EXHIBIT 10(5)(a)
THE PROMUS HOTEL CORPORATION
SAVINGS AND RETIREMENT PLAN - B
TABLE OF CONTENTS
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Article I. The Plan........................................................ 1
1.1 Establishment of Plan.............................................. 1
1.2 Applicability of the Plan.......................................... 1
1.3 Purpose of Plan.................................................... 1
Article II. Definitions.................................................... 2
2.1 Account............................................................ 2
2.2 Administrative Delegate ........................................... 3
2.3 Affiliate.......................................................... 3
2.4 After-Tax Contributions............................................ 4
2.5 Annuity Starting Date.............................................. 4
2.6 Basic Contributions................................................ 4
2.7 Before-Tax Contributions........................................... 4
2.8 Beneficiary........................................................ 4
2.9 Board of Directors................................................. 4
2.10 Break Year........................................................ 4
2.11 Chief Executive Officer........................................... 4
2.12 Code.............................................................. 4
2.13 Company........................................................... 4
2.14 Company Stock..................................................... 4
2.15 Compensation...................................................... 5
2.16 Division.......................................................... 5
2.17 Eligible Employee................................................. 5
2.18 Employee.......................................................... 6
2.19 Employer.......................................................... 6
2.20 Enrollment Form................................................... 6
2.21 Entry Date........................................................ 6
2.22 ERISA............................................................. 6
2.23 Fund.............................................................. 6
2.24 Highly Compensated Employee....................................... 6
2.25 Holiday Plan...................................................... 8
2.26 Hour of Service................................................... 8
2.27 Human Resources Committee......................................... 12
2.28 Investment Fund .................................................. 12
2.29 Matching Contributions............................................ 12
2.30 Member............................................................ 12
2.31 Participant....................................................... 12
2.32 Plan.............................................................. 12
2.33 Plan Administrator................................................ 12
2.34 Plan Year......................................................... 13
2.35 Predecessor Effective Date........................................ 13
2.36 Predecessor Plan.................................................. 13
2.37 Retirement Date................................................... 13
2.38 Rollover Contributions............................................ 13
2.39 Spin-Off Date..................................................... 13
2.40 S&RP.............................................................. 13
2.41 S&RP Spin-Off Date................................................ 13
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2.42 Supplemental Contributions........................................ 13
2.43 Termination of Service............................................ 13
2.44 Total and Permanent Disability.................................... 13
2.45 Trust Agreement................................................... 14
2.46 Trustees.......................................................... 14
2.47 Valuation Date.................................................... 14
2.48 Vested Balance.................................................... 14
2.49 Vested Percentage................................................. 14
2.50 Year of Eligibility Service....................................... 14
2.51 Year of Vesting Service........................................... 14
Article III. Eligibility and Participation................................. 15
3.1 Eligibility........................................................ 15
3.2 Participation...................................................... 15
3.3 Eligible Employees................................................. 16
3.4 Rehired Employees.................................................. 16
3.5 Loss of Status as Eligible Employee................................ 17
3.6 Leased Employees................................................... 17
Article IV. Contributions and Allocations.................................. 18
4.1 Before-Tax Contributions........................................... 18
4.2 After-Tax Contributions............................................ 19
4.3 Pay Reduction Agreements........................................... 19
4.4 Matching Contributions............................................. 20
4.5 [Reserved]......................................................... 21
4.6 Allocation of Forfeitures.......................................... 21
4.7 Limitations on Contributions....................................... 22
4.8 Limitations on Annual Additions.................................... 29
4.9 Rollover Contributions and Plan to Plan Transfers.................. 31
Article V. [Reserved]....................................................... 33
Article VI. Members' Accounts; Investment Funds............................ 33
6.1 Investment Elections by Members.................................... 33
6.2 Plan Expenses...................................................... 34
6.3 Valuation; Allocation of Investment Earnings and Losses............ 35
6.4 Company Stock Funds............................................... 36
Article VII. Vesting and Forfeitures....................................... 38
7.1 Vesting in Before-Tax Contributions and Rollover................... 38
7.2 Vesting Schedule for Matching Contributions Account................ 39
7.3 Full Vesting of Certain Employee Accounts.......................... 39
7.4 Forfeitures........................................................ 39
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Article VIII. In-Service Withdrawals....................................... 40
8.1 Order of Withdrawal................................................ 40
8.2 Withdrawal Limitations............................................. 41
Article IX. Distributions.................................................. 44
9.1 Entitlement to Distribution Upon Death of Member................... 44
9.2 Distribution Upon Termination of Service for Reasons
Other Than Death................................................... 46
9.3 Form of Benefit Payments........................................... 46
9.4 Time of Benefit Payments........................................... 48
9.5 Incidental Death Benefit........................................... 50
9.6 Distribution of Employee Account 9................................. 50
9.7 [Reserved]......................................................... 55
9.8 Limitations on Distributions....................................... 55
9.9 Eligible Rollover Distributions.................................... 55
9.10 Plan to Plan Transfers............................................ 56
Article X. Loans to Members................................................ 57
10.1 Administrator Authorized to Make Loans............................ 57
10.2 Amount of Loans................................................... 58
10.3 Interest.......................................................... 58
10.4 Term.............................................................. 59
10.5 Repayment......................................................... 59
10.6 Accounting for Loans.............................................. 59
10.7 Documents......................................................... 60
10.8 Default........................................................... 60
10.9 Spousal Consent................................................... 60
Article XI. Amendment and Termination...................................... 60
11.1 Amendment and Termination......................................... 60
11.2 Vesting on Termination or Partial Termination..................... 61
11.3 Merger, Consolidation, or Transfer................................ 62
11.4 Effect of Change in Control....................................... 62
Article XII. Administration of the Plan.................................... 63
12.1 Plan Administrator................................................ 63
12.2 Appointment and Resignation of Trustees........................... 64
12.3 Powers and Duties of the Plan Administrator....................... 64
12.4 Action by Majority of the Plan Administrator...................... 65
12.5 Rules and Regulations of the Plan Administrator................... 65
12.6 Conclusiveness of Reports, Etc.................................... 65
12.7 Claims Procedure.................................................. 65
12.8 Employment of Agents.............................................. 66
12.9 Compensation and Expenses of Trustees............................. 66
12.10 Indemnity for Liability.......................................... 67
12.11 Effect of Mistake................................................ 67
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Article XIII. Trust Arrangements........................................... 67
13.1 Appointment of Trustee............................................ 67
13.2 Change in Trust Agreements........................................ 67
13.3 Trust Fund........................................................ 68
13.4 Appointment of an Investment Manager.............................. 68
13.5 Diversification of Investments.................................... 68
13.6 Reversion of Employer Contributions............................... 69
Article XIV. Top-Heavy Plan Provisions..................................... 69
14.1 Application of Top-Heavy Provisions............................... 69
14.2 Definitions....................................................... 71
14.3 Vesting Requirements.............................................. 72
14.4 Minimum Contribution.............................................. 73
14.5 Limit on Annual Additions; Combined Plan Limit.................... 74
Article XV. Participation in and Withdrawal................................ 74
15.1 Participation in the Plan......................................... 74
15.2 Withdrawal from the Plan.......................................... 75
Article XVI. Miscellaneous................................................. 76
16.1 No Employment Rights Created...................................... 76
16.2 Rights to Fund Assets............................................. 76
16.3 Nonalienation of Benefits......................................... 76
16.4 Expenses.......................................................... 77
16.5 Severability...................................................... 77
16.6 Governing State................................................... 77
16.7 Facility of Payment............................................... 77
16.8 Missing Persons................................................... 78
16.9 Telephonic/Electronic Decisions................................... 78
16.10 Titles........................................................... 78
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THE PROMUS HOTEL CORPORATION
SAVINGS AND RETIREMENT PLAN - B
ARTICLE I. THE PLAN
1.1 ESTABLISHMENT OF PLAN. The Promus Hotel Corporation (the "Company")
established the Promus Hotel Corporation Savings and Retirement Plan (the
"S&RP") for its eligible Employees, effective as of June 30, 1995 (the "S&RP
Spin-off Date"). The S&RP is a spin-off of The Promus Companies Incorporated
Savings and Retirement Plan (now, the "Harrah's Entertainment, Inc. Savings and
Retirement Plan" (the "Predecessor Plan")), which spin-off was pursuant to the
distribution of a dividend of common stock in the Company to the shareholders of
The Promus Companies Incorporated (currently, Harrah's Entertainment, Inc.).
The S&RP was amended effective June 30, 1995 and on November 15, 1995.
As of December 31, 1995, the S&RP consisted of two plans, a profit-sharing plan
and a stock bonus plan ("ESOP"). Effective as of December 31, 1995, the ESOP
was spun-off from the S&RP. Following the spin-off of the ESOP, the S&RP was
further split into two plans on December 31, 1995 by spinning off the portion of
the S&RP attributable to the following participants: (1) Embassy Suitekeepers,
(2) Hampton Room Attendants and (3) Homewood Suitekeepers and such plan was
named The Promus Hotel Corporation Savings and Retirement Plan - B (the "Plan").
In order to document said spin-offs of the ESOP and the Plan from the S&RP and
to make certain other administrative changes to the Plan, the Plan has been
adopted by a resolution of the Board of Directors of the Company on November 15,
1995, effective as of January 1, 1996, except as otherwise provided in Exhibit
1.
1.2 APPLICABILITY OF THE PLAN. The provisions of this Plan are applicable only
to Employees in the employ of the Company or an Affiliate on or after January 1,
1996, except as otherwise specifically provided herein.
1.3 PURPOSE OF PLAN. The purpose of the Plan is to allow eligible Employees to
accumulate capital for their retirement. The Plan is intended to qualify as a
profit sharing plan, and it, together with all related trusts, is intended to
meet the requirements of Sections 401(a), 401(k), 401(m) and 501(a) of the Code.
ARTICLE II. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below unless otherwise expressly provided. Any masculine terminology
shall be deemed to refer either to a male or a female, and the definition of any
term in the singular shall also include the plural, whichever is appropriate in
the context.
2.1 ACCOUNT means the separate account maintained under the Plan for each
Member, which represents his total proportionate interest in the Fund as of any
Valuation Date and which consists of the sum of the following subaccounts:
(a) EMPLOYEE ACCOUNT 1 means the portion of a Member's Account which
evidences the value of--
(1) the Base Matching Contributions made on his behalf by an
Employer, including the value of such contributions transferred
from the Predecessor Plan and/or the S&RP;
(2) the noncontributory portion of the Holiday Plan as in effect on
December 31, 1977; and
(3) forfeitures allocated to such Account under Section 4.6(a).
Employee Account 1 also includes any gains and losses of the Fund
attributable to paragraphs (1), (2), and (3).
(b) EMPLOYEE ACCOUNT 2 means the portion of a Member's Account which
evidences the value of the Basic Before-Tax Contributions made on his
behalf by an Employer, including the value of such contributions
transferred from the Predecessor Plan and/or S&RP, and also including
any gains and losses of the Fund attributable thereto.
(c) EMPLOYEE ACCOUNT 3 means the portion of a Member's Account which
evidences the value of the Supplemental Before-Tax Contributions made
on his behalf by an Employer, including the value of such
contributions transferred from the Predecessor Plan and/or S&RP, and
also including any gains and losses of the Fund attributable thereto.
(d) EMPLOYEE ACCOUNT 4 means the portion of a Member's Account which
evidences the value of his Basic After-Tax Contributions, including
the value of such contributions transferred from the Predecessor Plan
and/or S&RP, and also including any gains and losses of the Fund
attributable thereto.
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(e) EMPLOYEE ACCOUNT 5 means the portion of a Member's Account which
evidences the value of his Supplemental After-Tax Contributions,
including the value of such contributions transferred from the
Predecessor Plan and/or the S&RP, and also including any gains and
losses of the Fund attributable thereto.
(f) EMPLOYEE ACCOUNT 6 means the portion of a Member's Account which
evidences the value of the Discretionary Matching Contributions made
on his behalf by an Employer, the value of such contributions
transferred from the Predecessor Plan and/or the S&RP, and the value
of forfeitures allocated to such Account under Section 4.6(a),
including any gains and losses of the Fund attributable thereto.
(g) EMPLOYEE ACCOUNT 7 means the portion of a Member's Account which
evidences the value of his Rollover Contributions, including the value
of such contributions transferred from the Holiday Plan, the
Predecessor Plan and/or the S&RP, and also including any gains and
losses of the Fund attributable thereto.
(h) EMPLOYEE ACCOUNT 8 means the portion of a Member's Account transferred
from the Predecessor Plan and/or the S&RP which is attributable to the
Member's accounts from the Harrah's Retirement Plan and the Holiday
Casino Profit Sharing Plan (collectively referred to as the "Harrah's
Plans") which were previously merged into the Holiday Plan, and the
value of forfeitures allocated to such Account under Section 4.6(b),
including any gains and losses of the Fund attributable thereto.
(i) EMPLOYEE ACCOUNT 9 means the portion of a Member's Account transferred
from the Predecessor Plan and/or the S&RP which evidences the value of
the portion of his account from the Holiday Plan attributable to
direct transfers from the Holiday Inns, Inc. Employee's Retirement
Plan and from any plan subject to Code Section 417, including any
gains and losses of the Fund attributable thereto.
2.2 ADMINISTRATIVE DELEGATE means one or more persons or institutions to whom
the Plan Administrator has delegated certain administrative functions pursuant
to a written agreement.
2.3 AFFILIATE means a member of the same controlled group of corporations (as
defined in Code Section 414(b)) as the Employer, a trade or business that is
under common control (as defined in Code Section 414(c)) with the Employer; an
organization which, along with the Employer, is a member of an affiliated
service group (as defined in Code Section 414(m)); or any other entity while it
is required to be aggregated with the Employer under
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Code Section 414(o) and related Regulations. Notwithstanding anything in this
Section to the contrary, for purposes of Section 4.8 (regarding annual
limitations on additions to a Participant's Account), a determination as to
whether an entity is an Affiliate shall be made in accordance with Code
Section 415.
2.4 AFTER-TAX CONTRIBUTIONS mean the contributions made by a Participant under
Section 4.2, which are derived from a Member's taxable compensation, and which
shall include both Basic After-Tax Contributions and Supplemental After-Tax
Contributions.
2.5 ANNUITY STARTING DATE means the first day of the first period for which a
benefit is paid as an annuity or in any other form.
2.6 BASIC CONTRIBUTIONS mean those contributions on which Matching
Contributions are made, and shall include Basic Before-Tax Contributions and
Basic After-Tax Contributions.
2.7 BEFORE-TAX CONTRIBUTIONS mean the contributions made by an Employer on
behalf of a Participant pursuant to the Participant's election to reduce
Compensation, as described in Sections 4.1 and 4.3, and shall include both Basic
Before-Tax Contributions and Supplemental Before-Tax Contributions.
2.8 BENEFICIARY means the person or persons designated under Section 9.1 to
receive benefits under the Plan.
2.9 BOARD OF DIRECTORS means the board of directors of the Company, the Human
Resources Committee, or any other committee of the Board of Directors designated
by the Chief Executive Officer, with authority to act in matters related to the
Plan.
2.10 BREAK YEAR means a Plan Year in which the Employee is credited with no
more than 500 Hours of Service.
2.11 CHIEF EXECUTIVE OFFICER means the Chief Executive Officer of the Company.
2.12 CODE means the Internal Revenue Code of 1986, as amended from time to
time. A reference to a provision of the Code shall, if such provision is
amended, refer to the successor to such provision to the extent required by law.
2.13 COMPANY means Promus Hotel Corporation or any successor thereto that
agrees to assume and continue this Plan.
2.14 COMPANY STOCK means the common stock of the Company or an Affiliate, as
the Plan Administrator shall determine.
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2.15 COMPENSATION.
(a) Except as otherwise specified in subsections (b) and (c), Compensation
means base pay paid to the Employee by the Employer (determined prior
to such Employee's election to reduce wages under Code Section 125 or
401(k)); including shift premiums, commissions, and tips reported to
the Employer for additional withholding of Federal income tax (not to
exceed actual tips received); and excluding overtime, bonuses, and
other forms of additional remuneration.
(b) For purposes of determining whether an individual is a Highly
Compensated Employee, "Compensation" means an Employee's compensation,
as defined in Code Section 414(q)(7) and the applicable Treasury
Regulations.
(c) For purposes of satisfying the limits on contributions described in
Section 4.7, Compensation means an Employee's compensation as defined
in Code Section 414(s) and, at the Plan Administrator's election, may
be increased by amounts excluded from wages by reason of an Employee's
election to reduce wages under Code Sections 125 and 401(k).
(d) In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, the
annual compensation of each Employee taken into account under the Plan
shall not exceed the OBRA '93 annual compensation limit. The OBRA '93
annual compensation limit is $150,000, as adjusted by the Commissioner
for increases in the cost of living in accordance with Section
401(a)(17)(B) of the Code. The cost-of-living adjustment in effect
for a calendar year applies to any period, not exceeding 12 months,
over which compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer
than 12 months, the OBRA '93 annual compensation limit will be
multiplied by a fraction, the numerator of which is the number of
months in the determination period, and the denominator of which is
12. In determining the Compensation of an Employee for purposes of
this limitation, Code Section 414(q)(6) shall apply, except in
applying such Section, the term "family" shall include only the
Employee's spouse and any lineal descendants of the Employee who have
not attained age 19 before the close of the Plan Year.
2.16 DIVISION means an Employer, Affiliate, group, or other identifiable unit
of the Company.
2.17 ELIGIBLE EMPLOYEE means an Employee described in Section 3.3.
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2.18 EMPLOYEE means any individual employed by the Company or an Affiliate. No
individual shall be considered an Employee under the Plan by reason of service
to the Company or an Affiliate solely as a director or during a period of
service pursuant to an agreement designating such service as that of a
consultant.
2.19 EMPLOYER means the Company and any Affiliate which is participating
hereunder or which elects or determines, with the consent of the Chief Executive
Officer, to participate hereunder. An Affiliate that employs a nonresident
alien who is participating in this Plan under Section 3.3(a) shall be deemed an
Employer only with respect to such nonresident alien.
2.20 ENROLLMENT FORM means the form described in Section 3.2.
2.21 ENTRY DATE means January 1, 1996, or any January 1 or July 1 thereafter.
2.22 ERISA means the Employee Retirement Income Security Act of 1974, as in
effect at the time with respect to which such term is used.
2.23 FUND means the trust fund established under Article XIII to hold the
assets of the Plan. It shall be composed of separate Investment Funds as
permitted by the Plan Administrator and the Trustees. A separate Investment
Fund exists to hold the Aurora National Life Assurance Company investment,
formerly Executive Life investment, of certain Members (the "Executive Life
Fund"). (See Addendum A attached hereto.) The Plan Administrator and the
Trustees shall have the discretion to establish, amend, and terminate such
Investment Funds as they shall deem appropriate.
2.24 HIGHLY COMPENSATED EMPLOYEE means an Employee who performs service during
the determination year and is described in one or more of the following groups:
(a) An Employee who is a 5% owner, as defined in Code Section
416(i)(1)(A)(iii), at any time during the determination year or the
look-back year.
(b) An Employee who receives compensation in excess of $75,000, (indexed
in accordance with Code Section 415(d)) during the look-back year.
(c) An Employee who receives compensation in excess of $50,000 (indexed in
accordance with Code Section 415(d)) during the look-back year and is
a member of the top-paid group for the look-back year.
(d) An Employee who is an officer, within the meaning of Code Section
416(i), during the look-back year and who receives compensation in the
look-back year greater than 50% of the dollar limitation in effect
under Code
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Section 415(b)(1)(A) for the calendar year in which the look-back year
begins.
(e) An Employee who is both described in paragraph (b), (c) or (d) above
when these paragraphs are modified to substitute the determination
year for the look-back year and one of the 100 employees who receive
the most compensation from the Employer during the determination year.
For purposes of the definition of Highly Compensated Employee:
(1) The determination year is the Plan Year for which the
determination of who is highly compensated is being made.
(2) The look-back year is the 12 month period immediately preceding
the determination year, or if the Employer elects, the calendar
year ending with or within the determination year.
(3) The top-paid group consists of the top 20% of Employees ranked on
the basis of compensation received during the year. For purposes
of determining the number of Employees in the top-paid group,
Employees described in Code Section 414(q)(8) and Q & A 9(b) of
Section 1.414(q)-1T of the Code Regulations are excluded.
(4) The number of officers is limited to 50 (or, if lesser, the
greater of 3 Employees or 10% of Employees) excluding those
Employees who may be excluded in determining the top-paid group.
(5) When no officer has compensation in excess of 50% of the Code
Section 415(b)(1)(A) limit, the highest paid officer is treated
as highly compensated.
(6) Compensation means compensation within the meaning of Code
Section 415(c)(3), including elective or salary reduction
contributions to a cafeteria plan, cash or deferred arrangement
or tax-sheltered annuity.
(7) Employers aggregated under Code Section 414(b), (c), (m), or (o)
are treated as a single Employer.
For purposes of the requirements of Code Section 414(q), a Highly
Compensated Employee who is either a 5% owner or one of the ten most Highly
Compensated Employees is subject to the family aggregation rules of Code Section
414(q)(6). For purposes of the family aggregation rules, the term "family"
means, with
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respect to any Employee, such Employee's spouse and lineal ascendants and
descendants and the spouses of such lineal ascendants and descendants.
2.25 HOLIDAY PLAN means the Holiday Corporation Savings and Retirement Plan, as
in effect immediately before the Predecessor Effective Date.
2.26 HOUR OF SERVICE.
(a) GENERAL RULE. "Hour of Service" means each hour for which the
Employee is directly or indirectly paid or entitled to payment by the
Company or an Affiliate--
(1) for the performance of duties,
(2) on account of a period of time during which no duties are
performed due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty, or
leave of absence, or
(3) for which back pay, irrespective of mitigation of damages, is
either awarded or agreed to by the Company or an Affiliate;
provided, however, that no hour shall be credited as an Hour of
Service under more than one of the preceding paragraphs. For
Employees who are paid on other than an hourly basis, Hours of Service
shall be credited for each payroll period of the Employee for which
the Employee receives or is entitled to receive compensation according
to the following chart:
Payroll Period Hours of Service Credited
-------------- -------------------------
(1) Daily 10
(2) Weekly 45
(3) Bi-Weekly 90
(4) Semi-Monthly 95
(5) Monthly 190
(b) APPLICABLE COMPUTATION PERIOD.
(1) Hours of Service described in subsection (a)(1) shall be credited
to the computation period (as defined below) in which the duties
are performed.
(2) Hours of Service described in subsection (a)(2) shall be credited
to the computation period in which the Employee is compensated
for such Hours of Service.
(3) Hours of Service described in subsection (a)(3) shall be credited
to the computation period to
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which the award or agreement for back pay pertains, rather than
the computation period in which the award, agreement, or payment
is made.
(4) The term "computation period" means--
(A) the Plan Year, when crediting Hours of Service for purposes
of determining Years of Vesting Service; and
(B) the appropriate 12-month period determined under Section
2.50 for purposes of determining Years of Eligibility
Service.
(c) HOURS NOT COUNTED. This subsection limits the Hours of Service
credited for periods during which no duties are performed and applies
whether or not Hours of Service otherwise would have been counted for
such periods under subsection (a)(2).
(1) UNPAID TIME. An hour for which an Employee is not paid, either
directly or indirectly, shall not be credited except in the case
of an approved leave of absence or military leave (as defined
below).
(2) WORKERS' COMPENSATION, DISABILITY INSURANCE, OR UNEMPLOYMENT
COMPENSATION. An hour for which an Employee is directly or
indirectly paid or entitled to payment on account of a period
during which the Employee performed no duties shall not be
credited if such payment is made or due under a plan maintained
solely for the purpose of complying with an applicable workers'
compensation, disability insurance, or unemployment compensation
law.
(3) MEDICAL REIMBURSEMENT. Hours of Service shall not be credited
for a payment which solely reimburses the Employee for medical or
medically-related expenses incurred by the Employee.
(4) 501 HOUR LIMITATION. Except in the case of an approved leave of
absence or military leave and except as required by the Family
and Medical Leave Act of 1993, not more than 501 Hours of Service
shall be credited under subsection (a)(2) on account of any
single period during which the Employee performs no duties
(whether or not such period occurs in a single computation
period).
(d) MILITARY LEAVE. An Employee shall be credited with an Hour of Service
for each hour of the normally scheduled workweek for each week during
any period in which he is absent from work, without pay, with the
Company and its
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Affiliates for voluntary or involuntary military service with the
armed forces of the United States of America, but not to exceed the
period required under the laws pertaining to veteran's reemployment
rights; provided, however, that if he fails to return to the employ of
the Company or an Affiliate at the end of such absence during which he
has reemployment rights under the applicable laws, he shall not
receive credit for hours on such leave.
(e) MATERNITY AND PATERNITY ABSENCE. Solely for purposes of determining
whether a Break Year has occurred, an Employee shall be credited with
an Hour of Service for each hour which would have been credited to
such Employee but for such Employee's absence from employment for
maternity or paternity reasons. In any case in which the Plan
Administrator is unable to determine the hours which would have been
credited to such Employee but for such absence, the Employee shall be
credited with eight Hours of Service for each day of the normally
scheduled workweek the Employee is absent from work for maternity or
paternity reasons. An absence from work for maternity or paternity
reasons shall mean an absence--
(1) by reason of the pregnancy of the Employee,
(2) by reason of the birth of a child of the Employee,
(3) by reason of the placement of a child with the Employee in
connection with the adoption of such child by such Employee, or
(4) for purposes of caring for such child for a period beginning
immediately following such birth or placement.
Except as required by the Family and Medical Leave Act of 1993, no
more than 501 Hours of Service shall be credited under this subsection
for any such absence. Hours of Service under this subsection shall be
credited in the Plan Year in which the absence from employment
commences if the crediting is necessary to prevent a Break Year (and
only to prevent a Break Year) or, in all other cases, such Hours of
Service shall be credited in the following Plan Year (and only for the
purpose of preventing a Break Year in such Plan Year).
(f) SPECIAL RULE FOR FORMER EMPLOYEES OF THE PROMUS COMPANIES
INCORPORATED.
(1) Notwithstanding any other provision of this Section 2.26, for
purposes of Sections 2.50 and 2.51, with respect to an Employee
who was an
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employee of The Promus Companies Incorporated or one of its
affiliates (as defined in the Predecessor Plan), including for
purposes of this Section 2.26(f) Harrah's Entertainment, Inc. or
any of its subsidiaries, at any time prior to the S&RP Spin-Off
Date and who becomes an Employee of the Company or an Affiliate
under either of the circumstances described below, "Hour of
Service" shall include, to the extent reasonably determinable by
the Plan Administrator, each "Hour of Service" credited to such
Employee under the Predecessor Plan through the date determined
in accordance with the following:
(A) any such employee who was employed by The Promus Companies
Incorporated or one of its affiliates (as defined in the
Predecessor Plan) on the day immediately preceding the S&RP
Spin-Off Date and who becomes employed by the Company or any
Affiliate on or after the S&RP Spin-Off Date but prior to
January 1, 1996, or who becomes concurrently employed by The
Promus Companies Incorporated or one of its affiliates (as
defined in the Predecessor Plan) and the Company or an
Affiliate as of the S&RP Spin-Off Date, shall be credited
with such "Hours of Service" through the date of
commencement of such Employee's employment or concurrent
employment with the Company or Affiliate; or
(B) any such employee who becomes employed by the Company or any
Affiliate after December 31, 1995 but within five years
after the S&RP Spin-Off Date shall be credited with such
"Hours of Service" through the S&RP Spin-Off Date only.
(2) Notwithstanding any other provision of this Section 2.26, for
purposes of Section 2.50 and 2.51, with respect to an Employee
who (i) is a former employee of The Promus Companies Incorporated
or one of its affiliates (as defined in the Predecessor Plan)
participating in the Predecessor Plan, (ii) was, on the S&RP
Spin-Off Date, employed by The Promus Companies Incorporated in a
position in its Administrative Systems Department or Computer
Operations Department in a capacity supporting the Human
Resources and Financial Computer Systems for the hotel business
of The Promus Companies Incorporated, (iii) terminates employment
with The Promus Companies Incorporated (currently, Harrah's
Entertainment, Inc.) or one of its affiliates (as
11
defined in the Predecessor Plan) within thirty months following
the S&RP Spin-Off Date and (iv) within thirty days following such
termination is employed by the Company or one of its Affiliates
in a capacity substantially similar to the capacity in which such
employee was employed by The Promus Companies Incorporated
(currently, Harrah's Entertainment, Inc.) or one of its
affiliates (as defined in the Predecessor Plan), "Hour of
Service" shall include, in addition to each "Hour of Service"
credited to such employee during the period preceding and
including the S&RP Spin-Off Date, each "Hour of Service" credited
to such Employee under the Predecessor Plan during the period
following the S&RP Spin-Off Date until the date of such
termination of employment, to the extent that such service is
reasonably determinable by the Plan Administrator.
(g) CONSTRUCTION. This Section is intended to be consistent with the
requirements of Section 2530.200b-2 of Department of Labor Regulations
and shall be so construed.
2.27 HUMAN RESOURCES COMMITTEE means the committee of that name appointed by
the Board of Directors, or any successor to such committee.
2.28 INVESTMENT FUND means one of the investment funds of the Fund which is
authorized by the Plan Administrator and the Trustees at the time of reference,
and may include a fund solely or primarily invested in Company Stock (the
"Company Stock Fund").
2.29 MATCHING CONTRIBUTIONS mean the contributions made by an Employer under
Section 4.4 and shall include both Base Matching Contributions and Discretionary
Matching Contributions. Matching Contributions shall also include forfeitures
which are allocated based upon elective (Before-Tax) or Matching Contributions
or Employee After-Tax Contributions.
2.30 MEMBER means a Participant, or a former Participant who still has a
balance in his Account.
2.31 PARTICIPANT means any Employee of an Employer who has met and continues to
meet the active participation requirements of the Plan as set forth in Article
III.
2.32 PLAN means the Promus Hotel Corporation Savings and Retirement Plan - B,
as set forth herein.
2.33 PLAN ADMINISTRATOR means the Promus Hotels, Inc. acting through one or
more of its officers or their respective delegates.
12
2.34 PLAN YEAR means the calendar year.
2.35 PREDECESSOR EFFECTIVE DATE means February 6, 1990.
2.36 PREDECESSOR PLAN means The Promus Companies Incorporated Amended and
Restated Savings and Retirement Plan (now, the Harrah's Entertainment, Inc.
Savings and Retirement Plan), as in effect immediately before the S&RP Spin-Off
Date, unless otherwise required by the context to include the Harrah's
Entertainment, Inc. Savings and Retirement Plan, as in effect after the S&RP
Spin-Off Date.
2.37 RETIREMENT DATE under the Plan includes the following:
(a) NORMAL RETIREMENT DATE means the Employee's sixty-fifth birthday.
(b) EARLY RETIREMENT DATE means the date on or after the Employee's
fifty-fifth birthday, but before his sixty-fifth birthday, on which
he retires.
2.38 ROLLOVER CONTRIBUTIONS mean the contributions made under Section 4.9.
2.39 SPIN-OFF DATE means December 31, 1995.
2.40 S&RP means the Promus Hotel Corporation Savings and Retirement Plan.
2.41 S&RP SPIN-OFF DATE means June 30, 1995 which is the date of the
distribution of a dividend of common stock in the Company to the shareholders of
The Promus Companies Incorporated when the S&RP was spun off of the Predecessor
Plan.
2.42 SUPPLEMENTAL CONTRIBUTIONS mean those employee contributions that are not
eligible for Matching Contributions, and shall include Supplemental Before-Tax
Contributions and Supplemental After-Tax Contributions.
2.43 TERMINATION OF SERVICE means the last date on which the individual is an
Employee of the Company or an Affiliate.
2.44 TOTAL AND PERMANENT DISABILITY means any physical or mental injury or
disease which causes an Employee to be permanently incapable of continuing
employment with his or her Employer or securing any gainful employment. Such
disability shall be established by certification to the Plan Administrator.
Such certification shall be by:
(a) a physician selected by the Employee and approved by the Plan
Administrator;
(b) three physicians, one selected by the Employee, one selected by the
Plan Administrator, and one selected
13
by the physicians selected by the Employee and Plan Administrator;
(c) an award to receive Social Security disability benefits; or
(d) approval of waiver of premiums under the Employer's group life
insurance plan.
2.45 TRUST AGREEMENT means the agreement under which Plan assets are held and
invested pursuant to Article XIII.
2.46 TRUSTEES means the person or persons acting as trustee under the Trust
Agreement.
2.47 VALUATION DATE means any day that the New York Stock Exchange is open for
business or any other date designated by the Plan Administrator and the
Trustees.
2.48 VESTED BALANCE as of a given date means the Vested Percentage of the
Member's Employee Accounts 1, 6, and 8 plus the aggregate balances of the
Member's Employee Accounts 2, 3, 4, 5, 7 and 9.
2.49 VESTED PERCENTAGE means the percentage determined under Section 7.2 or 7.3
of the Plan, whichever is applicable.
2.50 YEAR OF ELIGIBILITY SERVICE. An Employee shall receive credit for a Year
of Eligibility Service for each 12-month period during which the Employee
completes 1,000 or more Hours of Service, beginning on (1) the earlier of the
Employee's first day of compensated work for the Company or an Affiliate or, to
the extent applicable pursuant to Section 2.26(f), The Promus Companies
Incorporated (currently, Harrah's Entertainment, Inc.) or an affiliate thereof
(as defined in the Predecessor Plan) or (2) any January 1 thereafter.
2.51 YEAR OF VESTING SERVICE.
(a) GENERAL RULE. An Employee shall be credited with a Year of Vesting
Service for each Plan Year in which he is credited with at least 1,000
Hours of Service; provided however, that no Employee shall be credited
with more than one Year of Vesting Service for any Plan Year,
notwithstanding that an Employee may have 1,000 or more Hours of
Service with more than one Company or Affiliate or other entity during
the Plan Year.
(b) EFFECT OF BREAK IN SERVICE. An Employee's Years of Vesting Service
completed prior to a Break Year shall be disregarded if (1) the
Employee was not vested in any part of his Employee Accounts 1, 6, or
8 prior to such Break Year and (2) the number of such consecutive
Break Years equals or exceeds the greater of five or
14
the aggregate number of Years of Vesting Service completed prior to
such Break Year. In determining the aggregate number of Years of
Vesting Service for purposes of this subsection (c), the aggregate
number of Years of Vesting Service completed prior to a Break Year
shall not include Years of Vesting Service disregarded by reason of
any prior Break Year.
(c) SPECIAL RULE FOR FIRST YEAR OF VESTING SERVICE. Solely for the
purpose of determining an Employee's Vested Percentage, if the
Employee completes a Year of Eligibility Service but does not complete
a Year of Vesting Service in the Plan Year (or preceding Plan Year) in
which the Employee completes such Year of Eligibility Service, the
Employee shall be credited with a Year of Vesting Service for the Plan
Year in which he completes a Year of Eligibility Service.
ARTICLE III. ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY. Each Eligible Employee who was eligible to participate in the
S&RP on the Spin-Off Date shall be eligible to become a Participant in this Plan
on January 1, 1996, provided that he is then an Eligible Employee. Each other
Employee who becomes an Eligible Employee after January 1, 1996 shall be
eligible to become a Participant on the latest of:
(a) the Entry Date coincident with or next following the date on which he
becomes an Eligible Employee;
(b) the Entry Date coincident with or next following his completion of one
Year of Eligibility Service; or
(c) any business day.
3.2 PARTICIPATION.
(a) An Employee who became a Participant under Section 3.1 on January 1,
1996, and who was a participant in the S&RP on the Spin-Off Date,
shall be enrolled in the Plan as of January 1, 1996 at the same
contribution rates, and with the same investment elections and
beneficiary designation, that were in effect for him under the S&RP on
the Spin Off Date; provided, however, that such Employee may change
these contribution and investment elections and beneficiary
designation by submitting an Enrollment Form (as described in
subsection (b)) at the time and in the manner specified by the Plan
Administrator.
(b) An Employee who shall from time to time qualify to become a
Participant in accordance with Section 3.1 may enroll in the Plan,
with regard to the elective contributions described in Sections 4.1
and 4.2, as of
15
the Entry Date coincident with or next following the date on which he
satisfies the requirements of Section 3.1, or any business day
thereafter, by submitting an Enrollment Form at the time and in the
manner specified by the Plan Administrator. Such Enrollment Form shall
serve as--
(1) a pay reduction agreement pursuant to Section 4.3;
(2) a Beneficiary designation pursuant to Section 9.1;
(3) an investment election pursuant to Section 6.1; and
(4) a pre-authorization to effect future changes to his
investment election under paragraph (3) as directed by the
Participant telephonically or by written instruction to the
Administrative Delegate.
3.3 ELIGIBLE EMPLOYEES.
(a) GENERAL RULE. Subject to the provisions of subsection (b), the term
"Eligible Employee" shall mean an Employee of an Employer who is
classified by the Company as an (1) Embassy Suitekeeper, (2) Hampton
Room Attendant or (3) Homewood Suitekeeper and shall include a
nonresident alien who receives no United States source income from an
Employer who has been designated by an Employer as eligible to
participate in this Plan; provided, however, that such Employee has
attained age 21.
(b) EXCLUDED EMPLOYEES. There shall be excluded from the class of
"Eligible Employees" any Employees included in a unit of employees
covered by a collective bargaining agreement, if retirement benefits
were the subject of good faith bargaining, unless such agreement
specifically provides for participation in the Plan. In addition,
there shall be excluded from the class of "Eligible Employees" any
Employees who (1) are nonresident aliens and receive no United States
source income from an Employer unless specifically designated as
"Eligible Employees" by the Employer, or (2) reside in Puerto Rico or
are otherwise subject to the income tax code of Puerto Rico unless
such Employee is designated as an Eligible Employee by the Employer.
3.4 REHIRED EMPLOYEES. Each reemployed Employee who was an Eligible Employee
and who had completed a Year of Eligibility Service prior to his Termination of
Service but was not then a Participant shall be eligible to become a Participant
on the
16
Entry Date coincident with or next following his satisfying the requirements of
Section 3.3, or on any business day thereafter, provided he completes an
appropriate Enrollment Form. A former Eligible Employee who was a Participant
and is re-employed as an Eligible Employee will be eligible to participate in
the Plan immediately upon his or her reemployment commencement date by
completing an appropriate enrollment form. Each Participant who ceases to be an
Eligible Employee because he no longer classified by the Company as an (1)
Embassy Suitekeeper, (2) Hampton Room Attendant or (3) Homewood Suitekeeper and
who is subsequently retransferred into a position which qualifies him as an
Eligible Employee under Section 3.3 will be eligible to participate in the Plan
immediately upon such retransfer by completing an enrollment form. Each other
former Employee who is subsequently rehired by the Company or an Affiliate as an
Eligible Employee shall, upon reemployment, become a Participant in accordance
with Sections 3.1 and 3.2.
3.5 LOSS OF STATUS AS ELIGIBLE EMPLOYEE. For any period during which a Member
either--
(a) remains in the employ of the Company or Affiliate, but ceases to be an
Eligible Employee within the meaning of Section 3.3; or
(b) is no longer an Employee but has an Account balance under the Plan,
no contributions of any kind shall be made on his behalf to his Account, but
such individual shall remain a Member for all other purposes until the earlier
of his death or the complete distribution (and/or forfeiture) of his Account.
3.6 LEASED EMPLOYEES. A person who is treated as an Employee of an Employer or
an Affiliate pursuant to Code Section 414(n) or (o) and the regulations
thereunder shall be considered a "leased employee" and shall not be considered
an Employee for purposes of the Plan. If such a person participates in the Plan
as a result of subsequent employment with an Employer or Affiliate, he shall
receive Years of Eligibility Service and Years of Vesting Service for his
employment as a leased employee.
Notwithstanding the preceding provisions of this Section, a leased employee
shall be treated as an Employee for purposes of applying the requirements
described in Code Section 414(n)(3) and in determining the number and identity
of Highly Compensated Employees.
17
ARTICLE IV. CONTRIBUTIONS AND ALLOCATIONS
4.1 BEFORE-TAX CONTRIBUTIONS.
(a) BASIC BEFORE-TAX CONTRIBUTIONS. Each Employer shall contribute to the
Fund, on behalf of each Participant of such Employer, Basic Before-Tax
Contributions in an amount equal to the amount by which the
Participant's Compensation has been reduced for such contributions
under a Pay Reduction Agreement described in Section 4.3. Such
reduction for Basic Before-Tax Contributions shall be a specified
whole percentage of Compensation of no more than six percent and shall
be subject to Section 4.3(d).
(b) SUPPLEMENTAL BEFORE-TAX CONTRIBUTIONS. Provided that a Participant is
making Basic Before-Tax contributions at a rate of 6 percent, such
Participant's Employer shall contribute to the Fund, on his behalf,
Supplemental Before-Tax Contributions in an amount equal to the amount
by which the Participant's Compensation has been reduced for such
contributions under a pay reduction agreement described in Section
4.3; provided, however, that a Highly Compensated Employee may not
make Supplemental Before-Tax Contributions. Such reduction for
Supplemental Before-Tax Contributions shall be a specified whole
percentage of Compensation and shall be within limits established from
time to time by the Chief Executive Officer and communicated to all
Participants.
(c) LIMIT ON BEFORE-TAX CONTRIBUTIONS. The maximum Before-Tax
Contributions are as follows:
(A) 14% for non-Highly Compensated Employees.
(B) 6% for Highly Compensated Employees.
(d) TIMING AND ALLOCATION OF BEFORE-TAX CONTRIBUTIONS. Before-Tax
Contributions shall be paid to the Fund as soon as practicable after
each payroll period, provided that in no event shall contributions
under this Section for any Plan Year be made later than (1) the date
prescribed by law for the Employer to obtain a federal income tax
deduction for the Plan Year for which such contributions are made or
(2) the date required under ERISA and the regulations thereunder, if
earlier. Basic Before-Tax Contributions shall be allocated to
Employee Account 2 and Supplemental Before-Tax Contributions shall be
allocated to Employee Account 3 as soon as administratively feasible
following such payments to the Fund.
18
4.2 AFTER-TAX CONTRIBUTIONS.
(a) BASIC AFTER-TAX CONTRIBUTIONS. A Participant may contribute to the
Fund Basic After-Tax Contributions in an amount specified by him in
the pay reduction agreement described in Section 4.3. Such Basic
After-Tax Contributions shall be a specified whole percentage of
Compensation and, when added to a Participant's Before-Tax
Contributions, shall not exceed 6 percent of such Participant's
Compensation and shall be subject to Section 4.3(d).
(b) SUPPLEMENTAL AFTER-TAX CONTRIBUTIONS. Provided that a Participant has
made the maximum Basic After-Tax Contributions permitted under
subsection (a), he may contribute to the Fund Supplemental After-Tax
Contributions in an amount equal to an amount specified by him in the
pay reduction agreement described in Section 4.3. Such Supplemental
After-Tax Contributions shall be a specified whole percentage of
Compensation and, when added to a Participant's Before-Tax
Contributions and Basic After-Tax Contributions, shall not exceed 16
percent of such Participant's Compensation.
(c) TIMING AND ALLOCATION OF AFTER-TAX CONTRIBUTIONS. After-Tax
Contributions shall be made at the time described in Section 4.1(d).
Basic After-Tax Contributions shall be allocated to Employee Account 4
and Supplemental After-Tax Contributions shall be allocated to
Employee Account 5 as soon as administratively feasible following such
payment to the Fund.
4.3 PAY REDUCTION AGREEMENTS.
(a) GENERAL RULE. In order to make Before-Tax Contributions and After-Tax
Contributions, an Eligible Employee who has satisfied the requirements
of Section 3.1 must enter into a pay reduction agreement, which shall
be part of the Enrollment Form, whereby such Eligible Employee agrees
to reduce his Compensation for such contribution within the limits
described in Sections 4.1 and 4.2. A Participant's pay reduction
agreement shall remain effective until canceled or amended.
(b) CANCELLATION. A pay reduction agreement may be canceled by a
Participant at any time during the Plan Year by filing notice thereof
with the Plan Administrator. Such cancellation shall take effect as
soon as administratively feasible following its receipt by the Plan
Administrator.
19
(c) AMENDMENT. A pay reduction agreement may be amended by a Participant
to increase or decrease his Before-Tax Contributions and After-Tax
Contributions, or to reallocate the amount of contributions between
Before-Tax Contributions and After-Tax Contributions, at any time
during the Plan Year by filing notice thereof with the Plan
Administrator. Such amendment shall take effect as soon as
administratively feasible following its receipt by the Plan
Administrator.
(d) LIMITATION. No pay reduction agreement shall be effective unless it
provides for reduction of a specified whole percentage of Compensation
of at least two percent for Basic Before-Tax Contributions or Basic
After-Tax Contributions, or any combination of the two.
4.4 MATCHING CONTRIBUTIONS.
(a) BASE MATCHING CONTRIBUTIONS. Each Employer shall make Base Matching
Contributions on behalf of each of its Employees, in an amount equal
to 100 percent of an Employee's Basic Contributions (which shall not
exceed 6 percent of such Employee's Compensation).
(b) DISCRETIONARY MATCHING CONTRIBUTIONS. For each Plan Year, each
Employer may make Discretionary Matching Contributions to Participants
who are employed by an Employer or a Division that achieves its
budgeted pretax profit for such Plan Year, as determined by the Chief
Executive Officer in his sole and absolute discretion. The amount of
any such Discretionary Matching Contributions, which shall be
expressed as a percentage of the Participant's Basic Contributions,
shall also be determined by the Chief Executive Officer and be subject
to the approval of the Human Resources Committee.
(c) TIMING AND ALLOCATION OF MATCHING CONTRIBUTIONS. Matching
Contributions shall be made, in cash or Company Stock, as soon as
practicable after the end of the pay period to which they relate,
provided that in no event shall contributions under this Section for
any Plan Year be made later than the date as prescribed by law for the
Employer to obtain a federal income tax deduction for the Plan Year
for which such contributions are made. Basic Matching Contributions
shall be allocated to Employee Account 1 and Discretionary Matching
Contributions shall be allocated to Employee Account 6 as soon as
administratively feasible following the payment of such consideration
to the Fund. Amounts allocated to Employee Account 6 may, at the
Chief Executive Officer's discretion, be credited to the Investment
Fund invested solely or primarily in Company Stock.
20
4.5 [RESERVED]
4.6 ALLOCATION OF FORFEITURES.
(a) FORFEITED MATCHING CONTRIBUTION. To the extent not otherwise applied
under Section 7.4(b) for purposes of restoration of forfeitures for
reemployed Members, forfeitures of Matching Contributions attributable
to a Plan Year quarter in accordance with Section 7.4 and 16.8, shall
be allocated as of the end of such Plan Year quarter to Participants
who are in active employment on the last day of such Plan Year
quarter; provided, however, if Section 401(a)(28) requires a transfer
to the Plan pursuant to Section 4.9(d) prior to the end of a Plan Year
quarter but following the end of the next preceding calendar quarter,
such allocation shall be made on the last date such that such transfer
is required under Section 401(a)(28) to Participants who are in active
employment or such date. The amount of forfeitures allocated to each
Participant under this subsection shall be a proportion equal to --
(1) the Basic Contributions made by the eligible Participant during
the Plan Year quarter for which the allocation is made, divided
by
(2) the Basic Contributions made by all eligible Participants for
such Plan Year quarter.
Amounts allocated pursuant to this subsection shall be credited to the
Employee Account from which such forfeitures were derived.
(b) EMPLOYEE ACCOUNT 8. To the extent not otherwise applied under Section
7.4(b) for purposes of restoration of forfeitures from Employee
Account 8 for reemployed Members, forfeitures of Employee Account 8
attributable to a Plan Year quarter in accordance with Section 7.4 and
16.8 shall be allocated as of the end of such Plan Year quarter to
those Participants who are in active employment on the last day of
such Plan Year quarter, and who have a balance in Employee Account 8
at that time; provided, however, if Section 401(a)(28) requires a
transfer to the Plan pursuant to Section 4.9(d) prior to the end of a
Plan Year quarter but following the end of the next preceding calendar
quarter, such allocation shall be made on the last date such that such
transfer is required under Section 401(a)(28) to Participants who are
in active employment or such date and who have a balance in Employee
Account 8 at that time. The amount of forfeitures allocated to each
Participant under this subsection shall be a portion of the total of
such forfeitures equal to --
21
(1) the balance in such Participant's Employee Account 8 as of the
last Valuation Date of the Plan Year quarter, divided by
(2) the total balance in Employee Account 8 for all such Participants
as of the last Valuation Date in the Plan Year quarter; and
amounts allocated pursuant to this subsection shall be credited to
Employee Account 8.
4.7 LIMITATIONS ON CONTRIBUTIONS.
(a) BEFORE-TAX CONTRIBUTIONS.
(1) In no event shall any Employer make Before-Tax Contributions for
any calendar year with respect to any Member, which, when
aggregated with other deferrals in such calendar year by the
Member pursuant to any other cash or deferred arrangement
maintained by the Company or an Affiliate under Section 401(k),
are in excess of $7,000 (or such greater amount as may be
determined under Code Section 402(g)).
If a Member has Before-Tax Contributions in excess of $7,000 (or
such greater amount as may be permitted under Code Section
402(g)) for a Plan Year, such excess shall be refunded to the
Member as soon as administratively possible, as provided in the
Rules of the Plan.
A Member retains the right to make changes in his contributions
as provided in Section 4.3(a), except a Member may not change his
or her contributions to exceed the maximum permitted by law or by
this Plan.
(2) In no event shall any Employer make Before-Tax Contributions for
any Plan Year that would result in the actual deferral percentage
of the group of Highly Compensated Employees eligible to
participate in the Plan exceeding the actual deferral percentage
of the group of all other eligible Employees by more than the
greater of--
(A) one and one-quarter times; or
(B) the lesser of two times or two percentage points.
The deferral percentage of each group of eligible Employees for
any Plan Year shall be the average of the ratios (calculated
separately for each
22
eligible Employee in each group) of (i) the Before-Tax
Contributions made on behalf of each eligible Employee for such
Plan Year to (ii) such eligible Employee's Compensation for such
Plan Year or portion of the Plan Year in which the Employee was
an Eligible Employee as defined in Section 3.3. To the extent
necessary to conform to such limitation, the Plan Administrator
shall reduce Before-Tax Contributions made on behalf of the
Highly Compensated Employees. Such reduction shall be effected
by reducing contributions made on behalf of Highly Compensated
Employees (in the order of their actual deferral percentage)
beginning with the Highly Compensated Employees who elected the
highest percentage of such contributions. Any such reduction in
the Before-Tax Contributions made on behalf of any Member shall
be recharacterized as After-Tax Contributions or refunded to the
Member as soon as administratively possible, as provided in the
Rules of the Plan. If recharacterized, such excess contributions
shall be recharacterized as soon as practicable. In no event,
however, shall such excess contributions be left
unrecharacterized later than two and one-half months following
the Plan Year in which such contributions were made.
In addition to the foregoing, if the Plan Administrator
determines during the course of a Plan Year that the
discrimination test of Code Section 401(k)(3) otherwise might not
be met for the Plan Year, the Plan Administrator may reduce, at
any time, the maximum percentage of Compensation at which Highly
Compensated Employees may elect Before-Tax Contributions to such
percentage as the Plan Administrator determines appropriate to
ensure that such test shall be met for such Plan Year.
For purposes of determining whether the Plan satisfies the actual
deferral percentage test of Code Section 401(k), the following
provisions shall apply:
(i) All elective contributions that are made under two or more plans
that are aggregated for purposes of Code Section 401(a)(4) or
410(b) (other than Code Section 410(b)(2)(A)(ii)) are to be
treated as made under a single plan and if two or more plans are
permissively aggregated for purposes of Code Section 401(k), the
aggregated plans must also satisfy Code Sections 401(a)(4) and
410(b) as
23
though they were a single plan. Plans that are aggregated must
have the same Plan Year.
(ii) In calculating the actual deferral percentage for purposes of
Code Section 401(k), the actual deferral ratio of a Highly
Compensated Employee will be determined by treating all cash or
deferred arrangements under which the Highly Compensated Employee
is eligible (other than those that may not be permissively
aggregated) as a single arrangement.
(iii) In the case of a Highly Compensated Employee who is either a 5%
owner or one of the ten most Highly Compensated Employees and is
thereby subject to the family aggregation rules of Code Section
414(q)(6), the actual deferral ratio (ADR) for the family group
(which is treated as one Highly Compensated Employee) is the ADR
determined by combining the elective contributions, compensation,
and amounts treated as elective contributions of all eligible
family members. Except to the extent taken into account in the
preceding sentence, the elective contributions, compensation, and
amounts treated as elective contributions of all family members
are disregarded in determining the actual deferral percentages
for the groups of Highly Compensated Employees and non-Highly
Compensated Employees.
(iv) In the case of a Highly Compensated Employee whose ADR is
determined under the family aggregation rules, the determination
of the amount of excess contributions shall be as follows: The
ADR is reduced in accordance with the "leveling" method described
in Code Section 1.401(k)-1(f)(2) of the Code Regulations and the
excess contributions are allocated among the family members in
proportion to the contributions of each family member that have
been combined.
(v) The amount of excess contributions to be distributed or
recharacterized shall be reduced by excess deferrals previously
distributed for the taxable year ending in the same Plan Year and
excess deferrals to be distributed for a taxable year will be
reduced by excess contributions previously distributed or
recharacterized for the Plan Year beginning in such taxable year.
(vi) The distribution of excess contributions will include the income
allocable thereto. The income allocable to excess contributions
will include income for the Plan Year for which the excess
24
contributions were made and will be equal to the sum of the
allocable gain or loss for the Plan Year. The Plan will allocate
income to excess contributions by multiplying the income for the
Plan Year allocable to the Employee's elective contributions
(Before-Tax Contributions) and amounts treated as elective
contributions by the following fraction: The numerator of the
fraction is the excess contributions for the Employee for the
Plan Year and the denominator of the fraction is equal to the sum
of: (1) the total Account balance of the Employee attributable
to elective contributions (Before-Tax Contributions) and amounts
treated as elective contributions as of the beginning of the Plan
Year, plus (2) the Employee's elective contributions (Before-Tax
Contributions) and amounts treated as elective contributions for
the Plan Year.
(vii) Excess contributions will be corrected by the close of the Plan
Year following the Plan Year for which they were made, since the
failure to make such corrections by the close of the Plan Year
following the Plan Year for which they were made will cause the
Plan to fail to satisfy the requirements of Code Section
401(k)(3) for the Plan Year for which the excess contributions
were made and for all subsequent years they remain in the trust.
In addition, the Plan will endeavor to correct excess
contributions within 2 1/2 months after the close of the Plan
Year for which they were made since it is understood that the
Employer will be liable for a 10% excise tax on the amount of
excess contributions unless they are corrected within such 2 1/2
month period.
(viii) Recharacterized excess contributions will remain subject to the
nonforfeitability requirements and distribution limitations that
apply to elective contributions.
(b) MATCHING CONTRIBUTIONS AND AFTER-TAX CONTRIBUTIONS. In no event shall
Matching Contributions and After-Tax Contributions for any Plan Year
be made which would result in the contribution percentage of the group
of Highly Compensated Employees eligible to participate in the Plan
exceeding the contribution percentage of the group of all other
eligible Employees by more than the greater of--
(1) one and one-quarter times; or
(2) the lesser of (A) two times or (B) two percentage points.
25
The contribution percentage of each group of eligible Employees for
any Plan Year shall be the average of the ratios (calculated
separately for each eligible Employee in each group) of (i) the
Matching Contributions and After-Tax Contributions made on behalf of
each eligible Employee for such Plan Year to (ii) such eligible
Employee's Compensation for such Plan Year or portion of the Plan Year
in which the Employee was an Eligible Employee as defined in
Section 3.3. To the extent necessary to conform to such limitation,
the Plan Administrator shall reduce Matching Contributions and
After-Tax Contributions made on behalf of the Highly Compensated
Employees in a manner similar to the method described in subsection
(a). Any such reduction in the Matching Contributions or After-Tax
Contributions made on behalf of any Member (including income and
losses allocable thereto) shall be paid to the Member if vested, or
treated as a forfeiture (if forfeitable). To the extent permitted by
applicable Regulations, the Plan Administrator may elect to take
Before-Tax Contributions into account in applying the contribution
percentage test of this subsection (b).
The Plan Administrator may comply with the requirements of this
Section by combining contributions under this Plan with contributions
under any other defined contribution plan maintained by the Company or
an Affiliate, or in any other manner permissible under Code Section
401(k)(3) or 401(m)(2), as applicable. Any such combination shall be
done in compliance with such guidelines, if any, established by the
Secretary of the Treasury.
The following provisions shall apply for purposes of determining
whether the Plan satisfies the actual contribution percentage test of
Code Section 401(m):
(i) All Employee and matching contributions that are made under two
or more plans that are aggregated for purposes of Code Section
401(a)(4) and 410(b) (other than Code Section 410(b)(2)(A)(ii))
are to be treated as made under a single plan and if two or more
plans are permissively aggregated for purposes of Code Section
401(m), the aggregated plans must also satisfy Code Section
401(a)(4) and 410(b) as though they were a single plan. To be
aggregated, the plans must have the same Plan Year.
(ii) In calculating the actual contribution percentage for purposes of
Code Section 401(m), the actual contribution ratio of a Highly
Compensated Employee will be determined by treating all plans
26
subject to Code Section 401(m) under which the Highly Compensated
Employee is eligible (other than those that may not be
permissively aggregated) as a single plan.
(iii) In the case of a Highly Compensated Employee who is either a 5%
owner or one of the ten most Highly Compensated Employees and is
thereby subject to the family aggregation rules of Code Section
414(q)(6), the actual contribution ratio (ACR) for the family
group (which is treated as one Highly Compensated Employee) is
the ACR determined by combining the contributions and
compensation of all eligible family members. Except to the
extent taken into account in the preceding sentence, the
contributions and compensation of all family members are
disregarded in determining the actual contribution percentages
for the groups of Highly Compensated Employees and non-Highly
Compensated Employees.
(iv) In the case of a Highly Compensated Employee whose ACR is
determined under the family aggregation rules, the determination
of the amount of excess aggregate contributions shall be made as
follows: the ACR is reduced in accordance with the "leveling"
method described in Section 1.401(m)-1(e)(2) of the Code
Regulations and the excess aggregate contributions are allocated
among the family members in proportion to the contributions of
each family member that have been combined.
(v) The amount of excess aggregate contributions for a Plan Year
shall be determined only after first determining the excess
contributions that are treated as Employee contributions due to
recharacterization.
(vi) The distribution (or forfeiture, if applicable) of excess
aggregate contributions will include the income allocable
thereto. The income allocable to the excess aggregate
contributions shall include income for the Plan Year for which
the excess aggregate contributions were made and will be equal to
the sum of the allocable gain or loss for the Plan Year. The
Plan will allocate income to excess aggregate contributions by
multiplying the income for the Plan Year allocable to the
Employee's employee contributions (After-Tax Contributions),
Matching Contributions, and amounts treated as Matching
Contributions by the following fraction: The numerator of the
fraction is the excess aggregate contributions for the
27
Employee for the Plan Year and the denominator of the fraction is
equal to the sum of: (1) the total account balance of the
Employee attributable to employee contributions
(After-Tax Contributions) and Matching Contributions and amounts
treated as Matching Contributions as of the beginning of the Plan
Year, plus (2) the Employee's employee contributions (After-Tax
Contributions) and Matching Contributions and amounts treated as
Matching Contributions for the Plan Year.
(vii) A method of correcting excess aggregate contributions shall meet
the nondiscrimination requirements of Code Section 401(a)(4).
Accordingly, the Plan shall not use a method under which Employee
contributions are distributed to Highly Compensated Employees to
the extent necessary to meet the requirements of Code
Section 401(m)(2) while matching contributions attributable to
such Employee contributions remain allocated in the Employee's
account. If it is necessary to distribute Employee contributions
that have been matched to a Highly Compensated Employee, then a
pro-rata share of Employer Matching Contributions will also be
distributed to such Employee so that Matching Contributions that
remain allocated to Employee accounts will meet the requirements
of Code Section 401(a)(4).
(viii) Excess aggregate contributions shall be corrected by the close of
the Plan Year following the Plan Year for which they were made.
It is understood that if such correction is not made by the close
of the Plan Year following the Plan Year for which they were
made, such failure will cause the Plan to fail to satisfy the
requirements of Code Section 401(a)(4) for the Plan Year for
which the excess aggregate contributions were made and for all
subsequent years they remain uncorrected. The Plan shall
endeavor to correct excess aggregate contributions within 2 1/2
months after the close of the Plan Year for which they are made
since it is understood the Employer will be liable for a 10%
excise tax on the amount of excess aggregate contributions unless
they are so corrected.
(ix) Elective contributions and/or qualified nonelective contributions
may be treated as matching contributions only if the conditions
described in Section 1.401(m)-1(b)(5) of the Code Regulations are
satisfied.
(c) [RESERVED]
28
(d) ADDITIONAL LIMITATION. The limits of this subsection shall comply
with the provisions of Code Regulation 1.401(m)-2 for "multiple use of
the alternative limitation" and for this purpose the provisions of
Section 1.401(m)-2(d) of the Code Regulations are incorporated herein
by reference. Correction of the multiple use of the alternative
limitation shall occur by first reducing the actual contribution
percentages for only those Highly Compensated Employees who are
eligible in both the arrangement subject to Code Section 401(k) and
the plan subject to Code Section 401(m). If this is insufficient to
make the correction, then the actual deferral percentage shall be
reduced for these Employees in a manner that complies with Code
Regulations.
4.8 LIMITATIONS ON ANNUAL ADDITIONS. The provisions of this Section 4.8 shall
apply to Plan Years (which shall be the "limitation years" under this Plan for
purposes of Code Section 415).
(a) ANNUAL ADDITION. "Annual Addition" means, for any Participant for any
Plan Year, an annual addition as defined in Code Sections 415(c)(2)
and 415(c)(6), generally including the sum of:
(1) all Company and Affiliate contributions made for the Participant
under "any defined contribution plan" for the year;
(2) the Participant's after-tax contributions for the year to "any
defined contribution plan;"
(3) any forfeitures or employer contributions allocated to him for
the year under "any defined contribution plan"; except as
otherwise specified in Code Section 415(c)(6) for an employee
stock ownership plan that satisfies certain nondiscrimination
requirements; and
(4) contributions to an individual, post-retirement medical account
for the Participant, to the extent required by Code Section
415(1) or 419A(d)(2).
"Any defined contribution plan" means all qualified defined
contribution plans of the Employers and Affiliates that are considered
as one plan under Code Sections 414 and 415.
(b) LIMITATION. Notwithstanding the foregoing provisions of this Article
IV, for any Plan Year the Annual Addition of a Participant shall not
exceed the lesser of--
29
(1) $30,000 (or other amount for a particular Plan Year as may be
determined under Code Sections 415(c)(1) and 415(d) and related
Regulations); or
(2) 25 percent of the Participant's wages and all other payments of
compensation (for such Plan Year) as reported on Form W-2
(currently entitled "wages, tips, other compensation") (or the
successor method of reporting income under Code Sections 6041,
6051 and 6052) and as described in Treas. Reg. Section
1.415-2(d)(11)(i).
(c) ADDITIONAL LIMITATION. If in any Plan Year a Participant is both a
participant in any defined contribution plan and a participant in any
qualified defined benefit plan of the Employer or an Affiliate, the
sum of the defined benefit fraction (as defined in Code Section
415(e)(2)) and the defined contribution fraction (as defined in Code
Section 415(e)(3)) shall not exceed 1.0. In calculating the defined
contribution fraction, the Plan Administrator may, in his discretion,
make the election provided under Code Section 415(e)(6). Before any
contributions are reduced under this Plan, the benefit under a defined
benefit plan shall be reduced to the extent necessary to ensure that
the sum of the defined benefit fraction and defined contribution
fraction does not exceed 1.0.
(d) REDUCTION IN ANNUAL ADDITIONS. (1) If in any Plan Year a Member's
Annual Addition exceeds the limitation determined above, such excess
shall not be allocated to his accounts in any defined contribution
plan. In accordance with the provisions of Code Section 415 and the
Regulations thereunder, the Plan Administrator will distribute
elective deferrals (within the meaning of Code Section 402(g)(3)) or
return voluntary Employee contributions to the extent that the
distribution or return will reduce the excess amounts in the Member's
Account. Amounts equal to any gains attributable to the returned
elective deferrals and voluntary Employee contributions will also be
returned to the Member if necessary to insure that a Member's Annual
Addition does not exceed the limitation determined above. If gains
attributable to the returned elective deferrals or returned voluntary
Employee contributions are not returned to the Member, such earnings
will be considered as an Employee contribution for the limitation Plan
Year for which the returned contribution was made. (2) If the
foregoing distributions do not completely reduce the excess amounts in
the Member's account, then the remaining excess amounts in the
Member's Account will be placed in a suspense account and used to
reduce Employer contributions for the next Plan Year and succeeding
30
Plan Years as necessary (referred to as the "Next Plan Year"). Such
remaining excess amounts will be held unallocated in the suspense
account for the limitation Plan Year and will be allocated and
reallocated in the next Plan Year to the Accounts of all Participants
in accordance with applicable Code Regulations. Such suspense account
shall share in the gains and losses of the Fund on the same basis as
other Accounts. Excess amounts that are allocated to Participants
will be used to reduce Employer contributions for the Plan Year in
which such allocation occurs. For purposes of this Section 4.8(d)(2),
excess amounts will not be distributed to Participants or former
Participants.
4.9 ROLLOVER CONTRIBUTIONS AND PLAN TO PLAN TRANSFERS.
(a) ROLLOVER CONTRIBUTIONS. Any Eligible Employee, including an
individual who has not satisfied the service requirements of Article
III, may, with the approval of the Plan Administrator, contribute lump
sum cash amounts to the Plan which are attributable to eligible
rollover distributions within the meaning of Code Sections 402(c) or
403(a) or qualifying rollover distributions within the meaning of Code
Section 408(d)(3); provided, however, that if such amounts are not
contributed to the Plan in a direct transfer within the meaning of
Code Section 401(a)(31), such amounts shall be contributed to the Plan
within sixty days following the day on which the Employee received the
distribution from a qualified trust, annuity plan, individual
retirement account or individual retirement annuity. Such amounts
shall be credited to the Employee Account 7 established for the
Employee. An Eligible Employee who has not yet satisfied the service
requirements of Article III shall be treated as a Member solely with
regard to his Employee Account 7.
(b) TRANSFERS FROM PREDECESSOR PLAN. In the sole discretion of the Plan
Administrator (exercised in a nondiscriminatory manner), the Plan will
accept the direct transfer from the Predecessor Plan of an amount
which if paid to the Participant instead of the Plan would have
constituted a lump sum distribution within the meaning of Code Section
402(e). Such a plan-to-plan transfer must be for a person who has
been admitted or readmitted to the Plan as a Participant and be
received by the Trustee within the period established by the Plan
Administrator on a uniform and non-discriminatory basis. To the
extent possible, as determined in the sole discretion of the Plan
Administrator, such amount shall be credited to the subaccounts of
this Plan which are analogous to the subaccounts of the Predecessor
Plan in which such amounts were held immediately prior to such
transfer;
31
otherwise, the transferred amount shall be credited to the
Participant's Employee Account 7. To the extent permitted by
applicable law, the provisions of this Section 4.9(b) shall also be
applicable to former employees of The Promus Companies Incorporated or
its affiliates (i) who were participants in the Predecessor Plan and
(ii) who terminated their employment with The Promus Companies
Incorporated or its affiliates on or prior to the S&RP Spin-Off Date
and (iii) whose unvested account balances under the Predecessor Plan
were retained by the Predecessor Plan after the S&RP Spin-Off Date and
(iv) who subsequently become Eligible Employees under the Plan before
incurring five consecutive break years as defined in the Predecessor
Plan since termination of their employment with The Promus Companies
Incorporated or its affiliates.
(c) TRANSFERS FROM PLAN A. In the sole discretion of the Plan
Administrator (exercised in a nondiscriminatory manner) and at the
time and in the manner prescribed by the Plan Administrator, the Plan
may accept the direct transfer from Plan A of the total amount
credited to an Eligible Employee's account under Plan A who
immediately prior to his satisfaction of the eligibility requirements
under Section 3.3 of the Plan was an eligible employee under the terms
of Plan A and a participant thereunder.
(d) TRANSFERS FROM EMPLOYER'S TERMINATED PLANS. In the event that the
Employer maintains another defined contribution plan that is qualified
under Section 401(a) and such plan is terminated, in the discretion of
the Plan Administrator, the Plan will accept a direct transfer of the
value of the account balance in such plan of any individual who does
not accept a lump-sum distribution of such account balance upon
termination.
(e) TRANSFERS OF DIVERSIFIED AMOUNTS. In the event that any Participant
in the Promus Hotel Corporation Employee Stock Ownership Plan (the
"ESOP") diversifies the investment of his account in the ESOP a manner
that satisfies Code Section 401(a)(28) and elects, within 90 days
after the close of each Plan Year in the qualified election period (as
defined in the ESOP), to transfer the amount subject to the
diversification election to the Plan and invest such amount in any one
or more of the Investment Funds offered by the Plan (which Funds are
not inconsistent with IRS Regulations), the Plan shall accept such
amounts and any such investment option selected by the qualified
Participant shall be implemented no later than 90 days after the last
day of the period during which the election can be made. A Member who
chooses to diversify his ESOP by investing
32
in any one or more of the Investment Funds offered by the Plan may not
elect to receive this portion of his Account in Company Stock.
(f) TRANSFERS FROM QUALIFIED PLANS
In the sole discretion of the Plan Administrator (exercised in a
nondiscriminatory manner), the Plan may accept the direct transfer
from a plan qualified under Code Section 401(a) of an amount which if
paid to the Participant or Eligible Employee (who would be a
Participant but for the requirement under Section 3.1(b) that he
complete one Year of Eligibility Service) instead of the Plan would
have constituted a lump sum distribution within the meaning of Code
Section 402(e). Such a plan-to-plan transfer must be received by the
Trustee within the period established by the Plan Administrator on a
uniform and non-discriminatory basis. To the extent possible, as
determined in the sole discretion of the Plan Administrator, such
amount shall be credited to the subaccounts of this Plan which are
analogous to the accounts of the qualified plan in which such amounts
were held immediately prior to such transfer; otherwise, the
transferred amount shall be credited to the Participant's Employee
Account 7.
ARTICLE V. [RESERVED]
ARTICLE VI. MEMBERS' ACCOUNTS; INVESTMENT FUNDS
6.1 INVESTMENT ELECTIONS BY MEMBERS.
(a) INITIAL ELECTION. Upon becoming a Participant, each Member may file
with the Plan Administrator such Member's direction with respect to
what percentage, if any, of the Member's Account (derived from
contributions made pursuant to Sections 4.1, 4.2, 4.4, 4.6, and 4.9)
is to be invested in any one or more of the Investment Funds except
the Executive Life Fund described in Addendum A. The percentages so
specified by the Member shall be stated in one percent increments or
such other increments as may be approved by the Plan Administrator in
a nondiscriminatory manner. If by a date designated by the Plan
Administrator, a Member fails to make a valid investment election when
submitting an Enrollment Form, any amounts allocated to such Member's
Account shall be invested entirely in the Investment Fund designated
by the Plan Administrator in a uniform and nondiscriminatory manner.
(b) CHANGE OF ELECTION AND TRANSFER AMONG FUNDS. A Participant may change
his or her investment election as to future contributions (in
accordance with the
33
limitations described in Section 6.1(a)) as provided in the Rules of
the Plan. Except with respect to the Investment Fund described in
Addendum A, a Participant may elect to transfer amounts allocated to
his Account among Investment Funds in increments of one percent (or
such other increments as approved by the Plan Administrator in a
nondiscriminatory manner) as provided in the Rules of the Plan.
Subject to the transfer restrictions stated hereinbelow, such changes
or transfers shall take effect as soon as administratively feasible
after the request is received by the Plan Administrator; provided,
however in connection with establishing, amending, or terminating any
Investment Fund including establishing a new Investment Fund, the Plan
Administrator may establish reasonable rules and procedures on a
uniform and nondiscriminatory basis in connection with changes or
transfers by Members in transitioning with respect to such Fund. A
Participant who is subject to Section 16 of the Securities Exchange
Act of 1934, as amended (""Rule 16b-3"), or other securities laws,
regulations or rules that relate to investments in the Company Stock
Fund may effect the transfer of an existing Account balance into or
out of any Company Stock Fund only as provided in the Rules of the
Plan which shall be according to the applicable exemptive conditions
of Rule 16b-3 and, in the Plan Administration's discretion, the
applicable conditions of such other securities laws, regulations or
rules; PROVIDED, HOWEVER, that if the Plan Administrator reasonably
determines that contractual, legal or administrative considerations
no longer require such conditions be met, then the Plan Administrator
may permit other transfers or establish other time requirements for
transfers on a uniform and nondiscriminatory basis except as otherwise
required by law. The Plan Administrator will impose limits on
transfers between Investment Funds on a uniform and nondiscriminatory
basis if the Plan Administrator determines that such other available
funds would not be sufficient for such transfers. The Plan
Administrator may adopt other Rules of the Plan to govern transfers
which will be approved on a uniform and nondiscriminatory basis except
as otherwise required by law.
6.2 PLAN EXPENSES.
(a) INVESTMENT FEES, ETC. Expenses attributable to the management and
investment of each of the Funds shall be charged against the
respective Fund.
(b) ADMINISTRATIVE EXPENSES, ETC. All fees paid to the Trustee for
trustee services, all fees paid for
34
recordkeeping services performed by the Trustee, the Plan
Administrator and any third-party service provider, and any other
costs or expenses described in Sections 12.9 and 16.4, shall
constitute a charge upon the Fund and shall be paid from Members'
Accounts in proportion to the balance of such Accounts except to the
extent that the Company or an Employer elects to pay such fees, costs
or expenses; provided that the Company or an Employer may advance
fees, costs or expenses on behalf of the Plan in which case the
Company or Employer will be reimbursed for such payment by the Plan
from Fund assets.
6.3 VALUATION; ALLOCATION OF INVESTMENT EARNINGS AND LOSSES.
(a) GENERAL RULE. Except as provided in subsections (b) and (c), Accounts
and Funds shall be valued at their fair market values as of each
Valuation Date. Except as provided in subsections (b) and (c),
earnings, gains, and losses (realized or unrealized) for each Fund
shall be allocated to the portion ("subaccount") of a Member's Account
maintained with respect to that Fund, in the same ratio that the value
of his subaccount (determined as of the Valuation Date) bears to the
sum of the values of all Members' subaccounts maintained with respect
to the Fund. For the purpose of determining this ratio, the value of
a subaccount shall be the value of the subaccount as of the last
preceding Valuation Date. After the allocation of earnings, gains,
and losses, each Member's Account shall be adjusted for contributions,
reallocated forfeitures, loan repayments, interfund transfers,
distributions, withdrawals, and expenses made or incurred since the
last preceding Valuation Date.
(b) UNALLOCATED EARNINGS. Except as provided in subsection (c), earnings,
gains, and losses which have not been allocated to Members' Accounts
during the Plan Year under subsection (a), shall be allocated as of
the last day of the Plan Year to all Members who have a balance in
their Account as of such date. Each such Member shall receive a
percentage of the total amount allocated under this subsection (b)
equal to--
(1) the balance in the Member's Account as of the last Valuation Date
of the Plan Year, divided by
(2) the total balance of the Accounts of all eligible Members as of
the last Valuation Date of the Plan Year.
Amounts allocated under this subsection (b) shall be credited to the
various subaccounts and invested in the various Investment Funds in
accordance with uniform and
35
nondiscriminatory procedures established by the Plan Administrator.
(c) UNIT VALUES. The Plan Administrator or the Trustees (or their
designated agent or agents) or the Administrative Delegate may, for
administrative purposes, establish unit values for one or more
Investment Fund, including any Company Stock Fund, (or any portion
thereof) and maintain the Accounts setting forth each Member's
interest in such Investment Fund (or any portion thereof) in terms of
such units, all in accordance with such rules and procedures as such
Plan Administrator shall deem to be fair, equitable and
administratively practicable. Such terms and procedures may be
detailed in a separate document approved by the Plan Administrator and
such terms and procedures shall be deemed to be incorporated in the
Rules of the Plan. In the event that unit accounting is thus
established for any Investment Fund (or any portion thereof), the
value of a Member's interest in that Investment Fund (or any portion
thereof) at any time shall be an amount equal to the then value of a
unit in such Investment Fund (or any portion thereof) multiplied by
the number of units then credited to the Member.
6.4 COMPANY STOCK FUNDS.
(a) VALUATION.
(i) Subject to the special valuation rules set forth in subsection
(ii), Company Stock in any Company Stock Fund shall be initially
valued at the purchase price paid by the Trust and thereafter shall be
valued at its most recent closing price on the New York Stock Exchange
as of the Valuation Date. The Plan Administrator or the Trustees (or
their designated agent or agents) may, for administrative purposes,
establish unit values for any Company Stock Fund, (or any portion
thereof) and maintain the Accounts setting forth each Member's
interest in such Investment Fund (or any portion thereof) in terms of
such units, all in accordance with such rules and procedures as such
Plan Administrator shall deem to be fair, equitable and
administratively practicable. Such terms and procedures may be
detailed in a separate document approved by the Plan Administrator and
such terms and procedures shall be deemed to be incorporated in the
Rules of the Plan. In the event that unit accounting is thus
established for any Company Stock Fund (or any portion thereof), the
value of a Member's interest in that Company Stock Fund (or any
portion thereof) at any time shall be an amount equal to the
then value of a unit in such Company Stock Fund (or any portion
36
thereof) multiplied by the number of units then credited to the
Member.
(ii) If Company Stock ceases to be publicly traded or if it is being
valued in connection with a transaction between the Plan and a "party
in interest" (as defined in ERISA Section 3(14)) or a "disqualified
person" (as defined in Section 4975(e)(2) of the Code) or in
connection with an extraordinary transaction or event, its value shall
be determined by the Trustees in good faith based on all relevant
factors.
(b) COMPANY STOCK DIVIDENDS. Company Stock Dividends received on shares
in the Company Stock Fund shall be allocated as soon as
administratively feasible following the date such dividends are paid,
to each Member's Account in an amount which will bear substantially
the same proportion to the total number of shares received as the
number of shares of Company Stock in each Account as of the Valuation
Date next preceding the date of such allocation bears to the total
number of shares of Company Stock allocated to all Accounts as of such
Valuation Date.
(c) RIGHTS, WARRANTS, OR OPTIONS. Company Stock rights (including
warrants and options) issued with respect to Company Stock shall be
exercised by the Trustee on behalf of Members.
(d) VOTING RIGHTS.
(A) Members shall not have voting rights or other decision
rights with respect to any investment in any Fund, including
Company Stock in the Company Stock Fund, if any, all such
rights being vested in the Trustee. Notwithstanding the
foregoing, in the event of any "solicitation" of "proxies"
as such terms are defined in Regulation 14a-l under the
Securities Exchange Action of 1934, as amended, which is
opposed by management of the Company, all voting rights in
Company Stock held in any Company Stock Fund shall be voted
in accordance with the directions to the Trustee of the
Members who have any portion of their Accounts invested in
any such Company Stock Fund, with each such Participant
entitled to direct the vote of that number of shares
representing the proportionate investment of his Accounts in
such Company Stock Fund. The Trustee shall maintain the
strict confidentiality of Member voting directions.
37
(B) All Members entitled to direct such voting shall be notified
by the Trustee of each occasion for the exercise of such
voting rights within a reasonable time before such rights
are to be exercised.
(C) Such notification shall include all information distributed
to shareholders regarding the exercise of such rights.
(D) Such Members shall be so entitled to direct the voting of
fractional shares (or fractional rights to shares),
provided, however, that the Trustee may, to the extent
possible, vote the combined fractional shares (or fractional
rights to shares) so as to reflect the aggregate direction
of all Members giving directions with respect to allocated
fractional shares (or fractional rights to shares).
(E) In the event that a Member shall fail to direct the Trustee
in whole or in part as to the exercise of voting rights
arising with respect to the Company Stock Funds, then such
voting rights shall be exercised by the Trustee only to the
extent directed by such Member and any Company Stock with
respect to which no direction is received shall be voted in
accordance with subparagraph (F).
(F) The Trustee shall vote (i) shares of Company Stock with
respect to which a Participant has failed to exercise his
voting rights and (ii) shares representing forfeited account
values that have not been reallocated at the time of any
proxy solicitation referred to in subparagraph (A), in the
same proportion as Company Stock with respect to which
voting rights have been exercised are voted.
ARTICLE VII. VESTING AND FORFEITURES
7.1 VESTING IN BEFORE-TAX CONTRIBUTIONS AND ROLLOVER CONTRIBUTIONS. A Member
shall have a fully-vested interest at all times in his Employee Accounts 2, 3,
4, 5, 7 and 9.
38
7.2 VESTING SCHEDULE FOR MATCHING CONTRIBUTIONS ACCOUNT. Subject to Section
7.3 below, a Member shall have a nonforfeitable interest in a portion of the
value of his Employee Accounts 1, 6, and 8 in accordance with the following
schedule:
Completed Years of
Vesting Service Vested Percentage
--------------- -----------------
Less than 1 0%
1 but less than 2 10%
2 but less than 3 20%
3 but less than 4 30%
4 but less than 5 40%
5 but less than 6 60%
6 but less than 7 80%
7 or more 100%
Upon any amendment of this vesting schedule, for every Employee who is a
Participant on the amendment adoption date or the amendment effective date,
whichever is later, the nonforfeitable percentage (determined as of that date)
of the Participant's right to the Employer - derived accrued benefit may not be
less than the Participant's percentage figured under the Plan without regard to
the amendment.
7.3 FULL VESTING OF CERTAIN EMPLOYEE ACCOUNTS. Notwithstanding Section 7.2, a
Member shall have a Vested Percentage in Employee Accounts 1, 6, and 8 of 100
percent upon the occurrence of any of the following events prior to (or
concurrent with) his Termination of Service:
(a) the Member dies;
(b) the Member attains age 65; or
(c) the Member incurs a Total and Permanent Disability.
7.4 FORFEITURES.
(a) GENERAL RULE. In the event that a Member's interest in Employee
Accounts 1, 6, or 8 is not yet fully vested on his Termination of
Service, the portion of such Account in which he is not yet vested
under the foregoing Sections shall be immediately forfeited upon
distribution to the Member or, if distribution has not occurred, such
portion of his Account shall be held in a suspense account until the
earlier of (1) the date that distribution occurs or commences, or (2)
the date the Member incurs five consecutive Break Years, and such
portion of his Account shall be forfeited upon the earlier of such
dates. Forfeitures shall be attributable to the Plan Year quarter in
which such forfeiture occurs (or the next subsequent Plan Year quarter
if no allocation of forfeitures occurred in the Plan Year quarter in
which such forfeiture occurs). If
39
such Member does not return to employment as an Employee before
incurring five consecutive Break Years, the nonvested portion of his
Account shall be permanently forfeited and allocated in accordance
with Section 4.6.
(b) RESTORATION. If a Member suffers a forfeiture under subsection (a) of
the portion of his Accounts which is not fully vested on his
Termination of Service and is reemployed by the Company or an
Affiliate prior to his incurring five or more consecutive Break Years,
then the amounts forfeited under subsection (a) shall be restored to
his Accounts, applying forfeitures pending allocation and Employer
contributions, in that order, as necessary. Restored amounts shall be
credited to the Member's Employee Accounts 1, 6, and 8 as soon as
administratively feasible and shall be invested in the Investment Fund
designated by the Plan Administrator in a uniform and
nondiscriminatory manner unless a different Investment Fund(s) is
designated by the Member.
(c) SPECIAL RULE FOR PRIOR DISTRIBUTIONS FROM EMPLOYEE ACCOUNTS 1, 6,
AND 8. In the case of a Member who had previously received a
distribution of his partially vested interest in Employee Accounts 1,
6, and 8, and who again incurs a Break Year before being fully vested
in Employee Accounts 1, 6, and 8, such Member's vested interest in
such Accounts on his Termination of Service shall be determined by the
following formula:
X = P(AB + D) - D
For purposes of this formula: X is the vested amount; P is the Vested
Percentage at the relevant time; AB is the balance in Employee
Accounts 1, 6, and 8 at the relevant time; and D is the aggregate
amount of all prior withdrawals and distributions from Employee
Accounts 1, 6, and 8.
ARTICLE VIII. IN-SERVICE WITHDRAWALS
8.1 ORDER OF WITHDRAWAL. Subject to Section 8.2, a Member may withdraw funds
from his Account (valued as of the Valuation Date immediately preceding the date
of the withdrawal payment) in the following order:
(a) Supplemental After-Tax Contributions and earnings from
Employee Account 5;
(b) Basic After-Tax Contributions and earnings from Employee Account 4;
(c) Rollover Contributions from Employee Account 7;
40
(d) the vested portion of Basic Matching Contributions from Employee
Account 1;
(e) the vested portion of Discretionary Matching Contributions from
Employee Account 6;
(f) the vested portion derived from the Harrah's Plans in Employee Account
8;
(g) all or any part of the amounts transferred from the Holiday Inns, Inc.
Employee's Retirement Plan in Employee Account 9;
(h) Supplemental Before-Tax Contributions from Employee Account 3 (and
earnings credited to the analogous account under the Predecessor Plan
as of December 31, 1988 and transferred to such Account 3); and
(i) Basic Before-Tax Contributions from Employee Account 2 (and earnings
credited to the analogous account under the Predecessor Plan as of
December 31, 1988 and transferred to such Account 2).
(j) Earnings credited to Before-Tax Contributions after December 31, 1988.
Such a withdrawal shall be processed as soon as administratively feasible
following receipt of notice of such withdrawal by the Member in accordance with
the Rules of the Plan; provided, however, a Member must give at least 30 days
advance written notice to the Plan Administrator (or such other advance written
notice the Plan Administrator may allow in a uniform and nondiscriminatory
manner) to withdraw funds from Employee Account 9.
8.2 WITHDRAWAL LIMITATIONS.
(a) GENERAL RESTRICTION. If a Member makes a withdrawal under Section
8.1, except for a withdrawal under Section 8.1(a), such Member shall
not be eligible for Matching Contributions for the six-month period
beginning on the day after the withdrawal.
(b) ADDITIONAL RESTRICTIONS ON WITHDRAWAL OF MATCHING CONTRIBUTIONS. No
amounts may be withdrawn under Sections 8.1(d) and (e) unless the
Member making the withdrawal has been participating in the Plan for at
least 60 months or unless the amounts being withdrawn have been in the
Fund for at least 24 months.
(c) ADDITIONAL RESTRICTIONS ON WITHDRAWALS FROM EMPLOYEE ACCOUNTS 2, 3,
8, AND 9.
41
(1) A withdrawal under Sections 8.1(f), (g), (h), (i) and (j) shall
be permitted only upon a Member's Retirement Date or other
Termination of Service, attainment of age 59-1/2, or financial
hardship (except a withdrawal under 8.1(j) shall not be permitted
upon a financial hardship). See also the provisions of Section
11.2 for distributions allowed upon plan termination and the
restrictions thereon and also the provisions herein dealing with
qualified domestic relations orders.
(2) A withdrawal is on account of financial hardship only if it is
made on account of an immediate and heavy financial need of the
Member and is necessary to satisfy such financial need.
I. For this purpose, a withdrawal is not necessary to the extent
it exceeds the amount necessary (including taxes) to relieve the
need or to the extent the need may be satisfied from other
resources reasonably available to the Member. Under this Plan, a
financial hardship for purposes of a withdrawal on account of an
immediate and heavy financial need of the Member shall exist if
the withdrawal is for:
(A) Expenses for medical care described in Code Section 213(d)
previously incurred by the Member, the Member's spouse or
any dependents of the Member (as defined in Code Section
152) or necessary for these persons to attain medical care
described in Code Section 213(d);
(B) Costs directly related to the purchase of a principal
residence for the Member (excluding mortgage payments);
(C) Payments of tuition and related educational fees for the
next year of post-secondary education for the Member, for
the Member's spouse, children, or dependents (as defined in
Code Section 152); or
(D) Payments necessary to prevent the eviction of the Member
from the Member's principal residence or foreclosure on the
mortgage of that residence.
II. In general, Code Regulation 1.401(k)-1(d)(2)(iii) shall
govern in determining whether the withdrawal is necessary to
satisfy an immediate and heavy financial need. Under this Plan,
a withdrawal shall generally be treated as
42
necessary to satisfy a financial need if the Member represents in
writing as follows (which the Plan Administrator or its delegee
may rely upon unless the Plan Administrator or its delegee have
actual knowledge to the contrary):
(A) The withdrawal is required to meet an immediate and heavy
financial need, the amount of the withdrawal is necessary to
meet this need, and the requested amount does not exceed the
amount necessary (including taxes) to relieve the need.
(B) The need cannot reasonably be satisfied by any of the
following:
(i) Through reimbursement or compensation by insurance or
otherwise;
(ii) By liquidation of the Member's assets or those of his
spouse or minor children (which are reasonably
available to the Member) without creating an additional
and heavy financial need;
(iii) By cessation of elective contributions or Employee
contributions (Before-Tax or After-Tax Contributions)
under the Plan;
(iv) By other distributions or nontaxable (at the time of
the loan) loans from plans maintained by the Employer
(including this Plan) or by any other employer, or by
borrowing from commercial sources on reasonable
commercial terms, in an amount sufficient to satisfy
the need.
For purposes of this subparagraph (B), a need cannot
reasonably be relieved by one of the actions listed above if
the effect would be to increase the amount of the need. For
example, the need for funds to purchase a principal
residence cannot reasonably be relieved by a Plan loan if
the loan would disqualify the Member from obtaining other
necessary financing.
(C) The Member understands that the withdrawal will result in
Employer Matching Contributions being suspended for six
months.
(D) That the withdrawal is for one of the four purposes listed
in paragraph I above and such
43
purpose or purposes shall be identified by the Member.
(E) The Member understands that the application for such a
withdrawal will be reviewed by the Plan Administrator or its
delegee for compliance with the Plan's requirements for a
distribution on account of financial hardship.
The Plan Administrator (or its delegee) shall determine whether a
request for a hardship withdrawal meets the requirements of this
paragraph (2) in accordance with uniform and nondiscriminatory
procedures.
(d) SPOUSAL CONSENT. Absent a spousal consent meeting the requirements of
Section 9.1(b), the Plan Administrator shall not permit a withdrawal
to a married Member who has a balance in Employee Account 9 of more
than $3,500 (determined as of the date such Account was initially
established under the Predecessor Plan) if such withdrawal is from
such Employee Account 9.
ARTICLE IX. DISTRIBUTIONS
9.1 ENTITLEMENT TO DISTRIBUTION UPON DEATH OF MEMBER.
(a) DEATH OF MEMBER. In the event of a Member's death prior to the
complete distribution of his Account balance, the Beneficiary of such
Member shall be entitled to receive the entire balance remaining to
the credit of such Member's Account as of the first Valuation Date
coincident with or next following the Member's death, as provided in
Sections 9.3 and 9.4.
(b) DESIGNATION OF BENEFICIARY.
(1) GENERAL RULE. Each Member may designate one or more persons as
Beneficiary to receive his Account balance in the event of such
Member's death. Each such designation shall be made on a form
provided by the Plan Administrator, shall be effective only when
filed in writing with the Plan Administrator, and shall revoke
all prior designations, subject to the provisions of paragraph
(2) below. Subject to paragraph (2) below, a trust may be named
as a Beneficiary of a Member, but the trust itself will not be
treated as a "designated beneficiary" under the Code or Code
Regulations including Proposed Code Regulations. If the
requirements of Proposed Code Regulation 1.401(a)(9)-1D-5 are
met, the beneficiaries of the trust will be treated as
"designated beneficiaries" in accordance with and subject to the
requirements of Proposed Code
44
Regulation 1.401(a)(9)-1D and E and other applicable regulations.
If a trust is named as Beneficiary and the requirements of
Proposed Code Regulation 1.401(a)(9)-1D-5 are not met, the Member
will be treated as not having a "designated beneficiary" under the
Proposed Code Regulations and accordingly distribution will be
made to the trust in accordance with the five-year rule in Code
Section 401(a)(9)(B)(ii).
(2) RULE FOR SURVIVING SPOUSES. A Member's surviving spouse shall be
his sole Beneficiary unless, prior to the Member's death, one or
more other persons have been named pursuant to a qualified
alternate designation (as defined in paragraph (3) below) made
and filed with the Plan Administrator prior to the Member's death
or unless the Plan Administrator determines that the consent
otherwise required under paragraph (3) could not have been
obtained because the Member's spouse could not be located or
because of such other circumstances as the Secretary of Treasury
shall prescribe by Regulation.
(3) QUALIFIED ALTERNATE DESIGNATION. A designation shall be a
qualified alternate designation only if--
(A) the Member, in a signed written instrument, designates by
name one or more persons to be Beneficiary in lieu of, or
along with, his surviving spouse;
(B) the Member's surviving spouse (if any), determined at the
time of the Member's death, has consented in writing to the
naming of such Beneficiary and has acknowledged the effect
of such consent; and
(C) such consent is witnessed by a notary public or the Plan
Administrator.
A qualified alternate designation may not be changed without
spousal consent. Any spousal consent to a qualified alternate
designation shall be irrevocable.
(4) DEFAULT BENEFICIARY. If no person is otherwise designated under
this subsection, or if a designation is revoked in whole or in
part, or if no designated Beneficiary survives the Member, the
Member's Beneficiary shall be his surviving spouse; or, if there
is no surviving spouse, the surviving children of the Member in
equal shares;
45
or, if there are no surviving children, then the surviving
parent(s) of the Member; or, if there are no surviving parents,
the Member's estate. For purposes of the foregoing, the term
"surviving children" shall include the children of a Member's
deceased child. Such children shall share equally in any
distribution that would have gone to the Member's child had he
been alive.
If any payment is made under the Plan to any Beneficiary, in
reasonable reliance on (A) a written statement by the Member that
he was unmarried, (B) a spousal consent that on its face
conformed to the requirements set forth above, or (C) evidence
establishing to the Plan Administrator's satisfaction that a
Member's spouse could not be located at the time of a Beneficiary
designation, the Plan's liability for death benefits shall be
satisfied, to the extent of such payment, and the Plan shall have
no liability to any spouse to such extent.
9.2 DISTRIBUTION UPON TERMINATION OF SERVICE FOR REASONS OTHER THAN DEATH.
Upon a Member's Termination of Service for reasons other than death, such Member
shall be entitled to the Vested Balance of his Account as of the Valuation Date
provided in Section 9.4.
9.3 FORM OF BENEFIT PAYMENTS.
(a) PAYMENT TO MEMBER. Except as provided in Sections 9.4(b) and 9.6, the
distribution of a benefit to a Member pursuant to Section 9.2 shall be
made in either of the following ways, as the Member shall elect:
(1) in a lump sum; or
(2) in installments payable in substantially equal amounts or term
certain annuities continuing over a period certain as elected by
the Member, not exceeding the shorter of 15 years, the Member's
life expectancy, or the life expectancy of the Member and his
Beneficiary;
provided that subject to the Code and Code Regulations the first distribution to
a Member after Termination of Service may, at the Member's election, be a
partial payment of his vested Account balance and any subsequent distribution
shall conform to (1) or (2) above.
(b) PAYMENT TO BENEFICIARY. Subject to the provisions below, a
Beneficiary entitled to payment under this Article may elect to
continue receiving the benefits under the method of payment in effect
when the Member
46
died or be paid the remaining Account balance in a single lump sum
distribution.
If a Member dies before the time the distribution is considered to
have commenced in accordance with the Code or Code Regulations or
Proposed Code Regulations (i.e. before April 1 of the year after the
year that the Member reaches age 70 1/2), the method of distribution
shall satisfy the following requirements:
(1) any remaining portion of the Member's interest that is not
payable to a designated beneficiary (as defined under Code
Regulations or Proposed Code Regulations) will be distributed
within five years after the Participant's death; and
(2) any portion of the Member's interest that is payable to a
designated beneficiary (as defined in Code Regulations or
Proposed Code Regulations) will be distributed either (i) within
five years after the Member's death, or (ii) over the life of the
Beneficiary or over a period certain not extending beyond the
life expectancy of the Beneficiary, commencing not later than the
end of the calendar year following the calendar year in which the
Member died (or, if the designated Beneficiary is the Member's
surviving spouse, commencing not later than the end of the
calendar year following the calendar year in which the Member
would have attained age 70 1/2).
Subject to Sections 9.4(b) and 9.6 herein and further subject to the
limitations of the Code and Code Regulations or Proposed Code
Regulations, the distribution options described in Section 9.3(a)
above will be offered to a designated beneficiary (as defined under
Code or Proposed Code Regulations) whenever the Member dies. The
distribution options in Section 9.3(a) will also be offered to satisfy
subsection 9.3(b)(2)(ii) above, and for this purpose the term "Member"
in Section 9.3(a) will refer to the designated beneficiary (except
that if the designated beneficiary is not the Member's spouse, the
words "or the life expectancy of the Member and his Beneficiary" at
the end of 9.3(a)(2) shall not be applicable). Distribution options
offered to a Beneficiary who is not an individual shall be those
described in the first sentence of this Section 9.3(b) except that if
the Member dies before April 1 of the year following his/her reaching
age 70 1/2, the five-year rule of Code Section 401(a)(9)(B)(ii) shall
apply.
In the event a Beneficiary dies, any remaining balance payable to such
Beneficiary shall be distributed to the
47
Beneficiary's estate (except where the Beneficiary is the Member's
spouse and such spouse had submitted a beneficiary form designating an
individual as a Beneficiary prior to the spouse's death). The
distribution options available to a deceased Beneficiary's estate or
to a designated individual Beneficiary of a deceased
spouse-Beneficiary will be a continuation of the payments being made
to the deceased Beneficiary at the time of his/her death or a lump sum
payment (but any distribution shall in any event be completed by the
end of the normal life expectancy of the deceased Beneficiary
(measured at the time of the Employee's death) or within five years
after the Member's death if the five-year rule applies), PROVIDED
that, in cases where the deceased Beneficiary is the spouse of a
deceased Member, and if such spouse had, prior to such spouse's death,
submitted a beneficiary form to the Administrator designating an
individual as his/her Beneficiary, then such individual Beneficiary
may (in addition to the option of receiving a lump sum or the
continuation of existing payments) elect to receive annual
installments or a term certain annuity (commencing not later than
December 31 of the year following the spouse-Beneficiary's death) over
a period of up to 15 years, but in any event such period will not
exceed the life expectancy of the individual Beneficiary (measured at
the time of the spouse's death) named by the spouse and further will
not exceed the life expectancy of the spouse (measured at the time of
the Employee's death) if the spouse died after April 1 of the year
following the Member's reaching age 70 1/2."
(c) EARNINGS AND LOSSES. Amounts payable hereunder shall continue to
accrue earnings and losses under Section 6.3 pending such payment.
(d) COMPLIANCE WITH CERTAIN IRS REQUIREMENTS. Notwithstanding anything
herein, distributions from the Plan will be made in accordance with
the requirements of the Regulations under Code Section 401(a)(9),
including the minimum distribution incidental benefit requirements of
Section 1.401(a)(9)-2 of the proposed Code Regulations.
9.4 TIME OF BENEFIT PAYMENTS.
(a) GENERAL RULE. Except as otherwise provided in this Section 9.4 and
Section 9.8, distribution of benefits under the Plan shall commence as
soon as administratively feasible following the Member's Termination
of Service and his request for his distribution from the Plan in
accordance with the Rules of the Plan.
48
(b) SMALL AMOUNTS. If a Member incurs a Termination of Service and the
Vested Balance of his Account as of the first Valuation Date
coincident with or next following such Termination of Service is not
greater than $3,500 (or exceeded such amount at the time of a prior
distribution under Article VIII), distribution shall be made in a
single lump sum in cash as soon as administratively feasible in
accordance with the Rules of the Plan.
(c) DISTRIBUTIONS UPON DEATH. A distribution to a Beneficiary pursuant to
Section 9.1 shall be made as soon as practicable following the first
Valuation Date coincident with or next following the Member's death.
For purposes of Section 9.4(a) above, written consent of the
Participant is required before the commencement of the distribution of
any portion of an accrued benefit if the present value of the
nonforfeitable total accrued benefit is greater than $3,500. The
consent requirements are deemed satisfied if such value does not
exceed $3,500 and the Plan may distribute such portion to the
Participant as a single sum. Present value for this purpose shall be
the Participant's Vested Balance of his or her Account as of the
applicable Valuation Date. If the present value determined at the
time of a distribution to the Participant exceeds $3,500, then the
present value at any subsequent time shall be deemed to exceed $3,500.
The foregoing consent requirements do not apply to situations where
consent is not required by applicable law.
(d) The notice required by Section 1.411(a)-11(c) of the Code Regulations
will be provided no less than 30 days and no more than 90 days before
the Annuity Starting Date.
(e) If a distribution is one to which Sections 401(a)(11) and 417 of the
Internal Revenue Code do not apply, such distribution may commence
less than 30 days after the notice required under Section
1.411(a)-11(c) of the Code Regulations is given, provided that:
(1) the Plan Administrator clearly informs the Participant that
the Participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not
to elect a distribution (and, if applicable, a particular
distribution option), and
(2) the Participant, after receiving the notice, affirmatively
elects a distribution.
49
9.5 INCIDENTAL DEATH BENEFIT. Once distribution to the Member has commenced
under Section 9.4, the minimum amount which must be distributed each calendar
year shall be determined by dividing the balance in the Member's Account by the
"applicable divisor." The "applicable divisor" shall be determined under
Regulations issued under the incidental death benefit requirements of Code
Section 401(a)(9).
9.6 DISTRIBUTION OF EMPLOYEE ACCOUNT 9. If a Member's Employee Account 9
exceeds $3,500 (determined as of the date such Account was initially established
under the Predecessor Plan), distribution of such Employee Account 9 must
conform with the following:
(a) NORMAL FORM OF PAYMENT.
(1) UNMARRIED MEMBER. The form of benefit payable to an unmarried
Member shall be the single life annuity described in subsection
(c)(1) unless the Member consents to payment in another form.
(2) MARRIED. The form of benefit payable to each married Member
shall be the qualified joint and survivor annuity as defined in
Code Section 417, unless he consents to another form of payment
in accordance with the rules described in this Section. A
Participant who elects to receive a distribution on or after the
obtainment of the Participant's Early Retirement Date (that is,
the earliest date on which the Participant can elect to receive
retirement benefits from Employee Account 9 under the Plan), will
receive the distribution in the form of a qualified joint and
survivor annuity unless the Participant and the Participant's
spouse consent to payment in another form. The "qualified joint
and survivor annuity" is a reduced monthly benefit commencing on
the Member's benefit commencement date and payable throughout his
lifetime, with 50 percent of that monthly amount continuing for
life to his surviving spouse, beginning on the first day of the
month following his date of death. The qualified joint and
survivor annuity shall be the actuarial equivalent of the single
life annuity described in subsection (c)(1).
(A) EXPLANATION OF QUALIFIED JOINT AND SURVIVOR ANNUITY. The
Plan Administrator shall provide to each Member a written
explanation of the qualified joint and survivor annuity
between 30 and 90 days before the Member's Annuity Starting
Date. The written communication shall explain the terms and
conditions of the annuity; the Member's right
50
to waive, and the effect of an election to waive the
annuity; the right of the Member's spouse to refuse to
consent to a waiver of the annuity; and the right to revoke,
and the effect of a revocation of an election to waive the
annuity; and the relative value of optional forms of payment
available under the Plan.
(B) WAIVER OF THE QUALIFIED JOINT AND SURVIVOR ANNUITY. The
Member may elect to waive the qualified joint and survivor
annuity, and may revoke any such election during the
election period. Each election must be in writing and must
satisfy all of the following conditions: (i) the
Participant's spouse consents in writing to the election and
the spouse's consent is witnessed by a plan representative
or notary public; (ii) the Participant's waiver and the
spouse's consent state the specific non-spouse beneficiary
(including any class of beneficiaries or contingent
beneficiaries) and the particular optional form of benefit,
neither of which may be further modified (except back to a
qualified joint and survivor annuity) without subsequent
spousal consent (unless expressly permitted by the spouse);
and (iii) the spouse's consent acknowledges the effect of
the election; provided that spousal consent shall not be
required if the Participant provides the Administrator with
satisfactory evidence that such consent cannot be obtained
because his spouse cannot be located or because of other
circumstances described in Treasury Regulations.
(C) ELECTION PERIOD. The election period for waiving the
qualified joint and survivor annuity shall be the 90-day
period ending on the Member's Annuity Starting Date.
(D) ELECTION OF 75 PERCENT SURVIVOR ANNUITY. The Member may
elect to receive a 75 percent joint and survivor annuity
with his spouse as his joint annuitant, which shall be the
actuarial equivalent of the qualified joint and survivor
annuity, and he shall not be required to have his spouse's
consent to make the election.
(b) ELECTION OF OPTIONAL FORM OF PAYMENT. Subject to the restrictions
described in subsection (a), the Member who is entitled to elect an
optional form of payment
51
may elect, or revoke a previous election and make a new election,
within the 90-day period ending on his Annuity Starting Date, to
receive his benefits in one of the optional forms described in
subsection (c). Each election shall be in writing on a form
prescribed by the Plan Administrator.
(c) DESCRIPTION OF OPTIONAL FORMS OF PAYMENT. The value of each optional
form of payment shall be that which can be provided by the funds
credited to the Member's Employee Account 9 as of the date benefits
commence; and unless the Beneficiary is the Member's spouse, no option
may be elected unless the periodic annuity payments payable to the
Beneficiary do not exceed the "applicable percentage" (as defined in
Regulations issued under Code Section 401(a)(9)) of the annuity
payments payable to the Member.
(1) SINGLE LIFE ANNUITY. The single life annuity is a monthly
benefit commencing on the Member's Annuity Starting Date and
payable throughout his lifetime, ending with the last payment due
on the first day of the month in which his death occurs.
(2) JOINT AND SURVIVOR ANNUITY. An unmarried Member, or a married
Member who has properly waived the qualified joint and survivor
annuity under subsection (a), may elect to receive an annuity in
the form of a reduced monthly benefit commencing on his Annuity
Starting Date and payable throughout his lifetime, with either 25
percent, 50 percent, or 75 percent of that monthly amount
continuing for life to his surviving joint annuitant, beginning
on the first day of the month following the Member's date of
death.
(3) TEN YEARS CERTAIN AND LIFE ANNUITY. An unmarried Member or a
married Member who has properly waived the qualified joint and
survivor annuity may elect to receive his annuity in the form of
a reduced monthly benefit commencing on his Annuity Starting Date
and payable throughout his lifetime, ending with the last payment
due on the first day of the month in which his death occurs;
provided that if the Member dies within the ten-year period
following his Annuity Starting Date, payments shall continue to
his Beneficiary for the remainder of the ten-year period. In the
event the Beneficiary dies within the ten-year period and there
is no contingent Beneficiary, the actuarial equivalent of any
remaining monthly payments shall be paid in a lump sum to the
Member's estate.
52
(4) OTHER FORMS OF PAYMENT. Subject to obtaining appropriate
consents and waivers described in subsection (a) the Member may
elect a lump sum payment or other form of payment permitted under
Section 9.3.
(d) EFFECT OF DEATH ON OPTIONAL FORMS OF PAYMENT.
(1) DEATH BEFORE BENEFIT COMMENCEMENT DATE. In the event a Member
has elected an optional form of payment and either the Member or
his Beneficiary or joint annuitant dies before the Member's
Annuity Starting Date, the election will not become effective.
(2) DEATH AFTER ANNUITY STARTING DATE. If both the Member who has
elected an optional form of payment and his Beneficiary or joint
annuitant are living on his Annuity Starting Date, the subsequent
death of either shall not cancel or otherwise affect the elected
form of payment.
(e) PRERETIREMENT DEATH BENEFITS.
(1) MARRIED MEMBER. The surviving spouse of the vested Member who
dies before his Annuity Starting Date shall receive a monthly
benefit in the form of a survivor annuity. This annuity is
intended to satisfy the requirements of Code Section 417 related
to qualified preretirement survivor annuities.
The Plan shall provide the death benefit without any charge to
the Member for the cost of coverage. The Participant may not
waive this death benefit coverage.
(2) AMOUNT OF SPOUSE'S BENEFIT. The surviving Spouse shall receive a
monthly benefit equal to the amount that can be provided by
one-half the value of the Member's Employee Account 9. In lieu
of this monthly benefit, the surviving spouse may elect any other
form of payment permitted under Section 9.3(b).
(3) COMMENCEMENT DATE OF SPOUSE'S BENEFIT. The preretirement death
benefit shall be payable to the surviving spouse of the Member
who dies before his Normal Retirement Date, on the first day of
each month commencing in the month following the date that would
have been his Normal Retirement Date if he had survived,
provided, however, that the surviving spouse may direct that such
payments commence at any earlier date. The surviving
53
spouse may direct the commencement of payments under the
qualified pre-retirement survivor annuity within a reasonable
time after the Member's death. A surviving spouse shall not be
required to begin receiving benefits under a qualified
pre-retirement survivor annuity prior to the time the Member
would have obtained the later of age 62 or normal retirement age
(as defined in Code Section 411(a)(8)), except where the present
value of the nonforfeitable benefit does not exceed $3,500. The
preretirement death benefit shall be payable to the surviving
spouse of the Member who dies after his Normal Retirement Date,
on the first day of each month commencing in the month following
the Member's date of death. The last payment shall be due on the
first day of the month in which the surviving spouse's death
occurs.
(4) UNMARRIED MEMBER. A Member who is not legally married as of the
date of his death shall have the balance in his Employee Account
9 distributed to his designated Beneficiary in accordance with
Section 9.1.
(f) DELAYED RETIREMENT.
(1) BENEFIT COMMENCEMENT DATE. Benefits payable from Employee
Account 9 to a Member who remains employed after his Normal
Retirement Date shall commence on the first day of the month
following his actual retirement.
(2) NOTICE TO PARTICIPANTS. The Plan Administrator shall provide to
each Member who postpones retirement, during the month next
following the month in which he attains age 65, a written notice
containing (A) a statement that his benefit payments will be
suspended until the date he actually retires, except that
benefits will be paid during any month when he fails to accrue at
least 40 Hours of Service; (B) a description of the reasons why
his benefit payments are being suspended; i.e., because he has
continued employment after his Normal Retirement Date for at
least 40 Hours of Service per month; (C) a general description of
the Plan provisions relating to the suspension of benefit
payments and a photocopy of this Section; (D) a statement that
applicable Department of Labor Regulations may be found in
Section 2530.203-3 of Title 29 of the Code of Federal
Regulations; and (E) a statement that the Member may seek review
of his benefit suspension
54
by invoking the claims procedures described in Section 12.7.
9.7 [RESERVED]
9.8 LIMITATIONS ON DISTRIBUTIONS. Notwithstanding the foregoing provisions of
this Article IX, unless the Member otherwise elects in writing, distribution to
a Member shall not take place later than the sixtieth day after the close of the
Plan Year in which the latest of the following events occurs:
(a) the Member attains age 65;
(b) the Member attains the tenth anniversary of the date on which he
commenced participation in the Plan; or
(c) the Member's Termination of Service.
In any event, the payment of benefits to a Member shall commence no later than
April 1 following the calendar year in which the Member attains age 70-1/2.
All distributions under this Plan shall be made in accordance with Code Section
401(a)(9) and the Regulations thereunder.
9.9 ELIGIBLE ROLLOVER DISTRIBUTIONS. Notwithstanding any provision of the Plan
to the contrary that would otherwise limit a distributee's election under this
Article IX, a distributee may elect, at the time and in the manner prescribed by
the Plan Administrator, to have any portion of an eligible rollover distribution
paid directly to an eligible retirement plan specified by the distributee in a
direct rollover.
DEFINITIONS:
(a) Eligible rollover distribution: An eligible rollover distribution is
any distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such distribution is
required under Section 401(a)(9) of the Code; and the portion of any
distribution that is not includible in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to employer
securities).
(b) Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in Section 408(a) of the Code, an
individual retirement annuity described in Section 408(b) of the Code, an
annuity plan described in Section
55
403(a) of the Code, or a qualified trust described in Section 401(a) of the
Code, that accepts the distributee's eligible rollover distribution. However,
in the case of an eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account or individual
retirement annuity.
(c) Distributee: A distributee includes an employee or former employee.
In addition, the employee's or former employee's surviving spouse and the
employee's or former employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in Section 414(p)
of the Code, are distributees with regard to the interest of the spouse or
former spouse.
(d) Direct rollover: A direct rollover is a payment by the plan to the
eligible retirement plan specified by the distributee.
9.10 PLAN TO PLAN TRANSFERS.
(a) TRANSFERS TO PRECEDESSOR PLAN. Notwithstanding any provision of the
Plan to the contrary that would otherwise limit a distributee's
election under this Article IX, subject to the approval of the Plan
Administrator in its sole discretion (exercised in a nondiscriminatory
manner) and at the time and in the manner prescribed by the Plan
Administrator, a Participant who is entitled to a lump sum
distribution within the meaning of Code Section 402(e) from the Plan
may elect instead to have the amount of such distribution transferred
to the Predecessor Plan if the Participant is or becomes employed by a
participating employer in the Predecessor Plan. If elected by the
Participant and authorized by the Plan Administrator, such a
plan-to-plan transfer must be made to the recipient plan by the
Trustee within the period established by the Plan Administrator on a
uniform and non-discriminatory basis. To the extent permitted by
applicable law, the provisions of subsection (a) shall also be
applicable to former employees of The Promus Companies Incorporated
(i) who were participants in the Predecessor Plan and (ii) who
terminated their employment with The Promus Companies Incorporated or
its affiliates on or prior to the S&RP Spin-Off Date and (iii) whose
unvested account balances under the Predecessor Plan were transferred
to the S&RP on or after the S&RP Spin-Off Date and were subsequently
transferred to the Plan on or after the Spin-Off Date and (iv) who are
reemployed by The Promus Companies Incorporated (currently, Harrah's
Entertainment, Inc.) or any of its subsidiaries after the S&RP
Spin-Off Date and based upon such reemployment are Eligible Employees
under the Predecessor Plan before incurring five
56
consecutive break years (as defined in the Predecessor Plan) since
termination of their employment with The Promus Companies Incorporated
(currently, Harrah's Entertainment, Inc.).
(b) TRANSFERS TO PLAN A. Subject to the approval of the Plan
Administrator in its sole discretion (exercised in a nondiscriminatory
manner) and at the time and in the manner prescribed by the Plan
Administrator, a former Participant in the Plan who ceases to be an
Eligible Employee but remains an Employee of an Employer and is an
eligible employee under the terms of Plan A who is actively
participating in Plan A, shall have his Account under the Plan
transferred to Plan A. If authorized by the Plan Administrator, such
a plan-to-plan transfer must be made to Plan A by the Trustee within
the period established by the Plan Administrator on a uniform and
non-discriminatory basis.
(c) TRANSFER TO QUALIFIED PLANS. Subject to the approval of the Plan
Administrator in its sole discretion (exercised in a nondiscriminatory
manner) and at the time and in the manner prescribed by the Plan
Administrator, a former Participant in the Plan who ceases to be an
Eligible Employee and an Employee of an Employer and is an eligible
employee under the terms of another plan qualified under Code Section
401(a) of his new employer, may elect to have his Account under the
Plan transferred to such qualified plan. If elected by the former
Participant and authorized by the Plan Administrator, such a
plan-to-plan transfer must be made to the qualified plan by the
Trustee within the period established by the Plan Administrator on a
uniform and non-discriminatory basis.
ARTICLE X. LOANS TO MEMBERS
10.1 ADMINISTRATOR AUTHORIZED TO MAKE LOANS.
(a) CURRENT EMPLOYEES. Upon application of a Member who is currently
employed by the Company or an Affiliate, the Plan Administrator may
direct the Trustee to make a cash loan to the Member from the Vested
Balance of the Member's Account. Whether such loans are made, as well
as their amounts and terms, shall be in the sole discretion of the
Plan Administrator (exercised in a nondiscriminatory manner) subject
to the provisions of this Article. Appropriate disclosure shall be
made pursuant to the Truth in Lending Act to the extent applicable. A
Member cannot have more than one loan outstanding at any one time,
except the Plan Administrator, in his direction, may permit a Member
to have two outstanding loans if one such loan is for the purpose of
acquiring, constructing, reconstructing, or
57
substantially rehabilitating the principal residence of such Member or
a person in his immediate family.
(b) OTHER ELIGIBLE PERSONS. Loans shall also be available on a reasonably
equivalent basis to a Member or Beneficiary who is a party in
interest, as such term is defined in ERISA Section 3(14).
(c) OWNER-EMPLOYEES AND SHAREHOLDER-EMPLOYEES. Notwithstanding any other
provision of this Article, no loan shall be made to an owner-employee,
a member of the family of an owner-employee, or a
shareholder-employee, as such terms are defined in Code Section
4975(d), except as permitted under the applicable provisions of ERISA
and the Code and Regulations promulgated thereunder.
10.2 AMOUNT OF LOANS.
(a) MINIMUM AMOUNT. The minimum amount of any loan permitted under this
Article shall be $500.
(b) MAXIMUM AMOUNT. The amount of such loan (when added to the
outstanding balance of all loans to the Member from his Account) shall
not exceed the lesser of--
(1) $50,000, reduced by the excess (if any) of--
(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 Balance of the Member's Account at the
relevant time.
(c) COLLATERAL. The Vested Balance of the Account equal to the amount of
the loan shall be used as collateral to secure the loan.
(d) ADMINISTRATIVE FEE. The Plan Administrator may impose administrative
charges and processing fees for loans under the Plan in a
nondiscriminatory and uniform manner.
10.3 INTEREST. Each loan made under the Plan shall bear a reasonable rate of
interest fixed by the Plan Administrator which shall be set forth in the Rules
of the Plan and shall be commensurate with the interest rates charged by persons
in the business of lending money for loans which would be made under similar
circumstances. For loans approved prior to March 18, 1996, the interest rate
shall be the average of the rates charged
58
by The Hospitality Credit Union on loans secured by passbook savings accounts,
adjusted as necessary to ensure that the rate charged on a Plan loan shall
provide a return commensurate with the interest rates charged by persons in the
business of lending money under similar circumstances. The interest rate shall
remain unchanged for the life of the loan. The Plan Administrator shall
periodically review the interest rate.
10.4 TERM. A loan shall be for the term (in whole year increments) requested by
the Member but shall not exceed five years (except in the case of loans used to
acquire the principal residence of the Member, which shall be for a reasonable
term determined at the time the loan is made). Loans shall be made as of a
Valuation Date chosen by the Plan Administrator.
10.5 REPAYMENT.
(a) Loans shall be repaid in equal installments, one per pay period (but
in no event less than quarterly), representing a combination of
interest and principal, sufficient to amortize the loan during its
term.
(b) Payments by active Employees shall be made through payroll withholding
or such other means acceptable to the Plan Administrator in his sole
and absolute discretion.
(c) Loans may be prepaid in full at any time pursuant to the procedures
established by the Plan Administrator.
(d) Beneficiaries and Members who are not currently employed, and who are
parties-in-interest as defined in ERISA Section 3(14), must repay any
loan either in one full amount or in accordance with the terms of a
promissory note signed by such Beneficiary or Member.
(e) Participants who are on a leave of absence authorized by the Employer
either without pay or at a rate of pay (after income and employment
tax withholding) that is less than the amount of the installment
payments required under the terms of the loan may suspend the
installment payments on their outstanding loans under the Plan for up
to one year provided that such loans are repaid by the latest date
permitted under Code Section 72(p)(2)(B).
10.6 ACCOUNTING FOR LOANS. Loan proceeds distributed to the Member shall be
charged, on a PRO RATA basis, to each Investment Fund in which his Account is
invested. Repayments of principal and interest shall be allocated on a PRO RATA
basis according to his investment election as to future contributions at the
time of such repayment.
59
10.7 DOCUMENTS. No loan under this Article shall be made until the Member has
completed on the appropriate form, and submitted to the Plan Administrator, the
following:
(a) a loan application setting forth such information as the Plan
Administrator deems appropriate; and
(b) a promissory note designating the Trustee as payee; stating the
amount, term, repayment schedule, interest rate, and other terms and
conditions consistent with this Article; authorizing the Employer to
make payroll withholdings equal to the installment amounts determined
under Section 10.5(a); and granting a conditional security interest in
the Member's Vested Balance in his Account to the Trustee as security
for repayment of the loan.
10.8 DEFAULT. A loan shall be considered in default when all or any part of a
scheduled payment shall be more than 60 days past due. The Plan Administrator
may grant an additional grace period of 30 days in a uniform and
nondiscriminatory manner. Loan payments may be suspended for up to one year
during a Participant's authorized leave of absence as described in Section
10.5(e). Upon default of a loan, the total principal and interest remaining due
shall be deducted from the Member's Account and treated as if it were a
distribution made to the person receiving the loan. Notwithstanding the
foregoing, upon default by an Eligible Employee under the age of 59 l/2, the
portion of the outstanding loan balance related to the Employee's Before-Tax
Contributions or earnings thereon shall remain an outstanding loan without
accruing additional interest until such time as the Employee terminates
employment or attains age 59 l/2. An Eligible Employee with a loan in default
may not receive a distribution of the loan collateral until such time as the
loan has been completely repaid.
10.9 SPOUSAL CONSENT. Absent a spousal consent meeting the requirements of
Section 9.1(b), the Plan Administrator shall not permit a loan to a married
Member who has a balance in Employee Account 9 of more than $3,500 (determined
as of the date such Account was initially established under the Predecessor
Plan) if such loan is to be secured, all or in part, by such Employee Account 9.
Written spousal consent to the use of a Participant's accrued benefit under
Account 9 as security for a loan must be obtained within the 90-day period
ending on the date on which the loan is to be secured.
ARTICLE XI. AMENDMENT AND TERMINATION
11.1 AMENDMENT AND TERMINATION. The Company expects the Plan to be permanent,
but the Company must necessarily and does hereby reserve the right to amend or
modify in any respect, or to terminate, the Plan at any time, for any reason
whatsoever, by the action of the Board of Directors. The Company may make any
60
modifications or amendments to the Plan, retroactively if necessary or
appropriate, to qualify or maintain the Plan as a plan meeting the requirements
of Code Section 401(a) or of ERISA, or the Regulations issued thereunder.
No amendment of the Plan shall cause any part of the Fund to be used for or
diverted to purposes other than the exclusive benefit of the Members, their
surviving spouses, or their Beneficiaries covered by the Plan. No plan
amendment may decrease the accrued benefit of any Member. Retroactive plan
amendments may not decrease the accrued benefit of any Member determined as of
the time the amendment was adopted. The Chief Executive Officer shall have the
right to amend or modify the Plan; provided, however, that such amendments shall
be administrative in nature, or mandated by any applicable law.
The Plan may be amended or terminated under this Section without the vote of the
stockholders of the Company, except to the extent that stockholder approval is
required by Rule 16b-3, promulgated under Section 16 of Securities Exchange Act
of 1934, as amended.
11.2 VESTING ON TERMINATION OR PARTIAL TERMINATION. Upon a complete or partial
termination of the Plan or complete discontinuance of contributions to the Plan
(within the meaning of Treasury Regulation Section 1.411(d)-2), no further
contributions shall be made under the Plan; all accrued benefits credited to the
Account of each Member (or, in the case of a partial termination, each affected
Member within the meaning of Treasury Regulation 1.411(d)-2) shall fully vest;
and except as otherwise provided in this Section 11.2, the Accounts of any
affected Members shall be distributed at the time and in the manner specified in
Article IX. Amounts attributable to elective contributions (Basic Before-Tax
Contributions and earnings thereon and Supplemental Before-Tax Contributions and
earnings thereon) may not be distributed earlier than upon one of the following
events:
(1) The Employee's retirement, death, disability or separation from
service.
(2) The Employee's attainment of age 59 1/2 or the Employee's
financial hardship as described in Section 8.1(c)(2) except that
earnings credited to any Before-Tax Contributions after December
31, 1988 may not be withdrawn on account of an Employee's
financial hardship.
(3) The termination of the Plan without establishment or maintenance
of another defined contribution plan (other than an Employee
Stock Ownership Plan as defined in Code Section 4975(e) or 409 or
a simplified employee pension as defined in Code Section 408(k))
subject to the provisions of 1.401(k)-1(d)(3) of the Code
Regulations.
61
(4) The date of the sale or other disposition by an Employer that is
a corporation of substantially all the assets (within the meaning
of Section 409(d)(2)) used by such Employer in a trade or
business of such Employer to an unrelated corporation.
(5) The date of the sale or other disposition by an Employer that is
a corporation of its interest in an Employer subsidiary (within
the meaning of Code Section 409(d)(3) to an unrelated entity or
individual.
Notwithstanding any provision herein to the contrary, to the extent
permitted by law, upon a complete termination of the Plan, each Member shall
receive an immediate lump sum distribution of his Account maintained under the
Plan for his benefit, except that the portion of his Account, if any,
attributable to Employee Account 9 which the Member may receive as an annuity in
the form described in Section 9.6(a)(1) and (2), if applicable.
Upon a complete termination of the Plan, no Employee who is not a
Participant on the termination date shall thereafter become a Participant.
11.3 MERGER, CONSOLIDATION, OR TRANSFER. In the case of any merger or
consolidation of the Plan with, or any transfer of assets and liabilities of the
Plan to, any other plan, provision shall be made so that each Member would, if
the Plan were then terminated, receive a benefit immediately after the merger,
consolidation, or transfer which is equal to or greater than the benefit he
would have been entitled to receive immediately before the merger,
consolidation, or transfer if the Plan had then been terminated.
11.4 EFFECT OF CHANGE IN CONTROL. The following provisions shall govern in the
event that an Employer or Division, or any part of the assets of an Employer, is
acquired by, or merged into, a nonaffiliated company, or in the event a
nonaffiliated company acquires substantially all the outstanding stock of an
Employer:
(a) The amounts credited to the Accounts of the Employees who are involved
in such acquisition or merger shall become 100 percent vested whether
or not this Plan is continued or assumed and whether or not the
successor company has or establishes a comparable plan. An Employee
of an Employer (other than the Company) or Division shall be deemed
"involved" if his employment is terminated by reason of the
acquisition or merger or transferred (from the controlled group
consisting of the Company and its Affiliates) by reason of the
acquisition or merger. Employees of the Company shall be deemed
"involved" if their employment is terminated
62
by reason of the acquisition or merger or if they continue in the
employment of the Company after control of the Company changes hands.
(b) Subject to subsection (a), if the nonaffiliated successor company
shall have agreed to establish, or shall have, a plan substantially
comparable to this Plan (as determined by the Trustees), then the Plan
assets allocable to the Employees involved in the acquisition or
merger may be transferred to the plan so established by the successor
company subject, however, to the receipt of a favorable determination
letter from the Internal Revenue Service or opinion of counsel of the
successor company satisfactory to the Trustees that such successor
plan is a tax-exempt plan and trust under the applicable provisions of
the Code.
(c) Subject to subsection (a), if a nonaffiliated successor company
acquires substantially all of the stock or assets of the Company by
merger or acquisition or otherwise, then such successor company may
assume this Plan as the sponsoring company.
(d) If an Affiliate or other entity that owns 50 percent or more of the
Company's outstanding common stock acquires the Company or
substantially all of its assets or stock, then the affiliated company
may assume the Plan and the Plan shall then continue in effect without
interruption and without an acceleration in vesting.
For a corporate transaction that does not constitute a merger or acquisition,
the Human Resources Committee shall determine, in its sole and absolute
discretion, whether a change in control has occurred and whether the provisions
of this Section 11.4 shall apply with respect to affected Employees.
ARTICLE XII. ADMINISTRATION OF THE PLAN
12.1 PLAN ADMINISTRATOR.
(a) The general administration of the Plan shall be carried out by Promus
Hotels, Inc. or its delegates, who shall act as the "administrator" within
the meaning of Title 1 of ERISA. The Plan Administrator and the Trustees
shall be the "named fiduciaries" within the meaning of Title I of ERISA.
To the extent not prohibited by law or applicable rules or regulations, the
Plan Administrator shall have the authority to delegate to one or more
persons the duties and responsibilities of the Plan Administrator.
(b) The Plan Administrator shall also have the authority and discretion to
engage an Administrative Delegate who shall perform, without discretionary
authority or control, administrative functions within the framework of
policies,
63
interpretations, rules, practices, and procedures made by the Plan
Administrator or other Plan fiduciary. Any action made or taken by the
Administrative Delegate may be appealed by an affected Member to the Plan
Administrator in accordance with the claims review procedures provided in
Section 12.7. Any decisions which call for interpretations of Plan
provisions not previously made by the Plan Administrator shall be made only
by the Plan Administrator. Except to the extent the Administrative
Delegate exercises discretionary authority or control over the assets of
the Plan, the Administrative Delegate shall not be considered a fiduciary
with respect to the services it provides.
(c) Notwithstanding subsections (a) and (b), each Member shall be a named
fiduciary for purposes of Section 403(a) of ERISA but solely with respect
to the issuance of instructions to the Trustee--
(1) to tender or not to tender the Member's Company Stock Share
pursuant to Section 14.1 of the Trust Agreement; and
(2) to vote Company Stock pursuant to Section 6.4(d) of the Plan.
12.2 APPOINTMENT AND RESIGNATION OF TRUSTEES. The Board of Directors may
remove any Trustee at any time. In the event of the removal, death,
resignation, or inability to act of a Trustee, said Board of Directors may
appoint a successor. A Trustee may resign at any time, effective upon
delivering a written resignation to the Board of Directors or the Secretary or
Assistant Secretary of the Company.
12.3 POWERS AND DUTIES OF THE PLAN ADMINISTRATOR. Except as to powers and
duties and the determination of questions expressly reserved herein to the
Trustees, the Plan Administrator shall have full charge of the administration of
this Plan with all discretionary powers and authority to enable it properly to
carry out its duties including (without limitation) the authority to determine
all questions relating to (a) the interpretation of the Plan; (b) the
eligibility of Participants; (c) the dates and other considerations regarding
participation or termination of employment; (d) the benefit to which any Member
or his surviving spouse or beneficiary may become entitled hereunder; (e) to
construe the Plan and the Rules of the Plan; (f) to determine questions of
eligibility and vesting of Participants; (g) to determine entitlement to
allocations of contributions and forfeitures and to distributions of
Participants, former Participants, Beneficiaries, and all other persons; (h) to
make findings of fact as necessary to make any determinations and decisions in
the exercise of such discretionary power and authority; (i) to conduct claims
procedures as provided in Section 12.7; and (j) to delegate any power or duty to
any firm or person engaged under Section 12.8 or to any other person or
64
persons. The Plan Administrator shall also have the right to authorize
disbursements under the Plan, subject to any required withholdings. All
interpretations under the Plan and all determinations of fact made in good faith
by the Plan Administrator (or delegees thereof) and the Trustees shall be
binding on the Members and all other interested persons.
12.4 ACTION BY MAJORITY OF THE PLAN ADMINISTRATOR. To the extent that the Plan
Administrator has delegated its power and authority to a committee, all action
by such committee hereunder shall be authorized either by a majority vote of all
members of such committee present at a meeting (provided a quorum of all members
is present), or by a writing signed by a majority of all members of such
committee.
12.5 RULES AND REGULATIONS OF THE PLAN ADMINISTRATOR. The Plan Administrator
may make such rules and regulations in connection with its administration of the
Plan as are consistent with the terms and provisions hereof (the "Rules of the
Plan").
12.6 CONCLUSIVENESS OF REPORTS, ETC. The Trustees, the Plan Administrator and
the Company and any other Employer and their officers and directors, shall be
entitled to rely upon all tables, valuations, certificates, and reports
furnished by any enrolled actuary selected by the Plan Administrator, upon all
certificates and reports made by any accountant selected by the Plan
Administrator, the Company, or any other Employer, and upon all opinions given
by any legal counsel selected by the Plan Administrator (which may include
in-house counsel of the Company). The Trustees, the Plan Administrator and the
Company and any other Employers and their officers and directors, shall be fully
protected with respect to any action taken or suffered by them in good faith in
reliance upon any such actuary, or counsel, and all action so taken or suffered
shall be conclusive upon all persons.
12.7 CLAIMS PROCEDURE. If any claim for benefits under the Plan is wholly or
partially denied, the claimant shall be given notice in writing of such denial
within 90 days after receipt of the claim (or within an additional 90 days if
special circumstances require an extension of time, and written notice of the
extension shall be furnished to the claimant). Notice of the denial shall set
forth the following information:
(a) the specific reason or reasons for the denial;
(b) specific reference to pertinent Plan provisions on which 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 such
material or information is necessary;
65
(d) an explanation that a full and fair review by the Plan Administrator
of the decision denying the claim may be requested by the claimant or
his authorized representative by filing with the Plan Administrator,
within 60 days after such notice has been received, a written request
for such review; and
(e) if such request is so filed, the claimant or his authorized
representative may review pertinent documents and submit issues and
comments in writing within the same 60-day period specified in
subsection (d) above.
The decision of the Plan Administrator upon review shall be made promptly, and
not later than 60 days after the Plan Administrator's receipt of the request for
review, unless special circumstances require an extension of time for
processing, in which case the claimant shall be so notified and a decision shall
be rendered as soon as possible, but not later than 120 days after receipt of
the request for review. If the claim is denied, wholly or in part, the claimant
shall be given a copy of the decision promptly. The decision shall be in
writing and shall include specific reasons for the denial, shall include
specific references to the pertinent Plan provisions on which the denial is
based, and shall be written in a manner calculated to be understood by the
claimant. The Plan Administrator's decision on the appeal may be reviewed by
the Board of Directors which shall have the right to overrule the Plan
Administrator. The Plan Administrator and the Board of Directors shall have
full discretionary power and authority to construe the Plan and the Rules of the
Plan, to determine questions of eligibility, vesting and entitlements and to
make findings of fact as under Section 12.3 and, to the extent permitted by law,
the decision of the Plan Administrator (if no review is properly requested) or
the decision of the Board of Directors on review, as the case may be, shall be
final and binding on all parties except to the extent found by a court of
competent jurisdiction to constitute an abuse of discretion.
12.8 EMPLOYMENT OF AGENTS. The Plan Administrator may employ or designate
agents, including without limitation custodians, accountants, consultants, or
attorneys, to exercise and perform the powers and duties of the Plan
Administrator as the Plan Administrator delegate to them, and to render such
services to the Plan Administrator as the Plan Administrator may determine, and
the Trustees may enter into agreements setting forth the terms and conditions of
such services. The Plan Administrator may appoint an independent public
accountant to audit the Plan. The compensation of these agents shall be an
expense chargeable in accordance with Section 12.9.
12.9 COMPENSATION AND EXPENSES OF TRUSTEES. Unless otherwise determined by the
Company, the Plan Administrator and the Trustees shall serve without
compensation for services as such,
66
but all expenses of the Trustees shall be paid in accordance with the provisions
of Section 16.4. Such expenses shall include any expenses incident to the
functioning of the Plan, including without limitation attorneys' fees and the
compensation of other agents, accounting and clerical charges, expenses, if any,
of being bonded as required by ERISA, and any other costs of administering the
Plan.
12.10 INDEMNITY FOR LIABILITY. To the maximum extent allowed by law and to the
extent not otherwise indemnified, the Company shall indemnify each Trustee (and
former Trustee) and Plan Administrator, and any other current or former
Employee, officer, or director of the Company or the Employers, against any and
all claims, losses, damages, expenses, including counsel fees, incurred by any
such person on account of such person's action, or failure to act, in connection
with the Plan, including, in the case of amounts paid in settlement, only such
amounts as are paid with the Employer's approval.
12.11 EFFECT OF MISTAKE. In the event of a mistake or misstatement as to the
eligibility, participation, investments, or service of any Member, or the amount
of contributions made on behalf of, or payments made to, any Member or
Beneficiary, the Plan Administrator (or a designated agent or agents thereof and
the Plan Administrator) may determine whether or not a mistake has occurred and
may make any adjustment to a Member's or Beneficiary's Account, or make any
adjustment to payments made or being made to a Member or Beneficiary, which
will, in the Plan Administrator's sole judgment (or in the sole judgments of a
designated agent or agents of the Plan Administrator and the Plan
Administrator), correct such mistake or misstatement. In addition, if the
Administrator accepts a contribution or transfer pursuant to Section 4.9 of the
Plan and later determines that it was improper to do so, in whole or in part,
the Plan shall refund the necessary amount to the Participant.
ARTICLE XIII. TRUST ARRANGEMENTS
13.1 APPOINTMENT OF TRUSTEE. The Trustees for the Plan shall be named in the
Trust Agreement, and, upon acceptance thereof, each Trustee shall perform the
duties and exercise the authority of a Trustee as set forth in the Plan and in
said Trust Agreement. A Trustee shall be named, and may be removed, in
accordance with the provisions of Article XII.
13.2 CHANGE IN TRUST AGREEMENTS. The Company may from time to time enter into
such further agreements with the Trustees or other parties and make such
amendments to Trust Agreements, as it may deem necessary or desirable to carry
out the Plan and may take such other steps and execute such other instruments as
may be deemed necessary or desirable to put the Plan into effect or to execute
it.
67
13.3 TRUST FUND. All deposits under this Plan shall be paid to the Trustees
and deposited in the Fund. All assets of the Fund, including investment income,
shall be retained for the exclusive benefit of Members and beneficiaries and
shall be used to pay benefits under the Plan or to pay administrative expenses
of the Plan and of the Fund to the extent not permanently paid by the Company or
an Employer in its sole discretion, and shall not revert to or inure to the
benefit of the Company or an Employer, except as provided in Section 13.6.
13.4 APPOINTMENT OF AN INVESTMENT MANAGER. The Trustees shall have exclusive
authority and discretion to manage and control the Fund; provided, however, that
the Trustees may employ or appoint an Investment Manager(s) (within the meaning
of ERISA Section 3(38)) to manage all or any part of the Fund or a custodian to
hold such investments. The Trustees may also appoint an investment advisor. An
Investment Manager or custodian shall acknowledge in writing its appointment and
shall serve until removed by the Trustees or a proper resignation is received by
the Trustees. An Investment Manager shall have sole responsibility for the
investment of the portion of the Fund which such Investment Manager is appointed
to manage. Neither the Trustees nor the Administrator shall have any
responsibility for, or incur any liability for, the investment of such portion
or for the loss to or diminution in value of the Fund resulting from any action
directed, taken, or omitted by an Investment Manager or custodian. The Trustees
shall require each Investment Manager and custodian to furnish such periodic and
other reports to the Trustees as the Trustees deem to be in the best interests
of the Trust. Neither the Trustees nor the Plan Administrator shall be under
any duty to question, but shall be entitled to rely upon, any certificate,
report, opinion, direction, or lack of direction provided by an Investment
Manager or custodian and shall be fully protected in respect of any action taken
or suffered by them in reliance thereon. Such Investment Manager or custodian
may maintain cash balances in the Investment Fund(s) they are appointed to
manage; provided that such cash balances shall be limited to the amount needed
to meet the current cash requirements of the Plan, to make any cash
distributions, to pay any expenses, or to exercise applicable rights under the
Plan.
13.5 DIVERSIFICATION OF INVESTMENTS. Trust investments in the Investment Funds
(other than the Company Stock Fund, if any) shall consist only of those in which
a prudent man familiar with the objectives of the Plan and acting with the care,
skill, prudence, and diligence under the circumstances then prevailing, would
invest in the conduct of an enterprise of a like character and with the aims,
diversifying the investments of the Plan so as to minimize the risk of large
losses, unless under the circumstances it is clearly prudent not to do so.
Members or Employers shall not have any right to direct particular investments
within any Fund.
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13.6 REVERSION OF EMPLOYER CONTRIBUTIONS.
(a) Notwithstanding anything to the contrary contained in this Plan, if
the Internal Revenue Service issues a determination letter stating
that the Plan does not meet the requirements of Code Section 401 with
respect to its initial qualification, then within one year of the
issuance of such letter the Employer shall be entitled to receive a
return of its contributions made hereunder and each Participant shall
be entitled to receive a return of his Basic Before-Tax Contributions,
Supplemental Before-Tax Contributions, Basic After-Tax Contributions,
and Supplemental After-Tax Contributions.
(b) That portion of a contribution made by a mistake of fact shall be
returned to the Employer within one year after the payment of the
contribution; provided, that, if the contribution to be returned is a
Participant's Basic Before-Tax Contribution, Supplemental Before-Tax
Contribution, Basic After-Tax Contribution, or Supplemental After-Tax
Contribution, such contribution shall be returned to the Participant.
(c) That portion of a contribution made by the Employer that is
conditioned upon deductibility of the contribution under Code Section
404 and disallowed by the Internal Revenue Service as a deduction
under Code Section 404 shall be returned to the Employer within one
year after the Internal Revenue Service disallows the deduction;
provided, that, if the contribution to be returned is a Participant's
Basic Before-Tax Contribution or Supplemental Before-Tax Contribution,
such contribution shall be returned to the Participant.
(d) Earnings attributable to the contributions to be returned under this
Section shall not be returned (except with respect to Section 13.6(a))
and any losses attributable to such contributions shall reduce the
amount returned.
ARTICLE XIV. TOP-HEAVY PLAN PROVISIONS
14.1 APPLICATION OF TOP-HEAVY PROVISIONS.
(a) SINGLE PLAN DETERMINATION. Except as provided in subsection (b)(2)
below, if as of the Applicable Determination Date the aggregate of the Account
balances of Key Employees under the Plan exceeds 60 percent of the aggregate
amount of the Account balances of all Employees (other than former Key
Employees) under the Plan, the Plan will be top-heavy and the provisions of this
Article shall become applicable. For the purposes of this Article--
69
(1) Account balances shall include the aggregate amount of any
distributions made with respect to the Employee during the
five-year period ending on the Applicable Determination Date and
any contribution due but unpaid as of said Applicable
Determination Date; and
(2) the Account balance of any individual who has not performed
services for the Company or the Affiliates at any time during the
five-year period ending on the Applicable Determination Date
shall not be taken into account.
The determination of the foregoing ratio, including the extent to
which distributions, rollovers, and transfers shall be taken into
account, shall be made in accordance with Code Section 416 and the
Regulations thereunder which are incorporated herein by reference.
(b) AGGREGATION GROUP DETERMINATION.
(1) If as of the Applicable Determination Date the Plan is a member
of a Required Aggregation Group which is top-heavy, the
provisions of this Article shall become applicable. For purposes
of this subsection (b), an Aggregation Group shall be top-heavy,
as of the Applicable Determination Date, if the sum of--
(A) the aggregate of account balances of Key Employees under all
defined contribution plans in such group, and
(B) the present value of accrued benefits for Key Employees
under all defined benefit plans in such group exceeds 60
percent of the same amounts determined for all employees
(other than former Key Employees) under all plans included
within the Aggregation Group. Account balances and accrued
benefits shall be adjusted for any distribution made in the
five-year period ending on the Applicable Determination Date
and any contribution due but unpaid as of the Applicable
Determination Date. The account balance of any individual
who has not performed services for the Company or the
Affiliates at any time during the five-year period ending on
the Applicable Determination Date shall not be taken into
account. The determination of the foregoing ratio,
including the extent to which distributions (including
distributions from terminated plans), rollovers, and
transfers are taken into account, shall be made in
70
accordance with Code Section 416 and the Regulations
thereunder.
(2) If the Plan is top-heavy under subsection (a) above, but the
Aggregation Group is not top-heavy, this Article shall not be
applicable.
(c) THE TRUSTEES. The Trustees shall have responsibility to make all
calculations to determine whether the Plan is top-heavy.
14.2 DEFINITIONS. For purposes of this Article, the following definitions
apply.
(a) AGGREGATION GROUP means a required aggregation group or a permissive
aggregation group as follows:
(1) REQUIRED AGGREGATION GROUP. All plans maintained by the Company
and the Affiliates in which a Key Employee participates shall be
aggregated to determine whether or not the plans, as a group, are
top-heavy. Each other plan of the Company and the Affiliates
which enables this Plan to meet the requirements of Code Section
401(a) or Section 410 shall also be aggregated.
(2) PERMISSIVE AGGREGATION GROUP. One or more plans maintained by
the Company and the Affiliates, which are not required to be
aggregated, may be aggregated with each other or with plans under
paragraph (1) if such group would continue to meet the
requirements of Code Sections 401(a)(4) and 410 with such plan(s)
being taken into account.
(b) APPLICABLE DETERMINATION DATE shall mean, with respect to the Plan,
the Determination Date for the Plan Year of reference and, with
respect to any other plan, the Determination Date for any plan year of
such plan which falls within such calendar year as the Applicable
Determination Date of the Plan.
(c) DETERMINATION DATE shall mean, with respect to the initial plan year
of a plan, the last day of such plan year and, with respect to any
other plan year of a plan, the last day of the preceding plan year of
such plan.
(d) VALUATION DATE. For all top-heavy purposes, a Valuation Date shall be
the annual date on which Plan assets must be valued for the purpose of
determining the value of account balances or the date on which
liabilities and assets of a defined benefit plan are valued. For the
purpose of the top-heavy test, the Valuation Date for a defined
benefit plan shall be the
71
same Valuation Date used for computing plan costs for minimum funding.
The Valuation Date for a defined contribution plan shall be the most
recent valuation for a defined contribution plan date within a
12-month period ending on the Determination Date.
(e) KEY EMPLOYEE shall mean any Employee or former Employee who at any
time during the Plan Year containing the Determination Date or the
four preceding Plan Years, is or was (1) an officer of the Employer
having annual compensation for such Plan Year which is in excess of 50
percent of the dollar limit in effect under Code Section 415(b)(1)(A)
for the calendar year in which such Plan Year ends; (2) one of the ten
Employees having annual compensation from the Employer for a Plan Year
greater than the dollar limitation in effect under Code Section
415(c)(1)(A) for the calendar year in which such Plan Year ends and
owning (or considering as owning within the meaning of Code Section
318) more than a one-half percent interest as well as one of the ten
largest interests in the Employer; (3) a five percent owner of the
Employer; or (4) a one percent owner of the Employer having annual
compensation from the Employer for a Plan Year of more than $150,000.
For purposes of determining five-percent and one-percent owners,
neither the aggregation rules nor the rules of subsections (b), (c)
and (m) of Code Section 414 apply. Beneficiaries of an Employee
acquire the character of the Employee who performed service for the
Employer. Inherited benefits will retain the character of the
benefits of the Employee who performed services for the Employer.
(f) COMPENSATION. Compensation to be used for determining a minimum
benefit or minimum contribution for top-heavy purposes is the amount
set forth in Box 10 of Form W-2 (or the successor method of reporting
income under Code Sections 6041, 6051 and 6052). The same definition
of compensation shall be used for all top-heavy purposes, except that
for the purpose of determining whether an Employee is a Key Employee,
with respect to Plan Years beginning on or after January 1, 1989, the
compensation to be used is the aforesaid definition but including
Employer contributions made pursuant to a salary reduction
arrangement.
14.3 VESTING REQUIREMENTS. If the Plan is determined to be top-heavy with
respect to a Plan Year under the provisions of Section 14.1, then a Member's
interest in Employee Accounts 1, 6, and 8 shall vest in accordance with the
following schedule:
72
Years of Vesting Service Vested Percentage
------------------------ -----------------
Less than 1 0%
1 10%
2 20%
3 40%
4 60%
5 80%
6 100%
If in a subsequent Plan Year the Plan is no longer top-heavy, the vesting
provisions that were in effect prior to the time the Plan became top-heavy shall
be reinstated; provided, however, that any portion of a Member's Account which
was vested prior to the time the Plan was no longer top-heavy shall remain
vested, and provided further that a Member who has at least three Years of
Vesting Service at the start of such Plan Year shall have the option of
remaining under the vesting schedule in effect while the Plan was top-heavy.
14.4 MINIMUM CONTRIBUTION. For each Plan Year with respect to which the Plan
is top-heavy, the minimum amount contributed by the Employer under the Plan and
the Company and the Affiliates under all other qualified defined contribution
plans maintained by the Company and the Affiliates for the benefit of each
Participant who is not a Key Employee and who is otherwise eligible for such a
contribution shall be the lesser of --
(a) 3 percent of the non-key Participant's compensation for only the Plan,
or
(b) the non-key Participant's compensation times a percentage equal to the
largest percentage of the first $150,000 of such compensation of any
Key Employee allocated under any of such plans with respect to any Key
Employee for the Plan Year.
This minimum contribution is determined without regard to any social security
contribution and shall be in accordance with the requirements of Code Regulation
1.416-1. Solely with respect to Key Employees, contributions attributable to a
salary reduction, matching contributions, or similar arrangement shall be taken
into account. The minimum contribution provisions stated above shall not apply
to any Participant who was not employed by the Company or an Affiliate on
December 31 of the Plan Year. For a year in which the Plan is top-heavy, each
non-Key Employee will receive a minimum contribution if the Participant has not
separated from service at the end of the Plan Year, regardless of whether the
non-Key Employee has less than 1,000 hours of service (or the equivalent) and
regardless of whether such Employee declines to make a mandatory contribution to
a plan that generally requires such a contribution. This section shall not
apply to a Participant covered under a qualified defined benefit plan or a
qualified defined contribution plan maintained by the Company or the Affiliates
if the Participant's vested benefit
73
thereunder satisfies the requirements of Code Section 416(c). Amounts
contributed under this Section shall be credited to a Member's Employee Account
6, and shall be subject to the vesting provisions of this Plan applicable to
said Account.
14.5 LIMIT ON ANNUAL ADDITIONS; COMBINED PLAN LIMIT. If the Plan is determined
to be top-heavy, Code Sections 415(e)(2)(B) and 415(e)(3)(B) shall be applied by
substituting "1.0" for "1.25." This limitation shall not be applicable,
however, if--
(a) the Plan would not be top-heavy if "90 percent" is substituted for "60
percent" in Sections 14.1(a) and 14.1(b)(1) above; and
(b) for each Plan Year with respect to which the Plan is top-heavy, an
Employer contribution is made for Participants who are not Key
Employees equal to the sum of l percent of the non-key Participant's
compensation for the Plan Year plus the amount of the contribution
determined under Section 14.4 above.
ARTICLE XV. PARTICIPATION IN AND WITHDRAWAL
FROM THE PLAN BY AN AFFILIATE
15.1 PARTICIPATION IN THE PLAN. Any Affiliate which desires to become an
Employer hereunder may elect, with the written consent of the Chief Executive
Officer, to become a party to the Plan and Trust Agreement by adopting the Plan
for the benefit of its eligible Employees, effective as of the date specified in
such adoption. The adoption resolution or decision may contain such specific
changes and variations in Plan or Trust Agreement terms and provisions
applicable to such adopting Employer and its Employees as may be acceptable to
the Company and the Trustees. However, the sole, exclusive right of any other
amendment of whatever kind or extent to the Plan or Trust Agreement is reserved
by the Company. The adoption resolution or decision shall become, as to such
adopting organization and its employees, a part of this Plan (as then amended or
thereafter amended) and the related Trust Agreement. It shall not be necessary
for the adopting organization to sign or execute the original or then amended
Plan and Trust Agreement documents or to sign other documents to participate.
The effective date of the Plan for any such adopting organization shall be that
in the resolution or decision of adoption, and from and after such effective
date, such adopting organization shall assume all the rights, obligations, and
liabilities of an individual employer entity hereunder and under the Trust
Agreement. The administrative powers and control of the Company, as provided in
the Plan and Trust Agreement, including the sole right of amendment, and of
appointment and removal of the Trustees, and their successors, shall not be
diminished by reason of the participation of any such adopting organization in
the Plan and Trust Agreement.
74
15.2 WITHDRAWAL FROM THE PLAN. An Employer or Division may withdraw from, or
otherwise cease to participate in, the Plan by giving the Plan Administrator and
the Trustees 30 days written notice of its intention to do so, in which event
the Trustees shall, as promptly as is practicable, provide for the withdrawal or
segregation of the share of the assets in the Fund attributable to the
Participants of that Employer or Division and, if such Employer or Division so
requests, the former Participants of such Employer or Division; provided,
however, that the Plan Administrator, in its sole and absolute discretion, may
waive the 30-day notice requirement and provided further that any Participant
who will be an employee of the withdrawing Employer or Division after such
withdrawal and concurrently will also be an employee of an Employer or Division
which continues to participate in the Plan, such Participant may designate the
portion of the assets in the Fund attributable to such Participant which shall
be withdrawn or segregated in accordance with this Section 15.2. The amount of
such pro rata share shall be the net value of the Fund attributable to the
Participants and, if applicable, the former Participants of that Employer or
Division, determined as of the latest Valuation Date. The Trustees shall select
the assets of the Fund to be withdrawn or segregated in such amount.
(a) If the withdrawal of such Employer or Division from this Plan has the
effect of a termination of the plan so far as that Employer or
Division is concerned, then the rights of that Employer's
Participants, former Participants and Beneficiaries shall be governed
by the provisions of Section 11.2 relating to partial terminations.
(b) Subject to Section 11.4, if an Employer ceases to participate in the
Plan and adopts a substantially similar plan for the benefit of its
employees, the withdrawal from this Plan by that Employer shall not be
regarded as a termination of the Plan so far as that Employer and its
Employees are concerned; the rights of that Employer's Members and
Beneficiaries shall be governed in accordance with the provisions of
that substantially similar plan so adopted by that Employer for their
benefit as if no withdrawal from this Plan had taken place. Provided
further that any Participant who will be an employee of the
withdrawing Employer or Division after such withdrawal and
concurrently will also be an Employee of an Employer or Division which
continues to participate in the Plan will have the right to designate
in writing to the Plan Administrator, not later than twenty days after
the withdrawal of the Employer or Division, the percentage of the
Participant's vested Account that will be withdrawn or segregated in
accordance with this Section 15.2, which designated percentage shall
apply to all subaccounts, investment funds and other
75
financial amounts allocated to such Participant, and such
Participant's Account will be valued for such purposes as of the
Valuation Date coincident with or immediately preceding the effective
date of the Employer's or Division's withdrawal from the Plan; if such
written designation is not timely received, then such Participant's
Account will not be withdrawn or segregated under this Section 15.2.
The Plan Administrator may grant a reasonable extension of the time
limit for making this designation with respect to Employees whose
status as an employee of both a continuing Employer or Division and a
withdrawing Employer or Division is not immediately known or
ascertained, and the Valuation Date for such later designation will be
the Valuation Date coincident with or immediately preceding the date
the designation is submitted to the Plan Administrator. In the event
of such designation, Accounts may be transferred to the new Plan as
qualifying rollover distributions or plan to plan transfers subject to
the applicable requirements of the Code and ERISA.
ARTICLE XVI. MISCELLANEOUS
16.1 NO EMPLOYMENT RIGHTS CREATED. Neither the establishment nor the
continuation of the Plan, nor anything contained within the Plan, shall be
deemed to give any person the right to continued employment by the Company or
the Affiliates, or to affect the right of the Company or the Affiliates to
terminate the employment of any individual.
16.2 RIGHTS TO FUND ASSETS. No Employee or beneficiary shall have any right
to, or interest in, any assets of the Fund upon termination of his employment or
otherwise, except as specifically provided under the Plan, and then only to the
extent of the benefits payable under the Plan to such Employee or beneficiary
out of the assets of the Fund. All payments of benefits as provided for in this
Plan shall be made solely out of assets of the Fund and neither the Company, the
Affiliates, nor any fiduciary shall be liable therefor in any manner.
16.3 NONALIENATION OF BENEFITS. Except to the extent permissible under Code
Sections 401(a)(13) and 414(p), benefits payable under this Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, including any such liability which is for alimony or
other payments for the support of a spouse or former spouse, or for any other
relative of the Employee, prior to actually being received by the person
entitled to the benefit under the terms of the Plan; and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, or
otherwise dispose of any right to benefits payable hereunder, shall be void.
The Fund shall not in any manner be
76
liable for, or subject to, the debts, contracts, liabilities, engagements, or
torts of any person entitled to benefits hereunder.
The preceding paragraph shall also apply to the creation, assignment, or
recognition of a right to any interest or benefit payable with respect to a
Member pursuant to a domestic relations order, unless such order is determined
to be a qualified domestic relations order (as defined in Code Section 414(p)).
The Trustees (or a designated agent or agents thereof) shall establish
reasonable plan procedures to determine the qualified status of domestic
relations orders and to administer and pay distributions under such qualified
orders. Amounts vested hereunder and payable pursuant to a qualified domestic
relations order may be paid to the spouse or other alternate payee designated in
such order regardless of the Member's age or such spouses's or alternate payee's
age. Notwithstanding any provision of this Plan to the contrary and regardless
of whether the Member is an Employee or former Employee and regardless of the
Employee's or former Employee's age, such amounts may be paid immediately (as
soon as practical after the Plan Administrator receives the qualified domestic
relations order) in a single cash lump sum or in such other manner as may be
paid to a terminated Member as provided in such an order which complies with the
Plan's procedures for qualified domestic relations orders.
16.4 EXPENSES. All reasonable expenses of the Plan and Fund shall constitute a
charge upon the Fund and shall be paid from Member's Accounts in proportion to
the balance of such Accounts, except to the extent that the Company or an
Employer elects to pay such expenses, provided that the Company or an Employer
may advance such expenses on behalf of the Plan in which case the Company or
Employer will be reimbursed for such payment by the Plan from fund assets. Such
expenses shall include any expenses incident to the functioning of the Plan,
including, without limitation, attorneys' fees and the compensation of actuaries
and other agents, accounting and clerical charges, expenses, if any, of being
bonded as required by ERISA, and any other costs of administering the Plan.
16.5 SEVERABILITY. In the event that any provision of this Plan is held
invalid or illegal for any reason, such invalidity or illegality shall not
affect the remaining parts of the Plan and the Plan shall be enforced and
construed as if such provision had never been inserted herein.
16.6 GOVERNING STATE. The Plan shall be construed in accordance with the laws
of the State of Tennessee except where such laws have been preempted by laws of
the United States.
16.7 FACILITY OF PAYMENT. If the Plan Administrator shall find that any person
to whom a benefit is payable from the Fund is unable to care for his affairs
because of illness or accident, any payments due (unless a prior claim therefor
shall have been
77
made by a duly appointed guardian, committee, or other legal representative) may
be paid to the recipient's spouse, child, parent, brother or sister, or to any
person deemed by the Trustees to have incurred expense for such person otherwise
entitled to payment. Any such payment shall be a complete discharge of any
liability under the Plan therefor.
16.8 MISSING PERSONS. If the Plan Administrator is unable to locate a proper
payee within 18 months after a benefit becomes payable, the Plan Administrator
may treat the benefit as a forfeiture and allocate it to the Accounts of other
Participants under Section 4.6(a); however, if a claim for benefits is
subsequently presented by a person entitled to a payment, the forfeited amount
(determined as of the Valuation Date immediately before the forfeiture) shall be
recredited from such funds or resources as the Plan Administrator deems
appropriate (i.e., forfeitures, earnings, or additional Employer contributions)
upon verification of the claim in a manner satisfactory to the Plan
Administrator.
16.9 TELEPHONIC/ELECTRONIC DECISIONS. Notwithstanding anything in this Plan to
the contrary, pay reduction agreements and cancellations or amendments thereto,
investment elections, changes and transfers, loans, withdrawal decisions, and
any other decision or election by a Member or other person under this Plan may
be accomplished by electronic or telephonic means which are not prohibited by
law and which are in accordance with procedures and/or systems approved or
arranged by the Plan Administrator or its delegees.
16.10 TITLES. The titles of sections are included only for convenience and
shall not be construed as part of this Plan or in any respect affecting or
modifying its provisions.
* * * * *
IN WITNESS WHEREOF, PROMUS HOTEL CORPORATION has caused this instrument to
be executed by its duly authorized officer, effective as of the date specified
in Article I above.
PROMUS HOTEL CORPORATION
By: /s/ Raymond E. Schultz
---------------------------------------------
President and Chief
Executive Officer
78
ADDENDUM A
1. Notwithstanding any of the other provisions of this Plan, the
Predecessor Plan or the S&RP, effective April 1, 1991, the assets of Investment
Fund I under the Predecessor Plan invested as of March 31, 1991 in a guaranteed
annuity contract issued by Executive Life Insurance Company (the "Executive Life
Contract") were withdrawn from Investment Fund I and transferred to a separate
segregated investment fund denominated Investment Fund IA of the Predecessor
Plan. The amount transferred to Investment Fund IA of the Predecessor Plan was
the amount ("March 1991 Book Value") reflected on the books and records of the
Trustees of the Predecessor Plan as invested in the Executive Life Contract as
of March 31, 1991.
2. A portion of each Member's Account invested in Investment Fund I
under the Predecessor Plan as of March 31, 1991 was transferred to Investment
Fund IA of the Predecessor Plan. The transferred portion was an amount equal to
the value of such Member's Account invested in Investment Fund I of the
Predecessor Plan as of March 31, 1991 multiplied by a fraction, the numerator of
which is March 1991 Book Value, and the denominator of which is the value, as
reflected on the books and records of the Trustees, of Investment Fund I of the
Predecessor Plan as of March 31, 1991. The Executive Life Contract was
subsequently assumed by Aurora National Life Assurance Company.
3. The Executive Life Fund shall be administered in accordance with
the terms of this Addendum A. It is intended that the Predecessor Plan will
transfer to the Executive Life Fund of this Plan an amount equal to the value of
the accounts invested in Investment IA of the Predecessor Plan allocable to
individuals who became Participants in the S&RP on the Spin-Off Date and who are
Participants or Members in this Plan with an Account invested in part in the
Executive Life Fund on the date of such transfer. It is further intended that
the portion of the Executive Life Contract allocable to such amounts and the
analogous amounts transferred to the S&RP will be split from the Executive Life
Contract to create a separate contract between Aurora National Life Assurance
Company and the Company (the "PHC Contract") (for periods prior to the execution
of such PHC Contract, the term "PHC Contract" means the portion of the Executive
Life Contract allocable to such amounts). A portion of such PHC Contract will
be allocable to the Executive Life Fund under the Plan (the "Plan B Executive
Life Contract") and a portion of such PHC Contract will be allocable to the
Executive Life Fund under the Promus Hotel Corporation Savings and Retirement
Plan - A (i.e., the S&RP) (the "Plan A Executive Life Contract"). Effective as
of January 1, 1996, the amount equal to the value of the accounts invested in
the Executive Life Fund under the S&RP which were allocable to individuals who
became
Participants in the Plan on January 1, 1996 were transferred to the Executive
Life Fund of the Plan.
4. No Member shall be permitted to make or change investment
elections with respect to, or elect to transfer, any portion of his Account
invested in the Executive Life Fund. Accordingly, pursuant to the provisions of
this Addendum A, any change or transfer directions received by the Plan
Administrator with respect to Executive Life Fund shall not be honored.
5. No investments, contributions, reallocated forfeitures, or loan
repayments shall be made to the Executive Life Fund.
6. The portion of a Member's Account invested in the Executive Life
Fund shall not be taken into account in determining the amount he may borrow
from the Plan, and no loan made to a Member may be made from or charged to the
portion of the Member's Account invested in the Executive Life Fund.
7. No distributions or withdrawals shall be made from the Executive
Life Fund until such time as the Trustees determine that such distributions or
withdrawals are appropriate, except as provided in the following paragraph.
8. Notwithstanding the preceding paragraph, if a Member, Beneficiary
or alternate payee under a qualified domestic relations order ("Distributee") is
required under Section 9.8 of the Plan, Section 411(d)(6) of the Code or section
204(g)(2) of ERISA to receive a distribution or is entitled to a distribution on
account of death or other termination of service ("Required Distribution") and
if some or all of the Member's Account is invested in the Executive Life Fund,
the Trustees shall, to the extent necessary to make the Required Distribution,
distribute to the Distributee
(A) in cash, an amount equal to the percentage ("Distribution
Percentage") of the Distributee's Account remaining invested in the
Executive Life Fund, after reductions for prior distributions or
disbursements, valued based on the portion of the March 1991 Book
Value allocable to the Plan B Executive Life Contract (the "Plan B
March 1991 Book Value"), that is equal to the percentage of his
Account being distributed in the Required Distribution, and
(B) in kind, the Distributee's share ("Final Interest
Component") of an undivided interest in the amount ("Excess Value"),
if any, by which the Final Market Value (as defined below) of the
Executive Life Fund exceeds the Plan B March 1991 Book Value. The
value of Distributee's Final Interest Component with respect to any
Required Distribution shall be determined at the time the Final Market
Value is
determined, and shall be adjusted to reflect an early distribution if
the cash portion of the Required Distribution was distributed on or
before June 30, 1992. The Final Interest Component shall be
determined in a manner that is not inconsistent with the terms of
settlement of the Executive Life Contract. The Final Interest
Component shall be an amount equal to the Excess Value multiplied by a
fraction, the numerator of which is the amount of the cash portion of
the Required Distribution, and the denominator of which is the Plan B
March 1991 Book Value; the value thus determined shall be prorated by
multiplying it by a fraction, the numerator of which is the number of
days (not in excess of 457) elapsed between March 31, 1991 and the
date the Required Distribution is made, and the denominator of which
is 457; PROVIDED that the manner of determining the Final Interest
Component may be modified by the Plan Administrator to be consistent
with the terms of settlement of the Executive Life Contract.
9. To the extent cash distributions are made with respect to a
Distributee's interest in the Executive Life Fund and (after repaying Company
Loans as provided below) there is not sufficient cash in the Executive Life Fund
to make such distribution, the Trustees may borrow funds from the Company
("Company Loans"), on terms consistent with Prohibited Transaction Class
Exemption 80-26. Company Loans shall not be treated as contributions to the
Plan. Company Loans shall be repaid from time to time as follows:
(A) If and to the extent a payment is made to the Plan in
respect of the PHC Contract in any month on account of a distribution
to a Member or his beneficiaries ("Distribution Payment") at a time
when Company Loans are outstanding, the portion of such Distribution
Payment allocable to the Plan A Executive Life Contract shall be
applied to reduce (but not below zero) the outstanding balance of
Company Loans before being applied to make Distribution Payments.
(B) If and to the extent the PHC Contract is settled in one or
more payments ("Contract Payments") to the Plan in termination of the
PHC Contract, a portion of each Contract Payment allocable to the Plan
A Executive Life Contract will be applied to repay the Company Loans.
The amount of any such repayment shall be limited to a percentage
(which, when aggregated with all such repayments to the Company, shall
not exceed 100%) of the aggregate outstanding balance of the Company
Loans. Such percentage shall be determined by dividing the portion of
the Contract Payment allocable to the Plan B Executive Life Contract
by the Plan B March 1991 Book Value.
10. In the event the Trustees determine that the total amount paid to
the Plan in respect of the Executive Life Fund ("Final Market Value") is less
than the Plan B March 1991 Book Value, the difference between (a) the Plan B
March 1991 Book Value reduced by the aggregate outstanding balance of Company
Loans, and (b) the Final Market Value shall be paid to the Plan by the Company.
Such amount shall be treated as an amount paid in settlement of a claim under
the Plan, and all outstanding Company Loans shall be cancelled upon such
payment.
11. The purpose of this Addendum A is to provide special
administrative procedures protective of the interests of Plan Members and their
Beneficiaries in light of the court-supervised conservatorship of Executive Life
Insurance Company. The Trustees may make such rules and regulations regarding
transactions (including, but not limited to, investments, loans and
distributions) involving Members' Accounts as they deem necessary or appropriate
in light of the status or condition of Executive Life Fund. The Trustees shall
have authority and discretion to administer the provisions of this Addendum A,
and their determinations with respect thereto shall be final and binding upon
all parties. The Chief Executive Officer may, with the advice of the Trustees,
amend the Plan as appropriate in light of developments involving Executive Life
Insurance Company and their effect on the Executive Life Fund.
EXHIBIT 1
THE RESTATEMENT OF
THE PROMUS HOTEL CORPORATION
SAVINGS AND RETIREMENT PLAN - B
The provisions of the Restatement of The Promus Hotel Corporation
Savings and Retirement Plan - B are generally effective as of January 1, 1996.
However, the provisions set forth below are effective as follows:
Sections Effective Date
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10.3 and 10.5(c) March 18, 1996
1