<PAGE> 1
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
______________________
KMART CORPORATION
(Exact number of issuer as specified in its charter)
Michigan 38-0729500
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization
3100 West Big Beaver Road, Troy Michigan 48084
(Address of Principal Executive Offices) (Zip Code)
EMPLOYEE SAVINGS PLAN
(Full title of the plans)
A. N. Palizzi
Executive Vice President and General Counsel
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
(Name and Address of agent for service)
Telephone number, including area code, of agent for service:
313/643-1000
Copies of Communications to:
Verne C. Hampton II
Dickinson, Wright, Moon, Van Dusen & Freeman
500 Woodward, Suite 4000
Detroit, Michigan 48226
Approximate date of proposed public offering:
As soon as practicable after the effective date of this Registration Statement
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Proposed Maximum Proposed Amount of
Title of Securities Amount to be Offering Price Maximum Aggregate Registration
to be Registered Registered Per Share* Offering Price Fee
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock ($1 7,468,564
par value)...... shs. $17 7/8 $133,500,581 $46,035
- ----------------------------------------------------------------------------------------
</TABLE>
*Based upon the market price on March 16, 1994
- ---------------------------------------------
This Registration Statement also includes 6,000,000 shares for
the Employees Savings Plan previously registerd in
Registration Statement No. 33-6578.
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Kmart Corporation (the "Company") hereby incorporates by reference in this
Registration Statement the following documents previously filed with the
Securities and Exchange Commission (the "Commission") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"):
1. The Company's Annual Report on Form 10-K for the year ended
January 27, 1993.
2. The Company's Quarterly Reports on Form 10-Q for the quarters
ended April 28, 1993, July 28, 1993 and October 27, 1993.
3. The description of the Common Stock, $1.00 par value, of the
Company set forth in the Prospectus of the Company dated August 16, 1991 which
was part of Amendment No. 1 to Registration Statement No. 33-42022.
All documents subsequently filed with the Commission by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act prior to the filing of
a post-effective amendment which indicates that all securities offered hereby
have been sold or which deregisters all securities then remaining unsold shall
be deemed to be incorporated herein by reference and to be a part hereof from
the dates of filing of such documents.
ITEM 4. DESCRIPTION OF COMMON STOCK
Not Applicable.
ITEM 5. INTEREST OF NAMED EXPERTS AND COUNSEL
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws and the Michigan Business Corporation Act permit the
Company's officers and directors to be indemnified under certain circumstances
for expenses and in some instances, for judgments, fines, or amounts paid in
settlement of civil, criminal, administrative and investigative suits or
proceedings, including those involving alleged violations of the Securities Act
of 1933, as amended (the "Act"). In addition, the Company maintains directors'
and officers' liability insurance which,
<PAGE> 3
under certain circumstances, would cover alleged violations of the Act.
Insofar as indemnification for liabilities arising under the Act may be
permitted to officers and directors pursuant to the foregoing provisions, the
Company has been informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. Therefore in the event that a claim for
such indemnification is asserted by any officer or director, the Company
(except insofar as such claim seeks reimbursement by the Company of expenses
paid or incurred by an officer or director, in the successful defense of any
action, suit or proceeding) will, unless the matter has heretofore been
adjudicated by precedent deemed by the Company to be controlling, submit to a
court of appropriate jurisdiction the question of whether or not the
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
ITEM 8. EXHIBITS
The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------ -------
<S> <C>
5 Opinion and consent of Dickinson, Wright,
Moon, Van Dusen & Freeman
24 Consent of Price Waterhouse
28(a) Kmart Corporation Employee Savings Plan
</TABLE>
Additionally, the Company hereby undertakes that it has submitted or
will submit the Plan and any amendment thereto to the Internal Revenue
Service ("IRS") in a timely manner for purposes of determining qualification
under Section 401 of the Internal Revenue Code and has made or will make all
changes required by the IRS to qualify the Plan.
ITEM 9. UNDERTAKINGS
The undersigned Company hereby undertakes: 1. To file, during any period in
which offers or sales are being made, a post-effective amendment to this
Registration Statement: (i) to include any Prospectus required by Section
10(a)(3) of the Securities Act of 1933; (ii) to reflect in the Prospectus any
facts or events arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
the Registration Statement; (iii) to include any material information with
respect to the plan of distribution not previously disclosed in
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<PAGE> 4
the Registration Statement or any material change to such information in the
Registration Statement; provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the Company pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Registration
Statement. (2) That, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof. (3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934 that is incorporated by reference in the Registration Statement
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
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<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement or amendment thereto to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Troy and State of
Michigan on March 18, 1994.
KMART CORPORATION
By /s/ JOSEPH E. ANTONINI
--------------------------
(Joseph E. Antonini)
Chairman of the Board,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or amendment thereto has been signed below by the
following persons in the capacities indicated on March 18, 1994.
<TABLE>
<CAPTION>
SIGNATURE TITLE SIGNATURE TITLE
--------- ----- --------- -----
<S> <C> <C> <C>
/s/ JOSEPH E. ANTONINI Chairman of the Board, /s/ DAVID B. HARPER Director
- ------------------------ President (Principal ---------------------
(Joseph E. Antonini) Executive Officer) and (David B. Harper)
Director
/s/ THOMAS F. MURASKY Executive Vice President /s/ F. JAMES McDONALD Director
- ------------------------- (Principal Financial ---------------------
(Thomas F. Murasky) and Accounting Officer) (F. James McDonald)
/s/ LILYAN H. AFFINITO Director /s/ RICHARD S. MILLER Director
- ------------------------- ---------------------
(Lilyan H. Affinito) (Richard S. Miller)
/s/JOSEPH A. CALIFANO,JR. Director /s/ J. RICHARD MUNRO Director
- ------------------------- ---------------------
(Joseph A. Califano, Jr.) (J. Richard Munro)
/s/ WILLIE D. DAVIS Director /s/ DONALD S. PERKINS Director
- ------------------------- ---------------------
(Willie D. Davis) (Donald S. Perkins)
/s/ ENRIQUE C. FALLA Director /s/ GLORIA M. SHATTO Director
- ------------------------- ---------------------
(Enrique C. Falla) (Gloria M. Shatto)
/s/ JOSEPH P. FLANNERY Director /s/ JOSEPH R. THOMAS Director
- ------------------------- ---------------------
(Joseph P. Flannery) (Joseph R. Thomas)
</TABLE>
<PAGE> 1
DICKINSON, WRIGHT, MOON, VAN DUSEN & FREEMAN EXHIBIT 5
COUNSELLORS AT LAW
ONE DETROIT CENTER
500 WOODWARD AVENUE - SUITE 4000
DETROIT, MICHIGAN 48226-3425 BLOOMFIELD HILLS, MICHIGAN
TELEPHONE (313) 223-3500 LANSING, MICHIGAN
FACSIMILE (313) 223-3598 GRAND RAPIDS, MICHIGAN
WASHINGTON, D.C.
CHICAGO, ILLINOIS
WARSAW, POLAND
March 23, 1994
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Kmart Corporation
Employee Savings Plan
Registration Statement on Form S-8
Gentlemen:
As counsel for Kmart Corporation, a Michigan corporation (the
"Corporation"), we are familiar with the corporate affairs of the
Corporation and particularly with the corporate proceedings relating to
the establishment of the Corporation's Employee Savings Plan (herein called
the "Plan") and the action of the Board of Directors of the Corporation
authorizing additional shares to be issued under the Plan.
The Plan was duly and legally adopted by the Board of Directors
of the Corporation.
Based upon the above, we are of the opinion that:
1. The Corporation duly and validly has
adopted and established the Plan
taking all necessary corporate
action for that purpose.
2. The shares of Common Stock of the
Corporation covered by the Plan have
been duly authorized and when issued
pursuant to the Plan will be validly
issued, fully paid and non-
assessable and no personal liability
will attach to the holders thereof.
Exhibit 5
<PAGE> 2
DICKINSON, WRIGHT, MOON, VAN DUSEN & FREEMAN
Securities and Exchange Commission
March 23, 1994
Page Two
We hereby consent to the use of this opinion as a
part (Exhibit 5) to the Registration Statement on Form S-8
which is being filed by the Corporation with the Securities
and Exchange Commission with respect to the plan.
Very truly yours,
DICKINSON, WRIGHT, MOON,
VAN DUSEN & FREEMAN
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 24
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-8 of our report
dated March 1, 1993, which appears on page 30 of the 1992 Annual Report to
Shareholders of Kmart Corporation, which is incorporated by reference in Kmart
Corporation's Annual Report on Form 10-K for the year ended January 27, 1993.
We also consent to the incorporation by reference of our report on the
Financial Statement Schedules, which appears on page 12 of such Annual Report
on Form 10-K.
PRICE WATERHOUSE
200 Renaissance Center
Detroit, Michigan
March 18, 1994
<PAGE> 1
EXHIBIT 28(a)
KMART CORPORATION
EMPLOYEE SAVINGS PLAN
<PAGE> 2
KMART CORPORATION
EMPLOYEE SAVINGS PLAN
SECTION I. PURPOSE AND EFFECTIVE DATE
The purpose of the Kmart Corporation Employee Savings Plan is
to encourage and assist Employees in accumulating personal savings
and provide them with an opportunity to become stockholders of the
Company.
The non-ESOP portion of the Plan is intended to qualify as a
profit-sharing plan and a cash or deferred arrangement under
Sections 401(a) and 401(k) of the Internal Revenue Code ("IRC"), and
the ESOP portion of the Plan is intended to qualify as a stock bonus
and an employee stock ownership plan for purposes of Sections 401(a),
402, 412, 417, 4975 and related provisions of the IRC.
The effective date of this amendment and restatement shall be
January 1, 1994, except as otherwise provided herein.
SECTION II. DEFINITIONS
1. "Affiliated Company" shall mean any corporation of
which the Company owns directly or indirectly not less than 50% of all
classes of voting stock or not less than 50% of all classes of
stock, or any partnership of which the Company owns directly or
indirectly not less than a 50% ownership interest.
2. "After Tax Contributions" shall mean any combination
of After Tax Basic Contributions and After Tax Supplemental
Contributions described in Subsection 1 of Section V.
3. "Before Tax Contributions" shall mean any
combination of Before Tax Basic Contributions and Before Tax
Supplemental Contributions described in Subsection 1 of Section V,
which contributions are intended to meet the conditions of and
qualify under Section 401(k) of the IRC and any other applicable
or successor provision.
<PAGE> 3
4. "Break in Service" shall mean-any successive
period of twelve consecutive months from the Employee's
employment date during which the Employee's Hours of Employment are
500 or less. An Employee who is absent from active employment for any
period by reason of (1) pregnancy of the individual, (2) birth of a
child of the individual, (3) placement of a child with the
individual in connection with an adoption, or (4) caring for a child
described in (2) or (3) immediately following such birth or
placement, and who submits evidence satisfactory to the Company of such
absence, shall not incur a Break in Service in the twelve-month period
the absence begins or the following twelve- month period, whichever is
the first in which a Break in Service would have otherwise occurred
due to such absence, provided that such Employee would have completed
more than 500 Hours of Employment during such period but for such
absence.
5. "Company" shall mean Kmart Corporation, a Michigan corporation.
6. "Company Stock" shall mean the common stock of the Company.
7. "Compensation" shall mean wages, salary, commissions
and bonus from an Employer and shall include the amount of any
deferral or reduction thereof pursuant to Section V and IRC Sections
125, 402(h)(1)(B), 403(b), and 4O2(a)(8). Compensation shall be
recognized in the pay period in which it is paid, or would have been
paid but for any deferral or reduction pursuant to Section V.
Effective as of April 1, 1989, the maximum amount of a
Participant's Compensation which may be taken into account under the
Plan for any Plan Year is $200,000, or such other amount as may be
permitted from time to time under applicable provisions of the IRC.
For purposes of applying the $200,000 limit on Compensation, a Highly
Compensated Employee's family unit will be treated as a single
Employee with one Compensation, and the $200,000 limit will be
allocated among the members of the family unit in proportion to each
member's Compensation. For this purpose, a family unit is the
Highly Compensated Employee, the Employee's spouse, and the Employee's
lineal descendants who have not attained age 19 before the close of the
year.
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<PAGE> 4
8. "Effective Date" of the Plan shall be July 1, 1982. The
Effective Date of this amendment and restatement shall be January 1,
1994, except as otherwise provided herein.
9. "Employee" shall mean any person who is in the employ of an
Employer, except that the term shall not include any person who is covered
by a collective bargaining agreement entered into with an Employer
unless, and to the extent, such agreement provides that the Plan shall
apply to such person.
10. "Employee Directed Contributions" shall mean any combination of
After Tax Contributions and Before Tax Contributions.
11. "Employee Stock Ownership Plan" and "ESOP" shall mean the
portion of the Plan consisting of Employer Matching Contributions and
earnings thereon.
12. "Employer" shall mean the Company and/or any Affiliated
Company to which the Plan has been extended on terms and conditions
solely determined by the Board of Directors of the Company which action
shall be entirely within the discretion of the Board of Directors.
For purposes of (1) determining the Employee as used for the
definition of Highly Compensated Employee, and (2) determining an
Employee's Hours of Employment, companies aggregated under IRC Sections
414(b), (c), (m) and (o) are treated as a single Employer.
13. "Employer Matching Contributions" shall mean those
contributions described in Subsection 1 of Section VII.
14. An "Enrollment Date" shall be October 1, 1989 and the first day
of each month thereafter.
15. "Fair Market Value" with respect to Company Stock shall be the
closing price at which the Company Stock shall have been sold on the
date in question, or if no such sales were made on such date then on
the next preceding day on which there were such sales of Company Stock.
The price shall be as reported on the Composite Transactions reporting
system, or if not so reported, as reported by the New York Stock
Exchange.
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<PAGE> 5
16. "Highly Compensated Employee" shall mean a "Highly Compensated
Active Employee" or a "Highly Compensated Former Employee".
A. "Highly Compensated Active Employees" are:
1) Employees who are 5% owners during the Determination
Year or Look-back Year;
2) Employees with Compensation greater than $75,000, or
such other amount as may be permitted from time to time
under applicable provisions of the IRC, during the Look-
back Year;
3) Employees with Compensation greater than $50,000, or
such other amount as may be permitted from time to time
under applicable provisions of the IRC, and who are in
the Top Paid Group during the Look-back Year;
4) Employees who are officers and have Compensation greater
than 50% of the limit under IRC Section 415(b)(1)(A)
during the Look-back Year. The number of officers is
limited to 50 (or if lesser, the greater of 3 Employees
or 10% of Employees) excluding those Employees who may
be excluded in determining the Top-Paid Group. When no
officer has Compensation greater than 50% of the limit
under IRC Section 415(b)(1)(A) during the Look-back
Year, the highest paid officer is treated as highly
compensated; and
5) Employees described in 2, 3 and 4 above if Determination
Year is substituted for Look-back Year, and who are
among the 100 Employees who receive the most Compensa-
tion from the Employer during the Determination Year.
B. Terms
1) "Determination Year" - the Plan Year.
2) "Look-back Year" - the Plan Year immediately preceding
the Determination Year.
3) "Top Paid Group" - the top 20% of Employees ranked on
the basis of Compensation. Employees described in
Section 414(q)(8) and Q&A 9(b) of Section 1.414(q) - IT
of the regulations are excluded.
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<PAGE> 6
C. "Highly Compensated Former Employee" shall mean an individual
who:
1) separates from service prior to the Determination year;
2) performs no service for the Employer during the
Determination Year; and
3) was a Highly Compensated Active Employee for the year of
separation or any Determination Year ending on or after
the Employee's 55th birthday.
D. "Family Members" shall mean spouses, and lineal ascendants or
descendants (and their spouses). Family Members of 5% owners
or 1 of the 10 most Highly Compensated Employees must be
aggregated with such Highly Compensated Employee (i.e.
treated as 1 Employee with 1 Compensation and 1 benefit
amount).
17. "Hours of Employment" shall mean those hours:
(a) for which an Employee is directly or indirectly paid or
entitled to payment from an Employer for the performance of
duties or for reasons other than the performance of duties
(such as holiday, vacations, illnesses and disability), or
(b) for which back pay from an Employer (irrespective of
mitigation of damages) has been either awarded or agreed to
by the Employer. Each such Hour of Employment shall be
credited to that period in which the duties were performed or
to which the award or agreement pertains.
The foregoing definition shall be interpreted in accordance with the
rules set forth in U.S. Department of Labor Regulations, Sections
2530.200 b-2(b) and (c), the contents of which are hereby incorporated
by reference.
18. "Monthly Change Date" shall mean the first business day of any
month.
19. "Participant" shall mean a person included in the Plan in
accordance with its provisions and whose participation in the
Plan has not terminated.
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<PAGE> 7
20. "Plan" shall mean the Kmart Corporation Employee Savings Plan
as set forth herein, and shall include both the ESOP portion and
non-ESOP portion of the Plan.
21. "Plan Year" shall mean a period commencing on the Effective Date
of the Plan and ending on March 31, 1983, and each successive
twelve-month period thereafter through March 31, 1989. After March 31,
1989, "Plan Year" shall mean a period commencing on April 1, 1989 and
ending on December 31, 1989, and each successive twelve-month period
thereafter during the term of the Plan.
22. "Trustee" shall mean any trustee designated by the
Company to participate in the administration of the Plan and/or in
investments under the Plan.
23. "Year of Service" shall mean each successive period of
twelve consecutive months from the Employee's employment date
during which the Employee's Hours of Employment are 1000 or more.
SECTION III. Participation
1. Eligibility
An Employee or former Employee who is a Participant on September 30, 1989
shall continue to be a Participant on October 1, 1989.
Any other Employee may become a Participant as of an Enrollment Date if
on such date the Employee has attained age 21 and completed a Year
of Service. Any Employee who (i) satisfies these eligibility
requirements, (ii) never becomes a Participant in the Plan, and (iii)
incurs a continuous Break in Service which equals or exceeds the
Employee's Years of Service, shall not be eligible to participate in
the Plan until such Employee again satisfies these eligibility
requirements. The age 21 requirement shall not apply if the
Employee's employment date was prior to October 1, 1989.
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<PAGE> 8
In the event a person becomes an Employee as a result of
transfer from employment in an Affiliated Company to which the Plan has
not been extended, the Employee's service in such prior employment
shall, for purposes of eligibility to subsequently become a Participant,
be treated in the same manner as if such service had been rendered as an
Employee.
2. Enrollment and Application for Contributions
An eligible Employee shall become a Participant by completing and
delivering to the Employer at least one month prior to an Enrollment
Date an enrollment form authorizing contributions to the Plan in
accordance with Section V as of the first pay period which ends after
such Enrollment Date. The Employee shall at such time also direct that
such contributions be allocated as set forth in Subsection 1 of
Section VI (hereinafter referred to as an "investment election").
A Participant who has not previously authorized contributions to the Plan
may do so as of the first pay period which ends after an Enrollment Date
by completing and delivering to the Employer at least one month prior to
such Enrollment Date a contribution authorization form and investment
election.
SECTION IV. INVESTMENT FUNDS
The following Investment Funds and Participant accounts therein
shall be established for contributions made thereto:
Fund A -- Managed Income Fund
Fund B -- Growth Equity Fund
Fund C -- Company Stock Fund
Fund D -- Balanced Equity Fund
These Investment Funds are more fully described in Section XIII.
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<PAGE> 9
SECTION V. EMPLOYEE DIRECTED CONTRIBUTIONS
1. After Tax and Before Tax Contributions
A Participant may authorize After Tax Contributions to the Plan through
Employer payroll deductions, or may elect to have his or her
Compensation in each pay period reduced and to have such amount
contributed to the Plan by the Employer on behalf of the Participant as
Before Tax Contributions, as follows:
(a) Basic Contribution. A contribution of 2%, 3%, 4%, 5% or 6%
of Compensation in each pay period of the Employee.
(b) Supplemental Contribution. A Participant whose Basic
Contributions total 6% of Compensation may authorize an
additional contribution in each such pay period in whole
percentages of 1% to 10% of Compensation.
The total of Before Tax Basic Contributions and After Tax Basic
Contributions may not exceed 6% of Compensation, and the total of
all Employee Directed Contributions may not exceed 16% of
Compensation. Any Employee Directed Contributions in excess of
6% of Compensation will be Supplemental Contributions.
Effective as of January 1, 1987, no Participant shall be permitted
to make Before Tax Contributions during any calendar year in excess of
$7,000, or such other amount as may be permitted from time to time under
applicable provisions of the IRC.
Any amount contributed to the Plan by the Employer on behalf of the
Participant as Before Tax Contributions may not be distributed earlier
than the occurrence of one of the following events:
a) The Employee's retirement, death, disability or separation
from service;
b) The termination of the Plan without establishment of a
successor plan;
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<PAGE> 10
c) The Employee's attainment of age 59 1/2 or the Employee's
hardship;
d) The sale or other disposition by an Employer to an unrelated
entity of substantially all of the assets used in a trade or
business, but only with respect to employees who continue
employment with the acquiring entity; or
e) The sale or other disposition by an Employer of its interest
in a subsidiary to an unrelated entity but only with respect
to employees who continue employment with the subsidiary.
2. Contribution Limitations
The Company may at any time and in its sole discretion reduce the
contributions made on behalf of a Participant or group of Participants in
order to comply with the requirements of Section 401(k)(3) and Section
401(m)(2)(A) of the IRC and the regulations thereunder, which are
incorporated herein by reference, and any other applicable or successor
provision. Any such reduction shall to the extent practicable be
accomplished by a limitation on future contributions, by a refund of
contributions and the earnings allocable thereto, by a recharacterization
of Before Tax Contributions as After Tax Contributions if permitted under
the IRC, or by a combination of some or all of these methods. In
such event, the contributions authorized by a Participant may be
discontinued or decreased by a whole or fractional percentage and, in
addition, After Tax Contributions may be increased by a whole or
fractional percentage, in each case by such amount and for such time as
is determined by the Company in its sole discretion but not in excess of
the total Employee Directed Contributions authorized by the
Participant. Contributions may also be limited pursuant to Section XV
hereof.
The amount of excess contributions for a Highly Compensated Employee
will be determined in the following manner. First, the actual deferral
ratio ("ADR") of the Highly Compensated Employee with the highest ADR
is reduced to the extent
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<PAGE> 11
necessary to satisfy the actual deferral percentage ("ADP") test or
cause such ratio to equal the ADR of the Highly Compensated Employee with
the next highest ratio. Second, this process is repeated until the ADP
test is satisfied. The amount of excess contributions for a Highly
Compensated Employee is then equal to the total of elective and other
contributions taken into account for the ADP test minus the product of the
Employee's contribution ratio as determined above and the Employee's
compensation.
In the case of a Highly Compensated Employee whose actual contribution
ratio ("ACR") is determined under the family aggregation rules, the
determination of the amount of excess contributions shall be made as
follows:
(a) If the Highly Compensated Employee's ACR is
determined by combining the contributions and compensation of only
those Family Members who are highly compensated without regard to
family aggregation, then the ACR is reduced in accordance with the
"leveling" method described in Section 1.401(k)- 1(f)(2) of the
regulations and the excess contributions for the family unit are
allocated among the Family Members in proportion to the contributions
of each family member that have been combined.
(b) If the Highly Compensated Employee's ADR is
determined by combining the contributions and compensation of all Family
Members, then the ADR is reduced in accordance with the leveling
method but not below the ADR of eligible non-highly compensated
Family Members. Excess contributions are determined by taking into
consideration the contributions of the eligible Family Members who are
highly compensated without regard to family aggregation and are allocated
among such Family Members in proportion to their contributions. If
further reduction of the ADR is required, excess aggregate
contributions resulting from this reduction are determined by
taking into account the contributions of all eligible Family Members and
are allocated among such Family Members in proportion to their
contributions.
The amount of excess contributions to be distributed or recharacterized
shall be reduced by excess deferrals previously distributed for the
taxable year ending
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<PAGE> 12
in the same Plan Year, and excess deferrals to be distributed for a
taxable year will be reduced by excess contributions
previously distributed or recharacterized for the Plan beginning in
such taxable year. The distribution of excess contributions will include
the income allocable thereto. The income allocable to excess
contributions includes both income for the Plan Year for which the
excess contributions were made and income for the period between the end
of the Plan Year and the date of distribution.
Notwithstanding any other provision of this Plan an, excess
contributions, plus any income and minus any loss allocable thereto,
shall be distributed no later than the last day of each Plan Year to
Participants to whose accounts such excess contributions were allocated
for the preceding Plan Year. Excess contributions shall be allocated
to Participants who are subject to the family member aggregation rules
of Section 414(g)(6) of the IRC in the manner prescribed by the
regulations. Excess contributions shall be treated as annual additions
under the Plan.
Excess contributions shall be adjusted for any income or loss up to the
date of distribution. The income or loss allocable to excess
contributions is the sum of: (1) income or loss allocable to the
Participant's Before Tax Contributions account and Employer Matching
Contributions account for the Plan Year multiplied by a fraction, the
numerator of which is such Participant's excess contributions for the
year and the denominator of which is the Participant's account
balance(s) attributable to contribution percentage amounts without regard
to any income or loss occurring during such Plan Year; and (2) ten
percent of the amount determined under (1) multiplied by the number of
whole calendar months between the end of the Plan Year and the date
of distribution, counting the month of distribution if distribution occurs
after the 15th of such month.
Recharacterized excess contributions will remain subject to the
distribution limitations that apply to elective contributions. Excess
contributions will not be recharacterized with respect to a Highly
Compensated Employee to the extent that the recharacterized amounts, in
combination with employee contributions actually made by the
Employee, exceed the maximum amount of employee
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contributions (determined prior to applying section 4O1(m)(2)(A) of the
"IRC") that the Employee is permitted to make under the Plan in
the absence of recharacterization.
3. Change or Discontinuance
A Participant may change, suspend or resume the amount or form of
Employee Directed Contributions to any amount or form permitted by this
Section V, but only as of the first pay period of the Participant which
ends after a Monthly Change Date by delivering written notice of
such change, suspension or resumption to the Employer at least one
month prior to such Monthly Change Date.
4. General
Employee Directed Contributions will be remitted by the Employer to the
Trustee as soon as practicable following the pay date for the pay
period as to which such contributions apply.
Contributions or Compensation for pay periods which end during a
particular month or Plan Year will hereinafter sometimes be referred to as
contributions or Compensation for or during that month or Plan Year.
SECTION VI. INVESTMENT OF EMPLOYEE DIRECTED CONTRIBUTIONS
1. Allocation
Employee Directed Contributions will be allocated monthly to the
Participant's account and invested pursuant to the Participant's written
investment election delivered by the Participant to the Company (for
which the Participant shall have the ability to receive a confirmation
statement upon request) as follows:
Entirely in any one Investment Fund
or
In 25% increments in any two or more Investment Funds
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2. Change
An investment election may be changed by a Participant with respect to
future Employee Directed Contributions, but only as of the first pay
period of the Participant which ends after a Monthly Change Date, by
delivering written notice of such change to the Employer at least one
month prior to such Monthly Change Date.
3. Transfer
A Participant may as of a Monthly Change Date transfer to another
Investment Fund 25%, 50%, 75% or 100% of the value of his or her
accounts in one or more Investment Funds attributable to the
Participant's Employee Directed Contributions, by delivering to the
Employer prior to such Monthly Change Date a written notice directing such
transfer.
Transfer shall be made as soon after such Monthly Change Date as the
appropriate values are determined. Any transfer from an Investment Fund
shall be made pro rata from the Participant's accounts therein.
SECTION VII. EMPLOYER MATCHING CONTRIBUTIONS
1. Amount
The Employer will contribute monthly on behalf of each Participant an
amount equal to 50% of that portion of the Participant's
Employee Directed Contributions for the month which do not exceed
6% of the Participant's compensation for the month, except to the
extent that Employer Matching Contributions have been suspended
pursuant to Sections IX or XII. Employer Matching Contributions will
be remitted to the Trustee as soon as practicable after the end of each
month, and will be allocated to the Participant's account, and invested,
in Fund C.
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The Company may at any time and in its sole discretion reduce the
Employer Matching Contributions made on behalf of a Participant or group
of Participants in order to comply with the requirements of Section
401(k) or Section 401(m) of the IRC and the regulations thereunder,
which are incorporated herein by reference, and any other applicable
or successor provision. Employer Matching Contributions may also be
limited pursuant to Section XV hereof.
2. Transfer
A Participant who is at least 55 years of age and has been a Participant
for at least five full years may transfer to another Investment Fund
25%, 50%, 75% or 100% of the value of his or her accounts
attributable to Employer Matching Contributions as of a Monthly Change
Date by delivering to the Employer prior to such date written notice
directing the transfer.
Transfer shall be made as soon after the Monthly Change Date as the
appropriate values are determined.
SECTION VIII. PARTICIPANT ACCOUNTS
1. Maintenance of Accounts
There shall be established and maintained for each Participant separate
accounts in each Investment Fund as to which the Participant's After
Tax Contributions and Before Tax Contributions have been allocated
and for Employer Matching Contributions allocated to the Participant.
Each account shall reflect the value of the contributions allocated
thereto and the investment thereof. Each Participant who has a balance
in an account will be furnished a statement of his or her accounts at
least annually. Participants shall be 100% vested in their account
balances at all times.
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2. Valuation of Accounts
The value of a Participant's account in an Investment Fund shall be
determined as of the end of each month based on the Participant's
proportionate share of the total value of the Investment Fund
attributable to contributions which had been allocated to all such
accounts in the Investment Fund as of the end of the month.
SECTION IX. WITHDRAWALS PRIOR TO TERMINATION OF EMPLOYMENT
As of the end of a month a Participant may, by delivering prior written
notice thereof to the Employer, withdraw all or a portion of the value
of his or her accounts as follows:
1. Employee Directed Contributions
After Tax Contributions
(a) A withdrawal may be made up to the value of the Participant's
Supplemental Contributions, if any, without penalty.
(b) If a withdrawal exceeds the value of the Participant's
Supplemental Contributions, Employer Matching Contributions
will be suspended for a six month period.
Before Tax Contributions
A withdrawal may be made only if the value of all of
the Participant's After Tax Contributions, if any, are withdrawn
and either (i) the Participant has attained the age of 59-1/2 or
(ii) the value of all of the Participant's withdrawable
Employer Matching Contributions, if any, are withdrawn and the
Participant provides evidence that the withdrawal is required in
order to meet a financial hardship as defined under Section 401(k)
of the IRC or any other applicable or successor provision.
Effective as of December 31, 1988, the amount of any
hardship withdrawal may not include earnings credited after
such date on Before Tax Contributions. In the event of a
withdrawal of Before Tax Contributions, Employer Matching
Contributions will be suspended for a six-month period.
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2. Employer Matching Contributions
A withdrawal may be made after having been a Participant for
five years and if the value of all of the Participant's After
Tax Contributions, if any, are withdrawn. In the event of such a
withdrawal, Employer Matching Contributions will be suspended for a
six-month period.
Withdrawals will be based on values as of the end of the month as to
which the withdrawal request is effective, will be segregated from
the Participant's Account, and will be paid as soon as practicable
after the appropriate values are determined. No interest, market value
changes or other adjustments of any type shall be made to said values
during the time of segregation. Any interest, or earnings, losses, or
adjustments which may actually accrue during such segregation shall
accrue to or be borne by the Plan and, to the extent resulting in a net
asset increase to the Plan, will be used to offset administrative
expenses of the Plan as permitted by applicable law.
Any withdrawal of the value of contributions shall be made pro rata
from the Investment Funds and accounts in which the contributions are
invested, with payment of After Tax or Before Tax Contributions first
being made from such Supplemental Contributions. Any period of
suspension of Employer Matching Contributions applicable to a
withdrawal shall commence immediately following the withdrawal.
Withdrawals will not terminate participation in the Plan or
affect the continuation of Employee Directed Contributions. Amounts
withdrawn may not be repaid to the Plan.
SECTION X. TERMINATION OF EMPLOYMENT AND DISTRIBUTION
1. Termination of Participation
Participation in the Plan will automatically terminate when a person
is no longer an Employee, provided, however:
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(a) If a Participant ceases to be an Employee as a result of
transfer to employment in an Affiliated Company to which the
Plan has not been extended, participation in the Plan shall
continue during employment with the Affiliated Company except
that no Employee Directed or Employer Matching Contributions
shall be made so long as the Participant is not an Employee.
(b) If the value of the Participant's accounts at the time of
termination or thereafter exceeds $3,500, participation in
the Plan shall continue until the Participant's attainment of
age 65 (normal retirement age), unless the Participant sooner
delivers to the Company a written request for a total
distribution of the accounts or dies.
Such Participant may continue participation in the Plan past age
65, subject to Subsection 3 of this Section X.
In the event of continuation of participation pursuant to this
Subsection 1(b), the Participant's accounts shall remain in the
Plan until participation terminates, during which time no Employee
Directed or Employer Matching Contributions shall be made by or on
behalf of the Participant, nor may any loans or withdrawals be
made by the Participant.
Any request or election made under this Subsection 1(b) by a Participant
who is an officer or director of the Company shall comply with any
requirements for exemption from Sections 16(a) and 16(b) of the Securities
Exchange Act of 1934.
2. Distribution
Upon termination of participation a final valuation of the
Participant's accounts shall be made in the same manner as for monthly
valuations pursuant to Section VIII.2, and such final value of the
Participant's accounts shall be segregated and distributed to such
person in full as soon as practicable thereafter but in no event later
than 60 days after the end of the Plan Year in which participation
terminated. No market value or other adjustment of any type shall be made
to said final value, nor shall interest accrue thereon, for any reason.
Any interest, earnings, losses or adjustments which may actually accrue on
said amounts after final valuation shall accrue to or be borne by the
Plan, and, to the extent resulting in a net asset increase to the Plan,
may be used to offset administrative expenses as permitted by applicable
law.
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In the event of the death of a Participant prior to distribution,
distribution will be made to the beneficiary or beneficiaries whom the
Participant shall have designated on forms prescribed by and filed with
the Company, or, if no such designation has been made or if none of such
beneficiaries are surviving, to the legal representative of the
Participant's estate. If, however, the Participant is survived by a
spouse who has been married to the Participant for at least one year prior
to the Participant's death, distribution will be made to such spouse
unless such spouse has consented in writing to the designation of a
different beneficiary and such consent was witnessed by a Plan
representative or notary public. In the event of the incapacity of the
Participant, distribution may be made to the Participant's legal
representative or guardian. The Company may require an indemnity and/or
such evidence or other assurances as it may deem necessary in
connection with any distribution.
3. Mandatory Distribution
Effective after December 31, 1987, distribution shall be made on or
before the first day of April following the calendar year in which a
Participant attains the age of 70-1/2 and as of the end of each
calendar year thereafter, even if their employment and participation
continue. Such mandatory distribution amount shall be determined in
accordance with IRC section 401(a)(9) and regulations thereunder.
4. Re-Employment
If a former Participant, or a former Employee who is a Participant
pursuant to Subsection 1(b) of this Section X, again becomes an
Employee either before or after a Break in Service, such Employee
shall be eligible to resume regular participation in the Plan upon
reemployment for six consecutive months; provided, however, if such
former Participant, or former Employee who is a Participant, is
re-employed within 60 days of termination of employment, such person
shall be eligible to resume regular participation in the Plan immediately
following re-employment. If re-employment occurs prior to the
distribution of the value of all of a person's accounts in the Funds, such
distribution shall be
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suspended. Amounts distributed may not be repaid to the Plan. An
eligible Employee may resume regular participation on any Enrollment
Date, by providing written notice at least one month prior to said
Enrollment Date.
5. Non-locatable Participant
Neither the Plan Administrator nor the Trustee shall be obligated to
search for or ascertain the whereabouts of any Participant or
beneficiary (other than to write to the Participant at his or her last
mailing address shown in the Plan Administrator's records). If a
Participant or Beneficiary cannot be located at such address, any
benefit entitlement shall be forfeited. Such forfeited amounts may
be used to reduce future Employer Matching Contributions or to
offset administrative expenses of the Plan. Such forfeited amounts
shall be reinstated (without interest) upon the Participant's or
beneficiary's claim for the benefit through a special contribution by the
Employer.
6. Direct Transfers
This Subsection 6 applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this section, a
distributee may elect, at the time and in the manner prescribed by the
Plan Administrator, to have any portion of an "eligible rollover
distribution" paid directly to an "eligible retirement plan" specified
by the "distributee" in a "direct rollover." For the purposes of this
section, the following definitions shall apply:
(a) Eligible rollover distribution: An eligible
rollover distribution is any distribution of all or any portion of the
balance to the credit of the distributee, except that an eligible
rollover distribution does not include: any distribution that is one
of a series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the distributee
or the joint lives (or joint life expectancies) of the distributee and
the distributee's designated beneficiary, or for a specified period of
ten years or more; any distribution to the extent such
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distribution is required under IRC Section 401(a)(9); and the
portion of any distribution that is not includable in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
(b) Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in IRC Section 408(a), an
individual retirement annuity described in IRC Section 408(b), an annuity
plan described in IRC Section 403(a), or a qualified trust described in
IRC Section 401(a), that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution
to the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement annuity.
(c) Distributee: A distributee includes an employee or former
employee. In addition, the employee's or former employee's surviving
spouse and the employee's or former employee's spouse or former spouse who
is the alternate payee under a qualified domestic relations order,
as defined in IRC Section 414(p), are distributees with regard to the
interest of the spouse or former spouse.
(d) Direct rollover: A direct rollover is a payment by the plan to
the eligible retirement plan specified by the distributee.
SECTION XI. METHOD OF PAYMENT
1. Withdrawals and Distributions
Withdrawals and distributions pursuant to Sections IX and X shall be
paid in a lump sum in cash, except that such withdrawals from the ESOP
and distributions from Fund C shall be made in shares of Company Stock
with an equivalent Fair Market Value if so requested in advance by the
Participant.
Requests under this Subsection 1 shall not be available to Participants
who are officers or directors of the Company if such availability
would result in a distribution of Company Stock being subject to Section
16(b) of the Securities Exchange Act of 1934.
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<PAGE> 22
With respect to any distribution in shares of Company Stock, no
adjustment will be made for dividends or other rights for which the
record date is prior to the date the recipient becomes the stockholder of
record of such shares.
2. Payee
A withdrawal or distribution, other than as specifically provided in
Subsection 2 of Section X, will be made only to and in the name of
the Participant; provided, however, that any shares of Company Stock
may at the request of the Participant be issued in the name of the
Participant and one or more other persons, as joint tenants with right
of survivorship and not as tenants in common, or in the name of a trust
for the benefit of the Participant or for the benefit of the Participant
and others.
SECTION XII. PARTICIPANT LOANS
A Participant may request a loan from his or her Before Tax
Contribution accounts subject to the following conditions:
(a) No loan may be made unless the Participant has been a
Participant for at least five full years and is then actively
employed or is otherwise a "party in interest" under the
Employee Retirement Income Security Act of 1974, as amended.
Further, if the Participant is married, the consent of the
Participant's spouse to the loan is required.
(b) The amount of a loan shall be requested in $100 increments
and may not be less than $1,000.
(c) No loan may be in an amount which exceeds the lesser of the
current value of the Participant's Before Tax Contributions
or the current value of the Participant's Employer Matching
Contributions.
Further, except to the extent that different maximum amounts
may be permitted from time to time under applicable
provisions of the IRC, a loan may not exceed $50,000 less the
highest outstanding balance of any loan during the prior
twelve months, nor may it exceed 50% of the Participant's
total accounts in the Plan.
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<PAGE> 23
(d) No more than one loan may be outstanding at any one time to
any Participant and no loan may be made to a Participant
sooner than 30 days after the termination of a prior loan to
the Participant.
(e) No loan may be made for a term of less than twelve months or
more than four and one-half years (nine years if the loan is
for the purchase of a principal residence of the
Participant).
(f) Each loan shall bear a rate of interest commensurate with
interest rates charged by banks for similar loans as of the
date the loan amount is taken from the Participant's
accounts.
(g) Each loan shall be secured by up to 50% of the Participant's
accounts plus such other security as shall be deemed
necessary or desirable by the Plan Administrator.
(h) No loan may be made until the Participant has executed and
delivered to the Company an application for the loan, a
promissory note, an authorization for repayment of the loan
(plus interest) through payroll deductions, and such other
documents as the Company may require, all on forms prescribed
by the Company.
(i) Each loan shall be made in cash and be taken pro rata from
the Participant's Before Tax Contribution accounts in the
Funds. The repayment of the loan and interest shall be
allocated pro rata to Before Tax Contribution accounts of the
Participant in the Funds in the same manner as current
Employee Directed Contributions thereto, provided that if the
Participant is not then currently contributing to the Plan,
such repayment shall be made in accordance with the
Participant's most recent investment election. To the extent
of the outstanding balance of any loan from an account, such
account will not accrue earnings or otherwise share in
valuation adjustments.
(j) Notwithstanding any contrary Plan provisions, if a loan is
outstanding, the Participant shall not be permitted to make a
withdrawal of the value of his or her Employer Matching
Contributions if after the withdrawal such value would be
less than 100% of the outstanding balance of the loan plus
accrued interest.
(k) Repayment of a loan plus interest will be made through
regular payroll deductions, except that other forms of
payment may be permitted if repayment of the loan is made
prior to the expiration of its term or if the Participant is
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<PAGE> 24
on an approved leave of absence or if the Participant is not
receiving Compensation sufficient to permit deduction of
scheduled repayments of the loan and interest.
If a Participant is on an approved leave of absence and is
not receiving Compensation sufficient to permit deduction of
scheduled repayments of the loan and interest, such
repayments shall be deferred during such time for up to three
months with respect to any leave of absence, and the term of
the loan shall be extended by the deferral period. Provided,
however (i) in no event shall there be consecutive deferrals
or more than two deferrals and extensions with respect to any
loan, except that if the loan is for the purchase of a
principal residence of the Participant, four such deferrals
and extensions shall be permitted, and (ii) no deferral shall
be permitted if such deferral would result in the loan
failing to be amortized in level payments not less frequently
than quarterly over the term of the loan.
A Participant may voluntarily repay the outstanding balance,
plus accrued interest, of a loan prior to the expiration of
its term, but not sooner than twelve months after the date as
of which the loan amount was taken from the Participant's
accounts.
If a loan payment and/or any interest is not paid in full
when due or if the Participant fails to meet a condition of
the loan or otherwise defaults on a loan, or if the Parti-
cipant terminates employment prior to payment of an
outstanding loan and interest thereon, the entire outstanding
balance of the loan and interest thereon shall be due and
payable. The amount owing shall be deducted from the
Participant's accounts in accordance with applicable law, and
applied to satisfy the loan. If the portion of such accounts
permitted to be used to satisfy the loans is insufficient to
satisfy the loan, repayment will be made through payroll
deductions, and from any other security, with the Participant
liable for any deficiency. While a loan is in default and
unpaid, no Employer Matching Contributions shall be made by
or on behalf of the Participant nor may any withdrawals be
made by the Participant.
(l) All requests for loans shall, in accordance with the
provisions of subsections 1(a) and (b) of Section XVII, be
subject to the approval of the Company and be granted only on
such terms as are specified by the Company in written
documents which are incorporated herein by reference.
(m) All loans shall be subject to and limited to the extent
required by any applicable law, rule or regulation and to the
extent necessary so as not to adversely affect the Plan as
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<PAGE> 25
(i) being qualified as intended under the IRC or (ii) meeting
all requirements of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
SECTION XIII. OPERATION OF FUNDS
1. Fund A - Managed Income Fund
Contributions received by the Trustee for Fund A shall be
invested in a diversified fixed income portfolio which shall consist
primarily of investment contracts issued by insurance companies, banks or
other financial institutions, government securities, and other
intermediate-term fixed income securities or investments. Assets of
Fund A may be sold, exchanged or converted and the proceeds thereof
reinvested in Fund A or held pursuant to Subsection 5 of this Section
XIII.
2. Fund B -- Growth Equity Fund
Contributions received by the Trustee for Fund B shall be
invested in a diversified equity portfolio which shall consist primarily
of growth stocks or other securities convertible into growth stocks
(and may include securities issued by the Company) and other types of
equity investments. Assets of Fund B may be sold, exchanged or converted
and the proceeds thereof reinvested in Fund B or held pursuant to
Subsection 5 of this Section XIII.
3. Fund C -- Company Stock Fund
Contributions received by the Trustee for Fund C shall be invested in
Company Stock.
Contributions for Fund C may be remitted to the Trustee in whole or in
part in the form of Company Stock, and Company Stock acquired by the
Trustee with cash contributions may be obtained pursuant to market
purchases or from the Company by subscription or purchase. Any
contribution for Fund C remitted in the form of Company Stock and any
Company Stock acquired from the Company by subscription
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<PAGE> 26
or purchase may be either authorized and unissued shares or issued shares
which have been reacquired by the Company. Any contribution for Fund C in
the form of Company Stock shall be transferred and valued for Plan
purposes at the Fair Market Value of Company Stock on the day
immediately preceding the date of its transfer to the Trustee. Any
Company Stock acquired from the Company by subscription or purchase
shall be acquired at a price that constitutes adequate consideration as
defined in Section 3(18) of ERISA and any regulation thereunder and such
acquisition shall be in compliance with all other applicable provisions of
ERISA and the IRC. Under the provisions of the Plan, more than 10% of
the assets of the Plan may be invested in Company Stock.
4. Fund D -- Balanced Equity Fund
Contributions received by the Trustee for Fund D shall be invested
primarily in stocks and other equity securities (and may include
securities issued by the Company), but may include bonds and other fixed
income assets. Assets of Fund D may be sold, exchanged or converted and
the proceeds thereof reinvested in Fund D or held pursuant to Subsection 5
of this Section XIII.
5. Interim Investments
Each of the above Investment Funds may include investments of a
short-term nature (such as obligations of the United States
Government and commercial paper) and deposits with a financial
institution, as well as cash, pending investment in the forms specified
in Subsections 1, 2, 3 and 4 of this Section XIII or for purposes of
carrying out the provisions of the Plan.
6. Accruals and Reinvestment
Dividends, interest, earnings and any other distributions accrued with
respect to any of the Investment Funds, other than dividends paid after
May 1, 1991 on Company Stock held in the ESOP, shall be a part of the
Investment Fund and shall be invested in the Investment Fund when
received in the same manner as contributions to the Investment Fund.
Each dividend paid after May 1, 1991 on
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<PAGE> 27
Company Stock held in the ES0P shall be invested in the manner
described in Subsection 5 of this Section XIII until such dividend
is distributed to Participants in accordance with Subsection 2 of
Section XXV. Any income earned on Fund C dividends may be invested in
Company Stock.
7. Exclusive Benefit of Participants
Each Investment Fund shall be operated for the exclusive benefit
of the Participants.
8. Fund Valuation
In determining the value of an Investment Fund or any portion thereof
as of a certain date, the following shall be applicable:
(a) Value with respect to investment contracts with an insurance
company, bank or other financial institution under Fund A
shall mean the principal so invested plus accrued interest as
of the date in question.
(b) Value with respect to Company Stock in Fund C shall mean its
Fair Market Value.
(c) Value with respect to securities in an Investment Fund which
are listed on a national stock exchange shall be the closing
price at which the security shall have been sold on the date
in question, or if no sale was made on such date then on the
next preceding day on which there were such sales. The price
shall be as reported on the Composite Transactions reporting
system, or if not so reported, as reported by the applicable
stock exchange.
(d) Value with respect to securities in an Investment Fund which
are traded in over-the-counter markets shall be the last bid
price on the date in question, or if no such price is
available for such date then on the next preceding day for
which such a price is available. The prices shall be as
listed in a publication selected by the Trustee.
(e) Value with respect to all other assets in the Investment
Funds shall be their fair market value on the date in
question, taking into consideration generally accepted
pricing or quotation services or quotations furnished by one
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<PAGE> 28
or more reputable sources, such as securities brokers,
dealers or investment bankers, values of comparable property,
appraisals or other relevant information.
9. Stock Rights of Participants
(a) Voting Rights. The Trustee shall have the right to vote
securities held in the Funds, provided, however, that shares of Company
Stock in Fund C shall be voted in accordance with this paragraph. Each
Participant shall, as to that number of shares of Company Stock which the
Participant's proportionate share of Fund C represents ("allocated
shares"), have the right to direct the Trustee how to vote on each matter
brought before a stockholders meeting of the Company. Before each such
meeting of stockholders, the Plan Administrator shall cause proxy
solicitation material to be furnished to Participants together with a form
requesting directions on how such allocated shares are to be voted. Upon
timely receipt of such directions, the Trustee shall vote the
Participant's allocated shares as directed. The Trustee shall vote both
allocated shares for which it has not received direction, as well as
unallocated shares of Company Stock, in the same proportion as the
allocated shares for which the Trustee has received direction are voted.
Directions received from Participants shall be kept confidential.
(b) Rights on Tender or Exchange Offer. Each Participant for purposes
of this Section XIII is hereby designated a "named fiduciary" within
the meaning of Section 403(a)(1) of ERISA and shall have the right, to the
extent of his or her allocated shares of Company Stock in Fund C, to
direct the Trustee in writing as to the manner in which to respond to a
tender or exchange offer with respect to shares of Company Stock. The
Plan Administrator shall use its best efforts to timely distribute or
cause to be distributed to each Participant such information as
will be distributed to stockholders of the Company in connection with
any such tender or exchange offer. Upon timely receipt of such
instructions, the Trustee shall respond as instructed with respect
to such shares of Company Stock. If the Trustee shall not receive
timely instruction from a Participant as to the manner in which to
respond to such tender or exchange offer, the Trustee shall not tender
or exchange any shares of Company
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<PAGE> 29
Stock with respect to which such Participant has the right of
direction. Unallocated shares of Company Stock in Fund C shall be
tendered or exchanged by the Trustee in the same proportion as the
allocated shares for which the Trustee has received direction are
tendered or exchanged. Instructions received from Participants shall be
kept confidential.
SECTION XIV. VALUES NOT GUARANTEED BY COMPANY
Neither the Company nor any other Employer guarantees or represents in
any way that the value of any of the Investment Funds or the assets or
Participants' accounts therein will increase or will not decrease. Each
Participant assumes as a condition of participation all risks in
connection with the operation of the Plan and the Investment Funds. This
Plan is intended to constitute a plan described in ERISA {404(c), and the
fiduciaries of this Plan may therefore be relieved of liability for any
losses which are the direct result of investment instructions given by
any Participant or beneficiary.
SECTION XV. MAXIMUM BENEFIT
The amount of Annual Additions which may be credited to a Participant's.
account for any Limitation Year may not exceed the lesser of:
(a) $30,000, or if greater, one-fourth of the defined benefit
dollar limitation set forth in Section 415(6)(1) of the IRC
as in effect for the Limitation Year, or
(b) 25% of the Participant's compensation for the Limitation
Year.
Annual Additions for Limitation Years beginning on or after January
1, 1987 shall mean the sum of the following amounts credited to a
Participant's account for the Limitation Year under all defined
contribution plans maintained by the Employer:
(a) Participant Before Tax Contributions,
(b) Participant After Tax Contributions,
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(c) Employer Matching Contributions, and
(d) Amounts described in Sections 415(l)(1) and 419A(d) of the
IRC.
Annual Additions for Limitation Years beginning before January 1, 1987
shall mean the sum of the following amounts credited to a Participant's
account for the Limitation Year under all defined contribution plans
maintained by the Employer:
(a) Participant Before Tax Contributions,
(b) The lesser of (i) Participant After Tax Contributions in
excess of 6% of Compensation or (ii) one-half of Participant
After Tax Contributions, and
(c) Employer Matching Contributions.
For purposes of the limitations of this Section XV, compensation shall
mean all compensation of the Participant from the Employer for the
Limitation Year after deducting the Participant's Before Tax
Contributions.
Limitation Year for this Plan and all other qualified plans maintained
by the Employer shall mean the calendar year.
In the event a limitation is required hereunder, such limitation or
reduction shall as to the affected Participant apply to the extent
necessary first to Employer Matching Contributions, and then in the
following order to After Tax Contributions and Before Tax Contributions.
If, due to a reasonable error in estimating a Participant's annual
compensation, an excess Annual Addition exists, such excess will be
used to reduce Employer Matching Contributions for such Participant
in the next, and succeeding, Limitation Years. If the Participant was
not covered by the Plan at the end of the Limitation Year, the excess
amounts will be held unallocated in a suspense account for the
Limitation Year and such excess will be applied to reduce Employer
Matching Contributions for all remaining Participants in the next, and
succeeding, Limitation Years.
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If the Participant is, or was, covered under a defined benefit plan
and a defined contribution plan maintained by the Employer, the
sum of the Participant's Defined Benefit Plan Fraction and Defined
Contribution Plan Fraction may not exceed 1.0 in any Limitation Year.
The Defined Benefit Plan Fraction is a fraction (i) the numerator of
which is the sum of the Participant's projected annual benefits under all
defined benefit plans (whether or not terminated) maintained by the
Employer, and (ii) the denominator of which is the lesser of (1) 1.25
times the dollar limitation in effect under Section 415(b)(1)(A) of the
IRC for the Limitation Year, or (2) 1.4 times the amount which may be
taken into account under Section 415(b)(1)(B) of the IRC.
The Defined Contribution Plan Fraction is a fraction (i) the numerator of
which is the sum of the Annual Additions to the Participant's
account under all defined contribution plans maintained by the
Employer (whether or not terminated) for the current and all prior
Limitation Years, and (ii) 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: (1) 1.25 times the dollar
limitation in effect under Section 415(c)(1)(A) of the IRC for such year,
or (2) 1.4 times the amount which may be taken into account under
Section 415(c)(1)(B) of the IRC. If the Plan satisfied the applicable
requirements of Section 415 of the IRC as in effect for all Limitation
Years beginning before January l, 1987, an amount shall be
subtracted from the numerator of the Defined Contribution Plan
Fraction (not exceeding such numerator) as prescribed by the Secretary
of the Treasury so that the sum of the Defined Benefit Plan Fraction
and the Defined Contribution Plan Fraction computed under Section
415(e)(1) of the IRC (as revised by this Section XV) does not exceed 1.0
for such Limitation Year.
Projected annual benefit means the annual benefit to which the Participant
would be entitled under the terms of the Plan, if the Participant
continued employment until Normal Retirement Date (or current date, if
later) and the Participant's
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compensation for the Limitation Year and all other relevant factors
used to determine such benefit remained constant until Normal
Retirement Date (or current date, if later).
If, in any Limitation Year, the sum of the Defined Benefit Plan fraction
and the Defined Contribution Plan Fraction will exceed 1.0, the rate of
benefit accruals under defined benefit plans will be reduced so that
the sum of the fractions equal 1.0.
SECTION XVI. N0NTRANSFERABILITY
No rights, interests or benefits under the Plan shall be subject to any
debts or liabilities of a Participant or to execution, levy or
alienation of any kind, nor be assignable or transferable, except as
otherwise specifically provided in Section X in the event of the death
or disability of the Participant and in Section XII, and except to such
extent as may be required by law.
SECTION XVII. ADMINISTRATION OF THE PLAN
1. Plan Administrator
The Company shall be the Plan Administrator and shall be responsible
for the administration of the Plan and for carrying out the purposes and
provisions of the Plan. As Plan Administrator, the Company:
(a) May adopt such rules, regulations and forms and
establish such procedures as it deems necessary or appropriate
in its discretion for the administration of the Plan.
(b) Shall have discretionary authority to interpret, construe
and determine the application of the Plan and its terms and to
resolve all issues arising under the Plan. This discre-
tionary authority shall include the authority to (i) construe
disputed or doubtful terms of the Plan or of any rule,
regulation, form or procedure, (ii) determine the eligibility of
an individual to participate in the Plan, (iii) determine the
amount, if any, of benefits to which any Participant, former
Participant, spouse, beneficiary or other person may
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be entitled under the Plan, (iv) determine the timing and
manner of payment of benefits, (v) determine any matter
relating to the administration of the Plan or any claim under the
Plan, and (vi) resolve all other issues arising under the Plan,
any such determinations to be final and binding upon all
persons.
(c) Shall appoint any Trustee under the Plan and enter
into a trust agreement in connection therewith.
(d) Shall establish the Investment Funds and the arrangements
and guidelines under which they are operated.
(e) May appoint an investment manager or managers with regard
to an Investment Fund and may employ one or more persons to
render advice with regard to any of the Company's
responsibilities under the Plan.
(f) May take such other action as it deems necessary
or appropriate in its discretion for the proper administration
of the Plan.
(g) May delegate any of the foregoing powers to any person
or persons or committee or committees, whether already existing
or newly-created.
2. Administration Expenses
To the extent permitted by law, expenses of administering the Plan and
costs incident to the operation of the Plan not assumed by the Employer
(at its sole discretion) shall be borne by the Plan and shall be charged
pro rata (based on most recent valuations) among the Investment Funds.
However, brokerage fees, asset management fees, transfer taxes and other
costs incident to the operation of an Investment Fund (except Fund C)
shall be charged against that Investment Fund. Expenses incident to the
operation of Fund C shall be borne by the Employer. Taxes, if any,
on any assets held or income received by any Investment Fund shall
be charged against that Investment Fund.
3. Top Heavy Provisions
If the Plan is or becomes top-heavy in any Plan Year beginning after
April 1, 1984, the following provisions will supersede any conflicting
provisions in the Plan.
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(a) Key Employee: The determination of who is a key Employee
will be made in accordance with Section 416(i)(1) of the IRC and
the regulations thereunder. For purposes of determining who is a
key employee, annual compensation means compensation as defined
in Section 415(c)(3) of the IRC, but including amounts
contributed by the Employer pursuant to a salary reduction
agreement which are excludable from the Employee's gross income
under Section 125, Section 4O2(a)(8), Section 402(h) or Section
403(b) of the IRC.
(b) Top-heavy plan: For any Plan Year beginning on or
after April 1, 1984, this Plan is top-heavy if any of the
following conditions exists:
(i) If the top-heavy ratio for this Plan exceeds 60 percent
and this Plan is not part of any required aggregation
group or permissive aggregation group of plans;
(ii) If this Plan is a part of a required aggregation group
of plans but not part of a permissive aggregation group
and the top-heavy ratio for the group of plans exceeds
60 percent; or
(iii) If this Plan is a part of a required aggregation group
and part of a permissive aggregation group of plans and
the top-heavy ratio for the permissive aggregation
group exceeds 60 percent.
(c) Top-heavy ratio: The top-heavy ratio will be computed
in accordance with Section 416(g) of the IRC.
(d) Permissive aggregation group: The required aggregation
group of plans plus any other plan or plans of the Employer
which, when considered as a group with the required
aggregation group, would continue to satisfy the requirements of
Sections 401(a)(4) and 410 of the IRC.
(e) Required aggregation group: (1) Each qualified plan of
the Employer in which at least one key Employee participates or
participated at any time during the determination period
(regardless of whether the plan has terminated), and (2) any
other qualified plan of the Employer which enables a plan
described in (1) to meet the requirements of Sections
4O1(a)(4) or 410 of the IRC.
(f) Determination date: For any Plan Year subsequent to the
first Plan Year, the last day of the-preceding Plan Year. For
the first Plan Year of the Plan, the last day of that year.
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(g) Determination Period: The Plan Year containing
the determination date and the four preceding Plan Years.
(h) Except as otherwise provided in (i) below, the
Employer contributions and forfeitures allocated on behalf of
any Participant who is not a key Employee shall not be less than
the lesser of three percent of such Participant's
compensation or in the case where the Employer has no defined
benefit plan which designates this Plan to satisfy Section 401
of the IRC, the largest percentage of Employer contribu- tions
and forfeitures, as a percentage of the first $200,000 of the key
Employee's compensation, allocated on behalf of any key Employee
for that year. The minimum allocation is determined without
regard to any Social Security contribution. This
minimum allocation shall be made even though, under Other Plan
provisions, the Participant would not otherwise be entitled to
receive an allocation, or would have received a lesser allocation
for the year because of (i) the Participant's failure to
complete 1,000 Hours of Employment, or (ii) the
Participant's failure to make Employee Directed Contributions
to the Plan, or (iii) compensation less than a stated amount.
(i) The provision in (l) above shall not apply to any Participant who
was not employed by the Employer on the last day of the Plan
Year.
(j) The minimum allocation required (to the extent required to
be nonforfeitable under Section 416(b)) may not be forfeited
under Section 411(a)(3)(B) or 411 (a)(3)(D).
(k) Distributions to Key Employees: For any Plan Year in
which the Plan is a top-heavy plan, any benefit to which
an Employee who is a Key Employee is entitled shall commence not
later than the first day of April following the calendar year in
which he attains age 70-1/2, whether or not his employment has
terminated in such year.
(l) Impact on Maximum Benefits: For any Plan Year in which
the Plan is a top-heavy plan, the maximum benefit limit which-
applies on a combined basis under this Plan and the Kmart
Corporation Employee Pension Plan under Section XV shall be
determined by reducing the combined Plan limit from 1.25 to 1.00
if the value of Accrued Benefits and account balances for Key
Employees exceed 90% of the value of Accrued Benefits and account
balances for all Employees. If the combined top- heavy ratio does
not exceed 90% and the Employer uses a factor of 1.25 in
the denominator of the IRC section 415 fraction, a defined
benefit minimum of 3% per year of service (up to 30%) is provided.
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SECTION XVIII. TERM OF PLAN
The Plan was adopted by the Board of Directors of the Company on March
24, 1981 and approved by the stockholders of the Company at the Company's
Annual Meeting of Stockholders on May 26, 1981, and shall continue
until it is terminated in accordance with its provisions.
SECTION XIX. MODIFICATION, TERMINATION OR MERGER
The Board of Directors of the Company may in its discretion amend,
suspend or terminate the Plan, including the addition or elimination of
Investment Funds and taking any such action in order for the Plan or any
part thereof to comply with any applicable law or governmental rule or
regulation or to qualify as intended under the IRC or in order to obtain
any required governmental approval of the Plan or its operation;
provided, however, that no amendment, suspension or termination of the
Plan shall have the effect of diverting the assets of the Investment
Funds to purposes other than for the exclusive benefit of
Participants and their beneficiaries or the payment of reasonable
administrative expenses of the Plan.
In the event of a termination of the Plan, there shall be a distribution
to each Participant as provided in Section X as though employment had
terminated.
The Board of Directors of the Company may approve the merger or
consolidation of the Plan with, or the transfer of the assets or
liabilities of the Plan to, any other plan, but only if each Participant
in the Plan would (if the Plan then terminated) receive a benefit
immediately after the merger, consolidation or transfer which is equal
to or greater than the benefit the Participant would have been
entitled to receive immediately before the merger, consolidation or
transfer (if the Plan had then terminated).
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SECTION XX. SEVERABILITY
If any provision of the Plan, or any term or condition of any form
adopted hereunder, or any application thereof to any person or
circumstances is invalid or would result in the Plan or any part thereof
failing to qualify as intended under the IRC, such provision. term,
condition or application shall to that extent be void (or, in the
discretion of the Board of Directors of the Company, such provision, term
or condition may be amended so as to avoid such invalidity or failure),
and shall not affect other provisions, terms or conditions or
applications thereof, and to this extent such provisions, terms and
conditions are severable.
SECTION XXI. SPECIAL PROVISIONS RELATING TO THE MERGER OF THE
MAKRO INC. SAVINGS AND PROFIT SHARING PLAN INTO THE PLAN
Employees of Makro Inc. who were participants in the Makro Inc.
Savings and Profit Sharing Plan (the "Makro Savings Plan") as of
December 31, 1988 shall Plan (the "PACE Plan"), or who as of May 31,
1990 satisfied the eligibility requirements of the PACE Plan, shall be
eligible to participate in the Plan as of June 1, 1990. Others who are
employees of PACE as of May 31, 1990 shall be eligible to participate
in the Plan upon satisfaction of the eligibility requirements of the
PACE Plan. Employees of PACE employed after May 31, 1990 will be
eligible to participate in the Plan upon satisfaction of the eligibility
requirements of the Plan.
As of the effective date of the merger of the PACE Plan into the
Plan, the assets of the PACE Plan allocated to a Participant's account
shall be treated under the Plan as Before Tax Contributions and shall be
invested in accordance with the Participant's current investment election
relating to Employee Directed Contributions. If a Participant has not
made a current investment election, such assets shall be invested in Fund
A of the Plan.
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SECTION XXII. SPECIAL PROVISIONS RELATING TO THE MERGER OF THE PRICE
SAVERS WHOLESALE, INC., PERSONAL SAVINGS PLUS PLAN INTO THE PLAN
Employees of Price Savers Wholesale, Inc. ("Price Savers") who as of
March 31, 1991 are participants in the Price Savers Wholesale, Inc.
Personal Savings Plus Plan (the "Price Savers Plan"), or who as of
March 31, 1991 satisfied the eligibility requirements of the Price
Savers Plan, shall be eligible to participate in the Plan as of April
1, 1991. Others who are employees of Price Savers as of March 31, 1991
shall be eligible to participate in the Plan upon satisfaction of the
eligibility requirements of the Price Savers Plan. Employees of Price
Savers employed after March 31, 1991 will be eligible to participate in
the Plan upon satisfaction of the eligibility requirements of the Plan.
As of the effective date of the merger of the Price Savers Plan into the
Plan, the assets of the Price Savers Plan allocated to a Participant's
account shall be treated under the Plan as Before Tax Contributions and
shall be invested in accordance with the Participants current investment
election. If a Participant has not made a current investment election,
such assets shall be invested in Fund A of the Plan.
SECTION XXIII. SPECIAL PROVISIONS RELATING TO THE EMPLOYEE STOCK OWNERSHIP
PLAN
1. Establishment of ES0P. The Kmart Corporation Employee Stock
Ownership Plan is hereby established, effective as of May 1,
1991. The Company shall make all Employer Matching
Contributions to the ESOP and all previous Employer Matching
Contributions, and earnings thereon, shall be a part of the ES0P
as of such date. The assets of the ES0P shall at all times be
invested primarily in Company Stock.
2. Distribution of Dividends on Company Stock Held in the
ES0P. Notwithstanding any other provision of the Plan, but
subject to the final sentence of this Subsection, dividends
paid on or after May 1, 1991 on Company Stock held in a
Participant's Employer Matching Contributions account shall
be distributed by the Plan to such Participant or his or
her beneficiary. Such distributions may be made
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quarterly, semi-annually or annually as determined by the
Company, or as a part of any distribution or withdrawal to which
the Participant or his or her beneficiary is otherwise entitled
under the Plan; provided, however, each such dividend will be
distributed no later than 90 days after the end of the Plan Year
in which the dividend was paid by the Company, in accordance
with Section 404(k) of the IRC. Notwithstanding the foregoing,
no dividends shall be distributed to Participants or
beneficiaries pursuant to this Section XXV, Subsection 2 prior
to the date upon which approval of the Internal Revenue
Service of the provisions of this Section XXV is received by
the Company or its agent unless the Company elects, by action of
its Chairman of the Board and the Secretary, to permit the Plan
to distribute dividends prior to the receipt of such approval.
3. Discrimination Testing. For purposes of the discrimination
testing and limitations set out in Subsection 2 of Section
V, the ESOP and the Savings Plan shall be tested separately.
4. Put Option. If Company Stock becomes not readily tradeable
on an established market, then any Participant who is otherwise
entitled to a distribution under the Plan shall have the right to
require that his or her Employer repurchase any Company Stock
allocated to such Participant under the ES0P under a fair
valuation formula. This right is referred to as a "Put Option."
A Put Option shall only be exercisable by written notice to the
Participant's Employer during the 60 day period
immediately following the date of distribution and if the Put
Option is not exercised within such 60 day period, then it can
be exercised for an additional period of 60 days in the following
Plan Year. The period during which the Put Option is
exercisable shall not include any time when a Participant is
unable to exercise it because his Employer is prohibited from
honoring it by applicable Federal or State law.
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The amount paid for Company Stock under the Put Option shall be
paid in substantially equal periodic payments (not less
frequently than annually) over a period beginning not later
than 30 days after the exercise of the Put Option and not
exceeding 5 years. There shall be adequate security provided and
reasonable interest paid on the unpaid balance due under this
Section XXV, Subsection 4.
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