<PAGE>
As filed with the Securities and Exchange Commission on December 29, 1999
Registration No. 333-_________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
SAUER INC.
(Exact name of Registrant as specified in its charter)
------------
Delaware 36-3482074
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2800 EAST 13TH STREET
AMES, IOWA 50010
(515) 239-6000
(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
------------
SAUER-SUNDSTRAND
EMPLOYEES' SAVINGS AND RETIREMENT PLAN
SAUER-SUNDSTRAND LASALLE FACTORY EMPLOYEE SAVINGS PLAN
(Full Title of the Plans)
------------
KENNETH D. MCCUSKEY
TREASURER AND SECRETARY
SAUER INC.
2800 EAST 13TH STREET
AMES, IOWA 50010
(515) 239-6364
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------
COPY TO:
JAMES W. KAPP, JR., ESQ.
SPENCER FANE BRITT & BROWNE LLP
1000 WALNUT STREET, SUITE 1400
KANSAS CITY, MISSOURI 64106
(816) 292-8141
------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED TO BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value per share, and
participation interests in
the Sauer-Sundstrand
Employees' Savings and 1,000,000(3) $9.875 $9,875,000.00 $2,607.00
Retirement Plan and the
Sauer-Sundstrand LaSalle
Factory Employee Savings
Plan.
=================================================================================================================================
</TABLE>
(1) The shares of Common Stock (the "Shares") of Sauer, Inc. (the
"Registrant") being registered consist of 930,000 Shares to be acquired
in open market purchases under the Sauer-Sundstrand Employees' Savings
and Retirement Plan (the "Sauer-Sundstrand Plan") and 70,000 Shares to
be acquired in open market purchases under the Sauer-Sundstrand LaSalle
Factory Employee Savings Plan (the "LaSalle Plan") (the
Sauer-Sundstrand Plan and the LaSalle Plan are referred to herein
collectively as the "Plans").
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) and (h) of the Securities Act of 1933, as
amended (the "Securities Act"). The price per share and aggregate
offering price are based on the average of the high and low prices per
share of the Shares as reported by the New York Stock Exchange on
December 22, 1999.
(3) In addition, pursuant to Rule 416(c) under the Securities Act, this
Registration Statement also covers an indeterminate amount of interests
to be offered or sold pursuant to the Plans described herein.
<PAGE>
PART II
INFORMATION REQUIRED IN THE
REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
Sauer Inc. (the "Registrant") hereby incorporates by reference into
this Registration Statement the following documents filed by it with the
Commission:
(a) The Registrant's Annual Report on form 10-K for the year ended
December 31, 1998;
(b) The Registrant's Quarterly Report on form 10-Q for the fiscal
quarter ended April 4, 1999;
(c) The Registrant's Quarterly Report on form 10-Q for the fiscal
quarter ended July 4, 1999;
(d) The Registrant's Quarterly Report on form 10-Q for the fiscal
quarter ended October 3, 1999; and
(e) The description of the Registrant's Common Stock, par value
$.01 per share (the "Common Stock") contained in the
Registrant's Registration Statement on Form 8-A filed with the
Commission on May 7, 1998.
In addition, all documents and reports filed by the Registrant or
the Plans subsequent to the date hereof pursuant to Sections 13(a), 13(c),
14, and 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), prior to the filing of a post-effective amendment which
indicates that all securities offered have been sold or which deregisters all
securities remaining unsold, shall be deemed to be incorporated by reference
in this Registration Statement and to be part hereof from the date of filing
of such documents or reports.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein 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 of this
Registration Statement.
<PAGE>
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the Delaware General Corporation Law (the
"DGCL") permits a provision in the certificate of incorporation of each
corporation organized thereunder, eliminating or limiting, with certain
exceptions, the personal liability of a director to the corporation or its
stockholders for monetary damages for certain breaches of fiduciary duty as a
director. The Restated Certificate of Incorporation of the Company eliminates
the personal liability of directors to the fullest extent permitted by
Delaware law.
Section 145 of the DGCL ("Section 145"), in summary, empowers a
Delaware corporation, within certain limitations, to indemnify its officers,
directors, employees and agents against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, actually and reasonably
incurred by them in connection with any suit or proceeding other than by or
on behalf of the corporation, if they acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to a criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful.
With respect to actions by or on behalf of the corporation, Section
145 permits a corporation to indemnify its officers, directors, employees and
agents against expenses (including attorneys' fees) actually and reasonably
incurred in connection with the defense or settlement of such action or suit,
provided such person meets the standard of conduct described in the preceding
paragraph, except that no indemnification is permitted in respect of any
claim where such person has been found liable to the corporation, unless the
Court of Chancery or the court in which such action or suit was brought
approves such indemnification and determines that such person is fairly and
reasonably entitled to be indemnified.
Article Ninth of the Restated Certificate of Incorporation of the
Company provides for the indemnification of officers and directors and
certain other parties of the Company to the fullest extent permitted by law.
In addition, the Company has entered into Indemnification Agreements with its
directors and certain officers pursuant to which the Company generally is
obligated to indemnify its directors and officers to the maximum extent
permitted by law. The Company also maintains directors and officers liability
insurance.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
<PAGE>
ITEM 8. EXHIBITS.
Reference is made to the Exhibit Index filed herewith.
The Registrant has submitted the Plans and undertakes to have all
amendments to the Plans submitted to the Internal Revenue Service (the "IRS")
in a timely manner and to make all changes required by the IRS in order to
maintain the qualification of the Plans under Section 401 of the Internal
Revenue Code of 1986, as amended.
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 Securities Act of
1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of
the Registration Statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the Registration
Statement. Notwithstanding the foregoing,
any increase or decrease in volume of
securities offered (if the total dollar
value of securities offered would not exceed
that which was registered) and any deviation
from the low or high end of the estimated
maximum offering range may be reflected in
the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and
price represent no more than a 20% change
in the maximum aggregate offering price set
forth in the "Calculation of Registration
Fee" table in the effective Registration
Statement; and
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in the Registration
Statement or any material change to such
information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the Registration Statement
is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the
Registration Statement.
<PAGE>
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by
reference in the Registration Statement shall be deemed to be
a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors,
officers, and controlling persons of the Registrant pursuant
to the foregoing provisions, or otherwise, the Registrant has
been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act
of 1933, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-8 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Ames, State of Iowa,
on the 23rd day of December, 1999.
SAUER INC.
By: /s/ Kenneth D. McCuskey
-------------------------------
Name: Kenneth D. McCuskey
Title: Treasurer and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby severally constitutes and appoints Tonio P. Barlage,
David L. Pfeifle, and Kenneth D. McCuskey, and each of them, as his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (until revoked in writing), to sign any and all amendments,
including post-effective amendments and supplements, to this Registration
Statement on Form S-8, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or his or their substitute may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/s/ Klaus H. Murmann Chairman and Chief 12/23/1999
- ---------------------------- Executive Officer and
Klaus H. Murmann Director (Principal
Executive Officer)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Signatures Title Date
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
/s/ Tonio P. Barlage President and Chief 12/23/1999
- --------------------------- Operating Officer and
Tonio P. Barlage Director
/s/ David L. Pfeifle Executive Vice President 12/23/1999
- --------------------------- and Director
David L. Pfeifle
/s/ Nicola Keim Director 12/23/1999
- ---------------------------
Nicola Keim
/s/ Johannes F. Kirchhoff Director 12/23/1999
- ---------------------------
Johannes F. Kirchhoff
/s/ Sven Murmann Director 12/23/1999
- ---------------------------
Sven Murmann
/s/ Augustin A. Ramirez Director 12/23/1999
- ---------------------------
Agustin A. Ramirez
/s/ Richard M. Schilling Director 12/23/1999
- ---------------------------
Richard M. Schilling
/s/ Kenneth D. McCuskey Treasurer and Secretary 12/23/1999
- --------------------------- (Principal Accounting
Kenneth D. McCuskey Officer)
</TABLE>
The Plans. Pursuant to the requirements of the Securities Act of
1933, Institutional Trust Company, the trustee of the Sauer-Sundstrand
Employees' Savings and Retirement Plan and the Sauer-Sundstrand LaSalle
Factory Employee Savings Plan, has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Atlanta, State of Georgia, on December 27, 1999.
INSTITUTIONAL TRUST COMPANY
By: /s/ R. Eric Starr
--------------------------
R. Eric Starr
Trust Officer
<PAGE>
SAUER INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------- ---------------------------------------------------------------------
<S> <C>
4.1 Restated Certificate of Incorporation of the Registrant (incorporated
herein by reference to Exhibit 3.1(c) to Amendment No. 1 to the
Registrant's Registration Statement on Form S-1 (File No. 333-48299)
filed with the Commission on April 23, 1998).
4.2 Restated By-laws of the Registrant (incorporated herein by reference
to Exhibit 3.2 to the Registrant's Registration Statement on Form S-1
(File No. 333-48299) filed with the Commission on March 20, 1998).
4.3 Form of Certificate of the Common Stock of the Registrant
(incorporated herein by reference to Exhibit 4.1 to Amendment No. 1
to the Registrant's Registration Statement on Form S-1 (File No.
333-48299) filed with the Commission on April 23, 1998).
4.4 Sauer-Sundstrand LaSalle Factory Employee Savings Plan, amended and
restated as of January 1, 1998, and further amended by that certain
First Amendment dated December 3, 1999, and further amended by that
certain Second Amendment dated December 6, 1999.
4.5 Sauer-Sundstrand Employees' Savings and Retirement Plan, amended and
restated as of December 3, 1999.
4.6 Trust Agreement dated August 31, 1998, by and between
Sauer-Sundstrand Company and Institutional Trust Company, relating to
the Sauer-Sundstrand LaSalle Factory Employee Savings Plan.
4.7 Trust Agreement dated August 31, 1998, by and between
Sauer-Sundstrand Company and Institutional Trust Company, relating to
the Sauer-Sundstrand Employees' Savings and Retirement Plan.
23.1 Consent of Arthur Andersen LLP.
24.1 Power of Attorney (included in Signature Page).
</TABLE>
<PAGE>
Exhibit 4.4
SAUER-SUNDSTRAND
LASALLE FACTORY
EMPLOYEE SAVINGS PLAN
(AMENDED AND RESTATED AS OF JANUARY 1, 1998)
<PAGE>
SAUER-SUNDSTRAND
LASALLE FACTORY
EMPLOYEE SAVINGS PLAN
(AMENDED AND RESTATED AS OF JANUARY 1, 1998)
WHEREAS, a subsidiary of Sundstrand Corporation, a Delaware
corporation, and a subsidiary of Sauer Getriebe AG, an Aktiengesellschaft
organized under the laws of the Federal Republic of Germany, formed,
effective January 1, 1987, and in accordance with applicable Delaware law, a
partnership known as Sundstrand-Sauer Company, which company thereupon formed
a Delaware general partnership known as Sundstrand-Sauer; and
WHEREAS, in order to provide a certain benefit to its employees,
Sundstrand-Sauer established the LaSalle Factory Employee Savings Plan effective
as of March 1, 1988, which is a profit-sharing plan that includes a qualified
cash or deferred arrangement under which eligible employees may elect to have
the Company make contributions to the trust maintained in connection with the
plan on their behalf (which contributions will be nonforfeitable) or to pay such
amounts directly to them in cash; and
WHEREAS, said employees are represented by a collective bargaining agent
which is the Union identified in Article I of the Plan; and
WHEREAS, Sauer-Sundstrand Company, a Delaware corporation and Plan
Administrator herein, is the successor to Sundstrand-Sauer; and
WHEREAS, Sauer-Sundstrand Company amended and restated the
Sundstrand-Sauer LaSalle Factory Employee Savings Plan in the
Sauer-Sundstrand LaSalle Factory Employee Savings Plan (the "Plan"),
effective October 1, 1995; and
WHEREAS, Sauer-Sundstrand Company now desires to again amend and restate
the Plan; and
<PAGE>
WHEREAS, Sauer-Sundstrand Company intends that the Plan shall continue to
comply with the Employee Retirement Income Security Act of 1974, as amended, the
Internal Revenue Code of 1986, as amended (specifically including Section 401(k)
thereof), and all other applicable governmental laws and regulations;
NOW, THEREFORE, in compliance with the foregoing and effective as of
January 1, 1998 (and the other dates specified in Section 16.2 of the Plan),
Sauer-Sundstrand Company hereby amends and restates the Plan to provide as
follows:
ARTICLE I
DEFINITIONS
The following words and phrases as used herein shall have the following
meanings, unless a different meaning is plainly required by the context:
1.1 An "ACCOUNT" shall mean any of the following accounts established
on behalf of a Participant or Employee, all as described in Section 8.1:
(a) Employer Contribution Account;
(b) Matching Contribution Account;
(c) Participant Contribution Account; and
(d) Rollover Contribution Account.
1.2 The "ACT" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time. Reference to a section of the Act shall
include such section and any comparable section or sections of any future
legislation that amends, supplements or supersedes such section.
2
<PAGE>
1.3 An "ACTIVE PARTICIPANT" shall mean any Participant who is actively
employed by the Employer, and any other Participant (i) who is a "party in
interest" with respect to the Plan within the meaning of the Act, and (ii) whose
accounts have not yet been distributed. In addition, if it is determined by the
Plan Administrator that federal law (including the Code) or regulatory
interpretations thereof require that loans be available, under Article IX of the
Plan, to other beneficiaries or former employees whose Accounts have not yet
been distributed, the term Active Participant shall also include any such
individual.
1.4 An "AUTHORIZED LEAVE OF ABSENCE" with respect to an Employee shall
mean a leave of absence which is authorized by his Employer in accordance with
any applicable contractual provision for a specific purpose and a specified
period of time and during which such Employee is not on an Employer's payroll
and is not otherwise entitled, directly or indirectly, to payment from the
Employer with respect to such leave of absence. The authorization of leaves of
absence shall be determined by the Employer on the basis of nondiscriminatory
policies which shall be uniformly and consistently applied. If an Employee does
not return to employment as soon as reasonably practicable upon expiration of
his Authorized Leave of Absence, his employment with the Employer will be deemed
terminated.
1.5 The "BENEFICIARY" of a Participant or former Participant shall
mean the person or persons who, under the provisions of Article IV, shall be
entitled to receive a distribution hereunder in the event such Participant or
former Participant dies before his interest shall have been distributed to him
in full.
1.6 BREAK IN SERVICE.
(a) A "BREAK IN SERVICE" shall mean the termination of
employment of an Employee, followed by the expiration of an
Employment Year in which he
3
<PAGE>
accumulates fewer than 501 Hours of Service. A Break in
Service shall not be deemed to have occurred if:
(i) The employment of a terminated Employee is resumed
prior to the expiration of an Employment Year in
which he accumulates fewer than 501 Hours of
Service;
(ii) The Employee is absent with the prior consent of the
Employer for a period not exceeding twelve months
(which consent shall be granted under uniform rules
applied to all Employees on a nondiscriminatory
basis) and he returns to active employment with the
Employer upon the expiration of the period of
authorized absence; or
(iii) The Employee leaves the Employer for purposes of
qualified military service (as defined in Code
Section 414(u)(5)) for a period during which his
reemployment rights are guaranteed by law and he
returns or offers to return to work for the Employer
prior to the expiration of his reemployment rights.
(b) An Employee who is absent from work with the Employer
because of:
(i) The Employee's pregnancy,
(ii) The birth of the Employee's child,
(iii) The placement of a child with the Employee in
connection with the Employee's adoption of the
child, or
(iv) The Employee's caring for such child immediately
following such birth or placement,
shall receive credit, solely for purposes of subsection
1.6(a), for the Hours of Service provided in subsection
1.6(c); provided that the total number of hours credited as
Hours of Service under this subsection shall not exceed
501.
(c) If an Employee is absent from work for any of the reasons
set forth in subsection 1.6(b), the Hours of Service that
the Employee will be credited with under subsection 1.6(b)
are:
(i) The Hours of Service that otherwise would normally
have been credited to the Employee but for such
absence, or
4
<PAGE>
(ii) Eight Hours of Service per day of such absence, if
the Employer is unable to determine the Hours of
Service described in paragraph (i) of subsection
1.6(c).
(d) An Employee who is absent from work for any of the reasons
set forth in subsection 1.6(b) shall be credited with Hours
of Service under subsection 1.6(b):
(i) Only in the Employment Year in which the absence
begins, if the Employee would be prevented from
incurring a Break in Service in that Employment Year
solely because the period of absence is treated as
credited Hours of Service, as provided in
subsections 1.6(b) and 1.6(c), or
(ii) In any other case, in the immediately following
Employment Year.
(e) No credit for Hours of Service will be given pursuant to
subsections 1.6(b), 1.6(c), and 1.6(d) unless the Employee
furnishes to the Employer such timely information as the
Employer may reasonably require to establish:
(i) That the absence from work was for one of the
reasons specified in subsection 1.6(b), and
(ii) The number of days for which there was such an
absence.
(f) No credit for Hours of Service will be given pursuant to
subsections 1.6(b), 1.6(c), and 1.6(d) for any purpose of
the Plan other than the determination of whether an
Employee has incurred a Break in Service pursuant to
subsection 1.6(a).
1.7 The "CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time. Reference to a section of the Code shall include
such section and any comparable section or sections of any future legislation
that amends, supplements or supersedes such section.
1.8 COMPENSATION.
(a) The "COMPENSATION" of a Participant for any Plan Year shall
mean the dollar value of specific payments made by an
Employer to an Employee with respect to such Plan Year for
services rendered (including any amounts that are excluded
from the Participant's taxable income pursuant to Code
Sections 125 and 402(g)(3)), and is limited to the
following: (i) base wages paid; (ii) overtime pay; (iii)
payments for time not worked
5
<PAGE>
pursuant to Employer policies related to the following:
vacations, holidays, sick leave, bereavement, military
reserve training, jury duty; and (iv) any lump-sum payments
made in place of an increase in the base wage rate pursuant
to a collective bargaining agreement.
(b) Compensation for any period shall not include the
following: (i) pay under any incentive pay plan; (ii) shift
differential pay; (iii) severance payments; (iv) disability
payments; (v) payments under any plan or arrangement which
is not generally open to participation by all Employees;
(vi) payments under any workers' compensation program or
under any unemployment compensation program; (vii) payments
made under any employee benefit program or arrangement not
otherwise specifically included as compensation; (viii)
foreign-earned income; and (ix) gain sharing payments.
(c) For Plan Years beginning on or after January 1, 1994, only
the first $160,000 (or such other amount, as may be
prescribed by the Secretary of the Treasury or his
delegate) of an Employee's Compensation shall be taken into
account for any purpose under the Plan. In determining the
Compensation of an Employee for purposes of this
limitation, the rules of Section 414(q)(6) of the Code
shall apply.
1.9 The "COMPANY" shall mean Sauer-Sundstrand Company, a Delaware
corporation, its successors, and the surviving entity resulting from any merger
or consolidation of Sauer-Sundstrand Company with any other entity.
1.10 A "DISABILITY" shall mean a physical or mental condition which, in
the judgment of the Company, will prevent the Participant from performing any
work assigned by his Employer. A determination that a Disability exists and the
date thereof shall be made by the Company in consultation with a physician,
psychiatrist or dentist selected by the Company. The determination by the
Company of the existence of a Disability shall be made with reference to the
nature of the injury without regard to the period the Participant is absent from
work.
1.10A A Participant's "EARLY RETIREMENT DATE" shall mean the last day of
the month in which the Participant has both attained age 55 and completed five
Employment Years.
6
<PAGE>
1.11 The "EFFECTIVE DATE" of the Plan shall mean March 1, 1988. Any
amendment or restatement of the Plan shall be effective as of the date appearing
on such amendment or restatement.
1.12 An "ELIGIBLE EMPLOYEE" shall mean any Employee who is eligible to
participate in the Plan in accordance with the provisions of Article II.
1.13 An "EMPLOYEE" shall mean any person who is regularly employed by
the Employer in an hourly-paid position, whose customary employment is for 1,000
Hours of Service or more per year, and who is employed at the Employer's factory
located in LaSalle, Illinois, which has a duty to engage in collective
bargaining with the Union; provided, however, that the term shall not include
any person who renders service to the Employer solely as an independent
contractor or Leased Employee. A Leased Employee shall mean an individual who
performs services for the Employer if: (1) the services are performed under an
agreement between the Employer and any other person who was otherwise treated as
the individual's employer; (2) the individual performs services for the Employer
on a substantially full-time basis for a year; and (3) the individual's services
are performed under the primary direction or control of the Employer.
The foregoing notwithstanding, any person who is customarily employed by
the Employer for fewer than 1,000 Hours of Service per year shall become an
Employee as of the first day of any Employment Year in which he completes at
least 1,000 Hours of Service.
1.14 An "EMPLOYER" shall mean the Company and any Related Employer that
adopts the Plan in accordance with Article XIV.
1.15 An "EMPLOYER CONTRIBUTION" shall mean an amount contributed by the
Employer on behalf of a Participant, determined under subsection 5.1(a) and
without regard to any amount by which that Participant elects to reduce his
Compensation under Section 5.2.
7
<PAGE>
1.16 An "EMPLOYMENT YEAR" shall mean a twelve-consecutive-month period
commencing with an Employee's initial date of hire (or last date of rehire if he
has incurred a Break in Service) on which such Employee first performs service
for the Employer or with any anniversary thereof. If a Leased Employee is
subsequently employed as an "Employee" by an Employer, the period during which a
Leased Employee performs services for an Employer as a Leased Employee shall be
taken into account for purposes of Sections 2.1 and 2.2.
1.17 An "ENROLLMENT DATE" shall mean the first day of the first payroll
period after an Employee becomes an Eligible Employee if the Eligible Employee
elects, pursuant to Section 3.2, to participate in Participant Contributions on
that day. "Enrollment Date" shall also mean the first day of the first payroll
period commencing on or after April 1 and October 1 of each year.
1.18 A "FUND" shall mean any of the funds in which Plan assets may be
invested, as described in Section 8.2. Such Funds shall include:
(a) The Norwest Stable Return Fund;
(b) The Vanguard/Wellington Fund;
(c) The Fidelity Equity-Income Fund;
(d) The Fidelity Growth Company Fund;
(e) The Vanguard International Growth Portfolio; and
(f) The Transamerica Life Insurance Fund.
1.19 A "HIGHLY COMPENSATED EMPLOYEE" shall mean any Employee described
in Code Section 414(q) and the regulations promulgated thereunder.
1.20 The "HIGHLY COMPENSATED EMPLOYEE GROUP" shall mean all Eligible
Employees who are Highly Compensated Employees.
1.21 An "HOUR OF SERVICE" shall mean:
8
<PAGE>
(a) Each hour for which an Employee is paid or entitled to
payment for the performance of duties for his Employer; and
(b) Each hour for which an Employee is directly or indirectly
paid by his Employer, or entitled to payment from the
Employer, during which no duties are performed by reason of
vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of
absence (but not in excess of 501 hours in any continuous
period during which no duties are performed).
Each Hour of Service for which back pay, irrespective of mitigation of damages,
is either awarded or agreed to by the Employer shall be included under either
(a) or (b), as may be appropriate. Hours of Service shall be credited:
(c) In the case of Hours of Service referred to in subsection
1.21(a), for the computation period in which the duties are
performed;
(d) In the case of Hours of Service referred to in subsection
1.21(b), for the computation period or periods in which the
period during which no duties are performed occurs; and
(e) In the case of Hours of Service for which back pay is
awarded or agreed to by the Employer, for the computation
period or periods to which the award or agreement pertains,
rather than to the computation period in which the award,
agreement or payment is made.
If an Employee is paid for reasons other than the performance of duties,
pursuant to this subsection 1.21:
(f) In the case of a payment made or due which is calculated on
the basis of units of time, an Employee shall be credited
with the number of regularly scheduled working hours
included in the units of time on the basis of which the
payment is calculated; and
(g) An Employee without a regular work schedule shall be
credited with eight (8) Hours of Service per day (to a
maximum of forty (40) Hours of Service per week) for each
day that the Employee is so paid.
Hours of Service shall be calculated in accordance with Department of Labor
Regulations Section 2530.200b-2 or any future legislation or regulation that
amends, supplements or supersedes said
9
<PAGE>
Section. Notwithstanding any provision in this Plan to the contrary, benefits
and Hours of Service with respect to qualified military service will be provided
in accordance with Code Section 414(u).
1.22 A "MATCHING CONTRIBUTION" shall mean an amount contributed by the
Employer on behalf of a Participant, determined under subsection 5.1(b) and
based on the amount by which that Participant elects to reduce his Compensation
under Section 5.2.
1.23 A "NONHIGHLY COMPENSATED EMPLOYEE" shall mean any Employee who is
not a Highly Compensated Employee.
1.24 The "NONHIGHLY COMPENSATED EMPLOYEE GROUP" shall mean all Eligible
Employees who are Nonhighly Compensated Employees.
1.25 A Participant's "NORMAL RETIREMENT DATE" shall mean the last day
of the month in which the Participant attains age 65.
1.26 A "PARTICIPANT" shall mean any Eligible Employee who becomes a
Participant in the Plan in accordance with the provisions of Article III;
moreover, such term shall also include a Participant who ceases to be an
Eligible Employee but who continues to participate in the Plan in accordance
with the provisions of Section 2.3. Unless otherwise stated, the Plan's
provisions for Participants shall apply both to Employer Contributions and
Participant Contributions.
1.27 A "PARTICIPANT CONTRIBUTION" shall mean the amount of money by
which a Participant has elected to reduce his compensation in accordance with
the provisions of Section 5.2.
1.28 The "PLAN" shall mean this Sauer-Sundstrand LaSalle Factory
Employee Savings Plan, with all amendments and supplements hereafter made. For
purposes of Code Section 401(a)(27)(B), the Plan is a profit sharing plan.
10
<PAGE>
1.29 The "PLAN ADMINISTRATOR," which is the administrator for purposes
of the Act and the plan administrator for purposes of the Code, shall mean the
Company.
1.30 A "PLAN YEAR" shall mean the fiscal year of the Company, which
ends on December 31 of each year; provided, however, that the term shall not
include any fiscal year that ended prior to the Effective Date.
1.31 A "RELATED EMPLOYER" shall mean any employer that is a member of:
(a) A controlled group of corporations (as defined in Code
Section 414(b)) of which the Company is a member;
(b) Any trade or business (whether or not incorporated) which
is under common control (as defined in Code Section 414(c))
with the Company;
(c) An affiliated service group (as defined in Code Section
414(m)) which includes the Company; or
(d) Any other entity required to be aggregated with the Company
pursuant to regulations under Code Section 414(o).
1.32 A "RELATED PLAN" shall mean any other defined contribution plan
(as defined in Code Section 415(k)) maintained by the Company or by any Related
Employer.
1.33 A "REVALUATION DATE" shall mean each business day of each calendar
year.
1.34 SERVICE.
(a) "Service" shall mean a period of time, measured in whole
and partial Employment Years, commencing with the
Employment Year in which an Employee is initially employed
and ending with the Employment Year in which a Break in
Service occurs. Each period of qualified military service
is deemed, upon reemployment, to constitute service with
the Employer for purposes of determining the
nonforfeitability of the Employee's benefits under the
Plan.
(b) Without regard to subsection 1.34(a), a Participant's years
of Service after he incurs five consecutive one-year Breaks
in Service shall be disregarded for purposes of determining
whether he had a nonforfeitable interest in his Employer
and Matching Contribution Accounts as of the Revaluation
Date
11
<PAGE>
coincident with the date he incurred the first of such
five consecutive one-year Breaks in Service.
1.35 The "SETTLEMENT DATE" shall mean the date upon which a Participant
ceases to be a Participant in the Plan, as provided in Section 12.1.
1.36 The "TRUST AGREEMENT" shall mean the Sauer-Sundstrand LaSalle
Factory Employee Savings Plan Trust Agreement, including any amendments
hereafter made.
1.37 The "TRUST FUND" shall mean the trust fund established under the
Trust Agreement.
1.38 The "TRUSTEE" shall mean Investors Fiduciary Trust Company, or the
institution, person or persons so designated by the Company and any successor
trustee, and any co-trustee which at the time shall be designated, qualified and
acting under the Trust Agreement.
1.39 The "UNION" shall mean the International Union, United Automobile,
Aerospace and Agricultural Implement Workers of America, and its Local Union No.
285.
ARTICLE II
EMPLOYEE ELIGIBILITY
2.1 ELIGIBILITY. Any Employee shall become an Eligible Employee
immediately upon the commencement of his employment with the Employer, unless
such Employee falls within one of the following categories, in which case he
shall become an Eligible Employee on the date stated in the applicable
paragraph:
(a) An Employee on October 27, 1998 who had become an "Eligible
Employee" under the terms of the Plan in effect as of
September 30, 1998, is an Eligible Employee of the Plan.
(b) An Employee who is customarily employed by the Employer on
a part-time, temporary or irregular basis for fewer than
1,000 Hours of Service
12
<PAGE>
per year shall become an Eligible Employee on the date on
which he completes at least 1,000 Hours of Service in an
Employment Year.
(c) An Employee hired on or after October 28, 1997 shall become
an Eligible Employee of the Plan as of the later of (i) the
date of hire or (ii) January 1, 1998 for purposes of this
restatement of the Plan.
2.2 REINSTATEMENT OF AN ELIGIBLE EMPLOYEE AFTER TERMINATION.
Subject to the provisions of Sections 3.4 and 3.5, if the active employment
of an Eligible Employee is terminated and such Employee thereafter is
reinstated by an Employer, such Employee shall again be an Eligible Employee
on the date of reinstatement, provided, however, that any prior years of
Service upon re-employment shall be taken into account, unless the Eligible
Employee incurs five consecutive one-year Breaks in Service. If the active
employment of an Employee who is not an Eligible Employee is terminated for
any reason and such Employee is thereafter reemployed by an Employer, he
shall be treated as a new Employee for all purposes of the Plan and shall
become an Eligible Employee in accordance with the provisions of Section 2.1.
2.3 CHANGES IN EMPLOYMENT STATUS. If an Eligible Employee ceases to
be an Employee, but continues in the employment of (a) an Employer in some other
capacity or (b) a Related Employer, he shall nevertheless continue as an
Eligible Employee and as a Participant until his status as a Participant is
otherwise terminated in accordance with the provisions of the Plan; provided,
however, that such Participant shall not be permitted to make Participant
Contributions or have Employer or Matching Contributions made on the
Participant's behalf at any time during which he is employed in any capacity
other than as an Employee.
13
<PAGE>
ARTICLE III
PARTICIPATION
3.1 PARTICIPATION IN EMPLOYER AND MATCHING CONTRIBUTIONS. Eligible
Employees hired on or after October 28, 1997, shall become Participants in
Employer and Matching Contributions under Section 5.1, as of the later to occur
of (i) their date of hire or (ii) January 1,1998. An Eligible Employee hired
before October 28, 1997, shall become a Participant in Employer and Matching
Contributions under Section 5.1, as of the date he waives his right to accrue
additional benefits under the Factory Pension Plan of Sauer-Sundstrand (LaSalle)
and International Union, United Automobile, Aerospace and Agricultural Implement
Workers of America, and its Local Union No. 285, and instead elects to begin
sharing in Employer and Matching Contributions under this Plan.
3.2 PARTICIPATION IN PARTICIPANT CONTRIBUTIONS. Any Eligible Employee
may become a Participant in Participant Contributions under Section 5.2 as of
the first Enrollment Date following the date on which he meets the eligibility
requirements set forth in Article II, or as of any subsequent April 1 or October
1 Enrollment Date. Any such Participant who wishes to have the Employer make
Participant Contributions to the Plan on his behalf must first file with the
Employer a written election, on the form prescribed by the Company, containing:
(a) His authorization for the Employer to make Participant
Contributions on his behalf to the Plan, in accordance with
the provisions of Section 5.2; and
(b) His election as to the investment of his Participant
Contributions, in accordance with the provisions of Article
VII.
By filing an election form to become a Participant, an Eligible Employee accepts
all of the terms and conditions of the Plan and shall be bound by all provisions
of the Plan and the Trust Agreement.
14
<PAGE>
3.3 NOTIFICATION OF ENROLLMENT DATE. On or before the thirtieth
(30th) day preceding each Enrollment Date, the Employer shall cause notice of
such Enrollment Date to be given to the Employees. For purposes of providing
the notice required under this Section 3.3, the Employer shall give such notice
in a manner determined to be appropriate, including but not limited to Employee
bulletin board posting.
3.4 AUTHORIZED LEAVES OF ABSENCE AND LAYOFF OF ONE YEAR OR LESS. A
Participant who, for a period of one year or less, is on an Authorized Leave of
Absence, or on layoff, shall continue as a Participant during such Authorized
Leave of Absence or layoff, notwithstanding the provisions of Section 12.1;
provided, however, that no Participant Contributions shall be made by such
Participant during such Authorized Leave of Absence or layoff; and provided
further, that his election to become a Participant under Section 3.2 shall be
deemed suspended with respect to the authorization and election required,
respectively, by subsections 3.2(a) and (b). Upon his return to active
employment as an Employee, the suspension of his election to become a
Participant shall terminate, and his Participant Contributions shall be
AUTOMATICALLY resumed in accordance with the terms of such election.
3.5 AUTHORIZED LEAVES OF ABSENCE IN EXCESS OF ONE YEAR. A Participant
who, for a period in excess of one year, is on an Authorized Leave of Absence
shall continue as a Participant during such Authorized Leave of Absence,
notwithstanding the provisions of Section 12.1; provided, however, that no
Participant Contributions shall be made by such Participant during such leave;
and provided, further, that his election to become a Participant under Section
3.2 shall be deemed rescinded with respect to the payroll deduction
authorization and investment election required, respectively, by subsections
3.2(a) and (b). Upon his return to active employment as
15
<PAGE>
an Employee, such Participant may elect to resume making contributions by
again filing with the Company the written election described in Section 3.2.
3.6 REEMPLOYMENT FOLLOWING TERMINATION. If (a) the active employment
of a Participant is terminated for any reason, (b) the Participant ceases to be
a Participant as provided in Section 12.1, and (c) such former Participant is
thereafter reemployed by the Employer, he shall, upon return to active
employment, be treated as an Eligible Employee for all purposes of the Plan.
Such former Participant may elect to become a Participant on any subsequent
Enrollment Date by again filing with the Employer the written election described
in Section 3.2.
3.7 REEMPLOYMENT FOLLOWING RETURN FROM QUALIFIED MILITARY SERVICE. A
Participant returning to Employment from qualified military service (as
described in subsection 1.34(a) shall be permitted to make up any Participant
contributions during the period, beginning with the date of reemployment and
continuing for a period of five years, or, if less, three times the period of
qualified military service. Participant contributions under this Section 3.7
shall not exceed the maximum permitted participant contribution limit (under
Code Section 402(g)) that would have been permitted for the year to which the
contribution relates, as if the Participant had continued to be employed by the
Employer. The Company is required to make any Employer Contributions to which
such Participant would have been entitled, but for the period of qualified
military service.
16
<PAGE>
ARTICLE IV
BENEFICIARIES
4.1 DESIGNATION OF BENEFICIARY.
(a) Each Participant or former Participant may designate a
person or persons or an entity as Beneficiary to whom or to
which a distribution shall be made hereunder in the event
such Participant or former Participant dies before his
interest shall have been distributed to him in full.
Successive designations may be made, and the last
designation received by the Plan Administrator prior to the
death of the Participant or former Participant shall be
effective and shall revoke all prior designations. Any
such designation or successive designation shall be made in
writing on the form prescribed by the Plan Administrator.
If a designated Beneficiary shall die before the
Participant or former Participant, such Beneficiary's
interest shall terminate, and, unless otherwise provided in
the Participant's or former Participant's designation if
the designation included more than one Beneficiary, such
interest shall be paid in equal shares to those
Beneficiaries, if any, who survive the Participant or
former Participant. A Participant or former Participant
shall have the right to revoke the designation of any
Beneficiary without the consent of the Beneficiary. The
number of such revocations shall not be limited.
(b) The provisions of subsection 4.1(a) and any designation of
a Beneficiary thereunder notwithstanding, the Beneficiary
of each Participant who is married on the date of his death
shall be his spouse, unless, with respect to a designation
of Beneficiary other than his spouse, such spouse has
consented to such designation by the Participant, prior to
the Participant's death, or the Participant establishes to
the satisfaction of the Plan Administrator that such
consent may not be obtained because there is no spouse, the
spouse cannot be located, or because of such other
circumstances as the Secretary of the Treasury may by
regulations prescribe. Any such consent shall be in
writing, shall acknowledge the effect of such consent, and
shall be witnessed by a representative of the Plan or a
notary public. Moreover, the consent shall be effective
only if the Participant's written designation names a
specific alternate Beneficiary, including any class of
Beneficiaries, or any contingent Beneficiary, which may not
be changed without spousal consent. Any consent by a
spouse, or establishment that the consent of a spouse may
not be obtained under this subsection 4.1(b), shall be
effective only with respect to such spouse.
(c) Any amounts under the Plan arising from the payment of
benefits under a life insurance contract or contracts as
the result of the death of a
17
<PAGE>
Participant, a Participant's spouse or a Participant's
child(ren) shall be paid as provided in Section 8A.6.
4.2 BENEFICIARY IN THE ABSENCE OF DESIGNATION. If a Participant shall
fail to designate a Beneficiary, or if such designation shall for any reason be
illegal or ineffective, or if no designated Beneficiary shall survive the
Participant, the Participant's interest in the Plan shall be distributed:
(a) To his surviving spouse;
(b) If there is no surviving spouse, to his descendants
(including legally adopted children or their descendants),
PER STIRPES;
(c) If there is neither a surviving spouse nor surviving
descendants, to the duly appointed and qualified executor
or other personal representative of the Participant, to be
distributed in accordance with the Participant's will or
applicable intestacy law; or
(d) In the event that there shall be no such representative
duly appointed and qualified within six (6) months after
the date of death of such deceased Participant, then to
such persons as, at the date of his death, would be
entitled to share in the distribution of such deceased
Participant's personal estate under the provisions of the
applicable statute then in force governing the descent of
intestate property, in the proportions specified in such
statute.
4.3 IDENTIFICATION OF DISTRIBUTEES. The Plan Administrator may
determine the identity of the distributees and in so doing may act and rely upon
any information it may deem reliable upon reasonable inquiry, and upon any
affidavit, certificate, or other paper believed by it to be genuine, and upon
any evidence believed by it sufficient.
18
<PAGE>
ARTICLE V
CONTRIBUTIONS
5.1 EMPLOYER AND MATCHING CONTRIBUTIONS. With respect to each
Participant eligible under Section 3.1 to participate in Employer and Matching
Contributions, the Employer shall contribute to the Trust Fund for each payroll
period during the Plan Year:
(a) An amount equal to two percent (2%) of the Compensation
earned by such Participant (while a Participant) during
such period (herein referred to as an "Employer
Contribution"); plus
(b) An amount equal to fifty percent (50%) of the Participant
Contribution of each such Participant under Section 5.2,
provided that in no event will the amount contributed with
respect to any such Participant under this subsection
5.1(b) (herein referred to as a "Matching Contribution")
exceed two percent (2%) of such Participant's Compensation
for such period. The Matching Contribution shall be made
at the rate of 50% for each one percent of the Participant
Contribution.
Employer and Matching Contributions shall be subject to the limitations
described in Article VI.
5.2 PARTICIPANT CONTRIBUTIONS. Each Participant may elect to have his
Compensation reduced in the manner described in this Section 5.2, in which event
the Employer shall contribute the amount of that reduction to the Trust Fund as
a Participant Contribution no later than the 15th business day of the month
following the month in which such Contribution would otherwise have been payable
as wages. In addition to the limitations described in Article VI, Participant
Contributions shall be subject to the following restrictions:
(a) MINIMUM REDUCTION. The minimum reduction for any
Participant for any payroll period shall be one percent
(1%) of the Participant's Compensation for such payroll
period.
(b) MAXIMUM REDUCTION. The maximum reduction for any
Participant for any payroll period shall be as follows:
19
<PAGE>
(i) For any Participant who is a Highly Compensated
Employee, ten percent (10%) of such Participant's
Compensation for such payroll period, and
(ii) For any Participant who is a Non-highly Compensated
Employee, twenty percent (20%) of such Participant's
Compensation for such payroll period.
(c) MINIMUM INCREMENTS. All Compensation reductions under the
Plan shall be in multiples of one percent (1%) of a
Participant's Compensation, unless the Participant has
elected to reduce his Compensation by the maximum amount
permitted under Code Section 402(g), in which event a
reduction equal to that amount will be permitted.
5.3 ROLLOVER CONTRIBUTIONS AND ELECTIVE TRANSFERS.
(a) ROLLOVER CONTRIBUTIONS. Any Employee who is or may become
a Participant and who has received or is entitled to
receive a distribution from a qualified retirement plan of
a former employer under circumstances meeting the
requirements of Code Section 402(c)(4) may contribute all
or any portion of such distribution to the Plan as a
"Rollover Contribution." The Plan shall accept a Rollover
Contribution only if the Plan Administrator determines in
its discretion that the acceptance of such contribution
would not threaten the Plan's qualified status under
Section 401(a) of the Code.
(b) ELECTIVE TRANSFERS. In its discretion, the Plan
Administrator may direct the Trustee to accept a direct
transfer of assets from the trustee of a qualified plan
sponsored by the former employer of an Employee. Such
transfer must satisfy all of the requirements set forth for
an "Elective Transfer" under Question and Answer 3(b) of
Treasury Regulation Section 1.411(d)-4, including the
requirement that such transfer represent the Employee's
entire nonforfeitable accrued benefit under the
transferring plan. No such trustee-to-trustee transfer
shall be accepted if the amount transferred would remain
subject to any of the transferring plan's "section
411(d)(6) protected benefits" (as that term is used in said
Regulation).
(c) ROLLOVER ACCOUNT. The Plan Administrator shall establish a
fully vested "Rollover Account" for each Employee electing
to make a Rollover Contribution under subsection 5.3(a) or
as to whom an Elective Transfer is accepted under
subsection 5.3(b). All such Rollover Contributions and
Elective Transfers shall be credited to that Rollover
Account, to which investment gains or losses shall then be
credited or debited. If a Rollover Account is established
for an Employee who is not otherwise a Plan Participant,
that Employee shall be considered a Participant with
respect to
20
<PAGE>
his Rollover Account, but for no other Plan purpose until
he becomes a Participant pursuant to Article III.
(d) INVESTMENTS. Upon receipt of an Employee's Rollover
Contribution or Elective Transfer, the Trustee shall
immediately deposit such contribution or transfer into the
Investment Fund or Funds designated by the Employee in a
written election filed with the Plan Administrator;
provided that if such contribution or transfer is in a form
other than cash, the Trustee, in accordance with
instructions from the Plan Administrator, shall first take
such action as it determines to be appropriate to convert
such contribution or transfer to cash. The initial
investment of an Employee's Rollover Account shall remain
in effect unless changed in accordance with the provisions
of Section 7.4. Notwithstanding anything to the contrary
contained herein, an Employee shall not be permitted to
direct that any portion of his Rollover Account be used to
purchase life insurance.
(e) WITHDRAWALS. An Employee with respect to whom a Rollover
Account is maintained may withdraw all or any portion of
that Account as soon as administratively feasible after the
Employee's delivery to the Plan Administrator of a written
request for such withdrawal, on a form acceptable to the
Plan Administrator.
(f) DISTRIBUTIONS. The provisions of the Plan relating to
distributions upon a Participant's termination of
participation in the Plan, or upon the Plan's termination,
shall apply to an Employee's Rollover Account.
(g) RULES AND PROCEDURES. The Plan Administrator shall
establish rules and procedures to implement the provisions
of this Section 5.3, including, without limitation, such
procedures as may be appropriate to permit the Plan
Administrator to verify the qualified status of the plan of
the Employee's former employer and compliance with any
applicable provisions of the Code and regulations issued
thereunder relating to Rollover Contributions and Elective
Transfers.
5.4 ADMINISTRATION. The Employer shall pay to the Trustee all
Participant Contributions as soon as such amounts can reasonably be segregated
from the Employer's general assets, but in no event later than the 15th business
day of the month following the month in which such Contribution would otherwise
have been payable as wages. In no event will the Employer pay to the Trustee
any of its Employer, Matching or Participant Contributions for any calendar
21
<PAGE>
year later than the period of time prescribed by law for the filing of the
Employer's federal income tax return for such year, including any duly granted
extensions thereof.
5.5 FORM OF CONTRIBUTIONS. Employer, Matching and Participant
Contributions shall be paid to the Trustee in cash.
5.6 CHANGES IN PAYROLL DEDUCTION AUTHORIZATION. A Participant, not
more often than once per calendar quarter, may change the percentage of his
Compensation which is to be contributed to the Plan as a Participant
Contribution by filing an amended payroll deduction authorization with the
Company; provided, that any such change shall be effective as of the first day
of the payroll period following the end of the payroll period in which such
deduction authorization is received by the Company. Participant Contributions
shall be deducted from the Participant's Compensation in accordance with the
Participant's amended payroll deduction authorization, and such deductions shall
continue until otherwise changed, suspended or terminated in accordance with
applicable provisions of the Plan. The foregoing limit on the allowable number
of changes notwithstanding, if a Participant at any time elects to borrow money
from the Plan, as provided in Article IX, he shall, in connection with such
borrowing, be allowed to change the percentage of his Compensation which is to
be deducted and paid to the Trustee as his Participant Contribution.
5.7 SUSPENSION OF CONTRIBUTIONS. A Participant who is making
Participant Contributions may suspend all of such Participant Contributions at
any time by filing with the Company an amended payroll deduction authorization
providing for such suspension. Such suspension shall be effective as of the
first day of the payroll period following the end of the payroll period in which
such deduction authorization is received by the Company and shall remain in
effect until Participant Contributions are resumed, as hereinafter set forth. A
Participant who
22
<PAGE>
has suspended all of his Participant Contributions in accordance with the
foregoing provisions of this Section 5.7 may resume such Contributions only
as of an April 1 or October 1 Enrollment Date which is after the effective
date of such suspension and only by filing a new payroll deduction authorization
with the Company not later than the Enrollment Date as of which Participant
Contributions are to be resumed. Any new payroll deduction authorization filed
by a Participant pursuant to the provisions of this Section 5.7 shall meet the
requirements of Section 5.2.
ARTICLE VI
LIMITATIONS ON CONTRIBUTIONS
Notwithstanding any contrary provisions of this Plan, the following
limitations shall apply to the specified types of Contributions.
6.1 DEDUCTIBILITY OF CONTRIBUTIONS. In no event shall the sum of the
Employer, Matching and Participant Contributions for a Plan Year exceed the
maximum amount allowable as a deduction to the Employer for federal income tax
purposes under Code Section 404 and the regulations promulgated thereunder. All
such Contributions are expressly conditioned on their deductibility. The
Trustee shall immediately return to the Employer all such Contributions as are
later determined by the Internal Revenue Service not to be deductible for the
Plan Year for which contributed; provided, however, that no such Contribution
shall be returned to the Employer more than one year after the disallowance of
the deduction, unless permitted under the Act and the Code at that time. The
amount returned under this Section 6.1 shall be equal to the amount of the
23
<PAGE>
disallowed deduction, decreased for any investment losses but not increased for
any investment gains subsequent to the time of the Contribution.
Any Contribution returned to the Employer under this Section 6.1 shall,
unless otherwise directed by the Internal Revenue Service, be withdrawn from the
following Accounts, in the following order:
(a) First, from the Participant and Matching Contribution
Accounts, up to an amount equal to the Participant
Contributions (and any Matching Contributions attributable
to such Participant Contributions) made for the Plan Year;
and
(b) Second, from the Employer Contribution Account, in the
amount of any remaining nondeductible Contributions.
6.2 MISTAKE OF FACT. In the case of any Employer, Matching or
Participant Contribution that is made by the Employer due to a good faith
mistake of fact, the Trustee shall return the erroneous portion of the
Contribution to the Employer within one year after the Employer's payment of the
Contribution to the Trust Fund. The amount returned under this Section 6.2
shall be equal to the amount of the erroneous Contribution, decreased for any
investment losses but not increased for any investment gains subsequent to the
time of the Contribution. Any such Contribution returned to the Employer under
this Section 6.2 shall be withdrawn from the Account(s) as to which the mistake
related. Any Participant Contribution returned to the Employer shall
immediately be paid to the affected Participant in cash.
6.3 LIMITATION ON ANNUAL ADDITIONS. In no event shall the sum of the
Annual Additions to a Participant's Accounts for any Limitation Year exceed the
Maximum Permissible Amount. If, but for the provisions of this Section 6.3, the
Annual Additions to a Participant's Accounts for any Limitation Year would
exceed the Maximum Permissible Amount, such Annual Additions shall be reduced to
the extent necessary to comply with the requirements of this Section 6.3. Any
24
<PAGE>
such reduction shall be made in accordance with the applicable regulations
issued under Code Section 415 (hereafter, the "415 REGULATIONS") and the
remainder of this Section 6.3.
(a) ORDER OF REDUCTIONS. Should it become necessary to reduce
the Annual Additions to a Participant's Accounts, such
reduction shall be accomplished in the following order:
(i) To the extent permitted under the 415 Regulations,
any Participant Contributions that would otherwise
be allocated to that Participant's Participant
Contribution Account shall be returned to the
Employer and immediately paid by the Employer to the
Participant in cash.
(ii) If any further reduction in Annual Additions is
necessary, any Contributions or forfeitures that
would otherwise be allocated to the Participant's
Accounts shall be reduced.
(b) REALLOCATION OF CONTRIBUTIONS OR FORFEITURES. Any portion
of the Contributions or forfeitures that are reduced under
Paragraph 6.3(a)(ii) shall be reallocated to the Accounts
of the other Participants in the same manner as the initial
allocation was made. Such reallocation shall be made as
many times as is necessary to reallocate the amount reduced
under Paragraph 6.3(a)(ii), but only until the level of
Annual Additions to each Participant's Accounts reaches the
Maximum Permissible Amount.
(c) SUSPENSE ACCOUNT. If the sum of the Annual Additions for
all Participants for the Limitation Year exceeds the sum of
the Maximum Permissible Amount for all Participants, the
excess shall be held unallocated in a suspense account. If
a suspense account is in existence at any time during a
Limitation Year, other than the Limitation Year referred to
in to the preceding sentence, all amounts in the suspense
account shall be allocated and reallocated to Participants'
Accounts, subject to the limitations of this Section 6.3,
before any contributions that would constitute Annual
Additions may be made to the Plan for that Limitation Year.
For this purpose, such allocations and reallocations shall
be made in the same manner as forfeitures would be
allocated for that Limitation Year.
(d) ANNUAL ADDITIONS TO OTHER DEFINED CONTRIBUTION PLANS. If a
Participant is a participant under any other Defined
Contribution Plan maintained by the Employer, the total of
the Annual Additions to such Participant's accounts under
all such Defined Contribution Plans shall not exceed the
Maximum Permissible Amount. If it is determined that, as a
result of the limitation set forth in the preceding
sentence, the Annual Additions to a Participant's Accounts
under this Plan must be reduced, such reduction shall be
accomplished in accordance with the provisions of
subsection 6.3(a).
25
<PAGE>
(e) COMBINED LIMITATION. If a Participant is a participant
under a Defined Benefit Plan maintained by the Employer,
the sum of the Defined Benefit Plan Fraction for a
Limitation Year beginning before January 1, 2000 and the
Defined Contribution Plan Fraction for that year shall be
no greater than one (1.0). If it is determined that, as a
result of the limitation set forth in the preceding
sentence, the Annual Additions to a Participant's Accounts
under this Plan must be reduced, such reduction shall be
accomplished in accordance with the provisions of
subsection 6.3(a).
(f) DEFINITIONS. For purposes of this Section 6.3, each of the
following words or phrases shall have the meaning ascribed
to it below:
(i) "ANNUAL ADDITIONS" shall mean the total of the
following amounts that are allocated to a
Participant's Accounts (including any similar
amounts allocated under a Related Plan) during any
Limitation Year:
(A) Employer Contributions;
(B) Participant Contributions; and
(C) Forfeitures.
For this purpose, any excess amounts applied under
subsection 6.3(c) to reduce future contributions
will be considered Annual Additions for the
Limitation Year in which so applied.
(ii) A Participant's "COMPENSATION" shall include that
Participant's wages, salaries, fees for professional
services, and other amounts received for personal
services actually rendered in the course of
employment with the Employer (including, but not
limited to, commissions paid to salesman,
compensation for services on the basis of a
percentage of profits, tips, and bonuses); shall
include all Compensation actually paid or made
available to the Participant for an entire
Limitation Year (other than amounts by which a
Participant elects to reduce his Compensation
pursuant to Section 5.2); and shall NOT include any
other items or amounts paid to or for the benefit of
the Participant.
(iii) A "DEFINED BENEFIT PLAN" shall mean any Retirement
Plan which is not a Defined Contribution Plan.
(iv) The "DEFINED BENEFIT PLAN FRACTION" shall mean, for
any Limitation Year, a fraction:
26
<PAGE>
(A) The numerator of which is the projected
annual benefit of the Participant, that is,
the annual benefit to which he would be
entitled under the terms of the Defined
Benefit Plan on the assumptions that he
continues employment until his normal
retirement date, as determined under the
terms of the Defined Benefit Plan, that his
compensation continues at the same rate as in
effect in the calendar year under
consideration until his normal retirement
date, and that all other relevant factors
used to determine benefits under such Defined
Benefit Plan remain constant as of the
current calendar year for future calendar
years, under all Defined Benefit Plans
maintained by the Employer, determined as of
the close of the Limitation Year, and
(B) The denominator of which is the lesser of
(1) One and one-fourth (1.25) [one (1.0),
in the case of a key employee in
either a top-heavy plan failing to
provide the minimum benefit required
under Code Section 416(h)(2)(A) or a
super top-heavy plan] times the
projected annual benefit of such
Participant under the Defined Benefit
Plans, determined as of the close of
the Limitation Year and as though the
Defined Benefit Plans provided
benefits in the amount of the maximum
dollar limitation allowable under Code
Section 415(b)(1)(A), after taking
into account all applicable
modifications of that dollar
limitation found in the Code, and
(2) One and four-tenths (1.4) times the
projected annual benefit of such
Participant under the Defined Benefit
Plans, determined as of the close of
the Limitation Year and as though the
Defined Benefit Plans provided
benefits in the amount of the maximum
percentage-of-compensation limitation
allowable under Code Section
415(b)(1)(B), after taking into
account all applicable modifications
of that percentage-of-compensation
limitation found in the Code.
(v) A "DEFINED CONTRIBUTION PLAN" shall mean a
Retirement Plan which provides for an individual
account for each Participant and for benefits based
solely on the amount contributed to the
Participant's accounts and any income, expenses,
gains and losses, and any
27
<PAGE>
forfeitures of accounts of other Participants that
may be allocated to such Participant's accounts.
(vi) The "DEFINED CONTRIBUTION PLAN FRACTION" shall mean,
for any Limitation Year, a fraction:
(A) The numerator of which is the sum of the
Annual Additions to the Participant's
accounts for all years under all Defined
Contribution Plans maintained by the Employer
in that Limitation Year, and
(B) The denominator of which is the sum for the
Limitation Year and all prior years of the
lesser of:
(1) One and one-fourth (1.25) [one (1.0),
in the case of a key employee in
either a top-heavy plan failing to
provide the minimum benefit required
under Code Section 416(h)(2)(A) or a
super top-heavy plan] times the
maximum amount of Annual Additions to
such Participant's accounts under the
Defined Contribution Plans which could
have been made in accordance with the
dollar limitation set forth in Code
Section 415(c)(1)(A), after taking
into account all applicable
modifications of that dollar
limitation found in the Code, and
(2) One and four-tenths (1.4) times the
maximum amount of Annual Additions to
such Participant's accounts under the
Defined Contribution Plans which could
have been made in accordance with the
percentage-of-compensation limitation
set forth in Code Section
415(c)(1)(B), after taking into
account all applicable modifications
of that percentage-of-compensation
limitation found in the Code.
(vii) The "LIMITATION YEAR" shall mean the
twelve-consecutive-month period to be used in
determining the Plan's compliance with Code
Section 415 and the regulations thereunder, which
shall be identical to the Plan Year.
(viii) The "MAXIMUM PERMISSIBLE AMOUNT" shall mean the
lesser of:
(A) $30,000 (or, if greater, 25% of the defined
benefit dollar limitation in effect for the
relevant Limitation Year under Code Section
415(b)(1)(A)); or
28
<PAGE>
(B) 25% of a Participant's Compensation (as
defined in Paragraph 6.3(f)(ii)).
(ix) A "RETIREMENT PLAN" shall mean:
(A) Any profit sharing, pension or stock bonus
plan described in Code Section 401(a) and
501(a);
(B) Any annuity plan or annuity contract
described in Code Section 403(a) or 403(b);
and
(C) Any individual retirement account or
individual retirement annuity described in
Code Section 408(a) or 408(b).
6.4 DOLLAR LIMITATION ON PARTICIPANT CONTRIBUTIONS. The Participant
Contributions made on behalf of a Participant (in combination with all similar
contributions made on behalf of that Participant under all other plans,
contracts, or arrangements of the Employer) during a single calendar year (or
other taxable year of the Participant) shall not exceed $10,000, or such higher
amount as may be specified by the Secretary of the Treasury under Code Section
402(g). Any such Participant Contributions in excess of this limitation
(hereafter referred to as "EXCESS DEFERRALS") shall be corrected during either
the same calendar year for which those deferrals were made (as described in
subsection 6.4(a)) or the calendar year following the calendar year for which
those deferrals were made (as described in subsection 6.4(b)).
(a) CORRECTION OF EXCESS DEFERRALS DURING SAME CALENDAR YEAR.
A Participant who has Excess Deferrals during a calendar
year may receive a corrective distribution of such Excess
Deferrals during that same year. Such a corrective
distribution may be made only if each of the following
conditions is satisfied:
(i) The Participant must designate the distribution as
an Excess Deferral. The Participant's designation
must be in writing, and the Participant must certify
or otherwise establish to the satisfaction of the
Plan Administrator that the designated amount is an
Excess Deferral. To the extent an Excess Deferral
is attributable solely to Participant Contributions
under this Plan (and similar contributions
29
<PAGE>
under other plans of the Employer), the Participant
will be deemed to have made such designation.
(ii) The distribution must be made after the date on
which the Plan receives the Excess Deferral.
(iii) The Plan Administrator must designate the
distribution as a distribution of Excess Deferrals.
The Plan Administrator shall not be obligated to make a
corrective distribution during the same calendar year. Any
Matching Contributions (and the income allocable thereto)
that are attributable to distributed Excess Deferrals shall
be forfeited (even if otherwise nonforfeitable) and
reallocated among the Matching Contribution Accounts of all
Participants in Employer Contributions, in the same manner
as forfeitures would be allocated to such Accounts for that
Plan Year.
(b) CORRECTION OF EXCESS DEFERRALS DURING FOLLOWING CALENDAR
YEAR. A Participant who has Excess Deferrals during a
taxable year, and who has not received a complete
corrective distribution of such Excess Deferrals under
subsection 6.4(a) during that year, may receive a
distribution of any remaining Excess Deferrals during the
following calendar year. Such a corrective distribution
may be made only if the Participant notifies the Plan
Administrator of this Plan (and the plan administrators of
all other plans to which the Excess Deferrals relate) by
the March 1 following the close of the calendar year for
which the Excess Deferrals were made. Any such
notification must be in writing, and the Participant must
certify or otherwise establish to the satisfaction of the
Plan Administrator that the designated amount is an Excess
Deferral. To the extent the Excess Deferrals are
attributable solely to Participant Contributions under this
Plan (and similar contributions under other plans of the
Employer) the Participant shall be deemed to have notified
the Plan Administrator of such Excess Deferrals. Upon
receiving such timely notice, the Plan Administrator shall
distribute, not later than the immediately following April
15, the amount of the Excess Deferrals allocated to this
Plan by the Participant, together with any income allocable
to that Amount. The Plan Administrator shall allocate
income to such distributed Excess Deferrals in the same
manner as other income is allocated among Participant
Accounts under Article X of the Plan. Income allocable to
the period between the close of the calendar year for which
the Excess Deferrals were made and the date of the
corrective distribution (the "GAP PERIOD") shall be
disregarded for this purpose. Any Matching Contributions
(and any income allocable thereto) that are attributable to
distributed Excess Deferrals shall be forfeited (even if
otherwise nonforfeitable) and reallocated among the
Matching Contribution Accounts of all Participants in
Employer
30
<PAGE>
Contributions, in the same manner as forfeitures would
be allocated to such Accounts for that Plan Year.
6.5 LIMITATION ON PARTICIPANT CONTRIBUTIONS. The Plan's provisions
for Participant Contributions constitute a cash or deferred arrangement intended
to be qualified under Code Section 401(k). Accordingly, these Participant
Contributions must satisfy the Actual Deferral Percentage Test (the "ADP TEST")
under Code Section 401(k)(3) for each Plan Year. The ADP Test shall be
conducted in accordance with the following rules:
(a) ACTUAL DEFERRAL PERCENTAGE TEST. Effective beginning on or
after January 1, 1997, the Actual Deferral Percentage
("ADP") for a Plan Year for the Highly Compensated Employee
Group for each Plan Year and the prior year's ADP for the
Nonhighly Compensated Employee Group for the prior Plan
Year must satisfy one of the following tests:
(i) The ADP for a Plan Year for the Highly Compensated
Employee Group for the Plan Year shall not exceed
the prior year's ADP for the Nonhighly Compensated
Employee Group for the prior Plan Year multiplied by
1.25; or
(ii) The ADP for a Plan Year for the Highly Compensated
Employee Group for the Plan Year shall not exceed
the prior year's ADP for the Nonhighly Compensated
Employee Group for the prior Plan Year multiplied by
2.0, provided that the ADP for the Highly
Compensated Employee Group does not exceed the ADP
for the Nonhighly Compensated Employee Group in the
prior Plan Year by more than two (2) percentage
points.
(b) DETERMINATION OF ADP TEST. For purposes of determining the
precise manner in which the ADP Test is to be conducted,
including the definition of "ACTUAL DEFERRAL PERCENTAGE,"
the applicable provisions of Code Section 401(k)(3) and the
applicable regulations promulgated thereunder are
incorporated herein by reference (sometimes referred to as
the "401(k) REGULATIONS"). The Plan Administrator shall
maintain records sufficient to demonstrate satisfaction of
the ADP Test for each Plan Year.
(c) PRELIMINARY ADP TEST. The Plan Administrator may, from
time to time during the course of a Plan Year, make its
best estimate as to whether the ADP Test will be satisfied
for the year. In doing so, the Plan Administrator may
conduct one or more preliminary ADP Tests based on the
projected compensation and contribution level of
Participants. If it
31
<PAGE>
appears there will be "EXCESS CONTRIBUTIONS" (as defined in
the 401(k) Regulations), the Plan Administrator may, in its
discretion, limit Participant Contributions in a manner
designed to prevent Excess Contributions from being made,
or use a combination of methods acceptable under the 401(k)
Regulations, in order to provide reasonable assurance that
Excess Contributions will be avoided or corrected during
the Plan Year.
(d) CORRECTION OF EXCESS CONTRIBUTIONS. Notwithstanding any
other provision of this Plan, if it is determined that
Excess Contributions exist for a Plan Year, such Excess
Contributions shall be corrected within 2 1/2 months after
the end of such Plan Year in order to avoid the imposition
of an excise tax that might otherwise apply under Code
Section 4979 and, in any event, within 12 months after the
close of the Plan Year for which the contributions were
made. The Plan Administrator may, in its discretion, use
either or both of the following correction methods, as
described in the 401(k) Regulations:
(i) Allocation to the Participant Contribution Accounts
of the Non-highly Compensated Employee Group of any
"Qualified Nonelective Contributions" (as defined in
the 401(k) Regulations) made by the Employer, in the
Employer's sole discretion; or
(ii) Distribution of Excess Contributions (and any income
allocable thereto) to the appropriate Highly
Compensated Employees.
(e) TREATMENT OF MATCHING CONTRIBUTIONS. If a Matching
Contribution has been made to the Plan with respect to an
amount that constitutes an Excess Contribution, then such
Matching Contribution (and any income allocable thereto)
shall be forfeited (even if otherwise nonforfeitable) and
reallocated to the Matching Contribution Accounts of the
Non-highly Compensated Employee Group, in the same manner
that forfeitures would be allocated to such Accounts for
that Plan Year.
(f) ALLOCATION OF INCOME. If Excess Contributions are
distributed, any income allocable to the distributed Excess
Contributions shall also be distributed. The Plan
Administrator shall allocate income to such distributed
Excess Contributions in the same manner as other income is
allocated among Participant Accounts under Article X of the
Plan. Income allocable to the period between the close of
the Plan Year for which the Excess Contributions were made
and the date of the corrective distribution (the "GAP
PERIOD") shall be disregarded for this purpose.
6.6 LIMITATION ON MATCHING CONTRIBUTIONS. The Plan's provisions for
Matching Contributions are subject to the provisions of Code Section 401(m).
Accordingly, these Matching
32
<PAGE>
Contributions must satisfy the Actual Contribution Percentage Test (the "ACP
TEST") under Code Section 401(m)(2) for each Plan Year. The ACP Test shall be
conducted in accordance with the following rules:
(a) ACTUAL CONTRIBUTION PERCENTAGE TEST. Effective beginning
on or after January 1, 1997, for any Plan Year, the Actual
Contribution Percentage ("ACP") for the Highly Compensated
Employee Group for each Plan Year and the prior year's ACP
for the Nonhighly Compensated Employee Group for the prior
Plan Year must satisfy one of the following tests:
(i) The ACP for Highly Compensated Employee Group for
the Plan Year shall not exceed to prior year's ACP
for the Nonhighly Compensated Employee Group for the
prior Plan Year multiplied by 1.25; or
(ii) The ACP for the Highly Compensated Employee Group
for the Plan Year shall not exceed the prior year's
ACP for the Nonhighly Compensated Employee Group
for the prior Plan Year multiplied by 2.0, provided
that the ACP for the Highly Compensated Employee
Group does not exceed the ACP for the Nonhighly
Compensated Employee Group in the prior Plan Year by
more than two (2) percentage points.
(b) DETERMINATION OF ACP TEST. For purposes of determining the
precise manner in which the ACP Test is to be conducted,
including the definition of "ACTUAL CONTRIBUTION
PERCENTAGE," the applicable provisions of Code Section
401(m) and the applicable regulations promulgated
thereunder are incorporated herein by reference (sometimes
referred to as the "401(m) REGULATIONS"). The Plan
Administrator shall maintain records sufficient to
demonstrate satisfaction of the ACP Test for each Plan
Year.
(c) PRELIMINARY ACP TEST. The Plan Administrator may, from
time to time during the course of a Plan Year, make its
best estimate as to whether the ACP Test will be satisfied
for the year. In doing so, the Plan Administrator may
conduct one or more preliminary ACP Tests based on the
projected compensation and contribution level of
Participants. If it appears there will be "EXCESS
AGGREGATE CONTRIBUTIONS" (as defined in the 401(m)
Regulations), the Plan Administrator may, in its
discretion, limit Matching Contributions in a manner
designed to prevent Excess Aggregate Contributions from
being made, or use a combination of methods acceptable
under the 401(m) Regulations, in order to provide
reasonable assurance that Excess Aggregate Contributions
will be avoided or be corrected during the Plan Year.
33
<PAGE>
(d) CORRECTION OF EXCESS AGGREGATE CONTRIBUTIONS.
Notwithstanding any other provision of this Plan, if it is
determined that Excess Aggregate Contributions exist for a
Plan Year, such Excess Aggregate Contributions shall be
corrected within 2 1/2 months after the end of such Plan
Year in order to avoid the imposition of an excise tax that
might otherwise apply under Code Section 4979 and, in any
event, within 12 months after the close of the Plan Year
for which the contributions were made. The Plan
Administrator may, in its discretion, use any one or more
of the following correction methods, as described in the
401(m) Regulations:
(i) Allocation to the Matching Contribution Accounts of
the Nonhighly Compensated Employee Group of any
"QUALIFIED NONELECTIVE CONTRIBUTIONS" (as defined in
the 401(m) Regulations) made by the Employer, in the
Employer's sole discretion;
(ii) Distribution of any vested Excess Aggregate
Contributions (and any income allocable thereto) to
the appropriate Highly Compensated Employees; or
(iii) Forfeiture of any non-vested Excess Aggregate
Contributions (and any income allocable thereto)
made during the Plan Year on behalf of the Highly
Compensated Employee Group.
(e) ALLOCATION OF INCOME. If Excess Aggregate Contributions
are distributed, any income allocable to the distributed
Excess Aggregate Contributions shall also be distributed.
The Plan Administrator shall allocate income to such
distributed Excess Contributions in the same manner that
other income is allocated among Matching Contribution
Accounts under Article X of the Plan. Income allocable to
the period between the close of the Plan Year for which the
Excess Aggregate Contributions were made and the date of
the corrective distribution (the "GAP PERIOD") shall be
disregarded for this purpose.
6.7 MULTIPLE USE LIMITATION. The Plan Administrator shall ensure that
multiple use of the "Alternative Limitation" does not occur and, if it does,
that it is corrected in accordance with Treasury Regulation Section 1.401(m)-2.
The term "ALTERNATIVE LIMITATION" has the meaning ascribed to such term under
Regulation Section 1.401(m)-2(b)(2) and refers to the alternatives for
satisfying the ADP and ACP Tests provided in Paragraphs 6.5(a)(ii) and
6.6(a)(ii), respectively. If multiple use of the Alternative Limitation occurs,
it shall be corrected by reducing the ACP
34
<PAGE>
of the Highly Compensated Employee Group in the manner described in Regulation
Section 1.401(m)-1(e)(2), so that there is no multiple use of the Alternative
Limitation. Instead of making this reduction, the Plan Administrator may
eliminate multiple use of the Alternative Limitation by allocating Qualified
Nonelective Contributions, if any, in accordance with Regulation Section
1.401(m)-1(b)(5).
ARTICLE VII
DEPOSIT AND INVESTMENT OF CONTRIBUTIONS;
INVESTMENT ELECTIONS
7.1 DEPOSIT OF EMPLOYER AND MATCHING CONTRIBUTIONS. Upon receipt of
Employer or Matching Contributions, the Trustee shall deposit within 14 business
days such Contributions in the Norwest Stable Return Fund described in Section
8.2(a).
7.2 DEPOSIT OF PARTICIPANT CONTRIBUTIONS. Upon receipt of Participant
Contributions, the Trustee shall deposit within 14 business days such
Contributions in one or more of the Funds specified in Section 8.2, as directed
by the Plan Administrator; provided that the Plan Administrator's directions to
the Trustee shall be based on the investment election of each Participant, made
in accordance with the provisions of Section 7.3.
7.3 INVESTMENT ELECTION FOR PARTICIPANT CONTRIBUTIONS AT TIME OF
INITIAL PARTICIPATION. Each Participant in Participant Contributions shall,
upon electing to become a Participant under the Plan pursuant to Section 3.2 and
on a form suitable to the Plan Administrator, make an election as to the manner
in which Participant Contributions made by the Employer on his behalf are to be
invested by the Trustee. A Participant's investment election shall specify the
percentage
35
<PAGE>
of his Participant Contributions to be invested in one or more of the
Funds described in Section 8.2.
7.4 CHANGES IN INVESTMENT ELECTION. A Participant in Participant
Contributions may change his investment election for Participant Contributions
by filing with the Plan Administrator a written election directing a change in
his investment election or by utilizing any other administrative procedures
established by the Plan Administrator. Any such change shall apply to:
(a) Participant Contributions made by the Employer on the
Participant's behalf after the date the election becomes
effective;
(b) All amounts in the Participant's Participant Contribution
Account on the date the election becomes effective; and
(c) All amounts in the Participant's Rollover Account, if any.
Amounts already invested in the Transamerica Life Insurance Fund may be invested
in another Fund only in connection with a Participant's termination of life
insurance coverage under the Plan. In no event may a Participant have any
portion of his Rollover Contribution Account or any amount already in his
Participant Contribution Account on the date the election becomes effective (to
the extent not previously used to purchase life insurance) used to purchase life
insurance.
In no event may a Participant change his investment election more often
than once in any calendar quarter. A change in an investment election will be
implemented as soon as administratively practicable after it is received by the
Plan Administrator or as soon as the procedure utilized to make the election
permits.
36
<PAGE>
ARTICLE VIII
ESTABLISHMENT OF FUNDS AND PARTICIPANTS' ACCOUNTS
8.1 ESTABLISHMENT OF ACCOUNTS. Under the circumstances described
below, the Plan Administrator shall establish one or more of the following
Accounts in the name of each Participant:
(a) In the case of a Participant on whose behalf the Employer
makes an Employer Contribution under subsection 5.1(a), an
"Employer Contribution Account." This Account shall
reflect the amount attributable to such Employer
Contributions made on such Participant's behalf.
(b) In the case of a Participant on whose behalf the Employer
makes a Matching Contribution under subsection 5.1(b), a
"Matching Contribution Account." This Account shall
reflect the amount attributable to such Matching
Contributions made on such Participant's behalf.
(c) In the case of a Participant who elects any Compensation
reduction under Section 5.2, a "Participant Contribution
Account." This Account shall reflect the amount
attributable to Participant Contributions made on such
Participant's behalf.
(d) In the case of a Participant who makes a Rollover
Contribution or an Elective Transfer under Section 5.3, a
"Rollover Contribution Account." This Account shall
reflect the amount attributable to such Rollover
Contributions and Elective Transfers made by such
Participant.
8.2 ESTABLISHMENT OF FUNDS. The Trustee, at the direction of the Plan
Administrator, shall establish the following no-load investment Funds under the
Trust Agreement:
(a) The Norwest Stable Return Fund;
(b) The Vanguard/Wellington Fund;
(c) The Fidelity Equity-Income Fund;
(d) The Fidelity Growth Company Fund;
(e) The Vanguard International Growth Portfolio; and
37
<PAGE>
(f) The Transamerica Life Insurance Fund.
8.3 INCOME ON FUNDS. Any dividends, interest, distributions, or other
income received by the Trustee with respect to any of the Funds listed in
Section 8.2 shall be reinvested by the Trustee in the Fund in which such income
was received.
8.4 ACCOUNT STATEMENTS. The Employer shall prepare and deliver to the
Trustee, on at least a quarterly basis, the following information with respect
to each Participant:
(a) The amount of such contribution which represents an
Employer Contribution;
(b) The amount of such contribution which represents a Matching
Contribution;
(c) The amount of such contribution which represents a
Participant Contribution; and
(d) The manner in which such contribution is to be deposited
and invested by the Trustee in accordance with the
provisions of Article VII.
8.5 ACCOUNT BALANCES. For all purposes of the Plan, the balance of
each Account of a Participant as of any date shall be the balance of such
Account after all credits and charges thereto for and as of such date have been
made, as provided in the Plan and the Trust Agreement.
38
<PAGE>
ARTICLE VIII-A
LIFE INSURANCE
8A.1 PURCHASE OF POLICIES. Upon written instructions from the Plan
Administrator, the Trustee shall apply any Participant Contributions designated
by a Participant for investment in the Transamerica Life Insurance Fund toward
the purchase, from a legal reserve life insurance company or companies
authorized to do business in any one of the jurisdictions in which the Employer
employs Participants, of a life insurance policy or policies on the life of such
Participant, on the life of such Participant's spouse, and/or on the life of
such Participant's child(ren), as designated by the Participant. Any such
policy or policies shall be subject to the provisions of this Article VIII-A.
8A.2 POLICY TERMS. Limitations as to coverage, insurability, premium
rates, convertibility and other matters shall be subject to the provisions of
the policy issued by, or the underwriting guidelines of, the insurance company
or companies from which such insurance coverage is purchased. All such policies
shall designate the Trustee as the sole owner, with exclusive power to exercise
all rights, privileges, options and elections granted or permitted thereunder;
provided, however, that the exercise of such power by the Trustee shall be
subject to the right of the Plan Administrator to direct the Trustee with
respect thereto or to require the Trustee to obtain its approval before
exercising any such power. All such directions by the Plan Administrator shall
be made on a uniform, nondiscriminatory basis.
8A.3 PAYMENT OF PREMIUMS. The Trustee, upon written instructions from
the Plan Administrator, shall pay each premium on any policy or policies held
for the benefit of a Participant and shall charge such premium payment to the
Transamerica Life Insurance Fund. The Trustee shall be under no obligation to
pay any premium, however, unless the Plan Administrator acknowledges in writing
that there are funds available from the interest of such Participant in the
Transamerica Life Insurance Fund to make such payment.
39
<PAGE>
8A.4 OVERRIDING CONDITIONS AND LIMITATIONS. Notwithstanding any other
provision of the Plan, at no time shall the aggregate of the premiums paid under
the Trust for any ordinary life insurance policy or policies (within the meaning
of Internal Revenue Service Revenue Rulings 54-51 and 61-164) on the life of any
Participant, such Participant's spouse, and such Participant's child(ren) equal
or exceed one-half of the Participant's Participant Contributions, nor at any
time shall the aggregate of the premiums paid under the Trust for any policy or
policies on the life of any Participant, such Participant's spouse, and such
Participant's child(ren) that provide pure life insurance protection equal or
exceed one-fourth of the Participant's Participant Contributions. In order to
comply with this limitation, the Plan Administrator shall, in writing, direct
the Trustee to take such action with respect to any such policy or policies held
by it, as the Plan Administrator shall deem advisable, including, but not
limited to, conversion to paid-up basis or partial or total surrender of such
policy or policies or any part or parts thereof. At all times, each such policy
on the life of any Participant, such Participant's spouse, and/or such
Participant's child(ren) shall be owned by the Trustee as part of the
Transamerica Life Insurance Fund.
8A.5 DESIGNATION OF BENEFICIARY; DEATH BENEFITS.
(a) RECEIPT OF POLICY PROCEEDS. Subject to the provisions of
Section 4.2, the Beneficiary shall receive from any life
insurance policy purchased under the Plan any and all
proceeds paid, excluding any cash value, and the Trustee
shall be the beneficiary designated to receive any cash
value payable from any life insurance policy or policies
purchased under the Plan.
(b) DEATH OF PARTICIPANT. In the event of the death of a
Participant on whose life an insurance policy is held under
the Trust, the Trustee shall receive the cash value of such
policy and shall, as soon as practical thereafter, pay such
amount in accordance with the terms of the Beneficiary
designation form filed by such Participant with the Plan
Administrator pursuant to Section 4.1 or, failing any
effective Beneficiary designation, to the Beneficiary
determined under Section 4.2.
40
<PAGE>
The ownership of any policy held by the Trust on the life
of a Participant's spouse and/or child(ren) at the time of
the Participant's death shall be assigned by the Trustee to
the Beneficiary or Beneficiaries designated pursuant to
Section 4.1 to receive the Participant's interest in the
Plan or, failing any effective Beneficiary designation, to
the Beneficiary determined under Section 4.2.
(c) DEATH OF PARTICIPANT'S SPOUSE OR CHILD. In the event of
the death of a Participant's spouse or child on whose life
an insurance policy is held under the Trust, the Trustee
shall receive the proceeds of such policy and shall, at the
Participant's direction, either (i) invest all of such
proceeds, including any cash value and interest accruing
since the death of the spouse or child (hereafter,
"POST-DEATH INTEREST"), in one or more of the Funds
specified in Section 8.2, or (ii) pay all or part of
such proceeds, except any cash value and post-death
interest, to the Participant and invest such cash value
and post-death interest in one or more of the Funds
specified in Section 8.2. In the event the Participant
has not provided the Trustee with such direction, the
Trustee shall invest all of such proceeds, including any
cash value and post-death interest, in the Norwest Stable
Return Fund. By filing a written election with the Plan
Administrator, in accordance with the provisions of
Section 7.4, a Participant may direct the investment of
all or any portion of the policy proceeds retained in the
Plan, including any cash value and post-death interest, in
one or more of the Funds specified in Section 8.2.
Notwithstanding anything herein to the contrary, in no
event may a Participant elect to have such proceeds, or any
gains arising therefrom, used to purchase life insurance
under the Plan.
The provisions of the Plan relating to distributions upon a
Participant's termination of participation in the Plan, or
upon the Plan's termination, shall apply (to the extent
retained in the Plan) to the proceeds from a policy on the
life of a Participant's spouse or child(ren) and to all
gains and losses arising therefrom.
8A.6 OTHER DISTRIBUTIONS; VESTING.
(a) On the termination of a Participant's employment by the
Employer for any reason other than death, the former
Participant shall have a vested interest in the cash
surrender value, if any, of each policy on his life, the
life of his spouse, and/or the life of his child(ren), then
held under the Trust Agreement.
(b) Distribution of the vested interest of a former Participant
determined under subsection 8A.6(a) shall be made in the
form of an insurance policy or policies delivered to such
former Participant as soon as reasonably practicable;
provided, that, at the election of the Participant and upon
the
41
<PAGE>
Plan Administrator's written instructions to the Trustee,
such interest shall be distributed to the former
Participant in cash.
(c) To implement the provisions of this Article VIII-A, the
Plan Administrator, shall, in writing, direct the Trustee
to take such action with respect to any policy or policies
held hereunder as the Plan Administrator shall deem
advisable, including, but not limited to, conversion to a
paid-up basis or surrender of the policy or policies or any
part or parts thereof. In no event may any policy or
policies, or any portion of the value thereof, be retained
in the Trust after a former Participant's Settlement Date,
or after any termination of the Plan, for the purpose of
continuing the life insurance protection for such former
Participant.
ARTICLE IX
LOANS
9.1 LOANS TO PARTICIPANTS. Subject to the provisions of this Article
IX, an Active Participant may, by filing a written loan application with the
Plan Administrator, borrow money from the Plan which is attributable to (a) his
Participant Contributions, and (b) his Rollover Contributions and Elective
Transfers. The Plan Administrator, acting in a uniform, nondiscriminatory
manner, shall approve the loan application of an Active Participant if the loan
satisfies the requirements of this Article IX and if the loan complies with such
administrative rules and procedures as the Plan Administrator may adopt in
writing.
9.2 LIMITATIONS. The following restrictions, limitations and
requirements shall be observed by the Plan Administrator in approving or denying
any loan application:
(a) No more than two loans may be approved with respect to any
Active Participant in any Plan Year;
(b) No additional loan may be made if, at the time such loan is
to be made, the Active Participant applying for such loan
has two loans outstanding under the Plan (a loan which is
in default shall be considered an outstanding loan);
42
<PAGE>
(c) The amount that an Active Participant may borrow is limited
to the amount determined under paragraph (i) or (ii) of
this subsection 9.2(c), whichever amount is least:
(i) The greater of (A) Fifty percent (50%) of the total
vested value of the Active Participant's Participant
Contribution and Rollover Accounts, or (B) $10,000;
or
(ii) $50,000, reduced by the excess (if any) of:
(A) The highest outstanding balance of loans from
the Plan to the Active Participant during the
one-year period ending on the day before the
date a new loan is made, over
(B) The outstanding balance of loans from the
Plan to the Active Participant on the date a
new loan is made;
(d) Loans may be made only for a period of months, not to
exceed 60 months, as elected by the Participant; provided
that no loan may be made for a period which would extend
beyond the date on which the recipient of the loan ceases
to be an Active Participant; and
(e) No loan may be made for less than $500.
For purposes of subsection 9.2(c), the value of an Active Participant's Accounts
shall be determined as of the Revaluation Date coincident with the date on which
the Active Participant files his loan application. In determining the value of
an Active Participant's Accounts, amounts invested in the Transamerica Life
Insurance Fund shall not be taken into consideration.
9.3 INTEREST RATE. The interest rate to be paid by an Active
Participant on a new loan shall be the prime lending rate published by the Wall
Street Journal on the business day next preceding the day on which the
application for the loan is received by the Plan Administrator, plus 1 1/2
percentage points.
9.4 REPAYMENT. Interest and principal on a loan shall be repaid by an
Active Participant in equal installments through payroll deductions over the
period of the loan, not less
43
<PAGE>
frequently than quarterly. The foregoing notwithstanding, an Active
Participant may at any time, by a single lump sum, repay in full any loan
outstanding to him (including any interest accrued but unpaid as of such date).
9.5 DOCUMENTATION. Each loan must be evidenced by a written loan
agreement, signed by the Active Participant and evidenced by a promissory note,
in which the Active Participant personally guarantees the repayment of the loan
and secures the loan with fifty percent (50%) of his vested interest in the
Plan. The Active Participant must execute a payroll deduction authorization on
such form as is prescribed by the Plan Administrator, which authorization shall
be irrevocable for the period of the loan.
9.6 SECURITY; COLLECTION. Each loan from the Plan to an Active
Participant shall be secured by fifty percent (50%) of the Active Participant's
vested interest in the Plan. Any of the following events shall constitute a
default of a loan granted pursuant to this Article IX:
(a) The loan recipient's ceasing to be an Active Participant;
(b) The termination of the Plan;
(c) The failure by the recipient of the loan to make any
payment required under this Article IX within 30 days of
the date such payment is due;
(d) The filing for relief, by or against the recipient of the
loan, under the United States Bankruptcy Code, which
proceeding is not dismissed within 30 days of filing; or
(e) The past or future making of a false representation or
warranty by the recipient of the loan in connection with
any loan or loans to him under the Plan.
If an event of default described in subsection (a) or (b) of this Section 9.6
occurs with respect to an Active Participant's loan, the loan shall become
immediately due and payable and shall be repaid out of the Active Participant's
interest in the Plan by reducing his Account balances
44
<PAGE>
accordingly. The foregoing right of set-off shall not be construed as
authorizing the Plan Administrator to defer collection of a loan until the
termination of an Active Participant's employment, but merely provides a method
of ensuring payment by such time.
If an event of default described in subsection (d) or (e) of this Section
9.6 occurs with respect to an Active Participant's loan, the loan shall be
immediately due and payable and shall be repaid out of the Active Participant's
interest in the Plan by reducing his Account balances accordingly; provided,
however, that the loan shall not be satisfied out of the Active Participant's
interest in the Plan prior to his attainment of age 59 1/2 or entitlement to a
distribution under the terms of the Plan. The foregoing right of set-off shall
not be construed as authorizing the Plan Administrator to defer collection of a
loan until the termination of an Active Participant's employment but merely
provides a method of ensuring payment by such time.
If an event of default described in subsection (c) of this Section 9.6
occurs with respect to an Active Participant's loan, the loan shall be
immediately due and payable, and, pursuant to Code Section 72(p), a deemed
distribution equal to any unpaid principal and interest shall be reported to the
Internal Revenue Service; provided, however, that the loan shall not be
satisfied out of the Active Participant's interest in the Plan prior to his
attainment of age 59 1/2 or entitlement to a distribution under the terms of the
Plan.
Nothing in this Section 9.6 shall be construed to relieve a borrower from
his obligation to make timely payments, as required by Section 9.4, Section 9.5
and the written loan agreement.
9.7 ADDITIONAL INFORMATION. In addition to the limitations contained
in Section 9.2, the Plan Administrator may further limit the amount loaned to
any Active Participant in order to maintain a reserve chargeable against such
Participant's interest in the Plan for income taxes which would have to be
withheld by the Trustee if the loan were to become a deemed distribution
45
<PAGE>
to such Participant under Code Section 72(p). In the event the loan becomes a
deemed distribution to the Active Participant, any such taxes required to be
withheld by the Trustee (whether or not such a reserve has been created) shall
be charged to and shall reduce such Participant's interest in the Plan, to the
extent possible, and any excess shall be treated as an administrative expense of
the Plan which shall be reimbursed by such Participant.
9.8 ACCOUNTING. Upon approving a loan to an Active Participant, the
Plan Administrator shall direct the Trustee to draw the amount of the loan from
the Funds in which the Participant's Participant Contribution and Rollover
Accounts are invested, on a pro rata basis; provided, however, that no amount
shall be drawn from the Participant's investment in the Transamerica Life
Insurance Fund, if any.
An Active Participant's payments of principal and interest on a loan made
under this Article IX shall be reinvested by the Trustee in accordance with the
Active Participant's investment election for his Participant Contribution and
Rollover Accounts then currently in effect; provided, however, that no payments
under this provision shall be invested in the Transamerica Life Insurance Fund.
The Trustee shall make the appropriate credits and charges to the Funds involved
in such payments of principal and interest.
9.9. RELATED EMPLOYERS AND PLAN. For purposes of this Section, all
plans of the Employer or a Related Employer shall be treated as one plan.
46
<PAGE>
ARTICLE X
VALUATION OF ACCOUNTS
10.1 REVALUATION OF PARTICIPANT'S INTEREST. As of each Revaluation
Date, the Plan Administrator shall adjust each separate Account of each
Participant, each former Participant, and each Beneficiary to reflect any
increase or decrease in net worth of the Funds since the immediately preceding
Revaluation Date. Such adjustment shall be done in the following manner:
(a) The Trustee shall revalue all of the assets of the Funds at
fair market value, provided that the Transamerica Life
Insurance Fund shall be valued at the cash value of the
life insurance contract(s). In determining the fair market
value, the following rules shall apply:
(i) All transactions involving the purchase or
sale of investments, which have been executed
but for which settlement has not been made,
on or before the Revaluation Date, shall be
treated as through settlement had been made.
(ii) Assets which are regularly traded on
established markets shall be valued at the
last sale price on the Revaluation Date, or,
if no sale price is quoted on such
Revaluation Date, then at the bid price last
quoted on or prior to the close of business
on such date.
(iii) All other assets of the Trust Fund shall be
valued in accordance with usual valuation
practices.
(b) The Plan Administrator shall then, on the basis of the
valuation provided under subsection 10.1(a) and after
making appropriate adjustments for the amount of any
contributions, distributions, or withdrawals since the
immediately preceding Revaluation Date, ascertain the net
increase or decrease in net worth of the Funds attributable
to net earnings and all gains and losses, both realized and
unrealized, since the immediately preceding Revaluation
Date.
(c) The Plan Administrator shall then allocate the net increase
or decrease in the net worth of the Funds as thus
determined among all Participants, former Participants, and
Beneficiaries who have an interest in such Funds,
separately with respect to each of such Funds, in the ratio
that the balance of each separate Account of each such
Participant, and of the distribution account of each such
former Participant or Beneficiary, on such
47
<PAGE>
Revaluation Date bears to the aggregate of the balances of
all such Accounts on such Revaluation Date, and shall
credit or charge, as the case may be, each such Account
with the amount of its allocated share; provided that the
interest of each Participant, former Participant, and
Beneficiary in the Transamerica Life Insurance Fund shall
be equal to the cash value of the life insurance
contract(s) held under such Fund for the benefit of such
Participant, former Participant, or Beneficiary.
(d) Finally, the Plan Administrator shall credit to each
Account of each Participant, in accordance with the
provisions of Article V, his contributions since the
preceding Revaluation Date, shall debit each account of
each Participant with the amount of distributions made
therefrom since the preceding Revaluation Date, and shall
make such other adjustments to each Account of each
Participant as are necessary to reflect a Participant's
change in investment election with respect to contributions
previously credited to the Participant's Accounts, as
provided in Section 7.4.
10.2 INVESTMENT FUND ACCOUNTING. The Employer or Recordkeeper (as
defined in Section 13.8) shall maintain records for each Participant's Employer
Contribution Account, Matching Contribution Account, Participant Contribution
Account and Rollover Contribution Account, if any, that reflect the value of
each Participant's share in the Funds.
10.3 FINALITY OF DETERMINATIONS. The Trustee shall have exclusive
responsibility for determining the net income, liabilities and value of the
assets of the Funds. The Plan Administrator shall have exclusive responsibility
for determining the balance of each Account maintained under the Plan. The
Trustee's and the Plan Administrator's determinations shall be conclusive upon
the Employer and all Participants, former Participants, and Beneficiaries under
the Plan.
10.4 NOTIFICATION. As soon as reasonably possible after the end of
each calendar quarter, the Plan Administrator shall notify each Participant,
former Participant, or Beneficiary of the balance of his separate Accounts as of
the last day of such calendar quarter.
48
<PAGE>
ARTICLE XI
WITHDRAWALS WHILE EMPLOYED
11.1 EMPLOYER AND MATCHING CONTRIBUTION ACCOUNTS. Except as provided
in Section 11.4, a Participant who remains employed by the Employer may not
withdraw any portion of his Employer or Matching Contribution Account.
11.2 PARTICIPANT CONTRIBUTION ACCOUNT. Except as provided in Section
11.4, a Participant who remains employed by the Employer may withdraw amounts
from his Participant Contribution Account only for reasons of financial hardship
(hereafter referred to as a "HARDSHIP WITHDRAWAL"), as described in this Section
11.2.
(a) FINANCIAL HARDSHIP. A withdrawal shall be for financial
hardship only if it is made on account of an immediate and
heavy financial need of the Participant and is necessary to
satisfy that financial need.
(b) IMMEDIATE AND HEAVY FINANCIAL NEED. A withdrawal will be
considered to be made on account of a Participant's
immediate and heavy financial need only if the distribution
is for:
(i) Expenses for medical care described in Code Section
213(d) either previously incurred by the Participant
or his spouse or dependents (as defined in Code
Section 152) or necessary for these persons to
obtain such medical care;
(ii) Costs directly related to the purchase of a
principal residence for the Participant (but not to
pay mortgage payments);
(iii) Payment of tuition and related educational fees,
including room and board, for the next 12 months of
post-secondary education for the Participant or his
spouse, children, or dependents (as defined in Code
Section 152); or
(iv) Payments necessary to prevent the eviction of the
Participant from his principal residence or
foreclosure on the mortgage on that principal
residence.
49
<PAGE>
(c) DISTRIBUTION NECESSARY TO SATISFY HARDSHIP. A distribution
will be treated as necessary to satisfy a Participant's
financial need only if:
(i) The distribution is not in excess of the amount
required to relieve the immediate and heavy
financial need, including any amounts necessary to
pay any federal, state, or local income taxes or
penalties reasonably anticipated to result from the
distribution; and
(ii) The Participant cannot relieve that need from other
resources reasonably available to him, including any
assets of the Participant's spouse and minor
children that are reasonably available to him (but
excluding property held for the Participant's child
under an irrevocable trust or the Uniform Gifts to
Minors Act).
(d) REPRESENTATIONS BY PARTICIPANT. Absent actual knowledge to
the contrary, the Plan Administrator shall treat a
Participant as satisfying the requirements of subsection
11.2(c) if the Participant represents, in writing, that his
financial need cannot reasonably be relieved through any of
the following:
(i) Reimbursement or compensation by insurance or
otherwise;
(ii) Liquidation of the Participant's assets;
(iii) Cessation of Participant Contributions;
(iv) Other distributions or nontaxable (at the time of
the loan) loans from plans maintained by the
Employer or by any other employer; or
(v) Borrowing from commercial sources on reasonable
commercial terms in an amount sufficient to satisfy
the need.
For purposes of this subsection 11.2(d), a need cannot
reasonably be relieved by one of the actions listed above
if the effect would be to increase the amount of the need.
(e) SOURCE OF HARDSHIP WITHDRAWAL. In no event shall a
Hardship Withdrawal be permitted with respect to amounts
other than the portion of a Participant's Participant
Contribution Account consisting of:
(i) Participant Contributions, regardless of when made,
(ii) Qualified Nonelective Contributions, regardless of
when made, and
50
<PAGE>
(iii) Income allocable to both Participant and Qualified
Nonelective Contributions, to the extent such income
was credited to the Participant's Participant
Contribution Account as of December 31, 1988.
(f) APPLICATION FOR HARDSHIP WITHDRAWAL. A Participant who
wishes to receive a Hardship Withdrawal shall submit a
written request therefor to the Plan Administrator, on a
form acceptable to the Plan Administrator, and in
accordance with any rules and procedures established by the
Plan Administrator. The Plan Administrator, acting in a
uniform nondiscriminatory manner, shall approve any
Hardship Withdrawal request which meets the requirements
described in this Section 11.2, and shall deny all other
Hardship Withdrawal requests. Hardship Withdrawals so
approved shall be made as soon as administratively
practicable.
Notwithstanding anything to the contrary in this Section 11.2, an "alternate
payee," as defined in Section 12.7, shall be eligible to make Hardship
Withdrawals in accordance with the provisions of this Section 11.2; provided,
however, that the amount available for withdrawal shall be the amount payable to
such alternate payee under Section 12.7.
11.3 ROLLOVER ACCOUNT. A Participant who remains employed by the
Employer may withdraw all or any portion of his Rollover Account by submitting a
written request therefor to the Plan Administrator, on a form acceptable to the
Plan Administrator. The withdrawal shall be drawn pro rata from each of the
Funds in which that Account is invested, in accordance with the Participant's
investment election then in effect under Article VII. The withdrawal shall be
effected as soon as administratively feasible after the Plan Administrator's
receipt of the request form.
11.4 ATTAINMENT OF AGE 59 1/2 OR DISABILITY. Notwithstanding any other
provision of this Article XI, a Participant who remains employed by the Employer
may withdraw all or any portion of his vested Plan benefit upon attaining age
59 1/2 or becoming disabled. For this purpose, a Participant shall be
"DISABLED" if, in the opinion of the Plan Administrator, his condition is
51
<PAGE>
described in Code Section 401(k)(2)(B)(i)(I). A Participant may make a
withdrawal under this Section 11.4 by submitting a written request therefor to
the Plan Administrator, on a form acceptable to the Plan Administrator, and in
accordance with any rules and procedures established by the Plan Administrator.
Any such form shall specify the Account or Accounts from which the withdrawal is
to be made. The withdrawal shall be drawn pro rata from each of the Funds in
which that Account or those Accounts are invested, in accordance with the
Participant's investment election then in effect under Article VII.
11.5 FORM OF PAYMENT. All amounts withdrawn under this Article XI
shall be paid to the Participant in cash by check.
ARTICLE XII
DISTRIBUTION ON TERMINATION OF EMPLOYMENT
12.1 TERMINATION OF PARTICIPATION. Each Participant shall cease to be
a Participant under the Plan on the date such Participant's employment with the
Employer is terminated for any reason, including layoff (in excess of one year),
Disability, or death.
12.2 VESTING.
(a) The interest of a Participant in his Employer and Matching
Contribution Accounts shall vest as follows:
(i) Upon his termination of employment at or after his
Normal Retirement Date, one hundred percent (100%),
(ii) Upon his death or Disability, one hundred percent
(100%), or
(iii) Upon any other termination of employment, in
accordance with the following schedule:
52
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------
years of Service* Nonforfeitable Percentage*
-------------------------------------------------
Date Employee is hired 20%
-------------------------------------------------
<S> <C>
1 40%
-------------------------------------------------
2 60%
-------------------------------------------------
3 80%
-------------------------------------------------
4 or more 100%
-------------------------------------------------
</TABLE>
*A Participant's nonforfeitable percentage shall vest as of the
first day of each year of Service.
(b) The interest of a Participant in any Account other than his
Employer or Matching Contribution Account shall at all
times be one hundred percent (100%) vested and not subject
to forfeiture.
(c) On the Plan's termination or the Employer's complete
discontinuance of contributions, each Participant shall
become one hundred percent (100%) vested in his Employer
and Matching Contribution Accounts.
12.3 FORFEITURES. On the termination of a Participant's employment
with the Employer for any reason other than retirement on or after his 65th
birthday, death, or Disability, the Plan Administrator shall notify the Trustee
in writing of the termination and shall direct the Trustee to make payment of
the Participant's Participant Contribution Account and Rollover Account, if any,
and the vested portion of his Employer and Matching Contribution Accounts, if
any, as of the Revaluation Date coincident with his date of termination of
employment, in a method provided under Section 12.4. The vested portion of a
Participant's Employer and Matching Contribution Accounts shall be determined in
accordance with Section 12.2. The nonvested portion, if any, of his Employer
and Matching Contribution Accounts shall be retained in such Accounts until a
sufficient period has elapsed to determine whether he will be reemployed before
incurring a one-year Break in Service. If he is reemployed before incurring a
one-year Break in Service, his Employer and Matching Contribution Accounts will
continue to vest. If he incurs a one-year Break in Service, the non-vested
portion of such Accounts shall be deemed a forfeiture. If a
53
<PAGE>
Participant is rehired by the Employer after incurring a one-year Break in
Service, but before incurring five consecutive one-year Breaks in Service, any
portion of his Employer and Matching Contribution Accounts that was forfeited
on his earlier termination of employment shall be restored to him. Such
restoration shall be effected through forfeitures arising during the year of the
Participant's reemployment and, if such forfeitures are insufficient, additional
Employer Contributions. After five consecutive one-year Breaks in Service, the
forfeited amounts shall be used by the Company to off-set administrative
expenses for the Plan Year in which the Participant incurs the fifth consecutive
one-year Break in Service. On such Participant's subsequent termination of
employment before becoming fully vested in his Employer and Matching
Contribution Accounts, the portion of his Employer and Matching Contribution
Accounts distributable on such subsequent termination of employment shall be
calculated as follows:
(a) The amount distributed to the Participant from his Employer
and Matching Contribution Accounts on his earlier
termination of employment shall be added to his Employer
and Matching Contribution Accounts at such time;
(b) The amount determined under subsection 12.3(a) shall be
multiplied by the Participant's vested percentage as of the
date of his subsequent termination of employment, as
determined under Section 12.2; and
(c) The amount distributed to the Participant on his earlier
termination of employment shall be deducted from the
product calculated under subsection 12.3(b) to determine
the amount distributable on his subsequent termination of
employment.
12.4 DISTRIBUTION ON TERMINATION OF EMPLOYMENT. On a Participant's
termination of employment with the Employer for any reason described in Code
Section 401(k)(2)(B)(i)(I), the Plan Administrator shall direct the Trustee to
distribute to that Participant or his Beneficiary the vested portion of the
Participant's Accounts (as determined under Section 12.2), in accordance with
the provisions of this Section 12.4.
54
<PAGE>
(a) DISTRIBUTION TO PARTICIPANTS. On a Participant's
termination of employment with the Employer for any reason
other than the Participant's death, the Participant may
elect to receive the vested portion of his Accounts in
either of the following forms:
(i) A single lump sum, payable within a reasonable time
after the 120th day following the Plan
Administrator's receipt of the Participant's
election, or
(ii) A series of installment payments over a fixed period
of time that is not less than two (2) years nor more
than the joint life expectancy of the Participant
and his Beneficiary. For this purpose, life
expectancies shall be determined under Tables V and
VI of Treasury Regulation Section 1.72-9 (or such
other sources as may be required for use under Code
Section 401(a)(9) and the regulations promulgated
thereunder) and shall not be recalculated in years
following the initial determination. The amount of
the first installment payment shall be determined by
multiplying the value of the total vested portion of
the Participant's Accounts as of the Revaluation
Date coincident with the date the installment is
payable by a fraction, the numerator of which is one
(1) and the denominator of which is the total number
of installment payments. The amount of each
subsequent installment payment shall be determined
by multiplying the value of the total vested portion
of the Participant's Accounts as of the date the
installment is payable by a fraction, the numerator
of which is one (1) and the denominator of which is
the remaining number of installment payments. Such
installment payments shall be made on a quarterly,
semi-annual, or annual basis, as elected by the
Participant. The first installment payment shall be
made within a reasonable time after the 120th day
following the Plan Administrator's receipt of the
Participant's election.
(b) DISTRIBUTION TO BENEFICIARIES. On a Participant's
termination of employment with the Employer by reason of
the Participant's death, the Participant's designated
Beneficiary(ies) may elect to receive a distribution of the
vested portion of the Participant's Accounts in either of
the following forms:
(i) A single lump sum, payable within a reasonable time
after the Participant's death, or
(ii) A series of installment payments over a fixed period
of time that is not less than two (2) years nor more
than five (5) years; provided however, the period of
time over which the series of installment payments
is paid shall not exceed the Beneficiary's life
expectancy.
55
<PAGE>
For this purpose, life expectancy shall be
determined under Table V of the Treasury Regulation
Section 1.72-9 (or such other sources as may be
required for use under Code Section 401(a)(9) and
the regulations promulgated thereunder) and shall
not be recalculated in years following the initial
determination. The amount of the first installment
payment shall be determined by multiplying the value
of the total vested portion of the Participant's
Accounts as of the Revaluation Date coincident with
the date the installment is payable by a fraction,
the numerator of which is one (1) and the
denominator of which is the total number of
installment payments. The amount of each subsequent
installment payment shall be determined by
multiplying the value of the total vested portion
of the Participant's Accounts as of the date the
installment is payable by a fraction, the numerator
of which is one (1) and the denominator of which is
the remaining number of installment payments. Such
installment payments shall be made on a quarterly,
semi-annual, or annual basis, as elected by the
Beneficiary. The first such installment payment
shall be made within a reasonable time after the
Participant's death.
(c) LUMP SUM DISTRIBUTIONS. Any lump sum distribution shall be
made in cash by check.
(d) INSTALLMENT DISTRIBUTIONS. All installment distributions
shall be made in cash by check. Any Participant (or, in
the case of a distribution under Paragraph 12.4(b)(ii), any
Participant's Beneficiary) electing to receive an
installment distribution may elect to have the vested
portion of the Participant's Accounts invested in any one
or more of the Funds (other than the Transamerica Life
Insurance Fund) after the Participant's Settlement Date;
provided, however, that only one such election may be made
after such Settlement Date, which election must be made
prior to the payment of the first installment. Installment
payments will be drawn pro-rata from the Participant's
balances in the Funds. In the event a Participant or
Beneficiary dies before receiving all installment payments
to which he would otherwise be entitled, the remaining
portion of the Participant's vested Accounts shall be paid
in a single lump sum to the Participant's designated
Beneficiary(ies) (or, in the case of a distribution being
made under Paragraph 12.4(b)(ii), as provided in Section
4.2).
(e) LIFE INSURANCE FUND. Notwithstanding the preceding
provisions of this Section 12.4, any interest in the
Transamerica Life Insurance Fund shall be distributed to a
Participant or Beneficiary in accordance with the
provisions of Sections 8A.5 and 8A.6.
56
<PAGE>
12.5 DISTRIBUTION OF SMALL AMOUNTS. Notwithstanding any other
provision of this Plan to the contrary, if the vested portion of a Participant's
Accounts as of the Participant's Settlement Date does not exceed $5,000 (and did
not exceed $5,000 at the time of any prior distribution from such Accounts) that
amount shall be distributed to the Participant or Beneficiary in a single lump
sum, as soon as administratively practicable following that Settlement Date. If
the vested portion of a Participant's Accounts does exceed $5,000 (or did exceed
$5,000 at the time of any prior distribution from such Accounts) that amount
shall not be distributed prior to the Participant's (or, in the case of a
distribution under subsection 12.4(b), the Participant's Beneficiary's)
attainment of age 70 1/2, and as provided in Section 12.8(c) unless the
Participant or Beneficiary (as the case may be) shall have consented in writing
to an earlier distribution.
12.6 COMMENCEMENT OF RETIREMENT, DISABILITY AND TERMINATION BENEFIT
DISTRIBUTIONS. Notwithstanding anything in this Article XII to the contrary
(except the last paragraph of this Section 12.6), if the vested portion of the
Participant's Accounts exceeds $5,000 (or exceeded $5,000 at the time of any
prior distribution), distribution of benefits under Section 12.4(a) shall not
commence within 30 days after the date the Plan Administrator issues to the
Participant the notice required by Treasury Regulation Section 1.411(a)-11(c)
(the "TAX NOTICE"). The Tax Notice shall be distributed no less than 30 days
and no more than 90 days before any distribution would be made.
The Tax Notice shall explain the tax rules that apply to Plan
distributions and shall notify the Participant of his right to (1) have benefit
payments deferred to a later date, (2) have benefits paid to the Participant,
(3) have benefits paid in a direct rollover described in Article XII-A, or (4)
have benefits split between payment to the Participant and payment in a direct
rollover.
57
<PAGE>
The Participant shall elect in writing, on a form to be provided by the
Plan Administrator, whether and/or how benefits are to be distributed. No
distribution shall be made unless the Participant consents to such distribution.
Such consent may not be given before the Participant receives the Tax Notice nor
more than 90 days before the distribution would be made. If the Participant
refuses to consent to such distribution, his Accounts shall be retained in the
Trust Fund. In that case, distribution shall commence as soon as
administratively feasible after the first to occur of the Participant's (1)
attainment of age 65 and request for a lump-sum distribution of his entire
vested Account balance, (2) election to receive a distribution in accordance
with Section 12.10, (3) attainment of age 70 1/2 or retirement, whichever is
later (subject to Section 12.8(c)), or (4) death (provided the Plan
Administrator has received notice of the Participant's death).
A distribution that is subject to the Participant's consent may commence
less than 30 days (but not less than 7 days) after the Tax Notice is given to
the Participant, provided that:
(a) The Plan Administrator clearly informs the Participant that
the Participant has a right to a period of at least 30 days after
receiving the Tax Notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular distribution
option); and
(b) The Participant (or spouse, if applicable), after receiving
the Tax Notice, affirmatively elects a distribution.
12.7 DISTRIBUTION UNDER QUALIFIED DOMESTIC RELATIONS ORDER.
Notwithstanding anything in this Article XII or Section 15.8 to the contrary,
the Plan Administrator may direct the Trustee to make distribution to an
"alternate payee" under a "qualified domestic relations order" at any time
specified in such order, whether before, at, or after a Participant's "earliest
retirement age" (as all of such terms are defined in Code Section 414(p)),
provided that any such distribution before a Participant's earliest retirement
age shall be subject to the following conditions:
58
<PAGE>
(a) The order must either provide for, or permit the Plan
Administrator and alternate payee to agree to, such an
early distribution;
(b) The distribution must constitute a single-sum payment of
all Plan benefits to which the alternate payee may become
entitled under the terms of the order; and
(c) If the order so provides, any such distribution that
exceeds $5,000 shall be made only with the alternate
payee's written consent.
Unless the context clearly requires a contrary interpretation, any order
providing for a single-sum distribution to an alternate payee as of a
Participant's "earliest retirement age" shall be construed as providing for such
payment to be made on the date which is as soon as administratively practicable
after the Plan Administrator has determined that the order constitutes a
qualified domestic relations order.
12.8 SPECIAL DISTRIBUTION LIMITATIONS. This Section sets forth rules
concerning when distributions may or must begin, and over what period of time
they may or must be made. Any rules concerning the timing and duration of
benefits found in other provisions of the Plan shall be altered only to the
extent necessary to avoid violating the rules of this Section. In no event
shall these rules be read to provide any option as to the time, manner, or
duration of benefits in addition to those found in other provisions of the Plan.
(a) Unless a Participant (or, in the case of a distribution
under subsection 12.4(b), a Participant's Beneficiary)
elects otherwise, distribution of the vested portion of a
Participant's Accounts shall commence within sixty (60)
days after the close of the Plan Year in which occurs the
latest of:
(i) The Participant's attainment of age 65,
(ii) The tenth anniversary of the Participant's
commencement of participation in the Plan, or
(iii) The Participant's termination of employment with the
Employer.
59
<PAGE>
(b) Anything herein to the contrary notwithstanding, no
distribution may be made under this Plan, other than to a
Participant's spouse, that would result in the actuarial
equivalent of a Beneficiary's interest equaling or
exceeding 50 percent of the actuarial equivalent of the
Participant's full benefit, both equivalents being
determined as of the Participant's actual retirement date.
All distribution made under this subsection shall be made
in accordance with Code Section 401(a)(9) and the
regulations promulgated thereunder, including the minimum
distribution incidental benefit rules of Proposed
Regulation Section 1.401(a)(9)-2. Any Plan provisions
reflecting Section 401(a)(9) shall override any
distribution options in the Plan that are inconsistent with
Section 401(a)(9).
(c) In no event shall distribution with respect to a
Participant commence later than April 1 of the calendar
year following the calendar year in which the Participant
attains age 70 1/2. Notwithstanding the preceding
sentence, in the event a Participant who is not a 5
percent owner attains age 70 1/2 on or after
December 31, 1998, the Participant's benefit shall
commence no later than April 1 of the calendar year
following the calendar year in which such Participant
attains age 70 1/2 or retires, whichever occurs later.
(d) In no event shall distribution with respect to a
Participant be made over a period extending beyond the
later of:
(i) The life of the Participant or the joint lives of
the Participant and the Beneficiary designated by
him (if any), or
(ii) The life expectancy of the Participant or the joint
life expectancy of the Participant and the
Beneficiary designated by him (if any).
(e) If a Participant dies after a distribution of his interest
in the Plan has begun but before his complete interest has
been distributed, the remaining portion shall be
distributed at least as rapidly as under the method of
distribution (consistent with (d), above) being used at the
time of his death.
(f) If a Participant dies before distribution of his interest
has begun, distribution of his entire interest shall be
completed within five (5) years after his death. However,
if a portion of the Participant's interest is to be paid to
a Beneficiary designated by him, that portion may, if the
other provisions of this Plan so provide, be distributed
over the life or life expectancy of the Beneficiary. In
that case, distribution must begin not later than one year
after the date of the Participant's death or such later
date as the Secretary of the Treasury may by regulations
prescribe. If the Beneficiary is the Participant's
surviving spouse, and other provisions of the Plan so
provide, distribution need not begin until the date on
which the Participant would have attained age 70 1/2 or
retired, whichever is later. If
60
<PAGE>
the surviving Spouse dies before distribution to her
begins, then for purposes of the requirements of this and
the preceding subsections (concerning the latest date a
distribution may begin and the longest period of time over
which payments may be made), the surviving spouse shall be
treated as if she were a Participant.
12.9 EFFECT OF PLAN ADMINISTRATOR'S DETERMINATION. In exercising its
authority under this Article XII, the Plan Administrator shall act in such
manner as it shall in good faith determine will most adequately and fairly meet
the needs of each Participant or Beneficiary, as the case may be. No authority
shall be exercised in such manner as to discriminate between any class or group
of Participants. The Plan Administrator's determination of all questions that
may arise under this Article XII (if made in accordance with the standards
prescribed herein) shall be conclusive upon all persons claiming to have any
interest under the Plan. In making any determinations hereunder, the Plan
Administrator may rely upon any signed statement that a Participant or
Beneficiary files with it.
12.10 DISTRIBUTION AFTER EARLY RETIREMENT. A Participant who retires on
or after his Early Retirement Date and who does not immediately receive the
vested portion of his Accounts in a single lump sum may thereafter elect to
receive all or a portion of his vested Accounts under any of the forms of
distribution specified in subsection 12.4(a). The number of such elections
shall not be limited; provided, however, that any such election:
(a) Shall be made in accordance with Section 12.6;
(b) Shall result in either a minimum lump-sum distribution of
$500 or an installment distribution of the Participant's entire vested
Account balance; and
(c) Shall not apply to any portion of the Participant's
Accounts held in the Transamerica Life Insurance Fund.
61
<PAGE>
ARTICLE XII-A
DIRECT ROLLOVERS
12A.1 DIRECT ROLLOVERS. Notwithstanding any provision of the Plan to
the contrary that would otherwise limit a distributee's election under this
Article, a distributee may elect, at the time and in the manner prescribed by
the Plan Administrator, to have any portion of an eligible rollover distribution
paid directly to an eligible retirement plan specified by the distributee in a
direct rollover. An eligible rollover distribution may not be paid to more than
one eligible retirement plan.
12A.2 DEFINITIONS. For purposes of this Article, the following terms
shall have the meanings ascribed to them below:
(a) An "ELIGIBLE ROLLOVER DISTRIBUTION" is any distribution of
all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution
does not include: any distribution that is one of a series
of substantially equal periodic payments (not less
frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint
life expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten
years or more; any distribution, to the extent such
distribution is required under Code Section 401(a)(9); and
the portion of any distribution that is not includible in
gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to employer
securities).
(b) An "ELIGIBLE RETIREMENT PLAN" is 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 the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution
to the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement
annuity.
(c) A "DISTRIBUTEE" includes an Employee or former Employee.
In addition, the Employee's or former Employee's surviving
spouse and the Employee's or former Employee's spouse or
former spouse who is the alternate payee under a qualified
domestic relations order, as defined in Code Section
414(p), are distributees with regard to the interest of the
spouse or former spouse.
62
<PAGE>
(d) A "DIRECT ROLLOVER" is a payment by the Plan to the
eligible retirement plan specified by the distributee.
ARTICLE XIII
ADMINISTRATION
13.1 PLAN ADMINISTRATOR. Sauer-Sundstrand Company is the Plan
Administrator and has sole responsibility for the administration of the Plan,
including but not limited to the right to interpret and construe the Plan, and
to determine any disputes arising thereunder. In exercising such powers and
authorities, and in fulfilling such responsibilities, the Plan Administrator
shall exercise good faith, apply standards of uniform application, and refrain
from arbitrary action. The Plan Administrator hereby designates to those named
in Sections 13.2 through 13.5 certain rights and duties for the general
administration of the Plan, and from time to time may further designate or
change responsibilities under the Plan.
13.2 RIGHTS AND DUTIES OF THE BOARD. The Board of Directors of
Sauer-Sundstrand Company ("the Board"), shall:
(a) Adopt the Plan and such amendments thereto as the Board has
not delegated to the Committee under Section 13.4; and
(b) Appoint the Committee.
The Board shall act through a majority of its members, either by vote at a
meeting or in writing without a meeting.
13.3 RIGHT AND DUTIES OF THE TRUSTEE. The Trustee shall have such
rights and duties as are set forth in this Section 13.3.
(a) HOLD ASSETS. The Trustee shall hold the assets of this
Plan.
63
<PAGE>
(b) TRUST AGREEMENT. The Plan Administrator will enter into a
Trust Agreement with one or more Trustees, and the Trustee
will receive contributions made by the Employer pursuant to
the Plan and will hold, invest, and distribute the same in
accordance with the terms and provisions of each Trust
Agreement. The Plan Administrator will determine the form
and terms of such Trust Agreement and may modify such Trust
Agreement from time to time to accomplish the purposes of
this Plan.
(c) RECORDS. The Trustee will maintain the records of each
account and will, at least once during each calendar year,
submit to the Committee a report, which shall include a
list of the investments comprising the trust fund at the
end of the period covered by the report, showing the
valuation placed on each item on such list by the Trustee
at the end of such period and the total of such valuations,
and shall include a statement of purchases, sales and any
other investment changes and of income and disbursements
since the last report. Copies of such reports shall be
available for inspection at the principal office of the
Employer and at such other places as the Committee shall
specify.
(d) REMOVAL/RESIGNATION OF TRUSTEE. The Board may remove the
Trustee at any time upon the notice required by the terms
of the Trust Agreement. Upon such removal, or upon the
resignation of the Trustee, the Board will designate a
successor trustee.
13.4 RIGHTS AND DUTIES OF THE COMMITTEE. The Sauer-Sundstrand Employee
Benefit Committee (the "COMMITTEE") shall have such rights and duties as are set
forth in this Section 13.4.
(a) The Committee members shall be appointed by, and shall
serve at the pleasure of, the Board. Vacancies will be
filled in the same manner as original appointments.
(b) The Committee will hold meetings upon such notice, at such
place or places, and at such time or times as it may from
time to time determine. A majority of the members of the
Committee at the time in office will constitute a quorum
for the transaction of business.
(c) The Committee may act at a meeting or in writing without a
meeting. The Committee may adopt such regulations and
rules as it deems desirable for the conduct of its affairs,
which will be uniformly and consistently applied. All
decisions of the Committee will be made by the vote of the
majority, including actions in writing taken without a
meeting.
64
<PAGE>
(d) No member of the Committee will have any right to vote or
decide upon any matter relating solely to himself or solely
to any of his rights and benefits under the Plan.
(e) The Committee shall have the right to appoint, remove and
replace a Trustee or Trustees, investment manager,
Recordkeeper, insurance company or companies, or any
qualified institution or institutions to act as funding
agent with respect to the Plan.
(f) The Committee shall set funding and investment policies for
the assets of the Plan.
(g) The Committee shall appoint the Appeal Review Committee and
the Plan Benefit Committee, and shall have the right to
appoint others or to employ individuals to assist in the
administration of the Plan.
(h) The Committee shall take such steps as are considered
necessary and appropriate to remedy any inequity that
results from incorrect information received or communicated
in good faith or as the consequence of an administrative
error. It shall endeavor to act, whether by general rules
or by particular decisions, so as not to discriminate in
favor of, or against, any person and so as to treat all
persons in similar circumstances uniformly. The Committee
shall correct any defect, reconcile any inconsistency, or
supply any omission with respect to this Plan. All such
corrections, reconciliations, and completions of Plan
provisions shall be final and binding upon the parties.
(i) The Employer specifically intends that the Committee have
the greatest permissible discretion to construe the terms
of the Plan and to determine all questions concerning
eligibility, participation and benefits. Any such decision
made by the Committee shall be binding on the Employer and
all Employees, Participants, and Beneficiaries, and is
intended to be subject to the most deferential standard of
judicial review. Such standard of review is not to be
affected by any real or alleged conflict of interest on the
part of the Committee members.
(j) The Committee shall adopt all Plan amendments.
13.5 RIGHTS AND DUTIES OF THE PLAN BENEFIT COMMITTEE. The Plan Benefit
Committee shall have such rights and duties as are set forth in this Section
13.5.
(a) The Plan Benefit Committee shall receive and reply to
applications or claims for benefits filed with it by
Participants or Beneficiaries in accordance with subsection
13.11(a).
65
<PAGE>
(b) The Plan Benefit Committee shall issue directions to the
Trustee concerning all benefits that are to be paid
pursuant to the provisions of the Plan.
(c) The Plan Benefit Committee shall receive from the Employer
and Participants such information as is necessary for
proper administration of the Plan.
(d) The Plan Benefit Committee shall prepare and distribute, in
such form as it determines appropriate, information
explaining the Plan.
(e) The Plan Benefit Committee shall furnish to the Employer,
upon request, such reports with respect to the Plan's
administration as are necessary or appropriate.
13.6 RIGHTS AND DUTIES OF THE APPEAL REVIEW COMMITTEE. The Appeal
Review Committee shall have such rights and duties as are stated in subsection
13.11(b).
13.7 INVESTMENT MANAGER. The Committee has the authority to appoint an
investment manager to invest all or any of the assets of the Trust. The
investment manager, or any succeeding investment manager, shall have all the
powers granted to the Trustee with respect to the assets of the Trust Fund, and
the Committee and the Trustee shall be relieved of all liability with respect to
the management and investment of such assets, so long as an investment manager
is retained. For purposes of this Article 13, the term "investment manager"
shall mean any party that:
(a) Is registered as an investment broker under the Investment
Advisors Act of 1940, is a bank, or is an insurance company
qualified to manage, acquire, and dispose of plan assets
under the laws of more than one state;
(b) Acknowledges in writing that it is a fiduciary with respect
to the Plan; and
(c) Is granted the power to manage, acquire or dispose of any
asset of the Trust Fund pursuant to this Article 13.
13.8 RECORDKEEPER. The Committee may, in its sole discretion, appoint
a person to keep records for the Plan (the "Recordkeeper"). The Recordkeeper
shall maintain the Accounts (including Rollover Accounts), allocate earnings,
receive and monitor Participants' investment directions, communicate necessary
information to the Trustee (or, if applicable, to the investment manager) to
facilitate investment of the Trust Fund in accordance with Participants'
directions,
66
<PAGE>
and keep accurate and detailed accounts of all investments, receipts,
disbursements, and other transactions hereunder. Individual Account
statements shall be provided to the Participants at least quarterly. In the
event a Recordkeeper is appointed, the Trustee shall be relieved of its
responsibility for these recordkeeping duties imposed on the Recordkeeper and
shall be relieved of liability for those recordkeeping duties, to the extent
permitted under Part 4, Subtitle B, Title I of the Act.
13.9 INDEMNIFICATION. Each member of the Board and the forenamed
Committees, and each of the Employer's officers, directors and employees
associated with administration of the Plan, shall be indemnified by the Company
against all costs, expenses and liabilities (other than amounts paid in a
settlement to which the Company does not consent) reasonably incurred by him or
them in connection with any action to which he or they may be a party by reason
of performance of designated duties, except in relation to matters as to which
he or they shall be adjudged in such performance to be personally guilty of
gross negligence or willful misconduct. The foregoing right to indemnification
shall be in addition to such other rights as these individuals may enjoy as a
matter of law or by reason of insurance coverage of any kind.
13.10 RELIANCE UPON OTHERS. The Board members, the Trustee, and the
respective Committee members may rely upon the direction, information or actions
of each other to the extent such direction or information is proper under the
Plan and not inconsistent with ERISA. They may also rely upon all tables,
valuations, certificates and reports made by an accountant, attorney, actuary,
consultant or other person selected or approved by any one of them. Except as
prohibited by the Act, they will be indemnified in accordance with Section 13.9
with respect to their reliance upon others as stated herein.
67
<PAGE>
13.11 CLAIMS PROCEDURES.
(a) APPLICATION FOR BENEFITS. At least 60 days before intended
commencement of a Plan benefit, each Participant and/or
Beneficiary believing himself eligible shall apply for such
benefit by completing and filing with the Plan Benefit
Committee an application for benefits on a form supplied by
the Plan Benefit Committee. Before the date on which
benefit payments are to commence, each such application
must be supported by such information and data as the Plan
Benefit Committee deems relevant and appropriate. Evidence
of age, marital status (and, in the appropriate instances,
health, death, or disability), and location of residence
shall be required of all applicants for benefits.
(b) APPEALS OF DENIED CLAIMS FOR BENEFITS. In the event that
any claim for benefits is denied, in whole or in part, the
Participant or Beneficiary whose claim has been so denied
shall be notified of such denial in writing by the Plan
Benefit Committee. The notice advising of the denial shall
specify the reason or reasons for denial, make specific
reference to pertinent Plan provisions, describe any
additional material or information necessary for the
claimant to perfect the claim (explaining why such material
or information is needed), and advise the Participant or
Beneficiary, as the case may be, of the procedure for the
appeal of such denial. All appeals shall be made under the
following procedure:
(i) The Participant or Beneficiary whose claim has been
denied shall file with the Appeal Review Committee a
notice of desire to appeal from the denial. Such
notice shall be filed within ninety (90) days from
his receipt of notification by the Plan Benefit
Committee of the claim's denial, shall be made in
writing, and shall set forth all of the facts upon
which the appeal is based. Appeals not timely filed
shall be barred.
(ii) The Appeal Review Committee shall, within thirty
(30) days of receipt of the Participant's or
Beneficiary's notice of appeal, establish a hearing
date on which the Participant or Beneficiary may
make an oral presentation to the Appeal Review
Committee in support of his appeal. The Participant
or Beneficiary shall be given not less than ten (10)
days' notice of the date set for the hearing.
(iii) The Appeal Review Committee shall consider the
merits of the claimant's written and oral
presentations, the merits of any facts or evidence
in support of the denial of benefits, and such other
facts and circumstances as the Appeal Review
Committee shall deem relevant. If the claimant
elects not to make an oral presentation, such
election shall not be deemed adverse to his
interest, and the Appeal Review Committee shall
proceed as
68
<PAGE>
set forth below as though an oral presentation of
the contents of the claimant's written presentation
had been made.
(iv) The Appeal Review Committee shall render a
determination upon the appealed claim, which
determination shall be accompanied by a written
statement as to the reasons therefor. The
determination so rendered shall be binding upon all
parties.
ARTICLE XIV
AMENDMENT AND TERMINATION
14.1 AMENDMENT. Subject to any applicable contractual provision and to
the provisions of Section 14.2, the Board (or its designee) may at any time and
from time to time amend the Plan with the written consent of the Union.
However, amendment to the Plan may be made without Union consent to the extent
such amendment is required by law or related to the administration of the Plan.
All Employers, Employees, Participants, former Participants, Beneficiaries, and
persons claiming any interest under the Plan shall be bound thereby.
14.2 LIMITATION ON AMENDMENT. Notwithstanding the foregoing, no
amendment shall be made to the Plan which would have the effect of:
(a) Directly or indirectly divesting the interest of any
Participant or former Participant in any amount that he
would have received had he terminated his employment with
his Employer immediately prior to the effective date of
such amendment, or the interest of any Beneficiary as such
interest existed immediately prior to the effective date of
such amendment;
(b) Directly or indirectly affecting the vested interest of a
Participant under the Plan, unless the conditions of
Section 203(c) of the Act are satisfied; or
(c) Causing or effecting impermissible discrimination in favor
of Highly Compensated Employees;
provided, however, that nothing herein contained shall restrict the right to
amend the provisions hereof relating to the administration of the Plan.
Moreover, no amendment shall be made
69
<PAGE>
hereunder which would permit any portion of the Trust Fund to be returned to the
Company or an Employer or to be used for or diverted to purposes other than the
exclusive benefit of Participants, former Participants, and Beneficiaries.
Furthermore, no amendment shall be made which would decrease the amount of any
Participant's Accounts.
14.3 TERMINATION. The Company reserves the right, by action of the
Board to terminate the Plan, in whole or in part, at any time or to completely
discontinue contributions to the Plan, which termination or discontinuance of
contributions shall become effective at the time specified in such action (the
effective date of such termination or discontinuance shall hereafter be referred
to as the "TERMINATION DATE").
The Plan shall terminate automatically in the event of the bankruptcy or
insolvency of the Company; if the Company makes a general assignment for the
benefit of creditors; or if the Company is dissolved or liquidated (unless there
is a successor to the business of the Company which adopts the Plan within
ninety (90) days after becoming such successor). In the event of the merger or
consolidation of the Company or an Employer with or into any other corporation,
or in the event that substantially all of the assets of the Company or an
Employer are transferred to another corporation, the successor corporation
resulting from the consolidation, merger, or transfer of such assets, as the
case may be, shall have the right to adopt and continue the Plan and to succeed
to the position of the Company hereunder. If, however, the Plan is not so
adopted within ninety (90) days after the effective date of such consolidation,
merger, or transfer of assets, the Plan shall automatically be deemed terminated
as of the effective date of such transaction. Nothing in this Plan shall
prevent the dissolution, liquidation, consolidation, or merger of the Company or
an Employer, nor shall it prevent the sale or transfer of all or substantially
all of its assets.
70
<PAGE>
In the event of the termination of the Plan, written notice thereof shall
be given to Employees covered hereunder and to the Trustee. Upon any such
termination of the Plan, the Trustee and the Plan Administrator shall take the
following actions for the benefit of Participants, former Participants, and
Beneficiaries; provided that, in the event of a partial termination, it shall be
followed only with respect to those Participants, former Participants and
Beneficiaries directly affected:
(a) As of the termination date, the Trustee shall revalue the
Trust Fund, and the Plan Administrator, taking into account
such revaluation, shall adjust all Participant Accounts in
the manner provided in Section 10.1. In determining the
net worth of the Trust Fund hereunder, the Trustee shall,
unless payment is otherwise provided for by the Plan
Administrator, include as a liability such amounts as in
its judgment shall be necessary to pay all expenses in
connection with the termination of the Trust and the
liquidation and distribution of the Trust property, as well
as other expenses, whether or not accrued, and shall
include as an asset all accrued income.
(b) The Trustee, after first being advised by the Plan
Administrator in writing as to the value of all of the
Participant Accounts, shall thereafter dispose of such
Accounts to or for the benefit of such Participants, former
Participants, or Beneficiaries, at such times and by such
methods as are provided in Article XII.
ARTICLE XV
MISCELLANEOUS
15.1 PLAN NON-CONTRACTUAL. Nothing herein contained shall be construed
as a commitment or agreement on the part of any Employee to continue his
employment with the Employer, and nothing herein contained shall be construed as
a commitment on the part of the Employer to continue the employment or the rate
of compensation of any Employee for any
71
<PAGE>
period. All Employees herein shall remain subject to discharge, layoff, or
disciplinary action to the same extent as if the Plan had never been put into
effect.
15.2 CLAIMS OF OTHER PERSON. The provisions of the Plan shall in no
event be construed as giving any Employee or any other person, firm or
corporation, any legal or equitable right as against an Employer or the Company,
its officers, employees or directors, or as against the Trustee, except any such
rights as are specifically provided for in the Plan or are hereafter created in
accordance with the terms and provisions of the Plan.
15.3 BENEFITS. Nothing in the Plan shall be construed to confer any
right or claim upon any person other than the parties hereto, Participants,
former Participants and Beneficiaries.
15.4 NO GUARANTEES. Neither the Plan Administrator, an Employer, nor
the Trustee guarantees the Trust from loss or depreciation, nor the payment of
any amount which may be or become due to any person from the Trust Fund. No
Participant or other person shall have any recourse against the Plan
Administrator, an Employer, or the Trustee if the Trust Fund is insufficient to
provide Plan benefits in full. Nothing herein contained shall be deemed to give
any Participant, former Participant, or Beneficiary any interest in a specific
part of the Trust Fund, nor any other interest, except the right to receive
benefits out of the Trust Fund in accordance with the provisions of the Plan and
Trust Agreement.
15.5 MERGER OR CONSOLIDATION OF PLAN. Any merger or consolidation of
the Plan with another plan, or any transfer of Plan assets or liabilities to
another plan, shall be effected in accordance with such regulations, if any, as
may be issued pursuant to Section 208 of the Act, in such a manner that each
Participant in the Plan would receive, if the merged, consolidated or transferee
plan were terminated immediately following such event, a benefit which is equal
to or
72
<PAGE>
greater than the benefit he would have been entitled to receive if the Plan
had terminated immediately before such event.
15.6 LIMITATIONS ON LIABILITY. Notwithstanding any of the preceding
provisions of the Plan, none of the Plan Administrator, an Employer, the
Trustee, and each individual acting as an employee or agent of any of them shall
be liable to any Participant, former Participant or Beneficiary for any claim,
loss, liability or expense incurred in connection with the Plan, except when the
same shall have been judicially determined to be due to the gross negligence or
willful misconduct of such person.
15.7 RESTRICTIONS ON ALIENATION.
(a) The rights and interest of any Participant, former
Participant or Beneficiary hereunder shall not be subject
in any manner to sale, transfer, encumbrance, assignment,
pledge or alienation of any kind; nor may such rights or
interest be resorted to, voluntarily or involuntarily, for
the satisfaction of the debt of, or other obligations or
claims against, such person, including claims for alimony,
support, separate maintenance and claims in bankruptcy
proceedings. No such person shall have power in any manner
to sell, transfer, encumber, assign, pledge, or alienate
his right to receive any distribution hereunder, and any
attempt to do so shall be void.
(b) Notwithstanding the provisions of subsection 15.7(a), if
any Participant borrows money from the Plan pursuant to
Article IX, the Plan Administrator shall have all rights to
collect upon such indebtedness as are granted pursuant to
said Article and any agreements or documents executed in
connection with such loan.
(c) Notwithstanding the provisions of subsection 15.7(a), all
or any portion of any Account maintained under the Plan for
a Participant, former Participant or Beneficiary shall be
subject to and payable in accordance with the applicable
requirements of any "qualified domestic relations order,"
as that term is defined in Section 414(p) of the Act, and
the Plan Administrator shall direct the Trustee to provide
for payment from a Participant's, former Participant's, or
Beneficiary's Accounts in accordance with such order, the
Act, and any regulations promulgated thereunder. All such
payments pursuant to a qualified domestic relations order
shall be subject to reasonable rules and regulations
promulgated by the Plan Administrator respecting the time
of payment and the valuation of the Participant's,
73
<PAGE>
former Participant's, or Beneficiary's Account or Accounts
from which payment is made, including rules and regulations
necessary to implement the provisions of Section 12.7
hereof. The balance of any Account that is subject to a
qualified domestic relations order shall be reduced by the
amount of any payment made pursuant to such order.
(d) Notwithstanding the provisions of subsection 15.7(a),
special rules may apply, as provided in Code Section
401(a)(13)(C), to certain judgments and settlements under
which an offset of a Participant's benefit under the Plan
is required to be made against an amount that the
Participant is ordered or required to pay. The judgment,
order, decree or settlement agreement must (i) arise under
(A) a judgment of conviction for a crime (B) a civil
judgment or (C) a settlement agreement between the
Secretary of Labor or the Pension Benefit Guaranty
Corporation and the Participant; and (ii) expressly provide
for the offset of all or part of the amount ordered or
required to be paid to the Plan against the Participant's
benefits under the Plan. Moreover, in a case in which the
survivor annuity requirements of Code Section 401(a)(11)
apply with respect to a distribution from the Plan, such
offset shall be made as specifically provided for in Code
Section 401(a)(13)(C)(iii).
15.8 PAYMENT TO INCOMPETENT PERSONS. Every person receiving or
claiming a benefit under this Plan shall be presumed to be mentally competent
and of age until the Plan Administrator receives reliable, written notice that
such person is incompetent or a minor. Upon receiving such notice, the Plan
Administrator shall direct the Trustee to make payments in accordance with the
remainder of this Section 15.8. Payments otherwise due a minor shall be paid to
any custodial parent of such minor. Payments otherwise due any other
incompetent person shall be paid to the guardian, conservator, or other legal
representative of such person. In the event that the Plan Administrator is
unable to locate a parent, guardian, conservator, or other legal representative
of an incompetent person who is otherwise entitled to payment under the Plan,
such payment shall be made to the individual determined by the Plan
Administrator to have assumed financial responsibility for the care of such
person. Before the initial payment is made to an individual designated in this
Section 15.8, the minor or other legally incompetent person shall be
74
<PAGE>
notified of the Plan Administrator's intent to make such payment to that other
individual. Any payment of a benefit in accordance with the provisions of this
Section 15.8 shall be in complete discharge of any further liability to make
such payment.
15.9 PRUDENT MAN RULE. Notwithstanding any other provision of this
Plan or the Trust Agreement, the Plan Administrator, the Employer, and the
Trustee shall exercise their powers and discharge their duties under this Plan
and the Trust Agreement for the exclusive purpose of providing benefits to
Participants, former Participants, and Beneficiaries, and they shall act with
the care, skill, prudence and diligence under the circumstances that a prudent
man 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.
15.10 CORRECTIVE CONTRIBUTIONS. An Employer, in its sole discretion
(but subject to the applicable limitations described in Article VI), may elect
to make special contributions to the Plan in order to correct mistakes made in
distributing or crediting amounts to Participant Accounts. Any such
contribution shall be credited to Participant Accounts in the fashion specified
by the Employer and not as otherwise provided in the Plan.
15.11 DUTY TO FURNISH INFORMATION AND DOCUMENTS.
(a) Every person with an interest in the Plan or claiming
benefits under the Plan shall furnish the Plan
Administrator and the Trustee with such documents,
evidence, data, or information as the Plan Administrator
considers necessary or desirable for the purpose of
administering the Plan, and the provisions of the Plan for
each person are upon the condition that he will furnish
promptly full, true and complete documents, evidence, data
and information requested by the Plan Administrator. The
Plan Administrator may postpone payment of benefits until
such information and such documents have been furnished.
(b) Every person claiming a benefit under the Plan shall give
written notice to the Plan Administrator of his or her post
office address and each change of post office address. Any
communication, statement or notice addressed to
75
<PAGE>
such a person at his or her latest post office address, as
filed with the Plan Administrator, will, on deposit in the
United States mail with postage prepaid, be binding upon
such person for all purposes of the Plan. If a person
fails to give notice of his or her correct address, the
Plan Administrator, the Employer, and Plan fiduciaries
shall not be obliged to search for, or to ascertain, his
or her whereabouts. If the location of a Participant is
not made known to the Plan Administrator within three (3)
years after the date as of which distribution of the
Participant's Accounts may first be made, distribution may
be made as though the Participant had died at the end of
the three-year period. If, within one (1) additional year
after such three-year period has elapsed, or within three
(3) years after the actual death of a Participant, the Plan
Administrator is unable to locate any individual who would
receive a distribution under the Plan upon the death of the
Participant pursuant to Section 4.2, the balance in the
Participant's Accounts shall be deemed a forfeiture and
shall be used to reduce the Employer's contributions to the
Plan for the Plan Year next following the year in which the
forfeiture occurs; provided, however, that in the event the
Participant or a Beneficiary makes a valid claim for any
amount which has been forfeited, the amounts which have
been forfeited shall be reinstated.
15.12 PRECEDENT. Except as otherwise specifically provided, no action
taken in accordance with the Plan by the Plan Administrator, an Employer, or the
Trustee shall be construed or relied upon as a precedent for similar action
under similar circumstances.
15.13 LITIGATION. In order to protect the Trust Fund against depletion
as a result of litigation, costs incurred by the Trustee in defending any action
arising out of or based on the Plan by a Participant, or any person claiming any
interest through a Participant, shall be charged as far as possible directly
against the Accounts of such Participant, but only if the result of the action
is adverse to such Participant or claimant.
15.14 EXCLUSIVE BENEFIT OF PARTICIPANTS. All contributions made
pursuant to the Plan shall be held by the Trustee in accordance with the terms
of the Trust Agreement for the exclusive benefit of Participants under the Plan,
including former Participants and Beneficiaries, and shall be applied to provide
benefits under the Plan and to pay expenses of administration of the Plan
76
<PAGE>
and the Trust, to the extent that such expenses are not otherwise paid. At no
time prior to the satisfaction of all liabilities with respect to such
Participants, former Participants and Beneficiaries shall any part of the Trust
Fund (other than such part as may be required to pay administrative expenses
and taxes) be used for, or diverted to, purposes other than for the exclusive
benefit of such Participants, former Participants and Beneficiaries.
Notwithstanding the preceding sentence, however, a contribution to the Trust
Fund shall be returned to the Employer (and, if a Participant Contribution,
immediately paid to the Participant) under the following circumstances:
(a) If the contribution is not deductible to the Employer, as
provided in Section 6.1; or
(b) If the contribution is made under a mistake of fact, as
provided in Section 6.2.
15.15 SERVICE OF PROCESS. The Vice-President, Administration, of
Sauer-Sundstrand Company is hereby designated as agent for the service of
legal process on the Plan.
15.16 GOVERNING LAW. The Plan and the Trust Agreement shall be
interpreted, administered and enforced in accordance with the Code and the Act,
and the rights of Participants, former Participants, Beneficiaries, and all
other persons shall be determined in accordance therewith; provided, however,
that, to the extent any state law is applicable, the laws of the State of Iowa
shall apply.
15.17 TRUST AGREEMENT. The Trust Agreement and the Trust Fund shall be
deemed to be a part of the Plan, and the provisions of the Trust Agreement are
hereby incorporated by reference into the Plan.
15.18 PLURALS; MASCULINE TO INCLUDE FEMININE. Where the context so
indicates, the singular shall include the plural and vice-versa, and the
masculine pronoun shall include the feminine.
77
<PAGE>
15.19 TITLES. Titles of articles, sections, and the like are provided
herein for convenience of reference only and are not to serve as a basis for
interpretation or construction of the Plan.
15.20 REFERENCES. Unless the context clearly indicates to the contrary,
a reference to a Plan or Trust provision, statute, regulation, or document shall
be construed as referring to any subsequently enacted, adopted, or executed
counterpart.
ARTICLE XVI
RESTATEMENT EFFECTIVE DATES
16.1 IN GENERAL. Except as provided in Section 16.2, the changes made
by the October 1, 1995 Amendment and Restatement of the Plan shall be effective
as of October 1, 1995.
16.2 EXCEPTIONS. The changes made to the following Plan provisions by
the October 1, 1995 Amendment and Restatement shall be effective as of the
following dates:
(a) EFFECTIVE AUGUST 15, 1995: revisions to the financial
hardship withdrawal provisions which permit hardship
withdrawals by alternate payees (Section 11.1).
(b) EFFECTIVE JANUARY 1, 1995: revisions to provisions
permitting early retirees to elect distributions at any
time between their retirement date and age 70 1/2 (Sections
12.4 and 12.8).
(c) EFFECTIVE APRIL 1, 1996: revisions to the Plan's
definition of Compensation (Section 1.8), and clarification
of the Plan provisions dealing with loans in default
(Section 9.6).
16.3 RESTATEMENT EFFECTIVE DATE. Except as provided in subsection
6.3(d) and 6.5(a), the changes made by this January 1, 1998 Amendment and
Restatement of the Plan shall be effective January 1, 1998.
78
<PAGE>
16.4 REPEAL OF FIRST AMENDMENT. The First Amendment to the
Sauer-Sundstrand LaSalle Factory Employee Savings Plan January 1, 1994
Restatement, dated October __, 1995, is retroactively repealed as of its
effective date.
SAUER-SUNDSTRAND COMPANY
By:
---------------------------------
Its:
---------------------------------
Executed at Ames, Iowa
this_____day of_______________, 1998.
79
<PAGE>
SAUER-SUNDSTRAND
LASALLE FACTORY
EMPLOYEE SAVINGS PLAN
(AMENDED AND RESTATED AS OF JANUARY 1, 1998)
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 An "Account" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 The "Act". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 An "Active Participant". . . . . . . . . . . . . . . . . . . . . . . 3
1.4 An "Authorized Leave of Absence" . . . . . . . . . . . . . . . . . . 3
1.5 The "Beneficiary". . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6 Break in Service . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 The "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.9 The "Company". . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.10 A "Disability" . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.10A A Participant's "Early Retirement Date". . . . . . . . . . . . . . . 6
1.11 The "Effective Date" . . . . . . . . . . . . . . . . . . . . . . . . 7
1.12 An "Eligible Employee" . . . . . . . . . . . . . . . . . . . . . . . 7
1.13 An "Employee". . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.14 An "Employer". . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.15 An "Employer Contribution" . . . . . . . . . . . . . . . . . . . . . 7
1.16 An "Employment Year" . . . . . . . . . . . . . . . . . . . . . . . . 8
1.17 An "Enrollment Date" . . . . . . . . . . . . . . . . . . . . . . . . 8
1.18 A "Fund" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.19 A "Highly Compensated Employee". . . . . . . . . . . . . . . . . . . 8
1.20 The "Highly Compensated Employee Group". . . . . . . . . . . . . . . 8
1.21 An "Hour of Service" . . . . . . . . . . . . . . . . . . . . . . . . 8
1.22 A "Matching Contribution". . . . . . . . . . . . . . . . . . . . . . 10
1.23 A "Nonhighly Compensated Employee" . . . . . . . . . . . . . . . . . 10
1.24 The "Nonhighly Compensated Employee Group" . . . . . . . . . . . . . 10
1.25 A Participant's "Normal Retirement Date" . . . . . . . . . . . . . . 10
1.26 A "Participant". . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.27 A "Participant Contribution" . . . . . . . . . . . . . . . . . . . . 10
1.28 The "Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.29 The "Plan Administrator,". . . . . . . . . . . . . . . . . . . . . . 10
1.30 A "Plan Year". . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.31 A "Related Employer" . . . . . . . . . . . . . . . . . . . . . . . . 11
1.32 A "Related Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.33 A "Revaluation Date" . . . . . . . . . . . . . . . . . . . . . . . . 11
1.34 Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.35 The "Settlement Date". . . . . . . . . . . . . . . . . . . . . . . . 12
1.36 The "Trust Agreement". . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
1.37 The "Trust Fund" . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.38 The "Trustee". . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.39 The "Union". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE II EMPLOYEE ELIGIBILITY. . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1 Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2 Reinstatement of an Eligible Employee After Termination. . . . . . . 13
2.3 Changes in Employment Status . . . . . . . . . . . . . . . . . . . . 13
ARTICLE III PARTICIPATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Participation in Employer and Matching Contributions . . . . . . . . 13
3.2 Participation in Participant Contributions . . . . . . . . . . . . . 14
3.3 Notification of Enrollment Date. . . . . . . . . . . . . . . . . . . 14
3.4 Authorized Leaves of Absence and Layoff of One Year or Less. . . . . 15
3.5 Authorized Leaves of Absence in Excess of One Year . . . . . . . . . 15
3.6 Reemployment Following Termination . . . . . . . . . . . . . . . . . 15
ARTICLE IV BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.1 Designation of Beneficiary . . . . . . . . . . . . . . . . . . . . . 16
4.2 Beneficiary in the Absence of Designation. . . . . . . . . . . . . . 17
4.3 Identification of Distributees . . . . . . . . . . . . . . . . . . . 18
ARTICLE V CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 Employer and Matching Contributions. . . . . . . . . . . . . . . . . 18
5.2 Participant Contributions. . . . . . . . . . . . . . . . . . . . . . 18
(a) Minimum Reduction . . . . . . . . . . . . . . . . . . . . . . 19
(b) Maximum Reduction . . . . . . . . . . . . . . . . . . . . . . 19
(c) Minimum Increments. . . . . . . . . . . . . . . . . . . . . . 19
5.3 Rollover Contributions and Elective Transfers. . . . . . . . . . . . 19
(a) Rollover Contributions. . . . . . . . . . . . . . . . . . . . 19
(b) Elective Transfers. . . . . . . . . . . . . . . . . . . . . . 19
(c) Rollover Account. . . . . . . . . . . . . . . . . . . . . . . 20
(d) Investments . . . . . . . . . . . . . . . . . . . . . . . . . 20
(e) Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . 20
(f) Distributions . . . . . . . . . . . . . . . . . . . . . . . . 20
(g) Rules and Procedures. . . . . . . . . . . . . . . . . . . . . 20
5.4 Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.5 Form of Contributions. . . . . . . . . . . . . . . . . . . . . . . . 21
5.6 Changes in Payroll Deduction Authorization . . . . . . . . . . . . . 21
5.7 Suspension of Contributions. . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI LIMITATIONS ON CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . 22
6.1 Deductibility of Contributions . . . . . . . . . . . . . . . . . . . 22
6.2 Mistake of Fact. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.3 Limitation on Annual Additions . . . . . . . . . . . . . . . . . . . 23
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
(a) Order of Reductions . . . . . . . . . . . . . . . . . . . . . 24
(b) Reallocation of Contributions or Forfeitures. . . . . . . . . 24
(c) Suspense Account. . . . . . . . . . . . . . . . . . . . . . . 24
(d) Annual Additions to Other Defined Contribution Plans. . . . . 24
(e) Combined Limitation . . . . . . . . . . . . . . . . . . . . . 25
(f) Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.4 Dollar Limitation on Participant Contributions . . . . . . . . . . . 28
(a) Correction of Excess Deferrals During Same Calendar Year. . . 28
(b) Correction of Excess Deferrals During Following Calendar
Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.5 Limitation on Participant Contributions. . . . . . . . . . . . . . . 30
(a) Actual Deferral Percentage Test . . . . . . . . . . . . . . . 30
(b) Determination of ADP Test . . . . . . . . . . . . . . . . . . 30
(c) Preliminary ADP Test. . . . . . . . . . . . . . . . . . . . . 30
(d) Correction of Excess Contributions. . . . . . . . . . . . . . 31
(e) Treatment of Matching Contributions . . . . . . . . . . . . . 31
(f) Allocation of Income. . . . . . . . . . . . . . . . . . . . . 31
6.6 Limitation on Matching Contributions . . . . . . . . . . . . . . . . 31
(a) Actual Contribution Percentage Test . . . . . . . . . . . . . 32
(b) Determination of ACP Test . . . . . . . . . . . . . . . . . . 32
(c) Preliminary ACP Test. . . . . . . . . . . . . . . . . . . . . 32
(d) Correction of Excess Aggregate Contributions. . . . . . . . . 32
(e) Allocation of Income. . . . . . . . . . . . . . . . . . . . . 33
6.7 Multiple Use Limitation. . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VII DEPOSIT AND INVESTMENT OF CONTRIBUTIONS; INVESTMENT ELECTIONS. . . . . 34
7.1 Deposit of Employer and Matching Contributions . . . . . . . . . . . 34
7.2 Deposit of Participant Contributions . . . . . . . . . . . . . . . . 34
7.3 Investment Election for Participant Contributions at Time of
Initial Participation. . . . . . . . . . . . . . . . . . . . . . . . 34
7.4 Changes in Investment Election . . . . . . . . . . . . . . . . . . . 34
ARTICLE VIII ESTABLISHMENT OF FUNDS AND PARTICIPANTS' ACCOUNTS . . . . . . . . . . 35
8.1 Establishment of Accounts. . . . . . . . . . . . . . . . . . . . . . 35
8.2 Establishment of Funds . . . . . . . . . . . . . . . . . . . . . . . 36
8.3 Income on Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.4 Account Statements . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.5 Account Balances . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VIII-A LIFE INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8A.1 Purchase of Policies . . . . . . . . . . . . . . . . . . . . . . . . 37
8A.2 Policy Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8A.3 Payment of Premiums. . . . . . . . . . . . . . . . . . . . . . . . . 38
8A.4 Overriding Conditions and Limitations. . . . . . . . . . . . . . . . 38
8A.5 Designation of Beneficiary; Death Benefits . . . . . . . . . . . . . 38
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
(a) Receipt of Policy Proceeds. . . . . . . . . . . . . . . . . . 39
(b) Death of Participant. . . . . . . . . . . . . . . . . . . . . 39
(c) Death of Participant's Spouse or Child. . . . . . . . . . . . 39
8A.6 Other Distributions; Vesting . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IX LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.1 Loans to Participants. . . . . . . . . . . . . . . . . . . . . . . . 40
9.2 Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.3 Interest Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.4 Repayment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.5 Documentation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.6 Security; Collection . . . . . . . . . . . . . . . . . . . . . . . . 42
9.7 Additional Information . . . . . . . . . . . . . . . . . . . . . . . 44
9.8 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE X VALUATION OF ACCOUNTS. . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.1 Revaluation of Participant's Interest. . . . . . . . . . . . . . . . 45
10.2 Investment Fund Accounting . . . . . . . . . . . . . . . . . . . . . 46
10.3 Finality of Determinations . . . . . . . . . . . . . . . . . . . . . 46
10.4 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE XI WITHDRAWALS WHILE EMPLOYED. . . . . . . . . . . . . . . . . . . . . . . 47
11.1 Employer and Matching Contribution Accounts. . . . . . . . . . . . . 47
11.2 Participant Contribution Account . . . . . . . . . . . . . . . . . . 47
(a) Financial Hardship. . . . . . . . . . . . . . . . . . . . . . 47
(b) Immediate and Heavy Financial Need. . . . . . . . . . . . . . 47
(c) Distribution Necessary to Satisfy Hardship. . . . . . . . . . 48
(d) Representations by Participant. . . . . . . . . . . . . . . . 48
(e) Source of Hardship Withdrawal . . . . . . . . . . . . . . . . 48
(f) Application for Hardship Withdrawal . . . . . . . . . . . . . 49
11.3 Rollover Account . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.4 Attainment of Age 59 1/2 or Disability. . . . . . . . . . . . . . . . 49
11.5 Form of Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE XII DISTRIBUTION ON TERMINATION OF EMPLOYMENT. . . . . . . . . . . . . . . 50
12.1 Termination of Participation . . . . . . . . . . . . . . . . . . . . 50
12.2 Vesting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.3 Forfeitures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.4 Distribution on Termination of Employment. . . . . . . . . . . . . . 52
(a) Distribution to Participants. . . . . . . . . . . . . . . . . 53
(b) Distribution to Beneficiaries . . . . . . . . . . . . . . . . 53
(c) Lump Sum Distributions. . . . . . . . . . . . . . . . . . . . 54
(d) Installment Distributions . . . . . . . . . . . . . . . . . . 54
(e) Life Insurance Fund . . . . . . . . . . . . . . . . . . . . . 54
12.5 Distribution of Small Amounts. . . . . . . . . . . . . . . . . . . . 54
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
12.6 Commencement of Retirement, Disability and Termination Benefit
Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
12.7 Distribution Under Qualified Domestic Relations Order. . . . . . . . 56
12.8 Special Distribution Limitations . . . . . . . . . . . . . . . . . . 57
12.9 Effect of Plan Administrator's Determination . . . . . . . . . . . . 58
12.10 Distribution After Early Retirement. . . . . . . . . . . . . . . . . 59
ARTICLE XII-A DIRECT ROLLOVERS . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12A.1 Direct Rollovers . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12A.2 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
(a) An "eligible rollover distribution" . . . . . . . . . . . . . 60
(b) An "eligible retirement plan" . . . . . . . . . . . . . . . . 60
(c) A "distributee" . . . . . . . . . . . . . . . . . . . . . . . 60
(d) A "direct rollover" . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE XIII ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
13.1 Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . . . 61
13.2 Rights and Duties of the Board . . . . . . . . . . . . . . . . . . . 61
13.3 Right and Duties of the Trustee. . . . . . . . . . . . . . . . . . . 61
(a) Hold Assets . . . . . . . . . . . . . . . . . . . . . . . . . 61
(b) Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . 61
(c) Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(d) Removal/Resignation of Trustee. . . . . . . . . . . . . . . . 62
13.4 Rights and Duties of the Committee . . . . . . . . . . . . . . . . . 62
13.5 Rights and Duties of the Plan Benefit Committee. . . . . . . . . . . 63
13.6 Rights and Duties of the Appeal Review Committee . . . . . . . . . . 64
13.7 Investment Manager . . . . . . . . . . . . . . . . . . . . . . . . . 64
13.8 Recordkeeper . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.9 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.10 Reliance Upon Others . . . . . . . . . . . . . . . . . . . . . . . . 65
13.11 Claims Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE XIV AMENDMENT AND TERMINATION. . . . . . . . . . . . . . . . . . . . . . . 67
14.1 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
14.2 Limitation on Amendment. . . . . . . . . . . . . . . . . . . . . . . 67
14.3 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE XV MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
15.1 Plan Non-Contractual . . . . . . . . . . . . . . . . . . . . . . . . 69
15.2 Claims of Other Person . . . . . . . . . . . . . . . . . . . . . . . 70
15.3 Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
15.4 No Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
15.5 Merger or Consolidation of Plan. . . . . . . . . . . . . . . . . . . 70
15.6 Limitations on Liability . . . . . . . . . . . . . . . . . . . . . . 71
15.7 Restrictions on Alienation . . . . . . . . . . . . . . . . . . . . . 71
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
15.8 Payment to Incompetent Persons . . . . . . . . . . . . . . . . . . . 72
15.9 Prudent Man Rule . . . . . . . . . . . . . . . . . . . . . . . . . . 73
15.10 Corrective Contributions . . . . . . . . . . . . . . . . . . . . . . 73
15.11 Duty to Furnish Information and Documents. . . . . . . . . . . . . . 73
15.12 Precedent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
15.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
15.14 Exclusive Benefit of Participants. . . . . . . . . . . . . . . . . . 74
15.15 Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . 75
15.16 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
15.17 Trust Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . 75
15.18 Plurals; Masculine to Include Feminine . . . . . . . . . . . . . . . 75
15.19 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
15.20 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE XVI RESTATEMENT EFFECTIVE DATES. . . . . . . . . . . . . . . . . . . . . . 76
16.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
16.2 Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
(a) Effective August 15, 1995 . . . . . . . . . . . . . . . . . . 76
(b) Effective January 1, 1995 . . . . . . . . . . . . . . . . . . 76
(c) Effective April 1, 1996 . . . . . . . . . . . . . . . . . . . 76
16.3 Restatement Effective Date . . . . . . . . . . . . . . . . . . . . . 77
16.4 Repeal of First Amendment. . . . . . . . . . . . . . . . . . . . . . 77
vi
</TABLE>
<PAGE>
FIRST AMENDMENT
SAUER-SUNDSTRAND LASALLE FACTORY
EMPLOYEE SAVINGS PLAN
(AS AMENDED AND RESTATED AS OF JANUARY 1, 1998)
WHEREAS, the Company maintains the Sauer-Sundstrand LaSalle Factory
Employee Savings Plan (As Amended and Restated as of January 1, 1998) (the
"Plan"); and
WHEREAS, further amendment of the Plan is now deemed desirable;
NOW THEREFORE, IT IS RESOLVED, that pursuant to the amending power
reserved to this Company by Section 14.1 of the Plan, the Plan be, and it hereby
is, further amended, effective as of September 1, 1998, in the following
particulars:
1. By substituting the following for Section 1.17 of the Plan:
"1.17 An 'ENROLLMENT DATE' shall mean the first day that
an Employee becomes an Eligible Employee if the Eligible Employee
elects, pursuant to Section 3.2, to participate in Participant
Contributions on that day."
2. By substituting the following for Section 1.18 of the Plan:
"1.18 A 'FUND' shall mean any of the funds in which Plan
assets may be invested, or described in Section 8.2. Such Funds
shall include:
(a) IRT Stable Value Fund
(b) INVESCO Select Income Fund
(c) INVESCO Total Return Fund
(d) Fidelity Equity Income Fund
(e) IRT 500 Index Fund
(f) AIM Blue Chip Fund
(g) INVESCO Small Company Value Fund
(h) IRT International Equity Fund
(i) The Transamerica Life Insurance Fund."
3. By substituting the following for Section 1.38 of the Plan:
"1.38 The 'TRUSTEE' shall mean the Institutional Trust
Company, or the institution, person or persons so designated by
the Company and any successor trustee, and any co-trustee which at
the time shall be designated, qualified and acting under the Trust
Agreement."
1
<PAGE>
4. By substituting the following for the first sentence of
Section 3.2:
"Any Eligible Employee may become a Participant in
Participant Contributions under Section 5.2 as of the date such
Eligible Employee is hired."
5. By substituting the following for paragraph (ii) of
subsection 5.2(b)
"(ii) For any Participant who is a Non-highly Compensated
Employee, twenty-one percent (21%) of such Participant's
Compensation for such payroll period."
6. By substituting the following for the first sentence of
Section 5.6:
"A Participant may change the percentage of his
Compensation which is to be contributed to the Plan as a
Participant Contribution once per pay period by filing an amended
payroll deduction authorization with the Company; provided, that
any such change shall be effective as of the first day of the
payroll period following the end of the payroll period in which
such deduction authorization is received by the Company."
7. By substituting the following for the third sentence of
Section 5.7 of the Plan:
"A Participant who has suspended all of his Participant
Contributions in accordance with the foregoing provisions of this
Section 5.7 may resume such Contributions only by filing a new
payroll deduction authorization with the Company not later than
the date as of which Participant Contributions are to be resumed."
8. By substituting the following for Section 7.1 of the Plan:
"7.1 DEPOSIT OF EMPLOYER AND MATCHING CONTRIBUTIONS.
Upon receipt of Employer or Matching Contributions, the Trustee
shall deposit within 14 business days such Contributions in
accordance with the investment election of each Participant with
respect to such Participant's Participant Contributions. If no
such election is received by the Trustee, such Contributions shall
be invested in the INVESCO Total Return Fund."
9. By substituting the following for the first sentence of the last
paragraph of Section 7.4 of the Plan:
"A Participant may change his investment elections daily."
2
<PAGE>
10. By substituting the following for Section 8.2 of the Plan:
"8.2 ESTABLISHMENT OF FUNDS. The Trustee, at the
direction of the Plan Administrator, shall establish the following
no-load investment Funds under the Trust Agreement:
(a) IRT Stable Value Fund;
(b) INVESCO Select Income Fund;
(c) INVESCO Total Return Fund;
(d) Fidelity Equity Income Fund;
(e) IRT 500 Index Fund;
(f) AIM Blue Chip Fund;
(g) INVESCO Small Company Value Fund; and
(h) IRAT International Equity Fund
(i) The Transamerica Life Insurance Fund."
Dated this 3rd day of December, 1999.
Ronald C. Hanson
3
<PAGE>
SECOND AMENDMENT
SAUER-SUNDSTRAND LASALLE FACTORY
EMPLOYEE SAVINGS PLAN
(AS AMENDED AND RESTATED AS OF JANUARY 1, 1998)
WHEREAS, the Company maintains the Sauer-Sundstrand LaSalle Factory
Employee Savings Plan (As Amended and Restated as of January 1, 1998) (the
"Plan"); and
WHEREAS, the Company desires to amend the Plan to (1) bring the Plan into
compliance with the requirements of the Small Business Job Protection Act of
1996, and the Taxpayer Relief Act of 1997; (2) add a Company stock fund as an
investment option for its eligible employees, and (3) make certain other changes
with respect to applicable interest rates on plan loans.
NOW THEREFORE, BE IT RESOLVED, that pursuant to the amending power
reserved to this Company by Section 14.1, the Plan be, and it hereby is,
amended, effective as of the dates set forth below, in the following respects:
1. Section 1.18 is amended, effective as of January 1, 2000, to read
as follows:
"1.18 A 'FUND' shall mean any of the funds in which Plan assets
may be invested as described in Section 8.2."
2. Section 6.3(f)(ii) is amended, effective as of January 1, 1998, to
read as follows:
"A Participant's 'COMPENSATION' shall include that Participant's
wages, salaries, fees for professional services and other amounts
received for personal services actually rendered in the course of
employment with the Employer (including, but not limited to, commissions
paid to salesman, compensation for services on the basis of a percentage
of profits, tips, and bonuses), and all Compensation actually paid or
made available to the Participant for an entire Limitation Year,
including elective deferrals (as defined in Code Section 402(g)(3)), and
any amounts that would have been received as cash, but for an election to
receive benefits under a cafeteria plan satisfying Code Section 125.
Compensation shall exclude any other items or amounts paid to or for the
benefit of the Participant."
3. Sections 6.5(a) and 6.6(a) are amended, effective as of January 1,
1997, by adding the following at the end of the respective subsections:
"Notwithstanding the foregoing, for Plan Years commencing on and
after January 1, 1997 through the end of the remedial amendment period as
described in Notice 97-41, and modified by any subsequent Internal
Revenue Service publication, the ADP for the Nonhighly Compensated
Employee Group may be determined on the basis of data from the current
Plan Year."
1
<PAGE>
4. Section 6.5(d)(ii) is amended, effective as of January 1, 1997, to
read as follows:
"(ii) Distribution of Excess Contributions (and any income
allocable thereto) to the appropriate Highly Compensated
Employees. Such distribution shall be determined and made
as follows: First, the total dollar amount of excess
contributions for each affected Highly Compensated Employee
shall be determined. Second, such dollar amounts shall be
aggregated for all affected Highly Compensated Employees.
Third, the Highly Compensated Employee with the highest
dollar amount in Participant Contributions shall be reduced
by an amount necessary for such Highly Compensated
Employee's Participant Contributions to equal that of the
Highly Compensated Employee with the next highest dollar
amount in Participant Contributions. Such reduction is
then distributed to the Highly Compensated Employee with
the highest dollar amount. However, if a lesser reduction,
when added to the total dollar amount already distributed
under the foregoing, would equal the total excess
contributions, the lesser amount shall be distributed. If
Excess Contributions remain, the foregoing procedures are
repeated until the excess contributions are distributed."
5. Section 6.6(d)(ii) is amended, effective as of January 1, 1997, to
read as follows:
"(ii) Distribution of any vested Excess Aggregate Contributions
(and any income allocable thereto) to the appropriate
Highly Compensated Employees. Distribution of vested
Excess Aggregate Contributions shall be made in accordance
with the procedures for distributing Excess Contributions
as set forth above in Section 6.5(d)(ii); or"
6. Section 7.1 of the Plan is amended, effective as of January 1,
2000, to read as follows:
"7.1 DEPOSIT OF EMPLOYER AND MATCHING CONTRIBUTIONS. Upon
receipt of Employer or Matching Contributions, the Trustee shall deposit
within 14 business days such Contributions in accordance with the
investment election of each Participant with respect to such
Participant's Participant Contributions. If no such election is received
by the Trustee, such Contributions shall be invested in the Default Fund
(as defined in Section 8.2(b))."
7. Section 7.3 is amended, effective as of August 31, 1998 to read as
follows:
"7.3 INVESTMENT ELECTION FOR PARTICIPANT CONTRIBUTIONS AT TIME
OF INITIAL PARTICIPATION. Each Participant in Participant Contributions
shall, upon electing to become a Participant under the Plan pursuant to
Section 3.2 and on a form suitable to the Plan Administrator, make an
election as to the manner in which Participant
2
<PAGE>
Contributions made by the Employer on his behalf are to be invested by
the Trustee. A Participant's investment election shall specify the
percentage of his Participant Contributions to be invested in one or
more of the Funds described in Section 8.2. Unless changed by a
Participant under Section 7.4, the investment election initially made by
a Participant shall remain in effect until he ceases to be a Participant
under the Plan."
9. Section 8.2 is amended, in its entirety, effective as of
January 1, 2000, to read as follows:
"8.2 ESTABLISHMENT OF FUNDS. The Trustee, at the
direction of the Plan Administrator, shall establish the
following no-load investment Funds under the Trust Agreement:
(i) IRT Stable Value Fund;
(ii) INVESCO Select Income Fund;
(iii) INVESCO Total Return Fund;
(iv) Fidelity Equity Income Fund;
(v) IRT 500 Index Fund;
(vi) AIM Blue Chip Fund;
(vii) INVESCO Small Company Value Fund; and
(viii) IRT International Equity Fund
(ix) The Transamerica Life Insurance Fund.
Notwithstanding the foregoing, effective January 1, 2000, the
following provisions shall apply:
(a) The Plan Administrator may direct the Trustee to
add, change or eliminate from time to time one or
more investment funds, without an amendment to the
Plan and upon such terms and conditions as it deems
appropriate. Notwithstanding the foregoing, the
Plan Administrator shall direct the Trustee, in
accordance with Section 404(c) of ERISA, to make
available at all times at least three separate
investment alternatives each of which is diversified
and which have materially different risk and return
characteristics. The investment alternatives in the
aggregate shall enable each Participant by choosing
among them to achieve a portfolio with aggregate
risk and return characteristics at any point within
a range normally appropriate for the Participant,
and which in the aggregate tend to minimize through
diversification the overall risk of the
Participant's portfolio. The Plan intends to
constitute a plan described in Section 404(c) of
ERISA, such that to the extent permitted by law the
fiduciaries of the Plan shall be relieved of
liability for any losses that are the direct and
3
<PAGE>
necessary result of the investment instructions
given by Participants and Beneficiaries under the
Plan.
(b) Notwithstanding the foregoing, the Investment Funds
shall, at all times, include: (i) a Fund used for
the investment of Employer Matching Contributions
and Participant Contributions for which no
investment election is provided, which Fund is
designed to preserve capital and provide fixed
income until an investment election is made
('Default Fund'); (ii) a 'Life Insurance Fund' for
the purpose of purchasing life insurance under
Article 8A; and, (iii) a Company Stock Fund, which
is designed to permit Participants to invest in
shares of common stock of Sauer Inc., the parent
company of the Company ('Company Stock')."
10. Section 8.3 is added, effective as of January 1, 2000, to read as
follows, and the remaining sections of Article 8 are renumbered accordingly:
"8.3 COMPANY STOCK FUND. The provisions of this Section 8.3 set
forth special rules governing the investment of Participant Contributions
into the Company Stock Fund.
(a) INVESTMENTS IN COMPANY STOCK FUND. Participants may
elect to invest a portion of their Participant
Contributions in the Company Stock Fund. The
maximum amount permitted to be invested shall be 30%
of a Participant's Account balances, determined at
the time the amount is transferred to, or deposited
in, the Company Stock Fund. The Company shall have
the right (i) to pay from amounts transferred to or
deposited in the Company Stock Fund any brokerage
fees and expenses associated with such transfer and
acquisition of Company Stock, and (ii) to pay from
the Participant's Accounts any brokerage fees and
expenses associated with the conversion of such
units to any other Investment Fund and/or cash.
(b) VOTING RIGHTS. Participants with Contributions
invested in Company stock shall be entitled to vote
the shares allocated to the Participant's Account.
Within a reasonable time prior to each annual or
special meeting of the shareholders of the Sauer
Inc., the Company shall send to each Participant a
copy of the proxy soliciting material (including an
annual report) for the meeting, together with a form
requesting instructions to the Trustee on how to
vote the proportional number of shares of Company
Stock (and any fractional share thereof)
attributable to the Participant's interest in the
Company Stock Fund. Upon receipt of such
4
<PAGE>
instruction, the Trustee shall vote such shares to
the extent possible to reflect such Participants
instructions. If the Trustee does not receive
voting instructions from a Participant, the Trustee
shall vote the Company Stock attributable to each
Participant's interest in the same proportion as the
Trustee votes the shares of Company Stock which are
attributable to Participants' interests in the
Company Stock Fund of which the Trustee received
voting instructions.
Notwithstanding any provision of the Plan to the
contrary, if a tender or exchange offer is made for
a majority of the outstanding shares of Company
Stock, a Participant shall direct the Trustee as to
the disposition of the proportional number of shares
of Company Stock attributable to his interest in the
Company Stock Fund. If a Participant does not
direct the Trustee as to the disposition of the
Company Stock attributable to his Company Stock Fund
with the time specified, such Participant shall be
deemed to have timely instructed the Trustee not to
tender or exchange such shares of Company Stock.
Information relating to the purchase, holding and
sale of Company Stock and the exercise of
shareholder rights with respect to such Company
Stock by Participants shall be maintained in
accordance with procedures designed by the Trustee
to safeguard the confidentiality of such actions by
the Participant, except to the extent necessary to
comply with federal or state laws.
(c) COMPLIANCE WITH FEDERAL SECURITIES LAWS. The
Company reserves the right to file with the
Securities Exchange Commission (the 'SEC')a
Registration Statement on Form S-8 in connection
with registration of the shares of common stock of
Sauer Inc. and the participation interests to be
offered and sold to the Plan.
Notwithstanding any provision of this Section to the
contrary, if a Participant is a person subject to
Section 16 of the Securities and Exchange Act of
1934 ('Section 16') as of January 1, 2000, such
Participant shall not be permitted to invest his
Participant Contributions in the Company Stock Fund
until such time as he is no longer subject to
Section 16. If a Participant is not subject to
Section 16 as of January 1, 2000, but later becomes
subject to Section 16, he shall not be permitted, as
of the date he becomes subject to such Section, to
invest future Participant Contributions in the
Company Stock Fund. With respect to investments
already
5
<PAGE>
made in the Company Stock Fund, such Participant
shall, at his option, make an election to transfer
out of the Common Stock Fund; provided that such
transfer is made at least six months after any
investment election into the Common Stock Fund,
or purchase of Company stock under any other plan
maintained by the Company."
11. Article VIII-A and Sections 7.4, 10.1, and 12.4 are amended,
effective as of January 1, 2000, by substituting "Life Insurance Fund" for
"Transamerica Life Insurance Fund" wherever the latter appears, and by
substituting "Default Fund" for "Norwest Stable Return Fund" wherever the latter
appears.
12. Section 9.3 is amended, effective as of August 31, 1998, to read
as follows:
"9.3 INTEREST RATE. The interest rate to be paid by an Active
Participant on a new loan shall be the prime lending rate published by
the WALL STREET JOURNAL on the first business day of the month preceding
the month in which the application for the loan is received by the Plan
Administrator, plus 1-1/2 percentage points."
13. Section 12.4(f) is added, effective as of January 1, 2000, to read
as follows:
"(f) IN-KIND DISTRIBUTIONS. A Participant may elect to receive
amounts distributed from his Account invested in the
Company Stock Fund in whole shares of Company Stock, with
any fractional shares paid in cash. Such election and the
method of transfer of the shares shall be in such form and
manner as is established by the Plan Administrator."
14. Section 12.8(c) is amended, effective as of January 1, 1997, to
read as follows:
"(c) In no event shall distribution with respect to a
Participant commence later than:
(i) for a Participant who is not a five percent (5%)
owner (as described in Code Section 416(i)), the
later of (1) the April 1 of the calendar year next
following the calendar year in which the Participant
attains age 70 1/2, or (2) the April 1 of the
calendar year in which the Participant terminates
employment; and
(ii) for a Participant who is a five percent (5%) owner,
the calendar year following the calendar year in
which the Participant attains age 70 1/2, or such
other date as may be prescribed by applicable laws
or regulations.
6
<PAGE>
Notwithstanding the foregoing, if a Participant who is not
a five percent (5%) owner attains age 70 1/2 on or after
January 1, 1996 and before January 1, 1999, and is still
employed by the Employer on April 1 of the calendar year
following the year in which he attained age 70 1/2, such
Participant may elect to commence distribution effective as
of April 1 of the calendar year following the calendar year
in which he attained age 701/2 or to delay commencement of
distribution until the Participant terminates employment."
Dated this 6th day of December, 1999 at Ames, Iowa.
By: __________________________
Ronald C. Hanson
Director of Human Resources
7
<PAGE>
EXHIBIT 4.5
SAUER-SUNDSTRAND
EMPLOYEES' SAVINGS AND RETIREMENT PLAN
(Amended and Restated as of January 1, 1997)
<PAGE>
SAUER-SUNDSTRAND
EMPLOYEES' SAVINGS AND RETIREMENT PLAN
(AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1997)
WHEREAS, Sauer-Sundstrand Company (the "Company") is a Delaware
corporation and the successor to Sundstrand-Sauer, a Delaware general
partnership formed, effective January 1, 1987, by Sundstrand-Sauer Company, a
Delaware partnership, which was formed, effective January 1, 1987, by a
subsidiary of Sundstrand Corporation, a Delaware corporation, and a
subsidiary of Sauer Getriebe AG, an Aktiengesellschaft organized under the
laws of the Federal Republic of Germany; and
WHEREAS, effective October 1, 1985, Sundstrand Corporation
established and administered the "Sundstrand Hydro-Transmission Selmer,
Tennessee, Employees' Savings and Retirement Plan" (the "Selmer Tennessee
Plan"), a profit sharing plan with a qualified cash or deferred arrangement
for the benefit of eligible employees at Sundstrand Corporation's Selmer,
Tennessee, facility, and effective January 1, 1987, transferred to
Sundstrand-Sauer the employees at the Selmer, Tennessee facility, and also
transferred the assets and liabilities of the Selmer Tennessee Plan to the
trust established under the "Sundstrand-Sauer Employees' Savings and
Retirement Plan;" and
WHEREAS, Sundstrand Corporation transferred to Sundstrand-Sauer
employees at certain other locations, where such employees participated in
qualified plans sponsored and administered by Sundstrand Corporation, and
transferred the assets and liabilities attributable to such employees from a
trust under the Sundstrand Corporation Employee Savings Plan to a trust under
the Sundstrand-Sauer Employees' Savings and Retirement Plan; and
WHEREAS, the Company amended and restated the Sundstrand-Sauer
Employees' Savings and Retirement Plan, effective October 1, 1995, and
renamed it the "Sauer-Sundstrand Employees' Savings and Retirement Plan" (the
"Plan"); and
WHEREAS, the Company intends that the Plan shall continue to comply
with the Employee Retirement Income Security Act of 1974, as amended, and the
Internal Revenue Code of 1986, as amended, (specifically including Section
401(k) thereof), and regulations thereunder, and the Company desires to amend
and restate the Plan: (i) to incorporate applicable provisions of the Small
Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997, and the
Uniformed Services Employment and Reemployment Rights Act of 1994, and (ii)
to permit investments in shares of common stock of Sauer, Inc., the parent
company of the Company.
NOW, THEREFORE, the Plan is hereby amended and restated, effective as
of January 1, 1997, (except as otherwise provided), to provide as set forth
herein.
1
<PAGE>
ARTICLE I
DEFINITIONS
The following terms and phrases shall have the meanings set forth
below, unless the context clearly requires otherwise:
1.1 "ACCOUNT" shall mean any of the following accounts
established on behalf of a Participant or Employee, as described in Section
8.1:
(a) Employer Contribution Account;
(b) Matching Contribution Account;
(c) Participant Contribution Account;
(d) Rollover Account;
(e) After-Tax Contribution Account; and
(f) Thrift and Investment Plan Account.
1.2 "ACTIVE PARTICIPANT" shall mean any Participant who is
actively employed by the Employer, and any other Participant (i) who is a
"party in interest" with respect to the Plan within the meaning of ERISA, and
(ii) whose Accounts have not yet been distributed. If it is determined by
the Plan Administrator that federal law or regulations thereunder require
that loans be made available, under Article IX, to other beneficiaries or
former employees whose accounts have not yet been distributed, the term
Active Participant shall also include any such individual.
1.3 "AUTHORIZED LEAVE OF ABSENCE" with respect to an Employee
shall mean a leave of absence authorized by the Employer for a specific
purpose and a specified period of time, during which such Employee is not on
the Employer's payroll and is not otherwise entitled, directly or indirectly,
to payment from the Employer with respect to such leave of absence. The
Employer shall determine whether a leave of absence is authorized based a
uniform and consistent application of nondiscriminatory policies. If an
Employee does not return to employment as soon as reasonably practicable upon
expiration of his Authorized Leave of Absence, his employment with the
Employer will be deemed terminated.
1.4 "BENEFICIARY" of a Participant or former Participant shall
mean the person or persons who, under Article IV, shall be entitled to
receive a distribution hereunder in the event such Participant or former
Participant dies before his interest shall have been distributed to him in
full.
2
<PAGE>
1.5 "BREAK IN SERVICE" shall mean as follows:
(a) The termination of employment of an Employee, followed
by the expiration of an Employment Year in which he
accumulates fewer than 501 Hours of Service.
Notwithstanding the foregoing, a Break in Service shall
not be deemed to have occurred if:
(i) The employment of a terminated Employee is
resumed prior to the expiration of an
Employment Year in which he accumulates fewer
than 501 Hours of Service;
(ii) The Employee is absent from work with the prior
consent of the Employer for a period not
exceeding twelve (12) months (which consent
shall be granted under uniform rules applied to
all Employees on a nondiscriminatory basis) and
he returns to active employment with the
Employer upon the expiration of the period of
authorized absence; or
(iii) The Employee leaves the Employer to serve in the
armed forces of the United States for a period
during which his reemployment rights are
guaranteed by law and he returns or offers to
return to work for the Employer prior to the
expiration of his reemployment rights.
(b) For purposes of vesting under Article XII, one (1) Hour
of Service shall replace 501 Hours of Service in this
Section.
(c) An Employee who is absent from work with the Employer
because of:
(i) The Employee's pregnancy,
(ii) The birth of the Employee's child,
(iii) The placement of a child with the Employee in
connection with the Employee's adoption of the
child, or
(iv) The Employee's caring for such child immediately
following such birth or placement,
shall be credited with Hours of Service as provided in
this subsection 1.5(c), solely for purposes of
preventing a Break in Service. If an Employee is absent
from work for any of the reasons set forth in this
3
<PAGE>
subsection 1.5(c), the Employee will be credited with:
(A) the Hours of Service that otherwise would normally
have been credited to the Employee but for such absence,
or (B) eight (8) Hours of Service per day of such
absence, if the Employer is unable to determine the
Hours of Service described in subparagraph (i) of this
subsection 1.5(c). In no event shall an Employee be
credited with more than 501 Hours of Service. An
Employee who is absent from work for any of the reasons
set forth in this subsection 1.5(c) shall be credited
with Hours of Service pursuant to this subsection
1.5(c): (A) only in the Employment Year in which the
absence begins, if the Employee would be prevented from
incurring a Break in Service in that Employment Year
solely because the period of absence is treated as Hours
of Service, as provided in this subsection 1.5(c), or
(B) in any other case, in the immediately following
Employment Year. No credit for Hours of Service will be
given pursuant to this subsection 1.5(c) unless the
Employee furnishes to the Employer such timely
information as the Employer may reasonably require to
establish: (A) that the absence from work was for one of
the reasons specified in this subsection 1.5(c), and (B)
the number of days for which there was such an absence.
1.6 "CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the regulations thereunder. Reference to a section of the Code
shall include reference to any comparable section or sections of any
legislation that amends, supplements or supersedes such section.
1.7 "COMPANY" shall mean Sauer-Sundstrand Company, a Delaware
corporation, or any successor thereto.
1.8 "COMPENSATION" of a Participant for any Plan Year shall mean
the dollar value of specific payments made by the Employer to an Employee
with respect to such Plan Year for services rendered (including any amounts
that are excluded from the Participant's taxable income pursuant to Sections
125 and 402(e)(3) of the Code), and is limited to the following: (i) base
salary and/or wages paid; (ii) commissions paid under sales incentive plans;
(iii) overtime pay; (iv) lump-sum payments made in place of an increase in
the base wage rate; and (v) payments for time not worked pursuant to Employer
policies related to the following: vacations, holidays, sick leave,
bereavement, military reserve training, jury duty and educational leave under
provisions of the Employer's Engineering Master of Science program.
Compensation for any period shall not include the following: (i)
except as otherwise provided in this Section 1.8, pay under any incentive pay
plan; (ii) shift differential pay; (iii) severance payments; (iv) payments
under any plan or arrangement which is not generally open to participation by
all Employees; (v) bonus plan payments; (vi) incentive awards other than
commissions paid to an Employee under sales incentive plans; (vii) matching
payments by the Employer; (viii) salary or wages and earnings credited to
Employees or Employee accounts
4
<PAGE>
under any savings, investment, deferred compensation or salary reduction plan
or arrangement, including distributions from any such plan or arrangement
(other than the Plan); (ix) payments under any workers' compensation program
or under any unemployment compensation program; (x) payments made under any
employee benefit program or arrangement not otherwise specifically included
as compensation; (xi) foreign-earned income; and (xii) gain sharing payments.
Notwithstanding the foregoing, only the first $150,000 (or such other
amount as may be prescribed by the Secretary of the Treasury or his delegate)
of an Employee's Compensation shall be taken into account for any purpose
under the Plan. In determining the Compensation of an Employee for Plan
Years beginning before January 1, 1997, the family aggregation rules of
Section 414(q)(6) of the Code as then in effect shall be applied.
1.9 "DISABILITY" shall mean a physical or mental condition which,
in the judgment of the Employer, will prevent the Participant from performing
any work assigned by the Employer. The Plan Administrator, in consultation
with a physician, psychiatrist or dentist selected by the Plan Administrator,
shall make a determination that a Disability exists and the date thereof.
The determination by the Plan Administrator of the existence of a Disability
shall be made with reference to the nature of the injury without regard to
the period that the Participant is absent from work.
1.10 "EARLY RETIREMENT DATE" shall mean the last day of the month
in which the Participant has attained age 55 and completed ten (10) Years of
Service.
1.11 "EFFECTIVE DATE" of this amendment and restatement shall be
January 1, 1997 (except as otherwise provided herein. The Plan was
originally effective October 1, 1985.
1.12 "ELIGIBLE EMPLOYEE" shall mean any Employee who is eligible
to participate in the Plan in accordance with Article II.
1.13 "EMPLOYEE" shall mean any person who is employed on a regular
and full-time or part-time basis by:
(a) Any of the Company's Ames, Iowa; Freeport, Illinois;
Minneapolis, Minnesota; Selmer, Tennessee; West Branch,
Iowa; Lawrence, Kansas; or (in the office only) LaSalle,
Illinois, locations; or
(b) Sauer, Inc., primarily at its Ames, Iowa, location.
provided, however, that the term shall not include any person who renders
service to the Employer solely as an independent contractor or leased
employee (as defined in Code Section 414(n)), nor shall it include any person
covered by a collective bargaining agreement between employee representatives
and the Employer if retirement benefits were the subject of good faith
5
<PAGE>
bargaining between such employee representatives and the Employer (unless the
resulting bargaining agreement provides for such employee's coverage under
this Plan).
Notwithstanding the foregoing, any person who is customarily employed
by the Employer on a part-time temporary or irregular basis for fewer than
1,000 Hours of Service per year shall become an Employee as of the first day
of any Employment Year in which he completes at least 1,000 Hours of Service.
1.14 "EMPLOYER" shall mean Sauer-Sundstrand Company, a Delaware
corporation, and any Related Employer that adopts the Plan in accordance with
Article XVII.
1.15 "EMPLOYER CONTRIBUTION" shall mean an amount contributed by
the Employer on behalf of a Participant, determined under subsection 5.l(a),
without regard to any amount by which that Participant elects to reduce his
Compensation under Section 5.2.
1.16 "EMPLOYMENT YEAR" shall mean a twelve-consecutive-month
period commencing with an employee's initial date of hire (or last date of
rehire if he has incurred a Break in Service) or with any anniversary thereof.
1.17 "ENROLLMENT DATE" shall mean (i) the first day of the first
payroll period after an Employee becomes an Eligible Employee if the Eligible
Employee elects, pursuant to Section 3.2, to make Participant Contributions
on that day, and/or (ii) the first day of the first payroll period commencing
on or after April 1 and October 1 of each Plan Year. Notwithstanding the
foregoing, effective August 31, 1998, "Enrollment Date" shall mean the first
day that an Employee becomes an Eligible Employee under the Plan.
1.18 "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended, and the regulations thereunder. Reference to a
section of ERISA shall include reference to any comparable section or
sections of legislation that amends, supplements or supersedes such section.
1.19 "FUND" shall mean any of the funds in which Plan assets may
be invested, as described in Section 8.2.
1.20 "HIGHLY COMPENSATED EMPLOYEE" shall mean:
(a) For Plan Years beginning before January 1, 1997, a
Highly Compensated Employee as determined under the provisions of
Section 414(q) as then in effect.
(b) For Plan Years beginning on and after January 1, 1997, a
Highly Compensated Employee shall mean any Employee:
6
<PAGE>
(i) who is a 5-percent owner (within the meaning of
Section 416(i)(1)(A)(iii)) at any time during
the Determination Year or Look-Back Year; and
(ii) received compensation during the Look-Back Year
in excess of $80,000 (or as may be adjusted by
the Secretary of the Treasury for the Look-Back
Year), and if the Employer so elects, was in the
Top-Paid Group of Employees for the look-back
year.
For purposes of this definition, (A) the "Determination Year" is
the Plan Year in which the determination of Highly Compensated Employees
is being made; (B) the "Look-Back Year" is the immediately preceding
Plan Year; (C) the "Top-Paid Group" is the top 20% of Employees of the
Employer when ranked on the basis of compensation receive during the
year, but excluding employees who have not completed 6 months of
service, employees who work fewer than 17 1/2 hours per week, employees
who normally work during not more than 6 months in any year, and
employees who have not attained age 21; and (D) "compensation" is
compensation within the meaning of Section 1.8 of the Plan.
Notwithstanding the foregoing, the determination of which
Employees are Highly Compensated Employees shall at all time be subject
to the rules of Section 414(q) of the Code. Former Employees who were
Highly Compensated Employees during the year in which such Employee
separated from service or any year after such Employee attained age 55
shall also be included in the determination of a Highly Compensated
Employee.
1.21 "HIGHLY COMPENSATED EMPLOYEE GROUP" shall mean:
(a) With respect to Participant Contributions, all Eligible
Employees who are Highly Compensated Employees; and
(b) With respect to Matching Contributions, all Eligible
Employees employed at the Employer's Selmer, Tennessee, or West Branch,
Iowa, locations who are Highly Compensated Employees.
1.22 "HOUR OF SERVICE" shall mean:
(a) Each hour for which an Employee is paid or entitled to
payment for the performance of duties for the Employer. These hours
shall be credited for the computation period in which the duties are
performed; and
(b) Each hour for which an Employee is directly or
indirectly paid by the Employer, or entitled to payment from the
Employer, during which no duties are performed by reason of vacation,
holiday, illness, incapacity (including disability), layoff,
7
<PAGE>
jury duty, military duty or leave of absence (but not in excess of 501
hours in any continuous period during which no duties are performed).
These hours shall be credited for the computation period or periods
with respect to which no duties are performed.
(c) Each hour for which back pay, irrespective of mitigation
of damages, is either awarded or agreed to by the Employer, and shall be
included under either (a) or (b), as may be appropriate. These hours
shall be credited for the computation period or periods to which the
award or agreement pertains, rather than to the computation period in
which the award, agreement or payment is made.
(d) In determining Hours of Service for an Employee who is
employed by the Employer and is not paid on an hourly-rate basis, such
Employee shall be credited with eight (8) Hours of Service per day for
each day the Employee would, if paid on an hourly-rate basis, be
credited with service pursuant to subsection 1.21(a). If an Employee is
paid for reasons other than the performance of duties, pursuant to
subsection 1.21(b):
(i) In the case of a payment made or due which is
calculated on the basis of units of time, an
Employee shall be credited with the number of
regularly scheduled working hours included in
the units of time on the basis of which the
payment is calculated; and
(ii) An Employee without a regular work schedule
shall be credited with eight (8) Hours of
Service per day (to a maximum of forty (40)
Hours of Service per week) for each day that the
Employee is so paid.
Hours of Service shall be calculated in accordance with
Department of Labor Regulations Section 2530.200b-2, or legislation or
regulation that amends, supplements or supersedes such Section.
1.23 "MATCHING CONTRIBUTION" shall mean an amount contributed by
the Employer on behalf of a Participant, determined under subsection 5.l(b)
and based on the amount by which that Participant elects to reduce his
Compensation under Section 5.2.
1.24 "NONHIGHLY COMPENSATED EMPLOYEE" shall mean any Employee who
is not a Highly Compensated Employee.
1.25 "NONHIGHLY COMPENSATED EMPLOYEE GROUP" shall mean:
(a) With respect to Participant Contributions, all Eligible
Employees who are Nonhighly Compensated Employees; and
(b) With respect to Matching Contributions, all Eligible
Employees employed
8
<PAGE>
at the Employer's Selmer, Tennessee, or West Branch,
Iowa, locations who are Nonhighly Compensated Employees.
1.26 "NORMAL RETIREMENT DATE" shall mean the last day of the month
in which the Participant attains age 65.
1.27 "PARTICIPANT" shall mean any Eligible Employee who becomes a
Participant in the Plan in accordance with the provisions of Article III.
Such term shall also include a Participant who ceases to be an Eligible
Employee but who continues to participate in the Plan in accordance with the
provisions of Section 2.2. Except as specifically provided otherwise, the
Plan's provisions for Participants shall apply both to Participants in
Employer Contributions and Participants in Participant Contributions.
1.28 "PARTICIPANT CONTRIBUTION" shall mean the amount of money by
which a Participant has elected to have his Compensation reduced in
accordance with the provisions of Section 5.2.
1.29 "PLAN" shall mean this Sauer-Sundstrand Employees' Savings
and Retirement Plan, as amended from time to time. The Plan is intended to
be a profit-sharing plan for purposes of Section 401(a)(27)(B) of the Code.
1.30 "PLAN ADMINISTRATOR" shall mean the Company or such other
person(s) or committee(s) appointed by the Company in accordance with Article
XIII to administer the Plan.
1.31 "PLAN YEAR" shall mean the fiscal year of the Company, which
ends on December 31 of each year.
1.32 "RELATED EMPLOYER" shall mean any employer that is a member
of:
(a) A controlled group of corporations (as defined in
Section 414(b) of the Code) of which the Employer is a
member;
(b) Any trade or business (whether or not incorporated)
which is under common control (as defined in Section
414(c) of the Code) with the Employer; or
(c) An affiliated service group (as defined in Section
414(m) of the Code) which includes the Employer.
1.33 "RELATED PLAN" shall mean any other defined contribution plan
(as defined in Section 415(k) of the Code) maintained by the Employer or by
any Related Employer.
1.34 "REVALUATION DATE" shall mean each business day of each
calendar year.
9
<PAGE>
1.35 "SERVICE" shall mean a period of time, measured in whole and
partial Employment Years, commencing with the Employment Year in which an
Employee is initially employed and ending with the Employment Year in which a
Break in Service occurs. Notwithstanding the foregoing, a Participant's
years of Service after he incurs five consecutive one-year Breaks in Service
shall be disregarded for purposes of determining whether he had a
nonforfeitable interest in his Employer and Matching Contribution Accounts as
of the Revaluation Date coincident with the date he incurred the first of
such five consecutive one year Breaks in Service.
1.36 "SETTLEMENT DATE" shall mean the date upon which a
Participant ceases to be a Participant in the Plan, as provided in Section
12.1.
1.37 "TRUST AGREEMENT" shall mean the Sauer-Sundstrand Employees'
Savings and Retirement Plan Trust Agreement, as amended from time to time.
1.38 "TRUST FUND" shall mean the trust fund established under the
Trust Agreement.
1.39 "TRUSTEE" shall mean the trustee, and any successor trustee
or co-trustee that is designated, qualified and acting under the Trust
Agreement from time to time.
10
<PAGE>
ARTICLE II
EMPLOYEE ELIGIBILITY
2.1 ELIGIBILITY. Except as provided below, an Employee shall
become an Eligible Employee immediately upon the commencement of his
employment with the Employer. If any of the following paragraphs apply to an
Employee, such Employee shall become an Eligible Employee on the date as
provided below:
(a) An Employee on January 1, 1997, who became an "Eligible
Employee" under the terms of the Plan in effect as of
December 31, 1996, shall continue to be an Eligible
Employee for purposes of the Plan as of the Effective
Date.
(b) An Employee who is customarily employed by the Employer
on a part-time temporary or irregular basis for fewer
than 1,000 Hours of Service per year shall become an
Eligible Employee on the date on which he completes at
least 1,000 Hours of Service in an Employment Year.
(c) An Employee who had been an Eligible Employee under this
Plan and who is reinstated to active employment after a
period during which he was not an Employee actively
employed shall become an Eligible Employee on his date
of reinstatement.
2.2 CHANGES IN EMPLOYMENT STATUS. If an Eligible Employee ceases
to be an Employee, but continues in the employment of (i) the Employer in
some other capacity, or (ii) a Related Employer, he shall nevertheless
continue as an Eligible Employee and as a Participant until his status as a
Participant is otherwise terminated in accordance with the provisions of the
Plan; provided, however, that such Participant shall not be permitted to make
Participant Contributions at any time during which he is employed in any
capacity other than as an Employee.
2.3 SPECIAL RULE FOR UNIFORMED SERVICE. Notwithstanding any
provision of this Plan to the contrary, effective December 12, 1994,
contributions, benefits and service credit with respect to qualified military
service will be provided in accordance with Section 414(u) of the Code.
11
<PAGE>
ARTICLE III
PARTICIPATION
3.1 PARTICIPATION IN EMPLOYER AND MATCHING CONTRIBUTIONS.
Eligible Employees employed at the Employer's Selmer, Tennessee, and West
Branch, Iowa, locations (and only such Eligible Employees) shall be eligible
to receive Employer and Matching Contributions under Section 5.1,
retroactively as of the date they became Employees.
3.2 PARTICIPATION IN PARTICIPANT CONTRIBUTIONS. An Eligible
Employee may elect to make Participant Contributions under Section 5.2 as of
the first Enrollment Date following the date on which he meets the
eligibility requirements set forth in Article II, or as of any subsequent
April 1 or October 1 Enrollment Date. Any such Participant who elects to
make Participant Contribution must first file with the Employer a written
election, on the form prescribed by the Employer, containing:
(a) His authorization for the Employer to make Participant
Contributions on his behalf to the Plan, in accordance
with the provisions of Section 5.2; and
(b) His election as to the investment of his Participant
Contributions, in accordance with the provisions of
Article VII.
Notwithstanding the foregoing, effective August 31, 1998, an Eligible
Employee may elect to make Participant Contributions as of his or her date of
hire, or as of the first day of any subsequent payroll period.
3.3 NOTIFICATION OF ENROLLMENT DATE. Through August 30, 1998,
the Employer shall cause notice of an Eligible Employee's Enrollment Date to
be given to the Employee in such manner as it deems appropriate, which may
include and be limited to Employee bulletin board posting. No such further
notices shall be given on or after August 31, 1998.
3.4 AUTHORIZED LEAVES OF ABSENCE AND LAYOFF OF ONE YEAR OR LESS.
Notwithstanding the provisions of Section 12.1, a Participant who, for a
period of one year or less, is on an Authorized Leave of Absence, or on
layoff, shall continue as a Participant during such period; provided,
however, that (i) no Participant Contributions shall be made by such
Participant during such period, and (ii) his election to become a Participant
under Section 3.2 shall be deemed suspended. Upon his return to active
employment as an Employee, the suspension of his election to become a
Participant shall terminate and his Participant Contributions shall
automatically resume in accordance with the terms of such election.
3.5 AUTHORIZED LEAVES OF ABSENCE IN EXCESS OF ONE YEAR.
Notwithstanding the provisions of Section 12.1, a Participant who, for a
period in excess of one year, is on an
12
<PAGE>
Authorized Leave of Absence shall continue as a Participant during such
period, provided, however, that (i) no Participant Contributions shall be
made by such Participant during such period, and (ii) his election to become
a Participant under Section 3.2 shall be deemed rescinded. Upon his return to
active employment as an Employee, such Participant may elect to resume making
Participant Contributions by again filing with the Employer the written
election described in Section 3.2.
3.6 REEMPLOYMENT FOLLOWING TERMINATION. If (i) a Participant's
active employment is terminated for any reason, (ii) the Participant ceases
to be a Participant as provided in Section 12.1, and (iii) such former
Participant is thereinafter reemployed by the Employer, he shall be treated
as an Eligible Employee for all purposes of the Plan upon return to active
employment. Such former Participant may elect to become a Participant on any
subsequent Enrollment Date by again filing with the Employer the written
election described in Section 3.2.
13
<PAGE>
ARTICLE IV
BENEFICIARIES
4.1 DESIGNATION OF BENEFICIARY.
(a) Each Participant or former Participant may designate
one or more persons, or an entity as Beneficiary to
whom or to which a distribution shall be made
hereunder in the event such Participant or former
Participant dies before his interest shall have been
distributed to him in full. Successive designations
may be made, and the last designation received by the
Plan Administrator prior to the death of the
Participant or former Participant shall be effective
and shall revoke all prior designations. Any such
designation or successive designation shall be made
in writing on the form prescribed by the Plan
Administrator. If a designated Beneficiary shall die
before the Participant or former Participant, such
Beneficiary's interest shall terminate, and, unless
otherwise provided in the Participant's or former
Participant's designation if the designation included
more than one Beneficiary, such interest shall be
paid in equal shares to those Beneficiaries, if any,
who survive the Participant or former Participant. A
Participant or former Participant shall have the
right to revoke the designation of any Beneficiary
without the consent of the Beneficiary. The number
of such revocations shall not be limited.
(b) Notwithstanding subsection 4.l(a), the Beneficiary of
each Participant who is married on the date of his death
shall be his spouse, unless, such spouse has consented
to a designation of a non-spousal Beneficiary prior to
the Participant's death, or the Participant establishes
to the satisfaction of the Plan Administrator that such
consent may not be obtained because there is no spouse,
the spouse cannot be located, or because of such other
circumstances as the Secretary of the Treasury may by
regulations prescribe. Any such consent shall be in
writing, shall acknowledge the effect of such consent,
and shall be witnessed by a representative of the Plan
or a notary public. Moreover, the consent shall be
effective only if the Participant's written designation
names a specific alternate Beneficiary, including any
class of Beneficiaries, or any contingent Beneficiary,
which may not be changed without spousal consent. Any
consent by a spouse, or establishment that the consent
of a spouse may not be obtained under this subsection
4.l(b), shall be effective only with respect to such
spouse.
(c) Any amounts under the Plan arising from the payment of
benefits under one more life insurance contracts as the
result of the death of a Participant,
14
<PAGE>
a Participant's spouse or a Participant's child(ren)
shall be paid as provided in Section 8A.6.
4.2 BENEFICIARY IN THE ABSENCE OF DESIGNATION. If a Participant
fails to designate a Beneficiary, or if such designation is for any reason
illegal or ineffective, or if no designated Beneficiary survives the
Participant, the Participant's interest in the Plan shall be distributed in
the following order:
(a) To his surviving spouse;
(b) If there is no surviving spouse, to his descendants
(including legally adopted children or their
descendants), PER STIRPES;
(c) If there is neither a surviving spouse nor surviving
descendants, to the duly appointed and qualified
executor or other personal representative of the
Participant, to be distributed in accordance with the
Participant's will or applicable intestacy law; or
(d) In the event that there shall be no such representative
duly appointed and qualified within six (6) months after
the date of death of such deceased Participant, then to
such persons as, at the date of his death, would be
entitled to share in the distribution of such deceased
Participant's personal estate under the provisions of
the applicable statute then in force governing the
descent of intestate property, in the proportions
specified in such statute.
4.3 IDENTIFICATION OF DISTRIBUTEES. The Plan Administrator may
determine the identity of the distributees and in so doing may act and rely
upon any information it may deem reliable upon reasonable inquiry, and upon
any affidavit, certificate, or other paper believed by it to be genuine, and
upon any evidence believed by it sufficient.
15
<PAGE>
ARTICLE V
CONTRIBUTIONS
5.1 EMPLOYER AND MATCHING CONTRIBUTIONS. With respect to each
Participant eligible under Section 3.1 to receive Employer and Matching
Contributions, the Employer shall contribute to the Trust Fund for each
payroll period during the Plan Year:
(a) An "Employer Contribution" in an amount equal to two
percent (2%) of the Compensation earned by such
Participant (while a Participant) during such period;
plus
(b) A "Matching Contribution" in an amount equal to fifty
percent (50%) of the Participant Contribution of each
such Participant under Section 5.2, provided that in no
event will a Matching Contribution to any such
Participant exceed two percent (2%) of such
Participant's Compensation for such period.
Employer and Matching Contributions shall be subject to the limitations
described in Article VI.
5.2 PARTICIPANT CONTRIBUTIONS. Each Participant may elect to
have his Compensation reduced in the manner described in this Section 5.2, in
which event the Employer shall contribute such reduction to the Trust Fund
as a "Participant Contribution." In addition to the limitations described in
Article VI, Participant Contributions shall be subject to the following
restrictions:
(a) MINIMUM REDUCTION. The minimum reduction for any
Participant for any payroll period shall be one percent
(1%) of the Participant's Compensation for such payroll
period.
(b) MAXIMUM REDUCTION. The maximum reduction for any
Participant for any payroll period shall be as follows:
(i) For any Participant who is a Highly Compensated
Employee, ten percent (10%) of such
Participant's Compensation for such payroll
period;
(ii) For any Participant who is a Non-Highly
Compensated Employee, seventeen percent (17%) of
such Participant's Compensation for such payroll
period if the Participant is entitled to an
Employer Contribution under subSection 5.l(a),
or twenty percent (20%) of such Participant's
Compensation for such payroll period if such
Participant is not entitled to an Employer
Contribution; and
16
<PAGE>
(iii) Notwithstanding the foregoing, effective August
31, 1998, for all Participants, twenty-one
percent (21%) of such Participant's Compensation
for such payroll period.
(c) MINIMUM INCREMENTS. All Compensation reductions under
the Plan shall be in multiples of one percent (1%) of a
Participant's Compensation, unless the Participant has
elected to reduce his Compensation by the maximum amount
permitted under Section 402(g) of the Code, in which
event a reduction equal to that amount will be
permitted.
5.3 ROLLOVER CONTRIBUTIONS AND ELECTIVE TRANSFERS.
(a) ROLLOVER CONTRIBUTIONS. Any Employee who is or may
become a Participant and who has received or is entitled
to receive a distribution from a qualified retirement
plan of a former employer under circumstances meeting
the requirements of Code Section 402(c)(4) may
contribute all or any portion of such distribution to
the Plan as a "Rollover Contribution." The Plan shall
accept a Rollover Contribution only if the acceptance of
such Contribution would not threaten the Plan's
qualified status under Section 401(a) of the Code.
(b) ELECTIVE TRANSFERS. In its discretion, the Plan
Administrator may direct the Trustee to accept a direct
transfer of assets from the trustee of a qualified plan
sponsored by the former employer of an Employee. Such
transfer must satisfy all of the requirements set forth
for an "Elective Transfer" under Treasury Regulation
Section 1.411(d)-4, including the requirement that such
transfer represent the Employee's entire nonforfeitable
accrued benefit under the transferring plan. No such
trustee-to-trustee transfer shall be accepted if the
amount transferred would remain subject to any of the
transferring plan's "Section 411(d)(6) protected
benefits" (as that term is used in said Regulation).
(c) ROLLOVER ACCOUNT. The Plan Administrator shall
establish a fully vested "Rollover Account" for each
Employee electing to make a Rollover Contribution under
subsection 5.3(a) or as to whom an Elective Transfer is
accepted under subsection 5.3(b). All such Rollover
Contributions and Elective Transfers shall be credited
to that Rollover Account, to which investment gains or
losses shall then be credited or debited. If a Rollover
Account is established for an Employee who is not
otherwise a Plan Participant, that Employee shall be
considered a Participant with respect to his Rollover
Account, but for no other Plan purpose until he becomes
a Participant pursuant to Article III.
17
<PAGE>
(d) INVESTMENTS. Upon receipt of an Employee's Rollover
Contribution or Elective Transfer, the Trustee shall
immediately deposit such contribution or transfer into
the Investment Fund or Funds designated by the Employee
in a written election filed with the Plan Administrator;
provided that if such contribution or transfer is in a
form other than cash, the Trustee, in accordance with
instructions from the Plan Administrator, shall first
take such action as it determines to be appropriate to
convert such contribution or transfer to cash. The
initial investment of an Employee's Rollover Account
shall remain in effect unless changed in accordance with
the provisions of Section 7.4. Notwithstanding any
provision of the Plan to the contrary, an Employee shall
not be permitted to direct that any portion of his
Rollover Account be used to purchase life insurance.
(e) WITHDRAWALS. An Employee with respect to whom a
Rollover Account is maintained may withdraw all or any
portion of that Account as soon as administratively
feasible after the Employee's delivery to the Plan
Administrator of a written request for such withdrawal,
on a form acceptable to the Plan Administrator.
(f) DISTRIBUTIONS. The provisions of the Plan relating to
distributions upon a Participant's termination of
participation in the Plan, or upon the Plan's
termination, shall apply to an Employee's Rollover
Account.
(g) RULES AND PROCEDURES. The Plan Administrator shall
establish rules and procedures to implement the
provisions of this Section 5.3, including, without
limitation, such procedures as may be appropriate to
permit the Plan Administrator to verify the qualified
status of the plan of the Employee's former employer and
compliance with any applicable provisions of the Code
and regulations issued thereunder relating to Rollover
Contributions and Elective Transfers.
5.4 ELECTIVE TRANSFERS FROM RETIREMENT PLAN. The provisions of
Section 5.3 shall apply, in all respects, to any Elective Transfer to the
Trustee of this Plan from the trustee of the Sauer-Sundstrand Employees'
Retirement Plan (the "Retirement Plan").
5.5 ADMINISTRATION. The Employer intends to pay to the Trustee
its Employer and Matching Contributions with respect to a particular payroll
period within thirty (30) days after the last day of such period. The
Employer shall pay to the Trustee all Participant Contributions as soon as
such amounts can reasonably be segregated from the Employer's general assets,
but in no event later than ninety (90) days after the date any such
Contribution would otherwise have been payable as wages. In no event shall
the Employer pay to the Trustee any of its Employer, Matching or Participant
Contributions for any calendar year later than the period of time
18
<PAGE>
prescribed by law for the filing of the Employer's Federal income tax return
for such year, including any duly granted extensions thereof.
5.6 FORM OF CONTRIBUTIONS. Employer, Matching, and Participant
Contributions shall be paid to the Trustee in cash or in other property, as
the Employer, in its discretion, shall determine.
5.7 CHANGES IN PAYROLL DEDUCTION AUTHORIZATION. A Participant
may, once per calendar quarter (effective August 31, 1998, once per payroll
period) change the percentage of his Compensation contributed to the Plan as
a Participant Contribution by filing an amended payroll deduction
authorization with the Employer; provided, that any such change shall be
effective as of the first day of the payroll period following the end of the
payroll period in which such deduction authorization is received by the
Employer. Notwithstanding the foregoing limitation on the number of
allowable changes, if, at any time, a Participant elects to borrow money from
the Plan, as provided in Article IX, he shall, in connection with such
borrowing, be allowed to change the percentage of his Compensation
contributed to the Plan as his Participant Contribution. Participant
Contributions shall be deducted from the Participant's Compensation in
accordance with the Participant's amended payroll deduction authorization,
and such deductions shall continue until otherwise changed, suspended or
terminated in accordance with applicable provisions of the Plan.
5.8 SUSPENSION OF CONTRIBUTIONS. A Participant may suspend all
of his Participant Contributions at any time by filing with the Employer an
amended payroll deduction authorization providing for such suspension. Such
suspension shall be effective as of the first day of the payroll period
following the end of the payroll period in which such deduction authorization
is received by the Employer and shall remain in effect until the Participant
resumes his Participant Contributions. A Participant who has suspended all
of his Participant Contributions under this Section 5.8 may resume such
Contributions only as of an April 1 or October 1 Enrollment Date that is
after the effective date of such suspension and only by filing a new payroll
deduction authorization with the Employer no later than the Enrollment Date
as of which Participant Contributions are to resume. Notwithstanding the
foregoing, effective August 31, 1998, a Participant may resume such
Contributions at any time by filing a new payroll deduction authorization
form with the Company not later than the date as of which the Contributions
are to be resumed. Any new payroll deduction authorization filed by a
Participant pursuant to the provisions of this Section 5.8 shall meet the
requirements of Section 5.2.
19
<PAGE>
ARTICLE VI
LIMITATIONS ON CONTRIBUTIONS
Notwithstanding any provision of the Plan to the contrary, the
following limitations shall apply to the specified types of Contributions
made under the Plan.
6.1 DEDUCTIBILITY OF CONTRIBUTIONS. In no event shall the sum of
the Employer, Matching, and Participant Contributions for a Plan Year exceed
the maximum amount allowable as a deduction to the Employer for Federal
income tax purposes under Section 404 of the Code and the regulations
thereunder. All such Contributions are expressly conditioned on their
deductibility. If the Internal Revenue Service determines that such
Contributions are not deductible for a given Plan Year, the Trustee shall
immediately return to the Employer all such Contributions; provided, however,
that no such Contribution shall be returned to the Employer more than one
year after the disallowance of the deduction, unless permitted under ERISA
and the Code at that time. The amount returned under this Section 6.1 shall
be equal to the amount of the disallowed deduction, decreased for any
investment losses but not increased for any investment gains subsequent to
the time of the Contribution.
Any Contribution returned to the Employer under this Section 6.1
shall, unless otherwise directed by the Internal Revenue Service, be
withdrawn from the following Accounts, in the following order:
(a) First, from the Participant and Matching Contribution
Accounts, up to an amount equal to the Participant
Contributions (and any Matching Contributions
attributable to such Participant Contributions) made for
the Plan Year; and
(b) Second, from the Employer Contribution Account, in the
amount of any remaining nondeductible Contributions.
Any Participant Contribution returned to the Employer shall
immediately be paid to the affected Participant in cash.
6.2 MISTAKE OF FACT. In the case of any Employer, Matching, or
Participant Contribution that is made by the Employer due to a good faith
mistake of fact, the Trustee shall return the erroneous portion of the
Contribution to the Employer within one year after the Employer's payment of the
Contribution to the Trust Fund. The amount returned under this Section 6.2
shall be equal to the amount of the erroneous Contribution, decreased for any
investment losses but not increased for any investment gains subsequent to the
time of the Contribution. Any such Contribution returned to the Employer under
this Section 6.2 shall be withdrawn from the Account(s) as to which the mistake
related. Any Participant Contribution
20
<PAGE>
returned to the Employer shall immediately be paid to the affected
Participant in cash.
6.3 LIMITATION ON ANNUAL ADDITIONS. In no event shall the sum of
the Annual Additions to a Participant's Accounts for any Limitation Year
exceed the "Maximum Permissible Amount" (as defined below). If, but for the
provisions of this Section 6.3, the Annual Additions to a Participant's
Accounts for any Limitation Year would exceed the Maximum Permissible Amount,
such Annual Additions shall be reduced to the extent necessary to comply with
the requirements of this Section 6.3. Any such reduction shall be made in
accordance with the applicable regulations issued under Section 415 of the
Code (hereinafter referred to as the "415 Regulations") and this Section 6.3.
(a) REDUCTIONS AND REALLOCATIONS. Should it become
necessary to reduce the Annual Additions to a
Participant's Accounts, such reduction shall be
accomplished as follows:
(i) First, to the extent permitted under the 415
Regulations, any Participant Contributions that
would otherwise be allocated to that
Participant's Participant Contribution Account
shall be returned to the Employer and
immediately paid by the Employer to the
Participant in cash.
(ii) Second, if any further reduction in Annual
Additions is necessary, any Contributions or
forfeitures that would otherwise be allocated to
the Participant's Accounts shall be reduced, and
reallocated to the Accounts of the other
Participants in the same manner as the initial
allocation was made. Such reallocation shall be
made as many times as is necessary to reallocate
the amount reduced, but only to the extent of
the Maximum Permissible Amount for each
Participant.
(b) SUSPENSE ACCOUNT. If the sum of the Annual Additions
for all Participants for the Limitation Year exceeds the
sum of the Maximum Permissible Amounts for all
Participants, the excess shall be held unallocated in a
suspense account. If a suspense account is in existence
at any time during a Limitation Year, other than the
Limitation Year referred to in the preceding sentence,
all amounts in the suspense account shall be allocated
and reallocated to Participants' Accounts, subject to
the limitations of this Section 6.3, before any
contributions that would constitute Annual Additions may
be made to the Plan for that Limitation Year. For this
purpose, such allocations and reallocations shall be
made in the same manner as forfeitures would be
allocated for that Limitation Year.
(c) ANNUAL ADDITIONS TO OTHER DEFINED CONTRIBUTION PLANS.
If a Participant is a participant under any other
Defined Contribution Plan maintained by the
21
<PAGE>
Employer, the total of the Annual Additions to such
Participant's accounts under all such Defined
Contribution Plans shall not exceed the Maximum
Permissible Amount. If it is determined that, as a
result of the limitation set forth in the preceding
sentence, the Annual Additions to a Participant's
Accounts under this Plan must be reduced, such
reduction shall be accomplished in accordance with
the provisions of subsection 6.3(a).
(d) COMBINED LIMITATION. Notwithstanding any provision of
this Article VI to the contrary, solely for Limitation
Years beginning prior to January 1, 2000, if a
Participant is a participant under a Defined Benefit
Plan maintained by the Employer, the sum of the Defined
Benefit Plan Fraction for a Limitation Year and the
Defined Contribution Plan Fraction for that year shall
be no greater than one (1.0). If it is determined that,
as a result of the limitation set forth in the preceding
sentence, the Annual Additions to a Participant's
Accounts under this Plan must be reduced, such reduction
shall be accomplished in accordance with the provisions
of subsection 6.3(a).
(e) DEFINITIONS. For purposes of this Section 6.3, each of
the following words or phrases shall have the meaning
set forth below:
(i) "Annual Additions" shall mean the total of the
following amounts that are allocated to a
Participant's Accounts (including any similar
amounts allocated under a Related Plan) during
any Limitation Year:
(A) Employer Contributions;
(B) Participant Contributions; and
(C) Forfeitures (as provided in Section
12.3).
For this purpose, any excess amounts applied
under subsection 6.3(c) to reduce future
contributions will be considered Annual
Additions for the Limitation Year in which so
applied.
(ii) A Participant's "Section 415 Compensation" shall
include that Participant's wages, salaries, fees
for professional services, and other amounts
received for personal services actually rendered
in the course of employment with the Employer
(including, but not limited to, commissions paid
salesman, compensation for services on the basis
of a percentage of profits, tips, and bonuses);
and all Section 415 Compensation actually paid
or made available to the
22
<PAGE>
Participant for an entire Limitation Year
(other than amounts by which a Participant
elects to reduce his Compensation pursuant to
Section 5.2), but shall exclude any other
items or amounts paid to or for the benefit
of the Participant.
Notwithstanding the forgoing, effective
January 1, 1998, a Participant's Section 415
Compensation shall also include elective
deferrals (as defined in Section 402(g)(3) of
the Code), and any amounts that would have
been received as cash, but for an election to
receive benefits under a cafeteria plan
satisfying Section 125 of the Code.
(iii) A "Defined Benefit Plan" shall mean any
Retirement Plan which is not a Defined
Contribution Plan.
(iv) The "Defined Benefit Plan Fraction" shall mean a
fraction:
(A) The numerator of which is the projected
annual benefit of the Participant. The
projected annual benefit is based upon
the annual benefit to which he would be
entitled under the terms of the Defined
Benefit Plan on the assumptions that he
continues employment until his normal
retirement date as determined under the
terms of the Defined Benefit Plan, that
his compensation continues at the same
rate as in effect in the calendar year
under consideration until his normal
retirement date, and that all other
relevant factors used to determine
benefits under such Defined Benefit Plan
remain constant as of the current
calendar year for future calendar years,
under all Defined Benefit Plans
maintained by the Employer, determined
as of the close of the Limitation Year,
and
(B) The denominator of which is the lesser
of
(1) One and one-fourth (1.25) one
(1.0), in the case of a Key
Employee in either a Top-Heavy
Plan failing to provide the
minimum benefit required under
Section 416(h)(2)(A) of the Code
or a Super Top-Heavy Plan times
the projected annual benefit of
such Participant under the
Defined Benefit Plans,
determined as of the close of
the Limitation Year and as
though the Defined Benefit Plans
provided benefits in the amount
of the maximum dollar limitation
allowable under Section
415(b)(1)(A) of
23
<PAGE>
the Code, after taking into
account all applicable
modifications of that dollar
limitation found in the Code,
and
(2) One and four-tenths (1.4)
times the projected annual
benefit of such Participant
under the Defined Benefit
Plans, determined as of the
close of the Limitation Year
and as though the Defined
Benefit Plans provided
benefits in the amount of the
maximum percentage-of-
compensation limitation
allowable under Section
415(b)(1)(B) of the Code, after
taking into account all
applicable modifications of that
percentage-of-compensation
limitation found in the Code.
(v) A "Defined Contribution Plan" shall mean a
Retirement Plan which provides for an individual
account for each Participant and for benefits
based solely on the amount contributed to the
Participant's accounts and any income, expenses,
gains and losses, and any forfeitures of
accounts of other Participants that may be
allocated to such Participant's accounts.
(vi) The "Defined Contribution Plan Fraction" shall
mean a fraction:
(A) The numerator of which is the sum of the
Annual Additions to the Participant's
accounts for all years under all Defined
Contribution Plans maintained by the
Employer in that Limitation Year, and
(B) The denominator of which is the sum for
the Limitation Year and all prior years
of the lesser of
(1) One and one-fourth (1.25) one
(1.0), in the case of a Key
Employee in either a Top-Heavy
Plan failing to provide the
minimum benefit required under
Section 416(h)(2)(A) of the Code
or a Super Top-Heavy Plan times
the maximum amount of Annual
Additions to such Participant's
accounts under the Defined
Contribution Plans which could
have been made in accordance
with the dollar limitation set
forth in Section 415(c)(1)(A) of
the Code, after taking into
account all applicable
modifications of that dollar
limitation found in the Code,
and
24
<PAGE>
(2) One and four-tenths (1.4) times
the maximum amount of Annual
Additions to such Participant's
accounts under the Defined
Contribution Plans which could
have been made in accordance
with the percentage-of-
compensation limitation set
forth in Section 415(c)(1)(B) of
the Code, after taking into
account all applicable
modifications of that
percentage-of-compensation
limitation found in the Code.
(vii) "Limitation Year" shall mean the Plan Year.
(viii) The "Maximum Permissible Amount" shall mean the
lesser of:
(A) $30,000 (or, if greater, 25% of the
defined benefit dollar limitation in
effect under Section 415(b)(1)(A) of the
Code); or
(B) 25 % of a Participant's Section 415
Compensation (as defined in Paragraph
6.3(e)(ii)).
The foregoing amounts are subject to adjustment
by the Secretary of the Treasury.
(ix) A "Retirement Plan" shall mean:
(A) Any profit sharing, pension or stock
bonus plan described in Sections 401(a)
and 501(a) of the Code;
(B) Any annuity plan or annuity contract
described in Section 403(a) or 403(b) of
the Code; and
(C) Any individual retirement account or
individual retirement annuity described
in Section 408(a) or 408(b) of the Code.
6.4 DOLLAR LIMITATION ON PARTICIPANT CONTRIBUTIONS. The
Participant Contributions made on behalf of a Participant (in combination
with all similar contributions made on behalf of that Participant under all
other plans, contracts, or arrangements of the Employer) during a single
calendar year (or other taxable year of the Participant) shall not exceed
$7,000, or such higher amount as may be specified by the Secretary of the
Treasury under Section 402(g) of the Code. Any such Participant
Contributions in excess of this limitation (hereinafter referred to as
"Excess Deferrals") shall be corrected during either the same calendar year
for which those deferrals were
25
<PAGE>
made (as described in subsection 6.4(a)) or the calendar year following the
calendar year for which those deferrals were made (as described in subsection
6.4(b)).
(a) CORRECTION OF EXCESS DEFERRALS DURING SAME CALENDAR
YEAR. A Participant who has Excess Deferrals during a
calendar year may receive a corrective distribution of
such Excess Deferrals during that same year. Such a
corrective distribution may be made only if each of the
following conditions is satisfied:
(i) The Participant must designate the distribution
as an Excess Deferral. The Participant's
designation must be in writing, and the
Participant must certify or otherwise establish
to the satisfaction of the Plan Administrator
that the designated amount is an Excess
Deferral. To the extent an Excess Deferral is
attributable solely to Participant Contributions
under this Plan (and similar contributions under
other plans of the Employer), the Participant
will be deemed to have made such designation.
(ii) The distribution must be made after the date on
which the Plan receives the Excess Deferral.
(iii) The Plan Administrator must designate the
distribution as a distribution of Excess
Deferrals.
The Plan Administrator shall not be obligated to make a
corrective distribution during the same calendar year.
Any Matching Contributions (and the income allocable
thereto) that are attributable to distributed Excess
Deferrals shall be forfeited (even if otherwise
nonforfeitable) and reallocated among the Matching
Contribution Accounts of all Participants in Employer
Contributions, in the same manner as forfeitures would
be allocated to such Accounts for that Plan Year.
(b) CORRECTION OF EXCESS DEFERRALS DURING FOLLOWING CALENDAR
YEAR. A Participant who has Excess Deferrals during a
taxable year, and who has not received a complete
corrective distribution of such Excess Deferrals under
subsection 6.4(a) during that year, may receive a
distribution of any remaining Excess Deferrals during
the following calendar year. Such a corrective
distribution may be made only if the Participant
notifies the Plan Administrator of this Plan (and the
plan administrators of all other plans to which the
Excess Deferrals relate) by the March 1 following the
close of the calendar year for which the Excess
Deferrals were made.
Any such notification must be in writing, and the
Participant must certify
26
<PAGE>
or otherwise establish to the satisfaction of the
Plan Administrator that the designated amount is an
Excess Deferral. To the extent the Excess Deferrals
are attributable solely to Participant Contributions
under this Plan (and similar contributions under
other plans of the Employer) the Participant shall be
deemed to have notified the Plan Administrator of
such Excess Deferrals. Upon receiving such timely
notice, the Plan Administrator shall distribute, not
later than the immediately following April 15, the
amount of the Excess Deferrals allocated to this Plan
by the Participant, together with any income
allocable to that Amount. The Plan Administrator
shall allocate income to such distributed Excess
Deferrals in the same manner as other income is
allocated among Participant Accounts under Article X
of the Plan. Income allocable to the period between
the close of the calendar year for which the Excess
Deferrals were made and the date of the corrective
distribution (the "Gap Period") shall be disregarded
for this purpose. Any Matching Contributions (and
any income allocable thereto) that are attributable
to distributed Excess Deferrals shall be forfeited
(even if otherwise nonforfeitable) and reallocated
among the Matching Contribution Accounts of all
Participants in Employer Contributions, in the same
manner as forfeitures would be allocated to such
Accounts for that Plan Year.
6.5 LIMITATION ON PARTICIPANT CONTRIBUTIONS. The Plan's
provisions for Participant Contributions constitute a cash or deferred
arrangement intended to be qualified under Section 401(k) of the Code.
Accordingly, these Participant Contributions must satisfy the Actual Deferral
Percentage Test (the "ADP Test") under Section 401(k)(3) of the Code for each
Plan Year. The ADP Test shall be conducted in accordance with the following
rules:
(a) ACTUAL DEFERRAL PERCENTAGE TEST. For any Plan Year, the
ADP Test will be satisfied if the Actual Deferral
Percentage ("ADP") for the Highly Compensated Employee
Group does not exceed the greater of:
(i) 1.25 times the ADP for the Nonhighly Compensated
Employee Group; or
(ii) The lesser of:
(A) Two (2) times the ADP for the Nonhighly
Compensated Employee Group; and
(B) The ADP for the Nonhighly Compensated
Employee Group plus two (2) percentage
points.
Effective for Plan Years on and after January 1, 1997,
the ADP for the
27
<PAGE>
Highly Compensated Employee Group shall be determined
on the basis of data from the current Plan Year, and
the ADP for the Nonhighly Compensated Employee Group
shall be determined on the basis of data from the
immediately preceding Plan Year. Notwithstanding the
foregoing, for Plan Years commencing on and after
January 1, 1997 through the end of the remedial
amendment period as described in Notice 97-41, and
modified by any subsequent Internal Revenue Service
publication, the ADP for the Nonhighly Compensated
Employee Group may be determined on the basis of data
from the current Plan Year.
(b) DETERMINATION OF ADP TEST. For purposes of determining
the precise manner in which the ADP Test is to be
conducted, including the definition of "Actual Deferral
Percentage," the provisions of Section 401(k)(3) of the
Code and the regulations thereunder are incorporated
herein by reference (sometimes referred to as the
"401(k) Regulations"). For purposes of conducting the
ADP Test, a Participant's compensation shall be the
Participant's compensation (as defined in Treasury
Regulation Section 1.401(k)-l(g)(2)(i)) over the course
of the Plan Year. The Plan Administrator shall maintain
records sufficient to demonstrate satisfaction of the
ADP Test for each Plan Year.
(c) PRELIMINARY ADP TEST. The Plan Administrator may, from
time to time during the course of a Plan Year, make its
best estimate as to whether the ADP Test will be
satisfied for the Plan Year. In doing so, the Plan
Administrator may conduct one or more preliminary ADP
Tests based on the projected compensation and
contribution level of Participants. If it appears that
there will be "Excess Contributions" (as defined in the
401(k) Regulations), the Plan Administrator may, in its
discretion, limit Participant Contributions in a manner
designed to prevent Excess Contributions from being
made, or use a combination of methods acceptable under
the 401(k) Regulations, in order to provide reasonable
assurance that Excess Contributions will be avoided or
corrected during the Plan Year.
(d) CORRECTION OF EXCESS CONTRIBUTIONS. Notwithstanding
any other provision of this Plan, if it is determined
that Excess Contributions exist for a Plan Year, such
Excess Contributions shall be corrected within 2 1/2
months after the end of such Plan Year in order to avoid
the imposition of an excise tax that might otherwise
apply under Section 4979 of the Code, and in any event
within 12 months after the close of the Plan Year for
which the contributions were made. The Plan
Administrator may, in its discretion, use either or both
of the following correction methods, as described in the
401(k) Regulations:
28
<PAGE>
(i) Allocation to the Participant Contribution
Accounts of the Nonhighly Compensated Employee
Group of any "QUALIFIED NONELECTIVE
CONTRIBUTIONS" (as defined in the 401(k)
Regulations) made by the Employer, in the
Employer's sole discretion; or
(ii) Distribution of Excess Contributions (and any
income allocable thereto) to the appropriate
Highly Compensated Employees. Such distribution
shall be determined and made as follows: First,
the total dollar amount of excess contributions
for each affected Highly Compensated Employee
shall be determined. Second, such dollar
amounts shall be aggregated for all affected
Highly Compensated Employees. Third, the Highly
Compensated Employee with the highest dollar
amount in Participant Contributions shall be
reduced by an amount necessary for such Highly
Compensated Employee's Participant Contributions
to equal that of the Highly Compensated Employee
with the next highest dollar amount in
Participant Contributions. Such reduction is
then distributed to the Highly Compensated
Employee with the highest dollar amount.
However, if a lesser reduction, when added to
the total dollar amount already distributed
under the foregoing, would equal the total
excess contributions, the lesser amount shall be
distributed. If Excess Contributions remain,
the foregoing procedures are repeated until the
excess contributions are distributed.
(e) TREATMENT OF MATCHING CONTRIBUTIONS. If a Matching
Contribution has been made to the Plan with respect to
an amount that constitutes an Excess Contribution, then
such Matching Contribution (and any income allocable
thereto) shall be forfeited (even if otherwise
nonforfeitable) and reallocated to the Matching
Contribution Accounts of the Nonhighly Compensated
Employee Group, in the same manner that forfeitures
would be allocated to such Accounts for that Plan Year.
(f) ALLOCATION OF INCOME. If Excess Contributions are
distributed, any income allocable to the distributed
Excess Contributions shall also be distributed. The
Plan Administrator shall allocate income to such
distributed Excess Contributions in the same manner as
other income is allocated among Participant Accounts
under Article X of the Plan. Income allocable to the
period between the close of the Plan Year for which the
Excess Contributions were made and the date of the
corrective distribution (the "Gap Period") shall be
disregarded for this purpose.
29
<PAGE>
6.6 LIMITATION ON MATCHING CONTRIBUTIONS. The Plan's provisions
for Matching Contributions are subject to the provisions of Code Section
401(m). Accordingly, these Matching Contributions must satisfy the Actual
Contribution Percentage Test (the "ACP Test") under Code Section 401(m)(2)
for each Plan Year. The ACP Test shall be conducted in accordance with the
following rules:
(a) ACTUAL CONTRIBUTION PERCENTAGE TEST. For any Plan
Year, the ACP Test will be satisfied if the Actual
Contribution Percentage ("ACP") for the Highly
Compensated Employee Group does not exceed the greater
of:
(i) 1.25 times the ACP for the Nonhighly Compensated
Employee Group; or
(ii) The lesser of:
(A) Two (2) times the ACP for the Nonhighly
Compensated Employee Group; and
(B) The ACP for the Nonhighly Compensated
Employee Group plus two (2) percentage
points.
Effective for Plan Years on and after January 1, 1997,
the ACP for the Highly Compensated Employee Group shall
be determined on the basis of data from the current Plan
Year, and the ACP for the Nonhighly Compensated Employee
Group shall be determined on the basis of data from the
immediately preceding Plan Year. Notwithstanding the
foregoing, for Plan Years commencing on and after
January 1, 1997 through the end of the remedial
amendment period as described in Notice 97-41, and
modified by any subsequent Internal Revenue Service
publication, the ADP for the Nonhighly Compensated
Employee Group may be determined on the basis of data
from the current Plan Year.
(b) DETERMINATION OF ACP TEST. For purposes of determining
the precise manner in which the ACP Test is to be
conducted, including the definition of "Actual
Contribution Percentage," the provisions of Section
401(m) of the Code and the regulations promulgated
thereunder are incorporated herein by reference
(sometimes referred to as the "401(m) Regulations").
For purposes of conducting the ACP Test, a Participant's
compensation shall be the Participant's compensation (as
defined in Treasury Regulation Section 1.401(m)-l(f)(2))
over the course of the Plan Year. The Plan
Administrator shall maintain records sufficient to
demonstrate satisfaction of the ACP Test for each Plan
Year.
30
<PAGE>
(c) PRELIMINARY ACP TEST. The Plan Administrator may, from
time to time during the course of a Plan Year, make its
best estimate as to whether the ACP Test will be
satisfied for the Plan Year. In doing so, the Plan
Administrator may conduct one or more preliminary ACP
Tests based on the projected compensation and
contribution level of Participants. If it appears there
will be "Excess Aggregate Contributions" (as defined in
the 401(m) Regulations), the Plan Administrator may, in
its discretion, limit Matching Contributions in a manner
designed to prevent Excess Aggregate Contributions from
being made, or use a combination of methods acceptable
under the 401(m) Regulations, in order to provide
reasonable assurance that Excess Aggregate Contributions
will be avoided or be corrected during the Plan Year.
(d) CORRECTION OF EXCESS AGGREGATE CONTRIBUTIONS.
Notwithstanding any other provision of this Plan, if it
is determined that Excess Aggregate Contributions exist
for a Plan Year, such Excess Aggregate Contributions
shall be corrected within 2 1/2 months after the end of
such Plan Year in order to avoid the imposition of an
excise tax that might otherwise apply under Section 4979
of the Code, and in any event within 12 months after the
close of the Plan Year for which the contributions were
made. The Plan Administrator may, in its discretion,
use any one or more of the following correction methods,
as described in the 401(m) Regulations:
(i) Allocation to the Matching Contribution Accounts
of the Nonhighly Compensated Employee Group of
any "Qualified Nonelective Contributions" (as
defined in the 401(m) Regulations) made by the
Employer, in the Employer's sole discretion;
(ii) Distribution of any vested Excess Aggregate
Contributions (and any income allocable
thereto) to the appropriate Highly
Compensated Employees. Distribution of vested
Excess Aggregate Contributions shall be made
in accordance with the procedures for
distributing Excess Contributions as set
forth above in Section 6.5(d)(ii); or
(iii) Forfeiture of any non-vested Excess Aggregate
Contributions (and any income allocable thereto)
made during the Plan Year on behalf of the
Highly Compensated Employee Group.
(e) ALLOCATION OF INCOME. If Excess Aggregate
Contributions are distributed, any income allocable to
the distributed Excess Aggregate Contributions shall
also be distributed. The Plan Administrator shall
allocate income to such distributed Excess Contributions
in the same manner that other
31
<PAGE>
income is allocated among Matching Contribution
Accounts under Article X of the Plan. Income
allocable to the period between the close of the Plan
Year for which the Excess Aggregate Contributions
were made and the date of the corrective distribution
(the "Gap Period") shall be disregarded for this
purpose.
6.7 MULTIPLE USE LIMITATION. The Plan Administrator shall
ensure that multiple use of the "Alternative Limitation" does not occur, and
if it does, that it is corrected in accordance with Treasury Regulation
Section 1.401(m)-2. The term "Alternative Limitation" has the meaning
ascribed to such term under Regulation Section 1.401(m)-2(b)(2) and refers to
the alternatives for satisfying the ADP and ACP Tests provided in Paragraphs
6.5(a)(ii) and 6.6(a)(ii), respectively. If multiple use of the Alternative
Limitation occurs, it shall be corrected by reducing the ACP of the Highly
Compensated Employee Group in the manner described in Regulation Section
1.401(m)-l(e)(2), so that there is no multiple use of the Alternative
Limitation. Instead of making this reduction, the Plan Administrator may
eliminate multiple use of the Alternative Limitation by allocating Qualified
Nonelective Contributions, if any, in accordance with Regulation Section
1.401(m)-l(b)(5).
32
<PAGE>
ARTICLE VII
DEPOSIT AND INVESTMENT OF CONTRIBUTIONS
7.1 DEPOSIT OF EMPLOYER AND MATCHING CONTRIBUTIONS. Upon receipt
of Employer or Matching Contributions, the Trustee shall immediately deposit
such Contributions in the Default Fund (as defined in Section 8.2(b)).
Effective August, 31, 1998, the Trustee shall deposit and allocate such
Contributions in accordance with the Participant's investment directions made
under Section 7.3 or 7.4. Contributions for which no investment election is
made shall be deposited into the Default Fund until an investment election is
filed with the Plan Administrator.
7.2 DEPOSIT OF PARTICIPANT CONTRIBUTIONS. Upon receipt of
Participant Contributions, the Trustee shall immediately deposit such
contributions in one or more of the Funds established under Section 8.2, as
directed by the Employer; provided that the Employer's directions to the
Trustee shall be based on the investment election of each Participant, made
in accordance with the provisions of Section 7.3 or 7.4. Contributions for
which no investment election is made shall be deposited into the Default Fund
until an investment election is filed with the Plan Administrator.
7.3 INVESTMENT ELECTION AT PARTICIPATION. Each Participant in
Participant Contributions shall, upon electing to become a Participant under
the Plan pursuant to Section 3.2 and on a form suitable to the Plan
Administrator, make an election as to the manner in which Participant
Contributions made by the Employer on his behalf are to be invested by the
Trustee. A Participant's investment election shall specify the percentage of
his Participant Contributions to be invested in one or more of the Funds
described in Section 8.2. Unless changed by a Participant under Section 7.4,
the investment election initially made by a Participant shall remain in
effect until he ceases to be a Participant under the Plan. Notwithstanding
the foregoing, effective August 31, 1998, a Participant's investment election
hereunder shall apply to a Participant's entire Account, including Employer
and Matching Contributions. Contributions for which no investment election is
made shall be deposited into the Default Fund until an investment election is
filed with the Plan Administrator.
7.4 CHANGES IN INVESTMENT ELECTION. A Participant may change his
investment election for Participant Contributions by filing with the Plan
Administrator a written election directing a change in his investment
election or by utilizing any other administrative procedures established by
the Plan Administrator. Any such change shall apply to:
(a) Participant Contributions made by the Employer on the
Participant's behalf after the date the election becomes
effective;
(b) All amounts in the Participant's Participant
Contribution Account on the date the election becomes
effective; and
33
<PAGE>
(c) All amounts in the Participant's Rollover Account, if
any.
(d) Notwithstanding the foregoing, effective August 31,
1998, a Participant's change in investment election
hereunder shall apply to a Participant's entire Account,
including Employer and Matching Contributions.
Amounts already invested in the Life Insurance Fund (as defined in Section
8.2(b)) may be invested in another Fund only in connection with a
Participant's termination of life insurance coverage under the Plan. In no
event may a Participant have any portion of his Rollover Contribution
Account, or any amount already in his Participant Contribution Account on the
date the election becomes effective (to the extent not previously used to
purchase life insurance), used to purchase life insurance.
As of the Effective Date of the Plan, a Participant may change his
investment elections not more than once in any calendar quarter. Effective
August 31, 1998, a Participant may make investment election changes at any
time. A change in an investment election will be implemented as soon as
administratively practicable after it is received by the Plan Administrator.
34
<PAGE>
ARTICLE VIII
ESTABLISHMENT OF FUNDS AND ACCOUNTS
8.1 ESTABLISHMENT OF ACCOUNTS. Under the circumstances described
below, the Plan Administrator shall establish one or more of the following
Accounts in the name of each Participant:
(a) In the case of a Participant on whose behalf the
Employer makes an Employer Contribution under subsection
5.1(a), an "Employer Contribution Account." This
Account shall reflect the amount attributable to such
Employer Contributions made on such Participant's
behalf.
(b) In the case of a Participant on whose behalf the
Employer makes a Matching Contribution under subsection
5.1(b), a "Matching Contribution Account." This Account
shall reflect the amount attributable to such Matching
Contributions made on such Participant's behalf.
(c) In the case of a Participant who elects any Compensation
reduction under Section 5.2, a "Participant Contribution
Account." This Account shall reflect the amount
attributable to Participant Contributions made on such
Participant's behalf.
(d) In the case of a Participant who makes a Rollover
Contribution or an Elective Transfer under Section 5.3,
a "Rollover Contribution Account." This Account shall
reflect the amount attributable to such Rollover
Contributions and Elective Transfers made by such
Participant.
(e) In the case of a Participant who made after-tax
contributions to this Plan prior to the Plan's January
1, 1987, restatement, an "After-Tax Contribution
Account." This Account shall reflect the amount
attributable to such after-tax contributions made by
such Participant.
(f) In the case of a Participant who was a participant in
the former Sundstrand Corporation Thrift and Investment
Plan ("TIP") on September 30, 1983, a "Thrift and
Investment Plan Account." This Account shall reflect
the amount transferred to this Plan from the TIP, to the
extent not yet withdrawn by the Participant.
8.2 ESTABLISHMENT OF FUNDS.
(a) The Trustee, at the direction of the Plan Administrator,
shall establish separate investment funds under the
Trust Agreement. The Plan
35
<PAGE>
Administrator may direct the Trustee to add, change
or eliminate from time to time one or more investment
funds, without an amendment to the Plan and upon such
terms and conditions as it deems appropriate.
Notwithstanding the foregoing, the Plan Administrator
shall direct the Trustee, in accordance with Section
404(c) of ERISA, to make available at all times at
least three separate investment alternatives each of
which is diversified and which have materially
different risk and return characteristics. The
investment alternatives in the aggregate shall enable
each Participant by choosing among them to achieve a
portfolio with aggregate risk and return
characteristics at any point within a range normally
appropriate for the Participant, and which in the
aggregate tend to minimize through diversification
the overall risk of the Participant's portfolio. The
Plan intends to constitute a plan described in
Section 404(c) of ERISA, such that to the extent
permitted by law the fiduciaries of the Plan shall be
relieved of liability for any losses that are the
direct and necessary result of the investment
instructions given by Participants and Beneficiaries
under the Plan.
(b) Notwithstanding the foregoing, the Investment Funds
shall, at all times, include: (i) a Fund used for the
investment of Employer Matching Contributions and
Participant Contributions for which no investment
election is provided, which Fund is designed to preserve
capital and provide fixed income until an investment
election is made ("Default Fund"); (ii) a "Life
Insurance Fund" for the purpose of purchasing life
insurance under Article 8A (solely for amounts deposited
into such fund prior to August 31, 1998); and, (iii)
effective January 1, 2000, a Company Stock Fund, which
is designed to permit Participants to invest in shares
of common stock of Sauer, Inc., the parent company of
the Company ("Company Stock").
8.3 COMPANY STOCK FUND. The provisions of this Section 8.3 are
effective January 1, 2000, and sets forth special rules governing the
investment of Participant Contributions into the Company Stock Fund.
(a) INVESTMENTS IN COMPANY STOCK FUND. Participants may
elect to invest a portion of their Participant
Contributions in the Company Stock Fund. The maximum
amount permitted to be invested shall be 30% of a
Participant's Account balances, determined at the time
the amount is transferred to, or deposited in, the
Company Stock Fund. The Company shall have the right
(i) to pay from amounts transferred to or deposited in
the Company Stock Fund any brokerage fees and expenses
associated with such transfer and acquisition of Company
Stock, and (ii) to pay from the Participant's Accounts
any brokerage fees and expenses associated
36
<PAGE>
with the conversion of such units to any other
Investment Fund and/or cash.
(b) VOTING RIGHTS. Participants with Contributions invested
in Company stock shall be entitled to vote the shares
allocated to the Participant's Account. Within a
reasonable time prior to each annual or special meeting
of the shareholders of the Company, the Company shall
send to each Participant a copy of the proxy soliciting
material (including an annual report) for the meeting,
together with a form requesting instructions to the
Trustee on how to vote the proportional number of shares
of Company Stock (and any fractional share thereof)
attributable to the Participant's interest in the
Company Stock Fund. Upon receipt of such instruction,
the Trustee shall vote such shares to the extent
possible to reflect such Participants instructions. If
the Trustee does not receive voting instructions from a
Participant, the Trustee shall vote the Company Stock
attributable to each Participant's interest in the same
proportion as the Trustee votes the shares of Company
Stock which are attributable to Participants' interests
in the Company Stock Fund of which the Trustee received
voting instructions.
Notwithstanding any provision of the Plan to the
contrary, if a tender or exchange offer is made for a
majority of the outstanding shares of Company Stock, a
Participant shall direct the Trustee as to the
disposition of the proportional number of shares of
Company Stock attributable to his interest in the
Company Stock Fund. If a Participant does not direct
the Trustee as to the disposition of the Company Stock
attributable to his Company Stock Fund with the time
specified, such Participant shall be deemed to have
timely instructed the Trustee not to tender or exchange
such shares of Company Stock.
Information relating to the purchase, holding and sale
of Company Stock and the exercise of shareholder rights
with respect to such Company Stock by Participants shall
be maintained in accordance with procedures designed by
the Trustee to safeguard the confidentiality of such
actions by the Participant, except to the extent
necessary to comply with federal or state laws.
(c) COMPLIANCE WITH FEDERAL SECURITIES LAWS. The Company
reserves the right to file with the Securities Exchange
Commission (the "SEC") a Registration Statement on Form
S-8 in connection with registration of the shares of
common stock of the Company and the participation
interests to be offered and sold to the Plan.
37
<PAGE>
Notwithstanding any provision of this Section to the
contrary, if a Participant is a person subject to
Section 16 of the Securities and Exchange Act of 1934
("Section 16") as of January 1, 2000, such Participant
shall not be permitted to invest his Participant
Contributions in the Company Stock Fund until such time
as he is no longer subject to Section 16. If a
Participant is not subject to Section 16 as of January
1, 2000, but later becomes subject to Section 16, he
shall not be permitted, as of the date he becomes
subject to such Section, to invest future Participant
Contributions in the Company Stock Fund. With respect
to investments already made in the Company Stock Fund,
such Participant shall, at his option, make an election
to transfer out of the Common Stock Fund; provided that
such transfer is made at least six months after any
investment election into the Common Stock Fund, or
purchase of Company stock under any other plan
maintained by the Company.
8.4 INCOME ON FUNDS. Any dividends, interest, distributions, or
other income received by the Trustee with respect to any of the Funds
established under Section 8.2 shall be reinvested by the Trustee in the Fund
in respect of which such income was received.
8.5 RECORD OF INFORMATION. With respect to each payroll period
in which the Employer delivers contributions to the Trustee, the Employer
shall also prepare and deliver the following information with respect to each
Participant:
(a) The amount of such contribution which represents an
Employer Contribution;
(b) The amount of such contribution which represents a
Matching Contribution;
(c) The amount of such contribution which represents a
Participant Contribution; and
(d) The manner in which such contribution is to be deposited
and invested by the Trustee in accordance with the
provisions of Article VII.
8.6 ACCOUNT BALANCES. For all purposes of the Plan, the balance
of each Account of a Participant as of any date shall be the balance of such
Account after all credits and charges thereto for and as of such date have
been made, as provided in the Plan and the Trust Agreement.
38
<PAGE>
ARTICLE VIIIA
LIFE INSURANCE
8A.1 PURCHASE OF POLICIES. Upon written instructions from the
Plan Administrator, the Trustee shall apply any Participant Contributions
designated by a Participant for investment in the Life Insurance Fund toward
the purchase, from a legal reserve life insurance company or companies
authorized to do business in any one of the jurisdictions in which the
Employer employs Participants, of a life insurance policy or policies on the
life of such Participant, on the life of such Participant's spouse, and/or on
the life of such Participant's child(ren), as designated by the Participant.
Any such policy or policies shall be subject to the provisions of this
Article VIIIA.
8A.2 POLICY TERMS. Limitations as to coverage, insurability,
premium rates, convertibility and other matters shall be subject to the
provisions of the policy issued by, or the underwriting guidelines of, the
insurance company or companies from which such insurance coverage is
purchased. All such policies shall designate the Trustee as the sole owner,
with exclusive power to exercise all rights, privileges, options and
elections granted or permitted thereunder; provided, however, that the
exercise of such power by the Trustee shall be subject to the right of the
Plan Administrator to direct the Trustee with respect thereto or to require
the Trustee to obtain its approval before exercising any such power. All
such directions by the Plan Administrator shall be made on a uniform,
nondiscriminatory basis.
8A.3 PAYMENT OF PREMIUMS. The Trustee, upon written instructions
from the Plan Administrator, shall pay each premium on any policy or policies
held for the benefit of a Participant and shall charge such premium payment
to the Life Insurance Fund. The Trustee shall be under no obligation to pay
any premium, however, unless the Plan Administrator acknowledges in writing
that there are funds available from the interest of such Participant in the
Life Insurance Fund to make such payment.
8A.4 OVERRIDING CONDITIONS AND LIMITATIONS. Notwithstanding any
other provision of the Plan, at no time shall the aggregate of the premiums
paid under the Trust for any ordinary life insurance policy or policies
(within the meaning of Internal Revenue Service Revenue Rulings 54-51 and
61-164) on the life of any Participant, such Participant's spouse, and such
Participant's child(ren) equal or exceed one-half of the Participant's
Participant Contributions, nor at any time shall the aggregate of the
premiums paid under the Trust for any policy or policies on the life of any
Participant, such Participant's spouse, and such Participant's child(ren)
that provide pure life insurance protection equal or exceed one-fourth of the
Participant's Participant Contributions. In order to comply with this
limitation, the Plan Administrator shall, in writing, direct the Trustee to
take such action with respect to any such policy or policies held by it as
the Plan Administrator shall deem advisable, including, but not limited to,
conversion to paid-up basis or partial or total surrender of such policy or
policies or any part or parts thereof. At all times, each such policy on the
life of any Participant, such Participant's spouse, and/or
39
<PAGE>
such Participant's child(ren) shall be owned by the Trustee as part of the
Life Insurance Fund.
8A.5 DESIGNATION OF BENEFICIARY, DEATH BENEFITS.
(a) RECEIPT OF POLICY PROCEEDS. Subject to the provisions
of Section 4.2, the Beneficiary shall receive from any
life insurance policy purchased under the Plan any and
all proceeds paid, excluding any cash value, and the
Trustee shall be the beneficiary designated to receive
any cash value payable from any life insurance policy or
policies purchased under the Plan.
(b) DEATH OF PARTICIPANT. In the event of the death of a
Participant on whose life an insurance policy is held
under the Trust, the Trustee shall receive the cash
value of such policy and shall as soon as practical
thereinafter pay such amount in accordance with the
terms of the Beneficiary designation form filed by such
Participant with the Plan Administrator pursuant to
Section 4.1 or, failing any effective Beneficiary
designation, to the Beneficiary determined under Section
4.2.
The ownership of any policy held by the Trust on the
life of a Participant's spouse and/or child(ren) at the
time of the Participant's death shall be assigned by the
Trustee to the Beneficiary or Beneficiaries designated
pursuant to Section 4.1 to receive the Participant's
interest in the Plan or, failing any effective
Beneficiary designation, to the Beneficiary determined
under Section 4.2.
(c) DEATH OF PARTICIPANT'S SPOUSE OR CHILD. In the event of
the death of a Participant's spouse or child on whose
life an insurance policy is held under the Trust, the
Trustee shall receive the proceeds of such policy and
shall, at the Participant's direction, either (i) invest
all of such proceeds, including any cash value and
interest accruing since the death of the spouse or child
(hereinafter, "post-death interest"), in one or more of
the Funds established under Section 8.2, or (ii) pay all
or part of such proceeds, except any cash value and
post-death interest, to the Participant and invest such
cash value and post-death interest in one or more of the
Funds established under Section 8.2. In the event the
Participant has not provided the Trustee with such
direction, the Trustee shall invest all of such
proceeds, including any cash value and post-death
interest, in the Default Fund. By filing a written
election with the Plan Administrator, in accordance with
the provisions of Section 7.4, a Participant may direct
the investment of all or any portion of the policy
proceeds retained in the Plan, including any cash value
and post-death interest, in one or more of the Funds
established under Section 8.2. Notwithstanding anything
herein to the contrary, in no event may a Participant
elect to have such proceeds, or
40
<PAGE>
any gains arising therefrom, used to purchase life
insurance under the Plan.
The provisions of the Plan relating to distributions
upon a Participant's termination of participation in the
Plan, or upon the Plan's termination, shall apply (to
the extent retained in the Plan) to the proceeds from a
policy on the life of a Participant's spouse or
child(ren) and to all gains and losses arising
therefrom.
8A.6 OTHER DISTRIBUTIONS; VESTING.
(a) On the termination of a Participant's employment by the
Employer for any reason other than death, the former
Participant shall have a vested interest in the cash
surrender value, if any, of each policy on his life, the
life of his spouse, and/or the life of his child(ren),
then held under the Trust Agreement.
(b) Distribution of the vested interest of a former
Participant determined under subsection 8A.6(a) shall be
made in the form of an insurance policy or policies
delivered to such former Participant as soon as
reasonably practicable; provided, that, at the election
of the Participant and upon the Plan Administrator's
written instructions to the Trustee, such interest shall
be distributed to the former Participant in cash.
(c) To implement the provisions of this Article VIIIA, the
Plan Administrator, shall in writing direct the Trustee
to take such action with respect to any policy or
policies held hereunder as the Plan Administrator shall
deem advisable, including, but not limited to,
conversion to a paid up basis or surrender of the policy
or policies or any part or parts thereof. In no event
may any policy or policies, or any portion of the value
thereof, be retained in the Trust after a former
Participant's Settlement Date, or after any termination
of the Plan, for the purpose of continuing the life
insurance protection for such former Participant.
8A.7 LIFE INSURANCE SUNSET PROVISION. Notwithstanding anything in
this Article to the contrary, the Life Insurance Fund shall be frozen as of
August 30, 1998. No further Contributions from any source shall be deposited
into or transferred to the Life Insurance Fund after August 30, 1998. No
further actions may be taken, or changes made, with respect to any life
insurance policy in any Account on or after August 30, 1998. Notwithstanding
the foregoing, a Participant shall have the right at any time to surrender
any insurance policy purchased on behalf of his or her Account under the Plan
and to have the proceeds of such surrendered policy invested according to the
Participant's investment election under Section 7.3 or 7.4.
41
<PAGE>
ARTICLE IX
LOANS
9.1 LOANS TO PARTICIPANTS. Subject to the provisions of this
Article IX, an Active Participant may, by filing a written loan application
with the Plan Administrator, borrow money from the Plan which is attributable
to (a) his Participant Contributions, and (b) his Rollover Contributions and
Elective Transfers. The Plan Administrator shall approve the loan
application of an Active Participant if the loan satisfies the requirements
of this Article IX and if the loan complies with such administrative rules
and procedures as the Plan Administrator may adopt in writing.
9.2 LIMITATIONS. The following restrictions, limitations and
requirements shall be observed by the Plan Administrator in approving or
denying any loan application:
(a) No more than two (2) loans may be approved with respect
to any Active Participant in any Plan Year;
(b) No additional loan may be made if at the time such loan
is to be made the Active Participant applying for such
loan has two loans under the Plan outstanding (a loan
which is in default shall be considered an outstanding
loan);
(c) The amount that an Active Participant may borrow is
limited to the amount determined under paragraph (i) or
(ii), whichever is less:
(i) Fifty percent (50%) of the total vested value of
the Active Participant's Participant
Contribution and Rollover Accounts, or
(ii) $50,000, reduced by the excess (if any) of:
(A) The highest outstanding balance of loans
from the Plan to the Active Participant
during the one-year period ending on the
day before the date a new loan is made,
over
(B) The outstanding balance of loans from
the Plan to the Active Participant on
the date a new loan is made;
For purposes of this subsection 9.2(c), the value of an
Active Participant's Accounts shall be determined as of
the Revaluation Date coincident with the date on which
the Active Participant files his loan application.
(d) Loans may be made only for a period of months, not to
exceed 60 months,
42
<PAGE>
as elected by the Participant; provided that no loan
may be made for a period that would extend beyond the
date on which the recipient of the loan ceases to be
an Active Participant; and
(e) No loan may be made for less than $500.
For purposes of this Section, amounts invested in the Life Insurance
Fund shall not be taken into consideration when determining the value of an
Active Participant's Accounts.
9.3 INTEREST RATE. The interest rate to be paid by an Active
Participant on a new loan shall be the prime lending rate published by the
WALL STREET JOURNAL on the business day next preceding the day on which the
application for the loan is received by the Plan Administrator, plus 1-1/2
percentage points. Effective August 31, 1998, the interest rate shall be the
prime lending rate published by the WALL STREET JOURNAL on the first business
day of the month preceding the month in which the application for the loan is
received by the Plan Administrator, plus 1-1/2 percentage points.
9.4 REPAYMENT. Interest and principal on a loan shall be repaid
by an Active Participant in equal installments through payroll deductions
over the period of the loan. Notwithstanding the foregoing, an Active
Participant may at any time, by a single lump sum, repay the full amount of
any loan outstanding to him (including any interest accrued but unpaid as of
such date).
9.5 DOCUMENTATION. Each loan must be evidenced by a written
loan agreement, signed by the Active Participant, in which he personally
guarantees the repayment of the loan and secures the loan with fifty percent
(50%) of his vested interest in the Plan. The Active Participant must
execute a payroll deduction authorization on such form as is prescribed by
the Plan Administrator, which authorization shall be irrevocable for the
period of the loan.
9.6 SECURITY, COLLECTION. Each loan from the Plan to an Active
Participant shall be secured by fifty percent (50%) of the Active
Participant's vested interest in the Plan. Any of the following events shall
constitute a default of a loan granted pursuant to this Article IX:
(a) The recipient of the loan ceases to be an Active
Participant;
(b) The Plan terminates;
(c) The recipient of the loan fails to make any payment
required under this Article IX within 30 days of the
date such payment is due;
(d) The filing for relief, by or against the recipient of
the loan, under the United States Bankruptcy Code, which
proceeding is not dismissed within 30 days of filing; or
43
<PAGE>
(e) The past or future making of a false representation or
warranty by the recipient of the loan in connection with
any loan or loans to him under the Plan.
If an event of default described in subsections (a) or (b) of this Section
9.6 occurs with respect to an Active Participant's loan, the loan shall
become immediately due and payable and shall be repaid out of the Active
Participant's interest in the Plan by reducing his Account balances
accordingly. The foregoing right of set-off shall not be construed as
authorizing the Plan Administrator to defer collection of a loan until the
termination of an Active Participant's employment, but merely provides a
method of ensuring payment by such time.
If an event of default described in subsection (c) of this Section
9.6 occurs with respect to an Active Participant's loan, the loan shall be
immediately due and payable, and pursuant to Section 72(p) of the Code, a
deemed distribution equal to any unpaid principal and interest shall be
reported to the Internal Revenue Service; provided, however, that the loan
shall not be satisfied out of the Active Participant's interest in the Plan
prior to his attainment of age 59 1/2 or entitlement to a distribution under
the terms of the Plan. If an event of default described in subsections (d)
or (e) of this Section 9.6 occurs with respect to an Active Participant's
loan, the loan shall be immediately due and payable, but shall not be
satisfied out of the Active Participant's interest in the Plan prior to his
attainment of age 59 1/2 or entitlement to a distribution under the terms of
the Plan. Nothing in this Section 9.6 shall be construed to relieve a
borrower from his obligation to make timely payments as required by Section
9.4, Section 9.5, and the written loan agreement.
9.7 ADDITIONAL INFORMATION. In addition to the limitations
contained in Section 9.2, the Plan Administrator may further limit the amount
lent to any Active Participant in order to maintain a reserve chargeable
against such Participant's interest in the Plan for income taxes that would
have to be withheld by the Trustee if the loan were to become a deemed
distribution to such Participant under Section 72(p) of the Code. In the
event the loan becomes a deemed distribution to the Active Participant, any
such taxes required to be withheld by the Trustee (whether or not such a
reserve has been created) shall be charged to and shall reduce such
Participant's interest in the Plan, to the extent possible, and any excess
shall be treated as an administrative expense of the Plan that shall be
reimbursed by such Participant.
9.8 ACCOUNTING. Upon approving a loan to an Active Participant,
the Plan Administrator shall direct the Trustee to draw the amount of the
loan from the Funds in which the Participant's Participant Contribution and
Rollover Accounts are invested, on a pro rata basis; provided, however, that
no amount shall be drawn from the Participant's investment in the Life
Insurance Fund, if any.
An Active Participant's payments of principal and interest on a loan
made under this Article IX shall be reinvested by the Trustee in accordance
with the Active Participant's
44
<PAGE>
investment election for his Participant Contribution and Rollover Accounts
then in effect; provided, however, that no payments under this provision
shall be invested in the Life Insurance Fund. The Trustee shall make the
appropriate credits and charges to the Funds involved in such payments of
principal and interest.
ARTICLE X
VALUATION OF ACCOUNTS
10.1 REVALUATION OF PARTICIPANT'S INTEREST. As of each
Revaluation Date, the Plan Administrator shall adjust each separate Account
of each Participant, each former Participant, and each Beneficiary to reflect
any increase or decrease in net worth of the Funds since the immediately
preceding Revaluation Date. Such adjustment shall be done in the following
manner:
(a) The Trustee shall revalue all of the assets of the Funds
at fair market value, provided that the Life Insurance
Fund shall be valued at the cash value of the life
insurance contract(s). In determining the fair market
value, the following rules shall apply:
(i) All transactions involving the purchase or sale
of investments, which have been executed but for
which settlement has not been made, on or before
the Revaluation Date, shall be treated as though
settlement had been made.
(ii) Assets that are regularly traded on established
markets shall be valued at the last sale price
on the Revaluation Date, or, if no sale price is
quoted on such Revaluation Date, then at the bid
price last quoted on or prior to the close of
business on such date.
(iii) All other assets of the Trust Fund shall be
valued in accordance with usual valuation
practices.
(b) The Plan Administrator shall then, on the basis of the
valuation provided under subsection 10.l(a) and after
making appropriate adjustments for the amount of any
contributions, distributions, or withdrawals since the
immediately preceding Revaluation Date, ascertain the
net increase or decrease in net worth of the Funds
attributable to net earnings and all gains and losses,
both realized and unrealized, since the immediately
preceding Revaluation Date.
(c) The Plan Administrator shall then allocate the net
increase or decrease in the net worth of the Funds as
determined among all Participants, former Participants,
and Beneficiaries who have an interest in such Funds,
45
<PAGE>
separately with respect to each of such Funds, in the
ratio that the balance of each separate Account of each
such Participant, and of the distribution account of
each such former Participant or Beneficiary, on such
Revaluation Date bears to the aggregate of the balances
of all such Accounts on such Revaluation Date, and shall
credit or charge, as the case may be, each such Account
with the amount of its allocated share; provided that
the interest of each Participant, former Participant,
and Beneficiary in the Life Insurance Fund shall be
equal to the cash value of the life insurance
contract(s) held under such Fund for the benefit of such
Participant, former Participant, or Beneficiary.
(d) Finally, the Plan Administrator shall credit to each
Account of each Participant, in accordance with the
provisions of Article V, his contributions since the
preceding Revaluation Date, shall debit each account of
each Participant with the amount of distributions made
therefrom since the preceding Revaluation Date, and
shall make such other adjustments to each Account of
each Participant as are necessary to reflect a
Participant's change in investment election with respect
to contributions previously credited to the
Participant's Accounts, as provided in Section 7.4.
10.2 INVESTMENT FUND ACCOUNTING. The Employer (or designated
record keeper) shall maintain records for each Participant's Participant
Contribution Account, Rollover Contribution Account, After-Tax Contribution
Account, Thrift and Investment Plan Account, if any, that reflect the value
of each Participant's share in the Funds.
10.3 FINALITY OF DETERMINATIONS. The Trustee shall have exclusive
responsibility for determining the net income, liabilities and value of the
assets of the Funds. The Plan Administrator shall have exclusive
responsibility for determining the balance of each Account maintained under
the Plan. The Trustee's and the Plan Administrator's determinations shall be
conclusive upon the Employer and all Participants, former Participants, and
Beneficiaries under the Plan.
10.4 NOTIFICATION. As soon as reasonably possible after the end
of each calendar quarter, the Plan Administrator shall notify each
Participant, former Participant, or Beneficiary of the balance of his
separate Accounts as of the last day of such calendar quarter.
46
<PAGE>
ARTICLE XI
WITHDRAWALS WHILE EMPLOYED
11.1 EMPLOYER AND MATCHING CONTRIBUTION ACCOUNTS. Except as
provided in Section 11.4, a Participant who remains employed by the Employer
may not withdraw any portion of his Employer or Matching Contribution
Accounts.
11.2 PARTICIPANT CONTRIBUTION ACCOUNT. Except as provided in
Section 11.4, a Participant who remains employed by the Employer may withdraw
amounts from his Participant Contribution Account only for reasons of
financial hardship (hereinafter referred to as a "Hardship Withdrawal"), as
described in this Section 11.2.
(a) FINANCIAL HARDSHIP. A withdrawal shall be for financial
hardship only if it is made on account of an immediate
and heavy financial need of the Participant and is
necessary to satisfy that financial need.
(b) IMMEDIATE AND HEAVY FINANCIAL NEED. A withdrawal will
be considered to be made on account of a Participant's
immediate and heavy financial need only if the
distribution is for:
(i) Expenses for medical care described in Section
213(d) of the Code either previously incurred by
the Participant or his spouse or dependents (as
defined in Section 152 of the Code) or necessary
for these persons to obtain such medical care;
(ii) Costs directly related to the purchase of a
principal residence for the Participant (but not
to pay mortgage payments);
(iii) Payment of tuition and related educational fees,
including room and board, for the next 12 months
of post-secondary education for the Participant
or his spouse, children, or dependents (as
defined in Section 152 of the Code); or
(iv) Payments necessary to prevent the eviction of
the Participant from his principal residence or
foreclosure on the mortgage on that principal
residence.
(c) DISTRIBUTION NECESSARY TO SATISFY HARDSHIP. A
distribution will be treated as necessary to satisfy a
Participant's financial need only if:
(i) The distribution is not in excess of the amount
required to relieve the immediate and heavy
financial need, including any amounts
47
<PAGE>
necessary to pay any federal, state, or local
income taxes or penalties reasonably
anticipated to result from the distribution;
and
(ii) The Participant cannot relieve that need from
other resources reasonably available to him,
including any assets of the Participant's spouse
and minor children that are reasonably available
to him (but excluding property held for the
Participant's child under an irrevocable trust
or the Uniform Gifts to Minors Act).
(d) REPRESENTATIONS BY PARTICIPANT. Absent actual
knowledge to the contrary, the Plan Administrator shall
treat a Participant as satisfying the requirements of
subsection 11.2(c) if the Participant represents, in
writing, that his financial need cannot reasonably be
relieved through any of the following:
(i) Reimbursement or compensation by insurance or
otherwise;
(ii) Liquidation of the Participant's assets;
(iii) Cessation of Participant Contributions;
(iv) Other distributions or nontaxable (at the time
of the loan) loans from plans maintained by the
Employer or by any other employer; or
(v) Borrowing from commercial sources on reasonable
commercial terms in an amount sufficient to
satisfy the need.
For purposes of this subsection 11.2(d), a need
cannot reasonably be relieved by one of the
actions listed above if the effect would be to
increase the amount of the need.
(e) SOURCE OF HARDSHIP WITHDRAWAL. In no event shall a
Hardship Withdrawal be permitted with respect to amounts
other than the portion of a Participant's Participant
Contribution Account consisting of:
(i) Participant Contributions, regardless of when
made,
(ii) Qualified Nonelective Contributions, regardless
of when made, and
(iii) Income allocable to both Participant and
Qualified Nonelective Contributions, to the
extent such income was credited to the
48
<PAGE>
Participant's Participant Contribution Account
as of December 31, 1988.
(f) APPLICATION FOR HARDSHIP WITHDRAWAL. A Participant who
wishes to receive a Hardship Withdrawal shall submit a
written request to the Plan Administrator, on a form
acceptable to the Plan Administrator, and in accordance
with any rules and procedures established by the Plan
Administrator. The Plan Administrator, acting in a
uniform nondiscriminatory manner, shall approve any
Hardship Withdrawal request that meets the requirements
described in this Section 11.2, and shall deny all other
Hardship Withdrawal requests. Hardship withdrawals so
approved shall be made as soon as administratively
practicable.
Notwithstanding anything to the contrary in this Section 11.2, an "alternate
payee," as defined in Section 12.7, shall be eligible to make hardship
withdrawals in accordance with the provisions of this Section 11.2; provided,
however, that the amount available for withdrawal shall be limited to the
amount payable to such alternate payee under Section 12.7.
11.3 ROLLOVER, AFTER-TAX, AND THRIFT AND INVESTMENT PLAN ACCOUNTS.
A Participant who remains employed by the Employer may withdraw all or any
portion of his Rollover, After-Tax, or Thrift and Investment Plan Account by
submitting a written request to the Plan Administrator, on a form acceptable
to the Plan Administrator. Any such form shall specify the Account or
Accounts from which the withdrawal is to be made. The withdrawal shall be
drawn pro rata from each of the Funds in which that Account or those Accounts
are invested, in accordance with the Participant's investment election then
in effect under Article VII. The withdrawal shall be effected as soon as
administratively feasible after the Plan Administrator's receipt of the
request form.
11.4 ATTAINMENT OF AGE 59 1/2 OR DISABILITY. Notwithstanding
any other provision of this Article XI, a Participant who remains employed by
the Employer may withdraw all or any portion of his vested Plan benefit upon
attaining age 59 1/2 or becoming disabled. For this purpose, a Participant
shall be "Disabled" if, in the opinion of the Plan Administrator, his
condition is described in Section 401(k)(2)(B)(i)(1) of the Code. A
Participant may make a withdrawal under this Section 11.4 by submitting a
written request to the Plan Administrator, on a form acceptable to the Plan
Administrator, and in accordance with any rules and procedures established by
the Plan Administrator. Any such form shall specify the Account or Accounts
from which the withdrawal is to be made. The withdrawal shall be drawn pro
rata from each of the Funds in which that Account or those Accounts are
invested, in accordance with the Participant's investment election then in
effect under Article VII.
11.5 FORM OF PAYMENT. All amounts withdrawn under this Article
XI shall be paid to the Participant in cash by check.
49
<PAGE>
ARTICLE XII
DISTRIBUTION ON TERMINATION OF EMPLOYMENT
12.1 TERMINATION OF PARTICIPATION. Each Participant shall cease
to be a Participant under the Plan on the date such Participant's employment
with the employer is terminated for any reason, including layoff (in excess
of one year), Disability, or death.
12.2 VESTING.
(a) The interest of a Participant in his Employer and
Matching Contribution Accounts shall vest as follows:
(i) Upon his termination of employment at or after
his Normal Retirement Date, one hundred percent
(100%).
(ii) Upon his death or Disability, one hundred
percent (100%), or
(iii) Upon any other termination of employment, in
accordance with the following schedule:
YEARS OF SERVICE NONFORFEITABLE
PERCENTAGE*
Date Employee is hired 20
1 40
2 60
3 80
4 or more 100
(b) The interest of a Participant in any Account other than
his Employer or Matching Contribution Account shall at
all times be one hundred percent (100%) vested and not
subject to forfeiture.
(c) Upon the Plan's termination or the Employer's complete
discontinuance of contributions, each Participant shall
become one hundred percent (100%) vested in his Employer
and Matching Contribution Accounts.
- ------------------------
* A Participant's nonforfeitable percentage shall be calculated to the
nearest one thousandth of one percent, based on the number of completed years
and days of Service.
50
<PAGE>
12.3 FORFEITURES. Upon the termination of a Participant's
employment with the Employer for any reason other than retirement on or after
his 65th birthday, death, or Disability, the Plan Administrator shall notify
the Trustee in writing of the termination and shall direct the Trustee to
make payment of the Participant's Participant Contribution Account, Rollover
Account, After-Tax Contribution Account, Thrift and Investment Plan Account,
if any, and the vested portion of his Employer and Matching Contribution
Accounts, as of the Revaluation Date coincident with his date of termination
of employment, in a method provided under Section 12.4. The vested portion
of a Participant's Employer and Matching Contribution Accounts shall be
determined in accordance with Section 12.2.
The nonvested portion, if any, of his Employer and Matching
Contribution Accounts shall be retained in such Accounts until a sufficient
period has elapsed to determine whether he will be reemployed before
incurring a one-year Break in Service. If he is reemployed before incurring
a one-year Break in Service, his Employer and Matching Contribution Accounts
will continue to vest. If he incurs a one-year Break in Service, the
non-vested portion of such Accounts shall be deemed a forfeiture and used to
reduce the Employer and Matching Contributions of the Employer for the Plan
Year in which the Participant incurs such one-year Break in Service. If a
Participant is rehired by the Employer after incurring a one-year Break in
Service but before incurring five consecutive one-year Breaks in Service, any
portion of his Employer and Matching Contribution Accounts that was forfeited
on his earlier termination of employment shall be restored to him. Such
restoration shall be effected through forfeitures arising during the year of
the Participant's reemployment and, if such forfeitures are insufficient,
additional Employer Contributions.
On such Participant's subsequent termination of employment before
becoming fully vested in his Employer and Matching Contribution Accounts, the
portion of his Employer and Matching Contribution Accounts distributable on
such subsequent termination of employment shall be calculated as follows:
(a) The amount distributed to the Participant from his
Employer and Matching Contribution Accounts on his
earlier termination of employment shall be added to his
Employer and Matching Contribution Accounts at such
time;
(b) The amount determined under subsection 12.3(a) shall be
multiplied by the Participant's vested percentage as of
the date of his subsequent termination of employment, as
determined under Section 12.2; and
(c) The amount distributed to the Participant on his earlier
termination of employment shall be deducted from the
product calculated under subsection 12.3(b) to determine
the amount distributable on his subsequent termination
of employment.
12.4 DISTRIBUTION ON TERMINATION OF EMPLOYMENT. Upon a Participant's
termination
51
<PAGE>
of employment with the Employer for any reason described in Code Section
401(k)(2)(B)(i)(1), the Plan Administrator shall direct the Trustee to
distribute to that Participant or his Beneficiary the vested portion of the
Participant's Accounts (as determined under Section 12.2), in accordance with
the provisions of this Section 12.4.
(a) DISTRIBUTION TO PARTICIPANTS. Upon a Participant's
termination of employment with the Employer for any
reason other than the Participant's death, the
Participant may elect to receive the vested portion of
his Accounts in either of the following forms:
(i) A single lump sum, payable within a reasonable
time after the 120th day following the Plan
Administrator's receipt of the Participant's
election, or
(ii) A series of installment payments over a fixed
period of time that is not less than two (2)
years and not more than the joint life
expectancy of the Participant and his
Beneficiary. For this purpose, life
expectancies shall be determined under Tables V
and VI of Treasury Regulation Section 1.72-9 (or
such other sources as may be required for use
under Section 401(a)(9) of the Code and the
regulations thereunder) and shall not be
recalculated in years following the initial
determination. The amount of the first
installment payment shall be determined by
multiplying the value of the total vested
portion of the Participant's Accounts as of the
Revaluation Date coincident with the date as of
which the installment is payable by a fraction,
the numerator of which is one (1) and the
denominator of which is the total number of
installment payments. The amount of each
subsequent installment payment shall be
determined by multiplying the value of the total
vested portion of the Participant's Accounts as
of the date as of which the installment is
payable by a fraction, the numerator of which is
one (1) and the denominator of which is the
remaining number of installment payments. Such
installment payments shall be made on a
quarterly, semi-annual, or annual basis, as
elected by the Participant. The first
installment payment shall be made within a
reasonable time after the 120th day following
the Plan Administrator's receipt of the
Participant's election.
(b) DISTRIBUTION TO BENEFICIARIES. Upon a Participant's
termination of employment with the Employer by reason of
the Participant's death, the Participant's designated
Beneficiary(ies) may elect to receive a distribution of
the vested portion of the Participant's Accounts in
either of the following forms:
52
<PAGE>
(i) A single lump sum, payable within a reasonable
time after the Participant's death, or
(ii) A series of installment payments over a fixed
period of time that is not less than two (2)
years and not more than five (5) years;
provided, however, the period of time over which
the series of installment payments is paid shall
not exceed the Beneficiary's life expectancy.
For this purpose, life expectancy shall be
determined under Table V of the Treasury
Regulation Section 1.72-9 (or such other sources
as may be required for use under Section
401(a)(9) of the Code and the regulations
thereunder) and shall not be recalculated in
years following the initial determination. The
amount of the first installment payment shall be
determined by multiplying the value of the total
vested portion of the Participant's Accounts as
of the Revaluation Date coincident with the date
as of which the installment is payable by a
fraction, the numerator of which is one (1) and
the denominator of which is the total number of
installment payments. The amount of each
subsequent installment payment shall be
determined by multiplying the value of the total
vested portion of the Participant's Accounts as
of the date as of which the installment is
payable by a fraction, the numerator of which is
one (1) and the denominator of which is the
remaining number of installment payments. Such
installment payments shall be made on a
quarterly, semi-annual, or annual basis, as
elected by the Beneficiary. The first such
installment payment shall be made within a
reasonable time after the Participant's death.
(c) LUMP SUM DISTRIBUTIONS. Any lump sum distribution
shall be made in cash by check.
(d) INSTALLMENT DISTRIBUTIONS. All installment
distributions shall be made in cash by check. Any
Participant (or, in the case of a distribution under
Paragraph 12.4(b)(ii), any Participant's Beneficiary)
electing to receive an installment distribution may
elect to have the vested portion of the Participant's
Accounts invested in any one or more of the Funds
(other than the Life Insurance Fund) after the
Participant's Settlement Date; provided, however,
that only one such election may be made after such
Settlement Date, which election must be made prior to
the payment of the first installment. Installment
payments will be drawn pro-rata from the
Participant's balances in the Funds. In the event a
Participant or Beneficiary dies before receiving all
installment payments to which he
53
<PAGE>
would otherwise be entitled, the remaining portion of
the Participant's vested Accounts shall be paid in a
single lump sum to the Participant's designated
Beneficiary(ies) (or, in the case of a distribution
being made under Paragraph 12.4(b)(ii), as provided
in Section 4.2).
(e) LIFE INSURANCE FUND. Notwithstanding the preceding
provisions of this Section 12.4, any interest in the
Life Insurance Fund shall be distributed to a
Participant or Beneficiary in accordance with the
provisions of Sections 8A.5 and 8A.6.
(f) IN-KIND DISTRIBUTIONS. Effective January 1, 2000, a
Participant may elect to receive amounts distributed
from his Account invested in the Company Stock Fund in
whole shares of Company Stock, with any fractional
shares paid in cash. Such election and the method of
transfer of the shares shall be in such form and manner
as is established by the Plan Administrator.
12.5 DISTRIBUTION OF SMALL AMOUNTS. Notwithstanding any other
provision of this Plan to the contrary, if the vested portion of a
Participant's Accounts as of the Participant's Settlement Date does not
exceed $3,500 (effective January 1, 1998, $5,000) (and did not exceed such
amount at the time of any prior distribution from such Accounts) that amount
shall be distributed to the Participant or Beneficiary in a single lump sum,
as soon as administratively practicable following that Settlement Date. If
the vested portion of a Participant's Accounts does exceed $3,500 (effective
January 1, 1998, $5,000) (or did exceed such amount at the time of any prior
distribution from such Accounts) that amount shall not be distributed prior
to the Participant's (or, in the case of a distribution under subsection
12.4(b), the Participant's Beneficiary's) attainment of age 70 1/2, unless
the Participant or Beneficiary (as the case may be) shall have consented in
writing to an earlier distribution.
12.6 COMMENCEMENT OF DISTRIBUTIONS. Notwithstanding anything in
this Article XII to the contrary (except the last paragraph of this Section
12.6), if the vested portion of the Participant's Accounts exceeds $3,500
(effective January 1, 1998, $5,000) (or exceeded such amount at the time of
any prior distribution), distribution of benefits under Section 12.4(a) shall
not commence within 30 days after the date the Plan Administrator issues to
the Participant the notice required by Treasury Regulation Section
1.411(a)-11(c) (the "Tax Notice"). The Tax Notice shall be distributed no
less than 30 days and no more than 90 days before any distribution would be
made.
The Tax Notice shall explain the tax rules that apply to Plan
distributions and shall notify the Participant of his right to (1) have
benefit payments deferred to a later date, (2) have benefits paid to the
Participant, (3) have benefits paid in a direct rollover described in Article
XII, or (4) have benefits split between payment to the Participant and
payment in a direct rollover.
The Participant shall elect in writing, on a form to be provided by
the Plan Administrator,
54
<PAGE>
whether and/or how benefits are to be distributed. No distribution shall be
made unless the Participant consents to such distribution. Such consent may
not be given before the Participant receives the Tax Notice nor more than 90
days before the distribution would be made. If the Participant refuses to
consent to such distribution, his Accounts shall be retained in the Trust
Fund. In that case, distribution shall commence as soon as administratively
feasible after the first to occur of the Participant's (1) attainment of age
65 and request for a lump-sum distribution of his entire vested Account
balance, (2) election to receive a distribution in accordance with Section
12.10, (3) attainment of age 70 1/2, or (4) death (provided the Plan
Administrator has received notice of the Participant's death).
A distribution that is subject to the Participant's consent may
commence less than 30 days after the Tax Notice is given to the Participant,
provided that:
(a) The Plan Administrator clearly informs the Participant
that the Participant has a right to a period of at
least 30 days after receiving the Tax Notice to consider
the decision of whether or not to elect a distribution
(and, if applicable, a particular distribution option);
and
(b) The Participant, after receiving the Tax Notice,
affirmatively elects a distribution.
12.7 DISTRIBUTION UNDER QUALIFIED DOMESTIC RELATIONS ORDER.
Notwithstanding anything in this Article XII or Section 16.8 to the contrary,
the Plan Administrator may direct the Trustee to make distribution to an
"alternate payee" under a "qualified domestic relations order" at any time
specified in such order, whether before, at, or after a Participant's
"earliest retirement age" (as all of such terms are defined in Section 414(p)
of the Code), provided that any such distribution before a Participant's
earliest retirement age shall be subject to the following conditions:
(a) The order must either provide for, or permit the Plan
Administrator and alternate payee to agree to, such an
early distribution;
(b) The distribution must constitute a single-sum payment of
all Plan benefits to which the alternate payee may
become entitled under the terms of the order; and
(c) If the order so provides, any such distribution that
exceeds $3,500 (effective January 1, 1998, $5,000)
shall be made only with the alternate payee's written
consent. Unless the context clearly requires a
contrary interpretation, any order providing for a
single sum distribution to an alternate payee as of a
Participant's "earliest retirement age" shall be
construed as providing for such payment to be made on
the date which is as soon as administratively
practicable after the Plan Administrator has
55
<PAGE>
determined that the order constitutes a qualified
domestic relations order.
12.8 SPECIAL DISTRIBUTION LIMITATIONS. This Section sets forth
rules concerning when distributions may or must begin, and over what period
of time they may or must be made. Any rules concerning the timing and
duration of benefits found in other provisions of the Plan shall be altered
only to the extent necessary to avoid violating the rules of this Section.
In no event shall these rules be interpreted to provide any option as to the
time, manner, or duration of benefits in addition to options provided
elsewhere in the Plan.
(a) Unless a Participant (or, in the case of a distribution
under subsection 12.4(b), a Participant's Beneficiary)
elects otherwise, distribution of the vested portion of
a Participant's Accounts shall commence within sixty
(60) days after the close of the Plan Year in which
occurs the latest of:
(i) The Participant's attainment of age 65,
(ii) The tenth anniversary of the Participant's
commencement of participation in the Plan, or
(iii) The Participant's termination of employment with
the Employer.
(b) Notwithstanding any provision in the Plan to the
contrary, no distribution may be made under this Plan,
other than to a Participant's spouse, that would result
in the actuarial equivalent of a Beneficiary's interest
equaling or exceeding 50 percent of the actuarial
equivalent of the Participant's full benefit, both
equivalents being determined as of the Participant's
actual retirement date. All distribution made under
this subsection shall be made in accordance with Section
401(a)(9) of the Code and the regulations thereunder,
including the minimum distribution incidental benefit
rules of Proposed Regulation Section 1.401(a)(9)-2. Any
Plan provisions reflecting Section 401(a)(9) shall
override any distribution options in the Plan that are
inconsistent with Section 401(a)(9).
56
<PAGE>
(c) In no event shall distribution with respect to a
Participant commence later than:
(i) for Plan Year beginning before January 1, 1997,
the April 1 of the calendar year following the
calendar year in which the Participant attains
age 70 1/2.
(ii) for Plan Years beginning on or after January 1,
1997:
(A) for a Participant who is not a five
percent (5%) owner (as described in
Section 416(i) of the Code), the
later of (1) the April 1 of the
calendar year next following the
calendar year in which the
Participant attains age 70 1/2, or
(2) the April 1 of the calendar year
in which the Participant terminates
employment; and
(B) for a Participant who is a five
percent (5%) owner, the calendar
year following the calendar year in
which the Participant attains age
70 1/2, or such other date as may be
prescribed by applicable laws or
regulations.
Notwithstanding the foregoing, if a
Participant who is not a five percent (5%)
owner attains age 70 1/2 on or after January 1,
1996 and before January 1, 1999, and is
still employed by the Employer on April 1 of
the calendar year following the year in which
he attained age 70 1/2, such Participant may
elect to commence distribution effective as
of April 1 of the calendar year following the
calendar year in which he attained age 70 1/2
or to delay commencement of distribution
until the Participant terminates employment.
(d) In no event shall distribution with respect to a
Participant be made over a period extending beyond the
later of:
(i) The life of the Participant or the joint lives
of the Participant and the Beneficiary
designated by him (if any), or
(ii) The life expectancy of the Participant or the
joint life expectancy of the Participant and the
Beneficiary designated by him (if any).
(e) If a Participant dies after a distribution of his
interest in the Plan has begun but before his complete
interest has been distributed, the remaining portion
shall be distributed at least as rapidly as under the
method of distribution
57
<PAGE>
(consistent with (d), above) being used at the time
of his death.
(f) If a Participant dies before distribution of his
interest has begun, distribution of his entire
interest shall be completed within five (5) years
after his death. However, if a portion of the
Participant's interest is to be paid to a Beneficiary
designated by him, that portion may, if the other
provisions of this Plan so provide, be distributed
over the life or life expectancy of the Beneficiary.
In that case, distribution must begin not later than
one (1) year after the date of the Participant's
death or such later date as the Secretary of the
Treasury may by regulations prescribe. If the
Beneficiary is the Participant's surviving spouse,
and other provisions of the Plan so provide,
distribution need not begin until the date on which
the Participant would have attained age 70 1/2. If
the surviving Spouse dies before distribution to her
begins, then for purposes of the requirements of this
and the preceding subsections (concerning the latest
date a distribution may begin and the longest period
of time over which payments may be made), the
surviving spouse shall be treated as if she were a
Participant.
12.9 EFFECT OF PLAN ADMINISTRATOR'S DETERMINATION. In exercising
its authority under this Article XII, the Plan Administrator shall act in
such manner as it shall in good faith determine will most adequately and
fairly meet the needs of each Participant or Beneficiary, as the case may be.
No authority shall be exercised in such manner as to discriminate between
any class or group of Participants. The Plan Administrator's determination
of all questions that may arise under this Article XII (if made in accordance
with the standards prescribed herein) shall be conclusive upon all persons
claiming to have any interest under the Plan. In making any determinations
hereunder, the Plan Administrator may rely upon any signed statement that a
Participant or Beneficiary files with it.
12.10 DISTRIBUTION AFTER EARLY RETIREMENT. A Participant who
retires on or after his Early Retirement Date and who does not immediately
receive the vested portion of his Accounts in a single lump sum may
thereinafter elect to receive all or a portion of his vested Accounts under
any of the forms of distribution specified in subsection 12.4(a). The number
of such elections shall not be limited; provided, however, that any such
election:
(a) Shall be made in accordance with Section 12.6;
(b) Shall result in either a minimum lump-sum distribution
of $500 or an installment distribution of the
Participant's entire vested Account balance; and
(c) Shall not apply to any portion of the Participant's
Accounts held in the Life Insurance Fund.
58
<PAGE>
12.11 DIRECT ROLLOVERS. Notwithstanding any provision of the Plan
to the contrary that would otherwise limit a distributee's election under
this Section, a distributee may elect, at the time and in the manner
prescribed by the Plan Administrator, to have any portion of an eligible
rollover distribution paid directly to an eligible retirement plan specified
by the distributee in a direct rollover. An eligible rollover distribution
may not be paid to more than one eligible retirement plan. For purposes of
this Section, the following terms shall have the meaning ascribed to them
below:
(a) An "eligible rollover distribution" is any distribution
of all or any portion of the balance to the credit of
the distributee, except that an eligible rollover
distribution does not include: any distribution that is
one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life
(or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee
and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution
to the extent such distribution is required under
Section 401(a)(9) of the Code; and the portion of any
distribution that is not includible in gross income
(determined without regard to the exclusion for net
unrealized appreciation with respect to employer
securities).
(b) An "eligible retirement plan" is an individual
retirement account described in Section 408(a) of the
Code, an individual retirement annuity described in
Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust
described in Section 401(a) of the Code, that accepts
the distributee's eligible rollover distribution.
However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account or
individual retirement annuity.
(c) A "distributee" includes an Employee or former
Employee. In addition, the Employee's or former
Employee's surviving spouse and the Employee's or
former Employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations
order, as defined in Section 414(p) of the Code, are
distributees with regard to the interest of the
spouse or former spouse.
(d) A "direct rollover" is a payment by the Plan to the
eligible retirement plan specified by the distributee.
59
<PAGE>
ARTICLE XIII
ADMINISTRATION
13.1 PLAN ADMINISTRATOR. Sauer-Sundstrand Company is the Plan
Administrator and has sole responsibility for the administration of the Plan,
including but not limited to the rights to interpret and construe the Plan,
and to determine any disputes arising thereunder. In exercising such powers
and authorities, and in fulfilling such responsibilities, the Plan
Administrator shall exercise good faith, apply standards of uniform
application, and refrain from arbitrary action. The Plan Administrator
hereby designates to those named in Sections 13.2 through 13.5 certain rights
and duties for the general administration of the Plan, and from time to time
may further designate or change responsibilities under the Plan.
13.2 RIGHTS AND DUTIES OF THE BOARD. The Board of Directors of
Sauer-Sundstrand Company (the "Board"), shall:
(a) Adopt the Plan and such amendments thereto as the Board
has not delegated to the Committee under Section 13.4;
and
(b) Appoint the Committee.
The Board shall act through a majority of its members, either by vote at a
meeting or in writing without a meeting.
13.3 RIGHTS AND DUTIES OF THE TRUSTEE. The Trustee shall have such
rights and duties as are set forth in this Section 13.3.
(a) HOLD ASSETS. The Trustee shall hold the assets of this
Plan.
(b) TRUST AGREEMENT. The Plan Administrator will enter
into a Trust Agreement with one or more Trustees, and
the Trustee will receive contributions made by the
Employer pursuant to the Plan and will hold, invest, and
distribute the same in accordance with the terms and
provisions of each Trust Agreement. The Plan
Administrator will determine the form and terms of such
Trust Agreement and may modify such Trust Agreement from
time to time to accomplish the purposes of this Plan.
(c) RECORDS. The Trustee will keep full books of account
and will, at least once during each calendar year,
submit to the Committee a report, which shall include a
list of the investments comprising the trust fund at the
end of the period covered by the report, showing the
valuation placed on each item on such list by the
Trustee at the end of such period and the total of such
valuations, and shall include a statement of purchases,
sales and any
60
<PAGE>
other investment changes and of income and
disbursements since the last report. Copies of such
reports shall be available for inspection at the
principal office of the Employer and at such other
places as the Committee shall specify.
(d) REMOVAL AND RESIGNATION OF TRUSTEE. The Board may
remove the Trustee at any time upon the notice required
by the terms of the Trust Agreement. Upon such
removal, or upon the resignation of the Trustee, the
Board will designate a successor Trustee.
13.4 RIGHTS AND DUTIES OF THE COMMITTEE. The Sauer-Sundstrand
Employee Benefit Committee (the "Committee") shall have such rights and
duties as are set forth in this Section 13.4.
(a) The Committee members shall be appointed by, and shall
serve at the pleasure of, the Board. Vacancies will be
filled in the same manner as original appointments.
(b) The Committee will hold meetings upon such notice, at
such place or places, and at such time or times as it
may from time to time determine. A majority of the
members of the Committee at the time in office will
constitute a quorum for the transaction of business.
(c) The Committee may act at a meeting or in writing without
a meeting. The Committee may adopt such regulations and
rules as it deems desirable for the conduct of its
affairs, which will be uniformly and consistently
applied. All decisions of the Committee will be made
by the vote of the majority, including actions in
writing taken without a meeting.
(d) No member of the Committee will have any right to vote
or decide upon any matter relating solely to himself or
solely to any of his rights and benefits under the Plan.
(e) The Committee shall have the right to appoint, remove
and replace a Trustee or Trustees, investment manager,
record keeper, insurance company or companies, or any
qualified institution or institutions to act as funding
agent with respect to the Plan.
(f) The Committee shall set funding and investment policies
for the assets of the Plan.
(g) The Committee shall appoint the Appeal Review Committee
and the Plan Benefit Committee, and shall have the right
to appoint others or to employ
61
<PAGE>
individuals to assist in the administration of the Plan.
(h) The Committee shall take such steps as are considered
necessary and appropriate to remedy any inequity that
results from incorrect information received or
communicated in good faith or as the consequence of an
administrative error. It shall endeavor to act,
whether by general rules or by particular decisions, so
as not to discriminate in favor of, or against, any
person and so as to treat all persons in similar
circumstances uniformly. The Committee shall correct
any defect, reconcile any inconsistency, or supply any
omission with respect to this Plan. All such
corrections, reconciliations, and completions of Plan
provisions shall be final and binding upon the parties.
(i) The Employer specifically intends that the Committee
have the greatest permissible discretion to construe the
terms of the Plan and to determine all questions
concerning eligibility, participation and benefits.
Any such decision made by the Committee shall be binding
on the Employer and all Employees, Participants, and
Beneficiaries, and is intended to be subject to the most
deferential standard of judicial review. Such standard
of review is not to be affected by any real or alleged
conflict of interest on the part of the Committee
members.
The Committee shall adopt all Plan amendments.
13.5 RIGHTS AND DUTIES OF THE PLAN BENEFIT COMMITTEE. The Plan
Benefit Committee shall have the following rights and duties:
(a) To receive and reply to applications or claims for benefits
filed with it by Participants or Beneficiaries in accordance
with subsection 13.11(a);
(b) To issue directions to the Trustee concerning all benefits that
are to be paid pursuant to the provisions of the Plan;
(c) To receive from the Employer and Participants such information
as is necessary for proper administration of the Plan;
(d) To prepare and distribute, in such form as it determines
appropriate, information explaining the Plan; and
(e) To furnish to the Employer, upon request, such reports with
respect to the Plan's administration as are necessary or
appropriate.
13.6 RIGHTS AND DUTIES OF THE APPEAL REVIEW COMMITTEE. The Appeal
Review
62
<PAGE>
Committee shall have the rights and duties as set forth in subsection
13.11(b).
13.7 INVESTMENT MANAGER. In the event that the Committee appoints
an investment manager to invest all or any of the assets of the Trust, the
investment manager shall have all the powers granted to the Trustee with
respect to the assets of the Trust Fund, and the Committee and the Trustee
shall be relieved of all liability with respect to the management and
investment of such assets so long as any such investment manager is retained.
For purposes of this Article 13, the term "investment manager" shall mean
any party that:
(a) Is registered as an investment broker under the
Investment Advisors Act of 1940, is a bank, or is an
insurance company qualified to manage, acquire, and
dispose of plan assets under the laws of more than one
state;
(b) Acknowledges in writing that it is a fiduciary with
respect to the Plan; and
(c) Is granted the power to manage, acquire or dispose of
any asset of the Trust Fund pursuant to this Article 13.
13.8 RECORD KEEPER. The Committee may in its sole discretion,
appoint a person to keep records for the Plan (the "record keeper"). The
record keeper shall maintain the Accounts (including Rollover Accounts),
allocate earnings, receive and monitor Participants' investment directions,
communicate necessary information to the Trustee (or, if applicable, the
investment manager) to facilitate investment of the Trust Fund in accordance
with Participants' directions, and keep accurate and detailed accounts of all
investments, receipts, disbursements, and other transactions hereunder. In the
event a record keeper is appointed, the Trustee shall be relieved of its
responsibility for these recordkeeping duties imposed on the record keeper, and
shall be relieved of liability for those recordkeeping duties to the extent
permitted under Part 4, Subtitle B, Title I of ERISA.
13.9 INDEMNIFICATION. Each member of the Board and the
forenamed Committees, and each of the Employer's officers, directors and
employees associated with administration of the Plan, shall be indemnified by
Sauer-Sundstrand Company against all costs, expenses and liabilities (other
than amounts paid in a settlement to which Sauer-Sundstrand Company does not
consent) reasonably incurred by him or them in connection with any action to
which he or they may be a party by reason of performance of designated
duties, except in relation to matters as to which he or they shall be
adjudged in such performance to be personally guilty of gross negligence or
willful misconduct. The foregoing right to indemnification shall be in
addition to such other rights as these individuals may enjoy as a matter of
law or by reason of insurance coverage of any kind.
13.10 RELIANCE UPON OTHERS. The Board members, the Trustee, and
the respective Committee members may rely upon the direction,
63
<PAGE>
information or actions of each other as being proper under the Plan, and they
are not required to inquire into the propriety of such direction, information
or action. They may also rely upon all tables, valuations, certificates and
reports made by an accountant, attorney, actuary, consultant or other person
selected or approved by any one of them. Except as prohibited by ERISA,
they will be indemnified in accordance with Section 13.9 with respect to
their reliance upon others as stated herein.
13.11 CLAIMS PROCEDURES.
(a) APPLICATION FOR BENEFITS. At least 60 days before
intended commencement of a Plan benefit, each
Participant and/or Beneficiary believing himself
eligible shall apply for such benefit by completing and
filing with the Plan Benefit Committee an application
for benefits on a form supplied by the Plan Benefit
Committee. Before the date on which benefit payments
are to commence, each such application must be supported
by such information and data as the Plan Benefit
Committee deems relevant and appropriate. Evidence of
age, marital status (and, in the appropriate instances,
health, death, or disability), and location of residence
shall be required of all applicants for benefits.
(b) APPEALS OF DENIED CLAIMS FOR BENEFITS. In the event
that any claim for benefits is denied, in whole or in
part, the Participant or Beneficiary whose claim has
been so denied shall be notified of such denial in
writing by the Plan Benefit Committee. The notice
advising of the denial shall specify the reason or
reasons for denial, make specific reference to pertinent
Plan provisions, describe any additional material or
information necessary for the claimant to perfect the
claim (explaining why such material or information is
needed), and advise the Participant or Beneficiary, as
the case may be, of the procedure for the appeal of such
denial. All appeals shall be made under the following
procedure:
(i) The Participant or beneficiary whose claim
has been denied shall file with the Appeal
Review Committee a notice of appeal from the
denial. Such notice shall be filed within
ninety (90) days from his receipt of
notification by the Plan Benefit Committee of
the claim's denial, shall be made in writing,
and shall set forth all of the facts upon
which the appeal is based. Appeals not timely
filed shall be barred.
(ii) The Appeal Review Committee shall, within thirty
(30) days of receipt of the Participant's or
Beneficiary's notice of appeal, establish a
hearing date on which the Participant or
Beneficiary may make an oral presentation to the
Appeal Review Committee in support of his
appeal. The Participant or Beneficiary shall
be given not less than ten (10) days' notice of
the date set for the hearing.
64
<PAGE>
(iii) The Appeal Review Committee shall consider the
merits of the claimant's written and oral
presentations, the merits of any facts or
evidence in support of the denial of benefits,
and such other facts and circumstances as the
Appeal Review Committee shall deem relevant.
If the claimant elects not to make an oral
presentation, such election shall not be deemed
adverse to his interest, and the Appeal Review
Committee shall proceed as set forth below as
though an oral presentation of the contents of
the claimant's written presentation had been
made.
(iv) The Appeal Review Committee shall render a
determination upon the appealed claim, which
determination shall be accompanied by a written
statement as to the reasons therefor. The
determination so rendered shall be binding upon
all parties.
65
<PAGE>
ARTICLE XIV
AMENDMENT AND TERMINATION
14.1 AMENDMENT. Subject to the provisions of Section 14.2, the
Board of Directors of Sauer-Sundstrand Company (or its designee) may at any
time and from time to time amend the Plan, and all Employees, Participants,
former Participants, Beneficiaries, and persons claiming any interest under
the Plan shall be bound thereby.
14.2 LIMITATION ON AMENDMENT. No amendment shall be made to the
Plan which would have the effect of:
(a) Directly or indirectly divesting the interest of any
Participant or former Participant in any amount that he
would have received had he terminated his employment
with the Employer immediately prior to the effective
date of such amendment, or the interest of any
Beneficiary as such interest existed immediately prior
to the effective date of such amendment;
(b) Directly or indirectly affecting the vested interest of
a Participant under the Plan, unless the conditions of
Section 203(c) of ERISA are satisfied; or
(c) Causing or effecting impermissible discrimination in
favor of Highly Compensated Employees; provided,
however, that nothing herein contained shall restrict
the right to amend the provisions hereof relating to the
administration of the Plan. Moreover, no amendment
shall be made hereunder which would permit any portion
of the Trust Fund to be returned to the Employer or to
be used for or diverted to purposes other than the
exclusive benefit of Participants, former Participants,
and Beneficiaries. Furthermore, no amendment shall be
made which would decrease the amount of any
Participant's Accounts.
14.3 TERMINATION. The Plan Administrator reserves the right to
terminate the Plan, in whole or in part, at any time or to completely
discontinue contributions to the Plan, which termination or discontinuance of
contributions shall become effective at the time specified in such action
(the effective date of such termination or discontinuance shall hereinafter
be referred to as the "termination date").
The Plan shall terminate automatically in the event of the bankruptcy
or insolvency of the Employer; if the Employer makes a general assignment for
the benefit of creditors; or if the Employer is dissolved or liquidated
(unless there is a successor to the business of the Employer which adopts the
Plan within ninety (90) days after becoming such successor). In the event
of the merger or consolidation of the Employer with or into any other
corporation, or in the event that substantially all of the assets of the
Employer are transferred to another corporation, the
66
<PAGE>
successor corporation resulting from the consolidation, merger, or transfer
of such assets, as the case may be, shall have the right to adopt and
continue the Plan and to succeed to the position of the Employer hereunder.
If, however, the Plan is not so adopted within ninety (90) days after the
effective date of such consolidation, merger, or transfer of assets, the Plan
shall automatically be deemed terminated as of the effective date of such
transaction. Nothing in this Plan shall prevent the dissolution,
liquidation, consolidation, or merger of the Employer, nor the sale or
transfer of all or substantially all of its assets.
In the event of the termination of the Plan, written notice thereof
shall be given to Employees covered hereunder and to the Trustee. Upon any
such termination of the Plan, the Trustee and the Plan Administrator shall
take the following actions for the benefit of Participants, former
Participants, and Beneficiaries; provided that in the event of a partial
termination it shall be followed only with respect to those Participants,
former Participants and Beneficiaries directly affected:
(a) As of the termination date, the Trustee shall revalue
the Trust Fund, and the Plan Administrator, taking into
account such revaluation, shall adjust all Participant
Accounts in the manner provided in Section 10.1. In
determining the net worth of the Trust Fund hereunder,
the Trustee shall, unless payment is otherwise provided
for by the Plan Administrator, include as a liability
such amounts as in its judgment shall be necessary to
pay all expenses in connection with the termination of
the Trust and the liquidation and distribution of the
Trust property, as well as other expenses, whether or
not accrued, and shall include as an asset all accrued
income.
(b) The Trustee, after first being advised by the Plan
Administrator in writing as to the value of all of the
Participant Accounts, shall thereinafter dispose of such
Accounts to or for the benefit of such Participants,
former Participants, or Beneficiaries, at such times and
by such methods as are provided in Article XII.
67
<PAGE>
ARTICLE XV
TOP-HEAVY PROVISIONS
15.1 TOP-HEAVY STATUS. The provisions of this Article XV shall
apply only with respect to any Plan Year for which the Plan is Top-Heavy.
If the Plan is or becomes Top-Heavy in any Plan Year, the provisions of this
Article XV shall supersede any conflicting provisions elsewhere in the Plan.
15.2 DEFINITIONS. For purposes of this Article XV, the following
words and phrases shall have the meanings stated below, unless a different
meaning is plainly required by the context:
(a) An "Affiliate" of the Employer shall mean a Related
Employer.
(b) The term "Aggregation Group" with respect to the plans
of the Employer, shall mean the plan or group of plans
which includes all plans maintained by the Employer or
its Affiliates:
(i) In which a Key Employee is a participant,
(ii) Which enable any plan maintained by the Employer
or its Affiliates in which a Key Employee is a
participant to meet the requirements of Sections
401(a)(4) or 410 of the Code, or
(iii) Which are selected by the Employer for
permissive aggregation, the inclusion of which
would not prevent the group of plans from
continuing to meet the requirements of Sections
401(a)(4) and 410 of the Code.
(c) Except as provided in subsection 15.2(f), "Compensation"
shall have the meaning given such term under Paragraph
6.3(e)(ii).
(d) The "Cumulative Account" and "Cumulative Accrued
Benefit" of an Employee or former Employee shall be
determined as follows:
(i) An Employee's or former Employee's "Cumulative
Account," as of a Determination Date, shall be
the sum of the balances to his accounts under a
defined contributions plan, determined as of the
most recent plan valuation date occurring within
the 12-month period ending on the Determination
Date. That amount shall be increased by any
contributions due after such valuation date and
on or before the Determination Date. If the
valuation date falls within
68
<PAGE>
the first plan year of the plan, the
Employee's or former Employee's Cumulative
Account shall include any contributions made
after the Determination Date, but allocated
as of a date in the first plan year. If the
Plan is being considered in an Aggregation
Group, the Employee's or former Employee's
Cumulative Account shall be the sum of the
balances to his accounts under all defined
contribution plans included in the
Aggregation Group under consideration (as
determined under the rules above).
(ii) An Employee's or former Employee's "Cumulative
Accrued Benefit," as of a Determination Date,
shall be the present value of his accrued
benefit under a defined benefit plan, determined
under the actuarial assumptions set forth in
such plan, as of the most recent plan valuation
date occurring within the 12-month period ending
on the Determination Date. For purposes of
computing the Employee's or former Employee's
Cumulative Accrued Benefit, he shall be treated
as if he voluntarily terminated his service as
of such valuation date (as of the Determination
date, in the case of the plan's first year).
The accrued benefit of an Non-Key Employee shall
be determined under (A) the method, if any, that
uniformly applies for accrual purposes under all
defined benefit plans maintained by the
Employer, or (B) if there is no such method, as
if such benefit accrued not more rapidly than
the slowest accrual rate permitted under the
fractional rule of Section 411(b)(1)(C) of the
Code. If the Plan is being considered in an
Aggregation Group, the Employee's or former
Employee's Cumulative Accrued Benefit shall be
the sum of the present values of his accrued
benefits under all defined benefit plans
included in the Aggregation Group under
consideration (as determined under the rules
above).
(iii) The balance to an Employee's or former
Employee's accounts and the value of his
benefits shall not include amounts attributable
to deductible employee contributions.
(iv) The balance to an Employee's or former
Employee's accounts and the value of his
benefits shall be increased by the aggregate
amount of any distributions made on his account
under the Plan or plans during the five-year
period ending on the Determination Date.
(v) Rollovers and direct plan-to-plan transfers
shall be treated as follows:
69
<PAGE>
(1) If the transfer is initiated by the
Employee or former Employee and made
from a plan maintained by the Employer
to a plan maintained by another
employer, the transferor plan shall
continue to include the amount
transferred as an amount in the
Employee's or former Employee's account
under the transferor plan or as an
accrued benefit under the transferor
plan. The transferee plan shall not
consider the amount if it is accepted by
the plan after December 31, 1983, but
shall include it as an amount under the
plan if it is accepted prior to December
31, 1983.
(2) If the transfer is not initiated by the
Employee or former Employee, or is made
between plans maintained by the
Employer, the transferor plan shall not
include the amount transferred as an
amount under the plan and the transferee
plan shall consider the amount
transferred as an amount under the
transferee plan.
(3) For purposes of this Paragraph
15.2(d)(v), the Employer and all its
Affiliates shall be considered a single
employer.
(vi) For purposes of determining the Cumulative
Account under this Plan of an Employee or former
Employee, the valuation date shall be the
Determination Date.
(e) "Determination Date" shall mean, for purposes of
determining whether a plan is Top-Heavy for a particular
plan year, the last day of the preceding plan year (or,
in the case of the first plan year of a plan, the last
day of that first year).
(f) The words "Key Employee" shall mean an Employee or
former Employee (including the beneficiary of such
Employee or former Employee) who, at any time during the
Plan Year or any of the four preceding Plan Years, was:
(i) An officer of the Employer or an Affiliate
having an aggregate annual Compensation from the
Employer and its Affiliates of more than 50
percent of the amount in effect under Section
415(b)(1)(A) of the Code for the Plan Year, but
in no event shall more than 50 employees or, if
less, the greater of (A) 3 employees, or (B) 10
percent of the aggregate number of employees of
the Employer and its Affiliates, be taken into
account under this Paragraph 15.2(f)(i)
70
<PAGE>
as officers of the Employer or Affiliate;
(ii) One of the ten employees of the Employer having
an aggregate annual Compensation from the
Employer or an Affiliate of more than the
limitation in effect under Section 415(c)(1)(A)
of the Code for the Plan Year and owning (or
considered as owning, within the meaning of
Section 318 of the Code) both (A) more than a
one-half percent interest, and (B) the largest
interests, in the Employer;
(iii) A person owning more than 5 percent of the
Employer (within the meaning of Section
416(i)(l)(B)(i) of the Code); or
(iv) A person having an aggregate annual Compensation
from the Employer and its Affiliates of more
than $150,000 (as adjusted by the Secretary of
the Treasury) and owning more than one (1)
percent of the Employer (within the meaning of
Section 416(i)(1)(13)(i) of the Code).
For purposes of applying Section 318 of the Code to the
provisions of this subsection 15.2(f), subparagraph (C)
of Code Section 318(a)(2) shall be applied by
substituting "5 percent" for "50 percent." For purposes
of Section 15.2(f)(ii), if two employees have the same
interest in the Employer, the employee having the
greater aggregate annual Compensation from the Employer
and its Affiliates shall be treated as having the larger
interest. For purposes of this subsection 15.2(f),
"Compensation" shall be defined under Section 414(q)(7)
of the Code.
(g) The words "Non-Key Employee" shall mean any Employee who
is not a Key Employee.
15.3 DETERMINING TOP-HEAVY STATUS. The determination of whether the
Plan is "Top-Heavy" shall be made as follows:
(a) If the Plan is not required to be included in an
Aggregation Group with other plans of the Employer or
its Affiliates, then it shall be Top-Heavy only if, when
considered by itself, it is a Top-Heavy Plan and it is
not included in a permissive Aggregation Group that is
not a Top-Heavy Group.
(b) If the Plan is required to be included in an Aggregation
Group with other plans of the Employer or its
Affiliates, it shall be Top-Heavy only if the
Aggregation Group, including any permissively aggregated
plans, is Top-Heavy.
71
<PAGE>
(c) If the Plan is not a Top-Heavy Plan and it is not
required to be included in an Aggregation Group with
other plans of the Employer or its Affiliates, then it
shall not be Top-Heavy even if it is permissively
aggregated in an Aggregation Group which is a Top-Heavy
Group.
A plan shall be Top-Heavy and an Aggregation Group shall be a Top-Heavy Group
with respect to any plan year if the sum, as of the Determination date, of
the Cumulative Accrued Benefits and the Cumulative Accounts of Key Employees
for the plan year exceeds 60 percent of a similar sum determined for all
Employees. A plan is a "Super Top-Heavy Plan" if it would be a Top-Heavy
Plan under the provisions of this Section 15.3 after substituting "90
percent" for "60 percent" in the preceding sentence. For purposes of this
Section 15.3, the Cumulative Accrued Benefits and Cumulative Accounts of an
individual shall be disregarded if he has not, at any time during the
five-year period ending on the Determination Date, performed any services for
the Employer.
15.4 MINIMUM CONTRIBUTION. For each Plan Year that the Plan is
Top-Heavy, the Employer will contribute and allocate to an Account maintained
for each Non-Key Employee who is eligible to participate in the Plan and who
is employed by the Employer on the last day of such Plan Year an amount equal
to the lesser of:
(a) Three percent (3%) of such Non-Key Employee's
Compensation for such Plan Year; and
(b) The largest percentage of contributions and
forfeitures, if any, as a percentage of the Key
Employee's Compensation, allocated to the Accounts
maintained under the Plan for any Key Employee for
such Year.
The minimum contribution allocable pursuant to this Section 15.4 will be
determined without regard to any contributions made by the Employer for any
Employee under the Federal Social Security Act and will be made with respect
to any Non-Key Employee who is eligible to participate in the Plan, even if
he did not elect to have Participant Contributions made on his behalf under
the Plan for that Plan Year. Participant Contributions shall be disregarded
for all purposes under this Section 15.4, except in determining the
percentage described in subsection 15.4(b).
15.5 SAFE HARBOR RULE. If, in any Plan Year in which the Plan is
a Top-Heavy Plan, a Participant in the Plan is also participating in a
defined benefit plan, within the meaning of Section 3(35) of ERISA, which is
maintained by the Employer or any Affiliate and which is also a Top-Heavy
Plan, the minimum contribution specified in Section 15.4 will not apply to
him; he will instead be subject to the minimum benefit accrual provisions of
such defined benefit plan, as required to comply with Section 416(c)(1) of
the Code.
72
<PAGE>
ARTICLE XVI
MISCELLANEOUS
16.1 PLAN NON-CONTRACTUAL. Nothing herein contained shall be
construed as a commitment or agreement on the part of any Employee to
continue his employment with the Employer, and nothing herein contained shall
be construed as a commitment on the part of the Employer to continue the
employment or the rate of compensation of any Employee for any period. All
Employees herein shall remain subject to discharge, layoff, or disciplinary
action to the same extent as if the Plan had never been put into effect.
16.2 CLAIMS OF OTHER PERSON. The provisions of the Plan shall in
no event be construed as giving any Employee or any other person, firm or
corporation, any legal or equitable right as against the Employer, its
officers, employees or directors, or as against the Trustee, except any such
rights as are specifically provided for in the Plan or are hereinafter
created in accordance with the terms and provisions of the Plan.
16.3 BENEFITS. Nothing in the Plan shall be construed to confer
any right or claim upon any person other than the parties hereto,
Participants, former Participants and Beneficiaries.
16.4 NO GUARANTEES. Neither the Plan Administrator nor the
Trustee guarantees the Trust from loss or depreciation, nor the payment of
any amount which may be or become due to any person from the Trust Fund. No
Participant or other person shall have any recourse against the Plan
Administrator or the Trustee if the Trust Fund is insufficient to provide
Plan benefits in full. Nothing herein contained shall be deemed to give any
Participant, former Participant, or Beneficiary any interest in a specific
part of the Trust Fund, nor any other interest, except the right to receive
benefits out of the Trust Fund in accordance with the provisions of the Plan
and Trust Agreement.
16.5 MERGER OR CONSOLIDATION OF PLAN. Any merger or consolidation
of the Plan with another plan, or any transfer of Plan assets or liabilities
to another plan, shall be effected in accordance with such regulations, if
any, as may be issued pursuant to Section 208 of ERISA, in such a manner that
each Participant in the Plan would receive, if the merged, consolidated or
transferee plan were terminated immediately following such event, a benefit
which is equal to or greater than the benefit he would have been entitled to
receive if the Plan had terminated immediately before such event.
16.6 LIMITATIONS ON ABILITY. Notwithstanding any of the preceding
provisions of the Plan, none of the Plan Administrator, the Trustee, and each
individual acting as an employee or agent of any of them shall be liable to
any Participant, former Participant or Beneficiary for any claim, loss,
liability or expense incurred in connection with the Plan, except when the
same shall have been judicially determined to be due to the gross negligence
or willful misconduct of such person.
73
<PAGE>
16.7 RESTRICTIONS ON ALIENATION.
(a) The rights and interest of any Participant, former
Participant or Beneficiary hereunder shall not be
subject in any manner to sale, transfer, encumbrance,
assignment, pledge or alienation of any kind; nor may
such rights or interest be resorted to, voluntarily or
involuntarily, for the satisfaction of the debt of, or
other obligations or claims against, such person,
including claims for alimony, support, separate
maintenance and claims in bankruptcy proceedings. No
such person shall have power in any manner to sell,
transfer, encumber, assign, pledge, or alienate his
right to receive any distribution hereunder, and any
attempt to do so shall be void.
(b) Notwithstanding the provisions of subsection 16.8(a), if
any Participant borrows money from the Plan pursuant to
Article IX, the Plan Administrator shall have all rights
to collect upon such indebtedness as are granted
pursuant to said Article and any agreements or documents
executed in connection with such loan.
(c) Notwithstanding the provisions of subsection 16.8(a),
all or any portion of any Account maintained under the
Plan for a Participant, former Participant or
Beneficiary shall be subject to and payable in
accordance with the applicable requirements of any
"qualified domestic relations order," as that term is
defined in Section 206(d)(3) of ERISA, and the Plan
Administrator shall direct the Trustee to provide for
payment from a Participant's, former Participant's, or
Beneficiary's Accounts in accordance with such order,
ERISA, and any regulations promulgated thereunder. All
such payments pursuant to a qualified domestic relations
order shall be subject to reasonable rules and
regulations promulgated by the Plan Administrator
respecting the time of payment and the valuation of the
Participant's, former Participant's, or Beneficiary's
Account or Accounts from which payment is made,
including rules and regulations necessary to implement
the provisions of Section 12.7 hereof. The balance of
any Account that is subject to a qualified domestic
relations order shall be reduced by the amount of any
payment made pursuant to such order.
(d) Notwithstanding the foregoing, effective for judgments,
orders and decrees issued and settlement agreements
entered into on or after August 5, 1997, a Participant's
benefit under the Plan may be offset against any amount
a Participant is required to pay on account of a
Participant's breach of fiduciary duty involving the
Plan. Such Participant's benefit may be
74
<PAGE>
reduced only if such requirement to pay arises from:
(i) a judgment or conviction for a crime involving a
Plan;
(ii) a court entered civil judgment, consent order,
or decree in an action brought in connection
with a breach or alleged breach of fiduciary
duty under ERISA;
(iii) a settlement agreement between the Participant
and the Secretary of Labor or the Pension
Benefit Guaranty Corporation in connection with
a breach of fiduciary duty by a fiduciary or
other person.
Such judgment, order, decree or settlement must
specifically require that all or part of the amount to
be paid by the Participant to the Plan be offset against
the benefits of the Participant.
16.8 PAYMENT TO INCOMPETENT PERSONS. Every person receiving or
claiming a benefit under this Plan shall be presumed to be mentally competent
and of age until the Plan Administrator receives reliable, written notice
that such person is incompetent or a minor. Upon receiving such notice, the
Plan Administrator shall direct the Trustee to make payments in accordance
with the remainder of this Section 16.8. Payments otherwise due a minor shall
be paid to any custodial parent of such minor. Payments otherwise due any
other incompetent person shall be paid to the guardian, conservator, or other
legal representative of such person. In the event that the Plan Administrator
is unable to locate a parent, guardian, conservator, or other legal
representative of an incompetent person who is otherwise entitled to payment
under the Plan, such payment shall be made to the individual determined by
the Plan Administrator to have assumed financial responsibility for the care
of such person. Before the initial payment is made to an individual
designated in this Section 16.8, the minor or other legally incompetent
person shall be notified of the Plan Administrator's intent to make such
payment to that other individual. Any payment of a benefit in accordance with
the provisions of this Section 16.8 shall be in complete discharge of any
further liability to make such payment.
16.9 PRUDENT MAN RULE. Notwithstanding any other provision of this
Plan or the Trust Agreement, the Plan Administrator and the Trustee shall
exercise their powers and discharge their duties under this Plan and the
Trust Agreement for the exclusive purpose of providing benefits to
Participants, former Participants, and Beneficiaries, and they shall act with
the care, skill, prudence and diligence under the circumstances that a
prudent man 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.
16.10 CORRECTIVE CONTRIBUTIONS. The Employer, in its sole
discretion (but subject to the applicable limitations described in Article
VI), may elect to make special contributions to the Plan in order to correct
mistakes made in distributing or crediting amounts to Participant
75
<PAGE>
Accounts. Any such contribution shall be credited to Participant Accounts
in the fashion specified by the Employer and not as otherwise provided in the
Plan.
16.11 DUTY TO FURNISH INFORMATION AND DOCUMENTS.
(a) Every person with an interest in the Plan or claiming
benefits under the Plan shall furnish the Plan
Administrator and the Trustee with such documents,
evidence, data, or information as the Plan
Administrator considers necessary or desirable for
the purpose of administering the Plan, and the
provisions of the Plan for each person are upon the
condition that he will furnish promptly full, true
and complete documents, evidence, data and
information requested by the Plan Administrator. The
Plan Administrator may postpone payment of benefits
until such information and such documents have been
furnished.
(b) Every person claiming a benefit under the Plan shall
give written notice to the Plan Administrator of his or
her post office address and each change of post office
address. Any communication, statement or notice
addressed to such a person at his or her latest post
office address, as filed with the Plan Administrator,
will, on deposit in the United States mail with postage
prepaid, be binding upon such person for all purposes of
the Plan. If a person fails to give notice of his or
her correct address, the Plan Administrator and Plan
fiduciaries shall not be obliged to search for, or to
ascertain, his or her whereabouts. If the location of a
Participant is not made known to the Plan Administrator
within three (3) years after the date as of which
distribution of the Participant's Accounts may first be
made, distribution may be made as though the Participant
had died at the end of the three-year period. If,
within one (1) additional year after such three-year
period has elapsed, or within three (3) years after the
actual death of a Participant, the Plan Administrator is
unable to locate any individual who would receive a
distribution under the Plan upon the death of the
Participant pursuant to Section 4.2, the balance in the
Participant's Accounts shall be deemed a forfeiture and
shall be used to reduce the Employer's contributions to
the Plan for the Plan Year next following the year in
which the forfeiture occurs; provided, however, that in
the event the Participant or a Beneficiary makes a valid
claim for any amount which has been forfeited, the
amounts which have been forfeited shall be reinstated.
16.12 PRECEDENT. Except as otherwise specifically provided, no
action taken in accordance with the Plan by the Plan Administrator or the
Trustee shall be construed or relied upon as a precedent for similar action
under similar circumstances.
76
<PAGE>
16.13 LIMITATION. In order to protect the Trust Fund against
depletion as a result of litigation, costs incurred by the Trustee in
defending any action arising out of or based on the Plan by a Participant, or
any person claiming any interest through a Participant, shall be charged as
far as possible directly against the Accounts of such Participant, but only
if the result of the action is adverse to such Participant or claimant.
16.14 EXCLUSIVE BENEFIT OF PARTICIPANTS. All contributions made
pursuant to the Plan shall be held by the Trustee in accordance with the
terms of the Trust Agreement for the exclusive benefit of Participants under
the Plan, including former Participants and Beneficiaries, and shall be
applied to provide benefits under the Plan and to pay expenses of
administration of the Plan and the Trust, to the extent that such expenses
are not otherwise paid. At no time prior to the satisfaction of all
liabilities with respect to such Participants, former Participants and
Beneficiaries shall any part of the Trust Fund (other than such part as may
be required to pay administrative expenses and taxes) be used for, or
diverted to, purposes other than for the exclusive benefit of such
Participants, former Participants and Beneficiaries. Notwithstanding the
preceding sentence, however, a contribution to the Trust Fund shall be
returned to the Employer (and, if a Participant Contribution, immediately
paid to the Participant) under the following circumstances:
(a) If the Plan fails to qualify under Section 401(a) of
the Code;
(b) If the contribution is not deductible to the Employer,
as provided in Section 6.1; or
(c) If the contribution is made under a mistake of fact, as
provided in Section 6.2.
16.15 SERVICE OF PROCESS. The Vice-President, Administration, of
Sauer-Sundstrand Company is hereby designated as agent for the service of
legal process on the Plan.
16.16 GOVERNING LAW. The Plan and the Trust Agreement shall be
interpreted, administered and enforced in accordance with the Code and ERISA,
and the rights of Participants, former Participants, Beneficiaries, and all
other persons shall be determined in accordance therewith; provided however,
that to the extent any state law is applicable, the laws of the State of Iowa
shall apply.
16.17 TRUST AGREEMENT. The Trust Agreement and the Trust Fund
shall be deemed to be a part of the Plan, and the provisions of the Trust
Agreement are hereby incorporated by reference into the Plan.
16.18 PLURALS; MASCULINE TO INCLUDE FEMININE. Where the context so
indicates, the singular shall include the plural and vice-versa, and the
masculine pronoun shall include the feminine.
77
<PAGE>
16.19 TITLES. Titles of articles, sections, and the like are
provided herein for convenience of reference only and are not to serve as a
basis for interpretation or construction of the Plan.
16.20 REFERENCES. Unless the context clearly indicates to the
contrary, a reference to a Plan or Trust provision, statute, regulation, or
document shall be construed as referring to any subsequently enacted,
adopted, or executed counterpart.
ARTICLE XVII
SPECIAL COVERAGE PROVISIONS
17.1 EXTENSION TO NON-COVERED UNITS. The Employer may extend the
Plan to cover any division or other segment of its business not theretofore
covered under the Plan by resolution of its Board of Directors. Such
resolution shall specify the effective date of the extension of coverage to
such division or segment. Any new division or other segment of business
which is established by the Employer shall not become covered under the Plan
solely by virtue of the fact that it is a part of such Employer or a part of
a division or other segment of its business which at the time is covered
under the Plan. Any such new division or other segment of business shall
become covered only if Plan coverage is expressly extended thereto in
accordance with the procedures specified in the foregoing provisions of this
Section 17.1.
17.2 SPECIAL PROVISIONS REGARDING ELIGIBILITY. In the event it
becomes necessary to accommodate the transition from benefit arrangements
that were in effect for the benefit of the employees of a division or other
segment of business prior to the extension of the Plan to such division or
segment of business, an Appendix setting forth special overriding provisions
applicable to the extension of the Plan to such division or segment of
business may be added to the Plan. Each such Appendix shall for all purposes
constitute a part of the Plan.
17.3 ADOPTION BY RELATED EMPLOYERS. Any Related Employer that is
not an Employer hereunder, with the consent of the Board of Directors of
Sauer-Sundstrand Company, may adopt the Plan and become an Employer hereunder
by resolution of its Board of Directors. Such resolution shall specify the
covered unit(s) of the Related Employer to which the Plan is being extended,
and shall specify the effective date of such adoption.
78
<PAGE>
ARTICLE XVIII
RESTATEMENT EFFECTIVE DATES
18.1 IN GENERAL. Except as otherwise provided herein, the changes
made by this January 1, 1997 Amendment and Restatement of the Plan shall be
effective as of January 1, 1997.
18.2 REPEAL OF FIRST AMENDMENT. The First Amendment to the
Sauer-Sundstrand Employees' Savings and Retirement Plan January 1, 1994
Restatement, dated October 1995, is retroactively repealed as of its
effective date.
* * *
IN WITNESS WHEREOF, the Employee Benefits Committee hereby adopts and
executes this Plan on behalf of the Company as of this 3rd day of December,
1999.
SAUER-SUNDSTRAND COMPANY
By: _________________________________
Ronald C. Hanson
Representative of the Employee
Benefits Committee
79
<PAGE>
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 "Account". . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 "Active Participant" . . . . . . . . . . . . . . . . . . . . 2
1.3 "Authorized Leave of Absence". . . . . . . . . . . . . . . . 2
1.4 "Beneficiary". . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 "Break in Service" . . . . . . . . . . . . . . . . . . . . . 3
1.6 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.7 "Company". . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.8 "Compensation" . . . . . . . . . . . . . . . . . . . . . . . 4
1.9 "Disability" . . . . . . . . . . . . . . . . . . . . . . . . 5
1.10 "Early Retirement Date". . . . . . . . . . . . . . . . . . . 5
1.11 "Effective Date" . . . . . . . . . . . . . . . . . . . . . . 5
1.12 "Eligible Employee". . . . . . . . . . . . . . . . . . . . . 5
1.13 "Employee" . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.14 "Employer" . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.15 "Employer Contribution . . . . . . . . . . . . . . . . . . . 6
1.16 "Employment Year . . . . . . . . . . . . . . . . . . . . . . 6
1.17 "Enrollment Date". . . . . . . . . . . . . . . . . . . . . . 6
1.18 "ERISA". . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.19 "Fund" . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.20 "Highly Compensated Employee". . . . . . . . . . . . . . . . 6
1.21 "Highly Compensated Employee Group". . . . . . . . . . . . . 7
1.22 "Hour of Service". . . . . . . . . . . . . . . . . . . . . . 7
1.23 "Matching Contribution". . . . . . . . . . . . . . . . . . . 8
1.24 "Nonhighly Compensated Employee" . . . . . . . . . . . . . . 8
1.25 "Nonhighly Compensated Employee Group" . . . . . . . . . . . 8
1.26 "Normal Retirement Date" . . . . . . . . . . . . . . . . . . 9
1.27 "Participant". . . . . . . . . . . . . . . . . . . . . . . . 9
1.28 "Participant Contribution" . . . . . . . . . . . . . . . . . 9
1.29 "Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.30 "Plan Administrator" . . . . . . . . . . . . . . . . . . . . 9
1.31 "Plan Year". . . . . . . . . . . . . . . . . . . . . . . . . 9
1.32 "Related Employer" . . . . . . . . . . . . . . . . . . . . . 9
1.33 "Related Plan" . . . . . . . . . . . . . . . . . . . . . . . 9
1.34 "Revaluation Date" . . . . . . . . . . . . . . . . . . . . . 9
1.35 "Service". . . . . . . . . . . . . . . . . . . . . . . . . .10
1.36 "Settlement Date". . . . . . . . . . . . . . . . . . . . . .10
1.37 "Trust Agreement . . . . . . . . . . . . . . . . . . . . . .10
1.38 "Trust Fund" . . . . . . . . . . . . . . . . . . . . . . . .10
1.39 "Trustee". . . . . . . . . . . . . . . . . . . . . . . . . .10
<PAGE>
ARTICLE II - EMPLOYEE ELIGIBILITY. . . . . . . . . . . . . . . . . . . . . .11
2.1 Eligibility. . . . . . . . . . . . . . . . . . . . . . . . .11
2.2 Changes in Employment Status . . . . . . . . . . . . . . . .11
2.3 Special Rule for Uniformed Service. . . . . . . . . . . . .11
ARTICLE III - PARTICIPATION. . . . . . . . . . . . . . . . . . . . . . . . .12
3.1 Participation in Employer and Matching Contributions . . . .12
3.2 Participation in Participant Contributions . . . . . . . . .12
3.3 Notification of Enrollment Date. . . . . . . . . . . . . . .12
3.4 Authorized Leaves of Absence and Layoff of One Year or Less.12
3.5 Authorized Leaves of Absence in Excess of One Year . . . . .12
3.6 Reemployment Following Termination . . . . . . . . . . . . .13
ARTICLE IV - BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . .14
4.1 Designation of Beneficiary . . . . . . . . . . . . . . . . .14
4.2 Beneficiary in the Absence of Designation. . . . . . . . . .15
4.3 Identification of Distributees . . . . . . . . . . . . . . .15
ARTICLE V - CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . .16
5.1 Employer and Matching Contributions. . . . . . . . . . . . .16
5.2 Participant Contributions. . . . . . . . . . . . . . . . . .16
5.3 Rollover Contributions and Elective Transfers. . . . . . . .17
5.4 Elective Transfers From Retirement Plan. . . . . . . . . . .18
5.5 Administration . . . . . . . . . . . . . . . . . . . . . . .18
5.6 Form of Contributions. . . . . . . . . . . . . . . . . . . .19
5.7 Changes in Payroll Deduction Authorization . . . . . . . . .19
5.8 Suspension of Contributions. . . . . . . . . . . . . . . . .19
ARTICLE VI - LIMITATIONS ON CONTRIBUTIONS. . . . . . . . . . . . . . . . . .20
6.1 Deductibility of Contributions . . . . . . . . . . . . . . .20
6.2 Mistake of Fact. . . . . . . . . . . . . . . . . . . . . . .20
6.3 Limitation on Annual Additions . . . . . . . . . . . . . . .21
6.4 Dollar Limitation on Participant Contributions . . . . . . .25
6.5 Limitation on Participant Contributions. . . . . . . . . . .27
6.6 Limitation on Matching Contributions . . . . . . . . . . . .30
6.7 Multiple Use Limitation. . . . . . . . . . . . . . . . . . .32
ARTICLE VII - DEPOSIT AND INVESTMENT OF CONTRIBUTIONS. . . . . . . . . . . .33
<PAGE>
7.1 Deposit of Employer and Matching Contributions . . . . . . .33
7.2 Deposit of Participant Contributions . . . . . . . . . . . .33
7.3 Investment Election at Participation . . . . . . . . . . . .33
7.4 Changes in Investment Election . . . . . . . . . . . . . . .33
ARTICLE VIII - ESTABLISHMENT OF FUNDS AND ACCOUNTS . . . . . . . . . . . . .35
8.1 Establishment of Accounts. . . . . . . . . . . . . . . . . .35
8.2 Establishment of Funds . . . . . . . . . . . . . . . . . . .35
8.3 Company Stock Fund.. . . . . . . . . . . . . . . . . . . . .36
8.4 Income on Funds. . . . . . . . . . . . . . . . . . . . . . .38
8.5 Record of Information. . . . . . . . . . . . . . . . . . . .38
8.6 Account Balances . . . . . . . . . . . . . . . . . . . . . .38
ARTICLE VIIIA - LIFE INSURANCE . . . . . . . . . . . . . . . . . . . . . . .39
8A.1 Purchase of Policies . . . . . . . . . . . . . . . . . . . .39
8A.2 Policy Terms . . . . . . . . . . . . . . . . . . . . . . . .39
8A.3 Payment of Premiums. . . . . . . . . . . . . . . . . . . . .39
8A.4 Overriding Conditions and Limitations. . . . . . . . . . . .39
8A.5 Designation of Beneficiary, Death Benefits . . . . . . . . .40
8A.6 Other Distributions; Vesting . . . . . . . . . . . . . . . .41
8A.7 Life Insurance Sunset Provision. . . . . . . . . . . . . . .41
ARTICLE IX - LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
9.1 Loans to Participants. . . . . . . . . . . . . . . . . . . .42
9.2 Limitations. . . . . . . . . . . . . . . . . . . . . . . . .42
9.3 Interest Rate. . . . . . . . . . . . . . . . . . . . . . . .43
9.4 Repayment. . . . . . . . . . . . . . . . . . . . . . . . . .43
9.5 Documentation. . . . . . . . . . . . . . . . . . . . . . . .43
9.6 Security, Collection . . . . . . . . . . . . . . . . . . . .43
9.7 Additional Information . . . . . . . . . . . . . . . . . . .44
9.8 Accounting . . . . . . . . . . . . . . . . . . . . . . . . .44
ARTICLE X - VALUATION OF ACCOUNTS. . . . . . . . . . . . . . . . . . . . . .45
10.1 Revaluation of Participant's Interest. . . . . . . . . . . .45
10.2 Investment Fund Accounting . . . . . . . . . . . . . . . . .46
10.3 Finality of Determinations . . . . . . . . . . . . . . . . .46
10.4 Notification . . . . . . . . . . . . . . . . . . . . . . . .46
ARTICLE XI - WITHDRAWALS WHILE EMPLOYED. . . . . . . . . . . . . . . . . . .47
<PAGE>
11.1 Employer and Matching Contribution Accounts. . . . . . . . .47
11.2 Participant Contribution Account . . . . . . . . . . . . . .47
11.3 Rollover, After-Tax, and Thrift and Investment Plan
Accounts . . . . . . . . . . . . . . . . . . . . . . . . .49
11.4 Attainment of Age 59 1/2 or Disability. . . . . . . . . . .49
11.5 Form of Payment. . . . . . . . . . . . . . . . . . . . . . .49
ARTICLE XII - DISTRIBUTION ON TERMINATION OF EMPLOYMENT. . . . . . . . . . .50
12.1 Termination of Participation . . . . . . . . . . . . . . . .50
12.2 Vesting. . . . . . . . . . . . . . . . . . . . . . . . . . .50
12.3 Forfeitures. . . . . . . . . . . . . . . . . . . . . . . . .51
12.4 Distribution on Termination of Employment. . . . . . . . . .51
12.5 Distribution of Small Amounts. . . . . . . . . . . . . . . .54
12.6 Commencement of Distributions. . . . . . . . . . . . . . . .54
12.7 Distribution Under Qualified Domestic Relations Order. . . .55
12.8 Special Distribution Limitations . . . . . . . . . . . . . .56
12.9 Effect of Plan Administrator's Determination . . . . . . . .58
12.10 Distribution After Early Retirement. . . . . . . . . . . . .58
12.11 Direct Rollovers . . . . . . . . . . . . . . . . . . . . . .59
ARTICLE XIII - ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . .60
13.1 Plan Administrator . . . . . . . . . . . . . . . . . . . . .60
13.2 Rights and Duties of the Board . . . . . . . . . . . . . . .60
13.3 Rights and Duties of the Trustee . . . . . . . . . . . . . .60
13.4 Rights and Duties of the Committee . . . . . . . . . . . . .61
13.5 Rights and Duties of the Plan Benefit Committee. . . . . . .62
13.6 Rights and Duties of the Appeal Review Committee . . . . . .62
13.7 Investment Manager . . . . . . . . . . . . . . . . . . . . .63
13.8 Record Keeper. . . . . . . . . . . . . . . . . . . . . . . .63
13.9 Indemnification. . . . . . . . . . . . . . . . . . . . . . .63
13.10 Reliance Upon Others . . . . . . . . . . . . . . . . . . . .63
13.11 Claims Procedures. . . . . . . . . . . . . . . . . . . . . .64
ARTICLE XIV - AMENDMENT AND TERMINATION. . . . . . . . . . . . . . . . . . .66
14.1 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . .66
14.2 Limitation on Amendment. . . . . . . . . . . . . . . . . . .66
14.3 Termination. . . . . . . . . . . . . . . . . . . . . . . . .66
ARTICLE XV - TOP-HEAVY PROVISIONS. . . . . . . . . . . . . . . . . . . . . .68
15.1 Top-Heavy Status . . . . . . . . . . . . . . . . . . . . . .68
15.2 Definitions. . . . . . . . . . . . . . . . . . . . . . . . .68
<PAGE>
15.3 Determining Top-Heavy Status . . . . . . . . . . . . . . . .71
15.4 Minimum Contribution . . . . . . . . . . . . . . . . . . . .72
15.5 Safe Harbor Rule . . . . . . . . . . . . . . . . . . . . . .72
ARTICLE XVI - MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . .73
16.1 Plan Non-Contractual . . . . . . . . . . . . . . . . . . . .73
16.2 Claims of Other Person . . . . . . . . . . . . . . . . . . .73
16.3 Benefits . . . . . . . . . . . . . . . . . . . . . . . . . .73
16.4 No Guarantees. . . . . . . . . . . . . . . . . . . . . . . .73
16.5 Merger or Consolidation of Plan. . . . . . . . . . . . . . .73
16.6 Limitations on Ability . . . . . . . . . . . . . . . . . . .73
16.7 Restrictions on Alienation . . . . . . . . . . . . . . . . .74
16.8 Payment to Incompetent Persons . . . . . . . . . . . . . . .75
16.9 Prudent Man Rule . . . . . . . . . . . . . . . . . . . . . .75
16.10 Corrective Contributions . . . . . . . . . . . . . . . . . .75
16.11 Duty to Furnish Information and Documents. . . . . . . . . .76
16.12 Precedent. . . . . . . . . . . . . . . . . . . . . . . . . .76
16.13 Limitation . . . . . . . . . . . . . . . . . . . . . . . . .77
16.14 Exclusive Benefit of Participants. . . . . . . . . . . . . .77
16.15 Service of Process . . . . . . . . . . . . . . . . . . . . .77
16.16 Governing Law. . . . . . . . . . . . . . . . . . . . . . . .77
16.17 Trust Agreement. . . . . . . . . . . . . . . . . . . . . . .77
16.18 Plurals; Masculine to Include Feminine . . . . . . . . . . .77
16.19 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . .78
16.20 References . . . . . . . . . . . . . . . . . . . . . . . . .78
ARTICLE XVII - SPECIAL COVERAGE PROVISIONS . . . . . . . . . . . . . . . . .78
17.1 Extension to Non-Covered Units . . . . . . . . . . . . . . .78
17.2 Special Provisions Regarding Eligibility . . . . . . . . . .78
17.3 Adoption by Related Employers. . . . . . . . . . . . . . . .78
ARTICLE XVIII - RESTATEMENT EFFECTIVE DATES. . . . . . . . . . . . . . . . .79
18.1 In General . . . . . . . . . . . . . . . . . . . . . . . . .79
18.2 Repeal of First Amendment. . . . . . . . . . . . . . . . . .79
<PAGE>
EXHIBIT 4.6
TRUST AGREEMENT
THIS TRUST AGREEMENT is made as of the 31st day of August, 1998, by and
between Sauer-Sundstrand Company, a corporation organized under the laws of the
State of Delaware, (hereinafter referred to as the "Employer"), and
INSTITUTIONAL TRUST COMPANY, a Colorado corporation (hereinafter referred to as
the "Trustee").
W I T N E S S E T H :
WHEREAS, the Employer has established and sponsors an Internal Revenue Code
of 1986, as amended (hereinafter referred to as the "Code") Section 401(k)
profit sharing plan, known as the LaSalle Factory Employee Savings Plan
(hereinafter referred to as the "Plan"), for the purpose of providing retirement
and related benefits for certain employees of the Employer and their
beneficiaries; and
WHEREAS, a Committee of at least three individuals (hereinafter referred to
collectively as the "Administrator") has been appointed pursuant to the
provisions of the Plan to administer the same; and
WHEREAS, the Plan calls for the establishment of a trust to which
contributions can be paid from time to time under Code Section 401(a), and which
is exempt from income taxation under Section 501 of the Code; and
WHEREAS, as of August 31, 1998, Investors Fiduciary Trust Company (the
"Prior Trustee") served as trustee under the terms of the Trust Agreement
between the Employer and the Prior Trustee dated October 10, 1995 (hereinafter
the "Prior Trust Agreement"); and
WHEREAS, the Employer wishes to (a) appoint the Trustee as successor
trustee as of September 1, 1998, and (b) define and limit the Trustee's powers,
duties and responsibilities to those specifically provided herein; and
WHEREAS, the Employer desires the Trustee to hold and administer the funds
of the trust and any future amounts contributed by the Employer to the Plan, and
the Trustee is willing to do so on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereto hereby agree as follows:
ARTICLE I - Contributions
A. The Trustee shall hold all property received by it as Trustee and any
property into which the same or any part thereof may from time to time be
converted, together with the income thereon (all such property being
hereinafter called the "Trust Fund") IN TRUST, without distinction between
the principal and income thereof, and shall apply the same, after the
payment of all necessary expenses, for the exclusive benefit of certain
employees and their beneficiaries. The Trustee shall accept any cash, and
may accept any other property, contributed pursuant to the terms of the
Plan, but shall not be under any duty nor have any right to require the
Employer to
1
<PAGE>
contribute to the Trust Fund or to determine whether the amount of any
contribution hereunder has been correctly computed under the terms of the
Plan.
B. The Employer hereby agrees to provide to the Trustee within ninety (90)
days of the date of this Agreement, a full and complete written accounting
from the Prior Trustee as of the date of this Agreement setting forth all
investments, receipts, disbursements, allocations, and other transactions
effected by the Prior Trustee during the period beginning on the first day
of the current Plan year and ending on the date of this Agreement, and
certified as to the accuracy of the information contained therein.
ARTICLE II - Powers and Duties of Trustee
A. Directed Trustee
The Trustee shall be a directed trustee. The Trustee shall have no
discretion or authority with respect to the investment of the Trust Fund
and shall act solely as a directed trustee of the funds contributed to the
Trust Fund.
B. Investment Directions
The Trustee shall effect and change investment of the Trust Fund pursuant
to proper directions as and when reported to the Trustee. If participant
direction of investments is permitted under the Plan, the Administrator
shall establish procedures for a participant's proper direction of
investment. The Trustee shall neither effect nor change any such
investments without proper direction, and shall have no right, duty, or
responsibility to recommend investments or investment changes.
The Employer or Administrator may designate such number of separate
accounts as it, in its sole discretion, determines, for the investment of
the Trust Fund.
C. Investment Manager
The Employer may from time to time in its sole discretion appoint, an
investment manager as defined in Section 3(38) of the Employee Retirement
Income Security Act of 1974. The Employer shall notify the Trustee of any
appointment of an investment manager by delivering to the Trustee an
executed copy of the instrument under which the investment manager was
appointed to act as such hereunder and shall specify to the Trustee that
portion of the Trust Fund which shall be subject to investment management.
During the term of such appointment, the investment manager shall have the
sole responsibility for the investment and reinvestment of that portion of
the Trust Fund subject to its investment management. The Trustee may
maintain a separate account within the Trust Fund for the assets of the
Trust Fund subject to investment management. The Employer may terminate its
appointment of an investment manager at any time and shall in writing
notify the Trustee of such termination. Any investment manager shall
exercise such of the powers enumerated in Section D and otherwise contained
in this Agreement with respect to that portion of the Trust Fund subject to
its investment management as may be provided in the instrument under which
the investment manager was appointed to act as such hereunder.
2
<PAGE>
D. Investment Authority
The Trustee, as a directed trustee, is authorized and empowered with the
following rights, powers and duties, each of which the directed Trustee
exercises solely as directed Trustee in accordance with the direction of
the Employer, Administrator, participant, or Investment Manager, as the
case may be:
1. to invest all or any part of the assets of the Trust Fund in any
collective investment trust or group trust which provides for the
pooling of the assets of plan described in Code Section 401(a) and
exempt from tax under Code Section 501(a). The provisions of the
documents governing such collective investment trusts or group trusts,
as amended from time to time, shall govern any investment therein and
are adopted by and made a part of the Plan and this Trust Fund
Agreement. If this Trust Fund fails to be treated as tax-exempt under
the Code or loses its status as such, the Employer shall immediately
so notify the Trustee and the Trustee shall, without further notice or
direction, remove the Trust Fund assets from any such collective
investment trust or group trust maintained by the Trustee, its
affiliates, or other entity;
2. to invest and reinvest the Trust Fund in securities (including
"qualifying employer securities" as defined in Section 407(d) of the
Employee Retirement Security Act of 1974 ("ERISA")) or other property,
real or personal, within or without the United States, including,
without limitation, interests or part interests in any bond and
mortgage or note and mortgage, certificates of deposit, commercial
paper and other short-term or demand obligations, secured or
unsecured, whether issued by governmental or quasi- governmental
agencies or corporations or by any firm or corporation.
Notwithstanding the foregoing, the Trustee shall not make investments
in securities or other property outside the United States unless (i)
the indicia of ownership thereof are held within the jurisdiction of
the District Courts of the United States or (ii) the Secretary of the
Department of Labor shall have granted the Trustee permission to make
such investments and in no event shall anything contained herein be
deemed to purport to authorize any investment or reinvestment in
violation of the requirements of ERISA;
3. to enter into one or more insurance contracts with one or more legal
reserve life insurance companies and, subject to the provisions of
this Agreement, to remit any payments which it may receive hereunder
to any such insurance company, and to delegate powers in connection
with the administration of the portion of the Trust Fund invested in
any such insurance contract, to the insurance company issuing such
insurance contract;
4. to sell property at public or private sale for cash or upon credit or
partly for cash and partly upon credit and upon such terms and
conditions as it shall deem proper. No purchaser shall be bound or
liable for the application of the proceeds of any such sale;
5. to exchange any securities or property held by it for other securities
or property, or partly for such securities or property and partly for
cash, and to exercise conversion, subscription, option and similar
rights with respect to any securities held by it, and to make payments
in connection therewith;
3
<PAGE>
6. to vote in person or by proxy at corporate or other meetings and to
participate in or consent to any voting trust, reorganization,
dissolution, merger or other action affecting any securities in its
possession or the issuers thereof, and to make payments in connection
therewith;
7. to improve any real property;
8. to acquire, hold or dispose of property in unregistered form, or in
its name without designation of fiduciary capacity, or in the name of
its nominee, to deposit any property in a depository or clearing
corporation and to deposit with the federal reserve bank in its
district any securities the principal and interest of which the United
States or any department, agency or instrumentality thereof has agreed
to pay or has guaranteed payment;
9. to compromise and adjust all debts or claims due to or made against
it;
10. to make distributions in cash or in specific property, real or
personal, or an undivided interest therein, or partly in cash and
partly in such property; and
11. to retain in cash so much of the Trust Fund as the Administrator may
direct to satisfy liquidity needs of the Plan and to deposit any cash
held in the Trust Fund in any bank or savings account or short term
investment fund.
E. Funding Policy
The Employer shall advise the Trustee in writing of any funding policy and
method which has been established to carry out the objectives of the Plan
and shall promptly advise the Trustee of any changes therein and the
Trustee shall be obligated to follow such policy and method.
ARTICLE III - Payment of Funds
A. Subject to the provisions of Article XI hereof, the Trustee shall from time
to time withdraw, pay or transfer cash or other property from the Trust
Fund to such persons, in such amounts, and in such manner as the
Administrator may direct.
B. Orders from the Administrator need not specify the purpose of the payments
so ordered, and the Trustee shall not be responsible in any way respecting
the purpose or propriety of such payments or for the administration of the
Plan. Any such order shall constitute a certification that the payment
directed is one which the Administrator is authorized to direct.
Trustee shall be under no duty to enforce payment of any contribution and
shall not be responsible for the adequacy of the Trust Fund to meet and
discharge any liabilities under the Plan. It is expressly understood that
the duties and obligations of the Trustee shall be only those expressly
stated in this Agreement. If a dispute arises as to who is entitled to or
should receive any benefit or payment, the Trustee may withhold or cause to
be withheld such payment until the dispute has been resolved.
4
<PAGE>
C. In the event that any payment ordered by the Administrator shall be mailed
by the Trustee by registered mail directed to the person specified in such
order at the latest address of such person filed with the Administrator,
and shall be returned to the Trustee because such person cannot be located
at such address, the Trustee shall promptly notify the Administrator of
such return. Upon the expiration of sixty (60) days after such
notification such order shall become void, and unless and until a further
order of the Administrator is received by the Trustee with respect to such
payment, the Trustee shall thereafter continue to administer the Trust Fund
as if such order had not been made by the Administrator. The Trustee shall
not be obligated to search for or ascertain the whereabouts of any such
person (or his duly appointed representative).
ARTICLE IV - Return of Funds to Employer
A. Except as provided below, no part of the Trust Fund shall at any time prior
to the satisfaction of all liabilities with respect to the participants in
the Plan and their beneficiaries be used for, or diverted to, purposes
other than the exclusive benefit of such participants and their
beneficiaries and for the defraying of the reasonable expenses of the Trust
Fund as provided in ERISA. The investments of this Trust Fund shall not be
subject to garnishment, attachment, levy or execution of any kind for the
debts or defaults of the Trust Fund or of any person having or claiming to
have any interest in the Trust Fund. The Trust's Fund investments shall
not be assignable in whole or in part by the Trust Fund or by any person
having or claiming to have any interest in the Trust Fund, except that the
interest in this Trust Fund held by the Trustee may be transferred to a
successor Trustee.
B. In the case of a contribution that is made by the Employer by a mistake of
fact, Section A above shall not prohibit the return to the Employer at the
direction of the Administrator of such contribution within one year after
the payment of the contribution.
C. If a contribution by the Employer is expressly conditioned on the initial
qualification of the Plan under Section 401 of the Code, and if the Plan
does not initially qualify, then Section A above shall not prohibit the
return to the Employer at the direction of the Administrator of such
contribution within one year after the date of denial of qualification of
the Plan.
D. If a contribution by the Employer is expressly conditioned upon the
deductibility of the contribution under Section 404 of the Code, then to
the extent the deduction is disallowed, Section A above shall not prohibit
the return to the Employer at the direction of the Administrator of such
contribution (to the extent disallowed) within one year after the
disallowance of the deduction.
E. In the case of the termination of the Plan, any residual assets of the Plan
may be distributed to the Employer at the direction of the Administrator if
all liabilities of the Plan to participants and their beneficiaries have
been satisfied and the distribution does not contravene any provision of
the law.
ARTICLE V - Standard of Conduct
5
<PAGE>
A. The Trustee shall discharge its duties hereunder with the care, skill,
prudence and diligence under the circumstances then prevailing that a
prudent man 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.
The Trustee (or any investment manager appointed pursuant to Article II
hereof) shall not engage in any transaction which it knows or should know
is in violation of any provision of Section 406 of ERISA. Notwithstanding
the foregoing, the Trustee (or any investment manager appointed pursuant to
Article II hereof) may, in accordance with any appropriate exemption
provided under ERISA or upon the approval of the Secretary of the
Department of Labor, enter into any transaction otherwise prohibited under
Section 406 of ERISA.
B. The Trustee may consult with counsel, who may be counsel for the Employer
or Administrator or for the Trustee, in its individual capacity, and shall
not be deemed imprudent by reason of its taking or refraining from taking
any action in accordance with the opinion of counsel. The Trustee shall
not be required to give any bond or any other security for the faithful
performance of its duties under this Agreement, except as required by law.
To the extent permitted by law, the Trustee shall not be liable for any
loss to or diminution of the Trust Fund resulting from any action taken or
omitted except if due to the failure of the Trustee to act to fulfill its
obligation hereunder (including but not limited to the obligation to make
investments as directed by Plan participants as requested by the
Administrator) with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man 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.
ARTICLE VI - Records
The Trustee shall keep records of all transactions relating to the Trust
Fund, which shall be made available at all reasonable times to any persons
designated by the Administrator or as may otherwise be required by law.
The Trustee shall render to the Employer and the Administrator an
accounting annually within ninety (90) days after receipt of the final Plan
year end contributions. The Trustee shall file with the Employer a written
accounting setting forth all investments, receipts, disbursements and other
transactions effected by it during the year ending on such date (but not
including any part of such year for which such an accounting has previously
been filed) and certified as to the accuracy of the information set forth
therein. The Administrator may approve such accounting for the Employer and
itself by an instrument in writing delivered to the Trustee. In the
absence of the Administrator filing with the Trustee objections to any such
accounting within one hundred twenty (120) days after its receipt, the
Administrator shall be deemed to have so approved such accounting on behalf
of itself and the Employer except as to any act or transaction that the
Administrator cannot reasonably be expected to have discovered after
reviewing such accounting with the care, skill, diligence and prudence
expected of persons in the position and with the knowledge of the
Administrator. In such case, or upon the written approval of the
Administrator of any such accounting, the Trustee shall, to the extent
permitted by applicable law, be discharged from all liability to the
Administrator and the Employer for its acts or failures to act described by
such accounting except for a negligent, willful or other breach of duty
under ERISA on the part of the Trustee. Except to the extent otherwise
provided in Section 502 and 504 of ERISA, no person other than the Employer
or the Administrator may require an accounting or bring any action against
the Trustee with respect to the Trust Fund. The
6
<PAGE>
Trustee shall render to the Administratr, at least quarterly, a
statement of the Trust Fund assets and their values and, whenever a
contribution is made to the Trust Fund other than in cash, a statement of
the value of such property on the date it is received by the Trustee. The
Trustee shall render to the Employer and the Administrator an accounting
within one-hundred twenty (120) days after the effective date of the
removal or resignation of the Trustee.
The "valuation date" for the Trust Fund and for each investment fund within
the Trust Fund shall be each day on which the New York Stock Exchange is
open.
ARTICLE VII - Instructions From Employer and Administrator
The Employer shall certify to the Trustee the names of the persons from
time to time constituting the Administrator. In the absence of such
notice, the Trustee shall rely solely upon the Employer. Directions to the
Trustee may, but need not be in writing. The Trustee shall be entitled to
rely without further inquiry upon all such directions shall be held
harmless in relying upon such instructions.
ARTICLE VIII - Compensation for Trustee
The Trustee shall be entitled to receive such reasonable compensation for
its services as may be agreed upon between the Administrator and the
Trustee. Such compensation, reasonable attorneys' fees incurred in the
administration of the Trust Fund and all taxes levied or assessed against
the Trust Fund shall be paid out of the Trust Fund unless paid by the
Employer and, until paid, shall constitute a charge upon said Trust Fund.
In addition, the Trustee's ability to earn income on amounts held hereunder
in non-interest bearing transaction accounts for processing receipts and
disbursements has been taken into consideration in establishing the
Trustee's compensation hereunder. The Trustee shall be entitled to retain
any such income as a part of the Trustee's agreed compensation hereunder,
and such income shall not be or become a part of the assets of the Plan.
ARTICLE IX - Indemnification
The Employer and the Administrator shall indemnify and hold harmless the
Trustee and its shareholders, directors, officers, employees and agents
from and against any and all claims, losses, damages, expenses and
liabilities (including, without limitation, any amounts paid in settlement
and reasonable attorneys' fees) arising either prior to the execution of
this agreement, after termination of this agreement, or from the Trustee's
action or failure to act under the Plan and Trust Fund, unless such
liability arises from the Trustee's negligence, willful misconduct or
dishonesty in the performance of its duties. The exception to
indemnification contained in the last clause of the preceding sentence
shall not preclude indemnification of the Trustee with respect to any
action taken by the Trustee, or any failure to act, if the action taken or
the failure to act was directed by the Administrator, the Employer or any
investment manager, and the Trustee reasonably relied on such direction.
7
<PAGE>
ARTICLE X - Resignation of Trustee
The Trustee may resign at any time by giving ninety (90) days prior written
notice to the Employer. The Employer may remove the Trustee at any time by
giving written notice to the Trustee. In the case of the resignation or
removal of the Trustee, the Employer shall appoint a successor Trustee.
Upon the resignation or removal of the Trustee and the appointment of a
successor Trustee, the Trustee shall account for the administration of the
Trust Fund up to the date of its resignation or removal in the manner
provided in Article VI hereof and, upon the approval of such account, shall
transfer to the successor Trustee all of the assets then constituting the
Trust Fund. The term "Trustee" as used in this Agreement shall be deemed
to apply to any successor Trustee acting hereunder.
ARTICLE XI - Amendment
The parties hereto may amend in writing all or any part of this Agreement,
except Article IV, at any time and from time to time; provided, however,
that any amendment shall not be effective until the instrument of amendment
has been submitted to the Trustee and the Trustee shall have executed such
instrument.
ARTICLE XII - Termination of Agreement
This Agreement and the Trust Fund hereby created may be terminated at any
time by the Employer by written notice, executed and acknowledged so as to
authorize it to be recorded in the State of Colorado and delivered to the
Trustee. Upon receipt of notice of termination, the Trustee shall, after
payment of all expenses incurred in the administration and closing out of
the Trust Fund and the compensation to which the Trustee may be entitled,
and upon approval of the appropriate governmental or quasi-governmental
authorities (if such approval shall be required under applicable law), then
distribute the Trust Fund, in cash or such other property to such persons
and in such amounts as the Administrator shall direct.
ARTICLE XIII - Notices
All notices or other communications required or permitted to be given
hereunder by either party to the other shall be in writing and shall be
sent to such party by personal delivery or by first class mail, postage
prepaid, addressed as follows:
If to the Administrator/Employer, at:
Cheryl Stubbers
Sauer-Sundstrand Company
2800 East 13th Street
Ames, Iowa 50010
If to the Trustee, at:
8
<PAGE>
INSTITUTIONAL Trust Company
c/o R. Eric Starr
INVESCO Retirement Plan Services
400 Colony Square, Suite 2200
1201 Peachtree St., N.E.
Atlanta, GA 30361
Any such notice or other communication shall be deemed received by the
party to whom sent upon the earlier of actual receipt or three business
days after mailing as aforesaid. Any party hereto may change such address
for delivery of notices and other communications by giving notice in the
manner set forth above.
9
<PAGE>
ARTICLE XIV - Applicable Law
This Agreement shall be construed in accordance with the Employee
Retirement Income Security Act of 1974 and, to the extent not preempted by
said Act, the laws of the State of Colorado.
ARTICLE XV - Successors
This Agreement shall be binding upon the respective successors and assigns
of the Employer and the Trustee.
IN WITNESS WHEREOF, the parties and the Trustee have caused this instrument
to be executed as of the day and year first above written.
SAUER-SUNDSTRAND COMPANY
By
----------------------------------
Title:
INSTITUTIONAL TRUST COMPANY
(Corporate Seal)
By
----------------------------------
Attest:
- ----------------------------------
ADMINISTRATOR
By
----------------------------------
By
----------------------------------
By
----------------------------------
10
<PAGE>
EXHIBIT 4.7
TRUST AGREEMENT
THIS TRUST AGREEMENT is made as of the 31st day of August, 1998, by and
between Sauer-Sundstrand Company (hereinafter referred to as the "Employer"),
and INSTITUTIONAL TRUST COMPANY, a Colorado corporation (hereinafter referred
to as the "Trustee").
W I T N E S S E T H :
WHEREAS, the Employer has established and sponsors an Internal Revenue
Code of 1986, as amended (hereinafter referred to as the "Code") Section
401(k) profit sharing plan, known as the Sauer-Sundstrand Employees' Savings
and Retirement Plan (hereinafter referred to as the "Plan"), for the purpose
of providing retirement and related benefits for certain employees of the
Employer and their beneficiaries; and
WHEREAS, a Committee of at least three individuals (hereinafter referred
to collectively as the "Administrator") has been appointed pursuant to the
provisions of the Plan to administer the same; and
WHEREAS, the Plan calls for the establishment of a trust to which
contributions can be paid from time to time under Code Section 401(a), and
which is exempt from income taxation under Section 501 of the Code; and
WHEREAS, as of August 31, 1998, Investors Fiduciary Trust Company (the
"Prior Trustee") served as trustee under the terms of the Trust Agreement
between the Employer and the Prior Trustee dated October 10, 1995
(hereinafter the "Prior Trust Agreement"); and
WHEREAS, the Employer wishes to (a) appoint the Trustee as successor
trustee as of September 1, 1998, and (b) define and limit the Trustee's
powers, duties and responsibilities to those specifically provided herein; and
WHEREAS, the Employer desires the Trustee to hold and administer the
funds of the trust and any future amounts contributed by the Employer to the
Plan, and the Trustee is willing to do so on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereto hereby agree as follows:
ARTICLE I - Contributions
A. The Trustee shall hold all property received by it as Trustee and any
property into which the same or any part thereof may from time to time be
converted, together with the income thereon (all such property being
hereinafter called the "Trust Fund") IN TRUST, without distinction between
the principal and income thereof, and shall apply the same, after the
payment of all necessary expenses, for the exclusive benefit of certain
employees and their beneficiaries. The Trustee shall accept any cash, and
may accept any other property, contributed pursuant to the terms of the
Plan, but shall not be under any duty nor have any right to require the
Employer to
1
<PAGE>
contribute to the Trust Fund or to determine whether the amount of any
contribution hereunder has been correctly computed under the terms of
the Plan.
B. The Employer hereby agrees to provide to the Trustee within ninety (90)
days of the date of this Agreement, a full and complete written accounting
from the Prior Trustee as of the date of this Agreement setting forth all
investments, receipts, disbursements, allocations, and other transactions
effected by the Prior Trustee during the period beginning on the first day
of the current Plan year and ending on the date of this Agreement, and
certified as to the accuracy of the information contained therein.
ARTICLE II - Powers and Duties of Trustee
A. Directed Trustee
The Trustee shall be a directed trustee. The Trustee shall have no
discretion or authority with respect to the investment of the Trust Fund
and shall act solely as a directed trustee of the funds contributed to the
Trust Fund.
B. Investment Directions
The Trustee shall effect and change investment of the Trust Fund pursuant
to proper directions as and when reported to the Trustee. If participant
direction of investments is permitted under the Plan, the Administrator
shall establish procedures for a participant's proper direction of
investment. The Trustee shall neither effect nor change any such
investments without proper direction, and shall have no right, duty, or
responsibility to recommend investments or investment changes.
The Employer or Administrator may designate such number of separate
accounts as it, in its sole discretion, determines, for the investment of
the Trust Fund.
C. Investment Manager
The Employer may from time to time in its sole discretion appoint, an
investment manager as defined in Section 3(38) of the Employee Retirement
Income Security Act of 1974. The Employer shall notify the Trustee of any
appointment of an investment manager by delivering to the Trustee an
executed copy of the instrument under which the investment manager was
appointed to act as such hereunder and shall specify to the Trustee that
portion of the Trust Fund which shall be subject to investment management.
During the term of such appointment, the investment manager shall have the
sole responsibility for the investment and reinvestment of that portion of
the Trust Fund subject to its investment management. The Trustee may
maintain a separate account within the Trust Fund for the assets of the
Trust Fund subject to investment management. The Employer may terminate its
appointment of an investment manager at any time and shall in writing
notify the Trustee of such termination. Any investment manager shall
exercise such of the powers enumerated in Section D and otherwise contained
in this Agreement with respect to that portion of the Trust Fund subject to
its investment management as may be provided in the instrument under which
the investment manager was appointed to act as such hereunder.
2
<PAGE>
D. Investment Authority
The Trustee, as a directed trustee, is authorized and empowered with the
following rights, powers and duties, each of which the directed Trustee
exercises solely as directed Trustee in accordance with the direction of
the Employer, Administrator, participant, or Investment Manager, as the
case may be:
1. to invest all or any part of the assets of the Trust Fund in any
collective investment trust or group trust which provides for the
pooling of the assets of plan described in Code Section 401(a) and
exempt from tax under Code Section 501(a). The provisions of the
documents governing such collective investment trusts or group trusts,
as amended from time to time, shall govern any investment therein and
are adopted by and made a part of the Plan and this Trust Fund
Agreement. If this Trust Fund fails to be treated as tax-exempt under
the Code or loses its status as such, the Employer shall immediately
so notify the Trustee and the Trustee shall, without further notice or
direction, remove the Trust Fund assets from any such collective
investment trust or group trust maintained by the Trustee, its
affiliates, or other entity;
2. to invest and reinvest the Trust Fund in securities (including
"qualifying employer securities" as defined in Section 407(d) of the
Employee Retirement Security Act of 1974 ("ERISA")) or other property,
real or personal, within or without the United States, including,
without limitation, interests or part interests in any bond and
mortgage or note and mortgage, certificates of deposit, commercial
paper and other short-term or demand obligations, secured or
unsecured, whether issued by governmental or quasi- governmental
agencies or corporations or by any firm or corporation.
Notwithstanding the foregoing, the Trustee shall not make investments
in securities or other property outside the United States unless (i)
the indicia of ownership thereof are held within the jurisdiction of
the District Courts of the United States or (ii) the Secretary of the
Department of Labor shall have granted the Trustee permission to make
such investments and in no event shall anything contained herein be
deemed to purport to authorize any investment or reinvestment in
violation of the requirements of ERISA;
3. to enter into one or more insurance contracts with one or more legal
reserve life insurance companies and, subject to the provisions of
this Agreement, to remit any payments which it may receive hereunder
to any such insurance company, and to delegate powers in connection
with the administration of the portion of the Trust Fund invested in
any such insurance contract, to the insurance company issuing such
insurance contract;
4. to sell property at public or private sale for cash or upon credit or
partly for cash and partly upon credit and upon such terms and
conditions as it shall deem proper. No purchaser shall be bound or
liable for the application of the proceeds of any such sale;
5. to exchange any securities or property held by it for other securities
or property, or partly for such securities or property and partly for
cash, and to exercise conversion, subscription, option and similar
rights with respect to any securities held by it, and to make payments
in connection therewith;
3
<PAGE>
6. to vote in person or by proxy at corporate or other meetings and to
participate in or consent to any voting trust, reorganization,
dissolution, merger or other action affecting any securities in its
possession or the issuers thereof, and to make payments in connection
therewith;
7. to improve any real property;
8. to acquire, hold or dispose of property in unregistered form, or in
its name without designation of fiduciary capacity, or in the name of
its nominee, to deposit any property in a depository or clearing
corporation and to deposit with the federal reserve bank in its
district any securities the principal and interest of which the United
States or any department, agency or instrumentality thereof has agreed
to pay or has guaranteed payment;
9. to compromise and adjust all debts or claims due to or made against
it;
10. to make distributions in cash or in specific property, real or
personal, or an undivided interest therein, or partly in cash and
partly in such property; and
11. to retain in cash so much of the Trust Fund as the Administrator may
direct to satisfy liquidity needs of the Plan and to deposit any cash
held in the Trust Fund in any bank or savings account or short term
investment fund.
E. Funding Policy
The Employer shall advise the Trustee in writing of any funding policy and
method which has been established to carry out the objectives of the Plan
and shall promptly advise the Trustee of any changes therein and the
Trustee shall be obligated to follow such policy and method.
ARTICLE III - Payment of Funds
A. Subject to the provisions of Article XI hereof, the Trustee shall from time
to time withdraw, pay or transfer cash or other property from the Trust
Fund to such persons, in such amounts, and in such manner as the
Administrator may direct.
B. Orders from the Administrator need not specify the purpose of the payments
so ordered, and the Trustee shall not be responsible in any way respecting
the purpose or propriety of such payments or for the administration of the
Plan. Any such order shall constitute a certification that the payment
directed is one which the Administrator is authorized to direct.
Trustee shall be under no duty to enforce payment of any contribution and
shall not be responsible for the adequacy of the Trust Fund to meet and
discharge any liabilities under the Plan. It is expressly understood that
the duties and obligations of the Trustee shall be only those expressly
stated in this Agreement. If a dispute arises as to who is entitled to or
should receive any benefit or payment, the Trustee may withhold or cause to
be withheld such payment until the dispute has been resolved.
4
<PAGE>
C. In the event that any payment ordered by the Administrator shall be mailed
by the Trustee by registered mail directed to the person specified in such
order at the latest address of such person filed with the Administrator,
and shall be returned to the Trustee because such person cannot be located
at such address, the Trustee shall promptly notify the Administrator of
such return. Upon the expiration of sixty (60) days after such
notification such order shall become void, and unless and until a further
order of the Administrator is received by the Trustee with respect to such
payment, the Trustee shall thereafter continue to administer the Trust Fund
as if such order had not been made by the Administrator. The Trustee shall
not be obligated to search for or ascertain the whereabouts of any such
person (or his duly appointed representative).
ARTICLE IV - Return of Funds to Employer
A. Except as provided below, no part of the Trust Fund shall at any time prior
to the satisfaction of all liabilities with respect to the participants in
the Plan and their beneficiaries be used for, or diverted to, purposes
other than the exclusive benefit of such participants and their
beneficiaries and for the defraying of the reasonable expenses of the Trust
Fund as provided in ERISA. The investments of this Trust Fund shall not be
subject to garnishment, attachment, levy or execution of any kind for the
debts or defaults of the Trust Fund or of any person having or claiming to
have any interest in the Trust Fund. The Trust's Fund investments shall
not be assignable in whole or in part by the Trust Fund or by any person
having or claiming to have any interest in the Trust Fund, except that the
interest in this Trust Fund held by the Trustee may be transferred to a
successor Trustee.
B. In the case of a contribution that is made by the Employer by a mistake of
fact, Section A above shall not prohibit the return to the Employer at the
direction of the Administrator of such contribution within one year after
the payment of the contribution.
C. If a contribution by the Employer is expressly conditioned on the initial
qualification of the Plan under Section 401 of the Code, and if the Plan
does not initially qualify, then Section A above shall not prohibit the
return to the Employer at the direction of the Administrator of such
contribution within one year after the date of denial of qualification of
the Plan.
D. If a contribution by the Employer is expressly conditioned upon the
deductibility of the contribution under Section 404 of the Code, then to
the extent the deduction is disallowed, Section A above shall not prohibit
the return to the Employer at the direction of the Administrator of such
contribution (to the extent disallowed) within one year after the
disallowance of the deduction.
E. In the case of the termination of the Plan, any residual assets of the Plan
may be distributed to the Employer at the direction of the Administrator if
all liabilities of the Plan to participants and their beneficiaries have
been satisfied and the distribution does not contravene any provision of
the law.
ARTICLE V - Standard of Conduct
5
<PAGE>
A. The Trustee shall discharge its duties hereunder with the care, skill,
prudence and diligence under the circumstances then prevailing that a
prudent man 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. The Trustee (or any investment manager appointed pursuant to
Article II hereof) shall not engage in any transaction which it knows or
should know is in violation of any provision of Section 406 of ERISA.
Notwithstanding the foregoing, the Trustee (or any investment manager
appointed pursuant to Article II hereof) may, in accordance with any
appropriate exemption provided under ERISA or upon the approval of the
Secretary of the Department of Labor, enter into any transaction
otherwise prohibited under Section 406 of ERISA.
B. The Trustee may consult with counsel, who may be counsel for the Employer
or Administrator or for the Trustee, in its individual capacity, and shall
not be deemed imprudent by reason of its taking or refraining from taking
any action in accordance with the opinion of counsel. The Trustee shall
not be required to give any bond or any other security for the faithful
performance of its duties under this Agreement, except as required by law.
To the extent permitted by law, the Trustee shall not be liable for any
loss to or diminution of the Trust Fund resulting from any action taken or
omitted except if due to the failure of the Trustee to act to fulfill its
obligation hereunder (including but not limited to the obligation to make
investments as directed by Plan participants as requested by the
Administrator) with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man 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.
ARTICLE VI - Records
The Trustee shall keep records of all transactions relating to the Trust
Fund, which shall be made available at all reasonable times to any persons
designated by the Administrator or as may otherwise be required by law.
The Trustee shall render to the Employer and the Administrator an
accounting annually within ninety (90) days after receipt of the final Plan
year end contributions. The Trustee shall file with the Employer a written
accounting setting forth all investments, receipts, disbursements and other
transactions effected by it during the year ending on such date (but not
including any part of such year for which such an accounting has previously
been filed) and certified as to the accuracy of the information set forth
therein. The Administrator may approve such accounting for the Employer and
itself by an instrument in writing delivered to the Trustee. In the
absence of the Administrator filing with the Trustee objections to any such
accounting within one hundred twenty (120) days after its receipt, the
Administrator shall be deemed to have so approved such accounting on behalf
of itself and the Employer except as to any act or transaction that the
Administrator cannot reasonably be expected to have discovered after
reviewing such accounting with the care, skill, diligence and prudence
expected of persons in the position and with the knowledge of the
Administrator. In such case, or upon the written approval of the
Administrator of any such accounting, the Trustee shall, to the extent
permitted by applicable law, be discharged from all liability to the
Administrator and the Employer for its acts or failures to act described by
such accounting except for a negligent, willful or other breach of duty
under ERISA on the part of the Trustee. Except to the extent otherwise
provided in Section 502 and 504 of ERISA, no person other than the Employer
or the Administrator may require an accounting or bring any action against
the Trustee with respect to the Trust Fund. The
6
<PAGE>
Trustee shall render to the Administratr, at least quarterly, a
statement of the Trust Fund assets and their values and, whenever a
contribution is made to the Trust Fund other than in cash, a statement
of the value of such property on the date it is received by the Trustee.
The Trustee shall render to the Employer and the Administrator an
accounting within one-hundred twenty (120) days after the effective date
of the removal or resignation of the Trustee.
The "valuation date" for the Trust Fund and for each investment fund within
the Trust Fund shall be each day on which the New York Stock Exchange is
open.
ARTICLE VII - Instructions From Employer and Administrator
The Employer shall certify to the Trustee the names of the persons from
time to time constituting the Administrator. In the absence of such
notice, the Trustee shall rely solely upon the Employer. Directions to the
Trustee may, but need not be in writing. The Trustee shall be entitled to
rely without further inquiry upon all such directions shall be held
harmless in relying upon such instructions.
ARTICLE VIII - Compensation for Trustee
The Trustee shall be entitled to receive such reasonable compensation for
its services as may be agreed upon between the Administrator and the
Trustee. Such compensation, reasonable attorneys' fees incurred in the
administration of the Trust Fund and all taxes levied or assessed against
the Trust Fund shall be paid out of the Trust Fund unless paid by the
Employer and, until paid, shall constitute a charge upon said Trust Fund.
In addition, the Trustee's ability to earn income on amounts held hereunder
in non-interest bearing transaction accounts for processing receipts and
disbursements has been taken into consideration in establishing the
Trustee's compensation hereunder. The Trustee shall be entitled to retain
any such income as a part of the Trustee's agreed compensation hereunder,
and such income shall not be or become a part of the assets of the Plan.
ARTICLE IX - Indemnification
The Employer and the Administrator shall indemnify and hold harmless the
Trustee and its shareholders, directors, officers, employees and agents
from and against any and all claims, losses, damages, expenses and
liabilities (including, without limitation, any amounts paid in settlement
and reasonable attorneys' fees) arising either prior to the execution of
this agreement, after termination of this agreement, or from the Trustee's
action or failure to act under the Plan and Trust Fund, unless such
liability arises from the Trustee's negligence, willful misconduct or
dishonesty in the performance of its duties. The exception to
indemnification contained in the last clause of the preceding sentence
shall not preclude indemnification of the Trustee with respect to any
action taken by the Trustee, or any failure to act, if the action taken or
the failure to act was directed by the Administrator, the Employer or any
investment manager, and the Trustee reasonably relied on such direction.
7
<PAGE>
ARTICLE X - Resignation of Trustee
The Trustee may resign at any time by giving ninety (90) days prior written
notice to the Employer. The Employer may remove the Trustee at any time by
giving written notice to the Trustee. In the case of the resignation or
removal of the Trustee, the Employer shall appoint a successor Trustee.
Upon the resignation or removal of the Trustee and the appointment of a
successor Trustee, the Trustee shall account for the administration of the
Trust Fund up to the date of its resignation or removal in the manner
provided in Article VI hereof and, upon the approval of such account, shall
transfer to the successor Trustee all of the assets then constituting the
Trust Fund. The term "Trustee" as used in this Agreement shall be deemed
to apply to any successor Trustee acting hereunder.
ARTICLE XI - Amendment
The parties hereto may amend in writing all or any part of this Agreement,
except Article IV, at any time and from time to time; provided, however,
that any amendment shall not be effective until the instrument of amendment
has been submitted to the Trustee and the Trustee shall have executed such
instrument.
ARTICLE XII - Termination of Agreement
This Agreement and the Trust Fund hereby created may be terminated at any
time by the Employer by written notice, executed and acknowledged so as to
authorize it to be recorded in the State of Colorado and delivered to the
Trustee. Upon receipt of notice of termination, the Trustee shall, after
payment of all expenses incurred in the administration and closing out of
the Trust Fund and the compensation to which the Trustee may be entitled,
and upon approval of the appropriate governmental or quasi-governmental
authorities (if such approval shall be required under applicable law), then
distribute the Trust Fund, in cash or such other property to such persons
and in such amounts as the Administrator shall direct.
ARTICLE XIII - Notices
All notices or other communications required or permitted to be given
hereunder by either party to the other shall be in writing and shall be
sent to such party by personal delivery or by first class mail, postage
prepaid, addressed as follows:
If to the Administrator/Employer, at:
Cheryl Stubbers
Sauer-Sundstrand Company
2800 East 13th Street
Ames, Iowa 50010
If to the Trustee, at
8
<PAGE>
INSTITUTIONAL Trust Company
c/o R. Eric Starr
INVESCO Retirement Plan Services
400 Colony Square, Suite 2200
1201 Peachtree St., N.E.
Atlanta, GA 30361
Any such notice or other communication shall be deemed received by the
party to whom sent upon the earlier of actual receipt or three business
days after mailing as aforesaid. Any party hereto may change such address
for delivery of notices and other communications by giving notice in the
manner set forth above.
9
<PAGE>
ARTICLE XIV - Applicable Law
This Agreement shall be construed in accordance with the Employee
Retirement Income Security Act of 1974 and, to the extent not preempted by
said Act, the laws of the State of Colorado.
ARTICLE XV - Successors
This Agreement shall be binding upon the respective successors and assigns
of the Employer and the Trustee.
IN WITNESS WHEREOF, the parties and the Trustee have caused this instrument
to be executed as of the day and year first above written.
SAUER-SUNDSTAND COMPANY
By _________________________________
Title:
INSTITUTIONAL TRUST COMPANY
(Corporate Seal)
By _________________________________
Attest:
_______________________________
ADMINISTRATOR
By __________________________________
By ___________________________________
By ___________________________________
10
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-8 of our report dated
February 17, 1999, included in Sauer Inc.'s Form 10-K for the year ended
December 31, 1998 and to all references to our Firm included in this
registration statement.
/s/ Arthur Andersen LLP
Chicago, Illinois
December 27, 1999