<PAGE> 1
As filed with the Securities and Exchange Commission on May 1, 1998
Registration No. 333-_________________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-------------------
ZALE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-0675400
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
901 W. WALNUT HILL LANE
IRVING, TEXAS 75038-1003
(Address of registrant's principal executive offices)
ZALE CORPORATION SAVINGS AND
INVESTMENT PLAN
(Full Title of Plan)
-------------------
Copy to:
Alan P. Shor David G. McLane, Esq.
Executive Vice President, Chief Gardere & Wynne, L.L.P.
Logistics Officer and General Counsel 1601 Elm Street
901 West Walnut Hill Lane Suite 3000
Irving, Texas 75038-1003 Dallas, Texas 75201
(972) 580-4000 (214) 999-4607
(Name and address, including zip code, and telephone number,
including area code, of registrant's agent for service)
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==========================================================================================================================
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED (1) (2) SHARE (3) PRICE (1)(3) REGISTRATION FEE (3)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common Stock, $.01 par value 850,000 shares $28.1562 $23,932,813 $7,060
==========================================================================================================================
</TABLE>
(1) In addition, pursuant to Rule 416(c) under the Securities Act of
1933, as amended (the "Securities Act"), this registration
statement also covers an indeterminate amount of interests to be
offered or sold pursuant to the employee benefit plan described
herein.
(2) The shares of Common Stock, $.01 par value ("Common Stock"), of
Zale Corporation, a Delaware corporation (the "Company"), being
registered hereby consist of shares to be acquired by the Zale
Corporation Savings and Investment Plan (the "Plan") for the
accounts of participants.
(3) Calculated pursuant to Rule 457(h), based on the average of the
high and low prices for the Common Stock on April 27, 1998 as
reported on the New York Stock Exchange.
================================================================================
<PAGE> 2
PART I
INFORMATION REQUIRED IN THE SECTION 10 PROSPECTUS
ITEM 1. PLAN INFORMATION.*
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION.*
*Information required by Part I to be contained in the Section 10(a)
prospectus is omitted from the registration statement in accordance with
Rule 428 under the Securities Act and the Note to Part I of Form S-8.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.
The following documents filed by the Company with the Securities and
Exchange Commission are incorporated by reference in this registration
statement.
(1) The Company's Annual Report on Form 10-K for the fiscal year
ended July 31, 1997;
(2) All other reports filed by the Company pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") since the end of the fiscal year
covered by the Annual Report on Form 10-K in (1) above; and
(3) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A/A, as filed with
the Securities and Exchange Commission under Section 12(g) of
the Exchange Act on July 16, 1993, including any amendments or
reports filed for the purpose of updating such description.
In addition, all documents subsequently filed by the Company or the Plan
pursuant to Sections 13(a), 13(c), 14 and 15(d) of 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 in this registration
statement and to be a part hereof from the date of filing of such documents.
The consolidated financial statements of the Company appearing in its latest
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
September 12, 1997, for the year ended July 31, 1997, have been audited by
Arthur Andersen LLP, independent public accountants, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are, and audited consolidated financial
statements to be included in subsequently filed documents will be, incorporated
herein in reliance upon the reports of Arthur Andersen LLP, or such other
auditors as the Company may employ, pertaining to such financial statements (to
the extent covered by consents filed with the Securities and Exchange
Commission) given upon the authority of such firm as experts in accounting and
auditing.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The provisions of the Delaware General Corporation Law (the "DGCL") and
the Registrant's Certificate of Incorporation set forth the extent to which the
Registrant's directors and officers may be indemnified against liabilities they
may incur while serving in such capacities. Section 145 of Title 8 of the DGCL
gives a corporation power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right
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of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The same Section also
gives a corporation power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper. Also, the Section states that, to the extent that a
director, officer, employee or agent of a corporation has been successful on
the merits or otherwise in defense of any such action, suit or proceeding, or
in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection therewith.
Article Seven of the Certificate of Incorporation of the Company provides:
(a) A director of the Corporation shall not be personally liable either
to the Corporation or any stockholder for monetary damages for breach of
fiduciary duty as a director, except (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, or (ii) for acts
or omissions not in good faith or which involve intentional misconduct or
knowing violation of the law, or (iii) for any matter in respect of which
such director shall be liable under Section 174 of Title 8 of the General
Corporation Law of the State of Delaware or any amendment thereto or
successor provision thereto, or (iv) for any transaction from which the
director shall have derived an improper personal benefit. Neither
amendment nor repeal of this paragraph (a) nor the adoption of any
provision of the Certificate of Incorporation inconsistent with this
paragraph (a) shall eliminate or reduce the effect of this paragraph (a)
in any respect of any matter occurring, or any cause of action, suit or
claim that, but for this paragraph (a) of this Article, would accrue or
arise, prior to such amendment, repeal or adoption of an inconsistent
provision.
(b) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to, or testifies in, any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative in nature, by reason of (i) the fact that
such person is or was a director, officer, employee or agent of the
Corporation at any time after the Commencement Time (as defined below), or
is or was serving at any time after the Commencement Time at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, employee benefit plan, trust or
other enterprise and (ii) any acts or omissions by such person in such
capacity that occurred after the Commencement Time, against expenses
(including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection
with such action, suit or proceeding to the full extent permitted by law,
so long as such person acted or omitted to act in good faith and in a
manner that such person (x) reasonably believed to be in or not opposed to
the best interests of the Corporation and (y) with respect to any criminal
action or proceeding, had reasonable cause to believe was lawful;
provided, however, that if a court of competent jurisdiction, after
exhaustion of all appeals therefrom, adjudges such person to be liable to
the Corporation for any amount or if such person pays an amount in
settlement to the Corporation, the Corporation may indemnify such person
for such amount only with the approval of such court. The Corporation may
adopt bylaws or enter into agreements with
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any such person for the purpose of providing such indemnification.
"Commencement Time" means 8:00 a.m., C.S.T., on July 21, 1993.
The Company maintains an insurance policy insuring the Company and
directors and officers of the Company against certain liabilities, including
liabilities under the Securities Act of 1933.
ITEM 8. EXHIBITS.
4.1 Zale Corporation Savings and Investment Plan, and the
First Amendment through the Sixth Amendment thereto.*
5.1 Opinion of Gardere & Wynne, L.L.P. (1)
23.1 Consent of Arthur Andersen LLP.*
23.2 Consent of Gardere & Wynne, L.L.P. (included as part of
Exhibit 5.1).
24.1 Power of Attorney (set forth on the signature pages of the
registration statement).*
ITEM 9. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made of the securities registered hereby, 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 the 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;
provided, however, that the undertakings set forth in paragraphs (1)(i)
and (1)(ii) above do not apply if the information is contained in periodic
reports filed by the Registrant pursuant to Section 13 or Section 15(d) of
the Exchange Act that are incorporated by reference in this registration
statement.
- -----------------
(1) In lieu of the opinion of counsel or determination letter
contemplated by Item 601(b)(5) of Regulation S-K, the Company hereby undertakes
that it will submit or has submitted the Plan and all amendments thereto to the
Internal Revenue Service ("IRS") in a timely manner, and that it has made and
will make all changes required by the IRS in order to qualify the Plan under
Section 401 of the Internal Revenue Code.
*filed herewith
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<PAGE> 5
(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.
The undersigned registrant hereby further undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and each filing of the annual report of the Plan pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered by them, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Irving, State of Texas, on the 1st day of May,
1998.
ZALE CORPORATION
(Registrant)
By: /s/ ROBERT J. DINICOLA
---------------------------------------
Robert J. DiNicola Chairman of the Board and
Chief Executive Officer
Each person whose signature appears below hereby constitutes and appoints
Robert J. DiNicola and Alan P. Shor and each of them (with full power in each
of them to act alone), 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 and to file with the Securities
and Exchange Commission and the securities regulatory authorities of the
several states registration statements, any amendment or post-effective
amendments or any and all other documents in connection therewith, in
connection with the registration under the Securities Act, or the registration
or qualification under any applicable state securities laws or regulations, of
interests in the Plan and shares of Common Stock issuable pursuant to such
Plan, 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, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities indicated
below in the City of Irving, State of Texas on the 1st day of May, 1998.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
/s/ ROBERT J. DINICOLA Chairman of the Board and Chief Executive
- ------------------------------- Officer
Robert J. DiNicola (a principal executive officer)
/s/ SUE E. GOVE Group Vice President and Chief Financial Officer
- ------------------------------- (principal financial officer)
Sue E. Gove
/s/ MARK R. LENZ Senior Vice President, Controller
- ------------------------------- (principal accounting officer)
Mark R. Lenz
</TABLE>
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<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
/s/ GLEN ADAMS Director
- -------------------------------
Glen Adams
/s/ A. DAVID BROWN Director
- -------------------------------
A. David Brown
/s/ PETER P. COPSES Director
- -------------------------------
Peter P. Copses
/s/ ANDREA JUNG Director
- -------------------------------
Andrea Jung
/s/ RICHARD C. MARCUS Director
- -------------------------------
Richard C. Marcus
/s/ CHARLES H. PISTOR, JR. Director
- -------------------------------
Charles H. Pistor, Jr.
/s/ ANDREW H. TISCH Director
- -------------------------------
Andrew H. Tisch
</TABLE>
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The Plan. Pursuant to the requirements of the Securities Act, the
Plan has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Irving, State of Texas, on the 1st day of May, 1998.
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
By: /s/ MARK R. LENZ
------------------------------------
Mark R. Lenz
Committee Member - Chairman
Pursuant to the requirements of the Securities Act, as amended, this
registration statement has been signed by the following persons in the
capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ MARK R. LENZ
------------------------------ Committee Member - Chairman
Mark R. Lenz
/s/ GREGORY HUMENESKY
------------------------------ Committee Member
Gregory Humenesky
/s/ SUE E. GOVE
------------------------------ Committee Member
Sue E. Gove
/s/ GARY W. MELTON
------------------------------ Committee Member
Gary W. Melton
/s/ BERNARD M. SENSALE, JR.
------------------------------ Committee Member
Bernard M. Sensale, Jr.
/s/ SUSAN S. LANIGAN
------------------------------ Committee Member
Susan S. Lanigan
/s/ SUSAN M. TARPLEY
------------------------------ Secretary
Susan M. Tarpley
</TABLE>
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<S> <C>
4.1 Zale Corporation Savings and Investment Plan,
and the First Amendment through the Sixth Amendment thereto.
5.1 Opinion of Gardere & Wynne, L.L.P.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Gardere & Wynne, L.L.P. (included as part of Exhibit 5.1).
24.1 Power of Attorney (set forth on the signature pages of the registration statement).
</TABLE>
<PAGE> 1
ZALE'S PROFIT SHARING PLAN
Renamed, effective April 1, 1994
ZALE CORPORATION SAVINGS & INVESTMENT PLAN
<PAGE> 2
ZALE'S PROFIT SHARING PLAN
Renamed, effective April 1, 1994
ZALE CORPORATION SAVINGS & INVESTMENT PLAN
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
INTRODUCTION ........................................................................ 1
ARTICLE 1 - DEFINITIONS ............................................................. 3
1.1 Account.................................................................... 3
1.2 Active Service............................................................. 4
1.3 Active Contribution Percentage............................................. 4
1.4 Actual Contribution Ratio.................................................. 4
1.5 Actual Deferral Percentage................................................. 4
1.6 Actual Deferral Ratio...................................................... 4
1.7 Affiliated Employer........................................................ 4
1.8 Aggregate Accounts......................................................... 4
1.9 Aggregation Group.......................................................... 4
1.10 Alternate Payee ........................................................... 5
1.11 Annual Additions .......................................................... 5
1.12 Annual Compensation ....................................................... 5
1.13 Beneficiary ............................................................... 7
1.14 Board of Directors ........................................................ 7
1.15 Code ...................................................................... 7
1.16 Committee ................................................................. 7
1.17 Common Stock .............................................................. 7
1.18 Computation Period ........................................................ 7
1.19 Considered Compensation ................................................... 7
1.20 Contribution .............................................................. 8
1.21 Defined Benefit Plan ...................................................... 9
1.22 Defined Contribution Plan ................................................. 9
1.23 Determination Date ........................................................ 9
1.24 Direct Rollover ........................................................... 9
1.25 Disability ................................................................ 9
1.26 Distributee ............................................................... 9
1.27 Eligible Retirement Plan .................................................. 9
1.28 Eligible Rollover Distribution ............................................ 10
1.29 Employee .................................................................. 10
1.30 Employer or Employers ..................................................... 10
1.31 ERISA ..................................................................... 10
1.32 Excess Deferrals .......................................................... 10
1.33 Excess 401(k) Contributions ............................................... 10
1.34 Excess 401(m) Contributions ............................................... 11
1.35 Family Member ............................................................. 11
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1.36 Highly Compensated Employee ............................................... 11
1.37 Hour of Employment ........................................................ 11
1.38 Key Employee .............................................................. 12
1.39 Non-Highly Compensated Employee ........................................... 13
1.40 Non-Key Employee .......................................................... 13
1.41 Participant ............................................................... 13
1.42 Period of Service ......................................................... 13
1.43 Period of Severance ....................................................... 13
1.44 Plan ...................................................................... 13
1.45 Plan Year ................................................................. 13
1.46 Qualified Domestic Relations Order ........................................ 13
1.47 Regulation ................................................................ 13
1.48 Retired Participant ....................................................... 14
1.49 Retirement Age ............................................................ 14
1.50 Rollover Contribution ..................................................... 14
1.51 Section 401(k) Contributions .............................................. 14
1.52 Section 401(m) Contributions .............................................. 14
1.53 Service ................................................................... 14
1.54 Sponsor ................................................................... 14
1.55 Top-Heavy Plan ............................................................ 15
1.56 Transferred ............................................................... 15
1.57 Trust ..................................................................... 15
1.58 Trustee ................................................................... 15
1.59 Trust Fund ................................................................ 15
1.60 Valuation Date ............................................................ 15
ARTICLE 2 - ACTIVE SERVICE........................................................... 16
2.1 When Active Service Begins ............................................... 16
2.2 Eligibility Computation Period ........................................... 16
2.3 Accrual Computation Period ............................................... 16
2.4 Vesting Computation Period ............................................... 16
2.5 When An Employee Severs Service .......................................... 17
2.6 Periods of Severance ..................................................... 17
2.7 Transfers ................................................................ 18
2.8 Employment Records Conclusive ............................................ 18
2.9 Coverage of Certain Previously Excluded
Employees .............................................................. 18
2.10 Military Service.......................................................... 18
</TABLE>
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ARTICLE 3 - ELIGIBILITY RULES........................................................ 19
3.1 Eligibility Requirements................................................... 19
3.2 Eligibility Upon Reemployment.............................................. 19
3.3 Frozen Participation....................................................... 19
ARTICLE 4 - CONTRIBUTIONS............................................................ 20
4.1 Employee After-Tax Contributions........................................... 20
4.2 Rollover Contributions and Plan to Plan
Transfers................................................................ 20
4.3 Employer Contributions..................................................... 20
4.4 Limit on Salary Deferral Contributions..................................... 23
4.5 Actual Deferral Percentage for Highly
Compensated Employees.................................................... 24
4.6 Special Actual Deferral Percentage Rules For
Family Members........................................................... 26
4.7 Actual Contribution Percentage for Eligible
Highly Compensated Employees............................................. 26
4.8 Special Actual Contribution Percentage Rules
For Family Members....................................................... 27
4.9 Distributions of Income Allocable to Excess
401(k) Contributions and Excess
401(m) Contributions..................................................... 27
4.10 Additional Required Test if Alternative
Compliance is Used....................................................... 28
4.11 Salary Deferral Contributions, Employer
Matching Contributions and Employer
Discretionary Contributions.............................................. 29
4.12 Return of Contributions for Mistake,
Disqualification or Disallowance of
Deduction................................................................ 29
ARTICLE 5 - PARTICIPATION............................................................ 31
5.1 Allocation of Rollover Contributions and
Salary Deferral Contributions............................................ 31
5.2 Allocation of Employer Contributions....................................... 31
5.3 Forfeiture on Termination of Participation................................. 32
5.4 Limitation on Allocation................................................... 32
ARTICLE 6 - INVESTMENTS.............................................................. 35
6.1 Manner of Investment........................................................ 35
6.2 Investment Decisions........................................................ 35
6.3 Participant Directions to Trustees.......................................... 37
</TABLE>
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<TABLE>
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6.4 Investment of Employer Matching
Contributions ........................................................... 37
6.5 Voting Rights.............................................................. 37
6.6 Valuation of Trust Fund ................................................... 38
6.7 Interim Valuation of Trust Fund ........................................... 38
6.8 Rights of Participants in Trust Fund ...................................... 39
6.9 Loans to Participants ..................................................... 39
ARTICLE 7 - BENEFITS ................................................................ 43
7.1 Valuation of Accounts for Withdrawals and
Distributions ........................................................... 43
7.2 Death Benefit.............................................................. 43
7.3 Retirement Benefit ........................................................ 43
7.4 Disability Benefit ........................................................ 43
7.5 Severance Benefit ......................................................... 43
7.6 Dismissal for Cause or Employment With
Competitor .............................................................. 44
7.7 Distributions to Divorced Spouse........................................... 45
7.8 Withdrawals ............................................................... 45
7.9 Forfeiture by Lost Participants or
Beneficiaries; Escheat .................................................. 48
7.10 Claims Procedure .......................................................... 48
7.11 Timing and Form of All Distributions ...................................... 49
7.12 Mandatory Rules Applicable to All
Distributions............................................................ 50
7.13 No Duplication of Benefits ................................................ 51
7.14 Designation of Beneficiary................................................. 51
7.15 Distributions to Disabled or Minors ....................................... 51
7.16 Distributions from the Common Stock Fund................................... 52
ARTICLE 8 - TOP-HEAVY REQUIREMENTS................................................... 53
8.1 Application................................................................ 53
8.2 Top Heavy Test............................................................. 53
8.3 Vesting Restrictions if Plan Becomes -Top
Heavy.................................................................... 54
8.4 Minimum Contribution if Plan Becomes
Top-Heavy................................................................ 54
8.5 Limitation on Top-Heavy Vesting and
Minimum Contribution..................................................... 55
8.6 Coverage Under Multiple Top-Heavy Plans.................................... 55
8.7 Other Restrictions......................................................... 55
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE 9 - ADMINISTRATION OF THE PLAN............................................... 56
9.1 Appointment, Term of Service & Removal..................................... 56
9.2 Powers..................................................................... 56
9.3 Organization............................................................... 57
9.4 Quorum and Majority Action................................................. 57
9.5 Signatures................................................................. 57
9.6 Disqualification of Committee Member....................................... 57
9.7 Disclosure to Participants................................................. 58
9.8 Standard of Performance.................................................... 58
9.9 Liability of Committee and Liability
Insurance................................................................ 58
9.10 Exemption from Bond ....................................................... 58
9.11 Compensation .............................................................. 58
9.12 Persons Serving in Dual Fiduciary Roles ................................... 58
9.13 Administrator ............................................................. 59
9.14 Standard of Judicial Review of Committee
Actions ................................................................. 59
ARTICLE 10 - TRUST FUND AND CONTRIBUTIONS ........................................... 60
10.1 Funding of Plan ........................................................... 60
10.2 Incorporation of Trust .................................................... 60
10.3 Authority of Trustee ...................................................... 60
10.4 Allocation of Responsibility .............................................. 60
ARTICLE 11 - ADOPTION OF PLAN BY OTHER EMPLOYERS .................................... 61
11.1 Adoption Procedure ........................................................ 61
11.2 No Joint Venture Implied .................................................. 61
11.3 All Trust Assets Available to Pay
All Benefits ............................................................ 61
11.4 Qualification a Condition Precedent to
Adoption and Continued Participation .................................... 61
ARTICLE 12 - AMENDMENT AND TERMINATION .............................................. 63
12.1 Right to Amend and Limitations Thereon .................................... 63
12.2 Mandatory Amendments ...................................................... 64
12.3 Withdrawal of Employer .................................................... 64
12.4 Termination of Plan ....................................................... 65
12.5 Partial or Complete Termination or Complete
Discontinuance .......................................................... 65
12.6 Continuance Permitted Upon Sale or Transfer
of Assets ............................................................... 66
12.7 Distribution Upon Termination ............................................. 66
</TABLE>
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12.8 Modes of Distribution Upon Termination .................................... 67
12.9 Distributions to Highly Compensated
Employees and Former Employees
Must Not Discriminate ................................................... 67
ARTICLE 13 - MISCELLANEOUS .......................................................... 68
13.1 Plan Not An Employment Contract ........................................... 68
13.2 Benefits Provided Solely From Trust ....................................... 68
13.3 Anti-Alienation Provision ................................................. 68
13.4 Requirements Upon Merger or Consolidation
of Plans ................................................................ 68
13.5 Gender of Words Used ...................................................... 68
13.6 Severability .............................................................. 69
13.7 Governing Law; Parties to Legal Actions ................................... 69
</TABLE>
vi
<PAGE> 8
ZALE'S PROFIT SHARING PLAN
RENAMED, EFFECTIVE APRIL 1, 1994
ZALE CORPORATION SAVINGS & INVESTMENT PLAN
INTRODUCTION
Zale Corporation (the "Sponsor") has entered into this Agreement this
3 day of February, 1994.
WITNESSETH:
WHEREAS, effective April 1, 1951, the Sponsor established a plan known as
"Zale's Profit Sharing Plan" (the "Original Plan");
WHEREAS, the Original Plan was amended, effective April 1, 1989, to comply
with the Tax Reform Act of 1986 and subsequent tax act changes and to add
employee salary deferral elections pursuant to Section 401(k) of the Internal
Revenue Code of 1986, as amended (the "Code") and employer matching
contributions pursuant to Section 401(m) of the Code;
WHEREAS, the Original Plan was amended, effective April 1, 1991, to add an
employee stock ownership plan component (the "ESOP Component") which was
intended to qualify as a stock bonus plan under Section 401(a) of the Code and
as an employee stock ownership plan under Section 4975(e)(7) of the Code under
the instrument entitled "Zale's Savings and Employee Stock Ownership Plan" (the
"Savings/ESOP Plan");
WHEREAS, effective January 1, 1992, the Sponsor split up the Saving/ESOP
Plan into two separate plans: one through the amendment and restatement of the
Savings/ESOP Plan, which was known as the "Zale's Employee Stock Ownership Plan"
(the "Zale ESOP Plan") and the other through the execution of a new document,
which plan was known as the "Zale's Profit Sharing Plan" (the "Profit Sharing
Plan"), each of which was a continuation of its respective component of the
Savings/ESOP Plan without gap in time or effect;
WHEREAS, the Sponsor terminated the Zale ESOP Plan effective January 1,
1992 and received a favorable determination letter from the Internal Revenue
Service on the qualification of the Zale ESOP Plan upon its termination;
WHEREAS, the Sponsor amended the Profit Sharing Plan on April 15, 1993 by
adopting a First Amendment thereto and received a favorable determination letter
from the Internal Revenue Service on the qualification of the Profit Sharing
Plan, as amended by such First Amendment;
WHEREAS, effective April 1, 1994, the Sponsor desires to make certain
further changes to the Profit Sharing Plan, as amended by the First Amendment
thereto, to
<PAGE> 9
increase participation therein, to improve the delivery of benefits and to
provide participants with a proprietary interest in the Sponsor;
WHEREAS, the Sponsor also desires to make certain changes to comply with
recently enacted legislation and to make other clarifying and technical changes
thereto;
WHEREAS, the Sponsor desires to restate the Profit Sharing Plan, as amended
by the First Amendment, to consolidate all changes thereto in a single document.
NOW, THEREFORE, the Sponsor hereby amends and restates the Profit Sharing
Plan, as amended by the First Amendment, generally effective January 1, 1992,
except as otherwise specifically provided therein (as amended and restated, the
"Plan") as follows:
2
<PAGE> 10
ARTICLE 1
DEFINITIONS
The words and phrases defined in this Article shall have the meaning set
out in the definition unless the context in which the word or phrase appears
reasonably requires a broader, narrower or different meaning.
1.1 "Account" means all ledger accounts pertaining to a Participant which
are maintained by the Committee to reflect the Participant's interest in the
Trust Fund. The Committee shall establish the following Accounts and any
additional Accounts that the Committee considers necessary to reflect the entire
interest of the Participant in the Trust Fund. Each of the Accounts listed below
and any additional Accounts established by the Committee shall reflect the
Contributions or amounts transferred to the Trust Fund, if any, and the
appreciation or depreciation of the assets in the Trust Fund and the income
earned or loss incurred on the assets in the Trust Fund attributable to the
Contributions and/or other amounts transferred to the Account. An Account also
means all accounts transferred from a terminated qualified plan of an Employer
or Affiliated Employer.
(a) Employee After-Tax Contribution Account - The Employee's After-Tax
Contributions, if any.
(b) Salary Deferral Contribution Account - The Employee's contributions
made because of the Employee's salary deferral agreement, if any.
(c) Employer Matching Contribution Account - The Employer's Matching
Contributions allocated to the Participant, if any.
(d) Employer Discretionary Contribution Account - The Employer's
Discretionary Contributions, if any.
(e) PAYSOP Account - Funds transferred from a terminated PAYSOP of Sponsor
that are allocable to participants and beneficiaries of such PAYSOP
who cannot be located and whose accounts have not yet been forfeited.
(f) Profit Sharing Plan Account - Profit-sharing contributions, if any,
made pursuant to the terms of plans that are predecessors to the Plan
and allocated to Participants.
3
<PAGE> 11
(g) Rollover Account - Funds transferred from another qualified plan or
IRA account for the benefit of an Employee, if any.
1.2 "ACTIVE SERVICE" means the Periods of Service which are counted for
either eligibility, vesting or benefit accrual purposes as calculated under
Article 2.
1.3 "ACTUAL CONTRIBUTION PERCENTAGE" means for a specified group of
Employees for a Plan Year the average of the ratios (calculated separately for
each Employee in that group) of the sum of Section 401(m) Contributions actually
paid into the Trust on behalf of each Employee for that Plan Year, to the
Employee's Annual Compensation for that Plan Year. Solely for this purpose all
Section 401(m) Contributions and Annual Compensation of all eligible Family
Members will be attributed to each Highly Compensated Employee.
1.4 "ACTUAL CONTRIBUTION RATIO" means for an Employee the ratio of Section
401(m) Contributions actually paid into the Trust on behalf of the Employee for
a Plan Year to the Employee's Annual Compensation for the same Plan Year.
1.5 "ACTUAL DEFERRAL PERCENTAGE" means for a specified group of Employees
for a Plan Year the average of the ratios (calculated separately for each
Employee in that group) of the amount of Section 401(k) Contributions actually
paid into the Trust on behalf of the Employee for that Plan Year to the
Employee's Annual Compensation for the same Plan Year. Solely for this purpose
all Section 401(k) Contributions and Annual Compensation of all eligible Family
Members will be attributed to each Highly Compensated Employee.
1.6 "ACTUAL DEFERRAL RATIO" means for an Employee the ratio of Section
401(k) Contributions actually paid into the Trust on behalf of the Employee for
a Plan Year to the Employee's Annual Compensation for the same Plan Year.
1.7 "AFFILIATED EMPLOYER" means an employer which is a member of the same
controlled group of corporations within the meaning of Section 414(b) of the
Code or which is a trade or business (whether or not incorporated) which is
under common control (within the meaning of Section 414(c) of the Code) or which
is a member of an affiliated service group (within the meaning of Section 414(m)
of the Code) with the Employer.
1.8 "AGGREGATE ACCOUNTS" means the total of all Account balances derived
from Employer Contributions and Employee Contributions.
1.9 "AGGREGATION GROUP" means (a) each plan of the Employer or any
Affiliated Employer in which a Key Employee is a Participant and (b) each other
plan of the Employer or any Affiliated Employer which enables any plan in (a) to
meet the requirements of either Section 401(a)(4) or 410 of the Code. Any
Employer may treat a plan not
4
<PAGE> 12
required to be included in the Aggregation Group as being a part of the group if
the group would continue to meet the requirements of Section 401(a)(4) and 410
of the Code with that plan being taken into account.
1.10 "ALTERNATE PAYEE" means any spouse, former spouse, child or other
dependent of a Participant who is recognized by a Qualified Domestic Relations
Order as having a right to receive all, or any portion of, the benefits payable
hereunder with respect to such Participant.
1.11 "ANNUAL ADDITIONS" means (a) Employer Contributions, (b) Employee
Contributions, (c) forfeitures and (d) amounts described in Sections 415(l)(1)
and 419A(d)(2) of the Code having to do with individual medical accounts. Excess
401(k) Contributions and Excess 401(m) Contributions for a Plan Year are treated
as Annual Additions for that Plan Year even if they are corrected through
distribution or recharacterization. Excess Deferrals that are timely
distributed as set forth in Section 4.4 shall not be treated as Annual
Additions.
1.12 "ANNUAL COMPENSATION" means (a) for purposes of Section 415 of the
Code, all earned income, wages, salaries and fees for professional services and
other amounts received for personal services actually rendered in the course of
employment with the Employer or an Affiliated Employer including, but not
limited to, commissions paid salesmen, compensation for services on the basis of
a percentage of profits, commissions on insurance premiums, tips, bonuses,
fringe benefits, reimbursements or expense allowances under a nonaccountable
plan (as defined in Section 1.62-2(c) of the Regulations), amounts paid or
reimbursed by the Employer for moving expenses incurred by an Employee (but only
to the extent that these amounts are not deductible by the Employee under
Section 217 of the Code), amounts includable in income that are described in
Sections 104(a)(3), 105(a) and 105(h) of the Code, the value of a nonqualified
stock option grant to the extent the value of the option is includable in income
in the year of grant and the amount includable in income upon making an election
under Section 83(b) of the Code, but excluding (i) the Employer's contributions
to a plan of deferred compensation which are not included in the Employee's
gross income for the taxable year in which contributed or the Employer's
contributions to a simplified employee pension plan described in Code Section
408(k) to the extent the contributions are not included in the Employee's
compensation for the taxable year in which contributed, or any distributions
from a plan of deferred compensation; (ii) amounts realized from the exercise of
a nonqualified stock option or the value of restricted stock or property held by
the Employee when it becomes freely transferable or is no longer subject to a
substantial risk of forfeiture; (iii) amounts realized from the sale, exchange
or other disposition of stock acquired under a qualified stock option; and (iv)
other amounts which receive special tax benefits, or contributions made by the
Employer (whether or not under a salary reduction agreement) towards the
purchase of an annuity contract described in Section 403(b) of the Code whether
or not the amounts are excludable from the gross income of the Employee.
5
<PAGE> 13
(b) Annual Compensation means, when used in determining an Employee's
Actual Contribution Ratio, Actual Deferral Ratio or the allocation of any
qualified nonelective contribution and when used to determine if a person is a
Highly Compensated Employee or a Key Employee, the same as it does for purposes
of applying Section 415 of the Code as modified by including elective
contributions under a cafeteria plan governed by Section 125 of the Code and
contributions to any plan qualified under Section 401(k), 408(k) or 403(b) of
the Code. However, for purposes of determining an Employee's Actual
Contribution Ratio or Actual Deferral Ratio, Annual Compensation shall include
only compensation earned during the portion of the Plan Year that the Employee
was eligible to participate in the Plan.
(c) Annual Compensation means, when used for any other purpose,
compensation received by the Employee from the Employer, other than compensation
in the form of qualified or previously qualified deferred compensation that is
currently includable in gross income for federal income tax purposes.
(d) All Annual Compensation, without regard to its definition, in excess of
$200,000.00 (as adjusted by the Secretary of the Treasury) shall be disregarded.
In determining the Annual Compensation of a Participant for purposes of this
limitation, the rules of Section 414(q)(6) shall apply, except that the term
Family Member shall include only the spouse of the Participant and any lineal
descendants of the Participant who have not attained age 19 before the close of
the Plan Year. If as a result of the application of this rule, the adjusted
$200,000.00 limitation is exceeded, the limitation shall be prorated among the
affected Participants in proportion to each Participant's Annual Compensation as
determined under this Section prior to the application of this limitation.
Effective April 1, 1994, in addition to other applicable limitations
set forth in the Plan and notwithstanding any other provision of the Plan to the
contrary, for Plan Years beginning on or after January 1, 1994, the Annual
Compensation of each Employee taken into account under the Plan shall not exceed
the Omnibus Budget Reconciliation Act of 1993 ("OBRA '93") annual compensation
limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the
Commissioner for increases in the cost of living in accordance with section
401(a)(17)(B) of the Internal Revenue Code. The cost-of-living adjustment in
effect for a calendar year applies to any period, not exceeding 12 months, over
which compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12 months, the
OBRA '93 annual compensation limit will be multiplied by a fraction, the
numerator of which is the number of months in the determination period, and the
denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under section 401(a)(17) of the Code shall mean the
OBRA '93 annual compensation limit set forth in this provision.
6
<PAGE> 14
In determining the Annual Compensation for the purpose of the OBRA '93
annual compensation limitation, the rules of Section 414(q)(6) shall apply,
except that the term Family Member shall include only the spouse of the
Participant and any lineal descendants of the Participant who have not attained
age 19 before the close of the Plan Year. If as a result of the application of
this rule, the adjusted OBRA '93 compensation limitation is exceeded, the
limitation shall be prorated among the affected Participants in proportion to
each Participant's Annual Compensation as determined under this Section prior to
the application of this limitation.
1.13 "BENEFICIARY" or Beneficiaries means the person or persons, or the
trust or trusts created for the benefit of a natural person or persons or the
Participant's or retired Participant's estate, designated by the Participant or
retired Participant to receive the benefits payable under this Plan upon his
death.
1.14 "BOARD OF DIRECTORS" means the board of directors, the executive
committee or other body given management responsibility for the Sponsor.
1.15 "CODE" means the Internal Revenue Code of 1986, as amended from
1.16 "COMMITTEE" means the committee appointed by the Sponsor to administer
the Plan.
1.17 "COMMON STOCK" means the shares of common stock of Zale Corporation.
1.18 "COMPUTATION PERIOD" means a period of time used to determine an
Employee's eligibility, accrual or vesting.
1.19 "CONSIDERED COMPENSATION" means as to each Participant: (a) the ear-
reported on Form W-2 by the Employer during the Plan Year, and (b) the amounts
deferred under an eligible cash or deferred arrangement under Section 401(k) of
the Code or under a cafeteria plan described in Section 125 of the Code.
Considered Compensation in excess of $200,000.00 (as adjusted by the Secretary
of the Treasury) shall be disregarded. In determining the Considered
Compensation of a Participant for purposes of this limitation, the rules of
Section 414(q)(6) shall apply, except that the term Family Member shall include
only the spouse. of the Participant and any lineal descendants of the
Participant who have not attained age 19 before the close of the Plan Year. If
as a result of the application of this rule, the adjusted $200,000.00 limitation
is exceeded, the limitation shall be prorated among the affected Participants in
proportion to each Participant's Considered Compensation as determined under
this Section prior to the application of this limitation.
Effective April 1, 1994, in addition to other applicable limitations set
forth in the Plan and notwithstanding any other provision of the Plan to the
contrary, for Plan Years
7
<PAGE> 15
beginning on or after January 1, 1994, the Considered Compensation of each
Employee taken into account under the Plan shall not exceed the Omnibus Budget
Reconciliation Act of 1993 ("OBRA '93") annual compensation limit. OBRA '93
annual compensation limit is $150,000, as adjusted by the Commissioner for
increases in the cost of living in accordance with section 401(a)(17)(B) of the
Internal Revenue Code. The cost of living adjustment in effect for a calendar
year applies to any period, not exceeding 12 months, over which compensation is
determined (determination period) beginning in such calendar year. If a
determination period consists of fewer than 12 months, the OBRA '93 annual
compensation limit will be multiplied by a fraction, the numerator of which is
the number of months in the determination period, and the denominator of which
is 12.
For Plan Years beginning on or after January 1, 1994, any reference in this
Plan to the limitation under section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision.
In determining the Considered Compensation of a Participant for the purpose
of the OBRA '93 annual compensation limit, the rules of Section 414(q)(6) shall
apply, except that the term Family Member shall include only the spouse of the
Participant and any lineal descendants of the Participant who have not attained
age 19 before the close of the Plan Year. If as a result of the application of
this rule, the adjusted OBRA '93 limitation is exceeded, the limitation shall be
prorated among the affected Participants in proportion to each Participant's
Considered Compensation as determined under this Section prior to the
application of this limitation.
1.20 "CONTRIBUTION" means the total amount of contributions made under the
terms of this Plan. Each specific type of Contribution shall be designated by
the type of contribution made as follows:
(a) Employee After-Tax Contribution - After-Tax contributions paid by the
Employee.
(b) Salary Deferral Contribution - Contributions made by the Employer
under the Employee's salary deferral agreement.
(c) Employer Matching Contribution - Prior to April 1, 1994, the basic
$100.00 matching Contributions made by the Employer. Effective April
1, 1994, the 50% matching Contributions made by the Employer equal to
50% of the Salary Deferral Contribution, up to a maximum of 2% of
Considered Compensation.
(d) Employer Discretionary Contribution - Contributions made by the
Employer, if any, on a discretionary basis.
8
<PAGE> 16
(e) Rollover Contribution - Contributions made by an Employee which
are transfers from a prior qualified plan or IRA account.
1.21 "DEFINED BENEFIT PLAN" means a plan established and qualified
under Section 401 of the Code, other than to the extent it is or is treated as a
Defined Contribution Plan.
1.22 "DEFINED CONTRIBUTION PLAN" means a plan established and
qualified under Section 401 of the Code which provides for an individual account
for each participant therein and for benefits based solely on the amount
contributed to each participant's account and any income, expenses, gains and
losses (both realized and unrealized) and any forfeitures of accounts of other
participants which may be allocated to such participant's Account.
1.23 "DETERMINATION DATE" means for a given plan year the last day of
the preceding plan year, or, in the case of the first plan year of a plan, the
last day of that plan year.
1.24 "DIRECT ROLLOVER" means a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
1.25 "DISABILITY" means a mental or physical disability which, in the
opinion of the Committee, shall prevent the Participant from performing each of
the material duties of his regular occupation, and the disability insurance
benefits of the Employer have commenced to be paid to the Employee or would have
commenced to be paid to the Employee if the Employee were a participant under
the disability insurance policy of the Sponsor. The Committee may require the
Participant to submit to a physical examination in order to confirm disability.
1.26 "DISTRIBUTEE" means an Employee or former Employee. In addition,
the Employee's or former Employee's surviving spouse and the Employee's or
former Employee's spouse or former spouse who is the Alternate Payee under a
Qualified Domestic Relations Order, are Distributees with regard to the interest
of the spouse or former spouse.
1.27 "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.
9
<PAGE> 17
1.28 "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: (a) 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 beneficiary, or for a specified period of ten years or more; (b)
any distribution to the extent the distribution is required under Section
401(a)(9) of the Code; and (c) 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).
1.29 "EMPLOYEE" means all common law employees of the Employer
including residents of Puerto Rico and Guam but excluding all other employees
working outside of the United States unless the Committee elects to cover them
in this Plan and excluding all leased employees (as defined in Section 414(n) of
the Code) unless the Plan's qualified status is dependent upon coverage of the
leased employees. All Employees who are included in a unit of Employees covered
by a collective bargaining agreement between the Employees' representative and
the Employer shall be excluded, even if they have met the requirements for
eligibility, if there has been good faith bargaining between the Employer and
the Employees' representative and the collective bargaining agreement does not
require the Employer to include those Employees in this Plan.
1.30 "EMPLOYER" or "EMPLOYERS" means the Sponsor and any other
business organization which has adopted this Plan.
1.31 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
1.32 "EXCESS DEFERRALS" means the excess of the sum of a Participant's
Salary Deferral Contributions plus amounts deferred under other plans or
arrangements described in Sections 401(k), 408(k) and 403(b) of the Code over
the adjusted maximum amount for such deferrals permitted by Section 402(g) of
the Code for any Plan Year.
1.33 "EXCESS 401(k) CONTRIBUTIONS" means, with respect to any Plan
Year, the excess of (a) the aggregate amount of Section 401(k) Contributions
actually paid into the Trust on behalf of Highly Compensated Employees for the
Plan Year over (b) the maximum amount of those contributions permitted under the
limitations set out in the first sentence of Section 4.5 of the Plan. To correct
the amount of Excess 401(k) Contributions, the Actual Deferral Ratio of the
Highly Compensated Employee with the highest Actual Deferral Ratio is reduced to
equal the ratio of the Highly Compensated Employee with the next highest Actual
Deferral Ratio. However, if a lesser reduction would enable the Plan to pass the
test, only that lesser reduction may be made. This leveling process is repeated
until the Actual Deferral Percentage test described in Section 4.5 of the Plan
is satisfied.
10
<PAGE> 18
1.34 "EXCESS 401(m) CONTRIBUTIONS" means, with respect to any Plan
Year, the excess of (a) the aggregate amount of Section 401(m) Contributions
actually paid into the Trust on behalf of Highly Compensated Employees for the
Plan Year over (b) the maximum amount of those contributions permitted under the
limitations set out in the first sentence of Section 4.7 of the Plan. To correct
the amount of Excess 401(m) Contributions, the Actual Contribution Ratio of the
Highly Compensated Employee with the highest Actual Contribution Ratio is
reduced to equal the ratio of the Highly Compensated Employee with the next
highest Actual Contribution Ratio. However, if a lesser reduction would enable
the Plan to pass the test, only that lesser reduction may be made. This leveling
process is repeated until the Actual Contribution Percentage test described in
Section 4.7 of the Plan is satisfied.
1.35 "FAMILY MEMBER" means the spouse and lineal ascendants or
descendants and the spouses of those lineal ascendants or descendants of a 5%
owner or of a Highly Compensated Employee who is one of the 10 employees
receiving the greatest Annual Compensation from the Employers during the Plan
Year.
1.36 "HIGHLY COMPENSATED EMPLOYEE" means an Employee or an employee of
an Affiliated Employer who during the Plan Year or the preceding Plan Year (a)
was at any time a 5% owner, (b) received Annual Compensation from the Employer
in excess of $75,000.00 (as adjusted from time to time by the Secretary of the
Treasury), (c) received Annual Compensation from the Employers in excess of
$50,000.00 (as adjusted from time to time by the Secretary of the Treasury) and
was within the 20% of employees of the Employer and Affiliated Employers who
were the highest paid for the Plan Year, or (d) was at any time an officer and
received Annual Compensation in excess of 50% of the annual addition limitation
of Section 415(b)(1)(A) of the Code. For this purpose no more than 50 employees
or, if lesser, the greater of three employees or 10% of the employees shall be
treated as officers, excluding those Employees who may be excluded in
determining the top paid group. If no officer has Annual Compensation in excess
of 50% of the annual limitation of Section 415(b)(1)(A) of the Code, the highest
paid officer for the year shall be treated as a Highly Compensated Employee. If
a Participant did not fall within (b), (c) or (d) without regard to this
sentence for the Plan Year preceding the Plan Year of the determination, he will
not be treated as falling within (b), (c) or (d) for the Plan Year of the
determination unless he is a member of the group consisting of the 100 employees
paid the greatest Annual Compensation during that Plan Year. For this purpose
the determination of the top paid 100 employees will be made using Section
414(q) of the Code and its Regulations. A former Participant will be treated as
a Highly Compensated Employee if he was a Highly Compensated Employee when he
severed Service or he was a Highly Compensated Employee at any time after
attaining age 55.
1.37 "HOUR OF EMPLOYMENT" means each hour (a) that an Employee is
either directly or indirectly paid or entitled to payment by the Employer or
Affiliated Employer for the performance of duties; (b) that an Employee is
either directly or indirectly paid or entitled to payment by the Employer or
Affiliated Employer for a period of time during
11
<PAGE> 19
which no duties are performed (whether or not the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty, leave of absence; or (c) that an
Employee is paid or entitled to payment of back pay, irrespective of mitigation
of damages, which is awarded or agreed to by the Employer or Affiliated
Employer. The same Hours of Employment shall not be credited both under (a) or
(b) and (c). For purposes of (a), (b) and (c) no more than 501 Hours of
Employment shall be credited to an Employee due to any single continuous period
during which he performs no duties (whether or not the period occurs in a single
Computation Period). Hours of Employment shall not be credited if they are paid
for under a plan maintained solely to comply with workmen's compensation,
unemployment compensation or disability insurance laws. Hours of Employment
shall not be credited if they are paid for solely to reimburse an Employee for
medical or medically related expenses incurred by him. The number of Hours of
Employment credited as Active Service shall be the number of regularly scheduled
hours included in the units of time when units are used to compute pay. The
number of Hours of Employment credited as Active Service shall be the Employee's
pay divided by the Employee's most recent hourly rate of pay when units of time
are not used to compute pay. If an Employee's pay is a fixed rate for specified
periods other than hours, such as days, weeks or months, the Employee's hourly
rate shall be the most recent rate for the period of time divided by the number
of hours regularly scheduled for work during the period. If an Employee's pay is
not a fixed rate for specified periods of time, the Employee's hourly rate shall
be the lowest hourly rate paid to Employees in the same job classification as
that of the Employee or, if there are no Employees in the same job
classification, the minimum wage as established from time to time under Section
6(a)(1) of the Fair Labor Standards Act of 1938, as amended. However, in no
event can an Employee receive credit for a greater number of Hours of Employment
than the number of hours regularly scheduled for work during the period. An
Employee without a regular work schedule shall be presumed to regularly work a
40 hour week, an eight hour day, or any other representative period as reflects
the average hours worked in the job classification. The method used to calculate
the average number of hours worked must be consistently applied.
1.38 "Key Employee" means an Employee or former or deceased Employee
or Beneficiary of an Employee who at any time during the Plan Year or any of the
four preceding Plan Years is (a) an officer of an Employer or any Affiliated
Employer having an Annual Compensation greater than 50% of the annual addition
limitation of Section 415(b)(1)(A) of the Code for the Plan Year, (b) one of the
10 employees having an Annual Compensation from an Employer or any Affiliated
Employer of more than the annual addition limitation of Section 415(c)(1)(A) of
the Code for the Plan Year and owning or considered as owning (within the
meaning of Section 318 of the Code) the largest interest in an Employer or any
Affiliated Employer, treated separately, (c) a 5% owner of an Employer or any
Affiliated Employer, treated separately, or (d) a 1% owner of an Employer or any
Affiliated Employer, treated separately, having Annual Compensation from an
Employer or any Affiliated Employer of more than $150,000.00. For this purpose
no more than 50 employees or, if lesser, the greater of three employees or 10%
of the employees shall be treated as officers. Section 416(i) of the Code shall
be used to determine percentage
12
<PAGE> 20
of ownership. For the purpose of the test set out in (b) above, if two or more
employees have the same interest in an Employer, the employee with the greater
Annual Compensation from the Employer shall be treated as having the larger
interest.
1.39 "NON-HIGHLY COMPENSATED EMPLOYEE" means an Employee of the
Employer who is neither a Highly Compensated Employee nor a Family Member of a
Highly Compensated Employee.
1.40 "NON-KEY EMPLOYEE" means any Employee who is not a Key Employee.
1.41 "PARTICIPANT" means the person or persons employed by an Employer
during the Plan Year and eligible to participate in this Plan.
1.42 "PERIOD OF SERVICE" means a period of employment with an Employer
which commences on the day on which an Employee performs his initial Hour of
Employment or performs his initial Hour of Employment upon returning to the
employ of the Employer, whichever is applicable, and ending on the date the
Employee severs Service.
1.43 "PERIOD OF SEVERANCE" means the period of time commencing on the
date an Employee severs Service and ends on the date the Employee again performs
an Hour of Employment.
1.44 "PLAN" means this Plan, including all subsequent amendments.
Effective April 1, 1994, the Plan shall be renamed as the Zale Corporation
Savings & Investment Plan.
1.45 "PLAN YEAR" means the fiscal year of this Plan, which shall end
on the last day of March of each calendar year. Effective April 1, 1994, Plan
Year means the short Plan Year beginning on April 1, 1994 and ending on July 31,
1994. Effective August 1, 1994, Plan Year means the fiscal year of this Plan
which shall begin on August 1 of each year and end on the last day of July of
the following year.
1.46 "QUALIFIED DOMESTIC RELATIONS ORDER" shall mean any judgment,
decree or order (including approval of a property settlement agreement) made
pursuant to a State domestic relations law, including a community property law:
(a) which relates to the provision of child support, alimony payment or marital
property rights; (b) which creates or recognizes the existence of an Alternate
Payee's right to receive all or any portion of the benefits payable with respect
to a Participant; and (c) which otherwise satisfies the requirements of Section
414(p) of the Code and the regulations promulgated thereunder.
1.47 "REGULATION" means the Internal Revenue Service regulation
specified, as it may be changed from time to time.
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1.48 "RETIRED PARTICIPANT" means a person who was at one time a
Participant who received allocations of Contributions and who has now retired
under the terms of this Plan but still has an Account.
1.49 "RETIREMENT AGE" means (a) in the case of a Participant's normal
Retirement Age the attainment of 65 years of age and the fifth anniversary of
the time a Participant commenced participation in the Plan, and (b) in the case
of a Participant's early Retirement Age, the attainment of age 55 and the
seventh anniversary of the time a Participant commenced participation in the
Plan. Once a Participant has attained his normal or early Retirement Age he
shall be 100% vested at all times.
1.50 "ROLLOVER CONTRIBUTION" means the amount contributed by an
Employee which consists of: (a) any part of a distribution the Employee received
from an individual retirement account which consists entirely of property that
was initially contributed to the individual retirement account from a
distribution received out of a qualified total distribution from a qualified
employee trust described in Section 401(a) or 403(a) of the Code together with
the earnings on that property or (b) any part of a distribution or proceeds from
the sale of any part of the property that the Employee received in excess of his
own Contributions and in excess of any amounts previously distributed to the
Employee and not includable in gross income from any distribution out of a
qualified employee trust described in Section 401(a) or 403(a) of the Code.
1.51 "SECTION 401(k) CONTRIBUTIONS" means the sum of Salary Deferral
Contributions made on behalf of the Participant during the Plan Year and other
amounts that the Employer elects to have treated as Section 401(k) Contributions
pursuant to Code Section 401(k)(3)(D)(ii) to the extent that those other amounts
are not used to enable the Plan to satisfy the minimum contribution requirements
of Section 416 of the Code.
1.52 "SECTION 401(m) CONTRIBUTIONS" means the Employer Matching
Contributions made on behalf of the Participant during the Plan Year and other
amounts that the Employer elects to have treated as Section 401(m) Contributions
pursuant to Code Section 401(m)(3). However, Employer Matching Contributions and
amounts that the Employer could otherwise elect to have treated as Section
401(m) Contributions are not Section 401(m) Contributions to the extent that
they are used to enable the Plan to satisfy the minimum contribution
requirements of Section 416 of the Code.
1.53 "SERVICE" means the period or periods that a person is paid or is
entitled to payment for performance of duties with the Employer or an Affiliated
Employer.
1.54 "SPONSOR" means Zale Corporation or any other business
organization which assumes the primary responsibility for maintaining this Plan
with the consent of the last preceding Sponsor.
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1.55 "TOP-HEAVY PLAN" means any plan which has been determined to be
top-heavy under the test described in Article 8 of this Plan.
1.56 "TRANSFERRED" means, when used with respect to an Employee, the
termination of employment with one Employer and the contemporaneous commencement
of employment with another Employer.
1.57 "TRUST" means the one or more trust estates created to fund this
Plan.
1.58 "TRUSTEE" means collectively one or more persons or corporations
with trust powers which have been appointed by the initial Sponsor and have
accepted the duties of Trustee and any and all successor or successors appointed
by the Sponsor or successor Sponsor.
1.59 "TRUST FUND" means all of the trust estates established under the
terms of this Plan to fund this Plan, whether held to fund a particular group of
Accounts or held to fund all of the Accounts of Participants, collectively.
1.60 "VALUATION DATE" means the day or days of each Plan Year selected
by the Committee on which the Trust Fund is to be valued which cannot be less
frequent than annual. One or more Accounts may have different Valuation Dates
from other Accounts. The Valuation Date must be announced to all Participants
and shall remain the same until changed by the Committee and announced to the
Participants. Until changed by the Committee, the Valuation Date shall be the
last day of each calendar quarter.
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ARTICLE 2
ACTIVE SERVICE
2.1 WHEN ACTIVE SERVICE BEGINS. An Employee shall receive one year of
Active Service credit for eligibility, accrual and vesting purposes in each full
Computation Period described below during which he has 1,000 or more Hours of
Employment with the Employer, all Affiliated Employers or an employer, the stock
or assets of which were acquired by an Employer or Affiliated Employer, without
regard to whether a predecessor plan was maintained. Additionally, effective
April 1, 1994, an Employee will receive one year of Active Service credit for
eligibility for Salary Deferral Contributions and Employer Matching
Contributions if he completes at least 500 Hours of Employment during an
eligibility Computation Period, as defined in Section 2.2 hereof.
2.2 ELIGIBILITY COMPUTATION PERIOD. The Computation Period for
eligibility is the 12-consecutive-month period starting with the Employee's
first day of employment (or reemployment) for which he is entitled to be
credited with one Hour of Employment and each such successive
12-consecutive-month period beginning on the Employee's annual anniversary of
employment (or reemployment). Effective April 1, 1994, the Computation Period
for eligibility for Salary Deferral Contributions and Employer Matching
Contributions is the 6-consecutive-month period starting with the Employee's
first day of employment (or reemployment) for which he is entitled to be
credited with one Hour of Employment and each successive 6-consecutive-month
period beginning on each of the Employee's (i) annual anniversary and (ii)
semi-annual anniversary, as the case may be, of employment (or reemployment).
2.3 ACCRUAL COMPUTATION PERIOD. The Computation Period for accrual
purposes is the Plan Year, as defined in Section 1.45. The short Plan Year
starting April 1, 1994 and ending July 31, 1994 shall be treated as a partial
accrual Computation Period. For purposes of Sections 4.3 and 5.2, the minimum
service requirements for accrual purposes in such partial accrual Computation
Period is equal to the Plan's minimum service requirement for such accrual in a
full accrual Computation Period, multiplied by the ratio of the length of the
partial accrual Computation Period to a full year. In the case of the partial
short Plan Year, the ratio is one-third (4/12), and the service requirement is
333 1/3 Hours of Employment (1/3 x 1,000 Hours of Employment).
2.4 VESTING COMPUTATION PERIOD. The Computation Period for vesting
purposes is the twelve-consecutive month period beginning on April 1 of each
year and ending on March 31 of the next calendar year. Effective April 1, 1994,
the Computation Period for vesting purposes is the twelve-consecutive month
period beginning on August 1 of each year and ending on July 31 of the next
calendar year. As a result of the overlap in vesting Computation Periods,
Participants who complete 1,000 Hours of Employment during the
twelve-consecutive month period beginning on April 1, 1994 and ending on March
31,
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<PAGE> 24
1995 and who also complete 1,000 Hours of Employment during the twelve-
consecutive month period beginning on August 1, 1994 and ending on July 31,
1995 will be credited with two full years of Active Service credit, for vesting
purposes only. For vesting purposes only, an Employee shall not receive any
Active Service credit during the period the Employer did not maintain this Plan
or a predecessor plan.
2.5 WHEN AN EMPLOYEE SEVERS SERVICE. An Employee shall sever Service
if he is not credited with at least 501 Hours of Employment with the Employer
and all Affiliated Employers during a Computation Period unless he is credited
with less than 501 Hours of Employment because: (a) he is Transferred; (b) he is
on an approved leave of absence which does not exceed 18 months and he returns
to employment immediately following the leave of absence; (c) he is temporarily
laid off, and he returns to employment immediately following the temporary
layoff or (d) he is in the service in the armed forces of the United States, and
he returns to employment within 90 days after termination of military service
without being employed somewhere else.
Solely for the purpose of determining whether an Employee has severed
Service, if the Employee is absent from Service because of her pregnancy, the
birth of her child, his or her receipt of a child through adoption, or his or
her caring for the child immediately after birth or adoption, he or she shall be
entitled to the Hours of Employment that he or she would have received but for
that absence for up to one year after the absence began. Eight hours of Service
shall be credited for each day of absence. No more than a total of 501 hours can
be credited. The 501 hours shall be credited to the Computation Period in which
the absence first begins to the extent necessary to prevent a severance from
Service in such Computation Period; otherwise, the 501 hours shall be credited
to the next Computation Period, to the extent such absence continues into such
Computation Period and to the extent necessary to prevent a severance from
Service in such Computation Period.
For purposes of this Section 2.5, no severance from Service shall
occur in the Computation Period consisting of the short Plan Year starting April
1, 1994 and ending July 31, 1994, even if an Employee fails to complete a pro
rated portion of 501 Hours of Employment during such short Plan Year. For
purposes of the immediately preceding paragraph hereto, an Employee who is
absent from Service for any of the reasons enumerated in that paragraph in the
Plan Year ending March 31, 1994, and with respect to whom the last sentence of
such paragraph would otherwise apply, shall be entitled to have the last
sentence of such paragraph applied as if the term "next Computation Period" were
replaced by "the Plan Year beginning on August 1, 1994".
2.6 PERIODS OF SEVERANCE. If an Employee incurs a Period of Severance
of one year or longer, any prior Period of Service shall not count as Active
Service for vesting until he has completed one full year of Service during which
he has completed 1,000 Hours of Employment after he returns to employment. If an
Employee severs Service at a time when: (a) he has no vested interest in his
Employer Matching Contribution Account or
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<PAGE> 25
Employer Discretionary Contribution Account, and (b) his number of consecutive
one-year Periods of Severance equals or exceeds the greater of (i) five or (ii)
his aggregate number of one-year Periods of Service prior to such Period of
Severance, then any prior Period of Service shall not count as Active Service
for eligibility or vesting. If an Employee severs Service and has at least five
consecutive one-year Periods of Severance, then any subsequent Period of Service
shall not count as Active Service for purposes of vesting in amounts in his
Employer Matching Contribution Account or Employer Discretionary Contribution
Account from the prior Period of Service. For purposes of computing the number
of continuous one-year Periods of Severance of any Participant, the short Plan
Year shall not be counted.
2.7 TRANSFERS. If an Employee of one Employer is Transferred to the
service of another Employer, his Active Service shall not be interrupted and he
shall continue to be in Active Service for purposes of eligibility, vesting and
allocation of Contributions and/or forfeitures. If an Employee is transferred to
the service of an Affiliated Employer that has not adopted the Plan he shall not
have severed Service; however, even though he shall continue to be in Active
Service for eligibility and vesting purposes he shall not receive any allocation
of Contributions or forfeitures.
2.8 EMPLOYMENT RECORDS CONCLUSIVE. The employment records of the
Employer shall be conclusive for all determinations of Active Service.
2.9 COVERAGE OF CERTAIN PREVIOUSLY EXCLUDED EMPLOYEES. Any Employee
who is no longer excludable because he or she is no longer included in a unit of
Employees covered by a collective bargaining agreement between the Employees'
representative and the Employer where retirement benefits were the subject of
good faith bargaining shall immediately become eligible for membership if he
meets the eligibility requirements. All his Service with the Employer or any
Affiliated Employer which would have been counted had he not been previously
excluded shall now be counted as Active Service for eligibility and vesting
purposes.
2.10 MILITARY SERVICE. A Participant who leaves the employ of an
Employer to enter the armed services of the United States shall not be deemed to
have broken his continuous employment if he returns to employment with an
Employer within 90 days after his separation from military service without
employment elsewhere. The Participant, however, shall be awarded Active Service
for eligibility and vesting purposes, but shall be awarded only such Active
Service for an allocation of Contributions and/or forfeitures as is required by
law.
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ARTICLE 3
ELIGIBILITY RULES
3.1 ELIGIBILITY REQUIREMENTS. Each Employee shall be eligible to
participate in this Plan on the first day of the month which starts with or next
follows the later of (a) the effective date of the adoption of this Plan by the
Employer, (b) the date the Employee attains age 21 or (c) the date on which the
Employee completes one full year of Active Service. Effective April 1, 1994, an
Employee will be deemed to receive a full year of Active Service credit for
purposes of eligibility for Salary Deferral Contributions and Employer Matching
Contributions if he completes at least 500 Hours of Employment during any of the
six-consecutive-month periods described in Section 2.2, and shall be eligible to
participate in the Plan on the first day of the month which starts with or next
follows the later of (a) the effective date of the adoption of this Plan by the
Employer, (b) the date the Employee attains age 21 or (c) the completion of such
six-consecutive-month period.
3.2 ELIGIBILITY UPON REEMPLOYMENT. If an Employee severs Service with
the Employer for any reason after fulfilling the eligibility requirements but
prior to the date he initially begins participating in the Plan, the Employee
shall be eligible to begin participation in this Plan on the day he first
completes an Hour of Employment upon his return to employment with an Employer.
Once an Employee has become eligible to be a Participant, his eligibility shall
continue until he severs Service. A former Participant shall recommence
participation upon his return to employment with an Employer.
3.3 FROZEN PARTICIPATION. An Employee employed by an Affiliated
Employer which has not adopted this Plan cannot actively participate in this
Plan even though he accrues Active Service. Likewise, if an Employee: (a) is
Transferred from an Employer to an Affiliated Employer or (b) is a Participant
of this Plan when he is excluded under the provisions of a collective bargaining
agreement, his participation becomes inactive. Such a Participant's Account
becomes frozen: he cannot share in any allocation of Employer Contributions or
forfeitures, except for Periods of Service, if any, in which he is employed by
the Employer, and he cannot have any Salary Deferral Contributions made by the
Employer on his behalf. However, his Account shall continue to share in any
appreciation or depreciation of the Trust Fund and in any income earned or
losses incurred by the Trust Fund during the period of time that he is employed
by an Affiliated Employer or is excluded from covered employment under the
provisions of a collective bargaining agreement.
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ARTICLE 4
CONTRIBUTIONS
4.1 EMPLOYEE AFTER-TAX CONTRIBUTIONS. Employee After-Tax Contributions
are not permitted on and after March 31, 1989. Previously made Employee
After-Tax Contributions will continue to be held in the Employee's After-Tax
Contribution Account, subject to the terms of this Plan with respect to such
Accounts.
4.2 ROLLOVER CONTRIBUTIONS AND PLAN TO PLAN TRANSFERS. The Committee
may permit Rollover Contributions by Participants and/or direct transfers to or
from another qualified plan on behalf of Participants from time to time. If
Rollover Contributions and/or direct transfers to or from another qualified plan
are permitted, the opportunity to make those Contributions must be made
available to all Participants on a nondiscriminatory basis. For this purpose,
all Employees of an Employer shall be considered to be Participants of the Plan
even though they may not have met the eligibility requirements. However, they
shall not be entitled to contribute to the Plan, share in Employer Contributions
or share in forfeitures unless and until they have met the requirements for
eligibility, Contributions and allocations.
A Rollover Contribution shall not be accepted unless it is made on or
before the 60th day after the Participant received the distribution and it met
one of the following requirements: (a) the distribution, when made from a
qualified employee plan, must have met the requirements of a lump sum
distribution, or (b) it was part or all of a distribution which was made within
one taxable year of the Participant because of the termination of a qualified
plan or a complete discontinuance of contributions. A complete discontinuance of
contributions occurs, for this purpose, on the day the Internal Revenue Service
is notified that all contributions to the plan have been completely
discontinued. A direct transfer of assets from another qualified plan shall not
be accepted if such other qualified plan was at any time part of (a) a Defined
Benefit Plan, (b) a Defined Contribution Plan subject to the minimum funding
standards of Section 412 of the Code, (c) any other qualified plan which has
joint and survivor annuity benefits or qualified preretirement survivor annuity
benefits as described in Section 417 of the Code, or (d) which would require a
distribution or withdrawal in a form not permitted under this Plan.
Rollover Contributions shall have no effect upon the amount permitted
to be allocated to a Participant's Account under Section 415 of the Code or the
amount contributed to the Plan by a Participant under Section 4.1.
4.3 EMPLOYER CONTRIBUTIONS. Each Employer shall contribute for each
Plan Year the following amounts:
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(a) an amount, which when added to previously unapplied and
unallocated forfeitures, shall equal the amounts which have been
forfeited by Participants who have become entitled to have their
forfeited amounts restored;
(b) an amount equal to the value of all forfeited benefits for
Participants who formerly could not be located, upon receipt of
claims by those Participants;
(c) an amount which is equal to the amount, if any, necessary to
fulfill the Top-Heavy Plan requirements found in Article 8 if the
Plan is determined to be a Top-Heavy Plan;
(d) the amount by which the Participant's Considered Compensation is
reduced as a result of a salary deferral agreement, not to exceed
the amount of the Participant's Considered Compensation for the
Plan Year;
(e) prior to April 1, 1994, an Employer Matching Contribution in the
amount of $100.00 for each Participant who has had Salary Deferral
Contributions made on his behalf by the Employer for the Plan Year
in an amount equal to or greater than $100.00, is employed by one
of the Employers or Affiliated Employers on the last day of the
Plan Year, and has completed at least 1,000 Hours of Employment
during the Plan Year, unless the Participant has terminated
employment during the Plan Year because of death, Disability or
the attainment of his normal Retirement Age in which event he will
receive this Contribution irrespective of the number of Hours of
Employment he has completed during such Plan Year; and effective
April 1, 1994, in lieu of the Employer Matching Contribution set
forth in the preceding clause, an Employer Matching Contribution
for each Participant who has had Salary Deferral Contributions
made on such Participant's behalf by the Employer for the Plan
Year in an amount equal to 50% of the Salary Deferral Contribution
made on such Participant's behalf by the Employer for the Plan
Year, up to a maximum of 2% of such Participant's Considered
Compensation, provided such Participant is employed by one of the
Employers or Affiliated Employers on the last day of the Plan
Year, and has completed
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<PAGE> 29
at least 1,000 Hours of Employment during the Plan Year (which
Hours of Employment shall be prorated for a short Plan Year as
provided in Section 2.3 hereof), unless the Participant has
terminated employment during the Plan Year because of death,
Disability, or the attainment of his normal Retirement Age in
which event he will receive this Contribution irrespective of the
number of Hours of Employment he has completed during such Plan
Year;
(f) an amount, if any, which is designated by the Board of Directors
to be the Employer Discretionary Contribution for the Plan Year,
for each Participant who is employed by one of the Employers or
Affiliated Employers on the last day of the Plan Year, and has
completed at least 1,000 Hours of Employment during the Plan Year
(which Hours of Employment shall be prorated in a short Plan Year
as provided in Section 2.3 hereof), unless the Participant has
terminated employment during the Plan Year because of death,
Disability, or the attainment of his normal Retirement Age in
which event he will receive this Contribution irrespective of the
number of Hours of Employment he has completed during such Plan
Year.
The election to have Salary Deferral Contributions made, the ability
to change the rate of Salary Deferral Contributions, the right to suspend Salary
Deferral Contributions, and the manner of commencing new Salary Deferral
Contributions shall be permitted under any uniform method determined from time
to time by the Committee.
If the Plan fails to meet the coverage requirements of Section 410(b)
of the Code during the Plan Year because of the requirement described in (e)
and/or (f) above that the participant be employed by one of the Employers or
Affiliated Employers on the last day of the plan year, or because of the
requirement that the participant have completed at least 1,000 Hours of
Employment during such Plan Year, then
(i) an allocation will be made under (e) and/or (f) above, as
applicable, on behalf of all Participants who are employed by one
of the Employers or Affiliated Employers on the last day of the
Plan Year and who have completed at least five hundred and one
(501) Hours of Employment during the Plan Year;
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(ii) If the Plan would still fail the coverage requirements under
Section 410(b) of the Code after application of the preceding
paragraph, an allocation will be made under (e) and/or (f)
above, as applicable, to all Participants who are employed by
one of the Employers or Affiliated Employers on the last day of
the Plan Year, and who have completed less than five hundred and
one (501) during the Plan Year;
(iii) If the Plan would still fail the coverage requirements under
Section 410(b) of the Code after application of the preceding
paragraph, an allocation will be made under (e) and/or (f)
above, as applicable, to all Participants who terminated during
the Plan Year with at least five hundred and one (501) Hours of
Employment.
The Employer Matching Contributions described in (e) above shall not
be made with respect to amounts that must be distributed to the Participant
because of Code Sections 401(k), 401(m) or 402(g). Therefore, if inadvertent
Employer Matching Contributions were made on behalf of a Participant on amounts
that must be distributed to the Participant, that excess amount, plus any
earnings, shall be used to reduce future Employer Matching Contributions as
determined by the Committee.
In addition, the amount of the Employer's Contributions described
above cannot exceed the lesser of: (a) a sum equal to 15% of the total Annual
Compensation paid during its taxable year ending with or within the Plan Year to
all Participants plus the maximum amount deductible under the "carryover"
provisions of the Code which relate to contributions in previous years of less
than the maximum amount deductible or (b) the sum which may be allocated to the
Participants' Accounts without violating the limitations of Section 415 of the
Code.
4.4 LIMIT ON SALARY DEFERRAL CONTRIBUTIONS. A Participant may elect to
have made on such Participant's behalf a Salary Deferral Contribution in any
whole percentage, from 2% to 6%, of Considered Compensation, provided that the
maximum Salary Deferral Contribution that a Participant may elect to have made
on the Participant's behalf during the Participant's taxable year may not, when
added to the amounts deferred under other plans or arrangements described in
Sections 401(k), 408(k) and 403(b) of the Code exceed $7,000 (as adjusted by the
Secretary of Treasury). Effective April 1, 1994, a Participant may elect to have
made on such Participant's behalf a Salary Deferral Contribution in any whole
percentage, from 1% to 15% of Considered Compensation, provided that the maximum
Salary Deferral Contribution that a Participant may elect to have made on the
Participant's behalf during the Participant's taxable year may not, when added
to the amounts deferred under other plans or arrangements described in Sections
401(k), 408(k) and 403(b) of the Code exceed $7,000 (as adjusted by the
Secretary of
23
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Treasury). If this dollar limitation is exceeded during any taxable year of the
Participant, the Excess Deferrals, as adjusted by any earnings or losses thereon
will be distributed to the Participant no later than April 15 following the
Participant's taxable year in which the Excess Deferral was made. The Employer
shall determine to which Plan Year the Excess Deferrals relate by treating the
Excess Deferrals as the last deferrals made for the calendar year.
The income allocable to Excess Deferrals for the taxable year of the
Participant shall be determined by multiplying the income for the taxable year
of the Participant allocable to Salary Deferral Contributions by a fraction. The
numerator of the fraction is the amount of Excess Deferrals made on behalf of
the Participant for the taxable year. The denominator of the fraction is the
Participant's total Salary Deferral Account balance as of the beginning of the
taxable year plus the Participant's Salary Deferral Contributions for the
taxable year.
For purposes of applying the requirements of Section 4.5 and Article
8, Excess Deferrals shall not be disregarded merely because they are Excess
Deferrals or because they are distributed in accordance with this Section.
However, Excess Deferrals made to the Plan on behalf of Non-Highly Compensated
Employees are not to be taken into account under Section 4.5.
4.5 ACTUAL DEFERRAL PERCENTAGE FOR HIGHLY COMPENSATED EMPLOYEES. The
Actual Deferral Percentage for Highly Compensated Employees for any Plan Year
must bear a relationship to the Actual Deferral Percentage for all other
eligible Employees for the Plan Year which meets either of the following tests:
(a) The Actual Deferral Percentage of the Highly Compensated Employees
is not more than the Actual Deferral Percentage of all other
eligible Employees multiplied by 1.25; or
(b) The excess of the Actual Deferral Percentage of the Highly
Compensated Employees over that of all other eligible Employees is
not more than two percentage points, and the Actual Deferral
Percentage of the Highly Compensated Employees is not more than
the Actual Deferral Percentage of all other eligible Employees
multiplied by two.
For purposes of this test an eligible Employee is an Employee who is
directly or indirectly eligible to make Salary Deferral Contributions for all or
part of the Plan Year. A person who is suspended from making Salary Deferral
Contributions because he has made a withdrawal is an eligible Employee. If no
Salary Deferral Contributions are made for an eligible Employee, the Actual
Deferral Ratio that shall be included for him in determining
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<PAGE> 32
the Actual Deferral Percentage is zero. If this Plan and any other plan or plans
which include cash or deferred arrangements are considered as one plan for
purposes of Section 401(a)(4) or 410(b) of the Code, the cash or deferred
arrangements included in this Plan and the other plans shall be treated as one
plan for these tests. If any Highly Compensated Employee is a Participant of
this Plan and any other cash or deferred arrangements of the Employer, when
determining the deferral percentage of the Employee, all of the cash or deferred
arrangements are treated as one.
As soon as practicable after the close of each Plan Year, the
Committee shall determine whether the Actual Deferral Percentage for the Highly
Compensated Employees would exceed the limitation. If the limitation would be
exceeded for a Plan Year, before the close of the following Plan Year (a) the
amount of Excess 401(k) Contributions for that Plan Year (and any income
allocable to those Contributions as calculated in the specific manner required
by Section 4.9) shall be distributed, or (b) the Employer may make an Employer
contribution which it elects to have treated as a Section 401(k) Contribution
and allocated only to those Participants who are Non-Highly Compensated
Employees employed on the last day of the Plan Year. If the Employer makes an
Employer Contribution that it elects to have treated as a Section 401(k)
Contribution, the Contribution will be in an amount necessary to satisfy the
Actual Deferral Percentage Test and will be fully vested at all times. Any
Employer Contribution treated as a Section 401(k) Contribution shall be
allocated, at the Employer's option, either (i) to each Non-highly Compensated
Employee Participant in the same ratio that the Non-highly Compensated Employee
Participant's Salary Deferral Contributions for the Plan Year bear to the total
Salary Deferral Contributions for the Plan Year of all Non-Highly Compensated
Employee Participants; or (ii) only to such Non-highly Compensated Employee
Participants, and in such amounts, as shall be necessary to satisfy the Actual
Deferral Percentage Test. If the Employer chooses to allocate the Employer
Contribution treated as a Section 401(k) Contribution in accordance with the
second option in the immediately preceding sentence, the allocation will first
be made to the Non-highly Compensated Employee Participant who had the lowest
Considered Compensation until his allocation equals the limitations of Section
5.4 of the Plan and proceeding to the next Participant with the next to the
lowest in Considered Compensation in a similar manner and repeating the process
until all the Section 401(k) Contributions have been allocated. Any
distributions of the Excess 401(k) Contributions for any Plan Year are to be
made to Highly Compensated Employees on the basis of the respective portions of
the Excess 401(k) Contributions attributable to each of them. The amount of
Excess 401(k) Contributions to be distributed for any Plan Year must be reduced
by any Excess Deferrals previously distributed for the taxable year ending in
the same Plan Year.
The Actual Deferral Percentages are to be calculated, and the
provisions of this Section are to be applied, separately for each Employer which
constitutes a separate controlled group or affiliated service group.
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4.6 SPECIAL ACTUAL DEFERRAL PERCENTAGE RULES FOR FAMILY MEMBERS. If a
Participant is a Highly Compensated Employee and a Family Member, the combined
actual deferral ratio for the family group (which is treated as one Highly
Compensated Employee) must be determined by combining the Section 401(k)
Contributions and Annual Compensation of all the eligible Family Members. If an
Employee is required to be aggregated as a member of more than one family group
in the Plan, all eligible Employees who are members of those family groups that
include that Employee are aggregated as one family group. The correction of
Excess 401(k) Contributions of a Highly Compensated Employee whose Actual
Deferral Ratio is determined under the family aggregation rules is accomplished
by reducing the Actual Deferral Ratio and allocating the Excess 401(k)
Contributions for the family group among the Family Members in proportion to the
Section 401(k) Contributions of each Family Member that is combined to determine
the Actual Deferral Ratio. These family aggregation rules do not apply to
Non-Highly Compensated Employees.
4.7 ACTUAL CONTRIBUTION PERCENTAGE FOR ELIGIBLE HIGHLY COMPENSATED
EMPLOYEES. The Actual Contribution Percentage for eligible Highly Compensated
Employees for any Plan year must not exceed the greater of the following:
(a) The Actual Contribution Percentage for all other eligible
Employees multiplied by 1.25; or
(b) The lesser of the Actual Contribution Percentage for all other
eligible Employees multiplied by two, or the Actual Contribution
Percentage for all other eligible Employees plus two percentage
points.
For purposes of this test an eligible Employee is an Employee who is
directly or indirectly eligible to receive an allocation of Employer Matching
Contributions under the Plan for all or part of the Plan Year. If no Section
401(m) Contributions are made on behalf of an eligible Employee, the Actual
Contribution Ratio that shall be included for him in determining the Actual
Contribution Percentage is zero. If this Plan and any other plan or plans to
which Section 401(m) Contributions are made are considered as one plan for
purposes of Section 401(a)(4) or 410(b) of the Code, this Plan and those plans-
are to be treated as one. If any Highly Compensated Employee is a participant in
this Plan and any other plans. of the Employer, all Section 401(m) Contributions
are to, be aggregated.
If the limitation would be exceeded for any Plan Year, before the
close of the following Plan Year (a) the amount of a Participant's vested
portion of his Excess 401(m) Contributions for that Plan Year (and any income
allocable to those Contributions as calculated in the specific manner required
by the applicable Regulations) shall be distributed, and the nonvested portion
shall be forfeited and be used to reduce future Employer Matching Contributions
for the Plan Year following the Plan Year for which the Employer made the
Employer Matching Contribution, or (b) the Employer may make an Employer
contribution which it elects to have treated as a Section 401(m) Contribution
and allocated
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only to those Participants who are Non-Highly Compensated Employees employed on
the last day of the Plan Year. If the Employer makes an Employer Contribution
that it elects to have treated as a Section 401(m) Contribution, the
Contribution shall be in an amount necessary to satisfy the Actual Contribution
Percentage test, and shall be fully vested at all times. Any Employer
Contribution treated as a Section 401(m) Contribution shall be allocated, at the
Employer's option, either (i) to each Non-highly Compensated Employee
Participant in the same ratio that the Non-highly Compensated Employee
Participant's Salary Deferral Contributions for the Plan Year bear to the total
Salary Deferral Contributions for the Plan Year of all Non-Highly Compensated
Employee Participants; or (ii) only to such Non-highly Compensated Employee
Participants, and in such amounts, as shall be necessary to satisfy the Actual
Contribution Percentage Test. If the Employer chooses to allocate the Employer
Contribution treated as a Section 401(m) Contribution in accordance with the
second option in the immediately preceding sentence, the allocation will first
be made to the Non-highly Compensated Employee Participant who had the lowest
Considered Compensation until his allocation equals the limitations of Section
5.4 of the Plan and proceeding to the next Participant with the next to the
lowest in Considered Compensation in a similar manner and repeating the process
until all the Section 401(m) Contributions have been allocated. Any
distributions of the Excess 401(m) Contributions for any Plan Year are to be
made to Highly Compensated Employees on the basis of the respective portions of
the Excess 401(m) Contributions attributable to each of them. Forfeitures of
Excess 401(m) Contributions may not be allocated to Participants whose
contributions are reduced under this Section.
The Actual Contribution Percentage shall be calculated, and the
provisions of this Section applied, separately for each Employer which
constitutes a separate controlled group or affiliated service group.
4.8 SPECIAL ACTUAL CONTRIBUTION PERCENTAGE RULES FOR FAMILY MEMBERS.
If a Participant is a Highly Compensated Employee and a Family Member, the
combined Actual Contribution Ratio for the family group (which is treated as one
Highly Compensated Employee) must be determined by combining the Section 401(m)
Contributions and Annual Compensation of all the eligible Family Members. If an
Employee is required to be aggregated as a member of more than one family group
in the Plan, all eligible Employees who are members of those family groups that
include that Employee are aggregated as one family group. The correction of
Excess 401(m) Contributions of a Highly Compensated Employee whose Actual
Contribution Ratio is determined under the family aggregation rules is
accomplished by reducing the Actual Contribution Ratio and allocating the Excess
401(m) Contributions for the family group among the Family Members in proportion
to the Section 401(m) Contributions of each Family Member that is combined to
determine the Actual Contribution Ratio. The family aggregation rules do not
apply to Non-Highly Compensated Employees.
4.9 DISTRIBUTIONS OF INCOME ALLOCABLE TO EXCESS 401(k) CONTRIBUTIONS
AND EXCESS 401(M) CONTRIBUTIONS. The income allocable to Excess 401(k)
Contributions for the
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Plan Year shall be determined by multiplying the income for the Plan Year
allocable to Section 401(k) Contributions by a fraction. The numerator of the
fraction is the amount of Excess 401(k) Contributions made on behalf of the
Participant for the Plan Year. The denominator of the fraction is the
Participant's total Account balance attributable to Section 401(k) Contributions
as of the beginning of the Plan Year plus the Participant's Section 401(k)
Contributions for the Plan Year. The income allocable to Excess 401(m)
Contributions for a Plan Year shall be determined by multiplying the income for
the Plan Year allocable to Section 401(m) Contributions by a fraction. The
numerator of the fraction is the amount of Excess 401(m) Contributions made on
behalf of the Participant for the Plan Year. The denominator of the fraction is
the Participant's total Account balance attributable to Section 401(m)
Contributions as of the beginning of the Plan Year plus the Participant's
Section 401(m) Contributions for the Plan Year.
4.10 ADDITIONAL REQUIRED TEST IF ALTERNATIVE COMPLIANCE IS USED. If
the second alternative permitted in Sections 4.5 and 4.7 is used for both the
Actual Deferral Percentage test and the Actual Contribution Percentage test the
following additional limitation on Salary Deferral Contributions shall apply.
The Actual Deferral Percentage plus the Actual Contribution Percentage of the
eligible Highly Compensated Employees cannot exceed the greater of (a) or (b)
where:
(a) is the sum of:
(i) 1.25 times the greater of the Actual Deferral Percentage or
the Actual Contribution Percentage of the eligible
Non-Highly Compensated Employees, and
(ii) the lesser of (x) two percentage points plus the lesser of
the Actual Deferral Percentage or the Actual Contribution
Percentage of the eligible Non-Highly Compensated Employees
or (y) two times the lesser of the Actual Deferral
Percentage or the Actual Contribution Percentage of the
group of eligible Non-Highly Compensated Employees; and
(b) is the sum of:
(i) 1.25 times the lesser of the Actual Deferral Percentage or
the Actual Contribution Percentage of the eligible
Non-Highly Compensated Employees, and
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(ii) the lesser of (x) two percentage points plus the greater of
the Actual Deferral Percentage or the Actual Contribution
Percentage of the eligible Non-Highly Compensated Employees
or (y) two times the greater of the Actual Deferral
Percentage or the Actual Contribution Percentage of the
group of eligible Non-Highly Compensated Employees.
If the limitation would be exceeded for any Plan Year, before the
close of the following Plan Year the Actual Deferral Percentage of the eligible
Highly Compensated Employees must be reduced by distributions of Salary Deferral
Contributions made in the manner described for Excess 401(k) Contributions in
Regulation Section 1.401(k)-l(f)(2). These distributions will be in addition to
and not in lieu of distributions required for Excess 401(k) Contributions and
Excess 401(m) Contributions.
4.11 SALARY DEFERRAL CONTRIBUTIONS, EMPLOYER MATCHING CONTRIBUTIONS
AND EMPLOYER DISCRETIONARY CONTRIBUTIONS. The Salary Deferral Contributions are
to be paid to the Trustee in installments. The installment for each payroll
period is normally paid as of the end of the payroll period and shall be paid as
soon as administratively feasible but in any event not later than the time
prescribed by law for filing the Employer's federal income tax return (including
extensions) for its taxable year which ends with or next follows the end of the
Plan Year for which the Contribution is to be made, and shall be in an amount
equal to the amount by which all Participants' Considered Compensation was
reduced for the period. The Employer Matching Contributions and Employer
Discretionary Contributions for a Plan Year must be paid into the Trust Fund in
one or more installments not later than the time prescribed by law for filing
the Employer's federal income tax return (including extensions) for its taxable
year for which it is to take the deduction. If the Employer Matching
Contributions and Employer Discretionary Contributions are paid after the last
day of the Employer's taxable year but prior to the date it files its tax return
(including extensions), it shall be treated as being received by the Trustee on
the last day of the taxable year if (a) the Employer notifies the Trustee in
writing that the payment is being made for that taxable year or (b) the Employer
claims the Contribution as a deduction on its federal income tax return for the
taxable year.
Effective April 1, 1994, Employer Matching Contributions in a Plan
Year shall be contributed in an amount equal to the fair market value of the
Common Stock to which Participants are entitled as of the last day of such Plan
Year.
4.12 RETURN OF CONTRIBUTIONS FOR MISTAKE, DISQUALIFICATION OR
DISALLOWANCE OF DEDUCTION. Subject to the limitations of Section 415 of the
Code, the assets of the Trust shall not revert to any Employer or be used for
any purpose other than the exclusive benefit of the Participants and their
Beneficiaries and the reasonable expenses of administering the Plan except:
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<PAGE> 37
(a) any Contribution made because of a mistake of fact shall be repaid
to the Employer within one year after the payment of the
Contribution;
(b) any Contribution conditioned upon the Plan's initial qualification
under Section 401 of the Code or the initial qualification of an
Employer's adoption of the Plan, if later, shall be repaid to the
Employer within one year after the date of denial of the initial
qualification of the Plan or of its adoption by the Employer; and
(c) any and all Employer Contributions are conditioned upon their
deductibility under Section 404 of the Code; therefore, to the
extent the deduction is disallowed, the Contributions shall be
repaid to the Employer within one year after the disallowance.
The Employer has the exclusive right to determine if a Contribution or
any part of it is to be repaid or is to remain as a part of the Trust Fund
except that the amount to be repaid is limited, if the Contribution is made by
mistake of fact or if the deduction for the Contribution is disallowed, to the
excess of the amount contributed over the amount that would have been
contributed had there been no mistake or over the amount disallowed. Earnings
which are attributable to any excess contribution cannot be repaid. Losses
attributable to an excess contribution must reduce the amount that may be
repaid. All repayments of mistaken Contributions or Contributions which are
disallowed are limited so that the balance in a Participant's Account cannot be
reduced to less than the balance that would have been in the Participant's
Account had the mistaken amount or the amount disallowed never been contributed.
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ARTICLE 5
PARTICIPATION
5.1 ALLOCATION OF ROLLOVER CONTRIBUTIONS AND SALARY DEFERRAL
CONTRIBUTIONS. If Rollover Contributions are permitted, the Committee shall
allocate each Participants Rollover Contribution to his Rollover Account as of
the date it is contributed. The Committee shall allocate the Salary Deferral
Contributions made on behalf of each Participant to his Salary Deferral Account
as of the date they are contributed.
5.2 ALLOCATION OF EMPLOYER CONTRIBUTIONS. As of the end of each Plan
Year, the Committee shall:
(a) allocate an Employer Contribution, if any, which is required to
restore the nonvested portion of the Employer Accounts of
Participants who had previously forfeited that nonvested portion
on the date they terminated employment but who qualified for the
restoration of that amount during the Plan Year;
(b) allocate an Employer Contribution, if any, which is required to
restore the Accounts of those Participants whose distributions
were forfeited because of the Committee's inability to contact the
Participants previously but who have filed a claim for their
Accounts during the Plan Year;
(c) allocate an Employer Contribution, if any, which is necessary to
fulfill the Top-Heavy Plan requirements found in Article 8 if the
Plan is determined to be a Top-Heavy Plan;
(d) allocate the Employer Matching Contribution made on behalf of each
Participant to his Employer Matching Account in the same manner in
which the Employer Matching Contribution was made, as set forth in
Section 4.3 of the Plan;
(e) allocate the Employer Discretionary Contribution, if any, among
the Participants who are eligible to share in such Contribution,
as set forth in Section 4.3 of the Plan, based upon each
Participant's Considered Compensation paid by the Employer as
compared to
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the Considered Compensation of all Participants employed by the
Employer or Affiliated Employer and eligible for the allocation.
If a Participant has been Transferred during the Plan Year, the
Participant shall be entitled to have allocated to him a portion of the Employer
Matching Contribution based upon his Salary Deferral Contributions made while he
was an Employee of each Employer and the Employer Discretionary Contribution
based upon his Considered Compensation for the Plan Year earned from all of the
Employers for which an Employer Discretionary Contribution was made.
5.3 FORFEITURE ON TERMINATION OF PARTICIPATION. If as a result of
terminating his participation in the Plan a former Participant receives a
distribution of his entire vested interest in his Accounts, the nonvested amount
in his Accounts is Immediately forfeited. However, if the Participant is
reemployed, all of his Accounts containing Employer Contributions (unadjusted
for subsequent gains or losses) shall be restored if he repays to the Trustee
that portion of the distribution which was derived from Employer Contributions
before the earlier of five years after the first date on which the Participant
is subsequently re-employed by an Employer or the close of the first period of
five consecutive one year Periods of Severance commencing after the
distribution.
If a former Participant who has a vested interest in his Accounts
containing Employer Contributions received no distribution as a result of his
termination of participation in the Plan, the nonvested amount in his Account is
forfeited after the Participant incurs five consecutive one year Periods of
Severance. A Participant who received no distribution of Employer Contributions
because he had no vested interest shall be treated as if he received a
distribution of his entire vested interest and as if his entire vested interest
was less than $3,500.00. A distribution shall be treated as if it were made as a
result of termination of participation in the Plan if it is made not later than
the end of the second Plan Year following the Plan Year in which the
Participant's termination occurs.
At the time a forfeiture occurs, the amount forfeited shall first be
used to reinstate any Account required to be reinstated under this Section and
any remaining amount shall be used to reduce the type of Employer Contribution
(e.g. Employer Matching Contributions and/or Employer Discretionary
Contributions) which are made in the Plan Year in which the forfeiture occurs.
If a forfeiture relates to a type of Employer Contribution not made in a
particular Plan Year, the forfeiture shall be used to reduce other Employer
Contributions for the Plan Year in which the forfeiture occurred as determined
by the Committee in its sole discretion.
5.4 LIMITATION ON ALLOCATION. Under no circumstances shall the Annual
Additions to an individual Participant's Account in any Plan Year exceed the
lesser of (a) $30,000.00 or, if greater, 25% of the dollar limitation in effect
under Section
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415(b)(1)(A) of the Code, or (b) 25% of the Annual Compensation paid or made
available to the Participant.
If the Employer maintains a Defined Benefit Plan in which the
Participant participates, the sum of the following described defined benefit
fraction and defined contribution fraction for the Plan Year cannot exceed one.
The defined benefit fraction to be used is a fraction, in which the numerator is
the Participant's projected annual benefit under the plan computed as of the end
of the Plan Year and in which the denominator is the lesser of: (a) the product
of 1.25 multiplied by the dollar limitation in effect under Section 415(b)(1)(A)
of the Code for that Plan Year or (b) the product of 1.40 multiplied by the
amount which may be taken into account under Section 415(b)(1)(B) of the Code
with respect to the Participant for the Plan Year. The defined contribution
fraction to be used is a fraction in which the numerator is the sum of the
Annual Additions to the Participant's Account determined for the Plan Year and
for each prior Plan Year and in which the denominator is the sum of the lesser
of the following amounts determined for the Plan Year and for each prior Plan
Year that the Participant was employed by the Employer: (a) the product of 1.25
multiplied by the dollar limitation in effect under Section 415(c)(1)(A) of the
Code for that Plan Year, determined without regard to Code Section 415(c)(6),
and (b) the product of 1.40 multiplied by the amount which can be taken into
account under Section 415(c)(1)(B) of the Code with respect to the Participant
for the Plan Year. If the sum of the two fractions exceeds one, the
Participant's projected annual benefit under the Defined Benefit Plan shall be
reduced until the sum equals one.
The limitation year for Section 415 shall be the Plan Year unless the
Employer affirmatively, by resolution, designates another limitation year. In
that event, the different limitation year shall be used instead of the Plan Year
in applying the tests.
In order to compute the defined benefit fraction and the defined
contribution fraction, all Defined Contribution Plans (whether terminated or
not) of the Employer shall be treated as one Defined Contribution Plan and all
Defined Benefit Plans (whether terminated or not) of the Employer shall be
treated as one Defined Benefit Plan.
If the Employer has Affiliated Employers, the Employer and all
Affiliated Employers shall be considered a single employer in applying the
limitations described in this Section.
No Employee or Employer Contributions shall be made to this Plan which
cannot be allocated to the Accounts of Participants without exceeding the limits
of Section 415 of the Code.
If, despite this prohibition, an amount in excess of the limits of
Section 415 of the Code is held or contributed as a result of the allocation of
forfeitures, reasonable error in estimating a Participant's Annual Compensation,
reasonable error in calculating the maximum Salary Deferral Contribution that
may be made with respect to a Participant
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under section 415 of the Code or because of other facts and circumstances which
the Commissioner of Internal Revenue finds to be justified, the excess shall be
reduced as follows:
(a) first, all Salary Deferral Contributions in excess of the limits
of Section 415 of the Code shall be returned to the Participant;
(b) second, if the Participant is still employed by the Employer at
the end of the Plan Year, any remaining excess funds shall be
placed in an unallocated suspense account to be applied to reduce
future Employer Contributions for that Participant for as many
Plan Years as are necessary to exhaust the suspense account in
keeping with the amounts which would otherwise be allocated to
that Participant's Account; and
(c) third, if the Participant is not employed by the Employer at the
end of the Plan Year, the remaining excess funds shall be placed
in an unallocated suspense account to reduce future Employer
Contributions for all remaining Participants for as many Plan
Years as are necessary to exhaust the suspense account.
If the Plan terminates prior to the exhaustion of the suspense
account, the remaining amount shall revert to the Employer.
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ARTICLE 6
INVESTMENTS
6.1 MANNER OF INVESTMENT. All contributions made to the Accounts of
Participants shall be held for investment by the Trustee. The Accounts of
Participants shall be invested and reinvested only in eligible investments
selected by the Sponsor.
The Committee may (a) maintain commingled and/or separate Trusts for
all or a portion of Employee After-Tax Contributions, Salary Deferral
Contributions, Employer Matching Contributions, Employer Discretionary
Contributions, and/or Rollover Contributions for some or all Participants, (b)
establish separate investment funds which may be elected by some or all
Participants for all or a portion of their Employee After-Tax Contributions,
Salary Deferral Contributions, Employer Matching Contributions, Employer
Discretionary Contributions, and/or Rollover Contributions, (c) permit some or
all individual Participants to elect their own investments for all or a portion
of their Employee After-Tax Contributions, Salary Deferral Contributions,
Employer Matching Contributions, Employer Discretionary Contributions, and/or
Rollover Contributions, or (d) permit a combination of (a), (b) and (c), from
time to time. Once the Committee has selected or changed the mode of
investments, it shall establish rules pertaining to its administration,
including but not limited to: selection of forms, rules for making selections
effective, establishing the frequency of permitted changes, the minimum
percentage in any investment, and all other necessary or appropriate
regulations.
The Committee may direct the Trustee to hold funds in cash or near
money awaiting investment or to sell assets and hold the proceeds in cash or
near money awaiting reinvestment when establishing, using or changing investment
modes. For this purpose the funds may be held in cash or invested in short-term
investments such as certificates of deposit, U.S. Treasury bills, savings
accounts, commercial paper, demand notes, money market funds, any common, pooled
or collective funds which the Trustee or any other corporation may now have or
in the future may adopt for short-term investments and any other similar assets
which may be offered by the federal government, national or state banks (whether
or not serving as Trustee), trust company or any savings and loan association.
6.2 INVESTMENT DECISIONS. Investments shall be directed by the
Sponsor, or by each Participant, as determined by the Sponsor.
(a) Effective October 15, 1992, and except as otherwise provided in
Section 6.2(d) hereof, with respect to the Employee After-Tax
Contribution Account, the Salary Deferral Contribution Account,
the Employer Matching Contribution Account, the Profit Sharing
Plan Account, the Rollover Account, and the Employer Discretionary
Contribution
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Account, if any, each Participant shall direct the investment and
reinvestment of such Participant's Account among the following
Fidelity funds: Retirement Money Market (Government), U.S. Bond Index,
Asset Manager, U.S. Equity Index, and Magellan Fund. The Participant
shall file initial investment instructions with the Committee on such
forms as the Committee may provide, selecting the funds in which
amounts credited to such Participant's Account will be invested.
(i) Only authorized Plan contacts and the Participant shall have
access to the Participant's Account. While any balance remains in
the Account of a Participant after his death, the Beneficiary of
the Participant shall make decisions as to the investment of the
Account as though the Beneficiary were the Participant. To the
extent required by a Qualified Domestic Relations Order, an
Alternate Payee shall make investment decisions with respect to
an Account as though such Alternate Payee were the Participant.
(ii) If the Trustee receives any contribution under the Plan as to
which investment instructions have not been provided, the Trustee
shall promptly notify the Committee and the Committee shall take
steps to elicit instructions from the Participants. The Trustee
shall credit any such contribution to the Participant's Account
and such amount shall be invested 80% in the Retirement Money
Market fund and 20% in the U.S. Equity Index fund until
investment instructions have been received by the Trustee.
(b) Effective October 15, 1992, all dividends, interest, gains and
distributions of any nature received in respect of shares in Fidelity
funds shall be reinvested in additional shares of that Fidelity fund.
(c) Expenses attributable to the acquisition of investments shall be
charged to the Account of the Participant for which such investment is
made.
(d) Notwithstanding anything in this Article to the contrary, the Profit
Sharing Plan Account shall not be self-directed by Participants to the
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extent that it is invested by the Trustee in certain guaranteed annuity
contracts identified on Schedule G to the trust agreement between the
Sponsor and Fidelity Management Trust Company dated October 15, 1992.
6.3 PARTICIPANT DIRECTIONS TO TRUSTEES. Effective October 15, 1992 all
initial investment instructions filed by Participants with the Committee
pursuant to the provisions of Section 6.2 shall be promptly transmitted by the
Committee to the Trustee. A Participant shall transmit subsequent investment
instructions directly to the Trustee by means of the telephone exchange system
maintained by the Trustee for such purposes (with the option to receive
confirmation in writing). A Participant is permitted to change his or her
investment at least once in every three-month period, and to the extent not
inconsistent with such right to make quarterly investment changes, may make
up to twenty (20) changes in a full Plan Year. The Trustee shall have no duty
to inquire into the investment decisions of a Participant or to advise him
regarding the purchase, retention or sale of assets credited to his Account.
6.4 INVESTMENT OF EMPLOYER MATCHING CONTRIBUTIONS. Effective April 1,
1994, Employer Matching Contributions shall be invested entirely in the Common
Stock fund. The Common Stock fund, including earnings thereof, shall be invested
in Common Stock purchased by the Trustee at prevailing market prices directly
from the Sponsor if the Sponsor makes either treasury shares or authorized but
unissued shares available for sale to the Trustee. Otherwise, the Trustee shall
purchase Common Stock at prevailing market prices in the open market or in
privately negotiated transactions. Under no circumstances, however, may the
Trustee pay any commission in connection with the acquisition of such Common
Stock, nor may the Trustee pay more than "adequate consideration" for such
Common Stock, as such term is defined in Section 3(18) of ERISA and in the
Regulations promulgated thereunder. Funds in the Common Stock fund shall not be
commingled with funds in other investment funds.
6.5 VOTING RIGHTS. The Trustee shall exercise all voting rights
pertaining to each Participant's pro rata share of Common Stock held in the
Common Stock fund in accordance with written directions, if any, given by such
Participant prior to the date fixed for such exercise. The Trustee shall vote
the shares as to which no directions are given in the same proportions as it
votes the shares as to which it has received such direction. The Sponsor or
Committee shall appoint an independent third-party ("Agent") for the purpose of
confidentially soliciting, receiving and transmitting to the Trustee the
instructions from Participants. The Agent shall transmit such instructions
solely to the Trustee. Neither the Trustee nor the Agent shall disclose such
instructions to the Sponsor or to the Committee.
A Participant may direct the Trustee in writing, through the Agent, as
to how to respond to a tender or exchange offer for any or all whole shares of
Common Stock attributable to his Account as of the Valuation Date preceding, or
coincident with,
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the offer. A Participant's instructions hereunder shall be confidential and
shall not be disclosed to the Sponsor or the Committee. The Committee shall
timely notify each Participant of the pendency of such offer, and timely
distribute or cause to be distributed to each such Participant such information
as will be distributed to stockholders of the Sponsor in connection with any
such tender or exchange offer. The Committee shall engage the Agent to
confidentially solicit, receive and transmit to the Trustee the instructions
from Participants. The Agent shall transmit such instructions solely to the
Trustee and shall not disclose such instructions to the Sponsor or to the
Committee. Upon receipt of such instructions, the Trustee shall tender such
shares of Common Stock as and to the extent so instructed. If the Trustee shall
not receive instructions from any Participant with respect to shares of Common
Stock attributable to such Participant's Account, or shall receive instructions
from such Participant not to tender or exchange such shares, the Trustee shall
have no discretion in such matter and shall take no action with respect thereto.
Any securities received by the Trustee as a result of a tender of shares of
Common Stock shall be held, and any cash so received, shall be invested in
short-term investments for the Account of the Participant with respect to whom
shares were tendered pending any reinvestment by the Trustee consistent with the
purposes of the Plan and the mandates of this Article.
6.6 VALUATION OF TRUST FUND. The Trustee shall value the Trust Fund on
its Valuation Date at its then fair market value, but without regard to any
Contributions made to the Plan after the preceding Valuation Date, shall
determine the amount of income earned or losses suffered by the Trust Fund and
shall determine the appreciation or depreciation of the Trust Fund since the
preceding Valuation Date. The Committee shall separate the Trust Fund into the
various investment funds or accounts in which it is held, if more than one, and
shall then allocate as of the Valuation Date the income earned and losses
suffered and the appreciation or depreciation in the assets of the Trust Fund
for the period since the last preceding Valuation Date. The allocation shall be
among the Participants and former Participants who have undistributed Account
balances based upon their Account balances in each of the various investment
funds or accounts, if more than one, as of the last Valuation Date reduced, as
appropriate, by amounts used from the investment fund or account or Trust to
make a withdrawal or distribution or any other transaction which is properly
chargeable to the Participant's Account during the period since the last
Valuation Date. The Committee, by resolution, may elect in lieu of the
allocation method described above to use a unit allocation method, a separate
account method or any other equitable method if it announces the method of
allocation to the Participants prior to the beginning of the period during which
it is first used.
6.7 INTERIM VALUATION OF TRUST FUND. If at any time in the interval
between Valuation Dates, one or more withdrawals or one or more distributions
are to be made and the Committee determines that an interim allocation is
necessary to prevent discrimination against those Participants and former
Participants who are not receiving funds, the Trustee is to perform a valuation
of a portion or all of the Trust Fund as of a date selected by the Committee
which is administratively practical and near the date of
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<PAGE> 46
withdrawals or distributions in the same manner as it would if it were a
scheduled Valuation Date. That date may be before or after any particular
distribution or withdrawal. The Committee shall then allocate as of that date
any income or loss and any appreciation or depreciation to the various Accounts
of each of the Participants in the same manner as it would if it were a
scheduled Valuation Date. Then without regard to the language in Section 6.1,
all withdrawals or distributions made after that date and prior to the next
Valuation Date, even though the event causing it occurred earlier, shall be
based upon the Accounts as adjusted by the interim valuation.
6.8 RIGHTS OF PARTICIPANTS IN TRUST FUND. No allocation, adjustment,
credit or transfer shall ever vest in any Participant any right, title or
interest in the Trust Fund except at the times and upon the terms and conditions
specified in this Plan. The Trust Fund shall, as to all Accounts of all
Participants, be a commingled fund.
6.9 LOANS TO PARTICIPANTS. Effective June 1, 1994, loans from the Plan
shall be made available to Participants on the following terms:
(a) ELIGIBILITY AND LOAN APPROVAL - Each Participant shall be eligible
to receive a loan under the Plan from such Participant's Salary Deferral Account
only in accordance with these rules and to the extent permitted by applicable
law without any required period of prior participation in the Plan. Each such
Participant shall be required to provide to the Committee such information and
to execute such documents and other instruments as may be reasonably requested
by the Committee in connection with approving a loan to the Participant. The
Committee shall determine, in its sole discretion and in accordance with
applicable law, whether the application for a loan is to be approved. In making
its determination, the Committee may consider the applicant's creditworthiness
and financial need. All applications for loans shall be evaluated in a uniform
and nondiscriminatory manner. All references to Participants in this Section 6.9
shall be deemed to include individuals who are not Participants but who are
parties-in-interest with respect to the Plan within the meaning of Section 3(14)
of ERISA.
(b) PRINCIPAL AMOUNT OF THE LOAN - The amount of any loan granted to a
Participant, together with the aggregate outstanding balance (determined as of
the date the loan is made) of all previous loans to the Participant under the
Plan may not exceed the lesser of:
(i) $50,000, reduced by the excess (if any) of:
(1) the highest outstanding balance of loans from the
Plan to the Participant during the one year period
ending on the day before the date on which such loan
was made, over
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<PAGE> 47
(2) the outstanding balance of loans from the Plan to
the Participant on the date on which such loan was
made, or
(ii) 50% of his vested Accounts.
For purposes of this subsection, valuation of the Participant's
Account shall be made as of the Valuation Date which first occurs no less than
thirty (30) days after submission of a loan request. For purposes of determining
the maximum amount of a loan, all plans of the Employer and Affiliated Employers
shall be treated as one plan.
Notwithstanding anything above to the contrary, (i) no loan shall be
made in a principal amount of less than $1000 and the principal amount must be
in increments of $100 and (ii) the Committee may require reduction of the
principal amount of any loan if repayment of the loan would require reduction of
the Participant's payroll by more than 15%.
(c) INTEREST - Interest shall be charged on a loan based at a rate of
two (2) point above the Prime Commercial Lending Rate in force in the community
on the date of the loan.
(d) TERM OF THE LOAN - The term of the loan shall be fixed by the
Committee at the time the loan is made and shall not be extended. All loans
shall be for a minimum term of one year and must be in one-year increments. A
"non-residence loan" must be repaid within a maximum of five years and a
"residence loan" must be repaid within a maximum of fifteen years. A loan is a
"residence loan" if it is to be used to acquire any dwelling unit which within a
reasonable time is to be used as the principal residence of the borrowing
Participant. All other loans are non-residence loans. Regardless of its original
maturity, a "residence" loan shall be repaid when the residence to which it
relates is no longer the principal residence of the Participant. Under no
circumstances will a Participant be permitted to have more than one loan
outstanding at any time.
A Participant may repay all (but not part) of any loan without penalty
by payment of the outstanding principal amount thereof, plus unpaid accrued
interest to the date of repayment.
Regardless of its original maturity, the outstanding principal amount
of any loan, and accrued interest thereon, shall become immediately due and
payable as of the date a Participant's employment terminates for any reason
whatsoever.
(e) LOAN REPAYMENT AND SECURITY - All loans shall be repaid in
substantially equal installments consisting of level payments of principal and
interest at least quarterly. Loans shall be repaid by payroll deduction under a
fixed schedule which provides amortization of principal and interest in level
installments over the term of the loan. Such
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<PAGE> 48
installments shall be appropriately adjusted in the event of a change in payroll
frequency but shall not otherwise be modified while the loan is outstanding.
Loan repayments other than by payroll deduction will not be permitted unless
payment of the loan is due in full. Loan repayments other than by payroll
deduction will also be permitted by a Participant on an unpaid leave of absence
and by a Participant who elects to prepay his loan in full.
Withholding of loan repayments from a Participant's payroll will
commence in the first payroll of the third month following the date the loan was
made.
As security for repayment of each loan made to a Participant, such
Participant must pledge that portion of his vested Accounts equal to the lesser
of (i) fifty percent (50%) of such vested Accounts or (ii) the outstanding loan
balance, and such other collateral as may from time to time be required by
controlling law or regulation. In the event a Participant defaults on his
obligation to repay his loan, the Trustee may foreclose on such security to the
extent such Participant would be entitled to withdraw the amount foreclosed.
Upon termination of the Participant's employment with an Employer, the value of
the distributable portion of a Participant's Accounts shall be reduced by the
amount of any unpaid principal balance of the loan plus interest accrued to the
date of termination; provided, however, that a Participant who has elected to
defer distribution of his Plan benefit until any time up to his normal
Retirement Age may repay the loan from other sources provided such repayment is
effected no later than thirty (30) days after the date of termination of his
employment or such longer period as the Committee may determine to be
appropriate in its sole discretion.
Each loan shall be evidenced by a promissory note executed by the
Participant or Beneficiary payable to the Trustee in such form as may be
specified by the Committee.
(f) EFFECT OF LOAN REPAYMENTS - The right to receive loan repayments,
including interest thereon, shall be considered an asset of the Plan and all
loan repayments of principal and interest shall be credited to the Participant's
respective Salary Deferral Contribution Accounts from which the loan was made in
the same ratio that such Salary Deferral Contribution Accounts were reduced when
the loan was made. Amounts credited to such Salary Deferral Contribution
Accounts shall be considered a restoration of contributions to such Salary
Deferral Contribution Accounts until the amount by which the Salary Deferral
Contribution Account value was reduced when the loan was made is recovered and
thereafter shall be treated as earnings in such Salary Deferral Contribution.
Accounts.
(g) EXPENSES - Outstanding loans shall share in Plan expenses in a
manner determined by the Committee.
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<PAGE> 49
(h) PROCEDURES - The Committee shall apply these rules on a uniform
and non-discriminatory basis.
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<PAGE> 50
ARTICLE 7
BENEFITS
7.1 VALUATION OF ACCOUNTS FOR WITHDRAWALS AND DISTRIBUTIONS. For the
purpose of making a distribution or withdrawal, a Participant's Accounts shall
be his Accounts as valued as of the Valuation Date which is coincident with or
next preceding the event which caused the distribution or withdrawal, adjusted
only for Contributions, distributions and withdrawals, if any, made between the
Valuation Date and that event.
7.2 DEATH BENEFIT. If a Participant or retired Participant dies, the
death benefit payable to the Participant's spouse or designated Beneficiary or
Beneficiaries shall be 100% of the remaining amount in all of his Accounts as of
the day he dies.
7.3 RETIREMENT BENEFIT. A Participant may retire on the first day of
any month after he attains his early Retirement Age or normal Retirement Age. If
a Participant retires, he is entitled to receive 100% of all of his Accounts as
of the day he retires.
7.4 DISABILITY BENEFIT. If a Participant's employment with an Employer
is terminated and the Committee determines he is suffering from a Disability, he
is entitled to receive 100% of all of his Accounts as of the day he terminated
because of his Disability.
7.5 SEVERANCE BENEFIT. If a Participant severs employment with the
Employer and all Affiliated. Employers for any reason other than death,
retirement or Disability, he is entitled to receive (a) 100% of all of his
Accounts, except his Employer Matching Contribution Account, Profit Sharing Plan
Account and Employer Discretionary Contribution Account, if any, and (b) that
percentage of his Employer Matching Contribution Account, Profit Sharing Plan
Account and Employer Discretionary Contribution Account, if any, as shown in the
vesting schedule below, as of the day he severs employment.
<TABLE>
<CAPTION>
Percentage of Amount
Invested In Accounts Containing
Completed Full Years of Active Service Employer Contributions
- -------------------------------------- -------------------------------
<S> <C>
Less than three years ...................................... 0%
Three years but less than four years ....................... 20%
Four years but less than five years ........................ 40%
Five years but less than six years ......................... 60%
Six years but less than seven years ........................ 80%
Seven years or more ........................................ 100%
</TABLE>
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<PAGE> 51
The following vesting schedule shall be effective with respect to
Employer Matching Contributions for any Participant who has completed an Hour of
Employment on or after April 1, 1994:
<TABLE>
<CAPTION>
Percentage of Amount
Invested in Employer
Completed Full Years of Active Service Matching Contribution Account
- -------------------------------------- -----------------------------
<S> <C>
Less than one year ......................................... 0%
One year but less than two years ........................... 33 1/3%
Two years but less than three years ........................ 66 2/3%
Three years or more ........................................ 100%
</TABLE>
7.6 DISMISSAL FOR CAUSE OR EMPLOYMENT WITH COMPETITOR. The following
shall be effective April 1, 1994 for a Participant's Accounts attributable to
Contributions made on or after that date:
(a) Generally - Notwithstanding anything in this Article to the
contrary, if a Participant is dismissed for cause, as defined in
subsection (b) hereof, or if he is impermissibly employed by a
competitor, as defined in subsection (c) hereof, payment of the
Participant's Accounts under the Plan shall commence no earlier than
sixty (60) days after the close of the Plan Year in which the latest
of the following events occur:
(i) the Participant attains age 65;
(ii) the Participant has completed at least ten (10) years of
Active Service after becoming a Participant of the Plan; or
(iii) the Participant terminates his employment with the Employer
or any Affiliated Employer.
In addition, a Participant who has met the Plan participation
requirement in order to satisfy the provisions for an early
retirement benefit, if any, shall be entitled to commencement of
his benefits not later than the date upon which he satisfies the
age requirement for such benefit (as provided under section 1.49),
despite the fact that he may have terminated his employment prior
to the attainment of such age requirement.
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<PAGE> 52
(b) Dismissal for Cause - For purposes of this Section, a Participant
shall be deemed to be dismissed for cause if he is dismissed by an
Employer because of:
(i) passing on customer information or trade secrets to a
competitor;
(ii) commission of fraud, embezzlement, or other form of theft;
(iii) conviction of a felony.
(c) Employment by a Competitor - A Participant shall be deemed to have
been impermissibly employed by a competitor, if, within a period of
twelve (12) months after his voluntary or involuntary termination of
employment with any Employer he shall enter into competition with, or
become employed by any other employer in a capacity which is in
competition with, any Employer.
7.7 DISTRIBUTIONS TO DIVORCED SPOUSE. If the Committee determines that
a judgment, decree or order relating to child support, alimony payments or
marital property rights of the spouse, former spouse, child or other dependent
of the Participant is a Qualified Domestic Relations Order or is a domestic
relations order entered before January 1, 1985, the Committee may direct the
Trustee to distribute the awarded property to the person named in the award but
only in the manner permitted under this Plan. To be a Qualified Domestic
Relations Order, the order must clearly specify: (a) the name and last known
mailing address of the Participant and each Alternate Payee under the order, (b)
the amount or percentage of the Participant's benefits to be paid from the Plan
to each Alternate Payee or the manner in which the amount or percentage can be
determined, (c) the number of payments or periods for which the order applies,
(d) the plan to which the order applies, and (e) all other requirements set
forth in Section 414(p) of the Code. If a distribution is made at a time when
the Participant is not fully vested, a separate subaccount shall be created for
the remaining portion of each Account which was not fully vested. That
subaccount shall then remain frozen: that is, no further contributions of any
form and no forfeitures shall be allocated to the subaccount; however, it shall
receive its proportionate share of trust appreciation or depreciation and income
earned on or losses incurred by the Trust Fund. To determine the Participant's
vested interest in each subaccount at any future time, the Committee shall add
back to the subaccount at that time the amount that was previously distributed
under the Qualified Domestic Relations Order, shall multiply the reconstituted
subaccount by the vesting percentage, and shall then subtract the amount that
was previously distributed. The remaining amount is the Participant's vested
interest in the subaccount at that time.
7.8 WITHDRAWALS. Only the following withdrawals may be made during
employment and all withdrawals are subject to any rules promulgated by the
Committee,
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<PAGE> 53
in a nondiscriminatory fashion, regarding the timing, frequency and amounts of
withdrawals:
(a) A Participant is entitled to receive a withdrawal from his
Employee After-Tax Contribution Account after giving written
notice as required by the Committee. The withdrawal cannot
be more than the balance of the Account. Each withdrawal of
Employee After-Tax Contributions contributed after December
31, 1986 shall include a pro rata share of income earned on
those Contributions. Therefore, withdrawals shall be treated
as first made from pre-1987 contributions until they are
exhausted.
(b) After a Participant has made a withdrawal of the entire
amount in his Employee After-Tax Contribution Account, a
Participant is entitled to receive a withdrawal from his
Rollover Account after giving written notice as required by
the Committee. Rollover Contributions may not be withdrawn
until two years after contribution of such amounts.
(c) After a Participant has made a withdrawal of the entire
amounts available under subparagraphs (a) and (b) above, a
Participant may withdraw, after giving written notice as
required by the Committee, the vested portion, first, of
his Profit Sharing Plan Account and then, of his Employer
Discretionary Contribution Account. Such withdrawals must
be on account of an immediate and heavy financial need
(as defined in subparagraph (d) below) incurred by the
Participant and the Committee's determination that the
withdrawal is necessary to alleviate that hardship.
(d) A Participant is entitled, after giving written notice as
required by the Committee, to receive a withdrawal from his
Salary Deferral Contribution Account (exclusive of income
earned after December 31, 1988) in the event of an immediate
and heavy financial need incurred by the Participant and the
Committee's determination that the withdrawal is necessary
to alleviate that hardship.
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<PAGE> 54
A distribution shall be made on account of financial
hardship only if the distribution is for: (i) Expenses for
medical care described in Section 213(d) of the Code
previously incurred by the Participant, the Participant's
spouse, or any dependents of the Participant (as defined in
Section 152 of the Code) or necessary for these persons to
obtain medical care described in Section 213(d) of the Code,
(ii) costs directly related to the purchase (excluding
mortgage payments) of a principal residence for the
Participant, (iii) payment of tuition and related
educational fees for the next 12 months of post-secondary
education for the Participant, his or her spouse, children,
or dependents (as defined in Section 152 of the Code), (iv)
payments necessary to prevent the eviction of the
Participant from his principal residence or foreclosure on
the mortgage of the Participant's principal residence, or
(v) any other event added to this list by the Commissioner
of Internal Revenue.
A distribution to satisfy an immediate and heavy financial
need shall not be made in excess of the amount of the
immediate and heavy financial need of the Participant and
the Participant must have obtained all distributions, other
than hardship distributions, and all nontaxable (at the time
of the loan) loans currently available under all plans
maintained by the Employer. The amount of a Participant's
immediate and heavy financial need includes any amounts
necessary to pay any federal, state or local income taxes or
penalties reasonably anticipated to result from the
financial hardship distribution.
The Participant's hardship distribution shall terminate his
right to have the Employer make any Salary Deferral
Contributions on his behalf until the next time Salary
Deferral Contributions are permitted after the lapse of 12
months following the hardship distribution and his timely
filing of a written request to resume his Salary Deferral
Contributions. Even then, if the Participant resumes Salary
Deferral Contributions in his next taxable year he cannot
have the Employer make any Salary Deferral Contributions in
excess of the limit in Section 402(g) of the Code for that
taxable
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<PAGE> 55
year reduced by the amount of Salary Deferral Contributions
made by the Employer on the Participant's behalf during the
taxable year of the Participant in which he received the
hardship distribution.
In addition, for 12 months after he receives a hardship
distribution from this Plan the Participant is prohibited
from making elective contributions and employee
contributions to all other qualified and nonqualified plans
of deferred compensation maintained by the Employer,
including stock option plans, stock purchase plans and Code
Section 401(k) cash or deferred arrangements that are part
of cafeteria plans described in Section 125 of the Code.
However, the Participant is not prohibited from making
mandatory employee contributions to a Defined Benefit Plan,
or contributions to a health or welfare benefit plan,
including one that is part of a cafeteria plan within the
meaning of Section 125 of the Code.
7.9 FORFEITURE BY LOST PARTICIPANTS OR BENEFICIARIES; ESCHEAT. It
shall be the sole duty and responsibility of a Participant or Beneficiary to
keep the Trustee apprised of his whereabouts and of his most current mailing
address. In the event that a Participant or Beneficiary who shall have become
entitled to a distribution of his Account cannot be located, the Trustee shall
apply to the Internal Revenue Service or to the Social Security Administration
for assistance in locating the Participant or Beneficiary. If the Participant or
Beneficiary can still not be located after such effort by the Committee, he
shall forfeit his Account balance as of the last day of the Plan Year following
his date of termination of employment. Such forfeiture shall be applied to
reduce the required Contribution of the Employer that employed the Participant
for the Plan Year in which the forfeiture arose. However, if at any time prior
to the termination of this Plan and the complete distribution of the Trust Fund,
the former Participant or Beneficiary files a claim with the Committee for the
forfeited benefit, that benefit shall be reinstated (without adjustment for
Trust income or losses during the forfeited period) effective as of the date of
the receipt of the claim. As soon as appropriate following the Employer's
Contribution of the reinstated amount, it shall be paid to the former
Participant or Beneficiary in a single sum. If the Plan is joined as a party to
any escheat proceeding involving a forfeited amount, the Plan shall comply with
the final judgment and shall treat the judgment as if it were a claim filed by
the former Participant or Beneficiary and shall pay in accordance with that
judgment.
7.10 CLAIMS PROCEDURE. When a benefit is due, the Participant or
Beneficiary should submit his claim to the person or office designated by the
Committee
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<PAGE> 56
to receive claims. Under normal circumstances, a final decision shall be made as
to a claim within 90 days after receipt of the claim. If the Committee notifies
the claimant in writing during the initial 90 day period, it may extend the
period up to 180 days after the initial receipt of the claim. The written notice
must contain the circumstances necessitating the extension and the anticipated
date for the final decision. If a claim is denied during the claims period, the
Committee must notify the claimant in writing. The denial must include the
specific reasons for the denial, the Plan provisions upon which the denial is
based, the steps that must be taken to perfect the claim and the claims review
procedure. If no action is taken during the claims period, the claim is treated
as if it were denied on the last day of the claims period.
If a Participant's or Beneficiary's claim is denied and he wants a
review, he must apply to the Committee in writing. That application may include
any comment or argument the claimant wants to make. The claimant may either
represent himself or appoint a representative, either of whom has the right to
inspect all documents pertaining to the claim and its denial. The Committee may
schedule any meeting with the claimant or his representative that it finds
necessary or appropriate to complete its review.
The request for review must be filed within 60 days after the denial.
If it is not, the denial becomes final. If a timely request is made, the
Committee must make its decision, under normal circumstances, within 60 days of
the receipt of the request for review. However, if the Committee notifies the
claimant prior to the expiration of the initial review period, it may extend the
period of review up to 120 days following the initial receipt of the request for
a review. All decisions of the Committee must be in writing and must include the
specific reasons for their action and the Plan provisions on which their
decision is based. If a decision is not given to the claimant within the review
period, the claim is treated as if it were denied on the last day of the review
period.
7.11 TIMING AND FORM OF ALL DISTRIBUTIONS. Distributions shall be made
only in cash unless an asset held in the Trust cannot be sold by distribution
date or can only be sold at less than its appraised value, in which event part
or all of the distribution may be made in kind. Distributions shall be made in a
lump sum payment or, effective January 1, 1993, as a Direct Rollover, if the
Distributee elects, at the time and in the manner prescribed by the Committee,
to have any portion or all of the Eligible Rollover Distribution paid directly
to an Eligible Retirement Plan named by the Distributee. Effective January 1,
1993, 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 Regulations is given provided that:
(a) the Sponsor 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
49
<PAGE> 57
(b) the Participant, after receiving the notice, affirmatively
elects a distribution.
Any benefit held for distribution past one or more Valuation Dates
shall continue to share in the appreciation or depreciation of the Trust Fund
and in the income earned or losses incurred by the Trust Fund until the last
Valuation Date which occurs with or next precedes the date distribution is made.
If the benefit to be distributed plus all prior Plan distributions to
the Participant is $3,500.00 or less, the benefit shall be distributed in the
form of a lump sum distribution within one year after the Participant becomes
entitled to the benefit. If the benefit plus all prior Plan distributions to the
Participant is greater than $3,500.00 and the Participant consents to the
distribution, the benefit must be paid or begin to be paid within one year after
the Participant becomes entitled to the benefit. If the benefit plus all prior
Plan distributions to the Participant is greater than $3,500.00 and the
Participant fails to consent to the distribution, the distribution shall not be
made without the Participant's consent until he attains normal Retirement Age.
In any event, if the Participant dies, the surviving spouse may require payments
to begin within a reasonable time.
If a portion of the Participant's Account is payable to a designated
Beneficiary the payment must be made not later than one year after the
Participant's death. If the surviving spouse is the Beneficiary, the payment may
be delayed so as to be made on the date on which the Participant would have
attained age 70 1/2. If payment is postponed and the surviving spouse dies
before payment is made, the surviving spouse shall be treated as the Participant
for purposes of this paragraph.
7.12 MANDATORY RULES APPLICABLE TO ALL DISTRIBUTIONS. All
distributions must comply with Section 401(a)(9) and (14) of the Code and the
Regulations issued under it. Therefore, unless the distribution fits within one
of the exceptions below the distribution must be made NO LATER than the earlier
of (a) or (b): (a) the 60th day after the latest of the end of the Plan Year in
which: (i) the Participant attains age 65, (ii) occurs the 10th anniversary of
the year in which the Participant began participation, or (iii) the Participant
terminates employment with the Employer and all Affiliated Employers unless the
Participant consents to a later time, OR (b) April 1st of the calendar year
following the calendar year in which the Participant attains age 70 1/2. If a
Participant attains age 70 1/2, the Participant must elect to receive the
required distribution within that time limit in one lump sum. The following are
exceptions to the general mandatory distribution rule: (a) if a Participant was
70 1/2 before January 1, 1988, and neither is nor has been a 5% owner at any
time during the Plan Year ending with or within the calendar year in which the
Participant became 66 1/2 or any subsequent Plan Year, the distribution does not
have to be made until the April 1 following the calendar year in which the
Participant retires; (b) if a Participant was 70 1/2 before January 1, 1988,
and was then or later becomes a 50% owner, the distribution does not have to be
made until the April 1 following the earlier of the calendar year with or within
which ends the Plan Year in which the Participant
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<PAGE> 58
becomes a 5% owner or the calendar year in which the Participant retires; and
(c) if a Participant made a designation before January 1, 1984 which complied
with Section 401(a)(9) of the Code before its amendment by the Tax Reform Act of
1984, the distribution does not have to be made until the time described in the
designation.
7.13 NO DUPLICATION OF BENEFITS. There shall be no duplication of
benefits under this Plan. Without regard to any other language in this Plan, all
distributions and withdrawals are to be subtracted from a Participant's Account
as of the date of the distribution or withdrawal. Thus, if the Participant has
received one distribution or withdrawal and is ever entitled to another
distribution or withdrawal, the prior distribution or withdrawal is to be taken
into account.
7.14 DESIGNATION OF BENEFICIARY. Each Participant has the right to
designate and to revoke the designation of his Beneficiary or Beneficiaries.
Each designation or revocation must be evidenced by a written document in the
form required by the Committee, signed by the Participant and filed with the
Committee. If no designation is on file at the time of a Participant's death or
if the Committee determines that the designation is ineffective, the designated
Beneficiary shall be the Participant's spouse, if living, or if not, the
Participant's surviving children, including adopted children, in equal shares;
or if none, the Participant's surviving parents, in equal shares; or if none,
then the executor, administrator or other personal representative of the
Participant's estate.
If a Participant is considered to be married under local law, the
Participant's designation of any Beneficiary, other than the Participant's
spouse, shall not be valid unless the spouse acknowledges in writing that he or
she understands the effect of the Participant's beneficiary designation and
consents to it. The consent must be to a specific Beneficiary. The written
acknowledgement and consent must be filed with the Committee, signed by the
spouse, and witnessed by a Plan representative or a notary public. However, if
the spouse cannot be located or there exist other circumstances as described in
Sections 401(a)(11) and 417(a)(2) of the Code, the requirement of the
Participant's spouse's acknowledgement and consent may be waived. If a
Beneficiary other than the Participant's spouse is named, the designation shall
become invalid if the Participant is later determined to be married under local
law, the Participant's missing spouse is located or the circumstances which
resulted in the waiver of the requirement of obtaining the consent of the
Participant's spouse no longer exist.
7.15 DISTRIBUTIONS TO DISABLED OR MINORS. If the Committee determines
that any person to whom a payment is due is a minor or is unable to care for his
affairs because of a physical or mental disability, it shall have the authority
to cause the payments to be made to an ancestor, descendant, spouse, or other
person the Committee determines to have incurred, or to be expected to incur,
expenses for that person or to the institution which is maintaining or has
custody of the person unless a prior claim is made by a qualified guardian or
other legal representative. The Committee and the Trustee shall not be
responsible to oversee the application of those payments. Payments made pursuant
to this
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<PAGE> 59
power shall be a complete discharge of all liability under the Plan and Trust
and the obligations of the Employer, the Trustee, the Trust Fund and the
Committee.
7.16 DISTRIBUTIONS FROM THE COMMON STOCK FUND. Effective April 1, 1994,
and notwithstanding anything to the contrary in this Article 7, any
distributions from the Common Stock fund, shall be paid, at the election of the
Participant, either in cash or in shares of Common Stock, except that fractional
shares will in all events be payable in cash. Any cash dividends declared with
respect to such Participant's shares prior to the date of distribution will
similarly be paid in cash. Stock dividends declared prior to the distribution to
the Participant, will be treated as part of his Account, subject to his election
to receive either cash or Common Stock. In the event that the Participant elects
a distribution of his balance in the Common Stock fund in cash, the value of his
Account in such fund will be based on the current market value of a share of
Common Stock on the date as of which the amount payable is calculated. The
Committee's determination with respect to such valuation will be conclusive and
binding on the Participant and on the Trustee.
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ARTICLE 8
TOP-HEAVY REQUIREMENTS
8.1 APPLICATION. The requirements described in this Article shall
apply to each Plan Year that this Plan is determined to be a Top-Heavy Plan
under the test set out in the following Section.
8.2 TOP HEAVY TEST. If on the Determination Date the Aggregate
Accounts of Key Employees in the Plan exceeds 60% of the Aggregate Accounts of
all Employees in the Plan, this Plan shall be a Top-Heavy Plan for that Plan
Year. In addition, if this Plan is required to be included in an Aggregation
Group and that group is a top-heavy group, this Plan shall be treated as a
Top-Heavy Plan. An Aggregation Group is a top-heavy group if on the
Determination Date the sum of (a) the present value of the cumulative accrued
benefits for Key Employees under all Defined Benefit Plans in the Aggregation
Group which contains this Plan plus (b) the total of all of the accounts of Key
Employees under all Defined Contribution Plans included in the Aggregation Group
(which contains this Plan) is more than 60% of a similar sum determined for all
employees covered in the Aggregation Group which contains this Plan.
In applying the above tests, the following rules shall apply:
(a) in determining the present value of the accumulated accrued
benefits for any Employee or the amount in the account of any
Employee, the value or amount shall be increased by all
distributions made to or for the benefit of the Employee under
the Plan during the five year period ending on the Determination
Date;
(b) all rollover contributions made after December 31, 1983 by the
Employee to the Plan shall not be considered by the Plan for
either test;
(c) if an Employee is a Non-Key Employee under the Plan for the Plan
Year but was a Key Employee under the Plan for another prior
Plan Year, his account shall not be considered; and
(d) benefits shall not be taken into account in determining the
top-heavy ratio for any Employee who has not performed services
for the Employer during the last five-year period ending upon
the Determination Date.
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8.3 VESTING RESTRICTIONS IF PLAN BECOMES TOP HEAVY. If a Participant
has at least one Hour of Service during a Plan Year when the Plan is a Top-Heavy
Plan he shall either vest under each of the normal vesting provisions of the
Plan or under the following vesting schedule, whichever is more favorable:
<TABLE>
<CAPTION>
Percentage of Amount
Invested In Accounts Containing
Completed Full Years of Active Service Employer Contributions
- -------------------------------------- ----------------------
<S> <C>
Less than two year............................................ 0%
Two years but less than three years........................... 20%
Three years but less than four years.......................... 40%
Four years but less than five years........................... 60%
Five years but less than six years............................ 80%
Six years or more............................................. 100%
</TABLE>
If the Plan ceases to be a Top-Heavy Plan, this requirement shall no
longer apply. After that date the normal vesting provisions of the Plan shall be
applicable to all subsequent Contributions by the Employer. Any amounts that
vested, however, while the Plan was a Top-Heavy Plan, shall remain vested.
8.4 MINIMUM CONTRIBUTION IF PLAN BECOMES TOP-HEAVY. If this Plan is
a Top-Heavy Plan and the normal allocation of the Employer Contribution and
forfeitures is less than 3% of any Non-Key Employee Participant's Annual
Compensation, the Committee, without regard to the normal allocation procedures,
shall allocate the Employer Contribution and the forfeitures among the
Participants who are in the employ of the Employer at the end of the Plan Year,
regardless of the number of Hours of Employment completed by the Participant
during such Plan Year, in proportion to each Participant's Annual Compensation
as compared to the total Annual Compensation of all Participants for that Plan
Year until each Non-Key Employee Participant has had an amount equal to the
lesser of (i) the highest rate of Contribution applicable to any Key Employee,
or (ii) 3% of his Annual Compensation allocated to his Account. At that time,
any more Employer Contributions or forfeitures shall be allocated under the
normal allocation procedures described earlier in this Plan. Salary Deferral
Contributions and Employer Matching Contributions made on behalf of Key
Employees are included in determining the highest rate of Employer
Contributions. Salary Deferral Contributions made on behalf of Non-Key Employees
shall not be included in determining the minimum contribution required under
this Section. Employer Matching Contributions and amounts that may be treated as
Section 401(k) Contributions or Section 401(m) Contributions made on behalf of
Non-Key Employees may not be included in determining the minimum contribution
required under this Section to the extent that they are treated as Section
401(m) Contributions or Section 401(k) Contributions for purposes of the Actual
Deferral Percentage test or the Actual Contribution Percentage test.
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<PAGE> 62
In applying this restriction the following rules shall apply:
(a) each Employee who is eligible for membership (without regard
to whether he has made mandatory contributions, if any are
required, or whether his compensation is less than a stated
amount) shall be entitled to receive an allocation under this
Section; and
(b) all Defined Contribution Plans required to be included in the
Aggregation Group shall be treated as one plan for purposes of
meeting the 3% maximum; this required aggregation shall not
apply if this Plan is also required to be included in an
Aggregation Group which includes a Defined Benefit Plan and
this Plan enables that Defined Benefit Plan to meet the
requirements of Sections 401(a)(4) or 410 of the Code.
8.5 LIMITATION ON TOP-HEAVY VESTING AND MINIMUM CONTRIBUTION. If
this Plan is a Top-Heavy Plan, it must meet the vesting and benefit requirements
described in this Article without taking into account contributions or benefits
under Chapter 2 of the Code (relating to tax on self-employment income), Chapter
21 of the Code (relating to Federal Insurance Contributions Act), Title II of
the Social Security Act or any other Federal or State law.
8.6 COVERAGE UNDER MULTIPLE TOP-HEAVY PLANS. If a Non-Key Employee
is covered by both a Top-Heavy Defined Contribution Plan and a Top-Heavy Defined
Benefit Plan, he shall receive the minimum benefit under the Defined Benefit
Plan, offset by the benefits provided under the Defined Contribution Plan.
8.7 OTHER RESTRICTIONS. If the Plan is determined to be a
Top-Heavy Plan, the number "1.00" must be substituted for the number "1.25" when
applying the limitations of Section 415 of the Code and Section 5.4 of the Plan,
unless the Plan would not be a Top-Heavy Plan if "90%" were substituted for
"60%" and the Employer Contribution for the Plan Year for each Non-Key Employee
who is a Participant, is not less than 4% of the Participant's Annual
Compensation.
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<PAGE> 63
ARTICLE 9
ADMINISTRATION OF THE PLAN
9.1 APPOINTMENT, TERM OF SERVICE & REMOVAL. The Board of Directors
shall appoint a Committee to administer this Plan. The members shall serve until
their resignation, death or removal. Any member may resign at any time by
mailing a written resignation to the Board of Directors. Any member may be
removed by the Board of Directors, with or without cause. Vacancies may be
filled by the Board of Directors from time to time.
9.2 POWERS. The Committee is a fiduciary. It has the exclusive
responsibility for the general administration of the Plan and Trust, and has all
powers necessary to accomplish that purpose, including but not limited to the
following rights, powers, and authorities:
(a) To make rules for administering the Plan and Trust so long as
they are not inconsistent with the terms of the Plan;
(b) To construe all provisions of the Plan and Trust;
(c) To correct any defect, supply any omission, or reconcile any
inconsistency which may appear in the Plan or Trust;
(d) To select, employ, and compensate at any time any consultants,
actuaries, accountants, attorneys, and other agents and
employees the Committee believes necessary or advisable for
the proper administration of the Plan and Trust; any firm or
person selected may be a disqualified person but only if the
requirements of Section 4975(d) of the Code have been met;
(e) To determine all questions relating to eligibility, Active
Service, Compensation, allocations and all other matters
relating to benefits or Participants' entitlement to benefits;
(f) To determine all controversies relating to the administration
of the Plan and Trust, including but not limited to any
differences of opinion arising between an Employer and the
Trustee or a Participant, or any
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<PAGE> 64
combination of them and any questions it believes advisable
for the proper administration of the Plan and Trust;
(g) To direct or to appoint an investment manager or managers who
can direct the Trustee in all matters relating to the
investment, reinvestment and management of the Trust Fund;
(h) To direct the Trustee in all matters relating to the payment
of Plan benefits; and
(i) To delegate any clerical or recordation duties of the
Committee as the Committee believes is advisable to properly
administer the Plan and Trust.
The Committee shall have absolute discretion in carrying out its
responsibilities and any decision by the Committee shall be conclusive and
binding on all parties.
9.3 ORGANIZATION. The Committee may select, from among its members
a chairman, and may select a secretary. The secretary need not be a member of
the Committee. The secretary shall keep all records, documents and data
pertaining to its administration of the Plan and Trust.
9.4 QUORUM AND MAJORITY ACTION. A majority of the Committee
constitutes a quorum for the transaction of business. The vote of a majority of
the members present at any meeting shall decide any question brought before that
meeting. In addition, the Committee may decide any question by a vote, taken
without a meeting, of a majority of its members.
9.5 SIGNATURES. The chairman, the secretary and any one or more of
the members of the Committee to which the Committee has delegated the power
shall each, severally, have the power to execute any document on behalf of the
Committee, and to execute any certificate or other written evidence of the
action of the Committee. The Trustee, after it is notified of any delegation of
power in writing, shall accept and may rely upon any document executed by the
appropriate member or members as representing the action of the Committee until
the Committee files a written revocation of that delegation of power with the
Trustee.
9.6 DISQUALIFICATION OF COMMITTEE MEMBER. A member of the
Committee who is also a Participant of this Plan shall not vote or act upon any
matter relating solely to himself.
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<PAGE> 65
9.7 DISCLOSURE TO PARTICIPANTS. The Committee shall make
available to each Participant and Beneficiary for his examination those records,
documents and other data required under ERISA, but only at reasonable times
during business hours. No Participant or Beneficiary has the right to examine
any data or records reflecting the compensation paid to any other Participant or
Beneficiary. The Committee is not required to make any other data or records
available other than those required by ERISA.
9.8 STANDARD OF PERFORMANCE. The Committee and each of its members
shall use the care, skill, prudence and diligence under the circumstances then
prevailing that a prudent man, acting in a like capacity and familiar with such
matters, would use in conducting his business as the administrator of the Plan,
shall, when exercising its power to direct investments, diversify the
investments of the Plan so as to minimize the risk of large losses, unless under
the circumstances it is clearly prudent not to do so, and shall otherwise comply
with the provisions of this Plan and ERISA.
9.9 LIABILITY OF COMMITTEE AND LIABILITY INSURANCE. No member of
the Committee shall be liable for any act or omission of any other member of the
Committee, any Employer, the Trustee, any investment manager appointed by the
Committee or any other agent appointed by the Committee unless required by the
terms of ERISA or another applicable state or federal law under which liability
cannot be waived. No member of the Committee shall be liable for any act or
omission of his own unless required by ERISA or another applicable state or
federal law under which liability cannot be waived.
If the Committee directs the Trustee to do so, it may purchase out of
the Trust Fund insurance for the members of the Committee, for any other
fiduciaries appointed by the Committee and for the Trust Fund itself to cover
liability or losses occurring because of the act or omission of any one or more
of the members of the Committee or any other fiduciary appointed under this
Plan. But, that insurance must permit recourse by the insurer against the
members of the Committee or the other fiduciaries concerned if the loss is
caused by breach of a fiduciary obligation by one or more members of the
Committee or other fiduciary.
9.10 EXEMPTION FROM BOND. No member of the Committee is required to
give bond for the performance of his duties unless required by a law which
cannot be waived.
9.11 COMPENSATION. The Committee shall serve without compensation
but shall be reimbursed by the Employer for all expenses properly incurred in
the performance of their duties unless the Sponsor elects to have those expenses
paid from the Trust Fund. Each Employer shall pay that part of the expense as
determined by the Committee in its sole judgment.
9.12 PERSONS SERVING IN DUAL FIDUCIARY ROLES. Any person, group of
persons, corporations, firm or other entity, may serve in more than one
fiduciary capacity
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<PAGE> 66
with respect to this Plan, including serving as both Trustee and as a member of
the Committee.
9.13 ADMINISTRATOR. For all purposes of ERISA, the administrator of
the Plan is the Sponsor. The administrator has the final responsibility for
compliance with all reporting and disclosure requirements imposed under all
applicable federal or state laws and regulations.
9.14 STANDARD OF JUDICIAL REVIEW OF COMMITTEE ACTIONS. The
Committee has full and absolute discretion in the exercise of each and every
aspect of its authority under the Plan, including without limitation, the
authority to determine any person's right to benefits under the Plan, the
correct amount and form of any benefits, the authority to decide any appeal, the
authority to review and correct the actions of any prior administrative
committee, and all of the rights, powers, and authorities specified in this
Article 9 and the Plan. Notwithstanding any provision of law or any explicit or
implicit provision of this document or, any action taken, or ruling or decision
made, by the Committee in the exercise of any of its powers and authorities
under the Plan shall be final and conclusive as to all parties other than the
Sponsor or Trustee, including without limitation all Participants and
Beneficiaries, regardless of whether the Committee or one or more of its members
may have an actual or potential conflict of interest with respect to the subject
matter of the action, ruling, or decision. No final action, ruling, or decision
of the Committee shall be subject to de novo review in any judicial proceeding;
and no final action, ruling, or decision of the Committee may be set aside
unless it is held to have been arbitrary and capricious by a final judgment of a
court having jurisdiction with respect to the issue.
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ARTICLE 10
TRUST FUND AND CONTRIBUTIONS
10.1 FUNDING OF PLAN. This Plan shall be funded by one or more
separate Trusts.
10.2 INCORPORATION OF TRUST. Each Trust is a part of this Plan. All
rights or benefits which accrue to a person under this Plan shall be subject
also to the terms of the agreements creating the Trust or Trusts and any
amendments to them which are not in direct conflict with this Plan.
10.3 AUTHORITY OF TRUSTEE. Each Trustee shall have full title and
legal ownership of the assets in the separate Trust which, from time to time, is
in his separate possession. No other Trustee shall have joint title to or joint
legal ownership of any asset in one of the other Trusts held by another Trustee.
Each Trustee shall be governed separately by the trust agreement entered into
between the Employer and that Trustee and the terms of this Plan without regard
to any other agreement entered into between any other Trustee and the Employer
as a part of this Plan.
10.4 ALLOCATION OF RESPONSIBILITY. To the fullest extent permitted
under Section 405 of ERISA, the agreements entered into between the Employer and
each of the Trustees shall be interpreted to allocate to each Trustee its
specific responsibilities, obligations and duties so as to relieve all other
Trustees from liability either through the agreement, Plan or ERISA, for any act
of any other Trustee which results in a loss to the Plan because of his act or
failure to act.
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ARTICLE 11
ADOPTION OF PLAN BY OTHER EMPLOYERS
11.1 ADOPTION PROCEDURE. Any business organization may, with the
approval of the Sponsor, adopt this Plan by:
(a) A certified resolution or consent of the board of directors of
the adopting Employer or an executed adoption instrument
(approved by the board of directors of the adopting Employer)
agreeing to be bound as an Employer by all the terms,
conditions and limitations of this Plan except those, if any,
specifically described in the adoption instrument; and
(b) Providing all information required by the Committee and the
Trustee.
An adoption may be retroactive to the beginning of a Plan Year if these
conditions are complied with on or before the last day of that Plan Year.
11.2 NO JOINT VENTURE IMPLIED. The document which evidences the
adoption of the Plan by an Employer shall become a part of this Plan. However,
neither the adoption of this Plan and its related Trust Fund by an Employer nor
any act performed by it in relation to this Plan and its related Trust Fund
shall ever create a joint venture or partnership relation between it and any
other Employer.
11.3 ALL TRUST ASSETS AVAILABLE TO PAY ALL BENEFITS. The Accounts
of Participants employed by the Employers which adopt this Plan shall be
commingled for investment purposes. All assets in the Trust Fund shall be
available to pay benefits to all Participants employed by any Employer which is
an Affiliated Employer with the first Employer.
11.4 QUALIFICATION A CONDITION PRECEDENT TO ADOPTION AND CONTINUED
PARTICIPATION. The adoption of this Plan and the Trust or Trusts used to fund
this Plan by a business organization is contingent upon and subject to the
express condition precedent that the initial adoption meets all statutory and
regulatory requirements for qualification of the Plan and the exemption of the
Trust or Trusts and that the Plan and the Trust or Trusts that are applicable to
it continue in operation to maintain their qualified and exempt status. In the
event the adoption fails to initially qualify and be exempt, the adoption shall
fail retroactively for failure to meet the condition precedent and the portion
of the Trust Fund applicable to the adoption shall be immediately returned to
the adopting business organization and the adoption shall be void ab initio. In
the event the adoption
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<PAGE> 69
as to a given business organization later becomes disqualified and loses its
exemption for any reason, the adoption shall fail retroactively for failure to
meet the condition precedent and the portion of the Trust Fund allocable to the
adoption by that business organization shall be immediately spun off,
retroactively as of the last date for which the Plan qualified, to a separate
Trust for its sole benefit and an identical but separate Plan shall be created,
retroactively effective as of the last date the Plan as adopted by that business
organization qualified, for the benefit of the Participants covered by that
adoption.
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ARTICLE 12
AMENDMENT AND TERMINATION
12.1 RIGHT TO AMEND AND LIMITATIONS THEREON. The Sponsor has the
sole right to amend this Plan. An amendment may be made by a certified
resolution or consent of the Board of Directors, or by an instrument in writing
executed by the appropriate officer of the Sponsor. The amendment must describe
the nature of the amendment and its effective date. No amendment shall:
(a) Vest in an Employer any interest in the Trust Fund;
(b) Cause or permit the Trust Fund to be diverted to any purpose
other than the exclusive benefit of the present or future
Participants and their Beneficiaries except under the
circumstances described in Section 4.8;
(c) Decrease the Account of any Participant or eliminate an
optional form of payment. However, the Plan may be amended to
eliminate or reduce a Code Section 411(d)(6) protected benefit
with respect to any benefit not yet accrued as of the later of
the amendment's adoption date or effective date without
violating Code Section 411(d)(6);
(d) Increase substantially the duties or liabilities of the
Trustee without its written consent; or
(e) Change the vesting schedule to one which would result in the
nonforfeitable percentage of the Account derived from Employer
Contributions (determined as of the later of the date of the
adoption of the amendment or of the effective date of the
amendment) of any Participant being less than the
nonforfeitable percentage computed under the Plan without
regard to the amendment. If the Plan's vesting schedule is
amended, if the Plan is amended in any other way that affects
the computation of the Participant's nonforfeitable
percentage, or if the Plan is deemed amended by an automatic
change to or from a Top-Heavy vesting schedule, each
Participant with at least three years of Service may elect,
within a reasonable period after the adoption of the amendment
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or the change, to have the nonforfeitable percentage computed
under the Plan without regard to the amendment or the change.
The election period shall begin no later than the date the
amendment is adopted or deemed to be made and shall end no
later than the latest of the following dates: (1) 60 days
after the date the amendment is adopted or deemed to be made,
(2) 60 days after the date the amendment becomes effective, or
(3) 60 days after the day the Participant is issued written
notice of the amendment.
Each Employer shall be deemed to have adopted any amendment made by the
Sponsor unless the Employer notifies the Committee of its rejection in writing
within 30 days after it receives a copy of the amendment. A rejection shall
constitute a withdrawal from this Plan by that Employer unless the Sponsor
acquiesces in the rejection.
No Participant of this Plan nor his Accounts shall be affected by any
amendment of this Plan after the date he becomes entitled to a distribution
whether he delays the distribution or not unless the clear language of the
amendment makes it applicable to Participants who are no longer in the employ of
an Employer but still have an Account which has not been distributed.
12.2 MANDATORY AMENDMENTS. The Contributions of each Employer to
this Plan are intended to be:
(a) Deductible under the applicable provisions of the Code;
(b) Except as otherwise prescribed by applicable law, exempt from
the Federal Social Security Act;
(c) Except as otherwise prescribed by applicable law, exempt from
withholding under the Code; and
(d) Excludable from any Employee's regular rate of pay, as that
term is defined under the Fair Labor Standards Act of 1938, as
amended.
The Sponsor shall make any amendment necessary to carry out this
intention, and it may be made retroactively.
12.3 WITHDRAWAL OF EMPLOYER. An Employer may withdraw from this
Plan and its related Trust Fund if the Sponsor does not acquiesce in its
rejection of an amendment or by giving written notice of its intent to withdraw
to the Committee. The
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Committee shall then determine the portion of the Trust Fund that is
attributable to the Participants employed by the withdrawing Employer and shall
notify the Trustee to segregate and transfer those assets to the successor
Trustee or Trustees when it receives a designation of the successor from the
withdrawing Employer.
A withdrawal shall not terminate the Plan and its related Trust Fund
with respect to the withdrawing Employer, if the Employer either appoints a
successor Trustee or Trustees and reaffirms this Plan and its related Trust Fund
as its new and separate plan and trust intended to qualify under Section 401(a)
of the Code, or establishes another plan and trust intended to qualify under
Section 401(a) of the Code.
The determination of the Committee, in its sole discretion, of the
portion of the Trust Fund that is attributable to the Participants employed by
the withdrawing Employer shall be final and binding upon all parties; and, the
Trustee's transfer of those assets to the designated successor Trustee shall
relieve the Trustee of any further obligation, liability or duty to the
withdrawing Employer, the Participants employed by that Employer and their
Beneficiaries, and the successor Trustee or Trustees.
12.4 TERMINATION OF PLAN. The Sponsor may terminate this Plan and
its related Trust Fund with respect to all Employers by executing and delivering
to the Committee and the Trustee, a notice of termination, specifying the date
of termination. Any Employer may terminate this Plan and its related Trust Fund
with respect to itself by executing and delivering to the Trustee a notice of
termination, specifying the date of termination. Likewise, this Plan and its
related Trust Fund shall automatically terminate with respect to any Employer if
there is a general assignment by that Employer to or for the benefit of its
creditors, or a liquidation or dissolution of that Employer without a successor.
Upon the termination of this Plan as to an Employer, the Trustee shall, subject
to the provisions of Section 12.7, distribute to each Participant employed by
the terminating Employer the amount certified by the Committee to be due the
Participant.
The Employer should apply to the Internal Revenue Service for a
determination letter with respect to its termination, and the Trustee should not
distribute the Trust Funds until a determination is received. However, should it
decide that a distribution before receipt of the determination letter is
necessary or appropriate it should retain sufficient assets to cover any tax
that may become due upon that determination.
12.5 PARTIAL OR COMPLETE TERMINATION OR COMPLETE DISCONTINUANCE.
Without regard to any other provision of this Plan, if there is a partial or
total termination of this Plan each affected Participant shall immediately
become 100% vested in his Account. Likewise, if there is a complete
discontinuance of the Employer's Contributions, each of the affected
Participants shall immediately become 100% vested in his Account as of the end
of the last Plan Year for which a substantial Employer Contribution was made and
in any amounts later allocated to his Account. If the Employer then resumes
making substantial Contributions at any time, the appropriate vesting schedule
shall again
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apply to all amounts allocated to each affected Participant's Account beginning
with the Plan Year for which they were resumed.
12.6 CONTINUANCE PERMITTED UPON SALE OR TRANSFER OF ASSETS. An
Employer's participation in this Plan and its related Trust Fund shall not
automatically terminate if it consolidates or merges and is not the surviving
corporation, sells substantially all of its assets, is a party to a
reorganization and its Employees and substantially all of its assets are
transferred to another entity, liquidates, or dissolves, if there is a successor
organization. Instead, the successor may assume and continue this Plan and its
related Trust Fund by executing a direction, entering into a contractual
commitment or adopting a resolution providing for the continuance of the Plan
and its related Trust Fund. Only upon the successor's rejection of this Plan and
its related Trust Fund or its failure to respond to the Employer's, the
Sponsor's or the Trustee's request that it affirm its assumption of this Plan
within 90 days of the request shall this Plan automatically terminate. In that
event the appropriate portion of the Trust Fund shall be distributed exclusively
to the Participants or their Beneficiaries as soon as possible. If there is a
disposition to an unrelated entity of substantially all of the assets used by
the Employer in a trade or business or a disposition by the Employer of its
interest in a subsidiary, the Employer may make a lump sum distribution from the
Plan if it continues the Plan after the disposition; but the distribution can
only be made for those Participants who continue employment with the acquiring
entity.
12.7 DISTRIBUTION UPON TERMINATION. A Participant is entitled to
receive a lump sum distribution on account of the termination of the Plan if the
Employer and all Affiliated Employers do not establish or maintain a successor
plan within the period ending 12 months after all assets are distributed from
the Plan. A distribution on account of the termination of the Plan may be made
only in the form of a lump sum payment. Therefore, if a Participant's Account
balance plus all prior Plan distributions to the Participant is more than
$3,500, and the Participant does not consent to receive an immediate lump sum
payment on account of the termination of the Plan, the Participant shall not
receive a Plan distribution on account of the termination of the Plan. His Plan
benefit will be payable in the future on account of a distribution event other
than the termination of the Plan.
If the Plan is terminated and the Employer or an Affiliated Employer
maintains another Defined Contribution Plan, the Participant's Account balance
may be transferred to the other plan without his consent if he does not consent
to an immediate lump sum distribution from the Plan.
For purposes of this Section the term "successor plan" means a Defined
Contribution Plan other than an employee stock ownership plan as defined in
Sections 4975(e) or 409 of the Code or a simplified employee pension plan as
defined in Section 408(k) of the Code. The term successor plan does not include
any plan in which fewer
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than two percent of the Plan Participants were eligible to participate during
the 24 month period beginning 12 months before the time of Plan termination.
12.8 MODES OF DISTRIBUTION UPON TERMINATION. All modes of
distribution permitted by this Plan must be available for all distributions
to Participants upon termination of this Plan.
12.9 DISTRIBUTIONS TO HIGHLY COMPENSATED EMPLOYEES AND FORMER
EMPLOYEES MUST NOT DISCRIMINATE. Upon termination of the Plan, the benefit
payable to each Highly Compensated Employee or former Employee is limited to a
benefit that is nondiscriminatory under Section 401(a)(4) of the Code.
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ARTICLE 13
MISCELLANEOUS
13.1 PLAN NOT AN EMPLOYMENT CONTRACT. The adoption and maintenance
of this Plan and its related Trust Fund is not a contract between any Employer
and its Employees which gives any Employee the right to be retained in its
employment. Likewise, it is not intended to interfere with the rights of any
Employer to discharge any Employee at any time or to interfere with the
Employee's right to terminate his employment at any time.
13.2 BENEFITS PROVIDED SOLELY FROM TRUST. All benefits payable
under this Plan shall be paid or provided for solely from the Trust Fund. No
Employer assumes any liability or responsibility to pay any benefit provided by
the Plan.
13.3 ANTI-ALIENATION PROVISION. Prior to its actual receipt by the
Participant or Beneficiary, no principal or income payable, or to become
payable, from the Trust Fund shall be subject to anticipation or assignment by a
Participant or by a Beneficiary, to attachment by, interference with, or control
of any creditor of a Participant or Beneficiary, or to being taken or reached by
any legal or equitable process in satisfaction of any debt or liability of a
Participant or Beneficiary. An attempted conveyance, transfer, assignment,
mortgage, pledge, or encumbrance of the Trust Fund, any part of it, or any
interest in it by a Participant or Beneficiary prior to distribution shall be
void, whether that conveyance, transfer, assignment, mortgage, pledge, or
encumbrance is intended to take place or become effective before or after any
distribution of Trust assets or the termination of this Trust Fund itself. The
Trustee shall never under any circumstances be required to recognize any
conveyance, transfer, assignment, mortgage, pledge or encumbrance by a
Participant or Beneficiary of the Trust Fund, any part of it, or any interest in
it, or to pay any money or thing of value to any creditor or assignee of a
Participant or Beneficiary for any cause whatsoever. These prohibitions against
the alienation of a Participant's Account shall not apply to Qualified Domestic
Relations Orders or domestic relations orders entered prior to January 1, 1985.
13.4 REQUIREMENTS UPON MERGER OR CONSOLIDATION OF PLANS. This Plan
shall not merge or consolidate with or transfer any assets or liabilities to any
other plan unless each Participant would (if the 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 (if the Plan had then
terminated).
13.5 GENDER OF WORDS USED. If the context requires it, words of one
gender when used in this Plan shall include the other genders, and words used in
the singular or plural shall include the other.
68
<PAGE> 76
13.6 SEVERABILITY. Each provision of this Agreement may be severed.
If any provision is determined to be invalid or unenforceable, that
determination shall not affect the validity or enforceability of any other
provision.
13.7 GOVERNING LAW; PARTIES TO LEGAL ACTIONS. The provisions of
this Plan shall be construed, administered, and governed under the laws of the
State of Texas and, to the extent applicable, by the laws of the United States.
The Trustee or any Employer may at any time initiate a legal action or
proceeding for the settlement of the account of the Trustee, or for the
determination of any question or for instructions. The only necessary parties to
that action or proceeding are the Trustee and the Employer concerned. However,
any other person or persons may be included as parties defendant at the election
of the Trustee and the Employer.
IN WITNESS WHEREOF, Zale Corporation has caused this Agreement to be
executed this 18th day of March 1994, in multiple counterparts, each of which
shall be deemed to be an original, to be effective generally the 1st day of
January, 1992, except as otherwise specifically designated herein.
ZALE CORPORATION
By: Dolph Simon
-------------------------------------------------------
VP March 18,1994
-----------------------------------------------------------
Title Date
Zale Delaware, Inc. adopts the Plan effective generally January 1,
1992, except as otherwise specifically all forth herein.
By: Dolph Simon
-------------------------------------------------------
VP March 18,1994
-----------------------------------------------------------
Title Date
69
<PAGE> 77
Zale Puerto Rico, Inc. adopts the Plan effective generally January 1,
1992, except as otherwise specifically set forth herein.
By: /s/ DOLPH SIMON
-------------------------------------------------------
VP March 18,1994
-----------------------------------------------------------
Title Date
Dobbins Jewelers, Inc. adopts the Plan effective generally January 1,
1992, except as otherwise specifically set forth herein.
By: /s/ DOLPH SIMON
-------------------------------------------------------
VP March 18,1994
-----------------------------------------------------------
Title Date
Jewelers Financial Services, Inc. adopts the Plan effective generally
January 1, 1992, except as otherwise specifically set forth herein.
By: /s/ DOLPH SIMON
-------------------------------------------------------
VP March 18,1994
-----------------------------------------------------------
Title Date
Zale Life Insurance Company adopts the Plan effective generally January
1, 1992, except as otherwise specifically set forth herein.
By: /s/ DOLPH SIMON
-------------------------------------------------------
VP March 18,1994
-----------------------------------------------------------
Title Date
70
<PAGE> 78
Zale Indemnity Company adopts the Plan effective generally January 1,
1992, except as otherwise specifically set forth herein.
By: /s/ DOLPH SIMON
-------------------------------------------------------
VP March 18,1994
-----------------------------------------------------------
Title Date
Zale Employees' Child Care Association, Inc. adopts the Plan effective
generally January 1, 1992, except as otherwise specifically set forth herein.
By: /s/ DOLPH SIMON
-------------------------------------------------------
VP March 18,1994
-----------------------------------------------------------
Title Date
71
<PAGE> 79
FIRST AMENDMENT
TO THE
ZALE CORPORATION SAVINGS & INVESTMENT PLAN
WITNESSETH
WHEREAS, Zale Corporation (the "Company") Sponsors the Zale Corporation
Savings & Investment Plan; and
WHEREAS, under Section 12.1 of the Plan, the Company may amend the Plan at
any time;
NOW, THEREFORE, the Plan is amended effective April 1, 1994, unless
otherwise specified heroin, as follows:
FIRST
Section 3.1: The following sentence is added at the and of Section 3.1:
"Effective November 1, 1994, the foregoing sentence and the requirement
that an Employee complete one full year of Active Service shall cease to
apply to Employees (other than Employees who are "Extra/Temporary
employees" as defined in the Company's Personnel Policy Manual) for
purposes of eligibility for Salary Deferral Contributions and Employer
Matching Contributions."
<PAGE> 80
SECOND
Section 4.3: Section 4.3 is amended as follows:
1. The first sentence is deleted and replaced with the following sentence:
"The Employers shall contribute for each Plan Year the following
amounts:"
2. The following new clause is added to the end of Subsection (e)
immediately before the semicolon:
"(and an additional contribution, in respect of the Company's fiscal
year beginning April 1, 1994 and ending July 31, 1994 (the "Short Year")
equal to $122,152.50 which shall be allocated to each Participant pro
rata to such Participant's Employer Matching Contribution for the Short
Year)"
THIRD
Section 4.11: The second full paragraph of Section 4.11 is deleted.
FOURTH
Section 6.4: Section 6.4 is deleted in its entirety and replaced with the
following:
"Effective April 1, 1994, Employer Matching Contributions shall be
invested entirely in the Common Stock fund. The Common Stock Fund,
including earnings thereof, shall be invested in Common Stock purchased
by the Trustee at prevailing market prices in any of the following ways:
(a) the open market: or (b) in privately negotiated transactions; or
(c) directly from the Sponsor if the Sponsor makes either treasury
shares or authorized but unissued shares available for such purpose.
<PAGE> 81
The Trustee may not pay a commission in connection With the acquisition
of such Common Stock if such payment would cause the acquisition to be a
prohibited transaction under ERISA.
Funds in the Common Stock fund shall not be commingled with funds in
other investment funds."
FIFTH
Section 12.1: The first three sentences of Section 12.1 are deleted and
replaced with the following sentence:
"The Sponsor has the riot to amend this Plan by action of its Board of
Directors."
Except as amended herein, the Plan shall continue to be and shall remain,
in full force and effect in accordance with its terms.
IT WITNESS WHEREOF, the undersigned has set his hand this 3 day of October,
1994.
ZALE CORPORATION
By: /s/ DOLPH SIMON
----------------------------------
Title: Vice President
-------------------------------
<PAGE> 82
SECOND AMENDMENT
TO THE
ZALE CORPORATION SAVINGS & INVESTMENT PLAN
This amendment, made this 25th day of January 1995, by Zale Corporation, a
Delaware corporation (the "Company").
WITNESSETH
WHEREAS, the Company sponsors the Zale Corporation Savings & Investment Plan;
and
WHEREAS, under Section 12.1 of the Plan, the Company reserved the right to amend
the Plan at any time; and
NOW, THEREFORE. BE IT RESOLVED that, effective as of January 1, 1995, the Plan
is hereby amended in the manner hereinafter set forth:
FIRST
Section 6.9(a) of the Plan shall be amended by deleting the words "from such
Participant's Salary Deferral Account only" in the second line thereof and
substituting the following therefor. "only from such Participant's Salary
Deferral and Rollover Accounts".
SECOND
Section 6.9(b) of the Plan shall be amended by adding the following paragraph at
the end:
" A Participants loan will be funded solely by reduction of the Participant's
Account balances. This reduction will affect the Participant's Accounts in the
following order (a) Rollover Account; and (b) Salary Deferral Contribution
Account. If the balance in any Account is invested in more than one Fidelity
fund, the loan proceeds will be obtained from such funds on a pro rata basis.
<PAGE> 83
THIRD
Section 6.9(f) of the Plan shall be amended by deleting it in its entirety and
substituting the following:
"Effect of Loan Repayments - The right to receive loan repayments, Including
interest thereon, shall be considered an asset of the Plan and all loan
repayments of principal and interest shall be credited first to the
Participant's Rollover Account and then to the Salary Deferral Contribution
Account, in the same ratio that such Accounts were reduced when the loan was
made. Amounts credited to such Accounts shall be considered a restoration of
contributions to such Accounts until the amount by which the Account values were
reduced when the loan was made are recovered and thereafter shall be treated as
earnings in such Accounts. Loan repayments will be allocated to the Fidelity
fund(s) in accordance with the Participant's investment elections in effect at
the time of such repayment.
FOURTH
Except as amended herein, the Plan shall continue to be and shall remain, in
full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the undersigned has set his hand as of the date and year
first above written.
ZALE CORPORATION
By: /s/ A. HERSCHEL KRANITZ
----------------------------------
A. Herschel Kranitz
Title: Senior Vice President
-------------------------------
<PAGE> 84
THIRD AMENDMENT
TO THE
ZALE'S PROFIT SNARING PLAN,
RENAMED, EFFECTIVE APRIL 1, 1994,
ZALE CORPORATION SAVINGS & INVESTMENT PLAN
This amendment, made this 25th day of January, 1996, by Zale Corporation, a
Delaware corporation (the "Company").
WITNESSETH
WHEREAS, the Company sponsors Zale's Profit Sharing Plan, renamed,
effective April 1, 1994, Zale Corporation Savings & Investment Plan, as amended
and restated, generally effective January 1, 1992, except as otherwise
specifically provided therein (as amended and restated, the "Plan");
WHEREAS, the internal Revenue Service is requesting certain amendments to
the Plan as a condition of the issuance of a favorable determination letter; and
WHEREAS, the Company desires to amend the Plan in accordance with Internal
Revenue Service request;
WHEREAS, under Section 12.1 of the Plan, the Company reserved the right to
amend the Plan at any time; and
NOW, THEREFORE, BE IT RESOLVED that, effective as of January 1, 1992, the
Plan is hereby amended in the manner hereinafter set forth:
<PAGE> 85
FIRST
The third paragraph of Section 4.5 of the Plan shall be deleted and the
following substituted therefor:
"As soon as practicable after the close of each Plan Year, the
Committee shall determine whether the Actual Deferral Percentage for
the Highly Compensated Employees would exceed the limitation. If the
limitation would be exceeded for a Plan Year, before the close of the
following Plan Year, the amount of Excess 401(k) Contributions for that
Plan Year (and any income allocable to those Contributions as
calculated in the specific manner required by Section 4.9) shall be
distributed. Any distributions of the Excess 401(k) Contributions for
or any Plan Year are to be made to Highly Compensated Employees on the
basis of the respective portions of the Excess 401(k) Contributions
attributable to each of them. The amount of Excess 401(k) Contributions
to be distributed for any Plan Year must be reduced by any Excess
Deferrals previously distributed for the taxable year ending in the
same Plan Year."
SECOND
The third paragraph of Section 4.7 of the Plan shall be deleted and the
following substituted therefor:
"If the limitation would be exceeded for any Plan Year, before the
close of the following Plan Year, the amount of a Participant's vested
portion of his Excess 401(m) Contributions for that Plan Year (and any
income allocable to those Contributions as calculated in the specific
manner required by the applicable Regulations) shall be distributed,
and the nonvested portion shall be forfeited and be used to reduce
future Employer Matching Contributions for the Plan Year following the
Plan Year for which the Employer made the Employer Matching
Contribution. Any distributions of the Excess 401(m) Contributions for
any Plan Year are to be made to Highly Compensated Employees on the
basis of the respective portions of the Excess 401(m) Contributions
attributable to each of them. Forfeitures of Excess 401(m)
Contributions may not be allocated to Participants whose contributions
are reduced under this Section."
- 2 -
<PAGE> 86
THIRD
Section 5.4 of the Plan shall be amended by adding following new paragraph
after the third paragraph:
"For a short Plan Year, the dollar limitation with respect to this
limitation period is determined by multiplying (A) the applicable
dollar limitation for the calendar year in which the limitation period
ends by (B) a fraction, the numerator of which in the number of months
(including any fractional parts of a month) in the limitation period,
and the denominator of which in 12."
FOURTH
Section 7.5 shall be amended by deleting the heading and the phrase ending
before the "(a)" and substituting the following therefor: "7.5 VESTED BENEFIT. A
Participant in vested in".
FIFTH
A new Section 7.6 shall be added as follows and all subsequent subsections
in Article 7 shall be renumbered:
"7.6 SEVERANCE BENEFIT. If a Participant severs employment with the
Employer and all Affiliated Companies for any reason other than death,
retirement or Disability, he is entitled to receive his benefit to the
extent vested as provided in Section 7.5.
- 3 -
<PAGE> 87
SIXTH
Except as amended herein, the Plan shall continue to be and shall remain,
in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the undersigned has set his hand as of the date and
year first above written.
ZALE CORPORATION
By: /s/ A. HERSCHEL KRANITZ
----------------------------------
A. Herschel Kranitz
Title: Senior Vice President
-------------------------------
ZALE DELAWARE, INC.
By: /s/ A. HERSCHEL KRANITZ
----------------------------------
A. Herschel Kranitz
Title: Senior Vice President
-------------------------------
ZALE PUERTO RICO, INC.
By: /s/ A. HERSCHEL KRANITZ
----------------------------------
A. Herschel Kranitz
Title: Senior Vice President
-------------------------------
DOBBINS JEWELERS INC.
By: /s/ A. HERSCHEL KRANITZ
----------------------------------
A. Herschel Kranitz
Title: Senior Vice President
-------------------------------
JEWELERS FINANCIAL SERVICES, INC.
By: /s/ A. HERSCHEL KRANITZ
----------------------------------
A. Herschel Kranitz
Title: Senior Vice President
-------------------------------
- 4 -
<PAGE> 88
ZALE LIFE INSURANCE COMPANY
By: /s/ A. HERSCHEL KRANITZ
----------------------------------
A. Herschel Kranitz
Title: Senior Vice President
-------------------------------
ZALE INDEMNITY COMPANY
By: /s/ A. HERSCHEL KRANITZ
----------------------------------
A. Herschel Kranitz
Title: Senior Vice President
-------------------------------
ZALE EMPLOYEES' CHILD CARE
ASSOCIATION, INC.
By: /s/ A. HERSCHEL KRANITZ
----------------------------------
A. Herschel Kranitz
Title: Senior Vice President
-------------------------------
- 5 -
<PAGE> 89
FOURTH AMENDMENT
TO THE
ZALE CORPORATION SAVINGS & INVESTMENT PLAN
This amendment, made this 26 day of April, 1996, by Zale Corporation, a
Delaware corporation (the "Company").
WITNESSETH
WHEREAS, the Company sponsors the Zale Corporation Savings Investment Plan
(the "Plan");
WHEREAS, under Section 12.1 of the Plan, the Company reserved the right to
amend the Plan at any time; and
NOW, THEREFORE, BE IT RESOLVED that, effective as of January 1, 1992, the
Plan is hereby amended in the manner hereinafter set forth:
FIRST
Effective January 1, 1992, Section 1.19 of the Plan shall be amended by
inserting after the words "Plan Year" in the second line thereof the following:
"excluding, relocation expenses, merchandise incentives and car fringe
benefits,"
<PAGE> 90
SECOND
Except as amended herein, the Plan shall continue to be and shall remain,
in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the undersigned has set his hand as of the date and
year first above written.
ZALE CORPORATION
By: /s/ GREGORY HUMENESKY
----------------------------------
Title: Sr. V.P. Human Resources
-------------------------------
ZALE DELAWARE, INC.
By: /s/ GREGORY HUMENESKY
----------------------------------
Title: Sr. V.P. Human Resources
-------------------------------
ZALE PUERTO RICO, INC.
By: /s/ GREGORY HUMENESKY
----------------------------------
Title: Sr. V.P. Human Resources
-------------------------------
DOBBINS JEWELERS, INC.
By: /s/ GREGORY HUMENESKY
----------------------------------
Title: Sr.V.P. Human Resources
-------------------------------
<PAGE> 91
JEWELERS FINANCIAL SERVICES, INC.
By: /s/ GREGORY HUMENESKY
----------------------------------
Title: Sr.V.P. Human Resources
-------------------------------
ZALE LIFE INSURANCE COMPANY
By: /s/ GREGORY HUMENESKY
----------------------------------
Title: Sr.V.P. Human Resources
-------------------------------
ZALE INDEMNITY COMPANY
By: /s/ GREGORY HUMENESKY
----------------------------------
Title: Sr.V.P. Human Resources
-------------------------------
ZALE EMPLOYEES' CHILD CARE
ASSOCIATION, INC.
By: /s/ GREGORY HUMENESKY
----------------------------------
Title: Sr.V.P. Human Resources
-------------------------------
<PAGE> 92
FIFTH AMENDMENT
TO THE
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
This amendment, made this 30th day of July, 1996, by Zale Corporation,
a Delaware corporation (the "Sponsor").
W I T N E S S E T H
WHEREAS, the Sponsor sponsors and maintains the Zale Corporation
Savings & Investment Plan (the "Plan");
WHEREAS, under Section 12.1 of the Plan, the Sponsor reserved the right
to amend the Plan at any time;
NOW, THEREFORE, BE IT RESOLVED that, effective August 1, 1996, the Plan
is hereby amended in the manner hereinafter set forth:
FIRST
Section 1.1 is hereby amended to add to the end thereof new subsections
(h), (i), and (j) reading as follows:
(h) Karten's Matching Account - The Employee's account from the
Karten's Plan reflecting employer matching contributions made
to the Karten's Plan, if any, plus earnings thereon.
(i) Karten's Deferral Contribution Account - The Employee's
account from the Karten's Plan reflecting the contributions
made because of a salary deferral agreement under the Karten's
Plan, if any, plus earnings thereon.
(j) Karten's Rollover Account - The Employee's account from the
Karten's Plan reflecting rollover contributions to the
Karten's Plan, plus earnings thereon.
SECOND
Article 1 is amended by adding a new Section 1.61 thereto, reading as
follows:
1.61 "KARTEN'S PLAN" means the Karten's Jewelers, Inc.
401(k) Plan which was merged into the Plan on August 1, 1996.
<PAGE> 93
THIRD
Article 1 is amended by adding a new Section 1.62 thereto, reading as
follows:
1.62 "KARTEN'S PLAN ACCOUNTS" means the Karten's Matching
Account as described in Section 1.1 (h), the Karten's Deferral
Contribution Account as described in Section 1.1(i), and the Karten's
Rollover Account described in Section 1.1(j).
FOURTH
Article 4 is hereby amended by adding a new Section 4.13 to the end
thereof reading as follows:
4.13 MERGER OF THE KARTEN'S PLAN ACCOUNTS INTO THE PLAN.
The Karten's Plan Accounts will be merged into the Plan effective
August 1, 1996. Except as otherwise specifically provided in this
Section 4.13 or another Section of the Plan, the Karten's Plan Accounts
will be treated in the same manner as the other Accounts of the
Participants in the Plan. All Karten's Plan Accounts will be invested
as provided in Sections 6.1 and 6.2. Service counted under the Karten's
Plan will be counted for the purposes of determining eligibility and
vesting under the Plan.
FIFTH
Section 6.1 is hereby amended by revising the second sentence of the
first paragraph to read as follows:
The Accounts of Participants shall be invested and reinvested only in
eligible investments selected by the Committee.
SIXTH
Section 6.2(a) is hereby amended by adding the following sentences
immediately after the first sentence thereof:
Effective August 1, 1996, the Committee shall select such investment
funds for the Plan as it deems appropriate from time to time, and the
Committee shall not be limited to mutual funds managed by Fidelity
Investments. The Participant shall direct the investment and
reinvestment of such Participant's Accounts among the investment funds
selected by the Committee from time to time.
2
<PAGE> 94
SEVENTH
Section 6.2(b) is hereby amended by adding the following sentence to
the end thereof:
Effective August 1, 1996, all dividends, interest, gains and
distributions of any nature received in respect of the shares in an
investment fund shall be reinvested in additional shares of that
investment fund.
EIGHTH
The first sentence of Section 6.9(a) is hereby amended to read as
follows:
Each Participant shall be eligible to receive a loan under the Plan
only from such Participant's Salary Deferral Contribution Account,
Rollover Accounts, Karten's Deferral Contribution Account and Karten's
Rollover Account in accordance with the rules and to the extent
permitted by applicable law without any required period of prior
participation in the Plan.
NINTH
The last paragraph of Section 6.9(b) added by the Second Amendment to
the Plan is hereby revised to read as follows:
A Participant's loan will be funded solely by reduction of the
Participant's Account balances. The reduction will affect the
Participant's Accounts in the following order: (a) Karten's Rollover
Account; (b) Karten's Deferral Contribution Account; (c) Rollover
Account; and (d) Salary Deferral Contribution Account. If the balance
in any Account is invested in more than one investment fund, the loan
proceeds will be obtained from such funds on a pro rata basis.
TENTH
Section 6.9(f) as amended by the Second Amendment to the Plan is hereby
revised to read as follows:
(f) Effect of Loan Repayments - The right to receive loan
repayments, including interest thereon, shall be considered an
asset of the Plan and all loan repayments of principal and
interest shall be credited in the following order to
Participant's Accounts: (a) Karten's Rollover Account; (b)
Karten's Deferral Contribution Account; (c) Rollover Account;
and (d) Salary Deferral Contribution Account, in
3
<PAGE> 95
the same ratio that such Accounts were reduced when the loan was made.
Amounts credited to such Accounts shall be considered a restoration of
contributions to such Accounts until the amount by which the Account
values were reduced when the loan was made are recovered and thereafter
shall be treated as earnings in such Accounts. Loan repayments will be
allocated to the investment fund(s) in accordance with the
Participant's investment elections in effect at the time of such
repayment.
ELEVENTH
Section 7.5 is amended by adding to the end thereof the following
sentences:
The Karten's Matching Account will be subject to the same vesting
schedule as is applicable to the Employer Matching Contribution
Account. The Karten's Deferral Contribution Account and the Karten's
Rollover Account will be fully vested at all times. If a Participant
with a Karten's Plan Account attains age 65 before becoming 100% vested
in his entire Account, such Participant will immediately become fully
vested in his entire Account.
TWELFTH
Section 7.6(a) is hereby amended by adding a sentence to the end
thereof reading as follows:
Notwithstanding the provisions of this Section 7.6(a), the Karten's
Plan Accounts will not be subject to the provisions of this Section
7.6.
THIRTEENTH
Section 7.8 is hereby amended by adding to the end thereof a new
subparagraph (c) reading as follows:
(c) A Participant with a Karten's Rollover Account may take a
withdrawal from such Account at any time on reasonable notice
to the Committee. A Participant with a Karten's Matching
Account or a Karten's Deferral Contribution Account may take a
withdrawal from such Accounts after attaining age 59 1/2. In
addition, a Participant may take a withdrawal from his
Karten's Matching Account and Karten's Deferral Contribution
Account for an immediate and heavy financial need as described
in and pursuant to the limitations of this Section 7.8.
4
<PAGE> 96
FOURTEENTH
Section 7.11 is hereby amended by adding the following to the end of
the first paragraph:
Notwithstanding the foregoing, but subject to the provisions of the
third paragraph of this Section 7.11 regarding distributions of
Accounts that do not exceed $3,500, the Participant may elect to have
his Karten's Plan Accounts distributed in the form of equal monthly,
quarterly, semi-annual, or annual installments over a period certain
selected by the Participant not exceeding the life expectancy of the
Participant or the joint life and last survivor expectancy of the
Participant and his Beneficiary.
IN WITNESS WHEREOF, the Sponsor has executed this Fifth Amendment on
the day and year first above written.
ZALE CORPORATION
By: Gregory Humenesky
-------------------------------------------
Title: Senior Vice President - Human Resources
----------------------------------------
5
<PAGE> 97
SIXTH AMENDMENT
TO THE
ZALE CORPORATION SAVINGS AND INVESTMENT PLAN
This amendment, made this 30th day of April, 1998, by Zale Corporation,
a Delaware corporation (the "Sponsor"), is effective as of May 1, 1998.
W I T N E S S E T H:
WHEREAS, the Sponsor sponsors and maintains the Zale Corporation
Savings & Investment Plan (the "Plan");
WHEREAS, under Section 12.1 of the Plan, the Sponsor reserved the right
to amend the Plan at any time;
NOW, THEREFORE, BE IT RESOLVED that, effective May 1, 1998, the Plan is
hereby amended in the manner hereinafter set forth:
FIRST
Section 6.2(a) is hereby amended by adding the following sentences
immediately after the third sentence thereof:
In addition, effective May 1, 1998, a Participant may elect to invest
up to 25% of his Salary Deferral Contribution Account and up to 25% of
his future Salary Deferral Contributions in the Common Stock fund. The
purchases of Common Stock attributable to Salary Deferral Contributions
shall be in the manner described in Section 6.4 of the Plan.
IN WITNESS WHEREOF, the Sponsor has executed this Sixth Amendment on
the day and year first above written, to be effective as of May 1, 1998.
ZALE CORPORATION
By: /s/ GREGORY HUMENESKY
-------------------------------------------
Title: Senior Vice President - Human Resources
----------------------------------------
<PAGE> 1
[GARDERE & WYNNE, L.L.P. LETTERHEAD]
May 1, 1998
Zale Corporation
901 West Walnut Hill Lane
Irving, Texas 75038-1003
Gentlemen:
We have acted as counsel to Zale Corporation, a Delaware corporation
(the "Company"), in connection with the registration under the Securities Act of
1933, as amended (the "Securities Act"), on Form S-8 (the "Registration
Statement") of 850,000 shares of common stock, $0.01 par value ("Common Stock"),
of the Company which may be issued or transferred from time to time under the
Zale Corporation Savings and Investment Plan, as amended through the Sixth
Amendment thereof which is effective as of May 1, 1998 (the "Plan").
We have assisted the Company in the preparation of, and are familiar
with, the Registration Statement of the Company to be filed with the Securities
and Exchange Commission on May 1, 1998 for the registration under the Securities
Act of 850,000 shares of Common Stock relative to the Plan.
With respect to the foregoing, we have examined and have relied upon
originals or copies, certified or otherwise identified to our satisfaction, of
such corporate records, documents, orders, certificates and other instruments as
in our judgment are necessary or appropriate to enable us to render the opinion
expressed below.
Based upon the foregoing, we are of the opinion that the 850,000 shares
of Common Stock of the Company which from time to time may be issued or
transferred under the Plan in accordance with appropriate proceedings of the
Plan Administrative Committee, when so issued
<PAGE> 2
Zale Corporation
May 1, 1998
Page 2
and sold at prices in excess of the par value of the Common Stock in accordance
with the provisions of the Plan will be duly and validly authorized and issued
by the Company and fully paid and nonassessable.
We hereby consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement. In giving this consent, we do not thereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
GARDERE & WYNNE, L.L.P.
By: /s/ SUZAN E. FENNER
------------------------
Suzan E. Fenner, Partner
<PAGE> 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our reports dated September 3,
1997 included in Zale Corporation's Form 10-K for the year ended July 31, 1997
and to all references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Dallas, Texas
May 1, 1998
