EXHIBIT 10.9
BORG-WARNER RETIREMENT SAVINGS PLAN
(EFFECTIVE AS OF JUNE 1, 1988 AND FURTHER AMENDED AND RESTATED
EFFECTIVE AS OF APRIL 1, 1994 AND JANUARY 1, 1995)
ARTICLE 1. ESTABLISHMENT, TITLE, PURPOSE, INTENT AND EFFECTIVE DATE OF PLAN
--------- ----------------------------------------------------------------
Section 1.01 Establishment, Effective Date and Title of Plan. The Borg-
Warner Retirement Savings Plan (the "Plan") was established for the benefit of
certain employees of the Borg-Warner Security Corporation (the "Corporation")
and its divisions, subsidiaries and affiliates, effective as of June 1, 1988 and
further amended and restated effective as of April 1, 1994 and January 1, 1995.
Section 1.02 Purpose of Plan. The purpose of the Plan is to provide
retirement benefits and a method of long-term savings for Eligible Employees.
Section 1.03 Intent of Plan. The Corporation intends that the Plan, as
the same may be amended from time to time, shall constitute a qualified plan
under the provisions of Section 401(a) and related or successor provisions of
the Code and shall be in full compliance with ERISA. The Corporation intends
that the Plan shall continue to be maintained by it for the above purposes
indefinitely, subject to the rights reserved to the Corporation to amend and
terminate the Plan as set forth below.
ARTICLE 2. DEFINITIONS
--------- -----------
The terms set forth in this Article 2, when used in the Plan, shall have
the following meanings, unless the context clearly requires a different meaning.
Section 2.01 Actual Contribution Percentage. The term "Actual
Contribution Percentage" means a percentage calculated for purposes of Section
6.04 for (a) the group of Eligible Employees who are Highly Compensated
Employees or (b) the group of all other Eligible Employees. For each group
being tested, the Actual Contribution Percentage shall be the average of the
following percentages, which shall be calculated separately for each member of
the group: the sum of the Company Matching Contributions under Section 4.02 and
the After-Tax Contributions under Section 5.04 on behalf of each group member,
divided
by the Compensation of each group member. For purposes of meeting the test
under Section 6.04, the Employee Benefits Committee may elect for each Plan Year
to include the Before-Tax Contributions for each Participant in the numerator of
each corresponding percentage under this Section 2.01. In addition, a
Participant's similarly calculated actual contribution percentage under any
other Section 401(k) plan of the Company under certain circumstances shall be
included in determining the Actual Contribution Percentage and, under other
circumstances, may at the discretion of the Employee Benefits Committee be
included in determining the Actual Contribution Percentage.
Section 2.02 Actual Deferral Percentage. The term "Actual Deferral
Percentage" means a percentage calculated for purposes of Section 5.10 for (a)
the group of Eligible Employees who are Highly Compensated Employees or (b) the
group of all other Eligible Employees. For each group being tested, the Actual
Deferral Percentage shall be the average of the following percentages, which
shall be calculated separately for each member of the group: the sum of the
Before-Tax Contributions under Sections 5.01 and 5.02 on behalf of each group
member, divided by the Compensation of each group member. A Participant's
actual deferral percentage under any other Section 401(k) plan of the Company
under certain circumstances shall be included in determining the Actual Deferral
Percentage and, under other circumstances, may at the discretion of the Employee
Benefits Committee be included in determining the Actual Deferral Percentage.
Section 2.03 Administrative Services Provider. The term "Administrative
Services Provider" means the person or entity appointed by the Employee Benefits
Committee to provide administrative services to the Plan.
Section 2.04 After-Tax Contributions. The term "After-Tax Contributions"
means the contributions made by a Participant pursuant to Section 5.04. After-
Tax Contributions are not intended to qualify as salary reduction contributions
under Section 401(k) of the Code.
Section 2.05 Authorized Leave of Absence. The term "Authorized Leave of
Absence" means any absence of an Employee on account of time during which no
duties are performed due to vacation, holiday, illness, incapacity, layoff of
less than one year, jury duty, military duty or other leave of absence
authorized by the Company under its applicable personnel practices, administered
in a uniform and nondiscriminatory manner. During an Authorized Leave of
Absence, an Employee shall be given credit for service, provided that he retires
or returns to employment with the Company within the period specified in the
Authorized Leave of Absence.
Section 2.06 Before-Tax Contributions. The term "Before-Tax
Contributions" means the contributions made by a Participant pursuant to
Sections 5.01 and 5.02. Before-Tax Contributions are intended to qualify as
salary reduction contributions under Section 401(k) of the Code.
-2-
Section 2.07 Beneficiary. The term "Beneficiary" means the person,
persons or trust designated under Section 3.04 or Section 11.02, as applicable,
to receive a benefit under the Plan after the death of a Participant.
Section 2.08 Board of Directors. The term "Board of Directors" means the
Board of Directors of Borg-Warner Security Corporation as constituted from time
to time.
Section 2.09 Code. The term "Code" means the Internal Revenue Code of
1986, as amended from time to time.
Section 2.10 Company. The term "Company" means, individually, the
Corporation and the Corporation's divisions, subsidiaries and affiliates which
are participating in the Plan. Divisions of the Corporation shall participate
in the Plan as determined from time to time by the Employee Benefits Committee.
Subsidiaries and affiliates of the Corporation shall participate in the Plan by
taking appropriate corporate action with the consent of the Employee Benefits
Committee.
Section 2.11 Company Matching Contributions. The term "Company Matching
Contributions" means those contributions made by the Company on behalf of
Participants pursuant to Section 4.02.
Section 2.12 Company Retirement Account. The term "Company Retirement
Account" means the account maintained for each Participant showing the aggregate
of the Company Retirement Contributions made on such Participant's behalf
pursuant to Section 4.01 and certain amounts transferred to the Plan pursuant to
Section 7.01, after adjustment for earnings, changes in market valuation,
Forfeitures or distributions, if any. The Vested Portion of a Participant's
Company Retirement Account shall be determined pursuant to Section 2.49.
Section 2.13 Company Retirement Contributions. The term "Company
Retirement Contributions" means those contributions made by the Company on
behalf of Participants pursuant to Section 4.01.
Section 2.14 Compensation. The term "Compensation" means direct
compensation in the form of salary or wages paid to a Participant by the Company
during a Plan Year, including overtime pay, commissions and bonuses, but
excluding reimbursement for education or relocation expenses, severance or
transitional income pay, and other taxable fringe benefits. Other than for
purposes of Sections 6.02 and 19.02, Compensation shall also include Before-Tax
Contributions made by the Company on behalf of a Participant. Effective as of
January 1, 1994, Compensation shall be limited for all Plan purposes to $150,000
of Compensation per Participant, as adjusted by the Secretary of the Treasury
pursuant to Section 401(a)(17) of the Code.
-3-
For purposes of determining the Actual Contribution Percentage and Actual
Deferral Percentage the term "Compensation" shall have a meaning permitted under
Section 414(s) of the Code and the regulations thereunder, with any such
definitions to be consistently applied for each testing year.
For purposes of Section 2.25, the term "Compensation" shall have the
meaning set forth in Section 414(q)(7) of the Code.
Section 2.15 Corporation. The term "Corporation" means Borg-Warner
Security Corporation, a Delaware corporation, and any successor thereto which
continues the Plan as provided in Section 18.01.
Section 2.16 Effective Date. The term "Effective Date" means June 1,
1988. The Plan was amended and restated effective as of April 1, 1994 and
January 1, 1995.
Section 2.17 Eligible Employee. The term "Eligible Employee" means an
Employee who has completed a Six-Month Period of Service.
Section 2.18 Employee. The term "Employee" means (a) any resident of the
United States who is a common law employee of the Company or (b) any citizen of
the United States who is a common law employee of the Company or a foreign
subsidiary of the Company which subsidiary has entered into an agreement with
the Company under Section 3121(l) of the Code which is in effect, and as to whom
no contributions under a funded plan of deferred compensation are being made by
the Company or any other entity. Notwithstanding the foregoing, an employee who
elected to remain a participant in the Borg-Warner Corporation Retirement Plan
effective as of June 1, 1988 shall be deemed to be an Employee for purposes of
this Section 2.18. If approved by the Employee Benefits Committee, the term
Employee may include a non-U.S. citizen who is employed by the Company outside
of the United States. The term "Employee" also means any leased employee who
performs services for the Company, to the extent required by Section 414(n) or
Section 414(o) of the Code. Any employer contributions to a tax-qualified
retirement plan provided on behalf of such leased employee by the leasing
organization for services provided to the Company shall for all purposes of the
Plan be treated as contributions by the Company.
Effective as of January 1, 1995, the term "Employee" shall exclude all
Highly Compensated Employees or employees who are expected to meet the
definition of a Highly Compensated Employee pursuant to Section 2.25.
The term "Employee" also excludes non-U.S. citizens who are temporarily
transferred to the Company, all agents, consultants and independent contractors,
and any Highly Compensated Employee who has an employment agreement with the
Company and who is provided retirement benefits by the Company, its subsidiaries
or affiliates under any other
-4-
plan or program. Further, an employee who is employed within a collective
bargaining unit recognized as such by the Company shall not become or remain a
Participant who is eligible to receive any Company Retirement Contribution or
Company Matching Contribution under Article 4 or to make any Before-Tax
Contribution or After-Tax Contribution under Article 5 unless and until mutually
satisfactory agreements have been reached with the union bargaining agent for
coverage of the employees in the bargaining unit represented by the union under
the terms of the Plan, together with such other waivers as the Company may deem
necessary in light of local contractual situations.
Section 2.19 Employee Benefits Committee. The term "Employee Benefits
Committee" means the committee appointed by the Board of Directors to administer
all retirement plans maintained by the Corporation and any division, subsidiary
or affiliate of the Corporation.
Section 2.20 Employee Retirement Account. The term "Employee Retirement
Account" means the account maintained for each Participant showing the aggregate
of the Before-Tax Contributions made on such Participant's behalf pursuant to
Section 5.01 and the Company Matching Contributions made on such Participant's
behalf pursuant to Section 4.02, after adjustment for earnings, changes in
market valuation, Forfeitures or distributions, if any. A Participant shall at
all times have a fully vested nonforfeitable interest in the balance in his
Employee Retirement Account attributable to Before-Tax Contributions. The
Vested Portion of the balance in a Participant's Employee Retirement Account
attributable to Company Matching Contributions shall be determined pursuant to
Section 2.49.
Section 2.21 Employment Commencement Date. The term "Employment
Commencement Date" means the date on which an Employee first performs an Hour of
Service for the Company.
Section 2.22 ERISA. The term "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time.
Section 2.23 Fiduciaries. The term "Fiduciaries" means the Board of
Directors, the Employee Benefits Committee, the RSP Committee, the Plan
Administrator and the Trustee, but only with respect to the specific
responsibilities of each for Plan or Trust administration, as described and
allocated in Article 15.
Section 2.24 Forfeiture. The term "Forfeiture" means the Unvested Portion
of a Participant's Company Retirement Account and the Unvested Portion of the
balance in a Participant's Employee Retirement Account attributable to Company
Matching Contributions, which will be forfeited by a Participant upon
termination of employment as provided in Section 11.03. Each Forfeiture shall
be applied solely to reduce the amount of Company Retirement Contributions and
Company Matching Contributions otherwise payable by the
-5-
Company. No part of any Forfeiture may be applied to increase the benefits any
Participant otherwise would receive under the Plan.
Section 2.25 Highly Compensated Employee. The term "Highly Compensated
Employee" means each Employee of the Company (for purposes of this Section 2.25
"Company" shall mean Borg-Warner Security Corporation and its divisions,
subsidiaries and affiliates) who, during the Plan Year under consideration (the
"current Plan Year") or the preceding Plan Year:
(a) was at any time a more-than-five-percent (5%) owner of the Company;
(b) received Compensation from the Company in excess of $99,000, as
adjusted by the Secretary of the Treasury pursuant to Section
414(q)(l) of the Code for years beginning after 1994;
(c) received Compensation from the Company in excess of $66,000, as
adjusted by the Secretary of the Treasury pursuant to Section
414(q)(1) of the Code for years beginning after 1994, and was in the
top twenty percent (20%) of Employees (in terms of Compensation
received) for that Plan Year; or
(d) was at any time an officer and received Compensation greater than
fifty percent (50%) of the amount in effect under Section 415(b)(1)(A)
of the Code for that Plan Year.
An Employee who is not described in subsection 2.25(b), (c) or (d) above
for the year preceding the current Plan Year shall not be treated as being
described in subsection 2.25(b), (c) or (d) for the current Plan Year unless the
Employee is one of the 100 Employees paid the greatest Compensation during the
current Plan Year.
For purposes of subsection 2.25(c), the term "Employees" shall not include
any Employees who are excludeable under Section 414(q)(8) of the Code.
For purposes of subsection 2.25(d), no more than 50 Employees (or, if less,
the greater of three Employees or ten percent (10%) of Employees) shall be
treated as officers. However, if all officers of the Company have less
Compensation than the threshold amount stated in subsection 2.25(d) for a
particular Plan Year, the officer with the highest Compensation for such year
shall be treated as described in subsection 2.25(d).
Family members (i.e., an Employee's spouse and lineal ascendants or
descendants, and the spouses of such lineal ascendants or descendants) of a
more-than-five-percent (5%) owner or of a Highly Compensated Employee included
in the group consisting of the ten most Highly Compensated Employees during the
Plan Year shall not be treated as separate
-6-
Employees, and any Compensation paid to such family members shall be treated as
if it were paid to such more-than-five-percent (5%) owner or Highly Compensated
Employee.
A former Employee shall be treated as a Highly Compensated Employee if such
individual was a Highly Compensated Employee when he separated from service or
if such individual was a Highly Compensated Employee at any time after attaining
age 55.
Section 2.26 Hour of Service. The term "Hour of Service" means each hour
for which an Employee is directly or indirectly paid or entitled to payment by
the Company for the performance of services.
Section 2.27 Investment Funds or Funds. The term "Investment Funds" or
"Funds" means, as the context requires, any one or all of the funds provided for
in Article 9.
Section 2.28 Limitation Year. The term "Limitation Year" means, with
respect to the restrictions in Sections 6.02 and 6.03, the Plan Year.
Section 2.29 Local Plan Administrator. The term "Local Plan
Administrator" means the person appointed by the Plan Administrator to
administer the Plan on behalf of a specific division, subsidiary or affiliate of
the Corporation.
Section 2.30 Normal Retirement Date. The term "Normal Retirement Date"
means the last day of the calendar month coincident with or immediately
following the day on which a Participant attains age 65.
Section 2.31 One-Year Period of Severance. The term "One-Year Period of
Severance" means the 12-month period beginning on a Participant's Severance from
Service Date and each successive 12-month period during which the Participant
does not perform an Hour of Service.
Section 2.32 Payroll Period. The term "Payroll Period" means the period
for which the Participant is directly or indirectly paid or entitled to payment
by the Company for the performance of services.
Section 2.33 Participant. The term "Participant" means any Eligible
Employee or former Eligible Employee for whom an RSP Account is maintained under
the Plan.
Section 2.34 Permanent Disability. The term "Permanent Disability" means
the permanent and total incapacity of a Participant to perform the duties of his
employment with the Company by reason of physical or mental impairment, as
determined by the Plan Administrator based upon the written opinion of a
licensed physician approved by it. The Plan Administrator, acting upon the
written advice of such physician, shall determine the date
-7-
on which the Permanent Disability shall be deemed to exist. Subject to the
provisions of Section 15.11, the final decision of the Plan Administrator with
respect to Permanent Disability shall be conclusive for all purposes of the Plan
and Trust.
Section 2.35 Plan. The term "Plan" means the Borg-Warner Retirement
Savings Plan, as set forth herein and as from time to time amended and in
effect.
Section 2.36 Plan Administrator. The term "Plan Administrator" means the
person or persons appointed to administer the Plan pursuant to Section 15.03.
Section 2.37 Plan Year. The term "Plan Year" means the administrative
year of the Plan and Trust, which is maintained on a January 1 through December
31 basis.
Section 2.38 Reemployment Commencement Date. The term "Reemployment
Commencement Date" means the date on which an Employee first performs an Hour of
Service for the Company after a One-Year Period of Severance.
Section 2.39 Related Employer. The term "Related Employer" means (i) any
trade or business under common control (as defined in Sections 414(b) and (c) of
the Code) with the Company, (ii) members of a controlled group of corporations
(as defined in Section 1563(a) of the Code, applied without regard to Sections
1563(a)(4) and 1563(e)(3)(C) of the Code) of which the Company is also a member,
(iii) any member of an affiliated service group (as defined in Section 414(m) of
the Code) of which the Company is also a member, and/or (iv) any entity required
to be aggregated with the Company pursuant to Section 414(o) of the Code.
Section 2.40 RSP Account. The term "RSP Account" means the Company
Retirement Account, the Employee Retirement Account and/or the Savings Account
maintained for a Participant, as the context requires.
Section 2.41 RSP Committee. The term "RSP Committee" means the
committee, as constituted from time to time, which is appointed to administer
the Plan pursuant to Article 15.
Section 2.42 Savings Account. The term "Savings Account" means the
account maintained for each Participant showing the aggregate of the Before-Tax
Contributions made on such Participant's behalf pursuant to Section 5.02, the
After-Tax Contributions made by the Participant pursuant to Section 5.04 and
certain amounts transferred to the Plan pursuant to Section 7.01, after
adjustment for earnings, changes in market valuation or distributions, if any.
A Participant shall at all times have a fully vested and nonforfeitable interest
in his Savings Account.
-8-
Section 2.43 Severance from Service Date. The term "Severance from
Service Date" means the date on which an Employee's employment with the Company
is severed, which shall occur on the earlier of: (a) the date on which the
Employee quits, is discharged, retires or dies, or (b) the first day next
following a one-year period during which the Employee remains absent from
employment for any reason other than those specified in (a) above; provided,
however, that if the Employee is on an Authorized Leave of Absence at the end of
such one-year period, his Severance from Service Date shall occur on the
expiration date of such Authorized Leave of Absence unless he returns to active
employment with the Company prior to that date. If an Employee is on an
Authorized Leave of Absence due to a layoff, the Plan Administrator may approve
a Severance from Service Date which shall be the last day worked by the
Employee. Notwithstanding the foregoing, a Severance from Service Date shall
not be deemed to have occurred until the second anniversary of the first day of
an absence from work due to (w) the pregnancy of the Employee, (x) the birth of
a child of the Employee, (y) the placement of a child in connection with the
adoption of the child by the Employee, or (z) the caring for the child by the
Employee during the period immediately following the child's birth or placement
for adoption.
Section 2.44 Six-Month Period of Service. The term "Six-Month Period of
Service" means the period beginning on an Employee's Employment Commencement
Date and ending on the date as of which the Employee completes six consecutive
months of employment with the Company.
Section 2.45 Trust. The term "Trust" means the trust or trusts
established pursuant to Section 14.01.
Section 2.46 Trustee. The term "Trustee" means the trustee or trustees
appointed by the Employee Benefits Committee pursuant to Section 14.02, and any
successor trustee or trustees.
Section 2.47 Unvested Portion. The term "Unvested Portion" means (i) that
portion of the balance in a Participant's Company Retirement Account not
attributable to amounts transferred pursuant to Section 7.01 which is not the
Vested Portion, and (ii) that portion of the balance in a Participant's Employee
Retirement Account attributable to Company Matching Contributions which is not
the Vested Portion.
Section 2.48 Valuation Date. The term "Valuation Date" means a date as of
which each Investment Fund is valued and the RSP Accounts adjusted as provided
in Article 10. Valuation Dates shall be each business day (any day on which the
New York Stock Exchange is open for trading and on which the principal office of
the Administrative Services Provider is open) during the Plan Year.
-9-
Section 2.49 Vested Portion. The term "Vested Portion" means (a) that
portion of the balance in a Participant's Company Retirement Account, not
attributable to amounts transferred pursuant to Section 7.01, which results from
the application of the following schedule, and (b) that portion of the balance
in a Participant's Employee Retirement Account attributable to Company Matching
Contributions which results from the application of the following schedule:
Years of Vested Service Vested Portion
----------------------- --------------
Less than Five 0%
Five or more 100%
provided, however, that the balance in a Participant's Company Retirement
Account, not attributable to amounts transferred pursuant to Section 7.01, and
the balance in a Participant's Employee Retirement Account attributable to
Company Matching Contributions shall become fully vested and nonforfeitable on
the date on which the Participant suffers a Permanent Disability, the date on
which he attains age 65, provided he is employed by the Company on that date, or
the date of his death, provided he is employed by the Company on that date,
whichever occurs first.
A Participant shall at all times have a fully vested and nonforfeitable
interest in the balance in his Employee Retirement Account attributable to his
Before-Tax Contributions and his Savings Account.
Section 2.50 Year of Vested Service. The term "Year of Vested Service"
means each 12-month period of employment with the Company or with Borg-Warner
Automotive, Inc. or its subsidiaries, divisions and/or affiliates. An Employee
shall be credited with Years of Vested Service based on the time elapsed between
the Employee's Employment Commencement Date and his Severance from Service Date.
However, if an Employee, who is absent from service with the Company, is rehired
before incurring a One-Year Period of Severance, the Employee's period of
absence from service shall be included in his Years of Vested Service. Further,
any period during which an Employee is on an Authorized Leave of Absence or is
employed with a Related Employer shall be included in determining an Employee's
Years of Vested Service.
ARTICLE 3. PARTICIPATION
--------- -------------
Section 3.01 Commencement of Participation. Effective as of April 1,
1994, an Eligible Employee shall become a Participant in the Plan on the first
day of the first Payroll Period immediately following the date the Employee
first satisfies the eligibility requirements
-10-
of Section 2.17 or as soon as practicable thereafter. Such Eligible Employee,
upon becoming a Participant in the Plan, must submit the appropriate form to the
Local Plan Administrator.
Section 3.02 Participation After One-Year Period of Severance. If a
Participant's employment is terminated for any reason and he subsequently is
reemployed by the Company after incurring a One-Year Period of Severance, he
shall be eligible to become a Participant again on his Reemployment Commencement
Date, provided his prior Years of Vested Service are not disregarded under
subsection 11.05(c). The participation of any Employee whose prior Years of
Vested Service are disregarded under subsection 11.05(c) and who is so
reemployed shall commence when he satisfies the requirements of Section 3.01
after his Reemployment Commencement Date.
Section 3.03 Participation Upon Return From Authorized Leave of Absence.
A Participant on an Authorized Leave of Absence shall resume participation in
the Plan as of the first day of the first Payroll Period immediately following
the date such Participant returns to active employment with the Company or as
soon as practicable thereafter.
Section 3.04 Designation of Beneficiary. A Participant, by written
instrument executed and delivered to the Local Plan Administrator during his
lifetime, shall designate a Beneficiary to whom distribution shall be made in
the event of his death prior to the full receipt of his interest under the Plan.
The designation may be in favor of one or more Beneficiaries, may include
contingent as well as primary designations and named or unnamed trustees under
any will or trust agreement, may apportion the benefits payable in any manner
among the Beneficiaries and shall include the full name and post office address
of each Beneficiary; provided, however, that a married Participant's primary
Beneficiary shall at all times while the Participant is married be his current
spouse only (unless the spouse consents in writing, properly notarized or
witnessed by the Local Plan Administrator, to the Participant naming someone
other than the spouse as a primary Beneficiary and the consent acknowledges the
financial effect of the waiver and further acknowledges the nonspouse
beneficiary(ies), class of beneficiaries or contingent beneficiary(ies) and the
specific form of payment, if any, chosen by the Participant).
Any designation pursuant to this Section 3.04 may be changed or revoked by
the Participant at any time and from time to time by similar instrument in
writing delivered to the Local Plan Administrator on a form provided by the Plan
Administrator. The designation form received and acknowledged most recently by
the Local Plan Administrator shall control as of any date. Subject to the
provisions of Section 12.01, a Beneficiary with rights under the Plan, which
will or may survive such Beneficiary's death, may designate a Beneficiary of
those rights in the same manner and subject to the same limitations applicable
to a Participant, except that the spousal consent requirement shall not apply.
Distribution of any benefits with respect to which a Participant (or a
Beneficiary so entitled) fails effectively to designate a Beneficiary or
successor Beneficiary shall be made as provided in Section 11.02.
-11-
If concurrent Beneficiaries are named without specifying the proportion of
benefits due to each, distribution shall be made in equal shares to those
Beneficiaries. Any distribution other than to the estate of the person entitled
to make the designation shall not be subject to the claims of creditors of that
person.
Section 3.05 Transfer from and to a Tax-Qualified Defined-Benefit Pension
------------ ------------------------------------------------------------
Plan of the Company.
-------------------
(a) If a participant in a tax-qualified defined-benefit pension plan to
which the Company contributes becomes a Participant eligible to
receive a Company Retirement Contribution pursuant to Section 4.01,
then such Participant shall not accrue any benefit under such tax-
qualified defined-benefit pension plan for service with respect to
which he is eligible to receive a Company Retirement Contribution.
(b) If a Participant ceases to be eligible to receive a Company Retirement
Contribution pursuant to Section 4.01 and participates in any tax
qualified defined-benefit pension plan, the provisions of which would
grant the Participant credit for service for the period during which
he was eligible to receive a Company Retirement Contribution, the
Participant may upon retirement elect under the tax-qualified defined-
benefit pension plan to (i) receive his vested accrued benefit under
the terms of the tax-qualified defined-benefit pension plan and
forfeit the Vested Portion of his Company Retirement Account or (ii)
receive his vested accrued benefit under the tax-qualified defined-
benefit pension plan, reduced by the actuarially equivalent benefit
amount of the Vested Portion of the balance in his Company Retirement
Account (as determined by an actuary selected by the Plan
Administrator), and receive the Vested Portion of the balance in his
Company Retirement Account.
(c) If a Participant transfers the present value of his accrued benefit
under a tax-qualified defined-benefit pension plan maintained by the
Company to the Plan pursuant to Section 7.01 and subsequently ceases
to be an Eligible Employee and participates in a tax-qualified defined
benefit pension plan maintained by the Company, then for purposes of
subsection 3.05(b), such Participant's Company Retirement Account
shall include the amount transferred pursuant to Section 7.01.
Section 3.06 Transfer from Borg-Warner Automotive, Inc. Effective as of
January 27, 1993, if an Employee is transferred to the Corporation from Borg-
Warner Automotive, Inc. or its subsidiaries, divisions or affiliates, ("BWA")
such Employee shall be eligible to participate in the Plan effective as of the
first day of the first Payroll Period immediately following the date the
Employee first satisfies the eligibility requirements of Section 2.17 or
-12-
as soon as practicable thereafter. If such Employee has already met the
eligibility requirements under Section 2.17, they shall be eligible immediately.
Years of Service with BWA shall be counted as Years of Service for purposes of
Sections 2.17, 2.40 and 4.01.
ARTICLE 4. COMPANY CONTRIBUTIONS
--------- ---------------------
Section 4.01 Amount of Company Retirement Contribution. For each Payroll
Period, subject to the provisions of Sections 6.01, 6.02 and 6.03, the Company
shall make a Company Retirement Contribution to the Participant's Company
Retirement Account which is established by the Trustee on behalf of each
Participant who is an Eligible Employee at any time during such Payroll Period;
provided, however, that no Company Retirement Contribution shall be made to the
Participant's Company Retirement Account on behalf of a Participant who elected
on or before May 16, 1988 to continue participation in the Borg-Warner
Corporation Retirement Plan. Effective as of January 27, 1993, all Years of
Vested Service the Employee accrued with Borg-Warner Automotive, Inc. or its
subsidiaries, divisions and/or affiliates shall be counted for purposes of
calculating the Company Retirement Contribution to the Participant's Company
Retirement Account. The amount of such Company Retirement Contribution shall be
computed on the following basis:
(a) The Company shall make a Company Retirement Contribution to the
Trustee on behalf of each Participant as follows:
Years of Vested % of Compensation under % of Compensation over
Service as of January 1 Social Security Wage Base Social Security Wage Base
----------------------- ------------------------- -------------------------
Less than or equal to 10 4% 8%
Greater than 10, but less 5% 10%
than or equal to 20
Greater than 20 6% 11.5%
-----------------------------------------------------------------------------------
(b) The Company shall make an additional Company Retirement Contributions
to the Trustee on behalf of each Participant who (i) participated in a
qualified benefit plan of the Borg-Warner Corporation, subsidiaries,
divisions and affiliates as of May 31, 1988, and (ii) attained age 45
as of December 31, 1988, as follows:
-13-
Attained Age as of December 31, 1988 Additional Company Retirement Contribution
-------------------------------------- ------------------------------------------
At least 45 but less than 50 1% of Compensation
Greater than or equal to 50 2% of Compensation
----------------------------------------------------------------------------------
Section 4.02 Amount of Company Matching Contribution. For each Payroll
Period, subject to the provisions of Sections 6.01, 6.02, 6.03 and 6.04, the
Company shall make a Company Matching Contribution to the Participant's Employee
Retirement Account which is established by the Trustee on behalf of each
Participant who is an Eligible Employee at any time during such Payroll Period,
provided such Participant makes a Before-Tax Contribution to his Employee
Retirement Account during such Payroll Period. The Company Matching
Contribution shall be an amount equal to the Participant's Before-Tax
Contribution which he made to his Employee Retirement Account pursuant to
Section 5.01 during such Payroll Period.
ARTICLE 5. PARTICIPANT CONTRIBUTIONS
--------- -------------------------
Section 5.01 Authorization of Before-Tax Contributions to Employee
Retirement Account. At the time an Eligible Employee becomes a Participant, he
may file an initial written election with the Local Plan Administrator
authorizing the Company to make deductions, for each Payroll Period, from his
Compensation for deposit with the Trustee in the Participant's Employee
Retirement Account in an amount not less than one percent (1%) nor more than
three percent (3%) of his Compensation for such Payroll Period, in whole
multiples of one percent (1%), which shall be characterized as Before-Tax
Contributions. Amounts contributed pursuant to this Section 5.01 shall be
eligible for Company Matching Contributions as described in Section 4.02.
Section 5.02 Authorization of Before-Tax Contributions to Savings Account.
At the time an Eligible Employee becomes a Participant, he may file an initial
written election with the Local Plan Administrator authorizing the Company to
make deductions, for each Payroll Period, from his Compensation for deposit with
the Trustee in the Participant's Savings Account in an amount not less than one
percent (1%) nor more than ten percent (10%) of his Compensation for such
Payroll Period, in whole multiples of one percent (1%), which shall be
characterized as Before-Tax Contributions. Amounts contributed pursuant to this
Section 5.02 shall not be eligible for Company Matching Contributions as
described in Section 4.02.
Section 5.03 Yearly Limitations on Before-Tax Contributions. No
Participant shall be permitted to have Before-Tax Contributions made under the
Plan during any calendar year in excess of $9,240 (reduced by the Participant's
elective deferrals for such year under any other salary reduction arrangement
under Section 401(k) or 403(b) of the Code), adjusted by
-14-
the cost-of-living factor prescribed by the Secretary of the Treasury pursuant
to Section 402(g)(5) of the Code for years beginning after 1994. Any Before-Tax
Contributions made by the Company on behalf of a Participant in excess of the
$9,240 limit, as adjusted for any calendar year, shall be returned to the
Participant (with earnings attributable thereto) no later than the April 15
following the close of the calendar year to which such excess relates.
Section 5.04 Authorization of After-Tax Contributions to Savings Account.
At the time an Eligible Employee becomes a Participant, he may file an initial
written election with the Local Plan Administrator authorizing the Company to
make deductions, for each Payroll Period, from his Compensation for deposit with
the Trustee in the Participant's Savings Account in an amount not less than one
percent (1%) nor more than ten percent (10%) of his Compensation for such
Payroll Period, in whole multiples of one percent (1%), which shall be
characterized as After-Tax Contributions, provided, however, that the amount the
Eligible Employee may contribute shall be reduced by the percentage amount
contributed by the Eligible Employee pursuant to Section 5.02.
Section 5.05 Deduction of Before-Tax Contributions and After-Tax
Contributions. The Company shall deduct the Participant's Before-Tax
Contributions and After-Tax Contributions from his Compensation and shall
transmit the sums so deducted to the Trustee for investment as provided in
Article 9. Such transmittal shall be made as soon as practicable after the
Administrative Services Provider confirms the information provided by the
Company.
Section 5.06 Change in Rate of Before-Tax Contributions and After-Tax
Contributions. Within the limitations provided in Sections 5.01, 5.02 and 5.04,
a Participant may change the rate of his Before-Tax Contributions and/or After-
Tax Contributions as of the first day of the Payroll Period next following the
completion of the processing of the request.
Section 5.07 Suspension of Before-Tax Contributions and After-Tax
Contributions. A Participant may elect to suspend his Before-Tax Contributions
and/or After-Tax Contributions as of the first day of the Payroll Period next
following the completion of the processing of the request.
Section 5.08 Resumption of Before-Tax Contributions and After-Tax
Contributions. A Participant may elect to resume his Before-Tax Contributions
and/or After-Tax Contributions as of the first day of the Payroll Period next
following the completion of the processing of the request.
Section 5.09 Limitation on Before-Tax Contributions and After-Tax
Contributions to Savings Account. Notwithstanding the foregoing, the aggregate
of a Participant's Before-Tax Contributions to his Savings Account pursuant to
Section 5.02 and his After-Tax Contributions pursuant to Section 5.04 shall not
exceed ten percent (10%) of his Compensation.
-15-
Section 5.10 Limitation on Amount of Before-Tax Contributions. The
Employee Benefits Committee shall decrease the Before-Tax Contributions made by
certain Participants and shall return the Before-Tax Contributions made by
certain Participants (and income allocable thereto) to the extent necessary to
meet either of the following tests for any Plan Year:
(a) The Actual Deferral Percentage of Eligible Employees who are Highly
Compensated Employees is not more than 1.25 times the Actual Deferral
Percentage of all other Eligible Employees; or
(b) The excess of the Actual Deferral Percentage of Eligible Employees who
are Highly Compensated Employees over the Actual Deferral Percentage
of all other Eligible Employees is not more than two percentage points
and the Actual Deferral Percentage of Eligible Employees who are
Highly Compensated Employees is not more than two times the Actual
Deferral Percentage of all other Eligible Employees.
If neither test (a) or (b) is satisfied for the Plan Year, the Actual
Deferral Percentage of the Highly Compensated Employee(s) with the highest
Actual Deferral Percentage must be reduced to the next highest Actual Deferral
Percentage of any Highly Compensated Employee(s) or, if it would involve less of
a reduction, to the highest Actual Deferral Percentage which allows the Plan to
satisfy test (a) or (b). This reduction must be repeated as many times (for
Highly Compensated Employees with successively lower Actual Deferral
Percentages) as necessary to satisfy test (a) or (b).
Once the permitted Actual Deferral Percentages of Highly Compensated
Employees are determined under the preceding paragraph, the Employee Benefits
Committee shall stop or decrease future Before-Tax Contributions by Highly
Compensated Employees for the rest of the Plan Year, or it may, instead of or in
addition thereto, take the following steps with respect to Before-Tax
Contributions or Company Matching Contributions made for a Highly Compensated
Employee:
(x) First, Before-Tax Contributions to the Participant's Savings Account
and earnings on those contributions shall be returned to him;
(y) Second, Before-Tax Contributions to the Participant's Employee
Retirement Account and earnings on those contributions shall be
returned to him; and
(z) Third, Company Matching Contributions to the Participant's Employee
Retirement Account shall be forfeited.
-16-
The earnings to be returned under (x) or (y) shall be calculated on a
uniform basis under Reg. (S)1.401(k)-1(f)(4). All returns of contributions and
earnings (including gap earnings) under (x) or (y) shall be made within 2-1/2
months after the end of the Plan Year.
ARTICLE 6. LIMITATIONS ON CONTRIBUTIONS TO THE PLAN
--------- ----------------------------------------
Section 6.01 Limitation on Amount of Company Retirement Contributions and
Company Matching Contributions. Company Retirement Contributions and Company
Matching Contributions made by any party to the Plan which, along with the
Company, is a member of an affiliated group within the meaning of Code Section
1504 (for purposes of this Section 6.01, a "Member") shall be made only on
behalf of Participants who are Eligible Employees of the contributing Member,
and Company Retirement Contributions and Company Matching Contributions shall be
made only from current or accumulated earnings or profits of such Member.
If any Member is prevented from making a contribution which it otherwise
would have made by reason of having no current or accumulated earnings or
profits, or because such earnings or profits are less than the contribution
which it otherwise would have made, then so much of the contribution which such
Member was so prevented from making may be made for the benefit of the
Participants who are Eligible Employees of such Member by any of the other
Members to the extent of each such other Member's current or accumulated
earnings or profits. If the Members do not file a consolidated federal income
tax return, such contribution by each such other Member shall be limited to that
portion of its total current and accumulated earnings or profits remaining after
adjustment for its contributions on behalf of Participants who are its own
Eligible Employees which the total prevented contribution bears to the total
current and accumulated earnings or profits of all such other Members remaining
after adjustment for all contributions on behalf of Participants who are their
own Eligible Employees.
The Corporation may waive the earnings and profits limitation under this
Section 6.01 for any Plan Year. The amount of contributions made by any Member
for a Plan Year shall not exceed the amount deemed to be deductible in computing
the taxable income of such Member (taking into account all contributions under
all of such Member's tax-qualified plans and all privileges and limitations of
carryovers and carryforwards and established by law) for the purpose of
computing taxes on or measured by income under the provisions of the Code and/or
any other laws in effect from time to time.
A contribution which was made by a Member upon a mistake of fact, or
conditioned upon initial qualification of the Plan or upon the deductibility of
the contribution under Section 404 of the Code (all contributions to this Plan
shall be made conditioned on the deductibility of such contributions) shall,
upon a contributing Member's request, be returned
-17-
to such Member within one year after the payment of the mistaken contribution,
the denial of qualification or the disallowance of the deduction (to the extent
disallowed), which is applicable.
Section 6.02 Maximum Annual Additions to RSP Account. Notwithstanding any
other provision of the Plan, the "total additions" to a Participant's RSP
Account for any Limitation Year shall not exceed an amount equal to the lesser
of:
(a) $30,000 adjusted for each Limitation Year to take into account any
cost-of-living increase provided for that Limitation Year under
Section 415(d) of the Code; or
(b) Twenty-five percent (25%) of the Compensation paid to the Participant
by the Company in the Limitation Year.
For purposes of this Section 6.02 and Section 6.03, the term "total additions"
shall mean, with respect to each Participant for each Limitation Year, the
aggregate of the Company Retirement Contributions, Company Matching
Contributions, Before-Tax Contributions and After-Tax Contributions allocated to
his RSP Account.
If any Participant's total additions exceed the applicable maximum
limitation set forth above, contributions shall be returned to the Participant
or the contributing Company to the extent necessary and in the following
priority:
(v) First, After-Tax Contributions to the Participant's Savings Account
and earnings on those contributions shall be returned to him;
(w) Second, Before-Tax Contributions to the Participant's Savings Account
shall be placed in a suspense account and reallocated to the
Participant's Savings Account in the following year and any earnings
on these Before-Tax Contributions shall be forfeited;
(x) Third, Before-Tax Contributions to the Participant's Employee
Retirement Account shall be placed in a suspense account and
reallocated to the Participant's Employee Retirement Account in the
following year and any earnings on these Before-Tax Contributions
shall be forfeited;
(y) Fourth, Company Matching Contributions to the Participant's Employee
Retirement Account shall be forfeited; and
(z) Fifth, Company Retirement Contributions to the Participant's Company
Retirement Account shall be forfeited.
-18-
Section 6.03 Participation in More Than One Plan of Company. In the event
that the total additions which otherwise would be credited to a Participant's
account under all tax-qualified defined-contribution plans of the Company for
any Limitation Year exceed the limitations set forth in Section 6.02, the excess
total additions shall be returned to the Participant or the contributing Company
to the extent necessary and in the priority established under subsections
6.02(v), (w), (x), (y) and (z).
In the event a Participant is also a participant in one or more tax-
qualified defined-benefit pension plans of the Company, the sum of such
Participant's defined-benefit plan fraction and defined-contribution plan
fraction, as determined pursuant to Section 415(e) of the Code for any
Limitation Year, shall not exceed 1.0. If the sum of a Participant's defined-
contribution plan and defined-benefit plan fractions otherwise would exceed 1.0
for any Limitation Year, then the total additions which otherwise would be
credited to his accounts under all applicable defined-contribution plans shall
be adjusted pursuant to Section 6.02 and this Section 6.03 to the extent
necessary so that the sum of such fractions does not exceed 1.0. If, after all
such adjustments, the sum of a Participant's defined-contribution plan and
defined-benefit plan fractions would still exceed 1.0, then the benefit which
otherwise would be accrued with respect to such Participant under any applicable
tax-qualified defined-benefit pension plan shall be considered not to have been
accrued and will be limited to the extent necessary so that the sum does not
exceed 1.0.
Section 6.04 Limitation on Amount of Company Matching Contributions and
After-Tax Contributions. For each Plan Year, the Employee Benefits Committee
shall determine whether Company Matching Contributions and After-Tax
Contributions for that Plan Year meet either of the following tests:
(a) The Actual Contribution Percentage of Eligible Employees who are
Highly Compensated Employees is not more than 1.25 times the Actual
Contribution Percentage of all other Eligible Employees; or
(b) The excess of the Actual Contribution Percentage of Eligible Employees
who are Highly Compensated Employees over the Actual Contribution
Percentage of all other Eligible Employees is not more than two
percentage points and the Actual Contribution Percentage of Eligible
Employees who are Highly Compensated Employees is not more than two
times the Actual Contribution Percentage of all other Eligible
Employees.
If neither test (a) or (b) is satisfied for the Plan Year, the Actual
Contribution Percentage of the Highly Compensated Employee(s) with the highest
Actual Contribution Percentage must be reduced to the next highest Actual
Contribution Percentage of any Highly Compensated Employee(s) or, if it would
involve less of a reduction, to the highest Actual Contribution Percentage which
allows the Plan to satisfy test (a) or (b). This reduction must
-19-
be repeated as many times (for Highly Compensated Employees with successively
lower Actual Contribution Percentages) as necessary to satisfy test (a) or (b).
Once the permitted Actual Contribution Percentages of Highly Compensated
Employees are determined under the preceding paragraph, the Employee Benefits
Committee shall stop or decrease future After-Tax Contributions by Highly
Compensated Employees for the rest of the Plan Year, or it may, instead of or in
addition thereto, return to the Highly Compensated Employee his After-Tax
Contributions to his Savings Account and earnings on those contributions, and
forfeit his Company Matching Contributions to the extent necessary to satisfy
either test (a) or (b).
The earnings to be returned shall be calculated on a uniform basis under
Reg. (S)1.401(m)-1(e)(3). All returns of contributions and earnings (including
gap earnings) shall be made within 2-1/2 months after the end of the Plan Year.
Section 6.05 Limit on Multiple Use of Alternate Limitations. If, for any
Plan Year, the Employee Benefits Committee relies on Sections 5.10(b) and
6.04(b) to pass the relevant limitations in those Sections, the "Relevant
Percentage" must be calculated with respect to Highly Compensated Employees.
For any Plan Year, the Relevant Percentage is the greater of (a) or (b),
calculated as follows:
(a) 1.25 times the greater of the Actual Contribution Percentage or Actual
Deferral Percentage for all Eligible Employees who are not Highly
Compensated Employees, plus the lesser of the Actual Contribution
Percentage or Actual Deferral Percentage for Eligible Employees either
increased by 2% or doubled, whichever is less;
(b) 1.25 times the lesser of the Actual Contribution Percentage or Actual
Deferral Percentage for all Eligible Employees who are not Highly
Compensated Employees, plus the greater of the Actual Contribution
Percentage or Actual Deferral Percentage for Eligible Employees who
are not Highly Compensated Employees either increased by 2% or
doubled, whichever is less.
If the sum of the Actual Contribution Percentage and Actual Deferral
Percentage for all Eligible Employees who are Highly Compensated Employees
exceeds the Relevant Percentage, the Employee Benefits Committee may make
reductions in After-Tax Contributions as described in Section 6.04, Before-Tax
Contributions as described in Section 5.10 or Company Matching Contributions as
described in Section 6.04 until the sum of the Actual Contribution Percentage
and Actual Deferral Percentage for Eligible Employees who are Highly Compensated
Employees no longer exceeds the Relevant Percentage. The
-20-
reductions described in the previous sentence may be made either for all Highly
Compensated Employees or only for all Highly Compensated Employees who make both
Before-Tax Contributions and After-Tax Contributions.
ARTICLE 7. TRANSFER OF AMOUNTS TO/FROM OTHER QUALIFIED PLANS
--------- -------------------------------------------------
Section 7.01 Receipt of Portable Accounts. The RSP Committee may approve
the transfer to the Plan of all or a portion of the assets and liabilities of
any other plan of deferred compensation qualified under Section 401(a) of the
Code; provided, however, that the RSP Committee shall not accept a transfer of
any amount which would cause the Plan to be deemed a "transferee plan" within
the meaning of Section 401(a)(11)(B)(iii) of the Code. Transfers to the Plan
pursuant to this Section 7.01 shall be in the form of a direct trustee-to-
Trustee transfer. Notwithstanding the foregoing, the RSP Committee shall not
accept a transfer of any after-tax contributions. The amounts transferred
pursuant to this Section 7.01 from any tax-qualified defined-benefit pension
plan maintained by the Company shall be credited to the Participant's Company
Retirement Account. In all other cases, any amounts transferred pursuant to
this Section 7.01 shall be credited to the Participant's Savings Account. The
interest of each Participant in that portion of his Company Retirement Account
attributable to amounts transferred pursuant to this Section 7.01, if any, shall
be fully vested and nonforfeitable at all times. In no event shall the Trustee
receive accounts if such receipt or the subsequent administration of such
accounts might subject the Trust assets to tax liability deriving from an
Employee's terminated participation in any other tax-qualified plan.
ARTICLE 8. RSP ACCOUNTS
--------- ------------
Section 8.01 Establishment of RSP Accounts and Statement of Account
Balances. The Trustee shall establish and maintain for each Participant an RSP
Account, which shall consist of a Company Retirement Account, an Employee
Retirement Account and a Savings Account, if applicable. Each RSP Account shall
be invested as provided in Article 9. The Plan Administrator shall provide each
Participant with a statement of the balance in his Company Retirement Account,
Employee Retirement Account and Savings Account not less frequently than once
every Plan Year.
Section 8.02 Nonforfeitability of Certain Accounts. The interest of each
Participant in the balance in his Company Retirement Account attributable to
amounts transferred pursuant to Section 7.01, if any, the balance in his
Employee Retirement Account attributable to Before-Tax Contributions and the
entire balance in his Savings Account shall at all times be fully vested and
nonforfeitable.
-21-
ARTICLE 9. INVESTMENT FUNDS
--------- ----------------
Section 9.01 Establishment of Funds. The Employee Benefits Committee
shall cause the Trustee to establish the following Investment Funds effective as
of April 1, 1994 and such Funds as the Employee Benefits Committee shall
determine in its discretion from time to time. The Employee Benefit's Committee
may in its discretion discontinue the availability of any of the Investment
Funds established under the Plan from time to time.
(a) Investment Contracts Fund
-------------------------
The Investment Contracts Fund (the "IC Fund") seeks to preserve
capital and provide income through investments in investment contracts
with either highly rated insurance companies, major banks or a fund or
funds that invest in investment contracts of insurance companies or
major banks. The IC Fund also invests in short-term investments which
provide liquidity for meeting regular benefit payments, transfers and
other payments. The investment contracts provide that the insurance
company or bank will pay the IC Fund the amount invested plus interest
for a specified period of time.
(b) Putnam U.S. Government Income Trust
-----------------------------------
The Putnam U.S. Government Income Trust seeks a high level of current
income consistent with capital preservation by investing exclusively
in securities backed by the full faith and credit of the United States
government and in repurchase agreements and forward commitments with
respect to such securities.
(c) The George Putnam Fund of Boston
--------------------------------
The George Putnam Fund of Boston seeks to provide a balanced
investment composed of a well-diversified portfolio of stocks and
bonds. It is designed to produce both capital growth and current
income.
(d) The Putnam S&P 500 Index Fund
-----------------------------
The Putnam S&P 500 Index Fund is a collective investment trust that
will invest primarily in publicly traded common stocks either directly
or through collective investment trusts having a similar investment
objective. In addition, for liquidity and hedging purposes, a small
portion of the fund's assets will be invested in high-quality money
market instruments and financial futures contracts. This fund seeks
to mirror the performance of the Standard & Poor's 500 Index.
-22-
(e) Putnam Voyager Fund
-------------------
The Putnam Voyager Fund seeks capital appreciation, primarily from a
portfolio of common stocks. The fund generally invests a significant
portion of its assets in the securities of smaller and newer issuers.
The fund may use "leverage" -- that is, it may borrow money to
purchase additional portfolio securities. The fund may also trade
securities for short-term profits.
Section 9.02 Investment in Funds. Each of the Investment Funds shall be
invested without distinction between principal and income within the investment
directive for that Fund. Pending payment of costs, expenses or anticipated
benefits, or acquisition of investments, the Trustee may hold any portion of the
Investment Funds in obligations issued or fully guaranteed as to payment of
principal or interest by the Federal government or governmental agencies, short-
term demand notes, certificates of deposit, commercial paper, collective trust
funds that invest in short-term investments or any other interest-paying short-
term investment product or in cash, and may deposit any uninvested funds with
any bank selected by the Trustee.
Section 9.03 Investment of RSP Accounts. Each Participant shall have the
right to file an initial written election with the Local Plan Administrator
directing that Company Retirement Contributions, Company Matching Contributions,
Before-Tax Contributions and After-Tax Contributions to his Company Retirement
Account, Employee Retirement Account and Savings Account be invested in
specified multiples of five percent (5%) up to one hundred percent (100%)
thereof, in any one or more of the Investment Funds. A Participant's initial
investment election shall be made by submitting the required form to the Local
Plan Administrator. In the absence of an effective election, one hundred
percent (100%) of the Company Retirement Contributions in a Participant's
Company Retirement Account shall be invested in The George Putnam Fund of
Boston.
Section 9.04 Transfer of RSP Accounts From the Former Investment Funds
(Stock Fund, Bond Fund, Spectrum Fund and Investment Contracts Fund) to the
Investment Funds Pursuant to Section 9.01 of the Plan. Each Participant who had
a balance in their Company Retirement Account, Employee Retirement Account
and/or Savings Account as of March 31, 1994 shall have the right to file a
written election with the Local Plan Administrator directing the value of his
Company Retirement Account, Employee Retirement Account and Savings Account be
invested in any one or more of the Investment Funds established under Section
9.01. Such election shall be effective and such assets shall be transferred
from the former investment funds (the Stock Fund, Bond Fund, Spectrum Fund and
Investment Contracts Fund) to the Investment Funds under Section 9.01 following
the final accounting of the records by the Administrative Services Provider.
If the Participant does not make a written election, the assets in his
Company Retirement Account, Employee Retirement Account and Savings Account that
were invested
-23-
in the Investment Contracts Fund prior to the date of transfer shall be
transferred to the IC Fund, the amount in the Bond Fund shall be invested in the
Putnam U.S. Government Income Trust, the amount in the Spectrum Fund shall be
invested in The George Putnam Fund of Boston, and the amount in the Stock Fund
shall be invested 50% in the Putnam S&P 500 Index Fund and 50% in the Putnam
Voyager Fund.
Section 9.05 Change in Participant's Investment Election of Future
Contributions. Each Participant may elect to change the investment of future
Company Retirement Contributions, Employee Retirement Contributions, Before-Tax
Contributions, and After-Tax Contributions to his Company Retirement Account,
Employee Retirement Account and Savings Account in any multiple of five percent
(5%) of such contributions up to one hundred percent (100%) thereof by
contacting the Administrative Services Provider.
After the Participant's request to change has been processed, future
Company Retirement Contributions, Employee Retirement Contributions, Before-Tax
Contributions, and After-Tax Contributions made to the Participant's Company
Retirement Account, Employee Retirement Account and Savings Account will be
invested, according to the Participant's investment election.
Section 9.06 Change in Participant's Investment Election on the Balance of
the Participant's Account. Each Participant may elect to change the investment
(transfer from one Investment Fund to another) of the balance of the Company
Retirement Contributions, Company Matching Contributions, Before-Tax
Contributions and After-Tax Contributions made to his Company Retirement
Account, Employee Retirement Account and Savings Account in any multiple of five
percent (5%) of such contributions up to one hundred percent (100%) thereof by
contacting the Administrative Services Provider.
A Participant can make transfers among the Investment Funds (move a
percentage of money from one Investment Fund to another) as of the close of
business on any business day, if the request is received by the Administrative
Services Provider by 4:00 p.m. Eastern time. If any request for a transfer is
received after 4:00 p.m. Eastern time, it will be treated as being received the
next business day.
Section 9.07 Limitation of Liability of Fiduciaries. The Fiduciaries
shall not be responsible for any loss, depreciation or diminution in value of
Trust assets invested in accordance with the direction of a Participant. The
Plan is intended to constitute a plan described in Section 404(c) of ERISA, and
Department of Labor Regulation 2550.404(c)-1.
To the extent of such compliance, the Fiduciaries of the Plan may be
relieved of liability with respect to the Participant-directed investments. The
RSP Committee is the Fiduciary responsible for overseeing investments under the
Plan, but has delegated the daily administrative responsibility for implementing
Participant investment instructions to the
-24-
Administrative Services Provider. Also, the Administrative Services Provider is
responsible for providing the following detailed information about the
Investment Funds when requested by a Participant:
- copies of any prospectuses and/or brochures for any Investment Fund;
- copies of any other financial statements and reports provided to the
Pan about an Investment Fund;
- a description of the annual operating expenses of any Investment Fund
and the aggregate annual expenses expressed as a percentage of average
net assets;
- information about the past and current value of shares or units
available in the Investment Funds; and
- the current share or unit value of a Participant's RSP Account.
The RSP Committee has established procedures to protect the confidentiality
of information relating to Participant investments in all the Investment Funds.
Information about any Participant exercise of voting, tender and similar rights
is also subject to these confidentiality procedures. Investment information and
voting instructions from Participants shall not be divulged to anyone, including
the Company or any director, officer, employee or agent of the Company. The
intent is to insure that the Company (and its directors, officers, employees,
agents) cannot determine the instructions given by any Participant. The RSP
Committee is the Fiduciary responsible for insuring that these confidentiality
procedures are followed.
ARTICLE 10. VALUATIONS AND ADJUSTMENTS OF ACCOUNTS
---------- --------------------------------------
Section 10.01 Method of Valuation of RSP Accounts. Notwithstanding any
other provision of the Plan, to the extent that Participants' RSP Accounts are
invested in mutual funds or other assets for which daily pricing is available,
all amounts contributed to the Trust will be invested at the time of their
actual receipt by the Administrative Services Provider and the balance of each
Participant's RSP Account shall reflect the results of such daily pricing from
the time of the actual receipt until the time of distribution. References
elsewhere in the Plan to the investment of contributions "as of" a date other
than that described in this Section 10.01 shall apply only to the extent, if
any, that assets of the Trust are not invested in an asset for which daily
pricing is available.
Section 10.02 Forfeitures. As of the last Valuation Date of each month,
Forfeitures that arose during such month shall be applied to reduce the total
amount the Company
-25-
otherwise is required to contribute pursuant to Sections 4.01 and 4.02 as of the
Valuation Date or subsequent Valuation Date. Any amount applied to reduce a
Company contribution for any Valuation Date in accordance with this Section
10.02 shall be considered a part of the Company's contribution for such Payroll
Period.
Section 10.03 Date of Adjustments. Every adjustment made pursuant to
Section 10.01 and 10.02 shall be considered as having been made on the
applicable Valuation Date. The Employee Benefits Committee's determination of
the net value of the assets of the Trust (which shall be based upon accountings
rendered by the Trustee) and charges or credits to the RSP Accounts shall be
conclusive and binding on all parties having or claiming to have any interest
hereunder.
ARTICLE 11. BENEFITS
---------- --------
Section 11.01 Upon Termination After Full Vesting Except by Reason of
Death. Each Participant whose employment with the Company is terminated on or
after (a) his 65th birthday, (b) the date on which he completes the number of
Years of Vested Service necessary for full vesting or (c) the date on which he
suffers a Permanent Disability, shall be entitled to receive a benefit, to be
distributed as provided in Article 12, equal to the balance in his RSP Account
as of the Valuation Date coinciding with the date on which distribution of
benefits commences.
Section 11.02 Upon Termination by Reason of Death. If a Participant dies,
his Beneficiary shall be entitled to receive a benefit, to be distributed as
provided in Article 12, equal to the balance in the Participant's RSP Account as
of the Valuation Date coinciding with the date on which distribution of benefits
commences. In the event there is no designated Beneficiary living at the death
of the Participant, distribution shall be made as follows:
(a) If the Participant is survived by his spouse, the surviving spouse
shall be treated as the sole designated Beneficiary.
(b) If the Participant is not survived by his spouse and a will of the
Participant is admitted to probate, then as the Participant shall have
specifically directed in such will, and if he shall have made no
specific direction, then as his will shall direct distribution of his
residuary estate.
(c) If the Participant is not survived by his spouse and the Plan
Administrator has no notice that a will of the Participant has been
admitted to probate within 180 days after his death, then to the
heirs-at-law of the Participant, said heirs-at-law and the proportions
they shall respectively be entitled to receive to be
-26-
determined according to the laws of descent and distribution of the
state in which the Participant resided immediately before his death.
Section 11.03 Upon Termination Prior to Full Vesting. Each Participant
whose employment with the Company terminates by reason of resignation or
dismissal prior to completing the number of Years of Vested Service necessary
for full vesting shall be entitled to receive a benefit, to be distributed as
provided in Article 12, equal to the sum of the balance in his Company
Retirement Account attributable to amounts transferred pursuant to Section 7.01,
if any, the balance in his Employee Retirement Account attributable to Before-
Tax Contributions pursuant to Section 5.01 and the entire balance in his Savings
Account as of the Valuation Date, coincident with the date on which distribution
of benefits commences. The Unvested Portion of such Participant's Company
Retirement Account and Employee Retirement Account shall be forfeited pursuant
to Section 10.02.
Section 11.04 Amendment to Vesting Schedule. In the event of an amendment
to the vesting schedule in Section 2.49, each Participant with at least three
Years of Vested Service may elect to continue to have his Vested Portion
computed without regard to such amendment. Such a Participant shall make the
foregoing election no later than the last to occur of the following:
(a) The date which is 60 days after the date on which the amendment is
adopted;
(b) The date which is 60 days after the date on which the amendment
becomes effective; or
(c) The date which is 60 days after the date on which the Participant
receives written notice of the amendment.
Section 11.05 Period of Severance. A Participant's rights and benefits
under the Plan generally shall be determined in accordance with his Years of
Vested Service and the balance in his RSP Account at the time of termination of
service, subject to the following:
(a) If a Participant, who had a vested interest in that portion of the
balance in his Company Retirement Account not attributable to amounts
transferred pursuant to Section 7.01, and that portion of the balance
in his Employee Retirement Account attributable to Company Matching
Contributions when his employment terminated, is reemployed by the
Company, his Years of Vested Service prior to his termination of
employment shall be reinstated.
(b) If a Participant, who had no vested interest in that portion of the
balance in his Company Retirement Account not attributable to amounts
transferred pursuant to Section 7.01, and that portion of the balance
in his Employee Retirement
-27-
Account attributable to Company Matching Contributions when his
employment terminated, is reemployed by the Company before incurring
five consecutive One-Year Periods of Severance, the amounts forfeited
pursuant to Section 11.03 shall be restored to his Company Retirement
Account and Employee Retirement Account as of his Reemployment
Commencement Date and his Years of Vested Service prior to that period
of severance shall be reinstated.
(c) If a Participant had no vested interest in his RSP Account, then the
Years of Vested Service prior to his separation of service will be
disregarded, but only if the number of consecutive one year breaks in
service equals or exceeds the greater of his Years of Vested Service
prior to his separation of service, or five years.
Section 11.06 Suspension of Benefits Upon Reemployment of Participant.
Subject to Sections 12.04(b) or 12.06, a Participant who is receiving
installment payments from the Plan is reemployed by the Company, his installment
payments shall be suspended as of his reemployment, subject to the following
rules:
(a) the Participant must receive a notice (by personal delivery of first-
class mail) during the first month for which his installments are
suspended, with the notice to contain the information required by
Department of Labor Reg. (S)2530.230-3(b)(4);
(b) no installment may be withheld for any month in which the Participant
is credited with less than 40 Hours of Service or receives pay for
fewer than 8 days; and
(c) with his first installment after he is again eligible to receive
benefits under this Article 11, the Participant will receive all his
suspended installments.
ARTICLE 12. DISTRIBUTION OF BENEFITS
---------- ------------------------
Section 12.01 Request for Distribution. A Participant entitled to a
benefit under the Plan may request that his benefit be distributed to him under
one or more of the alternative methods of distribution described in Section
12.02. In the event a Participant dies prior to the commencement of benefits
under the Plan, or after the commencement of benefits but before distribution of
his entire interest under the Plan, the Participant's remaining interest shall
be distributed in such manner as the Participant has elected in writing prior to
his death, or in the absence of such an election, under one or more of the
alternative methods of distribution described in Section 12.02, as the
Beneficiary shall direct. Notwithstanding the foregoing, the
-28-
benefit payable to a Beneficiary of a Beneficiary pursuant to Section 3.04 shall
be distributed in a lump-sum payment.
Section 12.02 Methods of Distribution. Subject to the provisions of
Section 12.01, upon the termination of employment of a Participant for any
reason, distribution shall be made by one of the following methods, or
combination thereof, as the Participant or Beneficiary shall elect on a properly
completed final distribution form submitted to the Plan Administrator or to such
other person designated by the Plan Administrator, except that if the Vested
Portion in the Participant's RSP Account does not exceed $3,500, the Plan
Administrator shall require that distribution be made in one lump-sum payment
without the consent of the Participant or Beneficiary:
(a) Lump-Sum Distribution. Distribution may be made by lump-sum payment;
(b) Installment Distribution. Distribution may be made in approximately
equal installments not less frequently than annually for any definite
period which does not exceed (i) the life or life expectancy of the
Participant or (ii) the joint lives or joint life expectancy of the
Participant and his Beneficiary, whether or not the Beneficiary is his
spouse. The present value of benefits payable to the Participant
during his lifetime shall be more than fifty percent (50%) of the
present value of the total benefits payable to the Participant and his
Beneficiary, determined as of the termination of employment. Subject
to the provisions of Section 12.06, when a Participant's RSP Account
is distributable in periodic installments, it shall not thereafter be
eligible for any Company contributions pursuant to Sections 4.01 and
4.02. In the event distribution of a benefit is made, in whole or in
part, in installments pursuant to this subsection 12.02(b), the
distributee may elect in writing, on a form provided by the Plan
Administrator or by such other person designated by the Plan
Administrator, to accelerate the payment of all or any portion of any
unpaid installments; provided, however, that the distributee may not
make more than two elections to accelerate the payment of any unpaid
installments in any calendar year. The life expectancy used in this
subsection 12.02(b) shall be determined as of the Valuation Date
immediately preceding the later of the Participant's (i) retirement,
or receipt of benefit, or (ii) death, but in no event later than the
required minimum distribution date pursuant to Section 401(a)(9) of
the Code.
(c) Death Before Commencement of Benefits. If a Participant dies before
distribution pursuant to this Section 12.02 has begun, the entire
interest of the Participant's RSP Account shall be distributed within
five years after his death, with the following exceptions:
-29-
(1) If the Participant's Beneficiary is not his surviving spouse, the
entire interest of the Participant may be distributed to the
Beneficiary over a period not exceeding the Beneficiary's life or
life expectancy, provided such payments begin within one year
after the Participant's death.
(2) If the Beneficiary is the surviving spouse, distribution to the
surviving spouse shall begin no later than the later of the date
on which the Participant would have attained age 70-1/2 or the
first anniversary of the Participant's death, and shall be made
over a period not exceeding the life or life expectancy of the
surviving spouse.
(3) If the surviving spouse dies before payments begin, the surviving
spouse shall be treated for the purpose of the rules in this
subsection 12.02(c) as the Participant. If the surviving spouse
dies after payments begin but before the entire interest is
distributed, the entire remaining interest shall be distributed
to the surviving spouse's Beneficiary over a period not exceeding
the surviving spouse's Beneficiary's life or life expectancy,
provided such payments begin within one year after the surviving
spouse's death.
(4) Notwithstanding the foregoing provisions of this subsection
12.02(c), the Beneficiary may elect in writing, on a form
provided by the Plan Administrator or such other person
designated by the Plan Administrator, to accelerate the
distribution of all or any portion of the benefits payable to
him; provided, however, that the Beneficiary may not make more
than two elections to accelerate the distribution of benefits in
any calendar year.
(d) Death After Commencement of Installment Payments. If a Participant
dies after distribution pursuant to subsection 12.02(b) has begun but
before his entire interest is distributed and such distribution is to
be for a period certain not exceeding the life or life expectancy of
the Participant or the joint lives or joint life expectancy of the
Participant and his Beneficiary, the remaining portion shall continue
to be distributed according to that schedule. Notwithstanding the
preceding sentence, the Beneficiary may elect in writing, on a form
provided by the Plan Administrator or such other person designated by
the Plan Administrator, to accelerate the payment of all or any
portion of any unpaid installments; provided, however, that the
Beneficiary may not make more than two elections to accelerate the
payment of any unpaid installments in any calendar year.
-30-
(e) Distribution to Trust for Primary Benefit of a Spouse. In addition to
the requirements under subsections 12.02(c) and (d), if the
Participant's Beneficiary is a trust which qualifies for the Federal
estate tax marital deduction because it is held for the primary
benefit of the Participant's spouse, and if the trustee of that trust
elects to receive distributions from the Plan in installments, then
installment payments for each calendar year commencing upon the death
of the Participant shall be equal to or exceed the greater of (i) the
minimum amount necessary to satisfy the requirements under Section
401(a)(9) of the Code or (ii) the income earned by the Participant's
RSP Account.
If a Participant elects to begin distribution of his RSP Account prior to
his Normal Retirement Date pursuant to this Section 12.02, such election will be
deemed to be consent for purposes of Section 411(a)(11) of the Code.
Section 12.03 Treatment of RSP Account in Installment Distribution. In the
event distribution of a benefit is to be made in periodic installments pursuant
to subsection 12.02(b), (c), (d) or (e), each installment payment shall be
charged to each Investment Fund in the same ratio as the balance in the
Participant's RSP Account invested in that Fund bears to the total balance in
the Participant's RSP Account. The Participant (or Beneficiary, if applicable)
shall continue to have the right to change the investment of the balance in his
Company Retirement Account, Employee Retirement Account and Savings Account
among the Investment Funds pursuant to Section 9.06. The Participant's RSP
Account shall share in all adjustments pursuant to Article 10 until the entire
balance in the Participant's RSP Account is distributed.
Section 12.04 Commencement of Distribution. Subject to the provisions of
Section 12.02:
(a) After a Participant's termination of employment, distributions shall
commence as of any Valuation Date coincident with or next following
the date on which the request is received by the Plan Administrator or
such other person designated by the Plan Administrator, or as soon as
practicable thereafter.
(b) A Participant who has attained age 65 and continues to be employed by
the Company may request that all or any part of the Vested Portion in
his RSP Account be distributed to him in a lump-sum payment as of any
Valuation Date coincident with or next following the date on which
such request is received by the Plan Administrator or as soon as
practicable thereafter. Such Participant shall continue to be an
Eligible Employee for all purposes of the Plan.
Section 12.05 Deferral of Distribution. If the Participant's termination
of employment occurs prior to the date on which he attains age 70-1/2 and the
Vested Portion in his RSP Account is in excess of $3,500, the Participant, by
written notice to the Plan Administrator,
-31-
may defer commencement of distributions, but in no event may the Participant
defer distribution beyond the April 1 of the calendar year following the
calendar year in which he attains age 70-1/2. If a Participant defers
distribution pursuant to this Section 12.05, distributions to him shall commence
as of the Valuation Date following the date to which distribution is deferred or
as soon as practicable thereafter; provided, however, that the Participant shall
request such distribution from the Plan Administrator or from such other person
designated by the Plan Administrator. Any Participant who has deferred receipt
of benefits under the Plan may elect in writing, on a form provided by the Plan
Administrator, or from such other person designated by the Plan Administrator to
accelerate the distribution of all or any portion of the vested balance in his
RSP Account; provided, however, that the Participant may not make more than two
elections to accelerate the distribution of benefits in any calendar year.
Section 12.06 Notice. If a Participant's benefit does not exceed $3,500
and if a distribution of such Participant's benefit is one to which Sections
401(a)(11) and 417 of the Internal Revenue Code do not apply, such distribution
may commence less than 30 days after the notice required under Section 1.411(a)-
11(c) of the Income Tax Regulations is given provided that:
(a) 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
(b) the Participant, after receiving the notice, affirmatively elects a
distribution.
Section 12.07 Distribution Upon Attainment of Age 70-1/2. Distributions
to any Participant whose employment with the Company continues after he has
attained age 70-1/2 shall commence no later than the April 1 of the calendar
year following the calendar year in which he attains age 70-1/2 (or such later
date as may be permitted by law). Any distributions which are made pursuant to
this Section 12.07 shall satisfy the minimum distribution requirements of
Section 401(a)(9) of the Code. Such Participant shall continue to be an
Eligible Employee for all purposes of the Plan.
Section 12.08 Distribution to Alternate Payee Pursuant to Qualified
Domestic Relations Order. If the Plan Administrator receives a domestic
relations order and determines that such order is a qualified domestic relations
order (as described in Section 15.12), benefits payable to the alternate payee
thereunder shall be distributed in [any form permitted by the Plan (as if the
alternate payee were a Participant)] as soon as practicable following the first
Valuation Date after the Plan Administrator receives the alternate payee's
request for such distribution, which request shall be in any form requested by
the Plan Administrator. For
-32-
purposes of this Section 12.08, the terms "alternate payee" and "qualified
domestic relations order" shall have the meanings set forth in Section 414(p) of
the Code.
Section 12.09 Direct Rollovers On or After January 1, 1993. A Distributee
on or after January 1, 1993 may elect, at the time and in the manner prescribed
by the RSP Committee, to have any portion of an Eligible Rollover Distribution
paid directly to an Eligible Retirement Plan specified by the Distributee in a
Direct Rollover. For purposes of this Section the following definitions shall
apply:
(a) Eligible Rollover Distribution: An Eligible Rollover Distribution is
any distribution of all or any portion of the Distributee's RSP
Account, except that an Eligible Rollover Distribution does not
include: (i) 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 Distributees and
the Distributee's joint annuitant, (ii) any distribution that is one
of a series of payments made for a specified period of ten years or
more, or (iii) any distribution to the extent such distribution is
required under Section 401(a)(9) of the Code.
(b) Eligible Retirement Plan: An Eligible Retirement Plan is an
individual retirement account described in Section 408(a) of the Code,
an individual retirement annuity described in Section 408(b) of the
Code, an annuity plan described in Section 403(a) of the Code, an
annuity plan described in Section 401(a) of the Code, or any qualified
trust described in Section 401(a) of the Code, that accepts the
Distributee's Eligible Rollover Distribution. However, in the case of
an Eligible Rollover Distribution to the surviving spouse, an Eligible
Retirement Plan is an individual retirement account or individual
retirement annuity.
(c) Distributee: The term Distributee means, where applicable, the
Participant, the Participant's surviving spouse, and the Participant's
spouse or former spouse who is an alternate payee under a Qualified
Domestic Relations Order, as defined in Section 414(p) of the Code.
(d) Direct Rollover: A Direct Rollover is a payment by the Plan to the
Eligible Retirement Plan specified by the Distributee.
Section 12.10 Loans to Participants. If a signed credit agreement is on
file with the Administrative Services Provider, any "party in interest" (as
defined in Section 3(14) of ERISA) who is either a Participant, or a Beneficiary
entitled to receive a vested benefit under the Plan as a result of the death of
a Participant, may request a loan from the Plan Administrator. The Plan
Administrator may in its discretion to grant a loan to such
-33-
Participant or Beneficiary from the Participant's Savings Account. The loan
will be effective as of the Valuation Date on which the Participant requested a
loan and distributed as soon as reasonably practicable thereafter. Loans are
subject to specific conditions:
(a) The loan is one which is made available to all Participants and
Beneficiaries who are parties in interest on a reasonably equivalent
basis and is not made available to Participants who are Highly
Compensated Employees in an amount greater in proportion to the size
of such Participants' Savings Accounts than that available to other
Participants;
(b) Each loan shall bear a reasonable rate of interest commensurate with
the prime rate quoted in The Wall Street Journal as of the first
business day of each month plus one percentage point. The interest
rate shall apply to all loans issued during that month;
(c) The loan shall be adequately secured by assignment of a portion of the
balance in the Participant's Savings Account in an amount equal to the
principal amount of the loan, but not in excess of fifty percent (50%)
of the balance in the Participant's Savings Account determined as of
the Valuation Date on which the loan is requested;
(d) The minimum amount which may be loaned hereunder at any one time to
any Participant or Beneficiary shall be $500. The maximum amount
which may be loaned hereunder at any one time to any Participant or
Beneficiary shall not exceed the lesser of (i) $50,000 reduced by the
excess (if any) of the highest outstanding balance of all loans to the
Participant or Beneficiary from all tax-qualified plans of the Company
during the 1-year period ending on the day before the date on which
such loan is made, over the outstanding balance of all loans to the
Participant or Beneficiary from all tax-qualified plans of the Company
on the date on which such loan is made, or (ii) fifty percent (50%) of
the balance in the Participant's Savings Account determined as of the
Valuation Date on which the loan is requested;
(e) Refusal of the Plan Administrator or such other person designated by
the Plan Administrator to grant any loan shall not preclude future
applications by the same Participant or Beneficiary, and application
for or acceptance of a loan hereunder shall not of itself be construed
to constitute termination of participation in or waiver of any rights
under the Plan;
(f) All loans granted under the Plan shall be repaid, pursuant to a
written repayment schedule, by payroll deduction (or as otherwise
determined by the Plan Administrator if not paid by payroll deduction)
and shall be evidenced by
-34-
a written promissory note payable to the Trustee. In no event shall
loans be extended for a period of less than six months or greater than
five years. In no event shall more than one loan be extended to a
Participant or Beneficiary hereunder at any one time. Principal and
interest payments by the Participant or Beneficiary shall be at least
monthly on a level amortization basis. Any Participant or Beneficiary
to whom a loan is extended pursuant to this Section 12.10 may elect to
accelerate the repayment of such loan;
(g) In the event of the failure to pay on a timely basis any amount of
either principal or interest which is due under the terms of any loan,
the Trustee, at the direction of the RSP Committee, shall declare the
loan in default and the full amount of the loan due and payable. Upon
declaration of default, the Plan Administrator shall take whatever
action may be lawful to remedy the default. Such action may include
setoff of the remaining balance of the loan against the appropriate
Participant's Savings Account, provided that setoff may not be made
prior to the first date on which any such amount could otherwise have
been distributed pursuant to Article 12. The Plan Administrator may
setoff amounts owed by the Participant or Beneficiary as described in
the preceding sentence without being in violation of Section 16.01.
No Participant or Beneficiary who has once defaulted on a loan
extended hereunder shall be granted any additional loan whatsoever.
In the event a Participant or Beneficiary to whom a loan has been
extended pursuant to this Section 12.10 ceases to be a "party in
interest," the loan shall be deemed to be in default and subject to
the provisions of this subsection 12.10(g);
(h) A separate segregated account shall be established for each
Participant or Beneficiary who is granted a loan pursuant to this
Section 12.10. The segregated account, which shall be part of the
Participant's Savings Account, shall be credited with the amount of
the loan. Segregated accounts shall not share in the dividends,
earnings, losses and gains of the Trust. Each payment of principal
and interest shall be credited to the segregated account in the
Participant's Savings Account and shall be reinvested in the
Investment Funds in the same percentages as the contributions to the
Participant's Savings Account are invested at such time or, if there
are no current contributions to the Participant's Savings Account, in
the percentages in which such contributions were invested immediately
prior to the loan. In the absence of an effective investment
election, each payment of principal and interest shall be credited to
the segregated account in the Participant's Savings Account and shall
be reinvested in The George Putnam Fund of Boston;
(i) Amounts advanced as loans under this Section 12.10 shall not be
considered distributions; and
-35-
(j) Loan distributions shall commence following the Valuation Date in which
the Participant requested a loan or as soon as practicable thereafter.
ARTICLE 13. IN-SERVICE WITHDRAWALS
---------- ----------------------
Section 13.01 Withdrawals from Balance in the Participant's Savings
Account Attributable to After-Tax Contributions and the Company Matching
Contributions and After-Tax Contributions to the Borg-Warner Corporation
Investment Plan Transferred to the Savings Account Pursuant to Section 7.01.
Prior to the termination of his employment with the Company, a Participant may
withdraw as of any Valuation Date, subject to the limitations provided in this
Section 13.01, all or any portion of the balance in his Savings Account
attributable to his (i) After-Tax Contributions, and (ii) the company matching
contributions made on his behalf and any after-tax contributions made by him to
the Borg-Warner Corporation Investment Plan transferred to his Savings Account
pursuant to Section 7.01, by completing the applicable form setting forth the
amount he desires to withdraw to the Plan Administrator or such other person
designated by the Plan Administrator. No Participant will be required to
provide evidence of an immediate and heavy financial need to qualify for a
withdrawal pursuant to this Section 13.01. Any Before-Tax Contributions which
are treated as After-Tax Contributions under Section 2.01 shall be subject to
the withdrawal rules of Section 13.02 and not this Section 13.01.
Section 13.02 Withdrawals from Balance in the Participant's Savings
Account Attributable to Before-Tax Contributions and Amounts Transferred to the
Savings Account Pursuant to Section 7.01 Excluding Company Matching
Contributions and After-Tax Contributions to the Borg-Warner Corporation
Investment Plan Transferred to the Savings Account Pursuant to Section 7.01. If
a Participant has withdrawn the maximum amount permitted by Section 13.01, the
Participant may withdraw as of any Valuation Date, subject to the limitations
provided in this Section 13.02, all or any portion of the balance in his Savings
Account attributable to the Before-Tax Contributions made on his behalf and
amounts transferred to his Savings Account pursuant to Section 7.01 (excluding
the company matching contributions made on his behalf and any after-tax
contributions made by him to the Borg-Warner Corporation Investment Plan
transferred to his Savings Account pursuant to Section 7.01) by making a written
request to the Plan Administrator or such other person as designated by the Plan
Administrator.
A Participant who has not attained age 59-1/2 on or before the date on
which he would otherwise receive a withdrawal pursuant to this Section 13.02
shall be permitted to withdraw all or any portion of the balance in his Savings
Account attributable to the Before-Tax Contributions made on his behalf and
amounts transferred to his Savings Account pursuant to Section 7.01 (excluding
the company matching contributions made on his behalf and any after-tax
contributions made by him to the Borg-Warner Corporation Investment Plan
-36-
transferred to his Savings Account pursuant to Section 7.01), provided the
Participant has submitted satisfactory proof to the Plan Administrator that (i)
a hardship exists, which hardship shall be limited to the Participant's
immediate and heavy financial need, and (ii) such withdrawal is necessary to
satisfy such immediate and heavy financial need.
The determination of the existence of an immediate and heavy financial need
and of the amount necessary to meet the need shall be made by the Plan
Administrator in a nondiscriminatory manner. A distribution will be deemed to
be made on account of an immediate and heavy financial need of the Participant
if the Participant provides evidence satisfactory to the Plan Administrator that
the distribution is on account of:
(a) Medical expenses described in Section 213(d) of the Code previously
incurred by the Participant, the Participant's spouse, or any
dependent of the Participant (as defined in Section 152 of the Code)
or necessary for these persons to obtain medical care as described in
Section 213(d) of the Code;
(b) Purchase (excluding mortgage payments) of a principal residence for
the Participant;
(c) Payment of tuition for and related educational fees for the next
twelve months of post-secondary education for the Participant, his
spouse, children or dependents (as defined in Section 152 of the
Code); or
(d) The need to prevent the eviction of the Participant from his principal
residence or foreclosure on the mortgage of the Participant's
principal residence.
A withdrawal shall be necessary to satisfy a Participant's immediate and
heavy financial need only if all of the following requirements are met:
(w) The amount of the withdrawal is not in excess of the amount of the
immediate and heavy financial need including any Federal, State or
Local taxes or penalties from the withdrawal;
(x) The Participant has obtained all withdrawals, other than hardship
withdrawals, and all nontaxable loans available at the time of the
requested withdrawal under all plans maintained by the Company;
(y) The Before-Tax Contributions and After-Tax Contributions of any
Participant who makes a hardship withdrawal pursuant to this Section
13.02 shall be suspended until the first day of the first Payroll
Period following the end of the 12-month period beginning on the date
the withdrawal is effective; and
-37-
(z) A Participant may not make Before-Tax Contributions during the
calendar year immediately following the calendar year of the hardship
withdrawal in excess of the applicable dollar limit under Section 5.03
for such next calendar year less the amount of such Participant's
Before-Tax Contributions for the calendar year of the hardship
withdrawal.
The maximum amount which a Participant, who has not attained age 59-1/2 on
or before the date on which he would otherwise receive a withdrawal pursuant to
this Section 13.02, may withdraw from the balance in his Savings Account
attributable to Before-Tax Contributions shall be equal to the lesser of the
current balance in his Savings Account attributable to Before-Tax Contributions,
or the balance in his Savings Account attributable to Before-Tax Contributions
as of December 31, 1988 increased by the Before-Tax Contributions made on his
behalf after that date and reduced by any withdrawals pursuant to this Section
13.02 after that date.
A Participant who has attained age 59-1/2 on or before the date on which he
would otherwise receive a withdrawal pursuant to this Section 13.02 shall not be
required to provide evidence of an immediate and heavy financial need to qualify
for a withdrawal from the balance in his Savings Account attributable to the
Before-Tax Contributions made on his behalf and amounts transferred to his
Savings Account pursuant to Section 7.01 (excluding the company matching
contributions made on his behalf and any after-tax contributions made by him to
the Borg-Warner Corporation Investment Plan transferred to his Savings Account
pursuant to Section 7.01). A Participant described in the preceding sentence
shall be permitted to withdraw all or any portion of his Before-Tax
Contributions and amounts transferred to his Savings Account pursuant to Section
7.01 (excluding the company matching contributions made on his behalf and any
after-tax contributions made by him to the Borg-Warner Corporation Investment
Plan transferred to his Savings Account pursuant to Section 7.01), and the
income allocable thereto, including income credited to his Savings Account after
December 31, 1988. Such Participant's Before-Tax Contributions and After-Tax
Contributions shall not be suspended as a result of a withdrawal pursuant to
this Section 13.02.
Section 13.03 Number of Withdrawals and Distribution from Investment
Funds. Each withdrawal shall be made pro rata from the Investment Funds in
which the Participant's Savings Account is invested. A Participant may not make
more than two withdrawals pursuant to Sections 13.01 and 13.02 in any calendar
year.
Section 13.04 Time of Withdrawal. Withdrawals pursuant to Sections 13.01
and 13.02 shall commence following the Valuation Date as of which the withdrawal
is effective or as soon as practicable thereafter.
-38-
ARTICLE 14. THE TRUST
---------- ---------
Section 14.01 Establishment of Trust. All of the assets under the Plan
shall be held as a single trust, to be held, invested and distributed in
accordance with the provisions of the Plan providing benefits to Participants
and their Beneficiaries.
Section 14.02 Appointment of Trustee. The Trust shall be held by a
Trustee appointed by the Employee Benefits Committee, from time to time, under a
trust instrument which shall be approved by the Employee Benefits Committee and
shall constitute part of the Plan.
ARTICLE 15. ADMINISTRATION
---------- --------------
Section 15.01 Allocation of Fiduciary Duties. The Fiduciaries shall have
only those specific powers, duties, responsibilities and obligations as are
expressly given them under the Plan. In general, the Employee Benefits
Committee shall have the sole responsibility for setting or authorizing the
contributions required under the Plan as specified in Article 4, the sole
authority to appoint and remove any Trustee and any member of the RSP Committee
and the sole power to amend or terminate, in whole or in part, the Plan or
Trust. The RSP Committee shall have the sole responsibility for the
administration of the Plan, which responsibility is specifically described in
the Plan and the Trust. The Plan Administrator will have the duties provided
for it in ERISA. The Trustee shall have the sole responsibility for the
administration of the Trust and the management of the assets under the Trust,
all as specifically provided in the Trust. Each Fiduciary warrants that any
directions given, information furnished, or action taken by it shall be in
accordance with the provisions of the Plan and Trust, as the case may be,
authorizing or providing for such direction, information or action.
Furthermore, each Fiduciary may rely upon any such direction, information or
action of another Fiduciary as being proper under this Plan and Trust, and is
not required under the Plan or Trust to inquire into the propriety of any such
direction, information or action, except that each Fiduciary shall not be
relieved from liability for a breach of Fiduciary responsibility by a co-
Fiduciary under Section 405(a) of Title I of ERISA. It is intended under the
Plan and Trust that each Fiduciary shall be responsible for the proper exercise
of its own powers, duties, responsibilities and obligations under this Plan.
Section 15.02 Establishment of RSP Committee. The RSP Committee shall
consist of at least three members who shall be appointed by the Employee
Benefits Committee and who may also be officers, directors, employees, agents or
shareholders of the Company or members of the Employee Benefits Committee. RSP
Committee members may resign by written notice to, or may be removed by, the
Employee Benefits Committee, which shall appoint a successor to fill any vacancy
on the RSP Committee, howsoever caused. The Employee Benefits Committee shall
advise the Trustee in writing of the names of the
-39-
members of the RSP Committee and of any changes which may occur in its
membership from time to time.
Section 15.03 Appointment and Duties of Plan Administrator. The Plan
Administrator shall be appointed by the RSP Committee to serve at the RSP
Committee's discretion and shall exercise such authority and responsibility as
he deems appropriate in order to comply with ERISA and governmental regulations
issued thereunder relating to:
(a) The administration of the Plan;
(b) Reports and notifications to Participants;
(c) Reports to and registration with the Internal Revenue Service;
(d) Annual reports to the Department of Labor; and
(e) Any other actions required by ERISA or the Plan.
Section 15.04 Powers and Duties of RSP Committee. The RSP Committee shall
have such powers as may be necessary to discharge its duties hereunder,
including, but not by way of limitation, the following:
(a) To administer and enforce the Plan, including exclusive powers to
interpret the Plan, to determine and to resolve questions as between
the Company and Participants or Beneficiaries which relate to
eligibility and distributions from the Plan, to remedy possible
ambiguities, inconsistencies or omissions in a manner which does not
discriminate in favor of Highly Compensated Employees, and which
shall, subject to the claims procedure of Section 15.11, be conclusive
and binding upon all persons hereunder, including, without limitation,
Participants, other employees of the Company, Beneficiaries, and
former Participants, and their executors, administrators,
conservators, or heirs;
(b) To prescribe procedures to be followed by Participants or
Beneficiaries filing applications for benefits;
(c) To prepare and distribute, in such manner as the RSP Committee
determines to be appropriate, information explaining the Plan and
Trust;
(d) To receive from the Company and from Participants such information as
shall be necessary for the proper administration of the Plan and
Trust;
-40-
(e) To furnish the Company, upon request, such annual reports with respect
to the administration of the Plan as are reasonable and appropriate;
(f) To receive, review and keep on file (as it deems convenient or proper)
reports of the financial condition, the receipts and disbursements and
the assets of the Trust;
(g) To appoint or employ individuals to assist in the administration of
the Plan and any other agents it deems advisable, including legal
counsel, and such clerical, medical, accounting, auditing, actuarial
and other services as it may require in carrying out the provisions of
the Plan or in connection with any legal claim or proceeding involving
the Plan, to settle, compromise, contest, prosecute or abandon claims
in favor of or against the Plan, and to pay all costs and expenses
related to the above actions from the assets of the Trust; and
(h) To discharge all other duties set forth herein.
The RSP Committee shall have no power to add to, subtract from or modify any of
the terms of the Plan, or to change or add to any benefits provided by the Plan,
or to waive or fail to apply any requirements of eligibility under the Plan. No
member of the RSP Committee shall participate in any action on any matters
involving solely his own rights or benefits as a Participant under the Plan, and
any such matters shall be determined by the other members of the RSP Committee.
Section 15.05 RSP Committee Direction on Payments. The RSP Committee, or
an RSP Committee member designated by the RSP Committee shall direct the Trustee
concerning all payments which shall be made out of the Trust pursuant to the
provisions of the Plan.
Section 15.06 Actions by RSP Committee. The RSP Committee may act at a
meeting or by writing without a meeting, by the vote or assent of a majority of
its members. The RSP Committee may adopt such by-laws and regulations as it
deems desirable for the conduct of its affairs and the administration of the
Plan. A dissenting RSP Committee member who, within a reasonable time after he
has knowledge of any action or failure to act by the majority, registers his
dissent in writing delivered to the other RSP Committee members shall not be
responsible for any such action or failure to act.
Section 15.07 Expenses of RSP Committee. Members of the RSP Committee
shall not receive compensation from the Plan for those services they perform as
RSP Committee members while employed by the Company. Any and all necessary
expenses related to Plan and Trust administration shall be paid from the Trust,
but may be paid by the Company if it so elects.
-41-
Section 15.08 Records of RSP Committee. The RSP Committee shall keep a
record of all of its meetings and shall keep all such books of account, records
and other data as may be necessary or desirable in its judgment for the
administration of the Plan. The RSP Committee shall keep on file, in such form
as it shall deem convenient and proper, all reports of the Trust received from
the Trustee.
Section 15.09 Information from Participant. The Plan Administrator may
require a Participant to complete and file with the Plan Administrator forms
approved by the RSP Committee, and to furnish all pertinent information
requested by such RSP Committee. The RSP Committee may rely upon all such
information so furnished, including the Participant's current mailing address.
Section 15.10 Notification of Participant's Address. Each Participant,
retired Participant and Beneficiary entitled to benefits under the Plan must
file with the Plan Administrator or such other person designated by the Plan
Administrator, in writing, his post office address and each change of post
office address. Any communication, statement or notice addressed to such a
person at this latest post office address as filed with the Plan Administrator
will, on deposit in the United States mail with postage prepaid, be binding upon
such person for all purposes of the Plan, and the Plan Administrator shall not
be obliged to search for, or to ascertain the whereabouts of, any such person.
Section 15.11 Claims Procedure. A Participant or Beneficiary shall file a
claim for benefits under the Plan in writing with the Plan Administrator who
shall process it and approve or disapprove it within 90 days of the date that
the claim is received. If special circumstances arise and the Plan
Administrator cannot process the claim within 90 days, the Plan Administrator
shall notify the claimant that the time for making the decision is extended for
up to 90 additional days. If the Plan Administrator fails to notify the
claimant within the applicable period, the claim is considered denied. If the
Plan Administrator makes a determination to deny benefits to a Participant, the
denial shall be stated in writing and delivered or mailed to the Participant or
Beneficiary. Such notice shall set forth the specific reasons for the denial,
written in a manner that may be understood by the Participant, and shall
describe the steps necessary for appeal. The Participant whose claim for
benefits has been denied shall have a period of 60 days in which to appeal to
the RSP Committee and submit additional information to the RSP Committee. The
RSP Committee shall consider the request at its next scheduled meeting. If the
claim is again denied in writing, the Participant or Beneficiary may request a
hearing within 60 days of the second denial, and the RSP Committee shall afford
a reasonable opportunity for a hearing to any Participant or Beneficiary for a
review of its decision denying the claim, which hearing shall be held within 60
days following receipt of the request. The Claimant shall have an opportunity
to present evidence and appear before the RSP Committee. The RSP Committee
shall review all evidence submitted by the claimant, shall make its decision
regarding the claim within 120 days following the receipt of the request for a
hearing by the claimant and shall provide the
-42-
claimant with a written decision. The decision of the RSP Committee regarding
the claim shall be final and conclusive.
Section 15.12 Qualified Domestic Relations Order Procedure. In the case
of any domestic relations order received by the Plan Administrator, the Plan
Administrator shall promptly notify the Participant and the spouse, former
spouse, child or other alternate payee of the receipt of such order and the
Plan's procedures for determining the qualified status of domestic relations
orders. Within a reasonable period after receipt of such order, the Plan
Administrator shall determine whether such order is a "qualified domestic
relations order" within the meaning of Section 414(p) of the Code. It shall
then notify the Participant and the alternate payee of such determination.
The Plan Administrator shall establish reasonable procedures to determine
the qualified status of domestic relations orders and to administer
distributions under such qualified orders. Such procedures shall be in writing,
shall provide for the notification of each person specified in a domestic
relations order as entitled to payment of benefits under the Plan (at the
address included in the domestic relations order) of such procedures promptly
upon receipt by the Plan Administrator of the domestic relations order and shall
permit an alternate payee to designate a representative for receipt of copies of
notices that are sent to the alternate payee with respect to a domestic
relations order.
During any period in which the issue of whether a domestic relations order
is a qualified domestic relations order is being determined (by the Plan
Administrator, by a court of competent jurisdiction or otherwise), the Plan
Administrator shall cause the Trustee to segregate in a separate account in the
Trust or in an escrow account the amounts which would have been payable to the
alternate payee during such period if the order had been determined to be a
qualified domestic relations order. If within the 18-month period beginning on
the date on which the first payment would be required to be made under the
domestic relations order it is determined that the order is not a qualified
domestic relations order or the question of whether the order is a qualified
domestic relations order is not resolved, the Plan Administrator shall cause the
Trustee to pay the segregated amounts (plus any interest thereon) to the person
or persons who would have been entitled to such amounts if there had been no
order.
Any determination that an order is a qualified domestic relations order
which is made after the close of the 18-month period described in the preceding
paragraph shall be applied prospectively only.
If the Plan Administrator or any Fiduciary acts in accordance with this
Section 15.12 in treating a domestic relations order as being (or not being) a
qualified domestic relations order or taking action under this Section 15.12,
the Plan's obligation to the Participant and each alternate payee shall be
discharged to the extent of any payment made.
-43-
ARTICLE 16. GENERAL PROVISIONS
---------- ------------------
Section 16.01 Nonalienation of Benefits. Except for qualified domestic
relations orders, and as otherwise required under federal law, assignment of
benefits under the Plan or their pledge or encumbrance in any manner shall not
be permitted or recognized under any circumstance, nor shall such benefits be
subject to attachment or other legal process for the debts of any Participant,
former Participant or Beneficiary.
Section 16.02 Payment to Incapacitated Participant or Beneficiary. If the
RSP Committee shall find that a Participant, former Participant or Beneficiary
is unable to care for his affairs because of illness or accident, or is a minor,
or has died, the RSP Committee may direct that any payment due him, unless claim
therefor shall have been made by a duly appointed legal representative, shall be
paid to his spouse, a child, a parent, or other blood relative or to a person
with whom he resides, and any such payment so made shall be in complete
discharge of the liabilities of the Plan therefor.
Section 16.03 Payment Because of Inability to Locate Participant of
Beneficiary. If the Plan Administrator is unable, within three years after any
benefit becomes due under the Plan to a Participant or Beneficiary, to make
payment because the identity and/or whereabouts of such Participant or
Beneficiary cannot be ascertained notwithstanding the mailing of notice to any
last known address or addresses, the Plan Administrator shall make payment of
such benefit as provided in Section 11.02 as though such Participant had died
three years after the date such benefit became due. In the event the payment
cannot be made pursuant to the provisions of Section 11.02 the balance in such
Participant's RSP Account shall be forfeited. If the Participant or Beneficiary
later makes a claim for a benefit under the Plan, and that claim for a benefit
is granted, the amount in the Participant's RSP Account that was forfeited shall
be paid to the Participant or Beneficiary without regard to any subsequent gain
or loss.
Section 16.04 Interest in Fund Governed by Terms of the Plan. No
Participant, former Participant or Beneficiary, or any other person, shall have
any interest in or right under the Plan or in any part of the assets or earnings
thereof held in the Trust except as and to the extent provided in the Plan.
Section 16.05 Trust Sole Source of Benefits. The assets of the Trust
shall be the sole source of all benefits provided for in the Plan. The Company,
the Employee Benefits Committee and the RSP Committee do not in any way
guarantee the assets of the Trust from loss or depreciation as a result of
Participants' investments in the Investment Funds of the Plan.
Section 16.06 Actions by Board of Directors, Employee Benefits Committee
or RSP Committee. Whenever in the administration of the Plan, action by the
Board of Directors, the
-44-
Employee Benefits Committee or the RSP Committee is required with respect to
eligibility or classification of Employees, contributions or benefits, such
action shall be uniform in nature as applied to all persons similarly situated,
and no such action shall be taken which shall discriminate in favor of Employees
who are officers, stockholders or Highly Compensated Employees.
Section 16.07 Plan for Exclusive Benefit of Participant and Beneficiary.
No part of any Company Retirement Contribution or Company Matching Contribution
under Article 4 or of any Before-Tax Contribution or After-Tax Contribution
under Article 5 or of any part of the Trust (other than such part as provided
for under the Plan) shall be used for, or diverted to, purposes other than for
the exclusive benefit of the Participants under the Plan or their Beneficiaries.
Section 16.08 No Contract of Employment. Nothing contained in this Plan
shall be construed as a contract of employment between the Company and any
Employee, or as a right of any Employee to be continued in the employment of the
Company or as a limitation of the right of the Company to discharge any Employee
at any time with or without cause.
Section 16.09 Indemnification of Employee Benefits Committee, RSP
Committee and Plan Administrator. Members of the Employee Benefits Committee,
members of the RSP Committee and the Plan Administrator shall be indemnified by
the Corporation and the Company against any and all liabilities arising by
reason of any act or failure to act made in good faith pursuant to the
provisions of the Plan, including expenses reasonably incurred in the defense of
any claim relating thereto. If the Corporation takes any action to liquidate
under circumstances which require that the Employee Benefits Committee and/or
the RSP Committee remain in existence, the Corporation shall purchase insurance
for each member of the Employee Benefits Committee and the RSP Committee to
cover liability or losses occurring by reason of an act or omission of any such
member, unless the same is determined to be due to acts of gross negligence or
willful misconduct. The expenses incurred for such insurance or indemnification
shall be paid by the Company or Corporation, as applicable, and shall not be
reimbursable under the provisions of the Plan.
Section 16.10 Change in Business. In the event of the sale, dissolution,
merger, consolidation, reorganization or discontinuance of all or any part of
any trade or business of the Company, the RSP Committee, in its sole discretion,
may (a) determine that all or a portion of the affected Employees of the Company
shall no longer be Eligible Employees in the Plan and (b) determine that the
rights of the affected Employees accrued to the date of such sale, dissolution,
merger, consolidation, reorganization or discontinuance shall be nonforfeitable.
-45-
ARTICLE 17. AMENDMENTS AND TERMINATION
---------- --------------------------
Section 17.01 Right to Amend Plan. The Corporation has delegated the
power to amend or modify the Plan in whole or in part to the Employee Benefits
Committee and, through the powers delegated to the Employee Benefits Committee
pursuant to Section 15.01, reserves the right at any time and from time to time
to amend or modify the Plan in whole or in part and either retroactively or
prospectively through a written instrument delivered to the Trustee; provided,
however, that:
(a) Except as expressly provided to the contrary herein, no such amendment
or modification shall authorize or permit any part of the corpus or
income of the Trust to be used for or diverted to purposes other than
for the exclusive benefit of Participants or Beneficiaries, or to
deprive any of them of funds then held for their account;
(b) No amendment or modification shall increase the duties or liabilities
of the Trustee without its written consent; and
(c) Notwithstanding anything herein to the contrary, the Employee Benefit
Committee may make any amendment or modification to the Plan and the
Trust that it deems necessary or appropriate to comply with any
statute or regulation, including requirements for qualification,
exempt status and deductibility of contributions under the Code, and
such amendments or modifications shall have retroactive effect if
necessary or appropriate for such purposes.
Section 17.02 Termination of Plan or Discontinuance of Contributions. It
is the intention of the Corporation to continue the Plan and to make
contributions thereto, but the Corporation reserves the right, through the
powers delegated to the Employee Benefits Committee pursuant to Section 15.01,
to suspend or terminate the Plan at any time and for any reason. In the event
of termination, dissolution, merger, consolidation or reorganization of the
Corporation, where the successor does not continue the Plan in accordance with
Section 18.01, upon partial termination of the Plan with respect to a group of
Participants, upon complete discontinuance of Company contributions under the
Plan or any other termination of the Plan, the interests of the affected
Participants shall become fully vested and their interests shall be
nonforfeitable. There shall be no Company contributions under Article 4 after
the date the Plan terminates. However, the RSP Committee and the Trust shall
remain in existence, and all of the provisions of the Plan (other than the
provisions relating to contributions and Forfeitures), which in the sole opinion
of the RSP Committee are necessary, shall remain in full force and effect.
Section 17.03 Distribution on Termination of Plan. In the event of the
termination or partial termination of the Plan, after payment of all expenses
(including Trustee fees), there
-46-
shall be distributed to each affected Participant, or to his Beneficiary in the
case of a deceased Participant, in such manner as the RSP Committee shall
direct, a benefit equal to the balance in the Participant's RSP Account, such
balance to be adjusted as provided in Article 10 as of the later of the
Valuation Date on which termination or partial termination occurs or the
Valuation Date coinciding with or immediately preceding the date of
distribution; provided, however, that the RSP Committee and the Trustee shall
not be required to effect such distribution until written evidence of approval
of such termination and distribution has been received from the Internal Revenue
Service. If such benefits shall not exhaust the assets of the Trust, any
remaining assets shall be allocated among the RSP Accounts of continuing
Participants in the same proportion that the balance in each continuing
Participant's RSP Account bears to the aggregate balance in all continuing
Participant's RSP Accounts, and in no event shall such assets revert or inure to
the benefit of the Company. Upon termination, the RSP Committee may authorize
the payment to Participants or Beneficiaries of such amounts in cash or in kind,
with all such assets being measured at their fair market value. The Trustee
shall continue to hold, invest, administer and distribute the assets of the
Trust pursuant to the terms of the Plan until no Trust assets remain in its
hands. If a Participant dies after termination of the Plan and before all of
his interest in the Trust has been paid, the undistributed portion shall be
distributed to his Beneficiary in a lump-sum.
ARTICLE 18. SUCCESSOR CORPORATION, PLAN MERGER, CONSOLIDATION OR TRANSFER OF
---------- ----------------------------------------------------------------
ASSETS
------
Section 18.01 Successor Corporation. In the event of the sale,
dissolution, merger, consolidation or reorganization of the Corporation,
provision may be made by which the Plan will be continued by the successor; and
in that event, such successor shall be substituted for the Corporation under the
Plan. The substitution of the successor shall constitute an assumption of Plan
liabilities by the successor, and the successor shall have all of the powers,
duties and responsibilities of the Corporation under the Plan.
Section 18.02 Plan Merger, Consolidation or Transfer of Assets to Other
Qualified Plans. In the event of any merger or consolidation of the Plan with,
or transfer in whole or in part of the assets and liabilities of the Trust to,
any other plan of deferred compensation maintained or to be established for the
benefit of all or some of the Participants of this Plan, the assets of the Trust
applicable to such Participants shall be transferred to the other trust only if:
(a) Each Participant would (if the other plan then terminated) receive a
benefit immediately after the merger, consolidation or transfer which
is equal to or greater than the benefit he would have been entitled to
receive immediately before the merger, consolidation or transfer (if
the Plan had then terminated);
-47-
(b) Resolutions of the Board of Directors (as defined in Section 2.07 of
the Plan), and of the Board of Directors of any new successor employer
of the affected Participants, shall authorize such transfer of assets;
and in the case of the new successor employer of the affected
Participants, its resolutions shall include an assumption of
liabilities with respect to such Participants' inclusion in the new
employer's plan; and
(c) Such other plan is qualified under Sections 401(a) and 501(a) of the
Code.
ARTICLE 19. TOP-HEAVY PLAN PROVISIONS
---------- -------------------------
Section 19.01 Top-Heavy Plan Definitions. The definitions relating to
------------- --------------------------
top-heavy plan provisions are as follows:
(a) The term "Top-Heavy Plan" or "Top-Heavy" means the Plan or refers to
the Plan if, as of the Determination Date (as defined in subsection
19.01(b) below), the aggregate balance in the RSP Accounts of Key
Employees (as defined in subsection 19.01(c) below) under the Plan
exceeds sixty percent (60%) of the aggregate balance in the RSP
Accounts of all Employees under the Plan, as determined in accordance
with the provisions of Section 416(g) of the Code. The determination
of whether the Plan is Top-Heavy shall be made after aggregating all
other tax-qualified plans of the Company, if any, which are required
to be aggregated pursuant to Section 416(g)(2) of the Code and after
aggregating any other such plan of the Company which may be taken into
account under the permissive aggregation rules of Section
416(g)(2)(A)(ii) of the Code if such permissive aggregation thereby
eliminates the Top-Heavy status of any plan within such permissive
aggregation group. The Plan is "Super Top Heavy" if, as of the
Determination Date, the Plan would meet the test specified above for
being a Top-Heavy Plan if ninety percent (90%) were substituted for
sixty percent (60%) in each place in which it appears in this
subsection 19.01(a). The plans which are required to be aggregated
include (1) all qualified plans of the Company in which at least one
Key Employee participates and all qualified plans of the Company in
which at least one Key Employee participated which were terminated
within the five-year period ending on the Determination Date, and (2)
all other plans of the Company which enable a plan described in (1) to
meet the requirements of Section 401(a)(4) or Section 410 of the Code.
The plans which are permitted to be aggregated include the plans which
are required to be aggregated plus any plan or plans of the Company
which, when considered as a group with the required aggregation group,
would continue to satisfy the requirements of Sections 401(a)(4) and
410 of the Code. For the purposes of these Top-Heavy
-48-
provisions, Employees and Key Employees shall include only such
individuals who performed any services for the Company at any time
during the five-year period ending on the Determination Date.
(b) The term "Determination Date," for purposes of determining whether the
Plan is Top Heavy for a particular Plan Year, means the last day of
the preceding Plan Year (or, in the case of the first Plan Year of the
Plan, the last day of the first Plan Year).
(c) The term "Key Employee" means any Participant in the Plan (including a
Beneficiary of such Participant) who at any time during the Plan Year
or any of the four preceding Plan Years is:
(1) An individual who receives as annual Compensation more than 50%
of the dollar limit under Section 415(b)(1)(A) of the Code and
who is an officer of the Company (but in no event shall more than
fifty (50) Employees or, if less, the greater of three or ten
percent (10%) of all Employees be taken into account under this
paragraph (1) as Key Employees);
(2) One of the ten (10) Employees owning (or considered as owning
within the meaning of Section 318 of the Code) both more than a
one-half percent (1/2%) interest and the largest interests in the
Company, provided that such Employee also had Compensation for
that Plan Year exceeding the maximum dollar limitation under
Section 415(c)(1)(A) of the Code in effect for the calendar year
in which the Determination Date falls;
(3) A person owning (or considered as owning within the meaning of
Section 318 of the Code) more than five percent (5%) of the
outstanding stock of the Company or stock possessing more than
five percent (5%) of the total combined voting power of all stock
of the Company; or
(4) A person who receives as annual Compensation from the Company
more than $150,000 and who would be described in paragraph (3) of
this subsection 19.01(c) if one percent (1%) were substituted for
five percent (5%).
For purposes of applying Section 318 of the Code to the provisions of this
subsection 19.01(c), paragraph (C) of Section 318(a)(2) of the Code shall be
applied by substituting five percent (5%) of fifty percent (50%). In addition,
the rules of subsections (b), (c) and (m) of
-49-
Section 414 of the Code shall not apply for purposes of determining ownership
percentage in the Company under this subsection 19.01(c).
(d) The term "Non-Key Employee" means any Participant in the Plan
(including a Beneficiary of such Participant) who is not a Key
Employee.
Section 19.02 Requirements in Plan Years in Which Plan is Top-Heavy.
Notwithstanding anything herein to the contrary, if the Plan is Top-Heavy as
determined pursuant to Section 416 of the Code for any Plan Year, then the Plan
shall meet the following requirements for any such Plan Year:
(a) Minimum Vesting Requirements. A Participant's vested percentage in
his Company Retirement Contribution Account and that portion of the
balance in his Employee Retirement Account attributable to Company
Matching Contributions under Section 4.02 shall be determined in
accordance with the following schedule and not in accordance with
Section 2.49:
Years of Vested Service Vested Portion
----------------------- --------------
Less than Three 0%
Three or more 100%
In the event that the Top-Heavy Plan ceases thereafter to be Top-
Heavy, each Participant's vested percentage shall again be determined
under Section 2.49, provided that a Participant's vested percentage
shall not be reduced thereby.
(b) Minimum Contribution Requirement. It is intended that the Company
will meet the minimum contribution requirements of Sections 416(c) and
416(h) of the Code by providing the minimum contribution through a
combination of Company Retirement Contributions, Company Matching
Contributions and Before-Tax Contributions for such Plan Year for each
Participant who is a Non-Key Employee, in accordance with whichever of
the following paragraphs in applicable:
(1) If the Company does not maintain a tax-qualified defined-benefit
pension plan, or if the Company maintains such a pension plan in
which no Participant can participate, the minimum contribution
per Participant shall be three percent (3%) of the Participant's
Compensation for the Plan Year;
(2) If the Company maintains a tax-qualified defined-benefit pension
plan in which one or more Participants may participate, and that
pension plan is
-50-
not Top-Heavy, the minimum contribution per Participant shall be
three percent (3%) of a Participant's Compensation for that Plan
Year; provided, however, that if the Plan is not Super Top-Heavy,
the minimum contribution shall be increased to four percent (4%)
if necessary to avoid the application of Section 416(h)(1) of the
Code (relating to the adjustment of the combined plan
contributions and benefits limitation which would substitute 1.0
for 1.25 in the defined-contribution and benefit plan factors
under Section 415 of the Code) and if such adjusted plan
contributions and benefits limitation would otherwise be exceeded
if such increased minimum contribution were not so increased; and
(3) If the Company maintains a tax-qualified defined-benefit pension
plan in which one or more Participants may participate, and that
pension plan is Top-Heavy, the minimum contribution per
Participant shall be five percent (5%) of the Participant's
Compensation for that Plan Year; provided, however, that if the
Plan is not Super Top-Heavy, the minimum contribution shall be
increased to seven point five percent (7.5%) if necessary to
avoid the application of Section 416(h)(l) of the Code (relating
to the adjustments to the combined plan contributions and
benefits limitation described in paragraph (2) above) and if such
adjusted plan contributions and benefits limitation would
otherwise be exceeded if an increased minimum contribution is not
made.
The minimum Company contribution under this subsection 19.02(b) shall be
allocated to the Participants' RSP Accounts in the necessary amounts and in such
proportions as the RSP Committee shall determine.
The minimum contribution requirements set forth herein shall be reduced in
the following circumstances:
(1) The percentage minimum contribution required hereunder shall in
no event exceed the percentage contribution made for the Key
Employee for whom such percentage is the highest for the Plan
Year after taking into account contributions or benefits under
other qualified plans in this Plan's aggregate group as provided
pursuant to Section 416(c)(2)(B)(ii) of the Code; and
(2) No minimum contribution will be required (or the minimum
contribution will be reduced, as the case may be) for a
Participant for any Plan Year if the Employer maintains another
qualified plan under which a minimum benefit or contribution is
being accrued or made for
-51-
such Plan Year in whole or in part for the Participant in
accordance with Section 416(c) of the Code.
ARTICLE 20. CONSTRUCTION
---------- ------------
Section 20.01 Plan Administered According to Law. The Plan and the Trust
forming part thereof shall be construed and administered according to the laws
of the State of Illinois to the extent such laws are not preempted by ERISA or
subsequent amendments thereto of any other laws of the United States of America.
Section 20.02 Gender, Number and Context. Words used in the Plan in the
masculine gender shall include the feminine gender, the singular shall include
the plural and the plural shall include the singular, all unless the context
clearly indicates otherwise. The titles of Sections and subsections in this
instrument are included solely for convenience of reference and, if there is any
conflict between the titles and the text, the text shall control.
ARTICLE 21. QUALIFICATION OF PLAN
---------- ---------------------
Section 21.01 Qualification Intended. The Company shall promptly submit
the Plan to the Internal Revenue Service along with all necessary supporting
documents with a request for a determination letter that the Plan meets the
qualification requirements of Section 401(a) of the Code and that the Trust is
exempt from taxation under Section 501(a) of the Code. Any modification or
amendment of the Plan may be made retroactively, if necessary or appropriate, to
qualify or maintain the Plan as a qualified plan meeting the requirements of
Sections 401 and 501 of the Code, ERISA or any other provisions of federal law.
Witness Whereof, the Company has caused this Plan to be signed on this
_____ day of __________________, 1994.
BORG-WARNER SECURITY CORPORATION
By: ____________________________________
Its: Executive Vice President
Attest:
______________________________
Its: _________________________
-52-