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POLO RALPH LAUREN
PROFIT SHARING RETIREMENT SAVINGS PLAN
(For Hourly Employees of Fashions Outlet of America, Inc.
and Subsidiaries and Polo Clothing Co., Inc.)
Amended and restated generally effective as of March 31, 2001
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TABLE OF CONTENTS
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SECTION 1 DEFINITIONS....................................................................................1
1.1 Accrued Benefit.......................................................................1
1.2 Actual Contribution Ratio.............................................................2
1.3 Actual Deferral Ratio.................................................................2
1.4 Additional Basic Contribution.........................................................2
1.5 Adjustment Factor.....................................................................2
1.6 Affiliated Company....................................................................2
1.7 Annual Addition.......................................................................2
1.8 Basic Contribution....................................................................3
1.9 Basic Contribution Account............................................................3
1.10 Beneficiary...........................................................................3
1.11 Board.................................................................................3
1.12 Break in Service......................................................................3
1.13 Code..................................................................................3
1.14 Compensation..........................................................................3
1.15 Disability............................................................................4
1.16 Early Retirement Date.................................................................4
1.17 Earned Income.........................................................................4
1.18 Effective Date........................................................................5
1.19 Eligibility Computation Period means..................................................5
1.20 Eligible Employee.....................................................................5
1.21 Employee .............................................................................5
1.22 Employer..............................................................................5
1.23 Entry Date............................................................................6
1.24 ERISA.................................................................................6
1.25 Fiscal Year...........................................................................6
1.26 Forfeiture............................................................................6
1.27 Fund .................................................................................6
1.28 "Highly Compensated Employee".........................................................6
1.29 Hour of Service.......................................................................6
1.30 Hourly Employee.......................................................................8
1.31 Leave of Absence......................................................................9
1.32 Limitation Year.......................................................................9
1.33 Matching Contribution.................................................................9
1.34 Matching Contribution Account.........................................................9
1.35 Member................................................................................9
1.36 Non-Highly Compensated Employee.......................................................9
1.37 Normal Retirement Date................................................................9
1.38 Owner-Employee........................................................................9
1.39 Period of Service.....................................................................9
1.40 Plan..................................................................................9
1.41 Plan Administrator....................................................................9
1.42 Plan Sponsor..........................................................................9
1.43 Plan Year.............................................................................9
1.44 Prior Plan............................................................................9
1.45 Profit Sharing Contribution..........................................................10
1.46 Profit Sharing Contribution Account..................................................10
1.47 Retirement ..........................................................................10
1.48 Rollover Account.....................................................................10
1.49 Rollover Contribution................................................................10
1.50 Self-Employed Individual.............................................................10
1.51 Shareholder-Employee.................................................................10
1.52 Spouse ..............................................................................10
1.53 Top-Heavy Contribution...............................................................10
1.54 Top-Heavy Contribution Account.......................................................10
1.55 Trust ...............................................................................10
1.56 Trustee..............................................................................10
1.57 Valuation Date.......................................................................11
1.58 Year of Service......................................................................11
SECTION 2 MEMBERSHIP IN THE PLAN........................................................................13
2.1 Current Members......................................................................13
2.2 New or Reemployed Members............................................................13
2.3 Changes in Category..................................................................13
SECTION 3 CONTRIBUTIONS.................................................................................14
3.1 Profit Sharing Contributions.........................................................14
3.2 Basic Contributions..................................................................14
3.3 Matching Contributions...............................................................15
3.4 Adjustments to Contribution Limits...................................................15
3.5 Adjustments to Contributions.........................................................15
3.6 Distribution of "Excess Deferral Amounts"............................................16
3.7 Overall Limits on Contributions......................................................16
3.8 Permitted Employer Refunds...........................................................18
3.9 Timing of Deposits...................................................................19
3.10 Profits Not Required.................................................................19
SECTION 4 MEMBER ACCOUNTS...............................................................................19
4.1 Establishment of Accounts............................................................19
4.2 Valuation of Accounts................................................................19
4.3 Adjustment to Accounts...............................................................20
4.4 Directed Investments.................................................................20
4.5 Administration of Investments........................................................20
4.6 Investments for Terminated Members...................................................21
4.7 Valuation Adjustments................................................................21
(ii)
SECTION 5 VESTING AND FORFEITURES.......................................................................21
5.1 Vesting Schedule.....................................................................21
5.2 Forfeitures Reallocated..............................................................22
5.3 Change in Vesting Schedule...........................................................22
SECTION 6 DISTRIBUTIONS.................................................................................23
6.1 Distribution of Benefit..............................................................23
6.2 Election of Benefits.................................................................24
6.3 Rehire Prior to Incurring Five (5) Consecutive Breaks in Service.....................24
6.4 Death Prior to Total Distribution....................................................24
6.5 Distribution Limitation..............................................................25
6.6 Mandatory Distributions..............................................................25
6.7 Earnings on Undistributed Benefits...................................................25
6.8 Rollovers Into the Plan..............................................................25
6.9 Evidence in Writing..................................................................26
6.10 Hardship Withdrawal..................................................................26
6.11 Withdrawals Permitted After Age 59 1/2...............................................27
6.12 Conditions for Withdrawals...........................................................27
SECTION 7 ACTUAL DEFERRAL AND ACTUAL CONTRIBUTION PERCENTAGE TESTING....................................28
7.1 Actual Deferral Percentage Test......................................................28
7.2 ADP Formula..........................................................................28
7.3 Calculations of Excess Contributions.................................................29
7.4 Failure to Correct Excess Contributions..............................................30
7.5 Distribution of Excess Contributions.................................................30
7.6 Additional Basic and Matching Contributions..........................................30
7.7 Matching Contributions...............................................................30
7.8 Actual Contribution Percentage Test..................................................31
7.9 ACP Formula..........................................................................31
7.10 Calculation of Excess Aggregate Contributions........................................32
7.11 Distribution of Excess Aggregate Contribution........................................33
7.12 Additional Contributions.............................................................33
7.13 Forfeitures..........................................................................33
7.14 Aggregate Limit:.....................................................................33
7.15 Special Rules........................................................................34
SECTION 8 TOP-HEAVY PROVISIONS..........................................................................34
8.1 Top-Heavy Preemption.................................................................34
8.2 Top-Heavy Definitions................................................................34
8.3 Aggregation of Plans.................................................................37
8.4 Minimum Contribution Rate............................................................37
8.5 Deposit of Minimum Contribution......................................................38
8.6 Top-Heavy Vesting Schedule...........................................................38
(iii)
SECTION 9 DESIGNATION OF BENEFICIARY....................................................................38
9.1 Named Beneficiary....................................................................38
9.2 No Named Beneficiary.................................................................39
SECTION 10 MANAGEMENT OF THE FUND.......................................................................39
10.1 Contributions Deposited to Trust.....................................................39
10.2 No Reversion to Employer.............................................................39
SECTION 11 DISCONTINUANCE AND LIABILITIES...............................................................39
11.1 Termination..........................................................................39
11.2 No Liability for Employer............................................................40
11.3 Administrative Expenses..............................................................40
11.4 Nonforfeitability Due to Termination(s)..............................................40
11.5 Exclusive Benefit Rule...............................................................40
11.6 Mergers..............................................................................40
11.7 Non-Allocated Trust Assets...........................................................40
SECTION 12 ADMINISTRATION...............................................................................40
12.1 Appointment of Plan Administrator....................................................40
12.2 Responsibilities and Duties..........................................................40
12.3 Claims Procedure.....................................................................41
12.4 Trustee Has Authority to Invest......................................................42
12.5 Indemnification......................................................................42
12.6 Removal for Personal Involvement.....................................................42
SECTION 13 AMENDMENTS...................................................................................43
13.1 Amendment Restrictions...............................................................43
13.2 Amending the Plan....................................................................43
13.3 Retroactive Amendments...............................................................43
SECTION 14 LOANS 43
14.1 Permitted Loans......................................................................43
14.2 Collateral Required..................................................................44
14.3 Repayment............................................................................44
14.4 Interest Charges.....................................................................45
14.5 Failure to Make Timely Payment.......................................................45
14.6 Termination of Employment............................................................45
14.7 Loans to Non-Employees...............................................................45
14.8 No Loans to Owner-Employees..........................................................45
14.9 General Administration...............................................................45
14.10 Qualified Military Leave.............................................................46
SECTION 15 MISCELLANEOUS................................................................................46
15.1 "Spendthrift" Provision..............................................................46
15.2 QDRO Exception.......................................................................46
15.3 No Guarantee of Employment...........................................................47
15.4 State Law............................................................................47
(iv)
SECTION 16 DIRECT ROLLOVER PROVISIONS...................................................................47
16.1 Application of Article...............................................................47
16.2 Definitions..........................................................................47
APPENDIX A
(v)
POLO RALPH LAUREN CORPORATION
PROFIT SHARING RETIREMENT SAVINGS PLAN
(FOR HOURLY EMPLOYEES OF FASHIONS OUTLET OF AMERICA, INC.
AND SUBSIDIARIES AND POLO CLOTHING CO., INC.)
AMENDED AND RESTATED
GENERALLY EFFECTIVE AS OF MARCH 31, 2001
WHEREAS, Polo Ralph Lauren, (hereinafter, the "Employer")
sponsors and maintains the Polo Ralph Lauren Corporation Profit Sharing
Retirement Savings Plan (for Hourly Employees of Fashions Outlet of America,
Inc. and Subsidiaries and Polo Clothing Co., Inc.) (hereinafter, the "Plan");
and
WHEREAS the Employer wishes to amend and restate the Plan to
conform with the requirements of the Uniform Services Employment and
Reemployment Rights Act of 1994, the Small Business Job Protection Act of 1996,
the Taxpayer Relief Act of 1997, the Surface Transportation Revenue Act of 1998,
the Internal Revenue Service Restructuring and Reform Act of 1998 and other
applicable laws, regulations, and announcements.
NOW, THEREFORE, the Employer hereby adopts the following
amended and restated Plan, effective March 31, 2001 (or such other dates as may
be specified herein, or such earlier dates as are required in order to comply
with any of the foregoing legislative changes, regulations and announcements)
with such Plan to be applicable (except as otherwise expressly provided to the
contrary herein) only to those eligible employees who are actively employed (or,
on a qualified leave of absence from which they return within the designated
period) on or after March 31, 2001, and with such Plan to read as follows:
SECTION 1
DEFINITIONS
The following words and phrases as used herein shall have the
following meanings, unless a different meaning is plainly required by the
context; and the following rules of interpretation shall apply in reading this
instrument. Pronouns shall be interpreted so that the masculine pronoun shall
include the feminine and the singular shall include the plural. The words
"hereof," "herein" and other singular compounds shall refer to the Plan in its
entirety and not to any particular provision or section, unless so limited by
the text. All references herein to specific sections shall mean sections of this
document unless otherwise qualified.
1.1 Accrued Benefit means the sum of the balance in the
Member's Profit Sharing Contribution Account, Basic Contribution Account,
Top-Heavy Contribution Account, Matching Contribution Account and Rollover
Account.
2
1.2 Actual Contribution Ratio (ACR), with respect to any
Member for a Plan Year, means a fraction of which the numerator equals the
Matching Contributions paid to the Trust for a Plan Year on behalf of such
Member and of which the denominator equals the Member's Compensation for the
Plan Year.
1.3 Actual Deferral Ratio (ADR), with respect to any Member
for a Plan Year, means a fraction of which the numerator equals the Basic
Contributions paid to the Trust for the Plan Year on behalf of such Member and
of which the denominator equals the Member's Compensation for the Plan Year.
1.4 Additional Basic Contribution means a qualified
nonelective contribution as defined in Treasury regulation
1.401(k)-1(g)(13)(ii).
1.5 Adjustment Factor means the dollar limitation in effect at
the beginning of the taxable year prescribed by the Secretary of the Treasury
under section 402(g) of the Code, as applied to such items and in such manner as
the Secretary shall provide.
1.6 Affiliated Company means:
(a) any corporation which is a member of a controlled
group of corporations, including those within the meaning of section 1563(a) of
the Code, determined without regard to sections 1563(a)(4) and (e)(3)(C),
including the Employer;
(b) any organization under common control with the
Employer within the meaning of section 414(c) of the Code;
(c) any organization which is included with the Employer
in an affiliated service group within the meaning of section 414(m) of the Code;
or
(d) any other entity required to be aggregated with the
Employer pursuant to regulations under section 414(o) of the Code.
1.7 Annual Addition means the total for the Limitation Year of
the items listed below allocated to the account of an Employee under all defined
contribution plans sponsored by an Affiliated Company (except that, for the
purpose of this Section, "more than 50%" shall be substituted for "80%" each
place it appears in section 1563 of the Code):
(a) Employer contributions to a Member's accounts;
(b) Forfeitures;
(c) the total amount of a Member's nondeductible employee
contributions for the Limitation Year (but not including Rollover
Contributions); and
(d) amounts described in sections 415(l)(1) and 419A(d)(2)
of the Code;
3
(e) except that the Annual Addition for any Limitation
Year beginning before January 1, 1987, shall not be recomputed to treat
nondeductible Employee contributions as an Annual Addition.
1.8 Basic Contribution means an elective deferral made by a
Member pursuant to Section 3.2 of the Plan.
1.9 Basic Contribution Account means an account established
and maintained on behalf of a Member to which his Basic Contributions are
allocated.
1.10 Beneficiary means the person, persons, or trust
designated by written, revocable designation filed with the Plan Administrator
by the Member to receive payments in the event of such Member's death.
1.11 Board means the Board of Directors or Committee or other
body authorized and empowered pursuant to law to act for the Plan Sponsor.
1.12 Break in Service means a Plan Year during which a Member
fails to be credited with more than 500 Hours of Service.
1.13 Code means the Internal Revenue Code of 1986, and the
same as may be amended from time to time.
1.14 Compensation means, except as hereafter specified, salary
and wages, overtime pay, fees, tips, profits, bonuses and commissions paid by
the Employer to an Employee, including the Basic Contribution made hereunder
during the Plan Year, elective deferrals made pursuant to section 125 of the
Code, amounts not includable in a Employee's gross income pursuant to section
132(f) of the Code, and all other earnings reportable under sections 6041 and
6051 of the Code on Form W-2 received by an Employee from the Employer, but
excluding all other Employer contributions to benefit plans and all other forms
of compensation such as severance pay. For purposes of Section 7, the Employer
may elect for a specific Plan Year to limit the period taken into account for
the determination of Compensation to the period during which the Employee is a
Member. This limit shall be applied uniformly to all Members under the Plan for
the Plan Year in accordance with section 1.401(k)-1(g)(2)(i). Notwithstanding
the preceding sentence, for any Plan Year beginning on or after the Effective
Date, Compensation shall exclude any remuneration received by a Member in excess
of $170,000, as adjusted by the Secretary of the Treasury, for cost of living,
at the same time and in the same manner as under section 415(d) of the Code. The
cost-of-living adjustment in effect for a calendar year applies to any period,
not exceeding 12 months, over which compensation is determined (determination
period) beginning in such calendar year. If a determination period consists of
fewer than 12 months, the annual compensation limit, as adjusted, will be
multiplied by a fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
(a) For purposes of the nondiscrimination tests set forth
in Section 7, and except as provided in section 414(s) of the Code, Compensation
means any income received by the Employee from the Employer in accordance with
section
4
415(c)(3) of the Code, for the Plan Year for which compliance with the
tests is being measured.
(b) For purposes of measuring the limits set forth in
section 415 of the Code, Compensation shall mean earned income, wages, salaries,
fees, commissions, percentage of profits, tips, and all other earnings of a
Member reportable on Form W-2 for the Plan Year, but specifically excluding the
following:
(i) Employer contributions made on behalf of an
Employee to a SEP to the extent they are deductible by the Employee
under section 219(b)(2) of the Code;
(ii) distributions from a deferred compensation plan
(except from an unfunded nonqualified plan when includible in gross
income);
(iii) amounts realized from the exercise of a
nonqualified stock option, or when restricted stock (or property) held
by an Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
(iv) amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option; and
(v) other amounts which receive special tax benefits,
such as premiums for group term life insurance (to the extent excludable
from gross income) and Employer contributions towards the purchase of an
annuity contract described in section 403(b) of the Code.
1.15 Disability means a physical or mental condition of a
Member resulting from bodily injury, disease or mental disorder which renders
him incapable of continuing his usual and customary employment with the
Employer. The disability of a Member shall be determined by a licensed physician
chosen by the Plan Administrator. The determination shall be applied uniformly
to all Members.
1.16 Early Retirement Date means the date on which a Member
has attained age 55 and has completed at least 7 Years of Service.
1.17 Earned Income means with respect to a Self-Employed
Individual or Shareholder-Employee, the net earnings from self-employment in the
trade or business with respect to which the Plan is established, for which the
personal services of the individual are a material income-producing factor. Net
earnings shall be determined without regard to items not included in gross
income and the deductions allocable to such items; however, net earnings shall
be determined with regard to the deductions allowed to the Employer by section
164(f) of the Code for taxable years beginning after December 31, 1989. Net
earnings are reduced by contributions by the Employer to a qualified plan to the
extent deductible under section 404 of the Code.
5
1.18 Effective Date of this amended and restated Plan means
March 31, 2001.
1.19 Eligibility Computation Period means:
(a) the twelve-consecutive-month period commencing with
the date an Employee first is credited with an Hour of Service; and
(b) thereafter any Plan Year commencing with the Plan Year
in which occurs the first anniversary of the date an Employee first is credited
with an Hour of Service.
1.20 Eligible Employee means any Employee of the Employer who
satisfies the following conditions:
(a) he is not a leased employee within the meaning of
section 414(n)(2) of the Code;
(b) he is an Hourly Employee of Fashions Outlet of
America, Inc. or its subsidiaries or of Polo Clothing Co., Inc.;
(c) he is not covered by a collective bargaining
agreement, unless such collective bargaining agreement specifically provides for
coverage under the Plan; and
(d) he is classified as a "common law" employee by the
Employer.
Notwithstanding anything contained herein to the contrary, an individual
classified as an "independent contractor" by the Employer, or any individual who
renders services for the Employer while on the payroll of an entity other than
the Employer, shall not be deemed to be an Eligible Employee even if such
individual is deemed to be a common law employee of the Employer for any other
purpose by any governmental authority, including without limitation, the
Internal Revenue Service, Department of Labor or a court of competent
jurisdiction.
1.21 Employee means an individual in the employ of the
Employer and shall include leased employees within the meaning of section
414(n)(2) of the Code. Contributions or benefits provided a leased employee by
the leasing organization that are attributable to services performed for the
Employer shall be treated as provided by the Employer.
1.22 Employer means Fashions Outlet of America, Inc., Polo
Clothing Co., Inc. and any other business organization which succeeds to its
business and elects to continue this Plan, and any subsidiaries of Fashions
Outlet of America, Inc. and any Affiliated Company which adopts this Plan with
the consent of the Plan Sponsor.
6
1.23 Entry Date means the first day after an Employee of the
Employer fulfills all eligibility requirements for participation in the Plan, as
described in Section 1.20.
1.24 ERISA means the Employee Retirement Income Security Act
of 1974, and the same as may be amended from time to time.
1.25 Fiscal Year means the twelve-month period ending on the
Saturday closest to March 31 divided into four fiscal quarters.
1.26 Forfeiture means that portion of a Member's Accrued
Benefit, as determined under the Plan's vesting schedule, which may be
relinquished by the Member.
1.27 Fund means all assets of the Trust.
1.28 "Highly Compensated Employee" means, with respect to any
Plan Year, any Employee of the Employer (whether or not eligible for membership
in the Plan) who:
(a) at any time during such Plan Year or the preceding
Plan Year was a "five (5) percent owner" (within the meaning of section
416(i)(1) of the Code) of the Employer or an Affiliated Company; or
(b) during the preceding Plan Year had Compensation in
excess of $85,000 (as adjusted in accordance section 415(d) of the Code).
(c) "Compensation" shall mean for the purpose of this
Section, section 415(c)(3) of the Code compensation.
1.29 Hour of Service means each hour for which an Employee is
directly or indirectly paid or entitled to be paid by the Employer or an
Affiliated Company regardless of whether employment duties are performed, and
each hour for which back pay, irrespective of mitigation of damages, has been
either awarded or agreed to by the Employer or Affiliated Company. These hours
shall be credited to an Employee for the computation period during which his
employment duties were performed; but in the event a payment is made or due for
a reason other than the performance of duties, hours shall be credited for the
computation period during which the absence from work occurred or to which a
back pay agreement or award pertains. However, no Employee shall be credited
with duplicate Hours of Service as a result of a back pay agreement or award.
Hours of Service shall also include each hour (credited on the basis of the
Employee's customary workday) during which an Employee is on an uncompensated
excused Leave of Absence, provided that such Employee shall be credited with no
more than 501 Hours of Service for each complete Plan Year during which the
uncompensated Leave of Absence is in effect. Hours of Service for service
performed, for the period prior to the acquisition date, for a company
subsequently acquired by the Employer shall be credited for eligibility purposes
only to the extent expressly so provided in Appendix A. Notwithstanding any
provision in this Plan to the contrary, contributions, benefits and
7
service credit with respect to qualified military service will be provided in
accordance with section 414(u) of the Code.
(a) For purposes of determining the number of Hours of
Service completed in any applicable computation period, the Employer may
maintain accurate records of actual hours completed for all Employees. The
number of Hours of Service to be credited to an Employee for periods during
which no employment duties are performed shall be determined in accordance with
sections 2530.200b-2(b) and 2530.200b-2(c) of the Department of Labor
regulations in Title 29 of the Code of Federal Regulations.
(b) In instances where actual Hours of Service are not
maintained, an Employee shall be credited with 45 Hours of Service for each week
in which such Employee would otherwise be credited with at least one Hour of
Service.
(c) Notwithstanding (a) and (b) above and solely for the
purpose of preventing a Break in Service, an Employee shall be credited with
Hours of Service during an absence by reason of:
(i) the pregnancy of the Employee;
(ii) the birth of a child of the Employee;
(iii) the placement of the child with the Employee in
connection with the adoption of such child by the Employee;
(iv) the care of the child beginning immediately after
such birth or placement;
(v) leave under the Family and Medical Leave Act of
1993; or
(vi) qualified military service under section 414(u)
of the Code;
provided the Employee, shall during the period of his absence, be credited with
the number of Hours of Service which would have been credited to him at his
normal work rate but for such absence or, if the number of Hours of Service
based on a normal rate is indeterminable, the Employee shall be credited with 8
Hours of Service per day of such absence. Notwithstanding the foregoing, the
Employee shall be credited with no more than 501 Hours of Service during said
absence.
(d) In instances where actual Hours of Service are
maintained, the maternity/paternity leave described in (c) above shall be
credited to the computation period in which the absence began if necessary to
avoid a Break in Service or if not necessary, then to the following computation
period.
8
(e) For the purposes of vesting only, an Hour of Service
shall include each hour of employment with The Ralph Lauren Home Collection
operations of J.P. Stevens & Co. Inc. for which an Employee was entitled to
Compensation prior to commencement of such operations by Polo Ralph Lauren
Corporation.
(f) For purposes of eligibility and vesting, an Hour of
Service shall include each hour of employment with Ralph Lauren Womenswear, Inc.
("RLW") or Bidermann Industries Corporation ("BIC") for which an Employee was
entitled to compensation prior to the purchase by The Ralph Lauren Womenswear
Company, L.P. ("Womenswear") of certain assets of RLW on October 16, 1995,
provided that such Employee became an Employee of Womenswear or any Affiliated
Company between October 16, 1995 and December 31, 1995, and provided further
that such Employee has not received from RLW or BIC any payment in respect of or
relating to such Employee's termination of employment by RLW or BIC. For
purposes of computing eligibility and vesting service under this section 1.29(f)
only, an Employee shall be credited with one hundred and ninety (190) Hours of
Service for each calendar month in which he/she is credited with at least one
(1) Hour of Service during a period of employment with RLW or BIC, Inc. prior to
October 16, 1995.
(g) For purposes of eligibility and vesting, an Hour of
Service shall include each hour of service with Englewood Travel, Inc. ("EWI")
and Adelman Travel Systems, Inc. ("ATS") for which an Employee was entitled to
compensation prior to such Employee's employment by Polo Wings II, Inc.
("Wings"), provided that such Employee became an Employee of Wings or any
Affiliated Company between May 13, 1996 and July 31, 1996; that such Employee
was employed by EWI immediately prior to such transfer, and that such employee
was, while an employee of EWI or ATS, engaged in providing travel services to
Polo Ralph Lauren, L.P. or its predecessor Polo Ralph Lauren Corporation
("Polo") on Polo's premises pursuant to a written contract between EWI or ATS
and Polo. For purposes of computing eligibility and vesting service under this
section 1.29 (g) only, an Employee shall be credited with one hundred and ninety
(190) Hours of Service for each calendar month in which he/she is credited with
at least one (1) Hour of Service during a period of employment with EWI or ATS,
prior to May 13, 1996.
(h) For purposes of eligibility and vesting, an Hour of
Service shall include each hour of employment with Polo Retail Corporation
("Retail") for which an Employee was entitled to compensation prior to the
purchase by the Company of Retail on April 3, 1997, provided that such Employee
was employed by Retail immediately prior to such sale. For purposes of computing
eligibility and vesting service under this section 1.29(h) only, if the actual
number of Hours of Service cannot be calculated, an Employee shall be credited
with one hundred and ninety (190) Hours of Service for each calendar month in
which he/she is credited with at least (1) Hour of Service during a period of
employment with Retail prior to January 1, 1997.
1.30 Hourly Employee means any nonexempt (for purposes of
overtime) Employee whose compensation is calculated on the basis of an hourly
rate as
9
distinguished from "salaried" Employees who receive a salary based on a weekly,
monthly, annual or similar basis.
1.31 Leave of Absence means any temporary absence from
employment authorized by the Employer based on its normal practices. An
Employee's Period of Service shall continue uninterrupted during such leave.
1.32 Limitation Year shall be the Plan Year.
1.33 Matching Contribution means a contribution made on behalf
of a Member pursuant to Section 3.3 of the Plan.
1.34 Matching Contribution Account means an account
established and maintained on behalf of a Member to which his Matching
Contributions are allocated.
1.35 Member means any Eligible Employee included in the
membership of the Plan as provided in Section 2 hereof. A Member shall continue
to be a Member as long as he has an Accrued Benefit hereunder.
1.36 Non-Highly Compensated Employee means any Employee who is
not a Highly Compensated Employee.
1.37 Normal Retirement Date means the Member's 65th birthday.
1.38 Owner-Employee means a sole proprietor who owns the
entire interest in the Employer or a partner who owns more than 10% of either
the capital interest or the profits interest in the Employer and who receives
remuneration for personal services from the Employer.
1.39 Period of Service means the period between an Employee's
date of hire or rehire, as applicable, and the date on which he ceases to be an
Employee.
1.40 Plan means Polo Ralph Lauren Corporation Profit Sharing
Retirement Savings Plan (for Hourly Employees of Fashions Outlet of America,
Inc. and subsidiaries and Polo Clothing Co., Inc.), as set forth herein.
1.41 Plan Administrator is the individual or entity provided
for in Section 12 hereof.
1.42 Plan Sponsor means Fashions Outlet of America, Inc. or
its successor.
1.43 Plan Year means the twelve-month period ending on the
Saturday closest to March 31.
1.44 Prior Plan means the qualified plan of the Employer in
effect through March 30, 2001.
10
1.45 Profit Sharing Contribution means a contribution made by
the Employer pursuant to Section 3.1.
1.46 Profit Sharing Contribution Account means an account
established and maintained on behalf of a Member to which his Profit Sharing
Contributions are allocated.
1.47 Retirement means the termination of a Member's employment
with the Employer on his Early or Normal Retirement Date or such later date on
which he actually terminates employment.
1.48 Rollover Account means the account established and
maintained pursuant to Section 6 of the Plan.
1.49 Rollover Contribution means the amount contributed to the
Plan pursuant to Section 6.8.
1.50 Self-Employed Individual means an individual who has
Earned Income for the taxable year from the trade or business for which the Plan
is established, and shall also include an individual who would have Earned
Income but for the fact that the trade or business had no net profits for the
taxable year. A Self-Employed Individual shall be treated as an Employee.
1.51 Shareholder-Employee means a Member who owns more than
five percent (5%) of the Employer's outstanding capital stock during any year in
which the Employer elected to be taxed as an "S" corporation under the Code.
1.52 Spouse means the husband or wife of a Member on the date
benefits under the Plan commence. However, if the Member should die prior to the
date benefits under the Plan would have commenced to him, then the Spouse shall
be the husband or wife to whom the Member had been married throughout the
one-year period preceding the date of his death.
1.53 Top-Heavy Contribution means a contribution made by an
Employer pursuant to Section 8 of the Plan.
1.54 Top-Heavy Contribution Account means an account
established and maintained on behalf of a Member to which Top-Heavy
Contributions, if any, are allocated.
1.55 Trust means a trust, intended to qualify under section
501(a) of the Code, constituting the legal agreement between the Plan Sponsor
and the Trustee, fixing the rights and liabilities with respect to managing and
controlling the Fund for the purposes of the Plan.
1.56 Trustee means the individual or entity designated by the
Board as trustee(s) or any successor trustee(s) of the Trust.
11
1.57 Valuation Date means, every business day during a Plan
Year.
1.58 Year of Service means the period of service with the
Employer and any Affiliated Company used to determine vesting pursuant to
Section 5 of the Plan as follows:
(a) except as otherwise provided below, each Plan Year
during which an Employee completes at least 1,000 Hours of Service;
(b) for Years of Service (or fractions thereof) prior to
April 1, 1989, any period which was a year of service (or fraction thereof)
under such plan in effect on March 31, 1989;
(c) for Years of Service after April 1, 1990, except as
provided in paragraph (b) of this Section, each twelve (12) consecutive month
computation period during which the Member is credited with at least 1,000 Hours
of Service. Except for eligibility purposes herein, the computation period shall
be the Plan Year. For purposes of eligibility, such computation period shall be
the Eligibility Computation Period.
Notwithstanding the foregoing,
(i) if an Employee is rehired prior to incurring a
Break in Service, his Years of Service shall be computed as though his
service had not been severed,
(ii) an Employee who is absent by reason of service in
the armed forces of the United States, and who returns to service with
the Employer within the time during which his reemployment rights are
protected by federal law, shall be treated as though his employment had
not been severed, and
(iii) if the Employer is an Affiliated Company, Years
of Service shall be determined as if all Affiliated Companies were a
single employer, excluding, however, employment during periods when the
Employer was not a member of the Affiliated Company. In addition, if the
Employer maintains the plan of a predecessor employer, service with such
employer will be treated as service for the Employer.
(d) For purposes of vesting only, a Year of Service shall
include employment with The Ralph Lauren Home Collection operations of J.P.
Stevens & Co. Inc. prior to commencement of such operations by Polo Ralph Lauren
Corporation.
(e) Years of service completed prior to January 1, 1982
for Members who were covered under the Polo Players, Ltd. Deferred Savings Plan
will not be counted for vesting purposes.
(f) Notwithstanding the foregoing, Members of the Polo
Player, Ltd. Deferred Savings Plan are required to complete 800 Hours of Service
12
between January 1, 1990 through December 31, 1990 to receive a Year of Service
for vesting credit.
(g) Years of Service for service performed, for the period
prior to the acquisition date, for a company subsequently acquired by the
Employer shall be credited only to the extent expressly so provided in Appendix
A.
(h) If a Member incurs a Break in Service, his Years of
Service before that Break in Service (and not disregarded by reason of any prior
Break in Service) shall be taken into account only if following the Break in
Service the Member completes one Year of Service, and:
(i) before the Break in Service the Member had a
vested interest in his Accrued Benefit;
(ii) effective for consecutive Breaks in Service
ending before January 1, 1985, the aggregate number of the Member's
Years of Service before the Break in Service (and not disregarded by
reason of any prior Break in Service) equal or exceed the aggregate
number of his consecutive Breaks in Service; or
(iii) effective for consecutive Breaks in Service
ending on or after January 1, 1985, the aggregate number of the Member's
consecutive Breaks in Service is less than five (excluding Years of
Service which were disregarded by reason of any prior Break in Service)
before such Break in Service.
If a Member's Years of Service are disregarded pursuant to the preceding
paragraph, then such Member shall be treated as a new Employee, for eligibility
purposes, upon reemployment. If they may not be disregarded pursuant to the
preceding paragraph, then such Member shall continue to participate in the Plan
or, if terminated, shall participate immediately upon reemployment.
(i) For purposes of eligibility and vesting, a Year of
Service shall include each year of employment with RLW or BIC for which an
Employee was entitled to compensation prior to the purchase by Womenswear of
certain assets of RLW on October 16, 1995, provided that such Employee became an
Employee of Womenswear or any Affiliated Company between October 16, 1995 and
December 15, 1995, and provided further that such Employee has not received from
RLW or BIC any payment in respect of or relating to such Employee's termination
of employment by RLW or BIC.
(j) For purposes of eligibility and vesting, a Year of
Service shall include each year of continuous employment with EWI and ATS for
which an Employee was entitled to compensation prior to such Employee's
employment by Wings provided that such Employee became an Employee of Wings or
any Affiliated Company between May 13, 1996 and July 31, 1996, and provided
further that such Employee was employed by EWI or ATS prior to May 13, 1996 and
was engaged in rendering travel
13
services to the Company, Polo Ralph Lauren, L.P. or its predecessor Polo on
Polo's premises pursuant to a written contract between EWI or ATS and Polo.
(k) For purposes of eligibility and vesting, a Year of
Service shall include each year of continuous employment with Retail for which
an Employee was entitled to compensation prior to the purchase by the Company of
Retail on April 3, 1997, provided that such Employee was employed by Retail
immediately prior to such sale.
SECTION 2
MEMBERSHIP IN THE PLAN
2.1 Current Members. Each Employee who was participating in
the Prior Plan on March 30, 2001 shall automatically continue as a Member
hereunder. Each other Employee who is an Eligible Employee as of the Effective
Date shall become a Member of the Plan on such date.
2.2 New or Reemployed Members. Each other Employee shall
become a Member on the Entry Date coincident with or next following the date he
qualifies as an Eligible Employee. A reemployed Employee shall become a Member
on the next Entry Date following his date of reemployment if he had been a
Member of the Plan during his prior period of employment and had incurred a
prior Break in Service such as would cause his Years of Service to be
disregarded, or had become eligible but had not yet entered the Plan. Otherwise,
a reemployed Employee shall become a Member of the Plan as of the date of his
reemployment.
2.3 Changes in Category. If an Employee's status changes
either from a category of ineligibility to a category of eligibility, or from a
category of eligibility to a category of ineligibility, his employment during
the period of ineligibility shall be considered as Years of Service for vesting
purposes hereunder. For purposes of Section 3, only Compensation earned from the
Employer during a period in which the Employee is both an Eligible Employee and
a Member shall be considered in determining the amount of the contribution made
to the Trust on behalf of the Employee.
If a Member's status changes to a category of ineligibility,
he shall become a Member immediately upon returning to an eligible class of
Employees if he has not incurred a Break in Service; otherwise, eligibility
shall be determined in accordance with Section 1.12. If an ineligible Employee's
status changes to a category of eligibility, he shall become a Member
immediately if he has otherwise satisfied the requirements of Section 1.20.
14
SECTION 3
CONTRIBUTIONS
3.1 Profit Sharing Contributions. The Employer may, in its
sole discretion, elect to make a Profit Sharing Contribution to the Plan. The
Profit Sharing Contribution with respect to any given Plan Year shall be
allocated solely among the "eligible Members" (as hereafter defined) for such
Plan Year, in proportion to Compensation. For purposes of this Section only, a
Member shall be an eligible Member with respect to any given Plan Year only if
such person:
(a) has, not later than the last day of such Plan Year (i)
completed at least one Eligibility Computation Period during which such person
is credited with at least 1,000 Hours of Service and (ii) attained age 21,
(b) is credited with at least 1,000 Hours of Service
during such Plan Year, and
(c) is an Employee on the last day of such Plan Year.
Solely for the purpose of determining who is an eligible Member, a Member shall
be deemed to be employed on the last day of a given Plan Year if such Member
terminated employment with the Employer on the Friday before the Saturday that
is the last day of the Plan Year. Such Member shall be eligible to receive an
allocation hereunder whether or not the Member elects to defer a portion of his
income to this or any other tax-qualified plan sponsored by the Employer. Each
Member's share of the Profit Sharing Contribution shall be deposited to his
Profit Sharing Contribution Account.
All contributions to the Plan pursuant to this Section shall
be in cash, except to the extent that the Plan Administration, in accordance
with such written rules and procedures as shall be established by the Plan
Administrator (and which rules and procedures shall be annexed to, and shall
become a part of, the Plan) determines to instead denominate such contribution
with respect to any one or more Plan Years in the form of shares of Polo Ralph
Lauren Corporation Class A Common Stock.
3.2 Basic Contributions.
(a) Each Member who is a Non-Highly Compensated Employee
may authorize the Employer to reduce his Compensation by any whole percentage
between 0% and 15% of such Compensation, but in no event to exceed the
appropriate Adjustment Factor.
(b) Each Member who is a Highly Compensated Employee may
authorize the Employer to reduce his Compensation by any whole percentage
between 0% and 6% of Compensation, but in no event to exceed the appropriate
Adjustment Factor.
15
Such amount shall be deposited as Basic Contributions
hereunder to the Member's Basic Contribution Account. Each Eligible Employee
shall file a written election form with the Plan Administrator prior to the date
that he becomes a Member specifying the portion of his Compensation that is to
be contributed to the Plan as a Basic Contribution. The election of the Member
shall remain in effect until the Member files a new election with the Plan
Administrator.
3.3 Matching Contributions. The Employer shall make a Matching
Contribution, which shall equal $.50 for each $l.00 deposited to such Member's
Basic Contribution Account; provided, however, that a Matching Contribution with
respect to any given Member shall only be made with respect to amounts deposited
to such Member's Basic Contribution Account will respect to periods beginning
after the date that such Member first becomes an "eligible Member" (as hereafter
defined). For purposes of this Section only, a Member shall become an eligible
Member only after the later of:
(a) the end of the first Eligibility Computation Period
during which such person is credited with at least 1,000 Hours of Service, and
(b) such person's attainment of age 21.
The Matching Contribution shall be credited to the Member's
Matching Contribution Account. Notwithstanding the preceding, no Matching
Contributions shall be made with respect to a Member's Basic Contributions in
excess of 6% of his Compensation. Compensation, for purposes of this Section,
shall mean only Compensation earned by an Employee while he is a Member of the
Plan.
All contributions to the Plan pursuant to this Section shall
be in cash, except to the extent that the Plan Administration, in accordance
with such written rules and procedures as shall be established by the Plan
Administrator (and which rules and procedures shall be annexed to, and shall
become a part of, the Plan) determines to instead denominate one-half of such
contribution (or, at the Member's election, one hundred percent of such
contribution), and with respect to such periods of time as shall be determined
by the Plan Administration, in the form of shares of Polo Ralph Lauren
Corporation Class A Common Stock.
3.4 Adjustments to Contribution Limits. Notwithstanding
Sections 3.2 and 3.3, the maximum Basic Contribution deferral percentage and the
amount of Employer Matching Contributions may be increased or decreased at the
discretion of the Board, provided that no such adjustment may be made without at
least thirty (30) days' written notice to all Members.
3.5 Adjustments to Contributions. A Member may increase or
decrease the rate of Basic Contributions effective as of any Valuation Date by
submitting a new election to the Plan Administrator. A Member may suspend Basic
Contributions at any time by submitting written notice to the Plan
Administrator. Suspensions during the Plan Year shall be effective as soon as
practicable after the election to suspend is filed
16
with the Plan Administrator. A Member may recommence Basic Contributions to the
Plan effective as of any Valuation Date by submitting a new written election to
the Plan Administrator, prior to such Valuation Date.
3.6 Distribution of "Excess Deferral Amounts". Notwithstanding
any other provision of the Plan, Excess Deferral Amounts as adjusted for income
or losses thereon shall be distributed to Members who claim such Excess Deferral
Amounts for the preceding calendar year.
(a) For purposes of this Section, Excess Deferral Amount
shall mean the amount of a Member's Basic Contribution that causes a Member's
Basic Contribution to exceed the appropriate Adjustment Factor. Excess Deferral
Amount shall also mean the amount of Basic Contributions for a calendar year
that the Member allocates to this Plan pursuant to a claim procedure which shall
require that the Member's claim shall be in writing and shall be submitted to
the Plan Administrator no later than March 1 following the year in which the
Excess Deferral was made. Said claim shall specify the Member's Excess Deferral
Amount for the preceding calendar year; and shall be accompanied by the Member's
written statement that if such amounts are not distributed, such Excess Deferral
Amount, when added to amounts deferred under other plans or arrangements
described in sections 401(k), 408(k), 457, 501(c)(18) or 403(b) of the Code,
shall exceed the appropriate Adjustment Factor for the year in which the
deferral occurred.
(b) A Member who has an Excess Deferral during a taxable
year may receive a corrective distribution during the same year. Such a
corrective distribution shall be made if:
(i) the Member designates the distribution as an
Excess Deferral;
(ii) the correcting distribution is made after the
date on which the Plan received the Excess Deferral; and
(iii) the Plan Administrator designates the
distribution as a distribution of an Excess Deferral.
(c) The Excess Deferral distributed to a Member with
respect to a calendar year shall be adjusted to reflect income or loss in the
Member's Basic Contribution Account for the taxable year allocable thereto. The
income or loss allocable to such Excess Deferral Amount shall be determined by
the method generally used under the Plan to allocate income or loss to a
Member's account.
(d) Excess Deferral Amounts, as adjusted for income and
losses, shall be distributed to a Member no later than April 15 of the year
following the calendar year in which such Excess Deferral was made.
3.7 Overall Limits on Contributions. Contributions made on
behalf of any Member during any Plan Year shall be subject to the following:
17
(a) In no event shall the Annual Addition for a Member
exceed the lesser of:
(i) 25% of the Member's Compensation, under Section
1.14(b) for the Limitation Year, or
(ii) the "defined contribution dollar limitation,"
which shall mean $35,000.
(b) For purposes of the Annual Addition hereunder, Basic
Contributions made on behalf of a Member during a payroll period which begins in
one Plan Year but ends in the next succeeding Plan Year shall be deemed an
Annual Addition for the next succeeding Plan Year, pursuant to Treasury
regulation 1.415-6(b)(7). If the excess Annual Additional results from a
contribution made under Section 3.2, the excess, together with allocable
earnings, determined in such manner as is deemed reasonable by the Plan
Administrator, shall be distributed to the contributing Member to the extent
permitted by Treasury regulation 1.415-6(b)(6).
(c) If the Annual Addition must be limited for any Member
after application of paragraph (b), the excess amounts in the Member's account,
together with allocable earnings, determined in such manner as is deemed
reasonable by the Plan Administrator, will be used to reduce Employer
contributions for the next Limitation Year (and succeeding Limitation Years, as
necessary) for that Member if that Member is covered by the Plan as of the end
of the Limitation Year. However, if that Member is not covered by the Plan as of
the end of the Limitation Year, then the excess amounts will be held unallocated
in a suspense account for the Limitation Year and allocated and reallocated in
the next Limitation Year to all of the remaining Members in the Plan.
Furthermore, the excess amounts will be used to reduce Employer contributions
for the next Limitation Year (and succeeding Limitation Years, as necessary) for
all of the remaining Members in the Plan. Excess amounts may not be distributed
to Members or former Members except as provided in paragraph (b).
(d) This Section 3.7 shall be satisfied prior to
satisfying the ADP test.
(e) In addition to any other limitations contained in this
Section, if the Employer or an Affiliated Company maintains or maintained a
defined benefit plan and the amount contributed to the Trust in respect of any
Plan Year would cause the amount allocated to any Member under all defined
contribution plans maintained by the Employer or an Affiliated Company to exceed
the maximum allocation as determined in subsection (d), then the allocation with
respect to such Member shall be reduced by the amount of such excess. To the
extent administratively feasible, the limitation of this subsection shall be
applied to the Member's benefit payable from the defined benefit plan prior to
reduction of the Member's Annual Additions under this Plan. The excess
allocation shall be reallocated or held in a suspense account in accordance with
subsection (c).
18
(f) If this Plan provides contributions or benefits for
one or more Owner-Employees who control both the business for which this Plan is
established and one or more other trades or businesses, this Plan and the plan
established for other trades or businesses must, when considered as a single
plan, satisfy sections 401(a) and (d) of the Code for the employees of this and
all other trades or businesses.
If the Plan provides contributions or benefits for one or more
Owner-Employees who control one or more other trades or businesses, the
employees of the other trades or businesses must be included in a plan which
satisfies sections 401(a) and (d) of the Code and which provides contributions
and benefits not less favorable than those provided for Owner-Employees under
this Plan.
If an individual is covered as an Owner-Employee under the
plans of two or more trades or businesses which are not controlled, and the
individual controls a trade or business, then the contributions or benefits of
the employees under the plan of the trades or businesses which are controlled
must be as favorable as those provided for him under the most favorable plan of
the trade or business which is not controlled.
For purposes of the preceding paragraphs, an Owner-Employee,
or two or more Owner-Employees, will be considered to control a trade or
business if the Owner-Employee, or two or more Owner-Employees together:
(1) own the entire interest in an
unincorporated trade or business, or
(2) in the case of a partnership, own more
than 50 percent of either the capital interest or the profits interest
in the partnership.
For purposes of the preceding sentence, an Owner-Employee, or
two or more Owner-Employees, shall be treated as owning any interest in a
partnership which is owned, directly or indirectly, by a partnership which such
Owner-Employee, or such two or more Owner-Employees, is considered to control
within the meaning of the preceding sentence.
3.8 Permitted Employer Refunds. Employer contributions
hereunder are made with the understanding that this Plan shall qualify under
section 401 of the Code, and that such contributions shall be deductible under
section 404 of the Code. Any contribution that is disallowed as a deduction
shall be refunded to the Employer within one year of such disallowance if the
Employer has filed the application for the determination or qualification of
this Plan with the IRS by the time prescribed by law for filing the Employer's
return for the taxable year in which this Plan was adopted, or by such later
date as the Secretary of the Treasury may prescribe.
(a) Any contribution made by the Employer due to a mistake
of fact shall be refunded to the Employer within one year of such contribution.
19
(b) Refunds of contributions due to a disallowance, denial
or mistake of fact shall be governed by the following requirements:
(i) earnings attributable to the amount being refunded
shall remain in the Plan, but losses thereto must reduce the amount to
be refunded; and
(ii) in no event may a refund be made that would cause
the Accrued Benefit of any Member to be reduced to less than that which
the Member's Accrued Benefit would have been had the mistaken amount not
been contributed.
3.9 Timing of Deposits. Employer shall make payment of the
Basic Contribution to the Trust under the terms hereof no later than the time
period permitted by applicable law and regulations. All other Employer
contributions under the Plan shall be deposited to the Trust prior to the due
date for filing the Employer's Federal Income Tax Return for the Fiscal Year in
which the Plan Year ends, including any extension thereto. In no event shall the
Employer Contributions be made in excess of the amount deductible under
applicable federal law now or hereafter in effect limiting the allowable
deduction for contributions to profit sharing plans. The contributions to this
Plan when taken together with all other contributions made by the Employer to
other qualified retirement plans shall not exceed the maximum amount deductible
under section 404(a) of the Code.
3.10 Profits Not Required. The Employer shall make all
contributions to this Plan without regard to current or accumulated earnings or
profit for the taxable year or years ending with or within such Plan Year.
However, the Plan shall continue to be designed to qualify as a profit sharing
plan for purposes of sections 401(a), 402, 404, 412 and 417 of the Code.
SECTION 4
MEMBER ACCOUNTS
4.1 Establishment of Accounts. A Profit Sharing Contribution
Account, Basic Contribution Account, Top-Heavy Contribution Account, Matching
Contribution Account and Rollover Account shall be established for each Member
in accordance with Sections 3, 6 and 8, or under the Polo Players, Ltd. Deferred
Savings Plan as applicable. All contributions by or on behalf of a Member shall
be deposited to the appropriate account.
4.2 Valuation of Accounts. As of each Valuation Date, the
accounts of each Member shall be adjusted to reflect any appreciation or
depreciation in the fair market value of a fund and income or losses of a fund
which gain or loss shall be allocated pro rata to each Member's account. The
fair market value of the Fund shall be determined by the Trustee and
communicated to the Plan Administrator in writing. Each Member shall be
furnished with a statement as soon as practicable after each Valuation
20
Date, setting forth the value of his Accrued Benefit. It shall represent the
fair market value of all securities or other property held for each respective
fund, plus cash and accrued earnings, less accrued expenses and proper charges
against the fund as of the Valuation Date. The Trustee's determination shall be
final and conclusive for all purposes of this Plan.
4.3 Adjustment to Accounts. When determining the value of
Member accounts, any deposits due which have not been deposited to the fund on
behalf of the Member shall be added to his accounts; and any withdrawals or
distributions made which have not been paid out shall be subtracted from the
accounts. Similarly, adjustment of accounts for appreciation or depreciation of
a fund shall be deemed to have been made as of the Valuation Date on which the
adjustment relates, notwithstanding that they are actually made as of a later
date.
4.4 Directed Investments. Within the context of the Trust, the
Trustee at the direction of the Plan Administrator shall establish one or more
investment funds having such investment objectives as may be ascribed to each
such fund by the Plan Administrator ("Investment Funds"). Such Investment Funds
may consist of the Trust's investment in (i) one or more pooled funds
established by the Trustee, if it is a bank or trust company, for the investment
of the assets of tax qualified pension, and/or profit-sharing plans, (ii) one or
more mutual funds, (iii) one or more contracts issued by an insurance company,
and/or (iv) any other investment vehicle suitable for the investment of assets
of the Trust and designated by the Plan Administrator.
The Plan Administrator shall provide information to Members
regarding the Investment Funds available under the Plan, including a description
of the investment objectives and types of investments of each such Investment
Fund. If a prospectus is required to be issued with respect to any such
Investment Fund, the Plan Administrator will inform Members of the availability
of such prospectus or, if required by law, arrange to furnish a copy of the
prospectus to each Member.
A Member's Basic and Matching Contribution Accounts shall be
invested as selected by each Member in one or more of the Investment Funds. A
Member shall make such investment selections in writing, or otherwise in
accordance with procedures established by the Plan Administrator. The Member may
select investment in one or more of the Investment Funds in multiples of 1%. The
investment selection of a Member shall apply uniformly to all of his accounts.
4.5 Administration of Investments. Contributions made by or on
behalf of a Member shall continue to be invested in the manner selected by the
Member until the effective date of a new designation which has been properly
completed and filed with the Plan Administrator. If any Member fails to make an
initial designation, he shall be deemed to have elected investment in an
Investment Fund comprised of fixed income or similar types of investments as
determined by the Plan Administrator. A designation filed by a Member changing
his investment option shall apply to investment of future deposits and/or to
amounts already accumulated in his accounts. A Member may change his investment
option effective as of any Valuation Date by providing written notice to
21
the Plan Administrator at least 30 days prior to the Valuation Date on which the
change is to occur, or within such lesser period prior to the Valuation Date
which is acceptable to the Plan Administrator.
Notwithstanding the foregoing, if a Member files a designation
with the Plan Administrator which changes his investment selection with regard
to amounts already accumulated in his accounts, the Plan Administrator shall
effectuate the investment change by making an estimated transfer between funds
in accordance with the designation filed by the Member, based on the value of
the Member's accounts as of the Valuation Date preceding the effective date of
the designation, plus deposits and less withdrawals between the preceding
Valuation Date and the effective date of the designation. This estimated
transfer shall be made by the Plan Administrator as soon as practicable after
the effective date of the designation. Any remaining adjustments to the transfer
between investment funds on behalf of a Member pursuant to a valid designation
shall occur after the valuation of Plan assets for the preceding period is
completed. No Member shall have any recourse against the Plan Administrator,
Plan Sponsor, or any Plan fiduciary for any losses sustained or earnings lost as
a result of the timeliness or accuracy of any transfer between investment funds
made pursuant to a valid designation.
4.6 Investments for Terminated Members. Any Member who ceases
to be an Employee shall continue to have the authority to direct the investment
of his accounts. The Plan Administrator and Trustee shall have no authority to
direct the investment of any Member's account hereunder other than as the Member
so directs in accordance with the provisions of Sections 4.4 and 4.5.
4.7 Valuation Adjustments. The Member's account balances shall
be adjusted as of each Valuation Date, in accordance with Section 4.2, based on
the performance of the Investment Fund(s) selected by the Member. Each account
shall be valued separately.
SECTION 5
VESTING AND FORFEITURES
5.1 Vesting Schedule. A Member shall have a fully vested
interest in his Basic Contribution Account and Rollover Account in all
instances. A Member's vested interest in his Profit Sharing Contribution Account
and Matching Contribution Account shall be determined by the occurrence of the
following events:
(a) full vesting shall occur upon the death or Disability
of a Member;
(b) full vesting shall occur when a Member attains his
Normal Retirement Date or his Early Retirement Date; and
22
(c) except as otherwise stated above, the Member's vested
percentage in his Profit Sharing Contribution Account and Matching Contribution
Account shall be determined in accordance with the following schedule:
Years of Service Vested Percentage
---------------- -----------------
Less than 2 years 0%
After 2 years but less than 3 40%
After 3 years but less than 4 60%
After 4 years but less than 5 80%
After 5 years 100%
(d) Notwithstanding the vesting schedule above, the vested percentage
of a Member's Account shall not be less than the vested percentage attained as
of the later of the Effective Date or adoption date of this amendment and
restatement.
5.2 Forfeitures Reallocated. A Member's vested Accrued Benefit shall be
determined in accordance with Section 5.1 as of the date he terminates
employment. The nonvested portion shall be forfeited on the earlier of:
(a) the date on which the Member receives a distribution of his vested
Accrued Benefit, if any; or
(b) five (5) consecutive one-year Breaks in Service from the Member's
date of termination.
Said Forfeiture shall be reallocated as additional Profit Sharing
Contributions, in accordance with Section 3.1, to Members still employed on the
last day of the Plan Year. Solely for these purposes, a Member shall be deemed
to be employed on the last day of the Plan Year if such Member terminated
employment with the Employer on the Friday before the Saturday that is the last
day of the Plan Year.
For purposes of this Section 5.2, if the value of a Member's vested
Accrued Benefit is zero, the Member shall be deemed to have received a
distribution of such vested Accrued Benefit. A Member's vested Accrued Benefit
shall not include accumulated deductible Employee contributions within the
meaning of section 72(o)(5)(B) of the Code for Plan Years beginning prior to
January 1, 1989.
A distribution made no later than the close of the second Plan Year
following the year in which the Member terminates participation in the Plan is
deemed to be made on termination, in accordance with section 411(a)(7)(B) of the
Code.
5.3 Change in Vesting Schedule. A Member with at least three (3) Years of
Service as of the expiration date of the election period (as set forth below)
may elect to have his nonforfeitable percentage computed under the Plan without
regard to an amendment or restatement of the Plan. If a Member fails to make
such election, then
23
such Member shall be subject to the new vesting schedule. The Member's election
period shall commence on the adoption date of the amendment and shall end 60
days after the latest of:
(a) the adoption date of the amendment;
(b) the effective date of the amendment; or
(c) the date the Member receives written notice of the amendment from
the Employer or Administrator,
except, however, that any Employee who was a Member as of the later of the
Effective Date or adoption date of an amendment and restatement and who
completed three (3) Years of Service shall be subject to the pre-amendment
vesting schedule, provided such schedule is more liberal than the new vesting
schedule.
For purposes of this Section 5.3, a Member shall be considered to have
completed three (3) Years of Service whether or not consecutive, without regard
to the exceptions of section 411(a)(4) of the Code.
SECTION 6
DISTRIBUTIONS
6.1 Distribution of Benefit. A Member who ceases to be an Employee for any
reason other than death shall be entitled to receive his vested Accrued Benefit.
A Member's Beneficiary shall be entitled to receive the Member's vested Accrued
Benefit in the event of the Member's death. A Member or Beneficiary who is
entitled to payment under this Section may elect one of the following options:
Option A. A lump sum payment equal to the value of the Member's vested Accrued
Benefit determined as of any Valuation Date coincident with or
following the date he ceases to be an Employee.
Option B. A lump sum payment after the Valuation Date specified under Option
A. as the Member (or Surviving Spouse) requests pursuant to the
limitations set forth in Section 6.5 of this Plan. The amount
payable shall be equal to the Member's vested Accrued Benefit
determined as of the Valuation Date immediately following the date
payment is requested.
Option C. Substantially equal monthly, quarterly, semiannual or annual cash
installments over a period not to exceed the joint and last survivor
life expectancy of the Member and his Beneficiary. Such payments to
a Member must commence as provided in Section 6.6 of this Plan, and
shall continue to the Member's Beneficiary after the Member's death
until the entire vested Accrued Benefit has been distributed. A
Member (or in the case of a deceased Member, the Beneficiary) may
elect to receive the unpaid portion of his vested Accrued Benefit in
a lump sum payment as of
24
any Valuation Date by submitting a written request to the Plan
Administrator.
All distributions required under this Section 6 shall be determined and
made in accordance with the regulations under section 401(a)(9) of the Code,
including the minimum distribution incidental benefit requirement of section
1.401(a)(9) -2 of the regulations.
6.2 Election of Benefits. The Member shall notify the Plan Administrator,
in writing, of the form and timing of benefit payments. An election may be
revoked and a new written election may be filed with the Plan Administrator any
time prior to the commencement of benefits. Payment of benefits shall commence
as soon as practicable under the option the Member has designated; but in no
event later than as provided under Section 6.6 hereof. Notwithstanding the
foregoing, if an Employee separates from service with the Employer for reasons
other than death, the Employee's vested Accrued Benefit will be paid to him
automatically in accordance with Option A, unless the value of his vested
Accrued Benefit exceeds $5,000; provided that if the Employee's vested Accrued
Benefit exceeds $5,000 on the date that the Employee separates from service and
then on any subsequent date the value of the Employee's vested Accrued Benefit
is not greater than $5,000, the Employee's vested Accrued Benefit will be paid
to him automatically in accordance with Option A at that time.
6.3 Rehire Prior to Incurring Five (5) Consecutive Breaks in Service. If
the Member terminates his employment and is rehired by the Employer prior to the
date that he would incur his fifth consecutive Break in Service, any amounts
previously forfeited shall be restored by the Employer if such Member's vested
Accrued Benefit had remained in the Trust until the date the Member was rehired
or if the Member had received a distribution and repays the entire amount which
was distributed on or before the earlier of five years after the first date on
which the Member is subsequently reemployed by the Employer, or the close of the
first period of five consecutive one-year Breaks in Service after the
withdrawal. The Member's vested interest in such an instance shall be determined
thereafter as if he did not have a break in employment. The Employer shall make
sufficient contributions equal to the amount forfeited at the time distribution
occurred. If the Member does not repay the amount which was distributed to him,
new accounts shall be opened upon his reentry into the Plan and the amount
forfeited during the Member's prior employment may not be recovered. If a Member
receives or is deemed to receive a distribution pursuant to this Section 6 and
the Member resumes employment covered under this Plan, the Member's
Employer-derived Accrued Benefit will be restored to the amount on the date of
distribution if the Member repays to the Plan the full amount of the
distribution attributable to Employer contributions before the earlier of 5
years after the first date on which the Member is subsequently reemployed by the
Employer, or the date the Member incurs 5 consecutive one-year Breaks in Service
following the date of the distribution.
6.4 Death Prior to Total Distribution. If a Member dies before his entire
interest has been distributed to him, the remaining portion of such interest
shall be distributed in a lump sum as soon as practicable after the next
Valuation Date, and in no
25
event later than five (5) years after the Member's date of death unless Option
C. has been chosen by the Member prior to his death.
6.5 Distribution Limitation. In accordance with section 401(a) of the Code
and unless he elects otherwise, a Member shall commence distribution hereunder
no later than 60 days after the close of the Plan Year in which occurs the later
of his Normal Retirement Date, the tenth anniversary of the year in which a
Member has commenced participation in the Plan or the date of the Member's
termination of employment. Notwithstanding the foregoing, the failure of a
Member (and, if married, his Spouse) to consent to a distribution while a
benefit is immediately distributable within the meaning of this Section shall be
deemed to be an election to defer commencement of payment of any benefit
sufficient to satisfy this Section.
6.6 Mandatory Distributions. A Member's benefits shall be distributed to
him not later than April 1 of the calendar year following the later of (x) the
calendar year in which the Member attains age 70-1/2, or (y) the calendar year
in which the Member retires; provided that clause (y) shall not apply to any
Member who is a "five (5) percent owner" (as defined in section 416(i) of the
Code). Notwithstanding the foregoing, if a Member had attained age 70-1/2 before
January 1, 1988 and was not a "five (5) percent owner" at any time during the
Plan Year ending with or within the calendar year in which the Member attained
age 66-1/2 or any subsequent Plan Year, his benefits shall be distributed to him
not later than April 1 of the calendar year following the later of (A) the
calendar year in which the Member attains age 70-1/2 or (B) the calendar year in
which the Member retires. The restrictions imposed by this Section shall not
apply if a Member has, prior to January 1, 1984, made a written designation to
have his retirement benefit paid in an alternative method acceptable under
section 401(a) of the Code as in effect prior to the enactment of the Tax Equity
and Fiscal Responsibility Act of 1982. Any such written designation made by a
Member shall be binding upon the Plan Administrator. The Member shall be
required to withdraw during any Plan Year only the minimum amount required to
satisfy the Code.
6.7 Earnings on Undistributed Benefits. A Member's Accrued Benefit shall
share in investment income and/or depreciation in accordance with the provisions
of Section 4 until his vested Accrued Benefit, valued as of the Valuation Date
immediately following his date of termination, is distributed to him.
6.8 Rollovers Into the Plan. Subject to approval of the Plan
Administrator, an Employee may roll over to the Trust amounts accumulated for
the Employee under any other qualified retirement plan or plans. The amount
rolled over shall become subject to all of the terms and conditions of this Plan
and Trust Agreement after it is rolled over, except that it shall be fully
vested and nonforfeitable at all times. The amounts rolled over shall be
deposited in a separate account herein referred to as an Employee's Rollover
Account and shall be invested as other accounts. An Employee who makes a
rollover contribution to this Plan shall not otherwise participate in the Plan
until he qualifies as an Eligible Employee hereunder.
26
6.9 Evidence in Writing. The Plan Administrator may require the Member to
furnish a letter or other evidence in writing from the Administrator of the plan
from which the rollover originates, stating that the acceptance of the rollover
shall not affect the tax qualified status of the Plan.
6.10 Hardship Withdrawal. A Member may apply in writing to the Plan
Administrator for a hardship withdrawal from his vested Accrued Benefit at any
time. The withdrawal must satisfy the criteria set forth below and may be
approved or disapproved at the discretion of the Plan Administrator. Hardship
withdrawals from a Member's Basic Contribution Account are not permitted from
income on a Member's Basic Contribution, except to the extent of earnings on or
before December 31, 1988, nor are such withdrawals permitted to include amounts
treated as Basic Contributions as a result of the application of the special
nondiscrimination requirements under rules prescribed by the Secretary of the
Treasury for Employer contributions that are used to meet the vesting and
withdrawal restrictions for Basic Contributions. The circumstances which may
warrant approval of a Member's application for a hardship withdrawal are:
(a) General Rule. For purposes of this Plan, a hardship distribution
must be made on account of an immediate and heavy financial need of the Member
and must be in an amount not to exceed the sum necessary to satisfy such
financial need.
(b) Immediate and Heavy Financial Need. The determination of whether a
Member has an immediate and heavy financial need shall be made on the basis of
whether a request satisfies the definition of "immediate and heavy financial
need," including those deemed needs as set forth below. A financial need shall
not fail to qualify as immediate and heavy merely because such need was
reasonably foreseeable or voluntarily incurred by the Member.
(c) Deemed Immediate and Heavy Financial Need. A distribution shall be
deemed to be made on account of an immediate and heavy financial need of the
Member if the distribution is on account of:
(i) expenses for medical care described in section 213(d) of the
Code previously incurred by the Member, the Member's spouse, or any
dependents of the Member (as defined in section 152 of the Code) or
amounts necessary to obtain medical services, which constitute medical
expenses described in section 213(d) of the Code;
(ii) costs directly related to the purchase (excluding mortgage
payments) of a principal residence for the Member;
(iii) payment of tuition and related educational fees for the next
twelve months of post-secondary education for the Member, the Member's
spouse, children or dependents;
27
(iv) the need to prevent the eviction of the Member from his
principal residence or foreclosure on the mortgage of the Member's
principal residence; or
(v) such other events set forth by the Commissioner of the Internal
Revenue Service through the publication of revenue rulings, notices, and
other documents of general applicability.
(d) Distribution Deemed Necessary to Satisfy Financial Need (Suspension
Method). A distribution shall be deemed to be necessary to satisfy an immediate
and heavy financial need of a Member if all of the following requirements are
satisfied:
(i) the distribution is not in excess of the amount of the immediate
and heavy financial need of the Member plus anticipated federal, state and
local income taxes and penalties on distribution;
(ii) the Member has obtained all distributions, other than hardship
distributions, and all nontaxable (at the time of the loan) loans
currently available under all plans maintained by an Affiliated Company;
(iii) the Member's elective and after-tax contributions under this
Plan (and any other qualified or nonqualified plan of deferred
compensation maintained by an Affiliated Company) are suspended under a
legally enforceable arrangement for at least twelve months after receipt
of the hardship distribution; and
(iv) the Member may not make elective contributions for the Member's
taxable year immediately following the taxable year of the hardship
distribution in excess of the Dollar Limit for such next taxable year less
the amount of such Member's elective contributions for the taxable year of
the hardship distribution.
(e) The determination of the existence of financial hardship and the
amount required to be distributed to meet the need created by the hardship must
be made in a uniform and nondiscriminatory manner.
6.11 Withdrawals Permitted After Age 59-1/2. Notwithstanding the
foregoing, a Member may apply in writing to the Plan Administrator for a
withdrawal from all or a portion of his vested Accrued Benefit any time after
attaining age 59-1/2. Such withdrawal shall not be subject to the requirements
set forth in Section 6.10 but is subject to the conditions set forth below.
6.12 Conditions for Withdrawals. The following conditions apply to
withdrawals made under Sections 6.10 and 6.11:
(a) a Member may make only two hardship withdrawals and one age 59-1/2
withdrawal in any 12-month period;
28
(b) all withdrawals shall be based on the value of the Member's
applicable accounts as of the Valuation Date immediately preceding the
withdrawal request. Notwithstanding the foregoing, the Plan Administrator, in
its sole discretion, shall base a withdrawal under this Section on the value of
a Member's vested Accrued Benefit as of the date of the withdrawal; and
(c) any withdrawal hereunder by a married Member shall be subject to
the written consent of his Spouse.
SECTION 7
ACTUAL DEFERRAL AND ACTUAL
CONTRIBUTION PERCENTAGE TESTING
7.1 Actual Deferral Percentage Test. The actual deferral percentage (ADP)
of Basic Contributions allocated to Members who are Highly Compensated Employees
shall not exceed the greater of (a) or (b) as follows:
(a) the ADP of Members who are Non-Highly Compensated Employees times
1.25; or
(b) the ADP of Members who are Non-Highly Compensated Employees times
2.0, but not to exceed the ADP of Members who are Non-Highly Compensated
Employees by more than two percentage points.
7.2 ADP Formula.
(a) The ADP for a specified group of Members for a Plan Year shall be
the average of the Actual Deferral Ratios (ADR) calculated separately for each
Member in such group.
The Plan Administrator shall determine as soon as practicable after
the end of the Plan Year whether the ADP for Highly Compensated Employees
satisfies either of the tests contained in Section 7.1. In the event neither
test is satisfied, the Employer may elect either of the following:
(i) to reduce the allowable Basic Contribution for Highly
Compensated Employees as provided in Sections 7.3 and 7.5; or
(ii) to make an Additional Basic Contribution (subject to the
requirements of Section 7.6) on behalf of some or all of the Non-Highly
Compensated Employees eligible to make contributions under Section 3.1 in
such amount or amounts as it determines are necessary to satisfy the
requirements of Section 7.1, within the time period required by any
applicable law or regulation.
(b) The Plan shall take into account the ADRs of all Eligible Employees
for purposes of the ADP test. For this purpose, an Eligible Employee is any
Employee who is directly or indirectly eligible to make a Basic Contribution
under the
29
Plan for all or a portion of a Plan Year, including an Employee who would be
eligible but for his failure to make required contributions and an Employee
whose eligibility to make Basic Contributions has been suspended because of an
election to take a hardship distribution. In the case of an Eligible Employee
who makes no elective contributions, the ADR that is to be included in
determining the ADP is zero.
(c) A Basic Contribution shall be taken into account under the ADP test
for a Plan Year only if it relates to Compensation that either would have been
received by the Employee in the Plan Year (but for the deferral election) or is
attributable to services performed by the Employee in the Plan Year and would
have been received by the Employee within 2-1/2 months after the close of the
Plan Year (but for the deferral election).
(d) A Basic Contribution shall be taken into account under the ADP test
for a Plan Year only if it is contributed to the Trust before the last day of
the twelve-month period immediately following the Plan Year to which the
contribution relates and is allocated within the Plan Year to which the
contribution relates. A Basic Contribution is considered allocated as of a date
within a Plan Year if the allocation is not contingent on participation or
performance of services after such date.
(e) The ADR and ADP shall be calculated to the nearest .01%.
7.3 Calculations of Excess Contributions. The Excess Contributions for a
Highly Compensated Employee shall be determined and distributed in the following
manner:
(a) "Excess Contributions" shall mean, with respect to any Plan Year,
the excess of:
(i) the aggregate amount of Basic Contributions actually taken into
account in computing the ADP of Highly Compensated Employees for such Plan
Year, over
(ii) the maximum amount of Basic Contributions permitted by the ADP
test in accordance with Section 7.1.
(b) The amount of Excess Contributions attributable to each Highly
Compensated Employee shall be calculated and distributed by reducing Basic
Contributions made by, or on behalf of, the Highly Compensated Employee who has
made the greatest dollar amount of Basic Contributions with respect to such Plan
Year (or, in the event that more than one Highly Compensated Employee shall have
made Basic Contributions of an equal amount, the Basic Contributions of each
such Highly Compensated Employee) so that the amount of Basic Contributions of
such Highly Compensated Employee (or Highly Compensated Employees, as the case
may be) shall equal the amount of Basic Contributions with respect to such Plan
Year of the Highly Compensated Employee (or the Highly Compensated Employees, as
the case may be) who shall have made the next greatest amount of Basic
Contributions with respect to such Plan Year, and an amount equal to the amount
of reduction (or reductions, as the case
30
may be) shall be distributed to such Highly Compensated Employee (or Highly
Compensated Employees, as the case may be), provided, however, that the amount
of the reduction and the amount to be distributed shall in no event exceed the
Excess Contributions with respect to that Plan Year; and if the Excess
Contributions with respect to that Plan Year shall exceed the amount distributed
to such Highly Compensated Employee (or Highly Compensated Employees, as the
case may be) in accordance with the provisions of Section 7.3(a), then further
reductions shall be made in accordance with the provisions of Section 7.3(a)
until the amount distributed shall equal the Excess Contributions.
7.4 Failure to Correct Excess Contributions. Failure to correct Excess
Contributions by the close of the Plan Year following the Plan Year for which
they were made shall cause the cash or deferred arrangement to fail to satisfy
the requirements of section 401(k)(3) of the Code for the Plan Year for which
the Excess Contributions were made and for all subsequent years they remain in
the Trust. Also, the Employer shall be liable for a 10% excise tax on the amount
of Excess Contributions unless corrected by distribution or recharacterization
of Excess Contributions within 2-1/2 months after the close of the Plan Year for
which they were made.
7.5 Distribution of Excess Contributions. Excess Contributions shall be
distributed to Members on whose behalf such Excess Contributions were made no
later than the last day of the Plan Year following the Plan Year for which they
were made. Excess Contributions shall be adjusted in the manner utilized under
Sections 4.2 and 4.3 to reflect income earned and losses incurred for the Plan
Year on the Member's Basic Contributions Account.
7.6 Additional Basic and Matching Contributions. Additional Basic
Contributions and Matching Contributions may be treated as Basic Contributions
for purposes of the ADP test only if such contributions are nonforfeitable when
made and subject to the same distribution restrictions that apply to elective
contributions. Additional Basic Contributions and Matching Contributions which
may be treated as Basic Contributions must satisfy these requirements without
regard to whether they are actually taken into account as Basic Contributions
for purposes of satisfying the ADP tests.
Additional Basic Contributions and/or Matching Contributions may be
treated as Basic Contributions only if the conditions described in section
1.401(k)-1(b)(5) of the Treasury regulations are satisfied.
The amount of the Additional Basic Contribution for Non-Highly
Compensated Employees, or the reduction in the allowable Basic Contribution
deferral percentage for Highly Compensated Employees shall be such that at least
one of the tests contained in Section 7.1 is satisfied.
7.7 Matching Contributions. Any Matching Contributions made on account of
an Excess Contribution or deferral in excess of the Dollar Limit shall be
forfeited and shall be used to reduce Matching Contributions for the year of
forfeiture.
31
7.8 Actual Contribution Percentage Test. The actual contribution
percentage (ACP) of contributions deposited to the Plan for Members who are
Highly Compensated Employees shall not exceed the greater of (a) or (b) as
follows:
(a) the ACP of Members who are Non-Highly Compensated Employees times
1.25; or
(b) the ACP of Members who are Non-Highly Compensated Employees times
2.0, but not to exceed the ACP of Members who are Non-Highly Compensated
Employees by more than two percentage points.
7.9 ACP Formula.
(a) The ACP for a specified group of Members for a Plan Year shall be
the average of the Actual Contribution Ratios (ACR) calculated separately for
each Member in such group.
The Plan Administrator shall determine as soon as practicable after
the end of the Plan Year whether the ACP for Highly Compensated Employees
satisfies either of the tests contained in Section 7.8. In the event neither
test is satisfied, the Employer may elect either of the following:
(i) to reduce the allowable Matching Contribution for Highly
Compensated Employees as provided in Sections 7.10 and 7.11; or
(ii) to make an additional contribution on behalf of some or all of
the Non-Highly Compensated Employees eligible to make contributions under
Section 3.1 in such amount or amounts as it determines are necessary to
satisfy the requirements of Section 7.8, within the time period required
by any applicable law or regulation.
(b) The Plan shall take into account the ACRs of all Eligible Employees
for purposes of the ACP test. For this purpose, an Eligible Employee is any
Employee who is directly or indirectly eligible to receive an allocation of
Matching Contributions including an Employee who would be eligible but for his
failure to make required contributions and an Employee whose right to receive
Matching Contributions has been suspended because of an election not to
participate. In the case of an Eligible Employee who receives no Matching
Contributions, the ACR that is to be included in determining the ACP is zero.
(c) A Matching Contribution shall be taken into account under the ACP
test for a Plan Year only if it is made on account of the Eligible Employee's
Basic Contributions for the Plan Year contributed to the Trust before the last
day of the twelve-month period immediately following the Plan Year to which the
contributions relate and is allocated within the Plan Year to which the
contributions relate. Qualified Matching Contributions which are used to meet
the requirements of section 401(k)(3)(A) of the Code are not taken into account.
32
(d) The ACR and ACP shall be calculated to the nearest .01%.
(e) Additional Basic Contributions may be treated as Matching
Contributions for purposes of the ACP test of section 401(m) of the Code only if
such contributions are nonforfeitable when made and distributable only under the
following circumstances:
(i) the Employee's Retirement, death, Disability or separation from
service;
(ii) the termination of the Plan without establishment of a
successor plan;
(iii) the Employee's attainment of age 59-1/2;
(iv) the sale or other disposition by a corporation to an unrelated
corporation, which does not maintain the Plan, of substantially all of the
assets used in a trade or business, but only with respect to Employees who
continue employment with the acquiring corporation; and
(v) the sale or other disposition by a corporation of its interest
in a subsidiary to an unrelated entity which does not maintain the Plan,
but only with respect to Employees who continue employment with the
subsidiary. Additional Basic Contributions which may be treated as
Matching Contributions must satisfy these requirements without regard to
whether they are actually taken into account as Matching Contributions.
7.10 Calculation of Excess Aggregate Contributions. The Excess Aggregate
Contributions for a Highly Compensated Employee shall be determined and
distributed in the following manner:
(a) "Excess Aggregate Contributions" shall mean, with respect to any
Plan Year, the excess of:
(i) the aggregate Matching Contributions taken into account in
computing the numerator of the ADP actually made on behalf of the Highly
Compensated Employees for such Plan Year, over
(ii) the maximum Matching Contributions permitted by the ADP test in
accordance with Section 7.8.
(b) The amount contributed to the Matching Contribution Account
("Cumulative Amount") with respect to each such Member shall be calculated by
reducing the Cumulative Amount made on behalf of the Member who has been
credited with the greatest Cumulative Amount with respect to such Plan Year (or,
in the event that more than one Member shall have been credited with a
Cumulative Amount of an equal amount, the Cumulative Amount of each such Member)
shall be reduced so that the amount of Cumulative Amount of such Member (or
Members, as the case may be)
33
shall equal the Cumulative Amount with respect to such Plan Year of the Member
who shall have been credited with the next greatest Cumulative Amount with
respect to such Plan Year, and an amount equal to the amount of reduction (or
reductions, as the case may be) shall be forfeited, provided, however, that the
amount to be forfeited shall in no event exceed the Excess Aggregate
Contributions, and (ii) in the event that the Cumulative Amount attributable to
a Member who shall have been credited with the greatest Cumulative Amount with
respect to such Plan Year is less than the Excess Aggregate Contributions, then
further reductions shall be made in accordance with the provisions of the
previous sentence of this Section 7.10(b) until such time as the amount
allocated to each such Member refunded in accordance with this Section 7.10(b)
shall equal the Excess Aggregate Contributions.
7.11 Distribution of Excess Aggregate Contribution. Excess Aggregate
Contributions shall be distributed to Members on whose behalf such Excess
Aggregate Contributions were made, to the extent vested, no later than the last
day of the Plan Year following the Plan Year for which they were made. Nonvested
Excess Aggregate Contributions shall be applied as provided in Section 7.13.
Excess Aggregate Contributions shall be adjusted in the manner utilized under
Sections 4.2 and 4.3 to reflect income earned or loss as incurred for the Plan
Year on the Member's Matching Contribution Account.
7.12 Additional Contributions. Basic Contributions and/or Additional Basic
Contributions may be treated as Matching Contributions only if the conditions
described in Treasury regulation 1.401(m)-1(b)(5) are satisfied.
7.13 Forfeitures. Amounts forfeited by Highly Compensated Employees under
Section 7.11 shall be treated as an Annual Addition under the Plan and shall be
applied to reduce future Employer Matching Contributions. No forfeiture arising
under this Section shall be allocated to the account of any Highly Compensated
Employee.
7.14 Aggregate Limit. The sum of the ADP and ACP for Highly Compensated
Employees, determined after any corrections required to meet the ADP test or ACP
test, shall not exceed the Aggregate Limit as defined herein. If the Aggregate
Limit is exceeded for any particular Plan Year, the Plan Administrator may
recharacterize, to the maximum extent permitted under Sections 401(k) and 401(m)
of the Code and the regulations thereunder, Participants' Basic Contributions
and Matching Contributions for purposes of satisfying the Aggregate Limit, and,
if after any such recharacterization, the Aggregate Limit is still not
satisfied, the Employer may, in its sole discretion, either (i) make Additional
Basic Contributions on behalf of some or all of the Non-Highly Compensated
Employees eligible to make contributions to the Plan pursuant to Section 3.1 in
such amount or amounts as its determines are necessary to satisfy the Aggregate
Limit, or (ii) reduce either the ADR or the ACR for all affected Highly
Compensated Employees, in accordance with Section 7.3 or 7.10(a), as applicable,
and such reductions shall be treated, for each affected Highly Compensated
Employee, as an Excess Contribution or an Excess Aggregate Contribution, as
applicable. "Aggregate Limit" means the greater of (a) or (b) below:
34
(a) the sum of
(i) 125% of the greater of the ADP for eligible Non-Highly
Compensated Employees, or the ACP for eligible Non-Highly Compensated
Employees for the Plan Year; and
(ii) two plus the lesser of such ADP or ACP, but not greater than
200% of the lesser amount; or
(b) the sum of
(i) 125% of the lesser of the ADP for the eligible Non-Highly
Compensated Employees or the ACP for the eligible Non-Highly Compensated
Employees for the Plan Year; and
(ii) two plus the greater of such ADP or ACP, but not greater than
200% of the greater amount.
7.15 Special Rules.
(a) The ADR and ACR for any Member who is a Highly Compensated Employee
for the Plan Year and who is eligible to make Basic Contributions, or to have
Matching Contributions allocated to his account, or to make after-tax
contributions under two or more plans that are maintained by an Affiliated
Company shall be determined as if all such contributions were made under a
single plan.
(b) In the event that this Plan satisfies the requirements of sections
410(b) and 401(a)(4) of the Code only if aggregated with one or more other
plans, or if one or more other plans satisfy the requirements of sections 410(b)
and 401(a)(4) of the Code only if aggregated with this Plan, then the
contribution percentages and deferral percentages of Members shall be determined
as if all such plans were a single plan.
(c) The determination and treatment of the contribution percentage of
any Member shall satisfy such other requirements as may be prescribed by the
Secretary of the Treasury.
SECTION 8
TOP-HEAVY PROVISIONS
8.1 Top-Heavy Preemption. During any Plan Year in which this Plan is
Top-Heavy, as defined in Section 8.2 below, the Plan shall be governed in
accordance with this Section, which shall control over other provisions.
8.2 Top-Heavy Definitions. For purposes of this Section, the following
definitions shall apply:
35
(a) "Compensation" means Compensation as defined in Section 1.14(c) for
an entire Plan Year, including amounts contributed by the Employer pursuant to a
salary reduction agreement which are excludable from the Employee's gross income
under sections 125, 132(f), 402(e)(3) or 402(h) of the Code.
(b) "Contribution Rate" means the sum of contributions made by the
Employer under this Plan, excluding salary deferral contributions made under
this or any other plan maintained by the Employer, plus forfeitures allocated to
the Member's accounts for the Plan Year, divided by his Compensation for the
Plan Year. To determine the Contribution Rate, the Plan Administrator shall
consider all qualified defined contribution plans (within the meaning of the
Code) maintained by the Employer as a single plan.
(c) "Determination Date" means the last day of the preceding Plan Year,
except in the initial Plan Year, Determination Date means the last day of such
Plan Year. For purposes of testing the Top-Heavy status of Required and
Permissive Aggregation Groups, Determination Date means the last day of each
respective plan's Plan Year which occurs in the calendar year coincident with
the Determination Date of this Plan.
(d) "Key Employee" means any Employee or former Employee (and the
Beneficiaries of such Employee) who at any time during the "Determination
Period" was an officer of the Employer if such individual's annual Compensation
exceeds 50 percent of the dollar limitation under section 415(b)(1)(A) of the
Code, an owner (or considered an owner under section 318 of the Code) of one of
the ten largest interests in the Employer if such individual's compensation
exceeds 100 percent of the dollar limitation under section 415(c)(1)(A) of the
Code, a 5-percent owner of the Employer, or a 1-percent owner of the Employer
who has an annual compensation of more than $150,000. Annual compensation means
compensation as defined in section 415(c)(3) of the Code, but includes amounts
contributed by the Employer pursuant to a salary reduction agreement which are
excludible from the Employee's gross income under sections 125, 457, 402(g)(3)
or 402(h) of the Code. The "Determination Period" is the Plan Year containing
the Determination Date and the 4 preceding Plan Years.
The determination of who is a Key Employee will be made in
accordance with section 416(i)(1) of the Code and the regulations thereunder.
(e) "Non-Key Employee" means any Employee currently eligible to
participate in the Plan who is not a Key Employee.
(f) "Permissive Aggregation Group" means the Required Aggregation Group
plus any other qualified plans maintained by the Employer and Affiliated
Companies, but only if such resultant group would satisfy, in the aggregate, the
requirements of sections 401(a)(4) and 410 of the Code. The Plan Administrator
shall determine which plans to take into account in determining the Permissive
Aggregation Group.
36
(g) "Required Aggregation Group" means:
(i) each qualified plan of the Employer and Affiliated Companies
(including any terminated plan that covered a Key Employee and was
maintained within the five-year period ending on the Determination Date)
in which at least one (1) Key Employee participates during the Plan Year
containing the Determination Date or any of the four preceding Plan Years;
and
(ii) any other qualified plan of the Employer and Affiliated
Companies which enables a plan described in (i) above to meet the
requirements of sections 401(a)(4) or 410 of the Code.
(h) "Top-Heavy" shall describe the status of the Plan in any Plan Year
if the "Top-Heavy Ratio" as of the Determination Date exceeds sixty percent
(60%).
(i) "Top-Heavy Ratio" is a fraction as of the Determination Date, as
follows:
Accrued Benefit of all Key Employees
Accrued Benefits of all Employees
(ii) Notwithstanding (i) above, the Top-Heavy Ratio shall be
computed pursuant to section 416(g) of the Code, and any regulations
issued thereunder.
(iii) For Plan Years beginning after December 31, 1986, 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
(within the meaning of section 416(g) of the Code) the accrued benefit of
an Employee other than a Key Employee (within the meaning of section
416(i)(1) of the Code) shall be determined (a) under the method, if any,
that uniformly applies for accrual purposes under all plans maintained by
the Affiliated Employers, or if there is no such method, then (b) as if
such benefit accrued not more rapidly than the slowest accrual rate
permitted under the fractional accrual rule of section 411(b)(1)(C) of the
Code.
(iv) For purposes of this Section only, "Accrued Benefit" shall
include or exclude Rollovers pursuant to regulation 1.416-1, T-32.
(v) If an individual is not a Key Employee but was a Key Employee in
a prior year or if any individual has not performed services for the
Employer at any time during the five (5) year period ending on the
Determination Date, any Accrued Benefit for such individual shall not be
taken into account in determining the Top-Heavy status of the Plan.
(vi) The Accrued Benefit of any Employee (other than a Key Employee)
shall be determined:
37
(1) under the method which is used for accrual purposes for
all plans of the Employer or, if there is no such method,
(2) as if such benefit accrued not more rapidly than the
slowest accrual rate permitted under section 411(b)(1)(C) of the
Code.
(vii) The value of Account Balances and the present value of Accrued
Benefits will be determined as of the most recent Valuation Date that
falls within or ends with the 12-month period ending on the Determination
Date, except as provided in section 416 of the Code and the regulations
thereunder for the first and second plan years of a defined benefit plan.
(viii) The Accrued Benefit shall include any part of any account
balance distributed in the 5-year period ending on the Determination Date.
(ix) The present value shall be based only on the interest rate and
mortality rates specified in the defined benefit plan.
8.3 Aggregation of Plans. All Required Aggregation Groups shall be
considered (pursuant to section 416(g) of the Code) with this Plan in
determining whether this Plan is Top Heavy.
(a) If such aggregation constitutes a Top-Heavy group, each plan so
aggregated shall be considered Top-Heavy.
(b) If such aggregation does not constitute a Top-Heavy group, none of
the plans so aggregated shall be considered Top-Heavy.
At the direction of the Plan Administrator and subject to the restrictions
of sections 401(a)(4) and 410 of the Code, Permissive Aggregation Groups may be
considered with this Plan plus any Required Aggregation Groups to determine
whether such group is Top-Heavy. If such aggregation does not constitute a
Top-Heavy group, none of the plans so aggregated shall be considered Top-Heavy.
8.4 Minimum Contribution Rate. Subject to Section 8.7 below, for any Plan
Year in which this Plan is Top-Heavy, a minimum contribution shall be made for
each Non-Key Employee as of the last day of the Plan Year which shall equal the
lesser of:
(a) three (3%) percent of Compensation; or
(b) the highest Contribution Rate received by a Key Employee in that
Plan Year.
38
This Top-Heavy Contribution shall be made irrespective of such Non-Key
Employee's Hours of Service, Compensation or failure to make contributions, as
applicable hereunder.
8.5 Deposit of Minimum Contribution. The Plan Administrator shall deposit
any minimum contribution made under this Section to a "Top-Heavy Contribution
Account" for each Non-Key Employee. Such account shall become part of his
Accrued Benefit and shall vest pursuant to Section 8.6 hereof.
8.6 Top-Heavy Vesting Schedule. In any Plan Year in which this Plan is
Top-Heavy, any Member who is credited with at least one Hour of Service during
such Plan Year shall vest in accordance with Section 5.1 or the following
schedule, whichever produces the greater benefit:
Years of Service Vested Percentage
---------------- -----------------
Less than 2 years 0%
After 2 years but less than 3 20%
After 3 years but less than 4 40%
After 4 years but less than 5 60%
After 5 years but less than 6 80%
After 6 or more years 100%
During any Plan Year in which this Plan is not Top-Heavy, vesting shall be
determined pursuant to Section 5, except that nonforfeitable rights obtained
under the Top-Heavy vesting schedule shall continue as such.
SECTION 9
DESIGNATION OF BENEFICIARY
9.1 Named Beneficiary. Each Member may designate in writing, filed with
the Plan Trustee, a Beneficiary to whom, in the event of the Member's death, all
benefits or any unpaid balance of benefits shall be payable. However, each
married Member who designates a Beneficiary other than his Spouse must provide
the Plan Trustee with a spousal consent to the designation of such other
Beneficiary. Such spousal consent shall set forth the effects of such waiver and
must be either notarized or witnessed by a Plan representative. Subject to such
spousal consent the Beneficiary (Beneficiaries) so designated may be changed by
the Member at any time. The facts as shown by the records of the Plan Trustee at
the time of death shall be conclusive as to the identity of the proper payee and
the amount property payable, and payment made in accordance with such facts
shall constitute a complete discharge of any and all obligations hereunder.
39
9.2 No Named Beneficiary. If no such designation is on file with the Plan
Trustee at the time of death of the Member, or if such designation is not
effective for any reason, then such death benefit shall be payable to the
deceased Member's Spouse, if living. If such Spouse is not living, payment shall
be made to the deceased Member's estate.
SECTION 10
MANAGEMENT OF THE FUND
10.1 Contributions Deposited to Trust. All contributions to the Plan by
the Employer and Employees shall be committed in trust to the Trustee selected
by the Plan Sponsor subject to the terms of the Trust created in Section 1 of
the Trust Agreement, to be held, managed, and disposed of by the Trustee in
accordance with the aforementioned terms of the Trust and this Plan. The Trustee
selected may be changed from time to time by the Employer.
10.2 No Reversion to Employer. The Trust shall continue to contain such
provisions as shall render it impossible, except as is provided under Sections
3.8 and 11.3, for any part of the corpus of the Trust or income thereon to be at
any time used for, or diverted to, purposes other than for the exclusive benefit
of Members or their Beneficiaries; and it may contain such other provisions
relating to the custody, management and disposition of the Fund by the Trustee
as shall be deemed advisable by the Employer.
SECTION 11
DISCONTINUANCE AND LIABILITIES
11.1 Termination. The Plan may be terminated at any time by the Plan
Sponsor, but only upon condition that such action is taken under the Trust
Agreement or otherwise, as shall render it impossible at any time under the
Trust for any part of the corpus of the Trust or income thereon to be at any
time used for, or diverted to, purposes other than for the exclusive benefit of
active and retired employees, except as is provided under Sections 3.8 and 11.3.
If the Plan is terminated the Fund shall be held for distribution by the
Trustee, who shall distribute to the Members then participating in the Fund the
full amount standing to their credit on the date of such termination, less the
administrative costs to the Trustee for such distribution in accordance with the
methods specified under Section 6.
In the event that the Employer sponsors any other defined contribution
plan, if a Member does not consent to a distribution upon termination of this
Plan, that Member's Accrued Benefit shall be transferred to the other aforesaid
defined contribution plan. Notwithstanding the foregoing, if the Employer
sponsors any other defined contribution plan, all salary deferral contributions
will be transferred to said plan upon the termination of this Plan.
40
11.2 No Liability for Employer. The Employer shall have no liability with
respect to the payment of benefits or otherwise under the Plan, except to pay
over to the Trustee as provided in the Plan such contributions as are made by
the Employer and any and all contributions made by the Members. Further, the
Employer shall have no liability with respect to the administration of the Trust
or of the Fund held by the Trustee, and each Member and/or Beneficiary shall
look solely to the Fund for any payments or benefits under the Plan.
11.3 Administrative Expenses. The Employer may elect to pay all
administrative expenses of the Plan, including compensation of the Trustee,
consultants, auditor and counsel, but the Employer shall not be obliged to pay
such expenses. If Employer elects not to pay such expenses, they shall be paid
from the Trust. Any expenses directly relating to the investments of the Trust,
such as taxes, commissions, and registration charges, shall be paid from the
Trust.
11.4 Nonforfeitability Due to Termination(s). Upon termination, partial
termination or upon permanent discontinuance of contributions under the Plan,
the rights of all affected Employees to their Accrued Benefits accrued to the
date of such termination, partial termination or discontinuance, shall become
nonforfeitable.
11.5 Exclusive Benefit Rule. This Plan and Trust are for the exclusive
benefits of the Members and their Beneficiaries. This Plan should be interpreted
in a manner consistent with this intent and with the intention of the Employer
that the Trust satisfy those provisions of the Code relating to employees'
trusts.
11.6 Mergers. In the case of any merger or consolidation of the Plan with,
or transfer of Plan assets or liabilities to, any other plan, provisions shall
be made so that each Member in the Plan on the date thereof (if the Plan then
terminated) would receive a benefit immediately after the merger, consolidation
or transfer which is equal to or greater than the benefit he would have been
entitled to receive immediately prior to the merger, consolidation or transfer
(if the Plan had then terminated).
11.7 Non-Allocated Trust Assets. Any portion of the Fund which is
unallocated at the time of termination of the Plan shall be allocated among
Members of the Plan in a nondiscriminatory manner selected by the Plan
Administrator.
SECTION 12
ADMINISTRATION
12.1 Appointment of Plan Administrator. The Board shall appoint, on behalf
of all Members, a Plan Administrator or committee to act as Plan Administrator.
The Plan Administrator may be removed by the Board at any time and may resign at
any time by submitting a written resignation to the Board. A new Plan
Administrator shall be appointed as soon as possible in the event that the Plan
Administrator is removed or resigns from his position.
12.2 Responsibilities and Duties. The Plan Administrator shall:
41
(a) be responsible for the day-to-day administration of the Plan. He
may appoint other persons or entities to perform any of his fiduciary functions.
Such appointment shall be made and accepted by the appointee in writing and
shall be effective upon the written approval of the Board. The Plan
Administrator and any such appointee may employ advisors and other persons
necessary or convenient to help him carry out his duties including his fiduciary
duties. The Plan Administrator shall have the right to remove any such appointee
from his position. Any person, group of persons or entity may serve in more than
one fiduciary capacity.
(b) maintain or cause to be maintained accurate and detailed records
and accounts of employees and of their rights under the Plan and of all
investments, receipts, disbursements and other transactions. Such accounts,
books and records relating thereto shall be open at all reasonable times to
inspection and audit by the Board and by persons designated thereby.
(c) be the "named fiduciary," as defined under Section 402(a)(1) of
ERISA, and shall have the authority to act with respect to any claim for
benefits under the Plan. The Plan Administrator in its capacity as named
fiduciary shall have the exclusive discretionary right to interpret the Plan,
including those provisions governing eligibility and benefits, and to determine
any questions arising under or in connection with the administration of the
Plan, including without limitation, the authority to make factual determinations
and resolve claims in accordance with Section 12.3. The Plan Administrator shall
have full discretionary power and authority to determine the entitlement, rights
or eligibility of employees, Members and/or any other persons, and the amount of
benefits, if any due under the Plan. The Plan Administrator shall also have the
discretionary right and authority to remedy ambiguities, inconsistencies or
omissions arising under or in connection with the Plan. The construction and
interpretations of the Plan and the determinations of the Plan Administrator
hereunder, including, but not limited to, those pursuant to Section 12.3, shall
be final and binding on all persons to the maximum extent permitted by law.
12.3 Claims Procedure. Each Member or Beneficiary must claim any benefit
to which he believes he is entitled under this Plan by a written notification to
the Plan Administrator.
The Plan Administrator shall decide whether to honor a claim within ninety
(90) days of the date on which the claim is filed, unless special circumstances
require a longer period for adjudication and the claimant is notified in writing
of the reasons for an extension of time; provided, however, that no extensions
shall be permitted beyond ninety (90) days after the date on which the claimant
received notice of the extension of time from the Plan Administrator. If the
Plan Administrator fails to notify the claimant of his decision to grant or deny
such claim within the time specified by this subsection. such claim shall be
deemed to have been denied by the Plan Administrator and the review procedure
described below shall become available to the claimant.
If a claim is denied, it must be denied within a reasonable period of time
and be contained in a written notice stating the following:
42
(a) the specific reason for the denial;
(b) a specific reference to the Plan provision on which the denial is
based;
(c) a description of additional information necessary for the claimant
to perfect his claim, if any, and an explanation of why such material is
necessary; and
(d) an explanation of the Plan's claim review procedure.
The claimant shall have sixty (60) days to request a review of the denial by the
Plan Administrator, who shall provide a full and fair review. The request for
review must be written and submitted to the same person who handles initial
claims. The claimant may review pertinent documents, and he may submit issues
and comments in writing. The decision by the Plan Administrator with respect to
the review must be given within sixty (60) days after receipt of the request,
unless special circumstances require an extension (such as for a hearing). In no
event shall the decision be delayed beyond one hundred and twenty (120) days
after receipt of the request for review. The decision shall be written in a
manner calculated to be understood by the claimants and it shall include
specific reasons and refer to specific Plan provisions as to its effect.
12.4 Trustee Has Authority to Invest. All Funds of the Plan shall be
invested by the Trustee in accordance with the provisions of the Plan and Trust
Agreement, and the Trustee shall have full authority and liability in this
regard. To the extent that individual Members are permitted to direct investment
of their account balances, and to the extent a Member exercises such right to
direct investment, the Trustee shall be relieved from any liability therefor.
12.5 Indemnification. To the extent permitted by law, the Plan Sponsor may
be the Plan Administrator. In the event the Plan Sponsor is designated as the
Plan Administrator, an individual or committee shall be appointed to represent
the Plan Sponsor in this capacity. The Plan Sponsor shall indemnify any
individual who is serving as Plan Administrator or who is acting on behalf of
the Plan Sponsor in this capacity. Such individual shall be indemnified from any
and all liability that may arise by reason of his action or failure to act
concerning this Plan, excepting any willful misconduct or criminal acts.
12.6 Removal for Personal Involvement. No individual may participate in
the consideration of any matter of or question concerning the Plan which
specifically and uniquely relates to him because of his participation under the
Plan.
43
SECTION 13
AMENDMENTS
13.1 Amendment Restrictions. The provisions of this Plan may be amended at
any time and from time to time by the Plan Sponsor or any authorized
representative thereof, provided that:
(a) no such amendment shall be effective unless this Plan, as so
amended, shall be for the exclusive benefit of persons in, or formerly in, the
employ of Employer, or their Beneficiaries; (b) no such amendment shall operate
to deprive a Member of any rights or benefits irrevocably vested in him under
the Plan prior to such amendment;
(c) each such amendment shall be adopted pursuant to the laws of the
state of incorporation of the Employer, and a copy of such amendment shall be
filed with the Trustee and the Plan Administrator; and
(d) no such amendment shall be effective to the extent that it
decreases a Member's Accrued Benefit. For purposes of this Section 13, a Plan
amendment which has the effect of decreasing a Member's Accrued Benefit or
eliminating an optional form of benefit, with respect to benefits attributable
to service before the amendment, shall be treated as reducing an Accrued
Benefit.
If any amendment shall be necessary or desirable to conform to the
provisions and requirements of the Code or any amendment thereto, or any
regulation issued pursuant thereto, no such amendment thereto shall be
considered prejudicial to the interest of a Member or his Beneficiary, or a
diversion of any part of Fund to a purpose other than for their exclusive
benefit.
13.2 Amending the Plan. The Board may amend the Plan at any time by board
resolution or by such other action permitted by the Plan Sponsor's charter,
bylaws, or such other method permitted by the laws of the state of incorporation
of the Plan Sponsor.
13.3 Retroactive Amendments. Any modification or amendment of the Plan may
be made retroactive if, on the advice of counsel, such retroactivity is deemed
to be necessary in order for the Plan to conform to or satisfy the conditions of
any law, governmental regulations or ruling, or to meet the requirements of
applicable sections of the Code, or the corresponding regulations.
SECTION 14
LOANS
14.1 Permitted Loans. A Member may make application to the Plan
Administrator to borrow from his vested Accrued Benefit. That application must
be
44
made in writing and must specify the amount and term requested. The Plan
Administrator shall determine whether the application for a loan is to be
approved after an evaluation of all necessary documentation. All applications
for loans shall be evaluated in a uniform and nondiscriminatory manner, and
loans shall not be made available to Highly Compensated Employees in an amount
greater than that for other Employees. Loans that are granted shall be subject
to the following conditions:
(a) the aggregate amount of all such loans to a Member shall not exceed
the lesser of:
(i) $50,000, reduced by the greatest value of any outstanding loan
balance owed by the Member during the one-year period ending on the day
before the loan is made, or
(ii) 50% of his vested Accrued Benefit;
(b) the minimum amount of any loan made hereunder shall be $1,000;
(c) a fee shall be charged for processing a loan application, and such
fee shall be such amount as is then charged for such purpose under the Plan's
loan program;
(d) loans must be repaid in full before a new loan will be granted; and
(e) an employee may have payroll deductions taken out of his regular or
severance pay check to pay back his loan.
14.2 Collateral Required. A note shall be signed by the Member and his or
her Spouse, if any, pledging not more than 50% of his vested Accrued Benefit
equal to the value of the outstanding loan balance and such other collateral as
may from time to time be required by controlling law or regulation.
Where the account balance is to be used as collateral, written spousal
consent shall be obtained no earlier than the beginning of the 90-day period
that ends on the date on which the loan is to be so secured. The consent must
acknowledge the effect of the loan and must be witnessed by the Plan
Administrator or a notary public.
14.3 Repayment. The loan shall be repaid in substantially equal
installments consisting of principal and interest at least quarterly. The term
of the loan is not to exceed five (5) years unless the loan is used to buy or
build the Member's principal residence. Principal residence status shall be
determined at the time of the loan. Loan repayments are to be deducted from the
salary paid by the Employer to such Member, except that any loan made to a
non-Employee shall be repaid by that non-Employee in substantially equal monthly
installments.
45
14.4 Interest Charges. Interest shall be charged on loans based on the
prime rate plus 2%.
14.5 Failure to Make Timely Payment. In the event an installment payment
is not paid within thirty (30) days following the due date of an installment,
the Plan Administrator shall give written notice to the Member sent to his last
known address. If such installment payment is not made within thirty (30) days
thereafter, the Plan Administrator shall have the right to accelerate the loan
and to reduce the Member's Accrued Benefit to the extent permitted by law by the
amount of the unpaid loan balance including interest then due. If the Member's
Accrued Benefit must be used to eliminate any Plan loan which is in default, the
Member's various accounts shall be depleted in the following order:
(a) Profit Sharing Contribution Account, to the extent vested
(b) Matching Contribution Account, to the extent vested
(c) Rollover Account
(d) Basic Contribution Account
14.6 Termination of Employment. In the event of the termination of a
Member's employment before the loan is repaid in full, the unpaid balance
thereof, together with interest immediately due thereon, shall become due and
payable; and the Trustee shall first satisfy the indebtedness from the amount
payable to the Member or to the Member's Beneficiary before making any payments
to the Member or to the Member's Beneficiary. Employees can repay the loan in
full upon termination.
14.7 Loans to Non-Employees. Any Member who ceases to be an active
Employee may be eligible to borrow from the Plan under terms and conditions
reflecting valid economic differences between active Members and other Members
which would be considered in a normal commercial setting, such as the
unavailability of payroll deductions for repayment. In addition, there will be
an annual fee for the administration of each of such loans as determined by the
Plan Administrator, and such fee shall be the amount as is then charged for such
purpose under the Plan's loan program. In no event will loans be unreasonably
withheld from any applicant. Notwithstanding the foregoing, however, no loan
will be made available to a terminated Employee unless he is also a "party in
interest" as that term is defined in ERISA section 3(14).
14.8 No Loans to Owner-Employees. Loans shall not be made to any
Shareholder-Employee or Owner-Employee unless an exemption for such loan is
obtained pursuant to ERISA section 408 and further provided that such loan would
not be subject to tax pursuant to section 4975 of the Code.
14.9 General Administration. The Trustee and the Plan Administrator shall
have the right to establish such procedures as may be reasonable, necessary or
desirable to carry out the provisions of this Section 14.
46
14.10 Qualified Military Leave. Notwithstanding anything in Section 14 to
the contrary, loan repayments will be suspended under the Plan as permitted
under section 414(u)(4) of the Code.
SECTION 15
MISCELLANEOUS
15.1 "Spendthrift" Provision. Except as provided under section 401(a)(13)
of the Code (and the regulations thereunder), no benefits payable under the Plan
will be subject to the claim or legal process of any creditor of any Member or
Beneficiary, and no Member or Beneficiary may alienate, transfer, anticipate or
assign benefits under the Plan.
The preceding paragraph shall also apply to the creation, assignment, or
recognition of a right to any interest or benefit payable with respect to a
Member pursuant to a domestic relations order, unless the order is determined to
be a Qualified Domestic Relations Order (as defined in section 414(p) of the
Code). The Plan Administrator shall establish reasonable procedures in
accordance with Section 15.2 to determine the qualified status of domestic
relations orders and to administer distributions under such qualified orders.
15.2 QDRO Exception. In the event that a Qualified Domestic Relations
Order (as defined in section 414(p) of the Code) ("QDRO") is issued with respect
to any Member, the Plan Administrator shall notify the Member and the alternate
payee(s) of the order received and segregate and conservatively invest the
portion of the Member's Accrued Benefit which would be payable to the alternate
payee(s) as if the order received were a QDRO. Within 18 months of the order,
the Plan Administrator shall proceed with either (a) or (b) as follows:
(a) if the order is determined to be a QDRO, the Plan Administrator
shall pay the alternate payee(s), notwithstanding Section 6, (i) at the time
specified in such order or, if the order permits, (ii) as soon after the Plan
Administrator approves the order as is administratively feasible provided such
distribution is permitted under applicable provisions of the Code; or
(b) if the order is determined not to be a QDRO, or the issue remains
undetermined, the Plan Administrator shall pay the portions of the Member's
Accrued Benefit segregated in accordance with the above to the Member or
Beneficiary (Beneficiaries) who are otherwise entitled to such benefit.
If, 18 months after issuance of the order, a determination is made that
the order is a QDRO, the determination shall be applied prospectively only.
Notwithstanding any provision in the Plan to the contrary, a distribution
may be made to an alternate payee even if the distribution is made with respect
to a Member who has not separated from service and the distribution commences
prior to the
47
Member's "earliest retirement age" (as defined in section 414(p)(4)(B) of the
Code). If the value of the benefit to be paid to the alternate payee does not
exceed $5,000, the distribution shall automatically be made in the form of a
lump sum as soon as administratively feasible following the date that the
domestic relations order is deemed to be qualified. If the value of the benefit
to be paid to the alternate payee exceeds $5,000, a distribution may be made
prior to the earliest retirement age only if the alternate payee consents in
writing to such early distribution; provided that if on any later date the value
of the benefit to be paid to the alternate payee is not greater than $5,000, the
value of the benefit to be paid to the alternate payee shall be automatically
distributed in the form of a lump sum as soon as administratively feasible
following the later of the (i) the date that the value of the benefit is not
greater than $5,000, and (ii) the date that the domestic relations order is
deemed to be qualified.
15.3 No Guarantee of Employment. Nothing contained in this Plan or the
Trust shall be held or construed to create any liability upon the Employer to
retain any Employee in its employ. The Employer reserves the right to
discontinue the services of any Employee without any liability except for salary
or wages that may be due and unpaid whenever, in its judgment, its best
interests so require.
15.4 State Law. The Plan shall be construed, administered and governed in
all respects in accordance with the laws of the State of New York to the extent
such laws are not superseded by federal law. If any provision herein is held by
a court of competent jurisdiction to be invalid or unenforceable, the remaining
provisions hereof shall continue to be fully effective.
SECTION 16
DIRECT ROLLOVER PROVISIONS
16.1 Application of Article. This Article applies to distributions made on
or after January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Distributee's election under this Article,
a Distributee may elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an Eligible Rollover Distribution paid
directly to an Eligible Retirement Plan specified by the Distributee in a Direct
Rollover.
16.2 Definitions.
(a) Eligible Rollover Distribution. An Eligible Rollover Distribution
is any distribution of all or any portion of any benefit due to the Distributee,
except that an Eligible Rollover Distribution does not include: any distribution
that is one of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the
Distributee and the Distributee's designated beneficiary, or for a specified
period of ten (10) years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the Code; the portion of any
distribution that is not includible in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to employer
48
securities); and any other distribution(s) that is reasonably expected to total
less than $200 during a Plan Year; effective January 1, 2000, any hardship
distributions as described in Section 401(k)(2)(B)(i)(IV), which are
attributable to the Member's Basic Contributions under Treasury Regulation
1.401(k)-(d)(2)(ii).
(b) Eligible Retirement Plan. An Eligible Retirement Plan is an
individual retirement account described in section 408(a) of the Code, an
individual retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a qualified trust that
is part of a defined contribution plan described in section 401(a) of the Code,
that accepts the Distributee's Eligible Rollover Distribution. However, in the
case of an Eligible Rollover Distribution to the surviving spouse, an Eligible
Retirement Plan is an individual retirement account or individual retirement
annuity.
(c) Distributee. A Distributee includes an Employee or former Employee.
In addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in Section 414(p)
of the Code, are Distributees with regard to the interest of the spouse or
former spouse.
(d) Direct Rollover. A Direct Rollover is a payment by the Plan to the
Eligible Retirement Plan specified by the Distributee.
APPENDIX A
Eligibility Vesting
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Original Original
Date of Hire Date of Hire
Acquired Companies by Acquired Company by Acquired Company
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Franklin Specialty Stores X
Polo Players X X