1
Exhibit 10.22
HANOVER DIRECT
SAVINGS AND RETIREMENT PLAN
AMENDED AND RESTATED
AS OF JANUARY 1, 1989
2
HANOVER DIRECT SAVINGS AND RETIREMENT PLAN
AMENDED AND RESTATED
AS OF JANUARY 1, 1989
WHEREAS, The Horn & Hardart Company, a predecessor employer to Hanover
Direct, Inc. (hereinafter sometimes referred to as the "Company"), has
previously adopted the Horn & Hardart Company Savings Plan (hereinafter
referred to as the "Plan"), effective as of April 1, 1983, which is to continue
to be funded through the medium of a Trust Fund; and
WHEREAS, the Company desires to rename and amend and restate the Plan
in order to comply with the Tax Reform Act of 1986, the Omnibus Reconciliation
Acts of 1986 and 1987, the Revenue Act of 1987, the Technical and Miscellaneous
Revenue Act of 1988 and the Omnibus Reconciliation Act of 1989;
NOW, THEREFORE, the Company hereby renames, amends and restates the
Plan, effective January 1, 1989, unless otherwise indicated, with such Plan to
be known as the Hanover Direct Savings and Retirement Plan as follows:
3
TABLE OF CONTENTS
ARTICLE PAGE
- ------- ----
I DEFINITIONS 1
II PARTICIPATION AND ENTRY DATE 17
III CONTRIBUTIONS 19
IV ADMINISTRATION OF FUNDS 39
V RETIREMENT BENEFITS 46
VI DEATH BENEFITS 49
VII VESTING AND SEPARATION FROM SERVICE 52
VIII WITHDRAWALS AND LOANS 55
IX ADMINISTRATION 60
X AMENDMENT, TERMINATION AND MERGERS 64
XI MISCELLANEOUS PROVISIONS 69
XII TOP-HEAVY PROVISIONS 73
4
ARTICLE I
DEFINITIONS
1.01 "Account" shall mean with respect to a Participant all of the various
accounts maintained to define such Participant's proportionate interest in the
Trust Fund as follows:
(a) A "Salary Deferral Contribution Account" shall be maintained
for each Participant which includes the Salary Deferral Contributions made on
behalf of the Participant, and the appreciation or depreciation of the
investments allocated to that Account and the income earned on such
investments.
(b) An "After-Tax Contribution Account" shall be maintained for
each Participant which includes the Participant's After-Tax Contributions, and
the appreciation or depreciation of the investments allocated to that Account
and the income earned on such investments.
(c) A "Matching Employer Contribution Account" shall be maintained
for each Participant which reflects the Matching Employer Contributions
allocated to the Participant and the appreciation or depreciation of the
investments allocated to that Account and the income earned on such
investments.
(d) A "Discretionary Employer Contribution Account" shall be
maintained for each Participant which reflects the Discretionary Employer
Contributions allocated to the Participant and the appreciation or depreciation
of the investments allocated to that Account and the income earned on such
investments.
(e) A "Rollover Contribution Account" shall be maintained for each
Participant which reflects any rollover contribution made in accordance with
Section 3.12 and the
1
5
appreciation or depreciation of the investments allocated to that Account and
the income earned on such investments.
1.02 "Affiliated Organization" shall mean (i) any corporation on or after
the date it becomes a member of a controlled group of corporations which
includes the Company, as determined under the provisions of Section 414(b) of
the Code, (ii) any trade or business, whether or not incorporated, on or after
it comes under common control with the Company, as determined under Section
414(c) of the Code, (iii) any organization which is an affiliated service
organization within the meaning of Section 414(m) of the Code, and (iv) any
other entity required to be aggregated pursuant to regulations under Section
414(o) of the Code.
1.03 "Age" or "age" shall mean the chronological age attained by the
Participant at his most recent birthday or as of such other date of reference
as set forth in this Plan.
1.04 "Board of Directors" shall mean the board of directors of the
Company.
1.05 "Break-in-Service" shall mean a Plan Year during which an Employee
has not completed more than five hundred (500) Hours of Service.
1.06 "Code" means the Internal Revenue Code of 1986 as the same presently
exists, and as it may hereafter be amended or clarified by regulations,
rulings, notices or other publications of the Internal Revenue Service having
legal effect.
2
6
1.07 "Compensation" shall mean, for any applicable period, the W-2
earnings of a Participant including bonuses, overtime, commissions and any
Salary Deferral Contribution made on behalf of the Participant under this Plan,
and any contributions made by salary reduction to a plan established in
accordance with Section 125 or 129 of the Code. Compensation shall exclude
premiums paid to a life insurance plan of the Company for additional coverage
above $50,000, the value of Company car or commutation allowances,
reimbursements for expenses and any other fringe benefits. For any Plan Year
commencing after December 31, 1988, Compensation shall not exceed $200,000, or
such other maximum amount as set forth under Section 401(a)(17) of the Code,
adjusted at the same time and in the same manner as under Section 415(d) of the
Code, except that the dollar increase in effect on January 1 of any calendar
year is effective for Plan Years beginning in such calendar year and the first
adjustment to the $200,000 limitation is effected on January 1, 1990. If
Compensation is determined over a Plan Year that contains fewer than 12
calendar months, the annual compensation limit is an amount equal to the annual
compensation limit for the calendar year in which the compensation period
begins multiplied by the ratio obtained by dividing the number of full months
in the period by 12.
In addition to other applicable limitations set forth in the Plan,
and notwithstanding any other provision of the Plan to the contrary, for Plan
Years beginning on or after January 1, 1994, the annual Compensation of each
Employee taken into account under the Plan shall not exceed the OBRA '93 annual
Compensation limit. The OBRA '93 annual Compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding
12 months, over which compensation is determined (determination period)
beginning in such calendar year. If a determination period
3
7
consists of fewer than 12 months, the OBRA '93 annual compensation limit will
be multiplied by a fraction, the numerator of which is the number of months in
the determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference
in this Plan to the limitation under section 401(a)(17) of the Code shall mean
the OBRA '93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current Plan
Year, the Compensation for that prior determination period is subject to the
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the first
day of the first Plan Year beginning on or after January 1, 1994, the OBRA '93
annual compensation limit is $150,000.
In determining the Compensation of a Participant for purposes of this
limitation, the rules of Section 414(q)(6) of the Code shall apply, except in
applying such rules, the term "family" shall include only the spouse of the
Participant and any lineal descendants of the Participant who have not attained
age 19 before the close of the Plan Year.
1.08 "Contribution" shall mean any or all of the various types of
contributions made under the Plan by Participants or the Employer, as described
below:
(a) "Salary Deferral Contribution" shall mean that portion of the
Contribution made to the Plan on behalf of a Participant by his Employer
through a salary reduction agreement, as described under Section 3.01.
4
8
(b) "After-Tax Contribution" shall mean that portion of a
Participant's Contribution to the Plan which he elects to make independent of a
salary reduction agreement, as described under Section 3.02.
(c) "Matching Employer Contribution" shall mean a Contribution
made by an Employer as described under Section 3.04, based on a Participant's
Salary Deferral Contribution (including any Salary Deferral Contributions
recharacterized as After-Tax Contributions pursuant to Section 3.06).
(d) "Discretionary Employer Contribution" shall mean a
Contribution made by an Employer which is unrelated to any Participant
Contributions, as described under Section 3.05.
(e) "Qualified Non-elective Contribution" shall mean a
Contribution made by an Employer (other than those listed above) in order that
the Plan will satisfy the requirements of Section 3.06 for a Plan Year. The
allocation may be made to all Active Participants who are not Highly-Paid
Employees or, with respect to satisfaction of the ADP test, only to those
Active Participants who have made Salary Deferral Contributions for a Plan Year
and who are not Highly-Paid Employees. Such Contributions shall be treated as
Salary Deferral Contributions for all purposes under the Plan.
1.09 "Contribution Percentage" shall mean the percentage determined by
dividing (i) the sum of the Salary Deferral Contribution, After-Tax
Contribution, Matching Employer Contribution and any Qualified Non-elective
Contribution used to satisfy the non-discrimination requirements of Section
3.06 or any combination of such Contributions, whichever is applicable, made by
or on behalf of a Participant for the applicable period by (ii) his
compensation as
5
9
defined under Code Section 414(s). 'ADP' shall sometimes be used herein to
refer to the average Contribution Percentage with respect to Salary Deferral
Contributions or amounts treated as Salary Deferral Contributions. 'ACP' shall
sometimes be used herein to refer to the average Contribution Percentage with
respect to Matching Employer Contributions and After-Tax Contributions, if
applicable.
1.10 "Date of Employment" shall mean the first date on which an Employee
is credited with an Hour of Service for the Employer.
1.11 "Disability" shall mean a physical or mental condition of such
severity and probable prolonged duration as to cause the Participant to be
unable to continue his duties as an Employee. The existence of any Disability
shall be determined by a physician chosen by the Plan Administrator, based on
medical evidence of a physical or mental impairment that can be expected to
last more than 12 months or result in death, or on other uniform and
non-discriminatory criteria as established by the Plan Administrator.
Notwithstanding the foregoing, eligibility for Social Security Disability
benefits or for long term disability benefits under an insured plan sponsored
by the Employer shall be deemed conclusive proof of disability.
1.12 "Effective Date" of this Plan shall mean April 1, 1983. The
effective date of this amended and restated Plan is January 1, 1989.
6
10
1.13 "Eligible Employee" shall mean an Employee who has completed one (1)
Year of Service and attained age twenty-one (21). Notwithstanding the
foregoing, the term "Eligible Employee" shall not include any person whose
terms and conditions of employment are determined by collective bargaining with
a third party and with respect to whom inclusion in this Plan has not been
provided for in the collective bargaining agreement setting forth those terms
and conditions of employment, nor shall the term "Eligible Employee" include
any independent contractor or a leased employee.
1.14 "Employee" shall mean any employee of the Employer or an Affiliated
Organization, including a leased employee as defined under Section 414(n) of
the Code.
The term "leased employee" means any person (other than an employee
of the recipient organization) who pursuant to an agreement between the
recipient organization and any other person ("leasing organization") has
performed services for the recipient organization (including related persons
determined in accordance with Section 414(n)(6) of the Code) on a substantially
full-time basis for at least one (1) year, and such services are of a type
historically performed by employees in the business field of the recipient
organization. Contributions or benefits provided a leased employee by the
leasing organization which are attributable to services performed for the
recipient employer shall be treated as provided by the recipient employer.
A leased employee shall not be considered an employee of the
recipient organization if: (i) such employee is covered by a money purchase
pension plan providing immediate participation, full and immediate vesting and
a nonintegrated employer contribution rate of at least ten (10%) percent of
compensation (as defined in Section 415(c)(3) of the Code, but
7
11
including amounts contributed by the employer pursuant to a salary reduction
agreement which are excludable from the employee's gross income under Section
125, Section 402(a)(8), Section 401(h) or Section 403(b) of the Code). Also,
the leased employees must not constitute more than twenty percent (20%) of the
recipient organization's non-highly compensated workforce.
1.15 "Employer" shall mean Hanover Direct, Inc. (hereinafter sometimes
referred to as the "Company"), its predecessor, The Horn & Hardart Company, and
the Company's subsidiaries and affiliates and any successor entities thereto
which adopt this Plan. Such adopting Employers shall be set forth in Appendix
A attached at the end of this document.
1.16 "Entry Date" shall mean every January 1st, April 1st, July 1st and
October 1st during which the Plan remains in effect.
1.17 "ERISA" means the Employee Retirement Income Security Act of 1974
(P.L. 93-406), including all amendments thereto.
1.18 "Fund" or "Trust Fund" shall mean all of the assets of the Plan held
by the Trustees (or any nominees thereof) at any time under the Trust
Agreement.
1.19 "Highly-Paid Employee" shall mean any Employee who during the current
or preceding Plan Year (`determination year' and `look back year',
respectively):
8
12
(a) was at any time a 5% owner of the Employer or an Affiliated
Organization; or
(b) received compensation for such Plan Year in excess of $75,000
or such higher amount as provided under Section 414(q) of the Code, as adjusted
at the same time and in the same manner as under Section 415(d) of the Code; or
(c) received compensation for such Plan Year in excess of $50,000
or such higher amount as provided under Section 414(q) of the Code, as adjusted
at the same time and in the same manner as under Section 415(d) of the Code,
provided such compensation exceeded that of 80% of all Employees for the
applicable Plan Year; or
(d) was at any time an officer of the Employer or an Affiliated
Organization, and received compensation for such Plan Year in excess of
$45,000, as adjusted at the same time and in the same manner as under Section
415(d) of the Code (or, if higher, 50% of the amount in effect under Section
415(b)(1)(A) of the Code for such Plan Year).
For each Plan Year for which a determination in accordance with the
above paragraph is being made, any individual not described in sub-paragraph
(b), (c) or (d) for the preceding Plan Year (without regard to this paragraph)
shall not be treated as described in sub-paragraph (b), (c) or (d) for the
current Plan Year unless such individual is among the one-hundred (100) highest
paid Employees for the current Plan Year.
In no event shall the number of officers taken into account under
sub-paragraph (d) exceed the lesser of (i) fifty (50), and (ii) the greater of
(A) three or (B) 10% of the total Employees. Furthermore, if no officer of the
Employer or an Affiliated Organization is
9
13
described in sub-paragraph (d) for a Plan Year, then the highest paid officer
shall be treated as described in sub-paragraph (d) for such Plan Year.
The term "Highly-Paid Employee" shall include any highly paid former
employee who separated from service (or was deemed to have separated) prior to
the determination year, performs no service for the Employer during the
determination year, and was a Highly-Paid Employee for either the separation
year or any determination year ending on or after the Employee's 55th birthday.
If an Employee is, during a determination year or look-back year, a
family member of either a five percent (5%) owner who is an active or former
Employee or a Highly-Paid Employee who is one of the ten (10) most highly
compensated Employees ranked on the basis of Compensation paid by the Employer
during such year, then the family member and the five percent (5%) owner or
top-ten Highly-Paid Employee shall be aggregated. In such case, the family
member and five percent (5%) owner or top-ten Highly-Paid Employee shall be
treated as a single Employee receiving compensation and plan contributions or
benefits equal to the sum of such compensation and contributions or benefits of
the family member and five percent owner or top-ten Highly-Paid Employee. For
purposes of this Section, family member includes the spouse, lineal ascendants
and descendants of the Employee or former Employee and the spouses of such
lineal ascendants and descendants.
The determination of who is a Highly-Paid Employee, including the
determinations of the number and identity of Employees in the top-paid group,
the top one hundred (100) Employees, the number of Employees treated as
officers and the compensation that is considered, will be made in accordance
with Section 414(q) of the Code. In determining the
10
14
identity of Highly-Paid Employees for a determination year, the Company may
make the calendar year election provided for in Answer 14(b) of Treasury Reg.
section 1.414(q)-IT.
1.20 "Hour of Service" shall mean the following:
(a) An Hour of Service is each hour for which an Employee is paid,
or entitled to payment, for the performance of duties for the Employer or an
Affiliated Organization during the Plan Year.
(b) An Hour of Service is each hour for which an Employee is paid,
or entitled to payment, (either directly or indirectly), by the Employer or an
Affiliated Organization on account of a period of time during which no duties
are performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), lay-off, jury duty, military duty or leave of absence.
Notwithstanding the preceding sentence:
(i) No more than 501 Hours of Service shall be credited under
this paragraph (b) to an Employee on account of any
single continuous period during which the Employee
performs no duties (whether or not such period occurs in
a single Plan Year) except as the following provisions
may result in a credit of more than 501 Hours of Service:
(1) If an Employee receives full pay during any
authorized leave of absence, and he returns to work
after such absence, he shall be credited with an
Hour of Service for each hour for which he was paid.
11
15
(2) If an Employee is on a paid sick leave, he shall
receive an Hour of Service for each hour that he
would have normally worked during such leave.
(3) If an Employee is absent in military service, and he
retained re-employment rights under the law, and he
completed requirements under the law as to
re-employment and was re-employed, he shall be
credited with an Hour of Service for each hour that
he would have normally worked had he not entered
military service solely for purposes of determining
his vested rights; and
(4) If an Employee transfers to an employment status
which is ineligible to participate in this Plan, he
will continue to be credited with Hours of Service
as described above, for purposes of determining his
vested rights. However, he will receive no Hours of
Service for purposes of determining his right to
receive a Contribution to his Account after the date
of his change in employment status.
( ii) An hour for which an Employee is directly or indirectly paid,
or entitled to payment, on account of a period during which no
duties are performed, is not required to be credited to the
Employee if such payment is made or due under a plan
maintained solely for the purpose of complying with applicable
workers compensation, unemployment compensation or disability
insurance laws; and
12
16
(iii) Hours of Service are not required to be credited for a payment
which solely reimburses an Employee for medical or medically
related expenses incurred by the Employee.
(c) An hour worked at overtime or premium pay will count as only
one Hour of Service under the Plan.
(d) An Hour of Service is each hour for which back pay,
irrespective of mitigation of damages, is either awarded to or agreed to by
the Employer. The same Hours of Service shall not be credited both under
Paragraph (a) or paragraph (b), as the case may be, and under this paragraph
(d). Crediting of Hours of Service for each pay awarded shall be subject to
the limitations set forth in paragraphs (a), (b) and (c).
(e) An Hour of Service shall also be credited for reasons other
than the performance of duties in accordance with Department of Labor
Regulations, Section 2530.200b-2(b). Further, the computation periods used for
purposes of crediting Hours of Service shall be in accordance with Department
of Labor Regulations, Section 2530.200b-2(c). If an Employer does not maintain
hourly records with respect to any Employee, such Employee shall be credited
with forty-five (45) Hours of Service for each week in which he is entitled to
be credited with an Hour of Service.
1.21 "Named Fiduciary" shall mean the Employer, the Trustees and the Plan
Administrator. Each named Fiduciary shall have only those particular powers,
duties, responsibilities and obligations as are specifically given him under
the Plan and/or the Trust Agreement.
13
17
1.22 "Normal Retirement Date" shall mean the date on which the Participant
has attained Age 65.
1.23 "Participant" shall mean any person who is eligible to receive
benefits under the Plan. The term "Participant" shall include an Active
Participant (each Eligible Employee who has satisfied the participation
requirements of Section 2.01 as of an applicable Entry Date or who has made a
Rollover Contribution), Terminated Vested Participants (former Employees who
are entitled at some future date to the distribution of benefits from this
Plan), and Inactive Participants (former Participants who are not Terminated
Vested Participants and who continue to be employed in a non-covered class by
an Employer or by an Affiliated Organization).
1.24 "Plan" shall mean the Hanover Direct Savings and Retirement Plan as
set forth herein, and as the same may from time to time hereafter be amended.
1.25 "Plan Administrator" or "Administrator" shall mean the Employer, or
the persons or committee named as such pursuant to the provisions of Article IX
hereof.
1.26 "Plan Year" shall mean a twelve (12) month period beginning on
January 1st and ending on each December 31st.
14
18
1.27 "Reduced Compensation" shall mean Compensation reduced by any Salary
Deferral Contributions made by the Participant and also reduced by any
contributions made by salary reduction to a plan established in accordance with
Sections 125 or 129 of the Code.
1.28 "Trust Agreement" shall mean the Hanover Direct Savings and
Retirement Trust Agreement as the same presently exists and as it may from time
to time hereafter be amended.
1.29 "Trustees" shall mean the party or parties so designated pursuant to
the Trust Agreement.
1.30 "Valuation Date" shall mean the last day of each quarter during the
Plan Year and any other date as of which the Plan Administrator elects to make
a valuation of Plan Accounts.
1.31 "Wage Base" shall mean the amount of compensation with respect to
which old age and survivors insurance benefits would be provided for a
Participant under the Social Security Act, as in effect for the calendar year
in which the Plan Year commences.
1.32 "Year of Service" shall mean a Plan Year in which an Employee has at
least one thousand (1,000) Hours of Service. In addition, solely for purposes
of determining whether an Employee is eligible to become a Participant after
his initial year of employment under Section 2.01, a Year of Service shall be
credited to an Employee who has at least one thousand (1,000)
15
19
Hours of Service during the initial twelve (12) month period commencing with
such Employee's Date of Employment.
All Years of Service shall be counted regardless of whether or not
such years are continuous, subject to Appendix A attached at the end of this
document.
16
20
ARTICLE II
PARTICIPATION AND ENTRY DATE
2.01 Initial Eligibility.
Each Eligible Employee who is a Participant immediately prior to the
effective date of this amended and restated Plan shall continue to participate
as of such effective date. Each other Employee shall be eligible to become a
Participant on the Entry Date coincident with or next following the date he
first becomes an Eligible Employee.
2.02 Plan Participation.
Each Employee who is eligible to participate in accordance with
Section 2.01 shall complete such forms and provide such data as are reasonably
required by the Plan Administrator as a precondition to Plan participation. In
order to receive a Salary Deferral Contribution, a Participant must enter into
a salary reduction agreement to be effective as of an Entry Date, electing to
reduce his salary by an amount equal to his Salary Deferral Contribution. A
Participant's Salary Deferral Contribution for any Plan Year shall not exceed
the lesser of (i) 10% of his Compensation for the Plan Year or portion of such
Plan Year during which he was an Active Participant, subject to the limitations
set forth in Article III, and (ii) $7,627, or such higher maximum contribution
for a taxable year as may be permitted under Section 402(g) of the Code. The
Plan Administrator shall determine the minimum and/or maximum permitted salary
reduction. Any maximum permitted salary reduction may apply to all
Participants or solely to those Participants who are Highly-Paid Employees.
Participants shall make separate
17
21
elections with respect to Salary Deferral and After-Tax Contributions, and the
election of either type of contribution shall not, in any way, be contingent
upon any other election made under the Plan. By becoming a Participant, an
Employee shall for all purposes be deemed conclusively to have assented to the
provisions of the Plan, the corresponding Trust Agreement and to all amendments
to such instruments.
2.03 Re-employment.
In the event an Employee terminates employment, and is reemployed, he
shall be eligible to be admitted or readmitted as an Active Participant on the
date of his reemployment or, if later, the Entry Date coincident with or next
following the date he becomes an Eligible Employee.
2.04 Change in Status.
In the event that a person who has been an Employee in an employment
status not eligible for participation in this Plan subsequently becomes
eligible by reason of a change in status, he shall be eligible to become a
Participant on the Entry Date coincident with or next following the date on
which he becomes an Eligible Employee.
18
22
ARTICLE III
CONTRIBUTIONS
3.01 Salary Deferral Contributions.
The Employer will make a Salary Deferral Contribution to the Plan for
each Active Participant who has entered into a salary reduction agreement, in
accordance with Section 2.02, as determined by such salary reduction agreement.
In addition, for any Plan Year, an Employer may elect to make a Qualified
Non-elective Contribution (including a qualified matching Contribution)
allocable only to those Participants who are not Highly-Paid Employees, in
order that the Plan will satisfy requirements of Section 3.06 for such Plan
Year. Any Contribution made in accordance with the preceding sentence shall be
allocated among applicable Participants in proportion to the ratios of each
such Participant's Compensation or, with respect to satisfaction of the ADP
test, only to those Participants who have made Salary Deferral Contributions
(under the same allocation procedure used for Matching Employer Contributions
or pro-rata). Matching Employer Contributions used to satisfy the test
described under Section 3.06 must comply with the Regulations under Code
Section 1.401(k)-1(b)(3).
"Excess Elective Deferrals" shall mean any Salary Deferral
Contributions which exceed the dollar limitation under Code Section 402(g).
Such Excess Elective Deferrals shall be treated as annual additions under the
Plan unless they are distributed in accordance with this Article.
A Participant may assign to this Plan any Excess Elective Deferrals
made during a taxable year of the Participant by providing fifteen (15) days
written notification to the
19
23
Administrator of the amount of the Excess Elective Deferrals to be assigned to
this Plan. Such notice shall be provided no later than the first March 1st
following the close of the individual's tax year. Excess Elective Deferrals
with respect to the combination of Excess Elective Deferrals and deferrals
under another plan of deferred compensation of an Employer or an Affiliated
Organization may automatically be returned to the Participant.
Notwithstanding any other provision of the Plan, Excess Elective
Deferrals, plus any income and minus any loss allocable thereto, shall be
distributed no later than April 15th to any Participant to whose Account Excess
Elective Deferrals were assigned for the preceding year and who claims Excess
Elective Deferrals for such taxable year.
Excess Elective Deferrals shall be adjusted for any income or loss.
The income or loss allocable to Excess Elective Deferrals is the income or loss
allocable to the Participant's Account for the taxable year multiplied by a
fraction, the numerator of which is such Participant's Excess Elective
Deferrals for the year and the denominator of which is the Participant's Salary
Deferral Contribution Account without regard to any income or loss occurring
during such taxable year.
3.02 After-Tax Contributions.
Participants may elect to make After-Tax Contributions to the Trust
for each Plan Year in amounts not less than one percent (1%) of Compensation,
nor more than ten percent (10%) of Compensation for such Plan Year.
20
24
3.03 Method of Contribution.
Salary Deferral and After-Tax Contributions may be made by periodic
payroll deductions or on such other basis as shall be determined from time to
time by the Plan Administrator. Nothing contained herein shall preclude the
Plan Administrator from not allowing Salary Deferral or After-Tax Contributions
to be made by any Participant in accordance with Section 3.06 or from limiting
the number of payroll periods in a Plan Year during which such Contributions
are permitted. A Participant may elect an increase or decrease in his Salary
Deferral Contribution or After-Tax Contributions, provided that written notice
of such change (including amendment of a salary reduction agreement, if
applicable) is submitted to the Plan Administrator at least fifteen (15) days
in advance of the effective date, which date shall be the first day of a
calendar quarter. A Participant may cease Contributions as of any payroll
period upon fifteen (15) days written notice in advance of the last day of such
payroll period.
No contributions may be made by or on behalf of any Participant
during any period that he is receiving long term disability benefits, worker's
compensation benefits or while the Participant is on a leave of absence for
which no Compensation is being paid from the Employer.
3.04 Matching Employer Contributions.
An Employer may elect, in its sole discretion, to make Matching
Employer Contributions for a Plan Year for each Active Participant on whose
behalf Salary Deferral Contributions have been made during the Plan Year.
21
25
For any Plan Year, the Matching Employer Contributions (including any
forfeitures reallocated in accordance with Section 3.07) shall be allocated to
the Accounts of such Active Participants for the Plan Year in the same
proportion as the amount of Salary Deferral Contributions (not in excess of six
percent (6.0%) of the Participant's Compensation) for each such Active
Participant for such Plan Year bears to the total Salary Deferral Contribution
(as so limited) for all such Active Participants for such Plan Year.
3.05 Discretionary Employer Contributions.
For any Plan Year, an Employer may elect, in its sole discretion, to
make an additional Discretionary Employer Contribution to the Plan. If a
Discretionary Employer Contribution is made, then it shall be allocated as of
the last day of the Plan Year to the Account of each Active Participant who (i)
retired at or after age 65, retired due to a Disability or died during such
Plan Year or (ii) (a) had at least 1,000 Hours of Service during such Plan Year
and (b) is actively employed as of the last day of such Plan Year, including
any such Participant who did not make Salary Deferral Contributions for such
Plan Year. An individual who is terminated prior to the last day of a Plan
Year, but who is receiving severance pay as of such date, shall not be deemed
to be actively employed as of the last day of a Plan Year.
The amount allocated to each such Participant shall be an amount
chosen by the Company to be allocated under (a) below. If any Discretionary
Employer Contribution remains, such amount shall be allocated in accordance
with (b) below.
(a) An amount shall be allocated equal to a percentage of each
such Participant's Compensation earned while a Participant for
such Plan Year, plus the same
22
26
percentage of the excess of (i) such Participant's
Compensation earned while a Participant for the Plan Year
above (ii) the Wage Base for such Plan Year. However, the
percentage of Compensation used for allocations above the Wage
Base shall not exceed 5.7% (or such other percentage which
equals the maximum percentage permitted under Code Section
401(1)).
(b) Any remaining Discretionary Employer Contribution shall be
allocated to each such Participant in proportion to the ratio
that each such Participant's Compensation earned while a
Participant bears to such eligible Compensation of all
eligible Participants for the Plan Year.
3.06 Non-Discrimination Test.
For any Plan Year, the average Contribution Percentage for
Highly-Paid Employees determined based on Salary Deferral Contributions (ADP)
and separately based on the sum of After-Tax Contributions and any Matching
Employer Contributions (ACP) shall not exceed the greater of:
(a) 1.25 multiplied by the average Contribution Percentage for all
Eligible Employees who are not Highly-Paid Employees; or
(b) the lesser of
( i) twice the average Contribution Percentage for all
Eligible Employees who are not Highly-Paid Employees; and
(ii) the average Contribution Percentage for all Eligible
Employees who are not Highly-Paid Employees, plus two percent
(2%).
23
27
If the limitation described under subsection (b) above is applied
with respect to Salary Deferral Contributions, it shall not be applied with
respect to the sum of After-Tax Contributions and Matching Employer
Contributions, and vice-versa, except as otherwise permitted under the
following Definitions and Special Rules Section describing the multiple use
test.
For purposes of this Section, an Excess Contribution shall mean the
excess of a Highly-Paid Employee's Salary Deferral Contribution (or amounts
treated as Salary Deferral Contributions) over the maximum amount of such
Contributions as provided under the above test.
For purposes of this Section, Excess Aggregate Contributions shall
mean the excess of the aggregate amount of After-Tax Contributions and Matching
Employer Contributions which were made on behalf of Highly-Paid Employees for
any Plan Year, over the maximum amount of such Contributions as provided under
the above test.
The Excess Contributions or Excess Aggregate Contributions, whichever
is applicable, shall be allocated by reducing the actual Contribution
Percentage of the Highly-Paid Employee with the highest actual Contribution
Percentage. Such Contribution Percentage shall be reduced until the
Highly-Paid Employee with the highest actual Contribution Percentage is equal
to that of the Highly-Paid Employee with the next highest actual Contribution
Percentage or until the above test is passed. This process shall be repeated
until the test is passed and such leveling method shall determine the amount of
Excess Contributions attributable to each Highly-Paid Employee. The Excess
Aggregate Contribution amount shall be determined after any Salary Deferral
Contributions are recharacterized as After-Tax Contributions.
24
28
DEFINITIONS AND SPECIAL RULES:
"Aggregate Limit" shall mean the sum of (i) 125 percent of the
greater of the ADP of the Non-Highly-Paid Employees for the Plan Year or the
ACP of Non-Highly-Paid Employees under the Plan subject to Code Section 401(m)
for the Plan Year beginning with or within the Plan Year of the cash or
deferred arrangement (`CODA') and (ii) the lesser of 200% or two plus the
lesser of such ADP or ACP. `Lesser' is substituted for `greater' in (i) above
and `greater' is substituted for `lesser' after `two plus the' in (ii) if it
would result in a larger Aggregate Limit.
A multiple use method may be used in order to satisfy the
non-discrimination test if one or more Highly-Paid Employees participate in
both a CODA and a plan maintained by the Employer subject to the ACP test. If
the sum of the ADP and ACP of those Highly-Paid Employees subject to either or
both tests exceeds the Aggregate Limit, then the ACP of those Highly-Paid
Employees who also participate in a CODA will be reduced (beginning with such
Highly-Paid Employee whose ACP is the highest) so that the limit is not
exceeded. The amount by which each Highly-Paid Employee's Contribution
Percentage amount is reduced shall be treated as an Excess Aggregate
Contribution. The ADP and ACP of the Highly-Paid Employees are determined
after any corrections required to meet the ADP and ACP tests. Multiple use
does not occur if both the ADP and ACP of the Highly-Paid Employees does not
exceed 1.25 multiplied by the ADP and ACP of the Non-Highly Paid Employees.
Effective prior to the first Plan Year beginning after December 31,
1991, the Plan Administrator shall also have discretionary authority to
restructure the Plan and satisfy the above test based on specific common
attributes among Employees.
25
29
For purposes of determining the Contribution Percentage test,
After-Tax Contributions are considered to have been made in the Plan Year in
which contributed to the trust. Salary Deferral Contributions, Matching
Employer Contributions and Qualified Non- elective Contributions will be
considered made for a Plan Year only if made no later than the end of the
twelve-month period beginning on the day after the close of the Plan Year.
The Employer shall maintain records sufficient to demonstrate
satisfaction of the above tests and the amount of Qualified Non-elective
Contributions, including qualified matching Contributions, if applicable, used
in the test.
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.
A Participant may treat his Excess Contributions under Section 3.01
as an amount distributed to the Participant and then contributed by such
Participant to the Plan. Such recharacterized amounts will remain
nonforfeitable and subject to the same distribution requirements as Salary
Deferral Contributions. Amounts may not be recharacterized by a Highly-Paid
Employee to the extent that such amount, in combination with other After-Tax
Contributions made by that Employee, would exceed any stated limit under the
Plan on After-Tax Contributions.
Recharacterization must occur no later than two and one-half months
after the last day of the Plan Year in which such Excess Contributions arose
and is deemed to occur no earlier than the date the last Highly-Paid Employee
is informed in writing of the amount recharacterized and the consequences
thereof. Recharacterized amounts will be taxable to the Participant for the
Participant's tax year in which the Participant would have received them in
cash.
26
30
If a Highly-Paid Employee is subject to the family aggregation rules
of the Code, the combined actual Contribution Percentage (based on Salary
Deferral Contributions and separately based on After-Tax Contributions and
Matching Employer Contributions) for the family group shall be treated as one
Highly-Paid Employee. The combined actual Contribution Percentage shall be
determined as the combined actual Contribution Percentage of all eligible
family members.
The Excess Contributions or Excess Aggregate Contributions for the
family members shall be allocated in proportion to the ratio of such
Contributions for each family member.
Any distribution or forfeiture of Excess Contributions or Excess
Aggregate Contributions for any Plan Year shall be made based on the respective
portions of such amounts attributable to each Highly-Paid Employee.
Excess Contributions or Excess Aggregate Contributions shall be
adjusted for any income or loss. The income or loss allocable to such
Contributions is the income or loss allocable to the Participant's Account for
the Plan Year multiplied by a fraction, the numerator of which is such
Participant's Excess Contributions or Excess Aggregate Contributions for the
year and the denominator is the Participant's Account attributable to
satisfaction of ADP and ACP test (as applicable) without regard to any income
or loss occurring during such Plan Year.
Notwithstanding the preceding paragraph, any other reasonable method
for computing the income allocable to Excess Contributions or Excess Aggregate
Contributions may be used, provided that the method is non-discriminatory, 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
to Participants' Accounts.
27
31
Excess Contributions and Excess Aggregate Contributions shall be
forfeited, or if not forfeitable, distributed from the Participant's various
Accounts in proportion to the ratio of such Participant's applicable Accounts.
Excess Contributions shall be distributed from the Participant's Qualified
Non-elective Contribution Account only to the extent that such Excess
Contributions exceed the balance in the Participant's Salary Deferral Account
and Matching Contribution Account.
Forfeitures of Excess Aggregate Contributions shall be applied to
reduce Employer Contributions in accordance with Section 3.07.
Excess Contributions or Excess Aggregate Contributions, plus any
income and minus any loss allocable thereto, shall be forfeited, or if not
forfeitable, distributed no later than the last day of each Plan Year to
Participants to whose Accounts such Contributions were allocated for the
preceding Plan Year. If such excess amounts are distributed more than 2 1/2
months after the last day of the Plan Year in which such excess amounts arose,
a ten percent (10%) excise tax will be imposed on the Employer maintaining the
Plan with respect to such amounts to the extent required by law.
In the event that this Plan satisfies the requirements of Sections
401(k), 401(m), 401(a)(4), or 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
such Sections of the Code only if aggregated with this Plan, then this Section
3.06 shall be applied by determining the Contribution Percentage of Employees
as if all such plans were a single plan. For Plan Years beginning after
December 31, 1989, plans may be aggregated in order to satisfy section 401(k)
or 401(m) of the Code only if they have the same Plan Year.
28
32
The ADP for any Participant who is a Highly-Paid Employee for the
Plan Year and who is eligible to have Salary Deferral Contributions (or amounts
treated as Salary Deferral Contributions for purposes of the ADP test)
allocated to his or her accounts under two or more arrangements described in
Section 401(k) of the Code that are maintained by the Employer, shall be
determined as if such Contributions were made under a single arrangement. If a
Highly-Paid Employee participates in two or more cash or deferred arrangements
that have different Plan Years, all cash or deferred arrangements ending with
or within the same calendar year shall be treated as a single arrangement.
In the event that any provisions of this Section 3.06 are no longer
required or applicable for qualification of the Plan under the Code, then any
applicable provisions of this Section 3.06 shall thereupon be void.
3.07 Forfeitures.
As of the end of each Plan Year, any forfeitures occurring during
such Plan Year resulting from an Employee's termination of employment and
election to receive a distribution prior to being one hundred percent (100%)
vested in accordance with Section 7.01 shall first be applied to restore the
previously forfeited accounts, if applicable, of former Terminated Vested
Participants who have been re-employed. If a Participant elects to defer his
distribution the resulting forfeiture (subject to Section 7.03) shall occur
after a one year Break-in-Service.
Any remaining portion of the total forfeiture not applied in
accordance with the preceding paragraph shall be used to reduce a Matching
Employer Contribution and shall be allocated to remaining Active Participants
in the same manner as provided under Section 3.04.
29
33
Should a Participant who is 0% vested in his Matching Employer
Contribution and Discretionary Employer Contribution Accounts under Section
7.01 terminate employment, he shall cease to be a Participant (unless
reemployed) and the resulting forfeiture of his Matching and Discretionary
Employer Contribution Accounts shall be deemed a full distribution of such
Accounts.
If a terminated Participant who was 0% vested in his Matching
Employer Contribution and Discretionary Employer Contribution Accounts and was
deemed to have received a distribution is subsequently reemployed by the
Employer prior to the occurrence of five consecutive one year Breaks-in-Service
after the date of his termination of employment, any amount forfeited shall be
reinstated to his Account.
3.08 Maximum Contributions.
Notwithstanding the above, the total amount of Salary Deferral
Contributions, Matching Employer Contributions and Discretionary Employer
Contributions for any Plan Year shall not exceed an amount equal to fifteen
percent (15%) of the total Reduced Compensation of all Participants for such
Plan Year. The excess, if any, of fifteen (15%) percent of the total
Compensation of all Participants earned in any year commencing before January
1, 1987 above the actual aggregate Employer Contributions for such years may be
added to the total contribution provided the Plan was then in effect.
30
34
3.09 Time of Payment.
Matching Employer Contributions and Discretionary Employer
Contributions may be made at any time on or before the date required for
deduction of such Contributions on the Employer's Federal income tax return.
3.10 Annual Additions Limitation.
Notwithstanding the above provisions of this Article, in no event
shall the annual additions to a Participant's Account exceed the maximum amount
permitted under Section 415 of the Code, and all provisions of such Section are
hereby incorporated in the Plan by reference. The term "limitation year", as
defined under the Code, shall mean the Plan Year.
The term Defined Contribution Fraction shall mean a fraction, the
numerator of which is the sum of the annual additions to the Participant's
Account under all the defined contribution plans (whether or not terminated)
maintained by the Employer for the current and all prior limitation years
(including the annual additions attributable to the Participant's nondeductible
employee contributions to all defined benefit plans maintained by the Employer,
whether or not terminated, and the annual additions attributable to all welfare
benefits funds, as defined in Section 419(e) of the Code, and individual
medical accounts, as defined in Section 415(1)(2) of the Code, maintained by
the Employer), and the denominator of which is the sum of the maximum aggregate
amounts for the current and all prior limitation years of service with the
Employer (regardless of whether a defined contribution plan was maintained by
the Employer). The maximum aggregate amount in any limitation year is the
lesser of 125 percent
31
35
of the dollar limitation determined under Sections 415(b) and (d) of the Code
in effect under Section 415(c)(1)(A) of the Code or 35 percent of the
Participant's compensation for such year.
If the Employee was a participant as of the end of the first day of
the first limitation year beginning after December 31, 1986, in one or more
defined contribution plans maintained by the Employer which were in existence
on May 5, 1986, the numerator of this fraction will be adjusted if the sum of
this fraction and the defined benefit fraction would otherwise exceed 1.0 under
the terms of this Plan. Under the adjustment, an amount equal to the product
of (1) the excess of the sum of the fractions over 1.0 times (2) the
denominator of this fraction, will be permanently subtracted from the numerator
of this fraction. The adjustment is calculated using the fractions as they
would be computed as of the end of the last limitation year beginning before
January 1, 1987, and disregarding any changes in the terms and conditions of
the plan made after May 5, 1986, but using the Code Section 415 limitation
applicable to the first limitation year beginning on or after January 1, 1987.
The annual addition for any limitation year beginning before January
1, 1987, shall not be recomputed to treat all employee contributions as annual
additions.
The term "Defined Benefit Fraction" shall mean a fraction, the
numerator of which is the sum of the Participant's projected annual benefits
under all the defined benefit plans (whether or not terminated) maintained by
the Employer, and the denominator of which is the lesser of 125 percent of the
dollar limitation determined for the limitation year under Sections 415(b) and
(d) of the Code or 140 percent of the highest average compensation, including
any adjustments under Section 415(b) of the Code.
32
36
Notwithstanding the above, if the Participant was a participant as of
the first day of the first limitation year beginning after December 31, 1986,
in one or more defined benefit plans maintained by the Employer which were in
existence on May 5, 1986, the denominator of this fraction will not be less
than 125 percent of the sum of the annual benefits under such plans which the
participant had accrued as of the close of the last limitation year beginning
before January 1, 1987, disregarding any changes in the terms and conditions of
the plan after May 5, 1986. The preceding sentence applies only if the defined
benefit plans individually and in the aggregate satisfied the requirements of
section 415 for all limitation years beginning before January 1, 1987.
As soon as administratively feasible after the end of the limitation
year, the maximum permissible amount for the limitation year will be determined
on the basis of the Participant's actual compensation for the limitation year.
If due to the maximum permitted above or as a result of the
allocation of forfeitures there is an excess amount, the excess will be
disposed of in the following order:
(1) Any After-Tax Contributions, to the extent they would reduce
the excess amount, will be returned to the Participant;
(2a) If an excess amount still exists, and the Participant is
covered by the Plan at the end of the limitation year, the excess amount in the
Participant's Account will be used to reduce Employer Contributions (including
any allocation of forfeitures) for such Participant in the next limitation
year, and each succeeding limitation year if necessary; or
(2b) If an excess amount still exists, and the Participant is not
covered by the Plan at the end of a limitation year, the excess amount will be
held unallocated in a suspense account.
33
37
The suspense account will be applied to reduce future Employer Contributions
for all remaining Participants in the next limitation year, and each succeeding
limitation year if necessary.
If a suspense account is in existence at any time during a limitation
year pursuant to this Section, such account will not receive an allocation of
the trust's investment gains and losses. If a suspense account is in existence
at any time during a particular limitation year, all amounts in the suspense
account must be allocated and reallocated to Participant's Accounts before any
Employer or any employee contributions may be made to the Plan for that
limitation year. Excess amounts may not be distributed to Participants or
former Participants, except as provided below.
Notwithstanding the method for disposing of excess amounts as
indicated above, in the case where a reasonable error is made so that the
limitations of Section 415 are violated, the Plan may distribute Salary
Deferral Contributions (within the meaning of Section 402(g)(3) of the Code) to
the extent that the distribution would reduce the excess amounts in the
Participant's Account. These amounts are disregarded for purposes of the ADP
and ACP tests.
3.11 Return of Contribution.
Except as provided in Section 3.10 and paragraphs (a), (b), (c), (d),
(e) and (f) of this Section, and notwithstanding any other provision of this
Plan or of the Trust Agreement, the Employer irrevocably divests itself of any
interest or reversion whatsoever in any sums contributed by it to the Trust
Fund, and it shall be impossible for any portion of the Trust Fund to be used
for, or diverted to, any purpose other than for the exclusive benefit of
Participants or their Beneficiaries.
34
38
(a) If a contribution by the Employer is conditioned upon initial
qualification of the Plan or any amendment thereto under Section 401 of the
Code, and the Plan or any amendment thereto under Section 401 of the Code, and
the Plan or amendment does not so qualify, the contribution shall be returned
to the Employer within one year of the date of denial of such qualification or
of the failure to qualify.
(b) If a contribution made by the Employer is based upon a good
faith mistake of fact, the contribution shall be returned to the Employer
within one year after the payment of the contribution.
(c) If a contribution which is intended to be deductible for
Federal income tax purposes is determined to not be deductible and part or all
of the deduction is disallowed, the contribution, to the extent disallowed,
shall be returned to the Employer within one year after the disallowance of the
deduction.
(d) Earnings attributable to any mistaken or non-deductible
contribution may not be returned to the Employer, but losses attributable
thereto must reduce the amount to be so returned.
(e) If the withdrawal of the amount attributable to the mistaken
or nondeductible contribution would cause the balance of the individual Account
of any Participant to be reduced to less than the balance which would have been
in the Account had the mistaken or nondeductible amount not been contributed,
then the amount to be returned to the Employer must be limited so as to avoid
such reduction. In the case of a reversion due to initial disqualification of
the Plan, the entire assets of the Plan attributable to Employer contributions
may be returned to the Employer.
35
39
(f) A contribution may be returned to the Employer or an Employee,
whichever is applicable, in order to satisfy the requirements of Section 3.06.
3.12 Rollover Contributions.
(a) Direct Inter-Plan Transfers. Any Employee (including
Employees who are not yet Eligible Employees) may, no less than 15 days
following written notification to the Plan Administrator of such action, direct
the appropriate funding agency of any qualified retirement plan of the
Employer, a former employer, or of an Individual Retirement Account (IRA) which
was established solely as a repository for a distribution from a qualified plan
of a former employer (provided the Employee certifies that he made no
contributions to such IRA) to distribute directly to the Trustee such
Participant's entire interest in the distributing plan or IRA, exclusive of any
after-tax contributions made by the Participant as an employee or participant
thereunder, provided that the transferor plan or IRA is not subject to the
requirements of Section 401(a)(11) of the Code. Any amount presented by a
Participant to the Trustees within sixty (60) days of the receipt shall be
treated, upon receipt by the Trustee, as having been received directly from the
appropriate officer or fiduciary of the distributing plan or IRA.
(b) Cash Transfers. Only cash may be transferred in accordance
with paragraph (a) of this Section. Property other than cash cannot be
transferred.
(c) Investment of Rollover Contribution Accounts. Rollover
Contribution Accounts shall be invested as provided under Section 4.01 of the
Plan.
(d) Direct Rollovers. This paragraph applies to distributions
made on or after January 1, 1993. Notwithstanding any provision of the Plan to
the contrary that would otherwise
36
40
limit a distributee's election under this paragraph, a distributee may elect,
at the time and in the manner prescribed by the Plan Administrator, to have any
portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover. Such
distribution may commence less than 30 days after the notice required under
section 1.411(a)-1(k) of the Income Tax Regulations is given, provided that (i)
the Plan Administrator clearly informs the Participant that the Participant has
a right to a period of at least 30 days after receiving the notice to consider
the decision of whether or not to elect a distribution (and, if applicable, a
particular distribution option), and (ii) the Participant, after receiving the
notice, affirmatively elects a distribution.
For purposes of this Section, the following definitions shall apply:
Eligible rollover distribution: An eligible rollover distribution is
any distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not include:
any distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life expectancies)
of the distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the Code; and the portion
of any distribution that is not includible in gross income (determined without
regard to the exclusion for net unrealized appreciation with respect to
employer securities).
Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in section 408(a) of the Code, an
individual retirement annuity described in section 408(b) of the code, an
annuity plan described in section 403(a) of the Code, or a
37
41
qualified trust described in section 401(a) of the Code, that accepts the
distributee's eligible rollover distribution. However, in the case of an
eligible rollover distribution to the surviving spouse, an eligible retirement
plan is an individual retirement account or individual retirement annuity.
Distributee: A distributee includes an employee or former employee.
In addition, the employee's or former employee's surviving spouse and the
employee's or former employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in section 414(p)
of the Code, are distributees with regard to the interest of the spouse or
former spouse.
Direct rollover: A direct rollover is a payment by the plan to the
eligible retirement plan specified by the distributee.
38
42
ARTICLE IV
ADMINISTRATION OF FUNDS
4.01 Investment of Funds.
Participant Accounts will be invested by the Plan Trustee, in
accordance with Participant directions as described below and in Section 4.02
and 4.03, in such investment funds as may be offered under the Plan from time
to time. The available investment alternatives may include any or all of the
alternatives described below:
(a) Common or capital stocks, bonds, convertible debentures or
preferred stocks, money market investments and other short
term corporate and government investments and fixed debt
obligations of corporations and of the Federal, state and
local government, or any pooled or mutual fund invested in
such instruments.
(b) One or more guaranteed interest funds which shall be invested
under a contract (or contracts) with a bank, or an insurance
company licensed in the state in which an office of the
Employer is domiciled and whereby terms of such contract
guarantee both the repayment of principal and the payment of
interest at a pre-determined minimum rate for a fixed period
of time. Any such contract is subject to approval of the Plan
Administrator and may be renewed or discontinued in its
discretion. Should such contract be discontinued and should
the Plan Administrator not enter into or instruct the Trustee
to enter into a successor contract providing similar
guarantees as to principal and
39
43
interest, then any Participant whose Account was invested
under the contract shall be given the opportunity to make a
new investment election.
(c) Any other managed fund which the Plan Administrator deems
appropriate for investment of plan assets.
(d) A fund invested in shares of common stock of the Company.
Any dividends received on such shares shall be reinvested
in this fund. Contributions designated for the fund, or
dividends paid on shares held in the fund, shall be temporarily
invested in a short-term investment fund while the Trustee
awaits the opportunity to purchase additional shares. The
shares of common stock of the Company from time to time
required to be acquired for the purposes of this Plan shall be
acquired by the Trustees by purchase in the open market at
prevailing prices, or, if directed by the Company, by
contribution in kind or by purchase privately from the Company
or any other person at a price per share equal to the closing
market price per share at which the shares of common stock of
the Company were sold on the last business day preceding the
day of the purchase; it being understood that shares purchased
from the Company may be either treasury shares or authorized
but unissued shares, if the Company shall make such shares
available for that purpose.
The Plan Administrator may, in its discretion, discontinue the use of
any investment alternatives maintained under the Plan, without obligation to
substitute new alternatives, provided that Participants with Accounts invested
in a discontinued investment alternative are given an
40
44
opportunity to make an election to transfer the affected portion of their
Accounts to another investment alternative permitted under the Plan.
4.02 Investment Elections.
Each Participant shall, by written instructions to the Plan
Administrator, designate in which investment alternative or combination of
alternatives his Contributions shall be invested; provided, however, that the
portion invested in any alternative which he elects shall be 5% or any multiple
thereof, or such other percentage as designated by the Plan Administrator,
subject to the maximum of 100%. Each Participant shall, upon request, be
furnished with written confirmation of such instructions.
4.03 Change of Elections.
Changes in investment elections shall (subject to Section 4.04) be
permitted effective as of the first day of any quarter in each calendar year or
such other period as specified by the Plan Administrator, in the manner
described below:
(a) Any Participant may, by written request filed with the Plan
Administrator by a specified number of days prior to the effective date of the
change, or under any other method as prescribed by the Plan Administrator,
alter his election with respect to the investment of his future contributions.
(b) Any Participant may, by written request filed with the Plan
Administrator by a specified number of days prior to the effective date of the
change, or under any other method as prescribed by the Plan Administrator,
alter his election with respect to the investment
41
45
alternatives in which his prior contributions have been invested and may direct
the Trustee to transfer all or any portion of the balance in his Account to any
investment alternative or combination of alternatives.
4.04 Restrictions on Changes.
The Plan Administrator may, in its sole discretion, establish
restrictions, limitations or prohibitions with respect to changes in investment
elections, or transfers, permitted under the Plan. Any such restrictions,
limitations or prohibitions which may apply to elections related to, or
transfers among, any or all investment funds maintained under the Plan, shall
be communicated in advance of their applicability to Plan Participants, and
shall apply in a non-discriminatory manner to all Participants in similar
circumstances.
4.05 Allocation of Contributions.
As of each Valuation Date, the Plan Administrator shall allocate the
Salary Deferral Contributions, Matching Employer Contributions, Discretionary
Employer Contributions and After-Tax Contributions to the Account of each
Participant.
4.06 Valuation of Assets.
As of each Valuation Date, the assets of the Trust shall be valued at
fair market value and any gains or losses shall be allocated to the same
investment alternatives in which they arose.
42
46
4.07 Voting of Shares.
Before each annual or special meeting of shareholders of the Company,
the Company shall cause the Trustee to send to each Participant whose Account
is invested in common stock of the Company, a copy of the proxy solicitation
material therefor, together with a form providing confidential instructions to
the Trustee on how to vote the shares of Company stock held within the
Participant's Account. Upon receipt of such instructions in conformance with
said proxy solicitation material, the Trustee shall vote the shares of Company
stock as instructed. Instructions received from individual Participants by the
Trustee shall be held in strictest confidence and shall not be divulged or
released to any person, including officers or Employees of an Employer. The
Trustees shall vote the shares of the Company stock for which no instructions
have been received in the same proportion as the shares for which instructions
have been received.
4.08 Tender Offer Procedure.
In the event an offer is received by the Trustee (including, but not
limited to, a tender offer or exchange offer) to purchase any shares of Company
stock held by the Trustee in the Trust, the Company shall cause the Trustee to
send to each Participant whose Account is invested in Company stock such
information as will be distributed to shareholders of the Company in connection
with such offer, and to notify each Participant in writing of the number of
shares of Company stock which are then credited to such Participant's Account.
The Trustee shall provide to each Participant a form requesting confidential
directions as to the manner in which the Trustee is to respond to the offer
with respect to shares of Company stock allocated
43
47
to such Participant's Account. Upon timely receipt of such directions, the
Trustee shall respond as directed with respect to the tender or exchange of
such shares. Instructions received from individual Participants by the Trustee
shall be held in the strictest confidence and shall not be divulged or released
to any person, including officers or Employees of an Employer. The Trustee
shall not tender or exchange shares of Company stock allocated to a
Participant's Account for which the Trustee has not received directions from
the Participant.
A Participant who has directed the Trustee to tender or exchange
shares of Company stock allocated to such Participant's Account may, at any
time prior to the offer withdrawal date, direct the Trustee to withdraw such
shares from the offer prior to the withdrawal deadline, in which case the
Trustee shall carry out such directive.
In the event that shares of Company stock held in a Participant's
Account are tendered or exchanged pursuant to this Section 4.08, the proceeds
received upon the acceptance of such tender or exchange shall be credited to
such Participant's Account, and shall be invested in the manner determined by
the Company or as otherwise provided in the Plan.
4.09 ERISA Section 404(c) Plan.
The Plan is intended to constitute a plan described in Section 404(c)
of ERISA and shall be administered in accordance with such intent. Beginning
with the Plan Year commencing January 1, 1994, the Plan shall be administered
in compliance with Department of Labor Regulations Section 2550.440c-1.
44
48
4.10 Confidentiality.
Information relating to the purchase, holding, and sale of Company
stock in a Participant's Account and the exercise of voting, tender, and
similar rights with respect to such stock by Participants and their
beneficiaries shall be maintained in accordance with such procedures as the
Administrator shall establish designed to safeguard the confidentiality of such
information, except to the extent necessary to comply with Federal laws or
state laws not preempted by ERISA.
4.11 Fiduciary Designation.
Effective for Plan Years commencing on or after January 1, 1994, the
Administrator is designated as the Plan fiduciary responsible for ensuring that
the procedures implemented pursuant to Section 4.10 are sufficient to safeguard
the confidentiality of information described in that Section, that such
procedures are being followed, and that an independent fiduciary is appointed
to carry out activities which the Administrator determines involve a potential
for undue influence by any Employer upon Participants and beneficiaries with
regard to the direct or indirect exercise of shareholder rights with respect to
Company stock.
45
49
ARTICLE V
RETIREMENT BENEFITS
5.01 Normal Retirement Benefit.
A Normal Retirement Benefit shall be payable with respect to any
Participant retiring at his Normal Retirement Date, and shall be equal to the
Participant's Account as of the Valuation Date coincident with or next
following the Participant's Normal Retirement Date. Payment shall commence no
later than sixty (60) days following the last day of the Plan Year in which the
Participant's Normal Retirement Date occurs.
5.02 Deferred Retirement Benefit.
A Deferred Retirement Benefit shall be payable with respect to any
Participant retiring after his Normal Retirement Date and shall be equal to the
Participant's Account as of the Valuation Date coincident with or immediately
following the Participant's actual retirement. Any Contribution to such
Participant's Account after he has attained age 70 1/2 shall be taken into
consideration in determining the minimum distribution requirements of Section
5.04.
5.03 Disability Retirement Benefit.
A Disability Retirement Benefit shall be payable with respect to any
Participant who has suffered a Disability and who retires from service of the
Employer by reason of such Disability, and shall be equal to the Participant's
Account as of the Valuation Date coincident
46
50
with or next following the date of the Participant's termination due to
Disability. Such a Participant may also elect to be paid in accordance with
the provisions of Section 7.02.
5.04 Payment of Benefits.
Any benefit under this Article shall be made in a lump sum payment no
later than sixty days following the close of the Plan Year in which the
Participant's retirement occurs.
If, after a Participant terminates employment, the total value of his
vested Account is less than $3,500, the Administrator may direct the Trustee to
cash-out the Participant's benefit in a single lump sum after any Valuation
Date coincident with or following the date of his or her termination of
employment, without any requirement for such Participant's consent.
For Active Participants, benefit payments as mandated by Code Section
401(a)(9) shall not commence later than the April 1st following the calendar
year in which the Participant attains age 70 1/2 or such later date as
permitted under the Code, unless the Participant was (i) over age 70 1/2 before
January 1, 1988 and was not a 5% owner of the Employer during the Plan Year
ending within the calendar year in which the Participant attained age 66 1/2,
or any subsequent year, or (ii) the Participant made a designation under
Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act of 1982, in
which event benefit payments may commence after the April 1st following the
calendar year in which the Participant reaches age 70 1/2, but as soon after
the Participant terminates employment as is practical.
All distributions required under this Section shall be determined and
made in accordance with the Proposed or, if applicable, Final Regulations under
Code Section 401(a)(9),
47
51
including the minimum distribution incidental benefit requirement of Section
1.401(a)(9)-2 of the Proposed or Final Regulations.
5.05 Additional Allocations on Retirement.
Any allocation for a Participant, made as of a Valuation Date
subsequent to the date of his retirement shall be paid to such Participant, or
his beneficiary, as soon after such Valuation Date as is practical.
5.06 Crediting of Investment Earnings.
Investment earnings shall be credited to a Participant's Account
through the Valuation Date coincident with or preceding the date that
distribution of the Account is made. No earnings shall be credited after such
Valuation Date.
5.07 Company Stock.
A Participant may elect to have the portion, if any, of his vested
Account attributable to a fund invested in common stock of the Company
distributed all in cash or all in kind. In the case of an in-kind
distribution, the value of fractional shares shall be paid in cash.
48
52
ARTICLE VI
DEATH BENEFITS
6.01 Death Benefits.
In the event of the death of an Active Participant or of a Terminated
Vested Participant who has not yet received payment of his Account, the Account
shall be paid to his Beneficiary in a single lump sum. Any payment under this
Section shall be paid as soon as practicable at the Beneficiary's election and
no later than five (5) years after the Participant's death. The distribution
shall be equal to the Participant's Account as of the Valuation Date coincident
with or immediately preceding the date of payment.
6.02 Additional Allocations on Death.
Any allocation for a Participant, made as of a Valuation Date
subsequent to the date of his death, shall be paid to such Participant's
Beneficiary as soon after such Valuation Date as is practical.
6.03 Beneficiary Designation.
"Beneficiary" shall mean the person or persons named to receive any
death benefits which may become payable under the Plan, and shall include any
contingent beneficiary.
If a Participant has a qualified spouse, then such spouse shall
automatically be the Beneficiary eligible to receive the Account of the
Participant pursuant to the Participant's death, unless the Participant names
an alternate Beneficiary, and the qualified spouse consents in
49
53
writing to the Participant's naming of an alternate Beneficiary, which consent
must acknowledge the effect of such designation and be witnessed by a
representative of the Plan Administrator, or attested to by a notary public.
For purposes of this paragraph, a qualified spouse is a spouse to whom the
Participant is married at the date of death and to whom the Participant has
been married for at least one year. Each Participant shall have the right by
written notice to the Plan Administrator, in the form prescribed by the Plan
Administrator, to designate, and from time to time to change the designation
of, one or more Beneficiaries and contingent beneficiaries to receive any
benefit which may become payable under the Plan pursuant to his death, provided
his qualified spouse, if any, consents to the designation of an alternate
Beneficiary as set forth in the preceding sentence. A qualified spouse may
also expressly permit a Participant to subsequently change an alternative
beneficiary designation without any further spousal consent.
If it is established to the satisfaction of a Plan representative
that there is no qualified spouse or that such spouse cannot be located, an
alternative beneficiary designation will be deemed a proper election without
any spousal consent.
Any consent by a qualified spouse obtained under this provision (or
establishment that the consent of a qualified spouse may not be obtained) shall
be effective only with respect to such spouse. A consent that permits
designations by the Participant without any requirement of further consent by
the qualified spouse must acknowledge that such spouse has the right to limit
consent to a specific beneficiary, and a specific form of benefit where
applicable, and that the spouse voluntarily elects to relinquish either or both
of such rights. A revocation of a prior beneficiary designation may be made by
a Participant without the consent of the qualified spouse
50
54
at any time before the commencement of benefits. The number of revocations
shall not be limited.
In the event that a Participant who does not have a qualified spouse
as described above fails to designate a Beneficiary to receive a benefit under
the Plan that becomes payable pursuant to his death, or in the event that the
Participant is pre-deceased by all automatic or designated primary and
contingent beneficiaries, the death benefit shall be payable to the
Participant's estate.
51
55
ARTICLE VII
VESTING AND SEPARATION FROM SERVICE
7.01 Vesting of Accounts.
A Participant shall at all times be fully (100%) vested in his Salary
Deferral Contribution Account, After-Tax Contribution Account, Rollover
Contribution Account and in any restoration contributions made pursuant to
Section 7.03.
A Participant shall be vested in his Matching Employer Contribution
Account and his Discretionary Employer Contribution Account based on his Years
of Service in accordance with the following table:
Years of Service Vesting Percentage
---------------- ------------------
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
Notwithstanding the foregoing, an Active Participant shall be 100%
vested in his Account at his Normal Retirement Date, the date of his retirement
due to Disability or the date of his death.
7.02 Payment of Benefits.
An Active Participant who is vested in his Account and terminates
employment prior to his Normal Retirement Date shall be deemed a Terminated
Vested Participant. Payment
52
56
of his vested Account shall be made in a single lump sum no later than sixty
(60) days following the Valuation Date coincident with or next following the
Participant's Normal Retirement Date. However, any such Participant may elect
that payment of his vested Account be made as of the Valuation Date coincident
with or following the date of his termination of employment, provided that he
makes such election on or before the applicable Valuation Date. A Terminated
Vested Participant's Account shall continue to be credited with investment
earnings through the last Valuation Date coincident with or immediately
preceding the date that payment of the Account is made. No earnings shall be
credited after such Valuation Date.
The failure of a Participant to make such an election shall be deemed
to be an election to defer commencement of benefits.
If, after a Participant terminates employment, the total value of his
vested Account is less than $3,500, the Administrator may direct the Trustee
to cash-out the Participant's benefit in a single lump sum after the Valuation
Date coincident with or following the date of his or her termination of
employment, without any requirement for such Participant's consent.
7.03 Re-employment After Distribution and Restoration Contributions.
Any former Participant who once again qualifies as an Active
Participant and who has received a distribution of any portion of his vested
Account attributable to his prior participation in this Plan may restore to the
Trustee the full amount of the distribution he previously received which was
derived from Employer Contributions. In order to reinstate his full Matching
or Discretionary Employer Contribution Account, a reemployed Participant must
repay the full amount of the distribution from such Accounts prior to the
earlier of (i) the fifth
53
57
anniversary of the date such participant is reemployed or (ii) five consecutive
one year Breaks-in-Service after the date of distribution. Any Participant who
fails to make his restoration contribution within such time period shall waive
his right to the portion of his Account which was not vested when he received
his distribution.
54
58
ARTICLE VIII
WITHDRAWALS AND LOANS
8.01 Withdrawals While Employed.
In-service withdrawals shall be made upon 15 days written notice in
the following order:
(a) A Participant may withdraw all or any portion of his After-Tax
Contribution Account. Such withdrawal shall come first from After-Tax
Contributions made prior to January 1, 1987. Next, such withdrawal shall be
allocated proportionately between the Participant's After-Tax Contributions
made after December 31, 1986 and the investment earnings on such contributions.
A Participant may then withdraw the investment earnings on his After-Tax
Contributions made prior to January 1, 1987.
(b) A Participant may withdraw any portion of his Rollover
Contribution Account upon attainment of age 59 1/2 or in the event of a
financial hardship as described below.
(c) A Participant may withdraw his Salary Deferral Contribution
Account for any reason after he has attained Age 59 1/2 and prior to Age 59
1/2 solely in the event of a financial hardship, and solely to the extent
required to satisfy the hardship. The amount that may be distributed due to a
hardship may include the amount necessary to pay income taxes or penalties
resulting from the distribution. Such hardship must be an immediate and heavy
financial need of the Participant where such Participant lacks other available
resources. Expenses in connection with a death in a Participant's immediate
family would constitute such an immediate and heavy financial need and the
following conditions would automatically be
55
59
deemed an immediate and heavy financial need:
( i) expenses for medical care as described under Code Section
213(d) incurred by the Participant, his spouse or his
dependents or expenses necessary to obtain such medical care;
( ii) costs directly related to the purchase of a primary residence
(excluding mortgage payments);
(iii) payment of tuition or related educational fees for the next
twelve months of post-secondary education for the
Employee, his spouse or his dependents;
( iv) payment to prevent eviction of the Participant from a primary
residence or foreclosure of mortgage on his primary residence;
and
( v) any other occurrence as authorized by the IRS through
Regulations, Rulings, Notices and other documents of general
applicability.
A Participant must submit a written certification on the form
prescribed by the Plan Administrator that the hardship distribution is
necessary to satisfy an immediate and heavy financial need. The written
certification must indicate that the need cannot reasonably be relieved through
reimbursement or compensation by insurance or otherwise, by liquidation of the
employee's assets, by cessation of Salary Deferral Contributions or After Tax
Contributions (if applicable) under the Plan or by other distributions or
nontaxable loans from plans maintained by the Employer or any other employer,
or by borrowing from commercial sources on reasonable commercial terms in an
amount sufficient to satisfy the need. The Employer must
56
60
not have actual knowledge to the contrary that the need cannot reasonably be
relieved as described above.
A Participant may not withdraw any investment earnings included in
his Salary Deferral Contribution Account which wereaccumulated after
December 31, 1988, or any Qualified Non-elective Contributions (including
investment earnings), unless he has attained Age 59 1/2.
A Participant may not withdraw any portion of his Matching Employer
Contribution Account or Discretionary Employer Contribution Account for any
reason prior to his retirement or other termination of employment.
In no event will any hardship withdrawal of Salary Deferral
Contributions be granted until any applicable distributions and loans have been
taken from this Plan and from all other qualified retirement plans of the
Employer.
8.02 Loans.
(a) Loans to Active Participants from their Accounts in amounts of
not less than $500 shall be allowed upon 15 days written notice. No more than
one Plan loan may be outstanding to each Participant at any time.
(b) No Participant shall, under any circumstances, be entitled to
loans in excess of the lesser of (i) 50% of his vested Account as of the
Valuation Date coincident with or immediately preceding the date on which the
loan is made, and (ii) $50,000 less the highest outstanding loan balance over
the 12-month period immediately preceding the issuance of the
57
61
loan. For purposes of this paragraph, all outstanding loans to a Participant
under this Plan or any other qualified retirement plan of the Employer shall be
aggregated.
(c) Any loan to a Participant shall be evidenced by the
Participant's promissory note and secured by the pledge of the Participant's
Account in the Trust Fund and by the pledge of such further collateral as the
Trustee deems necessary or desirable to assure repayment of the borrowed amount
and all interest payable thereon in accordance with the terms of the loan.
(d) Interest shall be charged at an annual rate equal to the prime
interest rate in effect as of the date the loan is processed, plus one percent
(1%). The rate may be revised from time to time, but no more frequently than
quarterly. The Administrator shall have sole discretion in determining the
interest rate, and its decision shall be final and binding. Principal
repayments and interest payments shall be credited to the Account of the
Participant to whom the loan was made.
(e) Loans shall be for such term as the Participant elects, except
that loans shall not be for a period in excess of five (5) years unless they
are made for the purposes of purchasing the primary residence of the
Participant. In no event shall a loan be for a period in excess of thirty (30)
years or such longer period of time as established by the Administrator to be
used on a uniform and non-discriminatory basis.
(f) Loans shall be repaid in approximately level installments made
no less frequently than quarterly. The Plan Administrator may require that
loans be repaid by payroll deduction or any other convenient manner. The
manner and frequency of payment shall be determined by the Plan Administrator.
58
62
(g) If not repaid in full, the unpaid portion of any outstanding
loans (including interest thereon) shall be deducted at retirement, death,
disability or other termination of employment from any benefit to which a
Participant (or his beneficiary) is entitled under this Plan, and any other
security pledge shall be sold as soon as is practicable after such default by
the Trustee at private or public sale. The proceeds of such sale shall be
applied first to pay the expenses of conducting the sale, including reasonable
attorney's fees, and then to pay any sums due from the borrower to the Trust
Fund, with such payment to be applied first to accrued interest and then to
principal. The Participant shall remain liable for any deficiency, and any
surplus remaining shall be paid to the Participant.
(h) If a required periodic payment is not made within 90 days of
the date it was due, this shall be deemed a default and foreclosure on the note
and attachment of security will not occur until a distributable event occurs in
the Plan.
59
63
ARTICLE IX
ADMINISTRATION
9.01 Plan Administrator.
The Plan shall be administered by the Employer in accordance with its
provisions and for purposes of such Plan administration the Employer is hereby
deemed to be Plan Administrator within the meaning of ERISA. All aspects of
Plan administration shall be the responsibility of the Plan Administrator
except those specifically delegated to the Trustees or other parties in
accordance with provisions of the Plan or Trust Agreement.
9.02 Administrative Procedures.
The Administrator shall have discretionary authority based on a
reasonable interpretation of the Plan to determine the eligibility for benefits
and the benefits payable under the Plan, and shall have discretionary authority
to construe all terms of the Plan, including uncertain terms, to determine
questions of fact and law arising under the Plan and make such rules as may be
necessary for the administration of the Plan. Any determination by the Plan
Administrator shall be given deference in the event it is subject to judicial
review, and shall be overturned only if it is arbitrary and capricious or an
abuse of discretion. The Administrator may require Participants to apply in
writing for benefits hereunder and to furnish satisfactory evidence of their
date of birth and such other information as may from time to time be deemed
necessary.
60
64
The Plan Administrator shall appoint the Trustees, Investment
Managers, or any other professional advisors as the Administrator, in is sole
discretion, deems necessary or appropriate.
9.03 Other Plan Administrator.
Anything to the contrary notwithstanding, the Employer may appoint a
committee or an individual or individuals, whether or not employed by the
Employer, to carry out any of the duties of the Plan Administrator. Such
duties may include, but are not limited to, determining the eligibility of any
Employee for any benefits and the amount of such benefits under the Plan,
maintaining custody of all documents and elections made by an Employee,
directing the investment of any payment made by an Employer within any limits
which may be imposed by the Employer, and retaining suitable agents and
advisors. Any committee or individual shall be considered an agent of the
Employer with respect to the Plan and shall be indemnified by the Employer
against any and all claims, losses, damages, expenses and liabilities arising
from any action or failure to act, except when the same is determined to be due
to the gross negligence or willful misconduct of such individual or a member of
a committee.
9.04 Claims Procedures.
(a) If any claim of a Participant or Beneficiary (hereinafter
referred to as "Claimant") is partially or totally denied, the Plan
Administrator shall advise the Claimant in writing of the method of computation
of his benefit, if any, and the specific reason for the denial. This written
notice will be provided to the Claimant within a reasonable period of time
61
65
(generally within 90 days) after the Administrator's receipt of the claim. The
Administrator shall also furnish the Claimant at that time with:
( i) a specific reference to pertinent Plan provisions,
( ii) a description of any additional material or
information necessary for the Claimant to perfect
his claim, if possible, and an explanation of why
such material or information is needed, and
(iii) an explanation of the Plan's claim review procedure.
If a notice of denial of the claim, or a request for additional time
to process the claim due to special circumstances, is not furnished to the
Claimant within the 90-day period, the claim shall be deemed denied. The
Claimant may then proceed to the review stage described in the following
paragraphs.
(b) The Claimant shall, if he desires further review, file a
written request for reconsideration with the Administrator. This written
request must be filed no later than 60 days after receipt of the information
stated in (a) above.
(c) So long as the Claimant's request for review is pending
(including the 60 day period in (b) above), the Claimant or his duly authorized
representative may review pertinent Plan documents and may submit issues and
comments in writing to the Administrator.
(d) A final and binding decision shall be made by the
Administrator within 60 days of the filing by the Claimant of his request for
reconsideration, provided, however, that if the Administrator, in its
discretion, determines that a hearing with the Claimant or his
62
66
representative present is necessary or desirable, this period shall be extended
an additional 60 days.
(e) The Administrator's decision shall be conveyed to the Claimant
in writing and shall include specific reasons for the decision, written in a
manner calculated to be understood by the Claimant, with specific references to
the pertinent Plan provisions on which the decision is based.
9.05 Expenses.
Expenses of the Plan shall be paid from the Trust Fund unless the
Employer elects to pay such expenses.
63
67
ARTICLE X
AMENDMENT, TERMINATION AND MERGERS
10.01 Amendment.
The provisions of this Plan may be amended at any time and from time
to time by the Employer, provided, however, that:
(a) no amendment shall increase the duties or liabilities of the
Plan Administrator or of the Trustee without the consent of such party;
(b) no amendment shall deprive any Participant or beneficiary of a
deceased Participant of any of the benefits to which he is entitled under this
Plan with respect to contributions previously made, nor shall any amendment
decrease the balance in any Participant's Account. For purposes of this
paragraph, a plan amendment which has the effect of decreasing the balance of a
Participant's Account or eliminating an optional form of benefit with respect
to benefits attributable to service before the amendment shall be treated as
reducing an accrued benefit;
(c) no amendment shall provide for the use of funds or assets held
to provide benefits under this Plan other than for the benefit of Employees and
their beneficiaries or provide that funds may revert to the Employer except as
permitted by law; and
(d) no amendment may change the vesting schedule with respect to
any Participant, unless each Participant with three or more Years of Service is
permitted to elect to have the vesting schedule which was in effect before the
amendment used to determine his vested
64
68
benefit. The period during which the election may be made shall commence with
the date the amendment is adopted or deemed to be made and shall end on the
latest of:
(1) 60 days after the amendment is adopted;
(2) 60 days after the amendment becomes effective;
or
(3) 60 days after the Participant is issued written notice
of the amendment by the Employer or Plan Administrator.
In the case of an Employee who is a Participant as of the later of
the date such amendment is adopted or the date it becomes effective, the
nonforfeitable percentage (determined as of such date) of such Employee's right
to his Employer-derived accrued benefit will not be less than his percentage
computed under the Plan without regard to such amendment.
Each amendment shall be approved by the Board of Directors by
resolution and shall be filed with the Trustee.
10.02 Plan Termination.
(a) Right Reserved. While it is the Employer's intention to
continue the Plan indefinitely the right is, nevertheless, reserved to
terminate the Plan in whole or in part. Termination or partial termination of
the Plan shall result in full and immediate vesting of each affected
Participant in his entire Account, and there shall not thereafter be any
forfeitures with respect to any Participant for any reason. Notwithstanding
any other provision of this Plan, complete or partial termination of the Plan
shall not be conditioned solely upon any resolution or other action of the
Company, the Board of Directors or any other party.
65
69
(b) Effect on Retired Persons, etc. Termination of the Plan shall
have no effect upon payment of benefits due to former Participants, their
beneficiaries and their estates. The Trustee shall retain sufficient assets to
complete any such payments due and shall have the right, upon direction by the
Employer, to make such payments as of the effective date of the Plan
termination.
(c) Effect on Remaining Participants, etc. The Employer shall
instruct the Trustees either (i) to continue to manage and administer the
assets of the Trust for the benefit of the Participants and their beneficiaries
pursuant to the terms and provisions of the Trust Agreement, or (ii) to pay
over to each Participant (and vested former Participant) the value of his
vested account, and to thereupon dissolve the Trust.
Upon termination of this Plan, if the Employer or any Affiliated
Organization does not maintain a successor plan, the Participant's Account may,
without the Participant's consent, be distributed to the Participant. However,
if any entity within the same controlled group as the Employer maintains a
successor plan then the Participant's Account will be transferred, without the
Participant's consent, to the other plan. For purposes of this Section
10.02(c), a successor plan is any other defined contribution plan (other than
an employee stock ownership plan as defined in Section 4975(e)(7) of the Code
or a simplified employee pension as defined in Section 408(k) of the Code)
maintained by the Employer or any Affiliated Organization unless fewer than two
percent of the Active Participants as of the time of the Plan's termination are
or were eligible under such defined contribution plan at any time during the
24-month period beginning 12 months before the time of the termination.
66
70
10.03 Permanent Discontinuance of Employer Contributions.
While it is the Employer's intention to make substantial and
recurrent contributions to the Trust Fund pursuant to the provisions of this
Plan, the right is, nevertheless, reserved to at any time permanently
discontinue Employer contributions. Such permanent discontinuance shall be
established by resolution of the Board of Directors and shall have the effect
of a termination of the Plan, except that the Trustee shall not have authority
to dissolve the Trust Fund except upon adoption of a further resolution by the
Board of Directors to the effect that the Plan is terminated and upon receipt
from the Employer of instructions to dissolve the Trust Fund pursuant to
Section 10.02(c) hereof.
10.04 Suspension of Employer Contributions.
The Employer shall have the right at any time, and from time to time,
to suspend Employer contributions to the Trust Fund pursuant to this Plan.
Such suspension shall have no effect on the operation of the Plan unless the
Board of Directors determines by resolution that such suspension shall be
permanent. A permanent discontinuance of contributions will be deemed to have
occurred as of the date of such resolution or such earlier date as is therein
specified.
10.05 Mergers and Consolidations of Plans.
In the event of any merger or consolidation with, or transfer of
assets or liabilities to, any other plan, each Participant shall have a benefit
in the surviving or transferee plan (determined as if such plan were then
terminated immediately after such merger, etc.) that is
67
71
equal to or greater than the benefit he would have been entitled to receive
immediately before such merger, etc., in the Plan in which he was then a
Participant (had such Plan been terminated at that time). For the purposes
hereof, former Participants and beneficiaries shall be considered Participants.
68
72
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.01 Non-Alienation of Benefits.
None of the payments, benefits or rights of any Participant or
beneficiary shall be subject to any claim of any creditor, and in particular,
to the fullest extent permitted by law, all such payments, benefits and rights
shall be free from attachment, garnishment, trustee's process, or any other
legal or equitable process available to any creditor of such Participant or
beneficiary. Notwithstanding the foregoing, the Plan Administrator shall
assign or recognize an alternate payee with respect to all or a portion of a
Participant's benefit, as may be required in accordance with a Qualified
Domestic Relations Order, as such term is defined and as such action by the
Plan Administrator may be required under Section 414 of the Code and
regulations issued pursuant thereto. The Administrator shall develop such
guidelines and procedures as it deems appropriate to determine, in accordance
with Section 414 of the Code, and regulations issued pursuant thereto, whether,
and in what manner, to comply with any document it receives which is intended
to be a Qualified Domestic Relations Order. No Participant or beneficiary
shall have the right to alienate, anticipate, commute, pledge, encumber or
assign any of the benefits or payments which he may expect to receive,
contingently or otherwise, under this Plan, except the right to designate a
beneficiary or beneficiaries as hereinbefore provided.
69
73
11.02 No Contract of Employment.
Neither the establishment of the Plan, nor any modification thereof,
nor the creation of any fund, trust or account, nor the payment of any benefits
shall be construed as giving any Participant or Employee, or any person
whomsoever, the right to be retained in the service of the Employer, and all
Participants and other Employees shall remain subject to discharge to the same
extent as if the Plan had never been adopted.
11.03 Severability of Provisions.
If any provision of this Plan shall be held invalid or unenforceable,
such invalidity or unenforceability shall not affect any other provisions
hereof, and this Plan shall be construed and enforced as if such provisions had
not been included.
11.04 Heirs, Assigns and Personal Representatives.
This Plan shall be binding upon the heirs, executors, administrators,
successors and assigns of the parties, including each Participant and
beneficiary, present and future.
11.05 Headings and Captions.
The headings and captions herein are provided for reference and
convenience only, shall not be considered part of the Plan, and shall not be
employed in the construction of the Plan.
70
74
11.06 Gender and Number.
Except where otherwise clearly indicated by context, the masculine
and the neuter shall include the feminine and the neuter, the singular shall
include the plural, and vice-versa.
11.07 Funding Policy.
The Plan Administrator, in consultation with the Employer, shall
establish and communicate to the Trustees a funding policy consistent with the
objectives of this Plan and of the corresponding Trust. Such policy shall
reflect due regard for the emerging liquidity needs of the Trust. Such funding
policy shall also state the general investment objectives of the Trust and the
philosophy upon which maintenance of the Plan is based.
11.08 Title to Assets.
No Participant or beneficiary shall have any right to, or interest
in, any assets of the Trust Fund upon termination of his employment or
otherwise, except as provided from time to time under this Plan, and then only
to the extent of the benefits payable under the Plan to such Participant out of
the assets of the Trust Fund. All payments of benefits as provided for in this
Plan shall be made from the assets of the Trust Fund, and neither the Employer
nor any other person shall be liable therefor in any manner.
11.09 Payment to Minors, etc.
Any benefit payable to or for the benefit of a minor, an incompetent
person or other person incapable of receipting therefor shall be deemed paid
when paid to such person's
71
75
guardian or to the party providing or reasonably appearing to provide for the
care of such person, and such payment shall fully discharge the Trustees, the
Plan Administrator, the Employer and all other parties with respect thereto.
11.10 Situs.
This Plan shall, to the extent not pre-empted by ERISA or other
Federal law, be construed according to the laws of the state where the
principal office of the Company is domiciled, where such state statutes may be
applicable to an employee benefit plan.
72
76
ARTICLE XII
TOP-HEAVY PROVISIONS
12.01 Top-Heavy Plan.
For any Plan Year commencing in 1984 or thereafter, the Plan shall
be a Top-Heavy Plan, as such term is defined under Section 416 of the Internal
Revenue Code, if the Value of Accumulated Benefits for Key Employees under all
Aggregated Plans exceeds 60% of the Value of Accumulated Benefits for all Group
Participants under all Aggregated Plans, determined as of the Determination
Date immediately preceding such Plan Year. If the Plan is a Top-Heavy Plan for
a Plan Year and, as of the Determination Date immediately preceding such Plan
Year, the Value of Accumulated Benefits for Key Employees under all Aggregated
Plans exceeds 90% of the Value of Accumulated Benefits for all Group
Participants under all Aggregated Plans, then the Plan shall be a Super
Top-Heavy Plan for such Plan Year. For such purposes, the terms "Key
Employees" and "Group Participants" shall include all persons who are or were
Key Employees or Group Participants during the Plan Year ending on such
Determination Date or during any of the four (4) immediately preceding Plan
Years.
The value of Accounts and the present value of accrued benefits will
be determined as of the most recent Valuation Date that falls within or ends
with the 12-month period ending on the Determination Date, except as provided
in Section 416 of the Code for the first and second plan years of a defined
benefit plan. The Accounts and accrued benefits of a Participant (1) who is
not a Key Employee but who was a Key Employee in a prior year, or (2) who has
not been credited with at least one Hour of Service with any Employer
maintaining the
73
77
Plan at any time during the 5-year period ending on the Determination Date will
be disregarded. The calculation of the top-heavy ratio, and the extent to
which distributions, rollovers, and transfers are taken into account will be
made in accordance with Section 416 of the Code. Deductible employee
contributions will not be taken into account for purposes of computing the
top-heavy ratio. When aggregating plans the value of Accounts and accrued
benefits will be calculated with reference to the determination dates that fall
within the same calendar year.
The accrued benefit of a participant other than a Key Employee shall
be determined under (a) the method, if any, that uniformly applies for accrual
purposes under all defined benefit plans maintained by the Employer, or (b) if
there is no such method, as if such benefit accrued not more rapidly than the
slowest accrual rate permitted under the fractional rule of Section
411(b)(1)(c) of the Code.
For purposes of this Article, the following definitions shall apply
in addition to those set forth in Article I:
"Affiliated Employer Group" shall mean the Employer and each other
employer which must be aggregated with the Employer for purposes of Sections
414(b), 414(c) or 414(m) of the Code.
"Aggregated Plans" shall mean (i) all plans of the Employer or an
Affiliated Employer Group which are required to be aggregated with the Plan,
and (ii) all plans of the Employer or an Affiliated Employer Group which are
permitted to be aggregated with the Plan and which the Plan Administrator
elects to aggregate with the Plan, for purposes of determining whether the Plan
is a Top-Heavy Plan. A plan shall be required to be aggregated with the Plan
if such plan includes as a participant a Key Employee (and the beneficiary of
such employee)
74
78
or if such plan enables any plan of the Employer or of a member of the
Affiliated Employer Group in which a Key Employee participates to qualify under
Section 401(a)(4) or Section 410 of the Code. A plan of the Employer or the
Affiliated Employer Group shall be permitted to be aggregated with the Plan if
such plan satisfies the requirements of Sections 401(a)(4) and 410 of the Code,
when considered together with the Plan and all plans which are required to be
aggregated with the Plan. No plan shall be aggregated with the Plan unless it
is a qualified plan under Section 401 of the Code. The required aggregation
group shall include plans terminated within the five year period ending on the
Determination Date.
"Annual compensation" shall mean compensation as defined in Section
415(c)(3) of the Code but including amounts contributed by the Employer
pursuant to a salary reduction agreement which are excludable from the
Employee's gross income under Section 125, Section 402(a)(8), Section 402(h) or
Section 403(b) of the Code.
"Determination Date" shall mean the date as of which it is determined
whether a plan is a Top-Heavy Plan or Super Top-Heavy Plan for the Plan Year
immediately following such Determination Date. The Determination Date for the
Plan shall be:
(a) in the case of a defined benefit plan, the date as of which
the actuarial valuation of the Plan, as used for determination
of minimum funding standards under Section 412 of the Code, is
performed; and
(b) in the case of a defined contribution plan, the last day of
the Plan Year.
"Group Participant" shall mean anyone who is or was a participant in
any plan included in the Aggregated Plans during the Plan Year which includes
the Determination Date or any of the four (4) immediately preceding Plan Years,
and who received compensation from
75
79
an Employer during the five (5) year period ending on the Determination Date.
Any beneficiary of a Group Participant who has received, or is expected to
receive, a benefit from a plan included in the Aggregated Plans shall be
considered a Group Participant solely for purposes of determining whether the
Plan is a Top-Heavy Plan or Super Top-Heavy Plan.
"Key Employee" shall mean any employee or former employee of the
Employer or of an Affiliated Employer Group who during the Plan Year which
includes the Determination Date, or during any of the four (4) Plan Years
immediately preceding such Plan Year, was:
(a) an officer of the Employer whose compensation is at least
$45,000 (or such higher amount as is permitted in accordance
with the Code); or
(b) a five percent (5%) owner of the Employer; or
(c) a one percent (1%) owner of the Employer whose total annual
compensation from the Affiliated Employer Group exceeds
$150,000; or
(d) an employee whose compensation equals or exceeds $30,000 (or
such higher amount as may be defined under Section
415(c)(1)(A) of the Code), and whose ownership interest in the
Affiliated Employer Group is among the ten largest.
In no event shall a partner of an unincorporated employer be
considered an officer under paragraph(a) above. Further, the number of
officers counted under (a) above as of any Determination Date shall not exceed
the lesser of:
(1) the greater of (i) ten percent (10%) of the total number of
employees of the Affiliated Employer Group, and (ii) three
(3); and
(2) fifty (50).
76
80
If the application of the preceding paragraph results in a reduction
in the number of officers to be included as Key Employees, then individuals who
are officers shall be eliminated from the group of Key Employees beginning with
the individual who had the lowest one-year compensation in the five (5) year
period including the Plan Year which includes the Determination Date, and the
four (4) immediately preceding Plan Years, and eliminating each individual with
the next higher one-year compensation in such period, until the maximum number
of officers remain in the Key Employee group.
In addition, the beneficiary of a Key Employee shall be deemed to be
a Key Employee.
"Non-Key Employee" shall mean an Employee who is not a Key Employee.
An Employee who was a Key Employee in a previous Plan Year but who is no
longer a Key Employee in the current Plan Year, shall not be considered a
Non-Key Employee for the current Plan Year.
"Value of Accumulated Benefits" shall mean
(a) in the case of a Group Participant or beneficiary covered
under a defined benefit plan, the sum of
(i) the present value of the accrued pension benefit (as such term
is defined under the applicable plan) of the Group Participant
or beneficiary determined as of the Determination Date using
reasonable actuarial assumptions as to interest and mortality,
and taking into account any non-proportional subsidies in
accordance with regulations issued by the Secretary of the
Treasury; plus
77
81
(ii) the sum of any amounts distributed to the Group Participant
and his beneficiary during the plan year ending on the
Determination Date and during the four (4) immediately
preceding plan years.
(b) in the case of a Group Participant or beneficiary covered
under a defined contribution plan, the sum of the accounts of
the Group Participant or beneficiary under the plan as of the
plan's Determination Date derived from:
(1) employee contributions credited to such accounts and
investment earnings thereon; and
(2) employer contributions credited to such accounts and
investment earnings thereon; and
(3) rollover contributions made prior to January 1, 1984, and
investment earnings thereon; and
(4) any contributions which would have been credited to such
accounts on or before the Determination Date, but which
were waived as provided under the Code and resulted in a
funding deficiency; and
(5) any amount distributed from the accounts described in (1)
through (4) above during the Plan Year ending on the
Determination Date, and the four (4) immediately
preceding Plan Years.
If the Plan is determined to be a Top-Heavy Plan or Super Top-Heavy
Plan as of any Determination Date, then it shall be subject to the rules set
forth in the remainder of this
78
82
Article for the Plan Year next following such Determination Date. If, as of a
subsequent Determination Date, the Plan is determined to no longer be a
Top-Heavy Plan or Super Top-Heavy Plan, then the rules set forth in the
remainder of this Article shall no longer apply, except where expressly
indicated otherwise. Notwithstanding the foregoing, if the Plan changes from
being a Super Top-Heavy Plan to a Top-Heavy Plan, the rules applicable to a
Top-Heavy Plan shall apply.
"Year of Super Top-Heavy Service" shall mean a Year of Service of a
Participant which commenced in a Plan Year during which the Plan was a Super
Top-Heavy Plan.
"Year of Top-Heavy Service" shall mean a Year of Service of a
Participant which commenced in a Plan Year during which the Plan was a
Top-Heavy Plan.
12.02 Minimum Contributions or Benefits.
For any Plan Year in which the Plan is a Top-Heavy Plan the minimum
rate of contributions and forfeitures allocated to the account of any
Participant shall be the lesser of:
( i) The highest rate of employer contributions and forfeitures
(determined as a percentage of compensation as defined under
Section 415 of the Code) allocated to the account of any Key
Employee; and
(ii) 3% of such compensation.
Notwithstanding the above paragraph, if a Participant is also a
participant in another defined contribution plan of the Affiliated Employer
Group, all or a portion of the minimum allocation described above may be
provided under such other plan and the minimum
79
83
allocation provided under this Plan shall be eliminated or reduced accordingly.
If the Employee is a Participant in one or more defined benefit plans of the
Affiliated Employer Group, all or a portion of the minimum required benefits or
allocations under Section 416 of the Code may be provided under such plans as
set forth in regulations issued by the Secretary of the Treasury, and the
minimum allocation provided in the preceding paragraph shall be eliminated or
reduced accordingly. Employer contributions resulting from a salary reduction
election by an Employee shall not be counted toward meeting the minimum
required allocations under this Section. Matching Employer Contributions may
be used to satisfy the minimum required allocations under this Section, if such
contributions are not counted under the ACP test described in Section 3.06.
Participants who are Non-Key Employees and who are not separated from
service as of the last day of the Plan Year, and who have (1) failed to
complete 1000 Hours of Service (or the equivalent), (2) declined to make
mandatory contributions to the Plan, or (3) been excluded from the Plan because
such individual's compensation is less than a stated amount, are considered
Participants solely for purposes of this Section.
The minimum allocation required [to the extent required to be
nonforfeitable under Section 416(b)] may not be forfeited under Section
411(a)(3)(B) or 411 (a)(3)(D).
12.03 Adjustment to Maximum Benefits.
If the Plan is a Top-Heavy Plan for any Plan Year, then the maximum
benefit which can be provided under Section 3.10 shall be determined by
substituting "1.00" for "1.25" in the applicable fractions. However, if the
Plan is not a Super Top-Heavy Plan for such Plan
80
84
Year, than the preceding sentence shall not apply provided that "4%" (or such
higher rate as is required by Internal Revenue Service Regulations) is
substituted for "3%" in the first paragraph of Section 12.02.
12.04 Minimum Vesting
If the Plan is determined to be a Top-Heavy Plan for any Plan Year,
then an Active Participant's vested interest in his Account determined as of
the first day of such Plan Year, and determined as of any future date while the
Plan continues to be a Top- Heavy Plan, shall be no less than as determined
under the following Table:
Years of Service Vesting Percentage
---------------- ------------------
Less than 2 years None
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
If the Plan subsequently is determined to no longer be a Top-Heavy
Plan, then the above minimum vesting schedule shall not apply to any portion of
a Participant's Account which is accrued after the first day of the first Plan
Year in which the Plan is no longer a Top-Heavy Plan, provided that the Account
for any Participant with three (3) or more Years of Service as the first date
as of which the Plan is no longer a Top-Heavy Plan shall continue to be vested
in accordance with a schedule not less than the minimum vesting schedule
applicable during the period that the Plan was a Top-Heavy Plan.
81
85
The minimum vesting schedule applies to all benefits within the
meaning of Section 411(a)(7) of the Code except those attributable to employee
contributions, including benefits accrued before the effective date of section
416 and benefits accrued before the Plan became top-heavy.
12.05 Discontinuance of Article.
In the event that the provisions of this Article are no longer
required to qualify the Plan under the Code, then this Article XII shall
thereupon be void without the necessity of further amendment of the Plan.
82
86
IN WITNESS WHEREOF, and as evidence of the adoption of the foregoing,
the Company has caused this instrument to be executed by a duly authorized
officer as of this day of , 199 .
HANOVER DIRECT, INC.
By: ____________________________________
____________________________________
Title
83