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Exhibit 4(a)
ADVO, Inc.
Deferred Compensation Plan
Effective January 1, 1995
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ADVO, Inc.
Deferred Compensation Plan
I. Purpose
II. Definitions
III. Eligibility; Participation Limits
IV. Account Determination and Valuation
V. Benefits
VI. Claim for Benefits Procedure
VII. Administration
VIII. Amendment and Termination
IX. Miscellaneous
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ADVO, Inc.
Deferred Compensation Plan
I. Purpose
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The purpose of the ADVO, Inc. Deferred Compensation Plan is to provide a means
whereby ADVO, Inc. may provide a vehicle to permit Participants who also
participate in the ADVO, Inc. 401(k) Savings Plan to defer amounts in excess of
the dollar limitation of IRC (S)402(g) applicable to the 401(k) Savings
Plan, and to defer additional Salary and Bonus amounts, and thereby afford
senior management and certain other associates with an opportunity to build
additional financial security. In addition, the Company will credit a
Participant's Deferred Benefit Account with an amount equivalent to the amount
which would have been contributed to the 401(k) Plan for a Participant but for
IRS limitations on Company matching contributions to the 401(k) Plan on behalf
of Participants.
The Company will also transfer its obligations to participants in the ADVO, Inc.
Savings Continuation Plan to this Plan by crediting the Account of a Participant
with an amount equal to the value of the balance credited to the Savings
Continuation Account (as that term is used in the Savings Continuation Plan) of
a Participant. The Company shall then terminate the Savings Continuation Plan.
This Plan is similar to a defined contribution plan. Deferrals of Salary and
Bonus, together with Company Allocations made pursuant to the Plan, will be
credited with Investment Results based on Investment Results which mirror 401(k)
Plan investment results, in accordance with the Plan. The resulting balance will
be paid to the Participant (or his or her Beneficiary) as described herein. By
providing a means whereby Salary and Bonus may be deferred into the future, and
by restoring contributions otherwise foregone because of the operation of IRC
(S)(S)401(a)(17) and 415(c), the Plan will aid in attracting and retaining
managers of exceptional ability, provide them with additional financial security
at the time of Retirement, and supplement other Company-sponsored benefits in
the event of a Participant's death or Disability.
II Definitions and Additional Provisions
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2.1 "Administrative Committee" and "Committee" mean the Plan Committee
appointed pursuant to Article VII to manage and administer the Plan.
2.2 "Agreement" means the ADVO, Inc. Deferred Compensation Election
Agreement, executed between a Participant and the Company, whereby a Participant
agrees to participate in the Plan and may defer a portion of his or her Salary
or Bonus (as the case may be) or both, pursuant to the provisions of the Plan,
and the Company agrees to pay benefits in accordance with the provisions of the
Plan and Agreement. A Participant shall file an Agreement for each Plan Year in
Section 3.2.
2.3 "Beneficiary" means the person, persons, or trust designated
Beneficiary
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pursuant to Section 5.10.
2.4 "Bonus" means the gross annual bonus amount(s) payable to a
Participant from the ADVO, Inc. Corporate Management Incentive Plan and the
ADVO, Inc. Division/Regional Management Incentive Plan, or successor plan(s), if
any, in effect for the Company fiscal year ending within the Plan Year (but
payable after the end of the Plan Year) otherwise payable in cash, and
considered "wages" for FICA and federal income tax withholding, and including
any amount deferred under this or any other plan maintained by the Company.
Bonus amounts considered shall include any amounts by which the Participant's
Bonus is reduced by a bonus reduction or similar arrangement under any qualified
plan described in IRC (S)401(a) or any cafeteria plan (as described in IRC
(S)125) maintained by the Company.
2.5 "Change of Control" means the occurrence of any of the following
events:
1. a reorganization, merger (other than a merger of the Company in
which the holders of the Company's common stock immediately prior to the
merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger), or consolidation of
the Company in which the Company is not the surviving or resulting
corporation, or pursuant to which shares of the Company's common stock
would be converted into cash, securities, or other property, or
2. the approval by the stockholders of the Company of any plan or
proposal for the dissolution or liquidation of the Company, or
3. any sale, lease, exchange, or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the
consolidated assets of the Company;
provided, however, that any reorganization, merger, or consolidation described
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in (a)(c) immediately above, a reorganization of the Company into a holding
company structure including a reorganization involving a business combination
with another corporation or entity, a sale or transfer of all or substantially
all of the Company's assets, or a dissolution of the Company pursuant to which
the stockholders receive securities of another entity, will not result in a
Change of Control if:
a. the election or appointment of the individuals who
immediately after the effective time of any of those events constitute
the directors of the Board of Directors of the continuing corporation
was approved by a vote of at least two-thirds of the individuals
constituting the Board immediately prior to such effective time, or
b. a majority of the directors of any continuing corporation
immediately after the effective time of any of those events were
directors immediately prior to such effective time.
4. any "person" (as such term is used in Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended ["Exchange Act"]), other
than
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E.M. Warburg & Co. and its affiliates, is or becomes the "beneficial owner"
(within the meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 30% or more of the
Company's Common Stock then outstanding; provided, however, that any change
in the relative beneficial ownership of securities of any person resulting
solely from a reduction in the aggregate number of outstanding shares of
Common Stock, and any decrease thereafter in such person's ownership of
securities, shall be disregarded until such person increases in any manner,
directly or indirectly, such person's beneficial ownership of any
securities of the Company; or
5. a change in the composition of the Company's Board of Directors,
as a result of which Eligible Directors cease for any reason to constitute
a majority thereof. For purposes of this Section, an "Eligible Director"
is:
a. any individual who was a director of the Company on
September 27, 1990; or
b. any individual proposed by E.M. Warburg & Co. or its
affiliates and elected as a director in place of a director described
in (1), immediately above; or
c. any director elected, or nominated for election by the
Company's stockholders, by the vote of at least two-thirds of the
directors who at the time of such vote were Eligible Directors.
2.6 "Company" means ADVO, Inc., a Delaware corporation, its successors and
assigns, and any subsidiary company which grants participation hereunder to an
associate with the Company's consent.
2.7 "Company Allocation" means an amount added to a Participant's Deferred
Benefit Account, pursuant to Section 3.6.
2.8 "Compensation" means cash remuneration paid pursuant to this Plan for
services rendered prior to the date paid.
2.9 "Deferred Benefit Account" and "Account" mean the separate bookkeeping
accounting record(s) maintained by the Company for each Participant, pursuant to
Articles IV and V. Each Participant's Deferred Benefit Account shall consist of
the sum of as many subaccounts as shall be necessary to establish for
recordkeeping purposes to reflect the Participant's Subaccount Investment
Election(s) with respect to the Investment Results to be applied to amounts
deferred under the Plan. The total amount of each Participant's Deferred Benefit
Account shall consist of the amounts described in Article IV. Deferred Benefit
Account(s), Deferred Benefit Account subaccounts, and Subaccount Investment
Results shall be utilized solely as a set of bookkeeping devices for the
measurement and determination of the amounts to be paid to the Participant
pursuant to this Plan, and shall be subject to Section 9.2 hereof.
Notwithstanding the provisions of Section 9.9, a Participant's Deferred Benefit
Account shall not constitute or be treated as a trust fund or escrow arrangement
of any kind.
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2.10 "Determination Date" means the date on which the amount of a
Participant's Deferred Benefit Account is determined as provided in Articles IV
and V. The last day of each calendar month shall be a Determination Date.
2.11 "Disability" shall have the same meaning and be determined in the
same manner as in the ADVO, Inc. Long Term Disability Income Plan. In the
absence of such a plan, "Disability" or "Disabled" shall mean a permanent
impairment of the physical or mental condition of a Participant, which, in the
sole discretion of the Company, prevents Participant from performance of the
usual duties of employment attendant to the Participant's function with the
Company. The determination of the Company as to a Disability shall be made on
the basis of such medical and other competent evidence as the Company shall deem
relevant, and shall be binding on Participant.
2.12 "ERISA Funded" means that the Plan does not meet the "unfunded"
criterion of the exceptions to the application of Parts 2 through 4 of Subtitle
B of Title I of the Employee Retirement Income Security Act of 1974 (ERISA).
2.13 "401(k) Plan" means the ADVO, Inc. 401(k) Savings Plan, as amended
from time to time. Unless the context requires otherwise, definitions as used
herein shall have the same meaning as in the 401(k) Savings Plan when applied to
said Plan.
2.14 "IRC" means the Internal Revenue Code of 1986, as amended.
2.15 "Participant" means an associate of the Company who is eligible to
participate in the Plan pursuant to Section 3.1, and who enters into an
Agreement with the Company.
2.16 "Plan" means the ADVO, Inc. Deferred Compensation Plan, as amended
from time to time.
2.17 "Plan Effective Date" means January 1, 1995.
2.18 "Plan Year" means the calendar year, January 1 to December 31.
2.19 "Retirement Date" and "Retirement" mean the date of termination of
service of a Participant for reasons other than death or Disability after he or
she (i) attains age fifty-five (55) and has ten (10) Years of Service; (ii) has
attained age 65; or (iii) terminates under circumstances which the Company, in
its sole discretion, elects to treat as a Retirement for purposes of the Plan.
2.20 "Salary" for purposes of the Plan shall be the total of the
Participant's base salary paid during a Plan Year, and considered "wages" for
FICA and federal income tax withholding, but before any deferral made pursuant
to this or any other plan maintained by the Company. Salary amounts considered
shall include any amounts by which the Participant's Salary is reduced by a
salary reduction or similar arrangement under any qualified plan described in
IRC (S)401(a) or any cafeteria plan (as described in IRC (S)125)
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maintained by the Company.
2.21 "Savings Continuation Plan" means the ADVO Savings Continuation Plan,
as may have been amended from time to time, in effect on the Plan Effective
Date, and which will be terminated as provided in Section 3.7.
2.22 "Special Company Allocation" means the amount added to a Participant's
Deferred Benefit Account, pursuant to Section 3.7.
2.23 "Subaccount Investment Election" means the Participant's advance
notice request of future Investment Results to be applied to (the subaccounts
of) his or her Deferred Benefit Account, in such form as the Committee may
establish or accept. Such Subaccount Investment Election shall specify any
combination of whole percentage increments of one or any number of Subaccount
Investment Results from time to time offered under the Plan. The election shall
specify whether it applies to amounts not yet deferred, to amounts previously
credited to the Deferred Benefit Account, which, together with Investment
Results, represent the current Deferred Benefit Account balance, or both.
2.24 "Subaccount Investment Results" and "Investment Results" means the
investment results, expressed as a percentage rate, achieved by each of the
respective "Investment Fund" (as that term is used in the 401(k) Plan) within
the 401(k) Savings Plan Trust Fund as of the most recent Determination Date, and
which represents each Investment Fund's investment results attributable to
interest, dividends, changes in market value, expenses, and gains and losses,
and which is to be used, for purposes of the Plan, as a hypothetical investment
earnings rate to be applied as Investment Results of the respective subaccounts
maintained under this Plan.
2.25 "Tax Funded" means that the interest of a Participant in the Plan will
be includable in the gross income of the Participant for federal income tax
purposes prior to actual receipt of Plan benefits by the Participant.
2.26 "Termination of Service" means the Participant's ceasing his or
her employment with the Company for any reason whatsoever, whether voluntarily
or involuntarily.
2.27 "Years of Service" means years of service credited to a Participant in
the 401(k) Plan.
III Eligibility; Participation Limits
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3.1 Eligibility and Participation. Eligibility to participate in the Plan
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shall be limited to management associates of the Company who meet all of the
following conditions:
(a) each associate must be an officer or other key associate of the
Company designated and approved as eligible by the Administrative
Committee; and
(b) each associate must be eligible to participate in the 401(k)
Plan, and
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be a Participant, or have elected to become a Participant in the 401(k)
Plan (in accordance with its rules of eligibility and participation); and
(c) each associate designated eligible to participate must file an
Agreement with the Company in accordance with Section 3.2 in order to
become a Participant in the Plan.
An associate who meets all of the requirements of this Section shall become a
Participant in the Plan effective as of the date coincident with eligibility for
participation in the 401(k) Plan. Except as otherwise provided in Section 3.4,
once an associate becomes a Participant in the Plan, he or she shall remain a
Participant until all benefit payments, if any, to the Participant (or his or
her Beneficiary) have been made.
3.2 Deferral of Salary and Bonus. Eligible associates of the Company
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who elect to participate in the Plan must file an Agreement to participate in
the Plan and to defer Salary, Bonus, or both, with the Company prior to the
beginning of the Plan Year in which the Salary or Bonus is to be earned. An
eligible associate who fails to file an Agreement before the beginning of a Plan
Year may file an Agreement to defer Salary, Bonus, or both, with respect to a
subsequent Plan Year. A Participant's Agreement shall be subject to all of the
limitations of Section 3.3.
3.3 Deferral Limitations. A Participant's Agreement to participate in the
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Plan and to defer Salary, Bonus, or both, shall be subject to the following
limitations:
(a) a Participant may elect to defer no less than five percent (5%)
and no more than fifteen percent (15%) of Salary, in increments of one
percentage point (1%); and
(b) a Participant's Agreement to defer up to one hundred percent
(100%) of Bonus shall be in increments of ten percentage points (10%); and
(c) the Participant must elect (or have elected) to defer at least
six per cent (6%) of pay as an Associate Pre-Tax Contribution to the 401(k)
Plan (or a percentage amount which would result [but for the limits of IRC
(S)402(g)] in a deferral amount which exceeds the maximum dollar amount
permitted under IRC (S)402(g) under the 401(k) Plan; and
(d) any Agreement to defer Salary, Bonus, or both, may not apply to a
Plan Year after the 1999 Plan Year; and
(e) the Agreement shall be irrevocable upon acceptance by the
Company.
3.4 Suspension of Agreement to Defer. A Participant's Agreement to defer
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Salary, Bonus, or both, shall be suspended in the event that the Company, in its
sole discretion, reasonably determines that a Participant ceases to meet the
eligibility requirements of the Plan. In such event, no additional Company
Allocations shall be made to the Account of a Participant for the period his or
her Agreement is suspended. A Participant whose Agreement has been suspended
pursuant to this Section shall not be
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deemed to have incurred a Termination of Service, and his or her Deferred
Benefit Account shall continue to be maintained under the terms of the Plan.
3.5 Timing of Deferral Credits. The amount of Salary or Bonus that a
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Participant elects to defer in the Agreement shall cause an equivalent reduction
in his or her Salary or Bonus payment, and shall be credited to the
Participant's Deferred Benefit Account throughout the Plan Year as the
Participant is paid (or would have been paid) the non-deferred portion of his or
her Salary or Bonus in each Plan Year. Any Company Allocation to be made to a
Participant's Deferred Benefit Account in accordance with Section 3.6 shall be
credited to his or her Deferred Benefit Account at the same time the Company's
contributions are made (or would have been made) to the 401(k) Plan.
3.6 Company Allocation. The Company shall credit a Company Allocation to a
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Participant's Deferred Benefit Account. The amount of the Company Allocation, if
any, shall be determined and calculated as follows:
(a) The Company shall credit a Participant's Deferred Benefit Account
with the amount, if any, which is equivalent to matching Company
contributions which would have been made under the 401(k) Plan but for the
Participant's reduction in Salary and Bonus attributable to participation
in this Plan.
(b) The Company shall credit a Participant's Deferred Benefit Account
with the amount, if any, which is equivalent to the Company contribution
which could not be made under the 401(k) Plan because of:
(1) the dollar limit on contributions under
IRC(S)415(c); and
(2) the annual limitation of compensation which can be
taken into account under IRC (S)401(a)(17).
3.7 Special Company Allocation at Plan Effective Date. As of the Plan
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Effective Date, the Company shall terminate the participation of an associate in
the Savings Continuation Plan, and shall terminate the Savings Continuation
Plan. In terminating the participation of a participant in the Savings
Continuation Plan, the Company:
(a) shall credit a Special Company Allocation to the Deferred Benefit
Account of a Participant who, as of the Plan Effective Date, was a
participant in the Savings Continuation Plan. The amount of the Special
Company Allocation, if any, credited to the Account of the Participant
shall be equal to the balance credited to the "Savings Continuation
Account" that was maintained by the Company under the Savings Continuation
Plan. At all times thereafter, Investment Results credited to the
Participant's Account in accordance with Article IV of this Plan shall be
in lieu of "earnings", as otherwise provided in the Savings Continuation
Plan; and
6. shall terminate, void, and cancel any obligation to the
Participant under the Savings Continuation Plan. Such cancellation of the
Company's obligation shall not operate to reduce the right of a Participant
in the Savings Continuation Plan to receive any benefit accrued thereunder
prior to the Plan Effective Date, as
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provided in the Savings Continuation Plan. Upon cancellation of its
obligations in accordance with this subsection, the Company shall have no
further obligation under the Savings Continuation Plan with respect to a
Participant in this Plan; and
(c) shall terminate the Savings Continuation Plan with respect to
inactive and retired participants. In terminating the Plan, the Company
shall terminate, void, and cancel its obligations under the Savings
Continuation Plan with respect to all inactive or retired participants by
designating such participants as Participants in this Plan, establishing a
Deferred Benefit Account for the benefit of such participants, and
crediting a Special Company Allocation to the Account of each participant,
in the manner provided in subsection (a), immediately above. Each inactive
or retired participant in the Savings Continuation Plan who becomes a
Participant in this Plan pursuant to this subsection shall not be required
to meet the eligibility requirements of Section 3.1, or to file an
Agreement otherwise required by Section 3.2, and shall not be eligible for,
or entitled to, any Company Allocation provided in Section 3.6.
3.8 No Constructive Receipt. The operation of Sections 3.6 and 3.7 shall
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not permit the Participant to receive any amount credited to the Account of a
Participant as an Annual Company Allocation in accordance with Section 3.6, or
to receive any part or all of the amount equal to the "Savings Continuation
Account" of a participant in the Savings Continuation Plan credited as a Special
Company Allocation in accordance with Section 3.7, prior to the date such amount
is actually paid to a Participant pursuant to Article V of this Plan.
3.9 Vesting. A Participant shall be one hundred percent (100%) vested
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in the amount of Salary and Bonus deferred and credited to his or her Deferred
Benefit Account, and in any amounts credited to a Participant's Deferred Benefit
Account as a Special Company Allocation in accordance with Section 3.7,
including Subaccount Investment Results attributable thereto. Any amount
credited to a Participant's Deferred Benefit Account as a Company Allocation
attributable to the 401(k) Plan pursuant to Section 3.6, together with any
Subaccount Investment Results attributable thereto, shall vest in the same
percentage as if such Company Allocation had been a Company contribution made to
the 401(k) Plan account of a Participant.
3.10 Rollovers and Other Transfers. Except as specifically provided in
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Section 3.7, rollovers or transfers of funds from any other retirement or
savings plan shall not be permitted.
IV Determination and Valuation of Account
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4.1 Deferred Benefit Account. The Company shall establish each
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Participant's Deferred Benefit Account in accordance with the Plan, and shall
maintain such number of subaccounts as may be necessary as a recordkeeping
device to reflect the Participant's Subaccount Investment Election(s). Each
Participant's Deferred Benefit Account as of each Determination Date shall
consist of:
(a) the value of the Participant's Salary or Bonus deferred
pursuant to
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Section 3.2, and the value of any Company Allocation made pursuant to
Section 3.6, both amounts, if any, credited to a Participant's Account
since the immediately preceding Determination Date, and held to be
allocated to one or more subaccounts in accordance with Section 4.2, and
(b) the value of each subaccount established and maintained in
subaccount units under the Plan, after deduction of any subaccount units
converted to cash and paid as a benefit under Article V. The value of each
subaccount shall be determined in accordance with Section 4.4.
4.2 Subaccount Investment Election. Investment Results shall be applied to
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the respective subaccounts of a Participant's Account. Investment Results shall
be determined as follows:
(a) As of the Plan Effective Date, and at such other times as the
Committee shall permit, the Participant shall file and deliver to the
Company his or her Subaccount Investment Election. Such form may specify,
in whole percentage amounts, the percentage allocation to be applied
a. to the subaccount(s) to which amounts deferred thereafter in
accordance with Section 3.2 may be credited,
b. between or among subaccounts, for purposes of
determining the Subaccount Investment Results applicable to amounts
previously deferred, or
c. to any Special Company Allocation credited to his or
her Account in accordance with Section 3.7,
in such manner as approved or accepted by the Committee;
(b) A Participant's election shall remain in effect until changed by
the Participant. The Committee may limit the percentage amounts, number of
times a Participant may change the Subaccount Investment Results to be
applied to a Participant's Account Limitations, and establish such other
rules as it deems reasonable with respect to the Participant's Subaccount
Investment Election(s).
4.3 Reallocation of Subaccounts. In effecting a reallocation requested by
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the Participant, units in a subaccount shall be converted to dollar amounts
prior to redistribution between or among subaccounts, and reconverted to
subaccount units as necessary to effect the Participant's reallocation request,
both conversions to be as of the most recent Determination Date. A Participant's
reallocation request shall be in the form of a Subaccount Investment Election,
which shall be filed and delivered to the Company at such times and within such
other limitations as the Committee may establish. In the absence of any
Subaccount Investment Election(s) as may be required by the Participant (or his
or her Beneficiary) in order to designate one hundred percent (100%) of his or
her Deferred Benefit Account, the portion of the Account not designated shall be
allocated to a subaccount selected by the Committee.
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4.4 Determination of Subaccount Value. A Participant's subaccounts
---------------------------------
shall be valued in dollars, based on the dollar value of each unit credited to a
subaccount. The dollar value of each subaccount unit shall be based on the net
asset value of such unit as of the close of the business day coincident with or
immediately preceding a Determination Date.
(a) Each subaccount shall be credited with the number of full and
partial units which the dollar value of any amount credited to the
subaccount of a Participant in accordance with Section 4.1 would purchase
at the closing net asset value of each unit on the Determination Date.
(b) On the date a dividend or other distribution would have been paid
based on a subaccount unit, each subaccount shall be credited with the
number of additional full and partial subaccount units which would have
been purchased if the subaccount units then credited to the subaccount had
been held as shares. In the case of a dividend or other distribution paid
in property other than cash or shares, the Committee shall determine the
fair value of such property for purposes of the computation immediately
above.
V Benefits
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5.1 Retirement Benefit. Upon a Participant's Retirement Date, the Company
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shall pay to the Participant, as Compensation earned prior to Retirement, a
benefit equal to the value of his or her Deferred Benefit Account, with the
Company Allocation vested in accordance with Section 3.7, determined under
Article IV. The form of benefit payment shall be provided in Section 5.7. Upon
and after such Retirement Date, the Participant shall immediately cease to be
eligible for any benefit provided under Section 5.2, 5.3, 5.4, 5.5, or 5.6 of
the Plan.
5.2 Termination Benefit. Upon Termination of Service of the Participant
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before his or her Retirement Date for reasons other than his or her death or
Disability, the Company shall pay to the Participant, as Compensation earned
prior to his or her Termination of Service, a benefit equal to the value of his
or her Deferred Benefit Account, vested in accordance with Section 3.7,
determined under Article IV as of the date of Termination of Service. Unless
otherwise directed by the Committee, the value of the Participant's Deferred
Benefit Account paid as a termination benefit in the manner provided in Section
5.7. Upon a Termination of Service, the Participant shall immediately cease to
be eligible for any benefit provided under Section 5.1, 5.3, 5.4, 5.5, or 5.6 of
the Plan.
5.3 Death Benefit. Upon the death of the Participant prior to his or her
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Termination of Service, the Company shall pay to the Beneficiary of the deceased
Participant, as Compensation earned prior to his or her death, a benefit equal
to the value of the Participant's Deferred Benefit Account, vested in accordance
with Section 3.7, determined under Article IV as of the Determination Date
coincident with or next following the Participant's date of death. The value of
the Participant's Deferred Benefit Account paid as a death benefit shall be
converted to cash and paid in a lump sum, and shall cause
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a reduction in the number of units in a Participant's subaccounts equivalent to
the value of the lump sum amount paid. Upon a Termination of Service, the
Participant shall immediately cease to be eligible for any benefit provided
under Section 5.1, 5.2, 5.4, 5.5, or 5.6 of the Plan.
5.4 Disability Benefit. In the event of Disability prior to his or her
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Retirement Date, the Company shall pay to the Disabled Participant, as
Compensation earned prior to his Disability, a benefit equal to the value of his
Deferred Benefit Account, with the Company Allocation vested in accordance with
Section 3.7, determined under Article IV. The value of the Participant's
Deferred Benefit Account paid as a disability benefit shall be converted to cash
and paid in annual installments, as provided in Section 5.7, until the earliest
of the following events:
(a) The Participant ceases to be Disabled and resumes employment with
the Company;
(b) The Participant ceases to be Disabled and does not resume
employment with the Company. If the Participant has attained his Retirement
Date, he shall be entitled to the benefits provided for in Section 5.1. If
the Participant has not attained his Retirement Date, his Deferred Benefit
Account shall be recomputed and adjusted to reflect the vesting provisions
of Section 3.7. Upon any such recomputation and adjustment, the value of
his Deferred Benefit Account, if any, shall be paid in a lump sum as a
Termination Benefit in the manner provided in Section 5.2. In no event
shall the recomputation and adjustment of a Participant's Deferred Benefit
Account made pursuant to this subsection operate to require that such
previously Disabled Participant repay any Disability benefit paid
hereunder;
(c) The Participant dies. The Deferred Benefit Account balance
remaining shall be paid in a lump sum as provided in Section 5.3; or
(d) The value of the Participant's Deferred Benefit Account balance
reaches zero.
If a Disability occurs during the period elected in the Agreement, the Disabled
Participant's Agreement shall be suspended, and further deferrals shall not be
required during the period of Disability. Upon a written request by a
Participant filed with the Committee, the Committee may, in its sole discretion,
pay a Disability benefit equal to the value of the Disabled Participant's
Deferred Benefit Account in a single lump sum payment.
5.5 Interim Distribution Benefit. A Participant may elect in his or her
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Agreement to have a portion his or her Deferred Benefit Account converted to
cash and paid to him or her at the time specified in such Agreement. If the
Participant so elects, the Company shall pay to the Participant, as Compensation
earned prior to the interim distribution date, a lump sum benefit equal to the
amount so elected in the Agreement, subject to all of the following:
(a) The date selected for the interim distribution is a January 1
occurring on or after the fifth (5th) anniversary of the first day of the
Plan Year the Agreement became effective;
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(b) The amount to be distributed pursuant to such Agreement
will be equal to the amount by which his or her Salary, Bonus, or both,
were reduced pursuant to such Agreement;
(c) A Participant's Agreement may not provide for more than one date
on which a benefit shall be paid in accordance with this Section. The date
specified in the Agreement shall be disregarded if the Participant's
Termination of Service occurs prior to such date. An election to receive an
interim distribution benefit at a date specified in the Agreement shall be
irrevocable, unless the Administrative Committee, in its sole discretion,
grants a Participant's request to revoke his or her election. Any such
request to revoke his or her election must be filed with and approved by
the Committee at least one year prior to the January 1 that the interim
distribution would otherwise be made. If the request is granted by the
Committee, the value of such benefit shall remain as a credit to the
balance of the Participant's Deferred Benefit Account, to be maintained in
the manner provided in Section 4.1, and paid instead in the manner provided
in Sections 5.1, 5.2, 5.3, 5.4, or 5.6; and
(d) The amount to be distributed in accordance with this Section
shall be distributed without Committee approval required, and shall cause a
reduction in the number of units in a Participant's subaccounts equivalent
to the value of the lump sum amount paid.
5.6 Emergency Benefit. In the event that the Committee, upon written
-----------------
petition of the Participant, determines, in its sole discretion, that the
Participant has suffered a severe financial hardship, the Company shall pay to
the Participant, as soon as practicable following such determination, as
Compensation earned prior to the severe financial hardship, a benefit equal to
the amount necessary to meet the severe financial hardship not in excess of the
value of the vested portion of the Participant's Deferred Benefit Account,
including Investment Results. Any such payment shall cause a reduction in the
number of units in a Participant's subaccounts equivalent to the value of the
amount paid. For purposes of this Section, a severe financial hardship is an
unexpected need for cash arising from an illness, casualty loss, sudden
financial reversal, or other such unforeseeable occurrence. Cash needs arising
from events such as the purchase of a house or education expenses for children,
shall not be considered to be the result of a severe financial hardship. For
purposes of this Section, the criteria for establishing and determining a severe
financial hardship shall be made in accordance with IRC (S).401(k)(2)(b), and
Internal Revenue Service Regulation 1.401(k)-1(d)(2) (iii)-(iv).
5.7 Form of Benefit Payment. Upon the happening of an event described
-----------------------
in Section 5.1 or 5.4, the Company shall pay to the Participant (or his or her
Beneficiary) the amount calculated in accordance with this Section in
substantially equal annual installments. All payments made hereunder shall cause
a reduction in the number of units in a Participant's subaccounts equivalent to
the value of the installment amount paid, and shall be calculated and determined
as follows:
(a) An annual installment payment shall be determined for the
Participant's Deferred Benefit Account. The amount of the installment
payment shall
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be a determined using factors selected by the Committee to amortize the
unpaid balance of the Deferred Benefit Account balance in fifteen (15)
substantially equal annual installments, and shall be based on the
Investment Results available for the most recent Plan Year ended at the
time payments commence, or upon such Investment Results as the Committee,
in its sole discretion, determines as the rate of Investment Results to be
applied prospectively to determine installment payments. The Committee may
recompute the amount of the installment each year to reflect actual
Subaccount Investment Results, and based on current or projected Investment
Results and on subaccount balances of the Participant's Deferred Benefit
Account and on his or her Subaccount Investment Election(s) then in effect.
Installment benefit payments shall cease when the Deferred Benefit Account
balance reaches zero, or with the final payment determined hereunder.
(b) Unless an annual payment is the final annual installment payment,
each annual installment payment shall be at least equal to $5,000.
Notwithstanding the amortization method described in subsection (a)
immediately above, in the event an installment payment determined under
subsection (a) is less than $5,000, the annual installment payment shall be
$5,000. Annual installment payments in the amount of $5,000 shall continue
until the amount of the installment is recomputed, in accordance with
subsection (a), or until the remaining Account balance is less than $5,000.
Once the Account balance is less than $5,000, the subsequent annual
payment, which shall be the final payment, shall equal the remaining
Deferred Benefit Account balance.
Upon the death of a Participant after the commencement of payment of benefits
pursuant to Section 5.1, the Deferred Benefit Account remaining shall be paid to
the Beneficiary in annual installments over the remaining number of years
determined above. Upon a written request of such Beneficiary of a deceased
Participant, or upon the request of a Disabled Participant, the Committee may,
in its sole discretion, pay the value of a Disabled or deceased Participant's
Deferred Benefit Account in a lump sum.
Upon a written request by a Participant filed with the Committee prior to the
commencement of benefits under this Plan, the Committee may, in its sole
discretion, elect to pay the value of his or her Deferred Benefit Account in a
lump sum or in fewer than fifteen (15) annual installments.
5.8 Withholding; Employment Taxes. To the extent required by the law in
-----------------------------
effect at the time payments are made, the Company shall withhold any taxes
required to be withheld by the federal, or any state or local, government.
5.9 Commencement of Payments. Unless otherwise provided, payments under
------------------------
this Plan shall commence as soon as practicable following the Participant's
Termination of Service, but in no event later than ninety (90) days following
receipt of notice by the Committee of an event which entitles a Participant (or
a Beneficiary) to payments under this Plan. The date of each subsequent annual
installment shall be on the same Determination Date each year, as determined by
the Committee in its sole discretion.
5.10 Recipients of Payments; Designation of Beneficiary. All payments
--------------------------------------------------
to be made
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<PAGE>
by the Company under the Plan shall be made to the Participant during his or her
lifetime, provided that if the Participant dies prior to the commencement or
completion of such payments, then all subsequent payments under the Plan shall
be made by the Company to the Beneficiary or Beneficiaries determined in
accordance with this Section 5.10. The Participant shall designate a Beneficiary
by filing a written notice of such designation with the Committee in such form
as the Committee requires and may change such designation without the consent of
such Beneficiary or Beneficiaries by filing a new designation in writing with
the Committee. (In community property states, the spouse of a married
Participant shall join in any designation of a Beneficiary other than the
spouse.) If no designation shall be in effect at the time when any benefits
payable under this Plan shall become due, the Beneficiary shall be the
Beneficiary designated by the Participant in the 401(k) Plan, and otherwise
shall be the executor(s) or administrator(s) of the deceased Participant's
estate.
5.11 Facility of Payment. Any benefit payable hereunder to any person under
-------------------
a legal disability, or to any person who, in the judgment of the Committee, is
unable to properly administer his or her financial affairs, may be paid to the
legal representative of such person, or may be applied for the benefit of such
person in a manner which the Committee may select.
5.12 Loans to Participants. No loan, advancement, or other transaction in
---------------------
the nature of an anticipatory assignment of income shall be permitted under the
Plan.
VI CLAIM FOR BENEFITS PROCEDURE
----------------------------
6.1 Claim for Benefits. Any claim for benefits under the Plan shall be
------------------
made in writing to the Committee. If such claim for benefits is wholly or
partially denied by the Committee, the Committee shall, within a reasonable
period of time, but not later than sixty (60) days after receipt of the claim,
notify the claimant of the denial of the claim. Such notice of denial shall be
in writing and shall contain:
(a) the specific reason or reasons for the denial of the claim;
(b) a reference to the relevant Plan provisions upon which the denial
is based;
(c) a description of any additional material or information necessary
for the claimant to perfect the claim, together with an explanation of why
such material or information is necessary; and
(d) an explanation of the Plan's claim review procedure.
6.2 Request for Review of a Denial of a Claim for Benefits. Upon the
------------------------------------------------------
receipt by the claimant of written notice of denial of the claim, the claimant
may within ninety (90) days file a written request to the Committee, requesting
a review of the denial of the claim, which review shall include a hearing if
deemed necessary by the Committee. In connection with the claimant's appeal of
the denial of his or her claim, he or she may review relevant documents and may
submit issues and comments in writing.
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<PAGE>
6.3 Decision Upon Review of Denial of Claim for Benefits. The Committee
----------------------------------------------------
shall render a decision on the claim review promptly, but no more than sixty
(60) days after the receipt of the claimant's request for review, unless special
circumstances (such as the need to hold a hearing) require an extension of time,
in which case the sixty (60) day period shall be extended to one hundred-twenty
(120) days. Such decision shall:
(a) include specific reasons for the decision;
(b) be written in a manner calculated to be understood by the
claimant; and
(c) contain specific references to the relevant Plan provisions upon
which the decision is based.
The decision of the Committee shall be final and binding in all respects on both
the Company and the claimant.
VII Administration
--------------
7.1 Plan Administrative Committee. The Plan shall be administered by the
-----------------------------
Compensation Committee of the Board of Directors of the Company, which shall be
the Administrative Committee of the Plan. The Administrative Committee may
assign duties to an officer or other associates of the Company, and delegate
such duties as it sees fit.
7.2 General Rights, Powers and Duties of Administrative Committee. The
-------------------------------------------------------------
Administrative Committee shall be responsible for the management, operation and
administration of the Plan. In addition to any powers, rights, and duties set
forth elsewhere in the Plan, it shall have the following powers and duties to:
(a) adopt such rules and regulations consistent with the provisions
of the Plan as it deems necessary for the proper and efficient
administration of the Plan;
(b) administer the Plan in accordance with its terms and any rules
and regulations it establishes;
(c) maintain records concerning the Plan sufficient to prepare
reports, returns, and other information required by the Plan or by law;
(d) construe and interpret the Plan, and to resolve all questions
arising under the Plan;
(e) direct the Company to pay benefits under the Plan, and to give
such other directions and instructions as may be necessary for the proper
administration of the Plan;
(f) employ or retain agents, attorneys, actuaries, accountants or
other persons who may also be employed by or represent the Company; and
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<PAGE>
(g) be responsible for the preparation, filing, and disclosure on
behalf of the Plan of such documents and reports as are required by any
applicable federal or state law.
7.3 Information to be Furnished to Committee. The records of the Company
----------------------------------------
shall be determinative of each Participant's period of employment, age,
Termination of Service and the reason therefor, Disability, leave of absence,
reemployment, personal data, and Salary and Bonus. Participants and their
Beneficiaries shall furnish to the Committee such evidence, data or information,
and execute such documents as the Committee requests.
7.4 Responsibility. No member of the Committee shall be liable to any
--------------
person for any action taken or omitted in connection with the administration of
this Plan unless attributable to his or her own fraud or willful misconduct; nor
shall the Company be liable to any person for any such action unless
attributable to fraud or willful misconduct on the part of a director, officer
or associate of the Company. Further, the Company shall hold harmless and defend
any individual in the employment of the Company and any Director of the Company
against any claim, action, or liability asserted against him or her in
connection with any action or failure to act regarding the Plan, except as and
to the extent such liability may be based upon the individual's own willful
misconduct or fraud. This indemnification shall not duplicate, but may
supplement, any coverage available under any applicable insurance coverage.
VIII Amendment and Termination
-------------------------
8.1 Amendment. The Plan may be amended in whole or in part by the Company
---------
at any time. Notice of any material amendment shall be given in writing to the
Committee and to each Participant and to each Beneficiary of a deceased
Participant. No amendment shall retroactively decrease the balance of a
Participant's Deferred Benefit Account or retroactively decrease the Subaccount
Investment Results obtained prior to the date of the amendment.
8.2 Company's Right to Terminate. The Company reserves the sole right
----------------------------
to terminate the Plan. The Company also reserves the sole right to terminate the
Agreement pertaining to a Participant at any time prior to the commencement of
payment of his or her benefits. In the event of any such termination, the
Company shall continue to be obligated to pay benefits accrued prior to the date
of such termination in accordance with the Plan. The Participant shall be deemed
to have incurred a Termination of Service, and his or her Deferred Benefit
Account shall be paid in the manner provided in Section 5.2.
8.3 Special Termination. Any other provision of the Plan to the contrary
-------------------
notwithstanding, the Plan shall terminate if the Plan is held to be ERISA Funded
or Tax Funded by a federal court, and appeals from that holding are no longer
timely or have been exhausted. The Company may terminate the Plan if it
determines, based on a legal opinion which is satisfactory to the Company, that
either judicial authority or the opinion of the U.S. Department of Labor,
Treasury Department or Internal Revenue Service (as expressed in proposed or
final regulations, advisory opinions or rulings, or similar administrative
announcements) creates a significant risk that the Plan will be held to be ERISA
Funded or
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<PAGE>
Tax Funded, and failure to so terminate the Plan could subject the Company or
the Participants to material penalties. Upon any such termination, the Company
may:
(a) transfer the rights and obligations of the Participants
and the Company to a new plan established by the Company, which is not
deemed to be ERISA Funded or Tax Funded, but which is similar in all
other respect to this Plan, if the Company determines that it is
possible to establish such a Plan;
(b) if the Company, in its sole discretion, determines that it is not
possible to establish the Plan in (a) above, each Participant shall be paid
a lump sum benefit equal to the value of the vested portion of his or her
Deferred Benefit Account;
(c) pay a lump sum benefit equal to the value of the vested portion
of the Participant's Deferred Benefit Account to the extent that a federal
court has held that the interest of the Participant in the Plan is
includable in the gross income of the Participant for federal income tax
purposes prior to actual payment of Plan benefits. The value of any amount
remaining in the Participant's Deferred Benefit Account shall remain as an
obligation of the Company, to be paid to the Participant as provided in the
Plan;
(d) pay to a Participant a lump sum benefit equal to the vested
portion of a Participant's Deferred Benefit Account if, based on a legal
opinion satisfactory to the Company, there is a significant risk that such
Participant will be determined not to be part of a "select group of
management or highly compensated employees" for purposes of ERISA.
Any benefit payable under this Section shall be payable as soon as practicable
following the Company's determination that the Plan is ERISA Funded or Tax
Funded, but in no event later than ninety (90) days following receipt of notice
by the Committee that the Plan is ERISA Funded or Tax Funded, or at such other
date as may be determined by the Committee in its sole discretion.
A lump sum payment to be made in accordance with this Section shall be paid in
cash and shall be subject to the provisions of Section 5.9. As determined by the
Committee in its sole discretion, the termination benefit shall cause a
reduction in the number of units in a Participant's subaccounts equivalent to
the value of the lump sum amount paid.
IX Miscellaneous
-------------
9.1 Separation of Plan; No Implied Rights. The Plan shall not operate
-------------------------------------
to increase any benefit payable to or on behalf of a Participant (or his or her
Beneficiary) from any other Plan maintained by the Company. Neither the
establishment of the Plan nor any amendment thereof shall be construed as giving
any Participant, Beneficiary, or any other person any legal or equitable right
unless such right shall be specifically provided for in the Plan or conferred by
specific action of the Company in accordance with the terms and provisions of
the Plan. Except as expressly provided in this Plan, the Company shall not be
required or be liable to make any payment under this Plan.
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<PAGE>
9.2 No Right to Company Assets. Neither the Participant nor any other
--------------------------
person shall acquire by reason of the Plan any right in or title to any assets,
funds or property of the Company whatsoever, including, without limiting the
generality of the foregoing, any specific funds, assets or other property which
the Company, in its sole discretion, may set aside in anticipation of a
liability hereunder. Any benefits which become payable hereunder shall be paid
from the general assets of the Company. The Participant shall have only a
contractual right to the amounts, if any, payable hereunder, unsecured by any
asset of the Company or by a Trust pursuant to Section 9.9. Nothing contained in
the Plan constitutes a guarantee by the Company that the assets of the Company
shall be sufficient to pay any benefits to any person.
9.3 No Employment Rights. Nothing herein shall constitute a contract of
--------------------
employment or of continuing service or in any manner obligate the Company to
continue the services of the Participant, or obligate the Participant to
continue in the service of the Company, or as a limitation of the right of the
Company to discharge any of its associates, with or without cause. Nothing
herein shall be construed as fixing or regulating the Salary, Bonus, or other
remuneration payable to the Participant.
9.4 Offset. If, at the time payments or installments of payments are to
------
be made hereunder, the Participant or the Beneficiary or both are indebted or
obligated to the Company, then the payments remaining to be made to the
Participant or the Beneficiary or both may, at the discretion of the Company, be
reduced by the amount of such indebtedness or obligation, provided, however,
that an election by the Company not to reduce any such payment or payments shall
not constitute a waiver of its claim, or prohibit or otherwise impair the
Company's right to offset future payments for such indebtedness or obligation.
9.5 Protective Provisions. In order to facilitate the payment of benefits
---------------------
hereunder, each associate designated eligible shall cooperate with the Company
by furnishing any and all information requested by the Company, including taking
such physical examinations as the Company may deem necessary, and taking such
other actions as may be requested by the Company. If the associate refuses to
cooperate, he or she shall not become a Participant in the Plan and the Company
shall have no further obligation to him or her under the Plan. In such event,
the Participant or his or her Beneficiary shall receive a benefit equal to his
or her deferral, without Interest, paid in accordance with Section 5.9.
9.6 Non-assignability. Neither the Participant nor any other person shall
-----------------
have any voluntary or involuntary right to commute, sell, assign, pledge,
anticipate, mortgage or otherwise encumber, transfer, hypothecate, or convey in
advance of actual receipt the amounts, if any, payable hereunder, or any part
thereof, which are expressly declared to be unassignable and non-transferrable
except by will or in accordance with the laws of descent and distribution. No
part of the amounts payable shall be, prior to actual payment, subject to
seizure or sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by the Participant or any other person, or be
transferrable by operation of law in the event of the Participant's or any other
person's bankruptcy or insolvency.
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<PAGE>
9.7 Notice. Any notice required or permitted to be given under the Plan
------
shall be sufficient if in writing and hand delivered, or sent by registered or
certified mail to the last known address of the Participant if to the
Participant, or, if given to the Company, to the principal office of the
Company, directed to the attention of the Plan Committee. Such notice shall be
deemed given as of the date of delivery, or, if delivery is made by mail, as of
the date shown on the postmark or the receipt for registration or certification.
9.8 Governing Laws. The Plan shall be construed and administered according
--------------
to the laws of the State of Connecticut.
Deferred Compensation Plan Trust. The Company has established a Trust
--------------------------------
or Trusts with (an) independent trustee(s), and shall comply with the terms of
the Trust(s). The Company shall transfer to the trustee(s) an amount of cash,
marketable securities, or other property acceptable to the trustee(s) ("Trust
Property") equal in value to the amount necessary, calculated on an actuarial
basis in accordance with the terms of the Trust(s), to pay the Company's
obligations under the Plan (the "Funding Amount"), and may make additional
transfers to the trustee(s) as may be necessary in order to maintain the Funding
Amount. Trust Property so transferred shall be held, managed, and disbursed by
the Trustee(s) in accordance with the terms of the Trust(s). To the extent that
Trust Property shall be used to pay the Company's obligations under the Plan,
such payments shall discharge obligations of the Company; however, the Company
shall continue to be liable for amounts not paid by the Trust(s). In the event
of a Change of Control, the amount and timing of the payment of benefits shall
be as determined under any provisions of the Trust agreement relating thereto,
which shall replace the payment provisions of Article V herein. Trust Property
will nevertheless be subject to claims of the Company's creditors in the event
of bankruptcy or insolvency, and the Participant's rights under the Plan and
Trust(s) shall at all times be subject to the provisions of Section 9.2.
IN WITNESS WHEREOF, the Company has adopted the ADVO, Inc. Deferred Compensation
Plan as of the Plan Effective Date.
ADVO, Inc.
By: /s/ J. THOMAS VAN BERKEM
------------------------
J. Thomas Van Berkem
Its: Senior Vice President, Human Resources
--------------------------------------
Date: 11/28/94
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