Exhibit 10.6
CNY FINANCIAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
EFFECTIVE AS OF _____________
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.1 Account........................................................................................1
Section 1.2 Affiliated Employer............................................................................1
Section 1.3 Allocation Compensation........................................................................1
Section 1.4 Bank...........................................................................................2
Section 1.5 Board..........................................................................................2
Section 1.6 Beneficiary....................................................................................2
Section 1.7 Change In Control..............................................................................2
Section 1.8 Code...........................................................................................2
Section 1.9 Computation Period.............................................................................2
Section 1.10 Disability....................................................................................2
Section 1.11 Domestic Relations Order......................................................................2
Section 1.12 Effective Date................................................................................2
Section 1.13 Eligibility Computation Period................................................................2
Section 1.14 Eligible Employee.............................................................................2
Section 1.15 Eligible Participant..........................................................................3
Section 1.16 Employee......................................................................................3
Section 1.17 Employer......................................................................................3
Section 1.18 Employment Commencement Date..................................................................3
Section 1.19 ERISA.........................................................................................3
Section 1.20 ESOP Contribution.............................................................................3
Section 1.21 Fair Market Value.............................................................................3
Section 1.22 Family Member.................................................................................4
Section 1.23 Financed Share............................................................................... 4
Section 1.24 Five Percent Owner........................................................................... 4
Section 1.25 Forfeitures.................................................................................. 4
Section 1.26 Former Participant............................................................................4
Section 1.27 General Investment Account................................................................... 4
Section 1.28 Highly Compensated Employee.................................................................. 4
Section 1.29 Hour of Service.............................................................................. 5
Section 1.30 Investment Account........................................................................... 5
Section 1.31 Investment Fund.............................................................................. 5
Section 1.32 Loan Repayment Account....................................................................... 5
Section 1.33 Loan Repayment Contribution.................................................................. 5
Section 1.34 Maternity or Paternity Leave................................................................. 5
Section 1.35 Military Service............................................................................. 5
Section 1.36 Named Fiduciary.............................................................................. 6
Section 1.37 Officer...................................................................................... 6
Section 1.38 One-Year Break in Service.................................................................... 6
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Section 1.39 Participant.................................................................................. 6
Section 1.40 Plan......................................................................................... 6
Section 1.41 Plan Administrator........................................................................... 6
Section 1.42 Plan Year.................................................................................... 6
Section 1.43 Qualified Domestic Relations Order........................................................... 6
Section 1.44 Qualified Participant........................................................................ 6
Section 1.45 Retirement................................................................................... 7
Section 1.46 Share........................................................................................ 7
Section 1.47 Share Acquisition Loan....................................................................... 7
Section 1.48 Share Investment Account..................................................................... 7
Section 1.49 Tender Offer................................................................................. 7
Section 1.50 Total Compensation........................................................................... 7
Section 1.51 Trust........................................................................................ 7
Section 1.52 Trust Agreement.............................................................................. 7
Section 1.53 Trust Fund................................................................................... 7
Section 1.54 Trustee...................................................................................... 8
Section 1.55 Valuation Date............................................................................... 8
Section 1.56 Vesting Computation Period................................................................... 8
Section 1.57 Year of Eligibility Service.................................................................. 8
Section 1.58 Year of Vesting Service...................................................................... 8
ARTICLE II
PARTICIPATION
Section 2.1 Eligibility For Participation................................................................. 8
Section 2.2 Commencement of Participation................................................................. 9
Section 2.3 Termination of Participation...................................................................9
ARTICLE III
SPECIAL PROVISIONS
Section 3.1 Military Service.............................................................................. 9
Section 3.2 Maternity or Paternity Leave.................................................................. 9
Section 3.3 Adjustments to Years of Eligibility Service.................................................. 10
Section 3.4 Leave of Absence............................................................................. 11
Section 3.5 Family and Medical Leave......................................................................11
ARTICLE IV
CONTRIBUTIONS BY PARTICIPANTS NOT PERMITTED
Section 4.1 Contributions by Participants not Permitted...................................................11
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ARTICLE V
CONTRIBUTIONS BY THE EMPLOYER
Section 5.1 In General................................................................................... 11
Section 5.2 Loan Repayment Contributions................................................................. 11
Section 5.3 ESOP Contributions........................................................................... 12
Section 5.4 Time and Manner of Payment....................................................................12
ARTICLE VI
SHARE ACQUISITION LOANS
Section 6.1 In General................................................................................... 13
Section 6.2 Collateral; Liability for Repayment.......................................................... 13
Section 6.3 Loan Repayment Account....................................................................... 14
Section 6.4 Release of Financed Shares................................................................... 14
Section 6.5 Restrictions on Financed Shares...............................................................15
ARTICLE VII
ALLOCATION OF CONTRIBUTIONS
Section 7.1 Allocation Among Eligible Participants....................................................... 15
Section 7.2 Allocation of Released Shares or Other Property.............................................. 16
Section 7.3 Allocation of ESOP Contributions..............................................................16
ARTICLE VIII
LIMITATIONS ON ALLOCATIONS
Section 8.1 Optional Limitations on Allocations of Contributions.
..........................................................................................................16
Section 8.2 General Limitations on Contributions..........................................................17
ARTICLE IX
VESTING
Section 9.1 Vesting...................................................................................... 20
Section 9.2 Vesting on Death, Disability, Retirement or Change in
Control.................................................................................................. 20
Section 9.3 Forfeitures on Termination of Employment..................................................... 20
Section 9.4 Amounts Credited Upon Re-Employment.......................................................... 21
Section 9.5 Allocation of Forfeitures.....................................................................21
Section 9.6 Service Prior to Effective Date...............................................................21
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ARTICLE X
THE TRUST FUND
Section 10.1 The Trust Fund.............................................................................. 21
Section 10.2 Investments................................................................................. 22
Section 10.3 Diversification of Investments.............................................................. 22
Section 10.4 Use of Commingled Trust Funds............................................................... 23
Section 10.5 Management and Control of Assets.............................................................23
ARTICLE XI
VALUATION OF INTERESTS IN THE TRUST FUND
Section 11.1 Establishment of Investment Accounts........................................................ 24
Section 11.2 Share Investment Accounts................................................................... 24
Section 11.3 General Investment Accounts................................................................. 24
Section 11.4 Valuation of Investment Accounts............................................................ 24
Section 11.5 Annual Statements............................................................................25
ARTICLE XII
SHARES
Section 12.1 Specific Allocation of Shares............................................................... 25
Section 12.2 Divide4nds...................................................................................25
Section 12.3 Voting Rights............................................................................... 25
Section 12.4 Tender Offers............................................................................... 27
Section 12.5 Dissent and Appraisal Rights.................................................................29
ARTICLE XIII
PAYMENT OF BENEFITS
Section 13.1 In General.................................................................................. 30
Section 13.2 Designation of Beneficiaries................................................................ 30
Section 13.3 Distributions to Participants and Former
Participants..............................................................................................31
Section 13.4 Manner of Payment........................................................................... 34
Section 13.5 Put Options................................................................................. 34
Section 13.6 Right of First Refusal...................................................................... 35
Section 13.7 Minimum Required Distributions.............................................................. 35
Section 13.8 Direct Rollover of Eligible Rollover Distributions.......................................... 37
Section 13.9 Valuation of Shares Upon Settlement to a Participant........................................ 38
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ARTICLE XIV
CHANGE IN CONTROL
Section 14.1 Definition of Change in Control............................................................. 38
Section 14.2 Vesting on Change of Control................................................................ 39
Section 14.3 Repayment of Loan........................................................................... 39
Section 14.4 Plan Termination After Change in Control.................................................... 40
Section 14.5 Amendment of Article XIV.....................................................................41
ARTICLE XV
ADMINISTRATION
Section 15.1 Named Fiduciaries........................................................................... 41
Section 15.2 Plan Administrator.......................................................................... 41
Section 15.3 Claims Procedure............................................................................ 43
Section 15.4 Claims Review Procedure..................................................................... 43
Section 15.5 Allocation of Fiduciary Responsibilities and
Employment of Advisors....................................................................................44
Section 15.6 Other Administrative Provisions..............................................................44
ARTICLE XVI
AMENDMENT, TERMINATION AND TAX QUALIFICATION
Section 16.1 Amendment and Termination by CNY Financial Corporation...................................... 45
Section 16.2 Amendment or Termination Other Than by CNY Financial Corporation............................ 45
Section 16.3 Conformity to Internal Revenue Code......................................................... 46
Section 16.4 Contingent Nature of Contributions...........................................................46
ARTICLE XVII
SPECIAL RULES FOR TOP HEAVY PLAN YEARS
Section 17.1 In General.................................................................................. 47
Section 17.2 Definition of Top Heavy Plan................................................................ 47
Section 17.3 Determination Date.......................................................................... 48
Section 17.4 Cumulative Accrued Benefits................................................................. 48
Section 17.5 Key Employees............................................................................... 48
Section 17.6 Required Aggregation Group.................................................................. 49
Section 17.7 Permissible Aggregation Group............................................................... 49
Section 17.8 Special Requirements During Top Heavy Plan Years.............................................50
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ARTICLE XVIII
MISCELLANEOUS PROVISIONS
Section 18.1 Governing Law............................................................................... 50
Section 18.2 No Right to Continued Employment............................................................ 51
Section 18.3 Construction of Language.................................................................... 51
Section 18.4 Headings.................................................................................... 51
Section 18.5 Merger with Other Plans..................................................................... 51
Section 18.6 Non-Alienation of Benefits.................................................................. 51
Section 18.7 Procedures Involving Domestic Relations Orders.............................................. 52
Section 18.8 Leased Employees............................................................................ 52
Section 18.9 Status as an Employee Stock Ownership Plan...................................................53
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CNY FINANCIAL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
ARTICLE I
DEFINITIONS
The following definitions shall apply for the purposes of the Plan,
unless a different meaning is clearly indicated by the context:
Section 1.1 Account means an account established for each Participant
to which is allocated such Participant's share, if any, of all Financed Shares
and other property that are released from the Loan Repayment Account in
accordance with Section 6.4, together with his share, if any, of any ESOP
Contributions that may be made by the Employer.
Section 1.2 Affiliated Employer means any corporation which is a member
of a controlled group of corporations (as defined in Section 414(b) of the Code)
that includes the Employer; any trade or business (whether or not incorporated)
that is under common control (as defined in Section 414(c) of the Code) with the
Employer; any organization (whether or not incorporated) that is a member of an
affiliated service group (as defined in Section 414(m) of the Code) that
includes the Employer; any leasing organization (as defined in Section 414(n) of
the Code) to the extent that any of its employees are required pursuant to
Section 414(n) of the Code to be treated as employees of the Employer; and any
other entity that is required to be aggregated with the Employer pursuant to
regulations under Section 414(o) of the Code.
Section 1.3 Allocation Compensation during any period means the
compensation taken into account in determining the allocation of benefits and
contributions among Participants and consists of the aggregate compensation
received by an Employee from the Employer or any Affiliated Employer with
respect to such period as reported to the Internal Revenue Service as wages for
such period pursuant to Section 6041(a) of the Code, plus the amount by which
such Employee's compensation with respect to such period has been reduced
pursuant to a compensation reduction agreement under the terms of any of the
following plans which may be maintained by the Employer:
(a) a qualified cash or deferred arrangement described in
Section 401(k) of the Code;
(b) a salary reduction simplified employee pension plan described in
Section 408(k) of the Code;
(c) a tax deferred annuity plan described in Section 403(b) of the
Code; or
(d) a cafeteria plan described in Section 125 of the Code.
In no event, however, shall an Employee's Allocation Compensation for any
calendar year include any compensation in excess of $160,000, or any such other
amount as may be prescribed in accordance with regulations prescribed under
Section 401(a)(17) of the Code. If there are less
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than twelve (12) months in the Plan Year, the $160,000 limitation (as adjusted)
shall be prorated by multiplying such limitation by a fraction, the numerator of
which is the number of months in the Plan Year and the denominator of which is
twelve (12).
Section 1.4 Bank means Cortland Savings Bank and any successor thereto.
Section 1.5 Board means the Board of Directors of CNY
Financial Corporation
Section 1.6 Beneficiary means the person or persons designated by a
Participant or Former Participant or other person entitled to a benefit under
the Plan, or otherwise determined to be entitled to a benefit under the Plan. If
more than one person is designated, each shall have an equal share unless the
person making the designation directed otherwise. The word "person" includes an
individual, a trust, an estate or any other person that is permitted to be named
as a Beneficiary.
Section 1.7 Change in Control means an event described in Section 14.1.
Section 1.8 Code means the Internal Revenue Code of 1986 (including the
corresponding provisions of any succeeding law).
Section 1.9 Computation Period means an Eligibility Computation Period
or a Vesting Computation Period.
Section 1.10 Disability means a condition of total incapacity, mental
or physical, for further performance of duty with the Employer or any Affiliated
Employer, which the Plan Administrator shall have determined, on the basis of
competent medical evidence, is likely to be permanent.
Section 1.11 Domestic Relations Order means a judgment, decree or order
(including the approval of a property settlement) that is made pursuant to a
state domestic relations or community property law and relates to the provision
of child support, alimony payments, or marital property rights to a spouse,
child or other dependent of a Participant or Former Participant.
Section 1.12 Effective Date means the first day of the calendar year in
which Cortland Savings Bank converts from a mutual savings bank to a stock
savings bank.
Section 1.13 Eligibility Computation Period means, with respect to any
person, (a) the 12-consecutive month period beginning on such person's
Employment Commencement Date and (b) each 12-consecutive month period that
begins on an anniversary of such person's Employment Commencement Date.
Section 1.14 Eligible Employee means an Employee who is eligible for
participation in the Plan in accordance with Article II.
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Section 1.15 Eligible Participant means, for any Plan Year, an Employee
who is a Participant on the last day of such Plan Year and an Employee who was a
Participant during part of such Plan Year and whose participation ceased prior
to the last day of such Plan Year on account of his Retirement, Disability or
death.
Section 1.16 Employee means any person, including an officer, who is
employed by the Employer or an Affiliated Employer.
Section 1.17 Employer means CNY Financial Corporation and any successor
thereto and any Affiliated Employer which, with the prior written approval of
the Board of Directors of CNY Financial Corporation and subject to such terms
and conditions as may be imposed by the Board of Directors of CNY Financial
Corporation, shall adopt this Plan.
Section 1.18 Employment Commencement Date means the date on which a
person first performs an Hour of Service, except that if an Employee separates
from service with the Employer, incurs a One-Year Break in Service and
subsequently returns to service with the Employer, his Employment Commencement
Date shall be the date on which he first performs an Hour of Service following
the One-Year Break in Service.
Section 1.19 ERISA means the Employee Retirement Income Security Act of
1974, as amended from time to time (including the corresponding provisions of
any succeeding law).
Section 1.20 ESOP Contribution means Shares or amounts of money
contributed to the Plan by the Employer in accordance with Section 5.3.
Section 1.21 Fair Market Value on any date means:
(a) with respect to a Share:
(i) the final quoted sale price on the date in question (or, if there
is no reported sale on such date, on the last preceding date on which any
reported sale occurred) as reported in the principal consolidated reporting
system with respect to securities listed or admitted to trading on the principal
United States securities exchange on which like Shares are listed or admitted to
trading; or
(ii) if Shares are not listed or admitted to trading on any such
exchange, the closing bid quotation with respect to a Share on such date on the
Nasdaq Stock Market, or, if no such quotation is provided, on another similar
system, selected by the Plan Administrator, then in use; or
(iii) if Sections 1.21(a)(i) and (ii) are not applicable, the fair
market value of a Share as determined by an appraiser independent of the
Employer and experienced and expert in the field of corporate appraisal.
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(b) with respect to property other than Shares, the fair market value
determined in the manner determined by the Trustee.
Section 1.22 Family Member means, with respect to any person, such
person's spouse and lineal ascendants or descendants and the spouses of such
lineal ascendants or descendants.
Section 1.23 Financed Share means: (a) a Share that has been purchased
with the proceeds of a Share Acquisition Loan, that has been allocated to the
Loan Repayment Account in accordance with Section 6.3 and that has not been
released in accordance with Section 6.4; or (b) a Share that constitutes a
dividend paid with respect to a Share described in Section 1.46, that has been
allocated to the Loan Repayment Account in accordance with Section 6.3 and that
has not been released in accordance with Section 6.4.
Section 1.24 Five Percent Owner means, for any Plan Year, a person who,
during such Plan Year, owned (or was considered as owning for purposes of
Section 318 of the Code): (a) more than 5% of the value of all classes of
outstanding stock of the Employer; or (b) stock possessing more than 5% of the
combined voting power of all classes of outstanding stock of the Employer.
Section 1.25 Forfeitures means the amounts forfeited by Participants
and Former Participants on termination of employment prior to full vesting,
pursuant to Section 9.3, less amounts credited because of re-employment,
pursuant to Section 9.4.
Section 1.26 Former Participant means a Participant whose participation
in the Plan has terminated pursuant to Section 2.3.
Section 1.27 General Investment Account means an Investment Account
established and maintained in accordance with Article XI.
Section 1.28 Highly Compensated Employee means, for any Plan Year, an
Employee who:
(a) at any time during such Plan Year or the immediately preceding Plan
Year was a Five Percent Owner; or
(b) during the immediately preceding Plan Year received Total
Compensation for such Plan Year in excess of $80,000 (or such higher amount as
may be permitted under Section 414(q) of the Code) and, if the Employer so
elects, is a member of the group consisting of the top 20% of Employees when
ranked on the basis of Total Compensation paid to Employees during such Plan
Year.
The determination of who is a Highly Compensated Employee will be made in
accordance with Section 414(q) of the Code and the regulations thereunder.
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Section 1.29 Hour of Service means:
(a) Each hour for which a person is paid, or entitled to payment, for
the performance of duties for the Bank or any Affiliated Employer. These hours
shall be credited to the person for the Computation Period or Computation
Periods in which the duties are performed; and
(b) Each hour for which a person is paid, or entitled to payment, by
the Bank or any Affiliated 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. No more than
501 Hours of Service shall be credited under this Section 1.29(b) for any single
continuous period (whether or not such period occurs in a single Computation
Period). Hours under this Section 1.29(b) shall be calculated and credited
pursuant to Section 2530.200b-2 of the Department of Labor's regulations (or any
successor regulation), which are incorporated herein by reference; and
(c) Each hour for which back pay, irrespective of any mitigation of
damages, is either awarded or agreed to by the or any Affiliated Employer. The
same Hours of Service shall not be credited both under Section 1.29(a) or (b),
as the case may be, and under this Section 1.29(c). Hours under this Section
1.29(c) shall be credited to the person for the Computation Period or
Computation Periods to which the award or agreement pertains, rather than the
Computation Period in which the award, agreement or payment is made.
Section 1.30 Investment Account means either a General Investment
Account or a Share Investment Account.
Section 1.31 Investment Fund means any one of the three or more funds
as may be established from time to time by the Plan Administrator which,
together with any and all Shares and other investments held under the Plan,
constitute the Trust Fund.
Section 1.32 Loan Repayment Account means an account established and
maintained in accordance with Section 6.3.
Section 1.33 Loan Repayment Contribution means amounts of money
contributed to the Plan by the Employer in accordance with Section 5.2.
Section 1.34 Maternity or Paternity Leave means a person's absence from
work for the Employer and all Affiliated Employers: (a) by reason of the
pregnancy of such person; (b) by reason of the birth of a child of such person;
(c) by reason of the placement of a child with the person in connection with the
adoption of such child by such person; or (d) for purposes of caring for a child
of such person immediately following the birth of the child or the placement of
the child with such person.
Section 1.35 Military Service means service in the armed forces of the
United States. It may also include, if and to the extent that the Board so
provides and if all Participants and
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Former Participants in like circumstances are similarly treated, special service
for the government of the United States and other public service.
Section 1.36 Named Fiduciary means any person, committee, corporation
or organization as described in Section 15.1.
Section 1.37 Officer means an Employee who is an administrative
executive in regular and continued service with the Employer or any Affiliated
Employer; provided, however, that at no time shall more than the lesser of (a)
50 Employees or (b) the greater of: (i) 3 Employees or (ii) 10% of all employees
be treated as Officers. The determination of whether an employee is to be
considered an Officer shall be made in accordance with Section 416(i) of the
Code.
Section 1.38 One-Year Break in Service means, with respect to any
person: (a) for purposes of eligibility to participate, an Eligibility
Computation Period during which such person is credited with fewer than 501
Hours of Service and (b) for purposes of vesting, a Vesting Computation Period
during which such person is credited with fewer than 501 Hours of Service.
Section 1.39 Participant means any person who has satisfied the
eligibility requirements set forth in Section 2.1, who has become a Participant
in accordance with Section 2.2, and whose participation has not terminated under
Section 2.3.
Section 1.40 Plan means this CNY Financial Corporation
Employee Stock Ownership Plan, as amended from time to time. This
Plan may be referred to as the "CNY Financial Corporation
Employee Stock Ownership Plan."
Section 1.41 Plan Administrator means any person, committee,
corporation or organization designated in Section 15.2, or appointed pursuant to
Section 15.2, to perform the responsibilities of that office.
Section 1.42 Plan Year means the calendar year in which the Effective
Date occurs, and each calendar year thereafter.
Section 1.43 Qualified Domestic Relations Order means a Domestic
Relations Order that: (a) clearly specifies (i) the name and last known mailing
address of the Participant or Former Participant and of each person given rights
under such Domestic Relations Order, (ii) the amount or percentages of the
Participant's or Former Participant's benefits under this Plan to be paid to
each person covered by such Domestic Relations Order, (iii) the number of
payments or the period to which such Domestic Relations Order applies, and (iv)
the name of this Plan; and (b) does not require the payment of a benefit in a
form or amount that is (i) not otherwise provided for under the Plan, or (ii)
inconsistent with a previous Qualified Domestic Relations Order.
Section 1.44 Qualified Participant means a Participant who has attained
age 55 and who has been a Participant in the Plan for at least 10 years.
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Section 1.45 Retirement means: (a) any termination of participation in
the Plan at or after attainment of age 65; and (b) any retirement under an
applicable qualified defined benefit plan of the Employer as in effect from time
to time with entitlement to a normal or early retirement allowance.
Section 1.46 Share means a share of any class of stock issued by the
Employer or any Affiliated Employer; provided, however, that such share is a
"qualifying employer security" within the meaning Section 409(l) of the Code and
Section 407(d)(5) of ERISA.
Section 1.47 Share Acquisition Loan means a loan obtained by the
Trustee in accordance with Article VI.
Section 1.48 Share Investment Account means an Investment Account
established and maintained in accordance with Article XI.
Section 1.49 Tender Offer means a tender offer made to holders of any
one or more classes of Shares generally, or any other offer, made to holders of
any one or more classes of Shares generally, to purchase, exchange, redeem or
otherwise transfer Shares, whether for cash or other consideration.
Section 1.50 Total Compensation during any period means an Employee's
aggregate total compensation paid by the Employer and any Affiliated Employer
with respect to such period and reportable for federal income tax purposes
pursuant to Section 6041(a) of the Code. In addition, solely for purposes of
identifying those Employees who are Highly Compensated Employees, each
Employee's Total Compensation shall include any amounts by which the Employee's
compensation paid by the Employer or any Affiliated Employer has been reduced
pursuant to a compensation reduction agreement under the terms of any qualified
cash or deferred arrangement described in Section 401(k) of the Code, any salary
reduction simplified employee pension plan described in Section 408(k) of the
Code, any tax deferred annuity plan described in Section 403(b) of the Code, or
any cafeteria plan described in Section 125 of the Code. In no event, however,
shall an Employee's Total Compensation for any calendar year include any
compensation in excess of $160,000 (or such other amount as may be permitted
under Section 401(a)(17) of the Code).
Section 1.51 Trust means the legal relationship created by
the Trust Agreement pursuant to which the Trustee holds the Trust
Fund in trust. The Trust may be referred to as the "CNY Financial
Corporation Employee Stock Ownership Plan Trust."
Section 1.52 Trust Agreement means the agreement between CNY Financial
Corporation and the Trustee therein named or its successors pursuant to which
the Trust Fund shall be held in trust.
Section 1.53 Trust Fund means the corpus (consisting of contributions
paid over to the Trustee, and investments thereof), and all earnings,
appreciations or additions thereof and
7
thereto, held by the Trustee under the Trust Agreement in accordance with the
Plan, less any depreciation thereof and any payments made therefrom pursuant to
the Plan.
Section 1.54 Trustee means the Trustee of the Trust Fund from time to
time in office. The Trustee shall serve as Trustee until it is removed or
resigns from office and is replaced by a successor Trustee appointed in
accordance with the terms of the Trust Agreement.
Section 1.55 Valuation Date means the last business day of March, June,
September and December.
Section 1.56 Vesting Computation Period means, with respect to any
person, the 12-month period beginning on such person's Employment Commencement
Date and each Plan Year beginning after such Employment Commencement Date.
Section 1.57 Year of Eligibility Service means, with respect to any
person, an Eligibility Computation Period during which such person receives
credit for at least 1,000 Hours of Service.
Section 1.58 Year of Vesting Service means, with respect to any person,
a Vesting Computation Period during which such person receives credit for at
least 1,000 Hours of Service, but limited by Section 9.6. If an Employee has
credit for 1,000 Hours of Service in the Vesting Computation Period that
includes his Employment Commencement Date and 1,000 Hours of Service in the
first Vesting Computation Period that begins after his Employment Commencement
Date, he shall receive credit for two Years of Vesting Service even if such
periods overlap.
ARTICLE II
PARTICIPATION
Section 2.1 Eligibility for Participation.
(a) Only Eligible Employees may be or become Participants in the Plan.
An Employee shall be an Eligible Employee if he is a common law employee of an
Employer, has completed at least one Year of Eligibility Service and is not
excluded under Section 2.1(b).
(b) An Employee is not an Eligible Employee if he:
(i) is an Employee who has waived any claim to participation
in the Plan; or
(ii) is an Employee or in a unit of Employees covered by a collective
bargaining agreement with the Employer where retirement benefits were the
subject of good faith bargaining, unless such agreement expressly provides that
Employees such as he be covered under the Plan; or
(iii) is a "leased employee" as defined in Section 18.8(a).
8
Section 2.2 Commencement of Participation.
Every Employee who is an Eligible Employee on the Effective Date shall
automatically become a Participant on the Effective Date. An Employee who
becomes an Eligible Employee after the Effective Date shall automatically become
a Participant on the first day of the month following the month in which he
becomes an Eligible Employee.
Section 2.3 Termination of Participation.
Participation in the Plan shall cease, and a Participant shall become a
Former Participant, upon termination of employment with the Employer, death,
Disability or Retirement, failure to return to work upon the expiration of a
leave of absence granted by the Employer pursuant to Section 3.4 or becoming an
Employee who is excluded under Section 2.1(b) or distribution of the entire
vested interest in his Account.
ARTICLE III
SPECIAL PROVISIONS
Section 3.1 Military Service.
In the case of a termination of employment of any Employee to enter
directly into Military Service, the entire period of his absence shall be
treated, for purposes of vesting and eligibility for participation (but not,
except as required by law, for purposes of eligibility to share in allocations
of contributions in accordance with Article VII), as if he had worked for the
Employer during the period of his absence. In the event of the re-employment of
such person by the Employer within a period of not more than six months:
(a) after he becomes entitled to release or discharge, if he
has entered into the armed forces; or
(b) after such service terminates, if he has entered into other service
defined as Military Service;
such period, also, shall be deemed to be Military Service.
Section 3.2 Maternity or Paternity Leave.
(a) Subject to Section 3.2(c), in the event of an Employee's absence
from work in the service of the Employer and all Affiliated Employers for a
period:
(i) that commences on or after October 1, 1985;
9
(ii) for which the person is not paid or entitled to payment by the
Employer or any Affiliated Employer; and
(iii) that constitutes Maternity or Paternity Leave;
then the rules of Section 3.2(b) shall apply.
(b) In cases of absence described in Section 3.2(a), solely for
purposes of determining whether a One-Year Break in Service has occurred, the
person shall be credited for the period of an absence described in Section
3.2(a) with the number of Hours of Service equal to the lesser of:
(i) (A) the number of Hours of Service that would have been credited to
the person if he had continued working for the Bank during the period of such
absence, or (B) if the number of Hours of Service prescribed under Section
3.2(b)(i)(A) cannot be determined, 8 Hours of Service for each working day
during the period of absence; or
(ii) 501 Hours of Service.
Such credit shall be given during the Computation Period during which
such absence began, if necessary to prevent a One- Year Break in Service from
occurring during such Computation Period, and in all other cases, such credit
shall be given during the immediately following Computation Period.
(c) Notwithstanding anything in the Plan to the contrary, this Section
3.2 shall not apply unless the person furnishes to the Plan Administrator such
information as the Plan Administrator may reasonably require in order to
establish (i) that the person's absence is one described in Section 3.2(a), and
(ii) the number of working days during such absence.
Section 3.3 Adjustments to Years of Eligibility Service.
The Years of Eligibility Service of an Employee who returns to the
employment of the Employer or any Affiliated Employer following a separation
from service shall include his Years of Eligibility Service prior to such
separation from service, and such an Employee shall be readmitted to
participation immediately upon his return to service if he is then an Eligible
Employee; provided, however, that if such separation from service includes a
One-Year Break in Service, such prior Years of Eligibility Service shall not be
included until he has completed one Year of Eligibility Service following his
return to service, and upon completion of such one Year of Eligibility Service,
he shall be readmitted to participation in the Plan with retroactive effect to
the date of his return to employment, if he is then an Eligible Employee, but he
shall not participate in any ESOP Contributions or Loan Repayment Contributions
allocated during the interim period.
10
Section 3.4 Leave of Absence.
In the event of temporary absence from work in the service of the
Employer and all Affiliated Employers for any period for which a Participant
shall have been granted a leave of absence by the Employer, the entire period of
his absence shall be treated for purposes of vesting and eligibility for
participation (but not for purposes of eligibility to share in the allocation of
contributions in accordance with Article VII), as if he had worked for the
Employer during the period of his absence. Absence from work for a period
greater than, or failure to return to work upon the expiration of, the period of
leave of absence granted by the Employer shall terminate participation in the
Plan as of the date on which such period ended. In granting leaves of absence
for purposes of the Plan, all Employees in like circumstances shall be similarly
treated.
Section 3.5 Family and Medical Leave.
In the event of a leave of absence satisfying all requirements for
mandatory leave under the federal Family and Medical Leave Act of 1992, the
period of such absence shall be recognized for purposes of vesting and
eligibility to participate to the full extent required by law.
ARTICLE IV
CONTRIBUTIONS BY PARTICIPANTS NOT PERMITTED
Section 4.1 Contributions by Participants not Permitted.
Participants shall not be required, nor shall they be permitted, to
make contributions to the Plan.
ARTICLE V
CONTRIBUTIONS BY THE EMPLOYER
Section 5.1 In General.
Subject to the limitations of Article VIII, for each Plan Year, the
Employer shall contribute to the Plan the amount, if any, determined by the
Board, but in no event less than the amount described in Section 5.2(a). The
amount contributed for any Plan Year shall be treated as a Loan Repayment
Contribution, an ESOP Contribution or a combination thereof, in accordance with
the provisions of this Article V.
Section 5.2 Loan Repayment Contributions.
For each Plan Year, a portion of the Employer's contributions, if any,
to the Plan for such Plan Year equal to the sum of:
11
(a) the minimum amount required to be added to the Loan Repayment
Account in order to provide adequate funds for the payment of the principal and
interest then required to be repaid under the terms of any outstanding Share
Acquisition Loan obtained by the Trustee; plus
(b) the additional amount, if any, designated by the Plan Administrator
to be applied to the prepayment of principal or interest under the terms of any
out standing Share Acquisition Loan obtained by the Trustee;
shall be treated as a Loan Repayment Contribution for such Plan Year. A Loan
Repayment Contribution for a Plan Year shall be allocated to the Loan Repayment
Account and shall be applied by the Trustee, in the manner directed by the Plan
Administrator, to the payment of accrued interest and to the reduction of the
principal balance of any Share Acquisition Loan obtained by the Trustee that is
outstanding on the date on which the Loan Repayment Contribution is made. To the
extent that a Loan Repayment Contribution for a Plan Year results in a release
of Financed Shares in accordance with Section 6.4, such Shares shall be
allocated among the Accounts of Eligible Participants for such Plan Year in
accordance with Section 7.2.
Section 5.3 ESOP Contributions.
In the event that the amount of the Employer's contributions to the
Plan for a Plan Year exceeds the amount of the Loan Repayment Contributions for
such Plan Year, such excess shall be treated as an ESOP Contribution and shall
be allocated among the Accounts of the Eligible Participants for such Plan Year
in accordance with Section 7.3.
Section 5.4 Time and Manner of Payment.
(a) Payment of contributions made pursuant to this Article V shall be
made:
(i) in cash, in the case of a Loan Repayment Contribution;
and
(ii) in cash, in Shares or in a combination of cash and Shares, in the
case of an ESOP Contribution.
(b) Contributions made pursuant to this Article V for a Plan Year shall
be paid to the Trust Fund on or before the due date (including any extensions
thereof) of the Employer's federal income tax return for its taxable year during
which such Plan Year ends. All such contributions shall be allocated to the
Accounts of the Eligible Participants, in the case of an ESOP Contribution, or
to the Loan Repayment Account, in the case of a Loan Repayment Contribution, as
soon as is practicable following the payment thereof to the Trust Fund.
12
ARTICLE VI
SHARE ACQUISITION LOANS
Section 6.1 In General.
The Plan Administrator may, with the prior approval of the Board,
direct the Trustee to obtain a Share Acquisition Loan on behalf of the Plan, the
proceeds of which shall be applied on the earliest practicable date:
(a) to purchase Shares; or
(b) to make payments of principal or interest, or a combination of
principal and interest, with respect to such Share Acquisition Loan; or
(c) to make payments of principal and interest, or a combination of
principal and interest, with respect to a previously obtained Share Acquisition
Loan that is then outstanding.
Any such Share Acquisition Loan shall be obtained on such terms and conditions
as the Plan Administrator may approve; provided, however, that such terms and
conditions shall provide for the payment of interest at no more than a
reasonable rate and shall permit such Share Acquisition Loan to satisfy the
requirements of Section 4975(d)(3) of the Code and Section 408(b)(3) of ERISA.
Section 6.2 Collateral; Liability for Repayment.
(a) The Plan Administrator may direct the Trustee to pledge, at the
time a Share Acquisition Loan is obtained, the following assets of the Plan as
collateral for such Share Acquisition Loan:
(i) any Shares purchased with the proceeds of such Share Acquisition
Loan and any earnings attributable thereto;
(ii) any Financed Shares then pledged as collateral for a prior Share
Acquisition Loan which is repaid with the proceeds of such Share Acquisition
Loan and any earnings attributable thereto; and
(iii) pending the application thereof to purchase Shares or repay a
prior Share Acquisition Loan, the proceeds of such Share Acquisition Loan and
any earnings attributable thereto.
Except as specifically provided in this Section 6.2(a), no assets of the Plan
shall be pledged as collateral for the repayment of any Share Acquisition Loan.
(b) No person entitled to payment under a Share Acquisition Loan shall
have any right to the assets of the Plan except for:
13
(i) Financed Shares that have been pledged as collateral for such Share
Acquisition Loan pursuant to Section 6.2(a);
(ii) Loan Repayment Contributions made pursuant to Section 5.2; and
(iii) earnings attributable to Financed Shares described in Section
6.2(b)(i) and to Loan Repayment Contributions described
in Section 6.2(b)(ii).
Except in the event of a default or a refinancing pursuant to which an existing
Share Acquisition Loan is repaid, the aggregate amount of all payments of
principal and interest made by the Trustee with respect to all Share Acquisition
Loans obtained on behalf of the Plan shall at no time exceed the aggregate
amount of all Loan Repayment Contributions theretofore made plus the aggregate
amount of all earnings (other than dividends paid in the form of Shares)
attributable to Financed Shares and to such Loan Repayment Contributions.
(c) Any Share Acquisition Loan shall be without recourse against the
Plan and Trust.
Section 6.3 Loan Repayment Account.
In the event that one or more Share Acquisition Loans shall be
obtained, a Loan Repayment Account shall be established under the Plan. The Loan
Repayment Account shall be credited with all Shares acquired with the proceeds
of a Share Acquisition Loan, all Loan Repayment Contributions and all earnings
(including dividends paid in the form of Shares) or appreciation attributable to
such Shares and Loan Repayment Contributions. The Loan Repayment Account shall
be charged with all payments of principal and interest made by the Trustee with
respect to any Share Acquisition Loan, all Shares released in accordance with
Section 6.4 and all losses, depreciation or expenses attributable to Shares or
to other property credited thereto. The Financed Shares, as well as any earnings
thereon, shall be allocated to such Loan Repayment Account and shall be
accounted for separately from all other amounts contributed under the Plan.
Section 6.4 Release of Financed Shares.
As of the last day of each Plan Year during which a Share Acquisition
Loan is outstanding, a portion of the Financed Shares purchased with the
proceeds of such Share Acquisition Loan and allocated to the Loan Repayment
Account shall be released. The number of Financed Shares released in any such
Plan Year shall be equal to the amount determined according to one of the
following methods:
(a) by computing the product of: (i) the number of Financed Shares
purchased with the proceeds of such Share Acquisition Loan and allocated to the
Loan Repayment Account immediately before the release is effected; multiplied by
(ii) a fraction, the numerator of which is the aggregate amount of the principal
and interest payments (other than payments made upon the refinancing of a Share
Acquisition Loan as contemplated by Section 6.1(c)) made with respect to
14
such Share Acquisition Loan during such Plan Year, and the denominator of which
is the aggregate amount of all principal and interest remaining to be paid with
respect to such Share Acquisition Loan as of the first day of such Plan Year; or
(b) by computing the product of: (i) the number of Financed Shares
purchased with the proceeds of such Share Acquisition Loan and allocated to the
Loan Repayment Account immediately before the release is effected; multiplied by
(ii) a fraction, the numerator of which is the aggregate amount of the principal
payments (other than payments made upon the refinancing of a Share Acquisition
Loan as contemplated by Section 6.1(c)) made with respect to such Share
Acquisition Loan during such Plan Year, and the denominator of which is the
aggregate amount of all of principal remaining to be paid with respect to such
Share Acquisition Loan as of the first day of such Plan Year; provided, however,
that the method described in this Section 6.4(b) may be used only if the Share
Acquisition Loan does not extend for a period in excess of 10 years after the
date of origination and only to the extent that principal payments on such Share
Acquisition Loan are made at least as rapidly as under a loan of like principal
amount with a like interest rate and term requiring level amortization of
principal and interest.
The method to be used shall be specified in the documents governing the Share
Acquisition Loan or, if not specified therein, prescribed by the Plan
Administrator, in its discretion. In the event that property other than, or in
addition to, Financed Shares shall be held in the Loan Repayment Account and
pledged as collateral for a Share Acquisition Loan, then the property to be
released pursuant to this Section 6.4 shall be property having a Fair Market
Value determined by applying the method to be used to the Fair Market Value of
all property pledged as collateral for such Share Acquisition Loan; provided,
however, that no property other than Financed Shares shall be released pursuant
to this Section 6.4 unless all Financed Shares have previously been released.
Section 6.5 Restrictions on Financed Shares.
Except to the extent required under any applicable law, rule or
regulation, no Shares purchased with the proceeds of a Share Acquisition Loan
shall be subject to a put, call or other option, or to any buy-sell or similar
arrangement, while held by the Trustee or when distributed from the Plan. The
provisions of this Section 6.5 shall continue to apply in the event that this
Plan shall cease to be an employee stock ownership plan, within the meaning of
Section 4975(e)(7) of the Code.
ARTICLE VII
ALLOCATION OF CONTRIBUTIONS
Section 7.1 Allocation Among Eligible Participants.
Subject to the limitations of Article VIII, ESOP Contributions for a
Plan Year made in accordance with Section 5.3 and Financed Shares and other
property that are released from the Loan Repayment Account for a Plan Year in
accordance with Section 6.4 shall be allocated among the Eligible Participants
for such Plan Year, in the manner provided in this Article VII.
15
Section 7.2 Allocation of Releases Shares or Other Property.
Subject to the limitations of Article VIII, in the event that Financed
Shares or other property are released from the Loan Repayment Account for a Plan
Year in accordance with Section 6.4, such released Shares or other property
shall be allocated among the Accounts of the Eligible Participants for the Plan
Year in the proportion that each such Eligible Participant's Allocation
Compensation for the calendar year ending with or within the Plan Year bears to
the aggregate Allocation Compensation of all Eligible Participants for such
calendar year.
Section 7.3 Allocation of ESOP Contributions.
Subject to the limitations of Article VIII, in the event that the
Employer makes an ESOP Contribution for a Plan Year, such ESOP Contribution
shall be allocated among the Accounts of the Eligible Participants for such Plan
Year in the proportion that each such Eligible Participant's Allocation
Compensation for the calendar year that ends with or within the Plan Year bears
to the aggregate Allocation Compensation of all Eligible Participants for such
calendar year.
ARTICLE VIII
LIMITATIONS ON ALLOCATIONS
Section 8.1 Optional Limitations on Allocations of Contributions.
If, for any Plan Year, the application of Sections 7.2 and 7.3 would
result in more than one-third of the number of Shares or of the amount of money
or property to be allocated thereunder being allocated to the Accounts of
Eligible Participants for such Plan Year who are also Highly Compensated
Employees for such Plan Year, then the Plan Administrator may, but shall not be
required to, direct that this Section 8.1 shall apply in lieu of Sections 7.2
and 7.3. If the Plan Administrator gives such a direction, then the Plan
Administrator shall impose a maximum dollar limitation on the amount of
Allocation Compensation that may be taken into account for each Eligible
Participant. The dollar limitation which shall be imposed shall be the
limitation which produces the result that the aggregate Allocation Compensation
taken into account for Eligible Participants who are Highly Compensated
Employees, constitutes exactly one-third of the aggregate Allocation
Compensation taken into account for all Eligible Participants. In determining
whether more than one-third of the number of Shares or of the amount of money or
property to be allocated under the Plan for a Plan Year would be allocated to
the Highly Compensated Employees, any allocation to be made to the Account of a
Family Member of a Highly Compensated Employee who is either a Five Percent
Owner or one of the ten Highly Compensated Employees with the highest Total
Compensation, shall be treated as an allocation to such Highly Compensated
Employee.
16
Section 8.2 General Limitations on Contributions.
(a) No amount shall be allocated to a Participant's Account under this
Plan for any Limitation Year, to the extent that such an allocation would result
in an Annual Addition of an amount greater than the lesser of (i) $30,000 (or
such other amount as is permissible under Section 415(c)(1)(A) of the Code, or
(ii) 25% of the Participant's Total Compensation for such Limitation Year.
(b) In the case of a Participant who may be entitled to benefits under
any qualified defined benefit plan (whether or not terminated) now in effect or
ever maintained by the Employer, such Participant's Annual Additions under this
Plan shall, in addition to the limitations provided under Section 8.2(a), be
further limited so that for any Limitation Year beginning prior to December 31,
1999, the sum of the Participant's Defined Contribution Plan Fraction plus his
Defined Benefit Plan Fraction does not exceed 1.0 for any Limitation Year;
provided, however, that for any Limitation Year ending prior to January 1, 1983,
the sum of his Defined Contribution Plan Fraction plus his Defined Benefit Plan
Fraction shall not exceed 1.4; and provided further, that this limitation shall
only apply if and to the extent that the benefits under the Employer's
Retirement Plan or any other defined contribution plan are not limited so that
such sum is not exceeded.
(c) For purposes of this Section 8.2, the following special definitions
shall apply:
(i) Annual Addition means the sum of the following amounts allocated on
behalf of a Participant for a Limitation Year:
(A) all contributions by the Employer (including contributions made
under a salary reduction agreement pursuant to Sections 401(k), 408(k) or 403(b)
of the Code) under any qualified defined contribution plan (other than this
Plan) maintained by the Employer, as well as the Participant's allocable share,
if any, of any forfeitures under such plans; plus
(B) (I) for Limitation Years that began prior to January 1, 1987, the
lesser of (1) 50% of the Participant's voluntary nondeductible contributions to
all qualified defined contribution plans maintained by the Employer, or (2) the
amount by which the Participant's nondeductible voluntary contributions to such
plans exceeds 6% of his Total Compensation; and (II) for Limitation Years that
begin after December 31, 1986, all of the Participant's voluntary nondeductible
contributions to such plans; plus
(C) all ESOP Contributions under this Plan; plus
(D) except as hereinafter provided in this Section 8.2(c)(i), a portion
of the Employer's Loan Repayment Contributions to the Plan for such Limitation
Year which bears the same proportion to the total amount of the Employer's Loan
Repayment Contributions for the Limitation Year that the number of Shares (or
the Fair Market Value of property other than Shares) allocated to the
Participant's Account pursuant to Section 7.2 or 8.1, whichever is
17
applicable, bears to the aggregate number of Shares (or Fair Market Value of
property other than Shares) so allocated to all Participants for such Limitation
Year.
Notwithstanding Section 8.2(c)(i)(D), if, for any Limitation Year, the
aggregate amount of ESOP Contributions allocated to the Accounts of the
individuals who are Highly Compensated Employees
for such Limitation Year, when added to such Highly Compensated Employees'
allocable share of any Loan Repayment Contributions for such Limitation Year,
does not exceed one-third of the total of all ESOP Contributions and Loan
Repayment Contributions for such Limitation Year, then that portion, if any, of
the Loan Repayment Contributions for such Limitation Year that is applied to the
payment of interest on a Share Acquisition Loan shall not be included as an
Annual Addition. In no event shall any Financed Shares, any dividends or other
earnings thereon, any proceeds of the sale thereof or any portion of the value
of the foregoing be included as an Annual Addition.
(ii) Employer means CNY Financial Corporation and all members of a
controlled group of corporations, as defined in Section 414(b) of the Code, as
modified by Section 415(h) of the Code, all commonly controlled trades or
businesses, as defined in Section 414(c) of the Code, as modified by Section
415(h) of the Code, all affiliated service groups, as defined in Section 414(m)
of the Code, of which CNY Financial Corporation is a member, as well as any
leasing organization, as defined in Section 18.8, that employs any person who is
considered an employee under Section 18.8 and any other entity that is required
to be aggregated with the Employer pursuant to regulations under Section 414(o)
of the Code.
(iii) Defined Benefit Plan Fraction means, for any Participant for any
Limitation Year, a fraction, the numerator of which is the Projected Annual
Benefit (determined as of the end of such Limitation Year) of the Participant
under any qualified defined benefit plans (whether or not terminated) maintained
by the Employer for the current and all prior Limitation Years, and the
denominator of which is as follows: (A) for Limitation Years ending prior to
January 1, 1983, the lesser of (I) the dollar limitation in effect under Section
415(b)(1) (A) of the Code for such Limitation Year, or (II) the amount which may
be taken into account under Section 415(b)(1)(B) of the Code with respect to
such Participant for such Limitation Year; and (B) in all other cases, the
lesser of (I) (except as provided in Section 17.8(b) for a Top Heavy Plan Year)
the product of 1.25 multiplied by the dollar limitation in effect under Section
415(b)(1)(A) of the Code for such Limitation Year, or (II) the product of 1.4
multiplied by the amount which may be taken into account under Section
415(b)(1)(B) of the Code with respect to such Participant for such Limitation
Year.
(iv) Defined Contribution Plan Fraction means, for any Participant for
any Limitation Year, a fraction (A) the numerator of which is the sum of such
Participant's Annual Additions (determined as of the end of such Limitation
Year) under this Plan and any other qualified defined contribution plans
(whether or not terminated) maintained by the Employer for the current and all
prior Limitation Years, and (B) the denominator of which is as follows: (I) for
Limitation Years ending prior to January 1, 1983, the sum of the lesser of the
following amounts for such Limitation Year and for each prior Limitation Year
during which such Participant was employed by the Employer: (1) the Maximum
18
Permissible Amount for such Limitation Year (without regard to Section 415(c)(6)
of the Code), or (2) the amount which may be taken into account under Section
415(c)(1)(B) of the Code with respect to such Participant for such Limitation
Year; and (II) in all other cases, the sum of the lesser of the following
amounts for such Limitation Year and for each prior Limitation during which such
Participant was employed by the Employer: (1) (except as provided in Section
17.8(b) for a Top Heavy Plan Year) the product of 1.25 multiplied by the Maximum
Permissible Amount for such Limitation Year (determined without regard to
Section 415(c)(6) of the Code), or (2) the product of 1.4 multiplied by the
amount which may be taken into account under Section 415(c)(1)(B) of the Code
(or Section 415(c)(7) of the Code, if applicable) with respect to such
Participant for such Limitation Year; provided, however, that the Plan
Administrator may, at his election, adopt the transition rule set forth in
Section 415(e)(6) of the Code in making the computation set forth in this
Section 8.2(c)(iv). If the sum of a Participant's Defined Benefit Plan Fraction
and Defined Contribution Plan Fraction exceeded 1.0 as of September 30, 1983,
then such Participant's Defined Contribution Plan Fraction shall be determined
under regulations to be prescribed by the Secretary of the Treasury so that the
sum of the fractions does not exceed 1.0.
(v) Limitation Year means the Plan Year; provided, however, that if the
Employer changes the Limitation Year, the new Limitation Year shall begin on a
date within the Limitation Year in which the amendment is made.
(vi) Maximum Permissible Amount means (A) $25,000 (or such higher
amount as may be permitted under Section 415(d) of the Code because of cost of
living increases) for Limitation Years beginning prior to January 1, 1983, and
(B) the greater of (I) $30,000, or (II) 25% of the dollar limitation in effect
under Section 415(b)(1)(A) of the Code for Limitation Years beginning on or
after January 1, 1983.
(vii) Projected Annual Benefit means a Participant's annual retirement
benefit (adjusted to the actuarial equivalent of a straight life annuity if
expressed in a form other than a straight life or qualified joint and survivor
annuity) under any qualified defined benefit plan maintained by the Employer,
whether or not terminated, assuming that the Participant will continue
employment until the later of current age or normal retirement age under such
plan, and that the Participant's Total Compensation for the Limitation Year and
all other relevant factors used to determine benefits under such plan will
remain constant for all future Limitation Years.
(d) When a Participant's Annual Addition to this Plan must be reduced
to satisfy the limitations of Section 8.2(a) or (b), such reduction shall be
applied first to ESOP Contributions; and second, if necessary, to Shares
allocated as a result of a Loan Repayment Contribution which are included as an
Annual Addition in such order as shall result in the smallest reduction in the
number of Shares allocable to the Participant's Account. The amount by which any
Participant's Annual Addition to this Plan is reduced shall be allocated in
accordance with Articles V and VII as a contribution by the Employer in the next
succeeding Limitation Year.
(e) Prior to determining a Participant's actual Total Compensation for
a Limitation Year, the Employer may determine the limitations under this Section
8.2 for a Participant on the basis of a reasonable estimation of the
19
Participant's Total Compensation for the Limitation Year that is uniformly
determined for all Participants who are similarly situated. As soon as it is
administratively feasible after the end of the Limitation Year, the limitations
of this Section 8.2 shall be determined on the basis of the Participant's actual
Total Compensation for the Limitation Year.
ARTICLE IX
VESTING
Section 9.1 Vesting.
Subject to the provisions of Section 9.2, the balance credited to each
Employee's Account shall become vested in accordance with the following
schedule:
Years of Vested Service Vesting Percentage
----------------------- ------------------
1 but less than 2 200%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
Section 9.2 Vesting on Death, Disability, Retirement.
Any previously unvested portion of the remainder of the balance
credited to the Account of a Participant or of a person who is a Former
Participant solely because he is excluded from participation under Section
2.1(b) shall become fully vested in him immediately upon attainment of age 65,
or, if earlier, upon the termination of his participation by reason of death,
Disability, Retirement or upon the occurrence of a Change in Control of the
Employer.
Section 9.3 Forfeitures on Termination of Employment.
Upon the termination of employment of a Participant or Former
Participant for any reason other than death, Disability or Retirement, that
portion of the balance credited to his Account which is not vested at the date
of such termination shall be forfeited as of the last Valuation Date for the
Plan Year in which such termination of employment occurs. The proceeds of such
forfeitures, less amounts, if any, required to be credited because of
re-employment pursuant to Section 9.4, shall be treated as Forfeitures and shall
be disposed of as provided in Section 9.5.
20
Section 9.4 Amounts Credited Upon Re-Employment.
If an Employee forfeited any amount of the balance credited to his
Account upon his termination of employment with the Employer, and is re-employed
prior to the occurrence of five consecutive One-Year Breaks in Service, then:
(i) an amount equal to the Fair Market Value of the Shares forfeited,
determined as of the date of forfeiture; and
(ii) the amount credited to his General Investment Account that was
forfeited, determined as of the date of forfeiture;
shall be credited back to his Account from the proceeds of forfeitures which are
redeemed pursuant to Section 9.3 during the Plan Year in which he is
re-employed, unless such proceeds are insufficient, in which case the Employer
shall make an additional contribution in the amount of such deficiency.
Section 9.5 Allocation of Forfeitures.
Any Forfeitures that occur during a Plan Year shall be used to reduce
the contributions required of the Employer under the Plan and shall be treated
as Loan Repayment Contributions and ESOP Contributions in the proportions
designated by the Plan Administrator in accordance with Article V.
Section 9.6 Service Prior to Effective Date.
Notwithstanding any other provision of this Plan, service or employment
with the Employer including, without limitation, Cortland Savings Bank, prior to
the calendar year in which the Effective Date occurs shall not be counted in the
determination of years of vested service for the purposes of this Plan.
ARTICLE X
THE TRUST FUND
Section 10.1 The Trust Fund.
The Trust Fund shall be held and invested under the Trust Agreement
with the Trustee. The provisions of the Trust Agreement shall vest such powers
in the Trustee as to investment, control and disbursement of the Trust Fund, and
such other provisions not inconsistent with the Plan, including provision for
the appointment of one or more "investment managers" within the meaning of
Section 3(38) of ERISA to manage and control (including acquiring and disposing
of) all or any of the assets of the Trust Fund, as the Board may from time to
time authorize. Except as required by ERISA, no bond or other security shall be
required of any Trustee at any time in office.
21
Section 10.2 Investments.
Except to the extent provided to the contrary in Section 10.3, the
Trust Fund shall be invested in:
(a) Shares;
(b) such Investment Funds as may be established from time to time by
the Plan Administrator; and
(c) such other investments as may be permitted under the Trust
Agreement;
in such proportions as shall be determined by the Plan Administrator or, if so
provided under the Trust Agreement, as directed by one or more investment
managers or by the Trustee, in its discretion; provided, however, that the
investments of the Trust Fund shall consist primarily of Shares. Notwithstanding
the immediately preceding sentence, the Trustee may temporarily invest the Trust
Fund in short-term obligations of, or guaranteed by, the United States
Government or an agency thereof, or may retain uninvested, or sell investments
to provide, amounts of cash required for purposes of the Plan.
Section 10.3 Diversification of Investments.
(a) Notwithstanding Section 10.2, each Qualified Participant may:
(i) during the first 90 days of each of the first four Plan Years to
begin after the Plan Year in which he first becomes a Qualified Participant,
elect that such percentage of the balance credited to his Account as he may
specify, but in no event more than 25% of the balance credited to his Account,
be invested in one or more of the Investment Funds; and
(ii) during the first 90 days of the fifth Plan Year to begin after the
Plan Year in which he first becomes a Qualified Participant or of any Plan Year
thereafter, elect that such percentage of the balance credited to his Account as
he may specify, but in no event more than 50% of the balance credited to his
Account, be invested in one or more of the Investment Funds.
For purposes of an election under this Section 10.3, the balance credited to a
Participant's Account shall be the balance credited to his Account determined as
of the last Valuation Date to occur in the Plan Year immediately preceding the
Plan Year in which such election is made.
(b) An election made under Section 10.3(a) shall be made in writing, in
the form and manner prescribed by the Plan Administrator, and shall be filed
with the Plan Administrator during the election period specified in Section
10.3(a). As soon as is practicable following the end of the election period
during which such election is made, the Plan Administrator shall take such
actions as are necessary to cause the specified percentage of the balance
credited to the Account of the Qualified Participant making the election to be
invested in the specified
22
Investment Funds. Any investments made pursuant to this Section 10.3 shall be
specifically allocated to the General Investment Account of the Qualified
Participant for whom they are made.
(c) An election made under Section 10.3(a) may be changed or revoked at
any time during the election period described in Section 10.3(a) during which it
is initially made, during any subsequent election period described in Section
10.3(a) or, upon at least 15 days' advance written notice given in the form and
manner prescribed by the Plan Administrator, as of the first day of any calendar
quarter of any Plan Year that begins after the Participant first becomes a
Qualified Participant. In no event, however, shall any election under this
Section 10.3 result in more than 25% of the balance credited to the
Participant's Account being invested at the direction of the Participant, if
such election is made during a Plan Year to which Section 10.3(a)(i) applies, or
result in more than 50% of the balance credited to the Participant's Account
being invested at the direction of the Participant, if such election is made
during the Plan Year to which Section 10.3(a)(ii) applies or thereafter.
Section 10.4 Use of Commingled Trust Funds.
Subject to the provisions of the Trust Agreement, amounts held in the
Trust Fund may be invested in:
(a) any commingled or group trust fund described in Section 401(a) of
the Code and exempt under Section 501(a) of the Code; or
(b) any common trust fund exempt under Section 584 of the Code
maintained exclusively for the collective investment of the assets of trusts
that are exempt under Section 501(a) of the Code;
provided that the trustee of such commingled, group or common trust fund is a
bank or trust company.
Section 10.5 Management and Control of Assets.
All assets of the Plan shall be held by the Trustee in trust for the
exclusive benefit of Participants, Former Participants and their Beneficiaries.
No part of the corpus or income of the Trust Fund shall be used for, or diverted
to, purposes other than for the exclusive benefit of Participants, Former
Participants and their Beneficiaries, and for defraying reasonable
administrative expenses of the Plan and Trust Fund. No person shall have any
interest in or right to any part of the earnings of the Trust Fund, or any
rights in, to or under the Trust Fund or any part of its assets, except to the
extent expressly provided in the Plan.
23
ARTICLE XI
VALUATION OF INTERESTS IN THE TRUST FUND
Section 11.1 Establishment of Investment Accounts.
The Plan Administrator shall establish, or cause to be established, for
each person for whom an Account is maintained a Share Investment Account and a
General Investment Account. Such Share Investment Accounts and General
Investment Accounts shall be maintained in accordance with this Article XI.
Section 11.2 Share Investment Accounts.
The Share Investment Account established for a person in accordance
with Section 11.1 shall be credited with: (a) all Shares allocated to such
person's Account; (b) all Shares purchased with amounts of money or property
allocated to such person's Account; (c) all dividends paid in the form of Shares
with respect to Shares credited to his Account; and (d) all Shares purchased
with amounts credited to such person's General Investment Account. Such Share
Investment Account shall be charged with all Shares that are sold or exchanged
to acquire other investments or to provide cash and with all Shares that are
distributed in kind.
Section 11.3 General Investment Accounts.
The General Investment Account that is established for a person in
accordance with Section 11.1 shall be credited with: (a) all amounts, other than
Shares, allocated to such person's Account; (b) all dividends paid in a form
other than Shares with respect to Shares credited to such person's Share
Investment Account; (c) the proceeds of any sale of Shares credited to such
person's Share Investment Account; and (d) any earnings attributable to amounts
credited to such person's General Investment Account. Such General Investment
Account shall be charged with all amounts credited thereto that are applied to
the purchase of Shares, any losses or depreciation attributable to amounts
credited thereto, any expenses allocable thereto and any distributions of
amounts credited thereto.
Section 11.4 Valuation of Investment Accounts.
(a) The Plan Administrator shall determine, or cause to be determined,
the aggregate value of each person's Share Investment Account as of each
Valuation Date by multiplying the number of Shares credited to such Share
Investment Account on such Valuation Date by the Fair Market Value of a Share on
such Valuation Date.
(b) As of each Valuation Date, the Accounts of each Participant shall
be separately adjusted to reflect their proportionate share of any appreciation
or depreciation in the fair market value of the Investment Funds, any income
earned by the Investment Funds and any expenses incurred by the Investment
Funds, as well as any contributions, withdrawals or distributions and investment
transfers not posted as of the last Valuation Date.
24
Section 11.5 Annual Statements.
There shall be furnished, by mail or otherwise, at least once in each
Plan Year to each person who would then be entitled to receive all or part of
the balance credited to any Account if the Plan were then terminated, a
statement of his interest in the Plan as of such date as shall be selected by
the Plan Administrator, which statement shall be deemed to have been accepted as
correct and be binding on such person unless the Plan Administrator receives
written notice to the contrary within 30 days after the statement is mailed or
furnished to such person.
ARTICLE XII
SHARES
Section 12.1 Specific Allocation of Shares.
All Shares purchased under the Plan shall be specifically allocated to
the Share Investment Accounts of Participants, Former Participants and their
Beneficiaries in accordance with
Section 11.2, with the exception of Financed Shares, which shall be
allocated to the Loan Repayment Account.
Section 12.2 Dividends.
(a) Dividends paid with respect to Shares held under the Plan shall be
credited to the Loan Repayment Account, if paid with respect to Financed Shares.
Such dividends shall be: (i) applied to the payment of principal and accrued
interest with respect to any Share Acquisition Loan, if paid in cash; or (ii)
held in the Loan Repayment Account as Financed Shares for release in accordance
with Section 6.4, if paid in the form of Shares.
(b) Dividends paid with respect to Shares allocated to a person's Share
Investment Account shall be credited to such person's Share Investment Account.
Cash dividends credited to a person's General Investment Account shall be, at
the direction of the Board, either: (i) held in such General Investment Account
and invested in accordance with Sections 10.2 and 10.3; (ii) distributed
immediately to such person; (iii) distributed to such person within 90 days of
the close of the Plan Year in which such dividends were paid; or (iv) used to
make payments of principal or interest on a Share Acquisition Loan; provided,
however, that the Fair Market Value of Financed Shares released from the Loan
Repayment Account equals or exceeds the amount of the dividend.
Section 12.3 Voting Rights.
(a) Each person shall direct the manner in which all voting rights
appurtenant to Shares allocated to his Share Investment Account will be
exercised, provided that such Shares were allocated to his Share Investment
Account as of the applicable record date. Such person shall, for such purpose,
be deemed a "named fiduciary" within the meaning of Section 402(a)(2) of
25
ERISA.Such a direction shall be given by completing and filing with the
inspector of elections, the Trustee or such other person who shall be
independent of the Employer as the Plan Administrator shall designate, at least
10 days prior to the date of the meeting of holders of Shares at which such
voting rights will be exercised, a written direction in the form and manner
prescribed by the Plan Administrator. The inspector of elections, the Trustee or
such other person designated by the Plan Administrator shall tabulate the
directions given on a strictly confidential basis, and shall provide the Plan
Administrator with only the final results of the tabulation. The final results
of the tabulation shall be followed by the Plan Administrator in directing the
Trustee as to the manner in which such voting rights shall be exercised. The
Plan Administrator shall make a reasonable effort to furnish, or cause to be
furnished, to each person for whom a Share Investment Account is maintained all
annual reports, proxy materials and other information known by the Plan
Administrator to have been furnished by the issuer of the Shares, or by any
solicitor of proxies, to the holders of Shares.
(b) To the extent that any person shall fail to give instructions with
respect to the exercise of voting rights appurtenant to Shares allocated to his
Share Investment Account:
(i) the Trustee shall, with respect to each matter to be voted upon:
(A) cast a number of affirmative votes equal to the product of (I) the number of
allocated Shares for which no written instructions have been given, multiplied
by (II) a fraction, the numerator of which is the number of allocated Shares for
which affirmative votes will be cast in accordance with written instructions
given as provided in Section 12.3(a) and the denominator of which is the
aggregate number of affirmative and negative votes which will be cast in
accordance with written instructions given as aforesaid, and (B) cast a number
of negative votes equal to the excess (if any) of (I) the number of allocated
Shares for which no written instructions have been given over (II) the number of
affirmative votes being cast with respect to such allocated Shares pursuant to
Section 12.3(b)(i)(A); or
(ii) if the Trustee shall determine that it may not, consistent with
its fiduciary duties, vote the allocated Shares for which no written
instructions have been given in the manner described in Section 12.3(b)(i), it
shall vote such Shares in such manner as it, in its discretion, may determine to
be in the best interests of the persons to whose Share Investment Accounts such
Shares have been allocated.
(c) (i) The voting rights appurtenant to Financed Shares shall be
exercised as follows with respect to each matter as to which holders of Shares
may vote:
(A) a number of votes equal to the product of (I) the total number of
votes appurtenant to Financed Shares allocated to the Loan Repayment Account on
the applicable record date; multiplied by (II) a fraction, the numerator of
which is the total number of affirmative votes cast by Participants, Former
Participants and the Beneficiaries of deceased Former Participants with respect
to such matter pursuant to Section 12.3(a) and the denominator of which is the
total number of affirmative and negative votes cast by Participants, Former
Participants and the Beneficiaries of deceased Former Participants, shall be
cast in the affirmative; and
26
(B) a number of votes equal to the excess of (I) the total number of
votes appurtenant to Financed Shares allocated to the Loan Repayment Account on
the applicable record date, over (II) the number of affirmative votes cast
pursuant to Section 12.3(c)(i)(A) shall be cast in the negative.
To the extent that the Financed Shares consist of more than one class of Shares,
this Section 12.3(c)(i) shall be applied separately with respect to each class
of Shares.
(ii) If voting rights are to be exercised with respect to Financed
Shares as provided in Section 12.3(c)(i)(A) and (B) at a time when there are no
Shares allocated to the Share Investment Accounts of Participants, Former
Participants and the Beneficiaries of deceased Former Participants, then the
voting rights appurtenant to Financed Shares shall be exercised as follows with
respect to each matter as to which holders of Shares may vote:
(A) Each person who is a Participant on the applicable record date and
who was a Participant on the last day of the Plan Year ending on or immediately
prior to such record date will be granted a number of votes equal to the
quotient, rounded to the nearest integral number, of (I) such Participant's
Allocation Compensation for the Plan Year ending on or immediately prior to such
record date (or for the portion of such Plan Year during which he was a
Participant); divided by (II) $1,000.00; and
(B) a number of votes equal to the product of (I) the total number of
Financed Shares allocated to the Loan Repayment Account on the applicable record
date; multiplied by (II) a fraction, the numerator of which is the total number
of votes that are cast in the affirmative with respect to such matter pursuant
to Section 12.3(c)(ii)(A) and the denominator of which is the total number of
votes that are cast either in the affirmative or in the negative with respect to
such matter pursuant to Section 12.3(c)(ii)(A), shall be cast in the
affirmative; and
(C) a number of votes equal to the excess of (I) the total number of
Financed Shares allocated to the Loan Repayment Account on the applicable record
date, over (II) the number of affirmative votes cast with respect to such matter
pursuant to Section 12.3(c)(ii)(B), shall be cast in the negative. To the extent
that the Financed Shares consist of more than one class of Shares, this Section
12.3(c)(ii) shall be applied separately with respect to each class of Shares.
Section 12.4 Tender Offers.
(a) Each person shall direct whether Shares allocated to his Share
Investment Account will be delivered in response to any Tender Offer. Such
person shall, for such purpose, be deemed a "named fiduciary" within the meaning
of Section 402(a)(2) of ERISA. Such a direction shall be given by completing and
filing with the Trustee or such other person who shall be independent of the
Employer as the Plan Administrator shall designate, at least 10 days prior to
the latest date for exercising a right to deliver Shares pursuant to such Tender
Offer, a written direction in the form and manner prescribed by the Plan
Administrator. The Trustee or other person designated by the Plan Administrator
shall tabulate the directions given on a strictly confidential basis, and shall
provide the Plan Administrator with only the final results of the
27
tabulation. The final results of the tabulation shall be followed by the Plan
Administrator in directing the number of Shares to be delivered. The Plan
Administrator shall make a reasonable effort to furnish, or cause to be
furnished, to each person for whom a Share Investment Account is maintained, all
information known by the Plan Administrator to have been furnished by the issuer
or by or on behalf of any person making such Tender Offer, to the holders of
Shares in connection with such Tender Offer.
(b) To the extent that any person shall fail to give instructions with
respect to Shares allocated to his Share Investment Account:
(i) the Trustee shall (A) tender or otherwise offer for purchase,
exchange or redemption a number of such Shares equal to the product of (I) the
number of allocated Shares for which no written instructions have been given,
multiplied by (II) a fraction, the numerator of which is the number of allocated
Shares tendered or otherwise offered for purchase, exchange or redemption in
accordance with written instructions given as provided in Section 12.4(a) and
the denominator of which is the aggregate number of allocated Shares for which
written instructions have been given as aforesaid, and (B) withhold a number of
Shares equal to the excess (if any) of (I) the number of allocated Shares for
which no written instructions have been given over (II) the number of Shares
being tendered or otherwise offered pursuant to Section 12.4(b)(i)(A); or
(ii) if the Trustee shall determine that it may not, consistent with
its fiduciary duties, exercise the tender or other rights appurtenant to
allocated Shares for which no written instructions have been given in the manner
described in Section 12.4(b)(i), it shall tender, or otherwise offer, or
withhold such Shares in such manner as it, in its discretion, may determine to
be in the best interests of the persons to whose Share Investment Accounts such
Shares have been allocated.
(c) In the case of any Tender Offer, any Financed Shares held in the
Loan Repayment Account shall be dealt with as follows:
(i) If such Tender Offer occurs at a time when there are no Shares
allocated to the Share Investment Accounts of Participants, Former Participants
and the Beneficiaries of deceased Former Participants, then the disposition of
the Financed Shares shall be determined as follows:
(A) each person who is a Participant on the applicable record date and
who was a Participant on the last day of the Plan Year ending on or immediately
prior to such record date will be granted a number of tender rights equal to the
quotient, rounded to the nearest integral number, of (I) such Participant's
Allocation Compensation for the Plan Year ending on or immediately prior to such
record date (or for the portion of such Plan Year during which he was a
Participant), divided by (II) $1,000.00; and
(B) on the last day for delivering Shares or otherwise responding to
such Tender Offer, a number of Shares equal to the product of (I) the total
number of Financed Shares allocated to the Loan Repayment Account on the last
day of the effective period of such Tender Offer; multiplied by (II) a fraction,
the numerator of which is the total number of tender rights exercised in favor
of
28
the delivery of Shares in response to the Tender Offer pursuant to Section
12.4(c)(i)(A) and the denominator of which is the total number of tender rights
that are exercisable in response to the Tender Offer pursuant to Section
12.4(c)(i)(A), shall be delivered in response to the Tender Offer; and
(C) a number of Shares equal to the excess of (I) the total number of
Financed Shares allocated to the Loan Repayment Account on the last day of the
effective period of such Tender Offer; over (II) the number of Shares to be
delivered in response to the Tender Offer pursuant to Section 12.4(c)(i)(B),
shall be withheld from delivery.
(ii) If such Tender Offer occurs at a time when the voting rights
appurtenant to such Financed Shares are to be exercised in accordance with
Section 12.3(c)(i), then:
(A) on the last day for delivering Shares or otherwise responding to
such Tender Offer, a number of Financed Shares equal to the product of (I) the
total number of Financed Shares allocated to the Loan Repayment Account on the
last day of the effective period of such Tender Offer; multi plied by (II) a
fraction, the numerator of which is the total number of Shares delivered from
the Share Investment Accounts of Participants,
Former Participants and the Beneficiaries of deceased Former
Participants in response to such Tender Offer pursuant to Section 12.4(a), and
the denominator of which is the total number of Shares allocated to the Share
Investment Accounts of Participants, Former Participants and Beneficiaries of
deceased Former Participants immediately prior to the last day for delivering
Shares or otherwise responding to such Tender Offer, shall be delivered; and
(B) a number of Financed Shares equal to the excess of (I) the total
number of Financed Shares allocated to the Loan Repayment Account on the last
day for delivering Shares or otherwise responding to such Tender Offer; over
(II) the number of Financed Shares to be delivered pursuant to Section
12.4(c)(ii)(A), shall be withheld from delivery.
To the extent that the Financed Shares consist of more than one class of Shares,
this Section 12.4(c) shall be applied separately with respect to each class of
Shares.
Section 12.5 Dissent and Appraisal Rights.
(a) Each person shall have the right to direct the manner in which all
dissent and appraisal rights appurtenant to Shares allocated to his Share
Investment Account will be exercised. Such person shall, for such purpose, be
deemed a "named fiduciary" within the meaning of Section 402(a)(2) of ERISA.
Such a direction shall be given by completing and filing with the Trustee or
such other person who shall be independent of the Employer as the Plan
Administrator shall designate, at least 10 days prior to the latest date for
exercising such dissent and appraisal rights, a written direction in the form
and manner prescribed by the Plan Administrator. The Trustee or other person
designated by the Plan Administrator shall tabulate the directions given on a
strictly confidential basis, and shall provide the Plan Administrator with only
the final results of the tabulation. The final results of the tabulation shall
be followed by the Plan Administrator in
29
directing the Trustee as to the manner in which such dissent and appraisal
rights shall be exercised. The Plan Administrator shall make a reasonable effort
to furnish, or cause to be furnished, to each person for whom a Share Investment
Account is maintained, all information known by the Plan Administrator to have
been furnished by the issuer or by or on behalf of any person to the holders of
Shares in connection with such dissent and appraisal rights.
(b) To the extent that any person for whom a Share Investment Account
is maintained shall fail to give instructions with respect to dissent and
appraisal rights appurtenant to Shares attributable to his interest, the Plan
Administrator shall direct the Trustee to exercise dissent and appraisal rights
as to those Shares in such manner as the Plan Administrator shall determine to
be in the best interest of the person to whom such Shares are attributable.
ARTICLE XIII
PAYMENT OF BENEFITS
Section 13.1 In General.
The balance credited to a Participant's or Former Participant's Account
under the Plan shall be paid only at the times, to the extent, in the manner and
to the persons provided in this Article XIII.
Section 13.2 Designation of Beneficiaries.
(a) Subject to Section 13.2(b), any person entitled to a benefit under
the Plan may designate a Beneficiary to receive any amount to which he is
entitled that remains undistributed on the date of his death. Such person shall
designate his Beneficiary (and may change or revoke any such designation) in
writing in the form and manner prescribed by the Plan Administrator. Such
designation, and any change or revocation thereof, shall be effective only if
received by the Plan Administrator prior to such person's death and shall become
irrevocable upon such person's death.
(b) A Participant or Former Participant who is married shall
automatically be deemed to have designated his spouse as his Beneficiary,
unless, prior to the time such designation would, under Section 13.2(a), become
irrevocable:
(i) the Participant or Former Participant designates an additional or a
different Beneficiary in accordance with this Section 13.2; and
(ii) (A) the spouse of such Participant or Former Participant consents
to such designation in a writing that acknowledges the effect of such consent
and is witnessed by a Plan representative or a notary public; or (B) the spouse
of such Participant or Former Participant has previously consented to such
designation by signing a written waiver of any right to consent to any
designation made by the Participant or Former Participant, and such waiver
acknowledged the effect of the waiver and was witnessed by a Plan representative
or a notary public; or (C) it is
30
established to the satisfaction of a Plan representative that the consent
required under Section 13.2(b)(ii)(A) may not be obtained because such spouse
cannot be located or because of other circumstances permitted under regulations
issued by the Secretary of the Treasury.
(c) In the event that a Beneficiary entitled to payments hereunder
shall die after the death of the person who designated him but prior to
receiving payment of his entire interest in the Account of the person who
designated him, then such Beneficiary's interest in the Account of such person,
or any unpaid balance thereof, shall be paid as provided in Section 13.3 to the
Beneficiary who has been designated by the deceased Beneficiary, or if there is
none, to the executor or administrator of the estate of such deceased
Beneficiary, or if no such executor or administrator is appointed within such
time as the Plan Administrator, in his sole discretion, shall deem reasonable,
to such one or more of the spouse and descendants and blood relatives of such
deceased Beneficiary as the Plan Administrator may select. If a person entitled
to a benefit under the Plan and any of the Beneficiaries designated by him shall
die in such circumstances that there shall be substantial doubt as to which of
them shall have been the first to die, for all purposes of the Plan, the person
who made the Beneficiary designation shall be deemed to have survived such
Beneficiary.
(d) If no Beneficiary survives the person entitled to the benefit under
the Plan or if no Beneficiary has been designated by such person, such benefit
shall be paid to the executor or administrator of the estate of such person, or
if no such executor or administrator is appointed within such time as the Plan
Administrator, in his sole discretion, shall deem reasonable, to such one or
more of the spouse and descendants and blood relatives of such deceased person
as the Plan Administrator may select.
Section 13.3 Distributions to Participants and Former
Participants.
(a)(i) Subject to the provisions of Section 13.7 with respect to
required minimum distributions, the vested portion of the balance credited to a
Participant's or a Former Participant's Account shall be distributed to him
commencing as of the last Valuation Date to occur in the Plan Year in which the
Participant or Former Participant terminates employment with the Employer or
attains age 65, whichever is later; unless the Participant or Former Participant
elects otherwise pursuant to Section 13.3(a)(ii), and the payment, or first in a
series of payments, is actually made within three months following such
Valuation Date.
(ii) A Participant or Former Participant may, upon request on a form
provided by the Plan Administrator and filed with the Plan Administrator not
later than 15 days prior to the date on which his employment with the Employer
terminates, elect that his vested interest in his Account be paid commencing as
of any earlier or later Valuation Date after his termination of employment, but
in no event later than the last Valuation Date to occur in the calendar year in
which the Participant or Former Participant attains age 70 1/2, in which case
the payment, or first in a series of payments, shall be made within three months
following such Valuation Date.
(b)(i) Subject to Section 13.3(b)(ii), the vested portion of the
balance credited to the Account of a Participant or Former Participant will be
paid to him, commencing as of the
31
Valuation Date determined under Section 13.3(a), in substantially equal annual
installments over a fixed period equal to the greater of:
(A) five years; or
(B) if the vested portion of the balance credited to the Account of the
Participant or Former Participant, determined as of the Valuation Date
determined under Section 13.3(a), is greater than $500,000 (or such larger
amount as may be prescribed by the Secretary of the Treasury pursuant to Section
409(o) of the Code), the sum of five years plus the lesser of (I) five
additional years, or (II) one additional year for each $100,000 (or fraction
thereof) by which the vested portion of the balance credited to the
Participant's or Former Participant's Account exceeds $500,000 (or such larger
amount as may be prescribed by the Secretary of the Treasury pursuant to Section
409(o) of the Code).
(ii) A Participant or Former Participant may, upon request on a form
provided by the Plan Administrator and filed with the Plan Administrator not
later than 15 days prior to the date on which his employment terminates, elect
that the vested portion of the balance credited to his Account be paid,
commencing as of the Valuation Date determined under Section 13.3(a):
(A) in substantially equal annual installments over a fixed period
not to exceed the lesser of (I) 10 years, or (II) the life expectancy of the
Participant or Former Participant, or, if his Beneficiary is a natural
person, the joint life and last survivor expectancy of the Participant or
Former Participant and his Beneficiary; or
(B) subject to Section 13.4, in a lump sum payment.
(c) If any person entitled to a benefit under the Plan dies before his
entire benefit has been distributed to him, then the remainder of such benefit
shall be paid to the Beneficiary designated by him under Section 13.2 either:
(i) in a lump sum distribution as of the Valuation Date next following
the date of his death, and the amount thereof shall be based upon the vested
portion of the balance credited to his Account as of such Valuation Date; or
(ii) if, prior to the death of the Participant or Former Participant
whose vested Account is being distributed, an election pursuant to Section
13.3(b)(ii)(B) is in effect for him, in a lump sum distribution as of the
Valuation Date specified in such election, or, if earlier, as of the latest
Valuation Date that would permit payment to be made within five years after the
Participant's or Former Participant's death, and the amount thereof shall be
based upon the vested portion of the balance credited to his Account as of such
Valuation Date; or
(iii) if, prior to the death of the Participant or Former Participant
whose vested Account is being distributed, an election pursuant to Section
13.3(b)(ii)(A) is in effect for him:
32
(A) over the period and at the times set forth in such election, if
distribution has begun prior to the Participant's or Former Participant's death;
or
(B) commencing at the time set forth in such election and over the
period set forth in such election (or, if less, over a period equal to the life
expectancy of the Beneficiary of the deceased Participant or Former
Participant), if the deceased Participant's or Former Participant's spouse is
his Beneficiary and distribution has not begun prior to the deceased
Participant's or Former Participant's death; or
(C) commencing on the date specified in such election (or, if earlier,
the last Valuation Date that will permit payment to begin within one year after
the deceased Participant's or Former Participant's death) and over the period
set forth in such election (or, if less, over a period equal to the life
expectancy of the Beneficiary of the deceased Participant or Former
Participant), if the deceased Participant's or Former Participant's Beneficiary
is a natural person other than his spouse and distribution has not begun prior
to the deceased Participant's or Former Participant's death;
and the amount thereof shall be based upon the vested portion of the
balance credited to his Account as of the Valuation Dates as of which payments
are determined; or
(iv) upon written application of the Beneficiary made in such form and
manner as the Plan Administrator may prescribe, at another time or in another
manner permitted under Section 13.3(a) or (b), subject to the following
limitations:
(A)(I) If such Beneficiary is a natural person other than the spouse of
the deceased Participant or Former Participant whose vested Account is being
distributed, a distribution that commences within one year after such deceased
Participant's or Former Participant's death shall be made over a fixed period
that does not exceed the life expectancy of such Beneficiary when distribution
commences.
(II) If such Beneficiary is the spouse of the deceased Participant or
Former Participant whose vested Account is being distributed, a distribution
that commences no later than the later of: (1) the date on which the deceased
Participant or Former Participant would have attained age 70 1/2 had he lived;
or (2) the first anniversary of the death of such deceased Participant or Former
Participant; shall be made over a fixed period that does not exceed the life
expectancy of such Beneficiary when distribution commences.
(III) In all other cases where the spouse of the deceased Participant
or Former Participant whose vested Account is being distributed is not the
Beneficiary, payment must be completed within five years after the death of such
deceased Participant or Former Participant.
(B) In cases where distribution has commenced prior to the death of the
deceased Participant or Former Participant whose vested Account is being
distributed, distribution must be completed as least as rapidly as under the
method in effect prior to such deceased Participant's or Former Participant's
death.
33
Section 13.4 Manner of Payment.
(a) Subject to Section 13.4(b), payments of distributions made pursuant
to Section 13.3 or Section 13.7 shall be paid, in accordance with the written
direction of the person requesting the payment, in whole Shares, in cash, or in
a combination of cash and whole Shares. Such written direction shall be given in
such form and manner as the Plan Administrator may prescribe. If no such
direction is given, then payment shall be made in the maximum number of whole
Shares that may be acquired with the amount of the payment, plus, if necessary,
an amount of money equal to any remaining amount of the payment that is less
than the Fair Market Value of a whole Share.
(b) No distribution of a lump sum payment shall be made in cash to the
extent that the making of such distribution, when combined with all other
distributions to be made in cash as of the same Valuation Date, would require
the sale of Shares constituting 1% or more of all outstanding Shares; provided,
however, that this Section 13.4(b) shall not apply to or in respect of a
Participant or Former Participant:
(i) following such Participant's or Former Participant's termination of
employment with the Employer on account of his Retirement or Disability; or
(ii) following such Participant's or Former Participant's 65th
birthday; or
(iii) following the death of such Participant or Former Participant.
Section 13.5 Put Options.
(a) Except as provided otherwise in Section 13.5(b), each Participant
or Former Participant to whom Shares are distributed under the Plan, each
Beneficiary of a deceased Participant or Former Participant, including the
estate of a deceased Participant or Former Participant, to whom Shares are
distributed under the Plan, and each person to whom such a Participant, Former
Participant or Beneficiary gives Shares that have been distributed under the
Plan shall have the right to require the Employer to purchase from him all or
any portion of such Shares. A person shall exercise such right by delivering to
the Employer a written notice, in such form and manner as the Employer may by
written notice to such person prescribe, setting forth the number of Shares to
be purchased by the Employer, the number of the stock certificate evidencing
such person's ownership of such Shares, and the effective date of purchase. Such
notice shall be given, and the effective date of the purchase specified therein
shall be, no later than the last day of the fifteenth calendar month to begin
after the date on which the Shares to be purchased by the Employer were
distributed from the Plan. As soon as practicable following its receipt of such
notice, the Employer shall take such actions as are necessary to purchase the
Shares specified in such notice at a price per Share equal to the Fair Market
Value of a Share determined as of the effective date of the purchase.
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(b) The Employer shall have no obligation to purchase any Share (i)
pursuant to a notice given, or on an effective date of purchase, after the last
day of the fifteenth calendar month to begin after the date on which such Share
was distributed from the Plan; (ii) following the earliest date on which Shares
are publicly traded on an established market; or (iii) if the Employer is a
"bank" within the meaning of Section 581 of the Code and is prohibited by law
from redeeming or purchasing its own securities.
Section 13.6 Right of First Refusal.
(a) For any period during which Shares are not publicly traded on any
established market, no person who owns Shares that were distributed from the
Plan, other than a person to whom such Shares were sold in compliance with this
Section 13.6, shall sell such Shares to any person other than the Employer
without first offering to sell such Shares to the Employer (or person designated
by the Employer) in accordance with this Section 13.6.
(b) In the event that a person to whom this Section 13.6 applies shall
receive and desire to accept from a person other than the Employer a bona fide
offer to purchase Shares to which this Section 13.6 applies, he shall furnish to
the Employer a written notice which shall:
(i) include a copy of such offer to purchase;
(ii) offer to sell to the Employer the Shares subject to such offer to
purchase at a price per Share that is equal to the greater of:
(A) the price per Share specified in such offer to purchase; or
(B) the Fair Market Value of a Share as of the date of purchase;
and otherwise upon the same terms and conditions as those
specified in such offer to purchase; and
(iii) include an indication of his intention to accept such offer to
purchase if the Employer does not accept his offer to sell.
(c) The Employer shall have the right to purchase the Shares covered by
the offer to sell contained in a notice given pursuant to Section 13.6(b), on
the terms and conditions specified in such notice, by written notice given to
the party making the offer to sell not later than the fourteenth day after the
notice described in Section 13.6(b) is given. If the Employer does not give such
a notice during the prescribed fourteen day period, then the person owning such
Shares may accept the offer to purchase described in the notice.
Section 13.7 Minimum Required Distributions.
(a) Required minimum distributions of a Participant's or Former
Participant's Account shall commence no later than:
35
(i) if the Participant or Former Participant is not a Five Percent
Owner at any time during the Plan Year ending in the calendar year in which he
attains age 70 1/2, the later of (A) the calendar year in which he attains or
attained age 70 1/2 or (B) the calendar year in which he terminates employment
with the Employer; or
(ii) if the Participant or Former Participant is or was a Five Percent
Owner at any time during the Plan Year ending in the calendar year in which he
attains age 70 1/2, the later of (A) the calendar year in which he attains age
70 1/2 or (B) the calendar year in which he first becomes a Five Percent Owner.
(b) The required minimum distributions contemplated by Section 13.7(a)
shall be made as follows:
(i) The minimum required distribution to be made for the calendar year
for which the first minimum distribution is required shall be no later than
April 1st of the immediately following calendar year and shall be equal to the
quotient obtained by dividing (A) the vested balance credited to the
Participant's or Former Participant's Account as of the last Valuation Date to
occur in the calendar year immediately preceding the calendar year in which the
first minimum distribution is required (adjusted to account for any additions
thereto or subtractions therefrom after such Valuation Date but on or before
December 31st of such calendar year); by (B) the Participant's or Former
Participant's life expectancy (or, if his Beneficiary is a natural person, the
joint life and last survivor expectancy of him and his Beneficiary); and
(ii) the minimum required distribution to be made for each calendar
year following the calendar year for which the first minimum distribution is
required shall be made no later than December 31st of the calendar year for
which the distribution is required and shall be equal to the quotient obtained
by dividing (A) the vested balance credited to the Participant's or Former
Participant's Account as of the last Valuation Date to occur in the calendar
year prior to the calendar year for which the distribution is required (adjusted
to account for any additions thereto or subtractions therefrom after such
Valuation Date but on or before December 31st of such calendar year and, in the
case of the distribution for the calendar year immediately following the
calendar year for which the first minimum distribution is required, reduced by
any distribution for the prior calendar year that is made in the current
calendar year); by (B) the Participant's or Former Participant's life expectancy
(or, if his Beneficiary is a natural person, the joint life and last survivor
expectancy of him and his Beneficiary).
For purposes of this Section 13.7, the life expectancy of a Participant or
Former Participant (or the joint life and last survivor expectancy of a
Participant or Former Participant and his designated Beneficiary) for the
calendar year in which the Participant or Former Participant attains age 70 1/2
shall be determined on the basis of Tables V and VI, as applicable, of Section
1.72-9 of the Income Tax Regulations as of the Participant's or Former
Participant's and Beneficiary's birthday in such year. Such life expectancy or
joint life and last survivor expectancy for any subsequent year shall be equal
to the excess of (1) the life expectancy or joint life and last survivor
expectancy for the year in which the Participant or Former Participant
36
attains age 70 1/2, over (2) the number of whole years that have elapsed since
the Participant or Former Participant attained age 70 1/2.
(c) Payment of the distributions required to be made to a Participant
or Former Participant under this Section 13.7 shall be made in accordance with
Section 13.4.
Section 13.8 Direct Rollover of Eligible Rollover
Distributions.
(a) A Distributee may elect, at the time and in the manner prescribed
by the Plan Administer, to have any portion of an Eligible Rollover Distribution
paid directly to an Eligible Retirement Plan specified by the Distributee in a
Direct Rollover.
(b) The following rules shall apply with respect to Direct Rollovers
made pursuant to this Section 13.8:
(i) A Participant may only elect to make a Direct Rollover of an
Eligible Rollover Distribution if such Eligible Rollover Distribution (when
combined with other Eligible Rollover Distributions made or to be made in the
same calendar year) is reasonably expected to be at least $200;
(ii) If a Participant elects a Direct Rollover of a portion of an
Eligible Rollover Distribution, that portion must be equal to at least $500; and
(iii) A Participant may not divide his or her Eligible Rollover
Distribution into separate distributions to be transferred to two or more
Eligible Retirement Plans.
(c) For purposes of this Section 13.8 and any other applicable Section
of the Plan, the following definitions shall have the following meanings:
(i) "Direct Rollover" means a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
(ii) "Distributee" means an Employee or former Employee. In addition,
the Employee's or former Employee's surviving spouse and the Employee's spouse
or former spouse who is the alternate payee under a Qualified Domestic Relations
Order are considered Distributees with regard to the interest of the spouse or
former spouse.
(iii) "Eligible Retirement Plan" means an individual retirement account
described in Section 408(a) of the Code, an individual retirement annuity
described in Section 408(b) or the Code, an annuity plan described in Section
403(a) of the Code, or a qualified trust described in Section 401(a) of the Code
that accepts the Distributee's Eligible Rollover Distribution. However, in the
case of an Eligible Rollover Distribution to the current or former spouse who is
the alternative payee under a Qualified Domestic Relations Order or to a
surviving spouse, an Eligible Retirement Plan is an individual retirement
account or individual retirement annuity.
37
(iv) "Eligible Rollover Distribution" means 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's designated Beneficiary,
or for a specified period of ten years or more; any distribution to the extent
such distribution is required under Section 401(a)(9) of the Code; and the
portion of any distribution that is not includible in gross income (determined
without regard to the exclusion for net unrealized appreciation with respect to
employer securities).
Section 13.9 Valuation of Shares Upon Settlement to a
Participant.
Notwithstanding any contrary provision in this Article XIII, in the
event that all or a portion of a payment of a distribution to a Participant is
to be made in cash, such Participant shall only be entitled to receive the
proceeds of the Shares allocated to his Account that are sold in connection with
such distribution and which are valued as of the date of such sale.
ARTICLE XIV
CHANGE IN CONTROL
Section 14.1 Definition of Change in Control.
A Change in Control of the Employer shall be deemed to have occurred
upon the happening of any of the following events:
(a) the occurrence of any event upon which any "person" (as such term
is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended ("Exchange Act")), other than (A) a trustee or other fiduciary holding
securities under an employee benefit plan maintained for the benefit of
employees of CNY Financial Corporation; (B) a corporation owned, directly or
indirectly, by the shareholders of CNY Financial Corporation in substantially
the same proportions as their ownership of stock of CNY Financial Corporation;
or (C) any group constituting a person in which employees of CNY Financial
Corporation are substantial members, becomes the "beneficial owner" (as defined
in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of
securities issued by CNY Financial Corporation representing 25% or more of the
combined voting power of all of CNY Financial Corporation's then outstanding
securities; or
(b) the occurrence of any event upon which the individuals who on the
date the Plan is adopted are members of the Board, together with individuals
whose election by the Board or nomination for election by CNY Financial
Corporation's shareholders was approved by the affirmative vote of at least
two-thirds of the members of the Board then in office who were either members of
the Board on the date this Plan is adopted or whose nomination or election was
previously so approved, cease for any reason to constitute a majority of the
members of the Board, but excluding, for this purpose, any such individual whose
initial assumption of office is
38
in connection with an actual or threatened election contest relating to the
election of directors of CNY Financial Corporation (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or
(c) the shareholders of CNY Financial Corporation approve either:
(i) a merger or consolidation of CNY Financial Corporation with any
other corporation, other than a merger or consolidation following which both of
the following conditions are satisfied:
(A) either (1) the members of the Board of CNY Financial Corporation
immediately prior to such merger or consolidation constitute at least a majority
of the members of the governing body of the institution resulting from such
merger or consolidation; or (2) the shareholders of CNY Financial Corporation
own securities of the institution resulting from such merger or consolidation
representing 80% or more of the combined voting power of all such securities
then outstanding in substantially the same proportions as their ownership of
voting securities of CNY Financial Corporation before such merger or
consolidation; and
(B) the entity which results from such merger or consolidation
expressly agrees in writing to assume and perform CNY Financial Corporation's
obligations under the Plan; or
(ii) a plan of complete liquidation of CNY Financial Corporation or an
agreement for the sale or disposition by CNY Financial Corporation of all or
substantially all of its assets; and
(d) any event that would be described in Section 14.1(c)(i), or (ii) if
"Cortland Savings Bank" were substituted for "CNY Financial Corporation"
therein, and "Board of Directors of Cortland Savings Bank" were substituted for
"Board" therein; and
In no event, however, shall the transaction by which Cortland Savings Bank
converts from a mutual savings bank to a stock savings bank, or any transaction
by which a company wholly owned by Cortland Savings Bank becomes the parent
company of Cortland Savings Bank be deemed a Change in Control.
Section 14.2 Vesting on Change of Control.
Upon the effective date of a Change in Control, the Account of each person who
would then, upon termination of the Plan, be entitled to a benefit, shall be
fully vested and nonforfeitable.
Section 14.3 Repayment of Loan.
(a) Upon a Change in Control described in Section 14.1(c) (or which
would be described in Section 14.1(c) if "Cortland Savings Bank" were
substituted for "CNY Financial Corporation" thereunder), the Plan Administrator
shall direct the Trustee to sell a sufficient number of Shares to repay any
outstanding Share Acquisition Loan in full. The proceeds of such sale shall be
used to repay such Share Acquisition Loan. After repayment of the Share
Acquisition Loan, all
39
remaining Shares which had been unallocated (or the proceeds thereof, if
applicable) shall be allocated among the accounts of all Participants who were
employed by an Employer on the effective date of such Change in Control. Such
allocation of Shares or proceeds shall be credited as of the date on which the
Change in Control occurs to the Accounts of each Participant who has not had a
termination of participation under Section 2.3 as of such date (each, an
"Affected Participant"), in proportion to their Allocation Compensation, for the
period, beginning on the January 1 immediately preceding the date on which the
Change in Control occurs and ending on the date on which the Change in Control
occurs. If any amount cannot be allocated to an Affected Participant in the year
of such Change in Control as a result of the limitations of Section 415 of the
Code, the amounts will be allocated in subsequent years to those persons who
were Affected Participants and who continue to be Participants in the Plan until
finally distributed to Affected Participants.
(b) In the event that the application of Section 415 of the Code
prevents the allocation of all of the Shares or other assets released from the
Loan Repayment Account as provided in Section 14.3(a) as of the effective date
of the Change in Control, each Affected Participant shall be entitled to receive
a supplemental benefit payment directly from the Employer. The supplemental
benefit payment to each Affected Participant shall be an amount equal to the
excess of:
(i) the total amount of Shares or other property that would be
allocated to such Affected Participant's Account under Section 14.3(a) if
Section 415 of the Code did not apply; over
(ii) the total of Shares or other property actually allocated to such
Affected Participant's Account under Section 14.3(a).
Such payment (without offset for any allocations which may occur under this Plan
subsequent to the Change in Control) shall be made as soon as practicable, but
in any event within ten business days, after the effective date of the Change in
Control. This Section 14.3(b) shall be treated as a separate, non-qualified
"excess benefit plan" within the meaning of Section 3(34) of ERISA and shall be
interpreted, administered and enforced in a manner consistent with this
intention. To the extent that any Affected Participant is entitled to the same
or a similar payment under any other non-qualified plan, program or arrangement
of the Employer, any payment under this Section 14.3(b) shall be coordinated
with the payments under such other non-qualified programs, plan or arrangements
in such manner as shall be determined by the Plan Administrator to be necessary
to prevent the duplication of benefits.
Section 14.4 Plan Termination After Change in Control.
After repayment of the loan and allocation of shares or proceeds as
provided in Section 14.3, the Plan shall be terminated and all amounts shall be
distributed as soon as practicable.
40
Section 14.5 Amendment of Article XIV.
Article XIV of the Plan may not be amended after a Change in Control of
the Employer unless required by the Internal Revenue Service as a condition to
the continued treatment of the Plan as a tax-qualified plan under Section 401(a)
of the Code.
ARTICLE XV
ADMINISTRATION
Section 15.1 Named Fiduciaries.
The term "Named Fiduciary" shall mean (but only to the extent of the
responsibilities of each of them) the Plan Administrator, the Plan
Administrator, the Board and the Trustee. This Article XV is intended to
allocate to each Named Fiduciary the responsibility for the prudent execution of
the functions assigned to him or it, and none of such responsibilities or any
other responsibility shall be shared by two or more of such Named Fiduciaries.
Whenever one Named Fiduciary is required by the Plan or Trust Agreement to
follow the directions of another Named Fiduciary, the two Named Fiduciaries
shall not be deemed to have been assigned a shared responsibility, but the
responsibility of the Named Fiduciary giving the directions shall be deemed his
sole responsibility, and the responsibility of the Named Fiduciary receiving
those directions shall be to follow them insofar as such instructions are on
their face proper under applicable law.
Section 15.2 Plan Administrator.
There shall be a Plan Administrator, who shall be the Senior Human
Resources Officer of CNY Financial Corporation, or such Employee or officer as
may be designated by the Board, as hereinafter provided, and who shall, subject
to the responsibilities of the Plan Administrator and the Board, have the
responsibility for the day-to-day control, management, operation and
administration of the Plan (except trust duties). The Plan Administrator shall
have the following responsibilities:
(a) To maintain records necessary or appropriate for the
administration of the Plan;
(b) To give and receive such instructions, notices, information,
materials, reports and certifications to the Trustee as may be necessary or
appropriate in the administration of the Plan;
(c) To prescribe forms and make rules and regulations consistent with
the terms of the Plan;
(d) To require such proof of age or evidence of good health of an
Employee, Participant or Former Participant or the spouse of either, or of a
Beneficiary as may be necessary or appropriate in the administration of the
Plan;
41
(e) To prepare and file, distribute or furnish all reports, plan
descriptions, and other information concerning the Plan, including, without
limitation, filings with the Secretary of Labor and communications with
Participants, Former Participants and other persons, as shall be required of the
Plan Administrator under ERISA;
(f) To determine any question arising in connection with the Plan, and
the Plan Administrator's decision or action in respect thereof shall be final
and conclusive and binding upon the Employer, the Trustee, Participants, Former
Participants, Beneficiaries and any other person having an interest under the
Plan;
(g) To review and dispose of claims under the Plan filed pursuant to
Section 15.3 and appeals filed pursuant to Section 15.4;
(h) If the Plan Administrator shall determine that by reason of
illness, senility, insanity, or for any other reason, it is undesirable to make
any payment to a Participant, Former Participant, Beneficiary or any other
person entitled thereto, to direct the application of any amount so payable to
the use or benefit of such person in any manner that he may deem advisable or to
direct in his discretion the withholding of any payment under the Plan due to
any person under legal disability until a representative competent to receive
such payment in his behalf shall be appointed pursuant to law;
(i) To review the performance of the Trustee and such investment
managers as may be appointed in or pursuant to the Trust Agreement in investing,
managing and controlling the assets of the Plan;
(j) To the extent required by ERISA, to establish a funding policy and
method consistent with the objectives of the Plan and the requirements of ERISA,
and to review such policy and method at least annually;
(k) To report and make recommendations to the Board regarding changes
in the Plan, including changes in the operation and management of the Plan and
removal and replacement of the Trustee and such investment managers as may be
appointed in or pursuant to the Trust Agreement;
(l) To the extent provided under and subject to the provisions of the
Trust Agreement, to appoint "investment managers" as defined in Section 3(38) of
ERISA to manage and control (including acquiring and disposing of) all or any of
the assets of the Plan;
(m) With the prior approval of the Board, to direct the Trustee to
obtain one or more Share Acquisition Loans;
(n) To develop and provide procedures and forms necessary to enable
Participants to give voting and tendering directions on a confidential basis;
42
(o) To discharge such other responsibilities or follow such directions
as may be assigned or given by the Board; and
(p) To discharge such other responsibilities or follow such directions
as may be assigned or given by the Board; and
(q) To perform any duty or take any action which is allocated to the
Plan Administrator under the Plan.
The Plan Administrator shall have the power and authority necessary or
appropriate to carry out his responsibilities. The Plan Administrator may resign
only by giving at least 30 days' prior written notice of resignation to the
Board, and such resignation shall be effective on the date specified in such
notice.
Section 15.3 Claims Procedure.
Any claim relating to benefits under the Plan shall be filed with the
Plan Administrator on a form prescribed by him. If a claim is denied in whole or
in part, the Plan Administrator shall give the claimant written notice of such
denial, which notice shall specifically set forth:
(a) The reasons for the denial;
(b) The pertinent Plan provisions on which the denial was based;
(c) Any additional material or information necessary for the claimant
to perfect his claim and an explanation of why such material or information is
needed; and
(d) An explanation of the Plan's procedure for review of the denial of
the claim.
In the event that the claim is not granted and notice of denial of a
claim is not furnished by the 30th day after such claim was filed, the claim
shall be deemed to have been denied on that day for the purpose of permitting
the claimant to request review of the claim.
Section 15.4 Claims Review Procedure.
Any person whose claim filed pursuant to Section 15.3 has been denied
in whole or in part by the Plan Administrator may request review of the claim by
the Plan Administrator, upon a form prescribed by the Plan Administrator. The
claimant shall file such form (including a statement of his position) with the
Plan Administrator no later than 60 days after the mailing or delivery of the
written notice of denial provided for in Section 15.3, or, if such notice is not
provided, within 60 days after such claim is deemed denied pursuant to Section
15.3. The claimant shall be permitted to review pertinent documents. A decision
shall be rendered by the Plan Administrator and communicated to the claimant not
later than 30 days after receipt of the claimant's written request for review.
However, if the Plan Administrator finds it necessary, due to special
circumstances (for example, the need to hold a hearing), to extend this period
and so
43
notifies the claimant in writing, the decision shall be rendered as soon as
practicable, but in no event later than 120 days after the claimant's request
for review. The Plan Administrator's decision shall be in writing and shall
specifically set forth:
(a) The reasons for the decision; and
(b) The pertinent Plan provisions on which the decision is based.
Any such decision of the Plan Administrator shall be binding upon the claimant
and the Employer, and the Plan Administrator shall take appropriate action to
carry out such decision.
Section 15.5 Allocation of Fiduciary Responsibilities and
Employment of Advisors.
Any Named Fiduciary may:
(a) Allocate any of his or its responsibilities (other than trustee
responsibilities) under the Plan to such other person or persons as he or it may
designate, provided that such allocation and designation shall be in writing and
filed with the Plan Administrator;
(b) Employ one or more persons to render advice to him or it with
regard to any of his or its responsibilities under the Plan; and
(c) Consult with counsel, who may be counsel to the Employer.
Section 15.6 Other Administrative Provisions.
(a) Any person whose claim has been denied in whole or in part must
exhaust the administrative review procedures provided in Section 15.4 prior to
initiating any claim for judicial review.
(b) No bond or other security shall be required of the Plan
Administrator, or any officer or Employee of the Employer to whom fiduciary
responsibilities are allocated by a Named Fiduciary, except as may be required
by ERISA.
(c) Subject to any limitation on the application of this Section
15.6(c) pursuant to ERISA, neither the Plan Administrator, nor any officer or
Employee of the Employer to whom fiduciary responsibilities are allocated by a
Named Fiduciary, shall be liable for any act of omission or commission by
himself or by another person, except for his own individual willful and
intentional malfeasance.
(d) The Plan Administrator may, except with respect to actions under
Section 15.4, shorten, extend or waive the time (but not beyond 60 days)
required by the Plan for filing any notice or other form with the Plan
Administrator, or taking any other action under the Plan.
44
(e) The Plan Administrator may direct that the costs of services
provided pursuant to Section 15.5, and such other reasonable expenses as may be
incurred in the administration of the Plan, shall be paid out of the funds of
the Plan unless the Employer shall pay them.
(f) Any person, group of persons, committee, corporation or
organization may serve in more than one fiduciary capacity with respect to the
Plan.
(g) Any action taken or omitted by any fiduciary with respect to the
Plan, including any decision, interpretation, claim denial or review on appeal,
shall be conclusive and binding on all interested parties and shall be subject
to judicial modification or reversal only to the extent it is determined by a
court of competent jurisdiction that such action or omission was arbitrary and
capricious and contrary to the terms of the Plan.
ARTICLE XVI
AMENDMENT, TERMINATION AND TAX QUALIFICATION
Section 16.1 Amendment and Termination by CNY Financial
Corporation
The Employer expects to continue the Plan indefinitely, but
specifically reserves the right, in its sole discretion, at any time, by
appropriate action of the Board, to amend, in whole or in part, any or all of
the provisions of the Plan and to terminate the Plan at any time. Subject to the
provisions of Section 16.2, no such amendment or termination shall permit any
part of the Trust Fund to be used for or diverted to purposes other than for the
exclusive benefit of Participants, Former Participants, Beneficiaries or other
persons entitled to benefits, and no such amendment or termination shall reduce
the accrued benefit of any Participant, Former Participant, Beneficiary or other
person who may be entitled to benefits, without his consent. In the event of a
termination or partial termination of the Plan, or in the event of a complete
discontinuance of the Employer's contributions to the Plan, the Accounts of each
affected person shall forthwith become nonforfeitable and shall be payable in
accordance with the provisions of Article XIII.
Section 16.2 Amendment or Termination Other Than by CNY
Financial Corporation
In the event that a corporation or trade or business other than CNY
Financial Corporation shall adopt this Plan, such corporation or trade or
business shall, by adopting the Plan, empower CNY Financial Corporation to amend
or terminate the Plan, insofar as it shall cover employees of such corporation
or trade or business, upon the terms and conditions set forth in Section 16.1;
provided, however, that any such corporation or trade or business may, by action
of its board of directors or other governing body, amend or terminate the Plan,
insofar as it shall cover employees of such corporation or trade or business, at
different times and in a different manner. In the event of any such amendment or
termination by action of the board of directors or other governing body of such
a corporation or trade or business, a separate plan shall be deemed to have been
established for the employees of such corporation or trade or business, and the
assets
45
of such plan shall be segregated from the assets of this Plan at the
earliest practicable date and shall be dealt with in accordance with the
documents governing such separate plan.
Section 16.3 Conformity to Internal Revenue Code.
The Employer has established the Plan with the intent that the Plan and
Trust will at all times be qualified under Section 401(a) and exempt under
Section 501(a) of the Code and with the intent that contributions under the Plan
will be allowed as deductions in computing the net income of the Employer for
federal income tax purposes, and the provisions of the Plan and Trust Agreement
shall be construed to effectuate such intentions. Accordingly, notwithstanding
anything to the contrary hereinbefore provided, the Plan and the Trust Agreement
may be amended at any time without prior notice to Participants, Former
Participants, Beneficiaries or any other persons entitled to benefits, if such
amendment is deemed by the Board to be necessary or appropriate to effectuate
such intent.
Section 16.4 Contingent Nature of Contributions.
(a) All ESOP Contributions to the Plan are conditioned upon the
issuance by the Internal Revenue Service of a determination that the Plan and
Trust are qualified under Section 401(a) of the Code and exempt under Section
501(a) of the Code. If the Employer applies to the Internal Revenue Service
for such a determination within 90 days after the date on which it files its
federal income tax return for its taxable year that includes the last day of
the Plan Year in which the Plan is adopted, and if the Internal Revenue
Service issues a determination that the Plan and Trust are not so qualified
or exempt, all ESOP Contributions made by the Employer prior to the date of
receipt of such a determination may, at the election of the Employer, be
returned to the Employer within one year after the date of such determination.
(b) All ESOP Contributions and Loan Repayment Contributions to the
Plan are made upon the condition that such ESOP Contributions and
Loan Repayment Contributions will be allowed as a deduction in
computing the net income of the Employer for federal income tax
purposes. To the extent that any such deduction is disallowed, the
amount disallowed may, at the election of the Employer, be
returned to the Employer within one year after the deduction is
disallowed.
(c) Any contribution to the Plan made by the Employer as a result of a
mistake of fact may, at the election of the Employer, be returned
to the Employer within one year after such contribution is made.
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ARTICLE XVII
SPECIAL RULES FOR TOP HEAVY PLAN YEARS
Section 17.1 In General.
As of the Determination Date for each Plan Year, the Plan Administrator
shall determine whether the Plan is a Top Heavy Plan in accordance with the
provisions of this Article XVII. If, as of such Determination Date, the Plan is
a Top Heavy Plan, then the Plan Year immediately following such Determination
Date shall be a Top Heavy Plan Year and the special provisions of this Article
XVII shall be in effect; provided, however, that if, as of the Determination
Date for the Plan Year in which the Effective Date occurs, the Plan is a Top
Heavy Plan, such Plan Year shall be a Top Heavy Plan Year, and the provisions of
this Article XVII shall be given retroactive effect for such Plan Year.
Section 17.2 Definition of Top Heavy Plan.
(a) Subject to Section 17.2(c), the Plan is a Top Heavy Plan if, as of
a Determination Date: (i) it is not a member of a Required Aggregation Group,
and (ii)(A) the sum of the Cumulative Accrued Benefits of all Key Employees
exceeds 60% of (B) the sum of the Cumulative Accrued Benefits of all Employees
(excluding former Key Employees), former Employees (excluding former Key
Employees and other former Employees who have not performed any services for the
Employer or any Affiliated Employer during the immediately preceding five Plan
Years), and their Beneficiaries.
(b) Subject to Section 17.2(c), the Plan is a Top Heavy Plan if, as of
a Determination Date: (i) the Plan is a member of a Required Aggregation Group,
and (ii)(A) the sum of the Cumulative Accrued Benefits of all Key Employees
under all plans that are members of the Required Aggregation Group exceeds 60%
of (B) the sum of the Cumulative Accrued Benefits of all Employees (excluding
former Key Employees), former Employees (excluding former Key Employees and
other former Employees who have not performed any services for the Employer or
any Affiliated Employer during the immediately preceding five Plan Years), and
their Beneficiaries under all plans that are members of the Required Aggregation
Group.
(c) Notwithstanding Sections 17.2(a) and 17.2(b), the Plan is not a Top
Heavy Plan if, as of a Determination Date: (i) the Plan is a member of a
Permissible Aggregation Group, and (ii)(A) the sum of the Cumulative Accrued
Benefits of all Key Employees under all plans that are members of the
Permissible Aggregation Group does not exceed 60% of (B) the sum of the
Cumulative Accrued Benefits of all Employees (excluding former Key Employees),
former Employees (excluding former Key Employees and other former Employees who
have not performed any services for the Employer or any Affiliated Employer
during the immediately preceding five Plan Years), and their Beneficiaries under
all plans that are members of the Permissible Aggregation Group.
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Section 17.3 Determination Date.
The Determination Date for the Plan Year in which the Effective Date
occurs shall be the last day of such Plan Year, and the Determination Date for
each Plan Year beginning after the Plan Year in which the Effective Date occurs
shall be the last day of the preceding Plan Year. The Determination Date for any
other qualified plan maintained by the Employer for a plan year shall be the
last day of the preceding plan year of each such plan, except that in the case
of the first plan year of such plan, it shall be the last day of such first plan
year.
Section 17.4 Cumulative Accrued Benefits.
(a) An individual's Cumulative Accrued Benefits under this Plan as of a
Determination Date are equal to the sum of:
(i) the balance credited to such individual's Account under this Plan
as of the most recent Valuation Date preceding the Determination Date;
(ii) the amount of any ESOP Contributions or Loan Repayment
Contributions made after such Valuation Date but on or before the Determination
Date; and
(iii) the amount of any distributions of such individual's Cumulative
Accrued Benefits under the Plan during the five year period ending on the
Determination Date.
For purposes of this Section 17.4(a), the computation of an individual's
Cumulative Accrued Benefits, and the extent to which distributions, rollovers
and transfers are taken into account, will be made in accordance with Section
416 of the Code and the regulations thereunder.
(b) For purposes of this Plan, the term "Cumulative Accrued Benefits"
with respect to any other qualified plan, shall mean the cumulative accrued
benefits determined for purposes of Section 416 of the Code under the provisions
of such plans.
(c) For purposes of determining the top heavy status of a Required
Aggregation Group or a Permissible Aggregation Group, the Cumulative Accrued
Benefits under this Plan and the Cumulative Accrued Benefits under any other
plan shall be determined as of the Determination Date that falls within the same
calendar year as the Determination Dates for all other members of such Required
Aggregation Group or Permissible Aggregation Group.
Section 17.5 Key Employees.
(a) For purposes of the Plan, the term Key Employee means any employee
or former employee of the Employer or any Affiliated Employer who is at any time
during the current Plan Year or was at any time during the immediately preceding
four Plan Years:
(i) a Five Percent Owner;
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(ii) a person who would be described in Section 1.23 if the number "1%"
were substituted for the number "5%" in Section 1.23 and who has an annual Total
Compensation from the Employer and any Affiliated Employer of more than
$150,000;
(iii) an Officer of the Employer or any Affiliated Employer who has an
annual Total Compensation greater than 50% of the amount in effect under Section
415(b)(1)(A) of the Code of any such Plan Year; or
(iv) one of the ten persons owning the largest interests in the
Employer and having an annual Total Compensation from the Employer or any
Affiliated Employer in excess of the dollar limitation in effect under Section
415(c)(1)(A) of the Code for such Plan Year.
(b) For purposes of Section 17.5(a):
(i) for purposes of Section 17.5(a)(iii), in the event the Employer or
any Affiliated Employer has more officers than are considered Officers, the term
Key Employee shall mean those officers, up to the maximum number, with the
highest annual compensation in any one of the five consecutive Plan Years ending
on the Determination Date; and
(ii) for purposes of Section 17.5(a)(iv), if two or more persons have
equal ownership interests in the Employer, each such person shall be considered
as having a larger ownership interest than any such person with a lower annual
compensation from the Employer or any Affiliated Employer.
(c) For purposes of Section 17.5(a): (i) a person's compensation from
Affiliated Employers shall be aggregated, but his ownership interests in
Affiliated Employers shall not be aggregated; (ii) an employee shall only be
deemed to be an officer if he has the power and responsibility of a person who
is an officer within the meaning of Section 416 of the Code; and (iii) the term
Key Employee shall also include the Beneficiary of a deceased Key Employee.
Section 17.6 Required Aggregation Group.
For purposes of this Article XVII, a Required Aggregation Group shall
consist of (a) this Plan; (b) any other qualified plans maintained by the
Employer and any Affiliated Employers that cover Key Employees; and (c) any
other qualified plans that are required to be aggregated for purposes of
satisfying the requirements of Sections 401(a)(4) or 410(b) of the Code.
Section 17.7 Permissible Aggregation Group.
For purposes of this Article XVII, a Permissible Aggregation Group
shall consist of (a) the Required Aggregation Group and (b) any other qualified
plans maintained by the Employer and any Affiliated Employers; provided,
however, that the Permissible Aggregation Group must satisfy the requirements of
Sections 401(a)(4) and 410(b) of the Code.
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Section 17.8 Special Requirements During Top Heavy Plan
Years.
(a) Notwithstanding any other provision of the Plan to the contrary,
for each Top Heavy Plan Year, in the case of a Participant (other than a Key
Employee) on the last day of such Top Heavy Plan Year who is not also a
participant in another qualified plan which satisfies the minimum contribution
and benefit requirements of Section 416 of the Code with respect to such
Participant, the sum of the ESOP Contributions and Loan Repayment Contributions
made with respect to such Participant, when expressed as a percentage of his
Total Compensation for such Top Heavy Plan Year, shall not be less than 3% of
such Participant's Total Compensation for such Top Heavy Plan Year or, if less,
the highest combined rate, expressed as a percentage of Total Compensation at
which ESOP Contributions and Loan Repayment Contributions were made on behalf of
a Key Employee for such Top Heavy Plan Year. The Employer shall make an
additional contribution to the Account of each Participant to the extent
necessary to satisfy the foregoing requirement.
(b) For any Top Heavy Plan Year, the number "1.0" shall be substituted
for the number "1.25" in Sections 8.2(c)(iii) and 8.2(c)(iv), except that:
(i) this Section 17.8(b) shall not apply to any individual for a Top
Heavy Plan Year that is not a Super Top Heavy Plan Year if the requirements of
Section 17.8(a) would be satisfied for such Super Top Heavy Plan Year if the
number "4%" were substituted for the number 3% in Section 17.8(a); and
(ii) this Section 17.8(b) shall not apply to an individual for a Top
Heavy Plan Year if, during such Top Heavy Plan Year, there are no ESOP
Contributions or Loan Repayment Contributions allocated to such individual under
this Plan, there are no contributions under any other qualified defined
contribution plan maintained by the Employer, and there are no accruals for such
individual under any qualified defined benefit plan maintained by the Employer.
For purposes of this Section 17.8(b), the term Super Top Heavy Plan Year means a
Top Heavy Plan Year in which the Plan would meet the definitional requirements
of Sections 17.2(a) or 17.2(b) if the term "90%" were substituted for the term
"60%" in Sections 17.2(a), 17.2(b) and 17.2(c).
ARTICLE XVIII
MISCELLANEOUS PROVISIONS
Section 18.1 Governing Law.
The Plan shall be construed, administered and enforced according to the
laws of the State of New York without giving effect to the conflict of laws
principles thereof, except to the extent that such laws are preempted by federal
law.
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Section 18.2 No Right to Continued Employee.
Neither the establishment of the Plan, nor any provisions of the Plan
or of the Trust Agreement establishing the Trust Fund nor any action of the Plan
Administrator, the Plan Administrator or the Trustee, shall be held or construed
to confer upon any Employee any right to a continuation of employment by the
Employer. The Employer reserves the right to dismiss any Employee or otherwise
deal with any Employee to the same extent as though the Plan had not been
adopted.
Section 18.3 Construction of Language.
Wherever appropriate in the Plan, words used in the singular
may be read in the plural, words used in the plural may be read in the singular,
and words importing the masculine gender may be read as referring equally to the
feminine and the neuter. Any reference to an Article or Section number shall
refer to an Article or Section of the Plan, unless otherwise indicated.
Section 18.4 Headings.
The headings of Articles and Sections are included solely for
convenience of reference. If there is any conflict between such headings and the
text of the Plan, the text shall control.
Section 18.5 Merger With Other Plans.
The Plan shall not be merged or consolidated with, nor transfer its
assets or liabilities to, any other plan unless each Participant, Former
Participant, Beneficiary and other person entitled to benefits, would (if that
plan then terminated) receive a benefit immediately after the merger,
consolidation or transfer which is equal to or greater than the benefit he would
have been entitled to receive if the Plan had terminated immediately before the
merger, consolidation or transfer.
Section 18.6 Non-Alienation of Benefits.
(a) Except as provided in Section 18.6(b), the right to receive a
benefit under the Plan shall not be subject in any manner to anticipation,
alienation or assignment, nor shall such right to be liable for or subject to
debts, contracts, liabilities or torts. Should any Participant, Former
Participant or other person attempt to anticipate, alienate or assign his
interest in or right to a benefit, or should any person claiming against him
seek to subject such interest or right to legal or equitable process, all the
interest or right of such Participant or Former Participant or other person
entitled to benefits in the Plan shall cease, and in that event such interest or
right shall be held or applied, at the direction of the Plan Administrator, for
or to the benefit of such Participant or Former Participant, other person or his
spouse, children or other dependents in such manner and in such proportions as
the Plan Administrator may deem proper.
(b) This Section 18.6 shall not prohibit the Plan Administrator from
recognizing a Domestic Relations Order that is determined to be a Qualified
Domestic Relations Order in accordance with Section 18.7.
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Section 18.7 Procedures Involving Domestic Relations Orders.
Upon receiving a Domestic Relations Order, the Plan
Administrator shall segregate in a separate account or in an escrow account or
separately account for the amounts payable to any person pursuant to such
Domestic Relations Order, pending a determination whether such Domestic
Relations Order constitutes a Qualified Domestic Relations Order, and shall give
notice of the receipt of the Domestic Relations Order to the Participant or
Former Participant and each other person affected thereby. If, within 18 months
after receipt of such Domestic Relations Order, the Plan Administrator, a court
of competent jurisdiction or another appropriate authority determines that such
Domestic Relations Order constitutes a Qualified Domestic Relations Order, the
Plan Administrator shall direct the Trustee to pay the segregated amounts (plus
any interest thereon) to the person or persons entitled thereto under the
Qualified Domestic Relations Order. If it is determined that the Domestic
Relations Order is not a Qualified Domestic Relations Order or if no
determination is made within the prescribed 18-month period, the segregated
amounts shall be distributed as though the Domestic Relations Order had not been
received, and any later determination that such Domestic Relations Order
constitutes a Qualified Domestic Relations Order shall be applied only with
respect to benefits that remain undistributed on the date of such determination.
The Plan Administrator shall be authorized to establish such reasonable
administrative procedures as he deems necessary or appropriate to administer
this Section 18.7. This Section 18.7 shall be construed and administered so as
to comply with the requirements of Section 401(a)(13) of the Code.
Section 18.8 Leased Employees.
(a) Subject to Section 18.8(b), a leased employee shall be treated as
an Employee for purposes of the Plan. For purposes of this Section 18.8, the
term "leased employee" means any person (i) who would not, but for the
application of this Section 18.8, be an Employee and (ii) who pursuant to an
agreement between the Employer and any other person ("leasing organization") has
performed for the Employer (or for the Employer and related persons determined
in accordance with Section 414(n)(6) of the Code), on a substantially full-time
basis for a period of at least one year, services of a type historically
performed by employees in the business field of the Employer.
(b) For purposes of the Plan:
(i) contributions or benefits provided to the leased employee by the
leasing organization which are attributable to services performed for the
Employer shall be treated as provided by the Employer; and
(ii) Section 18.8(a) shall not apply to a leased employee if:
(A) the number of leased employees performing services for the Employer
does not exceed 20% of the number of the Employer's Employees who are not Highly
Compensated Employees; and
52
(B) such leased employee is covered by a money purchase pension plan
providing (I) a nonintegrated contribution rate of at least 10% of the leased
employee's compensation; (II) immediate participation; (III) full and immediate
vesting; and (IV) coverage for all of the employees of the leasing organization
(other than employees who perform substantially all of their services for the
leasing organization).
Section 18.9 Status as an Employee Stock Ownership Plan.
It is intended that the Plan constitute an "employee stock ownership
plan," as defined in Section 4975(e)(7) of the Code and Section 407(d)(6) of
ERISA. The Plan shall be construed and administered to give effect to such
intent.
53