AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON NOVEMBER 15, 1995.
Registration No. 33----------
---------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under the Securities Act of 1933
L.A. GEAR, INC.
(Exact name of registrant as specified in its charter)
California 95-3375118
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2850 Ocean Park Boulevard, (310) 452-4327
Santa Monica, California 90405 (telephone number of principal
(Address of principal executive executive offices)
offices)
L.A. GEAR, INC. EMPLOYEE STOCK SAVINGS PLAN
(Full title of the plan)
Thomas F. Larkins
General Counsel
L.A. Gear, Inc.
2850 Ocean Park Boulevard, Santa Monica, California 90405
(Name and address of agent for service)
(310) 581-7303
(Telephone number of agent for service)
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------
Proposed Proposed
Title of Maximum Maximum
Securities offering aggregate Amount of
to be Amount to be price offering Registration
Registered registered(1) per share price(2) Fee
- -----------------------------------------------------------------
Common
Stock
(without
par value) 1,000,000 $2.06 $2,060,000 $710.35
- -----------------------------------------------------------------
(1)In addition, pursuant to Rule 416(c) under the Securities Act
of 1933, this registration statement also covers an
indeterminate amount of interests to be offered or sold
pursuant to the Plan.
(2)Pursuant to Rule 457(h), the proposed maximum offering price
per unit is estimated solely for the purpose of calculating
the registration fee and is based upon the average of the
high and low sales prices of the common stock of L.A. Gear,
Inc., as reported on the New York Stock Exchange as of
November 10, 1995, a date within five business days of the
date on which this registration statement is being filed.
Page 1 of ---
Exhibit Index is on Page 10
<PAGE>2
PART I
INFORMATION REQUIRED
IN THE SECTION 10(a) PROSPECTUS
EXPLANATORY NOTE
----------------
The documents containing the information required by
this section will be given to employees participating in the L.A.
Gear, Inc. Employee Stock Savings Plan (the "Plan") and are not
required to be filed with the Securities and Exchange Commission
(the "Commission") as a part of the Registration Statement or as
an Exhibit.
<PAGE>3
PART II
INFORMATION REQUIRED
IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents which have been filed by L.A.
Gear, Inc. (the "Company") with the Commission are incorporated
by reference in this Registration Statement, as of their
respective dates:
(a) The Annual Report of the Company on Form 10-K for the
fiscal year ended November 30, 1994;
(b) The Company's Employee Stock Savings Plan Annual
Report on Form 11-K for the fiscal year ended November 30, 1994
(filed contemporaneously herewith);
(c) The Company's Reports on Form 10-Q for the
quarters ended February 28, 1995; May 31, 1995; and August 31,
1995;
(d) The Company's Current Reports on Form 8-K dated
January 26, 1995; January 31, 1995; March 3, 1995; April 28,
1995; July 17, 1995; and September 14, 1995;
(e) The description of the Company's common stock,
without par value, contained in the Company's Registration
Statement on Form 8-A filed under Section 12 of the Exchange
Act of 1934, as amended (the "Exchange Act"), including any
amendment or report filed for the purpose of updating such
description.
All documents filed subsequent to the date hereof by
the Company with the Commission pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act and prior to the filing
of a post-effective amendment hereto which indicates that all
securities offered hereby have been sold or which deregisters all
securities then remaining unsold, shall be deemed to be
incorporated by reference herein and made a part hereof from
their respective dates of filing (such documents, and the
documents enumerated above, being hereinafter referred to as
"Incorporated Documents").
<PAGE>4
Any statement contained in an Incorporated Document or
deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes hereof to the extent that
a statement contained herein or in any other subsequently filed
Incorporated Document modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part hereof.
Item 4. Description of Securities.
Not required.
Item 5. Interests of Named Experts.
Not Applicable.
Item 6. Indemnification of Directors and Officers.
The Company has entered into indemnification agreements
with each of its directors and executive officers pursuant to
which the Company has agreed to indemnify such persons against
expenses, judgments, fines, penalties or amounts paid in
settlement actually and reasonably incurred by such person in
connection with legal proceedings in which the person was
involved by reason of being a director or officer of the Company.
The indemnification generally is available if such person acted
in good faith and in a manner he reasonably believed to be in the
best interests of the Company and, with respect to criminal
proceedings, had no reasonable cause to believe his conduct was
unlawful. Such person is not indemnified in respect of matters
as to which he has been adjudged liable to the Company unless a
court determines that, under the circumstances, he is reasonably
entitled to such indemnification.
The Company also will indemnify and hold harmless the
members of the Board in any action brought against any member in
connection with the administration of the Plan to the maximum
extent permitted by then applicable law, except in the case of
willful misconduct or gross misfeasance by such member in
connection with the Plan and its administration.
Item 7. Exemption from registration claimed.
Not Applicable.
<PAGE>5
Item 8. Exhibits.
Exhibit No. Description
- ----------- -----------
4 L.A. Gear, Inc. Employee Stock Savings Plan
23 Consent of Price Waterhouse LLP
24 Powers of Attorney (included herein on pages
7-9)
The undersigned registrant hereby undertakes that it
will submit or has submitted the Plan and any amendment thereto
to the Internal Revenue Service (the "IRS") in a timely manner
and has made or will make all changes required by the IRS in
order to qualify the Plan.
Item 9. Undertakings.
A. The undersigned registrant 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 Act; (ii) to reflect in the prospectus
any facts or events arising after the effective date of the
registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in
this Registration Statement; and (iii) to include any material
information with respect to the plan of distribution not
previously disclosed in this Registration Statement or any
material change to such information in this Registration
Statement.
(2) That, for the purpose of determining any
liability under the Act, each post-effective amendment to this
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.
(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.
<PAGE>6
B. The undersigned registrant hereby undertakes that,
for purposes of determining any liability under the Act, each
filing of the Company's annual report pursuant to Section 13(a)
or Section 15(d) of the Exchange Act (and each filing of the
Plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in this 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.
C. Insofar as indemnification for liabilities arising
under the Act may be permitted to directors, officers and
controlling persons of the Company pursuant to any charter
provision, by-law, contract, arrangement, statute or otherwise,
the Company has been advised that in the opinion of the
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 payment by the Company of expenses incurred or paid
by an officer, director or controlling person of the Company in
the successful defense of any action, suit or proceeding) is
asserted by such officer, director 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 the 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.
<PAGE>7
SIGNATURES
Pursuant to the requirements of the Act, the Company
certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and it has duly
caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Santa
Monica, State of California, on November 10, 1995.
L.A. GEAR, INC.
By: /s/ Thomas F. Larkins
------------------------------
Thomas F. Larkins
Senior Vice President and Chief
Administrative Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person
whose signature appears below constitutes and appoints William L.
Benford and Thomas F. Larkins and each or either of them, his or
her true and lawful attorneys-in-fact and agents, each acting
alone, with full powers of substitution and resubstitution, for
such person and in his or her name, place and stead, in any and
all capacities, to sign any and all amendments (including post-
effective amendments) to this Registration Statement, and to file
the same, with all exhibits thereto, and other documents in
connection therewith, with the Commission, granting unto said
attorneys-in-fact and agents each acting alone, full power and
authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, each acting alone, or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue
hereof.
<PAGE>8
Pursuant to the requirements of the Act, this
Registration Statement has been signed by the following persons
in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Stanley P. Gold November 10, 1995
- -----------------------
Stanley P. Gold Director, Chairman of the
Board and Chief Executive
Officer
/s/ William L. Benford November 10, 1995
- -----------------------
William L. Benford President and Chief
Operating Officer
/s/ Thomas F. Larkins November 10, 1995
- -----------------------
Thomas F. Larkins Senior Vice President and
Chief Administrative Officer
/s/ Tracey C. Doi November 10, 1995
- -----------------------
Tracey C. Doi Vice President and Controller
/s/ Walter C. Bladstrom November 10, 1995
- -----------------------
Walter C. Bladstrom Director
/s/ Allan E. Dalshaug November 10, 1995
- -----------------------
Allan E. Dalshaug Director
/s/ Willie D. Davis November 10, 1995
- -----------------------
Willie D. Davis Director
/s/ Stephen A. Koffler November 10, 1995
- -----------------------
Stephen A. Koffler Director
/s/ Ann E. Meyers November 10, 1995
- -----------------------
Ann E. Meyers Director
<PAGE>9
/s/ Clifford A. Miller November 10, 1995
- -----------------------
Clifford A. Miller Director
/s/ Robert G. Moskowitz November 10, 1995
- -----------------------
Robert G. Moskowitz Director
/s/ Vappalak A. Ravindran November 10, 1995
- -------------------------
Vappalak A. Ravindran Director
Pursuant to the requirements of the Act, the 401(k)
Plan Committee of the Company has duly caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Santa Monica, State of
California, on November 10, 1995.
L.A. GEAR, INC. EMPLOYEE STOCK
SAVINGS PLAN
By: /s/ Victor J. Trippetti
-------------------------
Victor J. Trippetti
Member, 401(k) Plan
Committee
<PAGE>10
L.A. GEAR, INC.
INDEX TO EXHIBITS
-----------------
Sequentially
Exhibit No. Description Numbered Page
- ----------- ----------- -------------
4 L.A. Gear, Inc. Employee Stock Savings Plan
23 Consent of Price Waterhouse LLP
24 Powers of Attorney (included herein on pages
7-9)
L.A. GEAR, INC.
EMPLOYEE STOCK SAVINGS PLAN
Plan and Trust Agreement
Second Complete
Amendment and Restatement
Generally Effective August 1, 1993
<PAGE>
L.A. Gear, Inc. Employee Stock Savings Plan and Trust
Second Complete Amendment and Restatement Generally Effective
August 1, 1993
L.A. Gear, Inc. established the Retirement Plan for Employees of
L.A. Gear, effective December 1, 1985, intended to constitute a
qualified profit sharing plan, as described in Code section
401(a), for the benefit of eligible employees of the Company and
its participating affiliates. The Retirement Plan for Employees
of L.A. Gear was renamed the L.A. Gear, Inc. Employee Stock
Savings Plan effective December 1, 1986, and concurrently amended
and restated to add a qualified cash or deferred arrangement, as
described in Code section 401(k) and provisions to provide for a
qualified stock bonus plan, as described in Code section 401(a),
designated as an employee stock ownership plan, as described in
Code section 4975(e)(7).
The provisions related to the employee stock ownership plan are
discontinued, which provisions were never effected. The Plan, as
amended and restated generally effective August 1, 1993, is
intended to constitute a qualified profit sharing plan, as
described in Code section 401(a), which includes a qualified cash
or deferred arrangement, as described in Code section 401(k).
The provisions of this Plan and Trust relating to the Trustee
constitute the trust agreement which is entered into by and
between L.A. Gear, Inc. and Wells Fargo Bank, National
Association. The Trust is intended to be tax exempt as described
under Code section 501(a).
The L.A. Gear, Inc. Employee Stock Savings Plan and Trust, as set
forth in this document, is hereby amended and restated generally
effective as of August 1, 1993. This constitutes the second
complete amendment and restatement generally effective August 1,
1993.
Date:___________________, 19____ L.A.Gear, Inc.
By:______________________________
Title:________________________
The trust agreement set forth in those provisions of this Plan
and Trust which relate to the Trustee is hereby executed.
Date:___________________, 19____ Wells Fargo Bank, National Association
By:______________________________
Title:________________________
Date:___________________, 19____ Wells Fargo Bank, National Association
By:______________________________
Title:________________________
<PAGE>
TABLE OF CONTENTS
1 DEFINITIONS 1
2 ELIGIBILITY 10
2.1 Eligibility 10
2.2 Ineligible Employees 10
2.3 Ineligible or Former Participants 11
3 PARTICIPANT CONTRIBUTIONS 12
3.1 Employee 401(k) Contribution Election 12
3.2 After-Tax Contribution Election 12
3.3 Changing a Contribution Election 12
3.4 Revoking and Resuming a Contribution Election 12
3.5 Contribution Percentage Limits 13
3.6 Refunds When Contribution Dollar Limit Exceeded 13
3.7 Timing, Posting and Tax Considerations 14
4 ROLLOVERS AND TRANSFERS FROM AND TO OTHER QUALIFIED
PLANS 15
4.1 Rollovers 15
4.2 Transfers From and To Other Qualified Plans 15
5 EMPLOYER CONTRIBUTIONS 16
5.1 Employer Matching Contributions 16
5.2 Matching Stock Contributions 17
5.3 Matching Cash Contributions 17
5.4 Qualifying Contributions 18
6 ACCOUNTING 19
6.1 Individual Participant Accounting 19
6.2 Sweep Account is Transaction Account 19
6.3 Trade Date Accounting and Investment Cycle 19
6.4 Accounting for Investment Funds 19
6.5 Payment of Fees and Expenses 19
6.6 Accounting for Participant Loans 20
6.7 Error Correction 20
6.8 Participant Statements 21
6.9 Special Accounting During Conversion Period 21
6.10 Accounts for QDRO Beneficiaries 21
7 INVESTMENT FUNDS AND ELECTIONS 22
7.1 Investment Funds 22
7.2 Investment Fund Elections 22
7.3 Responsibility for Investment Choice 23
7.4 Default if No Election 23
7.5 Timing 23
7.6 Investment Fund Election Change Fees 23
<PAGE> i
8 VESTING & FORFEITURES 24
8.1 Fully Vested Contribution Accounts 24
8.2 Full Vesting upon Certain Events 24
8.3 Vesting Schedule 24
8.4 Forfeitures 25
8.5 Rehired Employees 25
9 PARTICIPANT LOANS 26
9.1 Participant Loans Permitted 26
9.2 Loan Application, Note and Security 26
9.3 Spousal Consent 26
9.4 Loan Approval 26
9.5 Loan Funding Limits, Account Sources and Funding
Order 26
9.6 Maximum Number of Loans 27
9.7 Source and Timing of Loan Funding 27
9.8 Interest Rate 27
9.9 Loan Payment 27
9.10 Loan Payment Hierarchy 28
9.11 Repayment Suspension 28
9.12 Loan Default 28
9.13 Call Feature 28
10 IN-SERVICE WITHDRAWALS 29
10.1 In-Service Withdrawals Permitted 29
10.2 In-Service Withdrawal Application and Notice 29
10.3 Spousal Consent 29
10.4 In-Service Withdrawal Approval 29
10.5 Minimum Amount, Payment Form and Medium 29
10.6 Source and Timing of In-Service Withdrawal Funding 30
10.7 Hardship Withdrawals 30
10.8 After-Tax Account Withdrawals 32
10.9 Over Age 59 1/2 Withdrawals 32
11 DISTRIBUTIONS ONCE EMPLOYMENT ENDS OR AS REQUIRED BY
LAW 34
11.1 Benefit Information, Notices and Election 34
11.2 Spousal Consent 34
11.3 Payment Form and Medium 34
11.4 Distribution of Small Amounts 35
11.5 Source and Timing of Distribution Funding 35
11.6 Deemed Distribution 35
11.7 Latest Commencement Permitted 36
11.8 Payment Within Life Expectancy 36
11.9 Incidental Benefit Rule 36
11.10Payment to Beneficiary 37
11.11Beneficiary Designation 37
<PAGE> ii
12 ADP AND ACP TESTS 38
12.1 Contribution Limitation Definitions 38
12.2 ADP and ACP Tests 41
12.3 Correction of ADP and ACP Tests 41
12.4 Multiple Use Test 43
12.5 Correction of Multiple Use Test 43
12.6 Adjustment for Investment Gain or Loss 43
12.7 Testing Responsibilities and Required Records 44
12.8 Separate Testing 44
13 MAXIMUM CONTRIBUTION AND BENEFIT LIMITATIONS 45
13.1 "Annual Addition" Defined 45
13.2 Maximum Annual Addition 45
13.3 Avoiding an Excess Annual Addition 45
13.4 Correcting an Excess Annual Addition 45
13.5 Correcting a Multiple Plan Excess 46
13.6 "Defined Benefit Fraction" Defined 46
13.7 "Defined Contribution Fraction" Defined 46
13.8 Combined Plan Limits and Correction 46
14 TOP HEAVY RULES 47
14.1 Top Heavy Definitions 47
14.2 Special Contributions 48
14.3 Adjustment to Combined Limits for Different Plans 49
15 PLAN ADMINISTRATION 50
15.1 Plan Delineates Authority and Responsibility 50
15.2 Fiduciary Standards 50
15.3 Company is ERISA Plan Administrator 50
15.4 Administrator Duties 51
15.5 Advisors May be Retained 51
15.6 Delegation of Administrator Duties 52
15.7 Committee Operating Rules 52
16 MANAGEMENT OF INVESTMENTS 53
16.1 Trust Agreement 53
16.2 Investment Funds 53
16.3 Authority to Hold Cash 54
16.4 Trustee to Act Upon Instructions 54
16.5 Administrator Has Right to
Vote Registered Investment Company Shares 54
16.6 Custom Fund Investment Management 54
16.7 Authority to Segregate Assets 55
16.8 Maximum Permitted Investment in Company Stock 55
16.9 Participants Have Right to Vote and Tender Company
Stock 55
16.10Registration and Disclosure for Company Stock 56
<PAGE> iii
17 TRUST ADMINISTRATION 57
17.1 Trustee to Construe Trust 57
17.2 Trustee To Act As Owner of Trust Assets 57
17.3 United States Indicia of Ownership 57
17.4 Tax Withholding and Payment 58
17.5 Trust Accounting 58
17.6 Valuation of Certain Assets 58
17.7 Legal Counsel 59
17.8 Fees and Expenses 59
17.9 Trustee Duties and Limitations 59
18 RIGHTS, PROTECTION, CONSTRUCTION AND JURISDICTION 60
18.1 Plan Does Not Affect Employment Rights 60
18.2 Limited Return of Contributions 60
18.3 Assignment and Alienation 60
18.4 Facility of Payment 61
18.5 Reallocation of Lost Participant's Accounts 61
18.6 Claims Procedure 61
18.7 Construction 62
18.8 Jurisdiction and Severability 62
18.9 Indemnification by Employer 62
19 AMENDMENT, MERGER, DIVESTITURES AND TERMINATION 63
19.1 Amendment 63
19.2 Merger 63
19.3 Divestitures 63
19.4 Plan Termination 64
19.5 Amendment and Termination Procedures 64
19.6 Termination of Employer's Participation 64
19.7 Replacement of the Trustee 65
19.8 Final Settlement and Accounting of Trustee 65
APPENDIX A - INVESTMENT FUNDS 66
APPENDIX B - PAYMENT OF PLAN FEES AND EXPENSES 67
APPENDIX C - LOAN INTEREST RATE 68
<PAGE> iv
1 DEFINITIONS
When capitalized, the words and phrases below have the
following meanings unless different meanings are clearly
required by the context:
1.1 "Account". The records maintained for purposes of
accounting for a Participant's interest in the Plan.
"Account" may refer to one or all of the following
accounts which have been created on behalf of a
Participant to hold specific types of Contributions
under the Plan:
(a) "Employee 401(k) Account". An account created to
hold Employee 401(k) Contributions.
(b) "After-Tax Account". An account created to hold
After-Tax Contributions.
(c) "Rollover Account". An account created to hold
Rollover Contributions.
(d) "Employer Matching Account". An account created
to hold Employer Matching Contributions.
(e) "Matching Stock Account". An account created to
hold Matching Stock Contributions and, effective
December 1, 1995, amounts designated as Employer
Matching Contributions, which amounts prior to
December 1, 1995, were held in a Participant's
Employer Matching Account.
(f) "Matching Cash Account". An account created to
hold Matching Cash Contributions.
(g) "Qualifying Account". An account created to hold
Qualifying Contributions.
1.2 "ACP" or "Average Contribution Percentage". The
percentage calculated in accordance with Section 12.1.
1.3 "Administrator". The Company, which may delegate all
or a portion of the duties of the Administrator under
the Plan to a Committee in accordance with Section
15.6.
1.4 "ADP" or "Average Deferral Percentage". The percentage
calculated in accordance with Section 12.1.
1.5 "Beneficiary". The person or persons who is to receive
benefits after the death of the Participant pursuant
to the "Beneficiary Designation" paragraph in Section
11, or as a result of a QDRO.
<PAGE> 1
1.6 "Break in Service". The end of five consecutive Plan
Years (or six consecutive Plan Years if absence from
employment was due to a Parental Leave) for which a
Participant is credited with no Hours of Service.
1.7 "Code". The Internal Revenue Code of 1986, as amended.
Reference to any specific Code section shall include
such section, any valid regulation promulgated
thereunder, and any comparable provision of any future
legislation amending, supplementing or superseding
such section.
1.8 "Committee". If applicable, the committee which has
been appointed by the Company to administer the Plan
in accordance with Section 15.6.
1.9 "Company". L.A. Gear, Inc. or any successor by merger,
purchase or otherwise.
1.10 "Company Stock". Shares of common stock of the
Company, or its successors or assigns, or any
corporation with or into which said corporation may be
merged, consolidated or reorganized, or to which a
majority of its assets may be sold.
1.11 "Compensation". The sum of a Participant's Taxable
Income and salary reductions, if any, pursuant to Code
sections 125, 402(e)(3), 402(h), 403(b), 414(h)(2) or
457, excluding reimbursements or other expense
allowances, cash and non-cash fringe benefits, moving
expenses, deferred compensation and welfare benefits.
Effective December 1, 1995, the preceding reference to
"excluding reimbursements or other expense allowances,
cash and non-cash fringe benefits, moving expenses,
deferred compensation and welfare benefits" shall no
longer apply.
For purposes of determining benefits under this Plan,
Compensation is limited to $200,000, (as adjusted for
the cost of living pursuant to Code sections
401(a)(17) and 415(d)) per Plan Year. For purposes of
determining benefits under this Plan for Plan Years
beginning after December 31, 1993, Compensation is
limited to $150,000, (as adjusted for the cost of
living pursuant to Code sections 401(a)(17) and
415(d)) per Plan Year.
For purposes of the preceding paragraph, in the case of
an HCE who is a 5% Owner or one of the 10 most highly
compensated Employees, (i) such HCE and such HCE's
family group (as defined below) shall be treated as a
single employee and the Compensation of each family
group member shall be aggregated with the Compensation
of such HCE, and (ii) the limitation on Compensation
shall be allocated among such HCE and his or her
family group members in proportion to each
individual's Compensation before the application of
this sentence. For purposes of this Section, the term
"family group" shall mean an Employee's spouse and
lineal descendants who have not attained age 19 before
the close of the year in question.
<PAGE> 2
For purposes of determining HCEs and key employees,
Compensation for the entire Plan Year shall be used.
For purposes of determining ADP and ACP, Compensation
shall be limited to amounts paid to an Eligible
Employee while a Participant.
1.12 "Contribution". An amount contributed to the Plan by
the Employer or an Eligible Employee, and allocated by
contribution type to Participants' Accounts, as
described in Section 1.1. Specific types of
contribution include:
(a) "Employee 401(k) Contribution". An amount
contributed by an eligible Participant in
conjunction with his or her Code section 401(k)
salary deferral election which shall be treated
as made by the Employer on an eligible
Participant's behalf.
(b) "After-Tax Contribution". An amount contributed
by an eligible Participant on an after-tax basis.
(c) "Rollover Contribution". An amount contributed by
an Eligible Employee which originated from
another employer's or an Employer's qualified
plan.
(d) "Employer Matching Contribution". An amount
contributed by the Employer on an eligible
Participant's behalf based upon the amount
contributed by the eligible Participant for
periods prior to December 1, 1995.
(e) "Matching Stock Contribution". An amount
contributed by the Employer on an eligible
Participant's behalf based upon the amount
contributed by the eligible Participant as set
forth in Section 5.2.
(f) "Matching Cash Contribution". An amount
contributed by the Employer on an eligible
Participant's behalf based upon the amount
contributed by the eligible Participant as set
forth in Section 5.3.
(g) "Qualifying Contribution". An amount contributed
by the Employer on an eligible Participant's
behalf and allocated on a pay based formula.
1.13 "Contribution Dollar Limit". The annual limit placed
on each Participant's Employee 401(k) Contributions,
which shall be $7,000 per calendar year (as adjusted
for the cost of living pursuant to Code sections
402(g)(5) and 415(d)). For purposes of this Section,
a Participant's Employee 401(k) Contributions shall
include (i) any employer contribution made under any
qualified cash or deferred arrangement as defined in
Code section 401(k) to the extent not includible in
gross income for the taxable year under Code section
402(e)(3) or 402(h)(1)(B) (determined without regard
to Code section 402(g)), and (ii) any employer
contribution to purchase an annuity contract under
Code section 403(b) under a salary reduction agreement
(within the meaning of Code section 3121(a)(5)(D)).
<PAGE> 3
1.14 "Conversion Period". The period of converting the
prior accounting system of the Plan and Trust, if such
Plan and Trust were in existence prior to the
Effective Date, or the prior accounting system of any
plan and trust which is merged into this Plan and
Trust subsequent to the Effective Date, to the
accounting system described in Section 6.
1.15 "Direct Rollover". An Eligible Rollover Distribution
that is paid directly to an Eligible Retirement Plan
for the benefit of a Distributee.
1.16 "Disability". A Participant's total and permanent,
mental or physical disability as evidenced by
presentation of medical evidence satisfactory to the
Administrator preventing a Participant from engaging
in his or her normal job, provided that the
Participant receives, or is anticipated to receive,
disability benefits under the Social Security Act.
1.17 "Distributee". An Employee or former Employee, the
surviving spouse of an Employee or former Employee and
a spouse or former spouse of an Employee or former
Employee determined to be an alternate payee under a
QDRO.
1.18 "Effective Date". The date upon which the provisions
of this document become effective. This date is
August 1, 1993, unless stated otherwise and
specifically except that the provisions related to
Qualifying Contributions and related Accounts are
effective November 1, 1994, provisions related to
Employer Matching Contributions and related Accounts
are discontinued effective November 30, 1995 and
provisions related to Matching Stock and Matching Cash
Contributions and related Accounts are effective
December 1, 1995. In general, the provisions of this
document only apply to Participants who are Employees
on or after the Effective Date. However, investment
and distribution provisions apply to all Participants
with Account balances to be invested or distributed
after the Effective Date.
1.19 "Eligible Employee". An Employee of an Employer,
except any Employee:
(a) whose compensation and conditions of employment
are covered by a collective bargaining agreement
to which an Employer is a party unless the
agreement calls for the Employee's participation
in the Plan;
(b) who is treated as an Employee because he or she is
a Leased Employee
(c) who is a nonresident alien who (i) either receives
no earned income (within the meaning of Code
section 911(d)(2)), from sources within the
United States under Code section 861(a)(3); or
(ii) receives such earned income from such
sources within the United States but such income
is exempt from United States income tax under an
applicable income tax convention; or
(d) who is a Temporary Employee.
<PAGE> 4
Effective December 1, 1995, an Eligible Employee shall
include a Temporary Employee other than a Temporary
Employee, if any, described in (a), (b) or (c) above.
1.20 "Eligible Retirement Plan". An individual retirement
account described in Code section 408(a), an
individual retirement annuity described in Code
section 408(b), an annuity plan described in Code
section 403(a), or a qualified trust described in Code
section 401(a), that accepts a Distributee's Eligible
Rollover Distribution, except that with regard to an
Eligible Rollover Distribution to a surviving spouse,
an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
1.21 "Eligible Rollover Distribution". A distribution of
all or any portion of the balance to the credit of a
Distributee, excluding a 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 a Distributee or the joint lives
(or joint life expectancies) of a Distributee and the
Distributee's designated Beneficiary, or for a
specified period of ten years or more; a distribution
to the extent such distribution is required under Code
section 401(a)(9); and the portion of a distribution
that is not includible in gross income (determined
without regard to the exclusion for net unrealized
appreciation with respect to Employer securities).
1.22 "Employee". An individual who is:
(a) directly employed by any Related Company and for
whom any income for such employment is subject to
withholding of income or social security taxes,
or
(b) a Leased Employee.
1.23 "Employer". The Company and any Subsidiary or other
Related Company of either the Company or a Subsidiary
which adopts this Plan with the approval of the
Company.
1.24 "ERISA". The Employee Retirement Income Security Act
of 1974, as amended. Reference to any specific
section shall include such section, any valid
regulation promulgated thereunder, and any comparable
provision of any future legislation amending,
supplementing or superseding such section.
1.25 "Expatriate Employee". The employment status of an
Eligible Employee during the period he or she is on an
international assignment and residing in a location
other this his or her home country.
1.26 "Forfeiture Account". An account holding amounts
forfeited by Participants who have terminated
employment with all Related Companies, invested in
interest bearing deposits of the Trustee, pending
disposition as provided in this Plan and Trust and as
directed by the Administrator.
<PAGE> 5
1.27 "HCE" or "Highly Compensated Employee". An Employee
described as a Highly Compensated Employee in Section
12.
1.28 "Hour of Service". Each hour for which an Employee is
entitled to:
(a) payment for the performance of duties for any
Related Company;
(b) payment from any Related Company for any period
during which no duties are performed
(irrespective of whether the employment
relationship has terminated) due to vacation,
holiday, sickness, incapacity (including
disability), layoff, leave of absence, jury duty
or military service;
(c) back pay, irrespective of mitigation of damages,
by award or agreement with any Related Company
(and these hours shall be credited to the period
to which the agreement pertains); or
(d) no payment, but is on a Leave of Absence (and
these hours shall be based upon his or her
normally scheduled hours per week or a 40 hour
week if there is no regular schedule).
The crediting of hours for which no duties are
performed shall be in accordance with Department of
Labor regulation sections 2530.200b-2(b) and (c).
Actual hours shall be used whenever an accurate record
of hours are maintained for an Employee. Otherwise,
an equivalent number of hours shall be credited for
each payroll period in which the Employee would be
credited with at least 1 hour. The payroll period
equivalencies are 45 hours weekly, 90 hours biweekly,
95 hours semimonthly and 190 hours monthly.
Hours credited prior to a Break in Service are
included.
An Employee's service with a predecessor or acquired
company shall only be counted in the determination of
his or her Hours of Service for eligibility and/or
vesting purposes if (1) the Company directs that
credit for such service be granted, or (2) a qualified
plan of the predecessor or acquired company is
subsequently maintained by any Employer or Related
Company.
1.29 "Ineligible". The Plan status of an individual during
the period in which he or she is (1) an Employee of a
Related Company which is not then an Employer, (2) an
Employee, but not an Eligible Employee, or (3) not an
Employee.
1.30 "Investment Fund" or "Fund". An investment fund as
described in Section 16.2. The Investment Funds
authorized by the Administrator to be offered under
the Plan as of the Effective Date, or such date as
otherwise specified, are set forth in Appendix A.
<PAGE> 6
1.31 "Leased Employee". An individual who is deemed to be
an employee of any Related Company as provided in Code
section 414(n) or (o).
1.32 "Leave of Absence". A period during which an
individual is deemed to be an Employee, but is absent
from active employment, provided that the absence:
(a) was authorized by a Related Company; or
(b) was due to military service in the United States
armed forces and the individual returns to active
employment within the period during which he or
she retains employment rights under federal law.
1.33 "Loan Account". The record maintained for purposes of
accounting for a Participant's loan and payments of
principal and interest thereon.
1.34 "NHCE" or "Non-Highly Compensated Employee". An
Employee described as a Non-Highly Compensated
Employee in Section 12.
1.35 "Normal Retirement Date". The date of a Participant's
65th birthday.
1.36 "Owner". A person with an ownership interest in the
capital, profits, outstanding stock or voting power of
a Related Company within the meaning of Code section
318 or 416 (which exclude indirect ownership through a
qualified plan).
1.37 "Parental Leave". The period of absence from work by
reason of pregnancy, the birth of an Employee's child,
the placement of a child with the Employee in
connection with the child's adoption, or caring for
such child immediately after birth or placement as
described in Code section 410(a)(5)(E).
1.38 "Participant". An Eligible Employee who begins to
participate in the Plan after completing the
eligibility requirements as described in Section 2.1.
An Eligible Employee who makes a Rollover Contribution
prior to completing the eligibility requirements as
described in Section 2.1 shall also be considered a
Participant, except that he or she shall not be
considered a Participant for purposes of provisions
related to Contributions, other than a Rollover
Contribution, until he or she completes the
eligibility requirements as described in Section 2.1.
A Participant's participation continues until his or
her employment with all Related Companies ends and his
or her Account is distributed or forfeited.
1.39 "Pay". All cash compensation paid to an Eligible
Employee by an Employer while a Participant during the
current period, except that "base pay" shall be
substituted for the preceding reference to "All cash
compensation" with regard to an Eligible Employee
during any period he or she is an Expatriate Employee.
Pay excludes reimbursements or other expense
allowances, cash and non-cash fringe benefits, moving
expenses, deferred compensation and welfare benefits.
<PAGE> 7
Pay is neither increased by any salary credit or
decreased by any salary reduction pursuant to Code
sections 125 or 402(e)(3). Pay is limited to $200,000
(as indexed for the cost of living pursuant to Code
sections 401(a)(17) and 415(d)) per Plan Year. Pay is
limited to $150,000 (as adjusted for the cost of
living pursuant to Code sections 401(a)(17) and
415(d)) per Plan Year for Plan Years beginning after
December 31, 1993.
1.40 "Plan". The L.A. Gear, Inc. Employee Stock Savings
Plan set forth in this document, as from time to time
amended.
1.41 "Plan Year". The annual accounting period of the Plan
and Trust which ends on each November 30.
1.42 "QDRO". A domestic relations order which the
Administrator has determined to be a qualified
domestic relations order within the meaning of Code
section 414(p).
1.43 "Related Company". With respect to any Employer, that
Employer and any corporation, trade or business which
is, together with that Employer, a member of the same
controlled group of corporations, a trade or business
under common control, or an affiliated service group
within the meaning of Code sections 414(b), (c), (m)
or (o), except that for purposes of Section 13 "within
the meaning of Code sections 414(b), (c), (m) or (o),
as modified by Code section 415(h)" shall be
substituted for the preceding reference to "within the
meaning of Code section 414(b), (c), (m) or (o)".
1.44 "Regular Employee". An Employee of an Employer other
than an Employee classified as a Temporary Employee.
1.45 "Settlement Date". For each Trade Date, the Trustee's
next business day.
1.46 "Spousal Consent". The written consent given by a
spouse to a Participant's Beneficiary designation.
The spouse's consent must acknowledge the effect on
the spouse of the Participant's designation, and be
duly witnessed by a Plan representative or notary
public. Spousal Consent shall be valid only with
respect to the spouse who signs the Spousal Consent
and only for the particular choice made by the
Participant which requires Spousal Consent. A
Participant may revoke (without Spousal Consent) a
prior designation that required Spousal Consent at any
time before payments begin. Spousal Consent also
means a determination by the Administrator that there
is no spouse, the spouse cannot be located, or such
other circumstances as may be established by
applicable law.
1.47 "Subsidiary". A company which is 50% or more owned,
directly or indirectly, by the Company.
<PAGE> 8
1.48 "Sweep Account". The subsidiary Account for each
Participant through which all transactions are
processed, which is invested in interest bearing
deposits of the Trustee.
1.49 "Sweep Date". The cut off date and time for receiving
instructions for transactions to be processed on the
next Trade Date.
1.50 "Taxable Income". Compensation in the amount reported
by the Employer or a Related Company as "Wages, tips,
other compensation" on Form W-2, or any successor
method of reporting under Code section 6041(d).
1.51 "Temporary Employee". An Employee of an Employer whose
work assignment is not intended to exceed 120 days and
therefore whose employment commencement date and
termination date is not intended to be more than 120
days apart.
1.52 "Trade Date". Each day the Investment Funds are
valued, which is normally every day the assets of such
Funds are traded.
1.53 "Trust". The legal entity created by those provisions
of this document which relate to the Trustee. The
Trust is part of the Plan and holds the Plan assets
which are comprised of the aggregate of Participants'
Accounts, any unallocated funds invested in deposit or
money market type assets pending allocation to
Participants' Accounts or disbursement to pay Plan
fees and expenses and the Forfeiture Account.
1.54 "Trustee". Wells Fargo Bank, National Association.
1.55 "Year of Vesting Service". A 12 consecutive month
period ending on the last day of a Plan Year in which
an Employee is credited with at least 1,000 Hours of
Service. An Employee shall be credited with a Year of
Vesting Service at such time as he or she is credited
with 1,000 Hours of Service during such 12 consecutive
month period.
Years of Vesting Service shall include service credited
prior to December 1, 1985.
<PAGE> 9
2 ELIGIBILITY
2.1 Eligibility
All Participants as of August 1, 1993 shall continue
their eligibility to participate. Each other Eligible
Employee shall become a Participant on the later of
August 1, 1993 or thereafter, on the first day of the
next month after the date he or she attains age 21,
and completes a three month eligibility period in
which he or she is credited with at least 250 Hours of
Service. The initial eligibility period begins on the
date an Employee first performs an Hour of Service.
Subsequent eligibility periods begin with the start of
each quarter of the Plan Year beginning after the
first Hour of Service is performed.
Effective February 1, 1995, all Participants as of
February 1, 1995 shall continue their eligibility to
participate. Each other Eligible Employee shall
become a Participant on the later of February 1, 1995
or thereafter, on the first day of the next payroll
period after the date he or she attains age 21, and
completes a 30 day eligibility period in which he or
she is credited with at least 83 Hours of Service.
The initial eligibility period begins on the date an
Employee first performs an Hour of Service. Subsequent
eligibility periods begin with the start of each month
beginning after the first Hour of Service is
performed.
Effective December 1, 1995, all Participants as of
December 1, 1995 shall continue their eligibility to
participate. Each other Eligible Employee, other than
a Temporary Employee or a Regular Employee classified
as part-time, shall become a Participant on the first
day of the next payroll period after the date he or
she attains age 21, and completes a 30 day eligibility
period in which he or she is credited with at least 83
Hours of Service. The initial eligibility period
begins on the date an Employee first performs an Hour
of Service. Subsequent eligibility periods begin with
the start of each month beginning after the first Hour
of Service is performed.
Each Eligible Employee who is a Temporary Employee or a
Regular Employee classified as part-time, shall become
a Participant on the later of December 1, 1995 or
thereafter, on the first day of the next payroll
period after the date he or she attains age 21, and
completes a twelve month eligibility period in which
he or she is credited with at least 1,000 Hours of
Service. The initial eligibility period begins on the
date an Employee first performs an Hour of Service.
Subsequent eligibility periods begin with the start of
each Plan Year after the first Hour of Service is
performed.
2.2 Ineligible Employees
If an Employee completes the above eligibility
requirements, but is Ineligible at the time
participation would otherwise begin (if he or she were
not Ineligible), he or she shall become a Participant
on the first subsequent date on which he or she is an
Eligible Employee.
<PAGE> 10
2.3 Ineligible or Former Participants
A Participant may not make or share in Plan
Contributions, nor generally be eligible for a new
Plan loan, during the period he or she is Ineligible,
but he or she shall continue to participate for all
other purposes. An Ineligible Participant or former
Participant shall automatically become an active
Participant on the date he or she again becomes an
Eligible Employee.
<PAGE> 11
3 PARTICIPANT CONTRIBUTIONS
3.1 Employee 401(k) Contribution Election
Upon becoming a Participant, an Eligible Employee may
elect to reduce his or her Pay by an amount which does
not exceed the Contribution Dollar Limit, within the
limits described in the Contribution Percentage Limits
paragraph of this Section 3, and have such amount
contributed to the Plan by the Employer as a Employee
401(k) Contribution. The election shall be made as a
whole percentage of Pay in such manner and with such
advance notice as prescribed by the Administrator. In
no event shall an Employee's Employee 401(k)
Contributions under the Plan and comparable
contributions to all other plans, contracts or
arrangements of all Related Companies exceed the
Contribution Dollar Limit for the Employee's taxable
year beginning in the Plan Year.
3.2 After-Tax Contribution Election
Upon becoming a Participant, an Eligible Employee may
elect to make After-Tax Contributions to the Plan in
an amount which does not exceed the limits described
in the Contribution Percentage Limits paragraph of
this Section 3. The election shall be made as a whole
percentage of Pay in such manner and with such advance
notice as prescribed by the Administrator.
3.3 Changing a Contribution Election
A Participant who is an Eligible Employee may change
his or her Employee 401(k) and/or After-Tax
Contribution election at any time, but no more
frequently than once in any 3-month period, in such
manner and with such advance notice as prescribed by
the Administrator, and such election shall be
effective with the first payroll paid after such date.
Participants' Contribution election percentages shall
automatically apply to Pay increases or decreases.
3.4 Revoking and Resuming a Contribution Election
A Participant may revoke his or her Employee 401(k)
and/or After-Tax Contribution election at any time in
such manner and with such advance notice as prescribed
by the Administrator, and such revocation shall be
effective with the first payroll paid after such date.
A Participant who has revoked his or her Employee
401(k) and/or After-Tax Contribution election shall be
required to wait at least three months before he or
she may resume Employee 401(k) and/or After-Tax
Contributions to the Plan. Thereafter, a Participant
who is an Eligible Employee may resume Employee 401(k)
and/or After-Tax Contributions by making a new
Contribution election at any time in such manner and
with such advance notice as prescribed by the
Administrator, and such election shall be effective
with the first payroll paid after such date.
<PAGE> 12
3.5 Contribution Percentage Limits
The Administrator may establish and change from time to
time, in writing, without the necessity of amending
this Plan and Trust, the minimum, if applicable, and
maximum Employee 401(k) and After-Tax Contribution
percentages, and/or a maximum combined Employee 401(k)
and After-Tax Contribution percentage, prospectively
or retrospectively (for the current Plan Year), for
all Participants. In addition, the Administrator may
establish any lower percentage limits for Highly
Compensated Employees as it deems necessary to satisfy
the tests described in Section 12. As of the
Effective Date, the minimum Employee 401(k) and After-
Tax Contribution Percentages are 1%, and the maximum
Contribution percentages are:
Highly
Contribution Compensated All Other
Type Employees Participants
Employee 401(k) 17% 17%
After-Tax 10% 10%
Sum of Both 17% 17%
Irrespective of the limits that may be established by
the Administrator in accordance with this paragraph,
in no event shall the contributions made by or on
behalf of a Participant for a Plan Year exceed the
maximum allowable under Code section 415.
3.6 Refunds When Contribution Dollar Limit Exceeded
A Participant who makes Employee 401(k) Contributions
for a calendar year to this Plan and comparable
contributions to any other qualified defined
contribution plan in excess of the Contribution Dollar
Limit may notify the Administrator in writing by the
following March 1 (or as late as April 14 if allowed
by the Administrator) that an excess has occurred. In
this event, the amount of the excess specified by the
Participant, adjusted for investment gain or loss,
shall be refunded to him or her by April 15 and shall
not be included as an Annual Addition under Code
section 415 for the year contributed. Refunds shall
not include investment gain or loss for the period
between the end of the applicable calendar year and
the date of distribution.
Excess amounts shall first be taken from unmatched
Employee 401(k) Contributions and then from matched
Employee 401(k) Contributions. Any Employer Matching
Contributions attributable to refunded excess Employee
401(k) Contributions as described in this Section
shall be forfeited and used as described in Section
8.4. For the calendar year commencing January 1,
1995, "Any Employer Matching, Matching Stock and
Matching Cash Contributions" shall be substituted for
the reference to "Any Employer Matching Contributions"
in the preceding sentence and for calendar years
commencing
<PAGE> 13
on or after January 1, 1996, "Any Matching Stock and
Matching Cash Contributions" shall be substituted for
the reference to "Any Employer Matching Contributions"
in the preceding sentence.
3.7 Timing, Posting and Tax Considerations
Participants' Contributions, other than Rollover
Contributions, may only be made through payroll
deduction. Such amounts shall be paid to the Trustee
in cash and posted to each Participant's Account(s) as
soon as such amounts can reasonably be separated from
the Employer's general assets and balanced against the
specific amount made on behalf of each Participant.
In no event, however, shall such amounts be paid to
the Trustee more than 90 days after the date amounts
are deducted from a Participant's Pay. Employee
401(k) Contributions shall be treated as Contributions
made by an Employer in determining tax deductions
under Code section 404(a).
<PAGE> 14
4 ROLLOVERS AND TRANSFERS FROM AND TO OTHER QUALIFIED PLANS
4.1 Rollovers
The Administrator may authorize the Trustee to accept a
rollover contribution, within the meaning of Code
section 402(c) or 408(d)(3)(A)(ii), in cash, directly
from an Eligible Employee or as a Direct Rollover from
another qualified plan on behalf of the Eligible
Employee, even if he or she is not yet a Participant.
The Employee shall be responsible for furnishing
satisfactory evidence, in such manner as prescribed by
the Administrator, that the amount is eligible for
rollover treatment. A rollover contribution received
directly from an Eligible Employee must be paid to the
Trustee in cash within 60 days after the date received
by the Eligible Employee from a qualified plan or
conduit individual retirement account. Contributions
described in this paragraph shall be posted to the
applicable Employee's Rollover Account as of the date
received by the Trustee.
If it is later determined that an amount contributed
pursuant to the above paragraph did not in fact
qualify as a rollover contribution under Code section
402(c) or 408(d)(3)(A)(ii), the balance credited to
the Employee's Rollover Account shall immediately be
(1) segregated from all other Plan assets, (2) treated
as a nonqualified trust established by and for the
benefit of the Employee, and (3) distributed to the
Employee. Any such nonqualifying rollover shall be
deemed never to have been a part of the Plan.
4.2 Transfers From and To Other Qualified Plans
The Administrator may instruct the Trustee to receive
assets in cash or in kind directly from another
qualified plan or transfer assets in cash or in kind
directly to another qualified plan; provided that a
transfer should not be directed if:
(a) any amounts are not exempted by Code section
401(a)(11)(B) from the annuity requirements of
Code section 417 unless, in the event of a
receipt of assets, the Plan complies with such
requirements or, in the event of a transfer of
assets, the receiving Plan complies with such
requirements; or
(b) any amounts include benefits protected by Code
section 411(d)(6) which would not be preserved
under applicable Plan provisions, in the event of
a receipt of assets or, under the applicable
provisions of the receiving plan, in the event of
a transfer of assets .
The Trustee may refuse the receipt of any transfer if:
(a) the Trustee finds the in-kind assets unacceptable;
or
(b) instructions for posting amounts to Participants'
Accounts are incomplete.
Such amounts shall be posted to the appropriate
Accounts of Participants as of the date received by
the Trustee.
<PAGE> 15
5 EMPLOYER CONTRIBUTIONS
The provisions of Section 5.1 are discontinued effective
November 30, 1995. The provisions of Sections 5.2 and 5.3
are effective December 1, 1995. The provisions of Section
5.4 are effective November 1, 1994.
5.1 Employer Matching Contributions
(a) Frequency and Eligibility. For each Plan Year,
the Employer shall make Employer Matching
Contributions, as described in the following
Allocation Method paragraph, on behalf of each
Participant who contributed during the period and
was an Eligible Employee on the last day of the
period.
Such Contributions shall also be made on behalf of
each Participant who contributed during the
period but who ceased being an Employee during
the period after having attained age 65, or by
reason of his or her Disability or death.
(b) Allocation Method. The Employer Matching
Contributions (including any Forfeiture Account
amounts applied as Employer Matching
Contributions in accordance with Section 8.4) for
each period shall total 50% of each eligible
Participant's Employee 401(k) Contributions for
the period, provided that no Employer Matching
Contributions (and Forfeiture Account amounts)
shall be made based upon a Participant's
Contributions in excess of 6% of his or her Pay.
The Employer may change the 50% matching rate or
the 6% of considered Pay to any other
percentages, including 0%, generally by notifying
eligible Participants in sufficient time to
adjust their Contribution elections prior to the
start of the period for which the new percentages
apply, or in the case of an increased percentage
matching rate or increased percentage of
considered Pay, no later than the due date,
including extensions, for filing the Employer's
federal income tax return for the applicable
year.
(c) Timing, Medium and Posting. The Employer shall
make each period's Employer Matching Contribution
in cash as soon as administratively feasible, and
for purposes of deducting such Contribution, not
later than the Employer's federal tax filing
date, including extensions. The Trustee shall
post such amount to each Participant's Employer
Matching Account once the total Contribution
received has been balanced against the specific
amount to be credited to each Participant's
Employer Matching Account.
<PAGE> 16
5.2 Matching Stock Contributions
(a) Frequency and Eligibility. For each Participant
for which Participants' Contributions are made,
the Employer shall make Matching Stock
Contributions, as described in the following
Allocation Method paragraph, on behalf of each
Participant who contributed during the period.
(b) Allocation Method. The Matching Stock
Contributions (including any Forfeiture Account
amounts applied as Matching Stock Contributions
in accordance with Section 8.4) for each period
shall total 25% of each eligible Participant's
Employee 401(k) Contributions for the period,
provided that no Matching Stock Contributions
(and Forfeiture Account amounts) shall be made
based upon a Participant's Contributions in
excess of 6% of his or her Pay. The Employer may
change the 25% matching rate or the 6% of
considered Pay to any other percentages,
including 0%, generally by notifying eligible
Participants in sufficient time to adjust their
Contribution elections prior to the start of the
Plan Year for which the new percentages apply.
(c) Timing, Medium and Posting. The Employer shall
make each period's Matching Stock Contribution in
cash as soon as administratively feasible, and
for purposes of deducting such Contribution, not
later than the Employer's federal tax filing
date, including extensions. The Trustee shall
post such amount to each Participant's Matching
Stock Account once the total Contribution
received has been balanced against the specific
amount to be credited to each Participant's
Matching Stock Account.
5.3 Matching Cash Contributions
(a) Frequency and Eligibility. For each period for
which Participants Contributions are made, the
Employer shall make Matching Cash Contributions,
as described in the following Allocation Method
paragraph, on behalf of each Participant who
contributed during the period.
(b) Allocation Method. The Matching Cash
Contributions (including any Forfeiture Account
amounts applied as Matching Cash Contributions in
accordance with Section 8.4) for each period
shall total 25% of each eligible Participant's
Employee 401(k) Contributions for the period,
provided that no Matching Cash Contributions (and
Forfeiture Account amounts) shall be made based
upon a Participant's Contributions in excess of
6% of his or her Pay. The Employer may change
the 25% matching rate or the 6% of considered Pay
to any other percentages, including 0%, generally
by notifying eligible Participants in sufficient
time to adjust their Contribution elections prior
to the start of the Plan Year for which the new
percentages apply.
<PAGE> 17
(c) Timing, Medium and Posting. The Employer shall
make each period's Matching Cash Contribution in
cash as soon as administratively feasible, and
for purposes of deducting such Contribution, not
later than the Employer's federal tax filing
date, including extensions. The Trustee shall
post such amount to each Participant's Matching
Cash Account once the total Contribution received
has been balanced against the specific amount to
be credited to each Participant's Matching Cash
Account.
5.4 Qualifying Contributions
(a) Frequency and Eligibility. For each Plan Year,
the Employer may make a Qualifying Contribution
on behalf of a Non-Highly Compensated Employee
Participant who was an Eligible Employee at any
time during the period.
(b) Allocation Method. The Qualifying Contribution
for each period shall be in an amount determined
by the Employer, not in excess of the amount
determined necessary to satisfy the tests
described in Section 12, and allocated among
eligible Participants in order of each
Participant's Taxable Income for the Plan Year
beginning with the Participant with the lowest
Taxable Income, in an amount representing the
lesser of the amount determined necessary to
satisfy the tests described in Section 12 or that
results in the Annual Addition, as defined in
Section 13.1, to the Participant's Account
equaling, but not exceeding, the Maximum Annual
Addition, as defined in Section 13.2. This
process shall be repeated with the Participant
with the next lowest Taxable Income and so forth
as necessary until the tests described in Section
12 are satisfied.
(c) Timing, Medium and Posting. The Employer shall
make each period's Qualifying Contribution in
cash as soon as administratively feasible, and
for purposes of deducting such Contribution, not
later than the Employer's federal tax filing
date, including extensions. Notwithstanding, for
purposes of satisfying the tests described in
Section 12, Qualifying Contributions shall be
made before the end of the Plan Year following
the Plan Year being tested. The Trustee shall
post such amount to each Participant's Qualifying
Account once the total Contribution received has
been balanced against the specific amount to be
credited to each Participant's Qualifying
Account.
<PAGE> 18
6 ACCOUNTING
6.1 Individual Participant Accounting
The Administrator shall maintain an individual set of
Accounts for each Participant in order to reflect
transactions both by type of Contribution and
investment medium. Financial transactions shall be
accounted for at the individual Account level by
posting each transaction to the appropriate Account of
each affected Participant. Participant Account values
shall be maintained in shares for the Investment Funds
and in dollars for the Sweep and Loan Accounts. At
any point in time, the Account value shall be
determined using the most recent Trade Date values
provided by the Trustee.
6.2 Sweep Account is Transaction Account
All transactions related to amounts being contributed
to or distributed from the Trust shall be posted to
each affected Participant's Sweep Account. Any amount
held in the Sweep Account shall be credited with
interest up until the date on which it is removed from
the Sweep Account.
6.3 Trade Date Accounting and Investment Cycle
Participant Account values shall be determined as of
each Trade Date. For any transaction to be processed
as of a Trade Date, the Trustee must receive
instructions for the transaction by the Sweep Date.
Such instructions shall apply to amounts held in the
Account on that Sweep Date. Financial transactions of
the Investment Funds shall be posted to Participants'
Accounts as of the Trade Date, based upon the Trade
Date values provided by the Trustee, and settled on
the Settlement Date.
6.4 Accounting for Investment Funds
Investments in each Investment Fund shall be maintained
in shares. The Trustee is responsible for determining
the share values of each Investment Fund as of each
Trade Date. To the extent an Investment Fund is
comprised of collective investment funds of the
Trustee, or any other fiduciary to the Plan, the share
values shall be determined in accordance with the
rules governing such collective investment funds,
which are incorporated herein by reference. All other
share values shall be determined by the Trustee. The
share value of each Investment Fund shall be based on
the fair market value of its underlying assets.
6.5 Payment of Fees and Expenses
Except to the extent Plan fees and expenses related to
Account maintenance, transaction and Investment Fund
management and maintenance, as set forth below, are
paid by the Employer directly, or indirectly, through
the Forfeiture
<PAGE> 19
Account as directed by the Administrator, such fees and
expenses shall be paid as set forth below. The
Employer may pay a lower portion of the fees and
expenses allocable to the Accounts of Participants who
are no longer Employees or who are not Beneficiaries,
unless doing so would result in discrimination.
(a) Account Maintenance: Account maintenance fees and
expenses, may include but are not limited to,
administrative, Trustee, government annual report
preparation, audit, legal, nondiscrimination
testing and fees for any other special services.
Account maintenance fees shall be charged to
Participants on a per Participant basis provided
that no fee shall reduce a Participant's Account
balance below zero.
(b) Transaction: Transaction fees and expenses, may
include but are not limited to, periodic
installment payment Investment Fund election
change and loan fees. Transaction fees shall be
charged to the Participant's Account involved in
the transaction provided that no fee shall reduce
a Participant's Account balance below zero.
(c) Investment Fund Management and Maintenance:
Management and maintenance fees and expenses
related to the Investment Funds shall be charged
at the Investment Fund level and reflected in the
net gain or loss of each Fund.
As of the Effective Date, a breakdown of which Plan
fees and expenses shall generally be borne by the
Trust (and charged to individual Participants'
Accounts or charged at the Investment Fund level and
reflected in the net gain or loss of each Fund) and
those that shall be paid by the Employer is set forth
in Appendix B and may be changed from time to time by
the Administrator, in writing, without the necessity
of amending this Plan and Trust.
The Trustee shall have the authority to pay any such
fees and expenses, which remain unpaid by the Employer
for 60 days, from the Trust.
6.6 Accounting for Participant Loans
Participant loans shall be held in a separate Loan
Account of the Participant and accounted for in
dollars as an earmarked asset of the borrowing
Participant's Account.
6.7 Error Correction
The Administrator may correct any errors or omissions
in the administration of the Plan by restoring any
Participant's Account balance with the amount that
would be credited to the Account had no error or
omission been made. Funds necessary for any such
restoration shall be provided through payment made by
the Employer, or by the Trustee to the extent the
error or omission is
<PAGE> 20
attributable to actions or inactions of the Trustee, or
if the restoration involves an Account holding amounts
contributed by an Employer, the Administrator may
direct the Trustee to use amounts from the Forfeiture
Account.
6.8 Participant Statements
The Administrator shall provide Participants with
statements of their Accounts as soon after the end of
each quarter of the Plan Year as administratively
feasible.
6.9 Special Accounting During Conversion Period
The Administrator and Trustee may use any reasonable
accounting methods in performing their respective
duties during any Conversion Period. This includes,
but is not limited to, the method for allocating net
investment gains or losses and the extent, if any, to
which contributions received by and distributions paid
from the Trust during this period share in such
allocation.
6.10 Accounts for QDRO Beneficiaries
A separate Account shall be established for an
alternate payee entitled to any portion of a
Participant's Account under a QDRO as of the date and
in accordance with the directions specified in the
QDRO. In addition, a separate Account may be
established during the period of time the
Administrator, a court of competent jurisdiction or
other appropriate person is determining whether a
domestic relations order qualifies as a QDRO. Such a
separate Account shall be valued and accounted for in
the same manner as any other Account.
(a) Distributions Pursuant to QDROs. If a QDRO so
provides, the portion of a Participant's Account
payable to an alternate payee may be distributed,
in a form as permissible under Section 11, to the
alternate payee at the time specified in the
QDRO, regardless of whether the Participant is
entitled to a distribution from the Plan at such
time.
(b) Participant Loans. Except to the extent required
by law, an alternate payee, on whose behalf a
separate Account has been established, shall not
be entitled to borrow from such Account. If a
QDRO specifies that the alternate payee is
entitled to any portion of the Account of a
Participant who has an outstanding loan balance,
all outstanding loans shall generally continue to
be held in the Participant's Account and shall
not be divided between the Participant's and
alternate payee's Accounts.
(c) Investment Direction. Where a separate Account
has been established on behalf of an alternate
payee and has not yet been distributed, the
alternate payee may direct the investment of such
Account in the same manner as if he or she were a
Participant.
<PAGE> 21
7 INVESTMENT FUNDS AND ELECTIONS
7.1 Investment Funds
Except for Participants' Sweep and Loan Accounts, the
Trust shall be maintained in various Investment Funds.
The Administrator shall select the Investment Funds
offered to Participants and may change the number or
composition of the Investment Funds, subject to the
terms and conditions agreed to with the Trustee. As
of the Effective Date or such date as otherwise
specified, a list of the Investment Funds offered
under the Plan is set forth in Appendix A, and may be
changed from time to time by the Administrator, in
writing, and as agreed to by the Trustee, without the
necessity of amending this Plan and Trust.
7.2 Investment Fund Elections
Each Participant shall direct the investment of all of
his or her Contribution Accounts except for these
Accounts:
Employer Matching Account
which shall be entirely invested in the Investment Fund
specified by the Administrator, which Investment Fund
as of the Effective Date is set forth in Appendix A.
However, a Participant who has attained age 55 may
direct the investment of the balances in his or her
Employer Matching Account. Future amounts allocated
to his or her Employer Matching Account shall continue
to be entirely invested in the Investment Fund
specified by the Administrator, until otherwise
directed by the Participant.
Effective December 1, 1995, "Matching Stock Account"
(which effective December 1, 1995 includes amounts
previously held in a Participant's Employer Matching
Account) shall be substituted for each reference to
"Employer Matching Account" in the preceding
paragraph.
A Participant shall make his or her investment election
in any combination of one or any number of the
Investment Funds offered in accordance with the
procedures established by the Administrator and
Trustee. However, during any Conversion Period, Trust
assets may be held in any investment vehicle permitted
by the Plan, as directed by the Administrator,
irrespective of Participant investment elections.
The Administrator may set a maximum percentage of the
total election that a Participant may direct into any
specific Investment Fund, which maximum, if any, as of
the Effective Date is set forth in Appendix A, and may
be changed from time to time by the Administrator, in
writing, without the necessity of amending this Plan
and Trust.
<PAGE> 22
7.3 Responsibility for Investment Choice
Each Participant shall be solely responsible for the
selection of his or her Investment Fund choices. No
fiduciary with respect to the Plan is empowered to
advise a Participant as to the manner in which his or
her Accounts are to be invested, and the fact that an
Investment Fund is offered shall not be construed to
be a recommendation for investment.
7.4 Default if No Election
The Administrator shall specify an Investment Fund for
the investment of that portion of a Participant's
Account which is not yet held in an Investment Fund
and for which no valid investment election is on file.
The Investment Fund specified as of the Effective Date
is set forth in Appendix A, and may be changed from
time to time by the Administrator, in writing, without
the necessity of amending this Plan and Trust.
7.5 Timing
A Participant shall make his or her initial investment
election upon becoming a Participant and may change
his or her investment election at any time in
accordance with the procedures established by the
Administrator and Trustee. Investment elections
received by the Trustee by the Sweep Date shall be
effective on the following Trade Date.
7.6 Investment Fund Election Change Fees
A reasonable processing fee may be charged directly to
a Participant's Account for Investment Fund election
changes in excess of a specified number per year as
determined by the Administrator.
<PAGE> 23
8 VESTING & FORFEITURES
8.1 Fully Vested Contribution Accounts
A Participant shall be fully vested in these Accounts
at all times:
Employee 401(k) Account
After-Tax Account
Rollover Account
Qualifying Account
8.2 Full Vesting upon Certain Events
A Participant's entire Account shall become fully
vested once he or she has attained his or her Normal
Retirement Date as an Employee or upon his or her
terminating employment with all Related Companies due
to his or her Disability or death.
8.3 Vesting Schedule
In addition to the vesting provided above, a
Participant's Employer Matching Account shall become
vested in accordance with the following schedule:
Years of Vesting Vested
Service Percentage
Less than 1 0%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
Effective December 1, 1995, "Matching Stock and
Matching Cash Accounts" (which, with regard to
"Matching Stock Account" effective December 1, 1995,
includes amounts previously held in a Participant's
Employer Matching Account) shall be substituted for
the preceding reference to "Employer Matching
Account".
If this vesting schedule is changed, the vested
percentage for each Participant shall not be less than
his or her vested percentage determined as of the last
day prior to this change, and for any Participant with
at least three Years of Vesting Service when the
schedule is changed, vesting shall be determined using
the more favorable vesting schedule.
<PAGE> 24
8.4 Forfeitures
A Participant's non-vested Account balance shall be
forfeited as of the Settlement Date following the
Sweep Date on which the Administrator has reported to
the Trustee that the Participant's employment has
terminated with all Related Companies. Forfeitures
from all Employer Contribution Accounts shall be
transferred to and maintained in a single Forfeiture
Account, which shall be invested in interest bearing
deposits of the Trustee. Forfeiture Account amounts
shall be utilized to restore Accounts, to pay Plan
fees and expenses and to reduce Employer Matching
Contributions as directed by the Administrator.
Effective December 1, 1995, "Matching Stock and
Matching Cash Contributions" shall be substituted for
the reference to "Employer Matching Contributions" in
the preceding paragraph.
8.5 Rehired Employees
(a) Service. If a former Employee is rehired, all
Years of Vesting Service credited when his or her
employment last terminated shall be counted in
determining his or her vested interest.
(b) Account Restoration. If a former Employee is
rehired before he or she has a Break in Service,
the amount forfeited when his or her employment
last terminated shall be restored to his or her
Account. The restoration shall include the
interest which would have been credited had such
forfeiture been invested in the Sweep Account
from the date forfeited until the date the
restoration amount is restored. The amount shall
come from the Forfeiture Account to the extent
possible, and any additional amount needed shall
be contributed by the Employer. The vested
interest in his or her restored Account shall
then be equal to:
V% times (AB + D) - D
where:
V% = current vested percentage
AB = current account balance
D = amount previously distributed
<PAGE> 25
9 PARTICIPANT LOANS
9.1 Participant Loans Permitted
Loans to Participants are permitted pursuant to the
terms and conditions set forth in this Section.
9.2 Loan Application, Note and Security
A Participant shall apply for any loan in such manner
and with such advance notice as prescribed by the
Administrator. All loans shall be evidenced by a
promissory note, secured only by the portion of the
Participant's Account from which the loan is made, and
the Plan shall have a lien on this portion of his or
her Account.
9.3 Spousal Consent
A Participant is not required to obtain Spousal Consent
in order to take out a loan under the Plan.
9.4 Loan Approval
The Administrator, or the Trustee, if otherwise
authorized by the Administrator and agreed to by the
Trustee, is responsible for determining that a loan
request conforms to the requirements described in this
Section and granting such request.
9.5 Loan Funding Limits, Account Sources and Funding Order
The loan amount must meet all of the following limits
as determined as of the Sweep Date the loan is
processed and shall be funded from the Participant's
Accounts as follows:
(a) Plan Minimum Limit. The minimum amount for any
loan is $500.
(b) Plan Maximum Limit, Account Sources and Funding
Order. Subject to the legal limit described in
(c) below, the maximum a Participant may borrow,
including the outstanding balance of existing
Plan loans, is 100% of the following of the
Participant's Accounts which are fully vested in
the priority order as follows:
Employee 401(k) Account
Qualifying Account
Rollover Account
After-Tax Account
(c) Legal Maximum Limit. The maximum a Participant
may borrow, including the outstanding balance of
existing Plan loans, is 50% of his or her vested
Account balance, not to exceed $50,000. However,
the $50,000 maximum is reduced by the
Participant's highest outstanding loan balance
during the 12 month period ending on the day
before the Sweep Date as of which the loan is
made. For purposes of this paragraph, the
qualified plans of all Related Companies shall be
treated as though they are part of this Plan to
the extent it would decrease the maximum loan
amount.
9.6 Maximum Number of Loans
A Participant may have a maximum of two loans
outstanding at any given time.
9.7 Source and Timing of Loan Funding
A loan to a Participant shall be made solely from the
assets of his or her own Account. The available
assets shall be determined first by Account type and
then within each Account used for funding a loan,
amounts shall first be taken from the Sweep Account
and then taken by Investment Fund in direct proportion
to the market value of the Participant's interest in
each Investment Fund as of the Trade Date on which the
loan is processed.
The loan shall be funded on the Settlement Date
following the Trade Date as of which the loan is
processed. The Trustee shall make payment to the
Participant as soon thereafter as administratively
feasible.
9.8 Interest Rate
The interest rate charged on Participant loans shall be
a fixed reasonable rate of interest, determined from
time to time by the Administrator, which provides the
Plan with a return commensurate with the prevailing
interest rate charged by persons in the business of
lending money for loans which would be made under
similar circumstances. As of the Effective Date, the
interest rate is determined as set forth in Appendix
C, and may be changed from time to time by the
Administrator, in writing, without the necessity of
amending this Plan and Trust.
9.9 Loan Payment
Substantially level amortization shall be required of
each loan with payments made at least monthly,
generally through payroll deduction. Loans may be
prepaid in full or in part at any time. The
Participant may choose the loan repayment period, not
to exceed 5 years, except that the repayment period
may be for any period not to exceed 10 years if the
purpose of the loan is to acquire the Participant's
principal residence.
<PAGE> 27
9.10 Loan Payment Hierarchy
Loan principal payments shall be credited to the
Participant's Accounts in the inverse of the order
used to fund the loan. Loan interest shall be
credited to the Participant's Accounts in direct
proportion to the principal payment. Loan payments
are credited to the Investment Funds based upon the
Participant's current investment election for new
Contributions.
9.11 Repayment Suspension
The Administrator may agree to a suspension of loan
payments for up to 12 months for a Participant who is
on a Leave of Absence without pay. During the
suspension period interest shall continue to accrue on
the outstanding loan balance. At the expiration of
the suspension period all outstanding loan payments
and accrued interest thereon shall be due unless
otherwise agreed upon by the Administrator.
9.12 Loan Default
A loan is treated as a default if scheduled loan
payments are more than 90 days late. A Participant
shall then have 30 days from the time he or she
receives written notice of the default and a demand
for past due amounts to cure the default before it
becomes final.
In the event of default, the Administrator may direct
the Trustee to report the outstanding principal
balance of the loan and accrued interest thereon as a
taxable distribution. As soon as a Plan withdrawal or
distribution to such Participant would otherwise be
permitted, the Administrator may instruct the Trustee
to execute upon its security interest in the
Participant's Account by distributing the note to the
Participant.
9.13 Call Feature
The Administrator shall have the right to call any
Participant loan once a Participant's employment with
all Related Companies has terminated or if the Plan is
terminated.
<PAGE> 28
10 IN-SERVICE WITHDRAWALS
10.1 In-Service Withdrawals Permitted
In-service withdrawals to a Participant who is an
Employee are permitted pursuant to the terms and
conditions set forth in this Section and as required
by law as set forth in Section 11.
10.2 In-Service Withdrawal Application and Notice
A Participant shall apply for any in-service withdrawal
in such manner and with such advance notice as
prescribed by the Administrator. The Participant
shall be provided the notice prescribed by Code
section 402(f).
If an in-service withdrawal is one to which Code
sections 401(a)(11) and 417 do not apply, such in-
service withdrawal may commence less than 30 days
after the aforementioned notice is provided, if:
(a) the Participant is clearly informed that he or she
has the right to a period of at least 30 days
after receipt of such notice to consider his or
her option to elect or not elect a Direct
Rollover for all or a portion, if any, of his or
her in-service withdrawal which shall constitute
an Eligible Rollover Distribution; and
(b) the Participant after receiving such notice,
affirmatively elects a Direct Rollover for all or
a portion, if any, of his or her in-service
withdrawal which shall constitute an Eligible
Rollover Distribution or alternatively elects to
have all or a portion made payable directly to
him or her, thereby not electing a Direct
Rollover for all or a portion thereof.
10.3 Spousal Consent
A Participant is not required to obtain Spousal Consent
in order to make an in-service withdrawal under the
Plan.
10.4 In-Service Withdrawal Approval
The Administrator, or the Trustee, if otherwise
authorized by the Administrator and agreed to by the
Trustee, is responsible for determining that an in-
service withdrawal request conforms to the
requirements described in this Section and granting
such request.
10.5 Minimum Amount, Payment Form and Medium
There is no minimum amount for any type of withdrawal.
The form of payment for an in-service withdrawal shall
be a single lump sum and payment shall be made in
cash.
<PAGE> 29
With regard to the portion of a withdrawal representing
an Eligible Rollover Distribution, a Participant may
elect a Direct Rollover for all or a portion of such
amount.
10.6 Source and Timing of In-Service Withdrawal Funding
An in-service withdrawal to a Participant shall be made
solely from the assets of his or her own Account and
shall be based on the Account values as of the Trade
Date the in-service withdrawal is processed. The
available assets shall be determined first by Account
type and then within each Account used for funding an
in-service withdrawal, amounts shall first be taken
from the Sweep Account and then taken by Investment
Fund in direct proportion to the market value of the
Participant's interest in each Investment Fund (which
excludes his or her Loan Account balance) as of the
Trade Date on which the in-service withdrawal is
processed.
The in-service withdrawal shall be funded on the
Settlement Date following the Trade Date as of which
the in-service withdrawal is processed. The Trustee
shall make payment as soon thereafter as
administratively feasible.
10.7 Hardship Withdrawals
(a) Requirements. A Participant who is an Employee
may request the withdrawal of up to the amount
necessary to satisfy a financial need including
amounts necessary to pay any federal, state or
local income taxes or penalties reasonably
anticipated to result from the withdrawal. Only
requests for withdrawals (1) on account of a
Participant's "Deemed Financial Need" or
"Demonstrated Financial Need", and (2) which are
"Demonstrated as Necessary" to satisfy the
financial need shall be approved.
(b) "Deemed Financial Need". An immediate and heavy
financial need relating to:
(1) the payment of unreimbursable medical
expenses described under Code section 213(d)
incurred (or to be incurred) by the
Employee, his or her spouse or dependents;
(2) the purchase (excluding mortgage payments)
of the Employee's principal residence;
(3) the payment of unreimbursable tuition and
related educational fees (which, effective
January 1, 1995 ,include room and board) for
up to the next 12 months of post-secondary
education for the Employee, his or her
spouse or dependents;
<PAGE> 30
(4) the payment of amounts necessary for the
Employee to prevent losing his or her
principal residence through eviction or
foreclosure on the mortgage; or
(5) any other circumstance specifically
permitted under Code section
401(k)(2)(B)(i)(IV).
(c) "Demonstrated Financial Need". A determination by
the Administrator that an immediate and heavy
financial need exists relating to:
(1) a sudden and unexpected illness or accident
to the Employee or his or her spouse or
dependents;
(2) the loss, due to casualty, of the Employee's
property other than nonessential property
(such as a boat or a television); or
(3) some other similar extraordinary and
unforeseeable circumstances arising as a
result of events beyond the control of the
Employee.
(d) "Demonstrated as Necessary". A withdrawal is
"demonstrated as necessary" to satisfy the
financial need only if the withdrawal amount does
not exceed the financial need, the Employee
represents that he or she is unable to relieve
the financial need (without causing further
hardship) by doing any or all of the following
and the Administrator does not have actual
knowledge to the contrary:
(1) receiving any reimbursement or compensation
from insurance or otherwise;
(2) reasonably liquidating his or her assets and
the assets of his or her spouse or minor
children that are reasonably available to
the Employee;
(3) ceasing his or her contributions to this
Plan;
(4) obtaining other withdrawals and nontaxable
loans available from this Plan, plans
maintained by Related Companies and plans
maintained by any other employer; and
(5) obtaining loans from commercial sources on
reasonable commercial terms.
(e) Account Sources and Funding Order. All available
amounts must first be withdrawn from a
Participant's After-Tax Account. The remaining
withdrawal amount shall come from the following
of the Participant's fully vested Accounts, in
the priority order as follows:
<PAGE> 31
Rollover Account
Employee 401(k) Account
The amount that may be withdrawn from a
Participant's Employee 401(k) Account shall not
include any earnings credited to his or her
Employee 401(k) Account.
(f) Permitted Frequency. There is no restriction on
the number of Hardship withdrawals permitted to a
Participant.
(g) Suspension from Further Contributions. A Hardship
withdrawal shall not affect a Participant's
ability to make or be eligible to receive further
Contributions.
10.8 After-Tax Account Withdrawals
(a) Requirements. A Participant who is an Employee
may withdraw from the Accounts listed in
paragraph (b) below.
(b) Account Sources and Funding Order. The withdrawal
amount shall come from a Participant's After-Tax
Account.
(c) Permitted Frequency. The maximum number of After-
Tax Account withdrawals permitted to a
Participant in any 12-month period is one.
(d) Suspension from Further Contributions. An After-
Tax Account withdrawal shall not affect a
Participant's ability to make or be eligible to
receive further Contributions.
10.9 Over Age 59 1/2 Withdrawals
(a) Requirements. A Participant who is an Employee
and over age 59 1/2 may withdraw from the Accounts
listed in paragraph (b) below.
(b) Account Sources and Funding Order. The withdrawal
amount shall come from the following of the
Participant's fully vested Accounts, in the
priority order as follows, except that the
Participant may instead choose to have amounts
taken from his or her After-Tax Account first:
Rollover Account
Employee 401(k) Account
Qualifying Account
Employer Matching Account
Matching Cash Account
After-Tax Account
<PAGE> 32
Effective December 1, 1995, "Matching Stock
Account" (which effective December 1, 1995
includes amounts previously held in a
Participant's Employer Matching Account) shall be
substituted for the preceding reference to
"Employer Matching Account".
(c) Permitted Frequency. The maximum number of Over
Age 59 1/2 withdrawals permitted to a Participant in
any 12-month period is one.
(d) Suspension from Further Contributions. An Over
Age 59 1/2 withdrawal shall not affect a
Participant's ability to make or be eligible to
receive further Contributions.
<PAGE> 33
11 DISTRIBUTIONS ONCE EMPLOYMENT ENDS OR AS REQUIRED BY LAW
11.1 Benefit Information, Notices and Election
A Participant, or his or her Beneficiary in the case of
his or her death, shall be provided with information
regarding all optional times and forms of distribution
available, to include the notices prescribed by Code
section 402(f) and Code section 411(a)(11). Subject
to the other requirements of this Section, a
Participant, or his or her Beneficiary in the case of
his or her death, may elect, in such manner and with
such advance notice as prescribed by the
Administrator, to have his or her vested Account
balance paid to him or her beginning upon any
Settlement Date following the Participant's
termination of employment with all Related Companies
or, if earlier, at the time required by law as set
forth in Section 11.7.
If a distribution is one to which Code sections
401(a)(11) and 417 do not apply, such distribution may
commence less than 30 days after the aforementioned
notices are provided, if:
(a) the Participant is clearly informed that he or she
has the right to a period of at least 30 days
after receipt of such notices to consider the
decision as to whether to elect a distribution
and if so to elect a particular form of
distribution and to elect or not elect a Direct
Rollover for all or a portion, if any, of his or
her distribution which shall constitute an
Eligible Rollover Distribution; and
(b) the Participant after receiving such notices,
affirmatively elects a distribution and a Direct
Rollover for all or a portion, if any, of his or
her distribution which shall constitute an
Eligible Rollover Distribution or alternatively
elects to have all or a portion made payable
directly to him or her, thereby not electing a
Direct Rollover for all or a portion thereof.
11.2 Spousal Consent
A Participant is not required to obtain Spousal Consent
in order to receive a distribution under the Plan.
11.3 Payment Form and Medium
Except to the extent otherwise provided by Section
11.4, a Participant may elect to be paid in any of
these forms:
(a) a single lump sum;
(b) a portion paid in a lump sum, and the remainder
paid later; or
(c) periodic installments over a period not to exceed
the life expectancy of the Participant and his or
her Beneficiary.
<PAGE> 34
Distributions shall be made in cash, except to the
extent a distribution consists of a loan call as
described in Section 9. Alternatively, a Participant
may elect that a lump sum payment be made in the form
of whole shares of Company Stock and cash in lieu of
fractional shares to the extent invested in the
Company Stock Fund.
With regard to the portion of a distribution
representing an Eligible Rollover Distribution, a
Distributee may elect a Direct Rollover for all or a
portion of such amount.
11.4 Distribution of Small Amounts
If after a Participant's employment with all Related
Companies ends, the Participant's vested Account
balance is $3,500 or less, the Participant's benefit
shall be paid as a single lump sum as soon as
administratively feasible in accordance with
procedures prescribed by the Administrator. Effective
December 1, 1995, "If after a Participant's employment
with all Related Companies ends, the Participant's
vested Account balance is $3,500 or less, and if at
the time of any prior in-service withdrawal or
distribution the Participant's vested Account balance
did not exceed $3,500," shall be substituted for the
preceding reference to "If after a Participant's
employment with all Related Companies ends, the
Participant's vested Account balance is $3,500 or
less,".
11.5 Source and Timing of Distribution Funding
A distribution to a Participant shall be made solely
from the assets of his or her own Accounts and shall
be based on the Account values as of the Trade Date
the distribution is processed. The available assets
shall be determined first by Account type and then
within each Account used for funding a distribution,
amounts shall first be taken from the Sweep Account
and then taken by Investment Fund in direct proportion
to the market value of the Participant's interest in
each Investment Fund as of the Trade Date on which the
distribution is processed.
The distribution shall be funded on the Settlement Date
following the Trade Date as of which the distribution
is processed. The Trustee shall make payment as soon
thereafter as administratively feasible.
11.6 Deemed Distribution
For purposes of Section 8.4, if at the time a
Participant's employment with all Related Companies
has terminated, the Participant's vested Account
balance attributable to Accounts subject to vesting as
described in Section 8, is zero, his or her vested
Account balance shall be deemed distributed as of the
Settlement Date following the Sweep Date on which the
Administrator has reported to the Trustee that the
Participant's employment with all Related Companies
has terminated.
<PAGE> 35
11.7 Latest Commencement Permitted
In addition to any other Plan requirements and unless a
Participant elects otherwise, his or her benefit
payments shall begin not later than 60 days after the
end of the Plan Year in which he or she attains his or
her Normal Retirement Date or retires, whichever is
later. However, if the amount of the payment or the
location of the Participant (after a reasonable
search) cannot be ascertained by that deadline,
payment shall be made no later than 60 days after the
earliest date on which such amount or location is
ascertained but in no event later than as described
below. A Participant's failure to elect in such
manner as prescribed by the Administrator to have his
or her vested Account balance paid to him or her,
shall be deemed an election by the Participant to
defer his or her distribution.
Benefit payments shall begin by the April 1 immediately
following the end of the calendar year in which the
Participant attains age 70 1/2, whether or not he or she
is an Employee, except that distribution for an
Employee who was born before July 1, 1917 does not
need to begin until his or her employment with all
Related Companies ends.
If benefit payments cannot begin at the time required
because the location of the Participant cannot be
ascertained (after a reasonable search), the
Administrator may, at any time thereafter, treat such
person's Account as forfeited subject to the
provisions of Section 18.5.
11.8 Payment Within Life Expectancy
The Participant's payment election must be consistent
with the requirement of Code section 401(a)(9) that
all payments are to be completed within a period not
to exceed the lives or the joint and last survivor
life expectancy of the Participant and his or her
Beneficiary. The life expectancies of a Participant
and his or her Beneficiary may not be recomputed
annually.
11.9 Incidental Benefit Rule
The Participant's payment election must be consistent
with the requirement that, if the Participant's spouse
is not his or her sole primary Beneficiary, the
minimum annual distribution for each calendar year,
beginning with the year in which he or she attains age
70 1/2 (or such later date as provided otherwise in
Section 11), shall not be less than the quotient
obtained by dividing (a) the Participant's vested
Account balance as of the last Trade Date of the
preceding year by (b) the applicable divisor as
determined under the incidental benefit requirements
of Code section 401(a)(9).
<PAGE> 36
11.10 Payment to Beneficiary
Payment to a Beneficiary must either: (1) be completed
by the end of the calendar year that contains the
fifth anniversary of the Participant's death or (2)
begin by the end of the calendar year that contains
the first anniversary of the Participant's death and
be completed within the period of the Beneficiary's
life or life expectancy, except that:
(a) If the Participant dies after the April 1
immediately following the end of the calendar
year in which he or she attains age 70 1/2, payment
to his or her Beneficiary must be made at least
as rapidly as provided in the Participant's
distribution election;
(b) If the surviving spouse is the Beneficiary,
payments need not begin until the end of the
calendar year in which the Participant would have
attained age 70 1/2 and must be completed within the
spouse's life or life expectancy; and
(c) If the Participant and the surviving spouse who is
the Beneficiary die (1) before the April 1
immediately following the end of the calendar
year in which the Participant would have attained
age 70 1/2 and (2) before payments have begun to the
spouse, the spouse shall be treated as the
Participant in applying these rules.
11.11 Beneficiary Designation
Each Participant may complete a beneficiary designation
form indicating the Beneficiary who is to receive the
Participant's remaining Plan interest at the time of
his or her death. The designation may be changed at
any time. However, a Participant's spouse shall be
the sole primary Beneficiary unless the designation
includes Spousal Consent for another Beneficiary. If
no proper designation is in effect at the time of a
Participant's death or if the Beneficiary does not
survive the Participant, the Beneficiary shall be, in
the order listed, the:
(a) Participant's surviving spouse,
(b) Participant's children, in equal shares, (or if a
child does not survive the Participant, and that
child leaves issue, the issue shall be entitled
to that child's share, by right of
representation) or
(c) Participant's estate.
<PAGE> 37
12 ADP AND ACP TESTS
12.1 Contribution Limitation Definitions
The following definitions are applicable to this
Section 12 (where a definition is contained in both
Sections 1 and 12, for purposes of Section 12 the
Section 12 definition shall be controlling):
(a) "ACP" or "Average Contribution Percentage". The
Average Percentage calculated using Contributions
allocated to Participants as of a date within the
Plan Year.
(b) "ACP Test". The determination of whether the ACP
is in compliance with the Basic or Alternative
Limitation for a Plan Year (as defined in Section
12.2).
(c) "ADP" or "Average Deferral Percentage". The
Average Percentage calculated using Deferrals
allocated to Participants as of a date within the
Plan Year.
(d) "ADP Test". The determination of whether the ADP
is in compliance with the Basic or Alternative
Limitation for a Plan Year (as defined in Section
12.2).
(e) "Average Percentage". The average of the
calculated percentages for Participants within
the specified group. The calculated percentage
refers to either the "Deferrals" or
"Contributions" (as defined in this Section) made
on each Participant's behalf for the Plan Year,
divided by his or her Compensation for the
portion of the Plan Year in which he or she was
an Eligible Employee while a Participant.
(Employee 401(k) Contributions to this Plan or
comparable contributions to plans of Related
Companies which shall be refunded solely because
they exceed the Contribution Dollar Limit are
included in the percentage for the HCE Group but
not for the NHCE Group.)
(f) "Contributions" shall include Employer Matching
and After-Tax Contributions. For Plan Years
commencing on or after December 1, 1995,
"Matching Stock, Matching Cash and After-Tax
Contributions" shall be substituted for the
reference to "Employer Matching and After-tax
Contributions" in the preceding sentence.
In addition, Contributions may include Employee
401(k) and, effective for Plan Years commencing
on or after December 1, 1993, Qualifying
Contributions, but only to the extent that (1)
the Employer elects to use them, (2) they are not
used or counted in the ADP Test, (3) Qualifying
Contributions are fully vested when made, not
withdrawable by an Employee before he or she
attains age 59 1/2 and (4) they otherwise
<PAGE> 38
satisfy the requirements as prescribed under Code
section 401(m) permitting treatment as
Contributions for purposes of the ACP Test,
including with regard to Qualifying Contributions
satisfaction of the requirements of Code section
401(a) in the manner prescribed under Code
section 401(m).
(g) "Deferrals" shall include Employee 401(k)
Contributions.
In addition, effective for Plan Years commencing
on or after December 1, 1993, Deferrals may
include Qualifying Contributions, but only to the
extent that (1) the Employer elects to use them,
(2) they are not used or counted in the ACP Test,
(3) they are fully vested when made, not
withdrawable by an Employee before he or she
attains age 59 1/2 and (4) they otherwise satisfy
the requirements as prescribed under Code section
401(k) permitting treatment as Deferrals for
purposes of the ADP Test, including satisfaction
of the requirements of Code section 401(a) in the
manner prescribed under Code section 401(k).
(h) "Family Member". An Employee who is, at any time
during the Plan Year or Lookback Year, a spouse,
lineal ascendant or descendant, or spouse of a
lineal ascendant or descendant of (1) an active
or former Employee who at any time during the
Plan Year or Lookback Year is a more than 5%
Owner (within the meaning of Code section
414(q)(3)), or (2) an HCE who is among the 10
Employees with the highest Compensation for such
Year.
(i) "HCE" or "Highly Compensated Employee". With
respect to each Employer and its Related
Companies, an Employee during the Plan Year or
Lookback Year who (in accordance with Code
section 414(q)):
(1) Was a more than 5% Owner at any time during
the Lookback Year or Plan Year;
(2) Received Compensation during the Lookback
Year (or in the Plan Year if among the 100
Employees with the highest Compensation for
such Year) in excess of (i) $75,000 (as
adjusted for such Year pursuant to Code
sections 414(q)(1) and 415(d)), or (ii)
$50,000 (as adjusted for such Year pursuant
to Code sections 414(q)(1) and 415(d)) in
the case of a member of the "top-paid group"
(within the meaning of Code section
414(q)(4)) for such Year), provided,
however, that if the conditions of Code
section 414(q)(12)(B)(ii) are met, the
Company may elect for any Plan Year to apply
clause (i) by substituting $50,000 for
$75,000 and not to apply clause (ii);
(3) Was an officer of a Related Company and
received Compensation during the Lookback
Year (or in the Plan Year if
<PAGE> 39
among the 100 Employees with the highest
Compensation for such Year) that is greater
than 50% of the dollar limitation in effect
under Code section 415(b)(1)(A) and (d) for
such Year (or if no officer has Compensation
in excess of the threshold, the officer with
the highest Compensation), provided that the
number of officers shall be limited to 50
Employees (or, if less, the greater of three
Employees or 10% of the Employees); or
(4) Was a Family Member at any time during the
Lookback Year or Plan Year, in which case
the Deferrals, Contributions and
Compensation of the HCE and his or her
Family Members shall be aggregated and they
shall be treated as a single HCE.
A former Employee shall be treated as an HCE if
(1) such former Employee was an HCE when he
separated from service, or (2) such former
Employee was an HCE in service at any time after
attaining age 55.
The determination of who is an HCE, including the
determinations of the number and identity of
Employees in the top-paid group, the top 100
Employees and the number of Employees treated as
officers shall be made in accordance with Code
section 414(q).
(j) "HCE Group" and "NHCE Group". With respect to
each Employer and its Related Companies, the
respective group of HCEs and NHCEs who are
eligible to have amounts contributed on their
behalf for the Plan Year, including Employees who
would be eligible but for their election not to
participate or to contribute, or because their
Pay is greater than zero but does not exceed a
stated minimum.
(1) If the Related Companies maintain two or
more plans which are subject to the ADP or
ACP Test and are considered as one plan for
purposes of Code sections 401(a)(4) or
410(b), all such plans shall be aggregated
and treated as one plan for purposes of
meeting the ADP and ACP Tests, provided that
the plans may only be aggregated if they
have the same Plan Year.
(2) If an HCE, who is one of the top 10 paid
Employees or a more than 5% Owner, has any
Family Members, the Deferrals, Contributions
and Compensation of such HCE and his or her
Family Members shall be combined and treated
as a single HCE. Such amounts for all other
Family Members shall be removed from the
NHCE Group percentage calculation and be
combined with the HCE's.
(3) If an HCE is covered by more than one cash
or deferred arrangement, or more than one
arrangement permitting
<PAGE> 40
employee or matching contributions,
maintained by the Related Companies, all
such plans shall be aggregated and treated
as one plan (other than those plans that may
not be permissively aggregated) for purposes
of calculating the separate percentage for
the HCE which is used in the determination
of the Average Percentage.
(k) "Lookback Year". Pursuant to Code section 414(q),
the Company elects as the Lookback Year the 12
months ending immediately prior to the start of
the Plan Year.
(l) "Multiple Use Test". The test described in
Section 12.4 which a Plan must meet where the
Alternative Limitation (described in Section
12.2(b)) is used to meet both the ADP and ACP
Tests.
(m) "NHCE" or "Non-Highly Compensated Employee". An
Employee who is not an HCE.
12.2 ADP and ACP Tests
For each Plan Year, the ADP and ACP for the HCE Group
must meet either the Basic or Alternative Limitation
when compared to the respective ADP and ACP for the
NHCE Group, defined as follows:
(a) Basic Limitation. The HCE Group Average
Percentage may not exceed 1.25 times the NHCE
Group Average Percentage.
(b) Alternative Limitation. The HCE Group Average
Percentage is limited by reference to the NHCE
Group Average Percentage as follows:
If the NHCE Group Then the Maximum HCE
Average Group Average Percentage
Percentage is: is:
Less than 2% 2 times NHCE Group
Average %
2% to 8% NHCE Group Average %
plus 2%
More than 8% NA - Basic Limitation
applies
12.3 Correction of ADP and ACP Tests
If the ADP or ACP Tests are not met, the Administrator
shall determine, no later than the end of the next
Plan Year, a maximum percentage to be used in place of
the calculated percentage for all HCEs that would
reduce the ADP and/or ACP for the HCE group by a
sufficient amount to meet the ADP and ACP Tests. ADP
and/or ACP corrections shall be made in accordance
with the leveling method as described below.
<PAGE> 41
(a) ADP Correction. The HCE with the highest Deferral
percentage shall have his or her Deferral
percentage reduced to the lesser of the extent
required to meet the ADP Test or to cause his or
her Deferral percentage to equal that of the HCE
with the next highest Deferral percentage. The
process shall be repeated until the ADP Test is
met.
To the extent an HCE's Deferrals were determined
to be reduced as described in the paragraph
above, Employee 401(k) Contributions shall, by
the end of the next Plan Year, be refunded to the
HCE in an amount equal to the actual Deferrals
minus the product of the maximum percentage and
the HCE's Compensation, except that such amount
to be refunded shall be reduced by Employee
401(k) Contributions previously refunded because
they exceeded the Contribution Dollar Limit.
The excess amounts shall first be taken from
unmatched Employee 401(k) Contributions and then
from matched Employee 401(k) Contributions. Any
Employer Matching Contributions attributable to
refunded excess Employee 401(k) Contributions as
described in this Section shall be forfeited and
used as described in Section 8.4. For Plan Years
commencing on or after December 1, 1995, "Any
Matching Stock and Matching Cash Contributions"
shall be substituted for the reference to "Any
Employer Matching Contributions" in the preceding
sentence.
(b) ACP Correction. The HCE with the highest
Contribution percentage shall have his or her
Contribution percentage reduced to the lesser of
the extent required to meet the ACP Test or to
cause his or her Contribution percentage to equal
that of the HCE with the next highest
Contribution percentage. The process shall be
repeated until the ACP Test is met.
To the extent an HCE's Contributions were
determined to be reduced as described in the
paragraph above, Contributions shall, by the end
of the next Plan Year, be refunded to the HCE to
the extent vested, and forfeited to the extent
such amounts were not vested, as of the end of
the Plan Year being tested, in an amount equal to
the actual Contributions minus the product of the
maximum percentage and the HCE's Compensation.
The excess amounts shall first be taken from After-
Tax Contributions and then from Employer Matching
Contributions. For Plan Years commencing on or
after December 1, 1995, "and then as a
proportional combination of Matching Stock and
Matching Cash Contributions" shall be substituted
for the reference to "and then from Employer
Matching Contributions" in the preceding
sentence.
<PAGE> 42
(c) Investment Fund Sources. Once the amount of
excess Deferrals and/or Contributions is
determined and with regard to excess
Contributions, allocated by type of Contribution,
amounts shall first be taken from the Sweep
Account and then taken by Investment Fund in
direct proportion to the market value of the
Participant's interest in each Investment Fund
(which excludes his or her Loan Account balance)
as of the Trade Date on which the correction is
processed.
(d) Family Member Correction. To the extent any
reduction is necessary with respect to an HCE and
his or her Family Members that have been combined
and treated for testing purposes as a single
Employee, the excess Deferrals and Contributions
from the ADP and/or ACP Test shall be prorated
among each such Participant in direct proportion
to his or her Deferrals or Contributions included
in each Test.
12.4 Multiple Use Test
If the Alternative Limitation (defined in Section 12.2)
is used to meet both the ADP and ACP Tests, the ADP
and ACP for the HCE Group must also comply with the
requirements of Code section 401(m)(9). Such Code
section requires that the sum of the ADP and ACP for
the HCE Group (as determined after any corrections
needed to meet the ADP and ACP Tests have been made)
not exceed the sum (which produces the most favorable
result) of:
(a) the Basic Limitation (defined in Section 12.2)
applied to either the ADP or ACP for the NHCE
Group, and
(b) the Alternative Limitation applied to the other
NHCE Group percentage.
12.5 Correction of Multiple Use Test
If the multiple use limit is exceeded, the
Administrator shall determine a maximum percentage to
be used in place of the calculated percentage for all
HCEs that would reduce either or both the ADP or ACP
for the HCE Group by a sufficient amount to meet the
multiple use limit. Any excess shall be handled in
the same manner that the distribution of excess
Deferrals or Contributions are handled.
12.6 Adjustment for Investment Gain or Loss
Any excess Deferrals or Contributions to be refunded to
a Participant or forfeited in accordance with Section
12.3 or 12.5 shall be adjusted for investment gain or
loss. Refunds or forfeitures shall include investment
gain or loss for the period between the end of the
applicable Plan Year and the date of distribution.
For Plan Years commencing on or after December 1,
1993, "shall not include" shall be substituted for the
reference to "shall include" in the preceding
sentence.
<PAGE> 43
12.7 Testing Responsibilities and Required Records
The Administrator shall be responsible for ensuring
that the Plan meets the ADP Test, the ACP Test and the
Multiple Use Test, and that the Contribution Dollar
Limit is not exceeded. In carrying out its
responsibilities, the Administrator shall have sole
discretion to limit or reduce Deferrals or
Contributions at any time. The Administrator shall
maintain records which are sufficient to demonstrate
that the ADP Test, the ACP Test and the Multiple Use
Test, have been met for each Plan Year for at least as
long as the Employer's corresponding tax year is open
to audit.
12.8 Separate Testing
(a) Multiple Employers: The determination of HCEs,
NHCEs, and the performance of the ADP Test, the
ACP Test and Multiple Use Test, and any
corrective action resulting therefrom, shall be
made separately with regard to the Employees of
each Employer (and its Related Companies) that is
not a Related Company with the other Employer(s).
(b) Collective Bargaining Units: The performance of
the ADP Test, and if applicable, the ACP Test and
Multiple Use Test, and any corrective action
resulting therefrom, shall be applied separately
to Employees who are eligible to participate in
the Plan as a result of a collective bargaining
agreement.
In addition, separate testing may be applied, at the
discretion of the Administrator and to the extent
permitted under Treasury regulations, to any group of
Employees for whom separate testing is permissible.
<PAGE> 44
13 MAXIMUM CONTRIBUTION AND BENEFIT LIMITATIONS
13.1 "Annual Addition" Defined
The sum of all amounts allocated to the Participant's
Account for a Plan Year. Amounts include
contributions (except for rollovers or transfers from
another qualified plan), forfeitures and, if the
Participant is a Key Employee (pursuant to Section 14)
for the applicable or any prior Plan Year, medical
benefits provided pursuant to Code section 419A(d)(1).
For purposes of this Section 13.1, "Account" also
includes a Participant's account in all other defined
contribution plans currently or previously maintained
by any Related Company. The Plan Year refers to the
year to which the allocation pertains, regardless of
when it was allocated. The Plan Year shall be the
Code section 415 limitation year.
13.2 Maximum Annual Addition
The Annual Addition to a Participant's accounts under
this Plan and any other defined contribution plan
maintained by any Related Company for any Plan Year
shall not exceed the lesser of (1) 25% of his or her
Taxable Income or (2) the greater of $30,000 or one-
quarter of the dollar limitation in effect under Code
section 415(b)(1)(A), except that for Plan Years
beginning after December 31, 1994, "(2) $30,000 (as
adjusted for the cost of living pursuant to Code
section 415(d))" shall be substituted for the
preceding reference to "(2) the greater of $30,000 or
one-quarter of the dollar limitation in effect under
Code section 415(b)(1)(A)".
13.3 Avoiding an Excess Annual Addition
If, at any time during a Plan Year, the allocation of
any additional Contributions would produce an excess
Annual Addition for such year, Contributions to be
made for the remainder of the Plan Year shall be
limited to the amount needed for each affected
Participant to receive the maximum Annual Addition.
13.4 Correcting an Excess Annual Addition
Upon the discovery of an excess Annual Addition to a
Participant's Account (resulting from forfeitures,
allocations, reasonable error in determining
Participant compensation or the amount of elective
contributions, or other facts and circumstances
acceptable to the Internal Revenue Service) the excess
amount (adjusted to reflect investment gains) shall
first be returned to the Participant to the extent of
his or her After-Tax Contributions, and then to the
extent of his or her Employee 401(k) Contributions
(however to the extent Employee 401(k) Contributions
were matched, the applicable Employer Matching
Contributions shall be forfeited in proportion to the
returned matched Employee 401(k) Contributions) and
the remaining excess, if any, shall be forfeited by
the Participant and used as described in Section 8.4.
For Plan Years commencing on or after December 1,
1995, "the applicable Matching Stock and Matching Cash
Contributions" shall be substituted for the reference
to "the applicable Employer Matching Contributions" in
the preceding sentence.
<PAGE> 45
13.5 Correcting a Multiple Plan Excess
If a Participant, whose Account is credited with an
excess Annual Addition, received allocations to more
than one defined contribution plan, the excess shall
be corrected by reducing the Annual Addition to this
Plan only after all possible reductions have been made
to the other defined contribution plans.
13.6 "Defined Benefit Fraction" Defined
The fraction, for any Plan Year, where the numerator is
the "projected annual benefit" and the denominator is
the greater of 125% of the "protected current accrued
benefit" or the normal limit which is the lesser of
(1) 125% of the maximum dollar limitation provided
under Code section 415(b)(1)(A) for the Plan Year or
(2) 140% of the amount which may be taken into account
under Code section 415(b)(1)(B) for the Plan Year,
where a Participant's:
(a) "projected annual benefit" is the annual benefit
provided by the Plan determined pursuant to Code
section 415(e)(2)(A), and
(b) "protected current accrued benefit" in a defined
benefit plan in existence (1) on July 1, 1982,
shall be the accrued annual benefit provided for
under Public Law 97-248, section 235(g)(4), as
amended, or (2) on May 6, 1986, shall be the
accrued annual benefit provided for under Public
Law 99-514, section 1106(i)(3).
13.7 "Defined Contribution Fraction" Defined
The fraction where the numerator is the sum of the
Participant's Annual Addition for each Plan Year to
date and the denominator is the sum of the "annual
amounts" for each year in which the Participant has
performed service with a Related Company. The "annual
amount" for any Plan Year is the lesser of (1) 125% of
the Code section 415(c)(1)(A) dollar limitation
(determined without regard to subsection (c)(6)) in
effect for the Plan Year and (2) 140% of the Code
section 415(c)(1)(B) amount in effect for the Plan
Year, where:
(a) each Annual Addition is determined pursuant to the
Code section 415(c) rules in effect for such Plan
Year, and
(b) the numerator is adjusted pursuant to Public Law
97-248, section 235(g)(3), as amended, or Public
Law 99-514, section 1106(i)(4).
13.8 Combined Plan Limits and Correction
If a Participant has also participated in a defined
benefit plan maintained by a Related Company, the sum
of the Defined Benefit Fraction and the Defined
Contribution Fraction for any Plan Year may not exceed
1.0. If the combined fraction exceeds 1.0 for any
Plan Year, the Participant's benefit under any defined
benefit plan (to the extent it has not been
distributed or used to purchase an annuity contract)
shall be limited so that the combined fraction does
not exceed 1.0 before any defined contribution limits
shall be enforced.
<PAGE> 46
14 TOP HEAVY RULES
14.1 Top Heavy Definitions
When capitalized, the following words and phrases have
the following meanings when used in this Section:
(a) "Aggregation Group". The group consisting of each
qualified plan of an Employer (and its Related
Companies) (1) in which a Key Employee is a
participant or was a participant during the
determination period (regardless of whether such
plan has terminated), or (2) which enables
another plan in the group to meet the
requirements of Code sections 401(a)(4) or
410(b). The Employer may also treat any other
qualified plan as part of the group if the group
would continue to meet the requirements of Code
sections 401(a)(4) and 410(b) with such plan
being taken into account.
(b) "Determination Date". The last Trade Date of the
preceding Plan Year or, in the case of the Plan's
first year, the last Trade Date of the first Plan
Year.
(c) "Key Employee". A current or former Employee (or
his or her Beneficiary) who at any time during
the five year period ending on the Determination
Date was:
(1) an officer of a Related Company whose
Compensation (i) exceeds 50% of the amount
in effect under Code section 415(b)(1)(A)
and (ii) places him within the following
highest paid group of officers:
Number of Employees Number of
not Excluded Under Highest Paid
Code Officers Included
Section 414(q)(8)
Less than 30 3
30 to 500 10% of the number
of
Employees not
excluded
under Code section
414(q)(8)
More than 500 50
(2) a more than 5% Owner,
(3) a more than 1% Owner whose Compensation
exceeds $150,000, or
<PAGE> 47
(4) a more than 0.5% Owner who is among the 10
Employees owning the largest interest in a
Related Company and whose Compensation
exceeds the amount in effect under Code
section 415(c)(1)(A).
(d) "Plan Benefit". The sum as of the Determination
Date of (1) an Employee's Account, (2) the
present value of his or her other accrued
benefits provided by all qualified plans within
the Aggregation Group, and (3) the aggregate
distributions made within the five year period
ending on such date. Plan Benefits shall exclude
Rollover Contributions and plan to plan transfers
made after December 31, 1983 which are both
employee initiated and from a plan maintained by
a non-related employer.
(e) "Top Heavy". The Plan's status when the Plan
Benefits of Key Employees account for more than
60% of the Plan Benefits of all Employees who
have performed services at any time during the
five year period ending on the Determination
Date. The Plan Benefits of Employees who were,
but are no longer, Key Employees (because they
have not been an officer or Owner during the five
year period), are excluded in the determination.
14.2 Special Contributions
(a) Minimum Contribution Requirement. For each Plan
Year in which the Plan is Top Heavy, the Employer
shall not allow any contributions (other than a
Rollover Contribution from a plan maintained by a
non-related employer) to be made by or on behalf
of any Key Employee unless the Employer makes a
contribution (other than contributions made by an
Employer in accordance with a Participant's
salary deferral election or contributions made by
an Employer based upon the amount contributed by
a Participant) on behalf of all Participants who
were Eligible Employees as of the last day of the
Plan Year in an amount equal to at least 3% of
each such Participant's Taxable Income. The
Administrator shall remove any such contributions
(including applicable investment gain or loss)
credited to a Key Employee's Account in violation
of the foregoing rule and return them to the
Employer or Employee to the extent permitted by
the Limited Return of Contributions paragraph of
Section 18.
(b) Overriding Minimum Benefit. Notwithstanding,
contributions shall be permitted on behalf of Key
Employees if the Employer also maintains a
defined benefit plan which automatically provides
a benefit which satisfies the Code section
416(c)(1) minimum benefit requirements, including
the adjustment provided in Code section
416(h)(2)(A), if applicable. If this Plan is
part of an aggregation group in which a Key
Employee is receiving a benefit and no minimum is
provided in any other plan, a minimum
contribution of at least 3% of Taxable Income
<PAGE> 48
shall be provided to the Participants specified in
the preceding paragraph. In addition, the
Employer may offset a defined benefit minimum by
contributions (other than contributions made by
an Employer in accordance with a Participant's
salary deferral election or contributions made by
an Employer based upon the amount contributed by
a Participant) made to this Plan.
14.3 Adjustment to Combined Limits for Different Plans
For each Plan Year in which the Plan is Top Heavy, 100%
shall be substituted for 125% in determining the
Defined Benefit Fraction and the Defined Contribution
Fraction.
<PAGE> 49
15 PLAN ADMINISTRATION
15.1 Plan Delineates Authority and Responsibility
Plan fiduciaries include the Company, the
Administrator, the Committee and/or the Trustee, as
applicable, whose specific duties are delineated in
this Plan and Trust. In addition, Plan fiduciaries
also include any other person to whom fiduciary duties
or responsibility is delegated with respect to the
Plan. Any person or group may serve in more than one
fiduciary capacity with respect to the Plan. To the
extent permitted under ERISA section 405, no fiduciary
shall be liable for a breach by another fiduciary.
15.2 Fiduciary Standards
Each fiduciary shall:
(a) discharge his or her duties in accordance with
this Plan and Trust to the extent they are
consistent with ERISA;
(b) use that degree of care, skill, prudence and
diligence 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;
(c) act with the exclusive purpose of providing
benefits to Participants and their Beneficiaries,
and defraying reasonable expenses of
administering the Plan;
(d) diversify Plan investments, to the extent such
fiduciary is responsible for directing the
investment of Plan assets, so as to minimize the
risk of large losses, unless under the
circumstances it is clearly prudent not to do so;
and
(e) treat similarly situated Participants and
Beneficiaries in a uniform and nondiscriminatory
manner.
15.3 Company is ERISA Plan Administrator
The Company is the plan administrator, within the
meaning of ERISA section 3(16), which is responsible
for compliance with all reporting and disclosure
requirements, except those that are explicitly the
responsibility of the Trustee under applicable law.
The Administrator and/or Committee shall have any
necessary authority to carry out such functions
through the actions of the Administrator, duly
appointed officers of the Company, and/or the
Committee.
<PAGE> 50
15.4 Administrator Duties
The Administrator shall have the discretionary
authority to construe this Plan and Trust, other than
the provisions which relate to the Trustee, and to do
all things necessary or convenient to effect the
intent and purposes thereof, whether or not such
powers are specifically set forth in this Plan and
Trust. Actions taken in good faith by the
Administrator shall be conclusive and binding on all
interested parties, and shall be given the maximum
possible deference allowed by law. In addition to the
duties listed elsewhere in this Plan and Trust, the
Administrator's authority shall include, but not be
limited to, the discretionary authority to:
(a) determine who is eligible to participate, if a
contribution qualifies as a rollover
contribution, the allocation of Contributions,
and the eligibility for loans, withdrawals and
distributions;
(b) provide each Participant with a summary plan
description no later than 90 days after he or she
has become a Participant (or such other period
permitted under ERISA section 104(b)(1)), as well
as informing each Participant of any material
modification to the Plan in a timely manner;
(c) make a copy of the following documents available
to Participants during normal work hours: this
Plan and Trust (including subsequent amendments),
all annual and interim reports of the Trustee
related to the entire Plan, the latest annual
report and the summary plan description;
(d) determine the fact of a Participant's death and of
any Beneficiary's right to receive the deceased
Participant's interest based upon such proof and
evidence as it deems necessary;
(e) establish and review at least annually a funding
policy bearing in mind both the short-run and
long-run needs and goals of the Plan. To the
extent Participants may direct their own
investments, the funding policy shall focus on
which Investment Funds are available for
Participants to use; and
(f) adjudicate claims pursuant to the claims procedure
described in Section 18.
15.5 Advisors May be Retained
The Administrator may retain such agents and advisors
(including attorneys, accountants, actuaries,
consultants, record keepers, investment counsel and
administrative assistants) as it considers necessary
to assist it in the performance of its duties. The
Administrator shall also comply with the bonding
requirements of ERISA section 412.
<PAGE> 51
15.6 Delegation of Administrator Duties
The Company, as Administrator of the Plan, has
appointed a Committee to administer the Plan on its
behalf. The Company shall provide the Trustee with
the names and specimen signatures of any persons
authorized to serve as Committee members and act as or
on its behalf. Any Committee member appointed by the
Company shall serve at the pleasure of the Company,
but may resign by written notice to the Company.
Committee members shall serve without compensation
from the Plan for such services. Except to the extent
that the Company otherwise provides, any delegation of
duties to a Committee shall carry with it the full
discretionary authority of the Administrator to
complete such duties.
15.7 Committee Operating Rules
(a) Actions of Majority. Any act delegated by the
Company to the Committee may be done by a
majority of its members. The majority may be
expressed by a vote at a meeting or in writing
without a meeting, and a majority action shall be
equivalent to an action of all Committee members.
(b) Meetings. The Committee shall hold meetings upon
such notice, place and times as it determines
necessary to conduct its functions properly.
(c) Reliance by Trustee. The Committee may authorize
one or more of its members to execute documents
on its behalf and may authorize one or more of
its members or other individuals who are not
members to give written direction to the Trustee
in the performance of its duties. The Committee
shall provide such authorization in writing to
the Trustee with the name and specimen signatures
of any person authorized to act on its behalf.
The Trustee shall accept such direction and rely
upon it until notified in writing that the
Committee has revoked the authorization to give
such direction. The Trustee shall not be deemed
to be on notice of any change in the membership
of the Committee, parties authorized to direct
the Trustee in the performance of its duties, or
the duties delegated to and by the Committee
until notified in writing.
<PAGE> 52
16 MANAGEMENT OF INVESTMENTS
16.1 Trust Agreement
All Plan assets shall be held by the Trustee in trust,
in accordance with those provisions of this Plan and
Trust which relate to the Trustee, for use in
providing Plan benefits and paying Plan fees and
expenses not paid directly by the Employer. Plan
benefits shall be drawn solely from the Trust and paid
by the Trustee as directed by the Administrator.
Notwithstanding, the Administrator may appoint, with
the approval of the Trustee, another trustee to hold
and administer Plan assets which do not meet the
requirements of Section 16.2.
16.2 Investment Funds
The Administrator is hereby granted authority to direct
the Trustee to invest Trust assets in one or more
Investment Funds. The number and composition of
Investment Funds may be changed from time to time,
without the necessity of amending this Plan and Trust.
The Trustee may establish reasonable limits on the
number of Investment Funds as well as the acceptable
assets for any such Investment Fund. Each of the
Investment Funds may be comprised of any of the
following:
(a) shares of a registered investment company, whether
or not the Trustee or any of its affiliates is an
advisor to, or other service provider to, such
company;
(b) collective investment funds maintained by the
Trustee, or any other fiduciary to the Plan,
which are available for investment by trusts
which are qualified under Code sections 401(a)
and 501(a);
(c) individual equity and fixed income securities
which are readily tradeable on the open market;
(d) guaranteed investment contracts issued by a bank
or insurance company;
(e) interest bearing deposits of the Trustee; and
(f) Company Stock.
Any Investment Fund assets invested in a collective
investment fund, shall be subject to all the
provisions of the instruments establishing and
governing such fund. These instruments, including any
subsequent amendments, are incorporated herein by
reference.
<PAGE> 53
16.3 Authority to Hold Cash
The Trustee shall have the authority to cause the
investment manager of each Investment Fund to maintain
sufficient deposit or money market type assets in each
Investment Fund to handle the Fund's liquidity and
disbursement needs. Each Participant's and
Beneficiary's Sweep Account, which is used to hold
assets pending investment or disbursement, shall
consist of interest bearing deposits of the Trustee.
16.4 Trustee to Act Upon Instructions
The Trustee shall carry out instructions to invest
assets in the Investment Funds as soon as practicable
after such instructions are received from the
Administrator, Participants, or Beneficiaries. Such
instructions shall remain in effect until changed by
the Administrator, Participants or Beneficiaries.
16.5 Administrator Has Right to Vote Registered Investment
Company Shares
The Administrator shall be entitled to vote proxies or
exercise any shareholder rights relating to shares
held on behalf of the Plan in a registered investment
company. Notwithstanding, the authority to vote
proxies and exercise shareholder rights related to
such shares held in a Custom Fund is vested as
provided otherwise in Section 16.
16.6 Custom Fund Investment Management
The Administrator may designate, with the consent of
the Trustee, an investment manager for any Investment
Fund established by the Trustee solely for
Participants of this Plan (a "Custom Fund"). The
investment manager may be the Administrator, Trustee
or an investment manager pursuant to ERISA section
3(38). The Administrator shall advise the Trustee in
writing of the appointment of an investment manager
and shall cause the investment manager to acknowledge
to the Trustee in writing that the investment manager
is a fiduciary to the Plan.
A Custom Fund shall be subject to the following:
(a) Guidelines. Written guidelines, acceptable to the
Trustee, shall be established for a Custom Fund.
If a Custom Fund consists solely of collective
investment funds or shares of a registered
investment company (and sufficient deposit or
money market type assets to handle the Fund's
liquidity and disbursement needs), its underlying
instruments shall constitute the guidelines.
(b) Authority of Investment Manager. The investment
manager of a Custom Fund shall have the authority
to vote or execute proxies, exercise shareholder
rights, manage, acquire, and dispose of Trust
<PAGE> 54
assets. Notwithstanding, the authority to vote
proxies and exercise shareholder rights related
to shares of Company Stock held in a Custom Fund
is vested as provided otherwise in Section 16.
(c) Custody and Trade Settlement. Unless otherwise
agreed to by the Trustee, the Trustee shall
maintain custody of all Custom Fund assets and be
responsible for the settlement of all Custom Fund
trades. For purposes of this section, shares of
a collective investment fund, shares of a
registered investment company and guaranteed
investment contracts issued by a bank or
insurance company, shall be regarded as the
Custom Fund assets instead of the underlying
assets of such instruments.
(d) Limited Liability of Co-Fiduciaries. Neither the
Administrator nor the Trustee shall be obligated
to invest or otherwise manage any Custom Fund
assets for which the Trustee or Administrator is
not the investment manager nor shall the
Administrator or Trustee be liable for acts or
omissions with regard to the investment of such
assets except to the extent required by ERISA.
16.7 Authority to Segregate Assets
The Company may direct the Trustee to split an
Investment Fund into two or more funds in the event
any assets in the Fund are illiquid or the value is
not readily determinable. In the event of such
segregation, the Company shall give instructions to
the Trustee on what value to use for the split-off
assets, and the Trustee shall not be responsible for
confirming such value.
16.8 Maximum Permitted Investment in Company Stock
If the Company provides for a Company Stock Fund the
Fund shall be comprised of Company Stock and
sufficient deposit or money market type assets to
handle the Fund's liquidity and disbursement needs.
The Fund may be as large as necessary to comply with
Participants' and Beneficiaries' investment elections
(if the Company Stock Fund is designated as an
Investment Fund offered to Participants and
Beneficiaries) as well the total investment of
Participants' and Beneficiaries' Employer Matching
Accounts. Effective December 1, 1995, "Matching Stock
Account" (which effective December 1, 1995 includes
amounts previously held in a Participant's Employer
Matching Account) shall be substituted for the
reference to "Employer Matching Account" in the
preceding sentence.
16.9 Participants Have Right to Vote and Tender Company
Stock
Each Participant or Beneficiary shall be entitled to
instruct the Trustee as to the voting or tendering of
any full or partial shares of Company Stock held on
his or her behalf in the Company Stock Fund. Prior to
such voting or tendering of
<PAGE> 55
Company Stock, each Participant or Beneficiary shall
receive a copy of the proxy solicitation or other
material relating to such vote or tender decision and
a form for the Participant or Beneficiary to complete
which confidentially instructs the Trustee to vote or
tender such shares in the manner indicated by the
Participant or Beneficiary. Upon receipt of such
instructions, the Trustee shall act with respect to
such shares as instructed. The Administrator shall
instruct the Trustee with respect to how to vote or
tender any shares for which instructions are not
received from Participants or Beneficiaries.
16.10 Registration and Disclosure for Company Stock
The Administrator shall be responsible for determining
the applicability (and, if applicable, complying with)
the requirements of the Securities Act of 1933, as
amended, the California Corporate Securities Law of
1968, as amended, and any other applicable blue sky
law. The Administrator shall also specify what
restrictive legend or transfer restriction, if any, is
required to be set forth on the certificates for the
securities and the procedure to be followed by the
Trustee to effectuate a resale of such securities.
<PAGE> 56
17 TRUST ADMINISTRATION
17.1 Trustee to Construe Trust
The Trustee shall have the discretionary authority to
construe those provisions of this Plan and Trust which
relate to the Trustee and to do all things necessary
or convenient to the administration of the Trust,
whether or not such powers are specifically set forth
in this Plan and Trust. Actions taken in good faith
by the Trustee shall be conclusive and binding on all
interested parties, and shall be given the maximum
possible deference allowed by law.
17.2 Trustee To Act As Owner of Trust Assets
Subject to the specific conditions and limitations set
forth in this Plan and Trust, the Trustee shall have
all the power, authority, rights and privileges of an
absolute owner of the Trust assets and, not in
limitation but in amplification of the foregoing, may:
(a) receive, hold, manage, invest and reinvest, sell,
tender, exchange, dispose of, encumber,
hypothecate, pledge, mortgage, lease, grant
options respecting, repair, alter, insure, or
distribute any and all property in the Trust;
(b) borrow money, participate in reorganizations, pay
calls and assessments, vote or execute proxies,
exercise subscription or conversion privileges,
exercise options and register any securities in
the Trust in the name of the nominee, in federal
book entry form or in any other form as shall
permit title thereto to pass by delivery;
(c) renew, extend the due date, compromise, arbitrate,
adjust, settle, enforce or foreclose, by judicial
proceedings or otherwise, or defend against the
same, any obligations or claims in favor of or
against the Trust; and
(d) lend, through a collective investment fund, any
securities held in such collective investment
fund to brokers, dealers or other borrowers and
to permit such securities to be transferred into
the name and custody and be voted by the borrower
or others.
17.3 United States Indicia of Ownership
The Trustee shall not maintain the indicia of ownership
of any Trust assets outside the jurisdiction of the
United States, except as authorized by ERISA section
404(b).
<PAGE> 57
17.4 Tax Withholding and Payment
(a) Withholding. The Trustee shall calculate and
withhold federal (and, if applicable, state)
income taxes with regard to any Eligible Rollover
Distribution that is not paid as a Direct
Rollover in accordance with the Participant's
withholding election or as required by law if no
election is made or the election is less than the
amount required by law. With regard to any
taxable distribution that is not an Eligible
Rollover Distribution, the Trustee shall
calculate and withhold federal (and, if
applicable, state) income taxes in accordance
with the Participant's withholding election or as
required by law if no election is made.
(b) Taxes Due From Investment Funds. The Trustee
shall pay from the Investment Fund any taxes or
assessments imposed by any taxing or governmental
authority on such Fund or its income, including
related interest and penalties.
17.5 Trust Accounting
(a) Annual Report. Within 60 days (or other
reasonable period) following the close of the
Plan Year, the Trustee shall provide the
Administrator with an annual accounting of Trust
assets and information to assist the
Administrator in meeting ERISA's annual reporting
and audit requirements.
(b) Periodic Reports. The Trustee shall maintain
records and provide sufficient reporting to allow
the Administrator to properly monitor the Trust's
assets and activity.
(c) Administrator Approval. Approval of any Trustee
accounting shall automatically occur 90 days
after such accounting has been received by the
Administrator, unless the Administrator files a
written objection with the Trustee within such
time period. Such approval shall be final as to
all matters and transactions stated or shown
therein and binding upon the Administrator.
17.6 Valuation of Certain Assets
If the Trustee determines the Trust holds any asset
which is not readily tradeable and listed on a
national securities exchange registered under the
Securities Exchange Act of 1934, as amended, the
Trustee may engage a qualified independent appraiser
to determine the fair market value of such property,
and the appraisal fees shall be paid from the
Investment Fund containing the asset.
<PAGE> 58
17.7 Legal Counsel
The Trustee may consult with legal counsel of its
choice, including counsel for the Employer or counsel
of the Trustee, upon any question or matter arising
under this Plan and Trust. When relied upon by the
Trustee, the opinion of such counsel shall be evidence
that the Trustee has acted in good faith.
17.8 Fees and Expenses
The Trustee's fees for its services as Trustee shall be
such as may be mutually agreed upon by the Company and
the Trustee. Trustee fees and all reasonable expenses
of counsel and advisors retained by the Trustee shall
be paid in accordance with Section 6.
17.9 Trustee Duties and Limitations
The Trustee's duties, unless otherwise agreed to by the
Trustee, shall be confined to construing the terms of
the Plan and Trust as they relate to the Trustee,
receiving funds on behalf of and making payments from
the Trust, safeguarding and valuing Trust assets,
investing and reinvesting Trust assets in the
Investment Funds as directed by the Administrator,
Participants or Beneficiaries and those duties as
described in this Section 17.
The Trustee shall have no duty or authority to
ascertain whether Contributions are in compliance with
the Plan, to enforce collection or to compute or
verify the accuracy or adequacy of any amount to be
paid to it by the Employer. The Trustee shall not be
liable for the proper application of any part of the
Trust with respect to any disbursement made at the
direction of the Administrator.
<PAGE> 59
18 RIGHTS, PROTECTION, CONSTRUCTION AND JURISDICTION
18.1 Plan Does Not Affect Employment Rights
The Plan does not provide any employment rights to any
Employee. The Employer expressly reserves the right
to discharge an Employee at any time, with or without
cause, without regard to the effect such discharge
would have upon the Employee's interest in the Plan.
18.2 Limited Return of Contributions
Except as provided in this paragraph, (1) Plan assets
shall not revert to the Employer nor be diverted for
any purpose other than the exclusive benefit of
Participants or their Beneficiaries; and (2) a
Participant's vested interest shall not be subject to
divestment. As provided in ERISA section 403(c)(2),
the actual amount of a Contribution made by the
Employer (or the current value of the Contribution if
a net loss has occurred) may revert to the Employer
if:
(a) such Contribution is made by reason of a mistake
of fact;
(b) initial qualification of the Plan under Code
section 401(a) is not received and a request for
such qualification is made within the time
prescribed under Code section 401(b) (the
existence of and Contributions under the Plan are
hereby conditioned upon such qualification); or
(c) such Contribution is not deductible under Code
section 404 (such Contributions are hereby
conditioned upon such deductibility) in the
taxable year of the Employer for which the
Contribution is made.
The reversion to the Employer must be made (if at all)
within one year of the mistaken payment of the
Contribution, the date of denial of qualification, or
the date of disallowance of deduction, as the case may
be. A Participant shall have no rights under the Plan
with respect to any such reversion.
18.3 Assignment and Alienation
As provided by Code section 401(a)(13) and to the
extent not otherwise required by law, no benefit
provided by the Plan may be anticipated, assigned or
alienated, except:
(a) to create, assign or recognize a right to any
benefit with respect to a Participant pursuant to
a QDRO, or
(b) to use a Participant's vested Account balance as
security for a loan from the Plan which is
permitted pursuant to Code section 4975.
<PAGE> 60
18.4 Facility of Payment
If a Plan benefit is due to be paid to a minor or if
the Administrator reasonably believes that any payee
is legally incapable of giving a valid receipt and
discharge for any payment due him or her, the
Administrator shall have the payment of the benefit,
or any part thereof, made to the person (or persons or
institution) whom it reasonably believes is caring for
or supporting the payee, unless it has received due
notice of claim therefor from a duly appointed
guardian or conservator of the payee. Any payment
shall to the extent thereof, be a complete discharge
of any liability under the Plan to the payee.
18.5 Reallocation of Lost Participant's Accounts
If the Administrator cannot locate a person entitled to
payment of a Plan benefit after a reasonable search,
the Administrator may at any time thereafter treat
such person's Account as forfeited and use such amount
as described in Section 8.4. If such person
subsequently presents the Administrator with a valid
claim for the benefit, such person shall be paid the
amount treated as forfeited, plus the interest that
would have been earned in the Sweep Account to the
date of determination. The Administrator shall pay
the amount through an additional amount contributed by
the Employer or direct the Trustee to pay the amount
from the Forfeiture Account.
18.6 Claims Procedure
(a) Right to Make Claim. An interested party who
disagrees with the Administrator's determination
of his or her right to Plan benefits must submit
a written claim and exhaust this claim procedure
before legal recourse of any type is sought. The
claim must include the important issues the
interested party believes support the claim. The
Administrator, pursuant to the authority provided
in this Plan, shall either approve or deny the
claim.
(b) Process for Denying a Claim. The Administrator's
partial or complete denial of an initial claim
must include an understandable, written response
covering (1) the specific reasons why the claim
is being denied (with reference to the pertinent
Plan provisions) and (2) the steps necessary to
perfect the claim and obtain a final review.
(c) Appeal of Denial and Final Review. The interested
party may make a written appeal of the
Administrator's initial decision, and the
Administrator shall respond in the same manner
and form as prescribed for denying a claim
initially.
<PAGE> 61
(d) Time Frame. The initial claim, its review, appeal
and final review shall be made in a timely
fashion, subject to the following time table:
Days to Respond
Action From Last Action
Administrator determines benefit NA
Interested party files initial request 60 days
Administrator's initial decision 90 days
Interested party requests final review 60 days
Administrator's final decision 60 days
However, the Administrator may take up to twice
the maximum response time for its initial and
final review if it provides an explanation within
the normal period of why an extension is needed
and when its decision shall be forthcoming.
18.7 Construction
Headings are included for reading convenience. The
text shall control if any ambiguity or inconsistency
exists between the headings and the text. The
singular and plural shall be interchanged wherever
appropriate. References to Participant shall include
Beneficiary when appropriate and even if not otherwise
already expressly stated.
18.8 Jurisdiction and Severability
The Plan and Trust shall be construed, regulated and
administered under ERISA and other applicable federal
laws and, where not otherwise preempted, by the laws
of the State of California. If any provision of this
Plan and Trust shall become invalid or unenforceable,
that fact shall not affect the validity or
enforceability of any other provision of this Plan and
Trust. All provisions of this Plan and Trust shall be
so construed as to render them valid and enforceable
in accordance with their intent.
18.9 Indemnification by Employer
The Employers hereby agree to indemnify all Plan
fiduciaries against any and all liabilities resulting
from any action or inaction, (including a Plan
termination in which the Company fails to apply for a
favorable determination from the Internal Revenue
Service with respect to the qualification of the Plan
upon its termination), in relation to the Plan or
Trust (1) including (without limitation) expenses
reasonably incurred in the defense of any claim
relating to the Plan or its assets, and amounts paid
in any settlement relating to the Plan or its assets,
but (2) excluding liability resulting from actions or
inactions made in bad faith, or resulting from the
negligence or willful misconduct of the Trustee. The
Company shall have the right, but not the obligation,
to conduct the defense of any action to which this
Section applies. The Plan fiduciaries are not
entitled to indemnity from the Plan assets relating to
any such action.
<PAGE> 62
19 AMENDMENT, MERGER, DIVESTITURES AND TERMINATION
19.1 Amendment
The Company reserves the right to amend this Plan and
Trust at any time, to any extent and in any manner it
may deem necessary or appropriate. The Company (and
not the Trustee) shall be responsible for adopting any
amendments necessary to maintain the qualified status
of this Plan and Trust under Code sections 401(a) and
501(a). If the Committee is acting as the
Administrator in accordance with Section 15.6, it
shall have the authority to adopt Plan and Trust
amendments which have no substantial adverse financial
impact upon any Employer or the Plan. All interested
parties shall be bound by any amendment, provided that
no amendment shall:
(a) become effective unless it has been adopted in
accordance with the procedures set forth in
Section 19.5;
(b) except to the extent permissible under ERISA and
the Code, make it possible for any portion of the
Trust assets to revert to an Employer or to be
used for, or diverted to, any purpose other than
for the exclusive benefit of Participants and
Beneficiaries entitled to Plan benefits and to
defray reasonable expenses of administering the
Plan;
(c) decrease the rights of any Employee to benefits
accrued (including the elimination of optional
forms of benefits) to the date on which the
amendment is adopted, or if later, the date upon
which the amendment becomes effective, except to
the extent permitted under ERISA and the Code;
nor
(d) permit an Employee to be paid the balance of his
or her Employee 401(k) Account unless the payment
would otherwise be permitted under Code section
401(k).
19.2 Merger
This Plan and Trust may not be merged or consolidated
with, nor may its assets or liabilities be transferred
to, another plan unless each Participant and
Beneficiary would, if the resulting plan were then
terminated, receive a benefit just after the merger,
consolidation or transfer which is at least equal to
the benefit which would be received if either plan had
terminated just before such event.
19.3 Divestitures
In the event of a sale by an Employer which is a
corporation of: (1) substantially all of the
Employer's assets used in a trade or business to an
unrelated corporation, or (2) a sale of such
Employer's interest in a subsidiary to an unrelated
entity or individual, lump sum distributions shall be
permitted from the Plan, except as provided below, to
Participants with respect to Employees who continue
employment with the corporation acquiring such assets
or who continue employment with such subsidiary, as
applicable.
<PAGE> 63
Notwithstanding, distributions shall not be permitted
if the purchaser agrees, in connection with the sale,
to be substituted as the Company as the sponsor of the
Plan or to accept a transfer of the assets and
liabilities representing the Participants' benefits
into a plan of the purchaser or a plan to be
established by the purchaser.
19.4 Plan Termination
The Company may, at any time and for any reason,
terminate the Plan in accordance with the procedures
set forth in Section 19.5, or completely discontinue
contributions. Upon either of these events, or in the
event of a partial termination of the Plan within the
meaning of Code section 411(d)(3), the Accounts of
each affected Employee who has not yet incurred a
Break in Service shall be fully vested. If no
successor plan is established or maintained, lump sum
distributions shall be made in accordance with the
terms of the Plan as in effect at the time of the
Plan's termination or as thereafter amended provided
that a post-termination amendment shall not be
effective to the extent that it violates Section 19.1
unless it is required in order to maintain the
qualified status of the Plan upon its termination.
The Trustee's and Employer's authority shall continue
beyond the Plan's termination date until all Trust
assets have been liquidated and distributed.
19.5 Amendment and Termination Procedures
The following procedural requirements shall govern the
adoption of any amendment or termination (a "Change")
of this Plan and Trust:
(a) The Company may adopt any Change by action of its
board of directors in accordance with its normal
procedures.
(b) The Committee, if acting as Administrator in
accordance with Section 15.6, may adopt any
amendment within the scope of its authority
provided under Section 19.1 and in the manner
specified in Section 15.7(a).
(c) Any Change must be (1) set forth in writing, and
(2) signed and dated by the Company's board of
directors or its designee.
(d) If the effective date of any Change is not
specified in the document setting forth the
Change, it shall be effective as of the date it
is signed in accordance with clause (2) above,
except to the extent that another effective date
is necessary to maintain the qualified status of
this Plan and Trust under Code sections 401(a)
and 501(a).
(e) No Change affecting the Trustee in its capacity as
Trustee or in any other capacity shall become
effective until it is accepted and signed by the
Trustee (which acceptance shall not unreasonably
be withheld).
19.6 Termination of Employer's Participation
Any Employer may, at any time and for any reason,
terminate its Plan participation by action of its
board of directors in accordance with its normal
<PAGE> 64
procedures. Written notice of such action shall be
signed and dated by an executive officer of the
Employer and delivered to the Company. If the
effective date of such action is not specified, it
shall be effective on, or as soon as reasonably
practicable after, the date of delivery. Upon the
Employer's request, the Company may instruct the
Trustee and Administrator to spin off all affected
Accounts and underlying assets into a separate
qualified plan under which the Employer shall assume
the powers and duties of the Company. Alternatively,
the Company may treat the event as a partial
termination described above or continue to maintain
the Accounts under the Plan.
19.7 Replacement of the Trustee
The Trustee may resign as Trustee under this Plan and
Trust or may be removed by the Company at any time
upon at least 90 days written notice (or less if
agreed to by both parties). In such event, the
Company shall appoint a successor trustee by the end
of the notice period. The successor trustee shall
then succeed to all the powers and duties of the
Trustee under this Plan and Trust. If no successor
trustee has been named by the end of the notice
period, the Company's chief executive officer shall
become the trustee, or if he or she declines, the
Trustee may petition the court for the appointment of
a successor trustee.
19.8 Final Settlement and Accounting of Trustee
(a) Final Settlement. As soon as administratively
feasible after its resignation or removal as
Trustee, the Trustee shall transfer to the
successor trustee all property currently held by
the Trust. However, the Trustee is authorized to
reserve such sum of money as it may deem
advisable for payment of its accounts and
expenses in connection with the settlement of its
accounts or other fees or expenses payable by the
Trust. Any balance remaining after payment of
such fees and expenses shall be paid to the
successor trustee.
(b) Final Accounting. The Trustee shall provide a
final accounting to the Administrator within 90
days of the date Trust assets are transferred to
the successor trustee.
(c) Administrator Approval. Approval of the final
accounting shall automatically occur 90 days
after such accounting has been received by the
Administrator, unless the Administrator files a
written objection with the Trustee within such
time period. Such approval shall be final as to
all matters and transactions stated or shown
therein and binding upon the Administrator.
<PAGE> 65
APPENDIX A - INVESTMENT FUNDS
I. Investment Funds Available
The Investment Funds offered under the Plan as of the
Effective Date to Participants and Beneficiaries include
this set of daily valued funds, except that "as of December
1, 1995" shall be substituted for the preceding reference to
"as of the Effective Date" with regard to the LifePath and
Company Stock Funds:
Category Funds
Money Market Money Market
Income Bond Index
Balanced Asset Allocation
Equity Company Stock
Growth Stock
S&P 500 Stock
Combination LifePath
Prior to December 1, 1995, the Investment Funds included a
Company Stock Fund but solely for the investment of a
Participant's or Beneficiary's Employer Matching Account as
directed by the Administrator.
II. Default Investment Fund
The default Investment Fund as of the Effective Date is the
Money Market Fund.
III. Contribution Accounts For Which Investment is Restricted
A Participant or Beneficiary may direct the investment of
his or her entire Account except for the following
Contribution Accounts, and except as otherwise provided in
Section 7, which shall be invested as of the Effective Date
as follows:
Employer Matching Account Company Stock Fund
Effective December 1, 1995, "Matching Stock Account" (which
effective December 1, 1995 includes amounts previously held
in a Participant's Employer Matching Account) shall be
substituted for the preceding reference to "Employer
Matching Account".
IV. Maximum Percentage Restrictions Applicable to Certain
Investment Funds
As of the Effective Date, there are no maximum percentage
restrictions applicable to any Investment Funds.
<PAGE> 66
APPENDIX B - PAYMENT OF PLAN FEES AND EXPENSES
As of the Effective Date, payment of Plan fees and expenses shall
be as follows:
1) Investment Management Fees: These are paid by Participants
in that management fees reduce the investment return
reported and credited to Participants, except that the
Employer shall pay the fees related to the Company Stock
Fund. These are paid by the Employer on a quarterly basis.
2) Recordkeeping Fees: These are paid by the Employer on a
quarterly basis.
3) Loan Fees: A $3.50 per month fee is assessed and
billed/collected quarterly from the Account of each
Participant who has an outstanding loan balance for loans
entered into on or after August 1, 1993. For loans entered
into prior to August 1, 1993, these are paid by the Employer
on a quarterly basis.
4) Investment Fund Election Changes: For each Investment Fund
election change by a Participant, in excess of 4 changes per
year, a $10 fee shall be assessed and billed/collected
quarterly from the Participant's Account.
5) Periodic Installment Payment Fees: A $3.00 per check fee
shall be assessed and billed/collected quarterly from the
Participant's Account.
6) Additional Fees Paid by Employer: All other Plan related
fees and expenses shall be paid by the Employer. To the
extent that the Administrator later elects that any such
fees shall be borne by Participants, estimates of the fees
shall be determined and reconciled, at least annually, and
the fees shall be assessed monthly and billed/collected from
Accounts quarterly.
<PAGE> 67
APPENDIX C - LOAN INTEREST RATE
As of the Effective Date, the interest rate charged on
Participant loans shall be equal to the Trustee's prime rate,
plus 2%.
<PAGE> 68
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-8 of our report dated
February 6, 1995, which appears on page 19 of the 1994
Annual Report to Shareholders of L.A. Gear, Inc., which is
incorporated by reference in L.A. Gear, Inc.'s Annual Report
on Form 10-K for the year ended November 30, 1994. We also
consent to the incorporation by reference of our report on
the Financial Statement Schedules, which appears on page 14
of such Annual Report on Form 10-K. We also consent to the
incorporation by reference in the Registration Statement of
our report dated November 13, 1995 appearing on page F-1 of
the Annual Report of the L.A. Gear, Inc. Employee Stock
Savings Plan on Form 11-K for the year ended November 30,
1994.
/s/ Price Waterhouse LLP
- ----------------------------------
Price Waterhouse LLP
Los Angeles, California
November 13, 1995
