<PAGE>
As filed with the Securities and Exchange Commission on November 1, 1996
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
Teleport Communications Group Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3173139
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
One Teleport Drive 10311-1033
Staten Island New York, New York (Zip Code)
(Address of Principal Executive Offices)
-------------------------
TELEPORT COMMUNICATIONS GROUP INC.
RETIREMENT SAVINGS PLAN
(Full title of plan)
-------------------------
JOHN W. THOMSON, ESQ.
Vice President and Secretary
Teleport Communications Group Inc.
One Teleport Drive
Staten Island, New York 10311-1011
(718) 355-2000
-------------------------
Telephone number of agent for service:
(718) 355-2000
-------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================
Proposed Proposed
Title of security Amount being maximum offering maximum
being registered registered (**) price per aggregate offering Amount of
share (***) price registration fee
===============================================================================================
<S> <C> <C> <C> <C>
Class A*
Common Stock,
$.01 Par Value
Per Share..... 2,000,000 $24.00 $48,000,000 $14,546
===============================================================================================
</TABLE>
(*) In addition, pursuant to Rule 416(c) under the Securities Act of 1933, this
registration statement also covers an indeterminate amount of interests to
be offered or sold pursuant to the Plan.
(**) Plus an indeterminate number of additional shares which may be offered and
issued in accordance with the Plan terms to prevent dilution from stock
splits, stock dividends or similar transactions.
(***)The maximum offering price per share is calculated pursuant to Rule 457(c)
using the average high and low prices of the security as of October 28,
1996 as reported on NASDAQ.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Teleport Communications Group Inc. (the "Company") hereby incorporates,
or will be deemed to have incorporated, herein by reference the following
documents:
(1) The Company's Prospectus filed pursuant to Rule 424(b) of the
Securities Act of 1933 for the fiscal year ended December 31, 1995, the
Company's Quarterly Report on Form 10-Q for the period ending June 30, 1996 and
all other reports filed pursuant to Sections 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended, (the "Exchange Act") since June 30, 1996.
(2) The Teleport Communications Group Inc. Retirement Savings Plan's
Annual Report on Form 11-K for the fiscal year ended December 31, 1995;
(3) The description of the Company's Class A Common Stock contained in
the Company's most recent Exchange Act registration statement, including any
amendment thereto or report filed for the purpose of updating such description;
and
(4) All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this
Registration Statement and prior to the filing of a post-effective amendment
which indicates that all securities offered have been sold or which deregisters
all securities then remaining unsold.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article V of the Amended and Restated Certificate of Incorporation of the
Company, (the "Certificate of Incorporation"), provides that to the fullest
extent of Section 102 of the General Corporation Law of the State of Delaware
(the "DGCL"), a director of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director.
Section 102(b)(7) of the DGCL, provides that a corporation (in its
original certificate of incorporation or an amendment thereto) may eliminate or
limit the personal liability of a director (or certain persons who, pursuant to
the provisions of the certificate of incorporation, exercise or perform duties
conferred or imposed upon directors by the DGCL) to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that such provisions shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL (providing for liability of directors for unlawful
payment of dividends or unlawful stock purchases or redemptions) or (iv) for any
transaction from which the director derived an improper personal benefit.
Under Section 145 of the DGCL, in general, a corporation may indemnify
its directors, officers, employees or agents against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by them in connection with any action, suit or proceeding
brought by third parties to which they may be made parties by reason of their
being or having been directors, officers, employees or agents and shall so
indemnify such persons if they acted in good faith and in a manner they
reasonably believed to be in or not opposed
<PAGE>
to the best interests of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe their conduct was
unlawful. Article VIII of the Certificate of Incorporation provides that the
Company shall indemnify its officers, directors, employees and agents to the
full extent permitted by Delaware law.
UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement to
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act, each such post effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's Annual Report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
Annual Report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of New York, State of New York on the 29th day of
October, 1996.
TELEPORT COMMUNICATIONS GROUP INC.
By: /s/ Robert Annunziata
------------------------------------
Robert Annunziata
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Robert Annunziata
- ------------------------- Chairman of the Board October 29, 1996
Robert Annunziata Directors, President, Chief
Executive Officer, and Chief
Operating Officer
/s/ John A. Scarpati
- ------------------------- Senior Vice President and October 29, 1996
John A. Scarpati Chief Executive Officer
(Principal Financial Officer)
/s/ Maria Terranova-Evans
- ------------------------- Vice President and Controller October 29, 1996
Maria Terranova-Evans (Principal Accounting Officer)
/s/ James O. Robbins
- ------------------------- Director September 30, 1996
James O. Robbins
/s/ Brian L. Roberts
- ------------------------- Director October 29, 1996
Brian L. Roberts
/s/ Brendan R. Clouston
- ------------------------- Director September 30, 1996
Brendan R. Clouston
/s/ John R. Dillon
- ------------------------- Director September 24, 1996
John R. Dillon
</TABLE>
<PAGE>
/s/ Gerald W. Gaines Director September 30, 1996
- ---------------------------
Gerald W. Gaines
/s/ Lawrence S. Smith
- --------------------------- Director September 30, 1996
Lawrence S. Smith
/s/ Larry E. Romrell
- --------------------------- Director September 30, 1996
Larry E. Romrell
/s/ David M. Woodrow
- --------------------------- Director September 26, 1996
David M. Woodrow
/s/ James Bruce Llewelyn
- --------------------------- Director September 24, 1996
James Bruce Llewelyn
/s/ C.B. Rogers, Jr.
- --------------------------- Director September 30, 1996
C.B. Rogers, Jr.
/s/ Jimmy W. Hayes
- --------------------------- Director September 30, 1996
Jimmy W. Hayes
/s/ Bernard W. Schotters
- --------------------------- Director September 30, 1996
Bernard W. Schotters
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Plan
Administrators have duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of New York,
State of New York on the 30 day of September, 1996.
TELEPORT COMMUNICATIONS GROUP INC.
RETIREMENT SAVINGS PLAN
By: /s/ John A. Scarpati
---------------------------------------
John A. Scarpati
Teleport Communications Group Inc.
Retirement Savings Plan
Administrative Committee
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
- ----------- -------
*3.6 Amended and Restated Certificate of Incorporation of TCGI, as
revised
*3.7 Amended and Restated By-laws of TCGI, as revised
*4.2 Form of Amended and Restated Stockholders' Agreement (incorporated
by reference to Exhibit E of Exhibit 2.1 hereof)
*4.3 Form of Indenture between TCGI and United States Trust Company of
New York, as Trustee, relating to the 111/8% Senior Discount Notes
due 2007 of TCGI
*4.4 Form of Indenture between TCGI and United States Trust Company of
New York, as Trustee, relating to 9 7/8% Senior Notes due 2006 of
TCGI
*4.5 Form of Stock Certificate for Teleport Communications Group Inc.
5 Opinion of Dow, Lohnes & Albertson
23(i) Consent of Deloitte & Touche LLP
23(ii) Consent of Dow, Lohnes & Albertson
(contained in their opinion in Exhibit 5)
99.1 Teleport Communications Group Inc. Retirement Savings Plan
* Incorporated by reference to the corresponding exhibit of TCGI's Registration
Statements on Form S-1 (File Nos. 333-3850 and 333-3984)
<PAGE>
Exhibit 5
[FIRM LETTERHEAD APPEARS HERE]
October 31, 1996
Teleport Communications Group Inc.
One Teleport Drive
Staten Island New York, New York 10311-1033
Re: Registration Statement on Form S-8
----------------------------------
Gentlemen:
We have acted as special counsel for Teleport Communications Group Inc.,
a Delaware corporation ("Teleport"), in connection with the preparation of the
Registration Statement on Form S-8 (the "Registration Statement") pertaining to
(i) 2,000,000 shares (the "Shares") of Teleport Class A Common Stock, $.01 par
value per share, being issued by Teleport pursuant to the Teleport
Communications Group Inc. Retirement Savings Plan (the "Savings Plan") and
(ii) an indeterminate number of interests in the Savings Plan (the "Interests")
that may be acquired thereunder.
To prepare this opinion we have examined and reviewed such documents and
made such investigations of law as we have considered necessary or appropriate
to render the opinions expressed below. We have reviewed (a) the Registration
Statement; (b) Teleport's Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws; (c) the Savings Plan; and (d) certain records of
Teleport's corporate proceedings as reflected in its minute and stock books.
As to matters of fact relevant to our opinion, we have relied upon
certificates of officers of Teleport without further investigations. With
respect to the foregoing documents, we have assumed: (i) the authenticity of
all documents submitted to us as originals, the conformity with authentic
original documents of all documents submitted to us as copies or forms, the
genuineness of all signatures and the legal capacity of natural persons, and
(ii) that the foregoing documents, in the forms thereof submitted for our
review, have not been altered, amended or repealed in any respect material to
our opinion as stated herein. We have not reviewed any documents other than the
documents listed above for purposes of rendering our opinion as expressed
herein, and we assume that there exists no provisions of any such other
documents that bears upon or is inconsistent with our opinion as expressed
herein. We have conducted no independent factual
<PAGE>
investigation of our own but rather have relied solely upon the foregoing
documents, the statements and information set forth therein and the additional
matters recited or assumed herein, all of which we assume to be true, complete
and accurate in all material respects.
Our opinion is limited to matters of law of the District of Columbia, the
General Corporation Law of the State of Delaware, and the United States of
America insofar as such laws apply, and we express no opinion as to conflicts of
law rules, or the laws of any states or jurisdictions, including federal laws
regulating securities or other federal laws, or the rules and regulations of
stock exchanges or any other regulatory body, other than as specified above.
Based upon and subject to the foregoing and any other qualifications
stated herein, we are of the opinion that (i) the Shares, when and to the extent
issued and paid for pursuant to the provisions of the Plan, will be validly
issued, fully paid and non-assessable and (ii) that the Plan confers legal
Interests upon employee's participating in the Plan to the extent and upon the
terms and conditions described therein.
We hereby consent to the use of this opinion as Exhibit 5 to the
Registration Statement, provided, however, that in giving such consent we do not
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the Rules and Regulations of
the Commission thereunder. Except as provided for hereinabove, without our
prior written consent, this opinion may not be furnished or quoted to, or relied
upon by, any other person or entity for any purpose.
Very truly yours,
DOW, LOHNES & ALBERTSON
By: /s/ Paul R. Lang
--------------------------------------
Paul R. Lang
Member of the Firm
<PAGE>
Exhibit 23(i)
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in this Registration Statement of
Teleport Communications Group Inc. on Form S-8 of our report on the combined
financial statements of Teleport Communications Group Inc. and subsidiaries and
TCG Partners dated February 16, 1996 (April 24, 1996 as to Note 1, May 13, 1996
as to Note 12 and June 25, 1996 as to Note 6), and appearing in Registration
Statements Nos. 333-3850 and 333-3984 of Teleport Communications Group Inc. on
Form S-1.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
October 30, 1996
<PAGE>
Exhibit 99.1
TELEPORT COMMUNICATIONS GROUP INC.
RETIREMENT SAVINGS PLAN
As Amended and Restated as of January 1, 1996
<PAGE>
TELEPORT COMMUNICATIONS GROUP INC.
RETIREMENT INCOME SAVINGS PLAN
TABLE OF CONTENTS
-----------------
<TABLE>
<C> <S> <C>
ARTICLE 1
THE PLAN'S ESTABLISHMENT........................................ 1
1.1 The Plan........................................................ 1
1.2 Adoption Procedure.............................................. 1
ARTICLE 2
DEFINITIONS..................................................... 1
2.1 "Accounts"...................................................... 1
2.2 "Actual Deferral Percentage".................................... 2
2.3 "Affiliated Company"............................................ 2
2.4 "Annuity Starting Date"......................................... 2
2.5 "Average Contribution Percentage"............................... 2
2.6 "Average Deferral Percentage"................................... 3
2.7 "Before-Tax Contributions"...................................... 3
2.8 "Board of Directors"............................................ 3
2.9 "Code".......................................................... 3
2.10 "Committee"..................................................... 3
2.11 "Company"....................................................... 3
2.12 "Compensation".................................................. 3
2.13 "Compensation Threshold"........................................ 3
2.14 "Contribution Percentage"....................................... 4
2.15 "Covered Employee".............................................. 4
2.16 "Effective Date"................................................ 4
2.17 "Eligible Employee"............................................. 4
2.18 "Employee"...................................................... 4
2.19 "Employer"...................................................... 4
2.20 "Employment Date"............................................... 4
2.21 "Entry Dates"................................................... 4
2.22 "ERISA"......................................................... 4
2.23 "Fund" or "Trust Fund".......................................... 4
2.24 "Highly Compensated Employee"................................... 5
2.25 "Hour of Service"............................................... 6
2.26 "Investment Fund"............................................... 7
2.27 "Limitation Year"............................................... 7
2.28 "Matching Contributions"........................................ 7
2.29 "Merrill Lynch & Co. ESOP"...................................... 7
2.30 "Merrill Lynch & Co. 401(k) Plan"............................... 7
2.31 "Merrill Lynch & Co. Retirement Plan"........................... 7
2.32 "Merrill Lynch & Co. Plans"..................................... 7
2.33 "Merrill Lynch & Co. Stock"..................................... 7
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
2.34 "Non-Highly Compensated Employee"............................... 8
2.35 "Normal Retirement Age"......................................... 8
2.36 "Participant"................................................... 8
2.37 "Plan".......................................................... 8
2.38 "Plan Year"..................................................... 8
2.40 "Qualified Joint and Survivor Annuity".......................... 8
2.41 "Qualified Pre-Retirement Survivor Annuity"..................... 8
2.42 "Required Beginning Date"....................................... 8
2.43 "Retirement".................................................... 8
2.44 "Section 414(s) Compensation"................................... 9
2.45 "Section 415 Compensation"...................................... 9
2.46 "Spouse"........................................................ 9
2.47 "TCG Stock"..................................................... 9
2.48 "Termination of Employment"..................................... 9
2.49 "Total Disability".............................................. 9
2.50 "Valuation Date"................................................ 9
2.51 "Years of Service".............................................. 9
ARTICLE 3
ELIGIBILITY..................................................... 10
3.1 General Rule.................................................... 10
3.2 Special Rules................................................... 10
3.3 Termination and Reemployment.................................... 10
ARTICLE 4
CONTRIBUTIONS................................................... 10
4.1 Before-Tax Contributions........................................ 10
4.2 Matching Contributions.......................................... 11
4.3 Retirement Contributions........................................ 11
4.4 Rollover Contributions.......................................... 11
4.5 Remittance of Contributions to Trustee.......................... 12
4.6 Return of Contributions......................................... 12
4.7 Limitations..................................................... 12
4.8 Contributions for Qualified Military Service.................... 13
ARTICLE 5
VESTING AND FORFEITURES......................................... 13
5.1 Fully Vested Accounts........................................... 13
5.2 Vesting Based on Service........................................ 13
5.3 Vesting Based on Events......................................... 14
5.4 Forfeiture of Employer Contributions Account.................... 14
5.5 Restoration of Forfeitures...................................... 14
</TABLE>
-ii-
<PAGE>
<TABLE>
<C> <S> <C>
ARTICLE 6
DISTRIBUTIONS AFTER TERMINATION OF EMPLOYMENT................... 14
6.1 General......................................................... 14
6.2 Form of Benefits................................................ 15
6.3 Time of Payment................................................. 15
6.4 Election of Payment Date and Form............................... 15
6.5 Notice to Participants.......................................... 15
6.6 Spousal Annuity Rules........................................... 15
6.7 Limitations Applicable to Benefit Forms......................... 16
6.8 Mandatory Lump Sum Payment...................................... 17
6.9 Effect of Reemployment.......................................... 17
ARTICLE 7
DEATH BENEFITS.................................................. 17
7.1 Payment to Beneficiary.......................................... 17
7.2 Time of Payment................................................. 17
7.3 Qualified Pre-Retirement Survivor Annuity....................... 17
7.4 Beneficiary Designation......................................... 17
ARTICLE 8
IN-SERVICE WITHDRAWALS.......................................... 18
8.1 Hardship Withdrawals............................................ 18
8.2 Withdrawals Prior to Age 59-1/2................................. 20
8.3 Withdrawals After Age 59-1/2.................................... 20
8.4 Withdrawals During Total Disability............................. 20
8.5 Withdrawals From PAYSOP Shares Accounts......................... 20
8.6 General Rules................................................... 20
ARTICLE 9
LOANS........................................................... 21
9.1 In General...................................................... 21
9.2 Loans Authorized................................................ 21
9.3 Documentation................................................... 21
9.4 Loan Limits..................................................... 21
9.5 Loan Terms...................................................... 21
9.6 Repayment....................................................... 22
9.7 Consequences of Default......................................... 22
9.8 Default......................................................... 22
9.9 Discrimination.................................................. 23
ARTICLE 10
LIMITATIONS ON CONTRIBUTIONS.................................... 23
10.1 Section 402(g) Limit on Before-Tax Contributions................ 23
10.2 Section 401(k) Limit on Before-Tax Contributions................ 23
</TABLE>
-iii-
<PAGE>
<TABLE>
<C> <S> <C>
10.3 Correction of Average Deferral Percentage Test.................. 24
10.4 Section 401(m) Limit on Matching Contributions.................. 25
10.5 Correction of Average Contribution Percentage Test.............. 25
10.6 Multiple Use of Alternative Limitation; Aggregate Limitation.... 26
10.7 Section 415 Limitation on Annual Additions...................... 27
ARTICLE 11
TRUST FUND AND INVESTMENTS...................................... 27
11.1 Trust Fund...................................................... 27
11.2 Investment Funds................................................ 28
11.3 Loan Fund....................................................... 28
11.4 Crediting Investment Earnings................................... 28
ARTICLE 12
ADMINISTRATION.................................................. 29
12.1 The Committee; Plan Administration.............................. 29
12.2 Powers and Duties of the Committee.............................. 29
12.3 Committee Procedure............................................. 30
12.4 Compensation of Committee....................................... 31
12.5 Payment of Plan Expenses........................................ 31
12.6 Recordkeeping................................................... 31
12.7 Uniform Action.................................................. 31
12.8 Information Furnished to the Committee.......................... 31
12.9 Indemnification of the Committee................................ 31
ARTICLE 13
CLAIMS PROCEDURE................................................ 31
13.1 Claim Denials................................................... 31
13.2 Appeal Procedures............................................... 32
ARTICLE 14
TOP-HEAVY PROVISIONS............................................ 32
14.1 General......................................................... 32
14.2 Definitions..................................................... 32
14.3 Top-Heavy Operating Rules....................................... 33
ARTICLE 15
AMENDMENT, TERMINATION, MERGERS AND TRANSFERS................... 34
15.1 Amendment....................................................... 34
15.2 Termination..................................................... 34
15.3 Effect of Termination........................................... 35
15.4 Merger, Consolidation or Transfer of Plan Assets................ 35
</TABLE>
-iv-
<PAGE>
<TABLE>
<C> <S> <C>
ARTICLE 16
GENERAL PROVISIONS.............................................. 35
16.1 Direct Rollover of Eligible Rollover Distributions.............. 35
16.2 Amount and Payment of Distributions............................. 36
16.3 No Employment Rights............................................ 36
16.4 Source of Benefits.............................................. 36
16.5 Governing Law................................................... 36
16.6 Spendthrift Clause.............................................. 36
16.7 Incapacity...................................................... 37
16.8 Unclaimed Benefits.............................................. 37
16.9 Receipt and Release............................................. 37
16.10 Effect of Mistake............................................... 38
16.11 Notice to Committee............................................. 38
16.12 Notices......................................................... 38
</TABLE>
-v-
<PAGE>
ARTICLE 1
THE PLAN'S ESTABLISHMENT
------------------------
1.1 The Plan. Teleport Communications Group Inc.(the "Company")
--------
initially adopted this Plan effective as of January 1, 1992 for the benefit of
certain of Employees. Prior to January 1, 1992, certain Employees of the Company
and its Affiliated Companies were participating in the Merrill Lynch Plans as
defined herein. During 1992, the account balances under the Merrill Lynch
Plans of Employees who became eligible for this Plan as of January 1, 1992 were
transferred to this Plan. This Plan is intended to be a profit sharing plan
qualified under section 401(a) which provides a cash or deferred arrangement
qualified under section 401(k) of the Code. The Plan has been amended from time
to time since its initial effective date and is amended and restated as set
forth under the terms of this document, generally effective as of January
1,1996.
1.2 Adoption Procedure. Any Affiliated Company may adopt this Plan
------------------
for the benefit of all or certain of its Employees by action of its Board of
Directors and by action of the Committee.
ARTICLE 2
DEFINITIONS
-----------
Except where otherwise clearly indicated by context, the masculine
shall include the feminine and the singular shall include the plural, and vice
versa.
2.1 "Accounts" shall mean the separate entries maintained in the Plan
--------
records representing the Participant's interest in the Plan as follows:
(a) "Before-Tax Contribution Account" shall mean the Account to
-------------------------------
which are credited or debited (i) a Participant's Before-Tax Contributions and
earnings thereon and losses thereto and (ii) the amounts which were credited to
the Participant's 401(k) Subaccount under the Merrill Lynch & Co. 401(k) Plan
prior to its transfer to this Plan and earnings thereon and losses thereto.
(b) "Matching Contribution Account" shall mean the Account to
-----------------------------
which are credited or debited (i) Matching Contributions and earnings thereon
and losses thereto and (ii) the amounts which were credited to the Participant's
Employer Contribution Subaccount under the Merrill Lynch & Co. 401(k) Plan prior
to their transfer to this Plan and earnings thereon and losses thereto.
(c) "Retirement Contribution Account" shall mean the Account to
-------------------------------
which are credited or debited (i) Retirement Contributions and earnings thereon
and losses thereto and (ii) the amounts which were credited to the Participant's
Company Retirement Contribution Account under the Merrill Lynch & Co. Retirement
Plan and Reversion Share Account and Leveraged Share Account under the Merrill
Lynch & Co. ESOP prior to their transfer to this Plan and earnings thereon and
losses thereto.
<PAGE>
(d) "PAYSOP Account" shall mean the Account to which are credited
--------------
or debited shares of Merrill Lynch & Co. Stock held in the Participant's
Transferred Share Account under the Merrill Lynch & Co. ESOP prior to their
transfer to this Plan and earnings thereon and losses thereto.
(e) "Rollover Contribution Account" shall mean the Account to
-----------------------------
which are credited or debited a (i) Participant's Rollover Contributions and
earnings thereon and losses thereto and (ii) the amounts which were credited to
the Participant's Rollover Contributions Subaccount under the Merrill Lynch &
Co. 401(k) Plan and Rollover Contribution Account under the Merrill Lynch & Co.
Retirement Plan prior to their transfer to this Plan and earnings thereon and
losses thereto.
(f) "Plan Account" shall mean a Participant's entire interest in
------------
all Accounts maintained for him under the Plan.
2.2 "Actual Deferral Percentage" shall mean the ratio of (a) the sum
--------------------------
of an Eligible Employee's Before-Tax Contributions for any Plan Year plus such
other amounts required or (at the election of the Committee) permitted to be
taken into account in accordance with section 401(k)(3) of the Code and the
regulations issued thereunder, including, in the case of any Highly Compensated
Eligible Employee, his elective deferrals for the year under any other qualified
retirement plan maintained by the Company or any Affiliated Company to (b) the
Eligible Employee's Section 414(s) Compensation for the Plan Year.
2.3 "Affiliated Company" shall mean (a) any corporation which is a
------------------
member of a controlled group of corporations with the Company, as determined
under section 414(b) of the Code; (b) any member of an affiliated service group,
as determined under section 414(m) of the Code, of which the Company is a
member; (c) any trade or business under common control with the Company, as
determined under section 414(c) of the Code; or (d) any other entity which is
required to be aggregated with the Company under section 414(o) of the Code.
For purposes of Section 10.7, Affiliated Company shall mean an Affiliated
Company as defined in the preceding sentence, but with the phrase "more than
50%" substituted for the phrase "at least 80%" in section 1563(a) of the Code.
2.4 "Annuity Starting Date" shall mean (i) the first day of the first
---------------------
period for which an amount is payable as an annuity or (ii) in the case of a
benefit not payable in the form of an annuity, the first day on which all events
have occurred which entitle a Participant to a benefit, whether or not payment
is actually made on such day.
2.5 "Average Contribution Percentage" shall mean for a specified
-------------------------------
group of Eligible Employees for a Plan Year, the average of the Contribution
Percentages for such Eligible Employees for the Plan Year.
-2-
<PAGE>
2.6 "Average Deferral Percentage" shall mean for a specified group of
---------------------------
Eligible Employees for a Plan Year, the average of the Actual Deferral
Percentages for such Eligible Employees for the Plan Year.
2.7 "Before-Tax Contributions" shall mean Employer contributions made
------------------------
pursuant to a Participant's election as provided in Section 4.1.
2.8 "Board of Directors" shall mean the board of directors of the
------------------
Company.
2.9 "Code" shall mean the Internal Revenue Code of 1986, as amended
----
from time to time.
2.10 "Committee" shall have the meaning set forth in Article 12 of
---------
the Plan.
2.11 "Company" shall mean Teleport Communications Group Inc. or any
-------
predecessor thereto or successor thereof.
2.12 "Compensation" shall mean all remuneration paid to an Employee
------------
while he is an Eligible Employee by the Employer in the form of salary or wages
and other amounts received (without regard to whether or not an amount is paid
in cash) for personal services actually rendered in the course of employment
with the Employer to the extent that amounts are includible in gross income
(including but not limited to commissions, compensation for services on the
basis of a percentage of profits, bonuses, fringe benefits and reimbursements or
other expense allowances under a nonaccountable plan (as described in Treas.
Reg. (S) 1.62-2 (c)) and shall include any amount which is contributed by the
Employer pursuant to a salary reduction agreement and which is not includible in
the gross income of the Employee under Code (S)(S) 125 or 402 (e) (3).
"Compensation" does not include any (i) amounts includible in income under the
Company's 1992 or 1993 Unit Appreciation Plans, 1993 Stock Option Plan, Equity
Incentive Plan or any similar long term incentive plan or (ii) contributions by
the Employer to a deferred compensation plan, to the extent that such
contributions are not includible in the Employee's gross income for the year in
which contributed. "Compensation" also does not include distributions from a
deferred compensation plan (other than amounts received from an unfunded, non-
qualified plan), amounts realized from the sale of a non-qualified stock option
or when restricted stock or property becomes freely transferable or no longer
subject to a substantial risk of forfeiture, amounts realized from the sale,
exchange or other disposition of stock acquired under a qualified stock option
plan or plan qualified under Section 423 of the Code, or other amounts set forth
under Treas. Reg. (S) 415-2 (d) (3) which receive special tax benefits.
Notwithstanding any other provision of this definition, the "Compensation" of a
Participant shall not exceed $150,000, as adjusted, pursuant to Code Section
401(a)(17). The determination of "Compensation" shall be made by the Committee
in accordance with records maintained by the Employer and the determination of
the Committee shall be conclusive.
2.13 "Compensation Threshold" shall mean three-quarters of the annual
----------------------
compensation limit applicable to Compensation prescribed in Code (S) 401(a)(17)
in effect for the Plan Year
-3-
<PAGE>
involved, rounded to the nearest hundred dollars, and shall be measured with
reference to the Compensation paid to the Participant for the calendar quarter
and all preceding quarters during the calendar year involved.
2.14 "Contribution Percentage" shall mean the ratio of (a) an
-----------------------
Eligible Employee's Matching Contributions for the Plan Year, and such other
amounts required or (at the election of the Committee) permitted to be taken
into account in accordance with section 401(m) of the Code and the regulations
issued thereunder, including, in the case of any Highly Compensated Eligible
Employee, any employee contributions and employer matching contributions for the
year under any other qualified retirement plan maintained by the Company or any
Affiliated Company to (b) the Participant's Section 414(s) Compensation for the
Plan Year.
2.15 "Covered Employee" shall mean an Employee of an Employer except:
----------------
(i) persons covered by a collective bargaining agreement unless such agreement
specifically provides for participation hereunder; (ii) persons who are "leased
employees" as described in section 414(n) of the Code; and (iii) persons who are
classified for payroll purposes as "casual" or "temporary" employees.
2.16 "Effective Date" shall mean January 1, 1996, the effective date
--------------
of this amendment and restatement.
2.17 "Eligible Employee" shall mean a Covered Employee who satisfies
-----------------
the eligibility requirements of Article 3 for electing Before-Tax Contributions
or sharing in Retirement Contributions, as applicable.
2.18 "Employee" shall mean an individual who is a common law employee
--------
of the Company or an Affiliated Company and (b) a "leased employee" described in
section 414(n)(2) of the Code who provides services to the Company or an
Affiliated Company.
2.19 "Employer" shall mean the Company and any Affiliated Company
--------
listed in Schedule A hereto that has adopted the Plan in accordance with Section
1.2 for the benefit of certain of its Employees.
2.20 "Employment Date" shall mean the first date on which an Employee
---------------
performs an Hour of Service following his hire or rehire after a Termination of
Employment.
2.21 "Entry Dates" shall mean the first day of each calendar month.
-----------
2.22 "ERISA" shall mean the Employee Retirement Income Security Act
-----
of 1974, as amended from time to time.
-4-
<PAGE>
2.23 "Fund" or "Trust Fund" shall mean the fund established for this
---- ----------
Plan and administered under the Trust Agreement, out of which benefits payable
under this Plan shall be paid.
2.24 "Highly Compensated Employee"
---------------------------
(a) For Plan Years beginning on or after January 1, 1997, a
Highly Compensated Employee shall mean any Employee who:
(i) was a 5% owner at any time during the current Plan
Year or the preceding Plan Year; or
(ii) for the preceding Plan Year, had Section 415
Compensation in excess of $80,000 (as indexed) and was in the "top-paid" group
of Employees for such year as such term is defined in Code section 414(q)(3).
(b) For Plan Years beginning prior to January 1, 1997, a Highly
Compensated Employee shall mean an Employee who during the current Plan Year or
the immediately preceding Plan Year:
(i) was a five-percent (5%) owner, as defined in
section 416(i)(1) of the Code;
(ii) received more than $75,000 (as indexed) in Section
415 Compensation from the Company or an Affiliated Company;
(iii) received more than $50,000 (as indexed) in Section
415 Compensation from the Company or an Affiliated Company and was among the top
twenty percent (20%) of employees of the Company and Affiliated Companies all
ranked by Section 415 Compensation (excluding employees described in section
414(q)(8) of the Code to the extent (1) permitted under the Code and regulations
thereunder and (2) elected by the Committee, for purposes of identifying the
number of employees in the top twenty percent (20%)); or
(iv) was an officer of the Company or an Affiliated
Company and received Section 415 Compensation of more than fifty percent (50%)
of the dollar limit under section 415(b)(1)(A) of the Code during such Plan
Year; provided, however, if for any Plan Year no officer of the Company is
-------- -------
included in the foregoing, the highest paid officer for such Plan Year shall be
treated as a Highly Compensated Employee. The number of employees considered to
be Highly Compensated Eligible Employees under this Subsection (iv) shall not
exceed the lesser of (1) fifty (50) or (2) the greater of three (3) or ten
percent (10%) of all Employees (excluding Employees described in section
414(q)(8) of the Code to the extent permitted under the Code and regulations
thereunder and elected by the Committee, for purposes of identifying the number
of employees in the top twenty percent (20%)). However, an Employee, other than
a five-percent (5%) owner, who was not a Highly Compensated Employee in the
preceding Plan Year
-5-
<PAGE>
is a Highly Compensated Employee for the current Plan Year only if he is among
the top 100 employees of the Company and all Affiliated Companies ranked by
Section 415 Compensation for the current Plan Year.
(c) In addition, for purposes of this Section: (a) for Plan
Years beginning prior to January 1, 1997, the compensation of any five percent
(5%) owner or any other Highly Compensated Employee who is one of the top ten
(10) Employees of the Company and all Affiliated Companies ranked by Section 415
Compensation for the year shall be increased by the amount of Section 415
Compensation of any Employee who is a spouse or lineal ascendant or descendant
(or a spouse thereof) of such Highly Compensated Employee, and (b) for Plan
Years beginning prior to January 1, 1998, Section 415 Compensation of an
Employee shall be increased by the elective contributions made on his behalf
under section 125 or section 402(e)(3) of the Code.
2.25 "Hour of Service" shall mean each hour of service credited to an
---------------
Employee as determined from records maintained by the Company or an Affiliated
Company in accordance with the following rules:
(a) An Hour of Service for all purposes under the Plan shall
include:
(i) Each hour for which an Employee is directly or
indirectly paid or entitled to payment by the Company or an Affiliated Company
for the performance of duties. Each such Hour of Service shall be credited to
the Plan Year in which the duties actually were performed.
(ii) Each hour for which back pay (irrespective of
mitigation of damages) has been either awarded to an Employee or agreed to by
the Company or an Affiliated Company. Each such Hour of Service shall be
credited to the Plan Year to which the agreement or award with respect to back
pay pertains rather than to the Plan Year in which the award, agreement or
payment is made.
(iii) Each hour for which an Employee is directly or
indirectly paid, or entitled to payment, by the Company or an Affiliated Company
for reasons other than the performance of duties during a period of service with
the Company or an Affiliated Company in which no duties are performed by the
Employee (irrespective of whether the employment relationship has terminated)
because of vacation, holiday, sickness, incapacity, disability, layoff, jury
duty, military duty or leave of absence.
(iv) Any hour for which the Employee is regularly
scheduled to work but is absent for a family or medical leave of absence but
only to the extent that the Company or an Affiliated Company is required to
provide credit for such leave of absence under The Family and Medical Leave Act
of 1993.
(b) Notwithstanding the foregoing, an Hour of Service shall not
include:
-6-
<PAGE>
(i) any hour credited during a period in which no
duties are performed by an Employee, which, when added to all other such hours,
causes such hours to exceed the number of hours regularly scheduled for the
performance of duties by the Employee during such period;
(ii) any hour in excess of five hundred and one (501)
Hours of Service, credited with respect to a single continuous period, during
which an Employee does not perform any duties or during which an Employee is
absent for maternity or paternity leave of absence (whether or not such period
occurs during a single Plan Year) except as may otherwise be required under The
Family Leave and Medical Act of 1993;
(iii) any hour for which an Employee is directly or
indirectly paid, or entitled to payment, if such payment is made or due solely
to reimburse the Employee for medical or medically related expenses incurred by,
or on behalf of, the Employee; or
(iv) any hour for which an Employee is directly or
indirectly paid, or entitled to payment, during a period in which he performs no
duties, if such payment is made or due under a plan maintained solely for the
purpose of complying with applicable worker's compensation, unemployment
compensation or disability insurance laws. Each such Hour of Service shall be
credited in accordance with paragraphs (b) and (c) of Section 2530.200b-2 of the
Hour of Service regulations of the Department of Labor.
2.26 "Investment Fund" shall mean any investment fund selected by the
---------------
Committee from time to time for the investment of Participants' Accounts.
2.27 "Limitation Year" shall mean the Plan Year or such other 12-
---------------
consecutive-month period as may be designated by the Committee.
2.28 "Matching Contributions" shall mean the amounts contributed by
----------------------
an Employer pursuant to Section 4.2.
2.29 "Merrill Lynch & Co. ESOP" shall mean the Merrill Lynch & Co.,
------------------------
Inc. Employee Stock Ownership Plan as in effect as of December 31, 1991.
2.30 "Merrill Lynch & Co. 401(k) Plan" shall mean the Merrill Lynch &
-------------------------------
Co., Inc. Savings Investment Plan as in effect as of December 31, 1991.
2.31 "Merrill Lynch & Co. Retirement Plan" shall mean the Merrill
-----------------------------------
Lynch & Co., Inc. Retirement Accumulation Plan as in effect as of December 31,
1991.
2.32 "Merrill Lynch & Co. Plans" shall mean, collectively, the
-------------------------
Merrill Lynch & Co. ESOP, the Merrill Lynch & Co. 401(k) Plan and the Merrill
Lynch & Co. Retirement Plan.
-7-
<PAGE>
2.33 "Merrill Lynch & Co. Stock" shall mean common stock of Merrill
-------------------------
Lynch & Co., Inc.
2.34 "Non-Highly Compensated Employee" shall mean an Employee who is
-------------------------------
not a Highly Compensated Employee.
2.35 "Normal Retirement Age" shall mean the date on which a
---------------------
Participant attains his 65th birthday.
2.36 "Participant" shall mean any Eligible Employee or any former
-----------
Eligible Employee for whom one or more Accounts are maintained under the Plan.
2.37 "Plan" shall mean the Teleport Communications Group Inc.
----
Retirement Savings Plan as set forth herein and as hereafter amended from time
to time.
2.38 "Plan Year" shall mean each 12-consecutive-month period which
---------
commences January 1 and ends on the next following December 31.
2.39 "Retirement Contributions" shall mean the Retirement
------------------------
Contributions contributed by the Employer pursuant to Section 4.3.
2.40 "Qualified Joint and Survivor Annuity" shall mean a life annuity
------------------------------------
payable to the Participant and, following the Participant's death, at least a
50% but not more than a 100% survivor annuity payable to the Participant's
Spouse. The amount of the Qualified Joint and Survivor Annuity payable to the
Participant for his life shall be the amount of the benefit which can be
purchased with the Participant's vested Plan Account. A former Spouse may be
treated as the Spouse to the extent provided under a qualified domestic
relations order as described in Code Section 414(p).
2.41 "Qualified Pre-Retirement Survivor Annuity" shall mean an
-----------------------------------------
annuity for the life of the Participant's Spouse purchased with the vested Plan
Account of the Participant unpaid as of the date of the Participant's death.
2.42 "Required Beginning Date" shall mean:
-----------------------
(a) For Plan Years beginning on or after January 1, 1997, (i) in
the case of an Employee who is a 5%-owner as defined in section 416 of the Code,
April 1 of the calendar year following the calendar year in which the Employee
attains age 70 1/2 or (ii) in the case of any other Employee, April 1 of the
calendar year following the later of the calendar year in which the Employee
attains age 70 1/2 or the calendar year in which the Employee's Termination of
Employment occurs; and
(b) For Plan Years beginning prior to January 1, 1997, April 1
of the calendar year following the calendar year in which the Employee attains
age 70 1/2.
-8-
<PAGE>
2.43 "Retirement" shall mean a Participant's Termination of
----------
Employment on or after his attainment of age 55 with 10 Years of Service.
2.44 "Section 414(s) Compensation" shall mean, for any period, a
---------------------------
Participant's "compensation" as defined in section 414(s) of the Code and
Treasury regulations issued thereunder, but not in excess of $150,000 or such
other amount as may be applicable under section 401(a)(17) of the Code.
2.45 "Section 415 Compensation" shall mean, for any period, an
------------------------
individual's current "compensation" from the Company or an Affiliated Company as
defined under section 415(c)(3) of the Code, as amended, and regulations issued
thereunder, including those items listed in paragraph (2) of Treas. Reg. Section
1.415-2(d) but excluding those items listed in paragraph (3) thereof.
2.46 "Spouse" shall mean the person to whom a Participant is legally
------
married on any date of reference.
2.47 "TCG Stock" shall mean the common stock of Teleport
---------
Communications Group Inc.
2.48 "Termination of Employment" shall mean the date, as recorded on
-------------------------
the records of the Company or an Affiliated Company, on which an Employee's
employment with the Company and all Affiliated Companies ceases because of the
Employee's resignation, retirement, death or other discharge.
2.49 "Total Disability" A physical or mental condition that
----------------
qualifies a Participant to receive total or partial benefit payments under the
long-term disability plan provided and maintained by such Participant's
Employer. No Participant shall be deemed to be disabled for the purpose of the
Plan if the incapacity was contracted, suffered or incurred while the
Participant was engaged in a felonious enterprise or resulted therefrom or
resulted from an intentionally self-inflicted injury or from service in the
armed forces of any country from an act of war or while the Participant was
employed by anyone other than the Employer.
2.50 "Valuation Date" shall mean the last business day of each month
--------------
or such other date as determined by the Committee.
2.51 "Years of Service" shall mean for an Employee the sum of (i)
----------------
each employment period commencing on an Employment Date and ending on the next
following Termination of Employment date and (ii) each severance period
commencing on a Termination of Employment date and ending on the next following
Employment Date, if any, provided that such Employment Date occurs within 12
months of the Termination of Employment date. For the purpose of determining an
Employee's Years of Service, an Employee shall not be treated as having a
Termination of Employment during any period he is on Total Disability or an
authorized leave of absence. Notwithstanding the foregoing, an Employee's Years
of Service for the purpose of
-9-
<PAGE>
determining his vested interest in his Matching Contribution Account shall not
include periods prior to October 1, 1987. In addition, if not otherwise
included pursuant to this Section, an Employee's Years of Service shall include
all periods required to be included under (i) the Family and Medical Leave Act
of 1993 and (ii) section 414(u) of the Code with respect to qualified military
service.
ARTICLE 3
ELIGIBILITY
-----------
3.1 General Rule. Each Covered Employee shall become an Eligible
------------
Employee for the purpose of electing Before-Tax Contributions as of the Entry
Date coincident with or next following the date on which he first completes a
Year of Service and shall become an Eligible Employee for the purpose of
eligibility to share in Retirement Contributions as of the Entry Date coincident
with the next following the date on which he first completes a Year of Service
and has attained age 21.
3.2 Special Rules.
-------------
(a) Each Covered Employee who was eligible to participate in the
Plan immediately prior to the Effective Date and who remains a Covered Employee
as of the Effective Date shall become an Eligible Employee as of the Effective
Date.
(b) If an Employee does not become an Eligible Employee as of any
Entry Date solely because he is not then a Covered Employee, such Employee shall
become an Eligible Employee on the date he first becomes a Covered Employee.
3.3 Termination and Reemployment. An Eligible Employee who ceases to
----------------------------
be a Covered Employee because of his Termination of Employment or for any other
reason shall become an Eligible Employee as of the date (if any) he again
becomes a Covered Employee.
ARTICLE 4
CONTRIBUTIONS
-------------
4.1 Before-Tax Contributions. For each Plan Year the Employer shall
------------------------
contribute to the Plan on behalf of each Eligible Employee such whole percentage
of the Eligible Employee's Compensation as the Eligible Employee designates
pursuant to a written election on a form provided by the Employer, in lieu of
paying cash compensation to the Eligible Employee. The percentage designated by
the Eligible Employee shall be made and may be changed at such times and in
accordance with such procedures as established by the Committee from time to
time in its sole discretion. The Before-Tax Contributions of an Eligible
Employee shall not exceed the lesser of (i) 15% of the Eligible Employee's
Compensation or (ii) the annual dollar limitation described in Section 10.1.
-10-
<PAGE>
4.2 Matching Contributions: Each Plan Year the Employer shall make a
----------------------
Matching Contribution to the Plan on behalf of each Eligible Employee equal to
50% of the first 6% of the Eligible Employee's Compensation contributed to the
Plan as Before-Tax Contributions up to $1,500 per Plan Year.
4.3 Retirement Contributions.
------------------------
(a) For each calendar quarter of the Plan Year, the Employer
shall contribute to the Plan on behalf of each Eligible Employee a Retirement
Contribution equal to such percentage of the Participant's Compensation for the
calendar quarter determined in accordance with the following table based on the
Participant's Years of Service as of January 4 of such Plan Year:
<TABLE>
<CAPTION>
Percentage of Eligible
Years of Service Compensation
on each January 4 Up to Compensation Over Compensation
- ----------------- Threshold Threshold
---------------------------------
<S> <C> <C>
less than five 2.0% 1.0%
at least 5 but less than 10 3.0% 1.5%
at least 10 but less than 15 4.0% 1.5%
at least 15 but less than 20 5.0% 1.5%
at least 20 but less than 25 6.0% 1.5%
at least 25 but less than 30 7.0% 1.5%
more than 30 8.0% 1.5%
</TABLE>
(b) If the Compensation of a Participant reaches the Compensation
Threshold within a calendar quarter, the Retirement Contributions for such
quarter shall be based on two percentages, one applicable to Compensation up to
the Compensation Threshold and the other applicable to Compensation in excess of
the Compensation Threshold.
(c) Notwithstanding the foregoing, with respect to a Participant
who is a Highly Compensated Employee, during a period of the Participant's Total
Disability, the Employer shall make no Retirement Contributions on his or her
behalf to the Trust. With respect to a Participant who is not a Highly
Compensated Employee, during a period of the Participant's Total Disability, the
Employer shall make Retirement Contributions on his or her behalf based upon the
Participant's Eligible Compensation for the last twelve full calendar months
prior to the commencement of the Total Disability.
4.4 Rollover Contributions. A Covered Employee (whether or not he is
----------------------
an Eligible Employee) may make one or more Rollover Contributions to the Plan by
delivering those contributions or having them transferred to the Trustee and by
filing any forms as required by the Committee. Rollover Contributions must be
attributable solely to a "qualifying rollover distribution" (as described in
Code (S)402(c)) or to a direct transfer (as described in Code
-11-
<PAGE>
(S)401(a)(31)) from another tax-qualified plan or a conduit "individual
retirement account", but may not include nondeductible amounts contributed by
the Employee nor amounts attributable to contributions by the Employee under
that other plan that were deductible under Code (S)219. The Covered Employee
must establish the acceptability of any Rollover Contribution to the
satisfaction of the Committee. Rollover Contributions must consist of cash,
unless the Committee and Trustee agree, in their discretion, to accept any
property other than cash which was included in the relevant qualifying rollover
distribution.
4.5 Remittance of Contributions to Trustee.
--------------------------------------
(a) Amounts contributed as Profit Sharing or Matching
Contributions shall be remitted to the Trustee as soon as practicable, but no
later than the due date, with extensions, for the Company's income tax return
for the Plan Year for which the contribution is made.
(b) Amounts contributed as After-Tax Contributions or Before-Tax
Contributions will be remitted to the Trustee as soon as practicable, but in no
event later than 90 days after the date on which such contributions are received
by the Company or withheld from the Participant's Compensation.
4.6 Return of Contributions.
-----------------------
(a) Qualification of Plan. The retention by the Trustee of
---------------------
contributions made to the Trust shall be specifically conditioned upon the
initial qualification of the Plan under section 401 of the Internal Revenue
Code. If the Plan does not so initially qualify, any Employer contributions made
to the Trust shall be returned to the Employer and any Employee contributions
made to the Trust shall be returned to the Participants as soon as practicable
but within one year after the date of denial of initial qualification of the
Plan.
(b) Deductibility of Contributions. The retention by the Trustee
------------------------------
of contributions made to the Trust Fund shall be conditioned upon the
deductibility of such contributions under section 404 of the Code. To the extent
such deduction is disallowed, any Employer contribution or Employee contribution
to the Trust may be returned to the Employer or the Participant, respectively,
at the discretion of the Employer and as soon as practicable but within one year
after the disallowance of the deduction.
(c) Mistake of Fact. Any Employer contribution or Employee
---------------
contribution made because of a mistake of fact may be returned to the Employer
or the Participant, respectively, at the discretion of the Employer as soon as
practicable but within one year after the payment of such contribution.
4.7 Limitations. Notwithstanding anything to the contrary in this
-----------
Article 4, all contributions to the Plan shall be subject to the limitations set
forth in Article 10.
-12-
<PAGE>
4.8 Contributions for Qualified Military Service. Notwithstanding
--------------------------------------------
any thing in the Plan to the contrary, all contributions with respect to
qualified military service will be provided in accordance with section 414(u) of
the Code.
ARTICLE 5
VESTING AND FORFEITURES
-----------------------
5.1 Fully Vested Accounts. At all times a Participant shall be fully
---------------------
vested in his Before-Tax Contribution Account, Rollover Contribution Account and
PAYSOP Shares Account. In addition, if the Participant had elected to make
contributions to the Merrill Lynch & Co. 401(k) Plan effective October 1, 1987,
the Participant's Matching Contribution Account shall be fully vested at all
times.
5.2 Vesting Based on Service. To the extent not fully vested under
------------------------
other Plan provisions, a Participant's vested interest in his Accounts shall be
based on his Years of Service as follows:
(a) Matching Contributions. The vested percentage of a
----------------------
Participant in his Matching Contribution Account shall be determined in
accordance with the following schedule:
Completed Years Vested
of Service Percentage
---------- ----------
Less than 1 0%
1 20%
2 40%
3 60%
4 80%
5 or more 100%
(b) Retirement Contributions. The vested percentage of a
------------------------
Participant in his Retirement Contribution Account shall be determined in
accordance with the following schedule:
Completed Years Vested
of Service Percentage
---------- ----------
Less than 5 0%
5 or more 100%
-13-
<PAGE>
5.3 Vesting Based on Events. To the extent not fully vested under
-----------------------
other Plan provisions, a Participant's Account shall become fully vested upon
the occurrence of any of the following events:
(a) Normal Retirement Age or Death. A Participant shall become
------------------------------
fully vested in his entire Plan Account upon the Participant's Normal Retirement
Age if he is still an Employee at that time or upon the Participant's
Termination of Employment because of death.
(b) Disability. A Participant shall become fully vested in his
----------
Retirement Contribution Account upon the Participant's Termination of Employment
due to Total Disability.
(c) Plan Termination. A Participant shall become fully vested in
----------------
his entire Plan Account as of the effective date of the complete or partial
termination of the Plan or complete discontinuance of Employer contributions,
provided that the Participant is affected by such termination or discontinuance
and the nonvested portion of his Plan Account has not been forfeited prior to
that date.
5.4 Forfeiture of Employer Contributions Account. In the event of a
--------------------------------------------
Participant's Termination of Employment, an amount equal to the non-vested
percentage of his Matching Contribution Account and Retirement Contribution
Account shall be forfeited as of the date of such Termination of Employment.
Such forfeitures shall be applied to reduce future Matching Contributions and
Retirement Contributions required to be made to the Plan by the Employer.
5.5 Restoration of Forfeitures. Amounts forfeited pursuant to
--------------------------
Section 5.4 (unadjusted by any subsequent gains or losses) shall be restored for
a Participant who incurred a Termination of Employment, forfeited any portion of
his Matching Contribution Account or Retirement Contribution Account and then
resumes employment with the Company or an affiliated Company within five years
after his Termination of Employment date. Such amounts shall be restored as of
the first day as of which contributions would be invested in the Participant's
Before-Tax Contribution Account if the Participant had elected to make
contributions following the Participant's resumption of Employment. The restored
amount shall be derived from amounts forfeited and not previously allocated and,
if such forfeitures are not sufficient to make a full restoration, from a
contribution by the Employer.
ARTICLE 6
DISTRIBUTIONS AFTER TERMINATION OF EMPLOYMENT
---------------------------------------------
6.1 General. A Participant who incurs a Termination of Employment
-------
for any reason other than death shall be entitled to receive his entire vested
Plan Account as provided under this Article 6.
6.2 Form of Benefits.
----------------
-14-
<PAGE>
(a) General Rule. A Participant's vested Plan Account shall be
------------
payable in a lump sum distribution in cash, provided that a Participant may
elect to receive in kind any whole shares of Merrill Lynch & Co. Stock or TCG
Stock held in his Plan Account.
(b) Merrill Lynch & Co. Plan Distribution Options. Any other
---------------------------------------------
provision of this Plan to the contrary notwithstanding, a Participant whose Plan
Account is derived from any amounts transferred from a Merrill Lynch & Co. Plan
shall be permitted, subject to the requirements of Code (S)(S) 401(a)(11) and
417, as such requirements are satisfied in such plan, to elect with respect to
such transferred amounts any of the forms of distribution available at the time
of the transfer under the Merrill Lynch & Co. Plan from which the amount was
transferred, including specifically, but not by way of limitation, any early
distribution to comply with the requirements of Code (S) 401(a)(28). Any annuity
contract purchased under this Plan shall comply with the requirements of Code
(S) 401(a)(9)and the regulations thereunder.
6.3 Time of Payment. The payment of benefits to a Participant shall
---------------
begin not later than the 60th day after the later of (a) the close of the Plan
Year in which the Participant attained age 65 or (b) the close of the Plan Year
in which the Participant's Termination of Employment occurs; provided, however,
that in no event shall the payment of benefits to a Participant commence later
than the Participant's Required Beginning Date.
6.4 Election of Payment Date and Form. Subject to all restrictions
---------------------------------
imposed under other Plan provisions, a Participant may elect the payment date
and benefit form to be used for the payment of his vested Plan Account. A valid
election under this Section 6.4 shall be made on a written form prescribed by
the Committee and shall be filed with the Committee no more than 90 days and no
less than 30 days before the Participant's Annuity Starting Date. The
Participant may change any prior election by filing a new election at any time
before his Annuity Starting Date.
6.5 Notice to Participants. No more than 90 days and no less than 30
----------------------
days before the Participant's Annuity Starting Date, the Committee shall provide
the Participant with a written notice that provides a general description of the
material features, and an explanation of the relative values, of the benefit
forms available under the Plan with respect to the Participant and an
explanation of the Participant's right to defer payment beyond the attainment of
age 65.
6.6 Spousal Annuity Rules. This Section 6.6 describes certain rules
---------------------
that apply to annuity payments to married Participants in the event that the
Participant's Plan Account includes amounts transferred from a Merrill Lynch &
Co. Plan that provides annuity options. These rules apply and supersede any
conflicting Plan provisions only in the case where a Participant who is married
as of his Annuity Starting Date and elects to receive payments under an annuity
form of payment other than a Qualified Joint and Survivor Annuity. In no event
shall these rules apply in the case of a Participant whose vested Plan Account
does not exceed and has never exceeded $3,500.
-15-
<PAGE>
(a) Qualified Joint and Survivor Annuity Required. When the
---------------------------------------------
spousal annuity rules of this Section 6.6 apply, the Participant's vested Plan
Account may only be paid in the form of a Qualified Joint and Survivor Annuity
unless the Participant, with his Spouse's consent, waives such payment form in
accordance with this Section 6.6.
(b) Waiver and Spouse's Consent. These spousal annuity rules may
---------------------------
be waived by the Participant with his Spouse's written consent at any time
within the 90-day period ending on the Participant's Annuity Starting Date. To
be effective, the Participant's waiver must (i) be in writing on a form
acceptable to the Committee, be signed by the Participant, and be filed with the
Committee within that 90-day period; (ii) if applicable, designate a specific
Beneficiary which may not be changed without further written spousal consent
unless the Spouse expressly consents in writing to designations by the
Participant without such further consent, and (iii) designate a specific benefit
form which may not be changed without further written spousal consent unless the
Spouse expressly consents in writing to the designations by the Participant
without such further consent. The Spouse's consent must be filed during the same
90-day period, conform to the requirements of Section 7.3 and acknowledge both
the Spouse's consent to, and the effect of the Participant's waiver under this
Section and, if applicable, to the distribution of the Participant's benefit
prior to his Normal Retirement Date. The Participant's waiver may be revoked and
new waivers may be filed without limit during that 90-day period.
(c) Notice to Participants. Not more than 90 days and not less
----------------------
than 30 days before the Participant's Annuity Starting Date for any benefits
subject to the spousal annuity rules, the Committee is to provide written notice
to the Participant of (i) the terms and conditions of the Spouse's joint and
survivor annuity; (ii) the Participant's right to waive the Spouse's joint and
survivor annuity and the effect of that waiver; (iii) the Spouse's rights under
the joint and survivor annuity rules; (iv) the Participant's right to revoke any
previous waiver of the Spouse's joint and survivor annuity and the effect of
that revocation; (v) the Participant's and the Spouse's right to defer
distribution until the Participant's Normal Retirement Date; and (vi) the
benefit forms available under the Plan, including a general description of the
material features, and an explanation of the relative values of such benefit
forms.
6.7 Limitations Applicable to Benefit Forms. The following
---------------------------------------
limitations, which shall be interpreted and applied in accordance with Code
section 401(a)(9) and Treasury regulation issues thereunder, shall apply to a
Participant's benefit form notwithstanding any Plan provisions to the contrary.
(a) No Participant may receive Plan benefits in a benefit form
which is expected to result in the complete distribution of his vested Plan
Account over a period extending beyond the longest of the actual life of the
Participant or his designated Beneficiary or the life expectancy of the
Participant or his designated Beneficiary.
(b) The amount to be paid each year under the benefit form
applicable to the Participant (other than the lump sum form) must be at least an
amount equal to the quotient obtained by dividing the Participant's vested Plan
Account balance by the lesser of (i) his life
-16-
<PAGE>
expectancy or the joint and last survivor expectancy of the Participant and his
designated Beneficiary, or (ii) if the Participant's Spouse is not the
designated Beneficiary, the applicable divisor determined from the table set
forth in Q&A-4 of (S)1.401(a)(9)-2 of proposed Treasury regulations or any
successor regulations. The life expectancies are to be computed using the
return multiples in (S)1.72-9 of the IRS regulations. Life expectancies shall
not be recalculated after the payment date.
6.8 Mandatory Lump Sum Payment. The Committee shall make a mandatory
--------------------------
lump sum payment to the Participant as soon as is administratively practicable
after the Participant's Termination of Employment if the Participants's vested
Plan Account does not then exceed and has not at any time exceeded $3,500 and
his Annuity Starting Date has not yet occurred. The Participant's consent is
not required for this mandatory lump sum payment.
6.9 Effect of Reemployment. In the event a Participant who has a
----------------------
Termination of Employment is reemployed by the Company or an Affiliated Company
before a complete distribution has been made to him, distribution of his
Accounts shall not be made until he subsequently incurs a Termination of
Employment.
ARTICLE 7
DEATH BENEFITS
--------------
7.1 Payment to Beneficiary. Upon the death of a Participant, any
----------------------
portion of the Participant's vested Plan Account not yet paid to the Participant
shall be paid to the Participant's Beneficiary in one lump sum payment unless
the rules of Section 7.3 apply.
7.2 Time of Payment. Payment to a Participant's Beneficiary under
---------------
Section 7.1 shall be made as soon as is administratively practicable following
the Participant's death but in no event later than 5 years after the death of
the Participant. However, in the case of a Participant who attained his
Required Beginning Date prior to his death, the remaining portion of the
Participant's vested Plan Account shall not be paid to the Participant's
Beneficiary less rapidly than such payments would have been made under the
method of distribution being used as of the date of the Participant's death.
7.3 Qualified Pre-Retirement Survivor Annuity. If a Participant dies
-----------------------------------------
at a time that his benefit is required to be paid in a Qualified Joint and
Survivor Annuity under Section 6.6 but before his Annuity Starting Date, his
Spouse shall receive payment of the Participant's vested Plan Account in the
form of a Qualified Pre-Retirement Survivor Annuity.
7.4 Beneficiary Designation.
-----------------------
(a) Death benefits under this Article 7 shall be paid to the
Participant's surviving Spouse (i) unless (A) the Spouse (or the Spouse's legal
guardian if the Spouse is legally incompetent) consents in writing not to
receive such benefit; (B) such consent acknowledges its
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<PAGE>
own effect; and (C) such consent is witnessed by a Plan representative or notary
public; or (ii) unless the Participant establishes to the satisfaction of the
Committee that (A) he has no Spouse; (B) his Spouse cannot be located; or (C)
his Spouse's consent is not required under such other circumstances as are
prescribed by governmental regulations. The Spouse's consent may be in the form
of a consent to a specific designation or may expressly permit the Participant
to change his designation without further consent by the Spouse.
(b) Subject to Section 7.4(a), each Participant shall have the
unrestricted right at any time to designate the Beneficiary or Beneficiaries who
shall receive, on or after his death, his interest in his vested Plan Account.
Such designation shall be made by executing and filing with the Committee a
written instrument in such form as may be prescribed by the Committee for that
purpose. Except as provided in this Section, the Participant shall also have the
unrestricted right to revoke and to change, at any time and from time to time,
any Beneficiary designations previously made. Such revocations and/or changes
shall be made by executing and filing with the Committee a written instrument in
such form as may be prescribed by the Committee for that purpose. No
designation, revocation, or change of Beneficiaries shall be valid and effective
unless and until filed with the Committee. In the event a Participant designates
a trust as his Beneficiary, a change in the Beneficiaries of the trust shall be
deemed a change in the Participant's Beneficiary for purposes of Section 7.4(a),
but not for the purposes of this Section 7.4(b). If no designation is made, or
if the Beneficiaries named in such designation predecease the Participant, or if
the beneficiaries cannot be located by the Committee, the interest of the
deceased Participant shall be paid to the Participant's Spouse, and if there is
no Spouse, to the Participant's estate.
ARTICLE 8
IN-SERVICE WITHDRAWALS
----------------------
8.1 Hardship Withdrawals
--------------------
(a) In General. Hardship withdrawals shall be made only if the
----------
Participant demonstrates to the Committee that he has an "immediate and heavy
financial need" and the withdrawal is "necessary to satisfy that need" as
described in this Section. A hardship withdrawal shall be made only from the
following Accounts in cash in the following order: (i) the Participant's Before-
Tax Contribution Account (not including the income attributable thereto or any
"qualified non-elective contributions"); (ii) the Participant's Matching
Contribution Account, if the Participant is 100% vested in such Account; and
(iii) the Participant's Rollover Contribution Account.
(b) Immediate and Heavy Financial Need. An immediate and heavy
----------------------------------
financial need shall be deemed to exist only on account of:
(i) Expenses not subject to reimbursement for medical care
(described in Code (S) 213(d)) (A) previously incurred by the Employee, the
Employee's Spouse, or any
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<PAGE>
dependents of the Employee (as defined in Code (S) 152) or (B) necessary for
those persons to obtain medical care, that exceed an amount established by the
Committee;
(ii) Costs directly related to the purchase (excluding
mortgage payments) of a principal residence for the Employee;
(iii) Payment of unreimbursed tuition and related
educational fees for the next twelve months of post-secondary education for the
Employee or the Employee's Spouse, children or dependents, including payments
for room and board.
(iv) The need to prevent the eviction of the Employee
from his or her principal residence or foreclosure on the Employee's mortgage of
his or her principal residence;
(v) Unreimbursed damages resulting from a natural
disaster; or
(vi) Such other financial need which the Commissioner of
Internal Revenue, through the publication of revenue rulings, notices and other
documents of general applicability, deems to be immediate and heavy.
(c) Necessary to Satisfy Financial Need. A distribution shall not
-----------------------------------
be treated as necessary to satisfy the immediate and heavy financial need unless
all of the following requirements are satisfied:
(i) The distribution is not in excess of the amount of
the financial hardship of the Employee (including for this purpose any amounts
necessary to enable the Employee to pay any federal, state or local taxes or
penalties reasonably anticipated to result from the distribution);
(ii) The Employee has obtained all distributions, other
than hardship distributions, and all nontaxable loans currently available under
all plans (as such term is interpreted by the Internal Revenue Service from time
to time) maintained by the Company and its Affiliates;
(iii) Elective contributions and employee contributions
under this Plan and all other plans (as such term is interpreted by the Internal
Revenue Service from time to time) maintained by the Company and its Affiliates
shall be suspended for at least 12 months commencing with the date on which
processing of the hardship distribution commences; and
(iv) The Plan, and all other plans (as such term is
interpreted by the Internal Revenue Service from time to time) maintained by the
Company and its Affiliates, provide that the Employee may not make elective
contributions for the Employee's taxable year immediately following the taxable
year of the hardship distribution in excess of the applicable limit under Code
(S) 402(g) for such next taxable year less the amount of such Employee's
elective contributions for the taxable year of the hardship distribution.
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<PAGE>
8.2 Withdrawals Prior to Age 59-1/2. Withdrawals prior to attainment
-------------------------------
of age 59-1/2 by a Participant shall be made in cash. Any withdrawal pursuant to
this Section 8.2 shall be made upon notice from the Participant only from the
Participant's (i) Rollover Contribution Account and (ii) if the Participant has
completed at least five full years of Plan participation, from the Participant's
Matching Contribution Account. For this purpose, a Participant's full year of
Plan participation shall be computed by adding the number of full calendar years
of participation in this Plan to the number of full calendar years of
participation in any of the Merrill Lynch & Co. Plans; provided, however, that
no calendar year of participation shall be counted more than once.
8.3 Withdrawals After Age 59-1/2. Withdrawals after attainment of age
----------------------------
59-1/2 by a Participant shall be made in cash. Any withdrawal pursuant to this
Section 8.3 shall be made, upon notice from the Participant only from the
following Accounts, and shall be made in the following order: (i) the
Participant's Rollover Contribution Account; (ii) the Participant's Before-Tax
Contribution Account; and (iii) the Participant's Matching Contribution Account
if the Participant is 100% vested in such Account.
8.4 Withdrawals During Total Disability. During the period of a
-----------------------------------
Participant's Total Disability, withdrawals shall be made in cash. Any
withdrawal pursuant to this Section 8.4 shall be made upon notice from the
Participant only from the following Accounts, and shall be made in the following
order: (i) the Participant's Rollover Contribution Account; (ii) the
Participant's Before-Tax Contribution Account; and (iii) the Participant's
Matching Contribution Account if the Participant is 100% vested in such Account.
8.5 Withdrawals From PAYSOP Shares Accounts. Withdrawals from a
---------------------------------------
Participant's PAYSOP Shares Account shall be made, upon the election of the
Participant, in cash or in kind, upon notice from the Participant, in any amount
as specified by the Participant but not to exceed the value of such Account;
provided, however, that notwithstanding the foregoing, shares of Merrill Lynch &
Co. Stock are not subject to withdrawal pursuant to this Section prior to the
84th month beginning after the month in which they were initially allocated to
the Payroll-Based Stock Ownership Plan for Employees of Merrill Lynch & Co.,
Inc. and Affiliates.
8.6 General Rules. The Accounts from which any withdrawal is made
-------------
shall be charged with the amount of any such withdrawal therefrom. No
withdrawal from a Participant's Accounts, other than a hardship withdrawal
pursuant to Section 8.1, shall be made within 12 months of a prior Account
withdrawal, and a hardship withdrawal may be made at any time subject to the
requirements of Section 8.1. A Participant's notice of withdrawal must be in
writing and filed with the Committee, using a form acceptable to the Committee.
Any withdrawal shall be paid as soon as is administratively feasible after the
withdrawal request is approved by the Committee. Notwithstanding anything to the
contrary in this Article 8, withdrawals under this Article 8 may be made only
while a Participant is an Employee. The Committee shall establish such rules
and procedures with respect to withdrawals as it shall from time to time
determine. No forfeitures shall occur as a result of any withdrawal.
-20-
<PAGE>
ARTICLE 9
LOANS
-----
9.1 In General. Participant loans may be granted in accordance with
----------
this Article and in accordance with any policy on Participant loans from the
Plan which may be adopted by the Committee from time to time, which policy is
incorporated herein and made a part hereof. Notwithstanding anything in this
Article to the contrary, the Committee has the power to restrict or expand the
conditions under which loans will be available, within the limitations applied
by applicable law, by adopting a written, uniform and nondiscriminatory policy.
9.2 Loans Authorized. The Committee may direct the Trustee to make a
----------------
loan at any time to any Participant who is a "party in interest" as defined in
Section 3(14) of ERISA, and to any other Participant who has not had a
Termination of Employment. Notwithstanding any contrary Plan provision, all
Participant loans from this Plan are administered by and must be approved by the
Committee.
9.3 Documentation. Participant loans must be documented by the
-------------
following written documents in a form acceptable to the Committee: (i) the
Participant's loan application; (ii) the Participant's collateral promissory
note from the loan amount (including interest) payable to the Trustee; (iii) a
mortgage or other security agreement evidencing the Plan's rights in the
Participant's Plan Account or any other property pledged as security for the
loan; (iv) a deduction authorization form by which the Participant authorizes
repayment of the loan through payroll deduction and (v) any other documents
which the Committee may require to evidence the loan and adequately secure its
repayment.
9.4 Loan Limits. The maximum outstanding loan balance for a
-----------
Participant loan may not exceed the lesser of: (i) $50,000 reduced by the excess
of the highest outstanding loan balance for the Participant during the previous
12-month period over the Participant's outstanding loan balance on the date the
loan is granted or (ii) one-half of the Participant's vested Plan Account under
this Plan.
9.5 Loan Terms. The interest rate and other terms and conditions for
----------
a Participant loan, its security and repayment, are to be generally comparable
to those that would be imposed by a commercial lender for a similar loan made at
the same date under similar circumstances. Subject to the foregoing, the
following specific provisions shall apply:
(i) Term: Except for a loan for the purchase of a home, the
----
term of any participant loan may not exceed five years. However, no loan may
extend beyond the Participant's Required Beginning Date.
(ii) Security: A loan is to be secured by the Participant's
--------
vested Plan Account. The Committee may also require the Participant to provide a
mortgage or security interest in any other property where the Committee feels
the additional security or collateral is necessary to secure adequately the
loan's repayment. No withdrawals or distributions shall be permitted from
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<PAGE>
the Plan to the extent that the Participant's vested Plan Account would be
reduced below 100% of the then outstanding loan balance of all of the
Participant's loans. A Participant may not elect a withdrawal or distribution
with respect to that portion of the amount invested in a loan and that portion
of his Plan Account is not to be taken into account in determining the amount
available for a withdrawal or distribution, except in the case of a forced
withdrawal in the event of default. However a Participant may elect a
withdrawal or distribution from other vested Plan Accounts, in accordance with
applicable provisions of the Plan. The Committee is to take all actions
necessary to perfect the Plan's security interest in all loan security to the
fullest extent possible.
9.6 Repayment. All loans must be repaid pursuant to a level
---------
amortization schedule with payments no less frequently than quarterly over the
term of the loan subject to any acceleration or early payment provisions in the
loan agreement. Loans may be repaid by payroll deduction, at least as often as
once per month, beginning with the Participant's first pay period after he
receives the loan. Notwithstanding the foregoing, loan repayments will be
suspended as permitted under section 414(u) of the Code.
9.7 Consequences of Default. Upon default, the entire outstanding
-----------------------
balance of the Participant's loan shall be immediately due and payable. At such
time the Participant's outstanding loan balance is to be deducted from any
amounts netted against and available to the Participant or his Beneficiaries as
a withdrawal or distribution, but only as and to the extent that amounts are so
available to the Participant or his Beneficiaries. Interest at the loan rate
shall continue to accrue on any outstanding loan balance (including previously
accrued interest) until the entire outstanding balance has been repaid by the
Participant or offset against his vested Plan Account. Any part of the
Participant's loan which is offset against his vested Plan Account shall be a
deemed withdrawal or distribution, as the case may be. However, in no event
shall a loan be offset against the Participant's Before-Tax Contribution Account
until the earliest of: (i) the date he attains age 59 1/2; (ii) the date he
retires or his Employment with the Company and all Affiliated Companies
otherwise terminates; or (iii) the date he incurs a disability within the
meaning of Internal Revenue Code (S)72(m)(7).
9.8 Default. Default shall mean, or occur upon: (i) failure by the
-------
Participant to pay any loan repayment within 60 days after it becomes due; (ii)
the Participant's death or disability within the meaning of Code (S)72(m)(7);
(iii) the Participant's Termination of Employment; (iv) the termination of the
Plan or discontinuance of Employer contributions to the Plan or (v) such other
event or occurrence defined as a default in the loan policy established by the
Committee and in the Participant's loan agreement.
9.9 Discrimination. The Committee is not to discriminate between
--------------
Participants in the matter of interest or other loan terms, but different rates
of interest may be charged and different terms imposed, if justified by the type
of loan or by changes in general economic conditions.
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<PAGE>
ARTICLE 10
LIMITATIONS ON CONTRIBUTIONS
----------------------------
10.1 Section 402(g) Limit on Before-Tax Contributions.
------------------------------------------------
(a) In General. The Before-Tax Contributions made with respect
----------
to a Participant shall not exceed $7,000 (as indexed) or such other amount
specified by the Internal Revenue Service pursuant to Code section 402(g) in any
calendar year. This limit shall be applied by aggregating all plans and
arrangements maintained by the Company and any Affiliated Company that provide
for elective deferrals as defined in Code section 402(g).
(b) Correction of Excess. Before-Tax Contributions made to the
--------------------
Plan in excess of the limitation of Section 10.1(a) (adjusted for gains and
losses as provided by regulations) shall be paid to the Participant not later
than April 15 of the taxable year which follows the taxable year in which the
excess amount arises. The amount to be distributed shall be reduced by any
amounts previously distributed to the Participant under Section 10.3 (relating
to section 401(k) limitation) during the Plan Year which begins with or within
such taxable year. Before-Tax Contributions which are refunded under this
Section shall not be treated as Annual Additions under Section 10. Before-Tax
Contributions of a Highly Compensated Employee which are refunded under this
section shall be taken into account as Before-Tax Contributions for the purpose
of Section 10.7. Matching Contributions made with respect to Before-Tax
Contributions which are refunded to a Participant shall be forfeited.
10.2 Section 401(k) Limit on Before-Tax Contributions.
------------------------------------------------
(a) Average Deferral Percentage Test. Before-Tax Contributions
--------------------------------
for any Plan Year shall be limited to the extent necessary so that the Actual
Deferral Percentage for the group of Highly Compensated Employees who are
Eligible Employees is not more than the greater of:
(i) the product of 1.25 and the Actual Deferral
Percentage for the Non-Highly Compensated Employees who are Eligible Employees,
or
(ii) the lesser of: (A) the product of two and the
Actual Deferral Percentage for the Non-Highly Compensated Employees who are
Eligible Employees; or (B) the Actual Deferral Percentage for the Non-Highly
Compensated Employees who are Eligible Employees plus two percentage points.
(b) Special Rules. The following rules shall apply in determining
-------------
whether the Average Deferral Percentage Test is satisfied:
(i) If this Plan is combined with another plan for the
purposes of Code section 410(b), both plans shall be combined for the purposes
of this Section.
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<PAGE>
(ii) In the case of an Eligible Employee who is a Highly
Compensated Employee and is a five-percent owner or a Highly Compensated
Employee in the group consisting of the ten Highly Compensated Employees paid
the greatest Section 414(b) Compensation during the Plan Year, a combined
deferral percentage shall be calculated with respect to such Eligible Employee
and another Eligible Employee who is a member of the same family (as defined in
Code section 414(q)(6)).
10.3 Correction of Average Deferral Percentage Test.
----------------------------------------------
(a) Reductions During Plan Year. If the Committee determines
---------------------------
prior to the end of a Plan Year that the limitation of Section 10.2 might not be
satisfied, the Committee may reduce the future Before-Tax Contributions of the
Highly Compensated Employees such that no Highly Compensated Employee's future
Before-Tax Contributions expressed as a percentage of Section 414(b)
Compensation will exceed such Contributions of any other Highly Compensated
Employee whose Before-Tax Contributions are reduced under this section, or to
the extent permitted by law, in such other manner as the Committee may decide.
(b) Reductions After End of Plan Year. If the Committee
---------------------------------
determines after the end of a Plan Year that the limitation of Section 10.2 has
not been satisfied, the excess shall be eliminated in accordance with the
following rules:
(i) The excess with respect to each Highly Compensated
Employee shall be determined by reducing, until the limitation of Section 10.2
is satisfied, the Before-Tax Contribution of the Highly Compensated Employee
with the highest Actual Deferral Percentage so that the ratio is reduced to the
ratio of the Highly Compensated Employee with the next highest Actual Deferral
Percentage, and repeating the process.
(ii) Excess amounts (adjusted for gains and losses
pursuant to Treasury regulations) shall be paid to Participants not later than 2
1/2 months or, if that is not administratively feasible, the last day of the
Plan Year following the close of the Plan Year with respect to which the
limitation of Section 10.2 is exceeded but the amount to be distributed shall be
reduced by amounts previously distributed under Section 10.1 (relating to the
section 402(g) limit).
(iii) In the case of "family members" whose Actual
Deferral Percentage is calculated on a combined basis, the excess shall be
allocated among the "family members" in proportion to the Before-Tax
Contributions of each such "family member."
(c) Additional Contribution. If the Committee determines that
-----------------------
the limitation of Section 10.2 has been or may be exceeded, to the extent
permitted by regulations of the Internal Revenue Service, the Employer may make
an additional contribution on behalf of Non-Highly Compensated Employees in
order to satisfy the limitation of Section 10.2. Such contribution shall be
fully and immediately nonforfeitable and may not be withdrawn pursuant to
Sections 8 (relating to certain in-service withdrawals).
-24-
<PAGE>
10.4 Section 401(m) Limit on Matching Contributions.
----------------------------------------------
(a) Average Contribution Percentage Test. Matching Contributions
------------------------------------
for any Plan Year shall be limited to the extent necessary so that the
Contribution Percentage for the group of Highly Compensated Employees who are
Eligible Employees is not more than the greater of:
(i) the product of 1.25 and the Actual Contribution
Percentage for the Non-Highly Compensated Employees who are Eligible Employees,
or
(ii) the lesser of: (A) the product of two and the
Actual Contribution Percentage for the Non-Highly Compensated Employees who are
Eligible Employees; or (B) the Actual Contribution Percentage for the Non-Highly
Compensated Employees who are Eligible Employees plus two percentage points.
(b) Special Rules. The following rules shall apply in
-------------
determining whether the Average Contribution Percentage Test is satisfied.
(i) If this Plan is combined with another plan for the
purposes of Code section 410(b), both plans shall be combined for the purposes
of this Section.
(ii) In the case of an Eligible Employee who is a
Highly Compensated Employee and is a five-percent owner or a Highly Compensated
Employee in the group consisting of the ten Highly Compensated Employees paid
the greatest Section 414(b) Compensation during the Plan Year, a combined
contribution percentage shall be calculated with respect to such Eligible
Employee and another Eligible Employee who is a member of the same family (as
defined in Code section 414(q)(6)).
10.5 Correction of Average Contribution Percentage Test.
--------------------------------------------------
(a) Reductions During Plan Year. If the Committee determines
---------------------------
prior to the end of a Plan Year that the limitation of Section 10.4 might not be
satisfied, the Committee may reduce the future Matching Contributions of the
Highly Compensated Employees, provided that no Highly Compensated Participant's
future Matching Contributions expressed as a percentage of Section 414(s)
Compensation will exceed such Contributions of any other Highly Compensated
Employee whose Matching Contributions are reduced under this section, or to the
extent permitted by law, in such other manner as the Committee may decide.
(b) Reduction of Contributions After End of Plan Year. If the
-------------------------------------------------
Committee determines after the end of the Plan Year that the limitation of
Section 10.4 has not been satisfied, the excess shall be eliminated in
accordance with the following rules:
(i) The excess with respect to each Highly Compensated
Employee shall be determined by reducing the Matching Contributions of the
Highly Compensated Employee with the highest Contribution Percentage, such that
the Contribution Percentage is reduced to
-25-
<PAGE>
the Contribution Percentage of the Highly Compensated Employee with the next
highest Contribution Percentage and repeating the process until the limitation
of Section 10.4 is satisfied.
(ii) The excess (adjusted for gains and losses pursuant
to Treasury regulations) shall be eliminated by forfeiting the Employee's excess
Matching Contributions. The excess shall be eliminated no later than 2 1/2
months or, if that is not administratively feasible, the last day of the Plan
Year following the close of the Plan Year with respect to which the limitation
of Section 10.4 is exceeded.
(iii) In the case of "family members" whose Contribution
Percentage is calculated on a combined basis under Section (b), the excess shall
be allocated among the "family members" in proportion to the aggregate Matching
Contributions of each such "family member."
(c) Additional Contribution. If the Committee determines that
-----------------------
the limitation of Section 10.4 has been or may be exceeded, to the extent
permitted by Treasury regulations, the Employer may make an additional
contribution on behalf of Non-Highly Compensated Employees to satisfy the
limitation of Section 10.4.
10.6 Multiple Use of Alternative Limitation; Aggregate Limitation.
------------------------------------------------------------
(a) In General. If the Actual Deferral Percentage for the group
----------
of Highly Compensated Employee exceeds the amount in Section 10.2(a)(1) and the
Actual Contribution Percentage for such group exceeds the amount in Section
10.4(a)(1) then the sum of --
(i) the Actual Deferral Percentage for the group of
Highly Compensated Employees who are Eligible Employees, and
(ii) the Actual Contribution Percentage for the group
of Highly Compensated Employees who are Eligible Employees; shall not exceed the
Aggregate Limitation.
(b) Aggregate Limitation. The Aggregate Limitation shall be the
--------------------
limit prescribed by the Internal Revenue Service pursuant to Code section
401(m)(9) and Treasury regulations issued thereunder to prevent the multiple use
of the limitation of Section 10.2(a)(2) and the limitation of Section
10.4(a)(2).
(c) Correction of Excess. If the Aggregate Limitation in Section
--------------------
10.6(b) is exceeded, the Actual Contribution Percentages of the Highly
Compensated Employees shall be reduced by forfeiting Matching Contributions (as
determined by the Committee subject to Treasury regulations) until the excess is
eliminated.
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10.7 Section 415 Limitation on Annual Additions.
------------------------------------------
(a) General Limitation. With respect to each Limitation Year,
------------------
the Annual Addition (as defined in Section 10.7(b) below) for a Participant
shall not exceed the lesser of: (i) $30,000 adjusted for increases in the cost
of living specified by the Department of the Treasury, effective January 1 of
each calendar year and applicable with respect to the Limitation Year ending
with or within such calendar year; or (ii) 25 percent of the Participant's
Section 415 Compensation for the Limitation Year. The rules of this Section 10.7
shall be applied in accordance with section 415 of the Code and Treasury
regulations issued thereunder which are incorporated herein by this reference.
(c) Annual Additions mean the following amounts for a Limitation
----------------
Year with respect to each Participant: Matching Contributions, Retirement, other
Employer contributions, Before-Tax Contributions, forfeitures, and employee
contributions and similar amounts under other qualified defined contribution
plans maintained by the Company or any Affiliated Company in which the
Participant is a covered employee. Amounts allocated to a post-retirement
medical account described in Code section 415(1)(2) or 419A(d)(2) shall be
treated as an Annual Addition. To the extent required by regulations,
contributions do not fail to be Annual Additions because they are excess
deferrals within the meaning of Code section 402(g), excess contributions within
the meaning of Code section 401(k), or excess aggregate contributions within the
meaning of Code section 401(m) which are distributed. Rollover contributions,
repaid distributions, restored forfeitures, and loan payments shall not be
treated as Annual Additions.
(d) Excess Amounts. If, for any Plan Year, it is necessary to
-------------
limit the allocation of an amount to a Participant's Account to comply with
Section 10.7(a), the Plan:
(i) first, shall refund to the Participant, to the
extent necessary and as soon as administratively feasible, the amount of the
Before-Tax Contributions made on his behalf. The Matching Contributions made
with respect to such Before-Tax Contributions and any earnings thereon shall be
held in a suspense account and used in the next Limitation Year as an Employer
contribution; and
(ii) second, to the extent necessary, hold the
Participant's Matching Contribution and Retirement Contribution, and earnings
thereon, in a suspense account to be used in the next Limitation Year as
Employer contributions.
ARTICLE 11
TRUST FUND AND INVESTMENTS
--------------------------
11.1 Trust Fund.
----------
(a) General. The Company shall maintain a Trust Fund as a part
-------
of the plan in order to implement and carry out the provisions of the Plan and
to finance the benefits under the
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Plan, by entering into one or more Trust Agreements. Any Trust Agreement is
designated as, and shall constitute, a part of a Plan, and all rights which may
accrue to any person under a Plan shall be subject to all the terms and
provisions of such Trust Agreement. The Company may modify any Trust Agreement
from time to time to accomplish the purpose of a Plan and may replace the
Trustee and appoint a successor Trustee. The assets of a Trust Fund shall not
be used for or diverted to purposes other than the exclusive benefit of
Participants and Beneficiaries and the payment of reasonable administrative
expenses of the Plan.
(b) Nonreversion. An Employer shall have no right, title, or
------------
interest in the contributions made to the Trust Fund under the Plan and no part
of the Trust Fund shall revert to an Employer, except as provided in Article 4.
11.2 Investment Funds. The Committee may establish and provide for
----------------
the investment of Trust assets in such different Investment Funds, and funds for
which the Company or an Affiliate is a manager or investment adviser, as it
shall from time to time determine for the investment of a Participant's Accounts
including a fund designed to invest primarily in "qualifying employee
securities" as defined in ERISA Section 401. Each such Investment Fund shall
have such investment objective as established by the Committee. The Committee
may direct the investment of trust assets pending investment in such Investment
Funds. If Investment Funds are established, the Committee may, in its sole
discretion, permit Participants and Beneficiaries to determine the portion of
their Accounts that shall be invested in each Investment Fund and shall
determine what transfers between Investment Funds and other Trust assets shall
be permissible. Anything in this Plan to the contrary notwithstanding, the
Committee may specify that assets with respect to which investment direction is
not received shall be invested as specified by the Committee. Notwithstanding
the foregoing, except as otherwise required to assure the Participant's
diversification rights pursuant to Code (S) 401 (a)(28), (i) any shares of
Merrill Lynch & Co. Stock which were transferred to this Plan from the Reversion
Share Accounts of participants under the Merrill Lynch & Co., Inc. Employee
Stock Ownership Plan must remain in this Plan until distributed to or withdrawn
by a Participant in accordance with the provisions of this Plan and (ii) except
as provided by Section 6.2, PAYSOP Shares must remain in the Plan until the 84th
month beginning after the month in which they were initially allocated to the
Payroll-Based Stock Ownership Plan for Employees of Merrill Lynch & Co., Inc.
and Affiliates.
11.3 Loan Fund. The Committee shall establish, or direct the Trustee
---------
to establish, a "Loan Fund" which shall consist of notes executed by
Participants evidencing loans made in accordance with provisions of Article 9.
11.4 Crediting Investment Earnings.
-----------------------------
(a) General. As of each Valuation Date with respect to each of
-------
the Investment Funds other than the Loan Fund, the Committee, or at its
direction the Trustee, shall value each Investment Fund at fair market value and
determine the investment earnings (whether gain or
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<PAGE>
loss) of that Investment Fund since the immediately preceding Valuation Date and
shall credit (or charge) each Participant's Plan Account with its share of such
investment earnings in the same proportion as the amount allocated to that
Investment Fund in all of the Participant's Accounts since the preceding
Valuation Date (as determined by the Committee) bears to the total amount
allocated to that Investment Fund in all of the Participants' Accounts since the
preceding Valuation Date (as determined by the Committee). The investment
earnings (whether gain or loss) of each Investment Fund, other than the Loan
Fund, shall also be credited or charged with a pro-rata portion of any credits
or charges to the Trust Fund not otherwise directly allocable to specific
Investment Funds. The investment earnings of each of the Investment Funds,
other than the Loan Fund, credited or charged pursuant to this Section 11.2
further shall be allocated pro rata as a credit or charge to each of the
--- ----
Participant's Accounts to the extent that such Accounts were invested in the
Investment Fund since the preceding Valuation Date (as determined by the
Committee).
(b) Loan Fund. Principal and interest attributable to any note
---------
in the Loan Fund shall be allocated entirely to the Plan account of the
Participant who is obligated on the note.
ARTICLE 12
ADMINISTRATION
--------------
12.1 The Committee; Plan Administration. The general administration
----------------------------------
of the Plan and the responsibility for carrying out its provisions shall be
placed in a committee (the "Committee") of two or more persons appointed from
time to time by the Company to serve at its pleasure. Any member of the
Committee may resign by delivering his written resignation to the secretary of
the Committee. The Committee shall be the "plan administrator" (within the
meaning of Section 3 of ERISA and section 414(g) of the Code) with such
authority, responsibilities and obligations as ERISA and the Code grant to and
impose upon persons so designated. For the purposes of ERISA, the Committee
shall be a "named fiduciary" under the Plan. No member of the Committee shall,
in such capacity, act or participate in any action directly affecting his own
interest in the Plan other than an action which affects the interests of
Participants generally.
12.2 Powers and Duties of the Committee. The Committee shall have
----------------------------------
full power and authority to control and manage the operation and administration
of the Plan and to construe and apply all of its provisions. Any action taken
in good faith by the Committee in the exercise of authority conferred upon it by
this Plan shall be conclusive and binding upon Participants, their Beneficiaries
and all other persons. All discretionary powers conferred upon the Committee
shall be absolute, provided that no discretionary power shall be exercised in
such manner as to cause or create discrimination in favor of Employees who are
Highly Compensated Employees. The authority of the Committee shall include, but
not by way of limitation, the following:
(a) Authority to interpret the provisions of the Plan and to
determine any questions arising under the Plan or in connection with the
administration or operation thereof;
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<PAGE>
(b) Authority to determine all questions affecting the
eligibility of any person to be, become or remain a Participant in the Plan;
(c) Authority to determine the Years of Service of any person
and to compute the amount of benefit or other sum payable under the Plan to any
person;
(d) Authority to maintain records necessary or convenient to the
determination of the foregoing;
(e) Authority to authorize and direct all disbursements of
benefits and other sums under the Plan which the Trustee is not by the terms of
the Plan or Trust Agreement authorized to make without such direction, and to
determine the manner in which benefits shall be payable to Participants;
(f) Authority to inform the Trustee of the annual estimates of
future benefits to be paid from the Trust and to furnish the Trustee with such
other information as is deemed necessary for the Trustee to carry out the
purposes of the Trust Agreement;
(g) Authority to adopt such rules as it may deem desirable for
the purpose of regulating the conduct and discharge of its business and duties
in the administration of the provisions of the Plan, provided that such rules
shall not be inconsistent with the provisions of the Plan;
(h) Authority to employ such counsel and agents, and to obtain
such clerical, administrative, accounting, medical, legal, insurance and
actuarial services as it may deem necessary or appropriate in carrying out the
provisions of the Plan, including authority to employ one or more persons to
render advice with regard to any responsibility which any person may have under
the Plan; and
(i) Authority to purchase such liability insurance and bonds as
it may deem appropriate in connection with the operation and administration of
the Plan.
12.3 Committee Procedure. Any action by a majority of the members of
-------------------
the Committee as constituted at any time shall constitute the action of the
Committee. A member of the Committee who is also a Participant hereunder shall
not vote on any question involving his own interest under the Plan, as
distinguished from interests of others similarly situated. If no member shall
thereby be able to vote on a question, the question shall be determined by the
Board of Directors. The Committee may authorize each or any one or more of its
members to execute any document or documents on behalf of the Committee, in
which event it shall notify the Trustee in writing of such action and the name
or names of its members so designated, and the Trustee may thereafter accept and
rely upon any document executed by such member or members as representing action
by the Committee until the Committee shall file with the Trustee a written
revocation of such designation.
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<PAGE>
12.4 Compensation of Committee. Members of the Committee shall serve
-------------------------
as such without compensation from the Plan, but may receive compensation from
the Company or an Affiliated Company for such service.
12.5 Payment of Plan Expenses. All expenses of the Company, the
------------------------
Committee, and the Trustee shall be paid from the Trust Fund to the extent they
constitute reasonable expenses of administering the Plan; provided that, the
obligation of the Trust Fund to pay these expenses shall cease to exist to the
extent that these expenses are paid by the Company. This provision shall be
deemed a part of any contract to provide for expenses.
12.6 Recordkeeping. The Committee shall maintain accounts showing
-------------
the fiscal transactions of the Plan and shall keep in convenient form such data
as may be necessary for the effective operation of the Plan. The Committee
shall prepare annually a report showing a reasonable summary of the financial
status of the Plan for the past year and any further information which the Board
of Directors may require and which the Committee can reasonably furnish or can
obtain from the Trustee. Such report shall be submitted to the Board of
Directors and a copy shall be filed in the office of the secretary of the
Committee.
12.7 Uniform Action. Whenever in the administration of the Plan any
--------------
discretionary action is required by the Committee, such action shall be uniform
in nature as applied to all persons similarly situated.
12.8 Information Furnished to the Committee. To the extent permitted
--------------------------------------
by ERISA, the members of the Committee and the Company and its officers and
directors shall be entitled to rely upon all certificates and reports made by
any accountant or by the Trustee, and upon all opinions given by any legal
counsel or investment adviser selected or approved by the Committee, and the
members of the Committee, the Company and its officers and directors shall be
fully protected in respect of any action taken or suffered by them in good faith
in reliance upon any such certificates, reports, opinions or other advice of any
accountant, Trustee, investment adviser or legal counsel, and all action so
taken or suffered shall be conclusive upon each of them and upon all
Participants and Employees.
12.9 Indemnification of the Committee. To the extent not contrary to
--------------------------------
ERISA, the Company shall indemnify each member of the Committee and any other
director, officer or employee of an Employer who is designated to carry out any
responsibilities under the Plan for any liability, joint and/or several, arising
out of or connected with their duties hereunder, except such liability as may
arise from their gross negligence or willful misconduct.
ARTICLE 13
CLAIMS PROCEDURE
----------------
13.1 Claim Denials. In the event that the Committee denies, in whole
-------------
or in part, a claim for benefits by a Participant or his beneficiary, the
Committee shall furnish notice of the
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<PAGE>
denial to the claimant, setting forth (a) the specific reasons for the denial,
(b) specific reference to the pertinent Plan provisions on which the denial is
based, (c) a description of any additional information necessary for the
claimant to perfect the claim and an explanation of why such information is
necessary, and (d) appropriate information as to the steps to be taken if the
claimant wishes to submit his claim for review. Such notice shall be forwarded
to the claimant within 90 days of the Committee's receipt of the claim;
provided, however, that in special circumstances the Committee may extend the
response period for up to an additional ninety (90) days, provided that the
Committee notifies the claimant in writing of the extension and specifies the
reason or reasons for the extension.
13.2 Appeal Procedures. Within sixty (60) days of receipt of a
-----------------
notice of claim denial, a claimant or his duly authorized representative may
petition the Committee in writing for a full and fair review of the denial. The
claimant or his duly authorized representative shall have the opportunity to
review pertinent documents and to submit issues and comments in writing to the
Committee. The Committee shall review the denial and shall communicate its
decision and the reasons therefor to the claimant in writing within 60 days of
receipt of the petition; provided, however, that the Committee may extend the
60-day response period in special circumstances for up to an additional sixty
(60) days. Written notice of the extension shall be sent to the claimant prior
to the commencement of the extension.
ARTICLE 14
TOP-HEAVY PROVISIONS
--------------------
14.1 General. The following provisions shall apply automatically to
-------
the Plan, and supersede any contrary provisions for each Plan Year in which the
Plan is a Top-Heavy Plan. It is intended that this Article shall be construed in
accordance with the provisions of section 416 of the Code.
14.2 Definitions. The following definitions shall supplement those
-----------
set forth in Article 2 of the Plan:
a) "Key Employee" means, for any Plan Year, a key employee
------------
within the meaning of section 416(i) of the Code. A "Non-Key Employee" is any
Employee or former Employee who does not meet the definition of a Key Employee
as to that Plan Year.
b) "Permissive Aggregation Group" means the group of qualified
----------------------------
retirement plans maintained by the Company or any Affiliated Company, which
group consists of the Required Aggregation Group and any other such plan or
plans designated by the Company which, considered together with the Required
Aggregation Group, meet the requirements of section 401(a)(4) and 410 of the
Code.
c) "Required Aggregation Group" means the group of qualified
--------------------------
retirement plans maintained by the Company or any Affiliated Company, including
any plan that has been
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<PAGE>
terminated during the five-year period ending on the last day of the preceding
Plan Year (or, in the case of the first Plan Year, the last day of such Plan
Year) which group consists of each plan in which a Key Employee is a participant
(or, in the case of a terminated plan, was a participant in such five-year
period) and each other plan that enables any such plan to meet the requirements
of section 401(a)(4) or 410 of the Code, but only if such group includes this
Plan. Otherwise, the Required Aggregation Group consists of this Plan only.
d) "Top-Heavy Plan Year" means a Plan Year in which the Plan is
-------------------
top-heavy. The Plan is top-heavy in any Plan Year if, on the last day of the
preceding year (or, in the case of the first Plan Year, the last day of such
Plan Year), the aggregate of the account balances of Participants who are Key
Employees exceeds sixty percent (60%) of the aggregate of the account balances
of all Participants. The Plan is also top-heavy for a given Plan Year if for
that Plan Year (1) the Required Aggregation Group is top-heavy, and (2) the
Required Aggregation Group is not part of a Permissive Aggregation Group that is
not top-heavy. The Required Aggregation Group or a Permissive Aggregation Group
(the "Group") is top-heavy for a given Plan Year if the aggregate of the
accounts (or, the present value of cumulative accrued benefits, in the case of a
defined benefit plan included in such Group) of participants who are key
employees exceeds sixty percent (60%) of the like amount determined for all
participants in all plans included in such Group. For purposes of this
definition:
(i) the account or the present value of the accrued
benefit of any participant shall be increased by the amount of any distributions
to such participant during the five-year period ending on the date described
above;
(ii) the account or the present value of the accrued
benefit of a participant who has been a Key Employee but no longer is a Key
Employee shall not be taken into account;
(iii) any rollover contribution (or fund to fund
transfer) initiated by the employee shall not be taken into account;
(iv) the account or the present value of the accrued
benefit of a participant who has not performed services for the Company or any
Affiliated Company at any time during the five-year period ending on the date
described above shall not be taken into account; and
(v) the present value of accrued benefits under all
qualified defined benefit plans included in the Required or Permissive
Aggregation Group shall be determined under the accrual method used for all
qualified defined benefit plans maintained by the Company or any Affiliated
Company, if any single method is used for all such plans, or otherwise the
slowest accrual method permitted under section 411(b)(1)(C) of the Code.
14.3 Top-Heavy Operating Rules. Anything in the Plan to the contrary
-------------------------
notwithstanding, the following rules shall apply in a Top-Heavy Plan Year:
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<PAGE>
(a) Minimum Contribution. In any Top-Heavy Plan Year the Company
--------------------
shall make a contribution for the Plan Year which shall be credited as of the
last day of each Plan Year to the Accounts of Eligible Employees for the Plan
Year, in proportion to the respective Section 415 Compensation for such Plan
Year, until the amount allocated to each such Employee who is a Non-Key Employee
equals the lesser of three percent (3%) of his Section 415 Compensation, or a
percentage of such Section 415 Compensation contributed by the Company (if any)
on behalf of the Key Employee for whom such percentage is the highest for such
Plan Year. For purposes of determining whether a minimum contribution under
this paragraph is required, all plans included in the Required Aggregation Group
or any Permissive Aggregation Group shall be treated as one plan. Salary
reduction and employer matching contributions made on behalf of Non-Key
Employees shall not be used to meet the minimum contribution requirements of
this Section.
(b) Special Rules. In any Top-Heavy Plan Year, any Non-Key
-------------
Employee who is an Eligible Employee will receive a minimum contribution if he
has not separated from service at the end of the Plan Year, regardless of
whether he has 1,000 Hours of Service or the equivalent, without regard to his
level of compensation and regardless of whether he declines to make a mandatory
contribution. If a Non-Key Employee participates in both a defined benefit plan
and a defined contribution plan in the Required Aggregation Group, the Non-Key
Employee shall receive the minimum benefit provided under the defined benefit
Top-Heavy Plan.
ARTICLE 15
AMENDMENT, TERMINATION, MERGERS AND TRANSFERS
---------------------------------------------
15.1 Amendment. The Company has the authority to amend the Plan from
---------
time to time as it deems appropriate pursuant to a written instrument duly
executed by an officer of the Company provided that no amendment which affects
a Trustee shall be effective without the Trustee's consent. Notwithstanding the
foregoing, no amendment to the Plan shall be effective if it authorizes,
permits, or causes any reduction, either directly or indirectly, in the amount
credited to the accounts of any Participant or violate section 411(d)(6) of the
Code. The Committee shall have the authority to amend the Plan to the extent
the Company's authority to amend is delegated to the Committee by the Board of
Directors or any committee thereof.
15.2 Termination. The Company may terminate the Plan established
-----------
hereunder at its option at any time. Without thereby undertaking a legal duty,
however, the Employer hereby expresses the intention of establishing a permanent
plan under which the Employer will make recurring and substantial contributions.
Upon full or partial termination of the Plan without the establishment of a
successor plan, as described in section 401(k)(10)(A)(i) of the Code, the Plan
sponsor shall direct the Trustee to distribute all assets remaining in the
Trust, after payment of any expenses properly chargeable against the Trust, to
the Participants in accordance with the Plan accounts of each participant at the
time of distribution, in cash, and in such manner as the Plan sponsor shall
determine.
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<PAGE>
15.3 Effect of Termination.
---------------------
(a) No part of the income or principal of the Trust shall be
used for or diverted to purposes other than for the exclusive benefit of the
Employer's employees or their beneficiaries (including the reasonable expenses
of administering the Plan).
(b) Upon any termination or partial termination of the Plan or
the complete discontinuance of contributions thereto (within the meaning of
section 411(d)(3) of the Code) the interest of each affected Participant in his
account or accounts at the date of such termination, partial termination or
discontinuance shall be nonforfeitable and all unallocated contributions and
forfeitures shall be allocated and shall be nonforfeitable.
15.4 Merger, Consolidation or Transfer of Plan Assets. In the event
------------------------------------------------
of the merger or consolidation of the Plan with, or the transfer of the assets
and/or liabilities of the Plan to, another plan which is qualified under section
401(a) of the Code, each Participant or Beneficiary under this Plan shall be
entitled to receive benefits immediately after the merger, consolidation or
transfer which are equal to or greater than the benefits he or she would have
been entitled to receive immediately prior to the merger, consolidation or
transfer if the Plan had been terminated at such time.
ARTICLE 16
GENERAL PROVISIONS
------------------
16.1 Direct Rollover of Eligible Rollover Distributions.
--------------------------------------------------
Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a distributee's election under this Section, a distributee may elect, at
the time and in the manner prescribed by the Committee, to have any portion of
an eligible rollover distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover.
(a) Eligible Rollover Distribution: An eligible rollover
------------------------------
distribution is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover distribution does
not include: any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life expectancies)
of the distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the Code; and the portion of
any distribution that is not includible in gross income (determined without
regard to the exclusion for net unrealized appreciation with respect to employer
securities).
(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
described in section 401(a) of the Code, that accepts the distributee's eligible
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<PAGE>
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.
16.2 Amount and Payment of Distributions. The amount of any
-----------------------------------
distribution shall be determined on the basis of the value of the Participant's
Accounts valued as of the Valuation Date coincident with the date the
Participant's Accounts are liquidated in order to make the distribution. If
approved by the Committee, the distribution will occur as soon as is
administratively practicable after the date of the Participant's written
application for benefits as provided under the Plan.
16.3 No Employment Rights. Neither the action of the Company in
--------------------
establishing the Plan, nor the action of any Employer in adopting the Plan, nor
any provisions of the Plan, nor any action taken by the Company or by the
Committee shall be construed as giving to any employee of the Company or an
Employer the right to be retained in its employ, or any right to payment except
to the extent of the benefits provided in the Plan to be paid from the Fund.
16.4 Source of Benefits. All benefits payable under the Plan shall
------------------
be paid or provided for solely from the Fund, and the Company assumes no
liability or responsibility therefor.
16.5 Governing Law. Except to the extent superseded by ERISA, all
-------------
questions pertaining to the validity, construction, and operation of the Plan
shall be determined in accordance with the laws of New York.
16.6 Spendthrift Clause.
------------------
(a) No benefit payable at any time under this Plan and no
interest or expectancy herein shall be anticipated, assigned, or alienated by
any Participant or Beneficiary, or subject to attachment, garnishment, levy,
execution, or other legal or equitable process, except for (i) an amount
necessary to satisfy a Federal tax levy made pursuant to Section 6331 of the
Code and (ii) any benefit payable pursuant to a domestic relations order which
is determined to be a qualified domestic relations order within the meaning of
Section 414(p) of the Code.
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<PAGE>
(b) Any attempt to alienate or assign a benefit hereunder,
whether currently or hereafter payable, shall be void. No benefit shall in any
manner be liable for or subject to the debts or liability of any Participant or
beneficiary. If any Participant or Beneficiary shall attempt to, or shall,
alienate or assign his benefit under the Plan or any part thereof, or if by
reason of his bankruptcy or other event happening at any time such benefit would
devolve upon anyone else or would not be enjoyed by him, then the Committee may
terminate payment of such benefit and hold or apply it for the benefit of the
Participant or Beneficiary.
(c) The Committee shall review any domestic relations order to
determine whether it is qualified within the meaning of section 414(p) of the
Code. An order shall not be qualified unless it complies with all applicable
provisions of the Plan concerning mode of payment and manner of elections.
Notwithstanding the preceding sentence and any restrictions on timing of
distributions and withdrawals under the Plan, an order may provide for
distribution at any time permitted under section 414(p)(4) of the Code.
16.7 Incapacity. If the Committee deems any Participant or
----------
Beneficiary who is entitled to receive payments hereunder incapable of receiving
or disbursing the same by reason of age, illness, or infirmity or incapacity of
any kind, the Committee may direct the Trustee to apply such payments directly
for the comfort, support, and maintenance of such Participant or Beneficiary, or
to pay the same to any responsible person caring for the Participant or
Beneficiary who is determined by the Committee to be qualified to receive and
disburse such payments for the Participant's or beneficiary's benefit; and the
receipt by such person shall be a complete acquittance for the payment of the
benefit. Payments pursuant to this Section shall be complete discharge to the
extent thereof of any and all liability of the Company, the Committee, the
Trustee, and the Fund.
16.8 Unclaimed Benefits. If the Committee cannot ascertain the
------------------
whereabouts of any person to whom a payment is due under the Plan, and if, after
five years from the date such payment is due, a notice of such payment due is
mailed to the last known address of such person, as shown on the records of the
Employer or within three months after such mailing such person has not made
written claim therefor, the Committee, if it so elects, after receiving advice
from counsel to the Plan, may direct that such payment and all remaining
payments otherwise due to such person be canceled on the records of the Plan and
the amount thereof applied to reduce Matching Contributions or Employer
contributions, and upon such cancellation, the Plan and the Trust shall have no
further liability therefor except that, in the event such person later notifies
the Committee of his whereabouts and requests the payment or payments due to
him, the amount so applied shall be paid to him as provided in Article 6.
16.9 Receipt and Release. Subject to the provisions of ERISA and to
-------------------
the extent permitted by ERISA, any final payments or distribution to any
Participant, his Beneficiary or his legal representative in accordance with the
Plan shall be in full satisfaction of all claims against the Trust Fund, the
Trustee, the Committee, and the Company. The Trustee, the Company, the
Committee, or any combination of them may require a Participant, his beneficiary
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or his legal representative to execute a receipt and release of all claims under
the Plan upon a final payment or distribution or a receipt to the extent of any
partial payment or distribution; and the form of any such receipt and release
shall be determined by the Trustee, the Company, the Committee or any
combination of them.
16.10 Effect of Mistake. In the event of any mistake or misstatement
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with respect to the age, eligibility, service, Compensation or participation of
a Participant or Beneficiary, or the amount of distribution made or to be made
to a Participant or Beneficiary, the Committee shall, to the extent it deems
appropriate, cause to be allocated from future Matching Contributions, or cause
to be withheld or accelerated, or otherwise adjust, such amounts as will in its
judgment accord to such Participant or Beneficiary the credits to the
Participant's Plan Account or the distributions to which he is entitled under
the Plan.
16.11 Notice to Committee. All elections, designations, requests,
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notices, instructions, and other communications from the Company, an Employer, a
Participant, Beneficiary or other person to the Committee required or permitted
under the Plan shall be in such form as is prescribed from time to time by such
Committee, shall be mailed, postage prepaid, by first-class mail or shall be
delivered to such location as shall be specified by each such Committee, and
shall be deemed to have been given and delivered only upon actual receipt
thereof by such Committee at such location.
16.12 Notices. All notices, statements, reports and other
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communications from the Company, an Employer or Committee to any Employee,
Participant, Beneficiary or other person required or permitted under the Plan
shall be deemed to have been duly given when delivered to, or when mailed by
first-class mail, postage prepaid, and addressed to such Employee, Participant,
Beneficiary or other person at his address last appearing on the records of the
Committee.
IN WITNESS WHEREOF, this Plan is adopted on behalf of the Company by
its duly authorized officer this 30th day of October, 1996.
WITNESS: TELEPORT COMMUNICATIONS GROUP INC.
/s/ Harvey Hirsh By: /s/ John A. Scarpati
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