Exhibit 10.3
Everett Mutual Bank 401(k) Plan
==================================================
EVERETT MUTUAL SAVINGS BANK
401(k) EMPLOYEE SAVINGS AND
PROFIT SHARING PLAN
AND TRUST
Originally Effective January 1, 1986
Restatement and Amendment Effective
January 1, 1989
==================================================
TABLE OF CONTENTS
Section Page
- ------- ----
1. INTRODUCTION TO DEFERRED RETIREMENT PLAN .............................. 1
1.1 Purpose ......................................................... 1
1.2 Diversion Prohibited ............................................ 2
1.3 Effective Date .................................................. 2
1.4 Contractual Rights .............................................. 2
1.5 Special Rules for Owner-Employee Plans .......................... 2
2. DEFINITIONS ........................................................... 3
2.1 Anniversary Date ................................................ 3
2.2 Annual Additions ................................................ 3
(A) Employer Contributions and Forfeitures ...................... 3
(B) Related Employer Contributions and Forfeitures .............. 3
(C) Voluntary Employee Contributions ............................ 3
(D) Individual Medical Account Allocations ...................... 3
2.3 Beneficiary ..................................................... 4
2.4 Board of Directors .............................................. 4
2.5 Break In Service ................................................ 4
2.6 Committee ....................................................... 4
2.7 Company ......................................................... 4
2.8 Compensation .................................................... 4
(A) Excluded Amounts ............................................ 5
(B) Special Rule for Self-Employed Individuals .................. 6
2.9 Computation Period .............................................. 6
2.10 Continuous Employment ........................................... 6
2.11 Date of Employment .............................................. 7
2.12 Designated Beneficiary .......................................... 7
2.13 Distributive Share .............................................. 7
2.14 Earliest Retirement Date ........................................ 7
2.15 Elective Deferral ............................................... 7
2.16 Employee ........................................................ 7
(A) General Definition .......................................... 7
(B) Highly Compensated Employee ................................. 8
(C) Leased Employee ............................................. 9
(D) Owner-Employee .............................................. 9
(E) Self-Employed Individual .................................... 9
2.17 Employer Real Property .......................................... 9
2.18 Employer Security ............................................... 10
2.19 ERISA ........................................................... 10
2.20 Fiduciary ....................................................... 10
2.21 Five Percent Owner .............................................. 10
2.22 Former Participant .............................................. 10
-i-
Section Page
- ------- ----
2.23 Hour of Service ................................................. 10
(A) Hours of Service for the Performance of Duties .............. 10
(B) Hours of Service When No Duties Performed ................... 10
(C) Special Rule Applicable to Family Absences .................. 11
(D) Miscellaneous Hours of Service Provisions ................... 11
2.24 Inactive Status ................................................. 12
2.25 Leave of Absence ................................................ 12
2.26 Matching Employer Contributions ................................. 12
2.27 Maximum Annual Addition Per Plan Limitation Year ................ 12
(A) Maximum Annual Addition ..................................... 12
(B) Limitation Year ............................................. 13
(C) Miscellaneous ............................................... 16
2.28 Nonelective Employer Contributions .............................. 16
2.29 Normal Retirement Date .......................................... 16
2.30 Participant ..................................................... 16
2.31 Party in Interest ............................................... 16
(A) Fiduciary ................................................... 16
(B) Services .................................................... 16
(C) Employer .................................................... 17
(D) Employee Organization ....................................... 17
(E) Majority Stockholder ........................................ 17
(F) Partnership ................................................. 17
(G) Unincorporated Enterprise ................................... 17
(H) Relative .................................................... 17
(I) Trust or Estate ............................................. 17
(J) Officer, Et Cetera .......................................... 17
(K) Ten Percent Partner ......................................... 17
(L) Change in Applicable Law .................................... 17
2.32 Permanent Disability ............................................ 18
2.33 Plan Year ....................................................... 18
2.34 Plan Administrator .............................................. 18
2.35 Qualified Joint and Survivor Annuity ............................ 18
2.36 Qualified Nonelective or Matching Contributions ................. 18
(A) Qualified Nonelective Contribution .......................... 18
(B) Qualified Matching Contribution ............................. 18
2.37 Qualified Preretirement Survivor Annuity ........................ 18
2.38 Qualifying Employer Real Property ............................... 19
(A) Geographically Dispersed .................................... 19
(B) Multiple Usage .............................................. 19
(C) Leased Real Property ........................................ 19
(D) Diversification ............................................. 19
2.39 Qualifying Employer Security .................................... 19
2.40 Retired Participant ............................................. 19
2.41 Taxable Year .................................................... 19
2.42 Terminated Participant .......................................... 19
-ii-
Section Page
- ------- ----
2.43 Top-Heavy Definitions ........................................... 19
(A) Determination Date and Year For Determining
Top-Heavy Status ............................................ 19
(B) Key Employee ................................................ 19
(C) Non-Key Employee ............................................ 20
(D) Aggregation Group ........................................... 20
(E) Top-Heavy Plan .............................................. 21
(F) Top-Heavy Group ............................................. 21
(G) Top-Heavy Ratio ............................................. 21
(H) Sum of Account Balances ..................................... 23
(I) Super Top-Heavy Plan and/or Super Top-Heavy Group ........... 23
(J) Compensation as Defined for Top-Heavy Purposes .............. 23
(K) Determination Date .......................................... 24
(L) Valuation Date .............................................. 24
2.44 Trust ........................................................... 24
2.45 Trust Fund ...................................................... 24
2.46 Trustee ......................................................... 24
2.47 Trustee Responsibility .......................................... 24
2.48 Year of Service ................................................. 24
3. COMMITTEE ............................................................. 24
3.1 General Administration .......................................... 24
3.2 Appointment of Committee Members ................................ 25
3.3 Resignation from Committee ...................................... 25
3.4 Committee Officers and Employees ................................ 25
3.5 Compensation .................................................... 25
3.6 Committee Determinations ........................................ 25
3.7 Powers and Duties ............................................... 26
(A) Construction ................................................ 26
(B) Eligibility ................................................. 26
(C) Permanent Disability ........................................ 26
(D) Benefits, Loans and Hardship Payments ....................... 26
(E) Procedures and Regulations .................................. 26
(F) Certification to Trustee .................................... 26
(G) Information Accumulation .................................... 27
(H) Compliance with Applicable Reporting Requirements ........... 27
(I) Limitations ................................................. 27
(J) Investments ................................................. 27
(K) Annual Report ............................................... 29
3.8 Communications With Trustee ..................................... 29
3.9 Company Indemnification of Committee ............................ 29
3.10 Joint Meetings .................................................. 30
3.11 Legal Disability of Benefit Recipient ........................... 30
3.12 Location of Recipient ........................................... 30
-iii-
Section Page
- ------- ----
3.13 Participants' Accounts .......................................... 31
(A) Employer Contribution Accounts .............................. 31
(B) Employee Contributions ...................................... 32
3.14 Annual Allocations .............................................. 32
(A) Deductions .................................................. 33
(B) Allocations of Employer Contributions ....................... 33
(C) Allocations of Employee Contributions ....................... 33
(D) Adjustments ................................................. 33
(E) Allocation of Insurance Dividends and Credits ............... 33
(F) Costs ....................................................... 33
3.15 Allocation Report to Participants ............................... 33
4. PARTICIPATION AND MEMBERSHIP ELIGIBILITY .............................. 34
4.1 Eligibility Requirements ........................................ 34
(A) Minimum Age ................................................. 34
(B) Year of Service ............................................. 34
(C) Union Exception ............................................. 34
(D) Nonresident Aliens .......................................... 34
4.2 Voluntary Membership and Participation .......................... 34
4.3 Membership Application .......................................... 34
(A) Execution of Membership Application ......................... 34
(B) Modifications to and Limitations On Participant
Contributions ............................................... 35
(C) Failure to Designate Beneficiaries .......................... 35
4.4 Entry Dates ..................................................... 36
(A) Entry Date for Eligibility to Receive Employer
Contributions ............................................... 36
(B) Entry Date for Eligibility to Make Elective Participant
Contributions ............................................... 36
(C) No Employer Allocations Prior to Participation in the Plan .. 36
4.5 Termination and Rehiring ........................................ 37
4.6 Affiliated Company .............................................. 37
4.7 Communication ................................................... 37
4.8 Limitations ..................................................... 37
4.9 Minimum Plan Participation Requirements ......................... 37
5. EMPLOYER CONTRIBUTIONS ................................................ 38
5.1 Determination of Amount ......................................... 38
(A) Nonelective Discretionary Employer Contributions ............ 38
(B) Elective 401(k) Employer Contributions ...................... 38
(C) Matching Employer Contributions ............................. 38
5.2 Funding Policy and Method ....................................... 38
(A) Nonelective Employer Contributions .......................... 38
(B) Elective Employer and Basic After-Tax Employee
Contributions ............................................... 39
-iv-
Section Page
- ------- ----
5.3 Limitation on Maximum Employer Contribution ..................... 39
(A) Maximum Annual Limitations .................................. 39
(B) Maximum Employer Contribution ............................... 39
(C) Allocation of Excess Annual Additions ....................... 39
(D) Creation of a Suspense Account .............................. 40
(E) Coordination of Annual Addition Reallocations ............... 40
5.4 Forfeitures ..................................................... 41
5.5 Reversion to Employer Prohibited ................................ 41
5.6 Allocation of Employer Contributions ............................ 41
(A) Nonelective Discretionary Employer Contributions ............ 41
(B) Matching Employer Contributions ............................. 42
5.7 Actual Deferral Percentage Tests ................................ 42
(A) Maximum Annual Allocation of Elective Employer
Contributions ............................................... 42
(B) Coordination of Actual Deferral Percentage and Actual
Compensation Percentage Tests ............................... 43
(C) Definitions ................................................. 43
(D) Family Aggregation .......................................... 44
(E) Aggregation of Cash or Deferred Plans ....................... 45
(F) Adjustments to Actual Deferral Percentage Tests ............. 45
(G) Impermissible Treatment of Excess Contributions ............. 48
(H) Miscellaneous Provisions .................................... 48
5.8 Diversion of Employer Contributions ............................. 50
(A) Exceptions Whereby Reversion of Plan Assets Is Not
Prohibited .................................................. 50
(B) Applicable Rules Concerning Reversion of Plan Funds ......... 50
6. CONTRIBUTIONS BY PARTICIPANTS ......................................... 52
6.1 Voluntary Employee Contributions ................................ 52
(A) After-Tax Contributions ..................................... 52
(B) Participant Salary Reduction Contributions .................. 52
6.2 Salary Reduction Election ....................................... 52
(A) Elections ................................................... 52
(B) Vesting ..................................................... 53
(C) Distributions from Elective Accounts ........................ 53
(D) Dollar Limitations on Funding ............................... 54
(E) Suspension of Elective Deferrals Due to Prior Hardship
Distribution ................................................ 55
(F) Cumulation of Elective Deferral Amounts ..................... 55
(G) Additional Benefits to Participants ......................... 56
(H) Self-Directed Account Treatment ............................. 56
(I) Segregation of Elective Accounts ............................ 56
(J) Elective Contribution Election Requirements ................. 56
6.3 Limitations on Amount ........................................... 58
(A) General Limitations ......................................... 58
-v-
Section Page
- ------- ----
(B) Average Contribution Percentage Tests Applicable to
Employee Contributions ...................................... 58
(C) Adjustment to Actual Contribution Percentage Tests .......... 62
6.4 Immediate Vesting ............................................... 64
6.5 Contribution Prohibited ......................................... 65
6.6 Accounts ........................................................ 65
6.7 Methods of Contribution ......................................... 65
6.8 Payroll Deduction Procedure ..................................... 65
(A) Percentage .................................................. 65
(B) Change in Deduction Percentage .............................. 65
6.9 Withdrawal of Participant Contributions ......................... 65
7. MANAGEMENT OF TRUST FUNDS AND TRUST AGREEMENT ......................... 66
7.1 Appointment of Trustee .......................................... 66
7.2 Title to Assets ................................................. 66
7.3 Company Notification to Trustee ................................. 66
(A) Company Contributions ....................................... 66
(B) Voluntary Payroll Deductions ................................ 66
7.4 Determination of Fair Market Value .............................. 67
7.5 Statement of Accounts ........................................... 67
7.6 Payment of Benefits ............................................. 67
7.7 Investment of Trust Fund Assets; General Powers and Duties ...... 68
(A) Cash Reserves ............................................... 68
(B) Prudent Man Rule ............................................ 68
(C) Committee Advice ............................................ 68
(D) General Powers .............................................. 68
(E) Delegation to Reorganization Committee ...................... 68
(F) Exercise of Ownership Rights ................................ 69
(G) Principal or Income ......................................... 69
(H) Execute Documents ........................................... 69
(I) Employment of Agents ........................................ 69
(J) Borrow Money ................................................ 69
(K) Compromise and Settlement ................................... 69
(L) Payment of Taxes ............................................ 70
(M) Diversification ............................................. 70
(N) Life Insurance .............................................. 70
(O) Earmarked Investments ....................................... 71
7.8 Prohibited Transactions ......................................... 72
(A) Property .................................................... 72
(B) Loans ....................................................... 72
(C) Provisions .................................................. 72
(D) Transfer .................................................... 72
(E) Employer Property ........................................... 72
7.9 Prohibited Transactions; Exemptions ............................. 72
7.10 Segregated Account .............................................. 72
-vi-
Section Page
- ------- ----
7.11 Third Party Dealings ............................................ 72
7.12 Payment of Expenses ............................................. 73
7.13 Voting by Co-Trustees ........................................... 73
7.14 Reports ......................................................... 73
7.15 Liability of Trustee ............................................ 73
(A) Prudent Man Standard ........................................ 73
(B) Reliance on Instructions .................................... 73
(C) Indemnification ............................................. 74
(D) Bond Waived ................................................. 74
(E) Liability Insurance ......................................... 74
7.16 Resignation or Removal .......................................... 74
(A) Resignation ................................................. 74
(B) Removal ..................................................... 74
(C) Settlement of Accounts ...................................... 74
(D) Company to Fill Vacancy ..................................... 75
7.17 Transfer of Interest or Rollovers ............................... 75
7.18 Authorization to Sign ........................................... 75
8. RETIREMENT BENEFITS ................................................... 76
8.1 Determination of Amount ......................................... 76
(A) Previous Plan Year End Value ................................ 76
(B) Adjustments for Significant Increases or Decreases in
Value of Plan Assets ........................................ 76
8.2 Mode of Distribution ............................................ 76
(A) Life Annuity ................................................ 76
(B) Qualified Preretirement Survivor Annuity .................... 78
(C) Lump Sum .................................................... 79
(D) Installments ................................................ 79
(E) Uniform Availability of Benefits ............................ 79
(F) Distribution to Designated Beneficiaries .................... 79
(G) Notice and Election ......................................... 80
(H) Commencement of Benefits and Required Beginning Dates ....... 83
(I) Minimum Required Distributions .............................. 87
(J) Definitions ................................................. 88
(K) Involuntary Distributions ................................... 90
(L) Taxable Distributions ....................................... 90
(M) Rehire of Participant in Pay Status ......................... 90
8.3 Segregated Account .............................................. 91
8.4 Nonalienation of Plan Benefits and Qualified Domestic
Relations Orders ................................................ 91
(A) Nonalienation of Plan Benefits .............................. 91
(B) Limited Exception to Alienation of Benefits for a
Qualified Domestic Relations Order .......................... 91
-vii-
Section Page
- ------- ----
8.5 Hardship Distributions .......................................... 96
(A) Written Application ......................................... 96
(B) Burden on Participant ....................................... 96
(C) Definition of Hardship ...................................... 96
(D) Effective Date .............................................. 97
(E) Participant Status .......................................... 97
(F) Limitation on Hardship Distributions ........................ 97
8.6 Retirement Benefits ............................................. 98
(A) Benefits on Normal Retirement ............................... 98
(B) Benefits on Optional Early Retirement ....................... 98
8.7 Benefits on Death ............................................... 98
8.8 Distribution Events and Distribution Limitations ................ 98
(A) Disposition of Corporation or Substantially All of
Employer's Assets ........................................... 98
(B) Plan Termination ............................................ 99
(C) Hardship .................................................... 99
8.9 Benefits on Permanent Disability ................................ 99
8.10 Benefits on Termination ......................................... 99
8.11 Vesting ......................................................... 100
(A) Years Before Attainment of Minimum Age for Vesting Purposes . 100
(B) Failure to Make Mandatory Contributions ..................... 100
(C) Break in Service Years ...................................... 100
(D) Prebreak Years of Service ................................... 100
8.12 Break in Service Rules .......................................... 101
(A) Years of Service After Break ................................ 101
(B) Years of Service Before Break ............................... 101
(C) Non-Vested Participants -- Greater of: Rule of Parity or
Five Years .................................................. 102
(D) Special Account Rule ........................................ 102
8.13 Forfeitures ..................................................... 103
(A) General Allocation of Forfeitures ........................... 103
(B) Return to Service by a Participant Whose Account Was
Forfeited ................................................... 103
(C) Years of Service for Vesting Purposes ....................... 105
(D) Account Restoration ......................................... 105
(E) Vested Rights ............................................... 105
8.14 Loans ........................................................... 106
8.15 Effect of Payments .............................................. 106
8.16 Top-Heavy Plans ................................................. 106
(A) Top-Heavy Vesting Schedule .................................. 106
(B) Excess Compensation Amounts ................................. 108
(C) Combined Plan Fraction ...................................... 108
(D) Defined Contribution Minimum Benefit ........................ 108
(E) Multiple Employer Plans ..................................... 110
-viii-
Section Page
- ------- ----
9. AMENDMENT, TERMINATION, MERGERS, CONSOLIDATIONS, ETC. ................. 110
9.1 Plan Amendments ................................................. 110
9.2 Successor Company ............................................... 111
9.3 Termination of Trust ............................................ 111
9.4 Contributions Permanently Discontinued .......................... 112
9.5 Partial Termination ............................................. 112
9.6 Merger or Consolidation ......................................... 112
10. MISCELLANEOUS ......................................................... 112
10.1 No Contribution Obligation ...................................... 112
(A) Employer .................................................... 112
(B) Employee .................................................... 112
10.2 Partial Invalidity .............................................. 113
10.3 Headings ........................................................ 113
10.4 Counterparts .................................................... 113
10.5 Gender .......................................................... 113
10.6 Retroactive Amendments .......................................... 113
10.7 Construction .................................................... 113
10.8 Division of Powers .............................................. 113
(A) Company ..................................................... 113
(B) Committee ................................................... 113
(C) Trustee ..................................................... 114
10.9 Appeals Procedure ............................................... 114
(A) Error ....................................................... 115
(B) Arbitrary or Capricious Exercise of Discretion .............. 115
(C) Existence of Substantial Evidence ........................... 115
10.10 Plan Transfer Provisions ........................................ 115
(A) Roll Over Provisions ........................................ 115
(B) Trust to Trust Transfers from Other Qualified Plans ......... 115
(C) Participant's Transfer Account .............................. 116
(D) No Forfeiture of Participant's Transfer Account ............. 116
(E) Additional Benefits at Retirement Date or Other Date on
Which Participant is Entitled to Benefits ................... 116
(F) Segregation of Transfer Funds ............................... 116
(G) General Investment of Transfer Funds ........................ 116
(H) Self-Directed Investment of Transferred Funds ............... 117
(I) Amounts Transferred From Another Qualified Corporate or
Noncorporate Plan ........................................... 117
(J) Qualified Corporate or Noncorporate Plan .................... 117
(K) Assets Received ............................................. 117
(L) Miscellaneous ............................................... 118
(M) Definitions ................................................. 118
10.11 Governing Law ................................................... 119
-ix-
EVERETT MUTUAL SAVINGS BANK
401(k) EMPLOYEE SAVINGS AND
PROFIT SHARING PLAN
AND TRUST
This is a Deferred Retirement Plan of EVERETT MUTUAL SAVINGS BANK (a stock
savings bank, previously known as Everett Federal Savings and Loan Association)
and MUTUAL BANCSHARES (a mutual holding company), hereinafter referred to as the
"Employer" or the "Company," and Trust Agreement between said Employer and the
undersigned "Trustees."
W I T N E S S E T H:
WHEREAS, the Employer is desirous of amending its existing 401(k) Profit
Sharing Plan and Trust to comply with applicable statutes and regulations;
WHEREAS, pursuant to this Plan the Employer will from time to time
contribute funds and property into a trust fund for the exclusive benefit of its
eligible employees and their beneficiaries;
WHEREAS, the Employer will pay certain expenses incurred in the
administration of said Plan and the management of its Trust Fund Assets;
WHEREAS, the Employer desires the Trustees to hold, invest, reinvest and
otherwise manage such Trust Fund assets; and,
WHEREAS, the Trustees are willing to hold, invest, reinvest and manage such
Trust Fund assets as set forth herein.
NOW, THEREFORE, in consideration of the promises and the mutual terms and
conditions set forth herein, the Employer and the Trustees do hereby covenant
and agree as follows:
ARTICLE 1.
INTRODUCTION TO DEFERRED RETIREMENT PLAN
1.1 Purpose. The purpose of this Plan and Trust Agreement is to enable the
Employer to establish a program of retirement benefits exclusively for its
eligible Employees and their beneficiaries. It is intended that this Deferred
Retirement Plan and Trust Agreement shall qualify under the provisions of
Section 401 of the Internal Revenue Code of 1986 (I.R.C.), as amended; shall be
tax exempt under I.R.C. ss. 501; shall conform to the requirements of the
Employment Retirement Income Security Act of 1974 (ERISA), and all subsequent
amendments thereto. The Plan and Trust Agreement and any subsequent amendments
shall be interpreted in accordance with such intent.
1.2 Diversion Prohibited. It shall be impossible at any time before the
satisfaction of all liabilities with respect to employees and their
beneficiaries under the trust for any part of the principal contributed to the
Trust Fund under this Plan, or income thereon, to be used for, or diverted to,
any purpose other than for the exclusive purpose of providing retirement
benefits for participating Employees or their beneficiaries and defraying
reasonable expenses of Plan administration; except as provided pursuant to
I.R.C. ss. 415 suspense account provisions or ERISA ss. 403(c)(2).
1.3 Effective Date. The effective date of this amended and restated Plan
and Trust shall be January 1, 1989. Notwithstanding the preceding provisions of
this Section 1.3, those provisions of this amendment and restatement which
comply with the requirements of the Tax Reform Act of 1986, the Omnibus Budget
Reconciliation Act of 1986, the Omnibus Budget Reconciliation Act of 1987 and
the final regulations issued pursuant to the Retirement Equity Act of 1984, to
the extent applicable to Plan Years beginning before 1989, shall be effective on
the first day of the Plan Year beginning in 1987, or earlier if required by
statute.
The Company's Plan and Trust was originally adopted effective on January 1,
1986.
1.4 Contractual Rights. The establishment of this Plan shall not be
considered as giving an Employee the right to be retained at the service of the
Employer.
1.5 Special Rules for Owner-Employee Plans. If this Plan provides
contributions or benefits for one or more owner-employees who control both the
business for which this Plan is established and one or more other trades or
businesses, this Plan and the Plan established for such other trades or
businesses must, when looked at as a single plan, satisfy I.R.C. ss.ss. 401(a)
and (d) for the employees of this and all other trades or businesses.
If the Plan provides contributions or benefits for one or more
owner-employees who control one or more other trades or businesses, the
employees of the other trades or businesses must be included in a plan which
satisfies I.R.C. ss.ss. 401(a) and (d) and which provides contributions and
benefits not less favorable than provided for owner-employees under this Plan.
If an individual is covered as an owner-employee under the plans of two or
more trades or businesses which are not controlled and the individual controls a
trade or business, then the contributions or benefits of the employees under the
Plan of the trades or businesses which are controlled must be as favorable as
those provided for him under the most favorable plan of the trade or business
which is not controlled.
For purposes of the preceding paragraphs, an owner-employee, or two or more
owner-employees, will be considered to control a trade or business if the
owner-employee, or two or more owner-employees together:
(A) Own the entire interest in an unincorporated trade or business;
or,
2
(B) In the case of a partnership, own more than fifty percent (50%) of
either the capital interest or the profits interest in the partnership.
For purposes of the preceding sentence, an owner-employee, or two or more
owner-employees, shall be treated as owning any interest in a partnership which
is owned, directly or indirectly, by a partnership which such owner-employee, or
such two or more owner-employees, are considered to control within the meaning
of the preceding sentence.
ARTICLE 2.
DEFINITIONS
2.1 Anniversary Date. "Anniversary Date" is the date on which the Plan Year
ends. Under this Plan, the Anniversary Date shall be December 31 of each year.
2.2 Annual Additions. "Annual Additions" shall mean with respect to any one
Limitation Year the sum of the following:
(A) Employer Contributions and Forfeitures. Employer contributions
and forfeitures, if any, allocated to the Participant pursuant to this
Plan;
(B) Related Employer Conributions and Forfeitures. Employer
contributions and forfeitures, if any, credited to the Participant's
account under any related Plan;
(C) Voluntary Employer Contributions. For Limitation Years commencing
before December 31, 1986, if the Employee Participant made any voluntary
contributions during said Plan Year, the lesser of:
(1) One-half (1/2) of said voluntary Participant's contribution;
or,
(2) The amount of the Participant's voluntary contribution in
excess of six percent (6%) of his Compensation for such year shall be
included.
For Limitation Years commencing after December 31, 1986, all Voluntary
Employee Contributions shall be included as Annual Additions (the annual
addition for any limitation year beginning before January 1, 1987, shall
not be recomputed to treat all employee contributions as annual additions);
and,
(D) Individual Medical Account Allocations. Amounts allocated, after
March 31, 1984, to an individual medical account, as defined in I.R.C.
ss.ss. 415(l)(1) and (2), which is part of a pension or annuity plan
maintained by the Employer are treated as Annual Additions to a defined
contribution plan. Also, amounts derived from contributions paid or accrued
after December 31, 1985, in taxable years ending after such
3
date, which are attributable to post-retirement medical benefits allocated
to the separate account of a Key Employee, as defined in I.R.C. ss.
419A(d)(3), under a welfare benefit fund, as defined in I.R.C. ss. 419(e),
maintained by the Employer, are treated as Annual Additions to a defined
contribution plan.
All defined contribution plans of the Employer will be considered as a
single defined contribution plan in determining annual additions.
2.3 Beneficiary. "Beneficiary" includes any persons designated by a
Participant to receive benefits from the Trust after said Participant's death,
or, in lieu of such designation, the person designated by the Committee to
receive benefits from the Trust after a Participant's death as provided in
Section 4.3 below. Whenever the rights of Participants or retired Participants
are determined by the Committee pursuant to this Agreement, their respective
Beneficiaries, Heirs, Executors and Administrators shall be bound by such
determination.
2.4 Board of Directors. "Board of Directors" means the Board of Directors
of the corporate Employer (if applicable) adopting this Plan. If the adopting
Employer is not a corporation then the "Board of Directors" shall refer to the
managing partner or partners of any partnership, or the sole proprietor of a
sole proprietorship.
2.5 Break In Service. A "Break in Service" occurs when a Participant does
not complete more than 500 Hours of Service during a Computation Period.
2.6 Committee. The "Committee" shall mean the Committee provided for herein
and charged with the administration of the Plan. The Committee shall have the
authority to control the operation and administration of the Plan.
2.7 Company. The word "Company" shall be interchangeable with the word
"Employer." As used herein, the terms "Company" and "Employer" shall mean the
entity or entities adopting this Plan and Trust Agreement, in writing, with the
consent of the Board of Directors. All trades or businesses (whether or not
incorporated) which are under common control (as defined in I.R.C. ss.ss. 414(b)
or (c) as modified by I.R.C. ss. 415(h)), and affiliated service groups (as
defined in I.R.C. ss. 414(m)), of which the Employer is a part, and any other
entity required to be aggregated with the Employer pursuant to the regulations
under I.R.C. ss. 414(o), shall be considered a single Employer for purposes of
determining Hours of Service and Years of Service for eligibility for
Participation and vesting, and for purposes of determining applicable
limitations on benefits and contributions.
2.8 Compensation. "Compensation" means, except as expressly provided for
herein, a Participant's earned income, wages, salaries, W-2 earnings and fees
for professional services and other amounts received for personal services
actually rendered in the course of employment with the Employer maintaining the
Plan, which compensation is currently includible in gross income as defined
under I.R.C. ss. 415(c)(3) and earned during the applicable Plan Year.
4
Compensation shall include any amount contributed by the Employer pursuant
to an I.R.C. ss. 401(k) salary reduction election agreement, if applicable, and
which is not includible in the gross income of the Participant under I.R.C.
ss.ss. 125, 129, 401(k), 402(a)(8), 402(h) or 403(b).
For purposes of applying the limitations of this Section, compensation for
a limitation year is the Compensation actually paid and includible in gross
income of the Participant for such Plan Year.
(A) Excluded Amounts. Compensation excludes the following amounts:
(1) Designated Pay. Compensation excludes payments for overtime,
bonuses, commissions, incentive payments and other special pay.
Compensation also excludes compensation amounts not paid in cash,
relocation or moving allowances, tuition allowances, reimbursements
for expenses, termination or severance pay, lump sum vacation and sick
leave pay provided upon termination from employment, living
allowances, income included pursuant to I.R.C. ss. 79 and compensatory
pay for board meeting participation.
(2) Employer Contributions. Employer contributions to a plan of
deferred compensation which are not includible in the Employee's gross
income for the taxable year in which contributed, or Employer
contributions under a simplified employee pension plan to the extent
such contributions are deductible by the Employee, or any
distributions from a plan of deferred compensation;
(3) Non-Qualified Stock Option Amounts. Amounts realized from the
exercise of a non-qualified stock option, or when restricted stock (or
property) held by the Employee either becomes freely transferable or
is no longer subject to a substantial risk of forfeiture;
(4) Sale, Exchange or Disposition of Stock Options. Amounts
realized from the sale, exchange or other disposition of stock
acquired under a qualified stock option;
(5) Compensation in Excess of $200,000.00. For Plan Years
commencing after December 31, 1988, the maximum amount of annual
compensation which shall be taken into account for all purposes under
this Plan shall be $200,000.00, as adjusted by the Secretary at the
same time and in the same manner as provided under I.R.C. ss. 415(d).
In determining the compensation of a Participant for purposes of this
limitation, the rules of I.R.C. ss. 414(q)(6) shall apply, except in
applying such rules, the term "family" shall include only the spouse
of the Participant and any lineal descendants of
5
the Participant who have not attained age nineteen (19) before the
close of the calendar year. If, as a result of the application of such
rules the adjusted $200,000.00 limitation is exceeded, then (except
for purposes of determining the portion of Compensation up to the
integration level, if this Plan provides for permitted disparity), the
limitation shall be prorated among the affected individuals in
proportion to each such individual's Compensation as determined under
this Section prior to the application of this limitation; and,
(6) Compensation Earned Prior to Entry Date. Compensation earned
prior to a Participant's entry into the Plan, as defined herein, shall
be excluded.
(B) Special Rules for Self-Employed Individuals. In the case of an
Employee within the meaning of I.R.C. ss. 401(c)(1), Compensation shall be
defined in the same manner as described above except the Participant's
"earned income," as defined under I.R.C. ss. 401(c)(12) without regard to
I.R.C. ss. 911, shall be substituted in lieu of reference to "compensation
of the Participant from the Employer," as described under I.R.C. ss.
415(c)(3)(A). Earned income, in general, means the net earnings from self
employment in the trade or business with respect to which the Plan is
established, for which personal services of the individual are a material
income-producing factor. Net earnings will be determined without regard to
items not included in gross income and the deductions allocable to such
items. Net earnings are reduced by contributions by the Employer to a
qualified plan to the extent deductible under I.R.C. ss. 404. For Plan
Years commencing after December 31, 1989, net earnings shall be determined
with regard to the deduction allowed to the Employer by I.R.C. ss. 164(f).
For Limitation Years commencing after December 31, 1991, for purposes of
applying the limitations of this Section, compensation for a Limitation
Year is the compensation actually paid or includible in the gross income of
the self-employed individual during such Limitation Year.
2.9 Computation Period. "Computation Period" means a twelve (12)
consecutive month period used to determine participation, eligibility, vesting,
retention of eligibility and accrual of benefits. For purposes of determining
Years of Service for eligibility and Breaks in Service, the Computation Period
for eligibility, and all subsequent eligibility computation periods, and for all
Breaks in Service, shall be the twelve (12) consecutive month period beginning
on the date the Employee first performs an Hour of Service for the Employer and
each anniversary date thereafter, as applicable. For purposes of the accrual of
benefits, vesting and retention of eligibility, the Computation Period shall
coincide with the Plan Year as defined below.
2.10 Continuous Employment. "Continuous Employment" means employment
without a "Break In Service." Authorized leaves of absence, under the terms
hereinafter set forth, shall not be deemed a "Break In Service." All absences
must be authorized by the Company and Committee in writing; provided further,
that all determinations of authorized
6
leaves of absence shall be made in a non-discriminatory fashion so that all
persons under similar circumstances will be treated alike in the granting of
authorization for such leaves of absence.
2.11 Date of Employment. "Date of Employment" means the first date on which
an Employee completes an Hour of Service, provided, however, that in the case of
a Break in Service, the Date of Employment shall be the first date thereafter on
which such Employee completes an Hour of Service.
2.12 Designated Beneficiary. A "Designated Beneficiary" is any individual
or entity deemed designated as a beneficiary by the Employee Participant.
2.13 Distributive Share. "Distributive Share" means the amount payable to a
Participant or his Beneficiary upon his retirement, disability, death or other
termination from employment.
2.14 Earliest Retirement Date. "Earliest Retirement Date" means the
earliest date, under the Plan, on which the Participant may elect to receive
retirement benefits. The Earliest Retirement Date under this Plan is the date on
which the Participant is fully vested, has attained the age of fifty-five (55)
and completed at least ten (10) Years of Service.
2.15 Elective Deferral. "Elective Deferral" shall mean any Employer
contributions made to the Plan at the election of the Participant pursuant to
ss. 6.2 below, in lieu of cash compensation, and shall include contributions
made pursuant to a salary reduction agreement or other deferral mechanism. With
respect to any taxable year, a Participant's Elective Deferral is the sum of all
Employer contributions made on behalf of such Participant pursuant to an
election to defer under any qualified CODA as described in I.R.C. ss. 401(k) of
the Code, any simplified employee cash or deferred arrangement as described in
I.R.C. ss. 402(h)(l)(B), any eligible deferred compensation plan under I.R.C.
ss. 457, any plan as described under I.R.C. ss. 501(c)(18), and any Employer
contributions made on the behalf of a Participant for the purchase of an annuity
contract under I.R.C. ss. 403(b) pursuant to a salary reduction agreement.
Elective Deferrals shall not include any deferrals properly distributed as
excess annual additions; provided, all Elective Deferrals must satisfy the
discrimination requirements of Treas. Reg. ss. 1.401(k)-1(b)(3), which is
incorporated herein by reference.
2.16 Employee.
(A) General Definition. "Employee" shall mean any person employed by
the Employers maintaining this Plan or of any other Employer required to be
aggregated with such Employer under I.R.C. ss.ss. 414(b), (c), (m) or (o).
The term "Employee" excludes any person who renders services as an
independent contractor and any person who has not been classified by the
Employer as an Employee. The term Employee shall also include any leased
employee deemed to be an employee of any Employer described herein as
provided under I.R.C. ss.ss. 414(n) or (o).
7
(B) Highly Compensated Employee. The term "Highly Compensated
Employee" includes highly compensated active employees and highly
compensated former employees.
For the purposes of this Plan, a Highly Compensated Participant and a
Non-Highly Compensated Participant shall include any Employee eligible to
make a deferral election pursuant to this Plan, whether or not such
deferral election was made or suspended pursuant to this Plan.
A highly compensated active employee includes any employee who
performs service for the Employer during the determination year and who,
during the look-back year: (i) received compensation from the Employer in
excess of $75,000.00 (as adjusted pursuant to I.R.C. ss. 415(d)); (ii)
received compensation from the Employer in excess of $50,000.00 (as
adjusted pursuant to I.R.C. ss. 415(d)) and was a member of the top-paid
group for such year; or (iii) was an officer of the Employer and received
compensation during such year that is greater than fifty percent (50%) of
the dollar limitation in effect under I.R.C. ss. 415(b)(1)(A). The term
Highly Compensated Employee also includes: (i) employees who are both
described in the preceding sentence if the term "determination year" is
substituted for the term "look-back year," and Employees who are one of the
one hundred (100) employees who received the most compensation from the
Employer during the determination year; and (ii) Employees who are five
percent (5%) owners at any time during the look-back year or determination
year.
If no officer has satisfied the compensation requirement of (iii)
above during either a determination year or look-back year, the highest
paid officer for such year shall be treated as a Highly Compensated
Employee.
For the above purposes, the determination year shall be the Plan Year.
The look-back year shall be the twelve (12) month period immediately
preceding the determination year.
A highly compensated former employee includes any employee who
separated from service (or was deemed to have separated) prior to the
determination year, performs no service for the Employer during the
determination year, and was a highly compensated active employee for either
the separation year or any determination year ending on or after the
Employee's 55th birthday.
If an Employee is, during a determination year or look-back year, a
family member of either a five percent (5%) owner who is an active or
former employee, or a Highly Compensated Employee who is one of the ten
(10) most highly compensated employees ranked on the basis of compensation
paid by the Employer during such year, then the family member and the five
percent (5%) owner, or top-ten highly compensated employee, shall be
aggregated. In such case, the family member and five percent (5%) owner, or
top-ten highly compensated employee, shall be treated as a single employee
8
receiving compensation and plan contributions or benefits equal to the sum
of such compensation and contributions or benefits of the family member and
five percent (5%) owner, or top-ten highly compensated employee. For
purposes of this Section, family member includes the spouse, lineal
ascendants and descendants of the Employee or Former Employee and the
spouses of such lineal ascendants and descendants.
The determination of who is a highly compensated employee, including
the determinations of the number and identity of employees in the top-paid
group, the top one hundred (100) employees, the number of employees treated
as officers and the compensation that is considered, will be made in
accordance with I.R.C. ss. 414(g) and the regulations thereunder.
(C) Leased Employee. The term "leased employee" means any person
(other than an employee of the recipient) who pursuant to an agreement
between the recipient and any other person ("leasing organization") has
performed services for the recipient (or for the recipient and related
persons determined in accordance with I.R.C. ss. 414(n)(6)) on a
substantially full time basis for a period of at least one (1) year, and
such services are of a type historically performed by employees in the
business field of the recipient employer. Contributions or benefits
provided to a leased employee by the leasing organization which are
attributable to services performed for the recipient employer shall be
treated as provided by the recipient employer.
A leased employee shall not be considered an employee of the recipient
if: (i) such employee is covered by a money purchase pension plan
providing: (1) a nonintegrated employer contribution rate of at least ten
percent (10%) of compensation, as defined in I.R.C. ss. 415(c)(3), but
including amounts contributed pursuant to a salary reduction agreement
which are excludible from the employee's gross income under I.R.C. ss.ss.
125, 402(a)(8), 402(h) or 403(b), (2) immediate participation, and (3) full
and immediate vesting; and (ii) leased employees do not constitute more
than twenty percent (20%) of the recipient's non-highly compensated
workforce.
(D) Owner-Employee. "Owner-employee" means an individual who is a sole
proprietor, or who is a partner owning more than ten percent (10%) of
either the capital or profits interest of the partnership.
(E) Self-Employed Individual. "Self-employed individual" means an
individual who has earned income for the taxable year from the trade or
business for which the Plan is established; also, an individual who would
have had earned income but for the fact that the trade or business had no
net profits for the taxable year.
2.17 Employer Real Proerty. "Employer Real Property" means real property
(and related personal property) which is leased to an Employer of Employees
covered by the Plan, or to an Affiliate of such Employer. For purposes of
determining the time at which a Plan acquires Employer Real Property for the
purposes of this Plan, such property shall be deemed to
9
be acquired by the Plan on the date on which the Plan acquired the property or
on the date on which the lease to the Employer is entered into, whichever is
later.
2.18 Employer Security. "Employer Security" means a security issued by an
Employer of Employees covered by the Plan, or by an Affiliate of such Employer
as defined by ERISA ss. 407(d)(1). A contract to which ERISA ss. 408(b)(5)
applies shall not be treated as an Employer Security for purposes of this Plan.
2.19 ERISA. "ERISA" refers to Public Law No. 93-406, commonly known as the
Employment Retirement Income Security Act of 1974 (and also as the Pension
Reform Act of 1974), as it now exists, or as it may hereinafter be amended.
2.20 Fiduciary. "Fiduciary" for purposes of this Plan includes the Company,
Committee and Trustee, but only with respect to the specific duties of said
parties as set forth in this Plan. A Fiduciary shall include a Fiduciary under
ERISA ss. 3(21), who is any person or party exercising discretionary authority
or control affecting the management of a plan or its assets, or rendering
investment advice for a fee or other compensation, direct or indirect, with
respect to assets of a plan.
2.21 Five Percent Owner. A "Five Percent (5%) Owner" is defined as the
owner of over a five percent (5%) interest in the stock, capital, profits or
total combined voting power of the corporate or noncorporate Employer; and, the
attribution rules of I.R.C. ss. 318 shall be used to attribute ownership under
this Section.
2.22 Former Participant. "Former Participant" means a person who has been a
Participant, but who has ceased to be a Participant for any reason.
2.23 Hour of Service. Each Employee will be credited with an Hour of
Service for:
(A) Hours of Service for the Performance of Duties. Each hour for
which an employee is paid, or entitled to payment, for the performance of
duties for the Employer. These Hours of Service will be credited to the
Employee for the applicable Computation Period in which the duties are
performed.
(B) Hours of Service When No Duties Performed. Each hour for which an
Employee is paid, or entitled to payment, by the Employer on account of a
period of time during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to vacation,
holiday, illness, incapacity (including disability), layoff, jury duty,
military duty or leave of absence. Notwithstanding the preceding sentence,
no more than 501 hours of service are required to be credited under this
paragraph to an Employee on account of any single continuous period during
which the Employee performs no duties (whether or not such period occurs in
a single Computation Period). Hours of Service under this paragraph will be
calculated and
10
credited pursuant to Department of Labor Regulations ss. 2530.200b-2, which
are incorporated herein by reference.
(C) Special Rule Applicable to Family Absences. Solely for purposes
of determining whether a Break in Service has occurred, maternity or
paternity absences will be included in determining hours of service for
participation and vesting in each Computation Period.
(1) A maternity or paternity absence shall include: any absence
by reason of pregnancy of the Participant; birth of a child by the
Participant; placement of a child with Participant in connection with
the adoption of such child by such Participant; or, for purposes of
caring for such child for a period beginning immediately following
such birth or placement; provided, that the Participant promptly
furnishes to the Plan Administrator information establishing that the
absence from work is for a maternity or paternity absence and states
the estimated number of days of his/her absence.
(2) Hours of service included herein are hours of service which
would otherwise be credited to the Participant for a similar absence,
or eight (8) hours of service per day if it is not possible to
determine hours of service for such absence; but in no event shall
hours credited by reason of a maternity or paternity absence exceed
501 hours per Plan Year, nor shall the Participant be entitled to the
benefits of this provision for more than one (1) year for each
maternity or paternity leave of absence.
(3) Hours of service are to be credited in the year in which
absence begins only if a Participant would be prevented from incurring
a Break in Service thereby; otherwise, such hours of service will be
credited in the immediately following Computation Period.
(D) Miscellaneous Hours of Service Provisions. Each hour for which
back pay, irrespective of mitigation of damages, is either awarded or
agreed to by the Employer. The same hours of service shall not be credited
both under paragraph (A), (B) or (C) as the case may be, and under this
paragraph (D). These Hours will be credited to the Employee for the
Computation Period or Periods to which the award or agreement pertains
rather than the Computation Period in which the award, agreement or payment
is made.
Hours of Service will be credited for employment with other members of an
affiliated service group as defined under I.R.C. ss. 414(m), a controlled group
of corporations as defined under I.R.C. ss. 414(b) or a group of trades or
businesses under common control as defined under I.R.C. ss. 414(c) of which the
adopting Employer is a member, and any other entity required to be aggregated
with the Employer pursuant to I.R.C. ss. 414(o) and the regulations thereunder.
Hours
11
of Service will also be credited for any individual considered an Employee for
purposes of the Plan under I.R.C. ss. 414(n) or 414(o) and the regulations
thereunder.
2.24 Inactive Status. "Inactive Status" is the status of a Participant who
failed to accumulate 1,000 Hours of Service during a Plan Year, but did
accumulate more than 500 Hours of Service during such Plan Year. In any such
year, said Participant shall not be deemed to have completed a Year of Service
and shall not share in the allocation of Company contributions or forfeitures
for such year, except as provided in Section 8.16(E) below; provided, however,
that said Participant shall continue to share in the income and loss allocations
incurred by the Trust during such year. In the event a Participant on Inactive
Status subsequently accumulates 1,000 Hours of Service in a subsequent Plan
Year, said Participant shall revert to active status with full rights and
privileges under this Plan.
2.25 Leave of Absence. All leaves of absence must be authorized by the
Company and the Committee in writing; provided, further, that all determinations
of authorized leaves of absence shall be made in a non-discriminatory fashion so
that all persons under similar circumstances will be treated alike in the
granting of authorization for such leaves of absence.
2.26 Matching Employer Contributions. "Matching Employer Contributions"
refers to Employer contributions made to the Plan on behalf of a Participant on
account of Participant contributions or Elective contributions made by such
Participant.
2.27 Maximum Annual Addition Per Plan Limitation Year. "Maximum Annual
Addition" means the limit on Annual Additions imposed by I.R.C. ss. 415 on all
qualified deferred compensation plans in each Limitation Year as defined below.
(A) Maximum Annual Addition. Pursuant to said limitation, the maximum
aggregate Annual Addition to the account of any Participant in any
Limitation Year shall not exceed the lesser of the maximum permissible
amount (as described below) or any other limitation contained in this Plan.
(1) Dollar Limitation. Thirty Thousand Dollars ($30,000.00); or,
if greater, one-quarter (3) of the defined benefit dollar limitation,
as adjusted for cost of living increases, as in effect under I.R.C.
ss. 415(b)(1)(A) as in effect for the Limitation Year; or,
(2) Percentage Limitation. Twenty-five percent (25%) of the
Compensation paid to the Participant by the Employer in the Plan Year;
provided, the Compensation limitation described herein shall not apply
to any contribution for medical benefits made within the meaning of
I.R.C. ss.ss. 401(h) or 419(A)(f)(2) which are otherwise treated as
Annual Additions under I.R.C. ss.ss. 415(l)(1) or 419(A)(d)(2),
respectively.
12
(3) 415 Safe-Harbor Compensation. Wages, salaries and fees for
professional services and other amounts received (without regard to
whether or not an amount is paid in cash) for personal services
actually rendered in the course of employment with the 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 excluding the
following:
(a) Employer contributions to a plan of deferred
compensation which are not includible in the employee's gross
income for the taxable year in which contributed, or employer
contributions under a simplified employee pension plan to the
extent such contributions are deductible by the employee, or any
distributions from a plan of deferred compensation;
(b) Amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property) held by the
employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
(c) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option;
and,
(d) Other amounts which received special tax benefits, or
contributions made by the employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity described
in I.R.C. ss. 403(b) (whether or not amounts are actually
excludible from the gross income of the employee).
(B) Limitation Year. The "Limitation Year" shall refer to the twelve
(12) consecutive month period from January 1 to December 31, chosen by the
Employer. All qualified plans maintained by the Employer shall use the same
Limitation Year. If the Limitation Year is amended to a different twelve
(12) consecutive month period, then the new Limitation Year must begin on a
date within the Limitation Year in which the amendment is made. If a short
Limitation Year is created because of an amendment changing the Limitation
Year to a different twelve (12) consecutive month period, then the maximum
permissible amount will not exceed the defined contribution dollar
limitation multiplied by: [number of months in the short limitation
year/12]. Such Limitation Year shall be identical to the Employer's Plan
Year as defined below, unless otherwise provided herein.
13
(1) Participation in Both Defined Contribution and Defined
Benefit Plans. In any case in which an individual is or was a
Participant in both a Defined Benefit Plan and a Defined Contribution
Plan maintained by the same Employer, the sum of the Defined Benefit
Plan Fraction and the Defined Contribution Plan Fraction for any year
may not exceed 1.0 in any Limitation Year.
(2) Defined Benefit Plan Fraction. For purposes of this
subsection, the Defined Benefit Plan Fraction for any year is a
fraction:
(a) The numerator of which is the sum of the Participant's
projected annual benefits to the Participant under all qualified
defined benefit plans (whether or not terminated) maintained by
the Employer (determined as of the close of the Limitation Year);
and,
(b) The denominator of which is the lesser of:
(i) The product of 1.25 (1.0 if for such year the Plan
is a "Top-Heavy Plan," except in the event the conditions of
I.R.C. ss. 416(h)(2) are met), multiplied by the dollar
limitation on the annual benefit in effect under I.R.C.
ss.ss. 415 (b) and (d) determined for such Limitation Year;
or
(ii) The product of 1.4, multiplied by one hundred
percent (100%) of the Participant's highest average
Compensation with the Employer for the three (3) highest
consecutive Years of Service during which the Participant
was an active Participant in such Plan, including any
adjustments as provided under I.R.C. ss. 415(b).
Notwithstanding the above, if the Participant was a Participant as of
the first day of the first Limitation Year beginning after December 31,
1986, in one or more defined benefit plans maintained by the Employer which
were in existence on May 6, 1986, the denominator of this fraction will not
be less than one hundred twenty-five percent (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 applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of I.R.C. ss.
415 for all Limitation Years beginning before January 1, 1987.
(3) Defined Contribution Plan Fraction. For purposes of this
subsection, the Defined Contribution Plan Fraction for any Limitation
Year is a fraction:
14
(a) The numerator of which is the sum of the Annual
Additions credited to the Participants' account under this Plan
and all qualified defined contribution plans maintained by the
Employer in which the Employee participates, as of the close of
the Limitation Year and all prior Limitation Years (including
Annual Additions attributable to the Participant's non-deductible
Employee contributions to all defined benefit plans, whether or
not terminated, maintained by the Employer and the Annual
Additions attributable to all welfare benefit funds, as defined
in I.R.C. ss. 419(e), and individual medical accounts as defined
in I.R.C. ss. 415(l)(2) maintained by the Employer; and,
(b) The denominator of which is the sum of the lesser of the
following maximum aggregate amounts determined for such
Limitation Year and for each prior Limitation Years of Service
with the Employer regardless of whether a defined contribution
plan was maintained by the Employer:
(i) The product of 1.25 (1.0 if for such year the Plan
is a "Top-Heavy Plan," except in the event the conditions of
I.R.C. ss. 416(h) are met), multiplied by the dollar
limitation in effect under I.R.C. ss. 415(c)(1)(A) for such
Limitation Year; or,
(ii) The product of 1.4, multiplied by the amount which
may be taken into account under I.R.C. ss. 415(c)(1)(B) with
respect to such Participant under such Plan for such
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 the Employer which
were in existence on May 6, 1986, the numerator of this fraction will
be adjusted if the sum of this fraction and the defined benefit
fraction would otherwise exceed 1.0 under the terms of this Plan.
Under the adjustment, an amount equal to the product of (1) the excess
of the sum of the fractions over 1.0 times (2) the denominator of this
fraction, will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the fractions as they
would be computed as of the end of the last Limitation Year beginning
before January 1, 1987, and disregarding any changes in the terms and
conditions of the Plan made after May 5, 1986, but using the I.R.C.
ss. 415 limitation applicable to the first Limitation Year beginning
on or after January 1, 1987.
15
(C) Miscellaneous.
(1) Determination During Plan Year. Prior to determining the
Participant's actual Compensation for the Limitation Year, the
Employer may determine the maximum permissible amount for a
Participant on the basis of a reasonable estimation of the
Participant's Compensation for the Limitation Year, provided any such
estimates shall be uniformly determined for all similarly situated
Participants.
(2) End of Year Determination. As soon as administratively
feasible after the end of the Limitation Year, the maximum permissible
amount for the Limitation Year will be determined based on the
Participant's actual Compensation for such Limitation Year.
(3) Excess Allocations. In the event of an excess allocation, any
such excess allocation or contribution shall be reduced so that the
Annual Addition for the Limitation Year will equal the maximum
permissible amount, all as more particularly described under Article 5
below.
2.28 Nonelective Employer Contributions. "Nonelective Employer
Contributions" means Employer contributions to the Plan, if any, excluding
contributions made pursuant to the Participant's deferral election provided for
below, nondiscretionary matching contributions made pursuant to this Plan, if
any, and any Qualified Nonelective Contributions.
2.29 Normal Retirement Date. "Normal Retirement Date" means the attainment
of the Normal Retirement Age of sixty-two (62) by such Participant, provided
such Participant retires at such age for reasons other than total and permanent
disability. If a Participant continues working after the attainment of the
Normal Retirement Date then pursuant to Section 8.6 below, the Participant's
normal retirement date shall be his actual retirement date.
2.30 Participant. The words "Participant" and "Member" for purposes of this
Plan shall be interchangeable. Member and Participant refer to an Employee who
meets the eligibility requirements of Article 4, who participates in the Plan
and has not become ineligible to participate or elected not to participate in
the Plan, and any beneficiary or alternate payee of such Participant.
2.31 Party in Interest. A "Party in Interest" for purposes of the
prohibited transactions provisions is any one of the following:
(A) Fiduciary. Any Fiduciary including, but not limited to, any
Administrator, officer, Trustee, custodian, counsel, Employee of the Plan;
(B) Services. Any person providing services to the Plan;
16
(C) Employer. Any Employer whose Employees are covered by the Plan;
(D) Employee Organization. An employee organization, such as a labor
union, any of whose members are covered by the Plan;
(E) Majority Stockholder. An owner, direct or indirect, of fifty
percent (50%) or more of the combined voting power of all classes of stock
entitled to vote or the total value of shares of all classes of stock of a
corporation Employer or employee organization any of whose Employees or
Members are covered by the Plan;
(F) Partnership. An owner, direct or indirect, of 50% or more of the
capital or profits interest of a partnership which is an Employer or
Employee Organization or whose Employees or Members are covered by the
Plan;
(G) Unincorporated Enterprise. An owner, direct or indirect, of fifty
percent (50%) or more of the beneficial interest of a trust or
Unincorporated Enterprise which is an Employer or Employee organization
whose Employees or Members are covered by the Plan;
(H) Relative. A relative (spouse, ancestor, lineal descendant, or
spouse of a lineal descendant) of any individual listed above (Section
3(15) Public Law No. 93-406);
(I) Trust or Estate. A corporation, partnership or trust or estate of
which (or in which) fifty percent (50%) or more of the stock (voting power
or value) of that corporation's value of shares of all classes of stock of
a corporation Employer or employee organization any of whose Employees or
Members are covered by the Plan;
(J) Officer, Et Cetera. An Employee, Officer, Director or an
individual having power and responsibilities similar to those of Officers
or Directors, or a ten percent (10%) or more shareholder, directly or
indirectly, of the Plan or of a person who is a Party in Interest other
than a Fiduciary or relative.
(K) Ten Percent Partner. A ten percent (10%) or more partner or joint
venturer of a person who is a Party in Interest (other than a Fiduciary,
relative, Employer, officer, director or ten (10%) percent shareholder of a
Party in Interest).
(L) Change in Applicable Law. In the event a change in ERISA ss. 3(14)
or other applicable law would include additional persons or entities as
Parties in Interest other than as set forth above, then such additional
persons or entities shall be deemed to be Parties in Interest under this
Plan. In the event a change in ERISA ss. 3(14) or other applicable law
would exclude persons or entities set forth above as Parties in Interest,
then said persons or entities shall not be deemed to be Parties in Interest
under this Plan.
17
2.32 Permanent Disability. "Permanent Disability" means a mental or
physical disability as defined in I.R.C. ss. 72(m)(7) which renders a
Participant permanently incapable to perform the usual duties of his normal
employment position or the duties of such other employment position which the
Company may make available to the Participant and for which said Participant is
qualified by reason of his training, education or experience. The Committee
shall make the determination of whether a Participant is permanently disabled
and may request certification of such Permanent Disability claim by a physician,
pursuant to the procedures set forth in Article 3.
2.33 Plan Year. "Plan Year" means the twelve (12) consecutive month period
designated as the Taxable Year of the Employer for purposes of this Plan,
January 1 to December 31, and shall be identical to the Limitation Year as set
forth above, unless otherwise provided herein.
2.34 Plan Administrator. The Plan Administrator shall be the Employer
unless a different person is designated Plan Administrator in a resolution
adopted by the Board of Directors of the Employer.
2.35 Qualified Joint and Survivor Annuity. "Qualified Joint and Survivor
Annuity" means an annuity for the life of the Participant with a Survivor
Annuity for the life of his designated beneficiary which is not less than fifty
percent (50%) of and is not greater than one hundred percent (100%) of the
amount of the annuity payable during the joint lives of the Participant and his
designated beneficiary, and which is the actuarial equivalent of a single
annuity for the life of the Participant and, which is the amount of the benefit
which can be purchased with the Participant's vested account balance. If the
benefit payable to the survivor is not designated by the Participant, then the
normal form of benefit shall be a joint and 50% survivor annuity. Such term also
includes any annuity in a form having the effect of an annuity described in the
preceding sentence.
2.36 Qualified Nonelective or Matching Contributions.
(A) Qualified Nonelective Contribution. "Qualified Nonelective
Contribution" means any Nonelective Employer Contributions to the Plan that
are made pursuant to Section 5.1, if any, which are used to satisfy the
"Actual Deferral Percentage" tests and meet the additional requirements of
Treas. Reg. ss. 1.401(k)-1(g)(7)(iii).
(B) Qualified Matching Contribution. "Qualified Matching Contribution"
means any Employer matching contribution to the Plan, if any, which is used
to satisfy the "Actual Deferral Percentage" tests and meet the additional
requirements of Treas. Reg. ss. 1.401(k)-1(g)(7)(iii).
2.37 Qualified Preretirement Survivor Annuity. A "Qualified Preretirement
Survivor Annuity" is an annuity for the life of the surviving spouse of the
Employee Participant or for a designated beneficiary, the actuarial equivalent
of which is not less than fifty percent (50%) of the account balance of the
Employee participant as of the date of his death.
18
2.38 Qualifying Employer Real Property. "Qualifying Employer Real Property"
includes parcels of Employer Real Property:
(A) Geographically Dispersed. If a substantial number of the parcels
are dispersed geographically;
(B) Multiple Usage. If each parcel of real property and the
improvements thereon are suitable (or adaptable without excessive cost) for
more than one use;
(C) Leased Real Property. Even if all of such real property is leased
to one lessee (which may be the Employer, or an Affiliate of the Employer);
and,
(D) Diversification. If such acquisition and retention complies with
the provisions of ERISA to the extent it requires diversification.
2.39 Qualifying Employer Security. "Qualifying Employer Security" means an
Employer Security which is stock or a marketable obligation (as defined in
ERISA).
2.40 Retired Participant. "Retired Participant" is a Participant who has
been certified to the Trustee by the Committee as "retired" and entitled to
receive retirement benefits from the Trust.
2.41 Taxable Year. The "Taxable Year" shall be the twelve month period from
January 1 to December 31, or such other Taxable Year of the Employer as may be
elected and specified. The Taxable Year shall be as provided above regardless of
the Plan or Limitation Years of the Employer.
2.42 Terminated Participant. A "Terminated Participant" is a Participant
for whom service is no longer being credited under the Plan.
2.43 Top-Heavy Definitions.
(A) Determination Date and Year for Determining Top-Heavy Status. The
"Determination Date" shall mean the last day of the preceding plan year
except in the case of the initial plan year of a plan in which event the
"Determination Date" shall be the last day of the initial plan year. The
"Determination Year" shall be the plan year.
(B) Key Employee. The term "Key Employee" means an Employee, or Former
Employee, who at any time during the determination period is or was:
(1) Officer. An officer of the Employer, provided such officer's
annual compensation exceeds fifty percent (50%) of the dollar
limitation in effect under I.R.C. ss. 415(b)(1)(A). For the purpose of
clause (1), no more than fifty (50) Employees (or, if less, the
greater of three (3) or ten percent
19
(10%) of the Employees) shall be treated as officers.
(2) Top Ten (10) Key Employees. One of the top ten (10) Employees
having an annual Compensation from the Employer for a Plan Year
greater than one hundred percent (100%) of the annual dollar
limitation in effect under I.R.C. ss. 415(c)(1)(A) for the calendar
year in which such Plan Year ends and owning (or considered as owning,
within the meaning of I.R.C. ss. 318) one of the ten (10) largest
interests in the Employer as provided in Treas. Reg. ss.ss.
1.416-1(T-12) and (T-19). Provided further, if two (2) or more
Employees have the same percentage ownership interest in the Employer,
then the one having the higher compensation will be treated as having
the larger interest;
(3) Five Percent (5%) Owner. A five percent (5%) owner of the
Employer; or
(4) One Percent (1%) Owner. A one percent (1%) owner of the
Employer having an annual compensation from the Employer for a Plan
Year of more than $150,000.00.
(5) Beneficiary of Key Employee. The term "Key Employee" includes
the Beneficiary of a Key Employee.
For purposes of the above definition of "Key Employee," annual
compensation means compensation as defined in I.R.C. ss. 415(c)(3), but
including amounts contributed by the Employer pursuant to a salary
reduction agreement which are excludible from the Participant Employee's
gross income under I.R.C. ss.ss. 125, 402(a)(8), 402(h) or 403(b). The
determination period is the Plan Year containing the determination date and
the four (4) preceding plan years. For purposes of determining an
Employee's percentage ownership in the Employer, the aggregation rules of
I.R.C. ss.ss. 414(b), (c) and (m) shall not apply for purposes of
determining ownership in the Employer. The determination of who is a Key
Employee will be made in accordance with I.R.C. ss. 416(i)(l) and the
regulations thereunder.
(C) Non-Key Employee. A Non-Key Employee is any Employee who is not a
Key Employee.
(D) Aggregation Group. For purposes of determining Top-Heavy status,
the term "Required Aggregate Group" includes each qualified Plan of the
Employer in which at least one Key Employee participates or participated at
any time during the Plan Year which contains the Determination Date
(regardless of whether such Plan was terminated). In addition, each other
qualified Plan of the Employer which, during this period, enables any Plan
in which a Key Employee participates to meet the requirements of I.R.C. ss.
410 or 401(a)(4) shall be part of the Required Aggregation Group.
20
A "Permissive Aggregation Group" shall refer to all plans of the
Employer which are required to be aggregated, plus any other plans of the
Employer that are not part of a required aggregation group but that
continue to satisfy the requirements of I.R.C. ss.ss. 401(a)(4) and 410
when considered together with the required aggregation group.
Each Plan of an Employer required or permitted to be included in an
Aggregation Group shall be treated as a Top-Heavy Plan if such group is a
Top-Heavy Group.
(E) Top-Heavy Plan. A "Top-Heavy Plan" means, with respect to any Plan
year:
(1) Defined Benefit Plan. Any defined benefit plan or required
and/or permissive aggregation group if, as of the Determination Date,
the present value of the accumulated accrued benefits under the Plan
for Key Employees exceeds sixty percent (60%) of the present value of
the cumulative accrued benefits under the Plan for all Employees; and
(2) Defined Contribution Plan. Any defined contribution plan or
required and/or permissive aggregation group if, as of the
Determination Date, the aggregate of the accounts of Key Employees
under the Plan exceeds sixty percent (60%) of the aggregate of the
accounts of all Employees under such Plan. In addition, all
distributions made within the Plan Year that includes the
Determination Date or within the four (4) preceding years are to be
added to the present value of accrued benefits to determine Top-Heavy
status of the Plan. See Treas. Reg. ss. 1.416-1(T-30). Provided that,
effective for Plan Years beginning after December 31, 1984, if any
individual has not performed services for the Employer maintaining the
Plan at any time during the five (5) year period ending on the
determination date, then any accrued benefit for such individual (and
the account of such individual) shall not be taken into account for
purposes of determining whether the Plan is Top-Heavy. See I.R.C. ss.
416(g)(4)(E).
(F) Top-Heavy Group. The term "Top-Heavy Group" means any Aggregation
Group if the sum (as of the Determination Date) of the present value of the
cumulative accrued benefits for Key Employees under all defined benefit
plans included in such group, and any aggregate of the accounts of Key
Employees under all defined contribution plans included in such group,
exceeds sixty percent (60%) of a similar sum determined for all Employees.
(G) Top-Heavy Ratio. If the Employer maintains one or more defined
contribution plans (including any Simplified Employee Pension Plan) and the
Employer
21
has not maintained any defined benefit plan which during the five (5) year
period ending on the Determination Date(s) has or has had accrued benefits,
the top-heavy ratio for this Plan alone, or for the required or permissive
aggregation group as appropriate, is a fraction, the numerator of which is
the sum of the account balances of all Key Employees as of the
determination date(s) (including any part of any account balance
distributed in the five (5) year period ending on the determination
date(s)), and the denominator of which is the sum of all account balances
(including any part of any account balance distributed in the five (5) year
period ending on the determination date(s)), both computed in accordance
with I.R.C. ss. 416 and the regulations thereunder. Both the numerator and
denominator of the top-heavy ratio are increased to reflect any
contribution not actually made as of the determination date, but which is
required to be taken into account on that date under I.R.C. ss. 416 and the
regulations thereunder.
If the Employer maintains one or more defined contribution plans
(including any Simplified Employee Pension Plan) and the Employer maintains
or has maintained one or more defined benefit plans which during the five
(5) year period ending on the determination date(s) has or has had any
accrued benefits, the top-heavy ratio for any required or permissive
aggregation group, as appropriate, is a fraction, the numerator of which is
the sum of account balances under the aggregated defined contribution plan
or plans for all Key Employees, determined in accordance with the preceding
paragraph, and the present value of accrued benefits under the aggregated
defined benefit plan or plans for all Key Employees as of the determination
date(s), and the denominator of which is the sum of the account balances
under the aggregated defined contribution plan or plans for all
participants, determined in accordance with the preceding paragraph, and
the present value of accrued benefits under the defined benefit plan or
plans for all participants as of the determination date(s), all determined
in accordance with I.R.C. ss. 416 and the regulations thereunder. The
accrued benefits under a defined benefit plan in both the numerator and
denominator of the top-heavy ratio are increased for any distribution of an
accrued benefit made in the five (5) year period ending on the
determination date.
For purposes of the two preceding paragraphs, the value of account
balances and the present value of accrued benefits will be determined as of
the most recent valuation date that falls within or ends with the twelve
(12) month period ending on the determination date, except as provided in
I.R.C. ss. 416, and the regulations thereunder, for the first and second
plan years of a defined benefit plan. The account balances and accrued
benefits of a participant (1) who is not a Key Employee but who was a Key
Employee in a prior year, or (2) who has not been credited with at least
one (1) hour of service with any employer maintaining the plan at any time
during the five (5) year period ending on the determination date, will be
disregarded. The calculation of the top-heavy ratio, and the extent to
which distributions, rollovers and transfers are taken into account will be
made in accordance with I.R.C. ss. 416 and the regulations thereunder.
Deductible employee contributions, if any, will not be taken into account
for purposes of computing the top-heavy ratio. When aggregating plans the
value of account balances and accrued
22
benefits will be calculated with reference to the determination dates that
fall within the same calendar year.
The accrued benefit of a Participant other than a Key Employee shall
be determined under the method, if any, that uniformly applies for accrual
purposes under all defined benefit plans maintained by the Employer, or 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 I.R.C. ss.
411(b)(1)(C).
(H) Sum of Account Balances. In determining the Sum of Account
Balances under a defined contribution plan both Employer and Employee
contributions are to be taken into account. Provided, however, accumulated
tax deductible Employee contributions permitted under I.R.C. ss. 219 are to
be disregarded. In addition, if any lump sum rollover contribution is
accepted from an unrelated plan in a plan-to-plan transfer, such
contribution shall not be deemed a part of the Participant's Account
Balance, effective for contributions received in Plan Years commencing
after December 31, 1983. See Treas. Reg. ss. 1.416-1(T-32).
In addition, the following special rules shall apply to determine
Top-Heavy status:
(1) Rollover Contributions to Plan Not Taken Into Account. Except
to the extent provided in applicable regulations, any rollover
contribution, or similar transfer, initiated by the Employee and made
after December 31, 1983, to a Plan shall not be taken into account
with respect to the Transferee Plan for purposes of determining
whether such Plan is a Top-Heavy Plan, or whether any aggregation
group which includes such Plan is a Top-Heavy group.
(2) Benefits Not Taken Into Account if Employee Ceases to be a
Key Employee. If any individual is a Non-Key Employee with respect to
any Plan for any Plan Year, but such individual was a Key Employee
with respect to such Plan for any prior Plan Year, any accrued benefit
for such Employee, and the account of such Employee, shall not be
taken into account.
(I) Super Top-Heavy Plan and/or Super Top-Heavy Group. A Super
Top-Heavy Plan and/or a Super Top-Heavy Group is defined in the same manner
as a Top-Heavy Plan or Top-Heavy Group defined above in subsection (E) and
(F) except ninety percent (90%) shall be substituted for sixty percent
(60%) in said definitions.
(J) Compensation as Defined for Top-Heavy Purposes. Compensation shall
be defined, for purposes of determining Top-Heavy Key Employee status,
minimum benefits and the $200,000.00 limitation, as Compensation that would
be stated on an Employee Participant's Form W-2 for the calendar year that
ends with or within the Plan Year. Such definition of Compensation shall be
used for all Top-Heavy purposes and
23
shall apply to all applicable provisions in Section 8.16 below.
(K) Determination Date. For any Plan Year subsequent to the first Plan
Year, the last day of the preceding Plan Year. For the first Plan Year of
the plan, the last day of that year.
(L) Valuation Date. For purposes of computing the top-heavy ratio, the
valuation date shall be the last day of the Plan Year of each year.
2.44 Trust. "Trust" means the legal entity resulting from this Agreement
between the Employer and the Trustee, wherein the contributions of the Employer
and Participants (if applicable), shall be received, held, invested and
distributed to the Participants and their respective Beneficiaries.
2.45 Trust Fund. "Trust Fund" includes all assets held by the Trustee
pursuant to this Agreement, including contributions by the Employer and
Participants, the income, accumulations and profits therefrom, and such other
assets as the Trustee may hold pursuant to this Agreement.
2.46 Trustee. "Trustee" includes the entity or entities who agree to serve
as Trustee pursuant to this Agreement, and any duly appointed successor
Trustees. The initial Trustee has signified its willingness and agreement to
serve as Trustee and administer the Trust Funds according to the terms and
conditions set forth in this Agreement and in compliance with all applicable
laws and regulations by signing this Agreement as Trustee.
2.47 Trustee Responsibility. "Trustee Responsibility" means any
responsibility set forth herein which imposes a duty or responsibility upon the
Trustee concerning the investment, management and control of the Trust Fund and
any other responsibilities imposed upon Trustees by operation of law.
2.48 Year of Service. A "Year of Service" shall mean a Computation Period,
twelve (12) consecutive month period, during which an Employee has completed at
least one (1) Hour of Service for the Employer. If the Employer adopts and
maintains the Plan of a predecessor employer, service with such employer will be
treated as service for the Employer. Service while employed for an affiliate or
subsidiary of Employer, prior to its having become an affiliate or subsidiary,
shall also be included.
ARTICLE 3.
COMMITTEE
3.1 General Administration. The general administration of the Plan shall be
performed by a Committee. The number of Committee members shall be determined by
the Board of Directors or other governing body of the Employer. All references
herein to the Board of Directors of the Employer shall include the applicable
governing body of the Employer if no Board of Directors exists.
24
3.2 Appointment of Committee Members. The Committee and such appointees
shall serve on the Committee at the pleasure of the Board. Any vacancies on the
Committee shall be promptly filled by the Board; provided, however, that if a
vacancy is not filled by the Board within ninety (90) days, the remaining
Committee members may fill such vacancy by a majority vote. The initial members
of the Committee are set forth in the resolution of the Board of Directors
adopting this Plan.
3.3 Resignation from Committee. A person may resign from the Committee by
giving written notice of such resignation to the Board and the Trustee. Said
resignation shall become effective thirty (30) days after receipt by both the
Board and the Trustee, or at such earlier time as agreed to by all parties.
3.4 Commitee Officers and Employees. The members of the Committee shall
elect a Chairman from their number and a Secretary who need not be a member of
the Committee. The Secretary shall keep minutes of the Committee proceedings
including, without limitation, all Committee actions and determinations, and all
dates, records and documents pertaining to the Committee's administration of the
Plan. The Committee may also employ, and suitably compensate, attorneys,
accountants, physicians, advisors, clerical and other employees, as it may deem
necessary in the performance of its duties, and may delegate to them such powers
and duties as the Committee deems desirable. Any officers, agents or employees
of the Committee may also perform services for the Company.
3.5 Compensation. No member of the Committee who is also an Employee of the
Company shall receive any compensation for his services on the Committee. No
bond or other security shall be required of any Committee member.
3.6 Committee Determinations. All actions and determinations of the
Committee shall be made by a majority vote of the Committee. A majority of the
Committee shall be necessary to constitute a quorum. The Committee may act at a
meeting with reasonable advance notice to all members or in writing without a
meeting. Either the Committee Chairman or Committee Secretary shall execute any
certificate or other documentation of a Committee determination. A member of the
Committee may not vote on any matter relating specifically to himself unless he
is the sole member of the Committee; on such matters in which one member is
disqualified, a majority of the remaining Committee members shall be necessary.
The Committee's determination shall be made in a nondiscriminatory manner, and
the Committee must treat all Employee Participants and Beneficiaries alike. The
Committee shall state, in writing, its decision to deny a claim to benefits
under the Plan. The Committee shall deliver or mail a copy of its decision to a
Participant or Beneficiary whose claim it has denied. The Committee shall write
the decision to the best of its abilities in terms that may be understood
without legal or actuarial counsel. At the same time, in writing, the Committee
shall notify the Participant or Beneficiary of the means by which he may obtain
review of said decision.
25
3.7 Powers and Duties. The Committee shall be charged with the general
administration of the Plan and shall enforce the Plan in accordance with the
terms hereof, the I.R.C. and applicable rules and regulations. The Committee
shall administer the Plan in accordance with its terms and shall have the power
to determine all questions arising in connection with the administration,
interpretation and application of the Plan as determined to be necessary,
convenient or appropriate in its sole discretion. Any such determination by the
Committee shall be conclusive and binding upon all persons. The Committee may
establish procedures, correct any defect, supply any information or reconcile
any inconsistency in such manner and to such extent as shall be deemed necessary
or advisable to carry out the purpose of the Plan; provided, however, that any
procedure, discretionary act, interpretation or construction shall be done in a
nondiscriminatory manner based upon uniform principles consistently applied and
shall be consistent with the intent that the Plan shall continue to be deemed a
qualified Plan under the terms of I.R.C. ss. 401(a), and shall comply with the
terms of the I.R.C. and all regulations issued pursuant thereto. The Committee
shall have all powers necessary or appropriate to accomplish and fulfill its
duties under this Plan.
(A) Construction. To construe and interpret the Plan, although it may
seek legal counsel, accounting advice or opinions from appropriate Federal
Agencies, and to publish such rules for regulation as deemed necessary or
convenient for regulation of the Plan as are consistent with the terms of
the Plan.
(B) Eligibility. To determine all questions relating to the
eligibility of Employees to become Participants and of Participants to
remain Participants.
(C) Permanent Disability. To determine all claims of permanent
disability, in its sole discretion, including, without limitation, the
establishment of procedures and proof of disability claims. The Committee
may require examination of claimants by independent physicians as well as
certification by a Participant's personal physician.
(D) Benefits, Loans and Hardship Payments. To determine the nature,
amount, manner and time of payment of benefits including, without
limitation, loans or hardship payments which may be made under this Plan,
subject to the terms and conditions of this Plan, the I.R.C. and applicable
rules and regulations.
(E) Procedures and Regulations. To make and publish such rules and
procedures for the regulation of this Plan as are not inconsistent
herewith, including, without limitation, application forms for Participants
and Beneficiaries and the preparation and distribution of notification and
waiver forms to Participants with respect to annuity payments available
from the Plan, if any.
(F) Certification to Trustee. To communicate to the Trustee, by way of
certification, all facts relating to the retirement, death, disability,
termination of employment or other status of any Participant or former
Participant.
26
(G) Information Accmulation. To receive from the Company, Participants
and Trustees such reports and information as may be prepared by such
persons. The Committee shall review and retain all Trustee financial
reports including, without limitation, records of receipts and
disbursements of the Trust Fund.
(H) Compliance with Applicable Reporting Requirements. To comply with
the Internal Revenue Code and other applicable laws and regulations
relating to reporting requirements, including, without limitation, the
maintenance of such records as are necessary to demonstrate compliance with
all applicable I.R.C. ss. 401(k) and regulations thereunder. Records
maintained shall also demonstrate the extent to which Qualified Nonelective
and Qualified Matching Employer Contributions are taken into account in
order to determine compliance with I.R.C. ss. 401(k).
(I) Limitations. The Committee shall have no power to add to
independently, subtract from or modify any of the terms of the Plan, or to
change or add to any benefits provided by the Plan or to waive or fail to
apply any requirements of eligibility for a benefit under this Plan.
(J) Investments.
(1) Investments in General. In all matters relating to the
investment of the Trust Fund, the Committee may act in the limited
capacity as an advisor to the Trustee or investment manager. Said
Trustee or investment manager may follow the investment
recommendations of the Committee but is not obligated to do so, if in
its opinion such recommendation is not in the best interests of the
Plan and the Trust Fund. Provided that, the Committee may provide for
self-directed investments by Plan Participants. All self-directed
investments, if allowable by the Employer, shall be made available to
Plan Participants on a uniform and non-discriminatory basis. In such
event, the provisions of Sections 7.7(O) and 3.7(J)(2) below shall
apply in full.
(2) Self-Directed Investments. The Committee may provide
Participants with the ability to self-direct their investments. An
individually directed account means an account under a Plan that
provides for individual accounts and which allows the Participant to
invest or control the manner in which his account will be invested.
The determination by any Participant to exercise control over all or a
portion of the Participant's account shall be made by written notice
to the Trustee and shall be effective as of the first day of the Plan
Year coincident with or next following the giving of said notice,
unless the Trustee agrees to an earlier effective date. The Committee
shall develop self-directed investment procedures to administer the
provisions contained herein, which procedures shall be uniformly
applied, without discrimination, and shall provide Participants with
reasonable opportunities to self-direct their own investments.
27
If a Participant, through the Trustee or its Agent, invests or
reinvests all or any portion of his accounts after December 31, 1981,
in "Collectibles," the amount invested shall be considered a
distribution to the Participant in the amount of the fair market value
to such account of such Collectible and shall be included in the
Participant's gross income for the Participant's taxable year in which
such investment is made. For purposes of the above, the term
"Collectible" means any work of art; any rug or antique; any metal or
gem; any stamp or coin; any alcoholic beverage; any musical
instrument; any historical documents, objects or clothes; or any other
tangible personal property acquired for a Participant's account which
the Commissioner determines to be a Collectible for purposes of I.R.C.
ss. 408. For Plan Years commencing after December 31, 1986,
Collectibles shall exclude gold coins described in 31 U.S.C. ss.
5112(a)(7), (8), (9) or (10) and 31 U.S.C. ss. 5112(e), and any other
item expressly excluded from the definition of "Collectible" as
determined in the I.R.C.
The acquisition of a Collectible includes the purchase, exchange,
contribution or any other method by which an individually-directed
investment account may, directly or indirectly, acquire a Collectible.
Any Collectible acquired on or before December 31, 1981, may continue
to be held by the Trustee for such Participant's account after
December 31, 1981; provided, however, that the proceeds of any sale or
other disposition of such Collectible shall not be used to acquire any
other Collectible after December 31, 1981. Should a Collectible be
acquired by a Participant after December 31, 1981, such Collectible
shall be deemed a distribution and the premature withdrawal penalty
provisions of I.R.C. ss.ss. 72(m)(5) and 408(f)(1) shall apply in
full; provided, that when a Collectible is actually distributed from
an individually-directed account, any amounts previously included in
income shall not be included in gross income at the time the
Collectible is actually distributed to the Participant.
(3) Direct Allocation of Costs, Expenses and Income to
Self-Directed Accounts. All costs and expenses incurred in the
investment of an individual Participant's account shall be charged to
the account of said individual Participant on a uniform and reasonable
basis. Notwithstanding any provision in this Plan to the contrary,
Participants' accounts which are invested at the direction of the
Participants pursuant to this subsection shall be credited with the
actual income, earnings, gains, appreciation, depreciation, expenses
or losses realized or incurred in such account. In the event the
investment philosophy of any Participant requires the expenditure of
an inordinate amount of time by the Trustee, then, in such an event,
said individual Participant's account may be charged a reasonable
amount to compensate said Trustee and/or the Plan.
28
The Plan Administrator and/or Trustee may refuse to follow the
directions of a Participant if in the reasonable opinion of the
Trustee and/or Plan Administrator, based upon the advice of the
attorneys and/or accountants of said Trustee and/or Plan
Administrator, that said investment is not legally permissible. The
decision of the Plan Administrator and/or Trustee shall be final.
(K) Annual Report. The Committee shall prepare annually a report
showing in reasonable summary the financial condition of the Trust Fund and
giving a brief account of the operation of the Plan for the past year and
any further information which the Board of Directors may require. Such
annual report shall be submitted to the Board of Directors and a copy shall
be filed in the office of the Secretary of the Committee.
3.8 Communications With Trustee. To assist the Committee in performing its
functions, the Company agrees to provide the Committee with full and timely
information concerning the compensation of all Participants, their status
including retirement, death, disability, termination of employment or of
participation; and such other pertinent facts as the Committee may require. In
turn, the Committee shall advise the Trustee in writing of such facts as may be
pertinent to the Trustee's management of the Trust. Either the Committee
Chairman or the Committee Secretary shall represent the Committee in its
dealings with the Trustee. They shall issue all written instruments to, and
conduct all necessary transactions with the Trustee. The Trustee is hereby
authorized to accept such written communications and instructions from the
Committee Chairman or the Committee Secretary, and is hereby authorized to act
upon any written instructions or communications duly signed by the Committee
Chairman or Committee Secretary. Whenever a certification is required to be
given to the Trustee, or the Trustee shall deem such certification necessary
prior to the Trustee's taking, suffering or omitting any action, the Committee
shall make such certification by an instrument delivered to the Trustee, signed
in the name of the Committee by the Committee Chairman or the Committee
Secretary. Upon receipt of said certification, the matter in question shall be
deemed conclusively proved to the satisfaction of the Trustee and the Trustee
may act in reliance thereon in his discretion. However, the Trustee may accept
such other evidence of the matter in question or may request such further
evidence as the Trustee may deem reasonable. In any event, the Trustee shall be
entitled to act in reliance upon any notice, resolution, order, certificate,
opinion, telegram, letter or other written document reasonably believed by the
Trustee to be genuine and to have been executed by the Committee Chairman or
Committee Secretary.
3.9 Company Indemnification of Committee. No member of the Committee shall
be liable for any act or omission of any other member of the Committee, nor for
any act or omission of duly appointed attorneys, accountants or agents acting in
its employment in the administration of the Plan, nor for any act or omission of
his own part, except for his own willful misconduct. The Company hereby agrees
to indemnify and hold harmless each member of the
29
Committee from any and all expenses and liabilities arising out of his
membership on the Committee except expenses and liabilities arising out of said
member's own willful misconduct. The members of the Committee, the Company and
its officers, Employees and directors shall be entitled to rely upon all tables,
valuations, certificates and reports provided to them by the Trustee, any
Certified Public Accountant, any physician authorized to practice medicine
selected or approved by the Committee or by the Board of Directors and upon all
opinions given by legal counsel. The members of the Committee, the Company and
its officers, Employees and directors are hereby presumed to act in good faith
when they rely upon any such Trustee, physician, accountant, legal counsel or
similar professional advice, and all actions taken in reliance thereon shall be
deemed within the scope of the indemnification and hold harmless provisions of
this Section.
3.10 Joint Meetings. So long as the Committee consists only of persons who
are also members of the Board of Directors, all meetings of the Committee may be
held jointly with regular or special meetings of the Board of Directors of the
Company, and it will not be necessary to maintain separate records of the
Committee's proceedings so long as written documentation of such proceedings are
maintained in the minutes of the meetings of the Board of Directors of the
Company.
3.11 Legal Disability of Benefit Recipient. Whenever, in the Committee's
opinion, a person entitled to receive any payment of a benefit or benefit
installment is under a legal disability or is incapacitated in any way so as to
be unable to manage his own financial affairs, the Committee may direct the
Trustee to make such benefit payments to said person directly, to said person's
legal representative or guardian, to a relative or friend of such person for his
benefit or the Committee may direct the Trustee to apply the payment for the
benefit of such disabled or incapacitated person in such manner as the Committee
deems advisable. Any payment of a benefit or installment thereof made in
accordance with the provisions of this Section shall be a complete discharge of
any liability for the making of such benefit payment under the provisions of
this Plan.
3.12 Location of Recipient. It shall be the duty of the Committee to locate
any Participant or Beneficiary when said person becomes eligible for benefits
under this Plan. The Committee may require each Participant and Beneficiary to
file with the Committee in writing his post office mailing address and any
change of post office mailing address. The Committee shall communicate to all
Participants that they are responsible to maintain their current address with
the Employer. The Committee may mail any communication, distribution, statement
or notice, first class, postage prepaid, to any Participant or Beneficiary, at
the last known address said person has filed with the Committee and said mailing
shall be deemed to discharge the obligation of the Committee hereunder. If no
address is filed with the Chairman, it may mail any communication, distribution,
statement or notice addressed to said person at his last post office address as
shown on the Company's records. No additional search for any Participant or
Beneficiary shall be required of the Committee, and the Committee's mailing by
first class mail, postage prepaid, to the address determined in accordance with
the foregoing shall be binding upon said person for all purposes of this Plan.
30
Alternatively, in the sole discretion of the Employer, the Employer may
elect to establish an interest bearing bank account in the Participant's name in
the event the Employer is not able to locate a Participant or other Beneficiary
and provided that the Employer has the social security number of the Participant
and has otherwise satisfied itself that the establishment of any such bank
account will not be economically infeasible or inconsistent with applicable
provisions of the I.R.C. If no claim to such account is made within three (3)
years from the date of its establishment, the Employer may elect to close said
account and reallocate said funds in the same manner as provided for
forfeitures; provided, however, any such reallocation of such amount as a
forfeiture shall remain subject to all applicable laws and plan provisions.
3.13 Participants' Accounts. The Committee shall establish and maintain
records in the form of separate accounts for each Participant or Former
Participant as required pursuant to applicable regulations and accounting
conventions. The Participant accounts which may be established are further
described below. All Participant accounts shall be further subdivided between
contributions made by the Employer prior to said Plan becoming a "Top-Heavy"
Plan and earnings and profits thereon, and contributions made by the Employer
during such period of time after the Plan has become "Top-Heavy." All types of
Participant accounts shall exist only for purposes of recordkeeping and a
physical segregation of the Trust Fund assets into such accounts is not
required.
(A) Employer Contribution Accounts. The following accounts shall exist
and shall be established to account for the type of contribution described
under each such account.
(1) Employer Discretionary Contribution Account shall refer to
the account which reflects discretionary Employer contributions which
may be made to the Plan. Employer Discretionary Contributions are also
referred to herein as "Nonelective Contributions" and refer to
Employer contributions (other than matching contributions) with
respect to which the Employee may not elect to have the contributions
paid to the Employee in cash or other benefits instead of being
contributed to the Plan. Forfeitures, if any, which are allocated
pursuant to Section 8.13 below shall be allocated to the Discretionary
Employer Contribution Account.
(2) Employer Matching Contribution Account shall refer to
matching contributions, if any, which are made by the Employer to the
Plan pursuant to I.R.C. ss. 401(m). Employer Matching Contributions
shall be further subdivided into "Basic" and "Discretionary" Company
Matching Accounts. The Basic Company Matching Account refers to the
Matching Company Contribution stemming from Participants' salary
deferrals up to two percent (2%) of Compensation and the net worth of
the Trust attributable thereto. The Discretionary Company Matching
Account refers to the Matching Company Contribution, if any, stemming
from Participants' salary deferrals in
31
excess of two percent (2%) of Compensation and the net worth of the
Trust attributable thereto.
(3) Elective Contributions refer to Employer contributions made
to the Plan that were subject to a cash or deferred election by a
Participant which qualifies as a cash or deferred or salary reduction
under I.R.C. ss. 401(k).
Elective Contributions shall be further subdivided into "Basic"
and "Voluntary" Elective Contribution Accounts. For Plan Years
commencing before January 1, 1989, the Basic Elective Contribution
refers to that portion of the Participant's contribution stemming from
salary deferrals up to two percent (2%) of Compensation and the net
worth of the Trust attributable thereto. For Plan Years commencing on
or after January 1, 1989, the Basic Elective Contribution refers to
that portion of the Participant's contribution stemming from after-tax
employee contributions up to two percent (2%) of Compensation and the
net worth of the Trust attributable thereto. The Voluntary Elective
Contribution Account refers to that portion of the Participant's
contribution stemming from salary deferrals in excess of two percent
(2%) of Compensation and the net worth of the Trust attributable
thereto.
No amount that has become currently available to an Employee or
that is designated or treated, at the time of deferral or
contribution, as an after-tax contribution may also be treated as an
elective contribution.
(4) Qualified Employer Contributions shall refer to Employer
Discretionary and/or Matching Contributions which meet the
requirements of Treas. Reg. ss. 1.401(k)-1(g)(7). Unless the Employer
expressly elects to characterize Employer contributions as "Qualified"
contributions, Employer contributions shall not be characterized as
Qualified contributions.
(B) Employee Contributions. Employee Contributions shall refer to all
other contributions made to the Plan by an Employee Participant on an
after-tax or matching basis. If an Employee Participant fails to designate
the character of his contribution to the Plan, then such contribution shall
be presumed to be a salary reduction election which shall be characterized
as an Elective Contribution as defined above; provided, the first two
percent (2%) contribution shall be deemed an after-tax Employee
contribution in all events.
3.14 Annual Allocations. The Committee, upon receipt of the fair market
value from the Trustee, pursuant to Article 7 below, shall determine the net
change in fair market value of the Trust Fund including all income or losses,
expenses of the Plan and changes in fair market value of Trust Fund assets. The
Committee shall allocate such changes at least annually among the respective
separate participating Participant accounts commensurately among Plan
32
Participants in the same ratio that such account balance bears to all account
balances. Such allocations shall be based upon the respective account balances
on the first day of the immediately preceding valuation period during the Plan
Year, less withdrawals during the Plan Year. Allocations shall be made on the
last bank business day of April, August and December of each Plan Year. The
Trustee shall also determine the value of the Trust Fund at any other time as
directed by the Committee.
Allocations shall be made in the following order during the Plan Year:
(A) Deductions. First, deductions shall be made from all accounts for
payments or distributions made from such accounts since the most recent
allocation.
(B) Allocations of Employer Contributions. Second, allocations of
Employer contributions pursuant to Article 5 below and forfeitures pursuant
to Section 8.13 below to the respective Employer contribution accounts of
all Participants.
(C) Allocations of Employee Contributions. Third, allocations of all
Employee contributions made during said year.
(D) Adjustments. Fourth, adjustments for each account to reflect
changes in the fair market value of the Trust Fund and all earnings, losses
and expenses of the Trust Fund.
(E) Allocation of Insurance Dividends and Credits. Any dividends or
credits earned on insurance contracts will be allocated to the
Participant's account from Employer contributions for whose benefit the
contract is held.
(F) Costs. Administrative costs to maintain and monitor a terminated
Participant's account may also be charged to a terminated Participant's
account; provided, any such charge shall only apply to Participant accounts
in excess of Ten Thousand and No/100 Dollars ($10,000.00); and, such
charge, if applied, shall be uniformly applied to all similarly situated
Participants.
Notwithstanding the above, by administrative rule, uniformly applied
without discrimination, the Committee may elect to allocate earnings, profits,
losses and expenses on sums withdrawn during the Plan Year, matching employer
contributions, elective deferrals and voluntary after-tax employee contributions
made, if any, during the Plan Year based upon a weighted average of the income,
losses and expenses of the Plan provided that, to the extent Section 5.6 below
requires a different allocation, such allocation shall govern.
3.15 Allocation Report to Participants. Within ninety (90) days of the
later of: the final annual payment of the Company's contribution to the Trust
Fund; or, the due date for filing the Employer's tax return, the Committee shall
give each Participant or Beneficiary a statement of the allocations made to his
respective accounts and the income, profits or losses charged to it.
33
The Committee also shall provide to any Participant or Beneficiary who requests,
in writing, a written report on said person's account balance setting forth the
latest information concerning the total amount of his account and the vested
percentage or the earliest date on which any part of his account will become
vested; provided, however, that no Participant or Beneficiary shall be entitled
to more than one report during any one twelve (12) month period. Any Participant
or Beneficiary shall have ninety (90) days after the notification of allocation
to object, in writing.
ARTICLE 4.
PARTICIPATION AND MEMBERSHIP ELIGIBILITY
4.1 Eligibility Requirements. Every Employee, as defined above, is eligible
to become a Participant in the Plan and to receive Employer contributions or to
make salary deferrals, as applicable, after satisfying the following
requirements:
(A) Minimum Age. The Employee has attained the age of twenty-one (21).
(B) Year of Service. The Employee has completed one (1) Year of
Service as defined herein.
(C) Union Exception. The Employee is not included in a unit of
employees covered by an agreement which the Secretary of Labor finds to be
a collective bargaining agreement between employee representatives and one
or more employers, if there is evidence that retirement benefits were the
subject of good faith bargaining between such employee representatives and
such employer or employers, unless the collective bargaining agreement
expressly provides for participation herein. For this purpose, the term
"employee representatives" does not include any organization more than
one-half (1/2) of whose members are employees who are owners, officers, or
executives of the Employer.
(D) Nonresident Aliens. Effective for Plan Years commencing on or
after January 1, 1995, nonresident aliens with no United States source
earned income are excluded from eligibility to participate.
Notwithstanding the above, in the event this Plan is a Top-Heavy Plan, then
the eligibility provisions of Section 8.16 below, to the extent inconsistent
with the above, shall control.
4.2 Voluntary Membership and Participation. Participation in the Plan is
voluntary. A Participant may not elect not to participate in discretionary
Employer Contributions, if any.
4.3 Membership Application.
(A) Execution of Membership Application. Subject to Section 6.2 below,
all Participants must execute and complete written application forms
providing such
34
information as the Committee or Trustee may reasonably and uniformly
require of all Participants. The failure to complete an application form
shall not affect a Participant's right to receive discretionary Employer
contributions under said Plan or to remain a Participant in said Plan,
however, a Participant shall not be eligible to make salary deferrals or to
receive matching Employer contributions unless a timely written election
has been made to make salary deferrals or elective contributions. All
salary reduction elections shall be prospective and shall not be effective
retroactively.
Each Employee, in his application for participation, may designate a
Beneficiary, and a successor Beneficiary, to receive any death benefits
provided herein and may elect the form of distribution of retirement
benefits as may be elected under Section 8.2 below. The application form
shall also be executed in writing by the Employee's spouse, if any, to
acknowledge the consent of the spouse to the Beneficiary designation and to
the method of distribution selected. In the event the Participant
subsequently desires to change his Beneficiary designation, he may do so by
submitting an appropriate written request in the form required by the
Committee, which designation shall also be executed in accordance with this
Plan.
(B) Modifications to and Limitations On Participant Contributions.
Subject to Section 6.2 below, each Participant may elect to increase or
decrease his salary deferrals or after-tax employee contributions,
prospectively, on the first day of the Plan Year or the first day of the
fifth or ninth months of the Plan year; provided, at least fifteen (15)
days advance notice, in writing, shall be required.
In addition, a Participant who is affected by a demonstrated hardship,
as defined herein or who wishes to completely suspend salary deferrals or
after-tax employee contributions, upon provision of written notice at least
fifteen (15) days in advance, may suspend all salary deferrals and/or
after-tax employee contributions effective on the first day of the month
following submission of the request to suspend such contributions. A
Participant who has suspended contributions shall not be permitted to renew
active participation in the Plan until the later of: the second entry date
next following the suspension of such Contributions; or, the earliest date
permitted subsequent to a hardship withdrawal from an I.R.C. ss. 401(k)
plan, if applicable; or, the date when the election may be modified as
provided herein. Notwithstanding the above, in no event shall any
Participant be entitled to modify his election during the last month of the
Plan Year.
(C) Failure to Designate Beneficiaries. If a Participant fails to
designate Beneficiaries, the Committee is empowered to designate
Beneficiaries on behalf of said Participant, but only from among the
following class of beneficiaries in the order and priority named: surviving
spouse of the Participant; children, including legally adopted children;
or, the estate of the Participant. In no event may the Company or the Trust
be named as a Beneficiary. The application form shall also set forth the
optional methods of payment provided in this Plan to afford the Employee
the opportunity to elect his preference. Upon becoming a Participant in the
Plan, the Employee shall be bound by the terms and conditions of the Plan
and Trust.
35
4.4 Entry Dates.
(A) Entry Date for Eligibility to Receive Employer Contributions.
Every employee who is eligible as of the effective date of this Agreement
shall become a Participant as of that date. Every other Employee who
thereafter becomes eligible under Section 4.1 above shall participate in
the Plan as provided for in this Article as of the earlier of the following
dates, provided he is employed on that date:
(1) First Day. The first day of the Plan Year next following the
date the Employee fulfills the requirements of Section 4.1;
(2) Fifth Month. The first day of the fifth month of the Plan
Year next following the date the Employee fulfills the requirements of
Section 4.1 above; or,
(3) Ninth Month. The first day of the ninth month of the Plan
Year next following the date the Employee fulfills the requirements of
Section 4.1 above.
The Employee shall be entitled to his allocation of Employer
contributions during the Plan Year in which the Employee fulfills his
eligibility requirements, and his contribution allocation shall be based
upon his compensation for the remaining portion of the Plan Year after the
Participant's entry date occurred, subject to the terms and conditions of
this Plan.
(B) Entry Date for Eligibility to Make Elective Participant
Contributions. Every Employee who is eligible as of the effective date of
this Agreement who has elected to participate shall either remain a
Participant in the Plan or shall be eligible to become a Participant in the
Plan as of the next following entry date. For purposes of this Section, the
Plan entry dates shall be on the same entry dates provided for above;
provided, in order to participate in the Plan, each eligible Employee must
first complete an election form to provide for salary deferrals or other
contributions before participation in the Plan can begin.
(C) No Employer Allocations Prior to Participation in the Plan. No
Employee shall be entitled to participate in or benefit from matching or
discretionary Employer contributions, if any, for any period prior to the
date on which the Employee actually becomes a Participant in the Plan.
36
4.5 Termination and Rehiring. An Employee who has satisfied the eligibility
requirements, separates from service prior to the entry date and returns after
the entry date but prior to a one (1) year Break in Service, will participate
immediately on his reemployment commencement, as if such termination had not
occurred.
A vested Participant, or a non-vested Participant as defined in Section
8.12 below, who is reemployed before or after a Break in Service, who has
already met the Plan eligibility requirements, will participate immediately on
commencement of his reemployment. Every other Employee whose employment has
terminated, upon being rehired, shall be deemed a new Employee for purposes of
determining his eligibility under Section 4.1 above.
4.6 Affiliated Company. This Plan and Trust shall include the Employees of
any affiliated or subsidiary corporation, if such corporation formally adopts
this Plan and Trust, in writing.
4.7 Communication. The Company shall inform all Employees of their
eligibility and of the Plan terms as soon as practicable after said Employee
becomes eligible for participation.
4.8 Limitations. The rights of any Employee, Participant or Beneficiary are
limited to those incorporated herein, and no Employee, Participant or
Beneficiary shall have any other legal or equitable right against the Company, a
subsidiary or affiliated Company, the officers and directors of such Company or
the Trustee.
4.9 Minimum Plan Participation Requirements. For Plan Years commencing
after December 31, 1988, a trust shall not constitute a qualified trust under
I.R.C. ss. 401(a)(26) unless such trust is part of a Plan, which on each day of
the Plan Year benefits the lesser of: fifty (50) Employees of the Employer; or,
forty percent (40%) or more of all Employees of the Employer. For purposes of
determining compliance with the above provisions, the following Employees of the
Employer may be excluded: Employees who are included in a unit of Employees
covered by an agreement which the Secretary of Labor finds to be a collective
bargaining agreement between employee representatives and one or more employers,
if there is evidence that retirement benefits were the subject of good faith
bargaining between such employee representatives and such employer or employers;
Employees who have not met the minimum age and service requirements established
by the Plan for Plan participation; and, any other employee excluded under
I.R.C. ss. 401(a)(26), as amended, unless such Employee is otherwise eligible to
participate hereunder. Employees who are eligible to contribute or who may elect
to have contributions made on their behalf, pursuant to a deferred salary
reduction election under I.R.C. ss. 401(k) or matching contributions under
I.R.C. ss. 401(m) shall be treated as benefiting under the Plan.
37
ARTICLE 5.
EMPLOYER CONTRIBUTIONS
5.1 Determination of Amount.
(A) Nonelective Discretionary Employer Contributions. This Plan is
intended to qualify as a profit sharing plan under I.R.C. ss. 401, et seq.
The Employer contribution to the Trust Fund for each Plan Year shall be
made without regard to current or accumulated profits of the Employer and
shall be in such amount as the Board of Directors (or other governing body)
may pay or authorize by appropriate resolution. For any Plan Year, the
resolution shall be adopted by the Board of Directors (or other governing
body) and funded into the Trust on or before the latest date allowable for
adoption of such a resolution pursuant to the applicable federal laws and
regulations, in order to obtain a deduction for federal income tax
purposes.
Nonelective Discretionary Employer Contributions shall not be treated
as Qualified Nonelective Contributions under Treas. Reg. ss.
1.401(k)-1(b)(3).
(B) Elective 401(k) Employer Contributions. For each Plan Year, the
Employer shall contribute to the Plan the amount of the total qualified
salary reduction elections under I.R.C. ss. 401(k) of all Participants
pursuant to Section 6.2, which amount shall be deemed the Employer's
Elective Contribution.
(C) Matching Employer Contributions. On behalf of each Participant who
is eligible to share in Employer matching contributions for the Plan Year,
an Employer matching contribution equal to one hundred percent (100%) of
the first two percent (2%) of Compensation contributed as a Participant
after-tax Employee contribution and fifty percent (50%) of the next four
percent (4%) of Compensation contributed as a Participant elective salary
deferral contribution will be made. Such Employer matching contribution
amount shall be deemed an Employer's Nonelective Contribution. In applying
the matching percentage specified above, only Participant salary reductions
and voluntary after-tax contributions up to six percent (6%) of total
Compensation shall be considered for matching contribution purposes. No
Employer matching contributions shall be made based upon a rollover account
balance.
Notwithstanding the above, in no event shall any Employer Matching
Contributions be made to the Plan if such contribution would result in an
impermissible contribution of benefits in excess of the limitations
described under I.R.C. ss.ss. 401(k), 404 or 415, or any other applicable
provisions of the I.R.C.
5.2 Funding Policy and Method.
(A) Nonelective Employer Contributions. The funding policy and method
of the Employer shall be to make all Employer Nonelective Contributions as
determined
38
into the trust Fund under the trust provisions of this Plan. The Directors
may amend or terminate said funding policy and method by appropriate
resolution, subject to the provisions of this Plan and subject to
applicable laws and regulations. The Employer has paid to the Trustee an
initial sum of money, as of the date of the adoption of this Plan, as its
initial contribution to the Trust Fund. The Employer shall pay its annual
contribution on account of any given Plan Year not later than the time
prescribed by law for filing its Federal Income Tax Return for its Taxable
Year, including extensions thereof.
The Employer contribution under the Plan for any Plan Year will be
considered to have been made on the earlier of: the actual date
contributed; or, the last day of the Plan Year (regardless of when paid to
the Trustee) immediately preceding the contribution (subject to applicable
I.R.C. rules) unless otherwise designated by the Employer.
(B) Elective Employer and Basic After-Tax Employee Contributions.
Elective Employer and Basic After-Tax Employee Contributions accumulated
through payroll deductions shall be paid to the Trustee as of the earliest
date on which such contributions can reasonably be segregated from the
Employer's general assets, but in any event within ninety (90) days from
the date on which such amounts would otherwise have been payable to the
participant in cash. The provisions of Department of Labor Reg. ss.
2510.3-102 are incorporated herein by reference. Furthermore, any
additional Elective Employer and Basic After-Tax Employee contributions
which are allocable to the Participant's Elective or Basic After-Tax
Employee contribution Accounts for a Plan Year shall be paid to the Plan no
later than the twelve (12) month period immediately following the close of
such Plan Year.
5.3 Limitation on Maximum Employer Contribution.
(A) Maximum Annual Limitations. In no event may the Employer's
contribution exceed the amount allowable as a deduction under the I.R.C.,
provide a contribution to any Participant that would exceed the Maximum
Annual Addition or any other Limitation provided for under this Plan or
applicable law, or provide an allocation to any Participant based on
compensation in excess of Participant Compensation as defined above.
(B) Maximum Employer Contribution. In no event may the Employer's
Nonelective contribution to the Trust Fund pursuant to this Plan exceed
fifteen percent (15%) of the Compensation otherwise paid or accrued for all
Participants under this Plan during the Plan Year in question, or such
other percentage as may hereafter be permitted under the I.R.C.
Contributions under this Plan shall be coordinated and aggregated with all
other Employer contributions to other Employer profit sharing plans, if
any, to determine the maximum permissible Employer Nonelective Contribution
amount.
(C) Allocation of Excess Annual Additions. In the event the
contribution allocated to any Participant exceeds the Maximum Permissible
Annual Addition, then,
39
and in such event, such excess Annual Addition under this Plan on behalf of
a Participant shall be reduced by first refunding all salary deferral
contributions; and, second, all nondeductible Employee contributions, to
the extent they are in excess of the Maximum Annual Addition amounts. The
amount of such reduction consisting of Employee contributions shall be paid
to the Employee as soon as reasonably possible without accrued interest.
The remainder of such reduction, if any, shall be affected by
proportionately reducing the Employer contributions and forfeitures, if
any, to be allocated under this Plan on behalf of such Participant as of
the allocation date.
The amount of such reduction in Plan contributions consisting of
Employer contributions and forfeitures shall be allocated and/or
reallocated to other Participants' accounts in accordance with the Plan
formula for allocating Employer contributions and forfeitures as provided
below; provided further, that any such contributions or allocations shall
not be allowed to cause the additions to any other Participant's account to
exceed the lesser of: the maximum permissible amount; or, any other
limitation provided for in the Plan.
(D) Creation of a Suspense Account. To the extent that the reductions
described in the above paragraphs cannot be allocated to other
Participants' accounts without exceeding applicable Plan Limitations, then
such reduction amount shall be allocated to a suspense account as
forfeitures and held therein until the next succeeding date on which
forfeitures can be allocated under this Plan. Provided, however, investment
gains and losses and other income shall not be allocated to funds in the
suspense account. If a suspense account is in existence at any time during
a particular Limitation Year, then all amounts in the suspense account must
be allocated and reallocated to Participants' accounts before any Employer
or Employee contributions may be made to the Plan for that Limitation Year.
In the event of termination of the Plan, the suspense account shall revert
to the Employer to the extent that it may not then be allocated to any
Participants' or former Participants' accounts.
If the Employer has established both a Pension and Profit Sharing
Plan, then, and in such event, if after the return of the Participant's
excess Voluntary Contributions, an excess remains, the adjustment will be
made in the profit sharing contributions and forfeitures allocated to the
Participants' Profit Sharing Accounts in the manner described below.
(E) Coordination of Annual Addition Reallocations. If, pursuant to
Section 5.3 above or as a result of the allocation of forfeitures, if
applicable, a Participant's Annual Additions under this Plan and any other
related or aggregated Plans would result in an excess contribution amount
for any Participant or Plan for a Limitation Year, then the excess amount
will be deemed to consist of the Annual Additions last allocated, except
that Annual Additions attributable to a welfare benefit fund or individual
medical account will be deemed to have been allocated first regardless of
the actual allocation date.
40
5.4 Forfeitures. For purposes of Article 5 only, all matching Employer
contributions under Section 5.1(C) shall be reduced by allocable forfeitures,
and if additional forfeitures remain to be allocated, then discretionary
nonmatching Employer contributions under Section 5.1(A) shall be reduced by
remaining allocable forfeitures, if any, reallocated for such Plan Year. No
forfeitures shall occur solely as a result of an Employee's withdrawal of
Employee contributions.
5.5 Reversion to Employer Prohibited. Notwithstanding any provision of this
Plan or any amendments thereof, except Section 5.7 below, it shall be impossible
at any time for any part of the principal or income of the Trust Fund to revert
to the Employer, or to be used for or directed to any purpose other than for the
exclusive benefit of Participants, their Beneficiaries or their estates.
5.6 Allocation of Employer Contributions. The Employer's nonelective
discretionary and matching contributions shall be allocated among all
Participants, who meet the eligibility requirements of Subsection 5.6(A) below.
(A) Nonelective Discretionary Employer Contributions.
(1) Eligibility. In order to receive an allocation of a Company
contribution for a particular Plan Year, a Participant must receive
Compensation from the Company during the Plan Year; complete at least
one (1) Hour of Service during a Year of Service for such Plan Year as
defined above; must be actively employed on the last day of the Plan
Year; and, not be in Inactive Status for such Plan Year as defined
above; provided that, Section 8.16 provisions shall apply to Top-Heavy
Plans. Provided, further, only compensation earned on or after a
Participant's entry into the Plan, for Employer contribution purposes,
shall be counted for allocation purposes.
(2) Allocation Formula. The Company's contribution shall be
allocated to the respective Employer contribution accounts of eligible
Participants in the same ratio which each eligible Participant's
Compensation during the Plan Year bears to the total Compensation of
all eligible Participants during the Plan Year.
41
(B) Matching Employer Contributions.
(1) Eligibility. In order to receive an allocation of a Company
matching contribution for a particular Plan Year, a Participant must
receive Compensation from the Company during the Plan Year; complete
at least one (1) Hour of Service during a Year of Service for such
Plan Year as defined above; elect to make after-tax and/or salary
reduction contributions into the Plan; and, not be in Inactive Status
for such Plan Year as defined above; provided that, Section 8.16
provisions shall apply to Top-Heavy Plans. Provided, further, only
compensation earned on or after a Participant's entry into the Plan,
for Employer contribution purposes, shall be counted for allocation
purposes.
(2) Allocation Formula. Matching Employer contributions shall be
allocated to eligible Participants based upon the matching formula
provided under Section 5.1 above.
5.7 Actual Deferral Percentage Tests.
(A) Maximum Annual Allocation of Elective Employer Contributions. For
each Plan Year commencing after December 31, 1986, the annual allocation
derived from Elective Employer Contributions, or Elective Employer
Contributions in combination with Qualified Nonelective Contributions
and/or Qualified Matching Contributions that are treated as Elective
Contributions under the Plan, made to a Participant's Elective Account
shall satisfy one of the following actual deferral percentage tests:
(1) The "Actual Deferral Percentage" for the eligible Highly
Compensated Participant group shall not be more than the "Actual
Deferral Percentage" of the eligible Non-Highly Compensated
Participant group multiplied by 1.25; or,
(2) The excess of the "Actual Deferral Percentage" for the
eligible Highly Compensated Participant group over the "Actual
Deferral Percentage" for the eligible Non-Highly Compensated
Participant group shall not be more than two percentage points.
Additionally, the "Actual Deferral Percentage" for the eligible Highly
Compensated Participant Group shall not be more than the "Actual
Deferral Percentage" for the eligible Non-Highly Compensated
Participant group multiplied by two (2).
The provisions of I.R.C. ss. 401(k)(3) and Treas. Reg. ss.
1.401(k)-1(b) shall also apply to this Plan and are incorporated
herein by reference.
The adopting Employer named herein has elected to utilize all
Elective
42
Contributions, Qualified Nonelective Contributions and Qualified
Matching Contributions which are treated as Elective Contributions
under the Plan, as applicable, to satisfy the Actual Deferral
Percentage Test.
(B) Coordination of Actual Deferral Percentage and Actual Compensation
Percentage Tests. Notwithstanding the above, for Plan Years commencing
after December 31, 1988, in order to prevent the multiple use of the
alternative method described in the immediately preceding paragraph and in
I.R.C. ss. 401(m)(9)(A), any Highly Compensated Participant eligible to
make Elective deferrals pursuant to this section and to make after-tax
Employee contributions or to receive matching contributions under this
Plan, if applicable, or under any other plan maintained by the Employer or
an Affiliated Employer, shall have his actual contribution ratio reduced
pursuant to Treas. Reg. ss. 1.401(M)-2, the provisions of which are
incorporated herein by reference.
(C) Definitions. For purposes of this Section, "Actual Deferral
Percentage" means, with regard to each specific group of Participants for a
Plan Year, with respect to the Highly Compensated and Non-Highly
Compensated Participant groups for a Plan Year, the average of the
contribution percentage ratios, calculated separately for each Participant
in each such group, of the amount of Elective Employer Contributions
allocated to each Participant's Elective Account for such Plan Year,
including all or any portion of cash bonuses which may be deferred pursuant
to this Plan in relation to such Participant's Compensation for such Plan
Year. The actual deferral ratio for each Participant and the "Actual
Deferral Percentage" for each group shall be calculated to the nearest
one-hundredth (1/100) of one percent (1%). Elective Employer Contributions
allocated to any Participant shall include: (1) any Elective Deferrals made
pursuant to the Participant's deferral election (including Excess Elective
Deferrals of Highly Compensated Employees), but excluding (a) Excess
Elective Deferrals of Non-Highly Compensated Employees that arise solely
from Elective Deferrals made under this Plan or plans of this Employer;
and, (b) Elective Deferrals that are taken into account in the Contribution
Percentage test (provided the ADP test is satisfied both with and without
exclusion of these Elective Deferrals; and, (2) at the election of the
Employer, Qualified Non-Elective Contributions and Qualified Matching
Contributions. For purposes of computing Actual Deferral Percentages, an
Employee who would be a Participant but for the failure to make Elective
Deferrals shall be treated as a Participant on whose behalf no Elective
Deferrals are made.
For purposes of this Plan, an Elective Contribution may only be taken
into account under the Plan if such contribution satisfies the requirements
described herein. Specifically, the Elective Contribution must be allocated
to the Participant under the Plan as of the date within the applicable Plan
Year. For purposes of this rule, an Elective Contribution is considered
allocated as of a date within a Plan Year only if the allocation is not
contingent on the Participant's participation in the Plan or performance of
services on any date subsequent to the allocation date; and, the Elective
Contribution is actually
43
paid to the trust no later than the end of the twelve (12) month period
immediately following the Plan Year to which the contribution relates. The
Elective Contribution must also relate to compensation that either would
have been received by the Participant in the Plan Year but for the
Participant's election to defer under the Plan, or is attributable to
services performed by the Participant in the Plan Year and, but for the
Participant's election to defer, would have been received by the
Participant within two and one-half (2 1/2) months after the close of the
Plan Year. All Elective Contributions must satisfy the above requirements
in order to be taken into account for purposes of the Actual Deferral
Percentage Test.
For the purposes of this section, a Highly Compensated Participant and
a Non-Highly Compensated Participant shall include any Employee eligible to
make a deferral election pursuant to this section, whether or not such
deferral election was made or suspended pursuant to this Plan.
(D) Family Aggregation. For the purpose of determining the actual
deferral ratio of a Highly Compensated Employee who is subject to the
Family Member aggregation rules of I.R.C. ss. 414(q)(6) because such
Participant is either a "five percent owner" of the Employer or one of the
ten (10) Highly Compensated Employees paid the greatest "415 Compensation"
during the year, the following rules shall apply:
(1) The combined actual deferral ratio for the family group
(which shall be treated as one Highly Compensated Participant) shall
be the greater of: (i) the ratio determined by aggregating Elective
Employer Contributions and "414(s) Compensation" of all eligible
Family Members who are Highly Compensated Participants without regard
to family aggregation; and, (ii) the ratio determined by aggregating
Elective Employer Contributions and "414(s) Compensation" of all
eligible Family Members (including Highly Compensated Participants).
However, in applying the $200,000.00 limit to "414(s) Compensation,"
for Plan Years beginning after December 31, 1988, Family Members shall
include only the affected Employee's spouse and any lineal descendants
who have not yet attained age nineteen (19) before the close of the
Plan Year.
(2) Elective Employer Contributions and "414(s) Compensation" of
all Family Members shall be disregarded for purposes of determining
the "Actual Deferral Percentage" of the Non-Highly Compensated
Participant group except to the extent taken into account in
subparagraph (1) above.
(3) If a Participant is required to be aggregated as a member of
more than one family group in a plan, all Participants who are members
of those family groups that include the Participant are aggregated as
one family group in accordance with subparagraphs (1) and (2) above.
44
(E) Aggregation of Cash or Deferred Plans. For the purposes of this
Section and I.R.C. ss.ss. 401(a)(4), 401(k) and 410(b), if two or more
plans which include cash or deferred arrangements are considered one plan
for purposes of I.R.C. ss.ss. 401(a)(4) or 410(b) (other than I.R.C. ss.
410(b)(2)(A)(ii) as in effect for Plan Years beginning after December 31,
1988, the cash or deferred arrangements included in such plans shall be
treated as one arrangement.
In addition, two or more cash or deferred arrangements may be
considered as a single arrangement for purposes of determining whether or
not such arrangements satisfy I.R.C. ss.ss. 401(a)(4), 401(k) or 410(b). In
such a case, the cash or deferred arrangements included in such plans and
the plans including such arrangements shall be treated as one arrangement
and as one plan for purposes of this Section and I.R.C. ss.ss. 401(a)(4),
401(k) and 410(b).
For Plan Years beginning after December 31, 1989, plans may be
aggregated under this subparagraph (E) only if they have the same Plan
Year.
For the purposes of this Section, if a Highly Compensated Participant
is a Participant under two or more cash or deferred arrangements (other
than a cash or deferred arrangement which is part of an employee stock
ownership plan as defined in I.R.C. ss. 4975(e)(7) for Plan Years beginning
after December 31, 1988), of the Employer or an Affiliated Employer, all
such cash or deferred arrangements shall be treated as one cash or deferred
arrangement for the purpose of determining the actual deferral ratio with
respect to such Highly Compensated Participant. However, for Plan Years
beginning after December 31, 1988, if the cash or deferred arrangements
have different Plan Years, this paragraph shall be applied by treating all
cash or deferred arrangements ending with or within the same calendar year
as a single arrangement.
Notwithstanding the foregoing, certain plans shall be treated as
separate if mandatorily disaggregated under regulations under I.R.C. ss.
401(k)
(F) Adjustments to Actual Deferral Percentage Tests. In the event that
the initial allocations of the Employer's Elective Contributions made
pursuant to Section 5.7(A) above do not satisfy one of the tests set forth
therein for Plan Years beginning after December 31, 1986, then the
Administrator shall adjust Excess Contributions pursuant to the options set
forth below:
(1) Leveling and Distribution Method. On or before the fifteenth
(15th) day of the third (3rd) month following the end of each Plan
Year, the Highly Compensated Participant having the highest Actual
Deferral Ratio shall have his portion of Excess Contributions
distributed to him and/or, at his election recharacterized as a
voluntary Employee contribution pursuant to this Plan until one of the
tests set forth in Section 5.7(A) is satisfied, or until his Actual
Deferral Ratio equals the Actual Deferral Ratio of the Highly
45
Compensated Participant having the second highest Actual Deferral
Ratio. This process shall continue until one of the tests set forth in
Section 5.7(A) is satisfied. For each Highly Compensated Participant,
the amount of Excess Contributions is equal to the Elective
Contributions made on behalf of such Highly Compensated Participant
(determined prior to the application of this paragraph) minus the
amount determined by multiplying the Highly Compensated Participant's
Actual Deferral Ratio (determined after application of this paragraph)
by his "414(s) Compensation." However, in determining the amount of
Excess Contributions to be distributed and/or recharacterized with
respect to an affected Highly Compensated Participant as determined
herein, such amount shall be reduced by any Excess Deferred
Compensation previously distributed to such affected Highly
Compensated Participant for his taxable year ending with or within
such Plan Year.
(a) With respect to the distribution of Excess Contributions
pursuant to subsection (1) above, such distribution:
(i) may be postponed but not later than the close of
the Plan Year following the Plan Year to which they are
allocable;
(ii) shall be made from Qualified Nonelective
Contributions only to the extent that Excess Contributions
exceed the balance in the Participant's Elective Account
attributable to Deferred Compensation and Employer matching
contributions made pursuant to this Plan, if any;
(iii) shall be adjusted for Income;
(iv) shall be designated by the Employer as a
distribution of Excess Contributions (and Income); and,
(v) in no case shall the amount of excess contributions
recharacterized for a Plan Year with respect to any Highly
Compensated Employee exceed the amount of Elective
Contributions made on behalf of such Highly Compensated
Employee for such Plan Year.
Notwithstanding the above, in the event of a complete
termination of the Plan during the Plan Year in which the Excess
Contribution arose, such distribution shall be made after the
date of termination of the Plan and as soon as administratively
feasible, but in no event later than the close of the twelve (12)
month period immediately following such termination.
46
(b) Excess Contributions of Participants who are subject to
the family member aggregation rules shall be allocated among the
family members in proportion to the Elective Employer
Contributions (and amounts treated as Elective Employer
Contributions) of each family member that is combined to
determine the combined Actual Deferral Percentage.
(2) Recharacterization Method. With respect to the
recharacterization of Excess Contributions pursuant to subsection (F)
above, such recharacterized amounts:
(a) shall be deemed to have occurred on the date on which
the last of those Highly Compensated Participants with Excess
Contributions to be recharacterized is notified of the
recharacterization and the tax consequences of such
recharacterization;
(b) for Plan Years ending on or before August 8, 1988, may
be postponed but not later than October 24, 1988;
(c) shall not exceed the amount of Deferred Compensation on
behalf of any Highly Compensated Participant for any Plan Year;
(d) shall be treated as voluntary Employee contributions for
purposes of I.R.C. ss. 401(a)(4) and Treas. Reg. 1.401(k)-1(b).
However, for purposes of Sections 5.7 and 6.2 to the extent
required by applicable regulations, recharacterized Excess
Contributions shall continue to be treated as Employer
contributions that are Deferred Compensation. For Plan Years
commencing after December 31, 1988, Excess Contributions
recharacterized as voluntary Employee contributions shall
continue to be nonforfeitable and subject to the same
distribution rules provided for in Article 8;
(e) are not permitted if the amount recharacterized, plus
voluntary Employee contributions actually made by such Highly
Compensated Participant, exceed the maximum amount of voluntary
Employee contributions (determined prior to application of this
section) that such Highly Compensated Participant is permitted to
make under the Plan in the absence of recharacterization;
(f) shall be adjusted for Income;
(g) any distribution and/or recharacterization of less than
the entire amount of Excess Contribution shall be treated as a
pro rata
47
distribution and/or recharacterization of Excess Contributions
and Income; and,
(h) for Plan Years commencing after December 31, 1988,
Elective Contributions may not be recharacterized hereunder
unless they are recharacterized under the Plan with respect to
which the Elective Contributions were made or under a Plan with
the same Plan Year as the Plan under which the Elective
Contributions were made.
(3) Discretionary Qualified Nonelective Employer Contributions.
Within twelve (12) months after the end of the Plan Year, the Employer
may make a special Qualified Nonelective Contribution on behalf of
Non-Highly Compensated Participants in an amount sufficient to satisfy
one of the tests set forth in Section 5.7. Such contribution shall be
allocated to the Participant's Elective Account of each Non-Highly
Compensated Participant in the same proportion that each Non-Highly
Compensated Participant's Compensation for the Plan Year bears to the
total Compensation of all Non-Highly Compensated Participants.
(G) Impermissible Treatment of Excess Contributions. Any excess
contributions for a Plan Year may not remain unallocated or be allocated to
a suspense account to one or more Participants in any future year.
(H) Miscellaneous Provisions.
(1) The income allocable to Excess Contributions is equal to the
sum of the allocable gain or loss during the Plan Year. Income
includes all earnings and appreciation, including, such items as
interest, dividends, rent, royalties, gains from the sale of property,
appreciation in the value of stock, bonds, annuity and life insurance
contracts, and other property, without regard to whether such
appreciation has been realized.
The income allocable to excess contributions for the Plan Year is
determined by multiplying the income for the Plan Year allocable to
Elective Contributions and amounts treated as Elective Contributions
by a fraction. The numerator of the fraction is the Excess
Contributions by the Participant for the Plan Year. The denominator of
the fraction is the total account balance of the Participant
attributable to Elective Contributions and amounts treated as Elective
Contributions as of the end of the Plan Year, reduced by the gain
allocable to such total amount for the Plan Year and increased by the
loss allocable to such total amount for the Plan Year.
No income shall be income allocable to Excess Contributions for
the period between the end of the Plan Year and the date of a
corrective distribution.
48
(2) A corrective distribution of Excess Contributions (and
income) may be made under the terms of the Plan without regard to any
notice or consent otherwise required under I.R.C. ss.ss. 411(a)(11)
and 417.
(3) A corrective distribution of Excess Contributions (and
income) under the terms of the Plan is includible in gross income on
the earliest dates any Elective Contributions by the Participant
during the Plan Year would have been received by the Participant had
he originally elected to receive the amounts in cash, or, if
distributed more than two and one-half (2 1/2) months after the Plan
Year for which such contributions were made, in the Taxable Year of
the Participant in which distributed. The amount of Excess
contributions includible in the Participant's gross income shall be
reduced as provided above. In addition, such a corrective distribution
of Excess Contributions (and income) is not subject to the early
distribution tax of I.R.C. ss. 72(t) and is not treated as a
distribution for purposes of applying the excess tax under I.R.C. ss.
4981A.
(4) A distribution of Excess Contributions (and income) is not
treated as a distribution for purposes of determining whether the Plan
satisfies the minimum distribution requirements of I.R.C. ss.
401(a)(9).
(5) The amount of Excess Contributions to be recharacterized or
distributed with respect to a Participant for a Plan Year shall be
reduced by any Excess Deferrals previously distributed to such
Participant for the Participant's Taxable Year ending with or within
such Plan Year.
(6) A Plan may use Qualified Nonelective Contributions, Qualified
Matching Contributions, the recharacterization method, the corrective
distribution method, or a combination of these methods, to avoid or
correct excess contributions. This Plan does not, at present, require
that, upon commencement of participating, a Highly Compensated
Employee may elect whether any Excess Contributions are to be
recharacterized or distributed, however, the Plan reserves the right
to require Highly Compensated Employees to make such election. This
Plan does permit a Highly Compensated Employee to elect to have all or
a portion of the Excess contributions on behalf of such Participant
for a Plan Year recharacterized or distributed. Any recharacterization
or distribution of less than the entire amount of Excess Contributions
with respect to any Highly Compensated Employee is treated as a pro
rata recharacterization or distribution of excess contributions and
allocable income or loss.
49
5.8 Diversion of Employer Contributions. Except as provided below, the
general rule shall apply that the assets of this Plan shall never inure to the
benefit of the Employer, or any affiliate of the Employer, and such assets shall
be held for the exclusive purposes to provide benefits to Participants in the
Plan and their Beneficiaries and defraying the reasonable expenses of
administering the Plan. Pursuant to ERISA ss. 403(c) and Revenue Ruling 77-200,
the following reversions of Employer contributions to the Plan may occur if all
the requirements of each provision permitting reversion are fulfilled:
(A) Exceptions Whereby Reversion of Plan Assets Is Not Prohibited.
(1) Mistake of Fact. In the case of an Employer Contribution to
the Plan attributable to a good faith mistake of fact, then the funds
mistakenly contributed by the Employer may revert to the Employer;
provided that, such mistaken contribution must be returned to the
Employer within one (1) year after the payment of such contribution to
the Plan. ERISA ss. 403(c)(2)(A)(i).
Notwithstanding the above, in the case of a contribution made by
an Employer to a multiemployer Plan by a good faith mistake of fact or
law (other than a mistake relating to whether the Plan or Trust is
qualified under I.R.C. ss.ss. 401(a) and 501(a) respectively) such
contributed funds may revert to the Employer; provided that, such
reversion of the mistakenly contributed funds occurs within six (6)
months after the Plan Administrator determines that the Employer
contribution was made because of such a mistake. ERISA ss.
403(c)(2)(A)(ii).
(2) Employer Contribution Conditioned on I.R.S. Qualification of
Plan. Irrespective of any other provisions in this Plan and Trust
Agreement, all contributions by the Company shall be refunded to the
Company, within one (1) year after the date of contribution upon
denial of initial qualification by the Internal Revenue Service (or
any other agency with authority to withhold or deny initial
qualification of the Plan), if this Plan is not approved and qualified
under I.R.C. ss.ss. 401, 404, 501 and other applicable provisions, or
if the hereinafter described Trust fails in its efforts to be approved
and qualified for exemption under I.R.C. ss.ss. 401, 404, 405 and any
other applicable provisions. ERISA ss. 403(c)(2)(B).
(3) Employer Contribution Contingent on Allowability of Corporate
Income Tax Deduction. In the event the deduction of the Employer
contribution is disallowed under I.R.C. ss. 404, then, to the extent
the deduction is disallowed, such Employer contribution to the Plan
shall be returned to the Employer; provided that, such contribution
must be returned within one (1) year after the disallowance of the
deduction. ERISA ss. 403(c)(2)(C).
(B) Applicable Rules Concerning Reversion of Plan Funds. If reversion
50
of an Employer Contribution takes place pursuant to the terms of Section
5.8(A)(1), (2) or (3) above, the following provisions shall apply:
(1) Good Faith. Any event allowing a reversion of the Employer
Contribution to the Plan must be attributable to a good faith mistake
in determining the amount allowable as a deduction for the Employer's
Contribution or a good faith mistake concerning the amount of the
contribution which could be made without being deemed an excessive
contribution.
(2) Reversion Pursuant to this Section Not Equivalent to a
Forfeiture. A reversion permitted under the circumstances described
above will not be treated as a forfeiture in violation of I.R.C. ss.
411(a), even if a resulting adjustment is made to the account of a
Participant that is partly or entirely nonforfeitable.
(3) Amount Returnable to Employer. The amount of the Employer
Contribution which may return to the Employer shall not be greater
than:
(a) The amount mistakenly contributed;
(b) The amount contributed which was contingent on the
Internal Revenue Service's qualification of the Plan; and/or
(c) The amount contributed for which the deduction was
denied, but only to the extent to which the deduction was denied.
(4) Allocations of Earnings and Losses on Amounts Returned to
Employer. In the event an Employer's Contribution to the Plan is
returned in whole or in part to the Employer, and notwithstanding any
contrary provisions in Article 3 or in this Article 5, the following
provisions regarding the allocation of earnings and losses on amounts
contributed by the Employer shall apply.
(a) Earnings. Earnings on Employer Contributions allocated
to a Participant's account, which contributions are subsequently
returned to the Employer pursuant to this Section 5.7, shall not
be returnable to the Employer and shall remain allocated to the
Participant's account.
(b) Losses. Losses attributable to Employer Contributions
allocated to a Participant's account, which contributions are
subsequently returned to the Employer pursuant to this Section
5.7, shall reduce the amount to be returned to the Employer and
shall not
51
reduce the Participant's account balance for any reason.
Provided, further, that if the withdrawal of the amount
attributable to the mistaken contribution would cause the balance
of the Participant's account to be reduced to less than the
balance which would have been in the account had the mistaken
amount not been contributed, then the amount to be returned to
the Employer shall be limited so as to avoid such a reduction.
ARTICLE 6.
CONTRIBUTIONS BY PARTICIPANTS
6.1 Voluntary Employee Contributions. All Participants may, but are not
required to, make voluntary cash or deferred or after-tax contributions to the
Plan, subject to the terms, conditions and limitations set forth in this Article
and applicable Federal laws and regulations. In the event a voluntary Employee
contribution is made the Participant shall designate such contribution as
deductible or nondeductible. Absent a designation, the Employer shall assume
such contribution is deductible; provided, with regard to the first two percent
(2%) participant contribution made, such contribution shall be deemed
nondeductible.
(A) After-Tax Contributions. For each Plan Year, the Employer shall
contribute to the Plan the elected voluntary Employee contribution selected
by an eligible Employee, pursuant to I.R.C. ss. 401(m), which amount shall
be deemed an Elective Employee Contribution. The maximum voluntary
after-tax contribution for each Plan Year is two percent (2%) of the
Participant's Compensation during such year. In the event a Participant is
a member of other qualified pension and/or profit sharing plans, his total
voluntary contributions to all plans may not exceed two percent (2%) of his
Compensation.
(B) Participant Salary Reduction Contributions. All Participants may,
but are not required to, make voluntary cash or deferred salary reduction
contributions to this 401(k) employee savings plan, subject to the terms,
conditions and limitations set forth in this Plan and applicable Federal
laws and regulations.
6.2 Salary Reduction Election.
(A) Elections. Each Participant may elect to defer from two percent
(2%) to ten percent (10%) of his Compensation which would have been
received in the Plan Year, but for the deferral election. A deferral
election (or modification of an earlier election) may not be made with
respect to Compensation which is currently available on or before the date
the Participant executed such election or, if later, the later of: the date
the Employer adopts this cash or deferred arrangement; or, the date such
arrangement first became effective.
Additionally, each Participant may elect to defer and have allocated
for a Plan
52
Year all or a portion of any cash bonus attributable to services performed
by the Participant for the Employer during such Plan Year and which would
have been received by the Participant on or before two and one-half (22)
months following the end of the Plan Year but for the deferral election. A
deferral election may not be made with respect to cash bonuses which are
currently available on or before the date the Participant executed such
election. Notwithstanding the foregoing, cash bonuses attributable to
services performed by the Participant during a Plan Year but which are to
be paid to the Participant later than two and one-half (2 1/2) months after
the closing of such Plan Year will be subjected to whatever deferral
election is in effect at the time such cash bonus would have otherwise been
received.
The amount by which Compensation and/or cash bonuses are reduced shall
be that Participant's Deferred Compensation and shall be treated as an
Elective Employer contribution and allocated to that Participant's Elective
Account.
For purposes of this Plan, an Elective Contribution shall only be
deemed a cash or deferred election under I.R.C. ss. 401(k) if, as of the
date of the election such deferral amount is not designated or treated as
an after-tax Employee Contribution at the time of deferral or contribution,
such contribution does not constitute a one-time irrevocable election under
applicable I.R.C. regulations and such amount is not currently available to
the electing Employee as of the date of the election. A cash or deferred
election also includes a salary reduction agreement between an eligible
Employee and the Employer under which a contribution is made under the Plan
only if the Employee elects to reduce his cash compensation or to forego an
increase in his cash compensation. In no event shall a cash or deferred
election include an election made with respect to amounts that have become
currently available on or before the later of: the date on which the
Employer adopts the cash or deferred arrangement; or, the date on which
such arrangement first becomes effective. An amount will be deemed
currently available under this Plan if it has been paid to the Participant
or if the Participant is currently able to receive the cash or other
taxable amount in his discretion. An amount is not currently available to a
Participant if there is any significant limitation or restriction on the
Participant's right to currently receive the amount or if the Participant
under no circumstances may receive the amount before a particular time in
the future.
If an eligible Employee or Participant does not elect to reduce his
salary as provided for above, then he will receive cash in lieu thereof.
(B) Vesting. The balance in each Participant's Elective Account shall
be fully Vested at all times and shall not be subject to Forfeiture for any
reason.
(C) Distributions from Elective Accounts. Amounts held in the
Participant's Elective Account may not be distributable earlier than:
(1) a Participant's termination of employment, total and
permanent disability or death;
53
(2) a Participant's attainment of age fifty-nine and one-half
(59 1/2) in the case of a profit sharing plan;
(3) the termination of the Plan without the existence at the time
of Plan termination of another defined contribution plan (other than
an employee stock ownership plan as defined in I.R.C. ss.ss. 409 and
4975(e)(7), or a simplified employee pension plan as defined in I.R.C.
ss. 408(k)) or without the establishment of a successor defined
contribution plan (other than an employee stock ownership plan as
defined in I.R.C. ss.ss. 409 and 4975(e)(7), or a simplified employee
pension plan as defined in I.R.C. ss. 408(k)) by the Employer or an
Affiliated Employer within the period ending twelve (12) months after
distribution of all assets from the Plan maintained by the Employer;
(4) the date of disposition by the Employer, to an entity that is
not an Affiliated Employer, of substantially all of the assets (within
the meaning of I.R.C. ss. 409(d)(2)) used in a trade or business of
such corporation if such corporation continues to maintain this Plan
after the disposition with respect to a Participant who continues
employment with the corporation acquiring such assets;
(5) the date of disposition by the Employer or an Affiliated
Employer who maintains the Plan of its interest in a subsidiary
(within the meaning of I.R.C. ss. 409(d)(3)) to an entity which is not
an Affiliated Employer but only with respect to a Participant who
continues employment with such subsidiary; or,
(6) the proven financial hardship of a Participant, subject to
the limitations of Section 8.5 below, if applicable.
All distributions that may be made pursuant to one or more of the
foregoing distributable events are subject to the spousal and
Participant consent requirements (if applicable) contained in I.R.C.
ss.ss. 411(a)(11) and 417. Such spousal consent shall be evidenced in
the same manner as provided for in Section 8.2 below. In addition,
distributions after March 31, 1988, that are triggered by
subparagraphs (3) - (5) above must be made in a lump sum.
(D) Dollar Limitations on Funding. For all Plan Years, commencing
after December 31, 1987, a Participant's Deferred Compensation contribution
made under this Plan and all other plans, contracts or arrangements of the
Employer maintaining this Plan shall not exceed, during any taxable year,
the limitation imposed by I.R.C. ss. 402(g), as in effect at the beginning
of such taxable year. This dollar limitation shall be adjusted
54
annually pursuant to the method provided in I.R.C. ss. 415(d) in accordance
with applicable regulations.
(E) Suspension of Elective Deferrals Due to Prior Hardship
Distribution. In the event a Participant has received a hardship
distribution from his Participant's Elective Account pursuant to Section
8.5 or pursuant to Treas. Reg. ss. 1.401(k)-1(d)(2)(iii)(B) from any other
plan maintained by the Employer, then such Participant shall not be
permitted to elect to have Deferred Compensation contributed to the Plan on
his behalf for a period of twelve (12) months following the receipt of any
such hardship distribution. Furthermore, the dollar limitation in effect
under I.R.C. ss. 402(g) shall be reduced, with respect to the Participant's
taxable year following the taxable year in which the hardship distribution
was made, by the amount of such Participant's Deferred Compensation, if
any, contributed pursuant to this Plan (and any other plan maintained by
the Employer) for the taxable year in which the hardship distribution
occurred.
(F) Cumulation of Elective Deferral Amounts. If a Participant's
Elective Deferrals under this Plan (excluding deferrals properly
distributed as Excess Annual Additions), together with any elective
deferrals (as defined in Treas. Reg. ss. 1.402(g)-1(b)) under another
qualified cash or deferred arrangement (as defined in I.R.C. ss. 408(k)), a
salary reduction arrangement (within the meaning of I.R.C. ss.
3121(a)(5)(D)), a deferred compensation plan under I.R.C. ss. 457, or a
trust described in I.R.C. ss. 501(c)(18), cumulatively exceed the
limitations imposed by I.R.C. ss. 402(g) (as adjusted annually in
accordance with the method provided in I.R.C. ss. 415(d) pursuant to
Regulations) for such Participant's taxable year, then the Participant may,
not later than March 1 following the close of his taxable year, notify the
Administrator in writing, or be deemed to notify the Administrator, of such
excess and request that his Deferred Compensation under this Plan be
reduced by an amount specified by the Participant. A Participant is deemed
to notify the Administrator of any excess amount that arises by taking into
account only those elective deferrals made to this Plan and to any other
plans of the Employer. In such event, the Administrator may direct the
Trustee to distribute such excess amount (and any reasonable income
allocable to such excess amount earned during the Plan Year and calculated
consistent with Section 5.7(H) above) to the Participant not later than the
first April 15th following the close of the Participant's taxable year.
Excess elective deferrals shall be treated as annual additions under the
Plan, for purposes of the limitation imposed by I.R.C. ss.ss. 402(g) and
415, unless such amounts are distributed no later than the first April 15
following the close of the Participant's taxable year. Distributions in
accordance with this paragraph may be made for any taxable year of the
Participant which begins after December 31, 1986. Any distribution of less
than the entire amount of Excess Deferred Compensation and Income shall be
treated as a pro rata distribution of Excess Deferral Compensation and
Income. The amount distributed shall not exceed the Participant's Deferred
Compensation under the Plan for the taxable year. Any distribution on or
before the last day of the Participant's taxable year must satisfy each of
the following conditions:
55
(1) the Participant shall designate the distribution as an Excess
Elective Deferral amount;
(2) the distribution must be made after the date on which the
Plan received the Excess Elective Deferral; and,
(3) the Plan must designate the distribution as a distribution of
Excess Elective Deferral.
Notwithstanding the above, a Participant's Excess Deferral shall be
reduced, but not below zero, by any distribution and/or recharacterization
of Excess Contributions pursuant to this Plan for the Plan Year beginning
with or within the taxable year of the Participant.
(G) Additional Benefits to Participants. At Normal Retirement Date, or
such other date when the Participant shall be entitled to receive benefits,
the fair market value of the Participant's Elective Account shall be used
to provide additional benefits to the Participant or his Beneficiary.
(H) Self-Directed Account Treatment. All amounts allocated to a
Participant's Elective Account may be treated as a Directed Investment
Account pursuant to Article 3.
(I) Segregation of Elective Accounts. Employer Elective Contributions
made pursuant to this Section may be segregated into a separate account for
each Participant in a federally insured savings account, certificate of
deposit in a bank or savings and loan association, money market certificate
or other short-term debt security acceptable to the Trustee until such time
as the allocations pursuant to this Plan have been made.
(J) Elective Contribution Election Requirements. The Employer and the
Administrator shall implement the salary reduction elections provided for
herein in accordance with the following:
(1) A Participant may commence making elective deferrals to the
Plan only after first satisfying the eligibility and participation
requirements specified in Article 4. However, the Participant must
make his initial salary deferral election within a reasonable time,
not to exceed fifteen (15) days, before entering the Plan. If the
Participant fails to make an initial salary deferral election within
such time, then such Participant may thereafter make an election in
accordance with the rules governing modifications. The Participant
shall make such an election by entering into a written salary
reduction agreement with the Employer and filing such agreement with
the
56
Administrator. Such election shall initially be effective beginning
with the Entry Date next following the acceptance of the salary
reduction agreement by the Administrator, shall not have retroactive
effect and shall remain in force until revoked.
(2) A Participant may modify a prior election at any time during
the Plan Year and concurrently make a new election by filing a written
notice with the Administrator within a reasonable time before, e.g.,
fifteen (15) days, before the Entry Date, such modification is to be
effective. However, modifications to a salary deferral election shall
only be permitted each trimester Entry Date, during election periods
established by the Administrator prior to the first day of each Plan
Year trimester. Any modification shall not have retroactive effect and
shall remain in full force until revoked.
(3) A Participant may elect to prospectively revoke his salary
reduction agreement in its entirety at any time during the Plan Year
by providing the Administrator with at least fifteen (15) days written
notice of such revocation. Such revocation shall become effective as
of the beginning of the month next following the expiration of the
notice period. Any Participant who elects to suspend his salary
deferral election shall not be permitted to renew active participation
in the Plan until the later of: the second Entry Date next following
the suspension of contributions; or, the earliest date permitted
subsequent to a hardship withdrawal. Furthermore, the termination of
the Participant's employment, or the cessation of participation for
any reason, shall be deemed to revoke any salary reduction agreement
then in effect, effective immediately following the close of the pay
period within which such termination or cessation occurs.
(4) The Participant election form shall require Participants to
contribute increments of not less than Five Dollars and No/100 ($5.00)
per pay period (or such other amount as may be administratively
determined by the Employer) and must limit Participant contributions
to permissible amounts as determined under the Internal Revenue Code.
Notwithstanding the above, nothing herein shall permit the Employer to
require Participants to contribute any amount which would result in an
undue burden on the Participant or prohibited discrimination.
(5) All requirements pertaining to a Participant's election to
contribute deferred compensation amounts shall be administered in a
uniform and nondiscriminatory fashion.
57
6.3 Limitations on Amount.
(A) General Limitations. No Participant may make voluntary
contributions to the extent such contributions, coupled with the Company's
contributions allocated to the Participant for such Plan Year, would exceed
the Maximum Annual Addition amount.
(B) Average Contribution Percentage Tests Applicable to Employee
Contributions. Participant contributions to the Plan shall be made in
conformity with applicable average contribution percentage tests and shall
be governed by applicable provisions in I.R.C. ss.ss. 401(k) and 401(m) and
regulations issued thereunder.
(1) Average Contribution Percentage Test. The "Average
Contribution Percentage Test" for Plan Years beginning after December
31, 1986, for the Highly Compensated Participants shall not exceed the
Aggregate Limit.
(a) The "Aggregate Limit" shall mean the sum of: (i) one
hundred twenty-five percent (125%) of the greater of: the ADP of
the Non-Highly Compensated Employees for the Plan Year; or, the
ACP of Non-Highly Compensated Employees under the Plan subject to
I.R.C. ss. 401(m) for the Plan Year beginning with or within the
Plan Year of the CODA; and, (ii) the lesser of: two hundred
percent (200%); or, two (2) plus the lesser of such ADP or ACP.
"Lesser" is substituted for "greater" in "(i)" above, and
"greater" is substituted for "lesser" after "two (2) plus the" in
"(ii)" above, if it would result in a larger Aggregate Limit.
(b) "Average Contribution Percentage" shall mean the average
of the Contribution Percentages of the Eligible Participants in a
group.
(c) "Contribution Percentage" shall mean the ratio
(expressed as a percentage) of the Participant's Contribution
Percentage Amounts relative to such Participant's Compensation
for the Plan Year.
(d) "Contribution Percentage Amounts" shall mean the sum of
the Employee Contributions, Matching Contributions and Qualified
Matching Contributions (to the extent not taken into account for
purposes of the ADP test) made under the Plan on behalf of the
Participant for the Plan Year. Such Contribution Percentage
Amounts shall not include Matching Contributions that are
forfeited either to correct Excess Aggregate Contributions or
because the contributions to which they relate are Excess
Deferrals, Excess Contributions or Excess Aggregate
Contributions. If so elected and designated at the time of
58
funding, the Employer may include Qualified Non-Elective
Contributions in the Contribution Percentage Amounts. The
Employer may also elect to use Elective Deferrals in the
Contribution Percentage Amounts so long as the ADP test is met
before the Elective Deferrals are used in the ACP test and
continues to be met following the exclusion of those Elective
Deferrals that are used to meet the ACP test.
(e) "Eligible Participant" shall mean any Employee who is
eligible to make an Employee Contribution or an Elective Deferral
(if the Employer takes such contributions into account in the
calculation of the Contribution Percentage), or to receive a
Matching Contribution (including forfeitures) or a Qualified
Matching Contribution. If an Employee Contribution is required as
a condition of participation in the Plan, any Employee who would
be a participant in the Plan if such Employee made such a
contribution shall be treated as an eligible Participant on
behalf of whom no Employee Contributions are made.
(f) "Employee Contribution" shall mean any contribution made
to the Plan by or on behalf of a Participant that is included in
the Participant's gross income in the year in which made and that
is maintained under a separate account to which earnings and
losses are allocated.
(g) "Matching Contribution" shall mean an Employer
Contribution made to this or any other defined contribution plan
on behalf of a Participant on account of an Employee Contribution
made by such Participant or on account of such Participant's
Elective Deferral, under a plan maintained by the Employer.
(2) Definition of Average Contribution Percentage. For purposes
of this Article, "Average Contribution Percentage" for a Plan Year
means, with respect to Highly Compensated Participants and Non-Highly
Compensated Participants, the average of the contribution percentages
(calculated separately for each eligible Participant in each such
group) of:
(a) the sum of Employee mandatory contributions, Employer
matching contributions and Employee voluntary contributions, if
any, made on behalf of each such Participant for such Plan Year,
excluding Employer matching contributions that are forfeited
either to correct Excess Aggregate Contributions or because the
contributions to which they relate are Excess Deferrals, Excess
Contributions or Excess Aggregate Contributions; to
59
(b) the Participant's Compensation for such Plan Year.
The Employer shall maintain records sufficient to demonstrate
satisfaction of the ACP test and the amount of Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both, used in
each such test.
The determination and treatment of the Contribution Percentage of
any Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
(1) Excess Aggregate Contributions. For purposes of determining
the "Actual Contribution Percentage" and the amount of Excess
Aggregate Contributions, only Employer matching contributions
contributed to the Plan prior to the end of the succeeding Plan Year
shall be considered. In addition, the Plan Administrator may elect to
take into account, with respect to Employees eligible to make Employee
mandatory contributions, Employer matching contributions or Employee
voluntary contributions, if any, allocated to their accounts, elective
deferrals (as defined in Treas. Reg. ss. 1.402(g)-1(b)) and qualified
non-elective contributions (as defined in I.R.C. ss. 401(m)(4)(C))
contributed to any plan maintained by the Employer. Such elective
deferrals and qualified non-elective contributions shall be treated as
Employer matching contributions subject to Treas. Reg. ss.
1.401(m)-1(b)(2) which is incorporated herein by reference. However,
for Plan Years beginning after December 31, 1988, the Plan Year must
be the same as the plan year of the plan to which the elective
deferrals and the qualified non-elective contributions are made.
(2) Family Aggregation Rules. For purposes of determining the
actual contribution ratio of a Highly Compensated Employee who is
subject to the Family Member Aggregation Rules of I.R.C. ss. 414(q)(6)
because such Participant is either: a five percent (5%) owner of the
Employer; or, one of the ten (10) Highly Compensated Employees paid
the greatest I.R.C. ss. 415 Compensation during the year, the
following additional rules shall apply:
(a) The combined actual contribution ratio for the family
group (which shall be treated as one (1) Highly Compensated
Participant) shall be the greater of: (i) the ratio determined by
aggregating Employee mandatory contributions, Employer matching
contributions and Employee voluntary contributions made, if any,
and all I.R.C. ss. 414(s) Compensation of all eligible Family
Members who are Highly Compensated Participants without regard to
family aggregation; and, (ii) the ratio determined by aggregating
Employee mandatory contributions, Employer matching contributions
and Employee voluntary contributions made, if any, and I.R.C. ss.
414(s)
60
Compensation of all eligible Family Members (including Highly
Compensated Participants). However, in applying the $200,000.00
limit to I.R.C. ss. 414(s) Compensation for Plan Years beginning
after December 31, 1988, Family Members shall include only the
affected Employee's spouse and any lineal descendants who have
not attained age nineteen (19) before the close of the Plan Year.
(b) The Employee mandatory contributions, Employer matching
contributions and Employee voluntary contributions made and
I.R.C. ss. 414(s) Compensation of all Family Members shall be
disregarded for purposes of determining the Actual Contribution
Percentage of Non-Highly Compensated Participants, except to the
extent taken into account above.
(c) If a Participant is required to be aggregated as a
member of more than one (1) family group in a plan, all
Participants who are members of those family groups that include
the Participant are aggregated as one (1) family group in
accordance with the above.
(3) Aggregation of Related Employers. For purposes of this
Section and I.R.C. ss.ss. 401(a)(4), 410(b) and 401(m), if two or more
plans of the Employer to which matching contributions, Employee
contributions, or both, are made are treated as one plan for purposes
of I.R.C. ss.ss. 401(a)(4) or 410(b) (other than the average benefits
test under I.R.C. ss. 410(b)(2)(A)(ii) as in effect for Plan Years
beginning after December 31, 1988), such plans shall be treated as one
plan. In addition, two or more plans of the Employer to which matching
contributions, Employee contributions, or both, are made may be
considered as a single plan for purposes of determining whether or not
such plans satisfy I.R.C. ss.ss. 401(a)(4), 410(b) and 401(m). In such
a case, the aggregated plans must satisfy this Section and I.R.C.
ss.ss. 401(a)(4), 410(b) and 401(m) as though such aggregated plans
were a single plan. For Plan Years beginning after December 31, 1989,
plans may be aggregated under this subparagraph (5) only if they have
the same plan year.
Notwithstanding the above, for Plan Years beginning after
December 31, 1988, an employee stock ownership plan described in
I.R.C. ss. 4975(e)(7) may not be aggregated with this Plan for
purposes of determining whether the employee stock ownership plan or
this Plan satisfies this Section and I.R.C. ss.ss. 401(a)(4), 410(b)
and 401(m).
(4) Aggregation of Highly Compensated Participant Contributions.
If a Highly Compensated Participant is a Participant under two or more
plans (other than an employee stock ownership plan as defined in
I.R.C. ss. 4975(e)(7) for Plan Years beginning after December 31,
1988) which
61
are maintained by the Employer or an Affiliated Employer to which
matching contributions, Employee contributions, or both, are made, all
such contributions on behalf of such Highly Compensated Participant
shall be aggregated for purposes of determining such Highly
Compensated Participant's actual contribution ratio. However, for Plan
Years beginning after December 31, 1988, if the plans have different
plan years, this paragraph shall be applied by treating all plans
ending with or within the same calendar year as a single plan.
Notwithstanding the foregoing, certain plans shall be treated as
separate if mandatorily disaggregated under regulations under I.R.C.
ss. 401(m).
(5) Included Participants. For purposes of this Section, Highly
Compensated Participants and Non-Highly Compensated Participants shall
include any Employee eligible to make Employee mandatory contributions
(whether or not a mandatory contribution election was made or
suspended) and Employer matching contributions or Employee voluntary
contributions (whether or not Employee voluntary contributions are
made) to his account for the Plan Year.
(C) Adjustment to Actual Contribution Percentage Tests.
(1) Distribution of Excess Contributions. For Plan Years
beginning after December 31, 1986, in the event the Actual
Contribution Percentage for Highly Compensated Participants exceeds
the Actual Contribution Percentage for Non-Highly Compensated
Participants as determined pursuant to this Section 6.2, then the Plan
Administrator (on or before the fifteenth (15th) day of the third
month following the end of the Plan Year, but in no event later than
the close of the following Plan Year) shall direct the Trustee to
distribute to the Highly Compensated Participant having the highest
actual contribution ratio, his Vested portion of Excess Aggregate
Contributions (and income allocable to such contributions) or, if
forfeitable, forfeit such non-Vested Excess Aggregate Contributions
attributable to Employer matching contributions (and Income allocable
to such forfeitures) until either one of the tests set forth in
Section 6.1 above is satisfied, or until his actual contribution ratio
equals the actual contribution ratio of the Highly Compensated
Participant having the second highest actual contribution ratio. This
process shall continue until one of the tests set forth in Section 6.1
is satisfied. The distribution and/or forfeiture of Excess Aggregate
Contributions shall be made simultaneously from mandatory Employee
contributions and related Employer matching contributions, if
applicable, in the following order:
(a) Voluntary Employee contributions;
62
(b) Simultaneously from mandatory Employee contributions and
related Employer matching contributions.
(2) Pro Rata Treatment of Excesses. Any distribution and/or
Forfeiture of less than the entire amount of Excess Aggregate
Contributions (and income) shall be treated as a pro rata distribution
and/or Forfeiture of Excess Aggregate Contributions and Income.
Distributions of Excess Aggregate Contributions shall be designated by
the Employer as a distribution of Excess Aggregate Contributions (and
Income). Forfeitures of Excess Aggregate Contributions shall be
treated in accordance with generally applicable Plan forfeiture
provisions, however, no such Forfeiture may be allocated to a Highly
Compensated Participant whose contributions are reduced pursuant to
this Section.
(3) Treatment of Excess Distributions For 404 and 415 Purposes.
Excess Aggregate Contributions attributable to matching contributions,
including forfeited matching contributions, if any, shall be treated
as Employer contributions for purposes of I.R.C. ss.ss. 404 and 415
even if distributed from the Plan.
(4) Excess Aggregate Contributions. For each Highly Compensated
Participant, the amount of Excess Aggregate Contributions is equal to
the total Employee mandatory contributions, Employer matching
contributions and Employee voluntary contributions made and any
qualified non-elective contributions or elective deferrals taken into
account, if any, on behalf of the Highly Compensated Participant
(determined prior to the application of this paragraph) minus the
amount determined by multiplying the Highly Compensated Participant's
actual contribution ratio (determined after application of this
paragraph) by his I.R.C. ss. 414(s) Compensation. The actual
contribution ratio must be rounded to the nearest one-hundredth of one
percent (1%) for Plan Years beginning after December 31, 1988. In no
case shall the amount of Excess Aggregate Contributions with respect
to any Highly Compensated Participant exceed the amount of Employee
mandatory contributions, Employer matching contributions and Employee
voluntary contributions made and any qualified nonelective
contributions or elective deferrals taken into account pursuant to
Section 6.1 on behalf of such Highly Compensated Participant for such
Plan Year.
(5) Coordination of Excess Aggregate Contribution Calculations.
The determination of the amount of Excess Aggregate Contributions with
respect to any Plan Year shall be made after first determining the
Excess Contributions (as defined in Treas. Reg. ss.
1.401(k)-1(g)(13)), if any, to be treated as Employee voluntary
contributions due to
63
recharacterization for the plan year of any qualified cash or deferred
arrangement (as defined in I.R.C. ss. 401(k)) maintained by the
Employer that ends with or within the Plan Year, if applicable.
(6) Calculation of Excess In Conjunction With Family Aggregation
Rules. Excess Aggregate Contributions of Participants who are subject
to the family member aggregation rules shall be allocated among the
family members in proportion to the Employee mandatory contributions,
Employer matching contributions, Employee voluntary contributions and
any qualified non-elective contributions or elective deferrals taken
into account, of each family member that is combined to determine the
combined Average Contribution Percentage.
(7) Correcting Employer Contribution to Meet ADP Test.
Notwithstanding the above, within twelve (12) months after the end of
the Plan Year, the Employer may make a qualified non-elective
contribution (as defined in I.R.C. ss. 401(m)(4)(C)) on behalf of
Non-Highly Compensated Participants in an amount sufficient to satisfy
one of the tests set forth in Section 6.2. Such contribution shall be
allocated to the Participant's Account of each Non-Highly Compensated
Participant in the same proportion that each Non-Highly Compensated
Participant's Compensation for the year bears to the total
Compensation of all Non-Highly Compensated Participants. A separate
accounting shall be maintained with respect to all such contributions.
(8) Determination of Income or Loss. Excess Aggregate
Contributions shall only be adjusted for any income or loss up through
the end of the Plan Year. The income or loss allocable to Excess
Aggregate Contributions is the sum of: income or loss allocable to the
Participant's Employee Contribution account, Matching Contribution
account (if any, and if all amounts therein are not used in the ADP
test) and, if applicable, Qualified Non-elective Contribution account
and Elective Deferral account of the Plan Year, multiplied by a
fraction, the numerator of which is such Participant's Excess
Aggregate Contributions for the Plan Year and the denominator is the
Participant's account balance(s) attributable to Contribution
Percentage Amounts without regard to any income or loss occurring
during such Plan Year. No income or loss shall be allocable to Excess
Aggregate Contributions for the period between the end of the Plan
Year and the date of the corrective distribution.
6.4 Immediate Vesting. All voluntary cash or deferred or after-tax
contributions, if any, and income and profits thereon shall be immediately
vested and nonforfeitable upon receipt by the Trustee at all times.
64
6.5 Contribution Prohibited. No contribution may be made by a person who is
not a Participant nor during any period when he is not receiving Compensation
from the Company.
6.6 Accounts. These voluntary contributions, upon delivery to the Trustee,
shall be allocated by the Committee to appropriate separate voluntary
contribution accounts of each Participant pursuant to Section 3.13 above. Thus,
each Participant who elects to make voluntary contributions shall have at least
two accounts maintained by the Committee, one for his voluntary employee
contributions and one for the Company contributions allocated to him. The
voluntary contributions shall be allocated to the appropriate account by the
Committee on the Committee's next valuation date following receipt of the
contributions by the Trustee.
6.7 Methods of Contribution. The Company may determine the permissible
methods of such voluntary contributions, whether by payroll deduction or by
deposit of cash. Provided, however, that the Company need not remit to the
Trustee nor need the Trustee accept any voluntary contributions more frequently
than monthly and in amounts less than Five No/100 Dollars ($5.00), unless
otherwise specified by Employer. If the Employer permits payroll deductions, the
Company shall remit and the Trustee agrees to accept the same on a monthly
basis. Any Participant may make his cash contributions during any Plan Year
subject to the limitations set forth herein, and applicable laws and
regulations.
6.8 Payroll Deduction Procedure. If the Company permits voluntary
contributions to be made by payroll deductions, the Company may require
Participants to complete written application forms providing the following
information:
(A) Percentage. The percentage of his Compensation which the
Participant desires deducted by the Company, subject to the limitations of
this Article.
(B) Change in Deduction Percentage. The percentage designated by the
Participant shall continue from period to period unless the Participant
files with the Committee and the Company a written request for such change
upon such forms as the Committee may require. Such changed percentage shall
be effective as of the date provided for above in regard to modifications
of elections next following the date it is received by the Company and the
Committee and shall remain in effect indefinitely until a further change is
requested by the Participant.
6.9 Withdrawal of Participant Contributions. A Participant may not withdraw
any amounts from his account balance under the Plan while remaining in the
employ of the Company, except as expressly provided herein, e.g., with regard to
hardship distributions.
65
ARTICLE 7.
MANAGEMENT OF TRUST FUNDS AND TRUST AGREEMENT
7.1 Appointment of Trustee. The Board of Directors of the Company shall
appoint one or more persons to serve as Trustees to manage the Trust Fund
pursuant to the terms and conditions of this Plan. A natural person, a bank or
other qualified corporation may serve as Trustee. All Trustees shall accept the
terms and conditions of this Plan and the duties and responsibilities set forth
herein by a written acknowledgment. All Trustees shall serve at the pleasure of
the Board of Directors. The Board of Directors shall also fill any vacancies by
appointing successor trustees; and, all subsequent Trustees shall be required to
signify in writing their acceptance of the terms and conditions of this Plan and
of the duties and responsibilities set forth herein.
7.2 Title to Assets. The title to assets of the Trust Fund shall be in the
name of the Trustee and shall remain in its name until distribution is made
pursuant to this Plan and Trust Agreement. The contributions may be in cash or
other property. All assets held by the Trustee pursuant to this Plan and Trust
Agreement shall be held as a single Trust Fund by the Trustee, in a separate
bank account, safe deposit box or other appropriate manner to ensure that such
Trust Fund assets are not commingled with other money or property held by the
Trustee. The Trust Fund, however, need not be segregated further into separate
accounts for each of the Participants, except as provided in Sections 7.7(O), if
applicable, 7.10, 8.3, 8.10 and 8.12. A compensated full-time Employee of the
Company may not also receive compensation from the Trust.
7.3 Company Notification to Trustee. The Company shall notify the Trustee
of the following information concerning Participants, Compensation and
Contributions at appropriate times:
(A) Company Contributions. At the time the Company pays its
contributions to the Trustee, it shall notify the Trustee and the Committee
of all Participants to whom such contributions are to be allocated and the
Compensation paid each Participant, during the period covered by such
Company contribution. The Company shall notify the Trustee with reference
to whether or not the Plan is a "Top-Heavy Plan" so that an allocation can
be made between Company contributions that relate to periods of time in
which the Plan was and was not in "Top-Heavy Status."
(B) Voluntary Payroll Deductions. When the Company remits to the
Trustee the Participant's voluntary contributions withheld by the Company
pursuant to Section 5.6 above, the Company shall notify the Trustee and the
Committee of the amount of each Participant's voluntary contribution. The
Trustee need not verify such information and shall forthwith credit the
respective accounts with the appropriate amounts.
66
7.4 Determination of Fair Market Value. The Trustee shall determine the
fair market value of all assets of the Trust Fund annually as of the last day of
each Plan Year. The Trustee's determination of fair market value shall be
binding and conclusive upon all Participants, former Participants and
Beneficiaries.
In determining the fair market value of securities held in the Trust which
are listed on a registered stock exchange, the Trustee shall value the same at
the prices they were last traded on such exchange preceding the close of
business on the valuation date. If such securities were not traded on the
valuation date, or if the exchange on which they are traded was not open for
business on the valuation date, then the securities shall be valued at the
prices at which they were last traded prior to the valuation date. Any unlisted
security held in the Trust shall be valued at its bid price next preceding the
close of business on the valuation date, which bid price shall be obtained from
a registered broker or an investment banker. In determining the fair market
value of assets other than securities for which trading or bid prices can be
obtained, the Trustee may appraise such assets itself, or in its discretion,
employ one or more appraisers for that purpose and rely on the values
established by such appraiser or appraisers.
7.5 Statement of Accounts. Within thirty (30) days, or within a reasonable
period of time following the end of the Plan Year, the Trustee shall provide to
the Committee a complete Statement of Account, setting forth the fair market
value of the Trust Fund. The Committee shall have sixty (60) days in which to
review and reject such Statement of Accounts by the Trustee; if the Committee
fails to communicate to the Trustee its written disapproval, the Trustee's
Statement of Account shall be deemed approved. Upon approval, whether by the
written approval of the Committee or the Committee's failure to object within
sixty (60) days, said Statement of Account shall be binding as to any and all
matters set forth therein upon all parties to this Plan and Trust Agreement and
upon all persons having or claiming any interest in the Trust Fund including,
without limitation, Participants, retired Participants, beneficiaries, heirs,
successors, administrators and executors, to the same extent as if the Statement
of Account of the Trustee had been settled by judgment or decree in an action
for a judicial settlement of its accounts in a court of competent jurisdiction
in which the Trustee, Company, Committee and any other persons having or
claiming any interest in the Trust Fund were parties; provided, however, that
nothing herein contained shall deprive the Trustee of the right to have the
accounts judicially settled, if the Trustee so elects. The Trustee is hereby
relieved from any requirements under the Uniform Trustee's Accounting Act of the
State of Washington, or any amendment or amendments thereto or any similar
legislation hereinafter enacted, and the Trustee shall not be required to file
an accounting in any court whatsoever.
7.6 Payment of Benefits. The Trustee may make any payment required to be
made pursuant to this Plan and Trust Agreement by depositing its checks in an
appropriate amount in the postage prepaid, first class mail, in an envelope
addressed to the person to whom such payment is to be made according to the
information certified to the Trustee by the Committee. The Trustee shall not be
required to make any further investigation to determine the identity of the
person or the accuracy of the mailing address of any person entitled to benefits
67
under this Agreement. However, the Trustee may refuse to make payments pending
certification of the identity and mailing address of persons entitled to
benefits by the Committee. In the event the Trustee is in doubt as to the
identity or rights of persons entitled to receive benefits under this Plan, the
Trustee may withhold payments or benefits until any such dispute has been
determined or resolved to the reasonable satisfaction of the Trustee; in that
regard, the Trustee may require written stipulation as to the settlement by all
parties to the dispute.
7.7 Investment of Trust Fund Assets; General Powers and Duties. The Trustee
shall have the duty and responsibility of investing and reinvesting the
principal and income of the Trust Fund. This responsibility shall be exercised
subject to the following:
(A) Cash Reserves. The Trustee may hold uninvested any cash to create
reserve for the payment of distributions pursuant to the Plan or for any
other purpose in connection with the Plan, without liability for any
interest or income upon such cash reserves.
(B) Prudent Man Rule. The Trustee shall, in discharging its duties,
act solely in the interests of the Participants and Beneficiaries of the
Plan. It may act exclusively for the purpose of providing benefits to
Participants and Beneficiaries or for defraying the reasonable expenses of
administering the Plan. The Trustee shall carry out its duties with the
care, skill, prudence and diligence under the circumstances then prevailing
that a prudent man acting in a like capacity and familiarity with such
matters would use in the conduct of an enterprise of a like character and
with like aims. ERISA ss. 404(a)(1).
(C) Committee Advice. Although the Committee is authorized under
Section 3.7(J) above to act in a limited capacity as an advisor to the
Trustee concerning investment of the Trust Fund, the Trustee is not
obligated to follow the investment recommendations of the Committee if, in
its opinion, such recommendation is not in the best interest of the Plan
and Trust Fund.
(D) General Powers. The Trustee shall have power to sell, convey,
exchange, lease, convert, transfer, divide, repair, partition, consent to
partition, mortgage, encumber or otherwise dispose of any Trust Fund assets
during the period of its trusteeship and, in addition, may bind the Trust
by undertaking any of the preceding transactions for periods beyond the
Trustee's own tenure as Trustee. The Trustee may engage in any of the
foregoing transactions with Trust Fund assets at public or private sale, or
on credit or such other terms and conditions as may appear appropriate
under the circumstances in the reasonable judgment of the Trustee.
(E) Delegation to Reorganization Committtee. The Trustee shall have
the power to deposit Trust Fund assets with a protective, reorganization or
similar committee; to delegate discretionary power thereto and to pay its
reasonable share of such committee's expenses and compensation and any
assessments levied with respect to any Trust Fund assets so deposited.
68
(F) Exercise of Ownership Rights. The Trustee with respect to all
assets, including but not limited to, bonds, shares of stock and other
securities, shall have all rights, powers and privileges of an owner of the
same, including holding the securities in the name of the Trustee or in the
name of a nominee with or without disclosure of the Trust, otherwise
voting, giving proxies, making payment of calls, assessments or other sums
deemed by the Trustee expedient for the protection of the Trust Fund,
exchanging securities, selling or exercising stock subscriptions or
conversion rights, participating in foreclosures, reorganizations,
consolidations, mergers, liquidations, pooling agreements, voting trusts
and assenting to corporate sales, leases and encumbrances.
(G) Principal or Income. At all times, the Trustee shall have the full
authority to determine what is principal and what is income of the Trust.
(H) Execute Documents. The Trustee is authorized and empowered to
sign, execute and deliver all instruments and documents necessary,
advisable and incidental to the exercise of his powers without obtaining
further authority, consent, ratification or confirmation thereof, or making
report to any court. In the event of Co-Trustees, any one (1) trustee may
execute any document and any third party may rely thereon as if executed by
all Co-Trustees.
(I) Employment of Agents. The Trustee is authorized in its discretion
to employ, at the expense of the Trust Fund, such agents, accountants,
legal counsel, investment counsel or such other services as the Trustee may
deem necessary in the performance of its duties hereunder. The persons
employed by the Trustee may also perform similar or other services for the
Company. The Trustee shall be fully protected with respect to any action
taken or omitted by it in good faith reliance upon the professional advice
of such persons.
(J) Borrow Money. The Trustee is authorized in its discretion to
borrow money from others, excluding a Party in Interest, and to advance its
own funds to the Trust Fund at any time and upon such reasonable terms and
conditions as the Trustee may deem appropriate. As collateral for such
loans, the Trustee may execute a promissory note to evidence said loan and
may provide security for the payment thereof by mortgage, deed of trust,
pledge of the Trust Fund or any Trust Fund assets, and may pay interest on
funds so borrowed at the current, prevailing rate of interest. If the
Trustee shall use any life insurance policy which is an asset of the Trust
Fund as security for such borrowed funds, the Trustee shall use all Trust
Fund insurance policies on a pro rata basis as security.
(K) Compromise and Settlement. The Trustee is authorized to accept,
compromise or otherwise settle any obligation or liability due to or from
it as Trustee under this Plan and Trust Agreement, including any claim that
may be asserted for taxes under present or future laws; or to enforce or
contest such matters through appropriate
69
legal proceedings. Provided, however, that the Trustee shall not be
required to institute or continue litigation unless the Trustee has in its
possession sufficient funds to finance such litigation, or unless the
Trustee has been indemnified to its satisfaction against any counsel fees
and all other expenses and liabilities which the Trustee may be subjected
to in such litigation. In any event, the Trustee shall be entitled, out of
the recoveries of any litigation, to reimbursement for its expenses in
connection therewith.
(L) Payment of Taxes. The Trustee is empowered to pay out of the Trust
Fund all taxes of whatever nature which may be imposed upon it or the Trust
Fund assets pursuant to any provision of the law, now or hereafter enacted,
with respect to the assets or income of the Trust Fund.
(M) Diversification. The Trustee shall invest the Trust Fund assets in
accordance with the diversification requirements of ERISA ss. 404(a)(1)(C),
unless it is clearly prudent not to do so. Pursuant to Revenue Ruling
81-100, as amended, the Plan hereby explicitly adopts and incorporates
herein by reference the declaration of trust, if applicable, of any
financial institution and/or insurance company segregated asset account in
which the Trust's assets may be invested.
(N) Life Insurance. The Trustee may purchase life insurance contracts
on the life of any Participant, upon the request of a Participant and upon
the approval of the Committee. The Trustee may not unreasonably refuse a
Participant's request that has Committee approval. Any acquisition of life
insurance shall meet any applicable incidental benefit provisions. Twice
the amount of term insurance premiums plus the amount of ordinary life
insurance premiums for any Participant shall be less than 50% of the total
of his Employer Contribution Account as of the close of the most recent
Plan Year. The life insurance is subject to the following additional
requirements:
(1) Ordinary Life Insurance. The aggregate of premiums for
ordinary life insurance for each Participant shall be less than fifty
percent (50%) of the aggregate of his Employer Contribution Account as
of the close of the most recent Plan Year. For purposes of these
incidental insurance provisions, ordinary life insurance contracts are
contracts with both non-decreasing death benefits and non-increasing
premiums.
(2) Term and Universal Life Insurance. The aggregate of premiums
for term, universal, and/or all other life insurance contracts which
are not defined as ordinary life insurance contracts herein. Life
insurance for each Participant shall be less than twenty-five percent
(25%) of the aggregate of his Employer Contribution Account as of the
close of the most recent Plan Year.
(3) Combination. The sum of one-half (1/2) of the ordinary life
insurance premiums and all other life insurance premiums will not
exceed
70
one-quarter (1/4) of the aggregate Employer contributions allocated to
any Participant.
(4) Retirement. In order that no portion of the value of a life
insurance contract be used to continue life insurance protection
beyond retirement, at or before retirement the Trustee shall, subject
to Section 8.2:
(a) Convert the entire value of all life insurance contracts
at or before retirement into cash; or
(b) Convert all life insurance contracts into a
nontransferable annuity; or
(c) Distribute the life insurance contracts to the
Participant upon his retirement.
(5) Procedure. The Trustee shall apply for and will be the owner
of any insurance contract purchased under the terms of this Plan. The
insurance contract(s) must provide that proceeds will be payable to
the Trustee, however, the Trustee shall be required to pay over all
proceeds of the contract(s) to the Participant's designated
beneficiary in accordance with the distribution provisions of this
Plan. A Participant's spouse will be the designated beneficiary of the
proceeds in all circumstances unless a qualified election has been
made in accordance with Section 8.2, Joint and Survivor Annuity
Requirements, if applicable. Under no circumstances shall the Trust
retain any part of the proceeds. In the event of any conflict between
the terms of this Plan and the terms of any insurance contract
purchased hereunder, the Plan provisions shall control.
(6) No Share in Earnings or Forfeiture Allocations. The amount of
any Participant's account that is allocated to the purchase of life
insurance shall not share in increases or decreases in the value of
the Trust Fund assets, or in the earnings of the Trust Fund, except
for increases in cash value of the life insurance.
(O) Earmarked Investments. Pursuant to ERISA ss. 404(c) which applies
to pension plans that provide for individual accounts and permits a
Participant or Beneficiary to invest or to exercise control over the
investment of the assets in his account(s), if a Participant or Beneficiary
in fact invests or exercises control over the investment of the assets in
his account, the Trustees shall not be liable for any loss, or by reason of
any breach, which results from such investment or exercise of control over
such investments. To demonstrate that the Participants and Beneficiaries
have independent control, thus insulating the Trustee from liability, the
Trustee should:
71
(1) Written Notice. Provide each Participant and Beneficiary with
written notice of their rights to earmark the investments of their
accounts including a broad list of permissible investments; and,
(2) Written Instructions. Obtain from each Participant or
Beneficiary a written statement setting forth his instructions for the
investment of his account and releasing the Trustee from
responsibility for such investments.
7.8 Prohibited Transactions. The Trustee shall not cause the Plan to engage
in certain transactions, deemed "prohibited transactions," as determined by the
Internal Revenue Service from time to time, if the Trustee knows or has reason
to know that the transaction involves Parties in Interest. The direct or
indirect transactions between the Plan and a Party in Interest that are
presently prohibited are:
(A) Property. A sale, exchange or lease of any property;
(B) Loans. The loan of money or other extension of credit;
(C) Provisions. The provision of goods, services or facilities;
(D) Transfer. The transfer to, or use by or for the benefit of, a
Party in Interest, of any Plan asset; and,
(E) Employer Property. Any acquisition or disposition, on behalf of
the Plan, of any Employer Security or Employer Real Property in violation
of ERISA ss. 407(a). In addition, the Trustee shall not deal with the
income or assets of the Plan in his own interest or for his own account.
However, where the Trustee is a Participant who has an account in the Plan,
he is not, for that reason, barred from legitimate dealings which apply to
all Plan accounts without discrimination. Thus, a Trustee is allowed to
receive any benefit to which he may be entitled as a Participant or
Beneficiary in the Plan as long as the benefit is computed and paid on a
basis which is consistent with the terms of the Plan as applied to all
other Participants or Beneficiaries.
7.9 Prohibited Transactions; Exemptions. This Plan does hereby adopt those
exemptions from prohibited transaction rules established from time to time by
the Department of Labor and the Treasury Department.
7.10 Segregated Account. The Trustee shall have authority to establish
segregated accounts.
7.11 Third Party Dealings. A third party, dealing with the Trustee, shall
not be required to make any inquiry whether the Committee has instructed or
authorized the Trustee, or
72
whether the Trustee is otherwise authorized to take or omit any action, or to
follow the application by the Trustee of any money or property which may be paid
or delivered to the Trustee by such third party.
7.12 Payment of Expenses. All expenses of the Plan and Trustee compensation
shall be paid by the Company, except as expressly provided by a Board
Resolution. To the extent the Company does not resolve by a Board Resolution to
pay such expenses and costs, such expenses and costs shall be paid by the
Trustee out of the Trust Fund, including, but not limited to: brokerage costs,
management fees, transfer fees, shipping expenses and compensation for
professional services such as accountants, attorneys, agents and such other
persons as the Trustee may employ in the discharge of its duties and
responsibilities under this Trust Agreement. All payments of expenses by the
Trustee from the Trust Fund, if any, shall be allocated against the accounts of
the Participants proportionately in accordance with this Plan. Irrespective of
anything stated above, a full time employee of the Company may not also receive
compensation from the Trust Fund.
7.13 Voting by Co-Trustees. In the event more than one person is appointed
as Trustee pursuant to Section 7.1 above, all actions taken by the Trustees
shall be taken pursuant to a vote by a majority of all Trustees. A majority of
the Trustees shall constitute a quorum; provided, however, that the affirmative
vote of a majority of all Trustees shall remain necessary (as distinguished from
the affirmative vote of a majority of those Trustees present and constituting
the quorum) for an effective and valid decision to be rendered by the Trustees.
7.14 Reports. The Trustee shall prepare and distribute reports to the
Committee, the Department of Labor and the Internal Revenue Service pursuant to
ERISA as it now exists or as it may hereafter be amended.
7.15 Liability of Trustee. The Trustee shall discharge his duties with
respect to said Plan solely in the interests of the Participants and
Beneficiaries for the exclusive purpose of providing benefits to the
Participants and their Beneficiaries, and defraying the reasonable expenses of
managing and administering the Trust Fund.
(A) Prudent Man Standard. The Trustee shall use the care, skill,
prudence and diligence under the circumstances then prevailing that a
prudent man acting in a like capacity and familiar with such matters would
with like aims. The Trustee shall not be liable to the Company, Committee,
Participants, Beneficiaries or any third party for any action taken, or any
inaction, in the exercise of its powers or in the performance of its
duties, if the Trustee is acting within the degree of judgment and care
prescribed herein.
(B) Reliance on Instructions. The Trustee shall not be liable for any
action taken or omitted pursuant to the written instructions of the Company
or the Committee; or in the absence of such instructions, for the omission
of any action as to
73
which the Company or Committee is authorized to provide instruction. If, at
any time, the Company or Committee shall fail to give instructions to the
Trustee as required pursuant to this Plan, the Trustee may act, and shall
be protected upon so acting, without such instructions, as in the Trustee's
discretion appears appropriate and advisable under the circumstances for
carrying out the purposes of this Plan and Agreement.
(C) Indemnification. The Company hereby agrees to indemnify and hold
harmless the Trustee against any liabilities, losses, costs or damages
which Trustee may incur in the exercise or performance of its duties within
the degree of judgment and care herein set forth.
(D) Bond Waived. The Trustee shall not be required to post any bond or
other security for the faithful performance of its duties hereunder, except
as specifically required by ERISA ss. 412 or any other Federal or
Washington State law. If a bond is required, the premium or costs for such
bond or other security shall be an expense of the Trust Fund, which may be
paid by the Company or Trustee.
(E) Liability Insurance. Pursuant to ERISA ss. 410(b), the Employer or
the Trustee may purchase insurance for the Fiduciaries, including
themselves, to cover potential liability or losses occurring by reason of
the act or omission of any Fiduciary.
7.16 Resignation or Removal.
(A) Resignation. A Trustee or Co-Trustee may resign at any time by
delivering to the Chairman or Secretary of the Board of Directors of the
Company a written notice of such resignation. Said resignation must be
delivered to the Board of Directors at least sixty (60) days prior to the
date such resignation is to become effective; provided, however, that the
Board of Directors in writing may waive such sixty (60) day period.
(B) Removal. All Trustees serve at the pleasure of the Board of
Directors, accordingly, any person appointed as a Trustee hereunder may be
removed by resolution of the Board of Directors of the Company. The Board
of Directors shall deliver to such person or entity a certified copy of the
resolution of removal, which shall set forth the effective date of the
removal. Said resolution and notice of removal shall be delivered to the
person or entity at least sixty (60) days prior to the effective date of
the removal; provided, however, that the person or entity may waive such
sixty (60) day period. In no event will the removal of a Trustee become
effective until a successor Trustee has been appointed to whom the outgoing
Trustee may transfer and deliver the Trust Fund.
(C) Settlement of Accounts. In the event of the resignation or removal
of a Trustee, said Trustee shall have the right to a settlement of its
accounts which may be made at the Trustee's option as follows:
74
(1) Judicial Settlement. By judicial settlement in an action
instituted by the Trustee in the Snohomish County Superior Court in
and for the State of Washington; or
(2) Settlement Agreement. By written agreement of settlement
between and among the Trustee, the Committee and the Company.
Upon such settlement, the Trustee shall transfer to the successor
Trustee all assets of the Trust Fund then existing as well as true copies
of all records of the Trust. The removed Trustee further agrees to execute
all documents and otherwise cooperate fully as may be required for
transferring the Trust Fund assets to the successor Trustee. The removed
Trustee shall only be discharged from further accountability and liability
for all matters embraced in its settlement upon satisfaction of these
conditions.
(D) Company to Fill Vacancy. The Company covenants and agrees that it
will, upon its receipt of resignation, or upon its giving notice of
removal, of a Trustee, forthwith appoint by resolution of its Board of
Directors a successor Trustee or Co-Trustee. Any successor Trustee or
Co-Trustee so appointed may qualify as such by executing, acknowledging and
delivering to the Chairman or Secretary of the Board of Directors of the
Company, and to the resigned or removed Trustee, a written instrument
accepting such appointment pursuant to this Article. Upon receipt of the
Trust Fund assets and records, such successor Trustee shall become, without
further act, vested with all the right, title, interest, power, duty and
discretion of the predecessor Trustee set forth in this Plan and Trust
Agreement as if said successor Trustee were originally appointed Trustee
hereunder. In the event there is at least one remaining Trustee after a
resignation or removal, the Company may, but is not required to, appoint
additional Co-Trustees.
7.17 Transfer of Interest or Rollovers. Notwithstanding any other provision
contained in this Plan, the Trustee at the direction of the Plan Administrator
shall transfer, upon a one (1) year Break in Service of a Participant (or at
such earlier time as may be deemed necessary by the Plan Trustee), the Vested
interest, if any, of such Participant in the Present Value of his Accrued
Benefit to another Trust forming part of a pension, profit sharing or stock
bonus plan maintained by such Participant's new Employer and represented by said
Employer in writing as meeting the requirements of I.R.C. ss. 401(a), provided
that the Trust to which such transfers are made permits the transfer to be made
and the requirements of Sections 10.10 and 10.11 are met.
7.18 Authorization to Sign. In the event more than one (1) Trustee is
designated to serve as Trustee herein, then the signature of all trustees shall
be required to effectuate or authorize any Plan or Trust transaction.
Notwithstanding the above, all Trustees shall be responsible to review each
trust transaction even if such trustee was not a signor on such transaction.
Provided further, the authority to sign shall be subject to modification
pursuant to any unanimous Committee resolution and shall be effective as
provided for in any such resolution.
75
ARTICLE 8.
RETIREMENT BENEFITS
8.1 Determination of Amount. The determination as to the amount of the
Distributive Share of any Participant or Beneficiary shall be made by the
Committee. The amount shall be determined as follows:
(A) Previous Plan Year End Value. The distributive plan share shall be
determined as of the previous Plan Year end (or such other more frequent
valuation dates as uniformly provided by the Employer); plus any voluntary
after-tax Employee and salary deferral contributions; plus any Employer
contributions allocated to the Participant's account for the previous Plan
Year end; plus any Employer contributions allocated to the Participant's
account during the Plan Year of termination if the Employee is eligible for
a contribution as determined pursuant to Section 5.6; LESS withdrawals
and/or distributions made to such Participant. Such determination of value
shall apply to any distribution made from the Plan, including, but not
limited to, distributions on account of a Participant's death, permanent
disability, termination of employment or retirement.
(B) Adjustments for Significant Increases or Decreases in Value of
Plan Assets. Notwithstanding the above, if, in the opinion of the Trustee,
there has been a significant increase or decrease in the value of the
assets of the Trust between the Participant's termination date and/or
valuation date, and the date said Participant's share is put into a
segregated account, or distributed to said Participant, then the Trustee,
in its sole discretion, shall have the right to select the date of
termination, segregation or distribution as the alternate valuation date,
to value assets accordingly, and to deposit such assets into a separate
account. In the event said change in valuation date increases the amount to
be distributed to said Participant, the Trustee, in its sole discretion,
may charge the Participant's account for the cost of making said valuation.
8.2 Mode of Distribution. After a determination has been made as to the
Distributive Share of a Participant, the general mode of distribution of such
benefits shall be in a form described below. All distributions shall be subject
to the additional limitations and requirements defined more particularly below.
Each method of distribution available shall be of equal value based upon the
full vested interest accumulated for the benefit of the Employee. All
distributions under this Section shall be determined and made in accordance with
the proposed regulations issued under I.R.C. ss. 401(a)(9) including, without
limitation, the minimum distribution incidental benefit requirement provided
under Prop. Treas. Reg. ss. 1.401(a)(9)-2.
(A) Life Annuity.
(1) Qualified Joint and Survivor Annuity. Unless the Participant
and his spouse both make a qualified election and waiver and elect an
76
alternative permissible mode of distribution in writing which
acknowledges the effect of such election, then the normal mode of
distribution in the case of a vested married Participant who does not
die before the annuity starting date, then upon such Participant's
permanent disability, early retirement, normal retirement or
commencement of payment of benefits on a date not earlier than one
hundred twenty (120) months before the Participant reaches normal
retirement age shall be a Non-Transferable Qualified Joint and
Survivor Annuity and, for unmarried Participants the normal mode of
distribution shall be a non-transferable single life annuity for the
life of the Participant, unless another form of benefit is elected by
the Participant during the applicable election period, and the mode of
distribution payable to a spouse of Participant who dies before the
early retirement date the normal mode of distribution shall be by a
preretirement survivor annuity. Provided further, that any written
consent of the Participant and the Participant's spouse to a
distribution must be obtained not more than ninety (90) days before
the commencement of the distribution of any part of an accrued
benefit. Any annuity contract distributed from this Plan must be
nontransferable. The terms of any annuity contract purchased and
distributed by the Plan to a Participant or spouse shall comply with
the requirements of this Plan.
Said Qualified Joint and Survivor Annuity shall not be less than
one-half (1/2) nor greater than the amount of the annuity payable
during the joint lives or joint life expectancies of the Employee
Participant and his spouse and which is the actuarial equivalent of a
single annuity for the life of the Employee Participant, and includes
any annuity in a form having the effect of a joint and survivor
annuity. The annuity contract shall be issued directly to and in the
name of the retiring Participant and all incidents of ownership of
said annuity contract shall be vested in him. Any monies remaining
after the purchase of said annuity contract shall be distributed to
the Participant in cash pursuant to Section 8.2(C) below. The annuity
shall commence within sixty (60) days after the close of the Plan Year
following his retirement, early retirement, permanent disability or
death.
The Qualified Joint and Survivor Annuity requirements provided
above shall apply to Plan benefits derived from both Employer and
non-deductible Employee contributions.
Provided that for Plan Years effective after December 31, 1984,
distribution may be made over the life of such Employee or over the
lives of such Employee and a designated Beneficiary or over a period
not extending beyond the life expectancy of such Employee or the life
expectancy of such Employee and a designated Beneficiary.
77
Notwithstanding anything above to the contrary, a Participant may
elect, without the consent of such Participant's spouse, if
applicable, to begin receiving a Qualified Joint and Survivor or
Single Life Annuity upon attainment of the earliest retirement age as
defined under the Plan.
(2) Ten-Year Period Certain Annuity. If a Participant dies on or
after the commencement of payments but before he has received one
hundred twenty (120) monthly payments, the monthly payments shall be
continued in the same amount to the Participant's Beneficiary until
the remainder of such one hundred twenty (120) monthly payments has
been paid.
(B) Qualified Preretirement Survivor Annuity. Unless otherwise elected
according to a qualified election and waiver as provided for below,
effective for Plan Years commencing after December 31, 1984, a Qualified
Preretirement Survivor Annuity for the life or life expectancy of the
Employee Participant's spouse shall be paid. Payments under such annuity
shall be for the life of the surviving spouse of the Employee Participant
or for a designated beneficiary, and shall be in an amount, the actuarial
equivalent of which is not less than fifty percent (50%) of the account
balance of the Employee Participant as of the date of his death. Any
annuity contract distributed from this Plan must be nontransferable. The
terms of any annuity contract purchased and distributed by the Plan to a
Participant or spouse shall comply with the requirements of this Plan.
The Qualified Preretirement Survivor Annuity requirements provided
above shall apply to Plan benefits derived from both Employer and
non-deductible Employee contributions.
In the event a Qualified Preretirement Survivor Annuity is payable
pursuant to this Section, then the Plan shall permit the surviving spouse
to direct the commencement of payments under the Qualified Preretirement
Survivor Annuity within a reasonable period after the Participant's death.
Any waiver of this form of benefit distribution shall require the same
degree of spousal written consent provided and must be made during the
election period provided in Section 8.2(G) below. In the event the death
benefit is not paid in the form of a Qualified Preretirement Survivor
Annuity, it shall be paid to the Participant's Beneficiary by any of the
methods allowable under this Section.
78
(C) Lump Sum. The total amount of the Distributive Share may be paid
to the Participant in a single cash sum by the later of: the time which is
as soon as administratively feasible; or, within sixty (60) days after the
close of the Plan Year following his retirement, early retirement,
permanent disability or death, provided the required qualified election and
spousal consent is obtained for this mode of distribution. Lump sum
distributions may be rolled over or directly transferred into an eligible
transferee plan as provided herein consistent with applicable laws.
(D) Installments. In monthly, quarterly or annual installments of
interest and/or interest and principal over a period not to exceed the
single or joint life or life expectancy of the participant and his or her
designated beneficiary, as applicable, and pursuant to a schedule to assure
payment of at least fifty-one percent (51%) of the amount determined under
Section 8.1 above, within the life or life expectancy of the Participant or
within the joint life or life expectancy of the Participant and the
Participant's spouse. Said installments shall be at least One Hundred
Dollars ($100.00), and shall be paid on or before the first day of each
succeeding designated period commencing not later than sixty (60) days
after the close of the Plan Year following his retirement, early
retirement, permanent disability or death, with said installments to
continue until the total Distributive Share is exhausted. Once elected,
installment payments may be increased or the period over which payments are
made may be accelerated. The Committee may request the Trustee to invest
the Participant's Distributive Share in an interest bearing savings account
or savings certificates of a bank or savings institution which may be
commingled with other such Distributive Shares of other Participants who
are receiving installments, or the Committee may request the Trustee to
purchase from an insurance company approved by the Committee an annuity
contract to pay such installments, containing such other provisions,
options and settlements as the Committee may approve. If the Trustee is
required to make the installment payments to a Participant or his
Beneficiary, the Trustee shall be compensated by the Company for
maintaining and paying such installments at such reasonable compensation as
may be agreed upon between the Company and the Trustee. Provided further,
that any election to receive benefits on the installment method shall
require the same degree of spousal written consent and a qualified election
must be made for such installment distribution.
(E) Uniform Availability of Benefits. All optional forms of benefit
shall be made available to all Participants on a uniform and
nondiscriminatory basis.
(F) Distribution to Designated Beneficiaries. Any distribution that
may be made to a Participant's spouse may similarly be made in a
distribution to a non-spouse designated beneficiary, provided any spousal
consent requirement is met and a qualified election is made as provided for
in Section 8.2(G)(2)below, except that no prior written consent to such
distribution is required from a non-spouse designated beneficiary.
79
(G) Notice and Election.
(1) General Election Period and Notice Requirement. No less than
thirty (30) days and no more than ninety (90) days prior to the
annuity starting date, the Plan Administrator shall furnish to the
Participant a general description of the terms and conditions of the
joint and survivor annuity, a description of the election and waiver
procedures, an explanation of the financial effect of a Participant's
election of such annuity, a description of the right of the
Participant's spouse to consent to any election to waive the joint and
survivor annuity and an explanation of the right of the Participant to
revoke or re-elect such election and the effect of such revocation. No
consent obtained under the provisions described herein shall be valid
unless the Participant has received notice as described herein.
(2) Qualified Election. Any waiver of a Qualified Joint and
Survivor Annuity or a Qualified Preretirement Survivor Annuity shall
require a qualified election as provided in this subsection. The
waiver must be in writing and must be consented to by the
Participant's spouse, if applicable. The spouse's consent to a waiver
must be in writing and witnessed by a plan representative or a notary
public and must be limited to and acknowledge the effect of such
election and any benefit to a specific alternate non-spouse
beneficiary, if applicable, including any class of beneficiaries or
any contingent beneficiaries which beneficiary designation may not be
changed without spousal consent (unless the Participant's spouse
expressly permits designations by the Participant without any further
spousal consent). Additionally, a Participant's waiver of a Qualified
Joint and Survivor Annuity shall not be effective unless the election
designates a form of benefit which may not be changed without spousal
consent (or the spouse expressly permits designations by the
Participant without any further spousal consent). Notwithstanding this
consent requirement, if the Participant establishes to the
satisfaction of the plan representative that such written consent may
not be obtained because there is no spouse or the spouse cannot be
located or such other circumstances as the Internal Revenue Service
may provide, a waiver will be deemed a qualified election. Any consent
necessary under this provision will not be valid with respect to any
other spouse. A consent that permits designations by the Participant
without any requirement of further consent by such spouse must
acknowledge that the spouse has a right to limit consent to a specific
beneficiary, and a specific form of benefit where applicable, and that
the spouse voluntarily elects to relinquish either or both of such
rights. Additionally, a revocation of a prior waiver may be made by a
Participant without the consent of the spouse at any time before the
commencement of benefits. The number of revocations shall not be
limited. Any new waiver or change of beneficiary will require a new
spousal consent according to the terms of this qualified election
subsection.
80
(3) Qualified Preretirement Election Period and Notice
Requirements. With regard to the election of a Qualified Preretirement
Survivor Annuity, the Administrator shall provide each Participant
within the applicable period with a written explanation of the
Qualified Preretirement Survivor Annuity containing comparable
information to that required pursuant to this Section 8.2.
The applicable period for purposes of the above notification
requirements shall mean, with respect to a Plan Participant, the
period which ends last from among the following periods: the period
beginning with the first day of the Plan Year in which the Participant
attains age thirty-two (32) and ending with the close of the Plan Year
preceding the plan year in which the Participant attains age
thirty-five (35); a reasonable period ending after an individual
becomes a Participant in the Plan; a reasonable period ending after
I.R.C. ss. 417(a)(5) first applies to the Participant; a reasonable
period ending after I.R.C. ss. 401(a)(11) applies to the Participant;
or, a reasonable period ending after separation from service in case
of a Participant who separates from service before attaining age
thirty-five (35).
For purposes of applying the preceding paragraph, a reasonable
period ending after the enumerated events described above is the end
of the two (2) year period beginning one (1) year prior to the date
the applicable event occurs, and ending one year after that date. In
the case of a Participant who separates from service before the Plan
Year in which age thirty-five (35) is attained, notice shall be
provided within the two (2) year period beginning one (1) year prior
to separation and ending one (1) year after separation. If such a
Participant thereafter returns to employment with the Employer, the
applicable period for such Participant shall be redetermined.
The election period to waive the Qualified Preretirement Survivor
Annuity shall be during the applicable period as described herein.
Provided, a Participant who will not yet attain age thirty-five (35)
as of the end of any current Plan Year may make a special qualified
election to waive the qualified preretirement survivor annuity for the
period beginning on the date of the election and ending on the first
day of the Plan Year in which the Participant will attain age
thirty-five (35). Such election shall not be valid unless the
Participant receives a written explanation of the qualified
preretirement survivor annuity in such terms as are comparable to the
explanation required as described herein. Qualified preretirement
survivor annuity coverage will be automatically reinstated as of the
first day of the Plan Year in which the Participant attains age
thirty-five (35). Any new waiver on or after such date shall be
subject to the full requirements of this Section.
81
The Qualified Preretirement Survivor Annuity provided for in this
Section shall apply only to Participants who are credited with an Hour
of Service on or after August 23, 1984. Former Participants who are
not credited with an Hour of Service on or after August 23, 1984 shall
be provided with rights to the Qualified Preretirement Survivor
Annuity in accordance with Section 303(e)(2) of the Retirement Equity
Act of 1984.
(4) Qualified Joint and Survivor Annuity Election Period. With
regard to the election of a Qualified Joint and Survivor Annuity, the
Plan Administrator shall provide each Participant, no less than thirty
(30) and no more than ninety (90) days prior to the annuity starting
date, with a written notice explaining the terms and conditions of the
Qualified Joint and Survivor Annuity, the Participant's right to make,
and the effect of making an election to waive the joint and survivor
annuity form of benefit, the rights of the Participant's spouse
concerning the election to receive or waive the joint and survivor
annuity form of benefit, and, the right to make, and the effect of a
revocation of an election to receive or to waive the right to receive
the joint and survivor annuity form of benefit. The annuity starting
date, for purposes of the above, means the first day of the first
period for which an amount is payable as an annuity, or in the case of
a benefit payable in the form of an annuity, the first day on which
all events have occurred which entitle the Participant to such a
benefit.
For purposes of electing to receive or to waive the right to
receive the joint and survivor annuity form of benefit, the applicable
election period shall be the ninety (90) day period ending on the
annuity starting date. For purposes of determining whether a
Participant's benefit is payable as a qualified joint and survivor or
preretirement survivor annuity, such determination shall be made with
reference to the annuity starting date.
For unmarried Participants, the same provisions detailed above
shall apply in regard to single life annuity notices, elections and
waivers.
(5) Definitions. For purposes of this Section "Annuity Starting
Date" shall mean the first day of the first period for which an amount
is paid as an annuity or any other form. For purposes of this Section,
a vested account balance shall refer to the aggregate value of the
Participant's vested account balances derived from Employer and
Employee contributions (including rollovers and transfers), whether
vested before or upon death, including the proceeds of insurance
contracts, if any, on the Participant's life. The provisions of this
section shall apply to a Participant who is vested in amounts
attributable to Employer contributions, Employee contributions (or
both) at the time of death or distribution.
82
(H) Commencement of Benefits and Required Beginning Dates. Benefits
will commence under the Plan to Participants not later than the sixtieth
(60th) day after the latest of the close of the Plan Year in which the
Participant and his spouse (if applicable) otherwise elect in writing:
(1) The date on which the Participant attains the age of
sixty-five (65) (or normal retirement age, if earlier);
(2) Occurs the tenth (10th) anniversary of the year in which the
Participant commenced participation in the Plan; or
(3) The Participant terminates service with the Company.
Notwithstanding the foregoing, the failure of a Participant and
spouse to consent to a distribution while a benefit is immediately
distributable, shall be deemed to be an election to defer commencement
of payment of any benefit sufficient to satisfy this Section. An
account balance is immediately distributable if any part of the
account balance could be distributed to the Participant (or surviving
spouse) before the Participant attains or would have attained, if not
deceased, the later of: normal retirement age; or, age sixty-two (62).
In the case of a Plan which provides for the payment of an early
retirement benefit, a Participant who satisfied the service
requirements, but separated from service with any nonforfeitable right
to an accrued benefit before satisfying the age requirement for such
early retirement benefit, is entitled upon satisfaction of such age
requirement to receive an early retirement benefit. A Participant may
not defer benefits to the extent that a Participant is creating a
death benefit that is more than incidental.
(4) In addition to the above rules, the entire interest of each
Employee Participant will be distributed as of the first distribution
calendar year (if not made in a single sum) may be made over one of
the following periods (or combination thereof):
(a) no later than the "required beginning date" for such
Participant; or,
(b) beginning no later than the "required beginning date" of
the Participant over one of the following periods:
(i) the life of the Participant,
83
(ii) the lives of the Participant and a Designated
Beneficiary,
(iii) a period not extending beyond the life expectancy
of the Participant; or,
(iv) a period not extending beyond the life expectancy
of the Participant and a Designated Beneficiary.
(5) (a) For Plan Years commencing before December 31, 1988, the
"required beginning date" for a Participant who is not a five percent
(5%) owner is April 1 of the calendar year following the calendar year
in which the later of the following occur: retirement; or, the
Participant attains the age seventy and one-half (70 1/2).
(b) For Plan Years commencing before December 31, 1988, the
"required beginning date" for a Participant who is a five percent
(5%) owner is the first day of April following the later of: the
earlier of the calendar year with or within which the Participant
becomes a five percent (5%) owner; or, the calendar year in which
the Participant retires or the calendar year in which the
Participant attains the age of seventy and one-half (70 1/2)
regardless of when such Participant retires. If a Participant
becomes a five percent (5%) owner during any Plan Year after such
Participant has attained the age of seventy and one-half (70
1/2), then the required beginning date is April 1 of the calendar
year following the calendar year in which such Participant became
a five percent (5%) owner. The above five percent (5%) ownership
rules apply whether or not the Plan is Top-Heavy.
(c) For all Plan Years commencing after December 31, 1988,
the required beginning date shall be April 1 of the calendar year
following the calendar year in which the Participant attains age
seventy and one-half (70 1/2) regardless of any stock ownership
interests held, if any; provided, any applicable grandfather
rules provided under applicable legislation shall continue to
apply.
Specifically, the required beginning date of a Participant
who is not a five percent (5%) owner who attains age seventy and
one-half (70 1/2) during 1988 and who has not retired as of
January 1, 1989, is April 1, 1990.
(d) Five Percent Owner. A Participant is treated as a five
percent (5%) owner for purposes of this Section if such
Participant is a
84
five percent (5%) owner as defined in I.R.C. ss. 416(i)
(determined in accordance with I.R.C. ss. 416 but without regard
to whether the plan is top-heavy) at any time during the Plan
Year ending with or within the calendar year in which such owner
attains age sixty-six and one-half (66 1/2) or any subsequent
Plan Year. Once distributions have begun to a five percent (5%)
owner under this Section, they must continue to be distributed,
even if the Participant ceases to be a five percent (5%) owner in
a subsequent year.
(6) Distributions Begun Before Death. Where distributions to a
Participant begin before death and the Participant dies before his
entire interest is distributed to him, the remaining portion of his
interest will be distributed at least as rapidly as under the method
of distribution that was in effect at the date of his death. I.R.C.
ss. 401(a)(9)(B)(i). However, the designated beneficiary may elect to
accelerate the remaining payments.
(7) Distributions Not Begun Before Death. Where the Participant
dies before a distribution of his interest begins, distribution of the
Participant's entire interest shall be completed by December 31 of the
calendar year containing the fifth (5th) anniversary of the
Participant's death, except to the extent that an election is made to
receive distributions as provided for below:
(a) Where (i) any portion of the Participant's interest is
payable to (or for the benefit of) a Designated Beneficiary, and
(ii) that portion will be distributed over the life of the
Beneficiary (or over a period not extending beyond the life
expectancy of the Beneficiary), and (iii) the distributions
commence on or before December 31 of the calendar year
immediately following the calendar year in which the Participant
died. Recalculation of life expectancy is not permitted under
this provision. I.R.C. ss. 401(a)(9)(B)(ii) and (iii). This
exception applies only if amounts are paid to the Designated
Beneficiary under rules that satisfy the minimum distribution
rules applicable to before-death distributions.
(b) Where the surviving spouse is the Designated
Beneficiary, the five (5) year rule does not apply if the date
distributions are required to begin shall not be earlier than the
later of: (i) December 31 of the calendar year immediately
following the calendar year in which the Participant died; or
(ii) December 31 of the calendar year in which the Participant
would have reached age seventy and one-half (70 1/2). If the
surviving spouse dies after the Participant but before payments
to such spouse must begin, then the five (5) year rule applies as
if the surviving spouse were the Employee. I.R.C. ss.
401(a)(9)(B)(iv). Payments to the surviving spouse will satisfy
the
85
exception to the five (5) year distribution requirement if
payments are made pursuant to a Qualified Joint and Survivor
Annuity.
(c) For purposes of the after-death distribution rules, any
amount paid to a child of the Participant is treated as if it had
been paid to the surviving spouse of an Participant if the amount
becomes payable to the surviving spouse when the child reaches
the age of majority. I.R.C. ss. 401(a)(9)(F).
(d) If the Participant has not made an election pursuant to
this Section 8.2(H) by the time of his death, the Participant's
designated beneficiary must elect the method of distribution no
later than the earlier of: December 31 of the calendar year in
which distributions would be required to begin under this
Section; or, December 31 of the calendar year which contains the
fifth (5th) 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 interest must be
completed by December 31 of the calendar year containing the
fifth (5th) anniversary of the Participant's death.
(e) For the purposes of this Section 8.2(H), distribution of
a Participant's interest is considered to begin on the
Participant's required beginning date (or, the date distribution
is required to begin to the surviving spouse pursuant to the
above). If distribution in the form of an annuity irrevocably
commences to the Participant before the required beginning date,
the date distribution is considered to begin is the date
distribution actually commences.
(8) Notwithstanding the above, this Subsection shall not prohibit
a Plan distribution under a Participant's written designation in
effect on or before January 1, 1984 (regardless of when such
distribution commences), provided such Participant had accrued a
benefit under the Plan as of December 31, 1983 and such designation
would not have disqualified the Plan under I.R.C. ss. 401(a)(9) as in
effect prior to the Tax Equity and Fiscal Responsibility Act of 1982,
and all other requirements therefor have been satisfied, including,
without limitation, inclusion of the required information described
above with regard to distributions to be made upon the death of a
Participant. For any distribution which commences before January 1,
1984, but continues after December 31, 1983, the Participant, or the
Participant's Beneficiary, to whom such distribution is being made,
will be presumed to have designated the method of distribution under
which the distribution is being made if the method of distribution was
specified in writing and the distribution satisfies the requirements
described above. If a designation is revoked, any subsequent
86
distribution must satisfy the requirements of I.R.C. ss. 401(a)(9) and
proposed regulations thereunder. If a TEFRA 242(b) designation is
revoked subsequent to the date distributions are required to begin,
the Trust must distribute by the end of the calendar year following
the calendar year in which the revocation occurs the total amount not
yet distributed which would have been required to have been
distributed to satisfy I.R.C. ss. 401(a)(9) and the proposed
regulations thereunder, but for the TEFRA 242(b)(2) election.
For calendar years beginning after December 31, 1988, such
distributions must meet the minimum distribution incidental benefit
requirements in I.R.C. Proposed Regulation ss. 1.401(a)(9)-2. Any
changes in the designation will be considered to be a revocation of
the designation. However, the mere substitution or addition of another
beneficiary (one not named in the original designation) under the
designation will not be considered to be a revocation of the
designation, so long as such substitution or addition does not alter
the period over which distributions are to be made under the
designation, directly or indirectly (for example, by altering the
relevant measuring life). In the case in which an amount is
transferred or rolled over from one plan to another plan, the rules in
Q&A J-2 and Q&A J-3 of the I.R.C. Proposed Regulations pertaining to
required distributions shall apply.
(I) Minimum Required Distributions.
(1) Determination of Amount to be Distributed Each Year. If the
Participant's interest is to be distributed in other than a single
sum, the following minimum distribution rules shall apply on or after
the required beginning date:
(a) Individual Accounts. If a Participant's benefit is to be
distributed over a period not extending beyond the life
expectancy of the Participant or the joint life and last survivor
expectancy of the Participant and the Participant's designated
beneficiary; or, 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.
For calendar years beginning before January 1, 1989, if the
Participant's spouse is not the designated beneficiary, the
method of distribution selected must assure that at least fifty
percent (50%) of the present value of the amount available for
distribution is paid within the life expectancy of the
Participant.
87
For calendar years beginning after December 31, 1988, 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: the applicable life expectancy; or, if the
Participant's spouse is not the designated beneficiary, the
applicable divisor determined from the table set forth in Prop.
Treas. Reg. ss. 1.401(a)(9)-2, Q&A-4. Distributions after the
death of the Participant shall be distributed using the
applicable life expectancy as defined above as the relevant
divisor without regard to Prop. Treas. Reg. ss. 1.401(a)(9)-2.
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.
(b) Other Forms. If the Participant's benefit is
distribution in the form of an annuity purchased from an
insurance company, distributions thereunder shall be made in
accordance with the requirements of I.R.C. ss. 401(a)(9) and the
proposed regulations thereunder.
(2) Recalculation of Life Expectancy Between Spouses. For
purposes of determining the amount that must be paid out to the
Participant and to his spouse under the required distribution rules,
the life expectancy of a Participant and the Participant's spouse
(except in the case of a life annuity payment) may be redetermined
upon execution of an appropriate election, but not more frequently
than annually, as provided under I.R.C. ss. 401(a)(9)(D).
(J) Definitions.
(1) Applicable Life Expectancy. The applicable life expectancy
(or joint and last survivor expectancy) is calculated 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 (1) for each calendar year which has
elapsed since the date life expectancy was first calculated.
If life expectancy is being recalculated, the applicable life
expectancy shall be the life expectancy as so recalculated. The
applicable calendar year
88
shall be the first distribution calendar year, and if life expectancy
is being recalculated such succeeding calendar year.
(2) Designated Beneficiary. The individual who is designated as
the beneficiary under the Plan in accordance with I.R.C. ss. 401(a)(9)
and the proposed regulations thereunder. Each Participant shall be
provided with an opportunity to affirmatively elect his own designated
beneficiary; provided, upon the failure to do so, the default plan
provisions regarding the payment of benefits to the class of default
beneficiaries shall govern.
(3) Distribution Calendar Year. The distribution calendar year is
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 the above described
provisions.
(4) Life Expectancy. Life expectancy and joint and last survivor
life expectancies are computed by use of the expected return multiples
found in Tables V and VI of Treas. Reg. ss. 1.72-9.
Unless otherwise elected by the Participant (or spouse, in the
case of distributions subscribed above) by the time distributions are
required to begin, life expectancies shall not be recalculated
annually. Any such election to recalculate life expectancies shall be
irrevocable as to the Participant (or spouse) and shall apply to all
subsequent distribution years. The life expectancy of a non-spouse
beneficiary may not be recalculated.
(5) Participant's Benefit. Subject to Section 8.1 above, the
Participant's benefit shall be the account balance 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 account
balance as of dates in the valuation calendar year after the valuation
date, if any, and decreased by distributions made in the valuation
calendar year after the valuation date.
For purposes of the immediately preceding subparagraph, 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.
89
(K) Involuntary Distributions. Involuntary distributions due to a
Participant's termination of participation in the Plan which never exceeded
$3,500.00 on a distribution date, will be made only if such distribution
represents the entire value of the Participant's vested account balance
which shall include all accrued benefits attributable to both Employer and
Employee contributions. Any nonvested portion shall be treated as a
forfeiture. For purposes of this Section, if the value of a Participant's
vested account balance is zero, the Participant shall be deemed to have
received a distribution of such vested account balance. A Participant's
vested account balance shall not include accumulated deductible employee
contributions within the meaning of I.R.C. ss. 72(o)(5)(B) for Plan Years
beginning prior to January 1, 1989. Distributions of any account balance
which ever exceeded $3,500.00 on a distribution date, at any time, shall
only be made with the advance written consent of both the Participant and
his spouse. Any spousal consent required must be in the same form as
provided for above.
(L) Taxable Distributions. All taxable distributions of benefits to a
Participant prior to age fifty-nine and one-half (59 1/2), except on
account of death, disability, retirement under the Plan and separation from
service in accordance with Plan provisions, or any other early distribution
expressly excepted from such distribution tax as provided for in applicable
I.R.C. provisions, shall be subject to an additional income tax penalty
equal to ten percent (10%) of the amount deemed distributed under
applicable I.R.C. provisions if such penalty applies under applicable law.
For purposes of this provision, except to the extent otherwise required by
the I.R.C. or as may be designated by the Participant, distributions from a
Plan shall be deemed to be distributed in the following order:
(1) Employee's voluntary contributions;
(2) Earnings and profits on the Employee's voluntary
contributions;
(3) Employer contributions and earnings and profits on Employer
contributions prior to said Plan becoming a Top-Heavy Plan; and
(4) Employer contributions and earnings and profits on Employer
contributions during years in which the Plan was a Top-Heavy Plan.
All taxable distributions shall further be subject to applicable income tax
withholding requirements as provided in the I.R.C., unless an exception
thereto applies.
(M) Rehire of Participant in Pay Status. Subject to the requirements
of I.R.C. ss. 401(a)(9), any benefit payments in progress under the Plan to
a Participant who
90
has terminated employment shall cease as of the first day of rehire by the
Company and shall resume in a recalculated amount upon such Participant's
subsequent termination from employment. All distributions shall remain
subject to required Participant elections and Participant spouse consent
requirements.
8.3 Segregated Account. When it is determined by the Committee that a
benefit is due a Participant or his Beneficiary, and the Committee has
determined the amount of the benefit pursuant to Section 8.1 above, an
appropriate amount of cash or securities may be withdrawn from the Trust Fund,
which may be placed in a segregated account in a bank or appropriate
institution. The Participant or his Beneficiary shall not thereafter participate
in Company contributions, profits and losses of the Trust Fund and will not be
eligible to make voluntary contributions, if applicable. Alternatively, an
account balance may be "segregated" for bookkeeping purposes only and an actual
physical segregation shall not be required.
8.4 Nonalienation of Plan Benefits and Qualified Domestic Relations Orders.
(A) Nonalienation of Plan Benefits. No benefit or interest available
under this Plan, any assets or the account of any Participant shall be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution or levy of
any kind, either voluntarily or involuntarily, including any liability for
alimony or support, prior to actually being received by the Participant,
and any such attempt will be void. No such benefit shall in any manner be
liable for or subject to the debts, contracts, liabilities, engagements or
torts of the Participant or Beneficiary entitled thereto.
Notwithstanding the above, the above nonalienation provisions shall
not apply to the extent a Participant or Beneficiary is indebted to the
Plan by reason of a loan, if such loan is secured by the Participant's
accrued nonforfeitable benefit and is exempt from the tax imposed by I.R.C.
ss. 4975 by reason of I.R.C. ss. 4975(d)(1).
(B) Limited Exception to Alienation of Benefits for a Qualified
Domestic Relations Order. Notwithstanding the above, effective for Plan
Years commencing after December 31, 1984, to the extent Federal r law
requires an exception to the nonalienation rule for a Qualified Domestic
Relations Order (QDRO) as defined below, pursuant to I.R.C. ss. 414(p) and
ERISA ss. 206(d), as amended, payment pursuant to a QDRO, or any domestic
relations order entered before January 1, 1985, shall be recognized, but no
other exceptions shall be recognized for any other purposes.
(1) Qualified Domestic Relations Order Defined.
(a) Qualified Domestic Relations Order. The term "Qualified
Domestic Relations Order" means a Domestic Relations Order which
creates or recognizes the existence of an alternate payee's right
to, or assigns to an alternate payee the right to, receive all or
91
a portion of the benefits payable with respect to a Participant
under the Plan, and which meets all the requirements as
established below.
(b) Domestic Relations Order. The term "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, child or
other dependent of a Participant, and
(ii) is made pursuant to a State Domestic Relations Law
(including a community property law).
(2) Order Must Clearly Specify Certain Facts. A domestic
relations order meets the requirements of this paragraph only if such
order clearly specifies:
(a) The name and the last known mailing address (if any) of
the Participant and the name and mailing address of each
alternate payee covered by the order;
(b) The amount or percentage of the Participant's benefits
to be paid by the Plan to each such alternate payee, or the
manner in which such amount or percentage is to be determined;
(c) The number of payments or period to which such order
applies; and
(d) Each Plan to which such order applies.
(3) Order May Not Alter Amount, Form, Et. Cetera, of Benefits. A
Domestic Relations Order meets the requirements of this paragraph only
if such order:
(a) Does not require the Plan to provide any type or form of
benefit, or any option, not otherwise provided under the Plan,
except as may be expressly permitted herein;
(b) Does not require the Plan to provide increased benefits,
(determined on the basis of actuarial value); and
(c) Does not require the payment of benefits to an alternate
92
payee which are required to be paid to another alternate payee
under another order previously determined to be a Qualified
Domestic Relations Order.
(4) Exception for Certain Payments Made After Earliest Retirement
Age.
(a) In General. In the case of any payment before a
Participant has separated from service, a Domestic Relations
Order shall not be treated as failing to meet the requirements of
subparagraph (a) of paragraph (3) solely because such order
provides for a distribution pursuant to Treas. Reg ss.
1.401(a)-13(g)(3) or requires that payment of benefits be made to
an alternate payee:
(i) on or after the date on which the Participant
attains (or would have attained) the Earliest Retirement Age
(as defined in this Section);
(ii) as if the Participant had retired on the date on
which such payment is to begin under such order (but taking
into account only the present value of the benefits actually
accrued and not taking into account the present value of any
Employer subsidy for early retirement); and
(iii) in any form in which such benefits may be paid
under the Plan to the Participant (other than in the form of
a joint and survivor annuity with respect to the alternate
payee and his subsequent spouse).
For purposes of clause (ii), the interest rate
assumption used in determining the present value shall be
the interest rate specified in the Plan or, if no rate is
specified, five percent (5%). In addition, notwithstanding
the above or any other provision of this Plan, distributions
may be made to an alternate payee under a qualified domestic
relations order in an immediate lump sum regardless of
whether the Participant has separated from service or
reached his earliest retirement age.
(b) Earliest Retirement Age. For purposes of this paragraph,
the term "Earliest Retirement Age" has the meaning given such
term by I.R.C. ss. 417(f)(3), except that in the case of any
Defined Contribution Plan, the earliest retirement age shall be
the date which is ten (10) years before the normal retirement age
(within the meaning of I.R.C. ss. 411(a)(8)) and shall also
include a pre-early retirement age distribution as permitted by
Treas. Reg. ss. 1.401(a)-13(g)(3).
93
(c) Method of Distribution Available to Alternate Payee.
Notwithstanding the above, an alternate payee who is entitled to
receive a distribution shall only be entitled to receive a
distribution in the form or method which would actually be
available to the Participant, e.g., in installments, if such
Participant terminated service and began receiving benefits at
such time.
(5) Treatment of Former Spouse as Surviving Spouse for Purposes
of Determining Survivor Benefits. To the extent expressly provided in
any Qualified Domestic Relations Order:
(a) The former spouse of a Participant shall be treated as a
surviving spouse of such Participant for purposes of I.R.C.
ss.ss. 401(a)(11) and 417; and
(b) If married for at least one (1) year, the surviving
spouse shall be treated as meeting the requirements of I.R.C. ss.
417(d).
The Plan shall not be treated as failing to meet the requirements
of I.R.C. ss.ss. 401(a) or (k) which prohibit payment of benefits
before termination of employment solely by reason of payments to an
alternate payee pursuant to a Qualified Domestic Relations Order.
(6) Plan Procedures with Respect to Orders.
(a) Notice and Determination by Plan Administrator. In the
case of any Domestic Relations Order received by the Plan:ion by
Plan Administrator
(i) the Plan Administrator shall promptly notify the
Participant and any other alternate payee of the receipt of
such order and the Plan's procedures for determining the
qualified status of Domestic Relations Orders; and
(ii) within a reasonable period after receipt of such
order, the Plan Administrator shall determine whether such
order is a Qualified Domestic Relations Order and notify the
Participant and each alternate payee of such determination.
(b) Plan to Establish Reasonable Procedures. The Plan shall
establish reasonable procedures to determine the qualified status
of Domestic Relations Orders and to administer distributions
under such qualified orders.
94
(7) Procedures for Period During Which Determination Is Being
Made.
(a) In General. During any period in which the issue of
whether a Domestic Relations Order is a Qualified Domestic
Relations Order is being determined (by the Plan Administrator,
by a court of competent jurisdiction or otherwise), the Plan
Administrator shall separately account for in the Plan or in an
escrow account (herein referred to as the "segregated" account)
the amounts which would have been payable to the alternate payee
during such period if the order had been determined to be a
Qualified Domestic Relations Order.
(b) Payment to Alternate Payee If Order Determined to Be
Qualified Domestic Relations Order. If within eighteen (18)
months the order (or modification thereof) is determined to be a
Qualified Domestic Relations Order, the Plan Administrator shall
pay the segregated amounts (plus any interest thereon) to the
person or persons entitled thereto.
(c) Payment to Plan Participant in Certain Cases. If within
eighteen (18) months:
(i) it is determined that the order is not a Qualified
Domestic Relations Order; or
(ii) the issue as to whether such order is a Qualified
Domestic Relations Order is not resolved, then the Plan
Administrator shall pay the segregated amounts (plus any
interest thereon) to the person or persons who would have
been entitled to such amounts if there had been no order.
The Plan Administrator may, however, elect in its sole
discretion to delay payment of any benefits from the Plan,
until the eighteen (18) month period has elapsed if the Plan
Administrator has actual knowledge that a defect in an order
is being remedied, that the resolution of a dispute
concerning an order is being sought, or that a qualified
domestic relations order is being sought.
(d) Subsequent Determination or Order to Be Applied
Prospectively Only. Any determination that an order is a
Qualified Domestic Relations Order which is made after the close
of the eighteen (18) month period shall be applied prospectively
only.
95
(8) Alternate Payee Defined. The term "alternate payee" means any
spouse, former spouse, child or other dependent of a Participant who
is recognized by a Domestic Relations Order as having a right to
receive all, or a portion of, the benefits payable under the Plan with
respect to such Participant.
8.5 Hardship Distributions. The Committee, in its sole discretion, subject
to the nondiscrimination requirements of ERISA, may authorize a lump sum payment
of cash in an amount not to exceed the vested interest in a Participant's
Elective Salary Deferral Contribution and Rollover accounts who has suffered
severe hardship occasioned by illness, accident or death to himself or to a
member of his family whom he is obligated to support, tuition or educational
expenses for the Participant or the Participant's spouse or dependents and/or
the need to prevent the eviction of the Participant from his principal residence
or foreclosure on the mortgage or similar security regarding the Participant's
principal residence.
No hardship distributions from a Participant's discretionary or matching
contribution account shall be permitted.
(A) Written Application. The Participant must provide an appropriate
written application for such hardship payment setting forth in detail the
reasons for his request.
(B) Burden on Participant. The burden is on the Participant to prove
to the Committee's satisfaction the hardship to justify this premature
withdrawal of retirement benefits from the Trust Fund.
(C) Definition of Hardship. For purposes of this Plan, a distribution
will be deemed made on account of hardship only if the distribution is made
both on account of an immediate and heavy financial need of the Participant
and is necessary to satisfy such financial need. The determination of the
existence of an immediate and heavy financial need and of the amount
necessary to meet such need must be made in accordance with
nondiscriminatory and objective standards described herein which decision
shall take into consideration all relevant facts and circumstances. A
financial need shall not fail to qualify as an immediate and heavy
financial need merely because such need was reasonably foreseeable or
voluntarily incurred by the Participant. The following expenses shall be
deemed immediate and heavy financial needs: funeral expenses of a family
member; medical expenses incurred or necessary for the medical care,
described in I.R.C. ss. 213(d), as amended, of the Participant,
Participant's spouse or any dependents of the Participant as defined under
I.R.C. ss. 152; purchase, excluding mortgage payments, of a principal
residence for the Participant; payment of tuition and related educational
fees for the next twelve (12) months of post-secondary education for the
Participant, Participant's spouse, children or dependents; the need to
prevent the eviction of the Participant from his or her principal residence
or foreclosure on the mortgage or deed of trust on the Participant's
principal residence; and, such other immediate and heavy financial needs
which may be determined, from time to time, by the Commissioner and
96
applicable regulations, revenue rulings, notices and other documents of
general applicability.
In addition, the hardship distribution must be in an amount necessary
to satisfy the determined financial need and shall not be made in excess of
the amount required to relieve the financial need (including amounts
necessary to pay any federal, state or local income taxes or penalties
reasonably anticipated to result from the distributions) or to the extent
such need may be satisfied from other resources that are reasonably
available to the Participant.
A Participant's resources shall be deemed to include assets of his
spouse and minor children that are reasonably available to the Participant.
(Property held for the Participant's child in an irrevocable trust or in
custodial accounts established under the Uniform Gifts to Minors Act will
not be treated as a resource of the Participant.)
A distribution will be deemed to be necessary to satisfy an immediate
and heavy financial need if all of the following requirements are met: the
distribution is not in excess of the amount of the immediate and heavy
financial need of the Participant; the Participant has obtained all
distributions other than hardship distributions and all nontaxable loans
currently available under the Employer's plans; the Plans and all other
plans maintained by the Employer provide that the Participant's Elective
Deferral Contributions and Employee after-tax contributions (as defined and
provided under I.R.C. Treas. Reg. ss. 1.401(k)-1(d)) to the Plan will be
suspended for at least twelve (12) months after receipt of the hardship
distribution ; and, the Plan and all other plans maintained by the Employer
provide that the Participant cannot make Elective Contributions for the
Participant's taxable year immediately following the taxable year of the
hardship distribution in excess of the applicable limit under I.R.C. ss.
402(g) for such next taxable year less the amount of such Participant's
Elective Contributions for the taxable year of the hardship distribution.
(D) Effective Date. The above-described hardship distribution
requirements shall only be effective for Plan Years commencing on or after
January 1, 1989.
(E) Participant Status. Notwithstanding the above, an Employee shall
not fail to be treated as an eligible employee for purposes of I.R.C. ss.
401(k) merely because he is suspended from making Elective Contributions in
accordance with the above hardship provisions.
(F) Limitation on Hardship Distributions. For Plan Years commencing
after December 31, 1988, amounts attributable to Qualified Nonelective
Contributions, Qualified Matching Contributions or earnings on Elective
Deferrals earned after the 1988 Plan Year shall not be distributable merely
on account of a Participant's hardship.
97
8.6 Retirement Benefits.
(A) Benefits on Normal Retirement. When any Participant reaches his
normal retirement age while in the employ of the Employer, his account
shall be fully vested and nonforfeitable. If said Participant shall
thereupon retire, the Committee shall certify that fact to the Trustee. The
Committee shall compute the amount of his Distributive Share and the
Trustee shall distribute the same in accordance with one of the methods set
forth above. Provided, however, a Participant is not required to retire at
the designated normal retirement age by virtue of this Plan. Thus, the
Participant and the Employer may agree that he may continue in the
employment of the Employer; and in such event, his Normal Retirement Date
under this Plan shall be his actual retirement date.
(B) Benefits on Optional Early Retirement. If a Participant shall,
upon reaching his Earliest Retirement Date, or at any time thereafter,
elect early retirement and shall thereupon retire, the Committee shall
certify said fact to the Trustee and his Distributive Share shall be paid
to him as if he had retired under the normal retirement provisions of this
Plan and benefits shall be distributed under one of the methods provided
for above. A Participant who meets the requirement for Early Retirement
upon termination of employment will commence to receive benefits upon such
early retirement or as otherwise provided under this Plan.
8.7 Benefits on Death. When any Participant dies while in the employ of the
Employer but before his actual retirement, his Distributive Share shall be
determined as if he had reached his Normal Retirement Date. The Committee shall
certify that fact to the Trustee, and the Trustee shall thereupon pay the
distributive share to the Beneficiary designated by such decedent.
8.8 Distribution Events and Disribution Limitations. Except as expressly
provided for in this Plan, all amounts attributable to Elective Contributions to
this Plan shall not be distributable earlier than upon one of the events
described in this Article or this Section. For Plan Years commencing after
December 31, 1988, amounts attributable to Elective Contributions may be
distributed upon the occurrence of any one of the following events:
(A) Disposition of Corporation or Substantially All of Employer's
Assets. Upon the date of sale by other disposition of the Employer
corporation of such Employer's interest in a subsidiary (within the meaning
of I.R.C. ss. 409(d)(3)) to an unrelated entity, or the date of the sale or
other disposition by the Employer to an unrelated corporation of
substantially all of its assets (within the meaning of I.R.C. ss.
409(d)(2)) used by such Employer corporation in a trade or business of such
Employer corporation, a distribution to Plan Participants may occur.
Provided, the above provision shall only apply, respectively, to an
employee Participant who continues employment with the corporation
acquiring such subsidiary or such assets. The sale of eighty-five percent
(85%) of the assets used in a trade or business will be deemed a sale of
"substantially all" of the assets used in such trade or business.
98
(B) Plan Termination. Upon the termination of the Plan without the
establishment of a successor Plan a distribution to Plan Participants may
occur. The establishment of a successor plan means the existence at the
time the Plan is terminated (including the cash or deferred arrangement) or
within the period ending twelve (12) months after the distribution of all
assets from the Plan, any other defined contribution plan maintained by the
Employer (other than an I.R.C. ss. 4975(e)(7) plan). If a successor plan
exists with respect to a terminated plan, the cash or deferred arrangement
under the Plan making the distribution will not meet I.R.C. ss. 401(k), the
successor plan will be treated as a continuation of the terminated plan and
the successor plan will be treated as not satisfying I.R.C. ss. 401(a). A
plan maintained by an unrelated employer maintaining the terminated plan
within the meaning of I.R.C. ss. 414(b), (c), (m) or (o) will be treated as
a successor plan only if, as of the date of the termination, the Employer
knows or has reason to know that such unrelated employer will become
related to the Employer.
(C) Hardship. In the case of Elective Contributions (and of income
allocable thereto credited to a Participant's account as of December 31,
1988, and such later date authorized by applicable regulations), a
distribution may be made on account of a Participant's hardship as defined
above under Section 8.5.
8.9 Benefits on Permanent Disability. In the event the Participant shall
suffer Permanent and Total Disability as defined under I.R.C. ss. 22(e)(3) and
as determined by the Committee on a uniform and nondiscriminatory basis, his
Distributive Share shall be fully vested and nonforfeitable. The Distributive
Share shall be paid to the Participant as an Accident and Health benefit under
one of the authorized methods provided and elected pursuant to Article 8 hereof
so as to qualify as a disability benefit under I.R.C. ss. 105 to the extent
possible.
8.10 Benefits on Termination. If a Participant shall, for any cause other
than retirement, death or Permanent Disability, cease to be employed by the
Company, or cease to have any Compensation from the Company, the Committee shall
certify such fact to the Trustee. The Committee shall determine the Distributive
Share of the Terminated Participant in accordance with the applicable vesting
schedule set forth below and in accordance with the status of said Terminated
Participant's accounts as of the applicable Committee's allocation and the
applicable Trustee's valuation. The Trustee shall thereupon place said
Distributive Share in a segregated account on behalf of said Terminated
Participant and/or take other actions deemed necessary or convenient by the
Trustee. Said amount shall be disbursed by the Trustee to the Terminated
Participant upon said Terminated Participant's attaining his Earliest Retirement
Date, or such other date as may be elected by the Participant in accordance with
Section 8.2 above. In the event the Participant requests an earlier
distribution, a distribution of the Participant's vested benefits will be made
to the terminated Participant after such Participant has incurred a one (1) year
Break in Service, or such other time as determined to be administratively
feasible; provided, however, all plan distributions shall be administered in a
uniform manner without discrimination.
99
8.11 Vesting. Subject to Section 8.16 below, pursuant to ERISA ss.
203(a)(2)(A), Employer matching and nonmatching contributions shall be vested
and nonforfeitable in accordance with the following schedule:
=================== ==============
Completed Years Percentage
of Service Vested
------------------- --------------
1 0%
2 0%
3 20%
4 40%
5 60%
6 80%
7 100%
=================== ==============
The term "year of employment" means a Year of Service, required by I.R.C.
ss. 411(a)(4) to be taken into account in computing an Employee Participant's
nonforfeitable percentage, without regard to subparagraphs (A), (B) and (C) of
I.R.C. ss. 411(a)(4).
For purposes of vesting, Years of Service shall not include:
(A) Years Before Attainment of Minimum Age for Vesting Purposes. Years
of Service during vesting Computation Periods before the period in which
the Employee attained age eighteen (18);
(B) Failure to Make Mandatory Contributions. Years of Service in which
an Employee made no mandatory contributions to the Plan, if the Plan
requires mandatory contributions;
(C) Break in Service Years. Years in which an Employee incurs a break
in service; and
(D) Prebreak Years of Service. Years of Service before a break in
service, if the Employee is both not vested in any benefits at the time of
his break and if the Employee's number of consecutive one (1) year break in
service equals or exceeds the greater of five (5), or the aggregate number
of years of service before such period of a break in service.
If the Plan's vesting schedule is amended, or the Plan is amended in any
way that directly or indirectly affects the computation of the Participant's
nonforfeitable percentage or if the Plan is deemed amended by an automatic
change to or from a top-heavy vesting schedule, each Participant with at least
three (3) years of service with the Employer may elect, within a
100
reasonable period after the adoption of the amendment or change, to have the
nonforfeitable percentage computed under the Plan without regard to such
amendment or change. For Participants who do not have at least one (1) Hour of
Service in any Plan Year beginning after December 31, 1988, the preceding
sentence shall be applied by substituting "five (5) years of service" for "three
(3) years of service" where such language appears.
The period during which the election may be made shall commence with the
date the amendment is adopted or deemed to be made and shall end on the later
of:
(A) Sixty (60) days after the amendment is adopted;
(B) Sixty (60) days after the amendment becomes effective; or
(C) Sixty (60) days after the Participant is issued written notice of
the amendment by the Employer or Plan Administrator.
For vesting purposes, Years of Service with an Employer must include credit
for service with other related Employers (while related) that are members of a
controlled group of corporations, [See I.R.C. ss.ss. 1563(a)(4) and
1563(e)(3)(C)] and trades or businesses under common control and affiliated
service groups. See I.R.C. ss. 414(b), (c) and (m); Treas. Reg. ss.
1.411(a)-5(b)(3)(iv)(B).
If the adopting Employer maintains a Plan of a Predecessor Employer,
service with the Predecessor Employer shall be counted as service with the
Adopting Employer for eligibility, retention of eligibility, vesting and accrual
of benefits purposes.
If a Participant terminates service, and elects, in accordance with the
requirements of Article 8, to receive the value of the Participant's vested
account balance, the nonvested portion will be treated as a forfeiture. If the
Participant elects to have distributed less than the entire vested portion of
the account balance derived from Employer contributions, the part of the
nonvested portion that will be treated as a forfeiture is the total nonvested
portion multiplied by a fraction, the numerator of which is the amount of the
distribution attributable to Employer contributions and the denominator of which
is the total value of the vested Employer derived account balance.
8.12 Break in Service Rules. For purposes of participation and vesting, the
following Break in Service Rules will control:
(A) Years of Service After Break. Years of Service after five (5)
one-year consecutive Breaks in Service will not be taken into consideration
in determining the vested percentage of a Participant's prebreak
Distributive Share.
(B) Years of Service Before Break. Years of Service before a Break in
Service shall not be taken into consideration until said Participant has
completed one (1) Year of Service after his reemployment.
101
(C) Non-Vested Participants--Greater of: Rule of Parity or Five Years.
A non-vested participant's years of service before any period of
consecutive one (1) year breaks in service will be disregarded or included
pursuant to the following rules:
(1) Breaks in service for Plan years commencing before December
31, 1984 -- if a Participant has no vested rights at the time of his
Break in Service, prior years of service shall not be taken into
consideration in determining post-break vested rights, if the number
of consecutive one year Breaks in Service equals or exceeds the number
of Years of Service prior to the break (herein referred to as the Rule
of Parity);
(2) Breaks in Service for Plan years commencing after December
31, 1984 -- the same general rule shall apply to Breaks in Service in
Plan years commencing after December 31, 1984 as before, except that
for a Participant who has the greater of: five (5) consecutive one (1)
year Breaks in Service; or, a Rule of Parity break in service, years
of service after such Break shall not be required to be taken into
account for purposes of determining the nonforfeitable percentage of
his accrued benefit derived from Employer contributions which accrued
before such five (5) year period.
(3) A nonvested Participant means a Participant who does not have
any nonforfeitable right under the Plan to an accrued benefit derived
from Employer contributions.
(C) Special Account Rule. If a distribution is made at a time when a
Participant has a nonforfeitable right to less than one hundred percent
(100%) of the account balance derived from Employer contributions and the
Participant may increase the nonforfeitable percentage in the account:
(1) A separate account will be established for the Participant's
interest in the Plan as of the time of the distribution; and
(2) At any relevant time the Participant's nonforfeitable portion
of the separate account will be equal to an amount ("X") determined by
the formula:
========================================
X = P(AB / (R x D)) - (R x D)
========================================
For purposes of applying the formula: P is the nonforfeitable percentage at the
relevant time; AB is the account balance at the relevant time; D is the amount
of the distribution; and R is the ratio of the account balance at the relevant
time to the account balance after distribution.
102
8.13 Forfeitures.
(A) General Allocation of Forfeitures. Any portion of a Participant's
Account to which such Participant is not entitled at the termination of
such Participant's employment and upon a distribution to such Participant
shall constitute a Forfeiture. The remaining portion of said money deemed
non-vested under Section 8.10 through 8.12 above, if any, shall remain
vested in the Trustee, shall remain a part of the Trust Fund and shall be
allocated to the suspense account as provided herein. Furthermore, in the
case of a Terminated Participant whose Vested benefit is zero, such
Terminated Participant shall be deemed to have received a distribution of
his Vested benefit upon his termination of employment.
If the Terminated Participant returns to the employ of the Company
before he has incurred five (5) consecutive one (1) year Breaks in Service,
the separate account (non-vested portion) shall be maintained for the
Employee and future allocations shall be made to a new Employer
Contribution Account.
Forfeitures shall occur on the last day of the Plan Year in which the
Participant incurs five (5) consecutive one (1) year Breaks in Service and
shall be allocated to Participants in such Plan as of such date, all as
more particularly provided for herein.
As of each Entry Date, any amounts which become Forfeitures since the
last Entry Date shall first be made available to reinstate previously
forfeited account balances of Former Participants, if any, in accordance
with Section 8.12(B) above. The remaining Forfeitures, if any, shall be
used to reduce matching Employer contributions provided for under Section
5.1(C) above; and, if additional forfeitures remain to be allocated, the
remaining forfeitures will be allocated among the Participants' Accounts in
the same proportion as discretionary Employer contributions are made for
such Plan Year, e.g., in the same proportion that each such Participant's
eligible Compensation (as determined for Employer Plan contribution
purposes) for the Plan Year bears to the total included eligible
Compensation of all Participants for the Plan Year; provided, nothing
herein shall require any additional allocation in excess of the minimum
top-heavy benefit, if applicable. In the allocation process said sum shall
be added to the Company contribution before any allocations are made to
avoid an excessive integration benefit in the event said Plan is
integrated.
The terminated Participant shall have no further interest in the
Forfeiture except as otherwise provided herein.
(B) Return to Service by a Participant Whose Account Was Forfeited. If
a Participant is partially vested in his account balance and receives a
distribution from the Plan of his vested account balance and resumes
employment covered by this Plan, then such Employee shall have the
opportunity, as provided herein, to repay the full
103
amount of the Employee's Employer derived account balance and the
Employee's nonvested Employer derived account balance will be restored to
the amount on the date of distribution if repayment is made as provided
herein. If a Participant's interest is reallocated and the Participant
returns to the service of the Employer before incurring five (5)
consecutive one (1) year Breaks in Service, the reallocated Account shall
be restored as follows:
(1) If no part of the Participant's nonforfeitable interest is
distributed to him, the forfeitable amount, adjusted for investment
increases, shall be restored to the Participant's Account.
(2) If the Participant is paid his entire nonforfeitable interest
and the portion of such distribution represented by the Employer
derived benefit does not exceed $3,500.00, or if the Participant
voluntarily elected to receive a distribution with respect to his
earlier service, the forfeitable amount, unadjusted by any investment
increases or decreases, shall be restored to the Participant's Account
only if the Participant repays the full amount of the earlier
distribution not later than the earliest of the following dates:
o the end of the five (5) year period beginning with the
Employee's resumption of service covered by the Plan; or,
o the end of the first period of five (5) consecutive one (1)
year Breaks in Service beginning with the date of the
distribution.
(3) If the Participant is paid less than his or her entire
nonforfeitable interest, the forfeitable amount, adjusted by any
investment increases, shall be restored and placed in a separate
suspense account. The Participant's vested portion of his or her
interest in the suspense account at any time shall not be less than an
amount "X" determined by the following formula:
========================================
X = P[AB + (R x D)] - (R x D)
========================================
For purposes of applying this formula, P is the vested percentage
at the relevant time; AB is the Participant's suspense account balance
at the relevant time; D is the amount of the distribution; and, R is
the ratio of the suspense account balance at the relevant time to the
account balance after distribution.
(4) Any amount repaid by the Participant pursuant to the above
shall be treated as an after-tax contribution by the Participant for
purposes of the taxation of any subsequent distribution.
104
(5) Amounts to be restored under this paragraph (B) shall first
be restored out of any forfeitures and second out of additional
nonelective discretionary Employer contributions to be allocated for
the Plan Year for which the restoration is to be made.
(C) Years of Service for Vesting Purposes. In counting an Employee's
Years of Service for vesting purposes, the following shall apply, using the
applicable Vesting Computation Period to determine Years of Service and
Breaks in Service.
(1) Except as hereafter provided, an Employee shall receive
credit for each Year of Service.
(2) Years of Service prior to a One-Year Break in Service will be
disregarded unless and until the Employee completes a Year of Service
after his re-employment.
(3) In the case of an Employee who incurs a one (1) year Break in
Service prior to the time he has any vested and nonforfeitable
interest in this Accrued Benefit derived from Employer contributions,
his service prior to the Break in Service shall not be counted if the
number of his consecutive one (1) Year Breaks in Service equals or
exceeds the greater of: five (5); or, his aggregate number of Years of
Service preceding the Break. Such aggregate number of Years of Service
preceding such Break in Service shall be deemed not to include Years
of Service not required to be taken into account under this Section by
reason of any prior Break in Service.
(4) In the case of a Participant who incurs five (5) consecutive
one (1) year Breaks in Service, Years of Service completed by such
Participant after the five (5) year break period shall not be counted
to increase the Participant's nonforfeitable interest in his Account
as determined prior to such Break in Service.
(D) Account Restoration. If a benefit is forfeited because the
Participant or Beneficiary cannot be found, such benefit will be reinstated
to such Participant or Beneficiary if a timely and bona fide claim is made
by the Participant or Beneficiary pursuant to applicable federal and/or
state law. Adequate proof of such claim shall be determined by the Plan
Administrator and shall be required from any such claimant on a uniform and
nondiscriminatory basis.
(E) Vested Rights. Nothing contained in this Plan shall be construed
as giving the Company or the Committee the right to deprive, forfeit or
take away from any Participant any of the vested rights such Participant
may have in the Trust Fund.
105
8.14 Loans. Effective as of the effective date of this Plan Amendment, no
future Plan loans shall be authorized pursuant to this Plan and Trust.
8.15 Effects of Payments. All benefits payable under this Plan shall be
paid or provided for solely from the Trust Fund, and the Company assumes no
liability or responsibility therefore. Any payment to any Participant, retired,
permanently disabled or Terminated Participant, Beneficiary or legal
representative of any of the above in accordance with the provisions of this
Plan shall, to the extent of such payment, be in full satisfaction of all claims
hereunder against the Trustee, Committee and Company. The Trustee, Committee
and/or Company may require any payee, as a condition precedent to such payment,
to execute a receipt of payment and release in such form as shall be determined
by the Trustee, Committee and/or Company as the case may be.
8.16. Top-Heavy Plans. Notwithstanding any other provision in this Plan,
for each Plan Year in which this Plan is a Top-Heavy Plan or part of a Top-Heavy
group of plans the following provisions shall apply:
(A) Top-Heavy Vesting Schedule. Irrespective of the provisions
contained in Section 8.11 above, the following vesting schedule shall
apply:
=================== ==============
Completed Years Percentage
of Service Vested
------------------- --------------
1 0%
2 20%
3 40%
4 60%
5 80%
6 100%
=================== ==============
For purposes of vesting, Years of Service shall not include:
(1) Years Before Attainment of Minimum Age for Vesting Purposes.
Years of Service during vesting computation periods before the period
in which the Employee reaches age eighteen (18);
(2) Failure to Make Mandatory Contributions. Years of Service in
which an Employee declines to make mandatory contributions to the
Plan, if the Plan requires mandatory contributions;
(3) Break in Service Years. Years in which an Employee has a
break in service; and
106
(4) Prebreak Years of Service. Years of Service before a break in
service, if the Employee is both not vested in any benefits at the
time of his break and if the Employee's number of consecutive one (1)
year breaks in service equals or exceeds the greater of five (5) or,
the aggregate number of Years of Service before such period.
For vesting purposes, Years of Service with an Employer must include
credit for service with other related Employers (while related) that are
members of a controlled group of corporations, [See I.R.C. ss. 1563(a)
without regard to subsection (a)(4) and (e)(3)(C)] and trades or businesses
under common control and affiliated service groups. See I.R.C. ss. 414(b),
(c) and (m); Treas. Reg. ss. 1.411(a)-5(b)(3)(iv)(B).
If the adopting Employer maintains a Plan of a Predecessor Employer,
service with the Predecessor Employer shall be counted as service with the
Adopting Employer for eligibility, retention of eligibility, vesting and
accrual of benefits purposes.
In the event the Plan subsequently ceases to be a Top-Heavy Plan, the
above provision contained in this Subsection (B) shall continue to apply in
reference to all current Plan Participants, irrespective of the fact the
Plan is no longer a Top-Heavy Plan.
Should the status of the Plan change from Non-Top-Heavy to Top-Heavy,
such change shall be treated as a Plan amendment when the regular
Non-Top-Heavy vesting schedule is more favorable than the required
Top-Heavy vesting schedule. Should the Plan cease to be a Top-Heavy Plan,
then any change in the vesting schedule shall be treated as a Plan
Amendment.
Pursuant to any Plan amendment to the vesting schedule which may
result from a change in Top-Heavy status of the Plan, the provisions of
I.R.C. ss. 411(a)(10) shall apply. Section 411(a)(10) of the I.R.C.
requires that no Plan Amendment to a vesting schedule shall result in a
reduction in the nonforfeitable percentage of accrued benefits allocable to
a Participant from Employer contributions. In addition, pursuant to any
amendment to the vesting schedule of the Plan, each Participant having not
less than three (3) Years of Service shall have an opportunity to select,
within a reasonable period after the adoption of such amendment, to have
his nonforfeitable vested percentage computed under the Plan without regard
to the amendment to the Plan vesting schedule.
For any Plan Year in which this Plan is Top-Heavy, the minimum vesting
schedule elected by the Employer in regard to a Top-Heavy Plan will
automatically apply to the Plan. The minimum vesting schedule applies to
all benefits within the meaning of I.R.C. ss. 411(a)(7) except those
attributable to Employee contributions, including benefits accrued before
the effective date of I.R.C. ss. 416 and benefits accrued before the Plan
became Top-Heavy. Further, no decrease in a Participant's nonforfeitable
percentage may occur in the event the Plan's status as a Top-Heavy Plan
changes for any Plan Year. However, this Section does not apply to the
account balances of any Employee who does
107
not have an Hour of Service after the Plan has initially become Top-Heavy
and such Employee's account balance attributable to Employer contributions
and forfeitures will be determined without regard to this Section.
If the vesting schedule under the Plan shifts in or out of the above
schedule for any Plan Year because of the Plan's Top-Heavy status, such
shift is an amendment to the vesting schedule and the election in Section
8.11 of the Plan applies.
(B) Excess Compensation Amounts. Irrespective of anything contained
herein, Compensation of Employees in excess of the first $200,000.00 for
any Plan Year for which the Plan is Top-Heavy shall not be taken into
consideration in determining contributions and benefits provided under a
Top-Heavy Plan, subject to cost of living adjustments as approved by the
Internal Revenue Service; provided that, any benefits accrued before the
Plan became Top-Heavy shall not be reduced hereby.
(C) Combined Plan Fraction. The combined Plan fraction set forth in
I.R.C. ss.ss. 415(e)(2)(B) and 415(e)(3)(B) shall be deemed to read 1.0
instead of 1.25. Provided, however, this provision shall not apply to
Top-Heavy Plans or Top-Heavy Groups if such Plan is not a Super Top-Heavy
Plan or Super Top-Heavy Group and if additional minimum benefits will be
provided for the benefit of Non-Key Employees as set forth in Sections
8.16(E) and (F) of this Plan and in I.R.C. ss. 416(h)(2)(A)(i) which
provides that for purposes of determining minimum benefits as detailed in
Section 8.16(E) below, seven and one-half percent (7 1/2%) shall be
substituted for three percent (3%) in regard to this defined contribution
plan.
(D) Defined Contribution Minimum Benefit. Each Non-Key Employee
Participant, who has not separated from service by the end of the Plan
Year, shall receive a defined contribution minimum benefit (in the form of
Qualified Nonelective Employer contributions, matching contributions and/or
reallocated forfeitures, as applicable) of not less than the lesser of:
three percent (3%) of said Participant's Compensation for that Plan Year
for the calendar year ending within the Plan Year for the year in which the
Plan is a Top-Heavy Plan; or, in the case where the Employer has no defined
benefit plan which designates this Plan to satisfy I.R.C. ss. 401, then the
largest percentage of Employer contributions and forfeitures, as a
percentage of the first $200,000.00 (indexed) of the Key Employee's
Compensation allocated on behalf of any Key Employee for that Plan Year. In
determining the percentage contributed for Key Employees, the contribution
made or required to be made for such Key Employee shall be equal to the
ratio of the sum of the contributions made or required to be made and
forfeitures allocated for such Key Employee divided by such of the Key
Employee's total compensation for the year that does not exceed $200,000.00
(as adjusted by the cost of living adjustments approved by the Internal
Revenue Service).
Non-Key Employees who have become Participants in the Plan, but who
subsequently fail to complete a Year of Service as defined herein (or the
equivalent) for an accrual computation period, shall receive the above
described defined contribution
108
minimum benefit. A Non-Key Employee shall not fail to receive a defined
contribution minimum benefit because the Employee is excluded from
participation or accrues no benefit or a reduced benefit merely because the
Employee's compensation is less than a stated amount; or the Employee is
excluded from participation or accrues minimal benefits merely because of a
failure to make Mandatory Employee Contributions (if required) or, in the
case of a cash or deferred arrangement, elective contributions. See Treas.
Reg. ss.ss. 1.416-1(M-7) and (M-19).
The minimum allocation shall be determined without regard to any
permitted disparity provisions which may be incorporated herein.
A lower defined contribution minimum benefit, however, is permissible
where the largest contribution made or required to be made, for Key
Employees is less than three percent (3%). In the event no contribution is
made, or a contribution of less than three percent (3%) is made, or
required to be made for Key Employees under the Plan, then the defined
contribution minimum benefit payable to Non-Key Employees under the Plan
shall be equal to the highest rate of Employer contribution made for the
benefit of any Key Employees. Provided that, the preceding exception to
payment of the three percent (3%) defined contribution minimum benefit does
not apply to any Plan required to be included in an Aggregation Group if
such Plan enables a defined benefit plan required to be included in such
Group to meet the requirements of I.R.C. ss. 401(a)(4) or 410. Provided
further, that for purposes of determining the defined contribution minimum
benefit that is required to be made on behalf of Non-Key Employees, a
waiver of the minimum funding requirement shall be disregarded. Thus, if a
defined contribution plan receives a waiver of the minimum funding
requirement, and if the minimum contribution required under the Plan
without regard to the waiver exceeds three percent (3%), then the exception
provided above shall not apply even though no Key Employee receives a
contribution in excess of three percent (3%) and even though the amount
required to be contributed on behalf of the Key Employee has been waived.
The adjusted account balance, however, of the Non-Key Employees must
reflect the required defined contribution minimum benefit even though such
contribution was not actually made.
For purposes of the defined contribution benefit rule, all defined
contribution plans that are included in a Top-Heavy Group shall be treated
as a single plan, reallocated forfeitures shall be treated as Employer
contributions.
Employer contributions attributable to a salary reduction or similar
arrangement elected by a Key Employee shall be included in determining the
amount contributed on behalf of a Key Employee, for the above purposes,
when the minimum contribution will be less than three percent (3%) (except
for Plan Years commencing before January 1, 1985). For Plan Years beginning
after December 31, 1988, the Plan shall not treat such salary reduction
contributions as Employer contributions for the purpose of satisfying the
minimum contribution or benefit requirements for Non-Key Employees.
109
To the extent a Participant is covered under any other Plan of the
Employer and the Employer has provided a minimum allocation to the
Participant under such Plan, then the Employer need not provide a second
minimum allocation to such Participant under this provision.
The minimum allocation provided herein (to the extent required to be
nonforfeitable under I.R.C. ss. 416(b)) may not be forfeited under I.R.C.
ss.ss. 411(a)(3)(B) or 411(a)(3)(D).
(E) Multiple Employer Plans. If the Employer maintains both a defined
contribution and a defined benefit plan in a Top-Heavy Aggregation Group,
then the Employer is not required to provide the Non-Key Employee with a
defined contribution minimum benefit under both plans, but rather the
Employer shall utilize the defined contribution five percent (5%) minimum
benefit safe harbor approach as provided in Treas. Reg. ss. 1.416-1(M-12)
under which the top-heavy minimum benefit of five percent (5%) shall be
provided under the defined contribution plan.
ARTICLE 9.
AMENDMENT, TERMINATION, MERGERS, CONSOLIDATIONS, ETC.
The Employer reserves certain rights of modification, amendment and
termination as hereinafter set forth:
9.1 Plan Amendments. The Employer reserves the right at any time and from
time to time to amend or terminate this Agreement in whole or in part by
delivering to the Trustee a copy of such amendment or termination certified by
any officer of the Employer; provided, however, that the Employer shall have no
power to amend or terminate this Agreement in such manner as would cause or
permit any part of the income or the corpus of the Trust to be diverted to
purposes other than for the exclusive benefit of Participants or their
Beneficiaries, or as would cause or permit any portion of the Trust Fund to
divert to, revert to or become the property of the Employer except as provided
in Section 5.7 above or except to the extent Plan assets are utilized to pay
Plan expenses, taxes or administrative costs; and provided further that no
change in the rights, duties or responsibilities of the Trustee or Plan
Administrator shall be permitted without its advance and express consent, in
writing. Any such amendment shall be communicated in writing to the
Participants.
Except as permitted by regulations, including Treas. Reg. ss. 1.411(d)-4,
no amendment to the Plan, or transaction having the effect of a Plan amendment
(such as a merger or plan transfer or similar transaction) shall be effective to
the extent that it has the effect of reducing or eliminating a Participant's
I.R.C. ss. 411(d)(6) protected benefit or adds or modifies conditions relating
to I.R.C. ss. 411(d)(6) protected benefits when the result is a further
restriction on such benefit unless such protected benefits are preserved with
respect to benefits accrued as of the later of: the adoption date; or, the
effective date of the amendment. I.R.C. ss. 411(d)(6) protected benefits are
benefits described under I.R.C. ss. 411(d)(6), early retirement benefits and
110
retirement-type subsidies and optional forms of benefit. Notwithstanding the
preceding sentence, a Participant's account balance may be reduced to the extent
permitted under I.R.C. ss. 412(c)(8). For purposes of this paragraph, a plan
amendment which has the effect of decreasing a Participant's account balance or
eliminating an optional form of benefit, with respect to benefits attributable
to service before the amendment, shall be treated as reducing an accrued
benefit. Furthermore, if the vesting schedule of the Plan is amended, in the
case of an Employee who is a Participant as of the later of: the date such
amendment is adopted; or, the date it becomes effective, the nonforfeitable
percentage (determined as of such date) of such Employee's right to his
Employer-derived accrued benefit will not be less than his percentage computed
under the Plan without regard to such amendment as more particularly provided
above.
9.2 Successor Company. Unless this Trust be sooner terminated, a successor
to the business of the Company, by whatever form or manner resulting, may
continue this Plan and Trust by executing an appropriate supplemental agreement
and such successor shall completely and immediately succeed to all the rights,
powers and duties of the Company hereunder. The employment of any Employee who
is continued in the employ of such successor shall not be deemed to have been
terminated or severed for any purpose hereunder.
9.3 Termination of Trust. In the event of a complete discontinuance of
contributions under the Plan, the account balance of each affected Participant
will be nonforfeitable. Upon termination of the Trust, whether by its own act or
pursuant to a petition by the Pension Benefit Guaranty Corporation, if
applicable, accounts of all Participants shall be nonforfeitable and fully
vested, and the Committee shall direct the Trustee to distribute all assets
remaining in the Trust as soon as administratively feasible (as determined in
the sole discretion of Employer), after payment of any expenses properly
chargeable against the Trust, to the Participants in accordance with the value
of the respective accounts of such Participants as of the date of such
termination of the Trust, in cash or in kind, and in such manner as the
Committee shall determine. To the extent any unallocated amounts exist in the
Trust, said unallocated amounts shall be allocated in accordance with the
provisions hereof. The Committee's determination shall be conclusive upon all
persons. Provided, however, that the Committee in its sole discretion may
provide Participants with the election to leave their account balances in the
Trust until they would otherwise be entitled to receive or elect to receive a
distribution thereof under the Plan to the extent such option is available under
applicable law. The Committee in office at the time of such termination shall
continue to act with its full powers hereunder until all the assets are
completely distributed; and a majority of the members of the Committee then in
office shall have the power to fill any vacancies occurring in the Committee
after such termination by resignation, death or otherwise. In the event the
Committee shall not within a reasonable time after such termination have given
the Trustee the directions provided in this Section, the assets then remaining
in the Trust Fund shall be distributed in such manner as may be directed by a
judgment or decree of a court of competent jurisdiction or by rule of the
Pension Benefit Guaranty Corporation. Distributions for all Participants shall
be made pursuant to the distribution provisions of Article 9. Except as
permitted by regulations, any termination shall not affect any Participant's
I.R.C. ss. 411(d)(6) protected benefit.
111
9.4 Contributions Permanently Discontinued. In the event that contributions
are permanently discontinued by the Employer, the Participants' entire interest
in their respective Employer contribution accounts shall become fully vested and
nonforfeitable.
9.5 Partial Termination. In the event of a partial termination, the
accounts of all affected Participants shall be nonforfeitable and fully vested
to the extent of such partial termination.
9.6 Merger or Consolidation. The Plan may be merged or consolidated with,
or its assets and/or liabilities transferred to, any other Plan and Trust
pursuant to I.R.C. ss. 401(a)(12), only if each Participant in this Plan shall
receive a benefit immediately after such merger, consolidation or transfer of
assets (if the Plan is then terminated) which is equal to or greater than the
benefit he would have been entitled to receive immediately before the merger,
consolidation or transfer of assets if the Plan was terminated at that time. No
transfer, merger or consolidation shall result in the elimination or reduction
of an I.R.C. ss. 411(d)(6) protected benefit.
ARTICLE 10.
MISCELLANEOUS
10.1 No Contribution Obligation.
(A) Employer. Continuance of this Plan is not assumed as a contractual
obligation of the Employer and the right is reserved by the Company at any
time to reduce, suspend or discontinue its contributions hereunder all as
provided in Article 9. Neither the establishment of this Plan nor any
modification thereof shall be deemed to constitute a contract between the
Employer and any Employee or to be a consideration for, an inducement for
or condition of, the employment of any person. Nothing contained herein
shall be deemed to give any Employee the right to be retained in the employ
of the Employer or to interfere with the rights of the Employer to
discharge any Employee at any time, nor shall it interfere with the
Employee's right to terminate his employment at any time. Nothing herein
contained shall be construed as giving any Participant, or any other
person, any legal or equitable rights against the Employer, the Trustee or
Committee, unless the same shall be specifically provided for in this
Agreement or conferred by affirmative action of the Committee or the
Employer in accordance with the terms and provisions of this Agreement.
(B) Employee. For Plan Years commencing after December 31, 1988, no
Employer provided benefits, as defined in Treas. Reg. ss. 1.401(k)-1(e)(6),
shall be conditioned, either directly or indirectly, upon any Participant's
or Employee's election to make or not to make salary deferral contributions
under the Plan (as described above under Section 6.2). Provided, this
provision shall not apply to Employer matching contributions as defined in
I.R.C. ss. 401(m) which are made by reason of a Participant's
112
Salary Deferral Election or I.R.C. ss. 125 contributions which may be made
in lieu of Elective Salary Deferral Contributions.
10.2 Partial Invalidity. In the event any provision of this Agreement
should for any reason be held invalid, such invalidity shall not affect the
remaining provisions hereof, and such remaining provisions shall be construed
and enforced as though such invalid provisions had not formed a part hereof.
10.3 Headings. The headings of Articles are included solely for convenience
of reference, and if there is any conflict between such heading and the text of
this Plan, the text shall control.
10.4 Counterparts. The Plan may be executed in any number of counterparts,
each of which shall be deemed the original whether or not all such counterparts
are produced.
10.5 Gender. Whenever appropriate, the masculine may include feminine, the
singular may include plural or the plural may be read as singular.
10.6 Retroactive Amendments. In general, no amendment shall have any
retroactive effect so as to eliminate or reduce any right or early retirement
benefit already accrued and no amendment shall eliminate an optional form of
benefit or mode of distribution to the Employee Participant; provided, however,
that an amendment may have such retroactive effect if necessary to bring the
Plan into conformity with any Federal law or regulation pertaining to the Plan's
qualification or tax exempt status under ERISA or any other applicable laws or
regulations now existing or hereafter adopted.
10.7 Construction. The provisions of this Agreement shall be construed,
administered and enforced according to applicable Federal laws including ERISA
and applicable regulations promulgated thereunder. Matters not covered by
applicable Federal laws shall be determined according to Washington State laws.
All contributions to the Trust shall be deemed to take place in Washington
State.
10.8 Division of Powers. The Fiduciaries shall have only those specific
powers, duties, responsibilities and obligations as are specifically set forth
in this Plan and Trust Agreement.
(A) Company. In general, the Company shall have the sole
responsibility for making its contributions, appointing and removing the
Trustee and members of the Committee; and amending or terminating in whole
or in part this Plan and Trust Agreement.
(B) Committee. The Committee shall have the sole responsibility for
the administration of this Plan as set forth in Article 3 above.
113
(C) Trustee. The Trustee shall have the sole responsibility for the
administration of the Trust and the management of the Trust Fund assets,
all as specifically set forth in Article 7 above.
Each Fiduciary may rely upon such direction, information or action of
another Fiduciary as being proper under this Plan and Trust Agreement, and
is not required to inquire further into the propriety of any such
direction, information or action of another Fiduciary. It is intended under
this Plan and Trust Agreement that each Fiduciary shall be responsible for
the proper exercise of its respective powers, duties, responsibilities and
obligations set forth herein, but that each Fiduciary should not be
responsible for any act or failure to act by another Fiduciary.
10.9 Appeals Procedure. Any Employee Participant or Beneficiary of an
Employee Participant who is dissatisfied with and adversely affected by any
decision, action or inaction of the Company, Trustee, Committee or Plan
Administrator with reference to any matter concerning the Plan or Trust,
including but not limited to the eligibility determinations or benefit awards,
shall have the right to request the Committee to conduct a hearing on the matter
provided that said person makes such a request, in writing, and delivers the
same to the Committee within sixty (60) days after being apprised of, or
learning of the decision or action. The Committee shall conduct a hearing within
forty-five (45) days after receipt of said written notification and shall give
said Employee Participant or Beneficiary at least fifteen (15) days notice prior
to the date of said hearing. The person requesting such hearing shall be
entitled to present his position and any evidence in support thereof either
orally or in writing. Said person may be represented at the hearing by an
attorney or by any other representative of his choosing.
Within thirty (30) days after said hearing, the Committee shall issue a
written decision affirming, modifying or setting aside the decision or action of
the Company, Trustee, Committee or Plan Administrator. A copy of said written
decision shall be mailed to the person requesting the hearing.
The decision of the Committee shall be final and binding on all parties.
Provided, if any dispute as a matter of state or federal law cannot be settled
by decision of the Committee, either the Employee Participant or Beneficiary of
the Employee Participant, or the Company, Trustee, or Plan Administrator shall
have a right to appeal said decision to the Snohomish County Superior Court by
filing an appeal with the Clerk of the Snohomish County Superior Court within
sixty (60) days after receipt of the written decision.
The Committee shall submit to the Snohomish County Superior Court a
certified copy of the record upon which the Committee's decision was made.
The Snohomish County Superior Court shall first determine whether federal
or state law mandates that the decision of the Committee cannot be final and
binding on all parties. If the court determines that the decision of the
Committee cannot be final and binding on all parties, then the question for the
court shall be:
114
(A) Error. Whether the Committee was in error upon an issue of law;
(B) Arbitrary or Capricious Exercise of Discretion. Whether the
Committee acted arbitrarily or capriciously in the exercise of its
discretion; or
(C) Existance of Substantial Evidence. Whether the Committee's finding
of fact was supported by substantial evidence.
The decision of the Snohomish County Superior Court shall be final and
binding upon all parties whose interests are affected thereby and neither party
shall have the right to appeal.
10.10 Plan Transfer Provisions.
(A) Roll Over Provisions. Subject to the limitations described herein,
this Plan and Trust is authorized to make or to accept elective transfers
which constitute any portion to the balance to the credit of the Employee
in a qualified retirement plan or any other entity or "conduit" individual
retirement account for the benefit of any Employee or Participant of the
Company. Said eligible rollover distribution received by the Employer shall
be credited to the account of said Employee or Participant and shall be
subject to the provisions of this Plan and Trust. With reference to the
amount rolled over only, and the earnings and profits thereon, said sum
shall be fully vested and non-forfeitable at all times. In regard to all
rollover distributions and contributions, the requirements of I.R.C. ss.ss.
402 and 403, as amended and applicable, shall govern. Notwithstanding the
above, the Committee, in its sole discretion, may refuse to accept a
rollover of plan assets if the character or qualification of said funds is
in question or if such rollover is not administratively feasible for the
Employer to handle. Any determination not to accept a rollover contribution
shall be made on a uniform and nondiscriminatory basis by the Committee as
determined in its sole discretion.
Rollovers shall be the preferred method of transfer as compared to
trust-to-trust transfers.
Provided further, with regard to distributions made from the Plan to a
Distributee Participant on or after January 1, 1993, notwithstanding any
provision of the plan to the contrary that would otherwise limit a
Distributee's election under this Section, a Distributee may elect, at the
time and in the manner prescribed by the Plan Administrator, to have any
portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the Distributee in a direct rollover, as
permitted by Revenue Procedure 93-12, as amended.
(B) Trust to Trust Transfers from Other Qualified Plans. This Plan is
authorized to accept or to make Trust to Trust transfers of fund assets
from related or unrelated qualified Plans; provided that, the Plan
Participant who receives an allocation to
115
his account pursuant to such Trust to Trust transfer shall not actually
receive a benefit distribution or have the funds made available for such
Employee or Participant's use. All trust to trust transfers from qualified
plans shall be subject to the consent of the Plan Administrator, amounts
may be transferred from other qualified corporate and, after December 31,
1983, noncorporate plans, provided that the trust from which such funds are
transferred permits the transfer to be made and, in the opinion of legal
counsel for the Employer, the transfer will not jeopardize the tax exempt
status of the Plan or Trust or create adverse tax consequences for the
Employer. The Employer may refuse to accept trust to trust transfers in its
sole discretion; provided, any such refusal shall be based on a uniform and
nondiscriminatory basis.
(C) Participant's Transfer Account. The amounts transferred pursuant
to this Section shall be set up in a separate account herein referred to as
"Participant's Transfer Account." Transfers may be made pursuant to this
Section if tax deductible voluntary Employee contributions are not
transferred, if consent to such transfer is expressly received from the
Plan Administrator and all other applicable I.R.C. limitations are met,
including, without limitation, spouse consent requirements on Plan
distribution.
(D) No Forfeiture of Participant's Transfer Account. Amounts in a
Participant's Rollover Account shall be held by the Trustee pursuant to the
provisions of this Plan, such amounts shall be fully vested at all times
and shall not be subject to forfeiture for any reason and may not be
withdrawn by, or distributed to the Participant, in whole or in part,
except as provided in this Section.
(E) Additional Benefits at Retirement Date or Other Date on Which
Participant is Entitled to Benefits. At Normal Retirement Date, or such
other date when the Participant or his beneficiary shall be entitled to
receive benefits, the fair market value of the Participant's Transfer
Account shall be used to provide additional benefits to the Participant in
the normal form or such other optional method as may be elected pursuant to
Section 8.2 above.
(F) Segregation of Transfer Funds. The Plan Administrator may direct,
in its sole discretion, that Employee transfers made after the first month
of the Plan Year pursuant to this Section be physically segregated or
separately accounted for in a separate account for each Participant in a
federally insured savings account, certificate of deposit in a bank or
savings and loan association, money market certificate or other short term
debt security acceptable to the Trustee until the first day of the
following Plan Year, at which time they shall be invested as determined by
the Plan Administrator pursuant to Section 3.7 above. Nothing herein shall,
however, require the Plan Administrator to segregate the same.
(G) General Investment of Transfer Funds. Unless the Plan
Administrator directs that the Participant's Transfer Account be segregated
into a separate account for such Participant in a federally insured savings
account, certificate of deposit
116
in a bank or savings and loan association, money market certificate or
other short term debt security acceptable to the Trustee, it shall be
invested as part of the general Trust Fund and share in earnings and
losses. Except, however, deposits into the general Trust Fund after the
first month of the Plan Year shall not share in earnings and losses of such
Plan Year except to the extent that the Committee may, by administrative
rule, provide for daily allocations pursuant to Article III above.
(H) Self-Directed Investment of Transferred Funds. All amounts
allocated to a Participant's Transfer Account may be treated as a self
directed investment account, if self directed investment accounts are
otherwise provided for by this Plan, and shall be subject to the same
limitations therein.
(I) Amounts Transferred From Another Qualified Corporate or
Noncorporate Plan. For purposes of this Section the term "amounts
transferred from another qualified corporate and Plan noncorporate plan"
shall mean (i) amounts transferred to this Plan directly from another
qualified corporate (and, after December 31, 1983, noncorporate) plan; (ii)
eligible rollover distributions received by an Employee from another
qualified Plan which are eligible for tax free rollover to a qualified
corporate or noncorporate plan and which are transferred by the Employee to
this Plan within sixty (60) days following the receipt thereof; (iii)
amounts transferred to this Plan from a conduit individual retirement
account provided that the conduit individual retirement account has no
assets other than assets which were previously distributed to the Employee
by another qualified corporate (and, after December 31, 1983, noncorporate)
plan as a lump sum distribution, such assets were eligible for tax free
rollover to a qualified corporate or noncorporate plan and were deposited
in such conduit individual retirement account within sixty (60) days of
receipt thereof and other than earnings on said assets; and, (iv) amounts
distributed to the Employee from a conduit individual retirement account
meeting the requirements of clause (iii) above, are transferred by the
Employee to this Plan within sixty (60) days of his receipt thereof from
such conduit individual retirement account. Prior to accepting any
transfers to which this Section applies, the Plan Administrator may require
the Employee to establish that the amounts to be transferred to this Plan
meet the requirements of this Section and may also require the Employee to
provide an opinion of legal counsel satisfactory to the Employer that the
amounts to be transferred meet the requirements of this Section.
(J) Qualified Corporate or Noncorporate Plan. For purposes of this
Section, the term "qualified corporate or noncorporate plan" shall mean any
tax qualified plan under I.R.C. ss. 401(a), including, without limitation,
other plans sponsored by the Employer to the extent permitted by the
recipient plan.
(K) Assets Received. The Employer may impose reasonable restrictions
on eligible rollovers received, uniformly applied, as determined in its
sole discretion, which may, by way of illustration and not by way of
limitation, limit rollovers required to cash or securities, may exclude
limited or general partnership interests, employer securities
117
and insurance or otherwise reasonably restrict the type of assets received
in a rollover or transfer to cash or other similarly liquid or readily
negotiable investments.
(L) Miscellaneous. This Plan shall not accept any direct or indirect
transfers, as that term is defined and interpreted under I.R.C. ss.
401(a)(11) and the Regulations thereunder, from a defined benefit plan,
money purchase plan (including a target benefit plan), stock bonus or
profit sharing plan which would otherwise have provided for a life annuity
form of payment to the Participant, unless this Plan also provides for a
life annuity form of payment or unless such transfer constitutes an
"elective transfer" as defined under applicable regulations.
Notwithstanding anything herein to the contrary, a transfer directly
to this Plan from another qualified plan, or a transaction having the
effect of such a transfer, shall only be permitted if it will not result in
the elimination or reduction of any I.R.C. ss. 411(d)(6) protected benefit.
The Employer, Committee or Trustees may, by an administrative
determination, impose additional rollover or transfer requirements,
uniformly applied, as deemed necessary or convenient for the administration
of the Plan.
(M) Definitions.
(1) Eligible Rollover Distributions. An "Eligible Rollover
Distribution" is any distribution of all or any portion of the balance
to the credit of the Distributee, except that an eligible rollover
distribution does not include: any distribution that is one of a
series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) of the
Distributee and the Distributee's designated beneficiary, or for a
specified period of ten (10) years or more; any distribution to the
extent such distribution is required under I.R.C. ss. 401(a)(9); and,
the portion of any distribution that is not includible in gross income
(determined without regard to the exclusions of net unrealized
appreciation with respect to employer securities).
(2) Eligible Retirement Plans. An "Eligible Retirement Plan" is
an individual retirement account described in I.R.C. ss. 408(a), an
individual retirement annuity described in I.R.C. ss. 408(b), an
annuity plan described in I.R.C. ss. 403(a), or a qualified trust
described in I.R.C. ss. 401(a), that accepts the Distributee's
eligible rollover distribution. In the case of an eligible rollover
distribution to the surviving spouse, however, an eligible retirement
plan is an individual retirement account or individual retirement
annuity.
(3) Distributee. A "Distributee" includes an employee or former
employee. In addition, the employee's or former employee's surviving
spouse
118
and the employee's or former employee's spouse or former spouse who is
the alternate payee under a qualified domestic relations order, as
defined in I.R.C. ss. 414(p), are Distributees with regard to the
interest of the spouse or former spouse.
(4) Direct Rollover. A "Direct Rollover" is a payment by the Plan
to the eligible retirement plan specified by the Distributee.
10.11 Governing Law. To the extent applicable and not preempted by federal
law, Washington State law shall govern this Plan and Trust.
[Please see signature page which is attached hereto and incorporated herein by
reference.]
119
IN WITNESS WHEREOF, and to record the adoption of the Plan, the Employer
has caused its officers to execute this 401(k) Profit Sharing Plan and Trust
Agreement for EVERETT MUTUAL SAVINGS BANK on October 17, 1999.
EVERETT MUTUAL SAVINGS BANK
-----------------------------------
Michael B. Hansen, President
Attest:
- -----------------------------------
Lori Christenson, Vice President
EVERETT MUTUAL SAVINGS BANK 401(k)
EMPLOYEE SAVINGS AND PROFIT SHARING
PLAN AND TRUST
TRUSTEE:
- -----------------------------------
U.S. Bank of Washington,
a National Association
MUTUAL BANCSHARES, a Mutual Holding
Company
-----------------------------------
Michael B. Hansen, President
-----------------------------------
Lori Christenson, Vice President
120
The following entities have adopted this Plan, with the consent of the
Board of Directors of Everett Mutual Savings Bank as of the date shown below:
=================================== ===================================
Adopting Employer Initial Participation Date
=================================== ===================================
Mutual Bancshares January 1, 1994
121
FIRST PLAN AMENDMENT TO THE
EVERETT MUTUAL SAVINGS BANK
401(k) PROFIT SHARING PLAN AND TRUST
This Amendment is made to the EVERETT MUTUAL SAVINGS BANK, 401(k) PROFIT
SHARING PLAN AND TRUST, to amend the same as provided for below, pursuant to
Article IX of said Plan.
1. Amended Plan Provisions. The following described amendments shall be
made to the Plan, to be effective as provided for herein.
a. Waiver of 30 Day Notification Period. Pursuant to I.R.S. Revenue
Procedure 93-47, the following model language shall be adopted and shall
control over any other inconsistent provisions of the Plan and Trust,
including, without limitation, Section 8.2(G)(1) thereof. Specifically, the
following language shall be adopted into the Plan:
If a distribution is one to which sections 401(a)(11) and 417 of
the Internal Revenue Code do not apply, such distribution may commence
less than thirty (30) days after the notice required under section
1.411(a)-ll(c) of the Income Tax Regulations is given, provided that:
(1) the plan administrator clearly informs the participant
that the participant has a right to a period of at least thirty
(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
(2) the participant, after receiving the notice,
affirmatively elects a distribution.
The immediately preceding Plan amendment shall be effective for
all distributions made during Plan Years commencing on and after
January 1, 1993.
b. Minimum Thirty Day Notification. Section 8.2(G)(1) of the Plan
shall be amended to read as follows:
(G) Notice and Election.
(1) General Election Period and Notice Requirement. No less
than thirty (30) days and no more than ninety (90) days prior to
the annuity starting date (or the date of distribution) the Plan
Administrator shall furnish to the Participant a general
description of the terms and
1
conditions of the joint and survivor annuity, a description of
the election and waiver procedures, an explanation of the
financial effect of a Participant's election of such an annuity,
a description of the right of the Participant's spouse to consent
to any election to waive the joint and survivor annuity, a notice
concerning tax consequences as described under I.R.C. ss. 402(f)
(including, without limitation, notification of the right to make
direct rollover transfers within a reasonable time period prior
to receipt of an eligible distribution), an explanation of the
right of the Participant to revoke or re-elect such elections and
the effect of such revocation and such other notices as may be
required pursuant to I.R.C. ss.ss. 402(f) and 411(a)(11).
The immediately preceding Plan amendment shall be effective
for all distributions made during Plan Years commencing on and
after January 1, 1993.
c. Maximum Compensation Limit of $150,000.00. Pursuant to I.R.S.
Revenue Procedure 94-13, the following model language shall be adopted and
shall control over any other inconsistent provisions of the Plan and Trust,
including, without limitation, Plan Sections 2.8, 8.16. Specifically, the
following language shall be adopted into the Plan:
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan
Years beginning on or after January 1, 1994, the annual compensation of
each Employee taken into account under the Plan shall not exceed the OBRA
'93 annual compensation limit. The OBRA '93 annual compensation limit is
$150,000, as adjusted by the Commissioner for increases in the cost of
living in accordance with section 401(a)(17)(B) of the Internal Revenue
Code. The cost-of-living adjustment in effect for a calendar year applies
to any period, not exceeding 12 months, over which compensation is
determined (determination period) beginning in such calendar year. If a
determination period consists of fewer than 12 months, the OBRA '93 annual
compensation limit will be multiplied by a fraction, the numerator of which
is the number of months in the determination period, and the denominator of
which is 12.
For Plan years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under section 401(a)(17) of the Code shall mean
the OBRA '93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current plan
year, the compensation for that prior determination period is subject to
the OBRA '93 annual compensation limit in effect for that prior
determination period. For this purpose, the determination periods
2
beginning before the first day of the first Plan Year beginning on or after
January 1, 1994, the OBRA '93 annual compensation limit is $150,000.
The immediately preceding Plan amendment shall be effective for all
contributions made during Plan Years commencing on and after January 1,
1994.
2. No I.R.C. ~ 411(dl(61 Engermissible Cut-Back. Nothing herein shall
result in an impermissible cut-back in Participant benefits as prohibited by
I.R.C. ss. 411(d)(6).
DATED this 7th day of December, 1994.
EVERETT MUTUAL SAVINGS BANK
/s/ Michael Hansen
----------------------------------------
By: Michael Hansen
Its: President
/s/ Lori Christenson
----------------------------------------
By: Lori Christenson
Its: Vice President/Secretary
MUTUAL BANCSHARES, A Mutual
Holding Company
/s/ Michael Hansen
- ------------------------------------
By: Michael Hansen
Its: President
/s/ Lori Christenson
- ------------------------------------
By: Lori Christenson
Its: Vice President/Secretary
3
EVERETT MUTUAL SAVINGS BANK
401(k) PROFIT SHARING PLAN AND TRUST
U.S. BANK OF WASHINGTON, TRUSTEE:
/s/ James M. Beaumont
- ------------------------------------------
By: James M. Beaumont
Its: Vice President, Asset Management Div.
4
SECOND PLAN AMENDMENT TO THE
EVERETT MUTUAL SAVINGS BANK
PENSION PLAN
THESE AMENDMENTS ARE MADE TO THE EVERETT MUTUAL SAVINGS BANK PENSION PLAN,
TO AMEND THE SAME AS PROVIDED FOR BELOW, PURSUANT TO SECTION 8.1 OF SAID PLAN,
TO BRING THE PLAN INTO COMPLIANCE WITH THE GENERAL AGREEMENT ON TARIFFS AND
TRADE (GATT), THE SMALL BUSINESS JOB PROTECTION AND HEALTH INSURANCE AND WELFARE
REFORM ACTS OF 1996, TAXPAYER RELIEF AFT OF 1997 AND TO PROVIDE FOR OTHER
DESIRED PLAN AMENDMENTS.
1. Effective Date. Except as may be expressly provided for herein, this
Amendment shall be effective for plan years commencing on and after December 31,
1997.
2. Change of Plan Name. The name of the Plan shall be changed to the Mutual
Bancshares Pension Plan. Any and all references to the Everett Mutual Savings
Bank Pension Plan shall be to the Mutual Bancshares Pension Plan. This amendment
to the name of the Plan shall be effective for all Plan Years commencing on and
after January 1, 1997.
3. Addition of Plan Sponsors. Effective on and after ________________,
199___, the Commercial Bank of Everett shall adopt the Mutual Bancshares Pension
Plan.
Effective on and after ________________, 199___, Mutual Bancshares shall
adopt the Mutual Bancshares Pension Plan.
The original sponsor of this Plan, Everett Mutual Savings Bank, hereby
expressly consents to the adoption of this Plan by the above designated
entities.
4. Amended Plan Provisions. The following described plan provisions shall
be amended to provide as follows:
1.12 Compensation. "Compensation" means a Participant's earned income,
wages, salaries, W-2 earnings and fees for professional services and other
amounts received for personal services actually rendered in the course of
employment with the Employer maintaining the Plan (including, but not
limited to, commissions paid salesmen, compensation for services on the
basis of a percentage of profits, commissions on insurance premiums, tips
and bonuses) which compensation is currently includible in gross income as
defined under I.R.C. ss. 415(c)(3). It also includes any elective deferral
(as defined in I.R.C. ss. 402(g)(3)) and any amount which is contributed or
deferred by the
1
Employer at the election of the Employee and which is not includible in the
gross income of the Employee by reason of I.R.C. ss.ss. 125 or 457.
For purposes of this Section, the determination of Compensation shall
be made by:
(a) including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Section 125,
402(e)(3), 402(h)(1)(B), 403(b) or 457, and Employee contributions
described in Code Section 414(h)(2) that are treated as Employer
contributions.
(b) excluding payments for overtime, bonuses, commissions,
incentive payments and other special pay. Compensation also excludes
compensation amounts not paid in cash, relocation or moving
allowances, tuition allowances, reimbursements for expenses,
termination or severance pay, lump sum vacation and sick leave pay
provided upon termination from employment, living allowances, income
included pursuant to I.R.C. Section 79 and compensatory pay for board
meeting participation.
(c) excluding employer contributions to a plan of deferred
compensation which are not includible in the Employee's gross income
for the taxable year in which contributed, or Employer contributions
under a simplified employee pension plan to the extent such
contributions are deductible by the Employee, or any distributions
from a plan of deferred compensation;
(d) excluding amounts realized from the exercise of a
non-qualified stock option, or when restricted stock (or property)
held by the Employee either becomes freely transferable or is no
longer subject to a substantial risk of forfeiture;
(e) excluding amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan
Years beginning on or after January 1, 1994, the annual Compensation of
each Employee taken into account under the Plan shall not exceed the OBRA
'93 annual compensation limit. The OBRA '93 annual compensation limit is
$150,000, as adjusted by the Commissioner for increases in the cost of
living in accordance with Code Section 401(a)(17)(B). The cost of living
adjustment in effect for a calendar year applies to any period, not
exceeding 12 months, over which Compensation is determined (determination
period) beginning in such
2
calendar year. If a determination period consists of few than 12 months,
the OBRA '93 annual compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the determination period,
and the denominator of which is 12.
For Plan years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Code Section 401(a)(17) shall mean the
OBRA '93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current Plan
Year, the Compensation for that prior determination period is subject to
the OBRA '93 annual compensation limit in effect for that prior
determination period. For this purpose, for determining periods beginning
before the first day of the first Plan year beginning on or after January
1, 1994, the OBRA '93 annual compensation limit is $150,000.
For purposes of this Section, if the plan is a plan described in Code
Section 413(c) or 414(f) (a plan maintained by more than one Employer), the
limitation applies separately with respect to the Compensation for any
Participant from each Employer maintaining the Plan.
The immediately preceding amendment to Section 1.12 is effective for
plan years beginning after December 31, 1997.
1.26 Highly Compensated Employee. The term "Highly Compensated
Employee" includes highly compensated active employees and highly
compensated former employees. A highly compensated active employee
includes any employee who: (i) was a 5-percent owner at any time
during the year or the preceding year; or, (ii) for the preceding
year: had compensation from the employer in excess of $80,000.00 (as
adjusted pursuant to I.R.C. ss. 415(d)); and, if the employer elects
the application of I.R.C. ss. 414(q)(1)(B)(ii) for such preceding
year, was in the top-paid group of employees for such preceding year.
For the above purposes, the determination year shall be the Plan Year.
The preceding year shall be the twelve (12) month period immediately
preceding the determination year. A highly compensated former employee
includes any employee who separated from service (or was deemed to
have separated) prior to the determination year, performed no service
for the Employer during the determination year, and was a highly
compensated active employee for either the separation year or any
determination year ending on or after the Employee's 55th birthday.
The determination of who is a highly compensated employee, including
the determination of the number and identity of employees in the
top-paid group and the compensation that is considered, will be made
in accordance with I.R.C. ss. 414(g) and the regulations
3
thereunder. For purposes of this section, the term compensation is the
"participant's compensation" as defined in I.R.C. ss. 415(c)(3).
The immediately preceding amendment to Section 1.26 is effective for
plan years beginning after December 31, 1996.
1.33 Leased Employee. The term "leased employee" means any person
(other than an employee of the recipient) who pursuant to an agreement
between the recipient and any other person ("leasing organization")
has performed services for the recipient (or for the recipient and
related persons determined in accordance with I.R.C. ss. 414(n)(6)) on
a substantially full time basis for a period of at least one (1) year,
and such services are performed under the primary direction or control
by the recipient. Contributions or benefits provided to a leased
employee by the leasing organization which are attributable to
services performed for the recipient employer shall be treated as
provided by the recipient employer. A leased employee shall not be
considered an employee of the recipient if: (i) such employee is
covered by a money purchase pension plan providing: (1) a
non-integrated employer contribution rate of at least ten percent
(10%) of compensation, as defined in I.R.C. ss. 415(c)(3), but
including amounts contributed pursuant to a salary reduction agreement
which are excludable from the employee's gross income under I.R.C.
ss.ss. 125, 402(a)(8), 402(h) or 403(b), (2) immediate participation,
and (3) full and immediate vesting; and (ii) leased employees do not
constitute more than twenty percent (20%) of the recipient's
non-highly compensated workforce.
The immediately preceding amendment to Section 1.33 is effective for
plan years beginning after December 31, 1996.
AMENDED LANGUAGE: 5.6 Involuntary Distributions.
The second paragraph of Section 5.6(a) shall be amended to read as follows:
However, the Administrator shall, at the election of the Participant,
direct earlier payment of the Vested portion of the Participant's Accrued
Benefit. Any distribution under this paragraph shall be made in a manner
which is consistent with and satisfies the provisions of Section 5.7,
including, but not limited to, notice and consent requirements of Code
Sections 417 and 411(a)(11) and the Regulations thereunder. Notwithstanding
the foregoing, if the Vested portion of the Present Value of Accrued
Benefit does not exceed $5,000 and has never exceeded $5,000 at the time of
any prior distribution, the Administrator shall direct the Trustee to
distribute such amount within a reasonable time after the Anniversary Date
to coincide with or next following such Terminated Participant's
termination of employment. For purposes of this Section, if the
4
value of a Participant's vested account balance is zero, the Participant
shall be deemed to have received a distribution of such vested account
balance. Any spousal consent required must be in the same form as provided
for above.
AMENDED LANGUAGE: 5.7 Distribution of Benefits.
Sections 5.7(c) and (d) of the Plan shall be amended to read as follows:
(c) The present value of a Participant's joint and survivor annuity
derived from Employer and Employee contributions may not be paid without
his written consent if the value exceeds, or has ever exceeded $5,000 at
the time of any prior distribution. Further, the spouse of a Participant
must consent in writing to any immediate distribution, if the value
exceeds, or has ever exceeded $5,000 at the time of any prior distribution.
If the value of the Participant's benefit derived from Employer and
Employee contributions does not exceed $5,000 and has never exceeded $5,000
at the time of any prior distribution, the Administrator may immediately
distribute such benefit without such Participant's and such Participant's
spouse's consent, if applicable. No distribution may be made under the
preceding sentence after the "annuity starting date" unless the Participant
and his spouse consent in writing to such distribution. Any written consent
required under this paragraph must be obtained not more than ninety (90)
days before commencement of the distribution and shall be made in a manner
consistent with Section 5.7(a)(2). The present value of accrued benefit
shall be determined as provided in Section 1.45.
(d) Any distribution to a Participant who has a benefit which exceeds,
or has ever exceeded, $5,000 at the time of any prior distribution shall
require such Participant's consent (and such Participant's spouse's
consent, if required under applicable laws) if such distribution commences
prior to the later of: his Normal Retirement Age; or, age 62. With regard
to this required consent:
(1) No consent shall be valid unless the Participant has received
a general description of the material features and an explanation of
the relative values of the optional forms of benefit available under
the Plan that would satisfy the notice requirements of Code Section
417.
(2) The Participant must be informed of his right to defer
receipt of the distribution. If a Participant fails to consent, it
shall be deemed an election to defer the commencement of payment of
any benefit. However, any election to defer the receipt of benefits
shall not apply with respect to distributions which are required under
Section 5.7(e).
5
(3) Notice of the rights specified under this paragraph shall be
provided no less than thirty (30) days and no more than ninety (90)
days before the "annuity starting date."
(4) Written consent of the Participant to the distribution must
not be made before the Participant receives the notice and must be
made more than ninety (90) days before the "annuity starting date."
(5) No consent shall be valid if a significant detriment is
imposed under the Plan on any Participant who does not consent to the
distribution.
AMENDED LANGUAGE: 5.8 Distribution of Benefits Upon Death.
Section 5.8(e) of the Plan shall be amended to read as follows:
(e) If the present value of the Pre-Retirement Survivor Annuity
derived from Employer and Employee contributions does not exceed $5,000 and
has never exceeded $5,000 at the time of any prior distribution, the
Administrator shall direct the immediate distribution of such amount to the
Participant's spouse. No distribution may be made under the preceding
sentence after the annuity starting date unless the spouse consents in
writing. The present value in this regard shall be determined as provided
in Section 1.45.
If the value exceeds, or has ever exceeded, $5,000 at the time of any
prior distribution, an immediate distribution of the entire amount may be
made to the surviving spouse, provided such surviving spouse consents in
writing to such distribution. Any written consent required under this
paragraph must be obtained not more than 90 days before commencement of the
distribution and shall be made in a manner consistent with Section
5.7(a)(2).
AMENDED LANGUAGE: 5.14 Limitation of Benefits on Termination.
Section 5.14(a)(3) of the Plan shall be amended to read as follows:
(3) the value of the benefits payable under the Plan to an individual
described above does not exceed $5,000.
The immediately preceding amendments to Sections 5.6(a), 5.7, 5.8 and 5.14
are effective for plan years beginning after August 5, 1997.
6
AMENDED LANGUAGE: 6.2 Maximum Annual Benefit.
The following additional subsections shall be added to Section 6.2 as
follows:
6.2(i) 415 Safe-Harbor Compensation. Under this Plan, the Code Section
415 safe-harbor compensation shall include wages, salaries and fees for
professional services and other amounts received (without regard to whether
or not an amount is paid in cash) for personal services actually rendered
in the course of employment with the 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, any
elective deferral (as defined in I.R.C. ss. 402(g)(3)) and any amount which
is contributed or deferred by the employer at the election of the employee
which is not includible in the gross income of the employee by reason of
I.R.C. ss.ss. 125 or 457, and excluding the following:
(a) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the employee
either becomes freely transferable or is no longer subject to a
substantial risk of forfeiture; and,
(b) Amounts realized from the sale, exchange or other disposition
of stock acquired under a qualified stock option.
DELETED LANGUAGE: 6.6 Multiple Plan Reduction.
Section 6.6 shall be deleted from the Plan.
The immediately preceding amendment to Section 6.2(i) and deletion of
Section 6.6 are effective for Plan Limitation Years beginning after December 31,
1999.
5. Global Amendments. Notwithstanding anything provided to the contrary in
the Plan or related documents, effective as noted below, this Plan shall be
amended as follows:
o Effective for Plan Years commencing on and after December 31,
1996, the family aggregation rules provided under I.R.C. ss.
414(q)(6) shall not apply.
o Effective for Plan Years commencing on and after August 5, 1997,
the applicable limit under I.R.C. ss. 411(a)(11) shall be the
applicable limit as determined under such provision, as amended
from time to time.
7
o Effective for Plan Years commencing on and after December 31,
1996, the rules provided under I.R.C. ss. 401(a)(26) shall cease
to apply to this Plan.
6. No I.R.C. ss. 411(d)(6) Impermissible Cut-Back. Nothing herein shall
result in an impermissible cut-back in Participant benefits as prohibited by
I.R.C. ss. 411(d)(6).
8
DATED this _____ day of ______________________, 1997.
EVERETT MUTUAL SAVINGS BANK
------------------------------------
By: Michael B. Hansen
Its: President and CEO/Director
------------------------------------
By: Lori Christenson
Its: Vice President and
Corporate Secretary
COMMERCIAL BANK OF EVERETT
------------------------------------
By: Dale Lyski
Its: President and COO/Director
------------------------------------
By: Lori Christenson
Its: Vice President and
Corporate Secretary
MUTUAL BANCSHARES
------------------------------------
By: Michael B. Hansen
Its: President, Chairman of the
Board of Directors and CEO
------------------------------------
By: Lori Christenson
Its: Secretary and Chief Information
Officer
9
EVERETT MUTUAL SAVINGS BANK
PENSION PLAN AND TRUST
TRUSTEE:
U.S. BANK OF WASHINGTON, N.A.
- ----------------------------------------------
By: James M. Beaumont
Its: Vice President, Asset Management Division
10
THIRD PLAN AMENDMENT TO THE
EVERETT MUTUAL SAVINGS BANK
401(k) EMPLOYEE SAVINGS AND
PROFIT SHARING PLAN AND TRUST
THESE AMENDMENTS ARE MADE TO THE EVERETT MUTUAL SAVINGS BANK 401(k)
EMPLOYEE SAVINGS AND PROFIT SHARING PLAN AND TRUST, TO AMEND THE SAME AS
PROVIDED FOR BELOW, PURSUANT TO ARTICLE IX OF SAID PLAN, TO BRING THE PLAN INTO
COMPLIANCE WITH THE GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT), THE SMALL
BUSINESS JOB PROTECTION AND HEALTH INSURANCE AND WELFARE REFORM ACTS OF 1996,
TAXPAYER RELIEF AFT OF 1997 AND TO PROVIDE FOR OTHER DESIRED PLAN AMENDMENTS.
1. Effective Date. Except as may be expressly provided for herein, this
Amendment shall be effective for plan years commencing on and after December 31,
1997.
2. Change of Plan Name. The name of the Plan shall be changed from the
Everett Mutual Savings Bank 401(k) Employee Savings and Profit Sharing Plan and
Trust to the Mutual Bancshares 401(k) Employee Savings and Profit Sharing Plan
and Trust. Any and all references to the Everett Mutual Savings Bank 401(k)
Employee Savings and Profit Sharing Plan shall be to the Mutual Bancshares
401(k) Employee Savings and Profit Sharing Plan and Trust. This amendment to the
name of the Plan shall be effective for all Plan Years commencing on and after
January 1, 1997.
3. Addition of Plan Sponsors. Effective on and after ________________,
199___, the Commercial Bank of Everett shall adopt the Mutual Bancshares 401(k)
Employee Savings and Profit Sharing Plan and Trust.
Effective on and after ________________, 199___, Mutual Bancshares shall
adopt the Mutual Bancshares 401(k) Employee Savings and Profit Sharing Plan and
Trust.
The original sponsor of this Plan, Everett Mutual Savings Bank, hereby
expressly consents to the adoption of this Plan by the above designated
entities.
4. Amended and/or Deleted Plan Provisions. The following described Plan
provisions shall be amended or deleted, as indicated, as follows:
1
AMENDED LANGUAGE: 2.16 Employee.
The following Sections 2.16(B) and (C) shall be amended to read as follows:
(B) Highly Compensated Employee. The term "Highly Compensated
Employee" includes highly compensated active employees and highly
compensated former employees. A highly compensated active employee includes
any employee who: (i) was a 5-percent owner at any time during the year or
the preceding year; or, (ii) for the preceding year: had compensation from
the employer in excess of $80,000.00 (as adjusted pursuant to I.R.C. ss.
415(d)); and, if the employer elects the application of I.R.C. ss.
414(q)(1)(B)(ii) for such preceding year, was in the top-paid group of
employees for such preceding year. For the above purposes, the
determination year shall be the Plan Year. The preceding year shall be the
twelve (12) month period immediately preceding the determination year. A
highly compensated former employee includes any employee who separated from
service (or was deemed to have separated) prior to the determination year,
performed no service for the Employer during the determination year, and
was a highly compensated active employee for either the separation year or
any determination year ending on or after the Employee's 55th birthday. The
determination of who is a highly compensated employee, including the
determination of the number and identity of employees in the top-paid group
and the compensation that is considered, will be made in accordance with
I.R.C. ss. 414(g) and the regulations thereunder. For purposes of this
section 2.15(B), the term compensation is the "participant's compensation"
as defined in I.R.C. ss. 415(c)(3).
(C) Leased Employee. The term "leased employee" means any person
(other than an employee of the recipient) who pursuant to an agreement
between the recipient and any other person ("leasing organization") has
performed services for the recipient (or for the recipient and related
persons determined in accordance with I.R.C. ss. 414(n)(6)) on a
substantially full time basis for a period of at least one (1) year, and
such services are performed under the primary direction or control by the
recipient. Contributions or benefits provided to a leased employee by the
leasing organization which are attributable to services performed for the
recipient employer shall be treated as provided by the recipient employer.
A leased employee shall not be considered an employee of the recipient if:
(i) such employee is covered by a money purchase pension plan providing:
(1) a non-integrated employer contribution rate of at least ten percent
(10%) of compensation, as defined in I.R.C. ss. 415(c)(3), but including
amounts contributed pursuant to a salary reduction agreement which are
excludable from the employee's gross income under I.R.C. ss.ss. 125,
402(a)(8), 402(h) or 403(b), (2) immediate participation, and (3) full and
immediate vesting; and (ii) leased
2
employees do not constitute more than twenty percent (20%) of the
recipient's non-highly compensated workforce.
The immediately preceding amendments to Sections 2.16(B) and (C) are
effective for plan years beginning after December 31, 1996.
AMENDED LANGUAGE: 2.27(A) Maximum Annual Addition.
The following Section 2.27(A) shall be amended to read as follows:
(A) Maximum Annual Addition. Pursuant to said limitation, the maximum
aggregate Annual Addition to the account of any Participant in any
Limitation Year shall not exceed the lesser of the maximum permissible
amount (as described below) or any other limitation contained in this Plan.
(1) Dollar Limitation. Thirty Thousand Dollars ($30,000.00); or,
(2) Percentage Limitation. Twenty-five percent (25%) of the
Compensation paid to the Participant by the Employer in the Plan Year;
provided, the Compensation limitation described herein shall not apply
to any contribution for medical benefits made within the meaning of
I.R.C. ss.ss. 401(h) or 419(A)(f)(2) which are otherwise treated as
Annual Additions under I.R.C. ss.ss. 415(1)(1) or 419(A)(d)(2),
respectively.
(3) 415 Safe-Harbor Compensation. Wages, salaries and fees for
professional services and other amounts received (without regard to
whether or not an amount is paid in cash) for personal services
actually rendered in the course of employment with the 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, any elective deferral
(as defined in I.R.C. ss. 402(g)(3)) and any amount which is
contributed or deferred by the employer at the election of the
employee which is not includible in the gross income of the employee
by reason of I.R.C. ss.ss. 125 or 457, and excluding the following:
(a) Amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property) held by the
employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture; and,
3
(b) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option.
DELETED LANGUAGE: 2.27(B) Maximum Annual Addition.
The following sections of Section 2.27(B) shall be deleted:
(1) Participation in Both Defined Contribution and Defined
Benefit Plans. In any case in which an individual is or was a
Participant in both a Defined Benefit Plan and a Defined Contribution
Plan maintained by the same Employer, the sum of the Defined Benefit
Plan Fraction and the Defined Contribution Plan Fraction for any year
may not exceed 1.0 in any Limitation Year.
(2) Defined Benefit Plan Fraction Defined Benefit Plan Fraction
for any year is a fraction:
(a) The numerator of which is the sum of the Participant's
projected annual benefits to the Participant under all qualified
defined benefit plans (whether or not terminated) maintained by
the Employer (determined as of the close of the Limitation Year);
and,
(b) The denominator of which is the lesser of:
(i) The product of 1.25 (1.0 if for such year the Plan
is a "Top-Heavy Plan," except in the event the conditions of
I.R.C. ss. 416(h)(2) are met), multiplied by the dollar
limitation on the annual benefit in effect under I.R.C.
ss.ss. 415 (b) and (d) determined for such Limitation Year;
or
(ii) The product of 1.4, multiplied by one hundred
percent (100%) of the Participant's highest average
Compensation with the Employer for the three (3) highest
consecutive Years of Service during which the Participant
was an active Participant in such Plan, including any
adjustments as provided under I.R.C. ss. 415(b).
Notwithstanding the above, if the Participant was a Participant
as of the first day of the first Limitation Year beginning after
December 31, 1986, in one or more defined benefit plans maintained by
the Employer which were in existence on May 6, 1986, the denominator
of this fraction will not be less than one hundred twenty-five percent
(125%) of the sum of the annual benefits under such plans which the
Participant had accrued as of the close of the last
4
Limitation Year beginning before January 1, 1987, disregarding any
changes in the terms and conditions of the Plan after May 5, 1986. The
preceding sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of I.R.C.
ss. 415 for all Limitation Years beginning before January 1, 1987.
(3) Defined Contribution Plan Fraction. For purposes of this
subsection, the Defined Contribution Plan Fraction for any Limitation
Year is a fraction:
(a) The numerator of which is the sum of the Annual
Additions credited to the Participants' account under this Plan
and all qualified defined contribution plans maintained by the
Employer in which the Employee participates, as of the close of
the Limitation Year and all prior Limitation Years (including
Annual Additions attributable to the Participant's non-deductible
Employee contributions to all defined benefit plans, whether or
not terminated, maintained by the Employer and the Annual
Additions attributable to all welfare benefit funds, as defined
in I.R.C. ss. 419(e), and individual medical accounts as defined
in I.R.C. ss. 415(l)(2) maintained by the Employer; and,
(b) The denominator of which is the sum of the lesser of the
following maximum aggregate amounts determined for such
Limitation Year and for each prior Limitation Years of Service
with the Employer regardless of whether a defined contribution
plan was maintained by the Employer:
(i) The product of 1.25 (1.0 if for such year the Plan
is a "Top-Heavy Plan," except in the event the conditions of
I.R.C. ss. 416(h) are met), multiplied by the dollar
limitation in effect under I.R.C. ss. 415(c)(1)(A) for such
Limitation Year; or,
(ii) The product of 1.4, multiplied by the amount which
may be taken into account under I.R.C. ss. 415(c)(1)(B) with
respect to such Participant under such Plan for such
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 the
Employer which were in existence on May 6, 1986, the numerator of
this fraction will be adjusted if the sum of this fraction and
the defined benefit fraction
5
would otherwise exceed 1.0 under the terms of this Plan. Under
the adjustment, an amount equal to the product of (1) the excess
of the sum of the fractions over 1.0 times (2) the denominator of
this fraction, will be permanently subtracted from the numerator
of this fraction. The adjustment is calculated using the
fractions as they would be computed as of the end of the last
Limitation Year beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the Plan
made after May 5, 1986, but using the I.R.C. ss. 415 limitation
applicable to the first Limitation Year beginning on or after
January 1, 1987.
Except as expressly provided below, the immediately preceding amendments to
Section 2.27(A) and deletion of Sections 2.27(B)(1)-(3) are effective for Plan
Limitation Years beginning after December 31, 1999. The amendment to Section
2.27(A)(1) to delete the language "if greater, one-quarter (1/4) of the defined
benefit dollar limitation, as adjusted for cost of living increases, as in
effect under I.R.C. ss. 415(b)(1)(A) as in effect for the Limitation Year; or,"
shall be effective for Plan Years commencing after December 31, 1994.
DELETED LANGUAGE: 4.9 Minimum Plan Participation Requirements.
The following language shall be deleted from the Plan:
4.9 Minimum Plan Participation Requirements. For Plan Years commencing
after December 31, 1988, a trust shall not constitute a qualified trust under
I.R.C. ss. 401(a)(26) unless such trust is part of a Plan, which on each day of
the Plan Year benefits the lesser of: fifty (50) Employees of the Employer; or,
forty percent (40%) or more of all Employees of the Employer. For purposes of
determining compliance with the above provisions, the following Employees of the
Employer may be excluded: Employees who are included in a unit of Employees
covered by an agreement which the Secretary of Labor finds to be a collective
bargaining agreement between employee representatives and one or more employers,
if there is evidence that retirement benefits were the subject of good faith
bargaining between such employee representatives and such employer or employers;
Employees who have not met the minimum age and service requirements established
by the Plan for Plan participation; and, any other employee excluded under
I.R.C. ss. 401(a)(26), as amended, unless such Employee is otherwise eligible to
participate hereunder. Employees who are eligible to contribute or who may elect
to have contributions made on their behalf, pursuant to a deferred salary
reduction election under I.R.C. ss. 401(k) or matching contributions under
I.R.C. ss. 401(m) shall be treated as benefiting under the Plan.
6
AMENDED LANGUAGE: 5.7 Actual Deferral Percentage Tests.
Section 5.7 of the Plan shall be amended to read as follows:
5.7 Actual Deferral Percentage Tests.
(A) Maximum Annual Allocation of Elective Employer Contributions. For
each Plan Year commencing after December 31, 1986, the annual allocation
derived from Elective Employer Contributions, or Elective Employer
Contributions in combination with Qualified Nonelective Contributions
and/or Qualified Matching Contributions that are treated as Elective
Contributions under the Plan, made to a Participant's Elective Account
shall satisfy one of the following actual deferral percentage tests:
(1) The "Actual Deferral Percentage" for the eligible Highly
Compensated Participant group shall not be more than the "Actual
Deferral Percentage" of the eligible Non-Highly Compensated
Participant group multiplied by 1.25; or,
(2) The excess of the "Actual Deferral Percentage" for the
eligible Highly Compensated Participant group over the "Actual
Deferral Percentage" for the eligible Non-Highly Compensated
Participant group shall not be more than two percentage points.
Additionally, the "Actual Deferral Percentage" for the eligible Highly
Compensated Participant Group shall not be more than the "Actual
Deferral Percentage" for the eligible Non-Highly Compensated
Participant group multiplied by two (2).
The provisions of I.R.C. ss. 401(k)(3) and Treas. Reg. ss.
1.401(k)-1(b) shall also apply to this Plan and are incorporated
herein by reference.
The adopting Employer named herein has elected to utilize all
Elective Contributions, Qualified Nonelective Contributions and
Qualified Matching Contributions which are treated as Elective
Contributions under the Plan, as applicable, to satisfy the Actual
Deferral Percentage Test.
Subject to applicable transition rules, compliance with the
Actual Deferral Percentage nondiscrimination requirements shall be
based on the applicable actual Deferral Percentages as of the Plan
Year immediately preceding the current Plan Year; provided, for the
initial year to which such provisions apply, the Actual Deferral
Percentage shall be based on either the current or immediately
preceding Plan Year as permitted by applicable transition rules.
7
(B) Coordination of Actual Deferral Percentage and Actual Compensation
Percentage Tests. Notwithstanding the above, for Plan Years commencing
after December 31, 1988, in order to prevent the multiple use of the
alternative method described in the immediately preceding paragraph and in
I.R.C. ss. 401(m)(9)(A), any Highly Compensated Participant eligible to
make Elective deferrals pursuant to this section and to make after-tax
Employee contributions or to receive matching contributions under this
Plan, if applicable, or under any other plan maintained by the Employer or
an Affiliated Employer, shall have his actual contribution ratio reduced
pursuant to Treas. Reg. ss. 1.401(M)-2, the provisions of which are
incorporated herein by reference.
1. Definitions. For purposes of this Section, "Actual Deferral
Percentage" means, with regard to each specific group of Participants
for a Plan Year, with respect to the Highly Compensated and Non-Highly
Compensated Participant groups for a Plan Year, the average of the
contribution percentage ratios, of the amount of Elective Employer
Contributions allocated to each Participant's Elective Account for
such Plan Year, including all or any portion of cash bonuses which may
be deferred pursuant to this Plan in relation to such Participant's
Compensation for such Plan Year. The actual deferral ratio for each
Participant and the "Actual Deferral Percentage" for each group shall
be calculated to the nearest one-hundredth (1/100) of one percent
(1%). Elective Employer Contributions allocated to any Participant
shall include: (1) any Elective Deferrals made pursuant to the
Participant's deferral election (including Excess Elective Deferrals
of Highly Compensated Employees), but excluding (a) Excess Elective
Deferrals of Non-Highly Compensated Employees that arise solely from
Elective Deferrals made under this Plan or plans of this Employer;
and, (b) Elective Deferrals that are taken into account in the
Contribution Percentage test (provided the ADP test is satisfied both
with and without exclusion of these Elective Deferrals; and, (2) at
the election of the Employer, Qualified Non-Elective Contributions and
Qualified Matching Contributions. For purposes of computing Actual
Deferral Percentages, an Employee who would be a Participant but for
the failure to make Elective Deferrals shall be treated as a
Participant on whose behalf no Elective Deferrals are made.
For purposes of this Plan, an Elective Contribution may only be
taken into account under the Plan if such contribution satisfies the
requirements described herein. Specifically, the Elective Contribution
must be allocated to the Participant under the Plan as of the date
within the applicable Plan Year. For purposes of this rule, an
Elective Contribution is considered allocated as of a date within a
Plan Year only if the allocation is not contingent on the
Participant's participation in the Plan or performance of services on
any date subsequent to the allocation date; and, the Elective
Contribution is actually paid to the trust no later than the end of
the twelve (12) month period immediately following the Plan Year to
which the contribution relates. The Elective Contribution must also
relate to compensation that either would have been received by the
Participant in the Plan Year but for the Participant's election to
defer under the Plan, or is
8
attributable to services performed by the Participant in the Plan Year
and, but for the Participant's election to defer, would have been
received by the Participant within two and one-half (2 1/2) months
after the close of the Plan Year. All Elective Contributions must
satisfy the above requirements in order to be taken into account for
purposes of the Actual Deferral Percentage Test.
For the purposes of this section, a Highly Compensated
Participant and a Non-Highly Compensated Participant shall include any
Employee eligible to make a deferral election pursuant to this
section, whether or not such deferral election was made or suspended
pursuant to this Plan.
(D) Aggregation of Cash or Deferred Plans. For the purposes of this
Section and I.R.C. ss.ss. 401(a)(4), 401(k) and 410(b), if two or more
plans which include cash or deferred arrangements are considered one plan
for purposes of I.R.C. ss.ss. 401(a)(4) or 410(b) (other than I.R.C. ss.
410(b)(2)(A)(ii) as in effect for Plan Years beginning after December 31,
1988, the cash or deferred arrangements included in such plans shall be
treated as one arrangement.
In addition, two or more cash or deferred arrangements may be
considered as a single arrangement for purposes of determining whether or
not such arrangements satisfy I.R.C. ss.ss. 401(a)(4), 401(k) or 410(b). In
such a case, the cash or deferred arrangements included in such plans and
the plans including such arrangements shall be treated as one arrangement
and as one plan for purposes of this Section and I.R.C. ss.ss. 401(a)(4),
401(k) and 410(b).
For Plan Years beginning after December 31, 1989, plans may be
aggregated under this subparagraph (E) only if they have the same Plan
Year.
For the purposes of this Section, if a Highly Compensated Participant
is a Participant under two or more cash or deferred arrangements (other
than a cash or deferred arrangement which is part of an employee stock
ownership plan as defined in I.R.C. ss. 4975(e)(7) for Plan Years beginning
after December 31, 1988), of the Employer or an Affiliated Employer, all
such cash or deferred arrangements shall be treated as one cash or deferred
arrangement for the purpose of determining the actual deferral ratio with
respect to such Highly Compensated Participant. However, for Plan Years
beginning after December 31, 1988, if the cash or deferred arrangements
have different Plan Years, this paragraph shall be applied by treating all
cash or deferred arrangements ending with or within the same calendar year
as a single arrangement.
Notwithstanding the foregoing, certain plans shall be treated as
separate if mandatorily disaggregated under regulations under I.R.C. ss.
401(k)
9
(E) Adjustments to Actual Deferral Percentage Tests. In the event that
the initial allocations of the Employer's Elective Contributions made
pursuant to Section 5.7(A) above do not satisfy one of the tests set forth
therein for Plan Years beginning after December 31, 1986, then the
Administrator shall adjust Excess Contributions pursuant to the options set
forth below:
(1) Leveling and Distribution Method. On or before the fifteenth
(15th) day of the third (3rd) month following the end of each Plan
Year, the Highly Compensated Participant having the highest dollar
deferral shall have his portion of Excess Contributions distributed to
him and/or, at his election recharacterized as a voluntary after-tax
Employee contribution, if available, pursuant to this Plan, until one
of the tests set forth in Section 5.7(A) is satisfied, or until his
dollar amount deferred equals the next highest dollar ratio of the
Highly Compensated Participant having the second highest dollar
deferral. This process shall continue until one of the tests set forth
in Section 5.7(A) is satisfied. For each Highly Compensated
Participant, the amount of Excess Contributions is equal to the
Elective Contributions made on behalf of such Highly Compensated
Participant (determined prior to the application of this paragraph)
minus the amount determined by multiplying the Highly Compensated
Participant's Actual Deferral Ratio (determined after application of
this paragraph) by his "414(s) Compensation." However, in determining
the amount of Excess Contributions to be distributed and/or
recharacterized with respect to an affected Highly Compensated
Participant as determined herein, such amount shall be reduced by any
Excess Deferred Compensation amounts previously distributed to such
affected Highly Compensated Participant for his taxable year ending
with or within such Plan Year.
With respect to the distribution of Excess Contributions pursuant
to subsection (1) above, such distribution:
(a) may be postponed but not later than the close of the
Plan Year following the Plan Year to which they are allocable;
(b) shall be made from Qualified Nonelective Contributions
only to the extent that Excess Contributions exceed the balance
in the Participant's Elective Account attributable to Deferred
Compensation and Employer matching contributions made pursuant to
this Plan, if any;
(c) shall be adjusted for Income, except for gap period
income as provided herein;
10
(d) shall be designated by the Employer as a distribution of
Excess Contributions (and Income); and,
(e) in no case shall the amount of excess contributions
recharacterized for a Plan Year with respect to any Highly
Compensated Employee exceed the amount of Elective Contributions
made on behalf of such Highly Compensated Employee for such Plan
Year.
Notwithstanding the above, in the event of a complete termination
of the Plan during the Plan Year in which the Excess Contribution
arose, such distribution shall be made after the date of termination
of the Plan and as soon as administratively feasible, but in no event
later than the close of the twelve (12) month period immediately
following such termination.
(2) Recharacterization Method. With respect to the
recharacterization of Excess Contributions pursuant to subsection (E)
above, such recharacterized amounts:
(a) shall be deemed to have occurred on the date on which
the last of those Highly Compensated Participants with Excess
Contributions to be recharacterized is notified of the
recharacterization and the tax consequences of such
recharacterization;
(b) for Plan Years ending on or before August 8, 1988, may
be postponed but not later than October 24, 1988;
(c) shall not exceed the amount of Deferred Compensation on
behalf of any Highly Compensated Participant for any Plan Year;
(d) shall be treated as voluntary Employee contributions for
purposes of I.R.C. ss. 401(a)(4) and Treas. Reg. 1.401(k)-1(b).
However, for purposes of Sections 5.7 and 6.2 to the extent
required by applicable regulations, recharacterized Excess
Contributions shall continue to be treated as Employer
contributions that are Deferred Compensation. For Plan Years
commencing after December 31, 1988, Excess Contributions
recharacterized as voluntary Employee contributions shall
continue to be nonforfeitable and subject to the same
distribution rules provided for in Article 8;
(e) are not permitted if the amount recharacterized, plus
voluntary Employee contributions actually made by such Highly
Compensated Participant, exceed the maximum amount of voluntary
11
Employee contributions (determined prior to application of this
section) that such Highly Compensated Participant is permitted to
make under the Plan in the absence of recharacterization;
(f) shall be adjusted for Income except for gap period
income as provided herein;
(g) any distribution and/or recharacterization of less than
the entire amount of Excess Contribution shall be treated as a
pro rata distribution and/or recharacterization of Excess
Contributions and Income; and,
(h) for Plan Years commencing after December 31, 1988,
Elective Contributions may not be recharacterized hereunder
unless they are recharacterized under the Plan with respect to
which the Elective Contributions were made or under a Plan with
the same Plan Year as the Plan under which the Elective
Contributions were made.
(3) Discretionary Qualified Nonelective Employer Contributions.
Within twelve (12) months after the end of the Plan Year, the Employer
may make a special Qualified Nonelective Contribution on behalf of
Non-Highly Compensated Participants in an amount sufficient to satisfy
one of the tests set forth in Section 5.7. Such contribution shall be
allocated to the Participant's Elective Account of each Non-Highly
Compensated Participant in the same proportion that each Non-Highly
Compensated Participant's Compensation for the Plan Year bears to the
total Compensation of all Non-Highly Compensated Participants.
(F) Impermissible Treatment of Excess Contributions. Any excess
contributions for a Plan Year may not remain unallocated or be allocated to
a suspense account to one or more Participants in any future year.
(G) Miscellaneous Provisions.
(1) The income allocable to Excess Contributions shall be
nondiscriminatory and used consistently for all Participants and for
all corrective distributions made during each Plan Year. The income
allocable to Excess Contributions is equal to the sum of the allocable
gain or loss for the Plan Year and excluding the allocable gain or
loss for the period between the end of the Plan Year and the date of
distribution. Income includes all earnings and appreciation,
including, such items as interest, dividends, rent, royalties, gains
from the sale of property, appreciation in the value of stock, bonds,
12
annuity and life insurance contracts, and other property, without
regard to whether such appreciation has been realized.
The income allocable to excess contributions for the Plan Year is
determined by multiplying the income for the Plan Year allocable to
Elective Contributions and amounts treated as Elective Contributions
by a fraction. The numerator of the fraction is the Excess
Contributions by the Participant for the Plan Year. The denominator of
the fraction is the total account balance of the Participant
attributable to Elective Contributions and amounts treated as Elective
Contributions as of the end of the Plan Year, reduced by the gain
allocable to such total amount for the Plan Year and increased by the
loss allocable to such total amount for the Plan Year. Such income
will be distributed under the fractional method set forth in Treas.
Reg ss. 1.401(k)-1 or, alternatively, under the safe harbor method
described below. If applicable, under the fractional method, the
income for the period between the end of the Plan Year and the last
day of the month preceding the distribution date that is allocable to
Elective Contributions is multiplied by a fraction determined under
the method described for the Plan Year. If elected, income may also be
computed under the safe harbor method, the allocable income for the
period between the end of the Plan Year and the distribution date is
equal to ten percent (10%) of the income allocable to Excess
Contributions for the Plan Year multiplied by the number of calendar
months that have elapsed since the end of the Plan Year. For purposes
of determining the number of calendar months that have elapsed under
the safe harbor method, a distribution occurring on or before the
fifteenth (15th) day of the month will be treated as having been made
on the last day of the preceding month, and a distribution occurring
after such fifteenth (15th) day will be treated as having been made on
the first day of the next month.
No income allocable to Excess Contributions for the period
between the end of the Plan Year and the date of a corrective
distribution, herein referred to as "gap period income," will be
distributed.
(2) A corrective distribution of Excess Contributions (and
income) may be made under the terms of the Plan without regard to any
notice or consent otherwise required under I.R.C. ss.ss. 411(a)(11)
and 417.
(3) A corrective distribution of Excess Contributions (and
income) under the terms of the Plan is includable in gross income on
the earliest dates any Elective Contributions by the Participant
during the Plan Year would have been received by the Participant had
he originally elected to receive the amounts in cash, or, if
distributed more than two and one-half (2 1/2) months after the Plan
Year for which such contributions were made, in the Taxable
13
Year of the Participant in which distributed. The amount of Excess
contributions includable in the Participant's gross income shall be
reduced as provided above. In addition, such a corrective distribution
of Excess Contributions (and income) is not subject to the early
distribution tax of I.R.C. ss. 72(t) and is not treated as a
distribution for purposes of applying the excess tax under I.R.C. ss.
4981A.
(4) A distribution of Excess Contributions (and income) is not
treated as a distribution for purposes of determining whether the Plan
satisfies the minimum distribution requirements of I.R.C. ss.
401(a)(9).
(5) The amount of Excess Contributions to be recharacterized or
distributed with respect to a Participant for a Plan Year shall be
reduced by any Excess Deferrals previously distributed to such
Participant for the Participant's Taxable Year ending with or within
such Plan Year.
(6) A Plan may use Qualified Nonelective Contributions, Qualified
Matching Contributions, the recharacterization method, the corrective
distribution method, or a combination of these methods, to avoid or
correct excess contributions. This Plan does not, at present, require
that, upon commencement of participation, a Highly Compensated
Employee may elect whether any Excess Contributions are to be
recharacterized or distributed, however, the Plan reserves the right
to require Highly Compensated Employees to make such election. This
Plan does permit a Highly Compensated Employee to elect to have all or
a portion of the Excess contributions on behalf of such Participant
for a Plan Year recharacterized or distributed. Any recharacterization
or distribution of less than the entire amount of Excess Contributions
with respect to any Highly Compensated Employee is treated as a pro
rata recharacterization or distribution of excess contributions and
allocable income or loss.
The immediately preceding amendment to Section 5.7 is effective for plan
years beginning after December 31, 1996.
DELETED LANGUAGE: 6.3 Limitations on Amount.
The following family aggregation rules under Section 6.3(B)(2) [sic]
commencing at page 59 shall be deleted:
(B)(2) [sic] Family Aggregation Rules. For the purpose of determining
the actual deferral ratio of a Highly Compensated Employee who is subject
to the Family Member aggregation rules of I.R.C. ss. 414(q)(6) because such
Participant is either: a "five percent owner" of the Employer; or,
14
one of the ten (10) Highly Compensated Employees paid the greatest I.R.C.
ss. 415 Compensation during the year, the following rules shall apply:
(a) The combined actual deferral ratio for the family group
(which shall be treated as one Highly Compensated Participant) shall
be the greater of: (i) the ratio determined by aggregating Employee
mandatory contributions, Employer matching contributions and Employee
voluntary contributions made, if any, and all I.R.C. ss. 414(s)
Compensation" of all eligible Family Members who are Highly
Compensated Participants without regard to family aggregation; and,
(ii) the ratio determined by aggregating Employee mandatory
contributions, Employer matching contributions and Employee voluntary
contributions made, if any, and I.R.C. ss. 414(s) Compensation of all
eligible Family Members (including Highly Compensated Participants).
However, in applying the compensation limit to I.R.C. ss. 414(s)
Compensation for Plan Years beginning after December 31, 1988, Family
Members shall include only the affected Employee's spouse and any
lineal descendants who have not yet attained age nineteen (19) before
the close of the Plan Year.
(b) The Employee mandatory contributions, Employer matching
contributions and Employee voluntary contributions made and I.R.C. ss.
414(s) Compensation of all Family Members shall be disregarded for
purposes of determining the Actual Contribution Percentage of
Non-Highly Compensated Participants, except to the extent taken into
account above.
(c) If a Participant is required to be aggregated as a member of
more than one (1) family group in a plan, all Participants who are
members of those family groups that include the Participant are
aggregated as one (1) family group in accordance with the above.
Plan Section 6.3(B) shall be renumbered to provide for the following
subsections under Section 6.3(B):
6.3(B)(1) Average Contribution Percentage Test
6.3(B)(2) Definition of Average Contribution Percentage
6.3(B)(3) Excess Aggregate Contributions
6.3(B)(4) Aggregation of Related Employers
6.3(B)(5) Aggregation of Highly Compensated Participant Contributions
6.3(B)(6) Included Participants
15
DELETED LANGUAGE: 6.3 Limitations on Amount.
The following family aggregation rules under Section 6.3(C)(6) shall be
deleted:
(C)(6) Calculation of Excess in Conjunction With Family Aggregation
Rules. Excess Aggregate Contributions of Participants who are subject to
the family member aggregation rules shall be allocated among the family
members in proportion to the Employee mandatory contributions, Employer
matching contributions, Employee voluntary contributions and any qualified
non-elective contributions or elective deferrals taken into account, of
each family member that is combined to determine the combined Average
Contribution Percentage.
Plan Sections 6.3(C)(7) and (8) shall be renumbered to 6.3(C)(6) and (7),
respectively.
The immediately preceding deletions of Sections 4.9, 6.3(B)(2) [sic] and
6.3(C)(6) are effective for plan years beginning after December 31, 1996.
AMENDED LANGUAGE: 8.2(K) Involuntary Distributions.
The following Section 8.2(K) shall be amended to read as follows:
(K) Involuntary Distributions. As provided in I.R.C. ss. 411(a)(11),
involuntary distributions due to a Participant's termination of
participation in the Plan up to the maximum amount provided by law
(currently $5,000.00 or less for Plan years beginning after August 5, 1997)
will only be made if such distribution represents the entire value of the
Participant's vested account balance which includes all accrued benefits
attributable to both Employer and Employee contributions. Any nonvested
portion shall be treated as a forfeiture. For purposes of this Section, if
the value of a Participant's vested account balance is zero, the
Participant shall be deemed to have received a distribution of such vested
account balance. A Participant's vested account balance shall not include
accumulated deductible employee contributions within the meaning of I.R.C.
ss. 72(o)(5)(B) for Plan Years beginning prior to January 1, 1989.
Distributions of any account balance which exceeded the maximum amount
provided by law at any time shall only be made with the advance written
consent of both the Participant and his spouse, if applicable. Any spousal
consent required must be in the same form as provided for above.
The immediately preceding amendment to Section 8.2(K) is effective for plan
years beginning after August 5, 1997.
16
5. No I.R.C. ss. 411(d)(6) Impermissible Cut-Back. Nothing herein shall
result in an impermissible cut-back in Participant benefits as prohibited by
I.R.C. ss. 411(d)(6).
DATED this _____ day of ______________________, 1998.
EVERETT MUTUAL SAVINGS BANK
------------------------------------
By: Michael B. Hansen
Its: President and CEO/Director
------------------------------------
By: Lori Christenson
Its: Vice President and
Corporate Secretary
COMMERCIAL BANK OF EVERETT
------------------------------------
By: Dale Lyski
Its: President and COO/Director
------------------------------------
By: Lori Christenson
Its: Vice President and
Corporate Secretary
MUTUAL BANCSHARES
------------------------------------
By: Michael B. Hansen
Its: President, Chairman of the
Board of Directors and CEO
------------------------------------
By: Lori Christenson
Its: Secretary and Chief Information
Officer
17
EVERETT MUTUAL SAVINGS BANK 401(k)
EMPLOYEES SAVINGS AND PROFIT SHARING
PLAN AND TRUST
TRUSTEE:
U.S. BANK OF WASHINGTON, N.A.
- ----------------------------------------------
By: James M. Beaumont
Its: Vice President, Asset Management Division
18
FOURTH PLAN AMENDMENT TO THE
EVERTRUST FINANCIAL GROUP, INC.
401(k) PROFIT SHARING PLAN AND TRUST
(p/k/a EVERETT MUTUAL SAVINGS BANK
401(k) PROFIT SHARING PLAN AND TRUST)
THESE AMENDMENTS ARE MADE TO THE EVERTRUST FINANCIAL GROUP, INC. 401(k)
PROFIT SHARING PLAN AND TRUST PREVIOUSLY KNOWN AS THE EVERETT MUTUAL SAVINGS
BANK 401(k) PROFIT SHARING PLAN AND TRUST, TO AMEND THE SAME AS PROVIDED FOR
BELOW, PURSUANT TO ARTICLE IX OF SAID PLAN.
1. Effective Date. Except as may be expressly provided for herein, this
Amendment shall be effective on and after the date specified below.
2. Change of Plan Name and Employer Name. The name of the Plan shall be
changed from the Everett Mutual Savings Bank 401(k) Profit Sharing Plan and
Trust to the EverTrust Financial Group, Inc. 401(k) Profit Sharing Plan and
Trust effective June 1, 1999. The name of the Employer Sponsor shall be changed
from Everett Mutual Savings Bank to EverTrust Financial Group, Inc. effective
June 1, 1999. Any and all references to the Everett Mutual Savings Bank 401(k)
Profit Sharing Plan and Trust shall be to the EverTrust Financial Group, Inc.
401(k) Profit Sharing Plan and Trust.
3. Amended and/or Deleted Plan Provisions. The following described plan
provisions shall be amended or deleted, as indicated, as follows:
AMENDED LANGUAGE: 7.7(D) General Powers.
The following Section 7.7(D) shall be amended to read as follows:
7.7(D) General Powers.
(1) General. The Trustee shall have the power to sell, convey,
exchange, lease, convert, transfer, divide, repair, partition, consent
to partition, mortgage, encumber or otherwise dispose of any Trust
Fund assets during the period of its trusteeship and, in addition, may
bind the Trust by undertaking any of the preceding transactions for
periods beyond the Trustee's own tenure as Trustee. The Trustee may
engage in any of the foregoing transactions with Trust Fund assets at
public or private sale (except as otherwise required by applicable
laws), or on credit or such other terms and conditions as
1
may appear appropriate under the circumstances in the reasonable
judgment of the Trustee.
(2) Qualifying Employer Securities. The Trustee is authorized and
empowered to acquire and hold Qualifying Employer Securities pursuant
to the self-directed investment election of any Participant; provided,
however, the Trustee shall not be permitted to acquire any Qualifying
Employer Securities if, immediately after the acquisition of such
securities, the fair market value of all Qualifying Employer
Securities held by the Trustee for any one Participant's account
should exceed the lesser of: one hundred percent (100%) of such
Participant's Elective Deferral Account; or, more than twenty-five
percent (25%) of the fair market value of such Participant's combined
vested account balances in the Trust Fund.
For the initial year to which this expanded opportunity to self-direct
investments into Qualifying Employer Securities in the Plan is
implemented, the Participant's account balances as of April 30, 1999
shall be utilized to determine the maximum permissible Qualifying
Employer Securities investment and such investments shall be further
subject to purchase limitations described in the conversion of
subscription rights agreements. Effective for Plan Years commencing on
and after January 1, 1999, self-directed investment elections may be
made on such dates as otherwise provided by the Plan and the maximum
permissible Qualifying Employer Securities self-directed investment
election therein shall be based on the valuation date immediately
prior to the effective date of such self-directed investment election.
All such investment elections shall be further subject to applicable
securities laws, as amended. Participants shall not have the option to
receive and the Trustees shall not make an in kind distribution of
Qualifying Employer Securities incident to any Plan Distribution. It
is intended that any investment in Qualifying Employer Securities will
meet the requirements of applicable securities laws and of ERISA,
including, without limitation, the prudence and diversification rules
of ERISA. Participants shall not have the opportunity to vote any
Qualifying Employer Securities held by the Trust, except as may be
expressly required to comply with applicable securities law or as
otherwise expressly provided herein. No commissions shall be payable
on any acquisition or disposition of Qualifying Employer Securities.
Any acquisition or disposition of a Qualifying Employer Security shall
be at an independently determined fair market value.
2
- --------------------------------------------------------------------------------
The immediately preceding amendment to Section 7.7(D) is effective on and after
September 1, 1999.
- --------------------------------------------------------------------------------
4. No I.R.C. ss. 411(d)(6) Impermissible Cut-Back. Nothing herein shall
result in an impermissible cut-back in Participant benefits as prohibited by
I.R.C. ss. 411(d)(6).
DATED this _____ day of ___________________, 1999.
EVERTRUST FINANCIAL GROUP, INC.
-------------------------------------------
By: Michael B. Hansen
Its: President and CEO/Director
-------------------------------------------
By: Lori Christenson
Its: Vice President and Corporate Secretary
EVERTRUST FINANCIAL GROUP, INC.
401(k) PROFIT SHARING PLAN AND TRUST
TRUSTEE:
U.S. BANK OF WASHINGTON, N.A.
- -----------------------------------------------
By: Cynthia Johnson
Its: Vice President, Asset Management Division
The undersigned affiliates of EverTrust Financial Group, Inc. also
acknowledges their acceptance, adoption and approval of this Fourth Plan
Amendment.
Dated this _____ day of ______________, 1999.
3
I-PRO, INC.
-------------------------------------------
By:
Its:
-------------------------------------------
By:
Its:
COMMERCIAL BANK OF EVERETT
-------------------------------------------
By:
Its:
-------------------------------------------
By:
Its:
EVERETT MUTUAL BANK
-------------------------------------------
By:
Its:
-------------------------------------------
By:
Its:
MUTUAL BANCSHARES CAPITAL, INC.
-------------------------------------------
By:
Its:
-------------------------------------------
By:
Its:
4