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EXHIBIT 99
ZALE CORPORATION SAVINGS & INVESTMENT PLAN
(AS REVISED AND RESTATED EFFECTIVE AUGUST 1, 1998)
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TABLE OF CONTENTS
Page
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Article I - DEFINITIONS...........................................................................................2
Article II - ELIGIBILITY OF EMPLOYEES............................................................................12
Article III - CONTRIBUTIONS......................................................................................14
Article IV - LIMITATIONS AND RESTRICTIONS ON SALARY DEFERRAL CONTRIBUTIONS.......................................17
Article V - LIMITATIONS AND RESTRICTIONS ON MATCHING CONTRIBUTIONS...............................................24
Article VI - AGGREGATE LIMIT ON ACTUAL DEFERRAL AND CONTRIBUTION PERCENTAGES.....................................29
Article VII - ALLOCATION OF CONTRIBUTIONS........................................................................30
Article VIII - LIMITATION ON ALLOCATIONS.........................................................................31
Article IX - ADJUSTMENT OF INDIVIDUAL ACCOUNTS...................................................................40
Article X - INDIVIDUAL ACCOUNTS..................................................................................41
Article XI - RETIREMENT..........................................................................................42
Article XII - DEATH..............................................................................................42
Article XIII - DISABILITY........................................................................................43
Article XIV - TERMINATION BENEFITS...............................................................................43
Article XV - DISTRIBUTIONS AND WITHDRAWALS.......................................................................45
Article XVI - NOTICES............................................................................................55
Article XVII - AMENDMENT OR TERMINATION OF PLAN..................................................................56
Article XVIII - COMMITTEE........................................................................................59
Article XIX - MISCELLANEOUS......................................................................................60
Article XX - ADOPTION BY AFFILIATED COMPANIES....................................................................62
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Article XXI - THE TRUSTEE........................................................................................62
Article XXII - INVESTMENTS AND CONTRACTS.........................................................................63
Article XXIII - TOP HEAVY PROVISIONS.............................................................................67
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ZALE CORPORATION SAVINGS & INVESTMENT PLAN
(AS REVISED AND RESTATED EFFECTIVE AUGUST 1, 1998)
THIS AGREEMENT, executed this 14th day of June, 2000, and
effective the 1st day of August, 1998 unless specifically provided elsewhere in
this Agreement, by Zale Corporation, having its principal office in Irving,
Texas (hereinafter referred to as the "Company").
WITNESSETH:
WHEREAS, effective April 1, 1951, the Company established a plan known
as "Zale's Profit Sharing Plan (the "Original Plan");
WHEREAS, the Original Plan was amended, effective April 1, 1989, to
comply with the Tax Reform Act of 1986 and subsequent tax act changes and to add
employee salary deferral elections pursuant to Section 401(k) of the Code and
employer matching contributions pursuant to Section 401(m) of the Code;
WHEREAS, the Original Plan was amended, effective April 1, 1991, to add
an employee stock ownership plan component (the "ESOP Component") which was
intended to qualify as a stock bonus plan under Section 401(a) of the Code and
as an employee stock ownership plan under Section 4975(e)(7) of the Code under
the instrument entitled "Zale's Savings and Employee Stock Ownership Plan" (the
"Savings/ESOP Plan");
WHEREAS, effective January 1, 1992, the Company split up the
Savings/ESOP Plan into two separate plans: one through the amendment and
restatement of the Savings/ESOP Plan, which was known as the "Zale's Employee
Stock Ownership Plan (the "Zale ESOP Plan"), and the other through the execution
of a new document, which plan was known as the "Zale's Profit Sharing Plan" (the
"Profit Sharing Plan"), each of which was a continuation of its respective
component of the Savings/ESOP Plan without gap in time or effect;
WHEREAS, the Company terminated the Zale ESOP Plan effective January 1,
1992 and received a favorable determination letter from the Internal Revenue
Service on the qualification of the Zale ESOP Plan upon its termination;
WHEREAS, the Company amended the Profit Sharing Plan on April 15, 1993
by adopting a First Amendment thereto and received a favorable determination
letter from the Internal Revenue Service on the qualification of the Profit
Sharing Plan, as amended by such First Amendment;
WHEREAS, effective April 1, 1994, the Company restated the Profit
Sharing Plan to comply with then applicable legislation;
WHEREAS, the restated Profit Sharing Plan was thereafter restated by
Amendments No. 1-7; and
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WHEREAS, the Company now desires to amend further and restate the Plan
to bring it into compliance with the Internal Revenue Code of 1986, as modified
by the Small Business Job Protection Act of 1996 ("SBJPA"), the General
Agreement on Tariffs and Trades under the Uruguay Round Agreements Act ("GATT"),
Uniformed Services Employment and Reemployment Rights Act of 1994 ("USERRA"),
and the Taxpayer Relief Act of 1997 ("TRA `97"), as well as all rules and
regulations enacted or promulgated since the date the Plan was last restated and
administrative pronouncements issued by the Treasury Department applicable to
the Plan;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Plan is hereby restated as follows:
Article I
DEFINITIONS
Unless by the context hereof a different meaning is clearly indicated,
whenever used in this Plan, the following words shall have the meanings
hereinafter set forth:
Sec. 1.1 Administrator for the purposes of ERISA means the Company;
provided, that the Company, by action of its Board of Directors or its Chief
Executive Officer, may designate another person or entity, including the
Trustee, the Recordkeeper or a Committee, as Administrator of the Plan.
Sec. 1.2 Affiliated Company means the Company and any other entity
which is, along with the Company, a member of a controlled group of corporations
or a controlled group of trades or businesses [as defined in Section 414(b) or
(c) of the Code], any entity which along with the Company is included in an
affiliated service group as defined in Section 414(m) of the Code, and any other
entity which is required to be aggregated with the Company pursuant to Section
414(o) of the Code.
Sec. 1.3 After-Tax Contribution Account means the portion of the
Individual Account maintained by the Trustee or the Recordkeeper for each
Participant, Former Participant or Beneficiary reflecting the monetary value of
such person's interest in the Trust Fund attributable to contributions made by
the Participant on an after-tax basis when such contributions were permitted by
the Plan.
Sec. 1.4 Allocation Date means the end of each calendar quarter or such
other date or dates as the Administrator may establish from time to time.
Sec. 1.5 Alternate Payee means a person defined in Section 414(p)(8) of
the Code who is entitled to benefits under the Plan pursuant to a Qualified
Domestic Relations Order.
Sec. 1.6 Annual Compensation means with respect to an Employee,
compensation paid to such Employee by an Employer which is includible in the
Employee's gross income for the Year,
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excluding relocation expenses, merchandise incentives and car fringe benefits,
plus amounts applied to purchase benefits pursuant to a salary reduction
agreement under a cafeteria plan as defined in Section 125 of the Code sponsored
by an Employer, amounts deferred pursuant to a salary deferral agreement
authorized in Section 3.1, and amounts deferred pursuant to a salary deferral
agreement under any other plan described in Sections 401(k) and 408(k) of the
Code sponsored by an Employer, but excluding all other items of compensation.
For the Year beginning August 1, 1998, a maximum of $160,000 of Annual
Compensation shall be taken into account by the Plan with respect to any
Participant. Beginning August 1, 1999, the maximum Annual Compensation which may
be taken into account shall be the amount determined under Section 401(a)(17)(B)
of the Code (hereinafter referred to as the "Compensation Limitation").
Sec. 1.7 Beneficiary means any person or fiduciary designated by a
Participant or Former Participant in accordance with the terms hereof and
Section 401(a)(9) of the Code to receive benefits hereunder following the death
of such Participant or Former Participant. Each Participant and Former
Participant may, from time to time, select one or more Beneficiaries to receive
benefits pursuant to Section 12.1 in the event of the death of such Participant
or Former Participant. Such selection shall be made in writing by Notice to the
Administrator. Unless the provisions of the Plan or a Qualified Domestic
Relations Order provide otherwise, the last such selection filed with the
Administrator shall control. If at the date of death the Participant or Former
Participant is married, the Beneficiary shall be the surviving spouse unless the
spouse has consented in writing to the designation of some other Beneficiary,
which designation may not be changed without spousal consent unless the
voluntary consent of the spouse (i) expressly permits designations by the
Participant or Former Participant without any requirement of further consent by
the spouse and (ii) acknowledges that the spouse has the right to limit the
consent to a specific Beneficiary. Such written consent must acknowledge the
effect of such selection and such consent must be witnessed by a Plan
representative or a notary public. Spousal consent is not required if it is
established to the satisfaction of the Plan representative that the consent may
not be obtained (i) because the Participant or Former Participant has no spouse,
(ii) because the spouse cannot be located or (iii) because of such other
circumstances as the Secretary of Treasury may by regulations prescribe. If the
Named Fiduciary cannot determine readily whether a Participant has a spouse
under the laws of the state in which the Participant resides resulting from an
individual's claim to be a "common law" spouse of a Participant or similar
circumstances, the Named Fiduciary may request such individual to provide the
Named Fiduciary with a legal opinion satisfactory to the Named Fiduciary or
other evidence demonstrating the individual's status as a spouse of a
Participant. The Named Fiduciary has the sole and absolute authority to
determine an individual's status as a spouse of a Participant and any such
determination shall be final, binding and conclusive on all parties ever
claiming an interest in the Plan. Any consent by a spouse (or establishment that
the consent of the spouse may not be obtained) shall be effective only with
respect to that spouse. If more than one Beneficiary of a particular class
(primary or secondary) is entitled to benefits, payments shall be made in equal
shares to such Beneficiaries, unless some other specific proportions are clearly
designated by the Participant or Former Participant. If more than one
Beneficiary of a particular class (primary or secondary) is named, the interest
of any deceased Beneficiary of that class shall pass to the surviving
Beneficiary or Beneficiaries of that class except to the extent that the
designation provides for payment to any secondary Beneficiary or Beneficiaries
upon the death of a primary Beneficiary.
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If a Participant's or Former Participant's Beneficiary selection is not
made in compliance with these provisions or if such designated persons
predecease the Participant or Former Participant, Beneficiary means the first of
the following classes of successive preference beneficiaries then surviving: the
Participant's or Former Participant's:
(a) surviving spouse,
(b) descendants, per stirpes (including adopted children),
(c) parents in equal shares,
(d) brothers and sisters in equal shares, and
(e) estate.
Sec. 1.8 Break-in-Service means a Year during which the Participant is
credited with 500 or fewer Hours of Service.
Sec. 1.9 Code means the Internal Revenue Code of 1986, as it may be
amended from time to time. Reference to a section of the Code shall include that
section, applicable Treasury regulations promulgated thereunder and any
comparable section of any future legislation that amends, supplements or
supersedes said section, effective as of the date such comparable section is
effective with respect to the Plan.
Sec. 1.10 Committee means the committee appointed under Article XVIII
to administer the Plan, as from time to time constituted. If no such committee
is appointed, the Company shall constitute the Committee.
Sec. 1.11 Common Stock means the shares of common stock of Zale
Corporation.
Sec. 1.12 Common Stock Fund means the Investment Fund maintained
pursuant to the Plan which is invested in Common Stock.
Sec. 1.13 Company means Zale Corporation, or such other organization
which, pursuant to a spinoff, merger, consolidation, reorganization, or similar
corporate transaction where a significant portion of the Company's employees
become employees of such organization, adopts and assumes the Plan and the Trust
Agreement as the sponsor with the consent of the Company and agrees to accept
the duties, responsibilities and obligations of the sponsor of the Plan and the
Trust Agreement. Reference in the Plan to the Company shall refer to any such
organization which adopts and assumes the sponsorship of the Plan and the Trust
Agreement.
Sec. 1.14 Disability means a total and permanent disability suffered by
a Participant which, in the opinion of the Administrator (which opinion shall be
conclusive for purposes of the Plan) prevents such Participant from continuing
his work with all Employers.
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Sec. 1.15 Early Retirement Date means the later of the Participant's
55th birthday or the 7th anniversary of the date he commenced participation in
the Plan.
Sec. 1.16 Effective Date of this Plan, as amended and restated, shall
generally be August 1, 1998; provided, however, that as necessary to comply with
the effective dates of the applicable provisions of the Code, including
revisions made by SBJPA, GATT, and TRA `97, certain provisions of the Plan shall
be effective as of the dates such provisions are required to be effective with
respect to the Plan under the Code or, if later, under administrative
pronouncements issued by the Internal Revenue Service or the Treasury Department
[subject to the provisions of Treasury Regulation Section 1.401(k)-1(h)(3)].
Notwithstanding the general effective date set forth above, the following
provisions of the Plan shall be effective as of such other dates as set forth
herein.
Effective August 1, 1997:
(a) Section 1.26 (except that for determining whether an
Employee is a Highly Compensated Employee for the Year beginning August
1, 1997, the revisions to Section 1.26 treated as having been effective
August 1, 1996);
(b) the elimination of the family aggregation rules previously
in the Plan;
(c) the amendments to Section 15.5;
(d) the amendment to the definition of Leased Employee in
Section 1.35;
(e) the amendments to Articles IV-VI (other than Sections 4.6,
5.5 and 6.4 which are effective August 1, 1999); and
(f) the increase from $3,500 to $5,000.
Effective August 1, 1995, the amendments to Article VIII, and effective August
1, 1999, the elimination of the vesting schedule in Section 14.1 that had
previously applied to Employer Matching Contribution Accounts.
Sec. 1.17 Employee means any individual in the employ of an Employer
who is on an Employer's payroll in the United States, Puerto Rico or Guam,
excluding all other persons who work outside of the United States unless the
Committee elects to cover them by the Plan and excluding any Leased Employee
that Section 414(n) of the Code treats as an Employee of an Employer. All
Employees who are included in a unit of Employees covered by a collective
bargaining agreement between the Employees' representative and the Employer
shall be excluded, even if they have met the requirements for eligibility, if
there has been good faith bargaining between the Employer and the Employees'
representative and the collective bargaining agreement does not require the
Employer to include those Employees in the Plan. The term "Employee" shall not
include any person who is not classified by the Employer as a common law
employee, even if such person is later reclassified as an employee who should be
included on the payroll whether by the Internal Revenue Service, a court, or an
Employer.
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Sec. 1.15 Employer means the Company and any other Affiliated Company,
with respect to its Employees, provided such Affiliated Company is designated by
the Board of Directors of the Company as an Employer under the Plan and whose
designation as such has become effective and has continued in effect. The
designation shall become effective only when it shall have been accepted by the
Board of Directors of the Employer. An Employer may revoke its acceptance of
such designation at any time, but until such acceptance has been revoked, all of
the provisions of the Plan and amendments thereto shall apply to the Employees
of the Employer. In the event the designation of the Employer as such is revoked
by the Board of Directors of the Employer, such revocation will not be deemed a
termination of the Plan.
Sec. 1.16 Employer Contribution Account means the portion of the
Individual Account maintained by the Trustee or the Recordkeeper for each
Participant, Former Participant or Beneficiary, reflecting the monetary value of
such person's individual interest in the Trust Fund attributable to an
Employer's non-matching contributions made to the Plan before August 1, 1998,
and earnings thereon.
Sec. 1.17 Employer Matching Contribution Account means the portion of
the Individual Account maintained by the Trustee or the Recordkeeper for each
Participant, Former Participant or Beneficiary, reflecting the monetary value of
such person's individual interest in the Trust Fund attributable to an
Employer's Matching Contributions under Section 3.2.
Sec. 1.18 Employment Commencement Date means the first day an Employee
has an Hour of Service.
Sec. 1.19 Entry Date means the first day of each month.
Sec. 1.20 ERISA means the Employee Retirement Income Security Act of
1974, as it may be amended from time to time, and applicable regulations
promulgated thereunder.
Sec. 1.21 Former Participant means any individual who has been a
Participant in the Plan, who is no longer in the employ of an Affiliated Company
and who has not yet received the entire benefit to which he is entitled under
the Plan.
Sec. 1.22 Highly Compensated Employee means for any Year any Employee
who is determined to be included in subsection (a) after applying the special
rules in subsection (b):
(a) any Employee who:
(i) was, at any time during the Year or the preceding Year, a
more than five percent owner of any Employer; or
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(ii) during the preceding Year received Compensation from all
Employers in excess of $80,000, and if the Company elects, was
in the top 20% of the Employees for the preceding Year (when
ranked on the basis of Compensation for such Year).
(b) For purposes of determining the Employees who are to be included in
subsection (a) above, the following special rules shall apply to this
Section 1.25:
(i) In determining the top 20% of Employees pursuant to
subsection (a)(ii), Employees who (A) have not completed at
least six months of service, (B) normally work fewer than 17
1/2 hours per week, (C) normally work during not more than six
months during any Year, (D) have not attained age 21 or (E)
are covered under a collective bargaining agreement (except to
the extent provided in applicable Treasury regulations) shall
be excluded from such determination.
(ii) "Compensation" means Annual Compensation as defined in
Section 8.2(f), but including (A) amounts applied to pay for
benefits pursuant to a salary deferral agreement under a
cafeteria plan as defined in Section 125 of the Code sponsored
by an Employer, and (B) amounts deferred pursuant to a salary
deferral agreement under the Plan or any other plan described
in Sections 401(k) and 408(k) of the Code sponsored by an
Employer.
(iii) The dollar amount in subsection (a)(ii) shall be
adjusted to such other amount as the Secretary of the Treasury
shall prescribe at the same time and in the same manner as
provided under Section 415(d) of the Code for adjusting the
dollar limitation in effect under Section 415(b)(1)(A) of the
Code.
(iv) In determining the number of Employees pursuant to this
Section, any Employee who is a nonresident alien and who
receives no earned income [within the meaning of Section
911(d)(2) of the Code] from any Employer which constitutes
income from sources within the United States [within the
meaning of Section 861(a)(3) of the Code] shall be excluded
from such determination.
Sec. 1.23 Hour or Hour of Service means, effective August 1, 1997, each
hour credited to a Participant in accordance with the following:
(a) An Hour of Service shall be credited to an Employee for each hour
for which he is directly or indirectly paid, or entitled to payment, by
any Affiliated Company.
(b) An Hour of Service shall be credited to an Employee for each hour
for which back pay, irrespective of mitigation of damages, has been
either awarded or agreed to by an Affiliated Company. These hours shall
be credited to the Employee for the Plan Year or Years to which the
award or agreement pertains rather than the Plan Year in which the
award, agreement or payment is made.
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(c) In no event shall an Employee be given credit for a specific Hour
of Service under more than one of the above subsections (a) or (b).
(d) Hours of Service for periods during which no duties are performed
will be determined and credited in accordance with Sections
2530.200b-2(b) and (c) of the Department of Labor regulations.
(e) If an absence from the service of an Affiliated Company occurs for
any period by reason of (i) pregnancy of the individual, (ii) birth of
a child of the individual, (iii) placement of a child with the
individual in connection with the adoption of such child by such
individual, or (iv) for purposes of caring for such child for a period
beginning immediately following such birth or placement and if the
Participant does not return to employment immediately on the expiration
of the period of absence, solely for purposes of determining a Break in
Service, the Plan shall credit the Participant with up to 501 Hours of
Service which otherwise would normally have been credited to such
individual during the Year. However, if in the Year in which the
absence commences the Participant would not have incurred a Break in
Service or five consecutive Breaks in Service even if the preceding
sentence had not applied, the Plan shall credit the Participant with
such Hours of Service in the following Year. The Plan shall not credit
any Participant with any Hours of Service under this subsection (e)
unless such Participant timely furnishes the Named Fiduciary
information establishing (i) that the absence from the service of an
Affiliated Company was for one or more reasons specified in the first
sentence of this subparagraph (e), and (ii) the numbers of days for
which there was an absence.
(f) Effective December 12, 1994, each period of qualified military
service (within the meaning of Chapter 43 of Title 38, United States
Code) served by an employee who is reemployed under that chapter by an
Affiliated Company following such service shall be considered service
with an Affiliated Company for purposes of determining his Hours of
Service.
(g) Hours of Service includes hours credited for an employer, the stock
or assets of which are acquired by an Employer or an Affiliated
Company, without regard to whether a predecessor plan was maintained.
Sec. 1.24 Individual Account means an account or record to be
maintained by the Trustee or the Recordkeeper reflecting the monetary value of
the undivided interest in the Trust Fund of each Participant, each Former
Participant and each Beneficiary and shall include the Employer Contribution
Account, Employer Matching Contribution Account, Salary Deferral Contribution
Account, Rollover Account, if any, and such other additional account or accounts
as the Administrator may establish from time to time.
Sec. 1.25 Interactive Electronic Communication means, to the extent
available under the Plan, a communication between a Participant, Former
Participant or Beneficiary and the Recordkeeper pursuant to a system maintained
by the Recordkeeper and communicated to each Participant, Former Participant and
Beneficiary whereby each such individual may obtain financial information
regarding his Individual Account and amounts available for withdrawal, and may
initiate
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investment transfer elections and exercise options as described herein with
respect to his Individual Account through the use of such system and a personal
identification number assigned to the Participant, Former Participant or
Beneficiary by the Recordkeeper or the Administrator. If a Participant, Former
Participant or Beneficiary participates in the Plan's Interactive Electronic
Communication feature through the use of his personal identification number, the
Participant, Former Participant or Beneficiary, as the case may be, will be
deemed to have given his written consent and authorization to any action
resulting from the use of the Interactive Electronic Communication system by the
Participant, Former Participant or Beneficiary.
Sec. 1.26 Investment Fund or Funds means one or more funds designated
by the Administrator pursuant to Section 22.9 from time to time and maintained
for the purpose of providing a vehicle for the investment of assets of the Trust
Fund, in accordance with the directions of each Participant, Former Participant
or Beneficiary with respect to his Individual Account, until such Investment
Fund or Funds shall be eliminated by action of the Administrator. The
Administrator may direct the Trustee to invest one or more of such funds with a
specified insurance company or mutual fund, or appoint an investment advisor as
provided in Section 22.4 to manage the same and may also direct the Trustee to
establish new Investment Funds or delete existing Investment Funds from time to
time.
Sec. 1.27 Karten's Deferral Contribution Account means the portion of
the Individual Account maintained by the Trustee or Recordkeeper reflecting the
account from the Karten's Plan reflecting the contributions made because of a
salary deferral agreement under the Karten's Plan, if any, plus earnings
thereon.
Sec. 1.28 Karten's Matching Account means the portion of the Individual
Account maintained by the Trustee or Recordkeeper reflecting employer matching
contributions made to the Karten's Plan, if any, plus earnings thereon.
Sec. 1.29 Karten's Plan means the Karten's Jewelers, Inc. 401(k) Plan
which was merged into the Plan on August 1, 1996.
Sec. 1.30 Karten's Plan Account means the Karten's Matching Account,
the Karten's Deferral Contribution Account, and the Karten's Rollover Account.
Sec. 1.31 Karten's Rollover Account means the portion of the Individual
Account maintained by the Trustee or Recordkeeper reflecting the account from
the Karten's Plan reflecting rollover contributions to the Karten's Plan, plus
earnings thereon.
Sec. 1.32 Leased Employee means an individual who is not in the employ
of an Employer and who, pursuant to a leasing agreement between an Employer and
any other person ("leasing organization"), has performed services for an
Employer [or for an Employer and any other person related to an Employer within
the meaning of Section 144(a)(3) of the Code] on a substantially full-time basis
for at least one year and who performs such services under the primary direction
or control by the Employer. Leased Employee shall also include any individual
who is deemed to be an employee of an Employer under Section 414(o) of the Code.
Notwithstanding the
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preceding sentence, if individuals described in the preceding sentence
constitute less than 20% of an Employer's non-highly compensated work force
within the meaning of Section 414(n)(5)(C)(ii) of the Code, the Plan shall not
treat an individual as a Leased Employee if the leasing organization covers the
individual in a money purchase pension plan providing immediate participation,
full and immediate vesting and a non-integrated contribution formula equal to at
least ten percent of the individual's annual compensation [as defined in Section
415(c)(3) of the Code, but including amounts contributed by an Employer pursuant
to a salary deferral agreement which are excludable from the individual's gross
income under Sections 125, 402(a)(8), 402(h) or 403(b) of the Code]. If any
Leased Employee shall be treated as an Employee of an Employer, however,
contributions or benefits provided by the leasing organization which are
attributable to services of the Leased Employee performed for an Employer shall
be treated as provided by the Employer.
Sec. 1.33 Matching Contribution means the contribution made by an
Employer pursuant to Section 3.2.
Sec. 1.34 Named Fiduciary means the Company, except to the extent the
Company has delegated specific functions to the Committee, if any, appointed by
the Company pursuant to Article XVIII. If no Committee is appointed, the Company
will perform the functions of the Committee.
Sec. 1.35 Non-Highly Compensated Employee means any Employee who is not
a Highly Compensated Employee. The determination of an Employee's status as a
Non-Highly Compensated Employee for a Year shall be determined based on the
definition of Highly Compensated Employee in Section 1.25 that is applicable for
that Year.
Sec. 1.36 Normal Retirement Date means the later of a Participant's or
Former Participant's 65th birthday or the 5th anniversary of the date he
commenced participation in the Plan.
Sec. 1.37 Notice means, unless otherwise provided specifically in the
Plan, (i) written Notice on an appropriate form provided by the Administrator,
which is properly completed and executed by the party giving such Notice and
which is delivered by hand or by mail to the Administrator or to such other
party designated by the terms of the Plan or by the Administrator to receive the
Notice or (ii) Notice by Interactive Electronic Communication to the
Recordkeeper. Notice to the Administrator, the Recordkeeper or to any other
person as provided herein shall be deemed to be given when it is actually
received (either physically or by Interactive Electronic Communication, as the
case may be) by the party to whom such Notice is given.
Sec. 1.38 Participant means an Employee who has met the eligibility
requirements of the Plan as provided in Article II hereof and has begun
participating in the Plan. An Employee who elects to make a Rollover
Contribution shall be considered a Participant only for purposes of applying the
relevant provisions of the Plan relating to the investment and distribution of
his Rollover Account and his rights and responsibilities under ERISA with
respect to such contribution.
Sec. 1.39 Plan means the plan embodied herein, as the same may be
amended from time to time, and shall be known as the "Zale Corporation Savings &
Investment Plan."
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Sec. 1.40 Profit Sharing Account means the portion of the Individual
Account maintained by the Trustee or the Recordkeeper for each Participant,
Former Participant or Beneficiary reflecting the monetary value of such person's
individual interest in the Trust Fund attributable to profit sharing
contributions made to plans that are predecessors to the Plan.
Sec. 1.41 Qualified Domestic Relations Order means any judgment, decree
or order (including approval of a property settlement agreement) which (i)
relates to the provision of child support, alimony payments, or marital property
rights to a spouse, former spouse, child or other dependent of a Participant or
Former Participant, (ii) is made pursuant to a state domestic relations law,
(iii) creates or recognizes the existence of an Alternate Payee's right to, or
assigns to an Alternate Payee the right to, receive all or a portion of the
benefits payable with respect to a Participant or Former Participant under the
Plan and (iv) complies with the requirements of Section 414(p) of the Code.
Sec. 1.42 Recordkeeper means any person or entity appointed by the
Company to perform record keeping and other administrative services on behalf of
the Plan. If no Recordkeeper is appointed, the Trustee shall perform the duties
of the Recordkeeper.
Sec. 1.43 Rollover Account means the portion of the Individual Account
maintained by the Trustee or the Recordkeeper for each Employee or Participant
who makes a Rollover Contribution reflecting the monetary value of such person's
individual interest in the Trust Fund attributable to his Rollover Contribution.
Sec. 1.44 Rollover Contribution means, in addition to a contribution
described in the last sentence of this Section, any amount transferred to the
Plan which would constitute a rollover contribution within the meaning of
Section 402(a)(5), 403(a)(4) or 408(d)(3) of the Code. Any such rollover
contribution must consist of either (i) all or a portion of the property (in
excess of employee contributions) that the Employee received in a distribution
from an employee's trust described in Section 401(a) of the Code which is exempt
from tax under Section 501(a) thereof or an annuity plan described in Section
403(a) of the Code and any earnings thereon (whether such contribution is paid
directly by the Employee, from such other trust or annuity plan, or from an
individual retirement account or individual retirement annuity) or (ii) all or a
portion of the proceeds from the sale of property received in such a
distribution pursuant to Section 402(a)(6)(D) of the Code. To the extent
required or permitted by the Code, on or after January 1, 1993, a Rollover
Contribution shall include an eligible rollover contribution as described in
Section 402(c)(4) of the Code transferred to the Plan pursuant to an Employee's
election as described in Section 401(a)(31)(A) of the Code.
Sec. 1.45 Salary Deferral Contribution means contributions made by an
Employer on behalf of each Participant pursuant to a salary deferral agreement
described in Section 3.1.
Sec. 1.46 Salary Deferral Contribution Account means the portion of the
Individual Account maintained by the Trustee or the Recordkeeper for each
Participant, Former Participant or Beneficiary reflecting the monetary value of
such person's individual interest in the Trust Fund attributable to Salary
Deferral Contributions made on the Participant's behalf pursuant to a salary
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deferral agreement described in Section 3.1 and attributable to qualified
non-elective contributions under Section 3.3.
Sec. 1.47 Trust Agreement means the Zale Corporation Savings &
Investment Trust Agreement entered into between the Company and the Trustee to
carry out the purposes of the Plan and under which the Trust Fund is maintained;
provided that if such agreement be amended or supplemented, Trust Agreement, as
of a particular date, shall mean such agreement, as amended and supplemented and
in force on such date.
Sec. 1.48 Trust Fund means all assets of whatsoever kind and nature
from time to time held by the Trustee pursuant to terms and conditions of the
Trust Agreement out of which benefits of the Plan are provided. The Trust Fund
may be divided into Investment Funds as provided in Section 22.9.
Sec. 1.49 Trustee means the trustee or trustees acting at any time as
Trustee under the Trust Agreement.
Sec. 1.50 Valuation Date means each day of the Year on which the New
York Stock Exchange is open.
Sec. 1.51 Year means the 12-month period from August 1 of each year to
the next following July 31.
Sec. 1.52 Year of Service means a 12-month period commencing on the
Employee's Employment Commencement Date or anniversary thereof during which the
Employee has 1,000 or more Hours of Service.
Sec. 1.53 Years of Service (Vesting) means a Year in which the Employee
has 1,000 or more Hours of Service.
Sec. 1.54 Gender and Number. Except as otherwise indicated by the
context, any masculine terminology used herein also includes the feminine and
neuter, and vice versa, and the definition of any term herein in a singular
shall also include the plural, and vice versa.
Article II
ELIGIBILITY OF EMPLOYEES
Sec. 2.1 Eligibility to Participate in the Plan. An Employee hired
prior to August 1, 1998 shall continue to be eligible to participate in the Plan
on the Entry Date coinciding or next following the date he attains age 21. An
Employee who was not employed as of July 31, 1998, shall become a Participant as
of the Entry Date coinciding with or next following the date he shall have both
(i) completed one Year of Service, and (ii) attained age 21, if he is employed
by an Employer on such Entry Date. An Employee who completes the eligibility
requirements but is not employed by an Employer on his Entry Date, shall become
a Participant as provided in Section 2.2. An Employee who completes the service
requirements while employed by an Affiliated Company
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which is not an Employer shall become a Participant as of the date on which he
becomes an Employee of an Employer, or the date he attains age 21, if later.
Sec. 2.2 Eligibility upon Reemployment. Notwithstanding Section 2.1,
each Employee who is not employed by an Employer on the Entry Date on which he
would have become a Participant in the Plan, and who returns to employment with
an Employer, shall be eligible to become a Participant hereunder on the date on
which he resumes employment as an Employee with an Employer.
Sec. 2.3 Reemployment of Participant. Except as provided in this
Section, if the employment of a Participant is terminated for any reason and he
subsequently is reemployed by an Employer, he shall be eligible to become a
Participant on the date he resumes employment with an Employer.
Sec. 2.4 Cessation of Participation. A Participant shall immediately
cease to be eligible for any further Matching Contributions in the Plan upon the
occurrence of either of the following events:
(a) termination of his salary deferral agreement established pursuant
to Section 3.1; or
(b) termination of his status as an Employee with all Employers for any
reason.
If a Participant is transferred to a class of employment not eligible for
participation in the Plan but continues to be employed by an Affiliated Company,
no further contributions to the Trust Fund shall be made by or on behalf of the
Participant under the Plan with respect to periods on and after the transfer.
Any Participant described in the preceding sentence may recommence his
participation in the features of the Plan for which he was eligible at the time
of the transfer to an ineligible class if he is transferred back to eligible
employment and a new enrollment form is executed in accordance with Section 3.1.
During the period of his employment in such transferred position, the
Participant will continue to (i) be eligible for withdrawals (subject to the
requirements of Section 15.5), (ii) be permitted to transfer his Individual
Account among the Investment Funds, and (iii) be permitted to change
Beneficiaries in accordance with the provisions of the Plan.
Sec. 2.5 Exclusion of Employees Covered by Collective Bargaining.
Notwithstanding Section 2.1, an Employee covered by a collective bargaining
agreement between an Employer and a collective bargaining representative
certified under the Labor Management Relations Act who is otherwise eligible to
become a Participant under this Article shall be excluded if retirement benefits
were the subject of good faith bargaining between the Employee's representative
and the Employer and if the agreement does not require the Employer to include
such Employee in this Plan. An Employee who is a Participant in this Plan when
he is excluded under the provisions of this Section 2.5 shall cease active
participation in this Plan on the effective date of that collective bargaining
agreement and shall not participate in Employer contributions while a member of
the ineligible class but shall not be considered to have terminated employment.
Sec. 2.6 Eligibility Upon Entry or Reentry into Eligible Class of
Employees. In the event a Participant is excluded because he is no longer a
member of an eligible class of Employees as specified in this Article II, such
Employee shall be eligible to become a Participant immediately
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upon his return to an eligible class of Employees. In the event that an Employee
who is not a former Participant in the Plan becomes a member of the eligible
class, such Employee shall be eligible to become a Participant immediately if
such Employee has satisfied the eligibility requirements of Section 2.1 and
would have previously been eligible to become a Participant had he been in the
eligible class.
Article III
CONTRIBUTIONS
Sec. 3.1 Salary Deferral Contributions.
(a) Amount of Contributions. On satisfying the requirements of Article
II, a Participant may elect to have the Employer make Salary Deferral
Contributions to the Trust Fund on his behalf by making the appropriate
elections through the Interactive Electronic Communication system. The
terms of any such Interactive Electronic Communication election shall
provide that the Participant agrees to accept a reduction in salary
from the Employer in an amount equal to up to 15% (but if in excess of
1%, in whole percentages) of his Annual Compensation per payroll
period, subject to the restrictions and limitations of Article IV
hereof.
(b) Salary Deferral Agreement.
(i) Nature of Agreement. The salary deferral agreement
referred to in Section 3.1(a) shall be a legally binding
agreement (on a form prescribed by the Administrator) whereby
(A) the Participant agrees that, as of the effective date of
the agreement, the Annual Compensation otherwise payable to
him thereafter shall be reduced by an amount (as selected by
the Participant) not to exceed the maximum percentage
permitted under Section 3.1(a), and (B) the Employer agrees to
contribute the total amount of such reduction in Annual
Compensation to the Trust Fund on behalf of the Participant as
a Salary Deferral Contribution under Section 3.1(a). Such
contributions shall be made by the Employer to the Trust Fund
as soon as administratively possible after the payroll period
to which such contribution relates. Subject to the provisions
of paragraph (iv) of this Section 3.1(b) and Article IV
hereof, a Participant's salary deferral agreement shall remain
in effect until modified or terminated in accordance with
paragraphs (iii) or (iv) of this Section 3.1(b).
(ii) Effective Date of Agreement. The effective date of a
Participant's salary deferral agreement shall be no earlier
than the Entry Date following the date such agreement is
timely received in executed form by the Administrator as
required by Article II (provided such effective date is no
earlier than the Entry Date the Participant first becomes
eligible to participate in the Plan).
(iii) Amendment of Salary Deferral Contribution Elections. As
of any payroll period, a Participant may amend his salary
deferral election to stop making Salary
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Deferral Contributions with respect to Annual Compensation not
yet paid. If a Participant elects to stop making Salary
Deferral Contributions, the Participant may elect to resume
making Salary Deferral Contributions by so electing using the
Interactive Electronic Communication system. The effective
date of such new salary deferral election will be the first
day of the next payroll period beginning after the date of the
election through the Interactive Electronic Communication
system. A Participant may increase or decrease his Salary
Deferral Contributions [within the limits of Section 3.1(a)]
by so electing using the Interactive Electronic Communication
system. The effective date of the new agreement will be the
first day of the next payroll period beginning after the date
of the election through the Interactive Electronic
Communication system.
(iv) Transfer to Ineligible Employment or Termination of
Employment. A Participant's salary deferral election shall
terminate automatically if the Participant transfers to a
class of employment not eligible for participation in the Plan
or if he terminates his employment as an Employee with the
Employer. Upon return of the Participant to eligible
employment, the Participant shall be permitted to execute a
new salary deferral agreement and resume having contributions
made to the Trust Fund on his behalf under Section 3.1(a),
provided that the effective date of the new salary deferral
agreement shall be no earlier than the later of (A) the first
payroll period beginning after the new salary deferral
agreement is received in executed form by the Administrator or
(B) the date the Participant resumes eligible employment with
an Employer. Transfers of Participants to different payroll
systems among the Employers shall be administered by
procedures established by the Administrator.
Sec. 3.2 Employer Matching Contributions. For each payroll period, an
Employer shall contribute hereunder as a Matching Contribution an amount equal
to 100% of the first 4% of Annual Compensation of each Participant contributed
to the Plan as a Salary Deferral Contribution. In calculating the Matching
Contribution, any Salary Deferral Contribution made on behalf of each
Participant for a payroll period in excess of 4% of the Participant's Annual
Compensation paid during such payroll period shall not be considered. For Years
beginning before August 1, 1999, an Employee shall only be eligible for an
allocation of Matching Contributions if the Employee is employed on the last day
of the Year and works 1,000 or more Hours of Service during the Year or retires
on or after Normal Retirement Date, dies or becomes Disabled during the Year.
Effective for Years beginning August 1, 1999, by the due date for the Employer's
tax return for the Plan Year, the Employer will make any additional Matching
Contribution needed to assure that each Participant receives a Matching
Contribution for the Year, taking into account the Matching Contributions made
throughout the Year on behalf of the Participant, equal to 100% of the first 4%
of Annual Compensation of such Participant contributed to the Plan as a Salary
Deferral Contribution. Matching Contributions made pursuant to this Section
shall be subject to the limitations and restrictions of Articles V and VI.
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Sec. 3.3 Employer Qualified Non-Elective Contributions. To insure that
the Actual Deferral Percentage tests of Section 401(k) of the Code as described
in Section 4.2 hereof or the Contribution Percentage tests of Section 401(m) of
the Code as described in Section 5.1 hereof are met for any Year, an Employer,
under such rules and regulations as the Secretary of the Treasury may prescribe,
in addition to the Salary Deferral Contributions made by the Employer pursuant
to Section 3.1, and the Matching Contributions under Section 3.2, may make
additional contributions which shall constitute "qualified non-elective
contributions" within the meaning of Section 401(m)(4)(C) of the Code on behalf
of any Non-Highly Compensated Employee (as defined in Section 4.2) selected by
the Company. Each Year an Employer shall designate the portion, if any, of the
qualified non-elective contributions that it made for the Year that shall be
considered under Section 4.2 for the Actual Deferral Percentage test and the
portion, if any, that shall be considered under Section 5.1 for the Contribution
Percentage test.
Sec. 3.4 Time and Form of Contributions. Payments of contributions due
under Section 3.1 shall be made at such time as the Employer may determine but
at least as promptly as the time prescribed by regulations promulgated by the
Department of Labor and the Matching Contributions due under Section 3.2 shall
be made at such time as the Employer shall determine, except that the Matching
Contribution shall be paid in full not later than the time required by law to
enable the Employer to obtain a deduction therefor on its federal income tax
return for said Year. All contributions shall be made in cash (by check or wire
transfer), or in Company Stock as determined by the Company in its discretion.
The Board of Directors of the Company may provide that all or a portion of such
contributions shall be allocated by payroll period during the Year.
Contributions made after the last day of the Year but within the time for filing
an Employer's federal income tax return (including extensions thereof) shall be
deemed made as of the last day of that Year if so directed by the Employer,
except such contributions shall not share in increases, decreases, or income to
the Trust Fund prior to the date actually made. Notwithstanding the foregoing,
upon an Employer's request, a contribution which was made upon a mistake of fact
or conditioned upon initial qualification of the Plan (application for which is
made by the time prescribed by law for filing the Employer's tax return for the
taxable year in which the Plan is adopted, or such later date as the Secretary
of the Treasury may prescribe) or upon deductibility of the contribution shall
be returned to the Employer within one year after payment of the contribution,
denial of the qualification, or disallowance of the deduction (to the extent
disallowed), as the case may be; provided, however, the amount returned to an
Employer due to mistake of fact or denial of deductibility shall not be
increased by any earnings thereon and shall be reduced by any losses
attributable to such amount.
Sec. 3.5 Limit on Employer Contributions. Notwithstanding the foregoing
provisions of Sections 3.1, 3.2, or 3.3, the contribution of an Employer for any
Year (whether made pursuant to Sections 3.1, 3.2, or 3.3) shall in no event
exceed an amount which will, under the law then in effect, be deductible by the
Employer in computing its federal taxes based on income for that Year. As
permitted by Section 401(a)(27) of the Code, any Employer may make contributions
to the Plan without regard to net profits, current or accumulated.
Sec. 3.6 Contributions May be Made with Respect to a Particular
Employer. In making its determination of Matching Contributions and Employer
non-matching contributions with respect to any Year, the Board of Directors of
the Company may make its determination separately with respect to any Employer
or business or operating unit within an Employer; provided, however, that
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any such determination must be nondiscriminatory within the meaning of the
Treasury regulations under Section 401(a)(4) of the Code and must satisfy the
minimum coverage requirements of Section 410(b) of the Code. In such case, the
contribution to such Employer or business or operating unit within an Employer
shall be allocated only to Participants who are Employees of such Employer or
business or operating unit within that Employer.
Sec. 3.7 Manner of Making Contributions. All contributions to the Trust
Fund shall be paid directly to the Trustee. In connection with each
contribution, the Employer shall provide the Recordkeeper with information that:
(a) identifies each Participant on whose behalf the contribution is
being made and the amount thereof;
(b) states whether the amount contributed on behalf of the Participant
is a Salary Deferral Contribution, a Matching Contribution, a qualified
non-elective contribution, or a Rollover Contribution; and
(c) directs the investment of the amount contributed on behalf of the
Participant.
Sec. 3.8 Rollover Contributions. An Employee, regardless of whether he
is a Participant in the Plan, may, if authorized by the Administrator and after
complying with all applicable laws, make a Rollover Contribution to the Plan at
any time. If the Employee is not a Participant hereunder, his Rollover Account
shall constitute his entire interest under the Plan. The Recordkeeper shall
allocate and credit a Rollover Contribution to the Employee's Rollover Account
as of the Valuation Date immediately following the date on which the Rollover
Contribution is made. An investment election which directs that such
contribution be invested in the Investment Funds in accordance with Section 22.9
shall be completed through the Interactive Electronic Communication system with
respect to the Employee's Rollover Contribution. In no event shall the existence
of a Rollover Contribution held for the benefit of an Employee be construed to
entitle the Employee to any amount in the Plan to which such Employee is not
otherwise entitled under the other provisions of the Plan.
Sec. 3.10 Contributions with Respect to Military Leave. Notwithstanding
any provision of the Plan to the contrary, contributions with respect to
qualified military service will be allowed in accordance with Section 414(u) of
the Code.
Article IV
LIMITATIONS AND RESTRICTIONS
ON SALARY DEFERRAL CONTRIBUTIONS
Sec. 4.1 Dollar Limitation and Excess Elective Deferrals. For any
taxable year of a Participant, the aggregate amount of (i) the Participant's
Salary Deferral Contributions made pursuant to Section 3.1 for that taxable
year, and (ii) amounts deferred by the Participant for that taxable year
pursuant to a salary deferral agreement under any other plan, contract or
agreement described in
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Sections 401(k), 403(b) or 408(k) of the Code sponsored by an Affiliated Company
shall not exceed the annual deferral limitation established by the Internal
Revenue Service for that taxable year. The annual deferral limitation for the
taxable year beginning in 1998 is $10,000. Beginning January 1, 1999, the annual
deferral limitation shall be such amount as the Secretary of the Treasury may
prescribe at the same time and in the same manner as provided under Code Section
415(d) for adjusting the dollar limitation in effect under Section 415(b)(1)(A)
of the Code.
If the Salary Deferral Contributions made on behalf of a Participant
for a taxable year exceed the annual deferral limitation for that year, the
amount of such excess shall be referred to as "Excess Elective Deferrals."
Excess Elective Deferrals (adjusted for the income or loss attributable to such
excess amount) shall be distributed to the Participant not later than the April
15 immediately following the taxable year of the Participant for which the
Excess Elective Deferrals were made to the Plan. The Administrator shall reduce
the amount of the Excess Elective Deferrals for a taxable year distributable to
the Participant under this Section 4.1 by the amount of Excess Salary Deferral
Contributions (as determined under Section 4.3), if any, previously distributed
to the Participant for the Year beginning in that taxable year. The
Administrator shall determine the net income or net loss in the same manner as
described in Section 4.3 for Excess Salary Deferral Contributions, except the
numerator of the allocation fraction shall be the amount of the Participant's
Excess Elective Deferrals for the taxable year under this Section 4.1 and the
denominator of the allocation fraction shall be the balance of the Participant's
Salary Deferral Contribution Account attributable to Salary Deferral
Contributions as of the end of the taxable year [without regard to the net
income or net loss for the taxable year on that portion of the Participant's
Salary Deferral Contribution Account]; provided, however, if there is a loss
attributable to such excess amount, the amount of the distribution adjusted for
such loss shall be limited to an amount which does not exceed the lesser of (i)
the balance of the Participant's Salary Deferral Contribution Account or (ii)
the Salary Deferral Contributions made on behalf of the Participant for that
taxable year. In adjusting a Participant's Excess Elective Deferrals for the
income or loss attributable to such Excess Elective Deferrals, the income or
loss attributable to such excess deferrals for the "gap period" shall not be
considered. For purposes of this Section 4.1, "gap period" shall mean the period
beginning with the first day of the taxable year next following the taxable year
for which the Excess Elective Deferrals were made on behalf of the Participant
and ending on the date of the distribution. If Excess Elective Deferrals are
distributed to a Participant from the Plan pursuant to this Section 4.1, the
Matching Contribution, if any, to which such Excess Elective Deferrals relate
(plus any income and minus any loss attributable thereto), determined after the
application of Section 5.2, shall be forfeited at the time the Excess Elective
Deferrals are distributed, and the forfeitures shall be applied as provided in
Section 14.4.
If the Participant also (i) participates in one or more other qualified
cash or deferred arrangements within the meaning of Section 401(k) of the Code,
(ii) has an employer contribution made on his behalf pursuant to a salary
deferral agreement under Section 408(k) of the Code, or (iii) has an employer
contribution made on his behalf pursuant to a salary deferral agreement toward
the purchase of an annuity contract under Section 403(b) of the Code, and the
sum of the elective deferrals [as defined in Section 402(g)(3) of the Code] that
are made for the Participant during a taxable year under such other arrangements
and this Plan exceeds the annual deferral limitation for that taxable year, the
Participant shall, not later than the March 1 following the close of his taxable
year for which the excess elective deferrals have been made, notify the
Administrator in writing of the portion of the excess elective deferrals that he
wishes to be allocated to this Plan, if any, and
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request that the Salary Deferral Contributions made on his behalf under this
Plan be reduced by the allocable amount specified by the Participant. If all
plans, contracts and agreements described in Section 401(k), 403(b) and 408(k)
of the Code pursuant to which the Participant is able to defer amounts for a
taxable year for which excess elective deferrals have been made are sponsored by
an Affiliated Company, the Administrator shall determine to which plan, contract
or agreement (including the Plan) the excess elective deferrals shall be
allocated for that taxable year and if the excess elective deferrals are to be
allocated to the Plan, the Administrator shall notify the Trustee and the
Participant in writing not later than March 1 following the close of that
taxable year. Such notification shall be deemed to be a notification by the
Participant to the Administrator. The portion of the excess elective deferrals
that is allocated to this Plan, if any, shall be adjusted for income and loss in
the manner provided above and shall then be distributed to the Participant no
later than the immediately following April 15. If the Salary Deferral
Contributions made on behalf of a Participant for a taxable year do not exceed
the annual deferral limitation for that taxable year and the Administrator has
not received any written Notice from the Participant (or deemed to have received
written Notice from the Participant pursuant to the provisions hereof) by the
March 1 immediately following that taxable year notifying the Administrator that
the Participant allocates a portion of the excess elective deferrals, if any,
for that taxable year to the Plan, the Administrator may assume that none of the
Salary Deferral Contributions made on behalf of the Participant for that taxable
year constitute Excess Elective Deferrals and that no distribution is required
to be made from the Participant's Salary Deferral Contribution Account pursuant
to this Section 4.1. Notwithstanding the fact that Excess Elective Deferrals
have been (or will be) distributed to a Highly Compensated Employee as provided
above, the excess amount of such Salary Deferral Contributions or the portion of
such Salary Deferral Contributions that are deemed to constitute Excess Elective
Deferrals by reason of the Administrator's or Participant's written Notice of
allocation hereunder shall still be treated as a Salary Deferral Contribution
for purposes of applying the Actual Deferral Percentage test described in
Section 4.2 hereof for the Year in which such Excess Elective Deferrals were
made, except to the extent provided under rules prescribed by the Secretary of
the Treasury.
Sec. 4.2 Actual Deferral Percentage Tests. For each Year, the
Administrator shall determine whether the aggregate amount allocated to each
Participant's Salary Deferral Contribution Account attributable to Salary
Deferral Contributions and qualified non-elective contributions (that are
designated under Section 3.3 for consideration under this Section 4.2) made for
that Year shall satisfy one of the following tests, in addition to the test set
forth in Article VI:
(a) the "Actual Deferral Percentage" for the Year for the group
consisting of all eligible Highly Compensated Employees (as defined
below) shall not exceed the "Actual Deferral Percentage" for the
preceding Year for the group consisting of all eligible Non-Highly
Compensated Employees (as defined below) multiplied by 1.25; or
(b) the "Actual Deferral Percentage" for the Year for the group
consisting of all eligible Highly Compensated Employees shall not
exceed the lesser of (i) 200% of the "Actual Deferral Percentage" for
the preceding Year for the group consisting of all eligible Non-Highly
Compensated Employees or (ii) the "Actual Deferral Percentage" for the
preceding Year for the group consisting of all eligible Non-Highly
Compensated Employees
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plus two percentage points or such lesser amount as the Secretary of
the Treasury shall prescribe; or
(c) the alternate method of meeting nondiscrimination requirements
described in Section 401(k)(12) of the Code.
Notwithstanding subsections (a) and (b) above, the Company may elect in
accordance with notices and regulations issued by the Internal Revenue Service,
to determine compliance with either of the tests under subsection (a) or (b) for
a Year by reference to the Actual Deferral Percentage of the eligible Non-Highly
Compensated Employees for the current Year in lieu of determining such
compliance based on the Actual Deferral Percentage of the eligible Non-Highly
Compensated Employees for the preceding Year.
For purposes of this Article IV, the following terms shall have the
following meanings:
(a) "Actual Deferral Percentage" for a Year or a preceding Year means,
with respect to the group consisting of the eligible Highly Compensated
Employees and the group consisting of the eligible Non-Highly
Compensated Employees, the average (expressed as a percentage) of the
ratios, calculated separately for each Employee in each such group and
rounded to the nearest one-hundredth of one percent, of the amount of
Salary Deferral Contributions and qualified non-elective contributions
(that are designated under Section 3.3 for consideration under this
Section 4.2) allocated to each Employee's Salary Deferral Contribution
Account under Section 7.2 and Section 7.4, respectively, (unreduced in
the case of Highly Compensated Employees by distributions made to any
such Employee pursuant to Section 4.1 hereof) for such Year or
preceding Year, whichever is applicable, to such Employee's Annual
Compensation [as defined in subsection (c) below] paid or accrued
during the Year or preceding Year, whichever is applicable, in which
the Employee was an eligible Highly Compensated Employee or eligible
Non-Highly Compensated Employee. Notwithstanding the preceding
sentence, a qualified non-elective contribution can be considered in
calculating the Actual Deferral Percentage of an eligible Non-Highly
Compensated Employee for a Year only if the qualified non-elective
contribution is allocated as of a date within that Year and is actually
contributed to the Trust Fund by an Employer no later than the last day
of the Year immediately following the Year to which that qualified
non-elective contribution relates.
(b) "Actual Deferral Ratio" means each separately calculated ratio
under subsection (a) above. An Employee who is considered a Highly
Compensated Employee under Section 1.25 or a Non-Highly Compensated
Employee under Section 1.38 shall considered an "eligible Highly
Compensated Employee" or an "eligible Non-Highly Compensated Employee"
for purposes of this Section 4.2 for each Year he is employed by an
Employer if he has satisfied the eligibility requirements of Article II
and reached a 401(k) Entry Date on which he could have become a
Participant, regardless of whether (i) he has elected to have an
Employer make a Salary Deferral Contribution to the Plan on his behalf
under Section 3.1 for that Year, (ii) his right to make Salary Deferral
Contributions to the Plan for that Year has been totally or partially
suspended under Section 15.6(d) due to his receipt of a hardship
distribution, or (iii) he is suspended from further contributions
during the Year due to the limitations of Section
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415 of the Code as described in Article VIII. Moreover, the eligible
Non-Highly Compensated Employees for a preceding Year shall be
determined for that Year as described in the preceding sentence and
shall not be affected by any such Non-Highly Compensated Employee's
status as an Employee, Highly Compensated Employee or Non-Highly
Compensated Employee for the current Year. Consequently, for purposes
of this Section 4.2, the Actual Deferral Ratio for each Highly
Compensated Employee and Non-Highly Compensated Employee who is
eligible to, but does not elect to have an Employer make a Salary
Deferral Contribution on his behalf to the Plan for a Year, shall be
zero for that Year, unless the Employer makes a qualified non-elective
contribution to the Plan for a Year to satisfy the Actual Deferral
Percentage tests, in which case the Actual Deferral Ratio for each such
Non-Highly Compensated Employee shall be the ratio of that portion of
the qualified non-elective contribution attributable to contributions
made by the Employer to satisfy the Actual Deferral Percentage tests
which is allocated to his Salary Deferral Contribution Account under
Section 7.4 for the Year to his Annual Compensation paid or accrued
during the Year in which the Employee was an eligible Non-Highly
Compensated Employee.
If any Employee who is an eligible Highly Compensated Employee
is a participant in two or more cash or deferred arrangements described
in Section 401(k) of the Code that are maintained by an Affiliated
Company, excluding any such arrangement that is part of an employee
stock ownership plan [as defined in Section 4975(e)(7) of the Code] for
purposes of determining his ratio under this Section 4.2, all such cash
or deferred arrangements shall be treated as one cash or deferred
arrangement to the extent required under Section 401(k) of the Code.
For purposes of this Section 4.2, if two or more plans or arrangements
described in Section 401(k) of the Code are considered one plan for the
purposes of Sections 401(a)(4) or 410(b) of the Code, such arrangements
shall be treated as a single arrangement, and if the plans use
different plan years, the Administrator shall determine the combined
Salary Deferral Contributions and ratio on the basis of the plan years
ending in the same calendar year. The Recordkeeper shall maintain
records to demonstrate compliance with the tests under this Section
4.2, including the extent to which the Plan used qualified non-elective
contributions made pursuant to Section 3.3 to satisfy a test.
(c) "Annual Compensation" means for a particular Year, the definition
of compensation determined by the Administrator to be used under
Section 4.2 for that Year, provided that any such definition of
compensation must satisfy Section 414(s) of the Code as determined
under Treas. Reg. Section 1.414(s)-1(c).
Sec. 4.3 Adjustments Required to Satisfy an Actual Deferral Percentage
Test. If Salary Deferral Contributions made for any Year do not satisfy one of
the tests set forth in Section 4.2, the excess amount that would result in a
test being satisfied for that Year if it had not been made to the Plan shall be
referred to as an "Excess Salary Deferral Contribution" and the Administrator
shall, in its sole and absolute discretion and notwithstanding any other
provision of the Plan to the contrary (but subject to the provisions of Sections
4.4 and 4.5), make appropriate adjustments pursuant to one or more of the
following provisions:
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(a) Within 2 1/2 months following the close of the Year for which an
Excess Salary Deferral Contribution was made, if administratively
possible, and not later than the close of the Year immediately
following the Year for which an Excess Salary Deferral Contribution was
made, the Excess Salary Deferral Contribution (plus any income and
minus any loss attributable thereto) shall be distributed to the Highly
Compensated Employees to whose Salary Deferral Contribution Accounts
all or a portion of such Excess Salary Deferral Contribution was
allocated first from such Highly Compensated Employees' unmatched
Salary Deferral Contributions, and then if necessary, from such Highly
Compensated Employees' matched Salary Deferral Contributions; provided,
however, that if matched Salary Deferral Contributions are distributed
to correct an Excess Salary Deferral Contribution, the Matching
Contribution to which such Excess Salary Deferral Contribution relates
(plus any income and minus any loss attributable thereto) shall be
forfeited (whether or not vested) at the time the Excess Salary
Deferral Contribution is distributed and the forfeiture shall be
applied as provided in Section 14.4.
(b) Within the time prescribed by law to enable an Employer to obtain a
deduction for a contribution on its federal income tax return for the
Year for which an Excess Salary Deferral Contribution was made, the
Employer shall, if the conditions applicable to qualified non-elective
contributions under final Treasury regulations issued by the Secretary
of the Treasury are satisfied, make a qualified non-elective
contribution pursuant to Section 3.4 on behalf of the eligible
Non-Highly Compensated Employees (as defined in Section 4.2) who meet
the requirements of Section 7.5 in an amount sufficient to satisfy one
of the tests set forth in Section 4.2 [before or after the application
of subsection (a) above].
The amount of the Excess Salary Deferral Contributions, if any, to be
distributed pursuant to subsection (a) hereof for a Year shall be
determined by a three-step process. First, a leveling method shall be
used by the Administrator under which the Actual Deferral Ratio of the
Highly Compensated Employee with the highest Actual Deferral Ratio for
that Year is reduced to the extent required (i) to enable the Plan to
satisfy for that Year one of the Actual Deferral Percentage tests set
forth in Section 4.2 or (ii) to cause such Highly Compensated
Employee's Actual Deferral Ratio for that Year to equal the Actual
Deferral Ratio of the Highly Compensated Employee with the next highest
Actual Deferral Ratio for that Year. The Actual Deferral Ratio of any
Highly Compensated Employee included for that Year in the leveling
method of the first step shall be the Actual Deferral Ratio determined
after the amount of that Highly Compensated Employee's Salary Deferral
Contributions for that Year have been reduced by the amount of Excess
Elective Deferrals for the Year, if any, that have been previously
distributed under Section 4.1 to the Employee for the taxable year
ending in that Year. This procedure shall be repeated until the Plan
satisfies one of the Actual Deferral Percentage tests set forth in
Section 4.2. Then the Administrator shall determine, with respect to
each Highly Compensated Employee included for that Year in the leveling
method of the first step, the difference between (i) that Highly
Compensated Employee's Salary Deferral Contributions for that Year and
(ii) the amount equal to the product of that Highly Compensated
Employee's adjusted Actual Deferral Ratio determined for that Year
pursuant to the leveling method of the first step multiplied by his
Annual Compensation [as defined in Section 4.2(c)] for that Year.
Finally, the Administrator shall add all amounts determined for
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that Year pursuant to the second step described in the preceding
sentence which shall constitute the amount of the Excess Salary
Deferral Contributions to be distributed pursuant to subsection (a) for
that Year.
Once the Plan satisfies one of the Actual Deferral Percentage tests,
the amount of the Excess Salary Deferral Contributions determined for
that Year pursuant to the preceding paragraph must be allocated to one
or more Highly Compensated Employees for that Year pursuant to a
leveling method under which the dollar amount of the Salary Deferral
Contributions of the Highly Compensated Employee with the highest
dollar amount of Salary Deferral Contributions for that Year is reduced
to the extent required (i) to allocate to that Highly Compensated
Employee all of the Excess Salary Deferral Contributions determined for
that Year pursuant to the preceding paragraph or (ii) to cause such
Highly Compensated Employee's dollar amount of Salary Deferral
Contributions to equal the dollar amount of Salary Deferral
Contributions of the Highly Compensated Employee with the next highest
dollar amount of Salary Deferral Contributions. This procedure shall be
repeated until the entire amount of the Excess Salary Deferral
Contributions determined for that Year has been allocated to one or
more Highly Compensated Employees for that Year. The amount of the
Excess Salary Deferral Contributions for a Year to be distributed to
any Highly Compensated Employee for that Year shall be adjusted for
income or loss as provided in the next paragraph. The Administrator
shall then direct the Trustee to distribute the adjusted Excess Salary
Deferral Contributions to each such Highly Compensated Employee.
The income or loss attributable to the portion of the Excess Salary
Deferral Contributions for a Year that are to be distributed to a
Highly Compensated Employee hereunder shall be determined by
multiplying the amount of the income or loss allocable to the
Participant's Salary Deferral Contribution Account for the Year by a
fraction, the numerator of which is the portion of the Excess Salary
Deferral Contributions for the Year that are to be distributed to that
Participant and the denominator of which is the balance of the
Participant's Salary Deferral Contribution Account on the last day of
the Year after adjustment as of such date under Section 9.2. In
adjusting a Participant's Excess Salary Deferral Contributions for the
income or loss attributable to such excess contributions, effective for
the Year beginning August 1, 1997, the income or loss attributable to
such excess contributions for the "gap period" shall not be considered.
For purposes of this Section 4.3, "gap period" shall mean the period
beginning with the first day of the Year next following the Year for
which the Excess Salary Deferral Contributions were made on behalf of
the Participant and ending on the date of the distribution.
Sec. 4.4 Additional Adjustments of Salary Deferral Contributions. For
purposes of assuring compliance with the Actual Deferral Percentage tests of
Section 4.2 hereof, the Administrator may, in its sole and absolute discretion,
make such adjustments, reductions or suspensions to Salary Deferral Contribution
rates of Participants who are Highly Compensated Employees at such times and in
such amounts as the Administrator shall reasonably deem necessary, including
prospective reductions of Salary Deferral Contributions at any time prior to or
within the Year. The Administrator shall make such adjustments, reductions or
suspensions based upon periodic reviews of the Salary Deferral Contribution
rates of Highly Compensated Employees during the Year
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and may make such adjustments, reductions or suspensions in any amount
notwithstanding any other provisions hereof. In addition, the Administrator
shall take any other action to assure compliance with the Actual Deferral
Percentage tests as shall be prescribed by the Secretary of the Treasury.
Sec. 4.5 Other Permissible Methods of Testing and Correction. The
provisions of this Article IV are intended to conform with Sections 401(k) and
402(g) of the Code. In the event that the Administrator determines, based on
changes to the Code or interpretations or guidance issued by the Internal
Revenue Service, that the requirements of such Code sections may be applied in a
manner different from that prescribed in this Article IV, the Administrator may
make appropriate adjustments to the administration of the Plan to incorporate
such changes to the Code or interpretations or guidance. If a change to the Code
or interpretations or guidance issued by the Internal Revenue Service results in
more than one additional option in the manner in which this Article IV may be
administered, the Administrator shall have the limited discretion to select the
option to be used, provided that such option, when compared to the other option
or options, results in the smallest adjustment to Participants' Individual
Accounts.
Sec. 4.6 Safe-Harbor Contributions. Notwithstanding the foregoing
provisions of Article IV, effective August 1, 1999, the Plan is intended to
satisfy the safe harbor provisions of Section 401(k)(12) of the Code.
Article V
LIMITATIONS AND RESTRICTIONS ON
MATCHING CONTRIBUTIONS
Sec. 5.1 Contribution Percentage Tests. For each Year, the Employer
shall determine, after first applying the provisions of Section 4.3(a), whether
the sum of (i) the amounts allocated to each Participant's Employer Matching
Contribution Account attributable to Matching Contributions, if any, made for
that Year and (ii) the amount allocated to each Participant's Salary Deferral
Contribution Account attributable to qualified non-elective contributions (that
are designated under Section 3.3 for consideration under this Section 5.1) for
that Year shall satisfy one of the following tests, in addition to the test set
forth in Article VI:
(a) the "Contribution Percentage" for the Year for the group consisting
of all eligible Highly Compensated Employees (as defined below) shall
not exceed the "Contribution Percentage" for the preceding Year for the
group consisting of all eligible Non-Highly Compensated Employees (as
defined below) multiplied by 1.25; or
(b) the "Contribution Percentage" for the Year for the group consisting
of all eligible Highly Compensated Employees shall not exceed the
lesser of (i) 200% of the "Contribution Percentage" for the preceding
Year for the group consisting of all eligible Non-Highly Compensated
Employees or (ii) the "Contribution Percentage" for the preceding Year
for the group consisting of all eligible Non-Highly Compensated
Employees plus two percentage points or such lesser amount as the
Secretary of the Treasury shall prescribe; or
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(c) the alternate method of meeting nondiscrimination requirements
described in Section 401(m)(11) of the Code.
Notwithstanding subsections (a) and (b) above, the Company may elect in
accordance with notices and regulations issued by the Internal Revenue Service,
to determine compliance with either of the tests under subsection (a) or (b) for
a Year by reference to the Contribution Percentage of the eligible Non-Highly
Compensated Employees for the current Year in lieu of determining such
compliance based on the Contribution Percentage of the eligible Non-Highly
Compensated Employees for the preceding Year.
For purposes of this Article V, the following terms shall have the
following meanings:
(a) "Contribution Percentage" for a Year or a preceding Year means,
with respect to the group consisting of the eligible Highly Compensated
Employees and the group consisting of the eligible Non-Highly
Compensated Employees, the average (expressed as a percentage) of the
ratios, calculated separately for each Employee in each such group and
rounded to the nearest one-hundredth of one percent, of the sum of (i)
the amount of Matching Contributions, if any, allocated to each
Employee's Employer Matching Contribution Account under Section 7.3 for
such Year or preceding Year, whichever is applicable, after reduction
for forfeited Matching Contributions, if any, under Section 4.3(a), and
(ii) the amount allocated to each Employee's Salary Deferral
Contribution Account under Section 7.4 attributable to qualified
non-elective contributions (that are designated under Section 3.4 for
consideration under this Section 5.1) for such Year or preceding Year,
whichever is applicable, to such Employee's Annual Compensation [as
defined in subsection (c) below] paid or accrued during the Year or
preceding Year, whichever is applicable, in which the Employee was an
eligible Highly Compensated Employee or eligible Non-Highly Compensated
Employee. Notwithstanding the preceding sentence, a qualified
non-elective contribution can be considered in calculating the Actual
Deferral Percentage of an eligible Non-Highly Compensated Employee for
a Year only if the qualified non-elective contribution is allocated as
of a date within that Year and is actually contributed to the Trust
Fund by an Employer no later than the last day of the Year immediately
following the Year to which that qualified non-elective contribution
relates.
(b) "Actual Contribution Ratio" means each separately calculated ratio
under subsection (a) above. An Employee who is considered a Highly
Compensated Employee under Section 1.25 or a Non-Highly Compensated
Employee under Section 1.38 shall be considered an "eligible Highly
Compensated Employee" or an "eligible Non-Highly Compensated Employee"
for purposes of this Section 5.1 for each Year he is employed by an
Employer if he has satisfied the eligibility requirements of Article II
and reached a 401(k) Entry Date on which he could have become a
Participant, regardless of whether he elected to have an Employer make
a Salary Deferral Contribution to the Plan on his behalf under Section
3.1 and is eligible to receive an allocation of a Matching Contribution
under Section 7.3 for that Year. Moreover, the eligible Non-Highly
Compensated Employees for a preceding Year shall be determined for that
Year as described in the preceding sentence and shall not be affected
by any such Non-Highly Compensated Employee's status as an Employee,
Highly Compensated
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Employee or Non-Highly Compensated Employee for the current Year.
Consequently, for purposes of this Section 5.1, the Actual Contribution
Ratio for each Highly Compensated Employee and Non-Highly Compensated
Employee who is eligible to, but does not elect to have an Employer
make a Salary Deferral Contribution on his behalf to the Plan for a
Year, shall be zero for that Year, unless an Employer makes a qualified
non-elective contribution to the Plan for a Year to satisfy the
Contribution Percentage tests, in which case the Actual Contribution
Ratio for each such Non-Highly Compensated Employee shall be the ratio
of that portion of the qualified non-elective contribution attributable
to contributions made by an Employer to satisfy the Contribution
Percentage tests which is allocated to his Salary Deferral Contribution
Account under Section 7.4 for the Year to his Annual Compensation paid
or accrued during the Year in which the Employee was an eligible
Non-Highly Compensated Employee.
For purposes of this Section 5.1, if two or more plans of an
Employer to which matching contributions within the meaning of Section
401(m)(4)(A) of the Code, employee voluntary after-tax contributions or
elective deferrals within the meaning of Section 401(m)(4)(B) of the
Code are made are treated as one plan for purposes of Sections
401(a)(4) and 410(b) of the Code, [other than the average benefits
test, and excluding allocations under an employee stock ownership plan
as defined in Section 4975(e)(7) or 409 of the Code, or the portion of
a plan which constitutes an employee stock ownership plan], such plans
shall be treated as one plan for purposes of this Section 5.1, and if
the plans use different plan years, the Administrator shall determine
the combined Matching Contributions and the ratio on the basis of the
plan years ending in the same calendar year. The Recordkeeper shall
maintain records to demonstrate compliance with the tests under this
Section 5.1, including the extent to which the Plan used qualified
non-elective contributions made pursuant to Section 3.3 to satisfy a
test. In addition, if any Employee who is an eligible Highly
Compensated Employee participates in two or more plans described in
Section 401(a) of the Code which are maintained by an Affiliated
Company to which such contributions are made, all such contributions
shall be aggregated for purposes of this Section 5.1 to the extent
required under Section 401(m) of the Code.
(c) "Annual Compensation" means for a particular Year, the definition
of compensation determined by the Administrator to be used under this
Section 5.1 for that Year, provided that any such definition of
compensation must satisfy Section 414(s) of the Code as determined
under Treas. Reg. Section 1.414(s)-1(c).
Sec. 5.2 Adjustments Required to Satisfy a Contribution Percentage
Test. If Matching Contributions, if any, made for any Year and allocated under
Section 7.3 do not satisfy one of the tests set forth in Section 5.1, the excess
amount that would result in a test being satisfied for the Year if it had not
been made to the Plan shall be referred to as an "Excess Matching Contribution"
and the Administrator shall, in its sole and absolute discretion and
notwithstanding any other provision hereof, make appropriate adjustments in
accordance with Sections 401(a)(4) and 401(m) of the Code (and the Treasury
regulations thereunder) pursuant to subsections (a) or (b), as determined by the
Administrator, as follows:
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(a) Such excess portion (plus any income and minus any loss
attributable thereto) shall be distributed to the Highly Compensated
Employee within 2 1/2 months following the close of that Year, if
administratively possible, and not later than the close of the Year
immediately following that Year; or
(b) In lieu of or in addition to the application of subsections
(a) above, within the time prescribed by law to enable an Employer to
obtain a deduction for a contribution on its federal income tax return
for the Year for which an Excess Matching Contribution was made, the
Employer shall, if the conditions applicable to qualified non-elective
contributions under final Treasury regulations issued by the Secretary
of the Treasury are satisfied, make a qualified nonelective
contribution pursuant to Section 3.3 on behalf of the eligible
Non-Highly Compensated Employees (as defined in Section 5.1) in an
amount sufficient to satisfy one of the tests set forth in Section 5.1
[before or after the application of subsection (a)].
The amount of the Excess Matching Contributions, if any, to be
distributed or forfeited pursuant to subsection (a) hereof for a Year
shall be determined by a three-step process. First, a leveling method
shall be used by the Administrator under which the Actual Contribution
Ratio of the Highly Compensated Employee with the highest Actual
Contribution Ratio for that Year is reduced to the extent required (i)
to enable the Plan to satisfy for that Year one of the Contribution
Percentage tests set forth in Section 5.1 or (ii) to cause such Highly
Compensated Employee's Actual Contribution Ratio for that Year to equal
the Actual Contribution Ratio of the Highly Compensated Employee with
the next highest Actual Contribution Ratio for that Year. This
procedure shall be repeated until the Plan satisfies one of the
Contribution Percentage tests set forth in Section 5.1. Then the
Administrator shall determine, with respect to each Highly Compensated
Employee included for that Year in the leveling method of the first
step, the difference between (i) that Highly Compensated Employee's
Matching Contributions for that Year and (ii) the amount equal to the
product of that Highly Compensated Employee's adjusted Actual
Contribution Ratio determined for that Year pursuant to the leveling
method of the first step multiplied by his Annual Compensation [as
defined in Section 5.1(c)] for that Year. Finally, the Administrator
shall add all amounts determined for that Year pursuant to the second
step described in the preceding sentence which shall constitute the
amount of the Excess Matching Contributions to be distributed pursuant
to subsection (a) for that Year.
Once the Plan satisfies one of the Contribution Percentage tests, the
amount of the Excess Matching Contributions determined for that Year
pursuant to the preceding paragraph must be allocated to one or more
Highly Compensated Employees for that Year pursuant to a leveling
method under which the dollar amount of the Matching Contributions of
the Highly Compensated Employee with the highest dollar amount of
Matching Contributions for that Year is reduced to the extent required
(i) to allocate to that Highly Compensated Employee all of the Excess
Matching Contributions determined for that Year pursuant to the
preceding paragraph or (ii) to cause such Highly Compensated Employee's
dollar amount of Matching Contributions to equal the dollar amount of
Matching Contributions of the Highly Compensated Employee with the next
highest dollar amount of Matching Contributions. This procedure shall
be repeated until the entire amount of the Excess Matching
Contributions determined for that Year has been allocated to one or
more Highly Compensated Employees
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for that Year. The amount of the Excess Matching Contributions for a
Year to be distributed to any Highly Compensated Employee for that Year
shall be adjusted for income or loss as provided in the next paragraph.
The Administrator shall then direct the Trustee to distribute the
adjusted Excess Matching Contributions to each such Highly Compensated
Employee.
The income or loss attributable to the portion of the Excess Matching
Contributions for a Year that are to be distributed to a Highly
Compensated Employee hereunder shall be determined by multiplying the
amount of the income or loss allocable to the Participant's Employer
Matching Contribution Account for the Year by a fraction, the numerator
of which is the portion of the Excess Matching Contributions for the
Year that are to be distributed to that Participant and the denominator
of which is the balance of the Participant's Employer Matching
Contribution Account on the last day of the Year after adjustment as of
such date under Section 9.2. In adjusting a Participant's Excess
Matching Contributions for the income or loss attributable to such
excess contributions, the income or loss attributable to such excess
contributions for the "gap period" shall not be considered. For
purposes of this Section 5.2, "gap period" shall mean the period
beginning with the first day of the Year next following the Year for
which the Excess Matching Contributions were made on behalf of the
Participant and ending on the date of the distribution.
Sec. 5.3 Testing of Salary Deferral Contributions Under Contribution
Percentage Test. Notwithstanding the foregoing provisions of this Article V or
of Article IV, all or a portion of the Salary Deferral Contributions made on
behalf of eligible Non-Highly Compensated Employees may be treated as Matching
Contributions made on behalf of such eligible Non-Highly Compensated Employees
for the purpose of meeting the Contribution Percentage test set forth in Section
5.1, provided that the Actual Deferral Percentage test of Section 4.2 can be
met, both when the Salary Deferral Contributions treated as Matching
Contributions hereunder are included in performing such Actual Deferral
Percentage test and when such Salary Deferral Contributions are excluded in
performing such Actual Deferral Percentage test. Except for purposes of meeting
the Contribution Percentage test of Section 5.1 to the extent described
hereunder, any such Salary Deferral Contributions shall continue to be treated
as Salary Deferral Contributions for all other purposes of the Plan.
Sec. 5.4 Other Permissible Methods of Testing and Corrections. The
provisions of this Article V are intended to conform with Section 401(m) of the
Code. In the event that the Administrator determines, based on changes to the
Code or interpretations or guidance issued by the Internal Revenue Service, that
the requirements of such Code section may be applied in a manner different from
that prescribed in this Article V, the Administrator may make appropriate
adjustments to the administration of the Plan to incorporate such changes to the
Code or interpretations or guidance. If a change to the Code or interpretations
or guidance issued by the Internal Revenue Service results in more than one
additional option in the manner in which this Article V may be administered, the
Administrator shall have the limited discretion to select the option to be used,
provided that such option, when compared to the other option or options, results
in the smallest adjustment to Participants' Individual Accounts.
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Sec. 5.5 Safe-Harbor Contributions. Notwithstanding the foregoing
provisions of Article V, effective August 1, 1999, the Plan is intended to
satisfy the safe harbor provisions of Section 401(m)(11) of the Code.
Article VI
AGGREGATE LIMIT ON ACTUAL DEFERRAL
AND CONTRIBUTION PERCENTAGES
Sec. 6.1 General Rules. If at least one Highly Compensated Employee is
included in the Actual Deferral Percentage test under Section 4.2 and in the
Contribution Percentage test under Section 5.1, in addition to satisfaction of
the Actual Deferral Percentage test and the Contribution Percentage test, the
sum of the Highly Compensated Group's Actual Deferral Percentage under Section
4.2 and Contribution Percentage under Section 5.1 may not exceed the aggregate
limit (the "multiple use limitation") of this Article VI. The multiple use
limitation of this Article VI does not apply, however, unless (a) prior to the
application of the multiple use limitation, the Actual Deferral Percentage and
the Contribution Percentage of the Highly Compensated Group each exceeds 125% of
the respective percentages for the Non-Highly Compensated Group; or (b) the Plan
does not satisfy the alternative methods of meeting non-discrimination
requirements described in Sections 401(k)(12) and 401(m)(11) of the Code.
Sec. 6.2 Multiple Use Limitations. The multiple use limitation is the
greater of (i) the sum of (a) and (b) or (ii) the sum of (c) and (d), where:
(a) is 125% of the greater of:
(i) the Actual Deferral Percentage of the Non-Highly
Compensated Group under Section 4.2 for the preceding Year; or
(ii) the Contribution Percentage of the Non-Highly Compensated
Group under Section 5.1 for the preceding Year; and
(b) is equal to two percent plus the lesser of the percentage in
subsection (a)(i) or (a)(ii) above, but not more than twice the lesser
of the percentage in subsection (a)(i) or (a)(ii); or
(c) is equal to 125% of the lesser of:
(i) the Actual Deferral Percentage of the Non-Highly
Compensated Group under Section 4.2 for the preceding Year; or
(ii) the Contribution Percentage of the Non-Highly Compensated
Group under Section 5.1 for the preceding Year; and
(d) is equal to two percent plus the greater of the percentage in
subsection (c)(i) or (c)(ii) above, but not more than twice the greater
of the percentage in subsection (c)(i) or (c)(ii).
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33
The Administrator shall determine whether the Plan satisfies the multiple use
limitation after applying the Actual Deferral Percentage test under Section 4.2
and the Contribution Percentage test under Section 5.1 and after making any
corrective distributions, the use of qualified non-elective contributions, or
any other adjustments required or permitted by Articles IV and V. If after
applying this Section 6.2, the Administrator determines that the Plan has failed
to satisfy the multiple use limitation, the Administrator shall correct the
failure by treating the excess amount as Excess Matching Contributions under
Section 5.2. For purposes of this Article VI, "Highly Compensated Group" and
"Non-Highly Compensated Group" means the group of Employees who are eligible
Highly Compensated Employees and eligible Non-Highly Compensated Employees,
respectively, for the Year or preceding Year, whichever is applicable, as
defined in Sections 4.2 and 5.1.
Sec. 6.3 Prospective Reduction of Contributions. In the event that it
is determined by the Administrator at any time prior to or within a Year that
the multiple use limitation prescribed in Section 6.2 could be exceeded with
respect to such Year, then the amount of Salary Deferral Contributions (as
determined by the Committee in its sole and absolute discretion) made on behalf
of Participants who are Highly Compensated Employees may be reduced in a manner
similar to the procedures described in Section 4.4.
Sec. 6.4 Safe-Harbor Contributions. Notwithstanding the foregoing
provisions of Article VI, effective August 1, 1999, the Plan is intended to
satisfy the safe harbor provisions of Sections 401(k)(12) and 401(m)(11) of the
Code.
Article VII
ALLOCATION OF CONTRIBUTIONS
Sec. 7.1 Establishment of Accounts. The Recordkeeper shall establish
and maintain a separate account as a record of each Participant's interest in
the Trust Fund with respect to each Individual Account in which a Participant
has an interest, including, as appropriate, sub-accounts for the Participant's
Salary Deferral Contributions, his Matching Contributions, his profit sharing
contributions and his Rollover Contributions. One or more sub-accounts shall be
maintained within each Individual Account to reflect the Participant's
investment elections among the Investment Funds.
Sec. 7.2 Allocation of Salary Deferral Contributions. As of each
Allocation Date, but after adjustment of the Individual Accounts as provided in
Section 9.2, the Employer contributions deposited with the Trustee during the
period since the last Allocation Date that were made pursuant to a salary
deferral agreement entered into with a Participant pursuant to Section 3.1 shall
be allocated by the Recordkeeper to the Participant's Salary Deferral
Contribution Account; provided however, that the amount allocated hereunder
shall be subject to the limitations of Sections 4.1 and 4.2.
Sec. 7.3 Allocation of Matching Contributions. As of each Allocation
Date, but after adjustment of the Individual Accounts as provided in Section
9.2, and after applying the limitations of Section 5.1 and Article VI, the
Administrator shall, to the extent permitted by either of the Contribution
Percentage tests of Section 5.1 and the multiple use limitation of Article VI,
direct the Recordkeeper to allocate the Matching Contribution made pursuant to
Section 3.2 for the period
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ending on such Allocation Date and any forfeitures that were applied to reduce
Matching Contributions, as provided in Section 14.4 for said period, and shall
credit the same to the Employer Matching Contribution Accounts of all
Participants for whom the contributions were made.
Sec. 7.4 Allocation of Employer Qualified Non-Elective Contributions.
As of the last day of each Year, but after adjustment of the Individual Accounts
as provided in Section 9.2, if an Employer made qualified non-elective
contributions for a Year under Section 3.3 on behalf of Participants who are
Non-Highly Compensated Employees in order to insure that one of the Actual
Deferral Percentage tests described in Section 4.2 are met for such Year or that
one of the Contribution Percentage tests described in Section 5.1 are met for
such Year, such qualified non-elective contributions shall be allocated to the
Salary Deferral Contribution Accounts of the Non-Highly Compensated Employees
determined by the Committee in the manner determined by the Committee.
Sec. 7.5 Credit of Rollover Contributions. A Rollover Contribution made
by an Employee during the period since the last Allocation Date shall be
credited to his Rollover Account.
Sec. 7.6 Included Individual Accounts. For the purposes of this Article
VII, references to the Individual Accounts of Participants shall include the
Individual Accounts of those who die, become disabled, retire, or terminate
their services during the Year in question.
Article VIII
LIMITATION ON ALLOCATIONS
Sec. 8.1 Limitation on Allocations. Notwithstanding any other provision
of the Plan, the following provisions shall be applicable to the Plan:
(a) If this Plan is the only plan maintained by an Employer which
covers the class of Employees eligible to participate hereunder and the
Participant does not participate in and has never participated in a
Related Plan or a welfare benefit fund, as defined in Section 419(e) of
the Code, maintained by the Employer, or an individual medical account,
as defined in Section 415(1)(2) of the Code, maintained by the
Employer, which provides an Annual Addition as defined in Section
8.2(a), the Annual Additions which may be allocated under this Plan to
a Participant's Individual Account for a Limitation Year shall not
exceed the lesser of:
(i) the Maximum Permissible Amount; or
(ii) any other limitation contained in this Plan.
(b) If an Employer maintains, in addition to this Plan, (i) a Related
Plan which covers the same class of Employees eligible to participate
hereunder, (ii) a welfare benefit fund, as defined in Section 419(e) of
the Code, or (iii) an individual medical account, as defined in Section
415(l)(2) of the Code, which provides an Annual Addition, the Annual
Additions
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which may be allocated under this Plan to a Participant's Individual
Account for a Limitation Year shall not exceed the lesser of:
(i) the Maximum Permissible Amount, reduced by the sum of any
Annual Additions allocated to the Participant's accounts for
the same Limitation Year under this Plan and such other
Related Plan and the welfare plans described in clauses (ii)
and (iii) above; or
(ii) any other limitation contained in this Plan.
Sec. 8.2 Definitions. For purposes of this Article VIII, the following
terms shall have the meanings set forth below:
(a) "Annual Additions" means the sum of the following amounts allocated
to a Participant's Individual Account for a Limitation Year:
(i) all Employer contributions;
(ii) all forfeitures;
(iii) all Employee contributions; and
(iv) amounts described in Sections 415(l)(1) and 419A(d)(2) of
the Code.
In addition, Annual Additions shall include Excess Elective Deferrals
under Section 4.1 that are not distributed under that section to the
Participant before April 15 following the taxable year of deferral,
Excess Salary Deferral Contributions within the meaning of Section 4.3
and Excess Matching Contributions within the meaning of Section 5.2.
For purposes of this Article VIII, Employee contributions shall be
determined without regard to any (i) rollover contribution within the
meaning of Section 402(a)(5), 403(a)(4) or 408(d)(3) of the Code [or,
on or after January 1, 1993, an eligible rollover contribution as
described in Section 402(c)(4) of the Code], (ii) contribution by the
Employee to a simplified employee pension, (iii) contribution to an
individual retirement account or individual retirement annuity, (iv)
repayment of loans made to the Participant from the Plan, and (v)
direct transfers of Employee contributions from a plan described in
Section 401(a) of the Code to the Plan.
(b) "Excess Amount" means the excess of the Annual Additions allocated
to a Participant's Individual Account for the Limitation Year over the
Maximum Permissible Amount, less loading and other administrative
charges allocable to such excess.
(c) "Limitation Year" means a twelve-consecutive month period ending on
the last day of the Year. All qualified plans maintained by the
Employer must use the same Limitation Year. If the Limitation Year is
amended to a different 12-consecutive month period, the new Limitation
Year must begin on a date within the Limitation Year in which the
amendment is made.
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(d) "Maximum Permissible Amount" for a Limitation Year with respect to
any Participant shall be the lesser of:
(i) $30,000 [or, beginning January 1, 1999, and each January
thereafter, such other dollar limitation determined for the
Limitation Year by automatically adjusting the $30,000
limitation by the cost of living adjustment factor prescribed
by the Secretary of the Treasury under Section 415(d) of the
Code in such manner as the Secretary shall prescribe]; or
(ii) 25% of the Participant's Annual Compensation for the
Limitation Year.
(e) "Employer" means for purposes of this Article VIII, any Employer
and any Affiliated Company that adopts this Plan; provided, however,
the determination under Sections 414(b) and (c) of the Code shall be
made as if the phrase "more than 50 percent" were substituted for the
phrase "at least 80 percent" each place it is incorporated into Section
414(b) and (c) of the Code.
(f) "Annual Compensation" means, notwithstanding Section 1.6, for the
purposes of this Article VIII, a Participant's earned income, wages,
salaries, fees for professional service and other amounts received
(without regard to whether an amount is paid in cash) for personal
services actually rendered in the course of employment with an Employer
maintaining the Plan to the extent that the amounts are includible in
gross income (including, but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe benefits,
reimbursements, and expense allowances) and amounts excluded from
income under Section 125, 402(g)(3) and 457 of the Code, and excluding
the following:
(i) Employer contributions to a plan of deferred compensation
to the extent contributions are not included in gross income
of the Employee for the taxable year in which contributed, or
on behalf of an Employee to a simplified employee pension plan
to the extent such contributions are deductible under Section
219(b)(2) of the Code, and any distributions from a plan of
deferred compensation whether or not includible in the gross
income of the Employee when distributed;
(ii) amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property) held by
an Employee becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
(iii) amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option;
and
(iv) other amounts which receive special tax benefits, or
contributions made by an Employer (whether or not under a
salary deferral agreement) towards the purchase of a 403(b)
annuity contract under Section 403(b) of the Code (whether or
not the contributions are excludable from the gross income of
the Employee), contributions
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made by an Employer for medical benefits [within the meaning
of Section 401(h) or 419A(f)(2) of the Code] which is
otherwise treated as an Annual Addition, or any amount
otherwise treated as an Annual Addition under Section
415(l)(1) or 419A(d)(2) of the Code.
For Limitation Years after December 31, 1991, Annual Compensation for
any Limitation Year is the Annual Compensation actually paid or
includible in gross income during such Limitation Year. For Limitation
Years after December 31, 1997, Annual Compensation shall include
amounts contributed by an Employer pursuant to a salary deferral
agreement which are excludable from the Participant's gross income
under Sections 125, 402(e)(3), 402(h)(1)(B) or 403(b) of the Code.
(g) "Related Plan" means any other defined contribution plan [as
defined in Section 415(k) of the Code] maintained by any Employer as
defined in Section 8.2(e).
(h) "Defined Contribution Plan Fraction" means for any Limitation Year:
(i) the sum of the Annual Additions to the Participant's
account under this Plan and his accounts under any Related
Plan and welfare plans [as described in Section 8.1(b)(ii) and
(iii)] as of the close of the Limitation Year,
divided by:
(ii) the sum of the lesser of the following amounts determined
for the Limitation Year and for each prior Year of his service
for an Employer:
(A) the product of 1.25, multiplied by the dollar
limitation in effect under Section 415(c)(1)(A) of
the Code for the Limitation Year [determined without
regard to Section 415(c)(6) of the Code], or
(B) the product of 1.4, multiplied by an amount equal
to 25% of the Participant's Annual Compensation for
the Limitation Year.
If the Employee was a Participant as of the end of the first day of the
first Limitation Year beginning after December 31, 1986, in one or more
defined contribution plans maintained by an Employer which were in
existence on May 6, 1986, the numerator of the Defined Contribution
Plan Fraction will be adjusted if the sum of that fraction and the
Defined Benefit Plan Fraction otherwise would exceed 1.0 under the
terms of this Plan. Under the adjustment, an amount equal to the
product of (i) the excess of the sum of the fractions over 1.0, times
(ii) the denominator of this fraction, will be permanently subtracted
from the numerator of this fraction. The adjustment is calculated using
the fractions as they would be computed under this Section 8.2(h) as of
the end of the last Limitation Year beginning before January 1, 1987,
and disregarding any changes in the terms and conditions of the Plan
made after May 6, 1986, but using the Section 415 limitations
applicable to the first Limitation Year beginning on or after January
1, 1987. The Annual Addition for any Limitation Year beginning before
January 1, 1987, shall not be recomputed to treat all Employee
contributions as Annual Additions.
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The adjustment also will be made if at the end of the last Limitation
Year beginning before January 1, 1984, the sum of the fractions exceeds
1.0 because of accruals or additions that were made before the
limitations of this Article VIII became effective to any plans of an
Employer in existence on July 1, 1982. With respect to any Limitation
Year ending after December 31, 1982, the amount taken into account
under Section 8.1(h)(ii) above with respect to each Participant for all
Limitation Years ending before January 1, 1983, shall be an amount
equal to the product of (iii) and (iv), where
(iii) is the amount determined under Section 8.1(h)(ii) [as in
effect for the Limitation Year ending in 1982] for the
Limitation Year ending in 1982, multiplied by
(iv) a fraction, the numerator of which is the lesser of
(A) $51,875, or
(B) 1.4, multiplied by 25% of the Annual Compensation
of the Participant for the Limitation Year ending in
1981, and
the denominator of which is the lesser of
(A) $41,500 or
(B) 25% of the Annual Compensation of the Participant
for the Limitation Year ending in 1981.
(i) "Defined Benefit Plan Fraction" means for any Limitation Year:
(i) the projected Annual Benefit of the Participant under the
defined benefit plans maintained by an Employer determined as
of the close of the Limitation Year,
divided by:
(ii) the lesser of:
(A) the product of 1.25, multiplied by the dollar
limitation in effect under Section 415(b)(1)(A) of
the Code for the Limitation Year, or
(B) the product of 1.4, multiplied by 100% of the
Participant's Average Compensation.
If the Employee was a Participant as of the first day of the first
Limitation Year beginning after December 31, 1986, in one or more
defined benefit plans maintained by an Employer which were in existence
on May 6, 1986, the denominator of this fraction will not be less than
125% of the sum of the annual benefits under such plans which the
Participant had accrued as of the close of the last Limitation Year
beginning before January 1, 1987, disregarding any changes in the terms
and conditions of the Plan after May 5, 1986. The preceding sentence
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applies only if the defined benefit plans individually and in the
aggregate satisfied the requirements of Section 415 of the Code for all
Limitation Years beginning before January 1, 1987.
(j) "Average Compensation" means the average Annual Compensation during
a Participant's high three years of service, which period is the three
consecutive calendar years (or, the actual number of consecutive years
of employment for those Employees who are employed for less than three
consecutive years with an Employer) during which the Employee had the
greatest aggregate Annual Compensation from the Employer, including any
adjustments under Section 415(d) of the Code.
(k) "Annual Benefit" means a benefit payable annually in the form of a
straight life annuity (with no ancillary benefits) under a plan to
which Employees do not contribute and under which no Rollover
Contributions are made.
Sec. 8.3 Excess Annual Additions. In the event that, notwithstanding
Section 8.5(a) hereof, the limitations with respect to Annual Additions
prescribed hereunder are exceeded with respect to any Participant for the
Limitation Year and such Excess Amount arises as a result of the allocation of
forfeitures, a reasonable error in estimating a Participant's Annual
Compensation [as defined in Section 8.2(f)] for the Year, a reasonable error in
determining the amount of Salary Deferral Contributions that may be made by a
Participant under the limits of Section 415 of the Code, or as a result of other
facts and circumstances as established by the Commissioner of the Internal
Revenue Service, the Excess Amounts shall not be deemed an Annual Addition in
that Limitation Year, to the extent such Excess Amounts are treated in
accordance with any of the following:
(a) Salary Deferral Contributions and earnings thereon shall be
distributed to the Participant to the extent necessary to reduce the
Excess Amount as soon as practicable after the close of the Year;
provided, however, that in the event Matching Contributions have been
made by an Employer against any Salary Deferral Contributions that are
returned to the Participant under this Section 8.3(a), then such
Matching Contributions shall, to the extent necessary to satisfy
Section 401(m) of the Code, be adjusted with respect to the Participant
pursuant to the procedures set forth in Section 5.2. The amounts
distributed are disregarded for purposes of applying Section 402(g) of
the Code and the tests set forth in Sections 4.2 and 5.1.
(b) If an Excess Amount still exists after application of subsection
(a) hereof, the Excess Amount attributable to the portion of the
Matching Contribution, if any, made pursuant to Section 3.2, which has
been allocated to a Participant under the Plan for a Year but which
cannot be allocated to his Employer Matching Contribution Account
because of the limitation imposed by this Section, shall, subject to
the limitations of Section 8.1(a) and Section 5.1, be allocated and
reallocated in the current Limitation Year to the Employer Matching
Contribution Accounts of the other Participants entitled to share in
the Matching Contributions for that Year in accordance with Section
7.3.
(c) Any Excess Amount that cannot be allocated will be held unallocated
in a suspense account. If a balance exists in the suspense account in
any Year in which an Employer makes
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40
contributions pursuant to Sections 3.2 or 3.3, such balance shall be
used to reduce the Employer contributions pursuant to such Sections and
shall be allocated in the same manner as such contributions would have
been allocated; provided, however, if in any such Year contributions
are made pursuant to Section 3.2 and Section 3.3, such balance shall
first be used to make the qualified non-elective contribution pursuant
to Section 3.3, then the Matching Contribution, if any, pursuant to
Section 3.2. All amounts in the suspense account must be allocated and
reallocated to the Participants' Salary Deferral Contribution Accounts,
Employer Contribution Accounts, or Employer Matching Contribution
Accounts (as determined by which type or types of Employer
contributions the balance in the suspense account, if any, is used to
reduce), subject to the limitations of Section 8.1(a), Section 4.2 and
Section 5.1, in succeeding Limitation Years before any qualified
non-elective contributions, Matching Contributions, and Employer
non-matching contributions which constitute Annual Additions may be
made to the Plan.
(e) in the event of termination of the Plan, the suspense account shall
revert to the Employer to the extent it may not then be allocated to
any Participants' Individual Account.
Sec. 8.4 Combined Plan Limits. [Attributable solely to years beginning
before August 1, 2000.]
(a) If an Employer maintains, or has ever maintained, one or more
defined benefit plans covering an Employee who is also a Participant in
this Plan, the sum of the Defined Contribution Plan Fraction and the
Defined Benefit Plan Fraction, cannot exceed 1.0 for any Limitation
Year. The Annual Addition for any Limitation Year beginning before
January 1, 1987 shall not be recomputed to treat all Employee
contributions as an Annual Addition. If the Plan satisfied the
applicable requirements of Section 415 of the Code as in effect for all
Limitation Years beginning before January 1, 1987, an amount shall be
subtracted from the numerator of the Defined Contribution Plan Fraction
(not exceeding such numerator) as prescribed by the Secretary of
Treasury so that the sum of the Defined Benefit Plan Fraction and the
Defined Contribution Plan Fraction computed under Section 415(e)(1) of
the Code [as revised by this Section 8.4(a)] does not exceed 1.0 for
such Limitation Year.
(b) For purposes of this Section 8.4, Employee contributions to a
defined benefit plan are treated as a separate defined contribution
plan. In addition, any contributions paid or accrued after December 31,
1985 which are attributable to medical benefits allocated under a
welfare benefit fund [as defined in Section 419(e) of the Code] during
Years ending after December 31, 1985 to a separate account established
for any post-retirement medical benefits provided with respect to a
Participant, who, at any time, during the Year or any preceding Year,
is or was a Key Employee, shall be treated as Annual Additions to a
defined contribution plan. Further, all defined contribution plans of
an Employer are to be treated as one defined contribution plan and all
defined benefit plans of an Employer are to be treated as one defined
benefit plan, whether or not such plans have been terminated.
(c) If the sum of the Defined Contribution Plan Fraction and the
Defined Benefit Plan Fraction exceeds 1.0, the sum of the fractions
will be reduced to 1.0 as follows:
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(i) voluntary nondeductible Employee contributions made by a
Participant to the defined benefit plan which constitute an
Annual Addition to a defined contribution plan, to the extent
they would reduce the sum of the fractions to 1.0, will be
returned to the Participant;
(ii) if additional reductions are required for the sum of the
fractions to equal 1.0, voluntary nondeductible Employee
contributions made by a Participant to this Plan which
constitute an Annual Addition to this Plan, to the extent they
would reduce the sum of the fractions to 1.0, will be returned
to the Participant;
(iii) if additional reductions are required for the sum of the
fractions to equal 1.0, the Annual Benefit of a Participant
under the defined benefit plan will be reduced (but not below
zero and not below the amount of the Participant's accrued
benefit to date) to the extent necessary to prevent the sum of
the fractions, computed as of the close of the Limitation Year
from exceeding 1.0; and
(iv) if additional reductions are required for the sum of the
fractions to equal 1.0, the reductions will then be made to
the Annual Additions of this Plan.
Sec. 8.5 Special Rules.
(a) Notwithstanding any other provision of this Article VIII, an
Employer shall not contribute any amount that would cause an allocation
to the suspense account as of the date the contribution is allocated.
In the event the making of any Salary Deferral Contribution, Matching
Contribution, or Employer non-matching or other contribution, or any
part thereof, would result in the limitations set forth in this Article
VIII being exceeded, the Administrator shall cause such contributions
not be made. If the contribution is made prior to the date as of which
it is to be allocated, then such contribution shall not exceed an
amount that would cause an allocation to the suspense account if the
date of the contribution were an Allocation Date. The Administrator
shall cause the Recordkeeper to maintain records which reflect the
contributions to be allocated to the Individual Account of each
Participant in any Limitation Year. In the event that it is determined
prior to or within any Limitation Year that the foregoing limitations
would be exceeded if the full amount of contributions otherwise
allocable would be allocated, the Annual Additions to this Plan for the
remainder of the Limitation Year shall be adjusted by reducing (i)
first, any unmatched Salary Deferral Contributions, (ii) second, any
Employer non-matching contributions and (iii) third, any matched Salary
Deferral Contributions and a corresponding share of Matching
Contributions but, in each case, only to the extent necessary to
satisfy the limitations.
(b) If the Annual Additions with respect to the Participant under other
Related Plans and welfare plans described in Section 8.1(b)(ii) and
(iii) are less than the Maximum Permissible Amount and the Employer
contribution that otherwise would be contributed or allocated to the
Participants' Individual Account under this Plan would cause the Annual
Additions for the Limitation Year to exceed the limitation of Section
8.1(b), the amount contributed or allocated will be reduced so that the
Annual Additions under all such plans for the Limitation Year will
equal the Maximum Permissible Amount. If the Annual Additions with
respect to the
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Participant under the Related Plans and welfare plans described in
Section 8.1(b)(ii) and (iii) in the aggregate are equal to or greater
than the Maximum Permissible Amount, no amount will be contributed or
allocated to the Participants' Individual Account under this Plan for
the Limitation Year. If a Participant's Annual Additions under this
Plan and all Related Plans result in an Excess Amount, such Excess
Amount shall be deemed to consist of the amounts last allocated, except
that Annual Additions attributable to a welfare plan described in
Section 8.1(b)(ii) and (iii) will be deemed to have been allocated
first regardless of the actual allocation date.
(c) If an Excess Amount was allocated to a Participant on an allocation
date of a Related Plan, the Excess Amount attributed to this Plan will
be the product of:
(i) the total Excess Amount allocated as of such date
[including any amount which would have been allocated but for
the limitations of Section 8.1(b)],
multiplied by:
(ii) the ratio of:
(A) the amount allocated to the Participant as of
such date under this Plan,
divided by:
(B) the total amount allocated as of such date under
this Plan and all Related Plans [determined without
regard to Section 8.1(b)].
(d) Prior to the determination of the Participant's actual Annual
Compensation for a Limitation Year, the Maximum Permissible Amount may
be determined on the basis of the Participant's estimated Annual
Compensation for such Limitation Year. Such estimated Annual
Compensation shall be determined on a reasonable basis and shall be
uniformly determined for all Participants similarly situated. Any
Employer contributions (including allocation of forfeitures) based on
estimated Annual Compensation shall be reduced by any Excess Amounts
carried over from prior Years.
(e) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for such Limitation
Year shall be determined on the basis of the Participant's actual
Annual Compensation for such Limitation Year.
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Article IX
ADJUSTMENT OF INDIVIDUAL ACCOUNTS
Sec. 9.1 Trust Fund Valuation. The value of each Investment Fund and of
the Trust Fund shall be determined by the Trustee as of the close of business on
each Valuation Date, or as soon thereafter as practicable, and shall be the fair
market value of all securities or other property held in the Investment Funds,
if any, plus cash and the fair market value of other assets held by the Trust
Fund, with equitable adjustments for pending trades.
While it is contemplated that the Trust Fund will be valued by the
Trustee and allocations made only on the Valuation Date, at any time that the
Plan's valuations are not performed on a daily basis, should it be necessary to
make distributions under the provisions hereof and the Administrator, in good
faith determines that, because of (i) an extraordinary change in general
economic conditions, (ii) the occurrence of some casualty materially affecting
the value of the Trust Fund or a substantial part thereof, or (iii) a
significant fluctuation in the value of the Trust Fund has occurred since the
immediately preceding Valuation Date, the Administrator may, in its sole
discretion, to prevent the payee from receiving a substantially greater or
lesser amount than what he would be entitled to, based on current values, cause
a revaluation of the Trust Fund to be made and a reallocation of the interests
therein as of the date the payee's right of distribution becomes fixed. The
Administrator's determination to make such special valuation and the valuation
of the Trust Fund as determined by the Trustee shall be conclusive and binding
on all persons ever interested hereunder.
If the Administrator in good faith determines that certain expenses of
administration paid by the Trustee during the Year under consideration are not
general, ordinary and usual and should not equitably be borne by all
Participants, Former Participants and Beneficiaries, but should be borne only by
one or more Participants, Former Participants or Beneficiaries, for whom or
because of whom such specific expenses were incurred, the net earnings and
adjustments in value of the Individual Accounts shall be increased by the
amounts of such expenses, and the Administrator shall make suitable adjustments
by debiting the particular Individual Account or Individual Accounts of such one
or more Participants, Former Participants or Beneficiaries; provided, however,
that any such adjustment must be nondiscriminatory and consistent with the
provisions of Section 401(a) of the Code.
Sec. 9.2 Adjustments to Participant's and Former Participant's
Individual Accounts. The value of a Participant's or Former Participant's
Individual Account (including for this purpose, the separate value of the
sub-accounts of a Participant's or Former Participant's Individual Account,
i.e., his Employer Contribution Account, his Salary Deferral Contribution
Account, his Employer Matching Contribution Account, if any, his Rollover
Account, if any), held in an Investment Fund maintained hereunder shall be
determined as of each Valuation Date by:
(a) First, allocating the Net Gains or Losses of each Fund since the
preceding Valuation Date to the Participant's Individual Account in the
same ratio as the value of the Participant's or Former Participant's
Individual Account in such Fund (as adjusted below), as the case may
be, bears to the aggregate value of all Individual Accounts in such
Fund (as adjusted below), as the case may be. An Individual Account
shall be adjusted on the Valuation Date for purposes of allocating Net
Gains or Losses under the above paragraph by taking the value of
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such Individual Account as of the prior Valuation Date and (i) adding
thereto (A) all contributions or loan repayments designated for
investment in such Fund which were made with respect to the immediately
prior valuation period but were received by the Trustee after the prior
Valuation Date, plus (B) any transfers from any other Fund under the
Plan to the Participant's Individual Account that were made after the
prior Valuation Date and were effective as of such prior Valuation Date
and (ii) deducting therefrom (A) any transfers to any other Fund or
Funds under the Plan from the Participant's Individual Account within
this Fund that were made after the prior Valuation Date and were
effective as of such prior Valuation Date and (B) any Participant
loans, withdrawals, or distributions from the Individual Account made
after, but effective as of, the preceding Valuation Date.
(b) Second, crediting the contributions and loan repayments made by or
on behalf of the Participant with respect to the valuation period
ending on the current Valuation Date and any transfers from the other
Funds under the Plan to the Participant's Individual Account within
this Fund made since the preceding Valuation Date.
(c) Last, deducting any transfers to the other Funds under the Plan
from the Participant's Individual Account maintained within this Fund
and any loans, withdrawals and distributions from his Individual
Account maintained within this Fund made since the preceding Valuation
Date.
For the purpose of this Section, "Net Gains or Losses" shall mean the
increase or decrease in the fair market value of the assets of the Trust or the
Investment Fund, as the case may be, (and if invested in a group insurance
investment contract, such value being determined in accordance with the terms of
the contract) as of the current Valuation Date, compared to such value which was
utilized for the prior Valuation Date, less the sum of any deposits plus the sum
of any loans, withdrawals, distributions or other deductions, if any, made to
pay any expenses incurred with respect to the operations of this Fund. The
initial Valuation Date for an Investment Fund shall be the date the funds are
first invested in such Investment Fund.
Article X
INDIVIDUAL ACCOUNTS
Sec. 10.1 Participant Interest in Individual Accounts. Each Participant
and Former Participant shall at all times have a nonforfeitable interest in his
entire Individual Account.
Sec. 10.2 Statement to Participant. At least quarterly, the
Administrator shall advise each Participant, Former Participant and Beneficiary
for whom an Individual Account is held hereunder of the then fair market value
of such Individual Account.
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Article XI
RETIREMENT
Sec. 11.1 Normal or Early Retirement. A Participant's Individual
Account shall remain nonforfeitable on the earlier of his Normal Retirement Date
or Early Retirement Date. Further, if a Participant with a Karten's Plan Account
attains age 65 before becoming 100% vested in his entire Individual Account,
such Participant will immediately become fully vested in his entire Individual
Account.
Sec. 11.2 Benefits on Normal or Early Retirement. Upon the retirement
of a Participant on or after the earlier of his Normal Retirement Date or Early
Retirement Date, his entire Individual Account shall be held for his benefit.
Said Participant shall receive payments from his Individual Account in
accordance with Article XV hereof commencing as of the Valuation Date
immediately following the date of his retirement that he determines in his
advance written election filed with the Administrator.
Sec. 11.3 Commencement of Benefits. Notwithstanding any other provision
of this Plan to the contrary, a Participant shall begin receiving distributions
from the Plan, as provided in Article XV, by his Required Beginning Date [as
defined in Section 15.5(j)(ii)], whether or not he actually retires.
Sec. 11.4 Final Contribution After Distribution of Benefits. If a
Participant who has already received a distribution of his Individual Account
under this Article is entitled to an allocation of a qualified non-elective
contributions under Section 7.4 for the Year in which such distribution was
made, such contributions shall be paid to the Participant as soon as
administratively practicable following the completion of the allocations under
Article VII for such Year.
Article XII
DEATH
Sec. 12.1 Benefits on Death. Upon the death of a Participant who is in
the service of an Employer, his entire Individual Account shall be held for the
benefit of his Beneficiary. Upon the death of a Participant whose service with
an Employer has terminated, his Individual Account which has not been
distributed at the time of his death under Articles XI-XIV shall be held for the
benefit of his Beneficiary. His Beneficiary shall receive payments from his
Individual Account in accordance with Article XV hereof commencing as of the
Valuation Date immediately following the date of the Participant's death that
the Beneficiary determines in his advance written election filed with the
Administrator.
Sec. 12.2 Final Contribution After Payment of Benefits. If the
Individual Account of a deceased Participant whose Beneficiary has already
received a distribution of the Participant's Individual Account under this
Article is entitled to an allocation of a qualified non-elective contributions
under Section 7.4 for the Year in which such distribution was made, such
contributions shall be paid to the Beneficiary as soon as administratively
practicable following the completion of the allocations under Article VII for
such Year.
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Article XIII
DISABILITY
Sec. 13.1 Benefits on Disability. In the event of termination of a
Participant's employment due to Disability, his entire Individual Account shall
be held for his benefit. If the balance of the Participant's Individual Account
exceeds $5,000, the Participant shall receive payments from his Individual
Account in accordance with Article XV hereof commencing as of the Valuation Date
immediately following the date of his Disability that he determines in his
advance written election filed with the Administrator. If the balance of the
Participant's Individual Account does not exceed $5,000, the Administrator shall
direct the Trustee to distribute the entire Individual Account to the
Participant in a single lump sum distribution as soon as administratively
practicable after the end of the calendar quarter in which the date of his
Disability occurs or prior to such date if so directed in writing by the
Participant.
Sec. 13.2 Final Contribution After Payment of Benefits. If a
Participant who has already received a distribution of his Individual Account
under this Article is entitled to an allocation of a qualified non-elective
contributions under Section 7.4 for the Year in which the distribution was made,
such contributions shall be paid to the Participant as soon as administratively
practicable following the completion of the allocations under Article VII for
such Year.
Article XIV
TERMINATION BENEFITS
Sec. 14.1 Termination Other than by Reason of Death, Disability or
Retirement. If a Participant terminates his employment for any reason other than
retirement on or after the earlier of his Normal Retirement Date or Early
Retirement Date, death or Disability, such Participant shall be entitled to
receive his entire Salary Deferral Contribution Account, After-Tax Contribution
Account, Employer Matching Contribution Account, Rollover Account, Karten's
Rollover Account, Karten's Matching Account, Karten's Deferral Contribution
Account, and Profit Sharing Account.
The Participant shall be entitled to the vested portion of his Employer
Contribution Account in accordance with the following schedule:
Years of Service (Vesting) Vested Percentage
-------------------------- -----------------
Less than 3 0%
3 but less than 4 20%
4 but less than 5 40%
5 but less than 6 60%
6 but less than 7 80%
7 or more 100%
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Sec. 14.2 Time of Distribution. If a Participant terminates his
employment for a reason other than retirement, death or Disability, and the
value of his Individual Account exceeds $5,000 (adjusted as provided below),
then the Administrator shall direct the Trustee, with such Participant's written
consent, to distribute to such Participant the vested portion of his Individual
Account in accordance with Article XV hereof as soon as administratively
practicable after the later of (i) the Participant's termination of employment
or (ii) the earlier of (A) the Valuation Date immediately following the date
determined by such Participant in his advance written election filed with the
Administrator or (B) the date on which such Participant attains age 62 or his
earlier death occurs, but not later than the time specified in Section 15.5. If
such Participant does not consent to an early distribution, his Individual
Account shall continue to be invested in the Investment Funds or Funds selected
by the Participant pursuant to his most recent investment direction, from time
to time.
However, if the balance of a terminated Participant's Individual
Account does not exceed $5,000, the Administrator shall direct the Trustee to
distribute the vested portion of the Individual Account to such Participant in a
single lump sum distribution as soon as administratively practicable after the
end of the calendar quarter in which the Participant's termination of employment
occurs or prior to such date if so directed in writing by the Participant. The
balance to the credit of a terminated Participant in his Individual Account
which is not vested under the schedules in Section 14.1, if not previously
forfeited, shall be forfeited as of the earlier of (i) the date his entire
vested Individual Account balance has been distributed under Article XV or (ii)
the last day of the Year in which such Participant incurs five consecutive
Breaks in Service. If the Participant is not entitled to any portion of his
Individual Account, he shall be deemed to have received a distribution and shall
forfeit the balance of his Individual Account on the date of his termination of
service. The forfeited amount under this Section 14.2 shall remain in the Trust
Fund and shall be applied as provided in Section 14.4. If a Former Participant
is reemployed by an Affiliated Company without incurring five consecutive Breaks
in Service, he shall have the right to restore in full the portion of his
Individual Account which was forfeited hereunder upon repayment to the Plan of
the full amount of the distribution from such account. Such repayment must be
made not later than the earlier of the fifth anniversary of his return to
employment or the last day of the Year in which the Participant incurs five
consecutive Breaks in Service after the date of his distribution. The
Participant's repayment, if any, shall be returned to the account or accounts
from which the distribution was made and the reinstated forfeiture shall also be
allocated to such account or accounts. If the Participant resumes active
employment with an Affiliated Company and does not repay a prior distribution
prior to the time specified above, the portion of his Individual Account which
was forfeited hereunder shall not be restored. If the Participant was deemed to
receive a distribution as provided in this Section, the forfeited portion of his
Individual Account shall be automatically reinstated upon his reemployment. If
currently unallocated forfeitures are not adequate to effect the restoration,
the Company or the Affiliated Company shall make such additional contribution to
the Plan as is necessary to restore the forfeited portion of his Individual
Account.
Sec. 14.3 Forfeiture and Return to Service Prior to Complete
Distribution. After five consecutive Breaks in Service, a Participant to whom
this Article XIV is applicable, other than a Participant described in Section
14.2, shall forfeit that portion of the amount of his Individual Account to
which he is not entitled under Section 14.1 and the amount thus forfeited shall
remain in the Trust Fund and shall be applied as provided in Section 14.4. The
amount forfeited by a Participant hereunder shall be charged to his Individual
Account on the last day of the Year as of which he shall incur five consecutive
Breaks in Service. If the Participant returns to the service of the Employer
after five consecutive Breaks in Service, but before the full payment of his
Individual Account, Employer contributions after such five consecutive Breaks in
Service shall be allocated to an Employer Matching
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Contribution Account established on behalf of such Participant which is separate
from the Employer Matching Contribution Account or other appropriate account of
such Participant to which is allocated his account balance attributable to
service prior to the five consecutive Breaks in Service.
Sec. 14.4 Application of Forfeitures. The forfeitures occurring as
provided in Articles IV, V, XIV and XV shall first be used to restore the
account of a Former Participant who has been located as provided in Section
15.10. If additional forfeitures remain after full restorations under Section
15.10, then remaining forfeitures shall be used to restore accounts of Former
Participants under Section 14.2. If additional forfeitures remain thereafter,
the forfeitures for a Year shall be used to reduce the Matching Contribution of
any Employer under Section 3.2 and for allocation under Section 7.3 as of any
Allocation Date as a Matching Contribution.
Article XV
DISTRIBUTIONS AND WITHDRAWALS
Sec. 15.1 Payment Options. Whenever a Participant, Former Participant,
or Beneficiary is entitled to receive benefits hereunder as provided in Articles
XI to XIV, inclusive, the Administrator shall direct the Trustee, if so directed
in writing signed by the Participant, to pay such benefits in any one or more of
the following ways:
(a) A lump sum, payable (except as provided in Section 15.2) in cash at
the fair market value as of the Valuation Date immediately preceding
the date of distribution plus the actual amount of any contributions
made by the Participant subsequent to such Valuation Date, provided
that a life annuity may not be a part of a lump sum distribution;
(b) A direct rollover to an eligible retirement plan as described in
Section 402(c)(8)(B) of the Code pursuant to the provisions of Section
15.12; or
(c) Karten's Plan Accounts may be distributed in the form of equal
monthly, quarterly, semi-annual or annual installments over a period
certain selected by the Participant not exceeding the life expectancy
of the Participant or the joint and last survivor life expectancy of
the Participant and his Beneficiary.
Sec. 15.2 Distributions from Common Stock Fund. Any distributions from
the Common Stock Fund shall be paid at the election of the Participant, either
in cash or in shares of Common Stock, except that fractional shares will in all
events be payable in cash. Any cash dividends declared with respect to such
Participant's shares prior to the date of distribution will similarly be paid in
cash. Stock dividends declared prior to the distribution to the Participant,
will be treated as part of his Individual Account, subject to his election to
receive either cash or Common Stock. In the event that the Participant elects a
distribution of his balance in the Common Stock Fund in cash, the value of his
Individual Account in such fund will be based on the current market value of a
share of Common Stock on the date as of which the amount payable is calculated.
The Committee's determination with respect to such valuation will be conclusive
and binding on the Participant and on the Trustee.
Sec. 15.3 Determination of Form and Timing of Payment. In determining
which method or methods permitted in Section 15.1 or 15.2 shall be used in any
case, the Administrator shall follow the directions of the Participant, Former
Participant or Beneficiary involved. Notwithstanding the
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foregoing or any other provision of the Plan to the contrary, if the balance of
the Participant's Individual Account does not exceed $5,000, then subject to the
requirements of Section 15.12, the Administrator shall direct the Trustee to pay
the balance to the Participant, Former Participant or Beneficiary, as the case
may be, in a single lump sum distribution. If the balance of the Participant's
Individual Account could be distributed to the Participant before the
Participant attains (or would have attained if not deceased) age 62 or, if
later, Normal Retirement Date, the Participant must consent in writing to any
distribution of such Individual Account. The consent must be obtained in writing
within the 90-day period prior to the date benefit payments are to commence. The
Administrator shall notify the Participant of the right to defer any
distribution until the later of the Participant's Normal Retirement Date or age
62. Such notification shall be provided no less than 30 days and no more than 90
days before benefit payments are to commence and shall include a general
description of the material features, and an explanation of the relative values
of, the forms of benefit available under Section 15.1 or 15.2 in a manner that
would satisfy the notice requirements of Section 417(a)(3) of the Code and a
description of his direct rollover rights under Section 15.12. Such distribution
may commence less than 30 days after the notice required under Treas. Reg.
Section 1.411(a)-11(c) is given, provided that (i) the Administrator clearly
informs the Participant that the Participant has a right to a period of at least
30 days after receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular distribution option) and
(ii) the Participant, after receiving the notice, affirmatively elects a
distribution. The consent of the Participant is not required to the extent that
a distribution is required to satisfy Section 401(a)(9) or Section 415 of the
Code.
Sec. 15.4 Minority or Disability of Distributee. During the minority or
disability of a person entitled to receive benefits hereunder, the Trustee may
make payments due such person directly to him or to his spouse or a relative or
to any individual or institution having custody of such person. Neither an
Employer, the Committee, the Administrator, the Named Fiduciary nor the Trustee
shall be required to see to the application of any payments so made and the
receipt of the payee (including the endorsement of a check or checks) shall be
conclusive as to all interested parties.
Sec. 15.5 Time of Payment and Payment on Death. Notwithstanding any
other provisions of the Plan, the following provisions shall be applicable to
the Plan:
(a) Payment of benefits shall begin, unless the Participant otherwise
elects, not later than the 60th day after the last day of the Year in
which the latest of the following events occurs:
(i) the Participant reaches the earlier of age 65 or his
Normal Retirement Date;
(ii) the tenth anniversary of the date on which the
Participant commenced participation in the Plan occurs, but in
the case of a five percent owner [as described in Section
416(i) of the Code], not later than the April 1 of the
calendar year following the calendar year in which the
Participant attains age 70 1/2; or
(iii) the Participant terminates his service with the
Employer, but [as described in Section 416(i) of the Code] in
no event later than the April 1 of the calendar year following
the calendar year in which the Participant attains age 70 1/2.
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A Participant who is not a five percent owner and who attains age
70-1/2 before January 1, 2001 may elect to receive or continue to
receive distributions after he attains age 70-1/2 even if he has not
terminated service with the Employer. If the Participant fails to
consent to a distribution at a time when any part of the balance of the
Individual Account could be distributed prior to the later of the
Participant's Normal Retirement Date or age 62, such failure shall be
deemed to be an election to defer commencement of payment of any
benefit under this Section 15.5(a).
(b) All distributions required under this Article XV shall be
determined and made in accordance with Section 401(a)(9) of the Code
and the Treasury regulations thereunder, including the minimum
distribution incidental benefit requirements of Treas. Reg. Section
1.401(a)(9)-2.
(c) An election of a Participant to defer receipt of benefits shall be
made by submitting to the Administrator a written statement signed by
the Participant, describing the benefits and the date on which the
Participant requests that the payments commence; provided, however, a
Participant may not elect to defer receipt or commencement of receipt
of benefits beyond his Required Beginning Date.
(d) If the Individual Account of a Participant is to be distributed
other than in a lump sum under Section 15.1(a) after the Required
Beginning Date, the following minimum distribution rules shall apply:
(i) As of the first Distribution Calendar Year, distributions
if not made in a single lump sum under Section 15.1(a), may
only be made over one of the following periods (or
combinations thereof): (A) the life of the Participant; (B)
the life of the Participant and a Designated Beneficiary; (C)
a period certain not extending beyond the Life Expectancy of
the Participant; or (D) a period certain not extending beyond
the Joint and Last Survivor Expectancy of the Participant and
a Designated Beneficiary;
(ii) If a Participant's Benefit is to be distributed over
either (A) a period not extending beyond the Life Expectancy
of the Participant or the Joint and Last Survivor Expectancy
of the Participant and the Participant's Designated
Beneficiary or (B) a period not extending beyond the Life
Expectancy of the Designated Beneficiary, the amount required
to be distributed for each calendar year, beginning with
distributions for the first Distribution Calendar Year, must
at least equal the quotient obtained by dividing the
Participant's Benefit by the Applicable Life Expectancy;
(iii) The amount to be distributed each year, beginning with
distributions for the first Distribution Calendar Year shall
not be less than the quotient obtained by dividing the
Participant's Benefit by the lesser of (A) the Applicable Life
Expectancy or (B) the applicable divisor, in the event the
Participant's spouse is not the Designated Beneficiary,
determined from the tables set forth in Q & A-4 of Section
1.401(a)(9)-2 of the Treasury regulations. Distributions after
the death of a Participant shall be distributed using the
Applicable Life Expectancy in Section 15.5(d)(ii) above as the
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relevant divisor without regard to Section 1.401(a)(9)-2 of
the Treasury regulations; and
(iv) The minimum distribution required for the Participant's
First Distribution Calendar Year must be made on or before the
Participant's Required Beginning Date. The minimum
distribution for other calendar years, including the minimum
distribution for the Distribution Calendar Year in which the
Participant's Required Beginning Date occurs, must be made on
or before December 31 of that Distribution Calendar Year.
(e) If distribution of benefits to a Participant has begun under
Section 15.1 and the Participant dies before his entire Individual
Account has been distributed to him, the remaining portion of such
Participant's Individual Account must be distributed to his Beneficiary
at least as rapidly as under the method of distributions being used
under Section 15.1 as of the date of his death.
(f) If a Participant dies before the distribution of benefits to him
has begun under Section 15.1, distribution to his Beneficiary of his
entire Individual Account must be completed by December 31 of the
calendar year containing the fifth anniversary of the death of such
Participant. The provisions of this Section 15.5(f) shall not apply to
the portion of the Participant's Individual Account which is payable:
(i) to a Designated Beneficiary other than the Participant's
surviving spouse under Section 15.1 of distributions made over
the life or over a period certain not greater than the Life
Expectancy of the Designated Beneficiary commencing on or
before December 31 of the calendar year immediately following
the calendar year in which the Participant died; or
(ii) under Section 15.1 to a Designated Beneficiary who is the
surviving spouse of the Participant if the distributions begin
at least by the later of (A) the December 31 of the calendar
year immediately following the calendar year in which the
Participant died and (B) the December 31 of the calendar year
in which the Participant would have attained age 70 1/2.
If the Participant has not made an election pursuant to this Section
15.5(f) by the time of his death, the Participant's Designated
Beneficiary must elect the method of distribution no later than the
earlier of (1) December 31 of the calendar year in which distributions
would be required to begin under this Section 15.5(f), or (2) December
31 of the calendar year which contains the fifth anniversary of the
date of death of the Participant. If the Participant has no Designated
Beneficiary, or if the Designated Beneficiary does not elect a method
of distribution, distribution of the Participant's entire Individual
Account must be completed by December 31 of the calendar year
containing the fifth anniversary of the Participant's death.
(g) If a portion of the Participant's Individual Account is payable to
the Participant's surviving spouse and such spouse dies before
distributions to such spouse begin, the spouse shall be treated as the
Participant under Section 15.5(f) with the exception of the provisions
of subsection (ii) thereof.
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(h) Any portion of a Participant's Individual Account paid to a child
shall be treated as if such portion has been paid to the Participant's
surviving spouse if such portion will become payable to the surviving
spouse upon the date the child reaches majority (or other designated
event permitted under regulations prescribed by the Secretary of the
Treasury).
(i) Distribution of a Participant's Individual Account is considered to
begin on the Participant's Required Beginning Date or, if Section
15.5(g) is applicable, the date distribution is required to begin to
the surviving spouse pursuant to Section 15.5(f)(ii).
(j) Definitions:
(i) Designated Beneficiary is the individual who is designated
as the Beneficiary under the Plan in accordance with Section
401(a)(9) of the Code and the Treasury regulations thereunder.
(ii) The Required Beginning Date of a Participant shall be
determined as follows:
(A) If the Participant is not a five percent owner of
the Company (as defined below), his Required
Beginning Date is the April 1 of the calendar year
following the later of (1) the calendar year in which
the Participant attains age 70 1/2 or (2) the
calendar year in which the Participant retires; or
(B) If the Participant is a five percent owner of the
Company (as defined below), his Required Beginning
Date is the April 1 of the calendar year following
the calendar year in which the Participant attains
age 70 1/2.
A Participant is treated as a five percent owner of the
Company for purposes of this Section 15.5(j)(ii) if such
Participant is a five percent owner as defined in Section
416(i) of the Code (determined in accordance with Section 416
of the Code but without regard to whether the Plan is top
heavy) at any time during the Year ending with or within the
calendar year in which such owner attains age 70-1/2. Once
distributions have begun to a five percent owner after his
Required Beginning Date, they must continue to be distributed,
even if the Participant ceases to be a five percent owner in a
subsequent Year.
(iii) Applicable Life Expectancy means the Life Expectancy (or
Joint and Last Survivor Expectancy) computed (by use of the
expected return multiples in Tables V and VI of Section 1.72-9
of the Treasury regulations) using the attained age of the
Participant (or Designated Beneficiary) as of the
Participant's (or Designated Beneficiary's) birthday in the
applicable calendar year reduced by one for each calendar year
which has elapsed since the date Life Expectancy was first
calculated. If the Life Expectancy is being recalculated, the
Applicable Life Expectancy shall be the Life Expectancy as so
recalculated. The Life Expectancy of a nonspouse beneficiary
may not be recalculated. The method of calculating the
Applicable Life Expectancy is irrevocable after the Required
Beginning Date. The Participant may elect whether the
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Applicable Life Expectancy (to be used in calculating
distributions commencing during his lifetime) is his Life
Expectancy or the Joint and Last Survivor Expectancy of him
and his Designated Beneficiary and whether such Life
Expectancy (or Joint and Last Survivor Expectancy) are to be
recalculated. If the Participant fails to elect before the
Required Beginning Date, the Applicable Life Expectancy shall
be the Life Expectancy of the Participant (irrespective of
whether the Participant has a Designated Beneficiary) and such
Life Expectancy shall be recalculated. The applicable calendar
year shall be the first Distribution Calendar Year, and if
Life Expectancy is being recalculated, such succeeding
calendar year. If annuity payments commence in accordance with
Article XV before the Required Beginning Date, the applicable
calendar year is the year such payments commence. If
distribution is in the form of an immediate annuity purchased
after the Participant's death with the Participant's remaining
interest, the applicable calendar year is the year of
purchase.
(iv) Participant's Benefit means the balance of the
Participant's Individual Account as of the last valuation date
in the calendar year immediately preceding the Distribution
Calendar Year (valuation calendar year) increased by the
amount of any contributions or forfeitures allocated to the
Individual Account as of dates in the valuation calendar year
after the valuation date and decreased by distributions made
in the valuation calendar year after the valuation date. For
purposes of this Section 15.5(j)(iv), if any portion of the
minimum distribution for the first Distribution Calendar Year
is made in the second Distribution Calendar Year on or before
the Required Beginning Date, the amount of the minimum
distribution made in the second Distribution Calendar Year
shall be treated as if it had been made in the immediately
preceding Distribution Calendar Year.
(v) Distribution Calendar Year means a calendar year for which
a minimum distribution is required. For distributions
beginning before the Participant's death, the first
Distribution Calendar Year is the calendar year immediately
preceding the calendar year which contains the Participant's
Required Beginning Date. For distributions beginning after the
Participant's death, the first Distribution Calendar Year is
the calendar year in which distributions are required to begin
pursuant to this Section 15.5.
Sec. 15.6 Withdrawals. Except as provided in this Section, no amounts
may be withdrawn by a Participant from his Individual Account until the
Participant's employment with an Employer has terminated:
(a) A Participant may at any time on notice such as is prescribed by
the Administrator and completion of such forms as are required by the
Committee, withdraw all or any portion of his After-Tax Contribution
Account.
(b) A Participant who is at least age 59 1/2, by giving such notice as
is prescribed by the Administrator, may withdraw from the Trust Fund
all or any portion of his Karten's Matching Account and Karten's
Deferral Contribution Account.
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(c) Any Participant may, upon notice as prescribed by the Administrator
and completion of such forms as may be required by the Committee or
Trustee, elect to make a withdrawal of all or any portion of his
Rollover Account and Karten's Rollover Account.
(d) Any Participant may, upon notice as prescribed by the Administrator
and completion of such forms as may be required by the Committee or the
Trustee, may elect to make a withdrawal from his Salary Deferral
Contribution Account, Profit Sharing Account, Employer Contribution
Account, Karten's Matching Account, and Karten's Deferral Contribution
Account if, under uniform rules and regulations, the Administrator
determines that (i) the purpose of the withdrawal is to meet the
Immediate and Heavy Financial Need (as defined below) of the
Participant, (ii) the withdrawal is necessary to satisfy the need, and
(iii) the amount of the withdrawal does not exceed the lesser of (A)
the aggregate value of the Participant's Account from which such
hardship withdrawal can be made as of the Valuation Date immediately
preceding the date of the withdrawal, (B) the aggregate of the actual
dollar amount of Salary Deferral Contributions made on behalf of the
Participant pursuant to Section 3.1 and the value of the Participant's
other accounts enumerated above as of the Valuation Date immediately
preceding the date of the withdrawal or (C) the amount of such
financial need (including amounts necessary to pay any federal, state
or local income taxes or penalties reasonably anticipated to result
from the distribution). Hardship withdrawals shall be taken from a
Participant's Individual Account in the following order: Karten's
Matching Account, Profit Sharing Account, Employer Contribution
Account, Karten's Deferral Contribution Account, and Salary Deferral
Contribution Account, excluding earnings as provided in this paragraph
above.
For purposes of this subsection (d), "Immediate and Heavy
Financial Need" shall mean (i) expenses for medical care described in
Section 213(d) of the Code previously incurred by the Participant, his
spouse or his dependents (as defined in Section 152 of the Code), or
the amount necessary for such persons to obtain medical care described
in Section 213(d) of the Code, (ii) the purchase (excluding mortgage
payments) of a principal residence of the Participant, (iii) the
payment of tuition, related educational expenses, fees and room and
board expenses for the next 12 months of post-secondary education for
the Participant or his spouse, children or dependents (as defined in
Section 152 of the Code), (iv) the need by the Participant to prevent
eviction from his principal residence or foreclosure on the mortgage of
his principal residence and (v) such other circumstances determined by
the Commissioner of Internal Revenue in revenue rulings, notices and
other promulgated documents of general applicability.
For purposes of this subsection (d), a withdrawal shall be
considered necessary to satisfy a Participant's Immediate and Heavy
Financial Need if (i) the amount of the withdrawal does not exceed the
amount of the Participant's Immediate and Heavy Financial Need
(increased if requested by the Participant by any amounts necessary to
pay any federal, state or local income taxes or penalties reasonably
anticipated to result from the withdrawal), (ii) the Participant has
obtained all distributions, other than hardship withdrawals under this
subsection (d), and all nontaxable loans (determined at the time of the
loan) currently available to the Participant under the Plan and all
other qualified plans maintained by the Employer in which he
participates, (iii) all elective deferrals [as defined in Section
402(g)(3) of the Code]
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and after-tax employee contributions by the Participant to the Plan and
all other plans (as described in the next sentence) maintained by the
Employer are suspended for a period of 12 months after receipt of the
hardship withdrawal hereunder, and (iv) the Participant's elective
deferrals [as defined in Section 402(g)(3) of the Code] under the Plan
and all other plans maintained by the Employer for the taxable year
immediately following the taxable year of the hardship withdrawal may
not exceed the applicable dollar limit under Section 3.1 for such
following taxable year reduced by the amount of such Participant's
elective deferrals for the taxable year of the hardship withdrawal. The
suspension of elective deferrals and after-tax employee contributions
described in clause (iii) in the immediately preceding sentence also
must apply to all other qualified plans and to all nonqualified plans
of deferred compensation maintained by the Employer, other than any
mandatory employee contribution portion of a defined benefit plan,
including stock option, stock purchase and other similar plans, but not
including health or welfare benefit plans (other than the cash or
deferred arrangement portion of a cafeteria plan). The application of
clauses (iii) and (iv) of this paragraph shall cease as of December 31,
1997 notwithstanding the date of the hardship withdrawal.
All withdrawals under this Section 15.6 shall be made as soon as
administratively practicable following the date Notice of withdrawal is received
by the Administrator. All withdrawals under this Section 15.6 shall be based on
the value of the Participant's Salary Deferral Contribution Account, as of the
Valuation Date for which the withdrawal is to be made. Withdrawals under this
Section 15.6 shall, to the extent required by the Code, be subject to the
provisions of Section 15.12. A Participant may, subject to any restrictions and
limitations imposed on a particular Investment Fund, direct withdrawals under
this Section 15.6 which are less than the full value of any Individual Account
from which an amount is withdrawn to be charged to any one or more of the
Investment Funds in which such Individual Account is invested. Such direction
shall be given by the Participant with his Notice to withdraw and shall specify
the manner in which the withdrawal will be allocated among the Investment Funds.
If a Participant does not specify the manner in which a withdrawal shall be
allocated among Investment Funds, the Administrator shall allocate the
withdrawal on a pro rata basis among the Participant's Investment Fund
elections, subject to any restrictions or limitations applicable to a particular
Investment Fund. Payments under this Section 15.6 shall be made in a single sum
payment in cash.
Sec. 15.7 Claims Procedure. The Administrator shall make all
determinations as to the right of any person to receive a benefit. The denial by
the Administrator of a claim for benefits under the Plan shall be stated in a
written instrument signed by the Administrator and delivered to or mailed to the
claimant within 60 days after receipt of the claim by the Administrator, unless
special circumstances require an extension of time for processing the claim, in
which case a determination shall be made as soon as possible, but in no event
later than 120 days after receipt of the claim. Written notice of the extension
shall be furnished to the claimant prior to the termination of the initial
60-day period and shall indicate the circumstances requiring the extension and
the date by which the Administrator expects to render its decision. The written
decision shall set forth:
(a) the specific reason or reasons for the denial;
(b) a specific reference to the pertinent provisions of the Plan on
which the denial is based;
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(c) a description of any additional material or information necessary
for the claimant to perfect a claim and an explanation of why such
material or information is necessary; and
(d) a statement that the claimant may:
(i) request a review upon written application to the
Administrator;
(ii) review pertinent plan documents; and
(iii) submit issues and comments in writing.
If notice of the denial is not furnished in accordance with the above procedure,
the claim shall be deemed denied and the claimant shall be permitted to proceed
with the review procedure. A request by the claimant for a review of the denied
claim must be delivered to the Administrator within 60 days after receipt by
such claimant of written notification of the denial of such claim. The
Administrator shall, not later than 60 days after receipt of a request for a
review, make a determination concerning the claim. If special circumstances
require, the Administrator shall notify the claimant that an extension of time
for processing, not in excess of 120 days after receipt of the request for
review, is necessary. A written statement stating the decision on review, the
specific reasons for the decision, and the specific provisions of the Plan on
which the decision is based shall be mailed or delivered to the claimant within
such 60 (or 120) day period. If the decision on review is not furnished within
the appropriate time, the claim shall be deemed denied on review. All
communications from the Administrator to the claimant shall be written in a
manner calculated to be understood by the claimant. All interpretations,
determinations, and decisions by the Named Fiduciary or the Insurance Company,
as applicable, in respect of any matter hereunder will be final, conclusive, and
binding on the Employer, Participants, Former Participants, Beneficiaries, and
all other person claiming an interest in the Plan.
Sec. 15.8 Administrator's Duty to Trustee. The Administrator will
notify the Trustee at the appropriate time of all facts which may be necessary
hereunder for the proper allocation of increases, decreases, expenses, and
contributions for Participants, the proper payment or distribution of benefits,
or the proper performance of any other act required of the Trustee hereunder.
The Administrator will notify the Trustee of such facts as are needed by the
Trustee to perform its functions under the Plan. The Administrator will secure
appropriate elections, directions, and designations for Participants, Former
Participants and Beneficiaries provided for in the Plan.
Sec. 15.9 Duty to Keep Administrator Informed of Distributee's Current
Address. Each Participant and Beneficiary must file with the Administrator from
time to time in writing his post office address and each change of post office
address. Any communication, statement or notice addressed to a Participant,
Former Participant or Beneficiary at his last post office address filed with the
Administrator or if no address is filed with the Administrator then at his last
post office address as shown on an Employer's records, will be binding on the
Participant or Former Participant, and his Beneficiary, for all purposes of the
Plan. Neither the Administrator nor the Trustee shall be required to search for
or locate a Participant, Former Participant or Beneficiary.
Sec. 15.10 Failure to Claim Benefits. If the Administrator notifies the
Participant, Former Participant or Beneficiary by registered or certified mail
at his last known address that he is entitled
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to a distribution and also notifies him of the provisions of this Section 15.10,
and the Participant, Former Participant or Beneficiary fails to claim his
benefits under the Plan or make his current address known to the Administrator
within a reasonable period of time after such notification, the Administrator
shall direct that all unpaid amounts which would have been payable to such
Participant, Former Participant or Beneficiary will be forfeited and applied as
provided in Section 14.4. In the event that the Participant, Former Participant
or Beneficiary is subsequently located, the amounts which were forfeited shall
be distributed to the Participant, Former Participant or Beneficiary, and the
Employer for whom the Participant last worked shall contribute an amount to the
Plan which is equal to the amount distributed under the terms of this Section
15.10 to the extent that such amount cannot be reinstated through forfeitures
occurring during the Year of payment. Notwithstanding the preceding sentences,
if the Administrator is trying to locate a Participant, Former Participant or
Beneficiary in connection with (i) a minimum required distribution under Section
15.4 or (ii) a return of Excess Elective Deferrals under Section 4.1, Excess
Salary Deferral Contributions under Section 4.3, or Excess Matching
Contributions under Section 5.2, and the Administrator determines that such
Participant, Former Participant or Beneficiary cannot be located, the
Administrator shall establish an escrow account outside of the Plan in the name
of that Participant, Former Participant or Beneficiary and direct the Trustee to
distribute such amount to that account.
Sec. 15.11 Distribution Pursuant to Qualified Domestic Relations
Orders. The Administrator shall establish policies and procedures for reviewing
domestic relations orders relating to a Participant's interest in the Plan. The
Administrator or its delegate shall determine whether any such domestic
relations order is a Qualified Domestic Relations Order. Notwithstanding any
other provision of the Plan to the contrary, effective September 1, 1997, if the
provisions of a Qualified Domestic Relations Order provide that distributions
shall be made to an Alternate Payee prior to the time that the Participant with
respect to whom the Alternate Payee's benefits are derived attains age 50 or
would be entitled to a distribution of assets from the Plan, the Administrator
shall direct the Trustee to commence payments to the Alternate Payee as soon as
administratively practicable following the later of (i) the receipt of such
Qualified Domestic Relations Order by the Administrator or (ii) the date the
Administrator receives the Alternate Payee's written consent to such
distribution. Until such time as payment is made to an Alternate Payee pursuant
to this Section 15.11, the Alternate Payee shall have no rights under the Plan
other than the rights of a Beneficiary and the right to direct the investment of
amounts awarded to the Alternate Payee. If an Alternate Payee does not receive
an immediate distribution pursuant to this Section 15.11, the Administrator
shall direct the Recordkeeper to identify the Alternate Payee's interest in the
Trust Fund pending a distribution to the Alternate Payee and the Alternate Payee
may direct the investment of the Alternate Payee's interest in the Trust Fund
pursuant the provisions of Section 22.9.
Sec. 15.12 Tax Withholding and Participant's Direct Rollover. Unless
provided otherwise in regulations promulgated by Secretary of the Treasury, to
the extent required under Section 3405 of the Code, the Trustee shall withhold
20% of the taxable portion of the Plan distribution or withdrawal made to a
Participant, Former Participant or Beneficiary after December 31, 1992 which
constitutes an eligible rollover distribution within the meaning of Section
402(c)(4) of the Code. Any amount withheld shall be deposited by the Trustee
with the Internal Revenue Service for the purpose of paying the distributee's
federal income tax liability associated with the distribution or withdrawal.
Notwithstanding the foregoing provisions, commencing on and after January 1,
1993, each
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Participant, each Former Participant and each spouse (or former spouse under a
Qualified Domestic Relations Order) of a Participant or Former Participant shall
be given the right to elect [pursuant to Section 401(a)(31) of the Code] to
rollover all or any portion of the taxable amount of such person's distribution
or withdrawal (subject to limitations and restrictions, if any, adopted by the
Administrator in accordance with applicable Treasury regulations) directly to an
eligible retirement plan as defined in Section 402(c)(8)(B) of the Code as
limited by Section 402(c)(9) of the Code and, to the extent a direct rollover is
elected by any such person, the withholding requirements of this Section 15.12
will not apply. If permitted by the Code or applicable Treasury regulations, a
direct rollover as described in the preceding sentence may be accomplished by
delivering a check from the Plan to the distributee payable to the trustee or
custodian of the eligible retirement plan. Each such election shall be in
writing on a form prescribed by the Administrator for such purpose and given to
the Participant, Former Participant or spouse within a reasonable period of time
prior to the distribution or withdrawal.
Article XVI
NOTICES
Sec. 16.1 Notice. As soon as practicable after a Participant, Former
Participant or Beneficiary makes a request for payment, the Administrator shall
notify the Recordkeeper of the following information and give such directions as
are necessary or advisable under the circumstances:
(a) name and address of the Participant, Former Participant or
Beneficiary, and
(b) amount to be distributed.
In addition to the information described above, the Administrator shall notify
the Recordkeeper and/or the Trustee, if applicable, as to the identity, address
and other pertinent information of eligible retirement plans as described in
Section 402(c)(8)(B) of the Code to which the payee has elected to rollover
directly such distribution or withdrawal pursuant to Section 15.12 of the Plan.
Sec. 16.2 Modification of Notice. At any time and from time to time
after giving the Notice as provided for in Section 16.1, the Administrator may
modify such original Notice or any subsequent Notice by means of a further
Notice or notices to the Trustee but any action taken or payments made by the
Trustee pursuant to a prior Notice shall not be affected by a subsequent Notice.
Sec. 16.3 Reliance on Notice. Upon receipt of any Notice as provided in
this Article XVI, the Recordkeeper and/or the Trustee, as applicable, shall
promptly take whatever action and make whatever payments are called for therein,
it being intended that the Trustee may rely upon the information and directions
in such Notice absolutely and without question. However, the Trustee may call to
the attention of the Administrator any error or oversight which the Trustee
believes to exist in any Notice.
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Article XVII
AMENDMENT OR TERMINATION OF PLAN
Sec. 17.1 Amendment or Termination by Company. At any time the Company
acting through its Board of Directors may amend or modify the Plan,
retroactively or otherwise, or may terminate or partially terminate or
discontinue or modify Employer contributions to the Plan, subject, however, to
the other provisions of this Article XVII. Such termination may be made without
consent being obtained from the Trustee, the Recordkeeper, any Employer or
Affiliated Company, the Administrator, the Committee, the Participants or their
Beneficiaries, the Employees or any other interested person. Also the Plan shall
be considered terminated if the Company ceases business operations or if there
is a complete discontinuance of Employer contributions to the Plan.
Sec. 17.2 Effect of Amendment. No amendment or modification hereof by
the Company, unless made to secure the approval of the Commissioner of Internal
Revenue or other governmental bureau or agency, shall:
(a) operate retroactively to reduce or divest the then vested interest
in any Individual Account or to reduce or divest any benefit then
payable hereunder; or
(b) change the duties or responsibilities of the Trustee without the
written consent or approval of the Trustee.
Each such amendment shall be in writing signed by duly authorized officers of
the Company with such consents or approval, if any, as provided above and shall
become effective as designated in such amendment.
Sec. 17.3 Distribution on Termination or Discontinuance of
Contributions. Upon termination of the Plan or complete discontinuance of
contributions to the Plan, any amount of the Trust Fund previously unallocated,
including any amounts in a suspense account established under Article VIII,
shall be allocated (unless such allocation would violate Article VIII), and the
Individual Accounts of all Participants, Former Participants, and Beneficiaries
shall thereupon remain fully vested and nonforfeitable to the extent then
funded. The Trustee shall deduct from the Trust Fund all unpaid charges and
expenses including those relating to said termination, except as the same may be
paid by an Employer. The Trustee shall then adjust the balance of all Individual
Accounts on the basis of the net value of the Trust Fund. The Trustee shall
distribute the amount to the credit of each Participant, Former Participant and
Beneficiary when all appropriate administrative procedures have been completed.
If any amount in a suspense account shall not be allocable because of the
provisions of Article VIII, such amount shall be returned to the Employer. Upon
any complete discontinuance of contributions by an Employer, the assets of the
Trust Fund shall be held and administered by the Trustee for the benefit of the
Participants employed by such Employer discontinuing contributions in the same
manner and with the same powers, rights, duties and privileges herein described
until the Trust Fund with respect to such Employer has been fully distributed.
Upon the partial termination of the Plan, the Individual Accounts of affected
Participants, Former Participants and Beneficiaries shall thereupon remain fully
vested and nonforfeitable to the extent then funded and shall be distributed to
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such Participants, Former Participants and Beneficiaries by the Trustee when all
appropriate administrative procedures have been completed. If no other defined
contribution plan [other than an employee stock ownership plan as defined in
Section 4975(e)(7) of the Code or a simplified employee pension plan as defined
in Section 408(k) of the Code] is maintained by the Company or any other
Affiliated Company as of the Plan termination date, subject to the requirements
of Section 15.12, the Administrator shall direct the Trustee to distribute each
Participant's entire Individual Account in a single lump sum distribution
without his consent as soon as administratively practicable after the later of
(i) the termination date of the Plan or (ii) the receipt following application
of a favorable determination letter from the Internal Revenue Service with
respect to the termination of the Plan. If, however, the Company or any
Affiliated Company maintains another defined contribution plan [other than an
employee stock ownership plan as defined in Section 4975(e)(7) of the Code or a
simplified employee pension plan as defined in Section 408(k) of the Code] as of
the Plan termination date, then except as provided in the next sentence, each
Participant's entire Individual Account shall be transferred by the Trustee,
without the Participant's consent, to such other defined contribution plan. A
Participant may request in writing that the Trustee distribute his Individual
Account, excluding the balance attributable to his Salary Deferral Contribution
Account unless distribution of such accounts would be permitted under Section
401(k)(2)(B) of the Code and the applicable Treasury regulations thereunder, in
a single lump sum distribution, subject to the requirements of Section 15.12, as
soon as administratively practicable after the later of (i) the termination date
of the Plan or (ii) the receipt following application of a favorable
determination letter from the Internal Revenue Service with respect to the
termination of the Plan.
Sec. 17.4 Reversion of Contributions to Employer. Except as provided in
Section 3.4 and Section 17.3, under no circumstances or conditions shall the
Trust Fund or any portion thereof revert to any Employer or be used for or
diverted to the benefit of anyone other than Participants, Former Participants
and Beneficiaries, it being understood that the Trust Fund shall be for the
exclusive benefit of Participants, Former Participants and Beneficiaries.
Sec. 17.5 Amendment of Vesting Schedule. At any time that a vesting
schedule is added to the Plan or the vesting schedule of the Plan is amended, or
the Plan is amended in any way that directly or indirectly affects the
computation of the Participant's nonforfeitable interest in his Individual
Account, each Participant who has completed a Period of Service of at least
three years, whether or not consecutive, may elect to have his vested interest
in his Individual Account determined under the vesting schedule in effect prior
to such amendment. An election made under the preceding sentence may be made at
any time within 60 days after the later of the date:
(a) the amendment is adopted;
(b) the amendment becomes effective; or
(c) the Participant is issued written notice of the amendment by the
Administrator.
An election under this Section shall be made in a written instrument delivered
to the Administrator and once made, shall be irrevocable. For the purposes of
this Section, a Participant shall be considered to
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have completed a Period of Service of at least three years, described in this
Section if he shall have completed such years prior to the end of the period
during which he could make an election hereunder.
Sec. 17.6 Merger or Consolidation of Plan. 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 Fund to, another trust fund held under any other
plan of deferred compensation maintained or to be established for the benefit of
all or some of the Participants in this Plan, the assets of the Trust Fund
applicable to such Participants shall be transferred to the other trust fund
only if:
(a) each Participant would (if either this Plan or the other plan had
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 this Plan had then terminated);
and
(b) such other plan and trust fund are qualified under Section 401(a)
of the Code and exempt from tax under Section 501(a) of the Code.
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Article XVIII
COMMITTEE
Sec. 18.1 Committee Composition. The Company may appoint a Committee
consisting of any number of members as determined by the Company. The Company
may remove any member of the Committee at any time and a member may resign by
written notice to the Company. Any vacancy in the membership of the Committee
shall be filled by appointment of the Board of Directors or the Chief Executive
Officer of the Company, but pending the filling of any such vacancy the then
members of the Committee may act hereunder as though they alone constitute the
full Committee.
Sec. 18.2 Committee Actions. Any and all acts and decisions of the
Committee shall be by at least a majority of the then members, but the Committee
may delegate to any one or more of its members the authority to sign notices or
other documents on its behalf or to perform ministerial acts for it, in which
event the Trustee and any other person may accept such notice, document or act
without question as having been authorized by the Committee.
Sec. 18.3 Committee Procedure. The Committee may, but need not, call or
hold formal meetings and any decisions made or action taken pursuant to written
approval of a majority of the then members shall be sufficient. The Committee
shall maintain adequate records of its decisions which records shall be subject
to inspection by the Company, Employer, any Participant, Former Participant,
Beneficiary, and any other person to the extent required by law, but only to the
extent that they apply to such person. Also the Committee may designate one of
its members as Chairman and one of its members as Secretary and may establish
policies and procedures governing it as long as the same are not inconsistent
with the terms of the Plan.
Sec. 18.4 Delegation to Committee and Company's Duty to Furnish
Information. The Committee shall perform the duties and may exercise the powers
and discretion given to it in this Plan and its decisions and actions may be
relied upon by all persons affected thereby. The Trustee and the Recordkeeper
may rely without question upon any notices, directions, or other documents
received from the Committee. The Company and each Employer shall furnish the
Committee with all data and information available to the Company which the
Committee may reasonably require in order to perform its duties. The Committee
may rely without question upon any such data or information furnished by the
Company and each Employer.
Sec. 18.5 Construction of Plan and Trustee's and Recordkeeper's
Reliance. Any and all matters involving the Plan, including but not limited to
any and all disputes which may arise involving Participants, Former
Participants, and Beneficiaries and/or the Trustee or the Recordkeeper shall be
referred to the Committee. The Committee has the exclusive discretionary
authority to construe the terms of the Plan and the exclusive discretionary
authority to determine eligibility for all benefits hereunder. Any such
determinations or interpretations of the Plan adopted by the Committee shall be
final and conclusive and shall bind all parties. The Trustee and the
Recordkeeper may rely upon the decision of the Committee with respect to any
question concerning the meaning, interpretation, or application of any provision
of the Plan.
Sec. 18.6 Committee Member's Abstention in Cases Involving Own Rights.
Notwithstanding any other provision of this Article XVIII, no Committee member
shall vote or act upon any matter involving his own rights, benefits, or
participation in the Plan.
Sec. 18.7 Counsel to Committee. The Committee may engage agents to
assist it and may engage legal counsel who may be legal counsel for the Company.
All reasonable expenses incurred by the Committee may be paid from the Trust
Fund.
Sec. 18.8 Indemnification of Employees and Directors. The Company
hereby indemnifies each member of the Committee and each employee, officer and
director of an Affiliated Company who are delegated responsibilities under or
pursuant to the Plan against any and all liabilities and expenses, including
attorneys' fees, actually and reasonably incurred by them in connection with any
threatened, pending or completed legal action or judicial or administrative
proceeding to which they may be a party, or may be threatened to be made a
party, by reason of membership on the Committee or other delegation of
responsibilities, except with regard to any matters as to which they shall be
adjudged in such action or proceeding to be liable for gross negligence or
willful misconduct in connection therewith. In addition, the Company may provide
appropriate insurance coverage for the members of the Committee or each such
other individual indemnified pursuant to this Section 18.8 who is not otherwise
appropriately insured.
Sec. 18.9 Action Taken in Good Faith. To the extent permitted by ERISA,
the members of the Committee and each employee, officer and director of an
Affiliated Company who are fiduciaries with respect to the Plan shall be
entitled to rely on, and be fully protected with respect to any action taken or
suffered by them in good faith in reliance on, all tables, valuations,
certificates, reports and opinions furnished by the Recordkeeper, the Trustee,
or any accountant, attorney, insurance company or investment manager acting at
any time hereunder.
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Article XIX
MISCELLANEOUS
Sec. 19.1 No Employment or Compensation Agreement. Nothing contained in
the Plan shall be construed as giving any person or entity any legal or
equitable right against the Company, any Employer, any Affiliated Company, their
stockholders or partners, officers or directors, the Named Fiduciary, the
Committee, the Administrator, the Trustee or the Recordkeeper, except as the
same shall be specifically provided in the Plan. Nor shall anything in the Plan
give any Participant or other Employee the right to be retained in the service
of an Employer. The employment of all persons by an Employer shall remain
subject to termination by such Employer to the same extent as if the Plan had
never been executed.
Sec. 19.2 Spendthrift Provision. Except as provided by the terms of a
domestic relations order which is determined to be qualified under Section
414(p) of the Code, no Participant, Former Participant, or Beneficiary shall
have the right to assign or transfer his interest hereunder, nor shall his
interest be subject to claims of his creditors or others, it being understood
that all provisions of the Plan shall be for the exclusive benefit of those
designated herein.
Sec. 19.3 Construction. It is the intention of each Employer that the
Plan be qualified under Section 401 of the Code, and comply with the applicable
provisions of ERISA, and all provisions hereof should be construed to that
result.
Sec. 19.4 Titles. Titles of Articles and Sections hereof are for
convenience only and shall not be considered in construing the Plan.
Sec. 19.5 Texas Law Applicable. The Plan and each of its provisions
shall be construed and their validity determined by the laws of the State of
Texas.
Sec. 19.6 Successors and Assigns. The Plan shall be binding upon the
successors and assigns of the Company and each Employer and the Trustee and upon
the heirs and personal representatives of those individuals who become
Participants hereunder.
Sec. 19.7 Allocation of Fiduciary Responsibility by Named Fiduciary. A
fiduciary with respect to the Plan, as described in Section 3(21) of ERISA,
shall only have those specific powers, duties, responsibilities and obligations
as are explicitly given such fiduciary under the terms of the Plan or allocated
to such fiduciary pursuant to the procedures set forth herein. It is intended
that each fiduciary shall be responsible only for the proper exercise of his own
powers, duties, responsibilities and obligations under the Plan and shall not be
responsible for any act or failure to act of another fiduciary. The Named
Fiduciary may, by written instrument, allocate some or all of its
responsibilities to another fiduciary, including the Trustee, or designate
another person to carry out some or all of its fiduciary responsibilities. Each
fiduciary to whom responsibilities are allocated by the Named Fiduciary will be
furnished a copy of the Plan and their acceptance of such responsibility will be
made by agreeing in writing to act in the capacity designated. The Named
Fiduciary shall not be liable for an act or omission of any person (who is
allocated a fiduciary responsibility or who is designated to carry out such
responsibility) in carrying out a fiduciary responsibility except to the extent
that with
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respect to the allocation or designation, continuation thereof, or
implementation or establishment of the allocation or designation procedures the
Named Fiduciary (i) did not perform all of his duties and responsibilities and
exercise his powers hereunder with the care, skill, prudence, and diligence
under the circumstances then prevailing that a prudent man acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of like character and with like aims, (ii) knowingly participates in
or knowingly undertakes to conceal an act or omission of another fiduciary of
the Plan, with the knowledge that such act or omission is a breach of fiduciary
responsibility, (iii) did not make reasonable efforts under the circumstances to
remedy a breach of fiduciary responsibility of which the Named Fiduciary has
knowledge, or (iv) did not carry out its specific responsibilities, in
accordance with the standard set forth in (i) above, and as a result, it has
enabled another fiduciary of the Plan to commit a breach. Any person or group of
persons may serve in more than one fiduciary capacity with respect to the Plan.
Sec. 19.8 Expenses of Administration. Except to the extent paid by an
Employer, the Administrator shall cause the Trustee to pay all expenses incurred
in the administration of the Plan, including expenses of the Committee, the
Recordkeeper and the Administrator, and expenses and compensation of the Trustee
and the expenses of counsel.
Sec. 19.9 Plan Controls. In the event of any conflict between the terms
of the Plan and any summary thereof or other document relating thereto, from
whatever source, the terms of the Plan shall govern.
Sec. 19.10 Effect of Mistakes. In the event of a mistake or
misstatement as to the age or eligibility of any person, or the amount of any
kind of contributions, withdrawals or distributions made or to be made to a
Participant, or other person, the Committee shall, to the extent it deems
possible, make such adjustment as will in its judgment afford to such person the
credits, distributions or other rights to which he is properly entitled under
the Plan.
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Article XX
ADOPTION BY AFFILIATED COMPANIES
Sec. 20.1 Transfer of Employment to Another Employer. When an
Employee's employment with any Employer is terminated, but such Employee
continues to be a Participant by reason of continued employment by another
Employer, the Participant concerned shall not be considered to have changed
employers for purposes of determining the Participant's eligibility,
participation, and Plan benefits.
Sec. 20.2 Contributions. Each Participant shall have his Employer
Contribution Account credited with his share of his former Employer's
contributions and with his share of his new Employer's contributions. The
aggregate of the Salary Deferral Contributions by such Participant during the
portion of the Year employed by an Employer shall constitute the basis for his
allocation of that particular Employer's Matching Contribution, if any, for that
Year and the aggregate of the Participant's Annual Compensation during the
portion of the Year employed by an Employer shall constitute the basis for his
allocation of that particular Employer's profit sharing contribution, if any,
for that Year.
Sec. 20.3 Action by Company. The Employers delegate to the Company the
authority to amend the Plan, remove the Trustee, Administrator and Recordkeeper,
or a Committee member, appoint a new or additional Trustee or Committee member,
appoint a new Administrator or Recordkeeper, or take all other actions
concerning the Plan without joinder or approval of the other Employers.
Article XXI
THE TRUSTEE
Sec. 21.1 Trust Fund. A Trust Fund has been created and will be
maintained for the purposes of the Plan, and the monies thereof will be invested
in accordance with the terms of the Trust Agreement which forms a part of the
Plan. All Salary Deferral Contributions, Matching Contributions, Employer
non-matching contributions, and Employer qualified non-elective contributions
will be paid into the Trust Fund, and all benefits under the Plan will be paid
from the Trust Fund.
Sec. 21.2 Trustee's Duties. Except as otherwise specifically provided
in the Trust Agreement, the Trustee's obligations, duties and responsibilities
are governed solely by the terms of the Trust Agreement, reference to which is
hereby made for all purposes.
Sec. 21.3 Benefits Only from Trust Fund. Any person having any claim
under the Plan will look solely to the assets of the Trust Fund for
satisfaction. In no event will any Employer or any of its officers, Employees,
agents, members of its Board of Directors, the Trustee, any successor trustee,
the Administrator, the Recordkeeper or any member of the Committee, be liable in
their individual capacities to any person whomsoever, under the provisions of
the Plan or Trust Agreement, absent a breach of fiduciary responsibility
determined pursuant to the applicable provisions of ERISA.
Sec. 21.4 Trust Fund Applicable Only to Payment of Benefits. The Trust
Fund will be used and applied only in accordance with the provisions of the
Plan, to provide the benefits thereof, except as provided in Section 19.8
regarding payment of administrative expenses, and no part of the corpus or
income of the Trust Fund will be used for, or diverted to, purposes other than
for the exclusive benefit of Participants and other persons thereunder entitled
to benefits.
Sec. 21.5 Texas Trust Code. Although it is intended that the foregoing
powers of the Trustee be applicable hereunder, it is also intended that all
provisions of the Texas Trust Code, and any amendments thereto, not inconsistent
with the above enumerated powers or other provisions of the Plan, shall be
applicable in the administration of the Trust Fund.
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Article XXII
INVESTMENTS AND CONTRACTS
Sec. 22.1 Permitted Investments. The investments permitted under the
provisions of this Article XXII shall be in addition to any investments
authorized pursuant to the provisions of the Trust Agreement.
Sec. 22.2 Investment of Trust Assets. In addition to all investments
allowable under the Texas Trust Code, and subject to the instructions of an
Investment Advisor who is duly appointed as provided in Section 22.4, the
Trustee may invest and reinvest the principal and income of the Trust Fund and
shall keep such assets invested, without distinction between principal and
income, in such property, real or personal, or part interests therein, wherever
situated, as the Trustee may deem suitable without regard to the proportion such
property or property of a similar character held in the Trust Fund may bear to
the entire amount so held, including, but not limited to, capital, common and
preferred stocks; personal, corporate, and governmental obligations; trust and
participation certificates, oil, mineral, or gas properties, fee simple
interests in real property; royalty interests or rights (including equipment
pertaining thereto); machinery, equipment, leaseholds; mortgages (including
mortgages inferior to other liens); other interests in real or personal
property; notes and other evidences of indebtedness or ownership, secured or
unsecured; partnership interests; contracts, and chooses in action. In addition,
the Trustee shall, upon direction of the Named Fiduciary, make a loan to a
Participant to the extent permitted in Section 22.12. Also, the Trustee may
purchase life insurance or annuity contracts as hereinafter provided in this
Article. The Trustee shall be obliged to use good faith and to exercise its
honest judgment as to what investments are from time to time in the best
interests of the Trust Fund and those entitled to benefit under the Plan.
Furthermore, the Trustee may hold any portion of the Trust Fund in cash and
uninvested whenever it deems such holding necessary or advisable.
Sec. 22.3 Investment in Certificate of Deposit. The Trustee, if a bank,
may invest in certificates of deposit issued by the Trustee provided such
certificates of deposit bear both a competitive and reasonable rate of interest.
Sec. 22.4 Appointment of Investment Advisor. The Named Fiduciary may
appoint an investment advisor as permitted by Section 402(c)(3) of ERISA to
direct the Trustee with regard to the investment of the assets held under the
Plan. For purposes of this Section 22.4, "investment advisor" shall mean a
fiduciary of the Plan who (i) is registered as an investment advisor under the
Investment Advisors Act of 1940, (ii) is a bank, as defined in the Investment
Advisors Act of 1940, or (iii) an insurance company qualified under the laws of
more than one state to manage, acquire, or dispose of any asset of the Plan. If
such an investment advisor be so appointed, the Trustee shall invest the assets
held under the Plan in accordance with the written directions received from such
investment advisor. The Trustee shall not be obligated to accept direction from
the investment advisor until such investment advisor acknowledges in writing
that it is a fiduciary of the Plan.
Sec. 22.5 Named Fiduciary's Control of Investments. Notwithstanding any
other provision in this Article XXII, the Named Fiduciary is hereby given the
right and power to direct the Trustee in writing to purchase, sell, lease, or
otherwise act for the Trust Fund in regard to any property, whether real,
personal, tangible or intangible, and to the extent that the Named Fiduciary so
directs the Trustee, all rights, duties, and obligations with respect to said
investment shall have been allocated to the Named Fiduciary within the meaning
of Section 405 of ERISA, unless the direction is contrary to ERISA, and the
Trustee shall carry out said directions without being liable or responsible in
any way for any losses or unfavorable results resulting therefrom. However, the
Named Fiduciary may specifically abdicate part or all of such right and power in
a written instrument so stating delivered to the Trustee. Furthermore, it is not
intended that the Trustee be required to ascertain whether the
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Named Fiduciary desires to give written directions pursuant to this Section
before the Trustee exercises any power, right, or discretion granted to the
Trustee hereunder.
Sec. 22.6 Investment in Collective Investment Trust. The Trustee may
invest the assets of the Trust Fund in any common or collective investment trust
or pooled investment fund maintained by a bank or trust company supervised by a
state or federal agency or pooled investment fund maintained by an Insurance
Company licensed to do business in a state, including any bank, trust company or
Insurance Company which may be a fiduciary or an affiliate of a fiduciary of the
Plan, which fund or funds then provide for the pooling of the assets of plans
described in Section 401(a) of the Code and exempt from tax under Section 501(a)
of the Code. The provisions of the document governing such common or collective
investment trust or pooled investment fund, as it may be amended from time to
time, shall govern any investment therein and are hereby made a part of the
Plan.
Furthermore, the Trustee, for collective investment purposes, may
combine into one trust fund the Trust and the trust created under any other
qualified retirement plan of an Affiliated Company. However, the Trustee shall
maintain separate records of account for the assets of each trust in order to
properly reflect each Participant's interest under each such plan.
Sec. 22.7 Investment of Matching Contributions. Matching Contributions
shall be made in Common Stock and shall be invested in the Common Stock Fund
until otherwise directed by the Participant. Common Stock shall be contributed
directly by an Employer or cash contributions and earnings from the Common Stock
Fund shall be used to purchase Common Stock at prevailing market prices directly
from the Company, on the open market, or in privately negotiated transactions.
The Trustee shall not pay any commissions in connection with the acquisition of
Common Stock if such payment would cause the acquisition to be a prohibited
transaction under ERISA. Funds in the Common Stock Fund shall not be commingled
with funds in other Investment Funds. If the Participant directs the investment
of his Employer Matching Contribution Account to be an Investment Fund other
than the Common Stock Fund, the Trustee shall transfer the Participant's
Employer Matching Contribution Account from the Common Stock Fund to the
Investment Fund selected by the Participant as soon as administratively feasible
after each Matching Contribution is made.
Sec. 22.8 Voting Rights. The Trustee shall exercise all voting rights
pertaining to each Participant's pro rata share of Common Stock held in the
Common Stock Fund in accordance with written directions, if any, given by such
Participant prior to the date fixed for such exercise. The Trustee shall vote
the shares as to which no directions are given in the same proportions as it
votes the shares as to which it has received such direction. The Company or
Committee shall appoint an independent third-party ("Agent") for the purpose of
confidentially soliciting, receiving and transmitting to the Trustee the
instructions from the Participants. The Agent shall transmit such instructions
solely to the Trustee. Neither the Trustee nor the Agent shall disclose such
instructions to the Company or to the Committee.
A Participant may direct the Trustee in writing, through the Agent, as
to how to respond to a tender or exchange offer for any or all whole shares of
Common Stock attributable to his Individual Account as of the Valuation Date
preceding, or coincident with, the offer. A Participant's instructions hereunder
shall be confidential and shall not be disclosed to the Company or the
Committee. The
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Committee shall timely notify each Participant of the pendency of such offer,
and timely distribute or cause to be distributed to each such Participant such
information as will be distributed to stockholders of the Company in connection
with any such tender or exchange offer. The Committee shall engage the Agent to
confidentially solicit, receive and transmit to the Trustee the instructions
from Participants. The Agent shall transmit such instructions solely to the
Trustee and shall not disclose such instructions to the Company or the
Committee. Upon receipt of such instructions, the Trustee shall tender such
shares of Common Stock as and to the extent so instructed. If the Trustee shall
not receive instructions from any Participant with respect to shares of Common
Stock attributable to such Participant's Individual Account, or shall receive
instructions from such Participant not to tender or exchange such shares, the
Trustee shall have no discretion in such matter and shall take no action with
respect thereto. Any securities received by the Trustee as a result of a tender
of shares of Common Stock shall be held, and any cash so received, shall be
invested in short-term investments for the Individual Account of the Participant
with respect to whom shares were tendered pending any reinvestment by the
Trustee consistent with the purposes of the Plan and the mandates of this
Section.
Sec. 22.9 Participant Direction of Investments. Each Participant and
Former Participant may direct the Trustee concerning the investment of his
Individual Account among Investment Funds made available to the Participants and
Former Participants by the Committee from time to time, and effective May 1,
1998 up to 25% of the Participant's Salary Deferral Contribution Account and up
to 25% of the Participant's future Salary Deferral Contributions may be invested
in the Common Stock Fund. A Participant or Former Participant may elect to
invest the balance of his Individual Account in any one or more of the
Investment Funds, but any such election of the Investment Funds must be in 1%
increments totaling 100%. At the time an Employee becomes a Participant, he
shall complete and file with the Administrator using the form furnished by the
Administrator designating the Investment Funds in which his Individual Accounts
are to be initially invested. Separate elections may not be made with respect to
different types of contributions. The directions, and any change thereto, must
be in writing, or, if permitted by the Administrator, by Interactive Electronic
Communication.
Sec. 22.10 Changes to Prior Participant Direction of Investments. A
Participant's direction of the investment of his Individual Account shall remain
the same until changed by such Participant pursuant to this Section. A
Participant may change the direction of the investment of the current balance of
his Individual Account or future contributions allocated to his Individual
Account, or both, effective as of any day following any Valuation Date by filing
the appropriate form, or by Interactive Electronic Communication (if
applicable), prior to such Valuation Date.
Sec. 22.11 Effect of Participant Direction of Investments. If the
Participant shall exercise any such right to direct the investment of his
Individual Account, then, to that extent, the obligations, discretion, and
duties with respect to such investments shall be deemed to have been allocated
to the Participant within the meaning of Section 404(c) of ERISA, and unless the
direction is contrary to ERISA or the Administrator shall determine that such
investment would be administratively infeasible and so notify the Participant,
such directions shall be followed and no fiduciary with respect to the Plan
shall be liable or responsible in any way for any losses or unfavorable results
resulting therefrom. It is not intended that the Administrator be required to
ascertain whether the Participant desires to give written or Interactive
Electronic Communication directions pursuant to this Section before the Trustee
exercises any power, right, or discretion granted the Trustee under the Trust
Agreement.
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Sec. 22.12 Participant Loans. The Administrator may, in its sole
discretion and in accordance with a uniform and nondiscriminatory policy
established by it, permit loans to be made to a Participant, former Participant
or Beneficiary provided that any such loan (i) loans may be made solely from the
following portions of the Participant's Individual Account, and shall be used in
the following order: (a) Karten's Rollover Account, (b) Karten's Deferral
Contribution Account; (c) Rollover Account, and (d) Salary Deferral Contribution
Account; (ii) shall be made available to all such Participants, former
Participants and Beneficiaries on a reasonably equivalent basis, (iii) shall not
be made available to Highly Compensated Employees in an amount greater than the
amount made available to other Participants, (iv) shall bear a reasonable rate
of interest, (v) shall be adequately secured, (vi) shall provide for periodic
repayment over a reasonable period of time, and (vii) repayment shall be
allocated to the Investment Funds in accordance with the Participant's
investment election in effect at the time of repayment. In addition, loans
granted or renewed pursuant to this Section 22.12 shall be granted or renewed in
accordance with a written loan policy established by the Administrator (which
policy, when properly adopted, is hereby incorporated by reference and made a
part of this Plan). Such written loan policy, once established may be modified
or amended in writing from time to time without the necessity of amending this
Section 22.12. The loan policy established by the Administrator shall comply
with the applicable provisions of ERISA and regulations promulgated pursuant
thereto and with any limitations imposed by the Code and regulations promulgated
pursuant thereto to prevent the loan from being deemed to be a taxable
distribution to the Participant. A loan will be offset against the Participant's
Individual Account to the extent it is not repaid within 30 days after the
Participant's employment with the Employer terminates.
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Article XXIII
TOP HEAVY PROVISIONS
Sec. 23.1 Minimum Allocation Requirements. For any Year in which the
Plan is a Top Heavy Plan, Employer contributions (excluding Employer
contributions to Social and Salary Deferral Contributions made to the Plan for
any Year under Section 7.2 and Matching Contributions included in the
Contribution Percentage test for the Year under Section 5.1) and forfeitures
which are allocated to any Employee who has satisfied the eligibility
requirements of Section 2.1, without regard to whether he has elected to
participate in the Plan pursuant to Section 2.2, and who on the last day of the
Year is a Non-Key Employee shall not be less than the lesser of (i) three
percent of such Participant's Annual Compensation [as defined in Section 8.2(f)]
or (ii) the largest percentage of Employer contributions (including Salary
Deferral Contributions and Matching Contributions), as a percentage of the
amount of the Annual Compensation [as defined in Section 8.2(f)] of Participants
who are Key Employees, but not in excess of the Compensation Limitation as
defined in Section 1.5 allocated to any such Participant who is a Key Employee
for that Year; provided, however, if an Employer maintains a defined benefit
plan which designates this Plan to satisfy Section 401 or 410 of the Code, (ii)
above shall not apply. No Employer contributions allocated to a Non-Key Employee
under this Section may be forfeited as a result of such Employee's withdrawal of
his Salary Deferral Contributions under Section 15.6(d).
Sec. 23.2 Adjustment to Limitation on Allocations. Notwithstanding the
provisions of Sections 8.2(h)(ii)(A) and 8.2(i)(ii)(A), beginning with the first
Year beginning after December 31, 1983 in which the Plan is a Top Heavy Plan,
the following provisions shall be applicable to Section 8.2 of the Plan:
(a) Section 8.2(h)(ii)(A) shall be revised by substituting "1.0" for
"1.25" and the numerator of the fraction described in Section
8.2(h)(iv)(A) shall be revised by substituting "$41,500" for "$51,875"
unless (i) the Plan would not be a Top Heavy Plan as defined in Section
23.3(f) if "90%" were substituted for 60% in such definition, and (ii)
the minimum allocation requirements of Section 23.1 for a Participant
who is a Non-Key Employee are satisfied and, in applying such
provisions, "four percent" is substituted for "three percent;" and
(b) Section 8.2(i)(ii)(A) shall be revised by substituting "1.0" for
"1.25" unless (i) the Plan would not be a Top Heavy Plan as defined in
Section 23.3(f) if "90%" were substituted for 60% in such definition,
and (ii) the minimum benefit requirements of Section 416(h)(2)(A) of
the Code are satisfied for all participants in the defined benefit
pension plan who are Non-Key Employees.
Sec. 23.3 Definitions.
(a) "Determination Date" means for any Year the Anniversary Date of the
preceding Year, or in the case of the first Year of the Plan, the
Anniversary Date of that Year.
(b) "Key Employee" means, as of any Determination Date [as defined in
Section 23.3(a)], any Employee or former Employee (or Beneficiary of
such Employee) who, at any time during the Year which includes the
Determination Date, or during the preceding four Years, is:
(i) an officer of any Employer having Annual Compensation
greater than 50% of the amount in effect under Section
415(b)(1)(A) of the Code for any such Year;
(ii) one of the ten Employees having Annual Compensation from
any Employer of more than the dollar limitation in effect
under Section 415(c)(1)(A) of the Code and owning the largest
interests in such Employer;
(iii) a more than five percent owner of any Employer; or
(iv) a more than one percent owner of any Employer having
Annual Compensation from all Employers of more than $150,000.
For purposes of this subsection (b), Annual Compensation shall mean
annual compensation as defined in Section 415(c)(3) of the Code, but
including amounts contributed by the Employer pursuant to a salary
deferral agreement which are excludable from the Participant's gross
income under Sections 125, 402(e)(3), 402(h)(1)(B) or 403(b) of the
Code. For purposes of subsection (b)(i), no more than 50 Employees (or,
if lesser, the greater of three or ten percent of the Employees) shall
be treated as officers. For purposes of subsection (b)(ii) above, if
two Employees have the same interest in an Employer, the Employee
having the greater Annual Compensation shall be treated as having the
larger interest. The constructive ownership rules
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of Section 318 of the Code (or the principles of that section, in the
case of an unincorporated Employer) will apply to determine ownership
in each Employer.
(c) "Non-Key Employee" means any Employee who is not a Key Employee.
(d) "Permissive Aggregation Group" means the Required Aggregation Group
plus any other qualified plans maintained by an Employer 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.
(e) "Required Aggregation Group" means (i) each qualified plan of an
Employer in which at least one Key Employee participates, and (ii) any
other qualified plan of an Employer which enables a plan described in
(i) to meet the requirements of Sections 401(a)(4) or 410 of the Code.
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(f) "Top Heavy Plan" means the Plan for a Year beginning after December
31, 1983, if the Plan is the only plan maintained by an Employer and
the top heavy ratio as of the Determination Date exceeds 60%. The top
heavy ratio is a fraction, the numerator of which is the sum of the
present value of the Individual Accounts of all Key Employees as of the
Determination Date, the contributions due as of the Determination Date,
and distributions made within the five-year period immediately
preceding the Determination Date (including distributions under a
terminated plan which if it had not been terminated would have been
required to be included in an aggregation group), and the denominator
of which is a similar sum determined for all Employees. The top heavy
ratio shall be calculated without regard to (i) the Individual Account
of a Participant who is not a Key Employee but who was a Key Employee
in a prior Year, (ii) the Individual Account of any individual who has
not performed any services for an Employer at any time during the
five-year period ending on the Determination Date, and (iii) voluntary
deductible Employee contributions, if any. The top heavy ratio,
including distributions, rollover and transfers, to the extent such
items must be taken into account, shall be calculated in accordance
with Section 416 of the Code and the regulations thereunder. If an
Employer maintains other qualified plans (including a simplified
employee pension plan) or has ever maintained one or more defined
benefit plans which have covered or could cover a Participant in this
Plan, this Plan is top heavy for a Year beginning after December 31,
1983 only if it is part of the Required Aggregation Group, and the top
heavy ratio for both the Required Aggregation Group and the Permissive
Aggregation Group exceeds 60%. The top heavy ratio shall be calculated
as described above, taking into account all plans within the
aggregation group and with reference to Determination Dates that fall
within the same calendar year; provided that if a defined benefit plan
is included in the aggregation group, the present value of accrued
benefits (instead of account balances) of participants in that plan
shall be computed for purposes of calculating the top heavy ratio. The
accrued benefit under a defined benefit plan in both the numerator and
the denominator of the top heavy ratio are increased for any
distribution of an accrued benefit made in the five-year period ending
on the Determination Date. The accrued benefit of a Participant other
than a Key Employee shall be determined under (i) the method, if any,
that uniformly applies for accrual purposes under all defined benefit
plans maintained by the Employer, or (ii) if there is no such method,
as if such benefit accrued not more rapidly than the slowest accrual
rate permitted under the fractional rule of Section 411(b)(1)(C) of the
Code. The value of account balances and the present value of accrued
benefits will be determined as of the most recent Allocation Date that
falls within or ends with the 12-month period ending on the
Determination Date, except as provided in Section 416 of the Code and
the Treasury regulations thereunder for the first and second plan years
of a defined benefit plan. The actuarial assumptions (interest rate and
mortality only) used by the actuary under the defined benefit plan
shall be used to calculate the present value of accrued benefits from
the defined benefit plan.
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IN WITNESS WHEREOF, Zale Corporation, the Company, acting by and
through its duly authorized officers, has caused this Agreement to be executed
as of the day and year first above written.
ZALE CORPORATION
By /s/ GREGORY HUMENESKY
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COMPANY