POLO RALPH LAUREN CORPORATION
PROFIT SHARING RETIREMENT SAVINGS PLAN
Amended and restated generally effective as of March 31, 2001
TABLE OF CONTENTS
Page
SECTION 1 DEFINITIONS....................................................................................1
1.1 Accrued Benefit......................................................................1
1.2 Actual Contribution Ratio (ACR)......................................................1
1.3 Actual Deferral Ratio (ADR)..........................................................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.......................................................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......................................................................9
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
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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
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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...............................................................35
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
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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.........................................................41
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
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SECTION 16 DIRECT ROLLOVER PROVISIONS...................................................................47
16.1 Application of Article..............................................................47
16.2 Definitions.........................................................................47
Appendix A
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POLO RALPH LAUREN CORPORATION
PROFIT SHARING RETIREMENT SAVINGS PLAN
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 (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.
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
2
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;
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(e) except that, the Annual Addition for any
Limitation Year beginning before January 19, 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 not an Hourly Employee of Fashions Outlet
of America, Inc., its subsidiaries or Polo Clothing Co. Inc.;
(c) he is not covered by a collective bargaining
agreement, unless such collective bargaining agreement specifically provides for
coverage under this 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 Polo Ralph Lauren Corporation and any
other business organization which succeeds to its business and elects to
continue this Plan, 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.
9
1.30 Hourly Employee means any nonexempt (for purposes of
overtime) Employee whose compensation is calculated on the basis of an hourly
rate as 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 as set forth herein.
1.41 Plan Administrator is the individual or entity provided
for in Section 12 hereof.
1.42 Plan Sponsor means Polo Ralph Lauren Corporation 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 31, 1995, provided further 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.
(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
13
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 services to 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:
(i) own the entire interest in an unincorporated
trade or business, or
(ii) 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:
Vested
Years of Service 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
23
amendment or restatement of the Plan. If a Member fails to make such election,
then 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
24
unpaid portion of his vested Accrued Benefit in a lump sum
payment as of 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
25
distributed in a lump sum as soon as practicable after the next Valuation Date,
and in no 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) shall
33
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
forfeitures 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
34
Excess Contribution or an Excess Aggregate Contribution, as applicable.
"Aggregate Limit" means the greater of (a) or (b) below:
(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.
35
8.2 Top-Heavy Definitions. For purposes of this Section, the
following definitions shall apply:
(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
36
determine which plans to take into account in determining the Permissive
Aggregation Group.
(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.
37
(vi) The Accrued Benefit of any Employee (other than
a Key Employee) shall be determined:
(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
38
(b) the highest Contribution Rate received by a Key
Employee in that Plan Year.
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 Vested
Service 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
39
accordance with such facts shall constitute a complete discharge of any and all
obligations hereunder.
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
40
contribution plan all salary deferral contributions will be transferred to said
plan upon the termination of this Plan.
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
41
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:
(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
42
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:
(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 such 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
47
Member who has not separated from service and the distribution commences prior
to the 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
48
without regard to the exclusion for net unrealized appreciation with respect to
employer 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
------------- -------------
ACQUIRED COMPANIES FROM ORIGINAL FROM ORIGINAL
--------------------------- DATE OF HIRE DATE OF HIRE
BY ACQUIRED BY ACQUIRED
COMPANY COMPANY
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Franklin Specialty Stores X
Polo Players X X