SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): SEPTEMBER 1, 1998
TOTAL-TEL USA COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-2180 22-1656895
(Commission (I.R.S. Employer
File Number) Identification Number)
OVERLOOK AT GREAT NOTCH
150 CLOVE ROAD
BOX 449
LITTLE FALLS, NEW JERSEY 07054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 812-1100
NONE
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
ANDERSON LITIGATION
On March 31, 1998, pursuant to the New Jersey anti-takeover statute
and after due consultation with counsel and a prominent investment
banking firm, the Board of Directors of Total-Tel USA Communications,
Inc. ("Total-Tel" or the "Company") adopted a Shareholder Rights Plan.
This measure was taken shortly after one of Total-Tel's officers and
directors declined a private offer from an individual investor named
Walter Anderson to purchase sufficient shares to give Mr. Anderson
control of the company. Through a foreign entity called Gold & Appel
Transfer, S.A. ("G&A"), Mr. Anderson had already acquired almost 30% of
the outstanding common shares of Total-Tel as of March 1998. These
purchases were made both in public transactions at prices quoted on
NASDAQ, and in privately negotiated transactions in which G&A paid
premiums of between 24% and 80% over the then-current market value. The
fundamental purpose of the Shareholder Rights Plan was to protect all
Total-Tel shareholders from hostile two-tiered tender offers which did
not recognize the inherent long run value of the Company.
In response to the adoption of the Shareholder Rights Plan, and
certain bylaw amendments adopted on April 7, 1998, G&A filed a lawsuit
seeking to enjoin the Shareholder Rights Plan and the bylaw amendments.
On April 13, 1998, the Superior Court of New Jersey, Chancery Division,
entered an order preserving the status quo pending completion of
expedited discovery and additional briefing on G&A's motion for
preliminary injunction. After a preliminary injunction hearing on May
20, 1998, the Court on June 2 continued the earlier status quo order and
specifically ordered Mr. Anderson and G&A not to "purchase or acquire,
directly or indirectly, any stock of Total-Tel's" pending a trial on the
merits.
Barely a week after entry of the Court's June 2 Order, G&A
transferred all but 100 shares of its Total-Tel Stock to a newly created
entity, Revision LLC, in return for which G&A received 100% of the non-
voting membership interests in Revision. G&A transferred its remaining
100 shares of Total-Tel common stock to Mr. Anderson for no
consideration. Mr. Anderson is the sole manager and has 100% of the
voting membership interests in Revision LLC. At a hearing on July 24,
the Court ordered that Revision LLC be added as a plaintiff, but denied
G&A's request to be removed from the case. The Court not only continued
the restraints against Mr. Anderson and G&A, but also prohibited Revision
from directly or indirectly purchasing or acquiring additional Total-Tel
shares.
On August 7, 1998, Total-Tel requested the Court to determine
whether Walter Anderson and G&A had intentionally violated the Court's
orders by continuing to purchase Total-Tel stock through Mr. Anderson's
longtime friend and close business associate, Thomas J. Cirrito. Mr.
Anderson and Mr. Cirrito have had common investments in several other
telecommunications companies, and Mr. Anderson has identified Mr. Cirrito
as someone who would represent him on Total-Tel's Board of Directors in
the event of a change of control. Through discovery, Total-Tel has
learned that Mr. Anderson and Mr. Cirrito discussed Mr. Anderson's plans
to obtain control of Total-Tel before Mr. Anderson filed suit against the
Company, that Messrs. Anderson and Cirrito discussed placing Mr. Cirrito
on Total-Tel's Board of Directors, that Mr. Cirrito began to acquire
additional Total-Tel shares only after Mr. Anderson was effectively
foreclosed from doing so by the Shareholder Rights Plan, that Mr.
Anderson informed Mr. Cirrito that a large block of Total-Tel stock was
becoming available so that Mr. Cirrito could purchase that block, and
that Mr. Cirrito has acquired more than 500,000 shares since the Court's
orders were entered. In response to Total-Tel's request, the Court
recently scheduled a hearing for September 28, 1998, to determine whether
Mr. Anderson and G&A should be held in contempt of court. The Court also
ordered Mr. Anderson to appear in person at the hearing.
ELECTION OF DIRECTORS
On August 20, 1998, the Board of Directors of Total-Tel USA
Communications, Inc. (the "Company") appointed two new directors, Joseph
A. Kelley and Brad W. Berger. Since 1984, Mr. Kelley has been Vice
President of Corporate Development for Career Blazers, Inc., the parent
corporation of several specialty and commercial staffing and training
companies. Mr. Berger is currently Executive Vice President and a
principal of RMC Development Company LLC, a Westchester County, New York,
based real estate developer. He is also Director of Business Development
for the New Jersey-based Mack-Cali Realty Corporation ("Mack-Cali"), one
of the largest REITs in the United States.
COMMITTEES
At the August 20, 1998 Board meeting, the Company appointed new
members to the committees of the Board of Directors. The Compensation
Committee is now comprised of Leon Genet, Jay Miller, Brad Berger, and
Warren Feldman. The Compensation Committee is charged with reviewing and
recommending the compensation and benefits payable to the Company's
senior executives. The Audit Committee is now comprised of Joseph Kelley
and Brad Berger. The Audit Committee reviews, analyzes, and may make
recommendations to the Board of Directors with respect to the Company's
financial statements and controls. In that context, the Board of
Directors has forwarded to the Audit Committee correspondence received by
it from counsel to Revision LLC which requested an independent
investigation of certain actions of officers and directors of the
Company. Copies of such correspondence were previously filed with the
Securities Exchange Commission by Revision with its Schedule 13D reports.
The Audit Committee, consisting of two newly-elected and disinterested
directors, is currently reviewing Revision's requests.
ESOP
On September 1, 1998, the Company established the Total Tel USA
Communications, Inc. Employee Stock Option Plan ("ESOP"). The purpose of
the ESOP is to permit participating employees to share in the growth and
prosperity of the Company through commitment and dedication to the
Company. Concurrently with the establishment of the ESOP, the Company
contributed 600,000 shares of its Common Stock to the Plan, which is
administered through a trust (the "Trust") by Summit Bank, as trustee
(the "Trustee"). The Trustee was designated by the Board of Directors.
Subsequent contributions to the ESOP will be determined in the sole
and absolute discretion of the Board of Directors based upon, among other
things, the financial performance of the Company. The Trust will hold
all investments for the ESOP as directed by a committee appointed by the
Board of Directors (the "ESOP Committee"). The initial members of the
ESOP Committee is the Board of Directors. However, until the resolution
of the litigation described in "Anderson Litigation" above, neither
Solomon Feldman nor Warren Feldman will participate on such Committee.
Each employee of the Company who completes 1,000 or more hours of
service within a 12-month period of employment with the Company, and is
21 years of age or greater, is eligible to participate in the ESOP. On
the last day of each Plan year, the contributions for such year will be
allocated, subject to the limitations on allocations contained in the
ESOP and under applicable law, among the eligible participants in the
proportion that each participant's compensation for that year bears to
the compensation of all eligible participants, with each individual
participant's allocation credited to his individual account.
The Trustee generally shall vote shares of Common Stock held under
the ESOP in accordance with the written instructions of the ESOP
Committee, but subject to its fiduciary duties. To the extent that
shares of Common Stock under the ESOP have been allocated to individual
participants' accounts, the Trustee will vote such shares in accordance
with the participants' written instructions. The Trustee will vote any
unallocated shares of Common Stock in the Trust, or any allocated Common
Stock as to which instructions have not been received, in such manner
as shall be directed by the ESOP Committee.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired
Not applicable
(b) Pro forma financial information
Not applicable
(c) Exhibits
10(a) Total-Tel USA Communications, Inc. Employee Stock
Ownership Trust Agreement.
10(b) Total-Tel USA Communications, Inc. Employee Stock
Ownership Plan.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
TOTAL-TEL USA COMMUNICATIONS, INC.
Dated: September 1, 1998 By: /S/ WARREN H. FELDMAN
Warren H. Feldman, President
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EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE NO.
10(a) Total-Tel USA Communications, Inc. Employee Stock
Ownership Trust Agreement.
10(b) Total-Tel USA Communications, Inc. Employee Stock
Ownership Plan.
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TOTAL-TEL USA COMMUNICATIONS, INC.
EMPLOYEE STOCK OWNERSHIP
TRUST AGREEMENT
<PAGE>
CONTENTS
PARAGRAPH PAGE
A. The Trust Assets<elliipsis><ellipsis><ellipsis><ellipsis> 1
B. Investment<ellipsis><ellipsis><ellipsis><ellipsis> 2
C. Trustee's Powers<ellipsis><ellipsis><ellipsis><ellipsis> 4
D. Voting Company Stock<ellipsis><ellipsis><ellipsis> 8
E. Nominees<ellipsis><ellipsis><ellipsis><ellipsis><ellipsis> 8
F. Records<ellipsis><ellipsis><ellipsis><ellipsis><ellipsis> 8
G. Reports<ellipsis><ellipsis><ellipsis><ellipsis><ellipsis> 8
H. Distributions<ellipsis><ellipsis><ellipsis><ellipsis> 9
I. Signatures<ellipsis><ellipsis><ellipsis><ellipsis><ellipsis>11
J. Expenses<ellipsis><ellipsis><ellipsis><ellipsis><ellipsis> 11
K. Liability of Trustee<ellipsis><ellipsis><ellipsis><ellipsis> 12
L. Amendment and Termination<ellipsis><ellipsis><ellipsis> 13
M. Irrevocability<ellipsis><ellipsis><ellipsis><ellipsis> 13
N. Resignation or Removal of Trustee<ellipsis><ellipsis> 14
O. Definitions<ellipsis><ellipsis><ellipsis><ellipsis> 15
P. Miscellaneous<ellipsis><ellipsis><ellipsis><ellipsis> 16
Q. Acceptance<ellipsis><ellipsis><ellipsis><ellipsis> 17
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TOTAL-TEL USA COMMUNICATIONS, INC.
EMPLOYEE STOCK OWNERSHIP TRUST AGREEMENT
THIS AGREEMENT, between Total-Tel USA Communications, Inc.,
hereinafter referred to as "Company", and Summit Bank, hereinafter referred
to as "Trustee," is effective as of September 1, 1998.
WITNESSETH:
WHEREAS, it is the policy of the Company to so finance and conduct its
operations as to enable its employees and the employees of any
participating affiliates to acquire through an Employee Stock Ownership
Plan equity ownership in the Company; and
WHEREAS, the Company has adopted the "Total-Tel USA Communications,
Inc. Employee Stock Ownership Plan," effective as of September 1, 1998
(hereinafter referred to as the "Plan"); and
WHEREAS, the Company has designated the Plan and this Trust as
constituting part of a plan intended to qualify under Section 401(a) of the
Internal Revenue Code (hereinafter referred to as the "Code");
NOW, THEREFORE, the parties hereto do hereby establish the Total-Tel
USA Communications, Inc. Employee Stock Ownership Trust and agree the
following shall constitute the Trust Agreement:
A. THE TRUST ASSETS.
(1) Employer Contributions shall be paid to the Trustee, from
time to time, in accordance with the Plan. All Employer Contributions
hereinafter made and all investments thereof together with all
accumulations, accruals, earnings, and income with respect thereto shall be
held by the Trustee in trust hereunder as the Trust Assets. The Trust
Assets shall be received by the Trustee and invested pursuant to written
instructions to the Trustee from the Committee. The Trustee shall not be
responsible for the administration of the Plan, maintaining any records of
Participants' Accounts under the Plan, or the computation of or collection
of Employer Contributions, but shall hold, invest, reinvest, manage,
administer, and distribute the Trust Assets as provided herein for the
exclusive benefit of Participants, retired Participants, and their
Beneficiaries.
(2) Unless otherwise directed by the Company or the Committee
provided in the Plan (hereinafter referred to as the "Committee"), the
Trustee shall hold, invest, and administer the Trust Assets as a single
fund without identification of any part of the Trust Assets with or
allocation of any part of the Trust Assets to the Company or to any
affiliate of the Company designated by it as a participating Employer under
the Plan or to any Participant or group of Participants of the Company or
of any such affiliate or their Beneficiaries.
B. INVESTMENT.
(1) As directed by the Committee, the Trustee may invest and
reinvest the Trust Assets without distinction between principal and income
in the Company Stock in accordance with the terms of the Plan and this
Agreement. The Trustee may also, as directed by the Committee, invest
funds in savings accounts, certificates of deposit, securities, or other
equity stocks or bonds or in any other kind of real or personal property,
including interests in oil or other depletable natural resources, options,
puts, calls, futures contracts, and commodities; or such funds may be held
in non-interest-bearing bank accounts, as necessary, on a temporary basis.
(2) The Plan assets shall be invested and controlled by the
Committee; provided, however, that the actual management of Trust
investments, other than Company Stock, may be delegated to the Trustee or
may be delegated to one or more investment managers appointed by the
Committee. Investments directed by the Committee shall not be in conflict
with the "Prohibited Transactions" provisions of the Code (as currently
defined and as hereinafter amended). The Trustee shall purchase or sell
such shares of Company Stock, including shares of stock of any
classification issued by any subsidiary or affiliate of the Company,
pursuant to direction from the Committee. The Trustee shall, subject to
the limitations hereinafter set forth, be under a duty to comply with any
such direction when given, but shall have no responsibility whatsoever in
connection with any such purchase, retention or sale, other than compliance
with such direction.
(3) If the Trustee invests any part of the Trust Assets,
pursuant to the directions of the Committee, in any securities issued or
guaranteed by the Company or any subsidiary or affiliate of the Company,
and the Committee thereafter directs the Trustee to dispose of such
investment, or any part thereof, under circumstances which, in the opinion
of counsel for the Company require registration of the securities under the
Securities Act of 1933, as amended, and/or qualification of the securities
under the Blue Sky laws of any state or states, then the Company, at its
own expense, will take or cause to be taken any and all such action as may
be necessary or appropriate to effect such registration and/or
qualification.
C. TRUSTEE'S POWERS.
In addition to the powers provided at law, the Trustee shall have
the power:
(1) to receive and to hold all contributions paid to it under
the Plan; provided, however, that the Trustee shall have no duty to require
any contributions to be made to it, or to determine that the contributions
received by it comply with the provisions of the Plan or with any
resolution of the Board of Directors providing therefor;
(2) to retain in cash (pending investment, reinvestment, or the
payment of dividends) such reasonable amounts as may be required for the
proper administration of the Trust;
(3) to make payments from the Trust Fund to such persons, in
such manner, at such times, and in such amounts as the Committee shall
direct without inquiring as to whether a payee is entitled to the payment,
or as to whether a payment is proper, and without liability for a payment
made in good faith without actual notice or knowledge of the changed
condition or status of the payee;
(4) as directed by the Committee, to borrow from any lender
(including the Employer) to finance the acquisition of Company Stock,
giving its note as Trustee, with such reasonable interest and security
(which shall only consist of Company Stock to the extent that proceeds of
the loan are used to purchase Company Stock or to refinance a prior
Acquisition Loan) for the loan as may be appropriate or necessary,
provided, that such borrowing shall comply with the applicable provisions
of the Plan;
(5) as directed by the Committee, except as provided in Section
9 of the Plan, to vote any stocks, bonds, or other securities held in the
Trust or otherwise consent to or request any action on the part of the
issuer in person or by proxy;
(6) as directed by the Committee, to deposit securities in any
voting trust, or with any protective or like committee, or with a trustee
or with depositories designated thereby;
(7) as directed by the Committee, to contract or otherwise enter
into transactions between itself, as Trustee, and the Company or any
Employer shareholder, for the purpose of acquiring or selling Company Stock
and, absent any direction by the Committee, shall retain such Company
Stock;
(8) as directed by the Committee, to compromise, contest,
arbitrate, settle, or abandon claims and demands;
(9) as directed by the Committee, to begin, maintain, or defend
any litigation necessary in connection with the investment, reinvestment,
and administration of the Trust;
(10) to retain any funds or property subject to any dispute
without liability for the payment of interest, or to decline to make
payment or delivery thereof until final adjudication is made by a court of
competent jurisdiction;
(11) to report to the Committee and the Employer as of the last
day of each Plan Year, as of any Anniversary Date (or as soon thereafter as
practicable), or at such other times as may be required under the Plan, the
then "Net Worth" of the Trust Fund, that is, the fair market value of all
property held in the Trust Fund, reduced by any liabilities, other than
liabilities to Participants in the Plan and their Beneficiaries, as
determined by the Trustee;
(12) to furnish to the Committee and the Employers an annual
written account and accounts for such other periods as may be required
under the Plan, showing the Net Worth of the Trust Fund at the end of the
period, all investments, receipts, disbursements, and other transactions
made by the Trustee during the accounting period, and such other
information as the Trustee may possess which the Committee or the Employer
require to comply with Section 103 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). All accounts of the Trustee
shall be kept on an accrual basis. If, during the term of this Trust
Agreement, the Department of Labor issues regulations under ERISA regarding
the valuation of securities or other assets for purposes of the reports
required by ERISA, the Trustee shall use such valuation methods for
purposes of the accounts described by this subparagraph. All valuations of
shares of Company Stock, which are not publicly traded on a national
securities market or exchange, shall be made by an "Independent Appraiser"
(as described in section 401(a)(28) of the Code);
(13) to pay any estate, inheritance, income, or other tax,
charge, or assessment attributable to any benefit which, as directed by the
Committee, it shall or may be required to pay out of such benefit; and to
require before making any payment such release or other document from any
taxing authority and such indemnity from the intended payee as the Trustee
shall deem necessary for its protection;
(14) to employ agents, attorneys, actuaries, accountants, or
other persons (who also may be employed by or may represent any Employer)
for such purposes as the Trustee considers desirable;
(15) to assume, until advised to the contrary, that the Trust
evidenced by this Trust Agreement is qualified under section 401(a) of the
Code and is entitled to tax exemption under section 501(a) thereof;
(16) to have the authority to invest and reinvest the assets of
the Trust Fund in real or personal property of any kind, except that assets
attributable to Employer contributions shall, at such time or times as
directed by the Committee, primarily be invested in Company Stock; and
(17) to perform any and all other acts in its judgment necessary
or appropriate for the proper and advantageous management, investment, and
distribution of the Trust Fund.
D. VOTING COMPANY STOCK.
Company Stock held in the Trust Fund shall be voted by the
Trustee in the manner set forth in Section 9 of the Plan.
E. NOMINEES.
The Trustee may register any securities or other property held by
it hereunder in its own name or in the name of its nominees with or without
the addition of words indicating that such securities are held in a
fiduciary capacity, and may hold any securities in bearer form, but the
books and records of the Trustee shall at all times show that all such
investments are part of the Trust.
F. RECORDS.
The Trustee shall keep accurate and detailed accounts of all
investments, receipts, and disbursements and other transactions hereunder,
and all accounts, books, and records relating thereto shall be open to
inspection by any person designated by the Committee or the Company at all
reasonable times. The Trustee shall maintain such records, make such
computations (except as concerns Employer and Employee Contributions), and
perform such ministerial acts as the Committee may, from time to time,
request.
G. REPORTS.
(1) Within sixty (60) days after the end of each taxable year of
the Company, or the removal or resignation of the Trustee, and as of any
other date specified by the Committee, the Trustee shall file a report with
the Committee. This report shall show for each participating Employer all
purchases, sales, receipts, disbursements, and other transactions effected
by the Trustee during the year or period for which the report is filed, and
shall contain an exact description, the cost as shown on the Trustee's
books, and the market value as of the end of such period of every item of
every item held in the Trust and the amount and nature of every obligation
owed by the Trust.
(2) The Trustee may rely without liability upon the valuation of
Company Stock as determined by an Independent Appraiser. The value placed
upon such property by an Independent Appraiser shall be conclusive and
binding upon all parties with an interest herein.
H. DISTRIBUTIONS.
(1) The Trustee shall make the distributions from the Trust at
such times and in such number of shares of Company Stock and amounts of
cash to or for the benefit of the persons entitled thereto under the Plan
as the Committee directs in writing. Any undistributed part of a
Participant's Plan Benefit shall be retained in the Trust until the
Committee directs its distribution. Any portion of a Participant's Plan
Benefit to be distributed in cash shall be paid by the Trustee, mailing its
check to the person entitled to receive the distribution at that person's
address of record. If a dispute arises to who is entitled to or should
receive any benefit or payment, the Trustee may withhold or cause to be
withheld such payment until the dispute has been resolved.
(2) As directed by the Committee, the Trustee shall make
payments out of the Trust Assets. Such directions or instructions need not
specify the purpose of the payments so directed, and the Trustee shall not
be responsible in any way respecting the purpose or propriety of such
payments.
(3) No distribution or payment under this Agreement to any
Participant or the Participant's Beneficiary under the Plan shall be
subject in any manner to anticipation, sale, transfer, assignment, or
encumbrance, whether voluntary or involuntary, and no attempt so to
anticipate, sell, transfer, assign, or encumber the same shall be valid or
recognized by the Trustee, nor shall any such distribution payment be in
any way liable for, or subject to, the debts, contracts, liabilities, or
torts of any person entitled to such distribution or payment, except to
such an extent as may be ordered under a Qualified Domestic Relations
Order. If the Trustee is notified by the Committee that any such
Participant or Beneficiary has been adjudicated bankrupt or has purported
to anticipate, sell, transfer, assign, or encumber any such distribution or
payment, voluntarily or involuntarily, the Trustee shall if so directed by
the Committee, hold or apply such distribution payment or any part thereof
to or for the benefit of such Participant or Beneficiary in such manner as
the Committee shall direct.
(4) If any distribution or payment directed by the Committee
shall be mailed by the Trustee to the person specified in such direction at
the latest address of such person filed with the Committee, and shall be
returned to the Trustee because such person cannot be located at such
address, the Trustee shall promptly notify the Committee of such return.
Upon the expiration of sixty (60) days after such notification, such
direction shall become void, and unless and until a further direction by
the Committee is received by the Trustee with respect to such distribution
or payment, the Trustee shall thereafter continue to administer the Trust
as if such direction had not been made by the Committee. The Trustee shall
not be obligated to search for or ascertain the whereabouts of any such
person.
(5) The Trustee shall have the primary responsibility for the
withholding of income taxes from Plan distributions, for the payment of
withheld income taxes on Plan distributions to the Internal Revenue
Service, and for notification to Participants of their right to elect not
to have income tax withheld from Plan distributions.
I. SIGNATURES.
All communications required hereunder from the Company or the
Committee to the Trustee shall be in writing, signed by an officer of the
Company or a person authorized by the Committee to sign on its behalf. The
Committee shall authorize one or more individuals to sign, on its behalf,
all communications required hereunder between the Committee and the
Trustee. The Company and the Committee shall at all times keep the Trustee
advised of the names and specimen signatures of all members of the
Committee and the individuals authorized to sign on behalf of the
Committee. The Trustee shall be fully protected in relying on any such
communication and shall not be required to verify the accuracy or validity
thereof, unless it has reasonable grounds to doubt the authenticity of any
signature. If after request the Trustee does not receive instructions from
the Committee on any matter in which instructions are required hereunder,
subject to the provisions of Paragraph D hereof, the Trustee shall act or
refrain from acting as it may determine. All communications required
hereunder from the Trustee shall be in writing, signed by the Trustee.
J. EXPENSES.
The Trustee and the Committee may employ suitable agents and
counsel, who may be counsel for the Company. The Company shall pay all
expenses in connection with the design, establishment, or termination of
the Plan. The Trust shall pay all costs of administering the Plan, unless
such expenses are paid by the Company. However, normal brokerage charges,
commissions, taxes, and other costs incident to the purchase and sale of
securities which are included in the cost of securities purchased, or
charged against the proceeds in the case of sales, shall be charged to and
paid out of Trust Assets. Any expenses paid by the Trust shall be
reasonable and necessary. The Plan shall not pay, directly or indirectly,
any commissions with respect to the purchase of Employer Securities. The
Trustee shall be entitled to compensation as may be agreed upon in writing,
from time to time, between the Committee and the Trustee; provided,
however, that no person (serving as fiduciary) who already receives full-
time pay from the Company shall receive any compensation from the Plan,
except for reimbursement of expenses properly and actually incurred.
K. LIABILITY OF TRUSTEE.
To the extent permitted by applicable law, the Trustee shall be
indemnified by the Company against any and all liabilities, settlements,
judgments, losses, costs, and expenses (including reasonable legal fees and
expenses) of whatever kind and nature which may be imposed on, incurred by,
or asserted against the Trustee by reason of the performance or
nonperformance of a Trustee's function if such action did not constitute
gross negligence or willful misconduct. Furthermore, the Company agrees to
indemnify the Trustee against any liability imposed as a result of a claim
asserted by any person or persons under Federal or state law where the
Trustee acts in good faith. The foregoing right of indemnification shall be
in addition to other rights of the Trustee by law or by reason of insurance
coverage of any kind. The Company may, at its own expense, and as allowed
by law, settle any claim asserted or proceeding brought against the Trustee
when such settlement appears to be in the best interests of the Company. If
the Company obtains fiduciary liability insurance to protect the Trustee,
the provisions of this paragraph shall be applicable only to the extent
that such insurance coverage is insufficient.
L. AMENDMENT AND TERMINATION.
(1) AMENDMENT.
The Company reserves the right to amend the Trust Agreement at any
time, except that no amendment shall substantially change the rights,
duties, and liabilities of the Trustee under this Trust Agreement without
its consent.
(2) TERMINATION.
If the Plan, as applied to all of the Employers, is terminated, all of
the provisions of the Trust evidenced by this Trust Agreement nevertheless
shall continue in effect until the entire Trust Fund has been distributed
by the Trustee in accordance with the provisions of the Plan. If the Plan,
as applied to any Employer, is terminated, all of the provisions of the
Trust evidenced by this Trust Agreement, as applied to that Employer,
nevertheless, shall continue in effect until the portion of the Trust Fund
attributable to employees and former employees of that Employer has been
distributed in its entirety by the Trustee in accordance with the
provisions of the Plan.
M. IRREVOCABILITY.
Subject to the provisions of Paragraph L, this Trust is declared
to be irrevocable and at no time shall any part of the Trust Assets revert
to or be recoverable by the Company or by any participating Employer or be
used for or be diverted to purposes other than for the exclusive benefit of
Participants or retired or terminated Participants and their Beneficiaries.
However, the Committee may, by notice in writing to the Trustee, direct
that all or part of the Trust Assets be transferred to a successor Trustee
or Trustees under a Trust instrument which is for the exclusive benefit of
such Participants and their Beneficiaries and meets the requirements of
Section 401(a) of the Code, and thereupon the Trust Assets, or any part
thereof, together with any outstanding loans and accrued interest
attributable thereto, shall be paid over, transferred, or assigned to said
successor Trustee or Trustees free from the Trust created hereunder;
provided, however, that no part of the Trust Assets may be used to pay
insurance policy premiums or to make contributions of the Company or of any
participating Employer under any other plan maintained by the Company or
any participating Employer for the benefit of its Employees.
N. RESIGNATION OR REMOVAL OF TRUSTEE.
(1) RESIGNATION.
The Trustee may resign at any time by giving thirty (30) days
advance written notice to the Company.
(2) REMOVAL OF THE TRUSTEE.
The Company may, at its discretion, remove a Trustee by giving
thirty (30) days advance written notice to the Trustee, subject to
providing the removed Trustee with satisfactory written evidence of the
appointment of a successor Trustee and of the successor Trustee's
acceptance of the trusteeship.
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(3) DUTIES OF RESIGNING OR REMOVED TRUSTEE AND OF SUCCESSOR TRUSTEE.
If the Trustee resigns or is removed, it shall promptly transfer
and deliver the assets of the Trust Fund to the successor Trustee, after
reserving such reasonable amount as it shall deem necessary to provide for
expenses and any sums chargeable against the Trust Fund for which it may be
liable. Within one-hundred twenty (120) days of the date of its resignation
or removal, the resigned or removed Trustee shall furnish to the Company
and the successor Trustee an account of its administration of the Trust
from the date of its last account. Each successor Trustee shall succeed to
the title to the Trust Fund vested in his predecessor without the signing
or filing of any further instrument, but any resigning or removed Trustee
shall execute all documents and do all acts necessary to vest such title or
record in any successor Trustee. Each successor shall have all the powers,
rights, and duties conferred by this Trust Agreement as if originally named
Trustee. No successor Trustee shall be personally liable for any act or
failure to act of a predecessor Trustee.
(4) FILLING TRUSTEE VACANCY.
The Company may fill a vacancy in the office of Trustee as soon
as practicable in a writing filed with the person or entity appointed to
fill the vacancy and with the other Employers.
O. DEFINITIONS.
The definitions of certain words in the Plan shall apply to this
Agreement wherever applicable. The singular or plural number shall each be
deemed to include the other whenever the context so indicates.
P. MISCELLANEOUS.
(1) DISAGREEMENT AS TO ACTS.
If there is a disagreement between the Trustee and anyone as to any
act or transaction reported in any accounting, the Trustee shall have the
right to have its account settled by a court of competent jurisdiction.
(2) PERSONS DEALING WITH TRUSTEE.
No person dealing with the Trustee shall be required to see to the
application of any money paid or property delivered to the Trustee, or to
determine whether or not the Trustee is acting pursuant to any authority
granted to it under this Trust Agreement or the Plan.
(3) EVIDENCE
Evidence required of anyone under this Trust Agreement may be by
certificate, affidavit, document, or other instrument which the person
acting in reliance thereon considers pertinent and reliable, and signed,
made, or presented by the proper party.
(4) WAIVER OF NOTICE.
Any notice required under this Trust Agreement may be waived in
writing by the person entitled thereto.
(5) COUNTERPARTS.
This Trust Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and no other
counterparts need be produced.
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(6) GOVERNING LAWS.
This Trust Agreement shall be construed and administered
according to ERISA and the internal laws of the State of New Jersey,
without regard to the conflicts of laws principles thereof, to the extent
that such laws are not preempted by the laws of the United States of
America.
(7) SUCCESSORS, ETC.
This Trust Agreement shall be binding on the Employers, the
Trustee, and their successors and on all persons entitled to benefits under
the Plan and their respective heirs and legal representatives.
(8) SUCCESSORS TO EMPLOYERS.
If provision is made for a successor to any Employer or a
purchaser of all or substantially all of any Employer's assets to continue
the Plan, such successor or purchaser shall be substituted for that
Employer under this Trust Agreement.
(9) ACTION BY EMPLOYERS.
Any action required or permitted to be taken by an Employer under
this Trust Agreement shall be by resolution of its Board of Directors or by
a person or persons authorized by resolution of its Board of Directors.
Q. ACCEPTANCE.
The Trustee hereby accepts this Trust and agrees to hold the
Trust Assets existing on the date of this Agreement and all additions and
accretions thereto, subject to all the terms and conditions of this
Agreement.
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IN WTNESS WHEREOF, the Company and the Trustee have caused this
Agreement to be executed in duplicate this 1st day of September, 1998.
TOTAL-TEL USA COMMUNICATIONS, INC.
By: /s/ Thomas P. Gunning
Name: Thomas P. Gunning
Title: Chief Financial Officer
TRUSTEE
SUMMIT BANK
By: /s/ Linda J. Ferrari
Name: Linda J. Ferrari
Title: Vice President
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TOTAL-TEL USA COMMUNICATIONS, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
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CONTENTS
Section PAGE
1. NATURE OF PLAN.................................1
2. DEFINITIONS....................................2
3. ELIGIBILITY...................................12
4. PARTICIPATION IN ALLOCATION OF BENEFITS.......13
5. EMPLOYER CONTRIBUTIONS........................14
6. INVESTMENT OF TRUST ASSETS..........................15
7. ALLOCATIONS TO ACCOUNTS.............................17
8. TREATMENT OF EXPENSES...............................19
9. VOTING COMPANY STOCK................................19
10. DISCLOSURE TO PARTICIPANTS..........................19
11. ALLOCATION OF EMPLOYER CONTRIBUTIONS
AND FORFEITURES.....................................21
12. PLAN BENEFIT AT DEATH, DISABILITY OR RETIREMENT..24
13. OTHER TERMINATION OF SERVICE AND VESTING........25
14. DISTRIBUTION OF PLAN BENEFIT................27
15. HOW PLAN BENEFIT WILL BE DISTRIBUTED.............31
16. RIGHTS AND OPTIONS ON DISTRIBUTED
SHARES OF COMPANY STOCK..........................32
17. SPECIAL PROVISIONS...............................34
18. THE COMMITTEE ...................................35
19. AMENDMENT AND TERMINATION ....................39
20. MISCELLANEOUS........................................ 40
21. TOP HEAVY PROVISIONS................................. 42
22. EXECUTION............................................ 43
2
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TOTAL-TEL USA COMMUNICATIONS, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
SECTION 1. GENERAL
(a) PURPOSE AND EFFECTIVE DATE .
Effective September 1, 1998 (the "Effective Date"), Total-Tel USA
Communications, Inc., a New Jersey corporation ("the Company"), hereby
establishes the Total-Tel USA Communications, Inc. Employee Stock
Ownership Plan (the "Plan") to enable eligible employees to acquire stock
ownership interests in the Company. The Plan is designed to invest
primarily in Company Stock (as defined in section 2) and is intended to
qualify as an Employee Stock Ownership Plan under sections 401(a), 409,
and 4975(e)(7) of the Internal Revenue Code (the "Code").
(b) TRUST AGREEMENT AND PLAN ADMINISTRATION.
All contributions made under the Plan will be held, managed, and
controlled by the trustee, or successor thereto (the "Trustee"), acting
under a trust which forms a part of the Plan. The terms of the trust are
set forth in a trust agreement known as Total-Tel USA Communications,
Inc. Employee Stock Ownership Trust (the "Trust"). The authority to
control and manage the operation and administration of the Plan is vested
in a Committee (the "Committee") appointed by the Board of Directors of
the Company. The members of the Committee shall be "named fiduciaries,"
as described in Section 402 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), with respect to their authority under
the Plan. The Committee shall be the administrator of the Plan and shall
have rights, duties, and obligations of an "administrator" as that term
is defined in section 3(16)(A) of ERISA and of a "plan administrator" as
that term is defined in section 414(g) of the Code.
(c) APPLICABLE LAWS.
The Plan shall be construed and administered according to ERISA and
the internal laws of the State of New Jersey, without regarding the
conflicts of law principles thereof to the extent that such laws are not
preempted by the laws of the United States of America.
(d) GENDER AND NUMBER.
Where the context admits, words in any gender shall include any
other gender, words in the singular shall include the plural, and the
plural shall include the singular.
(e) NO REVERSION TO EMPLOYERS.
No part of the corpus or income of the Trust Fund shall revert to
any Employer or be used for, or diverted to, purposes other than for the
exclusive benefit of Participants and other persons entitled to benefits
under the Plan, except as specifically provided in the Trust Agreement.
SECTION 2. DEFINITIONS
In this Plan, whenever the context so indicates, the singular or
plural number shall each be deemed to include the other, and the
capitalized words shall have the following meanings:
ACCOUNT
One of several Accounts maintained to record the interest of a
Participant in the Plan.
AFFILIATED COMPANY
Any Company which is a member of a controlled group of corporations
(as defined in Section 414(b) of the Code) which includes the Employer,
any trade or business (whether or not incorporated) which is under common
control (as defined in Section 414(c) of the Code) with the Employer, any
affiliated service group which includes the Employer (as defined in
Section 414(m) of the Code), and any other entity required to be
aggregated with the Employer under Section 414(o) of the Code.
ALTERNATE PAYEE
A spouse, former spouse, child, or other dependent of a Participant
who is recognized by a Domestic Relations Order as having a right to
receive all or a portion of the benefits otherwise payable to a
Participant.
ANNIVERSARY DATE
The 31{st} day of December of each year.
ANNUAL ADDITIONS
The aggregate of amounts credited to a Participant's Accounts each
year from Employer Contributions, Forfeitures, and a Participant's
voluntary contributions (if any) under all defined contribution plans of
an Employer or Affiliated Company; provided, however, that Employer
Contributions applied to the payment of interest on a Securities
Acquisition Loan and Forfeitures of Employer Securities purchased with
the proceeds of a Securities Acquisition Loan shall be excluded if no
more than one third (1/3) of the Employer Contribution deductible under
Section 404(a)(9) of the Code for that year is allocated to the Accounts
of Highly Compensated Employees. Amounts allocated to an individual
medical account (as defined in Section 415(l)(2) of the Code) which is
part of a pension or annuity plan maintained by the Company shall be
treated as an Annual Addition. Any amounts attributable to postretirement
medical benefits allocated to the separate account of a Key Employee (as
defined in Section 419A(d)(3) of the Code) under any Welfare Benefit Plan
(as defined in Section 419(e) of the Code) shall be treated as an Annual
Addition. A restored Forfeiture, a transfer from another qualified
pension plan and a rollover contribution (if any) shall not be counted as
an Annual Addition.
BENEFICIARY
The person or persons entitled to receive any benefits under the
Plan in the event of a Participant's death.
BOARD OF DIRECTORS
The board of directors of the Company.
BREAK IN SERVICE
A Plan Year during which a Participant has not completed more than
500 Hours of Service; provided, however, that for purposes of Section 3
of the Plan, the Eligibility Computation Period will be used to measure
Breaks in Service.
CODE
The Internal Revenue Code of 1986, as amended from time to time.
COMMITTEE
The Committee appointed by the Board of Directors to administer the
Plan and to give instructions to the Trustee.
COMPANY
Total-Tel USA Communications, Inc., a New Jersey corporation.
COMPANY STOCK
Shares of any class of stock, preferred or common, voting or
nonvoting, which are issued by the Company or by any affiliate of the
Company, as defined in Section 407(d) of ERISA, including Employer
Securities and Qualified Employer Securities.
COMPANY STOCK ACCOUNT
The Account of a Participant which is credited with the shares of
Company Stock purchased and paid for by the Trust or contributed to the
Trust.
CONTRIBUTIONS
Employer contributions which are deductible by an Employer under
Section 404(a) of the Code.
COVERED COMPENSATION
The Total Compensation paid to a Participant by the Employer for
each Plan Year, including any salary deferrals under Sections 401(k) and
125 of the Code, but excluding reimbursement or other expense allowances,
fringe benefits (cash and noncash), moving expenses, welfare benefits,
and deferred compensation, except deferrals under Sections 401(k) and 125
of the Code. Notwithstanding the foregoing, Covered Compensation of any
Participant taken into account in any Plan Year shall not exceed
$150,000, as adjusted by the Commissioner for increases in cost of living
in accordance with section 401(a)(17)(B) of the Code.
DEFERRED RETIREMENT
Termination of service subsequent to attainment of the Normal
Retirement Date.
DIRECT ROLLOVER
A payment by the Plan to the Eligible Retirement Plan specified by
the Distributee.
DISABILITY
If a Participant terminated employment because of a total and
permanent disability, the Participant will be given a Disability
Retirement without regard to age or length of service, and the
termination benefit shall be one hundred percent (100%) of the amounts in
all of the Participant's Accounts. "Total and permanent disability" shall
mean the Participant's entitlement to Social Security disability
benefits.
DISTRIBUTEE
Any Employee or former Employee. In addition, the Employee's or
former Employee's surviving spouse and the Employee's or former
Employee's spouse or former spouse who is the Alternate Payee under a
qualified domestic relations order, as defined in section 414(p) of the
Code, are Distributees with regard to the interest of the spouse or
former spouse.
DOMESTIC RELATIONS ORDER
Any judgment, decree, or order (including approval of a property
settlement agreement) which is made pursuant to a State domestic
relations law and which relates to the provision of child support,
alimony payments, or marital property rights to a spouse, former spouse,
child, or other dependent of a Participant.
EFFECTIVE DATE
The Effective Date of this Plan is September 1, 1998.
ELIGIBILITY COMPUTATION PERIOD
To determine Years of Service and Breaks in Service for purposes of
eligibility, the initial 12-month period shall commence on the date the
Employee first performs an Hour of Service for the Company. The second
12-month period shall be the Plan Year which commences prior to the end
of the initial 12-month period, regardless of whether the Employee is
entitled to be credited with 1,000 Hours of Service during the initial
eligibility computation period. An Employee who is credited with 1,000
Hours of Service in both the initial eligibility computation period and
the first Plan Year which commences prior to the first anniversary of the
Employee's initial eligibility computation period will be credited with
two Years of Service for purposes of eligibility to participate. All
subsequent computation periods will continue to be determined on the Plan
Year.
ELIGIBLE RETIREMENT PLAN
An individual retirement account described in Section 408(a) of the
Code, an individual retirement annuity described in Section 408(b) of the
Code, an annuity plan described in Section 403(a) of the Code, or a
qualified trust described in Section 401(a) of the Code, that accepts the
Distributee's Eligible Rollover Distribution. However, in the case of an
Eligible Rollover Distribution to the surviving spouse, an Eligible
Retirement Plan is an individual retirement account or individual
retirement annuity.
ELIGIBLE ROLLOVER DISTRIBUTION
Any distribution of all or any portion of the balance to the credit
of the Distributee, except that an Eligible Rollover Distribution does
not include: any distribution that is one of a series of substantially
equal periodic payments (not less frequently than annually) made for the
life (or life expectancy) of the Distributee or the joint lives (or joint
life expectancies) of the Distributee and the Distributee's designated
Beneficiary, or for a specified period of 10 years or more; any
distribution to the extent such distribution is required under Section
401(a)(9) of the Code; and the portion of any distribution that is not
includible in gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to Employer Securities).
EMPLOYEE
A person, employed by an Employer, any portion of whose income is
subject to withholding of income tax and/or for whom Social Security
contributions are made by an Employer, as well as any other person
qualifying as a common law employee of an Employer. Employee shall
include Leased Employees unless: (i) such Employee is covered by a money
purchase pension plan providing: (1) a nonintegrated Employer
contribution rate of at least ten percent (10%) of compensation, as
defined in Section 415(c)(3) of the Code, but including amounts
contributed pursuant to a salary reduction agreement which are excludable
from the Employee's gross income under Section 125, Section 402(e)(3),
Section 402(h), or Section 403(b) of the Code; (2) immediate
participation; and (3) full and immediate vesting; and (ii) Leased
Employees do not constitute more than twenty percent (20%) of the
Company's nonhighly compensated work force.
EMPLOYER
The Company and any other affiliate of the Company, as defined in
Section 407(d) of the ERISA, or any predecessor or successor corporation,
which has been designated by the Company as an Employer participating in
the Plan, and which has accepted such designation and has agreed to be
bound by the terms of the Plan and Trust Agreement.
EMPLOYER SECURITIES
Common stock issued by the Company or by any affiliate of the
Company, as defined in Section 407(d) of ERISA, having a combination of
voting power and dividend rights equal to (i) that class of common stock
of the Company having the greatest voting power and (ii) that class of
common stock of the Company having the greatest dividend rights.
Noncallable preferred stock shall be treated as Employer Securities if
such stock is convertible at any time into common stock which meets the
above requirements, and if (as of the date of acquisition by the Plan)
the conversion price is reasonable.
EMPLOYMENT COMMENCEMENT DATE
The date on which the Employee shall first perform an Hour of
Service for the Employer.
ENTRY DATE
The first day of January and the first day of July of each year.
ERISA
The Employee Retirement Income Security Act of 1974, as amended from
time to time.
FISCAL YEAR
The annual accounting period adopted by the Company for federal
income tax purposes.
FORFEITURES
The portion of a Participant's Accounts which does not become part
of the Participant's Plan Benefit. See Section 13 of the Plan.
HIGHLY COMPENSATED EMPLOYEE
An Employee is treated as highly compensated only if the Employee
(1) was a five percent (5%) owner of the Employer at any time during the
Plan Year or the preceding Plan Year or (2) at the election of the
Employer, had Total Compensation for the preceding Plan Year in excess of
$80,000 (indexed for inflation) and was in the top twenty percent (20%)
of the Employees by Total Compensation for such Plan Year.
HOUR OF SERVICE
(a) Each hour for which an Employee is paid, or entitled to payment,
for the performance of duties for the Employer or any Affiliated Company
during the applicable computation period.
(b) Each hour for which an Employee is paid, or entitled to payment,
by the Employer or any Affiliated Company on account of a period of time
during which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation, holiday,
illness, incapacity (including disability), layoff, jury duty,
military duty, or leave of absence. Notwithstanding the preceding
sentence, (1) no more than 501 Hours of Service will be credited under
this paragraph (b) to an Employee on account of any single continuous
period during which the Employee performs no duties (whether or not such
period occurs in a single computation period); (2) an hour for which an
Employee is directly or indirectly paid, or entitled to payment, during a
period in which no duties are performed, will not be credited to the
Employee if such payment is made or due under a plan maintained solely
for the purpose of complying with applicable workmen's compensation,
unemployment compensation, or disability insurance laws; and (3) Hours of
Service will not be credited for a payment which solely reimburses an
Employee for medical or medically related expenses incurred by the
Employee. For purposes of this paragraph (b), a payment shall be deemed
to be made by or due from an Employer or an Affiliated Company regardless
of whether such payment is made by or due from the Employer or an
Affiliated Company directly or indirectly through, among others, a trust
fund, or insurer, to which the Employer or an Affiliated Company
contributes or pays premiums and regardless of whether contributions made
or due to the trust fund, insurer, or other entity are for the benefit of
particular Employees or are on behalf of a group of Employees in the
aggregate.
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer or an Affiliated
Company.
(d) The determination of Hours of Service for reasons other than the
performance of duties, and the crediting of Hours of Service to
computation periods, shall be in accordance with U.S. Department of Labor
Regulations Section 2530.200b-2 (b)
and (c). There shall be no duplication of Hours of Service under any of
the foregoing provisions.
(e) In the case of a salaried Employee who is not paid on an hourly
basis, Hours of Service shall be based on any available records which
accurately reflect the actual number of hours worked by such Employee. If
such records do not exist, such Employee shall be credited with Hours of
Service on the basis of 45 hours for each week for which the Employee
would be credited with at least one Hour of Service.
(f) For purposes of determining whether a Participant has incurred
a one-year Break in Service, a Participant will be credited with Hours of
Service for certain periods of absence from work by reason of the
Participant's pregnancy, the birth of a Participant's child, the adoption
of a Participant's child, or caring for a Participant's child during the
period immediately following the birth or adoption of such child. If the
Participant's normal work hours are known, such Participant will be
credited with the number of hours that normally would have been credited
for such absence. If the Participant's normal work hours are not known,
such Participant will be credited with eight Hours of Service for each
normal workday during such absence. No more than 501 Hours of Service
shall be credited for such purposes in the Plan Year in which such
absence commences if the Participant would otherwise incur a Break in
Service in such Plan Year; otherwise, such Hours of Service shall be
credited in the following Plan Year if such absence continues in such
Plan Year.
INDEPENDENT APPRAISER
Any appraiser, appointed by the Trustee, who is independent of the
Company and who meets the requirements of the regulations prescribed
under Section 170(a)(1) of the Code.
LEASED EMPLOYEE
Any person (other than an Employee of the Company) who pursuant to
an agreement between the Company and any other person ("leasing
organization") has performed services for the Company (or for the Company
and related persons determined in accordance with Section 414(n)(6) of
the Code) on a substantially full-time basis for a period of at least one
year, and the individual's services are performed under primary direction
or control by the service recipient. Contributions or benefits provided a
Leased Employee by the leasing organization which are attributable to
services performed for the Company shall be treated as provided by the
Company.
LIMITATION YEAR
For purposes of the limitations on Contributions and benefits
imposed by Section 415 of the Code, the Limitation Year shall be the Plan
Year.
NORMAL RETIREMENT
Termination of service upon attainment of the Normal Retirement
Date.
NORMAL RETIREMENT DATE
The date on which a Participant attains age 65 or the fifth
anniversary of the date the Participant commenced participation in this
Plan, whichever is later.
OTHER INVESTMENTS ACCOUNT
The Account of a Participant which is credited with a share of the
net income (or loss) of the Trust and Employer Contributions and
Forfeitures in other than Company Stock and which is debited with
payments made to pay for Company Stock.
PARTICIPANT
Any Employee who is participating in this Plan as defined in Section
3 of the Plan or former Employee for whom an Account is maintained. A
Participant ceases to be a Participant when such Participant's Account is
closed after all amounts have been distributed or Forfeited.
PLAN
The Total-Tel USA Communications, Inc. Employee Stock Ownership
Plan, which includes the Plan and Trust Agreement.
PLAN BENEFIT
The vested amount, as defined in Sections 12 and 13 of the Plan, of
a Participant's Accounts.
PLAN YEAR
The 12-month period ending on each Anniversary Date.
QUALIFIED ELECTION PERIOD
The six-year Plan period beginning with the first Plan Year in which
the Participant first became a Qualified Participant.
QUALIFIED EMPLOYER SECURITIES
Employer Securities which are issued by a domestic corporation that
has no securities outstanding which are readily tradable on an
established securities market, have been held for at least three years by
the seller, and were not received by the seller in a distribution from a
Plan qualified under Section 401(a) or in a transfer pursuant to an
option or other right to acquire stock under Section 83, 422, 422A, 423,
or 424 of the Code.
QUALIFIED PARTICIPANT
Any Participant who has attained age 55 and has completed 10 years
of participation under the Plan.
QUALIFIED REPLACEMENT PROPERTY
Any stock, bond, debenture, note, or other evidence of indebtedness
issued by a domestic corporation (other than the Employer corporation or
any corporation which is a member of a parent-subsidiary controlled group
which includes the Employer corporation) which does not, for the taxable
year preceding the taxable year in which such security is purchased, have
passive investment income exceeding 25% of the gross receipts of such
corporation for such year.
RETIREMENT
Termination of service due to Normal Retirement, Deferred
Retirement, or Disability.
SECURITIES ACQUISITION LOAN
A loan which is used to purchase Employer Securities and which meets
the requirements of paragraphs 1 and 2 of Section 6(c) of the Plan.
SEGREGATED INVESTMENTS ACCOUNT
The Account of a Participant which is credited with amounts which
may not be used to purchase shares of Company Stock pursuant to the
provisions of Rev. Proc. 87-22.
STOCK BONUS PLAN
The portion of the Plan which is designed to qualify as such and is
subject to the rules pertaining to a stock bonus plan under Section
401(a) of the Code.
SUSPENSE ACCOUNT
The Suspense Account maintained by the Committee to which shall be
credited all shares of Employer Securities purchased with the proceeds of
a Securities Acquisition Loan.
TOTAL COMPENSATION
For purposes of Section 415 of the Code and the Top Heavy provisions
in Section 21 of this Plan,
(a) The term "Total Compensation" includes:
(1) The Employee's wages, salaries, fees for professional services,
and other amounts received (without regard to whether or not an amount is
paid in cash) for personal services actually rendered in the course of
employment with the Employer maintaining the Plan to the extent that the
amounts are includible in gross income (including, but not limited to,
commissions paid salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums, tips, bonuses,
fringe benefits, and reimbursements or other expense allowances under a
nonaccountable plan (as described in Section 1.62-2(c) of the regulations
under Section 62 of the Code).
(2) In the case of an Employee who is an employee within the
meaning of Section 401(c)(1) of the Code and the regulations thereunder,
the Employee's earned income (as described in Section 401(c)(2) of the
Code and the regulations thereunder).
(3) Amounts described in Sections 104(a)(3), 105(a), and 105(h) of
the Code, but only to the extent that these amounts are includible in the
gross income of the Employee.
(4) Amounts paid or reimbursed by the Employer for moving expenses
incurred by an Employee, but only to the extent that at the time of the
payment it is reasonable to believe that these amounts are not deductible
by the Employee under Section 217 of the Code.
(5) The value of a nonqualified stock option granted to an Employee
by the Employer, but only to the extent that the value of the option is
includible in the gross income of the Employee for the taxable year in
which granted.
(6) The amount includible in the gross income of an Employee upon
making the election described in Section 83(b) of the Code.
(7) For purposes of subdivisions (1) and (2) of this subparagraph,
foreign earned income (as defined in Section 911(b) of the Code), whether
or not excludable from gross income under Section 911 of the Code.
Compensation described in subdivision (1) of this subparagraph is to be
determined without regard to the exclusions from gross income in Sections
931 and 933 of the Code. Similar principles are to be applied with
respect to income subject to Sections 931 and 933 of the Code in
determining compensation described in subdivision (2) of this
subparagraph.
(b) The term "Total Compensation" does not include items such as:
(1) Contributions made by the Employer to a plan of deferred
compensation to the extent that, before the application of Code Section
415 limitations to that plan, the contributions are not includible in the
gross income of the Employee for the taxable year in which contributed.
In addition, Employer contributions made on behalfof an Employee to a
simplified employee pension plan described in Code Section 408(k) are not
considered as compensation for the taxable year in which contributed.
Additionally, any distributions from a plan of deferred compensation are
not considered as compensation for Section 415 purposes, regardless of
whether such amounts are includible in the gross income of the Employee
when distributed. However, any amounts received by an Employee pursuant
to an unfunded nonqualified plan may be considered as compensation for
Code Section 415 purposes in the year such amounts are includible in the
gross income of the Employee.
(2) Amounts realized from the exercise of a nonqualified stock
option, or when restricted stock (or property) held by an Employee either
becomes freely transferable or is no longer subject to a substantial risk
of forfeiture (under Section 83 of the Code).
(3) Amounts realized from the sale, exchange or other disposition
of stock acquired under a qualified stock option.
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(4) Other amounts which receive special tax benefits, such as
premiums for group term life insurance (but only to the extent that the
premiums are not includible in the gross income of the Employee), or
contributions made by an Employer (whether or not under a salary deferral
agreement) towards the purchase of an annuity contract described in
Section 403(b) of the Code (whether or not the contributions are
excludable from the gross income of the Employee).
TRUST
The Trust created by the Trust Agreement entered into between the
Company and the Trustee.
TRUST AGREEMENT
The Agreement between the Company and the Trustee or any successor
Trustee establishing the Trust and specifying the duties of the Trustee.
TRUSTEE
The Trustee (or Trustees) designated by the Company's Board of
Directors (and any successor Trustee). The Board of Directors may provide
that any person or group of persons may serve in more than one fiduciary
capacity with respect to the Plan (including service as both Trustee and
Committee member).
VALUATION DATE
The Anniversary Date coinciding with or immediately preceding the
date of actual distribution of Plan Benefits. For purposes of the top
heavy provisions of this Plan, the Valuation Date is the most recent
Anniversary Date within a 12-month period ending on a Determination Date
(as defined in Section 21).
YEAR OF SERVICE
For purposes of eligibility, a 12-month period beginning on an
Employee's Employment Commencement Date during which an Employee is
credited with not less than 1,000 Hours of Service.
For purposes of vesting under Section 13, all Plan Years beginning
on or after the Effective Date during which an Employee has completed
1,000 or more Hours of Service, including any Plan Year during which such
Participant has completed 1,000 or more Hours of Service but has not yet
become eligible to participate in the Plan.
SECTION 3. ELIGIBILITY.
Subject to the conditions and limitations of the Plan, each Employee
shall become eligible to participate in the Plan retroactively to the
first day of the Plan Year during which the Employee satisfies the
following requirements:
(a) the Employee has completed one Year of Service measured during
the Eligibility Computation Period; and
(b) the Employee has attained 21 years of age.
Upon the Employee so becoming eligible, participation in the Plan
shall be based on the total Covered Compensation paid to the Employee for
the entire Plan Year during which the Employee becomes eligible to
participate. If an Employee who has met the eligibility requirements
leaves the service of the Employer and returns to service without
incurring a one-year Break in Service, the Employee shall continue to be
eligible to participate in the Plan immediately upon returning to
Service.
An Employee whose terms of employment with the Employer are covered
by a collective bargaining agreement shall not be eligible to participate
in the Plan unless the terms of such collective bargaining agreement
specifically provide for participation in this Plan. Notwithstanding the
foregoing, if any such Employee ceases to be subject to the collective
bargaining agreement, Years of Service for purposes of eligibility and
vesting shall include years during which an Employee is covered by a
collective bargaining agreement after the Effective Date of the Plan.
An Employee who is a Leased Employee shall not be eligible to
participate in this Plan. Notwithstanding the foregoing, if an Employee
ceases to be a Leased Employee, Years of Service for purposes of
eligibility and vesting shall include all Years of Service with the
Employer after the Effective Date of the Plan.
SECTION 4. PARTICIPATION IN ALLOCATION OF BENEFITS.
(a) PARTICIPATION.
Except in the case of death, Disability, or Retirement, a
Participant will share in the allocation of Employer Contributions and
Forfeitures only if the Participant is still employed on the last day of
the Plan Year and has accumulated 1,000 or more Hours of Service during
the Plan Year. Except in the case of death, Disability, or Retirement, a
Participant who accumulates less than 1,000 Hours of Service during a
Plan Year will not share in the allocation of Employer Contributions and
Forfeitures under Section 11 for such Plan Year, will not be given a Year
of Service for purposes of vesting under Section 13, and shall become an
inactive Participant for that Plan Year.
A Participant reemployed following a Break in Service shall
again resume participation in the Plan as of the date of reemployment for
purposes of vesting under Section 13 and for purposes of participating in
Employer Contributions and Forfeitures under Section 11 (subject to the
requirements of this Section 4 and Section 13 of the Plan). However, if
the Participant is reemployed after a Break in Service and has no vested
rights under the Plan and the number of consecutive one-year Breaks in
Service equals or exceeds five years or the number of aggregate years of
pre-break service, whichever is greater, the Participant shall be treated
as a new Employee for purposes of participation.
(b) LEAVE OF ABSENCE.
A Participant's employment is not considered terminated for
purposes of the Plan if the Participant has been on leave of absence with
the consent of the Company, provided that the Participant returns to the
employ of the Company within 30 days after the leave (or within such
longer period as may be prescribed by law). Leave of absence shall mean a
leave granted by the Company, in accordance with rules uniformly applied
to all Participants, for reasons of health or public service or for
reasons determined by the Company to be in its best interests. Solely for
purposes of preventing a Break in Service, a Participant on such leave of
absence shall be credited with eight Hours of Service for each business
day of the leave. A Participant who does not return to the employ of the
Company within the prescribed time following the end of the leave of
absence shall be deemed to have terminated employment as of the date when
the leave began, unless such failure to return was the result of death,
Disability, or Retirement.
(c) SUSPENDED PARTICIPATION.
A Participant who ceases to be an eligible Employee by becoming
subject to a collective bargaining agreement shall become a suspended
Participant. During the period of suspension, no amounts shall be
credited to the Participant's Accounts which are based on the
Participant's Covered Compensation from and after the date of suspension.
However, amounts previously credited to a Participant's Accounts shall
continue to vest and the Participant shall be entitled to benefits in
accordance with the provisions of Section 14(g) of this Plan throughout
the period during which the Participant is on suspended status.
(d) INACTIVE PARTICIPATION.
A Participant who has more than 500 Hours of Service but less
than 1,000 Hours of Service in any Plan Year shall be an inactive
Participant for that Plan Year. No amounts shall be credited to such
Participant's Accounts which are based on the Participant's Covered
Compensation for that Plan Year unless the Participant terminates
employment due to death, Disability, or Retirement.
SECTION 5. PLAN CONTRIBUTIONS.
Subject to the conditions and limitations of the Plan, for each
Plan Year, the Employer will contribute to the Trustee cash equal to or
property or Company Stock having an aggregate fair market value equal to,
such amount, if any, as the Board of Directors of the Employer shall
determine by resolution; provided, however, that an Employer shall
contribute an amount in cash not less than the amount required to enable
the Trustee to discharge any indebtedness incurred with respect to an
Acquisition Loan. In no event will the Employer's contribution for any
Plan Year exceed the limitation discussed in Section 11(b).
The Employer's ESOP contribution for any Plan Year shall be due on
the last day of the Plan Year and, if not paid by the end of that year,
shall be payable to the Trustee as soon thereafter as practicable, but
not later than the time prescribed for filing the Employer's Federal
income tax return for that Plan Year, including any extensions of time,
without interest.
SECTION 6. INVESTMENT OF TRUST ASSETS.
(a) AUTHORIZED INVESTMENTS.
Employer Contributions in cash received by the Trust will be applied
to pay any outstanding obligations of the Trust incurred for the purchase
of Employer Securities, or may be applied to purchase additional shares
of Company Stock from current shareholders, treasury shares, or newly
issued shares from the Company. The Committee may also direct the Trustee
to invest funds under the Plan in savings accounts, certificates of
deposit, securities, or other equity stocks or bonds or in any other kind
of real or personal property, including interests in oil or other
depletable natural resources, options, puts, calls, futures contracts,
and commodities; or such funds may be held in non-interest-bearing bank
accounts, as necessary, on a temporary basis.
(b) DUTIES OF COMMITTEE.
Except as otherwise provided in Section 18(b), all investments will
be made by the Trustee only upon the direction of the Committee. Except
in the case of a purchase from a Disqualified Person (as defined in
Section 4975(e)(2) of the Code), all purchases of Company Stock shall be
made at no more than fair market value. In the case of a purchase from a
Disqualified Person, all purchases of Company Stock shall be made at
prices which, do not exceed the fair market value of such shares as of
the date of the transaction.
(c) PLAN LOANS.
(1) The Committee may direct the Trustee to incur Plan loans from
time to time to carry out the purposes of the Trust, provided that if the
loan is a Securities Acquisition Loan, the terms of the loan must comply
with the following requirements: Any such loan shall be for a specified
term, shall bear a reasonable rate of interest, may not exceed 15 years
in duration, and may only be secured by a collateral pledge of the
Employer Securities so acquired. Any such loan shall be primarily for the
benefit of Plan Participants and their Beneficiaries. No other Trust
assets may be pledged as collateral by the Trustee, and no lender shall
have recourse against Trust assets other than any shares of Employer
Securities remaining subject to pledge. Any pledge of Employer Securities
must provide for the release of shares so pledged pursuant to either the
"General Rule" or the "Special Rule" set forth in Section 7. Shares of
Employer Securities released from the Suspense Account shall be allocated
to Participants' accounts in shares of stock or other nonmonetary units.
Repayments of principal and interest on any Securities Acquisition Loan
shall be made by the Trustee (as directed by the Committee) only from
Employer Contributions in cash to the Trust, from any cash dividends
received by the Trust on such Employer Securities, or from any earnings
attributable to the investment of Employer Contributions made to the
Trust in cash to meet its obligations under the Securities Acquisition
Loan. Such Contributions, dividends, and earnings shall be accounted for
separately in the books of accounts of the Plan until the Securities
Acquisition Loan is repaid. The proceeds of a Securities Acquisition Loan
may be used only to acquire Employer Securities, to repay such loan, or
to repay a prior Securities Acquisition Loan. The Plan may not obligate
itself to acquire securities from a particular security holder at an
indefinite time determined upon the happening of an event such as the
death of the holder. The protections and rights described in Section 16
are nonterminable. Should this Plan cease to be an Employee Stock
Ownership Plan, or should the Securities Acquisition Loan be repaid, all
Employer Securities will continue to be subject to the provisions of
Section 16. If securities acquired with the proceeds of a Securities
Acquisition Loan available for distribution consist of more than one
class, a Distributee must receive substantially the same portion of each
such class.
(2) In the event of default upon a Securities Acquisition
Loan, the value of Plan assets transferred in satisfaction of the
Securities Acquisition Loan must not exceed the amount of default. If the
lender is a Disqualified Person, a loan must provide for a transfer of
Plan assets upon default only upon and to the extent of the failure of
the Plan to meet the payment schedule of the loan. For purposes of this
paragraph, the making of a guarantee does not make a person a lender.
(d) NONRECOGNITION OF GAIN.
(1) There shall be no recognition of gain upon a sale of
Employer Securities to the Plan if (i) the seller has held such
Securities for at least three years, (ii) after the purchase the Plan
owns at least 30% of each class of outstanding stock of the Company
(other than preferred stock described in Section 1504(a)(4) of the Code),
or 30% of the total value of all outstanding stock of the Company (other
than preferred stock described in Section 1504(a)(4) of the Code), (iii)
the seller purchases Qualified Replacement Property within three months
prior to the sale or within 12 months after the sale, (iv) on or before
the time (including extension) for filing an income tax return, the
seller files with the IRS a written statement, verified by the Company,
regarding the terms of the sale, and (v) the Plan complies with the
allocation requirements set forth in Section 11(b)(5).
(2) If, during the three-year period after the Plan acquires
Qualified Employer Securities in a transaction in which gain is not
recognized, the Plan disposes of part or all of such Qualified Employer
Securities, the Company shall be liable for a tax equal to 10% of the
amount realized upon the disposition, unless such disposition is
necessary to meet the diversification requirements of Section 17(a) of
the Plan, or unless such disposition is made to a Participant (or the
Participant's Beneficiary) by reason of death, Disability, Retirement
after age 59-1/2, or a separation from service which results in a
one-year Break in Service.
SECTION 7. ALLOCATIONS TO ACCOUNTS.
(a) INDIVIDUAL ACCOUNTS.
The Committee shall establish and maintain individual Accounts for
each Participant in the Plan. Individual Accounts shall also be
maintained for all former Participants who still have an interest in the
Plan. Except as provided in Section 17(a), such individual Accounts shall
not require a segregation of the Trust assets and no Participant, former
Participant, or Beneficiary shall acquire any right to or interest in any
specific asset of the Trust as a result of the allocation provided for in
the Plan.
(b) COMPANY STOCK ACCOUNT.
(1) The Company Stock Account of each Participant will be
credited as of each Anniversary Date with the Participant's allocated
share of Company Stock (including fractional shares) purchased and paid
for by the Trust or contributed in kind by the Company, with Forfeitures
of Company Stock and with stock dividends on Company Stock held in the
Participant's Company Stock Account.
Employer Securities acquired by the Trust with the proceeds of a
Securities Acquisition Loan shall be credited to a Suspense Account. For
each Plan Year during the duration of the Securities Acquisition Loan,
the number of shares of Employer Securities to be released from said
Suspense Account and allocated to the Company Stock Accounts of
Participants shall be determined pursuant to either the "General Rule" or
the "Special Rule" described below as selected by the Committee for each
Securities Acquisition Loan. Once the Committee has selected either the
General Rule or the Special Rule, that Rule shall be used exclusively for
the allocation of shares of Employer Securities purchased with the
proceeds of a particular Securities Acquisition Loan.
(A) General Rule: For each Plan Year during the duration
of the loan, the Committee shall withdraw from the Suspense Account a
number of shares of Employer Securities equal to the total number of such
shares held in the Suspense Account immediately prior to the withdrawal
multiplied by a fraction:
(i) The numerator of which is the amount of
principal and interest paid for the Plan Year; and
(ii) the denominator of which is the sum of the
numerator plus the principal and interest to be paid for all future
years:
(B) Special Rule:
(i) For each Plan Year, the Committee shall withdraw
from the Suspense Account a number of shares of Employer Securities equal
to the total number of such shares held in the Suspense Account
immediately prior to the withdrawal multiplied by a fraction paid for the
Plan Year; and
(aa) The numerator of which is the amount of
principal paid for the Plan Year; and
(bb) The denominator of which is the sum of the
numerator plus the principal to be paid for all future Plan Years.
(ii) The Committee may select the Special Rule only
if:
(aa) The Securities Acquisition Loan provides
for annual payments of principal and interest at a cumulative rate which
is not less rapid at any time than level annual payments of such amounts
for 10 years;
(bb) The interest included in any payment is
disregarded only to the extent that it would be determined to be interest
under standard loan amortization tables; and
(cc) By reason of a renewal, extension, or
refinancing, the sum of the expired duration of the original loan, any
renewal period, any extension period, and the duration of any new loan
does not exceed 10 years.
(C) In determining the number of shares to be released
for any Plan Year under either the General Rule or the Special Rule:
(i) The number of future years under the Loan must
be definitely ascertainable and must be determined without taking into
account any possible extensions or renewal periods;
(ii) If the Loan provides for a variable interest
rate, the interest to be paid for all future Plan Years must be computed
by using the interest rate applicable as of the end of the Plan Year for
which the determination is being made; and
(iii) If the Employer Securities allocated to the
Suspense Account includes more than one class of shares, the number of
shares of each class to be withdrawn for a Plan Year from the Suspense
Account must be determined by applying the applicable fraction provided
for above to each such class.
(2) Allocations of Company Stock shall be reflected separately
for each class of such stock, and the Committee shall maintain adequate
records of the aggregate cost basis of Company Stock allocated to each
Participant's Company Stock Account.
4
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(c) OTHER INVESTMENTS ACCOUNT.
The Other Investments Account of each Participant will be
credited (or debited) as of each Anniversary Date with the Participant's
share of the net income (or loss) of the Trust, with cash dividends on
Company Stock not distributed to Participants or used to pay a Securities
Acquisition Loan and with Employer Contributions and Forfeitures in other
than Company Stock. The Other Investments Account of each Participant
will be credited (or debited) as of each Anniversary Date with the
Participant's share of the unrealized appreciation (or depreciation) in
the value of Trust assets other than Company Stock. It will be debited
for any payments for purchases of Company Stock or for repayment of debt
(including principal and interest) incurred for the purchase of Employer
Securities.
SECTION 8. TREATMENT OF EXPENSES.
All expenses incurred by the Committee and the Trustee in connection
with administering this Plan and the Trust Fund shall be paid by the
Trustee from the Trust Fund to the extent the expenses have not been paid
or assumed by the Employers or by the Trustee.
SECTION 9. VOTING COMPANY STOCK.
The Trustee generally shall vote shares of Company Stock held under
the Plan in accordance with the written instructions of the Committee.
However, if the Employer has a registration-type class of securities
within the meaning of section 409(e) of the Code, or if a matter
submitted to the holders of the Company Stock involves a merger,
consolidation, recapitalization, reclassification, liquidation,
dissolution, or sale of substantially all assets of an entity, then the
shares of Company Stock which have been allocated to Participants'
Accounts shall be voted by the Trustee in accordance with the
Participants' written instructions.
The Trustee shall vote any unallocated shares of Company Stock in
the Trust Fund, or any allocated Company Stock as to which no voting
instructions have been received, in such manner as shall be directed by
the Committee.
Section 10. DISCLOSURE TO PARTICIPANTS
(a) SUMMARY Plan Description.
Within 120 days after the receipt of an initial favorable
determination letter from the Internal Revenue Service relating to the
qualification of the Plan, and thereafter within 90 days after a
Participant commences participation (or after a Beneficiary first
receives benefits under the Plan), the Committee shall furnish such
Participant (or Beneficiary) with the summary plan description required
by Sections 102(a)(1) and 104(b)(1) of ERISA. Such summary plan
description shall be updated from time to time as required under ERISA
and the Department of Labor regulations thereunder.
(b) SUMMARY ANNUAL REPORT.
Within nine months after each Anniversary Date, the Committee
shall furnish each Participant (and each Beneficiary receiving benefits
under the Plan) with the summary annual report of the Plan required by
Section 104(b)(3) of ERISA, in the form required by regulations of the
Department of Labor.
(c) ANNUAL STATEMENT.
As soon as possible after each Anniversary Date, Participants
will receive a written statement of their Accounts showing as of that
Anniversary Date:
(1) The balance in each of their Accounts as of the preceding
Anniversary Date.
(2) The amount of Employer Contributions and Forfeitures
allocated to their Accounts for the year.
(3) The adjustments to their Accounts to reflect their share
of dividends and the income and expenses of the Trust for the year.
(4) The new balances in each of their Accounts, including the
number of shares of Company Stock.
(5) The vested percentage of their Plan Benefit.
Upon the discovery of any error or miscalculation in an Account, the
Committee shall correct the same insofar as, in the Committee's
discretion, correction is feasible. Statements to Participants are for
reporting purposes only, and no allocation, valuation, or statement
shall, by itself, vest any right or title in any part of the Trust Fund.
(d) NOTICE OF ROLLOVER TREATMENT.
The Committee shall, when making any distribution which
qualifies as a qualifying rollover distribution under Section 402(c) or
Section 401(a)(31) of the Code, provide a written notice to the recipient
which explains the provisions of Sections 402(c) and 401(a)(31) under
which such distribution will not be subject to current tax if transferred
to an Eligible Retirement Plan. In the case of a distribution under
Section 402(c), such notice shall be given not less than 30 days nor more
than 90 days before the distribution date. If the distribution is one to
which Sections 401(a)(11) and 417 of the Internal Revenue Code do not
apply, such distribution may commence less than 30 days after the notice
required under Section 1.411(a)(11)(c) of the Income Tax Regulations is
given, provided that:
(1) the Committee clearly informs the Participant that the
Participant has a right to a period of at least 30 days after receiving
the notice to consider the decision of whether or not to elect a
distribution (and, if applicable, a particular distribution option), and
(2) the Participant, after receiving the notice, affirmatively
elects a distribution.
(e) ADDITIONAL DISCLOSURE.
The Committee shall make available for examination by any
Participant (or Beneficiary) copies of the summary plan description, the
Plan, the Trust Agreement, and the latest annual report of the Plan filed
with the Department of Labor. Upon written request of any Participant (or
Beneficiary), the Committee shall furnish copies of such documents and
may make a reasonable charge to cover the cost of furnishing such copies,
as provided in regulations of the Department of Labor.
SECTION 11. ALLOCATION OF EMPLOYER CONTRIBUTIONS AND FORFEITURES.
(a) ALLOCATION OF EMPLOYER CONTRIBUTIONS AND FORFEITURES.
The allocations will be made as follows:
(1) EMPLOYER CONTRIBUTIONS.
Employer Contributions will be allocated as of each Anniversary
Date among the Accounts of Participants who meet the requirements of
Section 4 of the Plan, in the proportion that each such Participant's
Covered Compensation bears to the total Covered Compensation of all such
Participants for that year. Shares of Employer Securities released from
the Suspense Account (as provided in Section 7(b)) by reason of the
payment of interest and principal on a Securities Acquisition Loan shall
be allocated as of each Anniversary Date among the Accounts of
Participants in the Plan who meet the requirements of Section 4 of the
Plan, in the proportion that each such Participant's Covered Compensation
bears to the total Covered Compensation of all such Participants for that
year.
(2) FORFEITURES.
Forfeitures shall be allocated in the same manner as Employer
Contributions are allocated.
(3) NET INCOME (OR LOSS) OF THE TRUST.
The net income (or loss) of the Trust will be determined
annually as of each Anniversary Date. Any stock dividends on shares of
Company Stock held by the Trust shall be allocated to each Participant's
Company Stock Account in the ratio in which the cumulative number of
shares allocated to the Participant's Company Stock Account as of the
preceding Anniversary Date bears to the total cumulative number of shares
of Company Stock allocated to the Company Stock Accounts of all
Participants as of that date. Trust income attributable to any cash
dividends paid on shares of Company Stock (whether or not allocated) and
not used to make payments on a Securities Acquisition Loan shall be
allocated to each Participant's Other Investments Account in the ratio in
which the cumulative number of shares allocated to the Participant's
Company Stock Account as of the preceding Anniversary Date bears to the
total cumulative number of shares of Company Stock allocated to the
Company Stock Accounts of all participants as of that date. Trust income
attributable to any gain from the sale of unallocated shares of Employer
Securities shall be allocated to each Participant's Other Investments
Account in the proportion that each such Participant's Covered
Compensation for the Plan Year bears to the total Covered Compensation of
all such Participants for that Plan Year. All other net income (or loss)
will be allocated to each Participant's Other Investments Account in the
ratio in which the balance of the Participant's Other Investments Account
on the preceding Anniversary Date bears to the sum of the balances of the
Other Investments Accounts of all Participants on that date. For this
purpose, Account balances shall be reduced by amounts distributed to
Participants during the Plan Year.
The net income (or loss) includes the increases (or
decreases) in the fair market value of assets of the Trust, interest,
dividends, other income, and expenses attributable to assets in the Other
Investments Accounts since the preceding Anniversary Date. Net income (or
loss) does not include the interest paid under any installment contract
for the purchase of Company Stock by the Trust or on any loan obtained by
the Trust to purchase Company Stock. Notwithstanding the foregoing, no
income (or loss) shall be allocated to a terminated Participant's Account
for the Plan Year in which the Participant receives final distribution of
the Plan Benefit.
(b) ALLOCATION LIMITATIONS.
(1) The total Annual Additions to a Participant's Accounts for
any Limitation Year shall not exceed the lesser of (i) $30,000, or (ii)
25% of the Participant's Total Compensation for the Limitation Year.
A Participant's allocable share of Employer Contributions
applied to the payment of interest on a Securities Acquisition Loan and
Forfeitures of Employer Securities purchased with the proceeds of a
Securities Acquisition Loan shall not be included as an Annual Addition,
provided that no more than one-third of the Employer Contribution for
that year is allocated to the Accounts of Highly Compensated Employees.
(2) If an Employer is contributing to another defined
contribution plan, as defined in Section 414(i) of the Code, for
Employees of the Company, some or all of whom may be Participants in this
Plan, then any such Participant's Annual Additions in such other plan
shall be aggregated with the Participant's Annual Additions derived from
this Plan for purposes of the limitation in Paragraph (1) of this
Subsection.
(3) If a Participant in this Plan is also a Participant in a
defined benefit plan to which Contributions are made by an Employer or
Affiliated Company, then in addition to the limitation contained in
Paragraph (1) of this Subsection, such Participant's allocations shall be
limited, such that the sum of the defined benefit plan fraction and the
defined contribution plan fraction for any Limitation Year shall not
exceed 1.0. For purposes of this Paragraph (3), the defined benefit plan
fraction is a fraction, the numerator of which is the projected annual
benefit of the Participant under all such defined Plans determined as of
the close of the Limitation Year, and the denominator of which is the
lesser of (i) the product of 1.25 multiplied by the dollar limitation in
effect for such Plan Year, or (ii) the product of 1.4 multiplied by 100%
of the Participant's average Total Compensation for the Participant's
highest three Limitation Years. For purposes of this Paragraph (3), the
defined contribution plan fraction for any Limitation Year is a fraction,
the numerator of which is the sum of the Annual Additions to the
Participant's Accounts as of the close of the Limitation Year, and the
denominator of which is the sum of the lesser of the following amounts
determined for such year and for each prior Year of Service with the
Employer: (i) the product of 1.25 multiplied by the dollar limitation in
effect for such Limitation Year or (ii) the product of 1.4 multiplied by
25% of the Participant's Total Compensation.
(4) If Company Stock is purchased from a shareholder of the
Company and if such shareholder is also a Participant in this Plan, then
notwithstanding anything to the contrary contained in this Plan, the
total Account balances of such Participant's Accounts other than the
Participant's Segregated Investments Account, combined with the total
Account balances of the Accounts of such Participant's spouse, parents,
grandparents, children, and grandchildren under the Plan, shall not
exceed 20% of the total of all Account balances under the Plan. However,
if the total Account balances of such Participant's Accounts exceed 20%
of the total of all Account balances, then the amounts in excess of said
20% shall be credited to that Participant's Segregated Investments
Account and invested in investments other than Company Stock.
(5) In the case of a sale in which a seller elects
nonrecognition of gain under Section 1042 of the Code, no portion of such
Qualified Employer Securities may be allocated to the Account of (i) the
seller (or the seller's family) during the nonallocation period or (ii)
any other person who owns (after application of the family attribution
rules) more than 25% of any class of outstanding Company Stock, or more
than 25% of the total value of any class of outstanding Company Stock, at
any time during the one year period preceding the purchase of such
Qualified Employer Securities by the Plan, or on any subsequent date when
such Qualified Employer Securities are allocated to Participants in the
Plan. For purposes of this Paragraph, the seller's family shall include
the seller's spouse, ancestors, lineal descendants, and brothers and
sisters. Notwithstanding the foregoing, lineal descendants of a seller
shall be permitted to share in the allocation of Qualified Employer
Securities, provided that the aggregate amount of such stock allocated
for the benefit of all such lineal descendants does not exceed more than
five percent of such stock purchased from the seller. For purposes of
this Paragraph (5), a person shall be considered to be a more than 25%
shareholder if the amount of Company Stock which such person owns
(whether outright or as a Plan Participant), together with the amount of
Company Stock owned by such person's spouse, children, grandchildren and
parents (whether outright or as Plan Participants), exceeds 25% of any
class of outstanding Company Stock or 25% of the total value of any class
of outstanding Company Stock. For purposes of this Paragraph (5), the
"nonallocation period" means the period beginning on the date of the sale
and ending on the later of (i) the date which is 10 years after the date
of sale, or (ii) the date of the Plan allocation attributable to the
final payment of the Securities Acquisition Loan.
(6) If, due to forfeitures, reasonable error in estimating
compensation, or other limited facts and circumstances as determined by
the Commissioner, the Account balances or the Annual Additions to a
Participant's Accounts would exceed the limitation described in
Paragraphs (1), (2), or (3) of this Subsection, the aggregate of the
Annual Additions to this Plan and the Annual Additions to any other plan
described in Paragraphs (2) or (3) shall be reduced until the applicable
limitation is satisfied.
(7) The reduction shall be treated the same as Forfeitures and
shall be allocated in accordance with Section 11(a)(2) of the Plan to the
Accounts of Participants who are not affected by this limitation.
(8) If any amount cannot be reallocated under the foregoing
provision, such amount shall be deposited in a suspense account and
allocated to the maximum extent possible under Section 11(a)(2) of the
Plan in succeeding years, provided that (i) no Employer Contributions are
made until Section 415 of the Code will permit their allocation, (ii) no
investment gains or losses are allocated to such suspense account, and
(iii) the amounts in such suspense account are allocated at the earliest
possible date.
SECTION 12. PLAN BENEFIT AT DEATH, DISABILITY, OR RETIREMENT.
A Participant's "Termination Date" will be the date on which his
employment with the Employer is terminated because of the first to occur
of the Participant's Death, Disability, or Retirement. A Participant's
Plan benefit upon death, Disability, or Retirement will be the total of
the Participant's Account balances as of the coinciding or following
Anniversary Date. A Participant who, while employed with the Company,
dies or attains any of the following Retirement dates will be 100% vested
(a) NORMAL RETIREMENT.
The Participant retires or is retired, as permitted by
applicable law, from the employ of the Employer on the date on which he
attains age 65 or the fifth anniversary of the date he commenced
participation in the Plan, if he commences participation in the Plan
within five years before attaining age 65.
(b) DISABILITY RETIREMENT.
The Participant is retired from the employ of the Employers and
the Related Companies at any age because of disability (physical or
mental), as determined by a qualified physician selected by the Trustee.
A Participant will be considered to be disabled for purposes of the Plan
if on account of a disability he is no longer capable of performing the
duties assigned to him by his Employer.
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(c) DEFERRED RETIREMENT.
If a Participant continues in the service of the Employer
beyond the Normal Retirement Date, such Participant shall continue to
participate in the Plan during any period of employment following the
Normal Retirement Date.
Any amount credited to a Participant's Accounts with respect to
the Employer's Contribution for the Plan Year in which such Participant
dies, becomes Disabled, or attains any of the above Retirement dates
shall also be completely vested at the time of such contribution.
SECTION 13. OTHER TERMINATION OF SERVICE AND VESTING.
(a) VESTING SCHEDULE.
If a Participant has a Break in Service or the Participant's
employment is terminated for any reason other than as described in
Section 12, the vesting of such Participant's Plan Benefit will be based
upon Years of Service, as defined in Section 2, in accordance with the
following vesting schedule:
NUMBER OF YEARS OF SERVICE VESTED PERCENTAGE
Less than Three Years 0%
3 years but less than 4 years 20%
4 years but less than 5 years 40%
5 years but less than 6 years 60%
6 years but less than 7 years 80%
7 years or more 100%
(b) VESTING UPON REEMPLOYMENT.
If a Participant is reemployed by the Company following a Break
in Service, such Participant's Accounts shall be vested as follows:
(1) VESTING OF PRIOR ACCOUNT BALANCES.
If a Participant has had five consecutive one-year Breaks in
Service, Years of Service after such five-year period will not be taken
into account for purposes of determining a Participant's vested interest
in the Participant's prebreak Account balances and new Accounts will be
established to record the Participant's interest in the Plan for service
after such five-year period.
(2) VESTING OF SUBSEQUENT ACCOUNT BALANCES.
(A) In the case of a Participant who, at the time of a
Break in Service, does not have any vested right under Paragraph (a)
above, Years of Service before such Break in Service shall not be taken
into account unless such Participant returns to work for the Employer and
completes one Year of Service. Notwithstanding the foregoing, Years of
Service before such Break in Service shall not be taken into account for
purposes of determining a Participant's vested interest in the
Participant's postbreak Account balances if the number of consecutive
one-year Breaks in Service equals or exceeds five years or the aggregate
number of years of prebreak service, whichever is greater.
(B) If a Participant had any degree of vested interest at
the time of the Participant's Break in Service, such Participant shall
participate retroactively to the Participant's reemployment date for
purposes of determining a Participant's vested interest in the
Participant's postbreak Account balances. Upon resuming participation,
such Participant's Years of Service shall include all Years of Service
prior to the Break in Service.
(c) FORFEITURES.
Forfeitures shall first be charged against a Participant's
Other Investments Account, with any balance charged next against the
Participant's Company Stock Account. If a portion of a Participant's
Account is to be forfeited and interests in more than one class of
Employer Securities have been allocated to a Participant's Account, the
Participant shall forfeit the same percentage of each such class. The
disposition of such Forfeitures shall be as follows:
(1) If a Participant has incurred five consecutive
one-year Breaks in Service and has not received a "cash-out distribution"
(as defined below), the nonvested balance of the Participant's Accounts
shall be allocated as a Forfeiture as soon as possible after the close of
the Plan Year in which the Participant incurs a five-year Break in
Service.
(2) If a Participant who is not 100% vested receives a
distribution of a Plan Benefit, which is not a "cash-out distribution"
(as defined below), prior to the occurrence of a five-year Break in
Service, and such Participant returns to work for the Employer, the
portion of the Participant's Accounts which was not vested shall be
maintained separately (from any additional contributions to this Plan)
until such Participant becomes 100% vested. Such Participant's vested and
nonforfeitable percentage in such separate Accounts upon any subsequent
termination of Service shall be equal to:
X - Y__
100%-Y
For purposes of applying this formula, X is the vested
percentage at the time of the subsequent termination, and Y is the vested
percentage at the time of the prior termination. Separate Accounts shall
share in the allocation of Trust income or loss on every Anniversary Date
prior to Forfeiture, but such accounts shall not share in allocation of
Trust income or loss on the Anniversary Date on which they are forfeited.
(3) If a Participant receives a "cash-out distribution"
(as defined below), the nonvested balance of the Participant's Accounts
shall be allocated as a Forfeiture as of the Anniversary Date coinciding
with or following the date such Participant incurred a one-year Break in
Service or received the cash-out distribution, whichever is later.
(d) CASH-OUT DISTRIBUTION.
If a partially vested Participant receives a cash-out
distribution, the cash-out distribution will result in a forfeiture of
the nonvested portion of the Participant's Accounts. A "cash-out
distribution" is a distribution of the entire vested portion of a
Participant's Accounts which is made before the Participant incurs five
consecutive one-year Breaks in Service.
If any former Participant shall be reemployed by the Employer
before five consecutive one-year Breaks in Service, and such former
Participant had received a cash-out distribution prior to reemployment,
the forfeited portion of such Participant's Accounts shall be reinstated
only if the Participant repays the full amount distributed to such
Participant. Such repayment must be made by the former Participant before
the Participant incurs five consecutive one-year Breaks in Service
following the date of distribution and before the five-year anniversary
of his reemployment date. If the former Participant does repay the full
amount distributed to such Participant, the undistributed portion of the
Participant's Accounts must be restored in full, unadjusted by any gains
or losses occurring subsequent to the Anniversary Date preceding the
Participant's termination. Restoration of a Participant's Accounts shall
include restoration of all Code Section 411(d)(6) protected benefits with
respect to such restored amounts.
If the Participant repays the amount distributed to such
Participant within the required time period, the Committee shall restore
the forfeited portion of the Participant's Accounts as of the Anniversary
Date coinciding with or following the repayment. Such amount shall be
restored, to the extent necessary, in the following manner: (A) first
from current-year Forfeitures; (B) second from current-year Trust
earnings; and (C) third from current-year Contributions. To the extent
the amounts described in clauses (A), (B), and (C) are insufficient to
enable the Committee to make the required restoration, the Employer must
contribute the additional amount necessary to enable the Committee to
make the required restoration.
A terminated Participant who is zero percent vested shall be
deemed to have received a cash-out distribution as of the last day of the
Plan Year in which the Participant terminates. For purposes of applying
the restoration provisions of this Paragraph, the Committee will treat a
zero percent vested Participant as repaying the Participant's cash-out
distribution on the first day of reemployment with the Employer.
SECTION 14. DISTRIBUTION OF PLAN BENEFIT.
(a) DEATH, DISABILITY, OR RETIREMENT.
Distribution will be made, to or for the benefit of the Participant
or, in the case of the Participant's death, his Beneficiary, subject to
subsection 14(e), by either, or a combination of, the following methods:
(1) By payment in a lump sum (required if the total vested
value of a Participant's Company Stock Account and Other Investments
Account is $5,000 or less) or;
(2) By payment in a series of substantially equal annual
installments over a period not to exceed five years, provided the maximum
period over which the distribution of a Participant's Company Stock
Account and other Investments Accounts may be made shall be extended by
one year, up to five additional years, for each $100,000 (or fraction
thereof) by which such Participant's Company Stock Account and other
Investment Account balance exceed $500,000 (the aforementioned figures
are subject to cost-of-living adjustments prescribed by the Secretary of
the Treasury).
(b) OTHER TERMINATION OF PARTICIPATION.
If a Participant terminates employment for reasons other than
death, Disability, or Retirement, subject to Subsection 14(e), the
Participant's vested Plan Benefit will be distributed as follows:
(1) COMPANY STOCK ACCOUNT AND OTHER INVESTMENTS ACCOUNT
(EXCEEDING $5,000).
If a Participant is not reemployed before the end of the fifth
Plan Year following the Plan Year in which the Participant terminates
employment, distribution of the Participant's Company Stock Account and
Other Investments Account will commence as soon as administratively
feasible after the close of the fifth Plan Year following the Plan Year
in which the Participant terminates employment. Distribution of such
Accounts will be made in annual installments over a period of years not
to exceed five years in an annual amount of $500,000. However, if the
value of such Accounts exceeds $500,000, as indexed, the term of the
distribution shall be five years, plus one year (but not more than five
additional years) for each $100,000 (or fraction thereof), as indexed, by
which the Plan Benefit exceeds $500,000, as indexed.
Notwithstanding the foregoing provisions of this Section 14(b),
the Plan shall not be required to distribute any Employer Securities
acquired with the proceeds of a Securities Acquisition Loan until the
close of the Plan Year in which such Securities Acquisition Loan has been
repaid in full.
Notwithstanding the foregoing provisions of this Section 14(b),
the Plan shall not be required to distribute any Employer Securities to
the extent that the Participants or Beneficiaries have elected to have
their Company Stock Account diversified under the provisions of Section
17(a) hereof.
Notwithstanding anything in this Section 14 to the contrary, in
the event a Participant's employment is terminated for reasons other than
death, Disability, or Retirement, subject to Section 14(e), distribution
of the Participant's Plan Benefit shall commence no later than one (1)
year after the close of the Plan Year in which the earliest of the
following events occurs:
(A) the Participant's Normal Retirement Date; or
(B) the Participant's death; or
(C) the Participant's Disability.
(2) COMPANY STOCK ACCOUNT AND OTHER INVESTMENTS ACCOUNT ($5,000
OR LESS).
Notwithstanding the foregoing, if the total vested value of a
Participant's Company Stock Account and Other Investments Account is
$5,000 or less, distribution shall be made in a lump sum as soon as
possible after the close of the Plan Year in which the Participant incurs
a one-year Break in Service.
(c) DEATH PRIOR TO DISTRIBUTION.
If a Participant who has elected to defer distribution dies
before the distribution has commenced, such Participant's entire Plan
Benefit shall be distributed within five years of the date of the
Participant's death; provided, however, that if any portion of a
Participant's Plan Benefit is payable to or for the benefit of an
individual who is the Participant's designated Beneficiary, such portion
may, at the election of such Beneficiary, be distributed over a period
not exceeding the life expectancy of such Beneficiary, provided such
distributions begin not later than one year after the death of the
Participant; and provided further that if the designated Beneficiary is
the spouse of the Participant, at the election of the spouse, such
distribution (over a period not exceeding the life expectancy of said
spouse) need not commence until the date the Participant would have
attained age 70-1/2.
(d) VALUATION DATE.
All Accounts, including the Company Stock Account, shall be
valued as of the appropriate Valuation Date. The Company or the
Committee may require other valuations from time to time as necessary.
(e) LIMITATIONS.
If a present value of a Participant's Plan Benefit (determined
in accordance with Section 411(a)(11)(B) of the Code) has ever exceeded
$5,000, any distribution prior to the later of age 62 or the
Participant's Normal Retirement Date may be made only with the written
consent of the Participant. The Committee shall provide the Participant
with a written notice which explains the provision of Section 411(a)-
11(c), not less than 30 days nor more than 90 days before the
distribution date. If the distribution is one to which Sections
401(a)(11) and 417 of the Internal Revenue Code do not apply, such
distribution may commence less than 30 days after the notice required
under Section 1.411(a) - 11(c) of the Income Tax Regulations is given,
provided that:
(1) the Committee clearly informs the Participant that
the Participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not to elect
a distribution (and, if applicable, a particular distribution option),
and
(2) the Participant, after receiving the notice,
affirmatively elects a distribution.
Failure of a Participant to consent to an immediate
distribution within the applicable time limit is an election to defer
benefits to the later of age 62 or the Normal Retirement Date of the
Participant.
(f) COMMENCEMENT OF BENEFITS.
Pursuant to Section 401(a)(9) of the Code as amended by the
Small Business Job Protection Act, distribution of a Participant's Plan
Benefits are required to begin by April 1 of the Plan Year following the
later of (1) the Plan Year in which the Participant attains age 70-1/2 or
(2) the Plan Year in which the Participant separates from service of the
Employer. However, in the case of a five-percent owner of the Employer,
distributions are required to begin no later than April 1 of the Plan
Year following the Plan Year in which the five-percent owner attains age
70-1/2.
Notwithstanding anything in this Section 14 to the contrary,
payment of the Plan Benefit will commence, unless the Participant
otherwise elects, no later than the 60th day after the close of the Plan
Year (or if later, after the Plan Benefit is determined) in which the
latest of the following events occurs:
(1) The attainment by the Participant of the Normal Retirement
Date;
(2) The Participant's actual retirement from the employ of the
Company;
(3) The 10{th} anniversary of the year in which the
Participant commenced participation in the Plan.
(g) UNDISTRIBUTED ACCOUNTS.
Any part of a Participant's Company Stock Account and Other
Investments Account which is retained in the Trust after the Anniversary
Date coinciding with or immediately following the date on which the
Participant terminates employment will continue to be treated as a
Company Stock Account or as an Other Investments Account, as the case may
be. Thus, the Other Investments Account of a terminated Participant will
be debited (and the Participant's Company Stock Account will be credited)
with such Participant's share of any repurchases of Company Stock from
other terminated Participants; provided, however, that a terminated
Participant's Other Investments Account shall not be debited for any
repurchases in the year in which such Participant incurs a one-year Break
in Service. However, except in the case of reemployment (as provided for
in Section 4), none of the Participant's Accounts will be credited with
any further Employer Contributions or Forfeitures.
(h) LIEN ON DISTRIBUTION.
Notwithstanding anything to the contrary herein, if, at the
time of distribution, a Participant is indebted to the Trust, or has
retained in his or her possession money or property which properly
belongs to the Trust, the Trust shall have a lien on such distribution
pending the resolution of such ownership rights. The Trustee may exercise
such lien either by directing the Company Secretary to withhold any stock
transfer of title, or by withholding distribution of any stock or the
value of any stock or other assets, pending resolution of such ownership
rights. Notwithstanding the foregoing, Plan Benefits under this Plan may
not be assigned or alienated except to the extent allowable under Code
Sections 401(a)(13) and 414(p).
SECTION 15. HOW PLAN BENEFIT WILL BE DISTRIBUTED.
(a) FORM OF DISTRIBUTION.
Subject to a Participant's right to demand distribution of such
Participant's Company Stock Account and Other Investments Account
entirely in the form of Employer Securities, the Trustee may distribute
such Participant's Plan Benefit entirely in cash or entirely in the form
of Employer Securities. Distributions made in the form of Employer
Securities shall be made in the form of whole shares of Employer
Securities with the value of any fractional shares paid in cash.
The Trustee will make distributions from the Trust in
accordance with instructions from the Committee.
(b) BENEFICIARIES.
(1) DESIGNATION.
Distribution will be made to the Participant if living,
and if not, to the Participant's Beneficiary. A Participant may designate
a Beneficiary upon becoming a Participant and may change such designation
at any time by filing a written designation with the Committee.
Notwithstanding anything in this Section 15 to the contrary, if a
Participant is married, a Participant shall not designate anyone other
than the Participant's spouse as primary Beneficiary of the Participant's
Plan Benefit unless such spouse consents in writing to such designation,
such spouse acknowledges the effect of such election, and such writing is
witnessed by a Plan representative or notary public and filed with the
Plan Committee.
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(2) ABSENCE OF VALID DESIGNATION.
If, upon the death of a Participant, former Participant or
Beneficiary, there is no valid designation of a Beneficiary on file with
the Company or the benefit is not claimed by any Beneficiary within a
reasonable period of time after the death of the Participant, the benefit
shall be paid to the Participant's surviving spouse. If the Participant
is not married or if the Participant's spouse does not survive the
Participant, the benefit shall be paid to the Participant's estate.
SECTION 16. RIGHTS AND OPTIONS ON DISTRIBUTED SHARES OF COMPANY STOCK.
(a) "PUT" OPTION.
If Company Stock is not readily tradable on an established
market, the Company shall issue a "Put Option" to each Participant or
Beneficiary receiving a distribution of Company Stock from the Plan. The
Put Option shall permit the Participant or Beneficiary to sell such
Company Stock at its then fair market value, as determined by an
Independent Appraiser, to the Company, at any time during the 60-day
period commencing on the date the Company Stock was distributed to the
recipient and, if not exercised within that period, the Put Option will
temporarily lapse. Upon the close of the Plan Year in which such
temporary lapse of the Put Option occurs, the Independent Appraiser shall
determine the value of the Company Stock, and the Trustee shall notify
each distributable who did not exercise the initial Put Option prior to
its temporary lapse in the preceding Plan Year of the revised value of
the Company Stock. The time during which the Put Option may be exercised
shall recommence on the date such notice or revaluation is given and
shall permanently terminate 60 days thereafter. The Trustee may be
permitted by the Company to purchase Company Stock put to the Company
under a Put Option. At the option of the Company or the Trustee, as the
case may be, the payment for Company Stock sold pursuant to a Put Option
shall be made in the following forms:
(a) if the Company Stock was distributed as part of a total
distribution (that is, a distribution within one taxable balance of the
credit of the Participant's Company Stock Accounts), then payments may be
made in substantially equal annual installments commencing within 30 days
from the date of the exercise of the Put Option and over a period not
exceeding five years, with interest payable at a reasonable rate (as
determined by the Company) on any unpaid installment balance, with
adequate security provided, and without penalty for any prepayment of
such installments; or
(b) if a Participant or Beneficiary exercises a Put Option on
a distribution of Company Stock made to him in periodic payments then the
payment for such Company Stock may be made in a lump sum no later than 30
days after such Participant exercises the Put Option.
The Trustee on behalf of the Trust may offer to purchase any shares
of Company Stock (which are not sold pursuant to a Put Option) from any
former Participant or Beneficiary at any time in the future, at their
then fair market value.
(b) RIGHT OF FIRST REFUSAL
Subject to the provisions of the last sentence of this subsection,
shares of the Company Stock distributed by the Trustee shall be subject
to a "Right of First Refusal." The Right of First Refusal shall provide
that, prior to any subsequent transfer, such Company Stock must first be
offered in writing to the Company and, if then refused by the Company, to
the Trust, at the then fair market value, as determined by an Independent
Appraiser (as defined in section 401(a)(28) of the Code). A bona fide
written offer from an independent prospective buyer shall be deemed to be
the fair market value of such Company Stock for this purpose unless the
value per share, as determined by the Independent Appraiser as of the
most recent Accounting Date, is greater. The Company and the Trustee
shall have a total of 14 days (from the date the Company receives the
offer) to exercise the Right of First Refusal on the same terms offered
by the prospective buyer. A Participant (or Beneficiary) entitled to a
distribution of Company Stock may be required to execute an appropriate
stock transfer agreement (evidencing the Right of First Refusal) prior to
receiving a certificate for Company Stock. No Right of First Refusal
shall be exercisable by reason of any of the following transfers:
(1) the transfer upon the death of a Participant or
Beneficiary of any shares of Company Stock to his legal representatives,
heirs, and legatees, provided however, that any proposed sale or other
disposition of any such shares by any legal representative, heir, or
legatee shall remain subject to the Right of First Refusal;
(2) the transfer by a Participant or Beneficiary in accordance
with the Put Option pursuant to subsection 9.2 below; or
(3) the transfer while the Company Stock is listed on a
national securities exchange registered under Section 6 of the Securities
Exchange Act of 1934, or quoted on a system sponsored by a national
securities association registered under Section 15A(b) of the Securities
Exchange Act of 1934, as amended.
(c) OTHER OPTIONS
Except as otherwise provided in this Section 16, no security
acquired with the proceeds of a Securities Acquisition Loan may be
subject to a put, call, buy-sell, or similar arrangement while held by or
when distributed from the Plan.
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SECTION 17. SPECIAL PROVISIONS.
(a) DIVERSIFICATION OF INVESTMENTS.
If a Participant attains age 55 and has 10 years of participation in the
Plan (so that he is a "Qualified Participant"), the Committee shall offer
such Participant a distribution of the value of at least 25% of the
number of shares of Company Stock credited to his Company Stock Account
in the first five years of his Qualified Election Period (as defined
below), and 50% of the number of shares of Company Stock credited to his
Company Stock Account in the last year of the Qualified Election Period
in accordance with the provisions of this subsection. The Participant
must elect to receive such a distribution within 90 days after the end of
each of the six Plan Years during the Qualified Election Period (the
"Diversification Election Period"), and the distribution will be made
within 90 days after each election made by Participant during the
Diversification Election Period. The "Qualified Election Period" means
the six Plan Years beginning with the Plan Year during which a
Participant becomes a Qualified Participant. The amount which may be
distributed to a Participant during the Qualified Election Period shall
be determined by multiplying the number of shares of Company Stock
credited to the Participant's Company Stock Account (including shares of
Company Stock the value of which has been previously distributed pursuant
to this subsection) by 25% or, with respect to a Participant's final
election, 50%, reduced by the amount of any prior distributions received
by such Participant pursuant to this subsection.
(b) CASH DIVIDENDS.
Cash dividends, if any, on shares of Company Stock allocated to
Participants' Accounts may be accumulated in the Trust or may be paid to
Participants currently as determined in the sole discretion of the
Committee, exercised in a uniform and nondiscriminatory manner. Provided
that the Plan is primarily invested in Employer Securities, it is
intended that the Company shall be allowed a deduction with respect to
any dividends paid on allocated shares of Company Stock of any class held
by the Plan on the record date to the extent such dividends are paid in
cash directly to the Participants, or their Beneficiaries, or are paid to
the Plan and are distributed from the Plan to the Participants or their
Beneficiaries not later than 90 days after the close of the Plan Year in
which paid; provided, however, that the Company shall not be required to
pay or distribute any dividends with respect to the nonvested portion of
the Company Stock Account of a Participant who has terminated employment
prior to the date such dividends are paid directly to Participants, or
are distributed from the Plan to the Participants. Provided that the Plan
is primarily invested in Employer Securities, it is also intended that
the Company shall be allowed a deduction for any dividends used to make
payments on a Securities Acquisition Loan the proceeds of which were used
to acquire the Employer Securities (whether or not allocated) with
respect to which the dividend is paid, provided that in the case of
dividends paid on allocated shares, Employer Securities in an amount
equal to such dividends are allocated to such Participants for the year
in which such dividends would otherwise have been allocated to such
Participants. The Company shall be allowed a deduction for dividends paid
only in the taxable year of the Company in which the dividend is either
paid to a Participant or Beneficiary or held to make payments on a
Securities Acquisition Loan.
Shares of Employer Securities released from the suspense
account (as provided in Section 7(b) of the Plan) by reason of the
payment of principal and interest on a Securities Acquisition Loan with
cash dividends paid to the Trust, shall be allocated as of each
Anniversary Date among the Accounts of Participants who meet the
requirements of Section 4 of the Plan, in the proportion that each such
Participant's Covered Compensation bears to the total Covered
Compensation of all such Participants for that year.
SECTION 18. THE COMMITTEE
(a) APPOINTMENT AND AUTHORITY.
The Committee shall be appointed by the Board of Directors of the
Company. Except as otherwise specifically provided in this Section, the
Committee shall have the following powers, rights, and duties in addition
to those vested in it elsewhere in the Plan:
(1) To adopt such rules of procedure and regulations as, in
its opinion, may be necessary for the proper and efficient administration
of the Plan and as are consistent with the provisions of the Plan;
(2) To enforce the Plan in accordance with its terms and with
such applicable rules and regulations as may be adopted by the Committee;
(3) To determine all questions arising under the Plan,
including the power to determine the rights or eligibility of employees
or Participants and their Beneficiaries and their respective benefits,
and to remedy ambiguities, inconsistencies, or omissions;
(4) To give such directions to the Trustee with respect to the
Trust Fund as may be provided in the Trust Agreement, including the
depositories which have been designated by the Board, which must be an
incorporated Federally insured bank or trust company;
(5) To maintain and keep adequate books, records, and other
data as shall be necessary to administer the Plan, except those that are
maintained by the Company or by the Trustee, and to meet the disclosure
and reporting requirements of ERISA;
(6) To direct all payments of benefits under the Plan;
(7) To establish an investment policy and objective for the
Plan;
(8) To be agent for the service of legal process on behalf of
the Plan;
(9) To execute any documents on behalf of the Committee, in
which event the Committee shall notify the Trustee in writing of such
action; and
(10) To perform any other acts necessary or appropriate to the
administration of the Plan and the discharge of its duties.
The certificate of a Committee member that the Committee has taken
or authorized any action shall be conclusive in favor of any person
relying on the certificate.
(b) DELEGATION BY COMMITTEE.
The Committee may establish procedures for allocation of fiduciary
responsibilities and delegation of fiduciary responsibilities to persons
other than named fiduciaries; however, the delegation of the power to
manage or control Plan assets may only be delegated to an Investment
Manager, as defined in Section 3(38) of ERISA. In exercising its
authority to control and manage the operation and administration of the
Plan, the Committee may employ agents and counsel (who may also be
employed by or represent any Employer) and to delegate to them such
powers as the Committee deems desirable. Any such delegation or
appointment shall be in writing. The writing contemplated by the
foregoing sentence shall fully describe the advice to be rendered or the
functions and duties to be performed by the delegate.
(c) UNIFORM RULES.
In managing the Plan, the Committee will uniformly apply rules and
regulations.
(d) INFORMATION TO BE FURNISHED TO COMMITTEE.
The Employer shall furnish the Committee such data and information
as may be required. The Committee shall be entitled to rely on any
information furnished by the Company that is needed for calculation of
benefits due under the Plan, or any matters relating to administration of
the Plan. A Participant, surviving spouse, or other person entitled to
benefits under the Plan must furnish to the Committee such evidence,
data, or information as the Committee considers desirable to carry out
the Plan. Any benefits under the Plan may be conditional upon the prompt
submission of such information. Any adjustment by the Committee by reason
of a misstatement of age or lack of information will be made in a manner
the Committee deems equitable.
(e) COMMITTEE'S DECISION FINAL.
To the extent permitted by law, any interpretation of the Plan and
any decision on any matter within the discretion of the Committee (such
as eligibility for participation and the timing and amount of benefit
payments) made by the Committee in good faith is binding on all persons.
A misstatement or other mistake of fact shall be corrected when it
becomes known, and the Committee shall make such adjustment on account
thereof as they consider equitable and practicable.
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(f) EXERCISE OF COMMITTEE'S DUTIES.
Notwithstanding any other provisions of the Plan, the Committee
members shall discharge their duties hereunder solely in the interests of
the Participants and other persons entitled to benefits under the Plan,
and:
(1) for the exclusive purpose of providing benefits to
Participants and other persons entitled to benefits under the Plan;
(2) with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent person acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims; and
(3) in accordance with the documents and instruments governing
the Plan insofar as they are consistent with ERISA.
(g) REMUNERATION AND EXPENSES.
No remuneration shall be paid to a Committee member as such.
However, the reasonable expenses of a Committee incurred in the
performance of a Committee function shall be reimbursed by the Employers.
(h) INDEMNIFICATION OF THE COMMITTEE.
To the extent permitted by applicable law, any person or entity
appointed by the Board of Directors to serve as a Committee member shall
be indemnified by the Company against any and all liabilities,
settlements, judgments, losses, costs, and expenses (including reasonable
legal fees and expenses) of whatever kind and nature which may be imposed
on, incurred by, or asserted against the Committee or its members by
reason of the performance or nonperformance of a Committee function if,
in the opinion of the Board of Directors of the Company, such action was
not dishonest or in willful violation of the law or regulations under
which such liability, loss, cost, or expense arose. Furthermore, the
Company agrees to indemnify the Committee members against any liability
imposed as a result of a claim asserted by any person or persons under
Federal or state law where the Committee acts in good faith or in
reliance on a written direction or certification of the Company. The
foregoing right of indemnification shall be in addition to other rights
the members by law or by reason of insurance coverage of any kind. The
Company may, at its own expense, settle any claim asserted or proceeding
brought against any member of the Committee when such settlement appears
to be in the best interests of the Company. If the Company obtains
fiduciary liability insurance to protect the Committee or any of its
members, the provisions of this subsection shall be applicable only to
the extent that such insurance coverage is insufficient.
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(i) RESIGNATION OR REMOVAL OF COMMITTEE MEMBER.
Any person or entity appointed as a Committee member may resign at
any time by delivering their written resignation to the Company. The
Company, at its discretion, may immediately remove any or all of the
Committee members with or without cause upon delivery of written notice
to them.
(j) APPOINTMENT OF SUCCESSOR COMMITTEE.
The Board will promptly fill any vacancy in the membership of the
Committee and shall give prompt written notice thereof to the other
Employers and the Trustee.
(k) INTERESTED PERSON.
A fiduciary may not decide or determine any matter or question
concerning his own benefits under the Plan or as to how they are to be
paid to him unless such decision could be made by him under the Plan if
he were not a member of the Committee, except when such decision applies
to all Participants similarly. If a person is disqualified to act, the
Company may appoint a temporary member to exercise the powers of the
interested person concerning the matter as to which he is disqualified,
or the remaining Committee members may act without the appointment of a
new Committee member.
(l) CLAIMS PROCEDURE.
Any Participant or Beneficiary who disputes the Committee's
determination of the benefits due to him under the Plan may file a claim
with the Committee. A claim must be in writing, in a form which gives the
Committee reasonable notice of the claim, sets forth the basis of the
claim, and authorizes the Committee to take all steps reasonably
necessary to determine the validity of the claim and to facilitate the
payment of any benefits to which the claimant is entitled. The Committee
will, if reasonably possible, decide whether to grant or deny a claim
within 90 days after it is filed. If a longer period is needed, the
Committee will, no later than the last day of the 90 day period, notify
the claimant of the extension of time and the reasons why it is needed. A
decision must then be rendered within 90 days after the claimant was
notified of the extension. If the Committee does not act within the time
specified by this subsection, the claim is automatically denied, and the
claimant may appeal in accordance with this subsection. If the Committee
determines that a claim should be denied, it will give the claimant
written notice of denial. This notice must be written in a manner
calculated to be understood by the claimant, state specific reasons for
denying the claim, citing the provisions of the Plan on which the denial
is based, explain the procedure for reviewing the Committee's decision,
and if the claim is denied because the Committee lacks adequate
information to reach a decision, state what information is needed to make
a decision possible and why it is needed. If a claim is denied, the
claimant may appeal to the Company. His appeal must be submitted in
writing to the Company no later than 60 days after the earlier of the
date on which he receives notice of denial or the expiration of the
period within which the Company is required to render a decision. The
claimant or his representative may submit any documents or written
arguments that he desires in support of his claim, and the Company may,
but is not required to, hold a hearing on the claim. The Company will, if
reasonably possible, decide the claimant's appeal within 60 days after it
is filed. If a longer period is needed, the Company will, no later than
the last day of the 60 day period, notify the claimant of the extension
of time and the reasons why it is needed. A decision must then be
rendered within 60 days after the claimant was notified of the extension.
If the Company does not act within the time specified by this subsection,
the appeal is automatically denied. If the Company determines that an
appeal should be denied, it must give the claimant written notice of the
denial in the same manner as required on initial denial of the claim by
the Company.
SECTION 19. AMENDMENT AND TERMINATION
(a) AMENDMENT.
While the Employer expects and intends to continue the Plan, the
Company must reserve, and reserves the right, to amend the Plan at any
time, except as follows:
(1) the duties and liabilities of the Trustee cannot be
substantially changed without their consent, and
(2) no amendment shall reduce a Participant's benefits to less
than the amount such Participant would be entitled to receive if such
Participant had resigned from the employ of all of the Employers and
Related Companies on the date of the amendment.
(b) TERMINATION.
The Plan will terminate as to the Employer on any day specified by
the Company. The Plan will terminate as to the Employer on the first to
occur of the following:
(1) the date it is terminated by that Employer if 30 days'
advance written notice is given to the Trustee;
(2) the date the Employer's contributions under the Plan are
completely discontinued;
(3) the date the Employer is judicially declared bankrupt under
Chapter 7 of the U.S. Bankruptcy Code; or
(4) the dissolution, merger, consolidation, or reorganization
of the Employer, or the sale by the Employer of all or substantially all
of its assets, except that, subject to the provisions of subsection (c),
with the consent of the Company, in any event such arrangements may be
made whereby the Plan will be continued by any successor to that
Employer or any purchaser of all or substantially all of that Employer's
assets, in which case the successor or purchaser will be substituted for
that Employer under the Plan.
(c) MERGER AND CONSOLIDATION OF PLAN; TRANSFER OF PLAN ASSETS.
In the case of any merger or consolidation with, or transfer of
assets and liabilities to, any other plan, provisions shall be made so
that each Participant in the Plan on the date thereof, if the Plan then
terminated, would receive a benefit immediately after the merger,
consolidation, or transfer which is equal to or greater than the benefit
he would have been entitled to receive immediately prior to the merger,
consolidation, or transfer, if the Plan had then terminated.
(d) VESTING AND DISTRIBUTION ON TERMINATION AND PARTIAL
TERMINATION.
On termination of the Plan in accordance with the provisions of
subsection (b) or on partial termination of the Plan by operation of law,
the date of termination or partial termination, as the case may be, will
be an Anniversary Date and, after all adjustments then required under the
Plan have been made, each affected employee's benefits will be
nonforfeitable. If, on termination of the Plan, a Participant remains an
employee of an Employer, the amount of the Participant's benefits may be
retained in the Trust until after the Participant's termination of
employment with the Employer and shall be paid to such Participant or, in
the event of the Participant's death, to the Beneficiary thereof in a
lump sum. The benefits payable to a Participant whose employment with the
Employer is terminated coincident with the termination of the Plan (and
the benefits payable to an affected employee on partial termination of
the Plan) shall be paid to the Participant or, in the event of the
Participant's death, to the Beneficiary thereof in a lump sum. All
appropriate accounting provisions of the Plan will continue to apply
until the benefits of all affected persons have been distributed to them.
(e) NOTICE OF AMENDMENT, TERMINATION OR PARTIAL TERMINATION.
Affected Participants will be notified of an amendment, termination
or partial termination of the Plan as required by law.
SECTION 20. MISCELLANEOUS
(a) PARTICIPATION BY AFFILIATED COMPANY.
(1) Any Affiliated Company presently existing or hereafter
acquired may, with the consent of the Company, adopt the Plan and Trust
and thereby enable its employees to participate herein.
(2) If any Participant is transferred to an Affiliated Company
which is a participating Employer, such Participant shall continue to
participate hereunder in the allocation of Employer Contributions and the
Participant's Accounts shall continue to vest in accordance with Section
13. Any Participant who is transferred to an Affiliated Company which is
not a participating Employer shall be treated as a suspended Participant
in accordance with Section 4(c).
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(b) LIMITATION OF RIGHTS: EMPLOYMENT RELATIONSHIP.
All Plan Benefits will be paid only from the Trust assets and
neither the Company nor any Employer nor the Committee nor the Trustee
shall have any duty or liability to furnish the Trust with any funds,
securities or other assets except as expressly provided in the Plan.
Nothing herein shall be construed to obligate any Employer to continue to
employ any Employee.
(c) MERGER; TRANSFER OF ASSETS.
In no event shall this Plan be merged or consolidated with any
other employee benefit plan, nor shall there be any transfer of assets or
liabilities from this Plan to any other such plan, unless immediately
after such merger, consolidation, or transfer, each Participant's
benefits, determined as if the plan had terminated, are at least equal to
or greater than the benefits which the Participant would have been
entitled to had this Plan been terminated immediately before such merger,
consolidation, or transfer.
(d) PROHIBITION AGAINST ASSIGNMENT.
The benefits provided by this Plan may not be assigned or
alienated; provided, however, that a qualified Domestic Relations Order
shall not be construed as an assignment or alienation. Except for
indebtedness to the Trust and orders to make payments or assign benefits
to a spouse, former spouse, child, or other dependent under a qualified
Domestic Relations Order, neither the Company nor the Trustee shall
recognize any transfer, mortgage, pledge, hypothecation, order, or
assignment by any Participants or Beneficiaries of all or part of their
interest hereunder, and such interest shall not be subject in any manner
to transfer by operation of law, and shall be exempt from the claims of
creditors or other claimants from all orders, decrees, levies,
garnishment, and/or executions and other legal or equitable process or
proceedings against such Participants or Beneficiaries to the fullest
extent which may be permitted by law.
(e) APPLICABLE LAW; SEVERABILITY.
The Plan hereby created shall be construed, administered, and
governed in all respects in accordance with ERISA and to the extent not
superseded by federal law, in accordance with the laws of the State of
New Jersey; provided, however, that if any provision is susceptible of
more than one interpretation, such interpretation shall be given thereto
as is consistent with the Plan being a qualified Employee Stock Ownership
Plan within the meaning of the Code. If any provision of this instrument
shall be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to be fully
effective.
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SECTION 21. TOP HEAVY PROVISIONS
The Plan will be a "top-heavy plan," if, as of the last day of the
first Plan Year or, as of the day next preceding the beginning of any
later Plan Year (the "Determination Date") and determined in accordance
with the provisions of section 416(g) of the Code, the aggregate present
value of the accrued benefits and account balances of all "Key Employees"
(within the meaning of section 416(i) of the Code) and their
Beneficiaries exceeds 60% of the aggregate present value of the accrued
benefits and account balances of all Participants and Beneficiaries. The
aggregate present value of the accrued benefits and account balances of a
Participant who has not performed any services for the Employer during
the five-year period ending on the Determination Date shall not be taken
into account. The term "Aggregation Group" shall include each plan of an
Employer or Related Company which includes a Key Employee and each Plan
of the Employer or Related Company (including a plan terminated during
the five preceding years) which allows the Plan to meet the requirements
of sections 401(a)(4) or 410 of the Code and may include any other plan
of an Employer or Related Company, if the Aggregation Group would
continue to meet the requirements of sections 401(a)(4) and 410 of the
Code. If the Plan is a top-heavy plan, effective as of the first day of
the Plan Year:
(a) Section 5 will automatically be amended effective as of
the first day of the Plan Year to provide that the aggregate amount of
Employer contributions allocated in each Plan Year to the Company Stock
Account of each Participant who is not a Key Employee (within the meaning
of section 416(i)(1) of the Code), and who is employed by the Employer as
of the last day of the Plan Year, may not be less than the lesser of:
(i) three percent of his Compensation for the Plan
Year; or
(ii) a percentage of his Compensation equal to the
largest percentage obtained by dividing the sum of the amount credited to
the Company Stock Account of any Key Employee by that Key Employee's
Compensation.
(b) subsection 13(a) will be modified as to all Participants
who performed an Hour of Service during such Plan Year to provide as
follows:
Vested
YEARS OF SERVICE PERCENTAGE
Less than 2 years 0%
2 years but less than 3 years 20%
3 years but less than 4 years 40%
4 years but less than 5 years 60%
5 years but less than 6 years 80%
6 years or more 100%
The preceding provisions will remain in effect for the period
in which the Plan is top-heavy. If, for any particular years thereafter,
the Plan is no longer top-heavy, the Company may amend or delete such
provisions from the Plan, except that the vesting schedule described in
paragraph (b) of this subsection may not be made less favorable for any
Participant who has completed three or more Years of Service, and no
amendment may cause any previously vested portion of any Account balance
to become forfeitable.
IN WITNESS WHEREOF, the Company and Trustee have caused these
presents to be signed and their seals to be hereunto affixed and attested
by their duly authorized officers all as of the day and year first above
written.
TOTAL-TEL USA COMMUNICATIONS, INC.
By: /s/ Thomas P. Gunning
Name: Thomas P. Gunning
Title: Chief Financial Officer
ATTEST:
/s/ Karen Ryan
Assistant Secretary
SUMMIT BANK
By: /s/ Linda J. Ferrari
Its: Vice President
ATTEST:
/s/ Richard Rolandelli
Secretary
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