CINERGY CORP. NON-UNION
EMPLOYEES' 401(k) PLAN
(Effective as of January 1, 1998)
Exhibit 10-t
CONTENTS
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ARTICLE 1. THE PLAN 1
1.1 Establishment of Plan 1
1.2 Applicability of Plan 1
1.3 Purpose of the Plan 1
ARTICLE 2. DEFINITIONS 2
2.1 Definitions 2
2.2 Gender and Number 8
ARTICLE 3. PARTICIPATION 9
3.1 Participation 9
3.2 Duration of Participation 9
3.3 Leased Employees 9
ARTICLE 4. CONTRIBUTIONS 10
4.1 Deferred Compensation Contributions 10
4.2 Employee After-Tax Contributions 10
4.3 Matching Contributions 11
4.4 Limitations on Contributions 12
4.5 Contributions Not Contingent on Profits 16
4.6 Limitations on Annual Account Additions 16
4.7 Rollover Contributions 18
4.8 Contributions During Period of Military Leave 18
ARTICLE 5. VESTING IN ACCOUNTS 20
5.1 All Accounts 20
ARTICLE 6. DISTRIBUTIONS AND WITHDRAWALS 21
6.1 Distribution Upon Retirement, Death, Disability, or Other Termination
of Employment 21
6.2 Commencement of Distributions 21
6.3 Method of Distribution 22
6.4 Hardship Withdrawals 23
6.5 Loans 25
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6.6 Other Withdrawals Prior to Termination of Employment 27
6.7 Withholding Taxes 27
ARTICLE 7. INVESTMENT ELECTIONS 28
7.1 After-Tax, Deferred Compensation, Employer Match, ESOP Transfer,
and Rollover Contribution Accounts 28
7.2 Matching Contributions Account 28
7.3 Voting and Other Rights with Respect to Cinergy Stock 28
ARTICLE 8. ACCOUNTS AND RECORDS OF THE PLAN 30
8.1 Accounts and Records 30
8.2 Trust Fund 30
8.3 Valuation and Allocation of Expenses 30
8.4 Allocation of Earnings and Losses 30
ARTICLE 9. FINANCING 31
9.1 Financing 31
9.2 Contributions 31
9.3 Nonreversion 31
9.4 Rights in the Trust Fund 31
ARTICLE 10. ADMINISTRATION 32
10.1 Plan Administrator and Fiduciary 32
10.2 Removal and Replacement of Benefits Committee Members 32
10.3 Compensation and Expenses 32
10.4 Delegation of Duties and Employment of Specialists 32
10.5 Administration 32
10.6 No Enlargement of Employee Rights 33
10.7 Appeals from Denial of Claims 33
10.8 Notice of Address and Missing Persons 34
10.9 Data and Information for Benefits 34
10.10 Indemnity for Liability 35
10.11 Effect of a Mistake 35
ARTICLE 11. AMENDMENT AND TERMINATION 36
11.1 Amendment and Termination 36
11.2 Limitations on Amendments 36
11.3 Effect of Bankruptcy and Other Contingencies Affecting an Employer 37
11.4 Amendment of Vesting Schedule 37
ARTICLE 12. TOP-HEAVY PROVISIONS 38
12.1 Application of Top-Heavy Provisions 38
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12.2 Definitions 38
12.3 Minimum Contribution 39
12.4 Limit on Annual Additions: Combined Plan Limit 40
12.5 Collective Bargaining Agreements 41
ARTICLE 13. PARTICIPATION IN AND WITHDRAWAL FROM THE PLAN
BY AN EMPLOYER 42
13.1 Adoption of the Plan 42
13.2 Withdrawal from Participation 42
13.3 Company as Agent for Employers 42
ARTICLE 14. MISCELLANEOUS 43
14.1 Beneficiary Designation 43
14.2 Facility of Payment 43
14.3 Nonalienation 44
14.4 Applicable Law 44
14.5 Severability 44
14.6 No Guarantee 44
14.7 Merger, Consolidation, or Transfer 45
14.8 Internal Revenue Service Approval 45
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ARTICLE 1. THE PLAN
1.1 ESTABLISHMENT OF PLAN
As of January 1, 1998, Cinergy Corp. (the "Company") has established the
Cinergy Corp. Non-Union Employees' 401(k) Plan (the "Plan") for the benefit
of its eligible non-union employees. The Plan is a new plan resulting from
the January 1, 1998 merger of the PSI Energy, Inc. Employees' 401(k) Savings
Plan and The Cincinnati Gas & Electric Company Deferred Compensation and
Investment Plan.
The PSI Energy, Inc. Employees' 401(k) Savings Plan was originally adopted
effective October 1, 1988 by Public Service Company of Indiana, Inc., as a
successor plan to an Employee's 401(k) Plan adopted as of January 1, 1987.
The Cincinnati Gas & Electric Company instituted the Employee Incentive
Thrift Plan in 1967. Effective as of October 1, 1983, the plan was amended
and renamed The Cincinnati Gas & Electric Company Deferred Compensation and
Investment Plan.
1.2 APPLICABILITY OF PLAN
The provisions of this Plan as set forth in this document are applicable only
to the Employees in current employment on or after January 1, 1998, except as
otherwise specifically provided. Except as so provided, any person who was
entitled to benefits under the Plan or a predecessor plan as in effect on
December 31, 1997, shall continue to be entitled to the same benefits under
this Plan.
1.3 PURPOSE OF THE PLAN
The purpose of the Plan is to provide a convenient way for Participants to
save on a regular and long-term basis for retirement and to enable
Participants to share in the profitable operations of the Company.
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ARTICLE 2. DEFINITIONS
2.1 DEFINITIONS
Whenever used in the Plan, the following terms, when capitalized, will have
the respective meanings set forth below, unless otherwise expressly provided
in this document.
(a) "ACCOUNT" means the separate account maintained for each Member, which
represents the Member's total proportionate interest in the Trust Fund as
of any Valuation Date and which consists of the sum of the following
subaccounts:
(1) "AFTER-TAX CONTRIBUTIONS ACCOUNT" means that portion of a Member's
Account that evidences the value of the Member's Employee After-Tax
Contributions made pursuant to section 4.2 (Employee After-Tax
Contributions), including any gains and losses of the Trust Fund
attributable thereto;
(2) "DEFERRED COMPENSATION CONTRIBUTIONS ACCOUNT" means that portion of a
Member's Account that evidences the value of the Deferred Compensation
Contributions made on the Member's behalf by an Employer pursuant to
section 4.1 (Deferred Compensation Contributions), including any gains
and losses of the Trust Fund attributable thereto;
(3) "EMPLOYER MATCH ACCOUNT" means that portion of a Member's Account that
evidences the value of the matching contributions made to the PSI
Energy, Inc. Employees' 401(k) Savings Plan before January 1, 1992,
including any gains and losses of the Trust Fund attributable thereto;
(4) "ESOP TRANSFER ACCOUNT" means that portion of a Member's Account that
evidences the value of the Member's account balance attributable to
amounts that the Member elected to have transferred from the Public
Service Company of Indiana, Inc. Employee Stock Ownership Plan to the
PSI Energy, Inc. Employees' 401(k) Savings Plan, including any gains
or losses of the Trust attributable thereto;
(5) "MATCHING CONTRIBUTIONS ACCOUNT" means that portion of a Member's
Account that evidences the value of the Employer Matching
Contributions made on the Member's behalf by an Employer pursuant to
section 4.3 (Matching Contributions), including any gains and losses
of the Trust Fund attributable thereto; and
(6) "ROLLOVER CONTRIBUTIONS ACCOUNT" means that portion of a Member's
Account that evidences the value of any Rollover Contributions made by
the Member pursuant to section 4.7 (Rollover Contributions), including
any gains and losses of the Trust Fund attributable thereto.
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(b) "AFFILIATE" means any employer that together with the Employer is under
common control or a member of an affiliated service group as determined
under Code subsections 414(b), (c), (m), and (o). In determining whether
an employer is a member of a controlled group for purposes of section 4.6
(Limitation on Annual Account Additions), the rules of Code subsections
414(b) and (c) shall be applied as modified by Code subsection 415(h).
(c) "BENEFICIARY" means the person or persons who are to receive benefits
under the Plan after a Member's death.
(d) "BENEFITS COMMITTEE" means the Committee established pursuant to Article
10 (Administrator) to serve as Plan Administrator.
(e) "BOARD" means the Board of Directors of the Company.
(f) "CHANGE IN CONTROL" means any of the following events have occurred:
(1) any "person" or "group" (within the meaning of subsection 13(d) and
paragraph 14(d)(2) of the Securities Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act), directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by such person or
group any securities acquired directly from the Company or an
Affiliate) representing 50 percent or more of the combined voting
power of the Company's then outstanding securities, excluding any
person or group who becomes such a beneficial owner in connection with
a transaction described in subsection (2)(A) below;
(2) there is consummated a merger or consolidation of the Company or any
direct or indirect subsidiary of the Company with any other
corporation, other than--
(A) a merger or consolidation that would result in the voting
securities of the Company outstanding immediately prior to the
merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof) at
least 50 percent of the combined voting power of the securities
of the Company or such surviving entity or any parent thereof
outstanding immediately after the merger or consolidation; or
(B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which
no person is or becomes a beneficial owner, directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such person any securities
acquired directly from the Company or its Affiliates other than
in connection with the acquisition by the Company or its
Affiliates of a
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business) representing 25 percent or more of the
combined voting power of the Company's then outstanding
securities;
(3) during any period of two consecutive years, individuals who at the
beginning of that period constitute the Board of Directors and any new
director (other than a director whose initial assumption of office is
in connection with an actual or threatened election context, including
but not limited to a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by the Board
of Directors or nomination for election by the Company's shareholders
was approved or recommended by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of that period or whose appointment, election, or nomination
for election was previously so approved or recommended cease for any
reason to constitute a majority of the Board of Directors; or
(4) the shareholders of the Company approve a plan of complete liquidation
or dissolution of the Company or there is consummated an agreement for
the sale or disposition by the Company of all or substantially all of
the Company assets, other than a sale or disposition by the Company of
all or substantially all of the Company's assets to an entity, at
least 60 percent of the combined voting power of the voting securities
of which are owned by shareholders of the Company in substantially the
same proportions as their ownership of the Company immediately prior
to such sale.
(g) "CINERGY STOCK" means Cinergy Corp. common stock.
(h) "CINERGY STOCK FUND" means the Investment Fund invested primarily in
Cinergy Stock.
(i) "CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and interpretive rulings and regulations.
(j) "COMPANY" means Cinergy Corp., a Delaware corporation, and any corporation
that succeeds to its business and adopts the Plan.
(k) "COMPENSATION" means--
(1) for purposes of sections 4.1 (Deferred Compensation Contributions) and
4.2 (Employee After-Tax Contributions), the sum of the Employee's--
(A) base compensation;
(B) overtime pay;
(C) performance lump sum pay; and
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(D) standard and variable bonuses under the Cinergy Corp. Non-Union
Employees' Incentive Plan, the Cinergy Corp. Union Employees'
Incentive Plan;
(2) for purposes of section 4.3 (Matching Contributions), the Employee's
base compensation; and
(3) for purposes of section 4.4 (Limitations on Contributions),
"compensation" as defined in Code subsection 414(s); and
(4) for purposes of sections 2.1(v) (Definitions) and 4.6 (Limitations on
Annual Account Additions), "compensation" as defined in Code paragraph
415(c)(3).
For purposes of this section--
(i) "BASE COMPENSATION" means the Employee's base rate of pay,
exclusive of any allowances, premiums, bonuses, overtime pay,
or other forms or types of compensation, for the applicable
period. For Employees paid on an hourly basis, the "base rate
of pay" means the Employee's hourly base rate of pay multiplied
by the Employee's hours worked during the applicable period.
"Base compensation" shall be determined prior to any reductions
for Deferred Compensation Contributions and other elective
contributions made by the Employer on the Employee's behalf
during or for the Plan Year that are not includable in gross
income under Code section 125, Code paragraph 402(a)(8), Code
subsection 402(h), or Code subsection 403(b).
(ii) "OVERTIME PAY" means, for Employees paid on an hourly basis, the pay
received in excess of the Employee's regular hourly base rate of pay
as remuneration for hours worked in a work day or a work week in
excess of eight hours or 40 hours, respectively, for the relevant
period. For Employees customarily paid on a salaried basis,
"overtime pay" means the pay received in excess of the Employee's
regular base rate of pay as remuneration for hours worked in a work
day or a work week in excess of the Employee's regularly scheduled
hours pursuant to the Employer's overtime pay policy applicable to
those Employees.
(iii) "PERFORMANCE LUMP SUM PAY" means the compensation received as a
one-time payment in recognition of an Employee's merit in lieu of
receiving an increase in the Employee's base rate of pay.
The Compensation of each Employee that may be taken into account under the
Plan for a Plan Year will not exceed $160,000 (as adjusted by the
Secretary of the Treasury pursuant to Code paragraph 401(a)(17)).
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(l) "DEFERRED COMPENSATION CONTRIBUTIONS" means the contributions made by an
Employer on behalf of a Participant pursuant to the Participant's election
to reduce Compensation as described in section 4.1 (Deferred Compensation
Contributions).
(m) "DISABILITY" means a physical or mental condition, resulting from injury
or disease, that in the judgment of the Plan Administrator constitutes
total disability under the Company's long-term disability plan.
(n) "EFFECTIVE DATE" means January 1, 1998.
(o) "ELIGIBLE EMPLOYEE" means an Employee employed by the Employer who has
attained age 18, and who is not a "leased employee" (as defined in section
3.6 (Leased Employee)), who is not classified by the Employer as a summer
laborer or a summer employee, and whose terms and conditions of employment
are not governed by a collective bargaining agreement that provides for
participation in this Plan.
(p) "EMPLOYEE" means any person who is employed by the Company or an Affiliate
and who receives compensation from the Company or an Affiliate that is
initially reported by the Company or the Affiliate on a federal wage and
tax statement (Form W-2).
(q) "EMPLOYEE AFTER-TAX CONTRIBUTIONS" means the contributions made by an
Employee pursuant to an election as described in section 4.2 (Employee
After-Tax Contributions).
(r) "EMPLOYER" means the Company and any Affiliate that elects to become a
party to the Plan, with the approval of the Company, by adopting the Plan
for the benefit of its Eligible Employees in the manner described in
Article 13 (Participation In and Withdrawal From the Plan by an Employer).
(s) "EMPLOYER MATCHING CONTRIBUTIONS" means the contributions made by an
Employer on behalf of a Participant, conditioned on the making of Deferred
Compensation Contributions, as described in section 4.3 (Matching
Contributions), and shall consist of--
(1) EMPLOYER BASE MATCHING CONTRIBUTIONS, as described in subsection
4.3(a) (Matching Contributions); and
(2) EMPLOYER INCENTIVE MATCHING CONTRIBUTIONS, as described in subsection
4.3(b) (Matching Contributions).
(t) "EMPLOYMENT COMMENCEMENT DATE" means the first day on which an Employee
first performs an hour of service (as defined in Department of Labor
regulation 2530.200b-2) as an Eligible Employee or, if applicable, the
first day following a
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severance from service on which an Employee performs an hour of service
as an Eligible Employee.
(u) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and interpretive rulings and regulations.
(v) "HIGHLY COMPENSATED EMPLOYEE" means, with respect to any Plan Year, any
Employee who is a 5-percent owner (as defined in Code paragraph 416(i)(1))
during the Plan Year, or during the preceding Plan Year (or such other
period as the Company may elect pursuant to Treasury regulations)--
(1) received Compensation from the Employer and all Affiliates in excess
of $80,000 (as adjusted pursuant to Code subsection 415(d)); or
(2) was a 5-percent owner (as defined in Code paragraph 416(i)(1)).
(w) "INVESTMENT FUND" means any investment fund established by the Plan
Administrator as an investment medium for Members' Accounts in the Trust
Fund. The Investment Funds will include the Cinergy Stock Fund. The Plan
Administrator has the discretion to establish and terminate such Funds as
it shall deem appropriate.
(x) "MEMBER" means a Participant, or a former Participant or alternate payee
who still has an Account balance in the Plan.
(y) "PARTICIPANT" means any Employee of an Employer who has met and continues
to meet the eligibility requirements of the Plan as set forth in section
3.1 (Participation).
(z) "PLAN" means the Cinergy Corp. Non-Union Employees' 401(k) Plan, as set
forth in this document and as subsequently amended from time to time.
(aa) "PLAN ADMINISTRATOR" means the entity that has been designated as the
"plan administrator" pursuant to section 10.1 (Plan Administrator and
Fiduciary).
(bb) "PLAN YEAR" means the 12-consecutive-month period ending each December 31.
(cc) "RETIRE" means to terminate employment with the Employer and all
Affiliates--
(1) after reaching age 65; or
(2) after reaching age 50 and completing five Years of Service.
(dd) "ROLLOVER CONTRIBUTION" means those contributions made by a Participant as
described in section 4.7 (Rollover Contributions).
(ee) "SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, and interpretive rulings and regulations.
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(ff) "TRUST AGREEMENT" means any agreement establishing a trust, which forms
part of the Plan, to receive, hold, invest, and dispose of the Trust Fund.
(gg) "TRUST FUND" means the assets of every kind and description held under the
Trust Agreement.
(hh) "TRUSTEE" means the corporation, or individual or individuals, or
combination thereof, acting as trustee under the Trust Agreement at any
time of reference.
(ii) "VALUATION DATE" means each business day.
(jj) "YEAR OF SERVICE" means a year of "service," as defined in section 1.94 of
the Cinergy Corp. Non-Union Employees' Pension Plan.
2.2 GENDER AND NUMBER
Unless the context clearly requires otherwise, the masculine pronoun whenever
used will be construed to include the feminine and neuter pronoun, and the
singular will be construed to include the plural.
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ARTICLE 3. PARTICIPATION
3.1 PARTICIPATION
Each Eligible Employee as of the Effective Date who was a Participant in the
PSI Energy, Inc. Employees' 401(k) Savings Plan or The Cincinnati Gas &
Electric Company Deferred Compensation & Investment Plan as of December 31,
1997 will become a Participant on the Effective Date.
Each other Eligible Employee may commence participation in the Plan as of the
later of the Effective Date or the Eligible Employee's Employment
Commencement Date, by electing to make Employee After-Tax or Deferred
Compensation Contributions, or by making a Rollover Contribution, pursuant to
Article 4 (Contributions).
3.2 DURATION OF PARTICIPATION
A Participant shall continue to be a Participant until the Participant
terminates employment with all Employers and Affiliates; thereafter, the
Participant will be a Member for as long as the Participant has an Account
balance in the Plan.
3.3 LEASED EMPLOYEES
A person who is not an Employee of an Employer or nonparticipating Affiliate
and who performs services for an Employer or a nonparticipating Affiliate
pursuant to an agreement between the Employer or nonparticipating Affiliate
and a leasing organization will be considered a "leased employee" if the
person performed the services on a substantially full-time basis for a year
and the services are performed under the primary direction and control of the
Employer or nonparticipating Affiliate. A person who is considered a "leased
employee" of an Employer or nonparticipating Affiliate will not be considered
an Employee for purposes of participating in this Plan or receiving any
contribution or benefit under this Plan. A leased employee will be excluded
from this Plan regardless of whether the leased employee participates in any
plan maintained by the leasing organization. However, if a leased employee
participates in the Plan as a result of subsequent employment with an
Employer, the leased employee will receive credit for service for his
employment as a leased employee. Notwithstanding the preceding provisions of
this section, a leased employee will be treated as an Employee for purposes
of applying the requirements described in Code paragraph 414(n)(3) and for
purposes of determining the number and identity of Highly Compensated
Employees.
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ARTICLE 4. CONTRIBUTIONS
4.1 DEFERRED COMPENSATION CONTRIBUTIONS
Each Participant may elect, in accordance with rules established by the Plan
Administrator, to reduce the Participant's Compensation by any percentage up to
15 percent, in increments of one-half percent, and to have the amount by which
the Participant's Compensation is reduced contributed on the Participant's
behalf by the Employer as a Deferred Compensation Contribution to the Plan. The
election will be effective as soon as administratively possible after the date
the Employee becomes eligible to participate and notifies the Plan Administrator
of the deferral percentage.
A Participant may elect, in accordance with rules established by the Plan
Administrator, to increase, decrease, or discontinue the Participant's
Compensation reductions. Such an election will be effective as soon as
administratively possible after receipt of the election by the Plan
Administrator and will be effective only with respect to Compensation not yet
earned as of the effective date of the election.
The Plan Administrator may adopt rules concerning the administration of this
section. The Deferred Compensation Contributions made on behalf of each
Participant shall be paid by each Employer to the Trustee and allocated to the
Participant's Deferred Compensation Contributions Account as soon as practical
after the end of the pay period to which the Deferred Compensation Contributions
relate, but in no case later than the fifteenth business day of the month
following the month in which those amounts would otherwise have been payable to
the Participant.
4.2 EMPLOYEE AFTER-TAX CONTRIBUTIONS
Each Participant may elect, in accordance with rules established by the Plan
Administrator, to have Employee After-Tax Contributions made to the Plan in an
amount equal to any percentage of the Participant's Compensation up to 15
percent in increments of one-half percent. The election will be effective as
soon as administratively possible after the Eligible Employee becomes eligible
to participate and notifies the Plan Administrator of the contribution
percentage.
A Participant may elect, in accordance with rules established by the Plan
Administrator, to increase, decrease, or discontinue the Participant's Employee
After-Tax Contributions. The election will be effective as soon as
administratively possible after receipt of the election by the Plan
Administrator and will be effective only with respect to Compensation not yet
earned as of the effective date of the election.
Once during each Plan Year, a Participant may elect to make an Employee
After-Tax Contribution in the form of a lump sum payment by check or money
order payable to the Trustee and delivered to the Plan Administrator.
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The sum of the Deferred Compensation Contributions and Employee After-Tax
Contributions made by or on behalf of an Employee for a Plan Year may not exceed
15 percent of the Employee's Compensation for that Plan Year.
The Plan Administrator may adopt rules concerning the administration of this
section. The Employee After-Tax Contributions made by each Participant shall
be paid by each Employer to the Trustee and allocated to the Participant's
After-Tax Contributions Account as soon as practical after the end of the pay
period, but in no case later than the fifteenth business day of the month
following the month in which those amounts would otherwise have been payable
to the Participant.
4.3 MATCHING CONTRIBUTIONS
(a) BASE MATCHING CONTRIBUTIONS. For each pay period, each Employer shall make
an Employer Base Matching Contribution on behalf of each Participant
equal to 60 percent of the Deferred Compensation Contributions not in
excess of 5 percent of the Participant's Compensation made on the
Participant's behalf for the pay period.
The Employer Base Matching Contributions made on behalf of each
Participant shall be paid by each Employer to the Trustee as soon as
practical after the end of the pay period for which it is made and
allocated to the Participant's Matching Contributions Account as of the
end of the pay period.
If a Participant's Deferred Compensation Contributions stop before the end
of a Plan Year because they reach the limitation in Code subsection
402(g), then his Employer will make a catch-up Base Employer Matching
Contribution. The catch-up Employer Base Matching Contribution will be
equal to the difference, if any, between--
(1) 60 percent of the Participant's total Deferred Compensation
Contributions for the Plan Year that are not in excess of 5 percent of
the Participant's Compensation for the Plan Year; and
(2) the Employer Base Matching Contributions previously made for the
Participant for the Plan Year.
(b) INCENTIVE MATCHING CONTRIBUTIONS. In addition to the Employer Base
Matching Contribution under (a), for each Plan Year each Employer may make
an Employer Incentive Matching Contribution on behalf of each Participant
employed on the last day of the Plan Year equal to a percentage of the
Deferred Compensation Contributions not in excess of 5 percent of the
Participant's Compensation made on the Participant's behalf for the Plan
Year. Such percentage shall be determined based on attainment of corporate
goals established by the Board in its discretion. The maximum percentage
for a Plan Year will not exceed 40 percent and will be communicated to
Participants prior to the beginning of the Plan Year. For purposes of this
subsection (b), a Participant who does not make any Deferred Compensation
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Contributions for a Plan Year will be deemed to have made Deferred
Compensation Contributions equal to 1 percent of the Participant's
Compensation for the Plan Year.
The Employer Incentive Matching Contributions made on behalf of each
Participant will be paid by each Employer to the Trustee as soon as
practical following the end of the Plan Year and will be allocated to the
Participant's Matching Contributions Account as soon as administratively
possible after determining if the corporate goals were achieved and what
percentage will be contributed.
(c) CONTRIBUTIONS OF CINERGY STOCK. Employer Matching Contributions may be
made in cash or in shares of Cinergy Stock. Contributions in shares of
Cinergy Stock will be determined by dividing the amount of the Employer
Matching Contribution determined under (a) or (b) by the closing price of
Cinergy Stock on the New York Stock Exchange for the date the Employer
Matching Contributions are made to the Trust.
4.4 LIMITATIONS ON CONTRIBUTIONS
(a) In no event shall any Employer make Deferred Compensation Contributions
for any calendar year, with respect to any Participant, in excess of
$10,000 (as adjusted by the Secretary of the Treasury to reflect increases
in the cost of living). This limit will be applied by aggregating all
plans and arrangements maintained by the Company and all Affiliates that
provide for elective deferrals (as defined in Code subsection 402(g)).
If this limit would be exceeded by contributions to this Plan, the Plan
Administrator shall distribute the amount of the excess (plus earnings
thereon) to the Member. If this limit would be exceeded by the
contribution of excess elective deferrals to this Plan and to the plan of
another employer, the Plan Administrator will distribute the amount of the
excess (plus earnings thereon) to the Member if the Member provides the
Plan Administrator with a written claim requesting a refund of the excess
on or before March 1 of the following calendar year. Excess elective
deferrals means elective deferrals (under Code paragraph 402(a)(8)) in
excess of the annual limit on elective deferrals in Code subsection
402(g). The Plan Administrator may require additional proof regarding the
existence of excess elective deferrals.
A distribution of excess elective deferrals, adjusted for earnings and
losses, will be made no later than the April 15 of the calendar year
following the calendar year in which the excess elective deferrals were
made.
(b) In no event will any Employer make Deferred Compensation Contributions for
any Plan Year that would cause the actual deferral percentage of the group
of Highly Compensated Employees eligible to participate in the Plan to
exceed the greater of--
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(1) one and one-quarter times the actual deferral percentage of the group
of all other eligible Employees for the preceding Plan Year; or
(2) the lesser of--
(A) two times the actual deferral percentage of the group of all
other eligible Employees for the preceding Plan Year; or
(B) the actual deferral percentage of the group of all other eligible
Employees for the preceding Plan Year plus two percentage points.
The actual deferral percentage of each group of eligible Employees for any
Plan Year will be the average of the ratios (calculated separately for
each eligible Employee in each group) of--
(i) the Deferred Compensation Contributions made on behalf of each
eligible Employee for the Plan Year to
(ii) the eligible Employee's Compensation (earned while the Employee was
eligible to participate in the Plan) for the Plan Year.
To the extent necessary to conform to this limitation, the Plan
Administrator shall reduce Deferred Compensation Contributions made on
behalf of the Highly Compensated Employees. The total amount of the
reduction will be determined by reducing the deferral ratio of the Highly
Compensated Employee with the highest deferral ratio to the higher of the
deferral ratio necessary to satisfy the limitation or the deferral ratio
of the Highly Compensated Employee with the next highest deferral ratio.
This process will be repeated until the limitation is satisfied. The
reduction so calculated will be allocated to some or all Highly
Compensated Employees by reducing the Deferred Compensation Contributions
of the Highly Compensated Employee with the highest dollar amount of
Deferred Compensation Contributions by the lesser of the total amount of
the required reduction or the amount required to cause that Participant's
Deferred Compensation Contributions to equal those of the Highly
Compensated Employee with the next highest dollar amount of Deferred
Compensation Contributions. This process will be repeated until the entire
amount of the reduction has been allocated.
Any reduction in the Deferred Compensation Contributions allocated to any
Participant will be refunded to the Participant as soon as
administratively possible, as provided in rules adopted by the Plan
Administrator (amounts refunded within 2 1/2 months after the Plan Year in
which the Deferred Compensation Contributions were made are not subject to
excise tax under Code section 4979). In no event, however, will the excess
contributions be left undistributed any later than the last day of the
Plan Year following the Plan Year in which the excess contributions were
made.
13
Deferred Compensation Contributions made under this Plan and all
before-tax contributions made under any other plan that is aggregated
with this Plan for purposes of Code paragraph 401(a)(4) and Code
subsection 410(b) will be treated as made under a single plan. The
deferral ratio of any Highly Compensated Employee will be determined by
treating all plans subject to Code subsection 401(k) under which the
Highly Compensated Employee is eligible as a single plan.
(c) In no event will Employee After-Tax Contributions and Employer Matching
Contributions for any Plan Year be made that would cause the contribution
percentage of the group of Highly Compensated Employees eligible to
participate in the Plan to exceed the greater of--
(1) one and one-quarter times the contribution percentage of the group of
all other eligible Employees for the preceding Plan Year; or
(2) the lesser of--
(A) two times the contribution percentage of the group of all other
eligible Employees for the preceding Plan Year; or
(B) the contribution percentage of the group of all other eligible
Employees for the preceding Plan Year plus two percentage points.
The contribution percentage of each group of eligible Employees for any
Plan Year will be the average of the ratios (calculated separately for
each eligible Employee in each group) of--
(i) the sum of the Employee After-Tax Contributions and the Employer
Matching Contributions made on behalf of each eligible Employee for
the Plan Year to
(ii) the eligible Employee's Compensation (earned while the Employee was
eligible to participate in the Plan) for the Plan Year.
To the extent necessary to conform to this limitation, the Plan
Administrator will reduce and allocate Employee After-Tax Contributions
and Employer Matching Contributions made on behalf of the Highly
Compensated Employees in a manner similar to the method used in subsection
(b). Any such reduction in Employee After-Tax Contributions and the
Employer Matching Contributions allocated to any Participant will be paid
to the Participant, within the time limits for refunds of Deferred
Compensation Contributions set forth in subsection 4.4(b) (Limitations on
Contributions).
All Employee After-Tax and Employer Matching Contributions made under this
Plan and all after-tax contributions made under any other plan that is
aggregated with this Plan for purposes of Code paragraph 401(a)(4)and Code
subsection 410(b) will be
14
treated as made under a single plan. If any plan is permissively
aggregated with this Plan for purposes of Code subsection 401(m), the
aggregated plans must also satisfy Code paragraph 401(a)(4) and Code
subsection 410(b) as though they were a single plan. The contribution
percentage ratio of any Highly Compensated Employee will be determined
by treating all plans subject to Code section 401(m) under which the
Highly Compensated Employee is eligible as a single plan.
(d) For purposes of satisfying the limits on contributions described in this
section 4.4 (Limitations on Contributions) and section 4.6 (Limitations on
Annual Account Additions), Compensation means an Employee's compensation
as defined in Code subsection 414(s). The Compensation of each Employee
that may be taken into account under the Plan will not exceed the first
$160,000 of an Employee's Compensation (as adjusted by the Secretary of
the Treasury under Code paragraph 401(a)(17)).
(e) The Plan Administrator may comply with the requirements of this section by
combining contributions under any other defined contribution plan
maintained by the Company or any Affiliate. Any such combination will be
done in compliance with the guidelines, if any, established by the
Secretary of the Treasury. To the extent permitted by applicable
regulations, the Plan Administrator may elect to take Deferred
Compensation Contributions into account in applying the contribution
percentage test of subsection (c).
(f) The Plan Administrator may take such additional action as it considers
appropriate to ensure compliance with the requirements of this section.
Such action may include, but is not limited to, reducing the maximum
amount of Deferred Compensation Contributions and/or Employee After-Tax
Contributions that can be contributed on behalf of or by any group of
Highly Compensated Employees.
(g) The Plan will not be treated as complying with the limits in this section
4.4 (Limitations on Contributions) if--
(1) the actual deferral percentage of the group of participants who are
Highly Compensated Employees only complies with the limits in
paragraph 4.4(b)(2) (Limitations on Contributions);
(2) the contribution percentage of the group of participants who are
Highly Compensated Employees only complies with the limit in
subsection (c)(2) above; and
(3) the sum of the actual deferral percentage and contribution percentage
of the group of Participants who are Highly Compensated Employees
exceed the "Aggregate Limit."
(h) For purposes of subsection (g) above, the "Aggregate Limit" means the sum
of--
15
(1) one and one-quarter times the greater of the actual deferral
percentage or contribution percentage of the group of all other
Participants for the preceding Plan Year; and
(2) the lesser of--
(A) two times the lesser of the actual deferral percentage or
contribution percentage of the group of all other Participants
for the preceding Plan Year; or
(B) the sum of two percentage points and the lesser of the actual
deferral percentage or contribution percentage of the group of
all other Participants for the preceding Plan Year.
(i) For purposes of the limitations described in subsections (b) and (c), the
Plan Administrator may elect to use the deferral ratio and/or contribution
ratio for the group of Participants other than Highly Compensated
Employees for the Plan Year being tested, rather than the preceding Plan
Year, provided that once such an election is made it may not be changed,
except as provided by the Secretary of the Treasury.
4.5 CONTRIBUTIONS NOT CONTINGENT ON PROFITS
This Plan is designated as a profit sharing plan under Code subsection 401(a).
However, payment by an Employer of contributions to the Plan will not be
contingent upon the existence of current or accumulated profits of the Employer.
4.6 LIMITATIONS ON ANNUAL ACCOUNT ADDITIONS
(a) ANNUAL ACCOUNT ADDITION. "Annual Account Addition" means for any
Participant for any Plan Year, which will also be the limitation year, the
sum of--
(1) Employer contributions made for the Participant under any qualified
defined contribution plan for the Plan Year (including any amounts
refunded to the Participant or forfeited pursuant to section 4.4
(Limitations on Contributions));
(2) the Participant's contributions to any qualified defined contribution
plan for the Plan Year;
(3) forfeitures allocated to the Participant under any defined
contribution plan for the Plan Year; and
(4) contributions allocated on the Participant's behalf to any individual
medical account within the meaning of Code paragraph 415(l)(2) or
attributable to medical benefits allocated to an account established
under Code subsection 419A(d).
16
"Any defined contribution plan" means all defined contribution plans of
the Company and Affiliates considered as one plan.
A Rollover Contribution pursuant to section 4.7 (Rollover Contributions)
will not be included as part of any Participant's Annual Account Addition.
(b) LIMITATION. A Participant's Annual Account Addition for any Plan Year will
not exceed the lesser of--
(1) the greater of $30,000, or one-fourth of the defined benefit dollar
limitation set forth in Code subsection 415(b) in effect for the Plan
Year; or
(2) 25 percent of the Participant's Compensation for the Plan Year.
(c) ADDITIONAL LIMITATION. If in any Plan Year beginning prior to January 1,
2000, a Participant is covered both under any defined contribution plan
and under any defined benefit plan, the sum of the defined benefit plan
fraction (as defined in Code paragraph 415(e)(2)) and the defined
contribution plan fraction (as defined in Code paragraph 415(e)(3)) for
the Plan Year shall not exceed one. It is intended that the contributions
under any defined contribution plan will be reduced to the extent
necessary to prevent the sum of those fractions for any Plan Year from
exceeding one before reducing benefits payable under any defined benefit
plan. "Any defined benefit plan" means all defined benefit plans of the
Company and Affiliates considered as one plan.
(d) REDUCTION IN ANNUAL ACCOUNT ADDITIONS. If in any Plan Year a Participant's
Annual Account Addition exceeds the limitation determined under subsection
(b) above, the excess will not be allocated to the Participant's accounts
in any defined contribution plan but shall be handled in the following
manner and order until the excess is eliminated:
(1) the Participant's portion of the allocation of Employee After-Tax
Contributions or any part thereof will be refunded to the
Participant;
(2) the Participant's portion of the allocation of Deferred Compensation
Contributions or any part thereof will be refunded to the
Participant; and
(3) the Participant's portion of the allocation of Employer Matching
Contributions or any part thereof will be placed in a suspense
account.
The amount held in a suspense account that is attributable to
contributions of an Employer will be used to reduce contributions by that
Employer for the next following Plan Year.
17
A suspense account shall share in the gains and losses of the Trust Fund
on the same basis as other Accounts.
The above reductions shall be applied to this Plan first, and thereafter
to any other defined contribution plan.
4.7 ROLLOVER CONTRIBUTIONS
An Eligible Employee of an Employer may, in accordance with procedures approved
by the Plan Administrator, contribute the following amounts to the Plan:
(a) part or all of a distribution or proceeds from a sale of distributed
property that qualifies as an "eligible rollover distribution" from a
trust described in Code subsection 401(a) and exempt from tax under Code
subsection 501(a), less any amounts considered to be employee after-tax
contributions; or
(b) a distribution from an individual retirement account or annuity, the
entire amount of which is from a source described in (a) above.
Such a contribution must be paid over to the Trustee (or transferred directly
from a prior plan) on or before the sixtieth day after receipt by the Eligible
Employee of the distribution and shall be held in the trust under this Plan as a
completely separate account in the name of the Eligible Employee whose interest
is being held. That account shall be fully vested and nonforfeitable.
4.8 CONTRIBUTIONS DURING PERIOD OF MILITARY LEAVE
(a) Notwithstanding any provision of this Plan to the contrary, contributions
and service credit with respect to qualified military service will be
provided in accordance with Code subsection 414(u).
(b) Without regard to any limitations on contributions set forth in this Plan,
a Participant who is credited with Service because of a period of service
in the uniformed services of the United States may elect to contribute to
the Plan the Deferred Compensation Contributions that could have been
contributed to the Plan in accordance with the provisions of the Plan had
he or she remained continuously employed by an Employer throughout that
period of absence ("make-up contributions"). The amount of make-up
contributions shall be determined on the basis of the Participant's
Compensation in effect immediately prior to the period of absence and the
terms of the Plan at that time. Any Deferred Compensation Contributions so
determined shall be limited as provided in section 4.4 (Limitations on
Contributions) with respect to the Plan Year or Plan Years to which the
contributions relate rather than the Plan Year or Plan Years in which
payment is made. Any payment to the Plan described in this paragraph shall
be made during the period, beginning with the date of reemployment, the
duration of which is the lesser of three times the period of absence or
five years. Earnings (or losses) on make-up contributions shall be
credited
18
commencing with the date the make-up contribution is made in accordance
with the provisions of Article 3 (Participation) and 4 (Contributions).
(c) All contributions under this section 4.8 are considered "annual
additions," as defined in Code paragraph 415(c)(2) and shall be limited in
accordance with the provisions of section 4.6 (Limitations on Annual
Account Additions) with respect to the Plan Year or Plan Years to which
the contributions relate rather than the Plan Year in which payment is
made.
19
ARTICLE 5. VESTING IN ACCOUNTS
5.1 ALL ACCOUNTS
A Member shall at all times be fully vested and have a nonforfeitable interest
all of his Accounts.
20
ARTICLE 6. DISTRIBUTIONS AND WITHDRAWALS
6.1 DISTRIBUTION UPON RETIREMENT, DEATH, DISABILITY, OR OTHER TERMINATION OF
EMPLOYMENT
Upon a Member's termination of employment, the full amount of the Member's
Account will be distributable to the Member, or to the Member's Beneficiary in
case of the Member's death.
The Account will be determined as of the Valuation Date coincident with the date
of distribution and will be distributed as provided in sections 6.3 (Method of
Distribution) and 6.4 (Hardship Withdrawals).
6.2 COMMENCEMENT OF DISTRIBUTIONS
(a) Except as provided in subsection (f), if a Member did not reach age 70 1/2
before January 1, 1999, the Member's Account balance will be distributed
commencing not later than April 1 of the year following the later of--
(1) the calendar year in which the Member reaches age 70 1/2; or
(2) the calendar year in which the Member retires.
If a Member reaches age 70 1/2 on or after January 1, 1997, but before
January 1, 1999, distribution of the Member's Account balance must
commence by April 1 of the calendar year following the calendar year in
which he reaches age 70 1/2 unless he elects to defer commencement of the
distribution until a date no later than April 1 of the calendar year
following the calendar year in which the Member retires.
(b) If the Member's Account to be distributed pursuant to section 6.1
(Distribution Upon Death, Disability, or Other Termination of Employment)
does not exceed $5,000 (or such higher amount as may be permitted under
applicable law or regulation), then the distribution will be made as soon
as practicable following termination of employment. If the value of the
Member's Account exceeds $5,000 (or such higher permitted amount), then
the distribution will be made as of any Valuation Date elected by the
Member, subject to (a) through (g).
(c) A Member who has terminated employment may elect to commence distribution
of his Accounts by giving 15 days' (or such shorter period designated by
the Plan Administrator) prior notice to, and in accordance with such other
rules prescribed by the Plan Administrator. Unless the Member elects
otherwise, distribution of a Member's Account will begin not later than
the sixtieth day after the close of the Plan Year in which occurs the
latest of--
(1) the Member's sixty-fifth birthday;
21
(2) the tenth anniversary of the Plan Year in which the Member began
participation in the Plan; or
(3) the Member's termination of employment with the Employer and all
Affiliates.
(d) Except as otherwise provided in section 6.3 (Method of Distribution), if a
Member dies after the Member's termination of employment but prior to
receiving the full distribution of the Member's Account to which the
Member is entitled under this Article 6 (Distribution and Withdrawals),
any unpaid balance of the Member's Account at the time of the Member's
death will be distributed to the Member's Beneficiary in a lump sum, as
soon as practicable after the Member's death.
(e) All distributions under this Plan will be made in accordance with Code
paragraph 401(a)(9). Provisions of the Plan regarding payment of
distributions will be interpreted and applied in accordance with Code
paragraph 401(a)(9) and interpretive regulations, including proposed
regulation 1.401(a)(9)-2, which will supersede any contrary provisions of
the Plan.
(f) In the case of a Member who is a "5-percent owner" (as defined in Code
paragraph 401(a)(9)), in no event may the distribution of the Member's
benefits commence later than April 1 of the calendar year following the
year in which the Member attains age 70 1/2, regardless of whether the
Member has terminated employment.
(g) Amounts payable under the Plan shall continue to be maintained and
adjusted under sections 8.3 (Valuation and Allocation of Expenses) and 8.4
(Allocation of Earnings and Losses) pending payment.
6.3 METHOD OF DISTRIBUTION
(a) GENERAL. Except as otherwise provided in (b), all distributions will be in
a lump sum. Distributions of amounts invested in the Cinergy Stock Fund
will be in shares of Cinergy Stock (with fractional shares in cash),
unless the Member or Beneficiary elects to receive the distribution in
cash. Distributions of all other amounts will be in cash. Amounts payable
under the Plan will continue to be maintained and adjusted under sections
8.3 (Valuation and Allocation of Expenses) and 8.4 (Allocation of Earnings
and Losses) pending payment.
(b) INSTALLMENT PAYMENTS. A Member who Retires and whose Account balance at
termination of employment is greater than $5,000 may elect to have
distributions made in annual installments over a period not exceeding 10
years. The period also will not exceed the greater of the Member's life
expectancy or the joint and survivor life expectancy of the Member and the
Member's Beneficiary, as of the date payments commence. The amount of each
payment will be determined by dividing the value of the Member's Account
as of the Valuation Date of the payment by the remaining number of annual
installments.
22
(c) DISTRIBUTIONS TO BENEFICIARIES. If a Member dies after commencement of
installment payments, remaining installments will be paid to the Member's
Beneficiary. In lieu of continuing installment payments, the Beneficiary
may elect to have the remaining Account balance paid in a lump sum.
If a Member dies prior to commencement of distribution of his Account, and
the value of his Account balance exceeds $5,000, the Member's Beneficiary
may elect to receive distribution of the Member's Account in a lump sum or
in annual installments over a period not exceeding the greater of ten
years or the Beneficiary's life expectancy as of the date payments
commence. Benefits will either:
(1) be completely distributed by December 31 of the calendar year
containing the fifth anniversary of the Member's death; or
(2) be paid in annual installments, as described above, commencing on a
date elected by the Beneficiary, but not later than--
(A) December 31 of the calendar year in which the Member would have
attained age 70 1/2, if the Beneficiary is the Member's spouse;
or
(B) December 31 of the calendar year containing the fifth anniversary
of the Member's death.
The amount of each payment will be determined by dividing the value of the
Member's Account as of the Valuation Date of the payment by the remaining
number of installments.
(d) DIRECT ROLLOVERS. A Member or a Member's spouse entitled to a distribution
under the Plan, or a Member entitled to a withdrawal distribution under
section 6.4 or 6.6, may elect to have all or part of the otherwise taxable
portion of the distribution transferred directly from the Trust Fund to an
"eligible retirement plan."
For purposes of this provision, an "eligible retirement plan" means an
individual retirement account, an individual retirement annuity other than
an endowment contract, or in the case of a Member (but not a Member's
spouse), a defined contribution plan qualified under Code subsection
401(a) (and funded under a trust that is qualified under Code subsection
501(a)) that accepts rollover contributions.
This provision shall not apply to any distribution the taxable amount of
which is less than $200 or to any other distribution that is not an
"eligible rollover distribution" within the meaning of Code subparagraph
401(a)(31)(C).
6.4 HARDSHIP WITHDRAWALS
A Participant may apply for a hardship withdrawal from the Participant's
Deferred Compensation and Rollover Accounts. A hardship withdrawal shall only be
made if the Plan
23
Administrator determines under nondiscriminatory and objective standards
established for that purpose, that the withdrawal is necessary to satisfy one
of the following financial needs:
(a) payment of medical expenses described in Code subsection 213(d) incurred
by the Participant, the Participant's spouse, or any dependents of the
Participant and not covered by insurance;
(b) purchase (excluding mortgage payments) of a principal residence of the
Participant;
(c) payment of tuition and room and board for the next year of post-secondary
education (i.e., education requiring a high school diploma as a
prerequisite) for the Participant, or the Participant's spouse, children,
or other dependents;
(d) the need to prevent the eviction of the Participant from the principal
residence or foreclosure on the mortgage of the Participant's principal
residence;
(e) funeral expenses of a member of the Participant's immediate family; and
(f) any other circumstances as shall be described in uniform rules promulgated
by the Plan Administrator.
The amount necessary to satisfy such a financial need includes an amount
necessary to pay income taxes and penalties reasonably anticipated to result
from the withdrawal.
A hardship withdrawal will be deemed necessary to satisfy such a financial need
if the Plan Administrator determines under nondiscriminatory and objective
standards established for that purpose, that the following requirements are met:
(1) the distribution does not exceed the amount of the financial need;
(2) the Participant has previously obtained all other distributions and
nontaxable loans currently available from the Employer's plans;
(3) the financial need cannot be satisfied from other sources reasonably
available to the Participant, including resources of the Participant's
spouse and minor children;
(4) all plans maintained by the Employer suspend all elective
contributions and employee contributions by or on behalf of the
Participant for the 12-month period following receipt of the hardship
distribution; and
(5) Deferred Compensation Contributions (if any) made by the Participant
for the Plan Year during which the suspension in (d) above ends shall not,
when aggregated with Deferred Compensation Contributions in the Plan Year
the suspension begins, exceed the limitation imposed under Code subsection
402(g).
24
That portion of a hardship distribution made from the Participant's Deferred
Compensation Contributions Account may be made only from Deferred
Compensation Contributions. Such a distribution may not include any earnings
credited to the Deferred Compensation Contributions Account.
No withdrawal may be made from a Participant's Account in an amount that
would cause any outstanding loan to the Participant to violate subsection
6.5(c) (Loans) or in an amount greater than the excess of 125 percent of the
balance of the Deferred Compensation Account over the aggregate of amounts
owing with respect to any loans made to the Participant plus interest, if
any, due thereon.
6.5 LOANS
Each Participant, and to the extent required under applicable regulations, each
former Participant who is a "party-in-interest" as defined under section 3(14)
of ERISA, may, with the approval of the Plan Administrator, borrow amounts from
the Participant's Deferred Compensation Contributions Account, ESOP Transfer
Account, or Rollover Contribution Account. Approval of loans shall be made in
accordance with the provisions of this section and uniform and nondiscriminatory
standards and policies adopted and interpreted by the Plan Administrator.
No more than two loans will be outstanding to a Participant at any time. The
Plan Administrator may establish other nondiscriminatory rules relating to
loans made under this section.
Each request for a loan will be submitted in a manner prescribed by the Plan
Administrator. Each loan will be made as soon as administratively possible
following loan approval. The Plan Administrator may require that a request
for a loan be submitted within a certain period of time prior to a proposed
loan date.
Each loan will be secured by a pledge of not more than 50 percent of the
vested and nonforfeitable portion of the Participant's Account. The terms of
the loan will be determined under uniform and nondiscriminatory standards and
policies adopted by and interpreted by the Plan Administrator, subject to the
following conditions:
(a) The term of a loan will not extend beyond 54 months.
(b) A loan will bear a commercially reasonable rate of interest, which will
not be less than the rates being charged at the time a loan is made by
entities in the business of making loans of similar type and kind.
(c) The amount of the loan (when added to the outstanding balance of all other
loans to the Participant from the Participant's Account) will not exceed
the lesser of--
(1) $50,000, reduced by the excess (if any) of--
25
(A) the highest outstanding balance of loans from the Plan during the
one-year period ending on the day before the loan was made, over
(B) the outstanding balance of loans from the Plan on the date the
loan is made; or
(2) 50 percent of the vested and nonforfeitable portion of the
Participant's Account at the relevant time.
(d) A loan shall be evidenced by a promissory note, in such form and
containing such terms and conditions as the Plan Administrator from time
to time directs.
(e) Payments of principal and interest will be made by approximately equal
payments on a basis that would permit the loan to be levelly amortized
over its term. Payments by former Participants who are "parties-in-
interest" shall be made at least quarterly.
Payments by active Participants will be made by payroll deduction.
Prepayment of the entire amount of principal and interest may be made at
any time without penalty.
(f) Appropriate disclosure will be made pursuant to the Truth in Lending Act
to the extent applicable.
(g) Amounts of principal and interest received on a loan will be credited to
the Participant's Account using the Participant's current investment
election, and the outstanding loan balance will be considered an
investment of the assets of the Account.
(h) Loans will be made on a pro rata basis from the available funds of each of
the Investment Funds in which the Participant's Account is invested at the
time the loan is made. Repayments will be credited to the Participant's
Account in accordance with the Participant's investment elections in
effect at the time of repayment.
(i) In the event that a distribution under this Article 6 (Distributions and
Withdrawals) (other than a withdrawal under section 6.6 (Other Withdrawals
Prior to Termination of Employment)) becomes payable before the loan is
repaid in full, the unpaid principal and interest will become due and
payable, and the Plan will first satisfy the indebtedness from the amount
in the Participant's Account before making any payments to the Participant
or to a Beneficiary.
(j) Reasonable loan set-up and/or maintenance fees may be charged to the
Member's Account with respect to each loan made to the Member by the Plan,
as established by the Plan Administrator.
In the exercise of the discretion conferred upon the Plan Administrator in this
section, all Participants under similar circumstances shall be treated alike,
and the provisions of this
26
section will not be utilized in any manner to discriminate in favor of Highly
Compensated Employees.
6.6 OTHER WITHDRAWALS PRIOR TO TERMINATION OF EMPLOYMENT
(a) WITHDRAWALS AT OR AFTER AGE 59 1/2. A Participant who has attained age
59 1/2 may withdraw any or all of the balance in his Account upon 15 days
(or such shorter period designated by the Plan Administrator) prior notice
to the Plan Administrator. Such withdrawals shall be made in a lump sum
and will be elected in accordance with rules established for that purpose
by the Plan Administrator.
No withdrawal will be made under this section that would cause the
Participant's Deferred Compensation Account to be less than 125 percent of
the outstanding balance of all loans (or such lesser percent designated by
the Plan Administrator) outstanding to the Participant.
(b) WITHDRAWALS OF AFTER-TAX CONTRIBUTIONS. A Participant may elect to
withdraw any or all of the balance in the Participant's Employee After-Tax
Contributions Account upon 15 days (or such shorter period designated by
the Plan Administrator) prior notice to the Plan Administrator.
Withdrawals shall be made in a lump sum and shall be elected in accordance
with rules established for such purpose by the Plan Administrator.
6.7 WITHHOLDING TAXES
An Employer may withhold from a Member's compensation and the Trustee may
withhold from any payment under this Plan any taxes required to be withheld with
respect to contributions or benefits under this Plan and such sum as the
Employer or Trustee may reasonably estimate as necessary to cover any taxes for
which they may be liable and that may be assessed with respect to contributions
or benefits under this Plan.
27
ARTICLE 7. INVESTMENT ELECTIONS
7.1 AFTER-TAX, DEFERRED COMPENSATION, EMPLOYER MATCH, ESOP TRANSFER, AND
ROLLOVER CONTRIBUTION ACCOUNTS
(a) INVESTMENT OF CONTRIBUTIONS. Each Participant may elect to have the After-
Tax, Deferred Compensation, and Rollover Contributions made on the
Participant's behalf invested in any one or more of the Investment Funds
in increments of 1 percent, in accordance with procedures established by
the Plan Administrator.
(b) INVESTMENT TRANSFERS. Each Member may elect as of any date to have the
assets in the Member's ESOP Transfer, Employer Match, After-Tax, Deferred
Compensation, and Rollover Contributions Accounts reallocated among the
Investment Funds, in increments of 1 percent, in accordance with
procedures established by the Plan Administrator.
(c) INVESTMENT ELECTIONS. Each Participant may make the elections described in
subsection (a) by making an election with the Plan Administrator upon
becoming a Participant. Such elections may be changed with respect to
future After-Tax, Deferred Compensation, or Rollover Contributions as of
any date in accordance with procedures established by the Plan
Administrator.
(d) TRANSFER OF ASSETS. The Plan Administrator shall cause the transfer of
moneys or other property from the appropriate Investment Fund to the other
Investment Fund as may be necessary to carry out the aggregate transfer
transactions elected by the Members, in accordance with uniform rules
therefor established by the Plan Administrator.
7.2 MATCHING CONTRIBUTIONS ACCOUNT
(a) INVESTMENT OF CONTRIBUTIONS. Employer Matching Contributions made to the
Participant's Accounts shall be invested in the Cinergy Stock Fund.
(b) INVESTMENT TRANSFERS. Except as otherwise provided in this section, assets
in the Member's Matching Contributions Account will remain invested in the
Cinergy Stock Fund until distributed under Article 6 (Distributions and
Withdrawals), and may not be reallocated among the Investment Funds. A
Member who has attained age 50 may reallocate assets in the Matching
Contributions Account among the Investment Funds, in accordance with the
provisions of subsection 7.1(b) (After-Tax, Deferred Compensation, ESOP
Transfer, Employer Match, and Rollover Contributions Accounts).
7.3 VOTING AND OTHER RIGHTS WITH RESPECT TO CINERGY STOCK
(a) GENERAL. Each Member having an interest in the Cinergy Stock Fund shall
have the right to direct the manner in which shares of Cinergy Stock held
in such Fund shall
28
be voted, and direct the manner in which all other rights appurtenant to
such shares shall be exercised, as if the Member was the shareholder of
record.
(b) PROVISION OF INFORMATION. Prior to each annual or special shareholders'
meeting at which Cinergy Stock has voting rights, the Trustee shall cause
to be furnished to each Member with an interest in the Cinergy Stock Fund
a copy of the proxy solicitation materials with respect to the meeting.
The Trustee shall use its best efforts to timely distribute to each Member
all information to be distributed to shareholders in connection with any
tender or exchange offer with respect to Cinergy Stock. The materials
and/or information shall include any forms and instructions as may be
necessary for the Member to direct the manner of voting on each matter to
be brought before a meeting or to direct a response to a tender or
exchange offer.
(c) VOTING OR TENDER OF SHARES. Subject to the requirements of ERISA, the
Trustee shall vote or tender Cinergy Stock corresponding to the interest
of the Member in the Cinergy Stock Fund in accordance with the Member's
directions issued in accordance with the instructions provided under (b).
The Trustee shall vote or tender any Cinergy Stock with respect to which
directions are not issued under this section in the manner determined by
the Trustee in the Trustee's discretion.
29
ARTICLE 8. ACCOUNTS AND RECORDS OF THE PLAN
8.1 ACCOUNTS AND RECORDS
The Accounts and records of the Plan shall be maintained by the Plan
Administrator and shall accurately disclose the status of the Accounts of each
Member or each Member's Beneficiary in the Plan.
Each Member shall be advised from time to time, at least once quarterly during
each Plan Year, as to the status of the Member's Account.
8.2 TRUST FUND
Each Member shall have an undivided proportionate interest in the Trust Fund,
which shall be measured by the proportion that the market value of the Member's
Account bears to the total market value of all Accounts as of the date that the
interest is being determined.
8.3 VALUATION AND ALLOCATION OF EXPENSES
As of each Valuation Date, the Trustee shall determine the fair market value of
the Trust Fund after first deducting any expenses that have not been paid by the
Employers. Unless paid by the Employers and subject to such limitations as may
be imposed by the Act or other applicable law, all costs and expenses incurred
in connection with the general administration of the Plan and the Trust shall be
chargeable to the Trust Fund.
8.4 ALLOCATION OF EARNINGS AND LOSSES
As of each Valuation Date, the Plan Administrator, with the assistance of the
Trustee, shall allocate the net earnings and gains or losses of each Investment
Fund of the Trust Fund since the preceding Valuation Date to each Member's
Account in the same proportion that the market value of the Member's Account in
the Investment Fund bears to the total market value of all Members' Accounts in
the Investment Fund; and, for this purpose, the Plan Administrator shall adopt
uniform rules that conform to applicable law and generally accepted accounting
practices. The foregoing shall not apply to the loan fund, which shall be
accounted for separately so that interest on a Participant's loan is credited
solely to the Participant's Account.
30
ARTICLE 9. FINANCING
9.1 FINANCING
The Company shall enter into a Trust Agreement to implement and carry out the
provisions of the Plan and to finance the benefits under the Plan. All rights
that may accrue to any person under the Plan shall be subject to all the terms
and provisions of the Trust Agreement. The Company may modify the Trust
Agreement in accordance with the terms of that Agreement from time to time to
accomplish the purposes of the Plan.
9.2 CONTRIBUTIONS
The Employers shall make such contributions to the Trust Fund as are required by
the provisions of the Plan, subject to the right of the Company to amend,
modify, or terminate the Plan.
9.3 NONREVERSION
No Employer shall have any right, title, or interest in the contributions made
to the Trust Fund, and no part of the Trust Fund shall revert to any Employer,
except that if a contribution is made to the Trust Fund by an Employer by a
mistake of fact, then the contribution may be returned to the Employer within
one year after the payment of the contribution; and if any part or all of a
contribution is disallowed as a deduction under Code section 404, then to the
extent the contribution is disallowed as a deduction it may be returned to the
Employer within one year after the disallowance.
9.4 RIGHTS IN THE TRUST FUND
Persons eligible for benefits under the Plan are entitled to look only to the
Trust Fund for the payment of those benefits and have no claim against any
Employer, the Plan Administrator, or any other person. No person has any right
or interest in the Trust Fund except as expressly provided in the Plan.
31
ARTICLE 10. ADMINISTRATION
10.1 PLAN ADMINISTRATOR AND FIDUCIARY
The Benefits Committee will be the Plan Administrator of the Plan within the
meaning of section 3(16)(A) of ERISA, a fiduciary with respect to the Plan
within the meaning of sections 3(21)(A)(i) and (iii) of ERISA, and the named
fiduciary under section 402 of ERISA. The Benefits Committee will consist of the
number of members, not fewer than three, that is specified from time to time by
the Board. All members of the Benefits Committee will be Employees or officers
of an Employer.
10.2 REMOVAL AND REPLACEMENT OF BENEFITS COMMITTEE MEMBERS
The members of the Benefits Committee will serve at the pleasure of the Board
and may be removed by the Board with or without cause. Any vacancy among the
members will be filled by the Board. A Benefits Committee member will be deemed
to be removed as of the date on which the Benefits Committee member becomes
disqualified from membership on the Benefits Committee. A member of the Benefits
Committee may resign by delivering his written resignation to any other member
of the Benefits Committee. A resignation will become effective on the date
specified in the instrument of resignation.
10.3 COMPENSATION AND EXPENSES
All reasonable expenses incurred in the administration of the Plan will be paid
from the Trust Fund to the extent not paid by the Employers. Such expenses will
include any expenses incident to the administration of the Plan, including, but
not limited to, fees of accountants, counsel, and other specialists.
10.4 DELEGATION OF DUTIES AND EMPLOYMENT OF SPECIALISTS
The Benefits Committee may designate any person, subcommittee, or other entity
to carry out any of its responsibilities under the Plan, in which case every
reference herein made to the Benefits Committee will be deemed to mean or
include the designee(s) as to matters within the designee's jurisdiction. Any
such designation will be in writing and will be kept with the records of the
Plan. The Benefits Committee or its designee may authorize one or more of its
members or any agent to execute or deliver any instrument or instruments on its
behalf, and may employ such counsel, auditors, and other specialists, and such
clerical, medical, actuarial, and other services as may be required to carry out
the provisions of the Plan. Those expenses shall be paid by the Trust to the
extent not paid by the Employers.
10.5 ADMINISTRATION
The Benefits Committee shall be responsible for the administration of the Plan.
The Benefits Committee will have all powers necessary to carry out the
provisions of the Plan and may, from time to time, establish rules for the
administration of the Plan and the transaction of the Plan's business. In making
any such determination or rule, the Benefits Committee will pursue uniform
policies as from time to time established by the Benefits Committee and will not
discriminate in favor of or against any Member. The Benefits Committee will have
the
32
exclusive right to make any finding of fact necessary or appropriate for any
purpose under the Plan including, but not limited to, the determination of the
eligibility for and the amount of any benefit payable under the Plan. The
Benefits Committee will have discretionary authority to interpret the terms and
provisions of the Plan and to determine any and all questions arising under the
Plan or in connection with Plan administration, including, without limitation,
the right to remedy or resolve possible ambiguities, inconsistencies, or
omissions, by general rule or particular decision. In exercising its rights
under this section to make findings of fact under the Plan, interpret the terms
and provisions of the Plan, and determine all questions arising under the Plan
or in connection with Plan administration, the Benefits Committee will be
granted the fullest discretion permitted by law. The Benefits Committee will
make, or cause to be made, all reports or other filings necessary to meet both
the reporting and disclosure requirements and other filing requirements of
ERISA that are the responsibility of "plan administrators" under ERISA. To the
extent permitted by law, all findings of fact, determinations, interpretations,
and decisions of the Benefits Committee will be conclusive and binding upon all
persons having or claiming to have any interest or right under the Plan.
10.6 NO ENLARGEMENT OF EMPLOYEE RIGHTS
Nothing contained in the Plan will be deemed to give any Employee the right to
be retained in the service of an Employer or to interfere with the right of an
Employer to discipline or discharge any Employee at any time.
10.7 APPEALS FROM DENIAL OF CLAIMS
Claims for benefits under the Plan will be made in writing to the Plan
Administrator or its designee. If any claim for benefits under the Plan, or
request for loan or hardship distribution under the Plan, is wholly or partially
denied, the claimant will be given notice of the denial in writing within a
reasonable period of time not to exceed 90 days after receipt of the claim,
unless special circumstances require an extension of time for processing, in
which case notification will be rendered as soon as possible, but not later than
180 days after the claim's receipt. If an extension of time for processing is
required, written notice of the extension will be furnished to the claimant
prior to the termination of the initial period. The extension notice will
indicate the special circumstances requiring an extension of time and the date
by which the Plan expects to render final notification. Notice of the denial
will be written in a manner calculated to be understood by the claimant and will
include the following information:
(a) the specific reasons for the denial;
(b) specific reference to pertinent Plan provisions on which the denial is
based;
(c) a description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why that material or
information is necessary; and
33
(d) an explanation of the Plan's claim review procedure.
Within 60 days after the claimant's receipt of written notice of the claim's
denial, the claimant, or his duly authorized representative, may file a written
request with the Benefits Committee requesting a full and fair review of the
denial of the claimant's claim for benefits. In connection with the claimant's
appeal of the denial of his claim for benefits, the claimant may review
pertinent documents in the Benefit Committee's possession and may submit issues
and comments in writing. The Benefits Committee will make a decision on review
promptly, but not later than the date of the meeting of the Benefits Committee
that immediately follows the receipt of the claimant's request for review,
unless the request for review is filed within 30 days before the date of that
meeting. In that case, a decision will be made as soon as possible but not later
than the date of the second Benefits Committee meeting following receipt of the
request for review. If special circumstances require a further extension of time
for processing, a decision will be rendered not later than the third Benefits
Committee meeting following receipt of the claimant's request for review. If an
extension of time for review is required because of special circumstances,
written notice of the extension will be sent to the claimant before the
extension commences. The extension notice will indicate the special
circumstances requiring an extension of time and the date by which the Benefits
Committee expects to render the final decision. The decision on review will be
in writing and written in a manner calculated to be understood by the claimant,
and will set forth the specific reason or reasons for the decision and will
contain specific references to the pertinent Plan provisions on which the
decision is based. If the decision on review is not furnished to the claimant
within 60 days of receipt of the request for review, or within 120 days after
its receipt if special circumstances required an extension of time, the claim
will be deemed denied on review.
10.8 NOTICE OF ADDRESS AND MISSING PERSONS
Each person entitled to benefits under the Plan must file with the Plan
Administrator, in writing, the person's post office address and each change of
post office address. Any communication, statement, or notice addressed to such a
person at the latest reported post office address will be binding upon the
person for all purposes of the Plan, and neither the Plan Administrator nor the
Employers or Trustee shall be obliged to search for or ascertain the person's
whereabouts. In the event that the person cannot be located, the Plan
Administrator may direct that the benefit and all further benefits with respect
to that person shall be discontinued, all liability for the payment thereof
shall terminate and the balance in such Member's Account shall be deemed a
forfeiture; provided, however, that in the event of the subsequent reappearance
of the Member or Beneficiary prior to termination of the Plan, the benefits that
were due and payable and that the person missed shall be paid in a single sum
and the future benefits due the person shall be reinstated in full.
10.9 DATA AND INFORMATION FOR BENEFITS
All persons claiming benefits under the Plan must furnish to the Plan
Administrator or its designated agent such documents, evidence, or information
as the Plan Administrator or its
34
designated agent considers necessary or desirable for the purpose of
administering the Plan; and a person must furnish such information promptly and
sign such documents as the Plan Administrator or its designated agent may
require before any benefits become payable under the Plan.
10.10 INDEMNITY FOR LIABILITY
The Company shall indemnify each member of the Benefits Committee and each other
individual who is directed by the Company to carry out responsibilities and
duties imposed by the Plan against any and all claims, losses, damages, and
expenses, including counsel fees, incurred by the individual and any liability,
including any amounts paid in settlement with the Company's approval, arising
from the individual's action or failure to act, except when the same is
judicially determined to be attributable to the gross negligence or willful
misconduct of that individual. The Company shall pay the premiums on any bond
secured under this section and shall be entitled to reimbursement by the other
Employers for their proportionate share.
10.11 EFFECT OF A MISTAKE
In the event of a mistake or misstatement as to the eligibility, participation,
or service of any Member, or the amount of payments made or to be made to a
Member or Beneficiary, the Plan Administrator shall, if possible, cause to be
withheld or accelerated or otherwise make adjustment of such amounts of payments
as will in its sole judgment result in the Member or Beneficiary receiving the
proper amount of payments under this Plan.
35
ARTICLE 11. AMENDMENT AND TERMINATION
11.1 AMENDMENT AND TERMINATION
(a) The Company reserves the right to alter, amend, revoke, or terminate the
Plan at any time. The Board shall generally have the authority to adopt
amendments; however, the Benefits Committee or the compensation committee
of the Board may adopt any amendment to ensure the continued qualification
of the Plan and Trust Fund under Code subsections 401(a) and 501(a), to
comply with the provisions of any federal statute or regulation impacting
pension plans, to enhance the delivery of benefits to Members and
Beneficiaries, to ease Plan administration, or to respond to the
withdrawal of any Employer from the Plan. Notwithstanding the preceding
sentence, no amendment by the Benefits Committee or the compensation
committee of the Board shall substantially increase the cost of the Plan
without the Board's consent. The Board, or any person or persons duly
authorized by the Board, shall also have the right, authority, and power
to terminate the Plan and to discontinue or suspend contributions to the
Plan.
(b) While each Employer contemplates carrying out the provisions of the Plan
indefinitely with respect to its Employees, no Employer shall be under any
obligation or liability whatsoever to maintain the Plan for any minimum or
other period of time.
(c) Upon any termination of the Plan in its entirety, or with respect to any
Employer, the Company shall give written notice thereof to the Trustee and
any Employer involved.
(d) Except as provided by law, upon any termination of the Plan, no Employer
with respect to whom the Plan is terminated (including the Company) shall
thereafter be under any obligation, liability, or responsibility
whatsoever to make any contribution or payment to the Trust Fund, the
Plan, any Member, any Beneficiary, or any other person, trust, or fund
whatsoever, for any purpose whatsoever under or in connection with the
Plan.
11.2 LIMITATIONS ON AMENDMENTS
The provisions of this Article are subject to and limited by the following
restrictions:
(a) No amendment will operate either directly or indirectly to give any
Employer any interest whatsoever in any funds or property held by the
Trustee under the terms of this Plan or the Trust Agreement, or to permit
the corpus or income of the Trust to be used for or diverted to purposes
other than the exclusive benefit of Members or their Beneficiaries.
(b) No such amendment will operate either directly or indirectly to deprive
any Member of any portion of the Member's vested and nonforfeitable
interest or right to any
36
"section 411(d)(6) protected benefit" (as defined in Treasury regulation
section 1.411(d)-4) as of the time of such amendment.
(c) No amendment will modify the vesting provisions of Article 5 (Vesting in
Accounts) unless the conditions of Code section 411(a)(10) and section
11.4 (Amendments of Vesting Schedule) are met.
11.3 EFFECT OF BANKRUPTCY AND OTHER CONTINGENCIES AFFECTING AN EMPLOYER
In the event an Employer terminates its connection with the Plan, or in the
event an Employer is dissolved, liquidated, or is by appropriate legal
proceedings adjudged a bankrupt, or in the event judicial proceedings of any
kind result in the involuntary dissolution of an Employer, the Plan shall be
terminated with respect to that Employer. The merger, consolidation, or
reorganization of an Employer, or the sale by it of all or substantially all of
its assets, shall not terminate the Plan if there is delivery to that Employer
by the Employer's successor or by the purchaser of all or substantially all of
the Employer's assets, of a written instrument requesting that the successor or
purchaser be substituted for the Employer and agreeing to perform all the
provisions of this Plan that the Employer is required to perform. Upon the
receipt of that instrument, with the approval of the Company, the successor, or
the purchaser will be substituted for that Employer under this Plan, and that
Employer shall be relieved and released from any obligations of any kind,
character, or description imposed upon it under the Plan or the Trust Agreement.
11.4 AMENDMENT OF VESTING SCHEDULE
If the Plan is amended to provide a different vesting schedule, each person
adversely affected--
(a) who is a Participant during the election period below; and
(b) who has completed at least three years of service
may elect to have the amendment disregarded in determining the vested percentage
of the Participant's Account. That election must be in writing and delivered to
the Plan Administrator within the election period. Upon delivery, the
Participant's election will be irrevocable. The election period begins on the
date the amendment is adopted and ends 60 days after the latest of the date--
(1) the amendment is adopted;
(2) the amendment becomes effective; or
(3) the Plan Administrator delivers a written notice of the amendment to the
Participant.
No amendment to the Plan's vesting schedule may decrease the vesting that any
Member has earned as of the date of the amendment.
37
ARTICLE 12. TOP-HEAVY PROVISIONS
12.1 APPLICATION OF TOP-HEAVY PROVISIONS
(a) SINGLE PLAN DETERMINATION. Except as provided in subsection (b)(2), if as
of a Determination Date, the sum of the amount of the Section 416 Accounts
of Key Employees and the Beneficiaries of deceased Key Employees exceeds
60 percent of the amount of the Section 416 Accounts of all Employees and
Beneficiaries (excluding former Key Employees), the Plan is top-heavy, and
the provisions of this Article will become applicable.
(b) AGGREGATION GROUP DETERMINATION.
(1) If as of a Determination Date this Plan is part of an Aggregation
Group that is top-heavy, the provisions of this Article will become
applicable. Top-heaviness for the purpose of this subsection shall be
determined with respect to the Aggregation Group in the same manner
as described in subsection (a) above.
(2) If this Plan is top-heavy under subsection (a), but the Aggregation
Group is not top-heavy, the Plan will not be top-heavy, and this
Article will not apply.
(c) CALCULATIONS. The Plan Administrator will have responsibility to make all
calculations to determine whether this Plan is top-heavy.
12.2 DEFINITIONS
(a) "AGGREGATION GROUP" means this Plan and all other plans maintained by the
Employers and nonparticipating Affiliates that cover a Key Employee and
any other plan that enables a plan covering a Key Employee to meet the
requirements of Code paragraph 401(a)(4) or section 410. In addition, at
the election of the Plan Administrator, the Aggregation Group may be
expanded to include any other qualified plan maintained by an Employer or
nonparticipating Affiliate if the expanded Aggregation Group meets the
requirements of Code paragraph 401(a)(4) and Code section 410.
(b) "COMPENSATION" means the Member's compensation, salaries, and other
amounts received for personal services rendered in the course of
employment with Employers and nonparticipating Affiliates, including those
items described in Treasury regulation 1.415-2(d)(1). The annual
Compensation of each Member that may be taken into account under the Plan
shall not exceed the first $160,000 (as adjusted by the Secretary of the
Treasury under Code paragraph 401(a)(17)).
(c) "DETERMINATION DATE" means the last day of the Plan Year immediately
preceding the Plan Year for which top-heaviness is to be determined or, in
the case of the first Plan Year of a new plan, the last day of that Plan
Year.
38
(d) "KEY EMPLOYEE" means a Member who is a "key employee," as defined in
Code subsection 416(i). Any Employee who is not a Key Employee shall be
a "non-Key employee" for purposes of applying this Article 12
(Top-Heavy Provisions).
(e) "SECTION 416 ACCOUNT" means--
(1) the amount credited as of a Determination Date to a Member's or
Beneficiary's account, under the Plan and under any other qualified
defined contribution plan that is part of an Aggregation Group
(including amounts to be credited as of the Determination Date but
that have not yet been contributed);
(2) the present value of the accrued benefit credited to a Member or
Beneficiary under a qualified defined benefit plan that is part of an
Aggregation Group; and
(3) the amount of distributions to the Member or Beneficiary during the
five-year period ending on the Determination Date other than a
distribution that is a tax-free Rollover Contribution (or similar
transfer) that is not initiated by the Member or that is contributed
to a plan that is maintained by an Employer or nonparticipating
Affiliate;
reduced by--
(4) the amount of Rollover Contributions (or similar transfers) and
earnings thereon credited as of a Determination Date under the Plan
or a plan forming part of an Aggregation Group that is attributable
to a Rollover Contribution (or similar transfer) accepted after
December 31, 1983, initiated by the Member and derived from a plan
not maintained by an Employer or nonparticipating Affiliate.
The Account of a Member who was a Key Employee and who subsequently
meets none of the conditions of subsection (c) for the Plan Year
containing the Determination Date is not a Section 416 Account and will
be excluded from all computations under this Article. If a Member has
not performed any services for an Employer or nonparticipating
Affiliate during the five-year period ending on the Determination Date,
any account of that Member (and any accrued benefit for that Member)
will not be taken into account in computing top-heaviness under this
Article.
12.3 MINIMUM CONTRIBUTION
(a) GENERAL. If this Plan is determined to be top-heavy under the provisions
of section 12.1 (Application of Top-Heavy Provisions) with respect to a
Plan Year, the sum of Employer contributions (excluding Employer Matching
Contributions and Tax-Deferred Contributions) and forfeitures under all
qualified defined contribution plans allocated to the accounts of each
Member in the Aggregation Group who is not a
39
Key Employee and is an Employee on the last day of the Plan Year will
not be less than 3 percent of the Member's Compensation.
(b) EXCEPTION. The contribution rate specified in subsection (a) will not
exceed the percentage at which Employer contributions and forfeitures are
allocated under the plans of the Aggregation Group to the account of the
Key Employee for whom that percentage is the highest for the Plan Year.
For the purpose of this subsection (b), the percentage for each Key
Employee shall be determined by dividing the Employer contributions
(excluding Employer Matching Contributions and Tax-Deferred Contributions)
and forfeitures for the Key Employee by the amount of the Key Employee's
Compensation for the year.
(c) MULTIPLE PLANS. If this Plan is determined to be top-heavy under the
provisions of section 12.1 (Application of Top-Heavy Provision) with
respect to a Plan Year, any Member who is a non-Key Employee covered under
this Plan and under a defined benefit plan maintained by the Employers and
nonparticipating Affiliates will receive a minimum contribution determined
by substituting 5 percent for 3 percent in applying the provisions of
subsection (a). However, no minimum contribution under this section will
be allocable to any non-Key Employee who participates in a defined benefit
plan maintained by an Employer or nonparticipating Affiliate and who
receives the minimum benefit described in Code paragraph 416(c)(1) under
the defined benefit plan.
12.4 LIMIT ON ANNUAL ADDITIONS: COMBINED PLAN LIMIT
(a) GENERAL. If this Plan is determined to be top-heavy under section 12.1,
section 4.6 of this Plan will be applied by substituting 1.0 for 1.25 in
applying the provisions of Code paragraphs 415(e)(2) and (e)(3).
The transitional rule of Code clause 415(e)(6)(B)(i) will be applied by
substituting "$41,500" for "$51,875."
(b) EXCEPTION. Subsection (a) will not apply if this Plan would not be
top-heavy if "90 percent" is substituted for "60 percent" in section
12.1, but in that case--
(1) subsection 12.3(a) (Minimum Contribution) will be applied by
substituting "4 percent" for "3 percent"; and
(2) subsection 12.3(c) (Minimum Contribution) will be applied by
substituting "7.5 percent" for "5 percent."
(c) TRANSITIONAL RULE. If, but for this subsection (c), subsection (a) would
begin to apply with respect to the Plan, the application of subsection (a)
shall be suspended with respect to a Member so long as there are--
40
(1) no Employer contributions, forfeitures, or voluntary nondeductible
contributions allocated to the Member, and
(2) no accruals under a qualified defined benefit plan for the Member.
12.5 COLLECTIVE BARGAINING AGREEMENTS
The requirements of sections 12.3 (Minimum Contributions) and 12.4 (Limit on
Annual Additions: Combined Plan Limit) will not apply with respect to any
Employee included in a unit of Employees covered by a collective bargaining
agreement between Employee representatives and an Employer or nonparticipating
Affiliate if retirement benefits were the subject of good faith bargaining
between the Employee representatives and the Employer or nonparticipating
Affiliate.
41
ARTICLE 13. PARTICIPATION IN AND WITHDRAWAL FROM THE PLAN BY AN EMPLOYER
13.1 ADOPTION OF THE PLAN
With the Company's consent, any Affiliate may become an Employer under the Plan
and may elect by--
(a) taking appropriate action to adopt the Plan;
(b) filing with the Company a duly certified copy of the Plan as adopted by
the Affiliate;
(c) becoming a party to the trust agreement establishing the Trust Fund; and
(d) executing and delivering documents and taking any other action as may be
necessary or desirable to put the Plan into effect with respect to it.
13.2 WITHDRAWAL FROM PARTICIPATION
Any Employer may, with the Company's consent, withdraw from participation in the
Plan at any time by filing with the Company a duly certified copy of a
resolution of its board of directors to that effect and giving notice of its
intended withdrawal to the Company and the Trustee prior to the effective date
of withdrawal. Distribution may be implemented through continuation of the Trust
Fund, or transfer to another trust fund exempt from tax under Code section 501,
or to a group annuity contract qualified under Code section 401, or distribution
may be made as an immediate cash payment in accordance with the directions of
the Plan Administrator; provided, however, that no such action shall divert any
part of the fund to any purpose other than the exclusive benefit of the
Employees of that Employer.
13.3 COMPANY AS AGENT FOR EMPLOYERS
Each Affiliate that becomes a participating Employer pursuant to section 13.1
(Adoption of Plan) by doing so will be deemed to have appointed the Company its
agent to exercise on its behalf all of the powers and authorities conferred upon
the Company by the terms of the Plan, including, but not limited to, the power
to amend and terminate the Plan. The Company's authority to act as agent will
continue unless and until that portion of the Trust Fund held for the benefit of
Employees of the particular Employer and their beneficiaries are transferred or
distributed pursuant to section 13.2 (Withdrawal from Participation). Each
Employer will, from time to time, upon the Company's request, furnish to the
Company any data and information as the Company requires in the performance of
its duties.
42
ARTICLE 14. MISCELLANEOUS
14.1 BENEFICIARY DESIGNATION
(a) Each Member may designate, on a form provided for that purpose by the Plan
Administrator, a Beneficiary (which may be an entity other than a natural
person) or Beneficiaries to receive the Member's interest in the Plan in
the event of the Member's death, but the designation will not be effective
for any purpose until it has been filed by the Member during the Member's
lifetime with the Plan Administrator. The Member may, from time to time
during the Member's lifetime, on a form approved by and filed with the
Plan Administrator, change the Member's Beneficiary or Beneficiaries.
(b) The Beneficiary of each Member who is married will be the Member's
surviving spouse, unless that spouse consents in writing to the
designation of another Beneficiary or Beneficiaries. The consent must
specifically acknowledge the identity of the nonspousal Beneficiary, or
must specifically acknowledge and waive the right to limit the consent to
a specific Beneficiary. Each married Member may, from time to time, change
the Member's designation of Beneficiaries; provided, however, that the
Member may not change the Member's Beneficiary without the written consent
of the Member's spouse, unless the spouse's prior consent expressly
permits designations by the Member without any requirement of further
consent by the spouse. The consent of a Member's spouse will be
irrevocable unless and until the Member changes the Member's designation
of Beneficiaries. Upon the divorce of a Member and the Member's spouse,
any designation of the spouse as the Member's Beneficiary will be deemed
to be revoked.
(c) In the event that a Member fails to designate a Beneficiary, or if for any
reason his designation is legally ineffective, or if all designated
Beneficiaries predecease the Member or die simultaneously with the Member,
distribution will be made to the Member's spouse; or if none, to the
Member's children in equal shares; or if none, to the Member's parents in
equal shares; or if none, to the Member's estate. If any such Beneficiary
dies before receiving the distribution that would have been made to the
Beneficiary had the Beneficiary not died, then, for the purposes of the
Plan, the distribution that would have been received by the Beneficiary
will be made to the Beneficiary's estate.
(d) The written consent described in subsection (b) must acknowledge the
effect of the election and must be witnessed by a notary public.
14.2 FACILITY OF PAYMENT
If any benefit under the Plan is payable to a person whom the Plan Administrator
knows is a minor or otherwise under legal incapacity, the Plan Administrator or
its designee may have the payment made to the legal guardian of that person or
to such person or organization as a
43
court of competent jurisdiction may direct. To the extent permitted by law,
any payment made under this section shall be a complete discharge of any
liability under the Plan to that person.
14.3 NONALIENATION
Except as provided in Code paragraph 401(a)(13), neither benefits payable at any
time under the Plan nor the corpus or income of the Trust Fund will be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
attachment, garnishment, levy, execution, or other legal or equitable process or
encumbrance of any kind. No payee may assign any payment due him under the Plan.
Any attempt to alienate, sell, transfer, assign, pledge, or otherwise encumber
any such benefit, whether presently or thereafter payable, will be void. The
Trust Fund will not in any manner be liable for, or subject to, the debts or
liabilities of any Member, Beneficiary, or any other person entitled to any
benefit. However, the payment of benefits will be made in accordance with the
applicable requirements of any qualified domestic relation order, as defined in
Code subsection 414(p). The Plan Administrator will establish procedures to
determine whether domestic relations orders are "qualified domestic relations
orders" and to administer distributions under qualified domestic relations
orders.
In the event that a qualified domestic relations order provides for the payment
of all or a portion of a Member's Accounts to an alternate payee, distribution
to the alternate payee may be made at any time specified in the order,
irrespective of whether the Member has reached the earliest retirement age, as
defined in Code subsection 414(p). In the event that a qualified domestic
relations order provides for the immediate payment of all or a portion of a
Member's Accounts to an alternate payee, distribution will be made pursuant to
the order as soon as administratively feasible following the Plan
Administrator's determination that the order is a qualified domestic relations
order.
14.4 APPLICABLE LAW
The Plan and all rights hereunder shall be governed by and construed in
accordance with the laws of the State of Ohio to the extent those laws have not
been preempted by applicable federal law.
14.5 SEVERABILITY
If a provision of this Plan will be held illegal or invalid, the illegality or
invalidity will not affect the remaining parts of the Plan, and the Plan will be
construed and enforced as if the illegal or invalid provision had not been
included in this Plan.
14.6 NO GUARANTEE
Neither the Plan Administrator, the Company, the Employers, nor the Trustee in
any way guarantees the Trust Fund from loss or depreciation nor the payment of
any money that may be or become due to any person from the Trust Fund. Nothing
contained in this Plan will be deemed to give any Participant, Member, or
Beneficiary an interest in any specific part of the
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Trust Fund or any other interest except the right to receive benefits out of
the Trust Fund in accordance with the provisions of the Plan and the Trust
Agreement.
14.7 MERGER, CONSOLIDATION, OR TRANSFER
In the case of any merger or consolidation with, or transfer of assets and
liabilities to any other plan, provisions will be made so that each Member will
receive a benefit immediately after the merger, consolidation, or transfer (if
the Plan had then terminated) that is equal to or greater than the benefit the
Member would have been entitled to receive immediately before the merger,
consolidation, or transfer (if the Plan had then terminated).
14.8 INTERNAL REVENUE SERVICE APPROVAL
The Company intends to obtain a ruling or rulings by the District Director of
Internal Revenue that--
(a) the Plan, as in effect from time to time, with respect to all Employers,
meets the requirements of Code subsection 401(a); and
(b) any and all contributions made by the Employers under the Plan are
deductible for income tax purposes under Code subsection 404(a) or any
other applicable provisions of the Code.
* * * * * * * * * *
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IN WITNESS WHEREOF, Cinergy Corp. has caused this instrument to be executed by
its duly authorized officers effective as of January 1, 1998.
CINERGY CORP.
APPROVED:
By_____________________________________
Madeleine W. Ludlow
Its_______________________________
By_______________________________
Its________________________
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