Exhibit 10.22
SUMMARY PLAN DESCRIPTION
CABOT MICROELECTRONICS CORPORATION 401(k) PLAN
CABOT MICROELECTRONICS CORPORATION 401(k) PLAN
SUMMARY PLAN DESCRIPTION.................................................................................3
I. BASIC PLAN INFORMATION..........................................................................4
A. Account....................................................................................4
B. Beneficiary................................................................................4
C. Employee...................................................................................4
D. Employer...................................................................................4
E. ERISA......................................................................................4
F. Highly Compensated Employee................................................................4
G. Non Highly Compensated Employee............................................................4
H. Participant................................................................................4
I. Plan Type..................................................................................5
J. Plan Administrator.........................................................................5
K. Plan Number................................................................................5
L. Plan Sponsor...............................................................................5
M. Plan Year..................................................................................5
N. Service of Process.........................................................................5
O. Trustee....................................................................................5
II. PARTICIPATION...................................................................................6
A. Eligibility Requirements...................................................................6
III. CONTRIBUTIONS...................................................................................7
A. Compensation...............................................................................7
B. Employee Pretax Contributions..............................................................7
1. Regular Contributions..................................................................7
2. Age 50 and Over Catch-Up Contributions.................................................7
C. Employer Matching Contributions............................................................7
1. Non-discretionary Matching Contributions...............................................8
D. Profit Sharing Contributions...............................................................8
1. Safe Harbor Nonelective Employer Contributions.............................................8
E. Limit on Contributions.....................................................................8
F. Rollover Contributions.....................................................................9
IV. INVESTMENTS....................................................................................10
A. Investments...............................................................................10
B. Statement of Account......................................................................10
V. VESTING........................................................................................11
VI. PARTICIPANT LOANS..............................................................................12
A. General Loan Rules........................................................................12
B. Specific Loan Procedures..................................................................12
VII. IN SERVICE WITHDRAWALS.........................................................................13
A. Hardship Withdrawals......................................................................13
B. Withdrawals After Age 59-1/2..............................................................13
C. WITHDRAWALS OF ROLLOVER CONTRIBUTIONS.....................................................13
Cabot Microelectronics Corporation 401(k) Plan 1
VIII. DISTRIBUTION OF BENEFITS.......................................................................14
A. Eligibility For Benefits..................................................................14
B. Distributable Events......................................................................14
1. Death.................................................................................14
2. Disability............................................................................14
3. Retirement............................................................................14
4. Minimum Required Distributions........................................................15
5. Termination of Employment.............................................................15
C. Form of Payments..........................................................................15
1. Lump Sum Distributions................................................................15
a) Cash Distribution.................................................................15
b) Direct Rollover Distribution......................................................15
c) Combination Cash Distribution and Direct Rollover Distributions...................16
IX. MISCELLANEOUS INFORMATION......................................................................17
A. Benefits Not Insured......................................................................17
B. Attachment of Your Account................................................................17
C. Plan-to-Plan Transfer Of Assets...........................................................17
D. Plan Amendment............................................................................17
E. Plan Termination..........................................................................17
F. Interpretation of Plan....................................................................18
G. Electronic Delivery.......................................................................18
X. INTERNAL REVENUE CODE TESTS....................................................................19
A. Top Heavy Test............................................................................19
XI. PARTICIPANT RIGHTS.............................................................................20
A. Claims....................................................................................20
1. Claims Procedures.....................................................................20
2. Review Procedures (For Appeal of an Adverse Benefit Determination)....................20
B. Statement of ERISA Rights.................................................................21
XII. SERVICES AND FEES..............................................................................23
Appendix A. investment options.....................................................................24
Appendix B. Loan Procedures........................................................................26
A. Initiating Loans..........................................................................26
1. Loan Application......................................................................26
2. Loan Amount...........................................................................26
3. Number of Loans.......................................................................26
4. Interest Rate.........................................................................26
5. Source of Loan Proceeds...............................................................26
B. Loan Repayments and Loan Maturity.........................................................26
C. Default or Termination of Employment......................................................27
Appendix C. special tax notice regarding plan payments.............................................28
Cabot Microelectronics Corporation 401(k) Plan 2
SUMMARY PLAN DESCRIPTION
CABOT MICROELECTRONICS CORPORATION 401(k) PLAN
The Cabot Microelectronics Corporation 401(k) Plan (the "Plan") of Cabot
Microelectronics Corporation has been amended as of 01/01/2002 (the "Effective
Date"). This Plan is intended to be a qualified retirement plan under the
Internal Revenue Code.
The purpose of the plan is to enable eligible Employees to save for retirement.
As well as retirement benefits, the plan provides certain benefits in the event
of death, disability, or other termination of employment. The Plan is for the
exclusive benefit of eligible Employees and their Beneficiaries.
This booklet is called a Summary Plan Description ("SPD") and it contains a
summary in understandable language of your rights and benefits under the plan.
If you have difficulty understanding any part of this SPD, you should contact
the Plan Administrator identified in the Basic Plan Information section of this
document during normal business hours for assistance.
This SPD is a brief description of the principal features of the plan document
and trust agreement as in effect at January 1, 2003 and is not meant to
interpret, extend or change these provisions in any way. A copy of the plan
document is on file with the Plan Administrator and may be read by any employee
at any reasonable time. The plan document and trust agreement shall govern if
there is a discrepancy between this SPD and the actual provisions of the plan.
This SPD is based on the federal tax implications of your participation in the
Plan, transactions made within your Account, and distributions you may receive
from the plan. The state tax implications of your participation and these
transactions should be determined based on an examination of appropriate state
law. Please consult with your tax advisor if you have any questions regarding
state tax law. Also, this SPD cannot advise any particular individual regarding
his or her own federal or state tax situation. Please consult with your tax
advisor regarding your tax situation.
Cabot Microelectronics Corporation 401(k) Plan 3
I. BASIC PLAN INFORMATION
The information in this section contains definitions to some of the terms that
may be used in this Summary Plan Description. If the first letter of any of
these definitions below is capitalized then it represents the indicated defined
term.
A. ACCOUNT
An Account shall be established by the Trustee to record contributions made on
your behalf and any related income, expenses, gains or losses. It may also be
referred to as an Account balance.
B. BENEFICIARY
This is the person or persons (including a trust) you designate, or who are
identified by the plan document if you fail to designate or improperly
designate, who will receive your benefits in the event of your death. You may
designate more than one Beneficiary.
C. EMPLOYEE
An Employee is an individual who is employed by your Employer as a common law
employee or, in certain cases, as a leased employee and is not terminated.
D. EMPLOYER
The name, address and business telephone number of your Employer is:
Cabot Microelectronics Corporation
870 Commons Drive
Aurora, IL 60504
(630) 375-6631
Your Employer's federal tax identification number is: 36-4324765.
E. ERISA
The Employee Retirement Income Security Act of 1974 (ERISA); it identifies the
rights of Participants and Beneficiaries covered by a qualified retirement plan.
F. HIGHLY COMPENSATED EMPLOYEE
An Employee is considered a Highly Compensated Employee if (i) at any time
during the current or prior year he or she owns, or is considered to own, at
least five percent of the Employer, or (ii) received compensation from the
Employer during the prior year in excess of $90,000, and he or she is in the top
paid group consisting of the top 20% of employees ranked by compensation. The
$90,000 figure will be adjusted from time to time to reflect increases in the
cost of living.
G. NON HIGHLY COMPENSATED EMPLOYEE
An Employee who is not a Highly Compensated Employee.
H. PARTICIPANT
A participant is an eligible Employee who has satisfied the eligibility and
entry date requirements and is eligible to participate in the Plan, or a
formerly eligible Employee who has an Account balance remaining in the Plan.
Cabot Microelectronics Corporation 401(k) Plan 4
I. PLAN TYPE
The Cabot Microelectronics Corporation 401(k) Plan is a defined contribution
plan. These types of plans are commonly described by the method by which
contributions for participants are made to the plan. The Cabot Microelectronics
Corporation 401(k) Plan is a 401(k) deferral plan. More information about the
contributions made to the plan can be found in Section III, Contributions.
J. PLAN ADMINISTRATOR
The Plan Administrator is responsible for the administration of the Plan and its
duties are identified in the plan document. In general, the Plan Administrator
is responsible for providing you and your Beneficiaries with information about
your rights and benefits under the Plan. The name, address and business
telephone number of the Plan Administrator is:
Cabot Microelectronics Corporation
870 Commons Drive
Aurora, IL 60504
(630) 375-6631
K. PLAN NUMBER
The three digit IRS number for the Plan is 001.
L. PLAN SPONSOR
Your Employer is the sponsor of the Plan.
M. PLAN YEAR
The Plan Year is the twelve-month period ending on the last day of December.
N. SERVICE OF PROCESS
The plan's agent for service of legal process is the Plan Administrator.
O. TRUSTEE
The trustee is responsible for trusteeing the Plan's assets. The trustee's
duties are identified in the trust agreement and relate only to the assets in
its possession. The name and address of the Plan's Trustee are:
Fidelity Management Trust Company
82 Devonshire Street
Boston, MA 02109
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II. PARTICIPATION
A. ELIGIBILITY REQUIREMENTS
You are eligible to participate in the Plan if you are an Employee and you are
not:
- a resident of Puerto Rico
- covered by a collective bargaining agreement for which
retirement benefits have been the subject of good faith
negotiations
- a Leased Employee
- a nonresident alien with no income from a U.S. source
- an independent contractor.
You are also not eligible to participate if you are an individual who is a
signatory to a contract, letter of agreement, or other document that
acknowledges your status as an independent contractor not entitled to
benefits under the Plan and you are not otherwise classified by the
Employer as a common law employee and the Employer does not withhold
income taxes, file Form W-2 (or any replacement form), or remit Social
Security payments to the Federal government for you, even if you are later
adjudicated to be a common law employee.
The plan requires you to attain the age of 21 before participating. Once
you reach age 21, if you are still an eligible Employee as described
above, you will be immediately eligible to participate in the Plan.
Once you become a Participant, you are eligible to participate in the Plan
until you terminate your employment with your Employer or become a member
of a class of Employees excluded from the Plan. If you terminate your
employment after you have met the eligibility requirements, and are later
re-employed by your Employer in a class of Employees eligible to
participate, you will again be eligible to participate in the Plan after
you complete one hour of service.
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III. CONTRIBUTIONS
After you satisfy the participation requirements in Section Two of this Summary
Plan Description, you will be eligible to make pretax contributions. In
addition, your Employer will make matching and profit sharing contributions to
your Account. The type(s) of contributions available under the Plan are
described in this section.
A. COMPENSATION
Compensation must be defined to compute contributions under the Plan. Eligible
compensation for computing contributions under the Plan is the taxable
compensation reportable by your Employer on your IRS Form W-2, excluding
reimbursements or other expense allowances, fringe benefits, moving expenses,
deferred compensation and welfare benefits and including salary reduction
contributions you made to an Employer sponsored cafeteria plan, 401(k) plan or
403(b) program. In addition for purposes of computing your Employee Pretax
Contributions and Employer Matching Contributions, compensation excludes:
- the taxable value of a qualified or non-qualified stock option
- severance pay
Compensation for your first year of eligible Plan participation will be measured
only for that portion of your initial Plan Year that you are eligible. Tax laws
limit the amount of compensation that may be taken into account each Plan Year;
the maximum amount for the 2003 Plan Year is $200,000.
B. EMPLOYEE PRETAX CONTRIBUTIONS
1. REGULAR CONTRIBUTIONS
You may elect to contribute a percentage of your eligible compensation
into the Plan after you satisfy the Plan's eligibility requirements. The
percentage of your eligible compensation you elect will be withheld from
each payroll on a pretax basis and contributed to an Account in the Plan
on your behalf. For pre-tax contributions being withheld from your
compensation beginning on 01/01/2002, the percentage you defer is subject
to an annual limit of the lesser of 60% of eligible compensation or
$12,000 (in 2003; for calendar years following 2002, legislation has
increased the deferral limit by $1,000 each year until it reaches $15,000
for 2006 and then thereafter as adjusted by the Secretary of the Treasury)
in a calendar year. Your pretax contributions cannot be forfeited for any
reason, however, there are special Internal Revenue Code rules that must
be satisfied and may require that some of your contributions be returned
to you. The Plan Administrator will notify you if any of your
contributions will be returned. You may completely suspend your
contributions with sufficient notice to the Plan Administrator.
Thereafter, if you want to resume your Employee pretax contributions as of
the beginning of any subsequent payroll period, you must complete a new
election form.
2. AGE 50 AND OVER CATCH-UP CONTRIBUTIONS
Beginning on 01/01/2002, your Plan will provide that participants who are
projected to be age 50 or older by the end of the calendar year and who
are making Deferral Contributions to the Plan may also make a catch-up
contribution of up to $1,000 in 2002, increasing by $1,000 each year until
reaching $5,000 in 2006, when such amount will be indexed in $500
increments.
C. EMPLOYER MATCHING CONTRIBUTIONS
All matching contributions will be computed by your Employer based on your
eligible compensation contributed to the Plan each payroll period. You become
eligible for matching contributions only if you make Employee pretax
contributions. Employer matching contributions must be allocated to your Account
in the Plan within prescribed legal time limits.
Cabot Microelectronics Corporation 401(k) Plan 7
1. NON-DISCRETIONARY MATCHING CONTRIBUTIONS
Each Plan Year your Employer will make a non-discretionary matching
contribution in an amount equal to 100% of the first 4% of your eligible
compensation contributed to the Plan and 50% of the next 2% of your
eligible compensation contributed to the Plan. For purposes of determining
your matching contributions under the Plan, your pre-tax contributions
will not include Age 50 and Over Catch-Up Contributions described above.
Also, for purposes of computing your Employer Matching Contribution under
the Plan, your match-eligible compensation is not measured by your yearly
rate of eligible compensation. Instead, it is measured only while you are
making Employee Pretax Contributions to the Plan.
D. PROFIT SHARING CONTRIBUTIONS
1. SAFE HARBOR NONELECTIVE EMPLOYER CONTRIBUTIONS
Your Employer has elected to make profit sharing contributions in an
amount equal to 4 percent of your eligible compensation if you were
eligible to participate in the Plan during the Plan Year. These
contributions satisfy certain Internal Revenue Code requirements and
eliminate the need for the Plan to perform certain annual
non-discrimination tests. You will be 100% vested in these contributions
when they are made. These contributions may be distributed under the same
circumstances which allow your pretax contributions to be distributed
(i.e., death, disability, separation from service, age 59 1/2, and
termination of the Plan without the establishment of a successor plan). In
addition, prior to the beginning of each Plan Year, your Employer will
provide written notice to you describing your rights and obligations under
the Plan. Your Employer will provide this notice to you at least 30 days
(but no more than 90 days) before the beginning of each Plan Year for
which this election to make Safe Harbor Nonelective Employer contributions
continues to apply. If you become eligible to participate during the Plan
Year, the notice will be provided no more than 90 days before you become
eligible (and no later than the date you become eligible). For a Plan Year
that began on or before April 1, 1999, the notice requirement is satisfied
if the notice was provided on or before March 1, 1999.
E. LIMIT ON CONTRIBUTIONS
Federal law requires that amounts contributed by you and on your behalf by your
Employer for a given limitation year generally may not exceed the lesser of:
- $40,000 (or such amount as may be prescribed by the Secretary
of the Treasury); or
- 100% of your annual compensation.
The limitation year for purposes of applying the above limits is the twelve
month period ending December 31. Contributions under this Plan may not exceed
the above limits. If this does occur, then excess contributions in your Account
may be forfeited or refunded to you based on the provisions of the Plan
document. You will be notified by the Plan Administrator if you have any excess
contributions. Income tax consequences may apply on the amount of any refund you
receive.
Cabot Microelectronics Corporation 401(k) Plan 8
F. ROLLOVER CONTRIBUTIONS
You can roll over part or all of an eligible rollover distribution you received
from a prior employer's qualified plan into this Plan, except amounts
contributed to the prior employer's plan as employee after-tax contributions.
The Plan Administrator must approve any rollover contribution and reserves the
right to refuse to accept any such contribution. If your rollover contribution
to the Plan is not a direct rollover (i.e. you received a cash distribution from
your prior employer's plan or from your rollover IRA), then it must be received
by the Trustee within 60 days of your receipt of the distribution. Rollover
contributions shall only be made in the form of cash or allowable mutual fund
shares. You may make a rollover contribution to the Plan before becoming a
Participant. However, you will not become a Participant in the Plan and become
entitled to make pretax contributions and share in Employer contributions until
you have met the Plan's eligibility and entry date requirements. Your rollover
contributions Account will be subject to the terms of this Plan and will always
be fully vested and nonforfeitable. In general, if you receive an eligible
rollover distribution as a surviving spouse of a participant or as a spouse or
former spouse who is an "alternate payee" pursuant to a qualified domestic
relations order ("QDRO"), you may also make a Rollover Contribution to the Plan.
Cabot Microelectronics Corporation 401(k) Plan 9
IV. INVESTMENTS
A. INVESTMENTS
The Employee Retirement Income Security Act of 1974 (ERISA) imposes certain
duties on the parties who are responsible for the operation of the Plan. These
parties, called fiduciaries, have a duty to invest Plan assets in a prudent
manner. However, an exception exists for plans that comply with ERISA Section
404(c) and permit a Participant to exercise control over the assets in his/her
Account and choose from a broad range of investment alternatives. This Plan is
intended to be a Section 404(c) plan. You are responsible for investment
decisions relating to the investment of assets in your Account under the Plan
and the Plan fiduciaries are not responsible for any losses based on your
investment instructions. In addition, you have the right to vote any mutual fund
proxy based on the number of shares you own. Please see Appendix A for a list of
the investments currently available under the Plan. If you want additional
information about any investment alternative, you may request any of the
following information by calling Fidelity at 1-800-835-5097 or by accessing the
NetBenefits(SM) web site at www.401k.com:
- - A description of the annual operating expenses of each investment fund
(e.g., investment management fees, administrative fees, transaction costs)
which reduce the rate of return to you, and the aggregate amount of such
expenses expressed as a percentage of average net assets of the designated
investment alternative;
- - Prospectuses, financial statements and reports, plus any other material
available to the Plan which relates to the available investment
alternatives;
- - A list of the assets comprising the portfolio of each investment fund, the
value of such assets (or the proportion of the investment fund which it
comprises), and with respect to each such asset which is a fixed rate
investment contract issued by a bank, savings and loan association or
insurance company, the name of the issuer of the contract, the term of the
contract and the rate of return on the contract;
- - Information concerning the value of shares or units of the investment
funds available to Participants under the Plan, as well as the past
investment performance of such funds, determined net of expenses, on a
reasonable and consistent basis.
B. STATEMENT OF ACCOUNT
Your account statement is available online through NetBenefits(SM) at
www.401k.com. You can view and print a statement for any time period up to 15
previous months. The assets in the Plan are invested in available investment
options and a separate Account is established for each Participant who receives
and/or makes a contribution. The value of your Account is updated each business
day to reflect any contributions, exchanges between investment options,
investment earnings or losses for each investment option and withdrawals. A hard
copy statement showing the value of your Account will also be automatically
mailed to you within 15 business days after the following dates: February 28,
May 31, August 31, November 30. You can suppress these mailings from being sent
to your home by logging on to NetBenefits(SM) and selecting Mail Preferences
under the Accounts tab.
Cabot Microelectronics Corporation 401(k) Plan 10
V. VESTING
The term "vesting" refers to your nonforfeitable right to the money in your
Account. If you terminate your employment with your Employer, you may be able to
receive a portion or all of your Account based on your vested percentage. You
are always 100% vested in your Rollover Contributions, Employer Profit Sharing
Contributions, Employer Matching Contributions, Qualified Nonelective
Contributions, Regular Contributions and any earnings thereon.
Cabot Microelectronics Corporation 401(k) Plan 11
VI. PARTICIPANT LOANS
A. GENERAL LOAN RULES
Loans shall be made available to all qualifying Participants on a
reasonably equivalent basis. However, loans may not be made to an eligible
Employee who makes a rollover contribution and who has not satisfied the
Plan's age, service requirement. Loans are not considered distributions
and are not subject to Federal or state income taxes, provided they are
repaid as required. While you do have to pay interest on your loan, both
the principal and interest are deposited in your Account.
B. SPECIFIC LOAN PROCEDURES
Please see Appendix B, Loan Procedures, for specific information regarding
receiving and repaying loans from the Plan. Additional information may be
attained from the Plan Administrator.
Cabot Microelectronics Corporation 401(k) Plan 12
VII. IN SERVICE WITHDRAWALS
If you qualify, as indicated below for each withdrawal, you may obtain a
withdrawal from the Plan while you are still an Employee. You can apply for any
of the below described distributions by calling the Fidelity Retirement Benefits
Line at 1-800-835-5097 or by accessing the NetBenefits(SM) web site at
www.401k.com. All telephone calls will be recorded. Most distributions have been
pre-approved by the Plan Administrator. The following types of withdrawals are
available under the Plan:
A. HARDSHIP WITHDRAWALS
If you are an Employee and request a hardship withdrawal and it is approved by
the Plan Administrator, you may withdraw your Employee pretax contributions to
satisfy any of the following immediate and heavy financial needs: (1) to pay
medical expenses for you, your spouse, children or dependents; (2) to purchase
your principal residence; (3) to prevent your eviction from, or foreclosure on,
your principal residence; or (4) to pay for post-secondary education expenses
(tuition, related educational fees, room and board) for you, your spouse,
children or dependents for the next twelve months; or (5) any other immediate
and heavy financial need as determined based on Internal Revenue Service
regulations. In accordance with Internal Revenue Service regulations, you must
first exhaust all other assets reasonably available to you prior to obtaining a
hardship withdrawal. This includes obtaining a loan from this Plan and any other
qualified plan maintained by your Employer. Your pretax contributions to this
Plan, and any other Employer-sponsored qualified or non-qualified plan, will be
suspended for six months after your receipt of the hardship withdrawal. The
minimum hardship withdrawal is $500. Hardship withdrawals distributed after
December 31, 2001 will not be considered "eligible rollover distributions".
Instead of the required federal withholding on an eligible rollover
distribution, these amounts will be subject to the 10% nonperiodic income tax
withholding rate unless you elect out of the withholding.
B. WITHDRAWALS AFTER AGE 59-1/2
If you have reached age 59-1/2, then you may elect to withdraw all or a portion
of your entire Account while you are still employed by your Employer.
C. WITHDRAWALS OF ROLLOVER CONTRIBUTIONS
If you have a balance in your rollover contributions Account, you may elect to
withdraw all or a portion of it.
The amount of any taxable withdrawal that is not rolled over into an Individual
Retirement Account or another qualified employer retirement plan will be subject
to Federal and state, if applicable, income taxes. In general, the amount of any
taxable withdrawal that is not rolled over into an Individual Retirement Account
or another qualified employer retirement plan will be subject to 20% Federal
Income Tax and any applicable State Income Tax. A 10% Internal Revenue Code
early withdrawal penalty tax may apply to the amount of your withdrawal if you
are under the age of 59-1/2 and do not meet one of the Internal Revenue Code
exceptions.
The amount of any withdrawal will be withdrawn from available investment options
in the order established by the Trustee.
Cabot Microelectronics Corporation 401(k) Plan 13
VIII. DISTRIBUTION OF BENEFITS
A. ELIGIBILITY FOR BENEFITS
A distribution can be made to you if you request one due to your disability,
retirement, or termination of employment from your Employer and any Related
Employer. Your Beneficiary or Beneficiaries may request a distribution of your
vested Account balance in the event of your death.
You may defer receipt of your distribution until a later date. However, you
cannot postpone it if your vested Account balance is $5,000 or less in which
case the Plan Administrator will direct the Trustee to distribute it to you as a
lump sum distribution without your consent. If your vested Account balance
exceeds $5,000, you may delay your distribution until you are required by law to
receive minimum required distributions. You will have a continuing election to
request a distribution if you elect to postpone your distribution unless you are
re-employed by your Employer or any Related Employer. The value of your Account
balance will continue to increase or decrease, as appropriate, based on the
investment returns until it is distributed. Your written consent will be
required for any distribution if your vested Account balance is greater than
$5,000.
You should consult with your tax advisor to determine the financial impact of
your situation before you request a distribution. You may apply for a
distribution by calling the Fidelity Retirement Benefits Line at 1-800-835-5097
and/or by accessing the NetBenefits(SM) web site at www.401k.com. All telephone
calls will be recorded. Most distributions have been pre-approved by the Plan
Administrator.
B. DISTRIBUTABLE EVENTS
You are eligible to request a distribution of your vested Account balance based
on any of the following events:
1. DEATH
If you are a Participant in the Plan and die, your vested Account balance,
if any, will be paid to your designated Beneficiary or Beneficiaries. You
may designate a Beneficiary or Beneficiaries on a designation form that
must be properly signed and filed with the Plan Administrator. If you are
married and want to designate someone other than your spouse as your
primary Beneficiary, your spouse must consent to this designation by
signing the form. His/her signature must be witnessed by a Plan
representative or a notary public. You should contact the Plan
Administrator to obtain a designation of beneficiary form.
2. DISABILITY
If you become disabled while you are employed by your Employer or a
Related Employer, so that you are eligible for disability benefits under
your Employer's Long-Term Disability Plan, the full value of your Account
balance may be distributed to you upon request. You may request a
distribution of your Account balance only if you terminate your employment
with your Employer or Related Employer.
3. RETIREMENT
You do not have to terminate your employment with your Employer just
because you attain your early retirement age of 55 or you attain your
normal retirement age of 65. You may take an early retirement distribution
at or after age 55, but you must first terminate your employment with your
Employer or Related Employer.
Cabot Microelectronics Corporation 401(k) Plan 14
4. MINIMUM REQUIRED DISTRIBUTIONS
You are required by law to receive a minimum required distribution from
the Employer's Plan, unless you are a five percent owner of the Employer,
no later than April 1 of the calendar year following the calendar year you
turn 70-1/2 or terminate your employment, whichever is later. If you are a
five percent owner of the Employer, you must start receiving your
distribution no later than April 1 of the calendar year following the
calendar year you turn 70-1/2. Once you start receiving your minimum
required distribution, you should receive it at least annually and you
should complete the appropriate documentation each year until all assets
in your Account are distributed. If you have any questions about your
minimum required distributions, please contact your Plan Administrator.
5. TERMINATION OF EMPLOYMENT
If you terminate your employment with your Employer and any Related
Employer, you may elect to receive a distribution of your vested Account
balance from the Plan.
C. FORM OF PAYMENTS-LUMP SUM DISTRIBUTIONS
Your entire vested Account balance will be paid to you in a single cash
distribution or other distribution that you elect.
1. CASH DISTRIBUTION
Any distribution paid directly to you will be subject to
mandatory Federal income tax withholding of 20% of the taxable
distribution and the remaining amount will be paid to you. You
cannot elect out of this tax withholding but you can avoid it
by electing a direct rollover distribution as described below.
This withholding is not a penalty but a prepayment of your
Federal income taxes.
You may roll over the taxable distribution you receive to an
individual retirement account (IRA) or your new employer's
qualified plan, if it accepts rollover contributions and you
roll over this distribution within 60 days after receipt. You
will not be taxed on any amounts timely rolled over into the
IRA or your new employer's qualified Plan until those amounts
are later distributed to you. Any amounts not rolled over may
also be subject to certain early withdrawal penalties
prescribed under the Internal Revenue Code.
2. DIRECT ROLLOVER DISTRIBUTION
As an alternative to a cash distribution, you may request that
your entire distribution be rolled directly into a Fidelity
IRA, a non-Fidelity IRA or to your new employer's qualified
plan if it accepts rollover contributions. Federal income
taxes will not be withheld on any direct rollover
distribution.
When you call the Fidelity Retirement Benefits Line to take a
withdrawal, you will be asked whether you will be rolling over
any part of your distribution. If you wish to have any part of
your distribution rolled over to an IRA or another qualified
plan, you will need to speak to a Fidelity representative.
Cabot Microelectronics Corporation 401(k) Plan 15
A. Rollover to Fidelity IRA - You will be asked whether
you have received a Fidelity Service for Exiting
Employees (`SEE') Rollover IRA Kit. If you haven't
received a SEE Kit, the Fidelity representative will
send one to you. Then, your rollover request will be
entered on the system and will pend (for up to 90
days) until the Rollover IRA account is set up. You
must return the signed Rollover IRA application to
Fidelity's Retail Customer Service Department (in
Dallas, TX) in order to set up the Rollover IRA
account. Once the Rollover IRA account has been set
up, your vested Account balance will be transferred
to the Fidelity Rollover IRA.
B. Rollover to Non-Fidelity IRA - A check will be issued
by the Trustee payable to the IRA custodian or
trustee for your benefit. The check will contain the
notation `Direct Rollover' and it will be mailed
directly to you. You will be responsible for
forwarding it on to the custodian or trustee. You
must provide the Plan Administrator with complete
information to facilitate your direct rollover
distribution.
C. Rollover to your New Employer's Qualified Plan - You
should check with your new employer to determine if
its plan will accept rollover contributions. If
allowed, then a check will be issued by the Trustee
payable to the trustee of your new employer's
qualified plan. The check will contain the notation
`Direct Rollover' and it will be mailed directly to
you. You will be responsible for forwarding it on to
the new trustee. You must provide the plan
Administrator with complete information to facilitate
your direct rollover distribution
3. COMBINATION CASH DISTRIBUTION AND DIRECT ROLLOVER
DISTRIBUTIONS
You may request that part of your distribution be paid
directly to you and the balance rolled into an IRA, your new
employer's retirement plan, or a 403(a) annuity. Any cash
distribution will be subject to the Federal income tax
withholding rules referred to in subsection 1 above and any
direct rollover distribution will be made in accordance with
section 2 above. Your direct rollover distribution must be at
least $500.
You will pay income tax on the amount of any taxable
distribution you receive from the Plan unless it is rolled
into an IRA or your new employer's qualified Plan. A 10% IRS
premature distribution penalty tax may also apply to your
taxable distribution unless it is rolled into an IRA or
another qualified plan. The 20% Federal income tax withheld
under this section may not cover your entire income tax
liability. In the case of a combination distribution, if any
portion of the eligible rollover distribution consists of
after-tax contributions, the cash paid directly to you will be
considered to consist completely of after-tax contributions
before any after-tax contributions are attributed to the
portion paid as a direct rollover. Consult with your tax
advisor for further details.
Cabot Microelectronics Corporation 401(k) Plan 16
IX. MISCELLANEOUS INFORMATION
A. BENEFITS NOT INSURED
Benefits provided by the Plan are not insured or guaranteed by the Pension
Benefit Guaranty Corporation under Title IV of the Employee Retirement Income
Security Act of 1974 because the insurance provisions under ERISA are not
applicable to this particular Plan. You will only be entitled to the vested
benefits in your Account based upon the provisions of the Plan and the value of
your Account will be subject to investment gains and losses.
B. ATTACHMENT OF YOUR ACCOUNT
Your Account may not be attached, garnished, assigned or used as collateral for
a loan outside of this Plan except to the extent required by law. Your creditors
may not attach, garnish or otherwise interfere with your Account balance except
in the case of a proper Internal Revenue Service tax levy or a Qualified
Domestic Relations Order (QDRO). A QDRO is a special order issued by the court
in a divorce, child support or similar proceeding. In this situation, your
spouse, or former spouse, or someone other than you or your Beneficiary, may be
entitled to a portion or all of your Account balance based on the court order.
Participants and Beneficiaries can obtain, without a charge, a copy of QDRO
procedures from the Plan Administrator.
C. PLAN-TO-PLAN TRANSFER OF ASSETS
Your Employer may direct the Trustee to transfer all or a portion of the assets
in the Account of designated Participants to another plan or plans maintained by
your Employer or other employers subject to certain restrictions. The plan
receiving the Trust Funds must contain a provision allowing the transfer and
preserve any benefits required to be protected under existing laws and
regulations. In addition, a Participant's vested Account balance may not be
decreased as a result of the transfer to another plan.
D. PLAN AMENDMENT
Your Employer reserves the authority to amend certain provisions of the Plan by
taking the appropriate action. However, any amendment may not eliminate certain
forms of benefits under the Plan or reduce the existing vested percentage of
your Account balance derived from Employer contributions. If you have three or
more years of service with your Employer and a Related Employer and the vesting
schedule is amended, then you will be given a choice to have the vested
percentage of future Employer contributions made to your Account computed under
the new or the old vesting schedule. The Plan Administrator will provide you
with the appropriate information to make an informed decision if the Plan's
vesting schedule is amended.
E. PLAN TERMINATION
Your Employer has no legal or contractual obligation to make annual
contributions to or to continue the Plan. Your Employer reserves the right to
terminate the Plan at any time by taking appropriate action as circumstances may
dictate, with the approval of the Board of Directors. In the event the Plan
should terminate, each Participant affected by such termination shall have a
vested interest in his Account of 100 percent. The Plan Administrator will
facilitate the distribution of Account balances in single lump sum payments to
each Participant in accordance with Plan provisions until all assets have been
distributed by the Trustee.
Cabot Microelectronics Corporation 401(k) Plan 17
F. INTERPRETATION OF PLAN
The Plan Administrator has the power and discretionary authority to construe the
terms of the Plan based on the Plan document, existing laws and regulations and
to determine all questions that arise under it. Such power and authority
include, for example, the administrative discretion necessary to resolve issues
with respect to an Employee's eligibility for benefits, credited services,
disability, and retirement, or to interpret any other term contained in Plan
documents. The Plan Administrator's interpretations and determinations are
binding on all Participants, Employees, former Employees, and their
Beneficiaries.
G. ELECTRONIC DELIVERY
This Summary Plan Description and other important Plan information may be
delivered to you through electronic means. This Summary Plan Description
contains important information concerning the rights and benefits of your Plan.
If you receive this Summary Plan Description (or any other Plan information)
through electronic means you are entitled to request a paper copy of this
document, free of charge, from the Plan Administrator. The electronic version of
this document contains substantially the same style, format and content as the
paper version.
Cabot Microelectronics Corporation 401(k) Plan 18
X. INTERNAL REVENUE CODE TESTS
A. TOP HEAVY TEST
The Plan is subject to the Internal Revenue Code "top-heavy" test. Each Plan
Year, the Plan Administrator tests this Plan, together with any other
Employer-sponsored qualified plans that cover one or more key employees, to
ensure that no more than 60% of the benefits are for key employees. If this Plan
is top-heavy, then your Employer may be required to make a minimum annual
contribution on your behalf to this, or another Employer sponsored plan, if you
are employed as of Plan Year-end.
Cabot Microelectronics Corporation 401(k) Plan 19
XI. PARTICIPANT RIGHTS
A. CLAIMS
1. CLAIMS PROCEDURES
A plan participant or beneficiary may make a claim for benefits under the Plan.
Any such claim you file must be submitted to the Plan Administrator in a form
and manner acceptable to the Plan Administrator. Contact your Plan Administrator
for more information. Generally, the Plan Administrator will provide you with
written notice of the disposition of your claim within 90 days after receipt of
your claim by the Plan. If the Plan Administrator determines that special
circumstances require an extension of time to process your claim, the Plan
Administrator will furnish written notice of the extension to the claimant prior
to the expiration of the initial 90-day period. In no event shall such extension
exceed a period of 90 days from the end of the initial period the Plan
Administrator had to dispose of your claim. The extension notice shall indicate
the special circumstances requiring an extension of time and the date by which
the Plan expects to render the benefit determination. (A different procedure
applies for disability related claims - see the next paragraph). In the event
the claim is denied, the Plan Administrator will disclose to you in writing the
specific reasons for the denial, a reference to the specific provisions of the
Plan on which the determination is based, a description of additional material
or information necessary for the claimant to perfect the claim and an
explanation of why it is required, and information about the steps that must be
taken to submit a timely request for review, including a statement of the your
right to bring a civil action under Section 502(a) of ERISA following as adverse
determination upon review.
If your claim concerns disability benefits under the Plan, the Plan
Administrator must notify you in writing within 45 days after you have filed
your claim in order to deny it. If special circumstances require an extension of
time to process your claim, the Plan Administrator must notify you before the
end of the 45-day period that your claim may take up to 30 days longer to
process. If special circumstances still prevent the resolution of your claim,
the Plan Administrator may then only take up to another 30 days after giving you
notice before the end of the original 30-day extension. If the Plan
Administrator gives you notice that you need to provide additional information
regarding your claim, you must do so within 45 days of that notice.
2. REVIEW PROCEDURES (FOR APPEAL OF AN ADVERSE BENEFIT
DETERMINATION)
You may appeal the denial of your claim made under the procedures described
above within 60 days after the date following the your receipt of notification
of the denied claim (a different procedure applies for disability related claims
- - see the next paragraph) by filing a written request for review with the Plan
Administrator. This written request may include comments, documents, records,
and other information relating to your claim for benefits. You shall be
provided, upon your request and free of charge, reasonable access to, and copies
of, all documents, records, and other information relevant to your claim for
benefits. The review will take into account all comments, documents, records,
and other information submitted by you relating to the claim, without regard to
whether such information was submitted or considered in the initial benefit
determination.
If your initial claim was for disability benefits under the Plan and has been
denied by the Plan Administrator, you have 180 days from the date you receive
notice of your denial in which to appeal that decision. Your review will be
handled completely independently of the findings and decision made regarding
your initial claim and will be processed by an individual who is not a
subordinate of the individual who denied your initial claim. If your claim
requires medical judgment, the individual handling your appeal will consult with
a medical professional who was not consulted regarding your initial claim and
who is not a subordinate of anyone consulted regarding your initial claim and
identify that medical professional to you.
Cabot Microelectronics Corporation 401(k) Plan 20
The Plan Administrator shall notify you of the Plan's benefit determination on
review within a reasonable period of time, but not later than 60 days after
receipt of your request for review by the Plan, unless the Plan Administrator
determines that special circumstances require an extension of time for
processing the claim. If the Plan Administrator determines that an extension of
time for processing is required, written notice of the extension shall be
furnished to you prior to the termination of the initial 60-day period. In no
event shall such extension exceed a period of 60 days from the end of the
initial period. The extension notice shall indicate the special circumstances
requiring an extension of time and the date by which the Plan expects to render
the determination on review.
The Plan Administrator shall provide you with written notification of a plan's
benefit determination on review. In the case of an adverse benefit
determination, the notification shall set forth, in a manner calculated to be
understood by you - the specific reason or reasons for the adverse
determinations, reference to the specific plan provisions on which the benefit
determination is based, a statement that you are entitled to receive, upon your
request and free of charge, reasonable access to, and copies of, all documents,
records, and other information relevant to your claim for benefits.
B. STATEMENT OF ERISA RIGHTS
As a Participant in the Plan, you are entitled to certain rights and protections
under ERISA. ERISA provides that all Plan Participants shall be entitled to:
RECEIVE INFORMATION ABOUT YOUR PLAN AND BENEFITS
- - Examine, without charge, at the Plan Administrator's office and at other
specified locations, such as worksites and union halls, all documents
governing the Plan, including insurance contracts and collective
bargaining agreements, and a copy of the latest annual report (Form 5500
Series) filed by the Plan with the U.S. Department of Labor and available
at the Public Disclosure Room of the Pension and Welfare Benefit
Administration.
- - Obtain, upon written request to the Plan Administrator, copies of
documents governing the operation of the plan, including insurance
contracts and collective bargaining agreements, and copies of the latest
annual report (Form 5500 Series) and updated Summary Plan Description. The
Plan Administrator may make a reasonable charge for the copies.
- - Receive a summary of the Plan's annual financial report. The Plan
Administrator is required by law to furnish each Participant with a copy
of this Summary Annual Report each year.
- - Obtain a statement telling you whether you have a right to receive a
benefit under the plan at normal retirement age (65) and if so, what your
benefits would be at normal retirement age if you stop working under the
Plan now. If you do not have a right to a benefit under the plan, the
statement will tell you how many more years you have to work to get a
right to a benefit. This statement must be requested in writing and is not
required to be given more than once every twelve (12) months. The Plan
must provide the statement free of charge.
PRUDENT ACTIONS BY FIDUCIARIES
In addition to creating rights for Plan Participants, ERISA imposes duties upon
the people who are responsible for the operation of the employee benefit plan.
The people who operate your Plan, called "fiduciaries" of the Plan, have a duty
to do so prudently and in the interest of you, other Plan Participants and
Beneficiaries. No one, including your Employer, your union, or any other person,
may fire you or otherwise discriminate against you in any way to prevent you
from obtaining a retirement benefit or exercising your rights under ERISA.
Cabot Microelectronics Corporation 401(k) Plan 21
ENFORCE YOUR RIGHTS
If your claim for a benefit under the Plan is denied or ignored, in whole or in
part, you have a right to know why this was done, to obtain copies of documents
relating to the decision without charge, and to appeal any denial, all within
certain time schedules. Under ERISA, there are steps you can take to enforce the
above rights. For instance, if you request a copy of plan documents or the
latest annual report from the Plan and do not receive them within 30 days, you
may file suit in a Federal court. The Plan's agent for legal service of process
in the event of a lawsuit is the Plan Administrator. In such a case, the court
may require the Plan Administrator to provide the materials and pay you up to
$110 a day until you receive the materials, unless the materials were not sent
because of reasons beyond the control of the Plan Administrator.
If you have a claim for benefits which is denied or ignored, in whole or in
part, you may file suit in a state or Federal court. In addition, if you
disagree with the Plan's decision or lack thereof concerning the qualified
status of a domestic relations order, you may file suit in Federal court. If it
should happen that Plan fiduciaries misuse the Plan's money, or if you are
discriminated against for asserting your rights, you may seek assistance from
the U.S. Department of Labor, or you may file suit in a Federal court. The court
will decide who should pay court costs and legal fees. If you are successful,
the court may order the person you have sued to pay these costs and fees. If you
lose, the court may order you to pay these costs and fees, for example, if it
finds your claim frivolous.
ASSISTANCE WITH YOUR QUESTIONS
If you have any questions about your Plan, you should contact the Plan
Administrator. If you have any questions about this statement or your rights
under ERISA, or if you need assistance in obtaining documents from the Plan
Administrator, you should contact the nearest office of the Pension and Welfare
Benefits Administration, U.S. Department of Labor, listed in your telephone
directory or the Division of Technical Assistance and Inquiries, Pension and
Welfare Benefits Administration, U.S. Department of Labor, 200 Constitution
Avenue N.W., Washington, D.C. 20210. You may also obtain certain publications
about your rights and responsibilities under ERISA by calling the publications
hotline of the Pension and Welfare Benefits Administration.
Cabot Microelectronics Corporation 401(k) Plan 22
XII. SERVICES AND FEES
Fees and expenses charged under your Account will impact your retirement
savings, and fall into three basic categories. Investment fees are generally
assessed as a percentage of assets invested, and are deducted directly from your
investment returns. Investment fees can be in the form of sales charges, loads,
commissions, 12b-1 fees, or management fees. You can obtain more information
about such fees from the documents (e.g., a prospectus) that describe the
investments available under your Plan and from Appendix A: Investment Options.
Plan administration fees cover the day-to-day expenses of your Plan for
recordkeeping, accounting, legal and trustee services, as well as additional
services that may be available under your Plan, such as daily valuation,
telephone response systems, internet access to plan information, retirement
planning tools, and educational materials. In some cases, these costs are
covered by investment fees that are deducted directly from investment returns.
In other cases, these administrative fees are either paid directly by your
Employer, or are passed through to the participants in the Plan, in which case a
recordkeeping fee will be deducted from your Account. Transaction-based fees are
associated with optional services offered under your Plan, and are charged
directly to your Account if you take advantage of a particular plan feature that
may be available, such as a Plan loan. For more information on fees associated
with your Account, refer to your quarterly Account statement or speak with your
Plan Administrator.
Cabot Microelectronics Corporation 401(k) Plan 23
APPENDIX A. INVESTMENT OPTIONS
You have the opportunity to direct the investments of your Account among the
following investment funds:
Fund Name Fund Code Fund Objective
- --------- --------- --------------
FIDELITY RETIRE MMKT 0630 Seeks a high current income,
preservation of capital, and liquidity
from money market instruments.
FID INST SH-INT GOVT 0662 Seeks a high level of current income,
consistent with preserving capital,
through investments in Government
securities.
FIDELITY BALANCED 0304 Seeks the highest amount of current
income possible while preserving
capital, by investing in a balance of
quality bonds and high-yielding stocks.
FIDELITY EQ INC II 0319 Seeks to provide a reasonable income. In
pursuing this objective, the fund will
also consider the potential for capital
appreciation. The fund seeks to provide
a yield that exceeds the composite yield
of the S&P 500(R).
FIDELITY LOW PR STK 0316 Capital appreciation; invests mainly in
a portfolio of low-priced stocks that
may be undervalued, overlooked or
out-of-favor.
FIDELITY FIFTY 0500 Seeks long-term capital appreciation.
FIDELITY FUND 0003 Seeks long-term capital growth, with a
reasonable level of current income as a
secondary objective, through investment
in common stocks.
FIDELITY AGGR GROWTH 0324 Seeks to provide capital appreciation.
FIDELITY DIVERS INTL 0325 Seeks capital growth by investing mainly
in countries which are included in the
Morgan Stanley EAFE Index; focuses on
companies with market capitalizations of
$100,000,000 or more; seeks a rate of
return which exceeds that of the
GDP-Weighted EAFE Index.
FID FREEDOM 2000 0370 To seek high total returns for those
planning to retire in approximately 1 -
10 years.
FID FREEDOM 2010 0371 To seek high total returns for those
planning to retire in approximately 10 -
20 years.
FID FREEDOM INCOME 0369 To seek high current income and, as a
secondary objective, some capital
appreciation for those already in
retirement.
Cabot Microelectronics Corporation 401(k) Plan 24
FID FREEDOM 2020 0372 To seek high total returns for those
planning to retire in approximately 20 -
30 years.
FID FREEDOM 2030 0373 To seek high total returns for those
planning to retire in approximately 30 -
40 years.
FID FREEDOM 2040 0718 Seeks high total returns for those
planning to retire around 2040.
Your Employer has agreed to pay certain investment fees associated with having
each investment in excess of the 15 investment options allowed for the Plan at
no additional fee. If your Employer fails to pay any of those fees, then
Participants may have those fees deducted from their Accounts.
If a contribution is received for your Account and you have not supplied
investment instructions to the Trustee, this contribution will be invested based
on Employer direction, or absent such direction, in the most conservative
investment option in the Plan.
You may redirect the investment of your future contributions or exchange your
existing Account balance among available investment options by calling
1-800-835-5097 on any business day between 8:30 AM (ET) and 8:00 PM (ET). This
is an automated telephone service and you should follow the telephonic
instructions or you can press the appropriate number if you want to talk to a
Fidelity telephone representative. All representative-assisted calls will be
recorded for your protection. You may call the telephone number virtually 24
hours a day, seven days a week to check Account balances, prices, yields or
obtain investment information. You may also use the internet to redirect the
investment or your future contributions or exchange your existing Account
balance by using Fidelity's NetBenefits internet account access website (at
401k.com). Please contact the Plan Administrator for further information.
Exchanges received and confirmed before the close of the market (usually 4:00 PM
(ET)) will be posted on that business day based upon the closing price of the
affected investment(s). Exchanges received and confirmed after the market close
will be processed on the next business day based upon the closing price of the
affected investment(s) on that next business day. The minimum exchange is the
lesser of $250 or 100% of your Account balance in the investment option. If your
exchange is less than $250 then it may only be exchanged into one investment
option. A written confirmation of your change in the investment of your future
contributions or your exchange of an existing fund will be mailed to you within
five business days. Fidelity reserves the right to change, restrict, or
terminate exchange procedures to protect mutual fund shareholders.
Cabot Microelectronics Corporation 401(k) Plan 25
APPENDIX B. LOAN PROCEDURES
A. INITIATING LOANS
1. LOAN APPLICATION
If you have met the Plan's eligibility and entry date requirements, you
may apply for a loan by calling the Fidelity Retirement Benefits Line,
1-800-835-5097 or by accessing the NetBenefits(SM) web site at
www.401k.com. All telephone calls will be recorded. You may apply for only
one loan each Plan Year. All loans have been pre-approved by the Plan
Administrator based on the criteria outlined in the Plan. Loans will be
allowed for any purpose. A loan set up fee of $75 will be deducted from
your Account for each new loan processed.
2. LOAN AMOUNT
The minimum loan is $1,000 and the maximum amount is the lesser of
one-half of your vested Account balance or $50,000 reduced by the highest
outstanding loan balance in your Account during the prior twelve month
period. All of your loans from plans maintained by your Employer or a
Related Employer will be considered for purposes of determining the
maximum amount of your loan. Up to 50% of your vested Account balance may
be used as collateral for any loan.
3. NUMBER OF LOANS
You may only have one loan outstanding at any given time. If you have an
existing loan you may not apply for another loan until the existing loan
is paid in full.
4. INTEREST RATE
All loans shall bear a reasonable rate of interest as determined by the
Plan Administrator based on the prevailing interest rates charged by
persons in the business of lending money for loans which would be made
under similar circumstances. The interest rate shall remain fixed
throughout the duration of the loan.
5. SOURCE OF LOAN PROCEEDS
Loan proceeds will be withdrawn from available contribution sources and
investment options in the order established by the Trustee.
Please contact the Plan Administrator for more information.
B. LOAN REPAYMENTS AND LOAN MATURITY
All loans must be repaid in level payments through after-tax payroll deductions
on at least a quarterly basis over a five year period unless it is for the
purchase of your principal residence in which case the loan repayment period may
not extend beyond 10 years from the date of the loan. If repayment is not made
by payroll deduction, a loan shall be repaid to the Plan by payment to the
Employer. The level repayment requirement may be waived for a period of one year
or less if you are on a leave of absence, however, your loan must still be
repaid in full on the maturity date. If you are on a military leave of absence,
the repayment schedule may be waived for the entire length of the time missed on
leave. Your loan will accrue interest during this time, and upon return from a
military leave of absence, your loan will be reamortized to extend the length of
the loan by the length of the leave. If a loan is not repaid within its stated
period, it will be treated as a taxable distribution to you.
Cabot Microelectronics Corporation 401(k) Plan 26
C. DEFAULT OR TERMINATION OF EMPLOYMENT
The Plan Administrator shall consider a loan in default if any scheduled
repayment remains unpaid as of the last business day of the calendar quarter
following the calendar quarter in which a loan is initially considered past due.
In the event of a default, death, disability or termination of employment, the
entire outstanding principal and accrued interest shall be immediately due and
payable. In addition, you will be deemed to have received a taxable distribution
from the Plan.
Cabot Microelectronics Corporation 401(k) Plan 27
APPENDIX C. SPECIAL TAX NOTICE REGARDING PLAN PAYMENTS
This notice explains how you can continue to defer federal income tax on your
retirement savings or retirement Plan benefits in Cabot Microelectronics
Corporation 401(k) Plan (the "Plan") and contains important information you will
need before you decide how to receive your Plan benefits.
This notice is provided to you at the request of Cabot Microelectronics
Corporation (your "Plan Administrator") because all or part of the payment that
you will soon receive from the Plan may be eligible for rollover by you or your
Plan Administrator to a traditional IRA or an eligible employer plan. A rollover
is a payment by you or the Plan Administrator of all or part of your benefit to
another plan or IRA that allows you to continue to postpone taxation of that
benefit until it is paid to you. Your payment cannot be rolled over to a Roth
IRA, a SIMPLE IRA, or a Coverdell Education Savings Account (formerly known as
an education IRA). An "eligible employer plan" includes a plan qualified under
section 401(a) of the Internal Revenue Code, including a 401(k) plan,
profit-sharing plan, defined benefit plan, stock bonus plan, and money purchase
plan; a section 403(a) annuity plan; a section 403(b) tax-sheltered annuity; and
an eligible section 457(b) plan maintained by a governmental employer
(governmental 457 plan).
An eligible employer plan is not legally required to accept a rollover. Before
you decide to roll over your payment to another employer plan, you should find
out whether the plan accepts rollovers and, if so, the types of distributions it
accepts as a rollover. You should also find out about any documents that are
required to be completed before the receiving plan will accept a rollover. Even
if a plan accepts rollovers, it might not accept rollovers of certain types of
distributions, such as after-tax amounts. If this is the case, and your
distribution includes after-tax amounts, you may wish instead to roll your
distribution over to a traditional IRA or split your rollover amount between the
employer plan in which you will participate and a traditional IRA. If an
employer plan accepts your rollover, the plan may restrict subsequent
distributions of the rollover amount or may require your spouse's consent for
any subsequent distribution. A subsequent distribution from the plan that
accepts your rollover may also be subject to different tax treatment than
distributions from this Plan. Check with the administrator of the plan that is
to receive your rollover prior to making the rollover.
If you have additional questions after reading this notice, you can contact your
plan administrator at (630) 375-5462.
SUMMARY
There are two ways you may be able to receive a Plan payment that is eligible
for rollover:
(1) Certain payments can be made directly to a traditional IRA that
you establish or to an eligible employer plan that will accept it
and hold it for your benefit ("DIRECT ROLLOVER"); or
(2) The payment can be PAID TO YOU.
If you choose a DIRECT ROLLOVER:
- Your payment will not be taxed in the current year and no income tax
will be withheld.
- You choose whether your payment will be made directly to your
traditional IRA or to an eligible employer plan that accepts your
rollover. Your payment cannot be rolled over to a Roth IRA, a SIMPLE
IRA, or a Coverdell Education Savings Account because these are not
traditional IRAs.
- The taxable portion of your payment will be taxed later when you
take it out of the traditional IRA or the eligible employer plan.
Depending on the type of plan, the later distribution may be subject
to different tax treatment than it would be if you received a
taxable distribution from this Plan.
Cabot Microelectronics Corporation 401(k) Plan 28
If you choose to have a Plan payment that is eligible for rollover PAID TO YOU:
- You will receive only 80% of the taxable amount of the payment,
because the Plan Administrator is required to withhold 20% of that
amount and send it to the IRS as income tax withholding to be
credited against your taxes.
- The taxable amount of your payment will be taxed in the current year
unless you roll it over. Under limited circumstances, you may be
able to use special tax rules that could reduce the tax you owe.
However, if you receive the payment before age 59-1/2, you may have
to pay an additional 10% tax.
- You can roll over all or part of the payment by paying it to your
traditional IRA or to an eligible employer plan that accepts your
rollover within 60 days after you receive the payment. The amount
rolled over will not be taxed until you take it out of the
traditional IRA or the eligible employer plan.
- If you want to roll over 100% of the payment to a traditional IRA or
an eligible employer plan, you must find other money to replace the
20% of the taxable portion that was withheld. If you roll over only
the 80% that you received, you will be taxed on the 20% that was
withheld and that is not rolled over.
Your Right to Waive the 30-Day Notice Period. Generally, neither a direct
rollover nor a payment can be made from the plan until at least 30 days after
your receipt of this notice. Thus, after receiving this notice, you have at
least 30 days to consider whether or not to have your withdrawal directly rolled
over. If you do not wish to wait until this 30-day notice period ends before
your election is processed, you may waive the notice period by making an
affirmative election indicating whether or not you wish to make a direct
rollover. Your withdrawal will then be processed in accordance with your
election as soon as practical after it is received by the Plan Administrator.
MORE INFORMATION
I. PAYMENTS THAT CAN AND CANNOT BE ROLLED OVER
II. DIRECT ROLLOVER
III. PAYMENT PAID TO YOU
IV. SURVIVING SPOUSES, ALTERNATE PAYEES, AND OTHER BENEFICIARIES
I. PAYMENTS THAT CAN AND CANNOT BE ROLLED OVER
Payments from the Plan may be "eligible rollover distributions." This means that
they can be rolled over to a traditional IRA or to an eligible employer plan
that accepts rollovers. Payments from a plan cannot be rolled over to a Roth
IRA, a SIMPLE IRA, or a Coverdell Education Savings Account. Your Plan
administrator should be able to tell you what portion of your payment is an
eligible rollover distribution.
The following types of payments cannot be rolled over:
Payments Spread over Long Periods. You cannot roll over a payment if it is part
of a series of equal (or almost equal) payments that are made at least once a
year and that will last for:
- your lifetime (or a period measured by your life expectancy), or
Cabot Microelectronics Corporation 401(k) Plan 29
- your lifetime and your beneficiary's lifetime (or a period measured
by your joint life expectancies), or
- a period of 10 years or more.
Required Minimum Payments. Beginning when you reach age 70-1/2 or retire,
whichever is later, a certain portion of your payment cannot be rolled over
because it is a "required minimum payment" that must be paid to you. Special
rules apply if you own more than 5% of your employer.
Hardship Distributions. A hardship distribution cannot be rolled over.
ESOP Dividends. Cash dividends paid to you on employer stock held in an employee
stock ownership plan cannot be rolled over.
Corrective Distributions. A distribution that is made to correct a failed
nondiscrimination test or because legal limits on certain contributions were
exceeded cannot be rolled over.
Loans Treated as Distributions. The amount of a plan loan that becomes a taxable
deemed distribution because of a default cannot be rolled over. However, a loan
offset amount is eligible for rollover, as discussed in Part III below. Ask the
Plan Administrator of this Plan if distribution of your loan qualifies for
rollover treatment.
The Plan Administrator of this Plan should be able to tell you if your payment
includes amounts which cannot be rolled over.
II. DIRECT ROLLOVER
A DIRECT ROLLOVER is a direct payment of the amount of your Plan benefits to a
traditional IRA or an eligible employer plan that will accept it. You can choose
a DIRECT ROLLOVER of all or any portion of your payment that is an eligible
rollover distribution, as described in Part I above. You are not taxed on any
taxable portion of your payment for which you choose a DIRECT ROLLOVER until you
later take it out of the traditional IRA or eligible employer plan. In addition,
no income tax withholding is required for any taxable portion of your Plan
benefits for which you choose a DIRECT ROLLOVER. This Plan might not let you
choose a DIRECT ROLLOVER if your distributions for the year are less than $200.
DIRECT ROLLOVER to a Traditional IRA. You can open a traditional IRA to receive
the direct rollover. If you choose to have your payment made directly to a
traditional IRA, contact an IRA sponsor (usually a financial institution) to
find out how to have your payment made in a direct rollover to a traditional IRA
at that institution. If you are unsure of how to invest your money, you can
temporarily establish a traditional IRA to receive the payment. However, in
choosing a traditional IRA, you may wish to make sure that the traditional IRA
you choose will allow you to move all or a part of your payment to another
traditional IRA at a later date, without penalties or other limitations. See IRS
Publication 590, Individual Retirement Arrangements, for more information on
traditional IRAs (including limits on how often you can roll over between IRAs).
Cabot Microelectronics Corporation 401(k) Plan 30
DIRECT ROLLOVER to a Plan. If you are employed by a new employer that has an
eligible employer plan, and you want a direct rollover to that plan, ask the
plan administrator of that plan whether it will accept your rollover. An
eligible employer plan is not legally required to accept a rollover. Even if
your new employer's plan does not accept a rollover, you can choose a DIRECT
ROLLOVER to a traditional IRA. If the employer plan accepts your rollover, the
plan may provide restrictions on the circumstances under which you may later
receive a distribution of the rollover amount or may require spousal consent to
any subsequent distribution. Check with the plan administrator of that plan
before making your decision.
DIRECT ROLLOVER of a Series of Payments. If you receive a payment that can be
rolled over to a traditional IRA or an eligible employer plan that will accept
it, and it is paid in a series of payments for less than 10 years, your choice
to make or not make a DIRECT ROLLOVER for a payment will apply to all later
payments in the series until you change your election. You are free to change
your election for any later payment in the series.
Change in Tax Treatment Resulting from a DIRECT ROLLOVER. The tax treatment of
any payment from the eligible employer plan or traditional IRA receiving your
DIRECT ROLLOVER might be different than if you received your benefit in a
taxable distribution directly from the Plan. For example, if you were born
before January 1, 1936, you might be entitled to ten-year averaging or capital
gain treatment, as explained below. However, if you have your benefit rolled
over to a section 403(b) tax-sheltered annuity, a governmental 457 plan, or a
traditional IRA in a DIRECT ROLLOVER, your benefit will no longer be eligible
for that special treatment. See the sections below entitled "Additional 10% Tax
if You Are under Age 59-1/2" and "Special Tax Treatment if You Were Born before
January 1, 1936."
III. PAYMENT PAID TO YOU
If your payment can be rolled over (see Part I above) and the payment is made to
you in cash, it is subject to 20% federal income tax withholding on the taxable
portion (state tax withholding may also apply). The payment is taxed in the year
you receive it unless, within 60 days, you roll it over to a traditional IRA or
an eligible employer plan that accepts rollovers. If you do not roll it over,
special tax rules may apply.
Income Tax Withholding:
Mandatory Withholding. If any portion of your payment can be rolled over under
Part I above and you do not elect to make a DIRECT ROLLOVER, the Plan is
required by law to withhold 20% of the taxable amount. This amount is sent to
the IRS as federal income tax withholding. For example, if you can roll over a
taxable payment of $10,000, only $8,000 will be paid to you because the Plan
must withhold $2,000 as income tax. However, when you prepare your income tax
return for the year, unless you make a rollover within 60 days (see "Sixty-Day
Rollover Option" below), you must report the full $10,000 as a taxable payment
from the Plan. You must report the $2,000 as tax withheld, and it will be
credited against any income tax you owe for the year. There will be no income
tax withholding if your payments for the year are less than $200.
Voluntary Withholding. If any portion of your payment is taxable but cannot be
rolled over under Part I above, the mandatory withholding rules described above
do not apply. In this case, you may elect not to have withholding apply to that
portion. If you do nothing, an amount will be taken out of this portion of your
payment for federal income tax withholding. To elect out of withholding, ask the
Plan Administrator for the election form and related information.
Sixty-Day Rollover Option. If you receive a payment that can be rolled over
under Part I above, you can still decide to roll over all or part of it to a
traditional IRA or to an eligible employer plan that accepts rollovers. If you
decide to roll over, you must contribute the amount of the payment you received
to a traditional IRA or eligible employer plan within 60 days after you receive
the payment. The portion of your payment that is rolled over will not be taxed
until you take it out of the traditional IRA or the eligible employer plan.
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You can roll over up to 100% of your payment that can be rolled over under Part
I above, including an amount equal to the 20% of the taxable portion that was
withheld. If you choose to roll over 100%, you must find other money within the
60-day period to contribute to the traditional IRA or the eligible employer
plan, to replace the 20% that was withheld. On the other hand, if you roll over
only the 80% of the taxable portion that you received, you will be taxed on the
20% that was withheld.
Example: The taxable portion of your payment that can be rolled over
under Part I above is $10,000, and you choose to have it paid to
you. You will receive $8,000, and $2,000 will be sent to the IRS as
income tax withholding. Within 60 days after receiving the $8,000,
you may roll over the entire $10,000 to a traditional IRA or an
eligible employer plan. To do this, you roll over the $8,000 you
received from the Plan, and you will have to find $2,000 from other
sources (your savings, a loan, etc.). In this case, the entire
$10,000 is not taxed until you take it out of the traditional IRA or
an eligible employer plan. If you roll over the entire $10,000, when
you file your income tax return you may get a refund of part or all
of the $2,000 withheld.
If, on the other hand, you roll over only $8,000, the $2,000 you did
not roll over is taxed in the year it was withheld. When you file
your income tax return, you may get a refund of part of the $2,000
withheld. (However, any refund is likely to be larger if you roll
over the entire $10,000.)
Additional 10% Tax If You Are under Age 59-1/2. If you receive a payment before
you reach age 59-1/2 and you do not roll it over, then, in addition to the
regular income tax, you may have to pay an extra tax equal to 10% of the taxable
portion of the payment. The additional 10% tax generally does not apply to (1)
payments that are paid after you separate from service with your employer during
or after the year you reach age 55, (2) payments that are paid because you
retire due to disability, (3) payments that are paid as equal (or almost equal)
payments over your life or life expectancy (or your and your beneficiary's lives
or life expectancies), (4) dividends paid with respect to stock by an employee
stock ownership plan (ESOP) as described in Code section 404(k), (5) payments
that are paid directly to the government to satisfy a federal tax levy, (6)
payments that are paid to an alternate payee under a qualified domestic
relations order, or (7) payments that do not exceed the amount of your
deductible medical expenses. See IRS Form 5329 for more information on the
additional 10% tax.
The additional 10% tax will not apply to distributions from a governmental 457
plan, except to the extent the distribution is attributable to an amount you
rolled over to that plan (adjusted for investment returns) from another type of
eligible employer plan or IRA. Any amount rolled over from a governmental 457
plan to another type of eligible employer plan or to a traditional IRA will
become subject to the additional 10% tax if it is distributed to you before you
reach age 59-1/2, unless one of the exceptions applies.
Special Tax Treatment If You Were Born before January 1, 1936. If you receive a
payment from a plan qualified under section 401(a) or a section 403(a) annuity
plan that can be rolled over under Part I and you do not roll it over to a
traditional IRA or an eligible employer plan, the payment will be taxed in the
year you receive it. However, if the payment qualifies as a "lump sum
distribution," it may be eligible for special tax treatment. (See also "Employer
Stock or Securities", below.) A lump sum distribution is a payment, within one
year, of your entire balance under the Plan (and certain other similar plans of
the employer) that is payable to you after you have reached age 59-1/2 or
because you have separated from service with your employer (or, in the case of a
self-employed individual, after you have reached age 59-1/2 or have become
disabled). For a payment to be treated as a lump sum distribution, you must have
been a participant in the plan for at least five years before the year in which
you received the distribution. The special tax treatment for lump sum
distributions that may be available to you is described below.
Ten-Year Averaging. If you receive a lump sum distribution and you
were born before January 1, 1936, you can make a one-time election
to figure the tax on the payment by using "10-year averaging" (using
1986 tax rates). Ten-year averaging often reduces the tax you owe.
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Capital Gain Treatment. If you receive a lump sum distribution and
you were born before January 1, 1936, and you were a participant in
the Plan before 1974, you may elect to have the part of your payment
that is attributable to your pre-1974 participation in the Plan
taxed as long-term capital gain at a rate of 20%.
There are other limits on the special tax treatment for lump sum distributions.
For example, you can generally elect this special tax treatment only once in
your lifetime, and the election applies to all lump sum distributions that you
receive in that same year. You may not elect this special tax treatment if you
rolled amounts into this Plan from a 403(b) tax-sheltered annuity contract, a
governmental 457 plan, or from an IRA not originally attributable to a qualified
employer plan. If you have previously rolled over a distribution from this Plan
(or certain other similar plans of the employer), you cannot use this special
averaging treatment for later payments from the Plan. If you roll over your
payment to a traditional IRA, governmental 457 plan, or 403(b) tax-sheltered
annuity, you will not be able to use special tax treatment for later payments
from that IRA, plan, or annuity. Also, if you roll over only a portion of your
payment to a traditional IRA, governmental 457 plan, or 403(b) tax-sheltered
annuity, this special tax treatment is not available for the rest of the
payment. See IRS Form 4972 for additional information on lump sum distributions
and how you elect the special tax treatment.
Repayment of Plan Loans. If your employment ends and you have an outstanding
loan from your Plan, your employer may reduce (or "offset") your balance in the
Plan by the amount of the loan you have not repaid. The amount of your loan
offset is treated as a distribution to you at the time of the offset and will be
taxed unless you roll over an amount equal to the amount of your loan offset to
another qualified employer plan or a traditional IRA within 60 days of the date
of the offset. If the amount of your loan offset is the only amount you receive
or are treated as having received, no amount will be withheld from it. If you
receive other payments of cash or property from the Plan, the 20% withholding
amount will be based on the entire amount paid to you, including the amount of
the loan offset. The amount withheld will be limited to the amount of other cash
or property paid to you (other than any employer securities). The amount of a
defaulted plan loan that is a taxable deemed distribution cannot be rolled over.
IV. SURVIVING SPOUSES, ALTERNATE PAYEES, AND OTHER BENEFICIARIES
In general, the rules summarized above that apply to payments to employees also
apply to payments to surviving spouses of employees and to spouses or former
spouses who are "alternate payees." You are an alternate payee if your interest
in the Plan results from a "qualified domestic relations order," which is an
order issued by a court, usually in connection with a divorce or legal
separation.
If you are a surviving spouse or an alternate payee, you may choose to have a
payment that can be rolled over, as described in Part I above, paid in a DIRECT
ROLLOVER to a traditional IRA or to an eligible employer plan or paid to you. If
you have the payment paid to you, you can keep it or roll it over yourself to a
traditional IRA or to an eligible employer plan. Thus, you have the same choices
as the employee.
If you are a beneficiary other than a surviving spouse or an alternate payee,
you cannot choose a direct rollover, and you cannot roll over the payment
yourself.
If you are a surviving spouse, an alternate payee, or another beneficiary, your
payment is generally not subject to the additional 10% tax described in Part III
above, even if you are younger than age 59-1/2.
If you are a surviving spouse, an alternate payee, or another beneficiary, you
may be able to use the special tax treatment for lump sum distributions and the
special rule for payments that include employer stock, as described in Part III
above. If you receive a payment because of the employee's death, you may be able
to treat the payment as a lump sum distribution if the employee met the
appropriate age requirements, whether or not the employee had 5 years of
participation in the Plan.
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HOW TO OBTAIN ADDITIONAL INFORMATION
This notice summarizes only the federal (not state or local) tax rules that
might apply to your payment. The rules described above are complex and contain
many conditions and exceptions that are not included in this notice. Therefore,
you may want to consult with the Plan Administrator or a professional tax
advisor before you take a payment of your benefits from your Plan. Also, you can
find more specific information on the tax treatment of payments from qualified
employer plans in IRS Publication 575, Pension and Annuity Income, and IRS
Publication 590, Individual Retirement Arrangements. These publications are
available from your local IRS office, on the IRS's Internet Web Site at
www.irs.gov, or by calling 1-800-TAX-FORMS.
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