As filed with the Securities and Exchange Commission on June 30, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FACTORY CARD OUTLET CORP.
(Exact name of registrant as specificed in its charter)
Delaware 36-3652087
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
745 Birginal Drive
Bensenville, Illinois 60106-1212
(Address, including zip code of registrant's principal executive offices)
FACTORY CARD OUTLET OF AMERICA LTD.
INCENTIVE SAVINGS PLAN
(Full title of the Plan)
Charles R. Cumello, President
Factory Card Outlet Corp.
745 Birginal Drive
Bensenville, Illinois 60106-1212
(630) 238-0010
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------
With a copy to:
Neal Aizenstein
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606-6404
(312) 876-8000
<TABLE>
<CAPTION>
===============================================================================================
Title of securities Amount to be Proposed maximum Proposed maximum Amount of
to be registed registered offering price aggregate offering registration fee
per share price
===============================================================================================
<S> <C> <C> <C> <C>
Common Stock, 25,000 shares $5.875 (1) $146,875_(1) $100 (2)
$.01 par value
- -----------------------------------------------------------------------------------------------
Interests in the (3) - - (4)
Plan
===============================================================================================
</TABLE>
- --------------------------------
1 Estimated in accordance with Rule 457(h) solely for purposes of calculating
the registration fee and based upon the average of the high and low sale prices
of the Common Stock on the NASDAQ National Market on June 25, 1997 as reported
by StockProfiles.
2 The minimum registration fee required pursuant to Section 6(b) of the
Securities Act of 1933 is being paid.
3 This registration statement covers an indeterminate amount of interests to be
offered or sold pursuant to the employee benefit plan described herein.
4 Pursuant to Rule 457(h)(2), no registration fee is requred with respect to
interests in the Plan.
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
ITEM 1 Plan Information
Not required to be included in this Registration
ITEM 2 Registrant Information and Employee Plan Annual Information
Not required to be included in this Registration Statement.
2
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3 Documents Incorporated By Reference
The following documents filed by Factory Card Outlet Corp. (the "Company")
or the Factory Card Outlet of America Ltd. Incentive Savings Plan (the "Plan")
with the Securities and Exchange Commission (the "Commission") are incorporated
by reference in this Registration Statement:
1. The Company's Prospectus, dated December 12, 1996 filed pursuant to
Rule 424(b) under the Securities Act of 1933.
2. The Plan's Annual Report on Form 11-K for the year ended December
31, 1996.
3. The description of the Company's Common Stock set forth in the
Company's Registration Statement on Form 8-A filed pursuant to
Section 12 of the Exchange Act of 1934, and any amendment or report
filed for the purpose of updating such description.
In addition, all documents filed by the Company and the Plan pursuant to
Section 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, 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, hereby are incorporated herein by reference and shall be deemed a part
hereof from the date of filing of such documents.
ITEM 4 Description of Securities
Not applicable.
ITEM 5 Interests of Named Experts and Counsel
Not applicable.
ITEM 6 Indemnification of Directors and Officers
(a) Limitation of Liability of Directors and Officers. Section 102 of the
Delaware General Corporation Law permits a corporation to provide in its
Certificate of Incorporation that a director or officer shall not be
personally liable to the corporation or its shareholders for breach of any
duty owed to the corporation or its shareholders, except that such
provisions shall not relieve a director or officer from liability for any
breach of duty based upon an action or omission (a) in breach of such
person's duty of loyalty to the corporation or its shareholder, (b) not in
good faith or involving intentional misconduct or a knowing violation of
law, (c) involving the payment of unlawful dividends or expenditure of
funds for unlawful stock purchases or redemptions, or (d) resulting in
receipt by such person of any improper personal benefit. Article EIGHTH of
the Company's Certificate of Incorporation includes limitation on the
liability of officers and directors to the fullest extent permitted by
Delaware law.
3
<PAGE>
(b) Indemnification of Directors, Officers, Employees and Agents. Under
Article SEVENTH of its Certificate of Incorporation, the Company may, to
the fullest extent permitted by law, indemnify its directors, officers,
employees and agents. Section 145 of the Delaware General CorporationLaw
provides that a corporation may indemnify its directors, officers,
employees and agents against judgments, fines, penalties, amounts paid in
settlement and expenses, including attorneys' fees, resulting from various
types of legal actions or proceedings if the actions of the party being
indemnified meet the standards of conduct specified therein.
Determinations concerning whether or not the applicable standard of
conduct has been met can be made by (a) a disinterested majority of the
Board of Directors, (b) independent legal counsel, or (c) an affirmative
vote of a majority of shares held by the shareholders. No indemnification
is permitted to be made to or on behalf of a corporate director, officer,
employee or agent if a judgment or other final adjudication adverse to
such person establishes that his acts or omissions (a) were in breach of
his duty of loyalty to the corporation or its shareholders, (b) were not
in good faith or involved a knowing violation of law or (c) resulted in
receipt by such person of an improper personal benefit.
(c) Insurance. The Company maintains insurance policies insuring the
Company's directors and officers against liability for wrongful acts or
omissions arising out of their positions as directors and officers,
subject to certain limitations.
ITEM 7 Exemption from Registration Claimed
Not applicable.
ITEM 8 Exhibits
23(a) Consent of KPMG Peat Marwick LLP.
99 Factory Card Outlet of America Ltd. Incentive Savings Plan.
Undertaking number 2 in Item 9 below is hereby incorporated by reference
in this Item 8.
ITEM 9 Undertakings
1. The undersigned registrant hereby undertakes:
(a) 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;
4
<PAGE>
(b) That, for purposes of determining any liability under the Securities
Act of 1933, 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.
(c) 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.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
this 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.
3. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 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.
5
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all 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, on June 27, 1997.
FACTORY CARD OUTLET CORP.
By:
----------------------------------------
Stewart M. Kasen, Chairman of the Board
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.
Signature Title Date
--------- ----- ----
Chairman of the Board of June 27, 1997
- ------------------------ Directors
Stewart M. Kasen
President and Director June 27, 1997
- ------------------------
Charles R. Cumello
Executive Vice President
Treasurer (principal financial June 27, 1997
- ------------------------ and accounting officer)
Glen J. Franchi
Director June __, 1997
- ------------------------
Michael I. Barach
Director June __, 1997
- ------------------------
Dr. Robert C. Blattberg
Director June __, 1997
- ------------------------
Bart A. Brown, Jr.
Director June __, 1997
- ------------------------
Richard A. Doppelt
Director June __, 1997
- ------------------------
J. Bayard Kelly
Director June __, 1997
- ------------------------
James L. Nouss, Jr.
Director June __, 1997
- ------------------------
William E. Freeman
6
<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
behalf of the Plan by the undersigned, thereunto duly authorized, on June 27,
1997.
Date: June 27, 1997 FACTORY CARD OUTLET OF AMERICA LTD.
INCENTIVE SAVINGS PLAN
By:
---------------------
Matthew Ellis
Plan Administrator
By:
---------------------
Glen J. Franchi
Plan Administrator
By:
---------------------
Jeffrey Kelly
Plan Administrator
By:
---------------------
Carol A. Travis
Plan Administrator
7
<PAGE>
INDEX TO EXHIBITS
Exhibit 23 (a)
Consent of KPMG Peat Marwick LLP
Exhibit 99
Factory Card Outlet of America Ltd.
Incentive Savings Plan and Amendments
8
EXHIBIT 23(a)
Consent of KPMG Peat Marwick LLP
The Board of Directors
Factory Card Outlet Corp.:
We consent to the incorporation by reference in this registration statement on
Form S-8 of Factory Card Outlet Corp. of our report dated September 30, 1996,
except as to Note 12, "Subsequent Events-Stock Split," which is as of November
19, 1996, relating to the financial statements and schedule of Factory Card
Outlet Corp. and subsidiary as of June 29, 1996 and July 1, 1995, and for each
of the years in the three-year period ended June 29, 1996, which report appears
in the prospectus dated December 12, 1996, filed by Factory Card Outlet Corp.
pursuant to Rule 424(b) under the Securities Act of 1933 and to our report dated
February 28, 1997, relating to the financial statements and schedules of the
Factory Card Outlet of America Ltd. Incentive Savings Plan as of December 31,
1996 and 1995, and for the years then ended, which report appears in the Form
11-K filed by Factory Card Outlet of America Ltd. Incentive Savings Plan.
KPMG PEAT MARWICK
Chicago, Illinois
June 27, 1997
9
Exhibit 99
FACTORY CARD OUTLET
OF AMERICA LTD.
INCENTIVE SAVINGS PLAN
1
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TABLE OF CONTENTS
Article Contents Page
- ------- -------- ----
I Definitions 1
II Participation 15
III Participant Salary Reduction 18
IV Employer Contributions 27
V Participant Contributions 41
VI Termination of service 42
VII Time and Method of Payment of Benefits 48
VIII Withdrawals 55
IX Investment of Contributions 58
X Loans 61
XI Employer Administrative Provisions 65
XII Participant Administrative Provisions 67
XIII Committee Duties With Respect to
Participant's Account 72
XIV Fiduciary Duties and Responsibilities 75
XV Top Heavy Rules 77
XVI Exclusive Benefit, Amendment and Termination 82
2
<PAGE>
FACTORY CARD OUTLET OF AMERICA LTD.
INCENTIVE SAVINGS PLAN
ARTICLE I
DEFINITIONS
Whenever the following words and phrases appear in the Plan, they shall
have the respective meaning set forth below, unless the context clearly
indicates otherwise:
1.01 "Accounting Date" shall be the last day of the Plan Year. The fair
market value of the Trust's assets will be determined on the Accounting Date.
The Committee shall allocate the earnings and losses for a particular Plan Year
to each Participant's account in the ratio that such Account Balance bears to
all Account Balances as of the Accounting Date of that Plan Year. Further, all
contributions under the Plan will be allocated as of the Accounting Date.
1.02 "Account Balance" shall mean the aggregate of the amount in the
Participant's Salary Reduction Contribution Account, Matching Contribution
Account and Base Contribution Account as of any date, plus any Rollover
Contributions accepted under Article V, less any excess amounts which must be
returned to the Participant in order to avoid exceeding the limitations of
Article IV.
1.03 "Annual Addition" shall mean for any Plan Year the sum of (a)
Employer contributions, (b) Employee contributions, (c) forfeitures, and (d)
amounts allocated to an individual medical account, as defined in Section 415(l)
(2) which is part of a
3
<PAGE>
pension or annuity plan maintained by the Employer, and amounts derived from
contributions paid or accrued which are attributable to post-retirement medical
benefits allocated to the separate account of a key employee, as defined in
Section 419A(d)(3) of the Code, under a welfare benefit fund, as defined in
Section 419(e) of the Code, maintained by the Employer.
1.04 "Annuity Starting Date" shall mean the first day of the first period
for which the Plan pays an amount as an annuity or in any other form.
1.05 "Base Contribution Account" shall mean the account maintained for a
Participant to record base contributions made by the Employer pursuant to
Article IV.
1.06 "Beneficiary" is a person designated by a Participant who is or may
become entitled to a benefit under the Plan.
1.07 "Break in Service" shall mean a Plan Year during which an Employee
completes less than 501 Hours of Service.
1.08 "Code" means the Internal Revenue Code of 1986, as amended.
1.09 "Committee" shall mean the Retirement Committee appointed by the
Company to administer this Plan pursuant to Article XIV hereof. In addition to
its other duties, the Committee shall have full responsibility for compliance
with the reporting and disclosure rules under ERISA as respects this Plan. Each
Committee member is designated a Named Fiduciary under the Plan.
4
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1.10 "Company" means Factory Card Outlet of America Ltd.
1.11 "Compensation" shall mean the total remuneration paid by the Employer
to an Employee for services rendered to the Employer as reflected on Form W-2
for Federal income tax withholding purposes, as well as amounts deferred
pursuant to Article III. In the case of any self-employed individual,
Compensation shall mean Earned Income. Notwithstanding the above, only the first
$200,000 (as adjusted by the Secretary of the Treasury pursuant to Section
415(d) of the Code) of an Employee's Compensation shall be taken into account
for purposes of the Plan in any one Plan Year. In determining the Compensation
of a Participant for purposes of this limitation, the rules of Section 414
(q)(6) of the Code shall apply, except in applying such rules, the term "family"
shall include only the spouse of the Participant and any lineal descendants of
the Participant who have not attained age 19 before the close of the Plan Year.
If, as a result of the application of such rules the adjusted $200,000
limitation is exceeded, then the limitation shall be prorated among the affected
individuals in proportion to each such individual's Compensation prior to the
application of this limitation.
1.12 "Earned Income" shall mean the net earnings from self-employment in
the trade or business with respect to which the Plan is established, for which
personal services of the individual are a material income-producing factor. Net
earnings will be determined without regard to items not included in gross
5
<PAGE>
income and the deductions allocable to such items. Net earnings are reduced by
(1) contributions by the Employer to a qualified plan to the extent deductible
under Section 404 of the Code, and (2) the deduction allowed to the employer by
Section 164(f) of the Code.
1.13 "Effective Date" of this Plan is July 10, 1989.
1.14 "Employment Commencement Date" shall mean the date on which the
Employee first performs an Hour of Service for the Employer.
1.15 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.16 "Employer" shall mean the Company and any Participating Employer
which adopts this Plan, as well as any predecessors or successors to the
Employer.
1.17 "Employee" shall mean any employee of the Employer or of any other
employer required to be aggregated under Section 414(b), (c), (m), (n) or (o) of
the Code.
1.18 "Enrollment Period" shall mean the thirty-one (31) day period from
December 1 to December 31 each year preceding the January 1 Plan Entry Date, and
the thirty (30) day period from June 1 to June 30 each year preceding the July 1
Plan Entry Date.
6
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1.19 "Highly Compensated Employee" shall mean an Employee who, during the
Plan Year or during the preceding 12- month period:
(a) is a more than 5% owner of the Employer (applying the constructive
ownership rules of Section 318 of the Code);
(b) has Compensation in excess of $75,000 (as adjusted by the Commissioner
of Internal Revenue for the relevant year);
(c) has Compensation in excess of $50,000 (as adjusted by the Commissioner
of Internal Revenue for the relevant year) and is part of the top-paid 20%
group of employees (based on Compensation for the relevant year); or
(d) has Compensation in excess of 50% of the dollar amount prescribed in
Section 415(b)(1)(A) of the Code and is an officer of the Employer.
If the Employee satisfies the definition in clause (b), (c) or (d) in the
Plan Year but does not satisfy clause (b), (c) or (d) during the preceding
12-month period and does not satisfy clause (a) in either period, the Employee
is a Highly Compensated Employee only if he is one of the 100 most highly
compensated Employees for the Plan Year. The number of officers taken into
account under clause (d) will not exceed the greater of 3 or 10% of the total
number (after application of the exclusions under Section 414(q) of the Code) of
Employees, but no more than 50 officers. If no Employee satisfies the
Compensation requirement in clause (d) for the relevant year, the Committee will
treat the highest paid officer as satisfying clause (d) for that year.
7
<PAGE>
The term "Highly Compensated Employee" also includes any former Employee
who separated from service (or has a deemed separation from service, as
determined under Treasury regulations) prior to the Plan Year, performs no
service for the Employer during the Plan Year, and was a Highly Compensated
Employee either for the separation year or any Plan Year ending on or after his
55th birthday. If the former Employee's separation from service occurred prior
to January 1, 1987, he is a Highly Compensated Employee only if he satisfied
clause (a) of this Section 1.19 or received Compensation in excess of $50,000
during: (1) the year of his separation from service (or the prior year); or (2)
any year ending after his 54th birthday.
The Committee shall also have discretion to use any other definition of
"Highly Compensated Employee" promulgated by the Secretary of Treasury.
1.20 "Hour of Service" shall mean:
(a) Each hour of service for which the Employer, either directly or
indirectly, pays an Employee, or for which the Employee is entitled to
payment, for the performance of duties during the Plan Year. The Committee
shall credit Hours of Service under this subsection (a) to the Employee
for the Plan Year in which the Employee performs the duties, irrespective
of when paid;
(b) Each hour of service for back pay, irrespective of mitigation of
damages, which the Employer has agreed to pay, or for which the Employee
has received an award. The Committee shall credit Hours of Service under
this subsection (b) to the Employee for the Plan Year(s) to which the
award of the agreement pertains,
8
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rather than for the Plan Year in which the award, agreement or payment is
made; and
(c) Each hour of service for which the Employer, either directly or
indirectly, pays an Employee, or for which the Employee is entitled to
payment (irrespective of whether the employment relationship is
terminated), for reasons other than for the performance of duties during a
Plan Year, such as leave of absence, vacation, holiday, sick leave,
illness, incapacity (including disability), layoff, jury duty, military
duty, or Maternity and Paternity Leave. The Committee shall not credit
more than five hundred one (501) Hours of Service under this subsection
(c) to an Employee on account of any single continuous period during which
the Employee does not perform any duties (whether or not such period
occurs during a single Plan Year). The Committee shall credit Hours of
Service under this subsection (c) in accordance with the rules of
subsections (b) and (c) of Department of Labor Reg. ss.2530.200(b)-2,
which the Plan, by this reference, specifically incorporates in full
within this subsection (c).
The Committee shall not credit an Hour of Service under more than one of
the above subsections. Furthermore, if the Committee is to credit Hours of
Service to an Employee for the twelve month period beginning with the Employee's
Employment Commencement Date or with an anniversary of such date, then such
twelve month period shall be substituted for the term "Plan Year" wherever the
latter term appears in this Section 1.20. The Committee shall resolve any
ambiguity with respect to the crediting of an Hour of Service in favor of the
Employee.
The Committee shall credit every Employee with Hours of Service on the
basis of the "actual" method. For purposes of the Plan, "actual" method means
the determination of Hours of
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Service from records of hours worked and hours for which the Employer makes
payment or for which payment is due from the Employer.
1.21 "Leased Employee" shall mean an individual (who otherwise is not an
Employee of the Employer) who, pursuant to a leasing agreement between the
Employer and any other person, has performed services for the Employer (or for
the Employer and any persons related to the Employer within the meaning of
Section 414 (n) (6) of the Code) on a substantially full time basis for at least
one year and who performs services historically performed by employees in the
Employer's business field. The Plan treats a Leased Employee as an Employee of
the Employer. "Compensation" for a Leased Employee includes Compensation from
the leasing organization which is attributable to services performed for the
Employer. The Committee will reduce a Leased Employee's allocation of Employer
contributions under this Plan by the Leased Employee's allocation under the
leasing organization's plan, but only to the extent that such allocation is
attributable to the Leased Employee's service provided to the Employer.
The Plan does not treat a Leased Employee as an Employee if the leasing
organization covers the employee in a safe harbor plan and, prior to application
of this safe harbor plan exception, 20% or less of the Employer's Employees
(other than Highly Compensated Employees) are Leased Employees. A safe harbor
plan is a money purchase pension plan providing immediate participation, full
and immediate vesting, and a nonintegrated
10
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contribution formula equal to at least 10% of the employee's compensation
without regard to employment by the leasing organization on a specified date.
The safe harbor plan must determine the 10% contribution on the basis of
compensation as defined in section 415(c)(3) of the Code plus contributions to a
cash or deferred arrangement under Section 401(k) of the Code.
1.22 "Matching Contribution Account" shall mean the account maintained for
a Participant to record matching contributions made by the Employer pursuant to
Article IV.
1.23 "Maternity and Paternity Leave" shall mean an absence from work for
any period by reason of the Employee's pregnancy, birth of the Employee's child,
placement of the child with the Employee in connection with the adoption of such
child, or any absence for the purpose of caring for such child for a period
immediately following the birth or placement. For this purpose, Hours of Service
shall be credited for the computation period in which the absence from work
begins, only if credit therefore is necessary to prevent the Employee from
incurring a one year Break in Service, or in the immediately following
computation period. The Hours of Service credited for a Maternity and Paternity
Leave shall be those which would have normally been credited but for such
absence, or, in any case in which the Committee is unable to determine such
hours normally credited, eight (8) Hours of Service per day. The total Hours of
Service
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required to be credited for a Maternity and Paternity Leave shall not exceed
501.
1.24 "Named Fiduciary" shall mean a person designated a fiduciary under
this Plan.
1.25 "Nonforfeitable" shall mean a Participant's or Beneficiary's
unconditional claim, legally enforceable against the Plan, to the Participant's
Account Balance.
1.26 "Normal Retirement Date" shall mean the later of the date the
Participant attains the Normal Retirement Age of 65, or the fifth anniversary of
the Participant's Plan Entry Date.
1.27 "Owner-Employee" shall mean an individual who is a sole proprietor,
or who is a partner owning more than 10 percent of either the capital or profits
interest of the partnership. If this Plan provides contributions or benefits for
one or more Owner-Employees who control both the business for which this Plan is
established and one or more other trades or businesses, this Plan and the plan
established for other trades or businesses must, when looked at as a single
plan, satisfy Sections 401(a) and (d) of the Code for the employees of this and
all other trades or businesses.
If the Plan provides contributions or benefits for one or more
Owner-Employees who control one or more other trades or businesses, the
employees of the other trades or businesses must
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be included in a plan which satisfies Sections 401(a) and (d) of the Code and
which provides contributions and benefits not less favorable than provided for
Owner-Employees under this plan.
If an individual is covered as an Owner-Employee under the plans of two or
more trades or businesses which are not controlled and the individual controls a
trade or business, then the contributions or benefits of the employees under the
plan of the trades or businesses which are controlled must be as favorable as
those provided for him under the most favorable plan of the trade or business
which is not controlled.
For purposes of the preceding paragraphs, an Owner-Employee, or two or
more Owner-Employee, will be considered to control a trade or businesses if the
Owner-Employee, or two or more Owner-Employees together:
(1) own the entire interest in an unincorporated trade or business, or
(2) in the case of a partnership, own more than 50 percent of either the
capital interest or the profits interest in the partnership.
For purposes of the preceding sentence, an Owner-Employee, or two or more
Owner-Employees shall be treated as owning any interest in a partnership which
is owned, directly or indirectly, by a partnership which such Owner-Employee, or
such two or more Owner-Employees, are considered to control within the meaning
pf the preceding sentence.
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1.28 "Participant" is an Employee who is eligible to be and becomes a
Participant in accordance with the provisions of Article II.
1.29 "Participating Employer" shall mean any member of a controlled group
of corporations, as defined in section 1563 (a) of the Code, of which the
Company is a member, which, with the written consent of the Company, adopts this
Plan.
1.30 "Plan Year" shall mean the twelve (12) consecutive month period
commencing on January 1 and ending on December 31.
1.31 "Plan" shall mean the Factory Card Outlet of America Ltd. Incentive
Savings Plan.
1.32 "Plan Entry Dates" shall mean the Effective Date and every January
lst and July lst after the Effective Date.
1.33 "Salary Reduction Contribution" shall mean the amount by which the
Participant elects to reduce his Compensation which is then contributed to the
Trust by the Employer.
1.34 "Salary Reduction Contribution Account" shall mean the account
maintained for a Participant to record Salary Reduction Contributions made on
his behalf by the Employer.
1.35 "Salary Reduction Agreement" shall mean the agreement between the
Participant and the Employer whereby the
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Participant directs the Employer to contribute a designated percentage of his
Compensation to the Trust.
1.36 "Self-Employed Individual" shall mean an individual who has Earned
Income for the taxable year from the trade or business for which the Plan is
established or an individual who would have had Earned Income but for the fact
that the trade or business has no net profits for the taxable year.
1.37 "Trust" shall mean the trust created under the Plan, known as the
Factory Card Outlet of America Ltd. Profit Sharing and 401(k) Plan Trust.
1.38 "Trust Fund" shall mean all property of every kind held or acquired
by the Trustee pursuant to this Plan. Trust assets will be valued at fair market
value.
1.39 "Trustee" shall mean the trustee appointed under the Trust, or any
successor Trustee appointed pursuant to the terms of the Trust.
1.40 "Year of Service" shall mean a Plan Year during which the Employee
completes at least 1,000 Hours of Service. If the Employer maintains the plan of
a predecessor employer, Year of Service shall also include all Years of Service
with such predecessor employer.
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1.41 Wherever used herein, the singular shall include the plural and the
masculine shall include the feminine and the neuter, unless the context clearly
indicates otherwise.
16
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ARTICLE II
PARTICIPATION
2.01 ELIGIBILITY. Each Employee who is in the employ of the Employer on
the Effective Date and has attained age 21 shall become a Participant on the
Effective Date. Each other Employee shall become a Participant in the Plan on
the Plan Entry Date coincident with, or next following, the later of the date on
which he completes six consecutive Months of Service or attains age twenty-one
(21).
Notwithstanding the foregoing, any person who is a member of a collective
bargaining unit is excluded from participation. If a Participant does not
terminate employment but becomes a member of a collective bargaining unit, then
unless the applicable collective bargaining agreement provides otherwise, during
the period that such Participant is a member of a collective bargaining unit,
the Committee shall limit that Participant's sharing in the allocation of
Employer contributions and Participant forfeitures, if any, under the Plan to
the extent of his Compensation paid by the Employer for services rendered while
he is not a member of a collective bargaining unit. However, during such
period,. the Participant's Account Balance shall continue to share fully in
Trust Fund earnings and losses.
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If an Employee who is not a Participant ceases to be a member of a
collective bargaining unit, he shall participate in the Plan immediately if he
has satisfied the service and age conditions of this Section 2.01 and would have
been a Participant had he not been a member of a collective bargaining unit
during his period of service with the Employer. Furthermore, an Employee shall
receive vesting credit under Article VI for each included Year of Service during
his period of service with the Employer without regard to whether the Employee
is a member of a collective bargaining unit.
For purposes of this Section 2.01, an Employee is a member of a collective
bargaining unit if he is included in a unit of Employees covered by an agreement
which the Secretary of Labor finds to be a collective bargaining agreement
between employee representatives and one (1) or more employers if there is
evidence that retirement benefits were the subject of good faith bargaining
between such employee representatives and such employer or employers. The term
"employee representatives" does not include an organization of which more than
one half the members are owners, officers or executives of the Employer.
2.02 MONTH OF SERVICE - PARTICIPATION. For purposes of participation under
Section 2.01, the Plan shall take into account all of an Employee's Months of
Service with the Employer. Months of Service shall include all Months of Service
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an Employee completes with an Employer or any entity which is required to be
aggregated with the Employer pursuant to Section 414 (b), (c), (m), (n), or (o)
of the Code. Month of Service shall mean a one (1) month period during which the
Employee completes not less than eighty-three (83) Hours of Service. If the
Employee does not complete five hundred (500) Hours of service during the six
(6) month period commencing with the Employment Commencement Date, the Plan
shall measure the six (6) month period from the Plan Entry Date next following
the Employment Commencement Date. The Plan shall measure any subsequent six (6)
month period necessary for a determination of Month of Service for participation
by reference to succeeding Plan Entry Dates.
2.03 BREAK IN SERVICE - PARTICIPATION. For purposes of participation in
the Plan, the Plan shall not apply any Break in Service rule.
2.04 PARTICIPATION UPON RE-EMPLOYMENT. A Participant whose employment
terminates shall re-enter the Plan as a Participant on the date of his
re-employment. An Employee who has satisfied the eligibility condition(s) of
Section 2.01, but who terminates employment prior to becoming a Participant,
shall become a Participant in the Plan on the date of his re-employment. Any
other Employee whose employment terminates and who is subsequently re-employed
shall become a Participant in accordance with the provisions of Section 2.01 and
Section 2.02.
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ARTICLE III
PARTICIPANT SALARY REDUCTION
3.01 SALARY REDUCTION AGREEMENT. A Participant may elect to enter into a
Salary Reduction Agreement with the Employer which will be applicable to all
payroll periods within such Plan Year after the Plan Entry Date following
execution of the Salary Reduction Agreement. The terms of any such Salary
Reduction Agreement shall provide that the Participant agrees to a reduction in
Compensation from the Employer equal to any whole percentage from one percent
(1%) to thirteen percent (13%) of his Compensation for each payroll period
within such Plan Year. For purposes of the preceding sentence only, Compensation
will be limited to the amount earned by an Employee while he is a Participant. A
Participant who does not elect to enter into a Salary Reduction Agreement with
the Employer shall continue to receive his entire amount of Compensation in
cash.
3.02 CHANGE IN SALARY REDUCTION RATE. A Participant may suspend his
contributions under his Salary Reduction Agreement at any time. A Participant
may amend his Salary Reduction Agreement twice during any Plan Year by filing
two weeks advance written notice of any change. Salary Reduction Agreement
amendments shall be effective as of the first day of the calendar quarter next
following the advance notice.
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Notwithstanding the above limitations, the Employer may decrease at any time the
Salary Reduction Contribution of any Participant by any percentage, whether
whole or fractional, if the Committee notifies the Employer that such decrease
is necessary to ensure that the limitations of Sections 3.04, 3.05 or 4.06 are
met for the Plan Year.
3.03 VESTING - SALARY REDUCTION CONTRIBUTION ACCOUNTS. Amounts credited to
a Participant Is Salary Reduction Contribution Account shall be 100% vested and
Nonforfeitable at all times. The Committee shall pay all Salary Reduction
Contributions over to the Trust no later than ninety (90) days after the date
the funds were withheld from the Participant's Compensation.
3.04 SALARY REDUCTION CONTRIBUTION LIMITATIONS. Notwithstanding Section
3.01 hereof, the maximum amount of Compensation a Participant is permitted to
defer during any calendar year is limited to $7,000 as adjusted by the Secretary
of Treasury pursuant to Section 402(g)(5) of the Code. Any amount that cannot be
credited to the Participant's Salary Reduction Account due to the foregoing
limit shall be paid to the Participant in cash. For purposes of the limitation
of this Section 3.04, the amount contributed to a Participant's Salary Reduction
Contribution Account shall not include any Salary Reduction Contributions
properly returned to the Participant as excess Annual Additions under Section
4.07.
If a Participant would exceed the limitation of this Section 3.04 when the
amount the Participant elects to
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contribute to his Salary Reduction Account is aggregated with the amounts
deferred by the Participant under other plans or arrangements described in
Sections 401(k), 408(k), 403(b), 457 or 501(c)(18) of the Code, the Participant
may request that the Committee distribute the excess deferrals to him. Such
excess deferrals and income or loss allocable thereto may be distributed no
later than April 15 of the year following the year in which any such excess
deferrals are contributed, to Participants who claim such allocable deferral
contributions for the preceding calendar year. The Participant's claim shall be
in writing; shall be submitted to the Committee no later than March 1; shall
specify the Participant's deferral contribution amount for the preceding
calendar year; and shall be accompanied by the Participant's written statement
that if such amounts are not distributed, such deferral contributions, when
added to amounts deferred under other plans or arrangements described in
Sections 4 01(k), 408(k), 403(b), 457 or 501(c)(18) of the Code, exceed the
limit imposed on the Participant in accordance with the applicable provisions of
the Code for the year in which the deferral occurred. To the extent the excess
deferral arises under this Plan when combined with other plans of the Employer,
the individual will be deemed to have notified the Committee of the excess
deferral and requested distribution of the excess deferral.
The income or loss allocable to the excess deferrals shall be the sum of
(1) the amount determined by multiplying the
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<PAGE>
income or loss allocable to the Participant's accounts containing the excess
deferrals for the calendar year by a fraction, the numerator of which is the
excess deferrals on behalf of the Participant for the calendar year and the
denominator of which is the Participant's account balance in his accounts
containing the excess deferrals as of the last day of the calendar year in which
the excess deferrals are made without regard to any gain or loss allocable to
such total amount for the calendar year; and (2) ten (10) percent of the amount
determined under (1) multiplied by the number of whole calendar months between
the end of the calendar year in which the excess deferrals were made and the
date of distribution, counting the month of distribution if distribution occurs
after the 15th day of such month. Excess deferrals shall be treated as Annual
Additions, unless such amounts are distributed to the Participant no later than
April 15 of the year following the year in which any such excess deferrals are
contributed.
3.05 SALARY REDUCTION DISCRIMINATION LIMITATION. The Employer shall not
permit a Participant to defer an amount of Compensation that would cause the
Plan to not satisfy at least one of the following tests in any Plan Year:
(a) The Actual Deferral Percentage for the group of Highly Compensated
Employees shall not exceed the Actual Deferral Percentage of all other
eligible Employees multiplied by 1.25; or
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(b) The Actual Deferral Percentage for the group of Highly Compensated
Employees shall not exceed the Actual Deferral Percentage for all other
eligible Employees multiplied by 2.0, provided that the Actual Deferral
Percentage for the group of Highly Compensated Employees does not exceed
the Actual Deferral Percentage of all other eligible Employees by more
than two (2) percentage points or such lesser amount as the Secretary of
the Treasury shall prescribe to prevent the multiple use of this
alternative limitation with respect to any Highly Compensated Employee.
The Actual Deferral Percentage for a specified group of Employees for a Plan
Year shall be the average of ratios (calculated separately for each Employee in
such group) of (i) the amount of Salary Reduction Contributions actually paid
over to the Trust on behalf of each such Employee for such Plan Year, to (ii)
the Employee's Compensation for that portion of the Plan Year during which the
Employee was eligible to participate. In computing the Actual Deferral
Percentage, Salary Reduction Contributions shall not include any amounts
properly returned to (i) the Participant as excess Annual Additions under
Section 4.07; or (ii) a Nonhighly Compensated Employee as excess deferrals under
section 3.05. The Actual Deferral Percentage for a Participant who makes no
Salary Reduction Contributions during a Plan Year shall be 0%. Contributions
taken into account for purposes of determining the Actual Deferral Percentage
test must
24
<PAGE>
be made before the last day of the twelve-month period immediately following the
Plan Year to which the contributions relate. In computing the Actual Deferral
Percentage, the Committee may include in subparagraph (i) above, the amount of
any Employer contributions which are 100% vested when made and are unavailable
for withdrawal under any circumstances. If matching contributions are taken into
account for purposes of this subparagraph (i), they must meet the requirements
applicable to Employer contributions in the preceding sentence and cannot be
taken into account under Section 4. 02 (i). In the event Salary Reduction
Contributions are used to satisfy the Average Contribution Percentage test under
Section 4.02, the Actual Deferral Percentage test must be satisfied both with
and without inclusion of the Salary Reduction Contributions used in the Average
Contribution Percentage test.
The Actual Deferral Percentage for any Employee who is a Highly
Compensated Employee for the Plan Year and who has Salary Reduction
Contributions allocated to his account under two or more plans of the Employer,
shall be determined as if all such contributions were made under a single plan.
If the above plans have different plan years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated as a single
arrangement.
In the event that this Plan satisfies the requirements of Section 401(k),
401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans,
or if one or more other plans satisfy the requirements of Section 401(k),
401(a)(4) or
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<PAGE>
410(b) of the Code only if aggregated with this Plan, then this Section 3.05
shall be applied by determining the Actual Deferral Percentages of Participants
as if all such plans were a single plan. Plans may be aggregated to satisfy
Section 401(k) of the Code only if they have the same plan year.
For purposes of determining the Actual Deferral Percentage of a
Participant who is a five percent (5%) owner or one of the ten most highly-paid
Highly Compensated Employees, the Salary Reduction Contributions and
Compensation of such Participant shall include the Salary Reduction
Contributions and Compensation for the Plan Year of Family Members as defined in
Section 414(q)(6) of the Code. Family Members, with respect to such Highly
Compensated Employees, shall be disregarded as separate Employees in determining
the Actual Deferral Percentage both for Participants who are Non-Highly
Compensated Employees and for Participants who are Highly Compensated Employees.
The Employer shall maintain records sufficient to demonstrate satisfaction
of the Actual Deferral Percentage test. The determination and treatment of the
Actual Deferral Percentage amounts of any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the Treasury.
3.06 EXCESS CONTRIBUTIONS. Notwithstanding the foregoing paragraph, with
respect to any Plan Year in which Salary Reduction Contributions on behalf of
Highly Compensated Employees exceed the applicable limit, the Committee shall
reduce the amount of the Excess Contributions made on behalf of
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<PAGE>
the Highly Compensated Employees (by reducing such contributions in order of
actual deferral percentages beginning with the highest), and shall distribute
any Excess Contributions which exist after such reduction, as adjusted by the
income or loss allocable to such Excess Contributions, to the affected Highly
Compensated Employees no later than March 15 of the year following the Plan Year
in which any such Excess Contributions are made, but in no event shall such
amounts be distributed later than the end of the Plan Year following the Plan
Year in which such Excess Contributions were contributed. Excess Contributions
shall be allocated to Participants who are subject to the Family Member
aggregation rules as defined in Section 414 (q)(6) of the Code in proportion to
the Salary Reduction Contributions and amounts treated as Salary Reduction
Contributions of each Family Member that is combined to determine the combined
Actual Deferral Percentage, in the manner prescribed by the regulations.
For purposes of Section 3.06, "Excess Contributions" shall mean, with
respect to any Plan Year, the aggregate amount of Employer contributions
actually taken into account in computing the Actual Deferral Percentage of the
Highly Compensated Employees over the maximum amount of such contributions
permitted by the Actual Deferral Percentage test. The income or loss allocable
to the Excess Contributions shall be the sum of (1) the amount determined by
multiplying the income or loss allocable to the Participant's accounts
containing the Excess Contributions for the Plan Year by a fraction, the
numerator of
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<PAGE>
which is the Excess Contributions on behalf of the Participant for the Plan Year
and the denominator of which is the Participant's account balance in his
accounts containing the Excess Contributions as of the Accounting Date of the
Plan Year in which the Excess Contribution is made without regard to any gain or
loss allocable to such total amount for the Plan Year; and (2) ten (10) percent
of the amount determined under (1) multiplied by the number of whole calendar
months between the end of the Plan Year in which the Excess Contributions were
made and the date of distribution, counting the month of distribution if
distribution occurs after the 15th day of such month.
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<PAGE>
ARTICLE IV
EMPLOYER CONTRIBUTIONS
4.01 DISCRETIONARY MATCHING CONTRIBUTION. The Employer may elect to make a
discretionary matching contribution. The Employer's matching contribution will
be allocated only to Participants who earn a Year of Service in the Plan Year
for which the matching contribution is made, except that Participants who
terminate their service with the Employer because of death, disability, or
retirement on or after Normal Retirement Date will be eligible to receive an
allocation of the matching contribution for that Plan Year. Notwithstanding the
foregoing, if a Participant completes 501 or more Hours of Service, regardless
of whether he is employed on the last day of the Plan Year, he will receive a
matching contribution if such contribution is necessary to enable the Plan to
satisfy the minimum coverage test of Section 410(b) of the Code or the minimum
participation test of Section 401(a)(26) of the Code. Although the amount to be
contributed for each Plan Year by the Employer under this Section 4.01 is purely
discretionary, any such contributed amounts will be allocated to the Matching
Contribution Accounts of each Participant on the basis of .33 multiplied by a
fraction, the numerator of which is equal to the amount of the Participant's
Salary Reduction Contribution (not in excess of six percent (6%) of such
Participant's Compensation) , and the denominator of which is the sum total of
29
<PAGE>
all Participants' Salary Reduction Contributions (not in excess of six percent
(6%) of each such Participant's Compensation).
4.02 LIMITATIONS ON MATCHING CONTRIBUTIONS. The Employer shall not make
matching contributions to the Plan which would cause the Plan not to satisfy at
least one of the following tests in any Plan Year:
(a) The Average Contribution Percentage for the group of Highly
Compensated Employees shall not exceed the Average Contribution Percentage
for all other eligible Employees multiplied by 1.25; or
(b) The Average Contribution Percentage for the group of Highly
Compensated Employees shall not exceed the Average Contribution Percentage
for all other eligible Employees multiplied by 2.0, provided that the
Average Contribution Percentage for the group of Highly Compensated
Employees does not exceed the Average Contribution Percentage for all
other eligible Employees by more than two (2) percentage points or such
lesser amount as the Secretary of the Treasury shall prescribe to prevent
the multiple use of this alternative limitation with respect to any Highly
Compensated Employee.
For purposes of this Section, the Average Contribution Percentage for a
specified group of Employees shall be the average of the ratios (calculated
separately for each Employee in the group) of (i) the matching contributions
under the Plan on behalf of the Employee for the Plan Year, to (ii) the
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<PAGE>
Employee's Compensation for that portion of the Plan Year during which the
Employee was eligible to participate. The Average Contribution Percentage for a
Participant who is not allocated a matching contribution shall be 0%. For
purposes of determining Contribution Percentages, Salary Reduction Contributions
are considered to have been made in the Plan Year in which contributed to the
Trust. Employer contributions will be considered made for a Plan Year if made no
later than the end of the twelve-month period beginning on the day after the
close of the Plan Year. In computing Contribution Percentages, the Committee may
include in subparagraph (i) above, Salary Reduction Contributions, except for
Salary Reduction Contributions which are properly distributed as excess Annual
Additions under Section 4.07, and base contributions which are 100% vested when
made and are not available for withdrawal under any circumstances.
In computing Contribution Percentages, the Committee shall not include
matching contributions that are forfeited either to correct Excess Aggregate
Contributions under Section 4.03 or because the contributions to which the
matching contributions relate are excess deferrals under Section 3.04, Excess
Contributions under Section 3.06 or Excess Aggregate Contributions under Section
4.03.
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<PAGE>
The Contribution Percentage for any Employee who is a Highly Compensated
Employee for the Plan Year and who has matching contributions allocated to his
account under two or more plans of the Employer shall be determined as if all
such contributions were made under a single plan. If the above plans have
different plan years, the plans ending with or within the same calendar year
shall be treated as a single plan.
In the event that this Plan satisfies the requirements of Section 401(m),
401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans,
or if one or more other plans satisfy the requirements of Section 401(m),
401(a)(4) or 410(b) of the Code only if aggregated with this Plan, then this
Section 4.02 shall be applied by determining the contribution Percentages of
Employees as if all such plans were a single plan. Plans may be aggregated in
order to satisfy Section 401(m) of the Code only if they have the same Plan
Year.
For purposes of determining the Contribution Percentage of a Participant who is
a five percent (5%) owner or one of the ten most highly-paid Highly Compensated
Employees, the Contribution Percentage amounts and Compensation of such
Participant shall include the Contribution Percentage amounts and Compensation
for the Plan Year of Family Members as defined in Section 414(q)(6) of the Code.
Family Members, with respect to Highly Compensated Employees, shall be
disregarded as separate employees in determining the Contribution Percentages
both for Participants who
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<PAGE>
are Non-Highly Compensated Employees and for Participants who are Highly
Compensated Employees. Excess Aggregate Contributions shall be allocated to
Participants who are subject to the Family Members aggregation rules of Section
414(q)(6) of the Code in proportion to the Employee and matching contributions
or amounts treated as matching contributions of each Family Member that is
combined to determine the combined Actual Contribution Percentage, in the manner
prescribed by the regulations.
The determination and treatment of the Contribution Percentage of any
Employee shall satisfy such other requirements as may be prescribed by the
Secretary of the Treasury. The Employer shall maintain records sufficient to
demonstrate satisfaction of the Average Contribution Percentage test.
4.03 DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS. Excess Aggregate
Contributions and income allocable thereto shall be distributed no later than
March 15 of the Plan Year following the Plan Year in which any such Excess
Aggregate Contribution were made, but in no event shall the Excess Aggregate
Contributions be distributed later than the last day of the Plan Year following
the Plan Year in which the contributions giving rise to the Excess Aggregate
Contributions were allocated. if Excess Aggregate Contributions are distributed
more than 2 1/2 months after the last day of the Plan Year in which such excess
amounts arose, a ten (10) percent excise tax will be imposed on the Employer
maintaining the Plan
33
<PAGE>
with respect to those amounts. Excess Aggregate Contributions shall be treated
as Annual Additions under the Plan.
For purposes of Section 4.03, "Excess Aggregate Contributions" shall mean, with
respect to any Plan Year, the excess of the aggregate Contribution Percentage
amounts taken into account in computing the numerator of the Contribution
Percentage actually made on behalf of Highly Compensated Employees for such Plan
Year, over the maximum Contribution Percentage amounts permitted by the Average
Contribution Percentage test (determined by reducing contributions made on
behalf of, Highly Compensated Employees in order of their Compensation
Percentages beginning with the highest of such percentages). Such determination
shall be made after first determining Excess Contributions pursuant to Section
3.06 and then determining Excess Aggregate Contributions pursuant to this
Section 4.03. The Excess Aggregate Contributions to be distributed to a
Participant shall be adjusted by the income or loss allocable to such Excess
Aggregate Contribution. The income or loss allocable to the Excess Aggregate
Contributions shall be the sum of (1) the amount determined by multiplying the
income or loss allocable to the Participant's accounts containing the excess
amounts for the Plan Year by a fraction, the numerator of which is the Excess
Aggregate Contributions on behalf of the Participant for the Plan Year and the
denominator of which is the Participant's account balance in the accounts
containing the excess amounts as of the Accounting Date of the Plan Year in
which the Excess Aggregate Contribution is made without regard to any gain or
34
<PAGE>
loss allocable to such total amount for the Plan Year; and (2) ten (10) percent
of the amount determined under (1) multiplied by the number of whole calendar
months between the end of the Plan Year in which the Excess Aggregate
Contributions were made and the date of distribution, counting the date of
distribution if distribution occurs after the 15th day of such month.
4.04 FORFEITURE OF MATCHING CONTRIBUTIONS. In order to satisfy Section 4.02, the
Committee, in its discretion, may forfeit non-vested matching contributions and
the income allocable thereto in lieu of distributing Excess Aggregate
Contributions. In the event a matching contribution relates to an excess
deferral under Section 3.04, or an Excess Contribution under Section 3.06, the
matching contribution and income allocable thereto shall be forfeited. The
income allocable to a matching contribution shall be determined in accordance
with the procedure for determining income allocable to Excess Aggregate
Contributions set forth in Section 4.03. Forfeited matching contributions and
the income allocable thereto shall be reallocated to the accounts of the
NonHighly Compensated Participants for the Plan Year in which the forfeiture
occurs in the ratio which each such Participant's Compensation for the Plan Year
bears to the total Compensation of all such Participants for such Plan Year. The
forfeited amounts are treated as Annual Additions under the Plan for both those
Participants to whose Accounts such amounts are reallocated as
35
<PAGE>
well as for those Participants from whose Accounts the amounts are forfeited.
4.05 DISCRETIONARY BASE CONTRIBUTIONS. For each Plan Year, the Employer may
contribute to the Trust a discretionary base contribution amount if the Employer
deems it advisable. The Employer's base contribution amount will be allocated
only to Participants who are employed by the Employer on the last day of the
Plan Year, except that a Participant whose service with the Employer terminates
in a Plan Year because of death, disability, or retirement on or after Normal
Retirement Date, will share in the allocation of the Employer's base
contribution for the Plan Year. Notwithstanding the foregoing, if a Participant
completes 501 or more Hours of Service, regardless of whether he is employed on
the last day of the Plan Year, he will receive a base contribution if such
contribution is necessary to enable the Plan to satisfy the minimum coverage
test of Section 410(b) of the Code or the minimum participation test of Section
401(a)(26) of the Code. The allocation of the Employer's base contribution shall
be based on a ratio, the numerator of which is the Participant's Compensation
for the Plan Year, and the denominator of which is the total Compensation for
all Participants for that Plan Year.
4.06 EMPLOYER CONTRIBUTIONS. This Plan is intended to be a profit
sharing plan to which Employer contributions shall be made without regard to
current or accumulated profits. All
36
<PAGE>
contributions by the Employer shall be paid to the Trustee not later than the
time prescribed by law for filing the federal income tax return of the Employer,
including any extensions which have been granted for the filing of such return.
4.07 LIMITATION ON ALLOCATION TO PARTICIPANT^IS ACCOUNT. If an Employee
does not and has not ever received an allocation of Annual Additions as defined
in 1.03(d), the amount of Annual Additions which the Committee may allocate
under this Plan on a Participant's behalf for a Limitation Year shall not exceed
the Maximum Permissible Amount. Prior to the determination of the Participant's
actual Compensation for a Limitation Year, the Committee may determine the
Maximum Permissible Amount on the basis of the Participant's estimated annual
Compensation for such Limitation Year. The Committee shall make this
determination on a uniform and reasonable basis for all Participants similarly
situated. As soon as is administratively feasible after the end of the
Limitation Year, the Committee shall determine the Maximum Permissible Amount
for the Limitation Year on the basis of the Participant's Compensation for the
Limitation Year.
If, as a result of the Committee's estimation of the Participant's Compensation,
as a result of a forfeiture allocation, or as a result of a reasonable error in
determining the amount of Salary Reduction Contributions that may be made with
respect to any Participant under the limits of Section 415 of the Code, an
Excess Amount exists, any Salary Reduction
37
<PAGE>
Contributions or nondeductible voluntary contributions will be returned to the
Participant. To the extent an Excess Amount still exists, the Committee shall
reduce any Employer contributions and forfeitures to the Participant's Accounts
at the end of the Limitation Year by the Excess Amount, and any remaining Excess
Amount shall be carried over to the next Limitation Year. If the Participant is
not covered by the Plan as of the end of the Limitation Year, then the Excess
Amount will be allocated to the Accounts of all other Participants in the Plan
for the Limitation Year before any other amounts are allocated for such
Limitation Year.
If an Employee is a Participant at any time in both a defined benefit
plan and a defined contribution plan maintained by the Employer, the sum of the
defined benefit plan fraction and the defined contribution plan fraction for any
Plan Year may not exceed 1.0.
The defined benefit plan fraction for any Plan Year is a fraction, the numerator
of which is the Participant's projected annual benefit under the plan
(determined at the close of the Plan Year) and the denominator of which is the
lesser of (1) 1.25 multiplied by the dollar limitation in effect for such Plan
Year under Section 415(b)(1)(A) of the Code as adjusted by Section 415(d) of the
Code; or (2) 1.4 multiplied by one-hundred percent (100%) of the Participant's
average monthly Compensation during the three consecutive years when the total
Compensation paid to him was highest, including any adjustment under Section
415(b) of the Code. Notwithstanding the above, if the
38
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Participant was a participant as of the first day of the first Limitation Year
beginning after December 31, 1986, in one or more defined benefit plans
maintained by the Employer which were in existence on May 6, 1986, the
denominator of this fraction will not be less than 125 percent of the sum of the
annual benefits under such plans which the Participant had accrued as of the
close of the last Limitation Year beginning before January 1, 1987, disregarding
any changes in the terms and conditions of the plan after May 5, 1986. The
preceding sentence applies only if the defined benefit plans individually and in
the aggregate satisfied the requirements of Section 415 for all Limitation Years
beginning before January 1, 1987.
The defined contribution plan fraction for any Plan Year is a fraction, the
numerator of which is the sum of the Annual Additions to the Participant's
Account Balance as of the close of the Plan Year, (including the Annual
Additions attributable to the Participant's nondeductible employee contributions
to all defined benefit plans, whether or not terminated, maintained by the
Employer, and the Annual Additions attributable to all welfare benefit funds, as
defined in Section 419(e) of the Code, and individual medical accounts, as
defined in Section 415(1)(2) of the Code, maintained by the Employer) and the
denominator of which is the sum of the applicable maximum amounts of Annual
Additions which could have been made under Section 415(c) of the Code for such
Plan Year and for all prior years of such Participant's employment. If the
employee was a Participant as of the end of the first day of the first
Limitation Year
39
<PAGE>
beginning after December 31, 1986, in one or more defined contribution plans
maintained by the Employer which were in existence on May 6, 1986, the numerator
of this fraction will be adjusted if the sum of this fraction and the defined
benefit fraction would otherwise exceed 1.0 under the terms of this Plan. Under
the adjustment, an amount equal to the product of (1) of the excess of the sum
of the fractions over 1.0 times (2) the denominator of this fraction, will be
permanently subtracted from the numerator of this fraction. The adjustment is
calculated using the fractions as they would be computed as of the end of the
last Limitation Year beginning before January 1, 1987, and disregarding any
changes in the terms and conditions of the Plan made after May 5, 1986, but
using the Section 415 limitation applicable to the first Limitation Year
beginning on or after January 1, 1987.
The applicable maximum amount for any Plan Year shall be equal to the lesser of
(1) 1.25 multiplied by the dollar limitation in effect for such Plan Year under
Section 415(c)(1)(A) of the Code; or (2) 1.4 multiplied by twenty-five percent
(25%) of the Participant's Compensation for such Plan Year. For purposes of this
limitation, all defined benefit plans of the Employer, whether or not
terminated, are to be treated as one defined benefit plan and all defined
contribution plans of the Employer, whether or not terminated, are to be treated
as one defined contribution plan.
The following definitions apply to this Section only:
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(a) "Maximum Permissible Amount" - For a Limitation Year, the Maximum
Permissible Amount with respect to any Participant shall be the lesser of
(i) $30,000 (or, if greater, 25% of the dollar limitation in effect under
Section 415(b)(1)(A) of the Code), or (ii) twenty-five percent (25%) of
the Participant's Compensation for the Limitation Year.
(b) "Compensation" - Compensation as defined but excluding amounts
deferred pursuant to Article III or pursuant to a cafeteria plan as
defined by Section 125 of the Code.
(c) "Employer" - The Employer which adopts this Plan as well as any entity
which must be aggregated with the Employer pursuant to Section 414(b),
(c), (m), (n) or (o)of the Code.
(d) "Excess Amount" - The excess of the Participant's Annual Additions
credited to the Participant's Account for the Limitation Year over the
Maximum Permissible Amount. Any Excess Amount shall be held in a suspense
account which does not participate in the allocation of the Trust's
investment gains and losses. Excess Amounts may not be distributed to
Participants or former Participants. Any Excess Amount which is allocated
shall be deemed to be an Annual Addition for the Limitation Year in which
it is allocated.
(e) "Limitation Year" - The Plan Year.
(f) "Projected Annual Benefit" - The annual retirement benefit (adjusted
if such benefit is expressed in a form other than a straight life annuity
or qualified joint and survivor annuity) to which the Participant would be
entitled under the terms of the plan assuming:
(1) the Participant will continue employment until normal retirement
age under the plan (or current age, if later), and
(2) the Participant's Compensation for the current Limitation Year
and all other relevant factors used to
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determine benefits under the Plan will remain constant for all
future Limitation Years.
ARTICLE V
PARTICIPANT CONTRIBUTIONS
5.01 ROLLOVER CONTRIBUTIONS. Any Employee, with the Committee's consent,
may contribute cash to the Trust Fund, if the contribution is a Rollover
Contribution. For this purpose a Rollover Contribution means (a) a contribution
by an Employee of a distribution received from the qualified plan of another
employer provided the Employee makes the contribution within 60 days of his
receipt of a distribution which satisfied the requirements of Section 402(a)(5)
of the Code; (b) a contribution by an Employee under Section 408(d)(3) of the
Code of the balance in an individual retirement account or annuity which amount
is attributable to a prior rollover distribution which satisfied the
requirements of Section 402(a)(5) of the Code; or (3) a direct transfer of the
Employee's interest from the trustee of a qualified plan maintained by another
employer. Before accepting a Rollover Contribution, the Committee may require
the Employee to furnish satisfactory evidence that the proposed transfer is in
fact a Rollover Contribution which the Code permits an Employee to make to a
qualified plan. The Committee shall not accept any amount from or attributable
to any defined benefit plan or other plan which is required to provide automatic
survivor benefits under Section 401(a)(11) of the Code. All Rollover
Contributions shall be fully vested at all times.
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ARTICLE VI
TERMINATION OF SERVICE
6.01 NORMAL RETIREMENT DATE. Upon reaching his Normal Retirement Date, a
Participant shall be fully vested in his Account Balance. A Participant who
remains employed after reaching his Normal Retirement Date shall continue to
fully participate in this Plan. Upon termination of a Participant's employment
for any reason after Normal Retirement Date, the Committee shall direct the
Trustee to commence payment of the Participant's Account Balance to him (or to
his Beneficiary if the Participant is deceased), in accordance with the
provisions of Article VII no later than sixty (60) days after the close of the
Plan Year in which the Participant's employment terminates.
6.02 PARTICIPANT DISABILITY. A Participant shall be fully vested in his
Account Balance if he is deemed disabled by the Committee. The Committee shall
direct the Trustee to commence payment of the Participant's Account Balance to
him in accordance with the provisions of Article VII no later than sixty(60)
days after the close of the Plan Year in which the Participant is deemed
disabled. The Plan shall consider a Participant disabled on the date the
Committee determines the Participant, because of a physical or mental
disability, will be unable to perform the duties of his customary position of
employment (or is unable to engage in any substantial gainful
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activity) for an indefinite period which the Committee considers will be of long
and continued duration. The Committee also shall consider a Participant disabled
if he incurs the permanent loss of use of a member or function of the body, or
is permanently disfigured. The immediately preceding sentence shall not apply
unless the Participant terminates employment. The Committee may require a
Participant to submit to a physical examination in order to confirm disability.
If the disabled Participant is a member of the Committee, a disinterested third
party shall be appointed by the Committee to evaluate the Committee member's
condition. The Committee shall apply the provisions of this Section 6.02 in a
nondiscriminatory, consistent and uniform manner.
6.03 TERMINATION OF SERVICE PRIOR TO NORMAL RETIREMENT DATE. Upon
termination of a Participant's employment prior to Normal Retirement Date (for
any reason other than death or disability), the Committee shall direct the
Trustee to commence payment of the Participant's vested Account Balance to him
(or to his Beneficiary if the Participant is deceased), in accordance with the
provisions of Article VII, no later than sixty (60) days after the close of the
Plan Year in which the Participant's employment terminates.
6.04 VESTING - EMPLOYER CONTRIBUTIONS. Amounts credited to a Participant's
Matching Contribution Account shall be one hundred percent (100%) vested at all
times. A Participant's Base
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Contribution Account shall be one hundred percent (100%) vested upon reaching
his Normal Retirement Date (if employed by the Employer on or after that date),
or if his employment with the Employer terminates as a result of death or
disability. If a Participant's employment with the Employer terminates prior to
his Normal Retirement Date for any reason other than death or disability, then
for each Year of Service he shall earn a ^Nonforfeitable percentage of his Base
Contribution Account as determined by the following vesting schedule:
Percent of
Nonforfeitable
Years of Service Base Contribution Account
---------------- -------------------------
Less than 1 0
1 20%
2 40%
3 60%
4 80%
5 or more 100%
For purposes of determining Years of Service under Section 6.04, the Plan shall
take into account all Years of Service an Employee completes with the Employer
or any entity which is required to be aggregated with the Employer pursuant to
Section 414(b), (c), (m), (n) or (o) of the Code. In addition, a Participant
will be credited with Years of Service for purposes of this Section for years of
service earned with Viking Enterprises Corp. or its subsidiaries, provided that
such Participant became employed by the Employer on the Effective Date.
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Solely for purposes of determining a Participant's Nonforfeitable percentage of
his Base Contribution Account which accrued prior to a Forfeiture Break in
Service, the Plan shall disregard any Years of Service after the Participant
first incurs a Forfeiture Break in Service. A Participant incurs a Forfeiture
Break in service when he incurs five (5) consecutive one-year Breaks in service.
If a Participant who has no vested interest incurs a Break in Service, the
Committee shall disregard the Participant's pre-break Years of Service for
purposes of determining his vested interest in his post-break Account Balance if
the number of the Participant's aggregate one-year Breaks in Service equals or
exceeds the greater of five (5) or the number of the Participant's aggregate
Years of Service.
6.05 FORFEITURE AND REPAYMENT. If a Participant terminates employment
before his interest in his Base Contribution Account is fully vested, that
portion which has not vested shall be forfeited as of the last day of the Plan
Year in which (i) he receives a distribution of the Nonforfeitable portion of
his Account Balance or (ii) he incurs a Forfeiture Break in Service. If the
value of the Participant's vested Base Contribution Account is zero, the
Participant shall be deemed to have received a distribution of such vested
Account Balance. If a Participant who has received a distribution of the
Nonforfeitable portion of his Account Balance is rehired before
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he incurs a Forfeiture Break in Service, he may repay to the Trustees an amount
equal to the distribution amount. The Participant must make repayment prior to
the earlier of the date he would incur a Forfeiture Break in Service after such
distribution, or five (5) years after the date on which he is re-employed. Such
repayment shall be credited to his Account Balance and an additional amount
equal to the forfeited portion of his Base Contribution Account will either be
allocated to the Participant's Account Balance out of current forfeitures or
contributed by the Employer as of the last day of that Plan Year. It shall be
the duty of the Employer to give timely notification to any rehired Employee if
such Employee is eligible to make a repayment, of his right to make such a
repayment, and of the consequences of not making such repayment. In the case of
a terminated Participant who is deemed to have received a distribution and is
rehired before he incurs a Forfeiture Break in Service, his forfeited Base
Contribution Account shall be restored upon reemployment. In the case of a
terminated Participant who does not receive a distribution of the Nonforfeitable
portion of his Account Balance and whose service resumes after five (5)
consecutive one-year Breaks in Service, the Nonforfeitable Account Balance shall
be maintained as a fully vested ^subaccount within his Base Contribution
Account.
Subject to any restoration allocation of a forfeited amount on behalf of a
Participant who repays a distribution as
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described above, the Employer shall allocate forfeitures which arise under this
section in proportion to each Participant's Compensation for the Plan Year in
relation to the total Compensation of all Participants for the Plan Year. Such
allocated forfeiture amounts shall be credited to each Participant's Base
Contribution Account.
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ARTICLE VII
TIME AND METHOD OF PAYMENT OF BENEFITS
7.01 TIME OF PAYMENT OF ACCOUNT BALANCE. Unless the Participant elects in
writing, if distribution has not yet commenced pursuant to Sections 6.02 or
6.03, the Committee shall direct the Trustee to commence distribution of a
Participant's Account Balance determined as of the Accounting Date coincident
with or preceding the event causing distribution no later than sixty (60) days
after the close of the Plan Year in which the later of the following events
occurs:
(a) The date the Participant reaches his Normal Retirement Date, or
(b) The date the Participant terminates service with the Employer.
The Committee shall, however, direct the Trustee to commence distribution no
later than the Participant's Required Beginning Date. The Required Beginning
Date is April 1 of the calendar year following the calendar year in which the
Participant attains age 70 1/2, notwithstanding the Participant's continued
employment; except that any Participant who attained age 70 1/2 before January
1, 1988, and who is not a five percent owner in the Plan Year in which he
attained age 66 1/2 or any later Plan Year, need not commence receiving payments
hereunder until April 1 of the year following the year in which he actually
retires.
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7.02 DEFERRED DISTRIBUTION. A Participant who separates from service prior
to attaining age 70 1/2 may request that the Committee direct the Trustee to
defer commencement of his distribution until his Required Beginning Date.
7.03 FORMS OF PAYMENT. The Participant may elect one of the optional forms
of payment described herein. The election of such option must be in writing, in
such form as the Committee shall prescribe, signed by the Participant and filed
with the Committee during the 90 day period preceding the Annuity Starting Date.
Any election may be revoked by written notice filed with the Committee at least
30 days prior to the Participant's Annuity Starting Date. The following optional
forms of distribution will be available:
(a) a lump sum payment; or
(b) installment payments over a period not to exceed ten years.
7.04 PAYMENT UPON DEATH. If distribution of the Participant's Account Balance
has commenced in accordance with a method selected pursuant to Section 7.03 and
the Participant dies before his entire interest is distributed to him, the
remaining portion of such interest shall be distributed at least as rapidly as
under the method of distribution selected by the Participant as of his date of
death.
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If a Participant dies prior to the commencement of distribution of his
Account Balance, distribution of his Account Balance to his designated
Beneficiary shall be completed by December 31 of the calendar year containing
the fifth anniversary of his death, unless one of the following exceptions
apply:
(a) If the Participant's Account Balance is payable to or for the benefit
of a designated Beneficiary, it may be distributed over the life of such
Beneficiary (or over a period not extending beyond the life expectancy of
such Beneficiary), provided such distribution commences no later than the
December 31 following the close of the calendar year in which the
Participant's death occurred.
(b) In the event that the Participant's spouse is his designated
Beneficiary, distribution to the spouse must commence no later than the
later of the December 31 of the calendar year in which the deceased
Participant would have attained age 70 1/2 had he survived or the December
31 following the close of the calendar year in which the Participant's
death occurred. If the surviving spouse dies before distribution to such
spouse has commenced, then the five year distribution requirement of this
Section shall apply as if the spouse were the Participant.
If the Participant has not designated a method of distribution in accordance
with (a) or (b) above, the Participant's designated Beneficiary must elect the
method of distribution no later than the earlier of (1) December 31 of the
calendar year in which distributions would be required to begin under this
Section, or (2) December 31 of the calendar year which contains the fifth
anniversary of the date of death of the Participant. If the Participant has no
designated Beneficiary, or if the designated Beneficiary does not elect a method
of distribution,
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distribution of the Participant's entire interest must be completed by December
31 of the calendar year containing the fifth anniversary of the Participant's
death.
For purposes of this section, any amount paid to a child of the
Participant will be treated as if it had been paid to the surviving spouse if
the amount becomes payable to the surviving spouse when the child reaches the
age of majority. For purposes of this Section only, distribution of a
Participant's interest is considered to begin on the Participant's Required
Beginning Date (or, if (b) above is applicable, the date distribution is
required to begin to the surviving spouse). If distribution in the form of an
annuity irrevocably commences to the Participant before the Required Beginning
Date, the date distribution is considered to begin is the date distribution
actually commences.
If the Trustee makes distribution in accordance with the exceptions in
either clause (a) or (b), the minimum distribution for a calendar year equals
the Participant's Nonforfeitable Account Balance as of the latest Accounting
Date preceding the beginning of the calendar year (adjusted by distributions
made after the Accounting Date but prior to the end of the calendar year),
divided by the designated Beneficiary's life expectancy without recalculation. A
distribution to the Beneficiary in the form of an annuity will satisfy the
minimum distribution requirements of this Section 7.04 if the method of
distribution provides substantially nonincreasing payments and otherwise
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satisfies applicable Treasury regulations. The Committee shall use the unisex
life expectancy multiples under Treasury regulation Section 1.72-9 for purposes
of applying this paragraph. In construing this Section 7.04, the method of
distribution to the Participant's Beneficiary must satisfy Section 401 (a) (9)
of the Code and the applicable Treasury regulations.
7.05 MINIMUM DISTRIBUTION REQUIREMENTS. Notwithstanding anything else
to the contrary herein, the Committee may not direct the Trustee to distribute
the Participant^'s Nonforfeitable Account Balance, nor may the Participant elect
to have the Trustee distribute his Account Balance over a period extending
beyond the Participant's life expectancy or over a period extending beyond the
joint life and last survivor life expectancy of the Participant and his
designated Beneficiary. The minimum distribution for a calendar year equals the
Participant's Nonforfeitable Account Balance as of the most recent Accounting
Date preceding the calendar year (adjusted for allocations of contributions,
forfeitures and distributions made after the Accounting Date but prior to the
end of the calendar year, if applicable), divided by the applicable life
expectancy or, if the Participant's spouse is not his designated Beneficiary,
the applicable divisor determined from the table set forth in Q&A-4 of Section
1.401(a)(9)-2 of the proposed regulations. The applicable life expectancy shall
be the life expectancy (or joint and last survivor expectancy) calculated
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using the attained age of the Participant (or designated Beneficiary) as of the
Participant's (or designated Beneficiary's) birthday in the first distribution
calendar year reduced by one for each calendar year which elapsed since the date
life expectancy was first calculated. Applicable life expectancies will be
determined under the unisex life expectancy multiples under Treasury regulation
Section 1.72-9, and will not be recomputed. The minimum distribution required
for the Participant's first distribution calendar year must be made on or before
the Participant's Required Beginning Date. The minimum distribution for other
calendar years, including the minimum distribution for the distribution calendar
year in which the Participant's Required Beginning Date occurs, must be made on
or before December 31 of that distribution calendar year. The first distribution
calendar year is the calendar year immediately preceding the calendar year which
contains the Participant's Required Beginning Date. All distributions under the
Plan must be made in accordance with Section 401(a)(9) of the Code and the
Treasury regulations thereunder. To the extent provisions of this Plan are
inconsistent with Section 401(a)(9) of the Code, Section 401(a)(9) of the Code
will override such provisions.
7.06 IMMEDIATE DISTRIBUTION. If the Participant's Nonforfeitable Account Balance
is $3,500 or less, including voluntary contributions, if applicable, the
Committee will immediately distribute such amount to the Participant without his
consent upon his termination of employment. No distribution
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may be made pursuant to this Section after the Annuity Starting Date without the
consent of the Participant, and if applicable, the Participant's spouse.
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ARTICLE VIII
WITHDRAWALS
8.01 HARDSHIP WITHDRAWAL. If a Participant elects to withdraw all or any
part of his Salary Reduction Contribution Account, such withdrawal will require
the consent of the Committee and such consent shall be given only if, under
uniform rules of application, the Committee determines that the purpose of the
withdrawal is to meet heavy and immediate financial needs of the Participant and
the amount of the hardship distribution requested is necessary to satisfy the
specified need. Withdrawals are permitted only for (1) payment of college or
graduate school tuition and related educational fees for college or graduate
school for the next 12 months for the Participant, the Participant's spouse,
children or dependents; (2) costs directly related to the purchase of a
principal residence for the Participant, excluding mortgage payments; (3)
payments necessary to prevent the Participant's eviction from, or foreclosure on
the mortgage of, the Participant's principal residence; and (4) expenses for
medical care, to the extent not covered by insurance, which have either been
previously incurred by the Participant, the Participant's spouse or dependents
or are necessary for the Participant, the Participant's spouse or dependents to
obtain medical care. The foregoing definition of hardship may be altered by the
Committee, as may the time, amount and manner of distributions under this
Section, to the extent required by the Code or applicable regulations. No
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distributions may be made under this Section to the extent that such
distributions would be allocable to income allocable to Salary Reduction
Contributions.
The amount of the hardship distribution shall not exceed the amount of the
Participant's immediate and heavy financial need. The amount of an immediate and
heavy financial need may include any amounts necessary to pay any Federal, state
or local income taxes or penalties reasonably anticipated to result from the
distribution. Prior to obtaining a hardship distribution from this Plan, the
Participant must obtain all distributions, other than hardship distributions,
and all nontaxable loans from this Plan and from all other plans maintained by
the Employer.
A hardship distribution from this Plan will be permitted only if all other
plans maintained by the Employer prohibit the Participant from making (a)
elective contributions and Employee contributions for at least twelve (12)
months subsequent to the hardship distribution; and (b) elective contributions
for the taxable year subsequent to the taxable year of the hardship
distribution, which exceed the limit on such deferrals under Section 402(g) of
the Code for such subsequent taxable year less the amount of such Participant's
elective contributions for the taxable year of the hardship distribution.
A Participant who has obtained a hardship distribution shall not make Salary
Reduction Contributions to this Plan for at least twelve (12) months subsequent
to the hardship distribution nor shall the Participant make Salary Reduction
Contributions to this Plan for the taxable year subsequent to the taxable year
of
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the hardship distribution, which exceed the limit on such deferrals under
Section 402(g) of the Code for such subsequent taxable year less the amount of
such Participant's Salary Reduction Contributions for the taxable year of the
hardship distribution.
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ARTICLE IX
INVESTMENT OF CONTRIBUTIONS
9.01 FUNDING VEHICLE. The Employer has entered into a Trust Agreement
with the Trustee providing for the establishment of a Trust to which all Salary
Reduction Contributions, matching contributions, base contributions and
voluntary contributions, if any, shall be contributed and from which all
benefits under the Plan shall be paid.
9.02 INVESTMENT FUNDS. The Trustee may, pursuant to the direction of the
Committee, establish and maintain separate subfunds into which the Participants
may direct the investment of their Accounts.
9.03 INVESTMENT ELECTIONS. If the Trustee maintains separate subfunds
pursuant to Section 9.02, each Participant's Account Balance shall be allocated
to any or all of the subfunds, in multiples of ten percent (10%), as the
Participant shall elect. Such election shall be made by the Participant in
writing and shall be filed with the Committee. A Participant's initial election
shall be made during the Enrollment Period preceding his entry into the Plan.
Separate accounts will be maintained reflecting the interest of each Participant
attributable to each subfund.
9.04 CHANGE IN INVESTMENT ELECTION. Any investment election made by the
Participant shall be deemed to be a continuing election until changed. A
Participant periodically may change his investment election with respect to
future
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contributions by filing an appropriate notice with the Committee. Such change
shall be effective only with respect to future amounts deferred from the
Participant's Compensation and for future matching contributions and base
contributions, if any.
9.05 TRANSFERS BETWEEN FUNDS. A Participant periodically may direct the
Trustee to transfer designated amounts from one subfund to another.
9.06 INVESTMENT OF EARNINGS. All earnings (whether denominated income,
capital gain or otherwise) from investments in each subfund shall be reinvested
in the same subfund.
9.07 LOAN FUNDS. Notwithstanding anything in this Article IX to the
contrary, any Participant who borrows from the Trust Fund pursuant to Article X
will be treated as having directed the Trustee to allocate such portion of his
Account Balance as is equal to the borrowed amount to the Participant's Loan
Fund. The Loan Fund, and the promissory note executed by the Participant held
therein, remains a part of the Trust Fund, but to the extent of the loan
outstanding at any time, the borrowing Participant's Loan Fund alone shares in
any interest paid on the loan, and it alone bears any expense or loss it incurs
in connection with the loan. The Trustee may retain in an interest-bearing
account any interest and principal paid on the borrowing Participant's loan in
the Loan Fund on behalf of the borrowing Participant until the Trustee deems it
appropriate to add the amount paid to the Participant's Loan Fund under the Plan
(plus interest, if any) back to the Participant's Account
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Balance, at the same time reducing the amount treated as having been allocated
to the Participant's Loan Fund by the amount of principal payments made with
respect to the loan.
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ARTICLE X
LOANS
10.01 LOAN APPLICATIONS. A Participant, or a Qualified Beneficiary may
make application to the Trustees to borrow from the Trust Fund, and the Trustees
may, in their sole discretion, permit such loan, provided, however, that such
loans shall be made available to all such Participants and Qualified
Beneficiaries on a reasonably equivalent basis. A Qualified Beneficiary for this
purpose, is a designated Beneficiary who is a party-in-interest as defined in
Section 3(14) of the Employee Retirement Income Security Act of 1974, as
amended. The authority herein granted to the Trustees to approve loans from the
Trust Fund shall not be used as a means of distributing benefits before they
otherwise become due.
10.02 LOAN TERMS AND CONDITIONS.
(a) The aggregate amount of all such loans to a Participant from this Plan
shall not, at the time any such loan is made, exceed the lesser of (i) $50,000
reduced by the excess (if any) of the highest outstanding balance of loans from
the Plan during the one year period ending on the day before the date on which
such loan was made, over the outstanding balance of loans from the Plan on the
date on which such loan was made, or (ii) fifty percent (50%) of the vested
portion of the Participant's Account Balance at the time of the making of such
loan. For purposes of this limitation, all loans from all qualified plans
maintained by the Employer or by any entity which is required to be aggregated
with the Employer pursuant to
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Sections 414(b), (c), (m) or (o) must be aggregated. The minimum loan amount is
$1,000, and no Participant may have more than two (2)loans from the Plan
outstanding at any one time.
(b) Loans shall be made pursuant to notes approved by the Trustees which
shall bear a reasonable interest rate equal to the prevailing rate charged by
lenders for similar loans and shall specify the time and manner of repayment, as
determined by the Trustees.
(c) Loans shall not be made available to Participants who are Highly
Compensated Employees in an amount greater than the amount made available to
other Participants.
(d) For all loans, the Participant must consent in writing within the 90
day period before the making of the loan to the possible reduction in the
Participant's Account Balance if the terms of the loan are not properly
fulfilled and fully executed. The consent must be in writing, must acknowledge
the effect of the loan, and must be witnessed by a Plan representative or notary
public. A new consent shall be required if the Account Balance is used for
renegotiation, extension, renewal, or other revision of the loan.
(e) All loans shall be adequately secured. A loan shall be deemed to be
adequately secured if the aggregate amount of all such loans to a Participant
does not exceed fifty percent (50%) of the vested amount of the Participant's
Account Balance at the time of the making of such loan. If, at any time, the
aggregate amount of outstanding loans to a Participant does
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exceed that limitation, then the Trustees shall require the Participant to repay
the amount of principal balance due on such loans to an amount not in excess of
such limitation, or to adequately secure with collateral other than the vested
amount of the Participant's Account Balance the amount by which such loans
exceed the limitation. The Trustees shall have sole discretion to determine the
nature and amount of security required.
(f) The period for repayment of a loan issued pursuant to this Section
must, by the terms of the note, not exceed five (5) years. Notwithstanding the
above, if the purpose or use of the loan, as determined at the time of issuance,
is to acquire any dwelling unit which within a reasonable time is to be used as
the principal residence of the Participant, the period for repayment of the loan
may be extended to ten (10) years. Repayment of a loan shall be made through
payroll deduction. Any loan shall, by its terms, require that repayment of
principal and interest be amortized quarterly over the period of the loan.
(g) In the event the Participant ceases to make Salary Reduction
Contributions, repayment of the loan shall be accelerated and any amount due
shall be paid from the Loan Fund unless otherwise satisfied by the Participant.
(h) In the event of default, foreclosure on the note and attachment of
security will not occur until a distributable event occurs in the Plan.
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(i) No loans will be made to any shareholder-employee or Owner-Employee.
For purposes of this requirement, a shareholder-employee means an employee or
officer of an electing small business (Subchapter S) corporation who owns (or is
considered as owning within the meaning of Section 318(a)(1) of the Code), on
any day during the taxable year of such corporation, more than 5% of the
outstanding stock of the corporation.
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ARTICLE XI
EMPLOYER ADMINISTRATIVE PROVISIONS
11.01 INFORMATION TO COMMITTEE. The Employer shall supply current
information to the Committee as to the name, date of birth, date of employment,
annual Compensation, leaves of absence and date of termination of employment of
each Employee who is, or who will be eligible to become, a Participant under the
Plan, together with any other information which the Committee considers
necessary. The Employer's records as to the current information the Employer
furnishes to the Committee shall be conclusive as to all persons.
11.02 NO LIABILITY. The Employer assumes no obligation or responsibility
to any of its Employees, Participants or Beneficiaries for any act of, or
failure to act, on the part of its Committee or the Trustees.
11.03 INDEMNITY OF COMMITTEE. The Employer indemni^ties and holds harmless
the members of the Committee, and each of them, from and against any and all
loss resulting from liability to which the Committee or members of the Committee
may be subjected by reason of any act or conduct (except willful misconduct or
gross negligence) in their official capacities in the administration of this
Plan or Trust or both, including all expenses reasonably incurred in their
defense in case the Employer fails to provide such defense. The indemnification
provisions of this Section 11.03 shall not relieve any Committee
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member from any liability he may have under the Code or ERISA for breach of a
fiduciary duty.
11.04 FACILITY OF PAYMENT. If satisfactory evidence is received that a
person entitled to receive any benefits is physically incapable or mentally
incompetent to receive such payment and give a valid release therefor, and
another person or institution has been maintaining or has custody of such
person, payment of such benefit may be made to such person or institution and
the release of such person or institution shall be a valid and complete
discharge of any liability under this Plan.
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ARTICLE XII
PARTICIPANT ADMINISTRATIVE PROVISIONS
12.01 BENEFICIARY DESIGNATION. The Beneficiary of a married Participant
shall be the surviving spouse. A married Participant may designate a Beneficiary
other than the spouse only if the Participant obtains the written consent of the
spouse to the alternate beneficiary, the spouse acknowledges the effect of the
consent and the spouse's signature is witnessed by a notary public or Plan
representative. Subject to the foregoing limitation, any Participant may from
time to time designate, in writing, any person or persons, contingently or
successively, to whom the Trustees shall pay his Account Balance in the event of
his death. The Committee shall prescribe the form for the written designation of
Beneficiary and, upon the Participant's filing the form with the Committee, it
effectively shall revoke all designations filed prior to that date by the same
Participant.
12.02 NO BENEFICIARY DESIGNATION. If a Participant fails to name a
Beneficiary, or if the Beneficiary named by a Participant predeceases him, then
the Trustees shall pay the Participant's Account Balance (subject to the
provisions of Articles V and VII) in the following order of priority to:
(a) The Participant's surviving spouse:
(b) The Participant's surviving children, including adopted children, in
equal shares;
(c) The Participant's surviving parents, in equal
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--shares; or
(d) The legal representative of the estate of the last to die of the
Participant and his Beneficiary.
The Committee shall direct the Trustees as to whom the Trustees shall make
payment under this Section 12.02.
12.03 PERSONAL DATA TO COMMITTEE. Each Participant and each Beneficiary of
a deceased Participant must furnish to the Committee such evidence, data or
information as the Committee considers necessary or desirable for the purpose of
administering the Plan. The provisions of this Plan are effective for the
benefit of each Participant upon the condition precedent that each Participant
will furnish promptly full, true and complete evidence, data and information
when requested by the Committee, provided that the Committee shall advise each
Participant of the effect of his failure to comply with its request.
12.04 ADDRESS FOR NOTIFICATION. Each Participant and each Beneficiary of a
deceased Participant shall file with the Committee from time to time, in
writing, his post office address and any change of post office address. Any
communication, statement or notice addressed to a Participant or Beneficiary at
his last post office address filed with the Committee, or as shown on the
records of the Employer, shall bind the Participant, or Beneficiary, for all
purposes of this Plan.
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12.05 ASSIGNMENT OR ALIENATION,. Neither a Participant nor a Beneficiary
shall anticipate, assign or alienate (either at law or in equity) any benefit
provided under the Plan, and the Trustees shall not recognize any such
anticipation, assignment or alienation. Furthermore, a benefit under the Plan is
not subject to attachment, garnishment, levy, execution or other legal or
equitable process. The Committee shall, however, abide by any Qualified Domestic
Relations Order as defined in Section 414(p) of the Code and Section 206(d)(3)
of ERISA which is served upon the Plan.
12.06 NOTICE OF CHANGE IN TERMS. The Committee, within the time prescribed
by ERISA and the applicable regulations thereunder, shall furnish all
Participants and Beneficiaries with a summary description of any material
amendment to the Plan or notice of discontinuance of the Plan and all other
information required by ERISA to be furnished without charge.
12.07 INFORMATION AVAILABLE. Any Participant in the Plan or any
Beneficiary may examine copies of the Plan description, latest annual report,
any bargaining agreement, this Plan and Trust, as well as any contract or other
instrument under which the Plan was established or is operated. The Committee
will maintain all of the items listed in this Section 12.07 in its office, or in
such other place or places as it may designate from time to time in order to
comply with the regulations issued under ERISA, for examination during
reasonable business hours. Upon the written request of a Participant or
Beneficiary the Committee shall furnish him with
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a copy of any item listed in this Section 12.07. The Committee may make a
reasonable charge to the requesting person for the copy so furnished.
12.08 APPEAL PROCEDURE FOR DENIAL OF BENEFITS. The Committee shall provide
adequate notice in writing to any Participant or to any Beneficiary ("Claimant")
whose claim for benefits under the Plan the Committee has denied. The
Committee^'s notice to the Claimant shall set forth:
(a) The specific reason for the denial;
(b) Specific references to pertinent Plan provisions on which the
Committee based its denial;
(c) A description of any additional material and information that is
needed; and
(d) That any appeal the Claimant wishes to make of the adverse
determination must be in writing to the Committee within seventy-five (75)
days after receipt of the Committee's notice of denial of benefits. The
Committee's notice must further advise the Claimant that his failure to
appeal the action to the Committee in writing within the seventy-five (75)
day period will render the Committee's determination final, binding and
conclusive.
If the Claimant should appeal to the Committee, he, or his duly authorized
representative, may submit, in writing, whatever issues and comments he or his
duly authorized representative feels are pertinent. The Claimant, or his duly
authorized representative, may review pertinent Plan documents. The Committee
shall re-examine all facts to the appeal and make a final determination as to
whether the denial of benefits is
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justified under the circumstances. The Committee shall advise the Claimant of
its decision within sixty (60) days of the Claimant's written request for
review, unless special circumstances (such as a hearing) would make the
rendering of a decision within the sixty (60) day limit unfeasible, but in no
event shall the Committee render a decision respecting a denial for a claim for
benefits later than one hundred twenty (120) days after its receipt of a request
for review.
The Committee's notice of denial of benefits shall identify the name and
address of each member of the Committee to whom the Claimant may forward his
appeal.
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ARTICLE XIII
COMMITTEE DUTIES WITH RESPECT TO PARTICIPANT^IS ACCOUNT
13.01 MEMBERS' COMPENSATION AND EXPENSES. The Company shall appoint a
Committee to administer the Plan, the members of which may or may not be
Participants in the Plan. The members of the Committee shall serve without
compensation for services as such, but the Employer shall pay all expenses of
the Committee, including the expense for any bond required under ERISA.
13.02 TERM. Each member of the Committee shall serve until his successor
is appointed.
13.03 POWERS. In case of a vacancy in the membership of the Committee, the
remaining members of the Committee may exercise any and all of the powers,
authority, duties and discretion conferred upon the Committee pending the
filling of the vacancy.
13.04 GENERAL. The Committee shall have the following powers and duties:
(a) To select a Secretary, who need not be a member of the Committee;
(b) To determine the rights of eligibility of an Em- ployee to participate
in the Plan;
(c) To adopt rules of procedure and regulations necessary for the proper
and efficient administration of the Plan;
(d) To enforce the terms of the Plan and the rules and regulations it
adopts;
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(e) To direct the Trustee as respects the crediting and distribution of
the Trust;
(f) To review and render decisions respecting a claim for (or denial of a
claim for) a benefit under the Plan;
(g) To furnish the Employer with information which the Employer may
require for tax or other purposes;
(h) To engage the services of agents whom it may deem advisable to assist
it with the performance of its duties; and
(i) To exercise broad discretionary authority to determine Employees' and
Participants' eligibility for benefits as well as to construe the terms of
the Plan.
The Committee shall exercise all of its powers, duties and discretion
under the Plan in a uniform and nondiscriminatory manner.
13.05 MANNER OF ACTION. The decision of a majority of the members
appointed and qualified shall control.
13.06 AUTHORIZED REPRESENTATIVE. The Committee may authorize any one (1)
of its members, or its Secretary, to sign on its behalf any notices, directions,
applications, certificates, consents, approvals, waivers, letters or other
documents. The Committee must evidence this authority by an instrument signed by
all members and filed with the Trustee.
13.07 INDIVIDUAL STATEMENT. As soon as practicable after the Accounting Date of
each Plan Year but within the time prescribed by ERISA and the regulations under
ERISA, the Committee will deliver to each Participant a statement
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reflecting the condition of his Account Balance in the Trust as of that date and
such other information ERISA requires be furnished to the Participant or
Beneficiary. A second such statement will be provided as soon as practicable
after the end of the second calendar quarter of each year. No Participant,
except a member of the Committee, shall have the right to inspect the records
reflecting the Account Balance of any other Participant.
13.08 LOAN POLICY. This Section 13.08 specifically authorizes the Trustee
of the Plan to establish a Participant loan program and make loans on a
nondiscriminatory basis in accordance with this Plan and the loan policy
established by the Committee. The loan policy must be a written document and
must include the identity of the person authorized to administer the Participant
loan program, a procedure for applying for a loan, the criteria for approving or
denying a loan, the limitations, if any, on the types and a-mounts of loans
available, the procedure for determining a reasonable rate of interest, the
types of collateral which may secure a loan, and the events constituting default
and the steps the Plan will take to preserve Plan assets in the event of
default.
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ARTICLE XIV
FIDUCIARY DUTIES AND RESPONSIBILITIES
14.01 GENERAL FIDUCIARY STANDARD OF CONDUCT. Each Fiduciary of the Plan
shall discharge his duties hereunder solely in the interest of the Participants
and their Beneficiaries and for the exclusive purpose of providing benefits to
Participants and their Beneficiaries and defraying reasonable expenses of
administering the Plan. Each Fiduciary shall act with the care, skill, prudence
and diligence under the circumstances that a prudent man acting in a like
capacity and familiar with such matters would use in conducting an enterprise of
like character and with like aims, in accordance with the documents and
instruments governing this Plan, insofar as such documents and instruments are
consistent with this standard.
14.02 SERVICE IN MULTIPLE CAPACITIES. Any person or group of persons may
serve in more than one Fiduciary capacity with respect to this Plan.
14.03 LIMITATIONS ON FIDUCIARY LIABILITY. Nothing in this Plan shall be
construed to prevent any Fiduciary from receiving any benefit to which he may be
entitled as a Participant or Beneficiary under this Plan, so long as the benefit
is computed and paid on a basis which is consistent with the terms of this Plan
as applied to all other Participants and Beneficiaries. This Plan shall not be
interpreted to prevent any Fiduciary from receiving any reasonable compensation
for services rendered, or
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for the reimbursement of expenses properly and actually incurred in the
performance of his duties with the Plan; except that no person so serving who
already receives full-time pay from the Employer shall receive compensation from
this Plan, except for reimbursement of expenses properly and actually incurred.
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ARTICLE XV
TOP HEAVY RULES
15.01 MINIMUM EMPLOYER CONTRIBUTION. If this Plan becomes top heavy, the
Plan guarantees a minimum contribution of three percent (3%) of Compensation for
each Non-Key Employee who is a Participant employed by the Employer on the
Accounting Date of the Plan Year. For purposes of determining whether the
minimum contribution is satisfied, Salary Reduction Contributions and matching
contributions shall be disregarded. The minimum contribution shall not be
forfeited under Sections 411(a)(3)(B) or (D) of the Code. The Plan satisfies the
guaranteed minimum contribution for the Non-Key Employee if the Non-Key
Employee's contribution rate is at least equal to the minimum contribution.
Notwithstanding the above, if the contribution rate for the Key Employee
with the highest contribution rate is less than three percent (3%), the
guaranteed minimum contribution for NonKey Employees shall equal the highest
contribution rate received by a Key Employee (provided that the Employer does
not also sponsor a defined benefit plan which has designated this Plan to
provide the top heavy minimum). The contribution rate is the sum of Employer
contributions (not including Employer contributions to Social Security) and
forfeitures allocated to the Participant's account for the Plan Year divided by
his Compensation for the Plan Year. To determine the contribution
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rate, the Committee shall consider all qualified defined contribution plans
maintained by the Employer as a single plan.
15.02 ADDITIONAL CONTRIBUTION. If the contribution rate for the Plan Year
with respect to a Non-Key Employee described in Section 15.01 is less than the
minimum contribution, the Employer will increase its contribution for such
Employee to the extent necessary so that his contribution rate for the Plan Year
will equal the guaranteed minimum contribution. The Committee shall allocate the
additional contribution to the Matching Contribution Account of the Non-Key
Employee for whom the Employer makes the contribution.
15.03 DETERMINATION OF TOP HEAVY STATUS. The Plan is top heavy for a Plan
Year if the top heavy ratio as of the Determination Date exceeds sixty percent
(60%). The top heavy ratio is a fraction, the numerator of which is the sum of
the present value of the Account Balances of all Key Employees as of the
Determination Date and distributions made within the five (5) Plan Year period
ending on the Determination Date, and the denominator of which is a similar sum
determined for all Employees. The Committee shall calculate the top heavy ratio
without regard to the Account Balance attributable to any Non-Key Employee who
was formerly a Key Employee. The Committee shall calculate the top heavy ratio,
including the extent to which it must take into account contributions not made
as of the Determination Date, distributions, rollovers and transfers, in
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accordance with Section 416 of the Code and the regulations thereunder.
If the Employer maintains other qualified plans (including a simplified
employee pension plan) this Plan is top heavy only if it is part of the Required
Aggregation Group, and the top heavy ratio for both the Required Aggregation
Group and the Permissive Aggregation Group exceeds sixty percent (60%). The
Committee will calculate the top heavy ratio in the same manner as required by
the first paragraph of this Section 15.03, taking into account all plans within
the aggregation group. The Committee shall calculate the present value of
accrued benefits and the other amounts the Committee must take into account
under defined benefit plans or simplified employee pension plans included within
the group in accordance with the terms of those plans, Section 416 of the Code
and the regulations thereunder. The Committee shall calculate the top heavy
ratio with reference to the Determination Dates that fall within the same
calendar year.
15.04 LIMITATION ON ALLOCATIONS. If, during any Limitation Year, the
Participant is a participant in both a defined contribution plan and a defined
benefit plan which are a part of a top heavy group, the Committee shall apply
the limitations of Article IV to such Participant by substituting "1.0%" for
"1.25%" each place it appears in Section 4.06. This Section 15.04 shall not
apply if:
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(a) The Plan would satisfy Section 15.01 if the guaranteed minimum
contribution was one percent (1%) greater than the guaranteed minimum
contribution the Committee otherwise would calculate; and
(b) The top heavy ratio does not exceed ninety percent (90%).
15.05 DEFINITIONS. For purposes of applying the pro- visions of this
Article XV:
(a) "Key Employee" shall mean, as of any Determination Date, any Employee
or former Employee, or any Beneficiary thereof, who, at any time during
the Plan Year (which includes the Determination Date) or during the
preceding four Plan Years,
(i) is an officer of the Employer who has annual compensation in
excess of 50% of the amount in effect under Section 415(b)(1)(A) of
the Code;
(ii) one of the ten Employees owning the largest interests in the
Employer with annual Compensation in excess of the dollar limit on
Annual Additions to a defined contribution plan under Section 415 of
the Code;
(iii) a more than five percent (5%) owner of the Employer; or
(iv) a more than one percent (1%) owner of the Employer who has
annual Compensation of more than $150,000.
The constructive ownership rules of Section 318 of the Code will apply to
determine ownership in the Employer.
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The Committee will make the determination of who is a Key Employee in
accordance with Section 416(i)(1) of the Code and the regulations
thereunder.
(b) "Non-Key Employee" is an Employee who does not meet the definition of
Key Employee.
(c) "Required Aggregation Group" means: (1) Each qualified plan of the
Employer in which at least one Key Employee participates; and (2) Any
other qualified plan of the Employer which enables a plan described in (1)
to meet the requirements of Sections 401(a)(4) or 410 of the Code. Any
terminated plan that covered a' Key ^-80- Employee and was maintained
within the five year period ending on the Determination Date shall also be
included in the Required Aggregation Group.
(d) "Permissive Aggregation Group" is the Required Aggregation Group plus
any other qualified plans maintained by the Employer, but only if such
group would satisfy in the aggregate the requirements of Sections 401(a)
(4) and 410 of the Code. The Committee shall determine which plan to take
into account in determining the Permissive Aggregation Group.
(e) "Determination Date" for any Plan Year is the Accounting Date of the
preceding Plan Year or, in the case of the first Plan Year of the Plan,
the Accounting Date of that Plan Year.
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ARTICLE XVI
EXCLUSIVE BENEFIT, AMENDMENT AND TERMINATION
16.01 EXCLUSIVE BENEFIT. The Employer shall have no beneficial interest in
any asset of the Trust and no part of any asset in the Trust shall ever revert
to or be repaid to an Employer, either directly or indirectly; nor prior to the
satisfaction of all liabilities with respect to the Participants and their
Beneficiaries under the Plan, shall any part of the corpus or income of the
Trust Fund, or any asset of the Trust, be used for, or diverted to, purposes
other than for the exclusive benefit of the Participants or their Beneficiaries.
Notwithstanding the foregoing, if the Commissioner of Internal Revenue,
upon the Employer's timely request for initial approval of this Plan, determines
that the Trust created under the Plan is not a qualified trust exempt from
Federal income tax, then the Trustees, upon written notice from the Employer,
shall return the Employer's contributions and increments attributable to the
contributions to the Employer. The Trustees must make the return of the Employer
contribution under this Section 17.01 within one (1) year of a final disposition
of the Employer's request for initial approval of the Plan. The Plan and Trust
shall terminate upon the Trustees' return of the Employer's contributions.
The Employer contributes to this Plan on the condition that its contribution is
deductible under Section 404 of the Code. If the Employer's contribution is
disallowed as a deduction, or if
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the Employer's contribution is attributable to a mistake of fact, the Trustee
shall return to the Employer the amount contributed over, as relevant, the
amount that would have been contributed had no mistake of fact occurred, or the
amount of the deductible contribution. Earnings attributable to the excess
contribution may not be returned to the Employer, but losses attributable
thereto must reduce the amount returned. The excess contributions must be
returned within one year of the disallowance or mistake. Further, if the amount
returned to the Employer would cause any Participant's Account Balance to be
reduced to less than the balance which would have been in his Account had the
mistaken or nondeductible amount not been contributed, then the amount to be
returned to the Employer must be limited so as to avoid the reduction. The
Trustee may require the Employer to furnish it with whatever evidence the
Trustee deems necessary to enable the Trustee to confirm that the amount the
Employer has demanded be returned as properly returnable under the Code and
ERISA.
16.02 AMENDMENT BY COMPANY. The Company shall have the right at any time
and from time to time to amend this Agreement in any manner it deems necessary
or advisable including any amendment in order to qualify (or maintain
qualification of) this Plan and the Trust created under it under the appropriate
provisions of the Code. An amendment to the Plan's vesting shall not decrease
any Participant's Nonforfeitable Account Balance as of the later of the date the
amendment is adopted or becomes effective. If the Plan's vesting schedule is
amended,
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each Participant with three (3) or more Years of Service may elect to have the
vesting schedule applicable immediately prior to the amendment continue to
apply. The period during which such election may be made shall commence with the
date the amendment is adopted or deemed to be made and shall end on the latest
of:
(1) 60 days after the amendment is adopted;
(2) 60 days after the amendment becomes effective; or
(3) 60 days after the Participant is issued written notice of the
amendment by the Employer or Committee.
No amendment shall authorize or permit any of the Trust Fund (other than
the part required to pay taxes and administration expenses) to be used for or
diverted to purposes other than for the exclusive benefit of the Participants or
their Beneficiaries or estates. No amendment shall cause or permit any portion
of the Trust Fund to revert to or become the property of the Employer; and the
Company shall not make any amendment which affects the rights, duties or
responsibilities of the Trustees or the Committee without the written consent of
the affected Trustee or the affected member of the Committee. No amendment shall
decrease a Participant's Account Balance or eliminate an optional form of
benefit to which the Participant is entitled as a result of service prior to the
amendment. The Company shall make all amendments in writing. Each amendment
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shall state the date to which it is either retroactively or prospectively
effective.
16.03 DISCONTINUANCE. The Company shall have the right, at any time, to
suspend or discontinue its contributions under the Plan, and to terminate, at
any time, this Plan. Upon complete discontinuance of contributions, the Account
Balance of each affected Participant shall be one hundred (100%) percent
Nonforfeitable.
16.04 FULL VESTING ON TERMINATION. Notwithstanding any other provision of
this Plan to the contrary, upon either full or partial termination of the Plan,
an affected Participant's right to his Account Balance shall be one hundred
percent (100%) Nonforfeitable. The Plan shall terminate upon the first to occur
of the following:
(a) The date terminated by action of the Employer provided the Employer
gives the Trustee thirty (30) days' prior notice of termination;
(b) The date the Employer shall be judicially declared bankrupt or
insolvent; or
(c) The dissolution, merger, consolidation or reorganization of the
Employer or the sale by the Employer of all or substantially all of its
assets, unless the successor or purchaser makes provision to continue the
Plan, in which event the successor or purchaser shall substitute itself as
the Employer under this Plan.
16.05 MERGER. The Trustee shall not consent to, or be a party to, any
merger or consolidation with another plan, or to
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a transfer of assets or liabilities to another plan, unless immediately after
the merger, consolidation or transfer, the surviving plan provides each
Participant a benefit equal to or greater than the benefit each Participant
would have received had the Plan terminated immediately before the merger or
consolidation or transfer. The Trustee possesses the specific authority to enter
into merger agreements or direct transfer of assets agreements with the trustees
of other retirement plans described in Section 401(a) of the Code and to accept
the direct transfer of plan assets, or to transfer plan assets, as a party to
any such agreement.
16.06 TRUSTEE TRANSFERS. Effective as of January 1, 1993, a Participant or
Beneficiary may direct the Trustee to transfer any rollover eligible
distribution directly to an individual retirement account, a Section 403(b)
annuity plan or another qualified plan. Any such distribution must comply with
all applicable notice and spousal consent rules.
16.07 EMPLOYMENT NOT GUARANTEED. Nothing contained in this Plan or any
modification or amendment to the Plan, or in the creation of any Salary
Reduction Contribution Account, or the payment of any benefit, shall give any
Participant the right to continued employment, or any legal or equitable right
against the Employer, an Employee of the Employer, the Trustee, or their agents
or employees, except as expressly provided by the Plan, the Trust, ERISA or the
Code or by a separate agreement.
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16.08 STATE LAW. Illinois law shall determine all questions arising with
respect to the provisions of this Plan, except to the extent Federal statute
supersedes Illinois law.
EXHIBIT I
FACTORY CARD OUTLET OF AMERICA LTD.
UNANIMOUS WRITTEN CONSENT OF DIRECTORS IN LIEU OF MEETING
We, the undersigned, being all of the directors of the Factory card Outlet
of America Ltd. (the "Company"), do hereby consent to the adoption of the
following resolutions:
WHEREAS, the Company maintains the Factory Card Outlet of America Ltd.
Incentive Savings Plan (the "Plan") for the benefit of its employees; and
WHEREAS, the Company restated the Plan in its entirety in order to comply
with the Tax Reform Act of 1986 and other recent tax legislation; and
WHEREAS, the Board of Directors have authorized the officers of the
Company to take appropriate action in furtherance of the Plan's qualification;
and
WHEREAS, the Internal Revenue Service has issued a favorable determination
letter upon the Plan's restatement; and
WHEREAS, the Company now desires to further amend the Plan to comply with
the Unemployment Compensation Amendments Act of 1992, to comply with the Omnibus
Budget Reconciliation
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Act of 1993, to clarify the Plan's consent rules and plan amendment procedures;
NOW, THEREFORE, be it
RESOLVED, that the Plan is hereby amended pursuant to the terms
of-Amendment No. 1 attached hereto;
FURTHER RESOLVED, that the Board of Directors hereby authorizes and
directs the appropriate officers of the Company to take such actions and to
execute such documents and instruments as are necessary to effectuate the
foregoing resolutions.
IN WITNESS WHEREOF, we have hereunto set our hands this 9th day of
December 1994.
/s/ WILLIAM E. FREEMAN
/s/ J. BAYARD KELLY
/s/ ROBERT BLATBERG
/s/ MICHAEL BARACH
/s/ RICHARD A. DOPPELT
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AMENDMENT NO. 1 TO THE
FACTORY CARD OUTLET OF AMERICA LTD.
INCENTIVE SAVINGS PLAN
Factory Card Outlet of America Ltd. (the "Company") hereby adopts the
following amendment to the Factory Card Outlet of America Ltd. Incentive Savings
Plan (the "Plan") effective January 1, 1994 unless otherwise noted as follows:
1. Section 1.10 of Article I is hereby amended by deleting the third
sentence in its entirety and in its place is substituted the following:
"In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan
Years beginning on or after January 1, 1994, the annual Compensation of
each Employee taken into account under the Plan shall not exceed the
OBRA'93 Annual Compensation Limit. The OBRA'93 Annual Compensation Limit
is $150,000, as adjusted by the Commissioner for increases in the cost of
living in accordance with Section 401(a)(17)(B) of the Code. The
cost-of-living adjustment in effect for a calendar year applies to any
period, not exceeding 12 months, over which Compensation is determined
(determination period) beginning in such calendar year. If a determination
period consists of fewer than 12 months, the OBRA'93 Annual Compensation
Limit will be multiplied by a fraction, the numerator of which is the
number of months in the determination period, and the denominator of which
is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under
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Section 401(a)(17) of the Code shall mean the OBRA'93 Annual Compensation
Limit set forth in this provision.
If Compensation for any prior determination period is taken into account
in determining an Employee's benefits accruing in the current Plan Year,
the Compensation for that prior determination period is subject to the
OBRA'93 Annual Compensation Limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the
first day of the first Plan Year beginning on or after January 1, 1994,
the OBRA'93 Annual Compensation Limit is $150,000."
2. Section 1.10 of Article I is further amended by substituting the phrase
"Section 401(a)(17)" for the number "200,000" in the last sentence.
3. Section 5.01 of Article V is hereby amended by deleting the second
sentence in its entirety and in its place is substituted the following:
"For this purpose a Rollover Contribution means (a) a contribution by an
Employee of a distribution received from the qualified plan of another
employer provided the Employee makes the contribution within 60 days of
his receipt of a distribution which satisfied the requirements of Section
402(a)(5) of the Code before January 1, 1993 and Section 402(c) on or
after January 1, 1993; (b) a contribution by an Employee under Section
408(d)(3) of the Code of the balance in an individual retirement account
or annuity which amount is attributable to a prior rollover distribution
which satisfied the requirements of Section 402(a)(5) of the Code (or
current Section 402(c)); or (c) a direct transfer of the Employee's
interest from the trustee of a qualified plan maintained by another
employer."
4. Section 7.03 of Article VII is hereby amended by
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adding the following after the third sentence:
"Such distribution may commence less than 30 days after the notice
required is given, provided that:
(a) the Committee clearly informs the Participant that the Participant has
a right to a period of at least 30 days after receiving the notice to
consider the decision of whether or not to elect a distribution (and, if
applicable, a particular distribution option), and
(b) the Participant, after receiving the notice, affirmatively elects a
distribution."
5. Section 16.02 of Article XVI is hereby amended byinserting the words
"by written Resolution of the Board of Directors" between the words "Agreement"
and "in" in the first sentence of the first paragraph.
6. Effective January 1, 1993, Section 16-06 of Article XVI of the Plan is
hereby deleted in its entirety and in its place is substituted the following:
16.06 DIRECT ROLLOVERS.
(a) This Section applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this 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.
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(b) Definitions.
(i) Eligible rollover distributions: 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).
(ii) 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 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.
(iii) 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.
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(iv) Direct rollover: A direct rollover is a payment by the Plan to
the eligible retirement plan specified by the distributee."
IN WITNESS WHEREOF, the Company has authorized and directed its duly authorized
officer to execute this Amendment No. 1 to the Plan this 9th day of December
1994.
Corporate Seal FACTORY CARD OUTLET OF AMERICA LTD.
/s/ Carol A. Travis By: /s/ Carol A. Travis
Attest
Title: Vice President and
Secretary
/s/ Mohammed Maali
Vice President and
Controller
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EXHIBIT #4
FACTORY CARD OUTLET CORP.
FACTORY CARD OUTLET OF AMERICA LTD.
SECRETARY'S CERTIFICATE
The undersigned, Carol A. Travis, Secretary of Factory Card Outlet Corp.,
a Delaware corporation (the "Company"), hereby certifies in such capacity as
follows:
Attached hereto is a true copy of a resolution of the Company's Board of
Directors approving the amendments to the Savings Incentive Plan of the
Corporation adopted at a meeting duly held on November 15, 1996. Such resolution
is in full force and effect on the date hereof.
IN WITNESS WHEREOF, the undersigned has signed this Certificate as of the
15th day of November, 1996.
/s/ Carol A. Travis
Secretary
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FACTORY CARD OUTLET CORP.
RESOLUTIONS OF BOARD OF DIRECTORS
At a meeting of the Board of Directors of Factory Card outlet Corp., a
Delaware corporation (the "Corporation") on November 15, 1996, at which a quorum
was present and acting throughout in person or by conference telephone in which
all parties could hear and participate therein, the following resolutions were
adopted by the unanimous approval of the Board of Directors present thereat:
RESOLVED, that the Corporation's Incentive Savings Plan (the "Plan"), as
amended, substantially in the form attached hereto as Exhibit A, is hereby
approved; and be it
FURTHER RESOLVED, that the appropriate officers of the Corporation each be
and hereby is authorized and directed to execute and deliver or cause to
be executed and delivered all such documents, agreements and instruments,
and to take or cause to be taken any such further actions, for and in the
name of and on behalf of the corporation as in such officer's judgment
shall be necessary or advisable to implement the terms of and to
consummate the transactions and purposes contemplated by the foregoing
resolution, the execution and delivery of any such document, agreement or
instrument and the taking of any such action to be conclusive evidence of
the authority therefor; and be it
FURTHER RESOLVED, that any and all actions heretofore taken by any officer
or director of the Corporation in connection with the transactions
contemplated herein are ratified, confirmed and approved in all respects
for in the name of and on behalf of the Corporation.
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EXHIBIT A
RESOLUTION #4
FACTORY CARD OUTLET
401k PLAN PROPOSED SUMMARY OF CHANGES
1. Addition of FCO common Stock to investment options, bringing the total to
four. Current investment options include a guaranteed principal fund, a
fixed income bond fund, and a common stock equity fund.
2. Allowing employees to direct their funds to the investment options in
increments as small as 1% (currently it is 10%).
3. Adding Matt Ellis to the list of plan administrators, replacing Mike
Maali: other plan administrators currently are Glen Franchi, Carol Travis
and Jeff Kelly.
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AMENDMENT NO. 2 TO THE
FACTORY CARD OUTLET OF AMERICA LTD.
INCENTIVE SAVINGS PLAN
Factory Card Outlet of America Ltd. (the "Company") hereby adopts the
following amendment to the Factory Card Outlet of America Ltd. Incentive Savings
Plan (the "Plan"), effective as of January 1, 1997:
Section 9.03 of the Plan is amended by deleting the words and
numbers "ten percent (10%)" and replacing them with "one percent (1%)".
IN WITNESS WHEREOF, the Company has authorized and directed its duly
authorized officer to execute this Amendment No. 2 to the Plan this 6th day of
January 1997.
Corporate Seal FACTORY CARD OUTLET OF AMERICA LTD.
By: /s/ CR Cumello
/s/ Carol A. Travis
Attest
Title: President
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AMENDMENT NO. 3 TO THE
FACTORY CARD OUTLET OF AMERICA LTD.
INCENTIVE SAVINGS PLAN
Factory Card Outlet of America Ltd. (the "Company") hereby amends the
Factory Card Outlet of America Ltd. Incentive Savings Plan (the "Plan"),
effective as of January 1, 1997, by deleting Section 1.32 and substituting the
following in its place:
"1.32 'Plan Entry Date' shall mean the first day of each quarter."
IN WITNESS WHEREOF, the Company has authorized and directed its duly
authorized officer to execute this Amendment No. 3 to the Plan this 16th day of
January, 1997.
Corporate Seal FACTORY CARD OUTLET OF AMERICA LTD.
/s/ Carol R. Travis By: /s/ C.R. Cumello
- ---------------------------- -----------------------------------
Attest Title: Chief Executive Officer
President
-----------------------------------
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