LILLY INDUSTRIES, INC.
REPLACEMENT PLAN
Effective as of January 1, 1996
TABLE OF CONTENTS
Page
ARTICLE I. ESTABLISHMENT OF PLAN........................................... 1
Section 1.01. Establishment....................................... 1
Section 1.02. Purpose............................................. 1
Section 1.03. Funding............................................. 1
Section 1.04. Trust............................................... 1
ARTICLE II. DEFINITIONS AND INTERPRETATION................................. 1
Section 2.01. Definitions......................................... 1
Section 2.02. Construction and Governing Law...................... 5
ARTICLE III. PARTICIPATION................................................. 5
ARTICLE IV. VESTING AND FORFEITURE......................................... 6
Section 4.01. Vesting............................................. 6
Section 4.02. Forfeiture.......................................... 6
ARTICLE V. PENSION REPLACEMENT BENEFIT..................................... 6
Section 5.01. Pension Replacement Benefit......................... 6
Section 5.02. Alternate Form...................................... 7
Section 5.03. Death of Participant................................ 7
ARTICLE VI. 401(k) REPLACEMENT BENEFIT..................................... 7
Section 6.01. Matching Contributions and
Profit Sharing Contributions..................... 7
Section 6.02. Adjustments to Participant Accounts................. 7
Section 6.03. Distribution of Net Earnings........................ 8
Section 6.04. 401(k) Replacement Benefit.......................... 8
Section 6.05. Alternate Form...................................... 8
Section 6.06. Death of Participant................................ 8
ARTICLE VII. MISCELLANEOUS................................................. 9
Section 7.01. Plan Terminations................................... 9
Section 7.02. Amendments.......................................... 9
Section 7.03. General Administration.............................. 9
Section 7.04. No Employment Rights................................ 9
Section 7.05. Non-alienation...................................... 9
Section 7.06. Limitation of Liability............................. 9
Section 7.07. Acceleration or Change of Payment................... 10
Section 7.08. Tax Withholding..................................... 10
Section 7.09. Counterparts........................................ 10
- 1 -
LILLY INDUSTRIES, INC. REPLACEMENT PLAN
ARTICLE I.
ESTABLISHMENT OF PLAN
Section 1.01. Establishment. Lilly Industries, Inc. ("Company") hereby
establishes the Lilly Industries, Inc. Replacement Plan ("Plan"), effective
January 1, 1996.
Section 1.02. Purpose. The sole purpose of the Plan is to replace
certain benefits for a select group of management and highly compensated
employees of the Company and its Affiliated Employers to the extent that the
benefits to which such employees would otherwise be entitled under the Lilly
Employees' Pension Plan, the Lilly Industries, Inc. Employee 401(k) Savings
Plan, and the Lilly Industries, Inc. Defined Contribution Plan are limited by
Sections 401(a)(17), 402(g), and 415 of the Internal Revenue Code of 1986, as
amended, and corresponding provisions of subsequent federal income tax laws
("Code").
Section 1.03. Funding. The Plan is an unfunded benefit plan within the
meaning of the Employee Retirement Income Security Act of 1974, as amended, and
the Code. The right of a Participant or Beneficiary to receive payment under the
Plan is merely a contractual right to payment from the Employer of the
Participant, and the Plan does not give Participants or Beneficiaries any
interest in, or right to, any of the assets of the Company or any Affiliated
Employer other than as a general creditor of his or her Employer. Pension
Replacement Benefits payable under the Plan with respect to a Participant shall
be paid solely from the general assets of the Employer of the Participant.
Section 1.04. Trust. The Company has established the Company Trust for
the purpose of satisfying the payment obligations of the Company and other
Employers with respect to Matching Contribution Accounts and Profit Sharing
Contribution Accounts of Participants under the Plan. Benefits payable under the
Plan with respect to the Matching Contribution Account and Profit Sharing
Contribution Account of a Participant shall be paid from the Company Trust, or
if the assets of the Company Trust are not sufficient to pay such benefits, the
Employer of the Participant shall pay such benefits from its general assets. The
interests or rights of Participants or Beneficiaries in or to any of the funds,
property, or assets held by the Company Trust shall not be senior to the
unsecured general creditors of the Company or any Affiliated Employer.
ARTICLE II.
DEFINITIONS AND INTERPRETATION
Section 2.01. Definitions. When the initial letter of a word or phrase
is capitalized herein, such word or phrase shall have the meaning hereinafter
set forth:
(a) "Affiliated Employer" means:
(i) a member of a controlled group of corporations (as defined
in Code Section 414(b)) of which the Company is a member; or
(ii) an unincorporated trade or business which is under common
control (as defined in Code Section 414(c)) with the Company.
(b) "Beneficiary" means the person or persons entitled to Plan benefits
with respect to the Participant after he or she is deceased.
(c) "Board" means the board of directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended, or any
corresponding provisions of any subsequent federal income tax law.
(e) "Committee" means the Compensation Committee of the Board to whom
authority to administer and interpret the Plan and to designate eligible
participants has been delegated by the Board.
(f) "Company" means Lilly Industries, Inc. and any successor to Lilly
Industries, Inc.
(g) "Company Trust" means the trust created by the Company under the
"Trust Agreement for Lilly Industries, Inc. Replacement Plan," as amended from
time to time.
(h) "Competition" means any of the activities described within this
Subsection. A Participant engages in Competition if he or she at any time (A)
directly or indirectly engages in any activity or business that is the same as
or substantially similar to or competitive with that of the Company or any
Affiliated Employer, (B) directly or indirectly engages in, owns, manages,
operates, joins, controls, lends money or other assistance to, or participates
in or is connected with, as an officer, employee, partner, stockholder,
consultant, or otherwise, an individual, partnership, firm, corporation or other
business organization or entity that is engaged in any activity or business that
is the same as or substantially similar to or competitive with that of the
Company or any Affiliated Employer, or (C) discloses or uses, other than in the
normal and ordinary performance of service for the Employer, any Confidential
Information of the Company or any Affiliated Employer. Nothing contained in the
foregoing, however, shall prohibit the Participant from owning shares of stock
representing less than one percent (1%) of the outstanding shares of any
publicly-held competitor of the Employer or any Affiliated Employer.
(i) "Confidential Information" means any information not in the public
domain and not previously disclosed to the public by the Board or the management
of the Company or an Affiliated Employer with respect to the products,
facilities and methods, trade secrets and other intellectual property, systems,
procedures, manuals, confidential reports, product price lists, customer lists,
financial information, business plans, prospects, or opportunities of the
Company
- 2 -
or an Affiliated Employer, or any information which the Company or an Affiliated
Employer has designated as Confidential Information.
(j) "Creditor Exempt Group Annuity Contract" means any group annuity
contract issued by an insurance company to the Company, as agent for each
Participant who elects to make Participant Contributions, for the purpose of
receiving and holding in accordance with its terms (i) Participant Contributions
(and investment earnings, gains and losses thereon) and (ii) amounts (and
investment earnings, gains, and losses thereon) transferred from the Company
Trust to the Creditor Exempt Group Annuity Contract in accordance with the terms
of the Plan and the Company Trust. Any amounts (plus additions thereon) held
under such Creditor Exempt Group Annuity Contract shall be solely the property
of the Participant and shall be paid to the Participant or to his beneficiary at
the time and in the manner provided for the 401(k) Replacement Benefit and the
terms of such annuity contract.
(k) "Employer" means the Company, any Affiliated Employer which adopts
the Plan with the consent of the Committee, and any successor thereto.
(l) "Good Cause" means (i) conviction for a felony or conviction for
any crime or offense lesser than a felony involving the property of the Company
or an Affiliated Employer, whether such conviction occurs before or after his or
her termination of employment; (ii) engaging in conduct that has caused
demonstrable and material injury to the Company or an Affiliated Employer,
monetary or otherwise; (iii) gross dereliction of duties or other gross
misconduct and the failure to cure such situation within thirty (30) days after
receipt of notice thereof from the Committee, or (iv) the disclosure or use of
Confidential Information other than in the normal and ordinary performance of
service for the Company or an Affiliated Employer. The determination as to
whether Good Cause exists shall be made by the Committee in good faith and in
its sole discretion.
(m) "Matching Contribution" means for any Plan Year the excess, if any,
of (i) the Employer matching contributions which would have been contributed to
the Savings Plan with respect to a Participant for the Plan Year if the
Participant had contributed his or her Participant Contributions for the Plan
Year to the Savings Plan and if the limitations of Code Sections 401(a)(17),
402(g), and 415 had not applied, over (ii) the actual Employer matching
contributions contributed to the Savings Plan with respect to the Participant
for the Plan Year.
Such Matching Contribution shall be contributed to the Company Trust at
least annually and at such times and in such manner as may be determined by the
Committee in its sole discretion from time to time.
(n) "Matching Contribution Account" means the bookkeeping account under
which Matching Contributions of a Participant are credited, as adjusted for
investment earnings, gains, and losses thereon and reduced by prior
distributions therefrom as provided under the terms of the Plan.
- 3 -
(o) "Participant" means each employee of an Employer who is employed in
a key executive or managerial position, who is designated by the Committee to be
eligible for participation in the Plan, and who agrees to be bound by the
provisions of the Plan on a form provided by the Committee.
(p) "Participant Contribution" means for any Plan Year the after-tax
amount contributed, at the written election of the Participant on the applicable
form, by the Participant to the Creditor Exempt Group Annuity Contract or the
Participant Trust, if any, up to an amount equal to the difference between (i)
the amount that he or she could have contributed to the Savings Plan if the
limitations of Code Sections 401(a)(17), 402(g), and 415 had not applied and
(ii) the amount that he or she was actually permitted to contribute to the
Savings Plan for such year, taking into account those limitations. Such
Participant Contributions shall be withheld from the pay of the Participant
throughout the year (after withholding applicable federal, state, and local
taxes) and shall be contributed to the Creditor Exempt Group Annuity Contract or
the Participant Trust, if any, at such times and in such manner as may be
determined by the Committee in its sole discretion from time to time.
(q) "Participant Trust" refers to any grantor trust established by any
Participant for the purpose of holding (i) Participant Contributions (and
investment earnings, gains, and losses thereon) and (ii) amounts (and investment
earnings, gains, and losses thereon) transferred from the Company Trust to the
Participant Trust in accordance with the terms of the Plan and the Company
Trust.
(r) "Pension Plan" means the "Lilly Employees' Pension Plan," as
amended from time to time.
(s) "Pension Replacement Benefit" means the excess, if any, of (i) the
amount of benefit that would have accrued to a Participant under the Pension
Plan if the amount of such accrued benefit were calculated without giving effect
to the limitations on compensation and benefits under Code Sections 401(a)(17)
and 415; provided, however, that such amount shall be determined after taking
into account the reduction in such retirement income that would have accrued if
Code Section 415(e) limitations applied, but only to the extent that such
reduction is attributable to contributions of the Participant to the Savings
Plan which are not matched by Employer Matching Contributions, over (ii) the
retirement benefit actually accrued to, or with respect to, the Participant
under the Pension Plan.
(t) "Plan" means the "Lilly Industries, Inc. Replacement Plan," as set
forth herein and as it may be amended from time to time hereafter.
(u) "Plan Year" means the calendar year.
(v) "Profit Sharing Contribution" means for any Plan Year the excess,
if any, of (i) the Employer profit sharing contributions which would have been
contributed to the Savings Plan with respect to a Participant for the Plan Year
if the limitations of Code Sections 401(a)(17) and
- 4 -
415 had not applied, over (ii) the actual Company profit sharing contributions
to the Savings Plan with respect to the Participant for the Plan Year.
Such Profit Sharing Contribution shall be contributed to the Company
Trust at least annually and at such times and in such manner as may be
determined by the Committee in its sole discretion from time to time.
(w) "Profit Sharing Contribution Account" means the bookkeeping account
under which Profit Sharing Contributions of a Participant are credited, as
adjusted for investment earnings, gains, and losses thereon and reduced by prior
distributions therefrom as provided under the terms of the Plan.
(x) "401(k) Replacement Benefit" means the aggregate amount of the
Matching Contribution Account and Profit Sharing Contribution Account of a
Participant as of the date of the retirement of the Participant under the
Savings Plan.
(y) "Savings Plan" refers collectively to the "Lilly Industries, Inc.
Employees 401(k) Savings Plan," as amended from time to time, and the "Lilly
Industries, Inc. Defined Contribution Plan," as amended from time to time.
Section 2.02. Construction and Governing Law.
(a) The Plan shall be construed, enforced, and administered, and the
validity thereof determined in accordance with, the laws of the State of
Indiana.
(b) Words used herein in the masculine gender shall be construed to
include the feminine gender where appropriate, and the words used herein in the
singular or plural shall be construed as being in the plural or singular where
appropriate.
(c) Whenever any actuarial present value or actuarial equivalency is to
be determined under the Plan, it shall be based on such actuarial assumptions as
may be provided under the Pension Plan for comparable situations as determined
by the Committee in its sole discretion.
ARTICLE III.
PARTICIPATION
The Committee may designate from time to time which employees of an
Employer are eligible to participate in the Plan. Any such employee shall become
a Participant only after completing such forms and making such elections as the
Committee may prescribe, including an agreement to be bound by all terms of the
Plan and all determinations of the Committee. A Participant shall remain a
Participant until all amounts to which he or she is entitled under the Plan have
been paid to him or her.
- 5 -
ARTICLE IV.
VESTING AND FORFEITURE
Section 4.01. Vesting. A Participant shall become vested in his or her
Pension Replacement Benefit and 401(k) Replacement Benefit as follows:
(a) Subject to Section 4.02, the Pension Replacement Benefit of a
Participant shall be vested in accordance with the vesting provisions set forth
in the Pension Plan.
(b) Subject to Section 4.02, the 401(k) Replacement Benefit of a
Participant shall be fully vested at all times.
Section 4.02. Forfeiture. A Participant shall forfeit his or her
Pension Replacement Benefit and 401(k) Replacement Benefit as follows:
(a) A Participant shall forfeit any and all rights he or she may have
to the nonvested portion of his or her Pension Replacement Benefit as of the
date his or her employment with the Employer ends either voluntarily or
involuntarily.
(b) Notwithstanding any other provision of the Plan, a Participant
shall forfeit any and all rights he or she may have to any 401(k) Replacement
Benefit or Pension Replacement Benefit if (i) the employment of the Participant
is involuntarily terminated by the Employer for Good Cause, as determined by the
Committee in its sole discretion, or (ii) the Participant, either before or
after any termination of employment with the Employer (including, without
limitation, retirement from the Employer) engages in Competition.
(c) If a Participant dies before any benefit becomes payable to him or
her under the Plan, the Participant shall forfeit any and all rights that
Participant may have had to any benefit under the Plan, except any death benefit
payable pursuant to Article V or VI.
ARTICLE V.
PENSION REPLACEMENT BENEFIT
Section 5.01. Pension Replacement Benefit. A Participant who retires
from the Employer in accordance with the Pension Plan and is entitled to receive
a retirement benefit under the Pension Plan shall be entitled to receive the
vested portion of his or her Pension Replacement Benefit, payable as an
actuarially equivalent lump sum payment at the same time as the initial benefit
payment of the pension under the Pension Plan, unless an alternate form of
benefit then available under the Pension Plan has been elected by the
Participant as provided in Section 5.02.
- 6 -
Section 5.02. Alternate Form. Upon becoming a Participant in the Plan
and at any time thereafter at least one (1) year before his or her Pension
Replacement Benefit becomes due and payable under the Plan, a Participant may
elect in writing, on a form prescribed by the Committee, an actuarially
equivalent alternate form of benefit then available under the Pension Plan;
provided, however, that any such election shall not become effective until the
date that is one (1) year after the date on which such election is approved by
the Committee, which approval may be withheld by the Committee in its sole
discretion.
Section 5.03. Death of Participant.
(a) If a married Participant dies prior to the date he or she begins
receiving payments under the Plan, and the survivor annuity payable to the
spouse of the Participant under the Pension Plan is less than the survivor
annuity which would have been payable if it were calculated without giving
effect to the limitations on benefits under Code Sections 401(a)(17) and 415,
the spouse of the deceased Participant shall be entitled to receive a survivor
annuity equal to the excess of (i) the survivor annuity that would have been
payable if it were calculated without giving effect to such Code limitations,
over (ii) the survivor annuity actually payable to such spouse under the Pension
Plan. Such survivor annuity payable under the Plan shall be payable at the same
time and in the same form as the survivor annuity under the Pension Plan is
payable.
(b) If a Participant dies after the date he or she begins receiving
payments under the Plan, survivor benefits, if any, will continue to be paid
pursuant to the alternate form of benefit, if any, elected under Section 5.02.
ARTICLE VI.
401(k) REPLACEMENT BENEFIT
Section 6.01. Matching Contributions and Profit Sharing Contributions.
Subject to the provisions of Section 6.03, the Employer shall credit to the
Matching Contribution Account of a Participant the Matching Contributions, if
any, with respect to the Participant for the Plan Year at the time and in such
manner as determined by the Committee in its sole discretion from time to time.
Subject to the provisions of Section 6.03, the Employer shall also credit to the
Profit Sharing Contribution Account of a Participant the Profit Sharing
Contributions, if any, with respect to the Participant for the Plan Year at the
time and in such manner as determined by the Committee in its sole discretion
from time to time.
Section 6.02. Adjustments to Participant Accounts. The Matching
Contribution Account and Profit Sharing Contribution Account of a Participant
shall be adjusted from time to time to reflect actual investment earnings,
gains, and losses under the equivalent accounts maintained for the Participant
under the Company Trust. The assets of said Trust shall be invested in a manner
which approximates as closely as practicable the investment options under the
equivalent accounts established and maintained for the Participant under the
Savings Plan.
- 7 -
The Matching Contribution Account and Profit Sharing Contribution Account of a
Participant shall also be adjusted to reflect distributions from such accounts
under the Plan and from the equivalent accounts established and maintained for
the Participant under the Company Trust.
Section 6.03. Distribution of Net Earnings. A Participant shall
receive, as soon as administratively practicable after the end of each Plan
Year, an annual distribution in an amount equal to the investment earnings and
realized gains with respect to each account of the Participant for the Plan Year
under the Company Trust. Upon becoming a Participant in the Plan or at any time
thereafter, a Participant may elect in writing, on a form prescribed by the
Committee, that distributions made pursuant to this Section 6.03 shall, in lieu
of being paid directly to the Participant, be contributed to the Creditor Exempt
Group Annuity Contract or the Participant Trust of the Participant. Any such
election shall remain effective until revoked by the Participant in writing, on
a form prescribed by the Committee. If the Participant does not make such an
election, or later revokes such an election, the Participant shall not be
entitled to any Matching Contributions or Profit Sharing Contributions for the
Plan Year within which a distribution of net earnings is made directly to the
Participant pursuant to this Section 6.03, or for any Plan Year thereafter until
the Participant has made such an election.
Section 6.04. 401(k) Replacement Benefit. A Participant who terminates
employment with the Employer shall be entitled to receive his or her 401(k)
Replacement Benefit, payable as a lump sum payment at the same time as the
initial benefit payment of the Participant under the Savings Plan, unless an
alternate form of benefit then available under the Savings Plan has been elected
by the Participant as provided in Section 6.05.
Section 6.05. Alternate Form. Upon becoming a Participant in the Plan
and at any time thereafter at least one (1) year before his or her 401(k)
Replacement Benefit becomes due and payable under the Plan, a Participant may
elect in writing, on a form prescribed by the Committee, an actuarially
equivalent alternate form of benefit permitted by the Committee; provided,
however, that any such election shall not become effective until the date that
is one (1) year after the date on which such election is approved by the
Committee, which approval may be withheld by the Committee in its sole
discretion.
Section 6.06. Death of Participant.
(a) If a Participant dies prior to the date he or she begins receiving
payments under the Plan, the designated Beneficiary of the Participant shall be
entitled to receive an amount equal to the sum of the Matching Contribution
Account and Profit Sharing Contribution Account balances of the Participant as
of the date of death of the Participant. The spouse of the Participant shall be
the beneficiary if the Participant is married at the time of his death, unless
the spouse consents to the designation of an alternate beneficiary.
(b) If a Participant dies after the date he or she begins receiving
payments under the Plan, survivor benefits, if any, will continue to be paid
pursuant to the alternate form of benefit, if any, elected under Section 6.05.
- 8 -
ARTICLE VII.
MISCELLANEOUS
Section 7.01. Plan Terminations. If the Pension Plan is terminated in
accordance with the terms thereof, the obligation to provide any Pension
Replacement Benefit accrued up to the termination date shall continue and shall
be payable in accordance with the terms of the Plan. If the Savings Plan (or
either of them) is terminated in accordance with the terms thereof, the
obligation to provide any 401(k) Replacement Benefit shall continue and shall be
payable in accordance with the terms of the Plan.
Section 7.02. Amendments. The Board from time to time may amend,
suspend, or terminate the Plan or any part hereof, effective as of the beginning
of any Plan Year commencing on or after the date of adoption of such action by
the Board; provided, however, that no such action shall affect the rights of the
Participant or the operation of the Plan with respect to any benefits of the
Participant that may have accrued or become payable before such action.
Section 7.03. General Administration. The Committee shall have
exclusive authority to administer the Plan. The Committee shall have the
exclusive right and authority to interpret the Plan and resolve any ambiguities.
The decisions, actions and records of the Committee shall be conclusive and
binding upon the Company, any Employer, and all persons having or claiming to
have any right or interest in or under the Plan. The Committee may delegate to
such officers, employees or departments of the Company such authority, duties,
and responsibilities of the Committee as it, in its sole discretion, considers
necessary or appropriate for the proper and efficient operation of the Plan,
including, without limitation, (a) interpretation of the plan, (b) approval and
payment of claims, and (c) establishment of procedures for administration of the
Plan.
Section 7.04. No Employment Rights. Neither the establishment of the
Plan nor the status of an employee as a Participant shall give any Participant
any right to be retained in the employ of the Employer; and no Participant and
no person claiming under or through such Participant shall have any right or
interest in any benefit under the Plan unless and until the terms, conditions,
and provisions of the Plan affecting such Participant shall have been satisfied.
Section 7.05. Non-alienation. The right of any Participant or any
person claiming under or through such Participant to any benefit or any payment
hereunder shall not be subject in any manner to attachment or other legal
process for the debts of such Participant or person; and the same shall not be
subject to anticipation, alienation, sale, transfer, assignment or encumbrance.
Section 7.06. Limitation of Liability. No member of the Board or the
Committee, and no officer or employee of the Company or any Affiliated Employer,
shall be liable to any person for any action taken or omitted in connection with
the administration of the Plan, nor shall the
- 9 -
Company or any Affiliated Employer be liable to any person for any such action
or omission. No person shall, because of the Plan, acquire any right to an
accounting or to examine the books or the affairs of the Company or any
Affiliated Employer. Nothing in the Plan shall be construed to create any trust
or any fiduciary relationship between the Company or any Affiliated Employer and
any Participant or any other person.
Section 7.07. Acceleration or Change of Payment. Notwithstanding any
provision of the Plan to the contrary, the Committee, in its sole discretion,
may accelerate the time of payment of any benefit to a Participant to the extent
that it deems equitable or desirable under the circumstances or, if there has
been a change in the family circumstances of the Participant, may change the
method of payment of any such benefit; provided, however, any such change shall
not reduce the benefit payable to an amount which is less than the actuarial
equivalent of the benefit payable to the Participant.
Section 7.08. Tax Withholding. The Employer may withhold from any
payment due hereunder any taxes required to be withheld under applicable
federal, state, or local tax laws or regulations.
Section 7.09. Counterparts. The Plan may be evidenced by any number of
counterparts, each of which shall constitute an original.
The Lilly Industries, Inc. Replacement Plan has been executed by the
duly authorized officers of Lilly Industries, Inc. on this 27th day of
September, 1996.
LILLY INDUSTRIES, INC.
By: /s/ Douglas W. Huemme
--------------------------------------
Douglas W. Huemme, Chairman, President
& Chief Executive Officer
By: /s/ Kenneth L. Mills
------------------------------------------------
Kenneth L. Mills
Title: Corporate Accounting Director
----------------------------------------------
- 10 -
TRUST AGREEMENT
FOR LILLY INDUSTRIES, INC.
REPLACEMENT PLAN
This Agreement is executed by and between LILLY INDUSTRIES, INC., with
its principal place of business in Indianapolis, Indiana ("Company"), and
Bankers Trust Company of Des Moines, as trustee ("Trustee").
RECITALS
The Company has established the Lilly Industries, Inc. Replacement Plan
("Plan") to provide a select group of employees of the Company and its
subsidiaries and affiliates with benefits to replace those lost under the Lilly
Employees' Pension Plan, the Lilly Industries, Inc. Employee 401(k) Savings
Plan, and the Lilly Industries, Inc. Defined Contribution Plan as a result of
the limitations of Sections 401(a)(17), 402(g), and 415 of the Internal Revenue
Code of 1986, as amended, and corresponding provisions of subsequent federal
income tax laws ("Code"). The Plan is incorporated herein and made a part hereof
by this reference the same as if fully set forth herein.
The Company wishes to establish a trust ("Trust") for the purpose of
satisfying the payment obligations of the Company and other Employers with
respect to Matching Contribution Accounts and Profit Sharing Contribution
Accounts of Participants under the Plan, and the Company and other Employers
wish to contribute assets to the Trust for such purpose. Assets contributed by
an Employer (including the Company) will be subject to the claims of the general
creditors of the Employer in the event of the insolvency or bankruptcy of the
Employer. Benefits payable under the Plan with respect to Matching Contribution
Accounts and Profit Sharing Contribution Account of a Participant shall be paid
from the Trust, or if the assets of the Trust
-1-
are not sufficient to pay such benefits, the Employer of the Participant shall
pay such benefits from its general assets. The interests or rights of
Participants or their beneficiaries in or to any of the funds, property, or
assets held by the Trust shall not be senior to the unsecured general creditors
of the Company or any Affiliated Employer.
Pension Replacement Benefits payable under the Plan with respect to a
Participant shall not be paid from the Trust, but instead shall be paid solely
out of the general assets of the Employer of the Participant.
The Company has selected the Trustee to serve as trustee of the Trust,
and the Trustee agrees to serve in that capacity, all on the terms and
conditions set forth herein.
The Company intends that the Trust shall constitute an unfunded
arrangement and shall not affect the status of the Plan as an unfunded benefit
plan within the meaning of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA").
AGREEMENT
NOW, THEREFORE, the Company and the Trustee hereby agree as follows:
Section 1. Establishment of Trust. The Company establishes the Trust
for the purpose of providing assets to satisfy the payment obligations of the
Company and other Employers with respect to Matching Contribution Accounts and
Profit Sharing Contribution Accounts of Participants under the Plan.
Section 2. Defined Terms. Except as otherwise expressly provided
herein, whenever the initial letter of a word or phrase is capitalized, and the
word or phrase is defined by Article II of the Plan, the word or phrase shall
have the meaning given to that term in Article II of the Plan.
-2-
Section 3. Rules of Construction. Except as otherwise expressly
provided herein, the rules of construction specified in the Plan shall apply
with respect to the Trust. The Trust is intended to be a grantor trust, of which
the Company is the grantor, within the meaning of Section 671 of the Code, and
it shall be construed accordingly.
Section 4. Trust Fund.
(a) The Trustee shall receive and accept for the purposes hereof all
property paid to it by or at the direction of the Company or other Employer from
time to time, and shall hold, invest, reinvest, manage, administer, and
distribute such property and the increments, proceeds, earnings, and income
thereof for the exclusive benefit of the Participants and their beneficiaries
under the Plan. All assets held by the Trustee in the Trust are referred to
herein as the "Trust Fund." The Trust Fund shall be held by the Trustee, in
trust, and dealt with in accordance with the provisions of this Trust Agreement.
The Trustee shall maintain accurate and detailed records regarding the receipt
and amount of property paid to it by or at the direction of the Company and each
other Employer.
(b) Except as may be provided in Sections 6(d), (6(e), and 7(a), at no
time shall any part of the Trust Fund be used for, or diverted to, purposes
other than for the exclusive benefit of Participants and their beneficiaries as
provided in the Plan or for defraying the reasonable expenses of administering
the Trust Fund. However, Participants and their beneficiaries shall not have any
preferred claim on, or any beneficial ownership interest in the Trust Fund, and
any rights created under the Plan and this Trust Agreement shall be unsecured
contractual rights of Participants and their beneficiaries.
-3-
Section 5. Investments by Trustee.
(a) The Trustee shall, if so directed in writing by the Committee,
segregate all or a portion of the Trust Fund held by it into one (1) or more
separate investment accounts, each separate account being hereinafter referred
to as an "Investment Fund." The Trustee shall be under no duty to question, and
shall not incur any liability on account of following, any such direction of the
Committee. The Trustee shall manage, acquire, or dispose of the assets in an
Investment Fund in accordance with the investment guidelines, objectives, and
restrictions established, or the specific investment directions given by the
Committee for that Investment Fund. Unless otherwise provided in specific
investment directions given by the Committee, it is the intent of the Committee
that the assets held in an Investment Fund shall be invested pursuant to the
written directions of the Participants in accordance with procedures established
by the Committee from time to time. Subject to the provisions of the Plan and
this Trust Agreement, all income received with respect to, and any proceeds
received from the disposition of, property held in an Investment Fund shall be
credited to, and reinvested in, that Investment Fund. Subject to the provisions
of the Plan, the Committee may direct the Trustee to transfer all or part of the
assets of one Investment Fund to another Investment Fund.
(b) The Trustee shall hold any portion of the Trust Fund not invested
pursuant to Subsection (a) in an Investment Fund to be known as the "General
Fund". Except as otherwise directed by the Committee in writing or provided
herein, the Trustee shall have the power and authority, in its discretion, to
manage, acquire, or dispose of the assets held in the General Fund and shall
invest and reinvest the assets of the General Fund without distinction between
principal and income in preferred or common stocks, including shares of
investment companies or mutual
-4-
funds, bonds, notes, debentures or mortgages, equipment trust certificates,
investment trust certificates, common trust funds, insurance contract or group
annuity contract, or other real or personal property investments or securities
of any kind, class, or character. The Trustee in its discretion may hold such
portion of the General Fund in cash or cash balances as the Trustee may from
time to time deem to be in the best interests of the Trust Fund.
Section 6. Disbursements from the Trust Fund.
(a) The Trustee shall make payments from the Trust Fund to
Participants, their beneficiaries, and such other persons as the Committee may
direct from time to time. Such payments shall be made in such manner, in such
amounts, and for such purposes, including the payment of Plan benefits and the
payment of expenses of administration of the Plan, as may be specified in the
directions of the Committee. The Committee shall ensure that any payment
directed under this Section conforms to the provisions of the Plan, this Trust
Agreement, and the provisions of any applicable law. Each direction of the
Committee shall be in writing and shall be deemed to include a certification
that any payment or other distribution directed thereby is one that the
Committee is authorized to direct, and the Trustee may rely conclusively on such
certification without further investigation. Payments by the Trustee shall be
made by its check (or the check of its agent) to the order of the payee.
Payments or other distributions hereunder may be mailed to the payee at the
address last furnished to the Trustee by the Committee or if no such address has
been so furnished, to the payee in care of the Committee. The Trustee shall not
incur any liability or other damage on account of any payments or other
distributions made by it in accordance with the written directions of the
Committee.
-5-
(b) A Participant who terminates employment with the Employer shall be entitled
to a distribution from the Trust Fund in an amount equal to the Matching
Contribution Account and Profit Sharing Contribution Account balances of the
Participant under the Plan as of the date of termination of employment of the
Participant. Unless otherwise directed by the Committee, such distribution shall
be made as a lump sum payment at the same time as the initial benefit payment of
the Participant under the Lilly Industries, Inc. 401(k) Savings Plan, as amended
from time to time. If a Participant dies prior to the date he or she begins to
receive distributions from the Trust Fund as provided in this Subsection, the
designated beneficiary of the Participant shall be entitled to a distribution
from the Trust Fund in an amount equal to the Matching Contribution Account and
Profit Sharing Contribution Account balances of the Participant under the Plan
as of the date of death of the Participant, payable as a lump sum payment as
soon as administratively practicable after the date of death of the Participant,
unless otherwise directed by the Committee. If a Participant dies after the date
he or she begins to receive distributions from the Trust Fund as provided in
this Subsection, the Trustee shall make such additional distributions from the
Trust Fund on behalf of the Participant as may be directed by the Committee.
(c) Each calendar year the Trustee shall set aside for each Participant
and each Participant shall be entitled to a distribution from the Trust Fund of
an amount equal to the investment earnings and realized gains with respect to
the Trust Fund for such calendar year that were credited to the Matching
Contribution Account and the Profit Sharing Contribution Account of the
Participant under the Plan for such calendar year. As soon as administratively
practicable, the Trustee shall distribute such amount to the Participant unless
the Participant directs the Trustee to transfer such amount to the Creditor
Exempt Group Annuity Contract or to his or her
-6-
Participant Trust. Payments made by the Trustee pursuant to this Subsection
shall be made by its check (or the check of its agent) to the order of the
Participant or the Creditor Exempt Group Annuity Contract or the Participant
Trust, as the case may be, and shall be mailed to the payee at the address
furnished by the Trustee by the Committee. The Trustee shall not incur any
liability or other damage on account of any such payment or transfer as so
directed by the Participant. Any amount set aside by the Trustee hereunder shall
not be subject to the general creditors of the Company and the Participant shall
have a security interest in such amounts until so paid or transferred.
(d) All expenses of the Trust that are allocable to a particular
Investment Fund shall be allocated and charged to that Fund. Expenses of the
Trust that are not allocable to a particular Investment Fund shall be charged
against any separate Investment Funds in proportion to their value relative to
the value of the entire Trust Fund.
(e) The Trustee shall pay from the Trust Fund all expenses of the Trust
and any real and personal property taxes, income taxes, and other taxes levied
or assessed under existing or future laws against the Trust Fund, unless the
Company or other Employer elects to pay such expenses or taxes.
(f) Upon termination of the Plan, after all Plan benefits have been
paid to Participants and their beneficiaries, the Trustee shall pay any
remaining assets of the Trust to the Company.
Section 7. Trustee Responsibility Regarding Payments if an Employer
Becomes Insolvent or Files for Bankruptcy.
(a) The portion of the Trust Fund attributable to contributions by an
Employer to the Trust Fund shall at all times be subject to the claims of the
Employer's general creditors in the
-7-
event the Employer becomes Insolvent (as defined in Subsection (c)). If an
Employer becomes Insolvent, and the Trustee is informed of that fact, the
Trustee shall transfer Trust assets to satisfy claims against the Employer as
directed by a court of competent jurisdiction. The Employer shall have the duty
to inform the Trustee within three business days, if the Employer becomes
Insolvent. If the Employer so notifies the Trustee, or a person claiming to be a
creditor of the Employer alleges in writing to the Trustee that the Employer has
become Insolvent, the Trustee shall independently determine, within thirty (30)
days after receipt of the notice, whether the allegation is correct. Pending
that determination, the Trustee shall discontinue payments to Participants and
their beneficiaries pursuant to the Plan which are attributable to contributions
by the Employer and shall hold such portion of the Trust Fund for the benefit of
the Employer's general creditors. The Trustee shall notify the Employer in
writing before any discontinuance of benefit payments pursuant to the preceding
sentence. The Trustee shall resume payments to such Participants and their
beneficiaries only after the Trustee has determined that the Employer is not
Insolvent or is no longer Insolvent. Except as otherwise expressly provided
herein, the Trustee shall have no duty to inquire as to whether an Employer is
Insolvent. Moreover, in determining whether an Employer is Insolvent, the
Trustee may rely conclusively on any evidence that gives it a reasonable basis
for making a determination concerning the Employer's solvency.
(b) If the Trustee discontinues payments from the Trust Fund pursuant
to Subsection (a) above and subsequently resumes such payments, the first
payment following the discontinuance shall include, to the extent available in
the Trust Fund, the aggregate amount of all payments that would have been made
to the Participants and their beneficiaries in accordance with the provisions
-8-
of the Plan during the period of discontinuance, less the aggregate amount of
payments made to Participants and their beneficiaries by the Employer in lieu of
the payments provided for hereunder during any period of discontinuance.
(c) An Employer shall be considered "Insolvent" for purposes of this
Trust Agreement if (i) the Employer is unable to pay its debts as they mature,
or (ii) the Employer is subject to a pending proceeding as a debtor under any
bankruptcy law.
(d) Nothing in this Trust Agreement shall in any way diminish any
rights of a Participant or a Participant's beneficiary to pursue his or her
rights as a general creditor of an Employer with respect to any payments due
under the Plan.
Section 8. Powers and Duties of Trustee. Except as otherwise expressly
provided herein, the Trustee shall discharge its duties under this Trust
Agreement solely in the interest of Participants and their beneficiaries with
the care, skill, prudence, and diligence under the circumstances then prevailing
that a prudent person acting in like capacity and familiar with such matters
would use in the conduct of an enterprise of like character and with like aims,
all in accordance with the provision of this Trust Agreement. Except to the
extent that the Committee provides otherwise, in administering the Trust Fund,
the Trustee shall have the power in its discretion:
(a) To exercise, or to refrain from exercising, all voting rights with
respect to any stocks, bonds, or other securities and to grant general or
special proxies or powers of attorney with or without power of substitution,
whether discretionary or otherwise, and to enter into any voting trust or
similar agreement;
-9-
(b) To register and hold any investment in the name of the Trustee, in
the name of one or more of its nominees or in the name of one or more nominees
of any system for the central handling of securities, with or without indication
of the capacity in which the investment is held, and to hold any investment in
bearer form, but the books and records of the Trustee shall at all times show
that such investments are part of the Trust Fund;
(c) To collect and receive any and all money and other property due to
the Trust Fund and to give full discharge therefor;
(d) To employ suitable agents and counsel, and to pay their reasonable
expenses and compensation from the Trust Fund;
(e) To provide ancillary services for no more than reasonable
compensation;
(f) To make, execute, acknowledge, and deliver any and all documents of
transfer and conveyance and any and all other instruments that may be necessary
or appropriate to carry out the powers herein granted;
(g) To invest the Trust Fund in deposits of the Trustee bearing a
reasonable rate of interest, including, but not limited to, savings accounts,
money market accounts, certificates of deposit and repurchase agreements;
(h) To withhold any tax that by any present or future law is required
to be withheld from any payment under the Plan and to issue required reports to
payees and governmental authorities;
(i) To pay the reasonable expenses of the Trust; and
(j) Generally, to do all acts, whether or not expressly authorized,
that the Trustee may deem necessary or desirable for the protection of the Trust
Fund.
-10-
Section 9. Compensation to Trustee. The Trustee shall be paid such
reasonable compensation as shall from time to time be agreed upon in writing by
the Company and the Trustee. Such compensation shall include all reasonable and
proper expenses of administration of the Trust, including reasonable fees for
legal services. Such compensation shall be paid by the Trustee out of the Trust
Fund, unless paid by the Company or other Employer.
Section 10. Records of Trust.
(a) The Trustee shall keep accurate and detailed accounts of all
investments, receipts, disbursements and other transactions hereunder, and all
accounts, books, and records relating thereto shall be open to inspection and
audit at all reasonable times by any person designated by the Company. Within
sixty (60) days following the close of each calendar year of the Trust
(hereinafter referred to as "Trust Year"), and within sixty (60) days after the
removal or resignation of the Trustee as provided in Section 12, the Trustee
shall file with the Company a written account setting forth all investments,
receipts, disbursements, and other transactions effected by it during the Trust
Year or during the period from the close of the last Trust Year to the date of
the removal or resignation.
(b) The Trustee shall determine the fair market value of the Trust Fund
and each Investment Fund as of the close of business on the last day of each
Plan quarter and as of each other date designated by the Committee by a method
uniformly applied. The Trustee shall determine the fair market value of the
Trust Fund and each Investment Fund based upon information and financial
publications of general circulation, statistical and valuation services, records
of security exchanges, appraisals by qualified persons, transactions and bona
fide offers
-11-
in assets of the type in question, and other information customarily used in the
valuation of property.
(c) The Trustee shall provide any additional information or reports as
reasonably requested by the Company from time to time.
Section 11. Limitation of Responsibilities of Trustee. The Trustee's
responsibilities and liabilities shall be subject to the following limitations:
(a) The Trustee shall have no duties other than those expressly set
forth in this Trust Agreement and those imposed on the Trustee by applicable
law.
(b) The Trustee shall not be responsible for the administration of the
Plan, for the correctness of any determination of payments or disbursements from
the Trust Fund, or for the adequacy of the Trust Fund to pay the benefits
arising under the provisions of the Plan. The Trustee is not a party to the Plan
and shall have no responsibility to monitor any provisions of the Plan.
(c) The Trustee shall not be under any duty to require payment of any
contributions to the Trust Fund or to see that any payment made to it is
computed in accordance with the terms of the Plan.
(d) The Trustee shall have no duty to make recommendations concerning
actions to be taken hereunder or to question the propriety of any action it is
directed to take hereunder with respect to matters falling within the
jurisdiction of the Company or the Committee, to the extent that the action is
consistent with this Trust Agreement and applicable law.
(e) The Trustee shall not be required to give any bond or other
obligation to secure the due performance of the Trust by it, unless required by
law.
-12-
(f) The Trustee shall have no liability for the acts or omissions of
any predecessors or successors in office.
Section 12. Resignation or Termination of Trustee. The Trustee may
resign at any time by giving sixty (60) days' prior written notice to the
Company, provided, however, that the Company may waive the sixty (60) day notice
requirement. The Trustee may be removed by the Company at any time upon giving
sixty (60) days' prior written notice to the Trustee, provided, however, that
the Trustee may waive the sixty (60) day notice requirement. Upon resignation or
removal of the Trustee or a successor trustee or trustees, the Committee shall
appoint a successor trustee or trustees. The successor trustee or trustees shall
have the same powers and duties as those conferred upon the Trustee hereunder,
and upon acceptance of the successor trustee's acceptance of his appointment,
the Trustee shall assign and transfer to the successor trustee or trustees the
funds and properties then constituting the Trust Fund. The Trustee is
authorized, however, to reserve such sums of money as it may deem advisable, for
payment of reasonable fees and expenses in connection with the settlement of its
account, and any balance of such reserve remaining after the payment of such
fees and expenses shall be paid transferred to the successor trustee or
trustees.
Section 13. Non-alienation. To the extent permitted by law, benefits or
rights under this Trust Agreement shall not be subject in any manner to
anticipation, alienation, sale, transfer or assignment, charge, pledge or
encumbrance of any kind, nor shall any such benefit or rights be liable for, or
subject to attachment, executions, garnishment, sequestration, or other legal,
equitable or other processes, nor shall the same be subject to the debts,
obligations, liabilities, or torts of the Participants or beneficiaries entitled
to any such benefits or rights under the Plan.
-13-
Section 14. Duty to Furnish Information. The Committee and the Trustee
shall furnish to each other any documents, reports, returns, statements, or
other information that the other reasonably deems necessary to perform duties
imposed under the Plan or this Trust Agreement or otherwise imposed by law.
Section 15. Reliance. Whenever any action is required to be taken by
the Company hereunder, it shall be taken by the Chief Executive Officer, Chief
Financial Officer, or Director of Corporate Accounting of the Company, or such
other officer as may be authorized from time to time by the Board of Directors
of the Company, in writing. Whenever any action is required to be taken by the
Board of Directors, it shall be taken by a duly adopted resolution. All orders,
requests, and instructions of the Committee or its delegate to the Trustee shall
be in writing, and the Trustee shall act and shall be fully protected in acting
in accordance with such orders, requests, and instructions.
Section 16. Foreign Assets. The Trustee shall not permit the indicia of
ownership of any of the assets of the Trust Fund to be maintained at a location
outside the jurisdiction of the district courts of the United States.
Section 17. Amendments. The Company may amend this Trust Agreement, in
whole or in part, from time to time by action of its Board of Directors and
notice thereof in writing delivered to the Trustee, provided that no such
amendment that affects the rights, duties, or responsibilities of the Trustee
shall be made without its written consent, and provided further that no
amendment shall authorize or permit, at any time before the satisfaction of all
liabilities with respect to the Participants or their beneficiaries, the Trust
Fund to be used for or diverted to purposes other than for the exclusive benefit
of such persons. In addition, no amendment shall
-14-
make this Trust Agreement revocable or terminate this Trust Agreement other than
as provided in Section 18.
Section 18. Termination of the Trust Agreement. This Trust Agreement
shall terminate automatically on the date that all payments have been paid to
the Participants and their beneficiaries as required by the Plan. On such
termination, any remaining assets of the Trust Fund shall paid to the Company.
Section 19. Governing Laws. This Trust Agreement shall be administered,
construed, and enforced according to the laws of the State of Indiana.
Section 20. Counterparts. This Trust Agreement may be executed in
several counterparts, each one of which shall be deemed to be an original.
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be executed as of the 27th day of September, 1996.
LILLY INDUSTRIES, INC.
By: /s/ Douglas W. Huemme
---------------------------------------
Douglas W. Huemme, Chairman, President
& CEO
ATTEST:
By: /s/ Kenneth L. Mills
--------------------------------
Title: Corporate Accounting Director
-15-
BANKERS TRUST COMPANY OF DES
MOINES
By: /s/ Niki Green
---------------------------------------
Title: Trust Officer
ATTEST:
By: /s/ Bryan H. Hall
-----------------------------------
Title: Vice President & Trust Officer