November 13, 1997
Securities and Exchange Commission
450 5th Street
Washington, D. C. 20549
RE: CHITTENDEN CORPORATION QUARTERLY REPORT (ON FROM 10-Q)
REGISTRATION NO. 0-7974
To Whom It May Concern:
Pursuant to the requirements of Rule 13a-13 under the Securities Exchange Act of
1934, there is appended to this transmittal, an electronic file of the quarterly
report for the three months ended September 30, 1997 (on Form 10-Q) of
Chittenden Corporation, Two Burlington Square, Burlington, Vermont 05401.
If you have any questions concerning this quarterly report, please telephone the
undersigned at (802) 660-1410.
Kindly acknowledge receipt of this letter by Compuserve E-Mail.
Sincerely,
CHITTENDEN CORPORATION
S/F. SHELDON PRENTICE, SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Nine Months Ended September 30, 1997
or
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from ____________to____________
Commission File Number 0-7974
CHITTENDEN CORPORATION
(Exact Name of Registrant as Specified in its Charter)
VERMONT 03-0228404
(State of Incorporation) (IRS Employer Identification No.) <PAGE>
TWO BURLINGTON SQUARE
BURLINGTON, VERMONT 05401
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: (802) 658-4000
NOT APPLICABLE
Former Name, Former Address and Formal Fiscal Year
If Changed Since Last Report
Indicate by checkmark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
At September 30, 1997 there were 12,715,655 shares of the Corporation's $1.00
par value common stock issued, with 11,581,924 shares outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CHITTENDEN CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30, December 31,
1997 1996
------------ -----------
ASSETS (In Thousands)
Cash and Cash Equivalents $ 161,744 $ 214,459
Securities Available For Sale 343,877 329,213
Securities Held for Investment (Market Value
$22,296,000 in 1997; and $35,405,000 in 1996) 22,680 35,580
Federal Home Loan Bank Stock 5,591 5,591
Mortgage Loans Held for Sale 11,352 9,870
Loans:
Commercial 367,198 321,068
Real Estate:
Residential 468,887 491,169
Commercial 319,024 304,530
Construction 21,204 25,084
-----------------------------
Total Real Estate 809,115 820,783
Consumer 234,191 202,816
Total Loans 1,410,504 1,344,667
Less: Allowance for Possible Loan Losses (26,227) (28,096)
-----------------------------
Net Loans 1,384,277 1,316,571
Accrued Interest Receivable 13,068 14,179
Other Real Estate Owned 685 2,251
Net Deferred Tax Asset 10,529 10,647
Other Assets 17,802 15,797
Premises and Equipment, Net 25,673 24,297
Intangible Assets 14,209 10,291
-----------------------------
Total Assets $2,011,487 $1,988,746
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand 290,943 286,932
Certificates of Deposit $100,000 and Over 112,764 104,295
Savings and Other Time 1,332,623 1,370,352
-----------------------------
Total Deposits 1,736,330 1,761,579
Short-Term Borrowings 70,150 23,992
Accrued Expenses and Other Liabilities 33,480 26,234
Long-Term Debt 3,225 2,540
-----------------------------
Total Liabilities 1,843,185 1,814,345
-----------------------------
Stockholders' Equity:
Common Stock - $1 Par Value
Authorized - 30,000,000 Shares
Issued - 12,715,655 Shares in 1997;
and 12,678,625 in 1996 12,716 12,679
Surplus 75,226 74,706
Retained Earnings 106,304 92,040
Treasury Stock - At Cost, 1,133,731 Shares in 1997;
402,413 in 1996 (26,681) (4,770)
Net Unrealized Gain (Loss) on Securities Available
for Sale, Net of Taxes of $679,000 in 1997; and
($102,000) in 1996 1,177 (208)
Unearned Portion of Employee Restricted Stock (440) (46)
----------------------------
Total Stockholders' Equity 168,302 174,401
----------------------------
Total Liabilities and Stockholders' Equity $2,011,487 $1,988,746
=============================
The accompanying notes are an integral part of these financial statements.
Certain amounts for 1996 have been reclassified to conform with 1997
classifications.
CHITTENDEN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months
Ended September 30,
1997 1996
---- ----
(In Thousands, Except Share Data)
Interest Income:
Interest on Loans $31,892 $30,140
Investment Securities:
Mortgage-Backed Securities 1,935 1,477
Taxable 3,760 3,705
Tax-Favored Debt 5 17
Tax-Favored Equity 195 85
Short-Term Investments 402 517
------------------------------
Total Interest Income 38,189 35,941
------------------------------
Interest Expense:
Deposits:
Savings 7,611 6,902
Time 7,032 7,348
------------------------------
Total Interest on Deposits 14,643 14,250
Short-Term Borrowings 589 532
Long-Term Debt 63 46
------------------------------
Total Interest Expense 15,295 14,828
------------------------------
Net Interest Income 22,894 21,113
Provision for Possible Loan Losses 1,013 850
------------------------------
Net Interest Income after Provision for
Possible Loan Losses 21,881 20,263
------------------------------
Noninterest Income:
Trust Income 1,337 1,188
Service Charges on Deposit Accounts 1,781 1,542
Mortgage Servicing Income 561 652
Gains on Sales of Mortgage Loans, Net 606 605
Credit Card Income, Net 998 1,197
Insurance Commisions, Net 592 0
Other 1,262 1,124
------------------------------
Total Noninterest Income 7,137 6,308
------------------------------
Noninterest Expense:
Salaries 6,944 6,575
Employee Benefits 2,089 1,971
Net Occupancy Expense 2,633 2,320
FDIC Deposit Insurance 54 6
Other Real Estate Owned, Income and Expense, Net (63) (61)
Other 5,847 5,442
------------------------------
Total Noninterest Expense 17,504 16,253
------------------------------
Income Before Income Taxes 11,514 10,318
Provision for Income Taxes 3,978 3,441
------------------------------
Net Income $7,536 $6,877
==============================
Earnings Per Share $0.63 $0.55
Dividends Per Share $0.22 $0.20
Book Value $14.53 $13.65
Weighted Average Common
and Common Equivalent Shares Outstanding 12,015,202 12,490,224
The accompanying notes are an integral part of these consolidated financial
statements.
Certain amounts for 1996 have been reclassified to conform with 1997
classifications.
CHITTENDEN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Nine Months
Ended September 30,
1997 1996
---- ----
(In Thousands, Except Share Data)
Interest Income:
Interest on Loans $92,632 $88,795
Investment Securities:
Mortgage-Backed Securities 5,859 4,363
Taxable 11,576 10,398
Tax-Favored Debt 19 72
Tax-Favored Equity 495 755
Short-Term Investments 1,293 1,256
--------------------------------
Total Interest Income 111,874 105,639
--------------------------------
Interest Expense:
Deposits:
Savings 21,852 19,974
Time 20,352 22,161
--------------------------------
Total Interest on Deposits 42,204 42,135
--------------------------------
Short-Term Borrowings 1,854 1,537
Long-Term Debt 163 146
--------------------------------
Total Interest Expense 44,221 43,818
Net Interest Income 67,653 61,821
Provision for Possible Loan Losses 3,038 2,858
--------------------------------
Net Interest Income after Provision for
Possible Loan Losses 64,615 58,963
--------------------------------
Noninterest Income:
Trust Income 3,974 3,638
Service Charges on Deposit Accounts 5,170 4,665
Mortgage Servicing Income 1,703 1,890
Gains on Sales of Mortgage Loans, Net 1,657 2,043
Credit Card Income, Net 3,752 2,990
Insurance Commisions, Net 829 -
Other 3,672 3,551
--------------------------------
Total Noninterest Income 20,757 18,777
--------------------------------
Noninterest Expense:
Salaries 20,625 19,013
Employee Benefits 6,883 5,907
Net Occupancy Expense 7,355 7,025
FDIC Deposit Insurance 171 21
Other Real Estate Owned, Income and Expense, Net 9 113
Other 17,033 16,201
--------------------------------
Total Noninterest Expense 52,076 48,280
--------------------------------
Income Before Income Taxes 33,296 29,460
Provision for Income Taxes 11,359 9,873
--------------------------------
Net Income $21,937 $19,587
================================
Earnings Per Share $1.79 $1.57
Dividends Per Share $0.64 $0.51
Book Value $14.53 $13.65
Weighted Average Common
and Common Equivalent Shares Outstanding 12,283,041 12,452,645
The accompanying notes are an integral part of these consolidated financial
statements.
Certain amounts for 1996 have been reclassified to conform with 1997
classifications.
CHITTENDEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Nine Months Ended September, 30,
1997 1996
----------------------------------------
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $21,937 $19,587
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses 3,038 2,858
Depreciation 2,574 2,662
Amortization of intangible assets 955 925
Amortization of premiums, fees, and
discounts, net (669) (1,322)
Deferred income taxes (760) 11
Loans originated and purchased for sale (120,314) (150,070)
Proceeds from sales of loans 120,238 157,504
Gain on sales of loans (1,657) (2,043)
Changes in assets and liabilities, net of effect
from purchase of The Pomerleau Agency, Inc.:
Accrued interest receivable 1,111 (847)
Other assets (4,166) (2,406)
Accrued expenses and other liabilities 7,216 (713)
--------- --------
Net cash provided by operating activities 29,503 26,146
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of The Pomerleau Agency, Inc.,
net of cash paid 721 -
Proceeds from sales of securities available
for sale 66,694 -
Proceeds from maturing securities and principal
payments on securities available for sale 126,333 202,255
Purchase of securities available for sale (204,804) (241,012)
Proceeds from sales of securities held for
investment 6,843 -
Proceeds from principal payments on securities
held for investment 5,688 3,150
Purchases of securities held for investment (199) (296)
Loans originated, net of principal repayments (71,595) (93,774)
Purchases of premises and equipment (3,950) (2,184)
--------- ---------
Net cash used in investing activities (74,269) (131,861)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits (25,264) 138,987
Net increase in short-term borrowings 46,158 23,063
Net increase in long-term debt 685 42
Proceeds from issuance of treasury and common
stock 156 1,962
Dividends on common stock (7,673) (6,293)
Repurchase of common stock (22,011) -
-------- --------
Net cash provided by (used in) financing
activities (7,949) 157,761
-------- --------
Net increase (decrease) in cash and cash equivalents (52,715) 52,046
Cash and cash equivalents at beginning of period 214,459 165,441
-------- --------
Cash and cash equivalents at end of period $161,744 $217,487
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $44,032 $28,851
Income taxes 8,244 6,866
Noncash investing and financing activities:
Securities transferred from held for investment
to held for sale 515 -
Loans transferred to other real estate owned 1,477 1,297
Issuance of treasury and restricted stock 501 279
Acquisition of The Pomerleau Agency, Inc.:
Fair value of assets acquired 7,937 -
Liabilities assumed 3,182 -
Debt issued 3,700 -
Cash paid 1,055 -
The accompanying notes are an integral part of these consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
NOTE 1 - ACCOUNTING POLICIES
The Company's significant accounting policies, other than those described in
Note 2 below, are described in Note 1 of the Notes to Consolidated Financial
Statements included in its 1996 Annual Report on Form 10-K filed with the
Securities and Exchange Commission. For interim reporting purposes, the
Company follows the same basic accounting policies and considers each interim
period as an integral part of an annual period. Certain amounts for 1996 have
been reclassified to conform with 1997 classifications.
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim periods. Results for interim periods are
not necessarily indicative of the results of operations for the full year or
any other interim period.
NOTE 2 - ACCOUNTING POLICY CHANGES - ADOPTION OF SFAS 125
As of January 1, 1997, the Company adopted Statement of Financial Accounting
Standards No. 125, ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS
AND EXTINGUISHMENT OF LIABILITIES ("SFAS 125"), which superseded SFAS 122,
ACCOUNTING FOR MORTGAGE SERVICING RIGHTS. Under the financial-components
approach set forth in SFAS 125, after a transfer of financial assets, an
entity recognizes the financial and servicing assets it controls and the
liabilities it has incurred, derecognizes financial assets when
control has been surrendered, and derecognizes liabilities when extinguished.
The Statement also provides consistent standards for distinguishing transfers
of financial assets that are sales from transfers that are secured borrowings.
SFAS 125 did not have a significant impact on the Company s financial position
or results of operations.
NOTE 3 NEW ACCOUNTING PRONOUNCEMENT
In March 1997, the Financial Accounting Standards Board (the FASB) issued
Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE
(SFAS 128), which established new standards for calculating and presenting
earnings per share. The Company will adopt this new standard in its financial
statements for the period ended December 31, 1997. The standard will require
the reporting of diluted earnings per share and basic earnings per share. For
the three-month and nine-month periods ended September 30, 1997 and 1996, pro
forma basic earnings per share and diluted earnings per share would have been as
follows:
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
Fully Diluted EPS, as reported $0.63 $0.55 $1.79 $1.57
Pro Forma:
Basic EPS per SFAS 128 $0.65 $0.56 $1.84 $1.61
Diluted EPS per SFAS 128 $0.63 $0.55 $1.80 $1.57
NOTE 4 ACQUISITIONS
On May 31, 1997, Chittenden Bank acquired certain assets and assumed certain
liabilities of The Pomerleau Agency, Inc. This transaction has been accounted
for as a purchase and accordingly, all results of operations subsequent to the
transaction have been included in Chittenden's consolidated statement of income.
The impact of the acquisition was not material to consolidated operations.
Therefore, pro forma disclosures have been omitted.
NOTE 5 - SUBSEQUENT EVENT
On, October 15, 1997, the Company declared regular dividends of approximately
$2.548 million or $0.22 per share and a special dividend of approximately
$8.686 million or $0.75 per share. Both the special and regular dividends
will be paid on November 14, 1997 to shareholders of record on October 31, 1997.
In addition, the Company declared a five-for-four stock split to be
distributed on December 12, 1997 to shareholders of record on November 28, 1997.
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Chittenden Corporation
Average Balances, Interest Income and Expense, and Average Rates (Unaudited)
For the Nine Months Ended September 30,
1997
----------------------------------------
Interest Average
Average Income/ Yield/
Balance Expense(1) Rate(1)
------- ---------- --------
ASSETS
Interest-Earning Assets:
Loans $1,388,276 $93,225 8.98%
Industrial Revenue Bonds (2) 4,539 395 11.64%
Investments:
Taxable 364,698 17,435 6.39%
Tax-Favored Debt Securities 399 29 9.72%
Tax-Favored Equity Securities 15,546 681 5.86%
Interest-Bearing Deposits in Banks 100 2 3.21%
Federal Funds Sold 31,766 1,291 5.43%
---------- -------
Total Interest-Earning Assets 1,805,324 113,058 8.37%
-------
NonInterest-Earning Assets 141,250
Allowance for Possible Loan Losses (28,239)
----------
Total Assets $1,918,335
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-Bearing Liabilities:
Savings and Interest-Bearing
Transactional Accounts 876,352 21,852 3.33%
Certificates of Deposit $100,000
and Over 113,504 4,534 5.34%
Other Time Deposits 413,855 15,818 5.11%
--------- ------
Total Interest-Bearing Deposits 1,403,711 42,204 4.02%
Short-Term Borrowings 38,411 1,854 6.45%
Long-Term Debt 2,575 163 8.46%
--------- ------
Total Interest-Bearing Liabilities 1,444,697 44,221 4.09%
------
NonInterest-Bearing Liabilities:
Demand Deposits 275,155
Other Liabilities 27,832
---------
Total Liabilities 1,747,684
Stockholders' Equity 170,651
---------
Total Liabilities and
Stockholders' Equity $1,918,335
==========
Net Interest Income $68,837
=======
Interest Rate Spread (3) 4.28%
Net Yield on Earning Assets (4) 5.10%
(1) On a fully taxable equivalent basis. Calculated using a Federal Income
Tax Rate of 35%. Loan income includes fees.
(2) Industrial revenue bonds are included in Loans in the Financial Statements.
(3) Interest rate spread is the average rate earned on total interest-earning
assets less the average rate paid on interest-bearing liabilities.
(4) Net yield on earning assets is net interest income divided by total
interest-earning assets.
1996
-----------------------------------------
Interest Average
Average Income/ Yield/
Balance Expense(1) Rate(1)
------- ---------- ---------
ASSETS
Interest-Earning Assets:
Loans $1,311,069 $89,500 9.12%
Industrial Revenue Bonds (2) 5,052 433 11.45%
Investments:
Taxable 319,699 14,834 6.20%
Tax-Favored Debt Securities 1,315 107 10.87%
Tax-Favored Equity Securities 23,843 1,040 5.83%
Interest-Bearing Deposits in Banks 100 1 3.00%
Federal Funds Sold 29,341 1,183 5.39%
---------- ------
Total Interest-Earning Assets 1,690,419 107,098 8.46%
-------
NonInterest-Earning Assets 156,406
Allowance for Possible Loan Losses (28,431)
----------
Total Assets $1,818,394
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-Bearing Liabilities:
Savings and Interest-Bearing
Transactional Accounts 819,828 19,974 3.25%
Certificates of Deposit $100,000
and Over 111,308 4,659 5.59%
Other Time Deposits 433,209 17,502 5.40%
--------- -------
Total Interest-Bearing Deposits 1,364,345 42,135 4.13%
Short-Term Borrowings 30,505 1,537 6.73%
Long-Term Debt 2,507 146 7.78%
--------- -------
Total Interest-Bearing Liabilities 1,397,357 43,818 4.19%
-------
NonInterest-Bearing Liabilities:
Demand Deposits 241,027
Other Liabilities 19,956
---------
Total Liabilities 1,658,340
Stockholders' Equity 160,054
---------
Total Liabilities and
Stockholders' Equity $1,818,394
==========
Net Interest Income $63,280
=======
Interest Rate Spread (3) 4.27%
Net Yield on Earning Assets (4) 5.00%
(1) On a fully taxable equivalent basis. Calculated using a Federal Income
Tax Rate of 35%. Loan income includes fees.
(2) Industrial revenue bonds are included in Loans in the Financial Statements.
(3) Interest rate spread is the average rate earned on total interest-earning
assets less the average rate paid on interest-bearing liabilities.
(4) Net yield on earning assets is net interest income divided by total
interest-earning assets.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
On May 31, 1997, Chittenden Bank acquired certain assets and assumed certain
liabilities of The Pomerleau Agency, Inc. The acquisition has been accounted
for as a purchase and accordingly, the consolidated statement of income includes
Pomerleau's results of operations from the date of acquisition. The impact of
the acquisition was not material to consolidated operations. Therefore, pro
forma disclosures have been omitted.
Chittenden Corporation had net income of $7.5 million or earnings per share of
$0.63 for the quarter ended September 30, 1997. This compares to net income
of $6.9 million or earnings per share of $0.55 for the same three-month period
a year ago. For the nine months ended September 30, 1997, net income totaled
$21.9 million or earnings per share of $1.79. This compares to net income of
$19.6 million or earnings per share of $1.57 for the same nine-month period a
year ago.
Net interest income on a fully taxable equivalent basis for the three months
ended September 30, 1997 was $23.5 million, up $1.9 million from the same
three-month period a year ago. The increase was attributed to both an
increase in the net interest margin, from 4.93% in 1996 to 5.09% in 1997, and
to an increase in average interest-earning assets, which was up $92 million.
For the nine months ended September 30, 1997, net interest income on a fully
taxable equivalent basis was $68.8 million, up $5.6 million from a year ago.
Net yield on earning assets was 5.10% in 1997, up from 5.00% in 1996. Average
earning assets also increased year-to-date, up $115 million compared to the
same nine-month period a year ago. The increase in average earning assets
during the current periods was due to growth in loans and investments funded
by higher levels of deposits and borrowings
Provisions for and activity in the allowance for possible loan losses are
summarized as follows:
Three Months Nine Months
Ended September Ended September
---------------------------------------
1997 1996 1997 1996
---- ---- ---- ----
(In thousands)
Beginning Balance,Allowance for
Possible Loan Losses $28,167 $28,107 $28,096 $27,817
Provision for Possible Loan Losses 1,013 850 3,038 2,858
Loans Charged Off (3,365) (1,273) (6,387) (4,013)
Loan Recoveries 412 644 1,480 1,666
---------------------------------------
Ending Balance, Allowance
for Possible Loan Losses $26,227 $28,328 $26,227 $28,328
=======================================
Charge-offs for the three and nine months ended September 30, 1997 include a
$1.9 million charge related to Chittenden Bank s merchant servicing (credit card
processing) business. The charge off related to overdraft extensions of credit
to a future services company which had contracted with, and accepted deposits
from, customers, prior to filing for bankruptcy. At the time of the company's
bankruptcy, Chittenden Bank honored these obligations, leading to the $1.9
million charge off. Chittenden has assessed its merchant servicing customer
base and has determined that the volumes processed for customers with future
service businesses are not significant and that the company's reserves
appropriately reflect the remaining risk in the portfolio.
Management believes that the allowance for possible loan losses is adequate.
While management uses available information to assess possible losses, future
additions to the allowance may be necessary.
Noninterest income amounted to $7.1 million for the third quarter of 1997, up
$829,000 or 13% from last year. The increase during the current period was
primarily attributable to $592,000 in net insurance commissions generated by
the insurance agency acquired in May 1997. Increases in trust income, and
service charges on deposit accounts also contributed to current period's
increase. The increase in trust income reflects higher levels of administrated
assets; while the increase in service charges on deposit accounts is
attributed to Chittenden Bank s new deposit fee schedule, which was
implemented during the second quarter of 1997. Mortgage servicing income
declined slightly from 1996 as a result of increased amortization expense
related to originate mortgage-servicing rights. Net credit card income
declined $199,000 to $998,000. This decline was caused by conversion
expenses, totaling $213,000, related to changing processors for the merchant
processing and the credit card operations. Excluding these conversion costs,
net credit card income would have been $1,211,000, or a 1.2% increase from the
third quarter of 1996.
For the nine months ended September 30, 1997, noninterest income was $20.8
million, an increase of $2.0 million or 11% from the same period a year ago.
Net insurance commissions and net credit card income for $829,000 and
$762,000, respectively, of the increase during the current nine-month period.
Also contributing to the increase were higher service charges on deposit
accounts, and stronger trust income. Partially offsetting these increases
during the current nine-month period were reductions in mortgage servicing
income, due to increased amortization expense, and gains on sales of mortgage
loans due to decreased market activity. Gains on sales of mortgage loans for
the nine months ended September 30, 1997 included a $251,000 gain recognized
upon the sale of mortgage backed securities, which had been deferred when the
underlying mortgages were securitized and held in the investment portfolio.
Chittenden continues to service the underlying mortgages. Excluding this
gain, gains on sale of mortgages were down $637,000.
For the third quarter of 1997, noninterest expenses were $17.5 million, up
$1.3 million or 8% from the comparable 1996 level. For the first nine months
of 1997, noninterest expenses were $52.1 million, an increase of $3.8 million
or 8% from 1996. Included in the increases during the current three and nine
month periods were administrative expenses for the insurance agency acquired
during the second quarter of 1997, totaling $674,000 and $853,000,
respectively. The majority of the remaining increases were attributable to
higher salaries and employee benefits costs, resulting primarily from higher
staffing levels and related recruitment expenses, as well as to higher
accruals for incentive compensation plans due to stronger profit levels.
INCOME TAXES
The Company and the Banks are taxed on income by the IRS at the Federal level
and by various states in which they do business. The majority of the
Company's income is generated in the State of Vermont, which levies franchise
taxes on financial institutions based upon average deposit levels in lieu of
taxing income. On August 1, 1997, the franchise tax rate increased from $.04
per $1,000 of deposits to $.096. This increased franchise tax expense from
approximately $47,000 per month prior to August 1, 1997 to approximately
$113,000 per month thereafter. For the third quarter of 1997, total franchise
taxes of $274,000 were approximately $132,000 higher than in the second
quarter of 1997. Franchise taxes are included in income tax expense in the
consolidated statements of income. Assuming there are no significant changes
in the level of deposits at Chittenden Bank, franchise taxes are expected to
increase to $340,000 for the fourth quarter of 1997.
For the nine months ended September 30, 1997 and 1996, Federal and state
income tax provisions amounted to $11.4 million and $9.9 million,
respectively. The effective tax rates for the respective periods were 34.1%
and 33.5%. For the three-month periods ended September 30, 1997 and 1996,
Federal and state income tax provisions amounted to $4.0 million and $3.4
million, respectively. The effective tax rates for the respective periods
were 34.6% and 33.4%. During all periods, the Company's statutory Federal
corporate tax rate was 35%. The Company's effective tax rates differed from
the statutory rates primarily because of 1) the proportion of interest income
from state and municipal securities and corporate dividend income which are
partially exempt from Federal taxation and 2) tax credits and depreciation
expense on investments in qualified low income housing projects.
FINANCIAL POSITION
Total assets increased slightly from $1.989 billion at December 31, 1996 to
$2.011 billion at September 30, 1997. The Company invests the majority of its
assets in loans and investments. During the same nine month period total loans
increased $67.3 million, or 5.0%, to $1.422 billion at September 30, 1997. This
growth was concentrated primarily in the consumer portfolio, particularly in
leasing and indirect installment loans (up $34.6 million) and in the commercial
loan portfolio where approximately half of the increase was in obligations of
states and political subdivisions (up $23.9), as a result of seasonal borrowings
by these government agencies.
Total investments at September 30, 1997 were $372.1 million, compared to $370.4
million at December 31, 1996. Other assets increased $4.5 million from December
31, 1996 to $82.0 million at September 30, 1997. This increase was due to
intangible assets resulting from the acquisition of The Pomerleau Agency.
Total deposits at September 30, 1997 were $1.736 billion, down $25.2 million
from the December 31, 1996 level. The deposit level at December 31, 1996 was
higher than usual due to higher than normal deposits left on hand by
governmental depositors.
CREDIT QUALITY
Nonperforming assets include nonaccrual loans, restructured debt, and foreclosed
real estate (Other Real Estate Owned). As of September 30, 1997, nonperforming
assets totaled $8.7 million, down from $17.0 million a year ago and $9.8 million
at June 30, 1997. The allowance for loan losses was $26.2 million at September
30, 1997, down from $28.3 million at September 30, 1996 and down from $28.2 at
June 30, 1997. The decrease in the allowance in the third quarter of 1997 was
due primarily to higher charge offs from overdrafts generated in credit card
processing operations (as discussed above). The provision for possible loan
losses charged against earnings in the third quarter was $1.0 million, the same
level provided during the third quarter of 1996 and the second quarter of 1997.
A summary of credit quality follows:
9/30/97 06/30/97 12/31/96 9/30/96
--------------------------------------
(In thousands)
Nonaccrual Loans $7,206 $7,845 $10,601 $12,212
Restructured Debt 795 835 638 2,791
Other Real Estate Owned (OREO) 685 1,141 2,251 1,990
--------------------------------------
Total Nonperforming Assets (NPA) $8,686 $9,821 $13,490 $16,993
======================================
Loans Past Due 90 Days of More
and Still Accruing Interest $2,847 $1,531 $ 966 $ 2,360
Allowance for Possible Loan Losses 28,167 28,096 28,328 28,328
NPA as % of Loans plus OREO 0.61% 0.71% 1.00% 1.25%
Loss Allowance as % of Loans 1.84 2.05 2.09 2.08
Loss Allowance as % of
Nonperforming Loans 327.80 324.50 249.99 188.82
Loss Allowance as % of NPA 301.95 286.80 208.27 166.70
CAPITAL
Stockholders' equity totaled $168.3 million at September 30, 1997, down
from $174.4 million at year-end 1996. The decrease during the current
nine-month period reflects stock repurchases of $22.0 million, and common
stock dividends of $7.7 million. These were partially offset by year-to-
date net income of $21.9 million.
"Tier One" capital, consisting entirely of common equity, measured 10.52%
of risk-weighted assets at September 30, 1997. Total capital, including
the "Tier Two" allowance for loan losses, was 11.83% of risk-weighted
assets. The leverage capital ratio was 8.00%. These ratios placed
Chittenden in the "well-capitalized" category according to regulatory
standards.
LIQUIDITY
The Bank's asset and liability committee monitors the Company's liquidity
and rate sensitivity. This committee meets regularly to review and direct
the Bank's lending and investment activities, as well as its deposit
gathering and borrowing functions.
The measure of an institution's liquidity is its ability to meet its cash
commitments at all times with available cash or by conversion of other
assets to cash at a reasonable price. At September 30, 1997, the Company
maintained cash balances and short-term investments of approximately $161.7
million, compared with $214.5 million at December 31, 1996. Cash on hand
at December 31, 1996 was higher than usual due to the higher than usual
deposit balances caused by the additional governmental deposits discussed
above. During the first nine months of 1997, the Company continued to be
an average daily net seller of Federal Funds.
YEAR 2000
The Year 2000 problem, which is common to most corporations, concerns the
inability of information systems, primarily computer software programs, to
properly recognize and process date sensitive information as the year 2000
approaches. The Corporation has commenced an assessment of the majority of
its systems and is in the process of developing a specific workplan to
address this issue. The Corporation currently believes it will be able to
modify or replace its affected systems in time to minimize any detrimental
effect on operations. While it is not possible, at present, to give an
accurate estimate of the cost of this work, these costs may be material to
the Corporation s results of operations in one or more fiscal quarters or
years, but should not have material adverse impact on the long-term results
of operations, liquidity, or consolidated financial position of the
Corporation.
Except for historical information contained herein, the foregoing
statements are forward-looking statements, the accuracy of which is subject
to a number of risks and assumptions. The Corporation s Form 10-K for the
fiscal year ended December 31, 1996 discusses such risks and assumptions
and other key factors that could cause actual results to differ materially
from those expressed in such forward-looking statements. An additional
risk is the Corporation s ability too timely and efficiently address the
Year 2000 problem.
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 10. Material Contracts
Amended and Restated Pension Plan
Exhibit 27. Financial Data Schedule
(b) REPORTS ON FORM 8-K
None.
CHITTENDEN CORPORATION
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHITTENDEN CORPORATION
Registrant
November 13, 1997 S/PAUL A. PERRAULT
- ------------------ ---------------------------------------
Date Paul A. Perrault,
President and Chief Executive Officer
November 13, 1997 S/KIRK W. WALTERS
- ------------------ ---------------------------------------
Date Kirk W. Walters
Executive Vice President,
Treasurer, and Chief Financial Officer
CHITTENDEN PENSION ACCOUNT PLAN
Effective January 1, 1996
Execution Copy
August, 1997
TABLE OF CONTENTS
Section Page
PREAMBLE
ARTICLE I DEFINITIONS
Accrued Benefit 1.1 I-1
Actuarial Equivalent 1.2 I-1
Affiliated Company 1.3 I-2
Annual Pay Credit 1.4 I-2
Annuity Starting Date 1.5 1-2
Authorized Leave of Absence 1.6 I-3
Beneficiary 1.7 I-3
Benefit Service 1.8 I-5
Board 1.9 I-5
Cash Balance Account 1.10 I-5
Code 1.11 I-5
Compensation 1.12 I-5
Disability 1.13 I-7
Early Retirement Date 1.14 I-7
Effective Date 1.15 I-7
Eligibility Service 1.16 I-7
Employee 1.17 I-7
Employer 1.18 1-8
Employment Date 1.19 I-8
Enrolled Actuary 1.20 I-8
ERISA 1.21 1-8
Fiduciary 1.22 I-8
Hour of Service 1.23 I-9
Interest Credit(s) 1.24 I-10
Member 1.25 I-11
Normal Retirement Age 1.26 I-11
Normal Retirement Date 1.27 I-11
Opening Balance Credit 1.28 I-11
Participating Employer(s) 1.29 I-11
Plan 1.30 I-11
Plan Administrator 1.31 I-11
Plan Year 1.32 I-11
Postponed Retirement Date 1.33 I-12
Principal Employer 1.34 I-12
Prior Plan 1.35 I-12
Service Termination Date 1.36 I-12
Spouse 1.37 I-12
Trust or Trust Fund 1.38 I-12
Trust Agreement 1.39 I-12
Trustee 1.40 I-12
Wage Base 1.41 I-13
ARTICLE II MEMBERSHIP AND SERVICE
Membership 2.1 II-1
Participation Service 2.2 II-1
Eligibility Service 2.3 II-2
Benefit Service 2.4 II-3
Break in Service 2.5 II-5
ARTICLE III CASH BALANCE ACCOUNT
In General 3.1 III-1
Opening Balance Credit 3.2 III-1
Annual Pay Credits 3.3 III-1
Interest Credits 3.4 III-3
Cash Balance Account 3.5 III-4
ARTICLE IV NORMAL RETIREMENT DATE AND
NORMAL RETIREMENT INCOME
Normal Retirement Date 4.1 IV-1
Normal Retirement Income 4.2 IV-1
Minimum Benefit 4.3 IV-1
Maximum Overall Benefit 4.4 IV-2
Continuing Employment 4.5 IV-7
ARTICLE V EARLY RETIREMENT DATE AND
EARLY RETIREMENT INCOME
Early Retirement Date 5.1 V-1
Early Retirement Income 5.2 V-1
Minimum Early Retirement Benefits 5.3 V-2
ARTICLE VI POSTPONED RETIREMENT DATE AND
POSTPONED RETIREMENT INCOME
Postponed Retirement Date 6.1 VI-1
Postponed Retirement Income 6.2 VI-1
Death Prior to Postponed
Retirement Date 6.3 VI-3
ARTICLE VII TERMINATION OF EMPLOYMENT
Non-Vested Termination 7.1 VII-1
Vested Termination 7.2 VII-1
Minimum Benefit 7.3 VII-2
Maximum Benefit 7.4 VII-2
ARTICLE VIII REEMPLOYMENT
Reemployment Before Annuity
Starting Date 8.1 VIII-1
Reemployment After Annuity
Starting Date 8.2 VIII-2
Cash Balance Account After
Annuity Starting Date 8.3 VIII-3
ARTICLE IX DEATH AND DISABILITY BENEFITS
Death Benefits Limited 9.1 IX-1
Death Benefits Prior to Annuity
Starting Date 9.2 IX-1
Death Benefits After Annuity
Starting Date 9.3 IX-2
Lump Sum Death Benefit 9.4 IX-3
Disability Retirement Income 9.5 IX-3
ARTICLE X PAYMENT OF RETIREMENT BENEFITS
Automatic Form of Payment 10.1 X-1
Election of Optional Forms 10.2 X-3
Joint and Survivor Option 10.3 X-4
Life Annuity Option 10.4 X-5
Lump Sum Option 10.5 X-5
Cash Refund Annuity 10.6 X-5
Life Annuity with Guaranteed
Payment Period 10.7 X-5
Direct Rollovers from the Plan 10.8 X-6
Small Payments 10.9 X-7
General Provisions 10.10 X-7
Restrictions on Distributions 10.11 X-9
ARTICLE XI ADMINISTRATION OF THE PLAN
Allocation of Responsibility
Among Fiduciaries for Plan
and Trust Administration 11.1 XI-1
Records and Reports 11.2 XI-2
Delegation to Individuals 11.3 XI-2
Benefit Claims Procedures 11.4 XI-2
Other Powers and Duties of the
Principal Employer 11.5 XI-3
Rules and Decisions 11.6 XI-4
Authorization of Benefit Payments 11.7 XI-5
Application and Forms for Benefits 11.8 XI-5
Indemnification 11.9 XI-5
ARTICLE XII FUNDING AND CONTRIBUTIONS
Establishment of Trust Fund 12.1 XII-1
Contributions to the Fund;
Plan Expenses 12.2 XII-1
Contributions Conditional 12.3 XII-2
Employee Contributions 12.4 XII-2
ARTICLE XIII FIDUCIARY RESPONSIBILITIES
Basic Responsibilities 13.1 XIII-1
Actions of Fiduciaries 13.2 XIII-1
Fiduciary Liability 13.3 XIII-2
ARTICLE XIV AMENDMENT AND TERMINATION
Right to Amend or Terminate 14.1 XIV-1
Partial Termination 14.2 XIV-1
Vesting and Distribution of Funds
Upon Termination 14.3 XIV-2
Determination of Funds Upon
Termination 14.4 XIV-3
Disabled Members 14.5 XIV-4
Restrictions on Benefits 14.6 XIV-5
Right to Accrued Benefits 14.7 XIV-5
ARTICLE XV GENERAL PROVISIONS
Plan Voluntary 15.1 XV-1
Payments to Minors and Incompetents 15.2 XV-2
Non-Alienation of Benefits 15.3 XV-2
Evidence of Survival 15.4 XV-4
Use of Masculine and Feminine;
Singular and Plural 15.5 XV-5
Merger, Consolidation or Transfer 15.6 XV-5
Leased Employees 15.7 XV-5
Governing Law 15.8 XV-6
Severability 15.9 XV-6
Captions 15.10 XV-6
ARTICLE XVI TOP-HEAVY PLAN REQUIREMENTS
General Rule 16.1 XVI-1
Vesting Provisions 16.2 XVI-1
Minimum Benefit Provisions 16.3 XVI-2
Limitation on Benefits 16.4 XVI-2
Top-heavy Plan Definition 16.5 XVI-3
Key Employee 16.6 XVI-7
Non-Key Employee 16.7 XVI-9
APPENDICES
PREAMBLE
Chittenden Corporation (the "Principal Employer") established the Pension Plan
for Employees of the Chittenden Corporation (the "Plan") effective December 1,
1946. The Plan has been previously amended from time to time and is now amended
and restated effective January 1, 1996, to reflect changing employee benefit
objectives. Effective January 1, 1996, the Plan shall also be renamed the
Chittenden Pension Account Plan.
The Plan is intended to provide periodic retirement income to Eligible Employees
who terminate employment with at least five years of Eligibility Service,
in addition to retirement benefits provided under the Social Security Act.
Benefits under the Plan accumulate under Cash Balance Accounts. Plan assets are
held and invested pursuant to a trust agreement (the "Trust Agreement") which
has been adopted by the Principal Employer and forms a part of this Plan.
It is intended that the Plan will continue to meet the requirements for
qualification under Section 401(a) of the Internal Revenue Code of 1986 (the
"Code") as amended from time to time and that the Trust shall be exempt from
taxation as provided under Code Section 501(a). As such, the Plan contains
provisions required by the Tax Reform Act of 1986, other laws and
governmental regulations.
The provisions of this Plan shall apply only to an eligible employee who
terminated employment with the Employer on or after January 1, 1996. Except as
otherwise specifically and expressly provided herein, a former employee's
eligibility for and amount of benefits, if any, payable to or on behalf of such
former employee, shall be determined in accordance with the provisions of
the Plan in effect on his termination date. The benefit payable to or on behalf
of a Member included under the Plan in accordance with the following provisions
shall not be affected by the terms of any amendment to the Plan adopted after
such Member s employment terminates, unless the amendment expressly provides
otherwise.
ARTICLE I
DEFINITIONS
1.1 "Accrued Benefit" means the monthly life annuity payable at Normal
Retirement Date (or Postponed Retirement Date for Eligible Employees who
continue to work after Normal Retirement Age) based on the Member's current Cash
Balance Account projected at the applicable interest as described in Section 1.2
(b), less 50 basis points, compounded annually, for the number of years
and full months to the Member's Normal Retirement Date or Postponed Retirement
Date, as applicable.
For purposes of this Section 1.1, the projected Cash Balance Account is
converted to a monthly life annuity as described under Section 10.1.
Notwithstanding the foregoing, in no event shall a Member's Accrued Benefit be
less than such Member's accrued benefit as of December 31, 1995, determined
under the provisions of the Prior Plan.
1.2 "Actuarial Equivalent" means a benefit of equivalent value to another
benefit, determined on the following bases:
(a) for conversion of a life annuity to an optional form of payment other than a
lump sum, the following:
(i) Interest: 7.5% per year
(ii) Mortality: 1983 Unisex Group Annuity Mortality (50% 1983 Group Annuity
Mortality for males, 50% 1983 Group Annuity Mortality for females)
(b) for purposes of determining the lump sum equivalent value of a Member's
Accrued Benefit, such lump sum value shall be calculated using the
applicable mortality table and the applicable interest rate promulgated by
the IRS under Code Section 417(e)(3) as in effect for the November preceding
the first day of the Plan Year in which the lump sum payment is made.
1.3 "Affiliated Company" means any corporation which is a member of a
controlled group of corporations (as defined in Code Section 414(b)) which
includes the Employer; any other trade or business (whether or not incorporated)
which is under common control (as defined in Code Sections 414(b) and 414(c))
with the Employer; but only for the period during which such other corporation
or such other trade or business and the Employer are members of such controlled
group with the Employer; any organization (whether or not incorporated) which is
a member of an Affiliated Company service group (as defined in Code Section
414(m)) which includes the Employer; and any other entity required to be
aggregated with the Employer pursuant to regulations under Code Section 414(o).
1.4 "Annual Pay Credit" means the notional amounts credited to a Member's Cash
Balance Account pursuant to Section 3.3.
1.5 "Annuity Starting Date" shall mean:
(a) the first day of the first period for which a benefit is payable to the
Member under the Plan as an annuity (or to the eligible Beneficiary in the
case of death before retirement income commences), or
(b) in the case of a benefit not payable in the form of an annuity, the first
day on which all events have occurred which entitle the Member (or eligible
Beneficiary) to such benefit.
1.6 "Authorized Leave of Absence" shall mean any absence authorized by the
Employer under the Employer's standard personnel practices, provided that all
persons under similar circumstances are treated alike in the granting of such
Authorized Leave of Absence, and provided further that the Member returns or
retires within the period specified in the Authorized Leave of Absence.
An absence due to service in the Armed Forces of the United States shall be
considered an Authorized Leave of Absence provided that the Employee complies
with all of the requirements of Federal law in order to be entitled to
reemployment and provided further that the Employee returns to employment with
the Employer within the period provided by such law.
1.7 "Beneficiary" means:
(a) the person designated by the Member or former Member to receive benefits
under the Plan in the event of the Member's death after an Annuity Starting
Date as provided in Article X, or
(b) the person, estate, trust or other entity designated by the Member (with
Spouse's consent, if applicable) to receive the preretirement death benefit
in the event of death prior to an Annuity Starting Date as provided in
Article IX.
Each such designation shall be in writing filed with the Plan Administrator and
shall be in such form as the Plan Administrator may require.
With respect to the election of optional forms of payment under Section 10.2, if
the Member has a Spouse and designates someone other than such Spouse as his
Beneficiary, his designation must include the written consent of his legal
Spouse at the time the designation is made in order to be valid as provided
under Section 10.10(b).
With respect to the Beneficiary designation for the preretirement death benefit
under (b) above, the Member may, from time to time, change the Beneficiary
designation in accordance with procedures the Plan Administrator may establish.
However, if the Member is married and designates someone other than his legal
Spouse, his Beneficiary designation must include the written consent of his
legal Spouse at the time the designation is made in order to be valid. Such
designation must be made within the period which begins on the first day of the
Plan Year in which the Member attains age 35, or the date the Employee becomes a
Member if later, and ends on the date of the Member's death. Prior to such
designation, the Member's Spouse shall be the automatic Beneficiary.
Each active Member shall be furnished a written explanation of the terms and
conditions of the preretirement death benefit and the rights of the Member and
the Member's Spouse regarding the preretirement death benefit. Such explanation
will be provided (i) within the period beginning with the first day of the Plan
Year in which the Member attains age 32 and ending with the close of the Plan
Year preceding the Plan Year in which the Member attains age 35, (ii) if later,
within the one year period after an individual becomes a Member, or (iii) if
earlier than (i) above, within the one year period after a Member who has a
vested Accrued Benefit terminates employment.
In any event, the explanation described above shall be furnished, and any
non-Spouse Beneficiary designation shall be made, in accordance with the rules
prescribed in Code Section 417 and applicable regulations thereunder.
In the event that no Beneficiary has been effectively designated, the Member's
Spouse shall be deemed the designated Beneficiary, or if the Member has no
Spouse, his children, if any, per stirpes, and if none, the estate of the Member
shall be deemed the designated Beneficiary. A former Spouse's consent shall
not be binding on a subsequent Spouse.
1.8 "Benefit Service" means the period of a Member s employment considered in
accordance with Section 2.4 in the determination of the amount of benefits
payable to or on behalf of the Member.
1.9 "Board" means the Board of Directors of the Chittenden Corporation.
1.10 "Cash Balance Account" means the notional account described in Section 3.1
and maintained for each Member pursuant to Section 3.5.
1.11 "Code" means the Internal Revenue Code of 1986, as amended from time to
time and any regulations issued thereunder. Reference to any section of the
Code shall include any successor provision thereto..
1.12 "Compensation" means the entire amount of all salaries, wages, overtime
pay, commissions, bonuses and similar payments for services rendered to the
Employer as reported on the Employee's federal Income Tax Withholding Statement
(Form W-2), excluding any amounts contributed by the Employer under this Plan or
under any other employee benefit plan of the Employer, any severance
payments and taxable income attributable to stock options, but including any
pre-tax contributions made at the Member s election to a qualified cash or
deferred arrangement as defined in Code Section 401(k) or to a plan which meets
the requirements of Code Section 125, sponsored by the Employer.
Notwithstanding the foregoing, Compensation shall not include any amount in
excess of $150,000, or such other amount permitted under Code Section 401(a)(17)
and related regulations.
For Plan Years beginning prior to January 1, 1997, in determining the
Compensation of an Employee for purposes of the Code Section 401(a)(17)
limitation above, the rules of Code Section 414(q)(6) shall apply; provided,
however, that, in applying such rules, the term "family" shall include only the
Spouse of the Employee and any lineal descendants of the Employee who have not
attained age 19 before the close of the Plan Year. If the Compensation of the
Employee exceeds the Code Section 401(a)(17) limitation, then the Code Section
401(a)(17) limitation shall be prorated among the Compensation of the Employee
and his family (as determined under this Section 1.12 prior to the application
of the Code Section 401(a)(17) limitation) in proportion to each such
individual's Compensation (as determined under this Section 1.12 prior to the
application of the Code Section 401(a)(17) limitation).
1.13 "Disability" means a total and permanent disability which qualifies the
Member to receive full Social Security disability benefits.
Notwithstanding the foregoing, no Member shall be deemed to have suffered a
Disability if the Employer determines that his disability results from self-
inflicted injuries or illness, an injury suffered while engaged in a felonious
or criminal act or enterprise, or service in the Armed Forces of the United
States which entitled the Member to a veteran s disability pension;
but this provision shall not prevent the Member from qualifying for a benefit
under another provision of the Plan.
1.14 "Early Retirement Date" means the date on which a Member becomes eligible
and elects to retire prior to Normal Retirement Date, as determined in
accordance with Section 5.1.
1.15 "Effective Date" means January 1, 1996.
1.16 "Eligibility Service" means the period of a Member s employment considered
in accordance with Section 2.3 in determination of his eligibility for benefits
under the Plan.
1.17 "Employee" means any person who is receiving renumeration for personal
services rendered to the Employer or an Affiliated Company (or would be
receiving such renumeration except for an Authorized Leave of Absence). Leased
employees shall be considered Employees only to the extent provided under
Section 15.7.
1.18 "Employer" means the Chittenden Corporation, the Chittenden Trust Company,
or any other Affiliated Company that adopts the Plan with the consent of the
Principal Employer. Employer refers to all Employers collectively, or to each
one individually, as the context may require.
1.19 "Employment Date" means the first day for which an Employee is credited
with an Hour of Service.
1.20 "Enrolled Actuary" means an individual or firm of actuaries who shall be
independent of the Employer, selected from time to time by the Plan
Administrator who meets the standards and qualifications established by the
Joint Board for the Enrollment of Actuaries, or a firm of actuaries which has on
staff such individual actuary, to perform all necessary actuarial services in
connection with the operation of the Plan.
1.21 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.22 "Fiduciary" means any person who exercises any discretionary authority or
discretionary control respecting the management of the Plan, assets held under
the Plan, or disposition of Plan assets; who renders investment advice for a fee
or other compensation, direct or indirect, with respect to assets held under the
Plan or has any authority or responsibility to do so; or who has any
discretionary authority or discretionary responsibility in the administration of
the Plan. Any person who exercises authority or has responsibility of a
fiduciary nature as described above shall be considered a Fiduciary under the
Plan.
1.23 "Hour of Service" means:
(a) Each hour for which an Employee is directly or indirectly paid or entitled
to payment by the Employer or any Affiliated Company for the performance of
duties;
(b) Each hour for which an individual is directly or indirectly paid or entitled
to payment by the Employer and any Affiliated Company (including payments
made or due from a trust fund or insurer to which the Employer or Affiliated
Company contributes or pays premiums) on account of a period of time during
which no duties are performed (irrespective of whether the employment
relationship has terminated) due to periods of vacation, holidays, illness,
incapacity, disability, layoff, jury duty, military duty, or leave of
absence, provided that:
(i) No more than 501 Hours of Service shall be credited under this paragraph
(b) to an Employee on account of any single continuous period during
which the Employee performs no duties; and
(ii) Hours of Service shall not be credited under this paragraph (b) to an
Employee for a payment which solely reimburses the Employee for
medically related expenses incurred by the Employee or which is made or
due under a plan maintained solely for the purpose of complying with
applicable workers' compensation, unemployment compensation or
disability insurance laws; and
(c) Each hour not already included under paragraph (a) or (b) above for which
back pay, irrespective of mitigation of damages, is either awarded or agreed
to by the Employer or by an Affiliated Company, provided that the crediting
of Hours of Service under this paragraph with respect to periods described
in paragraph (b) above shall be subject to the limitation therein
set forth.
The number of Hours of Service to be credited under paragraph (b) or (c)
above on account of a period during which an Employee performs no duties,
and the Plan Years to which Hours of Service shall be credited under
paragraphs (a), (b), or (c) above shall be determined by the Plan
Administrator in accordance with Sections 2530.200b-2(b) and (c) of the
Regulations of the U.S. Department of Labor.
To the extent not credited above, Hours of Service shall also be credited
based on the customary work week of the Employee for periods of military
duty (as required by applicable law) and Authorized Leave of Absence.
In the case of Employees whose Compensation is not determined on the basis
of Compensation for each hour worked during a given period, Hours of Service
shall be determined on the basis of 190 Hours of Service per month if under
(a), (b), or (c) above, such Employee would be credited with at least one
Hour of Service during the month.
1.24 "Interest Credit(s)" means the interest amounts credited to a Member's Cash
Balance Account pursuant to Section 3.4.
1.25 "Member" means an Employee who participates in the Plan as provided in
Article II, and further, shall include any Employee who has retired in
accordance with Article IV, V, or VI or has terminated employment with rights to
a benefit in accordance with Article VII.
1.26 "Normal Retirement Age" means the Member's 65th birthday.
1.27 "Normal Retirement Date" means the first day of the month next following
the month in which the Member attains Normal Retirement Age.
1.28 "Opening Balance Credit" means those amounts credited to an Employee who
was a Member under the Prior Plan pursuant to Section 3.2.
1.29 "Participating Employer(s)" means the Chittenden Corporation and each other
Affiliated Company that has duly adopted the Plan and has been authorized by
the Board to participate in the Plan.
1.30 "Plan" means the Chittenden Pension Account Plan (formerly named the
Pension Plan for Employees of the Chittenden Corporation) as set forth in this
document and as it may be amended from time to time.
1.31 "Plan Administrator" means, as that term is defined by ERISA, the Principal
Employer.
1.32 "Plan Year" means each 12-month period beginning on January 1 and ending on
the following December 31.
1.33 "Postponed Retirement Date" means the date after his Normal Retirement Date
on which a Member retires with a postponed retirement benefit under the Plan, as
determined in accordance with Section 6.1.
1.34 "Principal Employer" means the Chittenden Corporation and any firm or
corporation which may succeed to the business of Chittenden Corporation by
merger, consolidation or otherwise and by appropriate action shall adopt the
Plan.
1.35 "Prior Plan" means the Chittenden Pension Account Plan as in effect
immediately prior to January 1, 1996.
1.36 "Service Termination Date" means the latest of the date an Employee is
discharged, dies, retires, or voluntarily terminates employment.
1.37 "Spouse" means the person to whom a Member is legally married for at least
one year prior to the earlier of his Annuity Starting Date or the date of his
death.
1.38 "Trust" or "Trust Fund" means the fund established to accumulate assets out
of which benefits under the Plan are paid, maintained in accordance with the
terms of the Trust Agreement, as from time to time amended, which constitutes a
part of this Plan.
1.39 "Trust Agreement" means the agreement governing the investment of Plan
assets, as amended from time to time, entered into between the Principal
Employer and the Trustee to carry out the purpose of the Plan.
1.40 "Trustee" means the trustee or trustees named under the Trust as duly
appointed by the Board.
1.41 "Wage Base" means the maximum wages subject to FICA taxation for Old Age,
Survivors and Disability Income (OASDI) benefits under the Social Security Act
for any particular Plan Year.
ARTICLE II
MEMBERSHIP AND SERVICE
2.1 Membership.
(a) Each Employee who was a Member of the Prior Plan on December 31, 1995, shall
continue as a Member of this Plan on January 1, 1996.
(b) Each other Employee shall become a Member of the Plan on the first day of
the month coincident with or next following the date on which he has both:
(i) attained age 21; and
(ii) completed one year of Participation Service.
Notwithstanding the foregoing, an Employee who is a "leased employee" as
defined in Section 414(n)(2) of the Code shall not be eligible for
membership hereunder.
Notwithstanding the foregoing, an Employee who is employed by the Bank of
Western Massachusetts shall not be eligible for membership hereunder.
Notwithstanding the foregoing, an Employee who is employed by the Flagship
Bank and Trust Company shall not be eligible for membership hereunder.
2.2 Participation Service. Participation Service shall determine an Employee's
eligibility to participate in the Plan under Section 2.1. An Employee shall
earn a year of Participation Service if he is credited with at least 1,000 Hours
of Service in the 12-month period commencing on his Employment Date. If an
Employee fails to earn a year of Participation Service in this initial 12-month
period, he shall earn a year of Participation Service in the first calendar
year commencing on or after his date of Employment Date during which he is
credited with at least 1,000 Hours of Service.
The rights of any former Member whose employment terminated prior to the
Effective Date shall, unless the former Member is later reemployed by the
Employer or unless otherwise specifically provided in this Plan, be determined
in accordance with the provisions of the Prior Plan in effect at the date of
such former Member's termination of employment.
2.3 Eligibility Service.
(a) Eligibility Service shall determine a Member's nonforfeitable right to
benefits accrued under the Plan. Subject to the Break in Service
provisions of Section 2.5, an Employee shall receive a year of
Eligibility Service for each calendar year in which he is credited with
at least 1,000 Hours of Service subject to the provisions of Appendix A
to this Plan.
(b) An Employee of Mountain Trust Company who becomes a Member of this Plan
shall receive credit for purposes of this Section 2.3 for any service
with Mountain Trust Company before it became an Affiliated Company if
such service would have been considered Eligibility Service in
accordance with paragraph (a) of this Section 2.3.
(c) Notwithstanding anything herein to the contrary, an Employee of the
Employer who was an Employee of the Rutland Savings Bank before it was
acquired by the Principal Employer shall receive credit for purposes of
this Section 2.3 for any service with the former Rutland Savings Bank
through December 31, 1982, which would have been credited under the
Rutland Savings Bank Retirement Plan in the determination of the
nonforfeitable portion of his accrued benefit under the provisions of
that former plan.
(d) Employees of Electronic Data Systems Corporation who became Employees of
the Employer on February 1, 1982 shall be credited with Eligibility
Service for their period of employment with Electronic Data Systems
Corporation if such service would have been considered Eligibility
Service determined in accordance with paragraph (a) of this Section 2.3.
(e) Notwithstanding anything herein to the contrary, an Employee of the
Employer who was an Employee of Bellows Falls Trust Company before it
was acquired by the Employer shall receive credit for purposes of this
Section 2.3 for any service which would have been considered Eligibility
Service in accordance with paragraph (a) of this Section 2.3.
(f) Notwithstanding anything herein to the contrary, an Employee of the
Employer who was an Employee of the Bank of Western Massachusetts before
it was acquired by the Employer shall receive credit for purposes of
this Section 2.3 for any service which would have been considered
Eligibility Service in accordance with paragraph (a) of this Section
2.3.
(g) Notwithstanding anything herein to the contrary, an Employee who was an
Employee of the Flagship Bank and Trust Company before it was acquired
by the Employer shall receive credit for purposes of this Section 2.3
for any service which would have been considered Eligibility Service
in accordance with paragraph (a) of this Section 2.3.
(h) Subject to the Break in Service provisions of Section 2.5, an Employee
who terminates employment with the Employer and all Affiliated Companies
on or after January 1, 1995, shall be credited with Eligibility Service
in accordance with the provisions set forth in this Section 2.3 for
periods of employment with the Employer or an Affiliated Company prior
to December 1, 1976.
2.4 Benefit Service.
(a) The amount of benefit payable to or on behalf of a Member shall be
determined on the basis of his Benefit Service. Subject to the Break in
Service provisions of Section 2.5, an Employee shall receive one year of
Benefit Service for each calendar year on and after the Effective Date
in which he is credited with 1,000 or more Hours of Service. In the
calendar year of a Member's initial employment (or return to employment
after a Break in Service) and the calendar year of a Member's Service
Termination Date, Benefit Service shall be equal to the ratio of actual
Hours of Service credited in such fractional portion of a year over
1,000.
(b) An Employee s Benefit Service hereunder shall include the benefit
service he accumulated under the Prior Plan on December 31, 1995, in
accordance with the provisions of the Prior Plan on such date, subject
to the provisions of Appendix A to this Plan.
(c) An Employee of the Employer who was an employee of the Rutland Savings
Bank before it was acquired by the Principal Employer who becomes a
Member of this Plan shall receive credit for purposes of this Section
2.4 for all of his service with the former Rutland Savings Bank through
December 31, 1982, which would have been credited under the Rutland
Savings Bank Retirement Plan in the determination of the amount of his
accrued benefit under the provisions of that former plan.
(d) An Employee of Mountain Trust Company who becomes a Member of this Plan
shall receive credit for Benefit Service in accordance with paragraphs
(a) and (b) of this Section 2.4, provided that service prior to
March 20, 1981, the date that Mountain Trust Company became an
Affiliated Company, shall be disregarded.
(e) Former employees of Electronic Data Systems Corporation who became
Employees of the Employer on February 1, 1982 shall receive credit for
Benefit Service for employment commencing on February 1, 1982, in
accordance with paragraphs (a) and (b) of this Section 2.4.
(f) An Employee of Bellows Falls Trust Company who becomes a Member of this
Plan shall receive credit for purposes of this Section 2.4 for all
service with the former Bellows Falls Trust Company through June 30,
1993, which would have been considered Benefit Service in accordance
with paragraph (b) of this Section 2.4.
(g) An Employee of the Bank of Western Massachusetts shall not be eligible
to accumulate Benefit Service hereunder.
(h) An Employee of the Flagship Bank and Trust Company shall not be eligible
to accumulate Benefit Service hereunder.
(i) Subject to the Break in Service provisions of Section 2.5, a Member who
terminates employment with the Employer on or after January 1, 1995,
shall receive Benefit Service in accordance with the provisions set
forth in this Section 2.4 for periods of employment with the
Employer prior to December 1, 1976.
(j) Effective on and after January 1, 1988, Benefit Service shall include
periods of employment on and after a Member s Normal Retirement Date,
provided that years of Benefit Service shall not be credited for any
period prior to January 1, 1988, for an Employee hired prior to such
date and after his 65th birthday.
2.5 Break in Service. A calendar year during which a Member is credited with
less than 501 Hours of Service shall constitute a Break in Service. A Member
who incurs a Break in Service and who again is credited with at least 1,000
Hours of Service during a 12-month period, shall have his pre-break Eligibility
Service and Benefit Service restored in determining his rights and benefits
under the Plan.
Solely for determining whether a Break in Service for membership and eligibility
purposes has occurred in a Plan Year, an Employee who is absent from work for
maternity or paternity reasons shall receive credit for the Hours of Service
which would otherwise have been credited to such Employee but for such absence,
of, in any case in which such hours cannot be determined, 8 Hours of Service per
day of such absence. For purposes of this paragraph, an absence from work for
maternity or paternity reasons means an absence (1) by reason of the pregnancy
of the Employee, (2) by reason of a birth of a child of the Employee, (3) by
reason of the placement of a child with the Employee in connection with the
adoption of such child by the Employee, or (4) for purposes of caring for such
child beginning immediately following such birth or placement. The Hours of
Service credited under this paragraph shall be credited in the Plan Year in
which the absence begins if the crediting is necessary to prevent a Break in
Service in that year, or in all other cases, in the following Plan Year.
ARTICLE III
CASH BALANCE ACCOUNT
3.1 In General. A notional account (hereinafter referred to as the Cash Balance
Account) shall be established and maintained for each Member. A Member's Cash
Balance Account shall be credited with an Opening Balance Credit in accordance
with Section 3.2, Annual Pay Credits in accordance with Section 3.3 and Interest
Credits in accordance with Section 3.4.
3.2 Opening Balance Credit. The Opening Balance Credit for each Employee who
was a Member in the Prior Plan on December 31, 1995, shall be determined as of
January 1, 1996, based on the single sum Actuarial Equivalent described in
Section 1.2 of the Accrued Benefit determined under the Prior Plan as of
December 31, 1995, calculated on the basis of the Member s attained age in
years and completed months as of such date.
3.3 Annual Pay Credits.
(a) Except as provided for special situations under (b) and (c) below,
as of the last day of each Plan Year, an Annual Pay Credit shall be
credited to the Cash Balance Account of each Member who received
Compensation and completed at least 1,000 Hours of Service during such
Plan Year. The Annual Pay Credit shall be equal to the Compensation for
such Plan Year while a Member multiplied by an allocation percentage
determined in accordance with the following schedule:
Annual Pay Credit
------------------------------------
Member's Age plus Years of
Benefit Service On Compensation On Compensation
at Plan Year End Up To Over The
------------------------- The Wage Base Wage Base
------------- -----------
Less than 35 2.5% 5.0%
At least 35 but less than 45 3.0% 6.0%
At least 45 but less than 55 4.0% 8.0%
At least 55 but less than 65 5.0% 10.0%
At least 65 but less than 75 6.5% 11.5%
At least 75 but less than 85 8.5% 13.5%
85 or more 11.0% 16.0%
Except as provided in (c) below, years of Benefit Service to be used in the
above calculation, is as defined in Section 2.4 as of the last day of the Plan
Year and age means the Member's attained age in whole years as of the last day
of the Plan Year.
Notwithstanding the foregoing, for the Plan Year in which the Employee first
becomes a Member or recommences membership after rehire, Compensation for the
purpose of determining the Annual Pay Credit for such Plan Year shall be
prorated by the number of full months in which he was a Member for such Plan
Year, if less than a full year.
Notwithstanding the foregoing, for any Plan Year in which a Member has less than
a full year of participation, the Wage Base for such year for the purpose of
determining the Annual Pay Credit shall be prorated by the number of full and
partial months in which he was a Member for such Plan Year.
(b) Rule of 70. If a Member s attained age plus years of Eligibility
Service as of December 31, 1995, equals 70 or more, such Member shall
receive an additional Annual Pay Credit equal to 8% of his Compensation
for such Plan Year, provided he has completed at least 1,000 Hour of
Service during such Plan Year.
The additional 8% Annual Pay Credit may be credited for up to ten years
following the Member's initial eligibility therefor, but in no event
later than the 2005 Plan Year, or until such Member's Service
Termination Date, if earlier.
(c) The completion of 1,000 Hours of Service shall not be required to
receive the Annual Pay Credit for the Plan Year in which termination of
employment or death occurs. In the year of retirement or other
termination of employment, the Annual Pay Credit hereunder will be
determined and credited as of the individual's Service Termination Date
based on Benefit Service and attained age as of such date.
3.4 Interest Credits. Interest Credits based on the amount of the Member's Cash
Balance Account as of the first day of each Plan Year shall be added to each
Member's Cash Balance Account as of the last day of the Plan Year, prior to the
crediting of any Annual Pay Credit for such Plan Year. However, for any year in
which a Plan distribution is made to a Member, interest shall be credited on the
amount of the Member's Cash Balance Account as of the first day of the Plan Year
for the period from the first day of such Plan Year to the Member s Annuity
Starting Date. In no event will Interest Credits continue after benefits have
commenced.
The rate of interest used to determine the Interest Credit shall be the average
one-year constant maturity Treasury Bill rate in effect during December in the
preceding Plan Year (as published in the Federal Reserve Statistical Release)
plus .5%. In no event will the interest rate be less than 5% nor more than 8%
for any 12-month Plan Year.
For the purposes of this Section 3.4, the constant maturity Treasury Bill rate
shall be determined by calculating the yields on all actively traded U.S.
Treasury securities and interpolating the yield for a Treasury Bill with exactly
one year to maturity.
If an active Member is currently receiving retirement benefits from the Plan
pursuant to Section 8.3(b), interest hereunder shall not be credited to his Cash
Balance Account as long as such account continues to be automatically converted
to a retirement benefit as provided in such Section.
3.5 Cash Balance Account. The Cash Balance Account shall be equal to the sum of
the Opening Balance Credit, Annual Pay Credits, and the Interest Credits. Upon
reemployment, the Cash Balance Account is determined pursuant to Article VIII.
Upon the conversion of a Member's Cash Balance Account to a pension, or payment
of such account as a lump sum, such Cash Balance Account shall cease to exist.
However, a Member may have a new Cash Balance Account established after an
Annuity Starting Date as provided in Section 8.3.
ARTICLE IV
NORMAL RETIREMENT DATE AND NORMAL RETIREMENT INCOME
4.1 Normal Retirement Date. The Normal Retirement Date is the first day of the
month next following the month in which the Member attains Normal Retirement
Age.
4.2 Normal Retirement Income. Subject to the minimum benefit provisions of
Section 4.3 and the maximum overall benefit limitations of Section 4.4, a Member
who retires on his Normal Retirement Date will be entitled to a monthly annuity
payable for his life and ending upon his death equal to his Cash Balance Account
divided by 120.
The Cash Balance Account may also be paid in any optional form under the Plan
provided the requirements of Article X are met. Optional forms shall be the
Actuarial Equivalent of the life annuity described under Section 10.1(b)(ii),
except as provided in Section 10.5.
For those Members who have incurred a Break in Service under this Plan, the
retirement income payable to such Member shall be subject to the provisions of
Article VIII.
4.3 Minimum Benefit. In no event shall the Accrued Benefit due any Member under
this Plan be less than such Member s accrued benefit as of December 31, 1995,
determined under the provisions of the Prior Plan.
For purposes of determining the Social Security benefit portion of the Member's
accrued benefit under the provisions of the Prior Plan, a Member may furnish or
cause to be furnished a complete (or more complete record than already available
to the Principal Employer) record of past earnings for purposes of calculating
his Primary Social Security Benefit. The Principal Employer shall, accordingly,
make any necessary adjustments to the Member's accrued benefit determined under
the provisions of the Prior Plan.
4.4 Maximum Overall Benefit. Any other provision of the Plan to the contrary
notwithstanding, in no event may a Member's annual retirement benefit under the
Plan and any other defined benefit pension plan of the Employer or an Affiliated
Company exceed the lesser of (a) or (b) below:
(a) The lesser of (i) or (ii) below, but subject to subparagraphs (iii)
through (x) below:
(i) 100.0 percent of his average compensation as defined in Code Section
415(b)(3) in the three consecutive highest paid calendar years while
a Member in the Plan or Prior Plan.
(ii) $90,000 (as adjusted for increases in the cost of living as provided
in rules and regulations adopted by the Secretary of the Treasury).
(iii) In the case where a benefit commences before the Member has attained
his Social Security Retirement Age (as defined in (x) below), the
dollar limitation in subparagraph (ii) above shall be adjusted so
that it is the actuarial equivalent of an annual benefit of $90,000
(as adjusted for increases in the cost of living as provided in
rules and regulations adopted by the Secretary of the Treasury),
beginning at his Social Security Retirement Age, multiplied by an
adjustment factor, as prescribed by the Secretary of the Treasury.
The adjustment provided for in the preceding sentence shall be made
in such manner as the Secretary of the Treasury may prescribe which
is consistent with the reduction for old-age insurance benefits
commencing before the Social Security Retirement Age under the
Social Security Act. For purposes of determining actuarial
equivalence hereunder, the interest assumption shall not be less
than the greater of 5.0 percent per year or the underlying rate used
to determine the reduction of benefits for early payment under
Section 10.1. The mortality table for this purpose shall be
the applicable mortality table specified under Code Section
417(e)(3), and in the event a benefit under this subparagraph is a
lump sum, the interest assumption shall be the interest
rate specified under Code Section 417(e) as in effect for the
November preceding the Plan Year in which the maximum benefit
limitation is being determined.
(iv) In the case where a benefit commences after a Member has attained
his Social Security Retirement Age, the dollar limitation in
subparagraph (ii) above shall be adjusted so that it is the
actuarial equivalent of an annual benefit of $90,000 (as adjusted
for increases in the cost of living as provided in rules and
regulations adopted by the Secretary of the Treasury) beginning at
his Social Security Retirement Age, multiplied by an adjustment
factor as prescribed by the Secretary of the Treasury. For purposes
of determining actuarial equivalence hereunder, the interest
assumption shall not be greater than the lesser of 5.0 percent per
year or the interest rate specified in Section 1.2(a), and the
mortality table shall be the applicable mortality table specified
under Code Section 417(e)(3).
(v) Unless subsection (vii) applies to a Member, the limits of
subsections (i) and (ii) above shall be deemed met if:
(A) the annual benefit payable to the Member from this Plan and all
other qualified defined benefit plans of the Employer and
Affiliated Companies does not exceed $10,000; and
(B) the individual has never participated in a qualified defined
contribution plan sponsored by the Employer or an Affiliated
Company.
(vi) If a Member has completed less than ten years of participation in
the combination of the Plan and the Prior Plan, the Member's Accrued
Benefit shall not exceed the dollar limit in subparagraph (ii) above
as adjusted by multiplying such amount by a fraction, the numerator
of which is the Member's number of years (or part thereof) of
participation in the Plan and the Prior Plan, and the denominator of
which is ten.
(vii) If a Member has completed less than ten years of Eligibility Service
with the Employer and its Affiliated Companies, the limitations
described in (i) and (v) above shall be adjusted by multiplying such
amounts by a fraction, the numerator of which is the Member's number
of years of Eligibility Service (or part thereof), and the
denominator of which is ten.
(viii) In no event shall subparagraphs (vi) and (vii) above reduce the
limitations described in (i), (ii) and (v) to an amount less than
one-tenth of the applicable limitation (as determined without regard
to this paragraph).
(ix) Except in the case where a benefit is payable pursuant to Section
10.1(b)(i), or pursuant to Section 10.3 with the Member's Spouse as
the Beneficiary, if a benefit is payable in a benefit form other than
a life annuity, the amount otherwise determined under this Section
4.4(a) shall be the actuarial equivalent of the amount payable as a
life annuity.
For this purpose, the interest rate assumption shall not be less than
the greater of 5.0 percent or the rate specified in Section 1.2(a)
and the mortality table shall be the applicable table specified under
Code Section 417(e). In the event that the benefit is payable as a
lump sum, the interest rate assumption shall be the applicable
interest rate specified under Code Section 417(e)(3) as in effect for
the November preceding the Plan Year in which the maximum benefit
limitation is being determined.
(x) For the purpose of this Section 4.4, Social Security Retirement Age
shall mean such age as defined in Code Section 415(b)(8).
(b) Effective for Plan Years beginning prior to January 1, 2000, in the case
of a Member who has participated in a defined contribution plan (as
defined in Code Section 414(i)) maintained by the Employer or an
Affiliated Company, the amount determined pursuant to Section 4.4(a)
above shall be multiplied by 1.40 in the event (a)(i) applies or by 1.25
in the event (a)(ii) applies and shall further be multiplied by a
fraction equal to one minus a fraction with a numerator equal to (i)
below and a denominator equal to (ii) below:
(i) the sum of the annual additions made to the Member's account under
all defined contribution plans maintained by the Employer and its
Affiliate Companies, where the annual additions are equal to the sum
of (A) Employer contributions allocated to the Employee's account,
(B) any forfeitures allocated to the Employee's account, (C) the
portion of the Employee's after-tax contributions made prior to
January 1, 1987, that represented the lesser of one-half of such
contributions or the amount of such contributions in excess of 6% of
his compensation, (D) all Employee after-tax contributions made after
December 31, 1986, (E) amounts described in Code Sections 415(l)(1)
and 419A(d)(2), (F) excess contributions and excess aggregate
contributions as defined in Code Section 401(k)(8)(B) and
401(m)(6)(B), respectively, and (G) excess deferrals, as defined in
Code Section 402(g) which have not been returned to the Member by the
April 15 following the taxable year in which such excess deferral was
made.
(ii) the sum for each calendar year of the Member's employment with the
Employer or Affiliated Companies of the lesser of (a) 1.4 multiplied
by 25.0 percent of the Member's compensation (as defined by Treasury
Regulations under Code Section 415(c)) for the calendar year, or (b)
1.25 multiplied by $30,000, or, if greater, 1/4 of the dollar
limitation in effect under Code Section 415(b) (1)(A) (which amount
shall be subject to adjustments as provided by Treasury Regulations
under Code Section 415).
(c) Effective for Plan Years beginning prior to January 1, 2000, in the
event that the sum of a Member's defined benefit plan fraction plus his
defined contribution Plan fraction exceeds one, the Member's benefit
under the defined benefit plan shall be reduced to the extent necessary
to reduce such sum to one. For purposes of this subsection (c), defined
contribution plan shall include any such plan qualified under Code
Section 401(a).
The above notwithstanding, in the event that the Member's annual retirement
benefit under the Plan is limited by application of subsection (a) of this
Section 4.4, such annual retirement benefit shall be increased annually by the
cost-of-living adjustment provided under Code Section 415(d). In no event,
however, may such increases result in the Member's annual retirement benefit
being greater than it otherwise would be without regard to this Section 4.4.
For the purpose of this subsection, an Affiliated Company shall be determined by
substituting the phrase "more than 50.0 percent" for the phrase "at least 80.0
percent" wherever it appears in Code Section 1563, as it may be amended from
time to time.
4.5 Continuing Employment. The retirement of any Member under this Article IV
shall not become effective while he is in the service of the Employer or an
Affiliated Company. If an Employee continues to work for the Employer or an
Affiliated Company beyond his Normal Retirement Date, the provisions of Section
6.2 and Section 10.10 shall be applicable.
ARTICLE V
EARLY RETIREMENT DATE AND EARLY RETIREMENT INCOME
5.1 Early Retirement Date. A Member may retire prior to his Normal Retirement
Date on the first day of any month coincident with or next following his
attainment of age 55 and completion of five years of Eligibility Service.
The date a Member elects to retire under this Section 5.1 shall be his Early
Retirement Date.
5.2 Early Retirement Income. Subject to the minimum benefit provisions of
Section 5.3 and the maximum overall benefit limitations of Section 4.4, a Member
who retires on an Early Retirement Date may elect to receive either an immediate
early retirement income or a deferred retirement income as indicated below. As
of any Annuity Starting Date, the annual amount of early retirement income on
the life annuity basis described in Section 10.4 shall be equal to the
Member's Cash Balance Account on the Annuity Starting Date divided by the
immediate annuity factor in Section 10.1(b)(ii) that corresponds to the Member's
age on the Annuity Starting Date. Except as provided in Section 10.10, an
individual eligible for Early Retirement hereunder, may also elect a single
payment under Section 10.5, or any other optional form of payment under the
Plan, provided the consent requirements of Section 10.10 are met. For the
purpose of determining the Member's Cash Balance Account, interest shall be
credited in accordance with Section 3.4 to the Annuity Starting Date.
5.3 Minimum Early Retirement Benefits. In no event will a Member s early
retirement income payable as a life annuity under this Plan be less than his
accrued benefit determined under the provisions of the Prior Plan as of December
31, 1995, adjusted to reflect early receipt based on the early retirement
reduction factors specified in such Prior Plan.
ARTICLE VI
POSTPONED RETIREMENT DATE AND POSTPONED RETIREMENT INCOME
6.1 Postponed Retirement Date. The Postponed Retirement Date of a Member will
be the first day of the month coincident with or next following the Member's
actual retirement after his Normal Retirement Date.
6.2 Postponed Retirement Income.
(a) If a Member retires after his Normal Retirement Date but before the
April 1 following the calendar year in which he attains age 70-1/2, he
will be entitled to receive his Cash Balance Account as provided under
the procedures in Article X. The benefit hereunder shall be payable
in accordance with the provisions of such Article X, and, if paid as an
annuity, shall be first converted to a monthly amount payable for life
under Section 10.1. Any other form of payment shall be the Actuarial
Equivalent of such life annuity amount.
(b) If a Member's Annuity Starting Date has not occurred before the April 1
following the calendar year in which he attains age 70-1/2, a benefit
will automatically commence to be paid to such Member as of such
April 1. The amount of such benefit on the life annuity basis described
in Section 10.4 shall be equal to (i) the Cash Balance Account divided
by 9.0 or if greater, (ii) the minimum benefit under Section 4.3. Each
December 31 thereafter, while the Member remains an Employee and again
as of his actual Postponed Retirement Date, the amount of the benefit
shall be recalculated.
The benefit hereunder shall be payable in accordance with the procedures
and requirements of Article X and, if paid as an annuity, shall be
converted to a monthly amount. As an alternative to the automatic life
annuity form of payment, a Member may elect (with the consent of his
Spouse, if applicable) any optional form under Article X, including a
single payment under Section 10.5. However, once retirement benefits
commence under this Section, a Member may not elect a different form of
payment for any additional Accrued Benefit which is calculated
hereunder.
(c) The recalculation of the Member's Accrued Benefit under Paragraph 6.2(b)
shall be performed as follows:
(i) the retirement benefit already in pay status shall be unaffected;
(ii) an additional Accrued Benefit shall be the Member's Annual Pay
Credit for the Plan Year as determined under Section 3.3 and, if the
current benefit is being paid as an annuity, the Annual Pay Credit
shall be converted to a life annuity by dividing such pay credit by
9.0.
(iii) unless payable as a single sum, the additional Accrued Benefit,
determined under (ii) above shall be converted to the form of
payment in which the current retirement benefit is being paid using
for such purpose the factors first employed when benefits under this
Article originally became payable to the Member. This amount, if
any, shall be added to the retirement benefit already in pay status;
no change of payment form is permitted.
(d) Notwithstanding any provisions contained herein to the contrary,
distributions hereunder shall be made in accordance with Code Section
401(a)(9), including the incidental death benefit requirements of such
Code Section, and regulations thereunder, including proposed Treasury
Regulation 1.401(a)(9)-2. Such regulations and applicable rulings or
announcements are hereby incorporated by reference. The provisions of
Code Section 401(a)(9) override any distribution options under the Plan
if inconsistent with the requirements of such Code Section.
6.3 Death Prior to Postponed Retirement Date. If a Member shall die after his
Normal Retirement Date, but prior to retiring on his Postponed Retirement Date,
his Beneficiary shall be entitled to benefits under the Plan in accordance with
Article IX.
ARTICLE VII
TERMINATION OF EMPLOYMENT
7.1 Non-Vested Termination. Except as provided in Section 7.2, a Member whose
employment is terminated with the Employer and all Affiliates before the earlier
of Normal Retirement Age or the completion of five years of Eligibility Service
shall not be entitled to any benefits from the Plan. A Member who is not
entitled to a benefit hereunder upon such termination of employment shall be
deemed to have received a cash out distribution of $0, his entire vested
Accrued Benefit. Upon reemployment, such a Member shall be deemed to have
repaid the cash out with interest and his Accrued Benefit will be restored,
providing his Benefit and Eligibility Service are reinstated pursuant to Article
II.
7.2 Vested Termination.
(a) A Member has a fully vested, nonforfeitable interest in his Accrued
Benefit upon the earliest of:
(i) the date he reaches Normal Retirement Age while an Employee;
(ii) the date he completes five years of Eligibility Service; or
(iii) the date the Plan is terminated or deemed to be partially terminated
with respect to such individual.
(b) A Member who terminates employment prior to eligibility for Early or
Normal Retirement and has a vested Accrued Benefit hereunder shall be
entitled to receive such benefit commencing as early as the first of the
month following attainment of age 55.
If the Member elects an annuity payment, his Cash Balance Account will
first be converted to a life annuity according to the procedures
described in Section 10.1. Such life annuity will not be less than the
Actuarial Equivalent of the Member's Accrued Benefit. Election of
optional payment forms, the Annuity Starting Date and other similar
matters shall be governed by the further procedures and requirements of
Article X.
7.3 Minimum Benefit. The amount of retirement income determined under this
Article VII is subject to the minimum benefit provisions of Section 4.3, as
applicable.
7.4 Maximum Benefit. The maximum benefit limitation described in Section 4.4
shall apply to benefits determined under this Article VII.
ARTICLE VIII
REEMPLOYMENT
1. Reemployment Before Annuity Starting Date. Upon reemployment before an
Annuity Starting Date, the following rules shall apply:
a. The individual's Years of Benefit Service and Years of Service shall be
determined under Article II;
b. The individual shall become a Participant on his reemployment date, if
otherwise eligible as provided in Section 2.1. If he does not meet the
requirements of Section 2.1 on his reemployment date, he shall become a
Participant when he meets such requirements.
Further, if the individual terminated employment prior to January 1,
1996, and has no Cash Balance Account as of his reemployment date, his
Accrued Benefit determined under the terms of the Prior Plan in
effect when his prior employment terminated shall be converted to an
Opening Balance Credit. The Opening Balance Credit shall be the single
sum Actuarial Equivalent of the Accrued Benefit based on his age at his
birthday in the calendar year he is reemployed.
If the individual terminated employment on or after January 1, 1998, the
Opening Balance Credit shall be equal to the Participant s current Cash
Balance Account.
c. If an Employee has a One-Year Break in Service and his prior Years of
Benefit Service and Years of Service are subsequently reinstated in
accordance with Article II, then his retirement income, if any, related
to employment prior to the One-Year Break in Service shall be based upon
the Plan as in effect when his One-Year Break in Service commenced, and
his retirement income, if any, related to employment after the One-Year
Break in Service shall be based upon the Plan in effect on his subsequent
retirement or termination of employment.
2. Reemployment After Annuity Starting Date. If a former Participant returns
to work with the Employer after his Annuity Starting Date, the following rules
shall apply:
a. If he is otherwise eligible to participate in the Plan under Section 2.1,
he shall become a Participant on his reemployment date.
b. He shall be eligible for additional Years of Benefit and Years of Service
as a result of his reemployment in accordance with the provisions of the
Plan.
c. Retirement benefits being paid from the Plan shall continue uninterrupted
d. His prior Cash Balance Account, if any, and Accrued Benefit shall not be
restored.
e. A new Cash Balance Account, shall be established for the Participant
under Section 8.3. Such Cash Balance Account shall not be paid out to
the Participant until the earlier of:
i. his subsequent termination of employment, and election to commence
Plan benefits (or the date his benefit is cashed out under Section
10.9), and
ii. the date Plan benefits must commence under Section 10.10(a) due to the
Participant's attainment of age 70-1/2.
f. If he shall die during the period of subsequent or continuing employment,
death benefits, if any, shall be payable in accordance with Section 9.2
with respect to the Cash Balance Account established and maintained after
reemployment under Section 8.3. Death benefits, if any, with respect
to the benefit in pay status shall be determined under Section 9.3.
If an Employee has a One-Year Break in Service and his prior Years of Benefit
Service and Years of Service are subsequently reinstated in accordance with
Article II, then his retirement income, if any, based on his Years of Benefit
Service and Years of Service related to employment prior to the Break in Service
shall be based upon the Plan as in effect when his Break in Service commenced,
and his retirement income, if any, related to employment after the Break in
Service shall be based upon the Plan in effect on his subsequent retirement or
termination of employment.
8.3 Cash Balance Account After Annuity Starting Date. Pursuant to Paragraph
8.2, if a Participant is or becomes an Eligible Employee after an Annuity
Starting Date, a new Cash Balance Account attributable to employment after the
Annuity Starting Date shall be established and credited with Annual Pay Credits
and Interest Credits as provided under Article III. In addition, the following
shall be applicable:
(a) if he is a rehired former Employee:
(i) his Accrued Benefit resulting from employment after the original
Annuity Starting Date will be payable under the provisions of Article
X upon subsequent termination of employment. The Participant shall be
permitted to make independent payment elections with respect to such
Accrued Benefit, except as provided under Section 6.2(b); and
(ii) with respect to employment after the first Annuity Starting Date, he
shall not be eligible for the minimum benefit determined under Section
4.3.
(b) if he is an Employee who continued to work after age 70-1/2 and his Plan
benefits are payable to him under Section 6.2(b) because he is over age
70-1/2:
(i) as of the last day of each Plan Year during which Plan benefits are
paid, the Accrued Benefit of such Participant shall be recalculated as
prescribed under Section 6.2(c).
(ii) if there is a net increase in the Participant's Accrued Benefit as
determined under Section 6.2(c)(ii), such additional Accrued Benefit
shall be converted to the "current form of payment" and commence to be
paid as soon as practicable following the end of such Plan Year.
For purposes of this paragraph, "current form of payment" means the form
under which the retirement benefit is currently being paid. No change of
payment form is permitted.
ARTICLE IX
DEATH AND DISABILITY BENEFITS
9.1 Death Benefits Limited. Except as otherwise provided herein, no death
benefits will be payable hereunder to anyone following the death of the Member.
Any benefit payable under this Article IX must be applied for in writing by the
Beneficiary before such benefit will be paid.
9.2 Death Benefits Prior to Annuity Starting Date. Subject to the provisions of
Section 10.9(b), if a Member is vested in his Accrued Benefit under Section 7.2
and dies prior to his Annuity Starting Date his designated Beneficiary shall be
entitled to a death benefit hereunder. The death benefit shall be paid to the
Beneficiary as a single lump sum payment or as a life annuity, as the
Beneficiary elects in writing. If the Beneficiary is the Member's Spouse, the
normal form of payment, in the absence of any written election to the contrary,
is a life annuity. The annuity shall be payable to the Beneficiary for life
only as a monthly income beginning on any date up to the date the Member would
have reached age 65 if the Beneficiary is the Member's Spouse or if the
Beneficiary is not the Member's Spouse, beginning on any date within the one
year period following the Member's death. A lump sum payable to a Beneficiary
who is not the Member's Spouse must be paid within the five-year period
immediately following the Member's death.
The benefit hereunder shall be equal to either (a) or (b) but not less than (c)
below, as applicable:
(a) If the Beneficiary elects a life annuity, the annual death benefit shall
be equal to the Member's Cash Balance Account determined as of the
Annuity Starting Date, divided by the factor under Section 10.1(b)(ii)
corresponding to the Beneficiary's age on the Annuity Starting Date
for any Beneficiary age 55 or older on the date of payment. For a
Beneficiary younger than 55, the life annuity shall be the Actuarial
Equivalent of the benefit that would have been payable to the
Beneficiary at age 55. The annual amount hereunder shall be divided by
12 to convert to a monthly income.
(b) If the Beneficiary elects a single lump sum payment, the death benefit
shall be equal to the Member's Cash Balance Account as of the Annuity
Starting Date. A Beneficiary who is a Spouse must specifically elect in
writing to waive his right to the life annuity form of distribution
under subsection (a) above.
(c) For benefits payable to a Member's Spouse under this Section 9.2, the
Actuarial Equivalent of the benefit described in (a) and (b) above shall
not be less than the qualified preretirement survivor annuity required
under Code Section 417(c).
9.3 Death Benefits After Annuity Starting Date. After retirement income has
commenced to be paid to a Member, upon the Member's subsequent death, benefits,
if any, shall be payable to the Member's surviving Spouse or Beneficiary
strictly in accordance with the form of benefit which had been in effect prior
to the Member's death.
9.4 Lump Sum Death Benefit. Upon the death of a retired Member, a lump sum
benefit in the amount of $3,000 shall be payable to the retired Member's
Beneficiary. This lump sum death benefit shall be payable only on behalf of a
Member who retired prior to January 1, 1996, with eligibility for Early, Normal,
or Postponed Retirement. Such lump sum death benefit shall be payable in
addition to any other benefit payable upon the death of such Member under the
terms of the Plan as in effect on his retirement date.
9.5 Disability Retirement Income. If a Member suffers a Disability prior to
retirement, then such Member shall continue to be treated as though he were
still actively employed.
For the purpose of determining a disabled Member s Annual Pay Credits for any
Plan Year, such Member's Compensation for any period of Disability shall be his
Compensation as in effect on the date immediately preceding the date of such
Disability. Additionally, Benefit Service and Eligibility Service shall
continue to be credited during any period of Disability and shall be determined
on the basis of the Member s regularly scheduled Hours of Service as of the date
immediately preceding the date of such Disability. For the purposes of this
Section 9.5, a Member's period of Disability shall be the period beginning on
the date of the commencement of his Disability, as defined herein, and ending on
the earliest of (a) the last day of the month in which his Disability has
ceased, (b) the day he dies, and (c) the date he begins to receive benefit
payments hereunder.
ARTICLE X
PAYMENT OF RETIREMENT BENEFITS
10.1 Automatic Form of Payment. The automatic form of retirement income shall
be as follows:
(a) if the greater of the Member's Cash Balance Account and the Actuarial
Equivalent of his Accrued Benefit is $3,500 or less prior to payment
from the Plan, a single sum payment shall be made pursuant to Section
10.9.
(b) if subsection (a) above is inapplicable to the Member, then unless the
Member elects an optional form of retirement income in accordance with
Section 10.2, the following shall apply:
(i) a Member who has a Spouse on his Annuity Starting Date shall receive
a reduced retirement benefit which shall be the Actuarial Equivalent
of the life annuity amount described in Section 10.1(b)(ii) below,
payable monthly commencing on the Annuity Starting Date. If he
shall die leaving such Spouse, a benefit shall continue in one-half
the reduced amount to the Spouse commencing after the Member dies
and ending with the first day of the month in which the death
of the Spouse occurs;
(ii) a Member who does not have a Spouse on his Annuity Starting Date
shall receive a life annuity described in Section 10.4 payable
monthly commencing on the Annuity Starting Date and ending with the
first day of the month in which his death occurs.
The amount of the monthly life annuity shall be equal to 1/12 of the Member's
Cash Balance Account as of the Annuity Starting Date divided by the factor from
the table below corresponding to the Member's age on the Annuity Starting Date:
Age on Annuity Divisor to Convert
Starting Date to a Life Annuity
---------------- -------------------
55 12.0
56 11.8
57 11.6
58 11.4
59 11.2
60 11.0
61 10.8
62 10.6
63 10.4
64 10.2
65 10.0
66 9.8
67 9.6
68 9.4
69 9.2
70 and over 9.0
For ages between whole ages, the factors in the table above shall be
interpolated using the number of full months of age attained and rounding to
four places to the right of the decimal.
Notwithstanding the foregoing, the life annuity amount determined under this
Section 10.1(b)(ii) shall never be less than the Actuarial Equivalent of the
Member's Accrued Benefit for any Annuity Starting Date that occurs prior to the
Member's Normal Retirement Date.
10.2 Election of Optional Forms. Provided the requirements of Section 10.10 are
met, a Member who is eligible to commence benefits under the Plan may elect an
optional form of payment available under Section 10.3, 10.4, 10.5, 10.6, or
10.7. On or about 90 days prior to the date a Member is eligible for
retirement, written information concerning the normal form of payment, the
material features of optional forms of payment, the relative values of each, the
circumstances under which the qualified joint and survivor annuity will be paid,
and the relative financial impact of optional forms of payment shall be provided
to such Member. This information and the election forms used to effect
retirement and selection of a benefit form shall be written in plain, non-
technical language. In addition, the form will provide a description of the
Member's right to reinstate coverage under the automatic form of benefit
described in Section 10.1(b) prior to his Annuity Starting Date by revoking an
election of an optional form of benefit. If a Member files a subsequent
election form, the prior form shall be of no effect. Completed election forms
must be executed and returned to the Plan Administrator within the ninety day
period ending on the designated Annuity Starting Date. Once benefit
payments have commenced no other option may be elected, changed or revoked.
The Plan Administrator may, on a uniform and nondiscriminatory basis, provide
for such other election periods as comply with regulations issued under Code
Sections 401(a)(11) and 417. Subject to the provisions of Section 10.10, the
Plan Administrator shall defer a Member's Annuity Starting Date for a period of
up to 90 days if the Plan Administrator determines that the deferral is
desirable in order to provide for an orderly election procedure or if it is
necessary to do so in order to comply with applicable regulations.
10.3 Joint and Survivor Option. Subject to Section 10.10:
(a) A Member may elect, by submitting an election form to the Plan
Administrator, to convert his retirement income to an Actuarial
Equivalent of the life annuity amount described under Section
10.1(b)(ii), payable monthly during his life with the provision that
after his death, 100 percent, 75 percent or 50 percent of such reduced
retirement income will be payable monthly to his Beneficiary during the
remaining life of such Beneficiary.
(b) Any such election whenever made may be altered, amended, or revoked by
the Member only prior to the Annuity Starting Date, provided the Member
gives notice in writing to the Plan Administrator.
(c) If a Member elects a Joint and Survivor Option and his Beneficiary dies
before the Member's benefit actually commences, the Member may change
his election in accordance with Section 10.3(b). If no such change of
election is made, the benefits will commence in the form originally
elected by the Member.
(d) If a Member elects a Joint and Survivor Option and dies before reaching
his Annuity Starting Date, his Beneficiary will not be entitled to any
rights or benefits under the Plan, unless such person is also the
designated Beneficiary entitled to pre-retirement death benefits under
Article IX.
(e) If a Member elects a Joint and Survivor Option and his Beneficiary dies
before the death of such Member, but after the Annuity Starting Date,
such Member will continue to receive the reduced retirement income
payable to him in accordance with such option.
10.4 Life Annuity Option. Subject to the provisions of Section 10.10, a Member
may elect, by submitting a completed election form to the Plan Administrator, to
have his retirement income payable monthly during his life and ending with the
first day of the month in which his death occurs. Any such election whenever
made may be altered, amended, or revoked by the Member prior to the date when
the first payment of his retirement income would normally be made, provided the
Member gives notice in writing to the Plan Administrator. The amount of the
life annuity payment shall be determined under Section 10.1(b)(ii).
10.5 Lump Sum Option. Subject to the provisions of Section 10.10, a Member who
is eligible to receive a single lump sum payment under Article IV, V, VI or VII
may elect to do so by submitting a completed election form to the Plan
Administrator. If the Member elects to receive the value of his benefit in a
single lump sum payment, this payment shall be in lieu of all other benefits
under the Plan.
The single sum payment shall be equal to the greater of: (a) his Cash Balance
Account as of the Annuity Starting Date, or (b) the Actuarial Equivalent of his
Accrued Benefit.
10.6 Cash Refund Annuity. Subject to the provisions of Section 10.10, a Member
may elect, by submitting a completed election form to the Plan Administrator, to
have a reduced retirement income payable monthly during his life and ending with
the first day of the month in which his death occurs, provided, however, that if
the sum of monthly payments received by the Member is less than the Cash Balance
Account on the Annuity Starting Date, the Member's designated Beneficiary shall
be entitled to a single sum payment. This single sum shall be equal to the
value of the Member's Cash Balance Account on the Annuity Starting Date less the
sum of all annuity payments made to the Member.
The Cash Refund Annuity shall be the Actuarial Equivalent of the life annuity
amount determined under Section 10.1(b)(ii).
10.7 Life Annuity with Guaranteed Payment Period. Subject to the provisions of
Section 10.10, a Member may elect to have his Accrued Benefit under the Plan
payable as a life annuity, but guaranteed for a period of 120 months. Should
the Member die before the minimum number of monthly payments is made, his
designated Beneficiary shall receive the remaining payments. If the designated
Beneficiary should die before the guaranteed total of 120 monthly payments are
made, any remaining payments shall be commuted to an Actuarial Equivalent single
sum and paid to the Beneficiary's estate. The Annuity option under this Section
10.7 shall be the Actuarial Equivalent of the life annuity benefit described
under Section 10.1(b)(ii).
10.8 Direct Rollovers from the Plan. If any Plan distribution is an "eligible
rollover distribution" as defined in Code Section 402, a Member (or surviving
Spouse) may elect at the time and in the manner prescribed by the Plan
Administrator, to directly rollover such distribution to one of the following:
a retirement plan qualified under Code Section 401(a), an individual retirement
annuity described in Code Section 408(b), or an individual retirement account
described under Code Section 408(a), or any other program deemed to be an
eligible retirement plan under Code Section 402.
For purposes of this Section, the direct rollover rights of the Member shall
also apply to the Spouse or former Spouse of the Member if such person is an
"alternate payee" of the Member as defined in Code Section 414(p).
10.9 Small Payments. Notwithstanding any other provision hereof the following
shall apply:
(a) if any periodic retirement benefit payable to a Member or other payee
shall be less than $25.00 per month, payments may be made quarterly or
annually in advance at the discretion of the Plan Administrator;
(b) if the greater of the Member's Cash Balance Account and the Actuarial
Equivalent present value of the Accrued Benefit payable to the Member,
(or such other benefit payable to a Spouse or Beneficiary) is $3,500 or
less prior to the commencement of such benefit, an immediate lump
sum payment of such Cash Balance Account or Actuarial Equivalent value
(as applicable) shall automatically be made to the Member (or his Spouse
or Beneficiary, as applicable, in the case of the Member's death) in
lieu of all other benefits hereunder.
10.10 General Provisions.
(a) Anything in the foregoing to the contrary notwithstanding, no method of
distribution of retirement income may be made under this Article which
would result in the Actuarial Equivalent of the interest of a
Beneficiary (other than a Spouse) exceeding the minimum distribution
incidental benefit rules of Code Section 401(a)(9). Distribution to
Members who attain age 70-1/2 on or after January 1, 1988 must commence
by the April 1 following the year in which age 70-1/2 is attained.
Distribution to Members who attained age 70-1/2 prior to January 1, 1988
may be deferred until the April 1 of the year next following the close
of the calendar year in which the Member retires.
Upon the death of a Member, any remaining interest he may have in the
Plan shall be distributed within the later of five years after his death
or the death of his Beneficiary, unless another form of payment was
already in effect at the time of his death, in which case benefits may
be made in accordance with such form of payment. If the Beneficiary
entitled to death benefits under Section 9.2 is not the Member's Spouse,
the single lump sum death benefit, if elected, must be made within five
years of the Member's death and life annuity benefits must commence
within one year following such death.
If the Actuarial Equivalent value of any Plan benefit is in excess of
$3,500, such benefit may not be immediately distributed prior to the
Member's Normal Retirement Date unless the Member consents in writing.
(b) If a Member has a Spouse on the Annuity Starting Date, he may elect,
without his Spouse's consent, to receive his Plan benefit under the
normal form described in Section 10.1(b)(i) or under one of the Joint
and Survivor Options under Section 10.3 with the Spouse as the
Beneficiary. The election of any other optional form of payment by such
a Member will not take effect unless:
(i) the Member's Spouse consents in writing to the Member's election of
a specific optional form of benefit and to a specific nonspouse
Beneficiary or class of Beneficiaries provided the Spouse's consent
acknowledges the effect of such election and is witnessed by a
notary public or a Plan representative, or
(ii) it is established to the satisfaction of the Plan Administrator that
the Member has no Spouse, or that the Spouse's consent cannot be
obtained because the Spouse cannot be located, or because of such
other circumstances as may be prescribed in regulations issued
pursuant to Code Section 417.
(c) It is the intent of the Plan that all benefits be paid promptly when
due. In the absence of any inability to determine the amount of benefit
payable or the eligibility for a benefit due to the lack of adequate
information on the date of birth of the Member or Spouse, the first
benefit shall be paid no later than the 60th day after the close of the
latest Plan Year in which:
(i) the Member attains Normal Retirement Age;
(ii) the Member reaches the 10th anniversary of his date of commencement
of participation in the Plan, or
(iii) the Member's termination of employment occurs.
10.11 Restrictions on Distributions. This Section shall apply to the amount of
Annual Benefit (defined below) payable from this Plan for any Member who is
considered a Restricted Member (defined below). Such Annual Benefit shall be
limited to an amount equal to the payments that would have been made on behalf
of the Restricted Member under the life annuity form of payment described in
Section 10.4 that is the Actuarial Equivalent of the Restricted Member's Accrued
Benefit under the Plan.
For purposes of this Section 10.11, the term Restricted Member shall mean all
highly compensated employees as defined in Code Section 414(q) and highly
compensated former employees. In any one Plan Year, the total number of Members
whose benefits are subject to restriction under this Section 10.11 shall be
limited by the Plan to a group of not less than 25 highly compensated employees
and highly compensated former employees with the greatest compensation.
For purposes of this Section 10.11, the term Annual Benefit means the amount
payable each year including retirement income provided by the Plan, any other
periodic income, loans in excess of the amounts set forth in Code Section
72(p)(2)(A), any withdrawal values payable to a living Member and any death
benefits not provided for by insurance on the Member's life.
The limitations set forth in this Section 10.11 shall not restrict the current
payment of the full amount of retirement income provided by the Plan if:
(a) after payment to a Restricted Member of all of the Annual Benefits
described above, the value of Plan assets equals or exceeds 110% of the
value of current liabilities, as defined in Code Section 412(l)(7), or
(b) the value of the Annual Benefits described above for a Restricted Member
is less than 1% of the value of current liabilities, as defined in Code
Section 412(l)(7), or
(c) the value of the Annual Benefits described above for a Restricted Member
does not exceed $3,500 or such higher amount described in Code Section
411(a)(11)(A).
ARTICLE XI
ADMINISTRATION OF THE PLAN
11.1 Allocation of Responsibility Among Fiduciaries for Plan and Trust
Administration. The Fiduciaries shall have only those specific powers, duties,
responsibilities and obligations as are specifically given them under this Plan
or the Trust.
The Employers shall have the sole responsibility for making the contributions
necessary to provide benefits under the Plan as specified in Article XII. The
Principal Employer shall have the sole authority to appoint and remove the
Trustee and any investment manager which may be provided for under the Trust,
and to amend or terminate, in whole or in part, this Plan or the Trust. The
Principal Employer shall also have the sole responsibility for the
administration of this Plan, which responsibility is specifically described in
this Plan and the Trust.
The Trustee shall have the sole responsibility for the administration of the
Trust and the management of the assets held under the Trust, all as specifically
provided in the Trust.
Each Fiduciary warrants that any directions given, information furnished, or
action taken by it shall be in accordance with the provisions of the Plan or the
Trust, as the case may be, authorizing or providing for such direction,
information or action. Furthermore, each Fiduciary may rely upon any such
direction, information or action of another Fiduciary as being proper under this
Plan or the Trust, and is not required under this Plan or the Trust to inquire
into the propriety of any such direction, information or action. It is intended
under this Plan and the Trust that each Fiduciary shall be responsible for the
proper exercise of its own powers, duties, responsibilities and obligations
under this Plan and the Trust and shall not be responsible for any act or
failure to act of another Fiduciary. No Fiduciary guarantees the Trust Fund in
any manner against investment loss or depreciation in asset value.
11.2 Records and Reports. The Principal Employer shall exercise such authority
and responsibility as it deems appropriate in order to comply with ERISA and
governmental regulations issued thereunder relating to records of Member's Years
of Service and Accrued Benefits under the Plan; notifications to Members; annual
registration with the Internal Revenue Service; annual reports to the Department
of Labor; and reports to the Pension Benefit Guaranty Corporation.
11.3 Delegation to Individuals. The Plan Administrator may name an individual
or a committee to oversee the day to day operations of the Plan with
discretionary authority over the operation of the Plan and such individual or
the committee shall be Fiduciaries for purposes of plan administration.
11.4 Benefit Claims Procedures. All claims for benefits under the Plan shall be
in writing and shall be submitted to the Plan Administrator. If any application
for payment of a benefit under the Plan shall be denied, the Plan Administrator
shall notify the claimant within 90 days of such application setting forth the
specific reasons therefor and shall afford such claimant areasonable opportunity
for a full and fair review of the decision denying his claim. If special
circumstances require an extension of time for processing the claim, the
claimant will be furnished with a written notice of the extension prior to the
termination of the initial 90-day period. In no event shall such extension
exceed a period of 90 days from the end of such initial period. The extension
notice shall indicate the special circumstances requiring an extension of time
and the date by which the Plan Administrator expects to render its decision.
Notice of such denial shall set forth, in addition to the specific reasons for
the denial, the following:
(a) reference to pertinent provisions of the Plan;
(b) such additional information as may be relevant to the denial of the
claim;
(c) an explanation of the claims review procedure; and
(d) notice that such claimant may request the opportunity to review
pertinent Plan documents and submit a statement of issues and comments.
Within 60 days following notice of denial of his claim, upon written request
made by any claimant for a review of such denial to the Plan Administrator, the
Plan Administrator shall take appropriate steps to review its decision in light
of any further information or comments submitted by such claimant.
11.5 Other Powers and Duties of the Principal Employer. The Principal Employer
shall have such duties and powers as may be necessary to discharge its duties
hereunder, including, but not by way of limitation, the following:
(a) construe and interpret the Plan, decide all questions of eligibility and
determine the amount, manner and time of payment of any benefits
hereunder;
(b) prescribe procedures to be followed by Members or Beneficiaries filing
applications for benefits;
(c) prepare and distribute, in such manner as the Principal Employer
determines to be appropriate, information explaining the Plan;
(d) receive from the Employers and from Members such information as shall be
necessary for the proper administration of the Plan;
(e) prepare annual reports with respect to the administration of the Plan as
are reasonable and appropriate;
(f) receive and review a copy of the periodic valuation of the Plan made by
the Enrolled Actuary;
(g) receive, review and keep on file (as it deems convenient and proper)
reports of benefit payments by the Trustee and reports of disbursements
for expenses;
(h) to the extent not provided by the Principal Employer, appoint or employ
individuals to assist in the administration of the Plan and any other
agents it deems advisable, including legal and actuarial counsel.
11.6 Rules and Decisions. The Principal Employer may adopt such rules and
actuarial tables as it deems necessary, desirable or appropriate. Except as
otherwise herein expressly provided, the Plan Administrator shall have the
exclusive right and discretionary authority, to the fullest extent provided by
law, to interpret the Plan and decide any matters arising hereunder in the
administration and operation of the Plan, and any interpretations or decisions
so made will be conclusive and binding on all persons having an interest in the
Plan; provided, however, that all such interpretations and decisions will be
applied in a uniform and nondiscriminatory manner to all Employees. When making
a determination or calculation, the Principal Employer shall be entitled to rely
upon information furnished by a Member or Beneficiary, the Enrolled Actuary, or
the Trustee.
11.7 Authorization of Benefit Payments. The Principal Employer shall issue
directions to the Trustee concerning all benefits which are to be paid from the
Trust Fund pursuant to the provisions of the Plan, and warrants that all such
directions are in accordance with this Plan.
11.8 Application and Forms for Benefits. The Principal Employer may require a
Member to complete and file with the Principal Employer an application for
benefits and all other forms approved by the Principal Employer, and to furnish
all pertinent information requested by the Principal Employer. The Principal
Employer may rely upon all such information so furnished it, including the
Member's current mailing address.
11.9 Indemnification. Any individual Employee who is assigned administrative
responsibilities in accordance with this Article shall be indemnified by the
Principal Employer against any and all liabilities arising by reason of any act
or failure to act made in good faith pursuant to the provisions of the Plan,
including expenses reasonably incurred in the defense of any claim relating
thereto.
ARTICLE XII
FUNDING AND CONTRIBUTIONS
12.1 Establishment of Trust Fund. The Trust Fund shall be held and administered
by the Trustee in accordance with the terms of the Trust Agreement. The Trust
Fund shall hold all contributions made by the Employer and earnings and other
income attributable thereto. All benefits payable under the Plan shall be
disbursed from the Trust Fund.
12.2 Contributions to the Fund; Plan Expenses. The Employer will contribute to
the Trust Fund such sums and at such times as may be determined by the Board of
Directors of the Employer in accordance with the funding method and policy to be
established by the Board which are consistent with Plan objectives. The Board
of Directors of the Employer, in consultation with the Enrolled Actuary and the
Plan Administrator, shall have the right to change the method of funding,
subject only to any contractual restrictions of the existing method of funding.
Forfeitures arising from termination of service will be used to reduce Employer
contributions and will not be applied to increase any benefits under the Plan.
Except as provided in Section 12.3 and Article XIV, all contributions when made
to the Trust Fund and all property and assets of the Trust Fund, including
income from investments and from all other sources, will be retained for the
exclusive benefit of Members, Spouses and Beneficiaries included in the Plan
and will be used to pay benefits provided hereunder or to pay expenses of
administration of the Plan and the Trust Fund to the extent not paid by the
Employer.
12.3 Contributions Conditional. Each Employer contribution to the Plan is
expressly conditioned on its deductibility. If any Employer contribution is
deemed to be nondeductible or made by the Employer by a mistake of fact, then
upon request by the Employer, such contribution shall be returned to the
Employer within one year of the date of the disallowance of such deduction or
the date the contribution was made to the Trust Fund, respectively.
12.4 Employee Contributions. No Employee will be required or permitted to make
any contributions under this Plan.
ARTICLE XIII
FIDUCIARY RESPONSIBILITIES
13.1 Basic Responsibilities. Any Fiduciary under the Plan, whether specifically
designated or not, shall:
(a) discharge all duties solely in the interest of Members, Spouses, and
Beneficiaries and for the exclusive purpose of providing benefits and
defraying reasonable administrative expenses under the Plan;
(b) discharge his responsibilities with the care, skill, prudence, and
diligence a prudent man would use in similar circumstances; and
(c) conform with the provisions of the Plan. No person who is ineligible by
law will be permitted to serve as Fiduciary.
13.2 Actions of Fiduciaries. Any Fiduciary:
(a) may serve in more than one fiduciary capacity with respect to the Plan;
(b) may employ one or more persons to render advice with regard to or to
carry out any responsibility that such Fiduciary has under the Plan; and
(c) may rely upon any discretion, information, or action of any other
Fiduciary, acting within the scope of its responsibilities under the
Plan, as being proper under the Plan.
13.3 Fiduciary Liability. No Fiduciary shall be personally liable for any
losses resulting from his action except as provided by federal law. Each
Fiduciary shall have only the authority and duties which are specifically
allocated to it, shall be responsible for the proper exercise of its own
authority and duties. Except as provided under ERISA, a Fiduciary shall not be
responsible for any act or failure to act of any other Fiduciary.
ARTICLE XIV
AMENDMENT AND TERMINATION
14.1 Right to Amend or Terminate. The Principal Employer reserves the right to
amend, modify, suspend, or terminate the Plan in whole or in part at any time by
means of a resolution of its Board of Directors. No amendment will be effective
unless the Plan as so amended is for the exclusive benefit of Members, Spouses,
and Beneficiaries, and no amendment will deprive any Member without his consent
of any benefit to which he was theretofore entitled, provided that any and all
amendments may be made which are necessary to maintain the qualification of the
Plan under the Code and provided further that such amendments may be
retroactively effective. The Plan shall not be automatically terminated by the
Employer's or any Affiliate's acquisition by or merger or consolidation into any
other Employer. In the event of a reorganization, consolidation, dissolution or
merger of the Employer or an Affiliate, the Plan can be continued by the
successor, and the successor shall be substituted for the Employer or such
Affiliated Company and shall assume all of the Plan liabilities and all of the
powers, duties and responsibilities of the Employer or such Affiliated Company
under the Plan.
14.2 Partial Termination. Upon a partial termination of the Plan with respect
to a group of Members, as determined by a ruling of the Internal Revenue Service
as to which all rights to appeal have expired, the Principal Employer shall
direct the Enrolled Actuary to determine the proportionate share of the Members
affected by such partial termination. After such proportionate share has been
determined, the Trustees shall segregate the assets of the Fund allocable to
such group of Members for payment of benefits in accordance with the provisions
of Section 14.3.
14.3 Vesting and Distribution of Funds Upon Termination. Upon termination of
the Plan by the Principal Employer, in whole or in part, all affected Members
will be entitled to their Accrued Benefits under the Plan, and the assets in the
Fund (or the portion of the Fund determined in accordance with Section 14.2)
will be allocated as follows:
(a) There shall first be credited to each Member who was receiving retirement
income or who was eligible to receive retirement income at least three
years prior to the date of Plan termination and to each Spouse and
Beneficiary who was receiving retirement income or who was eligible to
receive retirement income at least three years prior to the date of Plan
termination an amount which will provide for him the amount of retirement
income then accrued to him under the Plan, but not in excess of the
benefit insured by the Pension Benefit Guaranty Corporation.
(b) There shall next be credited to each Member who was receiving retirement
income or who was eligible to receive retirement income on the date of
the Plan's termination and to each Spouse and Beneficiary who was
receiving retirement income or who was eligible to receive retirement
income on the date of the Plan's termination an amount which will provide
for him the amount of retirement income then accrued to him under the
Plan, but not in excess of the benefit insured by the Pension Benefit
Guaranty Corporation.
(c) There shall next be credited to each other Member who, on the date on
which the Plan shall terminate, is eligible for retirement income in
accordance with Section 7.2 an amount which will provide for him the
amount of the retirement income then accrued to him under the Plan, but
not in excess of the benefit insured by the Pension Benefit Guaranty
Corporation.
(d) There shall next be credited to each other Member who would be entitled
to additional retirement income in accordance with (a), (b), and (c)
above, were such additional income not in excess of the amount insured by
the Pension Benefit Guaranty Corporation, an amount which will provide
for him the amount of retirement income then accrued to him under the
Plan.
(e) There shall next be credited to each other Member an amount which will
provide for him the amount of retirement income then accrued to him under
the Plan.
Allocation in any of the above classes shall be adjusted for any allocation made
to the same Member under a prior class.
14.4 Determination of Funds Upon Termination.
(a) The application of the Fund on the foregoing basis shall be calculated
as of the date on which the Plan shall terminate. When the calculation
shall be completed, the respective interest in the Fund will be
distributed to or on behalf of the respective Members, Spouses, and
Beneficiaries under the Plan in the order stated in Section 14.3 only
after the Principal Employer has sent written notice to the Trustee,
that all of the applicable requirements governing the termination of
qualified retirement plans have been, or are being complied with or
that appropriate authorizations, waivers, exemptions or variances have
been, or are being, obtained.
(b) If the assets in the Fund on the date the Plan is terminated are not
sufficient to provide in full the amounts required within classes (a),
(b), (c), and (d) of Section 14.3, any benefit in excess of $10,000 paid
within a 12-month period during the 36- month period immediately
preceding the date of termination of the Plan to a Member, Spouse or
Beneficiary who owns 10% or more of the outstanding voting stock of any
Employer may be deemed a part of the Fund for purposes of allocation.
(c) If the assets are not sufficient to provide in full for the amounts
required for a class in the order listed in Section 14.3, the balance of
the assets shall be allocated to each member of a class in the
proportion which his amount bears to the total amount in such class.
(d) Distribution may be in the form of an annuity contract, cash, or
securities or other assets in kind as determined by the Principal
Employer in a uniform nondiscriminatory manner and applicable to all
Members.
(e) Any funds remaining after the satisfaction of all liabilities to
Members, Spouses, and Beneficiaries under the Plan shall be deemed to be
the result of actuarial error and shall be returned to the Principal
Employer or respective Affiliate.
14.5 Disabled Members. Any Member who has a Disability, on the date of
termination or discontinuance but who has not on such date begun to receive
retirement income, will participate in the foregoing allocation of assets in the
Fund as though he had been actively employed through the date of termination or
discontinuance.
14.6 Restrictions on Benefits. In the event of plan termination, the benefit of
any highly compensated employee as defined in Code Section 414(q) and highly
compensated former employee is limited to a benefit that is nondiscriminatory
under Code Section 401(a)(4).
14.7 Right to Accrued Benefits. Any other provision of the Plan notwithstanding
upon termination or partial termination of the Plan, the right of each Member to
benefits accrued to the date of such termination or partial termination to the
extent then funded or to the extent guaranteed by the Pension Benefit Guaranty
Corporation shall be nonforfeitable.
ARTICLE XV
GENERAL PROVISIONS
15.1 Plan Voluntary. Although it is intended that the Plan shall be continued
and that contributions shall be made as herein provided, this Plan is entirely
voluntary on the part of each Employer and each Affiliated Company and the
continuance of this Plan and the payment of contributions hereunder are not to
be regarded as contractual obligations of any Employer or any Affiliated
Company. The Employer and each Affiliate, does not guarantee or promise to pay
or to cause to be paid any of the benefits provided by this Plan. Each person
who shall claim the right to any payment or benefit under this Plan shall be
entitled to look only to the Fund or the Pension Benefit Guaranty Corporation
for any such payment or benefit and shall not have any right, claim, or demand
therefore against any Employer or any Affiliate, except as provided by
federal law. The Plan shall not be deemed to constitute a contract between any
Employer or any Affiliated Company and any Employee or to be a consideration
for, or an inducement for, the employment of any Employee by any Employer or any
Affiliated Company. Nothing contained in the Plan shall be deemed to give any
Employee the right to be retained in the service of any Employer or any
Affiliated Company or to interfere with the right of any Employer or any
Affiliated Company to discharge or to terminate the service of any Employee at
any time without regard to the effect such discharge or termination may have on
any rights under the Plan.
15.2 Payments to Minor and Incompetents. If any Member, Spouse or Beneficiary
entitled to receive any benefits hereunder is a minor or is deemed by the Plan
Administrator or is adjudged to be legally incapable of giving valid receipt and
discharge for such benefits, they will be paid to such person or institution as
the Plan Administrator may designate or to the duly appointed guardian. Such
payment shall, to the extent made, be deemed a complete discharge of any
liability for such payment under the Plan.
15.3 Non-Alienation of Benefits.
(a) No amount payable to, or held under the Plan for the account of, any
Member shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge, and any attempt to
so anticipate, alienate, sell, transfer, assign, pledge, encumber, or
charge the same shall be void; nor shall any amount payable to, or held
under the Plan for the account of, any Member be in any manner liable
for his debts, contracts, liabilities, engagements, or torts, or be
subject to any legal process to levy upon or attach, except as may
be provided under Code Section 401(a)(13) and under a qualified domestic
relations order as defined in Code Section 414(p).
Notwithstanding the foregoing, in accordance with the limits in
applicable regulations and upon written authority of any retired
Employee and the consent of the Employer, the Plan Administrator may
direct the Trustee to withhold a portion of any benefit payable to the
retired Employee under this Plan for the purpose of paying the costs or
premiums by the retired Employee as a result of being included in
another plan of any Employer or an Affiliate, such as an insurance plan.
The Trust, however, shall not in any manner be liable for, or subject
to, the debts, contracts, liabilities, engagements or torts of any
person entitled to benefits hereunder.
(b) Under a qualified domestic relations order, an alternate payee who had
been married to the Member for at least one year may be treated as a
Spouse with respect to the portion of the Member's benefit in which such
alternate payee has an interest provided that the qualified domestic
relations order provides for such treatment. However, under no
circumstances may the spouse of any alternate payee (who is not a Member
hereunder) be treated as a Spouse under the terms of the Plan.
Upon receipt of any judgement, decree or order (including approval of a
property settlement agreement) relating to the provision of payment by
the Plan to an alternate payee pursuant to a state domestic relations
law, the Plan Administrator shall promptly notify the affected Member
and any alternate payee of the receipt of such judgement, decree or
order and shall notify the affected Member and any alternate payee of
the Plan Administrator's procedure for determining whether or not the
judgement, decree or order is a qualified domestic relations order.
The Plan Administrator shall establish a procedure to determine the
status of a judgement, decree or order as a qualified domestic relations
order and to administer Plan distributions in accordance with qualified
domestic relations orders. Such procedure shall be in writing, shall
include a provision specifying the notification requirements enumerated
in the preceding paragraph, shall permit an alternate payee to designate
a representative for receipt of communications from the Plan
Administrator and shall include such other provisions as the Plan
Administrator shall determine, including provisions describing the
interest rate to be used in making present value determinations as well
as provisions required under regulations promulgated by the Secretary of
the Treasury.
During any period in which the issue of whether a judgement, decree or
order is a qualified domestic relations order is being determined (by
the Plan Administrator, a court of competent jurisdiction or otherwise),
the Plan Administrator shall separately account for the amount, if
any, which would have been payable to the alternate payee during such
period if the judgement, decree or order had been determined to be a
qualified domestic relations order.
If the judgement, decree or order is determined by the Plan
Administrator to be a qualified domestic relations order before the
first payments would otherwise be due under such order, then payment
of the appropriate amount shall be paid to the alternate payee(s) as
required under the order. If a domestic relations order is determined
by the Plan Administrator to be a qualified order within the 18 month
period beginning on the date that the first payment would have been
due under such order, the separately accounted for amounts (plus
reasonable interest thereon) shall be retroactively paid to the
alternate payee(s) named in the order. Subsequent payments shall not
include any interest component. If the Plan Administrator first
determines that the order is a qualified domestic relations order after
the 18-month period beginning on the date on which the first payment
would have been due under the order, then the provisions of such order
shall be applied on a prospective basis only.
15.4 Evidence of Survival. If the Plan Administrator, or the Trustees with the
assistance of the Plan Administrator, cannot make payment of any amount to, or
on behalf of, a Member within five years after such amount becomes payable
because the identity or whereabouts of such Member cannot be ascertained, the
Plan Administrator, at the end of such five-year period, will direct that all
unpaid amounts which would have been payable to or on behalf of such Member be
paid to the legal spouse of the Member if found and living at such time, or if
such legal spouse cannot be found or is not living at such time, in equal shares
to such of the children of the Member who can be found and are living at such
time, or if none of such children can be found or if none are living at such
time, to such other relative or relatives of the Member as the Plan
Administrator may deem proper.
15.5 Use of Masculine and Feminine; Singular and Plural. Wherever used in this
Plan, the masculine gender will include the feminine gender and the singular
will include the plural, unless the context indicates otherwise.
15.6 Merger, Consolidation, or Transfer. In the event that the Plan is merged
or consolidated with any other plan, or should the assets or liabilities of the
Plan be transferred to any other plan, each Member shall be entitled to a
benefit immediately after such merger, consolidation, or transfer if the Plan
should then terminate equal to or greater than the benefit he would have been
been entitled to receive immediately before such merger, consolidation, or
transfer if the Plan had then terminated.
15.7 Leased Employees. Any individual who performs services for the Employer
and who, by application of Code Section 414(n)(2) and regulations issued
pursuant thereto, would be considered a "leased employee", shall, for purposes
of determining the number of highly compensated employees of the Employer and
for purposes of the requirements enumerated in Code Section 414(n)(3), be
considered an Employee of the Employer with regard to services performed
after December 31, 1986.
When the total of all leased employees constitutes less than 20% of the
Employer's nonhighly compensated work force within the meaning of Code Section
414(n)(5)(C)(ii), however, a "leased employee" shall not be considered an
Employee of the Employer if the organization from which the individual is leased
maintains a qualified safe harbor plan (as defined in Code Section 414(n)(5)) in
which such individual participates.
"Leased employees" who are deemed to be Employees of the Employer for purposes
of this Section 15.7 shall not be eligible to participate in the Plan unless
specifically provided for in Section 2.1.
15.8 Governing Law. The Plan shall be administered, construed and enforced
according to the laws of the State of Vermont; provided, however, wherever
applicable, the provisions of ERISA shall govern and in such event the laws of
the United States of America shall be applied, and, to the extent necessary, its
courts shall have competent jurisdiction.
15.9 Severability. If any provision of the Plan is held invalid or
unenforceable, its invalidity or unenforceability will not affect any other
provision of the Plan, and the Plan will be construed and enforced as if such
provision had not been included.
15.10 Captions. The captions contained in the Plan are inserted only as a
matter of convenience and for reference and in no way define, limit, enlarge, or
describe the scope or intent of the Plan nor in any way affect the construction
of any provision of the Plan.
ARTICLE XVI
TOP-HEAVY PLAN REQUIREMENTS
16.1 General Rule. For any Plan Year for which this Plan is a "top-heavy plan"
as defined in Section 16.5, any other provisions of the Plan to the contrary
notwithstanding, the Plan shall be subject to the following provisions:
(a) The vesting provisions of Section 16.2.
(b) The minimum benefit provisions of Section 16.3.
(c) The limitation on benefits set by Section 16.4.
16.2 Vesting Provisions. Each Member who (a) has completed at least three years
of Eligibility Service and (b) has completed an Hour of Service during any Plan
Year in which the plan is "top-heavy", shall have a nonforfeitable right to all
of his Accrued Benefit under the Plan.
If the Plan ceases to be "top-heavy", each Member with three or more years of
Eligibility Service, whether or not consecutive, shall remain under the vesting
schedule hereunder. For all other Members, the vesting provisions of Section
7.2 shall be applicable once the Plan ceases to be "top heavy". This provision
shall not cause a Member's vested percentage to be reduced.
16.3 Minimum Benefit Provisions. Each Member who (a) is a "non-key employee"
(as defined in Section 16.7) and (b) has completed 1,000 Hours of Service in any
Plan Year shall be entitled to an annual retirement income payable as a single
life annuity equal to 2% of the Member's average annual Compensation in the
"testing period" multiplied by his years of Eligibility Service during which the
Plan is top heavy, up to a maximum of 20%. For purposes of this Section 16.3,
"testing period" means the period of five consecutive years during which the
Member had the highest aggregate Compensation, provided that Compensation for
any Plan Year after the close of the Plan Year in which the Plan was last
top-heavy shall be disregarded.
16.4 Limitation on Benefits. In the event that the Employer also maintains a
defined contribution plan providing contributions on behalf of Members in this
Plan, one of the two following provisions shall apply:
(a) If for the Plan Year this Plan would not be a "top-heavy plan" (as
defined in Section 16.5) if "90 percent" were substituted for "60
percent," then the minimum benefit described in Section 16.3 shall be
determined by substituting "3%" for "2%" and "30%" for "20%".
(b) If for the Plan Year this Plan would continue to be a "top-heavy plan"
(as defined in Section 16.5) if "90 percent" were substituted for "60
percent," then the denominator of both the defined contribution plan
fraction and the defined benefit plan fraction shall be calculated
as set forth in Section 4.4 for such Plan Year by substituting "1.0" for
"1.25" in each place such figure appears, except with respect to any
individual for whom there are no Employer contributions, forfeitures or
voluntary contributions allocated or any accruals for such individual
under the defined benefit plan.
16.5 Top-heavy Plan Definition. This Plan shall be a "top-heavy plan" for any
Plan Year if, as of the determination date, the present value of the Accrued
Benefits under the Plan for Members (including former Members) who are "key
employees" (as defined in Section 16.6) exceeds 60 percent of the present value
of Accrued Benefits for all Members (excluding former "key employees"), or if
this plan is required to be in an aggregation group which for such Plan Year
is a "top-heavy group." For purposes of this Article XVI,
(a) "Determination Date" shall mean for any Plan Year the last day of the
immediately preceding Plan Year (except that for the first Plan Year the
determination date means the last day of such Plan Year).
(b) "Present value of Accrued Benefits" shall be determined as of the most
recent valuation date that is within the 12-month period ending on the
determination date and as described under the Code.
(c) "Aggregate of the accounts" shall mean the sum of (i) the accounts
determined as of the most recent valuation date that is within the 12
month period ending on the determination date, and (ii) the adjustment
for contributions due as of the determination date, and as described in
the regulations under the Code.
(d) "Aggregation group" shall mean the group of plans, if any, that includes
both the group of plans that are required to be aggregated and the group
of plans that are permitted to be aggregated.
(i) The group of plans that are required to be aggregated (the "required
aggregation group") includes: each plan of the Employer in which a
key employee is a Member, including collectively-bargained plans; and
each other plan of the Employer including collectively-bargained
plans, which enables a plan in which a key employee is a Member to
meet the requirements of Code Sections 401(a)(4) and 410(b).
(ii) The group of plans that are permitted to be aggregated (the
"permissive aggregation group") includes the required aggregation
group plus one or more plans of the Employer that is not part
of the required aggregation group and that the Plan Administrator
certifies as constituting a plan within the permissive aggregation
group. Such plan or plans may be added to the permissive
aggregation group only if, after the addition, the aggregation group
as a whole continues not to discriminate as to contributions or
benefits in favor of officers, shareholders or the highly
compensated and to meet the minimum participation standards under the
Code.
(e) "Top-heavy group" shall mean the aggregation group, if as of the
applicable determination date, the sum of the present value of the
cumulative accrued benefits for "key employees" under all defined
benefit plans included in the aggregation group plus the aggregate of
the accounts of "key employees" under all defined contribution plans
included in the aggregation group exceeds 60 percent of the sum of the
present value of the cumulative accrued benefits for all employees,
excluding former "key employees," under all such defined benefit plans
plus the aggregate accounts for all employees, under such defined
contribution plans. If the aggregation group that is a top-heavy group
is a required aggregation group, each plan in the group will be
top-heavy. If the aggregation group that is a top-heavy group is a
permissive aggregation group, only those plans that are part of the
required aggregation group will be treated as top-heavy. If the
aggregation group is not a top-heavy group, no plan within such group
will be top-heavy.
(f) In determining whether this Plan constitutes a "top-heavy plan", the
Plan Administrator shall make the following adjustments in connection
therewith:
(i) When more than one plan is aggregated, the Plan Administrator shall
determine separately for each plan as of each plan's determination
date the present value of the accrued benefits or account balance.
The results shall then be aggregated by adding the results of each
plan as of the determination dates for such plans that fall within
the same calendar year.
(ii) In determining the present value of the Accrued Benefit or the
amount of the account of any Employee, such present value or account
shall include the dollar value of the aggregate distributions made
to such Employee under the applicable plan during the five-year
period ending on the determination date, unless reflected in the
value of the accrued benefit or account balance as of the most
recent valuation date. Such amounts shall include distributions to
Employees which represented the entire amount credited to their
accounts under the applicable plan.
(iii) Further, in making such determination, such present value or such
account shall include any rollover contribution (or similar
transfer), as follows:
(A) If the rollover contribution (or similar transfer) is initiated
by the Employee and made to or from a plan maintained by another
employer the plan providing the distribution shall include
such distribution in the value of such account; the plan
accepting the distribution shall not include such distribution
in the value of such account unless the plan accepted it before
December 31, 1983.
(B) If the rollover contribution (or similar transfer) is not
initiated by the Employee or made from a plan maintained by
another employer the plan accepting the distribution shall
include such distribution in the present value or such account,
whether the plan accepted the distribution before or after
December 31, 1983; the plan making the distribution shall not
include the distribution in the present value or such account.
(iv) Further, in making such determination, in any case where an
individual is a "non-key employee" (as defined in Section 16.7) with
respect to an applicable plan, but was a "key employee" with respect
to such plan for any prior plan year, any Accrued Benefit and any
account of such Employee shall be altogether disregarded. For this
purpose, to the extent that a key employee is deemed to be a "key
employee" if he met the definition thereof within any of the
four preceding plan years, this provision shall apply following the
end of such period of time.
(v) Further, in making such determination, the accrued benefit of an
Employee other than a key employee shall be determined under (A) the
method, if any, that uniformly applies for accrual purposes under
all plans maintained by the Employer and its Affiliates, or (B) if
there is no such method, as if such benefit accrued not more rapidly
than the slowest accrual rate permitted under the fractional accrual
rule of Code Section 411(b)(1)(C).
16.6 Key Employee. The term "key employee" shall mean any Employee or former
Employee under this plan who, at any time during the Plan Year containing the
determination date or during any of the four preceding Plan Years, is or was one
of the following:
(a) An officer of the Employer having annual compensation for such Plan Year
greater than 50 percent of the defined benefit dollar limit in effect
under Code Section 415(b)(1)(A). Whether an individual is an officer
shall be determined by the Plan Administrator on the basis of all
the facts and circumstances, such as an individual's authority, duties
and term of office, and not on the mere fact that the individual has the
title of an officer. For any such Plan Year, there shall be treated as
officers no more than the lesser of:
(i) 50 employees, or
(ii) the greater of three employees or 10% of the employees.
(b) One of the ten Employees owning (or considered as owning, within the
meaning of the constructive ownership rules of the Code) the largest
interests in the Employer. However, an Employee will not be considered
a top ten owner for a Plan Year if the Employee earns less than
the maximum dollar limitation under Code Section 415(c)(1)(A).
(c) Any person who owns (or is considered as owning within the meaning of
the constructive ownership rules of the Code) more than five percent of
the outstanding stock of the Employer or stock possessing more than five
percent of the combined total voting power of all stock of the Employer.
(d) Any person having annual compensation from the Employer of more than
$150,000 and possessing more than one percent of the stock of the
Employer or stock possessing more than one percent of the combined total
voting power of all stock of the Employer.
For purposes of this Section 16.6, "compensation" shall mean all items
includable as compensation for purposes of applying the limitations,
contributions and other annual additions to a Member's account in a defined
contribution plan under the Code, and a beneficiary of a "key employee" shall be
treated as a "key employee". An individual who has not performed services
for the Employer or any of its Affiliated Company during the five-year period
ending on a particular "determination date", however, shall not be considered a
"key employee".
16.7 Non-Key Employee. The term "non-key employee" shall mean any Employee (and
any beneficiary of an Employee) who is not a "key employee". An individual who
has not performed services for the Employer or any of its Affiliated Company
during the five-year period ending on a particular "determination date",
however, shall not be considered a "non-key employee".
IN WITNESS WHEREOF, Chittenden Corporation has caused this instrument to be
executed by its officers duly authorized and its corporate seal to be hereunto
affixed as of the 1st day of August, 1997.
CHITTENDEN CORPORATION
By: S/F. SHELDON PRENTICE
---------------------
Senior Vice President,
General Counsel and Secretary
ATTEST:
(CORPORATE SEAL)
CHITTENDEN PENSION ACCOUNT PLAN
APPENDIX A SERVICE AND BENEFITS FOR
EMPLOYEES OF ACQUIRED COMPANIES
Service Commencement Date
Earliest Possible Service Date:
------------------------------------------------
Former Company Eligibility Service Benefit Service
-------------- ------------------- ---------------
Swanton Savings Bank &
Trust Company July 1, 1947 July 1, 1947
Orleans Trust Company October 11, 1954 October 11, 1954
Valley Savings Bank &
Trust Company November 1, 1954 November 1, 1954
National Bank of Newport November 1, 1955 November 1, 1955
Addison County Trust Last hire date prior to Last hire date prior
Company March 26, 1960 to March 26, 1960
National Bank of Last hire date prior to Last hire date prior
Vergennes June 30, 1962 to June 30, 1962
Capital Savings Bank & Last hire date prior to Last hire date prior
Trust Company October 1, 1962 to October 1, 1962
First National Bank of Last hire date prior to Last hire date prior
Montpelier February 21, 1963 to February 21, 1963
County National Bank of Last hire date prior to Last hire date prior
Bennington September 1, 1973 to September 1, 1973
Mountain Trust Company Last hire date prior to March 20, 1981
January 1, 1983
Rutland Savings Bank See Section 2.3 See Section 2.4
Electronic Data Systems
Corporation See Section 2.3 See Section 2.4
Bellows Falls Trust See Section 2.3 See Section 2.4
Company
Bank of Western
Massachusetts See Section 2.3 See Section 2.4
Flagship Bank and Trust
Company See Section 2.3 See Section 2.4
CHITTENDEN PENSION ACCOUNT PLAN
APPENDIX B SPECIAL BENEFIT PROVISIONS
FOR EMPLOYEES WHO WERE ENTITLED TO BENEFITS UNDER
THE BELLOWS FALLS TRUST COMPANY PENSION PLAN AS OF JUNE 30, 1993
Subject to the applicable provisions of this Plan, Employees who were entitled
to benefits under the Bellows Falls Trust Company Pension Plan (the "Bellows
Plan") shall be subject to the following provisions. These provisions shall be
applicable only with respect to the portion of the Employee's Accrued Benefit
attributable to the benefit he accrued under the Bellows Plan as of June 30,
1993.
1. Early Retirement
Subject to the provisions of Article V, if payment of a Member s retirement
income commences prior to the Member s Normal Retirement Date, the amount of
such retirement income shall be reduced by 5/9 of 1% for each of the first 60
months by which his Annuity Starting Date precedes his Normal Retirement Date
and by 5/18 of 1% for each additional month by which his Annuity Starting
Date precedes his Normal Retirement Date.
2. Payment of Retirement Benefits
(a) Subject to the provisions of Article X, a Member who was a Member of the
Bellows Plan and entitled to a benefit thereunder as in effect on June
30, 1993, may elect, by submitting an election form to the Plan
Administrator, to receive a reduced benefit payable during his life
with the provision that after his death, 50%, 66 or 100% of such reduced
retirement income will be payable to his Spouse during the remaining life
of such Spouse.
(b) Subject to the provisions of Article X, a Member who was a Member of the
Bellows Plan and entitled to a benefit thereunder as in effect on June
30, 1993, may elect, by submitting an election form to the Plan
Administrator, to receive a reduced benefit during his lifetime with a
provision that if he dies after his Normal Retirement Date or after
commencement of his benefit payments but prior to receiving 60 monthly
retirement benefit payments, the balance of such 60 monthly retirement
benefit payments shall be paid to his Beneficiary either by continuing
the same monthly payments or by commuting to a single lump sum, as
elected by the Beneficiary. If the designated Beneficiary should die
before the guaranteed total of 60 monthly payments are made, any
remaining payments shall be commuted to an Actuarial Equivalent single
sum and paid to the Beneficiary's estate.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 93904
<INT-BEARING-DEPOSITS> 100
<FED-FUNDS-SOLD> 67740
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 343877
<INVESTMENTS-CARRYING> 22680
<INVESTMENTS-MARKET> 22296
<LOANS> 1410504
<ALLOWANCE> (26227)
<TOTAL-ASSETS> 2011487
<DEPOSITS> 1736330
<SHORT-TERM> 70150
<LIABILITIES-OTHER> 33480
<LONG-TERM> 3225
0
0
<COMMON> 12716
<OTHER-SE> 155586
<TOTAL-LIABILITIES-AND-EQUITY> 2011487
<INTEREST-LOAN> 92632
<INTEREST-INVEST> 17949
<INTEREST-OTHER> 1293
<INTEREST-TOTAL> 111874
<INTEREST-DEPOSIT> 42204
<INTEREST-EXPENSE> 44221
<INTEREST-INCOME-NET> 67653
<LOAN-LOSSES> 3038
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 52076
<INCOME-PRETAX> 33296
<INCOME-PRE-EXTRAORDINARY> 33296
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21937
<EPS-PRIMARY> 1.79
<EPS-DILUTED> 1.79
<YIELD-ACTUAL> 5.01
<LOANS-NON> 7206
<LOANS-PAST> 2847
<LOANS-TROUBLED> 795
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 28096
<CHARGE-OFFS> 6387
<RECOVERIES> 1480
<ALLOWANCE-CLOSE> 26227
<ALLOWANCE-DOMESTIC> 26227
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
