<PAGE> 1
As filed with the Securities and Exchange Commission on August 7, 1998
Registration No. 333-
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------------------------
HASTINGS ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-1386375
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3601 PLAINS BLVD., SUITE #1 79102
AMARILLO, TEXAS (Zip Code)
(Address of Principal Executive Offices)
---------------------------------------------
HASTINGS ENTERTAINMENT, INC. ASSOCIATES' 401(K) PLAN AND TRUST AGREEMENT
(Full Title of the Plan)
DENNIS MCGILL
VICE PRESIDENT OF FINANCE, CHIEF FINANCIAL OFFICER, TREASURER AND SECRETARY
HASTINGS ENTERTAINMENT, INC.
3601 PLAINS BLVD., SUITE #1
AMARILLO, TEXAS 79102
(806) 351-2300
(Name, address and telephone number, including area code, of agent for service)
---------------------------------------------
With Copies To:
KENT JAMISON, ESQ.
LOCKE PURNELL RAIN HARRELL
(A PROFESSIONAL CORPORATION)
2200 ROSS AVENUE, SUITE 2200
DALLAS, TEXAS 75201-6776
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
TITLE PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED BE REGISTERED PER SHARE (1) PRICE (1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 60,106 shares(2) $11.50 $691,219 $203.91
$.01 Par Value(2)
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated in accordance with Rule 457 (c) and (h) under the Securities
Act of 1933, as amended, solely for purposes of calculating the registration
fee, based on the average of the high and low prices reported on the Nasdaq
National Market on August 4, 1998. In addition, pursuant to Rule 416 under
the Securities Act of 1933, as amended, this Registration Statement also
covers shares of Common Stock of the Company issuable to prevent dilution
resulting from stock splits, stock dividends or similar transactions.
(2) In addition, pursuant to Rule 416(c) under the Securities Act of 1933, as
amended, this registration statement also covers an indeterminate amount of
interests to be offered or sold pursuant to the employee benefit plan described
herein.
-2-
<PAGE> 3
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
The information specified by Item 1 and Item 2 of Part I of Form S-8 is
omitted from this filing in accordance with the provisions of Rule 428 under
the Securities Act of 1933, as amended (the "Securities Act"), and the
introductory Note to Part I of Form S-8.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The documents set forth below are incorporated by reference in this
Registration Statement. All documents subsequently filed by Hastings
Entertainment, Inc. (the "Company") and the Hastings Entertainment, Inc.
Associates' 401(K) Plan and Trust Agreement (the "Plan") pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), 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, shall be deemed to be incorporated by
reference into this Registration Statement and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Registration Statement to the
extent a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Registration Statement.
(1) The Company's prospectus dated June 11, 1998 and relating to the
Form S-1 Registration Statement (Registration Statement No.
333-47969) filed pursuant to Rule 424(b) of the Securities Act;
(2) All other reports filed with the Securities and Exchange
Commission pursuant to Section 13(a) or 15(d) of the Exchange Act
since the end of the fiscal year covered by the prospectus
described in (1) above; and
(3) The description of the Common Stock which is contained in the
Company's Registration Statement on Form 8-A filed with the
Securities and Exchange Commission on June 3, 1998 pursuant to
Section 12 of the Exchange Act, and all amendments thereto and
reports that have been filed for the purpose of updating such
description.
ITEM 4. DESCRIPTION OF SECURITIES.
Not Applicable.
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ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 2.02-1 of the Texas Business Corporation Act (the "TBCA")
permits a corporation to indemnify certain persons, including officers and
directors and former officers and directors, and to purchase insurance with
respect to liability arising out of their capacity or status as officers and
directors.
Article Thirteen of the Company's Third Restated Articles of
Incorporation provides as follows:
The Corporation shall indemnify any person who was, is or is threatened
to be made a named defendant or respondent in a proceeding (as
hereinafter defined) because the person (a) is or was a director or
officer of the corporation or (b) while a director or officer of the
corporation, is or was serving at the request of the corporation as a
director, officer, manager, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic
corporation, limited liability company, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise, to the
fullest extent that a corporation may grant indemnification to a person
serving in such capacity under the Texas Business Corporation Act, as
the same exists or may hereafter be amended.
Such right shall include the right to be paid by the corporation for all
expenses incurred in defending any such proceeding in advance of its
final disposition to the maximum extent permitted under the Texas
Business Corporation Act, as the same exists or may hereafter be
amended. If a claim for indemnification or advancement of expenses
hereunder is not paid in full by the corporation within 90 days after a
written claim has been received by the corporation, the claimant may at
any time thereafter bring suit against the corporation to recover the
unpaid amount of the claim, and if successful in whole or in part, the
claimant shall be entitled to be paid also the expenses of prosecuting
such claim. It shall be a defense to any such action that such
indemnification or advancement of costs of defense are not permitted
under the Texas Business Corporation Act, but the burden of proving such
defense shall be on the corporation. Neither the failure of the
corporation (including its Board of Directors or any committee thereof,
special legal counsel or shareholders) to have made its determination
prior to the commencement of such action that indemnification of, or
advancement of costs of defense to, the claimant is permissible in the
circumstances nor an actual determination by the corporation (including
its Board of Directors or any committee thereof, special legal counsel
or shareholders) that such indemnification or advancement is not
permissible, shall be a defense to the action or create a presumption
that such indemnification or advancement is not permissible.
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<PAGE> 5
The corporation may additionally indemnify any person not covered by the
grant of mandatory indemnification contained above to the fullest extent
permitted by law.
Neither the amendment nor repeal of this Article, nor the adoption of
any provision of these Third Restated Articles of Incorporation
inconsistent with this Article, shall eliminate or reduce the effect of
this Article in respect of any proceeding that accrued or arose prior to
such amendment, repeal or adoption of any inconsistent provision.
As used herein, the term "proceeding" means any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, any appeal in such an
action, suit or proceeding, and any inquiry or investigation that could
lead to such an action, suit or proceeding.
Article Fourteen of the Company's Third Restated Articles of
Incorporation provides that no director of the Company shall be liable to the
Company or its shareholders for monetary damages for an act or omission in the
director's capacity as a director to the fullest extent permitted by the TBCA.
In addition, Article IX of the Company's Amended and Restated Bylaws,
provides that the Company shall indemnify any person who was, is or is
threatened to be made a named defendant or respondent in a proceeding (as
hereinafter defined) because the person is or was a director or officer of the
Company or while a director or officer of the corporation, is or was serving at
the request of the Company as a director, officer, manager, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another foreign
or domestic corporation, limited liability company, partnership, joint venture,
sole proprietorship, trust, employee benefit plan or other enterprise, to the
fullest extent that a corporation may grant indemnification to a person serving
in such capacity under the TBCA, as the same exists or may hereafter be
amended.
The Company has purchased directors' and officers' liability insurance.
Subject to conditions, limitations and exclusions in the policy, the insurance
covers amounts required to be paid for a claim or claims made against directors
and officers for any act, error, omission, misstatement, misleading statement
or breach of duty by directors and officers in their capacity as directors and
officers of the Company.
Reference is made to the Form of Indemnification Agreement by and
between the Company and its directors and executive officers filed as Exhibit
10.1 to the Company's Registration Statement on Form S-1 (File No. 333-47969)
declared effective on June 11, 1998, pursuant to which the Company does, to the
extent permitted by applicable law, indemnify such directors and executive
officers against all expenses, judgements, fines and penalties incurred in
connection with the defense or settlement of any actions brought against them
by reason of the fact that they were directors or executive officers of the
Company or assumed certain responsibilities at the direction of the Company.
-5-
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ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS.
5.1* Opinion of Locke Purnell Rain Harrell (A Professional
Corporation).
23.1* Consent of KPMG Peat Marwick LLP.
23.2* Consent of Locke Purnell Rain Harrell (A Professional
Corporation) (included in opinion filed as Exhibit 5.1).
24.1* Power of Attorney (included on the signature pages of this
Registration Statement).
99.1* Hastings Entertainment, Inc. Associates' 401(k) Plan and
Trust Agreement.
- --------------------
* Filed herewith.
The Company hereby undertakes that it will submit or has submitted the
Plan and any amendments thereto to the Internal Revenue Service (the "IRS") in
a timely manner and has made or will make all changes required by the IRS in
order to qualify the Plan under Section 401 of the Internal Revenue Code.
ITEM 9. UNDERTAKINGS.
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in this
Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this
Registration Statement or any material change to such
information in this Registration Statement;
-6-
<PAGE> 7
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof;
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering;
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act
and each filing of the Annual Report for each Plan pursuant to
Section 15(d) of the Exchange Act 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;
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company 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 Company 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 Securities Act and will
be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Amarillo, State of Texas, on August 7, 1998.
HASTINGS ENTERTAINMENT, INC.
By: /s/ Dennis McGill
-----------------------------------------------
Dennis McGill, Vice President of Finance, Chief
Financial Officer, Treasurer and Secretary
-8-
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose
signature appears below hereby constitutes and appoints each of Dennis McGill
and Jeffrey G. Shrader, and each of them, his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done on and about the premises as fully and to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ John H. Marmaduke Chairman of the Board, August 7, 1998
------------------------------ President and Chief Executive
John H. Marmaduke Officer (Principal Executive
Officer)
/s/ Dennis McGill Vice President of Finance, August 7, 1998
------------------------------- Chief Financial Officer,
Dennis McGill Treasurer and Secretary
(Principal Financial and
Accounting Officer)
/s/ Phillip Hill Senior Vice President, Chief August 7, 1998
------------------------------- Operating Officer and Director
Phillip Hill
/s/ Leonard L. Berry Director August 7, 1998
-------------------------------
Leonard L. Berry
/s/ Peter A. Dallas Director August 7, 1998
-------------------------------
Peter A. Dallas
/s/ Gaines L. Godfrey Director August 7, 1998
-------------------------------
Gaines L. Godfrey
/s/ Craig R. Lentzsch Director August 7, 1998
-------------------------------
Craig R. Lentzsch
/s/ Stephen S. Marmaduke Director August 7, 1998
-----------------------------
Stephen S. Marmaduke
/s/ Jeffrey G. Shrader Director August 7, 1998
-------------------------------
Jeffrey G. Shrader
/s/ Ron G. Stegall Director August 7, 1998
-------------------------------
Ron G. Stegall
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, the trustees (or
other persons who administer the Plan) have duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Amarillo, State of Texas on August 7, 1998.
HASTINGS ENTERTAINMENT, INC., ASSOCIATES' 401(K) PLAN AND
TRUST AGREEMENT
By: Amarillo National Bank, as trustee of the Hastings
Entertainment, Inc. Associates' 401(K) Plan and
Trust Agreement
By: /s/ David Fisher
---------------------------------------------
Name: David Fisher
Title: Senior Vice President and Trust Officer
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<PAGE> 10
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
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<S> <C>
5.1* Opinion of Locke Purnell Rain Harrell (A Professional
Corporation).
23.1* Consent of KPMG Peat Marwick LLP.
23.2* Consent of Locke Purnell Rain Harrell (A Professional
Corporation) (included in opinion filed as Exhibit 5.1).
24.1* Power of Attorney (included on the signature pages of this
Registration Statement).
99.1* Hastings Entertainment, Inc. Associates' 401(k) Plan and
Trust Agreement.
</TABLE>
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* Filed herewith.
<PAGE> 1
EXHIBIT 5.1
August 7, 1998
Hastings Entertainment, Inc.
3601 Plains Blvd., Suite #1
Amarillo, Texas 79102
Re: Registration of 60,106 shares of Common Stock, par value $.01
per share, pursuant to a Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as counsel for Hastings Entertainment, Inc., a Texas
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement on Form S-8 (the "Registration Statement"), of 60,106
shares of Common Stock, par value $.01 per share, of the Company (the "Common
Stock") to be offered pursuant to the Hastings Entertainment, Inc. Associates'
401(K) Plan and Trust Agreement (the "Plan").
Based upon our examination of such document and the investigation of
such matters of law as we have deemed relevant or necessary in rendering this
opinion, we hereby advise you that we are of the opinion that:
Assuming, with respect to shares of Common Stock issued after the
date hereof, (i) the receipt of proper consideration for the issuance thereof
in excess of par value thereof, (ii) the availability of a sufficient number of
shares of Common Stock authorized by the Company's Articles of Incorporation
then in effect, (iii) compliance with the terms of any agreement entered into
in connection with any options or restricted stock under the Plan, and (iv) no
change occurs in the applicable law or the pertinent facts, the shares of
Common Stock purchasable upon the exercise of any option granted under or
issued upon the awarding of any restricted stock under, the Plan will upon
issuance be duly authorized and validly issued, fully paid and non-assessable
shares of Common Stock.
<PAGE> 2
Hastings Entertainment, Inc.
August 7, 1998
Page 2
We consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement filed by the Company with the Securities and Exchange
Commission for the registration under the Securities Act, of 60,106 shares of
Common Stock of the Company covered by the Plan. By so consenting, we do not
thereby admit that our firm's consent is required by Section 7 of the
Securities Act.
Very truly yours,
LOCKE PURNELL RAIN HARRELL
(A Professional Corporation)
By: /s/ Kent Jamison
----------------------------------
Kent Jamison
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Hastings Entertainment, Inc.:
We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the registration
statement on Form S-1 incorporated herein by reference.
/s/ KPMG PEAT MARWICK LLP
Dallas, Texas
August 5, 1998
<PAGE> 1
HASTINGS ENTERTAINMENT, INC.
ASSOCIATES' 401(k) PLAN AND TRUST AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PAGE
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ARTICLE I
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.02 Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.03 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE III
ELIGIBILITY AND PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.01 Eligibility for Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.02 Eligibility to Make Elective Deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.03 Eligibility Upon Reemployment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.04 Omission of Eligible Associate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.05 Inclusion of Ineligible Associate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.06 Election Not to Participate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IV
CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.01 Elective Deferrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.02 Matching Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.03 Profit Sharing Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.04 Rollover Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.05 Transfer Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.06 Qualified Matching Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.07 Qualified Non-elective Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.08 Actual Deferral Percentage Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.09 Limitations on Matching Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.10 Annual Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE V
ALLOCATION TO PARTICIPANTS' ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.01 Individual Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.02 Valuation of the Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.03 Priority of Allocations to Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.04 Net Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.01 Vesting of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.02 Forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.03 Timing of Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.04 Form of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.05 Designation of Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.06 Distribution for Minor Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.07 Location of Participant, Former Participant or Beneficiary Unknown . . . . . . . . . . . . . . . . . 41
6.08 Limitations on Benefits and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VII
FORMER PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.01 Participation by Former Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.02 Reinstatement of Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.03 Separate Account Balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.04 Years of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VIII
WITHDRAWALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.01 In-service Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.02 Hardship Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE IX
PLAN ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.01 Powers and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.02 Assignment and Designation of Administrative Authority / Compensation of Benefits Committee . . . . 47
9.03 Allocation and Delegation of Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.04 Powers, Duties and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.05 Records and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.06 Appointment of Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.07 Information from Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.08 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.09 Majority Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.10 Bonding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.11 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.12 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.13 Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.14 Claims Review Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
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ARTICLE X
TRUST ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.01 Establishment and Acceptance of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.02 Scope of Trustee's Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.03 Powers and Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.04 Liability of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.05 Reliance Upon Acts of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.06 Records and Accounting of Trustee / Valuation of Plan Assets . . . . . . . . . . . . . . . . . . . . 56
10.07 Payment of Compensation and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.08 Resignation or Removal of Trustee / Withdrawal From Trust . . . . . . . . . . . . . . . . . . . . . 57
10.09 Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.10 Accounting Upon Resignation or Removal of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.11 Employment of Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.12 Employer Securities and Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE XI
AMENDMENT, TERMINATION AND MERGERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.01 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.02 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.03 Successor Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
11.04 Plan Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE XII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
12.01 Participant's Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
12.02 Alienation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
12.03 Construction of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
12.04 Legal Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
12.05 Prohibition Against Diversion of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.06 Employer's and Trustee's Protective Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.07 Receipt and Release for Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.08 Action by the Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.09 Named Fiduciaries and Allocation of Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.10 Approval by the Internal Revenue Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
12.11 Uniformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE XIII
PARTICIPATING EMPLOYERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
13.01 Adoption by Other Employers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
13.02 Requirements of Participating Employers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
</TABLE>
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13.03 Designation of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.04 Associate Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.05 Participating Employers Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.06 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.07 Discontinuance of Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.08 Plan Administrator's Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE XIV
TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
14.01 Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
14.02 Minimum Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
14.03 Super Top-Heavy Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
14.04 Determination of Top Heaviness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
14.05 Determination of Super Top Heaviness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
14.06 Calculation of Top-Heavy Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
14.07 Cumulative Accounts and Cumulative Accrued Accounts . . . . . . . . . . . . . . . . . . . . . . . . 68
14.08 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
14.09 Top Heavy Vesting Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE XV
PLAN LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
15.01 Authorization for Plan Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
15.02 Loan Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE XVI
ELIGIBLE ROLLOVER DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
16.01 General Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
16.02 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
</TABLE>
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ARTICLE I
INTRODUCTION
THIS AGREEMENT, by and between Hastings Entertainment, Inc., a
corporation organized and existing under the laws of the State of Texas (herein
referred to as the "Plan Sponsor") and Trustees as shall be appointed from time
to time by the Plan Sponsor (herein referred to as the "Trustee") for the
benefit of all associates of the Plan Sponsor and its affiliated companies who
are or may become eligible hereunder and who elect to participate in the
Hastings Entertainment, Inc. Associates' 401(k) Plan and Trust hereby
established.
W I T N E S S E T H:
WHEREAS, the Plan Sponsor heretofore adopted the Western
Merchandisers, Inc. Employees Profit Sharing Plan and Trust Agreement (the
"Western Merchandisers Plan"), as amended and restated effective June 1, 1989,
in recognition of the contribution made to its successful operation by its
associates and for the exclusive benefit of its eligible associates; and
WHEREAS, the Plan Sponsor is no longer an affiliate of Western
Merchandisers, Inc., as defined by Section 414(b) of the Internal Revenue Code
of 1986, as amended; and
WHEREAS, under the terms of the Western Merchandisers Plan, a
Participating Employer has the ability to modify and amend the Western
Merchandisers Plan by electing not to remain as a Participating Employer; and
WHEREAS, the Plan Sponsor previously established the Hastings Books,
Music & Video, Inc. Employees Profit Sharing Plan and Trust Agreement for the
exclusive benefit of its associates, effective as of June 1, 1993 (the "Prior
Plan"); and
WHEREAS, in accordance with the terms of the Prior Plan, the Plan
Sponsor has from time to time amended the Prior Plan, including a change in the
name of the Plan and the Plan Sponsor, and wishes to amend and restate the
Prior Plan in accordance with the terms and conditions hereafter set forth.
NOW, THEREFORE, effective October 1, 1996 (except as otherwise noted
herein), the Plan Sponsor hereby amends and restates the Hastings
Entertainment, Inc. Associates' 401(k) Plan and Trust (herein referred to as
the "Plan"), as set forth herein.
Except as otherwise provided herein, and subject to the following
sentence, the provisions of the amended and restated Plan as contained herein
are applicable to Associates and Participants who terminate employment for any
reason, including death, disability or retirement, on or after October 1, 1996,
or who are reemployed by the Employer on or after October 1, 1996 and while
they are still entitled to restatement of rights under the Plan. Except as
otherwise provided herein, any Associate or Participant who died, retired,
became disabled or terminated employment prior to October 1, 1996 shall receive
any benefits to which he or she is entitled based upon the appropriate
provisions of the Prior Plan as in effect prior to October 1, 1996.
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ARTICLE II
DEFINITIONS
2.01 Definitions.
(1) Actual Deferral Percentage (also referred to as ADP). Shall
mean, for a specified (group of Participants for a Plan Year,
the average of the ratios (calculated separately for each
Participant in such group) of:
(a) the amount of the Employer contributions actually
paid over to the trust on behalf of such Participant
for the Plan Year to
(b) the Participant's Compensation for such Plan Year.
Employer contributions on behalf of any Participant shall
include:
(c) any Elective Deferrals made pursuant to the
Participant's deferral election (including Excess
Elective Deferrals of Highly Compensated Employees),
but excluding:
(i) Excess Elective Deferrals of Non-Highly
Compensated Employees that arise solely from
Elective Deferrals made under the Plan or
plans of this Employer and
(ii) Elective Deferrals that are taken into
account in the Contribution Percentage test
(provided the ADP test is satisfied both with
and without exclusion of these Elective
Deferrals); and
(d) at the election of the Employer, Qualified
Non-elective Contributions and Qualified Matching
Contributions. For purposes of computing Actual
Deferral Percentages, an Associate who would be a
Participant but for the failure to make Elective
Deferrals shall be treated as a Participant on whose
behalf no Elective Deferrals are made.
(2) Adoption Agreement. The agreement by which an Affiliate or a
Subsidiary adopts this Plan for its associates.
(3) Affiliate. Any corporation, association, joint venture,
proprietorship or partnership that for Federal income tax
purposes is a member of a controlled group of corporations
(within the meaning of Section 414 of the Code) of which the
Plan Sponsor is a member.
(4) Aggregate Account. The total interest of a Participant in the
Trust Fund consisting of his Pre-Tax Savings Account, his
Voluntary Nondeductible Contribution Account, his Profit
Sharing Contribution Account, his Matching Contribution
Account, his Qualified Non-
2
<PAGE> 8
elective Contribution Account, his Qualified Matching
Contribution Account, his Rollover Account and his Transfer
Account as such accounts are established for a Participant.
(5) Aggregate Limit. The sum of:
(a) 125 percent of the greater of the ADP of the
Non-Highly Compensated Employees for the Plan Year or
the ACP of Non-Highly Compensated Employees under the
Plan subject to Code Section 401(m) for the Plan Year
beginning with or within the Plan Year of the CODA
and
(b) the lesser of 200 percent or two plus the lesser of
such ADP of ACP.
"Lesser" is substituted for "greater" in "(a)," above, and
"greater" is substituted for "lesser" after "two plus the" in
"(b)" if it would result in a larger Aggregate Limit.
(6) Associate. Associate shall mean any employee of the Employer
maintaining the Plan or of any other employer required to be
aggregated with such Employer under Sections 414(b) , (c), (m)
or (o) of the Code.
The term Associate shall also include any leased employee
deemed to be an employee of any employer described in the
previous paragraph as provided in Sections 414(n) or (o) of
the Code. Notwithstanding the previous sentence, if such
leased employees constitute not more than 20 percent of the
Employer's nonhighly compensated work force within the meaning
of Section 414(n)(5)(C)(ii) of the Code, the term "Associate"
shall not include those leased employees covered by the plan
described in Section 414(n)(5) of the Code.
(7) Authorized Leave of Absence. Any absence authorized by the
Employer under the Employer's standard personnel practices,
provided that all persons under similar circumstances must be
treated alike in the granting of such Authorized Leaves of
Absence and provided further that the Participant returns at
the end of the period of authorized absence. Absence due to
mandatory military service in the armed forces of the United
States (including enlistment in lieu of impending mandatory
service) shall be considered as an Authorized Leave of
Absence.
(8) Average Contribution Percentage (also referred to as ACP).
The average of the Contribution Percentages of the
Participants in a group.
(9) Beneficiary. A person or persons designated by a Participant
or a Former Participant in accordance with the provisions of
Section 6.05 to receive any death benefit which shall be
payable under this Plan.
(10) Break-in-Service. The 12-consecutive month period measured by
Plan Years beginning with the Plan Year which includes the
first anniversary of an Associate's Employment Commencement
Date during which a Participant does not complete more than
500 Hours of Service with the Employer. For the purpose of
the first computation period, service will
3
<PAGE> 9
be counted from the Associate's Employment Commencement Date
to the end of the initial Plan Year. An Associate shall not
incur a Break-in-Service for the Plan Year in which he becomes
a Participant, dies, retires, or becomes disabled. Further,
solely for the purpose of determining whether a Participant
has incurred a Break-in-Service, Hours of Service shall be
recognized for Authorized Leaves of Absence and for maternity
and paternity leaves of absence.
A "maternity or paternity leave of absence" shall mean an
absence from work for any period by reason of the Associate's
pregnancy, birth of the Associate's child, placement of a
child with the Associate in connection with the adoption of
such child, or any absence for the purpose of caring for such
child for a period immediately following such 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 the credit is necessary to prevent the
Associate from incurring a Break-in-Service, or, in any other
case, in the immediately following computation period. The
Hours of Service credited for a maternity or paternity leave
of absence shall be those which would normally have been
credited but for such absence, or, in any case in which the
Plan Administrator is unable to determine such hours normally
credited, eight Hours of Service per work day. The total
Hours of Service required to be credited for a maternity or
paternity leave of absence shall not exceed 501.
(11) CODA. A qualified cash or deferred arrangement as described
in Section 401(k) of the Code.
(12) Code. The Internal Revenue Code of 1986, as amended, or any
subsequent applicable Internal Revenue Code which becomes law
of the United States of America.
(13) Committee (also referred to as Benefits Committee). The
person(s) appointed by the Plan Administrator to assist in the
administration of the Plan. The Committee shall serve at the
pleasure of the Plan Administrator.
(14) Compensation. The Participant's salary and wages including
overtime, bonuses and commissions paid by the Employer for a
Plan Year. Amounts contributed by the Employer under the Plan
and any non-taxable fringe benefits provided by the Employer
shall not be considered as Compensation.
Compensation for any Self-Employed Individual shall be equal
to his Earned Income.
Compensation shall include only that compensation which is
actually paid to the Associate during the Plan Year.
Notwithstanding the above, Compensation shall include any
amount which is contributed by the Employer pursuant to a
salary reduction agreement and which is not includible in the
gross income of the Associate under Sections 125, 402(a)(8),
402(h) or 403(b) of the Code.
Notwithstanding the foregoing, for Plan Years beginning prior
to January 1, 1994, the annual Compensation of a Participant
in excess of $200,000 shall be disregarded under the
4
<PAGE> 10
Plan. This dollar limitation shall be adjusted by the
Secretary of the Treasury at the same time and in the same
manner as provided under Section 415(d) of the Code. For Plan
Years beginning on or after January 1, 1994, the annual
Compensation of a Participant in excess of $150,000 shall be
disregarded under the Plan. This dollar limitation shall be
adjusted by the Secretary of the Treasury at the same time and
in the same manner as provided under Section 401(a)(17)(B) of
the Code.
In applying the dollar limitation provided herein, the family
group of a Highly Compensated Participant who is subject to
the Family Member aggregation rules of Section 414(q)(6) of
the Code because such Participant is either a "five percent
owner" of the Employer or one of the ten (10) Highly
Compensated Employees paid the greatest "415 Compensation"
during the year, shall be treated as a single Participant,
except that for this purpose Family Members shall include only
the affected Participant's spouse and any lineal descendants
who have not attained age nineteen (19) before the close of
the 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 as
determined under this Section prior to the application of this
limitation.
(15) Contribution Percentage. The Contribution Percentage shall
mean the ratio (expressed as a percentage) of the
Participant's Contribution Percentage Amounts to a
Participant's Compensation for the Plan Year.
(16) Contribution Percentage Amounts. The sum of the Matching
Contributions and Qualified Matching Contributions (to the
extent not taken into account for purposes of the ADP test)
made under the Plan, on behalf of the Participant for the Plan
Year. Such Contribution Percentage Amounts shall not include
Matching Contributions that are forfeited either to correct
Excess Aggregate Contributions or because the contributions to
which they relate are Excess Deferrals, Excess Contributions,
or Excess Aggregate Contributions. The Employer may include
Qualified Non-elective Contributions in the Contribution
Percentage Amounts. The Employer may also use Elective
Deferrals in the Contribution Percentage Amounts so long as
the ADP test is met before the Elective Deferrals are used in
the ACP test and continues to be met following the exclusion
of those Elective Deferrals that are used to meet the ACP
test.
(17) Disability. A physical or mental condition of a Participant
resulting from bodily injury, disease, or mental disorder
which renders him incapable of continuing any gainful
occupation and which condition constitutes total disability
under the federal Social Security Acts.
(18) Early Retirement Age. The later of the date on which the
Participant (i) attains age 55, or (ii) completes 5 Years of
Service.
(19) Earned Income. The net earnings of a Self-Employed Individual
from self-employment in the trade or business with respect to
which the Plan is established for which the personal
5
<PAGE> 11
services of the individual are a material income-producing
factor. Net earnings will be determined without regard to
items not included in gross income and the deductions
allocable to such items. Net earnings are reduced by
contributions by the Employer to a qualified Plan to the
extent deductible under Section 404 of the Code. Net earnings
shall be determined with regard to the deduction allowed to
the Employer by Code Section 164(f).
(20) Effective Date. The Effective Date of this amendment and
restatement shall be October 1, 1996. Certain provisions
herein may be effective on such other dates as are noted
within such provisions.
(21) Elective Deferral. Any Employer contribution made to the Plan
at the election of the Participant, in lieu of cash
compensation, including contributions made pursuant to a
salary reduction agreement or other deferral mechanism. With
respect to any taxable year, a Participant's Elective Deferral
is the sum of all Employer contributions made on behalf of
such Participant pursuant to an election to defer under any
CODA, any simplified employee pension cash or deferred
arrangement as described in Section 402(h)(1)(B) of the Code,
any eligible deferred compensation plan under Section 457 of
the Code, any plan described under Section 501(c)(18) of the
Code, and any Employer contributions made on behalf of a
Participant for the purchase of an annuity contract under
Section 403(b) pursuant to a salary reduction agreement.
Elective Deferrals shall not include any deferrals properly
distributed as excess annual additions.
(22) Employer. Hastings Entertainment, Inc. or any Affiliate or
Subsidiary which shall adopt this Plan, or any successor which
shall assume the obligations of this Plan.
(23) Employment Commencement Date. The date on which an Associate
first performs an Hour of Service for the Employer.
(24) Entry Date. The date on which an Associate becomes a
Participant in accordance with Section 3.01.
(25) ERISA. Public Law No. 93-406, the Employee Retirement Income
Security Act of 1974, as amended from time to time.
(26) Excess Aggregate Contributions. With respect to any Plan
Year. the excess of
(a) 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
(b) The maximum Contribution Percentage Amounts permitted
by the ACP test (determined by reducing contributions
made on behalf of Highly Compensated Employees in
order of their Contribution Percentages beginning
with the highest of such percentages).
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(27) Excess Contributions. With respect to any Plan Year, the
excess of:
(a) The aggregate amount of Employer contributions
actually taken into account in computing the ADP of
Highly Compensated Employees for such Plan Year, over
(b) The maximum amount of such contributions permitted by
the ADP test (determined by reducing contributions
made on behalf of Highly Compensated Employees in
order of the ADPs, beginning with the highest of such
percentages).
(28) Excess Elective Deferrals. Those Elective Deferrals that are
includible in a Participant's gross income under Section
402(g) of the Code to the extent such Participant's Elective
Deferrals for a taxable year exceed the dollar limitation
under such Code section. Excess Elective Deferrals shall be
treated as annual additions under the Plan, unless such
amounts are distributed no later than the first April 15
following the close of the Participant's taxable year.
(29) Fiduciaries. The Employer, the Plan Sponsor, the Plan
Administrator, the Benefits Committee and the Trustee, but
only with respect to the specific responsibilities of each for
Plan and Trust administration, all as described in Article IX.
(30) Former Participant. A Participant whose employment with the
Employer has terminated but who has a vested account balance
under the Plan which has not been paid in full.
(31) Highly Compensated Employee. A Highly Compensated Employee
("HCE") includes any Associate who during the Plan Year
performs service for the Employer and who (i) is a 5-percent
owner, (ii) receives Compensation for the Plan Year in excess
of the Code Section 414(q)(1)(B) amount for the Plan Year,
(iii) receives Compensation for the Plan Year in excess of the
Code Section 414(q)(1)(C) amount for the Plan Year and is a
member of the top paid group of employees within the meaning
of Code Section 414(q)(4), or (iv) is an officer and receives
Compensation during the Plan Year that is greater than 50
percent of the dollar limitation in effect under Code Section
415(b)(1)(A) for the Plan Year. If no officer satisfies the
Compensation requirement during the Plan Year, the highest
paid officer for such Plan Year shall be treated as an HCE.
For purposes of determining who is an HCE, "Compensation"
means Compensation as defined in Section 4.10(a)(4) hereof,
except that amounts excluded pursuant to Code Sections 125,
402(e)(3), 402(h)(1)(B) and 403(b) are included.
If an Associate is a family member of either a 5-percent owner
(whether active or former) or an HCE who is one of the 10 most
highly compensated Associates ranked on the basis of
Compensation paid by the Employer during such Plan Year, then
the family member and the 5-percent owner or top-ten HCE shall
be aggregated. In such case, the family member and 5-percent
owner or top-ten HCE shall be treated as a single Associate
receiving Compensation and Plan contributions or benefits
equal to the sum of the Compensation and benefits of the
family member and 5-percent owner or top-ten HCE. For
purposes of this Section, family
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member includes the spouse, lineal ascendants and descendants
of the Associate or former Associate, and the spouses of such
lineal ascendants and descendants.
The determination of who is an HCE, including the
determinations of the number and identity of Associates in the
top paid group, the number of Associates treated as officers
and the Compensation that is taken into account, shall be made
in accordance with Code Section 414(q) and Section 1.414(q)-
1T of the temporary Income Treasury Regulations to the extent
they are not inconsistent with the method established above.
(32) Hour of Service.
(a) Each hour for which an Associate is paid, or entitled
to payment, for the performance of duties for the
Employer. These hours shall be credited to the
Associate for the computation period or periods in
which duties are performed; and
(b) Each hour for which an Associate is paid, or entitled
to payment, by the Employer on account of a period of
time during which no duties are performed
(irrespective of whether the employment relationship
has terminated) due to vacation, holiday, illness,
incapacity (including Disability), layoff, jury duty,
military duty or Authorized Leave of Absence. No
more than 501 Hours of Service shall be credited
under this paragraph for any single continuous period
(whether or not such period occurs in a single
computation period). Hours under this paragraph
shall be calculated and credited pursuant to Section
2530.200b-2 of the Department of Labor Regulations
which are incorporated herein by this reference; and
(c) Each hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to
by the Employer. The same Hours of Service shall not
be credited both under paragraph (a) or paragraph
(b), as the case may be, and under this paragraph
(c). These hours shall be credited to the Associate
for the computation period in which the award or
agreement pertains rather than the computation period
in which the award, agreement or payment is made.
(d) Hours of Service shall be determined on the basis of
actual hours for which an Associate is paid or
entitled to payment.
(e) An Hour of Service respecting any member of an
affiliated service group (as defined in Section
414(m) of the Code) of which the Employer is a member
or respecting any incorporated or unincorporated
trade or business which is under common control with
the Employer (as defined in Section 414(c) of the
Code) shall be credited as an Hour of Service with
the Employer.
(f) Hours of Service also will be credited for any
individual considered an Associate for purposes of
this Plan under Section 414(n) of the Code.
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<PAGE> 14
(33) Investment Manager. Any person, firm or corporation,
who:
(a) is a registered investment advisor under the Investment
Act of 1940;
(b) is a bank or an insurance company;
(c) has the power to manage, acquire or dispose of Plan
assets; and
(d) acknowledges in writing his fiduciary responsibility to
the Plan.
(34) Matching Contribution Account. The portion of a Participant's
Aggregate Account which is credited with Matching
Contributions, as adjusted for earnings and losses
attributable to such contributions.
(35) Matching Contribution. An Employer contribution made to this
or any other defined contribution plan on behalf of a
Participant on account of a Participant's Elective Deferral,
under a plan maintained by the Employer.
(36) Non-Highly Compensated Employee. Any Participant who is not a
Highly Compensated Employee.
(37) Normal Retirement Age. The date on which the Participant
attains age 65, or the fifth anniversary of participation in
the Plan, if later.
(38) Normal Retirement Date. The first day of the month coincident
with or next following the date the Participant attains Normal
Retirement Age. The Participant may, however, agree to
service past Normal Retirement Age and his Normal Retirement
Date is the date such Participant actually retires.
(39) Owner-Employee. A sole proprietor who owns the entire
interest in the Employer or a partner who owns more than 10%
of either the capital interest or the profits interest in the
Employer and who receives income for personal services from
the Employer.
(40) Participant. An Associate participating in the Plan in
accordance with the provisions of Section 3.01 and whose
vested interest under this Plan has not been fully
distributed.
(41) Plan. Hastings Entertainment, Inc. Associates' 401(k) Plan
and Trust, which is the Plan set forth herein, as amended from
time to time.
(42) Plan Administrator. Hastings Entertainment, Inc.
(43) Plan Sponsor. Hastings Entertainment, Inc.
(44) Plan Year. The Plan's accounting year of twelve (12)
consecutive months commencing on February 1 and ending the
following January 31.
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(45) Predecessor Plan. The Western Merchandisers, Inc. Employees
Profit Sharing Plan and Trust Agreement, as amended and
restated effective June 1, 1989.
(46) Pre-Tax Savings Account. The portion of a Participant's
Aggregate Account which is credited with Elective Deferrals,
as adjusted for earnings and losses attributable to such
contributions.
(47) Prior Plan. The Hastings Books, Music & Video, Inc. Employees
Profit Sharing Plan and Trust, as established effective June
1, 1993.
(48) Profit Sharing Contribution Account. The portion of a
Participant's Aggregate Account which is credited with profit
sharing contributions under Section 4.03, as adjusted for
earnings and losses attributable to such contributions.
(49) Qualified Matching Contributions. Matching Contributions
which are subject to the distribution and nonforfeitability
requirements under Section 401(k) of the Code when made.
(50) Qualified Matching Contributions Account. The portion of a
Participant's Aggregate Account which is credited with
Qualified Matching Contributions, as adjusted for earnings and
losses attributable to such contributions.
(51) Qualified Non-elective Contributions. Contributions (other
than Matching Contributions or Qualified Matching
Contributions) made by the Employer and allocated to
Participants' accounts that the Participants may not elect to
receive in cash until distributed from the Plan; that are
nonforfeitable when made; and that are distributable only in
accordance with the distribution provisions that are
applicable to Elective Deferrals and Qualified Matching
Contributions.
(52) Qualified Non-elective Contributions Account. The portion of
a Participant's Aggregate Account which is credited with
Qualified Non-elective Contributions, as adjusted for earnings
and losses attributable to such contributions.
(53) Rollover Account. The portion of an Associate's Aggregate
Account credited with rollover contributions under Section
4.04, as adjusted for earnings and losses attributable to such
contributions.
(54) Self-Employed Individual. An individual who has earned income
for the taxable year from the trade or business for which the
Plan is established, and, also, an individual who would have
had earned income but for the fact that the trade or business
had no net profits for the taxable year. A Self-Employed
Individual shall be treated as an Associate.
(55) Spouse. The spouse of an Associate who was legally married to
the Associate under the laws of the jurisdiction in which the
marriage was contracted at the time of the Associate's death
or actual retirement date.
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<PAGE> 16
(56) Subsidiary. Any corporation, association, joint venture,
proprietorship or partnership that is considered a subsidiary
under Section 424(f) of the Code.
(57) Transfer Account. The portion of a Participant's Aggregate
Account credited with funds transferred from qualified plans
pursuant to Section 4.05, as adjusted for earnings and losses
attributable to such funds.
(58) Trust Agreement. The agreement entered into between the Plan
Sponsor and the Trustee establishing the Trust.
(59) Trust Fund; Trust; or Fund. The Hastings Entertainment, Inc.
Associates' 401(k) Plan and Trust.
(60) Trustee. The person, persons or entity appointed as Trustee
by the Plan Sponsor and any duly appointed, qualified and
acting successor trustee which assumes responsibility and
liability for the Plan assets under such terms acceptable to
the Trustee and upon execution of such document or documents
acceptable to the Trustee evidencing acceptance of Plan assets
and liabilities by such successor trustee.
(61) Valuation Date. Each business day of the Plan Year on which
the New York Stock Exchange is open for business, and also the
last day of the Plan Year, if not such a business day.
(62) Voluntary Nondeductible Contribution. Contributions made by a
Participant on an after-tax basis under the Predecessor Plan.
Such contributions are not permitted by the Plan.
(63) Voluntary Nondeductible Contribution Account. The portion of
a Participant's Aggregate Account derived from the
Participant's Voluntary Nondeductible Contributions, as
adjusted for earnings and losses attributable to such
contributions.
(64) Year of Service. The initial Year of Service is defined as a
twelve (12) consecutive month period, measured from the
Associate's Employment Commencement Date, during which the
Associate completes at least 1,000 Hours of Service.
Subsequent Years of Service will be measured by Plan Years
beginning with the Plan Year which includes the first
anniversary of the Associate's Employment Commencement Date.
For purposes of vesting, each Plan Year, including the initial
Plan Year of employment, during which the Associate completes
1,000 Hours of Service shall count as a Year of Service.
Years of Service with any participating, or nonparticipating
Affiliate or Subsidiary shall be treated as Years of Service
with the Employer. An Associate who transfers from a
participating Employer to another participating Affiliate or
Subsidiary shall continue to be covered by this Plan without
interruption and shall not be considered to have incurred a
termination of service. The Employer shall have the right to
credit prior service with other organizations that are not
affiliates or subsidiaries as Years of Service under this Plan
and such prior service credit shall be given in a
nondiscriminatory manner.
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For an Associate with at least one Hour of Service after
October 1, 1996, all of such Associate's Years of Service with
the Employer are counted to determine the nonforfeitable
percentage in the Associate's Aggregate Account derived from
Employer contributions.
2.02 Number and Gender. Whenever appropriate herein, words used in the
singular shall be considered to include the plural and the plural to
include the singular. The masculine gender, when appearing in this
Plan, shall be deemed to include the feminine gender.
2.03 Headings. The headings of Articles and Sections herein are included
solely for convenience and if there is any conflict between such
headings and the text of the Plan, the text shall control.
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<PAGE> 18
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.01 Eligibility for Participation. Each Associate who is a Participant in
the Plan on the Effective Date shall remain a Participant. Each
Associate who is an employee of the Employer on the Effective Date but
who is not a Participant in the Plan shall become a Participant as of
the Effective Date. Each other Associate shall become a Participant
in the Plan on the later of (i) his Employment Commencement Date, or
(ii) the February 1, May 1, August 1, or November 1 immediately
following the date on which he attains age twenty-one (21).
Leased employees (as described in Section 414(n) of the Code),
independent contractors, and nonresident aliens who receive no earned
income from the Employer which constitutes income from sources within
the United States shall not be eligible to participate in the Plan.
3.02 Eligibility to Make Elective Deferrals. In order to make Elective
Deferrals hereunder, each Associate must make application to the
Employer for participation in the Plan and agree to the terms hereof.
The Associate shall supply all information, including designation of
Beneficiary form, required by the Employer in such manner and at such
time as determined by the Employer. Upon the acceptance of any
benefits under this Plan, such Associate shall automatically be bound
by the terms and conditions of this Plan and all amendments hereto.
3.03 Eligibility Upon Reemployment. If a terminated Associate who was a
Participant is reemployed, such Associate shall become a Participant
immediately upon reemployment. All other Associates who are
reemployed must meet the requirements of Section 3.01.
3.04 Omission of Eligible Associate. If, in any year, any Associate who
should be included as a Participant in the Plan is erroneously omitted
and discovery of such omission is not made until after a contribution
has been made by the Employer for the year, the Employer shall make a
subsequent contribution with respect to the omitted associate in the
amount which the Employer would have contributed with respect to him
had he not been omitted. Such contribution shall be made regardless
of whether or not it is deductible in whole or in part in any taxable
year under applicable provisions of the Code.
Where an Associate has been erroneously omitted from the Plan and
discovery of such omission is made during the Plan Year in which such
Associate should have become a Participant in the Plan, such Associate
shall be allowed to defer an amount which is equal to the amount the
Associate would have been allowed to defer if the Associate had been
allowed to enter the Plan upon his correct Entry Date, subject to the
annual twelve (12) percent limit imposed by Section 4.01 of the Plan.
Such deferral shall be made against Compensation not yet earned.
3.05 Inclusion of Ineligible Associate. If, in any year, any person who
should not have been included as a Participant in the Plan is
erroneously included and discovery of such incorrect inclusion is not
made until after a contribution by the Employer has been made for the
Plan Year, the Employer shall not be entitled to recover the
contribution made with respect to the ineligible person
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<PAGE> 19
regardless of whether or not a deduction is allowed with respect to
such contribution. in such event, the amount contributed with respect
to the ineligible person shall constitute a forfeiture in the Plan
Year in which the discovery is made.
3.06 Election Not to Participate. An Associate may, subject to the
approval of the Employer, elect voluntarily not to participate in the
Plan. The election not to participate must be communicated to the
Employer in writing, upon commencement of employment or initial
eligibility under this Plan or any other plan of the Employer.
14
<PAGE> 20
ARTICLE IV
CONTRIBUTIONS
4.01 Elective Deferrals. For any Plan Year, each Participant may enter
into a salary reduction agreement in which he elects to have allocated
to his Pre-Tax Savings Account any whole percentage, not to exceed
twelve (12) percent, of the Participant's Compensation.
(a) All salary reduction agreements shall be made at the time, in
the manner and subject to the conditions specified by the Plan
Administrator which shall prescribe uniform and
nondiscriminatory rules for such agreements.
(b) No Participant shall be permitted to have Elective Deferrals
made under this Plan, or any other qualified plan maintained
by the Employer, during any taxable year, in excess of the
dollar limitation contained in Section 402(g) of the Code in
effect at the beginning of such taxable year.
A Participant may assign to this Plan any Excess Elective
Deferrals made during a taxable year of the Participant by
notifying the Plan Administrator on or before March 1 of the
Excess Elective Deferrals to be assigned to the Plan. A
Participant is deemed to notify the Plan Administrator of any
Excess Elective Deferrals that arise by taking into account
only those Elective Deferrals made to this Plan and any other
plans of this Employer.
Notwithstanding any other provision of the Plan, Excess
Elective Deferrals, plus any income and minus any loss
allocable thereto, shall be distributed no later than April 15
to any Participant to whose account Excess Elective Deferrals
were assigned for the preceding year and who claims Excess
Elective Deferrals for such taxable year.
Excess Elective Deferrals shall be adjusted for any income or
loss up to the date of distribution. The income or loss
allocable to Excess Elective Deferrals is the sum of:
(i) income or loss allocable to the Participant's Pre-Tax
Savings Account for the taxable year multiplied by a
fraction, the numerator of which is such
Participant's Excess Elective Deferrals for the year
and the denominator is the Participant's account
balance attributable to Elective Deferrals without
regard to any income or loss occurring during such
taxable year; and
(ii) ten percent of the amount determined under (i)
multiplied by the number of whole calendar months
between the end of the Participant's taxable year and
the date of distribution, counting the month of
distribution if distribution occurs after the 15th of
such month.
(c) A Participant may change (increase, decrease, discontinue or
resume) the rate of Elective Deferrals to his Pre-Tax Savings
Account once each Plan quarter, to be effective on the first
day of the following Plan quarter (February 1, May 1, August 1
or November 1),
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<PAGE> 21
provided the Plan Administrator receives the amended salary
reduction agreement within a specified time prior to the
effective date of the change.
(d) Elective Deferrals shall be paid to the Trustee as soon as
such amounts reasonably can be segregated from the general
assets of the Employer, but in no event later than the 15th
business day of the month following the month in which such
amounts would otherwise have been payable to the Participant
in cash. Elective Deferrals shall be made in cash.
4.02 Matching Contributions. For any Plan Year, the Employer may make
Matching Contributions to the Plan on behalf of all eligible
Participants who make Elective Deferrals to the Plan in such amount as
its Board of Directors in its sole discretion may authorize. Such
Matching Contribution will be calculated as a percentage of Elective
Deferrals made during such Plan Year by each eligible Participant,
except that the amount of an eligible Participant's Elective Deferrals
which exceeds six percent (6%) of such Participant's Compensation for
the Plan Year shall not be taken into account when calculating the
Matching Contribution. The Employer shall determine in writing at or
before the beginning of each Plan Year the percentage of Elective
Deferrals which will be contributed as a Matching Contribution for
such Plan Year; provided, however, that the Employer may determine
that no Matching Contribution shall be made. If the Employer does not
change the percentage rate of Elective Deferrals which will be
contributed as a Matching Contribution for a Plan Year, then the
amount which was determined for the prior Plan Year will remain in
effect.
Matching Contributions shall be made on behalf of those Participants
who are credited with a Year of Service during the Plan Year and are
employed on the last day of the Plan Year. A Participant whose
employment is terminated before the end of a Plan Year, but after he
has completed 1,000 Hours of Service for the Plan Year, shall not
share in Matching Contributions for the Plan Year unless by the
terminated Participants not sharing in Matching Contributions for the
Plan Year, the Plan would fail to meet the coverage requirements of
Code Section 410(b)(1) for the Plan Year, in which case members of the
group of terminated Participants shall share in Matching Contributions
for the Plan Year as follows: the minimum number required to meet the
coverage tests under Code Section 410(b)(1) based on their number of
Hours of Service credited during the Plan Year, ranked in descending
order. If more than one individual receives credit for the lowest
number of Hours of Service for which any individual must be covered in
order to meet the coverage tests (pursuant to the sentence above),
then all individuals receiving credit for exactly that number of Hours
of Service shall share in the allocation of Matching Contributions.
Notwithstanding the preceding sentences, a Participant who terminated
employment with the Employer during the Plan Year because of death,
Disability or retirement is entitled to a Matching Contribution
regardless of the number of Hours of Service completed by the
Participant in such Plan Year.
Matching Contributions shall be made no later than the date prescribed
by law for filing the Employer's Federal income tax return, including
extensions, for the taxable year in which the Plan Year ends.
Matching Contributions shall be made in cash or in other such property
acceptable to the Trustee.
4.03 Profit Sharing Contributions. For any Plan Year, the Employer may
make a profit sharing contribution on behalf of each Participant who
is credited with a Year of Service during the Plan
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<PAGE> 22
Year and is employed on the last day of the Plan Year. A Participant
whose employment is terminated before the end of a Plan Year, but
after he has completed 1,000 Hours of Service for the Plan Year, shall
not share in profit sharing contributions for the Plan Year unless by
the terminated Participants not sharing in profit sharing
contributions for the Plan Year, the Plan would fail to meet the
coverage requirements of Code Section 410(b)(1) for the Plan Year, in
which case members of the group of terminated Participants shall share
in profit sharing contributions for the Plan Year as follows: the
minimum number required to meet the coverage tests under Code Section
410(b)(1) based on their number of Hours of Service credited during
the Plan Year, ranked in descending order. If more than one
individual receives credit for the lowest number of hours of Service
for which any individual must be covered in order to meet the coverage
tests (pursuant to the sentence above), then all individuals receiving
credit for exactly that number of Hours of Service shall share in the
allocation of profit sharing contributions. Notwithstanding the
preceding sentences, a Participant who terminated employment with the
Employer during the Plan Year because of death, Disability or
retirement is entitled to a profit sharing contribution regardless of
the number of Hours of Service completed by the Participant in such
Plan Year. The amount of the profit sharing contribution shall be
determined by the Employer each Plan Year.
(a) Profit sharing contributions shall be credited to the
Participant's Profit Sharing Contribution Account in the same
proportion that the Participant's Compensation bears to the
total Compensation of all Participants. Compensation shall be
measured from the date the Associate became a Participant in
the Plan.
(b) Profit sharing contributions shall be made no later than the
date prescribed by law for filing the Employer's federal
income tax return, including extensions, for the taxable year
within which the Plan Year ends. Profit sharing contributions
shall be made in cash or in other such property acceptable to
the Trustee.
4.04 Rollover Contributions. The Trustee, at the written discretion of the
Plan Administrator, may accept and hold for the account of a
Participant "rollover amounts," as described in either Section
402(a)(5)(A) or 408(d)(3)(A)(ii) of the Code. The funds of assets
rolled over shall be allocated to the Associate's Rollover Account.
The Associate does not have to be a Participant in the Plan before the
Trustee can allow assets to be rolled over to the Plan.
(a) The Plan Administrator shall develop rollover procedures, and
may require such information from an Associate desiring to
make such a rollover as it deems necessary or desirable.
(b) The rollover of assets must occur on or before the 60th day
following the Associate's receipt of the distribution from the
other qualified plan, individual retirement account or
individual retirement annuity.
(c) The amount transferred is subject to the maximum rollover
provision of Section 402(c)(2) of the Code.
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<PAGE> 23
4.05 Transfer Contributions. The Trustee, at the written direction of the
Plan Administrator, may accept and hold for the Transfer Account of a
Participant amounts representing the Participant's vested interest
transferred to the Trust by the trustee of another retirement plan
qualified under Section 401(a) of the Code. The assets transferred
shall be allocated to the Associate's Transfer Account. The Associate
does not have to be a Participant in the Plan before the Trustee can
allow assets to be transferred to the Plan.
This Plan shall not accept any direct or indirect transfers (as that
term is defined under Code Section 401(a)(11) and the regulations
thereunder) from a defined benefit plan, money purchase plan
(including a target benefit plan), stock bonus or profit sharing plan
which would otherwise have provided for a life annuity form of payment
to the Participant.
4.06 Qualified Matching Contributions. The Employer may make Qualified
Matching Contributions to the Plan on behalf of all Participants who
are Non-Highly Compensated Employees who make Elective Deferrals to
the Plan. The Qualified Matching Contributions shall be allocated to
all Participants eligible to receive a Qualified Matching Contribution
in the same proportion that the Participant's Compensation bears to
the total Compensation of all Participants who are Non-Highly
Compensated Employees eligible to receive a Qualified Matching
Contribution.
Qualified Matching Contributions shall be made on behalf of those
Non-Highly Compensated Participants who are credited with a Year of
Service during the Plan Year and who are employed on the last day of
the Plan Year. Notwithstanding the preceding sentence, Non-Highly
Compensated Participants who terminated employment with the Employer
during the Plan Year because of death, Disability or retirement are
entitled to a Qualified Matching Contribution.
Qualified Matching Contributions shall be made no later than the end
of the twelve-month period beginning on the day after the close of the
Plan Year. Qualified Matching Contributions shall be made in cash or
in other such property acceptable to the Trustee.
4.07 Qualified Non-elective Contributions. The Employer may elect to make
Qualified Non-elective Contributions under the Plan on behalf of all
Participants who are Non-Highly Compensated Employees in a ratio which
each Non-Highly Compensated Participant's Compensation for the Plan
Year bears to the total Compensation of all Non- Highly Compensated
Participants for such Plan Year.
(a) Qualified Non-elective Contributions shall be made on behalf
of those Non-Highly Compensated Participants who are credited
with a Year of Service during the Plan Year and who are
employed on the last day of the Plan Year. Notwithstanding
the preceding sentence, Non-Highly Compensated Participants
who terminated employment with the Employer during the Plan
Year because of death, Disability or retirement are entitled
to a Qualified Non-elective Contribution.
(b) Qualified Non-elective Contributions shall be made no later
than the end of the twelve-month period beginning on the day
after the close of the Plan Year. Qualified Non-elective
Contributions shall be made in cash or in other such property
acceptable to the Trustee.
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<PAGE> 24
4.08 Actual Deferral Percentage Test. The Actual Deferral
Percentage (ADP) for Participants who are Highly Compensated
Employees for each Plan Year and the ADP for Participants who
are Non-highly Compensated Employees for the same Plan Year
must satisfy one of the following tests:
(a) The ADP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed the ADP for Participants
who are Non-Highly Compensated Employees for the same Plan
Year multiplied by 1.25; or
(b) The ADP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed the ADP for Participants
who are Non-Highly Compensated Employees for the same Plan
Year multiplied by two (2), provided that the ADP for
Participants who are Highly Compensated Employees does not
exceed the ADP for Participants who are Non-Highly Compensated
Employees by more than two (2) percentage points.
(c) The ADP for any Participant who is a Highly Compensated
Employee for the Plan Year and who is eligible to have
Elective Deferrals (and Qualified Non-elective Contributions
or Qualified Matching Contributions, or both, if treated as
Elective Deferrals for purposes of the ADP test) allocated to
his accounts under two or more arrangements described in
Section 401(k) of the Code, that are maintained by the
Employer, shall be determined as if such Elective Deferrals
(and, if applicable, such Qualified Non-elective Contributions
or Qualified Matching, Contributions, or both) were made under
a single arrangement. If a Highly Compensated Employee
participates in two or more cash or deferred arrangements that
have different plan years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated
as a single arrangement. Notwithstanding the foregoing,
certain plans shall be treated as separate if mandatorily
disaggregated under regulations under Section 401(k) of the
Code.
(d) In the event that this Plan satisfies the requirements of
Sections 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 such sections of the
Code only if aggregated with this Plan, then this section
shall be applied by determining the ADP of Associates as if
all such plans were a single plan. Plans may be aggregated in
order to satisfy Section 401(k) of the Code only if they have
the same Plan Year.
(e) For purposes of determining the ADP of a Participant who is a
5-percent owner or one of the ten most highly-paid Highly
Compensated Employees, the Elective Deferrals (and Qualified
Non-elective Contributions or Qualified Matching
Contributions, or both, if treated as Elective Deferrals for
purposes of the ADP test) and Compensation of such Participant
shall include the Elective Deferrals (and, if applicable,
Qualified Non-elective Contributions and Qualified Matching
Contributions, or both) 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 associates in
determining the ADP both for Participants who are Non-Highly
Compensated Employees and for Participants who are Highly
Compensated Employees.
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<PAGE> 25
(f) For purposes of determining the ADP test, Elective Deferrals,
Qualified Non-elective Contributions and Qualified Matching
Contributions must be made before the last day of the
twelve-month period immediately following the Plan Year to
which contributions relate.
(g) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ADP test and the amount of Qualified
Non-elective Contributions or Qualified Matching
Contributions, or both, used in such test.
(h) The determination and treatment of the ADP amounts of any
Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
(i) Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of
each Plan Year to Participants to whose accounts such Excess
Contributions were allocated for the preceding Plan Year. If
such excess amounts 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 with respect to such
amounts. Such distributions shall be made to Highly
Compensated Employees on the basis of the respective portions
of the Excess Contributions attributable to each of such
Associates. Excess Contributions of Participants who are
subject to the family member aggregation rules shall be
allocated among the family members in proportion to the
Elective Deferrals (and amounts treated as Elective Deferrals)
of each family member that is combined to determine the
combined ADP.
Excess Contributions (including the amounts recharacterized)
shall be treated as annual additions under the Plan.
Excess Contributions shall be adjusted for any income or loss
up to the date of distribution. The income or loss allocable
to Excess Contributions is the sum of:
(i) income or loss allocable to the Participant's Pre-Tax
Savings Account (and, if applicable, the Qualified
Non-elective Contribution Account or the Qualified
Matching Contributions Account or both) for the Plan
Year multiplied by a fraction, the numerator of which
is such Participant's Excess Contributions for the
year and the denominator is the Participant's account
balance attributable to Elective Deferrals (and
Qualified Non-elective Contributions or Qualified
Matching Contributions, or both, if any of such
contributions are included in the ADP test) without
regard to any income or loss occurring during such
Plan Year; and
(ii) ten percent of the amount determined under (i)
multiplied by the number of whole calendar months
between the end of the Plan Year and the date of
distribution, counting the month of distribution if
distribution occurs after the 15th of such month.
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<PAGE> 26
Excess Contributions shall be distributed from the
Participant's Pre-Tax Savings Account and Qualified Matching
Contribution Account (if applicable) in proportion to the
Participant's Elective Deferrals and Qualified Matching
Contributions (to the extent used in the ADP test) for the
Plan Year. Excess Contributions shall be distributed from the
Participant's Qualified Non-elective Contributions Account
only to the extent that such Excess Contributions exceed the
balance in the Participant's Pre-Tax Savings Account and
Qualified Matching Contribution Account.
4.09 Limitations on Matching Contributions. The ACP for Participants who
are Highly Compensated Employees for each Plan Year and the ACP for
Participants who are Non-highly Compensated Employees for the same
Plan Year must satisfy one of the following tests:
(a) The ACP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed the ACP for Participants
who are Non-Highly Compensated Employees for the same Plan
Year multiplied by 1.25; or
(b) The ACP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed the ACP for Participants
who are Non-Highly Compensated Employees for the same Plan
Year multiplied by two (2), provided that the ACP for
Participants who are Highly Compensated Employees does not
exceed the ACP for Participants who are Non-Highly Compensated
Employees by more than two (2) percentage points.
(c) If one or more Highly Compensated Employees participate in
both a CODA and a plan subject to the ACP test maintained by
the Employer and the sum of the ADP and ACP of those Highly
Compensated Employees subject to either or both tests exceeds
the Aggregate Limit, then the ACP of those Highly Compensated
Employees who also participate in a CODA will be reduced
(beginning with such Highly Compensated Employee whose ACP is
the highest) so that the limit is not exceeded. The amount by
which each Highly Compensated Employee's Contribution
Percentage Amount is reduced shall be treated as an Excess
Aggregate Contribution. The ADP and ACP of the Highly
Compensated Employees are determined after any corrections
required to meet the ADP and ACP tests. Multiple use does not
occur if either the ADP or ACP of the Highly Compensated
Employees does not exceed 1.25 multiplied by the ADP and ACP
of the Non-Highly Compensated Employees.
(d) For purposes of this Section, the Contribution Percentage for
any Participant who is a Highly Compensated Employee and who
is eligible to have Contribution Percentage Amounts allocated
to his accounts under two or more plans described in Section
401(a) of the Code, or arrangements described in Section
401(k) of the Code that are maintained by the Employer, shall
be determined as if the total of such Contribution Percentage
Amounts were made under each plan. If a Highly Compensated
Employee participates in two or more cash or deferred
arrangements that have different plan years, all cash or
deferred arrangements ending with or within the same calendar
year shall be treated as a single arrangement.
Notwithstanding the foregoing, certain plans shall be treated
as separate if mandatorily disaggregated under regulations
under Section 401(m) of the Code.
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<PAGE> 27
(e) In the event that this Plan satisfies the requirements of
Sections 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 such sections of the
Code only if aggregated with this Plan, then this section
shall be applied by determining the Contribution Percentage of
Associates 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.
(f) For purposes of determining the Contribution Percentage of a
Participant who is a 5-percent 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
associates in determining the Contribution Percentage both for
Participants who are Non-Highly Compensated Employees and for
Participants who are Highly Compensated Employees.
(g) For purposes of determining the Contribution Percentage test,
Matching Contributions and Qualified Non-elective
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.
(h) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ACP test and the amount of Qualified
Non-elective Contributions or Qualified Matching
Contributions, or both, used in such test.
(i) The determination and treatment of the Contribution Percentage
amounts of any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the
Treasury.
(j) Notwithstanding any other provision of this Plan, Excess
Aggregate Contributions, plus any income and minus any loss
allocable thereto, shall be forfeited, if forfeitable, or if
not forfeitable, distributed no later than the last day of
each Plan Year to Participants to whose accounts such Excess
Aggregate Contributions were allocated for the preceding Plan
Year. If such 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 with
respect to such amounts. Such distributions shall be made to
Highly Compensated Employees on the basis of the respective
portions of the Excess Aggregate Contributions attributable to
each of such Associates. Excess Aggregate Contributions of
Participants who are subject to the family member aggregation
rules shall be allocated among the family members in
proportion to the Matching Contributions (or amounts treated
as Matching, Contributions) of each family member that is
combined to determine the combined ACP.
Excess Aggregate Contributions shall be treated as annual
additions under the Plan.
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<PAGE> 28
Excess Aggregate Contributions shall be adjusted for any
income or loss up to the date of distribution. The income or
loss allocable to Excess Aggregate Contributions is the sum
of:
(i) income or loss allocable to the Participant's
Matching Contribution Account, Qualified Matching
Contribution Account (if any, and if all amounts
therein are not used in the ADP test) and, if
applicable, Qualified Non-elective Contribution
Account and Pre-Tax Savings Account for the Plan Year
multiplied by a fraction, the numerator of which is
such Participant's Excess Aggregate Contributions for
the year and the denominator is the Participant's
account balance(s) attributable to Contribution
Percentage Amounts without regard to any income or
loss occurring during such Plan Year; and
(ii) ten percent of the amount determined under (i)
multiplied by the number of whole calendar months
between the end of the Plan Year and the date of
distribution, counting the month of distribution if
distribution occurs after the 15th of such month.
(k) Forfeitures of Excess Aggregate Contributions shall be applied
to reduce Employer contributions for the Plan Year in which
the excess arose. To the extent the excess exceeds Employer
contributions or the Employer has already contributed for such
Plan Year, forfeitures shall be allocated, after all other
forfeitures under the Plan, to the Matching Contribution
Account of each Non-Highly Compensated Employee who made
Elective Deferrals 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.
(l) Excess Aggregate Contributions shall be forfeited, if
forfeitable, or distributed on a pro rata basis from the
Participant's Matching Contribution Account and Qualified
Matching Contribution Account (and, if applicable, the
Participant's Qualified Non-elective Contribution Account or
Pre-Tax Savings Account, or both).
4.10 Annual Additions.
(a) Definitions. For purposes of this Section 4.10, the following
deletions and rules of interpretation shall apply:
(1) "Annual Additions" to a Participant's Aggregate
Account under this Plan is the sum, credited to a
Participant's Aggregate Account for any Limitation
Year, of all Employer contributions, Associate
contributions and forfeitures, and, after March 31,
1984, amounts added to an individual medical account,
as defined in Section 415(l)(2) of the Code which is
part of a defined benefit plan maintained by the
Employer and amounts derived from contributions paid
or accrued after December 31, 1985, in taxable years
ending after such date, which are attributable to
post-retirement medical benefits allocated to a
separate account of a Key
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<PAGE> 29
Employee (as defined in Section 419A(d)(3) of the
Code) under a welfare benefit plan (as defined in
Section 419(e) of the Code) maintained by the
Employer.
(2) "Annual Benefit":
(A) A benefit which is payable annually in the
form of a straight life annuity under a
defined benefit plan. Such benefit does not
include any benefits attributable to either
Associate contributions or rollover account
contributions. If a defined benefit plan
provides for a benefit which is not payable
in the form of a straight life annuity, the
benefit is adjusted in accordance with
Section 4.10(a)(2)(E) below.
(B) Where a defined benefit plan provides for
mandatory Associate contributions (as defined
in Code Section 411(c)(2)(C)), the annual
benefit attributable to mandatory
contributions is determined by using the
factors described in Code Section
411(c)(2)(B) and the regulations thereunder,
regardless of whether Code Section 411
applies to that plan. However, the mandatory
Associate contributions and any voluntary
Associate contributions are all considered a
separate defined contribution plan maintained
by the Employer.
(C) If rollover account contributions are made to
a defined benefit plan, the annual benefit
attributable to these contributions is
determined on the basis of reasonable
actuarial assumptions.
(D) When there is a transfer of assets or
liabilities from one qualified plan to
another, the annual benefit attributable to
the assets transferred shall not be taken
into account by the transferee plan in
applying the limitations of Code Section 415.
The annual benefit payable on account of the
transfer for any individual that is
attributable to the assets transferred will
be equal to the annual benefit transferred on
behalf of such individual multiplied by a
fraction, the numerator of which is the total
assets transferred and the denominator of
which is the total liabilities transferred.
(E) Where a defined benefit plan subject to the
limitations of Code Section 415(b) provides a
retirement benefit in any form other than a
straight life annuity, a defined benefit plan
benefit is adjusted to a straight life
annuity beginning at the same age which is
the actuarial equivalent of such benefit in
accordance with rules determined by the
Commissioner of Internal Revenue. However,
the following values are not taken into
account:
(i) the value of a qualified joint and
survivor annuity (as defined in Code
Section 417(a)(3)(A) and the
regulations thereunder)
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<PAGE> 30
provided by a defined benefit plan to
the extent that such value exceeds
the sum of (a) the value of a
straight life annuity beginning on
the same date, and (b) the value of
any post-retirement death benefits
which would be payable even if the
annuity were not in the form of a
joint and survivor annuity;
(ii) the value of benefits that are not
directly related to retirement
benefits (such as pre-retirement
disability and death benefits and
post-retirement medical benefits);
(iii) the value of benefits provided by a
defined benefit plan which reflect
post-retirement cost-of-living
increases to the extent that such
increases are in accordance with
Code Section 415(d) and the
regulations thereunder.
(F) Where a defined benefit plan provides a
retirement plan benefit beginning before the
Social Security retirement age, a defined
benefit plan benefit is adjusted to the
actuarial equivalent of a benefit beginning
at the Social Security retirement age in
accordance with rules determined by the
Commissioner. The reduction under this
provision shall be made in such manner as the
Commissioner may prescribe which is
consistent with the reduction for old-age
insurance benefits commencing before the
Social Security retirement age under the
Social Security Act.
(G) Where a Participant has less than ten (10)
years of participation in a defined benefit
plan with the Employer at the time the
Participant begins to receive retirement
benefits under a defined benefit plan, the
benefit limitations described in Code Section
415(b)(1) and (4) are to be reduced by
multiplying the otherwise applicable
limitation by a fraction:
(i) the numerator of which is the number
of Years of Service with the
Employer as of, and including, the
Current Limitation Year, and
(ii) the denominator of which is ten
(10).
(H) If the retirement benefit under a defined
benefit plan begins after the Social Security
retirement age, the determination as to
whether the Maximum Permissible Defined
Benefit Amount limitation has been satisfied
shall be made, in accordance with regulations
prescribed by the Commissioner, by adjusting
such benefit so that it is equivalent to such
a benefit beginning at the Social Security
retirement age.
(I) The annual benefit to which a Participant is
entitled at any time under all defined
benefit plans maintained by the Employer
shall not, during the Limitation Year, exceed
the Maximum Permissible Defined Benefit
Amount.
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<PAGE> 31
(3) "Employer" - Hastings Entertainment, Inc. and any
Affiliate or Subsidiary who adopts the Plan.
(4) "Compensation" with respect to the Limitation Year:
(A) Includes amounts accrued to a Participant
(regardless of whether he was such during the
entire Limitation Year):
(i) as wages, salaries, fees for
professional services, and other
amounts received for personal
services actually rendered in the
course of employment with the
Employer including but not limited
to commissions, compensation for
services on the basis of a
percentage of profits and bonuses;
(ii) for purposes of (i) above, earned
income from sources outside the
United States (as defined in Code
Section 911(b)), whether or not
excludable from gross income under
Code Section 911;
(iii) amounts described in Code Sections
104(a)(3), 105(a) and 105(h), but
only to the extent that these
amounts are includible in the gross
income of the Participant;
(iv) amounts paid or reimbursed by the
Employer for moving expenses
incurred by the Participant, but
only to the extent that these
amounts are not deductible by the
Participant under Code Section 217.
(B) Does not include:
(i) notwithstanding (a)(4)(A)(i) of this
Section 4.10, there shall be
excluded from Compensation amounts
contributed to this Plan as Elective
Deferrals;
(ii) other contributions made by the
Employer to a plan of deferred
compensation to the extent that,
before the application of the Code
Section 415 limitations to that
plan, the contributions are not
includible in the gross income of
the Participant for the taxable year
in which contributed. In addition,
Employer contributions made on
behalf of a participant to a
simplified employee pension
described in Code Section 408(k) are
not considered as Compensation for
the taxable year in which
contributed to the extent such
contributions are excludable by the
Participant from gross income under
Code Section 408(k)(6).
Additionally, any distributions from
a plan of deferred compensation are
not considered as Compensation,
regardless of
26
<PAGE> 32
whether such amounts are includible
in the gross income of the
Participant when distributed.
However, any amounts received by a
Participant pursuant to an unfunded
nonqualified plan shall be considered
as Compensation in the year such
amounts are includible in the gross
income of the Participant;
(iii) Amounts realized from the exercise
of a non-qualified stock option, or
when restricted stock (or property)
held by an associate either becomes
freely transferable or is no longer
subject to a substantial risk of
forfeiture (pursuant to Code Section
83 and regulations thereunder).
(5) "Limitation Year" - the Plan Year.
(6) "Maximum Permissible Defined Benefit Amount" - for a
Limitation Year the maximum permissible defined
benefit amount with respect to any Participant shall
be the lesser of the amounts determined under
paragraphs (A) and (B) below, subject to the rules of
paragraphs (C), (D) and (E) below, where:
(A) is $90,000, and
(B) is 100 percent of the Participant's average
Compensation for his high three consecutive
Years of Service.
(C) As of January 1 of each calendar year
commencing with the calendar year 1988, the
dollar limitation set forth in paragraph (A)
above shall be adjusted automatically to
equal the dollar limitation as determined by
the Commissioner of Internal Revenue for that
calendar year under Code Section
415(d)(1)(A). This adjusted dollar
limitation applies for the Limitation Year
ending with the calendar year. It is
applicable to associates who are participants
of the defined benefit plan and to associates
who have retired or otherwise terminated
their service under a defined benefit plan
with a nonforfeitable right to accrued
benefits, regardless of whether they have
actually begun to receive such benefits. The
annual benefit payable to a terminated
Participant which is otherwise limited by the
dollar limitation shall be increased to take
into account the adjustment of the dollar
limitation.
(D) With regard to Participants who have
separated from service with a nonforfeitable
right to accrued benefits, the Compensation
limitation described in paragraph (B) above
applicable to Limitation Years commencing on
or after January 1, 1976, shall be adjusted
annually to take into account increases in
the cost of living. For any Limitation Year
beginning after the separation occurs, the
adjustment of the Compensation limitation is
made as specified in regulations and rules
prescribed by the
27
<PAGE> 33
Commissioner. In the case of a Participant
who separated from service prior to January
1, 1976, the cost-of-living adjustment of the
Compensation limitation under this paragraph
for all Limitation Years prior to January 1,
1976, is to be determined as provided by the
Commissioner.
(E) Anything herein to the contrary
notwithstanding, the Maximum Permissible
Defined Benefit Amount for any Associate who
was a participant of a defined benefit plan
before January 1, 1983, shall in no case be
less than the "current accrued benefit" of
such Associate as of the close of the last
Limitation Year beginning before January 1,
1983, as such term is defined in Section
235(g)(4) of the Tax Equity and Fiscal
Responsibility Act of 1982 ("TEFRA").
(7) "Maximum Permissible Defined Contribution Amount" -
for a Limitation Year the maximum permissible defined
contribution amount with respect to any Participant
shall be the lesser of:
(A) $30,000, adjusted automatically as of January
1 of each calendar Year commencing with the
calendar year 1988, to equal the dollar
limitation as determined by the Commissioner
of Internal Revenue for that calendar year
under Code Section 415(d)(1)(A) (or, if
greater, 1/4 of the dollar limitation in
effect under Code Section 415(b)(1)(A)), or
(B) 25 percent of the Participant's Compensation
for the Limitation Year.
(8) "Projected Annual Benefit" - the annual benefit to
which a Participant would be entitled under a defined
benefit plan on the assumption that he or she
continues employment until the Normal Retirement Age
(or current age, if that is later) thereunder, that
his or her compensation continues at the same rate as
in effect for the Limitation Year under consideration
until such age, and that all other relevant factors
used to determine benefits under the defined benefit
plan remain constant as of the current Limitation
Year for all future Limitation Years.
(b) For purpose of applying the limitations of Code Sections
415(b), (c) and (e) applicable to a Participant for a
particular Limitation Year, all qualified defined benefit
plans (without regard to whether a plan has been terminated)
ever maintained by the Employer will be treated as one defined
benefit plan and all qualified defined contribution plans
(without regard to whether a plan has been terminated) ever
maintained by the Employer will be treated as part of this
Plan.
(1) Annual Addition Limits. The amount of the Annual
Addition which may be credited under this Plan to any
Participant's Aggregate Account as of any allocation
date shall not exceed the Maximum Permissible Defined
Contribution Amount (based upon his Compensation up
to such allocation date) reduced by the sum of any
credits of
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<PAGE> 34
Annual Additions made to the Participant's Aggregate
Account under all defined contribution plans as of
any preceding allocation date within the Limitation
Year. If an allocation date of this Plan coincides
with an allocation date of any other qualified
defined contribution plan maintained by the Employer,
the amount of the Annual Additions which may be
credited under this Plan to any Participant's
Aggregate Account as of such date shall be an amount
equal to the product of the amount to be credited
under this Plan without regard to this Section 4.10
multiplied by the lesser of one (1) or a fraction,
the numerator of which is the amount described in
this subsection (b)(1) of Section 4.10 during the
Limitation Year and the denominator of which is the
amount that would otherwise be credited on this
allocation date under all defined contribution plans
without regard to this Section 4.10. If
contributions to this Plan on behalf of a Participant
are to be reduced as a result of this Section 4.10,
such reduction shall be effected by first reducing
the amount of Participant profit sharing
contributions. If, as a result of a reasonable error
in estimating a Participant's Compensation or under
the limited facts and circumstances which the
Commissioner of Internal Revenue finds justify the
availability of the rules set forth in Section
1.415-6(b)(6) of the Income Tax Regulations,
allocation of Annual Additions under the terms of the
Plan for a particular Participant would cause the
limitations of Code Section 415 applicable to that
Participant for the Limitation Year to be exceeded,
the excess amount shall not be deemed to be Annual
Additions in that Limitation Year if they are treated
as follows:
(A) The excess amount in the Participant's profit
sharing contributions shall be used to reduce
contributions for the next Limitation Year
(and succeeding Limitation Years, as
necessary) for that Participant if that
Participant is covered by the Plan as of the
end of the Limitation Year. However, if that
Participant is not covered by the Plan as of
the end of the Limitation Year, then the
excess amounts must be held unallocated in a
suspense account for the Limitation Year and
allocated and reallocated in the next
Limitation Year to all of the remaining
Participants in the Plan. If a suspense
account is in existence at any time during a
particular Limitation Year, other than the
first Limitation Year described in the
preceding sentence, all amounts in the
suspense account must be allocated and
reallocated to Participants' Accounts
(subject to the limitations of Code Section
415) before any contributions which would
constitute Annual Additions may be made to
the Plan for that Limitation Year.
Furthermore, the excess amounts must be used
to reduce contributions for the next
Limitation Year (and succeeding Limitation
Years, as necessary) for all of the remaining
Participants in the Plan. For purposes of
this subdivision, except as provided in
(b)(1), excess amounts may not be distributed
to Participants or Former Participants.
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<PAGE> 35
(B) In the event of termination of the Plan, the
suspense account described in (A) above shall
revert to the Employer to the extent it may
not then be allocated to any Participant's
Aggregate Account.
(C) Notwithstanding any other provisions in this
Section 4.10, the Employer shall not
contribute any amount that would cause an
allocation to the suspense account as of the
date the contribution is allocated. If the
contribution is made prior to the date as of
which it is to be allocated, then such
contribution shall not exceed an amount that
would cause an allocation to the suspense
account if the date of contributions were an
allocation date.
(D) Alternatively, the Plan Administrator may
elect to follow the procedure described below
in lieu of the procedure described in
subparagraphs (A), (B) and (C) above. A
Participant's Elective Deferrals made under
Section 4.01 may be distributed to the extent
that the distribution would reduce the excess
amounts in the Participant's Account. These
excess amounts to be distributed shall be
adjusted for income or loss, provided such
method is used consistently for all
Participants and for all such corrective
distributions under the Plan for the Plan
Year, and is used by the Plan for allocating
income or loss to Participants' accounts.
(2) Overall Limit. For any Participant of this Plan who
at any time participated in a defined benefit plan of
the Employer, the rate of benefit accrual by such
Participant in each defined benefit plan in which the
Participant participates during the Limitation Year
will be reduced to the extent necessary to prevent
the sum of the following fractions, computed as of
the close of the Limitation Year, from exceeding 1.0:
Project Annual Benefit of the Participant
under all defined benefit plans
divided by
The lesser of (1) the product of 1.25
multiplied by the dollar limitation in effect
under Code Section 415(b)(1)(A) for such
Limitation Year, or (2) the product of 1.4
multiplied by the amount which may be taken
into account under Code Section 415(b)(1)(B)
with respect to such Participant for such
Limitation Year
plus
The sum of Annual Additions to such
Participant's Aggregate Account under all
defined contribution plans in such Limitation
Year and for all prior Limitation Years
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<PAGE> 36
divided by
The sum of the lesser of the following
amounts determined for such Limitation Year
and for each prior year of service with the
Employer: (1) the product of 1.25 multiplied
by the dollar limitation in effect under Code
Section 415(c)(1)(A) for such Limitation
Year, or (2) the product of 1.4 multiplied by
25 percent of the Participant's Compensation
for such Limitation Year.
31
<PAGE> 37
ARTICLE V
ALLOCATION TO PARTICIPANTS' ACCOUNTS
5.01 Individual Accounts. The Plan Administrator shall create and maintain
adequate records to disclose the interest in the Trust of each
Participant, Former Participant and Beneficiary. Such records shall
be in the form of individual accounts and credits and charges shall be
made to such accounts in the manner herein described. Each
Participant and Former Participant may have a Pre-Tax Savings Account,
a Voluntary Nondeductible Contribution Account, a Matching
Contribution Account, a Profit Sharing Contribution Account, a
Qualified Non-elective Contribution Account, a Qualified Matching
Contribution Account, a Rollover Account and a Transfer Account. The
maintenance of individual accounts is only for accounting purposes.
5.02 Valuation of the Trust Fund. The Trustee shall value the assets of
the Trust Fund on each Valuation Date. In making such valuation, the
Trustee shall take into account earnings or losses of the Trust Fund,
net of reasonable expenses, and capital appreciation or depreciation
in such assets whether or not realized. The method of valuation shall
be determined by the Trustee and shall be followed with reasonable
consistency from Valuation Date to Valuation Date.
5.03 Priority of Allocations to Accounts. As of each Valuation Date, the
account balances of Participants and Former Participants shall be
adjusted to reflect adjustments in the value of the Trust Fund, to
reflect payments of benefits and to reflect transfers of benefits to
or for the benefit of any Participant or Former Participant.
The following procedures shall apply when adjusting the account
balances of Participants and Former Participants:
(a) First, charge to the proper Accounts all payments,
distributions and forfeitures made since the last Valuation
Date; and
(b) Next, credit the total Elective Deferrals, principal and
interest loan repayments, rollover contributions and transfer
contributions made since the last Valuation Date to the proper
Participant's Account; and
(c) Next, allocate the net gain or loss (as defined below) in each
investment fund to all Participants and Former Participants,
according to the then credit balance in their Accounts in that
investment fund after the adjustments made in (a) and (b)
above; and
(d) Finally, if the Valuation Date corresponds to the Plan Year
end, credit to the Account of each Participant and Former
Participant who is eligible to share in Matching, Profit
Sharing, Qualified Non- elective, and Qualified Matching
Contributions, any such contributions made for the Plan Year.
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<PAGE> 38
For those accounts which are unitized, dividend income shall be
allocated in proportion to the units on which such dividend was
earned, except that any distributions or withdrawals paid since the
date the dividend was earned shall first be subtracted.
The "net gain or loss" of an investment fund to be allocated as of any
Valuation Date means the amount equal to the sum of all interest
income, dividend income, realized gains or losses and unrealized gains
or losses credited or accrued to that fund since the previous
Valuation Date, less an amount equal to any Net Expense (as defined in
Section 5.04) incurred for that fund since the previous Valuation
Date.
5.04 Net Expense. Any investment expense attributable to a particular
investment fund shall be charged to that fund. Any other expenses of
the Plan shall be charged on a pro rata basis to all investment funds
maintained under this Plan if not paid by the Employer.
5.05 Participant Direction of Investments. A Participant may elect to have
one percent (1%), or any multiple thereof up to one hundred percent
(100%), of such Participant's Aggregate Account invested in any
investment fund established hereunder. Such election shall apply to
the existing Aggregate Account balance and future contributions made
by or on behalf of such Participant. To the extent a Participant
fails to direct the investment of all or any portion of his Aggregate
Account and future contributions, they shall be invested in the
investment fund or funds selected by the Trustee. Upon a
Participant's termination of employment or cessation of participation
for any reason, such Participant (or Beneficiary, in the case of the
Participant's death) shall continue to have the right to direct the
investment of his Aggregate Account until such time as he receives a
distribution hereunder.
A Participant may change his designation of the manner for investment
of his Aggregate Account to any other manner permitted under this
Section, provided that (i) the change must be made on a form
prescribed by the Committee, or, if a telephone voice response system
is available, the change may be made by using the telephone voice
response system, (ii) the change shall become effective no later than
the business day next following (a) the date the change is received by
the Trustee, in the case of a written change, or (b) the date the
change is made using the telephone voice response system, and (iii)
the change shall be applicable to the Participant's existing Aggregate
Account and to contributions made after the application for change
shall have become effective. In order to comply with applicable
federal or state securities laws, the Committee may establish such
rules with respect to the change of investment designation by
Participants as it shall deem necessary or advisable to prevent
possible violations of such laws.
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<PAGE> 39
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.01 Vesting of Accounts. Participants shall vest in their Accounts in
accordance with the following:
(a) Participants who retire on or after attaining Normal
Retirement Age or Early Retirement Age or who terminate
employment because of Disability or death shall be 100 percent
vested in their Aggregate Account as of the date of such
event. A Participant's Accounts shall be distributed in
accordance with the applicable sections of this Article VI.
(b) Participants who terminate employment with the Employer before
their Normal Retirement Date or for any other reason other
than death, Disability, or attainment of Early Retirement Age
shall have the vested portion of their Accounts as of the date
of termination of employment determined in the following
manner. They shall be:
(1) 100 percent vested in their Pre-Tax Savings Account,
their Voluntary Nondeductible Contribution Account,
their Qualified Non-elective Contribution Account,
their Qualified Matching Contribution Account, their
Rollover Account and their Transfer Account; and
(2) vested in a certain percentage of their Matching
Contribution Account and their Profit Sharing
Contribution Account, determined in accordance with
the following schedule (for Participants credited
with at least one Hour of Service on or after October
1, 1996):
<TABLE>
<CAPTION>
Years of Service Vested Percentage
---------------- -----------------
<S> <C>
Less than 2 0%
2 but less than 3 25%
3 but less than 4 50%
4 but less than 5 75%
5 or more years 100%
</TABLE>
Participants who are not credited with an Hour of Service on
or after October 1, 1996 will be subject to the vesting
schedule of the Prior Plan.
The vested portion of a Participant's Accounts as determined
above shall be distributed in accordance with the applicable
Sections of this Article VI.
(c) The computation of a Participant's nonforfeitable percentage
of his interest in the Plan shall not be reduced as the result
of any direct or indirect amendment to this Plan. In the
event that the Plan is amended to change or modify any vesting
schedule, a Participant with at least three (3) Years of
Service as of the expiration date of the election period may
elect to have his nonforfeitable percentage computed under the
Plan without regard to such
34
<PAGE> 40
amendment. If a Participant fails to make such election, then
such Participant shall be subject to the new vesting schedule.
The Participant's election period shall commence on the
adoption date of the amendment and shall end 60 days after the
latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of
the amendment from the Employer or Plan
Administrator.
6.02 Forfeitures. Any portion of the final balance in the Participant's
Account upon the Participant's termination of employment for reasons
other than death, Disability or retirement which is not vested will be
forfeited. A forfeiture of the Participant's nonvested Account shall
take place upon the earlier of the occurrence of five (5) consecutive
one-year Breaks-in-Service or the distribution of his entire vested
account balance upon his termination of employment. Forfeitures shall
first be used to reinstate previously forfeited account balances of
rehired Former Participants who are entitled to reinstatement pursuant
to Section 7.02 of the Plan. Remaining forfeitures shall first be
used to reduce the Employer's matching contributions for the Plan
Year, and then, to the extent there are still remaining forfeitures,
to reduce the Employer's profit sharing contributions for the Plan
Year. If a Participant is not vested to any extent, he shall be
deemed to have received a distribution of his entire account balance
upon his termination of employment.
6.03 Timing of Distributions.
(a) If the amount of the Participant's total distribution is
$3,500 or less, the Account shall be immediately distributed
in a single lump sum payment without the consent of the
Participant, or in the case of the death of the Participant,
his Beneficiary.
If the amount of the Participant's total distribution exceeds
$3,500, the Participant must consent before an immediate
distribution may be made. The Participant's Aggregate Account
is immediately distributable if any part of the benefit may be
distributed to the Participant before the later of Normal
Retirement Age or age 62. If the Participant, or his
Beneficiary in the case of death, does not consent to
immediate payment, the distribution will be deferred until the
Valuation Date coinciding with or next following the day the
Participant reaches age 65 (or, in the case of a Beneficiary
receiving the distribution, the date the Participant would
have reached age 65 had he lived). A Former Participant or
Beneficiary who has not consented to an immediate distribution
may consent to such distribution on any subsequent Valuation
Date.
If a distribution is one to which Sections 401(a)(11) and 417
of the Code do not apply, such distribution may commence less
than 30 days after the notice required under Section
1.411(a)-11(c) of the Income Tax Regulations is given,
provided that:
35
<PAGE> 41
(1) the Plan Administrator 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
(2) the Participant, after receiving the notice,
affirmatively elects a distribution.
(b) Account balances shall be distributed to Former Participants
or Beneficiaries no later than ninety (90) days following the
Valuation Date coincident with or next following the
Participant's date of termination of employment.
(c) Payment of a Participant's or Former Participant's benefits,
unless the Participant or Former Participant otherwise elects,
will begin not later than the 60th day after the latest of the
close of the Plan Year in which:
(1) The date on which the Participant attains age 65;
(2) Occurs the 10th anniversary of the year in which the
Participant commenced Participation; or
(3) The Participant terminates his service with the
Employer.
(d) All distributions required under this Section 6.03(d) shall be
determined and made in accordance with the proposed
Regulations under Code Section 401(a)(9), including the
minimum distribution incidental benefit requirement of Section
1.401(a)(9)-2 of the proposed Regulations and will take
precedence over any inconsistent provisions of this Plan.
For Plan Years beginning after December 31, 1988,
distributions to all Participants or Former Participants who
attain age 70 1/2 on or after January 1, 1988 must commence no
later than the first day of April following the calendar year
in which the individual attains age 70 1/2. For those
Participants or Former Participants who attain age 70 1/2
before January 1, 1988, and who are not five percent owners
(as defined in Section 416(i) of the Code), distributions must
commence no later than the later of the first day of April
following the calendar year in which the individual attains
age 70 1/2 or retires. Distributions which commenced prior to
January 1, 1989 under the provisions of Code Section 401(a)(9)
and the regulations thereunder as then in effect, shall
continue unchanged.
As of the first distribution calendar year, distributions, if
not made in a form pursuant to Section 6.04, may only be made
over one of the following periods (or a combination thereof):
(1) The life of the Participant;
(2) The life of the Participant and a designated
beneficiary;
36
<PAGE> 42
(3) A period certain not extending beyond the life
expectancy of the Participant; or
(4) A period certain not extending beyond the joint and
last survivor expectancy of the Participant and a
designated Beneficiary.
(e) Notwithstanding any provision in this Plan to the contrary, if
a Former Participant's benefits have commenced and the Former
Participant dies before his entire interest has been
distributed to him, the remaining portion of such interest
will be distributed at least as rapidly as under the method of
distribution being used prior to the Former Participant's
death.
(f) If a Participant dies before his distributions have commenced,
such Participant's entire interest will be distributed within
five years after his death. The preceding sentence shall not
apply if:
(1) any portion of a Participant's benefit is payable to
(or for the benefit of) any individual designated (or
if the applicable law permits, deemed designated) as
a Beneficiary by the Participant and such portion
will be distributed over a period not extending
beyond the life expectancy of such Beneficiary and
such distribution begins not later than one year
after the date of the Participant's death (or such
later date as is prescribed by regulations); or
(2) if the designated Beneficiary is the Participant's
surviving Spouse, then Section 6.03(e) of the Plan
shall apply, except that the distribution need only
begin on the date on which the Participant would have
attained age 70 1/2 (rather than one year after the
date of the Participant's death); provided, however,
if the surviving Spouse then dies before payments are
required to begin, then the entire interest must be
distributed with five years of the surviving Spouse's
death.
(g) Pursuant to Section 401(a)(9)(D) of the Code, the Participant,
Former Participant or his Spouse, in the case of a
distribution pursuant to Sections 401(a)(9)(B)(iii) and (iv)
of the Code, may elect to have his life expectancy and the
life expectancy of his designated beneficiary recalculated
each year in order to determine the minimum distribution
requirements for each year. The election must be made no
later than the time the first distribution is required under
Section 401(a)(9) of the Code.
The election by the Participant, Former Participant or his
Spouse shall be irrevocable as of the date of the first
required distribution under Section 401(a)(9) of the Code.
Prior to such date the Participant, Former Participant or his
Spouse may change the election.
(h) Notwithstanding anything to the contrary, the surviving Spouse
of the Participant can direct the commencement of benefits
within a reasonable time after the death of the Participant.
37
<PAGE> 43
6.04 Form of Payment. Benefits from the Participant's or Former
Participant's vested Account shall be paid, to a Participant or Former
Participant who does not die before the annuity starting date, in one
of the optional forms explained below:
(a) Lump sum payment; or
(b) Equal installments over a fixed period of time in which the
Former Participant will receive equal payments in monthly,
quarterly, semi-annual or annual installments for any period
of time not exceeding the life expectancy of the Former
Participant, or the joint life expectancy of the Former
Participant and his designated Beneficiary.
6.05 Designation of Beneficiary. Each Participant or Former Participant
from time to time may designate any person or persons (who may be
designated contingently or successively and who may be an entity other
than a natural person) as his Beneficiary or Beneficiaries to whom his
Plan benefits are paid if he dies before receipt of all such benefits.
Each Beneficiary designation shall be in a form prescribed by the Plan
Administrator and will be effective only when filed with the Plan
Administrator during the Participant's or Former Participant's
lifetime. Each Beneficiary designation filed with the Plan
Administrator will cancel all Beneficiary designations previously
filed with the Plan Administrator. In the event a married Participant
or Former Participant designates a Beneficiary other than his Spouse,
his Spouse must consent to such designation in writing, witnessed by a
notary public or the Plan Administrator. This consent must be on file
with the Plan Administrator before the Beneficiary designation can be
honored. A spousal consent filed with the Plan Administrator shall be
applicable only with respect to the Spouse who has signed such form.
If a married Participant or Former Participant fails to designate a
Beneficiary in the manner provided above, or if the Beneficiary
designated by a deceased Participant or Former Participant dies before
him or before complete distribution of the Participant's or Former
Participant's benefits, the Plan Administrator in its discretion, may
direct the Trustee to distribute such Participant's or Former
Participant's benefits (or the balance thereof) to:
(a) The surviving Spouse of the Participant or Former Participant;
(b) The Participant's lineal descendants, in equal parts, per
stirpes; or
(c) The estate of the last to die of such Participant or Former
Participant and his Beneficiary or Beneficiaries.
6.06 Distribution for Minor Beneficiary. In the event a distribution is to
be made to a minor Beneficiary, or to the custodian for such minor
Beneficiary under the Uniform Gifts to Minors Act or Gift to Minors
Act, if such is permitted by the laws of the state in which such
Beneficiary resides, such payment to the legal guardian or parent of a
minor Beneficiary shall fully discharge the Trustee, Employer, and
Plan from further liability on account thereof.
38
<PAGE> 44
6.07 Location of Participant, Former Participant or Beneficiary Unknown.
In the event that all, or any portion, of the distribution payable to
a Participant or Former Participant or his Beneficiary hereunder
shall, at the expiration of five (5) years after it shall become
payable, remains unpaid solely by reason of the inability of the Plan
Administrator, after sending a registered letter, return receipt
requested, to the last known address, and after further diligent
effort, to ascertain the whereabouts of such Participant, Former
Participant or his Beneficiary, the amount so distributable shall be
reallocated in the same manner as a forfeiture pursuant to this
agreement. In the event a Participant, Former Participant or
Beneficiary is located subsequent to his benefit being reallocated,
such benefit shall be restored.
6.08 Limitations on Benefits and Distributions. All rights and benefits,
including, elections, provided to a Participant or Former Participant
in this Plan shall be subject to the rights afforded to any "alternate
payee" under a "qualified domestic relations order" as those terms are
defined in Code Section 414(p).
39
<PAGE> 45
ARTICLE VII
FORMER PARTICIPANTS
7.01 Participation by Former Participant. An Associate who is a Former
Participant and who is rehired by the Employer shall be eligible to
participate in the Plan immediately upon his rehire.
7.02 Reinstatement of Account. If any Former Participant is reemployed
before he receives a distribution of the vested portion of his
Account, the Former Participant shall continue to participate in the
Plan in the same manner as if such termination of employment had not
occurred.
If any Former Participant shall be reemployed by the Employer before
five consecutive one-year Breaks-in-Service, and such Former
Participant had received a distribution of his entire vested interest
prior to his reemployment, that portion of his Account that was
forfeited shall be reinstated to the amount on the date of
distribution if the Associate repays to the Plan the full amount of
the distribution attributable to employer contributions before the
earlier of five years after the first date on which the Former
Participant is subsequently reemployed by the Employer, or the date
the Former Participant incurs five consecutive one-year
Breaks-in-Service following the date of the distribution. If an
Associate is deemed to receive a distribution pursuant to Section 6.02
of the Plan, and the Associate resumes employment covered under this
Plan before the date the Former Participant incurs five consecutive
one-year Breaks-in-Service, upon the reemployment of such Associate,
the Employer-derived account balance of the Associate will be restored
to the amount on the date of such deemed distribution.
The full amount of his Matching Contribution Account and Profit
Sharing Contribution Account which was forfeited shall be reinstated
to his Matching Contribution Account and Profit Sharing Contribution
Account, respectively, and thereafter, at any subsequent date, the
vested balance in his Matching Contribution Account and Profit Sharing
Contribution Account will be determined in accordance with the
following formula:
Vested Balance = [VP (AB + PW)] - PW
where
VP = Current Vested Percent
AB = Current Account Balance (including restored forfeitures)
PW = Prior Withdrawal or distribution
7.03 Separate Account Balances. If a Former Participant is reemployed
after five consecutive one-year Breaks-in-Service, then separate
Accounts will be maintained as follows:
(a) One Account for nonforfeitable benefits attributable to
pre-break service; and
(b) One Account representing his status in the Plan attributable
to post-break service.
40
<PAGE> 46
7.04 Years of Service. If any Former Participant is reemployed after a
one-year Break-in-Service has occurred, Years of Service shall include
Years of Service prior to his one-year Break-in-Service subject to the
following rules:
(a) A Former Participant's pre-break and post-break service shall
be used for computing Years of Service for vesting purposes
only after the Former Participant has completed one Year of
Service following his date of reemployment with the Employer.
(b) The vested account balance attributable to post-break service
of a Former Participant who did not have a nonforfeitable
interest in any portion of his Account attributable to
contributions made by the Employer shall not be increased as a
result of pre-break service if his consecutive one-year
Breaks-in-Service equal or exceed the greater of five or the
aggregate number of his pre-break Years of Service.
(c) A Former Participant who had a nonforfeitable right to a
portion of his Account attributable to contributions made by
the Employer shall have pre-break and post-break Years of
Service taken into account in determining his vested account
balance.
(d) A Former Participant's vested account balance attributable to
pre-break service shall not be increased as a result of
post-break service after five consecutive one-year
Breaks-in-Service.
41
<PAGE> 47
ARTICLE VIII
WITHDRAWALS
8.01 In-service Withdrawals. Elective Deferrals, Qualified Non-elective
Contributions and Qualified Matching Contributions, and income
allocable to each are not distributable to a Participant or his
Beneficiary or Beneficiaries, in accordance with such Participant's,
Beneficiary's or Beneficiaries' election, earlier than upon separation
from service, death or Disability. Such amounts may also be
distributed upon:
(a) Termination of the Plan without the establishment of another
defined contribution plan, other than an employee stock
ownership plan (as defined in Section 4975(e) or Section 409
of the Code) or a simplified employee pension plan as defined
in Code Section 408(k).
(b) The disposition by a corporation to an unrelated corporation
of substantially all of the assets (within the meaning of
Section 409(d)(2) of the Code) used in a trade or business of
such corporation if such corporation continues to maintain
this Plan after disposition, but only with respect to
Associates who continue employment with the corporation
acquiring such assets.
(c) The disposition by a corporation to an unrelated entity of
such corporation's interest in a subsidiary (within the
meaning of Section 409(d)(3) of the Code) if such corporation
continues to maintain this Plan, but only with respect to
Associates who continue employment with such subsidiary.
(d) The attainment of age 59 1/2.
(e) The hardship of the Participant as described in Section 8.02.
Such withdrawals shall be paid in a single lump sum and shall be
subject to federal income tax withholding as prescribed by Section
3405 of the Code and the regulations thereunder.
8.02 Hardship Withdrawals. Upon the application of any Participant who is
an Associate, the Plan Administrator, in accordance with a uniform
nondiscriminatory policy, shall at any time permit such Participant to
withdraw all or any portion of the amounts in the Participant's
Pre-Tax Savings Account, if the withdrawal is in light of an immediate
and heavy financial need of the Associate and is necessary to satisfy
such financial need. However, any withdrawal under this Section 8.02
may not include earnings credited to a Participant's Pre-Tax Savings
Account after December 31, 1988. The amount of the withdrawal shall
not exceed the amount required to meet the financial need.
(a) The determination of whether an Associate has an immediate and
heavy financial need shall be based on all relevant facts and
circumstances pursuant to Treasury Regulation Section
1.401(k)-l(d)(2). The Plan Administrator will require
application for such hardship,
42
<PAGE> 48
review such application and shall request any additional
information necessary to verify existence of such hardship.
The Plan Administrator shall make determination in a
nondiscriminatory manner based upon objective criteria applied
on a uniform and nondiscriminatory basis.
(b) A distribution will be deemed to be made on account of an
immediate and heavy financial need of the Associate if the
distribution is on account of:
(1) Expenses incurred or necessary for medical care,
described in Section 213(d) of the Code, of the
Associate, the Associate's Spouse or any dependents
of the Associate (as defined in Section 152 of the
Code);
(2) The purchase (excluding mortgage payments) of a
principal residence for the Associate;
(3) Payment of tuition, related educational fees, and
room and board expenses for the next twelve (12)
months of post-secondary education for the Associate,
the Associate's Spouse, children or dependents (as
defined in Section 152 of the Code);
(4) The need to prevent the eviction of the Associate
from, or a foreclosure on the mortgage of, the
Associate's principal residence; or
(5) Any such extraordinary financial hardship as shall be
identified by the Commissioner of Internal Revenue.
(c) The determination as to whether the distribution is necessary
to satisfy a financial need shall be based on all the relevant
facts and circumstances including the Associate's
representation that the need cannot be relieved:
(1) Through reimbursement or compensation by insurance or
otherwise;
(2) By reasonable liquidation of the Associate's assets,
to the extent such liquidation would not itself cause
an immediate and heavy financial need;
(3) By cessation of Elective Deferrals to the Plan; or
(4) By other distributions or nontaxable (at the time of
the loan) loans from plans maintained by the Employer
or by any other employer, or by borrowing from
commercial sources on reasonable commercial terms.
(d) A distribution shall be deemed to satisfy an immediate and
heavy financial need if:
43
<PAGE> 49
(1) The Associate has obtained all distributions, other
than hardship distributions, and all nontaxable loans
currently available under all plans maintained by the
Employer;
(2) All plans maintained by the Employer provide that the
Associate's Elective Deferrals (and Associate
Contributions) will be suspended for twelve (12)
months after the receipt of the hardship
distribution;
(3) The distribution is not in excess of the amount of an
immediate and heavy financial need (including amounts
necessary to pay any federal, state, or local income
taxes or penalties reasonably anticipated to result
from the distribution); and
(4) All plans maintained by the Employer provide that the
Associate may not make Elective Deferrals for the
Associate's taxable year immediately following the
taxable year of the hardship distribution in excess
of the applicable limit under Section 402(g) of the
Code for such taxable year less the amount of such
Associate's Elective Deferrals for the taxable year
of the hardship distribution.
(e) A Participant making an application under this Section 8.02
shall have the burden of presenting to the Plan Administrator
evidence of such need. If a Participant's application for a
hardship withdrawal is approved, the Plan Administrator shall
then instruct the Trustee to make such payment of the approved
amount to the Participant. Hardship withdrawals shall be paid
in a single lump sum.
(f) Hardship withdrawals shall be subject to Federal income tax
withholding as prescribed by Section 3405 of the Code and the
regulations thereunder.
44
<PAGE> 50
ARTICLE IX
PLAN ADMINISTRATION
9.01 Powers and Responsibilities.
(a) Hastings Entertainment, Inc., as Plan Administrator, shall be
empowered to appoint and remove the Trustee and Benefits
Committee from time to time as it deems necessary for the
proper administration of the Plan and for the sole and
exclusive benefit of the Participants, Former Participants and
their Beneficiaries in accordance with the terms of this Plan,
the Code and ERISA.
(b) The Plan Administrator shall establish a funding policy and
method, including, but not limited to determination of the
short-term objectives for liquidity and long-term objectives
for investment growth, or shall appoint a qualified person to
do so.
(c) The Plan Administrator may in its discretion appoint an
Investment Manager to manage all or a designated portion of
the assets of the Plan. In such event, the Trustee shall
follow the written directive of the Investment Manager in
investing the assets of the Plan managed by the Investment
Manager.
(d) The Plan Administrator shall periodically review the
performance of any Fiduciary or other person to whom duties
have been delegated or allocated by it under the provisions of
this Plan or pursuant to procedures established hereunder.
This requirement may be satisfied by formal periodic review by
the Employer or by a qualified person specifically designated
by the Employer, through day-to-day conduct and evaluation, or
through other appropriate means.
9.02 Assignment and Designation of Administrative Authority / Compensation
of Benefits Committee. The Plan Administrator shall appoint one or
more individuals to the Benefits Committee. The Benefits Committee
shall have authority to assist in the administration of the Plan and
shall be empowered to carry out the duties of the Plan Administrator,
except as described in 9.01(a) above. Any person, including, but not
limited to, the shareholders, officers, and Associates of the Employer
shall be eligible to serve on the Benefits Committee. A member of the
Benefits Committee may resign by delivering his written resignation to
the Employer or be removed by the Employer by written notice of
removal, to take effect at a date specified therein. The Plan
Administrator shall furnish the Trustee with proper written evidence
of the names and individuals on the Benefits Committee and of any
resignations and replacements thereof. The Plan Administrator, upon
the resignation or removal of a member of the Benefits Committee
shall, as soon as administratively possible after such vacancy is
created, designate in writing a successor to this position.
The Benefits Committee shall select a Chairman from among its members.
A Secretary shall also be appointed by the Benefits Committee who may
or may not be a member of the Benefits Committee. The Chairman shall
preside at all meetings of the Benefits Committee unless, in his
absence, a Vice Chairman selected by the Benefits Committee presides.
The Secretary shall keep all minutes of
45
<PAGE> 51
Benefits Committee proceedings and such records and documents as are
necessary for the proper administration of the Plan.
Benefits Committee members may receive reasonable compensation for
services rendered, or for the reimbursement of expenses properly and
actually incurred in the performance of duties with the Plan; except
that no person so serving on the Benefits Committee who already
receives full-time pay from the Employer or an association of
Employers whose Associates are Participants in the Plan, shall receive
compensation from the Plan, except for reimbursement of expenses
properly and actually incurred.
Any bond which may be required by applicable laws or regulations for
the performance of duties by members of the Benefits Committee and all
reasonable and necessary costs, expenses, and liabilities incurred by
the Benefits Committee in the supervision and administration of the
Plan which are not paid by the Employer shall be a charge against the
Plan assets and shall be paid therefrom by the Trustee as directed in
writing by the Benefits Committee.
9.03 Allocation and Delegation of Responsibilities. If more than one
person is appointed to serve on the Benefits Committee, the
responsibilities of each member may be specified by the Plan
Administrator and accepted in writing by each member. In the event
that no such delegation is made by the Plan Administrator, the
Benefits Committee members may allocate the responsibilities among
themselves, in which event the Benefits Committee shall notify the
Plan Administrator and the Trustee in writing of such action and
specify the responsibilities of each member of the Benefits Committee.
The Trustee thereafter shall accept and rely upon any documents
executed by the appropriate member of the Benefits Committee until
such time as the Plan Administrator or the Benefits Committee files
with the Trustee a written revocation of such designation.
9.04 Powers, Duties and Responsibilities. The primary responsibility of
the Plan Administrator is to administer the Plan for the exclusive
benefit of the Participants, Former Participants and their
Beneficiaries, subject to the specific terms of the Plan. The Plan
Administrator shall have the discretionary authority to control and
manage the operation and administration of the Plan, shall administer
the Plan in accordance with the terms hereof, and shall have the power
to determine all questions arising in connection with the
administration, interpretation, and application of the Plan. Any such
determination by the Plan Administrator shall be conclusive and
binding upon all persons. The Plan Administrator may correct any
defect, supply any information, or reconcile any inconsistency in such
manner and to such extent as shall be deemed necessary or advisable to
carry out the purpose of this Plan; provided, however, that any
interpretation or construction shall be done in a nondiscriminatory
manner and shall be consistent with the intent that the Plan shall
continue to be deemed a qualified plan under the terms of Section
401(a) of the Code and the Trust which is a part hereof exempt under
Section 501(a) of the Code and shall comply with the terms of ERISA
and all regulations issued pursuant thereto. The Plan Administrator
shall have all powers necessary or appropriate to accomplish its
duties under this Plan.
The Plan Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the
following:
46
<PAGE> 52
(a) Determining all questions relating to the eligibility of
Associates to participate or remain Participants hereunder;
(b) Computing, certifying, and directing the Trustee with respect
to the amount and the kind of benefits to which any
Participant or Former Participant shall be entitled hereunder;
(c) Authorizing and directing the Trustee with respect to all
nondiscretionary or otherwise directed disbursements from the
Trust;
(d) Maintaining all necessary records for the administration of
the Plan;
(e) Interpreting the provisions of the Plan and making and
publishing such rules for regulation of the Plan as are
consistent with the terms hereof;
(f) Determining the size and type of any annuity contract to be
purchased from any insurer, and designating the insurer from
which such contract shall be purchased;
(g) Computing and certifying to the Employer and to the Trustee
from time to time the sums of money necessary or desirable to
be contributed to the Plan;
(h) Assisting any Participant or Former Participant regarding his
rights, benefits, or elections available under the Plan; and
(i) Preparing and implementing a procedure for notifying eligible
Associates that they may elect to have a portion of the
Employer's contribution deferred into the Plan through a
salary reduction agreement.
9.05 Records and Reports. The Plan Administrator shall keep a record of
all actions taken and shall keep all other books of account, records,
and other data that may be necessary, for proper administration of the
Plan and shall be responsible for supplying all information and
reports to the Internal Revenue Service, Department of Labor,
Participants, Former Participants, Beneficiaries and others as
required by law.
9.06 Appointment of Advisors. The Plan Administrator or the Trustee with
the consent of the Plan Administrator may appoint counsel,
specialists, advisers, and other persons as the Plan Administrator or
the Trustee deems necessary or desirable in connection with the
administration of this Plan.
9.07 Information from Employer. To enable the Plan Administrator to
perform its functions, the Employer shall supply full and timely
information to the Plan Administrator on all matters relating to the
compensation of all Participants, Hours of Service, Years of Service,
occurrences of retirement, death, Disability, or termination of
employment, and such other pertinent facts and data as the Plan
Administrator may require; and the Plan Administrator shall advise the
Trustee of the foregoing facts as may be pertinent to the Trustee's
duties under the Plan. The Plan
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Administrator and Trustee may rely upon such information as is
supplied by the Employer and shall have no duty or responsibility to
verify such information.
9.08 Payment of Expenses. All expenses of administration may be paid out
of the Plan assets unless paid by the Employer. Such expenses shall
include any expenses incident to the functioning of the Plan
Administrator, including, but not limited to, fees of accountants,
counsel, and other specialists, and other costs of administering the
Plan. Until paid, the expenses shall constitute a liability of the
Plan assets. However, the Employer may reimburse the Trust for any
administrative expenses incurred pursuant to the above. Any
administration expense paid to the Trust as a reimbursement shall not
be considered as an Employer contribution.
9.09 Majority Actions. Except where there has been an allocation and
delegation of administrative authority pursuant to Section 9.03, if
there shall be more than one member of the Benefits Committee, they
shall act by a majority of their number, but may authorize one or more
of them to sign all papers on their behalf.
9.10 Bonding. Every Fiduciary, except a bank or an insurance company,
unless exempted by ERISA and regulations thereunder, shall be bonded
in an amount not less than 10 percent of the amount of the fund such
Fiduciary handles; provided, however, that the minimum bond shall be
$1,000 and the maximum bond, $500,000. The amount of the bond shall
be determined at the beginning of each Plan Year by the amount of
funds handled by each such person, group, or class to be covered and
their predecessors, if any, during the preceding Plan Year, or if
there is no preceding Plan Year, then by the amount of the funds to be
handled during the then current year. The bond shall provide
protection to the Plan against any loss by reason of acts of fraud or
dishonesty by the Fiduciary alone or in connivance with others. The
surety shall be an approved corporate surety company (as such term is
used in Section 412(a)(2) of ERISA), and the bond shall be in the form
approved by the Secretary of Labor. Notwithstanding anything herein
to the contrary, the cost of such bonds shall be an expense of the
Plan and may, at the election of the Plan Administrator, be paid from
the Plan assets or by the Employer.
9.11 Indemnification. The Employer shall indemnify the Plan Administrator
and each member of the Benefits Committee from and against any and all
liabilities, costs, or expenses incurred as a result of any act or
omission to act in connection with the performance of fiduciary duties
or responsibilities, if any, under this Plan and applicable laws and
regulations, but not for liabilities and claims arising from such
Fiduciary's willful misconduct or gross negligence.
9.12 Interpretation. This Plan has been executed for the exclusive benefit
of the Participants, Former Participants and their Beneficiaries. So
far as possible, this Plan shall be interpreted and administered in a
manner consistent with this intent and with the intention of the
Employer that this Plan shall at all times fully comply with the
requirements of applicable laws and regulations. Neither the Employer
nor the Plan Administrator shall exercise any power or right to do or
perform any act which is in conflict with or violates such laws and
regulations. Any power or right granted under this Plan or retained
by the Employer shall be void to the extent that its exercise or
retention shall violate laws and regulations. The Employer shall make
any and all retroactive amendments to this Plan that are required
under applicable laws and regulations in order to
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establish and maintain the Plan in conformity as a qualified Plan
pursuant to Section 401(a) of the Code and the Trust which is a part
hereof exempt pursuant to Section 501(a) of the Code.
9.13 Claims Procedure. Claims for benefits under the Plan may be filed
with the Plan Administrator on forms supplied by the Employer.
Written notice of the disposition of a claim shall be furnished to the
claimant within ninety (90) days after the application thereof is
filed. In the event the claim is denied, the reasons for the denial
shall be specifically set forth in the notice in language calculated
to be understood by the claimant, pertinent provisions of the Plan
shall be cited, and, where appropriate, an explanation as to how the
claimant can perfect the claim will be provided. In addition the
claimant shall be furnished with an explanation of the Plan's claims
review procedure.
9.14 Claims Review Procedure. Any Associate, former Associate, or
Beneficiary of either, who has been denied a benefit by a decision of
the Plan Administrator pursuant to Section 9.13 shall be entitled to
request a review of the claim by filing with the Plan Administrator
(on a form which may be obtained from the Plan Administrator) a
request for a hearing. Such request, together with a written
statement of the reasons why the claimant believes his claim should be
allowed, shall be filed with the Plan Administrator no later than
sixty (60) days after receipt of the written notification provided for
in Section 9.13. The Plan Administrator shall then conduct a hearing
within the next sixty (60) days, at which time the claimant may be
represented by an attorney or any other representative of his choosing
and at which time the claimant shall have an opportunity to submit
written and oral evidence and arguments in support of his claim. At
the hearing (or prior thereto upon five (5) business days written
notice to the Plan Administrator) the claimant or his representative
shall have an opportunity to review all documents in the possession of
the Plan Administrator which are pertinent to the claim at issue and
its disallowance. Either the claimant or the Administrator may cause
a court reporter to attend the hearing and record the proceedings. In
such event, a complete written transcript of the proceedings shall be
furnished to both parties by the court reporter. The full expense of
any such court reporter and such transcripts shall be borne by the
party causing the court reporter to attend the hearing. A final
decision as to the allowances, of the claim shall be made by the Plan
Administrator with sixty (60) days of receipt of the appeal unless
there has been an extension of sixty (60) days and shall be
communicated in writing to the claimant. Such communication shall be
written in a manner calculated to be understood by the claimant and
shall include specific reasons for the decision and specific
references to the pertinent Plan provisions on which the decision is
based.
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ARTICLE X
TRUST ADMINISTRATION
10.01 Establishment and Acceptance of Trust. The Trustee, as of the date of
signature hereon, accepts the Trust hereby established and consents to
act as Trustee subject to the terms, provisions, conditions, and
limitations of this Plan.
10.02 Scope of Trustee's Functions. In all matters relating to the detailed
administration of the Plan the Trustee shall act only upon the
authorization evidenced by certificate of the Plan Administrator and
shall be fully protected in relying and acting thereon; provided,
however, if at any time the Plan Administrator shall fail to give
directions or instructions to the Trustee in regard to any detail
affecting the administration of the Plan over which the Plan
Administrator has jurisdiction, then and in that event the Trustee,
although being under no obligation to do so, may act without such
directions or instructions and may exercise its own discretion and
judgment as seems appropriate and advisable under the circumstances in
order to effectuate the purposes of the Plan. Where the Trustee does
so act without direction or instruction from the Plan Administrator,
it shall act solely in the interests of the Participants and their
Beneficiaries and for the exclusive purpose of providing the benefits
required and defraying reasonable expenses of administering the Plan.
The Trustee shall not be required to act on instructions received from
the Plan Administrator, other than instructions from a qualified
Investment Manager, if in its sole discretion and opinion it believes
that compliance with such instructions would result in an action which
would be improper or imprudent. In the event the Trustee declines or
refuses to follow such instructions given in writing by the Plan
Administrator or its duly authorized representative, notice of such
refusal shall be furnished to the Plan Administrator in writing within
fifteen (15) days of receipt of the Plan Administrator's written
instructions.
If at any time the Plan Administrator fails or refuses to provide the
Trustee with written instructions concerning any action which, in the
sole discretion of the Trustee, is deemed necessary in order to
properly administer the Plan under the provisions hereunder and in
accordance with applicable laws and regulations, then and in that
event, the Trustee shall notify the Plan Administrator in writing of
the Trustee's intent to take such action on a date no earlier than
thirty (30) days from the date notice is received by the Plan
Administrator. The notice shall describe the action which will be
performed by the Trustee on a certain date unless written notice is
received from the Plan Administrator within thirty (30) days
disapproving such action and instructing the Trustee concerning the
course of action which the Trustee should follow. If the Plan
Administrator fails or refuses to respond to the Trustee's
notification of intended action, such failure or refusal to respond
shall be deemed by the Trustee as implied consent on the part of the
Plan Administrator and on behalf of the Employer to the action
intended to be performed by
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the Trustee and shall be deemed as authorizing the Trustee to so act
at the expiration of the thirty (30) day period.
10.03 Powers and Duties. The Trustee is hereby authorized and empowered to
establish and maintain for and on behalf of the Plan Participants such
pooled investment accounts as the Plan Administrator may direct, and
into which the Plan assets shall be invested. In establishing such
pooled investment accounts, or in utilizing such other investments as
the Plan Administrator may from time to time direct, the Trustee shall
be authorized and empowered to perform the following functions with
respect to the Plan:
(a) To invest and reinvest the Plan assets in real, personal, or
mixed property including but not limited to securities of
domestic and foreign corporations and investment trusts
(whether open-end or not), bonds, preferred stocks, common
stocks, mortgages, mortgage participations, interests in any
common trust fund or commingled employee benefit fund to the
extent allowed under applicable laws and regulations and with
complete discretion as to converting realty into personalty or
personalty into realty.
(b) To invest in land, whether improved or unimproved, and improve
any such land in any manner determined by the Plan
Administrator to be feasible and prudent. To lease real,
personal, or mixed property on such terms as the Plan
Administrator shall deem proper, including the power to make
leases that may extend beyond any time in which Plan
termination may be necessary by such Employer; and to
foreclose, extend, renew, assign, release, or partially
release and discharge mortgages or other liens.
(c) To invest in bonds, stocks, secured notes, or similar
securities permitted by applicable laws and regulations.
(d) To borrow funds at the direction of the Plan Administrator,
from any party permitted by applicable laws and regulations
for the purpose of purchasing as investments any property as
collateral to secure such loan.
(e) To make investments of types other than specified herein,
provided such investments are in accordance with applicable
laws and regulations.
(f) To make distribution to or for the benefit of a retiree,
disabled Participant, inactive Participant, Former Participant
or of their Beneficiaries.
(g) To purchase an annuity contract on behalf of a Participant or
Former Participant as directed by the Plan Administrator.
(h) To acquire or retain property returning no income or slight
income as may be deemed advisable by the Plan Administrator
without liability therefor.
(i) To sell, exchange, give options, partition, convey, or
otherwise dispose of, with or without covenants of warranty of
title, any property, which may from time to time be or
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become a part of the Plan assets at public or private sale or
otherwise, for cash or other consideration or on credit, and
upon such terms and conditions and for such consideration as
the Plan Administrator shall consider advisable, and to
transfer the same free of all trusts.
(j) To vote, in person or by proxy, any stocks or other properties
having voting rights; to execute any options, rights or
privileges pertaining to any property; to participate in any
merger, reorganization or consolidation affecting any part of
the Plan assets and in connection therewith to take any action
which an individual could take with respect to property owned
outright by such individual including the payment of expenses
or assessments, the deposit of stock or property with a
protective committee, the acceptance or retention of new
securities or property and the payment of such amounts of
money as may seem advisable in connection therewith; and to
hold any item constituting a part of the Plan assets for any
length of time in the name of a nominee or nominees without
mention of the Trust or any instrument of ownership.
(k) To execute and deliver oil, gas, and other mineral leases,
containing such unitization, pooling, and recycling agreements
and other provisions as the Plan Administrator may deem
proper; to execute mineral and royalty conveyances; to
purchase leases, royalties, and any type of mineral interest;
and to execute and deliver drilling contracts or other
contracts or options and other instruments which the Plan
Administrator may consider necessary or desirable in
connection with oil, gas, or other mineral interests. All
such instruments may be executed and delivered for such
consideration as the Plan Administrator, in its sole
discretion, deems to be fair and reasonable.
(l) To exercise all other powers presently granted to Trustees by
the Texas Trust Code as amended and in force on the effective
date of this Plan, as amended from time to time thereafter,
and not in conflict with the provisions hereof.
(m) To do any and all things necessary and proper, including the
power to execute any other instruments which may be required
to fully and completely accomplish any of the powers herein
conferred.
(n) As a condition precedent to acting as Trustee for and on
behalf of the Employer, the Trustee may require that the Plan
Administrator execute any appropriate and proper instruments
authorizing investment of Plan assets by the Trustee in
investments so directed by the Plan Administrator or
authorizing any action by the Trustee so desired by the Plan
Administrator.
10.04 Liability of Trustees. The Trustee shall not be responsible for any
acts or omissions of the Plan Administrator. Any certificate or other
instrument duly signed by the Plan Administrator purporting to
evidence any instructions, direction, or order of the Plan
Administrator shall be accepted by the Trustee as conclusive proof
thereof.
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10.05 Reliance Upon Acts of Trustee. No person dealing with the Trustee
shall be required to verify the application by the Trustee of any
money paid or other property delivered to the Trustee, and all persons
dealing with the Trustee shall be entitled to rely upon the
representations and decisions of the Trustee as to its authority and
are released from any duty of inquiry with respect thereto. Any
action of the Trustee hereunder shall be conclusively evidenced for
all purposes of the Trust by the certification of the Trustee, and
such certificate when received by an issuing company or by any other
person, shall be conclusive evidence of the facts recited therein and
shall fully protect all persons relying upon the truth thereof. A
third person dealing with the Trustee shall not be required to make
any inquiry whether the Plan Administrator has instructed the Trustee,
or whether the Trustee is otherwise authorized to take or omit any
action.
10.06 Records and Accounting of Trustee/Valuation of Plan Assets. The
Trustee shall keep proper accounts of all investments, receipts,
disbursements, and other transactions affected by it hereunder and all
accounts, books, and records relating thereto shall be open for
inspection at all reasonable times by the Plan Administrator, or any
other representative designated by the Employer.
Within ninety (90) days following the Valuation Date which coincides
with the last day of the Plan Year, and at such other interim
Valuation Dates as may be requested by the Plan Administrator, the
Trustee shall furnish the Plan Administrator with a detailed statement
of the Plan assets for the period beginning with the day following the
previous Valuation Date for which a statement was required and ending
with the Valuation Date for which the current statement is required.
Reports prepared for the Employer by the Trustee as provided in the
preceding paragraph shall reflect the fair market value of all assets
to the Employer's account as of the Valuation Date for which the
report is prepared. Each report shall reflect:
(a) A detailed record of all cash receipts and disbursements for
the period.
(b) Value of all Plan assets on a cash basis held for the
Employer.
(c) Statement of earned income on a cash basis, other than capital
gains or losses, during the preceding period.
All such Plan assets which are listed by a recognized stock exchange
or which otherwise have a readily ascertainable market value shall be
valued by the Trustee as of the Valuation Date. Any assets held in
the Employer's Trust account by the Trustee which do not have a
readily ascertainable market value shall be valued by the Plan
Administrator as of the Valuation Date and such value reported to the
Trustee in writing. Upon the expiration of ninety (90) days from the
date of filing such account, or upon the earlier specific approval
thereof by the Plan Administrator, the Trustee, to the extent
permitted by ERISA, shall be forever released and discharged from
liability and accountability to anyone with respect to the propriety,
of its accounts and transactions shown in such accounting, except with
respect to such accounts or transactions as to which the Plan
Administrator shall within such ninety (90) day period file written
objection with the Trustee or with respect to any fraudulent act of
the Trustee. Nothing
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herein contained, however, shall preclude the Trustee from its right
to have any of its accounts judicially settled by a court of competent
jurisdiction.
10.07 Payment of Compensation and Expenses. The compensation of the
Trustee, payable by the Employer or directly from the Plan assets,
shall be determined by agreement wherein the Employer shall entitle
the Trustee to receive a reasonable rate of compensation for services
rendered in the performance of duties as Trustee. All reasonable
expenses necessarily incurred by the Trustee in the performance of its
duties shall also be agreed to and shall be paid by the Employer or
upon approval of the Plan Administrator directly from Plan assets.
The cost of any bond required of the Trustee in accordance with
applicable laws and regulations, or as may be required by the Plan
Administrator, shall be paid by the Employer or directly from Plan
assets.
10.08 Resignation or Removal of Trustee/Withdrawal From Trust. The
trustee may resign as Trustee hereunder for any reason, but such
resignation shall become effective only at the expiration of thirty
(30) days after written notice thereof has been forwarded by
registered mail to the Employer and after an audit of the books and
records of the Trustee has been made under the direction of the Plan
Administrator and has been approved by the Plan Administrator.
At the discretion of the Employer, the Trustee may be removed as
Trustee hereunder, but such removal shall become effective only at the
expiration of thirty (30) days after the Employer delivers written
notice by registered mail to the Trustee and informs the Trustee of
the name and address of the successor trustee to which assets are to
be transferred.
10.09 Successor Trustee. If at any time the Trustee acting hereunder shall
resign or be removed or cease to exist, a successor trustee or
successor trustees shall be appointed forthwith by the Employer.
Successor trustees may be a bank or other corporation with trust
powers organized under the laws of the United States of America or of
any State, an individual trustee, or a board of trustees. Any
successor trustee appointed hereunder may qualify as such by
executing, acknowledging, and delivering to the Plan Administrator an
instrument accepting such appointment, whereupon such successor shall
be and become vested with all the estate, rights, powers, discretions,
duties, and obligations of the original Trustee as provided in this
Plan.
10.10 Accounting Upon Resignation or Removal of Trustee. In the event of
resignation or removal of the Trustee, the Trustee shall have the
right to a full, final, and complete settlement of its account with
the Trust either (1) by agreement of settlement between the Trustee
and the Employer, or (2) if no such agreement can be reached, then by
judicial settlement in an action instituted by the Trustee in a court
of competent jurisdiction in the county where the Trustee's principal
place of business is located. Upon the making of such settlement, the
Trustee shall transfer to the successor trustee all Plan assets as
they may then be constituted, and true copies of all its records
relating to the Trust, and shall execute all documents necessary to
transfer the Plan assets to the successor trustee, and the Trustee
thereupon shall be discharged from further liability for all matters
embraced within such settlement.
10.11 Employment of Agents. The Trustee shall be empowered to employ legal,
accounting, clerical, and other assistance which may be required in
carrying out the provisions of this Plan with such
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expenses to be paid by the Employer; provided, however, that the Plan
Administrator may direct the Trustee to pay such expenses from Plan
assets.
10.12 Employer Securities and Real Property. The Trustee shall be empowered
to acquire and hold "qualifying Employer securities" and "qualifying
Employer real property," as those terms are defined in ERISA,
provided, however, that the Trustee shall not be permitted to acquire
any qualifying Employer securities or qualifying Employer real
property if, immediately after the acquisition of such securities or
property, the fair market value of all qualifying Employer securities
and qualifying Employer real property held by the Trustee hereunder
should amount to more than 100% of the fair market value of all the
assets in the Trust Fund.
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ARTICLE XI
AMENDMENT, TERMINATION AND MERGERS
11.01 Amendment. The Employer shall have the right at any time to amend
this Agreement. However, no such amendment shall authorize or permit
any part of the Trust Fund (other than such part as is required to pay
taxes and administration expenses) to be used for or diverted to
purposes other than for the exclusive benefit of the Participants,
Former Participants or their Beneficiaries or estates; no such
amendment shall cause any reduction in the amount credited to the
account of any Participant or Former Participant or cause or permit
any portion of the Trust Fund to revert to or become property of the
Employer; and no such amendment which affects the rights, duties or
responsibilities of the Trustee and Plan Administrator may be made
without the Trustee's and Plan Administrator's written consent. Any
such amendment shall become effective as provided therein upon its
execution. The Trustee shall not be required to execute any such
amendment unless the Trust provisions contained herein are a part of
this Agreement and the amendment affects the duties of the Trustee
hereunder.
For the purposes of this Section, a Plan amendment which has the
effect of eliminating or reducing an early retirement benefit or
eliminating, an optional form of benefit (as provided in Treasury
regulations) shall be treated as reducing the amount credited to the
account of a Participant or Former Participant.
11.02 Termination. The Employer shall have the right at any time to
terminate the Plan by delivering to the Trustee and Plan Administrator
written notice of such termination. A complete discontinuance of the
Employer's contributions to the Plan shall be deemed to constitute a
termination. Upon any termination (full or partial) or complete
discontinuance of contributions, all amounts credited to the affected
Participants' or Former Participants' Accounts shall become 100%
vested and shall not thereafter be subject to forfeiture and all
unallocated amounts shall be allocated to the accounts of all
Participants and Former Participants in accordance with the provisions
hereof. Upon such termination of the Plan, the Employer, by written
notice to the Trustee and Plan Administrator, may direct either:
(a) complete distribution of the assets in the Trust Fund to the
Participants and Former Participants, in accordance with the
modes of distribution provided for in Section 6.04 of the
Plan, as soon as the Trustee deems it to be in the best
interests of the Participants and Former Participants, but in
no event later than two years after such termination; or,
(b) continuation of the Trust created by this agreement and the
distribution of benefits at such time and in such manner as
though the Plan had not been terminated.
Provided, however, that any distributions made pursuant to this
Section shall be subject to the rights of consent afforded to the
Participant pursuant to Section 6.03.
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11.03 Successor Employer. In the event of the dissolution, merger,
consolidation or reorganization of the Employer, provisions may be
made by which the Plan will be continued by the successor; and, in
that event, such successor shall be substituted for the Employer under
the Plan. The substitution of the successor shall constitute an
assumption of Plan liabilities by the successor and the successor
shall have all the powers, duties, and responsibilities of the
Employer under the Plan.
11.04 Plan Assets. In the event of any merger or consolidation of the Plan
with, or transfer in whole or in part of the assets and liabilities of
the Trust Fund to another trust fund held under, any other plan of
deferred compensation maintained or to be established for the benefit
of all or some of the Participants or Former Participants of this
Plan, the assets of the Trust Fund applicable to such Participants or
Former Participants shall be transferred to the other trust fund only
if:
(a) Each Participant or Former Participant would (if either this
Plan or the other plan then terminated) receive a benefit
immediately after the merger, consolidation or transfer which
is equal to or greater than the benefit he would have been
entitled to receive immediately before the merger,
consolidation or transfer;
(b) Actions of the Employer under this Plan, or of any new or
successor employer of the affected Participants or Former
Participants, shall authorize such transfer of assets; and, in
the case of the new or successor employer of the affected
Participants or Former Participants, its resolutions shall
include an assumption of liabilities with respect to such
Participants' or Former Participants' inclusion in the new
employer's plan; and
(c) Such other plan and trust are qualified under Sections 401(a)
and 501(a) of the Code.
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ARTICLE XII
MISCELLANEOUS
12.01 Participant's Rights. This Plan shall not be deemed to constitute a
contract between the Employer and any Participant or to be a
consideration or an inducement for the employment of any Participant
or Associate. Nothing contained in this Plan shall be deemed to give
any Participant or Associate the right to be retained in the service
of the Employer or to interfere with the right of the Employer to
discharge any Participant or Associate at any time regardless of the
effect which such discharge shall have upon him as a Participant of
this Plan.
12.02 Alienation.
(a) Subject to the exceptions provided below, no benefit which
shall be payable out of the Trust Fund to any person
(including a Participant, Former Participant or his
Beneficiary) shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance,
or charge, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, or charge the same shall
be void; and no such benefit shall in any manner be liable
for, or subject to, the debts, contracts, liabilities,
engagement, or torts of any such person, and the same shall
not be recognized by the Trustee, except to such extent as may
be required by law.
(b) This provision shall not apply to a "qualified domestic
relations order" defined in Code Section 414(p), and those
other domestic relations orders permitted to be so treated by
the Plan Administrator under the provisions of the Retirement
Equity Act of 1984. The Plan Administrator shall establish a
written procedure to determine the qualified status of
domestic relations orders and to administer distributions
under such qualified orders. Further, to the extent provided
under a "qualified domestic relations order," a former Spouse
of a Participant or Former Participant shall be treated as the
Spouse or surviving Spouse for all purposes under the Plan.
12.03 Construction of Agreement. This Plan and Trust shall be construed and
enforced according to ERISA and the laws of the State of Texas, other
than its laws respecting choice of law, to the extent not preempted by
ERISA.
12.04 Legal Action. In the event any claim, suit, or proceeding is brought
regarding the Trust and/or Plan established hereunder to which the
Trustee or the Plan Administrator may be a party, and such claim,
suit, or proceeding is resolved in favor of the Trustee or Plan
Administrator, they shall be entitled to be reimbursed from the Trust
Fund for any and all costs, attorney's fees, and other expenses
pertaining thereto incurred by them for which they shall have become
liable.
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12.05 Prohibition Against Diversion of Funds.
(a) Except as provided below and otherwise specifically permitted
by law, it shall be impossible by operation of the Plan or of
the Trust, by termination of either, by power of revocation or
amendment, by the happening of any contingency, by collateral
arrangement or by any other means, for any part of the corpus
or income of any Trust Fund maintained pursuant to the Plan or
any funds contributed thereto to be used for, or diverted to,
purposes other than the exclusive use of Participants, Former
Participants or their Beneficiaries.
(b) In the event the Employer shall make an excessive contribution
under a mistake of fact pursuant to Section 403(c)(2)(A) of
ERISA, the Employer may demand repayment of such excessive
contribution at any time within one (1) year following the
time of payment and the Trustees shall return such amount to
the Employer within the one (1) year period. Earnings of the
Plan attributable to the excess contributions may not be
returned to the Employer but any losses attributable thereto
must reduce the amount so returned.
12.06 Employer's and Trustee's Protective Clause. Neither the Employer nor
the Trustee, nor their successors, shall be responsible for the
validity of any contract issued hereunder or for the failure on the
part of the insurer to make payments provided by any such contract, or
for the action of any person which may delay payment or render a
contract null and void or unenforceable in whole or in part.
12.07 Receipt and Release for Payments. Any payment to any Participant,
Former Participant, his legal representative, Beneficiary, or to any
guardian or committee appointed for such Participant, Former
Participant or Beneficiary in accordance with the provisions of this
agreement, shall, to the extent thereof, be in full satisfaction of
all claims hereunder against the Trustee and the Employer, either of
whom may require such Participant, Former Participant, legal
representative, Beneficiary, guardian or committee, as a condition
precedent to such payment, to execute a receipt and release thereof in
such form as shall be determined by the Trustee or Employer.
12.08 Action by the Employer. Whenever the Employer under the terms of this
agreement is permitted or required to do so or perform any act or
matter or thing, it shall be done and performed by a person duly
authorized by its legally constituted authority.
12.09 Named Fiduciaries and Allocation of Responsibility. The "Named
Fiduciaries" of this Plan are (1) the Employer, (2) the Plan
Administrator, (3) the Benefits Committee, (4) the Trustee and (5) any
Investment Manager appointed hereunder. The Named Fiduciaries shall
have only those specific powers, duties, responsibilities, and
obligations as are specifically given them under this agreement. In
general, the Employer shall have the sole responsibility for the
administration of this agreement, which responsibility is specifically
described in this agreement. The Benefits Committee shall have any
responsibility for the administration of the Plan as is given to them
by the Plan Administrator. The Trustee shall have the sole
responsibility of management of the assets held under the Trust,
except those assets, the management of which has been assigned to an
Investment Manager, who shall be solely responsible for the management
of the assets assigned to
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it, all as specifically provided in this agreement. Each Named
Fiduciary warrants that any directions given, information furnished,
or action taken by it shall be in accordance with the provisions of
this agreement, authorizing or providing for such direction,
information or action. Furthermore, each Named Fiduciary may rely
upon any such direction, information or action of agreement to inquire
into the propriety of any such direction, information or action. It
is intended under this agreement that each Named Fiduciary shall be
responsible for the proper exercise of its own powers, duties,
responsibilities and obligations under this agreement. No Named
Fiduciary shall guarantee the Trust Fund in any manner against
investment loss or depreciation in asset value. Any person or group
may serve in more than one Fiduciary capacity.
12.10 Approval by the Internal Revenue Service.
(a) Notwithstanding anything herein to the contrary, if, pursuant
to an application filed by or in behalf of the Plan, the
Commissioner of Internal Revenue or his delegate should
determine that the Plan as amended and restated does not
initially qualify as a tax-exempt plan and trust under
Sections 401 and 501 of the Code, and such determination is
not contested, or if contested, is finally upheld, then the
Plan shall operate as if it had not been amended and restated.
(b) Any contribution by the Employer to the Trust Fund is
conditioned upon the deductibility of the contribution by the
Employer under the Code and, to the extent any such deduction
is disallowed, the Employer may within one (1) year following
a final determination of the disallowance, whether by
agreement with the Internal Revenue Service or by final
decision of a court of competent jurisdiction, demand
repayment of such disallowed contribution and the Trustee
shall return such contribution within one (1) year following
the disallowance. Earnings of the Plan attributable to the
excess contribution may not be returned to the Employer, but
any losses attributable thereto must reduce the amount so
returned.
12.11 Uniformity. All provisions of the Plan shall be interpreted and
applied in a uniform, nondiscriminatory manner.
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ARTICLE XIII
PARTICIPATING EMPLOYERS
13.01 Adoption by Other Employers. Notwithstanding anything herein to the
contrary, with the consent of the Plan Administrator and Trustee, any
other corporation or entity (provided an Owner-Employee of such entity
does not participate in the Plan for Plan Years beginning before
January 1, 1984), whether an Affiliate or Subsidiary or not, may adopt
this Plan and all of the provisions hereof, and participate herein and
be known as a Participating Employer, by a properly executed document
evidencing said intent and will of such Participating Employer.
13.02 Requirements of Participating Employers.
(a) Each such Participating Employer shall be required to use the
same Trustee as provided in this Plan.
(b) The Trustee may, but shall not be required to, commingle, hold
and invest as one Trust Fund all contributions made by
Participating Employers, as well as all increments thereof.
(c) The transfer of any Participant from or to an Employer
participating in this Plan, whether he be an Associate of the
Employer or a Participating Employer, shall not affect such
Participant's rights under the Plan, and all amounts credited
to such Participant's Account as well as his accumulated
service time with the transferor or predecessor, and his
length of participation in the Plan, shall continue to his
credit.
(d) All rights and values forfeited by termination of employment
shall inure only to the benefit of the Associate Participants
of the Participating Employer by which the forfeiting
Participant was employed, except that if the forfeiture is for
an Associate whose Employer is a member of an affiliated or
controlled group, then said considered forfeiture shall be
allocated, based on Compensation to all Participant Accounts
of Participating Employers who are members of the affiliated
or controlled group. Should an Associate of one ("First")
Employer be transferred to an associated ("Second") Employer
(the Employer, an Affiliate or Subsidiary), such transfer
shall not cause his account balance (generated while an
Associate of the "First" Employer) in any manner, or by any
amount to be forfeited. Such Associate's Participant account
balance for all purposes of the Plan, including length of
service, shall be considered as though he had always been
employed by the "Second" Employer and as such had received
contributions, forfeitures, earning or losses, and
appreciation or depreciation in value of assets totaling
amounts so transferred.
(e) Any expenses of the Trust which are to be paid by the Employer
or borne by the Trust Fund shall be paid by each Participating
Employer in the same proportion that the total amount standing
to the credit of all Participants employed by such Employer
bears to the total standing to the credit of all Participants.
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13.03 Designation of Agent. Each Participating Employer shall be deemed to
be part of this Plan; provided, however, that with respect to all of
its relations with the Trustee and Plan Administrator for the purpose
of this Plan, each Participating Employer shall be deemed to have
designated irrevocably the Plan Administrator as its agent. Unless
the content of the Plan clearly indicates the contrary, the word
"Employer" shall be deemed to include each Participating Employer as
related to its adoption of the Plan.
13.04 Associate Transfers. It is anticipated that an Associate may be
transferred between Participating Employers, and the Associate
involved shall carry with him accumulated service and eligibility. No
such transfer shall effect a termination of employment hereunder, and
the Participating Employer to which the Associate is transferred shall
thereupon become obligated hereunder with respect to such Associate in
the same manner as was the Participating Employer from whom the
Associate was transferred.
13.05 Participating Employers Contribution. All contributions made by a
Participating Employer, as provided for in this Plan, shall be paid to
and held by the Trustee for the exclusive benefit of the Associates of
such Participating Employer and the Beneficiaries of such Associates,
subject to all the terms and conditions of this Plan. Any forfeiture
by an Associate of a Participating Employer subject to allocation
during each Plan Year shall be allocated only for the exclusive
benefit of the Participants of such Participating Employer in
accordance with the provisions of this Plan. On the basis of the
information furnished by the Plan Administrator, the Trustee shall
keep separate books and records concerning the affairs of each
Participating Employer hereunder and as to the accounts and credits of
the Associates of each Participating Employer. The Trustee may, but
need not, register contracts so as to evidence that a particular
Participating Employer is the interested Employer hereunder, but in
the event an Associate transfers from one Participating Employer to
another, the employing Employer shall immediately notify the Trustee
thereof.
13.06 Amendment. Amendment of this Plan by the Employer at any time when
there shall be a Participating Employer hereunder shall only be by
written action of each and every Participating Employer and with the
consent of the Trustee where such consent is necessary in accordance
with the terms of this Plan.
13.07 Discontinuance of Participation. Any Participating Employer shall be
permitted to discontinue or revoke its participation in the Plan. At
any time of any such discontinuance or revocation, satisfactory
evidence thereof and of any applicable conditions imposed shall be
delivered to the Trustee. The Trustee shall thereafter transfer,
deliver and assign contracts and other Trust Fund assets allocable to
the Participants of such Participating Employer to such new Trustee as
shall have been designated by such Participating Employer, in the
event that it has established a separate pension plan for its
Associates. If no successor is designated, the Trustee shall retain
such assets for the Associates of said Participating Employer pursuant
to the provisions of Article X hereof. In no such event shall any part
of the corpus or income of the Trust as it relates to such
Participating Employer be used for or diverted for purposes other than
for the exclusive benefit of the Associates of such Participating
Employer.
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13.08 Plan Administrator's Authority. The Plan Administrator shall have
authority to make any and all necessary rules or regulations, binding
upon all Participating Employers and all Participants, to effectuate
the purpose of this Article.
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ARTICLE XIV
TOP-HEAVY PROVISIONS
14.01 Generally. For any Plan Year in which the Plan is a Top-Heavy Plan,
the requirements of Sections 14.02, 14.03 and 14.09 must be met in
accordance with Section 416 of the Code and the regulations
thereunder.
14.02 Minimum Contributions. Minimum Employer contributions for a
Participant who is not a Key Employee shall be required under the Plan
for the Plan Year as follows:
(a) The amount of the minimum contributions shall be the lesser of
the following percentages of Compensation:
(1) three percent or,
(2) the highest percentage at which such contributions
are made under the Plan for the Plan Year on behalf
of a Key Employee.
(A) For purposes of this paragraph (2), all
defined contribution plans required to be
included in an Aggregation Group shall be
treated as one plan.
(B) This paragraph (2) shall not apply if the
Plan is required to be included in an
Aggregation Group and the Plan enables a
defined benefit plan required to be included
in the Aggregation Group to meet the
requirements of Sections 401(a)(4) or 410 of
the Code.
(b) There shall be disregarded for purposes of this Section 14.02
any contributions or benefits under chapter 21 of the Code
(relating to the Federal Insurance Contributions Act), Title
11 of the Social Security Act, or any other Federal or State
law.
(c) For purposes of this Section 14.02, the term "Participant"
shall be deemed to refer to all Participants who have not
separated from service at the end of the Plan Year including
without limitation, individuals who declined to elect or make
contributions to the Plan.
(d) In determining whether a Non-Key Employee has received the
required minimum contribution, such Non-Key Employee's
Elective Deferrals shall not be taken into account.
14.03 Super Top-Heavy Plans. If, for any Plan Year in which the Plan is a
Top-Heavy Plan it is also Super Top-Heavy Plan, then for purposes of
the limitations on contributions and benefit under Section 415 of the
Code, the dollar limitations in the defined benefit plan fraction and
the defined contribution fraction shall be multiplied by 1.0 rather
than 1.25. However, if the application of the provisions of this
Section 14.03 would cause any individual to exceed the combined
Section
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415 limitations on contributions and benefits, then the application of
the provisions of this Section 14.03 shall be suspended as to such
individual until such time as he no longer exceeds the combined
Section 415 limitations modified by this Section 14.03. During the
period of such suspension, there shall be no Employer contributions or
forfeitures allocated to such individual under this or any other
defined contribution plan of the Employer and there shall be no
accruals for such individual under an defined benefit plan of the
Employer.
14.04 Determination of Top Heaviness. The determination of whether a plan
is Top-Heavy shall be made as follows:
(a) If the Plan is not required to be included in an Aggregation
Group with other plans, it shall be Top- Heavy only if, when
considered by itself, it is a Top-Heavy Plan and it is not
included in a permissive Aggregation Group that is not a
Top-Heavy Group.
(b) If the Plan is required to be included in an Aggregation Group
with other plans, it shall be Top-Heavy only if the
Aggregation Group, including any permissively aggregated
plans, is Top-Heavy.
(c) If a plan is not a Top-Heavy Plan and is not required to be
included in an Aggregation Group, then it shall not be
Top-Heavy even if it is permissively aggregated in an
Aggregation Group which is a Top-Heavy Group.
14.05 Determination of Super Top Heaviness. A plan shall be a Super
Top-Heavy Plan if it would be a Top-Heavy Plan under the provisions of
Section 14.06, but substituting "90 percent" for "60 percent" in the
ratio test in Section 14.06.
14.06 Calculation of Top-Heavy Ratios. A plan shall be Top-Heavy and an
Aggregation Group shall be a Top-Heavy Group with respect to any Plan
Year as of the Determination Date, if the sum as of the Determination
Date of the Cumulative Accrued Benefits and the Cumulative Accounts of
Associates who are Key Employees for the Plan Year, exceeds 60 percent
of a similar sum determined for all Associates, excluding former Key
Employees.
14.07 Cumulative Accounts and Cumulative Accrued Accounts. The Cumulative
Accounts and Cumulative Accrued Benefits for any Associate shall be
determined as follows:
(a) "Cumulative Account" shall mean the sum of the amount of an
Associate's account under a defined contribution plan (for an
unaggregated plan) or under all defined contribution plans
included in an Aggregation Group (for aggregated plans)
determined as of the most recent plan Valuation Date within a
12-month period ending on the Determination Date, increased by
any contributions due after such Valuation Date and before the
Determination Date.
(b) "Cumulative Accrued Benefit" means the sum of the present
value of an Associate's accrued benefits under a defined
benefit plan (for an unaggregated plan) or under all defined
benefit plans included in an Aggregation Group (for aggregated
plans), determined under
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the actuarial assumptions set forth in such plan or such
plans, as of the most recent plan Valuation Date within a
12-month period ending on the Determination Date as if the
Associate voluntarily terminated service as of such Valuation
Date.
(c) Accounts and benefits shall be calculated to include all
amounts attributable to both Employer and Associate
contributions but excluding amounts attributable to voluntary
deductible Associate contributions.
(d) Accounts and benefits shall be increased by the aggregate
distributions during the five-year period ending on the
Determination Date made with respect to an Associate under the
plan or plans as the case may be or under a terminated plan
which, if it had not been terminated, would have been required
to be included in the Aggregation Group.
(e) If any Associate has not performed services for the Employer
maintaining the Plan at any time during the five-year period
ending on the Determination Date, any accrued benefit for such
Associate (and the account of such Associate) shall not be
taken into account.
(f) Rollovers and direct plan-to-plan transfers shall be handled
as follows:
(1) If the transfer is initiated by the Associate and
made from a plan maintained by one employer to a plan
maintained by another employer, the transferring plan
continues to count the amount transferred under the
rules for counting distributions. The receiving plan
does not count the amount if accepted after December
31, 1983, but does count the amount if accepted prior
to December 31, 1983.
(2) If the transfer is not initiated by the Associate or
is made between plans maintained by the Employers,
the transferring plan shall no longer count the
amount transferred and the receiving plan shall count
the amount transferred.
(3) For purposes of this subsection (f), all employers
aggregated under the rules of Sections 414(b), (c)
and (m) of the Code shall be considered a single
employer.
14.08 Other Definitions. For purposes of this Article XIV, the following
definitions shall apply, to be interpreted in accordance with the
provisions of Section 416 of the Code and the regulations thereunder:
(a) "Aggregation Group" means a plan or group of plans which
includes all plans maintained by the Employers in which a Key
Employee is a participant or which enables any plan in which a
Key Employee is a participant to meet the requirements of Code
Section 401(a)(4) or Code Section 410, as well as other plans
selected by the Employer for permissive aggregation, inclusion
of which would not prevent the group of plans from continuing
to meet the requirements of such Code sections.
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(b) "Compensation" shall have the meaning set forth in Section
4.10(a)(4), except that for purposes of this Article XIV,
salary deferral contributions and other deferred compensation
contributions made to the Plan by the Employer shall be
included in compensation.
(c) "Determination Date" means, with respect to any Plan Year:
(1) the last day of the preceding Plan Year, or
(2) in the case of the first Plan Year of any plan, the
last day of such Plan Year.
(d) "Associate" means, for purposes of this Article XIV, any
person employed by an Employer and shall also include any
Beneficiary of such person, provided that the requirement of
Section 14.02 shall not apply to any person included in a unit
of Associates covered by an agreement which the Secretary of
Labor finds to be a collective bargaining agreement between
Associate representatives and one or more Employers if there
is evidence that retirement benefits were the subject of good
faith bargaining between such Associate representatives and
such Employer or Employers.
(e) "Employer" means any corporation which is a member of a
controlled group of corporations (as defined in Code Section
414(b)) which includes the Employer, or any trades or
businesses (whether or not incorporated) which are under
common control (as defined in Code Section 414(c)) with the
Employer, or a member of an affiliated service group (as
defined in Code Section 414(m)) which includes the Employer.
(f) "Hour of Service" shall have the meaning set forth in Section
2.01(32).
(g) "Key Employee" means as of any Determination Date, any
Associate, former Associate, or Beneficiary of a former
Associate who is, at any time during the Plan Year, or was,
during any one of the four preceding Plan Years any one or
more of the following:
(1) An officer of an Employer having annual Compensation
greater than 50% of the limitation in effect under
Code Section 415(b)(1)(A) for any such Plan Year,
unless 50 other such officers (or, if lesser, a
number of such officers equal to the greater of three
or ten percent of the Associates) have higher annual
Compensation.
(2) An owner (or considered an owner under Code Section
318) of one of the ten largest interest in the
Employer if such individual's annual Compensation
exceeds 100 percent of the dollar limitation in
effect under, Code Section 415(c)(1)(A). For
purposes of this paragraph (2), if two Associates
have the same interest, the one with the greater
Compensation shall be treated as owning the larger
interest.
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(3) Any person owning (or considered as owning within the
meaning of Code Section 318) more than five percent
of the outstanding stock of an Employer or stock
possessing more than five percent of the total
combined voting power of such stock.
(4) A person who would be described in paragraph (3)
above if "one percent" were substituted for "five
percent" each place it appears in paragraph (3)
above, and who has annual Compensation of more than
$150,000. For purposes of determining ownership
under this subsection 14.08(g), Code Section
318(a)(2)(C) shall be applied by substituting "five
percent" for "50 percent" and the rules of
subsections (b), (c) and (m) of Section 414 of the
Code shall not apply.
(h) "Year of Service" means a year which constitute a "Year of
Service" under the rules of paragraphs (4), (5) and (6) of
Code Section 411(a) to the extent not inconsistent with the
provisions of this Article XIV.
(i) "Non-Key Employee" means an Associate who is not a Key
Employee.
14.09 Top Heavy Vesting Rule.
(a) Top Heavy Vesting Schedule Overrides Plan Regular Vesting
Schedule. For any Top Heavy Plan Year in which the Plan's
Vesting Schedule contained in Section 6.01 is less rapid than
the "Top Heavy Vesting Schedule" below, the Vested portion of
any Participant's Aggregate Account (including amounts
credited to such Account prior to the Plan becoming Top
Heavy), and regardless whether a similar schedule applies to
Participant's Aggregate Account in any other plan, shall be
determined on the basis of the Participant's number of Years
of Service according to the following schedule:
<TABLE>
<CAPTION>
Years of Service Vested Percentage
---------------- -----------------
<S> <C>
Less than 2 0%
2 but less than 3 25%
3 but less than 4 50%
4 but less than 5 75%
5 or more years 100%
</TABLE>
(b) Discretion to Discontinue Top Heavy Schedule for Non-Top Heavy
Plan Years. If in any Plan Year subsequent to a Top Heavy
Plan Year, the Plan ceases to be a Top Heavy Plan, the
Administrator may, in its sole and absolute discretion, elect
to: (1) if the Top Heavy Vesting Schedule Above is more rapid
than the Plan's current Vesting Schedule, to continue to apply
the Top Heavy Vesting Schedule at Section 14.09(a) above, in
determining a Participant's Aggregate Account, or (2) to
revert to the Vesting Schedule in effect before this Plan
became a Top Heavy Plan. Any such reversion shall be treated
as a Plan amendment pursuant to the terms of Code section
411(a)(10), as set forth at Section 11.01 of the Plan.
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<PAGE> 74
(c) Non-application. The Top Heavy vesting rule does not apply to
the Aggregate Account of any Participant who has not actually
worked an Hour of Service after the Plan becomes a Top Heavy
Plan. Additionally, any Participants who are not credited
with an Hour of Service on or after October 1, 1996 will be
subject to the Top Heavy Vesting Schedule of the Prior Plan.
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ARTICLE XV
PLAN LOANS
15.01 Authorization for Plan Loans. The Trustee is authorized to make loans
from the Plan ("Plan Loans") to Participants, Former Participants,
Beneficiaries, and Alternate Payees who are "Parties in Interest" to
the Plan, as that term is defined by ERISA Section 3(14). For the
purposes of this provision these individuals shall be referred to
collectively as "Eligible Participants."
Any outstanding loans existing on the Effective Date of this
Restatement shall be governed by the terms of the Loan Agreement and
the provisions of this Plan immediately before the Effective Date of
this Restatement. Any renewal, extension, or other modification of an
existing loan shall be governed by the terms of this restated Plan.
15.02 Loan Procedures. The Plan Administrator has established a loan policy
which shall govern all loans granted or renewed pursuant to this
Article XVI on or after the Effective Date of this Plan. A copy of
the loan policy is attached hereto and hereby incorporated by
reference and made a part hereof for all purposes.
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ARTICLE XVI
ELIGIBLE ROLLOVER DISTRIBUTIONS
16.01 General Rule. This Article applies to distributions made on or after
January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Distributee's election under
this Article XVI, a Distributee may elect, at the time and in the
manner prescribed by the Plan Administrator, to have any portion of an
Eligible Rollover Distribution paid directly to an Eligible Retirement
Plan specified by the Distributee in a Direct Rollover.
16.02 Definitions. For purposes of this Article XVI, the following
definitions shall apply, to be interpreted in accordance with the
provisions of Section 401(a)(31) of the Code and the regulations
thereunder:
(a) "Eligible Rollover Distribution" means 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:
(1) 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;
(2) any distribution to the extent such distribution is
required under Section 401(a)(9) of the Code; and
(3) the portion of any distribution that is not
includible in gross income (determined without regard
to the exclusion for net unrealized appreciation with
respect to employer securities).
(b) "Eligible Retirement Plan" means 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.
(c) "Distributee" includes an Associate or former Associate. In
addition, the Associate's or former Associate's surviving
Spouse and the Associate's or former Associate's Spouse or
former Spouse who is the alternate payee under a qualified
domestic relations order, as
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defined in Section 414(p) of the Code, are Distributees with
regard to the interest of the Spouse or former Spouse.
(d) "Direct Rollover" means a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
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IN WITNESS WHEREOF, this Agreement has been executed this 5th day
of September, 1996.
SPONSOR:
HASTINGS ENTERTAINMENT, INC.
By: /s/ DENNIS McGILL
-----------------------------------
Name: Dennis McGill
---------------------------------
Title: Vice President & CEO
--------------------------------
TRUSTEE:
AMARILLO NATIONAL BANK
By: /s/ SUSAN L. POWERS
-----------------------------------
Name: Susan L. Powers
---------------------------------
Title: Vice President & Trust Officer
--------------------------------
73
