate the number of years to that date
and use the row corresponding to that number of years in the "years to benefit
payout" column. For each deferral scenario, benefits for a lump sum and a ten
(10) year annual payout are provided.
Please note that this estimator illustrates installment payments in equal level
amounts when, in fact, they will actually be distributed as a fraction of the
account based upon the number of installments you select. For example, if you
select 10 years of annual payments you will receive 1/10, 1/9, 1/8, 1/7, 1/6,
1/5, 1/4, 1/3, 1/2 and finally 1/1 of the balance of your account in a year.
Thus, your first year installment will be equal to about 70% of the account and
grow each year, assuming the interest crediting rate remains level over the
entire time period.
To use either of the benefit calculation worksheets, follow the outlined steps.
14
VOLUME SERVICES, INC.
DEFERRED COMPENSATION PLAN
Benefit Calculator
================================================================================
Sample Benefit Calculation Worksheet
Version A: Sample Benefit Calculation - For a single year's Illustration of Participant's
contribution Sample Own Account
Assumptions
1 Approximate the amount you expect to defer in a single year. $ 50,000 $
----------
2 Since the benefit schedule is calculated based on a deferral of
$1,000, divide the deferred amount in line 1 by 1,000. 50
----------
3 Look up the benefits on Schedule A, using the investment rate you want to
assume and your current age or years to benefit payment.
o Lump Sum (Assumes Schedule A, 8% rate, and 15 years to payment) $ 3,058 $
---------
OR
o 10 Annual Installments (Assumes 8% rate, and 15 years to payment) $ 422 $
---------
4 Multiply the number in (2) by the amount(s) in (3) to estimate payout in
either lump sum or installments.
o Lump Sum $ 152,900 $
---------
OR
o 10 Annual Installments (The initial annual installment will equal
approximately 70% of this amount and grow over the remaining $ 21,150 $
installments) ---------
15