______________________________________________
KRISPY KREME PROFIT-SHARING
STOCK OWNERSHIP PLAN
EFFECTIVE FEBRUARY 1, 1999
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TABLE OF CONTENTS
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ARTICLE 1.....................................................................................................1
DEFINITIONS...................................................................................................1
ARTICLE 2.....................................................................................................9
ADMINISTRATION OF THE PLAN....................................................................................9
2.1 Designation of Plan Administrator................................................................9
2.2 Allocation of Responsibility Among Fiduciaries for Plan and Trust Administration.................9
2.3 Authority........................................................................................10
2.4 Funding..........................................................................................11
2.5 Successor Fiduciary..............................................................................11
2.6 Bond.............................................................................................11
2.7 Delegation of Services...........................................................................11
2.8 Availability of Plan.............................................................................12
2.9 Signature Authority..............................................................................12
2.10 Fiduciary Notice Requirements...................................................................12
2.11 Reliance........................................................................................12
2.12 Authorization of Benefit Distributions..........................................................12
2.13 Application and Forms for Distributions.........................................................12
2.14 Investments.....................................................................................12
2.15 Election of Investment Fund.....................................................................13
2.16 Uniform Application.............................................................................13
ARTICLE 3.....................................................................................................13
ELIGIBILITY AND PARTICIPATION.................................................................................13
3.1 Eligibility......................................................................................13
3.2 Omission of Eligible Employee....................................................................13
3.3 Inclusion of Ineligible Employee.................................................................14
3.4 Leave of Absence.................................................................................14
3.5 Maternity or Paternity Leave.....................................................................14
3.6 Status During Leave of Absence...................................................................15
3.7 Determination as to Eligibility..................................................................15
3.8 USERRA and Qualified Military Service............................................................16
ARTICLE 4.....................................................................................................16
EMPLOYER CONTRIBUTIONS........................................................................................16
4.1 Employer Contributions...........................................................................16
4.2 Adjustments.....................................................................................16
4.3 Compensation Allocation..........................................................................16
4.4 Maximum Employer Contribution....................................................................16
4.5 Form of Contribution.............................................................................17
4.6 Prohibition on Voluntary Contributions...........................................................17
4.7 Time of Contribution.............................................................................17
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ARTICLE 5.....................................................................................................17
ALLOCATIONS AND LIMITATIONS ON ALLOCATION.....................................................................17
5.1 Participant's Accounts...........................................................................17
5.2 Allocation Formula...............................................................................18
5.3 Specific Assets..................................................................................19
5.4 Simultaneous Employment..........................................................................19
5.5 Termination of Employment........................................................................20
5.6 Determination of Maximum Annual Addition.........................................................20
5.7 Excess Annual Additions..........................................................................21
5.8 Rules Relating to Employer Which Maintains One or More Qualified Defined
Contribution Plans in Addition to this Plan.................................................22
ARTICLE 6.....................................................................................................22
ADMINISTRATION OF FUNDS.......................................................................................22
6.1 Expenses of Trust................................................................................22
6.2 Maintenance of Accounts..........................................................................22
6.3 Investment in Employer Stock.....................................................................23
6.4 Crediting of Accounts............................................................................23
6.5 Voting of Employer Stock.........................................................................23
6.6 Valuation........................................................................................23
6.8 Diversification Election.........................................................................23
6.9 Put Option.......................................................................................24
ARTICLE 7.....................................................................................................25
BENEFITS .....................................................................................................25
7.1 Retirement.......................................................................................25
7.2 Disability.......................................................................................26
7.3 Termination of Employment........................................................................26
7.4 Death............................................................................................28
7.5 Method of Distribution of Benefits...............................................................29
7.6 Form of Distribution.............................................................................29
7.7 Commencement of Distribution of Benefits.........................................................30
7.8 Limitation on the Distribution of Benefits.......................................................31
7.9 Restrictions on Methods of Distribution..........................................................32
7.10 Direct Rollovers................................................................................32
7.11 Qualified Domestic Relations Orders.............................................................33
7.12 Definitions.....................................................................................35
ARTICLE 8.....................................................................................................36
ACCOUNTING PROCEDURES.........................................................................................36
8.1 Trust Accounts...................................................................................36
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ARTICLE 9.....................................................................................................37
ADOPTION, AMENDMENT, TERMINATION, MERGER, ....................................................................37
CONSOLIDATION OR TRANSFER OF ASSETS...........................................................................37
9.1 Amendment of Plan................................................................................37
9.2 Election of Prior Vesting........................................................................38
9.3 Discontinuance of Contributions and Termination of Plan and Trust................................38
9.4 Merger, Consolidation, or Transfer...............................................................39
9.5 Adoption By Affiliated Employers.................................................................39
9.6 Designation of Agent.............................................................................39
ARTICLE 10....................................................................................................39
MISCELLANEOUS PROVISIONS......................................................................................39
10.1 No Guaranty of Employment.......................................................................39
10.2 Provision of Benefits...........................................................................39
10.3 Headings........................................................................................40
10.4 Governing Law...................................................................................40
10.5 Spendthrift Clause..............................................................................40
10.6 Severability....................................................................................40
10.7 Authority of Trustee............................................................................40
10.8 Claims..........................................................................................41
10.9 Number and Gender...............................................................................41
10.10 Audit..........................................................................................41
ARTICLE 11....................................................................................................42
TOP-HEAVY PLAN RULES..........................................................................................42
11.1 Effect of Article 11 on Plan....................................................................42
11.2 Definitions.....................................................................................43
11.3 Minimum Contribution............................................................................46
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KRISPY KREME PROFIT-SHARING
STOCK OWNERSHIP PLAN
THIS PLAN is executed as of the 30th day of January, 2000, effective as
of the 1st day of February, 1999, by Krispy Kreme Doughnut Corporation.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Krispy Kreme Doughnut Corporation wishes to establish and
adopt, for the benefit of its employees, a stock bonus plan and for such plan to
qualify pursuant to the requirements of section 401(a) of the Code; and
WHEREAS, the Board of Directors of Krispy Kreme Doughnut Corporation
has authorized the establishment and adoption of the Krispy Kreme Profit-Sharing
Stock Ownership Plan (the "Plan") that shall comply with the requirements of the
Internal Revenue Code of 1986 and other changes in the law, including, but not
limited to, the Omnibus Budget Reconciliation Act of 1986, the Omnibus Budget
Reconciliation Act of 1987, the Technical and Miscellaneous Act of 1988, the
Omnibus Budget Reconciliation Act of 1989, the Omnibus Budget Reconciliation Act
of 1990, the Unemployment Compensation Amendments of 1992, the Omnibus Budget
Reconciliation Act of 1993, the Uniformed Services Employment and Reemployment
Rights Act of 1994, the Small Business Job Protection Act of 1996 and the
Taxpayer Relief Act of 1997; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Plan is hereby established and adopted to read
as follows effective February 1, 1999, except as otherwise provided herein:
ARTICLE 1
DEFINITIONS
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When used herein, the following words shall have the following meanings
unless the context clearly indicates otherwise:
1.1 "ACCOUNT" shall mean those account(s) established and maintained on
behalf of a Participant, including, but not limited to the Participant's Stock
Account and Other Investments Account, as well as any other accounts which may
be established for a Participant from time to time by the Plan Administrator, in
its discretion.
1.2 "ADJUSTMENT DATE" shall mean the last day of the Plan Year, which
is January 30 in each year.
1.3 "ADJUSTMENT FACTOR" shall mean the cost of living adjustment factor
prescribed by the Secretary of the Treasury under section 415(d) of the Code,
as applied to such items and in such manner as the Secretary shall provide.
1.4 "AFFILIATED EMPLOYER" shall mean any corporation which is a member
of a controlled group of corporations (as defined in section 414(b) of the Code,
as modified by section 415(h) of the Code), which includes the Employer; any
trade or business (whether or not incorporated) which is under common control
(as defined in section 414(c) of the Code, as modified by section 415(h) of the
Code) with the Employer; any organization (whether or not incorporated) which is
a member of an affiliated service group (as defined in section 414(m) of the
Code) which includes the Employer; and any other entity required to be
aggregated with the Employer pursuant to Regulations under section 414(o) of the
Code.
1.5 "AGENT FOR SERVICE OF LEGAL PROCESS" shall be the Plan
Administrator or such other person as shall be so designated in writing by the
Board of Directors.
1.6 "Anniversary Date" shall mean for each year of the Plan, the last
day of the Plan Year.
1.7 "ANNUAL ADDITION" shall mean the amount allocated to a
Participant's Account during the Limitation Year that constitutes:
(a) Employer contributions,
(b) Employee contributions (although Employee contributions are
not permitted under the Plan),
(c) Amounts allocated to an individual medical account, as defined
in section 415(1)(2) of the Code, which is part of a pension or annuity plan
maintained by the Employer, and
(d) Amounts derived from contributions paid or accrued, which are
attributable to post-retirement medical benefits allocated to the separate
account of a Key Employee (as defined in section 419A(d)(3) of the Code), under
a welfare benefit plan (as defined in section 419(e) of the Code) maintained
by the Employer.
1.8 "BENEFICIARY" shall mean such person or persons or legal entity as
may be entitled as a matter of law to receive or designated by a Participant to
receive benefits hereunder after the Participant's death, all as herein
prescribed and provided. If a Participant is married on the applicable date, the
Participant's spouse shall be the Beneficiary unless such spouse shall have
waived in writing all rights to receive the Participant's Account, by consenting
to the Participant's selection of another Beneficiary as provided in subsection
7.4(b). If the Participant shall have no surviving spouse, or if the
Participant's spouse has properly waived her rights to receive any or all of the
Account of the Participant, Beneficiary shall mean the person or persons
designated by the Participant as his Beneficiary.
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1.9 "BOARD OF DIRECTORS" shall mean the Board of Directors of Krispy
Kreme Doughnut Corporation, or its successors. To the extent the Board of
Directors has delegated any of its authority or responsibilities with respect to
the Plan, references to the Board of Directors shall include the entity or
individuals to whom such authority or responsibilities have been delegated.
1.10 "BREAK IN SERVICE" shall mean, subject to the provisions of
Article 3, a Plan Year during which the Employee has completed 500 or fewer
Hours of Service with the Employer (excluding, however, any period covered by an
authorized leave of absence).
1.11 "CODE" shall mean the Internal Revenue Code of 1986, and any
amendments thereto.
1.12 "COMPENSATION" shall mean total cash compensation paid by the
Employer to the Participant during the Plan Year which is required to be
reported as wages on the Participant's Form W-2, including regular bonus
compensation payments, overtime and the amount of any salary reduction elected
by a Participant pursuant to a plan maintained by the Employer under section 125
or section 401(k) of the Code. The maximum amount of compensation that may be
taken into account pursuant to section 401(a)(17) of the Code, is limited to one
hundred sixty thousand dollars ($160,000), which limit shall be adjusted to
reflect cost-of-living increases pursuant to section 401(a)(17)(B) of the Code.
The cost-of-living adjustment in effect for a calendar year applies to any
period, not exceeding 12 months, over which Compensation is determined
(determination period) beginning in such calendar year. If a determination
period consists of fewer than 12 months, the compensation limit set forth under
the Omnibus Budget Reconciliation Act of 1993 ("OBRA '93") 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.
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.
If Compensation for any prior determination period is taken into
account in determining a Participant's benefits accruing in the current Plan
Year, the Compensation for that prior determination period is subject to the
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the first
day of the first Plan Year beginning on or after January 1, 1994, the OBRA '93
annual compensation limit is $150,000.
1.13 "CURRENT OBLIGATIONS" shall mean Trust obligations arising from
extension of credit to the Trust and payable in cash within one year from the
date an Employer contribution is due. Trust obligations shall include the
liability for payment of taxes imposed by section 2001 of the Code, which
liability is incurred pursuant to section 2210(b) of the Code.
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1.14 "DEFINED CONTRIBUTION DOLLAR LIMITATION" shall mean $30,000, or,
if greater, one-fourth of the defined benefit dollar limitation which is in
effect for the Limitation Year, pursuant to section 415(b)(1) of the Code.
1.15 "DISABILITY" shall mean the total and permanent incapacity of a
Participant to engage in any occupation for wage or profit for which the
Participant is qualified by reason of training, education or experience.
Disability shall be deemed to exist when determined by the Plan Administrator
upon the basis of the certificate of a qualified physician approved by the Plan
Administrator and such other evidence as the Plan Administrator deems
acceptable. The determination shall be applied uniformly to all Participants.
1.16 "EFFECTIVE DATE" shall mean the 1st day of February, 1999.
1.17 "ELIGIBILITY YEAR" shall mean the attainment of age 18 and the
completion of at least 1,000 Hours of Service during 12 consecutive months of
service with the Employer. The calculation of the initial 12 month period shall
begin on the Employee's Employment Commencement Date, and each successive 12
month period shall begin on the Anniversary Date of the Plan following the
Employee's Employment Commencement Date.
1.18 "EMPLOYEE" shall mean any individual who is employed by the
Employer; provided, however, the term "Employee" shall not include (a) leased
employees who are "Leased Employees" within the meaning of section 414(n) or (o)
of the Code; or (b) individuals who are treated as independent contractors by
the Employer, regardless of whether the Internal Revenue Service requires that
such individuals be considered employees for any purpose.
1.19 "EMPLOYER" shall mean Krispy Kreme Doughnut Corporation and any
entity with or into which they may be merged or consolidated or to which their
assets may be sold, and any entity which is or may become an Affiliated Employer
and adopts the Plan; provided, however, the inclusion of an entity within or the
removal of any entity from the meaning of the word "Employer," for purposes of
participation of such entity as an Employer under the Plan, shall be effected
only by action of its governing body and the Board of Directors.
1.20 "EMPLOYER STOCK" shall mean a "qualifying employer security" of
the Employer within the meaning of section 4975(e)(8) of the Code or Regulation
section 54.4975-12. The term "Employer Stock" shall include Stock as defined
below.
1.21 "EMPLOYMENT COMMENCEMENT DATE" shall mean the date on which an
Employee first performs an Hour of Service for the Employer; provided, however,
if an Employee shall have incurred a Break in Service as provided for in Section
1.10, and his prior service for purposes of Plan eligibility is forfeited, the
Employee's Employment Commencement Date shall be the date on which such Employee
first performs an Hour of Service following his return after such Break in
Service.
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1.22 "EMPLOYMENT WITH THE EMPLOYER" shall, for all purposes of this
Plan, include any period that an Employee was employed by an Employer, as
defined in Section 1.19, subject to the Break in Service rules set forth in this
Plan.
1.23 "ENTRY DATE" shall mean the first day of the first month
coinciding with or immediately following an Employee's completion of the
eligibility requirements set forth in Sections 1.17 and 3.1.
1.24 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, and all amendments thereto.
1.25 "FIDUCIARY" means the Plan Administrator and any fiduciary to whom
duties have been delegated pursuant to Article 2 of the Plan.
1.26 "HIGHLY COMPENSATED EMPLOYEE" includes highly compensated active
Employees and highly compensated former Employees.
A highly compensated active Employee means any Employee who performs
service for the Employer during the determination year and who:
(a) was a 5 percent owner at any time during the year or the
preceding year, or
(b) for the preceding year:
(i) had compensation from the Employer in excess of $80,000
(indexed as such time and in such manner as the Secretary of the Treasury may
provide), and
(ii) if the Employer elects the application of this clause
for such preceding year, was in the top-paid group of employees (i.e., was among
the top 20% of employees in compensation) for such preceding year.
Compensation is compensation within the meaning of Code Section
415(c)(3), but without regard to Code Sections 125, 402(e)(3), 402(h)(1)(B) or
403(b).
The determination of who is a Highly Compensated Employee, including
the determination of the number and identity of Employees in the top-paid group,
will be made in accordance with the provisions of Code Section 414(q) and the
regulations thereunder.
A former employee shall be treated as a "Highly Compensated Employee"
if such employee was a Highly Compensated Employee when he or she separated from
service or who was a Highly Compensated Employee at any time after attaining age
fifty-five (55).
For all purposes of this definition, Employers aggregated under Section
414(b), (c), (m) or (o) are treated as a single Employer.
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1.27 "HOUR OF SERVICE" shall mean:
(a) Each hour for which an Employee is directly or indirectly
paid, or entitled to payment, for the performance of duties for the Employer.
These hours shall be credited to the Employee as of the time the duties are
performed;
(b) Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time during which no duties
are performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of absence (including
maternity or paternity leave). No more than 501 Hours of Service shall be
credited under this subsection for any single continuous period (whether or not
such period occurs in a single Plan Year). Hours under this Section shall be
calculated and credited pursuant to section 2530.200b-2 of the Department of
Labor Regulations, the provisions of which are incorporated herein by reference;
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same Hours of
Service shall not be credited both under subsection 1.27(a) or 1.27(b), as the
case may be, and under this subsection. These hours shall be credited to the
Employee for the time as of which the award or agreement pertains rather than
the time the award, agreement or payment is made;
(d) Where the Employer maintains the plan of a predecessor
employer, unless specifically stated otherwise, service for such predecessor
employer shall be treated as service for the Employer.
1.28 "INACTIVE PARTICIPANT" shall mean any Employee or former Employee
who has ceased to be a Participant and on whose behalf an Account is maintained
under the Plan.
1.29 "INVESTMENT MANAGER" shall mean the person or persons (if any)
designated by the Board of Directors who shall be charged with the management of
all or a portion of the assets of the Trust. An Investment Manager is any
person, firm or corporation other than the Trustee who (a) has the power to
manage, acquire, or dispose of any portion of the Trust Fund; (b) is registered
as an investment advisor under the Investment Advisors Act of 1940, is a bank as
defined in that Act, or is an insurance company qualified to perform the
services described in (a) above; and (c) has acknowledged in writing that it is
a fiduciary with respect to the Plan.
1.30 "LIMITATION YEAR" as defined by section 415 of the Code, shall be
the period from February 1 to January 30, subject to any necessary adjustments,
as determined by the Plan Administrator, on account of the date the Plan was
established. If the Limitation Year is amended to a different twelve consecutive
month period, the new Limitation Year must begin on a date within the Limitation
Year in which the amendment is made.
1.31 "NAMED FIDUCIARY" shall mean the person or persons, designated as
hereinafter provided, who shall be in charge of the operation and administration
of the Plan or Trust. "Fiduciary" means any person who (a) exercises any
discretionary authority or discretionary control respecting management of the
6
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Plan or exercises any authority or control respecting management or disposition
of its assets, (b) renders investment advice for a fee or other compensation,
direct or indirect, with respect to any moneys or other property of the Plan or
Trust, or has any authority or responsibility to do so, or (c) has any
discretionary authority or responsibility in the administration of the Plan or
Trust, including, but not limited to, the Trustee, the Board of Directors, and
the Plan Administrator, as well as Participants or Beneficiaries, as applicable,
to the extent such Participants or Beneficiaries may exercise investment
direction or voting rights.
1.32 "NORMAL RETIREMENT DATE" shall mean the Adjustment Date coinciding
with or following the 65th birthday of a Participant; and "Normal Retirement
Age" shall mean age 65.
1.33 "OTHER INVESTMENTS ACCOUNT" shall mean an account which consists
of investments, other than Employer Stock, cash dividends on Employer Stock, and
earnings and losses on these amounts.
1.34 "PARTICIPANT" shall mean any Employee who has met the eligibility
requirements of the Plan and who shall have acquired an interest in the Trust
Fund pursuant to the provisions of the Plan.
1.35 "PLAN" shall mean the Krispy Kreme Profit-Sharing Stock Ownership
Plan, as set forth in this document and all subsequent amendments thereto, which
Plan is a stock bonus plan under section 401(a) of the Code.
1.36 "PLAN ADMINISTRATOR," as that term is defined in section 3(16)(A)
of ERISA and section 414(g) of the Code, shall be the named fiduciary with
authority to control and manage the operation and administration of the Plan.
The Plan Administrator shall be Krispy Kreme Doughnut Corporation, or its
successor, unless Krispy Kreme Doughnut Corporation, or its successor, shall
appoint a committee of three (3) or more persons as Plan Administrator. The
Board of Directors may, in accordance with Section 2.2 hereof, replace an
administrative committee by appointing a successor committee of three or more
persons as Plan Administrator.
1.37 "PLAN YEAR" shall mean the 12 month period commencing February 1,
1999, and ending January 30, 2000. Thereafter, Plan Year shall mean the 12 month
period ending with the last day of the Employer's Taxable Year.
1.38 "QUALIFIED ELECTION PERIOD" shall mean the five Plan Year period
beginning with the later of:
(a) the Plan Year after the Plan Year in which the Participant
attains age 55; or
(b) the Plan Year after the Plan Year in which the Participant
first becomes a "Qualified Participant."
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1.39 "QUALIFIED PARTICIPANT" shall mean a Participant who has attained
age 55, and who has been a Participant of the Plan for at least ten years.
1.40 "REGULATION" shall mean the income tax regulations as promulgated
by the Secretary of the Treasury or his delegate, and as amended from time to
time.
1.41 "STOCK" shall mean common stock issued by the Employer, or
Affiliated Employer, which is readily tradable on an established securities
market; provided, however, "Stock" shall also include common stock issued by the
Employer, or Affiliated Employer, having a combination of voting power and
dividend rights equal to or in excess of those classes of common stock of the
Employer or Affiliated Employer having the greatest voting power and the
greatest dividend rights.
1.42 "STOCK ACCOUNT" shall mean an account which consists of whole and
fractional shares of Stock, and with stock dividends paid on such Stock.
1.43 "TAXABLE YEAR" shall mean the 12 month period adopted by the
Employer as its fiscal year for tax purposes. The Taxable Year of Krispy Kreme
Doughnut Corporation is the 12 month period ending on the Sunday closest to
January 31 of each year. If, at any time, the term "Employer" shall include more
than one separate entity and all such separate entities shall not have the same
fiscal year, the fiscal year of each separate entity shall be the "Taxable Year"
for each such separate entity.
1.44 "TRUST" as used herein shall mean the legal entity resulting from
the agreement between Krispy Kreme Doughnut Corporation and the Trustee by which
the Plan contributions shall be received, held, invested, and disbursed to or
for the benefit of Participants and/or Beneficiaries. Such agreement shall be
referred to herein as the "Trust Agreement."
1.45 "TRUSTEE" shall mean the person, persons or corporation,
association, or a combination thereof appointed under the agreement establishing
the Trust, who may at any time possess any power or control over the management
or disposition of the funds or other property constituting the assets of this
Plan.
1.46 "TRUST FUND" shall mean all funds received by the Trustee together
with any increments or decrements thereon.
1.47 "VALUATION DATE" shall mean the date upon which Accounts are
valued and allocations made, which shall be the Adjustment Date of each Plan
Year and any other dates selected by the Plan Administrator. If it becomes
necessary to sell, exchange or transfer Plan assets on a date other than the
Valuation Date, the Plan Administrator may, from time to time, establish a
special Valuation Date, in a manner which it deems appropriate to assure the
equitable treatment of all Participants.
1.48 "YEAR OF SERVICE" shall mean a Plan Year during which an Employee
is credited with at least 1,000 Hours of Service or more with the Employer.
Years of Service completed by an Employee with any corporation, partnership, or
proprietorship which is a member of a controlled group of corporations within
the meaning of section 1563(a) of the Code, determined without regard to
sections 1563(a)(4) and 1563(e)(3)(C) of the Code, or is a member of an
Affiliated Service Group with the Employer, or has adopted the Plan as an
Employer shall be recognized as Years of Service with the Employer.
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ARTICLE 2
ADMINISTRATION OF THE PLAN
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2.1 DESIGNATION OF PLAN ADMINISTRATOR. The Plan Administrator shall be
---------------------------------
in charge of the operation and the administration of the Plan. The Plan
Administrator shall have the power to delegate specific fiduciary
responsibilities (other than the fiduciary responsibilities of the Trustee
relating to the control of the Trust Fund). Such delegation of fiduciary
responsibilities may be to officers or Employees of the Employer, or to other
individuals, all of whom shall serve at the pleasure of the Plan Administrator;
and any individuals who are full-time Employees of the Employer shall serve
without compensation. Any person to whom fiduciary duties have been delegated
may resign upon reasonable notice by delivering a written resignation to the
Plan Administrator; however, the resignation shall not relieve such person from
any breach of fiduciary duty that arose prior to the resignation or because of
the resignation. Vacancies created by resignation, death, or other cause may be
filled by the Plan Administrator; or the assigned responsibilities may be
reabsorbed by or re-delegated by the Plan Administrator.
2.2 ALLOCATION OF RESPONSIBILITY AMONG FIDUCIARIES FOR PLAN AND TRUST
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ADMINISTRATION. The Fiduciaries shall have only those specific powers, duties,
--------------
responsibilities, and obligations as are specifically given or delegated to them
under this Plan and the Trust Agreement. The Employer shall have the sole
responsibility for making the contributions under the Plan as specified in
Article 4. The Board of Directors shall have the sole authority to appoint and
remove the Plan Administrator, any Trustee or Trustees, any Investment Manager
which may be appointed pursuant to this Plan and the Trust Agreement, and to
amend or terminate, in whole or in part, this Plan or the Trust Agreement;
provided, however, that the Board of Directors may delegate to the Compensation
Committee of the Board of Directors all such authority, other than the authority
to terminate the Plan. The Plan Administrator shall have the sole responsibility
for the administration of the Plan, which responsibility is specifically
described in this Plan. Subject to the rights of Qualified Participants to make
a diversification election, and further subject to the voting rights of
Participants and Beneficiaries as Named Fiduciaries pursuant to this Plan and
the Trust Agreement, the Trustee shall have the sole responsibility for the
administration of the Trust and the management of the assets held under the
Trust, except to the extent an Investment Manager has been appointed, all as
specifically provided herein. Each Fiduciary warrants that any directions given,
information furnished, or action taken by it shall be in accordance with the
provisions of the Plan and the Trust Agreement authorizing or providing for such
direction, information or action. It is intended under this Plan and the Trust
Agreement that each Fiduciary shall be responsible for the proper exercise of
its own powers, duties, responsibilities and obligations under this Plan and
shall not be responsible for any act or failure to act of another Fiduciary. No
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Fiduciary guarantees the Trust or any Participant or Beneficiary in any manner
against investment loss or depreciation in asset value.
2.3 AUTHORITY. The Plan Administrator shall administer the Plan in
---------
accordance with its terms and shall have the power to exercise its discretion in
determining all questions arising in connection with the administration,
interpretation, and application of the Plan. The Plan Administrator shall
interpret and construe the provisions of this Plan, decide any disputes which
may arise with regard to the rights of Employees, Participants, and their legal
representatives or Designated Beneficiaries under the terms of this Plan, and,
in general, direct the administration of this Plan. The decision of the Plan
Administrator in matters within its jurisdiction shall be final, binding, and
conclusive upon the Employer and upon all Employees, Participants, Designated
Beneficiaries, and every other person or party interested or concerned. The
duties of the Plan Administrator shall include, but shall not be limited to the
following:
(a) Determine all questions relating to the eligibility of
Employees to participate or remain a Participant hereunder.
(b) Compute, certify, and direct the Trustee with respect to the
amount and kind of benefits to which any Participant shall be entitled hereunder
and to prescribe procedures to be followed by Participants or Beneficiaries for
filing applications for distributions.
(c) Authorize and direct the Trustee with respect to all
nondiscretionary or otherwise directed disbursements from the Trust.
(d) Maintain all necessary records for the administration of the
Plan.
(e) Interpret the provision of the Plan and to make and
publish such rules for regulation of the Plan as are consistent with the terms
thereof.
(f) Determine the size and type of any contract to be
purchased from any insurer, if any, and to designate the insurer from which such
contract shall be purchased.
(g) Compute and certify to the Employer and to the Trustee from
time to time the sums of money necessary or desirable to be contributed to the
Trust.
(h) Consult the Board of Directors and the Trustee regarding the
short and long-term liquidity needs of the Plan in order that the Trustee can
exercise any investment discretion in a manner designed to accomplish specific
objectives.
(i) Establish and communicate to Participants a procedure and
method to insure that each Participant will vote Employer Stock allocated to
such Participant's Stock Account pursuant to the Plan and the Trust Agreement.
(j) Enter into a written agreement with regard to the payment of
federal estate tax pursuant to section 2210(b) of the Code.
10
<PAGE>
(k) Assist any Participant regarding his rights, benefits, or
elections available under the Plan.
2.4 FUNDING. The Plan Administrator shall establish the general
-------
investment policy and objectives for the Trust Fund, consistent with the needs
of the Plan and the requirements of ERISA, and shall communicate same to the
Trustee and to any Investment Manager who may then be serving as such, as
promptly as practicable after establishing or revising same. It shall be the
responsibility of any such Investment Manager to advise the Plan Administrator
and the Trustee at reasonable intervals and at such other times as the Plan
Administrator or the Trustee shall request of all investments and reinvestments
of the Trust Fund made in furtherance of such investment policy and objectives.
The Plan Administrator shall be charged with maintaining the funding method and
policy, with such duties and responsibilities including, but not limited to a
periodic review, not less often than annually, to determine whether the funding
policy and method are consistent with the current needs of the Plan.
2.5 SUCCESSOR FIDUCIARY. Upon the death, resignation, or inability to
-------------------
serve of any person to whom the Employer, Board of Directors or Plan
Administrator has delegated fiduciary duties, a successor fiduciary shall be
appointed within 30 days. If the Employer shall cease to exist, or be dissolved,
voluntarily or involuntarily, or have a receiver or trustee in bankruptcy
appointed, a successor fiduciary shall be appointed within 30 days by the then
remaining persons (if any) to whom fiduciary duties have been delegated. If
there are no remaining persons to whom the Board of Directors or Plan
Administrator has delegated fiduciary duties, or in the event of the inability,
failure, or refusal of the then remaining fiduciaries to make such appointment,
a successor fiduciary shall be selected by a majority of the Participants under
the Plan who are Employees of the Employer at the time of the occurrence of the
foregoing events.
2.6 BOND. A fidelity bond or other surety shall be required of the Plan
----
Administrator, as well as all individuals to whom fiduciary duties have been
delegated or will be delegated, and such bond will be of the type required by
the terms and provisions of ERISA and the regulations issued pursuant thereto,
and shall be in an amount equal to the greater of one thousand ($1,000) dollars,
or ten percent (10%) of the assets in the Plan, but need not be greater than
five hundred thousand dollars ($500,000) unless provided otherwise by the
Secretary of Labor or ERISA. The payment of premiums of such bond or other
surety shall be paid by the Employer within a reasonable time, or, upon its
failure to do so, by the Trustee from the Trust Fund.
2.7 DELEGATION OF SERVICES. The Plan Administrator and those to whom it
----------------------
has delegated fiduciary duties may employ such counsel and agents and obtain
such clerical and other services (including accounting, legal counsel, and
investment managers and advisors) as may be required in carrying out the
provisions of the Plan. All fees, charges, and costs relating to the
administration of the Plan shall be paid by the Employer, or, if the expense
specifically relates to administration of the Plan or the Trust, such expenses
may be paid by the Trustee from the Trust Fund, consistent with the requirements
of ERISA.
11
<PAGE>
2.8 AVAILABILITY OF PLAN. The principal terms of the Plan shall be
---------------------
communicated to the Employees by the Employer. Copies of the Plan and the Trust
Agreement shall be available to each Participant hereunder by having a copy
available at the principal offices of the Employer during business hours.
2.9 SIGNATURE AUTHORITY. If the Plan Administrator shall delegate
--------------------
specific fiduciary responsibilities, it may designate and authorize one or more
of the persons so delegated to sign documents for it, and shall further notify
the Trustee of such action and the name or names of the person or persons so
designated. The Trustee shall thereafter accept and rely upon any document
executed by such person or persons as representing action by the Plan
Administrator until the Plan Administrator shall deliver to the Trustee a
written revocation of such designation.
2.10 FIDUCIARY NOTICE REQUIREMENTS. The Plan Administrator and those to
-----------------------------
whom it has delegated fiduciary duties shall notify the Trustee of any action
taken with respect to the Plan and when required to do so, shall notify any
other interested party. The Plan Administrator and those to whom it has
delegated fiduciary duties shall maintain all such books of account, records,
and other data as shall be necessary to properly administer the Plan and meet
the disclosure and reporting requirements of ERISA and the Code. The Plan
Administrator shall ensure that the Plan is in compliance with the various
reporting requirements set forth in ERISA, the Code and the regulations
thereunder.
2.11 RELIANCE. The Plan Administrator shall be entitled to rely
--------
conclusively upon, and shall be fully protected in any actions taken by it in
good faith and in reliance upon, any opinions or reports which shall be
furnished to it by any accountant, actuary, counsel, or other specialist. The
Plan Administrator shall not incur any liability for its action or failure to
act, excepting only liability for its own gross negligence or willful
misconduct. The Employer shall indemnify each person to whom the Plan
Administrator has delegated fiduciary duties against all claims, losses,
damages, expenses, and liabilities arising from any action or failure to act,
except when the same is judicially determined to be due to the gross negligence
or willful misconduct of such person.
2.12 AUTHORIZATION OF BENEFIT DISTRIBUTIONS. The Plan Administrator or
--------------------------------------
its agent shall issue directions to the Trustee concerning all distributions
which are to be made from the Trust Fund pursuant to the provisions of the Plan,
and shall warrant that all such directions are in accordance with this Plan.
2.13 APPLICATION AND FORMS FOR DISTRIBUTIONS. The Plan Administrator
---------------------------------------
may require a Participant to complete and file with the Plan Administrator an
application for a distribution, and all other forms approved by the Plan
Administrator, and to furnish all pertinent information requested by the Plan
Administrator. The Plan Administrator may rely upon all such information so
furnished it, including the Participant's current mailing address.
2.14 INVESTMENTS. The Committee shall have the power, but shall not be
-----------
required, to direct the investments and reinvestments of the principal and
income of the Trust Fund, subject to the limitations provided in this Plan and
the Trust Agreement as to the character of the investments permitted, and
further subject to the limitations of ERISA as determined by the Trustee. In
12
<PAGE>
addition, the Board of Directors shall have the authority, but shall not be
required, to select one or more Investment Managers to manage all or any portion
of the Trust Fund. The Board of Directors may delegate to the Investment Manager
the power to direct the acquisition and disposition of assets held in the Trust
Fund. If the Board of Directors should appoint an Investment Manager, it shall
indemnify against liability for the acts or omissions of the Investment Manager
all other persons to whom it has delegated fiduciary duties, except if such
fiduciary knows that by its act or failure to act it is committing a breach of
fiduciary duty. Any Investment Manager shall serve at the pleasure of the Board
of Directors but may resign, with reasonable notice, by filing a written
resignation with the Board of Directors. The Investment Manager shall indemnify
each person to whom it has delegated fiduciary duties against any and all
claims, losses, damages, expenses, and liabilities arising from any action or
failure to act, except when the same is judicially determined to be due to the
gross negligence or willful misconduct.
2.15 ELECTION OF INVESTMENT FUND. The Plan Administrator may authorize
---------------------------
the use of one or more Investment Funds with respect to the diversification
election of a Qualified Participant, pursuant to Section 6.8 of the Plan.
"Investment Fund" shall mean the investment alternatives within the Trust Fund,
selected by the Plan Administrator and maintained by the Trustee to which the
Participants are allowed to direct the investment of their Accounts. The Plan
Administrator shall notify each Qualified Participant of the available
Investment Funds prior to his Qualified Election Period, and shall promulgate
written procedures for making a diversification election.
2.16 UNIFORM APPLICATION. The provisions of this Plan shall apply to
-------------------
all Participants uniformly.
ARTICLE 3
ELIGIBILITY AND PARTICIPATION
-----------------------------
3.1 ELIGIBILITY. Each Employee who is in the employ of the Employer and
-----------
has attained age 18 shall be eligible to participate in the Plan upon completion
of one Eligibility Year. Such Employee shall commence participation in the Plan
as of the Entry Date coincident with or next following completion of such
Eligibility Year. If an Affiliated Employer which has not previously
participated in the Plan shall join the Plan, Employees of such Affiliated
Employer who have completed the equivalent of an Eligibility Year with the
Affiliated Employer at the time the Affiliated Employer adopted the Plan shall
immediately be entitled to participate. The Employer shall give each prospective
eligible Employee written notice of his eligibility to participate in the Plan
prior to the date as of which he shall complete one Eligibility Year. If an
Employee has a Break in Service before satisfying the Plan's requirement for
eligibility, service before such break will not be taken into account.
3.2 OMISSION OF ELIGIBLE EMPLOYEE. If, in any Plan Year, any Employee
-----------------------------
who should be included as a Participant in the Plan is erroneously omitted and
discovery of such omission is not made until after a contribution by the
Employer for the year has been made, the Employer shall make a subsequent
13
<PAGE>
contribution with respect to the omitted Employee in the amount which the
Employer would have contributed with respect to such Employee had he not been
omitted. Such contribution shall be made regardless of whether or not it is
deductible in whole or in part in any Taxable Year under applicable provisions
of the Code.
3.3 INCLUSION OF INELIGIBLE EMPLOYEE. If, in any Plan Year, any person
--------------------------------
who should not have been included as a Participant in the Plan is erroneously
included and discovery of such incorrect inclusion is not made until after a
contribution for the year has been made, the Employer shall not be entitled to
recover the contribution made with respect to the ineligible person regardless
of whether or not a deduction is allowable with respect to such contribution. In
such event, the amount contributed with respect to the ineligible person shall
constitute a forfeiture for the Plan Year in which the discovery is made.
3.4 LEAVE OF ABSENCE. For purposes of determining the period of
-----------------
employment of any Employee, an Employee shall be deemed to be actively employed
with the Employer during periods covered by an authorized leave of absence, with
or without pay, provided, however, no more than 501 Hours of Service shall be
credited on behalf of a Participant during a leave of absence, and shall be
credited solely to prevent a Break in Service, unless otherwise provided by law.
Absence from work for the following reasons shall constitute an authorized leave
of absence:
(a) Illness or accident.
(b) A leave of absence authorized by the Employer, under the
Employer's standard personnel practices (as from time to time amended), provided
that the terms thereof shall be applied uniformly to all Employees similarly
situated, and, provided further, that the Employee returns to service after the
end of the leave of absence.
(c) During a period of national emergency or as required by the
Selective Service Act of 1948 or a subsequent act of like intent or purpose
requiring service with the armed forces, the government of the United States,
the Coast Guard, or Public Health Service, provided the Employee returns to the
service of the Employer within 90 days after completion of service as described
above, or such longer period during which the Employee's employment rights are
protected by law.
Notwithstanding any of the above provisions, an Employee who is not a
Participant under the Plan at the time such authorized leave of absence
commences shall not become eligible for membership in the Plan until he returns
to active employment with the Employer.
3.5 MATERNITY OR PATERNITY LEAVE. During a maternity or paternity leave
----------------------------
of absence, no more than 501 Hours of Service shall be credited on behalf of a
Participant, and shall be credited solely to prevent a Break in Service. With
regard to maternity or paternity leave of absence, the following special
provisions shall apply:
14
<PAGE>
(a) An Employee shall be deemed to be on a maternity or
paternity leave of absence if he is absent from work for any period because of
the Employee's pregnancy, the birth of a child of the Employee, or the placement
of a child with the Employee in connection with the adoption of the child by the
Employee, or for purposes of caring for the child for the period immediately
following the child's birth or placement.
(b) An Employee shall be credited with the number of Hours of
Service which would otherwise normally have been credited to him or her but for
such absence, or, if such Hours of Service cannot be determined, the Employee
will be credited with eight Hours of Service per day for the duration of the
absence; provided, however, the total number of Hours of Service credited to the
Employee by reason of such pregnancy, birth or placement shall not exceed 501
hours.
(c) Hours of Service credited as a result of maternity or
paternity leave shall be credited in the computation period in which the absence
from work begins, if solely because such Hours of Service are credited, the
Employee would be prevented from incurring a Break in Service in such period. In
all other cases such Hours of Service shall be credited in the immediately
following computation period.
(d) No credit will be given for a maternity or paternity leave
of absence unless the Employee furnishes the Plan Administrator whatever timely
information it may require to establish that the absence from work is for one of
the reasons described in subsection (a) above, as well as whatever timely
information is necessary to establish the number of days of the absence.
3.6 STATUS DURING LEAVE OF ABSENCE. If an Employee is on an authorized
------------------------------
leave of absence after he has become a Participant under the Plan, he shall
continue to remain a Participant during such leave of absence. However, during
the period of such leave of absence, no Employer contributions shall be
allocated to the credit of his Account except upon the basis of such
compensation as he may receive from the Employer during the leave of absence. If
the Participant does not return to the employ of the Employer upon or prior to
the expiration of the leave of absence, it shall be conclusively presumed that
his employment was terminated on or as of the date of the expiration of such
leave of absence. However, if the death of such Participant occurs prior to the
expiration of such leave of absence, the death benefit provided in Section 7.4
shall be payable to the Participant's Beneficiary.
3.7 DETERMINATION AS TO ELIGIBILITY. Any question as to the eligibility
of any Employee hereunder shall be determined by the Plan Administrator in
accordance with the terms hereof and in its sole discretion. Such determination
shall be final and conclusive for all purposes. The Plan Administrator shall
determine the eligibility of Participants in accordance with the provisions of
this Plan from the books and records of the Employer, or from such other
information or evidence as it may deem sufficient, and shall provide notice to
each Employee when he has become eligible for membership hereunder.
15
<PAGE>
3.8 USERRA AND QUALIFIED MILITARY SERVICE. Notwithstanding any
-----------------------------------------
provision of this Plan to the contrary, contributions, benefits and service
credit with respect to qualified military service will be provided in accordance
with Code Section 414(u).
ARTICLE 4
EMPLOYER CONTRIBUTIONS
----------------------
4.1 EMPLOYER CONTRIBUTIONS. For each Taxable Year of the Employer
-----------------------
during the continuance of this Plan, and within the time permitted by section
412(c)(10) of the Code, the Employer shall contribute to the Trust such amount
as it may determine to be appropriate and reasonable for such Taxable Year,
without regard to current or accumulated earnings and profits, it being the
purpose and intention of the Employer that the contributions under the Plan
shall be recurring and substantial.
4.2 ADJUSTMENTS. Although the Employer is not required to have current
-----------
or accumulated profits to make a contribution to the Plan, if the annual
contribution of the Employer to the Trust for any Taxable Year, as authorized by
the terms and provisions of this Plan, should be based upon a percentage of the
Employer's annual net profit for such year, no adjustment affecting the annual
net profit of the Employer made subsequent to 90 days after the filing of the
Employer's Federal income tax return for the particular year, whether resulting
from audit of the Employer's tax returns or otherwise, shall change the amount
of the contribution required to be made to the Trust Fund for such Taxable Year.
4.3 COMPENSATION ALLOCATION. If the contribution by the Employer for
------------------------
any Plan Year should be based upon the compensation of Participants for such
Plan Year, then in the case of a Participant who is simultaneously employed by
two or more Employers participating in the Plan, or in the case of a Participant
who has transferred during the year from the employment of one Employer to
another Employer, both of which Employers participate in the Plan, and there is
no unauthorized absence between the date employment ceases with one Employer and
the date employment commences with the other Employer, each Employer that said
Participant is employed by during the Taxable Year, whether simultaneously or as
a result of transfer, which is making a contribution for such Plan Year, shall
contribute to the Trust such amount (determined on the basis of the ratio of the
Participant's total compensation earned with each Employer to his total
aggregate compensation earned with all Employers during the Taxable Year) as
will provide for said Participant's account the sum required under the
allocation provisions of the Plan.
4.4 MAXIMUM EMPLOYER CONTRIBUTION. Notwithstanding any other provision
-----------------------------
of this Article, no annual contribution of the Employer to the Trust shall
exceed an amount equal to the maximum deduction allowable in such year for
Federal income tax purposes under section 404 of the Code, including the "carry
over" provisions (which relate to contributions in previous years of more or
less than the maximum amount deductible), or the maximum amount permitted to be
contributed pursuant to the provisions of section 415 of the Code, whichever
shall be the smaller. In this regard, if the Employer is a member of a group of
employers which constitutes either a controlled group of corporations, trades or
businesses under common control, or an "Affiliated Service Group" as that term
16
<PAGE>
is defined by section 414(m) of the Code, all of such employers shall be
considered a single Employer for purposes of applying the limitations of section
415 of the Code.
4.5 FORM OF CONTRIBUTION. The amount of the Employer's contribution for
--------------------
each year shall be paid to the Trust either in a single payment or in
installments, and either in cash or Employer Stock, or other property, as
determined by the Employer. Employer Stock and other property shall be valued as
of the time of the contribution at its fair market value in accordance with the
requirements of the Code.
4.6 PROHIBITION ON VOLUNTARY CONTRIBUTIONS. This Plan is
--------------------------------------
noncontributory, and no articipant hereunder shall be required or permitted to
contribute to the Trust.
4.7 TIME OF CONTRIBUTION. The Employer shall pay its contribution for
---------------------
each Taxable Year to the Trustee within the time prescribed by law for the
filing of its Federal income tax return for such year, including extensions of
time. Generally, the Employer shall pay its contribution to the Trustee on the
business day closest to April 15th of each year.
ARTICLE 5
ALLOCATIONS AND LIMITATIONS ON ALLOCATION
-----------------------------------------
5.1 PARTICIPANT'S ACCOUNTS. An Account or Accounts necessary to cause
----------------------
the assets of the Plan to be properly allocated shall be established and
maintained in the name of each Participant. The Plan Administrator may add or
delete Accounts from time to time, and may adopt uniform rules for the
administration of accounts. A "Stock Account" and an "Other Investments Account"
may be established and maintained in the name of each Participant as a
sub-account to each Participant's Account. Subject to the provisions of
subsection 5.1(e), allocations shall be made to the Accounts as follows:
(a) The Stock Account of each Participant shall be credited as of
the Valuation Date with the Participant's allocable share of Stock, as
determined under Section 5.2, including fractional shares, purchased and paid
for by the Trust or contributed in kind by the Employer, and stock dividends
paid on Stock held in the Participant's Stock Account.
(b) The Other Investments Account of each Participant shall be
credited as of the Valuation Date with the Participant's allocable share of the
net income (or loss) of the Trust, cash dividends on Employer Stock allocated to
the Participant's Stock Account and Employer contributions which have not been
used to purchase Employer Stock. This Account will be debited for any payments
for purchases of Employer Stock.
17
<PAGE>
5.2 ALLOCATION FORMULA.
------------------
(a) For each Plan Year, the Employer shall certify to the Plan
Administrator and the Trustee the total amount of contributions to the Plan,
setting forth separately: (i) the amount being contributed for the benefit of
the Participants; (ii) each Participant's Compensation; (iii) the aggregate
Compensation of all Participants for the Plan Year; and (iv) such other
information as may be required to enable the Trustee to properly allocate the
contributions and to file such tax and information returns as are necessary.
(b) As soon as administratively possible after receipt of the
information set forth in subsection (a) above, the Plan Administrator shall
allocate the Employer's contribution to all eligible Participants. Any amounts
forfeited by Participants pursuant to Section 7.3 shall be used to offset the
amount contributed by the Employer. The contribution shall be allocated as of
each Adjustment Date in the same proportion that each Participant's Compensation
for the Plan Year bears to the total Compensation of all Participants for such
Plan Year; provided, however, that Compensation earned prior to a Participant's
Entry Date shall not be considered for purposes of allocating contributions
under the Plan. A Participant must be employed on the last day of the Plan Year
to receive an allocation for such Plan Year, unless the Participant terminated
employment on account of (i) Disability; (ii) death; or (iii) retirement after
attainment of age 55 and completion of ten Years of Service.
(i) Notwithstanding anything herein to the contrary, if the
Plan fails to meet the requirements of sections 401(a)(26), 410(b)(1) or
410(b)(2)(A) of the Code and the Regulations thereunder because Employer
contributions have not been allocated to a sufficient number or percentage of
Employees for a Plan Year, then each Participant, other than those Participants
who terminate employment during the Plan Year prior to completion of at least
501 Hours of Service, shall be entitled to receive an allocation of the
Employer's contribution for that Plan Year.
(ii) Nothing in this Section shall permit the reduction
of a Participant's accrued benefit. Therefore, any amounts that have previously
been allocated to Participants may not be reallocated to satisfy the
requirements described in subsection (i) above. In such event, the Employer
shall make an additional contribution equal to the amount those Participants
entitled to receive an allocation pursuant to subsection (i) above, would have
received had they been included in the allocations, even if it exceeds the
amount which would be deductible under section 404 of the Code. Any adjustment
to the allocations pursuant to this subsection shall be considered a retroactive
amendment adopted by the last day of the Plan Year.
(c) The net income (or loss) of the Trust will be determined not
less often than annually as of each Valuation Date, and a share thereof shall be
allocated to each Participant's Account in the ratio to which the balance of
such Participant's Account on the preceding Valuation Date bears to the sum of
the Accounts of all Participants on that date. Prior to such allocation of
income (or loss), there shall be debited all distributions made during the Plan
Year from such Participant's Account, and all additions (other than allocations)
made during the Plan Year shall be credited to the Participant's Account. The
18
<PAGE>
net income (or loss) includes the increase (or decrease) in the fair market
value of assets of the Trust, interest, dividends, other income and expenses
attributable to assets in the Accounts since the preceding Valuation Date. Cash
dividends on Employer Stock allocated after the first month of the Plan Year
shall not share in any earnings or losses of the Trust Fund for such Plan Year.
Earnings or losses do not include the interest paid under any installment
contract for the purchase of the Employer Stock by the Trust.
(d) The Plan Administrator shall establish accounting
procedures for the purpose of making the allocations, valuations and adjustments
to Participants' Accounts provided for in this Article. Except as provided in
Regulation section 54.4975-11(d), Employer Stock acquired by the Plan shall be
accounted for as provided under Regulation section 1.402(a)-1(b)(2)(ii),
allocations of Employer Stock shall be made separately for each class of stock,
and the Plan Administrator shall maintain adequate record of the cost basis of
all shares of Employer Stock allocated to each Participant's Stock Account.
Should the Plan Administrator determine that the strict application of its
accounting procedures shall not result in an equitable and nondiscriminatory
allocation among Participants, it may modify its procedures for the purpose of
achieving an equitable and nondiscriminatory allocation in accordance with the
general concepts of the Plan.
5.3 SPECIFIC ASSETS. The fact that an allocation shall be made and
----------------
credited to the Account of a Participant shall not vest in such Participant any
right, title, or interest in and to any assets except at the time or times and
upon the terms and conditions expressly set forth in this Plan.
5.4 SIMULTANEOUS EMPLOYMENT.
-----------------------
(a) Notwithstanding any provision of this Trust to the
contrary, no provision herein shall be construed to mean that a contribution by
one Employer shall be allocated to benefit a Participant of this Plan whose
membership arises by reason of his employment with another Employer; provided,
however, an Employer making the contribution may so provide at the time of the
contribution. If a Participant is simultaneously employed by more than one of
the Employers participating in this Plan and each Employer makes a contribution
on behalf of such Participant, his benefits arising as a result of the dual
employment shall be separately computed for each Employer's contribution just as
though such Participant has a separate and distinct membership arising by reason
of his employment with each Employer, unless each Employer shall specify an
alternate method of computing contributions at the time of the contributions.
(b) If a Participant transfers during the year from the
employment of one Employer to the employment of another Employer, both of which
participate in the Plan, and there is no unauthorized absence between the date
employment ceases with one Employer and the date employment commences with
another Employer, the amount to which such Participant is entitled hereunder on
account of his total Compensation for the year of transfer shall be determined
by including as part of his total compensation for such year all amounts paid to
such Participant by each of the Employers during the Taxable Year in which the
transfer occurred.
19
<PAGE>
5.5 TERMINATION OF EMPLOYMENT. The Employer shall certify to the
---------------------------
Trustee and the Plan Administrator upon the termination of the employment of any
Participant for any reason (including Normal Retirement, death or Disability),
the date of such termination of employment and the reason for such termination
of employment. The Trustee and the Plan Administrator shall rely upon such
certification in determining the extent to which such Participant shall
participate in contributions and earnings of the Trust, and receive payment from
the Plan.
5.6 DETERMINATION OF MAXIMUM ANNUAL ADDITION.
----------------------------------------
(a) The maximum Annual Addition credited to a Participant's
Account for any Limitation Year shall not exceed the lesser of: (i) the Defined
Contribution Dollar Limitation as defined in Section 1.14 of the Plan, or (ii)
twenty-five percent (25%) of the Participant's compensation as defined by
section 415(c)(3) of the Code for such Limitation Year. The compensation
limitation referred to in (ii) shall not apply to: (i) any contribution for
medical benefits after separation from service, within the meaning of section
401(h) or 419A(f)(2) of the Code, which is otherwise treated as an Annual
Addition under section 415(l)(1) or section 419A(d)(2) of the Code.
(b) Prior to the determination of a Participant's actual
compensation for a Limitation Year, the maximum Annual Addition may be
determined on the basis of the Participant's estimated annual compensation for
such Limitation Year. Such estimated annual compensation shall be determined on
a reasonable basis and shall be uniformly determined for all Participants
similarly situated. Any Employer contribution (including allocation of
forfeitures) based on estimated annual compensation shall be reduced by any
excess amounts carried over from prior years.
(c) As soon as is administratively feasible after the end of
the Limitation Year, the maximum Annual Addition for such Limitation Year shall
be determined on the basis of the Participant's actual compensation for such
Limitation Year.
(d) If the Participant does not participate in, and has never
participated in another qualified plan maintained by the Employer or a welfare
benefit fund, as defined in section 419(e) of the Code, maintained by the
Employer, or an individual medical account, as defined in section 415(1)(2) of
the Code, maintained by the Employer, which provides an Annual Addition as
defined in Section 5.7, the amount of Annual Additions which may be credited to
the Participant's account for any Limitation Year will not exceed the lesser of
the maximum permissible amount or any other limitation contained in this Plan.
If the Employer contribution that would otherwise be contributed or allocated to
the Participant's account would cause the Annual Additions for the Limitation
Year to exceed the maximum permissible amount, the amount contributed or
allocated will be reduced so that the Annual Additions for the Limitation Year
will equal the maximum permissible amount, as provided in Section 5.7.
(e) If a short Limitation Year is created because of an
amendment changing the Limitation Year to a different 12 consecutive month
period, the maximum Annual Addition will not exceed the Defined Contribution
Dollar Limitation multiplied by the following fraction:
20
<PAGE>
Number of months in the short Limitation Year
---------------------------------------------
12
5.7 EXCESS ANNUAL ADDITIONS. If, as a result of a reasonable error in
------------------------
estimating the annual Compensation of a Participant, or a reasonable error in
determining the amount of elective deferrals (within the meaning of section
402(g)(3) of the Code) that may be made with respect to any individual within
the limits of section 415 of the Code, the Annual Additions with respect to any
Participant for any Plan Year would exceed the limitations set forth in any
provision of this Plan, the excess amount shall be treated as follows:
(a) Any excess Annual Addition shall be reallocated to the other
Participants proportionately on the basis that Employer contributions are
allocated to the Participants under the provisions of Section 5.2 to the extent
that such allocations do not cause the Annual Additions of any other
Participant's Account to exceed the limitations of this Article 5.
(b) To the extent that such allocation or reallocation of excess
amounts causes the limitations of this Article 5 to be exceeded with respect to
all Plan Participants for the Plan Year, then such amounts will be held
unallocated in a suspense account (hereinafter, a "Section 415 Suspense
Account") to be allocated in the next Plan Year(s) prior to the allocation of
any amount that would constitute an Annual Addition, on the basis that Employer
contributions would be allocated pursuant to Section 5.2 of the Plan.
(c) If a Section 415 Suspense Account is in existence at any time
during a Limitation Year pursuant to this Section, it will not participate in
the allocation of the Trust's investment gains and losses. If a Section 415
Suspense Account is in existence at any time during a particular Limitation
Year, all amounts in the Section 415 Suspense Account must be allocated and
reallocated to Participants' accounts before any Employer contribution or any
Employee contributions may be made to the Plan for that Limitation Year. Excess
amounts may not be distributed to Participants or former Participants, and upon
termination of the Plan, any amount remaining in the Section 415 Suspense
Account which is unallocable shall revert to the Employer.
5.8 RULES RELATING TO EMPLOYER WHICH MAINTAINS ONE OR MORE QUALIFIED
----------------------------------------------------------------
DEFINED CONTRIBUTION PLANS IN ADDITION TO THIS PLAN.
-----------------------------------------------------
(a) This Section applies if, in addition to this Plan, the
Participant is covered under another qualified defined contribution plan
maintained by the Employer, a welfare benefit fund, as defined in section 419(e)
of the Code, maintained by the Employer, or an individual medical account, as
defined in section 415(1)(2) of the Code, maintained by the Employer, which
provides an Annual Addition as defined in Section 1.7, during any Limitation
Year. The Annual Additions which may be credited to a Participant's Account
under this Plan for any such Limitation Year will not exceed the maximum
permissible amount reduced by the Annual Additions credited to a Participant's
Account under the other plans and welfare benefit funds for the same Limitation
Year. To the extent allowed by the Code, if the Annual Additions with respect to
the Participant under such other defined contribution plans and welfare benefit
21
<PAGE>
funds in the aggregate when added to the contributions under this Plan are equal
to or greater than the maximum permissible amount, the Annual Additions with
respect to this Plan shall be reduced to the extent necessary to comply with the
limits of section 415 of the Code.
(b) Prior to determining the Participant's actual Compensation for
the Limitation Year, the Employer may determine the maximum permissible amount
for a Participant in the manner described in subsection 5.6(b).
(c) As soon as is administratively feasible after the end of the
Limitation Year, the maximum permissible amount for the Limitation Year will be
determined on the basis of the Participant's actual Compensation for the
Limitation Year.
(d) If, pursuant to subsection 5.8(c) above, or as a result of the
allocation of forfeitures, a Participant's Annual Additions under this Plan and
such other plans would result in an excess amount for a Limitation Year, the
excess amount will be deemed to consist of the Annual Additions last allocated,
except that Annual Additions attributable to a welfare benefit fund or
individual medical account will be deemed to have been allocated first
regardless of the actual allocation date.
(e) If an excess amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation date of another
plan, the excess amount attributed to this Plan will be the product of:
(i) the total excess amount allocated as of such date, times
(ii) the ratio of the Annual Additions allocated to the
Participant for the Limitation Year as of such date under this Plan to the total
Annual Additions allocated to the Participant for the Limitation Year as of such
date under this and all the other qualified defined contribution plans.
(f) Any excess amount attributed to this Plan will be disposed in
the manner described in Section 5.7.
ARTICLE 6
ADMINISTRATION OF FUNDS
-----------------------
6.1 EXPENSES OF TRUST. The Employer may provide the Trustee with funds
-----------------
to pay all reasonable expenses necessarily incurred by the Trustee or the
Investment Manager in the administration of the Trust. Any reasonable expenses
of the Trust or the Investment Manager not paid by the Employer shall be paid by
the Trust.
6.2 MAINTENANCE OF ACCOUNTS. The Plan Administrator shall maintain all
-----------------------
necessary Accounts in the name of each Participant, and an annual statement of
22
<PAGE>
each Participant's Accounts as of each Adjustment Date shall be furnished to the
Participant, or if the Participant is deceased, to his Beneficiary.
6.3 INVESTMENT IN EMPLOYER STOCK. Any cash, including dividends,
-------------------------------
received by the Trustee for the Account of any Participant or credited to such
Account may be invested primarily in Employer Stock, to the extent practicable
and prudent, subject to the limitations of Section 6.8, and further subject to
the liquidity needs of the Plan as established in its funding policy. Pending
such investment, the Trustee may retain cash uninvested without liability for
interest or may invest all or any part thereof in accordance with the provisions
of the Plan and Trust Agreement. All sales of Employer Stock (except Employer
Stock held in a Suspense Account) by the Trustee will be charged pro rata to the
Accounts of the Participants.
6.4 CREDITING OF ACCOUNTS. All dividends, income and other property
---------------------
received by the Trustee applicable to a Participant's Account shall be credited
to that Account.
6.5 VOTING OF EMPLOYER STOCK. Employer Stock shall be voted in
------------------------
accordance with Article 9 of the Trust Agreement.
6.6 VALUATION. The Trust Fund shall be valued by the Trustee annually
---------
at fair market value as of the close of business on each Valuation Date. On such
date, the earnings and losses of the Trust shall be allocated to each
Participant's Account in the ratio that such Account bears to all Accounts. Fair
market value of Employer Stock that is not traded on an established securities
market shall be determined by the Plan Administrator in accordance with
Department of Labor regulations (if any) based on the appraisal of an
independent appraiser, who meets requirements similar to those contained in the
Regulations under section 170(a)(1) of the Code. An independent appraisal,
however, will not in and of itself be a good faith determination of value in the
case of a transaction between the Plan and a disqualified person. Value in a
transaction between a Plan and a disqualified person must be determined as of
the date of the transaction; and in all other cases, value may be determined as
of the most recent Valuation Date.
6.7 DIVIDENDS. Any dividends received which are attributable to shares
---------
held in the Participant's Stock Account shall be allocated to the respective
Accounts of Participants in accordance with the number of shares in their
respective individual Accounts as of the record date of the dividend.
6.8 DIVERSIFICATION ELECTION.
------------------------
(a) Each Qualified Participant, as defined in Section 1.39, shall
be permitted to direct the Plan as to the investment of up to twenty-five
percent (25%) of the value of his Account. The investment direction shall be
made within 90 days after the last day of each Plan Year during the
Participant's Qualified Election Period, as defined in Section 1.38. Within 90
days after the close of the last Plan Year in the Participant's Qualified
Election Period, a Qualified Participant may direct the Plan as to the
investment of up to fifty percent (50%) in the aggregate of the value of such
Account derived from Employer Stock. In order to make this diversification
election, the fair market value of shares of Employer Stock allocated to a
23
<PAGE>
Qualified Participant's Account must be at least five hundred dollars ($500) as
of the Adjustment Date immediately preceding the date such Qualified Participant
is eligible to make the diversification election.
(b) The Participant's directions shall be provided to the Plan
Administrator in writing, in a form subject to approval by the Plan
Administrator, and shall be effectuated no later than 180 days after the close
of the Plan Year to which the direction applies. In the alternative to offering
a diversification election as provided above, the Plan Administrator may adopt
uniform and nondiscriminatory procedures such that a Participant may elect for
the Plan to distribute notwithstanding section 409(d) of the Code) the portion
of the Participant's account that is covered by the diversification election
within 90 days after the last day of the Qualified Election Period. Such
distribution shall be subject to such requirements of the Plan concerning put
options as would otherwise apply to a distribution of Employer Stock from the
Plan. Pursuant to such a distribution, the Qualified Participant may direct the
Plan to transfer the portion of the Participant's account that is covered by the
election to another qualified plan of the Employer which accepts such transfers,
provided that such plan permits employee-directed investment and does not invest
in Employer Stock to a substantial degree. Such transfer shall be made no later
than 90 days after the last day of the Qualified Election Period.
6.9 PUT OPTION.
----------
(a) If Employer Stock is distributed to a Participant and such
Employer Stock is not readily tradable on an established securities market, a
Participant has a right to require the Employer to repurchase the Employer Stock
distributed to such Participant under a fair valuation formula. Such stock shall
be subject to the provisions of subsection (c) below.
(b) Employer Stock which is not publicly traded when distributed,
or if it is subject to a trading limitation when distributed, must be subject to
a put option. For purposes of this Section, a "trading limitation" on an
Employer Stock is a restriction under any Federal or state securities law or any
regulation thereunder, or an agreement (not prohibited by the Code or ERISA)
affecting the Employer Stock which would make the Employer Stock not as freely
tradable as stock not subject to such restriction.
(c) The put option must be exercisable only by a Participant, by
the Participant's donees, or by a person (including an estate or its
distributee) to whom the Employer Stock passes by reason of a Participant's
death. Under this Section, Participant means a Participant or former Participant
and the Beneficiaries of the Participant or former Participant under the Plan.
The put option must permit a Participant to put the Employer Stock to the
Employer. Under no circumstances may the put option bind the Plan or Trust.
However, it shall grant the Plan or Trust an option to assume the rights and
obligations of the Employer at the time that the put option is exercised. If it
is known at the time a loan is made that Federal or state law will be violated
by the Employer's honoring such put option, the put option must permit the
Employer Stock to be put, in a manner consistent with such law, to a third party
(e.g., an affiliate of the Employer or a shareholder other than the Plan or
Trust) that has substantial net worth at the time the loan is made and whose net
worth is reasonably expected to remain substantial.
24
<PAGE>
The put option shall commence as of the day following the date the
Employer Stock is distributed to the former Participant and end 60 days
thereafter, and if not exercised within such 60 day period, an additional 60 day
period shall commence in the subsequent Plan Year following the new valuation of
Employer Stock, but in no event shall such additional 60 day period commence
later than 15 months following the date the stock was distributed to the former
Participant (or later than such other period as provided in regulations
promulgated by the Secretary of the Treasury).
The put option is exercised by the holder notifying the Employer in
writing that the put option is being exercised; the notice shall state the name
and address of the holder and the number of shares to be sold. The period during
which a put option is exercisable does not include any time when a distributee
is unable to exercise it because the party bound by the put option is prohibited
from honoring it by applicable Federal or state law. The price at which a put
option must be exercisable is the value of the Employer Stock determined in
accordance with Section 6.6. Payment under the put option involving a "Total
Distribution" shall be paid in substantially equal monthly, quarterly,
semiannual or annual installments over a period certain beginning not later than
30 days after the exercise of the put option and not extending beyond five
years. The deferral of payment is reasonable if adequate security and a
reasonable interest rate on the unpaid amounts are provided. The amount to be
paid under the put option not involving installment distribution must be paid
not later than 30 days after the exercise of the put option. Payment under a put
option must not be restricted by the provisions of a loan or any other
arrangement, including the terms of the Employer's articles of incorporation,
unless so required by applicable state law.
For purposes of this Section, "Total Distribution" means a distribution
to a Participant or former Participant within one taxable year of the entire
vested Account of the Participant.
(d) An arrangement involving the Plan that creates a put option
must not provide for the issuance of put options other than as provided under
this Section. The Plan (and the Trust Fund) must not otherwise obligate itself
to acquire Employer Stock from a particular holder thereof at an indefinite time
determined upon the happening of an event such as the death of the holder.
ARTICLE 7
BENEFITS
--------
7.1 RETIREMENT.
----------
(a) Normal Retirement. As of the Normal Retirement Date of a
------------------
Participant, he may retire from the employ of the Employer. If a Participant
continues in the employment of the Employer after his Normal Retirement Date, he
shall continue to be treated in all respects as a Participant until his actual
retirement.
25
<PAGE>
(b) Distributions Upon Retirement. No retirement benefits shall be
-----------------------------
payable to a Participant until his actual termination of employment, and all
retirements shall be effective as of the actual date of termination. As of the
Adjustment Date coinciding with or following a Participant's termination of
employment on account of retirement on or after his Normal Retirement Age, all
amounts then credited to such Participant's Account shall be paid to him or
applied for his benefit as soon as administratively possible in accordance with
Sections 7.5 and 7.6.
7.2 DISABILITY. Upon the Disability of a Participant while in the
----------
employment of the Employer, the total balance of the Participant's Account as of
the Adjustment Date coinciding with or immediately following the determination
of Disability shall be distributed to said Participant in accordance with
Sections 7.5 and 7.6.
7.3 TERMINATION OF EMPLOYMENT
-------------------------
(a) Subject to the provisions of subsections 7.3(b) and (c) below,
whenever a Participant ceases to be an Employee of the Employer for reasons
other than Disability, retirement on or after Normal Retirement Age, or death
(hereinafter referred to as a "Terminating Participant"), the Terminating
Participant shall be paid his vested Account as of the Adjustment Date
coinciding with or immediately following his termination of employment, or as
soon as administratively possible thereafter. The Terminating Participant shall
be vested in all amounts credited to his Account based on his Years of Service
according to the following schedule:
Years of Service Vested Percentage
---------------- -----------------
1 20%
2 40%
3 60%
4 80%
5 or more 100%
(b) If the value of the Terminating Participant's Account at the
time of his termination of employment is not in excess of $5,000, and has never
exceeded $5,000, the Plan Administrator shall cause to be paid out in a lump sum
the entire value of such Participant's vested Account in full discharge of the
Plan's obligations to the Participant (hereinafter referred to as an
"involuntary cash-out"). The distribution of any involuntary cash-out shall be
made as of the Adjustment Date coinciding with or immediately following the
Terminating Participant's termination of employment, or as soon as
administratively possible thereafter. For purposes of this Section, if the value
of a Participant's Account is zero, the Participant shall be deemed to have
received a distribution of such vested Account upon his termination of
employment.
(c) If the value of a Terminating Participant's vested Account at
the time of his termination of employment exceeds $5,000, the Participant must
26
<PAGE>
consent to a distribution for it to be paid by the Plan Administrator prior to
the later of the Participant's attainment of Normal Retirement Age, or age 65.
(d) As of the Adjustment Date coinciding with or immediately
following the earliest to occur of the Terminating Participant's fifth
consecutive Break in Service, or distribution of the Terminating Participant's
vested Account, the nonvested Account of the Participant shall be forfeited.
Such amount shall be held in a forfeiture suspense account until it is utilized
to offset Employer contributions to the Plan, pursuant to Section 5.2(b)
(e) If a Terminating Participant who has received a lump sum
distribution of his vested Account is subsequently reemployed by the Employer
after having incurred five consecutive Breaks in Service, then the Employer
shall disregard all service performed by such Employee for which he received
such lump sum distribution. If the Terminating Participant returns to the
employment of the Employer prior to incurring five consecutive Breaks in Service
and repays the amount of the lump sum distribution within five years from the
date of subsequent reemployment, his nonvested Account shall be reestablished by
the Employer and the Participant's pre-break service with respect to which he
received the distribution shall be added to his post-break service for purposes
of determining his vested Account. If a Terminating Participant is deemed to
receive a distribution pursuant to subsection (b) above, and the Terminating
Participant resumes employment covered under this Plan before incurring five
consecutive Breaks in Service, upon the reemployment of such Terminating
Participant, his nonvested Account will be restored to the amount on the date of
such deemed distribution.
(f) If a Terminating Participant, who did not receive a lump sum
distribution returns to the employment of the Employer before incurring five
consecutive Breaks in Service after incurring a forfeiture of his nonvested
Account, then the nonvested portion of his Account shall be reestablished by the
Employer.
(g) If a Terminating Participant whose Account was not distributed
in a lump sum shall return to the employ of the Employer prior to incurring five
consecutive Breaks in Service, then the Participant's vested percentage in his
pre-break Account shall be increased as a result of his post-break service, and
only a single Account need be maintained. If such Terminating Participant shall
return to the employ of the Employer after incurring five consecutive Breaks in
Service, then the Participant's vested percentage in his pre-break Account shall
not be increased as a result of his post-break service, however for his
post-break Account both pre-break and post-break service shall be counted if
either (i) the Terminating Participant had a nonforfeitable interest in his
Account at the time of returning to service; or (ii) upon returning to service
the number of consecutive Breaks in Service is less than the number of Years of
Service; and provided further that separate Accounts shall be maintained for the
Participant's pre-break and post-break Account.
(h) If a Terminating Participant incurs a Break in Service, and
thereafter returns to the employ of the Employer, Years of Service before such
Break in Service shall be taken into account for purposes of this Section 7.3,
as well as for any other purposes of the Plan only after the Participant has
completed one Year of Service following his return to service, but once the
27
<PAGE>
Participant completes one Year of Service following his return to employment,
service shall be calculated retroactively to the date the Participant returned
to employment.
(i) For purposes of participation and vesting, if an Employee or
Participant does not have any vested right in his Account derived from Employer
contributions, Years of Service completed by the Participant or Employee prior
to incurring a Break in Service shall be disregarded if the number of
consecutive Breaks in Service exceeds the greater of five years or the number of
Years of Service the Participant or Employee completed prior to incurring a
Break in Service; however, the aggregate number of Years of Service completed
before such Break in Service shall not be deemed to include any Years of Service
not required to be taken into account by reason of any prior Breaks in Service.
(j) Any amounts forfeited by a Participant pursuant to this
Section 7.3 shall be used to offset the Employer's contributions to the Plan.
7.4 DEATH.
-----
(a) If a Participant dies prior to termination of employment, the
Participant's Beneficiary shall become fully vested in the deceased
Participant's Account. If a Participant or former Participant should die after
distributions have begun, but prior to the complete distribution of his Account,
then the balance of the Participant's Account as of the Adjustment Date
coinciding with or immediately following the date of death, shall be paid to the
deceased Participant's Beneficiary, unless an alternate Beneficiary was
designated pursuant to the original distribution election. The death benefit
shall be distributed to the deceased Participant's Beneficiary in a single lump
sum payment and shall be paid as of the Adjustment Date coinciding with or
immediately following the date of death.
(b) At any time, and from time to time, within the limits set
forth in Section 1.8, each Participant shall have the right to designate the
Beneficiary to receive the death benefit and to revoke any such designation,
provided, that if the Participant shall be married, he can name someone other
than his spouse as the recipient of his death benefit only with the consent of
his spouse. The spousal consent must be in the form of a waiver which must
acknowledge the effect of the waiver and must be either witnessed by a Plan
representative or acknowledged before a notary public. If a Participant shall
die without leaving a Beneficiary and no designation is on file with the
Employer at the time of the death of the Participant, or if such designation is
not effective for any reason, as determined by the Employer, then the surviving
spouse of the Participant shall be conclusively deemed to be the Beneficiary
designated to receive such death benefit, and the distribution shall be made in
the manner selected by the Beneficiary, and if the Participant shall have no
surviving spouse, the executor or administrator of the estate of such
Participant shall be designated to receive such death benefit.
(c) The Employer shall notify the Trustee of the death of a
Participant or former Participant and shall furnish the Trustee with an
authenticated copy of the Beneficiary designation for such deceased Participant.
The Trustee shall rely upon such designation for the purpose of distributing
death benefits hereunder.
28
<PAGE>
(d) The Employer may require such proof of death and such evidence
of the right of any person to receive distributions of the benefits of the
deceased Participant as it may deem advisable.
7.5 METHOD OF DISTRIBUTION OF BENEFITS. The benefits provided
---------------------------------------
hereunder shall be distributed in a single lump sum payment.
No earnings or losses shall be credited or debited to a Participant's
Account between the end of the Plan Year date as of which his Account is valued
for payment and the date of actual payment in the following Plan Year.
7.6 FORM OF DISTRIBUTION.
--------------------
(a) If the Employer's charter or bylaws restrict the ownership of
substantially all of all outstanding securities of the Employer to Employees or
to a trust described in section 401(a) of the Code, all distributions under this
Plan shall be in cash; any other provisions of the Plan contemplating
distributions in the form of stock, including the remainder of this Section,
shall not apply.
(b) Subject to the restrictions in the Plan and if subsection (a)
above is not applicable, the Plan Administrator may elect to make distributions
of such Participant's benefits in cash, in Stock, or in any combination thereof,
provided any form of distribution shall be selected on a nondiscriminatory
basis; and provided further, that, before making any distributions of benefits
to a Participant or his Beneficiary in any form other than Stock, such
Participant or Beneficiary shall be given an option to elect to receive
distribution of such benefits in the form of Stock. The Plan Administrator shall
establish procedures for the conversion or redemption at the election of the
Participant. Said option to receive Stock shall be in writing and shall be
exercisable for a period of 30 days following the date of delivery thereof to
said Participant or Beneficiary.
If distribution of Stock is required and if Stock is not available
for purchase by the Trustee, then the Trustee shall hold such balance until such
Stock is acquired and then make the required distribution. The Trustee will make
distributions from the Trust only on instructions from the Plan Administrator.
The distribution of shares of Stock to Participants shall be deferred until five
days after the delivery by the Participant of a signed statement, in such form
as the Plan Administrator shall require, which statement, if determined to be
necessary by the Plan Administrator, may contain the acknowledgment of such
Participant that:
(i) The Participant is acquiring the shares for his own
Account and not with a view to or for sale in connection with any distribution
thereof;
(ii) The shares are being acquired in a transaction not
involving a public offering and without being registered under the Securities
Act of 1933, as amended (the "'33 Act"), and that such shares may not be sold
29
<PAGE>
except in a transaction that complies with the requirements of the '33 Act and
the Rules and Regulations promulgated thereunder;
(iii) The certificates evidencing the shares will contain a
legend setting forth or referring to the restriction against transfer set forth
in this Plan and such other restrictions to which the transfer of the shares may
be subject by the provisions of the Articles of Incorporation or by-laws of the
Employer applicable to all other shares of the same class;
(iv) The shares are being acquired in a private transaction
without being registered under the '33 Act and the Employer has neither the
obligation nor the intention to effect any such registration and therefore such
shares must be held by the Participant indefinitely and without any market
therefor unless the shares are subsequently registered under the '33 Act or an
exemption from the registration provisions of the '33 Act is available;
(v) The Participant has been advised that Rule 144 under the
'33 Act (which Rule permits sales of securities in limited amounts in accordance
with the terms and conditions of such Rule) may not be applicable to resales of
such shares, and that no assurance has been given the Participant as to whether
or when there may be any registration statement under the '33 Act covering the
shares being distributed, or whether or when such Rule or any other exemption
from the requirements for registration under the '33 Act might be applicable.
(c) The Plan Administrator shall notify the Trustee in writing of
the separation from service of any Participant and the manner in which the
benefits of such Participant are to be paid. The Trustee shall rely upon such
notice for the purpose of paying benefits hereunder.
7.7 Commencement of Distribution of Benefits. Distribution to any
Participant of his Account must commence within sixty (60) days after the close
of the Plan Year in which the latest of the following events shall occur:
(a) The Participant attains 65 years of age; or
(b) The tenth anniversary of such Participant's commencement of
participation in the Plan occurs; or
(c) There is an actual termination of the Participant's employment
with the Employer.
The purpose of this Section is to provide a limitation, subject to the
incidental death benefit rules, on the latest date upon which payment of
benefits under the Plan can commence. This Section shall not pre-empt other
provisions of the Plan which require or permit payment of benefits at an earlier
date.
30
<PAGE>
7.8 LIMITATION ON THE DISTRIBUTION OF BENEFITS.
------------------------------------------
(a) The requirements of this Section shall apply to any
distribution of a Participant's interest and will take precedence over any
inconsistent provisions of the Plan.
(b) All distributions required under this Article 7 shall be
determined and made in accordance with the proposed regulations under section
401(a)(9) of the Code, including the minimum distribution incidental benefit
requirement of section 1.401(a)(9)-2 of the proposed regulations.
(c) The entire interest of a Participant must be distributed or
begin to be distributed no later than the Participant's Required Beginning Date,
as defined in subsection (e), below.
(d) As of the first distribution calendar year, distributions, if
not made in a single-sum, may only be made over one of the following periods (or
a combination thereof);
(i) the life of the Participant,
(ii) the life of the Participant and a Beneficiary,
(iii) a period certain not extending beyond the life
expectancy of the Participant, or
(iv) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a Beneficiary.
(e) The "Required Beginning Date" of a Participant who is not a
five percent (5%) owner is the first day of April of the calendar year following
the calendar year in which the later of retirement or attainment of age 70 1/2
occurs. The Required Beginning Date of a Participant who is a five percent (5%)
owner during any year beginning after January 30, 1979, is the first day of
April following the later of:
(i) the calendar year in which the Participant attains age 70
1/2, or
(ii) the earlier of the calendar year with or within which
ends the Plan Year in which the Participant becomes a five percent (5%) owner,
or the calendar year in which the Participant retires.
A Participant is treated as a five percent (5%) owner for purposes
of this subsection, if such Participant is a five percent (5%) owner as defined
in section 416(i) of the Code (determined in accordance with section 416(i) but
without regard to whether the Plan is top-heavy) at any time during the Plan
Year ending with or within the calendar year in which such owner attains age 66
1/2 or any subsequent Plan Year.
31
<PAGE>
Once distributions have begun to a five percent (5%) owner under
this subsection, they must continue to be distributed, even if the Participant
ceases to be a five percent (5%) owner in a subsequent year.
7.9 RESTRICTIONS ON METHODS OF DISTRIBUTION. Notwithstanding any other
---------------------------------------
provision of the Plan, distribution of benefits payable to a Participant
pursuant to the Plan shall be subject to the following restrictions in
accordance with section 401(a)(9) of the Code and the Regulations thereunder:
(a) If a Participant dies before his entire Account has been
distributed, then the undistributed portion of his Account must be distributed
to the Participant's Beneficiary using a method of distribution at least as
rapid as the method being used at the date of the Participant's death.
(b) If a Participant dies before the distribution of any portion
of his Account begins, the distribution of the Participant's entire interest
shall be completed by January 30 of the calendar year containing the fifth
anniversary of the Participant's death.
(c) For purposes of this Section, any amount paid to a child of
the Participant will be treated as if it had been paid to the surviving spouse
if the amount become payable to the surviving spouse when the child reaches the
age of majority.
(d) For the purposes of this Section, distribution of a
Participant's interest is considered to begin on the Participant's Required
Beginning Date.
7.10 DIRECT ROLLOVERS.
----------------
(a) Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a Distributee's election under this Section, a Distributee
may elect, at the time and in the manner prescribed by the Plan Administrator,
to have any portion of an Eligible Rollover Distribution paid directly to an
Eligible Retirement Plan specified by the Distributee in a Direct Rollover.
(b) The following definitions apply to this Section:
(i) "Eligible Rollover Distribution." An eligible rollover
distribution is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover distribution does
not include any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life expectancies)
of the distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the Code; and the portion of
any distribution that is not includible in gross income (determined without
regard to the exclusion for net unrealized appreciation with respect to employer
securities).
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(ii) "Eligible Retirement Plan." An eligible retirement plan
is an individual retirement account described in section 408(a) of the Code, an
individual retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a qualified trust
described in section 401(a) of the Code, that accepts the distributee's eligible
rollover distribution. However, in the case of an eligible rollover distribution
to the surviving spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.
(iii) "Distributee." A distributee includes an Employee or
former Employee. In addition, the Employee's or former Employee's surviving
spouse and the Employee's or former Employee's spouse or former spouse who is
the alternate payee under a qualified domestic relations order, as defined in
section 414(p) of the Code, are distributees with regard to the interest of the
spouse or former spouse.
(iv) "Direct Rollover." A direct rollover is a payment by the
Plan to the eligible retirement plan specified by the distributee.
7.11 QUALIFIED DOMESTIC RELATIONS ORDERS.
-----------------------------------
(a) Notice. Should the Plan receive a judgment, decree or order
------
entered or enforceable pursuant to North Carolina domestic relations law, and
relating to the provision of child support, alimony payments or marital property
rights of a spouse, child or other dependent of the Participant, then:
(i) The Plan Administrator shall promptly notify the
Participant and any Alternate Payee of the receipt of such order and the Plan's
procedures for determining its qualified status, and
(ii) The Plan Administrator within a reasonable time shall
determine the qualified status of such order as set forth in subsection (b), and
notify the Participant and each Alternate Payee upon such determination.
(b) Requirements of Qualified Domestic Relations Order. Subject to
--------------------------------------------------
any regulations promulgated by the Treasury Department, the Plan Administrator
shall determine whether a domestic relations order constitutes a Qualified
Domestic Relations Order by determining whether the following requirements
prescribed in section 414(p) of the Code have been met. The order must:
(i) Create or recognize the existence of, or assign to any
spouse, former spouse, child or other dependent of a Participant (hereinafter
referred to as an "Alternate Payee") the right to receive all or any portion of
the benefits payable with respect to a Participant under the Plan;
(ii) Clearly specify the following facts:
33
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(A) The name and last known mailing address of each
Participant and Alternate Payee covered by the order,
(B) The amount or percentage, or the manner of determining
same, of the Participant's benefits to be paid by the Plan to the Alternate
Payee,
(C) The number of payments or period to which the order
applies, and
(D) Each plan to which the order applies.
(iii) Not require the Plan to provide any type or form of
benefit not otherwise provided by its terms, or provide an increased benefit, or
be in conflict with the payment provisions of any order previously determined to
be a Qualified Domestic Relations Order. An order, however, shall not be
considered to provide any type or form of benefit not otherwise provided, merely
because the order requires payment be made to an Alternate Payee on or after the
date on which the Participant attains the earliest retirement age without regard
to whether the Participant has separated from service; such payments are to be
computed as if the Participant retired on the date on which payments begin
pursuant to the order, but shall take into account only the present value (using
a five-percent (5%) interest rate) of the benefits accrued and not any Employer
subsidy for early retirement and, furthermore, can be paid in any form except a
joint and survivor annuity.
(c) Treatment Pending Determination. During any period in which
--------------------------------
the issue of whether a domestic relations order is a Qualified Domestic
Relations Order is being determined pursuant to this section, a separate account
in the Plan shall be maintained consisting of the amount which would have been
payable to the Alternate Payee during such period if the order had been
determined to be qualified. If within 18 months the order is determined to be a
Qualified Domestic Relations Order, the segregated amount (plus any interest
thereon) shall be paid to the Alternate Payee. If within 18 months the issue is
not resolved, or the order is determined not be a Qualified Domestic Relations
Order, then the segregated amount (plus any interest thereon) shall be paid or
re-credited to the Account of the person or persons who would have been entitled
to such amounts if there had been no order. Any determination that an order is a
Qualified Domestic Relations Order which is made subsequent to the 18 month
period shall be applied prospectively only.
(d) Application to Distribution. All rights and benefits,
------------------------------
including elections, provided to a Participant in this Plan shall be subject to
the rights afforded to any Alternate Payee pursuant to the provisions of this
Section.
(e) Time and Form of Distribution. Notwithstanding anything in
-----------------------------
this Plan to the contrary, an Alternate Payee shall be eligible for a
distribution under the following terms:
(i) The Plan Administrator, at the election of the
Participant, shall direct the Trustee to distribute to an Alternate Payee his
34
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interest in the Participant's Account as determined by the "Qualified Domestic
Relations Order" within 18 months of the date said order is received.
(ii) The distribution shall be made in a lump-sum if the
amount required to be distributed is less than ten percent (10%) of liquid plan
assets, as determined by the Trustee.
(iii) If (ii) does not apply, the distribution shall be made
in five substantially equal, annual installments.
(iv) Distributions shall only be made to the extent that the
amounts to be distributed have been accumulated in the Participant's Account for
at least two years or the Participant has completed five years of participation
in the Plan.
(v) If the amount payable to the Alternate Payee exceeds five
thousand dollars ($5,000), no amount may be distributed without the written
consent of the "Alternate Payee."
(vi) If the Alternate Payee dies prior to the distribution of
his entire interest in the Plan, any remainder shall be paid to his estate not
later than 60 days following the end of the Plan Year in which he died.
(vii) Balances held in the account of an Alternate Payee
shall be treated as a segregated account charged with its own earnings and
losses and subject to the investment direction of the Alternate Payee.
7.12 DEFINITIONS. For purposes of this Article 7 , the following
-----------
definitions shall apply:
(a) "Applicable life expectancy" shall mean the life expectancy
(or joint and last survivor expectancy) calculated using the attained age of the
Participant (or Beneficiary) as of the Participant's (or Beneficiary's) birthday
in the applicable calendar year reduced by one for each calendar year which has
elapsed since the date life expectancy was first calculated. If life expectancy
is being recalculated, the applicable life expectancy shall be the life
expectancy as so recalculated. The applicable calendar year shall be the first
distribution calendar year, and if life expectancy is being recalculated, such
succeeding calendar year.
(b) "Beneficiary" shall mean the individual who is designated as
the Beneficiary under Section 1.8 of the Plan in accordance with section
401(a)(9) and the proposed regulations thereunder.
(c) "Distribution calendar year" shall mean a calendar year for
which a minimum distribution is required. For distributions beginning before the
Participant's death, the first distribution calendar year is the calendar year
immediately preceding the calendar year which contains the Participant's
Required Beginning Date. For distributions beginning after the Participant's
35
<PAGE>
death, the first distribution calendar year is the calendar year in which
distributions are required to begin pursuant to Section 7.7.
(d) "Life expectancy" shall mean life expectancy, and joint and
last survivor expectancy are computed by use of the expected return multiples in
Tables V and VI of section 1.72-9 of the income tax regulations. Unless
otherwise elected by the Participant (or spouse, in the case of death
distributions) by the time distributions are required to begin, life
expectancies shall be recalculated annually. Such election shall be irrevocable
as to the Participant (or spouse) and shall apply to all subsequent years. The
life expectancy of a nonspouse Beneficiary may not be recalculated.
(e) "Participant's benefit" shall mean:
(i) The Account as of the last valuation date in the calendar
year immediately preceding the distribution calendar year (valuation calendar
year) increased by the amount of any contributions or forfeitures allocated to
the Account as of dates in the valuation calendar year after the valuation date
and decreased by distributions made in the valuation calendar year after the
valuation date.
(ii) For purposes of subsection (i) above, if any portion of
the minimum distribution for the first distribution calendar year is made in the
second distribution calendar year on or before the Required Beginning Date, the
amount of the minimum distribution made in the second distribution calendar year
shall be treated as if it had been made in the immediately preceding
distribution calendar year.
ARTICLE 8
ACCOUNTING PROCEDURES
---------------------
8.1 TRUST ACCOUNTS.
--------------
(a) The Trustee shall establish for each Participant a Stock
Account, as provided in subsection 5.1(a), which shall be credited with the
total number of whole and fractional shares of Stock allocated to such
Participant and stock dividends paid on such Stock.
(b) The Trustee shall establish as part of the Trust an Other
Investments Account, as provided in subsection 5.1(c), which shall be credited
with all cash and assets, other than Employer Stock, and the net income and net
loss of the Trust, and which shall be debited with payments made by the Trust to
purchase Employer Stock.
(c) The Trustee shall establish such other Accounts as the Plan
Administrator shall require from time to time.
36
<PAGE>
ARTICLE 9
ADOPTION, AMENDMENT, TERMINATION, MERGER,
-----------------------------------------
CONSOLIDATION OR TRANSFER OF ASSETS
-----------------------------------
9.1 AMENDMENT OF PLAN.
-----------------
(a) The Board of Directors shall have the right to amend the Plan,
including the agreement establishing the Trust, in whole or in part, at any time
and from time to time, by duly-adopted resolution, including amending the Plan
so that it is no longer designed to invest primarily in Employer Stock;
provided, however, that the Plan Administrator shall have the right to amend the
Plan so long as such amendment does not materially increase the Employer's cost
under the Plan or materially change the nature of the Plan. However, no change
may be made which shall vest in the Employer, directly or indirectly, any
interest, ownership, or control of any of the present or subsequent funds of the
Trust or in any of the present or subsequent funds set aside for Participants
pursuant to the Plan; and no amendment shall increase or change the duties or
the liabilities of the Trustee without the Trustee's specific consent thereto in
writing. No portion of the funds of the Trust, by reason of any amendment, shall
be used for, or diverted to purposes other than for the exclusive benefit of
Participants and their Designated Beneficiaries or for administration expenses
of the Plan.
(b) No amendment to the Plan shall be effective to the extent that
it has the effect of decreasing a Participant's accrued benefit. Notwithstanding
the preceding sentence, a Participant's Account may be reduced to the extent
permitted under section 412(c)(8) of the Code. For purposes of this Section 9.1,
a Plan amendment which has the effect of decreasing a Participant's Account or
eliminating an optional form of benefit, with respect to benefits attributable
to service before the amendment, shall be treated as reducing an accrued
benefit. Furthermore, if the vesting schedule of the Plan is amended, in the
case of an Employee who is a Participant as of the later of the date such
amendment is adopted or the date it becomes effective, the nonforfeitable
percentage (determined as of such date) of such Participant's right to his
Employer-derived accrued benefit will not be less than his percentage computed
under the Plan without regard to such amendment.
(c) In addition, no such amendment shall have the effect of
terminating the protections and rights set forth in Section 6.9, unless such
termination shall then be permitted under the applicable provisions of the Code
and Regulations. For purposes of this Section, a Plan amendment which has the
effect of (i) eliminating or reducing an early retirement benefit or a
retirement-type subsidy, (ii) eliminating an optional form of benefit (as
provided in Regulations) or (iii) restricting, directly or indirectly, the
benefit provided to any Participant prior to the amendment shall be treated as
reducing the amount credited to the account of a Participant except that an
amendment described in clause (ii) (other than an amendment having an effect
described in clause (i)) shall not be treated as reducing the amount credited to
the Account of a Participant to the extent so provided in Regulations. Any Plan
amendment which modified distribution options in a nondiscriminatory manner
shall not be treated as reducing the amount credited to the Account of a
Participant.
37
<PAGE>
(d) Subject to the foregoing limitations, the Board of Directors
shall have the power to amend the Plan and Trust Agreement in any manner which
is deemed to be desirable, including, but not by way of limitation, the right to
increase or diminish contributions hereunder, to change or modify the method of
allocation of such contributions, to change any provisions relating to the
administration of the Plan, and to change any provisions relating to the
distribution or payment, or both, of any of the assets of the Trust.
9.2 ELECTION OF PRIOR VESTING. No amendment to the vesting schedule
--------------------------
shall be permitted to decrease the vested amount of the benefits which any
Participant had accrued prior to such amendment, and a Participant who has at
least three Years of Service may elect to have his nonforfeitable percentage
computed without regard to the amended vesting schedule. For Participants who do
not have at least one Hour of Service in any Plan Year beginning after the
Effective Date, the preceding sentence shall be applied by substituting "five
Years of Service" for "three Years of Service." Such election must be made
without regard to the amended vesting schedule. Such election must be made
within 60 days after the latest of the following dates: (a) the date the
amendment is adopted, (b) the date the amendment becomes effective, or (c) the
date the Participant is notified in writing of the amendment.
9.3 DISCONTINUANCE OF CONTRIBUTIONS AND TERMINATION OF PLAN AND TRUST.
-----------------------------------------------------------------
(a) If the Employer decides it is impossible or inadvisable to
make its contributions as herein provided, the Employer shall have the power to
terminate its participation in the Plan by appropriate resolution of its Board
of Directors, subject to the approval of the Board of Directors. A certified
copy of such resolution or resolutions shall be delivered to the Trustee, and as
soon as possible thereafter, the Plan Administrator shall advise each affected
Participant of the termination. After the date specified in such resolutions the
terminating Employer shall make no further contributions under the Plan.
However, the Trust shall remain in existence and all of the remaining provisions
of the Plan, other than the provisions for contributions by the Employer
terminating its participation in the Plan shall remain in full force and effect.
All Accounts of Participants whose membership in the Plan arises by reason of
their employment with such terminating Employer shall continue to be held,
administered and distributed by the Trustee in accordance with the provisions of
this Plan.
(b) If an Employer shall terminate its participation in the Plan
as heretofore provided or shall suspend contributions in such manner as to
constitute a termination of its participation in the Plan or a partial
termination of the Plan, the accounts of each Participant whose membership
arises by reason of his employment with such terminating Employer shall remain
fully vested and nonforfeitable; and such Participant shall have the right to
receive one hundred percent (100%) of his Account in the manner provided in the
Plan.
(c) If the terminating Employer shall decide to completely
terminate its participation in the Plan and the Trust with respect to its
Employees, such termination shall be effective as of a date to be specified in
certified copies of its resolutions to be delivered to the Trustee and other
Employers, and communicated to the Participants conditioned on the satisfaction
of all applicable regulatory requirements. Upon termination of the Plan and
38
<PAGE>
Trust with respect to the terminating Employer, and after payment of all
expenses and proportional adjustment of accounts of Participants of the
terminating Employer to reflect such expenses, Trust Fund profit or losses, and
reallocations to the date of termination, each employed or retired Participant
with respect to the terminating Employer shall be entitled to receive his
Account. The Trustee shall make payment of such amounts to such Participants in
accordance with the provisions of Article 7 above, unless the terminating
Employer shall direct that payment be made in a trustee-to-trustee transfer to
another qualified plan.
9.4 MERGER, CONSOLIDATION, OR TRANSFER. No merger, consolidation with,
----------------------------------
or transfer of assets to any other plan, shall occur unless each Participant
would receive a benefit immediately after such merger, etc. (if the Plan then
terminated) which is at least equal to the benefit the Participant would have
received immediately before such merger, etc. (if the Plan had terminated).
9.5 ADOPTION BY AFFILIATED EMPLOYERS. Notwithstanding anything herein
--------------------------------
to the contrary, with the consent of the Employer, an Affiliated Employer may
adopt this Plan and all of the provisions hereof, and participate herein and be
known as an Employer, by a properly executed document evidencing said intent and
will of such Affiliated Employer.
9.6 DESIGNATION OF AGENT. Each Employer shall be deemed to be a part of
--------------------
this Plan; provided, however, that with respect to all of its relations with the
Trustee and Plan Administrator for the purpose of this Plan, each Affiliated
Employer adopting the Plan shall irrevocably designate Krispy Kreme Doughnut
Corporation as its agent, and action by Krispy Kreme Doughnut Corporation shall
be binding on all Employers.
Unless the context of the Plan clearly indicates the contrary, the word
"Employer" shall be deemed to include each Employer as related to its adoption
of the Plan.
ARTICLE 10
MISCELLANEOUS PROVISIONS
------------------------
10.1 NO GUARANTY OF EMPLOYMENT. The adoption and maintenance of the
-------------------------
Plan shall not be deemed to constitute a contract between the Employer and any
Employee or to be a consideration for, or an inducement or condition of, the
employment of any person. Nothing herein contained shall be deemed to give any
Employee the right to be retained in the employ of the Employer or to interfere
with the right of the Employer to discharge any Employee at any time, nor shall
it be deemed to give the Employer the right to require the Employee to remain in
its employ, nor shall it interfere with the Employee's right to terminate his
employment at any time.
10.2 PROVISION OF BENEFITS. All benefits payable under the Plan shall
---------------------
be paid or provided for solely from the Trust Fund, and the Employer assumes no
liability or responsibility therefor.
39
<PAGE>
10.3 HEADINGS. The headings of articles and sections are included
--------
solely for convenience of reference, and if there is any conflict between such
headings and the text of this Plan and the Trust Agreement, the text shall
control.
10.4 GOVERNING LAW. All legal questions pertaining to the Plan shall be
-------------
determined in accordance with the laws of the State of North Carolina insofar as
the same shall be applicable and not superseded by ERISA.
10.5 SPENDTHRIFT CLAUSE.
------------------
(a) To the extent permitted by law, Participants are prohibited
from anticipating, encumbering, alienating or assigning any of their rights,
claims or interest in this Trust or in any of the assets thereof, and no
undertaking or attempt to do so shall in any way bind the Plan Administrator or
the Trustee or be of any force or effect whatever. Furthermore, to the extent
permitted by law, no such rights, claims or interest of a Participant in this
Trust or in any of the assets thereof shall in any way be subject to such
Participant's debts, contracts or engagements, nor to attachment, garnishment,
levy or other legal or equitable procesection
(b) Anything to the contrary herein notwithstanding, to the extent
permissible under applicable law, a Participant's interest hereunder is subject
to all bona fide and existing debts owed by such Participant to the Plan and
Trust, if any, and upon such Participant or the Beneficiary of such Participant
becoming entitled to receive a distribution hereunder, the Trustee, if it shall
prior to disbursement have received certified notice or confirmation from the
Plan Administrator in such form as it may reasonably require of the fact and
amount of such indebtedness, shall pay first from the distribution as payable
the amount of such indebtedness to the Plan and Trust with the remainder, if
any, being payable as otherwise provided herein. Prior to making a payment,
however, the Participant or Beneficiary must be given written notice by the Plan
Administrator that such indebtedness is to be so paid in whole or part from his
Participant's vested Account. If the Participant or Beneficiary does not agree
that the indebtedness is a valid claim against the Participant's vested Account,
he shall be entitled to a review of the validity of the claim in accordance with
procedures provided in Section 10.8.
(c) The foregoing provision against the assignment of a
Participant's right in the Plan shall not apply in the case of a Qualified
Domestic Relations Order which is determined by the Plan Administrator to meet
the requirements of section 414(p) of the Code.
10.6 SEVERABILITY. If any provisions of this Plan shall be held illegal
------------
or invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions of this Plan but shall be fully severable and the Plan
shall be construed and enforced as if said illegal and invalid provisions had
never been inserted herein.
10.7 AUTHORITY OF TRUSTEE. All persons dealing with the Trustee are
---------------------
hereby released from any necessity for questioning the authority of the Trustee
hereunder or to see to the application of any moneys, securities or other
property paid or delivered to the Trustee as a purchase price or otherwise.
40
<PAGE>
10.8 CLAIMS. A Participant or Beneficiary shall have the right to file
------
a claim, inquire if he has any right to benefits, or appeal the denial of a
claim. A claim will be considered as having been filed when a written or oral
communication is made by the person (or his authorized representative) which
brings his claim request to the attention of the Plan Administrator. The Plan
Administrator will notify the claimant in writing within a reasonable period of
time after the claim is filed if the claim is wholly or partially denied. This
notice will be in writing in a manner calculated to be understood by the
claimant and will include:
(a) The reason or reasons for denial;
(b) Specific reference to the provisions of the Plan or Trust
Agreement that apply in the case;
(c) A description of any additional material or information that
would be helpful to the Plan Administrator in further review of the claim, and
reason or reasons why it is necessary; and
(d) An explanation of the Plan's claim appeal procedure.
If a claim is denied, the claimant may file an appeal asking the Plan
Administrator to conduct a full and fair review of his claim. An appeal must be
made in writing no more than 60 days after the claimant receives written notice
of the denial. The claimant may review any documents that apply to the case and
may also submit points of disagreement and other comments in writing along with
the appeal. The decision of the Plan Administrator regarding the appeal will be
given to the claimant in writing no later than 60 days following receipt of the
appeal. However, if a hearing is held or there are special circumstances
involved, the decision will be given no later than 120 days after receiving the
appeal.
10.9 NUMBER AND GENDER. Masculine pronouns shall include both the
-----------------
masculine and feminine gender (and vice versa), and the singular shall include
the plural (and vice versa) unless the context indicates otherwise. The pronouns
"it" and "its" shall refer to a natural person (and vice versa) if the context
so requires.
10.10 AUDIT.
-----
(a) If an audit of the Plan's records shall be required for any
Plan Year, the Plan Administrator shall direct the Trustee to engage on behalf
of all Participants an independent qualified public accountant for that purpose.
Such accountant shall, after an audit of the books and records of the Plan in
accordance with generally accepted auditing standards, within a reasonable
period after the close of the Plan Year, furnish to the Plan Administrator and
the Trustee a report of his audit setting forth his opinion as to whether each
of the following statements, schedules or lists, or any others that are required
by section 103 of ERISA or the Secretary of Labor to be filed with the Plan's
annual report, are presented fairly in conformity with generally accepted
accounting principles applied consistently:
41
<PAGE>
(i) statement of the assets and liabilities of the Plan;
(ii) statement of changes in net assets available to the
Plan;
(iii) statement of receipts and disbursements, a schedule of
all assets held for investment purposes, a schedule of all loans or fixed income
obligations in default at the close of the Plan Year;
(iv) a list of all leases in default or uncollectible during
the Plan Year;
(v) the most recent annual statement of assets and
liabilities of any bank common or collective trust fund in which Plan assets are
invested or such information regarding separate accounts or trusts with a bank
or insurance company as the Trustee and Plan Administrator deem necessary; and
(vi) a schedule of each transaction or series of transactions
involving an amount in excess of five percent (5%) of Plan assets.
All auditing and accounting fees shall be an expense of and may,
at the election of the Administrator, be paid from the Trust Fund.
(b) If some or all of the information necessary to enable the Plan
Administrator to comply with section 103 of ERISA is maintained by a bank,
insurance company, or similar institution, regulated and supervised and subject
to periodic examination by a state or federal agency, it shall transmit and
certify the accuracy of that information to the Administrator as provided in
section 103(b) of ERISA within 120 days after the end of the Plan Year or by
such other date as may be prescribed under regulations of the Secretary of
Labor.
ARTICLE 11
TOP-HEAVY PLAN RULES
--------------------
11.1 EFFECT OF ARTICLE 11 ON PLAN. Notwithstanding any contrary
--------------------------------
provisions contained in any other Article of the Plan, if the Plan shall be a
Top-Heavy Plan (as hereinafter defined) this Article shall control; and any
contrary terms of the Plan shall be deemed replaced by the provisions of this
Article. However, this Article shall not become effective until the Plan is
determined to be a Top-Heavy Plan; thereafter, it shall continue in effect only
during those Plan Years in which the Plan is a Top-Heavy Plan or as otherwise
required by law. In addition, the requirements of Sections 11.2 and 11.3 shall
not apply with respect to any Employee included in a unit of employees covered
by an agreement which the Secretary of Labor finds to be a collective bargaining
agreement between Employee representatives and one or more Employers if there is
evidence that retirement benefits were the subject of good faith bargaining
between the parties. Further, the Account of any individual who has not
42
<PAGE>
performed any service for the Employer at any time for the five year period
ending on the Determination Date shall not be considered in determining whether
the Plan is a Top-Heavy Plan.
11.2 DEFINITIONS. For purposes of this Article 11, and Articles 5 and
-----------
7, the following words and terms shall have the following meanings:
(a) "Key Employee" shall mean:
(i) Any Employee or former Employee (and the surviving spouse
or other Beneficiary of such Employee) who at any time during the Determination
Period was an officer of the Employer having an annual "415 Compensation"
greater than one hundred fifty percent (150%) of the amount in effect under
section 415(b)(1)(A) of the Code for the calendar year in which such Plan Year
ends. No more than 50 employees (or, if the Employer shall have fewer than fifty
(50) Employees, the greater of three percent (3%) or ten percent (10%) of the
Employees) shall be considered officers.
(ii) An Employee who owns (or is considered to own
undersection 318 of the Code) one of the ten largest interests in the Employer
providing such interest is greater than one-half percent (1/2%), and further
providing that such individual's "415 Compensation" exceeds the dollar
limitation under section 415(c)(1)(A) of the Code for the calendar year in which
such Plan Year ends [if two Employees have the same interest in the Employer,
the Employee having greater annual "415 Compensation" shall be treated as having
a larger interest]; or
(iii) A five percent (5%) owner of the Employer, or a one
percent (1%) owner of the Employer who has an annual "415 Compensation" of more
than one hundred fifty thousand dollars ($150,000).
The Determination Period is the Plan Year containing the Determination
Date and the four preceding Plan Years. The determination of who is a Key
Employee will be made in accordance with section 416(i)(1) of the Code and the
regulations thereunder. For purposes of determining whether an individual has
"415 Compensation" of one hundred and fifty thousand dollars ($150,000), or
whether an individual is a Key Employee by reason of being an officer or a top
ten owner, compensation from each entity required to be aggregated under
sections 414(b), (c) and (m) is to be taken into account.
(b) "415 Compensation" shall mean compensation as defined in
section 415(c)(3) of the Code, but including amounts contributed by the Employer
pursuant to a salary reduction agreement which are excludable from the
Employee's gross income under section 125, 402(a)(8), 402(h) or 403(b) of the
code.
(c) "Top-Heavy Plan": shall mean a Plan for which the following
conditions exist:
43
<PAGE>
(i) If the Top-Heavy Ratio for this Plan exceeds sixty
percent (60%) and this Plan is not part of any Required Aggregation Group or
Permissive Aggregation Group of plans.
(ii) If this Plan is a part of a Required Aggregation Group
of plans but not part of a Permissive Aggregation Group and the Top-Heavy Ratio
for the group of plans exceeds sixty percent (60%).
(iii) If this Plan is a part of a Required Aggregation Group
and part of a Permissive Aggregation Group of plans and the Top-Heavy Ratio for
the Permissive Aggregation Group exceeds sixty percent (60%).
(d) "Top-Heavy Ratio" shall mean:
(i) If the Employer maintains one or more defined
contribution plans (including any Simplified Employee Pension Plan) and the
Employer has never maintained any defined benefit plan which has covered or
could cover a Participant in this Plan, the Top-Heavy Ratio is a fraction, the
numerator of which is the sum of the account balances of all Key Employees as of
the Determination Date, and the denominator of which is the sum of all account
balances of all Participants as of the Determination Date. Both the numerator
and the denominator of the Top-Heavy Ratio are adjusted to reflect any
Contribution which is due but unpaid as of the Determination Date. In
determining the above account balances, such amount must be increased by the
aggregate distributions made within the five year period ending on the
Determination Date as well as distributions under a terminated plan for the same
five year period which if it had not been terminated would have been required to
be included in an aggregation group.
(ii) If the Employer maintains one or more defined
contribution plans (including any Simplified Employee Pension Plan) and the
Employer maintains or has maintained one or more defined benefit plans which
have covered or could cover a Participant in this Plan, the Top-Heavy Ratio is a
fraction, the numerator of which is the sum of account balances under the
defined contribution plans for all Key Employees and the Present Value of
accrued benefits under the defined benefit plans for all Key Employees, and the
denominator of which is the sum of the account balances under the defined
contribution plans for all Participants and the Present Value of accrued
benefits under the defined benefit plans for all Participants. Both the
numerator and denominator of the Top-Heavy Ratio are adjusted for any
distribution of an account balance or an accrued benefit made in the five year
period ending on the Determination Date, as well as any distributions during the
same five year period under a terminated plan which if it had not been
terminated would have been required to be included in an aggregation group, and
any contribution due but unpaid as of the Determination Date.
(iii) For purposes of (i) and (ii) above, the value of
account balances and the Present Value of accrued benefits will be determined as
of the most recent valuation date that falls within or ends with the 12 month
period ending on the Determination Date. The account balances and accrued
benefits of the Participant who is not a Key Employee but who was a Key Employee
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in a prior year will be disregarded. The calculation of the Top-Heavy Ratio, and
the extent to which distributions, rollovers, and transfers are taken into
account will be made in accordance with section 416 of the Code, and the
regulations thereunder. Deductible employee contributions will not be taken into
account for purposes of computing the Top-Heavy Ratio. When aggregating plans
the value of account balances and the Present Value of accrued benefits will be
calculated with reference to the Determination Dates that fall within the same
calendar year.
(e) "Permissive Aggregation Group" shall mean the Required
Aggregation Group of plans plus any other plan or plans of the Employer which,
when considered as a group with the Required Aggregation Group, would continue
to satisfy the requirements of sections 401(a)(4) and 410 of the Code. Plans not
within the Required Aggregation Group may only be included in the Permissive
Aggregation Group if the contributions and benefits under the plans not within
the Required Aggregation Group are comparable to the contributions and benefits
provided under any plan included within the Required Aggregation Group.
(f) "Required Aggregation Group" shall mean (i) Each qualified
plan of the Employer in which at least one Key Employee participates in the Plan
Year containing the Determination Date, or any of the four (4) preceding Plan
Years, and (ii) any other qualified plan of the Employer which enables a plan
described in (i) to meet the requirements of sections 401(a)(4) and 410 of the
Code.
(g) "Determination Date" shall mean for any Plan Year subsequent
to the first Plan Year, the last day of the preceding Plan Year; and for the
first Plan Year of the Plan, the last day of that year.
(h) "Valuation Date" shall mean the last day of the Plan Year on
which account balances or accrued benefits are valued for purposes of
calculating the Top-Heavy Ratio. The valuation date must be the most recent
valuation date within a 12 month period ending on the determination date.
(i) "Present Value" shall be based on the annual effective
interest rate of five percent (5%) unless specifically designated otherwise in
this Plan, and actuarial assumptions shall be based on the following mortality
tables: (i) PBGC-I for males, and (ii) PBGC-II for females.
(j) "Non-Key Employee" shall mean any Employee who is not a Key
Employee.
(k) "Five Percent (5%) Owner and One Percent (1%) Owner" shall be
defined as follows:
(i) "Five Percent (5%) Owner shall mean any person who owns
(or is considered as owning pursuant to section 318 of the Code) more than five
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percent (5%) of the outstanding stock of the corporation, or stock possessing
more than five percent (5%) of the total combined voting power of all stock of
the corporation.
(ii) "One Percent (1%) Owner" shall mean any person who would
be described in subsection (i) above if one percent (1%) were substituted for
five percent (5%).
(iii) For purposes of this subsection 11.2(j) the provisions
of section 318(a)(2)(C) of the Code shall be applied by substituting "five
percent (5%)" for "fifty percent (50%)."
(iv) The aggregation rules of subsections (b), (c), and (m)
of section 414 of the Code shall not apply for purposes of determining ownership
in the Employer.
(l) The Maximum Annual Compensation taken into account under a
Top-Heavy Plan may not exceed the first two hundred thousand dollars ($200,000)
of any Employee's annual compensation (or such greater amount as may be
subsequently allowed as a cost of living adjustment by law or regulations
prescribed thereunder).
11.3 MINIMUM CONTRIBUTION.
--------------------
(a) If the Plan shall be a Top-Heavy Plan for any Plan Year,
except as otherwise provided in (c) and (d) below, the sum of Employer
Contributions and forfeitures allocated on behalf of any Participant who is not
a Key Employee shall not be less than the lesser of three percent (3%) of such
Participant's compensation or, in the case where the Employer has no defined
benefit plan which designates this Plan as satisfying section 401 of the Code,
the largest percentage of Employer contributions and forfeitures, as a
percentage of the first two hundred thousand dollars ($200,000) of the Key
Employee's Compensation, allocated on behalf of any Key Employee for that year.
For purpose of this Section, if the highest percentage rate allocated to a Key
Employee for a Plan Year in which the Plan is Top-Heavy is less than three
percent (3%), all amounts contributed as a result of a salary reduction
agreement are included in determining the Employer contributions made on behalf
of a Key Employee. The minimum contribution is determined without regard to any
Social Security contribution. Such minimum contribution shall be made and
allocated to the account of the Participant even though, under other Plan
provisions, the Participant would not otherwise be entitled to receive an
allocation, or would have received a smaller allocation for the year because of
(i) the Participant's failure to complete 1,000 Hours of Service (or any
equivalent provided in the Plan), or (ii) the Participant's failure to make
mandatory Employee contributions to the Plan, or (iii) the Participant's
compensation was less than a stated amount.
(b) Subsection (a) above shall not apply to any Participant who
terminated employment during the year for a reason other than death, Disability,
or Retirement, and who was not employed by the Employer on the last day of the
year.
(c) If this Plan is Top-Heavy and the Employer has one or more
additional plans which are also Top-Heavy, the minimum contribution for a
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Non-Key Employee who is a Participant of this Plan as well as another Top-Heavy
Plan shall be provided by the other plan, unless otherwise provided by the
Employer.
(d) The minimum contribution required (to the extent required to
be nonforfeitable under section 416(b)) may not be forfeited under sections
411(a)(3)(B) or 411(a)(3)(D) of the Code.
(e) For any Plan Year in which the Plan is Top-Heavy, the amount
of a Participant's annual compensation taken into account for purposes of
determining Employer Contributions under the Plan shall not exceed the limit
established by section 401(a)(17) of the Code.
IN WITNESS WHEREOF, Krispy Kreme Doughnut Corporation has caused these
presents to be executed by its duly authorized officers and its corporate seal
to be hereunto affixed, and the individuals comprising the Trustee have set
their hands and seals hereto, all as of the day and year first above written.
KRISPY KREME DOUGHNUT CORPORATION
[CORPORATE SEAL]
By: /s/ J. Paul Breitbach
----------------------
Executive Vice President
ATTEST:
/s/ Randy S. Casstevens
-----------------------
Secretary
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