EXHIBIT 10.2
WESTERN DIGITAL CORPORATION
401(k) PLAN
TABLE OF CONTENTS
Page
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Article 1 INTRODUCTION......................................................................1
Article 2 DEFINITIONS.......................................................................2
2.1 Accounts.....................................................................2
2.2 Affiliated Company...........................................................3
2.3 Beneficiary..................................................................3
2.4 Board of Directors...........................................................3
2.5 Break in Service.............................................................3
2.6 Code.........................................................................4
2.7 Company......................................................................4
2.8 Compensation.................................................................4
2.9 Computation Period...........................................................7
2.10 Disability...................................................................7
2.11 Distributable Benefit........................................................7
2.12 Effective Date...............................................................7
2.13 Eligible Employee............................................................7
2.14 Employee.....................................................................8
2.15 Employer.....................................................................9
2.16 Employment Commencement Date.................................................9
2.17 Entry Date...................................................................9
2.18 ERISA........................................................................9
2.19 Forfeiture Account...........................................................9
2.20 Hardship....................................................................10
2.21 Highly Compensated Employee.................................................10
2.22 Hour of Service.............................................................12
2.23 Investment Fund.............................................................13
2.24 Investment Manager..........................................................14
2.25 Leave of Absence............................................................14
2.26 Matching Contributions......................................................14
2.27 Maternity or Paternity Absence..............................................14
2.28 Normal Retirement Age.......................................................14
2.29 Participant and Active Participant..........................................14
2.30 Plan........................................................................15
2.31 Plan Administrator..........................................................15
2.32 Plan Year...................................................................15
2.33 Pre-Tax Contributions.......................................................15
2.34 Profit Sharing Contributions................................................15
2.35 Severance...................................................................15
2.36 Retirement Committee........................................................15
2.37 Severance Date..............................................................16
2.38 Spouse......................................................................16
2.39 Stock.......................................................................16
2.40 Trust and Trust Fund........................................................16
2.41 Trust Agreement.............................................................16
2.42 Trustee.....................................................................16
2.43 Valuation Date..............................................................16
2.44 Vested Interest.............................................................16
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2.45 Year of Eligibility Service.................................................16
2.46 Year of Vesting Service.....................................................18
Article 3 ELIGIBILITY AND PARTICIPATION....................................................19
3.1 Eligibility to Participate..................................................19
3.2 Commencement of Active Participation........................................19
3.3 Change in Status............................................................20
3.4 Reemployment................................................................20
3.5 Reemployment Following Qualified Military Service...........................20
3.6 Employee Responsibility.....................................................20
Article 4 PARTICIPANT CONTRIBUTIONS........................................................20
4.1 Election to Contribute......................................................20
4.2 Participant Contribution Amounts............................................21
4.3 Modification, Revocation or Termination of Contribution Election............22
4.4 Limitation on Pre-Tax Contributions by Highly Compensated Employees.........22
4.5 Provisions for Disposition of Excess Pre-Tax Contributions by Highly
Compensated Employees.......................................................25
4.6 Provisions for Return of Annual Pre-Tax Contributions in Excess of the
Deferral Limitation.........................................................26
4.7 Character of Amounts Contributed as Pre-Tax Contributions...................28
4.8 Participant Rollover Contributions..........................................28
4.9 Plan-to-Plan Transfers......................................................28
Article 5 EMPLOYER CONTRIBUTIONS...........................................................28
5.1 Determination of Employer Contributions.....................................28
5.2 Pre-Tax Contributions.......................................................29
5.3 Basic Matching Contribution.................................................29
5.4 Supplemental Matching Contributions and Qualified Nonelective
Contributions...............................................................30
5.5 Profit Sharing Contributions................................................32
5.6 Timing of Employer Contributions............................................32
5.7 Application of Forfeitures..................................................32
5.8 Requirement for Profits.....................................................33
5.9 Special Limitations on 401(m) Contributions.................................34
5.10 Provisions for Reduction of Excess 401(m) Contributions by or on Behalf
of Highly Compensated Employees.............................................37
5.11 Forfeiture of Matching Contributions Attributable to Excess Deferrals
or Contributions............................................................38
5.12 Irrevocability..............................................................38
5.13 Make-Up Contributions.......................................................39
Article 6 FUNDING..........................................................................39
6.1 In General..................................................................39
Article 7 INVESTMENTS......................................................................39
7.1 Investments of Contributions................................................39
7.2 Investment in Employer Securities...........................................40
7.3 Participant Investment Designations.........................................40
7.4 Securities Transactions.....................................................41
7.5 Rights, Warrants, or Options................................................41
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7.6 Voting of Stock.............................................................41
7.7 Valuation of Stock..........................................................43
7.8 Allocation of Stock Dividends and Splits....................................43
7.9 Reinvestment of Dividends...................................................43
7.10 Allocation of Dividends other than Stock Dividends..........................43
7.11 Certain Offers for Stock....................................................44
Article 8 VESTING..........................................................................48
8.1 Vested Interest in Pre-Tax Contributions Account, Rollover Account, and
Profit Sharing Account......................................................48
8.2 Determination of Vested Interest in Matching Contributions Account..........48
8.3 Amendment of Vesting Schedule...............................................49
Article 9 PAYMENT OF PLAN BENEFITS.........................................................50
9.1 Distribution Upon Retirement................................................50
9.2 Distribution Upon Death Prior to Payment of Benefits........................50
9.3 Distribution upon Disability................................................51
9.4 Severance Prior to Normal Retirement Age....................................51
9.5 Forfeitures; Restoration....................................................53
9.6 Form of Payment of Distributable Benefit....................................53
9.7 In-Service Withdrawals......................................................54
9.8 Loans.......................................................................56
9.9 Designation of Beneficiary..................................................57
9.10 Facility of Payment.........................................................59
9.11 Payee Consent...............................................................59
9.12 Additional Requirements for Distribution....................................59
9.13 Notice of Right to Elect Direct Rollover....................................60
Article 10 VALUATION OF ACCOUNTS...........................................................61
10.1 Allocation of Plan Earnings or Losses.......................................61
10.2 Value of Participant Accounts for Distribution..............................61
Article 11 OPERATION AND ADMINISTRATION OF THE PLAN........................................62
11.1 Plan Administration.........................................................62
11.2 Retirement Committee Powers.................................................62
11.3 Investment Manager..........................................................63
11.4 Retirement Committee Procedure..............................................64
11.5 Compensation of Retirement Committee........................................64
11.6 Resignation and Removal of Members..........................................64
11.7 Appointment of Successors...................................................65
11.8 Records.....................................................................65
11.9 Reliance Upon Documents and Opinions........................................65
11.10 Requirement of Proof........................................................66
11.11 Reliance on Retirement Committee Memorandum.................................66
11.12 Multiple Fiduciary Capacity.................................................66
11.13 Limitation on Liability.....................................................66
11.14 Indemnification.............................................................66
11.15 Bonding.....................................................................67
11.16 Prohibition Against Certain Actions.........................................67
11.17 Plan Expenses...............................................................67
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Article 12 MERGER OF COMPANY; MERGER OF PLAN...............................................67
12.1 Effect of Reorganization or Transfer of Assets..............................67
12.2 Merger Restriction..........................................................68
Article 13 PLAN TERMINATION AND DISCONTINUANCE OF CONTRIBUTIONS............................68
13.1 Plan Termination............................................................68
13.2 Discontinuance of Contributions.............................................68
13.3 Rights of Participants......................................................69
13.4 Trustee's Duties on Termination.............................................69
13.5 Partial Termination.........................................................70
13.6 Failure to Contribute.......................................................70
Article 14 APPLICATION FOR BENEFITS........................................................70
14.1 Application for Benefits....................................................70
14.2 Action on Application.......................................................70
14.3 Appeals.....................................................................71
Article 15 LIMITATIONS ON CONTRIBUTIONS....................................................72
15.1 General Rule................................................................72
15.2 Annual Additions............................................................72
15.3 Other Defined Contribution Plans............................................72
15.4 Combined Plan Limitation (Defined Benefit Plan) For Plan Years
Commencing Prior to July 1, 2000............................................72
15.5 Adjustments for Excess Annual Additions.....................................73
15.6 Disposition of Excess Profit Sharing Contribution Amounts...................74
15.7 Affiliated Company..........................................................74
Article 16 RESTRICTION ON ALIENATION.......................................................74
16.1 General Restrictions Against Alienation.....................................74
16.2 Nonconforming Distributions Under Court Order...............................75
Article 17 PLAN AMENDMENTS.................................................................76
17.1 Amendments..................................................................76
Article 18 MISCELLANEOUS...................................................................77
18.1 No Enlargement of Employee Rights...........................................77
18.2 Mailing of Payments; Lapsed Benefits........................................77
18.3 Addresses...................................................................78
18.4 Notices and Communications..................................................78
18.5 Reporting and Disclosure....................................................79
18.6 Interpretation..............................................................79
18.7 Withholding for Taxes.......................................................79
18.8 Limitation on Company and Employer; Retirement Committee and Trustee
Liability...................................................................79
18.9 Successors and Assigns......................................................79
18.10 Counterparts................................................................79
Article 19 TOP-HEAVY PLAN RULES............................................................80
19.1 Applicability...............................................................80
19.2 Definitions.................................................................80
19.3 Top-Heavy Status............................................................81
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19.4 Minimum Contributions.......................................................83
19.5 Maximum Annual Addition.....................................................84
19.6 Vesting Rules...............................................................84
19.7 Non-Eligible Employees......................................................85
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WESTERN DIGITAL CORPORATION
401(K) PLAN
ARTICLE 1
INTRODUCTION
Western Digital Corporation previously established the Western Digital
Corporation Savings and Investment Plan (the "Predecessor Plan") effective
October 1, 1984, for the benefit of certain of its employees.
Effective August 20, 1986, the Adaptive Data Systems, Inc. Employee
Savings and Investment Plan was merged into the Predecessor Plan.
Effective July 1, 1987, the Western Digital Corporation Employee Stock
Ownership Plan (the "ESOP") and the Faraday Electronics, Inc. Profit
Sharing-Salary Savings Plan and Trust were merged into the Predecessor Plan and
the resulting Predecessor Plan was renamed the Western Digital Corporation
Savings and Employee Stock Ownership Plan.
Effective July 1, 1987, the Predecessor Plan was amended and restated to
incorporate the provisions of the merged plans and to make various plan design
changes. That restatement was intended to be a continuation of the Predecessor
Plan.
Effective September 7, 1989 the Verticom Savings and Retirement Plan was
merged into the Predecessor Plan.
Effective May 10, 1991, the Predecessor Plan was split into two plans,
one consisting of the provisions relating to the ESOP Fund (as defined in
Section 1.16 of the Predecessor Plan) and the other consisting of provisions
relating to the remaining portion of the Predecessor Plan (the "401(k)
Portion"). Effective that same date, the 401(k) Portion was spun off from the
remaining portion of the Predecessor Plan and renamed the "Western Digital
Corporation Savings Plan" (the "Savings Plan"). The remaining portion of the
Predecessor Plan was renamed the "Western Digital Corporation Employee Stock
Ownership Plan".
The Savings Plan was amended and restated as of May 10, 1991 to reflect
the spin-off and the continuation of the 401(k) Portion of the Predecessor Plan.
The Savings Plan subsequently was amended by the First through Fifth Amendments.
The Savings Plan was amended and restated as of June 23, 1995 ("1995
Restatement"). The 1995 Restatement incorporated all amendments through and
including the Fifth Amendment.
The 1995 Restatement of the Savings Plan was subsequently amended and
restated as of July 1, 2001 (the "Restatement") to reflect changes in the law
and to incorporate the First Amendment (executed June 30, 1995), the Second
Amendment (executed March 27, 1996), the Third Amendment (executed January 9,
1997), the
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Fourth Amendment (executed March 20, 1997), the Fifth Amendment (executed
November 13, 1997), the Sixth Amendment (executed January 27, 2000), the Seventh
Amendment (executed March 30, 2001), and the Eighth Amendment (executed April 6,
2001). This Restatement incorporates all amendments through and including the
Eighth Amendment. Effective July 1, 2001 the name of the Savings Plan was
changed to the Western Digital Corporation 401(k) Plan.
The Plan is intended to qualify under Code Section 401(a) as a profit
sharing plan and Section 401(k) as a cash or deferred arrangement.
The purpose of the Plan is to enable participating employees to share in
Employer profits and to accumulate additional capital for retirement through a
convenient method of regular savings in a tax-efficient manner and matching
Employer Contributions.
Although this Restatement reflects provisions of the Plan as in effect
as of the date of execution hereof, the effective date of any provision of the
Plan affected by amendment of the Plan shall be as set forth in such amendment
or as otherwise set forth in this Restatement.
ARTICLE 2
DEFINITIONS
2.1 ACCOUNTS. "Accounts" or "Participant's Accounts" means the following
Plan accounts maintained by the Retirement Committee for each Participant:
2.1.1 "After-Tax Contributions Account" shall mean the account
established and maintained for each Participant to reflect amounts held
in the Trust Fund on behalf of such Participant which are attributable
to After-Tax Contributions by a Participant in accordance with Section
4.2.
2.1.2 "Pre-Tax Contributions Account" shall mean the account
established and maintained for each Participant to reflect amounts held
in the Trust Fund on behalf of such Participant which are attributable
to Pre-Tax Contributions by an Employer on behalf of the Participant in
accordance with Section 5.2.
2.1.3 "Matching Contributions Account" shall mean the account
established and maintained for each Participant to reflect amounts held
in the Trust Fund on behalf of such Participant which are attributable
to Matching Contributions by an Employer under Section 5.3 and Section
5.4.
2.1.4 "Profit Sharing Contributions Account" shall mean the
account established and maintained for each Participant to reflect
amounts held in the Trust Fund on behalf of such Participant which are
attributable to any Profit Sharing Contributions in accordance with
Section 5.5.
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2.1.5 "Rollover Account" shall mean the account established and
maintained for a Participant to reflect amounts held in the Trust Fund
which are attributable to Participant rollover contributions under
Section 4.8.
2.2 AFFILIATED COMPANY. "Affiliated Company" shall mean:
2.2.1 Any corporation that is included in a controlled group of
corporations, within the meaning of Section 414(b) of the Code, that
includes the Company,
2.2.2 Any trade or business that is under common control with the
Company within the meaning of Section 414(c) of the Code,
2.2.3 Any member of an affiliated service group, within the
meaning of Section 414(m) of the Code, that includes the Company, and
2.2.4 Any other entity required to be aggregated with the Company
pursuant to regulations under Section 414(o) of the Code.
2.3 BENEFICIARY. "Beneficiary" or "Beneficiaries" means the person or
persons last designated by a Participant as set forth in Section 9.9 or, if
there is no designated Beneficiary or surviving Beneficiary, the person or
persons designated in Section 9.9 to receive the Distributable Benefit of a
deceased Participant in such event.
2.4 BOARD OF DIRECTORS. "Board of Directors" shall mean the Board of
Directors of Western Digital Corporation as it may from time to time be
constituted, or a committee thereof, if duly authorized to act for and in place
of the Board of Directors.
2.5 BREAK IN SERVICE. "Break in Service," for purposes of determining an
Employee's Years of Vesting Service credit or Year of Eligibility Service
credit, shall mean a Computation Period during which an individual completes not
more than half the number of Hours of Service required for such Year of Vesting
Service or Eligibility Service. A Break in Service shall be sustained, or be
deemed to occur, on the last day of the applicable Computation Period.
2.5.1 Solely for purposes of determining whether an Employee
sustains a Break in Service because he is not credited with the number
of Hours of Service required for a Year of Vesting Service or a Year of
Eligibility Service, the provisions of Subsections 2.5.2 and 2.5.3 below
shall apply to an Employee's period of Maternity or Paternity Absence.
2.5.2 The number of Hours of Service which shall be credited to
an Employee for a period of Maternity or Paternity Absence shall be
2.5.2.1 the number which otherwise would normally have
been credited to the Employee but for the absence, or
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2.5.2.2 if the Administrative Committee determines that
the number described in 2.5.2.1 above can not be determined,
eight (8) Hours of Service per day of such absence; provided,
however, that the total number of hours treated as Hours of
Service under this Subsection 2.5.2 shall not exceed five hundred
one (501), and that these Hours of Service shall be taken into
account solely for purposes of determining whether or not the
Employee has incurred a Break in Service.
2.5.3 The Hours described in Subsection 2.5.2 above shall be
credited to the Computation Period
2.5.3.1 in which the absence from work begins, if the
Employee would be prevented from incurring a Break in Service in
that Computation Period solely because of such crediting, or
2.5.3.2 in any other case, in the immediately following
Computation Period.
2.6 CODE. "Code" shall mean the Internal Revenue Code of 1986, as in
effect on the date of execution of this Plan document and as thereafter amended
from time to time.
2.7 COMPANY. "Company" shall mean Western Digital Corporation.
2.8 COMPENSATION. "Compensation" for purposes of this Plan shall be
determined in accordance with the provisions of this Section 2.8.
2.8.1 For purposes of Section 4.2 relating to a Participant's
Pre-Tax Contribution amounts and Sections 5.3 and 5.4 and relating to
certain limitations on Matching Contributions, "Compensation" shall mean
the full salary and wages paid by the Employer to an Employee, including
commissions, bonuses (to the extent not excluded under 2.8.3 below),
tips, overtime pay, severance pay, and amounts of Pre-Tax Contributions
elected pursuant to Section 3.2 of this Plan and/or a benefit plan
sponsored by an Employer and qualified under Code Sections 125 or
132(f).
2.8.2 For purposes of Section 5.5 relating to the allocation of
any Profit Sharing Contributions, "Compensation" shall mean Compensation
as defined in 2.8.1 above, except that any non-draw commissions or
bonuses payable by the Employer to an Employee shall be excluded.
2.8.3 "Compensation" as defined in 2.8.1 or 2.8.2 shall exclude
the following:
2.8.3.1 any amounts contributed by the Employer, other
than Pre-Tax Contributions, pursuant to Section 4.1, to any
pension plan or plan of deferred compensation (including this
Plan),
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2.8.3.2 any automobile and relocation allowances (or
reimbursement for any such expenses),
2.8.3.3 any amounts paid as a starting bonus or finder's
fee,
2.8.3.4 amounts realized from the exercise of
non-qualified stock options,
2.8.3.5 any amounts paid by the Employer (other than
Pre-Tax Contributions described above) for other fringe benefits,
such as health and welfare, hospitalization, and group life
insurance benefits, or perquisites, or paid in lieu of such
benefits, such as cash-out of credits generated under a plan
qualified under Code Section 125; provided however, that payments
to an eligible Employee from a non-qualified plan of deferred
compensation shall not be excluded to the extent that (i) such
payments consist of amounts voluntarily deferred upon election of
the Eligible Employee in accordance with the terms of such plan
(exclusive of earnings thereon and exclusive of any other
additions by the Employer), (ii) such payments consist of amounts
that, but for such deferral in accordance with the terms of such
plan, would have constituted "Compensation" as defined in this
Section 2.8 in the year that such amounts would have been paid
(determined without application of any limit prescribed under
Section 401(a)(17) of the Code), (iii) such payments were not
previously considered as "Compensation" for purposes of this
Section 2.8, and (iv) such payments are (subject to deferral
under this Plan) includable in the gross income of the Eligible
Employee for federal income tax purposes in the year of payment.
2.8.4 Except as provided in Exhibit A, Compensation shall include
only the amounts determined in accordance with 2.8.1, 2.8.2 and 2.8.3
above that are paid to an individual while he is an Active Participant.
2.8.5 Solely for purposes of Article 15 (relating to certain
limitations on annual additions to or benefits from qualified plans) and
Article 19 (relating to top-heavy plans), the term "Compensation" shall
mean wages within the meaning of Section 3401(a) of the Code and any
other payments of compensation to the Employee by the Employer (in the
course of the Employer's trade or business) for which the Employer is
required to furnish the Employee a written statement under Sections
6041(d) and 6051(a)(3) of the Code; provided, however, that such
"Compensation" shall not include any amounts paid or reimbursed by the
Employer for moving expenses incurred by the Employee, but only to the
extent that at the time of payment it is reasonable to believe that
these amounts are deductible by the Employee under Section 217 of the
Code. For Limitation Years beginning after December 31, 1991, for
purposes of applying the limitations of Article 15, Compensation for a
Limitation Year, as defined in Subsection 15.1.2, is the Compensation
actually paid or includable in gross
5
income during such Limitation Year. For Limitation Years commencing on
or after July 1, 1998, the term "compensation" for purposes of applying
the limitations of Article 15 shall be determined in accordance with
this Subsection 2.8.5. but without regard to exclusions from gross
income of contributions under a cafeteria plan in accordance with Code
Section 125, a qualified transportation fringe benefit in accordance
with Code Section 132(f), or under a cash or deferred arrangement in
accordance with Code Section 401(k).
2.8.6 Except to the extent otherwise permitted by law,
"Compensation" for any Plan Year that begins on or after July 1, 1989
shall not exceed the annual compensation limit in effect under Section
401(a)(17) of the Code on the January 1 coinciding with or immediately
preceding the first day of such Plan Year, as provided in this
Subsection.
2.8.6.1 For any Plan Year that begins on or after July 1,
2001 such limit shall be $170,000, as that amount is adjusted in
accordance with Section 401(a)(17)(B) of the Code.
2.8.6.2 In no event shall this Plan be deemed to violate
the annual limitation on Compensation under this Subsection
solely because such limitation is applied separately to
Compensation taken into account for a Plan Year for purposes of
Sections 4.2.1, 4.2.2, 4.4 and 5.9.
2.8.6.3 If Compensation for a period of less than twelve
(12) months is taken into account for any Plan Year, then, to the
extent required by regulations under Section 401(a)(17) of the
Code, the otherwise applicable annual Compensation limit provided
under this Subsection 2.8.6 is reduced in the same proportion as
the reduction in the twelve-month period. However, no proration
shall be required solely because Compensation taken into account
for a Plan Year includes only Compensation paid for periods
during which the Employee is an Active Participant (including a
portion of a Compensation year corresponding to a period of
Active Participation).
2.8.6.4 For purposes of the annual Compensation limit
provided under this Subsection, the family aggregation rules of
Section 414(q)(6) of the Code shall apply to an Employee who is a
five percent (5%) owner or one of the top-ten highest paid
Employees, except in applying such rules, the term "family
member" shall include only the Spouse and any of the Employee's
lineal descendants who have not attained age 19 before the close
of the year. If, as a result of the application of such rules the
limit is exceeded, then, the limit shall be prorated among the
affected individuals in proportion to each such individual's
Compensation as determined under this Subsection prior to the
application of this limit. This Subsection shall be effective for
Plan Years commencing prior to July 1, 1997.
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2.9 COMPUTATION PERIOD. "Computation Period" shall mean the consecutive
twelve-month period used for purposes of determining whether an Employee is to
be credited with a Year of Vesting or Eligibility Service, or a Break in such
Service.
2.9.1 For purposes of determining whether an Employee is to be
credited with a Year of Eligibility Service or a Break in such Service,
the Computation Period shall be the twelve-month period commencing on
the Employee's Employment Commencement Date, or any Plan Year commencing
with the Plan Year that includes the anniversary of the Employee's
Employment Commencement Date.
2.9.2 For purposes of determining whether an Employee is to be
credited with a Year of Vesting Service or a Break in such Service, the
Computation Period shall be the Plan Year.
2.10 DISABILITY. "Disability" shall mean any physical or mental
condition which renders a person unable to engage in any substantial gainful
activity for the Company or an Affiliated Company for which he is reasonably
fitted by education, training, or experience. A physical or mental condition
which qualifies a Participant for disability payments under the Company or an
Affiliated Company's long-term disability plan is deemed to be a Disability,
effective as of the date on which the Participant qualifies for such payments.
The Committee will determine, based on whatever competent medical evidence it
requires, whether any other person has incurred a Disability and the effective
date of such Disability.
2.11 DISTRIBUTABLE BENEFIT. "Distributable Benefit" shall mean the
Vested Interest of a Participant in this Plan which is determined and
distributable to the Participant in accordance with the provisions of Article 8,
Article 9 and Article 10.
2.12 EFFECTIVE DATE. The original effective date of the Plan is October
1, 1984. The "Effective Date" of this Restatement is July 1, 2001.
2.13 ELIGIBLE EMPLOYEE. "Eligible Employee" shall mean any Employee of
an Employer who is paid from the Employer's United States payroll, except as
provided in Subsection 2.13.2 below.
2.13.2 The term "Eligible Employee" shall not include any person
in one or more of the following categories:
2.13.2.1 Any person who is covered by a collective
bargaining agreement to which an Employer is a party, unless the
collective bargaining agreement provides for coverage under this
Plan.
2.13.2.2 Any non-resident alien who receives no earned
income (within the meaning of Code Section 911(d)(2)) from
Employer that constitutes income from sources within the United
States (within the meaning of Code Section 861(a)(3)).
7
2.13.2.3 Any person who is a "leased employee" within the
meaning of Code Section 414(n).
2.13.2.4 Any person who is an "employee" within the
meaning of Code Section 401(c)(3).
2.13.2.5 Any person who is recorded on the books and
records of an Employer or Affiliated Company as an independent
contractor, summer intern, consultant, or temporary employee; a
worker provided by a third-party temporary staffing agency; or
any person with respect to whom a written agreement governing the
relationship between such person and an Employer or Affiliated
Company provides in substance that such person shall not be an
eligible Employee hereunder.
2.13.2.6 Any person who is not treated by an Employer or
an Affiliated Company as a common law employee without regard to
the characterization or recharacterization of such individual's
status by any court or government agency.
2.13.3 The preceding provisions of this Section 2.13 shall be
given effect notwithstanding any classification or reclassification of a
person as an employee or common law employee of an Employer or
Affiliated Company or as a member of any other category of person not
excluded under the preceding provisions of this Section 2.13 by reason
of action taken by any tax, or other governmental authority. In the
event that a person rendering services to an Employer or to an
Affiliated Company is an excluded category is classified or reclassified
by reason of action taken by any tax, or other governmental authority,
or by an Employer or Affiliated Company, such individual shall continue
to be excluded under this Plan unless specifically included hereunder by
the terms of an amendment to this Plan or by the terms of a written
instrument executed by such person and an Employer.
2.13.4 The categories of excluded persons described above in this
Section 2.13 are not mutually exclusive, it being contemplated that
certain categories described above may include persons in one or more
other categories, with the result that an individual may be excluded
under more than one category set forth herein.
2.14 EMPLOYEE.
2.14.1 "Employee" shall mean each person currently employed in
any capacity by an Employer or Affiliated Company, any portion of whose
Compensation paid by an Employer or an Affiliated Company is subject to
withholding of income tax and/or for whom Social Security contributions
are made by an Employer or an Affiliated Company.
2.14.2 "Employee" shall include a person deemed to be employed by
an Employer or an Affiliated Company, pursuant to Code Section 414(n).
8
Notwithstanding the foregoing, if such leased employees constitute less
than twenty percent (20%) of the Company's non-highly compensated work
force within the meaning of Section 414(n)(5)(C)(ii) of the Code, the
term "Employee" shall not include those leased employees covered by a
plan described in Section 414(n)(5) of the Code unless otherwise
provided by the terms of the Plan.
2.14.3 Although Eligible Employees are the only class of
Employees eligible to participate in this Plan, the term "Employee" is
used to refer to persons employed in a non-Eligible Employee capacity as
well as Eligible Employee category. Thus, those provisions of this Plan
that are not limited to Eligible Employees, such as those relating to
certain service computation rules, apply to both Eligible and
non-Eligible Employees.
2.15 EMPLOYER. "Employer" shall mean Western Digital Corporation and any
employer that is an Affiliated Company with respect to Western Digital
Corporation and which may be included within the coverage of the Plan with the
written consent of the Board of Directors (but only for such period of time that
such Employer's participation in this Plan and Trust continues to be approved by
the Board of Directors).
2.16 EMPLOYMENT COMMENCEMENT DATE. "Employment Commencement Date" shall
mean each of the following:
2.16.1 The date on which an Employee first performs an Hour of
Service in any capacity for an Employer or an Affiliated Company with
respect to which the Employee is compensated or is entitled to
compensation by the Employer or the Affiliated Company.
2.16.2 In the case of an Employee who incurs a Severance and who
is reemployed by an Employer or an Affiliated Company, the term
"Employment Commencement Date" shall mean either the Employee's
"Employment Commencement Date" as defined in 2.16.1 above or, if the
Participant incurs a Break in Service, the first day following the
Severance on which the Employee performs an Hour of Service for the
Employer or an Affiliated Company with respect to which he is
compensated or entitled to compensation by the Employer or Affiliated
Company.
2.17 ENTRY DATE. "Entry Date" shall mean, with respect to any
Participant, the first day of any payroll period applicable to such Participant.
2.18 ERISA. "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time.
2.19 FORFEITURE ACCOUNT. "Forfeiture Account" shall mean an account
established and maintained pursuant to Section 5.7 for purposes of holding any
non-vested portion of a Participant's Account that is forfeited by the
Participant in accordance with Section 9.5.
9
2.20 HARDSHIP.
2.20.1 "Hardship" shall mean a need created by an immediate and
heavy financial need of the Participant, which need cannot be met by
other sources reasonably available to the Participant and shall include
a distribution for:
2.20.1.1 expenses for medical care described in Section
213(d) of the Code previously incurred by the Employee, the
Employee's Spouse, children, or dependents, or necessary for such
persons to obtain medical care described in Code Section 213(d);
2.20.1.2 costs directly related to the purchase (excluding
mortgage payments) of a principal residence for the Employee;
2.20.1.3 payment of tuition and related educational fees
for the next twelve (12) months of post-secondary education for
the Employee, or the Employee's Spouse, children or dependents;
2.20.1.4 payments necessary to prevent the eviction of the
Employee from, or a foreclosure on the mortgage of, the
Employee's principal residence;
2.20.1.5 any other purpose specified by the Internal
Revenue Service as a deemed immediate and heavy financial need;
or
2.20.1.6 any other purpose determined by the Committee, in
its sole discretion, to be an immediate and heavy financial need.
2.20.2 In addition to the above, a Hardship need may include
amounts necessary to pay any federal, state, or local income taxes or
penalties anticipated to result from a Hardship distribution.
2.20.3 Any determination of Hardship shall be in accordance with
regulations promulgated under Code Section 401(k).
2.21 HIGHLY COMPENSATED EMPLOYEE.
2.21.1 Effective for Plan Years commencing on or after July 1,
1997, "Highly Compensated Employee" shall mean any Employee who
2.21.1.1 was a 5% owner, as defined in Code Section
416(i)(1)(A)(iii), at any time during the Plan Year or the
preceding Plan Year, or,
2.21.1.2 received Compensation from an Employer in excess
of $80,000 (as adjusted at the same time and in the same manner
10
as under Code Section 415(d)) during the preceding Plan Year,
without regard to whether the Employee was in the "top paid"
group of Employees (as defined in regulations under Section
414(q)(3) of the Code) for such preceding year.
2.21.2 Determination of a Highly Compensated Employee shall be in
accordance with the following definitions and special rules:
2.21.2.1 "Compensation" is 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.
2.21.2.2 A former Employee shall be treated as a Highly
Compensated Employee if:
2.21.2.2.1 such Employee was a Highly Compensated
Employee when such Employee incurred a Severance, or
2.21.2.2.2 such Employee was a Highly Compensated
Employee at any time after attaining age fifty-five (55).
2.21.2.3 Code Sections 414(b), (c), (m), (n), and (o)
shall be applied before the application of this Section 2.21.
Also, the term "Employee" shall include "leased employees" within
the meaning of Code Section 414(n), unless such leased Employee
is covered under a "safe harbor" plan of the leasing organization
and is not covered under a qualified plan of the Employer.
2.21.2.4 To the extent permissible under Code Section
414(q), the Retirement Committee may determine which Employees
shall be categorized as Highly Compensated Employees by applying
a simplified method prescribed by the Internal Revenue Service.
2.21.2.5 For purposes of determining the number of
Employees in the top-paid group, if applicable, under Paragraph
2.21.1.2 of Subsection 2.21.1 above, the following Employees
shall be excluded:
2.21.2.5.1 Employees who have not completed six (6)
months of Service,
2.21.2.5.2 Employees who normally work less than
17-1/2 hours per week,
2.21.2.5.3 Employees who normally work not more
than six (6) months during any Plan Year,
11
2.21.2.5.4 Employees who have not attained age 21,
2.21.2.5.5 Except to the extent provided in
Treasury Regulations, Employees who are included in a unit
of employees covered by an agreement which the Secretary
of Labor finds to be a collective bargaining agreement
between Employee representatives and Employer, and
2.21.2.5.6 Employees who are nonresident aliens and
who receive no earned income (within the meaning of
Section 911(d)(2) from the Employer which constitutes
income from sources within the United States (within the
meaning of Section 861(a)(3)).
An Employer may elect to apply Subparagraphs 2.21.2.5.1
through 2.21.2.5.4 above by substituting a shorter period of
Service, smaller number of hours or months, or lower age for the
period of service, number of hours or months, or (as the case may
be) than as specified in such Subparagraphs.
2.22 HOUR OF SERVICE.
2.22.1 "Hour of Service" of an Employee shall mean the following:
2.22.1.1 Each hour for which the Employee is paid by an
Employer or an Affiliated Company or entitled to payment for the
performance of services as an Employee. For purposes of this
Section, overtime work shall be credited as straight time.
2.22.1.2 Each hour in or attributable to a period of time
during which the Employee performs no duties (irrespective of
whether he has terminated his employment) due to a vacation,
holiday, illness, incapacity (including pregnancy or disability),
layoff, jury duty or military duty for which he is so paid or so
entitled to payment, whether direct or indirect. However, no such
hours shall be credited to an Employee if such Employee is
directly or indirectly paid or entitled to payment for such hours
and if such payment or entitlement is made or due under a plan
maintained solely for the purpose of complying with applicable
worker's compensation, unemployment compensation or disability
insurance laws or is a payment which solely reimburses the
Employee for medical or medically related expenses incurred by
him.
2.22.1.3 Each hour in or attributable to a period of time
during which the Employee performs no duties due to service in
the Armed Forces of the United States (other than by voluntary
enlistment or commission), provided that such Employee's duties
for the Employer or an Affiliated Company are resumed within
ninety (90) days after release from
12
the Armed Forces. With respect to any such unpaid absence as set
forth in this Paragraph 2.22.1.3, an Employee shall be deemed to
complete Hours of Service at his customary work schedule prior to
the commencement of such absence.
2.22.1.4 Each hour for which the Employee is entitled to
back pay, irrespective of mitigation of damages, whether awarded
or agreed to by the Employer or an Affiliated Company, provided
that such Employee has not previously been credited with an Hour
of Service with respect to such hour under Paragraphs 2.22.1.1 or
2.22.1.2 above.
2.22.2 In lieu of the Hours credited under Subsection 2.22.1
above, effective for hours attributable to periods on and after July 1,
1995, an Employee will be credited with the following Hours of Service
for each pay period during which he would have otherwise received credit
for at least one Hour of Service under Subsection 2.22.1 above;
provided, however, that in no event will an Employee's credit for Years
of Eligibility Service or Vesting Service as of June 30, 1995 be reduced
by application of such equivalency method:
2.22.2.1 If the pay period is one week, forty-five (45)
Hours of Service;
2.22.2.2 if the pay period is two weeks, ninety (90) Hours
of Service;
2.22.2.3 if the pay period is one-half of a month,
ninety-five (95) Hours of Service; and
2.22.2.4 if the pay period is one month, one hundred
ninety (190) Hours of Service.
2.22.3 Hours of Service above shall be calculated in accordance
with Department of Labor Regulation 29 C.F.R. Section 2530.200b-2(b).
Hours of Service shall be credited to the appropriate computation period
according to Department of Labor Regulation Section 2530.200b-2(c).
However, an Employee will not be considered as being entitled to payment
until the date when the Employer or the Affiliated Company would
normally make payment to the Employee for such Hour of Service.
2.22.4 Unless expressly provided to the contrary by Exhibit A or
by the Board of Directors, an Employee shall not be credited with Hours
of Service for periods of employment with an Affiliated Company prior to
the date on which an entity becomes an Affiliated Company, or part of an
Affiliated Company.
2.23 INVESTMENT FUND. "Investment Fund" shall mean any of the separate
Investment Funds established by the Retirement Committee which may be made
available by the Retirement Committee from time to time for selection by
Participants for purposes of the investment of amounts contributed to this Plan,
as provided in Article 7.
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2.24 INVESTMENT MANAGER. "Investment Manager" means the one or more
Investment Managers, if any, that are appointed pursuant to Section 11.3.
2.25 LEAVE OF ABSENCE. "Leave of Absence" shall mean any absence without
pay authorized by the Employer under the Employer's standard personnel
practices. The treatment of Leaves of Absence under this Plan shall not result
in discrimination in favor of Highly Compensated Employees in violation of Code
Section 401(a)(4).
2.26 MATCHING CONTRIBUTIONS. "Matching Contributions" shall mean Profit
Sharing Contributions that are geared to Participant contributions, as provided
in Section 5.3 and Section 5.4.
2.27 MATERNITY OR PATERNITY ABSENCE. "Maternity or Paternity Absence"
shall mean an absence from work for any period
2.27.1 By reason of the pregnancy of the Employee,
2.27.2 By reason of the birth of a child of the Employee,
2.27.3 By reason of the placement of a child with the Employee in
connection with the adoption of the child by the Employee, or
2.27.4 For purposes of caring for the child for a period
beginning immediately following the birth or placement referred to in
Subsection 2.27.2 or 2.27.3 above.
Notwithstanding the foregoing, a period of absence shall be
treated as a Maternity or Paternity Absence only if the Employee claims
that such absence qualifies as a Maternity or Paternity Absence and
furnishes such proof and information regarding such absence as the
Retirement Committee reasonably requires.
A Maternity or Paternity Absence shall be recognized solely for
purposes of determining whether or not an Employee has incurred a Break
in Service. Accordingly, such a Maternity or Paternity Absence shall not
result in an accrual of Service for purposes of the benefit accrual or
vesting provisions of this Plan.
2.28 NORMAL RETIREMENT AGE. "Normal Retirement Age" shall be the
Participant's age on his sixty-fifth birthday.
2.29 PARTICIPANT AND ACTIVE PARTICIPANT.
2.29.1 "Participant" shall mean any person for whom an Account is
maintained under the Plan and whose Account, representing such person's
interest in the Trust Fund, has not been distributed or otherwise
disposed of in accordance with applicable law.
14
2.29.2 "Active Participant" as of any applicable date shall mean
a Participant who is an Eligible Employee.
2.30 PLAN. "Plan" shall mean the Western Digital Corporation 401(k) Plan
as set forth herein, and as it may be amended from time to time. For periods
prior to May 10, 1991, unless the context clearly indicates to the contrary, the
term "Plan" shall refer to the Predecessor Plan.
2.31 PLAN ADMINISTRATOR. "Plan Administrator" shall mean the
administrator of the Plan, within the meaning of Section 3(16)(A) of ERISA. The
Plan Administrator shall be Western Digital Corporation.
2.32 PLAN YEAR. "Plan Year" shall mean the twelve (12) month period
ending on each June 30. For periods prior to the Effective Date, "Plan Year"
shall mean the period, or periods, determined in accordance with the applicable
provisions of the Predecessor Plan.
2.33 PRE-TAX CONTRIBUTIONS. "Pre-Tax Contributions" shall include those
amounts contributed to the Plan as a result of a salary or wage reduction
election made by the Participant in accordance with applicable provisions of the
Plan, to the extent such contributions qualify for treatment as contributions
made under a "qualified cash or deferred arrangement" within the meaning of
Section 401(k) of the Code.
2.34 PROFIT SHARING CONTRIBUTIONS. "Profit Sharing Contributions" shall
mean Profit Sharing Contributions described in Section 5.5.
2.35 SEVERANCE. "Severance" shall mean the termination of an Employee's
employment, in any capacity, with the Employer and Affiliated Companies, by
reason of such Employee's death, resignation, dismissal or otherwise, as
determined in accordance with the provisions of this Section 2.35. For the
purposes of this Plan, an Employee shall be deemed to have incurred a Severance
on the date on which he dies, resigns, is discharged, or his employment with the
Employer and its Affiliated Companies otherwise terminates, including a failure
to return to work at the end of an approved Leave of Absence, which failure
shall be deemed to constitute a termination of employment as of the date he is
scheduled to return.
In determining whether the employment of an Employee has terminated, the
customary policies and practices of the Employer shall apply. However, for
purposes of determining whether an individual is entitled to receive a
distribution of benefits by reason of a termination of Employment or termination
of Service, no person shall be deemed to have experienced a termination of
employment prior to the date as of which such person (a) experiences a
"separation from service," as such term is used in Section 401(k) and
regulations, rulings or other pronouncements thereunder issued by the Secretary
of the Treasury or Internal Revenue Service, or (b) otherwise becomes entitled
to a distribution of benefits under Section 401(k).
2.36 RETIREMENT COMMITTEE. "Retirement Committee" shall mean the
Retirement Committee described in Article 11 hereof.
15
2.37 SEVERANCE DATE. "Severance Date" shall, in the case of any Employee
who incurs a Severance, mean the day on which such Employee is deemed to have
incurred said Severance, determined in accordance with the provisions of Section
2.35.
2.38 SPOUSE. "Spouse" shall mean the person to whom a Participant is
legally married as of the date of the payment of all or a portion of the
Participant's Vested Interest in his Accounts, or in the case of a payment after
the Participant's death, the person to whom the Participant is legally married
as of the date of the Participant's death. To the extent required under a
qualified domestic relations order, a former spouse shall be treated as a
Spouse.
2.39 STOCK. "Stock" shall mean shares of common stock issued by Western
Digital Corporation, which are readily tradable on an established securities
market. At the Company's discretion, stock may also include other types of stock
which qualify as "employer securities" under Code Section 409(1).
2.40 TRUST AND TRUST FUND. "Trust" or "Trust Fund" shall mean the assets
of the Plan held in a trust, insurance contract or custodial account established
under a Trust Agreement pursuant to Article 6.
2.41 TRUST AGREEMENT. "Trust Agreement" shall mean the one or more trust
agreements entered into by the Company in accordance with the provisions of
Article 6 for the purpose of holding contributions and earnings under this Plan,
and shall include any funding agreement with an insurance company or custodian
treated as a Trustee under Section 401(f) of the Code.
2.42 TRUSTEE. "Trustee" shall mean any successor or other corporation or
person or persons selected by the Board of Directors to act as a trustee of the
Trust Fund under a Trust Agreement, and shall include any insurance company,
bank or person treated as the holder of a qualified trust under Section 401(f)
of the Code.
2.43 VALUATION DATE. "Valuation Date" shall mean, with respect to any
Investment Fund, the date as of which the value of a Participant's Account, to
the extent invested in such Investment Fund, is determined therein. With respect
to Investment Funds consisting of mutual funds or other pooled investments for
which net asset value or unit value generally is available each business day,
such Valuation Date shall be each business day. With respect to any other
Investment Fund, such Valuation Date shall be such date or dates as is
determined by the Committee.
2.44 VESTED INTEREST. "Vested Interest" or "Vested Right" shall mean the
interest of a Participant in his Accounts which is at all times fully vested and
nonforfeitable.
2.45 YEAR OF ELIGIBILITY SERVICE. An Employee's Year of Eligibility
Service credit shall be determined in accordance with the following provisions
of this Section 2.45.
16
2.45.1 "Year of Eligibility Service" shall mean, for purposes of
Article 3 of this Plan, a Computation Period during which the Employee
completes at least one thousand (1,000) Hours of Service for an Employer
or an Affiliated Company.
2.45.2 In the case of any Employee who incurs a Break in Service,
upon such Employee's completion of one (1) Hour of Service following a
Break in Service, his Years of Eligibility Service prior to said Break
shall be taken into account under this Plan if he either had a Vested
Right to benefits under this Plan immediately preceding such Break, or
the number of his one-year Breaks in Service does not equal or exceed
his Parity Period, as defined in Subsection 2.45.4 below.
2.45.3 In the case of any Employee who incurs a Break in Service
and who, immediately preceding such Break, did not have any Vested Right
to benefits under this Plan, if the number of his one-year Breaks in
Service equals or exceeds his Parity Period, as defined in Subsection
2.45.4 below, then his Years of Eligibility Service prior to said Break
in Service shall not be taken into account under this Plan. Any Years of
Eligibility Service credit accrued before a Break shall be deemed not to
include any Years of Eligibility Service not required to be taken into
account under this Subsection 2.45.3 by reason of any prior Break in
Service.
2.45.4 For purposes of this Section 2.45, the term Parity Period
shall mean:
2.45.4.1 For Plan Years commencing on or before December
31, 1984, the Participant's Years of Eligibility Service credit
accrued prior to a Severance giving rise to said Break.
2.45.4.2 For Plan Years commencing after December 31,
1984, the greater of (A) five Years of Eligibility Service, or
(B) the number of Years of Eligibility Service credited under
this Section prior to the Severance giving rise to such Break.
2.45.5 An Employee shall also be credited with a Year of
Eligibility Service for Hours of Service, to the extent such Hours of
Service would be credited had the Employee been employed during the
period by the Employer or an Affiliated Company, as provided in Exhibit
A.
2.45.6 An Employee shall be credited with Years of Eligibility
Service with respect to periods of employment with an Affiliated
Company, but only to the extent that such periods of employment would be
so credited under the foregoing rules set forth in this Section had such
Employee been employed during such period by the Employer.
Notwithstanding the foregoing, unless provided by the Board of Directors
or in Exhibit A, or unless otherwise expressly stated in this Plan, such
an Employee shall not receive such Service credit for
17
any period of employment with an Affiliated Company prior to such entity
becoming or becoming a part of, an Affiliated Company.
2.46 YEAR OF VESTING SERVICE. An Employee Years of Vesting Service
credit shall be determined in accordance with the following provisions of this
Section 2.46.
2.46.1 "Year of Vesting Service" shall mean a Computation Period
during which the Employee completes at least one thousand (1,000) Hours
of Service for an Employer or an Affiliated Company. In no instance will
an Employee be credited with more than one (1) Year of Vesting Service
with respect to service performed in a single Computation Period.
2.46.2 In the case of any Employee who incurs a Break in Service,
upon such Employee's completion of one (1) Hour of Service following a
Break in Service, his Years of Vesting Service prior to said Break shall
be taken into account under this Plan if he either had a Vested Right to
benefits under this Plan immediately preceding such Break, or the number
of his one-year Breaks in Service does not equal or exceed his Parity
Period, as defined in Subsection 2.46.4 below.
2.46.3 In the case of any Employee who incurs a Break in Service
and who, immediately preceding such Break, did not have any Vested Right
to benefits under this Plan, if the number of his one-year Breaks in
Service equals or exceeds his Parity Period, as defined in Subsection
2.46.4 below, then his Years of Vesting Service prior to said Break in
Service shall not be taken into account under this Plan. Any Years of
Vesting Service credit accrued before a Break shall be deemed not to
include any Years of Vesting Service not required to be taken into
account under this Subsection 2.46.3 by reason of any prior Break in
Service.
2.46.4 For purposes of this Section 2.46, the term Parity Period
shall mean:
2.46.4.1 For Plan Years commencing on or before December
31, 1984, the Participant's Years of Vesting Service credit
accrued prior to a Severance giving rise to said Break.
2.46.4.2 For Plan Years commencing after December 31,
1984, the greater of (A) five Years of Vesting Service, or (B)
the number of Years of Vesting Service credited under this
Section prior to the Severance giving rise to such Break.
2.46.5 An Employee shall be credited with Years of Vesting
Service with respect to periods of employment with an Affiliated
Company, but only to the extent that such periods of employment would be
so credited under the foregoing rules set forth in this Section had such
Employee been employed during such period by the Employer.
Notwithstanding the foregoing, unless provided by the Board of Directors
or in Exhibit A, or unless otherwise expressly stated in this
18
Plan, such an Employee shall not receive such Years of Vesting Service
credit for any period of employment with an Affiliated Company prior to
such entity becoming or becoming a part of, an Affiliated Company.
2.46.6 An Employee shall also be credited with Years of Vesting
Service for periods of employment with another employer, to the extent
such Years of Vesting Service would be credited had the Employee been
employed during that period by the Company or an Affiliated Company, to
the extent provided in Exhibit A.
2.46.7 In the event of a change in the Plan Year, an Employee who
is credited with a Year of Vesting Service in both the twelve (12) month
period that begins on the first day of the short Plan Year and the Plan
Year that immediately follows such short Plan Year, shall be credited
with two (2) Years of Vesting Service.
ARTICLE 3
ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY TO PARTICIPATE.
3.1.1 Each Eligible Employee who was a Participant in the
Predecessor Plan on the date immediately preceding the Effective Date
will automatically be a Participant in this Plan on the Effective Date,
and any Pre-Tax Contribution election under the Predecessor Plan will
apply to this Plan until changed according to Section 4.3.
3.1.2 Each other Eligible Employee will become a Participant on
the date which is the later of his Employment Commencement Date or the
date he becomes an Eligible Employee. Each Participant is responsible
for designating a beneficiary under the Plan and for designating the
manner in which such Participant's Accounts are invested. In the absence
of any designation the Retirement Committee shall apply such provisions
of the Plan as pertain to a failure to designate a beneficiary or as
pertain to failure to designate an investment selection, as the case may
be, and neither the Retirement Committee nor any other Plan
representative shall have an obligation to monitor such designations.
3.1.3 A Participant will first be eligible to make Pre-Tax
Contributions and/or After-Tax Contributions as provided in Section 3.2,
below.
3.2 COMMENCEMENT OF ACTIVE PARTICIPATION.
3.2.1 An Active Participant may elect to make Pre-Tax
Contributions and/or After-Tax Contributions in accordance with the
provisions of Article 4 by making an election in form and manner
satisfactory to the Retirement Committee.
19
3.2.2 The Retirement Committee may, in its discretion, prescribe
such rules relating to elections to participate and/or contribute as it
deems necessary or appropriate to promote the orderly and efficient
administration of the Plan.
3.3 CHANGE IN STATUS. If an Active Participant is transferred from one
Employer to another Employer, he shall automatically become an Active
Participant under the Plan with such other Employer if he continues to be an
Eligible Employee; further, he shall continue to be a Participant with respect
to his Accounts at the date of transfer during the period that he is a
Participant under the Plan with such Employer. If an Active Participant becomes
an ineligible Employee and therefore becomes ineligible to continue to be an
Active Participant because he is no longer an Eligible Employee, he shall
continue to be a Participant with respect to his Accounts at the date of his
change of status during the period of his subsequent employment as an ineligible
Employee.
3.4 REEMPLOYMENT. A Participant who incurs a Severance and who again
becomes an Eligible Employee, becomes an Active Participant on the date he again
becomes an Eligible Employee, and such Participant shall again become eligible
to contribute commencing as of the Entry Date that coincides with or next
follows the date he again becomes an Active Participant, subject to the making
of an appropriate election to contribute as provided in Section 3.2.
3.5 REEMPLOYMENT FOLLOWING QUALIFIED MILITARY SERVICE. Notwithstanding
any provision of this Plan to the contrary, contributions benefits and service
credit with respect to qualified military service will be provided in accordance
with Section 414(u) of the Code. This Section 3.5 shall be effective as of
December 12, 1994.
3.6 EMPLOYEE RESPONSIBILITY. It shall be the continuing responsibility
of an Eligible Employee who elects to contribute to this Plan to verify that
amounts of his contributions are in accordance with his election, and investment
of such contributions is in accordance with his investment designation.
ARTICLE 4
PARTICIPANT CONTRIBUTIONS
4.1 ELECTION TO CONTRIBUTE.
4.1.1 A Participant's contribution election, made in accordance
with Section 3.2, shall be effective as of the Entry Date next following
the date on which the election is properly made and is received by the
Administration Committee. Notwithstanding the foregoing, a Participant
may specify that his contribution election be effective on an earlier
date which is not earlier than the first day of the payroll period
during which the election is properly made and is received by the
Administration Committee, and such request shall be given effect to the
extent administratively practicable.
20
4.1.2 A Participant's contribution election shall remain in
effect until it is modified, revoked or terminated, pursuant to Section
4.3, or until the Active Participant ceases to be an Eligible Employee.
A contribution election shall be made in such form and manner as the
Retirement Committee shall prescribe or approve.
4.1.3 A Participant's Pre-Tax Contributions and After-Tax
Contributions shall be made by payroll deduction and an amount equal to
such Contributions shall be paid by the Employer to the Trustee in
accordance with Section 5.2.
4.2 PARTICIPANT CONTRIBUTION AMOUNTS. Participant contribution amounts
shall be subject to the limitations of this Section 4.2, in addition to such
other limitations as may be provided elsewhere in this Plan.
4.2.1 Pre-Tax Contributions. The amount of an Active
Participant's Pre-Tax Contributions shall be in whole percentage amounts
of from one percent (1%) to twenty percent (20%) of the Active
Participant's Compensation for each payroll period for which his
election to make Pre-Tax Contributions is in effect. Such maximum
percentage shall, however, be reduced by the amount of After-Tax
Contributions contributed by such Active Participant, in accordance with
such rules as the Committee may prescribe.
4.2.2 After-Tax Contributions. The amount of an Active
Participant's After-Tax Contributions shall be in whole percentage
amounts of from one percent (1%) to ten percent (10%) of the Active
Participant's Compensation for each payroll period for which his
election to make After-Tax Contributions is in effect. Such maximum
percentage shall, however, be reduced by the amount of Pre-Tax
Contributions contributed by such Active Participant, in accordance with
such rules as the Committee may prescribe. No Employer Matching
Contributions are made with respect to a Participant's After-Tax
Contributions.
4.2.3 In general, no Active Participant shall be permitted to
make Pre-Tax Contributions in excess of the dollar limitation on the
exclusion of elective deferrals from the Participant's gross income
under Section 402(g) of the Code, as in effect with respect to the
taxable year of the Participant (hereinafter referred to as the
"Deferral Limitation"). However, in the event an Active Participant's
Pre-Tax Contributions under this Plan, or the total amount of his
elective deferrals, within the meaning of Code Section 402(g)(3), under
all plans of the Employer and any Affiliated Company, exceed the
Deferral Limitation for any reason, such excess elective deferrals, and
any income or loss allocable thereto, shall be returned to the
Participant in accordance with Section 4.6.
4.2.4 The Retirement Committee may prescribe such rules as it
deems necessary or appropriate regarding an Active Participant's
contributions under this Plan, including rules regarding the maximum
amount that any Active
21
Participant may contribute and the timing of a contribution election.
These rules shall apply to all Eligible Employees, except to the extent
that the Retirement Committee prescribes special or more stringent rules
applicable only to Highly Compensated Employees.
4.3 MODIFICATION, REVOCATION OR TERMINATION OF CONTRIBUTION ELECTION.
4.3.1 Subject to the limitations of Section 4.2, an Active
Participant may modify his contribution election in accordance with such
rules as the Retirement Committee shall prescribe. Such modification,
made in accordance with Section 3.2 shall be effective as of the Entry
Date next following the date on which the modification is properly made
and is received by the Administration Committee. Notwithstanding the
foregoing, a Participant may specify that a modification of his
contribution election be effective on an earlier date which is not
earlier than the first day of the payroll period during which the
election is properly made and is received by the Retirement Committee,
and such request shall be given effect to the extent administratively
practicable.
4.3.2 An Active Participant may revoke his contribution election
in accordance with such rules as the Retirement Committee shall
prescribe. Such revocation shall be effective as of the later of the
Entry Date next following the date on which the revocation is properly
made and is received by the Administration Committee. Notwithstanding
the foregoing, a Participant may specify that a revocation of his
contribution election be effective on an earlier date which is not
earlier than the first day of the payroll period during which the
election is properly made and is received by the Retirement Committee,
and such request shall be given effect to the extent administratively
practicable. A revocation shall remain in effect throughout that Plan
Year and all subsequent Plan Years until the Participant makes a new
contribution election pursuant to Section 4.1.
4.3.3 A Participant's contribution election automatically shall
terminate if he ceases to be an Eligible Employee. If he again becomes
an Eligible Employee and desires to again contribute a portion of his
Compensation, it shall be his responsibility to make a new contribution
election pursuant to Section 3.2 in order to resume contributions.
4.3.4 The Retirement Committee may prescribe such rules as it
deems necessary or appropriate regarding the modification, revocation or
termination of an Active Participant's contribution election.
4.4 LIMITATION ON PRE-TAX CONTRIBUTIONS BY HIGHLY COMPENSATED EMPLOYEES.
This Section 4.4 shall be effective for Plan Years commencing on or after July
1, 1997. With respect to each Plan Year, Participant Pre-Tax Contributions under
the Plan for the Plan Year shall not exceed the limitations on contributions on
behalf of Highly Compensated Employees under Section 401(k) of the Code, as
provided in this Section. In the event that Pre-Tax Contributions under this
Plan on
22
behalf of Highly Compensated Employees for any Plan Year exceed the limitations
of this Section for any reason, such excess contributions and any income or loss
allocable thereto shall be returned to the Participant as provided in Section
4.5.
4.4.1 The Pre-Tax Contributions by a Participant for a Plan Year
shall satisfy the Average Deferral Percentage test set forth in Section
4.4.1.1.1 below, or the alternative Average Deferral Percentage test set
forth in Section 4.4.1.1.2 below, and to the extent required by
regulations under Code Section 401(m), also shall satisfy the test
identified in 4.4.1.2 below:
4.4.1.1 Basic Test.
4.4.1.1.1 The "Actual Deferral Percentage" for the
current Plan Year for Eligible Employees who are Highly
Compensated Employees shall not be more than the "Actual
Deferral Percentage" for the preceding Plan Year of all
other Eligible Employees multiplied by 1.25, or
4.4.1.1.2 The excess of the "Actual Deferral
Percentage" for the current Plan Year for Eligible
Employees who are Highly Compensated Employees over the
"Actual Deferral Percentage" for the preceding Plan Year
for all other Eligible Employees shall not be more than
two percentage points, and the "Actual Deferral
Percentage" for the current Plan Year for Highly
Compensated Employees shall not be more than the "Actual
Deferral Percentage" for the preceding Plan year of all
other Eligible Employees multiplied by 2.00.
4.4.1.1.3 Notwithstanding the foregoing, for Plan
Years commencing on or after July 1, 1997, the Retirement
Committee may elect to apply paragraphs 4.4.1.1.1 and
4.4.1.1.2 by using the Actual Deferral Percentage for the
current Plan Year for Eligible Employees who are not
Highly Compensated Employees. Effective for Plan Years
commencing on or after July 1, 1997, paragraphs 4.4.1.1.1
and 4.4.1.1.2 shall be applied using the Actual Deferral
Percentage for the prior Plan Year for Eligible Employees
who are not Highly Compensated Employees.
4.4.1.2 Multiple Use Test. Average Contribution Percentage
for Highly Compensated Employees eligible to participate in this
Plan and a plan of the Company or an Affiliated Company that is
subject to the limitations of Section 401(m) of the Code
including, if applicable, this Plan, shall be reduced in
accordance with Section 5.10, to the extent necessary to satisfy
the requirements of Treasury Regulations Section 1.401(m)-2.
23
4.4.2 For the purposes of the limitations of this Section, the
following definitions shall apply:
4.4.2.1 "Actual Deferral Percentage" means, with respect
to Eligible Employees who are Highly Compensated Employees and
all other Eligible Employees for a Plan Year, the average of the
Deferral Percentages, calculated separately for each Eligible
Employee in such group.
4.4.2.2 "Deferral Percentage" means for any Eligible
Employee the ratio of the amount of Pre-Tax Contributions under
the Plan allocated to each Eligible Employee for such Plan Year
to such Employee's "Compensation" for such Plan Year. An Eligible
Employee's Pre-Tax Contributions may be taken into account for
purposes of determining his Deferral Percentage for a particular
Plan Year only if such Pre-Tax Contributions are allocated to the
Eligible Employee as of a date within that Plan Year. For
purposes of this rule, an Eligible Employee's Pre-Tax
Contributions shall be considered allocated as of a date within a
Plan Year only if (A) the allocation is not contingent upon the
Eligible Employee's participation in the Plan or performance of
services on any date subsequent to that date, and (B) the Pre-Tax
Contribution is actually paid to the Trust no later than the end
of the twelve month period immediately following the Plan Year to
which the contribution relates. In accordance with regulations
issued by the Secretary of the Treasury, Employer contributions
on behalf of an Active Participant that satisfy the requirements
of Code Section 401(k)(3)(D)(ii) may also be taken into account
for the purpose of determining the Deferral Percentage of such
Active Participant.
4.4.2.3 "Eligible Employee" includes any Employee directly
or indirectly eligible to make Pre-Tax Contributions at any time
during the Plan Year, including any otherwise Eligible Employee
during a period of suspension due to a hardship withdrawal, as
prescribed by the Secretary of the Treasury in regulations under
Code Section 401(k).
4.4.2.4 "Compensation" means Compensation determined by
the Retirement Committee in accordance with the requirements of
Section 414(s) of the Code, including, to the extent elected by
the Retirement Committee, amounts deducted from an Employee's
wages or salary that are excludable from income under Sections
125 and 402(a)(8) of the Code.
4.4.3 In the event that as of the last day of a Plan Year this
Plan satisfies the requirements of Section 401(a)(4) or 410(b) of the
Code only if aggregated with one or more other plans which include
arrangements under Code Section 401(k), then this Section shall be
applied by determining the Actual Deferral Percentage of Eligible
Employees as if all such plans were a single plan,
24
in accordance with regulations prescribed by the Secretary of the
Treasury under Section 401(k) of the Code.
4.4.4 For the purposes of this Section, the Deferral Percentage
for any Highly Compensated Employee who is a participant under two or
more Code Section 401(k) arrangements of the Company or an Affiliated
Company shall be determined by taking into account the Highly
Compensated Employee's Compensation under each such arrangement and
contributions under each such arrangement which qualify for treatment
under Code Section 401(k), in accordance with regulations prescribed by
the Secretary of the Treasury under Section 401(k) of the Code.
4.4.5 For purposes of this Section, the amount of Pre-Tax
Contributions by a Participant who is not a Highly Compensated Employee
for a Plan Year shall be reduced by any Pre-Tax Contributions in excess
of the Deferral Limitation which have been distributed to the
Participant under Section 4.6, in accordance with regulations prescribed
by the Secretary of the Treasury under Section 401(k) of the Code.
4.4.6 The determination of the Deferral Percentage of any
Participant shall be made after applying the provisions of Section 15.5
relating to certain limits on Annual Additions under Section 415 of the
Code.
4.4.7 The determination and treatment of Pre-Tax Contributions
and the Deferral Percentage of any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the Treasury.
4.4.8 The Retirement Committee shall keep or cause to have kept
such records as are necessary to demonstrate that the Plan satisfies the
requirements of Code Section 401(k) and the regulations thereunder, in
accordance with regulations prescribed by the Secretary of the Treasury.
4.5 PROVISIONS FOR DISPOSITION OF EXCESS PRE-TAX CONTRIBUTIONS BY HIGHLY
COMPENSATED EMPLOYEES.
4.5.1 This Section 4.5 shall be effective for Plan Years
commencing on or after July 1, 1997. The Retirement Committee shall
determine, as soon as is reasonably possible following the close of each
Plan Year, if the Actual Deferral Percentage test is satisfied for the
Plan Year. If, pursuant to the determination by the Retirement
Committee, any or all of a Highly Compensated Employee's Pre-Tax
Contributions must be reduced to enable the Plan to satisfy the Actual
Deferral Percentage test, then any excess Pre-Tax Contributions by a
Highly Compensated Employee, and any income or loss allocable thereto
shall, if administratively feasible, be distributed to the Participant
not later than two and one-half (2-1/2) months following the close of
the Plan Year in which such excess Pre-Tax Contributions were made, but
in any event no later than the close of the first Plan Year following
the Plan Year in which such
25
excess Pre-Tax Contributions were made (after withholding any applicable
income taxes due on such amounts). Recharacterization of excess Pre-Tax
Contributions as Participant after-tax contributions shall not be
permitted.
4.5.2 For purposes of satisfying the Actual Deferral Percentage
Test the Retirement Committee shall determine the amount of any excess
Pre-Tax Contributions by Highly Compensated Employees for a Plan Year by
application of the leveling method set forth in Section 401(k)(8)(C) of
the Code under which the Actual Deferral Percentage of the Highly
Compensated Employee who has the highest such dollar amount of Pre-Tax
Contributions for such Plan Year is reduced by the lesser of the amount
required (i) to enable the Plan to satisfy the Actual Deferral
Percentage test, or (ii) to cause the dollar amount of such Highly
Compensated Employee's Pre-Tax Contributions to equal the dollar amount
of the Highly Compensated Employee with the next highest dollar amount.
This process shall be repeated until the Plan satisfies the Actual
Deferral Percentage test.
4.5.3 For purposes of satisfying the Average Contribution
Percentage test, income and loss allocable to a Participant's excess
Matching Contributions, as determined under 4.5.2 above, may be
determined by any reasonable method, provided the method does not
violate Code Section 401(a)(4), is used consistently for all
Participants and for all corrective distributions under the Plan for the
Plan Year, and is used by the Plan for allocating income and loss to
Participants' accounts. If there is a loss allocable to the excess, the
amount to be forfeited or distributed shall be the excess contribution
amount adjusted to reflect such loss.
4.5.4 To the extent required by regulations under Section 401(k)
or 415 of the Code, any excess Pre-Tax Contributions with respect to a
Highly Compensated Employee shall be treated as Annual Additions under
Article 15 for the Plan Year for which the excess Pre-Tax Contributions
were made, notwithstanding the distribution of such excess in accordance
with the provisions of this Section.
4.6 PROVISIONS FOR RETURN OF ANNUAL PRE-TAX CONTRIBUTIONS IN EXCESS OF
THE DEFERRAL LIMITATION. In the event Participant's elective deferrals, within
the meaning of Code Section 402(g)(3), for any calendar year exceed the Deferral
Limitation, such excess elective deferrals shall be returned to the Participant
as provided in this Section 4.6.
4.6.1 In the event that due to error or otherwise, a
Participant's Pre-Tax Contributions under this Plan for any calendar
year exceed the Deferral Limitation for such calendar year (without
regard to elective deferrals under any other plan), the Retirement
Committee shall notify the Plan of the amount of the excess Pre-Tax
Contributions, and such excess Pre-Tax Contributions, together with
income or loss allocable thereto, shall be distributed to the
Participant on or
26
before the first April 15 following the close of the calendar year in
which such excess Pre-Tax Contributions were made.
4.6.2 If in any calendar year, a Participant makes Pre-Tax
Contributions under this Plan and additional elective deferrals, within
the meaning of Code Section 402(g)(3), under any other plan maintained
by the Employer or an Affiliated Company, and the combined total amount
of the Participant's elective deferrals under this Plan and all such
other plans exceed the Deferral Limitation, the Employer and each
Affiliated Company maintaining a plan under which the Participant made
any elective deferrals shall notify the affected plans, and corrective
distributions of the excess elective deferrals, and any income or loss
allocable thereto, shall be made from one or more such plans, to the
extent determined by the Employer and each Affiliated Company. All
corrective distributions of excess elective deferrals shall be made on
or before the first April 15 following the close of the calendar year in
which the excess elective deferrals were made.
4.6.3 Income or loss on Pre-Tax Contributions in excess of the
Deferral Limitation shall be calculated in accordance with 4.5.3, except
that if the Plan Year is not the calendar year, calculations of
allocable income and loss shall be made with reference to income and
loss allocable for the calendar year rather than the Plan Year, and
based upon the Participant's account balance as of the last day of the
calendar year.
4.6.4 The Retirement Committee shall not be liable to any
Participant (or his Beneficiary, if applicable) for any losses caused by
misestimating the amount of any Pre-Tax Contributions in excess of the
limitations of this Article 4 and any income or loss allocable to such
excess.
4.6.5 In accordance with rules and procedures as may be
established by the Committee, a Participant may submit a claim to the
Committee in which he certifies in writing the specific amount of his
Pre-Tax Contributions for the preceding calendar year which, when added
to amounts deferred for such calendar year under any other plans or
arrangements described in Section 401(k), 408(k) or 403(b) of the Code
(other than a plan maintained by the Company or an Affiliated Company),
will cause the Participant to exceed the Deferral Limitation for the
calendar year in which the deferral occurred. To the extent the amount
specified by the Participant does not exceed the amount of the
Participant's Pre-Tax Contributions under the Plan for the applicable
calendar year, the Committee shall treat the amount specified by the
Participant in his claim as a Pre-Tax Contribution in excess of the
Deferral Limitation for such calendar year and return such excess and
any income or loss allocable thereto to the Participant, as provided in
4.6.1 above. In the event that for any reason such Participant's Pre-Tax
Contributions in excess of the Deferral Limitation for any calendar year
are not distributed to the Participant by the time prescribed in 4.6.1
above, such excess shall be held in the Participant's Pre-Tax
27
Contribution Account until distribution can be made in accordance with
the provisions of this Plan.
4.6.6 To the extent required by regulations under Section 402(g)
or 415 of the Code, Pre-Tax Contributions with respect to a Participant
in excess of the Deferral Limitation shall be treated as Annual
Additions under Article 15 for the Plan Year for which the excess
Pre-Tax Contributions were made, unless such excess is distributed to
the Participant in accordance with the provisions of this Section.
4.7 CHARACTER OF AMOUNTS CONTRIBUTED AS PRE-TAX CONTRIBUTIONS. Unless
otherwise specifically provided to the contrary elsewhere in this Plan, Pre-Tax
Contributions pursuant to a Participant's contribution election described above
in Section 4.1 (and which qualify for treatment under Code Section 401(k) and
are contributed to the Trust Fund pursuant to Article 6) shall be treated, for
federal and state income tax purposes, as Employer contributions.
4.8 PARTICIPANT ROLLOVER CONTRIBUTIONS. To the extent permissible under
Code Section 402(c), all or part of a distribution from a plan that satisfies
the requirements of Code Section 401(a), or from an individual retirement
account which is attributable solely to a rollover contribution within the
meaning of Code Section 408(d)(3), may be rolled over into this Plan by any
Active Participant and credited to a Rollover Account established for such
Active Participant in accordance with rules which the Retirement Committee shall
prescribe from time to time. Any rollover contributions in accordance with this
Section shall not be subject to distribution except as expressly provided under
the terms of this Plan. No rollover shall be accepted which is not in cash,
except that in the case of an amount consisting in whole or in part of Stock
distributable from the from the Western Digital Corporation Employee Stock
Ownership Plan following and on account of the termination of such Plan, such
requirement that a rollover be in cash shall not preclude the acceptance of such
rollover amount. Any shares of Stock rolled into this Plan pursuant to this
Section 4.8 shall be subject to rules set forth in this Plan regarding Stock,
and the Retirement Committee may establish such accounts or subaccounts as it
deems appropriate to reflect such shares of Stock.
4.9 PLAN-TO-PLAN TRANSFERS. No amounts held under another plan that is
qualified under Code Section 401(a) may be transferred directly from the trustee
of that plan to the Trustee of this plan, except in the case of a merger of this
plan with another plan qualified under Code Section 401(a) in accordance with
Code Sections 401(k), 411(d)(6) and 414(l).
ARTICLE 5
EMPLOYER CONTRIBUTIONS
5.1 DETERMINATION OF EMPLOYER CONTRIBUTIONS. Subject to the requirements
and restrictions of this Article 5 and Article 4 and Article 15, and subject
also to the amendment or termination of the Plan or the suspension or
discontinuance of
28
contributions as provided herein, Employer contributions to the Plan shall be
determined in accordance with this Article 5.
5.2 PRE-TAX CONTRIBUTIONS. The Employer shall make a Pre-Tax
Contribution on behalf of each Active Participant who is an Eligible Employee of
such Employer in an amount equal to the amount of the Pre-Tax Contribution
elected by the Active Participant in accordance with Article 4, provided such
Pre-Tax Contribution qualifies for tax treatment under Code Section 401(k).
Effective February 3, 1997, a Pre-Tax Contribution on behalf of an Active
Participant for a payroll period shall be paid to the Trustee and allocated to
the Active Participant's Pre-Tax Contribution Account as soon as
administratively practicable following the last day of such payroll period, but
in no event later than the fifteenth day of the month following the month in
which the Pre-Tax Contribution was withheld or received by the Employer, unless
a greater period is permitted by law.
5.3 BASIC MATCHING CONTRIBUTION.
5.3.1 As of the last day of a contribution cycle (as such term is
defined in 5.3.4 below), the Employer shall make a Basic Matching
Contribution on behalf of each "Eligible Participant," as defined in
Subsection 5.3.3 below, who is an Eligible Employee of such Employer. A
Basic Matching Contribution on behalf of an Eligible Participant under
this Section 5.3 shall be in an amount equal to fifty percent (50%) of
the Eligible Participant's Pre-Tax Contributions for the contribution
cycle which do not exceed five percent (5%) of the Eligible
Participant's Compensation for the contribution cycle, not to exceed a
maximum Aggregate Basic Matching Contribution of $2,000 for any calendar
year.
5.3.2 Any Basic Matching Contributions for a contribution cycle
shall be paid to the Trustee and allocated to the Eligible Participant's
Matching Contributions Account as soon as practicable following the last
day of such contribution cycle.
5.3.3 For purposes of this Section 5.3, "Eligible Participant"
means for any contribution cycle, each Eligible Employee of the Employer
who is an Active Participant throughout and on the last day of such
contribution cycle.
5.3.4 For purposes of this Section 5.3, the term "contribution
cycle" shall mean each calendar month, or, to the extent determined by
the Retirement Committee, a shorter period of time, including, but not
limited to, a payroll period.
5.3.5 Notwithstanding the foregoing, the Board of Directors, in
its sole discretion, may suspend Basic Matching Contributions on a
prospective basis only, provided prior notice is given to all affected
Participants.
29
5.4 SUPPLEMENTAL MATCHING CONTRIBUTIONS AND QUALIFIED NONELECTIVE
CONTRIBUTIONS.
5.4.1 As of the last day of a Plan Year, the Board of Directors
may determine, in its sole discretion, that each Employer shall make a
Supplemental Matching Contribution on behalf of each "Eligible
Participant," as defined in this Subsection 5.4.1, who is an Eligible
Employee of such Employer. Any Supplemental Matching Contribution under
this Subsection 5.4.1 shall be allocated among the Matching Contribution
Accounts of Eligible Participants in the same proportion that each
Eligible Participant's Pre-Tax Contributions for the Plan Year bears to
the Pre-Tax Contributions of all such Eligible Participants for the Plan
Year which do not exceed five percent (5%) of each Eligible
Participant's Compensation for the Plan Year. For purposes of this
Subsection 5.4.1, "Eligible Participant" means for a Plan Year, each
Eligible Employee of the Employer who is an Active Participant as of the
last day of such Plan Year and is credited with a Year of Vesting
Service during such Plan Year. Any Supplemental Matching Contributions
for a Plan Year under this Subsection 5.4.1 shall be paid to the Trustee
and allocated to the Eligible Participant's Matching Contributions
Account as soon as practicable following the last day of such Plan Year.
Unless the Company determines that Supplemental Matching Contributions
shall be made for a Plan Year in accordance with this Subsection 5.4.1,
no such Supplemental Matching Contributions shall be made for such Plan
Year.
5.4.2 As of the last day of a Plan Year, the Board of Directors
may, in its sole discretion, determine that each Employer shall make a
Qualified Matching Contribution on behalf of "Eligible Participants," as
defined in this Subsection 5.4.2, which contribution shall be a
"qualified matching contribution," within the meaning of regulations
under Section 401(k) of the Code. Any such "qualified matching
contribution" shall be allocated among the Matching Contribution
Accounts of Eligible Participants in the same proportion that each
Eligible Participant's Pre-Tax Contributions for the Plan Year bears to
the Pre-Tax Contributions of all such Eligible Participants for the Plan
Year. For purposes of Subsection 5.4.2, "Eligible Participant" means for
a Plan Year, an Eligible Employee of an Employer who is an Active
Participant and has been designated by the Board of Directors as an
Eligible Participant for such Plan Year with respect to a "qualified
matching contribution." Any such designation in accordance with this
Subsection 5.4.2 shall satisfy the nondiscrimination requirements of
Section 401(a)(4) of the Code. Any Qualified Matching Contributions for
a Plan Year under this Subsection 5.4.2 shall be paid to the Trustee and
allocated to the Eligible Participant's Matching Contributions Account
as soon as practicable following the last day of such Plan Year. Unless
the Company determines that Qualified Matching Contributions shall be
made for a Plan Year in accordance with this Subsection 5.4.2, no such
Qualified Matching Contributions shall be made for such Plan.
30
5.4.3 As of the last day of a Plan Year, the Company in its sole
discretion may determine that each Employer shall make an additional
Employer contribution for such Plan Year in an amount to be determined
by the Company in accordance with the provisions of this Subsection
5.4.3.
5.4.3.1 Any Employer contributions under this Subsection
5.4.3 shall be designated as "qualified nonelective
contributions," within the meaning of regulations under Section
401(k) of the Code. Unless the Company determines that Employer
contributions shall be made for a Plan Year in accordance with
this Subsection 5.4.3, no Employer contributions shall be made
for such Plan Year under this Subsection 5.4.3.
5.4.3.2 Any Employer contributions for a Plan Year in
accordance with this Subsection 5.4.3 shall be allocated as of
the last day of such Plan Year to the Pre-Tax Contributions
Accounts of Eligible Participants, in accordance with the
following rules:
5.4.3.2.1 Such contributions shall first be
allocated to the Pre-Tax Contributions Account of the
Eligible Participant with the lowest Compensation for the
Plan Year in an amount sufficient to cause the Deferral
Percentage (as defined in Paragraph 4.4.2.2) of the
Participant to equal the maximum percentage of
Compensation an Active Participant is permitted to
contribute to the Plan for the Plan Year as a Pre-Tax
Contribution in accordance with Subsection 4.2.1.
5.4.3.2.2 Such contributions shall then be
allocated in the amount described above to the Eligible
Participant with the next lowest Compensation, and such
allocations shall continue in the same manner until a
sufficient amount has been allocated to the Pre-Tax
Contributions Accounts of Eligible Participants to satisfy
the Actual Deferral Percentage test with the smallest
aggregate Employer contribution.
5.4.3.3 If, by the deadline for making "qualified
nonelective contributions" to the Plan under Treasury Regulations
1.401(k)-1(b)(4)(i)(A)(2), the Company does not have sufficient
data or is unable to determine exactly the smallest amount of
qualified nonelective contributions necessary to satisfy the
Actual Deferral Percentage test in accordance with the provisions
of Subparagraph 5.4.3.2.2, the Company may estimate such amount
and add a cushion sufficient to ensure that the test will be met.
Under these circumstances, qualified nonelective contributions
shall be allocated as provided in Subparagraphs 5.4.3.2.1 and
5.4.3.2.2, except that allocations under Subparagraph 5.4.3.2.2
shall continue until the aggregate estimated amount of such
contributions is completely allocated.
31
5.4.3.4 For purposes of this Subsection 5.4.3, "Eligible
Participant" means any Participant who has Compensation for the
Plan Year, who is not a Highly Compensated Employee, and who is
eligible to receive an allocation of the Employer contribution
pursuant to the provisions of Paragraph 5.4.3.2.
5.5 PROFIT SHARING CONTRIBUTIONS.
5.5.1 As of the last day of any Plan Year commencing on or after
July 1, 1994, the Board of Directors may, in its sole discretion,
determine that each Employer shall make a Profit Sharing Contribution
for such Plan year on behalf of "Eligible Participants," as defined in
this Subsection 5.5.1, in an amount to be determined by the Board. Any
Profit Sharing Contribution made in accordance with this Subsection
5.5.1 shall be allocated as of the last day of a Plan Year to the Profit
Sharing Contributions Account of each Eligible Participant in the same
proportion that the Eligible Participant's Compensation for the Plan
Year bears to the Compensation of all Eligible Participants for the Plan
year, provided, however, that the Board of Directors may, in its
discretion, provide for a profit sharing contribution to be made to each
Eligible Participant's account in a uniform amount (expressed as a
percentage of each such Eligible Participant's Compensation), subject to
such limitations as are prescribed by law as a condition to maintaining
the tax-qualified status of the Plan under Sections 401(a) et seq. of
the code. For purposes of this Subsection 5.5.1, "Eligible Participant"
means for a Plan Year, each individual who is an Eligible Employee of
the Employer as of the last day of the Plan Year. Unless the Company
determines that Profit Sharing Contributions shall be made for a Plan
Year in accordance with this Subsection 5.5.1, no Profit Sharing
Contributions shall be made for such Plan Year under this Subsection
5.5.1. With respect to periods prior to the Plan Year beginning July 1,
1994, contributions by the Employer shall be governed by provisions of
this Plan as in effect with respect to such periods.
5.5.2 "Compensation" for purposes of the allocation of a Profit
Sharing Contribution in accordance with this Section 5.5 shall mean
"Compensation" as defined in Subsection 2.8.2.
5.6 TIMING OF EMPLOYER CONTRIBUTIONS. In no event shall any Employer
contributions under this Article 5 for any Plan Year be made later than the time
prescribed by law for the deduction of such contributions for purposes of the
Employer's Federal income tax, as determined by the applicable provisions of the
Code.
5.7 APPLICATION OF FORFEITURES. Any non-vested portion of a
Participant's Matching Contributions Account or Profit Sharing Contributions
Account that is forfeited as provided in Subsection 9.4.1 shall be credited to a
Forfeiture Account and applied as provided in 5.7.1 and 5.7.2 below. Any
Matching Contributions forfeited in accordance with Section 5.10 or 5.11 shall
be applied as provided in 5.7.3 below.
32
5.7.1 Any non-vested Matching Contributions credited to a
Forfeiture Account during a Plan Year shall be applied first to restore
Matching Contribution amounts previously forfeited, as provided in
Subsection 9.4.2, and then any forfeitures that are not needed to
restore forfeited matching contributions shall, at the election of the
Company, be used to (i) pay Plan expenses, (ii) satisfy the Company's
obligation to make employer contributions, or (iii) offset the Company's
obligation to make qualified nonelective contributions.
5.7.1.1 who are actively employed as Eligible Employees on
the last day of the Plan Year,
5.7.1.2 who have completed one thousand (1,000) Hours of
Service in such Plan Year, and
5.7.1.3 who have Pre-Tax Contribution Accounts as of the
last day of such Plan Year,
in proportion to each Participant's Compensation for such Plan Year.
5.7.2 Any non-vested Profit Sharing Contribution amounts credited
to a Forfeiture Account during a Plan Year shall first be applied to
restore any Profit Sharing Contributions amounts previously forfeited,
as provided in Subsection 9.4.2 and then shall be allocated as of the
last day of such Plan Year among Profit Sharing Contribution Accounts of
Participants who are eligible to share in an allocation of any Profit
Sharing Contribution as of the last day of such Plan Year in proportion
to each Participant's Compensation for the Plan Year. "Compensation" for
purposes of the allocation of forfeitures of Profit Sharing
Contributions shall mean "Compensation" as defined in Subsection 2.8.2.
5.7.3 Any Matching Contributions forfeited by a Participant in
accordance with Section 5.10 or 5.11 shall be applied to reduce future
Matching Contributions by such Participant's Employer.
5.8 REQUIREMENT FOR PROFITS.
5.8.1 Any contributions by an Employer under this Plan (other
than Pre-Tax Contributions), shall be made only from current or
accumulated net profits.
5.8.2 Notwithstanding the foregoing, if an Employer does not have
sufficient current or accumulated net profits in any period to make the
applicable contribution, then the Board of Directors, in its sole
discretion, may determine that the Employer will make the contribution
notwithstanding the lack of current or accumulated net profits,
provided, however, the Plan is designed to qualify as a profit sharing
plan for purposes of Section 401(a), et seq. of the Code.
33
5.8.3 The term current or accumulated net profits means the net
income of the Employer determined in accordance with generally accepted
accounting principles and methods consistently applied.
5.9 SPECIAL LIMITATIONS ON 401(m) CONTRIBUTIONS. This Section 5.9 shall
be effective for Plan Years commencing on or after July 1, 1997. With respect to
each Plan Year, any employer matching contributions, as defined in Section
401(m) of the Code, or employee After-Tax Contributions, as defined in
regulations under Section 401(m) of the Code, under the Plan for the Plan Year
(hereafter referred to collectively as "401(m) Contributions") shall not exceed
the limitations on such contributions by or on behalf of Highly Compensated
Employees under Section 401(m) of the Code, as provided in this Section. In the
event that 401(m) Contributions under this Plan by or on behalf of Highly
Compensated Employees for any Plan Year exceed the limitations of this Section
for any reason, such excess 401(m) Contributions and any income or loss
allocable thereto shall be disposed of in accordance with Section 5.10.
5.9.1 401(m) Contributions by and on behalf of Participants for a
Plan Year shall satisfy the Average Contribution Percentage test set
forth in 5.9.1.1.1 below or the alternative Average Contribution
Percentage test set forth in 5.9.1.1.2 below, and to the extent required
by regulations under Code Section 401(m), shall satisfy the test
identified in 5.9.1.2 below.
5.9.1.1 Basic Test.
5.9.1.1.1 The Average Contribution Percentage for
the current Plan Year for Eligible Employees who are
Highly Compensated Employees shall not be more than the
Average Contribution Percentage for the preceding Plan
Year of all other Eligible Employees multiplied by 1.25,
or
5.9.1.1.2 The excess of the Average Contribution
Percentage for the current Plan Year for Eligible
Employees who are Highly Compensated Employees over the
Average Contribution Percentage for the prior Plan Year
for all other Eligible Employees shall not be more than
two (2) percentage points, and the Average Contribution
Percentage for the Highly Compensated Employees for the
current Plan Year shall not be more than the Average
Contribution Percentage for the prior Plan Year of all
other Eligible Employees multiplied by 2.00.
5.9.1.1.3 Notwithstanding the forgoing, for Plan
Years commencing on or after July 1, 1997 the Retirement
Committee may elect to apply paragraphs 5.9.1.1.1 and
5.9.1.1.2 using the Average Contribution Percentage for
the current Plan Year for Eligible Employees who are not
Highly Compensated Employees. Effective for Plan Years
commencing on or after July 1, 1997, paragraphs 5.9.1.1.1
and 5.9.1.1.2 shall be applied
34
using the Average Contribution Percentage for the prior
Plan Year for Eligible Employees who are not Highly
Compensated Employees.
5.9.1.2 Multiple Use Test. The Average Contribution
Percentage for Highly Compensated Employees eligible to
participate in this Plan and a plan of the Employer or an
Affiliated Company that satisfies the requirements of Section
401(k) of the Code, including, if applicable, this Plan, shall be
reduced to the extent necessary to satisfy the requirements of
Treasury Regulations Section 1.401(m)-2 or similar such rule
relating to the multiple use of the alternative test described in
5.9.1.1.2 above.
5.9.2 For purposes of this Article 5, the following definitions
shall apply:
5.9.2.1 "Average Contribution Percentage" means, with
respect to a group of Eligible Employees for a Plan Year, the
average of the Contribution Percentage, calculated separately for
each Eligible Employee in such group.
5.9.2.2 The "Contribution Percentage" means for any
Eligible Employee the percentage determined by dividing the sum
of 401(m) Contributions under the Plan on behalf of each Eligible
Employee for such Plan Year, by such Eligible Employee's
Compensation for such Plan Year in accordance with regulations
prescribed by the Secretary of the Treasury under Code Section
401(m). An after-tax contribution shall be taken into account for
a Plan Year if it is paid to the Trust during the Plan Year or
paid to an agent of the Plan and transmitted to the Trust within
a reasonable period after the end of the Plan Year. A matching
contribution shall be taken into account for a Plan Year only if
it is (A) made on account of a Participant's Pre-Tax
Contributions or after-tax contributions for the Plan Year; (B)
allocated to the Participant's matching contributions account
during that Plan Year; and (C) actually paid to the Trust no
later than the end of the twelve month period immediately
following the Plan Year to which the contribution relates. To the
extent determined by the Retirement Committee and in accordance
with regulations issued by the Secretary of the Treasury under
Code Section 401(m)(3), Pre-Tax Contributions on behalf of an
Eligible Employee and any qualified nonelective contributions,
within the meaning of Code Section 401(m)(4)(C), on behalf of an
Eligible Employee may also be taken into account for purposes of
calculating the Contribution Percentage of such Eligible
Employee, but shall not otherwise be taken into account. However,
if matching contributions are taken into account for purposes of
determining the Actual Deferral Percentage of an Eligible
Employee for a Plan Year under Section 4.4 then such matching
contributions shall not be taken into account under this Section.
35
5.9.2.3 "Eligible Employee" means any Eligible Employee
directly or indirectly eligible to contribute to the Plan,
including any otherwise Eligible Employee during a period of
suspension due to a Hardship withdrawal, in accordance with
regulations prescribed by the Secretary of the Treasury under
Code Section 401(k).
5.9.2.4 "Compensation" means Compensation determined by
the Retirement Committee in accordance with Section 414(s) of the
Code, including to the extent determined by the Retirement
Committee, amounts deducted from an Employee's wages or salary
that are not currently includable in the Employee's gross income
by reason of the application of Code Section 402(a)(8) or 125.
5.9.3 In the event that as of the last day of a Plan Year this
Plan satisfies the requirements of Section 410(b) of the Code only if
aggregated with one or more other plans, or if one or more other plans
satisfy the requirements of Section 410(b) of the Code only if
aggregated with this Plan, then this Section shall be applied by
determining the Contribution Percentages of Eligible Employees as if all
such plans were a single plan, in accordance with regulations prescribed
by the Secretary of the Treasury under Section 401(m) of the Code.
5.9.4 For the purposes of this Section, the Contribution
Percentage for any Eligible Employee who is a Highly Compensated
Employee under two or more Code Section 401(a) plans of an Employer or
an Affiliated Company to the extent required by Code Section 401(m),
shall be determined in a manner taking into account the participant
contributions and matching contributions for such Eligible Employee
under each of such plans.
5.9.5 The determination of the Contribution Percentage of any
Participant shall be made after first applying the provisions of Section
15.5 relating to certain limits on Annual Additions under Section 415 of
the Code, then applying the provisions of Section 4.6 relating to the
return of Pre-Tax Contributions in excess of the Deferral Limitation,
then applying the provisions of Section 4.5 relating to certain limits
under Section 401(k) of the Code imposed on Pre-Tax Contributions of
Highly Compensated Employees and last, applying the provisions of
Section 5.11 relating to the forfeiture of matching contributions
attributable to excess deferrals or contributions.
5.9.6 The determination and treatment of the Contribution
Percentage of any Participant shall satisfy such other requirements as
may be prescribed by the Secretary of the Treasury.
5.9.7 The Retirement Committee shall keep or cause to have kept
such records as are necessary to demonstrate that the Plan satisfies the
requirements of Code Section 401(m) and the regulations thereunder, in
accordance with regulations prescribed by the Secretary of the Treasury.
36
5.10 PROVISIONS FOR REDUCTION OF EXCESS 401(m) CONTRIBUTIONS BY OR ON
BEHALF OF HIGHLY COMPENSATED EMPLOYEES.
5.10.1 This Section 5.10 shall be effective for Plan Years
commencing on or after July 1, 1997. The Retirement Committee shall
determine, as soon as is reasonably possible following the close of the
Plan Year, if 401(m) Contributions by or on behalf of Highly Compensated
Employees satisfy the Average Contribution Percentage test for such Plan
Year. If, pursuant to the determination by the Retirement Committee,
401(m) Contributions by or on behalf of a Highly Compensated Employee
must be reduced to enable the Plan to satisfy the Average Contribution
Percentage test, then the Retirement Committee shall take the following
steps:
5.10.1.1 First, any excess After-Tax Contributions that
were not matched by matching contributions, and any income or
loss allocable thereto, shall be distributed to the Highly
Compensated Employee.
5.10.1.2 Second, if any excess remains after the
provisions of 5.10.1.1 above are applied, to the extent necessary
to eliminate the excess, any matching contributions on behalf of
the Highly Compensated Employee, any corresponding After-Tax
Contributions, and any income or loss allocable thereto, shall be
forfeited, to the extent forfeitable under the Plan, or
distributed to the Highly Compensated Employee, to the extent
non-forfeitable under the Plan (after withholding any applicable
income taxes on such amounts).
5.10.1.3 If administratively feasible, excess 401(m)
Contributions including any income or loss allocable thereto,
which are distributable under this Section 5.10, shall be
distributed to Highly Compensated Employees within two and
one-half (2-1/2) months following the close of the Plan Year for
which the excess Contributions were made, but in any event no
later than the end of the first Plan Year following the Plan Year
for which the excess Contributions were made, notwithstanding any
other provision in this Plan.
5.10.1.4 Any amounts of excess matching contributions
forfeited by Highly Compensated Employees under this Section,
including any income or loss allocable thereto, shall be applied
in accordance with Section 5.7.
5.10.2 The Retirement Committee shall determine the amount of any
excess 401(m) Contributions made by or on behalf of Highly Compensated
Employees for a Plan Year by application of the method set forth in
Section 401(m)(6)(C) of the Code under which the Average Contribution
Percentage of the Highly Compensated Employee who has the highest dollar
amount of 401(m) Contributions for the Plan Year is reduced, to the
extent required (a) to enable
37
the Plan to satisfy the Average Contribution Percentage test, or (b) to
cause the dollar amount of such Highly Compensated Employee's 401(m)
Contributions to equal the dollar amount of 401(m) Contributions of the
Highly Compensated Employee with the next highest dollar amount. This
process shall be repeated until the Plan satisfies the Average
Contribution Percentage test.
5.10.3 For purposes of satisfying the Average Contribution
Percentage test, income or loss allocable to a Participant's excess
401(m) Contributions, as determined under 5.10.2 above, shall be
determined in accordance with any reasonable method used by the Plan for
allocating income or loss to Participant Accounts, provided such method
does not discriminate in favor of Highly Compensated Employees and is
consistently applied to all Participants for all corrective
distributions under the Plan for a Plan Year. The Retirement Committee
shall not be liable to any Highly Compensated Employee (or his
Beneficiary, if applicable) for any losses caused by misestimating the
amount of any excess 401(m) Contributions on behalf of a Highly
Compensated Employee and the income or loss attributable to such excess.
5.10.4 To the extent required by regulations under Section 401(m)
or 415 of the Code, any 401(m) Contributions in excess of the
limitations of Section 5.9 forfeited by or distributed to a Highly
Compensated Employee in accordance with this Section shall be treated as
an Annual Addition under Article 15 for the Plan Year for which the
excess contribution was made, notwithstanding such forfeiture or
distribution.
5.11 FORFEITURE OF MATCHING CONTRIBUTIONS ATTRIBUTABLE TO EXCESS
DEFERRALS OR CONTRIBUTIONS. To the extent any Matching Contributions allocated
to a Participant's Matching Contributions Account are attributable to excess
Pre-Tax Contributions required to be distributed to the Participant in
accordance with Section 4.5 or 4.6, such Matching Contributions, including any
income or loss allocable thereto, shall be forfeited, notwithstanding that such
Matching Contributions may otherwise be non-forfeitable under the terms of the
Plan. Any Matching Contributions forfeited by a Participant in accordance with
this Section 5.11 shall be applied in the manner specified in Section 5.7.
5.12 IRREVOCABILITY. An Employer shall have no right or title to, nor
interest in, the contributions made to the Trust Fund, and no part of the Trust
Fund shall revert to an Employer except that on and after the Effective Date
funds may be returned to the Employer as follows:
5.12.1 In the case of an Employer contribution which is made by a
mistake of fact, that contribution (and any income or loss allocable to
such contribution) may be returned to the Employer within one (1) year
after it is made.
5.12.2 All Employer contributions are hereby conditioned upon the
Plan initially satisfying all of the requirements of Code Section 401(a)
and Section 401(k). If the Plan does not initially qualify, at the
Company's written
38
election the Plan or any portion thereof may be revoked and any or all
such contributions with respect to the portion revoked may be returned
to the Employer within one year after the date of IRS denial of the
initial qualification of the Plan. Upon such a revocation the affairs of
the Plan and Trust shall be terminated and wound up as the Company shall
direct.
5.12.3 All contributions to the Trust Fund are conditioned on
deductibility under Code Section 404. In the event a deduction is
disallowed for any such contribution such contribution shall be returned
to the Employer.
5.13 MAKE-UP CONTRIBUTIONS. In addition to other Employer contributions
described in this Article 5, the Employer may make special make-up contributions
to the Plan, if necessary. A make-up contribution will be necessary if there are
insufficient forfeitures under the Plan to restore a Participant's Matching
Contribution Account or Profit Sharing Account as provided in Section 9.5, if a
Participant or Beneficiary's Accounts must be reinstated according to Section
18.2, or if a mistake or omission in the allocation of contributions is
discovered and cannot be corrected by revising prior allocations.
ARTICLE 6
FUNDING
6.1 IN GENERAL. The Company has entered into a Trust Agreement with a
Trustee creating the Trust Fund. Such Trust Agreement provides for the
administration of the Trust Fund by the Trustee. The Trust Fund shall be
invested in accordance with provisions of Article 7 and the Trust Agreement and
shall be held in trust for the exclusive benefit of Participants or their
Beneficiaries. The Company by action of the Board of Directors shall select such
Trustee and may, without further reference to or action by any Participant, from
time to time
6.1.1 enter into such further agreements with the Trustee or
other parties and make such amendments to the Trust Agreement or said
further agreements as it may deem necessary or desirable to carry out
the Plan,
6.1.2 designate a successor Trustee or successor Trustees, and
6.1.3 take such other steps and execute such other instruments as
it may deem necessary or desirable to put the Plan into effect or to
carry out the provisions thereof.
ARTICLE 7
INVESTMENTS
7.1 INVESTMENTS OF CONTRIBUTIONS. Contributions by and on behalf of a
Participant shall be invested in accordance with the Participant's investment
designations in one or more Investment Funds established by the Retirement
39
Committee for this purpose. The Retirement Committee in its discretion, shall
from time to time determine the Investment Funds that shall be available to
Participants, which funds shall include a fund invested in Stock, and may
include one or more mutual funds or similar pooled investments.
7.2 INVESTMENT IN EMPLOYER SECURITIES.
7.2.1 Notwithstanding the establishment of separate Investment
Funds, up to one hundred percent (100%) of the assets of the Plan may be
invested in Stock, and up to twenty-five percent (25%) of the assets of
the Plan may be invested in Company Debentures; provided, however,
immediately following any acquisition of Company Debentures, not more
than twenty-five percent (25%) of the assets of the Plan shall be
invested in "marketable obligations" (as such term is defined in Section
407(e) of ERISA) of the Company or an Affiliated Company.
7.2.2 The term "Company Debentures" shall mean any debenture of
the Company which constitutes "qualifying employer securities," as
defined in Section 407(d)(5) of ERISA.
7.2.3 To the extent all or a portion of a Participant's Accounts
are invested in Stock, such Accounts shall reflect the number of whole
and fractional shares of Stock.
7.3 PARTICIPANT INVESTMENT DESIGNATIONS. In accordance with rules of
uniform application which the Retirement Committee may from time to time adopt
and subject to any limitations set forth below in this Article 7, each
Participant shall have the right to designate one or more of the Investment
Funds for the investment of his Accounts under the Plan, in accordance with the
following rules:
7.3.1 Investment of contributions by and on behalf of a
Participant in any Investment Fund and transfer of a Participant's
Account balances between Investment Funds shall be in such whole
percentage increments as the Retirement Committee may determine from
time to time.
7.3.2 A Participant may make a new investment designation which
shall apply to (i) the amount standing to his credit in his Accounts,
effective as of any Valuation Date; and (ii) future contributions to his
Accounts, effective as of any Valuation Date by giving notice to the
Retirement Committee to the extent required by the Retirement Committee
prior to the effective date of the change.
7.3.3 Investment Funds may, from time to time, hold cash or cash
equivalent investments (including interests in any fund maintained by
the Trustee as provided in the Trust Agreement) resulting from
investment transactions relating to the property of said Fund; provided,
however, that neither the Retirement Committee, the Company, the
Employer, the Trustee or any other person shall have any duty or
responsibility to cause such Funds to be held in cash or cash equivalent
investments for investment purposes. In the case of any
40
Investment Fund under the management and control of an Investment
Manager appointed by the Retirement Committee in accordance with Section
11.3, neither the Retirement Committee, the Company, the Employer, the
Trustee, nor any other person shall have any responsibility or liability
for investment decisions made by such Investment Manager.
7.3.4 In the event a Participant fails to make an investment
designation in accordance with this Article 7, contributions by and on
behalf of the Participant shall be invested in a fixed interest fund.
7.4 SECURITIES TRANSACTIONS. The Trustee may acquire Stock in the open
market or from the Company or any other person, including a party in interest.
No commission will be paid in connection with the Trustee's acquisition of Stock
from a party in interest. Neither the Company, nor any Employer, nor the
Committee, nor any Trustee have any responsibility or duty to time any
transaction involving Stock in order to anticipate market conditions or changes
in Stock value. Neither the Company, nor any Employer, nor the Committee, nor
any Trustee have any responsibility or duty to sell Stock held in the Trust Fund
in order to maximize return or minimize loss.
7.5 RIGHTS, WARRANTS, OR OPTIONS. Subject to the provisions applicable
to voting rights in Section 7.6, and unless otherwise directed by the Committee,
stock rights (including warrants and options) issued with respect to Stock will
be exercised by the Trustee on behalf of Participants to the extent that cash is
available. Unless otherwise directed by the Committee, rights which cannot be
exercised because of the lack of cash will be sold and the proceeds will be
invested in Stock.
7.6 VOTING OF STOCK. Notwithstanding any other provision of the Plan to
the contrary, the Trustee shall not vote Stock held in the Trust on any matter
presented for a vote by the stockholders of the Company except in accordance
with timely directions received by the Trustee either from the Committee or from
Participants, depending on who has the right to direct the voting of such stock
as provided in the following provisions of this Section 7.6.
7.6.1 All stock held in the Trust Fund shall be voted by the
Trustee as the Committee directs in its absolute discretion, except as
provided in this Subsection 7.6.1.
7.6.1.1 If the Company has a registration-type class of
securities (as defined in Section 409(e)(4) of the Code), then
with respect to all corporate matters, (i) each Participant shall
be entitled to direct the Trustee as to the voting of all Stock
allocated and credited to his Accounts and (ii) each Participant
who is an Eligible Employee shall be entitled to direct the
Trustee as to the voting of a portion of all Stock not allocated
to the Accounts of Participants, with such portion equal to the
total number of shares of such unallocated Stock multiplied by a
fraction the numerator of which is the number of shares of Stock
allocated to the Accounts of such
41
Participant and the denominator of which is the total number of
shares of Stock allocated to the Accounts of all Participants.
7.6.1.2 If the Company does not have a registration-type
class of securities (as defined in Section 409(e)(4) of the
Code), then only with respect to such matters as the approval or
disapproval of any corporate merger consolidation,
recapitalization, reclassification, liquidation, dissolution,
sale of substantially all assets of trade or business, or such
similar transactions as may be prescribed in Treasury
Regulations, (i) each Participant shall be entitled to direct the
Trustee as to the voting of all Stock allocated and credited to
his Accounts and (ii) each Participant who is an Eligible
Employee shall be entitled to direct the Trustee as to the voting
of a portion of all Stock not allocated to the Accounts of
Participants, with such portion determined in the same manner as
under Paragraph 7.6.1.1 above.
7.6.2 All Participants entitled to direct such voting shall be
notified by the Company, pursuant to its normal communications with
shareholders, of each occasion for the exercise of such voting rights
within a reasonable time before such rights are to be exercised. Such
notification shall include all information distributed to shareholders
either by the Company or any other party regarding the exercise of such
rights. To the extent that a Participant shall fail to direct the
Trustee as to the exercise of voting rights arising under any Stock
credited to his Accounts, such Stock shall not be voted. The Trustee
shall maintain confidentiality with respect to the voting directions of
all Participants.
7.6.3 Each Participant shall be a named fiduciary (as that term
is defined in ERISA Section 402(a)(2)) with respect to Stock for which
he has the right to direct the voting under the Plan but solely for the
purpose of exercising voting rights pursuant to this Section 7.6 or
certain Offers pursuant to Section 7.11.
7.6.4 In the event a court of competent jurisdiction shall issue
an opinion or order to the Plan, the Company, any Employer, or the
Trustee, which shall, in the opinion of counsel to the Company, the
Employer or the Trustee, invalidate under ERISA, in all circumstances or
in any particular circumstances, any provision or provisions of this
Section regarding the manner in which Stock held in the Trust shall be
voted or cause any such provision or provisions to conflict with ERISA,
then, upon notice thereof to the Company, the Employer, or the Trustee,
as the case may be, such invalid or conflicting provisions of this
Section shall be given no further force or effect. In such circumstances
the Trustee nevertheless shall not vote Stock held in the Trust unless
required under such order or opinion but shall follow instructions
received from Participants, to the extent such instructions have not
been invalidated. To the extent required to exercise any residual
fiduciary responsibility with respect to voting, the Trustee shall take
into account in exercising its fiduciary judgment, unless it is clearly
imprudent to do so, directions timely received from Participants, as
such
42
directions are most indicative of what is in the best interests of
Participants. Further, the Trustee, in addition to taking into
consideration any relevant financial factors bearing on any such
decision, shall take into consideration any relevant nonfinancial
factors, including, but not limited to, the continuing job security of
Participants as employees of the Company or any of its subsidiaries,
conditions of employment, employment opportunities and other similar
matters, and the prospect of the Participants and prospective
Participants for future benefits under the Plan.
7.7 VALUATION OF STOCK. When it is necessary to value Stock held by the
Plan, the value will be the current fair market value of the Stock, determined
in accordance with applicable legal requirements.
If the Stock is publicly traded, its fair market value will be based on
the most recent closing price in public trading, as determined by the Trustee.
If the Stock cannot be valued on the basis of its closing price in
recent public trading, its fair market value will be determined by the Company
in good faith based on all relevant factors for determining the fair market
value of securities. Relevant factors include an independent appraisal by a
person who customarily makes such appraisals, if an appraisal of the fair market
value of the Stock as of the relevant date was obtained.
In the case of a transaction between the Plan and an Employer or another
party in interest, the fair market value of the Stock must be determined as of
the date of the transaction rather than as of some other Valuation Date
occurring before or after the transaction. In other cases, the fair market value
of the Stock will be determined as of the most recent Valuation Date.
7.8 ALLOCATION OF STOCK DIVIDENDS AND SPLITS. Stock received by the
Trust as a result of a Stock split or Stock dividend on Stock held in
Participants' Pretax Deferral Accounts, Matching Contribution Accounts, and
Rollover Accounts will be allocated as of the Valuation Date coincident with or
following the date of such split or dividend, to each Participant who has such
an Account. The amount allocated will bear substantially the same proportion to
the total number of shares received as the number of shares in the Participant's
Pretax Deferral Account, Matching Contribution Account and/or Rollover Account
bears to the total number of shares allocated to such Accounts of all
Participants immediately before the allocation. The shares will be allocated to
the nearest thousandth of a share.
7.9 REINVESTMENT OF DIVIDENDS. Upon direction of the Committee, cash
dividends may be reinvested as soon as practicable by the Trustee in shares of
Stock for Participants' Accounts. Cash dividends may be reinvested in Stock
purchased as provided in Section 7.4 or purchased from the Accounts of
Participants who receive cash distributions.
7.10 ALLOCATION OF DIVIDENDS OTHER THAN STOCK DIVIDENDS. At the
direction of the Committee, dividends in cash or in property other than Stock
which are actually
43
received by the Trust during a Plan Year may be applied by the Trustee to the
purchase of Stock, as provided in Section 7.9. Dividends in property other than
Stock which are received by the Trustee with respect to Stock held by the Trust
may, to the extent practicable, be sold or exchanged for the ultimate purpose of
acquiring additional Stock.
Stock purchased by the Trustee for the Trust out of dividends and out of
the proceeds of rights or warrants sold (or exercised, to the extent of the
bargain element if such exercise is made with Employer contributions) will be
allocated, as of the Valuation Date coincident with or following the date such
shares were purchased, to the Account of each Participant who has an Account on
such Valuation Date.
Stock purchased with dividends on Stock held in Participants' Matching
Contribution Accounts, Pre-Tax Contributions Accounts, and Rollover Accounts
will be allocated to each Participant's Matching Contributions Account, Pre-Tax
Contributions Account and Rollover Account.
Shares allocated to an Account in accordance with this Section 7.10 will
be allocated in an amount which bears substantially the same proportion to the
total number of shares purchased as the ratio that the number of shares in such
Account on the Valuation Date immediately preceding such purchase bears to the
total number of shares that were allocated to such Accounts of all Participants
on such preceding Valuation Date (disregarding the shares that were distributed
to Participants as of such preceding Valuation Date).
Shares allocated under this Section will be allocated to the nearest
thousandth of a share.
7.11 CERTAIN OFFERS FOR STOCK. Notwithstanding any other provisions of
this Plan to the contrary, in the event an offer shall be received by the
Trustee (including, but not limited to, a tender offer or exchange offer within
the meaning of the Securities Exchange Act of 1934, as from time to time amended
and in effect) to acquire any or all shares of Stock held by the Trust (an
"Offer"), whether or not such Stock is allocated to Participants' Accounts, the
discretion or authority to sell, exchange or transfer any of such shares shall
be determined in accordance with the following rules:
7.11.1 The Trustee shall not sell, exchange or transfer any of
such Stock pursuant to such Offer except to the extent, and only to the
extent that the Trustee is timely directed to do so in writing (i) with
respect to any Stock held by the Trustee subject to such Offer and
allocated to the Accounts of any Participant, by each Participant to
whose Accounts any of such shares are allocated and (ii) with respect to
any Stock held by the Trustee subject to such Offer and not allocated to
the Accounts of any Participant, by each Participant who is an Eligible
Employee with respect to a number of shares of such unallocated Stock
equal to the total number of shares of such unallocated Stock multiplied
by a fraction the numerator of which is the number of shares of Stock
allocated to the Accounts of such Participant and the denominator of
which is the total number of shares of Stock allocated to the Accounts
of all Participants.
44
Upon timely receipt of such instructions, the Trustee shall,
subject to the provisions of Subsections 7.11.3 and 7.11.12 of this
Section, sell, exchange or transfer pursuant to such Offer, only such
shares as to which such instructions were given. The Trustee shall use
its best efforts to communicate or cause to be communicated to each
Participant the consequences of any failure to provide timely
instructions to the Trustee.
In the event, under the terms of an Offer or otherwise, any
shares of Stock tendered for sale, exchange or transfer pursuant to such
Offer may be withdrawn from such Offer, the Trustee shall follow such
instructions respecting the withdrawal of such securities from such
Offer in the same manner and the same proportion as shall be timely
received by the Trustee from the Participants entitled under this
Paragraph to give instructions as to the sale, exchange or transfer of
securities pursuant to such Offer.
7.11.2 In the event that an Offer for fewer than all of the
shares of Stock held by the Trustee in the Trust shall be received by
the Trustee, each Participant shall be entitled to direct the Trustee as
to the acceptance or rejection of such Offer (as provided by Subsection
7.11.1 of this Section) with respect to the largest portion of such
Stock as may be possible given the total number or amount of shares of
Stock the Plan may sell, exchange or transfer pursuant to the Offer
based upon the instructions received by the Trustee from all other
Participants who shall timely instruct the Trustee pursuant to this
Paragraph to sell, exchange or transfer such shares pursuant to such
Offer, each on a pro rata basis in accordance with the maximum number of
shares each such Participant would have been permitted to direct under
Subsection 7.11.1 had the Offer been for all shares of Stock held in the
trust.
7.11.3 In the event an Offer shall be received by the Trustee and
instructions shall be solicited from Participants in the Plan pursuant
to Subsection 7.11.1 of this Section regarding such Offer, and prior to
termination of such Offer, another Offer is received by the Trustee for
the securities subject to the first Offer, the Trustee shall use its
best efforts under the circumstances to solicit instructions from the
Participants to the Trustee (i) with respect to securities tendered for
sale, exchange or transfer pursuant to the first Offer, whether to
withdraw such tender, if possible, and, if withdrawn, whether to tender
any securities so withdrawn for sale, exchange or transfer pursuant to
the second Offer and (ii) with respect to securities not tendered for
sale, exchange or transfer pursuant to the first Offer, whether to
tender or not to tender such securities for sale, exchange or transfer
pursuant to the second Offer. The Trustee shall follow all such
instructions received in a timely manner from Participants in the same
manner and in the same proportion as provided in Subsection 7.11.1. of
this Section. With respect to any further Offer for any Stock received
by the Trustee and subject to any earlier Offer (including successive
Offers from one or more existing offerors), the Trustee shall act in the
same manner as described above.
45
7.11.4 With respect to any Offer received by the Trustee, the
Trustee shall distribute, at the Employer's expense, copies of all
relevant material, including, but not limited to, material filed with
the Securities and Exchange Commission with such Offer or regarding such
Offer, and shall seek confidential written instructions from each
Participant who is entitled to respond to such Offer pursuant to
Subsections 7.11.1, 7.11.2 or 7.11.3. The identities of Participants,
the amount of Stock allocated to their Accounts, and the Compensation of
each Participant shall be determined from the list of Participants
delivered to the Trustee by the Committee which shall take all
reasonable steps necessary to provide the Trustee with the latest
possible information.
7.11.5 The Trustee shall distribute and/or make available to each
Participant who is entitled to respond to an Offer pursuant to
Subsections 7.11.1, 7.11.2 or 7.11.3 an instruction form to be used by
each such Participant who wishes to instruct the Trustee. The
instruction form shall state that: (i) if the Participant fails to
return an instruction form to the Trustee by the indicated deadline, the
Stock with respect to which he is entitled to give instructions will not
be sold, exchanged or transferred pursuant to such Offer, (ii) the
Participant will be a named fiduciary (as described in Subsection
7.11.10 below) with respect to all shares for which he is entitled to
give instructions, and (iii) the Employer acknowledges and agrees to
honor the confidentiality of the Participant's instructions to the
Trustee.
7.11.6 Each Participant may choose to instruct the Trustee in one
of the following two ways: (i) not to sell, exchange or transfer any
shares of Stock for which he is entitled to give instructions, or (ii)
to sell, exchange or transfer all Stock for which he is entitled to give
instructions. The Trustee shall follow up with additional mailings and
postings of bulletins, as reasonable under the time constraints then
prevailing, to obtain instructions from Participants not otherwise
responding to such requests for instructions. Subject to Subsection
7.11.3, the Trustee shall then sell, exchange or transfer shares
according to instructions from Participants, except that shares for
which no instructions are received shall not be sold, exchanged or
transferred.
7.11.7 The Employer shall furnish former Participants who have
received distributions of Stock so recently as to not be shareholders of
record with the information given to Participants pursuant to
Subsections 7.11.4, 7.11.5, and 7.11.6 of this Section. The Trustee is
hereby authorized to sell, exchange or transfer pursuant to an Offer any
such Stock in accordance with appropriate instructions from such former
Participants.
7.11.8 Neither the Committee nor the Trustee shall express any
opinion or give any advice or recommendation to any Participant
concerning the Offer, nor shall they have any authority or
responsibility to do so. The Trustee has no duty to monitor or police
the party making the Offer; provided, however, that if the Trustee
becomes aware of activity which on its face reasonably
46
appears to the Trustee to be materially false, misleading, or coercive,
the Trustee shall demand promptly that the offending party take
appropriate corrective action. If the offending party fails or refuses
to take appropriate corrective action, the Trustee shall communicate
with affected Participants in such manner as it deems advisable.
7.11.9 The Trustee shall not reveal or release a Participant's
instructions to the Company or to any Employer, its officers, directors,
employees, or representatives. If some but not all Stock held by the
Trust is sold, exchanged, or transferred pursuant to an Offer, the
Employer, with the Trustee's cooperation, shall take such action as is
necessary to maintain the confidentiality of Participant's records,
including, without limitation, establishment of a security system and
procedures which restrict access to Participant records and retention of
an independent agent to maintain such records. If an independent
record-keeping agent is retained, such agent must agree, as a condition
of its retention by the Employer, not to disclose the composition of any
Participant Accounts to the Company, the Employer, its officers,
directors, employees, or representatives. The Company and the Employer
acknowledge and agree to honor the confidentiality of Participants'
instructions to the Trustee.
7.11.10 Each Participant shall be a named fiduciary (as that term
is defined in ERISA Section 402(a)(2)) with respect to Stock allocated
to his Accounts under the Plan and with respect to his pro-rata portion
of the unallocated Stock for which he is entitled to issue instructions
in accordance with Subsection 7.11.1 of this Section solely for purposes
of exercising the rights of a shareholder with respect to an Offer
pursuant to this Section 7.11 and voting rights pursuant to Section 7.6.
7.11.11 To the extent that an Offer results in the sale of Stock
in the Trust, the Committee shall instruct the Trustee as to the
investment of the proceeds of such sale.
7.11.12 In the event a court of competent jurisdiction shall
issue to the Plan, the Company, any Employer, or the Trustee an opinion
or order, which shall, in the opinion of counsel to the Company, the
Employer or the Trustee, invalidate, in all circumstances or in any
particular circumstances, any provision or provisions of this Section
regarding the determination to be made as to whether or not Stock held
by the Trustee shall be sold, exchanged or transferred pursuant to an
Offer or cause any such provision or provisions to conflict with
securities laws, then, upon notice thereof to the Company, the Employer
or the Trustee, as the case may be, such invalid or conflicting
provisions of this Section shall be given no further force or effect. In
such circumstances the Trustee shall not sell, exchange or transfer
Stock held in the Trust unless required under such order or opinion, but
shall follow instructions received from Participants, to the extent such
instructions have not been invalidated by such order or opinion. To the
extent required to exercise any residual fiduciary responsibility with
respect to such sale, exchange or transfer,
47
the Trustee shall take into account in exercising its fiduciary
judgment, unless it is clearly imprudent to do so, directions timely
received from Participants, as such directions are most indicative of
what action is in the best interests of Participants. Further, the
Trustee, in addition to taking into consideration any relevant financial
factors bearing on any such decision, shall take into consideration any
relevant nonfinancial factors, including, but not limited to, the
continuing job security of Participants as employees of the Company or
any Affiliate, conditions of employment, employment opportunities and
other similar matters, and the prospect of the Participants and
prospective Participants for future benefits under the Plan.
ARTICLE 8
VESTING
8.1 VESTED INTEREST IN PRE-TAX CONTRIBUTIONS ACCOUNT, ROLLOVER ACCOUNT,
AND PROFIT SHARING ACCOUNT. Each Participant shall at all times have one hundred
percent (100%) Vested Interest in the value of his Pre-Tax Contributions
Account, his Rollover Account, and, effective for individuals who complete a
Hour of Service for any payroll period commencing after May 31, 1995 and to the
extent a forfeiture of such Participant's Profit Sharing Account has not
occurred prior to the completion of such Hour of Service and is not subject to
restoration in accordance with Section 9.5, his Profit Sharing Account under the
Plan.
8.2 DETERMINATION OF VESTED INTEREST IN MATCHING CONTRIBUTIONS ACCOUNT.
A Participant shall acquire a Vested Interest in the value of his Matching
Contributions Account (and in his profit Sharing Account to the extent not
vested as provided in Section 8.1) in accordance with the following provisions
of this Section 8.2.
8.2.1 The Vested Interest of each Participant in the value of his
Matching Contributions Account shall be determined as provided in the
following table:
Number of Full Years
of Vesting Service Vested Interest
-------------------- ---------------
Under 1 0%
At least 1, less than 2 20%
At least 2, less than 3 40%
At least 3, less than 4 60%
At least 4, less than 5 80%
5 or more 100%
Fractional Years of Service shall not be taken into account.
8.2.2 In addition, a Participant shall be one hundred percent
100% vested in the value of his Matching Contributions Account upon
attainment of
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Normal Retirement Age while employed by the Employer or an Affiliated
Company or upon an earlier Severance due to death or Disability.
8.2.3 Any Matching Contributions that have been designated as
"qualified matching contributions" within the meaning of regulations
under Section 401(k) of the Code shall be one hundred percent (100%)
vested when paid to the Trustee, notwithstanding anything to the
contrary in this Plan.
8.2.4 If a Participant who incurs a Severance receives a
distribution from an Account at a time when the Participant does not
have a one hundred percent (100%) Vested Interest in the value of such
Account, and again becomes an Active Participant, upon restoration of
the non-vested portion of the Account in accordance with Section 9.5:
8.2.4.1 such non-vested portion shall be established as a
separate Account as of the date of distribution, and
8.2.4.2 at any relevant time the Participant's Vested
Interest in the value of such separate Account shall be equal to
an amount ("X") determined by the formula:
X = P(AB + D) - D
For purposes of applying the formula above: P is the nonforfeitable
percentage at the relevant time, AB is the Account balance at the
relevant time, and D is the amount of the prior distribution.
8.2.5 Notwithstanding the provisions of Subsection 8.2.1 above,
any Years of Vesting Service completed by a Participant after he incurs
at least five (5) consecutive Breaks in Service shall not be taken into
account for purposes of determining his Vested Interest in the value of
his Matching Contributions Account and Profit Sharing Contributions
Account prior to his incurring such five (5) consecutive Breaks in
Service.
8.3 AMENDMENT OF VESTING SCHEDULE. If the vesting schedule under the
Plan is amended or if the Plan is amended in any way that directly or indirectly
affects the computation of a Participant's Vested Interest, each Participant who
has completed at least three (3) Years of Service may elect, within a reasonable
time after the adoption of the amendment, to continue to have his Vested
Interest computed under the Plan without regard to such amendment. The period
during which the election may be made shall commence with the date the amendment
is adopted and shall end on the latest of: (i) 60 days after the amendment is
adopted; (ii) 60 days after the amendment is effective; or (iii) 60 days after
the Participant is issued notice of the amendment.
49
ARTICLE 9
PAYMENT OF PLAN BENEFITS
9.1 DISTRIBUTION UPON RETIREMENT.
9.1.1 Upon a Participant's Severance on or after he attains
Normal Retirement Age such Participant shall be entitled to a
distribution of his Distributable Benefit as provided in Section 9.5 as
soon as administratively feasible following the Valuation Date
determined in accordance with Section 10.2. In no event shall
distribution be made later than the sixtieth day after the later of the
close of the Plan Year in which occurs the Severance, or the close of
the Plan Year in which the Participant attains Normal Retirement Age
unless the Participant makes an election to defer payment to his
"Required Beginning Date" as defined in accordance with 9.1.3 below.
9.1.2 If the Participant continues in the service of the Employer
after he attains Normal Retirement Age, he shall continue to participate
in the Plan in the same manner as Participants who have not attained
Normal Retirement Age.
9.1.3 Notwithstanding the foregoing, effective January 1, 1997,
distribution of a Participant's Distributable Benefit shall be made not
later than his "Required Beginning Date" as determined in accordance
with this Subsection:
9.1.3.1 Except as provided in 9.1.3.2 below, a
Participant's "Required Beginning Date" shall mean the April 1
following the calendar year in which the Participant attains age
70 1/2, whether or not such Participant has incurred a Severance
or whether or not the Participant consents to the distribution.
The Participant's Distributable Benefit determined as of the
December 31 of the calendar year in which occurs his Required
Beginning Date and the December 31 of each subsequent calendar
year shall be distributed no later than the December 31 of the
next following calendar year.
9.1.3.2 Except in the case of a Participant who is a
"5-percent owner" within the meaning of Section 401(a)(9) of the
Code, the "Required Beginning Date" for a Participant who attains
age 70 1/2 after January 1, 1997 and remains in service shall
mean the April 1 following the later of (i) the calendar year in
which the Participant attains age 70-1/2, or (ii) the calendar
year in which the Participant incurs a Severance.
9.2 DISTRIBUTION UPON DEATH PRIOR TO PAYMENT OF BENEFITS.
9.2.1 Upon the death of a Participant prior to the payment of his
Distributable Benefit, the Retirement Committee shall direct the Trustee
to make a distribution of such Distributable Benefit as provided in
Section 9.5, to the
50
Beneficiary designated by the deceased Participant, or otherwise
entitled to such Distributable Benefit, as provided in Section 9.9.
9.2.2 Distribution of a Participant's Distributable Benefit shall
be made as soon as administratively practicable after the later of (i)
the Valuation Date determined in accordance with Section 10.2, or (ii)
the date all facts required by the Retirement Committee to be
established as a condition of payment shall have been established to the
satisfaction of the Retirement Committee, but in any event within five
(5) years of the Participant's death.
9.3 DISTRIBUTION UPON DISABILITY.
9.3.1 If a Participant incurs a Disability prior to his
Severance, distribution of his Distributable Benefit shall be made as
provided in Section 9.5 as soon as administratively practicable after
the later of (i) the Valuation Date determined in accordance with
Section 10.2, or (ii) the date the Participant's Disability has been
determined by the Retirement Committee.
9.3.2 Effective July 1, 1998 if a Participant incurs a Disability
prior to his attainment of Normal Retirement Age, the requirements of
Section 9.4 relating to consent to a distribution in excess of $5,000
shall be applicable.
9.4 SEVERANCE PRIOR TO NORMAL RETIREMENT AGE.
9.4.1 If a Participant incurs a Severance prior to attainment of
Normal Retirement Age for any reason other than death, distribution of
his Distributable Benefit before Normal Retirement Age shall be made as
provided in Section 9.5 after receipt by the Retirement Committee of all
required documentation, as follows:
9.4.1.1 In the case of a Participant whose Distributable
Benefit is $5,000 or less, distribution shall be made as soon as
administratively practicable following the Valuation Date
coinciding with or immediately following such Participant's
Severance, whether or not the Participant consents to such
distribution. The preceding provisions of this Subsection 9.4.1.1
shall not be interpreted or applied to preclude the
administrative practice of effecting distribution as of the last
day of a month, quarter or other period not less frequent than
annual, of all distributions to be made pursuant to this
Subsection 9.4.1.1 with respect to Severances occurring during
such period.
9.4.1.2 In the case of a Participant whose Distributable
Benefit exceeds $5,000, distribution shall be made as soon as
administratively practicable following the Valuation Date
coinciding with or next following the later of (A) the Valuation
Date determined in accordance with Section 10.2, or (B) the
receipt by the Retirement Committee of the consent of the
Participant to the distribution in accordance with 9.4.1.4 below.
51
9.4.1.3 If a Participant described in 9.4.1.2 above fails
to consent to distribution of the Participant's Distributable
Benefit prior to the first Valuation Date that occurs at least
ninety (90) days following the Participant's Severance Date, such
a Participant shall be deemed to have made an election to defer
distribution to Normal Retirement Age, unless prior to Normal
Retirement Age and in accordance with 9.4.1.2 above, the
Participant submits a request for an earlier distribution.
Notwithstanding the preceding provisions of this Subsection
9.4.1.3, no distribution shall occur on or after Normal
Retirement Age unless and until the Participant submits an
application, in form and manner satisfactory to the Committee,
distribution of the Participant's Distributable Benefit, except
in connection with a distribution required by Code Section
401(a)(9) as provided in Section 9.1.3.
9.4.1.4 Any consent by a Participant to receive
distribution of the Participant's Distributable Benefit prior to
Normal Retirement Age shall not be valid unless such consent is
made both (A) after the Participant receives a notice advising
him of his right to defer distribution to Normal Retirement Age
and (B) within the ninety (90) day period ending on the
Participant's "Benefit Starting Date." The notice to the
Participant advising him of his right to defer distribution shall
be given no less than thirty (30) nor more than ninety (90) days
prior to the Participant's Benefit Starting Date; provided,
however, that a Participant who receives the notice may waive the
thirty (30) day notice period by making an affirmative election
to receive or commence payment prior to the expiration of such
thirty (30) day period. For purposes of this Paragraph 9.4.1.4,
"Benefit Starting Date" shall mean the first day of the first
period for which the Participant's Distributable Benefit is paid.
9.4.2 If a Participant who incurs a Severance does not have a
100% Vested Interest in any Account as of such Severance, the portion of
such Participant's Account which is not vested as of such Severance
shall be held in such Account, subject to forfeiture in accordance with
Section 9.5.
9.4.3 To the extent permissible under Section 401(k)(10) of the
Code, if a Participant ceases to be an Employee by reason of the sale or
other disposition by the Employer or an Affiliated Company of either (i)
substantially all of the assets used by the Employer, or an Affiliated
Company, as the case may be, in a trade or business to an unrelated
corporation, or (ii) the interest of the Employer or an Affiliated
Company, as the case may be, in a subsidiary to an unrelated entity or
individual, such Participant shall be entitled to distribution of his
Distributable Benefit as if, for purposes of this Plan only, such event
constitutes a Severance.
52
9.5 FORFEITURES; RESTORATION.
9.5.1 Subject to the provisions of 9.5.3 below, any non-vested
portion of a Participant's Accounts shall be forfeited as of the earlier
of the date the Participant's Distributable Benefit is paid to him as
provided in Section 9.4, or the date the Participant incurs five (5)
consecutive Breaks in Service. For purposes of this Section, if the
value of a Participant's Distributable Benefit is zero, the Participant
shall be deemed to have received payment of his Distributable Benefit.
9.5.2 Any non-vested portion of a Participant's Accounts which is
forfeited in accordance with 9.5.1 above shall be applied as provided in
Section 5.7.
9.5.3 In accordance with such rules as the Retirement Committee
may prescribe, there shall be restored to the Participant's Account the
dollar value of any non-vested portion of such a Participant's Account
which was forfeited upon payment of the Participant's Distributable
Benefit in accordance with Subsection 9.4.1 prior to the date on which
he incurs five (5) consecutive Breaks in Service; provided, however,
that such restoration shall be made only in the case of the
Participant's reemployment as an Eligible Employee prior to incurring
five (5) consecutive Breaks in Service. The determination of the dollar
value of the forfeited portion of the Participant's Account required to
be restored to the Participant shall be made as of the Valuation Date
the Participant's Account was valued for purposes of determining his
Distributable Benefit, as provided in Article 10. No adjustment in the
dollar value of the forfeited amounts shall be made for any gains or
losses of the Trust Fund, between the applicable Valuation Date and the
restoration of the dollar value of the forfeited portion of the
Participant's Account. Restored amounts shall be paid from the
Forfeiture Account, or if forfeitures are not available, the Employer
shall make an additional contribution for this purpose.
9.6 FORM OF PAYMENT OF DISTRIBUTABLE BENEFIT. Payment of a Participant's
Distributable Benefit under this Article 9 shall be made in a lump sum
consisting of whole shares of Stock held in the Participant's Accounts and in
cash with respect to the remaining portion of the Participant's Accounts;
provided, however, effective for distributions made on or after April 1, 1992, a
Participant may elect payment of his Distributable Benefit either (a) in cash,
or (b) in whole shares of Stock with the value of fractional shares paid in
cash. To the extent that a Participant elects payment of his Distributable
Benefit in cash and such payment is attributable to Stock held in the
Participant's Accounts, such Stock shall be sold by the Trustee as soon as
practicable after communication to the Trustee of the Participant's election to
receive cash with respect to such shares, and the amount distributable to the
Participant shall be equal to the proceeds of such sale, after deduction of any
expenses associated with the sale, if any.
53
9.7 IN-SERVICE WITHDRAWALS. To the extent permissible under the
provisions of this Section, while still an Employee or on an approved Leave of
Absence, a Participant may make a withdrawal of his Vested Interest in his
Accounts in the Plan.
9.7.1 A Participant may make a withdrawal of his Pre-Tax
Contributions from his Rollover Account, from his Vested Interest in his
Matching Contributions Account, and from his Vested Interest in his
Profit Sharing Contributions Account in accordance with rules of uniform
application which the Retirement Committee may from time to time
prescribe.
9.7.2 Unless otherwise provided in this Section, no Participant
may make a withdrawal prior to a determination by the Retirement
Committee that such Participant has a Hardship need in excess of $500,
and such withdrawal is necessary on account of such Hardship need as
provided in this Section 9.7. Any determination of Hardship shall be in
accordance with regulations promulgated under Section 401(k) of the
Code, and to the extent determined by the Retirement Committee, may be
determined in accordance with either Subsection 9.7.3 or Subsection
9.7.4 below. In no event shall a Participant be permitted to make an
in-service withdrawal of any amounts attributable to Matching
Contributions that are designated as "qualified matching contributions"
or Profit Sharing Contributions that are designated as "nonelective
contributions," as defined in regulations issued under Section 401(k) of
the Code, except for Hardship reasons.
9.7.3 The existence of a Participant's Hardship and the amount
required to meet the need created by the Hardship may be determined by
the Retirement Committee on the basis of facts and circumstances, and in
accordance with rules of uniform application which the Retirement
Committee may from time to time prescribe. A distribution shall not be
treated as necessary to satisfy a Hardship need of a Participant to the
extent the amount of the distribution is in excess of the amount
required to relieve the Hardship need or to the extent that the Hardship
need may be satisfied from other resources reasonably available to the
Participant. The amount of a Hardship need may include amounts necessary
to pay any federal, state, or local income taxes or penalties reasonably
anticipated to result from the distribution. A distribution generally
may be treated as necessary on account of a Hardship need of a
Participant if the Retirement Committee reasonably relies on the
Participant's written representations to the Retirement Committee,
unless the Committee has actual knowledge to the contrary, that the
Hardship need cannot be relieved:
9.7.3.1 through reimbursement or compensation by insurance
or otherwise,
9.7.3.2 by reasonable liquidation of assets, if such
liquidation would not itself cause an immediate and heavy
financial need,
54
9.7.3.3 by the cessation of the Participant's
contributions to the Plan, or
9.7.3.4 by other distributions or non-taxable loans from
plans of the Employer or any other employer, or by borrowing from
commercial sources on reasonable commercial terms.
9.7.4 A Hardship distribution may be considered as necessary to
satisfy an immediate and heavy financial need of the Employee only if:
9.7.4.1 The distribution is not in excess of the amount of
the Hardship need of the Participant. The amount of the Hardship
need may include any amounts necessary to pay federal, state, or
local income taxes or penalties reasonably anticipated to result
from the distribution.
9.7.4.2 The Employee has obtained all distributions, other
than Hardship distributions under all plans maintained by the
Employer, and similarly, has obtained all nontaxable (at the time
of the loan) loans under all plans maintained by the Employer to
the extent that any such loan or the obligation to repay such
loan would not increase the amount necessary to relieve the
hardship (including, but not limited to the circumstance in
which, in connection with a withdrawal to purchase a principal
residence, such loan would disqualify the Participant from
obtaining other necessary financing in connection therewith).
For purposes of determining a Hardship need, a
Participant's resources shall be deemed to include those assets
of his Spouse and minor children that are reasonably available to
the Participant.
9.7.5 The amount of a Participant's Pre-Tax Contributions Account
which is available for a Hardship withdrawal on any date will not exceed
the lesser of
9.7.5.1 the value of the Account in the Predecessor Plan
on December 31, 1988, plus the dollar amount of Pre-Tax
Contributions added to such Account under the Predecessor Plan
and this Plan on and after January 1, 1989 minus all amounts
withdrawn from the Account under the Predecessor Plan and this
Plan since January 1, 1989, or
9.7.5.2 the value of the Account on the date as of which
the withdrawal will occur.
9.7.6 A Participant may request a withdrawal by submitting a
request for such withdrawal in a form satisfactory to the Retirement
Committee, together with any supporting documentation which the
Retirement Committee in its sole discretion may require. The maximum
amount subject to any withdrawal under this Section shall be determined
as of the Valuation Date coinciding with or
55
immediately preceding the Retirement Committee's determination
authorizing the withdrawal. To the extent permitted under this Section,
any withdrawal of a Participant's Vested Interest in the value of his
Accounts shall be made from such Accounts in the following order of
priority: After-Tax Contributions Account, Pre-Tax Contributions
Account, Rollover Account, Matching Contributions Account, and Profit
Sharing Contributions Account. Any unmatched Pre-Tax Contributions shall
be withdrawn before matched Pre-Tax Contributions.
9.7.7 The Retirement Committee shall not limit the number of
withdrawals a Participant shall be permitted to make, provided the
requirements of this Section are satisfied.
9.7.8 If a Participant makes an in-service withdrawal from an
Account at a time when the Participant does not have a one hundred
percent (100%) Vested Interest in the value of such Account, and the
Participant may increase his Vested Interest in the Account:
9.7.8.1 such Account shall be established as a separate
Account as of the date of distribution, and
9.7.8.2 at any relevant time the Participant's Vested
Interest in the value of such separate Account shall be equal to
an amount ("X") determined by the formula:
X = P(AB + D) - D
For purposes of applying the formula above: P is the nonforfeitable
percentage at the relevant time, AB is the Account balance at the
relevant time, and D is the amount of the withdrawal.
9.8 LOANS. From time to time, the Retirement Committee may establish a
Participant loan program under the Plan in accordance with the provisions of
this Section.
9.8.1 The implementation of a Participant loan program shall be
subject to the adoption by the Retirement Committee of written rules and
procedures governing the operation of such loan program, to the extent
required by regulations issued by the Department of Labor under Section
408(b)(1)(C) of ERISA. The written rules and procedures of the
Participant loan program shall form a part of the Plan and shall
include, but need not be limited to, the following: (i) the identity of
the person or positions authorized to administer the Participant loan
program; (ii) a procedure for applying for loans; (iii) the basis on
which loans will be approved or denied; (iv) any limitations on the
types and amounts of loans offered; (v) the procedure under the loan
program for determining a reasonable rate of interest; (vi) the types of
collateral which may secure a Participant loan; and (vii) the events
constituting default and the steps that will be taken to preserve Plan
assets in the event of such default.
56
9.8.2 In addition to such other requirements as may be imposed by
applicable law, any Participant loan shall bear a reasonable rate of
interest, shall be adequately secured by proper collateral, and shall be
repaid within a specified period of time according to a written
repayment schedule that calls for substantially level amortization over
the term of the loan.
9.8.3 In no event shall the principal amount of a loan hereunder,
at the time the loan is made, together with the outstanding balance of
all other loans to the Participant under this Plan, exceed the lesser
of:
9.8.3.1 fifty percent (50%) of the value of the
Participant's vested interest in his Accounts under this Plan, or
9.8.3.2 fifty thousand dollars ($50,000), reduced by the
excess (if any) of
9.8.3.2.1 the highest outstanding balances of loans
from the Plan during the one-year period ending on the day
before the date on which such loan was made, over
9.8.3.2.2 the outstanding balance of loans from the
Plan on the date on which such loan was made.
9.8.4 To the extent required to comply with the requirements of
Section 401(a)(4) of the Internal Revenue Code, loans hereunder shall be
made in a uniform and non-discriminatory manner.
9.9 DESIGNATION OF BENEFICIARY.
9.9.1 Subject to the provisions of 9.9.2 below, each Participant
shall have the right to designate a Beneficiary or Beneficiaries to
receive his interest in the Trust Fund in the event of his death before
receipt of his entire interest in the Trust Fund. This designation is to
be made on the form prescribed by and delivered to the Retirement
Committee. Subject to the provisions of 9.9.2 below, a Participant shall
have the right to change or revoke any such designation by filing a new
designation or notice of revocation with the Retirement Committee, and
no notice to any Beneficiary nor consent by any Beneficiary shall be
required to effect any such change or revocation.
9.9.2 If a Participant designates a Beneficiary and on the date
of his death has a Spouse who is not such Beneficiary, no effect shall
be given to such designation unless such Spouse has consented or
thereafter consents in writing to such designation, the consent
acknowledges the effect of the designation and the consent is witnessed
by a notary public. A Spouse's consent to a Beneficiary designation is
not required under the following circumstances:
9.9.2.1 if it is established to the satisfaction of the
Retirement Committee that there is no Spouse; or
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9.9.2.2 if the Participant's Spouse cannot be located; or
9.9.2.3 because of other circumstances under which a
Spouse's consent is not required in accordance with applicable
Treasury or Department of Labor Regulations.
The Retirement Committee shall have absolute discretion as to
whether the consent of a Spouse shall be required. The provisions of
this Section shall not be construed to place upon the Company or the
Retirement Committee any duty or obligation to require the consent of a
Spouse for the purpose of protecting the rights or interests of present
or former Spouses of Participants, except to the extent required to
comply with Code Section 401(a)(11) or Section 205 of ERISA.
9.9.3 If a deceased Participant shall have failed to designate a
Beneficiary, or if the Retirement Committee shall be unable to locate a
designated Beneficiary after reasonable efforts have been made, or if
for any reason (including but not limited to application of the rules in
9.9.2 above) the designation shall be legally ineffective, or if the
Beneficiary shall have predeceased the Participant without effectively
designating a successor Beneficiary, any distribution required to be
made under the provisions of this Plan shall commence within one (1)
year after the Participant's death to the person or persons included in
the highest priority category among the following, in order of priority:
9.9.3.1 The Participant's surviving Spouse;
9.9.3.2 The Participant's surviving children, including
adopted children and children of deceased children, per stirpes;
9.9.3.3 The Participant's surviving parents in equal
shares;
9.9.3.4 The Participant's brothers and sisters, and
nephews and nieces who are children of deceased brothers and
sisters, per stirpes; or
9.9.3.5 The Participant's estate.
The determination by the Retirement Committee as to which
persons, if any, qualify within the foregoing categories shall be final
and conclusive upon all persons. Notwithstanding the preceding
provisions of this Section, distribution made pursuant to this Section
shall be made to the Participant's estate if the Retirement Committee so
determines in its discretion.
9.9.4 In the event that the deceased Participant was not a
resident of California at the date of his death, the Retirement
Committee, in its discretion, may require the establishment of ancillary
administration in California. In the
58
event that a Participant shall predecease his Beneficiary and on the
subsequent death of the Beneficiary a remaining distribution is payable
under the applicable provisions of this Plan, the distribution shall be
payable in the same order of priority categories as set forth above but
determined with respect to the Beneficiary, subject to the same
provisions concerning non-California residency, the unavailability of an
estate representative and/or the absence of administration of the
Beneficiary's estate as are applicable on the death of the Participant.
9.9.5 The Retirement Committee shall not be required to authorize
any payment to be made to any person following a Participant's death,
whether or not such person has been designated by the Participant as a
Beneficiary, if the Retirement Committee determines that the Plan may be
subject to conflicting claims in respect of said payment for any reason,
including, without limitation, the designation or continuation of a
designation of a Beneficiary other than the Participant's Spouse without
the consent of such Spouse to the extent such consent is required by
Section 401(a)(11) of the Code. In the event the Retirement Committee
determines in accordance with this Section not to make payment to a
designated Beneficiary, the Retirement Committee shall take such steps
as it determines appropriate to resolve such potential conflict.
9.10 FACILITY OF PAYMENT. If any payee under the Plan is a minor or if
the Retirement Committee reasonably believes that any payee is legally incapable
of giving a valid receipt and discharge for any payment due him, the Retirement
Committee may have the payment, or any part thereof, made to the person (or
persons or institution) whom it reasonably believes is caring for or supporting
the payee, unless it has received due notice of claim therefor from a duly
appointed guardian or committee of the payee. Any payment shall be a payment
from the Accounts of the payee and shall, to the extent thereof, be a complete
discharge of any liability under the Plan to the payee.
9.11 PAYEE CONSENT. To the extent required to comply with Code Section
411(a)(11), the Retirement Committee shall require each Participant or other
payee to consent to any payment of a Participant's Accounts.
9.12 ADDITIONAL REQUIREMENTS FOR DISTRIBUTION.
9.12.1 The Retirement Committee or Trustee, or both, may require
the execution and delivery of such documents, papers and receipts as the
Retirement Committee or Trustee may determine necessary or appropriate
in order to establish the fact of death of the deceased Participant and
of the right and identity of any Beneficiary or other person or persons
claiming any benefits under this Article 9.
9.12.2 The Retirement Committee or the Trustee, or both, may, as
a condition precedent to the payment of death benefits hereunder,
require an inheritance tax release and/or such security as the
Retirement Committee or Trustee, or both, may deem appropriate as
protection against possible liability for state or federal death taxes
attributable to any death benefits.
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9.12.3 Notwithstanding any other provision in this Article 9
regarding the time within which a Participant's Distributable Benefit
will be paid, if, in the opinion of the Retirement Committee there are
or reasonably may be conflicting claims or other legal impediments to
the payment of such Distributable Benefit to a payee, such payment may
be delayed for so long as is necessary to resolve such conflict,
potential conflict, or other legal impediment, but not beyond the date
permitted by applicable law.
9.13 NOTICE OF RIGHT TO ELECT DIRECT ROLLOVER.
9.13.1 At least thirty (30) days, but not more than ninety (90)
days, before an eligible rollover distribution is made, each Participant
shall be given notice of any right he/she may have to elect a direct
rollover of his/her eligible rollover distribution in accordance with
this Section 9.13; provided, however, that a Participant who receives
the notice may waive the thirty (30) day notice requirement by making an
affirmative election to make or not to make a direct rollover of all or
a portion of his/her distributable benefit.
9.13.2 To the extent required by Section 401(a)(31) of the Code a
Participant whose Plan benefit becomes payable in an "eligible rollover
distribution," as defined below, shall be entitled to make an election
for a direct rollover of all or a portion of the taxable portion of such
benefit to an "eligible retirement plan," as defined in below. For
purposes of this Section 9.13, a Participant who makes a direct rollover
election in accordance with this Section 9.13 shall be deemed to have
received payment of his/her benefit as of the date payment is made from
the Plan.
9.13.3 For purposes of this Section 9.13,
9.13.3.1 an "eligible rollover distribution" shall mean
any distribution of all or any portion of a Participant's Plan
benefit, except that an eligible rollover distribution shall 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
Participant or the joint lives (or joint life expectancies) of
the Participant and the Participant'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; 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); and, effective for distributions after
December 31, 1998, any hardship distribution described in Code
Section 401(k)(2)(B)(i)(IV), and
9.13.3.2 an "eligible retirement plan" shall mean any plan
described in Code Section 402(c)(8)(B), the terms of which permit
the acceptance of a direct transfer from a qualified plan.
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9.13.4 A Participant's direct rollover election under this
Section shall be made in accordance with rules and procedures
established by the Committee and shall specify the dollar or percentage
amount of the direct rollover, the name and address of the eligible
retirement plan selected by the Participant and such additional
information as the Committee deems necessary or appropriate in order to
implement the Participant's election. It shall be the Participant's
responsibility to confirm that the eligible retirement plan designated
in the direct rollover election will accept the eligible rollover
distribution. The Committee shall be entitled to effect the direct
rollover based on its reasonable reliance on information provided by the
Participant, and shall not be required to independently verify such
information, unless it is clearly unreasonable not to do so.
9.13.5 If a Participant whose benefit becomes payable fails to
file a direct rollover election with the Committee within sixty (60)
days after receipt of the direct rollover notice, or if the Committee is
unable to effect the rollover within a reasonable time after the
election is filed with the Committee due to the failure of the
Participant to take such actions as may be required by the eligible
retirement plan before it will accept the rollover, the Participant's
benefit shall be paid to him/her in accordance with applicable
provisions of this Plan, after withholding any applicable income taxes
and no direct rollover shall be made.
9.13.6 To the extent required by Section 401(a)(31) of the Code,
if all or a portion of a Participant's benefit is payable to his/her
surviving Spouse in an eligible rollover distribution, or to a former
Spouse in accordance with a "qualified domestic relations order," such
surviving Spouse or former Spouse shall be entitled to elect a direct
rollover of all or a portion of such distribution to an individual
retirement account or an individual retirement annuity in accordance
with the provisions of this Section.
ARTICLE 10
VALUATION OF ACCOUNTS
10.1 ALLOCATION OF PLAN EARNINGS OR LOSSES. As of each Valuation Date,
the Retirement Committee will determine the net investment gain or loss, after
adjustment for applicable expenses, if any, of each Investment Fund since the
immediately preceding Valuation Date.
10.2 VALUE OF PARTICIPANT ACCOUNTS FOR DISTRIBUTION. For purposes of
payment of a Participant's Distributable Benefit following a Severance for any
reason, the value of a Participant's Accounts shall be determined in accordance
with Section 10.1 and rules prescribed by the Retirement Committee, subject,
however, to the following provisions:
10.2.1 Subject to 10.2.2 below, in the case of any Severance
including death, the value of a Participant's Accounts under the Plan
shall be
61
determined by reference to the Valuation Date immediately following both
(i) the occurrence of an event entitling the Participant to a
distribution, and (ii) the receipt by the Retirement Committee of the
properly completed application of the Participant (or his Beneficiary)
for payment of the Participant's Distributable Benefit with respect to
such event.
10.2.2 The value of a Participant's Accounts shall be increased
or decreased (as appropriate) by any contributions, withdrawals or
distributions properly allocable under the terms of this Plan to his
Accounts that occurred on or after the applicable Valuation Date or
which, for any other reason were not otherwise reflected in the
valuation of his Accounts on such Valuation Date.
ARTICLE 11
OPERATION AND ADMINISTRATION OF THE PLAN
11.1 PLAN ADMINISTRATION.
11.1.1 Authority to control and manage the operation and
administration of the Plan shall be vested in the Western Digital
Corporation Retirement Plan Committee (herein referred to as the
"Retirement Committee") as provided in this Article 11.
11.1.2 The Retirement Committee shall have at least three
members, all of whom shall be appointed by the Board of Directors and
shall hold office until resignation, death or removal by the Board of
Directors.
11.1.3 For purposes of ERISA Section 402(a), the members of the
Retirement Committee shall be the Named Fiduciaries of this Plan.
11.1.4 Notwithstanding the foregoing, a Trustee with whom Plan
assets have been placed in trust or an Investment Manager appointed
pursuant to Section 11.3 may be granted exclusive authority and
discretion to manage and control all or any portion of the assets of the
Plan in accordance with the terms of a Trust Agreement or investment
management agreement, as applicable.
11.2 RETIREMENT COMMITTEE POWERS. The Retirement Committee shall have
all powers necessary to supervise the administration of the Plan and control its
operations. In addition to any powers and authority conferred on the Retirement
Committee elsewhere in the Plan or by law, the Retirement Committee shall have,
by way of illustration but not by way of limitation, the following powers and
authority:
11.2.1 To allocate fiduciary responsibilities (other than trustee
responsibilities) among the Named Fiduciaries and to designate one or
more other persons to carry out fiduciary responsibilities (other than
trustee responsibilities). However, no allocation or delegation under
this Section 11.2 shall be effective until the person or persons to whom
the responsibilities have been allocated or delegated agree to assume
the responsibilities. The term
62
"trustee responsibilities" as used herein shall have the meaning set
forth in Section 405(c) of ERISA.
11.2.2 To designate agents to carry out responsibilities relating
to the Plan, other than fiduciary responsibilities.
11.2.3 To employ such legal, actuarial, medical, accounting,
clerical and other assistance as it may deem appropriate in carrying out
the provisions of this Plan, including one or more persons to render
advice with regard to any responsibility any Named Fiduciary or any
other fiduciary may have under the Plan.
11.2.4 To establish rules and regulations from time to time for
the conduct of the Retirement Committee's business and the
administration and effectuation of this Plan.
11.2.5 To administer, interpret, construe and apply this Plan and
to decide all questions which may arise or which may be raised under
this Plan by any Employee, Participant, former Participant, Beneficiary
or other person whatsoever, including but not limited to all questions
relating to eligibility to participate in the Plan, the amount of
service of any Participant, and the amount of benefits to which any
Participant or his Beneficiary may be entitled.
11.2.6 To determine the manner in which the assets of this Plan,
or any part thereof, shall be disbursed.
11.2.7 To the extent provided in Section 7.1, to direct the
investment of any portion of the Trust Fund that is not under the
management and control of the Trustee or an Investment Manager.
11.2.8 To perform or cause to be performed such further acts as
it may deem to be necessary, appropriate or convenient in the efficient
administration of the Plan.
Any action taken in good faith by the Retirement Committee in the
exercise of authority conferred upon it by this Plan shall be conclusive and
binding upon the Participants and their Beneficiaries. All discretionary powers
conferred upon the Retirement Committee shall be absolute. However, all
discretionary powers shall be exercised in a uniform and nondiscriminatory
manner.
11.3 INVESTMENT MANAGER.
11.3.1 The Retirement Committee, by action reflected in the
minutes thereof, may appoint one or more Investment Managers, as defined
in Section 3(38) of ERISA, to manage all or a portion of the assets of
the Plan.
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11.3.2 An Investment Manager shall discharge its duties in
accordance with applicable law and in particular in accordance with
Section 404(a)(l) of ERISA.
11.3.3 An Investment Manager, when appointed, shall have full
power to manage the assets of the Plan for which it has responsibility,
and neither the Company, an Employer nor the Retirement Committee shall
thereafter have any responsibility for the management of those assets.
11.4 RETIREMENT COMMITTEE PROCEDURE.
11.4.1 A majority of the members of the Retirement Committee as
constituted at any time shall constitute a quorum, and any action by a
majority of the members present at any meeting, or authorized by a
majority of the members in writing without a meeting, shall constitute
the action of the Retirement Committee.
11.4.2 The Retirement Committee may designate certain of its
members as authorized to execute any document or documents on behalf of
the Retirement Committee, in which event the Retirement Committee shall
notify the Trustee of this action and the name or names of the
designated members. The Trustee, Company, an Employer, Participants,
Beneficiaries, and any other party dealing with the Retirement Committee
may accept and rely upon any document executed by the designated members
as representing action by the Retirement Committee until the Retirement
Committee shall file with the Trustee a written revocation of the
authorization of the designated members.
11.5 COMPENSATION OF RETIREMENT COMMITTEE.
11.5.1 Members of the Retirement Committee shall serve without
compensation unless the Board of Directors shall otherwise determine.
However, in no event shall any member of the Retirement Committee who is
an Employee receive compensation from the Plan for his services as a
member of the Retirement Committee.
11.5.2 All members shall be reimbursed by the Company for any
necessary or appropriate expenditures incurred in the discharge of
duties as members of the Retirement Committee.
11.5.3 The compensation or fees, as the case may be, of all
officers, agents, counsel, the Trustee, or other persons retained or
employed by the Retirement Committee shall be fixed by the Retirement
Committee.
11.6 RESIGNATION AND REMOVAL OF MEMBERS. Any member of the Retirement
Committee may resign at any time by giving written notice to the other members
and to the Company effective as therein stated. Any member of the Retirement
Committee may, at any time, be removed by the Board of Directors. If a member of
the Retirement
64
Committee who is an Employee incurs a Severance, such person shall no longer be
a member of the Retirement Committee.
11.7 APPOINTMENT OF SUCCESSORS.
11.7.1 Upon the death, resignation, or removal of any Retirement
Committee member, or other termination of a member's status as a member
of the Retirement Committee, the Board of Directors may appoint a
successor.
11.7.2 Notice of appointment of a successor member shall be given
by the Board of Directors in writing to the Trustee and to the members
of the Retirement Committee.
11.7.3 Upon termination, for any reason, of an Retirement
Committee member's status as a member of the Retirement Committee, the
member's status as a Named Fiduciary shall concurrently be terminated,
and upon the appointment of a successor Retirement Committee member the
successor shall assume the status of a Named Fiduciary as provided in
Section 11.1.
11.8 RECORDS.
11.8.1 The Retirement Committee shall keep a record of all its
proceedings and shall keep, or cause to be kept, all such books,
accounts, records or other data as may be necessary or advisable in its
judgment for the administration of the Plan and to properly reflect the
affairs thereof.
11.8.2 However, nothing in this Section 11.8 shall require the
Retirement Committee or any member thereof to perform any act which,
pursuant to law or the provisions of this Plan, is the responsibility of
the Plan Administrator, nor shall this Section 11.8 relieve the Plan
Administrator from such responsibility.
11.9 RELIANCE UPON DOCUMENTS AND OPINIONS.
11.9.1 The members of the Retirement Committee, the Board of
Directors, the Company, the Employer and any person delegated under the
provisions hereof to carry out any fiduciary responsibilities under the
Plan ("delegated fiduciary"), shall be entitled to rely upon any tables,
valuations, computations, estimates, certificates and reports furnished
by any consultant, or firm or corporation which employs one or more
consultants, upon any opinions furnished by legal counsel, and upon any
reports furnished by the Trustee. The members of the Retirement
Committee, the Board of Directors, the Company, the Employer and any
delegated fiduciary shall be fully protected and shall not be liable in
any manner whatsoever for anything done or action taken or suffered in
reliance upon any such consultant or firm or corporation which employs
one or more consultants, Trustee, or counsel.
65
11.9.2 Any and all such things done or actions taken or suffered
by the Retirement Committee, the Board of Directors, the Company, the
Employer and any delegated fiduciary shall be conclusive and binding on
all Employees, Participants, Beneficiaries, and any other persons
whomsoever, except as otherwise provided by law.
11.9.3 The Retirement Committee and any delegated fiduciary may,
but are not required to, rely upon all records of the Company with
respect to any matter or thing whatsoever, and may likewise treat those
records as conclusive with respect to all Employees, Participants,
Beneficiaries, and any other persons whomsoever, except as otherwise
provided by law.
11.10 REQUIREMENT OF PROOF. The Retirement Committee or the Company may
require satisfactory proof of any matter under this Plan from or with respect to
any Employee, Participant, or Beneficiary, and no person shall acquire any
rights or be entitled to receive any benefits under this Plan until the required
proof shall be furnished.
11.11 RELIANCE ON RETIREMENT COMMITTEE MEMORANDUM. Any person dealing
with the Retirement Committee may rely on and shall be fully protected in
relying on a certificate or memorandum in writing signed by any Retirement
Committee member or other person so authorized, or by the majority of the
members of the Retirement Committee, as constituted as of the date of the
certificate or memorandum, as evidence of any action taken or resolution adopted
by the Retirement Committee.
11.12 MULTIPLE FIDUCIARY CAPACITY. Any person or group of persons may
serve in more than one fiduciary capacity with respect to the Plan.
11.13 LIMITATION ON LIABILITY. Except as provided in Part 4 of Title I
of ERISA, no person shall be subject to any liability with respect to his duties
under the Plan unless he acts fraudulently or in bad faith.
11.13.2 No person shall be liable for any breach of fiduciary
responsibility resulting from the act or omission of any other fiduciary
or any person to whom fiduciary responsibilities have been allocated or
delegated, except as provided in Part 4 of Title I of ERISA.
11.13.3 No action or responsibility shall be deemed to be a
fiduciary action or responsibility except to the extent required by
ERISA.
11.14 INDEMNIFICATION. To the extent permitted by law, the Company shall
indemnify each member of the Board of Directors and the Retirement Committee,
and any other Employee of the Company with duties under the Plan, against
expenses (including any amount paid in settlement) reasonably incurred by him in
connection with any claims against him by reason of his conduct in the
performance of his duties under the Plan, except in relation to matters as to
which he acted fraudulently or in bad faith in the performance of such duties.
The preceding right of indemnification shall pass to the estate of such a
person.
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11.14.2 The preceding right of indemnification shall be in
addition to any other right to which the Board member or Retirement
Committee member or other person may be entitled as a matter of law or
otherwise.
11.15 BONDING. Except as is prescribed by the Board of Directors, as
provided in Section 412 of ERISA, or as may be required under any other
applicable law, no bond or other security shall be required by any member of the
Retirement Committee, or any other fiduciary under this Plan.
11.15.2 Notwithstanding the foregoing, for purposes of satisfying
its indemnity obligations under Section 11.14, the Company may (but need
not) purchase and pay premiums for one or more policies of insurance.
However, this insurance shall not release the Company of its liability
under the indemnification provisions.
11.16 PROHIBITION AGAINST CERTAIN ACTIONS. To the extent prohibited by
law, in administering this Plan the Retirement Committee shall not discriminate
in favor of any class of Employees and particularly it shall not discriminate in
favor of Highly Compensated Employees.
11.16.2 The Retirement Committee shall not cause the Plan to
engage in any transaction that constitutes a nonexempt prohibited
transaction under Section 4975(c) of the Code or Section 406(a) of
ERISA.
11.16.3 All individuals who are fiduciaries with respect to the
Plan (as defined in Section 3(21) of ERISA) shall discharge their
fiduciary duties in accordance with applicable law, and in particular,
in accordance with the standards of conduct contained in Section 404 of
ERISA.
11.17 PLAN EXPENSES. All expenses incurred in the establishment,
administration and operation of the Plan, including but not limited to the
expenses incurred by the members of the Retirement Committee in exercising their
duties, shall be paid by the Company if not paid by the Trust Fund.
ARTICLE 12
MERGER OF COMPANY; MERGER OF PLAN
12.1 EFFECT OF REORGANIZATION OR TRANSFER OF ASSETS. In the event of a
consolidation, merger, sale, liquidation, or other transfer of the operating
assets of the Company to any other company, the ultimate successor or successors
to the business of the Company shall automatically be deemed to have elected to
continue this Plan in full force and effect, in the same manner as if the Plan
had been adopted by resolution of its board of directors, unless the
successor(s), by resolution of its board of directors, shall elect not to so
continue this Plan in effect, in which case the Plan shall automatically be
deemed terminated as of the applicable effective date set forth in the board
resolution.
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12.2 MERGER RESTRICTION. Notwithstanding any other provision in this
Article, this Plan shall not in whole or in part merge or consolidate with, or
transfer its assets or liabilities to any other plan unless each affected
Participant in this Plan would receive a benefit immediately after the merger,
consolidation, or transfer (if the Plan then terminated) 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 terminated).
ARTICLE 13
PLAN TERMINATION AND DISCONTINUANCE OF CONTRIBUTIONS
13.1 PLAN TERMINATION. Subject to the following provisions of this
Section 13.1, the Board of Directors may terminate the Plan and the Trust
Agreements at any time by an instrument in writing executed in the name of the
Retirement Committee, and delivered to the Trustee.
13.1.2 The Plan and Trust Agreements may terminate if the Company
merges into any other corporation, if as the result of the merger the
entity of the Company ceases, and the Plan is terminated pursuant to the
rules of Section 12.1.
13.1.3 Upon and after the effective date of the termination, an
Employer shall not make any further contributions under the Plan and no
contributions need be made by the Employer applicable to the Plan Year
in which the termination occurs, except as may otherwise be required by
applicable law.
13.1.4 The rights of all affected Participants to benefits
accrued to the date of termination of the Plan, to the extent funded as
of the date of termination, shall automatically become fully vested as
of that date, to the extent required to comply with the requirements of
Code Section 411.
13.2 DISCONTINUANCE OF CONTRIBUTIONS.
13.2.1 In the event an Employer decides it is impossible or
inadvisable for business reasons to continue to make Profit Sharing
Contributions under the Plan, the Employer may discontinue contributions
to the Plan. Upon and after the effective date of this discontinuance,
the Employer shall not make any further Profit Sharing Contributions
under the Plan and no Profit Sharing Contributions need be made by the
Employer with respect to the Plan Year in which the discontinuance
occurs, except as may otherwise be required by applicable law.
13.2.2 The discontinuance of Profit Sharing Contributions on the
part of an Employer shall not terminate the Plan as to the funds and
assets then held by the Trustee, or operate to accelerate any payments
of distributions to or for the benefit of Participants or Beneficiaries,
and the Trustee shall continue to
68
administer the Trust Fund in accordance with the provisions of the Plan
until all of the obligations under the Plan shall have been discharged
and satisfied.
13.2.3 However, if this discontinuance of Profit Sharing
Contributions shall cause the Plan to lose its status as a qualified
plan under Code Section 401(a), the Plan shall be terminated in
accordance with the provisions of this Article 13.
13.2.4 On and after the effective date of a complete
discontinuance of an Employer's contributions, the rights of all
affected Participants to benefits accrued to that date, to the extent
funded as of that date, shall automatically become fully vested as of
that date, to the extent required by Code Section 411.
13.3 RIGHTS OF PARTICIPANTS. In the event of the termination of the
Plan, for any cause whatsoever, all assets of the Plan, after payment of
expenses, shall be used for the exclusive benefit of Participants and their
Beneficiaries and no part thereof shall be returned to the Company, except as
provided in Section 5.12 of this Plan.
13.4 TRUSTEE'S DUTIES ON TERMINATION.
13.4.1 Upon the termination of the Plan, the Trustee shall
proceed as soon as administratively practicable, but in any event within
six months from the effective date, to reduce all of the assets of the
Trust Fund to cash and/or common stock and other securities in such
proportions as the Retirement Committee shall determine (after approval
by the Internal Revenue Service, if necessary or desirable, with respect
to any portion of the assets of the Trust Fund held in common stock or
securities of the Company).
13.4.2 After first deducting the estimated expenses for
liquidation and distribution chargeable to the Trust Fund, and after
setting aside a reasonable reserve for expenses and liabilities
(absolute or contingent) of the Trust, the Retirement Committee shall
make required allocations of items of income and expense to the
Accounts.
13.4.3 Following these allocations, the Trustee shall promptly,
after receipt of appropriate instructions from the Retirement Committee,
distribute in accordance with Section 9.5 to each former Participant a
benefit equal to the amount credited to his Accounts as of the date of
completion of the liquidation.
13.4.4 The Trustee and the Retirement Committee shall continue to
function as such for such period of time as may be necessary for the
winding up of this Plan and for the making of distributions in
accordance with the provisions of this Plan.
13.4.5 Notwithstanding the foregoing, distributions to
Participants upon Plan termination in accordance with this Section 13.4
shall not be made if the Employer establishes or maintains a "successor
plan" as defined in regulations issued under Section 401(k)(10) of the
Code. In the event benefits
69
are not distributable upon the termination of the Plan, the Retirement
Committee shall direct the Trustee to transfer such benefits to the
successor plan in accordance with regulations prescribed by the
Secretary of the Treasury.
13.5 PARTIAL TERMINATION.
13.5.1 In the event of a partial termination of the Plan within
the meaning of Code Section 411(d)(3), the interests of affected
Participants in the Trust Fund, as of the date of the partial
termination, shall become nonforfeitable as of that date.
13.5.2 That portion of the assets of the Plan affected by the
partial termination shall be used exclusively for the benefit of the
affected Participants and their Beneficiaries, and no part thereof shall
otherwise be applied.
13.5.3 With respect to Plan assets and Participants affected by a
partial termination, the Retirement Committee and the Trustee shall
follow the same procedures and take the same actions prescribed in this
Article 13 in the case of a total termination of the Plan.
13.6 FAILURE TO CONTRIBUTE. The failure of an Employer to contribute to
the Trust in any year, if contributions are not required under the Plan for that
year, shall not constitute a complete discontinuance of contributions to the
Plan.
ARTICLE 14
APPLICATION FOR BENEFITS
14.1 APPLICATION FOR BENEFITS. The Retirement Committee may require any
person claiming benefits under the Plan to submit an application therefor,
together with such documents and information as the Retirement Committee may
require. In the case of any person suffering from a disability which prevents
the claimant from making personal application for benefits, the Retirement
Committee may, in its discretion, permit another person acting on his behalf to
submit the application.
14.2 ACTION ON APPLICATION.
14.2.1 Within ninety days following receipt of an application and
all necessary documents and information, the Retirement Committee's
authorized delegate reviewing the claim (the "Claims Administrator")
shall furnish the claimant with written notice of the decision rendered
with respect to the application.
14.2.2 In the case of a denial of the claimant's application, the
written notice shall set forth:
14.2.2.1 The specific reasons for the denial, with
reference to the Plan provisions upon which the denial is based;
70
14.2.2.2 A description of any additional information or
material necessary for perfection of the application (together
with an explanation why the material or information is
necessary); and
14.2.2.3 An explanation of the Plan's claim review
procedure.
14.2.3 A claimant who wishes to contest the denial of his
application for benefits by the Claims Administrator or to contest the
amount of benefits payable to him shall follow the procedures for an
appeal of benefits as set forth in Section 14.3 below, and shall exhaust
such administrative procedures prior to seeking any other form of
relief.
14.3 APPEALS.
14.3.1 A claimant who does not agree with the decision rendered
by the Claims Administrator with respect to his application may appeal
the decision to the Retirement Committee.
14.3.2 The appeal shall be made, in writing, within sixty-five
days after the date of notice of the decision with respect to the
application.
14.3.3 If the application has neither been approved nor denied
within the ninety-day period provided in Section 14.2 above, then the
appeal shall be made within sixty-five days after the expiration of the
ninety-day period.
14.3.4 The claimant may request that his application be given
full and fair review by the Retirement Committee. The claimant may
review all pertinent documents and submit issues and comments in writing
in connection with the appeal.
14.3.5 The decision of the Retirement Committee shall be made
promptly, and not later than sixty days after the Retirement Committee's
receipt of a request for review, unless special circumstances require an
extension of time for processing, in which case a decision shall be
rendered as soon as possible, but not later than one hundred twenty days
after receipt of a request for review.
14.3.6 The decision on review shall be in writing and shall
include specific reasons for the decision, written in a manner
calculated to be understood by the claimant with specific reference to
the pertinent Plan provisions upon which the decision is based.
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ARTICLE 15
LIMITATIONS ON CONTRIBUTIONS
15.1 GENERAL RULE. This Subsection 15.1 shall be effective for Plan
Years commencing on or after July 1, 1995. Notwithstanding anything to the
contrary contained in this Plan the total Annual Additions under this Plan to a
Participant's Plan Accounts for any Plan Year shall not exceed the lesser of:
15.1.1.1 Thirty-Five Thousand Dollars ($35,000); or
15.1.1.2 Twenty-five percent of the Participant's total
Compensation from the Employer and any Affiliated Companies for
the year, excluding amounts otherwise treated as Annual Additions
under Section 15.2.1.
15.1.2 For purposes of this Article 15, the Employer has elected
a "Limitation Year" corresponding to the Plan Year.
15.2 ANNUAL ADDITIONS. For purposes of Section 15.1, the term "Annual
Additions" shall mean, for any Plan Year, the sum of (i) the amount credited to
the Participant's Accounts from Profit Sharing Contributions for such Plan Year;
(ii) any Employee contributions for the Plan Year; and (iii) any amounts
described in Sections 415(l)(1) or 419(A)(d)(2) of the Code. The term "Employee
Contributions," for purposes of the preceding sentence, shall mean amounts
considered contributed by the Employee and which do not qualify for tax deferral
treatment under Section 401(k) of the Code.
15.2.2 Notwithstanding anything to the contrary in this Section,
the Annual Addition for any Limitation Year beginning before January 1,
1987 shall not be recomputed to treat all Employee contributions as
Annual Additions.
15.3 OTHER DEFINED CONTRIBUTION PLANS. If the Employer or an Affiliated
Company is contributing to any other defined contribution plan (as defined in
Section 415(i) of the Code) for its Employees, some or all of whom may be
Participants in this Plan, then contributions to the other plan shall be
aggregated with contributions under this Plan for the purposes of applying the
limitations of Section 15.1.
15.4 COMBINED PLAN LIMITATION (DEFINED BENEFIT PLAN) FOR PLAN YEARS
COMMENCING PRIOR TO JULY 1, 2000. In the event a Participant hereunder also is a
participant in any qualified defined benefit plan (within the meaning of Section
414(j) of the Code) of the Employer or an Affiliated Company, then for Plan
Years commencing prior to July 1, 2000, the benefit payable under such defined
benefit plan, or any of them, shall be reduced for so long and to the extent
necessary to provide that the sum of the "defined benefit fraction" and the
"defined contribution fraction" for any Plan Year, as defined below, shall not
exceed 1.
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15.4.1 "Defined Benefit Fraction" shall be a fraction, the
numerator of which is the projected benefit of a Participant under all
qualified defined benefit plans adopted by the Employer or an Affiliated
Company expressed as either an annual straight life annuity or a
qualified joint and survivor annuity providing the maximum permissible
survivor benefit (determined as of the close of the Plan Year), and the
denominator of which is the lesser of (i) the maximum dollar amount
otherwise allowable for such Plan Year under applicable law times 1.25
or (ii) the percentage of compensation limit for such Plan Year times
1.4.
15.4.2 "Defined Contribution Fraction" shall be a fraction, the
numerator of which is the sum of the annual addition of the
Participant's account under this Plan and any other defined contribution
plans adopted by the Employer or an Affiliated Company for each Plan
Year, and the denominator of which is the lesser for each such Plan Year
of (i) maximum Annual Addition which could have been made under this
Plan and any other defined contribution plans adopted by the Employer or
an Affiliated Company for such Plan Year and for each prior Plan Year of
service with the Employer or an Affiliated Company times 1.25 or (ii)
the amount determined under the percentage of compensation limit for
such Plan Year times 1.4.
15.5 ADJUSTMENTS FOR EXCESS ANNUAL ADDITIONS. In general, Annual
Additions for any Plan Year under this Plan and any other defined contribution
plan (as defined in Code Section 414(i)) or defined benefit plan (as defined in
Code Section 414(j)) maintained by the Employer or an Affiliated Company will be
determined so as to avoid Annual Additions in excess of the limitations set
forth in Sections 15.1 through 15.4. However, if as a result of a reasonable
error in estimating the amount of the Annual Additions to a Participant's
Accounts under this Plan, such Annual Additions (after giving effect to the
maximum permissible adjustments under the other plans) exceed the applicable
limitations described in Sections 15.1 through 15.4, such excess Annual
Additions shall be corrected as follows:
15.5.1 If the Participant made any voluntary after-tax
contributions to this or any other defined contribution plan that is
maintained by the Employer or an Affiliated Company, which after-tax
contributions were not matched by matching contributions, within the
meaning of Code Section 401(m), such after-tax contributions shall be
returned to the Participant to the extent of any excess Annual
Additions.
15.5.2 If excess Annual Additions remain after the application of
the above rule, if the Participant made any Pre-Tax Contributions to
this or any other defined contribution plan that is maintained by the
Employer or an Affiliated Company, which Pre-Tax Contributions were not
matched by matching contributions, within the meaning of Code Section
401(m), such Pre-Tax Contributions shall be returned to the Participant
to the extent of any excess Annual Additions.
73
15.5.3 If excess Annual Additions remain after the application of
the above rule, if the Participant made any after-tax contributions to
this or any other defined contribution plan that is maintained by the
Employer or an Affiliated Company, which after-tax contributions were
matched by matching contributions, within the meaning of Code Section
401(m), any such after-tax contributions shall be returned to the
Participant and any matching contributions attributable thereto shall be
reduced to the extent necessary to eliminate any remaining excess Annual
Additions.
15.5.4 If excess Annual Additions remain after the application of
the above rule, if the Participant made any Pre-Tax Contributions to
this or any other defined contribution plan that is maintained by the
Employer or an Affiliated Company, which Pre-Tax Contributions were
matched by matching contributions, within the meaning of Code Section
401(m), any such Pre-Tax Contributions shall be returned to the
Participant and any matching contributions attributable thereto shall be
reduced to the extent necessary to eliminate any remaining excess Annual
Additions.
15.5.5 If excess Annual Additions remain after the application of
the above rule, any other Profit Sharing Contributions shall be reduced
to the extent necessary to eliminate any remaining excess Annual
Additions.
15.6 DISPOSITION OF EXCESS PROFIT SHARING CONTRIBUTION AMOUNTS. Any
excess Annual Additions attributable to Profit Sharing Contributions on behalf
of a Participant for any Plan Year, other than Pre-Tax Contributions returned to
the Participant in accordance with Section 15.5, shall be held unallocated in a
suspense account for the Plan Year and applied to reduce the Profit Sharing
Contributions for the succeeding Plan Year, or Years, if necessary. No
investment gains or losses shall be allocated to a suspense account established
for this purpose.
15.7 AFFILIATED COMPANY. For purposes of this Article 15, the status of
an entity as an Affiliated Company shall be determined by reference to the
percentage tests set forth in Code Section 415(h).
ARTICLE 16
RESTRICTION ON ALIENATION
16.1 GENERAL RESTRICTIONS AGAINST ALIENATION.
16.1.1 The interest of any Participant or Beneficiary in the
income, benefits, payments, claims or rights hereunder, or in the Trust
Fund shall not in any event be subject to sale, assignment,
hypothecation, or transfer. Each Participant and Beneficiary is
prohibited from anticipating, encumbering, assigning, or in any manner
alienating his or her interest under the Trust Fund, and is without
power to do so, except as may otherwise be provided for in the Trust
Agreement. The interest of any Participant or Beneficiary shall not be
liable
74
or subject to his debts, liabilities, or obligations, now contracted, or
which may be subsequently contracted. The interest of any Participant or
Beneficiary shall be free from all claims, liabilities, bankruptcy
proceedings, or other legal process now or hereafter incurred or
arising; and the interest or any part thereof, shall not be subject to
any judgment rendered against the Participant or Beneficiary.
16.1.2 In the event any person attempts to take any action
contrary to this Article 16, that action shall be void and the Company,
the Employer, the Retirement Committee, the Trustees and all
Participants and their Beneficiaries, may disregard that action and are
not in any manner bound thereby, and they, and each of them separately,
shall suffer no liability for any disregard of that action, and shall be
reimbursed on demand out of the Trust Fund for the amount of any loss,
cost or expense incurred as a result of disregarding or of acting in
disregard of that action.
16.1.3 The preceding provisions of this Section 16.1 shall be
interpreted and applied by the Retirement Committee in accordance with
the requirements of Code Section 401(a)(13) as construed and interpreted
by authoritative judicial and administrative rulings and regulations.
16.2 NONCONFORMING DISTRIBUTIONS UNDER COURT ORDER.
16.2.1 In the event that a court with jurisdiction over the Plan
and the Trust Fund shall issue an order or render a judgment requiring
that all or part of a Participant's interest under the Plan and in the
Trust Fund be paid to a spouse, former spouse and/or children of the
Participant by reason of or in connection with the marital dissolution
and/or marital separation of the Participant and the spouse, and/or some
other similar proceeding involving marital rights and property
interests, then notwithstanding the provisions of Section 16.1 the
Retirement Committee may, in its absolute discretion, direct the
applicable Trustee to comply with that court order or judgment and
distribute assets of the Trust Fund in accordance therewith.
16.2.2 The Retirement Committee's decision with respect to
compliance with any such court order or judgment shall be made in its
absolute discretion and shall be binding upon the Trustee and all
Participants and their Beneficiaries, provided, however, that the
Retirement Committee in the exercise of its discretion shall not make
payments in accordance with the terms of an order which is not a
qualified domestic relations order or which the Retirement Committee
determines would jeopardize the continued qualification of the Plan and
Trust under Section 401 of the Code. Nothing in this Plan shall prevent
the Retirement Committee from honoring a domestic relations order as a
qualified domestic relations order solely because it requires payment to
an alternate payee prior to the date the Participant attains age fifty
(50).
16.2.3 Neither the Plan, the Company, an Employer, the Retirement
Committee nor the Trustee shall be liable in any manner to any person,
including
75
any Participant or Beneficiary, for complying with any such court order
or judgment.
16.2.4 Nothing in this Section 16.2 shall be interpreted as
placing upon the Company, an Employer, the Retirement Committee or any
Trustee any duty or obligation to comply with any such court order or
judgment. The Retirement Committee may, if in its absolute discretion it
deems it to be in the best interests of the Plan and the Participants,
determine that any such court order or judgment shall be resisted by
means of judicial appeal or other available judicial remedy, and in that
event the Trustee shall act in accordance with the Retirement
Committee's directions.
16.2.5 The Retirement Committee shall adopt procedures and
provide notifications to a Participant and alternate payees in
connection with a qualified domestic relations order, to the extent
required under Code Section 414(p).
ARTICLE 17
PLAN AMENDMENTS
17.1 AMENDMENTS. The Company, acting through its Board of Directors may
at any time, and from time to time, amend the Plan by an instrument in writing
executed in the name of the Company and delivered to the applicable Trustee.
Notwithstanding the foregoing, no amendment shall be made at any time, the
effect of which would be:
17.1.1 To cause any assets of the Trust Fund to be used for or
diverted to purposes other than providing benefits to the Participants
and their Beneficiaries, and defraying reasonable expenses of
administering the Plan, except as provided in Section 5.12.;
17.1.2 To have any retroactive effect so as to deprive any
Participant or Beneficiary of any accrued benefit to which he would be
entitled under this Plan if his employment were terminated immediately
before the amendment, to the extent so doing would contravene Code
Section 411(d)(6);
17.1.3 To eliminate or reduce a subsidy or early retirement
benefit or an optional form of benefit to the extent so doing would
contravene Code Section 411(d)(6); or
17.1.4 To increase the responsibilities or liabilities of a
Trustee or an Investment Manager without his written consent.
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ARTICLE 18
MISCELLANEOUS
18.1 NO ENLARGEMENT OF EMPLOYEE RIGHTS.
18.1.1 This Plan is strictly a voluntary undertaking on the part
of the Company and shall not be deemed to constitute a contract between
the Company or any Employer and any Employee, or to be consideration
for, or an inducement to, or a condition of, the employment of any
Employee.
18.1.2 Nothing contained in this Plan or the Trust shall be
deemed to give any Employee the right to be retained in the employ of
the Company or an Employer or to interfere with the right of the Company
or an Employer to discharge or retire any Employee at any time.
18.1.3 No Employee, nor any other person, shall have any right to
or interest in any portion of the Trust Fund other than as specifically
provided in this Plan.
18.2 MAILING OF PAYMENTS; LAPSED BENEFITS.
18.2.1 All payments under the Plan shall be delivered in person
or mailed to the last address of the Participant (or, in the case of the
death of the Participant, to the last address of any other person
entitled to such payments under the terms of the Plan) furnished
pursuant to Section 18.3 below.
18.2.2 In the event that a benefit is payable under this Plan to
a Participant or any other person and after reasonable efforts such
person cannot be located for the purpose of paying the benefit for a
period of three (3) consecutive years, the benefit shall be forfeited
and as soon thereafter as practicable shall be applied to reduce
contributions by the Employer who was the Employer of the Participant as
of the Participant's Severance Date. In the event any person entitled to
payment of a benefit that has been forfeited in accordance with this
Section 18.2 submits a claim for such benefit, payment shall be made to
such person out of current forfeitures, or if necessary, such Employer
shall make an additional contribution for purposes of paying such
benefit.
18.2.3 For purposes of this Section 18.2, the term "Beneficiary"
shall include any person entitled under Section 9.9 to receive the
interest of a deceased Participant or deceased designated Beneficiary.
It is the intention of this provision that the benefit will be
distributed to an eligible Beneficiary in a lower priority category
under Section 9.9 if no eligible Beneficiary in a higher priority
category can be located by the Retirement Committee after reasonable
efforts have been made.
18.2.4 The Accounts of a Participant shall continue to be
maintained until the amounts in the Accounts are paid to the Participant
or his
77
Beneficiary. Notwithstanding the foregoing, in the event that the Plan
is terminated, the following rules shall apply:
18.2.4.1 All Participants (including Participants who have
not previously claimed their benefits under the Plan) shall be
notified of their right to receive a distribution of their
interests in the Plan;
18.2.4.2 All Participants shall be given a reasonable
length of time, which shall be specified in the notice, in which
to claim their benefits;
18.2.4.3 All Participants (and their Beneficiaries) who do
not claim their benefits within the designated time period shall
be presumed to be dead. The Accounts of such Participants shall
be forfeited at such time. These forfeitures shall be disposed of
according to rules prescribed by the Retirement Committee, which
rules shall be consistent with applicable law.
18.2.4.4 The Retirement Committee shall prescribe such
rules as it may deem necessary or appropriate with respect to the
notice and forfeiture rules stated above.
18.2.5 Should it be determined that the preceding rules relating
to forfeiture of benefits upon Plan termination are inconsistent with
any of the provisions of the Code and/or ERISA, these provisions shall
become inoperative without the need for a Plan amendment and the
Retirement Committee shall prescribe rules that are consistent with the
applicable provisions of the Code and/or ERISA.
18.3 ADDRESSES. Each Participant shall be responsible for furnishing the
Retirement Committee with his correct current address and the correct current
name and address of his Beneficiary or Beneficiaries.
18.4 NOTICES AND COMMUNICATIONS.
18.4.1 To the extent determined by the Retirement Committee or as
required by applicable law, all applications, notices, designations,
elections, and other communications from Participants shall be in
writing, on forms prescribed by the Retirement Committee and shall be
mailed or delivered to the office designated by the Retirement
Committee, and shall be deemed to have been given when received by that
office.
18.4.2 To the extent determined by the Retirement Committee or as
required by applicable law, each notice, report, remittance, statement
and other communication directed to a Participant or Beneficiary shall
be in writing and may be delivered in person or by mail. An item shall
be deemed to have been delivered and received by the Participant when it
is deposited in the United
78
States Mail with postage prepaid, addressed to the Participant or
Beneficiary at his last address of record with the Retirement Committee.
18.4.3 Notwithstanding the foregoing, to the extent permitted by
applicable law, and not inconsistent with the terms of the Plan, the
Retirement Committee may make a telephonic communication or other
electronic filing method available to Participants for certain
elections, designations, investment designations or applications for
benefits under this Plan, and for certain notices, statements or other
communications to Participants.
18.5 REPORTING AND DISCLOSURE. The Plan Administrator shall be
responsible for the reporting and disclosure of information required to be
reported or disclosed by the Plan Administrator pursuant to ERISA or any other
applicable law.
18.6 INTERPRETATION.
18.6.1 Article and Section headings are for convenient reference
only and shall not be deemed to be part of the substance of this
instrument or in any way to enlarge or limit the contents of any Article
or Section. Unless the context clearly indicates otherwise, masculine
gender shall include the feminine, and the singular shall include the
plural and the plural the singular.
18.6.2 The provisions of this Plan shall in all cases be
interpreted in a manner that is consistent with this Plan satisfying the
requirements (of Code Sections 401(a) and 401(k) and related statutes)
for qualification as a qualified cash or deferred arrangement.
18.7 WITHHOLDING FOR TAXES. Any payments out of the Trust Fund may be
subject to withholding for taxes as may be required by any applicable federal or
state law.
18.8 LIMITATION ON COMPANY AND EMPLOYER; RETIREMENT COMMITTEE AND
TRUSTEE LIABILITY. Any benefits payable under this Plan shall be paid or
provided for solely from the Trust Fund and neither the Company, the Employer,
the Retirement Committee nor the Trustee assume any responsibility for the
sufficiency of the assets of the Trust to provide the benefits payable
hereunder.
18.9 SUCCESSORS AND ASSIGNS. This Plan and the Trust established
hereunder shall inure to the benefit of, and be binding upon, the parties hereto
and their successors and assigns.
18.10 COUNTERPARTS. This Plan document may be executed in any number of
identical counterparts, each of which shall be deemed a complete original in
itself and may be introduced in evidence or used for any other purpose without
the production of any other counterparts.
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ARTICLE 19
TOP-HEAVY PLAN RULES
19.1 APPLICABILITY.
19.1.1 Notwithstanding any provision in this Plan to the
contrary, the provisions of this Article 19 shall apply in the case of
any Plan Year in which the Plan is determined to be a Top-Heavy Plan
under the rules of Section 19.3.
19.1.2 Except as is expressly provided to the contrary, the rules
of this Article 19 shall be applied after the application of the
Affiliated Company rules of Code Section 414.
19.2 DEFINITIONS.
19.2.1 For purposes of this Article 19, the term "Key Employee"
shall mean any Employee or former Employee who, at any time during the
Plan Year or any of the four (4) preceding Plan Years, is or was --
19.2.1.1 An officer of the Employer having an annual
compensation greater than fifty percent (50%) of the amount in
effect under Code Section 415(b)(1)(A) for this Plan Year.
However, no more than fifty (50) Employees (or, if lesser, the
greater of three (3) or ten percent (10%) of the Employees) shall
be treated as officers;
19.2.1.2 One of the ten (10) employees having annual
compensation from the Employer of more than the limitation in
effect under Code Section 415(c)(1)(A) and owning (or considered
as owning within the meaning of Code Section 318) the largest
interests in the Employer. For this purpose, if two (2) Employees
have the same interest in the Employer, the employee having
greater annual compensation from the Employer shall be treated as
having a larger interest;
19.2.1.3 A Five Percent Owner of the Employer; or
19.2.1.4 A One Percent Owner of the Employer having an
annual compensation from the Employer of more than one hundred
fifty thousand dollars ($150,000).
19.2.2 For purposes of this Section 19.2, the term "Five Percent
Owner" means any person who owns (or is considered as owning within the
meaning of Code Section 318) more than five percent (5%) of the
outstanding stock of the Employer or stock possessing more than five
percent (5%) of the total combined voting power of all stock of the
Employer. The rules of Subsections (b), (c), and (m) of Code Section 414
shall not apply for purposes of applying these ownership rules. Thus,
this ownership test shall be applied separately with respect to every
Affiliated Company.
80
19.2.3 For purposes of this Section 19.2, the term "One Percent
Owner" means any person who would be described in Subsection 19.2.2 if
"one percent (1%)" were substituted for "five percent (5%)" each place
where it appears therein.
19.2.4 For purposes of this Section 19.2, the rules of Code
Section 318(a)(2)(C) shall be applied by substituting "five percent
(5%)" for "fifty percent (50%)."
19.2.5 For purposes of this Article 19, the term "Non-Key
Employee" shall mean any Employee who is not a Key Employee.
19.2.6 For purposes of this Article 19, the terms "Key Employee"
and "Non-Key Employee" include their Beneficiaries.
19.3 TOP-HEAVY STATUS.
19.3.1 The term "Top-Heavy Plan" means, with respect to any Plan
Year --
19.3.1.1 Any defined benefit plan if, as of the
Determination Date, the present value of the cumulative accrued
benefits under the Plan for Key Employees exceeds sixty percent
(60%) of the present value of the cumulative accrued benefits
under the plan for all Employees, and
19.3.1.2 Any defined contribution plan if, as of the
Determination Date, the aggregate of the account balances of Key
Employees under the Plan exceeds sixty percent (60%) of the
present value of the aggregate of the account balances of all
Employees under the plan.
For purposes of this Subsection 19.3.1, the term "Determination
Date" means, with respect to any Plan Year, the last day of the
preceding Plan Year. In the case of the first Plan Year of any plan, the
term "Determination Date" shall mean the last day of that Plan Year.
The present value of account balances under a defined
contribution plan shall be determined as of the most recent valuation
date. The present value of accrued benefits under a defined benefit plan
shall be determined as of the same valuation date as used for computing
plan costs for minimum funding. The present value of the cumulative
accrued benefits of a Non-Key Employee shall be determined under either:
19.3.1.3 the method, if any, that uniformly applies for
accrual purposes under all plans maintained by affiliated
companies, within the meaning of Code Sections 414(b), (c), (m)
or (o); or
81
19.3.1.4 if there is no such method, as if such benefit
accrued not more rapidly than the lowest accrual rate permitted
under the fractional accrual rate of Section 411(b)(1)(C) of the
Code.
19.3.2 Each plan maintained by the Employer required to be
included in an Aggregation Group shall be treated as a Top-Heavy Plan if
the Aggregation Group is a Top-Heavy Group. If the Aggregation Group is
not a Top-Heavy Group no plan in such group shall be a Top-Heavy Plan.
19.3.2.1 The term "Aggregation Group" means --
19.3.2.1.1 Each Plan of the Employer in which a Key
Employee is a Participant, and
19.3.2.1.2 Each other plan of the Employer which
enables any plan described in Subparagraph 19.3.2.1.1 to
meet the requirements of Code Sections 401(a)(4) or 410.
Also, any plan not required to be included in an Aggregation
Group under the preceding rules may be treated as being part of such
group if the group would continue to meet the requirements of Code
Sections 401(a)(4) and 410 with the plan being taken into account.
19.3.2.2 The term "Top-Heavy Group" means any Aggregation
Group if the sum (as of the Determination Date) of --
19.3.2.2.1 The present value of the cumulative
accrued benefits for Key Employees under all defined
benefit plans included in the group, and
19.3.2.2.2 The aggregate of the account balances of
Key Employees under all defined contribution plans
included in the group exceeds sixty percent (60%) of a
similar sum determined for all Employees.
19.3.2.3 For purposes of determining --
19.3.2.3.1 The present value of the cumulative
accrued benefit of any Employee, or
19.3.2.3.2 The amount of the account balance of any
Employee,
such present value or amount shall be increased by the aggregate
distributions made with respect to the Employee under the plan during
the five (5) year period ending on the Determination Date. The preceding
rule shall also apply to distributions under a terminated plan which, if
it had not been terminated, would have been required to be included in
an Aggregation Group. Also, any rollover
82
contribution or similar transfer initiated by the Employee and made
after December 31, 1983 to a plan shall not be taken into account with
respect to the transferee plan for purposes of determining whether such
plan is a Top-Heavy Plan (or whether any Aggregation Group which
includes such plan is a Top-Heavy Group).
19.3.3 If any individual is a Non-Key Employee with respect to
any plan for any Plan Year, but the individual was a Key Employee with
respect to the plan for any prior Plan Year, any accrued benefit for the
individual (and the account balance of the individual) shall not be
taken into account for purposes of this Section 19.3.
19.3.4 If any individual has not performed any services for the
Employer at any time during the five (5) year period ending on the
Determination Date, any accrued benefit for such individual (and the
account balance of the individual) shall not be taken into account for
purposes of this Section 19.3.
19.4 MINIMUM CONTRIBUTIONS. For each Plan Year in which the Plan is
Top-Heavy, the minimum contributions for that year shall be determined in
accordance with the rules of this Section 19.4.
19.4.1 Except as provided below, the minimum contribution
(excluding amounts deferred under a cash or deferred arrangement under
Section 401(k) of the Code and any Profit Sharing Contributions taken
into account under Section 401(k)(3) or 401(m)(3) of the Code) for each
Non-Key Employee who has not separated from service as of the last day
of the Plan Year shall be not less than three percent (3%) of his
Compensation, regardless of whether the Non-Key Employee has less than
1,000 Hours of Service during such Plan Year or elected to make Pre-Tax
Contributions to the Plan for such year.
19.4.2 This determination shall be made by dividing the
contributions for each Key Employee by so much of his total compensation
for the year as does not exceed one hundred and fifty thousand dollars
($150,000), as adjusted in accordance with Code Section 401(a)(17).
19.4.3 The requirements of this Section 19.4 must be satisfied
without taking into account contributions under chapter 2 or 21 of the
Code, title II of the Social Security Act, or any other Federal or State
law.
19.4.4 In the event a Participant is covered by both a defined
contribution and a defined benefit plan maintained by the Employer, both
of which are determined to be Top Heavy Plans, the defined benefit
minimum, offset by the benefits provided under the defined contribution
plan, shall be provided under the defined benefit plan.
19.4.5 In no instance may the Plan take into account an
Employee's compensation in excess of the first two hundred thousand
dollars ($200,000) (or
83
such greater amount as may be permitted pursuant to Section 401(a)(17)
of the Code). For purposes of this Section 19.4, an Employee's
Compensation shall be as defined in Section 2.8 for purposes of Article
14.
19.5 MAXIMUM ANNUAL ADDITION.
19.5.1 Except as set forth below, in the case of any Top-Heavy
Plan the rules of Code Section 415(e)(2)(B) and (3)(B) shall be applied
by substituting "1.0" for "1.25."
19.5.2 The rule set forth in Subsection 19.5.1 above shall not
apply if the requirements of both Paragraphs 19.5.2.1 and 19.5.2.2,
below, are satisfied.
19.5.2.1 The requirements of this Paragraph 19.5.2.1 are
satisfied if the rules of Subsection 19.5.1 above would be
satisfied after substituting "four percent (4%)" for "three
percent (3%)" where it appears therein with respect to
participants covered only under a defined contribution plan.
19.5.2.2 The requirements of this Paragraph 19.5.2.2 are
satisfied if the Plan would not be a Top-Heavy Plan if "ninety
percent (90%)" were substituted for "sixty percent (60%)" each
place it appears in Section 19.3.1.
19.5.3 The rules of Subsection 19.5.1 shall not apply with
respect to any Employee as long as there are no --
19.5.3.1 Profit Sharing Contributions, forfeitures, or
voluntary nondeductible contributions allocated to the Employee
under a defined contribution plan maintained by the Employer, or
19.5.3.2 Accruals by the Employee under a defined benefit
plan maintained by the Employer.
19.6 VESTING RULES. In the event that the Plan is determined to be
Top-Heavy in accordance with the rules of this Article 19, then the vesting
schedule of the Plan shall be changed to that set forth below (unless the Plan's
vesting schedule provides for vesting at a rate at least as rapid as that set
forth below):
Years of Service Vested Interest
---------------- ---------------
2 20%
3 40%
4 60%
5 80%
6 or more 100%
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If the Plan ceases to be a Top-Heavy Plan for any Plan Year, the
election in Section 8.3 shall apply.
19.7 NON-ELIGIBLE EMPLOYEES. The rules of this Article 19 shall not
apply to any Employee included in a unit of employees covered by an agreement
which the Secretary of Labor finds to be a collective bargaining agreement
between employee representatives and one or more employers if there is evidence
that retirement benefits were the subject of good faith bargaining between such
employee representatives and the employer or employers.
85
IN WITNESS WHEREOF, in order to record the adoption of this amendment
and restatement of the Plan, WESTERN DIGITAL CORPORATION has caused this
instrument to be executed by its duly authorized officer this day of , 2001.
WESTERN DIGITAL CORPORATION
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
86
WESTERN DIGITAL CORPORATION
SAVINGS AND PROFIT SHARING PLAN
EXHIBIT A
Summary of Service and Compensation Rules
For Adopting Employer and Acquired Companies
PARTICIPATING EMPLOYERS:
Adaptive Data Systems, Inc.
With respect to employees of Adaptive Data Systems, Inc.:
(a) Hours of Service for calculating Years of Eligibility Service
include all hours of employment with Adaptive Data Systems, Inc. even if
such hours precede August 20, 1986.
(b) Hours of Service for calculating Years of Vesting Service
include all hours of employment with Adaptive Data Systems, Inc. even if
such hours precede August 20, 1986.
(c) Each Eligible Employee of Adaptive Data Systems, Inc. will
become a Participant on the later of the date he is hired at Adaptive
Data Systems, Inc. or August 20, 1986.
(d) Each employee of Adaptive Data Systems, Inc. who becomes a
Participant on August 20, 1986 will first be eligible to make Pretax
Deferrals on the later of:
(i) the first day of the month that coincides with or
immediately follows the date he completes one Year of Eligibility
Service; or
(ii) August 20, 1986.
(e) Compensation will be limited to Compensation paid to an
individual while he is a Participant.
Faraday Electronics, Inc.
With respect to employees of Faraday Electronics, Inc.:
(a) Hours of Service for calculating Years of Eligibility Service
include all hours of employment with Faraday Electronics, Inc. even if
such hours precede July 1, 1987.
(b) Hours of Service for calculating Years of Vesting Service
include all hours of employment with Faraday Electronics, Inc. even if
such hours precede July 1, 1987.
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(c) Each Eligible Employee of Faraday Electronics, Inc. will
become a Participant on the later of the date he is hired at Faraday
Electronics, Inc. or July 1, 1987.
(d) Each employee of Faraday Electronics, Inc. who becomes a
Participant on July 1, 1987 will first be eligible to make Pretax
Deferrals on the later of:
(i) the first day of the month that coincides with or
immediately follows the date he completes one Year of Eligibility
Service; or
(ii) July 1, 1987.
(e) Compensation will be limited to Compensation paid to an
individual while he is a Participant.
Paradise Systems, Inc.
With respect to employees of Paradise Systems, Inc.:
(a) Hours of Service for calculating Years of Eligibility Service
include all hours of employment with Paradise Systems, Inc. even if such
hours precede December 1, 1986.
(b) Hours of Service for calculating Years of Vesting Service
include all hours of employment with Paradise Systems, Inc. even if such
hours precede December 1, 1986.
(c) Each Eligible Employee of Paradise Systems, Inc. will become
a Participant on the later of the date he is hired at Paradise Systems,
Inc. or December 1, 1986.
(d) Each employee of Paradise Systems, Inc. who becomes a
Participant on December 1, 1986 will first be eligible to make Pretax
Deferrals on the later of:
(i) the first day of the month that coincides with or
immediately follows the date he completes one Year of Eligibility
Service; or
(ii) December 1, 1986.
(e) Compensation will be limited to Compensation paid to an
individual while he is a Participant.
Verticom, Inc.
With respect to employees of Verticom, Inc.:
(a) Hours of Service for calculating Years of Eligibility Service
and months of employment include all hours of employment with Verticom,
Inc. even if such hours precede September 1, 1988.
2
(b) Hours of Service for calculating Years of Vesting Service
include all hours of employment with Verticom, Inc. even if such hours
precede September 1, 1988.
(c) Each Eligible Employee of Verticom, Inc., will become a
Participant on the later of the date he is hired at Verticom, Inc. or
September 1, 1988.
(d) Each employee of Verticom, Inc. who becomes a Participant on
September 1, 1988 will first be eligible to make Pretax Deferrals on the
later of:
(i) the date he meets the requirements of Section 2.01(c)
of the Predecessor Plan; or
(ii) September 1, 1988.
(e) Notwithstanding (c) above, an Eligible Employee who was a
participant in the salary deferral plan sponsored by Verticom, Inc. on
August 31, 1988 and who was making salary deferrals under the terms of
such plan on August 31, 1988 will be eligible to make Pretax Deferrals
under this Plan pursuant to Section 3.01 of the Predecessor Plan,
effective September 1, 1988. Such Eligible Employee shall also be
entitled to Employer Matching Contributions as provided in Section 4.03
of the Predecessor Plan.
If such an Eligible Employee suspends Pretax Deferrals under this
Plan before the date he is eligible to make Pretax Deferrals pursuant to
(d) above, he may not resume Pretax Deferrals until the date he meets
the requirements of (d).
(f) Compensation will be limited to Compensation paid to an
individual while he is a Participant.
ACQUIRED COMPANIES:
Atasi
With respect to employees who were employees of Atasi on May 26, 1988
and who became employees of an Employer on May 27, 1988:
(a) Hours of Service for calculating Years of Eligibility Service
and months of employment include all hours of employment with Atasi even
if such hours were completed before May 27, 1988.
(b) Hours of Service for calculating Years of Vesting Service
include all hours of employment with Atasi even if such hours precede
May 27, 1988.
(c) Each such employee will become a Participant on May 27, 1988.
(d) Each such employee will first be eligible to make Pretax
Deferrals on the later of:
(i) the date he meets the requirements of Section 2.01(c)
of the Predecessor Plan; or
3
(ii) May 27, 1988.
(e) Compensation will be limited to Compensation paid to an
individual while he is a Participant.
Tandon Corporation
With respect to employees who were employees of Tandon Corporation on
February 29, 1988 and who became employed by Western Digital Media division and
Western Digital Drive Engineering division on March 1, 1988:
(a) Hours of Service for calculating Years of Eligibility Service
and months of employment include all hours of employment with Tandon
Corporation even if such hours were completed before March 1, 1988.
(b) Hours of Service for calculating Years of Vesting Service
include all hours of employment with Tandon Corporation even if such
hours precede March 1, 1988.
(c) Each such employee will become a Participant on the later of
the date he is hired at Tandon Corporation or March 1, 1988.
(d) Each such employee will first be eligible to make Pretax
Deferrals on the later of:
(i) the date he meets the requirements of Section 2.01(c)
of the Predecessor Plan; or
(ii) March 1, 1988.
(e) Compensation will be limited to Compensation paid to an
individual while he is a Participant.
ViaNetix, Inc.
With respect to employees who were employed with ViaNetix, Inc.:
(a) Hours of Service for calculating Years of Eligibility Service
include all hours of employment with ViaNetix, Inc. even if such hours
were completed before December 9, 1986.
(b) Hours of Service for calculating Years of Vesting Service
include all hours of employment with ViaNetix, Inc. even if such hours
precede December 9, 1986.
(c) Each such employee will become a Participant on December 9,
1986.
(d) Each such employee will first be eligible to make Pretax
Deferrals on the later of:
(i) the first day of the month that coincides with or
immediately follows the date he completes one Year of Eligibility
Service; or
4
(ii) December 9, 1986.
(e) Compensation will be limited to Compensation paid to an
individual while he is a Participant.
5
WESTERN DIGITAL CORPORATION
SAVINGS AND PROFIT SHARING PLAN
EXHIBIT B
Summary of Vesting and Distribution Rules
For Sale of Assets or Sale of Subsidiary
Sale of Assets to Standard Microsystems Corporation
With respect to Participants who become employees of Standard
Microsystems Corporation by reason of the sale of all or substantially all of
Western Digital Corporation assets used in the portion of the Western Digital
Corporation business relating to local area network products, effective on or
about October 1, 1991 (the "Closing Date"), and who continue employment with
Standard Microsystems Corporation after the Closing Date:
(a) Each such Participant shall have a one hundred percent (100%)
Vested Interest in his Accounts as of the Closing Date; and
(b) Each such Participant shall be treated for purposes of the
distribution provisions of the Plan as if he incurred a Severance as of
the Closing Date; provided, however, distribution of such a
Participant's Accounts shall not be earlier than December 31, 1991.
1