SAUER-DANFOSS
EMPLOYEES' RETIREMENT PLAN
(AS AMENDED AND RESTATED,
EFFECTIVE JANUARY 1, 2000 AND RENAMED
AS OF MAY 3, 2000)
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SAUER-DANFOSS
EMPLOYEES' RETIREMENT PLAN
(AS AMENDED AND RESTATED
EFFECTIVE AS OF JANUARY 1, 2000
AND RENAMED EFFECTIVE AS OF MAY 3, 2000)
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ARTICLE I - DEFINITIONS..........................................................................................1
1.1. The "Act"..........................................................................................2
1.2. The term "Actuarial Equivalent"....................................................................2
1.3. The "Actuary"......................................................................................3
1.4. "Average Annual Earnings"..........................................................................3
1.5. The "Code".........................................................................................3
1.6. "Considered Compensation"..........................................................................3
1.7. "Covered Compensation".............................................................................4
1.8. "Disability Income Plan"...........................................................................5
1.9. The "Effective Date"...............................................................................5
1.10. An "Employee"......................................................................................5
1.11. The "Employer".....................................................................................6
1.12. An Employee's "Final Average Compensation".........................................................6
1.13. The "Freeport Plan"................................................................................6
1.14. The "Frozen December 31, 1988, Benefit"............................................................6
1.15. The "Frozen December 31, 1990, Benefit"............................................................6
1.16. "Hour of Employment"...............................................................................6
1.17. The "Minneapolis Plan".............................................................................7
1.18. "Normal Retirement Age"............................................................................8
1.19. "Normal Retirement Date"...........................................................................8
1.20. Employee's "Offset Factor".........................................................................8
1.21. "Period of Severance"..............................................................................8
1.22. The "Plan".........................................................................................9
1.23. The "Plan Administrator"...........................................................................9
1.24. The "Plan Year"....................................................................................9
1.25. A "Related Corporation"............................................................................9
1.26. "Retirement Benefit"...............................................................................9
1.27. "Severance From Service Date"......................................................................9
1.28. An Employee's "Social Security Retirement Age"....................................................10
1.29. "Surviving Spouse"................................................................................10
1.30. The "Taxable Wage Base"...........................................................................10
1.31. "Trustee".........................................................................................10
1.32. "Trust Agreement".................................................................................10
1.33. "Trust Fund"......................................................................................10
1.34. "Years of Participation"..........................................................................10
1.35. "Years of Service"................................................................................10
ARTICLE II - YEARS OF SERVICE AND YEARS OF PARTICIPATION........................................................11
2.1. Years of Service and Years of Participation Prior to January 1, 1991..............................11
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2.2. Years of Service and Years of Participation on or After January 1, 1991...........................11
2.3. Military Service, Disability Leave of Absence and Lay Off.........................................11
2.4. Transfers.........................................................................................12
2.5. Loss of Years of Service and Years of Participation; Service Spanning.............................13
2.6. Reinstatement of Years of Service and Years of Participation......................................13
2.7. Finality of Determinations and Non-duplication....................................................14
2.8. Predecessors......................................................................................14
ARTICLE III - NORMAL RETIREMENT.................................................................................15
3.1. Eligibility.......................................................................................15
3.2. Benefit Amount....................................................................................15
3.3. Transitional Benefits.............................................................................15
3.4. Benefit Payments..................................................................................17
ARTICLE IV - EARLY RETIREMENT...................................................................................17
4.1. Eligibility.......................................................................................17
4.2. Benefit Amount....................................................................................17
4.3. Benefit Payments..................................................................................17
ARTICLE V - VESTED RIGHTS.......................................................................................18
5.1. Eligibility.......................................................................................18
5.2. Benefit Amount....................................................................................18
5.3. Benefit Payments..................................................................................18
ARTICLE VI - "RULE OF 50" RIGHTS................................................................................19
6.1. Eligibility.......................................................................................19
6.2. Benefit Amount....................................................................................19
6.3. Benefit Payments..................................................................................20
ARTICLE VII - OPTIONAL METHODS OF PAYMENT AND AUTOMATIC ELECTION................................................20
7.1. Available Options.................................................................................20
7.2. Election of Form of Benefits......................................................................23
7.3. Revocation and Change of Option...................................................................24
7.4. Effect of Various Circumstances upon Option.......................................................25
7.5. Payment Under Options.............................................................................25
7.6. Availability of Options for Employee Terminated by Layoff.........................................27
7.7. Automatic Election................................................................................27
ARTICLE VIII - SPECIAL AGE 65 BENEFIT...........................................................................28
8.1. Eligibility.......................................................................................28
8.2. Benefit Amount....................................................................................28
8.3. Benefit Payments..................................................................................28
ARTICLE IX - SURVIVOR BENEFIT...................................................................................29
9.1. Eligibility.......................................................................................29
9.2. Benefit Amount....................................................................................29
9.3. Benefit Payments..................................................................................30
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9.4. Surviving Spouse Defined..........................................................................30
ARTICLE X - GENERAL PROVISIONS AND LIMITATIONS REGARDING BENEFITS..............................................31
10.1. Limitations on Commencement.......................................................................31
10.2. Reemployment and Employment After Normal Retirement Date..........................................33
10.3. Restriction on Alienation of Retirement Benefits..................................................36
10.4. Payment to Incompetent Persons....................................................................37
10.5. Payment of Small Benefits.........................................................................38
10.6. Application of Certain Plan Provisions............................................................38
10.7. Direct Rollovers..................................................................................38
ARTICLE XI - MAXIMUM RETIREMENT BENEFITS........................................................................39
11.1. Maximum Benefit Limitations.......................................................................39
11.2. Exception to Application of Section 11.1 Limitation...............................................40
11.3. Treatment of Employee Contributions...............................................................40
11.4. Cost of Living Adjustments........................................................................40
11.5. Adjustments to Maximum Benefit Limitation.........................................................40
11.6. Miscellaneous.....................................................................................42
11.7. Limitation Year Defined...........................................................................42
11.8. Compensation Defined..............................................................................42
11.9. Adjustment for Retired Employees..................................................................43
ARTICLE XII - FINANCING.........................................................................................43
12.1. Trust Fund and Trustee............................................................................43
12.2. Contributions by an Employer......................................................................43
12.3. No Reversion: Return of Contributions.............................................................44
12.4. Forfeitures Not to Increase Benefits..............................................................44
12.5. Change of Funding Medium..........................................................................45
ARTICLE XIII - ADMINISTRATION...................................................................................45
13.1. Plan Administrator................................................................................45
13.2. Rights and Duties of the Board....................................................................46
13.3. Rights and Duties of the Trustee..................................................................46
13.4. Rights and Duties of the Committee................................................................46
13.5. Rights and Duties of the Plan Benefit Committee...................................................47
13.6. Rights and Duties of the Appeal Review Committee..................................................48
13.7. Indemnification...................................................................................48
13.8. Reliance Upon Others..............................................................................48
13.9. Claims Procedures.................................................................................48
ARTICLE XIV - MISCELLANEOUS.....................................................................................50
14.1. Plan Non-Contractual..............................................................................50
14.2. Claims of Other Persons...........................................................................50
14.3. No Guarantees.....................................................................................50
14.4. Limitations on Liability..........................................................................50
14.5. Merger or Consolidation of Plan...................................................................51
14.6. Military Service..................................................................................51
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14.7. Nonforfeitability of Benefits.....................................................................51
14.8. Prudent Man Rule..................................................................................51
14.9. Duty to Furnish Information and Documents.........................................................51
14.10. Precedent.........................................................................................52
14.11. Litigation........................................................................................52
14.12. Service of Process................................................................................52
14.13. Trust Agreement...................................................................................52
14.14. Governing Law.....................................................................................52
14.15. Titles............................................................................................53
14.16. References........................................................................................53
14.17. Masculine to Include Feminine.....................................................................53
ARTICLE XV - ADOPTION OF PLAN BY RELATED CORPORATIONS EXTENSION TO
NON-COVERED UNITS; ORGANIZATIONAL CHANGES..............................................................53
15.1. Adoption by Related Corporations..................................................................53
15.2. Extension to Non-Covered Units....................................................................53
15.3. Special Provision Regarding Eligibility and Benefits..............................................53
15.4. Changes in Employer Organization..................................................................54
ARTICLE XVI - AMENDMENT AND DURATION............................................................................54
16.1. Internal Revenue Code Qualification...............................................................54
16.2. Amendment and Termination.........................................................................54
16.3. Termination.......................................................................................55
16.4. Adjustment of Allocations.........................................................................56
16.5. Assets Insufficient for Allocation................................................................56
16.6. Assets Insufficient for Allocation Under Section 16.3(c)..........................................56
16.7. Residual Assets...................................................................................57
16.8. Immediate Vesting Upon Termination or Discontinuance..............................................57
16.9. Meanings of Terms.................................................................................57
16.10. Provisions to Prevent Discrimination in Case of Early Termination of Plan.........................57
16.11. Withdrawal of an Employer.........................................................................58
ARTICLE XVII - TOP-HEAVY PROVISIONS.............................................................................59
17.1. Top-Heavy Status..................................................................................59
17.2. Definitions.......................................................................................59
17.3. Determination of Top-Heavy Status.................................................................59
17.4. Actuarial Assumption..............................................................................60
17.5. Vesting...........................................................................................60
17.6. Minimum Benefit...................................................................................61
17.7. Maximum Allocation................................................................................62
17.8. Safe Harbor.......................................................................................62
17.9. Limits on Benefits to Key Employees...............................................................62
APPENDIX A TO SAUER-DANFOSS EMPLOYEES' RETIREMENT PLAN.........................................................A-1
APPENDIX B TO SAUER-DANFOSS EMPLOYEES' RETIREMENT PLAN.........................................................B-1
APPENDIX C TO SAUER-DANFOSS EMPLOYEES' RETIREMENT PLAN.........................................................C-1
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SAUER-DANFOSS
EMPLOYEES' RETIREMENT PLAN
(AS AMENDED AND RESTATED
EFFECTIVE JANUARY 1, 2000)
WHEREAS, Sauer-Sundstrand Company, a Delaware corporation and Plan
Administrator herein, is the successor to Sundstrand-Sauer, a partnership 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, Sauer-Sundstrand Company has sponsored and maintained the
Sauer-Sundstrand Employees' Retirement Plan for certain employees of
Sauer-Sundstrand; and
WHEREAS, Sauer-Sundstrand Company last amended and restated the
aforementioned plan effective January 1, 1991 as the Sauer-Sundstrand Employees'
Retirement Plan (the "Plan"); and
WHEREAS, Sauer-Sundstrand Company, known as Sauer-Danfoss, Inc. on and
after May 3, 2000 (the "Company") for each relevant period, desires to continue
the Plan as hereby amended and restated effective January 1, 2000, to provide
retirement benefits for its eligible employees; and
WHEREAS, the Company desires to amend the Plan in order to comply with the
requirements of the Uruguay Round Agreements Act ("GATT"), Small Business Job
Protection Act of 1996, the Taxpayer Relief Act of 1997, and the Uniformed
Services Employment and Reemployment Rights Act of 1994;
NOW, THEREFORE, in compliance with the foregoing, the Company adopts and
makes effective as of January 1, 2000, except where otherwise specifically
provided, this Plan, to provide as follows:
ARTICLE I.
DEFINITIONS
For the purposes of this Retirement Plan, the following words and
phrases shall have the meanings indicated, unless a different meaning is clearly
required by the context:
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1.1. The "Act" means 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 or sections of any future legislation that amends, supplements or
supercedes such section.
1.2. The term "Actuarial Equivalent" means equality in value of the
aggregate amounts expected to be received under different forms of payment based
on the interest rate and mortality assumptions applicable, as defined below:
(a) INTEREST RATE ASSUMPTION. For purposes of computing the value of
a lump sum payment the interest rate assumption shall be 8 1/2%
or the interest rate described in Section 417(e)(3) of the
Internal Revenue Code (determined as of the first day of the Plan
Year during which the payment is to be made) whichever produces
the greater benefit; and for purposes of computing any other
optional form of benefit payment (unless such optional form is
calculated based on a formula specified in the Plan) and for
purposes of computing any adjustments called for under the terms
of the Plan for any benefit other than a Normal Retirement
Benefit (when such adjustment is not otherwise provided for in
the Plan), the interest rate assumption shall be 8 1/2%.
Notwithstanding the foregoing, effective January 1, 2000,
the present value of any lump sum distribution under the Plan
shall be determined in accordance with Section 417(e)(3)(A)(i),
as follows:
(i) The applicable rate of interest shall be the annual
rate of interest on 30-year Treasury securities for the
"look back month"
(ii) the "look back month" used to determine the applicable
interest rate shall be the September preceding the
"stability period"
(iii) the "stability period" shall be the Plan Year.
(b) MORTALITY ASSUMPTION. The mortality assumption used for purposes
of computing any optional form of benefit payment (unless such
optional form is calculated based on a formula specified in the
Plan) and for purposes of computing any adjustments called for
under the terms of the Plan for any benefit other than a Normal
Retirement Benefit (when such adjustment is not otherwise
provided for in the Plan), shall be the Unisex Mortality Table
commonly referred to as UP-1984.
Notwithstanding the foregoing, effective January 1, 2000, with
respect to the present value of any lump sum distribution under
the Plan, the Plan shall use the "applicable mortality table"
under Section 417(e) of the Code, which shall be the prevailing
commissioner's standard table, as described in Section
807(d)(5)(A) of the Code, used to determine reserves for group
annuity contracts, or any other mortality table that the
Secretary of the Treasury shall publish under Section 417(e) of
the Code.
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1.3. The "Actuary" means an independent actuary, selected by the Plan
Administrator, who is an enrolled actuary, as defined in Section 7701(a)(35) of
the Code, or a firm or corporation of actuaries having such a person on its
staff, which person, firm or corporation is to serve as the actuary for the
Plan.
1.4. "Average Annual Earnings" shall have the following meanings:
(a) in the case of an Employee who has five or more Years of
Participation, the greater of (A) $9,000 or (B) one-fifth of such
Employee's Considered Compensation for the highest-paid 60
consecutive calendar months of his or her employment following
said date, or
(b) in the case of such Employee who has less than 60 consecutive
calendar months of employment, the average of his or her monthly
Considered Compensation, provided that if he or she has any Years
of Service credited to him under Section 2.1(a) for any periods
of employment, then all such periods of employment shall be
combined in order to determine the said highest-paid 60
consecutive calendar months.
1.5. The "Code" means 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.
1.6. "Considered Compensation" means, for any period, the compensation paid
to an Employee for services rendered in the employment of the Employer or a
Related Corporation during such period, including sales commissions to the
extent provided in rules of uniform application adopted by the Employer, but
excluding overtime compensation, bonuses, incentive awards and similar types of
discretionary payments. If an Employee receives no compensation (or reduced
compensation) for any period because he or she is disabled or on an approved
leave of absence or temporary absence from active service, there shall be
treated as compensation received by him during such period of absence an amount
equal to the compensation he or she would have received had he or she not been
disabled or absent, such amount to be determined by the Employer upon the basis
of the Employee's salary or wage rate in effect immediately prior to such
disability or absence.
(a) For Plan Years beginning after December 31, 1988, but before
December 31, 1993, an Employee's annual Considered Compensation
shall be limited to the "TRA '86 Annual Compensation Limit" for
each calendar year. The "TRA '86 ANNUAL COMPENSATION LIMIT" for
each such year is as follows:
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CALENDAR YEAR TRA '86 ANNUAL COMPENSATION LIMIT
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1989 $200,000
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1990 209,200
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1991 222,220
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1992 228,860
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1993 235,840
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If compensation earned during any prior Plan Year is
taken into account in determining an Employee's
benefits accruing in a Plan Year beginning after
December 31, 1988, but before December 31, 1993, the
Employee's Considered Compensation for that prior
Plan Year shall be subject to the TRA '86 Annual
Compensation Limit in effect for the later Plan Year
(i.e., the Plan Year in which benefits are accrued).
(b) For Plan Years beginning after December 31, 1993, an
Employee's annual Considered Compensation shall be
limited to the "OBRA '93 Annual Compensation Limit" for
each calendar year. The "OBRA '93 ANNUAL COMPENSATION
LIMIT" is $150,000, as adjusted by the Commissioner of
the Internal Revenue Service for increases in the cost
of living in accordance with Section 401(a)(17)(B) of
the Code. The cost-of-living adjustment in effect for a
calendar year shall apply to any Plan Year beginning in
such calendar year. If compensation earned during any
Plan Year beginning before December 31, 1993, is taken
into account in determining an Employee's benefits
accruing in a Plan Year beginning after December 31,
1993, the Employee's Considered Compensation for that
prior Plan Year shall be subject to the OBRA '93 Annual
Compensation Limit in effect for that prior Plan Year.
For this purpose, the OBRA '93 Annual Compensation
Limit for any Plan Year beginning before December 31,
1993, is $150,000, unadjusted for any subsequent
increases in the cost of living.
1.7. "Covered Compensation" of an Employee shall mean the average (without
indexing) of the taxable wage bases in effect for each calendar year during the
35-year period ending with the last day of the calendar year in which the
Employee attains (or will attain) Social Security Retirement Age. No increase in
Covered Compensation shall decrease an Employee's accrued benefit under the
Plan. In determining an Employee's Covered Compensation for a Plan Year, the
taxable wage base in effect for the current Plan Year and any subsequent Plan
Year will be assumed to be the same as the taxable wage base in effect as of the
beginning of the Plan Year for which the determination is being made. An
Employee's Covered Compensation for a Plan Year before the 35-year period ending
with the last day of
4
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the calendar year in which the Employee attains Social Security Retirement Age
is the taxable wage base in effect as of the beginning of the Plan Year. An
Employee's Covered Compensation for a Plan Year after such 35-year period is the
Employee's Covered Compensation for the plan year during which the Employee
attained Social Security Retirement Age.
1.8. "Disability Income Plan" means the plan or plans established from time
to time by the Employer to provide disability benefit payments to its Employees
who are unable to work by reason of physical or mental disability.
1.9. The "Effective Date" means October 1, 1985, and as to any amendment to
this Plan, the effective date appearing on such amendment.
1.10. An "Employee" means any person employed by the Employer by its Ames,
Iowa; Minneapolis, Minnesota; Lawrence, Kansas; or Freeport, Illinois locations;
or who is employed by the Company in the office only at its LaSalle, Illinois
location; or who is employed by Sauer-Danfoss, Inc., primarily at its Ames, Iowa
location; provided that such person:
(a) is regularly employed by the Employer and has:
(i) completed 1,000 Hours of Employment, or
(ii) completed one Year of Service,
provided, that such person shall for all purposes of the Plan be
deemed an Employee as of the time when the said 1,000 Hours of
Employment or the said one Year of Service, whichever is
applicable, commenced;
(b) is customarily employed by the Employer on a part-time, temporary
or irregular basis for less than 1,000 Hours of Employment a year
and has completed 1,000 Hours of Employment or more during any 12
consecutive calendar month period which commences with his or her
employment date or any anniversary thereof; provided, that such
person shall for all purposes of the Plan be deemed an Employee
as of the beginning of the said 12 month period during which he
or she completed at least 1,000 Hours of Employment; or
(c) was employed by the Employer and is eligible for benefits under
the Employer's Disability Income Plan.
In no event shall the word "Employee" include any person who renders service to
the Employer solely as an independent contractor or a leased employee, as
defined in Section 414(n) of the Code. A "former
5
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Employee" is a person who once was but is no longer an Employee, but did not
receive nor is receiving retirement benefits under this Plan. A "retired
Employee" is a person who once was but is no longer an Employee, but who
received or is receiving retirement benefits under this Plan.
1.11. The "Employer" means the Company and any Related Corporation which
adopts the Plan in accordance with the provisions of Article XV.
1.12. An Employee's "Final Average Compensation" is the average of the
Employee's annual compensation from the Employer for the 3-consecutive year
period ending with or within the Plan Year. If an Employee's entire period of
service with the employer is less than three consecutive years, compensation is
averaged on an annual basis over the Employee's entire period of service. An
Employee's Final Average Compensation shall not exceed his or her Covered
Compensation.
1.13. The "Freeport Plan" means the Sundstrand-Sauer Freeport, Illinois
Employees' Retirement Plan, which was merged into the Plan effective January 1,
1991.
1.14. The "Frozen December 31, 1988, Benefit" of any Employee shall be the
monthly Normal Retirement Benefit of such Employee, if any, earned by such
Employee under the Plan or the Minneapolis or Freeport Plans as of December 31,
1988, as set forth in Appendix C to the Plan.
1.15. The "Frozen December 31, 1990, Benefit" of any Employee shall be the
monthly Normal Retirement Benefit of such Employee, if any, earned by such
Employee under the Plan or the Minneapolis or Freeport Plans as of December 31,
1990, as set forth in Appendix C to the Plan.
1.16. "Hour of Employment" shall include:
(a) (i) each hour for which an Employee is directly or indirectly
paid or entitled to payment by the Employer or any Related
Corporation for the performance of services during such
period,
(ii) each hour for which an Employee is directly or indirectly
paid, or entitled to payment, by the Employer or any Related
Corporation but is excused from the performance of services
(including periods of vacation, sickness, military duty,
authorized leave of absence, and jury duty and paid holidays
during a regular work week) but not in excess of 501 hours
in any continuous period during which the performance of
service is excused, and
(iii)each hour (not credited under paragraph (i) or (ii) of
Section 1.16(a)) for
6
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which back pay, irrespective of mitigation of damages, has
been awarded or agreed to by the Employer or any Related
Corporation with respect to such period.
Hours of Employment shall be calculated in accordance with Department of
Labor Regulations Section 2530.200b-2 or any future legislation or regulation
that amends, supplements or supercedes said section.
(b) for purposes of determining Hours of Employment:
(i) The Employer may use whatever records may be reasonably
accessible to it and may make whatever calculations are
necessary to determine the approximate number of Hours of
Employment accumulated during such period, and
(ii) If accessible records are insufficient to make an
approximation of the number of Hours of Employment for an
Employee for any period on or after December 13, 1981: (A)
an Employee who is employed on other than an hourly-rated
basis shall be credited with ten (10) Hours of Employment
per day for each day the Employee would, if hourly-rated, be
credited with Years of Service pursuant to Section 1.34; and
(B) 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 an
Employee without a regular work schedule shall be credited
with eight (8) Hours of Employment per day (to a maximum of
forty (40) Hours of Employment per week), for each day that
an Employee is paid for reasons other than for the
performance of duties.
(c) Hours of Employment shall be credited:
(i) in the case of hours referred to in paragraph (i) of Section
1.16(a), for the computation period in which the duties are
performed,
(ii) in the case of hours referred to in paragraph (ii) of
Section 1.16(a), for the computation period or periods in
which the period during which no duties are performed
occurs, and
(iii)in the case of hours for which back pay is awarded or
agreed to by the Employer or any Related Corporation, 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.
1.17. The "Minneapolis Plan" means the Sundstrand-Sauer Minneapolis,
Minnesota Employees' Retirement Plan, which was merged into the Plan effective
January 1, 1991.
7
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1.18. "Normal Retirement Age" is the attainment of the later of age 65 or
the 5th anniversary of commencement of participation in the Plan.
1.19. "Normal Retirement Date" means with respect to any Employee, the last
day of the month in which he or she attains Normal Retirement Age.
The foregoing notwithstanding, any Employee who, upon attainment of
any age at or after his attainment of age 65, provided he has been employed by
his Employer in a bona fide executive or high policy making position during the
two-year period immediately preceding his attainment of such age, and who would
be eligible (if he retired at such time) for an immediate nonforfeitable annual
Retirement Benefit from this Plan, or from this Plan in combination with any
other pension, profit sharing, savings or deferred compensation plan maintained
by his Employer, which equals in the aggregate at least $44,000, or such other
amount as may be specified in the federal Age Discrimination in Employment Act
or regulations promulgated thereunder, shall be automatically retired on the
last day of the month in which he attains such age.
1.20. Employee's "Offset Factor" means 0.714 if the Employee's Social
Security Retirement Age is 65; 0.658 if the Employee's Social Security
Retirement Age is 66; and 0.610 if the Employee's Social Security Retirement Age
is 67.
1.21. "Period of Severance" has the following meaning:
(a) A "Period of Severance" with respect to any Employee means the
period beginning on the date his or her Years of Service are lost
under the provisions of Section 2.5 and ending on the date he or
she is reemployed by the Employer.
(b) A Period of Severance shall not include the twelve consecutive
month period beginning on the first anniversary of the date an
Employee is first 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 such child, or
(iv) caring for such child immediately following such birth or
placement.
8
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The preceding sentence will not be applicable to an Employee
unless the Employee furnishes to the Employer such timely
information as the Employer may reasonably require to establish
(i) that the absence from work is for one of the reasons
specified in the preceding sentence, and
(ii) the number of days for which there was such an absence.
No credit for employment will be given pursuant to this Section
1.20(b) for any purpose of the Plan other than avoiding the
occurrence of a Period of Severance.
1.22. The "Plan" means this Sauer-Sundstrand Employees' Retirement Plan to
be known as Sauer-Danfoss Employees' Retirement Plan on and after May 3, 2000,
with all amendments and supplements hereafter made.
1.23. The "Plan Administrator" is the Company.
1.24. The "Plan Year" means the period from each January 1 to the following
December 31.
1.25. A "Related Corporation" means:
(a) any corporation, now in existence or created or acquired
hereafter, which is a member of a controlled group of
corporations (as defined in Section 414(b) of the Code) of which
the Plan Administrator 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 Plan Administrator; and
(c) any member of an affiliated service group (as defined in Section
414(m) of the Code) which includes the Plan Administrator.
1.26. "Retirement Benefit" means the monthly benefit payments payable to a
retired Employee under the terms of the Plan.
1.27. "Severance From Service Date" means, with respect to any Employee,
the first to occur of:
(a) the date on which the Employee retires or his or her employment
with the Employer and all Related Corporations terminates for any
other reason; or
(b) the first date following one full year of absence from work by
the Employee due to any cause other than retirement or
termination of employment; provided that, for purposes hereof,
the said one year period of absence shall not commence prior to
the end of any period of absence with respect to which the
Employee receives Years of Service credit.
9
<PAGE>
1.28. An Employee's "Social Security Retirement Age" means age 65 if the
Employee attains age 62 before January 1, 2000 (i.e., born before January 1,
1938); age 66 if the Employee attains age 62 after December 31, 1999, but before
January 1, 2017 (i.e., born after December 31, 1937, but before January 1,
1955); and age 67 if the Employee attains age 62 after December 31, 2016 (i.e.,
born after December 31, 1954).
1.29. "Surviving Spouse" of a deceased Employee means and shall be limited
to the person who:
(a) was such deceased Employee's spouse at the time of his or her
death; and
(b) was his or her spouse at the time payment of such Employee's
Retirement Benefit commenced.
1.30. The "Taxable Wage Base" is the contribution and benefit base in
effect under Section 230 of the Social Security Act at the beginning of the Plan
Year.
1.31. "Trustee" means the bank or trust company duly qualified and acting
under the Trust Agreement.
1.32. "Trust Agreement" means the agreement entered into by the Plan
Administrator with the Trustee, which is referred to in Article XII as the same
may be amended from time to time.
1.33. "Trust Fund" means the contributions of the Employer made with
respect to the Plan, and all increments, proceeds, investments, and
reinvestments thereof, and income therefrom, held and administered by the
Trustee in accordance with the Trust Agreement, and to be used for the purpose
of paying the benefits provided by the Plan.
1.34. "Years of Participation" of an Employee means the amount of service
at the time credited to such Employee under the provisions of Article II hereof,
and which is used to determine the amount of any Retirement Benefit for which he
or she is eligible under the Plan.
1.35. "Years of Service" for an Employee means the amount of service at the
time credited to such Employee under the provisions of Article II hereof, and
which is used to determine his or her eligibility for and the vesting of
Retirement Benefits under the Plan.
10
<PAGE>
ARTICLE II.
YEARS OF SERVICE AND YEARS OF PARTICIPATION
2.1. YEARS OF SERVICE AND YEARS OF PARTICIPATION PRIOR TO JANUARY 1, 1991.
Each person who was an Employee on or prior to January 1, 1991, shall be
credited with:
(a) Years of Service equal to the Years of Service with which he or
she had been credited through December 31, 1990, for purposes of
determining his or her eligibility for benefits under the Plan or
the Minneapolis or Freeport Plans in accordance with the
provisions of those Plans in effect on December 31, 1990; and
(b) Years of Participation (up to a maximum of 30) equal to the Years
of Participation with which he or she had been credited through
December 31, 1990, for purposes of determining the amount of any
benefit under the Plan or the Minneapolis or Freeport Plans in
accordance with the provisions of those Plans in effect on
December 31, 1990.
2.2. YEARS OF SERVICE AND YEARS OF PARTICIPATION ON OR AFTER JANUARY 1,
1991. In addition to Years of Service and Years of Participation credited
pursuant to Section 2.1, each person who is an Employee on or after January 1,
1991, shall be credited with:
(a) a Year of Service for each 12-consecutive-month period of his or
her employment with the Employer or any Related Corporation,
beginning with the later of January 1, 1991, or the date on which
his or her employment commenced and ending on his or her
Severance From Service Date; and
(b) a Year of Participation (up to a maximum total of 30) for each
12-consecutive-month period of his or her employment with the
Employer, beginning with the later of January 1, 1991 or the date
on which his or her employment as such Employee commenced, and
ending on the date he or she ceases to be such an Employee.
2.3. MILITARY SERVICE, DISABILITY LEAVE OF ABSENCE AND LAY OFF. Subject to
the provisions of Section 14.6:
(a) An Employee who enters the armed services of the United States
shall retain the Years of Service and Years of Participation
which he or she had upon entering military service, so long as he
or she retains reemployment rights with the Employer by law. If
during the period he or she retains such reemployment rights such
Employee returns to work or reports to the Employer and receives
a leave of absence or is given laid-off status he or she shall be
credited with Years of Service and Years of Participation equal
to the period of his or her service in the military service.
11
<PAGE>
(b) An Employee who is absent from work due to disability for which
he or she is entitled to benefits under a Disability Income Plan
shall retain the Years of Service and Years of Participation
which he or she had upon commencement of such absence due to
disability. For purposes of determining his or her Years of
Service and Years of Participation under the Plan, he or she
shall be credited with Years of Service and Years of
Participation equal to the period of absence due to disability
for so long as he or she is entitled to benefits under a
Disability Income Plan.
(c) An Employee who is granted an approved leave of absence or is
laid-off from work by the Employer shall retain the Years of
Service and Years of Participation which he or she had upon
commencement of such leave of absence or layoff. For purposes of
determining his or her Years of Service and Years of
Participation under the Plan, he or she shall be credited with
Years of Service and Years of Participation in accordance with
rules established by the Plan Administrator and applied on a
uniform nondiscriminatory basis.
2.4. TRANSFERS. Notwithstanding the provisions of Section 2.1 and 2.2,
Years of Service and Years of Participation credited to an Employee shall be
subject to the following:
(a) Upon any transfer or retransfer of a person to employment with
the Employer as an Employee directly from other employment,
(i) with the Employer in a capacity other than as an Employee,
or
(ii) with any Related Corporation,
such person shall be credited with Years of Service, but not
Years of Participation, for such other employment as if such
other employment were employment with the Employer as an Employee
for the entire period of employment.
(b) Upon the transfer of a person from employment with the Employer
as an Employee directly to other employment,
(i) with the Employer in a capacity other than as an Employee,
or
(ii) with any Related Corporation,
such transfer shall be deemed not to cause a loss of his or her
Years of Service or Years of Participation, and he or she shall
be deemed not to retire or otherwise terminate his or her
employment as an Employee until such time as he or she is no
longer in the employment of the Employer or any Related
Corporation, at which time he or she shall become entitled to
benefits if he or she otherwise eligible therefor under the
provisions of the Plan; provided, however, that up to such time
he or she shall receive credit only for Years of Service, but not
for Years of Participation, for such other employment as if such
other employment were employment with the Employer as an
Employee.
12
<PAGE>
2.5. LOSS OF YEARS OF SERVICE AND YEARS OF PARTICIPATION; SERVICE SPANNING.
Except as otherwise specifically provided in the Plan, an Employee's Years of
Service and Years of Participation shall be lost on his or her Severance From
Service Date and, subject to applicable Plan provisions for the reinstatement of
Years of Service and Years of Participation, if he or she thereafter returns to
employment as an Employee, he or she shall be treated for Plan purposes as a new
Employee. If an Employee is reemployed within 12 months after his or her
Severance From Service Date his or her Years of Service and Years of
Participation shall be deemed to not have been lost and the Employee shall be
given Years of Service credit for the period beginning with his or her Severance
From Service Date and ending on his or her reemployment date.
2.6. REINSTATEMENT OF YEARS OF SERVICE AND YEARS OF PARTICIPATION. A former
Employee who returns to employment as an Employee prior to his or her Normal
Retirement Date shall be reinstated with the Years of Service and Years of
Participation with which he or she was credited on his or her Severance From
Service Date if:
(a) he or she was eligible for any Retirement Benefit on his or her
Severance From Service Date;
(b) (i) in the case of a former participant in the Minneapolis Plan, his
or her Severance From Service Date occurred on or after January 1,
1984, but prior to January 1, 1987; or, in the case of any other
former participant, his or her Severance From Service Date occurred on
or after January 1, 1977, but prior to December 31, 1984; and
(ii) the former participant's Severance From Service Date occurred
before the former Participant satisfied the conditions of eligibility
for a Vested Retirement Benefit, and the former participant's
Severance does not exceed his or her total Years of Service on his or
her Severance From Service Date; or
(c) (i) in the case of a former participant in the Minneapolis Plan, his
or her Severance From Service Date occurred on or after February 1,
1987; or, in the case of any other former Participant, his or her
Severance From Service Date occurred on or after January 1, 1985; and
(ii) the former participant's Severance From Service Date occurred
before the former Participant satisfied the conditions of eligibility
for a Vested Retirement Benefit, and the former participant's Period
of Severance does not exceed the greater of his or her total Years of
Service on his or her Severance From Service Date or 5 Years of
Service.
13
<PAGE>
For purposes of Sections 2.6(b) and (c), the total Years of Service
shall not include any Years of Service not required to be taken into account due
to previous Periods of Severance.
Notwithstanding the foregoing provisions of this Section 2.6, if a
former Employee whose Severance From Service Date occurred before satisfying the
conditions of eligibility for a vested Retirement Benefit returns to employment
as an Employee, and if his or her Years of Service and Years of Participation
which he or she had at the time of his or her previous termination of employment
are not reinstated pursuant to Section 2.6(b) or (c), such Years of Service and
Years of Participation shall be reinstated for purposes of the Plan upon his or
her completion of five continuous Years of Service as an Employee after his or
her return to employment.
Years of Service and Years of Participation which are reinstated under
this Section 2.6 shall be reinstated in accordance with and subject to all
applicable provisions of the Plan with respect to reemployment.
2.7. FINALITY OF DETERMINATIONS AND NON-DUPLICATION. All determinations
with respect to the crediting of Years of Service and Years of Participation
under the Plan shall be made on the basis of the records of the Employer, and
all determinations so made shall be final and conclusive upon Employees, retired
Employees, former Employees, and all other persons claiming a benefit under the
Plan. Notwithstanding anything to the contrary contained in this Article II
there shall be no duplication of Years of Service and Years of Participation
credited to an Employee for any one period of his or her employment.
2.8. PREDECESSORS. The Company may, by action of its Board of Directors,
adopt (for all purposes of the Plan) rules for determining what businesses or
activities shall be regarded as the Employer's predecessors, and predecessors
thereof, and for counting as Years of Service and Years of Participation
continuous employment with any of such predecessors, or predecessors thereof.
Such rules shall be applied uniformly to all persons similarly situated.
14
<PAGE>
ARTICLE III.
NORMAL RETIREMENT
3.1. ELIGIBILITY. An Employee shall be eligible for a Normal Retirement
Benefit if his or her employment with the Employer and all Related Corporations
is terminated on or after he or she has attained Normal Retirement Age.
3.2. BENEFIT AMOUNT. The monthly amount of a Normal Retirement Benefit
shall be an amount equal to one-twelfth of the amount derived from the following
calculation:
(a) Two percent for each of the Employee's Years of Participation at
the time of retirement (up to a maximum of 30 such years),
multiplied by the Employee's Average Annual Earnings; minus
(b) The least of
(i) 0.6% for each of the Employee's Years of Participation at
the time of retirement (up to a maximum of 30 such years)
multiplied by such Employee's Final Average Compensation; or
(ii) one-half of the amount determined under subsection 3.2(a),
not taking into account any of the Employee's Average Annual
Earnings which exceed such Employee's Final Average
Compensation; or
(iii)the Employee's Offset Factor, multiplied by the Employee's
Years of Participation at the time of retirement (up to a
maximum of 30 such years) multiplied by such Employee's
Final Average Compensated.
3.3. TRANSITIONAL BENEFITS. Notwithstanding the provisions of Section 3.2,
the Normal Retirement Benefit of an Employee who is either a "TRA '86 Employee"
or an "OBRA '93 Employee" shall be determined as follows:
(a) TRA '86 EMPLOYEES. The Normal Retirement Benefit of each "TRA '86
Employee" shall be the greater of:
(i) The Employee's Normal Retirement Benefit determined under
the Plan's benefit formula in effect at the time the
determination is made, as applied to the Employee's total
Years of Participation; or
(ii) The sum of:
(A) The Employee's Normal Retirement Benefit as of December
31, 1988, frozen in accordance with the Treasury
Regulations set forth at 26 C.F.R. Section
1.401(a)(4)-13; provided, however, that in determining
the Employee's Normal Retirement Benefit
15
<PAGE>
as of December 31, 1988, the Employee's Considered
Compensation shall not be limited to either the TRA '86
Annual Compensation Limit or the OBRA '93 Annual
Compensation Limit, and
(B) The Employee's Normal Retirement Benefit determined
under the Plan's benefit formula in effect at the time
the determination is made, as applied to the Employee's
Years of Participation during Plan Years beginning
after December 31, 1988.
A "TRA '86 EMPLOYEE" means any Employee whose current Normal
Retirement Benefit as of any date after December 31, 1988, is
based on Considered Compensation for a Plan Year beginning before
December 31, 1988, that exceeded the TRA '86 Annual Compensation
Limit.
(b) OBRA '93 EMPLOYEES. The Normal Retirement Benefit of each "OBRA
'93 Employee" shall be the greater of:
(i) The Employee's Normal Retirement Benefit determined under
the Plan's benefit formula in effect at the time the
determination is made, as applied to the Employee's total
Years of Participation; or
(ii) The sum of:
(A) The Employee's Normal Retirement Benefit as of December
31, 1993, frozen in accordance with the Treasury
Regulations set forth at 26 C.F.R. Section
1.401(a)(4)-13; provided, however, that in determining
the Employee's Normal Retirement Benefit as of December
31, 1993, the Employee's Considered Compensation shall
not be limited to the OBRA '93 Annual Compensation
Limit; provided further, however, that, except with
respect to any portion of such Employee's Normal
Retirement Benefit that was frozen under Section
3.3(a)(ii)(A) as of December 31, 1988, the Employee's
Considered Compensation shall be limited to the TRA '86
Annual Compensation Limit, and
(B) The Employee's Normal Retirement Benefit determined
under the Plan's benefit formula in effect at the time
the determination is made, as applied to the Employee's
Years of Participation during Plan Years beginning
after December 31, 1993.
An "OBRA '93 EMPLOYEE" means any Employee whose current Normal
Retirement Benefit as of any date after December 31, 1993, is
based on Considered Compensation for a Plan Year beginning before
December 31, 1993, that exceeded $150,000.
(c) ADJUSTING FROZEN BENEFITS. Any TRA '86 Employee's Normal
Retirement Benefit frozen as of December 31, 1988, and any OBRA
'93 Employee's Normal Retirement Benefit frozen as of December
31, 1993, shall be adjusted to reflect increases in the
Employee's Considered Compensation after December 31, 1993,
16
<PAGE>
if the result would be to increase the Employee's frozen Normal
Retirement Benefit. No such adjustment shall be made, however,
unless permitted under the Treasury Regulations set forth at 26
C.F.R. Section 1.401(a)(17)-l. Thus, for example, the definition
of Considered Compensation used in making any such adjustment
shall be the same as that in effect on the date the Employee's
Normal Retirement Benefit was frozen, except that such definition
shall not be subject to the TRA '86 Annual Compensation Limit and
shall be subject to the OBRA '93 Annual Compensation Limit in
effect at the time the adjustment is made.
3.4. BENEFIT PAYMENTS. A monthly Normal Retirement Benefit shall be paid to
a retired Employee commencing with the month following the month in which he or
she becomes eligible for such Benefit and shall be payable monthly thereafter
during the life of such retired Employee, the last payment being for the month
in which his or her death occurs.
ARTICLE IV.
EARLY RETIREMENT
4.1. ELIGIBILITY. An Employee with five or more Years of Service, whose
employment with the Employer and all Related Corporations is terminated when or
after he or she attains age 55, but prior to his or her Normal Retirement Date,
shall be eligible for an Early Retirement Benefit.
4.2. BENEFIT AMOUNT. The monthly amount of an Early Retirement Benefit
shall be an amount equal to the Employee's monthly Normal Retirement Benefit
based upon the Employee's Years of Participation at the time of his or her early
retirement, provided that such amount shall be reduced by .5 percent for each
month by which the Employee is less than 65 years of age at the time Early
Retirement Benefit payments commence.
4.3. BENEFIT PAYMENTS. A monthly Early Retirement Benefit shall be paid to
a retired Employee commencing with the month following the month in which:
(a) he or she becomes eligible for such Early Retirement Benefit and
has made written application to the Employer therefor; or
(b) he or she attains age 65 if he or she became eligible for such
Retirement Benefit prior to his or her attainment of age 65 and
elected to postpone commencement until he or she attained age 65,
17
<PAGE>
and shall be payable monthly thereafter during the life of such retired
Employee. The last Early Retirement Benefit payment shall be for the month in
which the death of the retired Employee occurs.
ARTICLE V.
VESTED RIGHTS
5.1. ELIGIBILITY. An Employee with five or more Years of Service whose
employment with the Employer and all Related Corporations terminates for any
reason other than death, and who is not eligible for any other Retirement
Benefit under the Plan, shall be eligible for a Vested Retirement Benefit.
5.2. BENEFIT AMOUNT. The monthly amount of a Vested Retirement Benefit
shall be, at the option of the Employee, either:
(a) an immediate Vested Retirement Benefit which shall be an amount
equal to a monthly Normal Retirement Benefit determined in
accordance with Article III, based upon the Employee's Years of
Participation at the time of his or her termination of employment
with the Employer and all Related Corporations, provided that
such amount shall be reduced to its Actuarial Equivalent value to
account for commencement of benefit payments prior to his or her
attainment of age 65; or
(b) an age 65 vested Retirement Benefit which shall be an amount
equal to a monthly Normal Retirement Benefit determined in
accordance with Article III, based upon the Employee's Years of
Participation at the time of his or her termination of employment
with Employer and all Related Corporations.
5.3. BENEFIT PAYMENTS. A monthly immediate Vested Retirement Benefit under
Section 5.2(a) shall be paid to a retired Employee commencing with any month
following the month in which the Employee attains age 55 and which the Employee
designates in his or her application to the Plan Administrator, and shall be
payable monthly thereafter during the life of such retired Employee; such
application to be filed with the Plan Administrator not more than 90 days nor
less than 60 days prior to the date on which he or she elects to have his or her
immediate Vested Retirement Benefit commence.
Subject to Section 10.1(b), a monthly age 65 Vested Retirement Benefit
under Section 5.2(b) shall be paid to an Employee commencing with the month
following the later of the month in which such retired Employee's Normal
Retirement Date occurs or the month in which he or she makes
18
<PAGE>
written application to the Plan Administrator for such Retirement Benefit, and
shall be payable monthly thereafter during the life of such retired Employee.
The last Vested Retirement Benefit payment shall be for the month in
which the death of the retired Employee occurs.
ARTICLE VI.
"RULE OF 50" RIGHTS
6.1. ELIGIBILITY. An Employee with less than five Years of Service, whose
employment with the Employers and all other Related Corporations terminates for
any reason, shall be eligible for a "Rule of 50" Retirement Benefit if, at the
time of such termination of employment, the total of his or her age and Years of
Service is 50 or more.
6.2. BENEFIT AMOUNT. The monthly amount of a "Rule of 50" Retirement
Benefit shall be an amount equal to the Employee's monthly Normal Retirement
Benefit based upon the Employee's Years of Participation at the time of his or
her termination of employment with all Employers multiplied by his or her
"Applicable Percentage"; provided that, if such "Rule of 50" Retirement Benefit
commences prior to the Employee's attainment of age 65, such amount shall be
reduced by .5 percent for each month by which the Employee is less than 65 years
of age at the time his or her "Rule of 50" Retirement Benefit payments commence.
For purposes of this Article, an Employee's Applicable Percentage shall
be determined in accordance with the following schedule:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
YEARS OF SERVICE COMPLETED AFTER FIRST BECOMING APPLICABLE PERCENTAGE
ELIGIBLE FOR "RULE OF 50" RETIREMENT BENEFIT
-----------------------------------------------------------------------------------------
<S> <C>
Date on which Employee first becomes 50%
eligible for Benefit
-----------------------------------------------------------------------------------------
For each Year of Service completed (up to five such An additional 10% per Year of
after first becoming eligible for Benefit (computed to Service (computed Years) (to
the nearest one thousandth) nearest one thousandth)
-----------------------------------------------------------------------------------------
Five or more Years of Service completed after first 100%
becoming eligible for Benefit
-----------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
6.3. BENEFIT PAYMENTS. A monthly "Rule of 50" Retirement Benefit shall be
paid to a retired Employee as follows:
(a) commencing with the month following the month in which the
retired Employee is both at least age 55 and has filed a written
election with the Plan Administrator to begin receiving benefit
payments; or
(b) commencing with the month following the month in which he or she
attains age 65 if he or she does not file an election for early
commencement prior to his or her attainment of age 65;
and shall be payable monthly thereafter during the life of such retired
Employee, the last "Rule of 50" Retirement Benefit payment being for the month
in which his or her death occurs.
ARTICLE VII.
OPTIONAL METHODS OF PAYMENT AND AUTOMATIC ELECTION
7.1. AVAILABLE OPTIONS. Under conditions set forth in this Article, an
Employee who becomes entitled to a Retirement Benefit under the Plan by reason
of his or her retirement under the conditions specified in any of Sections 3.1,
4.1, 5.1 or 6.1 may, as an alternative to having such Retirement Benefit paid in
the regular straight-life annuity form, or if applicable, the automatic election
form described in Section 7.7, elect (subject to the provisions of Section 7.7)
payment of such Retirement Benefit in accordance with any one of the optional
methods of payment stated below (an Employee who is entitled to a Vested
Retirement Benefit under Article V and an Employee who retired prior to
attainment of age 55 and who is entitled to a "Rule of 50" Retirement Benefit
under Article VI may only elect Option D).
OPTION A. A reduced monthly Retirement Benefit payable to such retired
Employee for life, with the continuance of monthly payments equal to
50 percent of such reduced amount after his or her death to his or her
Surviving Spouse during the lifetime of such Surviving Spouse;
The monthly payments to be made to a retired Employee under this
Option A shall be an amount equal to the monthly Retirement Benefit otherwise
payable to the retired Employee reduced by whichever of the following is
applicable:
20
<PAGE>
(a) if the age of the retired Employee and his
or her spouse are the same, or if such
spouse's birth date is within five years of
the birth date of the Employee, ten percent;
(b) if the age of the retired Employee is more
than five years less than the age of his or
her spouse, ten percent less .5 of one
percent for each full year by which such
Surviving Spouse's birth date is more than
five years prior to the birth date of the
retired Employee (the total reduction to be
not less than 0 percent); or
(c) if the age of the retired Employee is more
than five years greater than the age of his
or her spouse, ten percent plus .5 of one
percent for each full year by which the
Surviving Spouse's birth date is more than
five years after the birth date of the
retired Employee (provided that the total
reduction shall not cause the Retirement
Benefit to be less than the Retirement
Benefit the Employee and his or her spouse
would have received if he or she had elected
Option D).
The monthly payment to be made to such retired Employee's Surviving
Spouse under Option A shall be an amount equal to 50 percent of the monthly
payment made under Option A to the retired Employee.
OPTION B. A reduced monthly Retirement Benefit payable
to such retired Employee for life, with the continuance
of monthly payments equal to 100 percent of such
reduced amount after his or her death to his or her
Surviving Spouse, during the lifetime of such Surviving
Spouse;
OPTION C. A reduced monthly Retirement Benefit payable
to such retired Employee for life, with the continuance
of monthly payments equal to 75 percent of such reduced
amount after his or her death to his or her Surviving
Spouse, during the lifetime of such Surviving Spouse;
OPTION D. A reduced monthly Retirement Benefit payable
to such retired Employee for life, with the continuance
of monthly payments equal to 50 percent of such reduced
amount after his or her death to his or her Surviving
Spouse, during the lifetime of such Surviving Spouse;
OPTION E. A reduced monthly Retirement Benefit payable
to the retired Employee for life, with the continuance
to the person or persons designated by him as
Term-Certain Beneficiary of monthly payments in such
reduced amount after his or her death for the
remainder, if any, of the five-year term commencing
the date as of which the first payment of such
monthly Retirement Benefit is made, and with any
monthly payments remaining unpaid upon the death
of the survivor of the Employee and his or her Term-
Certain Beneficiary to be made to the estate of such
survivor;
OPTION F. A reduced monthly Retirement Benefit payable
to the retired Employee for life, with the continuance
to the person or persons designated by him as
Term-Certain Beneficiary of monthly payments in such
reduced amount after his or her death for the
remainder, if any, of the ten-year term commencing with
the date as of which the first payment of such
monthly Retirement Benefit is made, and with any
monthly payments
21
<PAGE>
remaining unpaid upon the death of the and hisor her
Term-Certain Beneficiary to be made to the estate of
such survivor;
OPTION G. A reduced monthly Retirement Benefit payable
to the retired Employee for life, with the continuance
to the person or persons designated by him as
Term-Certain Beneficiary of monthly payments in such
reduced amount after his or her death for the remainder,
if any, of the fifteen-year term commencing with the
date as of which the first payment of such monthly
Retirement Benefit is made, and with any monthly
payments remaining unpaid upon the death of the survivor
of the Employee and his or her Term-Certain Beneficiary
to be made to the estate of such survivor;
OPTION H. A reduced monthly Retirement Benefit payable
to the retired Employee for life, with the continuance
to the person or persons designated by him as Contingent
Annuitant of monthly payments, if any are required, in
such reduced amount after his or her death until the
total amount paid to the Employee and Contingent
Annuitant combined is equal to the Actuarial Equivalent
of the Retirement Benefit payable to the Employee if
neither an option under this Section nor the automatic
election under Section 7.7 were applicable, and with any
monthly payments remaining unpaid upon the death of the
survivor of the Employee and Contingent Annuitant to be
made to the estate of such survivor;
OPTION I. With respect to an Employee's Frozen December
31, 1990, Benefit, a reduced Retirement Benefit payable
to such retired Employee in a single lump sum.
The monthly payments to be made to a retired Employee
and his or her Surviving Spouse under Option B, Option C or Option D, to a
retired Employee and his or her Term-Certain Beneficiary under Option E, Option
F or Option G, or to a retired Employee and his or her Contingent Annuitant
under Option H, shall be in amounts which at the time of commencement of
Retirement Benefit payments under the Option, or at the time of the Employee's
Normal Retirement Date, if earlier, are the Actuarial Equivalent of all
Retirement Benefits otherwise payable to him under the Plan, including any
automatic election benefits payable under Section 7.7, taking into account the
age of the retired Employee and, where applicable, the age of his or her
Surviving Spouse, Contingent Annuitant, or beneficiary.
The lump sum payment to be made to a retired Employee
under Option I shall be in lieu of all benefit payments (including any
Special Age 65 benefit under Article VIII), otherwise payable to such Employee
under the Plan with respect to the Employee's Frozen December 31, 1990, Benefit;
and shall
(a) in the case of an Employee who is not
married on the date of retirement, be an
amount which at the time the lump sum
payment is made is the Actuarial
22
<PAGE>
Equivalent of the Employee's Frozen
December 31, 1990, Benefit otherwise payable
to him under the Plan; or
(b) in the case of an Employee who is married on
the date of retirement, be an amount which
at the time the lump sum payment is made is
the Actuarial Equivalent of the Employee's
Frozen December 31, 1990, Benefit which
would have been paid to the retired Employee
and his or her spouse if the retired
Employee had elected Option A with respect
to that portion of his or her benefit.
Notwithstanding the foregoing provisions of this Section
7.1, if an Employee elects Option H and designates someone other than his
or her Surviving Spouse as Contingent Annuitant or beneficiary, the present
value of the total payments to be made to such Contingent Annuitant or
beneficiary, must, at the time the Option becomes effective, be less than 50
percent of the present value of the total payments to be made to the retired
Employee and such Contingent Annuitant or beneficiary combined, and, if such is
not the case, the monthly amount payable to such Contingent Annuitant or
beneficiary shall be reduced to the extent necessary to satisfy such
requirement. Any reduction made pursuant to this paragraph shall be determined
by the Plan Administrator on the basis of the assumptions set forth in Section
1.2.
In addition, notwithstanding anything to the contrary
contained in this Article VII, in the event that the spouse of a retired
Employee who has elected Option A predeceases the Employee, the monthly
Retirement Benefit payable to the Employee commencing with the third monthly
payment following the month in which the death of the retired Employee's spouse
occurs, shall be increased to the amount which would have been payable to the
retired Employee if the retired Employee had not elected any optional method of
payment. Monthly payments in such increased amount shall thereafter be paid to
the retired Employee during his life, the last payment being for the month in
which his death occurs.
7.2. ELECTION OF FORM OF BENEFITS.
(a) Not less than 30 days and not more than 90
days prior to the date for commencement of
payment of an Employee's Retirement Benefit
the Plan Administrator shall give the
Employee a written notice of his or her
right to elect not to receive his or her
Retirement Benefit (under any of Section
3.1, 4.1, 5.1 or 6.1, whichever is
applicable) pursuant to the regular
straight-life annuity form, or if
applicable, the automatic election form set
forth in Section 7.7, and of his or her
right to make an election of an optional
form of payment of his or her
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<PAGE>
Retirement Benefit pursuant to Section 7.1.
Such notice shall include a general
description of:
(i) the terms and conditions of the
normal form of payment,
(ii) the Employee's right to make, and
the effect of, an election to waive
such form,
(iii) if applicable, the rights of the
Employee's spouse not to consent to
such an election under Section 7.7,
(iv) the Employee's right to make, and
the effect of, a revocation of such
an election,
(v) the optional forms available under
Section 7.1, and
(vi) the right to request an estimate
of the financial effect upon the
Employee's Retirement Benefit of
making the elections set forth
in Sections 7.1 and 7.7.
(b) If such written explanation is provided to
the Participant less than 30 days prior to
the commencement of payment, the Participant
shall be notified that he or she has the
right to at least 30 days to consider
whether to waive the normal form of benefit
and consent to an optional form of benefit.
In such an event the Participant shall be
permitted to revoke a distribution election
until the later of the date for the
commencement of payment or the expiration of
the seven-day period that begins the day
after the written explanation is provided to
the Participant. In no event shall the date
of commencement of payment be prior to the
date that the written explanation is
provided to the Participant.
(c) The elections provided in Sections 7.1,
7.2(a) and 7.7 may be made by giving a
written notice of election to the Plan
Administrator, in the form prescribed by the
Plan Administrator, at any time during the
period (the "Election Period") consisting of
the 90 calendar day period ending on the
date for commencement of payment of an
Employee's Retirement Benefit. Any election
provided in Sections 7.1 and 7.7 may be
rescinded as set forth in Section 7.3. At
the time of his or her election of an Option
an Employee shall identify his or her
spouse, Term-Certain Beneficiary, Contingent
Annuitant or beneficiary.
(d) If an Employee makes a request for
additional information pursuant to Section
7.2(a) on or before the last day of the
Election Period, the Election Period shall
be extended to the extent necessary to
include at least the 90 calendar days
immediately following the day the additional
requested information is personally
delivered or mailed to the Employee.
7.3. REVOCATION AND CHANGE OF OPTION. An Employee, by written notice
delivered to the Plan Administrator at any time prior to his or her retirement,
may revoke or change any election of an option theretofore made by him.
Moreover, by written notice delivered to the Plan Administrator at any time
24
<PAGE>
before or after retirement, an Employee may designate a new Term-Certain
Beneficiary under Option E, Option F or Option G, or a new Contingent Annuitant
under Option H. Except as otherwise provided in Section 7.7, no revocation,
change or new designation under this Section shall require the consent of a
spouse, Term-Certain Beneficiary, Contingent Annuitant or beneficiary.
7.4. EFFECT OF VARIOUS CIRCUMSTANCES UPON OPTION. The election of an
option shall become effective for all purposes upon the Employee's retirement
under the conditions specified in any of Sections 3.1, 4.1, 5.1 or 6.1. If an
Employee, having validly elected an optional method of payment, shall die before
such retirement and before his or her Normal Retirement Date, any election of an
optional method of payment theretofore made by him shall be inoperative, and no
payment shall become due to his or her Surviving Spouse, Term-Certain
Beneficiary, Contingent Annuitant or beneficiary under such Option.
In the event that, before the Employee's retirement,
such Employee's spouse shall die or otherwise cease to be his or her spouse,
or as to such Employee the Plan shall be terminated, or in the event that an
Employee shall retire or otherwise terminate his or her employment under
conditions other than as specified in any of Sections 3.1, 4.1, 5.1 or 6.1, any
election of an optional method of payment theretofore made by him shall be
inoperative and ineffective and he or she shall receive the Retirement Benefit,
if any, which he or she would have received under the Plan had such election not
been made.
Notwithstanding anything to the contrary contained
herein, this Section 7.4 shall not apply to Section 7.7.
7.5. PAYMENT UNDER OPTIONS. The monthly Retirement Benefit of a
retired Employee who has elected, or who is deemed under Section 7.7 to have
elected, an optional method of payment shall be payable commencing at the same
time as the Retirement Benefit to which he or she was otherwise entitled would
have commenced. Such Retirement Benefit shall be payable to the retired Employee
monthly thereafter during his or her life, the last such payment being for the
month in which his or her death occurs; provided, however, that such monthly
Retirement Benefit payments shall cease under the same circumstances and in the
same manner as specified with respect to the monthly Retirement Benefit
25
<PAGE>
otherwise payable to the Employee under the Plan. Notwithstanding the foregoing,
upon recommencement of a Retirement Benefit because of subsequent termination or
retirement following reemployment as provided in Section 10.3, payments shall be
made as applicable under the option previously elected by the Employee, unless
(a) the option has been revoked or changed as
provided in Section 7.3; or
(b) except as otherwise provided in Section
10.l(b)(v), if the Employee had not
previously elected an option, the automatic
election form provisions of Section 7.7
would have applied upon such subsequent
termination of employment or retirement, in
which event the Benefit shall be paid in the
form required under Section 7.7 unless,
prior to such subsequent termination of
employment or retirement, the Employee had
filed with the Plan Administrator a new
option election or a written rejection of
the automatic election form as provided in
Section 7.7.
If payments are made under such Option, upon such subsequent retirement, the
amount thereof shall be adjusted in accordance with the provisions of Section
10.3.
Subject to Section 10.1(b), monthly benefit payments
which become payable to an Employee's Surviving Spouse or Contingent Annuitant
shall commence with the later of:
(a) the month following the month in which the
death of the retired Employee shall occur;
or
(b) the month in which the Surviving Spouse or
Contingent Annuitant files an application
with the Plan Administrator therefor;
and shall be payable monthly thereafter during the life of such Surviving Spouse
or Contingent Annuitant, the last payment being for the month in which the death
of the Surviving Spouse or Contingent Annuitant occurs. Subject to Section
10.1(b), monthly payments which become payable to an Employee's Term-Certain
Beneficiary shall commence with the later of:
(a) the month following the month in which the
death of the retired Employee shall occur;
or
(b) the month in which such Term-Certain
Beneficiary files an application with the
Plan Administrator therefor;
and the last such monthly payment shall be made for the last month in the term
certain; provided, however, that should any such monthly payments become payable
to the estate of any person, or to a
26
<PAGE>
trust, a lump-sum amount shall be paid to such estate or trust in lieu thereof,
such lump-sum amount to be equal to the aggregate value of the monthly payments
otherwise payable to such estate or trust, discounted to the date of payment of
the lump-sum amount for interest, as determined by the Actuary, on the basis of
the assumptions set forth in Section 1.2.
7.6. AVAILABILITY OF OPTIONS FOR EMPLOYEE TERMINATED BY LAYOFF. The
provisions of Section 7.1 notwithstanding, an Employee who is terminated by
layoff and not recalled within one year from the date of such termination,
and who at the time of such termination meets the eligibility requirements for
a vested Retirement Benefit under Article V or a "Rule of 50" Retirement Benefit
under Article VI may, in lieu of such options as are available under the
respective Retirement Benefit, elect, subject to and in accordance with the
terms of this Article, any of the Options set forth in Section 7.1.
7.7. AUTOMATIC ELECTION. An Employee who becomes entitled to a Retirement
Benefit under the Plan by reason of his or her retirement under conditions
specified in any of Sections 3.1, 4.1, 5.1 or 6.1 and who has attained age 55
and is married on the date payment of such Retirement Benefit commences, shall
be deemed to have elected the qualified joint and survivor annuity described as
Option D in Section 7.1, and to have identified his or her spouse on such date
as his or her Surviving Spouse thereunder, unless prior to such date he or she
has elected an optional method of payment under this Article which became or
would have become effective on his or her retirement.
The foregoing notwithstanding, no Retirement Benefit shall become payable
under this Section 7.7 to a spouse, if such spouse has not been married to such
Employee for at least one year on the date of death of such Employee and if such
spouse is not the same spouse to whom the retired or former Employee was married
on the date payment of his or her benefit commenced.
Notwithstanding any other provision in this Article, any election by an
Employee to waive the receipt of Retirement Benefits pursuant to the automatic
election form set forth in this Section 7.7 shall not take effect, unless such
Employee's spouse consents in writing to such election to waive such election,
acknowledges the effect of such election to waive, and such consent is witnessed
by a representative of the Plan or a notary public, unless the Employee
establishes to the satisfaction of the
27
<PAGE>
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 and
acknowledgment will not be effective unless the election designates a form of
benefit payment and, if applicable, a 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 Section, shall be effective
only with respect to such spouse.
For purposes of this Section 7.5, "date payment of benefit commences" shall
mean the first day of the first period for which an amount is payable as an
annuity or, in the case of a benefit not payable as an annuity, the first day on
which all events have occurred which entitle the participant to such benefit.
ARTICLE VIII.
SPECIAL AGE 65 BENEFIT
8.1. ELIGIBILITY.
(a) A retired or terminated Employee (other than
an Employee whose eligibility for a
Retirement Benefit accrued under the
provisions of Article V) who at the time of
retirement or termination of employment with
the Employer and all Related Corporations
has attained at least age 55 and has 10 or
more Years of Service and who is receiving a
Retirement Benefit under the Plan shall be
eligible for a Special Age 65 Benefit.
(b) The Surviving Spouse (other than the
Surviving Spouse of a deceased Employee
whose eligibility for a Retirement Benefit
accrued under the provisions of Article V)
of a deceased Employee or deceased retired
Employee, which deceased Employee or
deceased retired Employee at the time of
retirement or termination of employment met
the age and service requirement set forth in
Section 8.1(a) and who is receiving a
benefit under the Plan shall be eligible for
a Special Age 65 Benefit.
8.2. BENEFIT AMOUNT. The monthly amount of a Special Age 65
Benefit shall be $9.70.
8.3. BENEFIT PAYMENTS. A Special Age 65 Benefit shall be paid
to a retired Employee, or the Surviving Spouse of a deceased Employee or
deceased retired Employee, commencing with the month following the month in
which such retired Employee or such Surviving Spouse attains age 65 and shall be
28
<PAGE>
payable monthly thereafter during the life of such retired Employee or such
Surviving Spouse, the last payment being for the month in which the death of
the retired Employee or the Surviving Spouse occurs.
The foregoing notwithstanding, in the event a retired
Employee elects payment of his or her Frozen December 31, 1990, Benefit under
Option I described in Section 7.1, he or she shall not be entitled to receive
any Special Age 65 benefit payments under this Article VIII.
ARTICLE IX.
SURVIVOR BENEFIT
9.1. ELIGIBILITY. The Surviving Spouse of a deceased
Employee shall be eligible to receive a Survivor Benefit if the deceased
Employee at the time of his or her death,
(a) had satisfied the requirements for a
Retirement Benefit under any of Sections
3.1, 4.1, 5.1 or 6.1; and
(b) had not commenced receiving Retirement
Benefit payments under the Plan.
9.2. BENEFIT AMOUNT.
(a) If a deceased Employee at the time of death
met the requirements for a Retirement
Benefit under either Section 3.1 or 4.1, or
met the requirements for a Retirement
Benefit under Section 5.1 and had attained
at least age 45, or Section 6.1 and had
attained at least age 55, the monthly amount
of the Survivor Benefit payable to his or
her Surviving Spouse shall be equal to the
greater of:
(i) one-half of a monthly Normal
Retirement Benefit determined
in accordance with Section 3.2,
based upon the Employee's
Years of Participation at the
time of death; provided that if
the Surviving Spouse's birth
date is more than five years
after the birth date of the
deceased Employee, such amount
shall be reduced by a fraction,
the numerator of which is the
actuarial lump sum factor under
Section 1.2 determined as if the
Surviving Spouse's birth date
was exactly five years after the
birth date of the deceased
Employee, and the denominator of
which is the actuarial lump sum
factor under Section 1.2
applicable to such Surviving
Spouse based upon such Surviving
Spouse's age as of the date of
death of the Employee; and
(ii) the amount which would be
payable to the Surviving Spouse
as a survivor annuity pursuant
to the terms of a qualified
joint and survivor annuity
described as Option D of Section
7.1 if the Employee had retired
and commenced receiving a
Retirement Benefit pursuant to
such qualified joint and
survivor annuity on the day
before the date of such
Employee's death.
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<PAGE>
(b) If a deceased Employee at the time of death
met the requirements for a Retirement
Benefit under Section 5.1 but had not
attained age 45 or met the requirements for
a Retirement Benefit under Section 6.1 but
had not attained age 55, and did not meet
the requirements for any other Retirement
Benefit, the monthly amount of the Survivor
Benefit payable to such Employee's Surviving
Spouse shall be the amount which would be
payable to the Surviving Spouse as a
survivor annuity pursuant to the terms of a
qualified joint and survivor annuity
described as Option D of Section 7.1 if the
Employee had retired and commenced receiving
a Retirement Benefit pursuant to such
qualified joint and survivor annuity on the
day before the date Survivor Benefit
payments commence (provided the number of
Years of Participation used to determine
such amount shall be the number of Years of
Participation the Employee had at the time
of death); provided further that such amount
shall be reduced to its Actuarial Equivalent
value to account for commencement of benefit
payments prior to the time the deceased
Employee, had he or she survived, would have
attained age 65.
9.3. BENEFIT PAYMENTS.
(a) A Survivor Benefit determined under Section
9.2(a) shall be paid to a deceased
Employee's Surviving Spouse commencing with
the month following the month in which the
Employee's death occurs and shall be payable
monthly thereafter during the life of such
Surviving Spouse, the last payment being for
the month in which the death of the
Surviving Spouse occurs.
(b) A Survivor Benefit determined under Section
9.2(b) shall be paid to a deceased
Employee's Surviving Spouse commencing with
the month following the month in which such
Surviving Spouse requests that Survivor
Benefit payments commence, the last payment
being for the month in which the death of
the Surviving Spouse occurs.
9.4. SURVIVING SPOUSE DEFINED. The provisions of
Section 1.29 notwithstanding, for purposes of this Article IX, the Surviving
Spouse of a deceased Employee shall mean and be limited to the person who:
(a) was the Employee's spouse at the time of his
or her death, and
(b) was his or her spouse for at least one full
year immediately prior to the date of his or
her death.
30
<PAGE>
ARTICLE X.
GENERAL PROVISIONS AND LIMITATIONS
REGARDING BENEFITS
10.1. LIMITATIONS ON COMMENCEMENT.
(a) Payment of a retired Employee's Retirement Benefit
shall commence not later than the 60th day after the
end of the Plan Year in which the latest of the
following occurs:
(i) the Employee's Normal Retirement Date;
(ii) the tenth anniversary of the date on which
he or she first became an Employee; or
(iii) the Employee's retirement or other
termination of employment with the Employer
and all Related Corporations.
If the amount of monthly benefit payable to a retired
Employee, or any person claiming under or through
him, cannot be determined for any reason (including
lack of information as to whether the Employee is
still living or as to his or her marital status) on
the date payment of such benefit is to commence under
this Section 10.1, payments shall be made
retroactively to such date no later than 60 days
after the date on which the amount of such monthly
benefit can be determined.
(b) Notwithstanding anything to the contrary contained
elsewhere in the Plan:
(i) the payment of benefits under the Plan to
any Employee will:
(A) be distributed to such Employee not
later than the Required
Distribution Date as defined in
paragraph (iii) of this Section
10.1(b), or
(B) be distributed to such Employee
commencing not later than the
Required Distribution Date, in
accordance with regulations
prescribed by the Secretary of the
Treasury, (1) over the life of such
Employee or over the lives of such
Employee and his or her
beneficiary, or (2) over a period
not extending beyond the life
expectancy of such Employee or the
life expectancy of such Employee
and his or her beneficiary.
(ii) (A) If the Employee dies after
distribution to him has commenced
pursuant to clause (B) of paragraph
(i) of Section 10.1(b) but before
his or her entire interest in the
Plan has been distributed to him
the remaining portion of such
interest shall be distributed at
least as rapidly as under the
method of distribution being used
under clause (B) of paragraph (i)
of Section 10.1(b) at the date of
his or her death.
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<PAGE>
(B) If the Employee dies before
distribution to him has commenced
pursuant to clause (B) of paragraph
(i) of Section 10.1(b), then,
except as provided in clauses (C)
and (D) of paragraph (ii) of
Section 10.1(b), his or her entire
interest in the Plan will be
distributed within five years after
his or her death.
(C) Notwithstanding the provisions of
clause B of paragraph (ii) of
Section 10.1(b), if the Employee
dies before distribution to him has
commenced pursuant to clause (B) of
paragraph (i) of Section 10.1(b),
and if (1) any portion of his or
her interest in the Plan is payable
to or for the benefit of his or her
beneficiary, (2) such portion will
be distributed in accordance with
regulations prescribed by the
Secretary of the Treasury over the
life expectancy of such beneficiary
or over a period not extending
beyond the life expectancy of such
beneficiary, and (3) distribution
of such portion will begin not
later than one year after the date
of the Employee's death, or such
later date as the Secretary of the
Treasury may prescribe by
regulations, then the portion of
such Employee's interest referred
to in this clause (C) of paragraph
(ii) of Section 10.1(b) shall be
treated as distributed on the date
on which such distribution begins.
(D) Notwithstanding the provisions of
clauses (B) and (C) of paragraph
(ii) of Section 10.1(b), if the
Employee's beneficiary referred to
in clause (C) of paragraph (ii) of
Section 10.1(b) is the Surviving
Spouse of the Employee, then: (1)
the date on which the distributions
are required to begin under
subclause (3) of clause (C) of
paragraph (ii) of Section 10.1(b)
shall not be earlier than the date
on which the Employee would have
attained age 70 1/2, and (2) if the
Employee's Surviving Spouse dies
before the distributions to such
spouse begin, then this clause (D)
of paragraph (ii) of Section
10.1(b) shall be applied as if such
Surviving Spouse were the Employee.
(iii) For purposes of this Section 10.1(b) the
"Required Distribution Date" of an Employee
who is not a 5-percent owner, within the
meaning of Proposed Treasury Regulation
Section 1.401(a)(9)-l Q/A B-2, and who
attains age 70 1/2 after December 31, 1998,
shall mean April 1 of the calendar year
following the calendar year in which such
Employee attains age 70 1/2 or retires,
whichever occurs later. In the case of a
Participant who is a 5-percent owner of the
Company and who attains age 70 1/2 after
December 31, 1998, the "Required
Distribution Date" shall mean the April 1 of
the calendar year following the year in
which he or she attains age 70 1/2,
regardless of whether or not such person's
employment continues after such date.
Notwithstanding the foregoing, if a
Participant attains age 70 1/2 prior to
January 1, 1999 and is not a 5-percent
owner, the Participant may elect to begin to
receive distributions as of the April 1
following the year in which the Participant
attains age 70 1/2.
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<PAGE>
(iv) For purposes of this Section 10.1(b), the
life expectancy of an Employee and his or
her spouse may be redetermined at any time,
but not more frequently than annually.
(v) In the event an Employee accrues additional
benefits under the Plan after payment of
such Employee's benefits commence pursuant
to this Section 10.1(b), such additional
benefits shall be paid in the same form in
which the Employee's benefit is currently
being paid, and shall be reflected in the
monthly amount payable to the Employee
commencing with the first payment made in
the calendar year following the calendar
year such additional benefits are accrued.
10.2. REEMPLOYMENT AND EMPLOYMENT AFTER NORMAL RETIREMENT DATE.
(a) If an Employee who, on termination of employment met
the requirements for an Early Retirement Benefit
under Article IV, a Vested Retirement Benefit under
Article VI, or a "Rule of 50" Retirement Benefit
under Article VI, is reemployed by the Employer prior
to the commencement of Retirement Benefit payments,
his or her right to such Retirement Benefit shall be
canceled and in lieu thereof the Years of Service and
Years of Participation which he or she had at the
time of his or her termination of employment shall be
reinstated as provided in Section 2.6 (the rules of
Section 2.6 shall apply irrespective of whether he or
she is an Employee upon his or her reemployment).
If a retired Employee who is receiving Retirement
Benefit payments (or who has already received the
lump sum Actuarial Equivalent of his or her
Retirement Benefit payments due under the Plan) is
reemployed by the Employer, his or her Retirement
Benefit payments shall not be discontinued, and such
retired Employee shall recommence participation in
the Plan either immediately upon his or her
reemployment, provided he or she is reemployed within
12 months after his or her Severance From Service
Date; or, where he or she is reemployed 12 or more
months after the Severance From Service Date, on the
date he or she again is an Employee (disregarding for
this purpose Years of Service prior to the Severance
From Service Date), provided that upon again becoming
an Employee he or she shall be credited with Years of
Participation from the date of his or her
reemployment. Upon his or her subsequent retirement,
he or she shall be entitled to an additional benefit
based solely on his or her Years of Participation,
Final Average Earnings and Final Average Compensation
during or with respect to the period of reemployment;
provided, however, that in no event will the Plan
take into account, for purposes of determining this
additional benefit, Years of Service during the
period of reemployment to the extent such Years of
Participation, when added to his or her Years of
Participation as of his or her reemployment date,
exceed thirty (30).
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<PAGE>
If:
(i) a former Employee is reemployed by the
Employer after his or her Normal Retirement
Date,
(ii) a former Employee is reemployed by the
Employer prior to his or her Normal
Retirement Date and he or she continues in
employment beyond his or her Normal
Retirement Date, or
(iii) an Employee continues in employment with the
Employer after his or her Normal Retirement
Date without a prior termination of
Employment, and
the Retirement Benefit accrued by reason of his or
her employment after his or her Normal Retirement
Date is less than the adjustment that would have been
made to his or her Retirement Benefit if it had been
increased to its Actuarial Equivalent for
commencement after his or her Normal Retirement Date,
then notwithstanding the provisions of this Section
10.2, Sections 10.2(b), (c), (d), (e), (f), (g) and
(h) shall become applicable to him as of the latest
of:
(A) his Normal Retirement Date,
(B) his date of reemployment, or
(C) the date on which the conditions of
paragraph (i), (ii) or (iii) of Section
10.2(a) are met and the Retirement Benefit
accrued by reason of his or her employment
after his or her Normal Retirement Date is
less than the adjustment that would have
been made to his or her Retirement Benefit
if it had been increased to its Actuarial
Equivalent for commencement after his or her
Normal Retirement Date.
The rules described in Section 10.2(a)(i), (ii) and (iii)
shall also apply to any reemployed retired Employee, provided
that where such rules refer to an Employee's Retirement
Benefit, such Retirement Benefit means only the Retirement
Benefit accrued by such reemployed retired Employee during his
or her period of reemployment.
(b) For purposes of Sections 10.2(b), (c), (d), (e), (f),
(g) and (h), the following definitions shall apply:
(i) "Post-Retirement Date Service" means each
calendar month of employment of an Employee
with the Employer or a Related Corporation
after his or her Normal Retirement Date and
subsequent to the time that payment of
Retirement Benefits would have commenced to
such Employee if he or she had not remained
in employment, if such Employee:
(A) completes forty (40) or more Hours
of Employment in such calendar
month, or
(B) receives from the Employer or a
Related Corporation payment for any
Hours of Employment performed on
each of eight (8) or more days in
such calendar month.
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<PAGE>
The determination of the Plan Administrator with respect to
whether an Employee is performing Post-Retirement Date Service
shall be based on a reasonable and good faith evaluation of
the facts, and shall be conclusive and binding.
(ii) "Suspendable Amount" means:
(A) in the case of a Retirement Benefit payable
periodically on a monthly basis for as long as a life
(or lives) continues, the monthly Retirement Benefit
otherwise payable in a calendar month in which the
Employee is engaged in Post-Retirement Date Service,
or
(B) in the case of a Retirement Benefit payable other
than in the form described in clause (A) of paragraph
(ii) of Section 10.2(b), the lesser of (1) the amount
of Retirement Benefit which would have been payable
to the Employee if he or she had been receiving
monthly benefits under the Plan since actual
retirement based on a single life annuity commencing
at his or her actual retirement date; or (2) the
actual amount paid or scheduled to be paid to the
Employee for such month. Payments which are scheduled
to be paid less frequently than monthly may be
converted to monthly payments for purposes of this
clause (B) of paragraph (ii) of Section 10.2(b).
(c) Payment of an Employee's Retirement Benefit, not in excess of
the Suspendable Amount, shall be permanently withheld for each
calendar month during which the Employee is employed in
Post-Retirement Date Service.
(d) [Reserved]
(e) [Reserved]
(f) Any Employee whose Retirement Benefit payments are suspended
pursuant to Section 10.2(c) shall be notified (by personal
delivery or certified mail) during the first calendar month in
which payments are withheld, that his or her Retirement
Benefit payments are suspended. Such notification shall
include:
(i) a description of the specific reasons for the
suspension of payments;
(ii) a general description of the Plan provisions relating
to the suspension;
(iii) a copy of the provisions;
(iv) a statement to the effect that applicable Department
of Labor regulations may be found at Section
2530.203-3 of the Code of Federal Regulations; and
(v) the procedure for appealing the suspension which
procedure shall be governed by Section 13.9 herein.
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If the Summary Plan Description (`SPD') for the Plan
contains information which is substantially the same
as the information required pursuant to the preceding
portions of this Section 10.2(f), the notification
required by this Section 10.2(f) may refer the
Employee to the relevant pages of the SPD. If the
notification refers to the SPD, the notification
shall also inform the Employee how to obtain a copy
of the SPD, or relevant pages thereof and any request
for the referenced information shall be honored
within thirty (30) days of the receipt by the
Employer of such request.
(g) An Employee may request, pursuant to the procedure
contained in Section 13.9 herein, a determination as
to whether specific contemplated employment will
constitute Post-Retirement Date Service.
(h) The application of Section 10.2 and its construction
and interpretation by the Employer shall be in
conformity with Department of Labor Regulations found
at Section 2530.203-3 of the Code of Federal
Regulations.
(i) In the event an Employee retires and commences to
receive his or her Retirement Benefit prior to
attainment of Normal Retirement Age, and is
subsequently reemployed and accrues additional
benefits under the Plan, the election and form of
payment provisions of Article VII of the Plan shall
be applied independently with respect to such
additionally accrued benefits.
10.3. RESTRICTION ON ALIENATION OF RETIREMENT BENEFITS.
(a) Except as provided in Sections 10.3(b), 10.3(c) and
10.3(d), the rights and interests of any person under
the Plan, including any right to receive
distributions from the Trust Fund 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, either
voluntarily or involuntarily, for the satisfaction of
the debts 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 the power in
any manner to sell, transfer, encumber, assign,
pledge or alienate any of his or her interest or
rights under the plan, including his or her right to
receive any distribution from the Trust Fund, and any
attempt to do so shall be void.
(b) Notwithstanding the provisions of Section 10.3(a),
all or any part of the accrued benefit of an Employee
under the Plan 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 the Act, and the Plan
Administrator shall direct the Trustee to provide for
payment in accordance with such Order and Section and
any regulations promulgated under such Section. All
such payments pursuant to a Qualified Domestic
Relations Orders shall be subject to reasonable rules
and regulations promulgated by the Plan
Administrator; provided that such rules and
regulations are consistent with such Section
206(d)(3) of the Act. If prior to a commencement of
payment of an Employee's Retirement Benefit any
amount attributable to his or her Retirement Benefit
is allocated for, or paid to, an alternate payee or
payees pursuant to a Qualified Domestic Relations
Order, the amount of his or her Retirement Benefit
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shall be reduced by an amount equal to the Actuarial
Equivalent of the amount so paid or allocated to an
alternate payee or payees.
(c) In addition, notwithstanding the provisions of
Section 10.3(a), an Employee, former Employee, or
spouse or beneficiary of an Employee or former
Employee who is a participant in a health plan
sponsored by the Company may elect to have a portion
of his or her Retirement Benefit withheld and paid
directly on his or her behalf to such plan or to the
Company. Any such election shall be in writing on a
form prescribed by the Plan Administrator, and shall
at all times be revocable, on a prospective basis, by
the filing of a written revocation with the Plan
Administrator. The amount withheld pursuant to such
an election shall not exceed the amount charged under
the health plan for the coverage purchased by the
person who made the election. The amount withheld
pursuant to such an election shall be treated as a
distribution for all purposes under the Plan, and all
provisions of the Plan shall apply to such withheld
amounts to the same extent as if such amounts were
distributed in cash to the persons making the
elections.
(d) Furthermore, notwithstanding the provisions of
Section 10.3(a), to the extent permitted by Section
401(a)(13) of the Code providing for such an offset
in accordance with court orders arising from
convictions of Participants for crimes involving the
Plan and settlements or judgments involving fiduciary
violations under Part 4 of Title I of ERISA, the Plan
Administrator may offset against the benefit to be
paid to a Participant from the Plan an amount that
the Participant is ordered or required to pay to the
Plan.
10.4. PAYMENT TO INCOMPETENT PERSONS. Every person receiving or
claiming a benefit under the 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. 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
Paragraph Section 10.4, the minor or other legally incompetent person shall be
notified of the Plan Administrator's intent to make such payment to that other
individual. The Trustee shall make such payment only upon receipt of written
instructions to such effect from the Plan Administrator. Any such payment made
in accordance
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with the provisions of this Section 10.4 shall be a complete discharge of
liability therefor under the Plan and the Trust Agreement.
10.5. PAYMENT OF SMALL BENEFITS. Notwithstanding anything to the
contrary contained in the Plan, if, upon termination of employment or upon
eligibility for benefits under the plan, the Actuarial Equivalent value of the
entire benefit ever accrued by an Employee under the Plan is $5,000 or less, the
Plan Administrator shall direct that the person entitled to receive such benefit
shall receive, in lieu thereof, the Actuarial Equivalent value of such benefit
in the form of a lump sum payment. No lump sum payment may be made under the
preceding sentence after commencement of payment of a benefit to an Employee
unless the Employee and his or her spouse, if any, (or where the Employee has
died, such spouse), consent in writing to such lump sum payment.
10.6. APPLICATION OF CERTAIN PLAN PROVISIONS. For purposes of the
general administrative provisions and limitations of the Plan, a former
Employee's spouse determined under Article IX shall be treated as any other
person entitled to receive benefits under the Plan. Upon any termination of the
Plan, any such spouse who has an interest under the Plan at the time of such
termination, which does not cease by reason thereof, shall be deemed to be a
retired Employee for all purposes of the Plan and Trust Agreement.
10.7. DIRECT ROLLOVERS. This Section applies to distributions made
on or after January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under this Section,
a distributee may elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in a direct
rollover.
For 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
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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.
ARTICLE XI.
MAXIMUM RETIREMENT BENEFITS
11.1. MAXIMUM BENEFIT LIMITATIONS. Notwithstanding any other provisions
of the Plan to the contrary, but subject to the provisions of this Article, in
no event may an Employee's annual Retirement Benefit which is attributable to
Employer contributions exceed the lesser of:
(a) $90,000 (or such other limitation amount as may
hereafter be set forth in Section 415 of the Code or
as may be determined under Treasury regulations
issued pursuant to Section 415(d) of the Code); or
(b) one hundred percent (100%) of the Employee's average
annual compensation over the three consecutive
calendar years during which he or she had the
greatest aggregate compensation from the Employer (in
the case of an Employee whose employment with the
Employer and all other Related Corporations has
terminated, such amount shall be increased to reflect
cost of living adjustments determined by Treasury
regulations issued pursuant to Section 415 of the
Code).
If an Employee has fewer than ten Years of Service, the dollar
limitation specified in Section 11.1(a) shall be reduced by multiplying such
amount by a fraction, the numerator of which is the Employee's number of Years
of Service (or part thereof) and the denominator of which is ten. If the
Employee has fewer than ten years of service with the Company, the compensation
limitation specified in
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Section 11.1(b) shall be reduced by multiplying such amount by a fraction, the
numerator of which is the Employee's number of years of service (or part
thereof) with the Company and the denominator of which is ten. Notwithstanding
the foregoing, however, the limitations specified above shall in no case be
reduced below one-tenth of the amount of such limitations as adjusted.
The foregoing notwithstanding, the maximum Retirement Benefit payable
to an Employee under this Section 11.1 shall be an amount which is equivalent to
a retirement benefit paid in the form of a straight life annuity (with no
ancillary benefits) under a plan to which a participant therein does not
contribute and under which no rollover contributions are made.
11.2. EXCEPTION TO APPLICATION OF SECTION 11.1 LIMITATION.
Notwithstanding the provisions of Section 11.1, a Retirement Benefit payable
under the Plan shall not be deemed to exceed the limitation of this Article in a
Plan Year if the total retirement benefit derived from Employer contributions
payable with respect to the Employee under this Plan and all other defined
benefit plans of the Employer does not exceed $10,000 for such Plan Year or for
any prior Plan Year. The provisions of this Section 11.2 shall not apply with
respect to any Employee if the Employer has at any time maintained a defined
contribution plan in which the Employee participated.
11.3. TREATMENT OF EMPLOYEE CONTRIBUTIONS. Employee contributions will
be treated as a separate defined contribution plan maintained by an Employer
which is subject to the limitations on contributions and other additions
described in Treasury Regulation Section 1.415-6.
11.4. COST OF LIVING ADJUSTMENTS. If the $90,000 amount contained in
Section 11.1(a) is increased pursuant to Treasury regulations issued under
Section 415(d) of the Code, such increase shall be effective as of January 1 of
the calendar year for which such Treasury regulations were effective and shall
apply with respect to Limitation Years ending with or within that calendar year.
11.5. ADJUSTMENTS TO MAXIMUM BENEFIT LIMITATION. For purposes of this
Article:
(a) If a Retirement Benefit under the Plan is payable in any
form other than a straight life annuity (with no ancillary
benefits), the determination as to whether the limitation
described in Section 11.1 has been satisfied shall be made
in accordance with regulations prescribed by the Secretary
of the Treasury, by adjusting such benefit so that it is
the equivalent to the benefit described in the
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last paragraph of Section 11.1. For purposes of this
Section 11.5(a), any ancillary benefit which is not
directly related to Retirement Benefits shall not be taken
into account and that portion of any joint and survivor
pension which constitutes a qualified joint and survivor
annuity under Section 417(b) of the Code shall not be taken
into account.
(b) If a Retirement Benefit under the Plan begins before age
62, the determination as to whether the $90,000 limitation
set forth in Section 11.1(a), as adjusted, has been
satisfied shall be made, in accordance with regulations
prescribed by the Secretary of the Treasury, by reducing
such Benefit so that it is equivalent to a $90,000
Retirement Benefit beginning at age 62.
(c) If a Retirement Benefit under the Plan begins after the
Employee's Social Security Retirement Age, the
determination as to whether the $90,000 limitation set
forth in Section 11.1(a), as adjusted, has been satisfied
shall be made, in accordance with regulations prescribed by
the Secretary of the Treasury, by increasing such
limitation so that it is equivalent to a $90,000 annual
benefit beginning at the Employee's Social Security
Retirement Age.
(d) If a Retirement Benefit under the Plan begins before the
Employee's Social Security Retirement Age, but on or after
age 62, the dollar limitation of Section 11.1(a), as
adjusted, shall be determined as follows:
(i) If an Employee's Social Security Retirement Age is
65, the dollar limitation of benefits commencing on
or after age 62 is determined by reducing the
adjusted dollar limitation by 5/9 of one percent for
each month by which benefits commence before the
month in which the Employee attains age 65.
(ii) If an Employee's Social Security Retirement Age is
greater than 65, the dollar limitation for benefits
commencing on or after age 62 is determined by
reducing the adjusted dollar limitation by 5/9 of
one percent for each of the first 36 months and 5/12
of one percent for each of the additional months (up
to 24 months) by which benefits commence before the
month of the Employee's Social Security Retirement
Age.
(e) (i) For purposes of adjusting any benefit under Section
11.5(a), the interest rate assumption shall be the
greater of five (5) percent or the rate specified in
Section 1.2 of the Plan.
(ii) For purposes of adjusting any benefit under Section
11.5(b), the interest rate assumption shall be the
greater of five (5) percent or the rate utilized in
reducing the amount of an early Retirement Benefit
payable to an Employee on account of commencement
prior to such Employee's Normal Retirement Date
under Section 4.2 of the Plan.
(iii) For purposes of adjusting any Benefit under Section
11.5(c), the interest rate assumption shall be five
(5) percent.
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11.6. MISCELLANEOUS.
(a) The total annual benefit payable to an Employee under all
qualified plans maintained by the Employer will not exceed the
limits under Section 415 of the Code as set forth in Section
11.1.
(b) For purposes of the limitations imposed by this Article, a
defined benefit plan or defined contribution plan shall be
treated as maintained by the Employer if the plan is maintained
by any Related Corporation.
11.7. LIMITATION YEAR DEFINED. For purposes of this Article, the term
"Limitation Year" means the period to be used in determining the Plan's
compliance with Section 415 of the Code and the regulations thereunder. The Plan
Administrator shall take all necessary and appropriate action to ensure that the
Limitation Year is the same period as the Plan Year.
11.8. COMPENSATION DEFINED. For purposes of this Article, "compensation"
shall mean wages, salaries, fees for professional services actually rendered in
the course of employment with the Employer, plus effective as of January 1,
1998, any amount contributed by the Employer pursuant to a salary reduction
agreement or otherwise deferred and not included in the gross income of the
Employee under Code Section 125, 401(n)(8), 402(h), 403(b), 457(b), or
414(h)(12); provided, however, that "compensation" shall exclude contributions
made by the Employer to a plan of deferred compensation to the extent that,
before the application of the limitations of Code Section 415 to such plan, the
contributions are not includable in the gross income of the Employee for the
taxable year in which contributed, contributions made by the Employer on his or
her behalf to a simplified employee pension plan described in Section 408(k) of
the Code, any distributions from a plan of deferred compensation (except amounts
received pursuant to an unfunded non-qualified plan in the year such amounts are
includable in the gross income of the Employee), amounts received from the
exercise of a non-qualified stock option or when restricted stock or other
property held by the Employee becomes freely transferable or is no longer
subject to substantial risk of forfeiture, amounts received from the sale,
exchange, or other disposition of stock acquired under a qualified stock option,
and any other amounts which receive special tax benefits, such as premiums for
group term life insurance (but only to the extent that the premiums are not
includable in the gross income of the Employee). "Compensation" shall not exceed
either the TRA
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'86 Annual Compensation Limit or the OBRA '93 Annual Compensation Limit, both as
set forth in Section 1.6.
11.9. ADJUSTMENT FOR RETIRED EMPLOYEES. In the event that the annual
Retirement Benefit payable to a retired Employee absent the limitations of this
Article would be greater than his or her annual Retirement Benefit after
application of such limitations, the annual Retirement Benefit otherwise payable
following his or her retirement shall be increased for each Limitation Year to
reflect, as appropriate with respect to him, any increase in the limitation set
forth in Section 11.1(a), which limitation shall be determined as described
therein, or any increase in the limitation set forth in Section 11.1(b), which
limitation shall be determined by multiplying the limitation applicable to him
under Section 11.1(b) in the Limitation Year in which he or she retired by a
fraction, the numerator of which is the maximum permissible dollar limitation
for the Limitation Year in which the compensation limitation is being adjusted
and the denominator of which is the maximum permissible dollar limitation for
the Limitation Year in which he or she retired.
ARTICLE XII.
FINANCING
12.1. TRUST FUND AND TRUSTEE. The Trust Fund is held and administered under
the Sauer-Sundstrand Consolidated Retirement Trust for Employee Retirement Plans
with State Street Bank and Trust Company, Boston, Massachusetts, as Trustee,
subject to the additional provisions of Section 13.3. Subject to the provisions
of Title IV of the Act, benefits under the Plan shall be only such as can be
provided by the assets of the Trust Fund, and no liability for the payment of
benefits under the Plan shall be imposed upon any Employer or any Related
Corporation, or any of their officers, employees, directors or stockholders.
12.2. CONTRIBUTIONS BY AN EMPLOYER. So long as the Plan continues,
contributions will be made by each Employer at such times and in such amounts as
the Board of Directors of such Employer in its sole discretion shall from time
to time determine, based on the advice of the Actuary and consistent with
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the funding policy for the Plan. Subject to the provisions of Section 12.5, all
such contributions shall be delivered to the Trust for deposit in the Trust
Fund. Employees shall make no contributions to the Plan. Unless paid by the Plan
Administrator, all expenses incident to the operation and management of the Plan
shall be paid out of the Trust Fund.
12.3. NO REVERSION: RETURN OF CONTRIBUTIONS. The Trust Fund shall be for
the exclusive benefit of Employees, retired and former Employees, and persons
claiming under or through them. Under no circumstances or conditions whatsoever
shall the Trust fund, or any portion of the principal or income thereof, ever be
used for or diverted to any other purpose, or ever revert, be paid, or inure to
the benefit, directly or indirectly, of an Employer or any other Related
Corporation; provided, however, that, as more particularly set forth in the
Trust Agreement, in the event of the termination of the Plan, after satisfaction
of all benefit liabilities of the Plan, such remaining portion of the Trust
Fund, if any, shall revert to the Employer with respect to which it relates.
The foregoing provisions of this Section 12.3 notwithstanding:
(a) If any contribution under the Plan is conditioned on initial
qualification of the Plan under Section 401(a) of the Code and if
the Plan does not so qualify, the Trustee shall upon written
request of the Employer that made the contribution, return to
such Employer the amount of such contribution and any increment
thereon within one calendar year after the date qualification of
the Plan is denied;
(b) If a contribution is conditioned upon the deductibility of the
contribution under Section 404 of the Code, then, to the extent
the deduction is disallowed, the Trustee shall, upon written
request of the Employer that made the contribution, return the
contribution (to the extent disallowed) and any increment thereon
to such Employer within one year after the date the deduction is
disallowed; and
(c) If a contribution or any portion thereof is made by an Employer
by a mistake of fact, the Trustee shall, upon written request of
the Employer that made the contribution, return the contribution
or such portion and any increment thereon to such Employer within
one year after the date of payment to the Trustee.
12.4. FORFEITURES NOT TO INCREASE BENEFITS. Any forfeiture arising from the
termination of employment or death of an Employee, or for any other reason,
shall be used to reduce the contributions of such Employee's Employer to the
Trust Fund, and shall not be applied to increase the benefits any
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Employee or any other person otherwise would receive under the Plan at any time
prior to the termination of the Plan.
12.5. CHANGE OF FUNDING MEDIUM. The Plan Administrator shall have the right
to change at any time the means through which benefits under the Plan shall be
provided, including the substitution of a contract or contracts with an
insurance company or companies, and may thereupon make suitable provision for
the use of assets of the Trust to provide for the payment of benefits under such
insurance contract or contracts. No such change shall constitute a termination
of the Plan or result in the diversion to any Employer of any funds previously
contributed in accordance with the Plan.
ARTICLE XIII.
ADMINISTRATION
13.1. PLAN ADMINISTRATOR. The 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. The Plan Administrator shall have all powers
necessary to administer the Plan in accordance with its terms. Not in
limitation, but in amplification of the foregoing and of the authority conferred
upon the Plan Administrator elsewhere in the Plan, the parties hereto
specifically intend that the Plan Administrator 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 Plan Administrator shall be binding on all Employees 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 Plan Administrator. All payments of benefits under
the Plan shall be made by the Trustee in accordance with the written direction
of the Plan Administrator. The decision of the Plan Administrator upon all
matters within the scope of its authority shall be final and binding. 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.
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13.2. RIGHTS AND DUTIES OF THE BOARD. The Board of Directors of the 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;
(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 Employers pursuant to the Plan and will
hold and distribute the same in accordance with the terms and
provisions of the Trust Agreement(s). 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 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 such Trust
Agreement, and 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 Company's 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 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 and at such
place or places, and at such time or times, as it may from time
to time determine. A majority of
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the members of the Committee at the time in office will
constitute a quorum for the transaction of business.
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.
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 or her rights or benefits under the Plan.
(c) The Committee shall have the right to appoint, remove and replace
a Trustee, Trustees, insurance company or companies, or any
qualified institution or institutions to act as Funding agent
with respect to the Plan.
(d) The Committee shall set funding and investment policies for
assets of the Plan.
(e) The Committee shall appoint the Appeal Review Committee and the
Plan Benefit Committee and have the right to appoint others or to
employ individuals to assist in the administration of the Plan.
(f) The Committee shall have final authority over construction and
direction of the Plan. 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, interpretations and
completions of Plan provisions shall be final and binding upon
the parties.
(g) 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 him by Employees
or beneficiaries in accordance with Section 13.8 of the Plan.
(b) The Plan Benefit Committee shall issue directions to the Trustee
concerning all benefits which are to be paid pursuant to the
provisions of the Plan.
(c) The Plan Benefit Committee shall receive from Employers and
Employees such information as is necessary for proper
administration of the Plan.
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(d) The Plan Benefit Committee shall prepare and distribute, in such
form as he or she determines appropriate, information explaining
the Plan.
(e) The Plan Benefit Committee shall furnish to the Company, upon
request, such reports with respect to the Plan 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 Section 13.9(b).
13.7. INDEMNIFICATION. Each member of the Board and the aforenamed
Committees, and Employer officers, directors and employees associated with
administration of the Plan, shall be indemnified by the Company against costs,
expenses and liabilities (other than amounts paid in settlement to which the
Plan Administrator does not consent) reasonably incurred by him or them in
connection with any action to which he or she or they may be a party by reason
of performance of designated duties except in relation to matters as to which he
or she 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 these individuals may enjoy as a
matter of law or by reason of insurance coverage of any kind.
13.8. RELIANCE UPON OTHERS. The Board members, the Trustee, and the
respective Committee members may rely upon the direction, information or actions
of each other as being proper under the Plan, and 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 13.7 with respect to their reliance upon others as stated herein.
13.9. CLAIMS PROCEDURES.
(a) APPLICATION FOR BENEFITS. At least 60 days before intended
commencement of a Plan benefit, each Employee 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 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
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<PAGE>
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 Employee 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, perfect the claim (explaining why such material or
information is needed), and shall advise the Employee or
beneficiary, as the case may be, of the procedure for the appeal
of such denial. All appeals shall be made by the following
procedure:
(1) The Employee or beneficiary whose claim has been denied
shall file with the Appeal Review Committee a notice of
desire to appeal the denial. Such notice shall be filed
within ninety (90) days from receipt of notification by the
Plan Benefit Committee of claim 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.
(2) The Appeal Review Committee shall, within thirty (30) days
of receipt of the Employee's or beneficiary's notice of
appeal, establish a hearing date on which the Employee or
beneficiary may make an oral presentation to the Appeal
Review Committee or a Named Appeals Fiduciary in support of
his or her appeal. The Employee or beneficiary shall be
given not less than ten (10) days' notice of the date set
for the hearing.
(3) The Appeal Review Committee or a Named Appeals Fiduciary
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 or a Named
Appeals Fiduciary shall deem relevant. If the claimant
elects not to make an oral presentation, such election shall
not be deemed adverse to his or her interest, and the Appeal
Review Committee or a Named Appeals Fiduciary shall proceed
as set forth below as though an oral presentation of the
contents of the claimant's written presentation had been
made.
(4) The Appeal Review Committee or a Named Appeals Fiduciary
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.
(c) APPOINTMENT OF A NAMED APPEALS FIDUCIARY. A Named Appeals
Fiduciary shall be the person or persons named as such by the
Appeal Review Committee. The Named Appeals Fiduciary shall be a
"Named Fiduciary" within the meaning of ERISA and, unless
appointed to other fiduciary responsibilities, shall have no
authority, responsibility, or liability with respect to any
matter other than the proper discharge of his or her appointed
functions.
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ARTICLE XIV.
MISCELLANEOUS
14.1. PLAN NON-CONTRACTUAL. Nothing herein contained shall be construed as
a commitment or agreement on the part of any person to continue his or her
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 such person for any period. All Employees shall remain
subject to discharge, layoff, or disciplinary action to the same extent as if
the Plan had never been put into effect.
14.2. CLAIMS OF OTHER PERSONS. 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 hereafter created in accordance with the terms
and provisions of the Plan.
14.3. NO GUARANTEES. The benefits provided under the Plan shall be paid
solely from the assets of the Trust Fund and neither the Plan Administrator, nor
the Trustee shall have any obligation to pay any benefits hereunder, except for
such benefits as may be satisfied out of such assets in accordance with the
terms of the Plan. Except to the extent provided by ERISA, nothing contained in
the Plan or in the Trust Agreement shall constitute a guaranty by the Plan
Administrator or the Trustee, that the assets of the Trust Fund will be
sufficient to pay any benefit to any person and neither the Plan Administrator,
its officers, employees or directors, nor the Trustee, in any manner guarantees
the Trust against loss or depreciation nor, to the extent permitted under the
applicable law, shall any of them be liable for any act or failure to act not
amounting to gross negligence or willful misconduct.
14.4. LIMITATIONS ON LIABILITY. Notwithstanding any of the preceding
provisions of the Plan, neither the Plan Administrator, the Trustee, nor any
individual acting as an employee or agent of either of them shall be liable to
any Employee, former Employee, Surviving Spouse or beneficiary for any claims,
loss, liability or expense incurred in connection with the Plan, except when the
same shall have been
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<PAGE>
judicially determined to be due to the gross negligence or willful misconduct of
the Plan Administrator, the Trustee or an individual acting as an employee or
agent of any of them.
14.5. MERGER OR CONSOLIDATION OF PLAN. Any merger or consolidation of the
Plan with another plan, or any transfer of Plan assets or liabilities to any
other 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
Employee in the Plan would receive, if the merged, consolidated or transferred
plan were terminated immediately following such event, a benefit which is equal
to or greater than the benefit he or she would have been entitled to receive if
the Plan had terminated immediately before such event.
14.6. MILITARY SERVICE. Notwithstanding any provision in 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 Code Section 414(u).
14.7. NONFORFEITABILITY OF BENEFITS. Notwithstanding any other provisions
of the Plan, an Employee's right to a normal Retirement Benefit under the Plan
shall be nonforfeitable upon and after his or her attainment of Normal
Retirement Age.
14.8. PRUDENT MAN RULE. Notwithstanding any other provision of this Plan
and Trust Agreement, the Plan Administrator, and the Trustee, shall exercise
their powers and discharge their duties under the Plan and the Trust Agreement
for the exclusive purpose of providing benefits to Employees, former Employees,
Surviving Spouses and beneficiaries, and 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.
14.9. 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 or its designee considers necessary or
desirable for the purpose of administering the Plan, and the
benefit provisions of the Plan shall be applicable to such person
upon the condition that such person will furnish promptly full,
true and complete documents, evidence, data and information
requested by the Plan Administrator. The Plan Administrator, in
its sole discretion, may postpone payment of benefits until such
information and such documents have been furnished.
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(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 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
obligated to search for, or to ascertain, his or her whereabouts.
If the location of a person entitled to a benefit is not made
known to the Plan Administrator within three (3) years after the
date on which payment of such benefit would otherwise commence,
payment may be made as though such person had died at the end of
the three-year period. If, within one additional year after such
three year period has elapsed, or, within three years after the
actual death of such person, the Plan Administrator is unable to
locate any individual who would receive a distribution under the
Plan upon the death of an Employee, such benefit shall be deemed
forfeited 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 that a Surviving Spouse or a beneficiary makes a claim
for any amount which has been forfeited, the amounts which have
been forfeited shall be reinstated.
14.10. 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.
14.11. 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 an Employee, former Employee, Surviving
Spouse or any person claiming any interest through an Employee, former Employee
or Surviving Spouse shall be charged as far as possible directly against the
benefit to which such Employee, former Employee, Surviving Spouse or other
person is entitled, but only if the result of the action is adverse to such
Employee, former Employee, Surviving Spouse or other person.
14.12. SERVICE OF PROCESS. The Director, Personnel and Information of the
Company is hereby designated as agent for the service of legal process on the
Plan.
14.13. 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.
14.14. GOVERNING LAW. The Plan and Trust shall be interpreted, administered
and enforced in accordance with the Code and the Act, and the rights of
Employees, former Employees, Surviving
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Spouses, beneficiaries and all other persons shall be determined in accordance
therewith; provided however, that, to the extent that state law is applicable,
the laws of the State of Iowa shall apply.
14.15. TITLES. Titles are provided in the Plan for convenience of reference
only and are not to serve as a basis for interpretation or construction of the
Plan.
14.16. 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.
14.17. MASCULINE TO INCLUDE FEMININE. Where used in this Plan, references
to the masculine gender shall be deemed to include the feminine gender.
ARTICLE XV.
ADOPTION OF PLAN BY RELATED CORPORATIONS
EXTENSION TO NON-COVERED UNITS; ORGANIZATIONAL CHANGES
15.1. ADOPTION BY RELATED CORPORATIONS. Any Related Corporation which is
not an Employer hereunder, with the consent of the Board of Directors of the
Company, may adopt the Plan and become an Employer by resolution of its Board of
Directors, a certified copy of which shall be filed with the Plan Administrator.
Such resolution shall specify the covered unit or units of the Employer to which
the Plan is being extended by virtue of its adoption of the Plan, and shall
specify the effective date of such adoption. Any Related Corporation which
adopts the Plan shall make contributions to the Plan in accordance with the
provisions of Section 12.2.
15.2. EXTENSION TO NON-COVERED UNITS. The Company or any other Employer
with its consent, may extend the Plan to cover any division or other segment of
its business not theretofore covered by 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.
15.3. SPECIAL PROVISION REGARDING ELIGIBILITY AND BENEFITS. In the event
that it is necessary to accommodate the transition from benefit arrangements
which were in effect for the benefit of the employees of a Related Corporation,
or a division or other segment of business of a Related Corporation
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<PAGE>
prior to the adoption of the Plan by such Related Corporation, or the extension
of the Plan to a division or segment of business of a Related Corporation or of
the Company, an Appendix setting forth special overriding provisions applicable
to the adoption of the Plan by such Related Corporation or to the extension of
the Plan to such a division or segment of business of a Related Corporation or
of the Company may be added to the Plan. Each such Appendix shall for all
purposes constitute a part of the Plan.
15.4. CHANGES IN EMPLOYER ORGANIZATION. Once Plan coverage has been
extended to a division or segment of business of an Employer or of the Company
as specified in Sections 15.1 or 15.2, such division or segment of business
shall remain covered under the Plan notwithstanding any subsequent changes in
the organizational structure of the Employer or the Company.
ARTICLE XVI.
AMENDMENT AND DURATION
16.1. INTERNAL REVENUE CODE QUALIFICATION. Any modification or amendment of
the Plan may be made as necessary to qualify or maintain the Plan as a qualified
plan and trust meeting the requirements of Sections 401(a) and 501(a) of the
Code, as now in effect or hereafter amended or adopted, and the regulations
issued thereunder.
16.2. AMENDMENT AND TERMINATION. The Company reserves the right to amend
the Plan, or to terminate the Plan at any time and from time to time by
resolution of its Board of Directors, and all persons claiming any interest
under the Plan shall be bound thereby; provided, however, that no amendment
shall be adopted, the effect of which would:
(a) revest in the Employer any right, title or interest in or to any
Trust Fund assets except as provided in Sections 12.3 and 16.8;
(b) directly or indirectly, result in discrimination in favor of
officers, shareholders or highly compensated employees;
(c) cause any part of the assets of the Trust Fund to be used for any
purpose other than the exclusive benefit of Employees, retired
Employees, former Employees, Surviving Spouses or persons
entitled to or receiving a benefit under or through them;
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<PAGE>
(d) directly or indirectly affect, on the effective date of the
amendment, the vesting of benefits pursuant to Articles V and VI
of the Plan unless the conditions of Section 411(a)(10) of the
Code are satisfied; and
(e) directly or indirectly divest the interest of any Employee, or
any person entitled to receive a benefit of an Employee, in any
amount that any of them would have received had the Employee's
employment with the Employer and all Related Corporations
terminated immediately prior to the effective date of such
amendment.
A complete discontinuance of contributions by the Employer shall
automatically constitute a termination of the Plan.
16.3. TERMINATION. In the event of a complete discontinuance of
contributions by the Employer hereunder, or other termination of the Plan with
respect to the Employer, the benefit interests, as specified in this Section
16.3, of all Employees, retired Employees and former Employees of the Employer,
or person or persons entitled to or receiving a benefit under or through them,
shall be determined and distributed in accordance with the provisions of this
Section 16.3. As of the date of termination of the Plan, all assets remaining in
the Trust Fund attributable to contributions of the Employer (as determined in
accordance with the advice of the Actuary for the Plan), after provision has
been made for expenses of administration and liquidation, shall be allocated by
the Actuary, to the extent that they shall be sufficient, to such persons in the
following manner and order of precedence (subject to the provisions of Section
16.4 through 16.11:
(a) First, in the case of benefits payable as an annuity
(i) in the case of the benefit of an Employee, Surviving Spouse
or beneficiary which was in pay status as of the beginning
of the 3-year period ending on the termination date of the
Plan, to each such benefit, based on the provisions of the
Plan (as in effect during the 5-year period ending on such
date) under which such benefit would be the least; and
(ii) in the case of an Employee's or beneficiary's benefit (other
than a benefit described in subpart (i) of this Section
16.3(a)) which would have been in pay status as of the
beginning of such 3-year period if the Employee had retired
prior to the beginning of the 3-year period and if payment
of his or her benefit had commenced (in the normal form of
annuity under the Plan) as of the beginning of such period,
to each such benefit based on the provisions of the Plan (as
in effect during the 5-year period ending on such date)
under which such benefit would be the least.
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For purposes of subpart (i) of this Section 16.3(a), the lowest
benefit in pay status during a 3-year period shall be considered
the benefit in pay status for such period.
(b) Second,
(i) to all other benefits, if any, of individuals under the Plan
guaranteed under Title IV of the Act (determined without
regard to Section 4022(b)(5) of the Act); and
(ii) to the additional benefits, if any, which would be
determined under subpart (i) of this Section 16.3(b) if
Section 4022(b)(6) of the Act did not apply.
For purposes of this Section 16.3(b), Section 4021 of the Act
shall be applied without regard to subsection (c) thereof.
(c) Third, to all nonforfeitable benefits under the Plan.
(d) Fourth, to all other benefits under the Plan.
16.4. ADJUSTMENT OF ALLOCATIONS. The amount allocated under any section of
Section 16.3 with respect to any benefit shall be properly adjusted for any
allocation of assets with respect to that benefit under a prior section of
Section 16.3.
16.5. ASSETS INSUFFICIENT FOR ALLOCATION. If the assets available for
allocation under any section of Section 16.3 (other than Section 16.3(c) and
16.3(d)) are insufficient to satisfy in full the benefits of all individuals
which are described in that Section, the assets shall be allocated pro rata
among such individuals on the basis of the present value (as of the termination
date) of their respective benefits described in that Section.
16.6. ASSETS INSUFFICIENT FOR ALLOCATION UNDER SECTION 16.3(c). This
Section 16.6 applies if the assets available for allocation under Section
16.3(c) are not sufficient to satisfy in full the benefits of individuals
described in that Section.
(a) If this Section 16.6 applies, except as provided in Section
16.6(b), the assets shall be allocated to the benefits of
individuals described in such Section 16.3(c) on the basis of the
benefits of individuals which would have been described in
Section 16.3(c) under the Plan as in effect at the beginning of
the 5-year period ending on the date of Plan termination.
(b) If the assets available for allocation under Section 16.6(a) are
sufficient to satisfy in full the benefits described in such
Section (without regard to this Section
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16.6(b)), then for purposes of Section 16.6(a), benefits of
individuals described in Section 16.6(a) shall be determined on
the basis of the Plan as amended by the most recent Plan
amendment effective during such 5-year period under which the
assets available for allocation are sufficient to satisfy in full
the benefits of individuals described in Section 16.6(a) and any
assets remaining to be allocated under Section 16.6(a) shall be
allocated under Section 17.6(a) on the basis of the Plan as
amended by the next succeeding Plan amendment effective during
such period.
16.7. RESIDUAL ASSETS. Any residual assets of the Plan shall be distributed
to the Employer if
(a) all liabilities of the Plan to Employees and their beneficiaries
have been satisfied; and
(b) the distribution does not contravene any provision of law.
16.8. IMMEDIATE VESTING UPON TERMINATION OR DISCONTINUANCE. Upon
termination or partial termination of the Plan or discontinuance of
contributions thereto by the Employer pursuant to Sections 16.1 through 16.7,
the rights of all affected Employees and persons claiming a benefit under or
through Employees to benefits accrued to the date of such termination, partial
termination or discontinuance shall be fully vested and nonforfeitable; however,
such benefits will be payable only out of the Trust Fund in accordance with
Sections 16.3 through 16.6 or by the Pension Benefit Guaranty Corporation and no
Employee or person claiming a benefit under or through an Employee shall have
any recourse against the Employer in the event the assets of the Trust Fund and
the amounts paid by the Pension Benefit Guaranty Corporation shall not be
sufficient to provide such benefits in full.
16.9. MEANINGS OF TERMS. The terms used in Sections 16.3 through 16.8 shall
have, where required, the same meaning as the same terms as used in Section 4044
of the Act; provided, however, that any term specifically defined in Article I
of the Plan shall have the meaning as defined therein.
16.10. PROVISIONS TO PREVENT DISCRIMINATION IN CASE OF EARLY TERMINATION OF
PLAN.
(a) In the event of Plan termination, the following benefit
limitations shall apply:
(i) The benefit of any highly compensated active or former
Employee will be limited to a benefit that is
nondiscriminatory under Section 401(a)(4) of the Internal
Revenue Code.
(ii) Benefits distributed to any of the 25 most highly
compensated active and former highly compensated Employees
will be restricted such that the annual payments are no
greater than an amount equal to the payment that
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would be made on behalf of the Employee under a single life
annuity that is the Actuarial Equivalent of the sum of the
Employee's accrued benefit and the Employee's other benefits
under the Plan.
(b) The limitation described in subsection 16.10(a) shall not apply
if:
(i) After payment of the benefit to an Employee described in
said subparagraph, the value of Plan assets equals or
exceeds one hundred ten percent (110%) of the value of
current liabilities, as defined in Section 412(l)(7) of the
Internal Revenue Code, or
(ii) The value of the benefits for an Employee described in said
subparagraph is less than one percent (1%) of the value of
current liabilities.
(c) For purposes of this Section 16.10, "benefit" includes loans in
excess of the amount set forth in Section 72(p)(2)(A) of the
Internal Revenue Code, any periodic income, any withdrawal values
provided to a living Employee, and any death benefits not
provided for by insurance on the Employee's life.
(d) For purposes of this Section 16.10, the determination of whether
an active or former Employee is "highly compensated" shall be
made in accordance with Section 414(q) of the Internal Revenue
Code and the regulations promulgated thereunder.
16.11. WITHDRAWAL OF AN EMPLOYER. Each Employer, other than the Company,
shall have the right to withdraw from the Plan by action of its Board of
Directors, and by filing written notice thereof with the Plan Administrator, in
which event the Employer shall cease to be an Employer for purposes of the Plan.
A complete discontinuance of contributions to the Plan by an Employer
automatically shall constitute a withdrawal of such Employer from the Plan. Upon
any withdrawal of an Employer, there shall be allocated and segregated for the
benefit of such Employer's Employees, retired or former Employees, Surviving
Spouses, or persons claiming under or through them, all assets remaining in the
Trust Fund which are attributable to contributions of such Employer, as
determined by the Plan Administrator in accordance with the advice of the
Actuary for the Plan, such portion to be disposed of as follows:
(a) If such withdrawal is for the purpose of establishing or merging
with a separate plan which meets the requirements for
qualification under applicable provisions of the Internal Revenue
Code, the portion of the assets of the Plan so segregated shall
be transferred to and become a part of the trust fund or other
financing medium established in connection with the separate
plan.
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(b) If such withdrawal is for any other purpose such withdrawal shall
constitute a termination of the Plan with respect to the
withdrawing Employer (but not with respect to the Plan
Administrator or any other Employer which has not so withdrawn
from the Plan), and the portion of the assets of the Plan so
segregated shall be allocated in accordance with the advice of
the Actuary, subject to provision for expenses of administration
and liquidation, for the benefit of persons employed by the
withdrawing Employer who have a benefit interest under the Plan
and who, following such withdrawal, do not remain Employees
within the meaning of the Plan, and for the benefit of former and
retired Employees of the withdrawing Employer, Surviving Spouses
and all persons claiming under or through them, in the manner,
order and subject to the conditions specified in Sections 16.3
through 16.10.
ARTICLE XVII.
TOP-HEAVY PROVISIONS
17.1. TOP-HEAVY STATUS. The provisions of this Article shall not apply to
the Plan with respect to any Plan Year for which the Plan is not Top-Heavy
(provided that if the Plan becomes Top Heavy the provisions of Section 17.5(b)
and 17.5(c) shall apply as set forth therein to periods of time before and after
the period during which the Plan is Top Heavy). If the Plan is or becomes
Top-Heavy in any Plan Year, the provisions of this Article XVII will supercede
any conflicting provisions elsewhere in the Plan.
17.2. DEFINITIONS. For purposes of this Article XVII, the following words
and phrases shall have the meanings stated below unless a different meaning is
plainly required by the context:
(a) "Determination Date" means, with respect to any Plan Year: (i)
the last day of the preceding Plan Year, or (ii) in the case of
the first Plan Year of the Plan, the last day of such Plan Year.
(b) "Key Employee" means an employee meeting the definition of "key
employee" contained in Section 416(i)(1) of the Code and the
Treasury Regulations interpreting said Section. For purposes of
applying such definitions, "compensation" shall have the meaning
set forth in Section 11.9.
(c) "Non-Key Employee" means any employee who is not a Key Employee.
(d) "Valuation Date" means with respect to a particular Determination
Date, the most recent date for valuation of the Trust Fund
occurring within a 12 month period ending on the applicable
Determination Date and used for computing Plan costs for purposes
of the minimum funding requirements of the Code.
17.3. DETERMINATION OF TOP-HEAVY STATUS.
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(a) The Plan will be "Top-Heavy" with respect to any Plan Year, if as
of the Determination Date applicable to such Year, the ratio of
the present value of accrued benefits under the Plan for Key
Employees (determined as of the Valuation Date applicable to such
Determination Date) to the present value of accrued benefits
under the Plan for all Employees (determined as of such Valuation
Date) exceeds 60 percent. For purposes of computing such ratio,
and for all other purposes of applying and interpreting this
Section 17.3, the provisions of Section 416 of the Code and all
Treasury Regulations interpreting said Section shall be applied.
(b) For purposes of determining whether the Plan is Top-Heavy, those
qualified retirement plans maintained by the Employer which,
under the applicable provisions of Section 416(g) of the Code and
the Treasury Regulations interpreting said section, are required
to be aggregated, shall be aggregated with the Plan. If elected
by the Employer, such other qualified retirement plans maintained
and formerly maintained by the Employer and each Related
Corporation shall be aggregated to the extent permitted by
Section 416(g) of the Code and the Treasury Regulations
interpreting said section. In addition, for purposes of
determining whether the Plan is Top-Heavy, the accrued benefits
of an individual shall be disregarded if he or she or she has not
performed any services for the Employer at any time during the
five-year period preceding the Determination Date.
17.4. ACTUARIAL ASSUMPTION. For purposes of determining whether the Plan is
Top-Heavy, the actuarial assumptions set forth in Section 1.2 shall be used.
17.5. VESTING.
(a) If the Plan becomes Top-Heavy, the vested interest of an Employee
in the portion of his or her Retirement Benefit referred to in
Section 17.5(b) shall be determined in accordance with the
following schedule, notwithstanding the provisions of Sections
5.1 or 6.1 (if vesting under either of such sections would not be
as fast as provided herein):
<TABLE>
<CAPTION>
---------------------------- ----------------------------------------------------------- -----------------------------------------
FORFEITABLE YEARS OF SERVICE VESTED PERCENTAGE
PERCENTAGE
---------------------------- ----------------------------------------------------------- -----------------------------------------
<S> <C> <C>
100% Less than 2 years 0%
---------------------------- ----------------------------------------------------------- -----------------------------------------
80% 2 but less than 3 years 20%
---------------------------- ----------------------------------------------------------- -----------------------------------------
60% 3 but less than 4 years 40%
---------------------------- ----------------------------------------------------------- -----------------------------------------
40% 4 but less than 5 years 60%
---------------------------- ----------------------------------------------------------- -----------------------------------------
20% 5 but less than 6 years 80%
---------------------------- ----------------------------------------------------------- -----------------------------------------
0% 6 or more years 100%
---------------------------- ----------------------------------------------------------- -----------------------------------------
</TABLE>
For purposes of this Section 17.5(a), Years of Service shall
include all Years of Service required to be counted under Section
411(a) of the Code, disregarding all Years of Service permitted
to be disregarded under Section 411(a)(4) of the Code.
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(b) The vesting provisions of Section 17.5(a) shall apply to all
Retirement Benefits which have accrued while the Plan is
Top-Heavy and during the period of time before the Plan becomes
Top-Heavy. These vesting provisions shall not apply to the
Retirement Benefit of any Employee who does not have an Hour of
Employment after the Plan becomes Top-Heavy.
(c) If the Plan becomes Top-Heavy and subsequently ceases to be
Top-Heavy, the vesting provisions of Section 17.5(a) shall
automatically cease to apply, and the provisions set forth in
Section 5.1 (or if applicable, Section 6.1) of the Plan shall
automatically apply, with respect to Retirement Benefits which
accrue to an Employee for all Plan Years after the Plan Year with
respect to which the Plan was last Top-Heavy. For purposes of
this Section 17.5(c), this change in vesting provisions shall
only be valid to the extent that the conditions of Section 16.2
of the Plan and Section 411(a)(10) of the Code are satisfied.
17.6. MINIMUM BENEFIT.
(a) If the Plan shall be Top-Heavy, the accrued benefit under the
Plan at any point in time for each Non-Key Employee described in
Section 17.6(c) shall be equal to the actuarial value (based on
the assumptions set forth in Section 17.4) of a single life
annuity (with no ancillary benefits) payable over the life of the
Non-Key Employee, commencing on his or her 65th birthday, equal
to a percentage (as determined pursuant to the next sentence of
this Section 17.6(a)) of such Employee's average compensation (as
defined in Section 11.9) for the five consecutive Plan Years
during which the Employee had the highest aggregate amount of
such compensation from an Employer and all Related Corporations.
Such percentage shall equal the lesser of
(i) two percent (2%) multiplied by such Employee's Years of
Service (as computed pursuant to Section 17.6(b), or
(ii) twenty percent (20%).
The minimum benefit payable pursuant to this Section 17.6 will be
determined without regard to any contributions for any Employee
under the federal Social Security Act. Notwithstanding the
provisions of Section 10.2, if the Retirement Benefit of a
Non-Key employee does not commence until after his or her 65th
birthday, or is suspended for any period after his or her 65th
birthday pursuant to Section 10.2, the amount of the Retirement
Benefit required under this Section upon the commencement or
recommencement of Retirement Benefit payments to such Non-Key
Employee after his or her 65th birthday shall be adjusted so that
such payments are equal to the Actuarial Equivalent of the
Retirement Benefit required by this Section at his or her 65th
birthday minus the Actuarial Equivalent of any Retirement Benefit
payments previously made to the Employee.
(b) For purposes of this Section 17.6, Years of Service shall not
include Plan Years when
(i) the Plan was not Top-Heavy for any Plan Year ending during
such Year of Service, and
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(ii) Years of Service completed in a Plan Year beginning before
January 1, 1984.
(c) Each Non-Key Employee who completes at least 1,000 hours of
employment in a Plan Year (or equivalent service as defined in
Department of Labor Regulation Section 2530-200b-3) shall accrue
the minimum benefit described in Section 17.6(a) for such Year. A
Non-Key Employee shall not fail to accrue such benefit merely
because the Employee was not employed on a specific date or
because he or she failed to earn a minimum amount of compensation
for such Year.
(d) For purposes of Section 17.6(a) compensation in Plan Years
beginning before January 1, 1984 and compensation in Plan Years
after the close of the last Plan Year in which the Plan is
Top-Heavy shall be disregarded.
17.7. MAXIMUM ALLOCATION. For purposes of determining whether the Plan
would be Top-Heavy if "90" were substituted for "60%" each place it appears in
paragraphs (1)(A) and (2)(8) of Section 416(g) of the Code, as required by
Section 416(h) of the Code, all of the preceding provisions of this Article XVII
shall be applicable, except that the phrase "90 percent" shall be substituted
for the phrase "60 percent" where it appears in Section 17.3(a). If, pursuant to
the preceding sentence, it is determined that the Plan would be Top-Heavy if "90
percent" were so substituted for "60 percent," then, for purposes of applying
Sections 415(e) and 416(h) of the Code and Article XI of the Plan to the maximum
benefit permitted for any Participant, 11.01 shall be substituted for "1.25" in
each applicable place in paragraph (2)(B) and (3)(B) of Section 415(e) of the
Code.
17.8. SAFE HARBOR. If, in a Plan Year in which this Plan is Top-Heavy, a
Non-Key Employee who is a participant in this Plan is also a participant in a
Top-Heavy defined contribution plan maintained by the Employer or a Related
Corporation, such Non-Key Employee shall be entitled to receive only the minimum
benefit under Section 17.6 of this Plan for such Plan Year and shall not be
entitled to receive any minimum allocation under such defined contribution plan
for such Plan Year on account of its Top-Heavy status.
17.9. LIMITS ON BENEFITS TO KEY EMPLOYEES. Subject to the exception
provided below, if, for any Plan Year, this Plan is a Top-Heavy Plan, then the
overall limitation imposed by Section 415(e) and 416(h) of the Code and Article
XI of the Plan, in the case of a Key Employee who is a participant in both this
Plan and a Top-Heavy defined contribution plan maintained by the Employer or any
Related
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<PAGE>
Corporation, shall be applied by substituting "1.0" for "1.25" in each
applicable place in paragraphs (2)(B) and (3)(B) of Section 415(e) of the Code.
The change in the Section 415(e) limitation specified in the preceding sentence
shall not be applicable to an Employee for a Plan Year in which this Plan is a
Top-Heavy Plan if
(a) the sum of the present values of the accrued benefits and account
balances of all participants in all defined benefit plans and
defined contribution plans maintained by the Employer or any
Related Corporation who are Key Employees does not exceed 90% of
the sum of the present values of the accrued benefits and account
balances of all participants in all defined benefit plans and
defined contribution plans maintained by the Employer or any
Related Corporation, and
(b) the minimum benefit percentage in Section 17.6 is increased to 3
percent.
Executed this _____ day of ____________________, 2000.
SAUER-DANFOSS INC.
By:
----------------------------------
Title:
-------------------------------
63
<PAGE>
APPENDIX A TO SAUER-DANFOSS
EMPLOYEES' RETIREMENT PLAN
This Appendix A to the Sauer-Danfoss Employees' Retirement Plan is
applicable only to Employees who have been credited under this Plan with Years
of Service earned under the Sundstrand Corporation Retirement Plan, the
Sundstrand Corporation Freeport-Hydro-Transmission Employees' Retirement Plan,
or the Sundstrand Corporation Mobile Controls Division Employees' Retirement
Plan prior to February 1, 1987. (Such Employees are hereinafter referred to as
"Former Sundstrand Employees.")
With respect to the Former Sundstrand Employees, the provisions of the Plan
shall apply with the following modifications:
1. For purposes of this Appendix, the following words and phrases shall
have the meanings indicated:
(a) "The "Frozen Part B Benefit" of any Former Sundstrand Employee shall
be the monthly amount of such Employee's Part B Normal Retirement
Benefit under the Plan, the Sundstrand-Sauer Freeport, Illinois,
Employees' Retirement Plan or the Sundstrand-Sauer Minneapolis,
Minnesota Employees' Retirement Plan, as amended prior to January 1,
1991, calculated as of December 31, 1988. The amount of the Frozen
Part B Benefit for each Former Sundstrand Employee is set forth in
Appendix C to this Plan.
(b) The "Part A Benefit" of any Former Sundstrand Employee shall be the
amount of such Employee's Normal Retirement Benefit as determined
under Article III of the Plan, less such Employee's Frozen Part B
Benefit.
2. Payment of a monthly Normal Retirement Benefit to a Former Sundstrand
Employee shall be paid according to the terms of the Plan, provided additionally
that the Former Sundstrand Employee may elect the same or separate commencement
dates for each of his Part A and Frozen Part B Benefits, and further may elect
the same or different optional methods of payment for each such Part, subject to
the provisions of Article VII of the Plan.
3. The monthly amount of an Early Retirement Benefit for each Former
Sundstrand Employee shall, notwithstanding Section 4.2 of the Plan, be an amount
equal to:
(a) for a Part A Benefit, the monthly Normal Retirement Benefit based upon
the Employee's Years of Participation at the time of his early
retirement, provided that such amount shall
A-1
<PAGE>
be reduced by .5 percent for each month by which the Employee is less
than 65 years of age at the time early Retirement Benefit payments
commence, and
(b) for a Frozen Part B Benefit, the monthly Normal Retirement Benefit
based upon the Employee's Years of Participation at the time of his
early retirement, reduced by the percentage from the following table
which corresponds to such Employee's age at the time his early
Retirement Benefit payments commence:
<TABLE>
<CAPTION>
-------------------------------------------------------- ----------------------------------------------------
Age at Benefit Commencement Date Percentage Reduction
-------------------------------------------------------- ----------------------------------------------------
<S> <C>
55 42
-------------------------------------------------------- ----------------------------------------------------
56 33
-------------------------------------------------------- ----------------------------------------------------
57 25
-------------------------------------------------------- ----------------------------------------------------
58 18
-------------------------------------------------------- ----------------------------------------------------
59 12
-------------------------------------------------------- ----------------------------------------------------
60 7
-------------------------------------------------------- ----------------------------------------------------
61 3
-------------------------------------------------------- ----------------------------------------------------
62 and over 0
-------------------------------------------------------- ----------------------------------------------------
</TABLE>
*Percentage shall be adjusted for intervening ages determined to the
nearest whole month.
4. A monthly Early Retirement Benefit for a Former Sundstrand Employee
shall be payable according to the terms of Section 4.3, except that in the case
of a Frozen Part B Early Retirement Benefit recipient, Section 4.3 shall be
modified by substituting "age 62" for "age 65" wherever it appears in such
Section.
5. The monthly amount of a "Rule of 50" Retirement Benefit for each
Former Sundstrand Employee shall, notwithstanding Section 6.2 of the Plan, be an
amount equal to:
(a) for a Part A Benefit, a monthly Normal Retirement Benefit based upon
the Employee's Years of Participation at the time of his termination
of employment multiplied by his "Applicable Percentage"; provided that
if such "Rule of 50" Retirement Benefit commences prior to the
Employee's attainment of age 65 such amount shall be reduced by .5
percent for each month by which the Employee is less than 65 years of
age at the time his "Rule of 50" Retirement Benefit payments commence.
(b) for a Frozen Part B Benefit, a monthly Normal Retirement Benefit based
upon the Employee's Years of Participation at the time of his
termination of employment with all Employers multiplied by his
"Applicable Percentage"; provided that if such "Rule of 50" Retirement
Benefit commences prior to the Employee's attainment of age 62 such
amount shall be reduced by the percentage from the following table
which corresponds to
A-2
<PAGE>
such Employee's age at the time his "Rule of 50" Retirement Benefit
payments commence:
<TABLE>
<CAPTION>
-------------------------------------------------------- ----------------------------------------------------
Age at Benefit Commencement Date Percentage Reduction
-------------------------------------------------------- ----------------------------------------------------
<S> <C>
55 42
-------------------------------------------------------- ----------------------------------------------------
56 33
-------------------------------------------------------- ----------------------------------------------------
57 25
-------------------------------------------------------- ----------------------------------------------------
58 18
-------------------------------------------------------- ----------------------------------------------------
59 12
-------------------------------------------------------- ----------------------------------------------------
60 7
-------------------------------------------------------- ----------------------------------------------------
61 3
-------------------------------------------------------- ----------------------------------------------------
62 and over 0
-------------------------------------------------------- ----------------------------------------------------
</TABLE>
*Percentage shall be adjusted for intervening ages determined to the
nearest whole month.
6. A monthly "Rule of 50" Retirement Benefit for a Former Sundstrand
Employee shall be payable according to the terms of Section 6.3, except that, in
the case of a Frozen Part B Early Retirement Benefit recipient, Section 6.3
shall be modified by substituting "age 62" for "age 65" wherever it appears in
such Section.
7. Section 7.1 of the Plan shall be applied with respect to a Former
Sundstrand Employee according to the terms of such Section, but as modified by
replacing the description of "Option A" in such Section with the following:
OPTION A FOR PART A BENEFIT RECIPIENT. A reduced monthly Retirement
Benefit payable to such retired Employee for life, with the
continuance of monthly payments equal to 50 percent of such reduced
amount after his death to his Surviving Spouse during the lifetime of
such Surviving Spouse;
The monthly payments to be made to a retired Employee under this
Option A as applicable to a Part A benefit recipient shall be an amount
equal to the monthly Retirement Benefit otherwise payable to the retired
Employee reduced by whichever of the following is applicable:
(a) if the age of the retired Employee and his spouse are the same, or if
such spouse's birth date is within five years of the birth of the
Employee, ten percent;
(b) if the age of the retired Employee is more than five years less than
the age of his spouse, ten percent less .5 of one percent for each
full year by which Surviving Spouse's birth date is more than five
years prior to the birth date of the retired Employee (the total
reduction to be not less than 0 percent); or
A-3
<PAGE>
(c) if the age of the retired Employee is more than five years greater
than the age of his spouse, ten percent plus .5 of one percent for
each full year by which the Surviving Spouse's birth date is more than
five years after the birth date of the retired Employee (provided that
the total reduction shall not cause the Retirement Benefit to be less
than the Retirement Benefit the Employee and his spouse would have
received if he had elected Option D).
The monthly payment to be made to such retired Employee's Surviving
Spouse under Option A shall be an amount equal to 50 percent of the monthly
payment made under Option A to the retired Employee.
OPTION A FOR FROZEN PART B BENEFIT RECIPIENT. A reduced monthly
Retirement Benefit payable to such retired Employee for life, with the
continuance of monthly payments equal to 60 percent of such reduced
amount after his death to his Surviving Spouse during the lifetime of
such Surviving Spouse;
The monthly payments to be made to a retired Employee under this
Option A applicable to a Frozen Part B benefit recipient shall be an amount
equal to the monthly Retirement Benefit otherwise payable to the retired
Employee reduced by whichever of the following is applicable:
(a) if the age of the retired Employee is the same as, less than or
not more than five years greater than that of his spouse, five
percent;
(b) if the age of the retired Employee is more than five years
greater than the age of his spouse, five percent plus .5 percent
for each fall year by which the Surviving Spouse's birth date is
more than five years after the birth date of the retired Employee
(provided that the total reduction shall not cause the Retirement
Benefit to be less than the Retirement Benefit the Employee and
his Spouse would have received if he had elected Option D).
The monthly payment to be made to such retired Employee's Surviving
Spouse under Option A shall be an amount equal to 60 percent of the monthly
payment made under Option A to the retired Employee.
8. The amount of the survivor benefit payable pursuant to Section 9.2 of
the Plan with respect to the Surviving Spouse of a deceased Former Sundstrand
Employee shall not be less than:
(a) If the deceased Former Sundstrand Employee at the time of death met
the requirements for a Retirement Benefit under Sections 3.1 or 4.1 or
met the requirements for a Retirement Benefit under either Section 5.1
or 6.1 and had attained at least age 45, the minimum monthly amount of
the Survivor Benefit payable to his Surviving Spouse shall be equal to
the greater of:
(i) One-half of the Former Sundstrand Employee's Frozen Part B
Benefit determined in accordance with Parts 2 and 3 of this
Appendix; provided, that if the Surviving Spouse's birth date is
more than five years after the birth date of the deceased
Employee, such amount shall be reduced by a fraction, the
numerator of which is the actuarial lump sum factor under Section
1.2 determined as if the Surviving Spouse's birth date was
exactly five years after the birth date of the deceased Employee,
and the denominator of which is the
A-4
<PAGE>
actuarial lump sum factor under Section 1.2 applicable to such
Surviving Spouse based upon such Surviving Spouse's age as of the
date of death of the Employee; and
(ii) the amount which would be payable to the Surviving Spouse with
respect to the Former Sundstrand Employee's Frozen Part B Benefit
as a survivor annuity pursuant to the terms of a qualified joint
and survivor annuity described as Option D of Section 7.1 if the
Employee had retired pursuant to such qualified joint and
survivor annuity on the day before the date of such Employee's
death.
(b) If a deceased Employee at the time of death met the requirements for a
Retirement Benefit under Section 5.1 but had not attained age 45 or
met the requirements for a Retirement Benefit under Section 6.1 but
had not attained age 45, and did not meet the requirements for any
other Retirement Benefit, the minimum monthly amount of the Survivor
Benefit payable to such Employee's Surviving Spouse shall be equal to
the greater of the amounts determined under the following paragraphs
(i) and (ii) at the time such Surviving Spouse elects to have such
Survivor Benefit payments commence:
(i) One-half of the Former Sundstrand Employee's Frozen Part B
Benefit determined in accordance with Parts 2 and 3 of this
Appendix; provided that if the Employee at the time of death met
the requirements for a "Rule of 50" Retirement Benefit only such
amount shall be multiplied by the Employee's applicable
percentage as determined under Section 6.2; provided, further,
that if the Surviving Spouse's birth date is more than five years
after the birth date of the deceased Employee, such amount shall
be reduced by a fraction, the numerator of which is the actuarial
lump sum factor under Section 1.2 determined as if the Surviving
Spouse's birth date was exactly five years after the birth date
of the deceased Employee, and the denominator of which is the
actuarial lump sum factor under Section 1.2 applicable to such
Surviving Spouse based upon such Surviving Spouse's age as of the
date of death of the Employee; and provided further, that such
amount shall be reduced to its Actuarial Equivalent value to
account for commencement of benefit payments prior to the time
the deceased Employee had he survived would have attained age 65;
and
(ii) The amount which would be payable to the Surviving Spouse under
the Former Sundstrand Employee's Frozen Part B Benefit as a
survivor annuity pursuant to the terms of a qualified joint and
survivor annuity described as Option D of Section 7.1 if the
Employee had retired and commenced receiving a Retirement Benefit
pursuant to such qualified joint and survivor annuity on the day
before the date Survivor Benefit payments commence.
A-5
<PAGE>
APPENDIX B TO SAUER-DANFOSS
EMPLOYEES' RETIREMENT PLAN
This Appendix B to the Sauer-Danfoss Employees' Retirement Plan is
applicable only to Employees who (a) were actively employed on December 15,
1990, in the Company's Ames, Freeport, or LaSalle locations; (b) were born on or
before December 31, 1930; and (c) elected on or before January 25, 1991, to
participate in the Company's 1990 Early Retirement Program. (Such Employees are
hereinafter referred to as "1990 Early Retirees.")
With respect to 1990 Early Retirees, the provisions of the Plan, as
modified by all other applicable appendices, shall apply with the following
additional modifications:
1. The monthly amount of a Normal Retirement Benefit for each 1990
Early Retiree shall be an amount equal to the monthly amount determined under
Section 3.2 of the Plan as modified by any other applicable appendices, except
that:
(a) For purposes of calculating the Normal Retirement
Benefit of a 1990 Early Retiree, there shall be taken
into account such Retiree's Years of Participation
determined under the Plan without regard to this
Appendix B, plus three additional Years of
Participation; PROVIDED, however, that in no case shall
the total Years of Participation taken into account for
any 1990 Early Retiree exceed 30; and
(b) There shall be added to each 1990 Early Retiree's Normal
Retirement Benefit, calculated after application of the
foregoing paragraph (a), a monthly amount which, when
expressed as a straight life annuity over the life of
such 1990 Early Retiree, is the Actuarial Equivalent of
a lump sum payment of $10,000 payable upon the
retirement of such Retiree.
2. All of a 1990 Early Retiree's Normal Retirement Benefit (except
any portion of such Benefit accrued with respect to employment on or after
February 1, 1991) shall be considered as part of such 1990 Early Retiree's
Frozen December 31, 1990, Benefit.
3. The portion of a 1990 Early Retiree's Normal Retirement Benefit
described in Part l(b) of this Appendix B (the $10,000 lump-sum equivalent)
shall be payable, at the election of such Retiree and satisfaction of all
applicable spousal consent requirements., as a lump sum of $10,000 upon
retirement, under Option I of Section 7.1 of the Plan, regardless of whether the
remainder of such Retiree's benefits under the Plan are payable as a lump sum.
If such Retiree does not elect (and, where applicable, obtain
B-1
<PAGE>
the necessary spousal consent) to receive such portion of his or her Normal
Retirement Benefit as a lump sum, such portion shall be payable in the same form
as the remainder of such Retiree's Part A Benefit under the Plan and Appendix A.
4. All terms of the Plan and any other applicable appendices, other
than Section 1.14 (Definition of "Frozen December 31, 1990, Benefit"), Article
III (Normal Retirement), and Section 7.1 (Available Forms), shall apply to each
1990 Early Retiree as set forth in the Plan. All cross-references in the Plan
and any other applicable appendices to Section 1.14, Article III and Section 7.1
with respect to any 1990 Early Retiree shall be applied as though such Sections
and Article were modified as described in Parts 1, 2 and 3 of this Appendix.
B-2
<PAGE>
APPENDIX C TO SAUER-DANFOSS
EMPLOYEES' RETIREMENT PLAN
This Appendix C to the Sauer-Danfoss Employees' Retirement Plan is
applicable only to Employees who (a) were actively employed on December 21,
1992, in the Company's Ames, Minneapolis, Freeport, or LaSalle locations; (b)
will have reached their 55th birthday and have five or more Years of Service on
or before December 31, 1992; (c) elect on or before February 8, 1993 (February
22, 1993, in the case of Employees at the Ames office location), to participate
in the Company's 1993 Early Retirement Program; (d) leave the Company's employ
on February 26, 1993; and (e) elect to begin receiving their retirement benefits
on March 1, 1993. (Such Employees are hereinafter referred to as "1993 Early
Retirees.")
With respect to 1993 Early Retirees, the provisions of the Plan, as
modified by all other applicable appendices, shall apply with the following
additional modifications:
1. Each 1993 Early Retiree may elect between the following two
benefit improvements:
(a) Solely for purposes of computing the
reduction appropriate to reflect the
commencement of benefits prior to the
Retiree's Normal Retirement Date, an
additional three years shall be added to the
Retiree's actual age; or
(b) The Retiree shall receive an additional
benefit of $25,000, payable as provided in
paragraph 2 of this Appendix.
2. If a 1993 Early Retiree elects to receive the additional $25,000
benefit, as provided in subparagraph 1(b) of this Appendix, that benefit shall
be paid as follows:
(a) If the Retiree is unmarried on March 1,
1993, the benefit shall be paid to the
Retiree in the form of an Ordinary Life
Annuity that is the Actuarial Equivalent of
an immediate $25,000 single-sum payment;
provided, however, that such Retiree may
instead elect to receive such benefit either
in the form of an immediate single-sum
payment or in the form in which the
remainder of his or her retirement benefit
is to be paid.
(b) If the Retiree is married on March 1, 1993,
the benefit shall be paid to the Retiree and
his or her spouse in the form of a Qualified
Joint and Survivor Annuity (as described
under Option D of Section 7.1) that is the
Actuarial Equivalent of an immediate $25,000
single-sum payment; provided, however, that
such Retiree may instead elect (with spousal
consent) to receive such benefit either in
the form of an immediate single-sum payment
or in the form in which the remainder of his
or her retirement benefit is to be paid.
C-1
<PAGE>
3. The following rules shall apply to any 1993 Early Retiree having
Years of Participation under both this Plan and the Factory Pension Plan of
Sauer-Danfoss (LaSalle) and International Union, United Automobile, Aerospace
and Agricultural Implement Workers of America, and its Local Union No. 285 (the
"Factory Plan"). (Such Retirees are hereinafter referred to as "Dual Service
Retirees.")
(a) If a Dual Service Retiree elects to have
three years added to his or her actual age,
as provided in subparagraph l(a) of this
Appendix, any increased benefits resulting
from that election shall be paid under this
Plan to the extent of the Retiree's Years of
Participation under this Plan, and under the
Factory Plan to the extent of the Retiree's
Years of Participation under the Factory
Plan.
(b) If a Dual Service Retiree elects to receive
the additional $25,000 benefit, as provided
in subparagraph l(b) of this Appendix, that
benefit (regardless of the form of payment
elected) shall be paid under this Plan.
C-2
