EXHIBIT 10.5
NORTH PENN BANK
EMPLOYEE STOCK OWNERSHIP PLAN
(Effective June 1, 2005)
TABLE OF CONTENTS
Page
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SECTION 1 BACKGROUND ................................................. 1
SECTION 2 ESTABLISHMENT OF PLAN ...................................... 1
SECTION 3 DEFINITIONS ................................................ 2
SECTION 4 ELIGIBILITY FOR PARTICIPATION .............................. 12
SECTION 5 COMPANY CONTRIBUTIONS PURSUANT TO THIS PLAN ................ 13
SECTION 6 PARTICIPANT ACCOUNTS ....................................... 14
SECTION 7 VESTING .................................................... 19
SECTION 8 BENEFIT DISTRIBUTIONS TO PARTICIPANTS AND BENEFICIARIES .... 21
SECTION 9 TOP-HEAVY PROVISIONS ....................................... 26
SECTION 10 RULES GOVERNING BENEFIT CLAIMS AND REVIEW OF APPEALS ....... 29
SECTION 11 THE PLAN ADMINISTRATOR ..................................... 31
SECTION 12 THE TRUST FUND ............................................. 33
SECTION 13 ACQUISITION LOANS .......................................... 37
SECTION 14 NO ASSIGNMENT OF BENEFITS .................................. 38
SECTION 15 FIDUCIARY RESPONSIBILITY ................................... 39
SECTION 16 FUTURE OF THE PLAN ......................................... 40
SECTION 17 GENERAL PROVISIONS ......................................... 41
SECTION 18 EXECUTION .................................................. 42
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NORTH PENN BANK
EMPLOYEE STOCK OWNERSHIP PLAN
SECTION 1
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BACKGROUND
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The Board of Directors of North Penn Bancorp, Inc. (the "Company")
adopted an employee stock ownership plan (the "Plan"), effective March 1, 2005,
for eligible employees to provide a means for them to acquire an equity interest
in the Company. The Board of Directors of the Company wishes to recognize the
contribution made to the successful operation of the Company by its Employees,
to encourage broader stock ownership in the Company by its Employees, and to
share with Employees the benefits of continued growth in Company profitability.
As the primary purpose of the Plan is to enable Participants to acquire a
proprietary interest in the Company, contributions made to the Trust shall be
primarily invested in stock of the Company.
The Plan is a stock bonus plan under Section 401(a) of the Internal
Revenue Code of 1986, as amended, (the "Code") and is intended to be an employee
stock ownership plan under Section 4975(e)(7) of the Code and regulations
thereunder. All assets acquired under the Plan as a result of contributions,
income, and other additions to the Trust established pursuant to the
accompanying Trust Agreement shall be administered, distributed, forfeited, and
otherwise governed by the provisions of this Plan, which is administered for the
exclusive benefit of Participants in the Plan and their Beneficiaries.
SECTION 2
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ESTABLISHMENT OF PLAN
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2.1 PURPOSE
The purpose of the Plan is to describe the terms and conditions under
which contributions, made pursuant to the Plan and used primarily or exclusively
to purchase stock of the Company, shall be allocated and paid to the
Participants and their Beneficiaries. The Plan is for the exclusive benefit of
Participants and Beneficiaries. The Plan is intended to be a stock bonus plan
qualified under Section 401(a) of the Code and an employee stock ownership plan
under Section 4975(e)(7) of the Code and regulations thereunder and Plan Assets
shall be invested primarily in employer securities.
2.2 PLAN YEAR
For the purpose of keeping the Plan's books and records and
distributing or filing any reports or returns required by law, the Plan shall be
operated on the basis of a Plan Year.
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SECTION 3
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DEFINITIONS
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In this Plan, whenever the context so indicates, the singular or plural
number and the masculine, feminine, or neuter gender shall be deemed to include
the other. The following capitalized words and phrases shall have the meanings
specified when used in the Plan and the Trust Agreement, unless a different
meaning is plainly required by the context.
3.1 ACCOUNT
"Account" shall mean the accounts maintained to record the interest of
a Participant in the Trust Assets held pursuant to the Plan document and the
Trust Agreement documents.
3.2 ACQUISITION LOAN
"Acquisition Loan" shall mean a loan (or other extension of credit)
used by the Trustee to purchase Company Stock, which loan constitutes an Exempt
Loan, as defined in Section 3.30.
3.3 ACQUISITION LOAN COMPANY CONTRIBUTION
"Acquisition Loan Company Contribution" shall mean the amounts
contributed to the Plan pursuant to Section 5.1 to repay an Acquisition Loan.
3.4 AFFILIATED COMPANY
"Affiliated Company" shall mean:
(a) any parent or subsidiary of the Company (or company under common
control with the Company) that is a member of the same controlled group of
corporations (within the meaning of Section 1563(a) of the Code and determined
without regard to Sections 1563(a)(4) and 1563(e)(3)(C) of the Code) as the
Company;
(b) any member of an affiliated service group, as determined under
Section 414(m) of the Code, of which the Company is a member; and
(c) any trade or business under common control with the company, as
determined under Section 414(c) of the Code.
"50 Percent Affiliated Company" shall mean an Affiliated Company, but
with the phrase "more than 50 percent" substituted for the phrase "at least 80
percent" in Section 1563(a) of the Code.
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3.5 ALTERNATE PAYEE
"Alternate Payee" shall mean any spouse, former spouse, child, or other
dependent of a Participant who is recognized by a Domestic Relations Order as
having a right to receive all or a portion of a Participant's benefits under the
Plan.
3.6 ANNIVERSARY DATE
"Anniversary Date" shall mean the last day of each Plan Year.
3.7 AUTHORIZED LEAVE OF ABSENCE
"Authorized Leave of Absence" shall mean an unpaid temporary cessation
from active employment for the following purposes, provided that all Employees
shall be treated alike in like circumstances:
(a) Temporary leave, such as layoff, which does not exceed six months;
(b) Absence for illness or disability, provided that such absence does
not exceed one year;
(c) Absence from work due to (i) the Employee's or the Employee's
spouse's pregnancy, (ii) the birth of the Employee's child, (iii) the placement
with, or adoption by, the Employee of a child, or (iv) child care for a period
beginning immediately after such birth, placement, or adoption.
(d) Absence due to a Military Absence required by law or under leave
granted by the Employer, provided that the Employee returns within 90 days of
his or her release from active duty or any longer period during which his or her
right to reemployment is legally protected.
For purposes of this Section, Hours of Service shall be credited for
the Plan Year in which such absence begins, but only if credit therefore is
necessary to prevent the Employee from incurring a Break in Service, or, in any
other case, in the immediately succeeding Plan Year. The Hours of Service
credited pursuant to this paragraph shall be those which would normally have
been credited, but for such absence, or in any case in which the Committee is
unable to determine such hours normally credited, eight (8) Hours of Service per
day. The total Hours of Service required to be credited pursuant to this
paragraph shall not exceed 501.
3.8 BENEFICIARY
"Beneficiary" shall mean the person or persons who are designated by a
Participant or the Plan to receive benefits payable upon the Participant's death
pursuant to Section 8.8.
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3.9 BREAK IN SERVICE
"Break in Service" shall mean the failure of a Participant to complete
at least 500 Hours of Service during a Plan Year (prorated for any short Plan
Year). For purposes of determining whether an Employee has incurred a Break in
Service, Hours of Service shall be recognized for "Authorized Leaves of Absence"
and "Maternity and Paternity Leaves of Absence."
3.10 BOARD OF DIRECTORS
"Board of Directors" shall mean the Board of Directors of the Company.
3.11 CODE
"Code" shall mean the Internal Revenue Code of 1986, as amended.
3.12 COMPANY
"Company" shall mean the employer, North Penn Bancorp, Inc., its
predecessors, successors, and any Affiliated Companies.
3.13 COMPANY CONTRIBUTION
"Company Contribution" shall mean the total of the amounts contributed
to the Trust by the Company allocated to the Company Contribution Account or the
Company Stock Account.
3.14 COMPANY CONTRIBUTION ACCOUNT
"Company Contribution Account" shall mean the Account credited with (i)
Company Contributions made in cash, (ii) forfeitures from the Company
Contribution Accounts of other Participants, and (iii) any investment in a
Participant's Account not credited to the Participant's Company Stock Account.
3.15 COMPANY STOCK
"Company Stock" shall mean shares of common stock issued by the
Company, which shares constitute "qualifying employer securities" under Section
407(d)(5) of ERISA and under Sections 409(l) and 4975(e)(8) of the Code.
3.16 COMPANY STOCK ACCOUNT
"Company Stock Account" shall mean the Account credited with Company
Stock (i) contributed in kind, purchased and paid for by the Trustee with
Company Contributions, (ii) released from the Unallocated Stock Suspense Account
for allocation to the Company Stock Account, or (iii) forfeitures from the
Company Stock Account of other Participants.
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3.17 COMPENSATION
"Compensation" shall mean the following:
(a) The wages as reported on Form W-2 for federal income tax purposes,
paid to a Participant by the Company during such Plan Year, determined prior to
reduction in compensation for amounts that are excluded from gross income under
Sections 125, 132(f)(4), 402(e)(3), 402(h), and 403(b) of the Code. Compensation
shall not include any severance pay a Participant receives under any severance
program or policy sponsored by the Company or an Affiliated Company.
(b) In addition to other applicable limitations set forth in the plan,
and notwithstanding any other provision of the plan to the contrary,
Compensation for any Participant taken into account under the Plan shall not
exceed $210,000 (as adjusted for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Code). The cost-of-living adjustment in effect
for a calendar year shall be applied to any period not exceeding 12 months, over
which compensation is determined (the determination period) beginning in such
calendar year. If a determination period consists of fewer than 12 months, the
annual compensation limit shall be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the denominator
of which is 12.
(c) A Participant's Compensation shall include the Compensation that
the Participant would have received during a period of Military Absence, (or if
the amount of such Compensation is not reasonably certain, the Participant's
average earnings from the Company or an Affiliated Company for the twelve-month
period immediately preceding the Participant's period of Military Absence);
provided, however, that the Participant returns to work within the period during
which his or her rights to reemployment is protected by law.
3.18 DIRECT ROLLOVER
"Direct Rollover" shall mean a payment by the Plan to an Eligible
Retirement Plan specified by the distributee and which is delivered to the
Participant.
3.19 DISABILITY
"Disability" shall mean a disability that renders the Participant
totally unable, as a result of a bodily or mental disease or injury, to perform
any duties for the Company for which the Participant is reasonably fitted, which
disability is expected to be of permanent or long and indefinite duration. This
term shall not include any disability directly or indirectly resulting from or
related to a criminal act or attempt, any injury or disease occurring while
compensation to the participant was suspended, or any injury that was
intentionally self-inflicted. Further, this term shall apply only if the
Participant is sufficiently disabled to qualify for the payment of disability
benefits under the federal Social Security Act.
3.20 DISTRIBUTEE
"Distributee" shall mean an Employee, former Employee, or an Employee's
or former Employee's surviving spouse (and the Employee's or former Employee's
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spouse or former spouse who is the alternate payee under a Qualified Domestic
Relations Order, as defined in Section 3.44) who receives a distribution of
benefits under this Plan.
3.21 DOMESTIC RELATIONS ORDER
"Domestic Relations Order" shall mean any judgment, decree or order
(including approval of a property settlement agreement) made pursuant to a state
domestic relations or community property law, which relates to the provision of
child support, alimony payments, or property rights to an Alternate Payee.
3.22 EFFECTIVE DATE
"Effective Date" shall mean March 1, 2005.
3.23 ELIGIBILITY COMPUTATION PERIOD
"Eligibility Computation Period" shall mean a twelve-month period. The
first Eligibility Computation Period begins on an Employee's first day of
employment with the Company. Subsequent Eligibility Computation Periods begin on
the anniversary date of an Employee's first day of employment.
3.24 ELIGIBLE EMPLOYEE
"Eligible Employee" shall mean all Employees of the Company who are at
least twenty-one (21) years of age, except that the following Employees shall be
excluded from participation in the Plan: (a) Employees who are members of a
collective bargaining unit unless the applicable collective bargaining agreement
specifically requires participation in this Plan, and (b) Leased Employees
within the meaning of Section 414(n) of the Code (unless such person's
participation is required in order to satisfy the coverage requirements of Code
Section 410).
3.25 ELIGIBLE RETIREMENT PLAN
"Eligible Retirement Plan" shall mean an (i) individual retirement
account described in Section 408(a) of the Code; (ii) an individual retirement
annuity described in Section 408(b) of the Code (other than an endowment
contract); (iii) an annuity plan described in Section 403(a) of the Code; (iv) a
qualified plan described in Section 401(a) of the Code, that accepts the
distributee's Eligible Rollover Distribution; (v) an eligible deferred
compensation plan described in Section 457(b) of the Code that is maintained by
an eligible employer described in Section 457(e)(i)(A) of the Code that shall
separately account for distributions, or (vi) an annuity contract described in
Section 403(b) of the Code. Notwithstanding the foregoing, any Eligible
Retirement Distribution in excess of $1,000, but not greater than $5,000, shall
be transferred directly to the individual retirement plan of a designated
trustee or insurer, unless the Participant elects to receive or rollover such
distribution.
3.26 ELIGIBLE ROLLOVER DISTRIBUTION
"Eligible Rollover Distribution" shall mean 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 (i) any distribution that is one
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of a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten years or more; (ii) any
distribution to the extent such distribution is required under Section 401(a)(9)
of the Code; (iii) any distribution to the extent such distribution is not
included in gross income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities); and (iv) any
hardship distribution. Notwithstanding the foregoing, clause (iii) of the
preceding sentence shall not apply to a distribution that is rolled over to an
Eligible Retirement Plan described in clause (i) or (ii) of Section 3.25 or a
qualified defined contribution plan that will separately account for the portion
of the distribution that is includible in gross income.
3.27 EMPLOYEE
"Employee" shall mean any person employed by the Company, including
officers, shareholders, or directors who are employees, and any person who is a
Leased Employee. Employee shall not include (i) an individual who is a
nonresident alien and who does not receive from the Company any earned income or
wages that constitute income from sources within the United States or (ii) an
independent contractor or other person who is not treated by the Company as an
employee for purposes of withholding federal employment taxes, regardless of any
contrary governmental or judicial determination relating to such employment
status or tax withholding. If a person described in clause (ii) of the preceding
sentence is subsequently reclassified as, or determined to be, an employee by
the Internal Revenue Service, any other governmental agency or authority or a
court or if the Company or an Affiliated Company is required to reclassify such
an individual as an employee as a result of such reclassification or
determination (including any reclassification by the Company or an Affiliated
Company in settlement of any claim or action relating to such individual's
employment status), such individual shall not become eligible to become a
Participant in this Plan by reason of such reclassification or determination.
3.28 ENTRY DATE
"Entry Date" shall mean January 1 and July 1 of each Plan Year.
Notwithstanding the foregoing, and solely with respect to the initial Plan Year,
Entry Date shall mean March 1, 2005 and July 1.
3.29 ERISA
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
(P.L. 93-406), as amended.
3.30 EXEMPT LOAN
"Exempt Loan" shall mean an Acquisition Loan made to the Trust by a
disqualified person (as defined in Section 4975(e)(2) of the Code) or a loan to
the Trust that is guaranteed by a disqualified person, which Acquisition Loan
satisfies the requirements of Department of Labor Regulation ss.2550.408b-3 and
Treasury Regulation ss.54.4975-7(b) and Section 13.1 hereof.
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3.31 FINANCED SHARES
"Financed Shares" shall mean shares of Company Stock acquired with the
proceeds of an Acquisition Loan.
3.32 FIVE-YEAR BREAK IN SERVICE
"Five-Year Break in Service" shall mean five consecutive Breaks in
Service.
3.33 HIGHLY COMPENSATED EMPLOYEE
"Highly Compensated Employee" shall mean an Employee who performed
service for the Company or an Affiliated Company during the Plan Year for which
a determination is being made and who was (i) at any time during the Plan Year
or the immediately preceding Plan Year, a five percent (5%) owner of the Company
(as defined in Section 416(i) of the Code); or (ii) for the immediately
preceding Plan Year received Compensation from the Company and all Affiliated
Companies in excess of $95,000 (prorated for any short Plan Year), as adjusted
by the Secretary of Treasury in accordance with Section 414(q) of the Code. The
determination of whether an Employee is a Highly Compensated Employee shall be
made in accordance with Section 414(q) of the Code.
3.34 HOUR OF SERVICE
"Hour of Service" shall mean each hour for which an Employee is paid or
is entitled to be paid for services to the Company and each hour for which an
Employee is directly or indirectly paid or is entitled to be paid (including
payments made under a plan maintained to comply with worker's compensation or
disability insurance laws) for a period of vacation, holiday, illness,
disability, lay-off, jury duty, temporary military duty, union-authorized lost
time, or leave of absence.
No Hours of Service shall be credited on account of payments made
solely under a plan maintained to comply with unemployment compensation laws.
Each hour for which back pay (ignoring any mitigation of damages) is either
awarded or agreed to by the Company is an Hour of Service. No more than 501
Hours of Service shall be credited for one continuous period during which an
Employee does not perform duties. In all respects, an Employee's Hours of
Service shall be counted as required by Section 2530.200b of the U.S. Department
of Labor's regulations under Title I of ERISA.
Notwithstanding the foregoing, Hours of Service for an Employee who is
compensated on a salaried basis shall be determined on the basis of 190 hours
for each month during which the Employee completes an Hour of Service.
Hours of Service shall be credited for any individual who is considered
a Leased Employee for purposes of this Plan under Section 414(n) of the Code.
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3.35 INDEPENDENT APPRAISER
"Independent Appraiser" shall mean any appraiser meeting the
requirements similar to the requirements of the regulations prescribed under
Section 170(a)(1) of the Code and any requirements of regulations prescribed
under Section 3(18) of ERISA.
3.36 LEASED EMPLOYEE
"Leased Employee" shall mean a person who provides services to
the Company or an Affiliate if: (i) such services are provided pursuant to an
agreement between a leasing organization and the Company or an Affiliate, (ii)
such person has performed such services for the Company or an Affiliate on a
substantially full-time basis for a period of at least one (1) year, and (iii)
such services are performed under the primary direction or control of the
Company or an Affiliated Company.
3.37 MILITARY ABSENCE
"Military Absence" shall mean, with respect to any applicable Employee
any absence by reason of service in the uniformed service (as defined in chapter
43 of title 38, United States Code) where the Participant's right to
reemployment is protected by law.
3.38 LIMITATION YEAR
"Limitation Year" shall mean the Plan Year or such other
12-consecutive-month period as may be designated by the Company from time to
time by resolution of its Board of Directors.
3.39 NORMAL RETIREMENT DATE
"Normal Retirement Date" shall mean the date of a Participant's
sixty-fifth (65th) birthday, or, if later, the fifth anniversary of the date a
Participant commenced employment with the Company.
3.40 PARTICIPANT
"Participant" shall mean any Employee who has satisfied the eligibility
requirements of Section 4 and who has an account balance under the Plan.
3.41 PLAN
"Plan" shall mean the North Penn Bank Employee Stock Ownership Plan,
which includes this Plan and a related Trust Agreement.
3.42 PLAN ADMINISTRATOR
"Plan Administrator" shall mean the person or committee appointed by
the Board of Directors of the Company to supervise the administration of the
Plan as hereinafter provided, or if no person is appointed by the Board of
Directors, the Company.
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3.43 PLAN YEAR
"Plan Year" shall mean the period ending on each Anniversary Date for
the Plan.
3.44 QUALIFIED DOMESTIC RELATIONS ORDER
"Qualified Domestic Relations Order" shall mean a domestic relations
order that:
(a) assigns to, creates, or recognizes the existence of an Alternate
Payee's right to receive all or a portion of the benefits payable to a
Participant hereunder;
(b) specifies (1) the name and last known mailing address (if any) of
the Participant and the name and mailing address of each Alternate Payee, (2)
the amount or percentage of the Participant's benefits to be paid to each
Alternate Payee, or the manner in which such amount is to be determined, and (3)
the number of payments or the period to which the order applies; and
(c) does not require (1) any form or type of benefit of any other option not
available under this Plan, (2) the Plan to provide benefits greater in value
than the actuarial equivalent of the benefits otherwise provided hereunder, and
(3) any payment which would be in conflict with a payment required to be made to
another Alternate Payee under the terms of a prior Qualified Domestic Relations
Order.
3.45 QUALIFIED PLAN
"Qualified Plan" shall mean any plan maintained by the Company or an
Affiliated Company that is qualified trust under Section 401(a) of the Code.
3.46 SECTION 1042 NONALLOCATION PERIOD
"Section 1042 Nonallocation Period" shall mean the period with respect
to any Section 1042 Stock beginning on the date of sale of such Section 1042
Stock and ending on the later of (i) the date of the allocation of Company Stock
attributable to the final payment of all Acquisition Loans with respect to such
Section 1042 Stock, or (ii) the date which is ten years after the date of sale
of such Section 1042 Stock.
3.47 SECTION 1042 PARTICIPANT
"Section 1042 Participant" shall mean:
(a) a Participant who has made an election under Section 1042 with
respect to Company Stock or other employer securities;
(b) any spouse, ancestor, lineal descendent, or brother or sister (by
whole or by half blood) of a Participant who has made an election under Section
1042 with respect to Company Stock or other employer securities; or
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(c) a Participant who owns, directly or indirectly (after application
of the attribution rules provided in Section 318(a) of the Code without regard
to 318(a)(2)(B)(i)) more than 25% of the value of any class of outstanding stock
(or more than 25% of the total value of any class of outstanding stock) of the
Company or an Affiliated Company.
3.48 SECTION 1042 STOCK
"Section 1042 Stock" shall mean Company Stock purchased by the Trustee,
but only if in connection with such purchase, the seller of such Company Stock
has timely elected application of Section 1042 of the Code to such sale and the
sale of such Company Stock and purchase of replacement securities by the seller
meets all applicable requirements of Section 1042 of the Code.
3.49 SERVICE
"Service" shall mean employment with the Company, commencing on the
first day that the Employee performs an Hour of Service for the Company.
3.50 TRUST OR TRUST FUND
"Trust" or "Trust Fund" shall mean the trust fund created under this
Plan for the benefit of Participants.
3.51 TRUST AGREEMENT
"Trust Agreement" shall mean the agreement between Company and the
Trustee concerning the Trust Fund.
3.52 TRUST ASSETS
"Trust Assets" shall mean the Company Stock and other assets held in
the Trust for the benefit of Participants.
3.53 TRUSTEE
"Trustee" shall mean one or more corporate persons and/or individuals
selected from time to time by the Board of Directors of the Company to serve as
trustee or co-trustee of the Trust Fund.
3.54 UNALLOCATED STOCK SUSPENSE ACCOUNT
"Unallocated Stock Suspense Account" shall mean an account containing
Company Stock acquired with the proceeds of an Acquisition Loan and which has
not been released from such account and allocated to the Participants' Company
Stock Accounts.
3.55 VALUATION DATE
"Valuation Date" shall mean the Anniversary Date and each interim date
upon which the Plan Administrator determines that a valuation of the Trust Fund
shall be made.
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3.56 YEAR OF SERVICE
"Year of Service" shall mean a Plan Year during which an Employee
completes 1,000 Hours of Service (prorated for any short Plan Year).
SECTION 4
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ELIGIBILITY FOR PARTICIPATION
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4.1 INITIAL ELIGIBILITY
All Eligible Employees who are employed by or provide services to the
Company on March 1, 2005 shall be Participants in the Plan as of the Effective
Date. All other Eligible Employees shall participate in this Plan as of the
Entry Date occurring immediately after the date on which the Eligible Employee
completes one Year of Service during an Eligibility Computation Period.
4.2 PARTICIPATION
A Participant shall share in contributions under Section 5.1(a) for all
Plan Years during which he or she (i) is employed on the last day of the Plan
Year or incurs a Disability during the Plan Year or has retired on or after his
or her Normal Retirement Date during the Plan Year, (ii) has at least 1,000
Hours of Service during the Plan Year (prorated for any short Plan Year), and
(iii) receives Compensation from the Company during the Plan Year.
4.3 PARTICIPATION AFTER REEMPLOYMENT
A Participant whose employment with the Company is terminated and who
subsequently again becomes an Eligible Employee shall be readmitted as a
Participant as of the first day he or she receives Compensation.
4.4 DATA
The Plan Administrator shall furnish each Eligible Employee who becomes
a Participant in the Plan with a form containing such information as the Plan
Administrator may desire, including, but not limited to, the date of birth of
the Eligible Employee and the Beneficiary designation of such Eligible Employee.
Participants shall also provide the Plan Administrator with such other data at
such other times and in such form as the Plan Administrator may consider
necessary for the determination of the Eligible Employee's rights and benefits
under the Plan and shall otherwise cooperate fully with the Plan Administrator
in the administration of the Plan.
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SECTION 5
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COMPANY CONTRIBUTIONS PURSUANT TO THIS PLAN
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5.1 COMPANY CONTRIBUTIONS
(a) The Company may make a discretionary contribution in an amount to
be determined by the Board of Directors of the Company in its sole discretion to
the Trust Fund for each Plan Year to be allocated to the Account of each
Participant eligible to receive such allocation under Section 4.2.
(b) Notwithstanding any other provision of the Plan to the contrary,
the contribution, if any, shall be in an amount determined by the Board of
Directors of the Company in its sole discretion, provided the Company shall make
a contribution at least in an amount that will allow the Trust Fund to satisfy
any currently maturing obligations under any Acquisition Loan, or, if such
Acquisition Loan is from the Company, shall extend the term of such Acquisition
Loan so as to prevent default by the Trust under such Acquisition Loan. Company
Contributions may be paid by the Company in cash, shares of Company Stock, or by
forgiveness of indebtedness, as determined by the Board of Directors of the
Company, provided however, that Company Contributions shall be paid in cash or
by forgiveness of indebtedness to the extent necessary for the Trust Fund to
satisfy any currently maturing obligations under any Acquisition Loan. Any
Company Contributions made by forgiveness of indebtedness shall be pursuant to a
written certificate of the Company describing the indebtedness that is forgiven,
the date of forgiveness, and the principal and interest portions thereof.
(c) Company Contributions for any Plan Year shall be paid to the Trust
Fund no later than the due date (including extensions thereof) for filing the
Company's income tax return for the fiscal year of the Company ending within
such Plan Year. In no event shall the Company Contribution under this Section
5.1 for any Plan Year exceed the lesser of:
(1) the maximum amount the Company is permitted to deduct as an
expense on its Federal Income Tax return; or
(2) the maximum amount which may be credited for such Plan Year in
accordance with individual maximum annual addition limitations as set forth in
Section 6.9.
(d) If any part of the Company Contribution for a Plan Year is in cash
for purposes other than discharging Acquisition Loan indebtedness, such cash
shall be applied by the Trustee to the purchase of Company Stock as such time
that such Company Stock is available for purchase and the Trustee deems it
desirable to purchase such Company Stock.
(e) Notwithstanding anything contained in the Plan to the contrary, the
Company or an Affiliated Company shall contribute to the Plan, on behalf of each
eligible Participant who returns to employment with the Company or an Affiliated
Company following a period of Military Absence in an amount equal to the
discretionary contribution that would have been made to the Plan and allocated
to his or her Account pursuant to Section 5.1(a) if he or she had continued to
be employed and received Compensation during the period of Military Absence.
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(f) The Company Contribution allocated pursuant to Section 6.4 shall be
reduced by the amount of the Company Contribution, if any, used to pay expenses
pursuant to Section 11.9.
5.2 PARTICIPANT CONTRIBUTIONS
No Participant shall be required or permitted to make any contributions
to the Plan.
5.3 TRUST FUND
(a) The contributions deposited by the Company in the Trust Fund in
accordance with this Section 5 shall constitute a fund held for the benefit of
Participants and their eligible Beneficiaries under and in accordance with this
Plan. No part of the principal or income of the Trust Fund shall be used for, or
diverted to, purposes other than for the exclusive benefit of such Participants
and their eligible Beneficiaries (including necessary administrative costs);
provided, however, in the case of a contribution made by the Company (1) as a
mistake of fact; (2) for which a tax deduction is disallowed, in whole or in
part by the Internal Revenue Service; or (3) which is conditioned upon the
initial qualification of the Plan under Section 401(a) of the Code and such
initial qualification cannot be obtained, the Company shall be entitled to a
refund of said contributions.
(b) Any refund of contributions described in Subsection (a) must be
made (1) within one year after payment of a contribution made as a mistake of
fact; (2) within one year after disallowance of the tax deduction or deemed
disallowance, to the extent of such disallowance or deemed disallowance; or (3)
within one year of the date on which the initial qualification of the Plan is
denied by the Internal Revenue Service, as the case may be.
SECTION 6
---------
PARTICIPANT ACCOUNTS
--------------------
6.1 CREATION OF ACCOUNTS
The Plan Administrator shall create and maintain adequate records to
disclose the interest in the Trust Fund of each Participant and Beneficiary
under the Plan. Such records shall be in the form of individual Accounts
(including a Company Stock Account for each Participant), and credits and
charges shall be made to such Accounts in the manner herein described. The
maintenance of individual Accounts is only for accounting purposes, and a
segregation of the assets of the Trust Fund to each Account shall not be
required. Distributions made from an Account shall be charged to the Account as
of the date paid.
6.2 VALUATION
The value of the Trust Fund shall be computed by the Trustee as of each
Valuation Date. The value of any Company Stock held in the Trust Fund shall be
determined by an Independent Appraiser as of the close of business on each
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Valuation Date on the basis of the fair market value of the assets of the Trust
Fund. The fair market value of Company Stock held by the Trust shall be
determined on a per share basis for each share of Company Stock.
6.3 APPORTIONMENT OF GAIN OR LOSS
The value of the Trust Fund as computed pursuant to Section
6.2 shall be compared with the value of the Trust Fund as of the previous
Valuation Date. Any difference in the value, not including contributions made
since the preceding Valuation Date, shall be the net increase or decrease of the
Trust Fund, and such amount shall be ratably apportioned by the Trustee on its
books among the Participants' Accounts. Dividends or other distributions paid
with respect to Company Stock allocated to Participant's Accounts or credited to
the Unallocated Suspense Account shall be accounted for pursuant to Section 6.5.
6.4 ALLOCATION OF CONTRIBUTIONS
Each Company Contribution under Section 5.1(a) shall be allocated as of
the last day of the Plan Year for which the contribution is made among the
Company Contribution Account and the Company Stock Account of eligible
Participants in the proportion that his or her Compensation for that Plan Year
bears to the Compensation of all Participants eligible to share in the Company
Contribution for that Plan Year under Section 4.2.
Each Participant's Company Contribution Account shall be credited with
the Participant's allocable share of the Company Contribution contributed in
cash and the Participant's appropriate Account shall be debited for the
Participant's allocable share (to be determined by the same method used to
allocate Company Contributions) of cash payments made by the Trustee for the
acquisition of Company Stock or for the payment of principal and/or interest on
an Acquisition Loan. Each Participant's Company Stock Account shall be credited
with the Participant's allocable share of Company Stock contributed in kind by
the Company for the Plan Year or purchased and paid for by the Trustee out of
the Participant's Company Contribution Account.
6.5 ALLOCATION OF DIVIDENDS OR DISTRIBUTIONS
(a) Any cash dividends or distributions paid on shares of Company Stock
allocated to Participants' Company Stock Accounts and remitted to the Trust Fund
shall, in the discretion of the Trustee and prior to the close of the Plan Year
in which paid, be either applied to repayment of an outstanding Acquisition Loan
concerning the Company Stock upon which the dividend or distribution is
received, distributed to Participants in cash, or invested by the Trustee.
(b) If cash dividends or distributions on allocated shares are used for
repayment of an Acquisition Loan, each Participant Account holding allocated
shares shall receive an allocation of Company Stock for the Plan Year from the
Company Stock to be allocated from the Unallocated Stock Suspense Account as a
result of all Company Contributions and all dividends or distributions paid
during the Plan Year applied to repayment of an outstanding Acquisition Loan
that shall have a minimum fair market value at least as great as the amount of
the cash dividend or distributions that would have been allocated to the
Participant's Account but for the Acquisition Loan repayment.
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(c) Any shares from the Unallocated Stock Suspense Account to be
allocated to Participant Accounts as a consequence of cash dividends or
distributions on allocated shares shall be allocated to Participant Accounts in
the proportion to which the cash dividend or distributions is attributable to
Company Stock held in each Participant Account. Any stock dividends received on
Company Stock shall be credited to the Accounts to which such Company Stock was
allocated. Cash dividends or distributions paid with respect to shares of
Company Stock in the Unallocated Stock Suspense Account shall be applied to the
repayment of the Acquisition Loan under which such stock was purchased. Company
Stock to be allocated as a consequence of such repayment and not required to be
allocated to the accounts of Participants receiving a cash dividend or
distribution used to repay an outstanding Acquisition Loan by operation of
Subsection (b) shall be allocated according to Section 6.4.
(d) Dividends or distributions paid on Company Stock by forgiveness of
debt in connection with an Acquisition Loan shall be treated as cash dividends
applied to repayment of an outstanding Acquisition Loan.
6.6 ALLOCATIONS OF PROCEEDS FROM SALE OR LIQUIDATION
(a) Proceeds with respect to Company Stock allocated to a Participant's
Account as a result of sale or redemption of Company Stock or of distributions
from liquidation of the Company resulting from sale or other disposition of
substantially all of the Company's assets shall be allocated in the Plan Year in
which such proceeds are received to such Participant's Account.
(b) Proceeds with respect to Company Stock held in the Unallocated
Stock Suspense Account as a result of sale or redemption of Company Stock or of
distributions from liquidation of the Company resulting from sale or other
disposition of substantially all of the Company's assets shall first be applied
to repayment of any outstanding Acquisition Loan with respect to such Company
Stock in the Plan Year in which such proceeds are received.
(c) Proceeds with respect to Company Stock held in the Unallocated
Stock Suspense Account as a result of sale or redemption of Company Stock or of
distributions from liquidation of the Company resulting from sale or other
disposition of substantially all of the Company's assets, net of proceeds
applied to repayment of an outstanding Acquisition Loan, shall be allocated in
the Plan Year in which such proceeds are received. The proportion of such
proceeds allocated to the Accounts of each Participant shall be the ratio of the
balance of that Participant's Accounts to the Accounts of all Participants,
computed as of the date immediately prior to any distribution made to
Participants in connection with the receipt of such proceeds.
6.7 ACCOUNTING FOR ALLOCATIONS
The Plan Administrator shall establish or provide for the establishment
of accounting procedures for the purpose of making the allocations, valuations,
and adjustments to Participants' Accounts provided for in this Section. From
time to time such procedures may be modified for the purpose of achieving
equitable and nondiscriminatory allocations among the Accounts of Participants
in accordance with the general concepts of the Plan and the provisions of this
Section.
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6.8 SPECIAL NONALLOCATION RULE
Notwithstanding Sections 6.3, 6.4, and 6.5, no Section 1042 Stock shall
be allocated to any Section 1042 Participant during the Section 1042
Nonallocation Period. Section 1042 Stock shall be allocated according to Section
6.4, except that the Compensation of all Section 1042 Participants shall be
excluded. The foregoing restriction shall cease to apply to any Section 1042
Stock in the Suspense Account at such time as such stock ceases to be Section
1042 Stock.
6.9 MAXIMUM ALLOCATION
The provisions of this Section shall be construed to comply with the
maximum allocations permitted under Section 415 of the Code.
(a) Notwithstanding anything in this Section to the contrary, in no
event shall the sum of:
(1) the lower of (i) any Company Contribution, or (ii) the sum of
the fair market value of Company Stock allocated to a Participant's Account as a
result of a Company Contribution plus Company Contributions that do not result
in allocations of Company Stock to Participant Accounts;
(2) any forfeitures; and
(3) the Participant's own contributions, determined without regard
to rollover contributions (as defined in Sections 402(a)(5), 403(a)(4),
403(b)(8), and 408(d)(3) of the Code) and without regard to employee
contributions to a Simplified Employee Pension which are excludable from gross
income under Section 408(b) of the Code, allocated for any Limitation Year to
any Participant under this and any other defined contribution plan maintained by
the Company or any 50 Percent Affiliated Company, exceed the lesser of $42,000
(prorated for any short Plan Year) or one hundred percent (100%) of such
Participant's Compensation for the Limitation Year, provided, however, that if
no more than one-third of the Company Contribution for a Plan Year is allocated
to the group of Eligible Employees consisting of Highly Compensated Employees,
then "employer contributions" in Subsection (a)(1) above shall not include any
portion of the Company Contribution used to pay interest on an Acquisition Loan
and charged against the Participant's Account and "forfeitures" in Subsection
(a)(2) shall not include forfeitures of Company Stock acquired by the Plan
pursuant to an Acquisition Loan and reallocated to the Participant's Account.
(b) If the Company Contributions under this Plan and any other defined
contribution plan maintained by the Company or any 50 Percent Affiliated Company
would cause such plans to exceed the limitations set forth in Subsection (a),
then the following remedial measures shall be taken in the following order to
attempt to comply with such limitations:
(1) If Company Stock cannot be allocated to a Participant's Account
because of the limitation contained in Subsection (a), but would be able to be
allocated consistent with such limitation if not more than one-third of the
Company Contribution were allocated to the group of Eligible Employees
consisting of Highly Compensated Employees, and allocation of such Company Stock
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exclusively on behalf of non-Highly Compensated Employees would result in not
more than one-third of the Company Contribution allocated to the group of
Eligible Employees consisting of Highly Compensated Employees, then such Company
Stock shall be allocated to the accounts of non-Highly Compensated Employees
notwithstanding Section 6.4.
(2) If Company Contributions and/or forfeitures cannot be allocated
to a Participant's Account because of the limitation contained in Subsection
(a), such Company Contributions and/or forfeitures shall be allocated to the
Accounts of the remaining Participants in accordance with Section 6.2 and
provided such allocations do not result in any Highly Compensated Employee
receiving an allocation of Company Contributions and/or forfeitures for such
Plan Year that is greater as a percentage of Compensation than the allocation of
Company Contributions and/or forfeitures for such year as a percentage of
Compensation for any non-Highly Compensated Employee.
(3) If Company Contributions otherwise allocable to the Accounts of
Participants would exceed the limits of Subsection (a) as a result of a
reasonable error in estimating the Participants' Compensation, the Plan
Administrator shall determine the amount of the excess and the Trustee shall
hold the excess in a suspense account until the following Plan Year (or
succeeding Plan Years), at which time it shall be allocated pursuant to Section
6.4 to the Accounts of all Participants before any contributions by the Company
may be made for the Plan Year. Amounts held in the suspense account shall share
in the investment gains and losses of the Trust Fund.
(4) If the limits of Subsection (a) will be exceeded as a result of
a Company Contribution to another Qualified Plan and the Company is permitted by
law and by the terms of such other Qualified Plan to reduce the Company
Contribution to such Qualified Plan or to receive a refund of a portion of the
Company Contribution to such Qualified Plan, the Company shall reduce its
Company Contribution to such Qualified Plan or exercise its right to receive a
refund from such Qualified Plan to the extent necessary to comply with the
limitations set forth in Subsection (a).
(c) For purposes of this Section 6.9:
(1) the dollar limitation described in Subsection (a) shall be
adjusted in accordance with governmental regulations describing the method and
amount of such adjustments.
(2) the dollar limitation described in Subsection (a) shall not
reduce the annual additions to the Account of any Participant under the Plan
prior to the Effective Date, using the applicable maximum dollar limitations
then in effect.
(d) Contributions allocated to an individual medical benefit account,
as defined in Section 415(l)(2) of the Code, shall be treated as an annual
addition to a defined contribution plan for purposes of the determining
application of the limitation described in Subsection (a).
(e) Amounts attributable to medical benefits allocated to an account
established under Section 419(A)(d) of the Code on behalf of a Key Employee (as
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defined in Section 9.2(c)) shall be treated as an annual addition to a defined
contribution plan for purposes of determining application of the dollar
limitation described in Subsection (a).
(f) Allocations of proceeds pursuant to Section 6.6 shall not be
considered an annual addition for purposes of this Section 6.9.
SECTION 7
---------
VESTING
-------
7.1 VESTING OF ACCOUNTS
(a) Subject to the provisions of Sections 7.2 and 9.5, the portion of a
Participant's Account relating to Company Contributions described in Section 5.1
that is vested (nonforfeitable) on any specified date shall be determined on the
basis of his or her Years of Service in accordance with the following schedule:
YEARS OF SERVICE VESTED PERCENTAGE
---------------- -----------------
3 20%
4 40%
5 60%
6 80%
7 or more 100%
(b) In computing Years of Service for vesting purposes under the Plan,
a Participant shall receive one year of vesting credit for each year of service
with the Company prior to March 1, 2005.
(c) Notwithstanding the foregoing, the Account of a Participant who is
an Eligible Employee of the Company shall become one hundred percent (100%)
vested and nonforfeitable upon a Participant's death or Disability.
7.2 FORFEITURES
If all of a Participant's Account is not vested under the Plan upon a
Participant's termination of employment, the nonvested portion of the
Participant's Account shall remain in the Plan, but no further allocation of
Company Contribution (or forfeitures) to the Plan shall be made to the
Participant's Account. If the Participant completes a Five-Year Break in
Service, the nonvested portion of the Participant's Account shall be forfeited
and deemed to be a Company Contribution to the Plan made pursuant to Section 5.1
for the Plan Year in which the forfeiture occurs. If a Participant receives a
distribution pursuant to Section 8.2(f), the forfeiture of the Participant's
Account that is not vested under the Plan shall occur at the time of the
distribution. Any financed shares allocated to a Participant's Account shall be
forfeited only after other assets have been forfeited.
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7.3 EFFECT OF BREAK IN SERVICE ON SERVICE
If a Participant who terminated his or her employment with the Company
is rehired by the Company and again becomes a Participant in the Plan pursuant
to Section 4.3, all Years of Service prior to his or her Break in Service shall
continue to be counted toward determining vesting of such Participant's Account
(including undistributed portions of the Participant's Account that accrued
prior to the Break in Service) if the Break in Service is not a Five-Year Break
in Service.
If such Break in Service is a Five-Year Break in Service:
(a) All Years of Service prior to the Break in Service shall be
excluded if the Participant had no vested account balance at the time of his or
her Five-Year Break in Service; and
(b) Years of Service after the Break in Service shall be excluded for
the purpose of determining a Participant's vested interest in his or her Account
that accrued before such Break in Service. Separate Accounts shall be maintained
for the Participant's pre-break and post-break Account balances.
7.4 RESTORATION OF PARTICIPANT'S ACCOUNT
(a) If a rehired Participant whose Account was not one hundred percent
(100%) vested received a distribution of the vested portion of his or her
Account pursuant to Section 8, the Participant's Account shall be restored to
the balance on the Allocation Date (or Valuation Date) immediately preceding the
distribution if the Participant repays to the Plan the full amount of such
distribution on or before the Participant incurs five consecutive Breaks in
Service following the date of distribution.
(b) To restore the Participant's Account balance, the Plan
Administrator shall, to the extent necessary, allocate to such Participant's
Account the following amounts in the order listed:
(1) The amount of any Participant forfeitures that would otherwise
be allocated under Section 6.4;
(2) The amount of any net income or gain of the Fund for the Plan
Year; and
(3) The amount of the Employer contribution for the Plan Year,
except to the extent such contribution is required to enable the Plan to meet
its obligations under an Exempt Loan.
To the extent the foregoing amounts are insufficient to restore
completely the Participant's Account, the Employer shall contribute without
regard to any requirement or condition contained in Section 5.1, such additional
amount as is necessary to complete such restoration. Such contribution must be
made as of the Allocation Date for the Plan Year in which the Participant's
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repayment occurs or the following Plan Year. If more than one Participant's
Account must be restored, such Accounts shall be restored pro-rata.
7.5 RETURNING VETERANS' RIGHTS
Notwithstanding any provisions of this Plan to contrary, contributions,
benefits, and service credit with respect to a Military Absence shall be
provided in accordance with Section 414(u) of the Code.
SECTION 8
---------
BENEFIT DISTRIBUTIONS
----------------------
TO PARTICIPANTS AND BENEFICIARIES
---------------------------------
8.1 GENERAL
A Participant shall not be permitted to withdraw any portion of his or
her interest under the Plan while he or she is employed by the Company, except
in the case of dividends or distributions distributed in cash to Participants as
set forth in Section 6.5 and distributions required by law and set forth in
Section 8.2(d). All distributions shall be subject to mandatory withholding
rules as may be in effect under the Code and accompanying regulations unless a
Distributee elects a Direct Rollover set forth in Section 8.11. Notwithstanding
anything in the Plan to the contrary, the form and timing of all distributions
under the Plan shall otherwise comply with the requirements of Section 401(a)(9)
of the Code and the Treasury regulations thereunder. The Plan shall apply the
minimum distribution requirements of Section 401(a)(9) of the Code in accordance
with the final Treasury Regulations under Section 401(a)(9) of the Code that
were published on April 17, 2002. There are no preretirement death benefits
provided by the Plan.
8.2 TIME OF DISTRIBUTION TO PARTICIPANTS
(a) Unless the Participant elects otherwise in writing, the
distribution of benefits to a Participant (or his or her beneficiary) under the
Plan shall commence no later than the last day of the Plan Year following the
Plan Year in which any of the following events occur:
(1) a Participant who has terminated his or her employment reaches
his or her Normal Retirement Date;
(2) a Participant who has reached his or her Normal Retirement Date
terminates his or her employment with the Company; or
(3) a Participant incurs a Disability or dies.
All benefits accrued on behalf of a Participant who dies or incurs a
Disability shall be distributed within five years of the date of death or
Disability, provided, in the case of Disability, that the Participant consents
to any distribution prior to his or her Normal Retirement Date. If a Participant
dies or incurs a Disability after distribution of his or her benefits have
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commenced, such Participant's remaining interest in the Plan shall be
distributed at least as rapidly as under the method of distribution being used
as of the date of the Participant's death.
(b) Unless the Participant elects otherwise in writing, distribution of
benefits to a Participant (or his or her beneficiary) under the Plan shall
commence no later than sixty days following the Plan Year in which the latest of
the following events occur:
(1) a Participant who has terminated his or her employment;
(2) a Participant who has reached his or her Normal Retirement Date
terminates his or her employment with the Company; or
(3) the tenth anniversary of the year in which the participant
commenced participation in the plan.
(c) A Participant who terminates his or her employment with the Company
prior to his or her Normal Retirement Date may elect to begin to receive his or
her benefits based upon the portion of his or her Account that is Company Stock
during the Plan Year occurring immediately following the Plan Year that is the
fifth Plan Year after the Plan Year in which such Participant terminates his or
her employment with the Company. Elections shall be made on a form to be
provided by the Plan Administrator with all required explanations during the
90-day period prior to the end of the Plan Year that is the fifth Plan Year
after the Plan Year in which such Participant terminates his or her employment
with the Company. A Participant who terminates his or her employment with the
Company prior to his or her Normal Retirement Date and who does not elect to
receive his or her benefit pursuant to this Section 8.2(c) shall receive his or
her benefit upon reaching his or her Normal Retirement Date.
(d) Notwithstanding any Participant election or any other provision of
this Plan, each Participant under the Plan who owns five percent (5%) or more of
the Company shall receive his or her entire benefit under the Plan no later than
January 1st of the calendar year following the calendar year in which the
Participant attains age 70 1/2. The Participant shall receive distributions
while still employed by the Company as necessary to effectuate the provisions of
this paragraph.
(e) Notwithstanding any Participant election or any other provision of
this Plan, each Participant under the Plan who does not own five percent (5%) or
more of the Company shall receive his or her entire Account balance under the
Plan no later than the later of (i) April 1st of the calendar year following the
calendar year in which the Participant attains age 70 1/2, or (ii) April 1st of
the calendar year following the calendar year in which the Participant incurs a
severance from employment with the Company.
(f) Notwithstanding any of the above provisions, a Participant whose
Account balance has a total value of $5,000 or less shall receive the value of
his or her entire account balance in a lump sum by the end of the first Plan
Year after the Plan Year in which such Participant incurs a severance from
employment with the Company for any reason, including, but not limited to,
death, Disability, retirement, and voluntary or involuntary severance from
employment, provided he or she first makes an election to do so. Absent such an
election, the value of his or her entire account balance shall be transferred
directly to the individual retirement plan of a designated trustee or insurer.
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No Participant shall be required to receive a distribution of all or part of his
or her Account balance prior to his or her Normal Retirement Date if his or her
total Account balance under this Plan exceeds $5,000. In the event that a
Participant terminates employment at a time when he or she is zero percent (0%)
vested in his or her Account, the Participant shall be deemed to have received a
lump-sum distribution of his or her entire vested Account balance ($0) at the
time of his or her termination of employment.
(g) Notwithstanding any of the foregoing provisions, no benefits based
upon the portion of a Participant's Account that is Company Stock acquired
through an Acquisition Loan shall be distributed to a Participant before the
Participant attains his or her Normal Retirement Date (other than according to
subparagraph (a)(3) or subparagraphs (d) and (e) of this Section) prior to the
close of the Plan Year after the Plan Year in which such Acquisition Loan is
repaid in full.
8.3 VALUATION FOR DISTRIBUTION
For the purpose of paying the amounts to be distributed to a
Participant or his or her Beneficiaries pursuant to Section 8.5 or determining
the fair market value of Company Stock to be repurchased by the Company pursuant
to Section 8.6, the value of Company Stock held within the Trust Fund and the
value of the Participant's interest in Company Stock shall be determined by an
Independent Appraiser in accordance with the provisions of Section 6 as of the
Valuation Date coincident or immediately preceding the date upon which the
Participant is to receive a distribution from the Plan.
8.4 MODE OF DISTRIBUTION
Unless the a Participant elects otherwise, the distribution of the
Participant's Account balance shall be in substantially equal periodic payments
(not less frequently than annually) over a period not longer than the greater of
(i) 5 years, or (ii) in the case of a Participant's Account with an account
balance in excess of $850,000, 5 years plus 1 additional year (but not more than
5 additional years for each $170,000 or fraction thereof by which such balance
exceeds $850,000) subject to increase for cost of living adjustments as
described in Section 409(o)(2) of the Code.
8.5 FORM OF DISTRIBUTION
Distribution of a Participant's Account shall be made in shares of
Company Stock, cash, or a combination of Company Stock and cash; provided,
however that the Plan Administrator shall provide written notification to the
Participant of his or her right to demand that the value of the portion of his
or her Account not diversified pursuant to Section 12.6 herein below be
distributed solely in Company Stock.
8.6 OPTION TO HAVE THE COMPANY PURCHASE COMPANY STOCK
Any Participant who receives Company Stock pursuant to Section 8.5, and
any person who has received Company Stock from such a Participant by reason of
the Participant's death or incompetency shall have the right to require the
Company to purchase all Company Stock received in a distribution from the Trust
for its current fair market value (hereinafter referred to as the "put option").
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The put option shall not apply to the extent that the Company Stock may be sold
on an established market in accordance with federal and state securities laws
and regulations. The put option shall be exercisable only with respect to the
entire distribution of Company Stock received by a Participant from the Trust.
The put option shall be exercised by written notice to the Company during the
first 60 days after the Company Stock is distributed by the Plan and for a
60-day period commencing one year after the Company Stock is distributed by the
Plan, and, if exercised, the Trustee may, in his or her sole discretion, assume
the Company's rights and obligation with respect to purchasing the Company
Stock. If the Company is required to repurchase Company Stock distributed to a
Participant as part of a distribution of a Participant's entire Account within a
single taxable year of the Participant, (i) the amount to be paid must be paid
in substantially equal periodic payments (not less frequently than annually)
over a period beginning not later than 30 days after the exercise of the put
option described above and not exceeding five years, and (ii) there must be
adequate security provided and a reasonable rate of interest paid on the unpaid
amounts referred to in (i) above. If the Company is required to repurchase
Company Stock as part of an installment distribution, the amount to be paid for
the Company Stock shall be paid not later than 30 days after the exercise of the
put option described above. Nothing contained herein shall be deemed to obligate
the Company to register any Company Stock under any federal and state securities
law or to create a public market to facilitate transferability of Company Stock.
The put option herein described may only be exercised by a person described in
the first sentence of this Section 8.6 and may not be transferred either
separately or together with any Company Stock to any other person.
8.7 RESTRICTIONS ON PARTICIPANTS' DISPOSITION OF COMPANY STOCK
Any Participant who receives Company Stock pursuant to Section 8.5, and
any person who has received Company Stock from such a Participant by reason of
the Participant's death or incompetency shall, prior to any sale or other
transfer of the Company Stock, first offer in writing to sell the Company Stock
to the Company and the Plan at its fair market value. This restriction shall
apply to any non-gratuitous transfer, whether voluntary, involuntary, or by
operation of law, except that it shall not apply to a transfer either to a
Participant's personal representatives or to the bank or other investment
institution receiving the Company Stock in a rollover contribution. This
restriction shall also not apply in the event that Company Stock becomes readily
tradable on an established market. Either the Company or the Trustee may accept
the offer within 14 days after it is delivered. If a Participant who has
received Company Stock pursuant to Section 8.5 shall have received a bona fide
written offer from a prospective buyer in excess of the current fair market
value of the Company Stock as determined according to Section 6.2, then,
notwithstanding Section 6.2, the fair market value of the Company Stock shall be
the amount of the offer, however, the Plan shall not be permitted to purchase
the Company Stock from the Participant. Any Company Stock distributed by the
Plan shall bear a conspicuous legend describing the right of first refusal under
this Section 8.7 as well as any other restrictions upon the transfer of the
Company Stock pursuant to the Company's Certificate of Incorporation, the
Company's bylaws, or federal or state securities laws and regulations.
-24-
8.8 BENEFICIARY DESIGNATION
(a) Death benefits under the Plan shall be paid to the Participant's
surviving spouse (1) unless (A) such spouse consents in writing not to receive
such benefit and consents to the specific beneficiary designated by the
Participant, (B) such consent acknowledges its own effect, and (C) such consent
is witnessed by a Plan representative or notary public; or (2) unless the
Participant establishes to the satisfaction of a Plan representative either that
he or she has no spouse or that his or her spouse cannot be located.
(b) Except as provided in paragraph (a) above, each Participant shall
have the unrestricted right at any time to designate the beneficiary or
beneficiaries who shall receive, on or after his or her death, his or her
interest in the Trust Fund. Such designation shall be made by executing and
filing with the Plan Administrator a written instrument in such form as may be
prescribed by the Plan Administrator for that purpose. Except as provided in
this Section, the Participant shall also have the unrestricted right to revoke
and to change, at any time and from time to time, any beneficiary designations
previously made. Such revocations and/or changes shall be made by executing and
filing with the Plan Administrator a written instrument in such form as may be
prescribed by the Plan Administrator for that purpose. No designation,
revocation, or change of beneficiaries shall be valid and effective unless and
until filed with the Plan Administrator. If no designation is made, or if the
beneficiary named in such designation predecease the Participant, or if the
beneficiaries cannot be located by the Plan Administrator, the interest of the
deceased Participant shall be paid to the Participant's surviving spouse or, if
none, to the Participant's estate.
8.9 MAILING ADDRESS
Benefit payments and notifications hereunder to any Participant shall
be deemed made when mailed to the last address furnished to the Plan
Administrator.
8.10 DELAY IN BENEFIT DETERMINATION
If the Plan Administrator is unable to determine the benefits payable
to a Participant or Beneficiary on or before the latest date prescribed for
payment pursuant to Section 8.2, the benefits shall in any event be paid within
60 days after they can first be determined.
8.11 ELIGIBLE ROLLOVER DISTRIBUTIONS
Notwithstanding any provision of the plan to the contrary that would
otherwise limit a distributee's election under this Section, a distributee may
elect, at the time and in the manner set forth herein, to have any portion of an
Eligible Rollover Distribution paid directly to an eligible retirement plan
specified by the distributee in an direct rollover. If a distributee elects to
receive his or her Distribution of a Participant's Account in cash or a
combination of Company Stock and cash, or as described in Section 8.5, is
required to receive such distribution in cash, and such distribution is an
Eligible Rollover Distribution, the distributee shall receive notice, as more
fully described in Section 11.7, of his or her right to request that the
distribution be transferred as a Direct Rollover. Such Direct Rollover shall be
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completed pursuant to the written directions of the distributee. Such written
directions shall acknowledge the participant's intention that the distribution
be paid to an Eligible Retirement Plan as a Direct Rollover, and must contain
the name of the new Trustee and the address of the distributee to which the
distribution should be sent. Upon its receipt of the directions, the Plan
Administrator shall communicate such directions to the Trustee, who will draw
the distribution check payable to the new receiving Trustee. The Plan
Administrator and or Trustee shall mail the check payment as soon as is
administratively feasible to the distributee at the address listed by the
distributee in his or her written directions. It shall be the sole
responsibility of the distributee to deliver the distribution check to his or
her Trustee within the applicable time period allowed by the Code for tax-free
rollovers to Eligible Retirement Plans.
SECTION 9
---------
TOP-HEAVY PROVISIONS
--------------------
9.1 GENERAL
The following provisions shall apply automatically to the Plan and
shall supersede any contrary provisions for each Plan Year in which the Plan is
a Top-Heavy Plan. It is intended that this Section shall be construed in
accordance with the provisions of Section 416 of the Code.
9.2 DEFINITIONS
The following definitions shall supplement those set forth in Section 3
of the Plan:
(a) "Aggregation Group" shall mean:
(1) each plan (including a frozen plan or a plan that has been
terminated during the 60-month period ending on the Determination Date) of the
Company or an Affiliated Company in which a Key Employee is a participant;
(2) each other plan (including a frozen plan or a plan that has
been terminated during the 60-month period ending on the Determination Date) of
the Company or an Affiliated Company that enables any plan in which a Key
Employee participates to meet the requirements of Section 401(a)(4) or 410 of
the Code; and
(3) each other plan (including a frozen plan or a plan that has
been terminated during the 60-month period ending on the Determination Date) of
the Company or an Affiliated Company that is included by the Company if the
Aggregation Group, including such a plan, would continue to meet the
requirements of Sections 401(a)(4) and 410 of the Code.
(b) "Determination Date" shall mean the last day of the preceding Plan
Year, except that for the first Plan Year it shall mean the last day of that
Plan Year.
(c) "Key Employee" for any Plan Year shall mean any Employee or former
Employee who is a Key Employee for such Plan Year as defined under Section
416(i)(1)(A)(i) of the Code).
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(d) "Key Employee Ratio" shall mean the ratio for any Plan Year,
calculated as of the Determination Date of such Plan Year, determined by
comparing the amount described in Subsection (d)(1) with the amount described in
Subsection (d)(2) after deducting from each such amount any portion thereof
described in Subsection (d)(3). The present value of accrued benefits under all
qualified defined benefit plans included in the Aggregation Group shall be
determined on the basis of the actuarial assumptions used by such plan.
(1) The amount described in this paragraph (1) is the sum of (A)
the aggregate of the present value of all accrued benefits of Key Employees
under all qualified defined benefit plans included in the Aggregation Group, (B)
the aggregate of the balances in all of the accounts standing to the credit of
Key Employees under all qualified defined contribution plans included in the
Aggregation Group, and (C) the sum of the amount of any in-service distributions
during the period of the five Plan Years ending on the Determination Date and
the amount of any other distributions during the one-year period ending on the
Determination Date, to or on behalf of any Key Employee for all plans in the
Aggregation Group.
(2) The amount described in this paragraph (2) is the sum of (A)
the aggregate of the present value of all accrued benefits of all Participants
under all qualified defined benefit plans included in the Aggregation Group, (B)
the aggregate of the balances in all of the accounts of all Participants under
all qualified defined contribution plans included in the Aggregation Group, and
(C) the sum of the amount of any in-service distribution during the period of
five Plan Years ending on the Determination Date, and the amount of any other
distributions during the one-year period ending on the Determination Date, to or
on behalf of an Participants from all plans in the Aggregation Group.
(3) The amount described in this paragraph (3) is the sum of (A)
all rollover contributions (or fund to fund transfers) to the Plan by an
Employee from a plan sponsored by an employer that is not the Company or an
Affiliated Company, (B) any amount that would have been included under paragraph
(d)(1) or (d)(2) hereof with respect to any person who has not rendered service
to the Company or an Affiliated Company at any time during the one year period
ending on the Determination Date, and (C) any amount that is included in
paragraph (2) hereof, for or on behalf of, or on account of, a person who is a
Non-Key Employee as to the Plan Year of reference but who was a Key Employee as
to any earlier Plan Year.
(e) "Non-Key Employee" shall mean any person who is an Employee or a
former Employee of the Company or an Affiliated Company in any Plan Year but who
is not a Key Employee as to that Plan Year. The term "Non-Key Employee" shall
also include the beneficiaries of such persons.
(f) "Top-Heavy Plan" shall mean each plan in an Aggregation Group if,
as of the applicable Determination Date, the Key Employee Ratio exceeds sixty
percent (60%), determined in accordance with Section 416 of the Code.
Solely for the purpose of determining if the Plan, or any other plan
included in a Required Aggregation Group of which this Plan is a part, is
top-heavy, the accrued benefit of an Employee other than a Key Employee shall be
determined under (A) the method, if any, that uniformly applies for accrual
purposes under all plans maintained by the Company and all Affiliated Companies,
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or (B) if there is no such method, as if such benefit accrued not more rapidly
than at the slowest accrual rate permitted under the fractional accrual rate of
Section 411(b)(1)(C) of the Code.
9.3 MINIMUM CONTRIBUTION FOR NON-KEY EMPLOYEES
(a) In each Plan Year in which the Plan is a Top-Heavy Plan, each
Participant who is a Non-Key Employee (except a Participant who is a Non-Key
Employee as to the Plan Year of reference but who was a Key Employee as to any
earlier Plan Year) and who is employed by the Company on the last day of such
Plan Year shall receive a total minimum Company Contribution (including
forfeitures) under the Plan of not less than three percent (3%) of the
Participant's Compensation, to a maximum of $210,000 (as adjusted for increases
in the cost of living in accordance with Section 401(a)(17)(B) of the Code) of a
Participant's Compensation. All such Participants shall receive such minimum
Company Contribution regardless of whether the Participant has performed 1,000
Hours of Service for such Plan Year.
(b) The percentage set forth in Subsection (a) shall be reduced to the
percentage at which contributions, including forfeitures, are made (or required
to be made) for a Plan Year for the Key Employee for whom such percentage is the
highest for that Plan Year. This percentage shall be determined for each Key
Employee by dividing the contributions for such Key Employee by his or her
Compensation for the Plan Year. All defined contribution plans required to be
included in an Aggregation Group shall be treated as one plan for the purpose of
this Section; however, this Section shall not apply to any plan that is required
to be included in an Aggregation Group if such plan enables a defined benefit
plan in the Aggregation Group to meet the requirements of Section 401(a)(4) or
410 of the Code.
(c) If a Non-Key Employee described in Subsection (a) participates in
both a defined benefit plan and a defined contribution plan described in Section
9.2(a)(1) and (2), the Company is not required to provide such Non-Key Employee
with both the minimum benefit under the defined benefit plan and the minimum
contribution. In such event, the Non-Key Employee shall receive the minimum
contribution provided under the defined benefit Top-Heavy Plan.
9.4 SOCIAL SECURITY
The Plan, for each Plan Year in which it is a Top-Heavy Plan, must meet
the requirements of this Section without regard to any Social Security or
similar contributions or benefits.
9.5 ADJUSTMENT TO VESTING SCHEDULE
If, for any Plan Year, the Plan is determined to be Top-Heavy
("Top-Heavy Plan Year"), a Participant who has completed at least three (3)
years of service with the Company shall have a nonforfeitable right to 100
percent of his or her Account balance derived from Company contributions based
upon the following table.
Years of Service Percentage Vested
---------------- -----------------
Less than 3 0%
3 or more 100%
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If the Plan shall cease to be Top-Heavy for any succeeding Plan Year
following a Top-Heavy Plan Year, the portion of a Participant's Account that is
vested shall be determined according to the vesting schedule set forth in
Section 7.1, provided (i) that all portions of a Participant's Account that
became vested during a Top-Heavy Plan Year shall continue to be vested, not
withstanding application of the vesting schedule set forth in Section 7.1, and
(ii) if such Participant has more than three Years of Service, such Participant
may elect to have his nonforfeitable percentage determined according to the
schedule set forth above.
9.6 CEILING ON INCLUDIBLE COMPENSATION
If this Plan is determined to be a Top Heavy Plan in any Plan Year,
only the first $200,000 (as adjusted for increases in the cost of living in
accordance with Section 401(a)(17)(B) of the Code) of a Participant's
Compensation shall be taken into account in determining the allocation to the
Accounts of such Participant for the Plan Year.
9.7 EMPLOYEES COVERED BY COLLECTIVE BARGAINING AGREEMENTS
Sections 9.3 and 9.6 shall not apply with respect to any employee
included in a unit of employees covered by a collective bargaining agreement
provided that (i) retirement benefits for members of the collective bargaining
unit were the subject of good faith bargaining between the Company and the
collective bargaining unit and (ii) the Company and the collective bargaining
unit have not otherwise agreed to include members of the collective bargaining
unit as Participants in the Plan.
SECTION 10
----------
RULES GOVERNING
---------------
BENEFIT CLAIMS AND REVIEW OF APPEALS
------------------------------------
10.1 CLAIMS FOR BENEFITS
Benefits under this Plan shall be paid when properly written
application for same is received by the Plan Administrator. In the event that
the Participant fails to apply to the Plan Administrator for his or her benefits
by his or her Normal Retirement Date or by the date five years after the date
upon which his or her employment terminates, if later, the Plan Administrator
shall make diligent efforts to locate such Participant.
10.2 NOTIFICATION BY PLAN ADMINISTRATOR
Within 60 days after receiving a claim for benefits, the Plan
Administrator shall notify the Participant or Beneficiary whether the claim has
been approved or denied. If the Plan Administrator denies a claim in any
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respect, the Plan Administrator shall set forth in a written or electronic
notice to the Participant or Beneficiary:
(a) each specific reason for the denial;
(b) specific references to the pertinent Plan provisions upon which the
denial is based;
(c) a description of any additional material or information which
reasonably could be submitted by the Participant or Beneficiary to support this
claim, with an explanation of the relevance of that material or information; and
(d) an explanation of the claims review procedures described in Section
10.3 and the time limits applicable for such procedure, including a statement of
the claimant's right to bring a civil action under Section 502(a) of ERISA
following an adverse benefit determination on appeal.
10.3 CLAIMS REVIEW PROCEDURE
Within 60 days after receiving notice from the Plan Administrator that
his or her claim for benefits has been denied in any respect, the Participant or
Beneficiary may file with the Plan Administrator a written notice of appeal
setting forth his or her reasons for disputing the Plan Administrator's
determination. In connection with the appeal, the Participant or Beneficiary or
his or her representative may inspect or purchase copies of pertinent documents
and records to the extent not inconsistent with other Participants' and
Beneficiaries' right of privacy. Within 60 days after receiving a notice of
appeal from a prior determination, the Plan Administrator shall furnish to the
Participant or Beneficiary and his or her representative, if any, a written or
electronic statement of the Plan Administrator's final decision with respect to
his or her claim, which statement shall be drafted in a manner calculated to be
understood by the claimant and shall include the specific reasons for the
decision; specific references to the pertinent Plan provisions upon which the
decision is based; the claimant's right to receive, upon request and free of
charge, reasonable access to, and copies of, all documents, records, and other
information relevant to the claim for benefits; and the claimant's right to
bring a civil action under Section 502(a) of ERISA. In special circumstances,
however, the Plan Administrator may extend the response period for up to an
additional sixty days, in which it shall notify the claimant prior to
commencement of the extension.
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SECTION 11
----------
THE PLAN ADMINISTRATOR
----------------------
11.1 AUTHORITY OF PLAN ADMINISTRATOR
The Plan Administrator shall have exclusive discretionary
responsibility and authority to control and manage the operation and
administration of the Plan, including the interpretation and application of its
provisions, except to the extent such responsibility and authority are otherwise
specifically (a) allocated to the Company or the Trustee under the Plan and
Trust Agreement; (b) delegated to other persons by the Company, the Plan
Administrator, or the Trustee; or (c) allocated to other parties by operation of
law. The Plan Administrator shall have no investment responsibility with respect
to the Trust Fund.
11.2 CONCLUSIVE DETERMINATION OF THE PLAN ADMINISTRATOR
The Plan Administrator shall have full responsibility and authority to
interpret the Plan and such reasonable interpretation, made in good faith, shall
be final and conclusive on any Employee, former Employee, Participant, former
Participant, and Beneficiary.
11.3 GENERAL EQUITABLE AUTHORITY TO CORRECT RECORDKEEPING MISTAKES
Pursuant to the partial list of enumerated powers as set forth in this
Section 11, the Plan Administrator shall have general equitable authority to
correct allocation errors, as set forth in Section 4 herein above, made as a
result of good faith error(s) in recordkeeping for the Plan.
11.4 RELIANCE ON TABLES, ETC.
In administering the Plan, the Administrator shall be entitled, to the
extent permitted by law, to rely conclusively upon all tables, valuations,
certificates, opinions, and reports that are furnished by any accountant,
Trustee, counsel, or other expert who is employed or engaged by the Plan
Administrator or by the Company on the Plan Administrator's behalf.
11.5 IDENTITY OF PLAN ADMINISTRATOR
The Plan Administrator shall be selected by the Board of Directors of
the Company and may be an individual, individuals, or a corporate person. Any
individual(s), including but not limited to a director, shareholder, officer, or
other employee of the Company, shall be eligible to serve as the Plan
Administrator. If the Board of Directors does not designate a Plan
Administrator, the Plan Administrator shall be the Company and the Board of
Directors may appoint an Administrative Committee to advise the Company in
performance of its duties as Plan Administrator. If created, the Administrative
Committee shall have three members as appointed from time to time by the Board
of Directors. Any individual eligible to become Plan Administrator shall be
eligible for appointment to the Administrative Committee. The Administrative
Committee shall operate according to rules and procedures similar to those set
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forth for operation of the Trustee described in Section 12 below. The Board of
Directors shall have the power to remove the Plan Administrator and/or members
of the Administrative Committee at any time without cause and without notice.
The Board of Directors shall notify the Trustee upon removal, resignation, or
other replacement of the Plan Administrator and/or members of the Administrative
Committee.
11.6 DUTIES OF PLAN ADMINISTRATOR
The Plan Administrator shall keep whatever records may be necessary to
implement the Plan and shall furnish whatever reports may be required from time
to time by the Trustee and whatever information may be necessary properly to
administer the Trust. The Plan Administrator shall see to the filing with the
appropriate government agencies of all reports and returns required under ERISA
and other laws. In addition, the Plan Administrator shall establish reasonable
procedures to determine the qualified status of Domestic Relations Orders that
relate to the Plan, as provided in Section 414(p) of the Code.
11.7 RESPONSIBILITIES TO PARTICIPANTS
The Plan Administrator's responsibilities shall include, but not be
limited, to the following. The Plan Administrator shall determine which
Employees are to enter the Plan according to the terms of the Plan. The Plan
Administrator shall furnish to each Eligible Employee whatever summary plan
description, summary annual reports, and other notices and information may be
required by ERISA. The Plan Administrator also shall determine when a
Participant or his or her Beneficiary qualifies for benefits under the Plan and
shall provide for the distribution of benefits in the proper form and amount
from the assets of the Trust Fund. The Plan Administrator shall, at least 30 but
no more than 90 days prior to making any distribution, including a distribution
that qualifies as an Eligible Rollover Distribution according to Section
402(a)(5)(E) of the Code, furnish the recipient of a distribution with the
statement required by Section 402(f) of the Code.
11.8 ESTABLISHMENT OF PARTICIPANTS' ACCOUNTS
The Plan Administrator shall maintain on its records for each
Participant any and all Accounts that may be necessary in connection with
participation in the Plan.
11.9 PLAN EXPENSES
The reasonable expenses incurred by the Plan Administrator in
connection with the operation of the Plan, including, but not limited to, the
expenses incurred by reason of the engagement of professional assistants and
consultants, shall be expenses of the Plan and shall be payable from the Trust
Fund at the direction of the Plan Administrator. The Company shall have the
option, but not the obligation, to pay any such expenses, in whole or in part,
and, by doing, to relieve the Trust Fund from the obligation of bearing such
expenses. Payment of any such expenses by the Company on one occasion shall not
bind the Company to pay any similar expenses on any subsequent occasion.
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11.10 INDEMNIFICATION OF THE PLAN ADMINISTRATOR
Each person who serves as the Plan Administrator and any other person
who is an employee or director of the Company or an Affiliated Company shall be
indemnified by the Company against expenses (other than amounts paid in
settlement to which the Company does not consent) reasonably incurred by him or
her in connection with any action to which he or she may be a party by reason of
his or her performance of administrative functions and duties under the Plan,
except in relationship to matters as to which he or she shall be adjudged in
such action to be personally guilty of willful misconduct in the performance of
his or her duties. The foregoing right to indemnification shall (i) be in
addition to such other rights as the person serving as Plan Administrator may
enjoy as a matter of law or by reason of insurance coverage of any kind and (ii)
not apply to the extent that such right would contravene applicable state law.
Rights granted hereunder shall be in addition to and not in lieu of any rights
to indemnification to which the person serving as the Plan Administrator or
other person may be entitled pursuant to the Bylaws of the Company.
SECTION 12
----------
THE TRUST FUND
--------------
12.1 DESIGNATION OF TRUSTEE
The Company, by appropriate resolution of its Board of Directors, shall
name and designate a Trustee(s) and enter into a Trust Agreement with such
Trustee(s). The Company shall have the power, by appropriate resolution of its
Board of Directors, to amend the Trust Agreement. All of the assets of the Plan
shall be held in trust by the Trustee(s) for use in accordance with this Plan in
providing for the benefits hereunder.
12.2 EXCLUSIVE BENEFIT
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 and
their Beneficiaries, except as specifically provided in this Plan and in the
Trust Agreement.
12.3 NO INTEREST IN FUND
No person shall have any interest in, or right to, any part of the
assets or income of the Trust Fund, except to the extent expressly provided in
this Plan and in the Trust Agreement.
12.4 TRUSTEE(S) TO BE FIDUCIARY
The Trustee(s) shall be a fiduciary with respect to management and
control of Trust Assets and shall have exclusive and sole responsibility for the
custody and investment thereof in accordance with the Trust Agreement.
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12.5 INVESTMENTS
(a) The Trustee(s) shall invest each Participant's Company Contribution
Account in an investment medium dedicated to Company Stock, except as set forth
in Section 12.6 and except as otherwise prudent and necessary. All contributions
allocated to Participants' Company Contribution Accounts and not invested in
Company Stock or pursuant to Section 12.6 shall be held by the Trustee in cash
or cash instruments. Such investments acquired in the manner prescribed by the
Plan shall be held by or for the Trustee.
(b) If the Trustee(s) shall receive a tender for all or a portion of
the Company Stock held by the Plan from any person other then the Company, the
Trustee(s) shall communicate the tender, along with all accompanying materials
to Plan Participants. The Trustee(s) shall also provide Plan Participants with
such information, including the opinions of professional advisors as may be
engaged by the Trustee(s) in his or her discretion, as shall be necessary for
Participants to make an informed decision with respect to such tender. Each
Participant in the Plan shall direct the Trustee(s) as to voting of shares of
Company Stock held in his or her Account in the Trust and not held in the
Unallocated Stock Account with respect to such tender offer. Such direction
shall be made upon a proxy form upon which directions may be indicated to the
Trustee(s). Each Participant shall have one vote for each share of Company Stock
in his or her Account. The Trustee shall vote such allocated shares of Company
Stock as instructed by Participants. Allocated shares for which no direction is
received shall not be voted. Fractional shares of Company Stock for which
direction is received shall be combined to the extent practicable to reflect
Participant's directions. The Trustee(s) shall vote the Company Stock held in
the Unallocated Stock Suspense Account with respect to such tender offer in his
or her discretion. The decision as to whether to tender all or a portion of the
shares of Company Stock held by the Plan shall be made according to a majority
of the votes cast with respect to such tender offer. Subject to a vote in favor
of such tender (if such tender offer is not from the Company) and subject to any
restrictions on transfer of Company Stock contained in the Certificate of
Incorporation or the bylaws of the Company, the Trustee(s) may sell shares of
the Company Stock to any person (including the Company) provided that any such
sale must be made at a price not less favorable to the Plan than fair market
value.
12.6 PARTICIPANT DIVERSIFICATION OF INVESTMENTS
(a) Notwithstanding any provision to the contrary, a Participant who is
a Qualified Participant may elect, within 90 days after the last day of each
Plan Year in his or her Qualified Election Period, to direct the investment of
twenty-five percent (25%) (or fifty percent (50%) with respect to the last year
of the qualified election period) of the sum of (A) the value of his or her
Accounts, determined as of the Valuation Date coincident with the last day of
the preceding Plan Year, plus (B) the aggregate amount of distributions paid to
the Participant during his or her Qualified Election Period. The amount of the
Participant's account a Participant may direct shall be reduced by the aggregate
amount of distributions paid to the Participant during his or her Qualified
Election Period.
The Participant shall make an election under this Section in writing on
a form to be prescribed by the Plan Administrator.
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(b) For purposes of this Section 12.6, "Qualified Participant" shall
mean any Participant who has attained age 55 and who has ten Years of Service
under this Plan, and "Qualified Election Period" shall mean the six-Plan Year
period beginning with the Plan Year in which the Participant becomes a qualified
participant.
(c) A Qualified Participant who makes an election under subparagraph
(a) to direct a portion of his or her Account under the Plan shall either: (1)
be offered the opportunity to invest the diversified portion in at least three
investment options under the Plan other than investment in Company securities;
or (2) shall receive, upon the Participant's written consent, the directed
portion as a distribution under the Plan. Any investment or distribution under
this Section shall be made within 90 days after the last day of the 90-day
election period described above in which the Participant elects to receive a
distribution.
12.7 VOTING OF COMPANY STOCK
The Trustee shall vote all shares of Company Stock held by the Plan in
the Unallocated Stock Suspense Account with respect to all corporate matters
upon which Company shareholders are entitled or permitted to vote. Voting rights
under Company Stock which is held by the Trustee for a Participant's Account
shall be exercised by the Trustee, except as provided below.
With respect to approval or disapproval of any corporate merger or
consolidation, recapitalization, reclassification, liquidation, dissolution,
sale of substantially all assets of a trade or business, or such similar
transactions as are prescribed in regulations under the Code, each Participant
shall be entitled to vote the shares of Company Stock allocated to his or her
Account, and he or she shall be given notice, either in person or by certified
mail, of the following:
(a) the matter to be decided;
(b) that he or she is entitled to direct the Trustee as to the manner
of voting the Company Stock allocated to his or her Account; and
(c) the procedure to be followed to exercise his or her voting rights.
If, pursuant to such notice, voting instructions are not received by
the Trustee, the shares shall be voted by the Trustee.
12.8 DELEGATION OF RESPONSIBILITIES OF TRUSTEE
The Trustee may appoint from its number such subcommittees with such
powers as the Trustee shall determine; may delegate to one or more of its number
or to any agent such administrative duties as they may deem advisable; may
authorize one or more of their number or any agent to execute or deliver any
written instructions, requisitions, orders, notices, or other instruments or
make any payment on its behalf; and may employ counsel and agents and obtain
such clerical and accounting assistance as the Trustee may deem advisable in
carrying out the provisions of the Plan.
-35-
12.9 TRUSTEE PROCEDURES
The Trustee shall hold meetings upon such notice, at such place or
places and at such time or times as it may from time to time determine, and a
majority of persons constituting the Trustee shall constitute a quorum. The
decision of the Trustee at any meeting at which a quorum is present shall be
made by a majority vote of the members present. The action of a majority of the
individuals constituting the Trustee expressed in writing without a meeting
shall constitute the action of the Trustee and shall have the same effect for
all purposes as if assented to by all such individuals. No bond or other
security shall be required of any Trustee in such capacity in any jurisdiction
unless otherwise required by law. The Trustee shall maintain written minutes of
all meetings of the Trustee.
All findings, determinations, and decisions of the Trustee shall be
reflected in the minutes of the meetings of the Trustee or otherwise reduced to
writing, and all such findings, determinations, and decisions shall be binding
and conclusive upon the Participants, their Beneficiaries, other employees, and
the Company.
12.10 LIABILITY OF TRUSTEE
The Trustee and all persons employed by the Company who are engaged in
administering the Plan shall be entitled to rely upon all valuations,
certificates, and reports furnished by other Trustee, an accountant on behalf of
the Trust, or by an Independent Appraiser selected by the Trustee and upon all
opinions given by any legal counsel selected by the Trustee. The Trustee, the
Company, and its officers and directors and all persons employed by the Company
who are engaged in administering the Plan (a) shall be fully protected with
respect to any action taken by them in good faith which is based upon such
valuation, certificate, report, or opinion and all actions so taken shall be
conclusive and binding upon all persons under the Plan; and (b) shall not be
personally liable by reason of any instrument made or executed by them or on
their behalf or in the course of administering the Plan or for any mistake of
judgment made by them or any other person, or for any neglect, omission, or
wrongdoing of any other person or for any loss to the Plan unless resulting from
their own willful misconduct.
12.11 INDEMNIFICATION
The Trustee and each director and officer of the Company shall be
indemnified by the Company to the extent permitted by law against all expenses
(including costs and attorneys' fees) actually and necessarily incurred or paid
by him or her in connection with the defense of any action, suit, or proceeding
in any way relating to or arising from the Plan to which he or she may be made a
party by reason of his or her being or having been a Trustee, director, or
officer or by reason of any action or omission or alleged action or omission by
him in such capacity, and against any amount or amounts which may be paid by him
(other than to the Company) in reasonable settlement of any such action, suit,
or proceeding, where it is in the interest of the Company that such settlement
be made. In cases where such action, suit, or proceeding shall proceed to final
adjudication, such indemnification shall not extend to matters as to which it
shall be adjudged that such Trustee, director, or officer is liable for willful
misconduct in the performance of his duties as such. The right of
indemnification herein provided shall not be exclusive of other rights to which
any Trustee, director, or officer may now or hereafter be entitled, shall
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continue as to a person who has ceased to be a Trustee, director, or officer and
shall inure to the benefit of the heirs, executors, and administrators of such
Trustee, director, or officer.
SECTION 13
----------
ACQUISITION LOANS
-----------------
13.1 ACQUISITION LOAN FOR FINANCING PURCHASE OF COMPANY STOCK
The Trustee(s) may incur Acquisition Loans from time to time to finance
the acquisition of Company Stock or to repay a prior Acquisition Loan. An
installment obligation incurred in connection with the purchase of Company Stock
shall be treated as an Acquisition Loan. An Acquisition Loan shall be for a
specific term, shall bear a reasonable rate of interest, and shall not be
payable on demand except in the event of default, provided that the default
provisions under such Acquisition Loan comply with exempt loan regulations
issued under Section 4975(d)(3) of the Code. An Acquisition Loan shall be
without recourse against the Plan. The only Trust Assets that may be given as
collateral on an Acquisition Loan are Financed Shares acquired with the proceeds
of the Acquisition Loan and Financed Shares pledged as collateral on a prior
Acquisition Loan repaid with the proceeds of the current Acquisition Loan. No
person entitled to payment under an Acquisition Loan shall have any right to
Trust Assets other than collateral given for such Acquisition Loan,
contributions made under this Plan to meet the Plan's obligations under such
Acquisition Loan, and earnings attributable to the collateral or to investment
of such contributions. If an Acquisition Loan is an Exempt Loan, the Acquisition
Loan Documents must provide for a transfer of Trust Assets on default only upon
and to the extent of the failure of the Trust to meet the payment schedule of
the Acquisition Loan. Any pledge of Financed Shares must provide for the release
of the shares so pledged as payments on the Acquisition Loan are made and such
Financed Shares are allocated to Participants' Company Stock Accounts under
Section 6.4. The Trustee shall use Company Contributions and earnings
attributable to Company Contributions (including cash dividends received on
Financed Shares to the extent described in Section 6.5, including both dividends
paid on unallocated Financed Shares and dividends paid on allocated Financed
Shares, that the Trustee determines should be applied to repayment of the
Acquisition Loan related to such Financed Shares) to make payments of principal
and/or interest on any Acquisition Loan.
13.2 RELEASE OF FINANCED SHARES
Any Financed Shares acquired by the Trust shall initially be
credited to the Unallocated Stock Suspense Account and shall be allocated to the
Company Stock Accounts of Participants only as payments on the Acquisition Loan
are made by the Trustee. The number of Financed Shares to be released from the
Unallocated Stock Suspense Account for allocation to Participants' Company Stock
Accounts for each Plan Year shall be the number of Financed Shares held in the
Unallocated Stock Suspense Account immediately before the release for the
current Plan Year multiplied by a fraction, the numerator of which is the amount
of principal paid on the Acquisition Loan for that Plan Year and the denominator
of which is the sum of the numerator and the total of all payments of principal
on that Acquisition Loan to be paid during the remaining term of the Acquisition
Loan.
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Notwithstanding the foregoing, the release method described shall be
used only if:
(1) the Acquisition Loan provides for annual payments of principal
and interest at a cumulative rate that is not less rapid at any time than level
annual payments of such amounts for ten years;
(2) interest included in any payment on the Acquisition Loan is
disregarded only to the extent that it is interest determined under standard
loan amortization tables; and
(3) the sum of the expired duration of an Acquisition Loan, the
renewal period, the extension period, and the duration of a new Acquisition Loan
does not exceed 10 years by reason of a renewal, extension, or refinancing of an
Acquisition Loan.
If any of these three conditions are not met, then, notwithstanding the
foregoing, the numerator of the fraction above shall be the amount of principal
and interest paid on the Acquisition Loan for that Plan Year and the denominator
shall be the sum of the numerator and the total of all payments of principal and
interest on that Acquisition Loan to be paid during the remaining term of the
Acquisition Loan. The Plan Administrator may also designate, by certificate
provided to the Trustee after the Trust has entered into an Acquisition Loan but
prior to release of stock resulting from repayment of such Acquisition Loan,
that the release method shall be according to payments of principal and interest
rather than principal only. Such certificate shall be binding upon the Trustee.
13.3 COMPANY STOCK ACQUIRED THROUGH AN ACQUISITION LOAN
Company Stock acquired with the proceeds of an Acquisition Loan shall
not at that time or any time thereafter be subject to any put, call, option,
buy-sell, or other similar arrangement, other than the put option described in
Section 8.6 and the right of first refusal described in Section 8.7. This
restriction and the put option described in Sections 8.6 and 8.7 shall continue
notwithstanding termination of this Plan or termination of the status of this
Plan as an ESOP. If a Participant's account is forfeited under Section 7.2, any
financed shares allocated to a Participant's Account under Section 13.2 shall be
forfeited only after other assets have been forfeited.
SECTION 14
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NO ASSIGNMENT OF BENEFITS
-------------------------
14.1 NO ASSIGNMENT OF BENEFITS
A Participant's Account or his or her entitlement to receive any
benefit under the Plan may not be anticipated, assigned (either at law or in
equity), alienated, or subject to attachment, garnishment, levy, execution, or
other legal or equitable process, except (i) in accordance with a Qualified
Domestic Relations Order; (ii) pursuant to a federal levy under Section 6331 of
the Code; or (iii) an amount a Participant is ordered or required to pay to the
Plan under a judgment, order, decree, or settlement agreement that is described
in and complies with Section 401(a)(13)(C) of the Code.
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14.2 QUALIFIED DOMESTIC RELATIONS ORDERS
A person other than a Participant or his or her Beneficiary may acquire
an interest in the Participant's benefits pursuant to a Qualified Domestic
Relations Order. Upon receipt of a Domestic Relations Order, the Plan
Administrator shall promptly notify the Participant and any Alternate Payee
named in such order of the receipt of such order and the Plan's procedures for
determining the qualified status of Domestic Relations Orders. Within a
reasonable period after receipt of such order (but in no event longer than
eighteen months) the Plan Administrator shall notify the Participant and each
Alternate Payee of its determination. Pending such determination the Plan
Administrator shall direct the Trustee to segregate the assets subject to such
order in either a separate account in the Trust Fund or in an escrow account. At
the conclusion of the 18-month period (or on such earlier date as the
determination of qualified status has been made) the assets subject to the order
shall be paid pursuant to the terms of the order provided the order is
qualified. If the Domestic Relation Order is not qualified (or no determination
can be made within such time period) the assets shall be paid in the same manner
as if the Domestic Relations Order had not been issued. The Plan Administrator
shall establish reasonable procedures to implement the requirements of this
Section 14.2.
SECTION 15
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FIDUCIARY RESPONSIBILITY
------------------------
15.1 NAMED FIDUCIARY
The Plan Administrator, the Trustee, and the Company shall be the Named
Fiduciaries for the Plan within the meaning of Section 402(a) of ERISA.
15.2 BONDING OF FIDUCIARIES
The Plan Administrator shall insure that the Trustee and all other Plan
fiduciaries handling funds are bonded in accordance with Section 412 of ERISA.
15.3 RESPONSIBILITY OF FIDUCIARIES
Any Fiduciary with respect to the Plan shall discharge his or her
duties solely in the interests of Participants and Beneficiaries for the
exclusive purpose of providing benefits to Participants and Beneficiaries and
defraying reasonable expenses of the Plan. In addition, any Fiduciary with
respect to the Plan shall discharge his or her duties with the care, skill,
prudence, and diligence under the circumstances then prevailing that a prudent
person acting in a like capacity and familiar with such matters would use in the
conduct of an enterprise of like character and with like aims.
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SECTION 16
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FUTURE OF THE PLAN
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16.1 POSSIBILITY OF AMENDMENT OR TERMINATION
As future conditions cannot be foreseen, the Company reserves the right
to amend or terminate this Plan (in whole or in part) and the Trust Agreement at
any time, by action of its Board of Directors. Neither amendment or termination
of the Plan shall retroactively reduce the accrued benefits or vested rights of
Participants nor permit any part of the Trust Assets to be diverted to or used
for any purpose other than for the exclusive benefit of the Participants (and
their Beneficiaries).
The Company specifically reserves the right to amend the Plan and the
Trust Agreement retroactively to satisfy any applicable requirements of the Code
and ERISA.
The Company further reserves the right to terminate the Plan in the
event of a determination by the Internal Revenue Service (after a timely
Application for Determination is filed by the Company) that the Plan initially
fails to satisfy the applicable requirements of Section 401(a) of the Code. In
that event, all Trust Assets shall (upon written direction of the Company) be
returned to the Company, the Plan and the Trust shall terminate.
16.2 VESTING UPON TERMINATION
If the Plan is terminated (or partially terminated), participation of
Participants affected by the termination shall end. The Accounts of Participants
affected by the termination shall be fully vested and nonforfeitable. After
termination of the Plan, the Trust shall be maintained until the Accounts of all
Participants have been distributed. Accounts may be distributed following
termination of the Plan or in accordance with Section 8 at the discretion of the
Company.
16.3 MERGER OR CONSOLIDATION
In the event of the merger or consolidation of this Plan with another
plan, or the transfer of Trust Assets (or liabilities) to another plan, the
Account balances of each Participant immediately after such merger,
consolidation, or transfer must be at least as great as immediately before such
merger, consolidation, or transfer (as if the Plan had then terminated).
16.4 COMPLETE DISCONTINUANCE OF CONTRIBUTIONS
In the event of a complete discontinuance of contributions under the
Plan, each Participant's account under the Plan shall be completely vested and
nonforfeitable as of such date.
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SECTION 17
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GENERAL PROVISIONS
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17.1 NO EMPLOYMENT RIGHTS
Neither the action of the Company in establishing the Plan, nor any
provisions of the Plan, nor any action taken by the Company or by the Plan
Administrator shall be construed as giving to any Employee of the Company the
right to be retained in its employ, or any right to payment except to the extent
of the benefits provided in the Plan to be paid from the Trust Fund.
17.2 SOURCE OF BENEFITS
All benefits payable under the Plan shall be paid or provided solely
from the Trust Fund, and the Company assumes no liability or responsibility
therefor.
17.3 GOVERNING LAW
Except to the extent superseded by ERISA, all questions pertaining to
the validity, construction, and operation of the Plan shall be determined in
accordance with the laws of the Commonwealth of Pennsylvania.
17.4 INCAPACITY
If the Plan Administrator deems any Participant or Beneficiary who is
entitled to receive benefits hereunder incapable of receiving or disbursing the
same by reason of age, illness, or infirmity or incapacity of any kind, the Plan
Administrator may direct the Trustee to apply such payments directly for the
comfort, support, and maintenance of such Participant or Beneficiary, or to pay
the same to any responsible person caring for the Participant or Beneficiary who
is determined by the Plan Administrator to be qualified to receive and disburse
such payments for the Participant's or Beneficiary's benefit; and the receipt of
such person shall be a complete acquittance for the payment of the benefit.
Payments pursuant to this Section shall be complete discharge to the extent
thereof of any and all liability of the Company, the Plan Administrator, the
Trustee, and the Trust Fund.
17.5 ADOPTION OF PLAN BY AFFILIATED COMPANIES
Any Affiliated Company presently existing or hereafter acquired may,
with the consent of the Company, adopt this Plan and the Trust created
hereunder. In the event that a Participant is transferred from the Company to an
Affiliated Company that has adopted this Plan or from an Affiliated Company that
has adopted this Plan to the Company, the Participant shall retain his or her
Account under the Plan and all credits for service under the Plan.
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SECTION 18
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EXECUTION
---------
To record the adoption of the Plan, as amended and restated, the
Company has caused this document to be executed on this 1st day of June 2005.
NORTH PENN BANCORP, INC.
By: /s/ Frederick L. Hickman
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